Brookfield Asset Management Announces Strong Third Quarter Results, Regular Dividend and the Launch of BAM Reinsurance

Rhea-AI Impact

(Low)

Rhea-AI Sentiment

(Positive)

Tags

dividends

Rhea-AI Summary

Brookfield Asset Management (NYSE: BAM) reported strong financial results for Q3 2020, with record operating funds from operations (FFO) reaching $1.0 billion, marking a 34% year-over-year increase. The firm generated $2.8 billion of cash available for distribution over the past twelve months. A quarterly dividend of $0.12 per share was declared, payable on December 31, 2020. With $76 billion in capital available for deployment and $18 billion raised in private fund capital during the quarter, Brookfield emphasizes its robust position for continued growth and investment.

Positive

Record operating FFO of $1.0 billion for Q3 2020, up 34% year-over-year.
Generated $2.8 billion of cash available for distribution over the last twelve months.
Declared a quarterly dividend of $0.12 per share.
Raised $18 billion in private fund capital during Q3.

Negative

Net income attributable to shareholders dropped to $172 million from $947 million year-over-year.
Reported a significant decrease in net income for the last twelve months, down to $69 million from $3.8 billion.

11/12/2020 - 06:55 AM

BROOKFIELD, NEWS, Nov. 12, 2020 (GLOBE NEWSWIRE) -- Brookfield Asset Management Inc. (NYSE: BAM, TSX: BAM.A) today announced financial results for the quarter ended September 30, 2020.

Bruce Flatt, CEO of Brookfield, stated, “Our third quarter results reflect the strength of both our operating businesses and our asset management franchise. We generated record operating FFO in the quarter, and over the last twelve months earned a record $2.8 billion of cash available for distribution and/or reinvestment, underlining the stability and continued growth of our cash flows. With over $75 billion of capital for deployment, our business is stronger than it has ever been.”

Operating Results

Unaudited For the periods ended September 30 (US$ millions, except per share amounts)	Three Months Ended				Last Twelve Months Ended
	*2020*		2019		*2020*			2019
Net income attributable to shareholders¹	$	172	$	947	$	69		$	3,845
Per Brookfield share^1,2	0.10		0.61		(0.02		)	2.48
Funds from operations^1,3	$	1,039	$	826	$	4,288		$	4,341
Per Brookfield share^1,2,3	0.65		0.54		2.70			2.86
Net income⁴	$	542	$	1,756	$	530		$	6,744

1.     Excludes amounts attributable to non-controlling interests.
2.     2019 per share amounts have been updated to reflect BAM’s three-for-two stock split effective April 1, 2020.
3.     See Basis of Presentation on page 9 and a reconciliation of net (loss) income to FFO on page 6.
4.     Consolidated basis – includes amounts attributable to non-controlling interests.

Funds from operations (FFO) were $1.0 billion for the quarter and $4.3 billion over the last twelve months. Fee-related earnings were $372 million for the quarter and $1.4 billion over the last twelve months, representing increases of 22% and 36% from the prior periods, respectively. This reflects record fundraising and deployment across our long-term and perpetual private funds, growth in our listed affiliates, and a full year’s contribution of fee-related earnings from our credit business. FFO from invested capital increased 34% from the prior year quarter and was driven by positive results in several of our private equity businesses and financial assets which reversed losses from the second quarter. We also recorded $162 million of disposition gains in FFO. All of this led to overall net income in the quarter of $542 million. Net income attributable to shareholders was $172 million, or $0.10 per share.

Regular Dividend Declaration

The Board declared a quarterly dividend of US$0.12 per share, payable on December 31, 2020 to shareholders of record as at the close of business on November 30, 2020. The Board also declared the regular monthly and quarterly dividends on its preferred shares.

Operating Highlights

We raised $18 billion of private fund capital during the quarter, and approximately $40 billion over the last twelve months. Growth in fee-bearing capital over the last twelve months led to a 36% increase in fee-related earnings over the same period.

Fundraising included $12 billion of previously announced commitments to our latest distressed debt fund and $6 billion of commitments raised across our perpetual core strategies, private credit funds and other co-investments and separately managed accounts. We launched our European core-plus real estate fund during the quarter raising over €1 billion and exceeding its initial target, and our second vintage private infrastructure debt fund has raised over $1.8 billion to date, compared with its predecessor fund of approximately $875 million. Most of our credit funds and perpetual fund strategies earn fees on invested capital, as such the capital raised in the period will become fee-earning as it is invested.

Fee-bearing capital increased $12 billion during the quarter to $290 billion as at September 30, 2020. Growth in fee-bearing capital includes $10 billion of growth across our listed affiliates, as well as $4 billion of capital invested across our credit and perpetual private funds. This growth was partially offset by distributions and the end of the investment period of our third flagship infrastructure fund. We currently also have approximately $30 billion of committed capital across our strategies that will earn $300 million of fees annually once deployed.

We generated $703 million of carried interest during the quarter, and our accumulated unrealized carried interest now stands at $4.0 billion.

We recorded $482 million of realized carried interest into income over the last twelve months, including $42 million during the quarter related to distributions received from the sale of shares in one of our private equity businesses. Real asset transactions slowed meaningfully over the last six months as a result of the economic shutdown, but we have seen the pipeline of deal activity for both private and public market transactions begin to pick up again, and we expect to realize an increasing amount of carried interest as we complete monetizations within our mature vintage flagship funds.

Annualized fee revenues and target carried interest now stand at a run-rate of $6.1 billion.

Growth in fee-bearing capital generated a commensurate increase in annualized fee revenues and target carried interest. Annualized fee revenues and annualized fee-related earnings are now $3.0 billion and $1.4 billion, respectively, and gross target carried interest stands at $3.1 billion, or $1.7 billion net of costs, at our share.

We generated a record $2.8 billion of cash available for distribution and/or reinvestment (CAFDR) over the last twelve months. As at September 30, 2020, we had $76 billion of capital available to deploy into new investments.

Excluding realized carried interest, CAFDR increased 27% over the last twelve month period. The increase is due to the growth in our asset management franchise, and continues to be very resilient due to the contracted and predictable nature of both our fee-related earnings and distributions from listed affiliates.

Deployable capital of $76 billion includes $16 billion of cash, financial assets and undrawn lines of credit in BAM and our affiliates and $60 billion of uncalled fund commitments available for new transactions. Liquidity remains very strong for high credit-worthy counterparties such as ourselves, and during the quarter we completed $1 billion of corporate financings across BAM and the listed affiliates. Subsequent to quarter-end, we also issued at a corporate level, $400 million of green subordinated notes with the proceeds to be deployed into eligible green projects.

We invested $14 billion during the current quarter, and $48 billion over the last twelve months.

During the quarter we invested $9 billion of private fund capital, along with $3 billion of co-investment capital, bringing our latest vintage of flagships to approximately 60% committed. We expect to be in the market with our next round of flagship funds shortly, starting with our next flagship real estate fund in early 2021. We funded BPY’s purchase of close to $1 billion of its units/shares through substantial and normal-course issuer bids, and repurchased approximately $100 million of BAM shares since quarter end. We will remain active with repurchases as long as the shares continue to trade at meaningful discounts to our view of their underlying value. We also continued to increase the public floats of Brookfield Infrastructure Corporation (BIPC) and Brookfield Renewable Corporation (BEPC) by selling approximately $500 million of shares in those two securities into the markets.

BAM Reinsurance

We intend to distribute, in the first half of 2021, a special dividend in the form of a newly created “paired” entity, Brookfield Asset Management Reinsurance Partners (“BAM Reinsurance”). We expect this special dividend to be approximately $500 million, or approximately 33 cents per share of BAM. BAM Reinsurance is the entity through which Brookfield will conduct its reinsurance and other related activities for the benefit of all shareholders of both entities.

BAM Reinsurance will be a paired share to Brookfield Asset Management Inc. and will aim to replicate the success of the structure used by us to create Brookfield Renewable Corporation and Brookfield Infrastructure Corporation. BAM Reinsurance will allow us to grow our reinsurance business in the most efficient fashion, and also provide flexibility to Brookfield’s shareholders in how they can own their interests in Brookfield. The attributes of these shares should be more attractive to some groups of shareholders.

As with our other paired entities, the Class A shares of BAM Reinsurance will be structured with the intention of being economically equivalent to the Class A shares of BAM. Each share of BAM Reinsurance will have the same dividend as a BAM share and shares of BAM Reinsurance will be exchangeable into shares of Brookfield at the shareholder’s option. Our infrastructure, renewable, and property partnerships successfully implemented this type of structure, pairing entities with shares having economic equivalency with their associated publicly traded units. In a similar manner, BAM Reinsurance will offer Brookfield shareholders an alternative security through which to hold their interests in the business and are expected to trade substantially at the same price as shares of Brookfield.

In order to launch BAM Reinsurance, Brookfield intends to pay a special dividend in the form of a fraction of a share of BAM Reinsurance for a given number of Class A shares of Brookfield. Details will be provided at the time of the declaration of the dividend, but from a corporate perspective, the transaction will be analogous to a stock split as it will not result in any underlying change to aggregate cash flows or net asset value, except for the adjustment for the number of shares outstanding and owned by all shareholders.

“BAM Reinsurance is intended to provide our shareholders with a choice of holding either shares of Brookfield or the new shares of BAM Reinsurance, depending on what is most attractive to them based on their own circumstances,” stated Nick Goodman, Chief Financial Officer of Brookfield. “The very positive market reception, including in the case of the most recent listing of Brookfield Renewable Corporation, has encouraged us to offer a similar structure for our own shareholders, enhancing shareholders’ ability to meet their own financial planning objectives, while also facilitating the growth of our overall organization.”

The special dividend will require the filing of a registration statement (including a prospectus) with the U.S. Securities and Exchange Commission and a preliminary prospectus with the Canadian securities regulatory authorities. BAM Reinsurance also intends to apply to list its class A shares in the United States on the NYSE and in Canada on the TSX. Subject to the receipt of all regulatory approvals, Brookfield anticipates completing the special distribution in the first half of 2021.

CONSOLIDATED BALANCE SHEETS

Unaudited
(US$ millions)

September 30

December 31

2020

2019

Assets

Cash and cash equivalents

8,723

6,778

Other financial assets

15,997

12,468

Accounts receivable and other

22,015

21,971

Inventory

10,374

10,272

Equity accounted investments

{ "@context": "https://schema.org", "@type": "FAQPage", "name": "Brookfield Asset Management Announces Strong Third Quarter Results, Regular Dividend and the Launch of BAM Reinsurance FAQs", "mainEntity": [ { "@type": "Question", "name": "What were Brookfield Asset Management's Q3 2020 earnings results?", "acceptedAnswer": { "@type": "Answer", "text": "Brookfield reported $1.0 billion in operating funds from operations (FFO) for Q3 2020, a 34% increase from the prior year." } }, { "@type": "Question", "name": "When is the next dividend payment for BAM shareholders?", "acceptedAnswer": { "@type": "Answer", "text": "The next dividend payment of $0.12 per share is scheduled for December 31, 2020, for shareholders of record on November 30, 2020." } }, { "@type": "Question", "name": "How much capital did Brookfield raise in Q3 2020?", "acceptedAnswer": { "@type": "Answer", "text": "Brookfield raised $18 billion in private fund capital during the third quarter of 2020." } }, { "@type": "Question", "name": "What is the cash available for distribution for Brookfield in the last twelve months?", "acceptedAnswer": { "@type": "Answer", "text": "Brookfield generated $2.8 billion of cash available for distribution over the last twelve months." } }, { "@type": "Question", "name": "What are the implications of the special dividend related to BAM Reinsurance?", "acceptedAnswer": { "@type": "Answer", "text": "Brookfield plans to distribute a special dividend in the form of BAM Reinsurance shares, expected to be approximately $500 million or 33 cents per BAM share." } } ] }

FAQ

What were Brookfield Asset Management's Q3 2020 earnings results?

Brookfield reported $1.0 billion in operating funds from operations (FFO) for Q3 2020, a 34% increase from the prior year.

When is the next dividend payment for BAM shareholders?

The next dividend payment of $0.12 per share is scheduled for December 31, 2020, for shareholders of record on November 30, 2020.

How much capital did Brookfield raise in Q3 2020?

Brookfield raised $18 billion in private fund capital during the third quarter of 2020.

What is the cash available for distribution for Brookfield in the last twelve months?

Brookfield generated $2.8 billion of cash available for distribution over the last twelve months.

What are the implications of the special dividend related to BAM Reinsurance?

Brookfield plans to distribute a special dividend in the form of BAM Reinsurance shares, expected to be approximately $500 million or 33 cents per BAM share.