Power Corporation of Canada

TSX:POW

Good morning, ladies and gentlemen, and welcome to the Power Corporation Fourth Quarter and Full Year 2024 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this call is being recorded on Thursday, March 20, 2025. I would now like to turn the conference over to Mr. Jeffrey Orr, President and Chief Executive Officer of Power Corporation. Please go ahead.

Thank you, operator. Welcome, everyone. Thanks for joining us for our Q4 2024 results. It's our first call of 2025. And on the cover page, you'll notice our logo has got a little change to it. We're actually celebrating the 100th anniversary of Power Corporation in 2025. And so fun to be here for that.

So we'll move through with the presentation. You've got over Pages 2 and 3 standard cautionary information -- or disclaimer, I should say, regarding forward-looking information and non-GAAP measures. Page 4. I'm joined here with Jake Lawrence for today's call, and we'll both be sharing the presentation as well as answering questions. And with that, I'm going to move right along to Page 6 which is the opening page, thank you.

And so just really pleased about another strong quarter at Power and for the group and a strong year, right across the year with very strong results. Really strong earnings, double-digit earnings growth at each of Great-West Life and IGM from a quarterly basis and on a yearly basis were the key drivers on our earnings, of course, those are the main contributors to our earnings. We had good growth in net asset value across the quarter and into the first part of 2025, particularly with the release of Great-West Life's earnings in early February, that really drove performance at Lifeco in our NAV.

So continued strong performance in the first quarter based on the 2024 results. Good development, continued development at our alternative asset management platforms, and we announced a 9% dividend growth funded really through the strong -- the 10% dividend growth that came through Great-West Lifeco. So really a strong quarter, looking forward to talking about developments, but I'm going to pass it over to Jake here to walk through the results themselves. Jake?

Great. Thanks, Jeff, and good morning, everyone joining us today. I'm going to start on Slide #7. And before I get into a bit more detail on the high-level numbers Jeff just shared, I just want to provide some color on a definitional change that we made to our reporting this quarter. This quarter, we expanded the definition of adjusted net earnings to apply it to GBL, our stand-alone businesses and all of our investing activities as well.

We also modified the definition to capture market-related remeasurements that occur that have been creating some accounting volatility in our numbers. We believe this new definition is going to better reflect the ongoing operating performance of the businesses. And with that, I'm going to turn to some of the numbers reporting on this basis.

So in Q4, our adjusted net earnings from continuing operations were $829 million. That's up a very strong 20% compared to the same quarter last year. And on a per share basis, it's slightly higher with $1.28 or up 21% compared to Q4 2023. As Jeff noted, the results really reflect strong performances coming from our main earnings drivers, which are Great-West and IGM Financial, both of whom again reported the double-digit earnings growth that Jeff alluded to.

Our Q4 net earnings also include a gain on sale from our investment in Peak, and that's partially offset by some items that I'm going to detail in a moment. The NAV story Jeff just gave a picture on, so $60.44 at the end of the quarter, and that was up 4% in the quarter versus Q3. Where we really saw a good move, as Jeff noted, was as we moved through the end of the quarter and where we find ourselves today after reporting Q4 results from Great-West and IGM earlier in February, we're up an additional 8% now to $65.10 on a NAV basis.

Another factor contributing to the NAV, I'd say both in Q4 and throughout the year was our buyback activity. We bought in excess of 400 million shares during the year in excess of $120 million during the quarter. And it's obviously reduced the share count and added about $0.70 to the adjusted NAV year-over-year. And then as Jeff noted, a good increase in the dividend now at $0.6125 per share. That 9% increase putting us at about a 5% yield at last night's close.

Turning to Slide 8 to provide a bit more of a breakdown on our earnings. Great-West delivered those strong quarterly base earnings we talked about. It exceeded $1.1 billion, and that's up 15% year-over-year. We did see good growth across all 4 segments at Great-West, and it marks the sixth consecutive quarter of base earnings growth at the company, which is quite impressive. And it's the third consecutive quarter where Great-West has reported earnings in excess of $1 billion.

And I think that really reflects some of the actions in recent years taken by Great-West to support and accelerate its growth strategies, particularly in the U.S., which is now the largest segment, but also in Canada. As a result of its earnings momentum and capital position, we did see Great-West increase 10% dividend -- announced a 10% dividend increase in the quarter. And in addition to that, they've also announced intentions to repurchase up to 500 million shares through their NCIB.

IGM also reported strong year-over-year quarterly earnings growth. Our shareholder earnings were up 23%. We had increased contributions from the 2 core businesses, IG Wealth and Mackenzie as they both reported record quarter-end assets. IGM's performance was also augmented by its 4 strategic investments, all of whom delivered record high client assets, including significant inflows across all of their businesses.

GBL's contribution to Power's adjusted net earnings did decline year-over-year as GBL's share of losses from the portfolio companies it consolidates did increase on an adjusted basis. This was partially offset by fair value gains on some investment funds that are accounted through at fair value in the P&L.

Moving to the alternative investment platforms which Jeff referred to, they do continue to develop. Sagard reported fee-related earnings of $5 million and fair value increases on its investments in private equity and venture capital funds.

Power Sustainable's results were comprised of fee-related losses consistent with the prior year and Power's share of losses on its consolidated energy assets. Sagard and Power Sustainable continued to develop their platforms in '24. They launched new products, they acquired some stakes in GPs, and they partnered with capital allocators in a year that was marked by headwinds for alternative asset manager fundraising.

In Q4, the contribution from our stand-alone businesses to adjusted earnings does consist of our share of LMPG's losses, and there are some other items related to stand-alone businesses that are reflected in the Adjustments segment. These adjustments do include the gain on sale of our investment in Peak, which was $279 million.

We did write down our investment in Lion to nil. That reflects the company entering CCAA protection and then we had a noncash impairment charge of $87 million at LMPG as the company continued to face an uncertain business and macroeconomic environment.

Overall, we are pleased with the strong quarter in Q4 as well as strong 2024 results. We believe it's a reflection of the meaningful changes that have been undertaken in our group of businesses and reinforces the future growth potential in our companies.

Moving quickly to the NAV on Slide 9. We do break down that year-end December 31 value. As we noted, growth in NAV was driven by strong share price performance at both Great-West and IGM. The alternative asset platforms also continued with some NAV growth in the quarter. Seed capital investments were made to support new strategies, and we also had some fair value increases in private equity, venture cap and energy assets that led to roughly a $300 million increase.

The decrease in NAV for our stand-alone businesses was driven by the monetization of Peak. That's obviously moved over into a cash balance on our balance sheet as well as the noncash impairment LMPG charge I mentioned and the write-off of Lion to nil.

Getting back to our cash balance, we sit at year-end at $1.6 billion, that's quite a strong position. That was partially offset in the quarter by the $120 million in buybacks I referred to as we continue to increase efforts to return capital to shareholders, and of the $1.6 billion, we consider $1.3 billion to be available after factoring in dividends declared by Power and IGM, but not yet paid or received.

So with that review of financials, I'll turn it back over to Jeff to go into a bit more detail.

Okay. Great. Thank you. So I'm going to move along to Page 10. And just a few comments on Great-West Life. Jake has already covered the earnings, so I won't go there. I will also just make a few points, however.

In addition to earnings, there's been a steady increase from the return on equity at Great-West Life and over 2024, they achieved 18% ROE. I'm going to show -- in another slide in a second, I'll show the progression of that.

Very strong cash generation across the businesses of Great-West Lifeco, which is something that they are endeavoring to explain more clearly to the market, the cash generation. So at the end of the quarter, they had $2 billion up at the Lifeco level, which is a strong increase in cash and maintained very strong capital ratios at the regulated entity level.

And so that was part of -- the earnings drove the dividend increase, but also the announcement of buybacks and the increased buybacks is also a reflection of the very strong capital and cash generation capability at Lifeco.

Just a bit of a -- Page 11, just a bit of a historic perspective. Great-West is obviously, really repositioned this business over the last 5 years. You see it -- we can look at either side. But if you go on the left side, base earnings over the last 5 years, you really see a rebalancing of the portfolio. The strong one, obviously, is the emergence of the U.S. with the growth of Empower, both organically and through acquisitions.

It's got a very balanced portfolio across geographies and business lines. And I'd say also by currency. If you look at this, the Canada earnings are obviously Canadian dollars, the U.S. is U.S. dollars. Europe is a mix of sterling and euros. And then capital and risk solutions, which is the reinsurance business, is multicurrency, but it's all U.S. dollars, a little bit of Canadian dollars. It's a mix in there.

So you've got diversification by geography, by business line and by currency across Great-West Lifeco. Another way of looking at Great-West is to go back and say, in early '21, just about 4 years ago, they came out with medium-term objectives on earnings per share, ROE and dividend payout ratio and you see what they have done in the 4 years since they made those announcements.

They told the market they thought they could grow EPS -- base EPS by 8% to 10%. They've actually delivered 12% compounded over that period. Their ROE at the time was 13%. I mentioned earlier, they hit 18% in 2024. And about half of that increase is from the switch from IFRS 4 to IFRS 17, but the other half is based on -- is actually improvement in capital efficiency and higher earnings.

And then we were at -- the Great-West was at a payout ratio that was running around the high 60s, would happen to be 61% in 2020, but it was up around the high 60s, and they announced they were going to move that to a target range of 45% to 55% and over that period, they basically have moved the payout ratio, notwithstanding the growth in dividends down to right in the middle of that range.

So really good performance and coming out and saying what they're going to do and then delivering. Great-West Life does have an Investor Day. I think it's April 2, right, Jake?

Yes.

And so looking forward to hearing that. If you have an interest in Power and in Great-West, that's something I'd encourage you to tune into.

Okay. Moving forward on Page 13, a couple of comments on IGM. As we mentioned, really strong growth in the 2 core businesses, IG Wealth within the wealth management, Mackenzie within the asset management businesses, driven by strong growth in AUM and AUA. Earnings quarter-over-quarter were up 22% and then net -- that's adjusted earnings per share and then adjusted earnings up about 11.5% on an EPS basis. I think it's up 12% year-over-year.

That's been in an environment where you really for the last 2, 3 years, the Canadian individual market where the bulk of both IG Wealth and Mackenzie have their assets, has been in outflows. Typically in inflow about 2% is what we figure is the right number. But with inflation hitting, mortgage rates going up, interest rates pulling money into deposits away from funds, the industry has been in outflows but at the end of the year, it started to come back to just about even. So there's some improving conditions there, which is good.

But my point is that Mackenzie have not benefited from organic growth over the last few years has been what they've been doing in the businesses, plus growth in market, obviously, has been a key driver. Who knows what's going forward? There's a little bit of risk out there in the world. We were getting quite optimistic about the flows coming in, but it's difficult to make predictions at this point given all that's happening around the world that you're all aware of.

Moving to 14. The strategic investments don't drive a lot of earnings, but they're performing really well. Wealthsimple in the upper left-hand corner, you see the year-over-year growth in AUA of over 100%, really knocking the cover off the ball. And in the fourth quarter, they grew it by $12 billion. So terrific performance at Wealthsimple.

Upper right-hand side, Rockefeller, 24% growth in client assets. That's both organic market as well as continuing to build their team of advisers. So really strong growth at Rockefeller. Down in the lower left, ChinaAMC. While there are headwinds in China in that the regulator mandated reductions in fees, but ChinaAMC has offset that by very strong growth in assets and AUM, and that's both from the industry having good flows, but they're also gaining share. They're the #2 market player. So they've offset the decrease in fees with growth in assets.

And then Northleaf, we talk about what a difficult environment it is in alt management land for raising capital if you're not one of the very, very large players, well, $4.9 billion in '24 in new commitments and very strong growth in AUM at Northleaf. So the whole portfolio there is performing really well.

Page 15, just to remind everyone that in December of 2023, IGM also came out with 5-year EPS growth targets of 9% over the next 5 years. Obviously, in the short term, IGM runs -- bumps up and down a little bit with market levels. So they're much more sensitive than Great-West Life. But over a 5-year period, they're very confident that they can, under normal market conditions, create 9% earnings growth with the base businesses, the core businesses driving 7% and the strategic investments driving 15%, that gives you 9%. And by the way, they delivered a 12% earnings growth in EPS in the first year after hitting their targets.

Comment on GBL then, moving to Page 16. A lot of action going on at GBL. They continue to dispose of public assets. They sold a big chunk of adidas in 2024. You see EUR 1.7 billion. They sold EUR 0.8 billion -- EUR 800 million, I think, is the way to say it, in March of '25 of SGS. And the money that goes out of their selling of the public portfolios is basically half is going into return to shareholders and half is being invested in private assets, and they continue to aggressively pursue the strategy.

Of importance in the upper right-hand corner, they did an Investor Day, Strategy Update Day in November 2024, and they're now, of our 3 main opcos, all 3 now have gone public with goals for what they're trying to achieve with their shareholders, and they have announced that they believe over the medium term, they can create double-digit total shareholder returns.

That's much higher than what they've done in the last few years. For those of you who have followed, they had some headwinds, but they are committed to increasing value for shareholders, creating TSRs and returning cash all at the same time. You saw, of course, last quarter, they increased their dividends by 80% for the dividend that will be paid in 2025. That's part of that strategy of returning cash to shareholders.

Page 17, asset management activities. Just a bit of a 5-year view here. We said that we would be growing the assets under management of our platforms and be using party -- capital other than Power Corp's, we'll recycle our capital. You see the growth over the 5 years. You see in the dark blue there, the Power Corp. capital. The $2.1 billion to $2.7 billion is not because of a lot of net investment, it's actually growth in value.

And so they continue to grow their businesses. They're not at the point where they're creating profitable contributions to us per se at the asset management -- asset manager level, which is different from saying we're not creating value there, but they're not creating earnings. We have, however, on the seed capital, been creating value and also been creating cash and which we have been able to use for different activities.

So I will then turn to Page 18. And on that $2.7 billion you see in total, we think over time that based on the target IRRs that we should be able to create 10% plus across that portfolio, which again is a source of value creation and ultimately cash for Power Corp. Sagard did enter into, on Page 19, they just announced this week or over the past week that GBL is going to acquire a 5% minority interest in the alt manager at the GP level as part of an ongoing partnership. They have participated in Sagard funds in the past, and they committed EUR 250 million as part of that over the next 5 years to Sagard's products. So that just continues.

Sagard's strategy of not only fundraising, I think they did $2.7 billion in 2024, but of entering into partnerships with Lunate or formerly Abu Dhabi investment...

ADQ.

ADQ, thank you. Lunate, Bank of Montreal, Canada Life and now GBL are all partners and participating in funding strategy. So it's a multifaceted strategy that Sagard is using to get to scale and grow their business.

I'm not sure I have much to add on Page 20. I think, Jake, you covered this well. I think you mentioned on Peak that although the Peak sale was in the market prior to Q4, the announcement of it, it closed in Q4, and you saw we did receive $468 million in the quarter, and we had a gain of $280 million or a 3x multiple. So that's been a good experience for the group. And then I think you addressed the Lion and the Lumenpulse.

So now I'm going to turn to returning capital to shareholders. Power did return $2 billion in 2024 between our dividends and the buyback activity. We got lots of room for further buybacks, and that's very much part of our playbook. We've got cash of $1.6 billion. And when you net out our dividends payable, we got $1.3 billion of available cash. It gives us lots of room to continue buybacks. And as I mentioned, we've got lots of other sources to continue that as a core part of our strategy to add a point or 2 to our return that we get from our underlying investments. We think that this is an additional driver of value.

I'm going to make a couple of comments then and turn to a few other elements. On buybacks on Page 22, a 5-year view. This is part of the source of our cash. But even though if you look at the non Great-West Life, IGM, GBL portfolio, the alt portfolio, the seed capital of stand-alone businesses, when you look at the entire portfolio over 5 years, you don't see a lot of change in the value that we have there, but that belies the fact that there's been massive activity.

It's not the same value that it was 5 years ago. And here's one illustration. We actually sold $3.6 billion of investments out of that portfolio over the 5 years. You see it on the left-hand side. And while it's always difficult to trace cash because cash is fungible, but we did do $1.8 billion of buybacks over that period.

We invested $1.4 billion in seed capital underpinning Sagard and Power Sustainable. And we also, as part of the transaction, Great-West Life invested $553 million in Great-West Lifeco shares back at the time we sold China Asset Management to IGM.

So lots going on. The portfolio has kind of stayed pretty static as a percentage of the -- or in terms of dollar values, I should say, not exactly, but lots of activity going underneath over the last 5 years.

I'm going to kind of make a few comments to close here with a bit of perspective and then a little bit of looking towards the future. The strategy on Page 23 that was announced as part of the reorganization 5 years ago, we're still on that strategy. It's working. We're pleased with it, and we are not changing that right now. We're driving forward on it.

One of the elements, Page 24, that we talked about that we were hopeful that it could be a driver of value is our net asset value discount. It has averaged 24% since the reorg, which was lower than the double discount between Power Corp. and Power Financial of 34% that was in the period up to the end of '18. It's been up and down, but it's still around 24%.

Is that an opportunity? I think it's an opportunity. I believe it is. It either comes down or we -- but in the meantime, we're continuing to take advantage of it. If that's where it is, we'll continue to try and evolve our portfolio and narrow it because we think it should be narrower. But in the meantime, we're selling and liquidating assets and we're buying shares back at a 24% discount. We're taking advantage of it to increase our earnings per share, our dividends per share and our net asset value per share.

So let's look at what's happened on Page 25 through different time lenses on the returns that Power has created. Go back on the right-hand side here to December 31, '19, that was about 2, 3 weeks after the reorg was announced. We've delivered 14% compounded total shareholder returns to shareholders.

I think you add a little bit if you went back to the date of the reorg, I think you're somewhere closer to 15%, if you go back. And you got to be -- in any given period, you got to be a little careful with their endpoint and -- start point endpoint sensitive, like the last 5 years is 25%. That's an overstated number. That was -- the start point there was a month after COVID hit. So that's -- I don't think we're expecting to create 26% returns going forward.

But 14%, that's probably a reasonable expectation of what we think that we can create without any reevaluation of our underlying subs or the discount moving, and I'm going to get to that in a second. But we have, importantly, through most measures you're going to look at, beaten our core benchmarks. The TSX Financials, which is a mix of different companies, we've done well relative to the banks over the period and the overall benchmarks. So we're pleased with that.

And let me turn to Page 26 and then try -- and I'll end on this page and just give you a few thoughts on how we look at the future and value creation. So I've already mentioned we're not changing the strategy. And I've mentioned that over the last 5 years, depending on the end date, start date, we've created kind of mid-teens returns to shareholders through growth in NAV and dividend yield without the discount having moved and without Great-West Life and IGM having changed their multiples.

Their multiples were -- if I go back 5 years, Great-West and IGM on a forward-looking basis based on Street estimates were in the 10s on their PE multiple. And if we look at yesterday's close based on the Street estimates, they're trading in the mid-10s.

There have been no change in the valuation of Great-West Life and IGM on a multiple basis. There's been no change on the valuation of Power on an NAV discount basis, but we've created 14% returns. So that's kind of interesting and that it hasn't been through valuation, it's been through growth in earnings and growth in value.

So as we look forward, I would look at it the following way, and I'm on Page 26 here, Great-West Life and IGM are 83% of our gross asset value, and they're obviously the overwhelming majority of our earnings because that's the way they're based. They have each got targeted EPS growth in their guidance that centers on 9%. And in Great-West Life case, they've had 4 years of experience where they've exceeded that. IGM has got 1 year where they've exceeded that.

If you assume for the moment they hit that over a 3- to 5-year period, which I believe they're confident in. But again, that's not a forecast. There's lots of risk out there. It depends on normal markets. But let's just assume for the moment they continue to hit that, they've also provided a yield on top of that of 4.7% at Great-West based on yesterday's close.

Of course, Great-West has been increasing their dividend every year. So if you thought about the next 3, 4, 5 years, you might expect if earnings grow, you would expect given they've set a payout ratio of 50% that you'd get some uptick in that yield. And IGM has got a 5% current yield. They've been holding that flat.

You're going to get to those 2, if that happens and their valuation doesn't change and they grow with those earnings and the dividends are maintained, you're going to get a 14% return at the center point of some range. It's not going to be exactly that, but that's the center point of the range. That would be a reasonable TSR we will get from that 83% of the portfolio.

The rest of the portfolio, well, we -- I showed you the slide, the bulk of what we have in our asset managers is in the proprietary capital. And we've got a targeted return of 10%, which we're confident under normal market conditions we can return on that. And I mentioned GBL is targeting double-digit returns. I'll just cover the portfolio there.

So you're going to get -- if you get those kind of growth in our underlying portfolio and our discount doesn't change, we're going to be able to create returns that are in the 13%, 14%, 15% range. It's going to not be that every quarter, not be that every year. It's going to have a range and lots of assumptions that the world carries on in a normal way.

And -- so that's not a forecast. But when we think about it and when we talk to our Board and when I talk to investors, that's the way we think about it. We're not dependent on a change in valuation here. We just continue to execute the strategy, and we're confident that we can continue to create very attractive returns.

So with that, I am going to stop, operator, and I will open the floor up to questions from those on the line.

[Operator Instructions] Our first question comes from Doug Young with Desjardins Capital Markets.

I guess, Jeff, roughly 5 years ago, it's -- I guess it's been roughly 5 years since you folded in Power Financial. You've done a lot to clean up the structure, and I kind of get what you're talking about on Slide 26. And it feels like a lot of heavy lifting has been done at the holdco level.

But I'd just be curious with you and your discussions with the Board and internally, I mean, what's next? And I guess what other levers can you pull to really materially help clean up the story perhaps and I know the discount to NAV, you talked about that, like help materially potentially push that down? Like what do you think needs to be done? And again, I get the operating companies of Great-West and IGM, but I'm talking more up top of the house.

Yes. Thank you, Doug. That's a good question. And there's been heavy lifting at Power Corp. So I'm going to pick up before I answer your question and just go and tee off one of the things you said, there's been heavy lifting at Power Corp., there's been heavy lifting at Great-West Life and there's been heavy lifting at IGM both in their core businesses, but also in -- at IGM in terms of building up the strategic portfolio.

So there has been heavy lifting. And I want to say going forward, if we didn't do a lot of heavy lifting going forward, my comments were, we're not as dependent on it going forward as we were 5 years ago. I think we had to do a lot of that heavy lifting. And I think if we, I'm not going to say put it on autopilot, that's a silly comment. But I think we don't have to do as much heavy lifting to create attractive returns.

So that's question number one -- or point number one. Point number two is, I think one of the issues we continue to face is that while we have invested in things like Rockefeller, Wealthsimple, although as you know, we have negative investment in Wealthsimple, but we did initially put $300 million into it as we have got our portfolio of seed capital supporting the alt managers we're not getting valuation for that in my view.

That's -- I can -- you can never prove that, how do I go out and get in the minds of all the people that buy and sell our shares. So this is, okay, in my view and having talked to a lot of investors, they view us as an earnings driver and they value our earnings, they value our dividend growth and it's interesting that we have all this other stuff, but talk to me when it turns into cash.

We're not -- we're long-term oriented. We think that investing in things like Wealthsimple or Rockefeller, they could be massive parts of the franchise, 5, 10, 15 years out. So's we're not going to give up on that. But at the margin, we can move to more earnings growth, and we have to be disciplined in the amount of appetite that we have for that kind of investment. And so you will note that Great-West and IGM, which drive the earnings, are 83% of the gross asset value. I think they were 76% if you go back 5 years.

And it's not only because they've been growing, but also as we take money out of the non-earnings growth portfolio, non IGM, and we buy shares back, we're actually -- if you do the math on that, we're actually migrating the portfolio towards more earnings growth. And that, I think, will help with the value creation.

If you're going to ask me a question, what else can we do with a major structural, I'm not going to speculate on that because it obviously gets into -- if you're going to do something like that, are there more transactions you can do and what would they be and that's really hard, Doug, for me to get into a discussion on that kind of things.

But I'll just add some final and I'll turn it back over to you, and we talk about that stuff all the time. We have all the deals that have gone on to Power, all the deals at Great-West Life, all the stuff at IGM. Obviously, we're always talking about transactions, and that is part of our DNA, and we'll continue to see what else we can do to add additional value. I hope that covers the waterfront for you.

Yes. No, I appreciate the color. I guess maybe the second question, one thing just it's obvious and curious what the strategy is around Power Sustainable. And it just seems like -- and can you talk a bit about what -- like it looks like the drag on adjusted earnings has increased. I think it's 2% to 3% of your NAV that's part of that franchise.

So can you talk a bit about what what's going on? What's been the drag on adjusted earnings and what's the strategy around Power Sustainable? Because I know you got rid of the investment side in China and all that stuff, but if you can kind of delve a little bit more, please?

Yes, a couple of comments. Good question. So first of all, I'm going to go to the seed capital, part of the losses on the energy seed capital is just the nature of our investment in the infrastructure fund which is producing really good earnings and is going to produce good carry and good cash flow.

But because we consolidate that, we end up taking the amortization of the assets through and we show net losses, but cash flow is going to -- it's generating positive cash flow. We have to do a better job of telling that story. So the seed is part of it.

But if I go to the manager itself, the asset manager, Power Sustainable manager is not at scale at this point. So you can say, well, what can you do to -- obvious question is, can you combine it with this, combine it with that. These businesses are all different cultures, different groups.

Where we are focused on is there are 4 strategies within Power Sustainable manager and we are -- we think they are good strategies, and we think we can get the underlying strategies to far greater profitability over the next year or 2 with fundraising that is ongoing.

So Power Sustainable, the infrastructure fund in Canada, the U.S. infrastructure debt fund, these are great teams, great investors and if we can get those strategies to contribute greater scale and contribution at the fund level, we have a lot more optionality either to -- then Power Sustainable gets much more profitable.

And at that point, you got greater optionality to go out and either leave it as it is, do something else but we're -- so we're focused on getting the underlying funds to far greater contribution to the GP, and that will give us lots of different options.

And in the meantime, it's a rounding error in terms of our P&L and the value uptick from doing it is way more than the small losses we're incurring. So that's why we're steady as she goes. Right now, even though it looks like we're kind of just enduring ongoing losses, we see a way through it here in the next year or two.

Okay. And just lastly, Jake, I don't know if you can give us some detail about the value that Sagard -- the value for Sagard that was part of the deal with GBL. Can you talk about -- and if you can't give us numbers, if you can talk about it relative to the deal with BMO and Abu Dhabi.

No, happy to. We actually go through an independent valuation activity around Sagard with some level of frequency. And so last quarter, so Q3, we marked it up to USD 600 million. And our interest sits just below 50% now after the latest transaction. So GBL comes in for 5% at that USD 600 million valuation.

I think the good note around that, Doug, is I don't have the precise number in front of me, but with a take half of the USD 600 million, call it, CAD 400 roughly, that's our stake, our investment would be less than CAD 50 million upfront.

So one of the ways these platforms can create value is also through the value of the GP. So I think that transaction is a good validation of the economic positivity that Sagard is creating for the broader group.

And then the ADQ and the BMO deal, I don't have the value in my head. We can get back to it, but this has been a nice story. As Jake mentioned, Sagard, the underlying value of the GP, even though it is not creating a lot of earnings right now, it's got a lot of revenue even before the performance equity transaction and the HalseyPoint CLO transaction, they had a run rate of about USD 200 million.

So that's getting to be a really, really big number in Canadian dollars of fees, of ongoing fees, but they've got lots of strategies and they're playing for the long term and continuing to grow and launch strategies. So we haven't seen it through the earnings, but the value of our stake in the GP, as we said, is around CAD 400 million right now, and that's a really good return on money.

We'll get the number -- I think we can get the number for where it was done, but I don't have it handy here, but there's been growth in values for sure over the last few years, Doug.

And the next question comes from Tom MacKinnon with BMO Capital.

Two questions. One is kind of more detail on the numbers and second, more in strategy. I'll start with a detailed one. On Page 31, you mentioned for Sagard there that you've got some fintech investments that would be making a contribution here in terms of venture capital for Sagard, it's $8 million in the quarter, and it notes that this is -- some of that includes your share of losses of earnings or losses on Wealthsimple.

Like the Wealthsimple treatment at IGM is fair value through OCI, so there's no earnings coming in. Do you treat this different? Do you account for Wealthsimple differently at Power than at IGM? What was the Wealthsimple earnings in the quarter? And if you do account for it different at Power than IGM, why do you do that?

So that's yours, Jake.

Yes. So Tom, we'll come back to you offline just on the 2 different accounting methodologies. I want to confirm something down at IGM. Wealthsimple is just a small portion of the loss in that footnote that you're referring to.

And in terms of the question around their profitability in the quarter, I don't believe they currently disclose it. I think they noted publicly in an interview that they've turned profitable, but I don't think we're at the stage where we're disclosing the amount. I think the key number around Wealthsimple over the course of the year is the revaluation of the company up to about $5 billion.

But we do consolidate Wealthsimple at the power level and IGM does not. So there's very different accounting, and it's not because we choose to do that, that's the way it works, we consolidate...

All right. And maybe a question just with respect to buybacks here. And how do you balance how you're going to approach buybacks? It seems to be -- or you've got almost $1 billion here in terms of kind of dry powder. And what do you -- do you think it's better to buy back stock? Or do you think it's better to do contributions into Sagard and Power Sustainable in order to increase perhaps their profitable contribution at the asset management level?

Like, to your point, Jeff, like people don't see value for the alts until they can turn into earnings. Is there anything you can do in terms of this dry powder to get better earnings out of those, out of Sagard and Power Sustainable as opposed to just trying to buy back stock and increase the NAV per share?

Yes, it's a very good question. And I think it's a balanced approach that we take to it. We think about buybacks as something that we want to do on an ongoing basis. So even though we've got a lot of cash, I want to just correct the way or at least tell you the way we think about cash, even though we've got $1.6 billion on the balance sheet, we do like to keep around $800 million around.

That's been something we've done for a long time. We could question that from time to time, but we do. And then we've got dividends payable. So it's not quite that much, but we can fund buybacks for quite a long time here, certainly well through the next year at the pace we've been at just based on our definition of excess cash, so we want to be in the market doing buybacks on a consistent basis and not jump in and do it kind of all at once just because the discount gaps out.

Obviously, when the discount gaps out, it's more attractive, but we try -- we want to be in the market on a consistent basis. I mentioned that we've got a trade-off that we're trying to build businesses. Part of that is creating and investing in businesses that are increasing in NAV, but the market in the short term won't pay for it until we've turned it into either something that grows earnings or something we can turn into cash.

And there's -- I'm going to go a little bit to how the two get linked. Over the last 5 years, we've been taking cash out of that portfolio. I mentioned the $3.6 billion of acquisitions of sales that we did, but we also took -- had returns cash returns from the underlying seed capital and in some cases, sold our position in some of those.

And when we use that to buy shares back, we actually are turning the returns from the NAV portfolio into earnings. And it's just -- it sounds silly, but it's a tool to do it. You take $100 million or $1 billion over a period of time that you return from those NAV portfolios, whether it produced earnings or not, and you buy shares back, and you shrunk your share base and you've increased your EPS and you've increased your ability to pay dividends per share. And that's an indirect tool, it doesn't show up in our NAV, but in effect is going on.

We're using cash flow from those portfolios. And so it's a balance. We're using those -- the cash -- and we're trying to do a balance. We've got to put some more money in to keep being in the strategies and supporting them. We're taking some money off the table as they grow in value to do buybacks and we're doing a balance so that we are able to continue to support the growth of the business while still increasing our earnings. We're happy to watch its approach.

Yes, how much -- if you're going to spend $100 and buy -- if you have $100 in kind of free cash here, how much would you put into buybacks? And how much would you put into the alts in order to get them to the position where, hey, they're going to have some more contributions to the asset management level?

It's not an algorithm. So you're sitting there and all of a sudden, you decide you're going to take your money out of China, and you've got $500 million on the table, right, okay? And then all of a sudden, we've just launched a new fund, and they need to go out in the fund in the U.S., our U.S. infrastructure debt fund with Tom Murray. It's a fantastic team we have there.

Trying to get the strategy launched and they need initial seed capital to get their first investments done and they need $100 million, $150 million to do it over the next 3 months. So it's not -- you're not on -- we're not driving a Tesla here. We're not -- you don't put it on autopilot. It's actually always different stuff coming at you.

You get cash in, all of a sudden, you've got a big demand for cash and you're trying to be steady with your buybacks and not be in and out and not -- so it's just -- I can't tell you -- it's judgment all the way through, depending on what the circumstances are. That's the only way I can answer the question because that's what we do.

And the -- what drives money going into the alts is really more of initial seed. Is that what you view it as? Or is there anything else that you can do to get them to more profitability on the asset management level other than just this initial seed?

Yes, the initial seed doing all the partnerships that Sagard has done, Power Sustainable did with Canada Life as well to get more scale into the strategies as I was -- when I was answering Doug's question, the more strategies that are up and profitable and running, the more contribution you have and ultimately, you get more profitability at the asset managers.

But I do think -- can I say 5 years ago, when we came out with the strategy, I was talking about, hey, we're going to get alt managers up to profitability and everyone's going to love it because it's going to create all kinds of contribution. Well, 5 years later, they're not creating any contribution.

So when I -- as much as I talked about the last 5 years having -- we've done a lot of stuff, we've had lots of success, that portion of what we advertise to the Street and to you hasn't played out the way we thought it would. And we just have to recognize that.

It's been a longer build, it's been a tougher fundraising environment, and the businesses to get to scale have had to continue to throw new strategies. So they're investing and so the GPs per se are not creating ongoing profitability.

So that we go, okay, we didn't get that one right when we talked about our goals. But that doesn't mean we're not creating value through it. And if we have -- and we're still creating very strong total shareholder returns, notwithstanding that, so that's part of the balance here.

How much of this can we continue to do? If we're confident we can create low mid-teens kind of returns and we can also be setting the stage for better returns in 2030 and 2033, like we're going to do that. If we're creating 8% returns over time because we can't do it and you might say, boy, we don't -- we actually can't afford to do this. So it's judgement.

And the next question comes from Jaeme Gloyn with National Bank Financial.

First question, just going back to, I believe it was Slide 26, the 3 bullets of looking ahead. The third one is continuing to monetize assets. It seems like most of that is done, as you kind of said, heavy lifting is done. So what might you be referring to when you make that statement?

Yes. Great question. So the -- so let me rephrase it, what could fund our buybacks. We are sitting on a lot of cash. Let's start there. Within the portfolio of proprietary capital, we have assets that can still be monetized. Some of it is seed capital, as I said, that will produce returns. We get cash back from it. Occasionally, we sell a position.

We put -- the previous seed discussion, if you were at listening to it, we put $100 million in on a seed capital, 3 years later, the fund is up and running. The seed capital is worth $150 million and somebody wants to buy a secondary position and we sell $75 million. So we get -- we occasionally sell positions, we get returns of capital on the seed.

We've got some assets in the energy portfolio that are actually not in the funds. They're kind of retained energy and wind assets that are going to be sold. So we've got that source of cash.

GBL is creating cash for us. They bumped their dividend. That wasn't flowing through. They did an CAD 80 million, I think, was our Canadian dollar share at the time of the increase. Of course, that's for 2025, the euro has been strong against Canadian dollars. So we didn't flow that through. There's another source of cash.

We've got lots of tools here to fund buybacks for the years to come, lots of tools in the toolkit. I think we probably overfocused you and the market on the stand-alone businesses as being the source. But in fact, the rest of the portfolio away from Lifeco and IGM is creating cash, and we think it will continue to do so in the years to come to fund the strategy.

James, if you look at Slide 22, which shows us the last 5 years of monetization that Jeff walked through, $3.6 billion, $1.8 billion went to share buybacks. A portion, $1.4 billion went to seed. If you were to look at that list of items, I'm not sure what items 5 years ago, you would have picked out as being obvious sources of capital, right? But there's so many levers here.

You probably would have said, oh, stand-alone, the Peak, yes, that's probably gone. But some of the other items, Wealthsimple secondary, some of the sale of an LP interest in Sagard Europe funds, they may not be as obvious on the surface, just looking at our statements, but there's many levers, as Jeff noted, to fund buybacks over the next couple of years.

And that doesn't include return of capital from the seed, from the investments itself. We really should do a more thorough kind of reconciliation of what we've done over the last 5 years to show the different sources because this is part of it because we get lots of questions on this and if we're getting questions on it, we're not being clear enough on it. But the answer to your question is we are -- we have lots of sources here for the ensuing years to keep the buyback program going.

Yes. Yes. Understood. And then I guess related to that, in terms of the proprietary capital now $2.7 billion, is that -- like how do you view that? Is that sort of like a steady state level? Or do you see it materially increasing as you continue to grow the funds or winding down from here? Like what's -- how should we think about the direction of proprietary capital at work?

Yes. In terms of our commitments, we're trying to keep it at an even level. And part of that growth was through markup in the value. Wealthsimple, the power stake is in there because it's managed by Sagard and it gets caught up in the definition there. And so you've got some value accretion in there. And again, we can present it with that broken out of it.

But I think the way to think about it is we are -- our message to both Sagard and to Power Sustainable is that we will support their seed capital, but we have to recycle it because we're not looking to increase our overall commitment to it. And we've been true to that over the last 5 years.

But the value of what it's shown that it will jump up and down a little bit as I was answering to, I think it was Tom's question, all of a sudden, we got to put in $100 million in a fund, and we get 2 going at the same time and it jumps a little bit. But we're trying to keep our commitments level over time. And that means we got to be taking money out, and we've got to be selling positions from time to be harvesting cash as well.

And net-net, that's been positive. We actually -- so we've kept the commitments at the same levels, but we've been taking cash -- net-net cash off the table over the last 5 years.

Great. And then in terms of the Sagard ownership, is this -- are you at a satisfied level right now in terms of the Power ownership in Sagard or is there opportunities to bring in more partners? And then is the Power Sustainable structure similar in terms of Power ownership versus others? Or is there an opportunity there as well?

Okay. So I'd love to own as much Sagard as we possibly can but we're prepared to own a smaller chunk of a larger, more successful company. And we made that decision by allowing now the fourth outside partners. So we've got -- we've got management as a significant partner. We've got Canada Life, BMO, ADQ and GBL and then Power.

So we just dipped below the 50% mark here with the GBL transaction. And our share, as Jake mentioned, at current value, is about CAD 400, USD 300 on the market, and I said it's about CAD 400, up from not very much 5 years ago.

We're going to continue to do that because I think the most important thing for Sagard is to continue to grow, and they have, I think, the ability to become much larger, more successful. They got the team and the management to do it, and we're not going to stand in their way by saying -- to do that, bringing in partners is fantastic. Like bringing in partners brings distribution, it brings capital, it brings relationships.

So they're going to continue to press on that as they have also been using -- they're using every tool in the kit. And they're also doing M&A as you've seen, and they've been out doing fundraising. So they're doing everything they can to grow, and we're not going to get in the way of that.

But quite frankly, like owning the position, we're doing really well on our GP stake. Power Sustainable manager, as I said, is at a different stage. We're at an early stage of trying to get the strategies that are in place right now to a much greater level of contribution and profitability at the strategy level.

You launch your first fund, you typically don't make any money. You get onto your second fund, you start to make money in a given strategy. They've been disciplined like we weren't getting -- we thought China 5 years ago, we're going to get lots of money into it. We weren't getting any traction, took all the capital out of that. We had a U.K. strategy we were going to launch. We dropped that.

So we are looking at the existing strategies that are in place that we think have a real chance of creating profitability and we're focusing on getting scale there. But they did do a transaction with Canada Life, who came in last year to the GP, and we diluted there. And that was Canada Life had a very high interest in some of their strategies, including the U.S. debt fund that they wanted to seed. So same strategy, very different stage of development.

Great. Last one, maybe just for Jake. Your dividend increased 9%, maybe a little bit bigger than I had previously expected. But how should we think about that in terms of payout ratio on -- is it adjusted EPS, the core metric or free cash flow? If I kind of use my free cash flow calculations, we're kind of almost close to 100% payout ratio. But maybe just refresh how we're thinking about that on a go-forward basis?

Sure. Yes. I think as Jeff alluded to, much of the recurring earnings comes from, obviously, Great-West and IGM. And so on the dividend side, when we see an increase in Great-West, we're looking to essentially flow as much of that through as we think is reasonable. And so it's essentially a flow-through. So don't necessarily look at it on an earnings basis. I take cue from what's happening with dividend growth, sustainable dividend growth happening at the underlying companies.

Yes, I'll just add to that. Yes. So we don't think of it as a payout ratio at the Power Corp. level, Great-West will and IGM will, but not us. So we take their dividends in, we deduct our operating expenses and our financing charges and you end up with a net cash flow.

And we then want a positive cash flow balance, and we're at a point where we flow it through, but we have a small amount of positive cash flow that comes net-net. And that's, as I mentioned earlier, not including the recent jump in the GBL dividend, which will -- so we have positive cash flow at that level. Not a massive amount, but we have positive cash flow.

And then we have the rest of the portfolio that is, as I've mentioned, 4 or 5 times in the call here, generating positive cash flow through the activities that we're doing that are, you could think of as, primarily funding the buyback from that part of the portfolio.

The next question comes from Michael Mccue with TD Cowen.

Just wondering if you could provide some visibility on the fundraising, the level of fundraising on the alt platform, both in the quarter and for 2024 as a whole?

Yes. For the quarter, I don't have it and these things can be -- but $2.7 billion at Sagard, $200 million at Power Sustainable, I think at Power Sustainable, you've got a lot -- we're expecting, well, better -- we're expecting some things that were worked on through 2024 to result in some much more material funding in 2025. So it makes it sound like there wasn't anything happening.

In fact, on their two biggest -- or on the two infrastructure funds, debt and equity, we are expecting some big fundings in 2025 if they're successful. And then the decarb fund is just getting going, and that will be fundraising in 2025. But $2.9 billion across the platform, do we have...

Yes, that's the full year number.

Yes, that's full year number.

And $1 billion in Q4. And it's really a tale of two halves, Michael, to be clear, the first half was quite anemic. There was a lot of headwinds and challenges. I'd say 2/3 of that $3 billion was raised in the second half of the year. So we've seen good momentum as we move into '25. And as Jeff noted, there's several strategies in market now that we're hoping to have stronger fundraising years in 2025.

Great. And then just one more for me is on, so you're targeting a 10% return on the $2.7 billion of the proprietary capital. Are you able to provide some visibility on the sort of IRR that, that's been generating in the last 5 years? I know you guys talk about putting money in, taking some out, but just in terms of internal return last 5 years, what that looks like?

Yes, we haven't -- I don't think we've done that in a clear way. You'll find some of that in the MD&A. But if you go there and we'll give you 1.5 weeks, you can call back and we can -- there's a lot of detail there, we actually need to do -- we need to do a better -- we need to pull that together and present that in a simpler way.

So the answer is I don't have a quick answer for you here, but it's a good question, Michael, and we will endeavor to provide that to you and to others.

Michael, maybe just on -- what you see on Page 18 is the forward, at 10-plus percent on the proprietary capital. That's based off what the funds have put in, in their offering documents. So that's not always based off what the historical performance has been, as we all know in the investment space, past performance won't be an indicator of future results always. But this is not us taking historical in all instances. This is us leveraging what the funds have marketed as their target IRRs.

The next question comes from Nik Priebe with CIBC Capital Markets.

I just wanted to ask a question about excess liquidity. It's conceivable that IGM doubles down on their interest in Rockefeller at some point in time. And when they made that initial investment, IPC was sold to Great-West. So this is hypothetical, but IGM owns interest in GWL and, of course, Wealthsimple too.

So my question is, number one, would it be possible if IGM pursues an additional stake in Rockefeller that you might consider consolidating Power's ownership in one of those businesses? And then number two, if that is a possibility, does that make you want to carry an excess cash buffer relative to that 2x fixed charge ratio to retain a bit of flexibility to accommodate a transaction like that?

I appreciate these are what-if scenarios, but I'm just wondering how those considerations might inform your desire to hold a bit of a buffer in terms of excess cash?

Yes. So it's a good question. The excess cash is we're creating a lot of cash, and were, as I mentioned, re-buyouts, not trying to go out and kind of blow it all at once, if I can put it that way. But we also -- as I've also said, Nick, we're always looking -- we always have M&A opportunities.

Sometimes we're looking at a bunch, sometimes we're looking at one, but we're all -- and if we're not looking at a live one we're thinking about, well, what else can we do. So it's just a little bit of the DNA here. And then when we do that, we are looking at all the ways that we can fund it.

So if IGM were looking at an acquisition, it would be looking at, well, what could we sell, what could we do to fund, can we borrow money, what's our leverage capability, what's our cash and so those are all yes, yes, yes, yes, yes. Those are all the tools in the toolbox that we have. And then you balance them against earnings and how much of the portfolio was NAV, all the things we've been talking about through this.

So I can just say those are all the tools in the toolkit, and we consider them all, and it's true Great-West Life at the IGM level is a bit of a historical artifact that goes back 20, 25 years. And they haven't hesitated that when we were deciding to consolidate the CMAC position -- did we lose the call? At 9:30. No. Are you still there, Nick?

I'm still here, yes.

I heard something drop off. When they did decide to unload some Great-West Life when they wanted to consolidate the CMAC position, both they did and we did in one spot and they use that as a tool, and we were happy to buy Great-West because we are huge believers in the future of Great-West.

So we've seen that in the past, would we consider that in the if there was a need for capital in the future, I think that would be on the list of things that we think about. But as to what we'd actually do and what decisions we make, that will be in the future, so I can't comment on that.

Yes. No, that's fair enough.

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

Well, my closing remarks is just to say thanks for joining us, and have a good day, everybody. We look forward to talking to you in the future. Thank you.

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