Transcript
Host
All right, well, Brookfield is a universally known business for touching the global economy, whether it's real estate, renewable energy. The company has a wide footprint and is increasingly Berkshire Hathaway references as they prioritize the long-term plan. Case in point, the CEO Bruce Flatt now talking about an increased focus on their insurance operations. Christopher Ballard is a managing director with Check Capital Management and joins us to talk a little bit more about the business. Nice to have you with us. I'd I'd say let's talk about the quarter, but these companies that are thinking in decades rather than three-month increments are probably worth considering from that vantage point. For those who want to know what sort of Brookfield really represents as an investment today, how would you characterize it Christopher?
Chris Ballard
Yes, definitely a long-term with the great global footprint in a lot of different industries being, you know, renewables, infrastructure, real estate, private equity asset management. They really have their hands in a lot of different aspects of our lives, whether it's to corporations and institutions or governments. So yeah, if you’re thinking about Brookfield Asset Management has so many different moving parts and components, you really want to think of it as a long-term play. The small moves that happened like on a quarter-to-quarter basis that you mentioned will all look kind of small to us in the fullness of time. So when you're when you're thinking about it, you want to kind of think about something that isn't a perfect place to, you know, grow over the period of time as a world develops and it seems to be right on the cutting edge of this AI infrastructure build out. There's really so much to get into when it comes to the business. But I like mentioned that you really want to think about it on just a quarter to quarter basis.
Host
Well, I you know, some of the things they've been talking about even this week would speak to the fact that it's very difficult to measure over a couple of months. Christopher will hopefully rejoin us in a little bit, but just as some context for the company right now on that AI part. They are working to assemble seven major AI computing sites that would include power and data centre shells, which are going to be built out over the next five years in the U.S., the U.K., Canada, Europe. They've talked about the costs associated with that being possibly a couple 100 billion dollars in capital. So you know, if you think about what big tech giants are spending, I mean capex bills for Amazon, Microsoft, Meta, Alphabet next year are enormous. A part of that is because they have to think about some of their data centre needs. And now Brookfield is in the same conversation. A company that has benefited from its real estate footprint and sees these data centres as a part of the big real estate play going forward is putting that into full gear. And beyond that part of the story, Christopher, the AI data centres. One of the headlines this week is this goal for the company to focus itself into an investment led insurer. And that kind of prompted some sort of comparisons to Berkshire Hathaway has a big insurance component as well. As someone who tracks the company what's been your sense of, of what the messaging from the, from, from the leadership there has been on on, on what they would like to do?
Chris Ballard
So insurance side of things, we really have their biggest component is their future growth engine, which is the wealth solutions side of the business. So the wealth solutions are there making purchases on average of like fixed income annuities, if you will, and taking those assets and redeploying them at much higher rates of return. So last quarter, they had $391 million of distributable earnings coming from that side of the business, which continues to grow at a very rapid clip. And we see as being at a run rate of about $2 billion on an annualized basis for distributable earnings in that in the very near future. At the current run rate it's about $1.6 billion. So yeah, when when they're getting in that they're in all aspects of insurance at this point but right now it really is this wealth solutions aspect of the business that they're focusing on. They’re trying to deploy as much capital into. And then as they do so, yeah, able to get, you know, these lower rates of return and then have this nice size spread as they deploy the assets to you know Brookfield Asset Management.
Host
So at the end of the day, should you as an investor, allow yourself to think about this company leaning into multiple trends whether it's sort getting more out of its insurance opportunity, whether it's leaning into the AI infrastructure opportunity or as our last guest said, looking at this as a possible just broader infrastructure play when in Canada, there's, you know and obviously there were previous Brookfield ties for the for the Prime Minister you know that that the nation building spending benefitting a company like Brookfield, do you have to sort of think about it in those components? And if so, do those trends do you think bode well for this as an investment?
Chris Ballard
Absolutely those trends bode, extremely well. And I believe that at some point in time, they will do some partnerships in Canada. The numbers have to look right for both Brookfield and the Canadian government. Yeah, like with Google I don’t know what was described there for a bit but with Google they actually have a recent inked deal with Brookfield, where they're going to, it’s a very unique and one of its kind deal, where they're going to tap into their hydro facilities in a couple places with in Pennsylvania, where they're going to have about 3 gigawatts of power. They're going to be able to tap into from those facilities to power their AI infrastructures. So you’re talking AI infrastructure. You're also looking at a deal with Duke Energy. Recently they have a stake with Duke Energy in Florida, where they're going to actually be able to tap into that electrical network and power utility network that Duke has there. And then and then the Swedish component as well. So they're, they're in Sweden, they just did a deal over there in their digital infrastructure build out. I think they did about a $10 billion dollar deal this past quarter. So you really do want to think of them as infrastructure. So that again, has to do with like hydro power, electric power, all power needed to drive these new AI infrastructures is where all the spend is going. Yeah, they're, they're on the cutting edge, kind of right in the middle of forefront.
Host
Okay, Christopher appreciate the breakdown. Thanks for joining us. Christopher Ballard is a managing director with Check Capital Management on the Brookfield story.