Brighthouse May Use More Capital to Fuel Annuity Sales Growth

Sales of non-variable indexed annuities increased to $213 million, from $198 million, and sales of fixed deferred annuities soared to $1.8 billion, from $19 million.

Thanks to strong sales of fixed deferred annuities, total annuity sales increased to $3.7 billion, from $2.4 billion.

Capital

The Brighthouse combined risk-based capital ratio, or financial strength indicator, was between 450% and 470% during the third quarter, above the company’s target of 400% to 450% in normal markets.

The range dropped from 470% to 490% on June 30 because of a need to invest cash in issuing new, less risky products, and away from depending the old, high-risk variable annuities, Spehar said.

The Brighthouse holding company has plenty of cash, and the Brighthouse Life Insurance Company life insurance subsidiary has plenty of cash, but Brighthouse might have the life insurance subsidiary keep the cash it’s generating to support new sales rather than having the subsidiary pay the usual $250 million cash dividend to the holding company, Spehar added.

Brighthouse does not expect to have the holding company conptirbute capital to the life subsidiary to support the growth, he said.

Share Buybacks

In the past, Spehar said, Brighthouse has returned capital to shareholders by buying back about 42% of the shares it has issued, at an average price of about $38 per share.

Buying back shares can help a company’s shareholders by increasing the price of the shares and by increasing the level of earnings per share.

Spehar indicated that Brighthouse will think both about its business strategy and shareholders when deciding how to allocate capital.

“We want to invest in this business to grow, because, ultimately, to get to the valuation we think we deserve, we need to continue affect this mix,” he said.

Spehar suggested that Brighthouse understands the importance of capital return to shareholders but avoids telegraphing its share buyback moves.

“What we have consistently said on buybacks is that we’ll tell you what we do after we do it,” he said.

Pictured: Ed Spehar (Photo: MetLife)