Yahoo Finance Brighthouse Financial Inc (BHF) Q1 2024 Earnings Call Transcript Highlights: Navigating ...
Liquid Assets: $1.3 billion at the holding company.
Risk-Based Capital (RBC) Ratio: Estimated between 415% and 435%.
Capital Returned to Shareholders: $62 million through common stock repurchases in Q1 2024.
Total Annuity Sales: $2.9 billion in Q1 2024, up 5% sequentially and 3% year-over-year.
Shield Annuity Sales: $1.9 billion, a 20% increase from Q1 2023.
Fixed Indexed Annuity Sales: $191 million, driven by SecureKey product.
Fixed Deferred Annuity Sales: $637 million.
Annuity Net Outflows: Approximately $1.5 billion.
Life Insurance Sales: $29 million, a 26% increase from Q1 2023.
Corporate Expenses: $207 million on a pretax basis, down 1% year-over-year.
Adjusted Earnings: Loss of $98 million in Q1 2024, includes a notable item of $366 million.
Adjusted Earnings Excluding Notable Items: $268 million.
Total Adjusted Capital (TAC): $6 billion as of March 31, 2024.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Brighthouse Financial Inc maintained a strong balance sheet with $1.3 billion of liquid assets and an RBC ratio between 415% and 435%, aligning with target ranges.
The company returned $62 million to shareholders through repurchases of common stock in Q1 2024, continuing its commitment to capital return.
Annuity sales increased by 5% sequentially and 3% year-over-year, totaling $2.9 billion in Q1 2024, demonstrating strong performance in the annuity product suite.
Life insurance sales saw a significant increase, with a 26% rise compared to Q1 2023, indicating robust growth in this segment.
Brighthouse Financial and BlackRock announced the availability of LifePath Paycheck in defined contribution plans, potentially expanding market reach and enhancing retirement solutions.
Negative Points
Annuity net outflows were approximately $1.5 billion due to elevated surrenders influenced by the interest rate environment and business exiting the surrender charge period.
The company reported a decrease in total adjusted capital by approximately $300 million from year-end 2023 due to a reinsurance premium rate increase.
First quarter adjusted loss was $98 million, influenced by a $366 million unfavorable notable item related to reinsurance rate adjustments.
There was a negative impact on normalized statutory earnings associated with growth, particularly from the Shield annuities now consuming capital.
Management anticipates near-term volatility in results despite efforts to generate more predictable statutory free cash flows and a balanced exposure to equities.
Q & A Highlights
Q: Ed, can you provide more details on the actual to expected impacts in the annuity business that affected regulatory capital this quarter? A: Edward Allen Spehar - Brighthouse Financial, Inc. - Executive VP & CFO: Yes, the $125 billion block of annuity business naturally experiences fluctuations between expected and actual in-force results each quarter, driven by factors like mortality, withdrawals, and annuitizations. Small deviations can significantly impact earnings, and this quarter, these deviations were notable enough to mention.
Q: With the growth in Shield and a move towards an equity market neutral situation, will this impact the distributable earnings scenarios you usually provide? A: Edward Allen Spehar - Brighthouse Financial, Inc. - Executive VP & CFO: The growth in Shield sales has put pressure on normalized statutory earnings as Shield now consumes capital. We are transitioning to manage Shield on a standalone basis, which involves purchasing a basket of options to directly offset the guarantees sold in the product. This change in management approach should benefit us going forward.
Q: Regarding the reinsurance arbitration that led to a retroactive premium rate increase, was this a unique situation or might we see similar large settlements in the future? A: Edward Allen Spehar - Brighthouse Financial, Inc. - Executive VP & CFO: This situation was unique due to it being a multi-year dispute, resulting in a significant retroactive premium rate increase. Our analysis of mortality assumptions annually has shown very little change, indicating that this situation does not reflect broader issues with our book of business.
Q: Can you discuss the expected impact of the DOL rule on your business? A: Eric Thomas Steigerwalt - Brighthouse Financial, Inc. - President, CEO & Director: It's challenging to quantify any potential sales impact from the DOL rule at this stage. We are working with distributors to understand and mitigate potential effects. The industry is concerned about increased compliance costs, but for now, sales remain strong.
Q: How will the management of Shield products change, and will this require changes to pricing? A: Edward Allen Spehar - Brighthouse Financial, Inc. - Executive VP & CFO: We are planning to manage Shield annuities on a standalone basis, which involves purchasing options to offset the guarantees sold. This approach is already assumed in our pricing, so no changes to pricing are necessary.
Q: What was the impact of the reinsurance premium rate increase on statutory reserves and future GAAP and stat income? A: Edward Allen Spehar - Brighthouse Financial, Inc. - Executive VP & CFO: The reinsurance premium rate increase led to a $187 million impact on statutory results. However, it does not significantly alter our outlook for normal run rate GAAP earnings, which remain around $4 per share.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
