Brighthouse Financial, Inc. (BHF)·Q3 2025 Earnings Summary

Executive Summary

• Announced definitive agreement to be acquired by Aquarian Capital for $70.00 per share in cash (~$4.1B), canceling the Q3 call; merger agreement restricts common dividends until closing while permitting preferred dividends .
• Q3 results: Total revenues $1.816B; net income to common $453M ($7.89 diluted EPS); adjusted EPS $16.87, with adjusted EPS less notable items $4.54 driven by $709M favorable notable items from the GAAP actuarial review .
• Capital strengthened: combined RBC ratio rose to 435–455% (upper end of 400–450% target), TAC ~$5.4B, holding company liquid assets $1.0B; company expects to remain within RBC target at year-end 2025 without capital contributions .
• Wall Street consensus: Missed S&P Global Primary EPS ($5.03* vs actual $4.54) and revenue ($2.273B* vs actual $1.816B); merger announcement likely the primary stock reaction catalyst, while AM Best placed ratings under review with negative implications post-deal .
  Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

• Record Shield Level Annuities sales; total annuity sales $2.731B (+8% YoY, +5% QoQ); life sales $38M (strong growth YoY/QoQ). CEO: “another record quarter for sales of our flagship Shield annuity products” .
• Capital position strengthened: estimated combined RBC ratio 435–455%, at the upper end of the target range; holding company liquid assets $1.0B .
• GAAP actuarial review delivered favorable impact: net income benefited by $316M; adjusted earnings boosted by $709M favorable notable items tied to actuarial items/insurance adjustments .

What Went Wrong

• Core earnings momentum modest: adjusted earnings less notable items $261M ($4.54 per share), only slightly above Q2’s $198M, reflecting lower fees and lower underwriting margin offset by higher net investment income .
• Miss versus Street: Primary EPS and revenue missed S&P Global consensus; Q3 revenue reported at $1.816B versus consensus $2.273B*; Primary EPS 4.54 versus 5.03* .
  Values retrieved from S&P Global.
• Elevated corporate expenses: $205M pre-tax, up YoY and sequentially, and continued pressures from underwriting margin dynamics across segments .

Financial Results

Segment adjusted earnings ($USD Millions):

Sales ($USD Millions):

Key capital & liquidity KPIs:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “Brighthouse Financial delivered solid results… achieving another record quarter for sales of our flagship Shield annuity products… completed the separation of our legacy VA and first-generation Shield business, and ended the quarter with an estimated combined RBC ratio of 435% to 455%, at the upper end of our target range” .
• CEO on transaction: “We believe the transaction with Aquarian Capital… will deliver clear and compelling value to our stockholders” .
• CFO (prior quarter context on hedging): Separation is aimed at simplification and reduced volatility without changing focus on statutory protection; rate and equity hedge profiles adjusted along the curve and delta positioning, respectively .

Q&A Highlights

• Hedging separation and impact: Management emphasized simplification, transparency, and expected reduction in volatility; not a wholesale change; completion by Q3 with liability model updates .
• Buybacks cadence and authorization: Historical use of 10b5‑1 plans; plan expired in May; $441M remaining authorization; cautious on forward guidance amid transaction backdrop .
• RBC dynamics and TAC: Detailed explanation of divergence/convergence under strong markets and VA total asset requirement framework; Q2 normalized statutory losses did not materially impair RBC due to reserve/TAC interaction .
• Cash flow projections: Long-term distributable cash flow outlook deferred until strategic/hedging initiatives complete; unlikely in 2025 .

Estimates Context

Values retrieved from S&P Global.

Implications: Consensus likely needs to incorporate the sizable non-GAAP notable items, actuarial assumption changes (10-year UST mean reversion to 4.50%), and the VA/Shield separation effects on reported GAAP versus adjusted figures .

Key Takeaways for Investors

• M&A overhang: The $70.00 cash deal sets a near-term anchor for the equity narrative; regulatory and execution risks identified by AM Best (ratings under review) should be monitored .
• Core run-rate: Adjusted earnings less notable items ($261M; $4.54 per share) improved modestly QoQ, with mix shifts (Run-off/Life stronger, Annuities softer) and higher net investment income; traders should focus on underlying fee and underwriting margin trajectories post-hedging separation .
• Capital strength: RBC at 435–455% and $1.0B holdco liquidity support resilience; management expects YE 2025 within target without capital contributions—reduces downside capital risk into closing .
• Non-GAAP adjustments: The $709M favorable notable items materially inflated adjusted EPS; use adjusted less notable items for comparability and valuation signals .
• Sales durability: Record Shield sales and solid life sales point to durable franchise demand; maintain awareness of surrender/flow dynamics into H2 due to products exiting surrender charge periods .
• Communication cadence: No Q3 call; expect limited updates pending proxy and regulatory milestones; common dividends restricted pre-close, preferred dividends continue as specified .
• Risk watchlist: Track actuarial/statutory reserve increases, execution of VA/Shield hedge separation in reported results, and any reinsurance or capital actions that could shape post-deal performance .