BHF — Brighthouse Financial, Inc.

Summary of Brighthouse Financial Q2 2025 Earnings Call

1. Key Financial Results and Metrics

• Adjusted Earnings: $198 million, or $3.43 per share, down from $245 million in Q1 2025 and $346 million in Q2 2024.
• Total Annuity Sales: $2.6 billion, a 16% sequential increase and an 8% year-over-year increase. Shield sales contributed $1.9 billion.
• Life Insurance Sales: $33 million for the quarter, leading to record year-to-date sales of $69 million, up 21% year-over-year.
• Combined Risk-Based Capital (RBC) Ratio: Estimated between 405% and 425%, within the target range of 400% to 450%.
• Total Adjusted Capital (TAC): Approximately $5.6 billion, up from $5.5 billion in Q1 2025, driven by a decline in reserves.
• Corporate Expenses: $202 million, down from $239 million in Q1 2025 but slightly up from $200 million in Q2 2024.
• Share Repurchases: $43 million in Q2, totaling $102 million year-to-date, with $441 million remaining under the repurchase program.

2. Strategic Updates and Business Highlights

• Continued execution of capital-focused strategic initiatives aimed at improving capital efficiency and managing risk.
• Strong performance in annuity and life insurance sales, with a focus on the BlackRock LifePath Paycheck product, which generated $176 million in deposits.
• Ongoing revisions to the hedging strategy for variable annuity and Shield business to enhance capital management.
• The company remains committed to expense discipline and maintaining a strong liquidity position with over $900 million in liquid assets.

3. Forward Guidance and Outlook

• The company expects to complete the transition to a revised hedging strategy by the end of September 2025, which is anticipated to simplify management and reduce volatility.
• There is no change in the appetite for new business, with strong sales trends continuing into Q3 2025.
• The management team is optimistic about the company's ability to generate positive capital in the future while maintaining franchise value.

4. Bad News, Challenges, or Points of Concern

• Adjusted earnings fell significantly below expectations due to lower alternative investment income and a reduced underwriting margin, attributed to higher claims severity.
• The RBC ratio decreased during the quarter, primarily due to seasonality and adverse results in non-variable annuity business, raising concerns about capital adequacy.
• Shield sales, while still strong, showed signs of slowing growth, which could indicate increased competition in the market.
• The company faces challenges related to managing legacy liabilities and the complexity of its variable annuity block, which could impact future performance.

5. Notable Q&A Insights

• Management confirmed that the actuarial review will continue as planned, with no immediate concerns about statutory charges despite recent losses.
• There was a discussion about the potential for future dividends from the Delaware Reinsurance Company, emphasizing the need for regulatory conversations given the current capital situation.
• The transition to a separate hedging strategy is expected to improve transparency and management effectiveness, although the immediate impact on capital ratios is not anticipated to be significant.
• Management acknowledged competitive pressures in the annuity market but emphasized their commitment to pricing discipline and maintaining a strong product offering.

Overall, Brighthouse Financial's Q2 2025 results reflect a mix of strong sales performance and strategic initiatives, tempered by challenges in earnings and capital management. The outlook remains cautiously optimistic, with a focus on enhancing operational efficiency and navigating competitive pressures.