Brookfield Corporation Price & Performance (BN)

In order to accommodate all those who want to ask questions, we request that you refrain from asking more than two questions. I would like to remind you that in today's comments, including responding to questions and in discussing new initiatives in our financial and operating performance, we may make forward looking statements. Including forward looking statements within the meaning of applicable Canadian and U. S. Securities laws. These statements reflect predictions of future events and trends and do not relate to historic events. They are subject to known and unknown risks and future events and results may differ materially from such statements. For further information on these risks, their potential impacts on our company, please see our filings with the securities regulators in Canada and The U. S. The information available on our website. In addition, when we speak about our wealth solutions business, or Brookfield Wealth Solutions, we are referring to Brookfield's investments in this business that supported the acquisition of its underlying subsidiaries. With that, I'll turn the call over to Bruce.

Thank you and welcome everyone on the call.

We had a strong start to the year. Distributable earnings before realizations increased 30% to 1,300,000,000.0 that was $0.82 a share for the quarter. And $5,200,000,000 or $3.26 for the last twelve months. Each of our businesses performed well. Our asset management business delivered strong earnings growth backed by continued fundraising Our operating businesses were resilient with stable cash flows. Underpinned by largely contracted and inflation protected revenues. Streams. Our Wealth Solutions business had a strong quarter delivering organic growth, scaling earnings and delivering on our goal of 15% ROE. In March, the business received its regulatory license to launch in The UK, marking the first dedicated PRT license granted there since 02/2007. Sachin Shah CEO of our Well Solutions business is with us today and will spend more time on the progress and growth of the business in his remarks.

Focusing brief on the macro environment, we started the year with positive economic momentum. As all of you know, since then trade policy has created volatility in the capital markets. While our businesses and operations are not immune they are generally insulated from the current environment. This is because we own and operate businesses which provide essential services and products without significant reliance on cross border movement of goods. We operate domestic businesses in 30 countries. We serve local customers in markets where we invest. Most of these businesses have highly contracted income streams. Or regulated meaning we can generally pass through increased cost to the end consumer. The global franchise we have the operating expertise to successfully navigate change. As we have experienced in previous periods of stress, markets often move for reasons that don't reflect underlying fundamentals. This creates opportunities for experienced, well capitalized investors to invest for value. This approach has allowed us to deliver stable and growing results for decades. This period should be no different. Despite the volatility we have seen, the underlying trends of deglobalization digitalization, and decarbonization continue to drive our investment pipeline. In this regard, we committed $20,000,000,000 in the quarter to acquire some excellent businesses at very good value.

Deglobalization policies promoting the reshoring of key manufacturing and supply chains are also now presenting opportunity. Breakthroughs in AI should also lead to further attractive opportunities for disciplined investors like us to continue to provide capital to fund these initiatives. With strong data centre growth, they need an enormous amount of power. Renewables continue to offer the most viable solution to meet this growing energy demand. Our ability to provide scalable solutions across technology and and regions. Reinforces our position as a partner of choice. In total, record 165,000,000,000 of capital to deploy, we are well positioned in the current environment to invest for value in all of these areas. At the same time, operating fundamentals for high quality assets remains very strong. For example, our in our real estate business, we continue to benefit from increased demand for premium assets further supported by a muted supply outlook. This has resulted in strong rental growth and higher occupancy rates across our portfolio. We are experiencing a significant increase in lease up activity for our top tier assets in our global markets. For example, in our largest market, being New York, office leasing surged to its highest level since 2019, we completed 1,300,000 square feet in the of leasing in the quarter, rents in premier buildings are very high and going higher.

While it always feels like the first time we have navigated through many periods similar to the one we have in front of us today. It is important to remember at times like these, price fluctuations may seem significant in the moment. But they are likely to represent just small deviations in the overall trajectory of long term wealth. Compounding. As an example, our shareholders have earned an annualized return of 18% over the past thirty years by simply staying invested in Brookfield. This has not been a straight line nor will it ever be. The compound returns are the secret to great long term wealth. Crucial to our success over the years has been effective capital allocation and reinvestment of the corporation's cash flows. We have a broad perspective on the relative investment opportunities and capital needs across our entire franchise Our philosophy has [indiscernible] always been to largely distribute free cash flow up from our operating companies to the corporation and centralize the cash reinvestment decisions. This deliberate approach to capital allocation has been a key contributor to our ability to scale our business and withstand economic cycles across sectors that we invest in. This flexibility is one of our greatest strengths and is something that has been created methodically and meticulously over the years.

This approach becomes even more valuable during periods of uncertainty when prices can diverge substantially from value and we are presented with attractive investment opportunities. One of the recent examples is repurchasing our own shares in the market. And given the trading levels of our shares, which gap down during the quarter like all markets, we repurchased $850,000,000 of shares to date this year. This was the most shares we have ever purchased in the open market in a single quarter. Looking ahead, we will continue to invest a disciplined manner while remaining focused on adapting with the ever evolving backbone of the global economy. Our business has proven to be a great compounder of capital across economic cycles and by staying the course we are well positioned to generate strong and sustainable returns for shareholders. Thank you as always for the continued support interest in Brookfield, With those comments, I'll turn the call over to Nick. Nick Thank you, Bruce, and good morning, everyone. Financial results were strong for the first quarter supported by continued momentum across our core operations. Distributable earnings or DE before realizations were $1,300,000,000 or $0.82 per share for the quarter. Representing an increase of 30% per share over the prior year quarter.

Over the last twelve months, DE before realizations was $5,200,000,000 or $3.26 per share. Total DE including realization realizations was $1,500,000,000 or $0.98 per share for the quarter and $6,600,000,000 or $4.17 per share over the last twelve months with total net income of $1,500,000,000 over the same period. Each of our businesses continues to generate stable and growing cash flows. Our asset management business delivered another quarter of strong results with distributions of $684,000,000 or $0.43 per share in the quarter and $2,700,000,000 or $1.71 per share over the last twelve months. We continue to see strong fundraising momentum across our flagship funds and complementary strategies. Inflows during the quarter were $25,000,000,000 contributing to more than $140,000,000,000 of capital raised over the past twelve months. Notably, we closed on approximately $6,000,000,000 of for our latest real estate flagship strategy this quarter, bringing total commitments to $16,000,000,000 and with final closes from clients in wealth and regional sleeves still ahead, this strategy is set to be our largest pool of capital ever raised for opportunistic real estate. Our fee bearing capital grew to $549,000,000,000 quarter end, representing a 20% increase over the last twelve months. This increase contributed to a 26 growth in fee related earnings reaching a record six ninety eight Our Wealth Solutions business continues to deliver strong financial performance.

Generating stable and growing long dated cash flows. Distributable operating earnings were $430,000,000 or $0.27 per share in the quarter, and $1,500,000,000 or $0.95 per share over the last twelve months. During the quarter, we originated $4,000,000,000 of retail and institutional annuities and we continue to maintain a strong financial position in the business with statutory capital increasing to over $16,000,000,000 and an ROE in line with our target of 15% plus. And Sachin will speak to this business in more detail. Through our combined wealth solutions platforms, we are raising close to $2,000,000,000 of retail capital per month which includes over $650,000,000 a month from our private wealth channel. Our operating businesses continue to deliver resilient and stable cash flows. Generating distributable earnings of $4.04 $26,000,000.00 $27 per share in the quarter and $1,700,000,000 or $1.08 per share over the last twelve months. Cash distributions from our renewable power and transition infrastructure and private equity businesses were supported by their strong operating earnings and underlying fundamentals. As Bruce mentioned, our real estate business continues to benefit from growing demand for the highest quality assets. Which contributed to high occupancy and strong rental growth across the portfolio. Specifically in our core portfolio, we delivered 3% growth in same store net operating income, over the same period last year, and occupancy levels remain high at 95% During the quarter, we signed close to 9,000,000 square feet of office and retail leases.

A few highlights of our office leasing activity include 1,100,000 square feet in India, 787,000 square feet in Canada and 2,300,000 square feet of office leases across The United States with 1,300,000 square feet leased in New York. Notably, given the supply constraints and strong demand for premium office around the world, we are consistently seeing leases being signed at rent significantly higher than expiring leases. Which is a very positive signal for our portfolio. Finally, in our North American residential business, we continue to shift the business to a more capital light model. And as part of this plan, we sold five master plan communities in the quarter generating approximately $640,000,000 of proceeds.

During the quarter, we realized $189,000,000 carried interest into income and accumulated unrealized carried interest increased to $11,600,000,000 The growth in accumulated unrealized carry reflects the implementation of our value creation strategies across our investments. And as we execute our monetization plan, and return capital to investors throughout 2025 and beyond, we are well positioned to recognize substantial carried interest into earnings over the next few years. And while uncertainty in the current environment may impact transaction activity, we do continue to see strong demand for the globally diversified portfolio of high quality cash generating assets and businesses that we own. In the quarter, we closed approximately $22,000,000,000 of asset sales across the business with substantially all sales completed at prices in line or above our carrying values. In our real estate business we closed the previously announced sale of our hospitality asset in Florida. For over $400,000,000 of gross proceeds, In our infrastructure business, we completed the sale of a minority stake in a portfolio portfolio of fully contracted containers, within our global intermodal logistics operation, and we remain on track to close on the remaining 25% interest in NGPL a U. S. Gas pipeline representing an extremely successful exit from the business generating total gross proceeds of over $1,700,000,000 crystallizing an 18% IRR and three times multiple of capital.

Looking ahead, we have a number of sales processes underway diversified across strategies, sectors and geographies. We employ a disciplined yet flexible approach to executing exit strategies with the objective of optimizing investment value. And we look forward to providing you with updates as they progress. Moving to capital allocation. We continue to reinvest our free cash flow back into the business to drive growth and further enhance value. We reinvested $3,000,000,000 back into our operations during the quarter. This included $1,400,000,000 towards our operating businesses, primarily to opportunistically repay debt within our real estate business and approximately $465,000,000 to support commitments in our real estate and credit private fund strategies within our asset management business. Additionally, we continue to allocate capital to support the growth of our wealth solutions business with a further $430,000,000 being allocated this quarter. In addition, we returned over $700,000,000 to our shareholders through regular dividends and share repurchases during the quarter and so far this year we have repurchased $850,000,000 shares in the open market. Adding more than $0.40 per share of value to each remaining share. As Bruce highlighted in his remarks, we will continue to opportunistically repurchase shares when they are undervalued.

Carefully weighing this use of capital against other opportunities. Moving on to our balance sheet and liquidity, we continue to maintain a conservatively capitalized balance sheet and high levels of liquidity with record deployable capital of $165,000,000,000 We were active in the capital markets and executed over $30,000,000,000 of financing during the quarter, including at the corporation where we issued $500,000,000 of senior unsecured thirty year notes achieving our tightest thirty year spread to date. Other notable financings include the $5,000,000,000 recapitalization of Clarios, dollars 10,000,000,000 of real estate financings which included successful term financings within our office and retail portfolios, and several other successful issuances within our infrastructure and renewable power businesses. Bringing it all together, our financial results signify a strong start to the year and we expect to continue on this positive momentum as we execute on our strategic plans to enhance shareholder value. With that, I am pleased to confirm that our Board of Directors has declared a quarter dividend of $0.09 per share payable the June to shareholders of record at the close of business on June 13, 2025. Thank you for your time and I will now pass the call over to Sachin.

Thank you, Nick, and good morning everyone. It's been a year since I last joined this call, and with the significant growth in Brookfield Wealth Solutions since that time, I'm pleased to provide you with an update. As many of you know, we set out in late twenty twenty to focus on building the next scale business for Brookfield.

Our thesis at that time was that certain retirement, wealth, and protection products within the insurance industry could benefit from our scale capital investment discipline, strong operating culture, and perpetual time horizon. Combining all of these attributes, with the tailwind of an aging population driving demand could set the stage for this business.

Equally important but maybe not as appreciated, is that this business could be highly synergistic with all of the parts of Brookfield. While scaling and delivering in excess of 15% returns on invested capital. Over a long period of time. Fast forward to today, and through a series of acquisitions and organic growth, our business has over $140,000,000,000 of assets, 1,700,000,000.0 of annualized earnings, and statutory capital in excess of $16,000,000,000 The business is also highly complementary to what we do across the group.

We benefit from access to Brookfield fund products credit and equity capabilities, and world class expertise in infrastructure, real estate, and renewable power. Which have decades long track records. This has allowed us to upgrade assets inherited when we acquired American National and American Equity. In particular in real estate, where we have access to the highest quality and irreplaceable commercial real estate globally. This allows us to grow our annuity franchise with the confidence that our investment teams will constantly source new and accretive assets. [indiscernible] More important than even our investment capabilities is our capital base. We have invested permanent capital from Brookfield's balance sheet to build this business. We do not have any client money or private equity money in any of our insurance businesses. This means our capital is perpetual, and 100% aligned with our policyholders. It allows us to make decisions with a very long term time horizon. Which prioritizes simple and predictable liabilities low volatility, and a singular focus on capital compounding. We will grow this business as long as our returns on capital remain above our targets and as long as the risk profile of liabilities remains low, and predictable, over the long term. [indiscernible] With that in mind, we continue to scale our core US annuity business.

We are primarily focused on expanding the reach of our product offerings through both new product development and new distribution channels. Including the larger bank channels. For context, banks and broker dealers account for 60% of total US retail annuity sales, each year. But only 30% of our retail annuity sales last year were through this channel. Leveraging Brookfield's strong relationships we expect to be on several of the larger bank channels over the next twelve to eighteen months which will support further growth. In our business. We are also in the beginning stages of our international expansion. We were recently granted a pension risk transfer license in The UK. The first such license to be granted since 02/2007. And plan to bring our strong track record of servicing policyholders to the region.

The UK represents the largest pension market in the world. With over 500,000,000,000 expected to come to market in the next decade.

Our U. S. Pension risk transfer business is just in its third full year, where our focus has been on small and mid sized plans, with a thoughtful progression towards larger plan deals. The US pension market is expected to represent another $3.50 to 500,000,000,000 over the next decade setting us setting us up for meaningful growth in the coming years. As you can see, we have built and are continuing to build a with diversified products, and sales channels in various markets around the world. Last year, wrote 19,000,000,000 of annuities and pension deals across our business.

While these numbers demonstrate the strength of our operating capabilities, and significant growth in a few short years, we are still in the early days of our evolution. Based on the current rate environment and projected demand, we expect to write $25,000,000,000 of combined retail and institutional annuities for the calendar year 2025.

Turning to investment returns, One of our great advantages is our ability to leverage the Brookfield ecosystem. This includes a vast network investment professionals across multiple asset classes and geographies.

Our capabilities in real estate, our capabilities in real assets, including real estate, and infrastructure, provide very attractive risk adjusted returns through economic cycles, which is a tremendous benefit to both policyholders and the growth of our capital base.

We are also highly opportunistic in particular during periods of volatility, In that regard, continue to maintain over £15,000,000,000 of cash on hand and over $40,000,000,000 of liquidity which can be used for accretive transactions. Taken altogether, our business is uniquely positioned to serve our policyholders and drive significant value and we remain on track with the goals set out during our Investor Day in September of last year.

Although our business is much larger than it was just a few short years ago, our fundamentals remain unchanged, and our focus continues to be on compounding capital in excess of 15% returns on our equity. With that, I'll turn I'll turn it over to the operator for questions.

Thank you. A question, please press 11 on your telephone and wait for your name to be announced. And our first question will come from the line of Cherilyn Radbourne with TD Cowen. Your line is open.

Thanks very much and good morning.

First question is apart from semiconductors and pharmaceuticals, I find that investors I speak with are somewhat skeptical about the concept of broad re industrialization in The US. Could you elaborate a little bit more on Brookfield's perspective on that? And the opportunity to use the Intel deal as a template to facilitate the related funding needs.

Yeah, sure, Cherilyn. Like, think the theme has been playing out for a while and our expectation is we are seeing supply chains reorient around the world. And we don't see that slowing down. And I understand it's a topic issue in The U. S. And we will see how much it plays out and what the infrastructure they have to support but absolutely we see it reorienting. We have a number of discussions underway and we think it will present attractive investment opportunities for the business. And we have a unique proposition. We have the capital, we have the scale, and we have the operating expertise to deliver these solutions that maybe few others have. So I think we are in a unique position to be able to have these conversations and we do see it being a driver of capital flows over the coming years. Thank you.

Secondly, we appreciate the enhanced disclosure on Brookfield Wealth Solutions. And one question that I have in that regard is with respect to funding agreements as a source of [indiscernible] Can you explain how the characteristics of that liability differ versus straight up annuities and pension risk transfer deals and who is the typical counterparty there.

Hi, Cherilyn, it's Sachin. I'm happy to take a shot at that.

So the characteristics, I would say almost are a bit of a hybrid between an annuity and a pension deal. Where they're like an annuity is they tend to have a finite term. Sort of ten years is the [indiscernible] the standard product between five, seven, and ten years. They have a fixed rate and they for all intents and purposes, look similar to a bond issue.

But they do they do form part of your insurance capital base, so they're not they're not issued out of the the holdco, they're issued out of the insurance subsidiary. Where they look like a pension is that the holders, typically fixed income buyers, cannot ask for their money back early. There's no lapse risk and therefore, you don't have to build in surrender charges or anything of that nature. So they kind of benefit from the best of both worlds. They're a fixed annuity, with a set term, and there's no right to ask for the money back early. And we think it's a pretty attractive market. We did 500,000,000 in the first quarter, which was our inaugural issue I would say we probably could do a billion and a half this year if the markets are constructive and we like the rate. And then you should see this part of our annuity offering grow over time as an alternative to either annuities or pensions.

That's really helpful. Thank you.

Thank you. One moment for our next question. And that will come from the line of Michael Cyprys with Morgan Stanley. Your line is open.

Hey, good morning. Thanks for taking the questions. Maybe starting off on on Wealth Solutions, and and greatly appreciate the enhanced disclosure there. So big thank you. Just around the $25,000,000,000 of business you expect to do in calendar 2025, I think you did maybe around $4,000,000,000 this quarter, so that would suggest a meaningful ramp. The next couple of quarters. So I was hoping you could elaborate a bit on where you see that coming from, what you see contributing there to drive the ramp. And then related to that, you spoke about building out the distribution and products side as well. Maybe you could just speak to how you anticipate that playing out just around the distribution channels. Maybe remind us where you are today and how you expect the product set to evolve from here. Thank you. Sure, it's Sachin again. First on the remainder of the year, Q1 is typically a little slower in terms of both annuities and pensions when come to market. So we were not surprised by that and we the reason our expectations haven't changed for the year is largely because of that profile of the first quarter. In terms of the makeup, I would say we should see progression in The UK.

We think we can do several billion dollars pension deals in The UK focused on smaller plans. But The UK market doesn't have many participants and deeply needs competition, and we represent a really interesting new entrant, because we have a track record both in The US and Canada. Although we're new, we have a track record to point to. We have great relationships with trustees. Who often act on a global basis for corporate counterparties. And therefore, we think we can hit the ground running Our US business on the pension side continues to scale as does our Canada business. So The overall pension outlook is very strong and then in terms of the retail annuity market, and the institutional annuity market, really on the retail side, we're building out relationships with broker dealers and the bank channel as I described. Our relationships at the independent marketing organizations and at the agent level are outstanding. We have a very strong following with both American National and American Equity. We're seen as one of the the leading firms when it comes to our technology backbone and customer service. And we have a strong following from agents because we service policyholders well.

I think you'll see our our product offering grow through those channels, the banks will be new the large banks in The US We're working actively to get on several bank channels. And then lastly, I'd say the institutional, annuity market, the earlier question was about, FABNs, we did our inaugural issue in the first quarter at 500,000,000, and it was three times oversubscribed. So we know there's healthy appetite for that product coming from us. And we can tap that market periodically throughout the throughout the year. Great. Thank you. And then just a follow-up question on real estate Maybe you could talk for a moment just how you're approaching and thinking about the opportunity set in this more volatile backdrop to monetize the real estate portfolio. How you expect that to the cadence of that to play out? Over the next twelve months versus the next five years? Thank you.

Yeah, hi Mike, it's Nick. I mean, listen, time will tell. What we know for sure is that the operating fundamentals of the portfolio are getting better and better by the day. And we are seeing as we expected, we're seeing tightness in the market with limited supply and the demand from tenants is really not going down. We talked about New York in our comments, but we are seeing this globally where there is a lack of new quality supply tenants are actively looking for new space. We have a number of conversations with tenants around the world. So the underlying fundamentals are strong. And that's a positive indicator for potential investors into the space. And the capital markets are constructive. The capital markets started the year very strongly for office and retail. We executed a number of financings The market took a pause for a couple of weeks, two, three weeks, but they now seem to be coming back with liquidity there and we're advancing a number of financings. So all the as we said before, all the building blocks are there from transaction activity and we have started to move on assets within the T and D portfolio not meaningful contributors to equity.

We are starting to transact and we are starting to to sell assets next to our plan. So I think over the next twelve months we will see how it develops, but all the building blocks are there transaction activity. To pick up. So we're highly optimistic, but in the meantime the fundamentals are very strong.

Great, thank you.

Thank you. One moment for our next question. And that will come from the line of Kenneth Worthington with JPMorgan. Your line is open.

Hi, good morning. Thanks for taking the questions. Along those same lines, Nick, Bruce Bruce both highlighted that carry generation sort of at the highest level in two years. The pace of monetization is $22,000,000,000 with strong and maybe a somewhat uneven environment.

What does the monetization pipeline look like as we think about the second half of the year? Maybe compare the outlook for monetizations in the funds versus what you see potentially off the balance sheet. Yes, hi Ken. Listen, the monetization pipeline is active. As you know, we have a global business and so we're always in the with assets in different sectors and different geographies through the cycle. And we have assets currently in the market in like in Australia, Korea, Brazil, Europe, and we're executing. And we've actually seen demand for some of those assets hold up pretty strongly through this period. Of volatility. Listen, I think if you talk about one area of the business where the uncertainty may impact, it's over the timing certainty. Of those monetizations. But so far we haven't seen that impact materially and we're continuing to progress. Now the bulk of those monetizations today would be fund assets, and they would be out of our earlier vintage real estate infrastructure [indiscernible] And as we work our way through those monetizations, we'll get ourselves into carry and we talked about this being a bridge year for carried interest and a meaningful step up next year.

That's still the expectation. So we do have assets that we plan to bring to market on the balance sheet, but the bulk of the sales that we have in the plan would be from the fund and that makes sense because it's just where the larger pool of assets would sit.

Okay, great. And then maybe secondly, The US financial media is suggesting another large annuity company is in play for take out by private equity. So you know, just sort of gets to the question, how So, beneficial is additional size and scale completely irrelevant to this to this company. But how much how beneficial is additional size and scale to Brookfield given your current position?

Is it nice to have at the right price? Is it a must have given the marketplace is consolidating? Is it really sort of irrelevant given what you've already built? Look. We've approached growing this whole business from a value perspective. We acquired American and American Equity at pretty meaningful discount to book equity somewhere in the range of point seven to point eight book. And we were fortunate to have done that when rates were very low. So we not only acquired for a discount, but we inherited liabilities at very low rates. I think the two things that have changed dramatically, which would maybe give us pause, is today the rate environment is much more normalized, And number two, insurance platforms are now trading at close to two times book. You would have seen the some recent transactions. I won't call them out by name, but some recent transactions of scale platforms that have traded much closer to two times book, which just signifies how valuable these are, the demand that is out there for this permanent capital base. Don't think we would be a buyer in that zone. In fact, I know we wouldn't. And then and then setting that aside, what we have today, is outstanding.

We have licenses across The US. We have distribution capabilities. In every major channel in The US. We have a pensions business, a retail annuity business, an institutional annuity business, and we have international expansion. We're in the fortunate position where we can lean on organic growth when valuations are high And if that changes, we have the ability to pursue M and A on an opportunistic basis. Great. Thank you. Thank you.

Thank you. One moment for our next question. And that will come from the line of Robert Kwan with RBC Capital Markets. Your line is open. Mr. Kwan, if your line is muted, please unmute. Again, Mr. Kwan, if your line is on mute, please unmute it. Alrighty, speakers. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Katie Battaglia for any closing remarks.

Thank you everybody for joining us today. With that, we'll end the call.

This concludes today's program. Thank you all for participating. You may now disconnect.