Brighthouse Financial(US:BHF)2022-11-08 14:32Financial Data and Key Metrics Changes - The estimated combined risk-based capital (RBC) ratio was between 450% and 470%, above the target of 400% to 450% in normal markets, but down from 470% to 490% at June 30 [9][19] - Normalized statutory earnings for the year-to-date were approximately $500 million, benefiting from a substantial increase in interest rates [18] - Adjusted earnings for Q3 were close to breakeven at a loss of $3 million, compared to $247 million in Q2 2022 and $514 million in Q3 2021 [30] Business Line Data and Key Metrics Changes - Record annuity sales of $3.7 billion in Q3, a 50% sequential increase, driven by fixed deferred annuities and Shield Level annuities [11][12] - Life insurance sales remained flat at $19 million sequentially, with management confident in the life insurance strategy despite economic headwinds [13] - The annuities segment reported adjusted earnings of $170 million, impacted by lower variable annuity separate account returns [34] Market Data and Key Metrics Changes - Interest rates increased significantly in Q3, up over 80 basis points as measured by the 10-year US Treasury [8] - The decline in the equity market resulted in variable annuity separate account returns of negative 5.4%, leading to actuarial adjustments and higher reserves [33] Company Strategy and Development Direction - The company is shifting its business mix towards lower risk, higher return products, moving away from legacy variable annuities [19][20] - Management is focused on protecting the balance sheet and optimizing distributable earnings while supporting growth through various market scenarios [16][36] - The company plans to introduce a new life insurance product next year and expand distribution [57] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to navigate the uncertain market environment while remaining disciplined in financial and risk management [8] - The company anticipates continued strong annuity sales and is monitoring growth trends to decide on potential dividends [54][55] - The implementation of LDTI is expected to have a negative impact on total equity, but the rise in interest rates may improve the overall impact [28][29] Other Important Information - The company returned $136 million in capital to shareholders through stock repurchases in Q3, with a total of $447 million year-to-date [14] - The holding company ended the quarter with $1.1 billion in cash and liquid assets, with no debt maturities until 2027 [21] Q&A Session Summary Question: Implications of moving to a more strategic interest rate hedging program - Management indicated that the goal is to raise the floor for distributable earnings and narrow expected outcomes [38][39] Question: Details on variable annuity policyholder behavior updates - Management provided insights on changes in GAAP assumptions and the impact of mortality and lapse rates [46][47] Question: Growth expectations for the fourth quarter - Management stated that growth is the primary reason for considering a dividend from Brighthouse Life Insurance Company [50] Question: Insights on life sales trends - Management noted that the environment for long-term care sales is challenging, but they are focused on executing their strategy [56] Question: Underwriting margin outlook - Management acknowledged higher severity claims this quarter but indicated that underwriting fluctuations are normal [60] Question: Impact of LDTI on adjusted earnings - Management expects adjusted earnings to be somewhat lower under LDTI compared to current GAAP accounting [67] Question: Capital allocation and growth capital considerations - Management feels confident about the statutory position and does not envision the need to inject additional capital into the operating company [69] Question: Fixed annuity sales and pricing confidence - Management expressed confidence in the profitability of the fixed annuity business written this year [100][101]