Power Corporation of Canada

TSX:POW

Earnings Call Transcript 2020-Q2

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Power Corporation of Canada Earnings Call Second Quarter 2020 Conference Call. [Operator Instruction]. I would like to now hand the conference over to your speaker today, Jeffrey Orr, President and CEO. Please go ahead, sir.

[Robert Jeffrey Orr, President, CEO & Director]

Thank you, operator, and good morning, everyone. Thanks for joining us this morning. Welcome to our second quarterly analyst and investor call. We had a very strong quarter across the group from a financial results point of view. We also continued to push very hard in advancing the strategic agenda that we have been talking about and telling you about over the last few quarters. And we'll try and give you a sense of that through today's call, while still leaving a lot of time for questions, hopefully, as we move into that part of the call. Pages 2 and 3 of the presentation are the standard disclaimers and cautions regarding forward-looking information.Page 4 is our participants with me today digitally, not with me physically but digitally is Greg Tretiak, who is the Executive Vice President and Chief Financial Officer of Power Corp.And I'm going to then moving forward to Page 6. We have just the other investor calls and investor presentations that were made by companies in our group. And this call is not intended to duplicate those calls and cover the information that they called -- covered. It's really meant to complement them and then really give the Power Corp. lens on our group developments. And so hopefully, if you've got specific questions on Lifeco or IGM or GBL, you can follow up directly with those companies. Let me turn then just very quickly to Page 7, which is the Power Corp. highlights. I'm pleased to start off at the top with the recognition that Power Corp. received and being included in the Corporate Knights of top 50 best corporate citizens. And it's really to make the broader point. We're in a COVID-19 environment, a lot of scrutiny on the role of companies and what they're playing in our society. And I think we're very well positioned because Power Corp., our operating companies, Great-West, Canada Life, Investors Group, IG, Wealth, Mackenzie across the group, for decades, have put a big emphasis on investing in the communities, giving back, being good corporate citizens. We didn't always tell that story very well. In the last several years, we've really made an effort to tell the story and document it and Corporate Knights is just one of many, many recognitions we've received. There's a few -- more information in the appendices and also on our website, you'll see we have dedicated corporate social responsibility pages talking about what we do and how we've been recognized. And I think in a world of ESG investing -- I mean, that's why we have done it, but in a world of ESG investing becoming more and more important, that's going to keep us in very good -- put us in a very good position going forward. 3 strategic transactions and announcements that were made, but there's a lot more going on than that. I'll try and give you a sense of that, and I'm going to talk about it during the presentation, so I won't spend any more time here on Page 7. What I will do is pass the microphone to Greg Tretiak, who will go through our financial results over the next few slides. Greg?

[Gregory Dennis Tretiak, Executive VP & CFO]

Okay. Thank you, Jeff. Good morning. To all those on the line. I'm on Page 8. Net earnings for the quarter were $0.99. Adjusted net earnings $0.79, which was up sharply sequentially from the $0.62 in Q1 and compares very favorably to last year's $0.83, given it was a COVID quarter. And net -- the NAV at the end of the quarter was $32.96, up 7% from Q1. And after Lifeco, IGM and Pargesa had reported last week, we have a NAV of $35.53 on August 7. With that, I'll go to Page 9. Just to give you a little color on the results and the contributions from all the component parts of PCC, you've heard already Great-West Life and IGM had a strong and good quarter this last quarter, up sharply from the one quarter that you can see there on the page. Pargesa, is reflecting some of the dividend pressure on its portfolio companies and I would note that our economic interest is up a snick over what it was in Q1. I think we're up about 1.4% in terms of our interest, economic interest in Pargesa. The corporate operations there is basically the expenses of Power Financial. And you can see further down the page, the corporate operations, again, which are the expenses in PCC. Both of those are reflecting the work that we've been doing to achieve our goal of $50 million. And of course, in part reflecting COVID-related reductions and expenses during the quarter as well, but trending down nicely quarter-over-quarter. Other investments, which includes Sagard Holdings and Power Sustainable Capital, you can see that line. Quiet quarter in terms of realizations. But unrealized gains were up in the quarter quite nicely, $86 million or 16%, most of that coming from our China A share portfolio at Power Pacific, which was up nicely in the quarter, and you'll see further in the slide, up almost 40% year-to-date. So the market in China is performing very well. And also, our European portfolio at Sagard Holdings was up in the quarter. China AMC. Again, we have a slide further on, but -- and you would have heard from IGM last week that it had another very good quarter, up 28% in terms of profit. And that reflects China's emergence from COVID-19, which is happening rather quickly or I should say, quicker than we are experiencing in North America. And with that, I would turn it back to Mr. Orr.

[Robert Jeffrey Orr, President, CEO & Director]

Okay, great. Thank you. So I'll move forward then to Page 10 in the presentation. And as Greg mentioned, this was a very strong quarter. Yes, it's COVID-19, but the companies have performed very well. We think we're well positioned from a balance sheet point of view, from a business model point of view. The nature of our business, we think, positions us very well. I think I would like to focus on the bottom part of the page. We are continuing to push forward. I think our attitude very much is -- yes, we're being cautious with liquidity, but we're playing offense. And the focus of the group at Power within our operating businesses are very much focused on offense and moving our businesses forward. You see that with our willingness to do transactions in this environment. But also, we continue to enhance our operating platforms, the business models, our client offerings, that's been going on at a frenetic pace for the last several years. We are, across the group, growing in our optimism about how we're building momentum across the different client franchises around the world, across Great-West platform across IGM's platforms. And then at the bottom of the page, at the Power level, we're very intensely focused on pursuing a strategy that we outlined and spoke to many investors and analysts as part of the reorganization. It may seem at the bottom of the page, good progress on our investment platform, Sagard Holdings and Power Sustainable Capital, but it's broader than that. It goes right across all of the elements of what we're trying to do with power.Let me flip you to Page 11, a slide you will have seen before. But this is really -- we find it very helpful to think about our activities in these buckets. We think as we are pursuing our value creation strategy, we've got 3 levers that we're pulling on. The first one is kind of all of the businesses going on internally across the Canada Life, the IG Wealth Management, the Mackenzie, the Empower's, our asset management businesses, our U.K. Canada Life business, Irish Life, Germany, our group insurance -- insurance and risk group at Great-West, just huge amounts of efforts. And as I said, that continues with strong momentum being built across those platforms. In addition to that, there's the M&A leaders that we have. And it's really deploying capital or in the case of some -- as you've seen with us in the last couple of years, it could involve getting out of businesses that we don't think are going to serve us well over time. And then we've got the third level, which is things we do at the Power Corp. level. And we are pulling aggressively on all 3 levers. And as I go through some of the slides coming up, while trying to put those in context for you and where they fit. Page 12 is a lever 1 organically, and this just focuses on digital. This doesn't state the entire strategies of the companies, but continued strong investment in digital capabilities at Canada Life, for example, on the individual side. SimpleProtect was launched last year to enable advisers to do all of their new business origination for life on basically a digital platform with very quick turnaround, and that's been extended into other products. And really thank goodness that was launched because with COVID-19 forcing everybody into a digital way of operating. We didn't launch it last year with that in mind, but we're very, very pleased that we did as a result. And then the second bullet point on the group side, I think our group business platform is very, very strong. And we are in a position where most of the transactions are happening digitally, and they're continuing to enhance that. And then in IGM, some -- again, fortuitous launch of a new adviser portal in the fourth quarter of 2009. And when COVID-19 comes on, you get very, very strong adoptions. Normally, when you put new technologies in with advisers, that take a long time to get adoption, but all of a sudden, it's that or it's very difficult to do business. So we've had very good take up. And with Conquest later in the year, we think we're going to take our planning advantage, which IG Wealth has, we think, relative to other financial services companies. We're going to take that to a whole new level with the next-generation of financial planning tools. So lots happening on the lever 1 organic side of the business. Page 13, this is a bit of a look back over the last 18 months or so on the lever 2 and 3, M&A activity and things we're doing at the holding company level. I would say it's been a frenetic pace. We have been -- and these are 6 things that we've announced publicly. It's like an iceberg. You see some things above the water, there's a lot more under the water that's been going on. But these are things that have come to fruition. The sale of Great-West Lifeco's U.S. life business announced in just January of 2019, some 18 months ago, which gave rise to Great-West Life doing the share buyback, and that gave rise to the possibility of Power Financial and Power Corp. being able to do a simultaneous buyback and, in effect, arbitrage the net asset value discount by selling shares at the net asset value and buying their own shares back at a discount, and that popped our NAV, which we think created shareholder value at both Power Financial and Power Corp. levels. The big announcement in December of the collapse of the dual holding company structure, and just as importantly, a more focused strategy as well as cost initiatives and launching an NCIB, although temporarily suspended due to the current environment in COVID-19. Then we followed up in March with an effect the same type of simplifying transaction with Pargesa and GBL. And then -- and in this quarter, that was approved, as I will -- you'll see -- you probably have seen, we've announced the acquisition of Personal Capital and then the GLC, Great-West Life Mackenzie transaction, which I'll talk more about in the pages that follow. So just very, very busy, and we are keeping the pedal to the metal to continue to use lever 2 and lever 3 tools to enhance our value. So on Page 14, I'll say a couple of comments about the Personal Capital transaction, Great-West would have spoken about it. I guess at a very high level, we have a great defined contribution group retirement business in the United States and Power is the second largest business. What really unlocks the economics of a group retirement business is coupling it with a direct-to-consumer retail capability. The best example of that is Fidelity and it really unlocks the economics. We have been on a road -- you've got 1 option, you can build it. We were on the road of building it. It's a very slow process, and it takes a long, long time to get any kind of scale. We have been on the lookout for ways to acquire those capabilities. And again, it's direct-to-consumer that you need. And so you would have seen just in the last 9 months, Schwab purchased TD Ameritrade for $26 billion in the U.S.; Morgan Stanley purchased E-Trade for $13 billion, like there's not a lot of direct-to-consumer companies out there and the ones that were mature and had profitability were very, very big tickets. Personal Capital is kind of right in a sweet spot. California-based company. We think the absolutely best technology out there. A company we knew because IGM had been investing in it over the last 4 years. So we knew the company, knew the management, had gotten very comfortable with it. And it was at a price that Great-West Life could do. It was -- we paid $825 million with an earnout, could get it up to $1 billion. It was a price that Great-West Life could afford and it's been called by some expensive. Well, at its stage of development, it doesn't have earnings. And so we were able but it ended up being affordable from a size point of view and is on a very, very high-growth trajectory. This is a revenue synergy deal. And at that size, Great-West Life should make the acquisition, plug it into Empower and still leave lots of capital to go and pursue other more, if I can call them, traditional acquisitions where you get cost synergies as opposed to revenue synergies. So very excited about this transaction and more to come on that as we move forward.Page 15. Just last week, announced that Mackenzie was going to buy GLC Asset Management business -- GLC from Canada Life and going the other way that the Quadrus fund contracts, which are -- actually, the contracts are owned and the management of them are owned by Mackenzie went the other way for transaction that had a net proceeds of $145 million. This is really a win-win. It's a pure win-win. From IGM and Mackenzie's point of view, Mackenzie becomes $172 billion holder asset manager in Canada, that's -- this scale is critical in asset management. They have scale and they extend their capabilities with new products and new teams. It gets them into the -- being a very significant player in the group business, the group retirement business as a supplier there, and they end up being the -- a principal supplier to Canada Life, the primary supplier to Canada Life.From Canada Life's point of view, they end up getting a much broader and better supplier. GLC was a smaller, more narrow platform, and they end up here being supplied by Mackenzie, which has just got a much broader shelf and greater capabilities. They also, of course, have the freedom as they have to go out and get external third-party advisers when the capabilities are stronger there. So this is really going to enhance their ability to serve their clients going forward, and that's the name of the game. So very excited about this. It works for both transactions -- for both the companies, excuse me.Okay. We can move to Page 16. And -- we talked about this at the last meeting. I think the main piece of news is that it got approved since we last met. It hasn't closed yet. There's still some steps to go on there, but the shareholders approved it. That's very meaningful.And on Page 17, you have the -- what it does to our corporate structure. And basically, a period of about 6, 7 months, we've gone from the left side of the page, to the right side of the page and really taken some very meaningful steps to simplify our corporate structure. Okay. Moving forward then, moving from the M&A side of the equation and the transactional side to what's happening at Power Corp. itself. I'll take you to Page 18. The investment platforms are really where we are building out in the future, and we're taking major steps to try and bring light to what it is we're doing there, what are those businesses? How are we creating value? And the slides that you're going to see 18 and the one that's going to follow are some of our initial attempts to do that. So on Page 18, you see that we have at the first bullet point, we have $4.5 billion of AUM in the 2 platforms, Sagard Holdings and Power Sustainable Capital. But we do have total unfunded commitments of $6.4 billion. In other words, investors have committed to money that has not yet been deployed. You see -- on the left side of the page down at the bottom, you see how that is broken out between the dark blue, which is the Power Corp's AUM and the lighter blue is third-party AUM, and then the 2 bars at the top are the Power Corp, the $500 million there unfunded commitment and then the $1.4 billion is third-parties' unfunded commitments. And then you get it broken down by the different strategies on the same basis. You can see Sagard Holdings currently is funded to a very large extent by third parties across those strategies. Power Sustainable Capital, which had been a diversification strategy for Power Corp. has pivoted and is very much in the quarter focusing on raising third-party money that currently is all money that is in with its Power Corp's capital, but that -- you'll see that changing as the strategy unfolds going forward. So just kind of initial attempt to lay out for you where the money is, where the fundraising is, what the strategies are. Page 19 is then laying out for you how it works financially. And this is a work in progress. But you will see at the top of the page, you have for Sagard Holdings, what's called management activities on that table. And at the top, we're breaking out the management fees and the carried interest Sagard Holdings earns as an asset manager and their expenses. And then the second bar investment activities is what Power is earning on the seed capital that it has. So conceptually kind of 2 businesses here. You've got an asset manager and then you've got Power's capital as a seed capital investor at work. And you're seeing -- we're going to be breaking that out for you so you can differentiate the different parts of the business. The Power Sustainable Capital at the bottom is not yet there. We will be coming forward very soon with a similar breakout as to what we have at the top of the page. So we show you the economics of that business, but not yet broken out between the asset manager and the capital that we have at work. I'm going to move forward then to Page 20. I'm not sure I can add to what IGM and Greg said. On the slide here, we talk at the top of the page about the strong position that China AMC is in. It's actually also a leading institutional player, which is not on the slide. But they've continued to press forward, doing very well, great momentum and increasing share or contribution to profitability. And so we're really pleased with the momentum that's being built at China AMC and very happy with how that is playing out.Page 21. Just to point out in a COVID-19 environment, digital offerings are doing very well, and Wealthsimple has continued to build momentum through this environment. And it has also broadened out the number of services and offerings that it has, including a trading business. They've got cash products that are being offered to their clients, the tax products. And so very, very strong progress. Lots of clients coming in, growing assets under administration and growing profitability, which is all great to see.Page 22 is our stand-alone businesses. Just talks about a few highlights. And while we have said that in the future, we're not going to be making investments in one-off companies like this. That doesn't mean that we're not really pleased about the quality of the businesses that we have and that we very much believe we've got strong businesses here can provide good value to Power Corp. And yes, we've been explicit that our strategy is to realize value over time. We are going to play that in a way that we maximize value as well. And you see on the page here, some of the developments for Lumenpulse and GP and Lion, which is a very exciting electric bus and truck company, which is making good progress commercially in a very, very hot sector, a lot of demand there. So we -- right now, we have these on our books at $660 million. You can see at the bottom of the page. We think that this is another source of value creation that we can pull on in the period ahead here. Turning to 23. And Greg mentioned this up front. We continue to make progress on hitting our target of reducing our expenses by $50 million. And then I'll just say on the page, I mentioned earlier, the other parts of our strategy not covered in a slide here, is we -- I think I mentioned it earlier, the NCIB and the redemption of preferred shares. We did announce those in the fall. And I think just to reiterate where we were in the first quarter, we've temporarily put those on a hold while we watch how the environment unfolds here in a COVID-19 type environment. We'll wait to see how that goes, but those are very much part of our plans going forward. Okay. I'm going to turn to 24. This is a theme you will have heard from us a lot and really pleased about some progress we've made in the last quarter here, and that's enhancing the disclosure that we have across the group so we can enhance the visibility of what we're doing and get the market's confidence in the future the way we have confidence in the future. So Great-West Life introduced base earnings in the first quarter. I think it was well received. We've got new segment disclosure around Great West Canada, the U.S., Europe and our growing capital and risk solutions basis. And in the second quarter, they also had increased disclosure and detail on the sources of earnings. So this is a journey, but it's a journey that's picking up momentum. I think the insurance sector in general in Great-West has probably been tagged with it being a bit of a black box. I think there's a lack of visibility that analysts would have on the future of earnings growth. And I think we're doing our very, very best to try and get Great-West in a position where there's greater visibility and greater confidence so that the market shares the confidence that we have in the future growth. IGM Financial also announced that they're going to come out with new disclosure in the third quarter. They're going to talk about it in September to the marketplace and divide their earnings into Wealth Management, Asset Management and then Strategic Investments & Other. And IGM is much more of a wealth manager than it is an asset manager. And it's important the market understands the source of profitability, not to dis asset management, but simply to state the facts that it has much more of its earnings from a wealth management point of view. You're going to see that as IGM moves forward and explains where its sources of profitability is.And then continued group disclosure at the Power Corp. level. This is our second earnings call, and I've already talked about some of the increased disclosure we're making around our investment platform. So we're continuing on this journey. I'm going to make a couple of comments on the market and then wrap it up. Page 25. The insurance sector globally and in Canada has been really come off since COVID-19. The general market, the overall broader market indices basically recovered to where they were at the start of the year, but the insurance market is still down 20%, 25%, 28%. It has not followed the recovery. So the market is discounting something big or something very, very negative happening in the life sector. If you think about what the market's discount is, put in the context of Great-West Lifeco, with its market cap, its market cap would be off in $5 billion, $6 billion, $7 billion depending on where the stock price is, it's -- there are scenarios as you roll forward with COVID-19 that if it carries on for a long time and you don't get funds being transferred by the authorities, they stop with their fiscal support or monetary support, could you get credit losses. There are scenarios out there that are not playing out right now, but you could -- there are scenarios you can play that happen that way. It is difficult in the modeling that we've done to try and put that in the context of the amount of market cap that's been lost. They seem to be completely on different planets in terms of the magnitude of the correction in the stock prices. So you can look at that pessimistically. We look at that optimistically. There's a source of increased value coming forward. Page 26 also goes to valuation a little bit. And holding companies, by the way, post-COVID-19, if you look around the world, their discounts have tended to gap out in this period. We're trading right now at about 28%. If you look at Friday's close to the net asset value. We historically had been up in the 30s on a double discount basis, if you look through Power and Power Financial. But given what we've done, the collapse of the holding company structure, the visibility we're giving to and we'll continue to give to the assets that we have at Power Corp., I mean, we think that this discount should go. We would be hopeful that it could get to the level of the single discount of Power Financial and through it because we think we'll have better disclosure and people will understand the value. So that's still a work in progress. We actually made great progress right after the announcement -- if you look at the blue lines there, right after the announcement and the deal got closed. And then we -- when the blue line spike up, that's basically the market collapsing on COVID-19 is what's happening there. I'm going to finish up on Page 27 with kind of a snapshot about how we think about value creation. And I'm going back to the 3 levers that I talked about earlier on. And I want to tell you how we see them coming together. So the OpCo organic levers basically, this has been a long work in progress, working very hard to invest in our leading franchises and build momentum in the underlying businesses. And I would say across the board, we are extremely confident that our businesses are getting stronger and stronger and are going to be able to demonstrate that growth. And then giving enhanced disclosure to have the market share in our enthusiasm. That is lever #1. Then augment that value through acquisitions and associated synergies. As I mentioned, Personal Capital was a revenue synergy transaction and revenue synergies don't happen in the short term, they tend to happen in medium and long term, not our classic deal. Our classic deal is where we go out and we do an in-market merger and end up with cost synergies, and we're very much focused on getting some of those done as well. So that is the second source of value and then create value at the Power Corp. level through our investment platforms, realizing -- creating and realizing value from stand-alone businesses. Plan A would then be to return capital to shareholders. We won't have the blinders on. If there's a very attractive use of capital at the Power Corp. level that is supporting one of our companies, we'll, of course, make those decisions based on the choices we have at the time. But plan A is to return the capital we free up to the shareholders and then enhance our communication all the way along, so you understand it. So on the box on the right, here's a little bit of the formula. If we're -- driving higher earnings growth is the goal. And through that, driving also higher NAV. And so what could happen with that? That in and of itself creates value. But we also think there's a potential for a much lower revision at the OpCos. If you look at Great-West Life trading at 8.5, 9x earnings, like is discounting -- if you do any kind of required rate of return, you'll be basically discounting negative earnings going forward. And hopefully, if the market gains confidence that we actually have growing earnings, there's a possibility as we prove that out, we hope it's more than the possibility that you get a multiple revision on that. And then at the same time, we carry up the strategy, we think we can narrow the discount. So -- at the holding company. So you put together the higher earnings, the higher NAV, a multiple revision and a lower discount and you got a formula where we get really excited about what the value creation is based on certainly where we're trading today. So that's really all I was going to say. We've got a summary on 28. I'm not going to carry you through it. We've -- I've -- I think I've made all the points. And I think what I should do, operator, is stop there and have you open it up for questions.

[Operator]

[Operator Instruction] Your first question comes from the line of Nick Priebe from CIBC Capital Markets.

[Nikolaus Priebe, Research Analyst]

I have a question on liquidity at the Power Corp. level. It looked relatively unchanged quarter-over-quarter. Just wondering if you could just give us a bit of a sense of how comfortable you're getting around the deployment of that capital. Or perhaps what conditions you'd like to see to start drawing down on that liquidity again to execute on some of those initiatives that you've outlined earlier, like the repurchase of the preferred shares and the resumption of buybacks.

[Robert Jeffrey Orr, President, CEO & Director]

Yes. It's hard to make that -- answer that question in too formulistic way. So I mentioned that we are playing offense, and playing offense includes taking advantage of the environment at the operating businesses to make acquisitions. So just think of that, we're going out, we're playing offense. And if we can -- we're prepared to deploy capital in the face of uncertainty of COVID-19 and what happens. And while the authorities have done everything, I think, from a fiscal and monetary point of view, they really responded in a very aggressive fashion, and I expect that they will continue to do so, you can run scenarios where they don't, where things don't happen and you end up with a financial environment that's not as good 6 months out or a year out. So there's a degree of caution we have. And yet, we're playing offense, taking advantage of it. So in that context, keeping greater liquidity at Power for the time being is a smart thing to do. While we encourage our -- the companies in our group to pursue the opportunities that are in front of them, and we keep our powder dry while that's happening in this environment. That's our current mode, Nick. I can't give you a formula as to when we might say, okay, it's different now. We can move to a different stance. We're just going to -- we'll know it when we get there, I guess, is the best way to answer. I hope that answers your question. I'm just trying to share our thinking with you.

[Nikolaus Priebe, Research Analyst]

Okay. Got it. No, that's helpful. And then could I ask for a little more color on the evolution of the Power Sustainable Capital? I know that platform manages your Power's owned proprietary capital. I was wondering if you could just give us a bit of an update on the status of those funds. With respect to fundraising efforts to attract third-party capital, just what stage you're at and how you see that progressing over the next year or 2?

[Robert Jeffrey Orr, President, CEO & Director]

So to start by, the strategies are equity investments in sustainable energy, wind and solar on the energy side and then there's the China fund management business based in Shanghai that we started in 2005 when we were 1 of 2 Canadians that got a license to operate in the country. We have a great long-term track record there and great value creation with -- not only from the market, but the outperformance that our team has realized. The team has been busy because it was a much bigger pivot for Power Sustainable Capital than it was for Sagard Holdings, which were already on a third-party model. So they have been, over the last 6 months and over the last 3 months, reorienting themselves to being in the business of bringing in third-party capital. They have got active discussions going on with some institutional parties that could come in and are interested in coming in. There's nothing definitive to announce, but I can say that they've been extremely active at doing that. They've set their organization up to become a third-party manager where you're interacting with outside investors. They get -- and they are going to build the organization around to do that. They're getting their financials and their business plan, which they have basically done, lined up that way and are actively fundraising, but nothing to announce at this point on the fundraising side, just a lot of activity and I think good progress.

[Nikolaus Priebe, Research Analyst]

Okay. Okay. That's helpful. And then I want to ask one last one. Just about one of these stand-alone businesses. I understand that IntegraMed underwent restructuring in the quarter. Can you just give us a bit of an update on what's happening in that business? And maybe remind us how much that investment is carried out from a net asset value perspective?

[Robert Jeffrey Orr, President, CEO & Director]

Greg Tretiak, I'm going to turn that question over to you on the NAV on the books and finish next question there.

[Gregory Dennis Tretiak, Executive VP & CFO]

Yes. Thanks for that, Nick. The IntegraMed property has been disposed of and is no longer on the books, and it was on that disposition. I think we realized a recovery of some $27 million. So it is no longer part of the portfolio, and it was disposed of in the quarter.

[Operator]

Your next question comes from the line of Graham Ryding from TD Securities.

[Graham Ryding, Research Analyst of Financial Services]

Maybe I can just start with the cost savings. So you said you're at 45% of your targeted $50 million. What drove the initial savings and then what's expected to surface the remaining 55%?

[Robert Jeffrey Orr, President, CEO & Director]

Yes. I'm going to let Greg handle that. Greg, do you want to address that question?

[Gregory Dennis Tretiak, Executive VP & CFO]

Sure. So the initial 45%, there's 3 items on that slide that point to the majority of that, quite frankly, and you can see that certainly with the retirement of the 2 co-CEOs and the changes in governance that contributed it. We still are a public company as PFC. However, there are some of the expenses associated with being a fully traded public company, in an equity sense of the term, and those have been eliminated in the first 8 weeks or I guess it's a little more than 8 weeks that we've been at this. And then we've restructured some of the services that we have in the group, including our research and our advisory services and those have contributed to the 45% reduction that we've attained so far. When we look forward over the next periods, we see opportunities, obviously, in some of our other expenses, the biggest categories being our properties that we have. And so we see opportunities there. And they will emerge over the next 6 quarters. Some of them may take a little longer than we had hoped for, given the COVID environment right now. But we feel confident that we're going to get to that $50 million over the next 6 quarters. And we'll probably give you a little more transparency on how we see that emerging as we move forward over the next couple of quarters.

[Robert Jeffrey Orr, President, CEO & Director]

And Graham, I might just add to Greg's comments. One of them as well was look at our travel and in particular with going from 3 to 1 CEO and just looking more generally, our travel expenses. Of course, we've completely blown through our savings, but you really can't measure it right now because nobody is traveling. So that's -- but there's a travel piece and the actual reported would include much lower travel expenses than what we would expect on a run rate basis. But there's travel as part of the run rate that we are looking at reducing as well. So I'll just add that. Does that answer your question?

[Graham Ryding, Research Analyst of Financial Services]

Yes. That's helpful. And maybe if I could jump to -- you've got liquidity, I think, of $1.4 billion at the Power Corp. level. And then you're looking to redeem the $350 million of preferred shares at some point. So when I think about your NCIB, you've got 23 million shares left. How would you fund all of that if you wanted to be active in purchasing all of that? Would you have to monetize some of your stand-alone businesses to fund that? Or how should I think about your liquidity and funding that NCIB?

[Robert Jeffrey Orr, President, CEO & Director]

Yes. We haven't -- as I answered to Nick, we haven't landed at this point about where the right level of cash and liquidity is on an ongoing basis. We'll continue to review that. But over time, we would be looking to disposal of assets and freeing up of capital as we replace some of the seed capital that we have. Those would be sources of liquidity for us as well as ultimately determining where we should land on the cash, but we're deferring that until -- as we see the environment basically settle itself. Greg, I don't know if you wanted to add anything to Graham's question around funding of buybacks and sources is really where he's going?

[Gregory Dennis Tretiak, Executive VP & CFO]

No. And I think you hit the nail on the head. On Page 22, as we realize value, we will certainly take that value that we've realized and put it to work in buying back shares, if that's the most opportune thing to do at the time. I think we'll balance that against our preferred share repurchase that we also signaled earlier on when we announced the transaction. So that's the only thing I'd add to it. Thank you.

[Graham Ryding, Research Analyst of Financial Services]

So would that included, your efforts to raise third-party capital for your sustainable investments. Should we think about that as a potential capital return? Or would you raise third-party capital to just reinvest and grow your sustainable AUM?

[Robert Jeffrey Orr, President, CEO & Director]

It's going to depend on the opportunities in terms of the products. So there's a tension that exists there. We are looking to free up capital by bringing in third-party capital into the sustainable energy portfolios because we have assets and we'll seed them. So that becomes a source of funding. The flip side is what opportunities are there to launch new products. We do want to grow these platforms. Obviously, the teams that are managing both Sagard Holdings and Power Sustainable Capital are looking to launch new products. If they get opportunities to do so on a profitable basis and grow their businesses, then that's going to be a call on capital. And we're just going to have to manage all of those tensions, if you will, but ultimately we'd call them opportunities is maybe a better way to put it. And because we don't have a perfect crystal ball as to how all that unfolds, it's hard to get precise. And I'm not trying to be evasive in the question. It's just hard to be precise on saying how much liquidity comes free and that over what period of time. It depends on the point you just raised. And then it also depends on maximizing the value on the stand-alone businesses versus realizing value and how that plays out over time that you don't want to put yourself in a straightjacket by committing to doing this and then you end up leaving money on the table or missing opportunities. Sorry to not be more precise, but again, I'm just sharing you -- with you the way that we think about it.

[Operator]

Your next question comes from the line of Geoff Kwan from RBC Capital Market.

[Geoffrey Kwan, Analyst]

You've done a number of transactions that you flagged involving the various entities within the Power complex. And in generally -- or in general, seemingly call it, more active on transactions in the past 18 months. When thinking about simplifying the Power structure and servicing value, like how would you describe like what inning you're in and if there's any sort of additional context you want to add to your answer?

[Robert Jeffrey Orr, President, CEO & Director]

Okay. Good question, Jeff. Thank you. I think in terms of the simplification, from a structural point of view, we don't have any other plans to -- we basically have 3 public companies, and we have wholly owned businesses within Power Corp. So structurally, the biggest steps have been taken. But simplification goes beyond structure. Simplification goes to what you do and how you -- how the market understands it. And so we still have, at Power Corp., I would say, a bunch of assets, if I can put it that way, in a kind of loose way than I would say when we talk to market participants, they don't understand the strategy that pulls it all together and look at it more as a diversification strategy. And if you play out what we've said to analysts and investors over the last couple of quarters since we announced the reorganization, we see if you reach out 2, 3 years from now, you're going to have a much simpler holding of assets at Power Corp., where you'll be able to see some asset management businesses with some revenue and some costs and see how those are growing and contributing. And then you're going to see seed capital supporting those businesses and that seed capital will have return attached to it, and you'll see how that's creating value. And so I think it will be simpler to understand in value, even though it may not -- even though I think the big structural steps have been taken already. Okay?

[Geoffrey Kwan, Analyst]

I guess maybe asking another way, is there -- are there assets that you have in any of the different entities that you think may make sense in another part of the Power family?

[Robert Jeffrey Orr, President, CEO & Director]

The one that gets talked about and is an obvious, and you haven't -- you've kind of stopped short of naming it, but we do have China AMC in 2 spots. And so I have spoken -- we have been -- Greg and we have at investors -- in front of investors conferences over the years about the fact that when CMAC, first, the opportunity came to acquire CMAC through really the Desmarais family, they're in a long history of focusing on China, starting with Paul Senior and André and Olivier taking up the cudgels there in terms of working the opportunities in China. We'll see MAC ended up being this prize, but we were -- had an opportunity to get a 10% foothold in back in 2011. But at the time, we had active discussions about whether it made sense in IGM or Power Corp. and Power Corp. was the only eligible buyer from the point of view of participating in it and being able to buy it. So there wasn't really any choice. It went to power Corp. When the second 2 blocks came, we thought that the best way to do it because there are synergies with IGM and maybe a more natural holding place. We split it. And now we have the holding 50-50. So that's something we have talked about. We talked about it from time to time. I think IGM is pretty keen on their CMAC sake as they should be and as we are with ours. That's the one that we would -- that we have discussions around, but I don't want to get ahead of ourselves, Geoff, in saying, totally transparent. We talk about that, but we have not made a decision at this point. And so to say anything beyond that, I think, would be -- I don't think it's appropriate.

[Geoffrey Kwan, Analyst]

Okay. And just my other question was, again, maybe as a baseball analogy makes most sense, like just looking at Great-West from Power's ownership perspective and your investment there relative to firing on all cylinders, how would you kind of describe where the various businesses within Great-West are at in terms of -- ones you feel are performing well and ones that you think are still a work in progress?

[Robert Jeffrey Orr, President, CEO & Director]

Yes. Good question. Everybody should cancel the next hour of their day, and I'll answer it. I'll try and do that quickly. I'm teasing. If I start with Canada, the group business in Canada for Canada Life is firing on all cylinders. And it's kind of basically just sharpening this off, I can call it that way, but they've got great position, good growth. The Canada individual business has got more challenges in terms of where the products are right now. But I would say, from a management team, leadership team, strategy, they know exactly where they're going right now, and they have got a very clear strategy. They're executing on it, they're executing quickly. The digital offering I talked about what they've done with GLC and Canada Life that looks innocuous. I think that's going to -- that's part of a much stronger wealth offering that they are coming out with. I feel really good about the strategy that Canada Life has got for its individual business. Still lots of work to do there, it's early stages, but very clear understanding of where they're going. If I set to the states, Empower what can I say, it's on a very strong growth trajectory. And I think by plugging in a retail business, as I said, in Personal Capital, that's going to really strengthen their offering, both on the DC side, but also on the individual side. We love to be able to do something that would grow there and from an acquisition point of view, but you've got to be -- we're going to remain disciplined, but that business is growing quickly. Putnam has cut in in a -- still a very difficult environment for active. Putnam has continued to manage their costs down while improving their shelf and the flows are really starting. I mean, they obviously went through a hiccup in the first quarter. But the flows are starting to come around. You saw that in the numbers in the second quarter. PanAgora, which is also in our asset management portfolio in the states. Quant is -- has really gone through big outflows, but they've got -- they've outperformed the Bridgewater's and the AQRs of the world on many other strategies. We feel very good about that. But there's an opportunity still to unlock value is the way I would look at that. Flipping over the U.K., really strong business, really taking advantage of the Retirement Advantage acquisition they made a couple of years ago and building out on the wealth side. Irish life, good momentum. Germany, very strong momentum. And then on the reinsurance and risk group, you see it, I mean, they're getting great returns on capital, and that's a nice source of growth. I feel really good right across the portfolio. I feel -- they're not all contributing earnings-wise the way they're capable of at this point. But every business is moving forward. And I can say more optimistic than I've been at any time in the last 4, 5 years about the suite of those businesses and where they're at. That would be my assessment, Geoff.

[Operator]

[Operator Instruction] Your next question comes from the line of Tom MacKinnon from BMO Capital.

[Tom MacKinnon, MD & Analyst]

One quick one for Greg, and maybe a follow-up for Jeff. Greg, I think you mentioned there were some COVID-related reductions in expenses in the quarter. Maybe you can just quantify what you think the dollar amount of those were and with -- and what they might have been. Obviously, probably related to travel, but if you could just give us an idea what the reduction was as a result of that?

[Gregory Dennis Tretiak, Executive VP & CFO]

Yes, Tom, broad strokes. I don't have a precise number, but I'd say $2 million in that neighborhood would be approximately what we would expect in terms of those type of expenses. And they'd relate primarily to travel, but travel on other related type of expenses. So that would be it.

[Tom MacKinnon, MD & Analyst]

Okay. And then for Jeff, like when you embarked on this restructuring, sort of conveyed to The Street that you'd be looking to sell some sort of the nonfinancial assets at the Power Corporation level. And obviously, the environment is different, but what probably The Street didn't expect was moves to sort of optimize efficiencies within the Power group. And so to what extent are there more opportunities to sort of optimize efficiencies within the group? You've got 3 businesses that are sort of in the wealth management and asset management type businesses. You've tried to optimize stuff within those functionalities between -- with the GLC acquisition. But do you see other opportunities here with 3 businesses sort of doing some of the same stuff in terms of optimize efficiencies within those 3 groups?

[Robert Jeffrey Orr, President, CEO & Director]

Yes. I think if I got your question right, in particular, you're talking -- it's not really at the Power Corp. level you're asking, but within the operating businesses and the obvious overlap you're talking about is within IGM, which operates in Canada and Canada Life, which operates in Canada because outside of that, you don't really have too much over at operate. It's Great-West Life that's in the states and in Europe and whatnot. So I think that the -- what we've just announced in terms of the asset management change is the biggest opportunity we saw. But we have -- I don't know how much you are aware of how much cooperation has been built up over the years between IG Wealth Management, Mackenzie and Canada Life from Great-West Life. Like there is a -- we should probably do ourselves a disservice by not highlighting all of the distribution opportunities that go on across those 2 groups. The -- because it's a lot. And so you continue to have asset management, Putnam PanAgora funds are distributed across IGM. Mackenzie funds are distributed the other way. China Asset Management is not just working with Mackenzie to try and create products for the group. You've got a lot on that side of it, insurance products. I think IG Wealth is -- I think they're the largest single distributor outside of the Canada Life on distribution of insurance products for Canada Life. There's a lot on the product side. The system side was probably bigger before because it used to be that companies did all their own systems. So we had both groups working together for 20 years. But as everybody's moved to the cloud and moving more to an outsourcing model, the reality is that, that business model has evolved and changed. I don't know if that's where you're getting at with your questions. But that's the way I would answer it.

[Tom MacKinnon, MD & Analyst]

Yes. I was just thinking just with respect to some of the asset management companies at the hold co level, is there any opportunities you see there with leveraging those capabilities down into the operating company?

[Robert Jeffrey Orr, President, CEO & Director]

Yes. Good question, good question. So I got it just a bit. Very much so, the capabilities that we're creating at Power Sustainable Capital and Sagard Holdings are a -- have -- are good fit for Great-West Life's balance sheet, which is trying to and is very much looking to extend their position in alternatives. So right there, there's a good -- there's a fit, and they're actively working on those opportunities. Obviously, Great-West is not going to be exclusively looking at Power. It's a big world out there. And then from a distribution point of view, there's opportunities for those products to find their way into some of the alternative products that are -- that are being built for retail, high net worth clients, et cetera. So that is going on. Thank you. I missed that what you were saying. There's absolutely lots of efforts going on there. More to say about that in the future.

[Operator]

There are no further questions at this time. I will turn the call back over to Jeffrey Orr.

[Robert Jeffrey Orr, President, CEO & Director]

Okay. And time flies when you're having fun. I see we're right up against the 9:30. Again, I just want to end it on the note of how busy a quarter it is, and we're -- we just got the pedal to the metal to keep driving it forward with more. And hopefully, we can be successful at doing some other things that create value. Thanks again on a Monday morning in August for being on the call, and we look forward to talking to you again soon. Buh-bye now.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.