Q2 2021 Brookfield Asset Management Inc Earnings Call

August 12, 2021

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Brookfield asset management second quarter 2021 results Conference call. Please be advised that today's conference is being recorded I would now like to turn the conference over to your speaker today Ms. Suzanne Fleming managing partner. Please go ahead.

Thank you operator, and good morning, welcome to Brookfield second quarter 2021 conference call on the call today are Bruce Flatt, Our Chief Executive Officer, Nick Goodman, Our Chief Financial Officer, and Sachin Shah Chief Investment Officer for Brookfield, and CEO of our insurance business.

Chris will start off by giving a business update followed by Nick will discuss our financial and operating results for the quarter and finally, Sachin will give an update on our insurance business. After our formal remarks, we will turn the call over to the operator and take analyst questions.

I'd like to remind you that in today's comments, including in responding to questions and in discussing new initiatives and our financial and operating performance. We may make forward looking statements, including forward looking statements within the meaning of the applicable Canadian and U S. Securities Law. These statements reflect predictions of future events and trends and do not relate to historic events. They are subject to known and.

Unknown risks and future events and results may differ materially from such statements.

For further information on these risks and their potential impact on our company. Please see our filings with the securities regulators in Canada, and the U S and the information available on our website and with that I'll turn the call over to Bruce.

Thank you Suzanne and welcome everyone on the call.

Nick Goodman will walk you through our financial results in more detail in a moment, but I am pleased to say, they're good on almost every front.

The market environment has been strong and continues to get stronger in most if not almost all of our key markets we operate in.

While our total reopening will not be without challenges, we seem to be on a good path and GDP growth remains strong.

We're seeing this in almost all of our operating businesses.

Just to give you a few examples in our infrastructure business new connections doubled this quarter within our UK regulated distribution business, where we install and after that one household connections for water gas electricity and fiber.

In our U S real estate business tenant sales per square foot on average ship now increase to higher than 2019 levels, not 2000, 22019 levels across our retail centers and.

In our private equity business, we saw a residential mortgage insurance company benefit from higher premiums earned and supported by the continued strength of the housing market.

These are just a few examples of which there are countless others across the business.

Capital markets remain very strong with strong levels of global liquidity and a search for yield driving demand.

10 year Treasury of most of you know is in the low 1% range.

It appears certain that interest rates will remain low ish.

For some time.

Overall, with a strong GDP growth backdrop and lower for longer interest rates.

This leaves us well positioned to execute on our growth plans as we pushed further to assist our clients with capital and fixed income investment options.

To that end, we recently announced a transaction to acquire 100% of American National which will add a great base to our insurance businesses.

Sachin Shah as Suzanne mentioned.

He's here with us today, and we will discuss what our plans are with regards to reinsurance insurance and dispense transaction specifically.

More broadly across all of our businesses. Our teams have been busy while valuations are generally high we continue to find assets for value.

This is because we often find ourselves as a buyer of choice given our operational capabilities, our bench strength across a number of industries are access to large scale capital and we can therefore ask execute on transactions swiftly.

And also our proven and long term track record.

So while the market is competitive right now we're still very confident that we can deploy capital while staying disciplined within the business.

Moving to fundraising efforts, we've made significant progress with $24 billion of private capital raised since we last spoke to you, including three of our flagship funds, which are now in active fundraising.

The capital rates. So far include includes the $7 billion of our founders close for our inaugural global transition fund.

And capital raised as part of our initial close for our fourth flagship real estate fund of just over $9 billion to date.

Compared to the first close of its prior vintage this as more capital raised in a quicker timeline and should lead to a much larger funds and last vintage.

Our latest private equity fund signed agreements for a couple of transactions recently.

Our latest private equity fund has passed the commitment threshold to start fund raising for its next vintage and we expect that launch to happen soon.

Deployment with our in our infrastructure fund large infrastructure fund is progressing well and we are confident we will shortly complete the acquisition of IPL.

This acquisition sets us up well to be in the market with the next vintage of our flagship infrastructure fund early next year and should be an excellent investment for our listed entity Brookfield infrastructure partners.

We also expect to have a final close on our opportunistic credit flagship fund in the coming months with the final close out of our $15 billion fund the largest in <unk> history.

And while we continue to scale up our flagship funds. We're also focused on expanding our client base and growing our product offering designing and innovating new products that cater to our clients' needs.

In particular in this low interest rate environment.

As an example of this in July we announced the creation of our private non traded REIT, which will emerge with an existing oaktree REIT <unk>.

Which will assist us getting to market quicker and it will be rebranded as Brookfield Reed.

This private wealth product is geared towards private income oriented investors.

The focus in the United States, and we expect it will be very attractive in this wealth channel.

Brookfield REIT will own high occupancy de risked assets with recurring cash flows of course, which has been long a specialty of our real estate business. We hope to fully launch the strategy by the end of 2021, the flexibility provided by the privatization of BP Y will be instrumental to this.

Its launch and the forward business plan for this product.

Lastly, we completed our progress a number of our key initiatives that we previously laid out for the business, including the spinoff of Brookfield reinsurance partners to you by way of a special dividend at the end of June.

The privatization of BP Y which closed in July.

Thank you all for your continued support and I'll turn it over to Nick to discuss the financial performance.

Thank you Bruce and good morning, everyone.

Performance for the second quarter was very strong we recorded $1.2 billion of distributable earnings supported by growth in our asset management business and steady distributions from our principal investments.

Momentum in our asset management business continues to grow supported by a very constructive economic backdrop. Our flagship funds are growing in size, we're developing new products that are being well received by the market and we are investing in our distribution capabilities to reach and serve more clients.

In addition, the current environment is very supportive of our asset sales program, enabling us to surface profits for our clients return capital to them and realize the realized carried interest in the process.

Inflows during the quarter totaled $8 billion.

Across several of our perpetual in long term fund strategies, including our first close for early just real estate debt fund and further capital raises for our special investment strategy.

Subsequent to quarter end, we held successful initial closes for inaugural global transition fund and our fourth flagship real estate funds for a total of $16 billion.

Unexpected to grow significantly with further closes over the next 12 months.

Together with the successful fund raising of our latest flagship opportunistic credit fund we are on track to meet our fundraising goals outlined in our 2020 Investor day.

We completed the privatization of <unk> on July 26, another 100% of the business, we expect the privatization to be accretive to our distributable earnings and overtime through asset monetization the portfolio will provide us with capital to fuel the next phase of our growth.

Turning to quarterly results total funds from operations of $1.6 billion.

Operating <unk> of $813 million and net income of $2.4 billion.

Were all up meaningfully from the prior year period.

As our asset management business fee bearing capital increased by $6 billion.

To $325 billion at quarter end and is up by $48 billion over the last 12 months.

Led to strong growth in fee related earnings, which was $483 million for the three months period and totaled $1.7 billion over the last 12 months, an increase of 25% from the prior period.

We have $32 billion of additional committed capital that will become fee bearing once invested translates into approximately $320 million of incremental annual fee revenues.

We've continued to execute on capital recycling initiatives favorable prices, we generated $8 billion of proceeds from monetization during the quarter, allowing us to returned $6 billion to our clients and realized $335 million of carried interest into income.

Year to date, we have no realized over $1 billion of gross carried interest, reaching our 2021 full year target well ahead of schedule and we expect more to come over the balance of the year.

Our investments performed very well during the quarter, we generated over $1 billion of unrealized carried interest increasing the total accumulated carried interest by 20% to over $6 billion.

We expect to recognize this into income over time as we continue to execute on asset sales.

We should want to remind everyone that much of our accumulated unrealized carried interest is in our earlier vintage funds, which are much smaller than the current vintages and if we do our jobs right. We expect to realized carried interest we expect realized carried interest to scale meaningfully as we create value for our investors.

As for our invested capital our operating businesses continued to perform very well and as Bruce mentioned some are specifically benefiting from the relaxing of restrictions when continued reopening of the global economy.

This contributed to <unk> for the quarter of $330 million with the strong earnings being offset by a decrease in <unk> contribution from our renewables and infrastructure businesses. Following secondary sales of some of our shares in these companies over the last 12 months and the sale of our majority interest in West Fraser.

Distributable earnings or de before realizations increased 35% over the last 12 months period.

The increase was largely driven by the continued growth in our asset management franchise as well as increased distributions across our listed affiliates.

Including realizations de doubled for the 12 month period to $6.3 billion.

Our liquidity continues to remain very strong in addition to $60 billion of Uncalled fund commitments, we have approximately $18 billion of core liquidity, including close to $9 billion directly at the Bam level. All of this adds to a total of 78 billion of deployable capital.

Following the quarter, we further bolstered our liquidity with an $850 million debt issuance, taking advantage of an attractive rate environment.

Proceeds from the offering will be used to finance eligible green projects and for general corporate purposes.

Our balance sheet remains conservatively capitalized with 94% of our debt, having no recourse to the corporation and a debt to market capitalization ratio of around 10%.

When combined with our corporate balance sheet that has over $9 billion of core liquidity $60 billion of investments under $3 billion of day that we generate on an annual basis. We have a strong foundation to fund strategic acquisitions, such as American national which will be highly accretive or use the capital to continue to buyback share.

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Before I hand, the call over to such an I am pleased to confirm that our board of directors has declared a <unk> 13 per share dividend payable at the end of September session.

Thank you Nick and good morning, everyone.

I am pleased to be here today to provide you an update on the activities taking place across Brookfield growing insurance solutions platform Brookfield reinsurance.

Over the past two decades, we have transformed brookfield into a leading alternative asset manager with access to scale amounts of capital, including our own strong capital base global presence and investment expertise across real estate infrastructure renewable power private equity and more laterally credit.

These businesses have enabled us to deploy large amounts of capital at attractive risk adjusted returns for us and our clients.

Increasingly over the last decade as rates have come down many of our clients have been insurance companies around the world looking for low volatility higher returning investment opportunities backed by high quality assets.

Our business is <unk>.

Our expertise in particular in real estate infrastructure power and private credit.

Match up very nicely against the needs of asset intensive life and annuity insurance.

As our insurance client capital has grown so has the desire from insurers to look more broadly for partners like us who can offer diverse capital solutions, such as block or future flow reinsurance capital investment management and partnership opportunities.

All of these skills are well suited to Brookfield investment franchise, given our deployable capital investment expertise and ability to partner with Counterparties over the long term.

To focus our efforts at the end of June we completed the spinoff of Brookfield reinsurance partners.

Separate public company that was established to own and operate insurance companies and conduct reinsurance.

Since the spinoff we have been actively progressing our previously previously announced deals such as our cornerstone investment in American equity life.

And we have been working on a robust pipeline of new opportunities.

To be clear and before I speak about our recent activities.

The opportunity has always existed to be an insurance and reinsurance.

It helps that our franchise is now bigger and our credit credit platform is much broader to ensure that we can put the capital to work effectively.

But the real change over the last couple of years is that interest rates are as close to zero as they have ever been.

Therefore, the risk profile of losing money on annuity like products is lower than it has ever been.

Accordingly, the opportunity for us to out earn and generate a substantial return on equity is excellent.

Bottom line when rates were at 5% annuities needed to earn to out earn that 5% as rates have fallen to 1% the losses on the liabilities for those who took on policies to pay that circa 5% rate has been significant but now with rates at 1% and with it.

Likely that nominal yields will go negative for any long period of time the risk on the liability side of the business is far less.

We believe therefore that this is the ideal time to enter the business in a large way and therefore, we have been working on this plan for the last year.

Cutting through it all we're always trying to find ways to invest money in businesses, which have good returns, but low risk.

We think that annuities as long as you have a strong investment franchise to put money to work into offers that today.

With that backdrop earlier this week, we announced that Brookfield reinsurance entered into an agreement to acquire a 100% interest and American National Group.

U S based insurance company founded in Texas, nearly 100 years ago.

American National is predominantly focused on life and annuity products with a smaller P&C business.

We believe the acquisition will significantly enhance our capabilities in the U S and provide us with a scale platform for future growth.

Today, the company manages approximately $30 billion of assets and has a net asset value of just over $6 billion.

We are acquiring the company for $5.1 billion funded with $1.5 billion of nonrecourse debt with the balance coming from equity.

We believe we can grow the net asset value of the business meaningfully over the next five years through asset optimization and expanding into new lines of business.

Accordingly for Brookfield reinsurance this represents an attractive and value oriented entry into the U S insurance market.

To elaborate on these themes I will describe some of the key features of the business.

First the company has an excellent management team with decades of experience, a conservative and prudent underwriting culture and a long track record of stable earnings and capital management.

Second the operational base of the company its employees. Its distribution partners is very strong this gives us tremendous confidence to manage the existing business while pursuing growth.

As a result, we will focus our efforts on enhancing profitability and lowering risk through our investment capabilities. We believe this is achievable due to the significant credit products, we have within Brookfield that as I. Previously mentioned are ideally suited to the broader insurance community due to their low volatility stable return.

And capital efficiency.

These are typically these are typically our credit strategies across real estate infrastructure and renewable power, where we have a depth of operating and investment origination expertise.

And have been further enhanced through our partnership with Oaktree.

Today, we already have more than 100 shares in North America, and Europe as clients in these strategies.

We also believe we can add new lines of business, such as pension risk transfer and third party reinsurance to the American National business. Given these services match up nicely with the investment products I just referenced.

All of these factors give us conviction that the business has strong downside protection and substantial upside potential through asset optimization growth and capital efficiency initiatives.

We look forward to working with all stakeholders over the next decade.

We expect the transaction to generate strong risk adjusted returns and are currently targeting to close the transaction in the first half of 2022.

Once the American National transaction is closed Brookfield reinsurance will manage over $40 billion of reinsurance assets through a combination of our pension business and the reinsurance transactions signed to date with several U S domestic insurers.

We look forward to providing you an update on the progress of these initiatives in coming quarters with that I will pass the call over to the operator for any questions. Thank you.

Certainly ladies and gentlemen, if you have any questions. At this time. Please press Star then one on your Touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue. Please press the pound key our first question comes from the line of children.

Securities Your question please.

Thanks, very much and good morning.

Was hoping you could give a bit more color on Brookfield oaktree in wealth solutions and how that compares versus kind of the company with accessing the wealth channel previously.

<unk>, whether that Tmall global or primarily focused on North America for now.

Hi, Sharon.

The team I would say it used to be in three different sports with an oaktree team, we had a team in Brookfield and we had a team in our public Securities group, all doing a job of kind of accessing and penetrating different parts of the channel with different products and so putting it together.

Will be immensely powerful and there are people I would see.

Focused on this predominantly in the U S. But also we have some people in Europe, and we will broaden the team we have been accessing channels and it's really.

A combination of.

All of what we were doing before so the RIS.

The bank wealth channels, the high net worth family office and putting it together with the right products that we think will give it.

Tremendous scale.

A product quite the non traded REIT is a perfect example of that.

And just as a follow up beyond that non traded REIT would you anticipate creating other products, particularly for the wealth channel and just what would be the interplay between those products and you listed affiliates.

Yes, we would I think there will be new products and I think whatever we look to do obviously there is certain.

Return requirements in these different kinds of products and some might work for the listed affiliates and like the private funds. If thats. The case that we can work out that way.

We do invest alongside each other but some of these are products like in our Super core infrastructure fund.

Have different risk return attributes than we sometimes look for in the western affiliates, but either invest alongside each other or they're tailored specifically for that channel.

Thank you. Thank you.

Thank you. Our next question comes from the line of Bill Katz from Citigroup. Your question. Please.

You may have covered this so I apologize.

Sort of shareholder Red very favorably to me around asset gathering across a broadening platform at scale and sort of reinforced reiterated the $100 billion goal and well under way with a good track record into third quarter ready stepping back a little bit Bruce many of your peers have had similar type bogeys and have significantly ramped the opportunity.

On the other side of that so as you look now today at that $100 billion more or less confident.

Where could that ultimately get to you think in terms of sort of ultimate raised for the cycle. Thank you.

Yes look I would just say.

If you look more broadly across the business are.

Those numbers aren't included.

What's not included in them as our insurance.

Accumulation of assets I think R. R.

Private funds can be much larger I think our perpetual funds can get bigger.

The only thing I would say is and we've said it in the letter that our our goal is to get each of them are private flagship funds to 25 billion.

They will probably after that point in time, they won't get that much bigger than that they may split and we will do ones in Asia or Europe, but.

That sort of.

Size, where institutions institutions are comfortable, but but I think theres lots of room.

On the sides to keep growing years ago I wouldn't have thought we'd have five flagship funds we had three.

And we keep expanding the business.

Okay. Just a quick follow up so in terms of BP Y I guess I was reading some of the footnotes. There that you expect to keep some of the 15 plus billion potentially forever on the balance sheet and just sort of wondering just conceptually why such a strong statement and what would cause you to potentially maybe liquidate that capital and redeploy.

The proceeds elsewhere.

Although maybe Europe, maybe I'll start I would probably answer it a different way.

Maybe you asked the question, we have a $30 billion of equity and real estate to date, and we think that that will continue to generate strong returns and cash flow, but over the next five to seven years, we outlined that we could surface 25 up to $25 billion of cash.

Against that 30 billion to data that will continue to compound the value that maybe gets you to hold but thats a significant amount of capital that we think we can raise and if the market is even more constructive than we think it will be then maybe we can accelerate and by having new products in the business such as our non traded REIT other private funds and insurance business maybe there.

Another path to accelerate but.

I would focus on the fact that against 30 billion of equity today theres potential to raise up to $25 billion of cash.

Okay. Thank you both.

Okay.

Thank you. Our next question comes from the line of Alex <unk> from Goldman Sachs. Your question. Please.

Hi, Good morning. This is actually Ryan Bailey on behalf of Alex I also had a question on <unk>.

I was wondering if we could walk through some of the economic implications now that the deal was closed and this is a little bit of a nested question, but.

I guess how have.

Economic change related to FRE.

Now that you arent BP y.

How do you expect it to change over time, and then also in terms of valuing the assets on the balance sheet, how do you expect that to happen.

Going forward as well as the outlets I appreciate it.

Well I'll answer the second question first there is no change to the way the assets would be valued on the balance sheet that we're always fair valued on our balance sheet on consolidated and won't change going forward.

On the first part.

I think we've talked about this in the past <unk>. The entity continues to exist to continues to file financial statements because as public press in that fee so that the standalone entity.

As opposed to public and it will pay fees more in line with a private perpetual real estate vehicle and basis points on equity.

We expect the fees to be not too different than they are today and as that portfolio changes overtime fees will change, but at the same time, we will be creating new fee streams with some of.

The moves that we outlined on the call. So I would say in the short term no change, but over time will surface capital create fee streams.

The portfolio value will just move along with that.

Okay got it.

And then maybe one on Brookfield REIT in terms of some of the district distribution dynamics.

Which platforms are you on at the moment, which ones do you expect beyond.

I guess what are you seeing in terms of competition.

About some of those distribution partners.

How do you think about sort of prioritizing your product relative to some of the other ones out there in terms of getting it in front of us.

<unk> advisors and clients.

So the.

To accelerate as Bruce mentioned, we are taking over the Oaktree, REIT, which will accelerate things and we expect to be approved and launched in the fourth quarter. It is already on one of the bank platforms and we are working with the other banks the major banks see three or four others to have on their platform.

To this year early next year.

And I think given the.

Our scale and reputation in the real estate business and our track record and what we can deliver.

Think that we are well positioned to get on the platform and to get the attention of investors.

Got it thank you.

Thank you. Our next question comes from the line of Ken Worthington from Jpmorgan. Your question. Please.

Thanks for taking the question.

With regard to BP y.

How are you thinking about selling in my reading.

<unk> assets are there existing or newly created Brookfield funds over time in your prepared remarks, you mentioned that the privatization of BP y being.

Being instrumental I think to the launch of your.

Non traded REIT. So help me make the connection there and do you see leveraging BP Y assets in other brookfield funds or initiatives, including an insurance and how might that work.

Listen I think node.

Ken It's a great question and I think noted a BP Y is private.

Executing what you just outlined it becomes a lot easier because those conflicts perceived conflicts.

Exist anymore.

I think.

We launched the MTR there were a few seed assets.

The portfolio that are going in there that's an illustration of what could happen in the future obviously be balanced value, creating the new product and wanting to get best value, but there's definitely a path for some of the assets to go in there some of the assets as we said could be sold out right and that capital gets reinvested elsewhere in the business maybe into something like reinsurance which creates.

<unk>.

Fees and return on capital. So we will we will we will.

Optimize the portfolio as we move forward, but there's definitely potential for these assets to be used to create and grow in new and existing products.

Okay, and then I believe the thought initially was something like a third of the assets <unk> assets might be sold a third might find their way into other brookfield products and a third might remain on balance sheet for longer than the five to six years.

Does that sort of at least roughly reconcile with how youre thinking about things today.

Seals like that 10.10 billion that rig.

It remains on the balance sheet.

For a long time or permanently sits with what you were thinking does the rest sort of fall in line as well or did the pieces change a bit based on what you know today.

Listen I think it falls in line and the only thing I would say Ken is the piece, we see we're holding.

These are from.

Tastic assets, the best assets with great cash flow and they'll compound at great value, but they represent.

I'll sort of liquidity on the balance sheet that should we should we should it be attractive should there be a need for capital it will be available to raise more capital over time, So I would say in line, but it could be accelerated if theres. Some tenants would use for that capital and these are great assets that will appreciate in value over the long term.

Okay, great well, thank you very much.

Thank you. Our next question comes from the line of Sara multi heading from BMO capital markets. Your question. Please.

Thank you.

First just a course of action.

Sachin.

Thanks for the discussion on the reinsurance I think you noted that you are.

At around <unk> 40 billion.

At the Investor Day, you talked about.

Opportunity for reinsurance into 100 to 200 billion.

So first.

First of all wanting to just confirm that the opportunity set of 100 to 200 is delayed.

Good guidepost.

And then secondarily, if you think to be able to realize on that maybe at the upper end of that.

If you think you will still have to do some I'll call it business acquisitions as opposed to.

Reinsurance portfolio purchases.

Hi, sorry, I'm sure first of all.

The 100 to $200 that Bruce set out last year.

<unk> is the right guidepost I don't think we have any reason to change it.

I would not have expected that we would've made as much progress as we have.

This quickly.

It is a function of where rates are and how much activity. In this space is seeing because of the difficulty for insurers to earn.

A proper return so I think you can take from that that the higher end of that guide posts.

It is possible.

And therefore, if youre trying to figure out where this is all going I think we can get to the scale and likely on the higher end.

In terms of business acquisition acquisitions versus reinsurance I think you should expect that reinsurance is our focus.

It was important for us to have all the tools available to be a good partner to insurance companies to have a domestic U S platform and American national fits that bill.

<unk> its people and it systems and operations and distribution partners just gives us tremendous flexibility to be a good partner to the insurance community more broadly and I think with that in place.

We can then accelerate our reinsurance activities. So you should assume that that's our path forward.

Okay. Thank you and maybe I can get one in for Bruce as well.

Bruce when you kind of zoom out.

Obviously locks happening around the world since the pandemic was declared I don't know a year and half ago. When you think about all the puts and takes.

How has your business Faired would you say Bam has been a covid winner here.

Do you think the acceleration of maybe dispositions.

The biggest net positive over here.

But how should we be thinking about the key drivers of your business and how they were impacted over the last year.

Look I think theres two backdrops that help.

Okay.

<unk> have helped our business for a long time in the last year and a half.

Has accelerated both of them. The first one is.

Interest rates were.

Going down and they went to zero.

And it appears like.

They're going to stay.

Low for a long period of time. The question was whether they were going to go up before and I don't think there's that many people think they are going to go up and when people think theyre going up if you test them. What they say is they think rates on 10 year Treasury will go to 3%.

That's an incredibly positive thing for our business.

As a result of that institutional investors and individual investors globally.

Trying to find.

Alternative places to put their money.

And there the alternative places our alternatives so our skills in offering our products are more sought after today than ever work and and the last point, maybe just to make is that.

We're out raising $24 billion in <unk>.

Pivot funds plus all the other things we raised this quarter.

There's many people that they can't go visit people in their offices and they can't start new funds.

So anybody that has a brand.

One over the last 18 months.

<unk> financial alternatives because they.

They are familiar with the institutional investors and therefore, they've got all the money in.

And they continue to.

So.

I'd say the franchise is much deeper much stronger today than it ever was and we're not the only one but there's a few of those franchises in the world.

Just getting stronger.

Thank you.

Thank you. Our next question comes from the line of Dean Wilkinson from CIBC. Your question. Please.

Thank you good morning.

Just a question on the reinsurance.

Post this acquisition youll be it'll be a $40 billion business potentially going to 200.

Given any thought as to what size that business needs to be before you could consider decoupling it from Bam and perhaps what would the funding mechanism to get to that size.

Hey, Dan its Sachin.

Look I think we are.

We're a ways away from that at this stage.

We really need to just build up scale and our operational capabilities and.

And work with management on American National too.

To close the transaction and also to execute our business plan I think the the idea of decoupling it.

We will really come down to is it a good product for shareholders in the marketplace as a separate.

Entity, where the security.

Can create a lot of value for our shareholders that we spun it out to on the other hand, the way its set up today.

It gives our existing shareholders tremendous.

Visibility into the business, but also all the upside as we build it out.

Because it's apparent securities so.

I think retaining that Optionality is a good thing and the decoupling discussions I think there is still time to be had on that and we're going to be patient in that regard.

Okay.

It's Nick here I'd, probably just add that if there comes a point where.

Sooner Noteware external capital, we think the external capital Theres just as good a chance that we think of it raising private capital to come alongside us to support the growth of the insurance business versus necessarily spending into the into the public. So there is a decision point to be made when we decided to external capital makes sense. It may be that we go down to private capital.

Which because this product could be very attractive to our clients.

That would seem to be the path of least resistance for that for sure.

Thanks, guys.

Thank you. Our next question comes from the line of Andrew Kuske from Credit Suisse. Your question. Please.

Thanks, Good morning, I think that's a question for SaaS stops and then it really revolves around just an evolution of insurance regulation.

Given the insurance regulation as far as their investments go.

Those tend to be quite prescriptive of tons and so.

So do you see an evolution of that to really benefit.

Product offerings, and then I guess related to that are you targeting for the equity sleeves.

We're really fixed income alternatives at this stage.

Yeah.

Hi, Andrew I'll start with the regs.

First of all they have been evolving in the U S.

And very recently.

They continue to evolve in particular in the favor of two things one is <unk>.

Alternatives and two is real estate.

But both are areas, where we obviously have a depth of capabilities.

And when I say they are evolving in a favorable way.

The FDIC rules in the U S.

And the <unk> in the U S.

All recently evolved with.

Our broader and deeper ratings set and a more favorable capital treatment for private.

Credit.

Alternative credit and in particular real estate oriented credit. So I think all of that plays really well to our strengths.

Both obviously on the real estate side, but more broadly on the private side long duration infrastructure credit is an emerging asset class and again because of our infrastructure franchise.

It plays well to our strength.

So I think with that.

We're really well positioned to grow the business out and and then in terms of designing products and getting into equities.

I'd say there.

You really need to have.

A meaningful amount of capital in your insurance business and excess capital in your insurance business. If you want to start too.

<unk> broadened out the investment portfolio into into equities and given our balance sheet strength.

And the amount of permanent capital we have.

At Brookfield.

We have the flexibility and the optionality to invest in the business have excess capital and over time, if we want to invest in equities. We can so I think that again puts positions us quite uniquely relative to our peers.

Thank you for that and then the follow ups and then somewhat related question is it really just goes to Bruce.

Quite a few years ago, you made a comment about the infrastructure business being the most exciting and the overall brookdale portfolio.

And I think at the time base was maybe just shy of $3 billion raise.

How do you think about the business positioning now.

Are you equally excited about the energy transition business and the insurance activities. At this point is there a good parallel there.

For you and others that know me I am excited about all of our businesses.

Look I think.

The alternative area of investments if interest rates stay low or are all unbelievably positive.

The transition business is that is it.

Is at a very low base.

And it can grow.

For the next 25 years, we've de carbonization is not happening in fall there won't be a bell wrong for 40 years and therefore, we are in the very very early stages of it and if we can and we're just seeing it today and dealing with some major corporations in helping them achieve some of their goals.

And we think it's going to be really exciting. So I would say all the businesses have a lot of growth in them, but that one just because it's brand new.

Has a lot of runway I think.

Okay. Thank you.

Thank you and as a reminder, ladies and gentlemen, if you have any questions. At this time. Please press Star then one our next question comes from the line of Geoff Kwan from RBC capital markets. Your question. Please.

On the global transition fund just wanted to see what types of opportunities youre seeing in the near term.

To start making your investments, but also too is how is the competitive environment.

For winning those deals and how it may be different or maybe not versus the other types of deals you would do in your other platforms. In other words is there less competition or you're seeing more proprietary situations that sort of thing.

Hi, it's Sachin again.

I will answer this.

In light of.

Our power our renewable power business that really underpins, our de carbonization and transition efforts.

I would say the opportunity set is very broad I think what we're seeing in the marketplace is that.

Every institution.

Size and substance today is targeting some form of de carbonization and it really starts with electricity because thats the easiest place in the low hanging fruit is to Decarbonize first your your electricity demand and that involves investing in renewables signing renewable ppas.

And we have a depth of expertise in that regard across Brookfield, but in particular in our renewable business. We would have over 500 corporate clients in the United States.

If we include Latam and Europe that number it gets close to a 1000 corporate clients, where we sell power.

And that could include corporations, but also utilities.

Therefore, it gives us an amazing access point to talk to these companies about their broader needs beyond just electricity carbon capture.

Ensuring that they can electrify their industrial output, so dealing with automotive companies technology companies with data center needs, our renewable power business and our transition fund just announced a global partnership with Amazon to help provide green data centers and data centers are very large consumers of electricity.

And therefore, it's critically important.

The source of that electricity from renewables.

So as Bruce said I think the runway here, we're really in the early stages, but it is set to 25% to 40 year runway to electrify industry Electrify transportation.

And ultimately drive Seo two levels down.

And we have a leading business in that regard.

Great. Thanks for that and then my second My second question was one of the key messages. This year has been we should expect to see a lot of them and monetization activity. So far that's been the case.

And then kind of got two part question is first off of the ASP.

That you've monetize how would you describe the realized sale values versus what you expected and then secondly on.

The assets you had planned to monetize in 2021 kind of ballpark like how much have you monetized so far.

Hey, Jeff it's Nick.

Listen I think we've talked a lot about the demand for real assets high quality assets assets that generate stable cash flow and as you know we like to buy assets, where we can enhance the operations.

And turned them into kind of stabilized assets that are very attractive.

To the broader market and those are the assets that we can bring it to market and given the interest rate environment. The values that we have been obtaining are probably higher than what we would have expected 12 to 18 months ago, and so I'd say the assets or the sales are going very well the assets are incredibly attractive. These are very very high quality assets and so.

Global investors they are very attractive so they've always had been very strong.

And we've been pleased with the outcome and as we look forward to the rest of the year.

It's hard to see where we are in the ballpark, maybe we've done half of what we expect to do we got a bunch more.

We're at that point in the franchise and in the business that we've talked about where the earlier vintage funds have a lot of the high quality assets and where the business plan has been executed the assets have been stabilized and noticed the right time, given the market environment to look at.

Transacting, whether it happens in Q3, Q4 or a drift into Q1 or Q2 of next year. The pipeline is very full and we have a number of assets that we're looking at monetizing in the next little while.

Okay, great. Thank you.

Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Suzanne Fleming for any further remarks.

Thank you operator, and with that we will end the call. Thank you all for joining us and we look forward to seeing as many of you as possible at our Investor Day in New York at Brookfield place that's on September 20th.

Thank you.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Yeah.

Okay.

I need it I'm sorry.

You can pick up.

Okay.

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Brookfield asset management second quarter 2021 results Conference call. Please be advised that today's conference is being recorded I would now like to turn the conference over to your speaker today, Suzanne Fleming managing partner. Please go ahead.

Sachin Shah Chief investment officer for Brookfield, and CEO of our insurance business.

Bruce will start off by giving a business update followed by Nick will discuss our financial and operating results for the quarter and finally, Sachin will give an update on our insurance business. After our formal remarks, we'll turn the call over to the operator and take analyst questions.

And unknown risks and future events or results may differ materially from such statements.

For further information on these risks and their potential impacts on our company. Please see our filings with the securities regulators in Canada, and the U S and the information available on our website and with that I'll turn the call over to Bruce.

Thank you Suzanne and welcome everyone on the call.

Nick Goodman will walk you through our financial results in more detail in a moment, but I am pleased to say, they're good on almost every front.

The market environment has been strong and continues to get stronger and most if not almost all of our key markets we operate in.

While our total reopening will not be without challenges, we seem to be on a good path and GDP growth remains strong.

We're seeing this in almost all of our operating businesses.

Just to give you a few examples in our infrastructure business.

New connections doubled this quarter within our UK regulated distribution business, where we install and after that one household connections for water gas electricity and fiber.

In our U S real estate business tenant sales per square foot on average DAU increase to higher than 2019 levels, not 2000, 22019 levels across our retail centers and.

In our private equity business, we saw a residential mortgage insurance company benefit from higher premiums earn supported by the continued strength of the housing market.

These are just a few examples of which there are countless others across the business.

Capital markets remain very strong with level strong levels of global liquidity and a search for yield driving demand.

10 year Treasury as most of you know is in the low 1% range.

It appears certain that interest rates will remain low ish.

For some time.

Overall, with a strong GDP growth backdrop and lower for longer interest rates.

This leaves us well positioned to execute on our growth plans as we pushed further to assist our clients with capital and fixed income investment options.

To that end, we recently announced a transaction to acquire 100% of American National which will add a great base to our insurance businesses.

Sachin Shah as Suzanne mentioned.

Is here with us today, and we will discuss what our plans are with regards to reinsurance insurance and this transaction specifically.

Yeah.

More broadly across all of our businesses our teams have been busy well, but valuations are generally high we continue to find assets for value.

This is because we often find ourselves as a buyer of choice given our operational capabilities, our bench strength across a number of industries are access to large scale capital.

And we can therefore ask execute on transactions swiftly.

And also our proven and long term track record.

So while the market is competitive right now we're still very confident that we can deploy capital while staying disciplined within the business.

Moving to fund raising efforts, we have made significant progress with $24 billion of private capital raised since we last spoke to you, including three of our flagship funds, which are now in active fundraising.

The capital raise so far include includes the $7 billion of our founders close for our inaugural global transition fund and.

Capital raised as part of our initial close for our fourth flagship real estate fund of just over $9 billion to date.

Impaired to the first close of its prior vintage this as more capital raising a quicker timeline and should lead to a much larger funds and last vintage.

Our latest private equity fund signed agreements for a couple of transactions recently.

Our latest private equity fund has passed the commitment threshold to start fund raising for its next vintage and we expect that launch to happen soon.

Deployment within our infrastructure fund large infrastructure fund is progressing well and we are confident we will shortly complete the acquisition of IPL.

We also expect to have a final close on our opportunistic credit flagship fund in the coming months with the final close out of our $15 billion fund the largest in <unk> history.

In particular in this low interest rate environment.

As an example of this in July we announced the creation of our private non traded REIT, which will emerge within the existing Oaktree REIT.

Which will assist us getting to market quicker and it will be rebranded as Brookfield Reed.

This private wealth product is geared towards private income oriented investors.

It's focused in the United States and we expect it will be very attractive in this wealth channel.

This launch and the forward business plan for this product.

The privatization of BP Y which closed in July.

Thank you all for your continued support and I'll turn it over to Nick to discuss the financial performance.

Thank you Bruce and good morning, everyone.

If our asset sales program, enabling us to surface profit for our clients return capital to them and realize acumen realized carried interest in the process.

Inflows during the quarter totaled $8 billion.

Across several of our perpetual in long term fund strategies, including our first close for our latest real estate debt fund and further capital raises for our special investment strategy.

Subsequent to quarter end, we held successful initial clauses for inaugural global transition fund and our fourth flagship real estate funds for a total of $16 billion.

I would expect them to grow significantly with further closes over the next 12 months together.

Together with the successful fund raising of our latest flagship opportunistic credit fund we are on track to meet our fundraising goals outlined in our 2020 Investor day.

We completed the privatization of <unk> on July 26, and now we're 100% of the business. We expect the privatization to be accretive to our distributable earnings and overtime through asset monetization the portfolio will provide us with capital to fuel the next phase of our growth.

Turning to quarterly results total funds from operations of $1.6 billion.

Operating <unk> of $813 million and net income of $2.4 billion.

Were all up meaningfully from the prior year period.

As our asset management business fee bearing capital increased by $6 billion.

To $325 billion at quarter end and is up by $48 billion over the last 12 months. This led to strong growth in fee related earnings, which was $483 million for the three months period and totaled $1.7 billion over the last 12 months, an increase of 25% from the prior period.

We have $32 billion of additional committed capital that will become fee bearing once invested translating to approximately $320 million of incremental annual fee revenues.

We've continued to execute on capital recycling initiatives at favorable prices, we generated $8 billion of proceeds from monetization during the quarter, allowing us to returned $6 billion to our clients and realized $335 million of carried interest into income.

Year to date, we have now realized over $1 billion of gross carried interest, reaching our 2021 full year target well ahead of schedule and we expect more to come over the balance of the year.

Our investments performed very well during the quarter, we generated over $1 billion of unrealized carried interest increasing the total accumulated carried interest by 20% to over $6 billion.

We expect to recognize this into income over time as we continue to execute on asset sales.

As for our invested capital our operating businesses continued to perform very well and as Bruce mentioned some are specifically benefiting from the relaxing of restrictions and continued reopening of the global economy.

Distributable earnings or de before realizations increased 35% over the last 12 months period.

The increase was largely driven by the continued growth in our asset management franchise as well as increased distributions across our listed affiliates, including realizations de doubled for the 12 months period to $6.3 billion.

Our liquidity continues to remain very strong in addition to $60 billion.

<unk> fund commitments, we have approximately $18 billion of core liquidity, including close to $9 billion directly at the Bam level. All of this adds to a total of 78 billion of deployable capital.

Following the quarter, we further bolstered our liquidity with an $850 million debt issuance, taking advantage of an attractive rate environment Prost.

Proceeds from the offering will be used to finance eligible green projects and for general corporate purposes.

Our balance sheet remains conservatively capitalized with 94% of our debt, having no recourse to the corporation and a debt to market capitalization ratio of around 10%.

When combined with our corporate balance sheet that has over $9 billion of core liquidity $60 billion of investments and the $3 billion of day that we generate on an annual basis. We have a strong foundation to fund strategic acquisitions, such as American national which will be highly accretive or use the capital to continue to buyback share.

Yes.

Before I hand, the call over to such an I am pleased to confirm that our board of directors has declared a <unk> 13 per share dividend payable at the end of September Sachin.

Thank you Nick and good morning, everyone.

I am pleased to be here today to provide you an update on the activities taking place across Brookfield growing insurance solutions platform Brookfield reinsurance.

These businesses have enabled us to deploy large amounts of capital at attractive risk adjusted returns for us and our clients.

Our businesses and our expertise in particular in real estate infrastructure power and private credit.

Up very nicely against the needs of asset intensive life and annuity insurance.

As our insurance client capital has grown so has the desire from insurers to look more broadly from partners like us who can offer diverse capital solutions, such as block or future flow reinsurance capital investment management and partnership opportunities.

All of these skills are well suited to Brookfield investment franchise, given our deployable capital investment expertise and ability to partner with Counterparties over the long term.

To focus our efforts at the end of June we completed the spinoff of Brookfield reinsurance partners.

Separate public company that was established to own and operate insurance companies and conduct reinsurance.

Since the spinoff we have been actively progressing our previously previously announced deals such as our cornerstone investment in American equity life, and we have been working on a robust pipeline of new opportunities.

To be clear and before I speak about our recent activities.

The opportunity has always existed to be an insurance and reinsurance.

It helps that our franchise is now bigger and our credit credit platform is much broader to ensure that we can put the capital to work effectively.

But the real change over the last couple of years is that interest rates are as close to zero as they have ever been.

Therefore, the risk profile of losing money on annuity like products is lower than it has ever been.

Accordingly, the opportunity for us to out earn and generate a substantial return on equity is excellent.

Bottom line when rates were at 5% annuity as needed to earn to out earn that 5% as rates have fallen to 1% the losses on the liabilities for those who took on policies to pay that circa 5% rate has been significant but now with rates at 1% and with.

It's unlikely that nominal yields will go negative for any long period of time the risk on the liability side of the business is far less.

We believe therefore that this is the ideal time to enter the business in a large way and therefore, we have been working on this plan for the last year.

Cutting through it all we're always trying to find ways to invest money in businesses, which have good returns, but low risk.

We think that annuities as long as you have a strong investment franchise to put money to work into offers that today.

With that backdrop earlier this week, we announced that Brookfield reinsurance entered into an agreement to acquire a 100% interest and American National Group.

U S based insurance company founded in Texas, nearly 100 years ago.

American National is predominantly focused on life and annuities products with a smaller P&C business.