Brighthouse Financial(US:BHF)2023-05-09 15:28Financial Data and Key Metrics Changes - In Q1 2023, total annuity sales reached $2.8 billion, a 35% increase compared to Q1 2022 [10] - Life insurance sales were $23 million, up 15% from Q1 2022, marking the highest quarterly sales since Q4 2021 [11] - Adjusted earnings for Q1 2023 were $195 million, down from $411 million in Q1 2022 and $282 million in Q4 2022 [16] - The estimated combined risk-based capital (RBC) ratio was between 460% and 480%, an increase from 441% at year-end 2022 [15] Business Line Data and Key Metrics Changes - The Annuities segment reported adjusted earnings of $314 million, reflecting higher fees driven by a 5.8% return on variable annuity separate accounts [39] - The Life segment had adjusted earnings of $1 million, while the Runoff segment reported an adjusted loss of $106 million, both affected by lower underwriting margins [40] Market Data and Key Metrics Changes - The company repositioned approximately $2 billion from lower quality to higher-quality assets, reducing the below-investment-grade portion of its credit portfolio by about 20% [34] - Office exposure within the commercial real estate loan portfolio was reduced from 40% in 2019 to 25% as of March 31, 2023 [34] Company Strategy and Development Direction - The company aims to shift its business mix towards lower risk, higher return products, moving away from legacy variable annuities [10] - Plans to introduce a new life insurance product later in the year to diversify and strengthen the Life product suite [32] - The focus remains on maintaining balance sheet strength to support distribution and business growth [33] Management's Comments on Operating Environment and Future Outlook - Management expressed a cautious view on the market and economic environment while highlighting a strong cash and capital position [5] - The company believes it is well-positioned to weather challenging environments due to a robust balance sheet and high-quality investment portfolio [13] - Management anticipates fluctuations in underwriting margins due to seasonal factors and variability in claims [17] Other Important Information - The company repurchased $62 million of common stock in Q1 2023, with an additional $27 million repurchased through May 5 [12] - The liquidity position remains strong with $1.1 billion of holding company liquid assets as of March 31 [37] Q&A Session Summary Question: What caused the compression in underwriting margins this quarter? - Management noted that the quarter experienced higher mortality claims than typical, with direct claims exceeding normal expectations [20] Question: Have you conducted a commercial real estate stress test? - Management confirmed that various stress scenarios were run on the commercial mortgage loan portfolio, with manageable impacts observed [44] Question: What is the outlook for surrender activity? - The company expects slightly higher outflows this year compared to historical levels, consistent with pricing assumptions [60] Question: Can you quantify the new business strain in the current quarter? - Management indicated that normal capital usage for growth is about 5 RBC points per quarter, with expectations of downward pressure on the RBC ratio due to growth [70]