Brookfield Corporation (BN:CA) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary highlights strong financial performance, strategic partnerships, and positive guidance in various sectors, including AI and real estate. The Q&A section confirms a positive outlook with robust pipelines and strategic growth plans, despite some uncertainties in management responses. The 17% dividend increase and focus on reinvestment further boost sentiment. Overall, the positive aspects outweigh the negative, suggesting a likely stock price increase.
Key Financial Performance
Distributable Earnings (DE) before realizations $5.4 billion or $2.27 per share, representing an 11% increase over the prior year. The increase was supported by strong momentum across core businesses.
Total Distributable Earnings (DE) including realizations $6 billion or $2.54 per share. This was driven by record financial results across the company.
Total Net Income $3.2 billion for the year. No specific reasons for change were mentioned.
Asset Management Business Distributable Earnings $2.8 billion or $1.17 per share, reflecting a 22% increase in fee-related earnings to $3 billion. This was driven by a 12% increase in fee-bearing capital to over $600 billion and strong investor demand for fund offerings.
Wealth Solutions Business Distributable Earnings $1.7 billion or $0.71 per share, representing a 24% increase over the prior year. This was driven by $20 billion of annuity sales and improved profitability in the P&C business.
Operating Businesses Distributable Earnings $1.6 billion or $0.68 per share. This was supported by strong underlying fundamentals, including a 14% increase in operating funds from renewable power, transition, and infrastructure businesses.
Real Estate Leasing Activity 17 million square feet of office leases globally, with net rents averaging 18% higher than expiring leases. This was driven by strong demand from large creditworthy tenants and limited new supply in major global markets.
Asset Sales $91 billion of asset sales across the business, including $24 billion in real estate, $22 billion in infrastructure, $12 billion in renewable power, and $33 billion from private equity and other investments. Substantially all sales were completed at or above carrying values.
Carried Interest Realized into Income $560 million, with $11.6 billion of accumulated unrealized carried interest. This was supported by a strong pipeline of planned asset sales.
Shareholder Returns $1.6 billion returned to shareholders through dividends and share buybacks, including $1 billion of Class A shares repurchased at an average price of $36, representing a 50% discount to intrinsic value.
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Operating Highlights
AI Infrastructure Fund: Launched inaugural AI infrastructure fund as part of asset management business.
UK Pension Market: Acquired Just Group in the UK to tap into the GBP 500 billion pension market opportunity over the next decade.
Asia Expansion: Expanded into Japan and broader Asia, targeting $3 billion to $5 billion of annual flows in the region.
US Retirement Market: Expanded retirement distribution capabilities in the U.S., aiming for $30 billion of inflows annually.
Capital Raised: Raised $112 billion of capital in 2025 across diversified strategies.
Asset Sales: Completed $91 billion of asset sales, including $24 billion in real estate and $22 billion in infrastructure.
Insurance Asset Growth: Grew insurance assets to $145 billion, with plans to reach $200 billion by 2026.
Market Capitalization Streamlining: Announced plans to merge Brookfield Corporation with its sister insurance entity, BNT, to streamline structure and enhance capital allocation.
Real Estate Strategy: Focused on acquiring, developing, and repositioning high-quality real estate assets, achieving 95% occupancy in core portfolios.
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Risk or Challenges
Market Environment: The company acknowledges that while business fundamentals are strong, the market environment is subject to economic cycles. Interest rates have started to come down globally, but there is still a need to maintain excess capital to ride through any market cycle and avoid disruption to the compounding process.
Real Estate Market: The real estate market has experienced dislocation driven by capital markets and shifting sentiment rather than underlying fundamentals. While the company remains optimistic about asset values rising, the market environment reflects limited new supply and growing tenant demand, which could pose challenges if sentiment does not align with fundamentals.
Regulatory and Structural Changes: The company is undergoing structural changes, such as merging Brookfield Corporation with its paired sister insurance entity, BNT. While this aims to streamline operations, it introduces risks related to execution and integration of these changes.
Insurance Business Expansion: The company is expanding its insurance business into new markets like the U.K. and Asia. This includes acquisitions and scaling operations, which carry risks related to integration, market entry, and achieving expected growth targets.
Capital Allocation and Financing: The company executed $175 billion of financings in 2025, but maintaining strong access to capital markets and favorable financing terms is critical. Any disruptions in capital markets could impact the company's ability to finance operations and growth.
Geopolitical and Economic Risks: The company operates globally and partners with governments and large organizations. This exposes it to geopolitical and economic risks that could impact operations and partnerships.
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Guidance & Outlook
Market Environment and Real Assets: Capital markets have improved, liquidity has returned, interest rates are decreasing globally, and transaction activity is increasing. Real assets are expected to outperform, offering excellent returns with moderate risk.
Real Estate Outlook: New supply in core markets is limited, demand is growing, and asset values are expected to rise substantially. The company is positioned with high-quality real estate in supply-constrained markets, which is expected to deliver robust NOI growth in 2026.
Streamlining Corporate Structure: The company plans to merge Brookfield Corporation with its sister insurance entity, BNT, in 2026. This will streamline the structure, add substantial capital to insurance operations, and support growth in the insurance business.
Asset Management Business: The company expects strong fundraising visibility in 2026, including the launch of a flagship private equity fund and an inaugural AI infrastructure fund. The acquisition of Oaktree is expected to contribute to meaningful earnings growth.
Wealth Solutions Business: The company projects to end 2026 with approximately $200 billion in insurance assets, over $2 billion in distributable earnings, and a capital base exceeding $20 billion. Growth is supported by diversified geographies, high-demand retirement products, and a growing protection franchise.
U.K. Pension Market: The company plans to close the acquisition of the Just Group in the first half of 2026 and execute on over GBP 5 billion of pension opportunities annually. The U.K. risk transfer market is expected to see over GBP 50 billion of pensions in 2026 and GBP 500 billion over the next decade.
Asia Expansion: The company is building its business in Japan and broader Asia, with a strong pipeline of opportunities expected to translate into $3 billion to $5 billion of annual flows over time.
U.S. Retirement Distribution: The company is expanding its U.S. retirement distribution capabilities, targeting over $30 billion of inflows annually over time. Investments in bank and broker-dealer channels are expected to grow annualized organic inflows to over $25 billion in the near term.
Protection Franchise: The company is focusing on selective M&A, organic growth, and reinsurance capabilities to scale its protection franchise. The business delivered $8 billion of float in 2025 and is positioned for growth as markets soften.
Equity-Oriented Strategies: The company is pivoting towards equity-oriented strategies to enhance investment returns, deploying $13 billion into Brookfield-originated strategies in 2025 with average net yields of 8.5%. Additional commitments to private funds are expected to be accretive to earnings over the medium term.
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Shareholder Return Plan
Dividend Increase: The Board of Directors declared a 17% increase in the quarterly dividend to $0.07 per share, payable at the end of March to shareholders of record at the close of business on March 17, 2026.
Share Buybacks: In 2025, the company returned $1.6 billion to shareholders through regular dividends and share buybacks. Over $1 billion of Class A shares were repurchased in the open market at an average price of $36, representing nearly a 50% discount to the company's view of intrinsic value. Approximately $150 million was repurchased since the last quarter.
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Key Q&A
Q:Can you elaborate on the current state and future plans for scaling the P&C business, including its relative size to the life and annuity business?
A:The P&C business has been repositioned to generate strong profits, with $3 billion of capital and $8 billion of float. The company aims to grow this to $20-$25 billion of float by the end of the decade. Plans include pursuing M&A, building reinsurance capabilities, and diversifying lines as markets soften.
Q:Why was the decision made to simplify the structure and collapse BNT, and what is the expected time frame?
A:The decision was made to streamline and simplify the structure, allowing the insurance business to fully benefit from Brookfield's $180 billion capital base while maintaining low operating leverage. The plan is to combine BN and BNT into a single listed company within the next 12 months.
Q:What is contributing to the strong ROE of over 15% for Brookfield Wealth Solutions, and how is it being preserved?
A:The strong ROE is driven by diversification of product types, geographic expansion, and the ability to allocate capital to areas with the lowest funding costs. This is coupled with Brookfield's investment franchise, leading to robust spreads and total returns.
Q:How is the company managing the risks and opportunities associated with the P&C business, and what are the implications for the management fee business?
A:The P&C business is a lower leverage business requiring capital to grow, with less projected assets going to BAM compared to the annuity business. The company uses the P&C business to drive funding costs down and allocate capital to less competitive areas, balancing risks and opportunities.
Q:What is driving the improvement in real estate fundamentals, and what is the sensitivity to interest rate changes?
A:Improvement is driven by strong tenant demand, low new supply, and high-quality leases in global gateway cities. Retail sales and lease spreads are also strong. A 25 basis point rate cut would impact FFO by approximately $35 million annually, but tightening spreads and deleveraging also contribute positively.
Q:What steps are being taken to grow Brookfield Wealth Solutions' footprint in Asia and Europe, and what is the pipeline outlook?
A:In Asia, the company is building relationships in Japan, Korea, Hong Kong, and Taiwan, focusing on reinsurance partnerships. In Europe, the focus is on careful growth due to regulatory constraints. The pipeline in Asia is strong, with recurring reinsurance relationships expected.
Q:What is the outlook for carry into 2026 and 2027?
A:The pipeline for monetizations is strong, particularly in infrastructure, real estate, and Oaktree funds. The company expects carry to step up in the second half of 2026 and continue scaling into 2027 and 2028, depending on timing.
Q:What is the rationale behind the 17% dividend increase, and does it indicate a shift in dividend growth policy?
A:The increase is not a shift in strategy but a result of the share split and maintaining a low payout ratio. The company remains focused on reinvesting capital and opportunistically buying back shares.
Q:What themes might Brookfield discuss at its Investor Day five years from now?
A:The company expects to continue focusing on themes like digitalization, decarbonization, and deglobalization, which have long runways for growth. These themes are anchored in core principles that have driven the business for decades.
Q:What is driving the performance of the North American residential portfolio, and what is the outlook?
A:Performance is influenced by seasonality and strong cash flow generation. The company has derisked the portfolio by exiting some master-planned communities and shifting to an asset-light model. Muted activity is expected in the short term, but the platform is well-positioned for future growth.
Q:Why has the real estate asset base ticked up, and what is the outlook for monetization?
A:The company has focused on operational improvements and holding assets until better monetization opportunities arise. Market sentiment for high-quality office assets is improving, and transaction activity is expected to pick up soon.
Q:What are the tax and structural implications of merging BN and BNT?
A:The merger aims to preserve operational benefits while allowing the insurance business to fully utilize Brookfield's capital base. The paired security structure previously required separate capitalization, which will be streamlined under the merger.
Q:How is the reallocation of annuity inflows to BAM-managed strategies progressing, and what is the outlook?
A:In 2025, $13 billion was reallocated to BAM strategies, exceeding the 50% target for private investments. The company expects to maintain this pace, with half of new inflows going into private strategies and the rest in liquid assets.
Q:Can the cost of funds be reduced further, and how quickly can capital be reallocated across jurisdictions?
A:The cost of funds can be reduced further through growth in low-cost markets like Japan and the P&C business. The company can quickly reallocate capital due to monthly repricing of annuities and nimble operations in pension and P&C markets.
Q:Is there potential to increase the 15% ROE target for Brookfield Wealth Solutions?
A:The company aims to maintain a mid-teens ROE target while keeping leverage low and capital high for a safer balance sheet and higher quality earnings. Higher returns could be achieved with more leverage, but the focus is on long-term stability.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the potential tax implications of merging BN and BNT, providing only general assurances about preserving operational benefits. Additionally, the timing of real estate asset monetization remains vague, with no specific details on when transaction activity will pick up.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
BNT structure
DE realization
access capital
approach
asset value
avenue
capital base
capital insurance
compound
compounding
core portfolio
detail
difference
dislocation
entity
expansion
foot lease
index
insurance asset
lease rent
leasing activity
market capitalization
market cycle
others
partner
partnership
power equity
property
record result
result share
sentiment fundamental
sister
strategy
strength
structure market
supply market
tenant
term success
value creation
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The earnings call summary and Q&A reveal strong financial performance, strategic acquisitions, and optimistic guidance. Despite some vague responses, the company's expansion plans, particularly in insurance and AI infrastructure, are promising. The Just Group acquisition and AI strategy are expected to significantly boost growth. The management's focus on high-quality opportunities and strong demand for assets, coupled with a disciplined financial approach, further supports a positive outlook. However, the lack of specific financial impact details tempers the sentiment slightly, leading to a 'Positive' rating.
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