Brighthouse Financial, Inc. · NASDAQ:BHF
Brighthouse Financial — Investor Day (March 2020)
34 slides from Brighthouse Financial's investor day presentation, Mar 5, 2020
Slide 1: Business Update for Investors & Analysts
Exhibit 99.1 Business Update for Investors & Analysts
Slide 2: Note regarding forward-looking statements
Note regarding forward-looking statements This presentation and other oral or written statements that we make from time to time contains information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-look
Slide 3: Agenda
Agenda I. Company update and strategy Eric Steigerwalt II. Business growth strategy Myles Lambert Conor Murphy III. Financial drivers Ed Spehar IV. Closing remarks Eric Steigerwalt 3
Slide 4: Company update and strategy
Company update & strategy Business growth strategy Financial drivers Closing remarks
Slide 5: We're Brighthouse Financial
We’re Brighthouse Financial We are on a mission to help people achieve financial security We specialize in products designed to help people protect what they’ve earned and ensure it lasts We are built on a foundation of experience and knowledge, which allows us to keep our promises and provide value
Slide 6: Strategic overview
Strategic overview Offer simpler products that provide value to all stakeholders Broaden distribution footprint in the U.S. Become a cost-competitive manufacturer over time 6
Slide 7: An established U.S. retail franchise
An established U.S. retail franchise One of the largest providers of annuities and life insurance in the U.S. Company Profile Financial Strength $227B 2M+ $9.7B $16.2B Total Assets Customers Statutory Combined Total Stockholders’ Equity Adjusted Capital (TAC) $150B $400B 552% $0.8B Annuity Assets Un
Slide 8: Significant progress over the past two years
Significant progress over the past two years 47% $2.0B 68% 3.0x 11%+ Increase in TAC Increase in Increase in Increase in Reduction in Ordinary Dividend Annuity Sales Advisor Shares Capacity(1) Awareness(2) Outstanding 2017 2019 $9.7 $2.1 $7.3 76% 119.8 $6.6 $4.3 106.0 25% $0.1 $ in billions $ in bil
Slide 9: Metrics to drive shareholder value
Metrics to drive shareholder value Sales • Total annual annuity sales target increased to $8.5B+ in 2021 • Targeting $250M of total life sales in 2021 Corporate Expenses • On track for $150M run-rate corporate expense reduction by end of 2020 • Targeting additional $25M reduction in 2021 Capital Str
Slide 10: Key messages
Key messages • Competitive annuity and life insurance products available through broad independent distribution network • Strong sales momentum and identified growth opportunities • Evolving business mix to less capital-intensive products • Compelling distributable earnings across a range of market
Slide 11: Business growth strategy
Company update & strategy Business growth strategy Financial drivers Closing remarks
Slide 12: Annuity and life insurance growth strategy
Annuity and life insurance growth strategy Wholesaler Productivity Core Sales Expansion Continued Product Expansions Digital Platforms New / Adjacent Channels IMO and Other Partnerships 12
Slide 13: Meaningful growth in annuity sales since 2017
Meaningful growth in annuity sales since 2017 Annuity Multi-Ticket Wholesaler Wholesaler Sales Growth Sales Growth Sellers Productivity Count from Our Top 20 Firms +68% +43% +45% +10% +81% Percentages show growth from year-end 2017 to year-end 2019. 13
Slide 14: Diversification through growth of life insurance
Diversification through growth of life insurance SmartCareSM First life insurance product • $400B of life insurance in-force, net launched as an independent (1) of reinsurance company • Recently developed new fully- digitized process with data-driven Offered through 13 underwriting distributors • La
Slide 15: Continued sales momentum
Continued sales momentum Targeted distribution strategy with customized solutions Annuity sales ($ in billions) Life sales ($ in millions) $250 $8.5+ $8.0+ $7.3 $5.9 $4.3 $90 $25 2017 2018 2019 2020E 2021E 2019 2020E 2021E New business priced with double-digit statutory internal rates of return 15
Slide 16: Improving annuity net flows
Improving annuity net flows 2020 Projected $ in billions Inflows Outflows ~$12 Higher capital- ~$4 intensive blocks $8+ ~$8 Lower capital- intensive blocks 16
Slide 17: Evolving business mix to less capital-intensive products
Evolving business mix to less capital-intensive products Annuity account value by product type 2016 2019 2022E 2025E 2% 5% 13% 11% 9% 2% 10% 9% 11% 38% 32% 44% 49% 22% 36% 32% 32% 25% 18% VA Non-Capital Intensive VA Capital Intensive Shield Fixed & Income FIA Lower capital-intensive products and gre
Slide 18: Shield Level annuities complement VA in-force block
Shield Level annuities complement VA in-force block Shield Level – Illustrative(1) Key highlights Hedges on new business cover the increase in • Risk offset for VA business account value Shield Assets Shield Account Value • Invested in fixed instruments Level of Assets & Account Value Account & Asse
Slide 19: Key takeaways
Key takeaways • Continued sales momentum driven by diversified products and distribution expansion • Sales growth continues to improve net flows and company risk profile • Evolving business mix to less capital-intensive products and greater cash flow generation 19
Slide 20: Financial drivers
Company update & strategy Business growth strategy Financial drivers Closing remarks
Slide 21: Key messages on financial strategy
Key messages on financial strategy • Lower risk profile compared with separation • Hedging strategy preserves distributable earnings across scenarios • Compelling RBC ratio and holding company cash in stressed markets • Significant long-term total company distributable earnings profile 21
Slide 22: VA hedging strategy overview
VA hedging strategy overview Change in first loss position and hedging approach $ in billions Original Strategy Revised Strategy First loss position $2.0 Up to $0.5 Hedging approach(1) OTM More ATM Change in hedge instruments relative to original strategy Total Return Swaps Equity markets Options Sw
Slide 23: Less volatility in distributable earnings across scenarios
Less volatility in distributable earnings across scenarios Projected VA distributable earnings, cumulative 2020 – 2022(1) $ in billions Original Strategy Revised Strategy Base $1.4 – 2.4 $2.2 Upside (Scenario 2) $2.4 – 3.4 $2.6 Lower SA Return(2) (Scenario 3) $0.5 – 1.5 $1.8 Lower SA Return/Rates(2)
Slide 24: Significant reduction in equity market sensitivity
Significant reduction in equity market sensitivity Projected VA distributable earnings sensitivities, cumulative 2020 – 2022(1) $ in billions Original strategy Revised strategy 25% decline in equity 250 bps lower SA return markets, $1.4 – $2.4 10YR-UST drops to 1% $2.2 $1.8 $0.5 – $1.5 $1.3 $0.0 Bas
Slide 25: Well-diversified, high-quality investment portfolio
Well-diversified, high-quality investment portfolio Portfolio composition by asset class(1) Key highlights 1% <1% 2% <1% • $96B general account assets 2% 3% • 74% fixed maturities 96% investment grade 33% 17% 2% 2% Fixed maturities securities portfolio(1)(2) 4% 1% 6% 10% 3% AAA 8% 10% 24% AA 30% Fix
Slide 26: Balance sheet strength under stressed market conditions
Balance sheet strength under stressed market conditions Combined RBC ratio 552% ~475% 350% – 400% Year-end 2019 Pro forma for 2020 Pro forma for 2020 dividends dividends to holding to holding company and company stressed market condition(1) Holding Company Cash $0.8B ~$2.0B ~$2.0B (1) Stressed marke
Slide 27: Significant long-term total company distributable earnings
Significant long-term total company distributable earnings Total company projected distributable earnings, cumulative 2020 - 2029 $ in billions Non-VA & new business $9 – $11 VA ~30% $4 – $5 ~70% ~50% ~50% Base Case Lower SA Return/Rates Significant distributable earnings even in persistent low retu
Slide 28: Key takeaways
Key takeaways • Prudence and flexibility define financial management strategy • Ensure strong balance sheet in stressed markets to protect franchise • Significant distributable earnings story 28
Slide 29: Closing remarks
Company update & strategy Business growth strategy Financial drivers Closing remarks
Slide 30: Closing remarks
Closing remarks • Competitive annuity and life insurance products available through broad independent distribution network • Strong sales momentum and identified growth opportunities • Evolving business mix to less capital-intensive products • Compelling distributable earnings across a range of mark
Slide 31: Appendix
Appendix
Slide 32: Projected VA distributable earnings
Projected VA distributable earnings 2020 - 2022 $4.3 2020 - 2024 $3.6 $ in billions $2.6 $2.7 $2.2 $1.8 $1.5 $1.3 $1.3 $1.3 Equity Lower SA Lower SA Base Case Upside Shock/Low Return Return/Rates Rates Assumptions as of December 31, 2019 (25)% shock to Separate 6.5% 9.0% 4.0% 4.0% equities, then Acc
Slide 33: Projected VA distributable earnings across scenarios, three years
Projected VA distributable earnings across scenarios For the Three Years Ending December 31, 2020 to December 31, 2022 Equity Lower SA Lower SA Base Case Upside Shock/ Return Return/Rates $ in billions Low Rates Fees $8.3 $8.5 $8.1 $8.1 $7.3 Hedge gains/(losses) (including Shield net (4.5) (6.2) (2.
Slide 34: Projected VA distributable earnings across scenarios, five years
Projected VA distributable earnings across scenarios For the Five Years Ending December 31, 2020 to December 31, 2024 Equity Lower SA Lower SA Base Case Upside Shock/ Return Return/Rates $ in billions Low Rates Fees $12.9 $13.4 $12.5 $12.5 $11.5 Hedge gains/(losses) (including Shield net (6.5) (9.1)