Prepared remarks
Good day, and welcome to the Brookfield Corporation's Second Quarter 2026 Conference Call and Webcast. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference call over to our first speaker, Ms. Katie Battaglia, Vice President, Investor Relations. Please go ahead.
Thank you, operator, and good morning. Welcome to Brookfield Corporation's Second Quarter 2026 Conference Call. On the call today are Bruce Flatt, our Chief Executive Officer; Nick Goodman, President of Brookfield Corporation; and Sachin Shah, Chief Executive Officer of our Wealth Solutions business. Bruce will start off by giving a business update followed by Nick, who will discuss our financial and operating results for the quarter. Finally, Sachin will provide an update on our Wealth Solutions business. After our formal comments, we will turn the call over to the operator and take analyst questions. In order to accommodate all those who want to ask questions, we request that you refrain from asking more than two questions. I would like to remind you that in today's comments, including in responding to questions and in discussing new initiatives and our financial and operating performance, we may make forward-looking statements, including forward-looking statements within the meaning of applicable Canadian and U.S. securities laws. These statements reflect predictions of future events and trends and do not relate to historic events. They are subject to known and unknown risks and future events and results may differ materially from such statements. For further information on these risks and their potential impacts on our company, please see our filings with the securities regulators in Canada and the U.S. and the information available on our website. In addition, when we speak about our wealth solutions business or Brookfield Wealth Solutions, we are referring to Brookfield's investments in this business that supported the acquisition of its underlying operating subsidiaries. With that, I will turn the call over to Bruce.
Thank you, Katie, and welcome to the call. Our business performed well in the second quarter and through the first half. Distributable earnings before realizations increased 15% year over year to $1.4 billion in the quarter, and $5.7 billion for the last 12 months. In the first half of the year, we were active. We raised $98 billion of capital, deployed $100 billion into opportunities, and monetized $40 billion of assets while a further $130 billion of assets were financed. We advanced several important strategic initiatives. We expanded our insurance business with the acquisition of Just in the U.K. Our insurance assets through that increased to $190 billion. Shareholders approved the simplification of our capital structure, bringing our insurance and investment capabilities together. This creates a stronger and simpler Brookfield. Last, we completed the acquisition of Oaktree. Combined, our credit business is now one of the most comprehensive globally. Turning briefly to the market environment: there is no shortage of noise in the markets today — geopolitical conflict, higher energy prices, and uncertainty around interest rates. While these factors may influence markets in the near term, our focus remains on firmly building long-term value across the business. None of these short-term factors will matter materially to our long-term business success. The market environment continues, though, to be constructive. Economic resilience and functioning capital markets are supporting operating performance throughout the business and transaction activity. While uncertainty around growth and inflation is increasing demand for high-quality, heavy assets with low obsolescence risk — precisely the type of assets and businesses which we own. At the same time, long-term investment themes shaping our opportunity set are accelerating. Digitalization, decarbonization, and deglobalization, which we have been talking about for years, are now creating opportunities unlike anything we have ever seen. The opportunities are accelerating. Across AI infrastructure, energy transition, supply chain reorganization, and data sovereignty, the opportunities are larger, more multifaceted, and more capital intensive. Participating in these investments requires a broad range of capabilities, and our advantage sits with our ability to deliver integrated solutions at scale. We have invested decades deliberately building and strengthening the capabilities needed to pursue opportunities of this scale. Together, they have become one of the defining advantages of our business and position us to capitalize on these transformational investment opportunities in the years ahead. For us, this starts with relationships. Many of the opportunities we pursue are not broadly marketed. They come to us through bilateral discussions and strategic partnerships. Due to our scale, or because certainty of execution matters, we aim to be the first call because of the relationships we have built across industries, geographies, and capital markets to originate differentiated opportunities and give our partners access to transactions they could not typically source or pursue directly. Our global presence helps us determine where the best opportunities exist at any point in time. With teams on the ground across markets and asset classes, we see where demand is building, where capital is moving, and where risks are emerging. That perspective helps us focus on the best risk-adjusted opportunities. Our operating expertise is then what allows us to execute. Many of today's most attractive opportunities span multiple disciplines, and we can bring together teams across Brookfield to deliver integrated solutions that address the full scope of the opportunity. Our ability to source and execute is driven by the capital we have available to deploy. Decades of strong investment performance have therefore enabled us to build a diversified capital base that draws on public markets, institutions, private wealth, long-duration insurance, and our own balance sheet. These five things make us quite unique. This allows us to match the right capital to each investment and continue deploying through cycles. Nowhere is the importance of integrating these complementary capabilities more evident than in the rapid build-out of AI infrastructure. The build-out of AI infrastructure brings together the capabilities of our real estate, energy, infrastructure, and credit businesses, each a leader in their field. At the same time, the rapid adoption of AI is driving tremendous demand for electricity, and while constraints across the grid are limiting how quickly new supply can come online, the result is a widening gap between insatiable power and compute demand with constrained supply. Together, these trends are creating one of the most compelling investment opportunities we have seen in years and precisely the type of opportunities our scale enables us to pursue without taking undue risks. We are bringing together power generation, transmission, land entitlement skills, financing, and long-term relationships to deliver solutions that few organizations can provide. Our recent $100 billion project to build one of the world's most advanced AI factories in Kentucky, in partnership with the U.S. government, illustrates this well. We were selected by the U.S. Department of Energy to repurpose a federally owned industrial site and deliver a major world-class AI campus, drawing on our certainty of execution, our ability to bring together land, power, transmission, and capital at scale. Because this is federal land that the DOE controls and uses, it needs few approvals to move forward. Turning now to Westinghouse. This is another example of how these long-term trends are creating new opportunities. No business we own today is more directly positioned to benefit from the growing importance of energy transition and energy security than Westinghouse. Governments and companies increasingly want reliable domestically available generation; baseload nuclear, due to its scale, is really important. We are supporting the next wave of nuclear deployment. Building on our strategic partnership with the U.S. Department of Commerce announced last year, the U.S. Department of Energy recently announced a further $17.5 billion financing commitment to us alongside our utility partners to acquire long-lead time items to advance the production of the reactors we are going to build. It will reduce the time periods dramatically, shorten development timelines, and establish a repeatable model for large-scale nuclear construction. Westinghouse is in various stages of construction today on 14 reactors, has line of sight on another 40, and another 100 coming. This is part of a $6 trillion industry build-out where we hold a very dominant position. Turning to our capital base, it is also continuing to evolve. One of the most significant developments today is the role of private markets and retirement savings. Most individual savers have had very little access to private assets, with their savings invested largely in public stocks and bonds even as the investment world has evolved over the last 20 years. Businesses today are staying private longer, meaning a growing share of the world's essential assets and value creation now sits outside the public markets. As a result, retirement savers are increasingly missing out on a meaningful share of global value creation and only participate once meaningful value has already been created. Recent changes to U.S. federal policy are beginning to open the door to greater private market participation in retirement portfolios. Savers will soon have access to diversification, resilient cash flows, inflation-protected assets, and all these types of investment products. This will become another important source of long-duration capital for us, further growing and diversifying our capital base. I will end by saying that we look forward to seeing all of you at our Investor Day on September 17th in Manhattan. Additional details are on our website. As always, thank you for your continued support and interest in Brookfield. I will now turn the call over to Nick.
Thank you, Bruce, and good morning, everyone. We delivered another quarter of strong financial results supported by broad-based momentum across the business. Distributable earnings, or DE, before realizations were $1.4 billion or $0.61 per share for the quarter, representing an increase of 15% per share over the prior year quarter. Over the last 12 months, DE before realizations was $5.7 billion, $2.39 per share. Total DE, including realizations, was $1.5 billion or $0.66 per share for the quarter and $6.2 billion or $2.61 per share over the last 12 months. Starting with our operating performance, our Asset Management business delivered another strong quarter, generating distributable earnings of $740 million or $0.31 per share in the quarter, and $2.9 billion or $1.24 per share over the last 12 months. Fundraising was a record $77 billion during the quarter, reflecting continued strong demand across our flagship and complementary strategies as well as growth initiatives. This included $17 billion raised across our flagship strategies, including $7 billion for the seventh vintage of our private equity strategy and $9 billion for the sixth vintage of our infrastructure strategy. Both are progressing well and are on track to be the largest in their respective series. Fee-bearing capital increased by 19% to $672 billion at quarter end, driving a 20% increase in fee-related earnings compared to the prior year quarter. With the momentum we have across the platform, we are on track for what should be another record fundraising year. In July, we completed the acquisition of Oaktree, bringing the organizations fully together, further enhancing the scale and breadth of our global platform and strengthening our ability to serve clients with a broader range of investment solutions. Turning briefly to Wealth Solutions, which Sachin will cover in more detail in his remarks, the business generated distributable earnings of $480 million or $0.20 per share in the quarter, an increase of 23% compared to the prior year quarter, and $1.8 billion or $0.75 per share over the last 12 months. Results were driven by strong organic inflows, growth in net investment income, and the first full-quarter contribution from Just Group. We originated $5 billion of annuity sales during the quarter. Total insurance assets increased to over $190 billion driven by positive net annuity flows and the closing of Just Group which added $45 billion of insurance assets. Our North American business' investment performance remained strong. During the quarter, we deployed $5 billion into real asset investments contributing to an average net investment income yield of 5.7%. Disciplined underwriting in our P&C business contributed to a 99% combined ratio, lowering our overall cost of funds and supporting a gross spread of 2.2% for the quarter, further contributing to strong results on our invested capital. Turning to our operating businesses, they continue to generate resilient and stable cash flows, with distributable earnings of $361 million or $0.15 per share in the quarter and $1.5 billion or $0.65 per share over the last 12 months. Underlying performance across our infrastructure, energy, and private equity businesses remained strong, supported by long-term secular trends increasing demand for their essential products and services. Our real estate business also continues to perform well. The operating fundamentals across our high-quality portfolio remain very strong. Our supercore and core-plus portfolios finished the quarter over 95% occupancy, supported by continued tenant demand and very limited new supply. In our retail portfolio, nearly 1 million square feet of leases commenced during the quarter at rents 12% higher than those expiring. In office, we signed 4.5 million square feet of leases globally, with average net rents 19% above expiring levels. That is worth emphasizing: net rents on the leases we signed during the quarter were 19% higher than those expiring, providing meaningful embedded cash flow growth as these tenants take occupancy. A few highlights include, in the U.S., we signed 1.3 million square feet of leases at rents 25% above expiring levels, including two leases totaling 673 thousand square feet at 1 Liberty Plaza, a core-plus asset, at net rents 44% above expiring levels. In Canada, we signed over 700 thousand square feet at rents more than 70% above expiring levels, including a 433 thousand-square-foot lease at Bay Adelaide Centre, a supercore asset at rents more than double expiring levels. Our leasing pipeline remains strong, with more than 2 million square feet under active discussion. This leasing activity continues to demonstrate the strength of demand for high-quality real estate and the advantage of owning the best assets in supply-constrained markets. Turning to monetizations, transaction activity continued to build momentum through the first half of the year. We executed approximately $40 billion of asset sales year to date, returning capital to our investors and crystallizing attractive returns. A few notable examples include infrastructure: we completed the IPO of Evoque, our U.S. colocation data center platform, generating approximately $1.2 billion of proceeds at an attractive valuation. We retain a 64% interest in the business and will continue to participate in future value creation as demand for AI infrastructure accelerates. In real estate, we sold 1 Churchill Place, a premier office tower on our estate at Canary Wharf, for £750 million, further demonstrating the recovery of high-quality real estate. And in private equity, we completed the $650 million sale of Multiplex, our construction business. During the quarter, we realized $121 million of net carried interest into income and ended the quarter with $12.5 billion of accumulated unrealized carried interest. Shifting now to capital allocation and liquidity, we continue to return capital to shareholders during the quarter through a combination of dividends and share repurchases totaling $270 million. We maintain a disciplined approach to capital allocation. In addition to reinvesting in our existing businesses and completing the acquisition of Oaktree, we have repurchased approximately $580 million of BN shares in the open market year to date at an average price of $42 per share, keeping us on pace with the repurchases of the last two years. Capital markets remain constructive, and year to date, we have completed $130 billion of financings across the franchise. Notably, the corporation issued CAD750 million of 10- and 30-year notes; the transaction was four times oversubscribed, underscoring strong market demand and the strength of our credit profile. We continue to maintain a strong liquidity position and a conservatively capitalized balance sheet. With record deployable capital of $210 billion, we have substantial flexibility to invest at scale as attractive opportunities arise. Bringing it all together, we had a very strong and active second quarter. Earnings grew 15% per share, fundraising reached record levels, transaction activity continued to build, and we completed several important strategic initiatives that will continue to support our growth. We enter the second half with strong momentum across each of our businesses and are very well positioned to continue to grow earnings and compound intrinsic value per share. Before I hand over to Sachin, I want to briefly touch on the simplification. Shareholders approved the transaction at our annual meeting on July 16th, marking an important step in bringing our insurance and investment capabilities together in a simpler and stronger structure. Shareholders who are in non-taxable accounts or in all jurisdictions other than Canada and the U.K. do not need to do anything. You will receive new shares in your account once the transaction is complete. For taxable Canadian and U.K. shareholders who wish to complete their share exchange on a tax-deferred basis, the election period is now open and additional information is available on our website for you to do this. With that, I am pleased to confirm that our board of directors has declared a quarterly dividend of $0.07 per share payable at the end of September to shareholders of record at the close of business on September 14, 2026. With that, I thank you for your time, and I will pass the call over to Sachin.
Thank you, Nick, and good morning, everyone. With the recent addition of the Just Group, we thought it would be useful to start with an update on the progress we are making in the U.K., then provide an update on our existing businesses and close with how we are thinking about the broader retirement markets. As always, our objective is to compound capital at 15%-plus returns over the long term while maintaining a disciplined approach to risk and generating stable, predictable earnings. Turning first to the Just Group: we are very pleased with the progress since closing the acquisition in April. Just is a high-quality retirement business with capabilities in both the pension risk transfer and retail annuity markets. It gives us meaningful scale in one of the largest and most developed retirement markets globally. It adds another important source of long-duration predictable liabilities to our business. Since closing, we have focused on several areas. First, we have sharpened the business around its core pension risk transfer and retail franchises. We exited the early-stage direct-to-consumer initiative and have been simplifying the organization around the areas where Just has an established track record and a real competitive advantage. We have also been working on reducing the cost base. There is more work to do, but the direction is clear. We want a simpler operating model, a more efficient cost structure, and a business that can scale. Second, on the investment side, we have started bringing Brookfield's origination capabilities into the portfolio with a strong investment pipeline for the remainder of the year that we expect to drive further growth in our investment yields, our spreads, and the returns on the overall business. Third, on the liability side, we have adopted the same discipline we apply across the broader Wealth Solutions business, and since closing, all new business has been underwritten based on our targets. From an earnings perspective, Just generated approximately $29 million of earnings in our first quarter of ownership, representing a going-in return on equity of approximately 12%. We think that is a solid starting point with many near-term and medium-term levers to grow the business from here. Taken together, we feel very good about where the business is today. Just has a strong market position, a large opportunity ahead of it, and a clear pathway to improving performance. Our focus from here is execution: keep the business simple, stay disciplined on capital, and capture the opportunity in the U.K., which represents over half a trillion of pensions coming to market over the next decade. Turning to our existing annuity platform, we continue to make good progress in expanding the business. On product development, we have continued to broaden our retail annuity offering. Through American National, we continue to launch new products designed to offer pension-like attributes to retirees. On distribution, we have expanded through bank and broker-dealer channels with several new relationships launched this year and additional channels expected over the balance of the year and into 2027. These new bank channels contributed approximately $200 million of sales during the quarter and we expect them to become a very meaningful source of growth as they scale. Importantly, despite a competitive market, our spreads remain above 200 basis points. This reflects the discipline we continue to apply in matching the liabilities we originate with attractive investment opportunities and allocating capital only where we can achieve our target returns. Our U.S. property and casualty platform, Clearbrook, continues to make significant progress. We have de-risked the liability profile and focused the business on profitable growth by exiting volatile lines, reducing catastrophe exposure, and strengthening underwriting discipline. This has led to stable and consistent underwriting income. As the P&C market sees pockets of softening, we believe there will be meaningful opportunities to continue scaling this platform both organically and through M&A. Bringing it all together, demand for retirement products continues to grow as populations age and retirement savings shortfalls widen. The U.S. fixed annuity market is expected to generate over $300 billion of sales in 2026, which would be the second-best year on record, and we expect it will continue to grow in this interest rate environment. Across our key pension risk transfer markets in the U.K., the U.S., and Canada, we see a large pipeline of potential transactions coming to market over the next decade as corporations continue to de-risk pension plans and transfer them to insurance companies that have the capital and expertise to more appropriately manage them. With our now scaled platform across products, distribution channels, and geographies, we are well positioned to allocate capital to the most attractive opportunities while maintaining discipline on the returns we earn. Very few platforms have the depth and capabilities we have to originate attractive capital and have the investment franchise to deliver strong risk-adjusted returns over a long sustained period of time. We are excited about the future of the business and the returns it can provide to Brookfield shareholders for years to come. We continue to see a pathway to more than $300 billion of insurance assets by the end of the decade. Thank you. With that, I will hand the call over to the operator for questions.
Questions and answers
Thank you. And as a reminder, if you have a question, please press *1 on your telephone. If your question has been answered or you want to remove yourself from the queue, please press *1 again. Our first question comes from the line of Michael Cyprys with Morgan Stanley. Your line is now open.
Hey, good morning. Thanks for taking the question. Maybe just starting off with a bigger picture question on the AI side. As you look across power, data centers, and increasingly compute, curious if you could speak to where you are seeing some of the most attractive risk-adjusted returns there as there is clearly a lot of capital coming into the space. And then maybe more strategically, how much of the opportunity for Brookfield is not just simply owning and developing these assets, but also recycling them into stabilized homes with longer, lower-cost of capital, longer-duration pools over time?
Hey, Mike. It's Nick. So listen, you are spot on. We are very excited about the opportunity. We see it as being significant and broad-based and touching many different parts of our business — real estate, energy, and infrastructure. The numbers are big right now, but we are, in our view, in the very early stages of what is a very significant investment cycle around AI, digital infrastructure, and the whole power build-out that is needed. One of the easiest ways to think about it is we are generally just scratching the surface right now of AI adoption and implementation into the world and into business. As that takes hold, the need, scale, and earnings power that is going to be backing that is going to be very significant. You asked where we are most excited: Bruce touched on a couple of the opportunities — recent examples across data center development, what we are seeing in our energy business across both renewable and nuclear — but it will be broader across infrastructure and real estate. We see a lot of opportunity. Given our position in the market, our scale, and our access to capital and operating expertise, that affords us the ability to be disciplined and patient. So we are focusing on the highest-quality investment opportunities with the highest-quality counterparties, looking at stable structures where we can earn attractive risk-adjusted returns. Your second point is right: once we have developed and built these data centers into what will be very stabilized, high-core assets, they are very attractive for institutional owners for the long term. We have been recycling capital both in Europe and North America, and we expect to continue that to recycle capital to generate strong returns for our clients, but also to recycle capital to support the next build-out and the future build-out of these platforms. We expect to see that as we move forward.
And then could I ask a follow-up question, or should I get back in queue? Can I ask a second? And then just on Wealth Solutions with Just Group coming into the numbers here in the quarter, was hoping you could maybe speak to how you were thinking about some of the near-term versus medium-term levers to expand the $29 million of earnings contribution there, a 12% ROE on that. How do you expect that performance to ramp as you look out over the next 12 to 18 months? Versus where do you see that over more of the medium term?
Sure. First, on the short term, I alluded to it in my comments around focusing the business: exiting some areas that were more early-stage, venture-type initiatives — direct-to-consumer and other new lines of business that were not profitable. We have shut those down and exited them. That in and of itself is a cost reduction exercise. To frame it, Just's cost structure is two to three times what some of its competitors are as they bid for the same product. In this market, you have to be a low-cost operator to be competitive when you are bidding on pension business. So that is our first and foremost focus area. Then the real big opportunity is bringing in our investment capabilities through Brookfield Asset Management. We can source the perfect assets for long-duration liabilities through our real estate, infrastructure, and energy businesses. If you think about pensions, they are different than annuities: there is no lapse risk in a pension. When you offer a pension, you are paying until mortality. To be able to back that with long-duration, very high-quality assets whose cash flows grow over time and which have a return profile behind them is a tremendous competitive advantage for us. Between those two things, we believe we can get returns up to levels similar to what you see in our U.S. business. Once you are there, you can capture new business because you can bid more competitively than others in the marketplace.
Our next question comes from the line of Bart Dziarski with RBC Capital Markets. Your line is now open.
Great. Thanks for taking the questions and good morning everyone. I wanted to ask a follow-up on the AI. You announced a partnership with NVIDIA to launch a compute financing platform, mobilizing about $500 billion of capital. Congrats on that. Recognizing it is early days, but would love to get your early views on will this be made available to retail or institutional investors, maybe a bit more detail on how you are underwriting the downside case, and which asset classes could benefit from this partnership. Thanks.
Thanks, Bart. So as you know, this is an MoU at this stage that we have signed with NVIDIA to gather large pools of capital. We are very excited about the opportunity. If we take a step back, compute is the critical part of the infrastructure stack supporting AI. Up until now, our business historically largely focused on new-build development. But now we are focused on developing partnerships to finance the chips and accelerate growth with bespoke deals. When you are building an AI factory, GPUs can represent half of the required capital to complete the build, so finding efficient ways to finance the equipment is becoming increasingly important. We have been working with NVIDIA closely for the last 18 to 24 months across a number of partnerships and initiatives, including a recent transaction in Korea, and we are building a solid pipeline of investment opportunities. The opportunity is very attractive and offers access to a large pipeline. On risk, it is an attractive risk profile. We maintain a focus on contractual cash flows, counterparty quality, and generating attractive risk-adjusted returns that are ideal for our institutional clients and for retail clients as they look to invest alongside us into strategies. That is part of the catalyst for starting the AI fund because these types of opportunities are ideal for that capital and for the returns sought by partnering with different parts of Brookfield.
Very helpful. And then on Brookfield Wealth Solutions, Sachin, you talked about seeing meaningful opportunities for both organic and inorganic ways to scale the business, especially on P&C with the softening pricing cycle. Could you talk through the latest view on the inorganic side? How are those conversations evolving? What are you seeing out there as you look to scale BWS further? Thanks.
Sure. I touched on P&C in the prepared remarks. That market is softening pretty rapidly across property and casualty lines, particularly in specialty markets. Over the next 36 months, that will lead to platforms that either need capital — for example, if they have too much catastrophe exposure or have extended themselves too far in pursuing new business — or there will be great businesses that are unable to grow because they must be very patient. Being part of our overall apparatus at Brookfield could be very helpful to them in particular because we can drive the investment side of that business. So I think the next 36 months in P&C will be very interesting. Some players will get caught out as markets soften, and for us that could represent a meaningful opportunity to partner with somebody, bring capital, and bring investment expertise to drive that business forward. On the annuity and pension side, we are focused today on several things: much more organic growth, both in Just in the U.K., which I discussed, and in the U.S. we have a leading franchise in the IMO market. We are the strongest seller of retail annuities through IMOs, but we are not yet advanced in the bank and broker-dealer market, which represents about 60% of U.S. annuity sales. Our ability to get onto these platforms in the last 12 months and to continue to get onto more platforms over the next 12 months will open up new markets for us and scale our program to sell more annuities to a wider audience. We are making tremendous progress in that regard. It is more of an organic growth story in the U.S.
Our next question comes from the line of Cherilyn Radbourne with TD Securities. Your line is now open.
Thanks very much and good morning. As you know, concerns have been raised about circularity in the deals underpinning AI investment industry-wide. I would love to get your perspective on how much of that is perceived versus real and how Brookfield is staying disciplined with its counterparties and contract structures.
Hey, Cherilyn. It's Nick. When you look at the cash flows being generated by these transactions and the scale and potential of the earnings that will be realized over time as compute is increasingly adopted into business, we have conviction that working with the highest-quality hyperscalers, off-takers, and chip providers is an attractive risk profile for our business. There are certainly integrated relationships and synergies with different counterparties working together, but we believe we can invest around this with the right risk controls. When we look at the relevance of the contracts we are signing, the revenue, and the overall percentage of what we are doing, we have very diversified businesses. This is a strong driver of growth today, but we still have a broad infrastructure platform, a very broad energy platform, and a very broad real estate platform. We believe the risks are well managed. We have been active in capital recycling and focused on the highest-quality counterparties and projects with the right contractual protections. We are not stepping away from our historical focus on risk management and earning attractive returns while taking on moderate amounts of risk, and we can do it at scale here, which is the most exciting part.
And then maybe this is at a higher level, but as you grow the insurance business, which hedges interest rate sensitivity elsewhere in the business, how do you think about your interest rate exposure and how that evolves over time?
Hey, Cherilyn. There are two models. One is a passive model where you just match your assets and liabilities and do not take much rate risk. The other is a more active model where you, from time to time, position based on where you are in the rate cycle. We got into this business five to six years ago because rates were historically low and we understood that was an asymmetric opportunity. At that time, we kept meaningful exposure to rising rates by shortening our asset book, lengthening our liability duration, and keeping that exposure for the benefit of Brookfield shareholders. Today, we are much more careful. We are largely matched: our asset and liability duration is almost entirely matched and cash flows are matched. We are at a point in the cycle where, as Bruce mentioned, there is a lot of noise in the market and some risk premium built into the rate curve. Therefore, we will be patient. Once this short-term noise comes out, we can see a clearer picture and continue to take views. But for now, we are matched and not taking an aggressive position either way.
Our next question comes from the line of Mario Saric with Scotiabank. Your line is now open.
Hi, good morning. I wanted to touch on your commentary on the importance of scale. It was highlighted on the call as well as in the shareholder letter in terms of the relevance of scale and providing integrated solutions to global relationships. My question pertains to the incremental benefits from incremental scale from here. Brookfield's already a large organization. Is it missing out on opportunities today because of your size? If so, where are the opportunities going forward for Brookfield to increase its big-deal market share or become, as you mentioned, the first call even more frequently?
Hey, Mario. It's Nick. Scale matters — it's the capital, the operating expertise, and the reliability as a counterparty because delivery matters, particularly for projects like AI. That gives us access to incremental projects. We are very well positioned now to grow with the market and be one of the established partners for the build-out. That does not eliminate our ability to do smaller transactions. We build platforms, and those platforms do tuck-ins and small acquisitions to add incremental value every day. We operate across the spectrum of deal transactions, and those tuck-ins and operating platforms all feed into the overall scale of the business and the ability to participate in the large build-out and the large transactions.
Got it. And then maybe my follow-up for Sachin: coming back to your organic growth vis-à-vis the bank and broker network expansion, I think you mentioned there was $200 million of sales this quarter. Can you help frame where you believe that can move to once you are at your desired number of relationships? What inning are we in and what is the potential upside?
The upside is that we expect to see roughly half of our sales coming from the bank network while preserving the sales coming from independent marketing organizations. In the U.S., we are currently selling almost $12 billion to $13 billion through IMOs and little through the bank network. We see the potential to get an additional $10 billion to $12 billion just coming through banks over the next few years. That would take our current $25 billion a year between pensions and annuities up to $35 billion a year quite comfortably. The opportunity is meaningful; it takes time to season those relationships and to provide the necessary support to frontline agents who sell the product, but the potential upside is large.
Our next question comes from the line of Kenneth Worthington with JPMorgan. Your line is now open.
Hi, good morning, and thank you for taking the questions. Maybe first on carry: Connor Teskey on the Brookfield Asset Management call talked about the pull forward of carry for funds relevant for them, which should benefit you as well. To what extent are you also seeing the pull forward of carry in funds where carry is exclusive to BN? If you are seeing it, what is the magnitude of the pull forward you are seeing?
Hi, Ken. Our outlook is largely consistent with what we have discussed recently. We are focused on the next 12 to 24 months and think about the inflection point for our carry. The material drivers for BN are earlier vintage funds, earlier vintage infrastructure funds, and Oaktree funds. On those, we are making good progress. The second-number fund is smaller than the third and therefore less impactful, but it has now worked its way through the preferred return and incremental sales from here will realize carry. The third infrastructure fund is not far behind. We have a number of monetizations coming and the monetization pipeline is very strong. So we are bullish on the outlook, but it is largely consistent with what we have talked about recently. I would note that some funds raised after the BAM spin, where BAM is eligible for carry, are outperforming and may realize carry ahead of schedule, but I would not say that is material to the short-term BN outlook.
Okay. Perfect. And then broadly on the outlook of the pension risk market in the U.K., to what extent did the announcement of the Just acquisition impact the new business pipeline? Where does that pipeline for new business stand today relative to prior to the announcement of the deal?
Our acquisition of Just has resulted in the company being invited to see and bid on much more than they ever have. The fact that Brookfield is now behind them and people understand we have the capital and expertise means that Just, which largely focused on very small pensions, is now getting invited to larger schemes that are coming to market. The good news is we are being invited to all the large auctions. That said, pensions in the market today continue to be bid to levels that drive much lower returns than we are comfortable with, so we are being patient. We are not in this market to grow at all costs; we are being patient in terms of the returns. The invitations are coming; when the time is right, the business will scale.
Our next question comes from the line of Alexander Blostein with Goldman Sachs. Your line is now open.
Good morning. First, would love to hit on the interplay of the very large AI opportunity with balance sheet management and curious how you are thinking about allocating capital at the BN level and to what extent any of the AI opportunity will require more of BN's capital being invested alongside third-party capital or some other way?
Alexander, first, we highlighted our access to scale capital. As we think about the strategies today, it is largely being funded within the funds with co-invest from very large institutions around the world who have a large appetite for these kinds of transactions given how attractive they are, and by participating alongside our listed issuers. That is largely how we expect to fund. As opportunities become more attractive, and given the integration of BN and BWS and the scale of capital we will have available, we could potentially participate alongside the funds, but that is not the base assumption in the plan. This should be largely funded through our client business and through BAM.
Then a couple of specific questions around Wealth Solutions. Sachin, I heard your points around Just and the steps you will take to improve the spread. From what it looks like today, on that $29 million the spread is, I think, below 80 basis points. So just from ripping out some of the operational costs as you described, what kind of magnitude of a benefit do you think the spread could get at Just over the next 12 months? Rotating the portfolio takes longer. Second, on the existing core annuities business, I think the spread is below 180 basis points. You mentioned you see spreads above 200. Is that on new business and is that the bogey while older business runs off? I am trying to reconcile the reported 81 with the 200 number you mentioned.
I'll start with the second point because it is important. The 81 basis points is just the income spread and excludes the fact that a large portion of our portfolio is invested in equities — both in our funds that are equity-oriented and in public equities. That makes us very different from some competitors. Much of the business's value will be total return over time. If you take the unrealized marks on our funds that are invested in equity-oriented strategies, that 81-basis-point figure goes to about 2.2% in the current quarter. We provide disclosure in that regard. As we grow our equity base and as equity returns come in closer to long-term total return assumptions for the underlying positions, we would expect spreads to go up. Using the word spread is shorthand; the reality is it is more of a total return concept. We have continued to outperform the broader market where spreads are much tighter, closer to 100 to 110 basis points. Moving to Just, there is at least 50 basis points of opportunity to enhance spreads simply by taking costs out of the business. That will take time, but from the 80 basis points I could see us comfortably adding 50 basis points on top of that. Then the asset rotation program and letting our asset strategy work through the system provides a path to getting closer to a 200-basis-point spread in that market as well.
Our next question comes from the line of Jaeme Gloyn with National Bank. Your line is now open.
Yes, thanks. Quick one just on the BBU shift from BN to BWS. Can you just talk about the benefits to each of the companies of shifting a portion of that holding?
Hi, Jaeme. We have lots of investments on the BN balance sheet that can be attractive for pools of capital within insurance. We have moved BBU shares across in the past, BEP shares, BIPC shares, and they have performed well for the insurance accounts. This is a continuation of that strategy: we have almost a ready-made investment pipeline for insurance accounts that can be highly attractive, and at certain times you may choose to move them over and let policyholders benefit from the strong returns.
And then in Bruce's letter, a couple of mentions of index inclusion. Do you feel like you have done enough at this stage? Or are there other strategies or initiatives you could take to achieve that outcome?
We have given ourselves optionality that did not exist before. Under our previous structure, we had no path to U.S. index inclusion. Now, being in a more convenient domicile and with the current fact pattern around our business, we have an option. It will take time as rules emerge and evolve and as our footprint evolves, but there are actions we can take over time to enhance inclusion and the rules as they evolve should accommodate our business. So we have optionality today; it will take time but could be a significant positive if materialized.
Our next question comes from the line of Etienne Ricard with BMO Capital Markets. Your line is now open.
Thank you, and good morning. Just Group is the latest of a series of acquisitions you have made in Wealth Solutions. When you onboard new insurance leadership teams, how do you make sure the acquired assets meet Brookfield's risk tolerance and that returns are prioritized over volumes?
Look, the first thing is alignment throughout the system. One, all of the capital that we provide and that goes into these insurance companies comes from Brookfield, so we have complete alignment with policyholders. Two, we incentivize management teams with long-term incentive programs that mirror Brookfield's approach, focusing on long-term capital compounding. Three, we spend time with management teams to ensure the culture is strong and that the people leading these companies align with our value-focused culture. If you do those things, generally good outcomes follow, and we have been fortunate that in the businesses we have acquired, we have been able to execute those steps.
And to follow up on carried interest: we have seen quite an increase in asset sales in recent years while carried interest realizations have not picked up as meaningfully. Nick, what are your expectations for asset sales over the next year and why should that translate into better carry realization?
Etienne, monetizations have been very strong, which is testament to the quality of the assets we own and our value creation plans and the breadth of our asset base across asset class and geography. Monetization progress is good, but we realize carry on a conservative, fund-by-fund basis, not investment-by-investment. That means it takes time: funds are large, we must return original capital to investors, work through preferred returns, and only when there is limited to no risk of callback do we start to realize carry. That's why we've talked about an inflection point — it takes time to compound returns, return capital at scale, and then start realizing carry. We are getting closer to that point in earlier vintage infrastructure funds and our Oaktree funds. It should continue to scale as we work through even larger funds moving forward.
As there are no more questions, I will now turn the call back to Ms. Katie Battaglia for closing remarks.
Thank you, everybody, for joining us today. And with that, we will end the call.
This concludes today's conference call. Thank you for participating. You may now disconnect.