Brighthouse Financial, Inc. Q3 FY2024 earnings call

Strategic Initiatives - Progress on reinsurance opportunities, including nearing completion of a reinsurance agreement for a legacy block of fixed and payout annuities to improve capital efficiency. - Simplifying hedging strategy: Expanding stand-alone hedging for Shield sales, including Shield Level Pay+ and remaining Shield product suite sales, and formulating a revised hedging strategy for the in-force legacy block. ### Sales Results - Annuity sales totaled $7.8 billion YTD, with Shield Annuity products at $5.8 billion YTD (a 15% increase). Life insurance sales were $87 million YTD (a 19% increase). - Institutional expansion: Launch of BlackRock's LifePath Paycheck product, with expected inflows in 2025. ### Expense Management - Corporate expenses were $610 million YTD, down 5% YOY. Anticipate fourth quarter expenses to increase due to seasonality, but full-year 2024 corporate expenses expected to be lower than 2023.

In the third quarter, the Annuities segment reported adjusted earnings of $307 million (excluding notable items). The Life segment had adjusted earnings of $41 million. The Runoff segment reported an adjusted loss of $107 million (excluding notable items). Corporate and other was flat sequentially with $2 million of adjusted earnings. Shield new business represents approximately 95% of total VA and Shield sales.

RBC Expectations - Pro forma combined RBC ratio would be at the lower end of the target range (400% - 450%) in normal markets with the pending reinsurance deal closing before year-end. - Anticipate reduced new business strain in future quarters as a result of simplifying hedging strategy, with potential flow reinsurance in 2025 providing further support. ### Share Repurchase - Continued common stock repurchase program: $64 million repurchased in Q3, $25 million through Nov 1, cumulative over $2.4 billion since 2018.

• Uncertainty in achieving expected RBC ratio due to market conditions and complexity of hedging strategy. - Volatility in adjusted earnings due to factors like alternative investment returns, claims experience, and actuarial assumptions. - Risks associated with the timing and impact of reinsurance transactions and hedging strategy refinements.

Q: Have you and the Board talked about bringing in more risk management experience?

A: Yes, we've brought in external resources and hired in the hedging and finance areas in the last 6 months.

Q: Are you confident your RBC ratio has troughed out?

A: With the pending reinsurance deal, pro forma combined RBC ratio would be at the low end of the target range in normal markets, and new business strain is expected to improve.

Q: Can you provide color on norm stat earnings over a longer period?

A: Plan to provide long-term statutory free cash flow disclosures next year, with a ramp-up expected as the legacy block runs off.

Q: Any color on the timing of the reinsurance deal?

A: Confident it will close in the fourth quarter.

Q: Thoughts on Shield sales continuing strong?

A: No plans to slow sales; initiatives are in place to ensure appropriate capital levels and ability to write new business