BHF - Earnings call transcript Q1 2020 | Brighthouse Financial, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to Brighthouse Financial's First Quarter 2020 Earnings Conference Call. My name is Daniel 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 yourselves to one question and one follow-up.

conference being the purposes. for reminder, a call recorded is replay As call. we from the headsets today’s refrain that question-and-answer cellphones, of Also you or using ask speaker phones, portion during

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

David Rosenbaum

joining you, for thank operator. quarter first and morning Financial's Thank XXXX Good you Brighthouse earnings call.

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

our will John Chief Chief from hear our Steigerwalt, Executive you Rosenthal, President Officer; Officer; Investment and Spehar, Financial Today Chief Officer. Eric Ed and

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

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

financial Relations most the or of and comparable release, portion on measures also as that are to our Investor these of the financial related certain Accepted non-GAAP During management measures. definitions basis not by Accounting be slide Reconciliations measures this in Generally presentation call, discussing website, will may on used we supplement. based known on earnings be found our historical GAAP Principles, a measures non-GAAP directly

results of statutory by due to measures filing And including preliminary finally, certain statutory the management the used references are the base to statements. of statutory timing

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

Eric Steigerwalt

I Thank you, David, few and cover a morning, today. good topics want to everyone.

First, perspectives some current provide I environment. on will the

And cover our Financial's Next, I share results program. in give Brighthouse update I quarter. will an the on repurchase finally, first will

more the time Financial Through pandemic and support are Let's of start families, to upends world. with and contributions, I beyond. need the the their to-date our top corporate customers. and organizations Brighthouse that current as Financial's remains hope we environment. and and well-being COVID-XX this throughout communities loved and the food safety in those you at our and Brighthouse employees and have Brighthouse to this your partners priority and local communities well our safe ones Foundation our our the banks donated than and other pandemic $XXX,XXX

remain today. cities and business our in successfully health across the country where and to our safety plans, and states implemented communities, work-from-home to employees began they protect their environment shifted a we As promptly the help quickly March, to all enact of and continuity measures

this spend our to on flexible a trying add the of to in work-from-home in times, time outstanding steps including and to have to take these through are midst personal the work taken to And team. to We our allow with of number days continue while talent employees vacation we care or needs, of family period support remains them additional arrangements, intended bring effect. to that time,

partners, customers and the our on on steadfastly when the and help despite our our mission these resilience financial mission focused incredible our remain to pandemic, challenges employees, in becomes and of more is to uncertain and people times even shareholders. adaptability strategy security the achieve that by important. our Please It like note delivering created we for thanks

are While impact to interest rates, and leading believe global the equity to down, weather we volatility, driving economy, the increasing we historically low pandemic positioned continues downturn. well to the markets current

On a which certain of earnings the ongoing on we Slide of environment position from in our impacts a remain are strength business, and we We focused X of summary this current presentation potential have currently of manageable. provided confident our believe situation we strategy. entered our

strong, balance liquidity sheet our portfolio and is well investment Finally, are positions and diversified. our

$XXX authorization repurchase public stock common time approximately than of have repurchases. reduction first XXXX, this of million our The representing $XXX million shares a in of significant a XX% August we through shareholders. outstanding shares for XXXX, independent And company of more second action of the XX% repurchased expectations. the relative outstanding a common of an cover is stock, value repurchased initial we to Xth, I we would In May stock Xth of over announcement of our of well This year-end year, share creating our topic from ahead our like through became since our was our to our XXXX. approximately of May total and

have are unprecedented Now of environments given suspending times. which many temporarily you market heard in prudence repurchases we common stock. our use word And are the the us operating, we

We will continually we'll our evaluate our resume common stock circumstances and as repurchase warrant. of repurchases program

place. of in XXXX billion year-end Importantly, our target remains shareholders to of returning capital our $X.X by

Now, turn first results. to let me quarter

presentations. are our earnings quarter summarized on the for highlights X of key Our Slide

continue manage statutory capitalization. to our we First, prudently

well the performed hedging first in Our quarter XXXX. of extremely program

risk the results Importantly, ordinary though to capital a quarter. even we million on Ed paid or ratio will $XXX XXX% company XXX%, in to more estimate that dividend we our the was provide subsidiary holding statutory RBC based shortly. combined details

sales this in compared sales the XXXX. billion, XX% of strong quarter were approximately very had quarter. first with $X up Annuity we Second,

focused approximately of financial expectations connect financial our order $XX their quarter SmartCare. in of first in professionals and and first the in pleased XXXX, of insurance our quarter million XX% sales am and life fourth results in the of the these moving generated a ahead transition on of I with our times. from remain remain clients XXXX, we made, supporting to by sales the primarily Additionally, with and our compared front to virtual we up And driven with during very quarter teams model model face-to-face professionals.

not forward, probably of life and Looking and environment surprise products a is sales the market for headwind insurance you Brighthouse. annuity that industry it current to for the near-term does

to it a generate growth annuities in XXXX. be may result, year, a As strong challenging sales very of for off this coming

respect we life achieve advisors. insurance and virtual in With the last SmartCare and on challenging may been sales year, and with world to have more targets. firms on an building life a when our that insurance, relationships becomes launched we focused Obviously, impact of timing have

on XXXX gives goal that be respect going with is to great though our insurance me we However, will are and we it strategic was plan our clear that confidence headwinds, business. life life for insurance for achievable Even growing laser-focused facing our forward.

is I we healthcare for As Financial believe concerns long-term. rising retirement Brighthouse help retirement financial Americans. over healthcare positioned previously, address people unforeseen needs, costs, concerns and said pervasive help achieve security And are to income insufficient retirement well the in and

turn Third, net down from million annuity approximately total sequentially. to of outflows, first and $XXX were which both down in XXXX quarter let me the the quarter,

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

expenses million We million which the a in Fourth, $XXX remain and with of our corporate reducing million this expectations. run corporate to expenses, were first not XXXX. by quarter, costs, basis an additional by rate committed do $XXX $XX include the consistent on year, end establishment by in

establishment business. were We costs in $XX our to investments million our technology in continue refer In make necessary investments and these infrastructure, we before Finally, first costs. as quarter tax. establishment the to approximately

believe both million $XX on We continue in a establishment in XXXX, be costs to around million $XXX pre-tax to basis. $XXX and XXXX million will $XX to million

being TSA As how our I’ve are are our way final us of through and one exits closer transitions TSAs. systems put we of platform. prudent expected said associated managing before, step These future state we to couple years operating our in

they of To dedication and for the our shown situation. to unprecedented in employees the wrap up, I have want resilience thank this face

support able customers to continue to and result the a now professionals, our adaptability commitment, and financial of we and both into future. As their are

and stressed Our a them balance midst strong the strong positions in are even liquidity we of sheet expect remain market. and to

right We to we place strategy. to value. are have the well believe believe of strategy continue And that positioned deliver in long-term shareholder we we continue our to the execution

over the John portfolio, as interest. our turn of Officer, provide now an on to John? call sectors Investment will our Rosenthal, of I'll several details asset who well Chief investment overview as

John Rosenthal

Eric. you, Thank

investment positioned and believe money below grade portfolio's investments we turn for new in Let into more longer limiting We've investment result. me have well in reducing a early investment conservative investment a credit we grade year saying a our well credit, the higher last diversified that and positions. new a grade investment sector, downturn is and a as This as below since no the been to allocating preparing grade strategy very adopted portfolio. well high as risk included for investment quality cycle by cyclical as weaker the to credit portfolio start exposure

presentation, Slide overview an investment provides start on Let's the X which portfolio. our of of

our $XXX on roughly will you total the cash At on As in basis. of concentrated securities maturity had which pie carrying GAAP the investments the billion story. investment level right are is and portfolio. equivalents fixed three-quarters chart the The we good distribution any overly is excluding diversification the this see, March illustrates of illustrates cash class. not value left of investment a XX% ratings of that is maturity, of XXst, The on fixed we a demonstrates portfolio approximately grade. asset very and chart Approximately one

exposed may given both loans and provide is good that want environment, a COVID-XX on some sectors, corporate for With what more to that us, we and risk. specific I as story mortgage perspectives be commercial backdrop believe be credit exposure. manageable this a current to to Overall, the asset

corporate book in On $XXX a X basis, investments, cash credit. Slide total including to cash and billion approximately Turning had of we equivalents. value

credit with quarter. quality We high have a about at investment the XX% grade of the portfolio end rated

allocation believe of industry, an of economic relative to is during Importantly, the downturn. is important an we total XX% investments approximately distinction low our corporate credit which

a than portfolio our last putting assets the more corporate, years, several the structural in new better protections. to more at private work primarily believe These in credit the we of of money end which corporate been due downturn, quarter. for our assets we've of generally XX% the Over accounted these perform will to

likely Our $X.X COVID-XX, and be at billion approximately exposure to we X% airlines more than less or of XXst leisure, total metals, retail, investments. believe March including autos by impacted to was sectors energy, our

to I’ll of for for rating X quality publics of shortly, and billion, As credits. exposure our grade ratings From approximately these or below had only $X.X or the energy NAIC and discuss $X.X X% higher billion is investment most retail privates. total publics investment

we believe manageable what with So again, story are exposures. a very good

a energy I'd like in and provide credit have our retail in and sectors, retail exposure we commercial as the holdings portfolio. detail to our now about little mortgage our that hotel as more well

overview rated of Moving investment Approximately of having XX% exposure is are energy XXst. flows. exposure to less provided Overall, $X.X of X, and cash rated our less energy higher BAAX XX% generally price billion Slide at volatile a is or as companies, we’ve and March an higher with our midstream holdings which result risk quality our contractual commodity grade. XX% energy a

rating Our XX% March of holdings an sector average XXst. at which another high accounted company A of exposure our for integrated energy had energy

at independent company $XXX holdings $XXX March million about is is this our XX% our grade. rated investment manageable that believe about only XX% of we below less at than million, and Of XXst. production or slightly energy exposure Finally, exploration

exposure rated to exposure This XX% retailers. on related investment at Slide corporate of Almost is XXst quality March holdings detailed these retail credit billion with is two-thirds $X.X high grade. were Our X.

of at five retailer had for are which and average our In March rating Lowe's, accounted weighted about top XX% this A fact, Depot, a exposure XXst. corporate Home together Walgreens of Walmart, exposures Target and single

we store no one-third investment and These exposure. department holdings our estate highly The retail direct of had Importantly, are rated. trusts. holdings real diversified are remaining geographically

March as believe commercial diversified let average In of loan to our with It vintage, portfolio was well total, Overall, $X.X that geography our is portfolio over Ed, an portfolio. commercial call March the touch type. is me XX% on at loan-to-value XXst. turning approximately mortgage loan our XXst. and also high commercial property across we billion Before quality

Like subsectors hotels, XX. portfolio, retail most strong credit two be are COVID-XX on we have and believe are Slide by these The will impacted summarized overall mortgages and our that metrics.

exposure was loan quality strong loans. retail commercial XX mortgage are in Our affluent covering and $X.X high sponsors with billion assets markets. approximately located These

prime diversified These also Our with geographically areas and well located hotel covering exposure was $XXX are are commercial generally mortgage approximately in million XX major loan loans. assets brands.

to To and to asset overall likely quality exposure is our manageable. be portfolio investment by summarize, and is more COVID-XX sectors impacted diversified believe high our well we

over it discuss to turn I'll Ed? results. that, With our Ed to financial

Ed Spehar

all like the and John, frequently was everyone. I flexibility of on financial safe company. are good something both staying you, to our market words and and reminder healthy. value services Thank said for two hear update hope by start business you're March and morning, of a a I repeating us I recent from call. would you movements will Prudence

despite interest and quarter believe Because prudence material strong rates illustrate, a our on And entered in the months reduction the risk of results strong market three environment profile. year. liquidity steep capital balance position in we first first maintained and sheet equities and focus have the equity decline of as flexibility, our with this I and we a in a challenging our statutory

on will share finish were of I repurchases discuss adjusted billion was company liquidity primary will three adjusted the from I the statutory on then total at remarks from There our comments change with my statutory combined and XXXX. earnings. end capital of $X.X year-end. billion, down drivers results. the with and quarter, begin TAC year-end $X.X holding or At comments prepared

annuity variable was products. equity result from VA which for our offset gains in as a increase and rates, annuity in hedge of interest benefit Shield reserves partially decline the an by reserves or First, lower and only the markets

business. three, ordinary for a Company annuity dividend to results Brighthouse Second, company. holding the or from $XXX BLIC million non-variable Insurance Life paid our And unfavorable

expected we will a It experienced is impact like that in the on have adjusted that we out capital. And to quarter. reserves substantially increase first point environment VA an to this important total in increase negative

loss first XXXX, it that expect at and also business our Insurance XX Brighthouse reform update capital, As adjusted Xth XXXX was Company This XXX% and ratio. quarter. exactly million the I maximum for on program. we and discussed call, in compares ordinary our quarter. works range VA We how to dividend RBC capital paid XXX% the substantial at target the would of than said the diminish saw was, as approximately our the in negative includes XXX% which point ratio if $XXX greater This in on March March the the Life be offset year-end to would our what hedging our we could combined XX-K, total impact is required in impact XXst. impact RBC a on in from estimate by an But

million normalized first a had the We in statutory loss of approximately $XXX quarter.

volatility statutory related impact money Gains two-thirds up which However, earnings our on fourth we you increased to any did call. call loss and discussed we use offset Xth the million of previously to revised $XXX the our market not March hedges the the update first is low target interest business on VA years, going associated in incorporated driven non-recurring, hedging as view as seen loss remaining non-variable last tax mortality, the forward. impact we of of this annuity one-third and the interest with book. unfavorable reform. value annuity program our into was liabilities an our rates this have over results below adoption impact by We The of on which from our a was level adjusted market negative the with our rate fully of position, of other quarter items. out Approximately low hedge was the two normalized attributable of loss function

hedging environment. our program a well extremely market performed during summarize, To challenging

relative $X.X billion a is target believe to we of asset environment. to an increase real billion $X.X is on is an our requirement program. billion environment environment. that variable in stressed during suggests this that of hedge increase the increase XX% or requirement a management very annuity market stressed a an market total a XXX% by risk assets was CTEXX annuity effective hedging this asset assets. increased in than our Our long-term an in $X.X The are at offset above Success ratio that in RBC XXX% but And variable reason test market well normal reporting key effectiveness we for almost more in by in quarter billion annuities variable $X.X

holding Since dividend additional of almost holding an quarter, I'd discuss billion Brighthouse company the quarter approximately $X X the We annual ended fixed to holding end of the company Insurance or now from like with cash charges. Life first $XXX the company liquidity. first times our received Company. million

at So, of significant second even quarter. after the the considering second would shares the repurchased the common to-date, company holding in of we cash stock a quarter in increase anticipate end

$X.XX Company emphasize than Insurance billion. of charges. our inflows most of holding any holding more Brighthouse to continue to Also, will including operating we and subsidiaries, plans a as of before flexibility covers forward, annual planned $XXX when the evaluating which the consideration reminder, company our of dividend Life prudence XXXX Looking of from company dividends, expect million operating fixed remaining million we $XXX company dividend our

Additionally, helps we capital under that based crisis, maintain testing the a framework scenario financial to as our business. coverage analysis, our rates as targets necessary have stress well liquidity a a a which robust equity to liquidity liquidity comfortably ensure stress exceed scenario markets. we in similar spike We support the XXXX interest for scenario includes

a I'd now take to stock our about like common to purchases. talk moment

action significant value our taken shareholders. to have We create for

share, stock through average $XXX to Eric XX% outstanding repurchased million year-end common representing price May over shares Xth, mentioned, the in of at $XX.XX our As we of year-to-date XXXX. relative an per of

share. Xth XXXX price call the of March of business Approximately per completed XX% at May amount of an was Xth, $XX.XX update average as repurchase after our

As repurchase will resume you prudence suspended and buybacks. have to when heard exercise program as assess continually share we we temporarily from Eric, our we

the $XXX decreased the the after-tax excluding and same $XXX a were; earnings of items fourth related one-time earnings, to Moving items in million There two items transition $XXX an to costs with from to corporate adjusted from the which new a by and XXXX of first of establishment $XX adjusted unfavorable notable million basis quarter, we a the first million The in basis which million. XXXX. compares vendor and a in $XX quarter reported recapture other. the on night and on to adjustment runoff reinsurance million quarter of adjusted million, impact notable $XX were earnings, quarter of earnings adjusted last notable impact in

net driven with margin. earnings adjusted investment by offset were and first quarter, an partially underwriting items impacts, less in notable unfavorable lower expenses favorable income, Sequentially corporate the by unfavorable market along

$XXX down fourth $XX with approximately expenses compared expenses: Starting with corporate million, Corporate million were the quarter.

we XXXX. expenses to corporate a of Eric mentioned, year-end by As XXXX corporate additional expense $XX reducing in remain committed rate on reduction run $XXX by million million and basis an

Moving of income with alternatives that quarter one Alternative the X.X% in X% in fourth returns quarter, quarter. returns net investment quarter increased fourth compared which first to mind the last a alternative the returns sequentially. year, on lag. quarter the Keep market this were performance, investment investment in in are reported favorable reflected as

first be early which growth, market to but second income a quarter. equity we see estimate. negative, returns quarter, to Given too performance quarter continue positive the to in we contributed it's asset to in investment the in expect change sequential Also, meaningful provide net alternative the

stock VA along return the with annuities Turning drove in in reserves. XX.X% account variable returns performance, significant performance increase in the account for to were and an insurance, separate increase the quarter, amortization driven negative market life by DAC an market. in Separate decline

DAC in Shield offset increase amortization. DAC by was the VA However, amortization lower

fourth historical results businesses, Claims XXXX was quarter. fourth the impacted life by by relatively flat levels. underwriting, which were of quarter. flat compared of but first quarter frequency insurance sequential with with claims unfavorable Claims the XXXX, above compared our relatively Moving quarter of higher first severity was was the on driven in frequency the to

to-date, of not While significant perfect. COVID-XX death we've suggest cause the a seen impact data reporting isn't does from

first In and addition, the there related around still pandemic. uncertainty U.S. is to death of timing infection this

a million the adjusted earnings by notable at quarter. the lower and investment higher by expenses the was Life with partially higher $XX expenses Sequentially, DAC were were items annuities, had earnings. amortization quarter. net by starting adjusted Turning offset on favorable DAC and amortization, lower claims earnings adjusted excluding This earnings higher in sequentially, were $XXX income. to offset segment fees. level, items results segment notable million reserves and were which impacted partially impact lower in higher and excluding

lower Sequentially, offset notable The segment Run-off of an excluding Other alternative items had claims were driven excluding $XX adjusted in were investment partially by results loss, notable income. by adjusted expenses. reported loss quarter. higher by results million Sequentially, the driven

Overall, this our with very quarter. pleased I am results

and sheet have markets. We we and liquidity position we the prudence strong franchise through and stressed to a protect the emphasize manage as flexibility continue balance capital to

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

Operator

Instructions]. [Operator

Bass, Our Autonomous first question Erik Research. for

Your line is open. now

Erik Bass

dividend equity an on this How the by captive March can think is the And about movements? future affected then well just interest BLIC should we to update capacity market related as how the and that, assigned from of provide you and as rate XXst? as recent surplus

Ed Spehar

Yes. Eric, it's Good morning, Ed.

dividend guess March $X.X you thought capacity am we’ve earnings scenario. I -- bear in And potential a sorry back I'd to what talked refer or distributable I the about about talked update was billion. when So, our call we we

out So, if to-date, dividends the we've BLIC. you taken million we've of $XXX look taken at

remaining We do the coming what will assess the to months $XXX over with million.

block, which know predictable real not a more I that kind dividend normally dividend runoff know from and NELICO the of of take market is taken a you we haven't capacity. We business more sensitive

we think, you end in I And plans our that, near-term million were terms time. happy at last to dividend assess $XXX get we told we impact would that of of in that no that year. over the BRCD, the dividend had up the on

-- lower BRCD. are is scenario base not the in is where our much of BRCD, what margins today well at they very low we In rates are flow materially different capitalization of hedged than for lower than actually cash for testing our and rates terms it

think which of the we is, feel that we of testing cash way margins about the very BRCD about good as you that. flow the So capitalization know,

little bit $XXX more the negative it's of funds, quarter a at -- And the negative million estimate. our than $XXX million is finally unassigned first the end on around

not a year year-end funds does unassigned As that capacity dividend of you for capital year, this know, which gain. function XXXX operating impact is and prior

Erik Bass

we you. moving movements going of the annuities between the in Thank should the the earnings, relative X% I your and market provide a how just VA equity details little to given of about Got block? account earnings And $X.XX and it. more the just on can bit the then Shield interplay operating you legacy that forward per sensitivity returns think And kind to in think $X.XX move you’ve previously? separate to

Ed Spehar

Sure.

So, we're reassessing and a rule Shield than that importance thumb book. really different you. is we have been our increased driven sensitivity of I a of total percentage It the what in-force don't had to it's updated of provide as to assuming by

What look something think, I our gone had greater from we back negative like block, in VA was, about a from business how XXXX. if at DAC year-end had saw impact had block. we DAC from our in while talked a we impact X% quarter block XXXX positive did the call, you our update our have Shield to XX% at Shield of back we annuity

you I couple can about forward. think to out hopefully how on for you amortization things DAC to a think help going provide I

I for -- third think update, assumption out would first and you amortization believe the DAC five last quarter. the if at quarter segment, a annuity it's $XXX the for The million quarter look be, I average adjusting for

at look you first quarter million it the was of If year this $XX

that impact positive relative roughly the five Shield VA DAC. net and average, between at look that the of And of impact difference the think million. to quarter you the I is could net $XX negative So

the quarter, that looking were saw were year that impacts which we say throughout if I’d but XXXX same the isn't thing other into separate appears The first for DAC our of by is is baseline you that far saw XXXX the the for this, quarter. we're surprising account the Shield it below returns for about impact they consider our negative not about that first still our off amount in baseline positive you above that full

Operator

Gallagher Tom from comes question next with Evercore. Our

open. now is line Your

Tom Gallagher

deciding the million just to more to is, month thinking first where the quarter the saw question over Eric, more get behind almost of to of the a kind the with opportunity the earlier of $XXX more be deciding and and the little want last you versus be maybe behind just pause to a that second aggressive? part in buyback getting a aggressive decision pause. color just Was half and little to the then value

Eric Steigerwalt

Hi, Tom.

got kind of You’ve it.

out came it a into flesh did situation in have and we with Look to a little the which buy, maybe, now bit. prudence me Let pause. we nutshell this to we flexibility the

we So and well capital with in we knew positioned respect coming to liquidity. were

felt stress of our a that May. As of we early buying bought about testing, roughly all result also we amount back through good the of stock

just et of our over the we're We're coming was this the we be and obviously, repurchased, a sort economic, months, we cetera, this where said market having for we monitoring to see appropriate Now, survey wanted value this. creating point But exercise to going landscape, shareholders. what to, feel it's at. constantly to at pause

straightforward pretty it's do. what So able we’re to

Tom Gallagher

or taking way fair that say pause. out the changed of of you a there sound and done within Eric, having week nothing was it's let’s a now a a that lot your Really, view. so new Sure, that last describing matter has just it? opportunity Is the

Eric Steigerwalt

the out the from buy companies, to Yes, of this nothing back that new we mean thrilled and nothing I able We're lot you're obviously, been landscape. a shares the to prices Ed, have other you right? back anything? just them survey taking a we many like we're at want economic here were able And as we that of to companies, that ordinary -- pause hearing add at. the to buy bought

Ed Spehar

over that to think at like stock go about, shares outstanding just end to you would. we the amount back of made I comments XXXX. of I Yes, of XX% I our bought the Eric was

highlight others, So, number XX%, what number, of many while it's that we're think pace. to relative any amount a important be normal the so I think type pause -- along substantial obviously very a that is because with consider to I taking would to we

as than stock year, to noteworthy. amount to the buy think buy ability actually so is stock thought we much more spent the the would that as we of we thought And I money for buy full we spend we would back

Tom Gallagher

then solving the Can kind consolidated of capital I it's some dividend and of for the is, or provide flattish you solid, think remained guys view excess about by -- can went capital, other TAC proportion just my if on a on But percentage because down updated perspective adjusted follow-up quite on kind when TAC hand, one you you excess XX%. hand your of your RBC on out.

and your company-wide? sort puts on takes some was view there's of So what updated But there. your -- excess what is capital

Ed Spehar

Thanks, Tom. Yes.

me So, TAC first step this Because, I about and our adjusted that loss back hedge the movement capital our remarks, and about been talking my mentioned. total relative you between position the to let disconnect we've prepared talk in target. said potential in as movement

mentioned and this amount call our of I prepared about on this also in the business call, in we remarks, our spent time reasonable XXXX talking So, update XX-K. a

this saw quarter, happened. So, -- happen an as and of we've exactly first what like a sort it's of we environment giving indication just in the been an in what would

what sort first saw in happen and just of environment happened. an in quarter, an So, would it's like the exactly what indication of just we

of -- reform, at year-end element know as So adopted element reform, we remember, is annuity we at you we which to reserves of annuity year-end key and total managed the XXXX. a variable adopted variable which

reserves. markets is shift So, there decline, from capital a when to

is actual which event, become reserves. now was has potential adverse capital adverse event reflected reflected in in which a As an

this you now capital VA adverse reserves, in against is don't what have and hold So, because reflected this event to actual it. happens is with reform

capital. And a the so, decline there's in required

in the we look is factors, and analogous the in capital, So, to first to when the the RBC about to about you required two because these think the movements about when we position. those of the need loss TAC ratio combination going be talk you at change more of change really talk what our

took So, you where ratio you dividend, year. the points XXX after about at XXX we to the referenced of were you the you're XX RBC to ending out, consider unchanged from essentially end the related

it's an increase would in the that -- that the you when I in with capital, total reserves mentioned. on therefore quarter be VA a the of time, market, because based So, going impact environment. capital, negative in to reversal market move follow as you find this to when -- that have not going see an But you're just see required on likely in extent the To have well. you'll suit you second most dynamic and TAC a increase market TAC. rebound surprising to-date is TAC the And in over also the bear

Operator

comes question Elyse Greenspan Fargo. next from with Wells Our

Your is now open. line

Elyse Greenspan

just sort us My of or remaining macro first sensitivity give you million? that question, sense see need the you’d to a of $XXX for that can environment

Ed Spehar

$X.X said up, prepared in Ed. it's into company we tell to the [$XXX my Yes, that on quarter might uncertain influence with going buybacks Elyse, and in $XXX probably factors not Good even cash, our that environment, did specific remaining get Clearly in guess we're remarks, an any the morning, an decision we're holding the a the get could sort expected and year second emphasizing around best I of then make how at the that I going flexibility, I in increase end after about million can again to mean $XXX there to-date we're billion abundance and develops the you and is and of adjusting caution -- a for of decision probably prudence taking obviously, of probably remaining second you million. substantial we in balance the I quarter. our see mean, the million].

and decision. good year So make to of a we the second we are feel about we're sort And company at the holding half the going really where assess today. of

Elyse Greenspan

about life just headwind? given sales insurance you kind COVID see of of related out that got year the sales, balance Can you us some called could help headwinds about levels for the As think think of just we you there.

Myles Lambert

Myles Good it’s morning, hi. speaking. Yes,

see earlier last it So, bring on we And We in much sales. the was on continued conversation, began you an expect as the do impact to mentioned really on Eric really through mode. life franchise, on product startup that about distributors May October. our think selling to life if very and

advisors. with, new working to teams on the very relationships were we're So been highly they’re the selling doing successfully. that establishing that have And insurance life product, really distributer with they the focused

grow remotely. it's selling environment to we think they a to ago, work But we difficult base where successful. environment our has as of forward new, we’ve in I results committed proven distribution started relatively was advisors last to and prospect months working quite life be this But look year just to product again. strategy because even more our of insurance see which absolutely over remain sales look is could the strategy be normal to we And our the And can back because start getting to wholesalers that. to still going you a not our to the to several for

Eric Steigerwalt

just in second one I'll jump too. for

us. just where We're all fair say from life targets to advisors. they're we'll keep is the the shot February, very care back we're that, them clients, take with, talking all like the It not getting to pushing. for exciting have It's environment, I wholesalers into unchanged. sales going But the to perspective see here. So of was in not work business. of new to in care not the and an think clients. do business taking their tremendous, they to a just slow a taking we're say, to and them. But March results to the important that time. life talking insurance and little out overall is our we're advisors in develop look we're January, I their trying virtual This of business financial of that And of it's been a the down care strategy got they a to And have

Operator

from comes Krueger KBW. Ryan with question next Our

Your line is now open.

Ryan Krueger

additional any lower the I material capital expected amount of year, to generation due expect you From that? sales this do guess activity

Ed Spehar

Ed. it's Ryan, Hi,

we anything don't want put number that I think to right on like a now. So,

sort at going talked might $XXX we're forward. business we change any that how business time, that you and our that distributable recall the and get update over on specifics I the earnings going from in of around, million, about obviously neighborhood that of it into we to think, new our not But flips. be strain the had might said

Eric Steigerwalt

advisors It's Eric. free I'll capital to But We clients. want because just up add used one thing. Look, be it new to might it's and not sell. end want up sales. do we for their to there that little a back we

to quick think we But as get we here, that can as move in you year the road like give materializes. farther I of as down possible. the a selling back So, to frankly, number I'd

Ryan Krueger

RBC the versus you in And can -- how you credit interest sensitivity had and of was think that break at an then RBC. markets equity is can markets, you Ed, to interest provided out total them and about Can down about of credit, XXX XX%, rates? we just much think X% think points I rates I separately? So

Ed Spehar

Ryan. sure, Yes,

equity interest update I'll it in color. start But included some the as then of over and it provided migration. stress for pass and down losses shock, our said So and credit call, I'll more business we market to John rates you

occur obviously quarter. we of So, saw two the first in the three

XXX and sure up you're I surprised our we very credit in want type you $X say overlay was minimal scenario. at that guess billion, we would playing RBC as when three XXX the we in impact migration. standing quarter, But that the to had I cushion to if as these I'm of anticipated something As more business holding think not to beyond losses and company that I out and items at update, say it's well there to of quarter from with the stress first fair absorb that gave have the impairments some what cash a is ratio two

now about I'll So, what over we specifics in impact March. in pass on back of maybe John talked some it terms to provide the had to

John Rosenthal

you remind assumptions corporate the during losses financial just the I'll consistent used March experience assumed the crisis. we for with actual credit Ryan, data. of We

inform we for migration losses for use outside on that used managers to Moody's migration we point -- and their based to assumptions on loan this to kind of best which migrations With on LTVs Maybe mortgage XXXX and approximately And there. over impact to from scenario XXXX XXXX data mortgage portfolio, account losses estimate of scenario. stress Specifically, structured estimates losses our they're question, RBC shocks percentage data migration to finance, expected two XX XXXX to during defaults. for credit based and a expected respect from our our years. credit would your

Operator

you. Thank

Lee Our with next from Partners. question Humphrey & comes Dowling

Your line now is open.

Humphrey Lee

I Good wondering updates of some sub XX-year morning. you was X% the if sensitivity, environment. kind taking Thank interest rate especially you in my provide for questions. can on

I stopped environment? sub How the think kind should call, at you X% X%. we the in of think Update Business in about

Ed Spehar

Yes, it's Ed. hi Humphrey,

then just some about saw here. maybe qualitatively So let I guess, give quarter and talk me we what in you assistance the

relative pierce quarter rate or all out first use hedge to So, first the any previously the money the because -- of is did up target the not of pierce, position gains not did loss substantial offset reason from the negative we protection impact our that our not our other markets. interest in on

the talked valuable. about out-of-the-money rates. protection interest know current for you become So, environment, have we has pretty And in that significant obviously

versus also we saw -- separate you and our our rates base rate our interest from higher scenario interest higher lower that account return scenario. However, we showed and returns at on benefit update you clearly our looked at that you lower business when account separate

where rate in protection numbers position. We today -- we are would the have provide we at gains and I'm the in obviously distributable XX-some-basis a the very we'll an just from uncertain are and what update from points. in capital the we with about going a it's environment feel with the that But of earnings to treasury interest So, good with know have we're on qualitatively, right -- here where I good go we But markets. see very not XX-year provided we're terms very to now. feel a you say,

Humphrey Lee

feel manageable. flow interest with very we is I it just about you don't a or meaningful of statutory helpful. should environment how expect cash pretty simply the that follow low Like rate And the current early from to in as, any should kind on capital it's comment comfortable of take then on rate impact environment, think just you testing kind That's margins you about that?

Ed Spehar

Yes, clarify. so me me let let --

very what strong, on the is to our from capitalization the rates I my comments So, testing said at insurance today. lower even question about margin, specific that BRCD, entity on of focus that the flow that were we are we when substantially think captive. we which And are where cash life is

life So block. key our a obviously that's piece of

of obviously mean ahead testing. year for process to we testing going In last not fine. get fourth year-end I'm quarter our overall terms at margins, I cash flow cash flow of were

think for third quarter cash a calculating don't a ourselves. it's those. prudent are lot those to think There's we're of wait of goes update fourth testing, the year into flow provide where the to or assumption the I a question ahead to have with we second impacts I and get that about going quarter of work to half

Operator

you. Thank

comes next Our from with Scott Alex Sachs. question Goldman

now line Your open. is

Alex Scott

thinking looking RBC excess on, When follow-up and guess different there I quarter, TAC not be the I assess I you the TAC was that's is you do that just from trying don't that's unexpected square do But think that's about that -- think to minimum need about -- loss targeted, at guess, much and capital the excess or capital. and position you that the there at when has I your of been your managing you're that something guess, just about Have was capital not a decline guys first and position? levels touched I way excess with you've I would the how just of some been what having sort quarter-over-quarter, I the I have of something. how saying I that communicated. calculation, When to in amount

Ed Spehar

it's Alex, Ed. Hey

reform, So say year-end you is VA thing we I would that, 'XX. adopted at first the as know,

for So, total and the mentioned reform, asset shift I the I market a between it there is capital at a environment. depending framework think before, when you look on And reserves VA requirement. as is

a technical bit you're this a technical one. -- guy, know I let little on me get me more so let So

between is CTEXX, the capital reform. like basis and occur, market convergence when VA the which events reform there basis saw the reserves basis for know which is is we under So quarter, reserves, the CTEXX basically -- you adverse in VA for

So CTEXX. CTEXX same you extent see CTEXX because reflect as to between and convergence a CTEXX adverse -- the the potential CTEXX does events not

overall. if underscore the about worst scenarios, think bad average outcome to really for average just XX% a you you, of And that this the isn't

not is hedging this, didn't a illustrate to the are less they reason XX% what worst at of And be today. interesting. scenarios, we hedge, benefit, if So, our for that average a pretty than look is because the you when reserves would CTEXX cause, the

this happened isn't event, if of you is this your what that look adverse a XX% so I when because up event at CTEXX quarter adverse average go right reserves bad. becomes it potential real So think the

that's So increase actual CTEXX they happens, and at look have any reform a is face, framework. event you think different when an you so a going and manage in if bigger have CTE anybody than VA I CTEXX don't the than in to through what else company

a CTEXX reminder, a company XXX% reform under pure for as a And, is VA RBC VA ratio.

what more saying I to managing a this the between you of at hear be first I component. requirement you're than indicative concept RBC as of about looking total one when between ratio about any type looking loss So you're the reserves. in and need asset of risk change shift But in think business, the thinking at the TAC and capital

Alex Scott

And have then, a I follow-up.

a adjusted eat the I bigger Just on capital, of losses at total one go-forward -- the credit would of your X-XX. think credit is I that think part the stress. just there implications TAC would

credit it those were losses XX So of year-end stresses March the credit downgrades? as and sensitivity and does of impairments to change or much as or in

John Rosenthal

capital since Things range greater of actually. losses, use based stresses The in XX-XX haven't the probably from on would that I John. of portfolio and downgrades -- XX-XX. actually it's Hi, then is a the coming much of were our say and proportion something not changed

Operator

Andrew next comes from Kligerman Suisse. our Credit question And

now Your is open. line

Andrew Kligerman

it. fascinating $XXX that that now having loss never get and the dollar use I you'll equity it think curious to seem markets it's million. to close with of even -- first doesn't rallying kind you use the of I'm back,

the in to hedging specify So I'm it was in regarding would with that utilized. a first kick could wondering the it variable your what what start in scenario and then annuities? question, you effectiveness quarter would where -- And might get be

Ed Spehar

it's Ed. Hey Andrew,

if of repeat could just You part bit a your cut on second the little out question, that. you I wonder

Andrew Kligerman

Yes.

scenario -- first would what the respect with which -- given secondly, exercised then you occur? I'm hedging used loss that that could million, to you -- So or hedge provide a effectiveness, never $XXX in of And could and million number a of effectiveness? of you $XXX sounds you put hedging north loss. the know million was a said, two-thirds that like $XXX little statutory I on Was that? maybe the it

Ed Spehar

Yes.

Okay, Andrew.

like I fascinating think, hedge real me occurs, I through. occurs and that So number question, because of find effectiveness it saw know a think hedge the we And effectiveness measure infrequently. lived in this, just about I people I we start let with this of quarter talk because relatively a it

at I our That had just the at in to So at what billion end on $X.X number billion $XX.X script, of was of to first the quarter. my up commented XXXX. requirement total end went CTEXX restate asset

an had $X.X we in increase CTEXX. So billion

$X.X billion, before was billion, This the benefit when fact quarter billion which a combination and an had annuity and of flows, our you hedge increase the from that was is were you assets derivative which our the $X.X the product billion, variable assess effectiveness our VA product cash $X.X gains, dividend. Shield the which $X.X in

pretty percentages, and increase would hedge I So, but your $X.X effective $X.X that's XX% billion asset know I VA calculate its your say how goes assets and people total I by go program. requirement up if by a up mean billion don't

Andrew Kligerman

Sounds good.

Ed Spehar

rate protection. loss. had interest first comment on our here we gains The I made that the two; Part was significant

I up, where think rates any of back us But So seeing scenario interest those don't back of mind obviously go go go might some a if would I'd up. away. say rates interest what, gains

I loss. negative $XXX that target guess necessarily million that's to it's $XXX first I of up say just up first million not just And a So would this things. it's a that loss, to

haven't been think the played never we target how with -- we've we're the exactly I happy quarter. So first out what things in pretty is. But said

Andrew Kligerman

up like million, lot strong you recapture on And few a of reinsurance spike sounds companies in that maybe $XX very It lastly a know a Yes. you're years position that there. saw ago.

treaties have there think saw on that's individual it? any risk other major we going recently your Lincoln that life or you you recapture. a do may think I do any What's recapture sense to forward? Is

Eric Steigerwalt

hi Yes, Andrew.

have So had some we of these.

come right do. see. impossible it's here other The they what When to think decision was to the a might ones about predict have to we thing to up, make decision economic I recapture. we what's right

on any at reinsurance look to provide item And I not I'm the really was you million not remember all mean, that. in that so, unfortunately, notable the you were mentioned, two there able there. how But going items to be the to recapture. guidance $XX

vendor to exit of One probably $XX TSA related number. was items a a two-thirds million change, and and the was reinsurance of -- the so was recapture that it around

you give little sizing a to just So that. just -- on

Conor Murphy

Andrew, Hey Conor. it's

me a X% overall over policy. of add ULSG The little of little about over and recapture, block of the million force the X.XX% it's in it's Let a context. force in just a

the the So a in overall force. significant it's not of amount in context

Operator

will turn for call I gentlemen, closing back Mr. and now Ladies any you. to Thank the Steigerwalt over remarks.

Eric Steigerwalt

Thanks everybody.

sense here. hopefully, you So, got a

the You a strength. of position current know, we from entered climate

the remain even strong, in to expect stressed Our the of sheet midst them are balance liquidity and and position we markets. strong

overall and Our high quality well investment portfolio is diversified.

market you As on we heard continue extremely our And to place performed going have challenging and strategy. execute we're today, we program well strategy in that a during hedging right believe to the environment.

healthy, you your and we talking you and hope forward ones stay I safe loved and with look to So again.

Operator

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

now disconnect. may You

Brighthouse Financial (BHF) 12 May 202020 Q1 Earnings call transcript