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.

Okay, Denis, thank you. So then I'm going to move forward to just a bit of a look at the last four or five years, really, Even though this is a quarter-end report, we're at the end of the year. We're at the fourth anniversary of the completion of our reorganization. In my mind, I go all the way back to 2019 where there was a lot of activity in 2019 through the year that led to the reorganization. A little bit of a look back here. The overall comment I'd make is that over the last five years, our company has really repositioned itself. There's been a ton of work done, and we've been describing it through the three levers of our value creation, but we really have repositioned each of the businesses. If I start with Great West Life, it's a different company than where it was five years ago. I think it has got strong businesses across its different platforms and its different markets. And, of course, the emergence of Empower, which was not a large contributor five years ago, and our business in the United States with now the U.S. is emerging as the largest part of Great West Life. It's probably the most significant change, but there's been very significant investments across the rest of the platform as well. IGM, again, you know, right now we're in an environment where wealth channels are generally in outflows, asset management channels are in outflows in Canada. And so, you know, people are going, well, that's not a, you've got a lot of macro headwinds, but it does not, when you look at it from a, a multi-year position here. This business has repositioned itself as well for much higher future growth. In its wealth channel and its wealth segment, it's got the core business of IG Wealth, and that's got a couple of very high growth drivers for the future. And in its asset management segment, it's got its core business of McKinsey, which is in a strong market position, and then some very high strong growth drivers. And I'm going to come back to that as we go through the presentation. And then at Power, you know, really, really big change from where we were five years ago. Obviously, a simpler structure, a much simpler strategy. And I would say, as I look back, lots of great progress made in terms of raising funds, selling assets, buying shares back, enhanced communication. But I would also say, you know, unfinished work here, lots of work still to do. There's a lot of opportunity, I could put it in a positive way, but lots of things that we... that we had set out to do, and some of them were difficult over the last four or five years, if you think about the environment we've been in. But just overall, it's a different company, and we still have lots of opportunity ahead to execute on the strategy. I'll flip over then to the next page, which is page 13, just to remind folks, we did have another busy year from a transactional point of view. It was highlighted by the acquisition of the Rockefeller position by IGM, by Canada Life, Acquiring Investment Planning Council, which really enhances its position and its scale in the wealth business in Canada, which is going to be a key focus for them going forward. And then ultimately the sale of Putnam, which closed on January 1st of this year to Franklin. So those were the three highlights, but I'm going to come back to the three on the bottom and what Cigar's announced over the last little bit here, because it's interesting how Cigar is using transactions in a difficult fundraising environment to enhance its scale and its growth prospects. Page 14 is just kind of a look back on Great West. Great West had, I think, a version of this slide in their deck, so I'm not going to belabor each of these points. Notwithstanding the very difficult market in wealth, they had a lot of positive flows. A lot of that, the majority of that was in the U.S. because Empower is gaining market share and growing organically in the dc market and they've got a wealth business of course which i think is up to now somewhere around 70 billion us with the combination of the personal capital acquisition and the existing wealth business they had so they've and they've got strong strong flows into that business so that that is a bright spot in terms of a difficult wealth market and then down at the bottom of the page just to highlight you know We are in both of Canada and the United States. We've got much stronger brands than we had even a few years ago. Remind folks that have followed us for a few years ago, back three, four years ago, Canada Life, we were operating as Canada Life, Great West Life, and London Life. So, you know, it's only been a few years that we've emerged with the Canada Life brand. And then Empower is investing heavily and will continue to invest heavily in building up its Empower brand in the U.S. So we've got two strong positions here, and we are very much – working under what we think are very strong brands. Okay, page 15 is probably the page in terms of change. As I mentioned a few slides ago, there's been change across power. I think nowhere more dramatically, if I can use that word, I don't think it's too strong a word as in the Great West U.S. business. If you go back to the end of 2018, Great West on the left-hand side of this page had three businesses. It had Great West Financial, which was its insurance business for those that followed us It was Coliboli. There was some closed Lifeblocks. It was actually the largest earnings contributor at that time. It had Empower and it had Putnam. And all three of those businesses in 2018 were earning less than $400 million Canadian. I think I've got $388 million in my head, but someone will correct me if I'm off. But if I'm off, I'm not off by much. You go through what happened over the next five years. We kicked off 2019 in January with the announcement of the sale of the insurance business to Protective Life. The Great West followed that up with three acquisitions over the next couple of years, two defined contribution acquisitions, MassMutual and Prudential, and the personal capital acquisition. And then in the middle of this year announced the sale of Putnam and also the merging of personal capital and Empower's own wealth business into what's now branded as Empower Personal Wealth, And where are we today? We have one business in power. It's the second largest retirement provider in the United States. It has got 18.5 million clients. It's got 1.5 billion U.S. on its platforms. It's growing organically at a very strong rate. And in 2023, as Denise said, it earned more than a billion dollars. And Great West, at their recent call, are calling for that growth to be somewhere in the 15 to 20% range for 2024. So Empower is now the largest single business unit contributor in Great West and the U.S. is approaching somewhere, you know, 30, 32%. It's the largest segment. So, you know, the whole group has changed, but this is really the biggest piece of the story. And then we talked four or five years ago about, at the time of the reorganization, really upping our game in terms of communication with the market, transparency, accountability. Part of that was in June of 2021, Great West came out and for the first time in our group announced that their medium-term financial objectives, which you have on the left-hand side of the page, and at their recent call, they reported what you have on the right-hand side of the page, their performance in terms of EPS growth, 11% for 2023, Five-year growth is 11% on CAGR compounded growth rate, which is above the growth targets they set. You've got their ROE performance there and their dividend payout ratio, which was above their range and will work its way down slowly as we expect. The reality has been that the earnings growth has been higher than the dividend growth, and through that, a little bit of noise as they went to IFRS 17. but our expectation is that we'll move over time that payout ratio down towards the middle of the range. It'll bounce around from year to year, of course. Over on the 17, just some comments on IGM and what they achieved in 2023. I think the ROC seller acquisition is a significant transaction. It will offer them the opportunity to have a much larger exposure to the ultra-high net worth business and starts to give them much more of a North American wealth presence. We forget, but the China AMC deal, which we talked a lot about, I guess, back in 2022, it actually closed at the start in the first quarter of 2023. And we think that's the right place to concentrate that position. And notwithstanding the challenges that China is facing right now and investor apathy, I don't think that's a Maybe that's not a strong enough word in terms of their views of China. That business continues to do really well. There's a lot of savings going on in China right now, and China's AMC's relative position continues to strengthen. So that's going to turn out, I think, over the long term to be a great acquisition for IGM. And then they sold IPC, as we mentioned, to Canada Light to allow them to focus their time, their energy, their capital on building up the businesses that they had. Importantly, there was an investor day held in December by IGM, and a couple of things were announced there. They recast their segmentation into wealth and asset management, and they basically no longer are segmenting around their strategic investment segment, which I think is the way we think about it, and they think about it, and the right way to do it. And they came out with medium-term objectives for IGM. the first time, very much the way Great West Life, I just mentioned, did in 2021. And the best slide to describe that is the following one, page 18, where you see the segmentation on the left. And I just go back to my comments earlier. They've got a core franchise in each of wealth and asset management. And then they got some very much high growth drivers for the future. And their earnings are EPS objectives on a five-year basis are 9% overall earnings growth. That's a specific number. It will obviously, if they execute, be a range around that. And it's 7% coming from the core franchises, more mature. Those are the bigger franchises paying the bills right now, if I can use that expression. But they're more mature franchises, and then they're expecting higher growth out of the other parts of the portfolio here. These assumptions assume normal market growth. There's normal stock market and growth assumptions in that. There's obviously some volatility on a year-to-year basis in those businesses. Okay, a couple of comments on 19 on GDL. And just to say, record year for returning capital to shareholders. Second point is they're refocusing their portfolio. basically putting more emphasis on private assets. They sold out of three positions, and they reduced their position on Pernod Ricard, and they created a value in their private asset portfolio. So they continue to drive forward with their strategy. A couple of slides on our investment platforms. Just a little bit of a look back here to when we announced the new strategy. We said at that time we were going to try and grow The investment platforms, without putting additional seed capital from power into it, we were going to rely on parties other than power. And you're going to look back there on the funded assets under management, $3.7 billion to $17.6 billion. That's over just slightly less. It's end of Q1 to the end of Q4, so it's a little less than four years. And then the dark blue bar. PowerCorp has got effectively the same amount of capital invested in it. There's some mark-to-markets in some of those numbers. We've effectively done what we said we were doing, but still a long way to go, clearly, to get these platforms into a point where they're contributing from a value point of view and the way we're able to communicate that contribution to the market effectively. But lots of progress. Page 21, I think, is really interesting. Cigar, everyone following the all-market private asset market knows it's been difficult to fund. It's been difficult to actually deploy capital. So the businesses across the world are really kind of finding this has been, 2023 has been a difficult year from a growth point of view. Cigar has done three transactions previously. So there's one thing to go out and ask people to invest in your fund, but they've done three transactions to expand their scale and their funding and their growth going forward. We talked about ADQ and the BMO, ADQ now called Lunate, coming in as a GP and committing to provide future seed capital for the funds, but also investing capital and cash into Cigar. So that was a growth strategy. But then in December and closing in January, Cigar announced the acquisition of a strategic interest, and that means we've got a significant equity interest, and there is a path to control eventually in that transaction of a US $9 billion AU manager called Performance Equity Management, and basically gets Cigar into the fund-to-fund secondary and co-investment space, which is a very important space particularly if you think about the shifts and flows going forward in the alt space from having been historically institutional and endowment-led and now moving more into high net worth family office and ultimately into retail. Those products are very well suited for that. And then they just announced a couple of weeks ago the acquisition of a 40% stake in Halsey Point, which is a CLO manager. out of the United States and Cigar has got credit products, this will extend their range in the credit market and again will give them other avenues for growth. So difficult funding environment, but they've got the capital and they're doing the transactions to expand their scale and expand their growth prospects through a different form which is using M&A. Okay, and back to wrap it up here before I open it up for questions. You see our buybacks across the top of the page. I'll remind you we had COVID. We were a little slow out of the blocks getting transactions done and monetizations. That has picked up in 2022 and 2023. We increased the dividend, as I mentioned, for buybacks going forward. Our cash at $900 million is just a little bit above where we like to keep it. So we are very much focused on getting additional buybacks through 2024, and we'll be looking to continue the monetization of non-core assets as the key funder for that, and all the same time maintaining our very strong credit rating. I have to at least pause on page 23 for a second on our total shareholder returns. We're long-term shareholders, but we are very much in business to create shareholder returns. And while all of these numbers are always very sensitive to start dates and end dates, as you know, we do very much keep our eye on what kind of total shareholder returns we're providing to shareholders. And then you've got some benchmarks there. We've done very, very well against the key benchmarks that we look at in terms of those time periods of outperformance. On page 24, Notwithstanding that the discount has widened out over the last 18 months or so, and we're working hard on ensuring that shareholders see the value across all of the assets we have, including the assets that are at power. And we do believe that that's, you know, we don't ultimately control that, but our behavior and the actions we take can certainly have an impact on it. So those returns were created even though we have widened that discount out a little bit. And again, I view this as in the opportunity category. Page 25 just kind of summarizes, and operator will be going to questions in a second, our three key drivers and walks through where our businesses are today. And I'll summarize the way I started. We've got lots of work done here, but lots of opportunity to keep driving the strategy going forward. With that, operator, I would ask you to... open it up for questions.

Thank you. We will now begin the question and answer session. To join the question queue, you may press star, then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then 2. The first question comes from Graham Riding with TD Securities. Please go ahead.

Hi, good morning. Just on the CIGAR and the minority stakes year to date into those private equity and private credit managers or CLO manager, what's the thought process there in terms of taking minority stake positions here as opposed to controlling majority positions?

I think you should think of it as a path along a road. So I mentioned, for example, They've got a path to control in the first instance. And so, you know, these are people, businesses you buy in, you establish a major position, and then you negotiate your ability over time to take a controlling position. So I don't think the intent is to stay in a minority position is the bottom line, but to work with those platforms and ultimately be in a position to control a brand. It's tactical is what it is.

Okay. Yep, understood. There were some, I think, fair value gains within Power Sustainable that triggered you booking some non-controlling interest charges. Can you maybe just give us some color on what drove the gains and just make sure we're understanding that correctly? Denis, do you want to take that?

Yeah, well, the gains were primarily in the portage and the private equity.

It was a power sustainable capital question, I think. I'm sorry, go ahead. It's a non-controlling interest in the infra fund.

In the infra fund, the non-controlling interest is, we've explained before the accounting mismatch, that when you have an increase in the value of the fund itself, we have a redemption feature from the non-controlling unit holders, and that turns into what we call the non-controlling interest charge because we have to record on our books the increase in the value that goes to the NCR.

So put another way, we consolidate this fund because between our position and Canada Life's got a position in it where we consolidate it. When the value of the fund goes up, we don't recognize the increase in the value of the fund, but we do recognize recognize the value of the minority, non-powered, non-Canada life shareholders in it, that value flows through as a liability and flows through the P&L. So every time we have good news and the value goes up, we have a P&L loss with the current accounting. So it's just, is that a layman's description of the outcome as opposed to the technical description?

Yeah, but I think the gist of it is good news on the value side results in bad news on the earning side.

Yeah, we should start every presentation, Graham, by going, and really good news in power of sustainable capital, we had another loss. It is what it is, but the bottom line is the value went up, and we don't recognize that, and we recognize the minority shareholders' increase in value as a liability through the P&L.

Yeah, okay. And what drove the increase in the fair value gain within the fund?

In the quarter itself, the fair value gain in the in the fund was essentially looking at the future electricity rates. And there has been a shift in the electricity rates so that when you do your DCF of all of your projects, that did turn into increases in the value of the funds. At other times, you will see de-risking events as we've seen in the past, but that was not the case in the current quarter.

Okay, understood. And my last one, if I could just... I think you mentioned 0.9 billion in cash, so slightly above sort of that minimum level that you like to sit at. So if you're able to, I guess, continue buybacks this year at a similar level to what we've seen in 2022 and 2023, what are the, I guess, assets to stand alone or otherwise, what are the assets you're most likely looking to monetize if you're going to be able to continue to buy back shares at this level?

Yeah, Graham, I'd rather, I don't want to name any specifics because you've got in the portfolio, we've got a series of assets that are clearly non-financial services. So we said for some time that Those long-term are not in place. I've said before publicly, I don't think I would have anticipated four years ago that they'd still be, we'd still have as much capital tied up in those, but the world unfolded the way it did. So those are there. You've seen in the past that, you know, we seed capital into the strategies of power, sustainable capital and cigar. And when there's opportunities to do secondaries, we've done that. So if, you know, we sold out of positions, because we seed them and then ultimately they get to a more mature state and there's lots of secondary buyers for positions. So that's another tool that we have. So we've got a bunch and how we execute on them will depend on markets, buyers and negotiations and all of that. So I don't want to pre-anticipate that. So I don't mean to be evasive, but I think it would be misleading to kind of name one or two because I actually, the year will unfold the way it's going to unfold, and we'll do what we can. We'll succeed at doing what we do, and that will have a bearing on the rate of buybacks that we execute on.

Okay. Understood. That's it for me. Thank you. Okay. Thanks, Graham.

Once again, if you have a question, please press star, then 1. The next question comes from Doug Young with Desjardins Capital Markets. Please go ahead.

Hi, good morning. Just, you know, back to the acquisitions in Sagerd or performance equity in Housley. Can you talk about, you know, purchase price or, you know, what this should add in terms of financial terms and earnings? And I know it's at the margin, but what I'm trying to understand is the amount of capital that's being deployed, the potential return on the capital, and, you know, how do we, what are the metrics we should be using to kind of gauge your progress as you kind of build this franchise out? Is it earnings, EBITDA? hoping to get some color.

Thank you. We're not in a position. First of all, it's not material to power. We would have disclosed it. And then secondly, we would have liked to disclose it. But as I mentioned in Graham's question, you're dealing with people, businesses here. And often in these circumstances, the principals are the founders. And in the agreements, we have confidentiality agreements to state that we can't state the purchase price at this point. So that's awkward from a disclosure point of view, but it's not material amounts of money. So that's a polite way, Doug, of saying I can't tell you the answer to the first part of your question. I think where you went there is with the metrics as to what we're looking for. I think at this point, when Cigar is doing these transactions, it's about value creation right now, and ultimately it's going to be at the GP level about earnings. but they are building up their scale big time. And so they're at 15 billion of AUM. They get another nine US out of the performance equity transaction, but also in a great new sector. The CLO is a smaller AUM than that, but gives them additional products. And the ADQ, Lunate, and BMO deal, they bought an equity position, diluted us, in that process, but put cash into cigar and that validated the value creation. So we marked, if you remember, we marked cigar up on our books. I think it was a double in terms of the value. It was somewhere around a double. So there's a metric of success. It's not producing earnings that will move the dial at power for the time being, but the value that validated two third parties coming in and doubled the value we had at Cigar. But they also put cash into Cigar. So the acquisitions that they're making of performance equity and HealthyPoint is really, you know, that's not, we didn't have to throw cash in there as power. That's cash that Cigar now has in its treasury through Cigar. through those transactions and other sources, through the EDQ and the BMO, and they had some cash in there. So we haven't been injecting capital, but they're building out their scale, they're building out their value, and therefore, what do I expect out of that? I expect that you're going to see continued increase in the value of our position in Cigar over time as they build out their scale and their position, and ultimately, it'll be producing earnings. The final thing I'll say on it is that, you know, there's a little bit of a, how much do we want to show profit today versus how successful do we want Cigar ultimately to be? And so, you know, we're at a point where if we wanted to drive some earnings through it, you know, there's enough revenue there that we could drive some earnings out, but is it going to make a difference to PowerCorp on our P&L? No. And so you end up saying, well, let's keep investing. We've got some cash here. Let's keep building up the scale and make this into a much bigger business three, four, five years from now. And that's kind of the internal discussions that we have. Final thing, I think we disclosed the fee revenue for Cigar, and I think it was, I'm looking at someone here. We have it in our statements. I think if you go back, correct me if I'm wrong, just in the past year, it was $135 million, $137 million U.S., which Translate 175 Canadian. So 137, 135 US. I'm just going by memory here. So that's the run rate for the last year. So, you know, we've got to regard it as built up. We're just on the fees, the steady fees they're earning from their funds. They've got $175 million. This is a real business. It's got scale. And they're trying to build that scale by these transactions into something even bigger. And ultimately, that is a contribution. Wrong answer, Doug? But yeah, there you go.

I appreciate it. And so the cash that you're using to buy these entities or the stakes in these entities is actually not part of the $0.9 billion that you at the hold go. This is coming out of liquidity at Sager. Do I have that correct? Yep, that's it. Okay. Okay. And then, in fact, just on Graham's question, let's follow up on that one in terms of buybacks. It sounds like either you're going to use the liquidity at the holdco, which is about $100 million in excess of what you want to hold, it sounds like, and then otherwise standalone businesses being sold. Is there any other kind of lever you can pull to kind of finance buybacks?

For sure. Secondaries, capital out of some of our positions in the in the strategies that we have. That was part of what I answered in Graham. We raised, I think, over $300 million by doing a secondary of our position in Cigar III, which Cigar III Fund is a European private equity fund. I'm looking around. It's over $300 million. $330 million. We raised $330 million. That was a couple of years ago. We've done some other small secondaries. We look across the funds. So what ends up happening, you launch a new fund, Doug, and the sponsor, especially on a first fund, say, well, we want to see the sponsors put up $200 million of capital if you're going to raise this $500 million fund. So we end up putting up a bunch of capital on the first fund. And then it grows. And three, four years later, the fund has done really well. We're under the second fund. We won't have to put up $50 million in the second fund because because we were successful. And now our 200 million has got a position of 350 million because I'm making these numbers up, okay? Like I'm just giving you an example. And the fund is three, four years old. And there's a lot of buyers of secondary positions because a lot of, for a bunch of reasons I won't get into, but a lot of buyers in secondary positions. And we, at that point, can take our 350 off the table and go and sell it. So we're always looking at the 2.5 billion that we have in the seed capital pool and saying, where can we harvest that? Where can we take 100 off here or 200 off? So it's not just a standalone. It's actually harvesting. And some of that goes back into seeding new funds, and some of that comes back to PowerCorp, and we buy shares back.

Okay. Okay, that makes sense. And then just on standalone businesses, just correct me if I'm wrong, if you were to sell them and you kind of show what you hold them at carrying value, I mean, that would be marginal. It's marginal. But if you're marginally positive to operating EPS and that frees up, cash to buy back shares. Do I have that right?

You have it perfectly right. So to make your point, when we closed the reorganization in February of 2020, we had on closing 683 million shares outstanding, and we bought back 38 million over the last three, call it four years. We had 8 million shares 7 million options exercised. So we net bought back 31 million shares. So we have 652 at the end of the year. So that's 31 million less. We have a dividend at this rate of two and a quarter. So you can do the math. We have about $70 million less in dividend obligations in the aggregate, which flows through to our cash flow. And we've raised 750 or a billion dollars, wherever it is, on selling a bunch of other assets. And we put that to back into cash flows. That's another 25 million shares at 40 bucks. You can do the math. So every time we do this, we're increasing our, not only our NAV, when we're buying back shares at a 25% discount, we're increasing our earnings because we've got less shares outstanding and we create a lot of more cash flow. So that's, you got it exactly.

Yeah. And then just lastly, I'm going to do this question or this statement, but it's like the 48 million negative impact on the mechanics of how it works. Why is that not an adjusting item?

That's a good question. I'm not touching that one. Wait, wait, this is the one for Jake. Jake, you've been here for years.

I think that is a fair question. That is one that we've toyed with in the past. That could be a candidate for just putting it into the adjustments. And it would be more in line with what we see as the type of adjustments that Great West does. And just on fair value, like kind of unexpected fair values, how they affect your earnings as opposed to your run rate. So they would be in our earnings, but it would be, it could be, I'm not saying it will be, but it could be part of the adjustments.

That's one to take off on. Appreciate it, thanks. Okay, Doug, thank you.

There are no further questions. I would like to turn the conference back over to Mr. Jeffrey Orr for any closing remarks. Please go ahead.

Okay. Thank you again, everyone, for being with us this morning, and we look forward to talking to everyone soon, and have a great day. Thanks a lot. Bye-bye now. Thanks, operator. You can terminate the call.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.