Brookfield Finance Inc. 4.625% Q1 FY2024 earnings call

• Bruce Flatt noted strong financial results with distributable earnings before realizations $1 billion in Q1 and $4.3 billion over the last 12 months, a 10% increase. Highlighted Wealth Solutions' acquisition of AEL, Asset Management's investment in Castlelake, and operating businesses' resilient earnings.
• Nick Goodman reported Q1 distributable earnings before realizations of $1 billion ($0.63 per share) and total DE of $1.2 billion ($0.77 per share). Discussed Asset Management's strong inflows, Wealth Solutions' growth post-AEL, operating businesses' performance, monetization activities (e.g., sale of 49% stake in Dubai office asset, progress on sales of various assets), balance sheet strength with $150 billion of deployable capital, and capital allocation including $626 million returned to shareholders via dividends and buybacks.
• Sachin Shah provided an update on Wealth Solutions, highlighting the market opportunity in retirement funding, progress with American National and recent acquisition of AEL, growth targets for annuity sales, and the business's ability to generate stable and growing earnings with over $110 billion of diversified insurance assets and capability to originate over $20 billion of annuity sales annually.

Asset Management

• Distributable earnings in the first quarter were $621 million or $0.39 per share, and $2.5 billion or $1.58 per share over the last 12 months.
• Total inflows of private fund strategies were $20 billion in the first quarter.
• Fee bearing capital was $459 billion as of March 31st, 2024, 6% higher than 12 months ago.
• Recently announced acquisition of a majority stake in Castlelake, a premier asset backed lender.

Wealth Solutions

• Distributable operating earnings in the first quarter were $273 million or $0.17 per share, and $868 million or $0.55 per share over the last 12 months.
• After the close of AEL in May, annualized earnings are now approximately $1.4 billion and on track to grow to approximately $2 billion.
• Monthly retail flows from high net worth and mid-market clients are approximately $800 million, on track to reach over $1.5 billion monthly or $20 billion annually.

Operating Businesses

• Distributable earnings in the first quarter were $337 million or $0.21 per share, and $1.5 billion or $0.95 per share over the last 12 months.
• Real estate: core portfolio same store net operating income grew 5% over the last 12 months, occupancy 96%; signed over 7 million square feet of office and retail leases in Q1.
• Renewable power and transition: signed landmark agreement with Microsoft to deliver over 10.5 gigawatts of new renewable energy capacity between 2026 and 2030.

• Bruce Flatt stated the outlook remains strong with underlying businesses executing plans, driving organic earnings growth supplemented by strategic acquisitions.
• Nick Goodman indicated Asset Management expects fundraising to build throughout the year, leading to strong earnings growth. For Wealth Solutions, on track to grow annual earnings to approximately $2 billion. Carried interest range of $400 million to $500 million for 2024 is still reasonable. Liquidity in capital markets is strong, supporting refinancing and other financings.
• Expectation of continued momentum in financial performance with record deployable capital setting up for further earnings growth and value enhancement.

• Macro environment risks: Continued normalization of markets, potential interest rate fluctuations, and inflation impacts.
• Market volatility risks: Impact on transaction volume and valuations of assets.
• Integration risks: Risks associated with integrating acquisitions such as AEL smoothly and realizing expected synergies.

Q: Mario Saric asked about carried interest utilization, specifically if the $400 million to $500 million range for 2024 is still reasonable and if it could be exceeded.

A: Nick Goodman responded that it's still a reasonable range and expected to be a bit front loaded but would still work off the previous level.

Q: Mario Saric also asked about real estate debt spreads and lender appetite.

A: Nick Goodman said liquidity in capital markets is strong, spreads have tightened across the board, demand for debt on high quality real estate is robust globally, with examples like $2 billion financing in Korea and $600 million office financing in Perth, Australia.

Q: Ken Worthington inquired about monetization picture for T&D and AEL's factor.

A: Nick Goodman stated core real estate is good, insurance platform will play a part in monetization, capital markets improving supports transactions, and T&D plan hasn't changed with office in US needing more time but outlook same.

Q: Cherilyn Radbourne asked about pension risk transfer and international expansion for Wealth Solutions.

A: Sachin Shah said pension markets in US and UK are strong, US has longer runway with $3 billion of US pensions won in last 12 months, UK in process of getting licensed to bid on transactions by end of year.

Q: Cherilyn Radbourne also asked about capital allocation of over $450 million reinvested.

A: Nick Goodman replied it was used to retire corporate bonds within BPY as a capital allocation decision to delever the corporate balance sheet.

Q: Geoffrey Kwan asked about appetite for share buybacks given discount to NAV.

A: Nick Goodman said appetite remains the same, seeing strong growth potential and intrinsic value, with buybacks still an attractive use of capital.

Q: Geoffrey Kwan further asked about T&D monetization timeline.

A: Nick Goodman said would take it as market comes, T&D assets are good, will monetize when transaction market improves and it makes sense, not material driver to strategic objectives.