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Ed Spehar (Photo: MetLife)

Life Health > Annuities > Fixed Annuities

Brighthouse May Use More Capital to Fuel Annuity Sales Growth

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What You Need to Know

  • The company posted a $702 million net loss, partly due to $336 million in guaranteed minimum income benefit fees and costs.
  • Adjusted earnings were lower but positive.
  • Sales of fixed deferred annuities climbed to $1.8 billion, from $19 million.

Brighthouse Financial might focus more on using life insurance company cash to fuel annuity sales growth for the rest of the year and less on buying back shares of common stock from shareholders.

Company executives talked about what they see as new opportunities to use cash during a conference call they held to go over third-quarter earnings with securities analysts.

Brighthouse used twice as much capital to fuel annuity sales growth in the third quarter as expected, and strong sales have continued into this quarter, according to Ed Spehar, the company’s chief financial officer.

“We are excited to have the opportunity to deploy capital in new business,” Spehar said.

What It Means

People like your clients are adding many fixed annuities to their retirement planning arrangements.

The Earnings

The third quarter ended Sept. 30.

Brighthouse is reporting a $702 million net loss for the quarter on $1.5 billion in revenue, compared with $361 million in net income on $2.5 billion in revenue for the third quarter of 2021.

Adjusted earnings, which excluded a number of unusual items and items that don’t affect how much cash the company has, fell to $97 million, from $450 million.

The list of notable items includes a $439 million drop in the value of the derivatives the company uses to run its life and annuity operations. Most of the decrease was related to derivatives used in hedging for universal life policies with secondary guarantees.

The derivatives value change item has no effect on the company’s current level of cash.

The list of notable items also includes $336 million in expenses related to fees and costs for the guaranteed minimum income benefits associated with older Brighthouse annuities.

Product Sales

Life insurance sales fell to $19 million, from $27 million in the year-earlier quarter.

Variable annuity sales fell to $1.7 billion, from $2.1 billion.

Sales of the variable annuity contracts Brighthouse is emphasized — the Shield Level registered index-linked annuity contracts — fell to $1.4 billion, from $1.6 billion.

Sales of non-variable indexed annuities increased to $213 million, from $198 million, and sales of fixed deferred annuities soared to $1.8 billion, from $19 million.

Thanks to strong sales of fixed deferred annuities, total annuity sales increased to $3.7 billion, from $2.4 billion.


The Brighthouse combined risk-based capital ratio, or financial strength indicator, was between 450% and 470% during the third quarter, above the company’s target of 400% to 450% in normal markets.

The range dropped from 470% to 490% on June 30 because of a need to invest cash in issuing new, less risky products, and away from depending on the old, high-risk variable annuities, Spehar said.

The Brighthouse holding company has plenty of cash, and the Brighthouse Life Insurance Company life insurance subsidiary has plenty of cash, but Brighthouse might have the life insurance subsidiary keep the cash it’s generating to support new sales rather than having the subsidiary pay the usual $250 million cash dividend to the holding company, Spehar added.

Brighthouse does not expect to have the holding company contribute capital to the life subsidiary to support the growth, he said.

Share Buybacks

In the past, Spehar said, Brighthouse has returned capital to shareholders by buying back about 42% of the shares it has issued, at an average price of about $38 per share.

Buying back shares can help a company’s shareholders by increasing the price of the shares and by increasing the level of earnings per share.

Spehar indicated that Brighthouse will think both about its business strategy and shareholders when deciding how to allocate capital.

“We want to invest in this business to grow, because, ultimately, to get to the valuation we think we deserve, we need to continue affect this mix,” he said.

Spehar suggested that Brighthouse understands the importance of capital return to shareholders but avoids telegraphing its share buyback moves.

“What we have consistently said on buybacks is that we’ll tell you what we do after we do it,” he said.

Pictured: Ed Spehar (Photo: MetLife)


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