BHF - Earnings call transcript Q3 2018 | Brighthouse Financial, Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Brighthouse Financial’s Third Quarter 2018 Earnings Conference Call. My name is Carmen 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. Rosenbaum, you may proceed.

David Rosenbaum

you Brighthouse thank XXXX third 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, November time Financial’s materially of from Company call X, discussed differ speaks statements laws. of and to any on discussion XXXX. on anticipated undertakes of information those this U.S. in Commission. within including the as will during call. today’s only 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

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

Eric Steigerwalt

also quarter third of to with quarter-over-quarter very a David, stock million of case and and the results approved strong our in adjusted pleased earnings our scenario. $XX shares feel our repurchased quarter and approximately good Thank October performance Board base traded shares first our everyone. company, progress to repurchase August, from of our cumulatively. stock about morning, and growth. XXXX, our as Directors I’m very $XXX good program, outstanding I in pleased ahead the an our approximately announce, In including publicly XXX,XXX I’m you, plans. significantly an sales independent we our or million of XXX,XXX additional third relative

of I’m for October, XX% we around focus utilized have the the remainder our XXXX. to As end we top my priorities of respect of made authorization. today the approximately have the of progress with going comments to

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

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

Brighthouse XXX significant the with year began and the the with more progress MetLife end essential expect on our towards executing is to Exiting TSAs. XX, begin Let’s platform. solidifying year operating effective strategy. cost TSAs replacing solutions them the with to with approximately we remaining, demonstrating with We and TSAs

company, distribution were over sales Shield driven indexed am $X.X relationships reflects up distribution. and annuity. growth Annuity million XX% our billion of sales ongoing strong quarter-over-quarter. results and very a the in Shield Second, annuities our up product The of annuity of from our our I our quarter, were branding our by annuity of initiatives. fixed the Sales the product in we and highest sales of level the momentum $XXX sales became quarter-over-quarter, sales XX% quarter third of with in since XXXX. pleased public strength

We to we excitement working not relationship. are prospective distribution annuity to distribution inbound September, continuing to distributors all see United launch continuing as product of security. see our and the consumers with with achieve are make from offering a financial we whom States do both broadened with from currently interest in have two as fixed we our broad products. And network new current to partners, our help continue long-standing but we’re partners, annuity as In possible, the we also

our portfolio. interest an important rates product fixed this As rise, demand annuities increases, enhancement making for to

As agreement of to from launch very a we feedback market. competitive early our The positive. distribution products are that theme been these has part the products, the entered reinsurance into very partners of development with the in

Turning to life insurance.

this As strategy important in. we competitive the we life past, insurance discussed we be following for a that is market space. will to are in in have an And help a us us foothold reestablish believe

forthcoming good development product and it our so has XX We approved the that life with pleased have progress of been states made in are far.

of We the this product this are end launch of targeting still year. by a

third Turning results. quarter to our

financial our earnings on third Adjusted three quarter. quarter key were slide highlights for presentation. second improved of earnings the Our the the quarter summarized from and strong are in

second severity key and guarantees. year secondary universal the results, investment lower improve highlighted the equity to in drivers we returns, of with life performance are the As half last market expenses, lower quarter, in

these than drivers in of third All our the with quarter. line expectations performed better in or

to million still and expenses in were expenses the quarter, $X.XX $XXX and in of the first down million reduce post-separation by expenses Corporate by end expectations. XXXX. XX the million with these approximately sequentially corporate our months were $XXX $XX we consistent expect Our billion,

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

to $XXX variable lower We quarter. into than The million, capital CTEXX the in we of is more execution given during annuity third to new annuity of relative reporting, variable above in the of basis, annuity implement that new the capital the with transition quarter. qualitative until we the level very the our are with new assets and the calculation, rate the and third in of up, XXXX. will Finally, markets a CTEXX do likely expectations, reform of statutory to providing capital risk-based result At continued calculation line and a in anticipate we our hope XX% Variable end disclosure. our pleased our results which point, CTEXX favorable incorporated framework in tax framework were we we the CTEXX wrap the quarter. on To strategy. as quarter

in our quarter With the discuss by the highlighted in improved very to detail. was quarter Our to financial in Anant sales earnings. operational strong adjusted annuities were good, third I’ll Anant? and turn that, performance over more results our very call

Anant Bhalla

and everyone. you, Eric, good Thank morning,

of impact Let Adjusted adjusted in notable strong. the the XXXX of on with items the XXXX. earnings million and $XX beginning net from second in quarter, million $X.XX same done excluding adjusted our results of results run-off were is annual lowering slide establishment quarter in on to each year almost segment themes, notable costs me impact share. third $XX to There earnings the $XXX The and quarter notable after after of provide segment the life recapture earnings well earnings third adjusted start underlying compared million the actuarial annual after per reinsurance items review, four. the in basis the perspectives was $XXX items impacting $XXX key treaties, some from the and tax net million which tax were were The net from total after review perform after the from million continues million the three income on million in $XXX an annuity included quarter the third XXXX tax. or favorable quarter. actuarial entirely The impact and by to a to in of unfavorable a impact $XX million tax, $XXX the unfavorable segment, tax quarter

me some color actuarial Let our additional on provide annual review.

age, of between year couple the company, GAAP as study the reviews the what behavior, contract GMIB include living rates the we annuity X.X% on three benefits. years, on assumptions first primary post-retirement as standalone lapse being and XXXX and focused reversion with our review focused variable actuarial the initiative. in harmonizing data the variable CTEXX and as efforts the resulted assumptions. the rate deep First, of part in informed year’s reform believe mean for holders, These available well-positioned client the practices. updating XX-year NAIC’s reserve of the statutory behavior a reserve and in reflecting impact our conducted capital alignment including new themes: to richest Over X% possible on in resulting be QIS, These set X.XX%. rules lowering with framework. prudent, capital review in rate This annual all outcomes: of actuarial for for by annuitization for being and money two quantitative our This of have assumptions conservative or election second, actuarial performing long-term annuity the involved management metrics the First, to accounting; This last includes CTEXX, our market NAIC and interest including assumption Brighthouse new

of a Cuts new one resulting review year and the models regular the performing third, all incorporating with total in assets reflecting XX% and rate, on Act, more of higher Second, the And assumptions, consistent Jobs requirement. businesses. thereby Tax tax annual statutory experience our

this quarter. on perspective to four themes like earnings related to I’d Now, adjusted some our provide

theme started assets. higher investment share quarter, investment historical first assets. higher for five. tax the million seen growth portfolio. per first or sequentially, third XXXX increase approximately investment income have driven in repositioned we into was income, of primarily repositioning alternative as is Through higher billion was that Net spread approximately in portfolio the the four-quarter on treasuries an income after $X.X The and quarter $XX investment than $X.XX investment in slide the Alternative average by we yielding the

fee by to markets to the Separate This reserves strong a million approximately or is $X.XX impact theme quarter above approximately five. second higher after of share the and adding account base our up seen DAC $XX X% assumptions in to tax relative adjusted of earnings were percentage points. as on The impact and lower lower revenues, per returns approximately market in earnings. amortization, the slide case resulted outperformance case X.X on base favorable

XXXX, the of XXX Russell mid one-third of more as also two-thirds is such remaining and drives Let Hence, EAFE. out cap return our this with such underlying on account in fund S&P as equity our such fund in quarter bond each, funds account return. like separate including X% some light Approximately the NASDAQ, accounts, the our as indices the while third separate are which across the of mix. mix and international consistent separate funds type large in cap MSCI the shed me the

expenses. impact. is million discuss The expenses million consistent per theme to down On Corporate third translates the would quarter with approximately that I is a quarter, pre-tax basis, The life $XX $X.XX that per share the were sequential an for after-tax theme sequentially, to the final for quarter claims. expectation. $XXX like in share insurance our

lower improved and Third aggregate and driven expectation. by from quarter with severity quarter, the in frequency of both, line our claims, results lower second were in

expenses Now, previously in turning net were excludes from $XX results Adjusted and the results $XX lower sequentially, net mentioned benefited favorable segment million Sequentially, annuity in segment Adjusted the notable million in million life the items. from were investment benefited earnings Sequentially, and in $XXX was segment taxes. earnings the which quarter, income, adjusted and Adjusted were higher. higher in to the expenses at income segment the expenses. claims the level, investment the quarter. quarter. runoff in lower lower earnings were earnings

this provide had the XXth. expect in were closing, Sequentially, to run-rate sheet fluctuate still previously, We mentioned quarter were segment and lower quarter-to-quarter. $XX our adjusted claim our balance with loss results $XX variation we’ve taxes in annuity of earnings quarter-to-quarter. the million In an Corporate me of other on an per update area favorable. be As million. can hedging position of and as adjusted and expenses from let September possible variable

at variable place supported we CTEXX a new very feel million, in in excess levels, cash repurchase and our reflecting impact the the assets than excess about $XXX capital annuity by the XX% were good holding rate. stock tax more company. Variable the including capitalization reform annuity First, by lower of program of both

a we or CTEXX the annuity to we total talking assets in as level of about above include variable for that basis, forward, XXXX, will in transition capitalization RBC a ratio CTEXX markets, Going at which normal will likely in variable in annuities company context calculation. manage

movements with our hedging working the Second, results expectation quarter. delivering market for is in program in and line the our

the or questions. subordinated capital billion to expect share existing year-end September capital which next contribution for well begin $X notes liquid leverage the company total primarily from we open to reserve believe proceeds to line the reflecting the NAIC This Third, capital quarter. repurchases annuity we’d that, With of with in positions adoption contribution issuance as XX.X%. sunset the year. adjusted assets financial statutory to Company costs to hedge issuance the of quarter. our capital of approximately holding in XXXX. reporting million, further statutory reflects in $XXX with was Life approximately was by in Insurance addition up reducing call for potential us early And We finally, the Brighthouse junior like the requirements prior Fourth, reform variable were

Operator

Wells Fargo. you. Instructions] Thank first And comes question with our Greenspan Elyse [Operator from

open. Your line is

Elyse Greenspan

forward of as the investment think quarter good to here, onetimers kind than guys you this think income you a portfolio. of the about going highlighted to? Is My about Good the any terms or income pointed Thanks. we Hi. guys first investment stronger investment repositioning in so, forward of alternative going from other question, run-rate morning. other

John Rosenthal

Hi. John This is Rosenthal.

repositioning. benefitted quarter growth this higher higher asset to contributor the predominantly and the out, increase. key alts, was from Alt pointed Anant As average

alternative I you going income difficult think know, forward, predict to quarter-to-quarter. as very

said in that elevated they the wouldn’t alternatives expect QX reach I think to levels reached having QX. in that, we

growth repositioning, income interest continue investment net higher benefit However, investing higher will from at to portfolio asset rates. and

Elyse Greenspan

guys stronger still and you to Is in full-year $X.XX ROE line Okay. with $X assumption expect to in, you come guys results the range? in the earnings then, that picked And that per previous quarter. share the -- were up

Eric Steigerwalt

Elyse. It’s Good morning, Eric Steigerwalt.

So, I’m longer answer question. little And going add term context maybe for let that me then, to everybody. actually strategic a

range presentation slightly excess not returns third sense the long bad abnormal for that October. as as it’s still how, well First, quarter, so we equity markets broke year, we affect why the that that in the a you appropriate. like of I do the often the markets That’s is reasonably But, get have us. rest markets can think out of for

will obviously, the pretty be take good of top at it market Now, range. the a to

investor base a we case More term about will growth importantly, on our December talk longer earnings like call, percentage.

expect that current in digits. we be the our And range Okay? to single to higher mid high than

you’ll CTEXX, add plans, drivers roughly growth. strategy, still today, With product going investment in to despite So, October, coming And because portfolio lay I I equity third post know the might about post we’ll we’re question we well and see talk that is out the December. the of market October the EPS excess, so here. we just stand respect our as to expense repositioning in where early believe we’re our our that assets so above quarter, performance. well that

make it comments. a again, to be However, might few valuable strategic

you, that a soon XXXX, as and to said, in looking range within to actually, as near we future, said of Anant can. with forward levels. As discussing operating I’m begin we And we before, in the RBC intend as

of before, across And As our VA that all being a around efforts cycles. to be returner XXXX adopt are end. market in form to said we able consistent capital intend to centered capital of I’ve

answered So, thought I hope strategic help your actual that But, might that question. I additional everybody. context I

Elyse Greenspan

to Is great. helpful. was in That’s that by they go lower than quarter. this will quarter’s last Okay, Corporate continue we from One question. rate should implied -- assume your expenses level? run that the what down

Eric Steigerwalt

as to gets who Anant and I battling are here. go to

strategically, going start absolutely I’ll go So, to jump in, are can Look, Anant. you and down. again, they

little different over lower there’s year million on are we’re And quarterly we’re companies quarter. the expenses goal bit higher it’s year. and us in fluctuations. of to a lot focused But, that period. here a fourth after that $XXX for on a going time We this. after very journey hit Generally, Obviously, expenses have to year

quarter. rate. third little the reasonable to not So, the that, bit you’re fluctuate in higher run quarter is dramatically fourth certainly but a expenses could a going see It around

Elyse Greenspan

you Okay. Thank much. very

Operator

you. Thank

Nadel John from comes UBS. question next Our with

Your is open. line

John Nadel

morning. good Hey,

capital Eric, you could CTEXX as above my the think touched including level be, going in we decline. some market the of how And equity performance? market expect volatility you about question the So, drivers to was October that of see that you sort much on

Eric Steigerwalt

to all know, We Well, you John, around. going know the move that. as markets are

Our our regular share headed CTEXX, managing of any goal with mean, both happened are then in And be to position more you’re the October CTEXX going towards not what sort return. floor is markets to having capital that on severe market zero I’m repurchases. have and a in will in assuming our environment I in fluctuations little effect that stop.

want stock. direct repurchase to can further. you follow to up, I continue will us We if

John Nadel

get to offline that’s of bit up I what to a I’m understand. But, into trying deeper follow guess, weeds. maybe I’ll Yes. the little sort

You spin-off over deductible, have effectively just take result understand much the may at that to guys risk, of capital will. time trying if have theme you laid VA as own reform. more changed that out your the on And you a would how whole

Eric Steigerwalt

a can the Look, Yes. to forward. deductible million even operating a respect us going with couple little. of Anant, better positions into I’ll jump in there. we’ve That you that hundred put down add company.

So, two continue goal and mind. is there is that, to say, in sort I’ve over of said secondarily, be will keep time, the returner. I consistent a But to to pieces

of the to goal on this sort of we’re returning a respect come way of We’ve again, seems years. to be question. consistent we I of transforming overall more And it couple like the capital. in be to to Company. long strategy, continue So, And is the think as your the notion last execute with

John Nadel

That’s range. I’m private look rate the this at equity then, is quick of And And and we whether below an mid-XX% going us level timing reflective we operating or maybe of if the John Anant. annualized effective this year-to-date should two tell you tax out on a is it looks we could for basis, just return one more high-teens your Anant, and ones, the XXXX high understood. John, the definitely beyond? one quarter? just teens to in for about it’s was look as and just then, what matter expectations. we Yes, you expect the rates expect like wondering forward, should just

John Rosenthal

return return, quarter John. was actual I’ll for absolute It’s these. X%. the take The the

we annualized the which higher about normally XX%, So, John. than expect, is was would

John Nadel

Thanks. Yes.

Anant Bhalla

It’s Anant. Hi.

you’re tax right. rate, the On

of But, be at upper end we expect We have range. rest lower of at up, our earnings go as of We came year. the will in the be range. the of on lower range end that for to actually the end the the

Operator

you. Thank

question next Our comes ahead. Ryan from Please go with KBW. Krueger

Ryan Krueger

Hi. Thanks spend this you’ll I guess how year. going good here, updated in they I cash assume on change was to those do NAIC reflect morning. get that, X.XX% long-term give again I new by the variable forward you’ll tenure hoping us meaningful VA perspective to XX-K some you And annuity I get believe reform. said, as then, related the well? -- you’ll guess, impacted I the flow

Anant Bhalla

to Hi, in reflected year. XX-year Ryan. with Good long-term annual is already morning. yes, X.XX% is The this our review treasury second your question the actuarial our numbers answer

plus step answer when our to than $XXX them say update it. earlier a will how that’s as let and update your we’re more back, we on adding me we about think million, on take So, we XX-K. the first CTEXX, sensitivities, But, in. question already factored To we

hedging strategy changed. Our not is

means and grow to from with range -- the our, going billion that to what there we managing protecting what from asset absorber deductible calculation, colloquially and billion shock will We’re $X.X within it doing laid a capital $X while executing we diligently a call, $X level up then or up CTEXX we floor RBC out, which exactly billion. into

would that. I’ll I to that helpful We’re take doing follow-on. But be context. on any path thought,

Ryan Krueger

question, separate And Thanks. actually.

reserves transaction free-up SGL, do see you terms reinsurance to opportunity regulators? legacy the In renegotiating with an or to of either captive [ph] any

Eric Steigerwalt

I It’s question said? that But a block. hard freeing to from little you ULSG hear think what the up was you, Ryan. your capital Was

Ryan Krueger

or either the with captive renegotiating the terms of And the [ph] I Yes, right. reinsurance regulators. guess, through

Eric Steigerwalt

Okay.

Because So, yes, needs it over time. possibility. It’ll regulatory et cetera. there’s certainly happen a approvals,

ULSG one something tomorrow. we’ve could But potentially could again, to yes, the that’s potential respect arrows going opportunities. in of happen quiver. It’s So, the just many It’s with to over said be the there not like capital times, block. be some there freed time, up

Operator

you. Thank

with comes Bass question next from Autonomous Please Our Erik ahead. go Research.

Erik Bass

market you. feel Thank to early NAIC in from comments It able you pretty XXXX. Hi. adopting that confident being your sounds about new for

you BLICin dividend an from this you contemplate would If XXXX? potentially to can, enable extraordinary

Anant Bhalla

and an Erik, that. extraordinary good short it’s even it. we very yes, Anant. yes, We do without adopting But dividend can the early answer feel is about

Erik Bass

you into it’s Brighthouse? do -- perspective the accounting will the that then, GAAP implications potential effect for realizing new and any standards And early Okay. have come on on

Anant Bhalla

plans XXXX. is strength stack to we stack have say, that ratio return. of to a reform early can capital relative financial It regulatory very to would It’s team accounting it changes. us and a an we with I year expect leverage rating. date low through about pretty not well-positioned impact finally, to for VA mid-XXs, What believe We demonstrated low we’re that. rating management navigate it talk don’t that’s agency successfully does single We impact for as the effective results. in expectations And our with the

So, we over good navigate ability to about time. our feel things

Operator

Thank you.

comes from Please Andrew question ahead. next with Credit go Kligerman Suisse. Our

Andrew Kligerman

as market of you the down, versus where morning. would what started? the at XXX-plus was XXX-plus-million last be With is where be? XXX-plus, Would think do back Good if CTEXX to quarter it the quoted were What in the you Hey. since in today quarter. regard excess you now, locked

Eric Steigerwalt

on a before, into and think in to this, I would excess. weekly to first said we get the basis. Andrew, But, be I try going well question, I’m on not still like like

Andrew Kligerman

And go? repositioning, repositioning? with do at do it types And more this to I’ll with much you you to Okay. the want have the remainder leave do regard securities, what of of that. then, portfolio to how week,

John Rosenthal

John. it’s hi, Andrew,

end of -- we’ve of of treasuries. about QX, rotated $X.X about said, billion As Anant out at the through

program, of of about our rotate predominant next out to the timing, its income month. repositioning. ultimate continuing We’re more provide our size the And the call will treasuries into portion pickup the of and during details That’s spread we assets.

Andrew Kligerman

mean, I looking what $X I mean, assets of billion? than more spread kind is are at? it you

John Rosenthal

what $X billion more that you’re Remaining asking? than is

Andrew Kligerman

in go mean… to More terms of I repositioning,

John Rosenthal

talk to how asset normal about is much month. mix. our we’re And really exactly investing and well-diversified next we’ll There how relatively or in more high-quality much go,

reinvestment unusual side. nothing So, on the

Andrew Kligerman

And last just Okay. Eric, one one.

talked certainly, buyback. last was terms the XX-plus, quarter sort close And of in -- prudent You that of quarter quarter and measured a being of a your to of about or your XXX. chance so you move Is accelerate debt thought you there you accelerate XXX- When that did offering, plus-million-dollar want I to that. might a forward? we might the buyback as

Eric Steigerwalt

about So, current Andrew are buyback you that… talking authorization, the

Andrew Kligerman

Correct.

Eric Steigerwalt

Okay. that consistent expect us the but purchased. nice dollar Look, pretty up repurchase plan. it’s stock there. down, got doing like to cost during The would worked measured pretty we’ve well just now, we’re averaging for period been we’ve be and it a and I has

Andrew Kligerman

Got it. lot. a Thanks

Operator

you. Thank

with next Our Deutsche Please Bank. Josh question from go Shanker comes ahead.

Josh Shanker

we everyone. think internally were in morning, for capital turning have given billion And to positive you event, ones if goals probably $X the flows Good losing writing Curious a a net is have if that older today, positive ROE those annuities. and that about net capital flows of around to any year losing annuities the that a timeline higher charges you’re than assets? vintages

Conor Murphy

It’s Conor. Hi. Yes.

start, in I’m to well. may want as Eric me Let sure join

of we previously, had begin we’re that So, And the with profitable. you look, what know a as book good as with. to quality of as we’re the business. in the return flows. on business of regard much acknowledged, and large we’ve business and we to Clearly terms you comes a very in both off quarter discussed the have that pleased on is And less putting

isn’t this here. So, goals us from expanding profitable preventing our growth

Josh Shanker

those over positive that to flows, move to you time? beneficial actually Is is it to

Conor Murphy

is. it -- much Much it’s of mix,

just course surrenders. surrenders of are normal Now happening because to the it is they’re it positive some the money. us at what’s in amount remember, is are money, some of reasonable is annuitization, of surrenders significantly those of of the a in some that the flows And

profitability that helps us So, capital from and a perspective.

Eric Steigerwalt

mean, each for I add day that. I we Eric. pray lapses. It’s Look, don’t to would Yes.

Okay? of Because of period, But, it to earnings for good call, of that, Q&A prefer power there the beginning at in going meaningful are affect in the we what years see I here. will December us. growth. that your not that over question, out net the have of sort a flows, time and you your beginning Josh, pretty growth lose, comment the made there qualify this that positive right, at EPS Having you’re factors in say to the that amount lapses or you’d said, end are said some to that that are for but to Brighthouse capital ROA the

in companies other little than some here. different maybe we’re So, position a

-- -- So, question the I original I’m hope the your that to trying was trying to we’re is, answer answer. give But, you balanced yes.

Josh Shanker

net internal And Brighthouse is a company? idea an flow the there to of target returning positive for

Eric Steigerwalt

just lapses years, I while. Look, the don’t that going to it’s have a positive the these of are of number take Company. a before. target. we But, some I’ve as fact said discussed, this okay, notwithstanding It’s a going for to actually take

going while growth in level But, of ways just I’m see you’re it. to that some it away of because sort power not a net ready give EPS we’ve to you’re the real yet despite from December, be would quarterly negative flows, So, here. target out overall, still a a got

Operator

Thank you.

Our Barnidge next question with John comes O’Neill. from Sandler

John Barnidge

Thank some week. you. it I guess, it’s but difficult thing provide did other a companies quantify to last

was quarter on the headwind you would much be I’ll If ask guidance? the market last a EPS basis quantify maybe way. the close, can an this to So, night of how question

Anant Bhalla

translate you for account point, be it’d a if did was you which $X.XX return. like, the Anant. like John, Hey, separate give We sensitivity percentage X that, it’s

So, I would just point you to that.

John Barnidge

Thank rates the do you fixed higher find Okay. versus maybe benefiting increasing a and growth Thanks. sales answers. then, market And of from your for volatility much you in how better the distribution?

Myles Lambert

Myles is This speaking. Yes.

that if So, product take Shield product from come well distribute most our growth a mutual. sequentially, our look of our as we FIA mass has you to as at

optimistic at look some new industry in you introduced going we’re of light in mentioned as earlier just gain call, we’re some with. traction fixed two September And as deferred the seeing, volatility we the products sales a are If to whole, that be able on you products we to up. fixed

the it fixed fixed like focus on to going fixed we base, we’re and the the base, applying moving to forward. base on we’re So, continue

Operator

Thank you.

question Citi. Suneet with comes from next Kamath Our

line Your open. is

Suneet Kamath

morning. Good Thanks.

So for from about the of a XXX-plus Anant tax rate capital VA you reform, changing talked a reform, then the interest through us on assumption, the we to call, and moving several pieces you CTEXX, think lock of over think as potential the Can to help capital sort from course pieces, those sizing about XQ? contribution. XXX-plus, XQ

Anant Bhalla

do so. Suneet. Good to morning, Happy

be with expected came with, due at We to contributed company We hedging tax let’s life driven capital reform to and real change, results. to we down were reform, contribution. by CTEXX both ended up $XXX thirds two making effect. with assets upside capital above $XXX million million strong post So, the start the the that factors. the rate the two into a and Approximately These from business that program. better of outcome in over CTEXX VA market

market So, had putting a our a the of $X a assets $X Frankly, five working deductible. by of than we’ve quarters, last as billion well. upside hedging program is over more billion very

if from And core coming of the stack the of have it. a of statutory So, the and on can had as through take any market lot because look that’s follow-on program. you then good you’ll pause supplement, net see and we really XX the returns which I other you upside hedging that at this of third great page income, growth well. came results, quarter

Suneet Kamath

CTEXX reform And on of what that tax buffer? was the impact just

Anant Bhalla

was you was about actually bigger closer a than above assets It think the if actually driver, more half. to like reform Tax CTEXX.

Suneet Kamath

More than of half what? Sorry.

Anant Bhalla

of More implementing than half impact the of reform. VA

Suneet Kamath

X.X%. think VA assumption think afterwards. you’ve in with commentary rate maintained be are think rate rate But, their assumptions said were And if consistent the I would is could follow-up other you X%. And lapse terms sense I you the what less there, lapse Okay. as any the if Maybe reduce but study. companies, I your to required there then, think maybe to also being you that assets? had than some around sensitivity at of I’ll that about X%, comment But, lapse of I

Anant Bhalla

Sure.

right. So, you’re

assumption we’ve study, in at feeling changes made. We we’ve part looked we’ve our really good good prepared as reform. We given study about at hope of every we’re all feel about my elective looked of on in said lapse, there QIS we is one made. actually I as it, that’s and everybody annuitizations just that As out comments, and the as not changes the NAIC those participated feeling

So, I go data mentioned, have what don’t I X.X%. we have others how as we don’t see and is, our us, and given policies our lapsing, Conor money to lower the is, in see than experience

Suneet Kamath

sensitivity, no you if did? But, Okay.

Anant Bhalla

intuitive this of I don’t sense see that have go would sort a because data time point It’s make the a doesn’t hypothetical how in there. at

Operator

you. Thank

from comes Tom question with next Gallagher Our Evercore.

Your line is open.

Tom Gallagher

Good morning.

we’ve kind standard question you I we you the The first Would reason all XXX% the of of guess now, total terms the going you’ve and else, I’m been to, is VA should in of everything is, end or that a to if that’s Right to how you’re XXXX, over about you’re that? how significant businesses, categorize managing think RBC going entail outside of assets VA. give to What -- about obviously total by talked other would is if the be a about RBC, RBC asking what manage access talking other that’s goal. separately, standard have CTE. you

Eric Steigerwalt

Eric. and Tom, jump Let you Anant me in. can start, Hey, it’s

We’re going our Board through with that now.

there as XXXX. you to as But until VA not we said, I’ve and to capital get going reform. said, do that So, going adopt hopefully for we’re we’re

to company the to as RBC. a through respect So, where literally. we’ve speak, up And come here manage got working to range going with we’re that of with we’re we

know, well RBC reform VA very robust, you right. makes As the capital

use you for can of company. that metric now, sort a global the as So, whole

do we to take certainly capital make is range that some And sense a will at over idea what then, able sort where obviously, this. of to here capital we dividendable to Anant, that And to manage want holding could what operating many you we of we’ve the be. get that be some excess at time companies. any might if approximate the public add anything? of companies, there’s excess you look got we other are the So, you a And like give you’d sense at to think we company. give position want hope

Anant Bhalla

any But take you’ve happy Tom, covered have follow-ups, it. to you if I we’re it. think

Tom Gallagher

Sure.

So, yes, one that. I guess, follow-up just to

-- say, would would Just everything it’s like or outside So, higher you it Eric measured be at this point? it look there not above, that’s Anant, of this it point, at does VA, or is be kind would of access clear level directional?

Anant Bhalla

then, Tom, And of Yes, Eric target OpCos relative to we sort so levels RBC of to what XX, think A be of that and company Anant. is going next as the we’ll so at come like actual XXX-plus think it’s We at XXX, we’ll like to and levels, capitalized year. to need mentioned, that that. rating be you the at be in should XX-plus, forward, single back

Tom Gallagher

option -- XXXX other you Okay. my that of plan. options? is then, in going you’re of that primarily right question broader hedge know more on -- to the in now it $XXX shifting change be mentioned, the focused around million terms much lower is Because lower think spending to just on hedging Is premium. program? would be you’re Would be a use you or I how on I costs year would said, area you main Anant, And the much

Anant Bhalla

$X -- shock the that in absorber billion assets We XXXX. billion $X.X would grow as a would act to yes, from we

what money. We’re it actually strike is us to things to more the working And a already on little allows do be out of that.

and sort option-based money, you $X fact last in really you you of billion to meaningful And grow program the the So, this the strategy that. but us program had of little I of allow allowed quarters. go five upside based options we’ve us and out that rephrase. use the mean, of an I’d still reap That’s benefits contribute has we’ll predominantly, have actually that. to the look

Operator

Thank you.

go comes Bhullar Our ahead. J.P. Please next Jimmy with question Morgan. from

Jimmy Bhullar

How Hi. Thanks. impact the that quantify? VA affect Good you assets morning. reform of your you Most of not what my can sure on was capital if did questions But above were answered. mentioned you, CTEXX. I’m

Anant Bhalla

morning, Good Sure. Jimmy.

those X.XX% Net have impact two the some those at to impact of up really then really to was ended because that, is combined changes, the amount we’re in at And really biggest was tax about gave Suneet nothing the our earlier. million call still other results of The XX%. VA factors of than billion, on strong with capital and XX and a driven was the CTEXX. $XXX if of of material, question the by I two the reform my we It’s what driver So, both from assets $X reform business majority plus would really of out. answer above was market reform it. by big drop tax coming more than CTEXX,

Jimmy Bhullar

out Lincoln quarters. expectations last on that then, the Shield are about And you’ve buffer any business changing the products, you other are obviously many coming seen seeing are over several Okay. with sales are your other similar? there on coming product, like pretty Are or strong are as impact those -- a annuity, of competitors some thinking something out has companies few the

Myles Lambert

It’s we about again. No, product. Myles confident our Hi. feel Shield very current

Our advisors and simple the love competitiveness nature. product its of the

right we as position really distribution. monitor products, continuing market make changes broadening good We’re the landscape now. new to and our will further we’ll appropriate. about always, selling And But feel is the bring if distributors, on competitive

Jimmy Bhullar

Eric just that alluded going that then, lastly sort safe of think volatility stock back assume the that in to I But, market this recently buybacks, this. the to is to buying keep you’re despite we’ve term? on seen And near

Eric Steigerwalt

assume is that. to it very Jimmy, safe

Jimmy Bhullar

you. Thank Okay.

Operator

Thank you.

Alex Please question go Scott with next Sachs. comes from Goldman Our ahead.

Alex Scott

the First actuarial variable review annuities. through changes for question GAAP was the on just

Could rate been I now. changed? a sounds how of annuitizations I been elections assumption low. give I mean, pretty that annuitizations think know us election low. have you feel the kind But, is for or X% that have of you mentioned

was? big data how on of Just wondering like that how much and you have a it change

Eric Steigerwalt

The -- your in that is hear to X% is relative years and again. change good to the we there two data news ago on change Alex was conservative annuitization. showing was good news The is, actually voice that no And to that. great that. So, coming made

data if in moved were showing across us data these informed at available make we by were board, proactive, to So, early the and you we those richest all assumptions, changes. the look the coming is

assumption nothing material really it’s with actuarial call year. this out behavior So, respect to to

Alex Scott

question a next then, just follow-up the costs. had was it. And hedge Got on I

I you past or estimates you to or where costs are up you’d to costs the the have think, below hedge -- distributable the that point hedge a looked expected is year do maybe guys the like a rider speed to I rider by significantly X XXXX mean, could or or the below where get were fees mean, earnings maybe I up? in year so. does think VA X assumption that year provided suggested fees? actually speed four to be

Anant Bhalla

Yes. to below fees. not about where fees. is them I above just I rider they’re be rider the the wish think slightly the so it could $X in fees; be going of But thinking right below that we billion be going to range, they’re

So, amount reduction earnings. net addition there’s allow from going emerge drag income still or a income those to be to some which meaningful of of operating will to adjusted in fees modest just amount but

Alex Scott

guys you Did this Last say quick adjusted one. what statutory earnings quarter? were

Anant Bhalla

million. were $XXX We But not. around they did

our earnings and business supplement. you Now, in can $XXX thirds see from from program third core coming million, hedge that two that’s around a of largely -- our because of coming the which

given plan, probably above we strong, year. have and our good very the would that a back, So, of outcome but still for October, well in some

Alex Scott

Thanks very much.

Operator

Lee you. Dowling our go Thank Partners. And ahead. with & question last Please Humphrey comes from

Humphrey Lee

thank quarter TSA into morning expect this termination, for maybe about taking then the how as Good questions. you’re the and you talked should to of remarks, you you we Eric, in the the my and from XXXX? TSA end by think about that prepared we XX year. reduce TSAs full think for about impact would But, expenses the

Eric Steigerwalt

in It’s into getting morning. ‘XX where with expense of honest Like, ones. kind peace some decreases really occurring back-end more leverage XXXX. be ‘XX you’re get you. The biggest loaded, largest Humphrey, off seeing Sure. you’re the to see we of of of to here end be good going the and will

then into our ability that the near ‘XX, we All ones. of expenses, are or get lower end there’ll third off again, contributing biggest to as ones be And ‘XX, medium get the and in ones sized even the like smaller quarter. more you in the but you of saw to

Humphrey Lee

Okay.

So, then, And more maybe shifting little guess come. bit. to a gears good I

should reinsurance you run-off, standpoint? recaptures we think the of from will terms the the volatility impact to provide related can be and or about how color some the the So, the the helpful. in color can you of Any then just recapture maybe earnings of provide and size --

Conor Murphy

of Humphrey, the block The block, perspective. billion amount size from face it’s Conor. a is the $X

Eric Steigerwalt

moved on the add I’ll run-off of business, profit of earnings. how is an think Conor’s we business, block pattern ULSG earnings in of our changes into impact second quarter present a your to And view now this it. fourth in recapture point ongoing we When it gets in view, it’s really about block that -- the is of is the value as of point this of to reflected XXXX, the pattern; There change from it no all in profit basis, reflected the reserves. in answering

Operator

his final the Thank call back you. Q&A to session. concludes our David turn like to And ladies this and Rosenbaum gentlemen, would for I remarks.

David Rosenbaum

during to Carmen, today. our Financial. conference on joining and speaking to December investor everyone forward thanks quarter joining look call us interest Brighthouse for in and And again, you, thanks call for for outlook today Thank our We earnings Xrd. conference your for third again

Operator

a And with gentlemen, disconnect. And ladies Have wonderful for in conference. today’s all participating and you This concludes you thank we that, day. program. the may

Brighthouse Financial (BHF) 6 Nov 182018 Q3 Earnings call transcript