BHF - Earnings call transcript Q3 2019 | Brighthouse Financial, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to Brighthouse Financial's Third Quarter 2019 Earnings Conference Call. My name is Catherine and I'll be your coordinator today. At this time, all participants are in a listen-only mode.

We will facilitate a question and answer session towards the end of the conference call in fairness to all participants, please limit yourself to one question and one follow-up.

As a reminder, this conference call is being recorded for replay purposes. Instructions] [Operator

like Investor presentation may Relations. now Rosenbaum, to proceed. turn of Head Mr to would over the David I Rosenbaum, you

David Rosenbaum

quarter Good Brighthouse you thank XXXX third morning earnings for call. and Financial's joining

can remarks. at refer presentation these release prepared materials, all in Relations were night the financial Our to encourage presentation be our you our earnings on website and accessed of of will the We released slide and supplement last we and brighthousefinancial.com. section review Investor to

Today from by and Spehar, hear you Executive our Chief Officer. President will our Steigerwalt, Eric Financial Officer; Ed followed Chief

prepared Officer; will with for us our Murphy, and Officer; Conor Chief discussions Chief the here a participate to call Lambert, in the Chief Officer. Operating Following up comments, Rosenthal, we today are John Also Marketing question-and-answer Investment and period. Myles open Distribution

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

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

Steigerwalt. to the And our call turn CEO, over now Eric I'll

Eric Steigerwalt

morning and the good the XXXX. capitalization to And from income given quarter. performance, results was quarter mixed normal more Thank everyone. declined, of you, Brighthouse US with in remained equity our second while annuity third the while rates during David. strong investments quarter alternative was solid second Investment income Global market interest performance prepayment levels. line delivered market variable returned

in sales Claims results the strong. were quarter, with line prior and remained

which Moving forward, to believe strategy, we value. generate our focused long-term will we remain executing on shareholder continue

to achieving time, continue As capital we previously be of of have we our is this consistent and goal. discussed, towards progress make over one returner goals a to

million and of announcement in have through our we in our $XXX repurchased of of total in October with third our repurchase approximately million XXXX XXXX. XXXX, million in our stock common stock first stock August approximately common the repurchases of $XX authorization quarter, October. a of Since the repurchased of quarter We $XXX we've repurchased fourth continued of the stock

me turn to let Now, results. third quarter

highlights summarized presentation. quarter key earnings slide our of X Our the on for are

billion First, quarter. XX% approximately up we XXXX. had the of compared third $X.X annuity of had strong another We sales with quarter sales,

our each with the new are sales we as business quarter. pleased quality We very adding well continue to be as of

Moving to life insurance.

insurance and competitive focus presence product strategy to insurance an the introduction Brighthouse market. life since continue our is our We first public independent our re-establish a insurance SmartCare. to hybrid life This on company becoming part product in as life of

extremely partners positive. The from our has early been feedback distribution

to this distributors time. with our of made adding for to roll SmartCare and additional a good out XX,XXX major product advisors, have we over distributors progress, intend network over We product

as the to strong pleased date fourth we into line are the Results I'm quarter. pipeline with our with in expectations, and sales move

billion outflows the XXXX. third the both from quarter prior net annuity Second, total quarter approximately the down of in $X.X and were quarter,

profile mix see less profitable to expect our of coupled generating business we add runoff time and the over less business. we previously, said business intensive cash we've with capital continued in new as As flow more a shift

include Third, XXXX be expectations. line corporate as corporate transition not expenses, anticipate operating do full the expenses third were consistent We the quarter, in to establishment Brighthouse which XXXX year with continue platform. costs $XXX to in level, the we with to our million

projecting corporate expense We XXXX $XXX reduction $XX are still XXXX. run expense an million of by a reduction on basis in corporate additional and year-end of rate million

We Fourth, refer establishment make and $XX In first quarter, through investments three costs of tax in establishment investments infrastructure as million our in our the we necessary to costs. the to the approximately million continuing before are third technology and the quarters pre-tax these were $XX businesses. year.

perspectives Let me costs forward. establishment provide on going few a

have we and XX infrastructure we technology have are or XXX our and remaining. our TSAs progress only company, significant transition we that First, service branding made with pleased agreements setting exited up

Second, we cumulative a for on believe $XXX to million establishment million basis costs through will $XXX tax before be XXXX XXXX.

before million of higher a our is result estimate This $XXX factors. tax million of than two to as $XXX initial

that TSAs some is the more with expect The previously to cost MetLife first thought. longer exit complex little a take than we to more of and

are all XXXX, XXXX, in second transition state pre-tax We to $XX currently platform. future our to $XXX additional that million between operating $XXX establishment on $XX be expect we in $XXX million basis. XXXX and $XXX our in factor making investments a to million million The is million and costs in million we company to as

but I'm establishment way the we final our end, being prudent pleased with and how managing of with TSAs, the the in couple costs respect to years. how through are very we doing exiting are In we're

We by growth in less notable with equity items second decreased low $XXX Next, let million. at the driven quarter as the approximately share, of XXXX earnings percentage statutory earnings in XXXX. very double-digit results. still our quarter strong earnings adjusted versus me touch compared less XXXX. anticipate on favorable per market results were in items Normalized earnings, Adjusted less notable sequentially

continue manage prudently we to finally, capitalization. variable our And annuity

higher. to or talked As about CTEXX managing are VA we our have previously, we business

consistent and in second quarter, the assets the billion excess with third of end with the of $X.X strategy our approximately quarter results. were of our VA line As CTEXX, in

Our well expectations. across a line hedging with to program continues our economic range of conditions in perform wide and

third delivered results solid quarter XXXX, during to the we continue we up, our as wrap To strategy. execute of

strong, remained repurchased well, program of common continued more sales and our our to we Our stock. hedging perform

forward, Going to believe will confident enable we in for which strategy, long-term we and shareholders, they clients us our partners, the value generate remain distribution our our serve.

more With Ed turn Ed? quarter to financial call that, results third I'll over discuss the detail. to our in

Edward Spehar

team Thank capital employees and earnings position to and you, Brighthouse pleased CFO. and in results, I on good my strategy by the first our at everyone. that strategy. talented excited robust our call I'm engaged Eric, I'm very the importantly, business be and executing solid most Financial. as believe morning

time. separation, A the the means been statutory on Since and balance earnings on the has to financial focus a management cash. distributable earnings distributable deliver focus protect strategy sheet over

Over in the value past for the manage decades, to to three create insurance maintained industry I cash. is have the surest life that way

So of Brighthouse I'm key the long-term to a partners, value thrilled, for to our this clients generate distribution the is with our Overall, the shareholders, strategy. Brighthouse entire serve. element forward I team working look they and

second XXXX same Now, items of million of impact compares earnings, reported adjusted quarter on which the basis adjusted turning the $XXX of $XXX notable of and in third Last our XXXX. the to in $XXX quarter with million night million, from third excluding earnings the we results. quarter

corporate income the with along favorable net There lower net notable by a impacted $XXX by in were were investment performance items adjusted on million. which basis results and market expenses. increase a less lowered quarter, modest Sequentially, three in earnings

items a Run-off of Other, million million $XX a million The notable Corporate the establishment in to related segment. in from Corporate were $XXX & from of primarily costs the separation items annual review, tax on MetLife, $XX charge basis & from the Other an actuarial revaluation after-tax benefit in and a

driven review, our year's Capital annual by assumptions. market markets, actuarial the in model, we of with business assumptions policyholder review categories. associated behavior. a part change in annual this The examine capital As and charge three is

Specifically, the from reversion assumed long-term mean to XX-year X.XX%. X.XX% a for reduction rate treasury in the GAAP

XX occurs life Run-off that from driven to change assumed universal modest mean impact block mean secondary The interest reversion reversion from impact rate the our annuity rate. in negative over the by was assume with a There our segment the primarily of next on years. continue guarantees. was We the lower

on Most VA that of for relatively to our for as accounted market rates, current insensitive are not accounted rates. results. It guarantee had reversion in are reversion the VA are insurance guarantees no therefore to the and mean interest worth the currently reserves statutory reserves noting rate. our impact as also sensitive mean GAAP rate embedded derivatives is change

impacting less earnings notable underlying the would adjusted themes results. to items, discuss like to Turning I

Equity X.X%. with total return Nasdaq total mixed Let's XXX The the performance S&P was in was begin the X.X% and was quarter. return market performance. market

the point given our indices While XXXX. had X.X% quarter, the returns second Bond All in separate drove returns. decline these rates. X of positive below returns below case positive EAFE factors in, approximately MSCI account than less negative in Russell and quarter percentage X points the percentage assumption of the were base and

a a of to reserves adjusted per performance, unfavorable $X.XX As for or DAC less combined million result sequentially of amortization favorable increased impact and earnings market $XX share.

lower income The investment by decreased investment $XX sequentially net driven tax. primarily returns. was Next, alternative decrease by approximately after million

returned in contributed also to the more in investment to prepayment addition, income income. levels decline In which third normal quarter, sequential net the

Asset sales primarily continued our driven growth by a strong offset, partial was momentum.

consistent approximately $X quarter, third expectations. our the million expenses. with million, Moving quarter corporate to from $XXX In second the and corporate were up expenses

Eric as corporate the continue to mentioned, the expenses anticipate to we platform. XXXX to level, As in be with we operating still transition XXXX line Brighthouse

few in the annuities, earnings. I'd $XXX to were a Now, excluding earnings make with Starting comments items quarter. notable segment million like on adjusted

and which income lower unfavorable As had I on were impact impacts mentioned, earnings. an market net sequentially, investment

segment second were in in were were life million higher offset by relative results the higher impacted insurance the expenses, Additionally, life excluding claims. to Sequentially, notable partially earnings Adjusted items $XX quarter. by quarter. the lower taxes

higher an higher Other notable items adjusted million lower results offset notable The reported driven segment Run-off driven lower reserves, earnings excluding adjusted expenses. was excluding by Sequentially, by in investment loss taxes, net sequential lower and of & items quarter. offset by The partially the by taxes. decrease $X had $XX were income Corporate partially of million.

To our XX. like I position as wrap capital up, on an provide September update would to of

Our hedging expectations. perform line in program our and to continues with well

quarter, Assets in driven our in gains $X.X XX, with at third September primarily VA earnings $XXX by above statutory from approximately were Normalized million hedging the second were billion quarter. approximately line CTEXX program. the

earnings $X.X reform, combined up $X.X result the The VA adopt total was Year-to-date we which still we total were adjusted than representative of is quarter year-end billion, sequentially. XXXX. more this at billion would billion. Statutory capital, to approximately post capital plan normalized anticipate $X.X statutory adjusted

better changes Going in we our align expect reserves will target. with forward, hedge

roughly or and was holding average at quarter million company XX% financial target. in ratio four assets share sequential the company our liquid decline our approximately driven company times the by leverage The end primarily was cash Finally, liquid of $XXX approximately holding were holding buybacks. our third assets

we million worth before have any our company $XXX to is operating inflows that holding of annual the It dividends than highlighting subsidiaries. from consideration more of

and quarter. most I am capital prudently would earnings XXXX. I cover still take outflows. company we solid strong Brighthouse share with pleased less annual of balance the BLIC results of in low also per inflows said, from plan were in that growth position, like These Eric roughly debt to this Company maintained less versus all starting dividends statutory we We in our earnings notable other to XXXX our we manage holding VA $XXX items or and adjusted notable Life note the Overall, million Insurance as service to XXXX. sheet. double-digit anticipate items continue Adjusted and

that, questions. operator the your turn call to for the we'd to like With over

Operator

question Gallagher from [Operator first Tom Instructions] comes Evercore with our And ISI.

line Your open. is

Tom Gallagher

morning. Good

mentioned it's or XXXX, levels that be? to the the you few things of a range what BLIC coming whether The terms starting can on you a follow-ups end in dividends bit would source and Just at in driver add and expand final that there. the of take on the

Edward Spehar

good morning, Tom. Hey,

adjusted get at capital, don't point $X.X from but funds increase with out BLIC. might similar specifics sequential just BLIC, I the into next So we to that in unassigned in had about want increase would a take billion year I what total we dividends,

of were when think funds unassigned quarter. BLIC's end million dividend an capacity. know, the of end third important at positive you quarter the billion and that that's So number increased as the about negative $XXX the you And to second $X.X at

Tom Gallagher

XXXX, capacity just And dividend you're follow-up stat gauging what capacity you done and give have of some final way for on change not the for perspective -- obviously know I a on how can you with any that do dividends? that, would filings but --

Edward Spehar

the third our like think talk at the end Well, it we reflects, what how a look VA bit believe quarter about when will balance I little of sheet reform. under we

manage first end with like do a VA step say, because and that's risk. we we regulatory we consistent we back reform reform? VA framework why like with the if We So, up how

quarter, representative of expect the that TAC balance was And was what statutory reform. consistent sheet with the manage at end of how and the therefore with had we third what be you to risk would VA we a

as convergence interest And balance to today. the reason on with the in had is that for we've which interest of in a you as post-VA and that reserve, year rates, date, standard scenario reserves reform decline is, the a an in we've our seen rates, sheet and the increase know, decline in result what's

portfolio the increase also TAC Not seen our increase reserves, surprisingly, hedge what's the post-VA appreciation third driven reform the significant saw hedge with in portfolio. in the that quarter. in those we in we've in And gains is unrealized the

would focusing in of as on over you coming dividend and ask unassigned use think TAC back increase that . to years go that I guide the So, funds to from the to BLIC -- think significant I about capacity and some still sort

Tom Gallagher

final can give billion question, how you the quarter? your Okay. quick changes to perspective. get versus the other then assumption your, on performed And perspective $X.X for hedges That's helpful neutral buffer VA just some

Edward Spehar

pointed Sure, the third at the same were but $X.X the above the there is you second of good the end quarter, risk end VA billion the out, of as in total requirement. a quarter, the program than as so is CTEXX which essentially quarter, gains the million increase asset that number. to our greater our as benefit our hedge story had portfolio a from management approximately $XXX underlying were in We assets

to impacted where rate items gain change about $XXX review, performance business. had on in about million the There that offset of were the by was That This basis review quarter. was of derivatives, $XXX million a the statutory assumption million. our the expense statutory interest actuarial by positive driven we largest $XXX of a assumption the variety allocation a was which annuity in

with expenses. to has do this total nothing Importantly, Company

that on you As one out coming simply and from expenses This the thing statutory change was know, point in the so reversion results down. is total there I'd GAAP other offset. an the was that was really impact Company the are The mean allocation, rate. no

Tom Gallagher

Okay. Thanks.

Operator

comes from our Bass Erik Autonomous And you. question with Research. Thank next

open. is line Your

Erik Bass

you. Thank Hi.

versus establishment of Just cost expense what the determine more what detail what on is driving much you and hoping expenses exactly you normal could into you've targeted provide the kind goes costs savings goes there course talked how how goes bucket, about? separation of into that ultimately the

Eric Steigerwalt

Erik, I part? that just Hey, one, Eric. you it's second missed repeat last could your

Erik Bass

Yeah.

the TAC a just second ultimately I of kind I savings The two? $XXX are expense over how in million time adding establishment you're was terms the between in guess the the much of driving that costs there is of of guess efficiencies. linkage

Eric Steigerwalt

okay. it, Got

run that's about rate, probably the normal we a consider right? going we forever, way costs establishment think process then what look, certainly continue just are well costs, goes I it, part, costs not establishment they're they're and to If rate rigorous theoretically run to first best the costs. So have into around and what reasonably guess

costs If you no felt company like original not establishment level, right? those a the started, to certain initiatives was think longer once we then branding, those continue one-time were the branding into we We how about at were go the that costs. going cost,

like associated transferring our with costs. being MetLife DXC either still operations of or ourselves administration number at to of some A to costs the mostly establishment having and still those -- and then partners

Okay.

in up corporate ongoing in expenses. just ends expense that nature in like much up ends anything costs, very one-time an normal So establishment looks

probably I the getting number Take Those very the cost is real a Management, our platform That's costs. Yeah, of new of drivers. also Brighthouse mean drivers. are systems, buckets. to of move a important there to legacy saver us, obviously for And then driver the to with is Multi-Asset of for respect right? out transferring big administrative a bigger two but

couple believe, or I $XX but there XXX out to do what that the following one-time higher prudent not extra target said have that opening areas, affect I not we little my said we given a with in we that cost respect final a in being the are complicated. is many remarks. that, surprise to it's of million even a to either It's few the This year, you of here, probably we as So, going in bit is more than complicated years thought.

are mentioned, I as expenses, investments. these to go of Some to going

going etc., etc., Hope But make as finish do. not might to able TSAs, opened time sure movement patient and were, going rigorous that some the going far. that testing, QA we're it we been otherwise the to know, do we're to we've also, from way to do the been is so about the have You to to -- it things we're helps. to time out that of staffing able double we out be

Erik Bass

just follow-up you. thank Yes, then on And expenses. one

the talked by should run course -- of expense coming how the the year? kind next the think end You XXXX year savings think about there about we of in getting of I rate, XXX over the through

Eric Steigerwalt

You we XXX? - we towards mean as head as the

Erik Bass

Exactly.

So throughout how or in the it? of of perspective the should year, back be to half think it sort on kind about any ratably more

Eric Steigerwalt

start first Absolutely. then to XXXX. more down half lot do the to you We come second got in back the in part see the Yes, a in half. of and expenses will

Erik Bass

it. you. Thank Got

Operator

question Greenspan comes Thank you. Elyse with next Wells Fargo. And from our

is line Your open.

Elyse Greenspan

the guys assumption you question I in Hi, change guys one questions, expense to thank you Tom going and on of were My business. allocation think you. the through a the components first mentioned review, Good -- Tom's morning. annuity of

if color impact more on there? what's can bit to Just get there, little going and the was quantify hoping you a on

Edward Spehar

Sure. Hi. it's Ed. Elyse,

like million related XXX just assumption $XXX and in something roughly the review heard was as on this Eric. this you expense was, to of change that overall it from million impact again no of allocation stat, the expenses, actuarial So, from

down be expect will what we'll well. see next as have to We continue that expenses and coming year

did product level to what But that a multiplier was that based see was did that work, is and some there be a determine greater you in-force have on here effect. you business we what of some work we we the annuity should aligned study time that expenses have

you're allocation. be So, the from therefore really it's million a impact roughly requirement. see and ongoing asset the change going multiplier these higher this the review that Because that -- forward, like is expenses we the are expense to $XXX going the X total an times roughly on assumption on in assuming impact

Elyse Greenspan

Okay. That's the helpful. of from year, and potential in we the next about can timeframe should us at a And then repurchases dividends of how terms and in sense just thinking you share think about, BLIC XXXX? Holdco capital give

Edward Spehar

unassigned had the hi, improvement color the you what in in to Elyse, go add sorry $X.X to funds to the just I might additional guess I gains unassigned hedge I Yeah, topic and I I'm back the unassigned anticipate appointing think, that, I portfolio is piece in of of here increase unrealized would one this billion, funds. TAC just because to get on said I drive and going of we funds the have

we capital total thought adjusted from that back anticipating we say those how to first there might would we both of reform. reform should that VA talking in about am started and be gains what we had we think I If what to a means material go numbers? someone benefit VA communicated XXXX, about unrealized our when So, happens, for well

If to anticipate points, above And gains more these basis unrealized are portfolio points, XXX were were basis basis more today. points the believe to hedge we at than be XXX time, to were, than up in they XXX go we rates that would back the we where go interest where eliminated. would were a if rates I

at But the quarter so what and also look reserves that like funds come third expect end total a we everything down much we unassigned would would by pretty the that capital of would you anticipate and our being similar amount, equal. saw adjusted else would

Elyse Greenspan

of modeling these in And helpful. some establishment know - XXXX, terms we into think kind last some front feel then think I Okay. of as the rule of EPS. thumb does people Is of modeling in That it a us them to costs it us modeling more it, does about there quarters loaded? and don't of or throughout of about - even question, is

Edward Spehar

is these Yeah, you timing, I give already. of you've flow guidance seen around we can fair through how a don't much quarter-to-quarter amount think there uncertainty will on as and

think I the point to is divide this by bet at best four.

Elyse Greenspan

Okay. Thank you very much.

Operator

you. Thank

from comes Ryan Krueger Our next KBW. with question

is line open. Your

Ryan Krueger

what the to the for I needed change. Thanks, would that as is I Hi. rate what well. change assumption and annuities have reserves thought in good cause assumption it guess as part variable I the GAAP interest review SOP morning. guess of would to

Edward Spehar

that, clarify you Could time? more Ryan. one Sorry, maybe try

Ryan Krueger

by to give no a lowered variable but XX Yeah, interest I you change reserves interest the SOP on SOP that? that sense annuities. had rate is points, basis you it you in guess would in us the, the Can long-term your reserves I impact what said rate and cause to you for the -- assumption for think variable annuities what of

Edward Spehar

Ryan. Yeah. Hi,

So, the both is which separate assumption, fixed obviously return equity think include the return X.X%. is and at to unchanged I income going account

what the of So, you're assumption I return associated that's maybe with VA getting at business. the in think terms

annuity is the the side. lower rate for that fixed spread gross DAC interest change sensitivity our a future to the came saw through annuities business the in with in reason associated really is profits so on really change for you mean lower little and The reversion of all income,

mean an of sensitive rate. VA market reversion they mean reversion for as as derivative to the The rate sensitive to but guarantees it's insurance, is most relatively and accounted rates, not that's embedded insensitive portion for are are those to the and rates, this accounted

Ryan Krueger

going CTEXX shift would to framework planning RBC above And guess an you a annuity are Got anticipate full the to following it. more ratio you variable still reform? manage in to then an VA or of capital I forward, Thanks. assets implementation

Edward Spehar

manage how be assets a I would. don't whether there's mean, in we think we above going I change to I Yeah, CTEXX. know

goal heard markets think how to would and plus we think I markets. normal But to aligns RBC manage capital framework you've we framework us with work the the say is because still protect us now, we as across CTEXX CTEXX an managing for to an be have RBC think going in should that that risk. think to I I

I and we with we XXX% ratio sit our where reform. don't material a RBC post would be just the XXXX today, believe of is say on RBC, end in ended going there ratio to difference RBC at XXXX, VA we a

Ryan Krueger

you. Thank Okay.

Operator

you. Thank

Kligerman Our with next from question comes Credit Suisse. Andrew

Your line is open.

Andrew Kligerman

I morning. to ask Good wanted Hey. you about the establishment costs.

new you're higher you such And guidance and think, a $XXX XXX additional that little those the a is pieces That's occur a the of out a what change big TSAs couple only investments maybe could the could clarity the in years? more more originally provide parts in So, terms about were two of how increase making, on break of in million complexity was XX% than Eric, it one than as original. said and you the I the guiding. of you

Eric Steigerwalt

works, doesn't provider being right? big is Yeah, sure, a try situation transformational the these make in been Andrew. sure not MetLife projections As It's and one difficult. we've very this TSA only include original correct. business. at have we involved and TSA They a strategy efforts their this, I've as We get where it Look, really number Especially the a in of discussed previously, to to shot Brighthouse. to want have in might we right? own

we some majority to we internal and we get forward. that want off Met now, move successful them we of or pretty sure make of at from been our these, get off this into service ops getting to either large going as providers we've right, So, the as

range. here somewhere end, will in big that number will a the be in $XXX spends million have number. So, we the the It's

were revision we these but confident numbers had surprising in them reasonably of them is idea not the we've project. we the our our numbers or overly in magnitude when gave this that we given have a So, given obviously wouldn't out,

resources I things XX%. would staffing with biggest liked would than going than I second includes that XX% double I and -- of, that's to maybe additional you for be to for have would finishing plus less associated and think then, So the do question, kind like but off say calls would longer your TSAs periods and that prudence we're what then to, say

time able a that good I if would do you to wouldn't is reasonable our focus given that these we're and the even before, still investments. patient it's valuable investments to be et known make, to some said but to heretofore will, because But want going customer been number, as on have again cetera, open the experience necessarily, make have things you I advisor and now, experience, a

here on, So, -- gives math what sense and a increase. on hopefully you that why we're doing the the behind

Andrew Kligerman

in they Yes. Thank that of get whereas 'XX, drop third trying second to so how sense you. were They quarter compared XX a Bps 'XX, in the quarter second a derivative over were treasury I'm were billion gains And the $X big, derivative with of just that then over quarter gains. shifting the and XX-year million. to of XX the XXX given of basis points fell 'XX in the yield about the

big where those why from So little the give a what instruments differential color XQ 'XX? maybe you on could and hedging

Edward Spehar

Ed. it's Andrew, Hi,

one quarter So, third you is consider quarter equity you I the when at look need piece think versus to the the side. second

equity in mitigated some So, from of you second know I rate we had which interest benefit think of the positions. the losses the quarter, sort

XX-some in a, move. is that in I And a I quarter significant a a decline would say point is just basis one XX-year guess

as as out equities, - have money at and consider we the money and well when we of the that protection. the rates fact also interest hedge So

Andrew Kligerman

have didn't materially had to just was or number, expense [ph] that Okay. - seen you would know capacity simply in [indiscernible] that and the tie versus at does the change and capital, CTEXX, when you that been BLIC disclose the dividending adjusted change And and -- change unassigned were it an into similar funds capital you planning a funds? total in last so unassigned your you quarter again not the in dividend excess boosted dividend that was simply a I but just you of that allocation

Edward Spehar

Okay.

I comments the made to back unassigned change go me funds. about in let Andrew, So the

balance how third VA going we representative because quarter, risk So, the to under we that's representative really and we're sheet had a at see think of the we manage of what of the reform. end statutory therefore

We large relative that a as adjusted unassigned as expense well both the isn't quarter funds. really total captured capital benefit really of It billion in explains so terms second in the to piece. related TAC and increase $X.X to the

think expenses you're gain I is that we we have CTEXX... the assets in gain referencing what saw above would seen on the -

Andrew Kligerman

Right...

Edward Spehar

statutory actuarial the assumption Was eliminated by review.

risk $XXX and related VA of negative the it bulk and from So, from $XXX review was million had our was an positive actuarial offset you effective allocation. about management to expense that million the [ph]yet assumption

Again, Okay. of the Company, business. level much how the [indiscernible] of we expenses allocate the not simply expenses to across our

Andrew Kligerman

Thanks, I Ed. see.

Edward Spehar

welcome. You're

Operator

Thank you.

next comes from Jimmy question JPMorgan. with Our Bhullar

Your open. line is

Jimmy Bhullar

Good morning. Hey.

the on expense Just allocation.

clarify, there business. in to an think was impact, the I offsetting Just life

as no still company? it's for So, impact you mentioned, overall the

Edward Spehar

Jimmy. Ed. not on Yeah. stat GAAP side, was There the It's on side. Hi, the

Jimmy Bhullar

on the hedges derivative any the Got obviously of much your duration and your in sort a in it. color have on the one, capital, benefited of the interest especially then next how sort years. from of rate waterfall hedges two, within roughly three you expires And those lot that -- from a

to get sensitivity future can rates your we so in an other Just factors. and/or sort on of changes idea

Edward Spehar

Sure.

cetera. we of a risk carefully elevated position where know, profile so So, dislocation, during et have you period significant a volatility, we're as that maturity of hedges, market in the never we roll manage the

the look five If equity of to hedges at and... of bulk for our the years life range two hedges, you in are those average

Jimmy Bhullar

And pretty even...

Edward Spehar

All those categories.

Jimmy Bhullar

years in or spread that it of And like pretty in most them more two that, versus expire there, period is five? evenly

Edward Spehar

make want we spread, made we're of upfront manage we a comment sure that never going maturity evenly to sort we how Yes position and at in roll too time. about the of back so on book, much the profile this to pretty I have where one

Jimmy Bhullar

And projects, benefits then really you're of you the the questions and how companies on that expenses let's these of projects the period, some say so this. them, costs we done on a you are never sort a do business, and entirely think just and of assume these do lot lot cost establishment whenever there your go go and away or are or this into will XXXX about? Should we do then through once have of company with

that some one them stay costs that going to say some you or so do you think let's other be or about these of we future, the assume divisions, the with at would XXXX, Should in how in are point of all that? gone

Eric Steigerwalt

Jimmy. they No, could hope have Eric. to mean, It's I I Hey, in go gone they have 'XX. away frankly, away.

ago but, little I our these Now, methodology truly costs. that we've following a just go establishment are in through a you explanation little and still longer but see, my did I 'XX while won't bit got

to some make at be we we in we at established to have because another situation a got point talk has end of where sort to point. establishment as costs it If wanted would some about but the that, meaningful investment, company

Jimmy Bhullar

Okay. Thank you.

Operator

next Thank you. And question our Scott comes with Sachs. Alex Goldman from

is line Your open.

Alex Scott

Hi. Good morning.

earnings. question the normalized First just I statutory had on

You mentioned, million. it's XXX

gains. think that was variable that annuity some do hedge mentioned also I it of with to had

is with value that able create economic mean you variable to reform, were much to distributable this quarter? wanted once, out, how find like adopted you've annuity earnings, just normalized I synonymous earnings I once numbers the statutory and So

Eric Steigerwalt

Hey, Alex. It's Eric.

I Let me, make sure meant I I these question. because answer, Jimmy's my 'XX I and 'XX want last right, On just to on numbers down. All you. said know

So, over now. Ed, I'll you this turn to

Edward Spehar

Okay. Thanks, Alex.

give of normalized about talk what first definition we we a mean all, of So statutory just when let earnings. me

from start net stat operations from statements. we directly from So, the gain

stat said, CTEXX. operations, change add VA sort reserves, under period get because managing So, we in we're we adjust the We the to business. whatever net as changes total to asset then the requirement take the out pre-tax we're the how we in gain current from in of trying

we're on establishment business. we'll the get of how all in add normalize basically actuarial of assumption and basis then et cetera. we the realized gains the reserves the the managing we attributed costs, and like Then, VA a stuff business, finally gains for So, unrealized review, to

quarter VA $XXX say $XXX wouldn't expect to you in business and normal rest the run or the million So, of This million the of good was was the million the number annuity rate. I particularly for non-VA. the $XXX - approximately let's was was non-VA. a referenced, be neighborhood kind that just

we the benefit the But think what that business. -- that move more would normally that indicative from adjustments time. this I to to us we sort would number you statutory really timing had on some type over of think We gave the is related was non-VA the is Obviously, expect that market above that distributable is would depending reinsurance the normalized power of earnings earnings going quarter. have number it's of conditions a in

Alex Scott

there XXX, wasn't that buffer would closer of I probably which wasn't XXX. RBC where I place a much guess on think you Okay. And long just then through CTEXX, ago to it thinking

rates I a have appreciate and delta it's moved a lot that and a time lot, the equity period. markets So, moved in big pretty have

say, drawing willing like need of ratio or But think coming I the the associated that ratio if you have at the that or that with that do statutory all have? guess, environment, down would about let's to you normalized RBC to aren't higher be weaker would through RBC because will it guys earnings, feel down you you draw how volatility

Eric Steigerwalt

Yes.

equity above the first stock is to right? mentioned more the year thing positive end the you XXXX, you're CTEXX. market benefit alluding in At think impact, shouldn't guess the So of to, of I up million XX% that had I very assets above market. and saw $XXX So, We that the that's a fact as than we date, assets CTEXX. the significant ignore you

end of it quarter, $X.X the was At the billion. third

having we've above $X -- talked talk ranges we to about given assumption assets XX-K, $X the in based about the billion of on earnings billion So, of distributable when CTEXX. we've

with of there an starting where our distributable we are So, capital position. is based impact on the on point earnings

Alex Scott

Is comfortable some down there and it VA still business? be RBC fair to, come and way to with is say the flexibility have managing Got lower you're hedging you. the that

Eric Steigerwalt

as Yeah. CTEXX. roughly VA the is if look you reform, at to I said, of XXX you RBC guess, business VA equivalent post

a say a in numbers mean $XXX I account. you keep assets of know, not with billion round general $XX of have, we're mind, VA just let's we company. billion just Now,

a look XXX% capital at company, it's to plus in plan market is CTEXX us. markets we're is our just portion would there we normal if just would of I back CTEXX, CTEXX capital, what are pure so the across manage at good to So that and with that to be that's but non-VA, I not that simple earlier so a VA protect you cycles. our still said can't go

Alex Scott

Thank you. Got it.

Operator

you. Thank

Our next from comes Ian question Ryave with America. Bank of

line is Your open.

Ian Ryave

my Thanks questions. for taking

last with NELICO to Stock couple buybacks $XXX been million was Just do healthy driver dividend the the I kind of a to of couple. that am from last buybacks quarters? a have a had couple quarters. in some that of guessing this of definitely the

-Edward Spehar

Yeah, Ian.

that's think I correct.

Ian Ryave

Okay. Great. then I And you about the suggest BLIC couldn't uses capital, fixed Holdco, dividends pieces, from and to have at getting regular next from of of sources that you going be in X in if quarter coverage is times per do then the speaking dividends and the anything the about all regular think And buybacks a relatedly similar year. there right? XXXX? to are You level NELICO

Eric Steigerwalt

it's There couldn't, nothing suggest is Eric. - to no. we There is

at Ed it's would what a at whether the or from NELICO little room that respect the was that RBC even pick-up number ratio, we to this of the we sort even can the some potential company having. most conversation liquidity. it's out I whether dividend in levers. off last Whether litany. listed You Look, holding time, got BRCD, etc., dividend have of of we've get, it's a with the

prevent question oblivious to want is we are nothing add markets. at to that would your similar. answer is There something to same I not the the just no. So, time, that

We every single are company managing day. this

will - it alluding we to manage have billion want to $X.X target, prudently. always we but still you we are capital the So return which hit,

covered we question. think your I

Ian Ryave

driver capacity that just important go perhaps the the quarter what be so would the Yeah. we've other first the And an quarter drivers would lastly, way, been funds, to or the fourth dividend next when then , because cause about as in talking of year? unassigned thinking about

Edward Spehar

It's Ian. Ed. Yeah,

is It risk going to liabilities VA that have tried that sense we but we moving numbers obviously, a we think to be so I how we're the assets framework see So, that a sense and should together. not always give reason perfect. get for won't reform that statutory specific and we the makes we like manage into you means that

go saw a the similar very go end But scenario total the of know, movement would back ever basis and both number sheet I on at as quarter. similar up happen, we would a said think adjusted back if sides capital expect balance but of one basis I points, you seems earlier, XXX that what to that XXX can third points, where up in a the rates be no rates to

in over company about you the just first in talking would and uses. mentioned annual to know that, other the million from I on sources I of is that have you're prepared thing - thing, remarks which other to one one flows The your holding I unrelated we were of my question, companies. sort coming The operating the to $XXX add dividends

Ian Ryave

Thank all really That's Perfect. That's helpful. Right. you. true.

Operator

you. Thank

from Our Citi. with Kamath Suneet next question comes

Your line OPEN is

Suneet Kamath

Thanks.

know on are regulators, we terms you conversations subsidiary. talked take potential just how any but size dividend and one in update Eric, dividend able I of as mentioned the out could with reinsurance a to you quarter the of out that capital Just call, about sub? big of well. last the this on you

Eric Steigerwalt

gets but is BRCD, capital lilt on, even want in I I voice very this. Suneet. do there sometimes commented the a in the process remain excess that to know run to Yes, We we but don't my front regulators. comfortable look, have

process. a and We them nice working very we're have with the relationship through so

I believe that excess and repeat, we BRCD's I position. believe, capital we have hedged capital we've there, also

to hedged we're rates interest So generally here.

you we tell I actually in we're where middle on in I'll the the So, comment process, but are of it. can't

Suneet Kamath

I a would just about expect impact there guess the TAC unrealized negative see then unrealized in and offsetting And flat, in quarter. capital if of no Okay. the reserves the And in on remain terms gain? the if you'd we what or in said of on back gain, up, but rates the rates be go sort you just the movements to the change reserves

Edward Spehar

time, various of on long expect talked would you that. rates as it have that. we XX-K, said, business. interest period we've time, to for Over say of clearly, Suneet. see we've in does guess an shown you that about Eric a We’ve Hi, and sensitivities the Yeah. you and the the shown I in different impacts the I'd scenarios that low impact rate provide

Suneet Kamath

quarter. a big seeing? Did the that how we you've improvement that in on that, much maybe And talking last in just - due this know, Right, then TAC those driver about okay. was on time the opportunistic, this - this that are but purchases was some TAC. we're bought to lastly I derivatives were this, spent improvement of this you that of

Edward Spehar

say would the it in additional helped. of we I first guess that protection it the clearly I I quarter Yeah, that and think was mean bulk interest rate had, helped. I the

the Now, about derivatives tables, we've in you notional increase will notional VA in the VA an I the some quarter had third Q. you for amounts see discussion know when again see

mean material indicative protection position. are really double not our I guide. can quarter. of there, it's any offsetting have change rate It counts notionals this But rough but in interest in

versus quarter no just material I change am you quarter. our that So in was second going protection there tell to third the

Suneet Kamath

you. Thank Okay.

Operator

you. Thank

Shanker from Our next Bank. question comes with Deutsche Josh

Your line is open. please button. your Josh, mute check

Edward Spehar

Operator, they be might another call. on

another on on. you call, to but one can, to of we we’re We've those got have stay we'll So get for question. stay on more going

Operator

Okay.

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

open. is line Your

John Barnidge

you're Thanks. shelf talk now company? rates, you that further and independence battle demonstrating for how about from maybe has as changed Met this year given but space Can the a removed decline the also

Eric Steigerwalt

have It know. don't seem that much. I doesn't changed Yeah, to

you're we a couple point, Its Our calls is at which distributors. you a we to But brand to. get know of because calls different that conference though. little ourselves, said from had obviously kind situation business we've pointing over of inbound this

anything? distributors. add in it. marketplace got know, hundreds you for You day fight Myles, really about I But you of you good the to want got literally every our across, to, abilities feel to

Myles Lambert

Yeah, sure. you, Absolutely. Eric. Thank

and and it relates our haven't is the annuity with it firms. business channels in what to are also annuity the expanding that channels, to So solutions relates would I offering the that with as say business, annuity been the new We're getting calls SmartCare. expanding we we past to of new into inbound side

out that been their from with I the firms, pleased on we’ve demand product platform. firms the of major SmartCare would a mean, there incredibly number have to like

firms, new a it as distribution, been relates So for challenge new hasn't at it entering channels, bringing expanding and us. all to on

John Barnidge

Okay. And my follow-up. then

insurer equity among life largest value? positions private you quarter on venture have, many what quantify Thanks and had for size, the private your you Can equity capital you large investment how what them is average the carrying in maybe a a of write-down Another answers. position. and the have, the

John Rosenthal

Hi, it's John.

about So, we XXX $X across million. managers, a is strategies, north funds have a own fund geographies, and well of is portfolio the that advantages. We diversified and size little average

of next question, two your largest each the million. to $XX The below million. about underlying our last And part is are largest positions $XX indirect portfolio company

Operator

am the turn Mr no further to showing I I’d call Okay. questions. for remarks. like back to Steigerwalt closing

Eric Steigerwalt

you, operator. Thank

be those able you who to are on here. still For of

Annuity quarter. to our good. summarize strong. I be this just me continue Let quite thought we’re results sales

that we’re quality new product. that made with able XX,XXX business life over a advisors We that. SmartCare very have We’re with with the progress I our of am to writing. the we've also pleased network the of now pleased sell

exiting and good our to the ultimate reduction As good about you progress saw, expense made feel TSAs plans. we continue

rate low your as offsets quarter. you the we to well, is to $X.X and environment. do perform sheet even look our talk throughout so next capital, a the continue Our in we've out prudently managed we'll to interest forward finally for protected And thank here, in the you CTEXX. to hedge well call future. and We our We talking with continue Brighthouse. balance believe for And assets program remained over billion

Operator

this today's for participating. gentlemen, you Thank and conference call. Ladies concludes

have now may disconnect. great a day. You Everyone

Brighthouse Financial (BHF) 5 Nov 192019 Q3 Earnings call transcript