Bart Dziarski

Bart Dziarski asked about the significant increase in NOI within the real estate LP this quarter (465 million versus 80 million last year) and its drivers. He also inquired if the Target Carry Framework would increase once the Oaktree acquisition closes and by how much.

Answer

President and CFO Nick Goodman explained that the increase in NOI was driven by disposition gains from monetizations during the quarter, benefiting the FFO. He confirmed that the Target Carry Framework would pick up due to increased carry-eligible capital from Oaktree, but it would not be a material adjustment to current numbers.

Bart Dziarski asked about the significant increase in the real estate LP's Net Operating Income (NOI) this quarter, which rose to $465 million from approximately $80 million last year, seeking clarification on the drivers behind this step-up. He also inquired whether the Target Carry Framework would increase after the Oaktree acquisition closes and, if so, by how much.

Answer

Nick Goodman, President of Brookfield Corporation, explained that the increase in the real estate LP's FFO (which includes NOI) was primarily driven by disposition gains from monetizations during the quarter. Regarding the Oaktree acquisition, he confirmed that the Target Carry Framework would pick up due to increased carry-eligible capital, but stated that the adjustment would not be material or a significant change to the current numbers.

Bart Dziarski of RBC Capital Markets inquired about Brookfield's strategy to scale its P&C insurance business to $30-50 billion in equity and the source of its perceived competitive advantage in pricing risk.

Answer

Nicholas Goodman, President & CFO of Brookfield, explained that growth will initially be organic, focusing on specific product lines where Brookfield's operational expertise provides a competitive edge. He stated this deep understanding of underlying assets allows for better risk pricing without increasing the overall risk profile, leveraging their long-standing operator experience.

Bart Dziarski of RBC Capital Markets inquired about Brookfield's strategy to scale its P&C insurance business to $30-50 billion of equity and the nature of its competitive pricing advantage in that sector.

Answer

Nicholas Goodman, President & CFO of Brookfield, explained that the growth will initially be organic, focusing on specific P&C lines where Brookfield's deep operational expertise in underlying assets provides a competitive advantage. This expertise allows for better risk assessment and pricing, leading to a sub-100 combined ratio and attractive float, without increasing the overall risk profile. Inorganic opportunities may be considered in the future.

Bart Dziarski asked for insights into the early indications and momentum of Brookfield's retail-focused products, specifically the infrastructure wealth product and the newly launched private equity evergreen strategy, along with an overview of the distribution strategy for these offerings.

Answer

Connor Teskey, President, noted robust momentum in the individual market, viewing it as a significant, long-term growth opportunity. He expects the new private equity product for the retail channel to scale even faster than the successful infrastructure product. The distribution strategy focuses on placing products on leading bank distribution platforms globally for the near-term retail market, and preparing for the 401(k) and retiree markets by building relationships with advisors, plan administrators, consultants, and record keepers.

Bart Dziarski inquired about the momentum and early indications for Brookfield's retail-focused products, specifically the infrastructure wealth product and the newly launched private equity evergreen strategy, along with the company's distribution strategy for these offerings.

Answer

Connor Teskey, President, noted robust momentum in the individual market, viewing it as a significant, long-term opportunity across high net worth, retail, annuity/insurance, and 401(k) segments. He expects the new private equity product for the retail channel to scale even faster than the infrastructure product. For distribution, he highlighted getting products placed on leading bank distribution platforms for the near-term retail market and preparing for the 401(k) and retiree markets by building relationships with advisors, plan administrators, consultants, and record keepers, leveraging Brookfield's real asset focus.

Bart Dziarski from RBC Capital Markets followed up on fundraising, asking about the new evergreen private equity strategy and what its success might imply for the structure of Brookfield Business Partners (BBU) in the future.

Answer

President Connor Teskey positioned the new semi-liquid private equity fund as a complementary product that broadens their investor base. He emphasized that Brookfield's PE strategy, focused on high-quality, cash-generative businesses, is well-suited for retail investors and the current market. He did not comment on potential structural changes for BBU.

Bart Dziarski asked for specific examples of AI benefits across other large investments like CDK, Dexco, and Scientific Games, beyond those highlighted for Clarios and Sagen. He also sought clarification on capital allocation, specifically if the next $2 billion in proceeds would primarily be directed towards capital deployment and buybacks, rather than debt reduction, unlike previous allocations.

Answer

Adrian Letts, Head of Global Business Operations Team, detailed AI benefits: for Clarios, sensors and data improve manufacturing throughput and inventory; for CDK, data opportunity enhances workflow and product propositions; for Scientific Games, understanding lottery behavior supports licensees; and for Dexco, AI aids sales patterns, inventory management, and operational performance. CFO Jaspreet Dehl clarified that corporate leverage is comfortable, and while proceeds will pay down debt, sufficient liquidity exists for new investments. She confirmed the continuation of the $250 million buyback program due to the unit's discount to intrinsic value, indicating all facets of capital allocation remain in play.

Bart Dziarski asked for insights into AI benefits across large investments like CDK Global, DexKo Global, and Scientific Games, and sought clarification on the capital allocation strategy for future proceeds, specifically if it would prioritize capital deployment and buybacks over debt reduction.

Answer

Adrian Letts, Head of Global Business Operations Team, highlighted AI benefits, including data opportunity for workflow improvement at CDK Global, understanding lottery behavior at Scientific Games, and improving sales patterns, inventory management, and operational performance at DexKo Global. Jaspreet Dehl, Chief Financial Officer, stated that corporate leverage is comfortable, and while proceeds will be used to pay down the line, sufficient liquidity exists for new investments and acquisitions. She confirmed that the buyback program will continue given the unit and share discount to intrinsic value.

Bart Dziarski from RBC Capital Markets questioned the secondary transaction, asking how the three specific assets were selected and how the approximately 9% discount to NAV was determined in the context of current market pricing.

Answer

CFO Jaspreet Dehl explained that the assets were chosen based on BBU's outsized ownership, with the process overseen by an independent board committee that hired financial advisors to ensure fairness. She noted the 8.6% discount is highly accretive given BBU's own trading discount and stated that while secondary market discounts fluctuate, a 10% average is historically normal, making the transaction favorable.