Brookfield Corp. is planning to refocus itself into an investment-led insurer, marking a turn for the Canadian money manager that built its name as an owner of real assets.
For years, Brookfield used its capital to mostly invest in real assets alongside its clients in the asset management business, Chief Executive Officer Bruce Flatt wrote in a letter to shareholders on Thursday, alongside reporting second-quarter results.
“In our next evolution, 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,” he said.
The new model partly emulates Berkshire Hathaway Inc., which uses its insurance businesses to buy whole companies.
Brookfield, which has $177 billion of capital, has been aggressively growing its insurance and wealth business, snatching up companies in the US and more recently, pushing into the UK market. The Toronto-based firm plans to allocate further equity capital to its annuity business, which will allow the book to grow to as much as $750 billion over time, according to Flatt.
Another growth target is the property and casualty insurance business, which currently makes up a small portion of its book. Flatt expects to grow that book to between $100 billion and $150 billion in the long run by writing up policies for real estate construction, industrial warehouses and renewable power facilities.
On the asset side of the balance sheet, Brookfield plans to stay focused on the same asset classes, including infrastructure, renewable energy, real estate, credit and private equity.
Alternative asset managers have increasingly plowed into the insurance industry lured by permanent capital, which can be ultimately deployed into their own vehicles. Apollo Global Management Inc. spearheaded this trend over a decade ago when it launched its insurance platform, Athene.
Brookfield is also digging deeper into artificial intelligence with the launch of a strategy dedicated to investing in AI infrastructure development. The firm owns or is working to assemble seven major AI computing sites — including power and data center shells — which will be built out over the next five years in the US, UK, Canada and Europe and require around $200 billion of capital, the CEO said. He likened the strategy to the split-off of Brookfield’s transition business from its infrastructure group five years ago.
Brookfield’s distributable earnings rose to $1.25 billion, or 80 cents a share, excluding gains on asset sales, according to a statement Thursday. That was an increase of 12.5% compared to the prior year.
The firm originated over $4 billion of retail and institutional annuity sales during the quarter, increasing insurance assets to $135 billion, according to the statement. Last week, Brookfield Wealth Solutions agreed to buy UK insurer Just Group Plc in a deal that values the equity of the London-listed company at £2.4 billion.
Flatt said market sentiment is improving and is “increasingly supportive for high-quality transactions,” adding the firm has sold $55 billion of assets since the beginning of the year.
Photograph: Brookfield CEO Bruce Flatt; photo credit: Jose Sarmento Matos/Bloomberg
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