Power Corporation of Canada

Good morning, ladies and gentlemen, and welcome to the Power Corporation Q4 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 the 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 Thursday, March 21st, 2024. 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 for joining us. We'll go through our results for the quarter and a little bit of a look back on the year as well, and maybe even a few comments as we look back over the last several years as to where we are at power on our journey as we execute on our strategy. I'm going to just remind you of the disclaimers on pages two and three regarding forward-looking information and non-IFRS measures. And then say that I'm here today with Denis Levasseur, who is VP and has been acting as our Chief Financial Officer effectively over the last several quarters. And then he will be working with me today to go through the presentation. We're also joined by Jake Lawrence, who is on day four with Power Corporation. So welcome, Jake. We're not going to ask Jake to play a starring role in today's presentation, but just to say he is here and we're delighted to have him on board. As we move forward here, I'm going to start off with the Q4 results and remind you, you know, we'll make some high-level comments on Great West Life, IGM, and GBL in terms of our perspectives, but each of those three companies have just recently come out with their results and gone through with extensive earnings releases, review of results. GBL's was just a few days ago. IGM and Great West Life a few weeks ago, plus IGM had its investor day in December. So there's lots of material if you're trying to dig deep into any of the three public companies that you can reference or speak to those management teams. So if I go to page seven, just kind of reflect on where we are from an earnings point of view, and from both quarter and the year, we had really strong results at Great West Life, and they were broadly based, clearly led, by the emergence of Empower, but strong growth and strong results across a diversified portfolio. IGM reported really solid results with an environment of headwinds with what's going on in their businesses right now, but we thought the results were very, very solid. And then as I move down onto some of the key points as we reflect on the quarter and the year, You know, the first one is with the Prudential integration coming to a successful close here, the sale of Putnam that happened on January 1st. It really highlights and is the completion of a five-year repositioning of Great West U.S. business. And I'll make some comments in the presentation on that. Great West Life's financial performance really for this year and over the last five years has been great. I'm going to touch on that. Really pleased with the positioning of IGM. And I'm going to make a couple of comments on the way we think about their positioning going forward. And as I mentioned, they got an investor day where they've laid out medium term financial objectives the way Great West Life had done back in 2021. GBL continues to focus on executing its strategy and had a record year in terms of returning money to shareholders. And then we've continued to build a scale of cigar and power sustainable. And Cigar has entered into a number of transactions, which I'm going to walk you through very, very briefly to enhance its growth. And then not to be forgotten is we had our biggest year of share buybacks in 2023 and in Q4, and we announced a 7.1% dividend increase yesterday. So lots going on, and we're excited to share it with you and get into questions that you might have. On page eight, the market environment hasn't changed too much. You know, we've got high rates. And in some ways, that's good. Like a lot of financial institutions, when you've got some parts of your businesses where you have cash, you have short-term investments, so obviously earnings from those parts of the balance sheet helps on the earnings front. But then we all know what's going on overall in the market. You've got high inflation, high interest rates. That's squeezing a lot of people that are clients, also clients of our various businesses, It means that for a lot of the client bases, people are trying to figure out how they make ends meet. So you've got less money flowing into wealth channels, less money flowing into the asset management products that are on those channels. And where is money going? Money is either going to repay debt to try and pay bills for certain parts of our client base. If they are investing, there's more flows on an absolute basis going into money new money products, including bank CDs, and out of traditional wealth channels. So I guess bottom line, rates being higher can help your earnings here and there, but from a flow point of view in wealth channels and in asset management on balance, it's a negative. And you've got a couple of indicators there of that in the Canadian channel, but we're seeing that across the markets where we operate. So let me then turn... over to Denis to walk us through our financial results and net asset values.

Thank you, Jeff. Good morning, everyone. I will go to slide nine. This is our Q4 financial highlights. Adjusted net earnings from continuing operations in the quarter were $579 million. This is up from $395 million in the same corresponding quarter of last year. translates into $0.89 per share compared to $0.59 in Q4-22, and I'll address the breakdown of earnings shortly. Adjusted net asset value per share was $53.53 at year end compared to $48.26 at the end of Q3, and our net asset value per share yesterday was $52.93. At its Q4 meeting yesterday, as Jeff mentioned earlier, the Board of Directors declared a quarterly dividend of $0.5625, are 225 on an annual basis, and this represents an increase of 7.1%. Turning to slide 10, Great West once again delivered strong results across all segments, including an increase in year-over-year base earnings from Canada, the U.S., and the capital and risk solution. Notably, you'll see that Great West U.S. retirement and wealth business Empower surpassed $1 billion in base earnings in 2023, exceeding the objective announced at the beginning of the year. IGM's earnings had a solid performance, reflecting a challenging market environment. Earnings at IGM were impacted by the partial sale of Great West shares to Power as part of the CAMC transaction, and IGM also reported losses in Q4 on edging instruments, However, we must consider this as a timing issue, and going forward, IGM will realize higher income, which will offset these losses. As a reminder, IGM's Q4 adjusted net earnings exclude the gain on its sale of ITC to Canada Life, and which in turn is eliminated on consolidation at Power Corporation as it is an intercompany sale. Moving to our NAV-focused businesses, GBL's contribution in Q4 includes an impairment recorded by Imerys. And note that while GBL's private assets saw fair value increases during the quarter, these are not entirely reflected in the results as some of these companies are consolidated. CIGAR contributed positive earnings this quarter, driven primarily by the fair value increases in our investments in the private equity funds. And SAGAR's manager continues to make strong programs despite market headwinds, slowing down capital fundraising and deployment. Finally, as we've seen in the past, Power Sustainable's negative contribution was driven by an increase in the fair value of third-party capital in the infrastructure fund. This loss in our P&L results from consolidating the infrastructure fund where the corresponding fair value increase of assets is not reflected, however, we must recognize the increase in value of the units held by the non-controlling unit holders of the fund. If I turn to slide 11, we break down the 53 net asset value per share as of December 31. The shares of our publicly traded operating companies performed well in Q4 with Great West delivering a 13% increase. Great West remains a large component of our net asset value and its performance essentially explains our quarter-over-quarter NAB per share growth. As a reminder, we now record SaGard's management company, the value of the management company at fair value in our NAV in Q4. Power's share of the management company value was $265 million, with quarter-over-quarter changes only due to foreign exchange movements. Power Sustainable's management company remains at carrying value. Cash and cash equivalents decreased quarter-over-quarter as we bought back shares at a higher pace in Q4. And this is also reflected in our participating share count, decreasing from 658.9 million shares in Q3 to 652 million shares in Q4. And with that, I will turn it back to Jeff.