BHFAM — Brighthouse Financial, Inc.

Summary of Brighthouse Financial's Q2 2025 Earnings Call

1. Key Financial Results and Metrics

• Adjusted Earnings: $198 million ($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 accounted for $1.9 billion.
• Life Insurance Sales: $33 million in Q2, contributing to year-to-date sales of $69 million, up 21% from 2024.
• Combined Risk-Based Capital (RBC) Ratio: Estimated at 405% to 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.
• Corporate Expenses: $202 million, down from $239 million in Q1 2025.

2. Strategic Updates and Business Highlights

• Continued execution of capital-focused strategic initiatives aimed at improving capital efficiency and unlocking capital.
• Successful sales growth in both annuities and life insurance, with significant contributions from the BlackRock LifePath Paycheck product, which generated $176 million in deposits.
• Ongoing work to simplify and revise the hedging strategy for variable annuities and Shield products.
• Shareholder returns included $43 million in common stock repurchases in Q2, totaling $102 million year-to-date.

3. Forward Guidance and Outlook

• The company remains committed to maintaining a strong capital position and liquidity, with over $900 million in liquid assets at the holding company.
• Anticipated completion of the revised hedging strategy by the end of September 2025, which is expected to improve capital management and reduce volatility.
• No significant changes to the appetite for new business or sales strategies despite recent challenges.

4. Bad News, Challenges, or Points of Concern

• Adjusted earnings fell short of quarterly average run rate expectations by approximately $60 million, primarily due to lower alternative investment income and a lower underwriting margin.
• Claims severity increased by 18% compared to normal levels, impacting both the Life and Run-off segments.
• The company faces competitive pressures in the annuity market, particularly with Shield product sales showing signs of slowing growth after a record year.
• The negative unassigned surplus of approximately $2 billion raises concerns regarding capital flexibility and regulatory discussions for future dividends.

5. Notable Q&A Insights

• Management confirmed that the actuarial review is ongoing, with no updates on potential charges expected.
• The separation of hedging strategies for VA and Shield products is anticipated to provide better transparency and management of risks.
• The company is open to exploring reinsurance opportunities to enhance capital generation without harming franchise value.
• Management expressed confidence in the company’s ability to operate independently and continue innovating in product development and technology.
• The Board remains committed to paying preferred dividends, despite market volatility affecting preferred equity costs.

Overall, Brighthouse Financial reported solid sales growth and maintained a strong capital position, but faced challenges with earnings and claims severity, alongside competitive pressures in the annuity market. The strategic focus remains on capital efficiency and risk management as the company navigates these challenges.