Power Corporation of Canada

Good morning, ladies and gentlemen, and welcome to the Power Corporation Q2 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 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 Friday, August 11th, 2023. I would now like to 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 to our earnings results call here. Happy Friday to everyone. Thanks for being with us. I would, before starting the presentation, just like to remind everyone of page three. We have our disclaimer regarding non-GAAP measures and forward-looking information. And with me today is Greg Kretziak, Chief Financial Officer of PowerCorp, and we're pleased to go through our presentation with you and open it up to questions later on. Just skipping forward several pages, you've got on page six other information from our various companies that's available to you regarding results and other recent presentations that have been done. With that, I'll go right into the guts of the presentation on page 7. We're really pleased with results and with developments since we last spoke at the end of Q1. First of all, from an earnings point of view, it was a very strong quarter for our group overall. To my mind, it really demonstrated the earnings power of our two key earnings-deriving companies, being Great West Life Co. and IGM. From Great West Life's perspective, really a broad-based earnings strength on a base earnings basis, and then led, of course, by the strong growth of the U.S. business through Empower. There wasn't a lot of noise in the quarter for base earnings strength, And so it really, to my mind, demonstrated the earnings power of Great West Life Co. And then when you go over to IGM, flat assets year over year, really solid earnings and really very, you know, kind of consistent performance. So very pleased with both the earnings at Great West Life and IGM. And then across the group, we had good earnings results as well. At the same time, as you go to the bottom part of the page here, continue to be extremely busy in executing on a number of strategic items that are part of our value creation strategy, including a number of key transactions, the sale of Putnam to Franklin, obviously, the largest of those, but also an important transaction for Cigar with ADQ and BMO. And along the way, we sold a position in Bellis for an after-tax proceeds of $97 million, which continues to be part of our strategy of selling non-core assets and creating funds for, in principle, for share buybacks. So I'll move over to then page eight. You would know all of this information, but just to say, you know, it's a difficult environment. It's not an impossible environment, but obviously with rates going up and with a lot of jitters around markets in the last several years, long-term fund flows have gone negative. And this is a Canadian example at the start of the page, but you've also got the same phenomena happening with individual clients across a lot of markets in the United States. And money's been flowing in with rates where they are into term deposits. You just have one example of that. Over the last couple of years, the change in term deposits at the big six banks in Canada. So clients are putting money with proactive rates or buying CDs at a far higher pace than they had been previously. and they're being fairly defensive in terms of their long-term flows. We'll see how that lasts. Markets have been strong in both the U.S. and Canada over the last period here, so we'll see whether that starts to change. But that's the environment in which we're operating in. And with that, I'm going to turn it to Greg to actually walk through the financial results over the next few pages.

Greg? Great. Thanks, Jeff, and good morning. Jeff had mentioned strong adjusted earnings across the group. You know, we're up $200 million, $847 or $127 per share versus the prior year of $647 or $0.97. Of course, the adjusted NAV is reflecting those strong earnings. And you can see that we were end of the quarter at 48.86 per share. And it traveled to August 10th to almost $50 at $49.95. So up sharply over 2022. And of course, we declared a dividend in the quarter at 52.50 cents. And that takes me to slide 10. Not to be too repetitive, but Great West Life, very strong quarter. And as Jeff mentioned, quality quarter in terms of good solid growth from the underlying segments, in particular the U.S. and the capital and risk solutions segments. At IGM, just a quick note, as Jeff had mentioned, AUM not changing all that much year over year, but still delivering comparable results. IGM did have a restructuring charge in the quarter. which they see leading to expense reductions on a run rate basis of about $65 million a year. And they guided that you should see expense growth of only 2% a year. And that will take us to JBL. $90 million contribution to PCC this quarter versus the minus 27 year over year. Strong cash earnings at JBL and also some fair value marks on their JBL capital portfolio in the quarter of about $17 million. And we had a reversal recovery of the Web help, non-controlling interest liabilities of about $37 million in the quarter. That, as you all know, has been going against the earnings statement for nine consecutive quarters as we recognized the liability increase as the Web help asset increased over those periods. Takes me to other investments and standalone businesses. We sold Bellas Health, which was a nice event during the quarter. We realized $97 million on that. And corporate expenses, pretty simple in terms of the changes there. We have a $17 million gain in the prior quarter from our cash settled liabilities in compensation, and this quarter it was a loss of $5 million. And the 46 looks like a good number if you're looking at where we should be coming in for the remainder of the year. That's about 46 per quarter is a pretty good number. The financing and income tax charges, last year we had a deferred tax benefit that we recognized, so that is basically the difference there. And with that, I think I'll just go straight to slide 11. And here we break down the net asset values. And, of course, the big driver in the quarter being Great West Life. Great West Life has had a very strong stock performance over the last couple of quarters. And since March 1st, It is up 7% and of course that's reflected in our NAV and as I said, at June it was almost $49 and yesterday it was almost knocking on the door of $50. So with that, I'll turn it over to Jeff.