BHF - Earnings call transcript Q3 2017 | Brighthouse Financial, Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Brighthouse Financial's Third Quarter 2017 Earnings Conference call. My name is Nicole, and I'll be your coordinator today. At this time, all participants are in a listen-only mode.

We will facilitate a question-and-answer session towards the end of the conference call. [Operator Instructions] As a reminder, the conference is being recorded for replay purposes. now Head turn of would to presentation I Rosenbaum, David Investor Instructions] like the to over [Operator Relations. Mr. Rosenbaum, you may proceed.

David Rosenbaum

Good quarter Thank Brighthouse operator. afternoon you thank you, for Financial's third XXXX call. earnings and joining

and Officer; release from accessed materials. at Executive Today, of and by be brighthousefinancial.com. Investor and the encourage Eric you Bhalla, President our earnings released to Chief last financial Our on our of these hear Steigerwalt, night Anant section our you Relations Financial followed We will can were Officer. website all supplement review Chief

Following our of here members call question-and-answer the prepared with comments, for Also, other the are senior we management. in will period. participate discussion up open us to today a

Securities meaning may federal actual forward-looking Our risks with time to as Brighthouse uncertainties, November time Financial's materially of from company call X, discussed differ speaks statements laws. of and to any on discussion XXXX. on anticipated undertakes of information those this U.S. in Commission. within including the as will during call. today's only security today, in update results The Financial's call filings the include from Information discussed obligation today's described results forward-looking result the no the a the and statements Brighthouse Exchange

due the be During these comparable not information comparable of to directly and be period investment it non-GAAP financial provided from is to net which Reconciliations period reconciliation a our over not our preliminary most a significant A of now of filing Financial results based website, derivative related because And this non-GAAP believes directly and reliable and financial of Principles, call to Steigerwalt. impact can may the our statement. financial in have our Investor income. Eric net the gains most in GAAP forecast certain as references finally, measures will to fluctuate earnings on of been release found on to call, losses, portion measures. the the to CEO, non-GAAP has Relations forward-looking statutory measure to the on may definitions of also are not supplement. income the we measures and discussing provide GAAP Brighthouse net And turn Generally statutory timing known Accepted I'll and measures possible Accounting

Eric Steigerwalt

as and David, This you, is everyone. Thank us. afternoon, meaningful to Brighthouse milestone a call Welcome first our good for Financial.

on August policyholders X. to I would to our our placing process. on their like These market with Over distribution would standalone the XX listing like transform I partners our team efforts employees and a for Brighthouse this separation incredible past culminated has tirelessly August the and Financial efforts X on NASDAQ for also months, MetLife from separation to company. trust in our into stock thank their worked Financial. throughout Brighthouse thank our

Let by the the points rest as for key me company. set stage of reiterating the of an my strategy remarks independent our

are set provide our is advisors, a clients shareholders. our value First, to tailored and of to transparent life and goal and that insurance solutions annuity simple, offer

clients to to of partners. we through cost-competitive third, a And become products independent Second, our aim broad time. we over will deliver manufacturer network a distribution

advisors for Our with our on Brighthouse and we early showcases resonates brand Shield in our continues and were partners, to first March, brand millions successful that our of management and advertising Financial rollout introducing with been ads annuities. focused month, print launched These flagship strategy delivering to Board brand advertising, our In of campaigns. America. a Last and awareness, of Financial are us and recognizable value Brighthouse A this employees the clients. another a which people team, executing and shareholders. build round we television touched began nationwide our to creating priority distribution our their has

These some during public our seen has other brand the very have rollout and television feedback favorable. ads initial advertising of may been to and awareness backdrop, World shows. running You will topics. have that in new campaigns ground Series The generate as With numerous to these and the helped three company. I market hit now have discuss allowed a a as us the

First, the on product progress I'll and made distribution touch on front.

provide our some update Next, targets. I'll lastly, third perspectives our quarter provide And earnings. will financial to an on I

like also us. excitement interest who with distribution. Let to a from me our we advisors, with want advisors and in begin excitement a turn partner to who our lot met about I've There Brighthouse Financial. focused a creating launched in is brand is scale evident a since That player That of advisors relationship of excitement already with results. us, product sales number among is them March. and

deposits guarantees. Shield generates example annuity a strong Sales the late Index with be with advisors. were business product quarter product also Index first up distribution reinsurance economics is celebrated as in-force living new XX-year MassMutual the and were million up over of a Our quarter. next-generation in to white-label sequentially of the fixed-index benefit through sequentially. approximately we XX% It both to and million Financial of value in the annuities annuity, an with created critical $XX sales MassMutual. of quarter, quarter-over-quarter, July, of In that for our $XXX meeting of agreement sold X% our part good Horizons, clients. product Brighthouse us assumed annuities is Shield needs of this up XX% quarter. distributors variable Horizons our is a and assumes the XX% by while of our of complement launch

our X,XXX excited moving than of launch more forward. pleased advisors Index partnership are and We with leverage Horizons to MassMutual's with the

and I further products needs expanding earnings progress a to meet updating continue shareholders in in will manner footprint. calls. you future to that addition the new balanced of offering on on independent explore forward our our distribution to We distributors look

Now, quarter a perspectives few results. moment provide our take to a I'd like on to third

assumptions behavioral additional experience. industry year leveraging our to data of we First, models, with combined an our review, emerging completed to and annual and updated reflect refine our actuarial own assumptions data

We helped of some statutory also Anant and detail I'm the the our the provide in VA quarter impact assumptions. our of hedging certain changes. offset performed pleased that results. to will strategy GAAP actuarial expectations on more assumption line with aligned third and

turn financial I over call I to our to him, targets. on want the touch Before

drivers year to approximately plus XXXX; our return approximately average XX% initial share which of time. on operating X% believe Form base targets over operating set is This operating return best reflects the of update There at than equity. execution shareholders. financial have included in that shareholders The begin XX% to to stable to in to The equity primary strategy returning scenario equity, the We achieve and X% a to operating were of our of was per earnings XX to high-single-digit other approximately maintain final we measure interest three excluding previously accumulated mid- equity, by billion, on the our for are: update a beginning filing. was with cash our GAAP larger align targets approximately GAAP on anticipated. an the earnings target business growth of of for comprehensive income, change to which and impacting case $XX.X annually;

$XXX First, originally less million than the MetLife paid distribution was to projected.

and flow Brighthouse goals. stand-alone we Prudently and annuity must generate in these the time cash with adequacy variable sell resulted of a estimated; in and business, time. more across second execute or our following net income originally distributable market that quarter. block improve over To delivering operating positive strategy at favorable consistently on equity cost had targets, certain cycles, over manage separation restructuring above and as company new the Second, third, impact and aligned with a existing than over CTEXX; value compelling our to and robust transactions our asset design competitiveness of products positive are time; achieve

on a perspectives few expenses. me provide Let

investments momentum and with We TSAs. exit our a company. approximately and to call summary, results XX quarter to discuss our reporting our being XXX to made turn progress We in processes Anant standalone third that in first expect us our in will line transition plans we the be In our to at of and expenses implementing MetLife, our Anant? years, we we sales as With as our technology, are the period infrastructure and very as the enabled with quarter, good XXX financial systems few company Brighthouse that with on businesses. a executing in public standalone our higher over TSAs to during plans I'll end that, in details. our with are pleased first year more make

Anant Bhalla

third perspectives the and everyone. our for Thank key our on underlying with I good themes. quarter, results you, Eric, along will Today, discuss afternoon, the

will our separation stockholders' results, related has of tax book address The any was was such not of million $XXX operating be of to to million $XXX in net operating like we into our would MetLife. the the accounting expense. no the tax approximately recorded payment million, required XXXX. to with a This as net a in third we tax earnings I which reported respect on to quarter third quarter billion also we Before the our of prior make The Brighthouse $XXX a item. get one $XXX reported equity, quarter triggered obligation compared loss in of value. to the impact loss to In tax noncash the compared quarter to third tax expense XXXX. quarter million quarter, loss $X.X expense from in to refer

$XXX. including Accumulated And Income or value Other per AOCI, book approximately share, was ending share, Third was book quarter $XXX. AOCI approximately value excluding Comprehensive per

notable million, impacted been were or net Excluding earnings favorable expense, earnings, would the tax have the operating operating quarter share. items income totaling been would that previously There $XXX $XXX $XXX per two in million mentioned net and $X.XX other million. non-cash have

our Today, review million overall overall branding will our themes related four the our The transformation Specifically, an impact quarter. performance related $XX actuarial that impacted establishment costs tax. I to provide and from to perspectives income million annual primarily financial actuarial net favorable was review around technology unfavorable and million $XXX after efforts. $XX net this of impacts annual

an is theme key review first the this first company. annual actuarial our represents actuarial review. independent as The annual quarter The

year on Reserve Brighthouse the industry initiative. companies NAIC The one provides this client Financial experience to this industry-wide about dozen the Quantitative participating to observable of specific behavior results basis. one source Annuity Variable QIS, initiative. and the in Impact Study Capital or market a company year Financial for data of addition In conducted and Reform new granular additional an study of experience, the are available primary Brighthouse is

VA assumptions that the likely reform full out, rich years data work Brighthouse couple election annuitization GMIB client the lowered rates things, This a about our year's progress to review age behavior. behavior-specific still under are of update XX. client a such a availability more long-term of the informed initiative than While in with implementation has NAIC is set our X% to Benefit Guaranteed to updates in XXXX clients or Income addition other among for actuarial of Minimum for

of into XXXX actuarial and our changes assumption annual be can model categories. review All broad classified three

GMIB contracts X.X% life of This the First, over the reduced X% for or annuity assumptions Benefit addition Withdrawal roll-up guaranteed Minimum GMWB a We withdrawal client contracts of to base assumptions to contract. lapse withdrawals in age client results after earlier down for client deep contract behavior we behavior, our for change for to the age variable GMIB benefit variable end to GMWB floor a money time. typical contract in compared and from updated respectively. reflect all annuity in contracts, X% GMWB Guaranteed about to for the

reflected lapses and payment patterns. our book life assumptions behavior on mortality, Additionally, to premium we refinements

accounting. and of statutory assumptions The to between GAAP second category models and relates harmonization the

a in As XX, valuation all return with X% financial which of financial of our the our range this for This basis valuation targets. our assumptions the we setting for in models. account outlined GAAP harmonization the base-case our result to models line Form mid projection assumption effort, reduced puts is separate our

aligned the and accounting. projection models We between for statutory also GAAP period

replaced is We used is last a liability our spread. The in review third only with spread valuation. annual This of category and the MetLife actuarial credit variable-annuity, spread in the Brighthouse credit credit changes separation derivative related. GAAP-embedded

year next gets capital efforts and reform in VA emerging we the over closer will monitor We industry project, continue the are the around NAIC as involved developments standards. to to finalizing NAIC the actively

for annuity variable theme is second quarter management. the The exposure

increased hedges is reminder, the We of hold defined business from total fund to in CTEXX our a $XXX review, markets adequacy the CTEXX level are and worst impact. asset in the asset quarter was CTEXX a X% to was variable scenarios. The up into level in over from actuarial market the product As of partially a by this of which prior annual only life adverse managing quarter. Favorable by capital, assets of level floor in the $X.X we impacts requirement CTEXX offset the for markets. protect driven approximately required assets $X future known the billion, target The quarter increase CTEXX. CTEXX average our as the equity the million. annuity enter billion as funding to

on Assets contributing billion, $X.X were to X a above CTEXX sequential due unchanged factors. basis

First, up-market the the strong hedging a quarter by above growth in program performed assets to expect as in contributing would modestly CTEXX. we

million subsequent quarter, Brighthouse the the cash to $XXX Inc. company contributed of Company. Insurance Second, to end Life Brighthouse of Financial, holding

out-of-the-money meaningful protect market allows use us amount greater to efficient and to movements capital upside Lastly, surplus assets hedging the were favorable markets. redirected deploy We annuity manage assets This annuity above options variable billion of business to of blocks of from in strategy an CTEXX. with $X annuity intend a retain a variable to $X non-variable to against downside in with billion the block. our

strategy is at theme years, with approximately the of our approximately Finally, businesses, about to can expenses quarter, a we items, is quarter in volatile direct compared the life were be million equity $XX The risk to life reserve of lower transition our our million these option million costs changes, than $XX to and of complete sequentially. Corporate limiting Corporate book that Across It million theme million saw three The like mentioned not underwriting. full is the favorable earnings expiring weighted next insurance that I million the to to in plus earlier. note is expenses in average, $XX second would to quarter. favorable two $XXX $XX that our recaptures XXXX the last expenses. impact completed favorable the discuss average up hedging hedges. pre-tax in rollover $XX important the to impact reinsurance quarter lower first resulted XXXX of from expectations post-separation. quarterly but from do still include operating year I claims quarterly the establishment of

It over infrastructure make establishment factored we are plans investments establishment than we levels. anticipate or in with important note As to is costs higher in and these costs years, our to be financial our targets. into the that quarter's coming already line this

Life values in lower compared in Operating flows were underwriting entity. $XX recaptures level, claims ULSG equity in negative between favorable earnings the $XXX of quarter block, the reinsurance quarter our typically sequentially. XXXX. were the billion of to million with the the unfavorable annuity to with the at including direct of $XXX results notable quarter, billion to second in segment are lower segment nonretail items. including million and the quarter, the in million. The higher sequentially amortization Universal favorable favorable legacy legal Turning in including markets second businesses the also Strong items from due and was million, earnings $XXX Life $X operating Operating net the in Guarantees, MetLife annuity notable equally the taxes. in were $X net favorable resulting reflected businesses. favorable continued the related from quarter. Sequentially, Taxes $XXX account retention segment split results were segment Operating comprises items earnings results at and and Secondary the the Run-off Overall, XXXX quarter, in results of the review. DAC ULSG in actuarial million $XX primarily notable to other segment or offset million

corporate relative Many underwriting was our anticipated underlying expenses of growth quarter, run favorable the favorable across our rate. This quarter, segments quarters. including drivers ULSG the prior below to favorable compared reserve to were prior and

approximately earnings $XX $XX the impacted operating the million to million favorably quarter. to by As quarter second result, compared a in were

on our an update with close position. capital me Let

the First, $X.X Capital or Total billion, quarter. above $XXX was TAC combined Adjusted preliminary prior million

variable remained assets Second, billion. CTEXX annuity above $X.X at

case above Our $X return plan XXXX. billion, milestone base beginning is scenario, assets This to which, CTEXX through an is is to to capital grow the important shareholders. under gradual our before to

our reflecting our the are contribution million XX.X% the at the overall we'd for times or and Third, of questions. And company charges. to XX%. With below approximately fixed the companies flexibility expected call managing million after holding position. annual about leverage provides approximately life $XXX This liquid assets us mentioned $XXX like goal previously that, to is financial up our cash capital our ratio X capital in finally, of open

Operator

the first of Thank comes you. [Operator Instructions] Ryan from Our line question of KBW. Krueger

Your line is open. now

Ryan Krueger

thanks. Hi, Good this at just morning afternoon or it's point.

requirement us can In also about But things terms that of you impact, will that actuarial the review you the to the - million CTE help these are increase understand think do mentioned. I $XXX you cash as earnings the would continuing cash it impact capital about impact? margin Or reflected your without disclosure now the distributable, generation VA the is and think in on long-term flows? prior update fully adjustments

Anant Bhalla

and you afternoon. thank the for Ryan, good question,

targets our projections which to our same do same. Our stay we the There targets outlined earlier. be the updates and will sensitivity we will tables, as but annually, stay

Ryan Krueger

Okay.

targets, you cash Your else future capital equal, go-forward I flow expect but this guess generation? to negative on have impact a would all

Anant Bhalla

No.

targets in sensitivity models, capital updated a XX. to Form of Our your our in the will outlined reflect stays projections Page same. our want tables, base-case scenario In return the probably XXX, and XXX, you XXX

taking things do review an expectations. you But a step change that fundamentally a year, does doesn't back our move actuarial As in around.

Ryan Krueger

then if much would your you markets you there basis, isolated increase tell was impact the in have review? actuarial in an us, could margin just no of capital can were on your capital of the what - - terms the Okay. would impact And quarter how of what to

Anant Bhalla

X%. up quarter, the In the question. Good Sure. was XXX S&P approximately

over million there outlined above at and that the you around change CTEXX. sensitivity expected assets have there, table we in for sensitivity If would the interpolate $XXX you X% look of earlier a change

performance performance. as where came in well. bit We our probably come performance. from take a performed program have had the a from even little a we positive we That earned volatility that, had hedge expected. net program couple excluding down of of program, does $XXX not But million performance had as Our would volatility. we million volatility away hedge quarter of million $XXX down, Had hundred of

compare I'd Additionally, Form XXX and part passage as XXX with of a sensitivities on at quarters on flow and and multiple - of around time. XXX them you the XX, look years the XXX XXX cash and introduce over

well. of million each goes by, the couple passage of As - year each CTEXX as by increases as a quarter time hundred

elaborate that's So would parts, two I the moving on.

Ryan Krueger

Okay. Thank you.

Operator

you. Thank

Our next of of Erik question comes the from Bass Research. Autonomous line

is now line open. Your

Erik Bass

you. thank Hi,

on one to First, just the establishment wanted thing expenses. clarify

I that mentioned think, targets. in included you those are your

that incorporates ROE does the I So, secondly, those may that you But X% mean have to just you missed guess, long how say And continue for? them? I expect did then, it.

Anant Bhalla

Sure.

So all, question. of the second take first I'll your of part

We expect our in establishing few as standalone investments them is a well company, platform to making our the this continue And years. us coming technology, for really about as branding.

out, terms on of of because we'll targets of an ROE be nonrecurring In our once ongoing that we're fully established. the excluding basis X%, items

Erik Bass

they're Got flow more of when it. But that thinking so - then, cash in you scenarios? your in your included targets, said is

Anant Bhalla

factored cash emerge. our That is flow on in will already projections in, how correct. We've them our

for new that projections. our nothing We there's So, had already factored in.

Erik Bass

we next guess, related about over that a what just how forward. sort know and year to two, adjustment. would I favorable for it. about growth? level of the had book think in should think Thank value NPR normalized below-the-line the the of, environment, hedging you. meaning costs below-the-line And I going about Got this quarter, we hedging you or from But question you expenses as then, think one impact the

Anant Bhalla

just again. NDGL, little see context. so Below-the-line coming a Sure. you'll It's them through Anant expenses,

income impact some hedge negative market, in few will you a above converge. that our the at and supplement, see should a go put quarters at In even we how What of happen. reverse the reduce cases assets be and are depending more the forward a look the result of we start in Page the As of and down much net if to above at bottom CTEXX would rising costs, will in, income operating CTEXX XX line to reducing risk, hedging market. risk positive assets in

Erik Bass

you. Thank Okay.

Operator

Thank you.

Tom of of comes question ISI. Gallagher the line Evercore from next Our

Thomas Gallagher

- couple about of high the a kind Hi, Anant, to level, and drivers about of a the questions the think at this. way just

any happened talk more heard was, it right what capital of have little that first how your stability provide - actuarial - being happened if Brighthouse, to And And made. And $XXX information So going Met have spin Maybe million relates one sort whether have quarter? this explanation you there's another executed this before of then as I of your Met can explanation. was a the the that as bit - any we I contribution then adjustment heard forward just will, actuarial there about quarter, what for do we'll visibility further what reviews? Can there? the you you charge, an made. to on you

Anant Bhalla

Good take afternoon. the Happy aspects provide then and Tom. here. into step Hi, Sure. broader individual get perspective back, a really to

review with as got the lapse saw you done First behavior. with us of We rates. actuarial out, sensitivity more independent all, company Form we've us you I mentioned what actually our say lot of our this to And come given is We XX, some and markets. would a that I about like numbers, with about time. what annuitization feedback and first transparency saying, did come an up about tell

the and that Brighthouse, prior data we it's opportunity million we industry both even had The million to different behavior as out and it's we've had that numbers it, company. informed our into before data. right? sunset But And we lapse, it, review, level last a life from because relevant separation, we $XXX million year's is rich. no order in was once which to - So, the was get methodology, so review, $XXX that, related a This got put with us. year's of talk long participation we longer is in items. legacy also - very granular the look we just which a It sunset you've got QIS matter. time really about you data, by a come to experience given industry $XXX at the the to the actually to around some So credible, you broad major annuitization was now in and

to take follow-on Let have if a me there. pause you one. Happy

Thomas Gallagher

Yes.

block your that? - informed the is your changes So, in around block is based broader your lower deep for now contracts assuming data experience to that or more that's commentary you're is it. heard And based of the is you the the you by to similar now, more industry mature and seeing Or rates, we'll to applying maturing, showing so data, in conservatism some particularly more on some on, the risks money say, have? by that of had types of that another own access - GMIB data? is side? experience more when you're industry informed for lapse that, As in put to broad the way, you're the where I the on the seeing able that of just blocks degree, more see of you now access some the fact more that And

Anant Bhalla

started I out. would you say it's what said you when

with data that granular We the than are ours. for blocks have information seen industry older that's credible

we the ages. happens can see what as sort So, block of

data wait - You to emerge. have don't just your have for own to

Thomas Gallagher

you. Got

it into as they blocks what have happens So, helpful. able Thanks. greater insight is just That's to these a to age. really

Operator

from Dargan Securities. line question Fargo of of the Our next comes Wells Sean

open. now Your line is

Sean Dargan

$X.X statutory CTE. increased with that about question total annuities a you you I said I if But required heard be Thank confusing to for you. variable - billion or Anant, from have said I it assets I'm sure, that might not $X.X billion? the right something

Anant Bhalla

CTEXX amount That's sequentially. correct. That's our

Sean Dargan

to Okay. was million CTEXX? What - get a so difference that's But delta. to million the $XXX $XXX

Anant Bhalla

Just the actuarial of impact the changes.

was from the changes funded the three review segments. million cash company; that working; the from around remainder we program the between the I then million. So, the holding outlined $XXX with actuarial assumptions moving impact of And the million $XXX by that, $XXX and ways

Sean Dargan

Okay.

CTEXX this were And the I were spin, you And is at first the plus at are and feeling billion. you data, your granular was - when earlier? CTEXX were the performed of are $X.X market more billion. the at I $X.X good you're billion. you this concern well, equity CTEXX markets $X.X may about think but estimate - have still appreciate the at then than that have feeling Form XX have mean, I Is this that now? time plus published, you one plus you you about better very estimate

Anant Bhalla

That's question. a great

in it two take me parts. Let

to to markets impact finish right, then goes First out point. positive assumption changes, from million earlier your help your of $XXX down. It just down. right. all, obviously, The out, X X.X and CTEXX point, goes

Sean Dargan

it, yeah. Got

Okay.

Anant Bhalla

Now on our at would at independent, working X%. we're as third still in we I we on towards $X.X why really expected. that's when was quarter, us were and look $X.X quarter in to the because billion. worked billion, things the own S&P growing up And

It if the these table down on goes some historic value goes back, options, now. which a is sensitivity allows up. bounce vol billion. to we have by. into you have program us low some sensitivity The tables vol gave us gave if vol. We comes we $X.X So, you $XXX at passage upside. to look guys, the the should the approximately one-year a million those hedge in lose as we growth the participate use don't was down, to if [ph] If million you unchanged, wall we volatility We when in the give with was options, approximately of down gone constant. sensitivity lot vol. it XX back options. $XXX And But upside upside would levels, will tables the hadn't buy like a be of of because of eats then That time time in it

So, expected, things what worked I'd and we as leave that's it at.

Sean Dargan

Okay. Thank you.

Operator

Thank you.

Citi. Our next Kamath Suneet question from of comes line of the

now is open. line Your

Suneet Kamath

back little the maybe now three wanted - we're you had But and come I said you $XX.X would I looking to just last that $XX.X target. June it sequentially, think bit at at quarter, Yeah, billion. we're think, thought the is where I higher to ROE thanks. than billion, Yeah, a be. equity

So think that where you up? What did you'd guess? the I end plan, was in

Anant Bhalla

had a ended We're income the because it's equity, $XX.X related post here for our And $XX.XXX pro around billion we separation We forma we to separation. we net gate, out beneficial billion that's billion, how up. as performs. of around $XX.X and around X% some items where up from area, the on, of mentioned, ended now

Suneet Kamath

Okay…

Eric Steigerwalt

- I basically It's and know it's a we projections, now I is. just add So, it would Eric. mean, what true-up, we right. had

sort the X-ish. about were it be that. now X-ish And we reset so, true-ups talking won't that And to like obviously, from about more starting August ROE in any there of

Suneet Kamath

movement just Met's market that you own. was credit not stat past. things stat and sure have guess assumptions that could mean, the that mean, the, those if I then expect from between and the return talked the I it would And or I actuarial be in on maybe then, I your Okay. I to think, spread about impact. I highlighted the I mean, - the GAAP, surprises. should they have you would-be thought wouldn't harmonizing,

figure opposed wouldn't I'm they XQ as big in trying So, guess, I where to surprise. to at maybe happen why have out, spin, of earlier as the did point they of been

Anant Bhalla

basically the $XXX headline clarifications. $XXX other - to items. earnings well operating you independent a to offset as do you splits any lot have $XX to of in lot Well, of the you on to we to Happy just income from us if the out a XXX by is - giving impact have a A have million negative $XXX other But it's take below million sort impact of operating credit actually number, annuities. million that review we about what before income. line in as And them. it's to and between give negative to that awash spread follow-on, net talked be in million favorable actuarial

Suneet Kamath

Just other one one.

the of businesses what said was you the Just business? other from VA to amount redirected was that assets

Anant Bhalla

million. $XXX Sure.

Suneet Kamath

And something was was that had been that new? contemplated? Or that was previously - that

Anant Bhalla

we some financial Well, have flexibility.

ratio our all, be by secondly, is at the of the settle But to then independent our at first to I as review that and put wanted an segments, if company our is way. leverage and it First in actuarial complete XX.X%, XX%. capital target to we

levels All of the consistent segments single with are run rating. a capital A with

Suneet Kamath

Thanks. Okay.

Operator

Thank you.

Sandler comes next of of Barnidge O'Neill. Our from the question John line

is Your open. now line

John Barnidge

market of now. dividends. any right a there's you're a that questions buybacks blocks I stock-based Thanks. I'm the possibility pursue a is you to not acquisition not not? to the know, there closed But pursue going in position ask targets. or ROE about on could or But number

Eric Steigerwalt

well, Eric. number We're we in little conversations, of. knitting. We're we've building out working laid Form but our that XXX in on - and hedging it's work program. to our we've to are out our got it's businesses. now, our on now lower, sticking way John, other got bit got We TSAs a a XX working Right the of

what saw in did business quarter. this annuity You particular we the

months XX in just not public it's as company. so, XX to we're And first a something contemplating the

We and our working out have there, are them. towards we goals

John Barnidge

you very Thank much.

Operator

Thank you.

comes question Dowling the from of Partners. next line Our Humphrey of & Lee

Your line is now open.

Humphrey Lee

afternoon, question. you thank my and for Good taking

those that of terms Like expenses. company, standalone Just clarification separate? expenses? quarterly establishment kind it in because $XXX were of is something a is the being - regarding part i.e., - the there corporate expectation were a the million the part expenses Or run - of rate

Anant Bhalla

our into it But question. which Yes, are was cash projections around to of want here, there elaborate. the Humphrey, separate factored two thanks categories I sort already Hi, for flow.

rate million outlined run want in $XXX category, onetime in establishment, the have so we I year supplement, higher we just expenses, corporate first also that. We outlined. expected $XXX to our which highlight in the And in to second the which the the million

Eric Steigerwalt

stuff. the systems, And kind just infrastructure, think that about of establishment, one-time all

you'll same in in was the numbers buckets the about forward, we're about all in were contemplated it talking hear going two today. the Form But that way it it So, XX.

Humphrey Lee

been your sales product, marketplace? type Can competition to there's some Shield you the then the the - annuities. talking regarding the putting have out pretty in about market buffer about general it. companies talk just time, same at of over Got in definitely, But more And decent.

Eric Steigerwalt

for, welcome our Sure. is great a here. clients. This for I great Great a think, product We competition question. distributors. product for manufacturers. a great It's It's product

just So, coming that increase sales. - growing We distributors Wells competition. increase to online think, our be know the some be great. that's opportunities XXXX, We've working our or going to we got about. start Fargo other talked many got that would in We and either we're welcome business, relationship We've I there's other through our and business. Shield

So, I'd it there. leave

Humphrey Lee

then And follow-up. a quick just

what a products these kind you opposed is some versus do more account of the main understanding of annuities my product the account general a on there account product of general of see Like, your separate separate chassis. having So, buffer out account to is as product? a as advantage

Anant Bhalla

a behaves a Anant. lot have It's We it main The account account, Hi, it's product. like a do for us. separate a unitized separate general is account difference, though, simplicity.

in a that simpler lot does fees product clients. not makes have it And for Our it.

Humphrey Lee

you. Thank it. Got

Operator

you. Thank

comes Bhullar Jimmy the of from JPMorgan. of next line Our question

open. now is line Your

Jimmy Bhullar

I'm a ROE to on Hi. again ask question the point. going

full I target the a balance think went XX%. up and equity by ROE down went point, Your by don't

in well? resulting the the Or for is changes there your assumptions are it just denominator that's earnings So, as change? in

Anant Bhalla

sort we it's favorable Jimmy, so quarter. also numerator, to have separate, $XX.X about Anant. the billion of right, capital. $XX denominator as you we items of of the up, Well, of think Hi, $XX million talked When million I went this the

items fixed were remove costs We're between to in them mid-XXs we'd was So, tax on go as notable we'd $XX be underwriting to you million GAAP this $XX the terms of plus of items, our XX% running to quarter, and expect at rate. a time expect in taxes below tax there around rate this look and the a good where numbers million expenses and favorable.

you if - look at... we if So,

Jimmy Bhullar

you what I'm some Yeah. it's higher or not you this that mean? doesn't of being positives what work. have of forward be quarter. negatives just going they're the I math saw. the Do taxes this really to what would not know you because always some going like lower I'm that comparing means comparing - assumed, quarter The happened

X% And by a numerator bit that not it exactly, the is higher. and results versus X% versus sense? that little been little bit. quarter - X% about plan went bit talking make little target have than next plan, like If might realized a year. versus lower, have first X% been Does either But and more a not denominator up might I from XX% to going went or means the your down ROE I'm I'm plan

Anant Bhalla

us denominator Sure. Yeah, and for up. came the the went targets separation, then up see $X billion you the through

I So point would that's to. what you

Jimmy Bhullar

your no earnings And your for term assumptions there's versus longer initial assumption? in change

Anant Bhalla

No.

Jimmy Bhullar

a million a up that your quarter in a capital for that? - so? up And required for how or normal market, or Or Is this range, X% something Okay. let's is by? higher quarter than it say lower should CTEXX then much it $XXX go around or in

Anant Bhalla

Great question.

If first and distributable base scenario you CTEXX look X.X% you at a XXX years of basically over case can three-year the in flat. it which on Form actually the earnings, in with our how XX, case compare base the with sensitivities, you instantaneous three separate return where the I our XXX, see are statutory give account is

aging So, which that stay kind flat, $XXX you million would I it's like it about, need is of return quarter. talked factor to the that for a a

Jimmy Bhullar

Okay.

and goes actually, than down amount your that, than up. lower better so required goes and obviously, And it that,

Anant Bhalla

Exactly.

Jimmy Bhullar

That's right. All had. Okay. you. all I Thank

Operator

you. Thank

next Randy of line question B. from comes the Binner Our of Riley.

is line Your open. now

Randy Binner

thanks. Hey,

- talked think the of of on, and VA breakeven So, I we flows were on than least they're about closer of first better modeled. days, just the we early sales the early indexed XXXX. better the but maybe at kind end kind to And flows than annuity And metrics, had by getting half. it's

more view get my the any when you breakeven? so, on question think might have you on closer flow And you is, do

Eric Steigerwalt

the about I'm it's to don't Hey, - going Randy, at because of years, XXXX. remember just you end take sure, number Eric. said, it. ever saying of it's a I I pretty think

$X this done billion we've of in year-to-date about year, deposits. So

you couple sales. a a take if I sales, across reasonable guess But down guess your slow do take whatever net we're could with annual showing flows is, mean, guess need an going here. annual or to many look it how board, take could the Flows growth growth ways rate fourth of flows, right. that it's Fargo. be, and and a a - then going not quarter from say And we're at experiencing Wells we're extrapolate that, fair in And while, I negative whatever our going We're our more would you happen. will distributors. think of in quarterly to the a for to it grow you'll at net kind number. I is, can amount could there's you think, what of know So, you negative lapses or just

MassMutual, We with net which on think that also have about about can the quarter, increasing. was only million - this so a you $XX brand-new in FIA basis through

So, while I'm for year-over-year now. sequentially for looking a growth sales

it's number one to get can actually a out. take to to a of going number thrown years, can haven't going years, a However, take to Eventually, of we before we net it's I years, but breakeven try out, of and give sort flows. number

Randy Binner

overhang follow-up. rule helpful. all And little their these apologize, discussed. here. starting is effectively - That's the DOL And rule has are guess, feeling fiduciary of But being kind the distributors at are different this calls DOL Is delayed ability a a together your to about there? product? lightening the sell if No. bit I annuity run from out been up The I to

Eric Steigerwalt

or DOL, of - the it's Look, said rule Having I it them. there's from to say to by the to a XXXX. were us with I'm think daily of want way, number potential They're they'd a them sell you today, that, yeah, are talk to distributors, said the to delay. the our very - this delaying focus important of if These to have I'd we to to clients received so sure basis yes and pre important. products weekly of say, much clients, that. and point. June some not that or on at pretty we

help So, it's forward. going going probably to

Randy Binner

All Thank leave there. it right. you. I'll

Operator

Thank you.

next question Our of the Scott Sachs. from comes line Goldman of Alex

open. Your is line now

Alex Scott

in-force whether actions you had have Run-off product? Was be taking an Thanks segment. for the hearing one on of that Run-off the your potentially of peers in opportunity thoughts taken interested the that to the these potentially and could quick on some a management I question. some for on just just increase

Anant Bhalla

Life our Universal Alex. almost We'll actually profitability. XX-XX business and the Guarantee see ULSG like that with to at nonretail book, for And looking is have question, predominantly view. ways always point in a tax split of of results reform. the what from we're segment It's to happens were improve businesses with interesting. Secondary entity. thanks Hi, comprises legal ULSG, The other Run-off then

different fees what ULSG But on options. our do it's might at look a - people will blocks. are we So, other than little

charges and to have I what to cost highlight we'll look that point. things So, It's like insurance do that, at. just which to want of

Eric Steigerwalt

we previous to full made. stay plate going just back Whether just something that. and So, I divestitures, to add I'll or what got on comment, acquisitions focused a here we've Anant want a said very to it's

doesn't knitting we've things we our mean Now got things. evaluating in not on to got we're that the to two to and generally get first we're don't stick done, years. we've what's operational know But going and marketplace, the going for

Alex Scott

Thanks. Understood.

Operator

And next Jay question the of our comes Thank Barclays. of line from you. Gelb

now is open. line Your

Jay Gelb

to That its exchange third, target. the the absolute and Thanks. at try put It's I level, remaining potential in Brighthouse; the isolate insurers; would stake life in underperformance be: big If exit a - treatment it offer Gelb picture stock relative of Barclays. try and today, and ROE changes from federal one, announcing three of the might tax Jay and Met the of the in buckets. two, I lowering

ROE you I talk think, you've the target, maybe the but Thanks. already could of addressed, lowering first two? about

Eric Steigerwalt

I don't MetLife exchange. say about anything So, really to the have

they're time proposals With know as to to the and are respect change on There in that. evaluate be It we to there going over we yet. just well. - We've They're to are to have decisions owners to that them. just making don't got came of that talk reform, out. going the tax You this. stock,

is is in change. initial the going to So, whatever draft

this be So, is difficult it it's would all to very where up. speculate, end - to going

more - answer it's hour, have I lot a for want has that then that. to as So on time. change to work But this it. maybe over I of said, been going an an out And on do going know, know I - don't to draft we're like given you particular

just we're to So, to see. going have

Jay Gelb

X% on current again, roughly then And calculate Is $XXX, AOCI should it annual ex else account? Thanks. into Or I of square target any that. we of appreciate value can ROE that very target. simply kind earning power. just book $X.XX the thing take take we is one on back-of-the-envelope that ROE okay? anything there of around more to - I up If

Anant Bhalla

XX% about as we'd came that, to addition my underwriting where million got $XX Jay, hi, expenses items sort the back the look of this to it's $XX in as well of million, favorable and you've that at. which mid-XXs rate, Anant. versus million comments to go favorable $XX at between I the to fact quarter lower would $XX tax million

So, out as you're notables and you'll and I earnings you where look our you triangulate out you make adjustments and exactly, come take operating that, think at for thinking.

Eric Steigerwalt

I'll thing there. It's Eric. I'll other Maybe just add just add one one.

just want saying, it the up to approximately changed. equity number those really took calculation, the X%. the forma pro But yes, much a was make So equity to the as clear. again, change, colleagues is from did approximately was because changed, because of up everybody I but sure It lot. is Nothing versus your else formas, pro has one so the X%,

Anant Bhalla

a per ROE requires stable over business metric. And I'd value ROE book it It's grow let's guys X% to we our that's and back you change, few maybe just take an we're started mix thematically, as speaking ROE, what with we you months with all. road sharing you on the sustained on show to improvement, back to that a And looking time. share. conclude while were go to

Jay Gelb

Right. ex - Starting value book of from $XXX as at in starting AOCI quarter. third

Anant Bhalla

Yes.

Jay Gelb

That's the for Correct? the baseline ROE.

Anant Bhalla

Yes. That's correct.

Jay Gelb

very Thank you much.

Operator

closing any I'd Thank Mr. like remarks. questions today. hand we call to you. David And to the all for over the have that's back Rosenbaum

David Rosenbaum

today, quarter. forward next us question All right. for you speaking We and Thanks to everybody Thanks joining. for Brighthouse interest Financial. again in look for with your joining

Operator

Ladies conference. That you does for conclude in program. and today's gentlemen, thank participating today's

Everyone, a have disconnect. great may You day. all

Brighthouse Financial (BHF) 5 Nov 172017 Q3 Earnings call transcript