Brookfield Corporation (BN 0.78%) can be a rather complex entity. It has several publicly traded affiliates, many of which have two separate U.S. listings. That complexity has weighed on the valuation of its different entities.
This discount is leading Brookfield to make some changes. It recently approved the corporate simplification to combine with its insurance arm, Brookfield Wealth Solutions (BNT 0.70%). Here's a look at what this will mean for investors.
Image source: The Motley Fool.
Bringing this entity back into the fold
Brookfield formed its insurance arm in 2021. The leading alternative investment company launched a separate entity, then called Brookfield Reinsurance, by paying a special stock dividend to investors in the newly formed company. Brookfield created a separate, publicly traded entity to establish a scalable platform for growing its insurance business and to provide investors with an alternative way to invest in the company.
The global financial firm has significantly expanded its insurance operations through acquisitions over the years. Notable deals include AEL ($4.3 billion in 2024), Argo ($1.1 billion in 2023), and American National ($5.1 billion in 2022). The company changed the name of this business to Brookfield Wealth Solutions in 2024 to reflect its broader expansion into providing retirement services and wealth protection products, including commercial property and casualty insurance and annuities. The leading global financial firm has grown its insurance business from $30 billion in value to nearly $200 billion over the last five years.
Brookfield announced earlier this year that it planned to seek board approval to recombine with its wealth solutions business. Both boards recently granted their approval, which will now go to a shareholder vote in July.
NYSE: BN
Key Data Points
Streamlining to unlock shareholder value
The proposed recombination of Brookfield Corporation and Brookfield Wealth Solutions is the next step in its streamlining process to combine paired securities. The company previously combined Brookfield Business Corporation with Brookfield Business Partners. The positive market response to that combination is leading the company to combine BN and BNT. Brookfield is also evaluating a similar simplification of its two infrastructure entities (BIPC and BIP) and energy entities (BEPC and BEP).
CEO Bruce Flatt commented on the company's streamlining plan in his first-quarter letter to shareholders. He noted that Brookfield is streamlining based on the view that companies with simpler structures and larger market capitalizations are more effective in today's market, given the dominance of index investing. The CEO also noted that it has become "clear that to keep growing and to maximize our returns and lower risk, a full combination is optimal." It will provide its insurance operations with greater access to Brookfield's balance sheet, giving it more flexibility to grow.
Strengthening its value proposition
Brookfield's insurance operations have been a meaningful growth driver over the past five years. The company expects it to continue playing a significant role over the next five years, contributing more than a third of its expected earnings growth during that period. The company's investment-led insurance model is a core aspect of its plan to grow the value of its shares to $140 by 2030. With its stock price currently below $50, it has significant upside potential as it continues to simplify its businesses and execute its growth strategy.
