November 12, 2020
Brookfield Asset Management Inc.
Strong Q3 results all-around; introducing BAMRe
Impact: Positive
Q3/20 OFFO/share $0.53 was +25% YoY and +15% over our $0.46E with generally strong results all-around.
Q3 Highlights and first impressions
Q3/20 OFFO/share above estimates – Q3/20 Operating FFO/share of $0.53 ($850MM) was +25% from Q3/19’s $0.42 ($662MM) and $0.07 (15%) above our $0.46E ($748MM).
Strong fee related earnings (“FRE”) – Q3/20 FRE of $372MM ($0.24/ share), was +22% YoY from Q3/19’s $306MM ($0.21/share) and 15% ($48MM) above our $324MM ($0.21/share) forecast.
OFFO on invested capital ahead of expectations – Q3/20 Operating FFO on invested capital of $478MM ($0.31/share) was +34% YoY from Q3/19’s $356MM ($0.22/share) and above our $425MM ($0.25/share) forecast.
Reported FFO/share – $0.65 ($1.04B) was above our $0.51E ($826MM) on significant realized carried interest and disposition gains. Q3/20 reported FFO/share included $162MM ($0.11/share) of disposition gains and $27MM ($0.02/share) of net realized carried interest versus comparable amounts of $125MM ($0.09/share) and $39MM ($0.03/share) in Q3/19.
Fee bearing capital (“FBC”) at $290B – Q3/20’s Consolidated FBC of $290B was +$12B (+5%) QoQ from $277B at Q2/20 and +$20B (+7%) YoY from Q3/19's $270B. The QoQ increase in FBC included $10B of growth across BAM’s listed entities, as well as $4B of capital invested across credit and perpetual private funds.
New Spinco: BAMRe – Following (to some degree) in the path taken with the likes of BPY, BBU and Trisura (just to name a few) BAM plans a H1/21 special distribution of (via special divy) a new “paired” entity, Brookfield Asset Management Reinsurance Partners (“BAM Reinsurance” or our abbreviation, “BAMRe”). BAM expects this dividend to be ~$500MM or $0.33/BAM share. BAMRe will be the entity through which BAM will conduct its reinsurance and other related activities for the benefit of all shareholders of both entities. BAMRe will be a paired share to BAM, with the aim of replicating the success of the structure used to create BIPC and BEPC and this standalone entity should allow BAM to grow its reinsurance business in the most efficient fashion, and provide the flexibility for BAM shareholders in how they chose to allocate their own capital.
$40 Intrinsic Value per share – Our IVPS model currently reads $40, which is +$4 (+11%) from $36 published our Aug-14 note. We expect BAM’s shares to generally track IVPS over time.
Conference call today @ 11AM – 1-866-688-9425 (ID: 2235277).