What Brighthouse Told Investors About Distribution

“We will not be engaging in direct distribution of retail products, including [individual retirement arrangement] and retail annuities sold into ERISA plans and IRAs,” Brighthouse says.

Brighthouse is hoping use of the independent distribution model will limit the company’s exposure to DOL regulations, Brighthouse says.

Brighthouse notes that uncertainty surrounding any delays in implementation of the DOL regulations, or about how the regulations might be rewritten or repealed, could create confusion among distribution partners, which could hurt sales.

3. Brighthouse may end up relying more on a relatively small number of big distributors.

The company cites reliance on a relatively small number of distributors as a potential risk.

“Furthermore, such distributions may be subject to differing commission structures depending on the product sold, and there can be no assurance that these new commission structures will be acceptable,” the company says.

The company notes that, in 2016, Fidelity, a company that had accounted for 36% of MetLife’s 2015 annuity sales premium, decided to break up with MetLife.

“Other distributors may elect to suspend, alter, reduce or terminate their distribution relationships with us for various reasons,” Brighthouse says.

If other insurers pay higher commissions or offer more attractive products, that could also hurt, Brighthouse says.

4. Brighthouse worries about the flu.

Brighthouse says a severe pandemic involving influenza or another serious disease could hurt the economy as a whole, and also its own operations.

“In addition, a pandemic that affected our employees or the employees of our distributors or of other companies with which we do business could disrupt our business operations,” the company says. “The effectiveness of external parties, including governmental and non-governmental organizations, in combating the spread and severity of such a pandemic could have a material impact on the losses we experience.”

5. Brighthouse worries about cyber problems.

The company says it relies on computers, including computers used in distribution, that are subject to cyber attacks and other disasters.

“Vendors, distributors, and other third parties, including MetLife, provide operational or information technology services to us,” the company says. “The failure of such third parties’ or MetLife’s computer systems and/or their disaster recovery plans for any reason might cause significant interruptions in our operations and result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to our customers.”

Brighthouse has cyber liability insurance that provides both third-party liability and first-party liability coverages, but “this insurance may not be sufficient to protect us against all losses,” the company says. 

—Read Brighthouse Seeks `Sleep-at-Night’ Calm in $79 Billion Portfolio on ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on Facebook and Twitter.