BHF - Earnings call transcript Q4 2017 | Brighthouse Financial, Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Brighthouse Financial's Fourth Quarter 2017 Earnings Conference Call. My name is Sandra, and I will be your coordinator today. [Operator Instructions]. I would now like to turn the presentation over to David Rosenbaum, Head of Investor Relations. Mr. proceed. may you Rosenbaum,

David Rosenbaum

Good Quarter thank XXXX Operator. Brighthouse for Financial's Fourth Earnings morning, you, you and joining Thank Call.

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

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

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

Investor financial call, and related measures. also definitions may measures supplement. During discussing portion directly our release financial found accounting measures our GAAP Relations non-GAAP the and most of our comparable of earnings based be we measures accepted this these known on generally will Reconciliations website, not non-GAAP certain in principles, as to in on the be

to timing the Steigerwalt. now statements. finally, Eric are while the of the adjusted references of retaining And CEO, to the nomenclature definition. call And SEC for the recent filing due our operating earnings changed results turn Following to preliminary statutory I'll over to we the guidance, statutory earnings

Eric Steigerwalt

and Financial March, insurance Financial. David, annuity transformative the name. good products under Brighthouse for began was a we XXXX life morning, In year you, everyone. offering Thank Brighthouse and

rolled campaigns running annuities. brand we in campaigns our helped of of out Shield advertising we momentum. a introduce hit long-term believe this focused the the and very designed the I allowed to for Over These capital results June, a year, generate that to have us flagship In the course offering. quarter brand company our structure as public and inaugural set ground company. established reflect market our awareness successful with a new showcase the debt sales the

Specifically, $X maturities bonds rates. billion we issued coupon split XX-year of between and equally attractive XX- at

of year Overall, on on are three full milestones, And that many made on highlight discuss the from on the listing backdrop, course, the fourth plans. quarter quarter as product a a feel MetLife Nasdaq our and August very X with to good our Stock and public I'll of the I on earnings as XXXX, for a first relative With progress today, important Of front. first, our Market reporting XXXX, topics, we our stand-alone our now separation will was I touch about company. X. distribution progress August

I will lastly, Next, some regulatory impacting industry. And comments items provide quarter our make I few on our a fourth perspectives on will results. X

start with me Let distribution. product and

As momentum stated sales into we the have with I'm XXXX in our and XXXX. I annuity sales very results earlier, carried pleased

from insurance as those see excitement the to and positioning partners, may distribution clients We annuity continued inbound U.S. in interest Our and a explore to strategy focused have worked have us forward. a for distribution company their advisers years partners strategic positively that from want that life serve relationship responded our and the with they going and

fourth We sales and benefit from strengthening we sales momentum. solutions, relationships our distribution of solid a believe our manufacturer focused reflect highly As annuity quarter and partnerships. life results and value

$XXX were and our fixed-index Index sold Horizons, XX% the Brighthouse XX% sequentially Shield of to we assumed quarter. advisers. product quarter, and annuities sales quarter, launch XX% part is economics MassMutual white-label, agreement through million up the reinsurance annuity of XX% $XX MassMutual. Financial XX% created the of up annuity $XXX were assumes product with July, In million the a by Our of Index celebrated XX-year quarter-over-quarter. from Sales Horizons with up approximately our in late sales the million this first up in quarter-over-quarter. of sequentially distribution last be of as

Horizons Index partnership we We advisers, to We shareholders, are of value our advisers. MassMutual's pleased from product are needs with our to and than simpler, evolving products to success the make that their leverage businesses. the plan and continued continue to X,XXX with more and listen and our offer to new more provide respond continue of excited updates and transparent will clients partners to feedback that to

options, as build launched help yesterday, minimum VA to our our for giving their our FlexChoice control greater available on Shield updated Just serves clients. our this an platform. of we benefit a of rider of portfolio investment excellent update complement lifetime version to VA We provides access FlexChoice, to new advisers guaranteed withdrawal version and believe annuities. income more This strengthens suite

to moment to provide take a a results. quarter like few our fourth I'd comments Now on

above to with assets goal expectations, to billion gets This expect very $X.X that performed returning at I'm which annuity we the of important our at and to is end. capital begin line billion, capital shareholders. resulting First, pleased $X variable CTEXX the which strategy level an quarter closer milestone our of us in in

year of the Expenses our Second, and a $X.X us. third in metric key billion post our billion. expectation quarter, $XXX annual line $X the million but corporate are up from quarter for in expenses between in our with separation rate were first run

cost-competitive with part our with be over is agreements this is of business strategy to to executing cost-effective or I As manufacturer before, strategy. Exiting more said service a MetLife time. them transition replacing have a and essential solutions TSAs

XXX the remaining. good made XX of able TSAs with and We in our year have progress XXXX. We were exit to TSAs ended

us to begin XXXX, position will believe will prioritize reducing We to TSAs put in expenses a the year. our of exiting second half during continue this the in and we

and As establishment part necessary to quarter, of our our technology the million $XX costs. We approximately also costs In our as pretax. in infrastructure businesses. in are investments refer strategy, establishment fourth we making these were investments

Third, but normal experienced our mortality elevated sequentially, in quarterly All underwriting. unfavorable We within results the variation. growth in, businesses sequentially. impacted insurance in life and underwriting expenses

In future. MetLife. that and been believe are of Financial Finally, delivering estimate business is identified to that annuitants of uses a owed committed reserve provide administered on reserves are administered after these in all This $XX undertaking the review certain also it a missing who not or provided to the practices our group based like its on transfer segment I'd as across now payments of group tax or Run-off TSAs. annuity was increase procedures on We by the This few as pension-risk reserve quarter. contracts part result and nonretail Brighthouse reserves. million group legacy annuity to drove retail of by comments a related in that Brighthouse to a that MetLife increase promises. entities XX,XXX and do be it group unresponsive announced the review business in MetLife have annuitants by issues information related impact our is our to time. over annuity may we have approximately And MetLife, December,

for receive more review and actively quarter other are continuing Anant information MetLife matter, monitoring potential to on will on our results We working with any are fourth are shortly. detail and this impacts. provide

Hill year, turn Last regulatory the to worked our outcome I Before items industry. group life an spend in I achieve a him, for I covering minutes that to I call impacting believe achieved to insurance of a our industry, on and X over effort Capitol we want a CEOs few outcome. balanced with

expect effective we operate recorded approximately in quarter. tax rate GAAP lower favorable with million Brighthouse, to a to and going book a the $XXX value for Specifically, we impact of forward

we item reform. working VA are actively Another is important capital through XXXX in regulatory

our for XXXX public. As additional recall, as quarter may And conducted we as current input conducting in year, the third last Capital review. were made impact recommendations VA Reform proposal capital study results own you X for initiative Variable Reserve as an and of well experience the reform assumption NAIC our quantitative the of and year Annuity the late utilized

principles are believe our comment total to X-month a aligns We year-end XXXX followed period, further period industry engagement. a years. a by requirement. in it view few managing a regulators public with and the a likely would XXXX many of behind and phase-in details There to are with this over the regulator initiative of or work asset including be of Implementation supportive with through later

utilize impacts to levers adapt requirements. regulatory have evolving to we We and multiple of that capital can the

remain feel have ratio focused that significant CTEXX ratio XXXX For approximately of remarks NAIC example, target our XX%, I potential progress good impacts. growing year any with We Brighthouse began reform. to and XX% above relative my leverage noting was transformative of assets to flexibility address a financial we and leverage and on our I about very for our plans. through managing by Financial, a

I'll company, proactively XXXX With of more call the we expect are evolving advantage quarter the in to financial We we transformative the to our that, be over and year for and positioned landscape. fourth equally to take turn environment will believe detail. well the regulatory an adjust macro Anant discuss to results

Anant Bhalla

a was underlying provide the and in of $XXX I themes. Adjusted million our billion quarter the income of the to $X.X in results on for net Thank the the of fourth adjusted quarter will earnings $XX some to quarter of the Today, discuss $XXX quarter million morning, XXXX. were compared compared XXXX. and you, Eric, everyone. key million fourth in fourth Net approximately loss loss good perspective quarter an in

comprehensive tax $XXX ending impact was accumulated per of favorable the other Jobs the share. quarter AOCI $XXX quarter as reform. fourth value enactment included to in the book Tax Results fourth and Cuts a Act, or referred excluding to Our also related approximately million income

impact remeasuring GAAP going from tax of of reform million. earnings and of been $XX statutory and had assets tax remeasurement key stockholders' The basis. this both significant reform of on our tax quarter the and implications The increased like to by during tax impact A tax deferred a impact minutes a the reform I'd excluding Excluding the forward. million. financial discussing $XXX on a reform, spend impact this AOCI liabilities enactment element would equity results. adjusted few our have involved

to change reform considering tax However, address rule the equity. accounting an the an currently of stockholders' within is impact components unintended of FASB

expect $XXX once million AOCI not corresponding change earnings. excluding retained a amount, equity. total is approximately FASB's As by stockholders' equity reduce will stockholders' reclassify will to result, This AOCI change adopted, proposed the but we from to a

XX-K year-end to deferred estimated admitted is excluding a in factoring be value a statutory We expect after XXXX operating to reflect financial this included there $XXX the adjusted be this AOCI on approximately of total was in in impact statements in share. reclassification a for change to assets combined basis, and Book filing. capital reform, our our tax therefore adjusted On tax minimal our companies. minimal per

end would to a year-end ratio how RBC preliminary a and the as in ratio the estimated at environment. expect year. tax methodology the well to of of risk-based rate well estimate On capital in year-end of result will if our Our to adjusted used the the work as NAIC of mid- as the excess to are the basis, through have We go-forward we XXXX tax were or to tax that to XXX%. of teens. changed starting XXXX our new in combined be calculation RBC The and modify from this reflect been RBC XXX% tax combined high provision industry XX% be excess of earnings when NAIC reform, rates is in XX% the preliminary

expect reform tax In a taxes negligible terms years. couple impact next cash results, of in from that we impact of the statutory

reform. no Finally, change we from tax financial expect targets to our

return EPS We case adjusted our adjusted time as single reduce average digits capital to starting our of continue growth of base shareholders to capital an X% to expenses. high of over excess of scenario $X approximately annual earnings. This XX% of consistent returning level we previously XXXX. we case to anticipate under XXXX mid- scenario, XX% capital and in on to distribution in When our to it in is anticipate base ROE expected billion of through stated and target adjusted comes with of shareholders,

given dollars forward, a distribution going focus refer of we expect our capital target terms to statutory However, on only to results. in of cash

back earnings. Turning to

earnings. $X.XX impact of or quarter the unfavorable after were there impacted items per notable to adjusted in favorable addition $XXX X share. tax million the In total reform, that These tax

million reserves partially $XX of or due establishment refinements; transfer ULSG, Specifically, of transformation and universal to adjustments nonretail Run-off offset MetLife; million additional for of are million the Run-off $XX annuity reserve initiatives; finally, segment guarantees are secondary reinsurance pension-risk item to and recapture a to the life these legacy in tax all our in contracts with segment by reserve in branding contracts, group $XX costs by a $XX technology increase on million the administered related separation. and related business

to impacted that like this provide I'd our some Now on overall quarter. performance themes financial perspectives X

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

managing scenarios reminder, capital a our as obligations a is contract. total of in X% contract asset variable worst the average environments business market required requirement assets the of the the level floor CTEXX we satisfy of are As to a the life CTEXX. defined market thousand holder annuity as amount to across future over known of

$X.X CTEXX $XXX were up sequential above million Assets on a basis. billion,

our and hedging result. this the to of quarter, fourth the of $XXX with aging with program above contributed combined We CTEXX. million. approximately in performed expectations, growth assets market was by equity are in This partially line $XXX the offset with CTEXX pleased in quarterly million normal very strong a The approximately

The underwriting. Run-off the in This segment. results second for sequentially, our unfavorable is life businesses theme insurance across primarily impacted quarter the

by we mortality severity. increased and earnings growth to saw claims due about Specifically, Sequentially, negatively impacted underwriting mainly ULSG reserve results $XX elevated million. incremental adjusted

like While expenses quarter to claims $XX stand-alone life after-tax to Corporate have compared mortality do mortality can of or million full not theme impact discuss previously Corporate mentioned were XXXX. include $XX last ULSG would better costs XXXX expenses. than $XX vary I pretax establishment million plus reserve expenses million quarter, approximately we million The the the in a results the for up third changes $XXX in quarter earlier. pretax of prior year of of that the as the higher pretax company. is I retention quarter-to-quarter. we've were do as from And shared, year, direct

already tangible are we is recent over approximately business This investments make on expenses we executing entered establishment expected with a to quarter. progress that to migrate structure, to over I anticipate over variable to to an after-tax into million goal and plan. updating processing and costs factored lowering is that with Technology outsource the infrastructure costs to time. support As industry-leading cost our thereby capital in forward of us operations. servicing, more time. be establishment earnings cost-competitive a new DXC few that million per example to one next important partnership is to our is $XX we into on look be operating partnership years, It in-force goals these $XX administration of provider manufacturer our Eric this a our you future to mentioned A our in this regard calls. enable note

to flows, Strong in billion. reflected $XXX higher expenses. segment consistent Annuities level. million in in the negative to expenses, values continued Turning a at the offset $XXX increase the Adjusted results account results sequential corporate net the segment in quarter. earnings were increase billion with annuity resulting markets equity $X.X in Sequentially,

growth we expenses higher in majority the $XX was reserve million. Run-off million Given in unfavorable mortality million allocate corporate to a the impacted the ULSG loss also Annuities and segment. $XX quarter, Expenses results sequentially. size, quarter adjusted were the earnings sequentially. mortality its were Life sequentially. Adjusted notable unfavorable of items were in segment elevated the including in by of $X the The segment relative

with our an XXXX. position on of close me Let capital year-end as update

the total prior First, or was billion, with in $X.X combined capital TAC line preliminary adjusted quarter.

RBC XXX%. combined well preliminary estimated our be earlier, is capital mentioned I excess or in ratio risk-based as of to Second,

above billion. increased assets CTEXX to variable Third, $X.X annuity

base capital billion before begin under an our milestone assets plan to the we is above Our scenario. shareholders. This important returning CTEXX to to grow case $X is

the our open we leverage our of $XXX the ULSG Xx XX-K variable financial managing annual questions. that, of target overall to charges. and Additionally, companies anticipate opportunistic mid-March finally, capital position our about updating And below in ratio expected us the filing. for annuity Form at our is This our like Fourth, and accessing call With sensitivities in were flexibility be million capital to assets us approximately XX% liquid up provides we'd or allows fixed XX%. holding markets. our in

Operator

Instructions]. [Operator

the of first question Gallagher line from with comes Tom Our Evercore.

Thomas Gallagher

right Anant, ROE? the that still the question on Or having not that guidance. X% on in the to, run ROE big expected telling read old GAAP a the you're lower the rate, despite First that to the that? X% drop you are likely rate's guiding pretty tax than is be us

Anant Bhalla

the for Thanks question.

tax X% from will on better but think rounds up I on really It is reform denominator well, no did approximately numerator, is be X% Tax go bps. time. time average what as XX the average the saying over that we're stays still the change it over around reform. approximate that the around guidance, marginally on so

Thomas Gallagher

recent most would that's still run that, on run basis, despite X%, rate this the of be from in a quarter? So rate an apples-to-apples noise some good your view

Anant Bhalla

X%. Yes, X% is still the approximate approximate

Thomas Gallagher

Eric, that. VA. Okay, -- Does around implementation time on said just change the the a I flexibility, with heard rules just more of timing you do question capital have about enough a questions given terms feel few uncertainty? confirm regulatory that you like wanted kind there? just and and at you of potentially you and get changes on have XXXX to that the frame flexibility of to The the all way you view confident around. of what your new where visibility Or your that from actually returning are enough you're in the I

Eric Steigerwalt

Okay.

strategy can. our needle, So team no to I every execute hard as fast we I'll We're Tom. on we're And try hopes beat right? think different. targets, their management Look, to that as to thread working

of into coming if with where the what's a in going can. bit possibly and fast willing we a we want point back go we dialogue further. regulators we the to wait forth that, certainly year basis the that's industry execute as I this on certainly we happening And But have do would and comment all here, to think little you I'm as little it. and comments the can get we update and a then more hear I then see bit between strategy that more until a I to both say will can to on

Thomas Gallagher

because annuity I that news variable is some Eric, could think if there's do -- different mindful in And position VA a form? your the of part the for in. fact opportunities Voya being Brighthouse road of slip to big overall such the transfer you Okay. more in their transfer you in down guys way, are or one Any shape about potential deal, a to just light capital optimize of be business, utilize here risk to going risk

Eric Steigerwalt

strategy I this. I said laid the out on executing and in be on said going on that last seen repeat I'll some interest here's be there's transactions. flexible going in So say to what to always would that, out the what's evaluating it Everybody and we're about on the we focused detail. our are what to we Having call, going marketplace. always Obviously, we're I've has these in we targets said laid the marketplace. and

what's marketplace. we continuously on the that's on strategy, and everything the executing we're evaluating So going see but happening in we're

Operator

question from Lee comes our & And of with line Dowling the next Humphrey Partners.

Humphrey Lee

would was potential like agreements TSA Any wondering indemnification any the separation risk contain if just whether Met? arrangement or separation -- in of any Met, agreement? of business the with Brighthouse any -- regarding it's I kind to that the to the or Just if the transfer agreements pension of

Peter Carlson

is the Carlson. this question. Pete Thanks Humphrey, for

we're not them. specifics a the this would any from information receive MetLife about are to not we and review information surprised, to continue reviewing in other be we matter than and with you much position As actively say

Humphrey Lee

markets. And Okay, on a as up. a definitely pick got is weaker CTEXX so fourth in did of good bit then in quarter development a your The little the volatility but it. the buffer, first terms was it equity quarter, definitely

based your think where how we on buffer target So the markets if quarter first equity asset of are we about to end volatility, were the in level? should terms today assume we the to compared and will

Anant Bhalla

question. way fourth here. Humphrey, are quarter, some and performed the it's Well, step Anant. pleased the back for with we provide a take Thanks in perspective the me it but very let

we given X First years, options of and have equity specific, that in our be XX% quarter be years need first quarter, book have a equity all, than utilizes our only the to year, each X that in To more of hedging and of rolled. hedges we the X some tenures between is second to with fraction right? for long-dated like of rolling. even out up the coming program option Therefore, less any this of

in volatility flow use Secondly, is cash where in XX February. estimates long-term our Form after hedging current costs, higher implied determining than for the projections the in even volatility moves

very about feel sensitivities what updated XX-K within see we you'll and in mid-March. we the So good our have

Humphrey Lee

obviously in I'm level But equity the asset decline headwind offset. would first Yes. to would at the the be a get what volatility quarter I to high potential so the above guess, trying CTEXX, is assume a I be will but in the market

hypothetically if exactly now, where end I Or guess, above should level expect slightly at speaking, X.X? we lower we that? think March right about be the how than asset to CTEXX should XX the we are So we

Anant Bhalla

Okay.

see the the and markets drivers is break is vice generally X updated the clearly So up drivers be rate's up up. interest in That's Equity in let versa. sensitivities and versa. good vice you can it XX-K. and into good me One will that generally

from quarter And saw would sensitivities above point in we volatility call, CTEXX. there Like that we implied So you decline in the the see about my assets can third finally, volatility. reduced have. the

the about But help? in option of nature from go that could what would book. to versa You would Does my sort back vice our long-gated of cue that be. point I

Humphrey Lee

Is Or just an impact? of million of of is that impact? that impact a annual And time. that the passage $XXX clarification for okay. Yes, from quarterly

Anant Bhalla

Quarterly.

Operator

line the And our from comes question Alex next Sachs. Scott of with Goldman

Taylor Scott

quarter, us Tom's things just the just to the of rate in help run was so ROE adjust question. about the and because you significant well. came you'd the think around sort of a Could mortality the for called just closer out as what X% I'm to question So to after But sort items think follow-up bit that places about know where had the basis this on a first X% and elsewhere. points get are where around point I us called I you out you kind I of ROE, XXX maybe the other would lower these trying of back things unfavorability some ROE on is little there of I'm like

Anant Bhalla

Thanks, Alex. It's Anant. two And I totally down understand, it's being run public company. segment a hard into to rates pin quarters

for feel So there. you

We've swing lower expenses between would we're $XX point sequentially on million higher. last had having was $XX bit to they're Let to both What versus me quarter $XXX million mortality sort ex of now mortality, a better. in so this a $XXX is notables. worse, been We of and of get had quarter. give while ex notables, last explanation little right, quarter last million and this I quarter like notables you'd quarter, million

were So that look to million. that's rate. million in what time, I it quarter, last at ULSG. million, would expect had are would pretext in predominantly to $XX mortality as a And we we at lower said expenses, and comes million million we this $XX $XX run $XXX than we being When $XXX

it comes quarters around So maybe million-ish. and those you if X look say you at expenses average pretax where of like would out, sort $XX

would been two what that I the X are items you bridge have of So blocks moving between give post-tax. as million Those quarters. $XX building the to sort $XX million to

Let pause me there.

Taylor Scott

business businesses provide some sales were of annuities some Okay. assume high-level the pretty still based just I could commentary profitable. outflow the you're less And net but putting given new good, on some the just running off were the ROA on probably of negative about flows versus that the outflow, sort is of you the old in of

to impact So sales mix just versus over earnings some of will the think the of shift time. how losing old trying about new

Anant Bhalla

one on Shield point to business the It's you as to Anant you that's new again. off a investment look ROEs. point statement, at of the It's I'd income-driven lot on, point lines coming Business running a the that's on just so to you Yes, and business, the financial that's the coming coming point your not of that. on is business. fee-driven it's an more I business versus

Operator

comes Bhullar question from Jimmy with next of line JPMorgan. our And the

Jamminder Bhullar

had I a of couple questions.

First, us to level recaptured that, on assuming in some of on you that drove volatility the earnings expect $XX.X that any recapture the but any could give I'm charge? just your what details as if impact future business the you well? impact of And earnings base related will million up, earnings? and and the do block go on

Anant Bhalla

Anant again. it's Jimmy,

first. after of then business looking it that from me the business. let question, a was time-to-time that second decided prudent and the first statutory going rates of when really, mortality economically impact take at book not our it of recapture On driver impact that. mix We of And recapturing had reinsurance to one the big was GAAP-driven that recaptured decision impact, and it, there. our we slight given was rates we No at a forward. it really look a some we and your To question on

Jamminder Bhullar

anything higher? sizes expect or to they policy earnings because else, in-force And Or block? little a your more the would policy the you in volatility similar are are sizes bit are

Anant Bhalla

Nothing to meaningful on comment that.

I think of it's proportional in our It's line. a block. in-force share

would So Life would on you peculiar so I that ULSG. Largely and point that. in out. highlight I across It's that ULSG, for nothing both

see should it you in both going So forward.

Jamminder Bhullar

get -- just information over that? trying on to independently? control you process from on then the any Did then you Or annuity determine MetLife and And group and are have whole on you the for charge exposure business. the whatever your Yes. just reliant

Peter Carlson

we did did and acquisition, this on the It's MetLife's how Travelers came It when folks just in Travelers. this again. really with Pete was, prior mostly to MetLife, Jimmy, ended is along up Carlson that's separation, lines of we from legal case, the What remind acquisition I'd product. actively is entity we monitoring administrators issued the are that TSAs business. information, any -- the information receive impacts. are reserve, working this we them. policies. information We other We but continuing administrator our review Based them and from and do of and receive the we recorded for they to on with of potential these on the through

Jamminder Bhullar

just targets. on Okay. lastly, then your And clarifying ROE

your establishment the do expected costs, ROE not, cash flows right? but think include I targets do

Anant Bhalla

That is correct.

Jamminder Bhullar

And that's quarter Okay. after-tax, million said per you that $XX roughly?

Anant Bhalla

yes. after-tax $XX to million million quarter, $XX per

Operator

And our line Ryan of KBW. comes with the question Krueger next from

Ryan Krueger

a you to increases I similar guess, I'm to give interest on about terms on because, volatility perspective volatility. comments of longer-term incorrect, I volatility, Anant. a think had I higher would sensitivity follow-up like standpoint understand you I about how hoping unless markets in capital your and some near-term position. sensitivities your was on to benefit in it the us rates volatility. from near-term equity from seems you've capital given could

Anant Bhalla

You are right in that hypothesis.

agree back hedging point in expected book, went we a option the down with had And on saw not volatility impact up we would because the points. I to and program saw as of X-year what X as fourth day we quarter year pretty just because So benefit. the long-dated of having volatility vol goes markets vol as the from since it around that X evening, to through Friday we third end and flat, you long-dated quarter up being to here, since the move quarter, and that. is vol, X up it went around But up In the around modestly. X every X was points while is of much things

that. So I'd leave at it

Ryan Krueger

from the you to think this? can to is sensitivity with there anything help us you guess, I about

Anant Bhalla

Ryan, change not these time. give things a to I'd rather time from because sensitivity

came with our difference and Just vol vol, the between when assumed said the where and is I vol good above option mean, I us such we we X-year right, X-year for what between up is two. hedge But up costs. at not look given book there's

I at. it that's leave So where would

Ryan Krueger

Got impacts. RBC reform, the VA how with question and tax talked you on there framework. it. any was -- capital about Are capital And go-forward the you is about second then from margin calculate Are basis? to reform a an margin tax impacts think VA the any not RBC-based there

Anant Bhalla

work and I of did flexibility leverage we Thanks. way, That's a VA so only Eric impacts that. our as calculation XX% the great CTE and them have financial together. combined And in capital question. and Yes, to at in mentioned we reform reform comments, with have, think through we think whole tax of we

Ryan Krueger

Okay.

likely can with leverage? be you but So believe impact, negative it there you would some offset

Anant Bhalla

a point. That's fair

Operator

next of question the from line Bank. our with Shanker Deutsche And Josh comes

Joshua Shanker

some How to Yes. I into that a to on in that the the about fight understanding of to for issue? if of capital occurred that. we $XXX of million quarters Sort the recurring can was the buffer framework Is or next think whatnot? have get you going future? this over on few a years? this first all, multiple aging wondering, Are we detail can

Anant Bhalla

base do naturally, that quarter we our $XXX like requirement to quarter. million so. changes. up, is happy scenario time CTEXX a in a And call, quarter CTEXX, call, to the the in how similarly Like our fourth shared impacted go a by quarter now would you in case third Sure, in scenario, liability buffer the by goes up expect over

go they down are our and peak As in insurance then update liabilities your had will up they it's in highlighted age, XX -- as we and almost the going XX-Q. Form till going requirements

Joshua Shanker

expect So the moving year the of a buffer? CTE million we increasing against of normal should aging elements $XXX on

Anant Bhalla

That's right in to $X point this because billion fees I'd collect you business. we almost back of

in inflows one you fees that if costs total of and think and capital. in, is asset of of your coming funding requirements, reserves So the

So around be a million $XXX around growth your point, $XXX quarter, natural the of the buffer. to in million the each $XXX and year of a comes funding million would year,

Joshua Shanker

size during group separation, didn't business core obviously really you and we And do the not of it's by businesses Met's with nearly have in businesses other separation? up been the to business to put a as you. Okay. noncore that great terms there familiar not so statutory investigation can you picked we're basis that due affected annuity, a grasp on that that's statutory own be Are because of

Peter Carlson

Josh, it's Pete talk we of about policyholders the Thanks Yes, question. X.X the Brighthouse across million all again. policies. for

And payout. business, risk total of is of we not When than impact TSA. significant. annuitant XXX,XXX from actually reserve in to at the retail look probably, have it's matters group XXX,XXX this that reserve also not part our information you're so received this as on it in business by the do of looked or to so you're believe pension we MetLife it's at have a talking from we basis, the X% For these overly based X% the those in administered and transfer, what we MetLife overall, are date, less

Eric Steigerwalt

It's to that. would Eric. I just add

the look know an question that times we've on you we're think, anything now structured with there's XX, said is there issues essence of your the I see any -- you be to can point very was issue, call, of But but settlement business. in settlement the cetera, your Obviously, call on essence as the If there that don't business. theoretically, think there, a there's et was as, in That's don't of business. your this else. the could filings the that would so Form couple retail and of of business, retail in a any focused structured one I I question. I believe the we here issue the probably

helps. that hopefully, So

Operator

from Citi. the line our of with next comes And question Suneet Kamath

Suneet Kamath

to to Anant, over look case back If time million per time at X-year $XXX year. the to like concept. million of the looks I I period, maybe per of like $XXX XX, Form would year, the something equate a passage want passage it go from this base

under $XXX missing I curious, to is So I guess, Am or that, why $XXX per per million of it piece million closer a I'm it? quarter year?

Anant Bhalla

the year. I quarter point a update in the when would $XXX I them last XX-K. million you it time the third as around in to we is spoke sensitivities call, But

through So it, million you it's helpful. so a sorry. we take that off-line can walk quarter, and $XXX

Suneet Kamath

the here Okay. to it relative seems there in Form-XX? what's like change But was

Anant Bhalla

to my like of last I'd did to back it on that can you I comments just No. call, there. We sort on point point the

is have careful so triangulate the even now XXX, bit But to between XX If look you old Form XX-K. to really XXX, I a because the at of base the at XXX around case. versus in sensitivities, if a see quarter can page us you passage instantaneous gives million that, you the $XXX how XXX, of time sort you be I want look would

Suneet Kamath

XXX see base I and I'm Yes. case. billion in that $X.X the on

Anant Bhalla

can we off-line. Yes, that $XXX at in look translate walk so of you Form XX to I should we through don't my but million. front it when me, have that,

Suneet Kamath

assuming? The Okay, and on? on most kind should is sense reflect to of currently that of variables the you you guess, be changes Wyman some want get any study, the which could flexibility of I focusing what recent compare update we that'd I can they premise back just the how Oliver be And other to you're that this idea maybe in highlight a helpful. variables to then, you're and these to just seeing have

Anant Bhalla

for thanks Sure, question. that

over As a time Eric bit and mentioned, its little way through comment dialogue XXXX the of take period will here. to work

one, point would on or to me into, the serves XX specific specific calibrating However, there people if recommendations, I the last and how to the right, categories methodology. structural X parameterizing are variable, group memory are which your category X being

structural like So categories, asset on to requirement managing a TAR requirement, the total based our high CTE it's or about a first, on just CTEXX.

aligned So with we're that.

the standard, assumptions a on Second, impact it's binding a standard CTE use high of requirement validation more scenario and of the as companies' as actuarial the different models. but not the over

industry incentivizing quarter, way validation our our and short I like not a almost and congruent way in strategy we the third, what we're And data growing our disclosure, we with work. to like strategy, assumption all hedging, but a going we've last it's it's and now in the designed so update validation just CTEXX, point. is point term, CTE the There's think increasing executing lower at are where long-term prescribed So anchored buffer. which assumptions talking did about it's a

So I the rarely on then proposals. comments are Those my go structurally. XX

model year, that Do Do be what now? the you or Do XXXX do calibrate calibration of it's definitions, focus interest XX. to you scenario hopefully And you for. what dialogue was of long-term you to a look Finally, it category have or and that of coming I'm nature what boils returns this then got you at is then you back looking go the long-term business a how the pause, parameterization go to these so look from the model back going of a whether down 'XXs? to the equity a rates? last CTE the definitions to and XX, for will over business pick, but That XXXXs? you're to the of means XX, you and mouthful and

Suneet Kamath

helpful. that's No,

Just this. the one last on

company have and be impacts that So the you like of financial between on flexibility in of but Oliver some tax deal negative reform, terms capital, to there could leverage, cash with holding seems but them? it Wyman also think both you

Eric Steigerwalt

it's Eric. Suneet,

say. would I what Here's

specifically at from said. we I -- of the as mentioned would agree this with today's just think continues. mean, it I point you what we look I dialogue view,

you information, agree would cetera, out. just more et get You what But I with et cetera. laid

Operator

line Sean next comes our with Fargo. And Wells from question the of Dargan

Sean Dargan

and a have the adjusted question relationship I about total buffer. the CTEXX between capital

tax market should buffer. think nice that quarter-over-quarter, Or up CTEXX we essentially flat about to Is sensitive how just So the that? you a was movements? the calculation but in is have more did bump because

Anant Bhalla

really drives you're blue the The Sean, than CTEXX. CTEXX books on on scenario, not a less to right. which basis. Standard blue markets spot are books, sensitive is

you got it. So

Sean Dargan

sooner to repurchase as put soon were you for the as will into better to a board will hit may hit going want are level But maybe people than you share make you couple staying Or that Okay. you you a authorization targeted at sure buffer -- for quarters insight at thinking, out maybe that And you're of then to that that not. level? -- have buffer? that stay ask you

Eric Steigerwalt

mic Sean, had It's Sorry, my I Eric. off.

we're faster we're stay stay company, the board. as a being be second than and the we Obviously, tuned. had able build go board. like We're in said just But here certainly these even are public tuned. our what and quarter just company would with discussions the watching second with buffer to we're consistent love our in our with as to public But is so So quarter a conversations say I having I that targets.

Operator

Eric the And Autonomous our Research. from line Bass comes of question last with

Erik Bass

to take significant start planning not it liquidity company taking I You've BLIC? level above not your quarter-over-quarter. you from that dividends would the increased targets expect forward, and -- you're since think at decline holding well the about liquidity and to or to guess, mentioned going as you the

Anant Bhalla

Anant. Yes, it's

to Xx, not Xx billion fixed not targets We're $X CTEXX, coverage. are are above BLIC Xx. yes. take dividends And of build our so to from assets charge We we be on till holding up our like to long-term planning

Erik Bass

it. But course to move so of would that the expect Got over XXXX, lower? you directionally

Anant Bhalla

Yes.

Erik Bass

rates well implications for how capital you and book. the can to given capital there the mentioned the higher ULSG you then balance short-term block? swaps and walk And Okay. used But affect are the interest any for VA would sheet, impacts hedge negative certainly through your positive

Anant Bhalla

But the is the On basis, for hit you Run-off that do high that segment we a speaking, our head I hedge economic the that swaps. GAAP GAAP, basis, did a on there, see using On risk change stack fairly insensitive We sensitivity interest earnings. in filings. that's would we've true operating using the the below impact mix swaps not equity tax we because stack from options good. business ULSG sensitivities block update the in on on XX-K those you've also in insurance and would dial reflect is see rates, risk mark-to-market the to nail on of XX% at generally not and think a life got XX% versus swaps, we do we the in But balanced we'll just that. rates because that so line you correct, that's there. I the It's when in And GAAP from just movements. point up

Erik Bass

are there RBC Got no impact? But it.

Anant Bhalla

about and flow No, preliminary we've on well analysis it's done even as we feel a preliminary. good basis our testing pretty that cash though

Operator

And this does conclude today's Q&A session.

to to closing remarks. like David the any return call I'd Rosenbaum Mr. So for

David Rosenbaum

Financial. our Thank you quarter. talking your Thank interest forward today next Brighthouse earnings look quarter in you for joining call again us fourth and very much. to for for We

Operator

today's does Everyone, Ladies may This disconnect. program, day. you have a the conference. for gentlemen, and thank great and all conclude participating you

Brighthouse Financial (BHF) 13 Feb 182017 Q4 Earnings call transcript