Brighthouse Financial(BHF) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - The RBC ratio for the year decreased from $500 million to$440 million, with approximately 50 points of the 60-point decline expected to reverse over time [1] - The MRP impact was $250 million to$300 million negative in 2022, but it is reversing with a 25 basis points increase in Q1 2023 and another 50-75 basis points increase expected in 2024 and 2025 [2] - Normalized statutory earnings were approximately $500 million in Q4 2022, bringing full-year normalized statutory earnings to approximately$1 billion [10] - The combined total adjusted capital (TAC) was $8.1 billion at December 31, compared to$8 billion at September 30 [7] Business Line Data and Key Metrics - Fixed deferred annuity and Shield annuity products saw strong sales in Q4 2022, with total annuity sales reaching $3.2 billion, a 36$22 million, down year-over-year due to economic headwinds, but the company remains confident in its life insurance strategy [57] - The Annuities segment reported adjusted earnings of $286 million in Q4 2022, driven by higher VA separate account returns and lower DAC amortization [64] Market Data and Key Metrics - The company benefited from a significant increase in interest rates in 2022, with rates up over 230 basis points as measured by the 10-year U.S. Treasury [8] - The mortgage loan exposure in the investment portfolio grew from 16$13.5 billion [97] Company Strategy and Industry Competition - The company plans to resume dividends from BLIC to the holding company in 2023 and continues to focus on maintaining a strong balance sheet [10][116] - A new life insurance product is planned for 2023 to diversify and strengthen the life product suite, with a focus on expanding distribution footprint [22] - The company is cautious about capital return due to macroeconomic uncertainty but remains committed to returning capital to shareholders through share repurchases [114][123] Management Commentary on Operating Environment and Future Outlook - The company expects the business mix to evolve towards higher cash flow generation and less capital-intensive business as older, less profitable business is run off [9] - The company is focused on protecting its distribution franchise and maintaining a strong balance sheet under a multiyear, multi-scenario framework [59][65] - The company is optimistic about the Shield annuity product suite, with a new Shield Level Pay Plus product launched in 2022 to meet retirement income needs [37] Other Important Information - The company completed major system conversions in 2022, marking the end of establishment costs and allowing increased focus on growth and business mix evolution [133] - The company repurchased $488 million of common stock in 2022, reducing the number of shares outstanding by 43$24 million unfavorable impact, but it made economic sense for the company to recapture the business [73] Question: Capital return and macroeconomic environment - The company is cautious about capital return due to macroeconomic uncertainty but continues to repurchase shares, with $27 million repurchased year-to-date through February 7 [39][123] Question: New business strain and growth - The company experienced higher-than-typical new business strain in 2022, with around 30 points of strain for the full year, driven by strong sales growth [88] Question: Fixed annuity spreads and growth opportunities - Fixed annuity spreads were strong in Q4 2022, and the company expects most growth in 2023 to come from Shield annuity products [81][103] Question: Corporate expenses and outlook - Corporate expenses were elevated in 2022, but the company expects to see some cleanup costs in 2023, with no large-scale expense initiatives planned [18][93] Question: Impact of accounting changes on adjusted earnings - The impact of accounting changes on adjusted earnings is expected to be modest, with some fee income moving below the line but offset by other adjustments [31]