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Brighthouse Financial(BHF) - 2023 Q4 - Earnings Call Transcript
BHFBrighthouse Financial(BHF)2024-02-13 15:06
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Financial Data and Key Metrics - Total annuity sales for 2023 were 10.6billion,exceedingthe2023target,withlifeinsurancesalesat10.6 billion, exceeding the 2023 target, with life insurance sales at 102 million [7] - Field sales of flagship Shield level annuity products reached 6.9billion,a176.9 billion, a 17% increase year-over-year [7] - Fixed rate annuity sales were 2.7 billion, down from 3.7billionin2022[7]−Full−yearcorporateexpensesincreasedby23.7 billion in 2022 [7] - Full-year corporate expenses increased by 2% to 885 million, despite core inflation of approximately 4% [8] - The company repurchased 250millionofcommonstockin2023,reducingsharesoutstandingbyapproximately7250 million of common stock in 2023, reducing shares outstanding by approximately 7% [35] - Total combined adjusted capital (TAC) declined to 6.3 billion at year-end 2023, compared to 7.3billionattheendofQ32023[13]−Theestimatedcombinedrisk−basedcapital(RBC)ratioincreasedby10pointssequentiallyto4207.3 billion at the end of Q3 2023 [13] - The estimated combined risk-based capital (RBC) ratio increased by 10 points sequentially to 420% [40] Business Line Data and Key Metrics - Shield level annuity products had a record sales year, contributing significantly to total annuity sales [7] - The company launched Brighthouse Secure Fixed Indexed Annuities and expanded its life insurance suite with Brighthouse SmartGuard Plus [36] - The Annuities segment reported adjusted earnings of 245 million in Q4 2023, while the Life segment reported 4million[45]−TheRun−offsegmentreportedanadjustedlossof4 million [45] - The Run-off segment reported an adjusted loss of 50 million in Q4 2023 [16] Market Data and Key Metrics - The company is working with 14 plan sponsors to implement BlackRock's LifePath Paycheck, totaling 27billionintargetdatefundassetsandover500,000individualemployees[10]−Thecompanyexpectssimilarlevelsofoutflowsin2024asin2023,drivenbyblocksofbusinesscomingoutofsurrenderchargeperiodsandhigherrates[83]CompanyStrategyandIndustryCompetition−Thecompanyplanstocontinuestrengtheningitsproductsuiteandleveragingdistributionrelationshipstocompeteeffectivelyinchosenmarkets[9]−Thecompanyaimstomaintainalow−costproduceradvantage,focusingonefficiencygainstooffercompetitiveproductsandgenerateshareholderreturns[8]−Thecompany′sriskmanagementstrategyremainsunchanged,withnomaterialimpactexpectedonlong−termstatutoryfreecashflowsduetonewstatutoryrequirements[37]ManagementCommentaryonOperatingEnvironmentandFutureOutlook−Managementhighlightedtheeffectivenessofthecompany′shedgingstrategy,withCTE98totalassetrequirementsreducedby27 billion in target date fund assets and over 500,000 individual employees [10] - The company expects similar levels of outflows in 2024 as in 2023, driven by blocks of business coming out of surrender charge periods and higher rates [83] Company Strategy and Industry Competition - The company plans to continue strengthening its product suite and leveraging distribution relationships to compete effectively in chosen markets [9] - The company aims to maintain a low-cost producer advantage, focusing on efficiency gains to offer competitive products and generate shareholder returns [8] - The company's risk management strategy remains unchanged, with no material impact expected on long-term statutory free cash flows due to new statutory requirements [37] Management Commentary on Operating Environment and Future Outlook - Management highlighted the effectiveness of the company's hedging strategy, with CTE98 total asset requirements reduced by 1.14 billion due to anticipated future hedging [41] - The company expects corporate expenses to decrease in 2024 compared to 2023 [107] - Management remains optimistic about growth in Shield sales, expansion in the fixed indexed annuity market, and contributions from the worksite product offering with BlackRock [38] Other Important Information - The company implemented a new statutory requirement to reflect all anticipated future hedging in variable annuity reserves and capital, increasing total asset requirements at CTE70 by 870million[12]−ThenegativeunassignedfundsbalanceatBLICwasapproximately870 million [12] - The negative unassigned funds balance at BLIC was approximately 1.1 billion at year-end 2023, primarily due to the new statutory requirement [14] - The company expects to support taking capital up from BLIC in 2024, subject to regulatory approval [20] Q&A Session Summary Question: Impact of the new statutory requirement on capital management and dividend flows [19] - The new requirement is more of a technical consideration, and the company's financial plan for 2024 supports taking capital from BLIC [20] - The company does not expect changes in cash flows or buyback plans due to the new requirement [24] Question: Sensitivity to the 50 basis point increase in the statutory mean reversion rate [52] - The impact of the 50 basis point increase is expected to be different under the new statutory requirement, but it is too early to quantify [76] Question: Expectations for normalized EPS and alternative investment returns [59] - The company expects a run-rate EPS in the range of 4,excludingnotableitemsandadjustingforalternativeinvestmentreturns[88]−Thecompanydoesnotpredictnear−termalternativeinvestmentreturnsbutexpectslong−termreturnsof94, excluding notable items and adjusting for alternative investment returns [88] - The company does not predict near-term alternative investment returns but expects long-term returns of 9% to 11% [60] Question: Buyback cadence and capital return plans [61] - The company does not provide forward-looking guidance on buyback pace but expects to continue repurchasing shares in 2024 [61] Question: Impact of the new statutory requirement on CTE98 and CTE70 [91] - The new requirement reduces CTE98 total asset requirements by 1.14 billion, with a convergence of about $2 billion between CTE98 and CTE70 [49] Question: Surrender activity and outflows outlook [121] - The company expects similar levels of outflows in 2024 as in 2023, driven by blocks of business coming out of surrender charge periods and higher rates [83] Question: Long-term statutory free cash flow projections [125] - The company plans to publish long-term statutory free cash flow projections but does not have a specific timeline [84]