Brookfield Corp. is merging its shares with those of its insurance business as the firm pushes ahead with plans to transform itself into an investment-led insurer. The merger of the parent company and the insurance business will improve Brookfield's overall capital structure and give it access to the combined group's asset base to pursue growth, chief executive Bruce Flatt said in a letter accompanying its first-quarter earnings statement on Thursday.
Financial Performance Highlights
The asset manager's distributable earnings before realizations rose to US$1.4 billion in the first quarter, a seven per cent increase from the prior year, according to the statement. Profits from the wealth business, which includes insurance, were US$430 million unchanged from a year ago while its property group's fell to US$120 million during the quarter, down from US$215 million.
Strategic Restructuring
The change with the insurance unit is the latest move in Brookfield's plan to simplify its corporate structure. The firm earlier combined Brookfield Business Partners and its sister entity, Brookfield Business Corp., into a single publicly traded vehicle, eliminating the dual-listed structure. Flatt emphasized that this combination is expected to allow the company to fully utilize its permanent capital base an incremental approximately US$145 billion of cash, equities, real estate, and other investments to support the growth of its insurance operations.
Capital Raising and Growth
Brookfield has raised US$67 billion since the start of the year, including US$23 billion for investment strategies and US$44 billion of insurance capital. After the acquisition of pension-risk-transfer company Just Group, Brookfield's insurance assets grew to US$180 billion. The company also plans to adopt U.S. generally accepted accounting principles starting from the first quarter of 2027 to allow greater comparability to peers according to the statement.
Macroeconomic Outlook
On the broader macroeconomic environment, Flatt said that while markets generally become focused on such developments as geopolitics, inflation and recession risk, those events are also the most observable and widely discussed aspects of investing and therefore tend to attract disproportionate attention relative to their long-term impact.
Simplified Structure
The dominance of index investing and shareholder support have reinforced the firm's view that simpler structures with larger market capitalizations are now the most effective way to position these businesses, Flatt said in the letter. Brookfield will approach both boards for approval in the next two months. Flatt stepped down from his role as CEO of Brookfield Asset Management earlier this year as he turns his attention to transform the parent company into an investment-led insurer.
