Results: Brookfield 1q26
Call summaries for BN, BAM, BIP, BBU, and BEP
Original review: Brookfield
Tag for finding my other articles on this stock: BN
Key takeaways
A slower growth quarter with acceleration expected through the year. Private credit worries are not systemic and Brookfield’s areas of exposure are fine. Momentum is accelerating in real estate. Merging BNT (insurance) back into BN gives the insurance operation a huge capital base. Both BN and BAM have bought back significant amounts of stock recently.
Thesis and valuation update
No major change.
Probably the single thing that stood out to me is that office construction costs have risen so significantly that the rents required to justify newbuilds are sometimes double current market rents, and demand is growing.
2026 will be a record year for fundraising.
There is useful discussion of insurance capital and use of Bermuda reinsurers in the BN call.
Most of Brookfield’s insurance business is life/annuity, but they have a small P&C insurer which they are increasingly talking about scaling.
BEP have commented for several quarters now that battery costs have come down so much that they are economic for balancing grids an evening out renewable generation.
I recommend reading letter too - good discussion about how little macro matters, and how they observe, test, and perfect businesses before scaling them.
Notes (please note these are call summaries. I don’t dive into the detailed reporting every quarter).
BN
DE $1.6bn, $6bn LTM, and will strengthen through the year. DEBR $0.59/share, up 7%, LTM $2.32/share.
Advanced $17bn of sales “substantially all” at or above marks.
Realised $157 of carry into income and have $11.8bn unrealised.
Think carry inflects in 2h as sales accelerate.
Partially monetised a tech investment at a gain. Growing relationships with tech companies are leading to interesting investment opportunities for the BN balance sheet and clients - they have $2bn in tech of which $1bn is SpaceX at its pre-IPO mark.
YTD have bought back $470m of BN shares plus $575m at BAM.
Macro developments “often receive far, far more attention than their long-term impact warrants. Bottom line, we largely try to ignore them when building our business…Our role as investors is to capitalize on attractive entry points to acquire good businesses for value, operate them well and allow compounding to work over time…We take the time to watch an industry, learn how it works, invest in a measured way, refine a business model and only then scale a platform. This allows us to make small mistakes while avoiding large ones. In our experience, successful businesses are not built quickly. They are built deliberately.”
Private credit: “there are issues that are grabbing a lot of headlines, but in the scale of the broader investment markets, their materiality is low [and] as it relates to Brookfield, these are very immaterial asset classes to us based on our deliberate posture…our credit portfolio is performing incredibly well.”
Real estate.
Sentiment is now catching up with fundamentals. “Buyers looking for solid assets are moving back from software to real assets like these.”
In office, signed 2.6m ft2 of leases, 15% above the expiring levels.
Office replacement costs have risen significantly. Rents required to justify new construction are double current market rents in many markets. This makes new supply very difficult to deliver.
Manhattan West was started in 2020. It cost $1000/ft2; would be $2,500/ft2 now. Most recent lease was signed at nearly 3x the rent of the first lease, and is still not high enough to justify new construction. Recently refinanced this: $1.9bn 10-year nonrecourse mortgage, including $400m cash extracted, at 5.5% - a 107bp spread to treasury.
One Leadenhall was fully leased within 6 months of completion and achieved the highest rents ever in the city of London.
In retail, tenant consolidation into top-tier malls continues to drive demand. Commenced 1.6m ft2 of leases, 11% above prior levels.
Brookfield Wealth Solutions
Insurance has $180bn in assets, $20bn of regulatory capital, and over $2bn of annualised earnings.
Origination
“Our priority is not maximizing volume but generating high-quality, durable earnings.” Goal is to compound equity capital at 15% with low risk and generate stable earnings.
Aging and the decline of defined benefit pensions creates a long runway for growth.
Annuity demand in the US is down 9-10% y/y but Brookfield has picked up 4pp of share.
Recently launched on 2 major bank platforms with more to come. Brookfield sell 1/3 of annuities through the bank channel vs. peers at 2/3.
Will write $25bn of new policies in 2026.
Outflows will be $10-12bn - average liability duration is 8-9 years.
Asia - early stages of building a presence in a very significant market, with growing interest from counterparties.
Spreads
LTM deployed $15bn into Brookfield strategies at an average total return exceeding 10%.
Spreads compressed slightly this q. Annuity rates peg to the back end of the curve but cash from newly sold annuities earns the short end until it can be deployed. When the yield curve steepens, therefore, spreads compress slightly. What matters in the long run, however, is the total return over the life of the annuity.
Brookfield are well positioned to invest globally for best total return. “We’re trying to build a business where at the top of the house, we can move our capital around to geographies and products, and we can do that without any conflicts or clients or other invested capital partners sitting in any parts of the business.”
Capital
Each policy-writing company is rated A or A- by the 3 major agencies, and 2 have received upgrades over the last few years.
Brookfield generally operate at about 4x the regulatory minimum capital requirement, not including the excess capital at BN.
UK is moving against use of Bermudan companies to reinsure pension risk transfer deals. No impact: Just doesn’t use Bermuda as a reinsurance jurisdiction, and anyway Bermudan capital rules align with the UK and Europe so repatriating reinsurance won’t affect competitors either. (My notes: the Bermuda regulatory regime is Solvency II equivalent and for US purposes Bermuda is a NAIC reciprocal jurisdiction. In 2024 Bermuda overhauled its rules to remain Solvency II equivalent, specifically targeting the life reinsurance and annuity block transfer markets where PE-backed reinsurers were taking advantage of Bermuda’s more lenient capital eligibility rules for private credit. Bermuda’s approach to assumed default and downgrade costs on private assets now reportedly results in higher costs than those applied to a reinsurer authorised by the UK PRA, so the competitive advantage of Bermuda domicile now rests primarily on the Pillar Two corporate tax rate of 15%).
The planned merger of BN and BWS creates a fully integrated insurance/investment operation and gives insurance a vast permanent capital base.
Closed acquisition of Just Group.
Leading pension risk transfer and individual annuity provider in the UK. Serves 700k UK pensioners, has $40m of assets. Going-in valuation gives a 10-12% return.
Brookfield can improve Just’s investing so that it can grow its £5bn of annual originations.
Just is very good at operating small pension schemes, where there is not much competition.
With BN’s capital and asset origination, they can also move into large deals, where there is also not much competition. (Competition is in the middle.)
Clearbrook (P&C) achieved a 99% CR. Important diversifier into specialist insurance. Have worked hard to exit some lines, derisk liabilities, and grow profitably. Expect opportunities to grow organically and via M&A as the P&C market softens.
BAM
FRE +11%, DE 7%.
FBC +12%.
LTM FRE 18%.
Sold $8bn, invested $34bn,
Will exceed long term growth targets in 2026.
Have bought back $800m over the last 7 months.
After the q, they issued $550m of 5y notes at 4.83% and $450m of 10y notes at 5.3%.
2026 will be a record fundraising year by a significant amount.
Including Just Group and flagship PE, YTD fundraising is $67bn, over half of total 2025 fundraising.
Each of Primary Wave, 17Capital and Pinegrove recently recently closed funds that were their largest ever and the largest of their kind.
Oaktree closes in 2q. Benefits: easier to create customised solutions combining both companies’ products, and potential to optimise 2 balance sheets.
“One of the clearest ways our platform is evolving is in how we engage with our largest clients.”
Investors are consolidating more of their business with fewer managers that can invest at scale across asset classes and geographies and up and down the capital structure.
Conversations are leading to broad strategic relationships and customized solutions using insights from across the Brookfield ecosystem.
Real estate recovery is accelerating.
“What we’re seeing on the ground is far ahead of what you’re reading in the headlines”.
Significant increases in transaction activity and valuations. Primarily hospitality, logistics, housing, so far - less in office and retail but that will follow - “the fundamentals for office are absolutely flying…in Tier 1 markets, we’re seeing [rents] 50%, 70%, 80% higher than they were 5 years ago”.
Credit
Spreads post-covid were excellent. That attracted capital and spreads compressed. They didn’t maximise growth in this period and “it’s important to separate the fundamentals of private credit from the excesses in select parts of direct lending.”
“We have always preferred areas where underwriting matters, where structure matters and where there is real downside protection, notably real asset credit, asset-backed finance and opportunistic credit”.
If there is a broader dislocation, Oaktree benefits.
“When liquidity becomes scarce and capital is repriced, that is when disciplined investors with flexible capital and deep experience have historically generated some of their best returns.”
“We are already tracking dozens of emerging opportunities in real time”.
Could deploy tens of billions in a proper credit dislocation but “today, we don’t see a broad-based macro condition that would result in meaningfully higher deployment patterns than what we’ve seen over the last 5 years. But we always see sector-specific distress. Today, we see distress in software, building products, chemicals, autos, packaging.”
AI: “While there is a significant amount of capital flowing into the sector, the investment opportunity set is incredibly vast. And as a result of that, we can be incredibly selective. We can focus on the best assets in the best markets with the best revenue constructs and the best corporate credit counterparties.”
Penetration of the individual wealth market is accelerating fast. With respect to 401ks, they are in advanced discussions with some of the largest target date fund providers to put real asset products into default portfolios.
BIP
FFOPU $0.90, up 10%.
Sold or agreed $1bn in sales.
Refinanced $1.5bn of nonrecourse debt.
Will exceed 10% FFOPU long term growth target this year.
Assessing merging BIPC and BIP to form a single entity.
New framework with a leading global OEM - exclusive long term leasing platform for industrial equipment, including for data centres, without residual value interest rate or refinancing risk. $375m (BIP share) over 24 months.
Intel JV on schedule with first earnings in 3q26.
Canadian midstream business seeing strong demand - completed $400m of growth projects over the last few months that are now ramping, and have $8bn of bite sized, straightforward, low-multiple growth projects ahead.
Looking at an IPO for Csquare.
Tremendous demand across datacentres, compute, fibre, grid stabilisation, behind-the-meter power.
BBU
Ebitda $582m, down on sales. LFL ebitda was up 5%. EFO $279m.
Completed corporate simplification.
Clarios is $15 per share in NAV at 9-10x ebitda and can 2x in 5y driven by advanced batteries (higher market share and higher margins), cash generation, and tax credits. Clarios received $1bn of tax credit cash this quarter, or $1.50 per share. Expect similar amounts annually through the decade.
Sold 27% of La Trobe, an Australian asset manager and lender, at an implied 3x MM in 4y.
Committed to lead a $500m investment ($150m BBU share) alongside OpenAI into the new OpenAI Deployment Company.
Primarily an advisory/services business which they know is needed from their own work.
Investment is a preferred with >15% upside CAGR but low downside.
Also gives the Brookfield ecosystem access to leading technology early.
Sagen (Canadian residential mortgage insurer) has grown share, reduced expense ratio, and optimised capital efficiency under Brookfield.
ROE has gone from low double digits to over 20% and the business can distribute $400m per year over the cycle.
House prices are down 20% since early 2022.
80% of the portfolio is fixed rate and most of the remainder have constant payments (so only the mix between interest and variable changes with rates).
Loans have full recourse, all insured borrowers in Canada are subject to a stress test that builds in a cushion for affordability in a rising rate environment, and insured borrowers facing financial hardship can extend amortizations.
Losses are therefore driven by unemployment (frequency) and home prices (severity). Both are manageable with resilient employment and significant homeowner equity.
Loss ratio has risen from 5% to 12% on severity, mainly on 2022/23 vintages with less equity. They price for long run loss ratios of 15-20%. Will be below that this year, but the last few years have been abnormal with strong employment and house price appreciation.
BRK won a new concession in north east Brazil. Meaningful but will take time to ramp. Interest rates falling which may open an IPO window.
BEP
FFOPU +15% to $0.55. LTM FFOPU $2.08, up 12%.
Deployed or committed $2.2bn/$550m net.
Sold/agreed sale of $2.8bn/$800m net.
Closed $4bn of financing including CAD500m of 30-year notes at tightest spread ever.
Corporate level debt maturity now 14y.
Brought 1.8Gw online (LTM: 9Gw, up 2x in 2y) and contracted 1.7Gw from pipeline.
Between strong demand and strong bids for mature assets, feel they can grow medium term FFOPU ahead of the 10% long term target.
Capital recycling is driven by value - if recycling mature assets generates more value than holding them, they sell. Bids are currently strong. Created Northview Energy in partnership with BCI, Norges Bank, and a Brookfield fund. BEP will sell mature, derisked renewables assets to Northview.
“Demand continues to go up. It is higher today than it was last quarter. It’s higher today than it was last year.”
Good progress on the Westinghouse / US Govt deal including ordering long lead time items.
Continue to see opportunities in the public markets where companies have projects but not capital. Bought Boralex in partnership with La Caisse. $6.5bn EV. Accretive on close, and can accelerate growth.
Batteries
“Undoubtedly the fastest-growing technology across Brookfield Renewable today is batteries and energy storage. We are seeing that within all of our existing development platforms. We are increasingly looking at stand-alone energy storage opportunities. And the rationale for this is very simple. They remove grid congestion…and they are very quick to deploy.”
CapEx for batteries and energy storage has come down 65% over the last 2 years, “making these investments very economic”.
It is “absolutely, in no uncertain terms” economic to add batteries to existing renewables generation and offtakers are willing to pay a premium to firm up their power.
Issued 2.8m BEPC shares to buy 2.8m BEP LP units for a net cash gain of $27m. Continue to explore whether a single structure is better.
Thanks for reading - if you enjoyed reading this please like and restack, and do get in touch if you have questions.
Pete
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