Brighthouse Financial execs evade sale rumors in testy Q2 call
Brighthouse Financial is surely going to be sold. Whether it happens sooner or later remains a mystery after executives revealed little during a Friday morning conference call with Wall Street analysts.
According to the Wall Street Journal, the sale is likely sooner, and to the investment firm Aquarian Holdings. Brighthouse is highly sought for its annuity sales expertise, with several private equity firms and annuity-selling competitors lining up offers in recent months.
Analysts made several attempts to get comments on the swirling sales rumors, to no avail in a sometimes-testy call.
“With respect to any market rumors, I don’t have any comments on that,” CEO Eric Steigerwalt said at one point.
According to WSJ reporting, the sale to Aquarian could be wrapped up in the coming weeks. The firm separated itself from TPG, another global asset manager, which preferred a structured deal involving only certain parts of Brighthouse.
If the sale goes through, the firm will be getting a strong annuity seller with quarterly sales between $2.2 billion and $2.6 billion. Sales dipped somewhat this year, which Steigerwalt said is due in part to Brighthouse’s size and stature as a market leader.
“We are going to display pricing discipline,” Steigerwalt said. “We have for eight years, and we’re going to continue to do that. I think it’s a great product still for manufacturers and certainly for clients. So, despite the fact that it’s a little tougher to grow, I’m still pretty pleased with the second quarter.”
Brighthouse split off from MetLife in a 2017 separation completed on Aug. 4 of that year. The insurer settled in at 15th in LIMRA’s annual list of annuity sellers with $10 billion of sales, along with a small amount of life insurance.
In recent quarters, Brighthouse struggled to get its risk-based capital ratio to its 400% minimum target. The insurer’s RBC ratio declined in the second quarter, said Chief Financial Officer Ed Spehar, but remained within target range.
“The combined RBC ratio decreased during the period, primarily as a result of seasonality and capital charges for fixed business and adverse non-[variable annuity] results, partially driven by mortality,” he explained.
RBC requirements provide for a ratio to assess the level of risk associated with an insurance company’s assets. It took a $100 million infusion from the holding company for Brighthouse to finish Q4 with a 400% RBC ratio.
In Other News:
Hedging strategy. Brighthouse will complete a revised hedging strategy at the end of September, Spehar said. The result will be a separate hedging for the insurer’s variable annuity and first-generation Shield annuity blocks of business.
“We’ve talked in the past about how we were getting a capital benefit when we were doing Shield and VA together, when Shield was a smaller portion of the total,” Spehar explained. “Once we got this balanced risk profile, we started to see more of the complexity of managing them together become an issue. That’s why we’re going to the separated approach.”
It’s “too early” to know what the impact of the separation will be, Spehar added.
“I’ll tell you that it will introduce simplification, more transparency, and allow for more effective management of the block of business,” he said. “I also think overall, we’re going to see less volatility in our results over time.”
Quarterly Snapshot:
- Annuity sales increased 8% quarter-over-quarter and 16% sequentially, primarily driven by higher sales of fixed annuities, partially offset by lower sales of Shield Level annuities.
- Estimated combined risk-based capital ratio between 405% and 425%; holding company liquid assets of about $900 million.
- Corporate expenses in the quarter were $202 million, up from $200 million in the year-ago quarter and down from $239 million in the first quarter, all on a pre-tax basis.
- The Run-off segment had an adjusted loss of $83 million in the second quarter, compared with an adjusted loss of $30 million in the year-ago quarter, and an adjusted loss of $64 million in the first quarter.
Management Perspective:
“When I talk about things like strategic initiatives … we think about where we might be lacking, where we need to upgrade. And so it wouldn’t surprise you, I’m sure, if we’re thinking about that every single day.”
– CEO Eric Steigerwalt on the concept of an asset management partner
By The Numbers:
- Total Revenue: $2.15 billion ($2.21 billion in Q2 2024)
- Net Income: $85 million ($34 million in Q2 2024)
- Earnings Per Share: Adjusted earnings per share of $3.43 ($5.57 in Q2 2024)
- Share Repurchases: $43 million in Q2 2025
- Stock Price Movement: Stock down more than 3% Friday morning to $44.58.
Life Picture:
– Adjusted Earnings: -$26 million ($42 million in Q2 2024)
– Sales: $33 million ($28 million in Q2 2024)
Annuity Picture:
– Adjusted Earnings: $332 million ($332 million in Q2 2024)
– Sales: $2.6 billion ($2.4 billion in Q2 2024)
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