Brighthouse Financial(US:BHF)2020-05-12 18:00Financial Data and Key Metrics Changes - The company reported a combined statutory total adjusted capital (TAC) of $7.2 billion, down from $9.7 billion at year-end 2019, primarily due to increased variable annuity reserves and a $300 million dividend paid [42][44] - The estimated risk-based capital (RBC) ratio was between 515% to 535%, compared to 552% at year-end 2019, reflecting a 20-point negative impact from the dividend [44][46] - Adjusted earnings for Q1 2020 were $273 million, compared to $265 million in Q4 2019 and $259 million in Q1 2019, with notable items decreasing adjusted earnings by $62 million [52][54] Business Line Data and Key Metrics Changes - Annuity sales were approximately $2 billion, up 15% compared to Q1 2019, while life insurance sales reached approximately $16 million, up 33% from Q4 2019, driven by the SmartCare product [18][19] - Total annuity net outflows were approximately $900 million, down from both Q1 2019 and sequentially [22] - Corporate expenses were $214 million, consistent with expectations, with a commitment to reduce corporate expenses by $150 million by year-end 2020 [23][54] Market Data and Key Metrics Changes - The company noted that the current market environment poses headwinds to near-term sales of annuity and life insurance products, making sales growth challenging for the year [19][20] - The investment portfolio was reported to be well diversified, with approximately $105 billion in total investments, of which about 96% were investment grade [29][30] Company Strategy and Development Direction - The company emphasized its focus on prudence and flexibility in managing its capital and liquidity amid the challenging market environment [41][48] - The strategic goal remains to return $1.5 billion of capital to shareholders by year-end 2021, despite temporarily suspending share repurchases [16][50] - Investments in technology infrastructure continue, with establishment costs expected to be around $150 million to $160 million in 2020 [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to weather the current downturn, citing a strong balance sheet and diversified investment portfolio [14][27] - The company acknowledged the challenges posed by the COVID-19 pandemic but remains focused on its mission to help people achieve financial security [13][21] - Future sales growth in life insurance is expected to be impacted by the pandemic, but the company remains committed to its distribution strategy [80] Other Important Information - The company has donated over $500,000 to local food banks and organizations to support communities during the pandemic [10] - The hedging program performed well during the quarter, with gains offsetting negative market impacts [46] Q&A Session Summary Question: Future dividend capacity from BLIC and assigned surplus update - The company indicated potential distributable earnings of $1.3 billion, with $800 million already taken from BLIC and plans to assess the remaining $450 million [62] Question: Operating earnings and annuities movements - The company is reassessing the sensitivity of earnings to equity market movements, particularly due to the increased importance of the Shield product [65] Question: Decision to pause share buybacks - Management explained that the decision to pause was based on surveying the economic landscape after having repurchased over 12% of shares outstanding [68][71] Question: Interest rate sensitivity in a low rate environment - The company feels comfortable with its interest rate protection and cash flow testing margins, indicating manageable impacts from the current interest rate environment [90][92]