Earnings call transcript Q1 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen, and welcome to Brighthouse Financial's First Quarter 2023 Earnings Conference Call. My name is Olivia, and I'll be your coordinator today. [Operator Instructions].

As a reminder, this conference call is being recorded for replay purposes.

I would now like to turn the presentation over to Dana Amante, Head of Investor Relations. Ms. proceed. may you Amante,

Dana Amante

Relations good Call. to were Materials can all the night and encourage website. Quarter to you released Financial's XXXX and review Investor on found Earnings for these be of morning. you, our Brighthouse We materials. Welcome of First last section Thank today's call

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

to here David participate and call Following the our up the Chief with prepared us Underwriting; period. question-and-answer Marketing of Investment open Myles today remarks, are our and for Also in Distribution discussions John Lambert, Rosenbaum, we a Chief Rosenthal, and Officer. Products will our Head Officer;

within begin, that results with federal to described note the as from time I'd actual this securities Financial's risks our laws. we time of SEC. Brighthouse call Brighthouse the uncertainties may in like a the meaning forward-looking filings from the result differ the materially the in Financial's of during Before statements statements forward-looking results anticipated discussion may to include and

May on today, only information on call. today's speaks The obligation XXXX. update as call discussed today's undertakes of any discussed to company Information no X,

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

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

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

Eric Steigerwalt

investment our in today. entered and market about and and and strength franchise, morning, for our good thank Good position a strong high-quality joining business economic cautious XXXX the Dana. the Brighthouse call position portfolio. you We well-diversified capital environment. very on and with and you, feel our of view everyone, Financial a cash Thank

new toward legacy to return drive our Profitable mix away essential from annuities. business variable business higher risk, and lower is growth products

We towards sales mix. with increase XX% achieved the first XXXX, progress $X.X sales are compared annuity Total we billion, that business of first our we an quarter to quarter XXXX. make very of results. In were the strong with pleased continue of the annuity shifting

Sales annuities the the of contributors in billion the sales quarter combined. Level Shield at and $X.X fixed were deferred largest strong to

meets As of have that clients. we are on product I our and focused before, the providing needs said a distributors their evolving portfolio

to our of annuity As part ways strengthen continue of flagship products. seek suite that to focus, we

million to Rate Last certain Life we May quarterly Annuities XX% in the opportunities additional a new of week, of quarter suite, fourth Options growth $XX designed is keep for XXXX. of were X, insurance the insurance first level the down sales with compared first XXXX, of in announced XXXX providing quarter of on to plans their markets. the the highest since help track clients enhancements Edge, increase and by that sales retirement life on quarter with an Shield of Step product our including strategy Shield launch Level

to strengthen and introduce further will our insurance Life previously, suite. we which said a plan year, we've expect life As this later diversify we product product new

with growth support the to first strength markets. business cash company RBC risk-based capital the And ratio end assets between is a the liquid In our holding and we our XXX% which execute combined our or remain first risk strong is we our results robust billion the our sheet with Maintaining of at we management. in franchise and XXX% of of and XXXX, on balance and in above strategy, Brighthouse have quarter. distribution continue of imperative $X.X XXX% to evolution XXX%, estimated targeted As position of business disciplined normal in an to range delivered financial quarter order mix.

first approximately we In We through to shareholders. our million of quarter May with capital XXXX, additional $XX an returning repurchased remain repurchased our $XX to X. committed the common million stock of

last our of our common reduced over the cautious buybacks began level program. while we stock through emerging said reduce number an selling quarter, May down economic reflect both we lower this XX%. share of have program the the high-yield we opportunistic of reduced market of years of we on repurchase in investment began I markets intend view XXXX, of our level year, X environment, As profile. portions and we have the to a active to derisking past by portfolios. the have several repurchases, maintain Along with quarter additional and August In fourth Since and over to our repurchase the of outstanding common we portfolio risk taken further shares actions XXXX, by stock

reduction We repositioned portfolio. our credit in higher-quality approximately portion $X below-investment-grade approximately quality an XX% in resulted the from billion lower assets. to of This

relates sector, to in it from intentionally our office As of have XX, XXXX March loan to commercial office our we as within portfolio estate exposure the reduced XX% XX% real XXXX.

low for our some XXXX previously, time. materially additional period investment reduce rate We have detail tail with our extremely I presentation, And an portfolio. have protection associated which added rates of included in amount interest substantial on extended said a provides we low slides interest as to of risk earnings in

very franchise of to sheet. since have market supporting derisking becoming broad we pleased range demonstrate the upon are balance of that significant independent a build We further other an quality These commitment measures public scenarios. and of our actions our through implemented to efforts proactive growth improve with took company the our we

have market remains ongoing balance position environment, a volatile robust our And and liquidity To despite we sheet. the strong. up, continue economic wrap very to

and we positioned to Our investment well high weather that portfolio quality is are we well challenging believe and environments. diversified,

return the our and disciplined increased strategy, time. risk with to drive believe our over approach we focused Additionally, of will business combination along financial management shareholder

to to Ed more over discuss call our in the results turn I'll financial Now detail.

Edward Spehar

demonstrate Financial's results our and Brighthouse XXXX and good navigate management of financial Eric, environment. through market morning, the as uncertain you, Thank risk an economic strategy strength we and first quarter everyone.

have reflected continue results a balance of robust for preliminary in to we Eric As first the quarter as sheet XXXX. our statutory mentioned,

XX, of As TAC approximately adjusted capital of March XX, million with was $XXX December as statutory or increase TAC compared billion, $X.X estimated XXXX. our total combined a

In the first partially quarter, TAC benefited was this from annuity strong results, variable and mortality. VA by performance elevated or offset

$XXX compares RBC benefited of was from ratio favorable previously combined end the ratio quarter, XXXX. risk-based the of of a normalized XXX%. combined by the first RBC approximately which XXX% statutory driven was earnings with capital In mentioned RBC at As ratio the XXX% our estimated first results. between This quarter, and year-end or million, VA the of

ratio Additionally, the with reflects RBC associated new lower business. capital requirements

of Our strong March assets liquidity company $X.X billion XX. of liquid remains position as with holding

flows have debt you like cover we believe non-dividend have do that previously, it the would maturities charges, to As position most the our at appropriate we I holding is conservative said to company. until company XXXX. remind a not of the have also we any to cash holding and fixed

Moving earnings to results. adjusted

improvements January Brighthouse long-duration accounting LDTI. of or new As the targeted X, XXXX, contracts Financial to the standard for accounting adopted for

data With has adoption, historical retrospectively. updated been the

same $XXX of earnings, the basis adjusted quarter and compares adjusted on which in XXXX fourth of items, million million with less quarter quarter in first million, First the were $XXX earnings the of notable $XXX XXXX.

alternative net the the lower no XXXX. several income normal quarter partially quarter income. The were a growth of in first by earnings There offset rate results asset impacted by were margin, than in compared underwriting and adjusted run Net was investment items expenses notable continued our higher investment items, by driven favorable higher and investment lower with quarterly including income expectation. sequentially, lower

zero the the expectations, $XX rate alternative approximately run of million share, quarterly expected, lower first yield to by compared an than quarter $X.XX when quarter. per or However, was driven investment in

reminder, the investment X% long yield alternative and annual a we term. over an between expect As XX%

underwriting of There are than first and was the sequentially The high quarterly expectation. full in relative seasonality claims the direct rate an run was is typically year quarterly margin as element quarter to average. also lower our lower

anticipate frequency the results The driven Other. than in number in have claims reinsurance. seasonally offset on basis, underwriting by underwriting rate severity factors, low Corporate quarterly of and with & fluctuations a before, offset we we by lower-than-expected along was better As from and including expenses, variability in margin a run of said

excluding Adjusted Moving million items, annuity reflect were separate returns account Sequentially, to X.X%. results annuity in by by in notable $XXX the results the earnings, of Annuities segment quarter. sequential higher variable segment. fees driven

year, Additionally, fees, expenses market lower offset to lower contributing under sequential fees new the accounting the the risk to net benefits that sequentially, with fees. income. seasonally were lower earnings attributed which are Along the by from was partially favorable standard, investment in first higher change are of half adjusted MRB, in the or moved

offset results adjusted an Run-off $X of investment higher partially quarter. results Other million. adjusted margin, income. expenses underwriting a sequential of segment investment On excluding both the by reported reported offset items, by sequential loss, net & driven driven Run-off of earnings items segment lower expenses. And Life On basis, had Life by adjusted in excluding and partially higher were $XX items excluding loss, The lower a basis, million. notable million an by $XXX Corporate net the income higher in notable a and notable were

strong framework. balance focus ongoing our managing XXXX, performance using multi-scenario on in quarter up, a wrap company's first our multiyear, demonstrates the To the sheet of

long capital return term. the generate over to growth sustainable on continue shareholders We and focus ability to the our to

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

Operator

Instructions]. the [Operator And first coming from Barclays. line of from Benguigui question our Tracy

Tracy Benguigui

above seasonality has And this for this elaborate were like else? with like or NPR first the the we that but quarter typically world, in Can realize something XXX%? losses, higher than quarters. mortality margins you quarter these your first I compressed LDTI see and the the underwriting flu were typically more cohorts feels it under causes, was

Edward Spehar

Ed. it's Tracy,

a than of being So end It than quarter that reinsurance $XXX this claims normal. think to offset have was the more seeing. been more important I understand it direct was that. quarter And top million we of for the I've talked we mortality. $XXX lower number. as about is But to claims seasonally that the was Also, -- above what that million had it's beyond high

as say typical claims than would But contributing standpoint as quarter. seasonality well both a is factor. was reinsurance a standpoint, I again, a worse So from it a the

and had rate, to average normal that alts on little underwriting expenses need we suggested for talked performance other relative offset we when adverse you taxes favorability reason bit only consider be run the what adjust a quarter. to we to about So on was because some we a the

Tracy Benguigui

these understand under just And for earnings above XXX%? Okay. were premium cohorts to LDTI, net the or emergence was ratio

Edward Spehar

an I really here say we're LDTI. Yes, about much LDTI isn't or when would pre impact of there talking

don't factor that's So here. I think a

Tracy Benguigui

any in estate did your general your done changes valuations share RBC? if could And And you Have did that like test? a result stress on real findings, you stress Okay. meaningful commercial did, you if you in CMLs?

John Rosenthal

Tracy, it's variety John. CML the on We manageable. stress portfolio do the impacts and both on of bottom-up top-down and a scenarios our run portfolio are

already office, term. As expect you over continue to for it's we've the and unreasonable seen particular, in not to decreases know, near them decline valuation to

However, we're a LTVs. low starting from relatively including you portfolio, can a which diversified, of see, strength, position high-quality

us And the further reasonably low severe values, LTVs property in declines to even give protect significant cushion against declines.

again, we information pretty enough provide CML the able good any LTV And to including being So stress. about reach weather coverage conclusion. allow you holdings, we on distributions feel to to our and believe same I

Edward Spehar

would the in bad that a the of a And that, market us rates were cycle. Tracy, been a -- today, protection me add under of a triple that And we all So equity say low where the look to we repeatedly framework. scenario and are and has better are bare credit company standpoint heard the rates substantially at up. XXXX we for you've multi-scenario I in from interest threat you multiyear, rate manage we on because just position if when put very a

as you this And in put John investment we very things multiyear, well that the efforts us look overall framework. think the combined, at strategy, those talking is derisking I good about multi-scenario think, a to, that had two we've when when as position

Operator

coming Piper the question John of from next our with Barnidge line And Sandler.

John Barnidge

what's And elevated at in going surrender I was as progressed? quite activity the forward? change did that know it the outlook for quarter. Curious, your all quarter Because

David Rosenbaum

is this John, David.

maybe a start to of So I'll just talk and then about couple the comments overall pace.

that disclosed per outflows in So impacted know, number timing $X will of out things the you range. this period. be of as But billion by like know, previously surrender as been the normal we charge coming historically have business month you

associated formula. products very our with have We do close been our lapse for those And assumptions actual have rates. under to expectations that interest lapses dynamic

rates, with with what coming surrender So will currently seen where we higher our historically, pricing we coupled higher assumptions. this this blocks is when year be which year, given we've of are we with all than think consistent slightly and sustained the that outflows expect about are out that

the of year, back quarter, -- back R&Ds, we you modest when continue the consistent We a very So the with outflows end look pace the later then think at was end at I blocks increase is which a saw into when in in that the year. saw outflow the with those bit. what plus to little end, that April, quarter the a tick we up outflows throughout about little really happened higher surrender. we saw bit, the coming out of that outflow came which And of first associated with last quarter, just mentioned, which

John Barnidge

presentation. the the just Can talk And didn't on maybe office quick it levels portfolio? in you about in I then question a occupancy CRE. see

John Rosenthal

John, it's XX%. John. They're

Operator

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

Alex Scott

is have projections update since a the Been to those mean could mentioned? framework on we've you on opine First reversion gotten what look And has how any provide if like. point multiyear, at case the may you if that one available? evolved, become update a given that on for adjustment? I some multi-scenario just of you particularly there's look for way when the any you while base Any

Edward Spehar

Alex, it's Ed.

the with this versus we're platform prior the earnings we for in would here underway of transformation to it and any earnings. how completed distributable preview it I I won't LDTI we on able last we leveraging actuarial years, that with year, adoption were you did that reiterate talking that when might out projections there call, to and efforts be sure midyear make in we with those last give say, our come numbers March. So for think look I year had the have distributable our I the just we done of about

really than just would I getting not we're more still that any So again say specific midyear targeting and that.

Alex Scott

the Got question gap of could normalize that that was. on And loss. you help bridge net that movement what earnings then it. I statutory Understood. and income just hoping is between the of have I second us was and the some sort

ordinary unassigned be interested look like I capacity dividend separately, BLIC? that XXXX. the does as just I And be then for also because I'd how item that of we think into surplus that, ask impact can And gating

issue just an So interested I is was if that at all.

Edward Spehar

Sure.

on unassigned So first of all, funds.

for prior If $X.X for our BLIC, most previously. recent, the capacity gain year dividend in that and is operating that's look and the from prior at this $XXX it's year unassigned you down for million, it's the gating factor billion about year, funds. was reason And the statutory that

key a dividends the for of talked is year. though, this here, we've think about expectation I million that point $XXX

you norm guess the see how And be one about can So the able to discussion, the we've stat we're we manage of that risk. that, lot capacity obviously, loss obviously VA do a that things to walk. supplement in we on talked that have deliver about. we to cash is talking I of big the the flows disclose net on the

unrealized. So looking are at and hedges we're both and gains that realized

And about through than just looking so statutory talking CTEXX again, will and that well at the the you're the CTEXX realized and come reserve RBC. line as be what gains when different we're the movements, as losses are target we're which, seeing

Operator

the Research. Bass from line coming question Autonomous next our And Instructions]. [Operator of Erik

Erik Bass

NAIC change First, benefit stat I interest could in quantify RBC this rate change you earnings on was the hoping -- quarter? interest

Edward Spehar

Ed. it's Erik,

the to $XXX think was was million MRP at to So the all VA, past, said had change. in one we've driven stat really We've and million. said norm I earnings That $XXX we point, said $XXX approximately million. it of we due by

$XXX maybe $XXX I middle million. those. another said would we I $XXX it's say around million was in point the to million, think of It

Erik Bass

for or behavior then it. being Got a a lapsing mature? policyholder of experience another Shield versus -- carrier? And annuity annuity exchanged an can with policies contracts about contract rolling those you much new policy And when how Shield new are talk into

Edward Spehar

Yes. Sure, Erik.

his alluded a lapse in a as response -- get to when have prior is dynamic question, shock assumption that And in we for guarantee the So you David period. prior assumption. high to of Shield the out the

in environment, look on what rate And could we so current assumption. you as lapse it at the close is when to be that an about shock

what why saying expect. into in that's with would we contract. a So much we're line assume don't rolling percentage we it's very And new Shield high

Erik Bass

or coming new Got kind how it. much sales but isn't I that any guess, is Maybe much new your right essentially have do sense are business? of from exchanges I of, it the guess, word, churn? into how of you

David Rosenbaum

number, is this do or just have that we some whether I business, exchanges. David. qualitatively, a Erik, renewals retain I of of that's say don't the but kind internal Yes. would from

we experience assumption. do, pricing. assumption But a -- right So that. our built Ed has into do that in mentioned, tracking shock have lapse lapse assumption a we the with line do as And been

Operator

And Krueger next question from our with KBW. coming Ryan

Ryan Krueger

Could business in quantify quarter? strain current the about new you talk or/and

Edward Spehar

Sure.

RBC ratio, quarter. capital when RBC we've of So normal X at to looking about the points about the growth talked in a we're past fund a usage

at So last the year think, fixed this a Ryan, substantial a you that little And the of every what had the that year. bit is for calendar capital annuity business amount there because know, dynamic's -- as risk different beginning I charge of year. sales we of rolls year off

the it because capital at you you That of when RBC to is about seeing not being about related growth first ratio. are capital so off rolls a this fact in to annuities? the quarter, of charge is you think that, think fixed material a that every year, Shield the beginning consideration product, And contributor when the actually

we which few that you will will the see ratio. forward, pressure downward being So as you on I over capital put the equal, look continue would quarters, grow, some usage next assuming else to everything RBC say,

Ryan Krueger

you that know running to a amount would -- be given fair term, higher And been X-point some, down they're but expect fixed impact annuity near previously. above still I had came sales they just than

Edward Spehar

would. fixed In dependent they annuities last right? I it's be I And mix, that, year more simply on would year sales $XXX million. were than to now, to remember, going again, the prior And so billion. were just $X.X

that have get. been we the on opportunistic in we margin and environment can that So depending the market,

So it mix. on business certainly going heavily be dependent is to

told points contributor, points of I is But I a quarter if it's For it right? was normal would a first just that actually assume say And that over X you usage year, else more usage. everything the have than X sales quarter average you you're of being to X full a to equal, per going to have Again, something cetera. et quarter. points mix,

Operator

gentlemen, ladies back turn for over closing I and call will remarks. you, Thank the Dana Amante now to any

Dana Amante

Thank for a Financial. all great your Brighthouse you, today interest in for day. and thank you and Olivia, Have us joining

Operator

Ladies conference for and that for your gentlemen, does conclude Thank today. participation. you our

You disconnect. may now

Brighthouse Financial (BHF) 9 May 232023 Q1 Earnings call transcript