Brookfield Ord Shs Class A T.BN

TD

[retiredcf]

Currently have a US$62.00 target. GLTA

Q1/24 DE BEAT; STRONG RESULTS IN WEALTH SOL'NS; $700MM OF SHARES REPURCHASES

THE TD COWEN INSIGHT

The DE beat was driven by realized carried interest, making it of somewhat lower quality. However, 1) the market backdrop is becoming more conducive to asset sales, yet should still offer good opportunities to deploy capital; 2) the insurance business had excellent results, and is on track for substantial growth; and 3) BN has repurchased $700mm of shares YTD, and will continue to buy back stock.

Event

BN reported Q1/24 results. The conference call is at 10:00 a.m. ET. Registration: link Impact: SLIGHTLY POSITIVE

• Q1/24 DE Beat: DE of $0.77/share was a beat vs. the Street/TDSI at $0.72/$0.73.
  Core DE was 5% below our forecast; therefore, the beat was driven by realized carried interest, which makes it one of somewhat lower quality. However, it is interesting to see BN generate $183mm of realized carried interest in Q1/24 vs. $570mm in all of 2023, considering that transaction velocity is still in the early stages of re-accelerating.

• Carried Interest: BN is progressing additional monetizations in real estate and in the renewable power/transition business; therefore, we would expect realized carried interest to build throughout the year. Notwithstanding the carried interest recognized in Q1/24, the accumulated but unrealized carried interest balance (net) still increased marginally q/q to $6.3bln or ~$4.00/share. Importantly, BN indicated that substantially all sales are being executed at prices in line with its carrying values.

• Wealth Solutions: The wealth solutions business had an excellent quarter, generating spread-related earnings of $273mm, up ~90% y/y, prior to closing the AEL deal. The acquisition of AEL brings insurance AUM to >$100bln and will make BN one of the largest underwriters of annuities in the U.S. The company indicated that, pro forma the AEL deal, annualized insurance cash flows should be $1.4bln vs. $740mm in 2023, and as the company repositions the investment portfolio, cash flows are on track to exceed $2bln over the next 18-24 months.

• Capital Deployment: BN anticipates that a more normalized interest rate environment will test those who have relied primarily on multiple expansion and leverage to earn returns and will be a great time for it to deploy capital. BN has $150bln of total deployable capital across the business, including ~$6bln of corporate liquidity.

• Share Buybacks: BN has repurchased $700mm of shares YTD, adding ~$0.50 of value to each remaining share, and intends to continue allocating cash to share buybacks.