Power Co. of Canada (TSE:POW) President and CEO Jeff Orr said the company’s strategy to simplify its structure and unlock value remains intact, emphasizing that recent shareholder returns have been driven primarily by earnings growth rather than multiple expansion.
Orr made the comments in a conference discussion moderated by National Bank equity analyst James Glynn, where Orr also addressed leadership transitions across the group, operating momentum at Great-West Lifeco and IGM Financial, the company’s alternative asset platform, and his view of how artificial intelligence may affect financial services.
Strategy “at a different stage of execution”
- Improving the performance of the group’s “earnings parts” — including Great-West Life and IG Wealth and Mackenzie at IGM — through organic investment and acquisitions to support more consistent growth.
- Building and validating longer-dated investments that “will earn money for us in five years and 10 years,” pointing to Wealthsimple and Rockefeller as examples of value surfacing outside near-term reported earnings.
- Simplifying the corporate structure, focusing the company more tightly on financial services, and improving communication with investors.
Orr also pushed back on the idea that the stock’s performance has been primarily a valuation story. “It hasn’t been a valuation story. It’s been a growth earnings story,” he said, citing Great-West Life’s “12% earnings growth EPS for the last four years” and noting the company’s discount has narrowed but remains elevated.
Leadership transitions across the group
Asked about strategic continuity amid a leadership transition, Orr said he is “delighted with the leadership changes,” noting that the group has changed leaders at its three main companies as well as at Power Corporation over the past 12 months. He described the process as a “classic Power transition playbook,” highlighting executive familiarity with the organization and its subsidiaries.
Orr said he felt “great” about incoming CEO James’ readiness for the role, citing experience running IGM, board exposure to Great-West Life, and knowledge of Power Corp. He also said the transition to David Harney at Great-West Life from Paul Mahon was executed successfully, and called the move to Damon Murchison at IGM “fantastic.”
Great-West Lifeco: consistent earnings growth, led by Empower
Orr said Great-West Lifeco’s shareholder returns have been driven by “consistent earnings growth,” again citing roughly 12% EPS growth over the past four years. He said the performance has been diversified but “obviously led by Empower.”
He said Great-West’s scale and franchise strength have been built through long-term investment and M&A that repositioned the business. Looking forward, Orr said the company is “not dependent on doing acquisitions” to meet its stated “8%-10% earnings growth hurdle,” though he added that additional M&A could contribute on top of that.
On Empower specifically, Orr said the company can grow “in the double digits without further acquisitions,” while also arguing additional consolidation opportunities are likely over time. He pointed to Empower’s cost position and integration experience, noting, “We actually put them all on one platform.” However, he said timing is uncertain: “I don’t know whether it’s next year or whether it’s five years from now.”
Orr also offered a forward-looking perspective on returns, saying he does not expect the next five years to match the “20+” annualized returns achieved over the last six years. Still, he suggested that earnings growth plus dividend yield could support “low- to mid-teens” returns, describing Power and Great-West as businesses run at “a lower risk point than the peer group” by design.
IGM flows and the role of strategic investments
Discussing IGM Financial, Orr said the recent return to more consistent net flows at IG Wealth and Mackenzie reflects both improving industry conditions and company-specific initiatives. He described IG Wealth as “a reengineered business” compared with a decade ago, citing a focus on “mass affluent and high net worth,” changes in pricing and product mix, and an “incredible technology platform.”
Orr said industry outflows followed the inflation and rate shock, as clients shifted assets toward deposits or mortgage paydowns, but the sector has returned to inflows over the past few quarters. He suggested IG Wealth is positioned to outgrow in the lower end of the high-net-worth segment.
For Mackenzie, he said improvement is tied to product work and momentum in institutional channels, though he noted some strategies remain in outflows due to periods of underperformance. Even so, he said the platform is “in very strong shape” and he expects “very good things” in the next couple of years.
Orr also emphasized IGM’s “optionality” from strategic investments, citing Wealthsimple and Rockefeller. He said most of that portfolio is not yet producing earnings, with China Asset Management as an exception, but he framed the investments as potential future growth drivers.
Alternatives platform: growth first, profits later
Orr outlined three potential sources of earnings contribution from the company’s alternative investment platform: returns on seed capital, profitability from the general partner (GP) businesses, and carried interest. He said Power has “about CAD 1 billion of capital underpinning each of Sagard and Power Sustainable,” and expects roughly “10% returns” on balance, though he cautioned that accounting earnings may not always reflect cash returns. As an example, he cited infrastructure assets that can generate cash flow while producing “negative income” in reported results.
He said the near-term focus is building scale rather than maximizing profits. Using Sagard as an example, Orr said management fees grew from $19 million when the strategy launched to a $192 million run rate, with costs around $200 million and the business near break-even. He also said the marked value of Power’s Sagard position has risen to about $320 million (in U.S. dollars), but that value does not flow through the P&L, creating “earnings noise” and communication challenges.
On growth plans, Orr said Sagard aims to reach $100 billion of assets under management and would be around $44 billion following the pending closing of Unigestion. He described the Unigestion deal as adding a “solutions provider” capability in Europe. For Power Sustainable, Orr said it remains earlier stage but has built “four very attractive products” and about CAD 4 billion in strategies.
AI as a productivity enhancer, not necessarily a profit driver
Orr said artificial intelligence will “definitely” improve productivity and client experience and make advisors more productive. However, he questioned how much of those benefits will translate into higher margins, arguing competitive pressures may pass savings to clients or suppliers.
He said technology shifts historically have expanded markets rather than eliminated them, and he expects advice to move “to a higher level of value added,” with greater emphasis on holistic planning. On asset management, he said AI may increase access to information, but he does not expect investment judgment and portfolio construction skills to disappear in the “foreseeable five, six, 10 years.”
NAV discount, buybacks, and capital deployment
Addressing movements in Power’s net asset value (NAV) discount, Orr said it does not move “in a straight line” and described the current discount as a “real source of value.” He argued that buying Power shares effectively provides almost a full Great-West Life share exposure while “getting the rest of the portfolio for free” at current levels.
Orr said value creation is not dependent on valuation changes, pointing instead to earnings growth at operating businesses, value creation in longer-term franchises, strong cash inflows, and buybacks. He added that the company is “sitting on a lot of cash right now” and, with the discount elevated, he expects buybacks to be used “more aggressively going forward.”
About Power Co. of Canada (TSE:POW)
Power Corp. of Canada is a diversified holding company with interests in financial services, communications, and other business sectors through its controlling interests in Power Financial. Power Financial in turn holds controlling interests in Great-West Life (an insurance conglomerate), IGM Financial (Canada’s largest nonbank asset manager), and Pargesa (a holding company with interests in European companies). Power Corp. bought out the remaining shares of Power Financial in February 2020.
