Brighthouse Financial, Inc. (BHF)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 adjusted EPS was $3.43 vs $4.17 in Q1 2025 and $5.57 in Q2 2024; against S&P Global consensus of $4.39, this was a miss driven by lower alternative investment income and weaker underwriting margins; GAAP EPS was $1.02 versus $0.12 YoY and $(5.04) QoQ . S&P Global consensus EPS values marked with an asterisk; see Estimates Context.
• Capital position remained solid: estimated combined RBC ratio within the 400%–450% target at 405%–425% and holding company liquid assets at ~$0.9B; TAC was ~$5.6B .
• Sales execution was strong: annuity sales $2.61B (Shield Level Annuities $1.925B) and life sales $33M; corporate expenses declined sequentially to $202M .
• Management is completing a major hedging transition to separately manage VA and Shield blocks by September, aiming for simplification and reduced volatility over time; near-term quarterly variability (alt investments, mortality severity +18%) was the main earnings headwind and a stock narrative driver .

What Went Well and What Went Wrong

What Went Well

• Capital and liquidity within targets: combined RBC ratio 405%–425% and holdco liquid assets ~$0.9B; CEO emphasized confidence in capital and expense discipline .
  “I am pleased that we ended the quarter with an estimated combined RBC ratio that was within our target range… Additionally, we maintained a robust level of holding company liquid assets…” — CEO Eric Steigerwalt .
• Strong distribution and sales: annuity sales $2.61B (Shield $1.925B) and life sales $33M; management highlighted continued momentum and records earlier in the year .
• Expense control: corporate expenses fell to $202M from $239M in Q1; management reiterated commitment to disciplined expense management .

What Went Wrong

• Earnings below expectations: adjusted EPS $3.43 vs S&P Global consensus $4.39*, with a ~$32M shortfall in alternative investment income (alt yield 1.5%) and lower underwriting margin; mortality severity was ~18% above normal .
• Life and Run-off losses: Life adjusted loss $(26)M and Run-off adjusted loss $(83)M vs profits in the prior-year life segment; both reflected lower underwriting margin and/or net investment income .
• Sequential RBC drift lower (still in range) due to seasonal fixed business capital charges (C4) and adverse non-VA results including mortality; highlights sensitivity to quarterly drivers even as the target range is maintained .

Financial Results

Headline P&L vs Prior Periods and S&P Global Estimates

Estimate comparison (S&P Global; estimates marked with asterisk; see disclaimer):

• Q2 2025 Adjusted/Primary EPS: Actual $3.43 vs Consensus $4.39* → miss [functions.GetEstimates].
• Q2 2025 GAAP Revenues: Actual $0.871B vs Consensus $2.202B* → miss; note revenue volatility from MRB/derivatives; adjusted revenues were $2.154B .
  Values retrieved from S&P Global.*

Segment Adjusted Earnings ($M)

Drivers (Q2): Annuities benefited from lower expenses partially offset by lower fees; Life and Run-off reflected lower underwriting margin and lower/higher NII dynamics; Corp & Other roughly flat sequentially .

KPIs and Balance Sheet/Capital

Notes: Q2 annuity sales up 16% sequentially and 8% YoY; life sales up 18% QoQ and up 21% in 1H25 vs 1H24; RBC range remained within 400%–450% target in normal markets .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We delivered strong sales results… prudently managed our expenses and maintained a strong capital and liquidity position.” — CEO Eric Steigerwalt .
• “Adjusted earnings… were approximately $60 million below our quarterly average run rate expectations, driven by lower alternative investment income and a lower underwriting margin.” — CFO Edward Spehar .
• “We… plan to complete the transition to our revised strategy, managing the VA and Shield businesses separately by… September… [leading to] simplification, more transparency, and… less volatility in our results over time.” — CFO .
• “We… returned capital to shareholders through $43 million of common stock repurchases… year-to-date… $102 million… [but] no additional share repurchases since [May]. We have $441 million of capacity remaining…” — CEO/CFO .

Q&A Highlights

• Assumption reviews: GAAP review in Q3; statutory review (annuities) in Q4; no early read .
• Hedging separation mechanics/impact: Transition staged during Q3 with modeling/valuation by quarter-end; expected to simplify and reduce volatility over time; equity delta not changing much; rate hedge tweaks along the curve; not a “blank sheet” reset .
• Capital and RBC: Sequential RBC decline mainly from C4 charge seasonality and adverse non-VA mortality; VA normalized statutory loss had muted RBC impact due to reserve/TAR divergence in strong markets .
• Mortality: Claim severity ~18% above normal, affecting Life/Run-off (~two-thirds/one-third split) .
• Buybacks/capital returns: Repurchases paused post-May with capacity intact; management reiterated preference not to guide repurchases ahead .
• BRCD (Delaware reinsurance co.): Not a source of excess capital; capitalization assessed via cash-flow testing margins; disclosures available in 10-K .
• M&A/rumors: No comment; management confident in standalone path and ongoing strategic initiatives .

Estimates Context

• EPS: Q2 2025 actual $3.43 vs S&P Global consensus $4.39* → miss; drivers were alt investment underperformance (~$32M; 1.5% yield) and lower underwriting margin [functions.GetEstimates].
• Revenue: Q2 2025 GAAP revenue $0.871B vs S&P Global consensus $2.202B* → miss; management emphasizes volatility in GAAP revenue due to MRB/derivatives; adjusted revenues were $2.154B, closer to consensus construct [functions.GetEstimates].
  Values retrieved from S&P Global.*

Implication: Street likely adjusts near-term EPS for lower alt returns and mortality, while monitoring the hedging separation for medium-term volatility dampening.

Key Takeaways for Investors

• Solid capital with RBC inside the 400%–450% target and TAC up; liquidity robust at the holdco — supports distribution and reduces downside risk; quarterly RBC can drift with C4 seasonality and mortality, but range is intact .
• Near-term earnings pressure reflected in an EPS miss, largely from transitory alt investment underperformance (1.5% yield) and elevated claim severity; watch for reversion toward long-term alt return targets (9%–11%) .
• Strategic hedging separation (VA vs Shield) completes by September, aiming to simplify risk management and reduce result volatility; a medium-term narrative catalyst as execution is demonstrated .
• Distribution engine remains strong: $2.61B annuity sales (Shield $1.925B) and $33M life sales show franchise health and pricing discipline; LPP deposits ($176M) broaden channel reach .
• Watch run-rate drivers: underwriting margin trajectory (mortality normalization), fee income tied to separate account balances, and expense discipline (corporate expense down QoQ) .
• Capital return: buybacks paused post-May with $441M capacity remaining; future cadence likely contingent on statutory dividend capacity and capital plan progress .
• Trading setup: near-term estimate resets likely on alt/mortality; medium-term re-rating case requires evidence of lower volatility post-hedging transition and continued capital strength within target range .

Appendix Tables

Sales and Capital Detail

Share Count & Book Value

Additional Disclosures

• Preferred dividends and related distributions were declared for Series A–D depositary shares on 9/25/25, consistent with management’s commitment to the preferred dividend; while post-quarter, it underpins capital policy communication .

S&P Global estimates disclaimer: Values marked with an asterisk (*) are retrieved from S&P Global via the GetEstimates tool.