Brighthouse Financial Announces First Quarter 2019 Results

• First quarter 2019 net loss available to shareholders of $737
  million, or $6.31 on a per diluted share basis, driven primarily by
  net derivative mark-to-market losses
• Adjusted earnings, less notable items*, of $259 million, or $2.21
  on a per diluted share basis
• Annuity sales grew 36 percent over the first quarter of 2018
• Variable annuity assets approximately $1.1 billion in excess of
  CTE98*
• Company repurchased $52 million of its common stock during the
  quarter; announced the repurchase of up to an additional $400 million
  shares of common stock

CHARLOTTE, N.C.–(BUSINESS WIRE)–Brighthouse Financial, Inc. (“Brighthouse Financial” or the “company”)
(Nasdaq: BHF) announced today its financial results for the first
quarter ended March 31, 2019.

First Quarter 2019 Results

The company reported a net loss available to shareholders of $737
million in the first quarter of 2019, or $6.31 on a per diluted share
basis, compared to a net loss available to shareholders of $67 million
in the first quarter of 2018. The company ended the first quarter of
2019 with stockholders’ equity (“book value”) of $15.0 billion, or
$129.10 on a per share basis, and book value, excluding preferred stock
and accumulated other comprehensive income (“AOCI”) of $12.9 billion, or
$111.18 on a per share basis.

For the first quarter of 2019, the company reported adjusted earnings*
of $232 million, or $1.98 on a per diluted share basis.

The adjusted earnings for the quarter reflected a $27 million
unfavorable notable item, or $0.23 on a per diluted share basis, for
establishment costs related to planned technology and branding expenses
associated with the company’s separation from its former parent company.

Corporate expenses in the first quarter of 2019 were $225 million
pre-tax, down from $233 million pre-tax in the fourth quarter of 2018.

Annuity sales increased 36 percent quarter-over-quarter and 1 percent
sequentially. The company’s first quarter 2019 sales results were its
highest since becoming an independent public company.

The company also announced today that it has authorized the repurchase
of up to $400 million of Brighthouse Financial common stock. This stock
repurchase authorization is in addition to the $200 million stock
repurchase authorization announced in August 2018. During the first
quarter of 2019, the company repurchased $52 million of its common
stock, with an additional $14 million of its common stock repurchased in
April 2019, bringing total repurchases pursuant to the August 2018
authorization to $171 million through April 30, 2019.

“Brighthouse delivered solid results during the first quarter of 2019,
driven by robust annuity sales, favorable market conditions, and prudent
capital and expense management,” said Eric Steigerwalt, president and
chief executive officer, Brighthouse Financial. “We remain focused on
executing our strategy, which we continue to believe will generate
long-term value for our customers, partners and shareholders.”

Key Metrics (Unaudited, dollars in millions except share and per
share amounts)

Results by Business Segment and Corporate & Other (Unaudited, in
millions)

Sales (Unaudited, in millions)

Annuities

Adjusted earnings in the Annuities segment were $295 million in the
current quarter, compared to adjusted earnings of $226 million in the
first quarter of 2018 and adjusted earnings of $175 million in the
fourth quarter of 2018.

There were no notable items in the current quarter or in the first
quarter of 2018. The fourth quarter of 2018 included a $12 million
favorable notable item.

On a quarter-over-quarter and sequential basis, adjusted earnings, less
notable items, reflect lower amortization of deferred acquisition costs
(“DAC”), lower reserves, and higher net investment income, driven
primarily by positive market performance in the quarter, partially
offset by lower fees.

As mentioned above, annuity sales increased 36 percent
quarter-over-quarter and 1 percent sequentially.

Life

Adjusted earnings in the Life segment were $25 million in the current
quarter, compared to adjusted earnings of $66 million in the first
quarter of 2018 and adjusted earnings of $64 million in the fourth
quarter of 2018.

There were no notable items in the current quarter. The first quarter of
2018 included $16 million of favorable notable items, while the fourth
quarter of 2018 did not include any notable items.

On a quarter-over-quarter basis, adjusted earnings, less notable items,
reflect higher claims and lower net investment income, partially offset
by lower expenses. On a sequential basis, adjusted earnings, less
notable items, reflect higher claims related to lower reinsurance
recoveries, and lower net investment income, partially offset by lower
DAC amortization.

Run-off

The Run-off segment had an adjusted loss of $36 million in the current
quarter, compared to adjusted earnings of $50 million in the first
quarter of 2018 and adjusted earnings of $18 million in the fourth
quarter of 2018.

There were no notable items in the current quarter while the first
quarter of 2018 included $16 million of favorable notable items. The
fourth quarter of 2018 included $14 million of favorable notable items.

On a quarter-over-quarter basis, the adjusted loss, less notable items,
reflects lower net investment income and higher claims related to lower
reinsurance recoveries. On a sequential basis, the adjusted loss, less
notable items, reflects lower net investment income.

Corporate & Other

Corporate & Other had an adjusted loss of $52 million in the current
quarter, compared to an adjusted loss of $59 million in the first
quarter of 2018 and an adjusted loss of $71 million in the fourth
quarter of 2018.

The current quarter includes a $27 million unfavorable notable item
related to establishment costs, as described above. The first quarter of
2018 included a $37 million unfavorable notable item and the fourth
quarter of 2018 included a $39 million unfavorable notable item.

On a quarter-over-quarter basis, the adjusted loss, less notable items,
reflects higher interest expense, partially offset by higher net
investment income. On a sequential basis, the adjusted loss, less
notable items, reflects lower expenses, partially offset by a
non-recurring tax benefit in the fourth quarter of 2018.

Net Investment Income and Adjusted Net Investment Income (Unaudited,
in millions)

Net Investment Income

Net investment income and adjusted net investment income for the first
quarter of 2019 were each $811 million. On a quarter-over-quarter and
sequential basis, adjusted net investment income decreased $14 million
and $52 million, respectively. These results were primarily driven by
lower alternative investment income, partially offset by growth in
average invested assets and the ongoing repositioning of the investment
portfolio.

The net investment income yield was 4.10 percent during the quarter.

Statutory Capital and Liquidity (Unaudited, in billions)

Capitalization

Holding company liquid assets were approximately $1.1 billion at
March 31, 2019.

Statutory combined total adjusted capital on a preliminary basis
decreased to approximately $6.3 billion at March 31, 2019, driven
primarily by net derivative mark-to-market losses.

Variable annuity assets were approximately $1.1 billion above the CTE98
level at March 31, 2019.

As previously announced, on March 25, 2019, the company issued
depositary shares each representing a 1/1,000th interest in a share of
its 6.600% Non-Cumulative Preferred Stock, Series A. The net proceeds of
$412 million were contributed to Brighthouse Life Insurance Company.

Earnings Conference Call

Brighthouse Financial will hold a conference call and audio webcast to
discuss its financial results for the first quarter of 2019 at 8:00 a.m.
Eastern Time on Tuesday, May 7, 2019.

To listen to the audio webcast via the internet and to access the
related presentation, please visit the Brighthouse Financial Investor
Relations web page at http://investor.brighthousefinancial.com.
To join the conference call via telephone please dial (844) 358-9117 (+1
(209) 905-5952 from outside the U.S.) and use conference ID 3895856.

A replay of the conference call will be made available until Friday, May
24, 2019 on the Brighthouse Financial Investor Relations web page at http://investor.brighthousefinancial.com.

Note Regarding Forward-Looking Statements

This news release 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-looking statements involve
substantial risks and uncertainties. We have tried, wherever possible,
to identify such statements using words such as “anticipate,”
“estimate,” “expect,” “project,” “may,” “will,” “could,” “intend,”
“goal,” “target,” “guidance,” “forecast,” “preliminary,” “objective,”
“continue,” “aim,” “plan,” “believe” and other words and terms of
similar meaning, or that are tied to future periods, in connection with
a discussion of future operating or financial performance. In
particular, these include, without limitation, statements relating to
future actions, prospective services or products, future performance or
results of current and anticipated services or products, sales efforts,
expenses, the outcome of contingencies such as legal proceedings, trends
in operating and financial results, as well as statements regarding the
expected benefits of the separation (the “Separation”) from MetLife,
Inc. (“MetLife”).

Any or all forward-looking statements may turn out to be wrong. They can
be affected by inaccurate assumptions or by known or unknown risks and
uncertainties. Many such factors will be important in determining the
actual future results of Brighthouse Financial. These statements are
based on current expectations and the current economic environment and
involve a number of risks and uncertainties that are difficult to
predict. These statements are not guarantees of future performance.
Actual results could differ materially from those expressed or implied
in the forward-looking statements due to a variety of known and unknown
risks, uncertainties and other factors. Although it is not possible to
identify all of these risks and factors, they include, among others:
differences between actual experience and actuarial assumptions and the
effectiveness of our actuarial models; higher risk management costs and
exposure to increased market and counterparty risk due to guarantees
within certain of our products; the effectiveness of our variable
annuity exposure management strategy and the impact of such strategy on
net income volatility and negative effects on our statutory capital; the
reserves we are required to hold against our variable annuities as a
result of actuarial guidelines; a sustained period of low equity market
prices and interest rates that are lower than those we assumed when we
issued our variable annuity products; the potential material adverse
effect of changes in accounting standards, practices and/or policies
applicable to us, including changes in the accounting for long-duration
contracts; our degree of leverage due to indebtedness; the effect
adverse capital and credit market conditions may have on our ability to
meet liquidity needs and our access to capital; the impact of changes in
regulation and in supervisory and enforcement policies on our insurance
business or other operations; the effectiveness of our risk management
policies and procedures; the availability of reinsurance and the ability
of our counterparties to our reinsurance or indemnification arrangements
to perform their obligations thereunder; heightened competition,
including with respect to service, product features, scale, price,
actual or perceived financial strength, claims-paying ratings, credit
ratings, e-business capabilities and name recognition; the ability of
our insurance subsidiaries to pay dividends to us, and our ability to
pay dividends to our shareholders; our ability to market and distribute
our products through distribution channels; any failure of third parties
to provide services we need, any failure of the practices and procedures
of these third parties and any inability to obtain information or
assistance we need from third parties, including MetLife; whether all or
any portion of the tax consequences of the Separation are not as
expected, leading to material additional taxes or material adverse
consequences to tax attributes that impact us; the uncertainty of the
outcome of any disputes with MetLife over tax-related or other matters
and agreements including the potential of outcomes adverse to us that
could cause us to owe MetLife material tax reimbursements or payments or
disagreements regarding MetLife’s or our obligations under our other
agreements; the impact on our business structure, profitability, cost of
capital and flexibility due to restrictions we have agreed to that
preserve the tax-free treatment of certain parts of the Separation; the
potential material negative tax impact of potential future tax
legislation that could decrease the value of our tax attributes and
cause other cash expenses, such as reserves, to increase materially and
make some of our products less attractive to consumers; whether the
Separation will qualify for non-recognition treatment for federal income
tax purposes and potential indemnification to MetLife if the Separation
does not so qualify; the impact of the Separation on our business and
profitability due to MetLife’s strong brand and reputation, the
increased costs related to replacing arrangements with MetLife with
those of third parties and incremental costs as a public company;
whether the operational, strategic and other benefits of the Separation
can be achieved, and our ability to implement our business strategy; our
ability to attract and retain key personnel; and other factors described
from time to time in documents that we file with the U.S. Securities and
Exchange Commission (the “SEC”).

For the reasons described above, we caution you against relying on any
forward-looking statements, which should also be read in conjunction
with the other cautionary statements included and the risks,
uncertainties and other factors identified in our Annual Report on Form
10-K for the year ended December 31, 2018, particularly in the sections
entitled “Risk Factors” and “Quantitative and Qualitative Disclosures
About Market Risk,” as well as in our subsequent filings with the SEC.
Further, any forward-looking statement speaks only as of the date on
which it is made, and we undertake no obligation to update or revise any
forward-looking statement to reflect events or circumstances after the
date on which the statement is made or to reflect the occurrence of
unanticipated events, except as otherwise may be required by law.

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 accounting principles generally accepted in the
United States of America, also known as “GAAP.” We believe that these
non-GAAP financial measures highlight our results of operations and the
underlying profitability drivers of our business, as well as enhance the
understanding of our performance by the investor community.

The following non-GAAP financial measures, previously referred to as
operating measures, should not be viewed as substitutes for the most
directly comparable financial measures calculated in accordance with
GAAP:

Reconciliations to the most directly comparable historical GAAP measures
are included for those measures which are presented herein.
Reconciliations of these non-GAAP financial measures to the most
directly comparable GAAP financial measures are not accessible on a
forward-looking basis because we believe it is not possible without
unreasonable efforts to provide other than a range of net investment
gains and losses and net derivative gains and losses, which can
fluctuate significantly within or outside the range and from period to
period and may have a material impact on net income (loss) available to
shareholders.

Adjusted Earnings, Adjusted Revenues and Adjusted Expenses

Adjusted earnings, which may be positive or negative, is used by
management to evaluate performance, allocate resources and facilitate
comparisons to industry results. This financial measure focuses on our
primary businesses principally by excluding the impact of market
volatility, which could distort trends.

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 calculate adjusted revenues and
adjusted expenses, respectively.

The following are significant items excluded from total revenues, net of
income tax, in calculating the adjusted revenues component of adjusted
earnings:

• Net investment gains (losses);
• Net derivative gains (losses) (“NDGL”), except earned income on
  derivatives that are hedges of investments or that are used to
  replicate certain investments, but do not qualify for hedge accounting
  treatment (“Investment Hedge Adjustments”); and
• Certain variable annuity GMIB fees (“GMIB Fees”) and amortization of
  unearned revenue related to net investment gains (losses) and net
  derivative gains (losses).

The following are significant items excluded from total expenses, net of
income tax, in calculating the adjusted expenses component of adjusted
earnings:

• Amounts associated with benefits and hedging costs related to GMIBs
  (“GMIB Costs”);
• Amounts associated with periodic crediting rate adjustments based on
  the total return of a contractually referenced pool of assets and
  market value adjustments associated with surrenders or terminations of
  contracts (“Market Value Adjustments”); and
• Amortization of DAC and value of business acquired (“VOBA”) related to
  (i) net investment gains (losses), (ii) net derivative gains (losses),
  (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments.

The tax impact of the adjustments mentioned is calculated net of the
statutory tax rate, which could differ from our effective tax rate.

Consistent with GAAP guidance for segment reporting, adjusted earnings
is also our GAAP measure of segment performance.

Adjusted Earnings per Common Share and Adjusted Return on Equity

Adjusted earnings per common share and adjusted return on equity are
measures used by management to evaluate the execution of our business
strategy and align such strategy with our shareholders’ interests.

Adjusted earnings per common share is defined as adjusted earnings for
the period divided by the weighted average number of fully diluted
shares of common stock outstanding for the period.

Adjusted return on equity is defined as total annual adjusted earnings
on a four quarter trailing basis, divided by the simple average of the
most recent five quarters of total Brighthouse Financial, Inc.’s
stockholders’ equity, excluding preferred stock and AOCI.

Adjusted Net Investment Income

We present adjusted net investment income to measure our performance for
management purposes, and we believe it enhances the understanding of our
investment portfolio results. Adjusted net investment income represents
net investment income including investment hedge adjustments.

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 items

Certain of the non-GAAP measures described above may be presented
further adjusted to exclude notable items.

Contacts

FOR INVESTORS
David Rosenbaum
(980) 949-3326
[email protected]

FOR MEDIA
Meghan Lantier
(980) 949-4142
[email protected]

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