• Total Annuity Sales: $10 billion in 2024.
• Shield Level Annuities Sales: $7.7 billion, a 12% increase from 2023.
• Life Insurance Sales: $120 million, an 18% increase over 2023.
• Corporate Expenses: Down over 7% compared to 2023.
• Combined RBC Ratio: Approximately 400% as of December 31, 2024.
• Liquid Assets at Holding Company: $1.1 billion as of December 31, 2024; $1 billion pro forma after capital contribution.
• Common Stock Repurchase: $250 million in 2024, including $60 million in Q4.
• Adjusted Earnings Q4 2024: $304 million; $352 million excluding notable items.
• Alternative Investment Income: 2.6% in Q4, at the upper end of the 9% to 11% annual return expectation.
• Adjusted Earnings by Segment: Annuity: $327 million; Life: $52 million; Run-off: Loss of $27 million; Corporate and Other: Zero adjusted earnings.

• Warning! GuruFocus has detected 3 Warning Sign with BHF.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Brighthouse Financial Inc (NASDAQ:BHF) reported $10 billion in total annuity sales for 2024, with record sales of $7.7 billion in their flagship Shield Level annuities product suite, marking a 12% increase from 2023.
• The company successfully launched BlackRock's LifePath Paycheck solution in defined contribution plans, receiving initial deposits and expanding their reach in the worksite channel.
• BHF achieved an 18% increase in life insurance sales, totaling $120 million for the year, and introduced enhancements to their SmartCare product suite.
• Corporate expenses were reduced by over 7% compared to the previous year, reflecting strong expense discipline.
• The company returned $250 million to shareholders through stock repurchases in 2024, reducing the number of shares outstanding by over 50% since 2018.

Negative Points

• Brighthouse Financial Inc (NASDAQ:BHF) faced challenges with statutory results, which were disappointing and impacted by increased complexity in managing their variable annuity and Shield business.
• The company's estimated combined RBC ratio was at the low end of their target range, requiring a $100 million capital contribution to Brighthouse Life Insurance Company.
• Interest rate increases and yield curve steepening negatively impacted annuity statutory results, contributing to a $300 million decline in total adjusted capital in the fourth quarter.
• A $200 million increase in asset adequacy testing reserves was required due to legacy fixed annuity blocks, affecting statutory results.
• The company acknowledged the complexity of their business model, particularly in managing the hedging strategy for their legacy variable annuity and Shield products.

Q & A Highlights

Q: Can you explain the drivers behind the RBC decline in the quarter, excluding the capital contribution and reinsurance? A: Edward Spehar, CFO, explained that the quarter was influenced by strategic initiatives, market factors, and year-end asset adequacy testing. The reinsurance deal and stand-alone hedging for Shield new business contributed positively, while interest rate impacts and asset adequacy testing reserves negatively affected the results.

Q: What is the status of the hedging strategy for the legacy VA portfolio? A: Edward Spehar, CFO, stated that the company is still working on the strategy for the legacy VA and Shield block. The focus remains on managing risk with a maximum loss tolerance of $500 million on a statutory basis, and the company aims to complete the work on this initiative before updating long-term free cash flow projections.

Q: Should we interpret "stable RBC" as maintaining a 400% ratio, and does this outlook include subsidiary dividends? A: Edward Spehar, CFO, indicated that "stable" suggests maintaining the RBC ratio within the target range of 400% to 450% in normal markets. The financial plan does include taking dividends from operating companies after this year.

Q: Does it make sense for Brighthouse Financial to remain a public company given the complexity of its operations? A: Eric Steigerwalt, CEO, acknowledged the complexity but emphasized the company's focus on long-term shareholder value. He highlighted the significant stock repurchases and the company's ability to manage complexity while executing strategic initiatives.

Q: What are the competitive dynamics in the RILA business, and how is Brighthouse positioned? A: Myles Lambert, Chief Distribution and Marketing Officer, noted strong demand for RILA products due to customer interest in staying invested with protection. He highlighted Brighthouse's competitive positioning, record Shield sales, and ongoing product enhancements.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.