Power Corporation of Canada

Good morning, ladies and gentlemen, and welcome to the Power Corporation Q1 2023 earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for a question. If anyone has any difficulties hearing in the conference, please press star zero for operator assistance at any time. I would like to remind everyone that this call is being recorded on Tuesday, May 16th, 2023. I would now turn the conference over to Mr. Jeffrey Orr, President and Chief Executive Officer of Power Corporation. Please go ahead, sir.

Thank you, operator, and welcome, everyone. Thanks for joining us this morning for our first quarter results call. I would draw your attention on page two. to the cautionary statement regarding forward-looking statements and non-IFRS disclosure measures. So with me this morning is Greg Tretziak, who is the Chief Financial Officer of Power Corporation, and together we'll make the presentation and then be pleased to answer your questions. I will just highlight page six, as I normally do, to call your attention to various public disclosure events and documents for our group companies that you can reference that have come out over the last several weeks. And with that, I will turn to page seven. First comment on our earnings, and really we focus our earnings on Great West Life Co. and IGM, which are the two main sources. They are the sources of our recurring earnings. And it was a strong result in what is pretty difficult market conditions. Great West Life, of course, the big highlight is that they and their other competitors in the insurance industry released earnings under IFRS 17, so a very significant change. Greg will spend just a quick few moments on that today, although the Great West Life disclosure is much more extensive on the topic, obviously. But Great West Life had strong earnings in the quarter today. And IGM at 207 of adjusted net earnings, just down a snick from the same quarter in 2022, despite significantly lower markets, we thought was a very strong result. Their net earnings, of course, were affected by the transaction that we did with CMAC and the gain they recognized with respect to that. So we ourselves look at the adjusted net earnings number as the one which is more indicative of underlying earnings levels. And then, you know, a lot of things happened in the quarter. We've been awfully busy. Great West Life announced the acquisition of IPC from IGM. We'll give our perspectives on that in this call. And then IGM announced the acquisition of a 20% plus interest in Rockefeller. I'll make some comments about that. GBL reported a good growth in its net asset value and really quite an interesting transaction on WebHelp, which we will talk about not just in terms of the value that was created, but I think it's quite illustrative of some of the earnings challenges that exist in looking at that part of our portfolio from an earnings point of view as opposed to from a value creation point of view. And the platforms in a difficult environment raised just under $400 million during the quarter, so we'll touch on those points as we go through the presentation. Page 8 is just a reminder, it's a difficult environment. The bottom left hand, the S&P had its worst year since the financial crisis, its fourth worst on record. And then that coincided with the Bloomberg Barclays Bond Index having its worst performance on record. So this was a difficult year for investors and for companies that serve investors and earn a lot of their revenue from market levels. And then that, of course, on the right-hand side has resulted in investors not putting a lot of work money at work, excuse me, in markets. Money is flowing into CDs and other type products, as you've seen, and this is a Canadian example, but it's true across the various geographies where we operate. Greg, I'd ask you to pick it up on the earnings and the NAV over the next few slides.

Okay, thanks, Jeff. So I'm on page nine, and Looking at adjusted earnings, $514 million in the quarter, which is up 16% over last year, 77 cents per share, which is 18.5 over last year. The NAV, nice increases over the quarter. We have more on that in subsequent slides, so I won't spend any time there. Of course, we declared a quarterly dividend of 52.5 cents. and take you over to page 10. I'm not going to give you an accounting class today. I'm sure you've heard a lot about IFRS 9 and 17 for all those who follow the insurance industry, but just a few points if we could. So, you know, with Great West Life Co., they adopted 17 and 9, and that affects about a third of their business. And A lot of work for that reporting effort in the quarter, obviously. And one of the things that is apparent, I think, across the industry is that the net earnings volatility, given the delinking of assets and liability under the standards framework, uh standard 17 in particular uh is expected to uh uh continue to uh uh give net earnings volatility and so i'm sure you've seen that and you can witness it in the quarters uh uh certainly and uh life goes results and and others um at great west life i think uh one of the the most important changes in terms of management's presentation has been the the addition of the value drivers workplace solutions, wealth and asset management, and insurance and risk solutions. I think breaking down the information in this way and presenting the information this way will give us a lot more insights and new insights into the nature of the business and how it's performing in addition to their geographic segmentation. With respect to PowerCorp, I should start with JBL. JBL adopted IFRS 9 back in 2018 when you could first adopt that standard. At that time, PCC preferred to wait until Great West Life, one of its major subs, obviously, to change its accounting. And so we were under 39 and we moved to 9. And that reconciliation, if you will, presented a fair amount of noise in our results over the last several years. And we adopted JBL's accounting standard, which is IFRS 9 in this quarter. So going forward, that's one less moving part that you'll see in our numbers, which is a good thing. And then on Power Sustainable China, this portfolio basically is held for capital appreciation. And we look to, obviously, the changes in NAVs over time for this particular portfolio. And we have classified it as fair value through OCI. All the rest of our investments are basically fair value through the P&L, and there is a slide in the appendix that helps you navigate our selection of accounting standards through the quarter. Sorry for the long-winded explanation of the changes for accounting in the quarter, but I promise not to do it in the future.