TRANSCRIPT: Q2 2025 CONFERENCE CALL / WEBCAST
August 7, 2025 at 10.00 am (ET) Corporate Speakers:
Bruce Flatt, Chief Executive Officer
Nick Goodman, President
Katie Battaglia, Vice President, Investor Relations
PRESENTATION
Operator
Hello. Welcome to the Brookfield Corporation Second Quarter 2025 Conference Call and Webcast. [Operator Instructions]
I would now like to hand the conference over to your speaker today Ms. Katie Battaglia, Vice President, Investor Relations. Please go ahead.
Katie Battaglia, Vice President
Thank you, Operator. And good morning.
Welcome to Brookfield Corporation's Second Quarter 2025 Conference Call. On the call today are Bruce Flatt, our Chief Executive Officer, and Nick Goodman, President of Brookfield Corporation. Bruce will start off by giving a business update, followed by Nick, who will discuss our financial and operating results for the quarter. After our formal comments, we'll turn the call over to the operator and take analyst questions.
[Q&A Instructions] I would remind you that in today's comments including in responding to questions and in discussing new initiatives in our financial and operating performance, we may make forward-looking statements including forward-looking statements within the meaning of applicable Canadian and U.S. security laws. 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. In addition, when we speak about our Wealth Solutions business or Brookfield Wealth Solutions, we are referring to Brookfield's investments in this business that supported the acquisition of its underlying operating subsidiaries.
With that, I'll turn the call over to Bruce.
Bruce Flatt, Chief Executive Officer
Thank you. Welcome, everyone, on the call. We delivered strong second quarter results. Distributable earnings before realizations increased 13% year-over-year to $1.3 billion. That was
$0.80 per share for the quarter and $5.3 billion or $3.36 per share for the last 12 months. Performance was supported by continued momentum across our core businesses and a significant pickup in transaction activity.
Strong underlying operating fundamentals are driving demand and cash flow growth in both our asset management and operating businesses. Our Wealth Solutions business continues to grow its asset base. And last week, we announced an agreement to acquire Just Group, a leading provider of pension risk transfer solutions in the United Kingdom. This acquisition builds on the foundation we established in the U.K. earlier this year and will allow us to accelerate our growth in the country. As already one of the largest infrastructure, renewable, and property investors in the U.K., this acquisition matches well with our capabilities and positions us to assist policyholders to earn strong returns.
Turning briefly to the macro environment. Conditions continue to become increasingly constructive. During the quarter, as most of you will know, global equities hit all-time highs. Credit spreads tightened dramatically, and interest rates remain largely unchanged, with growing expectations that we may see cuts on the short end of the curve in the next while. This relative stability has been supportive of increased monotone, which reflects both the quality of the businesses we own and assets we have.
So far this year, we've completed $55 billion of asset sales including $35 billion in the quarter, each generating excellent returns and returning meaningful capital to investors. We also saw continued strength in the financing markets, where we opportunistically completed $94 billion of financings across the franchise, enhancing our capital structure and deploying significant capital within the business. Against this increasingly constructive backdrop, the key themes that ground our capital deployment, digitalization, deglobalization and decarbonization are accelerating.
With a record $177 billion of deployable capital, we are well positioned to be at the forefront of these opportunities including the next evolution of the build-out of the global economy. As an example, we are launching our AI infrastructure strategy. At the core of this strategy is the development of AI factories, which are large-scale integrated sites that combine power data shells and the equipment to provide compute capacity to the industry's leaders as well as governments and corporates seeking compute capacity.
This effort draws on the strength of our global operating teams in real estate, power and infrastructure, each today a global leader in their category. At the same time global electricity demand is accelerating at a very dramatic pace, driven by power demand for the AI revolution and the broader electrification of the energy grid. This, coupled with AI infrastructure presents a tremendous investment opportunity, particularly for our renewables and our infrastructure platforms.
As the backbone of the global economy transforms so does our approach to investing our capital. Today we have $180 billion of our own capital on our balance sheet, predominantly invested in real assets beside or to assist our clients, where we have deep investing and operating expertise. Our long-term plan is to further enhance the efficiency of our capital structure, thereby enhancing the returns we can earn on our equity without changing the risk profile of the business. This is being done by continuing to refocus overall Brookfield as an investment-led insurance organization. using our large-scale capital base to back low-risk long-duration insurance.
On the asset side of the balance sheet, Importantly, we remain focused on the exact same asset classes where we have proven best-in-class investment skills for decades and which are ideally suited for wealth and insurance. This shift is a natural extension of our platform to continue to
drive long-term shareholder value. To date, we have had two primary sources of capital, the first being our balance sheet and the second being institutional capital in our Asset Management business.
In this next evolution, besides those two amounts, we are focusing our balance sheet to back our growing insurance operations, meaning that our capital will increasingly come from individual investors via our insurance float. Our intention is to continue funding our insurance operations from the Brookfield Corporation balance sheet to ensure that our policyholders and regulators know that we have our capital at risk to assist them. When we established our insurance business, we envisaged this as one arm of Brookfield. But after 5 years of meaningful growth and with a large number of opportunities ahead, this business is becoming an increasingly foundational part of our long-term vision for Brookfield. There will be more to come, so stay tuned.
As we plan for the future, it's important also to reflect on what has been the foundation of our growth and success from the past.
Simply stated, it is our ability to consistently adapt and evolve with the shifts in the global economy, while staying focused on generating investment returns over the long term. This started 30 years ago with real estate, moved to pipelines and electricity transmission lines, and is now led by renewable power data centers, fiber lines telecom towers, and more recently, AI infrastructure and battery storage which are just developing. Each step has been about anticipating where the world is going and positioning ourselves and our investors the center of each transformation.
Our view is that AI is next and coming after that is AI-led advances in manufacturing. The world is always evolving and it is exciting to be involved. I will end my comments by saying that we look forward to seeing you at our Investor Day on September 10 at Brookfield Place in New York. Additional details are on our website. And as always, thank you for your continued support and interest in Brookfield.
Over to Nick.
Nick Goodman, President
Thank you, Bruce. And good morning, everyone. Financial results were strong for the quarter. Distributable earnings or DE, before realizations were $1.3 billion or $0.80 per share, representing an increase of 13% per share over the prior year quarter. Over the last 12 months, DE before realizations was $5.3 billion or $3.36 per share. Total DE including realizations was $1.4 billion or
$0.88 per share for the quarter and $5.9 billion or $3.71 per share over the last 12 months with total net income of $2.9 billion over the same period.
Starting with our operating performance. Our Asset Management business generated distributable earnings of $650 million or $0.41 per share in the quarter and $2.7 billion or $1.72 per share over the last 12 months. Strong fundraising across our flagship funds and complementary strategies led to inflows during the quarter of $22 billion including over $5 billion from our retail and wealth solutions clients. Fee-bearing capital grew to $563 billion, resulting in fee-related earnings of $676 million, an increase of 10% and 16%, respectively, over the prior year quarter.
With final closes anticipated for our fifth vintage flagship opportunistic real estate strategy and our second vintage global transition strategy, we expect fundraising momentum to continue into the second half of 2025, which should support further earnings growth.
Our Wealth Solutions business delivered another quarter of strong results, benefiting from robust investment performance and disciplined capital deployment. Distributable operating earnings were $391 million or $0.25 per share in the quarter and $1.6 billion or $1.02 per share over the last 12 months. During the quarter, we originated over $4 billion of retail and institutional annuities, bringing our total insurance assets to $135 billion.
On the investment side, we deployed $3.5 billion into Brookfield managed strategies across our portfolio at an average net yield of 8%. Our investment portfolio generated an average yield of 5.8%, allowing us to achieve strong spread earnings, which were 1.8% higher than our average cost of funds.
On both an LTM and annualized basis, we continue to deliver a return on equity that's broadly in line with our long-term target of 15% plus. As Bruce mentioned, we announced an agreement to acquire Just Group, a U.K. leader in buying pensions from companies who wish to get off the risks. This marks an important next step in scaling our global platform and expanding our presence in one of the world's fastest-growing retirement markets. Per the announcement, we plan to acquire the company for $3.2 billion and we plan to fund this with roughly two-thirds from an acquisition credit facility and the balance from cash on hand at BWS.
While we anticipate net investment income will take some time to ramp up following the close, we expect the transaction to deliver a return on equity in line with the long-term target for the overall business of 15% plus.
With this acquisition, our insurance assets are expected to grow by approximately $40 billion, significantly accelerating the growth of our business and advancing a short-term path towards
$200 billion of insurance assets. Our operating businesses continue to deliver stable and growing cash flows, generating distributable earnings of $350 million or $0.22 per share in the quarter and
$1.7 billion or $1.07 per share over the last 12 months. These results were supported by strong underlying fundamentals and resilient operating earnings. As an example, we signed a landmark agreement with Google to deliver up to 3,000 megawatts of hydroelectric capacity across the U.S., a first-of-its-kind partnership and a testament to our unique capabilities and demonstrates our relationships with the largest buyers of power in the world.
In our real estate business, market fundamentals across the platform continue to strengthen. While this quarter's performance was impacted by softer conditions in our North American residential business, where land and housing sales have moderated, most of our real estate businesses performed well and we saw strong same-store NOI growth across our core portfolio. Demand for high-quality office and retail space remains the first choice for tenants with active requirements. We signed nearly 4 million square feet of office and retail leases during the quarter, reflecting both strong tenant demand and limited availability across our premium space. Our core office and retail assets continue to perform exceptionally well with occupancy in 94% and 97%, respectively.
As the global supply of trophy office space tightens we're seeing leasing interest begin to spill over into other high-quality, well-located assets across our portfolio, and we are seeing this trend play out in real time. For example, in downtown Toronto, one of our long-term tenants in the trophy office building approached us with expansion plans. With our trophy office space pool for a requirement of that size, we leveraged our broader platform to meet their needs by offering space in a nearby premium building where they ultimately 17-year lease.
At the same time, we're already in late-stage discussions to backfill space we vacated at rents approximately 10% higher than prior levels. Rents in premium space are well above their highest on a net effective base ever. We expect this evolving shift in tenant demand to support performance across our broader office portfolio in the coming quarters.
Moving to monetizations. Market sentiment is improving and is increasingly supportive for transactions for high-quality assets.
As Bruce mentioned, we've sold $55 billion of assets across the business so far this year including over $35 billion since the last quarter alone. This includes $15 billion of real estate sales, nearly
$13 billion of infrastructure investments and $7 billion within energy.
Some highlights include in real estate, we exited a leading student housing platform in Southern Europe for EUR 1.2 billion, sold our triple net lease platform in the U.S. for $2.2 billion. We also completed the successful IPO of Leela Palaces in India, valuing the portfolio of $1.8 billion and marking the largest hospitality IPO in India's history, and we executed to AUD 3.9 billion sale of a senior living platform in Australia, the largest direct real estate transaction in the country's history. In infrastructure, we sold our remaining interest in the U.S. gas pipeline for $1.4 billion of proceeds and a stake in PD ports, one of the U.K.'s largest port operations for approximately $1.3 billion of proceeds. In energy, we sold $7 billion in assets, generating an aggregate 17% IRR underscoring the strength of our strategy and execution while also illustrating the global demand for high-quality renewable power assets remains strong.
Substantially, all sales were completed at or above our carrying values monetizing significant value for our clients at attractive returns. And as a result, we realized $129 million of carried interest into income, but more importantly, with these asset sales, we've moved a number of our funds closer to carried interest realization.
And finally, across our assets, which are not our super premium assets, we continue to make progress on our monetization pipeline, completing over 10 transactions this year. One highlight was the sale of an office building in Washington, D.C. at an 11% premium to recent market comps. This generated a 5.5x multiple on invested capital. That is over 5x equity of what we invested. As markets remain constructive, we expect this momentum and monetizations to continue through the remainder of 2025 and beyond as we continue to see strong demand for high-quality cash-generative assets we own.
Shifting to capital allocation. During the quarter, we invested excess cash flow back into the business and returned $432 million to shareholders through regular dividends and share buybacks. Notably, we repurchased over $300 million of shares in the open market in the quarter at an average price of $49.03, adding $0.21 of value to each remaining share. We continue to
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Brookfield Corporation published this content on August 14, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on August 14, 2025 at 19:28 UTC.
