Brighthouse Financial, Inc. (BHF)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 produced solid statutory and sales outcomes but an EPS miss versus consensus; Primary EPS of $4.17 fell short of S&P Global consensus $4.55, while revenue of $2.390B was above the $2.300B consensus. Management cited elevated corporate expenses (non-trendable) and weaker alternative investment income as key drivers of EPS shortfall . EPS/Revenue estimates from S&P Global.*
• Capital position strengthened: combined RBC ratio improved to 420%–440% (within the 400%–450% target) and holding company liquid assets were $1.0B; normalized statutory earnings were ~$300M, aided by a prescribed 20-year Treasury mean reversion point increase (25 bps) worth ~15 RBC points and ~$200M to normalized earnings .
• Sales mix was favorable: annuity sales totaled $2.259B, led by Shield Level Annuities of $1.957B (+3% YoY Q1-to-Q1, +5% QoQ Q4-to-Q1); Life sales were $36M (+24% QoQ Q4-to-Q1, +9% sequential) .
• The company advanced hedging strategy simplification: full stand-alone hedging for Shield new business completed in 2024; a revised approach for in-force VA and first-generation Shield is targeted for completion before year-end 2025, with protection maintained (up to $500M first-loss tolerance) .
• Capital actions continued: common stock repurchases of $59M in Q1 and $26M through May 6; quarterly preferred dividend distributions declared for Series A–D depositary shares, payable June 25, 2025 .

What Went Well and What Went Wrong

• What Went Well

  • RBC ratio improved into target range (420%–440%) with ~$1.0B holdco liquid assets; normalized statutory earnings $300M aided by mean reversion benefit ($200M) .
  • Shield Level Annuity momentum: $1.957B sales in Q1; CEO: “we produced solid results… growing sales of our flagship Shield Level Annuities” .
  • LifePath Paycheck (BlackRock) traction: “LPP is now live in 6 employer retirement plans, totaling $16B in AUM… we expect to see additional flows in 2025” .

• What Went Wrong

  • EPS miss vs consensus: Primary EPS $4.17 below $4.55; alternative investment income yield was just 1.4%, materially below long-term 9%–11% expectation . EPS estimates from S&P Global.*
  • Corporate expenses were elevated at $239M pretax (non-trendable, expected to normalize), weighing on quarterly earnings .
  • Fixed annuity sales softness amid a highly rate-dependent, competitive market; management aims to build momentum over the remainder of the year .

Financial Results

Segment adjusted earnings ($USD Millions):

KPIs and capital:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “We ended the quarter with… RBC ratio between 420% and 440%… Overall, we produced solid results… growing sales of our flagship Shield Level Annuities Product Suite” .
• CFO: “Adjusted earnings… were $235M, including a $10M unfavorable notable item… excluding the notable item… approximately $15M or $0.26 per share below our quarterly run rate… Alternative investment income was $39M… yield 1.4%” .
• CFO on capital: “Normalized statutory earnings… approximately $300M… mean reversion point increased from 3.75% to 4%… around $200M… ~15 percentage points of RBC” .
• CFO on hedging: “An underlying goal here is simplification… not a wholesale change… very protected… impact between down 30 to down 50 is underneath that $500M max loss” .
• CEO on buybacks: “We repurchased $59M [Q1]… and another $26M through May 6” .

Q&A Highlights

• Capital drivers: Mean reversion benefit quantified at ~$200M normalized earnings and ~15 RBC points; seasonality of fixed business capital charges (C4) noted .
• Hedging evolution: Clarified stand-alone option approach for Shield and simplification plan for legacy VA/Shield; “not going back to the drawing board” and protection maintained .
• Sales outlook: Fixed annuity competitiveness and rate dependence; reinsurance partner dynamics; aim to build momentum across 2025 .
• Flows/surrender trends: Expect 2025 flows at or above 2024 due to Shield/VA full surrenders and fixed annuity maturities weighted to H2 2025 .
• Holding company cash/dividends: Plan anticipates dividends from operating companies over a 3-year horizon; buybacks continue opportunistically .

Estimates Context

Values retrieved from S&P Global.*

Where estimates may need to adjust:

• EPS: Lower alternative investment income and elevated corporate expenses suggest near-term consensus may drift lower unless ALT returns revert toward long-term 9%–11% and expenses normalize as guided .
• Revenue: Resilient fee/investment spread plus Shield momentum support revenue estimates; but surrender dynamics and fixed annuity competitiveness warrant caution on gross flows .

Key Takeaways for Investors

• Capital inflection: RBC ratio back within target (420%–440%) and normalized statutory earnings ~$300M provide near-term confidence in solvency and capacity for cash upstreaming over the multi-year plan .
• EPS headwind drivers: Alternative investment yield (1.4%) and temporary corporate expense elevation drove the EPS miss; watch for reversion and cost normalization in Q2–Q4 as catalysts .
• Product mix: Shield sales strength continues; fixed annuity sales remain rate-sensitive—pricing discipline implies balanced growth with margin protection .
• Hedging catalyst: Execution of the simplified hedging strategy for the legacy VA/Shield block by YE 2025 could reduce complexity and volatility while preserving statutory protection—positive for valuation and narrative .
• Flow/surrenders: Expect outflows at or above 2024 levels, weighted to H2; manage expectations on net flows and potential fee impacts in 2H 2025 .
• Capital returns: Continued buybacks and preferred dividends; track pace of repurchases versus capital generation and market volatility .
• Near-term trading: Statutory and RBC positives vs EPS miss likely create mixed sentiment; watch alternative investment marks, expense trajectory, and Shield sales cadence for beats/misses in subsequent quarters .