Power Corporation of Canada

Good morning ladies and gentlemen and welcome to the Power Corporation second quarter 2026 earnings conference call. At this time all lines are in listen-only mode. Following the presentation we will conduct a question and answer session. Analysts who wish to join the question queue may press star then 1 at any point throughout the call. If anyone has difficulties hearing the conference Please press star then zero for operator assistance at any time. I would like to remind everyone that this call is being recorded on Friday, July 31st, 2026. I would now like to turn the conference over to Mr. Stephen Hung, Head of Investor Relations for Power Corporation. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us for Power Corporation's second quarter 2026 results call. Before we begin, A link to the audio webcast and materials for this call have been posted to our website at powercorporation.com under the Investors tab. Please turn to slide two. I would like to draw your attention to the cautionary note regarding the use of forward-looking statements which form part of today's remarks. Please also refer to slide three for a note on the use of non-IFRS measures and clarifications on adjusted net asset value. To discuss our results today are James O'Sullivan, who is appointed President and CEO of Power Corporation on July 1st, 2026, and Jake Lawrence, our EVP and CFO. We will begin with opening remarks, followed by a question and answer session. With that, I'll turn the call over to James.

All right. Well, thank you, Steve. Good morning, everyone, and thank you for joining us today. Before turning to the results, I want to share some high-level thoughts. Power has an exceptional culture and team, working with its partners right across the group. Having formerly led one of the public operating companies, I understand how Power creates value through active ownership and enables strong collaboration across leadership, capital allocation, strategy, and risk. The strong partnership across the Power Group of companies will continue to drive strong shareholder returns. Second, power has made strong progress against its value creation strategy and investors have benefited from strong total shareholder returns. Power will maintain continuity in strategy and no major changes are anticipated. Transparency and communication remain a top priority and we look forward to engaging with you directly. Thirdly, in terms of capital allocation, Power will remain focused on investing organically in existing businesses while being strategic in M&A. Return of capital through dividends and share buybacks will remain a key priority. Power is a patient investor with a longer term time horizon and decisions are made thoughtfully. Building on the strong execution of the value creation strategy under Jeff Orr's tenure, Power will maintain ongoing momentum. I look forward to your continued support, engagement, and dialogue over time. Now, turning to the results, Power reported a strong quarter with record adjusted EPS of $1.55. The results reflected strong earnings growth from Great West and IGM, continued value creation from our NAV-based businesses, as well as a decreasing share count. Power's net asset value grew 74% year over year, led by our publicly traded operating companies. Great West and IGM continue to track well against their respective medium-term financial objectives. Great West surpassed 19% base ROE for the second straight quarter and both companies demonstrated strong double-digit adjusted EPS growth. On the NAV-based investments in our portfolio, Wealthsimple posted strong AUA and client growth and the business momentum supported a 15% fair value increase in Wealthsimple. At Cigar, Power also recognized an 11% increase in fair value. Great West announced the acquisition of Milliman through its Empower subsidiary.

This will enhance its capabilities and contribute to it winning more business.

Power also took another step in simplifying our operations by agreeing to sell our interest in LMPG. Power returned $1.5 billion to shareholders in the first half of the year, and buybacks remain an attractive use of capital, with Power trading at a 20% discount. Finally, Power has delivered strong historical returns for shareholders over the short and long terms. As a former CEO of an operating subsidiary, I can attest to the power of active ownership. With that overview, I'll pass it over to Jake to walk through the financial update and business review.

Great. Thanks, James, and good day to everyone joining us today on the line and webcast. I'm going to begin on slide seven. As you can see, Great West, IGM, and GBL have all reported their respective results over the course of the week, which I think helps us obviously present today. Turning to slide eight, powers adjusted net earnings were $974 million. That is up 10% year over year. are adjusted EPS of $1.55, which, as James noted, is the highest quarterly EPS power has reported and is up 12% compared to Q2 last year. On a reported basis, powers net earnings were $690 million and EPS was $1.10. The Great West contribution to powers adjusted net earnings was $871 million, up 10% versus last year. The results were led by double-digit base earnings growth at Empower, as well as very strong double digit growth in the capital and risk solutions business. IGM's contribution in the quarter was $211 million and that is up 34% year over year, very strong. And that was led by double digit growth from both the wealth and the asset management business segments. Turning to powers now focused businesses, GBL and Power Sustainable reported a modest loss of $5 and $4 million respectively. Meanwhile, Cigar contributed positive adjusted net earnings of $33 million with positive net carry in asset management and the fair value increases in private equity from our investing activities. Corporate operations and other activities contributed a loss of $112 million in the quarter. Turning to the next slide, slide nine, NAB for share was $1.1294 at the end of Q2. As James mentioned, NAV for Share is up 74% year-over-year, and it's up 34% quarter-over-quarter. The composition of our gross asset value of $77.4 billion continues to be anchored by our earnings-based businesses. Importantly, I'd note, 91% of our gross asset value is related to our public companies, Great West, IGM, and GBL. And when we include cash, this rises to 94%. As of last night's close, the adjusted NAV per share stood at $116.01, reflecting further appreciation in our listed holdings since quarter end. Turning to our other investments, the fair value of Powers Wealthsimple position was $1.7 billion net of carried interest. That's up 15% from last quarter, and that's in addition to an increase at the end of 2025. The increase in fair value was supported by stronger business performance and improved revenue expectations at Wealthsimple. The fair value of our ownership in Cigar had also increased in the quarter, up 11%, and that reflects the platform's continued expansion of capabilities and increasing scale. In Q2, Power also agreed to sell our interest in LMPG, as James noted, and that resulted in a small NAV reduction of $41 million. and then lastly Powers Cash and cash equivalents were $2.2 billion at the end of the quarter, up from $1.7 billion in the same period last year. Next, I'll walk through the businesses starting on slide 10. Starting with Great West who reported a strong quarter, base EPS of $1.42 was up 15% from $1.24 in Q2 of 25, reflecting sustained top line momentum, operating leverage as well as the impact of share buybacks. Base ROE at Great West was 19.3 for the quarter. That achieves the company's 19% plus midterm objective for the second straight quarter. As I mentioned, Empower and Capital Risk Solutions both delivered double digit growth. Cash at Great West Holding Company was 2.5 billion at the end of the quarter, supporting continued capital flexibility. Great West repurchased $925 million of its shares on a year-to-date basis. Total capital deployment between share buybacks and the M&A transaction of acquiring Milliman's defined benefit business is expected to be at least the same level as 2025 at $1.6 billion. Looking closer at Empower on slide 11, year-over-year base earnings growth was strong, up 34% on a constant currency basis. In the retirement business, client assets crossed $2 trillion for the first time. This quarter, Empower also announced the acquisition of Milliman's defined benefit business, strengthening the company's offering to plan sponsors. The transaction is expected to close in the second half of 26. It's going to add 1.5 million participants and an additional $130 billion of client assets in the retirement business. Next, turning to slide 12. IGM reported a record quarter of adjusted EPS at $1.41, up 32% year-over-year and ahead of its 9% medium-term earnings target. The results were supported by double-digit earnings growth across each business segment. On a year-to-date basis, IGM returned $386 million to shareholders through a combination of share repurchases and dividends paid. Net flows across IG Wealth and McKinsey were strong at $2.2 billion. And record-ending AUM&A, including strategic investments of $622 billion, was up 19% year-over-year and an increase of 9% from last quarter. IGM also announced a multi-year initiative to simplify the organization and accelerate investment in key technology capabilities, such as AI, to strengthen the business. Turning to slide 13, which takes a deeper look at IGM's results, on a year-over-year basis and by business segment, wealth management grew 33%, asset management grew 31%, while corporate and other, which primarily reflects IGM's proportionate share of Great West-based earnings, grew 17%. The wealth business reported record high AUM&A of $176.6 billion, up 20% versus Q2 of 2025. It was also a record second quarter of gross inflows and sales, and the 19th consecutive quarter of positive net flows. In asset management, retail net sales of $217 million improved by $360 million from Q2 of 25, reflecting the business's fourth consecutive quarter of positive retail investment fund net sales. Turning to the next slide, which shows our strategic investments at IGM, They continued to see impressive client asset growth. On a year-over-year basis, Rockefeller's client assets grew 37% to $318.5 billion, China's MCAUM was up 12% to $608 billion, and Northleaf increased client assets 13% to $37.1 billion. These investments significantly broadened IGM's long-term growth profile. Now moving to slide 15. As you heard earlier, Wealthsimple's strong business momentum continues as it further increases its scale. Wealthsimple's AUA increase of $30.8 billion from Q1 reflects the company's largest quarter-over-quarter growth in its history. The growth was driven by strong net flows of approximately $17 billion. Power's collective group interest in Wealthsimple, net of carried interest now stands at $4.4 billion, up 15% year-over-year. This includes 2.6 billion at IGM, 1.7 billion at PowerCorp, and the balance at Great West & Other. Now turning to GBL on slide 16. The business has made strong progress on its medium-term plan for portfolio simplification with disposals of more than Euro 5 billion across listed companies and non-core asset sales. Meanwhile, GBL will continue to deploy Euro 2.3 billion into direct private assets through controlled or co-controlled positions. On a year-to-date basis, GBL continued to return capital to shareholders with Euro 773 million of buybacks and dividends. All of these actions are consistent with GBL's strategy of increasing direct private assets while returning capital to shareholders. Moving to our alternative asset management platforms on slide 17, which reported total AUM of 69.4 billion at quarter end. These businesses remain focused on increasing scale and growing AUM. On April 2nd, Cigard closed the previously announced acquisition of Unigestion, which added 15.1 billion of AUM. And despite the challenging fundraising market, Cigard delivered tangible results with approximately $2.6 billion raised in the first half of 2026. This fundraising was led by strategies in real estate, private equity, venture capital, as well as credit. Meanwhile, Power Sustainable's focus remains on converting its momentum into durable third-party AUM, maintaining disciplined investment and risk management, and building a larger, scalable, and increasingly profitable alternatives platform. During the quarter, we saw further developments, including SIGGARD Credit Fund 3 announced a US $1 billion of initial commitments towards its $2 billion targets. And this is investments focused on senior unsecured financing to mid-market companies across Canada and the US. Also during the quarter, SIGGARD launched the US $150 million AI fund that will be focused on AI infrastructure, cybersecurity, governance, customer experience, customer engagement, and agentic workflows. And with that, I'm going to turn the call back over to James for some thoughts on value creation and then concluding with closing remarks.

All right. Thanks, Jake. Power Corporation remains focused on building the momentum in its value creation strategy. Slide 19 shows the aggregate capital return to participating shareholders since 2020. Over $12 billion in dividends and share repurchases since we began that program. Returning capital to our shareholders will remain a priority. Moving to slide 20, you can see the strong NAV growth PowerCorp has delivered since 2020 with a 20% compound annual growth rate. While the NAV discount is topical, I believe that as Power continues to demonstrate and communicate the value addition from its active ownership, the trading discount can and will meaningfully narrow. Next, slide 21 tracks the discount to NAV since 2015. PowerCorp is a very different company today versus pre-reorganization. At a 20% discount currently, there is much more room to narrow, in my view, and Power can focus on adding value by growing the company's net asset value delivering recurring and predictable returns, continuing to simplify the company over time, and I think communicating the strong value proposition as one power share essentially gets an investor 0.98 of a Great West Life share and everything else for free, including an interest in IGM, GBL, cigar, power sustainable, Wealthsimple, and the cash position of $2.2 billion. Moving to slide 22, Power's total shareholder returns have materially outperformed both the S&P TSX Financials Index and the broader S&P TSX Composite over the measured periods, including the 1, 3, 5, 10 and 30-year periods. We believe these results reflect the successful execution of our value creation strategy and Power will build on that strong foundation. Turning to the next slide. Looking ahead, Power is well positioned to generate further attractive returns for shareholders. The three pillars remain firmly in place. First, our earnings-focused businesses are showing strong momentum against medium-term objectives. Great West and IGM should provide low to mid-teens returns as they continue to track well against the respective adjusted EPS growth plus dividend yields. Second, our NAV-based businesses also offer long-term value creation. GBL is targeting medium-term double-digit TSR, and Wealthsimple continues to grow at a remarkable rate. Power's alternative investment platforms continue to scale their respective platforms. Third, our balance sheet is strong, with $1.8 billion of available cash supporting continued and growing return of capital through dividends and share buybacks, which in turn drives per share growth in NAV, earnings, and dividends. I am confident with the foundation and momentum that Power and its group of companies have been able to deliver against its objectives. This quarter was another example of the strong execution of the value creation strategy that I look forward to continuing to build upon. Thank you, everyone. And operator, I believe we're ready to take questions.

Thank you, sir. 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 are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. The first question comes from Doug Young with Desjardins Capital Markets. Please go ahead.

Hi, good morning. James, you mentioned at the end in your prepared remarks like simplifying the story further over time and a lot of work has been done over the last six, seven, and, you know, finally, I guess the LPMG stake has been small, but it was kind of, it was removed now. So maybe can you walk through a little bit about what else can be done to simplify the story? I have some thoughts, but I'd love to hear what you have to say. And then just thinking about timing of these items as well.

Sure. Well, good morning. You know, when I think about simplification, Doug, I think about You know, specific investments or properties that are perhaps held in more than one place. Is there an opportunity to consolidate those in a single place? I think we made great progress there between Power and IGM with China AMC a few years ago. I think that was a very good example of a simplification initiative. I also think about types of businesses that are, you know, similar, that are perhaps similar where they're owned in multiple places. Is there an opportunity to rethink, to consolidate, to make them stronger perhaps by bringing them together? You know, so I think, you know, this is a multi-year journey. I think we're well into it. There is more to do. I'm not going to attach kind of specific initiatives or specific timelines to it though. I am kind of 30 days into the job. but I think this initiative of simplification has been frankly one of the more important contributors to the market kind of really kind of recognizing the value creation within the group over the past several years. So we'll carry on with it, but it's just very difficult at this point for me to point to what's next or when it's next. But simplification is very much something that's front of mind for me.

Okay, appreciate it. And then just on Wealthsimple, you know, another revaluation this quarter. Any thoughts of, like, how often, I know there's, you know, growth and there's an explanation about why it happened this quarter, but, you know, how often should we, outside of just funding rounds, should we expect, you know, revaluation of Wealthsimple? And, you know, what else can we expect maybe disclosure-wise? Because, to get a sense of how to think about the valuation of Wealthsimple.

Good question. A couple of thoughts on Wealthsimple. The first thing I would say is I've served on the board there now for a couple of years. We just had a board meeting on Monday of this week. Momentum has never been stronger. Their performance against their KPIs is very, very strong. I think the company continues to move Doug from strength to strength and so you know to your specific question what I would say is the value is revisited every quarter we have a rigorous process internally led by the team at IGM it includes people at power it includes external people as well we're obliged to look at it every quarter and we do look at it every quarter and it was really the remarkable progress relative to Plan frankly and the forward outlook for the business that resulted in the 15% increase. So Plan, performance against Plan and Outlook are the biggest, biggest drivers and those are what support the increase. We did disclose, I think Jake just spoke briefly to the flows in Wealthsimple for the quarter. So that is additive in terms of disclosure. I think to this point we've disclosed assets, we've disclosed clients, Now we've got flows. I think your point is a very reasonable one. I think as this becomes a bigger and bigger share of IGM, as it becomes a bigger share of Power Corp, indeed, on a consolidated basis, the market will be looking for and deserves incremental disclosure, and we'll do what we can in pursuit of that. I think it's a reasonable request.

I appreciate the color. Thank you.

Thank you. The next question comes from Matthew Fortini with CIBC. Please go ahead.

Hey, good morning. Matthew on for Scott here. Thanks for taking the question. I just want to ask about the wealth simple revaluation since we didn't get the chance to ask on the IGM call yesterday. Clearly the impressive 17 billion of net flows in the quarter was a significant factor. I'm wondering if you can give some colour into what drove those flows, in the quarter, and where or what product lines they were concentrated in across the platform. Thanks.

Yeah, thanks for the question. Very, very broad-based. You know, the remarkable thing about Wealthsimple is that it's not just a trading platform, although it is that, and it's a very good one at that. But it's trading, it's investing, it's saving, it's banking, it's crypto, it's tax. and soon, no doubt, it will be predictions. And I can assure you that there's good growth kind of across the board. Their trading business in particular is just moving from kind of strength to strength and you see that in the flows. And they're also, as you know, driving very strong flows from kind of the domestic competition. Some of those are wealth managers, some of them are banks, but it's coming into the Well Simple ecosystem. And I think the real strength of Well Simple is that when they get a customer, when they get flows, they get to know you real quickly and they get to know what the right next product is for you. So the flows are really just step one in terms of building a deep and sustainable relationship. And I think that's part of their secret sauce, frankly.

Okay, thanks. And maybe another quick one from me. On the LMPG sale, can you give us a sense of how much the business was carried out in the NAV and should we expect the proceeds to further support the buyback or do you have another use of the proceeds in mind? Thanks.

So it was marked on the book just under 90 million. The proceeds will be about half of that. We expect those proceeds to come in during Q3, later today, frankly, if all goes according to plan. and frankly it's with our cash balance at 2.2 and are available at 1.8 that amount coming in is it's quite fungible it's just going to move in and so it'll be part of our overall capital allocation strategy it doesn't really skew us to say oh this this incremental amount will go to this activity so it'll just fall into our overall pool of capital that we have available to make choices with.

Okay awesome that's great color thank you I'll pass it on. The next question comes from Michael McHugh from TD Securities. Please go ahead.

Hi, good morning. Just in for Graham here. Just first question, obviously the buyback is topical. Just notice with IGM accelerating the pace of their buyback, the ownership stake has started to creep up a little bit. at the power level, and just wondering if there's any sort of intention to maintain a certain ownership stake in the way that you have by participating in the Great West buyback.

Yes, James, I'll start, and then Jake will add to it. You know, I mean, where I'd start is we do own a higher, we have a higher shareholding measured in percentage terms in Great West life than we do in IGM. And to be perfectly candid, I'm very happy to own more IGM. And so if that occurs as a result of not participating in their buyback, I think it's just fine. I have exceptionally high regard for their core businesses and their strategic businesses. I think they've been re-architected for growth, for diversification, and I think the market is increasingly recognizing that. Having said all of that, we'll revisit this. By this, I mean whether we should or should not participate in IGM's share buybacks. We'll revisit it as we move through the year and as they start to think about what they might do next year. But certainly, for the time being, I'm very happy, we are very happy to own more of IGM. And one way that I look at this is that that buyback, which is substantial at 5%, I think that provides very strong support for the minority shareholders of IGM. And I think they deserve it, and I'm very happy to see that. So I think everyone gets something here. The minority shareholders get a stronger market with strong support in the market, and we get to own a bit more of a great business. James, I think it's good to answer, nothing to add.

Great. And then just if I may, a second one, just the outlook on fundraising for the remainder of the year, just sort of at the cigar level holistically, and then specifically as regards to the private credit fund, looks like we're about halfway to the $2 billion target. Just the outlook for the remainder of 2026.

Yeah, I think 2026 has been an interesting year, just given all the volatility and uncertainty and different events that have taken place. And that's that obviously impacts allocators of capital, particularly in the investment space. So Cigar, as I noted, has had a good start to the year at about $2.6 billion. I think on the IGM call, they noted a strong quarter from Northleaf as well. So in terms of outlook, we're hoping it continues at or near the pace we're at now for the balance of the year. We've seen strength so far this year around real estate, private equity, Portage closed fund four on the VC side. That went well. and as you noted, credit has done fine. I know there's lots of newspaper articles and I just remind people that the credit business at Cigar is mid-market. It has de minimis exposure into the software space and it's very much focused on, I'd say, that mid-market cash flow and EBITDA business. So their strategies under Adam Vigna have performed well and that's why they've been able to fundraise in this space and are halfway to the 2 billion goal. So we're optimistic that The challenging fundraising space that existed probably for part of 24 through 25 and into 26 starts to subside, and we see some stronger ones, but we're encouraged. I think part of the strategy that I'd note also is away from the organic fundraising, we did close any gesture on in the quarter, and now we see Cigar at almost 70 billion Canadian AUM, and that really creates a nice earnings management stream for them as we move forward.

Okay, great. Thank you. That's all I had. Appreciate it.

Thank you. The next question comes from Bart Jarski with RBC. Please go ahead.

Hi, good morning. Thanks for taking my questions. Maybe just on the SHMI revaluation, could you unpack the drivers of that between, I guess, the Wealthsimple mark would have had a flow through and the Bex deal closing? Thanks.

Yeah. Hey Bart, thanks for the question. So yeah, the Cigar Revaluation in the quarter is up 11% and I was just commenting on the Unigest John transaction. Obviously, Beck's also has closed recently. A revaluation on the business was done in the second half of 25 and since then, lots of great milestones have taken place. So they're now through that easily 50 billion Canadian assets under management. They continue to build out capabilities. The Unigest John and Beck's transactions bring in much stronger capabilities in Europe and a much stronger private equities platform with secondaries, primary and co-ownership. I'd say one of the interesting things is the forecast and the earnings of the business is as strong as it's been in the past several years and continues to grow well. I think the trick is when we look at the valuations of all managers, which I think I know you do full-time in your day job, those valuations have compressed. If we go back a year when things were trading at 30 times FRE, this would have been a much higher revaluation. But we're still quite encouraged at the 11% mark, which does reflect the growing management fees, which does reflect the carry, as you note, in the business, which has been quite strong from Wealthsimple, but also from other investments within the venture cap and private equity portfolios. and it really represents a strong maturing business that deserves a higher valuation and we expect that to continue over time and we'll revisit when it deserves it. Much like Wealthsimple, there's third-party investors here so there is an independent party involved in this valuation exercise and so we find ourselves very comfortable with the market and are quite happy to see Cigar valued north of a billion dollars as we leave the quarter.

Thanks, Jake. That's very helpful. And maybe just a follow-up for James. I know you're 30 days in the seat, James, but would love any early observations from your seat now at Power versus IGN as to early takes, early reads. What surprised you? What are you seeing there? Thanks so much.

Sure. Well, okay, a few thoughts. I mean, the first thing I would say is that I think the market is clearly recognizing the accomplishments right across this group that have been years in the making. And so I do want to emphasize what I said in my prepared remarks, which is that the principal theme as we sit here today is kind of continuity and strategy. There's not going to be any sharp turns. No turns left, no turns right. Our goal very much is to maintain the momentum that we have built over the past several years. And I think the way we're going to maintain momentum is through what we call active ownership. You know, PowerCorp has had a mission statement for some number of years on our website. And for me, the key words in it are active ownership. We add value kind of vertically through the group. We add value horizontally across the group. and we do that by being good active owners. So we lean in on strategy, capital allocation, people, risk, but all of that I think is very, very additive to the value both of the publicly traded operating companies as well as PowerCorp overall. You know, maybe just a thought on priorities. You know, for me, always sustainably growing the dividend is job number one over time. I mean, that's the principal way of returning cash and certainly the most regular way of returning cash to shareholders. A critically important driver, I think, of total shareholder return. So we want to sustainably grow the dividend. This management team is very committed to growing the net asset value, and we're going to do what we can. to narrow the trading discount. And I think the way to narrow the trading discount is going to be to really focus on the quality of our active ownership. We need to do it and we need to communicate it. And there's lots of levers for us to pull along the way. I think we've been very clear over the years that if you look at our operating companies, they have remarkable growth opportunities, both organically and inorganically. and there's plenty for us to do up top at PowerCorp. We can grow the alternatives businesses, that's a priority. We can continue to simplify as we discussed earlier and we can buy back shares. There's gonna be lots to do I think to drive value and so let me just summarize by saying I'm very excited to be here. I look forward to meeting each of you on the line and communicating a path forward that I'm confident will create more value for our shareholders.

Thanks so much, James. Welcome to the seat.

Thank you. Thank you. There are no further questions. I would like to turn the conference back over to Mr. Stephen Hung for any closing remarks.

Thank you for joining us today. Following the call, the telephone replay will be available later this morning, and the webcast will be archived on our website, saparacorporation.com, for one year. We look forward to our next update on our Q3 results and have a great summer. This concludes the call.

Thank you. Ladies and gentlemen, this concludes your conference call for today. Thank you for participating and you may now disconnect your lines.