Brighthouse Financial, Inc. Q1 FY2024 earnings call

• Eric Steigerwalt noted the company maintained a strong balance sheet with $1.3 billion in liquid assets at the holding company and an RBC ratio between 415% and 435%. They repurchased $62 million of common stock in Q1 2024 and had repurchased an additional $27 million by May 3rd. - Annuity sales were strong, with SHIELD Annuity showing steady growth, Fixed Indexed Annuity driven by the SecureKey product, and Fixed Deferred Annuities contributing. Total annuity sales were $2.9 billion. - The company partnered with BlackRock on the LifePath Paycheck solution for defined contribution plans, with 14 plan sponsors with $27 billion in target date assets planning to make it available to over 500,000 employees. - Corporate expenses in Q1 2024 were $207 million pre-tax, down 1% year-over-year and 15% sequentially, with 2024 full-year corporate expenses expected to be lower than 2023.

In the first quarter of 2024, Brighthouse Financial's annuity sales totaled $2.9 billion, marking a 5% sequential increase and a 3% year-over-year increase compared to Q1 2023. Total SHIELD Annuity sales were $1.9 billion for the first quarter, showing a 2% sequential rise and a 20% year-over-year increase. Fixed Indexed Annuity sales reached $191 million in the first quarter, driven by the SecureKey product. Fixed Deferred Annuities had $637 million in sales. For the life segment, first quarter life insurance product sales were $29 million, representing a 26% year-over-year increase.

• 2024 full-year corporate expenses are expected to be lower than 2023. - SHIELD business will be managed independently with stand-alone hedging, involving the purchase of a basket of options to directly offset the guarantee in the product. - The reinsurance premium increase doesn't significantly change the outlook for normal run rate GAAP earnings, which are expected to be north of $4 per share.

• Reinsurance arbitration led to a premium rate increase, which was a primary driver of the decrease in total adjusted capital (TAC) by approximately $300 million from year-end 2023. - Annuity business has actual to expected impacts that can magnify and affect regulatory capital. - The DOL rule may bring compliance costs and has an uncertain impact on sales as its full effect is still being determined.

Q: Suneet Kamath asked about actual to expected impacts in the annuity business affecting regulatory capital.

A: Edward Spehar explained that there is a $125 billion block of annuity business, and there are fluctuations each quarter due to mortality, withdrawals, annuitizations, and even small deviations can impact earnings.

Q: Thomas Gallagher asked about SHIELD growth impacting distributable earnings scenarios.

A: Edward Spehar said SHIELD sales growth pressured normalized statutory earnings and they will manage SHIELD independently, purchasing options to offset guarantees.

Q: Thomas Gallagher asked about managing SHIELD differently and its pricing impact.

A: Edward Spehar said pricing already assumes stand-alone hedging, and David Rosenbaum mentioned maintaining pricing discipline during SHIELD growth.

Q: Elyse Greenspan asked about distributable earnings timing and RBC strain.

A: Edward Spehar said the timing of the business risk charge affected Q1 capital and sales levels are important for fixed annuities in terms of the business risk charge.

Q: Wes Carmichael asked about reinsurance impact on statutory reserves.

A: Edward Spehar said there was a $187 million statutory impact related to the reinsurance premium rate increase.

Q: Wilma Burdis asked about products impacted by reinsurance repricing.

A: Edward Spehar said primarily ULSG, with UL and VUL also involved but in different proportions relative to the reinsured book.

Q: Ryan Krueger asked about DOL rule impact and reinsurance price increase impact.

A: Eric Steigerwalt said the DOL rule impact is hard to quantify, and Edward Spehar said the reinsurance price increase doesn't significantly change the outlook for GAAP and stat income.

Q: Jamminder Bhullar asked about DOL rule impact and reinsurance price increase impact.

A: Eric Steigerwalt said the DOL rule impact is uncertain, and Edward Spehar said the reinsurance price increase isn't majorly affecting the EPS outlook.