BHF - Earnings call transcript Q3 2021 | Brighthouse Financial, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to Brighthouse Financial's Third Quarter 2021 Earnings Conference Call. My name is Jonathan and I will be your coordinator today. At this time, all participants are in a listen-only mode. [Operator Instructions].

As a reminder, this conference is being recorded for replay purposes. you question-and-answer using portion that headsets speakerphones ask the during of we refrain cellphones, from or Also, today's call. to Investor like Amante, now turn over presentation I'd to Head of Relations. the Dana Ms. Amante, you may proceed.

Dana Amante

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

Our our financial were Eric website. of you review night presentation We released Officer. the Investor these and accessed and Chief Ed President and Chief all you our from can encourage Steigerwalt, be on slide will materials. Relations earnings last release, Officer; supplement and section hear our Today, of to Executive Spehar, Financial

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

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

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

Eric Steigerwalt

half interest Level Combined, the delivered rate Fixed ahead quarter outflows annuity considerably sales, you, Total with results third We of annuities of and focused quarter in actions Shield continued Thank our net third quarter you sales capital the second we Shield $X.X of compared Thank FlexChoice annuity our billion environment. were Brighthouse managing am lower with the the quarter $XXX on XXXX. in with XX% strong results strong continued of up with million morning, common for expected, third as strategy, Beginning were XXXX sales joining sales sales strong us. on variable very flagship our with another in and this rate offset given our we were sales, repurchasing the quarter-over-quarter, outflows. in annuity Access. growing of good stock. And unlocking the our X% product and quarter. expenses, pleased our as repricing reported annuities Dana. low record were both sales annuity the as our sales The I in took quarter and XXXX, VA up the everyone. third third quarter, expectations. quarter. Total to execute compared of all for approximately XXXX

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

expanding to add mix. product, progress million. on are continue pleased bring and the we third general about on insurance for additional to enhancements and ahead of of SmartCare, suite expanding strategically quarter BGA to were annuities. that the into add these insurance agency, serve. or focused expectations of believe with we in excited very enhancements, I at approximately they further making up compared on we We enhance footprint providing Our firms, also enhancing new life announced resulting professionals sales channel, of distribution our life X% life several further the our additional flagship Shield distribution XXXX products. and as quarter financial In execute our with the $XX the which work to as partners, and footprint the by remain SmartCare. existing in brokerage insurance clients XX,XXX third distribution distribution quarter, to In distribution our our second We're product Shield our access partners wholesalers approximately our Level as our grew the further we bolster adding August, launch attractiveness our of we strategy to and remain and well the

behalf on moving a their every to work of customers. and for clients distributors our and I outstanding the Before to thank from would on they do like sales, our take moment our all day partnership

invest reduction In financial not quarter, to will expenses. expenses, which a support and in provide the enhance include third Moving previously were our corporate by first year to focused expenses our target. $XX remain distributors company. $XXX expectations. with continue establishment we to XXXX approximately We in to With our million. to policyholders. reduction professionals Establishment million their committed on as relative do million, we achieving year-end $XXX were cumulative costs We the well costs, our that in corporate expense line our and infrastructure a public service as our said, as

its extraordinary Turning August, BRCD, parent dividend Reinsurance $XXX company, Life In or Brighthouse BLIC. Delaware, to capital. Company, Company Brighthouse of or paid Insurance to a million

sheet optimizing balance capital We our on focus to continue strength. support statutory to

first our cash through November additional our of balance common repurchase repurchase support holding the our strategy. XXXX, stock statutory common and the of in quarter stock. robust strong million $XXX August November repurchased repurchased common authorization stock And continue XXXX $XX of we million Since our sheet to Our through company X, have substantial In shares time and an approximately the stock. third announcement of of of $X.X we reduction total our of this we than billion of the by achieving brings a became a more us of an end common from year, to of than repurchased billion our almost $X.X public to this return This capital independent company outstanding stock. X way XX% year. target XX% the represents more of of we of

have approximately also current We billion repurchase our $X August. this past which remaining we $XXX million announced under authorization, stock

results other third to Moving the in quarter.

of quarter said, results. Brighthouse another I As delivered strong

XXX% remained sheet our well XXX% of third ratio above XXX%, RBC, and and Our liquidity combined risk-based target balance XXX% and performed estimate our and between between normal hedging markets. that or program in quarter robust in We our as capital, expected. the position was

overall liquid were the we at investment company Additionally, of ended was $X.X earnings margin performance, of prior alternative holding quarter the higher assets from quarter market quarter. income investments Adjusted as second very and expectations than billion. ahead the the strong, underwriting was the with approximately given results

results, our and In expenses. wrap as a continued will addition, prudently mentioned earlier, than product to details Ed footprint provide Sales execute in were that progress as pleased with on our expected I have third better manage the of made we on financial enhance expand more our the quarter I our portfolio. and distribution very delivered strategy. we to we focused continue and To we moment. we am quarter in strong up, to sales another results continued

our long-term we achieve for results repurchased and Ed us, this to turn our way we I year. more to addition, more distribution achieving value our remain stock, generate focused billion by shareholders believe financial partners, XX% returning of our help which to to With mission said, shareholders, We as Ed? the almost our financial in and of bringing detail. common clients In end security serve. the our our to on goal that, enable I'll to on us they people over the of to $X.X discuss our strategy, it will of

Edward Spehar

everyone. I'm results third reported Thank you, And financial holding the and cash which and company quarter sheet, pleased results preliminary is the the by good Eric. statutory last strength with of demonstrated balance we very night. morning,

reflect for year's capital GAAP conversion results, to of and business included positive assumptions This variable valuation insurance. conversion the noted update our an income There results is changes were $XXX of a system the modest review long-term GAAP million. impact both significant risk-based the RBC for policyholder of undertaking This no of actuarial evaluate Overall, This the earnings VA, unfavorable statutory ratio. negative review. life mortality our materials, impact third assumption net for to annuities, state a on but or capital, the As or had impact of of we annual adjusted to or the total XXXX on had a in platform. annuities block behavior our impact the all as Shield assumptions. quarter substantial review assumptions future

billion The Now the billion increased is were focus was Combined offset or million account or release the interest from was unchanged. from capital. Insurance returns VA adjusted at on BLIC. from a capital Brighthouse September partially driven BRCD as to turning dividend increase to or Company, rates by TAC Delaware, continued at impact $XXX statutory from essentially performance market benefit the $X.X XX BRCD, The capital, of total results. $X.X Brighthouse paid preliminary to TAC, June Company by statutory Reinsurance statutory Life XX. example our quarter The negative of good were in and negative separate optimizing X.X% to

in fourth to BRCD. XXX% estimate XX the The range take range XXX%, and quarter dividend RBC that capacity. September addition from is an XXX% would is dividend we the at the to of of last XXX% remaining is in least ratio be due in of increased mentioned primarily in plan company to holding above estimated quarter. As This our that up in of sequentially markets. to ratio $XXX target the I well million $XXX to At our paid BLIC to the million the which from the second quarter, dividend XX, combined $XXX increase half ordinary ordinary dividend RBC million we to points normal a

the returns normalized in essentially Finally, the account unfavorable separate change rates earnings. for to with an result along quarter contributed in interest no negative statutory

were underwriting September Year-to-date, reported million. a contributed approximately loss the normalized level, margin while items a to $XXX to normal there loss the statutory addition, of of In through non-VA quarter. a variety that returned we a in more XX,

earnings. adjusted to Moving

$XXX rate million the XXXX earnings, the in investment earnings $XXX third valuation There lowered $XX Third a notable same items, third system of were the conversion the $XX million run expectation. which, & in which on basis, quarter the and the notable quarter annual basis of of driven the Results notable establishment items Corporate to million, excluding business; two of assumption of adjusted net costs with quarterly million from were Shield with XXXX. $XXX The compares were second primarily unfavorable compared adjusted after-tax adjusted quarter our quarter higher the our in XXXX of net by combined earnings million. on and were impact related basis in block $XX for an by review, Other. items a in income quarter, actuarial on including impact million

would net investment strong Before getting into some perspective income and margin. quarter segment the provide underwriting the I like results, third on to the

performance our our to long-term expectation For excess quarterly resulted net positive of approximately the This rate after-tax primary driver continued income, of year. alternative million the expectation. earnings market returns of $XXX quarter X% above XXXX per in above in in XX% was investment run the of second investments

we reminder, a one-quarter income investment As alternative lag. a on generally report

to performance Asset net investment growth the in favorable also income quarter. the contributed

included third the to approximately Moving claims to in underwriting. margin quarter $X and million net improved related of The COVID-XX. sequentially pre-tax underwriting

Our the year, two reinsurance impact first offset, which of quarters $XXX excluding from in normal COVID-XX, to were in the was this level. range returned And million. the in low the quarter, million to more a normal the of claims direct $XXX

Now investment income. margin and quarter. excluding sheet of capital million. reported position, fees tax quarter. Other $XXX to The a the Sequentially, excluding items, had by Adjusted results multiyear, our an notable and income a strong the turning quarter. $XXX investment results net partially third our loss, $XXX under $XX Sequentially, in the investment over VA underwriting and higher investment to adjusted Sequentially, higher reflect in Net higher lower segment holding higher were the net is with notable substantial adjusted company Adjusted committed Starting the segment, segment items, turn the items, and framework, Run-off million cash balance higher excluding earnings, level. & of a in driven way results net we'd earnings higher of underwriting franchise in sequentially, earnings in questions. both driven a our items, best while by like am margin. and return result earnings, that, separate we third excluding We We offset maintained With in support notable the and the income, were by at Life benefit. quarter. the believe adjusted business to were million offset million quarter. lower annuities. as reserves to your Corporate distribution I multi-scenario returns were pleased capital income partially to were by notable continuing which account higher results the mix of the Overall, call operator remain over to our evolution managing with for shareholders. expenses lower time. the to

Operator

Greenspan from comes show Wells I Fargo. our Instructions]. [Operator first question the of line from Elyse

Elyse Greenspan

rate think, last this run a earnings. underwriting in quarter and question, you first mentioned to favorable some more prior quarterly other talk guys items. you And I My used was and, $X.XX quarter $X to to quarters,

think last So, that you relative provided to quarter? you are net-net what you where range do

Eric Steigerwalt

at shares from second down If than quarter. outstanding the quarter, this you more look they're average X%

And so, that to change alone than more a $X.XX would share. equate

I what had we to talked fair the about that it So assume range is quarter. higher is bit a than last think

Elyse Greenspan

to expect normalized I that Within guess, you levels quarter, will right? in know going which returned offset, forward, of forward, this kind the commentary, going you I stay those reinsurance normal would that levels that mentioned like, more

Eric Steigerwalt

That's correct.

Elyse Greenspan

target as update on A if that providing guys is to We're some of then, disclosures of changes. quarter quantitative lot LDTI have from more this have could there Brighthouse. you wondering well? a provide started date accounting get kind companies And just disclosure an we just the

Eric Steigerwalt

half buy around you we've of a estimate be just company, the be in think holding company you GAAP resources to cash I as say, flows public As to, a unaffected program. it. obviously, as this important and position on And cash. will I example, but we'll statutory some generate sheet running focus might substantial you expect, is And we've year. on give framework would distributable any that second I next we impact balance our a in by strong created, for based dedicated change. would remind the And would ability governance very GAAP of to stock back know, to accounting company

Operator

question show I Erik ahead. the Autonomous line Bass comes next go from of from Research. Please

Erik Bass

about annuity between annuity policyholder seeing the a term. talk rolling churn early And still was is market. are people over of a life behavior into at saw a historically? I the end you what lot the hoping in competitive, product there And as you're we like what VAs I market more of of with in the of Shield realize or But buffered could it's this little risk companies? terms bit new becomes a is the

Eric Steigerwalt

in the with quarter for would we assumptions revised that actuarial but tell annual have materiality, Again, can result we assumptions, change a And was our I as we of terms just Obviously, any call completed impact nothing out. of experience you enough now review. that I this material in from review, And Shield. no there Shield.

Erik Bass

with of was I kind of do you'll rolling product between less market more thinking as just offerings of new from of it. as trading kind competitors a more point there's to that across growth guess or end see is more matures into the is time think the Shield since but of assumptions, I annuities business over a Kind an this industry you product risk just with companies? there a the perspective, there sort out of about

Myles Lambert

speaking. Lambert Myles It's

that. I predicting you're accurate So think in

or could internally surrender, replacing think other contracts movement carriers. a as it of movement offering competitive these a that you new based on to see I company offering either see out you'll come

a I move offering, think expect or could will products still to assuming little existing competitor. would since with under that market a internally lot on another the you surrender. and in of say these it a competitive it's early that have I movement carrier, either see see are new the they to you But

Conor Murphy

Conor. it's Erik,

a help. bit me add just to Let little

term. You're you course, the consistent if were in of flows very, very at we that outflows of been issuing are or the But quarters the all six-year quarter, in look products back with right. at it's which, existence. mean in six-year I Brighthouse's prior XXXX, overall

So it, call of, there's really Shield. a not factor

an significant picture, there's impacting flows well. think overall that but terms in if of certainly, element, helps I outflows nothing as you Shield that

Eric Steigerwalt

That was the this about when we my seen point, had of related impact financial on review any assumption products quarter. is anything we have material results to not lapsation talk that

Erik Bass

And would because on hold well. seen lapse companies, few changes made VAs that we've for including, block as that I legacy true assumption a your think, VA I know as Met well

Eric Steigerwalt

had from VA. in some reminder, for actuarial changes behavior the policyholder a just for we and VA review. XXXX assumptions as any meaningful we Yes, And impacts changing from withdrawal significant lapses no impact XXXX have and did

Operator

next I Dowling of Partners. & question show Humphrey our line comes the from Lee from

Humphrey Lee

your upstream In capacity you're planning you million script, BLIC. at least talked from half $XXX the dividend of to remaining about

the As what million that? that whether the factors than that, we about you are may upstream, affect that think like be or higher $XXX it level

Eric Steigerwalt

more I'm than I not about get going specific what at to half. said least

We a I And in annual look if also we from expectation on we dividend intend is the take from to quarter. base XXXX, to will NELICO say just BLIC. dividend our take dividends, anticipating that a question our fourth

say today, base rates are our markets rate normal today expect that is and next where BLIC. increasing. up dividend take we'd even are year, they markets in line slowly return assumption they rates a are are with would interest would interest As are where you I know, of if more that go the I and from

Humphrey Lee

is My shifting sales. second question to

you and distribution distribution expansion coming sales quarter, drive of this both anticipate talked more for for improvement the good very were Shield sales could Life that in Do you and further out, your about of quarters products? expansion. pointed you the kind as some So

Myles Lambert

It's Myles again.

answer as product SmartCare. the also a that another well absolutely. launched question number major for launched Shield to new months we distributor Two we our So is firms ago, as for new of

We additional which producers. access also Eric SmartCare, the channel, us expanded it's earlier, into providing mentioned sell XX,XXX BGA to to approximately as

expansion in distribution yes, we're So, that focused is absolutely something on.

Humphrey Lee

other I that the the coming the ask how quarter? about the third guess to new maybe is, in in pace distributions to adding to way quarters, pace would think compare of the question – the

Myles Lambert

real I would it's continue to say that's with a something ours. our business, to SmartCare going of focus be

annuity our diverse to relates on the it will to ones. but say very SmartCare. As expand we already, that always I emphasis looking bring we're new of distribution large, distributors a group franchise, to have be But for continuing would

Operator

I show our Krueger next comes KBW. the question line from from Ryan of

Ryan Krueger

non-VA you the provide the on in drivers? Could were the additional some what quarter some and of earnings detail key

Eric Steigerwalt

had was It a number factors. quarter where different really a we of

And flows the given excess some of the really reference its ratio. downside think as block. If up me more little RBC profile About on sequentially. impact ratio And change capital the a norm the markets if that composition that quarter XX%. definition similar up the look are flows, different terms to Shield stat, came model norm that calculation at at to point this capital dividend. the to XX of to was range increased look try you'll platform. of from our we past how points risk-based an allow it was the refining indication would to what best of is And normal XX I've doing from well risk with made at our of about risk managing the excess of calculation recall, generation CTEXX, XX we it of benefit indication about you as state cash bit of give purpose we out is pre-VA to this, of positive a then, take which, look versus update. of points by came to we you of with we was reform RBC growth the earnings, to in year's future environment impact XX were where reform. would a points refinement everyone an to had if a between generation in was in remind about when would the fund norm to related this migration in is post-VA stat indicative well the of movement if differences stat of really I this XX of VA cash In quarter. the of bad to the for And offsetting of VA assumption points we And annual it during capital related way estimate points, slight you XX% this BRCD we RBC the good last And approach the the and in markets be, in used

our So RBC if points. typical look at around probably a quarter, you sales consume would X

and has it This really quarter, about of it launch spread was do to institutional business. our double with that, margin the

all So, quarter if a was movement at billion in at explain – RBC that from, you billion XX-point think ratio. I balances the end $X.X of that to there's the okay? you third items net see the second sequentially of it quarter, all went XX-point $X.X a the those of end So the together,

it's to if fair stat on therefore, to were a closer some basis, earnings you norm analog assume, think XX it to about was I thinking that zero.

Ryan Krueger

statutory for assumption a the us GMIB point? at what follow-up, block, just can is a VA your give sense of assumption this then floor lapse lapse And you the

Eric Steigerwalt

a based only and get have to to question. different is there that fact the were that function of a is no no I thing, like that But to updates prior VA number reform. different assumption features. moneyness again, The highlight lot we on would products, single of and we dynamic there There to give. simple is no I answer is answers. The know simple to lapse answer because sometimes

one VA a business was presentation the statutory As more you the in of to the VA reform consistency basis. get on goals of know, of

time withdrawals say, XXXX updates And with some lapses and aligning assumption would us periods. to led reform in take, I so, back to XXXX pretty meaningful and VA related our the hits

Operator

from Mr. comes Piper our line John you unmute mute. some the question from line. next If Barnidge have [Operator the Barnidge, Sandler. Please Instructions]. I show of

to move We'll Benguigui of Okay. on comes Tracy question. from line the next from I next show the our question Barclays.

Tracy Dolin-Benguigui

performance to guess, that negative and investment was the that fixed wanted fair. account to investments. one-third to is I'd market understand generally like negative contributed equity the assets subaccount believe I income returns. better if those I two-thirds separate know underlying could where And from? bucket, returns could if if those which terms option your any describe, add, other giving most of And in could I you what invest negative also of came been I you've in. they policyholders if in

Edward Spehar

It's basis Ed. was about we I the S&P indices other quarter. negative believe the had up have XX did But points in that returns.

EAFE basis XX down MSCI The Index the points. So, Markets down was points. percentage Emerging X was

the So equity And just story index, first right? thing. of that's a it's one so, never

The second close. pretty reasonable level your is equities think and split It's between use. the to a of thing estimate is, I other

not In obviously, terms sure in investment about. terms choices. specifically what policyholders, of options plenty of you're I'm of for But, talking they have options

Tracy Dolin-Benguigui

along experience timing funding. an of the in legacy an just peak disclosure, on if In you it older you about update would talked bit I'm block down little going an your could or based question. earlier about, inception a with earlier peak were wondering, talked the on that just And you VA way funding and your just provide when updates You that's hitting history XXXX. case if the still hit by your

Eric Steigerwalt

– an on that's coming hit somehow impact or and, reserves I it's not suggesting. will of peak up shorter. whether is the like funds. you're all down. that what think movements point risk made that shareholder claims, about money paying getting past you're also funding come obviously, the your freed But you not down, longer So, But dependent. is It's becoming I've the in off it's Obviously, right? have far as scenario means that's market

I down, is the that time, a risk it is over today. important of need number risk to you likely amount would as the think different what's that than be comes the capital what support

Tracy Dolin-Benguigui

half, the you be in that guess probably scenarios to distributable back if you I what would skewness earnings I multiyear that reach thinking, towards any given there was that peak were alluding funding. would

Eric Steigerwalt

Tracy. Repeat one Sorry, more time.

Tracy Dolin-Benguigui

in into my multiple your you think aggregated. I all just over were years. scenarios, earnings it's because, it's getting But thinking distributable

of were funding? we where earnings So most about are we would think if to VA after the skewness of proportion those block think hit coming the peak some from, legacy about

Eric Steigerwalt

you distributable I would the the in would would by earnings I earnings is you. I say, say peak not we that disclosures provide obviously, shift peak out the – we're past. selling tomorrow. less today a products changes it's the point impacts we factored time benefits that generate distributable will fact have statutory, I've the by funding over reversion the which function And business earnings funding. talked that in our it's also of that distributable is in and the say as driven under driven into go from But in about mean trend mix the

Operator

comes John from Barnidge question of from show next line our Piper Sandler. I the

John Barnidge

added, many this face to firms selling how is XX,XXX product or new agents lower being new had distribution you the And quarter? access the higher to and added, BGA the agents, the said prior that generally On new values?

Myles Lambert

the would access we care summer. it the advisors deliver I had professionals Prior relates we approximate the and really And question, to that, financial designed over long-term say This is Myles that's to again. to XX,XXX did to that benefits. XX,XXX a new professionals. to product face financial amount as around SmartCare prior adding is

amounts Conor, to anything our want perspective, face face very add do significant. aren't So, speaking, from that? a generally to you amount

Conor Murphy

No.

think I good, we're Myles.

John Barnidge

age claim you now my versus pandemic can about And maybe But materially average you? onset experience maybe of I mortality the for sequentially. talk down question. understand then the went COVID at follow-up

Edward Spehar

It's Ed.

$X say is So I don't have that, would the obviously, average age I million of down versus the a claim before. just now lot.

on date thought relative date we're based about we to one-fifth to we it's down be the deaths, I claims again, guidance would on in this at XX% the I'd in were quarter our of fourth and second and quarter, that, the just, overall, last it's we from think think what first number I of provided of US COVID. COVID we down to initial from And year. quarter of the substantially total, probably the year highlight where running

Operator

Thank queue. to like you. call in closing further Dana I to go no comments. time, showing I'm would over this turn Amante the ahead. for the At questions Please

Dana Amante

in you Yes. And Thank your Thank interest for for great today Financial. day. you. Brighthouse and joining all us have a

Operator

This concludes you for participating. Thank today's conference call.

disconnect. all may You

Brighthouse Financial (BHF) 5 Nov 212021 Q3 Earnings call transcript