Jaeme Gloyn

Jaeme Gloyn asked about Fairfax's capital deployment strategy, specifically how the company balances share repurchases with holding company liquidity, the timing for buying minority interests in Allied World and Odyssey Group, and the role of the Fairfax Total Return Swap (TRS) in these plans.

Answer

Peter S. Clarke, President and COO of Fairfax Financial, emphasized that financial strength and significant holding company cash are paramount. He confirmed that Fairfax continues to buy back its stock at current prices, viewing it as a favorable deployment of capital. Clarke stated that the Fairfax TRS is considered a good investment and will continue to be held. He also indicated that buying minority interests in Allied World and Odyssey Group, both strong performers, remains a goal over time.

Jaeme Gloyn from National Bank Financial followed up on capital deployment, specifically inquiring about the outlook for share buybacks in the coming months and through 2026 given recent activity, the timing of buying minority interests, and how the Fairfax Total Return Swap (TRS) factors into the capital deployment strategy.

Answer

Peter S. Clarke, President and COO of Fairfax Financial, explained that flattening premiums can generate excess capital at insurance operations, leading to more dividends to the holding company. He reiterated that financial strength (significant holding company cash, no foreseeable long-term debt maturities, and credit line) is paramount. Clarke stated that at current prices, the company is pleased to buy back its stock, evaluating intrinsic value for capital allocation. He confirmed that the Fairfax TRS is considered a good investment and will continue to be held. Buying back minority interests in Allied World and Odyssey Group is also a goal, as both companies are performing exceptionally well.

Jaeme Gloyn asked for details on casualty reserving trends, the company's organic growth outlook, and the cadence of excess capital flowing from subsidiaries to the holding company via dividends.

Answer

President and COO Peter Clarke explained that adverse casualty development from older years was more than offset by favorable development elsewhere, resulting in a strong reserve position. He attributed slower organic growth to specific portfolio actions at Odyssey and Brit. CFO Jenn Allen confirmed subsidiary dividends were received and directed investors to the MD&A for specific figures.

Jaeme Gloyn of National Bank Financial asked a series of questions covering casualty reserving trends, the outlook for organic growth, and the flow of dividends from subsidiaries to the holding company for share buybacks.

Answer

President and COO Peter Clarke and CFO Jennifer Allen responded. On reserving, Clarke stated that while some casualty development from 2014-2019 exists, it's more than offset by favorable development in other lines, with 80% of reserves in strong, hard-market years. On growth, Clarke attributed the modest 1% organic growth to specific pullbacks at Odyssey Group and Brit, noting other units are growing and expecting a potential pickup in H2. Regarding capital flow, Clarke confirmed dividends are taken up quarterly after subsidiaries are well-capitalized, and Allen directed to the MD&A for specific YTD dividend amounts.

Jaeme Gloyn asked about the drivers behind the North American residential portfolio's operating FFO increase, specifically if it was due to sales activity or seasonality, and the outlook for 2026. He then inquired about the recent increase in real estate assets, questioning if it reflects holding assets for better monetization opportunities and the expected timing for capital levels to decline.

Answer

Nick Goodman, President of Brookfield Corporation, attributed the residential FFO increase to seasonality, noting muted housing market activity but long-term improvement prospects. He explained the real estate asset increase is due to holding assets for operational improvement and awaiting stronger market sentiment for monetization, expecting transaction activity to pick up soon.

Jaeme Gloyn inquired about the Wealth Solutions business, specifically the quarter-over-quarter and year-over-year step down in distributable earnings from annuities, and a 10 basis point decrease in the yield on investments within that portfolio.

Answer

Nick Goodman, President of Brookfield Corporation, stated that there were no significant underlying issues, with the portfolio continuing to perform well despite minor one-off movements in earnings. He attributed the decrease in spread and yield to capital inflows being temporarily parked in cash. Mr. Goodman reiterated that Brookfield is being patient and disciplined in waiting for the right real asset investment opportunities, expecting the spread to increase as this capital is deployed.

Jaeme Gloyn asked about the quarter-over-quarter and year-over-year step down in annuities distributable earnings and a 10 basis point step down in the yield on investments within the Wealth Solutions business.

Answer

President and CFO Nick Goodman stated there were no significant factors, possibly small one-off movements. He explained that the drop in spread/yield is due to capital inflows being parked in cash, awaiting patient and disciplined investment into real asset opportunities, expecting the spread to increase as capital is deployed.

Jaeme Gloyn of National Bank inquired about the slight decline in the Wealth Solutions investment spread and the reasons for lower cash distributions from the real estate operating business, asking when FFO might recover.

Answer

Nicholas Goodman, President & CFO, attributed the stable 1.8% spread to the timing of inflows versus deployment and sees no downside risk. For real estate, he explained the lower distribution was due to a slowdown in the residential land and housing business. He expressed a positive outlook for FFO growth, driven by strong leasing, deleveraging, and significant cash flow from upcoming monetizations.

Jaeme Gloyn of National Bank Financial asked for color on the Wealth Solutions business's 1.8% investment spread and the reasons for lighter cash distributions from the real estate operating business, as well as the outlook for FFO.

Answer

Nicholas Goodman, President & CFO, stated the 1.8% spread was consistent with the prior quarter and mainly reflected the timing of capital deployment, with a strong outlook. He attributed the lower real estate distribution to a temporary slowdown in the residential land and housing business. Goodman expressed a positive outlook for FFO growth, citing strong fundamentals, deleveraging, and record-high rents on new leases that will boost future earnings.

Jaeme Gloyn asked about the evolving private wealth and 401(k) market, specifically how the expansion of access for private markets in 401(k)s might impact Brookfield Asset Management's fee-bearing capital and FRE, and what factors are needed for this to become material.

Answer

Conor Teskey, CEO, outlined the individual investor opportunity across retail/high net worth, insurance/annuity, and 401(k)/retiree markets, expecting the 401(k) segment to be very large and grow incrementally. He anticipated supportive guidance for alternatives in 401(k)s, creating catalysts for increased reviews. Brookfield is well-positioned, working with target date fund managers to provide strategies that offer value for cost and meet regulatory requirements, leveraging positive feedback on its high-quality, downside-protected real assets.

Jaeme Gloyn with National Bank asked about the potential impact of the evolving private wealth market and expanding 401(k) access on Brookfield Asset Management's fee-bearing capital and Fee-Related Earnings (FRE), and what catalysts are needed for this to become material.

Answer

Conor Teskey, Chief Executive Officer of Brookfield Asset Management, described the 401(k) and retiree benefit market as a very large, incrementally growing opportunity. He anticipated supportive guidance for alternatives in 401(k)s, creating catalysts for increased reviews. Brookfield is well-positioned to capture these opportunities by working with target date fund managers and offering high-quality, downside-protected real assets that align with plan participants' objectives.

Jaeme Gloyn asked about Brookfield's strategy for broadening and deepening its institutional client base, specifically seeking details on the sources and breadth of fundraising from these client segments.

Answer

Connor Teskey, President, stated that while large-scale institutions remain a core foundation, Brookfield has invested in dedicated fundraising teams targeting small/medium-sized institutions, insurance institutions, and family offices. He noted these initiatives are in early stages but are seeing tremendous growth across a greater number of clients, more products offered, and larger check sizes from existing clients, expecting this momentum to continue.

Jaeme Gloyn asked about Brookfield's progress in broadening and deepening its institutional client base, specifically inquiring about the breadth of client sources contributing to fundraising this quarter, following discussions at the recent investor day.

Answer

Connor Teskey, President, stated that while large-scale institutions remain a core foundation, Brookfield has invested in dedicated fundraising teams targeting small/medium-sized institutions, insurance institutions, and family offices. He noted that these initiatives are in early stages but are seeing tremendous growth across three verticals: a greater number of clients, more products offered to existing clients, and larger checks from clients. He expects this momentum to continue, driven by dedicated teams focusing on all institutional market subcomponents.

Jaeme Gloyn from National Bank Financial asked about the Just Group acquisition, specifically the requirements and expected timelines for rotating Just's in-house assets into higher-yielding Brookfield private funds.

Answer

President Connor Teskey explained that the process requires regulatory approval, which he anticipates will occur sometime in 2026. Following approval, the actual rotation of assets into private funds is an incremental process that typically takes between two to five years for a newly acquired portfolio.

Jaeme Gloyn of National Bank Financial asked about the decision to place the secondary transaction with Brookfield Asset Management, the drivers of growth in the 'other business services' segment, the status of the share buyback program, and the current debt maturity profile.

Answer

CEO Anuj Ranjan described the secondary deal as an opportunistic transaction that offered a better value than might be found in the broader market. CFO Jaspreet Dehl attributed the business services growth to the normalization of results at its construction operations. She also reaffirmed the commitment to the $250 million buyback program and noted that the company has proactively managed its debt, with no large maturities in the next 12 months and an average maturity of nearly six years.

Jaeme Gloyn of National Bank Financial questioned the customer churn trends at CDK, the performance and macro impacts on the Unidas business in Brazil, and which business lines are actively implementing tariff-mitigation strategies like pricing actions.

Answer

CFO Jaspreet Dehl and Head of Business Operations Adrian Letts clarified that lower CDK performance was due to expensed tech investments and that core DMS churn is stabilizing. Jaspreet Dehl reported that Unidas's fleet management is stable while higher interest rates in Brazil are impacting EFO. Both executives confirmed that tariff mitigation is focused on DexKo, where they are well-positioned to use commercial and pricing actions if needed.

Jaeme Gloyn asked for more color on the challenging market for DexKo and what conditions are needed for a turnaround. He also asked about the higher costs, timeline, and customer churn at the dealer software and technology services operations (CDK).

Answer

An executive, Adrian Letts, explained that DexKo volumes remain challenged by market softness and inventory destocking, with weakness expected through 2025, but noted the business is well-positioned for an eventual turn. Jaspreet Dehl, CFO, stated the higher costs at CDK are due to an accelerated 18-24 month technology modernization program. She added that while churn is slightly elevated, the gross retention rate is still 90% and the business is also signing significant new customers.

Jaeme Gloyn sought clarification on the beneficiary of recent debt refinancing savings, the company's interest rate hedging strategy, and the cumulative capital returned from the Sagen investment.

Answer

CFO Jaspreet Dehl clarified that BBU's proportionate share of the annual interest savings is approximately $15 million. She explained that about 70% of the company's debt is fixed or hedged, and as hedges roll off, they will decide whether to re-hedge or float the debt. Regarding Sagen, she confirmed that BBU has received back 85% of its initial $855 million investment.