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    Brighthouse Financial Inc (BHF)

    BHF Q2 2024: Seeks to hit 400–450% RBC by year-end with reinsurance

    Reported on May 13, 2025 (After Market Close)
    Pre-Earnings Price$42.16Last close (Aug 8, 2024)
    Post-Earnings Price$42.42Open (Aug 9, 2024)
    Price Change
    $0.26(+0.62%)

    What went well

    • Capital Efficiency Initiatives: Management expects that a series of reinsurance and capital management initiatives will help restore its RBC ratio into the target range of 400–450% by year-end. This indicates a proactive approach to improve capital efficiency and unlock capital benefits.
    • Growth in Innovative Product Inflows: The executives noted that while BlackRock LifePath Paycheck flows may be slower in Q3, they anticipate stronger inflows in Q4, highlighting the potential for increased deposit growth from this new product.
    • Consistent Share Repurchase Activity: Despite market uncertainties, management reiterated its commitment to an opportunistic and sustained share buyback program, underlining a focus on delivering shareholder value.

    Q&A Summary

    1. Reinsurance Timeline
      Q: How long for reinsurance execution?
      A: Management expects reinsurance initiatives to restore the target RBC range within 6–12 months, with several measures potentially coming online sooner.

    2. Free Cash Flow Outlook
      Q: What’s the free cash flow post-initiatives?
      A: They noted that historically, free cash flow averages just under $400 million annually, though volatility remains and updated guidance is pending.

    3. Capital Shoring
      Q: Why not deploy capital and adjust buybacks?
      A: They maintain a robust liquidity position of $1.2 billion and see no need to change the current buyback pace given strong cash buffers.

    4. Hedging Strategy
      Q: Are hedging methods for Shield and VA changing?
      A: Management is implementing new hedging initiatives to reduce volatility—for example, mitigating a $250 million impact—while continuing to refine risk management.

    5. RBC Volatility
      Q: Was the RBC decline unexpected and risk further drops?
      A: About 70% of the statutory loss was unanticipated, and while market volatility persists, management is making tactical adjustments to shore up capital.

    6. Basis Risk Outlook
      Q: Will basis risk continue to drag results?
      A: They see basis risk as a volatile, quarter‐to‐quarter issue with no clear long‐term trend in either direction.

    7. Capital Consumption
      Q: How are new Shield sales affecting capital use?
      A: The shift from Shield as a capital generator to a capital consumer is increasing capital usage, prompting targeted efficiency initiatives.

    8. Internal Reinsurance
      Q: Is internal reinsurance part of the plan?
      A: They already benefit from their captive reinsurance structure and are leveraging external market options to enhance capital efficiency.

    9. Liquidity Position
      Q: What is the holding company’s liquidity target?
      A: The company is comfortable with its $1.2 billion cash cushion, adjusting liquidity targets based on situational factors.

    10. Floating Rate Exposure
      Q: How sensitive are floaters if rates drop?
      A: Their floating rate assets are well-matched to short-term liabilities, so any net margin impact from declining rates should be minimal.

    11. External Partnerships
      Q: Are there external partners for LPP capital ease?
      A: While no specific external asset management partnerships for LifePath Paycheck are planned, management remains open to future opportunities.

    12. BlackRock Flows
      Q: What is the outlook for BlackRock deposits?
      A: Deposits via BlackRock’s LifePath Paycheck are expected to be lumpy—with very little in Q3 and increased activity in Q4.

    13. Corporate Expenses
      Q: Will higher later expenses be seasonality-driven?
      A: The anticipated uptick in expenses in the latter half is primarily due to seasonality, with disciplined cost control still in place.

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