Brookfield Finance Inc. 4.625% Q4 FY2024 earnings call

• Bruce highlighted a strong 2024 with record financial results, over $135 billion inflows, wealth solutions as top-tier annuity writer in US, and operating businesses generating stable cash flows. - Nick detailed record financial results in 2024, asset management inflows and fee-related earnings growth, wealth solutions scaling with double distributable operating earnings, operating businesses' cash flows, $40 billion asset monetization in 2024, record deployable capital of ~$160 billion, $1 billion share buybacks in 2024 and ~$200 million to date in 2025, and Board declaring 13% quarterly dividend increase.

Asset management business: Distributable earnings were $2.6 billion or $1.67 per share for the year, with over $135 billion in inflows in 2024, driving fee-bearing capital to $539 billion and a 17% growth in fee-related earnings. Wealth solutions business: Distributable operating earnings were $1.4 billion or $0.85 per share for the year, nearly double the prior year, with the business now firmly established as a top-tier annuity writer in the US and potential to originate over $25 billion of predictable liabilities annually. Operating businesses: Generated distributable earnings of $1.6 billion or $1.03 per share for the year, with renewable power and transition infrastructure and infrastructure businesses seeing a 10% increase in operating funds from operations over the prior year, and real estate core portfolio delivering 4% growth in same-store net operating income.

• 2025 expected to be a good year with constructive market backdrop, record deployable capital of ~$160 billion, expectation of continued growth in earnings and cash flows. - Asset management expected to hold final closes for latest flagship funds and actively deploy capital. - Wealth solutions expected to continue scaling with organic growth. - Board declared a 13% increase in the quarterly dividend.

Forward-looking statements subject to known and unknown risks, future events and results may differ materially. Indexing impacts on listed businesses, including companies not fitting into indexes and trading poorly, and impacts on Brookfield's own companies' share price reflection of business value.

Q: Hi. Good morning. Thanks for taking the question. So much to ask here, but I think I'll focus on capital management. It would seem like a target-rich environment for Brookfield and I would love to better understand what makes the most sense for you now given your view of the future, especially in the context of improving cash flows. So in terms of insurance, could a large insurance deal still make sense, you know, assuming a good fit in price, or are blocks, bolt-ons, and organic growth really sort of the exclusive path forward on the insurance side? And then in infrastructure and renewables for Brookfield Corp, given the size of the opportunity that you, asset management, your peers are all sort of talking about, and given the size of these deals, like Intel and now the French AI announcement, do you see increased indirect opportunity here such as BIP and BEP or even more direct opportunities for Brookfield Corp from an investment perspective?

A: Hi, Ken. Good morning. Thanks for the question. I would say that as we think about capital management at Brookfield, there are a lot of highly attractive areas for capital deployment right now, and we sit at the center of the capital flows and have the expertise to invest into these sectors and allocate capital for what we think will be attractive returns. To answer your question specifically on insurance, it will probably be a combination of everything. That's the way we tend to grow our businesses. We like to build platforms that can deliver organic growth at attractive returns, but then we also look at M&A that can enhance and provide sort of step-change growth in the business, be it geographically or diversifying. So focusing on potentially bolting on M&A growth, and that could be geographic diversification or product diversification. As it relates to infrastructure and renewables, we've talked about this a lot with decarbonization and deglobalization almost intersecting with each other. The investment opportunity is enormous. And we have a unique combination of capabilities to play across that spectrum with the provision of renewable power at the center of that capability and the real estate expertise. I think the investment for that largely resides within our listed affiliates and our clients where we have capital available to us, but the opportunity is significant. And I expect Brookfield to be a large player in that, but the capital largely comes directly off of the listed affiliates and in partnership with our clients who have very significant appetite for these sectors.

Q: Hey. Good morning. Thanks for taking the question. Maybe just one on real estate. I was hoping maybe you could elaborate a bit more on your expectations for monetizations this year. You sound pretty optimistic. Maybe you could unpack what sort of instills that confidence. How do you see sort of the impact from the recent uplift in ten-year treasury yield over the past six months and potential risks from tariffs and such? Maybe just talk a little bit about what gives you the confidence there. And how do you see the sort of pace, magnitude, and cadence of this evolving throughout the year?

A: Hi, Mike. So, yeah, I just make a general comment on real estate. I would say overall, globally, real estate markets continue to improve, and I'd say that's based on a few factors. One's which we said we should be watching out for over the last couple of years. One is the underlying fundamentals continue to improve across sectors. And two, the depth of liquidity in the capital markets is getting better every day and the cost of capital is compressing with spreads tightening. And, yes, the ten-year may have corrected slightly, but spreads are continuing to come in, we're seeing that across our portfolio. And not just that, but the breadth of liquidity available across sectors is improving. I think that is the ingredients that you need for a pickup in monetization activity. And on the global scale, we're seeing that activity. We've been selling assets in different sectors and different markets around the world. And I expect that to continue and specifically in the US as we see the capital markets continue to improve, the operating performance is incredibly strong. The demand for our assets is probably the most robust we've seen. The tone is improving all the time. And so we do expect this year to be an attractive environment for monetization. We have assets across the franchise that we will be looking to bring to market. The balance of that, between fund assets or those directly held on balance sheet, we'll see how that plays out. But as we sit here today and with the tone in the market, we do expect it to be an active year.

Q: Great. Good morning. I can just start to ask about the carried interest. And so you've got $11.5 billion or $7 billion net. And most, you're talking about realizing over the next five years. So can you just talk about how you could see that pace of realizations annually and if you'd want to talk about 2025? That would be obviously very interesting. And then just as that $20 billion number you put out there, over ten years. Is there any material amount of that that you would see falling into the five-year period?

A: Hi, Rob. This I am I think we laid out for you investor day the ten-year view and the five-year view. Five-year closer to sort of maybe $5 billion the balance coming over the longer-term period. Beyond five years, and as you know, in our view, it's really a matter of when, not if. The performance of the underlying investments is very strong. And as market tone continues to improve and we work our way through the early return of capital, which are now in higher funds with larger investments, we expect to get to the point where Carry will meaningfully step up. As it relates to 2025, looks like it will be another sort of bridge year. Similar to last year, maybe a bit higher. But then we expect a significant pickup to really come in 2026 and 2027, and that's just a product of where we are in the lifecycle of the funds. So the story hasn't really changed compared to what we would have in the last few quarters.

Q: Thanks very much, and good morning. Mentioned that your internal view of intrinsic value has increased to $100 versus $84 in late September. Can you comment on some of the major contributors to that increase?

A: Yeah. Sure. I would just say it's broad-based growth across the business. As you know, BAM has performed incredibly well in the capital markets. We continue to scale the earnings on the wealth solutions platform. Those would be two large contributors to the growth in that value. And just think it's continued execution of the plan. It's really earnings growth coming from the underlying operations.

Q: K. Thank you. Nick, I appreciate lots of liquidity. Is there a preference to monetize before investing?

A: Listen, I think we remain opportunistic. What is unique we've often said, and one of the key differentiators of the corporation because we have significant scale capital available to us and significant liquidity with lots of levers that we can pull. And so we're not dependent on monetizations to be doing acquisitions. And I think we believe there's lots of potentially interesting things we'll be able to do and it's not dependent on executing sales first.