Brookfield Corporation Class A Limited Voting Shares

Hello, and welcome to the Brookfield Corporation's second quarter 2023 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 11 on your telephone. I would now like to hand the conference call over to our first speaker, Ms. Angela Yulo, vice president. Please go ahead.

Thank you, operator, and good morning. Welcome to Brookfield Corporation's second quarter 2023 conference call. On the call today are Bruce Flatt, our chief executive officer, Nick Goodman, president of Brookfield Corporation, and John Bayer, managing partner of our insurance solutions business. Bruce will start off by giving a business update, followed by Nick, who will discuss our financial and operating results for the quarter. And finally, John will give an update on our insurance solutions business. After our formal comments, we'll turn the call over to the operator and take analyst questions. In order to accommodate all those who want to ask questions, we ask that you refrain from asking more than two questions. I would like to remind you that in today's comments, including in responding to questions and in discussing new initiatives and their 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 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 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, Angela, and welcome everyone on the call. We had a strong second quarter and first half of 2023 with our business performing well and generating strong cash flows. Nick will talk about this, but distributable earnings for realizations were $1 billion in the quarter and $4.3 billion for the last 12 months, up 21% year over year on a comparable basis. Before I turn to a few business items, I'll make a few comments just on the markets. The global economy has been very resilient during the first six months of 23 on the back of strong labor markets and healthy corporate and household balance sheets. There were periods of volatility, but the resolution of the U.S. debt ceiling negotiations and the subsiding of the challenges for a few of the regional banks seems to have settled markets. The increase in short-term interest rates is lowering inflation and slowing the economy, particularly in the U.S. And so as we look ahead, it seems likely that central banks will keep rates in their current range for a while but they were reaching the end of the hiking cycles. And then they will lower them as conditions dictate. With that backdrop, equity markets have been on a strong run of late, and credit spreads for high-quality borrowers have compressed back to early 2022 levels. Having said that, overall credit conditions remain relatively tight for many, And this is where premier players like us stand to benefit. Despite this more challenging environment, we were able to demonstrate what makes us different. We continued to access significant sums of capital in the first half to fund growth across multiple levels of the organization. We executed on a number of monetizations showing that there is significant demand for high quality cash generating assets that we own. and we delivered another strong quarter of operating results supported by underlying fundamentals across our businesses. As an example, as an overall sponsor, we completed more financings than any other group to date this year. This is because of the quality of the businesses we own, our relatively low leverage levels, and our sponsorship. Our manager had a very strong quarter for the start of the year, delivering 16% growth in fee-related earnings, excluding performance fees, with a positive outlook for fundraising for the rest of 2023. I'd note a couple of things, which includes our latest flagship infrastructure private fund, which now stands at $27 billion, which is the largest drawdown infrastructure fund ever raised and is one of the largest private funds of any type ever completed. In addition, for our third infrastructure debt fund, we have raised over $4 billion with more capital to come, which altogether, when combined with our insurance flows, puts us on track to raise a record of upwards of $150 billion of capital in 2023. Our insurance solutions business is delivering strong results as we continue to increase the investment returns on our approximately $45 billion and growing float of insurance assets. During the quarter, we announced the acquisition of American Equity Life, which is one of the largest independent annuity platforms in the U.S. The transaction grows our insurance business to over $100 billion of assets and will be highly additive to overall Brookfield. John Baer is with us today and will cover our insurance business in more detail later in the call. Third, our operating businesses continue to perform well and demonstrate their resilience, generating strong and growing cash flows that compound their intrinsic value. We also had a very active first half of 23M monetizations, where we transacted on approximately $15 billion of asset sales, which bring our total monetizations over the last 12 months to $30 billion. Just a few examples. We sold a high-quality portfolio of office campuses in India for $1.4 billion, returning nearly four times our capital. I might note that high-quality, well-located office assets around the world continue to be attractive investments and trade at premium values. We sold our 50% ownership of our mobile network operator in New Zealand, generating an IRR of over 30% and a multiple of just over two and a half times in four years. We monetized a portion of our US gas pipeline with an IRR of over 18% and a multiple of three times. We also sold wind and solar assets in Uruguay, a toll road in India, a freehold port in Australia, and some gas storage assets in the US. The diversity of this portfolio gives it resilience. These recent sales were executed at levels in line with or higher than IFRS carrying values, providing strong support for accrued or unrealized carried interest and potential future carry, which Nick will touch on in his remarks. Before I hand the call off to Nick, I'll make a few brief comments on our wholly owned real estate business. Yesterday, on our manager call, we spoke on some of the opportunities for our manager to put money to work for clients in our funds. I will not repeat these. But at Brookfield Corporation, we own an extremely high quality global portfolio of office, residential, retail, and mixed use assets. What distinguishes this portfolio is its quality and that it is owned with perpetual equity capital and backed by our vast liquidity and strong access to capital. As a consequence, our short- and medium-term focus is on optimizing our assets and growing cash flows. We care less about the perceived short-term movements in price, and we are focusing on our best and making our best even better. We are undoubtedly in a period of change for some real estate, owners or assets, that were not prepared for higher interest rates or those that have not been able to keep their real estate relevant to the end consumer will undoubtedly feel some pain. On the other hand, great real estate is still great and, in fact, will be a beneficiary of the current environment as it captures increasing demand for quality real estate and also the real increases in cash flow. What we own does generally not compete with commodity office, commodity retail, or mixed use market. Over time, great assets deliver very compelling inflation protected returns. Interest rates go up once, but the rental rates can go up for very, very long periods of time. We expect to push through this current environment and be in a very powerful position as we emerge from this cycle. In the meantime, we expect to see some excellent opportunities to acquire more real estate on a deep value basis through our funds from those owners without permanent equity capital or those without capital structures that can withstand this environment. Finally, and relating to overall Brookfield, We continue to see that our scale perpetual capital, our global operations, our deep investment in operating expertise puts us in a very strong position. We remain focused on delivering for you on our goal of building one of the world's largest pools of discretionary capital because we believe that doing so will enable our clients and shareholders to earn strong returns over the long term. In what we do, Scale matters. Before I pass it over to Nick, I will mention that we all look forward to seeing many of you at our Investor Day, which is on September 12th in New York. Additional details are available on the website. And thank you for your continued support and interest in Brookfield. And with that, I'll turn it over to Nick.