Brighthouse Financial(US:BHF)2024-08-08 15:33Financial Data and Key Metrics Changes - The estimated statutory combined risk-based capital (RBC) ratio was between 380% and 400%, which is at or modestly below the low end of the target range of 400% to 450% in normal markets [5][14] - Statutory combined total adjusted capital (TAC) was $5.4 billion at June 30, down from $6 billion as of March 31, reflecting a normalized statutory loss of approximately $600 million in the quarter [14][17] - Adjusted earnings for the second quarter were $346 million or $5.57 per share, compared to adjusted earnings of $271 million in the second quarter of 2023 [17][18] Business Line Data and Key Metrics Changes - Year-to-date total annuity sales were $5.3 billion, consistent with the same period in 2023, with record sales of Shield annuities exceeding $2 billion in the quarter [9][10] - Fixed indexed annuity (FIA) sales were $351 million, a 60% increase over 2023, driven by the SecureKey product [10][11] - Life insurance sales in the second quarter were $28 million, contributing to record year-to-date life insurance sales of $57 million, an increase of approximately 19% compared to the same period in 2023 [11] Market Data and Key Metrics Changes - The company received first deposits of over $340 million through BlackRock's LifePath Paycheck, launched at the end of April [12] - The growth in Shield and FIA was offset by lower fixed deferred annuity sales due to a transition to a new reinsurer [10] Company Strategy and Development Direction - The company is focused on improving capital efficiency and restoring the RBC ratio to the target range within the next 6 to 12 months through specific initiatives, including reinsurance opportunities [7][13] - The company has successfully derisked since separating from MetLife, with spread-based business growing by over 225% on an account value basis since year-end 2017 [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with statutory results but remains confident in the capital and liquidity position, supporting continued capital return to shareholders [6][7] - The company anticipates that the combination of initiatives and expected results in the second half of the year will help restore the RBC ratio to the target range by year-end [28][29] Other Important Information - Corporate expenses were $200 million in the second quarter, with year-to-date corporate expenses through June 30 at $407 million, approximately 6% lower compared to the same period in 2023 [8] - The company repurchased $151 million of common stock year-to-date through August 2, with $64 million repurchased in the second quarter [12] Q&A Session Summary Question: Can you talk about basis risk and its impact? - Management indicated that basis risk is volatile from quarter to quarter but does not expect it to be a long-term positive or negative factor [20][21] Question: How long will it take to execute reinsurance contracts? - The expectation is that initiatives will help restore the RBC ratio to the target range by year-end [28] Question: What is the expected pro forma free cash flow generation level after reinsurance arrangements? - Updated long-term statutory free cash flows will be provided in the first half of next year, with historical averages just under $400 million of norm stat earnings a year [31] Question: What changes are needed for hedging performance? - Management is pursuing multiple avenues to simplify the hedging process and manage risk effectively [33][34] Question: Why not downstream capital to shore up the RBC position? - The capital return plan is not dependent on cash from the operating company, and management is comfortable with the current capital position [38][40] Question: What is the trajectory for BlackRock flows? - Management does not expect much activity in the third quarter but anticipates more in the fourth quarter as new companies are brought on [52]