Brighthouse Financial, Inc. Q1 FY2025 earnings call

• Sales: Delivered strong sales in annuities and life insurance. Annuity sales totaled approximately $2.3 billion, including ~$2 billion in Shield sales (up 3% QoQ, 5% YoY). Life sales were $36 million (up 24% YoY, 9% QoQ).
• Capital and Liquidity: Ended the quarter with holding company liquid assets of approximately $1 billion, combined RBC ratio 420%-440% (within target range). Repurchased $59 million of common stock in the quarter, with an additional $26 million repurchased by May 6th.
• Expenses: Corporate expenses were $239 million pre-tax in the quarter, higher than run rate but expected to normalize in 2025.
• Macro Environment: Positioned to navigate volatile markets, focused on executing business strategy and delivering for partners, customers, and shareholders.

The annuity segment reported adjusted earnings less notable items of $324 million, relatively flat sequentially. The life segment reported adjusted earnings of $9 million, with lower underwriting margin, lower net investment income, and higher expenses sequentially. The runoff segment had an adjusted loss of $64 million, with lower net investment income partially offset by higher underwriting margin sequentially. The corporate and other segment had an adjusted loss of $24 million, reflecting higher expenses sequentially.

• Statutory results were in line with expectations. The estimated combined RBC ratio ended the quarter within the target range.
• Corporate expenses are expected to normalize in the remainder of 2025.
• Focus on simplifying the hedging strategy for in-force variable annuity (VA) and first-generation Shield business.

• Volatile market conditions could materially impact actual results compared to forward-looking statements.
• Complexity in hedging strategies for in-force VA and first-generation Shield business poses execution risks.
• Uncertainty in the macro environment may affect sales and expense management.

Q: Wes Carmichael asked for clarification on the mean reversion benefit to normalized stat earnings.

A: Ed Spehar said it was around $200 million.

Q: Wes Carmichael inquired about fixed annuity sales being softer and expectations.

A: David Rosenbaum mentioned monitoring the competitive environment and looking to build momentum for fixed sales.

Q: John Barnidge asked about outlook for flows and surrender activity.

A: Eric Steigerwalt discussed drivers of outflows and expected flows in 2025 to be at 2024 levels or higher.

Q: John Barnidge asked about optimizing investment portfolio for RILA market.

A: John Rosenthal said they're always working on portfolio optimization.

Q: Elyse Greenspan asked about RBC move and other factors.

A: Ed Spehar discussed mean reversion and seasonality of capital charges.

Q: Elyse Greenspan asked about actions to increase value and reinsurance options.

A: Eric Steigerwalt talked about reinsurance options including flow reinsurance and simplifying hedging strategy.

Q: Suneet Kamath asked about distributable earnings from BLIC.

A: Ed Spehar mentioned the three-year financial plan but no specific annual forecast.

Q: Suneet Kamath asked about stock price and being standalone.

A: Eric Steigerwalt said they'll continue with their strategy to produce shareholder value.

Q: Wilma Burdis asked about hedging strategy for legacy block and VA hedge program performance in April.

A: Eric Steigerwalt discussed simplification goal and protection in adverse markets.

Q: Ryan Krueger asked about changes in hedging strategy and practical benefits.

A: Eric Steigerwalt explained goal of simplification and pivot away from complexity.

Q: Wilma Burdis asked about share repurchase program.

A: Eric Steigerwalt discussed repurchases in the quarter.

Q: Thomas Gallagher asked about hedging strategy reevaluation.

A: Ed Spehar said it's not a wholesale change, focused on simplification.

Q: Alex Scott asked about cash flow projections and balance sheet.

A: Ed Spehar talked about timeline for cash flow projections and focus on hedging simplification.

Q: Alex Scott asked about growth opportunities in RILA and LifePath paycheck.

A: Eric Steigerwalt and David Rosenbaum discussed growth and pricing discipline.

Q: Wes Carmichael asked about surrenders in annuity business.

A: David Rosenbaum discussed drivers of surrenders and expectations for 2025 flows.

Q: Wes Carmichael asked about capital injection into BLIC and RBC.

A: Ed Spehar mentioned the three-year financial plan with dividends to holding company.

Q: Thomas Gallagher asked about industry transactions and impact.

A: Eric Steigerwalt discussed monitoring transactions and their limited impact on Brighthouse's business.

Q: Jimmy Bhullar asked about RBC ratio components and strategic initiatives.

A: Ed Spehar talked about mean reversion benefit and unlocking capital for growth.

Q: Jimmy Bhullar asked about stock valuation and buybacks.

A: Eric Steigerwalt said they don't comment on market rumors or speculation.