Brighthouse Financial, Inc. Q3 FY2024 earnings call

• Strategic initiatives include reinsurance opportunities (expecting to enter a reinsurance agreement for fixed and payout annuities before year-end) and simplifying hedging strategy. • Expanded stand-alone hedging for Shield sales, including Shield Level Pay+ and remaining Shield product suite sales. • In-force book of legacy VA and Shield contracts is a closed block with a separate hedging strategy being developed. • Strong sales results: Annuity sales $7.8B YTD, Shield sales $5.8B YTD (+15% vs 2023), life insurance sales $87M YTD (+19% vs prior year). • Corporate expenses $203M in Q3, $610M YTD, down 5% YOY, expecting Q4 expenses to increase due to seasonality but full-year 2024 expenses to be lower than 2023. • Launched BlackRock's LifePath Paycheck product, expecting inflows in 2025.

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 excluding notable items. 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. Annuity sales were $7.8 billion year-to-date through September 30, consistent with the same period in 2023. Shield Annuity products had $5.8 billion year-to-date sales, a 15% increase over 2023. Life insurance sales were $87 million year-to-date through September 30, a 19% increase compared to the same period last year.

• Expect combined RBC ratio to be at the low end of target range (400%-450%) in normal markets pro forma for the pending reinsurance agreement. • Anticipate less strain from new business in future quarters due to expanded stand-alone hedging. • Expect inflows for BlackRock's LifePath Paycheck product in 2025. • Full-year 2024 corporate expenses expected to be lower than 2023.

• Complexity in managing hedging strategy for combined VA and Shield business leading to strain on RBC. • Uncertainties in market conditions affecting RBC ratio. • Volatility in alternative investment returns impacting adjusted earnings.

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

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

Q: Are you confident RBC ratio has troughed out assuming normal markets?

A: Pending reinsurance deal would put pro forma RBC at low end of target range, and strain from new business expected to improve. Also, robust capital position at holding company with stock buybacks continuing.

Q: Can you give more color on reinsurance beyond year-end?

A: Looking at multiple in-force and flow reinsurance opportunities, with negotiations ongoing.

Q: Is there an opportunity to optimize the investment portfolio?

A: Possible, and considering all possibilities including investment portfolio optimization.

Q: How do you view the TAM for liabilities?

A: Looking at everything, prioritizing based on degree of difficulty and potential transactions.

Q: Any color on norm stat earnings over longer period?

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

Q: Thoughts on Shield sales continuing at strong pace?

A: No intention to slow down sales, initiatives designed to ensure appropriate capital levels and ability to write new business.