The Globe and Mail - 24.10.2019

B2| REPORTONBUSINESS O THEGLOBEANDMAIL| THURSDAY,OCTOBER24,2019

The Ontario Teachers’ Pension
Plan and Caisse de dépôt et place-
ment du Québec are teaming up
on a US$500-million venture to
invest in growing insurance com-
panies, a sector whose long-term
strategies have proven attractive
to Canada’s big pension plans.
The two plans, which together
manage more than $500-billion
in assets, have provided startup
capital to a venture called Con-
stellation Insurance Holdings,
formed by insurance executive
Anurag Chandra. Mr. Chandra,
who will serve as CEO, spent five
years at Prosperity Life Insurance
Group before it was sold to a
group of private investors in Janu-
ary. He left the U.S. company in
June.
The idea behind Constellation
Insurance is to buy into insurers
with plans for long-term growth
and boosting profits by growing
and realizing efficiencies, Mr.
Chandra said in a statement.
What the company does not
want, he said, is insurers that are
trying to fulfill short-term goals
by cutting costs or avoiding
spending for growth. Constella-
tion will invest in both sellers of
life insurance and property and
casualty insurers. It will also look
at mutual insurers, which are
owned by policyholders and have
not yet converted themselves in-
to stock corporations.
In a statement, Jane Rowe,
Teachers’ executive managing di-

rector for equities, said the pen-

sion plan was attracted by Mr.

Chandra’s “distinctive and suc-

cessful track record in the insur-

ance sector,” including building

“an attractive, high growth insur-

ance platform that generated ex-

ceptional investor returns” at

Prosperity.

Major Canadian pension plans

have all invested in the insurance

sector in recent years, drawn by

the prospect of steady returns

and growth for patient investors.

“The insurance industry pro-

vides stable, sustained returns

over a long-term horizon.

Through its resistance to eco-

nomic cycles, this sector is per-

fectly aligned with the invest-

ment profile that CDPQ seeks,”

said Caisse spokesman Jean-Be-

noît Houde.

The Ontario Municipal Em-

ployees Retirement System (OM-

ERS) paid US$1-billion in 2017 for

about 21 per cent of Allied World

Assurance Company Holdings

AG, joining Fairfax Financial

Holdings in its bid to acquire the

insurer. OMERS also bought just

less than 30 per cent of Brit PLC

from Fairfax in 2015. The Canada

Pension Plan Investment Board

spent $2-billion in 2014 to buy

Wilton Re Holdings Ltd., a life in-

surance and reinsurance compa-

ny. CPPIB spokesman Michel Le-

duc said insurance is a “platform”

where CPPIB has targeted a line of

business it would like to be in,

purchased a company with a

management team it believed in

and used that vehicle to expand.

Since 2014, Wilton has made two

major acquisitions.

“A headwind on the Canada

Pension Plan is mortality risk,” he

said, explaining that as CPP bene-

ficiaries live longer, the plan owes

more in benefits, which ultimate-

ly requires more assets. “Life in-

surance is a fantastic hedge – as

people live longer, they continue

to pay their contractual obliga-

tions.”

Mr. Chandra was chief operat-

ing officer at Allstate Financial’s

life insurance, retirement and

voluntary benefits business be-

fore joining privately owned

Prosperity as CEO in May, 2014.

The company had bought an al-

most century-old Virginia con-

cern called Shenandoah Life In-

surance Co. and completed a deal

for New York-based SBLI USA Mu-

tual Life Insurance Company Inc.

after his arrival. In January of this

year, an investment partnership

that included hedge fund Elliott

Management Corp., insurance-fo-

cused private investment firm

Wand Partners Inc. and Mr. Chan-

dra closed a deal to buy Prosper-

ity. An Elliott spokesman said

Wednesday the firm could not

speak to whether Mr. Chandra

maintained his ownership in the

company after his departure.

Teachers,Caisseprovide

startupcapitaltoinsurancefund

DAVIDMILSTEAD
INSTITUTIONALINVESTMENT
REPORTER

Life insurance is a fantastic

hedge – as people live

longer, they continue to pay

their contractual obligations.

MICHELLEDUC

CPPIB SPOKESMAN

Canada Pension Plan Invest-
ment Board(CPPIB) said on
Wednesday it would sell its
39-per-cent stake in European
car-park manager Interparking
SA to Dutch pension fund APG.
Pension funds and private
equity firms are looking to
offload their unprofitable park-
ing assets as people reduce car
ownership and rely more on
ride-hailing.

Reuters reported last month

that CPPIB had hired U.S. in-

vestment bank Citigroup to

explore the sale of its stake.

Financial terms of the deal

were not disclosed.

CPPIB bought the minority

stake for €376-million ($547-

million) in 2014 from Belgium-

based AG Real Estate, which still

holds 51 per cent.

AG Real Estate and Parkimo

will keep their current stake in

Interparking, the company said.

The Interparking Group has

more than 800 car parks in nine

countries, with leading market

shares in Belgium, the Nether-

lands and Germany.

Its turnover in 2018 was

€463.5-million and earnings

before interest, taxes, deprecia-

tion and amortization touched

€148.7-million.REUTERS

CPPIBTOSELLITS39-PER-CENTINTERPARKINGSTAKETODUTCHPENSIONFUND

Chip makerIntel Corp.has filed an antitrust lawsuit against a

SoftBank Group Corp.-owned investment company alleging

the company stockpiled patents to hold up technology com-

panies with numerous lawsuits.

The complaint filed late Monday in the U.S. District Court

for the Northern District of California in San Jose alleged that

Fortress Investment Group, which SoftBank bought in 2017

for US$3.3-billion, acquired control of more than 1,000 U.S.

technology patents.

Intel said that Fortress and other companies it owns or

controls filed lawsuits against the Santa Clara chip maker

claiming that nearly every Intel processor made since 2011

infringed patents the companies had obtained control of

from NXP Semiconductors.

“One way in which Fortress has tried to turn around its

performance and justify SoftBank’s investment in it is

through increased speculation on patent assertions,” the

lawsuit said.

“Intel brings this complaint to end a campaign of anticom-

petitive patent aggregation by Fortress and a web of [patent

assertion entities] that Fortress owns or controls.”

Gordon Runté, a managing director at Fortress, said in a

statement that the company is “confident in our business

practices and our legal position and view this lawsuit as mer-

itless, but we don’t comment on the specifics of litigation

matters.”

SoftBank also owns Arm Holdings, a British chip company

whose technology is making inroads on key Intel markets

such as personal computers and data centres.

Intel said Fortress’s efforts to gather patents constituted

anticompetitive behaviour because they were driven by the

idea that its purchases would cost less than what technology

companies would pay to avoid lawsuits.

REUTERS

INTEL(INTC)

CLOSE: US$51.72, DOWN 29 US CENTS

Intelfilesantitrustsuit

againstFortressover

patentpractices

STEPHENNELLIS

Statistics Canada says wholesale sales fell 1.2 per cent to

$64.3-billion in August.

Economists had expected growth of 0.3 per cent for the

month, according to financial markets data firm Refinitiv.

Statistics Canada says five of seven subsectors, repre-

senting 85 per cent of wholesale sales, fell in the month.

The machinery, equipment and supplies subsector drop-

ped for the second consecutive month as it fell 2.6 per cent

in the month, while the personal and household goods

subsector lost 3.4 per cent. The motor vehicle and motor-

vehicle parts and accessories group fell 1.2 per cent, the

miscellaneous subsector lost 0.7 per cent and the food,

beverage and tobacco subsector dropped 0.4 per cent.

Wholesale sales in volume terms decreased 1.3 per cent

in August.THE CANADIAN PRESS

AUGUSTWHOLESALESALESDROPPED

1.2PERCENT,STATSCANREPORTS

Quebec says it would push ahead
with its own carbon market if the
U.S. government is successful in
killing the emissions trading sys-
tem it has in place with the state
of California.
The United States on Wednes-
day sued California and other
state entities for entering a
greenhouse gas emissions trad-
ing program with the province,
saying the state had no right to
conduct foreign policy and strike
what amounts to an internation-
al agreement to fight air pollu-
tion.
It is the latest feud between
the administration of President
Donald Trump and California
over the state’s aggressive ap-
proach toward combatting air
pollution and climate change.
And it sparked a quick reaction
in Canada’s political capitals.
“We are satisfied with the car-
bon market. If ever California
left, we would continue alone,”
Quebec Premier François Legault
told reporters in Quebec City.
“We would prefer if California
stayed and if even other states
joined. I know certaingovernors
are thinking about it. But we’re
not going to start debating what
Mr. Trump says.”
Asked about the legal chal-
lenge in Ottawa on Wednesday,
Prime Minister Justin Trudeau
said hisgovernment intends to
look into the matter and com-
mended Quebec’s environmen-
tal actions. “Quebec has long
demonstrated leadership in the
fight against climate change, like
B.C., in Canada. And we’re going
to make sure that we are contin-
uing to fight climate change
across this country in ways that

we can,” he said.

In the lawsuit, the Trump ad-

ministration argues that the U.S.

Constitution prohibits states

from making treaties or pacts

with foreign powers. The U.S. Jus-

tice Department said California,

state officials, the California Air

Resources Board and the Sacra-

mento-based Western Climate

Initiative Inc., a non-profit ad-

ministration company, entered a

complex cap-and-trade emis-

sions-curbing climate program

with Quebec without congres-

sional approval.

“The state of California has

veered outside of its proper con-

stitutional lane to enter into an

international emissions agree-

ment. The power to enter into

such agreements is reserved to

the federalgovernment, which

must be able to speak with one

voice in the area of U.S. foreign

policy,” assistant attorney-gener-

al Jeffrey Bossert Clark said in a

statement Wednesday.

Environmental lawyers said

that California’s Republican and

Democraticgovernors, who de-

signed the cap-and-trade system

and authorized its linkage with

Quebec’s market, were on “solid

legal and constitutional ground.”

Quebec launched its cap-and-

trade system for emission allow-

ances on its own in 2013 and link-

ed the system with California a

year later to create the largest

carbon market in North America.

The system, which aims to use a

flexible market mechanism to

encourage the implementation

of clean technologies, is the first

one in the world to have been

designed and operated by subna-

tional governments of different

countries, according to Quebec’s

environment department.

Under Quebec’s scheme, large

carbon emitters must purchase

pollution credits above and be-

yond free allowances granted by

the province.The government

holds auctions of credits on its

own but also jointly with Califor-

nia, through the Western Climate

Initiative. That means increases

in carbon emissions in Quebec

can be offset by reductions in

California and vice versa.

Quebec’s program is consid-

ered tough enough by the Tru-

deau government to exempt the

province from its federal carbon

tax, which is opposed by several

provinces, including Alberta and

Ontario. Mr. Legault said

Wednesday he believes a carbon

exchange is “more intelligent

and more efficient” than a car-

bon tax and urged other prov-

inces to consider the system.

There’s no reason to think a

Quebec-only carbon market

won’t work, said Pierre-Olivier

Pineau, an energy policy special-

ist at Montreal’s HEC business

school.

“Technically, it’s completely

doable,” he said, adding Quebec

could also strike a new pact with

Nova Scotia, which is on the

board of the Western Climate Ini-

tiative but runs its own internal

cap-and-trade market.

California, the most populous

state and one of the top-10 large-

st economies in the world, has

positioned itself as a leader on

climate-change action in the ab-

sence of federal leadership on

the issue. Mr. Trump questions

the science behind climate

change and has eased regula-

tions on the oil, gas and coal in-

dustries.

With reports from Reuters

Quebectocontinuewithcarbonmarket

ifCaliforniadealisscuttled

Provincesaysitwill

pushaheadaloneif

Trumpadministration

issuccessfulinlegal

challengeagainststate

NICOLASVANPRAET
QUEBECBUSINESSREPORTER

TrafficisseeninLosAngelesin2019.California,themostpopulousU.S.state,haspositioneditselfasaleaderonclimate-changeactioninthe

absenceoffederalleadershipontheissue.JENNA SCHOENEFELD/THE NEW YORK TIMES