BHF - Earnings call transcript Q2 2018 | Brighthouse Financial, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Brighthouse Financial's Second Quarter 2018 Earnings Conference Call. [Operator Instructions] And I would now like to introduce your host for today’s conference, Mr. David Rosenbaum, Head of Investor Relations. Sir, you may begin.

David Rosenbaum

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

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

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

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

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

Eric Steigerwalt

believe we good significant the one a We’ve celebrate. traded have our we made and year. year Today, much we progress morning, publicly David company. you, as anniversary And to Thank everyone. over are celebrating past

what executing and we An of strategy create last as We success on shareholder have we are we remain focused the announcement we the of made strategy our accomplished of example proud night. is believe that value. will our

directors the to $XXX of million stock publicly to strategy beginning in Our traded made, have enhance have diligently have flexibility. program financial we the approved as our and base commitment the worked our ahead and has and progress an of we our strength first This board shareholders. confidence case program, returning a capital company From scenario. repurchase significantly our our independent reflects to we

for expectation. over priorities the expect today around We top year, going with with remainder to respect the manage made focus to prudently the consistent our of Board’s my I’m next we’ve this comments the progress to XXXX.

we are, reminder, Exiting a first, as goal MetLife. the with As service TSAs priorities exiting of on are TSAs our structure our overall focused our reducing or standalone company. a cost transition top agreements supports

and products developing earnings distribution the variable respond through of actively managing the reform clients to Second, needs enhancing platform power. advisors and are they our our growing third, evolving new our capital and we And and that serve. network annuity that NAIC

while and TSAs reduce is XXXX TSAs. with to quarter begin with and second them operating with anticipate We we cost the with We on solutions able Exiting the our more with fewer ending us begin platform. Consistent XXX began were solidifying MetLife TSAs Let’s with to XX to replacing effective strategy. currently quarter. essential expenses, exit TSAs. strategy, Brighthouse the remaining will help XX executing exiting TSAs in our than

and up XX% quarter-over-quarter pleased very the fixed-indexed XX% Annuity important the annuities. few $X.X second sales sales by of ongoing of our relationships in of XXXX. quarter in of distribution. initiatives. I our perspectives were approximately annuities business. strength shield diversification the momentum were life and results and The $XXX in annuity million am from us. provide want Sales product billion Second, with distribution insurance quarter-over-quarter, shield Product the on quarter, sales quarter-over-quarter. I our to reflects is annuity a also growth to up our branding driven

We have force. of XXXX. of of approximately life $XXX amount block XX, a as billion large in June face reinsurance net with of insurance That’s

are a tailored one a simpler, focused significant shareholders. with more of intend life solutions strategy, the As years. our annuity player sales new key the and life is Consistent and to growing of the before, insurance coming I’ve also and industry of in transparent their our provide to insurance on advisors, that set said strategy clients are elements be of we offer and to value in

we subject of to or such, regulatory the this are year a As life product to beginning the targeting new next year end launch of approval.

summarized Turning assets second of on slide stable with quarter the to expectations. X second CTEXX that XXXX are and results, in highlights above Results presentation. our quarter-over-quarter key of in were our mixed the our annuity quarter variable with earnings outstanding quarter were second growth for our sales financial line

by were sequentially as and higher higher of segment. lower both alternative which from quarter-to-quarter. by earnings corporate runoff impacted the vary expected Sequentially, the segment expenses in runoff results was claims, investment our and However, unfavorable can impacted income

expenses basis run for months on quarter, Our approximately up expect were corporate We $X.XX and the expenses post $XX XXXX. sequentially still first end of the these with with billion. line of XX level in culminating watermark high million $XXX corporate expense This reduce rate by XXXX. in in the to a million separation million expectations, $XXX expenses was by

infrastructure share. $XX also achieve We quarter, adjusted investments these diluted second share, items refer investments notable $X establishment our for In in costs. approximately to to technology earnings still for the pretax. less making our of to as and per costs guidance in our businesses. establishment were necessary XXXX We are expect We million $X.XX per

The adjusted from second of expenses, guidance are notables notables lower lower returns, half year. ROE secondary market less XXXX in this X% in intend of approximately the primary XXXX claim investment universal and drivers on improvement investment repositioning. before an higher performance end less additional be continued meaningful expect equity income portfolio life and expected ROE still we with We Additionally, adjusted XXXX. provide to severity in with to both guarantees

Finally, CTE billion assets above at XX than assets XX. CTE $X.X sequentially of were or billion more flat above $X.X

are aging in Importantly, normal our markets, these favorable lower and results line our expectations, given with of block. volatility

X. to more capital like quarter to reform over variable I NAIC annuity to turn discuss update I slide is summarized an call Before results would detail, on which the our Anant second in provide on

the certain for the capital annuity at today approval the various framework variable meeting. X, the of After will date We The framework, the of reform committees guidelines. conclusion effective XXXX. process expect approve NAIC implementation expected clarifying January of the reform NAIC is to of begin NAIC will be the

to it today, principles to and framework is managing positioned reform believe reform. behind total believe we Based well with a the supportive on to be continue to to the be the view and tax this our annuity variable of reform of aligns of adopted Brighthouse expected We asset requirement. impacts adapt

thoughts timing. provide on me two implementation and impacts Let

the equity annuity we including in tax in First, and XX beginning and our benefits variable frameworks of and behavioral from to new assumptions XX the capital incorporate third interest hedging and calculation the quarter. CTE intend rate scenarios, the CTE reform

will as the increase, total result. a asset that requirement expect We

be assets the funded CTE However, increase we by this expect current XX. will above

our made, To first the up, very believe stock shareholders. excited in program for and Secondly, if processes about are to standard for reform in potentially initiation confidence ordinary we adoption in actuarial are have reporting, reserve XXXX. our should framework early our of for capacity help the that in currently in of we changes sunset repurchase it the hedge will the growth to capital the align we to to This reserves dividend current better our commitment returning considering way the enabling shareholders. we reflects our in come years and for progress have the as program framework strategy new the scenario we capital potential NAIC pave us creates statutory wrap value permitted, target. the The with

We in with and strong our in with performance annuities are the our pleased sales quarter. growth operational

earnings With discuss for second call sequential in targets to lower our more this we quarter, our expect year. Anant achieve had detail. I'll to results over financial the to we quarter turn the that, While Anant? still

Anant Bhalla

Thank you, Eric and good morning, everyone.

Let me the the adjusted on the in were by well million and perspectives per to second $XXX beginning after and and provide the quarter of second X. continues Adjusted million segment lowering results basis same tax some $XXX start from but adjusted underlying slide only impacted on million notable with XXXX The compared the quarter, the earnings first excluding notable XXXX. in costs, the item $XXX items, to segment quarter of key higher impact of themes results The earnings on were the quarter earnings, expenses. annuity $X.XX in quarter million perform in or was establishment by the life in $XX share. good, were

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

for our the up share expenses the sequentially XXXX with like to that share watermark quarter, basis, consistent expectations. million would is for per and quarter theme were per high $X.XX impact. translates a and I sequential $XXX discuss first an tax The Corporate to after the On expenses. million approximately in that $XX

of billion. average the in million or quarter $X.XX share, As X, XX $XX seen than were level slide first for to expenses our corporate as tax per expense Actual of run quarterly company. year public expected the $X.X middle rate on our a in higher range first the the months billion corporate is after approximately $X right

after seen we investment repositioning the lower results slide was for assets is Net quarter. alternate income per quarter four investment $X.XX performance average approximately related decrease we started weaker XXXX historical income. was by to The lower private second partially the alternate equity investment portfolio. report The and the primarily as which This by million investment was in on funds, a tax lag. investment six. growth offset last is in quarter in driven $XX than share theme portfolio This that income one or sequentially, a on

quarter third the The theme claims in is run-off segment. the for

per were driven slide by Secondly Second sequentially, six. Life severity or on with Universal seen of $X.XX quarter book higher in Guarantees primarily as share claim $X results after unfavorable approximately tax million the

annuity in addition, lower. incidence segment In blocks was in legacy our payout run-off

million the annuity fund this in approximate quarter. the Sequentially, lower in the are the segment in loss the amortization, Now in lower flows in separate earnings net annuity of results partially higher Sequentially, million equity million. $X in a approximately performance improved in assets partially was expenses, segment the values Adjusted investment level. an The equity in income the run-off DAC turning market resulted the by decrease $XXX higher account $XX performance by life quarter. higher million as our sequential in Sequentially, results Net run-off $XXX at results given account $XXX quarter. offset Adjusted were reflected and million to income adjusted quarter. were earnings segment sequential segment. reflect majority investment to the segment was expenses. private offset

run fluctuate establishment loss the higher be segment experienced $XX per from we a We million rate claims, notable Corporate with Additionally, the other costs. million and expect quarter in adjusted million currently $XX quarter. were area this item quarter-to-quarter. sequentially. to quarter, an possible of higher which $XX Expenses can for included in and unfavorable variation had to

with our and June an XXXX. position on hedging close our as update XX, now me capital on of Let VA

reform. annuity our we capital reflecting variable about good capitalization prospectively including First, levels, tax of very expected the reform and feel impacts

with Second, line to program, our with exposure in results variable expectations. respect our annuity management were

slide above on level XX more assets were than CTE assets billion billion $X.X basis. approximately the or above As XX X, a of seen pre-reform CTE on $X.X

delivering in and in for expectations our with Our working quarter. hedging results programs movements the the line market are

Third, market quarter, to total less XX variable down adjusted the our movements are capital by was from $X.X the annuity requirements, billion CTE reserve than $X primarily hedging driven target. which billion, existing prior sensitive

earnings the current to Eric in out our of respect end with adoption million in the potential framework statutory XXXX. we existing $XXX approximately funded mentioned, finally, holding liquid expect from NAIC reporting, us line potentially And the assets the adjusted repurchase processes stock the if quarter. of reform the of early enabling of the second second As we actuarial Fourth, expectations. our our company with currently be as million through capital statutory were for million are considering $XXX repurchase sunset permitted, authorization of the the for $XXX in board, quarter, to to

our quarter’s is consistent capacity with levels. Additionally, leverage the prior

open present that, up a reminder, call questions. order the enhance when access to we markets the as for As may debt and financial themselves opportunities like in we flexibility. to With

Operator

of line the from comes question Partners. Lee first Humphrey our with And Instructions] [Operator & Dowling

Humphrey Lee

capital related the Just reform. to VA

view your during have to -- now generation your to laid So strategy flow roadshow what with clarity, the approach going the from the greater block you your cash kind your forward, changed and inflows relative hedging to related of how process. you out

Anant Bhalla

to Good same the change it, Humphrey. With in our way. we way morning. the Hi, exactly hedging respect no about think strategy,

You hedging RBC real of CTE would update sensitivity within tables strategy capitalization basis annually, see will about the us as earnings distributable probably but it. our comes our think in talk in strategy how primarily we XX with year-end our about framework impact that but we terms doesn't there, and and so no in process, change the

Humphrey Lee

your to strategy. the still your of related regime above hedging time create and X So basically thinking new to, XX a reduce asset that sense, to over you billion still cost? use your expect hedging level be then That's buffer under to CTE in

Eric Steigerwalt

Eric. with the to adopt to that it Hi, important. right capital Humphrey. been certainly, doing of start the the Right We've is more RBC I now, about reform was quarter behind I discussing to because as make it you're frankly, just forward. whole capitalization new But respect Look, we're at RBC looking VA lies buffer we to It’s framework, as point think talk going think robust. hear us Anant said once that going now. every it and

So I your think that question. answers

Humphrey Lee

largely how with quarters. quarter portfolio. million wondering roughly was done coming did that realized like still by your lost much we your losses come investment I And at then your and repositioning My you through $X.XX investment number. expect you of looking kind in realized in process in are that have losses, XX the repositioning yield pick understanding is or you should ECS in is up the or to the just some driven

John Rosenthal

John. It’s Humphrey. Hi,

second repositioning. to right, lower trading that. I were of And done those the be three, you're losses at coupon treasuries. as We're probably with treasuries. -- in losses the the most quarter continue reposition think, of those due one, realized to losses to not going Two, we're do in will there future out we continued

Humphrey Lee

Is the to now, to repositioned -- have guess, right like size your way about percentage you thinking so investment had there are I done the how relative portfolio, you any you where coming the, quarters. you stand

John Rosenthal

first half rotated it of first about the $X we've the Humphrey, year. at billion in quarter,

we're down. trim -- continuing we're As -- continuing far as to position to the

we're bit timing to ultimate as far As impact, that, evaluating but and a we amount have go. and still

Operator

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

Jimmy Bhullar

Are your First, I just how give plan had any the of a going question on the program? or expected timing drive, base and just complete the and pace program. to buyback really you to sense going on us it if of to what's you're price could going you more fast completing certain

Eric Steigerwalt

going or I would that, break Jimmy, you I'm it's but many know of that, to Eric. I not down want it quarter-by-quarter guess, me to like something –

Jimmy Bhullar

going going based to how where to evaluate right guidance, are on you would now, strategy is? it? are to just approach not Or price you are just -- start your looking it actual going for you on the and How but you

Eric Steigerwalt

Look, thrilled that at this we're we're point.

certainly above. going you prices, are to these prudent. over time I your back of We’ll into to think like At We you do do would is whatever can the model stock. plug all kind and think buy I it

be prudent. We're about I Look, have think we watch a overall, we to stock. to we've think company and to got markets, to that repurchase an word to got might be authorization intend use. going but that that we've the

Jimmy Bhullar

the claims, And a secondary that How the related that I of reinsurance was guarantee book. company. the recaptured block Universal think of to Life it then you from you mentioned part in much elevated

Anant Bhalla

Anant. It’s Jimmy. Hi,

the from separation, aspects prior our we recaptured severity. will but to ULSG was that was that's not year, block, large block parent some a last former Really, traditional the there as ULSG, of so So there be driver well.

Jimmy Bhullar

I block from mean, third-party recaptured from a reinsurer, you the third-party a reinsurer?

Anant Bhalla

that of ULSG the that It portion was there of percentages, a yes, was portion some don't a would but We recaptured. because there have was recaptured. the block portion was be exact that,

Jimmy Bhullar

cost, increasing the should than insurance because you worse block, right, book would the otherwise of UL assume just than sort that should a would basically reinsurance correct? relationship, was have And we it you normal retain that recaptured – the reason reinsurance, behave

Anant Bhalla

increase industry. current it We a than this rate higher insurance the they've recaptured block got and standard A it’s because do from company. lot is for it that the entire it, reinsurers -- so the They -- do was companies. they don't the multiple across when rates particular pretty of for do this,

So it's specific something not us or systemic us. to to

Eric Steigerwalt

that of I to in Eric. if else it part that it’s perform we something differently, question. expect Jimmy, any Yeah. don't question No, too. hear your was

Jimmy Bhullar

a Yeah. block quarter, block that of -- or forward, point Obviously, My anyway industry might your expenses? was out that do a meant. block, and part normal obviously, be -- is establishment those I whole? that guarantee think how the UL amount than every you but for that normal be from just then bad as last will actually on your question typically experience not behaving I the what of The going what you that's UL majority total done is is on like worse the show results. in What views when with No. worse on the that That's going secondary to if are single here be was that that's would costs. had had

Anant Bhalla

again. Hi. It’s Anant

and million be be line in this in with the just then XXXX. totals, view in for from the this again of XX in will low of expenses is we rest year around, the what XXXs quarter We in we terms basically XXXX. So low-XXXs on to done last here provided the next and under year in

say, across that here we’re on, XXX I XXX. around those numbers XXX, cumulative from So talking

Operator

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

Ryan Krueger

you've change hedging – of billion I by that at X VA Does specific past, strategy -- then XXXX. about believe, cushion thinking that level, talked that of capital managing $X to about more over changing at billion that risk assets think should an the in from RBC this about to standpoint, all, new there's time, So at framework and and now you're the all? a we putting moving

Anant Bhalla

call why Anant. billion XX, above change. billion X. X very as X at to X it stays deductible hedging The range risk That to strategy of and grow X colloquially it that Hi, that's Ryan. because deductible you It’s from the is, does eloquently the we're we said, or at as billion assets you will got not

So almost will think of though, holding work. that to make, robust. the When we about said, can Eric conversation the excess CTE a adopted, little post for the framework deductible than make the all about RBC more being because capital RBC reform as we strategy talk

Ryan Krueger

in will is that of $X next move to shift, be to something occur get to a it then do will billion. or time gradually it over to certain that a more from $X or the terms And going you right billion and billion -- the the be it's time in think point you -- you’ll of $X over that time

Anant Bhalla

Yeah. Well, year. as the we each laid up passing expect billion year go like out over in our projections, a to we X.X of

Ryan Krueger

debt with have forward on after something repurchases looking done this program. about should available be that And debt future share one as we then you you you mentioned, get potentially the to just so would last issuance that capacity for you that think

Eric Steigerwalt

I it wouldn't that It's think Eric. of way.

to beginning, can term we out a flexibility targeted the capital of our about XX% ratio kinds if for financial you and very opportunities, way see of the it, and we that structure. we've things leverage it and want said advantage from take by as we there's use think all I

Operator

comes from line And Research. the with Autonomous our Bass question of Erik next

Erik Bass

of anything ’XX of VA the if or reform, me, for has XXXX taking I terms BLIC And impact? does a in early anything XXXX? of in changed your this a can you XXXX not excuse is or from dividend, expectation guess, that adopt capital more change –

Anant Bhalla

Anant here. Erik. Hi,

second answer me your let first. So question

together. we can We at will adopt. would today. to early how shortly Hopefully, if it, see have but everything comes to we we and regulators this to is It's look for us work with see passed the like beneficial

taking we're have we on Secondly, dividends requirements. adopt the contemplating BLIC BLIC drive and the not till RBC dividends, early framework

question. So answers hopefully that your

Erik Bass

right your funded still guess interest by of I near any to and think then is going cash dividends expense it are largely to other So needs from be term that?

Anant Bhalla

Yes.

Erik Bass

keep impact at point level to you any program understand And at plan as can CTE be, the CTE any that CTE the just the at point? would XX kind dipped rather floor below a future, if than then you your hedge of I about talk set to in you XX, XX changing so what

Anant Bhalla

new So the will basically to CTE XX, XXX% in a company. framework, translate RBC

that whatever RBC. details we'll at, above XXX. it, end normal we means about already we're is above think probably above to up That's XX When of the from in range the means CTE number being program, XX to CTE basically come finalized. come shared, protect operate above and we're being we’ll we've we RBC, which our above As once meaningfully going should XXX% markets, be to you back more XX, way that framework XXX%

Erik Bass

there of back dipping wouldn't your sort just below, RBC of be that to target rebuild to for any need happen? problem were if -- you trigger sort to So

Anant Bhalla

robustly XX, because being would we’re correct. would even be see It or at We at be us trigger. you’d That's capitalized, XXX very if no higher.

Operator

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

Randy Binner

I because go low-XXXs the referring case, if a that. the I well. segments, to of other expenses the were get saw annuity higher question, just next, expenses Yeah. timing in in I feeling back wanted wanted kind And corporate the segment the year and of also asked we clarify you as that the is I but think Jimmy this when to answered think, and Anant, the to timing, segment? the to you

improvements in just helped ‘XX. get a picture a those the guide that trying the half of expense kind back of pace I’m fuller of to So the of

Anant Bhalla

Hi, Randy. Sure. morning. Good

about I around I of prior costs, expenses from was that those talk categories. about When through we here are quarter. those our answering was segments, as higher, be X establishment and are your when which the the billion a So I expenses, We when and of came XXX expenses, XXX the corporate the two go the range our to expense, question, talk comes expenses, item XXXX was let's between are And and watermark break middle Establishment costs Those corporate answering our in in we it. expenses, here were first to $XXX with as what of right, XXXX we a reduce billion. mentioned, I it breakout and we in each is it notable right operating had Eric range X.X to our so by will million the gave. that to on, by that actually it's year what in that out run rate. high

Randy Binner

then on just or had hear of rate about we a a the your question could -- was run-off XX and the another end to it you run that million And run one commentary, items couldn’t segment, the near think rate mentioned end? our million you you're XX of I referring I

Anant Bhalla

run-off five, No and was worries, happy clarify. to million Yes, area. XX one, it

Operator

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

Andrew Kligerman

billion First of would the tax greater the final what question buffer on be that might When so do they X.X speak. tax CTE format, you implement reform estimate around the to reform, impact than buffer? XX

Anant Bhalla

It's Andrew. Anant. Hi,

all we rate We've not it we're reform. together. going Tax with to answered given have so We tax questions plus the together, them future. being meaning pushing XX% that off these into reform,

Andrew Kligerman

tax and reform capital impact together the million? might what the of sense a plus XXX reform have you Do

Anant Bhalla

to XX. still We be at would expect

Andrew Kligerman

I see.

XXX or of excess reduce of XXX then that million some could million? it So

Anant Bhalla

it That is would correct grow and back. we organically

Andrew Kligerman

operating million operating pretax. the And went the from into million estimated respect the then costs, expenses, drilling if little corporate establishment to corporate notables XX with or a I the expenses take expenses, that XX out about in to deeper you

saw what you pick kind million a So and curious of I was consisted $XX of. up that

Anant Bhalla

to answer Happy it.

higher up So many going advertising that we had some was that through. pick one-time and items corporate basically

we had example, meeting. our For annual

all at, There of on one-timers backup which basis. fair items putting costs, a just run look on like our the things service can we number which shareholder advertising, those million to we facility strengthen now that steady again to providing liquidity little costs, some XX are driven million help So by in corporate have in view sub Maybe rate are a what of -- these number XX think constitute drove year, expenses a and of quarters, about couple of would you shareholders by everyone resources, place how interest a it. other two a shareholder operating basically are around a year that services, that. expenses, last pretty should plus line or we're

Andrew Kligerman

with last with product out your the to little talk you then competitive respect to in that that noticed one a are mid-May. And one, similar just shield. landscape Lincoln came I bit sales, in about National with buffered -- Maybe regard could the a products

Myles Lambert

consumers overall the the landscape and to the just and like competitive advisors. welcome annuity appropriate, We good for it's speaking. it our our thing Lambert continue entrants the competitiveness category product, if product Myles We really but into It's hopefully and always, into our new Yes. and entrants structured space. space our think We new the the a we’ll further validates category. as make of monitor to product, changes grows

Operator

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

Suneet Kamath

the in on the you're reductions some half. It like second question of would be sounded pretty with TSA. targeting significant First what what Any planning. associated you're savings the quantification cost

Eric Steigerwalt

can do not biggest would out to that. a There's TSAs. the it's TSA One It's and wasn’t mic every time of about exit say, they're save. have a activity about at we getting cost, ways to meaningful, My pieces, that two Sorry you're think I going lower is but on. Eric. expense Suneet. Look, an

would quarter to third watermark. ’XX downdraft pieces year previously see our high talked historically where though we've are I in the going are of say about be numbers would biggest a that's meaningful our lot expenses, in ’XX but or being So we said why there there. the and second really that you're

I is to are quarter, big and see that hope is quarter and second – the but so us. Our you in years ’XX some fourth be our really are expenses the watermark, third high of for going ‘XX going ’XX helps. to degradation

Suneet Kamath

in funding are out seem of And looking the that that level the XXXX then provided an at you'd capital, for does kind at company you're cash, past. in buyback sounds expectation the and like we had holding when terms you're of still buyback funding you comfortable of not taking the that since excess VA with business, and be dividends on dividends – be out to

Eric Steigerwalt

and at it you're from exists authorization jump here's is to start buyback of course and say. The would Anant here. right that least piece out the obviously do maybe. to right, real pretty Look, in consistent our think gotten thrilled the we of never to ahead what Let this key shorter is, capital what I'm holding of Suneet, board company to you can being going The here, well, returner me of the getting cash will I time shareholders. have now. We're will next is is probably do you're we answer get this but and term, I towards more? end over And a want board, up

I announced must goal sort buyback. first personally, that. Well, of we've So that's original goal. the the admit the was mean I now,

anything couple do of do piece you the that want future, we about think with is, you years. repurchaser in As we coming consistent of add obviously, next Anant, and XXXX? respect obviously become the do hope to stock to how a the to technically

Anant Bhalla

Yes.

the so specific XXXX helps also because enabler to that and funds drivers XXXX, One and what said. that's on it to out adopting respect it of items. unassigned reform question. with would of three I approach a one our is adoption it like three great really think BLIC money build of getting your with is in VA answer dividend of So to capital Eric I capacity, would early

to of markets see And is then the into I we we about you say separate implement translation perform perform us. that needs sure business. the finally, translating make The and account the growth well this happen. That want well items, returns to second for continue continuing to as what block that these see to really would is and that new

elements those to going we’re So see through. three come

Suneet Kamath

just one for could. if And then one Anant, last I you

sense on Any pretty of was just of markets of billion moving the you’ve decent know, $X.X forward? you terms volatility, -- buffer, pieces? can despite calls sort quarter, sense this a higher give of and we impacted you as the markets in the us track flat On rate. it this done going versus prior kind how first versus I some of

Anant Bhalla

Sure.

little the were down have the the are Both have at derivative look quarter a of mark-to-market. impact you I Those and mark-to-market time a bit markets So items would in then interest that volatility rates. with and passage drove those would along came up. the

our derivative block. something on $X consideration, answers, think that prior $X billion comment we and to time building to up you from keep mind, cash important the annuity company that that be are we over drives when as out because in Another also Life going of flow billion will of b, Life the that also a, that's down deductible to my mark of the market mark-to-market happens, but, block, drives, go out

Operator

of And Barnidge our O'Neill. the Sandler with from next line comes question John

John Barnidge

tax your rate With thoughts can latest your balance if around said give year, rather? the the you or updated the guidance, it, of the year for you apologies, us but already

Anant Bhalla

expectation the same true that’s quarter, provision. knowing in of as tax mid third a where to stays true the quarter we Our so that sort up rate to we high-teens earlier, up the do

John Barnidge

And and then sentiment. than annuity pursuing there's has I is question, that or run-offs margins preventing obviously you divestiture some other for market there know also but lower all of anything conditions, structurally my from life. the

Eric Steigerwalt

maybe will with would it. require it's block easy just start I'll reinsurance chime a Hi. else a in. Delaware, not divesting we've think it's talked ULSG us and as that Structurally, transaction, as having have regulator as and complex to we working of large to, about runoff our anyone as

Operator

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

Alex Scott

comments the first uses the the be know until with a I company? a it, that the will put operating or expectation holding there be from to question just of at an you issuance. sitting was decide sort do is capital into potential need company debt you're any but follow-up on about on that the to potentially should of it what guess you ready I not talk

Eric Steigerwalt

to degree, We'll capacity financial we'll us it the Wyman I’ll it's nice have mean, general agreement be about pretty Anant, see. XX the be regulators to great having I you a and excess here, have Eric. talking what understanding say our to leverage we've to can see, now I proposals but the look, consider flexibility. Oliver and It's I here since jump beginning, start. flexibility. from would very sitting in. to exactly said,

answer So anything to Anant, I add? it. would that's how

Anant Bhalla

think I you covered it, Eric.

Alex Scott

And then guess, just the a question on follow-up it was was you adjusted statutory earnings I XXX. gave,

do little some and that us so if was a of of are the and the that for about be that a indicator that you power? should we at, that I earnings wondering just closer a GAAP of half the earnings is like, think looking than you of – think better what XX% metric sort less I lower was could help make is the first differences of you what year, significantly mentioned

Anant Bhalla

about to out better answer above CTE short is life is the the of The yes. being and capital grow XX That able indicator a return of assets talk company. us

return you are but of plus the hedges, stat able income, how Now, as end your from capital funding to existing as VA the the you take to any. to almost stat stat this which and because reserve will XX XXX line losses be the of VA out, to income, level capital, taking the that, pretax at technically the adjusted grow to with adjusted pretax day, sunset of is so go include be above CTE that gains and and reserve have know out unrealized tact, and reform question, required XX which to differ start we does change, in through the answer reserve, that of your earnings, not from assets passage AGXX manage statutory essence, they CTE and in with total bringing block at

Alex Scott

maybe And that but you benefit mean sunsetting and would not how today? go reserve your on the, much was scenario. that how much total of were for the I if how standard scenario requirement today, I the implications necessarily asset like, quick the removed standard follow-up one down remove requirement, would know, much would the if to stat surplus

Anant Bhalla

my That be and is meaningfully. up would comment goes it’s It capacity driver meaningful a question. about the dividend great behind

Alex Scott

take mean I like should billion? to over $X So that

Anant Bhalla

mean to that take it's meaningful. very should You

Operator

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

Tom Gallagher

morning. Good

pull think on of on follow on of current cash up Just this Anant, looks all about question that any or on is the XXXX, the couple of Alex's forward mechanics the sunsetting be the a the sun the to initially and first that helpful? forward in might that years was at it the like flow could what framework. of of that that setting like, sort clarity to look some guidance the, worked way to some of it stage you've if and sort out would or pull of out output given would

Anant Bhalla

It helps. Yeah.

it where early with helps To the my helps explain capacity. really me answer, Let dividend most.

all changes. it none removes really of because have allows. thought may hedging flow the The it it any and we ordinary flows and company that, dynamics, in manner clouds, of targets allows So the unencumbered happen an standard had what the to cash that anyone underlying life capital out That's through and of core scenario dividends. really of

Tom Gallagher

improve? volatility it's outcomes capital more you would to So the the would of -- say related

Anant Bhalla

Yes. Pretty much.

Tom Gallagher

stock anything was regard that I that really can insurance, it's consideration have transfer, Eric higher whether made for but how may -- right stock appreciate -- how your products, under given now when the with market's VA, does XXs, you? Okay. whether not sense, a level where And XXs Anything it's life just in risk the change you. now, or valuing your question spread to then for

Eric Steigerwalt

with to is. I the don't it respect where stock think price changes

that. shareholder said Our in the have the that everything's create market goal values do previously I I understand the on to table. the it. we can ways is I value mean, stock,

so mean, nothing is But I Now, we what to I've Tom. much I also said, table, in given here's say, some the look, any is degree. there off constraints would year, nothing. do resource can only

will if we and add anything We executable value. shareholder will consider it's think

if a want. So, at and of answered we inherent if the we resources any anything still and it's stock on executable, hopefully it, executable do guess, notion I add follow in have happy will consider that do and the the to to will that's I'm price, shareholder we think you value

Tom Gallagher

evaluation or risk is of today still debt into the OpCos reform with then be clear, still to based down the initial VA OpCo initial new you than rules, doing more going deal is in the And your about there be that a deal capital just to you the know capital on with have to requirements. streaming deal, you're some -- there reform to what enough

Anant Bhalla

achieve added capital a is which your it when structure Eric terms Tom, flexibility little sense – and in debt opportunity add financial answered is the to to deal of makes issuing way there market more, the I’ll I’d answer a us.

sensitivities, downstreaming or lot organically VA upfront talked also capital, reducing changes which as deductible as well the costs. end. are about that being reform, into year capital be play X Now billion to we whatever there hedge two here. One OpCo, downstream we've by are it to from growing very point strategy is is our at of or to growing number, shareholder impacts, speculate useful the core a is, we’ll do friendly looking to that dynamics by able a the to our higher at update

sure we want to deliver be make hedge can those that Capital things. to helpful can for So both continue reductions. we’d cost

Eric Steigerwalt

at Look, run you just we’ll heard Tom, add. maybe say, I Anant XX. than would more

to about we're, make about the what Do saying? end, XXX talk XXX you here. starting that we're billion. million, $X million talking Does sense? We're XXX I'm million, So in not get

Tom Gallagher

sheet Yeah. you watch just then for that do. would anything areas? into heading And question as I balance final kind review XQ, you season, flag guys, of

Anant Bhalla

nothing review point time. would this We No. annual the in quarter, at we flag in have a we for you do actuarial third

Operator

with of Research. Erik from we do have And follow-up Bass a Autonomous line question the

Erik Bass

continue assumptions NAIC I own the scenarios I about your review, question to the your asked going set third you your you would as think quarter assumption align we just but we assumptions? GAAP actually estimate would guess with best to, was to annual or Tom macro expect

Anant Bhalla

to actuarial was that is to just answer return on I our Eric, our based one to We've estimate. expect to got help. maybe capital impact process like that. the early third process, We GAAP work best through quarter announced. do may make point, not which third it's quarter

Operator

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

David Rosenbaum

you. second earnings interest again your Thank Brighthouse joining and our us in conference quarter today quarter. call speak everybody for and and thanks we'll you, Sandra next Financial Thank for for

Operator

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

Brighthouse Financial (BHF) 7 Aug 182018 Q2 Earnings call transcript