Brighthouse Financial, Inc. — 2023 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2023; it is not a standalone fourth-quarter filing. Brighthouse is a U.S. life insurer and annuity provider with more than 2.3 million policies and contracts in force. Its reporting segments are Annuities, Life and Run-off, plus Corporate & Other. The company distributes primarily through independent partners.
Financial performance and position
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | $4.12 billion | $6.87 billion |
| Net income (loss) available to common shareholders | $(1.21) billion | $3.78 billion |
| Adjusted earnings (non-GAAP) | $969 million | $1.18 billion |
| Net investment income | $4.66 billion | $4.14 billion |
| Net cash from operating activities | $(137) million | $(1.23) billion |
- Profitability and drivers: The reported net loss principally reflected unfavorable fair-value movements in variable-annuity guarantees, losses on fixed-maturity security sales, and losses on ULSG interest-rate hedges. Net derivative losses were $3.91 billion versus $592 million in 2022. Adjusted earnings, which excludes significant market-volatility items, declined 18%; higher investment spread and lower expenses partly offset higher insurance-related costs and lower fee income.
- Investment returns: Adjusted net investment income yield was 4.09%, up from 3.82%. Adjusted net investment income was $4.77 billion, compared with $4.21 billion.
- Balance sheet: Total assets were $236.3 billion, liabilities $231.3 billion and equity $5.0 billion at year-end. Assets under management were $203.7 billion, up from $193.6 billion. Fixed-maturity securities had $6.1 billion of net unrealized losses at year-end; these losses principally reflected interest rates and spreads.
- Debt and liquidity: Consolidated long-term debt was $3.16 billion carrying value. Short-term liquidity was $3.8 billion and liquid assets were $45.2 billion, excluding pledged or committed assets. Parent-company short-term liquidity was $1.2 billion.
- Insurance capital: Insurance subsidiaries had approximately $6.3 billion of combined statutory total adjusted capital and a combined RBC ratio of approximately 428%. Management’s normal-market target is 400%–450%. Combined normalized statutory earnings were a loss of $0.2 billion, versus earnings of $1.0 billion in 2022.
- Capital returns: The company repurchased $250 million of common stock in 2023 and had $793 million remaining under repurchase authorizations at year-end. It stated it had no current plans to pay common-stock dividends.
Material changes versus 2022
- GAAP net income available to common shareholders swung from $3.78 billion profit to a $1.21 billion loss; adjusted earnings also fell, from $1.18 billion to $969 million. Results are highly sensitive to market movements and insurance-accounting estimates.
- Net investment income rose, but fee income declined and insurance-related activities had higher net costs. Annuities adjusted earnings increased to $1.17 billion; Life and Run-off shifted to adjusted losses of $53 million and $77 million, respectively.
- Cash used in operating activities improved to $137 million from $1.23 billion, but remained negative. Ending cash and cash equivalents were $3.85 billion, down from $4.12 billion.
- Year-end AUM increased, including general-account investments of $115.5 billion and separate-account assets of $88.3 billion.
Outlook, management commentary, risks and unusual items
- Outlook: The filing provides no specific earnings or revenue guidance. Management says it intends to focus on risk-adjusted returns, maintain capital and liquidity, and continue hedging significant market risks. It targets a 400%–450% combined RBC ratio in normal markets.
- Accounting change: The company adopted long-duration targeted improvements (LDTI) effective January 1, 2023, with a January 1, 2021 transition date. The change substantially altered insurance-liability and guarantee measurement and presentation; its transition reduced retained earnings and AOCI by $5.4 billion and $3.9 billion, respectively. Comparisons across periods require care.
- Actuarial review: The 2023 annual review changed assumptions for ULSG, variable annuities and life products. Raising the ULSG mean-reversion rate from 3.50% to 3.75% reduced ULSG liabilities by $259 million; other assumption changes had offsetting effects.
- Key risks: Variable-annuity guarantees and hedging may create substantial earnings and statutory-capital volatility. Other principal risks include interest-rate and equity-market moves, investment credit and commercial-real-estate exposure, actuarial-estimate uncertainty, reinsurance-counterparty performance, distribution concentration, regulatory changes, liquidity and ratings pressure, and cybersecurity or third-party service failures.
- Legal and contingent matters: The company estimated reasonably possible litigation losses of up to approximately $10 million for matters where a range could be estimated. For certain other loss contingencies, it estimated a range of zero to approximately $200 million in excess of accruals; some matters could not be estimated. A purported class action concerns the MOVEit data-security incident. The filing says an arbitration panel ruled in March 2023 that certain Genworth long-term-care reinsurance trusts were overfunded, and the company complied with the release ruling.
- Audit and controls: Deloitte issued an unqualified opinion on the financial statements and internal controls; management also concluded controls were effective. The auditors identified valuation assumptions for future policy benefits and market-risk benefits as critical audit matters.
Investor verification priorities
- Review the reconciliation of GAAP losses to adjusted earnings, including derivative and guarantee valuation effects, and assess how LDTI affects comparability.
- Check current statutory capital, RBC ratios, subsidiary dividend capacity and any approvals required to move cash to the holding company.
- Assess liquidity against collateral calls, policyholder withdrawals, funding-agreement maturities and the $3.16 billion debt balance.
- Evaluate variable-annuity and ULSG hedge effectiveness, assumptions and stress sensitivities; compare reported GAAP volatility with statutory-capital outcomes.
- Review investment-portfolio credit quality, unrealized losses, commercial mortgage exposure and reinsurance recoverables, including counterparty concentration.
- Track legal and regulatory developments, the MOVEit matter, the disclosed contingency ranges and any developments in reinsurance arrangements.