Dean Wilkinson: Okay. Great. And I guess that sort of dovetails kind of back into Ken’s question just around assets coming or real estate assets coming into the fold there. Could I interpret from that then that the required cap rate you would need to see transactions come across be something around a 5% or better given the strength of that same-property NOI number? And would that continue?
Nick Goodman: Well, I don’t know if I think of it exactly that way Dean. We think about the return real estate can generate over the long-term as opposed to just the day one cap rate or valuations. But I’d say that with the income-generating profile that we have on the high-quality assets that are attractive to insurance, we’ve been successful in doing some transactions in 2023 and we expect this is the market where the returns that they’re generating. And with the balanced portfolio we are building on the insurance side that current valuations we think the assets are worth are a level that works for the insurance balance sheet.
Dean Wilkinson: Yes. Make sense. That’s it. Thanks, guys.
Nick Goodman: Thanks, Dean.
Operator: Thank you. Our next question comes from the line of Sohrab Movahedi with BMO Capital Markets. Your line is now open.
Sohrab Movahedi: Thank you. A broader capital allocation question. What do you have to see maybe to reduce your ownership stake in Brookfield the asset manager from 75% to something lower and maybe redeploy that into corporation’s buyback activity? Thanks.
Nick Goodman: Hey, Sohrab. It’s Nick. Listen, I think, we obviously own 75% of that business. As you know that will go down to 73% when we complete the American Equity transaction. And so it’s been a really strong success this transaction. If you just look over the last 12 months the value of our ownership of BAM is up $14 billion next to BN. So it’s a very valuable company and performance has been exceptional and that’s a valuable currency for us. But the growth that business is generating is contributing to our returns and our growth and our cash flow and it’s a really fantastic investment for us. So it would have to be something strategic. And right now we’re just thinking about how we can help that business grow. But if something came along strategic like AEL, it’s just another tool or currency we have available to us and that really was the intention of the spin. So it’s worked really well.
Sohrab Movahedi: Okay. And then so Nick just for crystal clarity you don’t see any relative value benefits to Brookfield Corporation to maybe lighten the load a little bit on BAM and buy back BN?
Nick Goodman: Listen there is a relative value there Sohrab, but I think we want the BAM currency to perform well. And so I’m not sure that we would see just doing a secondary into the market. But it’s a valuable currency that on a relative basis may makes — definitely makes more sense than using BN shares for anything we look to acquire.
Sohrab Movahedi: Thank you for the color.
Operator: Thank you. Our next question comes from the line of Mike Brown with KBW. Your line is now open.
Mike Brown: Great. Thank you for taking my questions. Yeah. I appreciate all the commentary on the Insurance business. I just wanted to maybe dive in a little bit deeper there. As we approach a kind of easing environment from central banks globally. But what is the floating rate exposure? I mean, if you have that pro forma with AEL, I’d be interested to hear, where that is today, where it could go over the next six months. And then, clearly the annuity flows have been very strong 2023, a record, 4Q a record. What’s your take on the tailwinds in the environment for that to continue even in a declining rate environment? And how well do you believe you’re positioned, just given this market continues to be very competitive? And how do you feel that you’re positioned for that? Thank you.
Nick Goodman: Hi, Mike. Thanks for the questions. I don’t have the specific floating rate component of the portfolio, but we do proactively manage interest rate risk within the portfolio. So we do hedge. But at the same time, I would also caution, that the way we think about the portfolio is managing it to our return on equity within the insurance business, but it also acts as a very nice hedge against the broader BN balance sheet and income profile. So we’ve been running a little bit short in the investment portfolio. With that specific thought in mind that, were rates to come down maybe you missed out on a few basis points on the insurance side. But you more than makeup for it in the broader business and has definitely played out the way over the last 12 months, as FFO in other parts of the business were maybe impacted by higher rates.
We almost more than made up for it in the returns we generated in our insurance assets. So it’s a really nice hedge for the broader business. On the ability to write new policy, listen, there are — obviously there’s competition. There’s competition in everything that we do. But to-date, we have not seen that impact our ability to write new policies. We’re going to stay disciplined. We’re going to focus on our hurdle ROEs, but nothing right now gives us concern about our ability to achieve our targets.
Mike Brown: Okay. Great. And then maybe just one clarification question on the real estate business, just looking at the FFO in the core piece of the…
Nick Goodman: Yeah.
Mike Brown: … real estate there. It looks like it rose to 285 this quarter. I know that was up pretty meaningfully quarter-over-quarter. And in the rate environment continues to be a challenge. So just curious about what would’ve driven that change and maybe some of your thoughts on the near-term there? Thank you.
Nick Goodman: Yeah. So there was a one-time revenue item this quarter which was associated with a lease extension and amendment of one of our assets. And if you back that out and actually look at the FFO performance year-over-year, it’s up about 11%. And so the FFO performance of the business is getting better and that’s driven by the NOI growth which we focus on every quarter. So the NOI continues to grow. FFO feels like a trough from the rate impact. It’s now climbing its way back with the NOI impact. And as rates come down that will be a tailwind for FFO going forward.
Mike Brown: Okay. Understood. Thank you for that.
Nick Goodman: Thanks, Mike.
Operator: Thank you. I would now like to turn the call back over to Angela Yulo, for closing remarks.
Angela Yulo: Thank you everybody for joining us today. And with that, we’ll end the call.
Operator: This concludes today’s conference call. Thank you for participating. And you may now disconnect.
