Q3 2022 Brookfield Asset Management Inc Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Yeah.
Okay.
Good day, and thank you for standing by.
Welcome to the Brookfield asset management third quarter 2022 earnings conference call and webcast.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one one on your telephone.
You will then hear an automated message advising your hand is raised.
Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your Speaker today Suzanne Fleming. Please go ahead.
Thank you operator, and good morning, welcome to Brookfield third quarter 2022 conference call on.
On the call today are Bruce Flatt, our Chief Executive Officer, Nick Goodman, Chief Financial Officer of Brookfield Corporation here.
Chief Financial officer of our asset management business.
Bruce will start off by giving a business update followed by Bahir, who will walk you through the results of our asset management business and finally, Nick will discuss our overall financial and operating results.
After our formal remarks, we will turn the call over to the operator and take analyst questions in order to accommodate those who want to ask questions. We ask that you refrain from asking more than two questions. At one time. If you have additional questions. Please rejoin the queue and we'll be happy to take any additional questions at the end as time permits.
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 applicable Canadian and U S. Securities Law. These statements reflect predictions of future events and trends and do not relate to historic events.
They're 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 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.
Our third quarter results were strong demonstrating the resilience.
And the diversification of our franchise.
We reported over $700 million of net income and $1 4 billion.
Distributable earnings.
In addition to these strong results we entered into a number of strategic partnerships, where we will deploy a significant amount of capital alongside our partners.
The economic backdrop has continued to create volatility in the capital markets.
With bonds and equities underperforming in the last while.
On the contrary private real assets have proven to be a safe Haven.
Further enhancing their appeal to investors.
Interest rates should be set to peak in the next six months.
In many major economies around the world look like they will experience a recession.
With the central bank induced slowdown.
Rates are then set to stabilize.
And should eventually decline.
Patients in the financial market has been access to capital has become less available for many.
Fortunately.
We are well positioned to thrive in the current environment with a record level of investable capital of over $125 billion.
And more importantly, the skills to navigate these types of markets and execute transactions.
Our access to liquidity combined with our deep operating expertise.
Sets us apart and makes us an extremely attractive partner for many companies.
Our recently announced strategic partnerships are hopefully only in the beginning of what we want to accomplish when we bring our competitive advantages to bear.
Touching on a few of these recent partnerships briefly.
We agreed to fund half of a $30 billion chip manufacturing facility with Intel with Brookfield funding $15 billion through our infrastructure business.
This is just one chip manufacturing facility and the trends towards the globalization may result in similar opportunities going forward.
We partnered with Deutsche Telekom to acquire <unk>.
Part of half of our 51% interest and there are $17 5 billion tower business.
This is a marquee portfolio of 36000 towers in Germany and includes Greenfield development portfolio of an additional over 5000 towers.
Our renewable power and transition business partnered with cameco to acquire Westinghouse.
<unk> 8 billion.
Following an incredibly successful turnaround by our private equity group.
We are very excited about this business going forward and the partnership with Cameco.
Fundraising continues to go extremely well with a significant amount of capital coming in for our flagship funds.
But also for our complementary strategies.
We continue to see clients consolidate the number of managers that they allocate capital to.
And with our strong track record.
Focused client service.
And wide breadth of product offerings, we have been successful at deepening our existing relationships and attracting new clients to our business.
We also continue to focus on enhancing private wealth product offerings.
Here, we'll talk about this a little later.
Our insurance solutions business continues to make strides and.
And it's providing a natural hedge for us against interest rates.
Having stayed short in duration and our investment portfolio and largely sitting on cash since the acquisition of American National.
Over the last while we've started to invest in a variety of higher earnings strategy.
Additionally, with the direct origination capabilities obtained through the acquisition of American National we have been writing new annuities directly.
We are actively deploying this capital.
These efforts are steadily increasing the cash earnings from the business and to date have delivered very attractive returns on our equity.
Beyond what we expected when we launched the business two years ago.
Before I turn the call over I wanted to highlight that yesterday at our special meeting shareholders approved the distribution and listing of 25% of our asset management business.
We remain on track to complete the distribution.
And lifting by the end of this year.
Thank you to those who follow Brookfield, and who joined us at our Investor day or watched online.
Thank you for the interest in our business and I will now turn the call over to Bahir.
Great.
Thank you Bruce and good morning, everyone.
I am pleased to report that our asset management business had an excellent quarter and continues to prove out its resiliency and ability to deliver strong profitability and growth through the cycle.
As Bruce noted the business had a great quarter from a fundraising perspective, it progress number a number of initiatives on the product innovation side and delivered strong financial results I'll provide an.
Update in my remarks on all three fronts.
First from a fundraising perspective, we remain on track to deliver our best fundraising year ever.
Our clients continue to allocate large sums of capital to our real asset strategies that provide predominantly contracted an inflation protected cash flows which offer shelter during times of volatility in the financial markets.
Since the end of the last quarter, we had inflows of $33 billion.
This was predominantly driven by first close for our fifth flagship infrastructure fund and our sixth flagship private equity fund, which now stand at approximately 20 184 billion respectively.
We also finished fundraising for our fourth flagship real estate fund and have raised $17 billion for the strategy.
In addition, we continue to raise capital across our other complementary strategies.
Our third infrastructure debt fund had a first close for $2 8 billion and our Super core infrastructure fund raised $1 billion during the quarter.
We recently launched fundraising for the next vintage of our opportunistic credit flagship fund.
This strategy along with the broader Oaktree franchise specializes in investing capital during periods of capital scarcity and market volatility.
We expect this period of time to be no different.
Our target is for the next opportunistic credit fund to be larger than the prior vintage which stood at $16 billion.
As a result of all these initiatives we ended the quarter with $407 billion of fee bearing capital, which was up almost 20% compared to the prior year.
On the product innovation front, we continue to focus on solutions designed for private wealth leveraging our strengths in <unk>.
And private real estate, and private and public performing credit as well as our newest strategy focused on infrastructure.
We recently launched a private wealth product that will give investors the ability to invest alongside our institutional clients and our infrastructure funds, providing investors with exposure to a balanced portfolio of the highest quality debt and equity infrastructure investments.
We believe there is a great potential for this product similar to other products. We have designed for this distribution channel that are steadily scaling up.
From a financial results perspective, as I noted earlier in my remarks, they were very strong.
Fee related earnings were $531 million in the quarter and $2 1 billion over the last 12 months, representing increases of 18, and 20% respectively over the prior period.
Our fee related earning margins were 59% over the last 12 months.
The change from the prior year comparative period, as we continued to focus on cost discipline as we scale up our business.
In addition to our current fee bearing capital, we have $39 billion of committed capital that when invested will translate to approximately $319 million of.
Of incremental annual fee revenues.
This in addition to the capital raised across our latest flagship series will be a strong catalyst for continued growth in our fee related earnings for years to come.
Asset valuations across our across our managed strategies continued to be supported by the growing revenues as we benefit from higher same store demand and the positive impact of inflation.
That combined with our minimal exposure to public securities resulted in the business generating $379 million of carried interest during the quarter.
We currently have total accumulated unrealized carried interest of <unk>.
$9 billion, which is up almost 30% from last year.
Moving on to investment performance and monetization activity, we continued to execute on a number of monetization of high quality de risked assets.
During the quarter, we agreed on the sale of Westinghouse and our private equity business, realizing an approximately 60% IRR and a six times multiple of capital.
Our real estate business continues to recycle capital, including the sale of an office property in Melbourne.
And although the pace of monetization in the broader market has slowed our pipeline of capital recycling initiatives across our mature high quality assets remains strong.
As we look forward our growth profile remains very strong and highly visible as we continued to build on our position as the preeminent manager across the renewable power transmission infrastructure and real estate assets.
Furthermore, we will continue to reap the benefits of synergies with the corporation and maintained significant access to capital to support growth as well as benefit from capital allocation from our insurance solutions business.
Which should propel both fund size and fees going forward.
So that was a recap on our activities for the quarter before I hand, the call often echostar, let's spend a few minutes speaking about the upcoming special distribution of our manage our business.
Yesterday, we received shareholder approval to proceed with the special distribution and the listing of a 25% interest in our asset management business before the end of the year.
As a reminder for every four shares you own of Brookfield today, you will receive one share of the newly listed manager company.
Consequently, when the manager business begins to trade later this year the share count of this company will be a quarter of the share count of Brookfield today.
The manager will be called Brookfield asset management and trade under the symbol of B a M.
While the existing business today will be renamed to Brookfield Corporation.
And trade under the symbol B and.
The manager has a market leading global platform that is on track to more than double its fee bearing capital from roughly $400 billion today to a trillion dollars over the next five years translating directly to fee related earnings growing from $2 billion annually today to over <unk>.
$4 billion five years from now.
In addition to the management fees it generates the manager will receive upside from two thirds of gross carried interest on new funds.
The manager will require a minimal amount of capital and we will target a dividend payout ratio of approximately 90% of its distributable earnings.
We anticipate being in a position to communicate to the market the dividend rate for the company for fiscal 2023 before the start of trading in December .
We strongly believe that this manage our company will have one of the most attractive dividend profiles out there.
We laid out the story on this at our Investor Day held in September , but as a brief recap the dividend will be underpinned by a highly predictable cash flow profile as over 90% of our cash flows underpinning. This dividend will be derived from fee related earnings that are predominantly generated.
Long dated and perpetual strategies.
It will have a very strong growth trajectory as we expect to grow our fee related earnings by 15% to 20% over the five year plan period.
And finally, this dividend will be anchored by a strong balance sheet that has no debt and a significant liquidity position right out of the gate with almost $3 billion of cash on the balance sheet.
And so with that thank you for your time and attention this morning, and I'll pass it on connect.
Thanks, Bahir and good morning, everyone.
To reiterate the previous comments, our financial results were excellent during the quarter.
Distributable earnings or de <unk> were $1 $4 billion for the quarter.
$5 billion over the last 12 months.
Hey, before realizations were $1 2 billion for the quarter and $4 $2 billion over the last 12 months.
39% and 29%, respectively compared to last year.
<unk> net income for the quarter were $1 5 billion and $716 million respectively.
The strength of the earnings is due to the high quality and essential nature of our assets and businesses that generate predominantly contracted inflation protected cash flows underpinned by conservative and stable to stable capital structures.
As a reminder, we always strive to minimize the risk of our capital structures refinancing largely on in investment grade fixed rate basis matching the currency of the debt to that of the underlying asset cash flows.
We also seek to hedge the residual currency exposure over equity maintaining high hedge levels against developed market currencies, which have been most affected in the last 12 months.
The result is a resilient asset portfolio that continues to perform well.
As Bahir mentioned earlier this model continues to benefit our clients as well as our own capital as our investment.
Portfolio on the whole continues to generate stable and growing cash flows and the values of our investments are robust it.
It is worth noting that the performance of our insurance solutions business has also been very strong.
<unk> to ramp up its investments.
Operating <unk> was $1 $2 billion for the quarter, a 30% increase compared to the prior year period the.
The increase was largely driven by the continued growth in our asset management franchise. The benefit of same store growth across our operating businesses contributions from recent acquisitions.
Substantial growth in our insurance solutions business.
Distributions from our investments were $696 million, 23% higher than the prior year. These.
These results are especially impressive when you consider the economic backdrop.
Across the portfolio, we have seen growing demand for our essential services be it for backbone infrastructure renewable power contracts Premier office space or to expand physical retail presence.
The market leading positions of many of the businesses. We own is also providing strong underlying growth either through inflation indexation or our ability to pass on real pricing increases to consumers.
While the strong underlying operating results were partially offset by the impact of higher rates for certain of our businesses and markets. Like these it is worth noting that a large percentage of our debt is fixed rate on our insurance operations provide a natural hedge to interest rates and the performance of that business to date has been very strong.
Our insurance solutions business had an excellent quarter generating almost $160 million.
Of distributable earnings, reflecting the first quarter, where the fuel contribution from American national.
This business, which is largely being sitting on cash until note is very well positioned to benefit from the current rising rate environment with the ability to deploy a significant amount of insurance capital into our alternative strategies and therefore earn strong returns. This business is beginning to demonstrate why we believe it has.
Such strong long term growth potential.
Since the end of the second quarter, we bought back 100 $636 million of shares over the last 12 months, our share buybacks totaled $626 million and when combined with our regular and special dividends. We have returned over $1 5 billion of capital to our shareholders.
Further the manager distribution next month will return $10 billion to $20 billion to shareholders, depending on how you view, what you received and its value.
We ended the quarter with record liquidity at approximately or approximately $125 billion of deployable capital. This includes approximately $36 billion of core liquidity and $89 billion of Uncalled fund commitments.
As we look forward, we are very well positioned to leverage this liquidity combined with our ability to source proprietary scale investment opportunities to do something large and interesting should that show up.
Finally, I am pleased to confirm that our board of directors has declared a quarterly dividend of <unk> 14 per share payable at the end of December to shareholders of record at the close of business on November 30th.
I want to thank you for your time and I would now like to pass the call back to the operator for questions.
Thank you as a reminder to ask a question. Please press star one one.
And again to ask a question. Please press star one one please.
Please standby will be compile the Q&A roster.
And our first question will come from Cherilyn Radbourne from TD Securities. Your line is open.
Thank you very much and good morning.
My first question is with respect to the secondary market, where there is clearly an expectation of more LP activity in the near term is it logical that more GP activity, where bandwidth more focus should follow that and is that something that you're preparing for.
Yes, Bruce Cherilyn.
Say look I think the.
During times of.
Less capital availability versus quote more capital availability, those with capital more opportunities come to them. So.
I think when GPS cancer.
Wind up a fund by selling assets.
Outright.
Continuity vehicles make even more sense, so I think there'll be.
There'll be much greater opportunity looking forward too.
Continue to expand our business. So I think it'll be a good time.
And then in terms of the retail wealth channel, maybe you could just expand a little bit there on how many platforms are listed on the kind of receptivity youre seeing from advisors in terms of alternative products and how much was baked into your five year plan in terms of retail.
Inflows.
Hey, Sharon it's Nick.
Listen we are advancing the initiatives that we laid out which is developing.
More products are non traded REIT as you know is on 13 platforms right now.
And also expanding into the RIAA channels.
We have our <unk> III product, which recently launched through their BDC and we are in the process of getting our infrastructure product out there as well, which is really providing retail and wealth with access to the full suite of our capabilities and products and we think thats going to resonate very well with the channel over time, we know it takes time first stage.
Just getting on the channels, which we've achieved node.
No. It's about the performance, which has been very good on non traded REIT is performing well in scaling up and now it's just about getting out and distributing.
The product and.
And that's the next stage of the of the growth for this product and.
The change that we had in the next five years has not deviated from what we laid out at Investor day was about $50 billion to $60 billion over five years, and we still believe that's achievable.
Thank you. Thank you thank.
Thanks.
Thank you.
One moment for our next question please.
And our next question will come from Ken Worthington from Jpmorgan. Your line is open.
Hi, Good morning, and thank you for taking my questions maybe first for Bruce.
Love to hear how you're characterizing the real estate market in the U S. At this point, both the corporate building.
And the retail parts of the U S real estate market and if you could give us some flavor on how you see the path forward in 2023 in real estate for Brookfield.
So thats a pretty broad question, you could I could take a while but I'll try to.
Give you a couple of points I.
I think point number one is.
Real estate the real estate market there, it's almost a tale of two cities now it always has been.
But I think it's.
In this environment.
The gap has widened between premier everything.
Poor quality things and I would say poor quality things, whether it's <unk>.
Residential industrial retail or office is not.
Lower priced it's no bid and some of these things that are going to be plowed down and.
And the real estate and those business those assets are going to have trouble and they're either going to hand, it back to lenders recapitalized or things are going to occur. So thats one sector of the market.
On the other hand, our assets generally are predominantly fit into the category of the best of the best.
<unk> always had.
Strategy of focusing on the best of the best.
And.
In high quality assets.
Most.
As in all asset classes.
In real estate today are getting higher rents.
And just give you a couple of anecdotes.
And retail sales broadly across the U S are up 30%.
In shopping centers from pre Covid numbers.
But high high quality centers, you've got more than that.
Some of them office space in major markets.
Like New York on the premium side.
Rents are up 50% from where they were pre COVID-19 and what we expected before COVID-19. So.
<unk>.
The story in real estate has always been.
Focus on premier quality, and it always wins and in this environment and I think going forward to answer the last part of your question for 'twenty three.
The.
The race to the best it's always wins and it's even more so than exacerbated in this environment. So I would just say our.
Our business is very good there is no doubt interest rates.
Our higher filler if you didn't have fixed rate financing and some transitional assets or assets like hotels have.
Floating rate.
Financing on them.
But the revenues are inflating as well with inflation. So these are these are inflation sensitive assets and you get the income back eventually so I'd say we're quite.
Constructive and positive about the environment and on the acquisition side, there's a number of very interesting things to do.
Thank you and then maybe for Nick.
On the margin outlook.
You are in the midst of a significant flagship fund raising cycle. The perpetual funds are growing.
We assume that this is very high incremental margin, but you're investing in the business. So as we think about Brookfield asset management and Brookfield Corp to the extent that its different how should we think about the margin outlook and even expense allocation between.
The spin and Holdco going forward, but really the question is about the margin outlook.
And what we should expect.
Yes.
Thanks, Ken.
Listen I think the margin outlook guidance from us really hasnt changed over the long term for Brookfield, we've guided to around 60, which when you include all tree, that's roughly where we are right now around 50 960 <unk>.
You might see some margin expansion short term because we really have.
Loaded up on the cost ahead of the fund raising for their surrender flagships, we're almost done with the fund raising that people are obviously in their seats looking for investments. We've raised the capital a few extra people to service the additional clients, but the cost have been incurred to know youll see the revenue coming through but as you said, we're also in continuing to invest in the growth of the business. So I would guide you to the consistent.
Outlook that we've given for the last couple of years.
Okay. Thank you.
Yes.
Thank you.
One moment for our next question please.
And our next question will come from Alexandra <unk> from Goldman Sachs. Your line is open.
Hey, good morning, everybody. Thank you for the question as well.
I was hoping we could dig into some of the fundraising dynamics in the quarter outside of the flagship and Bruce you mentioned $14 billion of capital raise outside of the flagship campaign, which is which is quite strong.
Can you help unpack, where thats coming from and more importantly, as you look forward at the growth of the business into 'twenty three and beyond.
Do you think about these kind of contributions outside of the flagships and where they would be coming from.
Hey, Alex just maybe I'll start off and Bruce can add in if he wants at the and listen I think.
We've talked about the flagships and the scaling up but what was really going to help propel the growth of our business is the growth of these complementary strategies and they have proven to be very popular with our clients.
Maybe people and fill in a rising rate environment. Some of these lower income lower risk strategies.
Struggled, but we've actually fund the resonate even better given their stability and the areas in which we're focused in the inflation protection of the underlying investments and we've seen really strong demand across our infrastructure debt strategy had a really strong first close are super core infrastructure, which is an inflation protected long term core return uneven.
In the quarter, we had about 750 million to $1 billion come in across our.
Perpetual real estate trustees across real estate and non traded REIT. So we're continuing to see that capital come in is coming from.
Broad array of clients the ICF another benefit to this it's also attracting new clients to Brookfield and a lot of the investors coming into this are first time investors in Brookfield strategies. So I think it's got really positive momentum and fund raising has not slowed down if anything it's accelerated this year and we're really optimistic for his contribution over the long term.
Great. Thanks, Nick.
Second question is around.
The transition business.
You guys have outlined.
A lot of secular growth drivers in that business at the Investor day, If we look at the pace of deployment I believe roughly 7 billion or so out of the global transition point has already been committed or deployed I think that's almost half of the fun side. So given.
Given the opportunity set you see for capital needs in this part of the market I guess, how are you thinking about deployment here over the next several quarters and when should we think about global tours and should fund to point out.
Yes, so Alex your observation on the amount invested or committed is correct.
Listen to fund is seeing tremendous opportunities. This was the whole idea behind the strategy that the amount of capital needed to invest in the transition is enormous.
Pool of capital that can effectively go where the emissions are and start to help companies achieve their decarbonization efforts. The opportunities are vast and some of them are very large in size and so listen the pace of deployment will be thoughtful we will target stuff that achieves that and strong returns for our clients but.
And we're seeing lots of good opportunities and as we worked through that then yes at some point, we will move on to too hard.
Hard to see exact timing, but the pace of deployment.
It's going well.
Very well thanks, so much.
Okay.
Thank you one moment for our next question. Please.
And our next question will come from Geoff Kwan from RBC capital markets. Your line is open.
Hi, good morning.
Just wondering if there's any sort of sensitivity to planned value per share you can provide.
Interest rates, because I would think the sensitivity would be around.
The principal investment.
NAV as opposed to your point of values.
FRE or carry.
Hi, Jeff it's Nick.
Listen I think if you were to take interest rates in isolation, you could see there could be an impact, but I think when you take interest rates combined with the inflation that we have right now than when we look at our portfolio. We believe that the valuations are fairly robust in this environment and the two seem pretty closely intertwined right now.
If inflation comes down rates come down so I think we feel pretty good about the value of the of the investments and as we just said.
Impacting our fundraising ability on the private fund side. So we feel good about the business in this environment.
Okay and just my second question I know its not material. Its here now, but just on the American equity life situation. Just wondering if theres any color you can.
This is the rationale for the decision that was made but also to specifically.
We'll bam reinsurance still date, the remaining new flow requirements under the original agreement.
And also for the shares that you are not it looks like climbing to tell initially.
Because there is a lock up just wondering how much longer you'd have to wait or is there a plan to sell those.
Other shares as soon as he can.
Okay.
So it's Bruce I'll just say.
I'm not sure I can add.
Add much to answer those questions because it is a public company and.
So I can't really say too much but maybe just to put it into context.
It's a small investment in <unk>.
300 businesses that we have.
Sometimes small events catch their breath sometimes.
Large ones don't you just never know what catches the press.
It will get sorted out in due course and what we can say is filed publicly so you should look at those materials and it does.
Does contain some answers to your questions and the other ones I just can't deviate from that.
Okay. Thank you.
Thank you.
Moment for our next question please.
And our next question will come from Sohrab <unk> from BMO capital markets. Your line is open.
Yeah.
Yes. Thank you.
Just wanted to get maybe a bit more.
Meat on the bone I think in the shareholder report Bruce you talked about leveraging the magnitude to source investment opportunities.
Opportunistically grow the business and.
Odds of something large and interesting showing up is increasing.
Any chance you could kind of maybe give us a bit of.
Direction as to what would be large what sort of areas would.
It would be good opportunities, maybe including jurisdictions as well.
Yes look I would say first off.
<unk> Corporation.
We'll continue to put money into all the funds that are sponsored by the manager and B.
Hopefully the.
A very large co investor beside it in transactions just like many of our other clients.
And from time to time, there may be a business or an asset which doesn't fit any one of those funds or it as.
As such so large that the corporation can take a very.
Meaning full piece of the business side one of the funds.
I'd say that was that that may be the first point.
We're thinking about investing.
On top of that.
Look the bottom line is when when the markets are extremely volatile and equities.
Some sectors.
Go down between 75% to 90%.
I'd favor.
One of those businesses, maybe being an opportunity to purchase.
Or the volatility of the current environment creates opportunities, where there are our liquidity issues for some entities that come into the market.
And increasingly we've been seeing and continue to see and I think we will.
Increasingly see over the next while while this environment persists.
Many more opportunities coming to us.
That you wouldn't have imagined 612 months ago. So I just I don't we don't know what they are they show up on a daily basis. Most of them. We don't do but there will be one of them I think that could be very interesting win having liquidity in capital available as always.
And a great place to be and in this environment.
And then maybe just as a follow up to that I mean to get the pool.
Leverage if you will out of the manager doubling the fee bearing capital in.
There are things like that.
Would there be anything that.
As a group you would think you would need to add.
Acquisition wise or is this the kind.
The organic trajectory.
By itself, then we will get us there.
Yes, I think our plans.
Nick can add to this or bahir can add to this but our plans are essentially everything you see is just an organic build out of our businesses.
Having said that.
And we don't need to add anything I think we have an excellent breadth.
Breadth of products and we're increasingly building.
Other areas adjacent.
Step outs to our plans.
But from time to time people come to us with things and we look at them and.
There could be something one day that is.
Inorganic.
And we'll just assess it as they come along.
Thank you.
Thank you one moment for our next question. Please.
And our next question will come from Andrew <unk> from Credit Suisse. Your line is open.
Thanks, Good morning.
Greatly appreciate it if you could provide us just some color on your client coverage model and really how you benchmark it versus some of your peer group and.
And I guess the gist of the question is just the number of your private LP clients that you are effectively covering now, but our investors in the funds.
Our average ticket size I think it's been a while since you've updated that information.
Okay.
Hey, Andrew it's Nick.
Listen our client coverage model is it's global.
And we run client coverage regionally, where as you can expect we have a lot of CRM.
Building relationships with clients and maintaining relationships with clients every day and we do that with the.
Largest pension plans sovereign wealth funds down to the smaller institutional investors and then we have a dedicated team covering insurance clients as well leveraging our expertise that we are building all the time through our reinsurance business to help structure are the right ways for insurance to invest into our strategies and so thats the frontline.
For institutional clients and obviously, we're building our wealth solutions business to target the retail channel and then supporting that is a huge effort around client service.
And thats for managing our clients requesting to reporting.
<unk> investors in the fund so it's a significant effort it's more of a regional approach today complemented by senior executives, who also manage and maintain significant relationships.
The average size of investors is growing it's up from previous years, it's about $175 million right now.
On growing significantly and also the average funds that are invested are invested in is also stepping up over time, so things are improving and the client coverage is obviously growing all the time as we continue to try and target a more clients, but do.
Do more with existing clients. So it's a continual effort.
Okay. I appreciate those comments and then maybe just to dive into that a little bit more are there certain regions, where you are growing at a faster rate from a coverage standpoint versus some others.
Not necessarily it listen I think the U S is still a tremendous opportunity for us. We're obviously very well covered in Canada. As you would expect great relationships in the Middle East and Asia and Europe , I think is a market, where we're continuing to grow as we tailor new products for that market that seem to be resonates.
Well and we're growing the client penetration there in the U S is still a significant opportunity for us so.
That's probably the summary.
Okay I'll leave it at those two thank you. Thank you.
Yes.
Thank you one moment for the next question.
And we will take our last question from Mike Brown with <unk>. Your line is open.
Hi, good morning.
So for the insurance business, how should we think about the organic and inorganic path forward and I guess on the inorganic side. There are some attractive assets in the market. So how are you thinking about other potential insurance partner opportunities.
Hey, Mike it's Nick.
There's been a lot of the organic growth in the short term has been just the earnings growth in the short term has really been about <unk>.
Investing the significant capital that we have that was largely sitting in short dated cash in short term assets and reallocating them now are investing into still very high credit quality, but much higher yielding opportunities and that spread expansion as a significant boost for earnings.
From an organic perspective, obviously with our American National platform are out there originating product every day and we're still looking at building strategic partnerships with insurance companies in the market and being a good partner and trying to.
Growth through that way and that can be a combination of pension risk transfer from which we are building a very strong market position in Canada, and looking to grow that at globally into Europe and the U S. At some point.
And it's also just through life and annuity products and just being.
A partner for insurance companies across a whole host of opportunities. So I would say the organic comes largely through pension risk transfer and American national and inorganic through opportunities. We continue to see in the market through blocks and strategic partnerships.
Okay, great. Thanks for the color there and then on the insurance business just to dive in a little more there. It does sound like there is some some good growth opportunities.
And the business near term.
Should we think about that in terms of.
How the contribution can continue to progress here over the coming quarters.
And as it grows in size can we expect to get a bit more disclosure on that business.
To answer the second question first yes as it grows in size it becomes more material there will be more.
There will be more disclosure and listen I think this quarter, we were about $160 million of <unk> in the quarter and annualized number has increased to $550 million and I think thats, a decent sort of annualized number based on what we're seeing in the quarter, but as we continue to allocate more of that cash and capital into higher yielding opportunities we could see further.
Expansion.
Thank you.
Thanks.
Thank you and that does conclude our question and answer session for today's conference I'd now like to turn the conference back over to Suzanne Fleming for any closing remarks. Thank.
Thank you operator, and with that we'll end today's call. Thank you everyone for joining us.
Thank you. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
The conference will begin shortly to raise your hand during Q&A you can dial one one.
Okay.
Okay.
Yes.
Okay.
Great.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Yes.
Yes.
Okay.
[music].
Yes.
Yes.
Okay.
Yes.
Yes.
Yes.
Yes.
Thank you.
[music].
[music].
[music].