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Brighthouse Executives Shrug at Inflation Talk

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What You Need to Know

  • Ed Spehar of Brighthouse had kind words for inflation.
  • Equitable executives said they deployed annuity buyouts in 2011 and now focus more on reinsurance as a vehicle for de-risking.
  • CNO is hungry for new agents.

Brighthouse Financial executives can live with the idea of a moderate increase in inflation.

A securities analyst asked them about inflation Friday, on a conference call the Charlotte, North Carolina-based company held to go over earnings for the fourth quarter of 2021 with securities analysts

Eric Steigerwalt, the CEO, emphasized that the company will be careful about trying to hold its administrative expenses down.

Ed Spehar, the chief financial officer, emphasized that moderate inflation could help Brighthouse by improving investment returns.

Brighthouse, like other U.S. life insurers, uses big portfolios of high-grade corporate bonds to support its life insurance and annuity obligations. Rates on those bonds have been below 5% for most of the past five years.

Spehar observed that inflation often leads to higher interest rates.

Because of that, “inflation is an overall good guy for us,” Spehar said. “Higher interest rates, higher inflation is not something that we are afraid of.”

Spehar said rates started to rise a bit in the fourth quarter.

“Clearly, we are happy that rates are higher,” he said.

The Earnings

Brighthouse is reporting $64 million in net income for the fourth quarter of 2021 on $2 billion in revenue, compared with a net loss of $1 billion on $131 million in revenue for the fourth quarter of 2020.

Excluding the effects of fluctuations in the value of investments and derivatives, revenue increased to $2.4 billion, from $2.2 billion.

Annuity sales fell to $2.4 billion, from $3 billion, because of a tilt away from fixed deferred annuities.

Sales of variable annuities without significant benefits guarantees increased 14%.

More Earnings

Other individual life and annuity issuers reported earnings last week.

CNO Financial Group reported $116 million in net income for the latest quarter on $1.1 billion in revenue, compared with $112 million in net income on $1.1 billion in revenue for the year-earlier quarter. Executives noted on an earnings call that the company is hungry for new agents and working hard to retain and increase the productivity of the agents it has.

Equitable Holdings reported $388 million in net income for the latest quarter on $3.3 billion in revenue, compared with a $1.3 billion net loss on $516 million in revenue for the year-earlier quarter. Excluding the effects of fluctuations in the value of investments and derivatives, revenue fell to $1.1 billion, from $1.2 billion. Executives said on their call that the company implemented efforts to buy out some annuity owners about 10 years ago and are noq focusing on use of reinsurance, rather than buyouts, to reduce annuity risk.

Principal Financial Group reported $1.8 billion in net income for the latest quarter on $14 billion in revenue, compared with $1.4 billion in net income on $15 billion in revenue for the year-earlier period.

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Photo: Ed Spehar