Summary

  • Power Corporation of Canada is holding company that focuses on financial services in North America, Europe and Asia.
  • The company core holdings are leading insurance, retirement, wealth management and investment businesses, including a portfolio of alternative asset investment platforms.
  • It's main companies include Power Financial, Great-West Lifeco, IGM Financial, Groupe Bruxelles Lambert.

POW0.jpg

Company Overview

Incorporated in 1925, Power Corporation (TSX:POW) is an international management and holding company that focuses on financial services in North America, Europe and Asia. Its core holdings are leading insurance, retirement, wealth management and investment businesses, including a portfolio of alternative asset investment platforms.1

POW1.png

Company History

On April 18, 1925, Power Corporation of Canada came into being.2

1925-1950Power Corporation of Canada was founded on April 18, 1925, by A.J. Nesbitt and P.A. Thomson, principal partners in the Montréal investment firm Nesbitt, Thomson and Company.
1951-1967

During the 1950s, Power Corporation continued to take minority positions in power companies across Canada. Most importantly, it bought shares in Shawinigan Water and Power Company, one of the largest privately owned hydroelectric producers in the world, with massive installations in Québec. Meanwhile, its successful engineering and construction divisions were engaged in designing and building innovative power projects from British Columbia to Newfoundland.

The 1960s brought dramatic change. It was forced on Power Corporation when governments in Canada’s provinces, including Québec, pushed ahead to nationalize the hydroelectric industry as an essential public service. Between 1962 and 1964, in fact, more than 80 per cent of the value of the Corporation’s portfolio was liquidated.

1968-1980Early in 1968, the leadership of Power Corporation passed from the sons of the founding shareholders to financier Paul Desmarais. His strategy was to increase Power Corporation’s cash flow; to consolidate its holdings into control positions in a limited number of large, diversified, long-term holdings; and to concentrate on improving their performance. By 1971, two thirds of the Corporation’s assets were in operating subsidiaries controlled by Power, as opposed to less than 40 per cent in 1968.
1981-1989

The early 1980s proved a challenging period for Canadian business. Inflation returned, interest rates soared toward 20 per cent, and the prospects for economic recovery were far from certain. Despite its solid earnings and profits, Power Corporation decided it would be prudent to restructure its capital base and lower its long-term debt.

In April 1984, to create an integrated financial services group, Power transferred its holdings in Great-West Life, Investors Group, and Montreal Trust to a new subsidiary, Power Financial Corporation, which went public a year later. Another series of transactions in 1984 and 1985 resulted in the complete elimination of Power’s long-term debt.

1990-2000

Power Corporation entered the 1990s with a solid cash position and was debt-free. It maintained its prudent approach, especially in the face of unsettled economic conditions.

The Corporation continued to build upon the investment it had made in 1981 in Pargesa Holding SA, a Swiss firm, when Pargesa acquired the non-French assets of Compagnie Financière de Paris et des Pays-Bas (commonly known as Paribas).

At the same time, Great-West Life’s wholly owned subsidiary Great-West Life & Annuity Insurance Company emerged as a U.S. leader in employee benefits and retirement products. In Canada, meanwhile, Great-West Life and Investors Group became the largest companies in the Canadian domestic life and health insurance and mutual fund distribution industries, respectively.

The company also expanded its investments in communications and worked at solidifying the special, ongoing relationship with China that had begun in the late 1970s.

 

2001-Present

The next fifteen years marked a period of continued strong earnings. It also saw one of the most tumultuous economic times in many decades, including the sudden financial crisis that rocked the global economy in 2008, a crisis the Corporation and its group companies weathered better than most of their peers.

In 2001, Investors Group Inc. (subsequently renamed IGM Financial Inc.)

In 2007, Great-West Lifeco acquired Putnam Investments, a world-class mutual fund brand based in Boston, for $4.6 billion.

POW2.png

Companies

Power Financial Corporation

Power Financial Corporation, a wholly owned subsidiary of Power Corporation of Canada, is an international management and holding company with interests in financial services and asset management businesses in Canada, the United States and Europe. It also has significant holdings in a portfolio of global companies based in Europe.

Great-West Lifeco

Great-West Lifeco Inc. (Lifeco) is an international financial services holding company with interests in life insurance, health insurance, retirement and investment services, asset management and reinsurance businesses.

Lifeco has operations in Canada, the United States and Europe through Canada Life, Irish Life, Empower Retirement, Putnam Investments and PanAgora Asset Management.

Canada Life

Founded in 1847, The Canada Life Assurance Company (Canada Life) was Canada’s first domestic life insurance company. Today, the company operates in Canada, the United States, the United Kingdom, Isle of Man and Germany, and in Ireland through Irish Life. As a diversified international financial services company, Canada Life offers a wide range of insurance and wealth management products for individuals, families and businesses. The company also provides reinsurance products and operates primarily in the U.S., Barbados, Bermuda and Ireland.

On January 1, 2020, Great-West Life, London Life and Canada Life became one company – Canada Life. Canada Life is committed to its customers and helping build stronger communities across the regions where it operates.

Empower Retirement

Empower Retirement is the second-largest U.S. retirement services provider by assets and participants. It serves all segments of the employer-sponsored retirement plan market – small, mid-size and large corporate clients, government plans, non-profit entities and private-label recordkeeping clients – and offers individual retirement accounts. In 2020, Empower invested US$4.3 billion in four strategic acquisitions, including Personal Capital and the retirement business of Massachusetts Mutual Life Insurance Company.

Putnam Investments

Putnam Investments is a U.S.-based global asset manager, offering investment management services across a range of equity, fixed income, global asset allocation, ESG and alternative strategies, including absolute return, risk parity and hedge funds, for individuals and institutions. Putnam distributes those services largely through financial intermediaries via its offices and strategic alliances in North America, Europe and Asia.

PanAgora Asset Management

PanAgora Asset Management is a quantitative investment manager of distinct and innovative Equity, Multi Asset and Risk Premia strategies that are designed to address the evolving objectives of institutional investors worldwide.

PanAgora builds strategies on a foundation of continuous, innovative research that integrates in‐depth fundamental insights with the breadth and discipline of sophisticated quantitative techniques.

PanAgora’s process is fluid and holistic, with the flexibility required in a complex marketplace to assimilate advances in technology and address a rapidly changing investment environment.

Irish Life

Irish Life is one of Ireland’s leading financial services companies with over 1.3 million customers.

For 80 years, Irish Life has been helping people in Ireland to look after their needs for life insurance, pensions and investments and more recently, health insurance. Its vision is to help people in Ireland to have healthier lives and to build better futures.

As part of Great-West Lifeco, Irish Life has access to experience and expertise on a global scale, allowing the company to continuously enhance its leading range of products and services. This also has been independently recognized with a number of customer experience awards in recent years.

IGM Financial

IGM Financial is a leading wealth and asset management company supporting financial advisors and the clients they serve in Canada, and institutional investors throughout North America, Europe and Asia. Through its operating companies, IGM provides a broad range of financial planning and investment management services to help Canadians meet their financial goals at every stage of their lives.

IG Wealth Management

IG Wealth Management is a national leader in providing personalized financial solutions delivered through long-term client and advisor relationships to approximately one million individuals, families and business owners in Canada.

Mackenzie Investments

Mackenzie Investments is an investment management firm providing services through multiple product offerings utilizing proprietary investment research and experienced investment professionals. Mackenzie Investments distributes its products and services primarily through multiple distribution channels to both retail and institutional investors.

Investment Planning Counsel

Investment Planning Counsel is an integrated financial services company focused on providing Canadians with high-quality financial products, services and advice through its network of approximately 730 independent financial advisors.

POW3.jpg

Groupe Bruxelles Lambert

GBL is a leading investor in Europe, focused on long-term value creation and relying on a stable and supportive family shareholder base. GBL strives to maintain a diversified high-quality portfolio composed of global companies, leaders in their sector, in which it can contribute to value creation by being an active professional investor.

Power Financial Europe SA, a wholly owned subsidiary of Power Financial, and the Frère Group each hold a 50% interest in Parjointco SA, a Belgium-based company. Parjointco holds a 43.2% voting interest in GBL.

Alternative Asset Investment Platforms

Power Corporation, through its alternative asset investment platforms (investment platforms), is developing alternative asset management businesses which build upon the investment capabilities that have been created over many years in several high-growth asset classes. The investment platforms are focused on growing their asset management businesses through raising third-party capital and the Corporation intends to provide seed capital to the different investment products managed by each of the investment platforms.

Sagard

Sagard was founded in 2005 as a complement to the Corporation’s global investment activities. Today, Sagard is a multi-strategy alternative asset manager with professionals principally located in Canada, the U.S. and Europe.

Sagard seeks to generate attractive returns by matching investment opportunities with flexible capital solutions and pairing entrepreneurs with teams that have deep industry knowledge. Sagard develops long-term partnerships and empowers the growth of its investments through a unique global network of portfolio companies, limited partners, advisors and other valued relationships.

Sagard invests across five asset classes: private credit, healthcare royalties, venture capital, private equity and real estate, and also offers wealth management services. 

Power Sustainable

Power Sustainable is a global multi-platform alternative asset manager with a long-term investment approach focused on sustainable strategies. It has offices in Montréal, Toronto, Shanghai, Beijing and New Jersey.

Power Sustainable is comprised of two platforms: the Pacific platform invests in the China equity markets, seeking high-quality, sustainable business models with a fundamentals-based, research-driven investment process; and the Energy Infrastructure platform invests in the development, construction, and operations of renewable energy infrastructure assets in North America.

Fintech Investments

In partnership with its subsidiaries Great-West Lifeco and IGM Financial, Power Corporation has been actively participating in the emerging fintech industry. The group believes that fintech will change business models in financial services, making financial advice, insurance and investment services more accessible to consumers and available to them by the means and at the times that best suit them.

China AMC

Power Corporation’s multi-generational relationships have been foundational in creating investment opportunities in China, such as through its investment in China Asset Management Co., Ltd. (China AMC), one of the largest asset managers in China.

Founded in 1998 as one of the first fund management companies in China, China AMC has developed and maintained its position among the market leaders in China’s asset management industry. China AMC diversifies Power Corporation’s interests creating strategic opportunities with other asset managers within the Power group of companies.

The investment in China AMC provides the potential to leverage the group’s global experience in wealth management and distribution. The Power group of companies benefit from the strategic relationship with China AMC which provides opportunities to work together on developing products and subadvisory relationships.

Power Corporation and IGM Financial each hold interests of 13.9% in China AMC, representing a combined 27.8% interest.

POW4.jpg

Recent Acquisitions

Acquisition of MassMutual retirement services business

On December 31, 2020 Great-West Life & Annuity completed the purchase, via indemnity reinsurance, of the retirement services business of Massachusetts Mutual Life Insurance Company (MassMutual). Lifeco assumed the economics and risks associated with the reinsured business. The acquisition strengthens Lifeco’s position as a leader in the U.S. retirement market.3

Lifeco paid a ceding commission of $2,937 million (US$2,312 million) net of working capital adjustments to MassMutual, and funded the transaction with existing cash, short-term debt and $1,973 million (US$1,500 million) in long-term debt issued on September 17, 2020.

During the year ended December 31, 2021, MassMutual contributed revenue of $2,861  million (US$2,262  million) and net earnings of $199  million (US$158 million). These amounts are included in the statements of earnings and comprehensive income for the year ended December 31, 2021.

Acquisition of Personal Capital Corporation

On August 17, 2020, Great-West Life & Annuity completed the acquisition of 100% of the equity of Personal Capital, including the 24.8% interest held by IGM prior to the completion of the transaction (approximately 21.7% after giving effect to the dilution). Upon completion of the purchase price allocation in the fourth quarter of 2020, a contingent consideration earn-out provision of $22 million was recognized, representing Lifeco’s best estimate of growth in assets under management metrics defined in the Merger Agreement. The contingent consideration provision was increased by $87 million in 2021 for a total contingent consideration provision of $109 million at December 31, 2021. The increases in 2021 were due to growth in net new assets above the amount assumed at the date of acquisition.

The Merger Agreement allows for contingent consideration of up to $222 million (US$175 million) based on the achievement of growth in assets under management metrics, payable following measurements through December 31, 2021 and December 31, 2022. Changes in the fair value of the contingent consideration measured in accordance with the Merger Agreement subsequent to the completion of the purchase price allocation are recognized in operating and administrative expenses in the statements of earnings.

Acquisition of Prudential retirement services business

On July 21, 2021, Great-West Life & Annuity announced that it had entered into an agreement to purchase, through a share purchase and a reinsurance transaction, the full-service retirement business of Prudential Financial, Inc. The acquisition further solidifies Lifeco’s position as a leader in the U.S. retirement market. Lifeco will assume the economics and risks associated with the business, while Prudential will continue to retain the obligation to the contract holders of the reinsured portion. Lifeco will pay a total transaction value of approximately US$3,550 million and will fund the transaction with $1,500 million (US$1,193 million) of limited recourse capital notes (Note 20) and up to US$1,000 million of short-term debt, in addition to its existing resources. The transaction is expected to close in the first half of 2022, subject to regulatory and customary closing conditions. During the year ended December 31, 2021, Lifeco incurred transaction expenses of $9 million (US$7 million) which are included within operating and administrative expenses in the statements of earnings.

Acquisition of Ark Life Assurance Company

On November 1, 2021, Irish Life completed the acquisition of Ark Life Assurance Company dac (Ark Life) from Phoenix Group Holdings plc for total cash consideration of $332 million (€230 million). Ark Life is closed to new business and manages a range of pensions, savings and protection policies for its customers in the Irish market.

Acquisition of ClaimSecure Inc.

On September 1, 2021, Canada Life completed the acquisition of 100% of the equity of ClaimSecure Inc., a healthcare management firm that provides health and dental claim management services to private and public businesses in Canada.

POW5.jpg

Financial Highlights

First Quarter 2022 Financial Results

May 11, 2022; Power Corporation of Canada reported earnings results for the three months ended March 31, 2022.4

Net earnings attributable to participating shareholders were $478 million or $0.71 per share, compared with $556 million or $0.82 per share in 2021.

Adjusted net earnings attributable to participating shareholders were $515 million or $0.76 per share, compared with $786 million or $1.16 per share in 2021.

Power Corporation

The Corporation reported net earnings of $478 million or $0.71 per share for the first quarter of 2022, compared with $556 million or $0.82 per share in 2021. Adjusted net earnings were $515 million or $0.76 per share, compared with $786 million or $1.16 per share in 2021.

Adjusted net asset value per share was $49.92 at March 31, 2022, compared with $52.60 at December 31, 2021. The Corporation's book value per participating share was $33.32 at March 31, 2022, compared with $34.56 at December 31, 2021.

In 2022, the Corporation purchased for cancellation 7,192,900 subordinate voting shares for a total of $280 million under its normal course issuer bids.

Great-West Lifeco Inc. (Lifeco)

First quarter adjusted net earnings were $809 million, up 9% compared with the first quarter of 2021.

Total assets were $600 billion and assets under administration were $2.2 trillion at March 31, 2022, compared with total assets of $630 billion and assets under administration of $2.3 trillion at December 31, 2021.

On April 1, 2022, Empower, a subsidiary of Lifeco, completed the acquisition of the full-service retirement services business of Prudential Financial, Inc. (Prudential). Empower's reach in the U.S. is now expanded to more than 17.1 million retirement plan participants and assets under administration to US$1.4 trillion.

Canada Life was rated as the fourth most valued brand in Canada by Brand Finance, making Canada Life the first insurance company ever to jump into its top five most valuable brands in Canada.

IGM Financial Inc. (IGM)

Record-high first quarter net earnings of $219.3 million, up 8% from the first quarter of 2021.

Record-high first quarter assets under management and advisement of $268.3 billion, up 8% from the first quarter of 2021 and down 3% from December 31, 2021.

Record-high first quarter net inflows of $2.5 billion, compared with net inflows of $2.3 billion in the first quarter of 2021.

Groupe Bruxelles Lambert (GBL)

GBL reported a net asset value of €21.3 billion, representing €136.10 per share, compared with €22.5 billion or €143.91 per share at December 31, 2021.

In the first quarter of 2022, GBL completed €202 million of share buybacks. GBL's board of directors approved an additional buyback envelope of €500 million on May 5, 2022.

GBL announced two strategic investments in the healthcare sector with majority shareholdings in private companies Affidea Group B.V. and Sanoptis AG, leaders in their sector, in April 2022.

Sagard Holdings Inc. (Sagard) and Power Sustainable Capital Inc. (Power Sustainable)

Assets under management including unfunded commitments, of the alternative asset investment platforms were $19 billion, up from $11 billion at March 31, 2021.

On March 30, 2022, Power Sustainable announced the launch of its North American agri-food private equity platform, Power Sustainable Lios, and its inaugural Lios Fund I. Power Sustainable Lios is a specialized agri-food private equity investment platform supporting the sustainability transformation occurring within the food system.

Lifeco: contribution to net earnings increased by 8.5% and contribution to adjusted net earnings increased by 9.1%.

IGM: contribution to net and adjusted net earnings increased by 8.0%.

GBL: negative contribution to net earnings of $29 million. Results include the Corporation's share of a charge of $44 million in the first quarter of 2022 for losses due to an increase in the put right liability of the non-controlling interests in Webhelp Group (Webhelp) and charges related to Webhelp's employee incentive plan.

Alternative asset investment platforms: net earnings include a negative contribution of $92 million from Power Sustainable mainly related to realized losses and impairments in the Power Sustainable China portfolio of $67 million and a $10 million impairment charge in its energy infrastructure platform.

Standalone businesses: contribution to net and adjusted net earnings of $4 million.

Corporate operations and Other: the comparative period includes an income tax expense of $38 million, primarily related to the deferred tax expense resulting from the realization of gains recorded in earnings on the sale of investments.

Adjustments in the first quarter of 2022, excluded from adjusted net earnings, were a net negative impact to earnings of $37 million or $0.05 per share, mainly related to the Corporation's share of Lifeco's adjustments and the Corporation's share of an impairment charge of $10 million recognized by Power Sustainable on direct investments in energy assets. Adjustments in the first quarter of 2021 were a negative net impact to earnings of $230 million or $0.34 per share, mainly related to the Corporation's share of the charge arising from the remeasurement of the put right liability of certain of the non-controlling interests in Wealthsimple Financial Corp. (Wealthsimple) to fair value of $208 million. These were reflected in the Adjustments of the alternative and other investments and in the Effect of consolidation based on Lifeco's and IGM's respective interest.

References

  1. ^ https://www.powercorporation.com/en/about/profile-and-mission/
  2. ^ https://www.powercorporationhistory.com/en/
  3. ^ https://www.powercorporation.com/media/uploads/reports/annual/power_corporation_-_2021_annual_report-final.pdf
  4. ^ https://www.powercorporation.com/en/news/press-releases/2022/power-corporation-reports-first-quarter-2022-financial-results-122633/
Tags: CA:POW
Created by Asif Farooqui on 2022/05/31 07:16
     

Become a Contributor

If you follow a company closely and would like to share your knowledge, we would love your contributions. Register Now and start editing!

Recently Modified

This site is funded and maintained by Fintel.io