Slide 1: Brighthouse Financial Investor Outlook Call
December 3, 2018 Brighthouse Financial Investor Outlook Call
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 may contain information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-l
Slide 3: Agenda
Agenda • Company overview and business update Eric Steigerwalt • Assumptions and key drivers Conor Murphy • Balance sheet and variable annuity hedging Anant Bhalla • Financial outlook Eric Steigerwalt • Q&A All 3
Slide 4: Company overview and business update
Company overview and business update
Slide 5: Brighthouse – A Focused U.S. Retail Franchise
Brighthouse – A Focused U.S. Retail Franchise One of the largest U.S. life insurance companies offering annuity and life products Operating Model Financial Strength $217B 2M+ $6.0B $12.9B Total Assets Customers Combined Total Adjusted Stockholders’ Equity Capital $145B $418B1 $600M+ $603M Annuity As
Slide 6: Achieving and surpassing operational and financial targets
Achieving and surpassing operational and financial targets Sales Results • Total annuity deposits up 40% year-over-year through 3Q 2018 • Shield deposits up 38% year-over-year through 3Q 2018 Separation from • Exited over 100 Transition Services Agreements (TSAs) with MetLife as of MetLife 3Q 2018 V
Slide 7: Evolution of Brighthouse's financial targets
Evolution of Brighthouse's financial targets At Separation Today Sales • Annual annuity deposits of $4 billion+ by • Annual annuity deposits of $8 billion+ by 2021 Results 2020 • Solid annuity and life insurance new business platform with attractive growth expectations Corporate • Corporate expense
Slide 8: Assumptions and key drivers
Assumptions and key drivers
Slide 9: Assumptions through 2021
Assumptions through 2021 • Variable annuity separate account returns of 6.5% annually • 10-year U.S. Treasury of 3.06% (9/30/18) increasing to 3.45% (YE 2021) • Capital return of $1.5 billion through 2021 • Early adoption of NAIC VA capital reform at year-end 2019 for statutory reporting and risk-ba
Slide 10: Strong annuity and life insurance sales expectations
Strong annuity and life insurance sales expectations Annuity deposits ($ billions) Key drivers $8.0+ • Enhanced annuity product portfolio +11% CAGR • Annuity new business: mid-teens $5.8-$6.0 statutory internal rates of return • Life insurance product launch targeted for the end of 2018 • Life insur
Slide 11: $125 million increase to net investment income expected in 2020
$125 million increase to net investment income expected in 2020 from portfolio repositioning actions Select general account asset classes1 Key drivers Sector YE 2017 YE 2019 • Targeting less than 10% U.S. Treasuries allocation by end of 2019 U.S. Treasuries 19% Public Credit 30% • Expect to increase
Slide 12: $150 million run-rate corporate expense reduction by end of 2020
$150 million run-rate corporate expense reduction by end of 2020; $25 million further reduction targeted in 2021 Corporate expenses ($ millions) Key drivers $1,046 • >80% of TSAs exited by the end of -14% 2019 ~ $900 ~ $875 • Investment portfolio asset manager transition beginning in early 2019 • Si
Slide 13: Balance sheet and VA hedging
Balance sheet and VA hedging
Slide 14: Balance sheet strength in market shocks
Balance sheet strength in market shocks As of 9/30/18, with $1B VA deductible Equity Markets Interest Rates -40% -10% +10% -100 bps +100 bps Variable annuity CTE98+ CTE98+ CTE98+ CTE97+ CTE98+ capitalization Stockholders’ equity, excluding AOCI 14
Slide 15: Significant reduction in expected VA hedging costs
Significant reduction in expected VA hedging costs VA deductible and hedge gain/(loss) ($ billions) Key drivers • Reduction in annual hedge losses $2.0 $2.0 of ~$800 million by 2021 in Base Case Scenario VA Deductible $1.5 • Driven by further increase of ~ $1.2 deductible from $1.2 to $2 billion by
Slide 16: Financial outlook
Financial outlook
Slide 17: Meaningful improvement in financial outlook and key drivers
Meaningful improvement in financial outlook and key drivers 2018 2021 Financial • ~8% adjusted return on equity1 • ~11% adjusted return on equity1 Outlook (less notable • $8.50 - $9.00 adjusted earnings per • ~8% return on equity, excluding AOCI2 (on items) share1 a GAAP net income basis) • Low doub
Slide 18: Appendix
Appendix
Slide 19: Non-GAAP and Other Financial Disclosures
Non-GAAP and Other Financial Disclosures Our definitions of the non-GAAP and other financial measures may differ from those used by other companies. Non-GAAP Financial Disclosures We present certain measures of our performance that are not calculated in accordance with GAAP. We believe that these no
Slide 20: Non-GAAP and Other Financial Disclosures (Cont.)
Non-GAAP and Other Financial Disclosures (Cont.) Adjusted earnings reflects adjusted revenues less adjusted expenses, both net of income tax, and excludes net income (loss) attributable to noncontrolling interests. Provided below are the adjustments to GAAP revenues and GAAP expenses used to calcula
Slide 21: Non-GAAP and Other Financial Disclosures (Cont.)
Non-GAAP and Other Financial Disclosures (Cont.) Other Financial Disclosures Corporate Expenses Corporate expenses includes functional department expenses, public company expenses, certain investment expenses, retirement funding and incentive compensation; and excludes establishment costs. Notable i
Slide 22: Non-GAAP and Other Financial Disclosures (Cont.)
Non-GAAP and Other Financial Disclosures (Cont.) Other Financial Disclosures (cont.) Deposits Life insurance and annuity deposits consist of 100 percent of direct statutory premiums, except for fixed indexed annuity deposits distributed through MassMutual that consist of 90 percent of gross deposits
Slide 23: Base Case Scenario definition
Base Case Scenario definition Annual Separate Account Fund 10-Year U.S. Treasury Rate Return Mean reversion of 10-year UST 6.5% per year to 4.25% over 10 years Source: Brighthouse Financial 2017 Form 10-K, filed March 2018. 23