Sign in

You're signed outSign in or to get full access.

BF

Brighthouse Financial, Inc. (BHF)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 showed strong reported profitability: net income of $646 million ($10.79 diluted EPS) as GAAP MRB and derivative mark-to-market swung favorably; adjusted earnings were $304 million ($5.07) and $352 million ($5.88) excluding a $48 million unfavorable actuarial notable item .
  • Capital actions stabilized statutory capital: combined RBC ratio was ~400% at year-end after a $100 million capital contribution to BLIC; holding company liquid assets remained robust at $1.1 billion ($1.0 billion pro forma) .
  • Segment mix was resilient: Annuities adjusted earnings of $279 million (ex-notables higher sequentially on net investment income), Life improved to $52 million, while Run-off posted a $(27) million adjusted loss; corporate expenses fell 14% YoY to $210 million .
  • Annuity sales softened (seasonal and product mix): $2.24 billion, down 11% sequentially and 5% YoY, while Life sales rose to $33 million; Shield RILA sales drove full-year records ($7.7B Shield; $10.0B total annuities; $120M life) .
  • 2025 narrative catalysts: simplification of hedging (standalone for new Shield), reinsurance unlocking capital (UL/VUL deal added ~10–15 RBC points), and CFO outlook for relatively stable RBC without additional HoldCo support; rate steepening and legacy fixed annuity AAT sensitivity remain watch points .

What Went Well and What Went Wrong

  • What Went Well

    • “Fully transitioning to hedging all new business for our Shield Level Annuities Product Suite on a standalone basis” and completing life reinsurance; RBC ~400% with $100 million BLIC contribution .
    • Record 2024 sales: Shield RILA $7.7B, total annuities $10.0B, life $120M; “expense discipline” with corporate expenses down 7% YoY .
    • Robust liquidity and capital returns: $1.1B HoldCo liquid assets at year-end and $250M 2024 buybacks ($60M in Q4) plus $25M repurchases through Feb 7, 2025 .

  • What Went Wrong

    • Statutory TAC fell ~$300M in Q4 due to rates up ~80 bps and a significantly steeper curve; near-term hedge losses outweighed liability offsets under the statutory framework .
    • Asset adequacy testing reserves rose by ~$200M tied to legacy fixed annuities with higher lapse sensitivity in high-rate scenarios, pressuring TAC .
    • Annuity sales declined q/q and y/y, primarily from lower fixed deferred annuities despite record Shield sales; Run-off posted an adjusted loss of $(27)M .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Total Revenues ($USD Millions)$1,400 $1,427 $2,018 $1,205
Net Income Available to Shareholders ($USD Millions)$(942) $9 $150 $646
Diluted EPS ($)$(14.70) $0.12 $2.47 $10.79
Adjusted Earnings ($USD Millions)$177 $346 $767 $304
Adjusted EPS ($)$2.73 $5.57 $12.58 $5.07
Adjusted Earnings, less Notable Items ($USD Millions)$189 $346 $243 $352
Adjusted EPS, less Notable Items ($)$2.92 $5.57 $3.99 $5.88
Corporate Expenses (pre-tax, $USD Millions)$244 $200 $203 $210
Segment Adjusted Earnings ($USD Millions)Q4 2023Q2 2024Q3 2024Q4 2024
Annuities$245 $332 $327 $279
Life$4 $42 $(25) $52
Run-off$(50) $(30) $463 $(27)
Corporate & Other$(22) $2 $2 $—
KPIs and CapitalQ4 2023Q2 2024Q3 2024Q4 2024
Annuity Sales ($USD Millions)$2,740 $2,408 $2,528 $2,239
Life Sales ($USD Millions)$29 $28 $30 $33
Net Investment Income ($USD Millions)$1,207 $1,307 $1,288 $1,373
Adjusted Net Investment Income ($USD Millions)$1,226 $1,316 $1,294 $1,376
Adjusted NII Yield (%)4.16% 4.39% 4.26% 4.51%
Combined RBC Ratio (%)428% 380–400% 365–385% ~400%
HoldCo Liquid Assets ($USD Billions)N/A$1.2 $1.3 $1.1 ($1.0 pro forma)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Combined RBC Ratio outlookMulti-yearTarget range 400–450% in normal markets (reiterated historically) “Relatively stable over the next few years without additional support from the holding company” Maintained, with stability emphasis
Subsidiary dividends to HoldCoPost-2024Not specifiedFinancial plan contemplates taking money from operating companies after this year New clarity (dividends expected)
Long-term statutory free cash flow disclosuresTimingTargeted midyear (prior) Timing likely to slip pending back-book hedging completion Deferred
Capital efficiency actions (reinsurance, hedging)OngoingIn-progressUL/VUL reinsurance completed in Q4; RBC benefit estimated ~10–15 points Strengthened capital; raised RBC
Shield new business hedgingOngoingTransition initiated in mid-2024 Fully standalone for all Shield new business by year-end Implemented

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Hedging simplification (Shield standalone; back-book strategy)Q2: Shield standalone hedging begun; Q3: expanded to Shield Level Pay+, in-force block treated as closed Fully transitioned to standalone hedging for Shield new business; working on legacy VA/Shield hedging in 2025 Clear execution progress; legacy hedging work ongoing
Reinsurance to unlock capitalQ2: In-force annuity reinsurance expected; Q3: approvals received; ~$8B annuity deal confirmed UL/VUL reinsurance executed in Q4; ~10–15 RBC point benefit Positive capital impact; more deals considered
RBC trajectory and stabilityQ2: 380–400%; Q3: 365–385%; pro forma to low end of range ~400% at year-end with $100M BLIC contribution; CFO sees multi-year stability Stabilizing with actions; outlook steadier
Rates and curve impact on TACQ2/Q3: curve moves noted, alt returns variability Q4: 10Y up ~80 bps; significant steepening hurt hedges, reduced TAC by ~$300M Ongoing macro sensitivity; timing effect highlighted
Sales mix and product performanceQ2: Record Shield sales; fixed deferred down; initial BlackRock LPP deposits Q4: Shield record year; total annuity sales down q/q; LPP live in 6 DC plans ($16B AUM) Shield strength; fixed deferred softness; institutional channel ramping
Expense disciplineQ2/Q3: corporate expenses trending down Full-year corporate expenses down 7% YoY Sustained efficiency focus

Management Commentary

  • CEO: “We completed a reinsurance transaction… and fully transitioned to hedging all new business for our Shield Level Annuities… Our estimated combined RBC ratio… was approximately 400%… and we continue to have a robust level of holding company liquid assets.”
  • CEO: “Record sales of our Shield Level Annuities Product Suite of $7.7 billion… and $120 million of life insurance sales for the full year.”
  • CFO: “Our financial plan currently anticipates that our combined RBC ratio will be relatively stable over the next few years without additional support from the holding company.”
  • CFO on Q4 drivers: “Interest rates were up approximately 80 bps… significant steepening… resulted in a negative impact on… statutory results… contributed to the $300 million decline in TAC… [and] a net $200 million increase in asset adequacy testing reserves.”

Q&A Highlights

  • RBC dynamics: Strategic initiatives (reinsurance; Shield standalone hedging) added >$400M to positives, offset by rate/curve moves and $200M AAT, yielding ~400% RBC after $100M BLIC capital; UL/VUL reinsurance added ~10–15 RBC points .
  • Legacy hedging and FCF timing: Back-book (legacy VA/Shield) hedging strategy in development; long-term statutory free cash flow disclosure timing likely slips until strategy finalized .
  • Capital return and dividends: Plan contemplates subsidiary dividends to HoldCo after 2024; buybacks continued ($2.5B cumulative since 2018), with $25M repurchases early 2025 .
  • Product outlook: Competitive RILA market; Shield enhancements (income riders; new crediting strategies) and continued sales momentum; FIA sales balanced with pricing and capital .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 EPS and revenue were unavailable at time of analysis due to a Capital IQ daily request limit. As a result, we cannot provide a beat/miss assessment versus Street for EPS/revenue this quarter.
  • Benchmark for performance: Adjusted EPS less notable items was $5.88 and adjusted earnings less notable items were $352 million; GAAP diluted EPS was $10.79 driven by MRB/derivative volatility .

Key Takeaways for Investors

  • Capital stability improved: Actions (life reinsurance, Shield standalone hedging, $100M capital to BLIC) anchored RBC ~400% with CFO signaling multi-year stability—supports valuation and capital return capacity .
  • Earnings quality: Adjusted results ex-notables strengthened sequentially ($352M; $5.88), while GAAP remains volatile given MRB/derivative accounting—focus on adjusted trends and net investment income trajectory .
  • Rate/curve sensitivity: Steepening yield curve can pressure near-term TAC via hedge marks; management expects benefits to accrue over time (mean reversion point increases)—watch rate path and curve shape .
  • Legacy block execution risk: Timing of back-book hedging and long-term statutory FCF disclosures likely slips until strategy finalized—monitor 2025 updates .
  • Growth engines intact: Shield RILA leadership, enhancements (income riders), and institutional LPP footprint (6 plans; $16B AUM) underpin medium-term sales, though fixed deferred annuities remain tactically constrained by capital/pricing .
  • Expense discipline a tailwind: 7% YoY corporate expense reduction enhances adjusted profitability and ROCE ex-AOCI; priority remains sustaining low expense ratio .
  • External ratings watch: AM Best revised issuer credit outlook to negative (FSR A affirmed), citing VA/RILA earnings drag and hedging complexity—continued delivery on capital initiatives should mitigate pressure over time .

Additional Context

  • Preferred stock dividends declared for all four series with March 25, 2025 payment (Series A/B/C/D depositary shares) .
  • Q3 confirmation: Approvals for the third-quarter annuity reinsurance transaction were received during the Q3 call; approximate deal size ~$8B .