BHF - Earnings call transcript Q1 2018 | Brighthouse Financial, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Brighthouse Financial's First Quarter 2018 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 First Earnings morning, you, you and joining Thank Call.

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

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

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

we the directly most turn definitions our Investor call known finally, are non-GAAP now And earnings statutory our filing presentation the the of measures. financial slide Steigerwalt. as measures preliminary timing financial references During CEO, measures these the generally supplement. I'll also principles, of the measures be statutory that portion GAAP And in will to may the to to certain call, our be results statement. of over Eric discussing on release, Relations website, due to and and on Reconciliations this accounting are not found accepted based comparable non-GAAP related of

Eric Steigerwalt

about strong the including quarter Thank you, with of our plans. morning, in pleased our our everyone. I adjusted to and also sales progress outstanding David, very quarter-over-quarter earnings very results relative first growth. good our good and performance XXXX, I'm feel

place, We in strategy have a it solid is and working.

on and simpler, their the advisers, our key including, annuity products our clients solutions respect through is financial discipline elements that life of broad and offering sheet. our focus of transparent strategy, our independent insurance tailored a and network executing a and distribution to of expenses selling provide shareholders; set are Our our more balance value to and leveraging manage to with our well-established partners;

Our top priorities goals. following in XXXX the reflect

exiting goal TSAs, on TSAs service with our stand-alone supports or company. structure overall as Exiting focused transition are our agreements, a we MetLife. our First, of reducing cost

actively and provide next, and I to third, needs distribution power. will evolving With and Financial. are that we And an I platform touch of NAIC the few clients respond products some discuss better that NAIC capital distribution managing a four I'll will that third, progress our key analysts perspectives and help I three the will a our first, understand annuity investors comments variable network as they now through topics, first front; will results; update and reform; made enhancing on product Second, capital on reform measures serve. Brighthouse to our developing on provide on new lastly, I backdrop, quarter our make on VA and advisers growing the and earnings

annuities we $X.X rolled pleased campaigns. annuities. showcase the quarter-over-quarter sales momentum advertising were in with from further To relationships distribution up sales in quarter-over-quarter billion in our new very our Shield a of million and product I of and designed the results approximately and XX% of quarter $XXX start annuity distribution. and the with me The XXXX. am driven Sales quarter-over-quarter. reflects were sales our out in quarter, by first April, annuities. Shield fixed annuity flagship campaign of Let the awareness targeted XX% up build Annuity ongoing growth that indexed to our strength brand end, Shield

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

assets CTEXX. First, very CTEXX to above I'm increased billion. pleased that the $X.X

hedging to perform Our strategy well. continues

This point is on put is proof to stand-alone another basis in a operate strategy hedge that quarter's place performance the working. we Brighthouse

$X.X in we is expenses This fourth continue corporate but the to our billion Second, expenses were expect our quarter, separation. $X first in from year $XXX and the quarter. billion down of between post million

for levels be corporate Additionally, to consistent expect the the of expense high with quarter in watermark expenses, the expenses XXXX. fourth and the in second this year we third quarters of

expenses began we before, said the eight to cost-competitive quarter. in more in with we with able of We with MetLife business the TSAs strategy. strategy, year and product TSAs a first remaining, with reducing manufacturer. to XXX I've fully intend cost-effective strategy to on a and them Exiting is our exit solutions is essential XXXX. to were executing part replacing our As begin this be Consistent

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

as results underwriting expectations of tax And expected, as taxes quarter. improved line and finally, Third, the were were with sequentially reform. a for in first lower, result

now remain turn this important regulatory actively to capital initiative. NAIC We me involved reform. VA Let in

aligns a of our behind it supportive and requirement. with process asset believe this total the are managing We of view principles to

the NAIC regulators many XXXX. to meeting spring through As discussed in and with there participants are industry regulators details we where X/X last March, work said the In quarter, held its the of proposals. approximately

we constructive. more believe been work is While to the do, discussions have there

phase-in would a implementation with over XXXX years. or a year-end later, be likely few reminder, a As

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

remain CTEXX on and We impacts, reform. have potential managing significant above address flexibility financial to and we through assets growing NAIC focused

company. to I are provide for summarized provide and call earnings X a to quarter year new Brighthouse a measures to our I These of investors few Before the measures better three Anant, perspectives Slide key call on first baseline foundational over understand turn our want as a presentation. help to on

The share. earnings adjusted first is per

Many this the can of as quarter-to-quarter. adjusted quarter. As were were I vary these drivers mentioned And of earlier, know, favorable. you our strong key earnings performance

As such, items. share we notable case in for per $X project adjusted XXXX, earnings excluding $X.XX of scenario, base our to

an continue rate We expect to in few annual for years. EPS over to next growth range the the single-digit mid- high

XX financial important The for in second the and return balance our connection we Adjusted is ROE in like impact and of XXXX discuss the of third separation, ROE. for had metrics, filing, In ROE. is second quarter transactions established adjusted measure equity Brighthouse. a I'd metric quarter targets to substantial our Form that on with separation-related or filing, XXXX selected reform the in sheet. on including adjusted fourth Since tax an

XXXX, of reposition to portfolio. Additionally, we in began our the quarter investment first

ROE XXXX our begins in case, adjusted XXXX. in Specifically, With XXXX treasuries X% XXXX, of begins base this expense ROE we all $X of expect XXXX, In spread and in in and almost we improving into an reduction assets but higher-yielding income in in rotated we goal approximately beyond. with XXXX. in growth still both return billion expect and the adjusted now investment capital mind, of

us, VA With portfolio the the expected and hedging migration adjusted behind separation-related XXXX previously now improvement drive reform impacts, return transaction and in ROE. repositioning, capital mentioned expense reduction tax

discuss costs. The year expect clarity as later establishment final capital We on adjusted like emerges. to I'd details on provide ROE reform NAIC measure is to more growth this VA targets

financial component are As establishment note build approximately pretax you approximately respected factored make Financial strategy With Slide in name important of these to support XXXX. our can costs costs $XXX throughout into that, we XXXX Anant? out recognized already X, our and our turn in results that to detail. on pretax discuss first million more call needs capital our as to infrastructure company see to as expand These Anant a we in the United anticipate technology and costs initiatives branding I'll of a reducing plan. the our to critical to over our Brighthouse million a stand-alone is States. $XX are It quarter

Anant Bhalla

start the strong quarter. the I'm our earnings. had Eric, Thank had and to good with in generating year, pleased you, everyone. hedge our We the in adjusted performance morning, a quarter. performance solid good strategy very And

some Before we that me results I quarter, slides discuss first explain our provided night. for last let have the additional

update financial of compared are lower through market on to to in the to Form earnings XX takeaway X, driven the as variability projected to $X three of profile, improvement and future profile to of distributable following the is scenarios seen and across These the you our summarize be year-end to risk year-end the the five business of year expected case is the market key our and in that the in business also XXXX XXXX. X as in be conjunction variable the by over expected XXXX. X and billion the book as cash on More X value in that by in performance is risk above profiles risk profile last expected of our the reach flows X.; furnished improved present variable year-end annuity annuity specifically, in-force projected of of be capital X observable, financial the the provide XXXX. business three in X, these base lifetime five report. March lower financial from we slides higher meaningful X in scenarios underlying previously improved expected X-K annual the scenarios assets scenarios; in finally, Slides filing tables and cash three the Specifically, CTEXX The with of slides costs; were of driven are is hedge by flows XXXX

million $XXX discuss X. and some themes me background, the per to move first a Slide the quarter for perspectives of strong with unfavorable earnings were earnings Adjusted $XXX were of or Now in quarter of items quarter earnings that on XXXX. after-tax impact beginning the impacted share. the to with results key at Notable let adjusted in items small that $X in total first on million underlying $X.XX quarter provide adjusted compared on million two the

on to our earnings like this Now adjusted quarter. I'd perspectives themes the related X to some provide

the discuss for $X as first quarter, Corporate or in theme the which approximately quarter full down expectations, our approximately based expenses quarterly in $X.XX fourth $XX would XXXX. X. year to per first This pretax the million $X.X Slide than $XXX tax like post lower $XX that share of compared seen were I The are to full after the to separation, corporate year million on billion expenses. quarter expenses billion million result pretax on is is of

quarters, XXXX, establishment Eric we item prior notable X. include as Additionally, to through similar a expenses the outlined expect do as corporate not costs, Slide on which

than higher investment income. investment after strong Alternate increase alternate four-quarter The sequentially, average investment second driven as primarily or on to investment in results $X.XX was X. per tax quarter the share an seen This $XX was income Slide higher Net income related for performance the million is the portfolio. theme from to target our approximately completed to one-quarter historical based assets requirements. I XXXX, for by private assets, of invested on equity also a segments, with were this, GAAP that XXXX, realignment statutory in across a lag. assets the all in funds, note report which based on we would we first Staying each like methodology. quarter of now on Prior our asset segment is

change asset this results. not our did and have an it continue our earnings did While will it in impact we total, on to expect realignment segment

be a and, segment. will life to extent, insurance the the beneficial impact segment to Specifically, Annuities the lesser

higher million first after tax. equity On improved $XX Underwriting quarter. is in and is sequentially by base in The And was were solid current segments benefited with the after the case The our impact underwriting. approximately taxes. from tax results a underwriting lower driven theme tax than These theme line the $XX amortization scenario. effective reform. performance expectations market sequential results rate were tax next million by in earnings third quarter. the basis, for $X.XX about of lastly, or the across DAC expectation a

of XX% primarily tax $XX Specifically, is timing during to high-teens driven end effective XX% rate range of tax mid- the this benefit approximately million. roughly year. expected low to by with quarter of tax rate, effective the our at decreased GAAP quarter, sequential a last rate from the to This earnings approximately a differences

recapture fund the Now higher offset segment income, market the amortization in $XX turning $X.X account noted flows reflected the a higher first segment last were lower. level. billion. quarter in higher lower in million values favorable to $XXX million to net the account billion by Sequentially, the pretax equity investment to Annuities reinsurance realignment, performance taxes, quarter. million to related Net taxes annuity expenses the portfolio item was results net results quarter, sequential due and earnings and of Adjusted resulted earnings were lower and investment in Adjusted decrease notable Life DAC $XX including given quarter. quarter. segment at partially $XX income a in in the this $XXX separate were million approximately performance Sequentially,

on underwriting Sequentially, all quarter, the earnings lower million Life Corporate realignment item were underwriting & sequentially, segment. an the $XX million in into mentioned unfavorable $XX for a Other taxes Corporate Expenses income the were costs. including related investment segment related favorable partially Run-off results the were Additionally, notable the of performance, in of $XX had sequential favorable in recapture. million Other net loss notable a and offset adjusted item portfolio Adjusted favorable. $XX lower by included million & were and reinsurance establishment to business to basis. expenses a previously

capital March position of Let our me as update with on XXXX. close XX, an

variable to exposure management respect annuity quarter. program, solid results were with our the First, in

billion, CTEXX higher capital performance $X.X rates indices, our volatility In volatile the and program. we quarter in solid mixed Assets with up and $XXX market a hedging performance quarter. million above from fairly across saw were interest for equity

Second, with prior consistent that, were the leverage capacity for call open questions. liquid we'd up the holding With to levels. like assets our company and quarter's

Operator

[Operator Instructions].

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

Erik Bass

to are and to go to annuity there. NAIC the on provide wondering But want you update get next what on standard. final just I you process. the appreciate First, variable the clarity if when more any could back expect color the steps

Anant Bhalla

Eric question. constructive, of on, this mentioned meeting expect Anant. the update XX. actively involved half meeting the There's our prepared Thank year. in as We - at the another and for it's It's May X/X in we you of remarks, in the had throughout worked we proposals Erik, March. to in second you We're this. actually,

Erik Bass

returning key what most guess, your Got or I positioning? what getting the you're the your capital debates, are pieces on comfortable, it's concerned capital And are it. about to just And feel with clarity guess? mean, I that I whether -

Anant Bhalla

based all, capacity, of a, about ability First we flows this, we on mentioned to very past. the feel our in our leverage our cash confident as manage through and

question The there So confident call, your manage proposals. boils down of is moving May the scenario to reform this. to we shared The being that to It be is to what focus scenarios categories we, think parts, important. are the in. as few XX That probably last the of them through standard very of going Of expected. feel were XX a in able those, moving conversation.

be of So timing second to half you. able the of update about this capital. year, returning we'll It's

through We to have the with levels resources the manage this we mentioned.

Erik Bass

Got maybe given shifted that talk level products you consumer And in level in quarters? the products? just in Could guess, of interest over annuity I last buffered And you in one the couple adviser of and the just volatility, of annuities. on the the any how differences it. interest pickup and past are about seeing

Eric Steigerwalt

spoken calls give Myles, yet. any is of charge not don't let here? marketing. some all on in Erik, distribution who why of Myles I'll Myles have sure you and I'm it's Eric. color Lambert, these

Myles Lambert

you, Sure. Eric. Thank

the So particular. in we remain buffered very bullish annuities on base,

were As during Eric quarter. his sales mentioned pleased our we for opening results very comments, with the

we're at of Shield XX% campaigns working that see of quarter-over-quarter, going of our some expectations $XXX the to Our light million now. in up product especially are to and of momentum, continue marketing that that sales, type we're on

Operator

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

Sean Dargan

the I sure just make have guidance a setting question level we're about to expectations.

Is way $X $X.XX adjusting way it? include to that will establishment will to And normalized, the it, in think establishment should going $X the earnings costs, a but first you're going $X.XX about to $X.XX we exclude costs. this be the So was reporting the assumes quarter? forward

Anant Bhalla

Yes.

Sean Dargan

right. All Okay.

focus the so getting the that And you're is excluding us costs way that establishment to on ROE? X%

Anant Bhalla

Yes.

Sean Dargan

the so kind a And ROE XXXX. the pointed before I in you're growth And out-years, is we XXXX. similar expect And that telling out EPS of looking thought Okay. to in were there the to then, rate adjusted in now - ROE growth we same. us should some

expansion base from XXXX, coming is XXXX? So that in we're where be ROE be in going to case will capital if not the returning

Anant Bhalla

start ROE XXXX, we expansion.

return As mentioned and XXXX. comments, expense we'll in get Eric reduction in capital then going his

Sean Dargan

Okay.

will reduction. expansion XXXX ROE any be So in from expense coming

Anant Bhalla

we investment portfolio mentioned. that the repositioning Plus

Operator

next the comes Nadel of our with And question from UBS. John line

John Nadel

just you through that incurred if the on seeing net consider you expect A And you that cost splitting the I'm update out could wondering the in us to question - forward quarter from wondering just that the if I we're you and coming fair going incur was value cost would program. results. on the change in to related hedging

expect update to prior your costs indicating you're your you that to actual an scenarios expectations. with to think I hedge relative those decline that

if very helpful. on some that, you dimensioning could So that give us would be

Anant Bhalla

It's to it John, break for Happy Anant. out you.

NDGL, it hedges, So I as is derivative rates. this there's billion. way rightly approximately rising around out million The with were ULSG the quarter, $X in which goes through you mark-to-market that mentioned, break had $XXX you which would is

stat is mentioned, insensitive; way hedge. previously liability protected is the in we we've GAAP liability the As fairly the

million should you over our the if option by a If you of million, as the of about of is give nothing decay by program around we eliminate up can goes on see time of the an costs Embedded option. program, option of the think it. hedge ULSG you $XXX one in projection itself really when VA as at the hedging $XXX runs value it of down, and that we had it's the concept Page because cost an markets, supplement. come happens as period, in think XX That, mark-to-market, around

John Nadel

million, And a that that or an annual Anant, cost? cost is $XXX quarterly

Anant Bhalla

million $XXX the from a $XXX at billion our year offset P&L, time quarter, to to of year. When can $XXX Rider $X a expire. have of fees we options quarterly. GMLB be a to riders, million as look million and million we want those around the decay the That's It you around $XXX so they

John Nadel

Okay.

I - about we cost. sort way the why of that's talking net so And was and

So roughly is the about, $XXX effectively the net cost we thinking option fees, fund to the should which used million of be rider costs.

between is so couple I range the pretax? the two a in And net million assume rate and the now drag hundred that's dollars, the net of

Anant Bhalla

much at when was rider quarter business, this the That operating convergence between VA And look and because a is P&L you saw on pretty the income net we correct. rider fair amount of flat. the P&L

Operator

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

Ryan Krueger

sense capacity is First you give point? this of debt at you think question, us can your where a

Anant Bhalla

Ryan, good morning.

So really debt of or kind as debt put would capacity you is about traditional rating a to debt. range in think $X range. billion-plus hybrid We the $XXX agency-friendly million more it

Ryan Krueger

just follow-up And you you've The so going Got the is additional then forward? portfolio did already - repositioning. it. are anticipating on billion repositioning a pretty repositioning? far, the was that that $X Or much what done you

John Rosenthal

treasuries Ryan, over time would it's We rotate over time. continuing of more Rosenthal. John out - to anticipate treasuries

Operator

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

Suneet Kamath

CTEXX on VA of are public block Just CTEXX the the companies at soon their XX. if of seems with universe companies. or sort we other most like pretty Voya It disposing look

how do CTEXX get you guess, comfort I So being at the level?

Eric Steigerwalt

Suneet, it's Eric. I'll Well, start.

went that it. understand numerous They well think you CTEXX comfortable second, at That we're walking notion the months add? way we people that And program; buffer. the the to above rating We're over got above of cycle. great agencies public. at the So The first, with might about CTEXX the Anant, want is whole They design a through us but here confused. the well understand then, we is And will floor that think cycle, anything the we out it through I it. when gave now, through sometimes, through is, you right going get before comfort. plus notion CTEXX.

Anant Bhalla

And Suneet. is XX-plus maybe said. markets, we're the appreciates covered floor Well, to XX it, protect. on this, emphasize like Eric at floor - across clarity of everyone and to Eric the

Suneet Kamath

Okay.

about And capital just returns. so the then think around if we philosophy

around would you you that flat market quarter would your change that buffer fee let's to $X.X get a point buffer - for $X the down to So concept? we're distribute of in that hedging billion a go because essentially start from $XXX of strategy, you billion, earnings. assume per if And that million passage-of-time to year,

Anant Bhalla

that can concept scenario the in That the say, outlined difference would of one That's is yes, of because you range I what sort and outlines. four. between scenario see you possibilities,

Suneet Kamath

buffer Okay, would that billion, say, coming $X.X $X of in billion? be but terms $X that even the over is share to in comfortable you let's presumption buffer repurchase that distributing approaching the where is the down environment is still period around earnings billion, as

Eric Steigerwalt

depending to. as have factors - $X.X we mean, even I on sit on, mean, we But VA $X yes, big out environmental company. billion consideration. at the reform. you'd we're get really say going Yes, where mean, we've a here all buffer this into and now, But I depending target to now, Suneet, thrown would about what's take I is it's billion, variable to annuity I are capital

a clarity. don't think You all know this until I it as that. this us to result, we get And for would about think prudent be

Now the clarity in isn't long coming.

about, fall, reform our and We VA sometime is as with end thinking in don't summer the capital as the me, discussing or board, expect billion, important $X the obviously then $X.X buffer I near around and and that's key mean, the I measure. differential, billion to is that the think understanding it think whether anywhere I a returns. or capital a of

I I into below point, capital. consideration here, your return eventually some reform some taking be yes, we buffer behind know impacts, to comfortable things to capital slip billion. continuing I added us $X and think main expected the will we'd So environmental but VA And

Suneet Kamath

numbers Yes, one could. makes one sense. I if Maybe just

us your Do you Just the it the reduced can calculation on VA. embedded the of in to CTE remember what's Is of is assumption number? around in I for rate? rate money know Is third the GAAP think lapse I on different? deep same quarter your in terms that assumption call, something X.X%. you sort it lapse - what give the you the

Anant Bhalla

It's the same.

Operator

Credit line question our comes And next with Andrew of Kligerman the Suisse. from

Andrew Kligerman

asking your was you you to rider a the questions that billion to hedging gross the John Could billion, get $X.X numbers what $X.X-plus And $XXX ago. about in First more provided about John? that million, presented not but reconcile costs I gross I'm the $X.X to question, just billion? talking back few fees.

Anant Bhalla

Anant. it's Andrew,

at was of you the around you if shy So that million. the that you for $X.X-ish the NDTL it referenced the year, $XXX just for gross billion quarter, can And program number in VA the line. look see

Andrew Kligerman

And that's you if times right? billion - mean, that's $X.X okay, got... - So Right. so multiply you've so four, that billion, $X.X I

Anant Bhalla

Right.

Andrew Kligerman

John, telling $XXX though, were in you million million $XXX to So cost a quarter?

Anant Bhalla

In that $XXX Is - you million million, total good? $XXX let's say stay dissecting your so John got just to was with of that okay, mark-to-market derivative example.

Andrew Kligerman

Yes.

Anant Bhalla

isolate Right. derivative, think versus Using you out it take what derivative and you value. cost, mark-to-market cash has you some buy is

Cost cost. - really not expires time to value of million worthless, what a quarter, sorry. if around that's that's you million $XXX $XXX that the And option. year buy a So is

So becomes to $X $XXX year. million it billion a

Andrew Kligerman

I see.

the you the versus put Okay. different what in little that guess, a I was changed Got in brighter from What sensitivity terms March input improved Form March intended, of you of make allowed you. sensitivity? Form the type XX? the sensitivity of you XX in that And just what out, house to, did pun terms in

Eric Steigerwalt

to want start? You me

Anant Bhalla

better. Much

Eric Steigerwalt

to to be check of out. end. going couldn't see we kind of were we were you a knew going We knew remarks, you One there and prepared you'll is litany my - be had them sure when separation-related impacts. that, If look, those Andrew, laid

and big. anticipate horizon. there, the happen. what had couldn't on pretty were Two, we tax And reform was that's one, really number you going So they to

when there, going was remember As and you to to respect there go you it may touch was happen. what back with

So of were John working et was and what we then part of we - be we about, to and And would reposition this out portfolio, the talking what repositioning modeling, all portfolio. liquidity could through modeling, figure three, that. it Rosenthal when to just parcel project our the impossible cetera,

those you then comfort clear, will we more ROE got in in as see so And fact, became growth here. saying,

- that we have can't I reform you as there, going effects, that of in have will course, to well do and whatever yet Now will is because, there know. come VA GAAP quantify

that there? very XX have Anant, So hopefully, by comfortable get we wouldn't anything again at meaningful. basis I I be said okay? comfortable, And then put we'll understood, talking you I not VA we said reform point, so if I'm fall, the ROE this when capital late it have accretion. saying want here, it'll points feel as about to maybe targets. way, summer, in out And - we were early some add will

Anant Bhalla

Well, driven the ROE losses, just That's and in two things. statutory distributable Eric covered that and I'll lower meaningful in slides. the part. flows to cash driven hedge gains out few add put by VA we by the primary improvement that's

hedging XXXX, which in That's basis. need post-tax beneficial hedge look hedge on XX. a First of to gains are we Form secondly, your all, in need optimizing around and the see at probably we allows out - that tangible made us And we pretax at we're put what that a less can put year-end to being the needs to strategy actually basis the a execute We to tax is not stress. more less. We selection because it. a relative arms we measure you can

we take any So Andrew and we'll follow-up it at you have. that, leave

Andrew Kligerman

that back clarify to come again after-tax on that. just basis just pretax, hedge to Yes, the

Anant Bhalla

Historically, if from that from tax selection selection have Sure. tax We had a - some at those friction. have separate XXXX reform. tax taxes hedges we a made tax correction, gains. not gains tax on to a made does pay end the We friction. that in We market of had on we'd

gain a for you tax for market when we're in correction, look paying friction. now not So a hedge

number tax immediately. having need anymore. marking over taxes of friction hedge So and hedge we compensate it to realize the don't We're a a to to little have we less spreading mark-to-market for years because versus for

Andrew Kligerman

an the had sensitivities? some of material net value - that impact those impact present And in a on

Anant Bhalla

Yes.

Operator

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

Joshua Shanker

variable? said if variable and right, and me in in what's And you be I I'm If high low XQ but that that overhead corporate that correct where 'XX, XQ was would in overhead XQ the think would prepared that in remarks establishment 'XX. why Please corporate 'XX Yes. something difference regard? be between costs that's in missing is the high XQ 'XX,

Anant Bhalla

are of It's the basically Think the expenses the Anant. across of Corporate cost department, running of the the the segments. finance finance company, running each all expenses And of that functions. gets sprinkled department.

& in not Those in & only to comments, our billion $X Run-off It's than Eric Life. It's million, at Corporate in our billion as Other. expenses, Corporate mentioned $X.X $XXX it's Other. It's range. were Annuities. So and less in in

X, XXXX, onetime-ish we've nature the are And our through the brand. infrastructure, - cost difference. which given Slide our difference in out there. costs estimate on technology, the our building that's are really of and So around the over Establishment

Joshua Shanker

I get fairly think costs consistent corporate that. overhead would guess, My is question, No, quarter-to-quarter. that be I I just would

maybe obviously costs, Sometimes companies what talking and bonuses cost around Why rate that sort of I'm variable XQ make 'XX expectation? but they bounce - would corporate there. about would of elevate, you're pay these a X why And which behind is normal why would quarter-to-quarter? run would we understanding I the over out corporate in some a quarter, that for guess, -

Eric Steigerwalt

start. look, here. in about I'll you're to going costs. think Anant, Eric. probably marketing But it's Josh, jump want to

doesn't going in projects got one you've or time X the well, you're Consulting well. here X mean, some sales, here. and of same seasonality marketing other finish about have quarters. costs, at costs, think as I seasonality first You lumpiness to the the

not expected perfectly and We just projectable. that, it's

it's be quarter project. in with anything? it's only to one understand we Do out, then to so normalize. you, day. the want quarter fall in project much little add think will you a Eventually, And they'll that higher, to costs I those can giving that business And those as I easier so much. we're so here, We're you day guidance And lower. one running agree can

Anant Bhalla

You've said, Eric running reasons some generally first is for marketing. covered quarter we've of the it, outlined lighter impacts Eric. And the consulting, that. And of

Joshua Shanker

Okay. assets Corporate investment And then segment I & Corporate opposed Other & kind - investment kind on income investment Other what guess, side. fall as that category income? of into to the What of

Anant Bhalla

the investment between So just to the clarify, you're asking realignment about segments?

Joshua Shanker

and - there's a bit how that's NII to No, Other, to little that I'm component also that necessarily. variable. segments if in Corporate an related to the various & doesn't out. model look in product a through understand you wondering feel there I'm trying the

Anant Bhalla

small. in NII those business is direct legacy reserves some It'll a reserves. there, some and which have There's Sure. very on

Joshua Shanker

will that quarter-to-quarter, as I well? bounce guess, around And

Anant Bhalla

quarter, Annuities. assets into this moved and out Well, Corporate of Life Other we &

should the was onwards, this level it be it So around from that quarter. here in

Operator

with our [Operator comes the question Alex Scott And Instructions]. line of from next Goldman Sachs.

Alex Scott

color sensitivity I on can I after-tax rate follow-up rate And question in I we the around it's Is the And should about was the think or kind if of how provide a XX%? it question being used had around levels. tax is calculation. calculation? CTE guess, just am right just the And changed. you then XX% that that any that's tax

Anant Bhalla

Alex, it Anant.

XX%. it's So

NAIC to have the For through fact And already the change. change we about it when to go reform, we've it - change, of factored happen. this in process to may VA talk will would

said manageable And about we'll guys a It's it of on XX%, believe dollars we VA you along we so couple million hundred give what you later. it's overall. but reform if wanted a view

Alex Scott

it. Got

color And when half of I that helpful. just Okay. point guess, then NII around on the alternatives. quarter-over-quarter, look think increase I and it Was around was was it basis XX how I at, yield, That's repositioning the guess, I XX And few - quarters? up the basis points? the some to on the could other expect we go over that of much any next more that drove

John Rosenthal

repositioning assets a was smaller I to would will next from repositioning. floating growth, the rate of over and number including of variable little a portfolio asset rose. There a were continue the John. compared your income, which bit The quarters. benefits things, as benefits our the floating some bigger, the rates are the say It's and rate

Operator

with our next Gallagher from ISI. of comes Evercore the Tom question And line

Thomas Gallagher

$X XXXX you? at you pretty Is going this unless of If on the the here? because strong comments capital is necessarily back that's capital return the do the get not made now, a adverse VA Or and you versus why that's isn't end-all XXXX it billion buffer more yet? of flow you're just there's but what point some on distributable once make about cash sense for thinking wouldn't to case, year, a be-all, reform. visibility the free a development more Eric, enough and possibility it's why clarity

Eric Steigerwalt

pretty want sound. creating why that's now. think I we capital. seems reform value-creating you you board. imagine if That to be take never being we off do want of things. we We I front-run do. is to but it transparent prudent, out. theoretical, to where and I'd just return to all my really to value, logic tried need We've But Your you are with as we're there to Well, the would VA table? comes where capital want really know

a have to had case. base You

$X there. I begins so want that been time you case, tied XXXX. tied it's the it to But my I of correctly. it And kind over don't said, be out reform. to go the mind, completely us in to continue in this to my comments of would billion. capital comfortable. Form VA been occur - XX, the base back that's markets sort know also not-too-distant we of $X read in billion But to if going look, to a buffer the here, future. $X both I'll you would make billion you if imagine They're timing add, in

So it as very Anant I'm at this very we It's And is participating said, are point, capital constructive, reform. really that. and in hopeful. VA

there's comment. So my

Thomas Gallagher

determine were when or, if XX% as way earnings. and Okay. related it is I was that still XX decent out, to And first show, start, about the capital came think does return that might I - the at Or of tied might think any way going that there's drawdown it you to kind to annual be you want sizing if help point? be when more to it's how you're can I excess on get Or size to do point? because do? of thinking presume give that distributable - Is I some cash road XX% And you guess, free do think to your flow you my Form the when generating to what of about net the percent of guess, other question the you you GAAP about talking a annually? excess be I much it, in you'd a the know

Eric Steigerwalt

Look, me of pleased. addition the let Tom. you, we're think of love thrust to something here very just question. say sort your Look, in I I

was there opening just Anant, the us. are a for is in going returning the I'm to to constraint direction. be You This it's going I of of clean line anything? They throwaway hold add But a of right Most not quarter thinking remarks. want off for heard be restraint concept that on us. going now, taking on my much not for now drivers don't comments. the free flow think cash I to the it I the if going will is are how capital, to But second be? you leap us. towards, operative said think well, you were

Anant Bhalla

you And add think want Well, ratio to only in you about impact. the guys see we dollar do is as can the then execute, as we earnings emerge the power the terms so you I'll it then thing that. dollar you after see can

Eric Steigerwalt

Does that make Tom? sense,

Thomas Gallagher

there's is where for areas is does. would that are, on Yes, just pressure the there I - of on of uncertainty? that that focused is rate that right? reform, some And what bit there thing reform assumption all you one you you. regarding does, to And that Anant, other issues final Is us VA or a interest the then think most VMXX direct create guess, VA may question. with I focus obvious any

Anant Bhalla

Yes.

can it got the through interest the into that the rates levels would moving mean And were scenarios all side. on There VMXX for feel be VMXX. parts, about XX of parts, actually and managing you've probably right? the So lower good very summarize We which we tax of makes industry. the GMIB across timing harmonized we're reformed. versus most when scenario, focus on punitive difference. thing that companies them drives companies. The is the getting get standard is GMWB single The which It's But the standard to a surplus you reversion. scenario not

most for standard want to start about CTEXX the can we we like make scenario think we this, focus what be me regulators sure, ask all pushing distribute harmonized. to measure you And the CTE is the on a then are to if and capital. high-type So and

Operator

And B. line Randy our final Riley. of question comes with Binner the from

Randolph Binner

on Just the a segments. couple

you've and guess, the kind when continue looking This And be past. Annuities, of question I'm good. we this are sales the So in of do indexed expectation But on is when asked I've I given negative, kind don't significantly and to variable believe I being - annuities. they and at negative fixed variable the annuity of flows. stop an But, flows material turn materially sorry, flow, this see think negative? I a positive and an the -

Eric Steigerwalt

here to $X.X I'll here. start. of billion while. to you might billion been for we've Myles, in want jump $X-ish range Look, this saying a

book sales as to and increase expect mature, that and continues think frankly, I here. will the stabilize, sales lapses we growth As

comment on question. heard You Myles' previous a

we lot new VA momentum lot a of of as lot XXXX. our of It's product We've of just way, are the have a got have that here, fabulous that Shield. well. channels, we the head products. distribution had We We new into the And second by a into as partners here. momentum not coming momentum selling already quarter more it's

full though, So look, still going a to while. transparency it's take with

coming are of back. a you 'XX You 'XX it these deposits. books, I to off will I remember of 'XX, that on lapses and solely, but lot if was XXXX, not And you think mean, remember, that business. got billion in most the of was $XX and remember, business put was in

can in you more range sales, you're here. when of the billion So math $X-ish that see

Now heading and doesn't cannot sales, rates It that it we again, which in it's as you work. stabilize zero. we lapse math towards going start measure But do, as - grow will to quarters.

all know think you I that.

to So way That's take it's going is. years. of it just couple a the

Randolph Binner

quarterly segment earnings is the if it's number Life you Or helpful. be that the Life - pattern better within what basis can - the you kind whether then the And That's is for Life realm segment, a on quarter, this plan there? normal of up has is not this And characterize this the quarter, there - would at on down. this or but in adjusted that an look on earnings than the of probably a can lower segment? we been possibilities and

Anant Bhalla

Anant. It's

ex ex notables, So from almost is right? the $XX notables And of Life of realignment income the investment million that is the earnings from half portfolio.

of segment. lot a assets into the moved we So

capital. its reserves So it's got stat and

patterns expenses And good, were of and Underwriting segment reserve was the well I quarter. very went severity good. Life taxes was underwriting this lower, think the low were were then development everything both Now in lower.

everything a if you direction, get this. goes the like right in So quarter

Operator

Scott question Goldman of have with follow-up And we a the do Sachs. Alex line from

Alex Scott

been had ceded could a have and that the capitalized been have also capital hard that conservatively been ceded and, about just done. there, reserves the in just amount the that I'm done of there quick how stat relative I that's ceded. SQL, how of I discuss have of of assets captive. that on amount when sort of been reinsurance understand to that's you reserves just I that one hard and been is In entity amount amount guess, the reserves GAAP the to much think the the just trying

Anant Bhalla

the It's Anant. Thanks, ULSG XX-K, in Those the around of assets hard assets, that total outlined the book for In billion with around with are invested and captive. is target Alex. we $XX.X assets. of X/X

Alex Scott

that difference reserves between any on way it? I Okay. think to just look And gross net third-party at of reinsurance how much But sort supplement? would in down there, then piece if your about is basis. I and there GAAP of I think used the a was that's about guess, the

Anant Bhalla

reserve billion, north of around $XX The is total that. a stat little

the reserves, between of people billion around are what difference assets. - there's which noneconomic $X funded with call third-party So

Operator

call the And any return to to Q&A remarks. session, that like does conclude for David closing today's Rosenbaum and Mr. I'd

David Rosenbaum

Operator. in call speak for Thank your you and today we'll you, Financial, Brighthouse for our earnings for much. conference again Thank quarter interest quarter. us joining and Thank very you first next

Operator

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

Brighthouse Financial (BHF) 8 May 182018 Q1 Earnings call transcript