Brookfield Corporation(US:BN)2024-08-12 20:49Investment Strategy and Performance - Brookfield Corporation aims to deliver over 15% annualized returns to shareholders, supported by a long-term investment strategy [182]. - The company has a proven track record of delivering 15%+ annualized returns for over 30 years, leveraging deep investment and operational expertise [189]. - The company focuses on investing in assets with stable, contracted, or inflation-linked revenues, driving outsized financial returns through operational excellence [183]. - Distributable earnings (DE) is the primary performance measure used to evaluate the company's business performance [191]. - The company aims to diversify its investment portfolio by acquiring public and private real assets across various asset classes [353]. Financial Position and Liquidity - The company maintains a conservative leverage approach, with only 6% of total leverage having recourse to the Corporation [190]. - Brookfield Corporation has a significant liquidity position, referred to as core liquidity, to support its investment strategies [185]. - The company has $41.8 billion of capital in its Operating Businesses, providing financial stability and flexibility [196]. - Cash and cash equivalents increased by $27 million, reflecting stable liquidity [269]. Revenue and Earnings - Revenues for the quarter were $23.1 billion, a decrease of $618 million or 3% compared to the prior year quarter, primarily due to the absence of contributions from net dispositions [211]. - Net income attributable to common shareholders was $43 million for the quarter, a decrease of $38 million compared to the prior year [206]. - The company recorded a consolidated net loss of $285 million for the quarter, a decrease of $1.8 billion compared to the prior year quarter [206]. - In Q2 2024, the company generated DE of $2.1 billion, with DE before realizations increasing by $100 million or 11% year-over-year [315]. Segment Performance - Wealth Solutions business insurance assets grew to over $110 billion following the acquisition of American Equity Life (AEL), with annualized earnings of $1.4 billion expected to increase as the investment portfolio shifts to higher yielding assets [194]. - Equity accounted income increased by $424 million to $825 million for the quarter, driven by growth in the Wealth Solutions business and increases in the value of certain U.S. retail assets [210]. - The Infrastructure segment's acquisitions contributed $642 million in revenue and $131 million in net income [229]. - Renewable power and transition fee-bearing capital increased by $370 million, driven by higher market valuations and inflows from capital raised [329]. Costs and Expenses - Direct costs decreased by $754 million to $19.2 billion, primarily due to the deconsolidation of certain operations and lower inventory costs [212]. - Interest expense increased by $412 million to $4.2 billion, primarily due to incremental borrowings associated with acquisitions and higher interest rates on floating rate debt [215]. - The effective tax rate for the first half of 2024 was 71%, significantly higher than 26% in 2023 [251]. - Impairment and provisions expense for the quarter was $77 million, primarily related to the lower valuation of a Brazil biomass asset [246]. Asset Management - The Asset Management business has approximately $1 trillion in assets under management (AUM) as of June 30, 2024, focusing on long-term investments in real assets and essential service businesses [192]. - Total assets increased by $7.2 billion to $497.3 billion as of June 30, 2024, primarily due to recent business combinations and asset acquisitions in the Infrastructure and Real Estate segments [263]. - Investment properties increased by $3.1 billion to $127.2 billion, driven by $6.0 billion in acquisitions, mainly in multifamily and logistics assets [266]. Shareholder Returns and Equity - The quarterly dividend for Class A and B shares was declared at $0.16, representing a 14.3% increase from $0.14 in 2023 [289]. - Common equity decreased by $442 million to $41.2 billion, primarily due to net income of $145 million and share repurchases of $715 million [278]. - Common equity in the Wealth Solutions segment increased to $9.0 billion as of June 30, 2024, up from $6.1 billion at the end of 2023 [356]. Market and Economic Factors - The company aims to hedge foreign currency exposure, particularly against Brazilian real and Colombian peso, where hedge levels were lower due to high historical costs [288]. - The company’s renewable power operations are seasonal, with higher generation during winter rainy seasons in Brazil and spring thaws in North America [293]. - The company’s Private Equity operations show revenue and direct cost variances due to acquisitions, foreign exchange fluctuations, and economic cycles [294].