Q4 2021 Brighthouse Financial Inc Earnings Call

Speaker 1: Good morning ladies and gentlemen and welcome to Bright House Financial's fourth quarter and full year 2021.

Good morning, ladies and gentlemen, and welcome to Brighthouse Financial's fourth quarter and full year 2021 earnings conference call.

Speaker 1: My name is Shannon and I will be your coordinator today. At this time, all participants are in a listen-only mode.

Ms Shannon and I will be your coordinator today at this time all participants are in a listen only mode.

Speaker 1: We will facilitate a question and answer session towards the end of the conference call.

We'll facilitate a question and answer session towards the end of the conference call and.

Speaker 1: fairness to all participants, please limit yourself to one question and one follow-up. As a reminder, the conference is adjourned.

In fairness to all participants please limit yourself to one question and one follow up.

As a reminder, the conference is being recorded for replay purposes.

Speaker 1: Also, we ask that you refrain from using cell phones, speaker phones, or headsets during the question and answer portion of today's call. I would now like to turn the presentation over to Dana Amante, Head of Investment Services

Also we ask that you refrain from using cell phones speaker phones are his sets during the question and answer portion of today's call.

I would now like to turn the presentation over to Dana Marty head of Investor Relations Ms. <unk> you May proceed.

Speaker 2: Thank you. Good morning. Thank you for joining Bright House Financial's fourth quarter and full year 2021 earnings call. Our earnings release, slide presentation and financial supplement were released last night and can be accessed on the investor relations section of our website.

Thank you. Good morning, Thank you for joining Brighthouse Financial's fourth quarter and full year 2021 earnings call.

Earnings release Slide presentation, and financial supplement were released last night and can be accessed on the Investor Relations section of our website.

We encourage you to review all of these materials.

Speaker 2: Today, you will hear from Eric Stagowal, our President and Chief Executive Officer, and Ed Spiehar, our Chief Financial Officer.

Today, you will hear from Eric Steigerwalt, our President and Chief Executive Officer, and SBR, Our Chief Financial Officer. Following our prepared remarks, we will open the call up for a question and answer period.

Speaker 2: Following our prepared remarks, we will open the call up for a question and answer period. Also here with us today to participate in the discussions are other members of Senior...

Also here with us today to participate in the discussions are other members of senior management.

Speaker 2: Our discussion during this call may include forward-looking statements within the meaning of the federal securities laws. Bright House Financial's actual results may differ materially from the results anticipated in the forward-looking statements as a result of risks and uncertainties described from time to time in Bright House Financial's filings with the U.S. Securities and Exchange Commission.

Our discussion during this call may include forward looking statements within the meaning of the federal Securities laws Brighthouse Financial's actual results may differ materially from the results anticipated in the forward looking statements as a result of risks and uncertainties described from time to time in Brighthouse Financial's filings with the U S Securities and exchange can.

Mission.

Speaker 2: Information discussed on today's call speaks only as of today, February 11, 2022.

Information discussed on today's call speaks only as of today February 11 2022.

Speaker 2: The company undertakes no obligations to update any information discussed on today's call.

The company undertakes no obligations to update any information discussed on today's call.

Speaker 2: During this call, we will be discussing certain financial measures used by management that are not based on generally accepted accounting principles, also known as non-GAAP measures. Reconciliations of these non-GAAP measures on a historical basis to the most directly comparable GAAP measures and related definitions may be found on the investor relations portion of our website in our earnings release, slide presentation, or financial supplements.

During this call we will be discussing certain financial measures used by management that are not based on generally accepted accounting principles also known as non-GAAP measures reconciliations of these non-GAAP measures on a historical basis to the most directly comparable GAAP measures and related definitions may be found on the <unk>.

After relations portion of our website in our earnings release slide presentation or financial supplement.

Speaker 2: And finally, references to statutory results, including certain statutory-based measures used by management, are preliminary due to the timing of the filing of the statutory statements. And now I'll turn the call over to our CEO , Eric Stark.

And finally references to statutory results, including certain statutory based measures used by management are preliminary due to the timing of the filing of the statutory statements and now I'll turn the call over to our CEO Eric Steigerwalt.

Speaker 3: Thank you, Dana. Good morning, everyone, and thank you all for joining us.

Thank you Dana good morning, everyone and thank you all for joining us I am pleased to share that 2021 was another strong year for Brighthouse financial.

Speaker 3: I am pleased to share that 2021 was another strong year for Bright House Financial. Despite the challenges resulting from the COVID-19 pandemic, we remain steadfastly focused on our mission and strategy and on delivering for our customers, partners, and shareholders.

Despite the challenges, resulting from the COVID-19 pandemic, we remain steadfastly focused on our mission and strategy and on delivering for our customers partners and shareholders.

Speaker 3: Thanks to the tremendous dedication of our employees, we accomplished many important strategic milestones in 2021, including

Thanks to the tremendous dedication of our employees, we accomplished many important strategic milestones in 2021, including.

Speaker 3: We achieved our target of returning $1.5 billion to our shareholders by the end of 2021.

We achieved our target of returning $1 5 billion to our shareholders by the end of 2021.

Speaker 3: As a result, we have reduced the number of shares outstanding relative to when we became an independent public company in 2017 by 35%. That includes $499 million of our common stock that we repurchased in 2021, representing a reduction of 12% of shares outstanding relative to year-end 2020.

As a result, we have reduced the number of shares outstanding relative to when we became an independent public company in 2017 by 35% that includes $499 million of our common stock that we repurchased in 2021, representing a reduction.

<unk> of 12% of shares outstanding relative to year end 2020.

Speaker 3: We continued to optimize statutory capital to further strengthen the balance sheet and paid subsidiary ordinary dividends totaling $594 million to the holding company, primarily consisting of $550 million from Bright House Life Insurance Company, or BLEC.

We continue to optimize statutory capital to further strengthen the balance sheet and paid subsidiary ordinary dividends totaling $594 million to the holding company.

Primarily consisting of $550 million from Brighthouse life insurance company or black.

Speaker 3: Sales of both annuities and life insurance were very strong throughout the year. In each of the first three quarters of 2021, we delivered record sales for both our flagship shield level annuities and our variable annuities with flex choice access.

Sales of both annuities and life insurance were very strong throughout the year.

In each of the first three quarters of 2021, we delivered record sales for both our flagship shield level annuities and variable annuities with choice access.

Speaker 3: The strong sales continued in the fourth quarter, resulting in a record year of total annuity sales in 2021.

The strong sales continued in the fourth quarter, resulting in a record year of total annuity sales in 2021.

Speaker 3: Life insurance sales grew steadily throughout the year and were ahead of our expectations.

Life insurance sales grew steadily throughout the year and we're ahead of our expectations.

Speaker 3: We continue to expand our distribution footprint and enhance the way we support financial professionals and the clients they serve.

We continued to expand our distribution footprint and enhance the way, we support financial professionals and the clients they serve.

Speaker 3: During the year, we added new distribution relationships, including the addition of our newities to the Simon Marketplace.

During the year, we added new distribution relationships, including the addition of our annuities to the Simon marketplace.

Speaker 3: We also added more life insurance wholesalers, rolled out smart care to more firms, selectively expanded into the brokerage general agency or BGA distribution channel, and rolled out enhancements to our shield level annuities and smart care.

We also added more life insurance wholesalers rolled out smart care to more firms selectively expanded into the brokerage general agency or PGA distribution channel and we rolled out enhancements to our shield level annuities and smart care.

Speaker 3: We launched our institutional spread margin business, which we expect will enhance and diversify our earnings profile over time.

We launched our institutional spread margin business, which we expect will enhance and diversify our earnings profile over time.

Speaker 3: We achieved almost 90% of our run rate expense reduction relative to the first year post-separation, while simultaneously making strategic investments in 2021 to start up the institutional spread margin business and fund future growth.

We achieved almost 90% of our run rate expense reduction relative to the first year post separation, while simultaneously, making strategic investments in 2021 to start up the institutional spread margin business and fund future growth.

Speaker 3: Some of these investments allowed us to provide better support to our distributors and their financial professionals as well as our policyholders and contract holders.

Some of these investments allowed us to provide better support to our distributors and their financial professionals as well as our policyholders and contract holders.

Speaker 3: And finally, we completed a major platform conversion as we continue our efforts to implement our future state operations and technology platform.

And finally, we completed a major platform conversion as we continue our efforts to implement our future state operations and technology platform turning to our fourth quarter results, our balance sheet and liquidity position remained robust in the fourth quarter and we estimate our combined risk based <unk>.

Speaker 3: Our balance sheet and liquidity position remained robust in the fourth quarter, and we estimate our combined risk-based capital, or RBC, ratio was approximately 500%.

Capital or RBC ratio was approximately 500%. Additionally, we ended the year with holding company liquid assets of $1 6 billion.

Speaker 3: Additionally, we ended the year withholding company liquid assets of $1.6 billion.

Speaker 3: BrightHouse delivered strong sales results in the fourth quarter. Annuity sales were $2.4 billion driven by variable annuity and shield product sales of $2 billion combined.

Brighthouse delivered strong sales results in the fourth quarter.

<unk> sales were $2 $4 billion, driven by variable annuity and shield product sales of $2 billion combined.

Speaker 3: Total VA and SHIELD sales were up 14% compared with the fourth quarter of 2020.

Total VA and shield sales were up 14% compared with the fourth quarter of 2020.

Speaker 3: Fixed rate annuity sales were lower quarter over quarter, as expected.

Fixed rate annuity sales were lower quarter over quarter as expected.

Speaker 3: As I have mentioned previously, we took repricing actions in the second half of 2020, given the low interest rate environment.

As I have mentioned previously we took repricing actions in the second half of 2020, given the low interest rate environment.

Speaker 3: Additionally, we generated approximately $35 million of life insurance sales in the fourth quarter of 2021, an increase of 133% compared with the fourth quarter of 2020, and an increase of 30% compared with the third quarter of 2021.

Additionally, we generated approximately $35 million of life insurance sales in the fourth quarter of 2021 and.

An increase of 133% compared with the fourth quarter of 2020.

We had an increase of 30% compared with the third quarter of 2021.

Speaker 3: As I said, we delivered steady growth in life insurance sales in 2021, which is a result of the focus and execution on our life insurance strategy, including the addition of new distribution partners and bringing on additional wholesalers.

As I said, we delivered steady growth in life insurance sales in 2021, which is a result of the focus and execution on our life insurance strategy, including the addition of new distribution partners and bringing on additional wholesalers.

Speaker 3: We couldn't be more pleased with our sales results last year. Before moving your expenses, I would like to thank our distribution partners for all they do on behalf of their clients and our customers every day.

We couldnt be more pleased with our sales results last year.

Before moving to expenses I would like to thank our distribution partners for all they do on behalf of their clients and our customers every day.

Speaker 3: Now turning to expenses. Corporate expenses, which do not include establishment costs, were $247 million before tax in the fourth quarter.

Now turning to expenses corporate expenses, which do not include establishment costs were $247 million before tax in the fourth quarter.

Speaker 3: Establishment costs were approximately $27 million before tax.

Establishment costs were approximately $27 million before tax.

Speaker 3: I am pleased with the results for both the full year and fourth quarter of 2021.

I am pleased with the results for both the full year and fourth quarter of 2021.

Speaker 3: We have made significant progress in 2021, and we believe we remain well positioned to continue to execute on our focused strategy in 2022.

We have made significant progress in 2021, and we believe we remain well positioned to continue to execute on our focused strategy in 2022.

Speaker 3: We continue to prudently manage statutory capital and target a combined RBC ratio of between 400 and 450% in normal markets.

We continue to prudently manage statutory capital.

We target a combined RBC ratio of between 400 and 450% in normal markets.

Speaker 3: In addition, our business mix will continue to evolve by adding more high quality new business.

In addition, our business mix will continue to evolve by adding more high quality new business, we expect to see a continued shift in our business mix profile over time, as we add more higher cash flow generating and less capital intensive business copper.

Speaker 3: We expect to see a continued shift in our business mix profile over time as we add more, higher cash flow generating and less capital intensive business.

Speaker 3: coupled with the runoff of older, less profitable business.

Coupled with the run off of older less profitable business.

Speaker 3: As we enhance our existing products, develop new ones, and expand our distribution reach, we expect to see continued sales growth across annuities and life insurance.

As we enhance our existing products develop new ones and expand our distribution reach we expect to see continued sales growth across annuities and life insurance.

Speaker 3: And we remain very excited about being one of two annuity providers selected to help deliver BlackRock's LifePath Paycheck, an investment solution that is designed to provide millions of American workers with simplified access to lifetime income throughout their retirement.

And we remain very excited about being one of two annuity provider selected to help deliver blackhawks lifestyle paycheck and investment solution that is designed to provide millions of American workers with simplified access to lifetime income throughout their retirement.

Speaker 3: We have significantly reduced corporate expenses, and we plan to continue to manage expenses effectively to drive our statutory expense ratio down over time.

We have significantly reduced corporate expenses.

And we plan to continue to manage expenses effectively to drive our statutory expense ratio down over time.

Speaker 3: Additionally, we will continue to prudently manage the exit of the remaining transition services agreements as we implement our future state operations and technology platform.

Additionally, we will continue to prudently manage the exit of the remaining transition services agreements as we implement our future state operations and technology platform.

Speaker 3: We expect the remaining establishment costs to occur in 2022.

We expect the remaining establishment costs to occur in 2022.

Speaker 3: Lastly, we intend to continue to deliver on our ongoing commitment to return capital to our shareholders.

Lastly, we intend to continue to deliver on our ongoing commitment to return capital to our shareholders.

Speaker 3: Year to date through February 8th of this year, we have repurchased $57 million of our common stock.

Year to date through February eight of this year, we have repurchased $57 million of our common stock.

Speaker 3: To wrap up, Bright House Financial made significant progress in 2021. We continue to believe that we have the right strategy in place, and we remain focused and well positioned to continue the execution of our strategy.

To wrap up Brighthouse financial made significant progress in 2021, we continue to believe that we have the right strategy in place and we remain focused and well positioned to continue the execution of our strategy.

Speaker 3: As the Bright House Financial Franchise grows and evolves to include a more diversified business mix, we are committed to consistently driving shareholder value.

As the Brighthouse financial franchise grows and evolves to include a more diversified business mix.

We are committed to consistently driving shareholder value.

Speaker 3: With that, I will turn the call over to Ed to discuss financial results. Ed. Thank you.

With that I will turn the call over to Ed to discuss financial results.

Ed.

Thank you Eric good morning, everyone.

Speaker 4: Bright House Financial reported strong results for the fourth quarter and full year of 2021.

Brighthouse financial reported strong results for the fourth quarter and full year of 2021.

Speaker 4: Favorable equity market performance and higher interest rates provided a positive backdrop for the year.

Favorable equity market performance and higher interest rates provided a positive backdrop for the year.

Speaker 4: We further strengthened the balance sheet and ended the year with an estimated combined risk-based capital, or RBC, ratio of approximately 500%.

We further strengthened the balance sheet and ended the year with an estimated combined risk based capital or RBC ratio of approximately 500%.

Speaker 4: well above our target range of 400% to 450% in normal markets.

Well above our target range of 400% to 450% in normal markets.

Speaker 4: and up from our year-end 2020 combined RBC ratio of 487%.

And up from our year end 2020, combined RBC ratio of 487%.

Speaker 4: Statutory combined total adjusted capital, or TAC, was approximately $9.5 billion on December 31st.

Statutory combined total adjusted capital or TAC was approximately $9 5 billion at December 31.

Compared with $9 8 billion at September 30th.

Speaker 4: compared with $9.8 billion at September 30.

Speaker 4: The decrease is explained by $344 million of subsidiary ordinary dividends paid to the holding company in the quarter.

The decrease is explained by $344 million of subsidiary ordinary dividends paid to the holding company in the quarter.

Looking at year over year.

Speaker 4: Favorable equity markets and rising interest rates help drive a $900 million increase in TAC from year end 2020.

Favorable equity markets and rising interest rates helped drive a $900 million increase in Tac from year end 2020.

Speaker 4: Additionally, in 2021, the operating companies paid total ordinary dividends of $594 million to the holding company.

Additionally, in 2021, the operating companies paid total ordinary dividends of $594 million to the holding company.

Speaker 4: The total Bright House Life Insurance Company, or BLIC, ordinary dividend paid in 2021 was more than double our initial plan for last year. Turning to the next slide, please.

The total Brighthouse life insurance company or blip ordinary dividend paid in 2021.

It was more than double our initial plan for last year.

Turning to normalized statutory earnings.

This metric was close to breakeven in the fourth quarter.

Speaker 4: For the full year, the normalized statutory loss was approximately $300 million.

For the full year, the normalized statutory loss was approximately $300 million.

Speaker 4: Strong Core Variable Annuity, or VA, results were more than offset by a $200 million to $250 million dollar negative impact.

Strong core variable annuity or VA results were more than offset by a 200 million to $250 million negative impact from a decline in the statutory mean reversion point for interest rates.

Speaker 4: from a decline in the statutory mean reversion point for interest rates and a loss in non-VA.

And a loss in non VA.

As I discussed on our last earnings call normalized statutory earnings is meant to give an indication of excess capital generation and normal to good markets and to measure our performance managing risk in bad markets.

Speaker 4: Normalized statutory earnings is meant to give an indication of excess capital generation in normal to good markets and to measure our performance managing.

Speaker 4: Importantly, this measure in its current form was introduced prior to the adoption of VA reform.

Importantly, this measure in its current form was introduced prior to the adoption of VA reform.

Speaker 4: Starting this year, we are redefining normalized statutory earnings to better align with VA reform, and therefore movement in the RBC ratio.

Starting this year, we are redefining normalized statutory earnings to better align with VA reform.

And therefore, a movement in the RBC ratio.

Speaker 4: At an operating company level, we believe that the RBC ratio is the best indicator of excess capital generation over time.

At an operating company level, we believe that the RBC ratio is the best indicator of excess capital generation over time.

Speaker 4: Cash at the holding company is the other important indicator of excess cash.

Cash at the holding company is the other important indicator of excess capital.

Speaker 4: Holding company Liquid Assets were $1.6 billion at December 31st.

Holding company liquid assets were $1 6 billion at December 31.

Speaker 4: up from $1.5 billion at September 30th.

Up from $1 5 billion at September 30.

Speaker 4: Also, in the fourth quarter, we took advantage of historically low holding company funding.

Also in the fourth quarter, we took advantage of historically low holding company funding costs by extending debt maturities and adding more fixed for life preferred equity capital.

Speaker 4: by extending debt maturities and adding more fixed-for-life preferred equity capital.

Speaker 4: We issued $400 million of 30-year senior notes and $350 million of preferred stock.

We issued $400 million.

<unk> 30 year senior notes and $350 million of preferred stock.

Speaker 4: The net proceeds were used to repurchase approximately $680 million of senior notes with a weighted average maturity of approximately 10 years. As we look to 2020, the net proceeds were used to repurchase approximately $680 million of senior notes with a weighted average maturity of approximately 10 years.

The net proceeds were used to repurchase approximately $680 million of senior notes with a weighted average rate weighted average maturity of approximately 10 years.

As we look to 2022.

Balance sheet strength remains a top priority.

Speaker 4: And we continue to manage the company using a multi-year, multi-scenario framework to evaluate capital, liquidity, and subsidiary dividend plans to the whole.

And we continue to manage the company using a multi year multi scenario framework to evaluate capital liquidity and subsidiary dividend plans to the holding company.

Speaker 4: In 2022, total subsidiary ordinary dividend capacity is approximately $1.3 billion.

In 2022 total subsidiary ordinary dividend capacity is approximately $1 $3 billion.

Speaker 4: and we currently expect to pay ordinary dividends to the holding company of approximately $300 million.

And we currently expect to pay ordinary dividends to the holding company of approximately $300 million.

Shifting to adjusted earnings.

Speaker 4: Fourth quarter adjusted earnings, excluding the impact from notable items, were $416 million.

Fourth quarter adjusted earnings excluding the impact from notable items were $416 million.

Speaker 4: which compares with adjusted earnings on the same basis of $514 million in the third quarter of 2021 and $272 million in the fourth quarter of 2020.

Which compares with adjusted earnings on the same basis of $514 million in the third quarter of 2021.

And $272 million in the fourth quarter of 2020.

The notable items on an after tax basis were.

Speaker 4: $59 million debt repayment expense in corporate and other associated with the repurchase of the company's senior notes

A $59 million debt repayment expense in corporate and other associated with the repurchase of the company's senior notes.

Speaker 4: establishment costs of $21 million, included in corporate and other.

Establishment costs of $21 million included in corporate and other.

Speaker 4: and $13 million net unfavorable actuary lighting.

And $13 million net unfavorable actuarial items, including reinsurance recaptures and the run off segment.

Speaker 4: including reinsurance recaptures in the runoff segment, refinements to certain actuarial assumptions.

Refinements to certain actuarial assumptions.

Speaker 4: And valuation systems conversions associated with our transition to the future state.

And valuation systems conversions associated with our transition to the future state platform.

Speaker 4: There are two key themes when we think about the fourth quarter adjusted earnings results, compared with the quarterly adjusted earnings expectations.

There are two key themes when we think about the fourth quarter adjusted earnings results compared with Accordingly adjusted earnings expectation.

Speaker 4: First, while net investment income was lower sequentially, it was still very strong in the fourth quarter.

First while net investment income was lower sequentially. It was still very strong in the fourth quarter.

Speaker 4: primarily due to a 7.5% alternative investment return.

Primarily due to a seven 5% alternative investment return.

Speaker 4: Net investment income was approximately $165 million above a quarterly run rate expectation on an after tax base.

Net investment income was approximately $165 million above our quarterly run rate expectation on an after tax basis.

Speaker 4: For the full year, the Alternative Investment Return was 42.6%, which greatly exceeded the 9% to 11% annual return we anticipate for this asset class.

For the full year. The alternative investment return was 42, 6%, which greatly exceeded the 9% to 11% annual return we anticipate for this asset class.

Second the fourth quarter underwriting margin, which included $34 million of pre tax net claims related to COVID-19 was lower sequentially.

Speaker 4: which included $34 million of pretax net claims related to COVID-19, was lower sequentially.

Speaker 4: There is variability in the underwriting margin throughout the year, driven by fluctuations in a number of factors.

There is variability in the underwriting margin throughout the year driven by fluctuations in a number of factors, including frequency of claims severity of claims and the offset from reinsurance.

Speaker 4: including frequency of claims, severity of claims, and the offset from re-insurance.

Speaker 4: As we have previously communicated, we expect direct claims on a quarterly basis to average between $400 million and $500 million.

As we have previously communicated we expect direct claims on a quarterly basis to average between $400 million and $500 million.

Speaker 4: In the fourth quarter, we were at the higher end of that range as we experienced a higher volume of direct claims.

In the fourth quarter, we were at the higher end of that range as we experienced a higher volume of direct claims.

Moving to adjusted earnings at the segment level.

Speaker 4: Annuity Adjusted Earnings, excluding notable items, were $361 million in the quarter.

Annuity adjusted earnings excluding notable items were $361 million in the quarter.

Speaker 4: Sequentially, annuity results were driven by lower amortization of Deferred Acquisition Costs, or DAC, and a—

Sequentially annuity results were driven by lower amortization of deferred acquisition costs or DAC.

And a smaller increase in reserves.

Speaker 4: both as a result of the favorable market performance in the quarter.

Both as a result of the favorable market performance in the quarter.

Speaker 4: This was partially offset by lower fees and higher expenses.

This was partially offset by lower fees and higher expenses.

The life segment reported adjusted earnings excluding notable items of $58 million in the quarter.

Speaker 4: The life segment reported adjusted earnings, excluding notable items, of $58 million in the quarter.

On a sequential basis results reflect lower net investment income.

Speaker 4: Results reflect lower net investment income, a lower underwriting margin, and higher expense.

Underwriting margin and higher expenses.

Speaker 4: Adjusted earnings in the runoff segment, excluding notable items, were $6 million in the quarter.

Adjusted earnings in the run off segment, excluding notable items were $6 million in the quarter.

Speaker 4: Sequentially, results were driven by lower net investment income, a lower underwriting margin,

Sequentially results were driven by lower net investment income.

The lower underwriting margin.

Speaker 4: and a tax true-up that was offset in the corporate and other sectors.

And a tax true up that was offset in the corporate and other segment.

Corporate and other had an adjusted loss excluding notable items of $9 million.

Speaker 4: Corporate and other had an adjusted loss, excluding notable items, of $9 million.

Sequentially results reflect a higher tax benefit and the previously mentioned tax true up.

Speaker 4: Sequentially, results reflect a higher tax benefit and the previously mentioned tax truer.

Speaker 4: Before I conclude, I would like to mention that we plan to provide an update in March on distributable learnings, as we have done in prior years.

Before I conclude I would like to mention that we plan to provide an update in March on distributable earnings as we have done in prior years.

Speaker 4: Overall, I'm very pleased with the fourth quarter and full year 2021 results.

Overall, I'm very pleased with the fourth quarter and full year 2021 results.

Speaker 4: We continued to optimize statutory capital, strengthen the balance sheet, and return a substantial amount of capital to share.

We continued to optimize statutory capital strengthen the balance sheet and return a substantial amount of capital to shareholders.

Speaker 4: With that, we would like to turn the call over to the operator for your questions.

With that we would like to turn the call over to the operator for your questions.

Thank you.

Speaker 1: You as a reminder: to ask a question, you will need to press star one of your telephone to withdraw your question. Press the pounkey. Please stand by we.

Binder to ask a question you will need to press star one on your telephone.

Sorry, Your question press the pound key please standby, while we compile the Q&A roster.

Speaker 1: Our first question comes from Tom Gallagher with Evercore. Your line is up.

Our first question comes from Tom Gallagher with Evercore. Your line is open.

Yes.

Speaker 4: Good morning. First, just a question on capital generation in the quarter. Ed, I think I heard you mention 200 to 250 million negative mean reversion interest rate adjustment. Was that done this quarter? Was that like a true up done this quarter?

Good morning.

First just a question on capital generation in the quarter, Ed I think I heard you had mentioned 200 to 250 million negative mean reversion interest rate adjustment was that was that done this quarter was that like a true up done this quarter.

Speaker 4: Hey, good morning, Tom. No, that was the impact we had in the first quarter.

Hey, Good morning, Tom No that was the impact we had in the first quarter of last year.

Speaker 4: So what you're talking about in the fourth quarter, I think, is

So what youre talking about in the fourth quarter I think is.

Speaker 4: Norm adjustments on a statutory basis. So the actuarial items and other insurance adjustments line when we talk about the norm stat earnings disclosure in the supplement.

Norm adjustments on a statutory basis, so the actuarial items and other insurance adjustments line when we talk about.

The norm Stat earnings disclosure in the supplement.

Speaker 4: Let me give you a little color on it. I think it's important to understand the movement and the RBC ratio. In the fourth quarter, we made substantial progress on transitioning to our future state platform in actuarial. And as a reminder, this is movement away from multiple valuation systems and customized models to one valuation platform and more standardized.

And let me give you a little color on I think it's important to understand the movement of the RBC ratio in the fourth quarter, we made substantial progress on transitioning to our future state platform and actuarial and as a reminder, this is movement away from multiple valuation systems and customized models too.

<unk>, one valuation platform and more standardized models and so this has created and will continue to create more time for value added analysis more flexibility and also a better control environment.

Speaker 4: And so this is created and will continue to create more time for value-added analysis, more flexibility, and also a better control environment. The fourth quarter was a busy quarter for this.

Fourth quarter was a busy quarter for this and we had three models that were fully.

Speaker 4: three models that were fully put into production for three product lines. The total statutory reserves we're talking about is around $33 billion.

Put into production.

For three product lines. The total statutory reserves were talking about is around $33 billion.

Speaker 4: So one thing to think about when you look at these conversions, it's sort of like an actuarial assumption review for the associated product line. So while we had gone through our review in the third quarter, every time you do this model conversion, you're looking very closely at the one model versus the other model and the difference.

No.

One thing to think about when you look at these conversions, it's sort of like an actuarial assumption review for the associated product lines. So while we had gone through a review in the third quarter. Every time you do this model conversion Youre looking very closely at the one model versus the other model and the differences.

Speaker 4: And so as a result of this, in the fourth quarter, there was a negative impact on TAC and the RBC from the transition to the future state. And this really explains the sequential change in the RBC ratio that you see on top of the impact you calculated from the dividends we paid up to the holding.

So as a result of this in the fourth quarter, there was a negative impact on Tac and the RBC from the transition to the future state and this really explains the sequential change in the RBC ratio.

That you see.

On top of the impact you calculated from the dividends, we paid up to the holding company.

Speaker 4: So, you know, that's really the driver of this incremental change in RBC in the fourth quarter. The final thing I'd say is it's important to note that if you look at these actuarial adjustments on a full year basis for statutory, it was a positive impact on our RBC rate.

So.

That's really the driver of this incremental change in RBC in the fourth quarter. The final thing I'd say is it's important to note that if you look at these actuarial adjustments on a full year basis for statutory.

A positive impact on our RBC ratio.

Speaker 4: Gotcha. So that's helpful, Ed. So tell me if these numbers sound directionally correct.

Got you so.

That's helpful. Ed So if I tell me if these numbers sound Directionally correct.

Speaker 4: If I solve for a 30 point RBC drop, that equates to $500 to $600 million of pack, keeping the denominator constant. So the dividend clearly accounted for the majority of your drop in RBC.

If I solve for a 30 point RBC drop that equates to $5 million to $600 million of pack keeping the denominator content.

So the dividend clearly accounted for the majority of your drop in RBC.

Speaker 4: or you'll say actually a little less than half of the drop in the RBC. And so this systems conversion then would have been

Or sale.

Actually a little less than half of the drop in the RBC and so this systems conversion than would have been.

Speaker 4: you know, several hundred million dollars, it sounds like. I mean, I was calculating upwards of half a billion negative impact on your RBC, assuming you would have had a normal level of stacked capital generation in the quarter. Is it kind of that order of magnitude in the RBC adjustment or, and any help there would be appreciated? Yeah, yeah, that's high. It's not a half a billion dollar.

Several hundred million dollars. It sounds like I mean, I was calculating upwards of half a billion negative impact on your RBC, assuming you would've had a normal level of stat capital generation in the quarter is it is it kind of at that order of magnitude in the RBC adjustment or.

Any help there would be appreciated yet, yes, thats high it's not it's not half a billion dollar impact.

Speaker 4: Because just, I would say this, remember I said the total impact for the year of actuarial adjustments was positive, right? Right. On a stat basis. And I think on the third quarter call I discussed that the statutory impact from our actuarial assumption review was positive by something around 20 RBC points.

Because just.

I'd say this remember I said the total impact for the year of actuarial adjustments was positive right right on a stat basis, and I think on the third quarter call I discussed that the statutory impact from our actuarial assumption review was positive by something around 20 RBC points.

I think it was 21 RBC points right I think you could use that as a.

Speaker 4: I think it was 21 RBC points. Right. I think you could use that as a

Speaker 4: as an anchor to think about like how much of a negative impact must there have been in the fourth quarter if I could you know if we can still say it's positive for the full year.

As an as an anchor to think about like how much of a negative impact must they have been in the fourth quarter. If I could if we can still say it's positive for the full year.

Speaker 4: Gotcha. Okay. And then just follow up to this. I totally get it, but are there any further large systems conversions left where there could be adjustments here? How many of these are left when you think about the next couple of years?

Got you, Okay, and then just follow up to this.

Annie <unk>.

I totally get it but are there any further large systems conversions left where where there could be.

Adjustments here.

Many of these are left when you think about the next couple of years.

Speaker 4: Yeah, so we have the VA transformation, which is going to occur this year. So that's it for actuare.

Yes, so we have the VA.

Transformation, which is going to occur this year. So that's it for actuarial.

Speaker 4: Okay. Is that a really big one or I assume it is when I hear VA, but maybe dimension that a little bit. Thanks.

Okay.

Is that a.

Really big one or I assume it is what I hear VA.

But but how maybe dimension that a little bit yes.

Speaker 5: Yeah, I don't know how to dimension. I would say using an actuarially approved term, it's a big one. I think that that is probably fair to say, but you know we've learned an awful lot along the way here with the model conversions that we've completed already. So, you know, I think we're very well positioned here and

Yes, I don't know how to dimension I would say.

Using an actuarially approved term, it's a big one I think that that is probably fair to say, but we've learned an awful lot along the way here with the model conversions that we've completed already so.

I think we're very well positioned here and.

Speaker 5: You know, we'll have to see what happens, but, you know, I don't, you know, I think we're very well positioned, obviously, from a capital standpoint. And you know, the movements we're talking about here, like I said, have not been that significant in total. Again, positive for full year.

We'll have to see what happens but.

I think we're very well positioned obviously from a capital standpoint, and the movements we're talking about here.

Like I said have not been that significant in total again positive for full year.

Speaker 5: 2021 when we had an awful lot of activity on the actuarial transformation front.

2021, when we had.

An awful lot of <unk>.

Activity on the actuarial transformation front.

Got you thanks.

Thank you. Our next question comes from Tracy <unk> with Barclays. Your line is open.

Speaker 1: Our next question comes from Tracy Bingigi with Barclays. Your line is open.

Good morning.

Speaker 6: In the past, you referenced buying back soft-cut at average daily trading volume of 4-6%, but if I look at the last two quarters, you're well above that, I would say around 9% or so.

In the past you referenced buying back stock on an average daily trading volume of 4% to 6%, but if I look at the last two quarter, you're well above that I would say around 9% or so.

Speaker 6: But on the other hand, your stock may not be as cheap as it once was.

But in the other hand, your stock may not be as cheap as it. Once was so are you still targeting the 4% to 6% range or have you changed your thinking behind that.

Speaker 6: So are you still targeting this 4 to 6% range? Or have you changed your thinking behind that? Also coupling on your expanded ordinary dividend capacity, your healthy whole co-liquidity, and your RBC cushion.

Coupling on Youre, expanding ordinary dividend capacity, you're healthy holdco liquidity in your RBC question.

Speaker 3: Oops, my mic didn't work. Hi Tracy, it's Eric.

So my Mic didn't work Hi, Tracy it's Eric.

Okay.

Speaker 3: Look, let me just start out by saying we are laser focused on the strategy that we laid out a couple of years ago and that has not changed at all. So you're trying to get a sense of what we're going to do going forward and Ed will jump in here on dividend capacity. We have returned a lot of capital to shareholders as you're very well aware.

Look let me just start out by saying we are laser focused on the strategy that we laid out a couple of years ago and that has not changed at all so you're you're trying to get a sense of what we're going to do going forward.

Ed will jump in here on the dividend capacity.

We have returned a lot of capital to shareholders as you're very well aware and we still have over $700 million of buyback authorization.

Speaker 3: and we still have over 700 million of buyback authorization.

Speaker 3: I think it's fair to say either today or anytime in the future when we get buyback authorization, we intend to carry out the buyback.

I think it's fair to say either today or anytime in the future when we get buyback authorization, we intend to carry out the buyback.

Speaker 3: Now you're mentioning four to six percent. In 2021, we accounted for roughly eight percent. So slightly more than that. Yes, I understand the stock price is higher. We still think it's undervalued. And as a result, we are buying back stock. You see what we've bought back so far in 2022. So while I'm not going to give an exact number.

Now youre mentioning 4% to 6% in 2021 .

We accounted for roughly 8% so slightly more than that yes, I understand the stock price is higher.

We still think it's undervalued and as a result, we are buying back stock.

You see what we've bought back so far in 2022, so while I'm not going to give an exact number.

Speaker 3: you know, 4, 6, 8 percent, and it was 8 percent in 2021.

468%.

And it was 8% in 2021.

Speaker 3: sounds like a reasonable guide and of course

Sounds like a reasonable guide and of course.

Speaker 3: That excludes any time that we think there's an opportunity to purchase even more. I know Ed wanted to say this, but I guess I'll say it. We bought back 17% of our shares in 2020 at around $26 a share.

That excludes any time that we think theres an opportunity to purchase even more.

I know Ed wanted to say this but I guess I'll say it we bought back 17% of our shares in 2020.

At around 26 Bucks a share.

Speaker 3: So I think all of what I just said gives you some guidance on what we intend to do going forward. I know you want to add.

So I think all of what I just said gives you.

Good some guidance on what we intend to do going forward and I know you want to add.

Speaker 5: Yeah. Hi, Tracy. The only thing I would add is, you know, we don't target a percentage of average daily volume. The reason that we've quoted those statistics, you know, today and in the past is just to give you a sense of how much, you know, how much we're buying back and how active we are. So, you know, we bought back 12% of our shares outstanding last year.

Yes, Hi, Tracy the only thing I would add is we don't target a percentage of average daily volume. The reason that we've quoted those statistics.

Today and in the past, it's just to give you a sense of how much how.

How much we're buying back and how active we are so we bought back 12% of our shares outstanding last year.

Speaker 5: As I think Eric said, we bought back 35% or shares outstanding of decline by 35% since we separated

As as I think Eric said, we bought back 35% of shares outstanding have declined by 35% since we separated.

Speaker 5: You know, obviously we take capital return very seriously and we've been very active and you know, it's our strategy and I don't really see our strategy change.

Obviously, we take capital returned very seriously and we've we've been very active and it is our strategy and I don't really see our strategy changing.

Speaker 5: Got it. I'm sorry, what was that? Yeah, sorry, sorry. I know you had another question. Just if you could repeat that.

Got it.

Alright.

Sorry, sorry, I know you had another question just if you could repeat that.

No I think you answered my first question.

Speaker 6: And then I guess my second question is, you mentioned in March you're going to provide a refresh of your detruable earnings scenarios, but should we expect it to be directionally more positive, particularly given the 10-year Treasury is now sitting above 2%? I think the assumptions last year you shared was at 0.93% as of year-end 2020. Or is it really not comparable because of what you said earlier about redefining normalized patterns?

And then I guess my second question is you mentioned in March we're going to provide a refresh of the articulable, earning scenarios.

But should we expect it to be Directionally more positive, particularly given the 10 year Treasury is now sitting above 2% and I think the assumptions last year, you shared was that 9% to 8% as of year end 2020 or is it really not comparable comparable because of what you said earlier about redefining normalize.

That earnings.

Speaker 5: Well, I wouldn't say that the change in the

Well I wouldn't say that.

The change in the.

Speaker 5: definition of norm stat earnings is really going to be a meaningful factor here. I mean, we are lining norm stat with the RBC ratio. The RBC ratio, as I said, is the best indicator over time of excess capital generation. When we think about distributable earnings, we think about what can we pay up to the holding company while still maintaining a strong capital position at the operating company level.

Definition of norm Stat earnings is really going to be a meaningful factor here. I mean, we are we are aligning norm stat with the RBC ratio in the RBC ratio as I said is the best indicator over time.

Of excess capital generation and so.

When we think about distributable earnings we think about what can we pay up to the holding company, while still maintaining a strong capital position at the operating company level.

Speaker 5: And just in terms of the pre- Sorry. Go ahead. I'm not going to give a preview of what we're going to say in March. And clearly we are happy that interest rates are higher than they were when we did it last.

Okay.

Just in terms of the sorry.

Sorry.

I'm not going to give a preview of what we're going to say in March I mean, clearly we are happy that interest rates are higher.

Than they were when we did it last time.

Speaker 6: Okay. I mean, just considering that you early adopted VA capital reform, so it's been a little bit wild. So it's almost like same store basis because that's how you were thinking about it last year. So it should be on the same basis. Is that fair?

Okay. I mean, just considering that you early adopt the VA capital reform. So it's been a little bit while so it's almost like same store base.

That's how you were thinking about it last year.

HCP.

Is that fair.

Sorry, what should be on the same basis.

Speaker 6: viewing your view of distributed capital being some derivative of excess RBC.

Viewing your view of distributable capital being some derivatives.

It's RBC.

Speaker 5: Yeah, I'm not 100% sure what you're asking, but let me try this. When we give you distributable earnings disclosures for VA and for the company under various scenarios, we're looking at what can we pay up to the holding company and still support the appropriate level of capital at the operating company.

Yes.

No.

I guess I'm, not 100% sure what youre asking but let me try this when we give you distributable earnings disclosures for VA and for the company under various scenarios. We're looking at what can we pay up to the holding company and still support the appropriate level of capital.

At the operating company so.

Speaker 5: you know nothing's changed in terms of how we think about that today versus a year ago because as you said the a reform was in place a year ago and it's in place

Nothing's changed in terms of how we think about that today versus a year ago, because as you said VA reform was in place a year ago and it's in place today.

Speaker 6: Yeah, I guess the big difference would be, you know, under RBC, you're looking at CT98, and I think under your definition of normalized stat earnings, you're looking at CT95. So I just wanted to make sure that the assumptions would be similar. If I just want to make a comparison, you know, your disclosure this in March versus what you shared last year. Yeah, I.

Yes, I guess, the big difference would be.

Under RBC Youre looking at Cte 98, and I think I'm sure you are.

Definition of normalized Stat earnings Youre looking at the $2 95, So I just wanted to make sure that the assumptions will be similar.

I just want to make a comparison.

Your disclosure in March versus what you shared last year.

Yes, I don't think youre going to have a problem.

Okay. Thank you Sir hi, good morning.

Thank you. Our next question is from Ryan Krueger with <unk>. Your line is open.

Speaker 7: Hey, good morning and based on where rates are right now, would you expect the mean reversion rate to come down 25 basis points in the 1st, quarter of 2022? And if so, is the impact bill 200 to 250M?

Hey, good morning.

And based on where rates are right now would you expect the mean reversion rate to come down 25 basis points in the first quarter of 2022.

If so is the impact.

$250 million.

Yes, and yes.

Speaker 7: All right, that was easy. And then I guess, secondly, just on the subsidiary dividend to the whole co. I guess is there your RBC is, you know, a fair amount above your target.

Alright.

And then.

I guess secondly, just on the subsidiary dividends to the Holdco.

I guess is there.

RBC has a fair amount above your target.

Speaker 7: you know, would you consider at some point starting to take additional dividends to work down closer towards your the high end of the 400 to 450% target or, or at this point, are you just still looking to run run the stack capital within the subs with more of a cushion.

Would you consider at some point starting to take additional dividend to work down closer towards the high end of the 400% to 450% target at this point or are you just still looking to.

Run the stat capital within the subs with more of a cushion.

Speaker 5: Yeah, so, you know, obviously we have a high RBC ratio and a lot of cash.

Yes, so obviously, we have a higher RBC ratio in a lot of cash at the holding company and I guess I would just say with $1 $6 billion of cash at the holding company.

Speaker 5: And I guess I would just say with $1.6 billion to cash the holding company.

Speaker 5: Most of our fixed charges covered by non-dividend flows from the operating companies, and with our first debt maturity in 2027.

Most of our fixed charge is covered by non dividend flows from the operating companies and with our first debt maturity.

In 2027, which by the way has been reduced by more than 40% because of the capital transactions. We did late last year. So.

Speaker 5: which by the way has been reduced by more than 40% because of the capital transactions we did late last year. So, you know, I, we issued $750 million of

We issued.

$750 million of.

Speaker 5: a combination of 30-year debt and fixed-for-life preferred, and took out

A combination of 30 year debt and fixed for life preferred and took out.

Speaker 5: that shorter debt, most of it in the 2027. So we're very happy we locked in historically low funding costs for us. I mean, as you can imagine, the yields on our debt and preferred are up a fair amount from where they were at that point in time. You know, it also means that there's less, even in 2027, the amount that's maturing is small. So we have the ability to...

That shorter debt most of it that in the 2027 so.

We're very happy we locked in historically low funding cost for us.

You can imagine the yields on our debt and preferred are up a fair amount from where they were at that point in time.

It also means that there's less even in 2027 the amount that's coming that's maturing is small so we are we have the ability to.

Speaker 5: you know complete the authorization without any reliance on dividends anywhere.

Complete the authorization without any reliance on dividends.

Anywhere certainly not from Blake.

Speaker 5: over time. I mean, so, you know, I don't really, you know, that's, that's point number one. Point number two, we look at taking dividends based on, as you've heard me say repeatedly, this, you know, in a multi-year, multi-scenario framework. And so, it's great to have a lot of dividend capacity, but, you know, that's not what's going to drive us to, to determine what we're going to take up in any one year. That makes sense. Thanks Ed.

Over time I mean, so.

I don't really.

That's point number one point number two we look at taking dividends based on as you've heard me say repeatedly this.

In a multi year multi scenario framework and so it's great to have a lot of dividend capacity, but that's not what's going to drive us to to.

To determine what we're going to take up in any one year.

That makes sense. Thanks, Ed.

Thank you. Our next question comes from Alex Scott with Goldman Sachs. Your line is open.

Hi, Thanks for taking the question I just wanted to circle back on the comments about trends transforming the platform for variable annuities.

Speaker 8: the platform for variable annuities. Could you talk about...

Could you talk about.

What that entails what are some of the changes that are made and I guess, specifically on the scenario generator. I mean is that one of the changes that occurs with that kind of a platform switch.

Speaker 8: Specifically on the scenario generator, I mean, is that one of the changes?

So just any.

Where you could help us diversify that.

Speaker 5: Yeah, there's no change in the scenario generator. I think you're referring to the discussions around the new scenario generator for statutory, which is going to be a...

Yes, there is.

No. There's no change in the scenario generator I think you're referring to the discussions around the new scenario generator.

Statutory which is going to be a.

Speaker 5: You know, I think it's going to be a long process. Obviously, we're very engaged. There's a lot of work to do. As you can imagine, it's extremely complicated. And you know, it's going to take time. And I'm optimistic that the industry and regulators will, you know, come to a good framework.

I think it's going to be a long process obviously.

Very engaged there is a lot of work to do as you can imagine it's extremely complicated.

And it's going to take time, and I'm optimistic that the industry and regulators will come to a a good framework.

Speaker 5: And I just say, look, we've proven we can manage through VA reform. We've got a lot of capital. I'm not really concerned about the change in the ESG. In terms of

And I'd, just say look we've proven we can manage through VA reform, we've got a lot of capital I'm not.

I'm not really concerned about the change in the ESG in terms of.

Speaker 5: The VA, you know, I would just say that, you know, we have, there are multiple systems that are in place, they're in place now. And we're going to, as I said, a single environment for all of our products. So it does provide simplification. It does provide, I think, ease of use and frees up the time for people to do more value added analysis. So I'm really looking forward to the opportunities we're going to have as a result of.

The VA.

I would just say that we have.

There are multiple systems that are there in place now and we're going to as I said.

A single environment for all of our products. So it does provide simplification.

Does provide I think ease of use and frees up the time for people to do more value added analysis. So I'm really looking forward to the opportunities we're going to have as a result of completing fully completing this transformation.

Speaker 5: completing fully completing this transformation and the benefits.

And the benefits that we'll realize.

Speaker 5: But I don't know that there's anything specific I would go into on the VA.

But I don't know that Theres anything specific I would go into.

The VA system.

Speaker 8: Got it. And so should I take that to mean that when we think through what you're going to bring forward in March or in cash flow scenarios and so forth, that's not really

Got it.

Should I take that to mean that when we when we think through where youre going to report in March or in cash flow scenarios and so forth that's not really a consideration that we need to.

Taken into account.

Speaker 5: That is correct. You do not need to take it into account.

That is correct you do not need to take it into account.

Speaker 8: Maybe for my follow-up, I just wanted to find out how you guys are thinking about inflation on the expenses, and just is there any impact that we should expect from that?

And then maybe for my follow up I, just wanted to find out.

How you guys are thinking about inflation.

Expenses in Gist.

Is there any impact that we should expect from that and into next year.

And maybe if you could shed any light around how much the institutional platform investments in <unk>.

Speaker 5: Well, I'll start on inflation.

Well I'll start on <unk>.

Inflation.

Speaker 5: You know, I would say if we assume that inflation translates to higher interest rates, which certainly yesterday's market action would suggest that's a reasonable linkage to think about, inflation is an overall good guy.

I would say if we assume that inflation.

Translates to higher interest rates, which certainly yesterdays market action would suggest that's a reasonable.

Linkage to think about.

Inflation is an overall good guy for us.

Speaker 5: And, you know, obviously people have to deal with wage inflation across all industries and we'll have to do the same, but, you know, higher interest rates, higher inflation is not something that we're afraid of.

And.

Obviously people have to deal with wage inflation across all industries, and we will have to do the same but.

Higher interest rates higher inflation is not something that.

We're afraid of.

Yeah, it's Eric I'll add to that.

Speaker 3: So I think over time here you can count on us talking about our sort of stat expense rates.

So I think overtime here you can count on us talking about our sort of stat expense ratio continuing to go down this despite any effects.

Speaker 3: continuing to go down despite any effects that might hit us with respect to inflation. You should expect continued sales growth.

That might hit us with respect to inflation.

You should expect continued sales growth.

Speaker 3: and margin expansion as we think about the stat expense ratio coming down. This particular year, 2021, we did start up, you know, it's a new business for Bright House, certainly for some of us it's a business we've been in for a long time, but the institutional spread margin business and I think you specifically asked about that.

And.

And margin expansion as we think about the stat expense ratio coming down.

This particular.

Year 2021, we did startup.

A new business for Brighthouse certainly for some of US it's a business we've been in for a long time, but the institutional spread margin business and I think you specifically asked about that so it was in the neighborhood of 10 ish million to get that all up and running.

Speaker 3: So it was in the neighborhood of 10-ish million.

Speaker 3: to get that all up and running in 2021. And of course that affected our expenses, right? That made them 10-ish million higher. And you didn't ask this question, but I'll answer it anyway.

In 2021 and of course that that affected our expenses right that made them 10 ish million higher.

And you didn't ask this question, but I'll answer it anyway. So we had originally set out to save $150 million off are sort of starting expense space and then another $25 million in 2021. So we did not hit that for two reasons one.

Speaker 3: So we had originally set out to save 150 million off our sort of starting expense base.

Speaker 3: and then another $25 million in 2021. So we did not hit that for two reasons. One, the institutional spread margin business, which was about half of the difference. And then we did a lot of investing this year, and we'll continue to do that in distribution.

On the institutional spread margin business, which was about half of the difference and then we did a lot of investing this year and we will continue to do that.

In distribution.

Speaker 3: You will see that in 2022 as well and probably in 2023. And along with your comments on inflation, we will still lower our stat expense ratio. So hope that helps.

You will see that in 2022, as well and probably in 2023.

Along with your comments on inflation, we will still lower our stat expense ratio. So I hope that helps.

Thank you.

Thank you. Our next question comes from the screen span with Wells Fargo. Your line is open.

Speaker 1: Our next question comes from Lisa Greenspan with Wells Fargo.

Speaker 2: Thanks. Good morning. My first question goes back to capital return, I guess. I'm assuming, you know, you guys, I'm assuming given where your stock price is, even though I think someone pointed out earlier, it's obviously more expensive than where it was, that you would still look for share repurchase, you know, for your return of capital as opposed to instituting a dividend, but I wasn't sure if you had any updated thoughts there.

Thanks, Good morning, My first question.

Back to capital return I guess.

I'm, assuming you bet.

I mean, given where your stock price is even though I think someone pointed out earlier, it's obviously more expensive than where it was that you would still look for share repurchase.

For your return of capital as opposed to.

Instituting a dividend, but I wasn't sure if you had any updated thoughts there.

Speaker 3: Yeah, I think that's a good assumption.

Yes, I think Thats thats a good assumption.

Speaker 2: Okay, thanks. And then my second question, you guys had a reinsurance recapture that you pulled out of earnings in the quarter. Can you just give us any additional color there?

Okay. Thanks, and then my.

Second question.

Right.

<unk> recapture that you pulled out of earnings in the quarter can you just give us any additional color there.

Speaker 5: Yeah, sure. Hi, Elise. So, you know, the recapture was not a meaningful impact.

Yes sure.

<unk>.

So.

The recapture was not.

A meaningful impact from a statutory basis.

Speaker 5: In the total items on a GAAP basis, which had a net unfavorable impact of $13 million, the reinsurance recaptures had a $36 million unfavorable impact, included in that.

In the total items on a GAAP basis, which had a net unfavorable impact of $13 million.

The reinsurance Recaptures had a $36 million unfavorable impact included in that number.

Speaker 5: And I think as you know, when we're presented with a rate increase, we evaluate whether it makes sense to accept that or just to recapture the business. And in this instance, we decided it made sense to do the latter.

And I think as you know.

When we are presented with the rate increase we evaluate whether it makes sense to accept that or just to recapture the business and in this instance, we decided it made sense to do the latter.

Okay. Thank you.

Speaker 1: Our next question comes from Johnnage with Piper Sandler.

Thank you. Our next question comes from John inch with Piper Sandler Your line is open.

Speaker 9: Thank you. Maybe if we talk about other companies have announced cost-cutting programs after close to two years in a heavily hybrid world. Totally understand you're able to start up your company and digitize it very quickly, but with establishment costs set to end in 22, how do you approach future expense rightsizing opportunities?

Thank you.

Maybe if we talk about other companies have announced cost cutting programs after close to two years in a heavily hybrid world.

Totally understand youre able to startup your company digitize it very quickly, but with establishment costs in 'twenty two how do you approach future expense right sizing opportunities.

Hi, John .

Speaker 3: We will, I think there's still room for us to take out some expenses.

We will.

I think we there are theres still room for us to take out some expenses.

Speaker 3: You mentioned the digitization. It's taken a while, by the way. You know, we started this a number of years ago.

You mentioned the Digitization, it's taken a while by the way we started this a number of years ago. So.

Speaker 3: So, you know, it's finally coming to fruition here after a number of years. There will be still some areas where we can take some expenses out.

It's finally coming to fruition here after a number of years.

There will be still some areas, where we can take some expenses out.

Speaker 3: um... maybe some rent overtime here uh... i think from a previous question obviously inflation will will be a factor it is not going to preclude us as i said twice now uh... lowering our that expense ratio uh... but also we are never going to shy away from making investments in growth uh... we've made investments for the black rock l p p products

Maybe some rent over time here.

But I think from a previous question, obviously inflation will be a factor it is not going to preclude us as I've said twice now from lowering our <unk> expense ratio.

But also we are never going to shy away from making investments in growth.

We've made investments for the Blackrock LPP product, we've made investments in new products, which will youll see this year and next year and we will continue our sort of digitization.

Speaker 3: We've made investments in new products, which you'll see this year and next year. And we will continue our sort of digitization for the financial professionals that we work with. So there are going to be opportunities, but frankly, I'm pretty focused on growth and investing in growth as well.

For the financial professionals that we work with so there are going to be opportunities, but frankly, I'm pretty focused on on growth and investing in growth as well.

Speaker 9: That's very helpful. Thank you very much. And maybe my follow up. Last quarter you added 13,000 agents to the 50,000 you had previously. Can you talk about performance of those new agents in the quarter and then success in recruitment of new agents as well? Thank you.

That's very helpful. Thank you very much and maybe my follow up.

Last quarter, you added 13000 agents to the 50000 you have previously can you talk about performance of those new agents in the quarter and then success in recruitment of new agents as well. Thank you.

Speaker 4: Yes, hi, it's Miles Lambert speaking. So we did launch several new relationships, and I think you're referencing specifically for our SmartCare products.

Yes, Hi, it's Myles Lambert speaking so.

We did launch several new relationships and I think youre referencing specifically for our smart care product.

Speaker 4: in August and throughout the fall of last year. We brought on about 13 new distributors, giving us access to approximately 14,000 additional advisors. And we also expanded into the BGA channel. And it happened, like I said, throughout the summer and the fall, and we're starting to slowly see some growth.

In August and throughout the fall of last year, we brought on about 13, new distributors, giving us access to approximately 14000.

<unk> advisors.

And we also expanded into the PGA channel and.

It happened like I said throughout the summer and the fall and we're starting to slowly see some growth from that new distribution opportunity from those new distribution opportunities.

Speaker 4: from that new distribution opportunity, from those new distribution opportunities. Thank you.

Thank you.

Yes.

Thank you. Our next question comes from Humphrey Lee with <unk>.

Yes.

Good morning, and thank you for taking my question.

Just looking at the mortality claims.

Sure.

Definitely ups and downs throughout.

Speaker 10: But we're taking a step back and look at kind of the direct claims

The quarters, but if we're taking a step back and look at kind of the direct claims.

Speaker 10: say over the past four to six quarters and compared to the reinsurance recoveries, where do you end up relative to your...

Say over the past four to six quarters.

Care to the reinsurance recoveries, where did you end up.

Kyle.

Relative to your expectations.

Yeah, Hi, Humphrey it's Ed.

Speaker 5: So yeah, we pointed out that underwriting was a little less favorable than what we would consider to be normal. And you know, I think that has been the case.

So yes, we pointed out that underwriting was a little less favorable than what we would consider to be normal and.

Think that has been the case.

Speaker 5: generally in the pandemic. And we talk about obviously there's the COVID impact that's direct, that explains part of that.

Generally.

In the pandemic and we talk about obviously there is the COVID-19 impact it's direct that explains part of that.

<unk>.

Speaker 5: You know, I also think, and I don't believe we can prove this, but there could be a knock-on effect here, right, where you have people that aren't as quick to go to the hospital, they're not as quick to go to the emergency room.

I also think and.

Believe we can prove this but.

There could be a knock on effect here right, where you have people that aren't as quick to go to the hospital and they're not as quick to go to the emergency room.

Speaker 5: We know the cause of death reporting is imperfect. So what we identify as COVID related deaths are the deaths that are

Ed.

No that cause of death reporting is imperfect so what we identify as COVID-19 related deaths are the debts that are <unk>.

Speaker 5: tagged as COVID. And, you know, we know that that has to be, I would say, the minimum number of COVID deaths because there are others that are possibly not categorized correctly. So I think it's difficult to really be that precise about what's pandemic and what's not.

Tagged as Covid and.

We know that that has to be I would say the minimum number of COVID-19 deaths. Because there are others that are possibly not categorize correctly. So I think it's difficult to to really be that precise about what's pandemic and what's not.

Speaker 5: I would say that this is not something that is an issue for us. I talked about in the third quarter how we generally had very little change in our mortality expectations based on our experience studies. So our heavy third quarter actuarial assumption update analysis of this issue. We continue to look at it.

I would say that this is not something that is.

An issue for us I talked about in the third quarter, how we generally had very little change in our mortality expectations based on our experience study. So our heavy third quarter actuarial assumption update analysis of this issue we continue to look at it.

Speaker 5: You know, reinsurance percentage was a little lighter this quarter than what we would consider to be the average. It can bounce around a lot. And you know, the direct claims themselves, the fact that I give a range of $400 to $500 million gives you some indication of the type of volatility you can see. So I would say there's nothing to see here, but you know, I think there is probably somewhat of a pandemic impact that's affected the last.

Reinsurance percentage was a little lighter this quarter than what we would consider to be the average it can bounce around a lot and the direct claims themselves. The fact that I gave a range of $400 million to $500 million gives you. Some indication of the type of volatility you can see so I would say there's nothing to see here.

<unk>.

<unk>.

I think there is probably somewhat of a pandemic impact that's affected the last year or two.

Speaker 10: Okay, thank you for the color. My second question is related to kind of how to think about the market impact running through annuities. I think you used to provide some guidance.

Okay. Thank you for the color.

My second question is related to kind of how to think about the market impact running through annuities. I think you used to provide some guidance in the past, but the product mix continued to shift to shield from your legacy GM <unk>.

Speaker 10: product makes continued shift to shield from your legacy GMIB.

Speaker 10: Can you just give us an updated rule of thumb in terms of how to think about the market impact?

Can you just give us an update a roof in terms of how to think about the market impact.

Speaker 5: Sure. So we're not identifying a specific market impact. I think we qualitatively said that if you look at market impact, that it was an offset to say the slightly less favorable expenses as well as the underwriting issue that we talked about when we if you're thinking about run rate.

Sure. So we're not identifying a specific market impact I think we qualitatively said that if you look at market impact.

That it was an offset to say thats slightly less favorable.

<unk> expenses as well as the underwriting issue that we talked about when if youre thinking about run rate.

Speaker 5: If you look at the annuities segment...

If you look at the annuity segment the.

Speaker 5: The DAC this quarter, I believe, was $49 million. Now, that has an impact from the systems conversions that we talked about, so there's actually a DAC benefit. So unlike statutory, where there was the negative impact, there was a positive impact for GAP because of DAC.

The DAC this quarter I believe was $49 million now that has an impact from the systems conversions that we talked about so theres actually a DAC benefit so unlike statutory where there was the negative impact that was a positive impact for GAAP because of the DAC.

Speaker 5: So if you adjust for that, the run rate or the number in the quarter for DAC related to adjusted earnings in annuities was more like $80 to $90 million. And I have said in the past that a more normal quarter for DAC amortization is probably in the neighborhood of 100. I think it's fair to say that it's a higher number than that now. So that should give you some indication of how to think about the market impact. Thank you for that.

So if you adjust for that the run rate or the number in the quarter for DAC related to adjusted earnings and annuities was more like $80 to $90 million.

And I have said in the past that a more normal quarter for DAC amortization is probably in the neighborhood of 100, I think it's fair to say that it's a higher number than that now so that should give you some indication of how to think about the market impact.

Got it thank you for that.

Thank you. Our next question comes from Erik Bass with Autonomous Research. Your line is open.

Speaker 4: Hi, thank you. I want to follow up on Elisa's question about a potential common dividend. Well, certainly it's hard to argue with the value of buying back your stock. A dividend could potentially expand your shareholder base and send a strong signal about your confidence in the sustainability of cash flow. So just be interested in getting a little bit more thoughts on how you're thinking about that.

Hi, Thank you I wanted to follow up on our leases question about a potential common dividend well. It certainly it's hard to argue with the value of buying back your stock dividend you could potentially expand your shareholder base and send a strong signal that your confidence in the sustainability of cash flow. So just interested in getting a little bit more thoughts on how you are.

Youre thinking about that.

Yeah.

Speaker 3: higher component haven't problems with this microphone today uh...

Hi, Eric I'm, sorry, I'm, having problems with this microphone today.

Look it's not like we never discuss it.

Speaker 3: Look, it's not like we never discuss it. And certainly this is a board topic as well. But at this point, it still strikes us that buying back our stock is the right way to go. Does that preclude eventually a dividend? No, it does not. And as I kind of hinted, and I'll say it more formally, we will talk about it.

And certainly this is a board topic as well.

But but at this point.

Still strikes us that buying back our stock is the right way to go does that preclude eventually a dividend no. It does not.

<unk>.

As I kind of hinted and I'll say it more formally.

We will talk about this this is a topic that we should be talking about both as a management team as a board and over time. There is a certainly there is a possibility that we will play a common dividend, but for the time being and I think the words I used were buying back stock is probably a good assumption when you think about capital.

Speaker 3: This is a topic that we should be talking about both as a management team and as a board. And over time, certainly there is a possibility that we will play a common dividend. But for the time being, and I think the words I used were, you know, buying back stock is probably a good assumption when you think about capital return for us right now.

Turn for Us right now.

Speaker 4: Got it. Thank you. And then I know you'll provide obviously the update on VA cash flows in a month or so. I was just hoping you could remind us of kind of the relative sensitivity to interest rates versus equity markets. And if we have an environment of higher rates but modestly declining markets like we've seen year to date, is that still something we should think of as a net positive for you?

Got it thank you.

I know you'll provide obviously the update on VA cash flows in a month or so was just hoping you could remind us of kind of the relative sensitivity to interest rates versus equity markets like we have an environment of higher rates, but modestly declining markets like we've seen year to date is that still something we should think of it as a net positive for you.

Speaker 5: Yeah, Eric, I'm not going to get into the specifics here like ahead of the DE tables. The only thing I'd point out is when we did this last year, I remember we talked about how our DEs...

Yeah, Eric I am not going to get into the specifics here like ahead of the day tables. The only thing I would point out is when we did this last year.

I remember, we talked about how our our D R.

Speaker 5: our DE tables look very similar to the prior year, adjusted for the $1 billion of additional capital that we took out.

Our day tables look very similar to the prior year adjusted for the $1 billion of additional capital that we took out.

Speaker 5: you know, two years ago because of the de-risking of the hedge strategy, right? And the point that I was making then...

Two years ago, because of the de risking of the hedge strategy right and the point that I was making then was.

Speaker 5: Look, its interest rates had come down a lot.

Look its interest rates had come down a lot.

Speaker 5: down 100 basis points, but at the same time, the equity market had performed.

It goes down 100 basis points.

But at the same time the equity market had performed.

Speaker 5: very well. So, it gave you an indication that they're both important.

Very well so.

It gave you an indication that they're both important right.

Speaker 4: Yeah, certainly. But we'll stay tuned. Thank you. Our next question.

Yes, certainly.

Well, we'll stay tuned.

Yeah.

Thank you. Our next question comes from Michael <unk> with Wolfe Research. Your line is open.

Okay great.

Friday.

Speaker 11: One question, when you talk about your RBC ratio target, you use the word normal markets. Maybe you can comment on what is your view of normal markets and has it evolved over recent quarters.

One question.

When you talk about your RBC ratio target you used the world the word.

Normal markets, maybe you can comment on.

What is your view of normal markets and hesitant evolved over recent quarters.

Speaker 5: Mike, happy Friday to you. And it probably won't be a surprise that Eric just waved the hand to me to discuss the answer to this question. We were just sort of having a few laughs about what exactly does normal markets mean, right? Because it doesn't feel like normal, maybe ever. You know, it's a guide for us to say that.

Mike Happy Friday to you and it probably won't be a surprise that Eric just waive the hand to me to discuss the answer to this question.

We're just.

Sort of having a few laughs about what exactly does normal markets mean right.

Because it doesn't feel like.

Normal maybe ever.

It is a guide for us to say that.

Okay.

Speaker 5: 400 to 450 percent is it feels like the right number for an RBC ratio during a, you know, kind of on a full cycle.

400% to 450% is it feels like the right.

Number four in RBC ratio during a kind of on a full cycle basis and so when times are really good you would expect it to be above that and if times got tough certainly would you would expect it to be below that so that's why I think you want to make sure that you are.

Speaker 5: And so, you know, when times are really good, you would expect it to be above that. And if times got tough, certainly would you'd expect it to be below that. So that's why I think you want to make sure that you are positioned. You know, we've had a very good run here. I mean, the stock market's done very well. Interest rates, not so much. But until recently now we're seeing, you know, rates going up, too. So I don't know that now's the time.

Our positioned.

We've had a very good run here I mean, the stock market has done very well interest rates not so much but until recently now we're seeing rates going up too so.

I don't know that now is the time to.

Speaker 5: to get too aggressive in terms of how you think about your capitalization at the operating company level.

To get too aggressive in terms of how you think about your <unk>.

Capitalization at the operating company level.

Understood. Thank you.

Thank you.

Ladies and gentlemen, I will now turn the call over to Dana Monty for closing remarks.

Speaker 2: Thank you, Shannon. And thank you all for joining us today and for your interest in Bright House Financial. Have a great day.

Thank you Shannon and thank you all for joining us today and for your interest in Brighthouse financial have a great day.

This concludes today's conference call. Thank you for participating you may now disconnect.

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Speaker 1: Good morning ladies and gentlemen and welcome to Bright House Financial's fourth quarter and full year 2021.

Good morning, ladies and gentlemen, and welcome to Brighthouse Financial's fourth quarter and full year 2021 earnings conference call. My name is Shannon and I'll be your coordinator today at this time all participants are in a listen only mode.

Speaker 1: My name is Shannon and I will be your coordinator today. At this time, all participants are in a listening-

Speaker 1: We will facilitate a question and answer session towards the end of the conference call.

We will facilitate a question and answer session towards the end of the conference call.

Speaker 1: fairness to all participants, please limit yourself to one question and one follow-up.

In fairness to all participants please limit yourself to one question and one follow up.

As a reminder, the conference is being recorded for replay purposes.

Speaker 1: Also, we ask that you refrain from using cell phones, speaker phones, or headsets during the question and answer portion of today's call. I would now like to turn the presentation over to Dana Amante. Get increased.

Also we ask that you refrain from using cell phones speaker phones, our headsets during the question and answer portion of today's call.

I would now like to turn the presentation over to Dana Marty head of Investor Relations. Mr. Marty You May proceed.

Speaker 2: Thank you. Good morning. Thank you for joining Bright House Financial's fourth quarter and full year 2021 earnings call. Our earnings release, slide presentation and financial supplement were released last night and can be accessed on the investor relations section of our website.

Thank you. Good morning, Thank you for joining Brighthouse Financial's fourth quarter and full year 2021 earnings call. Our earnings release Slide presentation and financial supplement were released last night and can be accessed on the Investor Relations section of our website.

We encourage you to review all of these materials.

Speaker 2: Today, you will hear from Eric Stagowal, our President and Chief Executive Officer, and Ed Zihar, our Chief Financial Officer.

Today, you will hear from Eric Steigerwalt, our President and Chief Executive Officer, and S. Bihar, Our Chief Financial Officer. Following our prepared remarks, we will open the call up for a question and answer period.

Speaker 2: Following our prepared remarks, we will open the call up for a question and answer period. Also here with us today to participate in the discussions are other members of Senior speak are very important for you and I know you agree...

Also here with us today to participate in the discussions are other members of senior management.

Speaker 2: Our discussion during this call may include forward-looking statements within the meaning of the federal securities laws. Bright House Financial's actual results may differ materially from the results anticipated in the forward-looking statements as a result of risks and uncertainties described from time to time in Bright House Financial's filings with the U.S. Securities and Exchange Company.

Our discussion during this call may include forward looking statements within the meaning of the federal Securities laws Brighthouse Financial's actual results may differ materially from the results anticipated in the forward looking statements as a result of risks and uncertainties described from time to time in Brighthouse Financial's filings with the U S Securities and exchange can.

Mission.

Speaker 2: Information discussed on today's call speaks only as of today, February 11, 2022.

Information discussed on today's call speaks only as of today February 11 2022.

Speaker 2: The company undertakes no obligations to update any information discussed on today's call.

The company undertakes no obligation to update any information discussed on today's call.

Speaker 2: During this call, we will be discussing certain financial measures used by management that are not based on generally accepted accounting principles, also known as non-GAAP measures. Reconciliations of these non-GAAP measures on a historical basis to the most directly comparable GAAP measures and related definitions may be found on the investor relations portion of our website in our earnings release, slide presentation, or financial supplements.

During this call we will be discussing certain financial measures used by management that are not based on generally accepted accounting principles also known as non-GAAP measures reconciliations of these non-GAAP measures on a historical basis to the most directly comparable GAAP measures and related definitions may be found on the <unk>.

Relations portion of our website in our earnings release slide presentation or financial supplement.

Speaker 2: And finally, references to statutory results, including certain statutory-based measures used by management, are preliminary due to the timing of the filing of the statutory statements. And now I'll turn the call over to our CEO , Eric Starks.

And finally references to statutory results, including certain statutory based measures used by management are preliminary due to the timing of the filing of the statutory statements and now I'll turn the call over to our CEO Eric Steigerwalt.

Speaker 3: Thank you, Dana. Good morning, everyone, and thank you all for joining us.

Thank you Dana good morning, everyone and thank you all for joining us.

Speaker 3: I am pleased to share that 2021 was another strong year for Bright House Financial. Despite the challenges resulting from the COVID-19 pandemic, we remain steadfastly focused on our mission and strategy and on delivering for our customers, partners, and shareholders.

I am pleased to share that 2021 was another strong year for Brighthouse financial despite the challenges, resulting from the COVID-19 pandemic, we remain steadfastly focused on our mission and strategy and on delivering for our customers partners and shareholders.

Speaker 3: Thanks to the tremendous dedication of our employees, we accomplished many important strategic milestones in 2021, including

Thanks to the tremendous dedication of our employees, we accomplished many important strategic milestones in 2021, including.

Speaker 3: We achieved our target of returning $1.5 billion to our shareholders by the end of 2021.

We achieved our target of returning $1 $5 billion to our shareholders by the end of 2021.

Speaker 3: As a result, we have reduced the number of shares outstanding relative to when we became an independent public company in 2017 by 35%. That includes $499 million of our common stock that we repurchased in 2021, representing a reduction of 12% of shares outstanding relative to year-end 2020.

As a result, we have reduced the number of shares outstanding relative to when we became an independent public company in 2017 by 35% that includes $499 million of our common stock that we repurchased in 2021, representing a reduction.

<unk> of 12% of shares outstanding relative to year end 2020.

Speaker 3: We continued to optimize statutory capital to further strengthen the balance sheet and paid subsidiary ordinary dividends totaling $594 million to the holding company, primarily consisting of $550 million from Bright House Life Insurance Company, or BLEC.

We continue to optimize statutory capital to further strengthen the balance sheet and paid subsidiary ordinary dividends totaling $594 million to the holding company.

Primarily consisting of $550 million from Brighthouse life insurance company or black.

Speaker 3: Sales of both annuities and life insurance were very strong throughout the year. In each of the first three quarters of 2021, we delivered record sales for both our flagship shield level annuities and our variable annuities with FLEC choice access.

Sales of both annuities and life insurance were very strong throughout the year.

In each of the first three quarters of 2021, we delivered record sales for both our flagship shield level annuities and variable annuities with fourth choice access.

Speaker 3: The strong sales continued in the fourth quarter, resulting in a record year of total annuity sales in 2021.

The strong sales continued in the fourth quarter, resulting in a record year of total annuity sales in 2021.

Speaker 3: Life insurance sales grew steadily throughout the year and were ahead of our expectations.

Life insurance sales grew steadily throughout the year and we're ahead of our expectations.

Speaker 3: We continue to expand our distribution footprint and enhance the way we support financial professionals and the clients they serve.

We continue to expand our distribution footprint and enhance the way, we support financial professionals and the clients they serve.

Speaker 3: During the year, we added new distribution relationships, including the addition of our newities to the Simon Marketplace.

During the year, we added new distribution relationships, including the addition of our annuities to the Simon marketplace.

Speaker 3: We also added more life insurance wholesalers, rolled out smart care to more firms, selectively expanded into the brokerage general agency or BGA distribution channel, and rolled out enhancements to our shield level annuities and smart care.

We have also added more life insurance wholesalers rolled out smart care to more firms selectively expanded into the brokerage General agency, our PGA distribution channel and we rolled out enhancements to our shield level annuities and smart care.

Speaker 3: We launched our institutional spread margin business, which we expect will enhance and diversify our earnings profile over time.

We launched our institutional spread margin business, which we expect will enhance and diversify our earnings profile over time.

Speaker 3: We achieved almost 90% of our run rate expense reduction relative to the first year post-separation, while simultaneously making strategic investments in 2021 to start up the institutional spread margin business and fund future growth.

We achieved almost 90% of our run rate expense reduction relative to the first year post separation, while simultaneously, making strategic investments in 2021 to start up the institutional spread margin business and fund future growth.

Speaker 3: Some of these investments allowed us to provide better support to our distributors and their financial professionals, as well as our policyholders and contract holders.

Some of these investments allowed us to provide better support to our distributors and their financial professionals as well as our policyholders and contract holders.

Speaker 3: And finally, we completed a major platform conversion as we continue our efforts to implement our future state operations and technology platform.

And finally, we completed a major platform conversion as we continue our efforts to implement our future state operations and technology platform turning to our fourth quarter results, our balance sheet and liquidity position remained robust in the fourth quarter and we estimate our combined risk based.

Speaker 3: Our balance sheet and liquidity position remained robust in the fourth quarter, and we estimate our combined risk-based capital, or RBC, ratio was approximately 500%.

Capital or RBC ratio was approximately 500%. Additionally, we ended the year with holding company liquid assets of $1 6 billion.

Speaker 3: Additionally, we ended the year withholding company liquid assets of $1.6 billion.

Speaker 3: BrightHouse delivered strong sales results in the fourth quarter. Annuity sales were $2.4 billion driven by variable annuity and shield product sales of $2 billion combined.

Brighthouse delivered strong sales results in the fourth quarter.

Annuity sales were $2 4 billion.

By variable annuity and shield product sales of $2 billion combined.

Speaker 3: Total VA and SHIELD sales were up 14% compared with the fourth quarter of 2020.

Total VA and shield sales were up 14% compared with the fourth quarter of 2020.

Speaker 3: Fixed rate annuity sales were lower quarter over quarter, as expected.

Fixed rate annuity sales were lower quarter over quarter as expected.

Speaker 3: As I have mentioned previously, we took repricing actions in the second half of 2020, given the low interest rate environment.

As I have mentioned previously we took re pricing actions in the second half of 2020, given the low interest rate environment.

Speaker 3: Additionally, we generated approximately $35 million of life insurance sales in the fourth quarter of 2021, an increase of 133% compared with the fourth quarter of 2020, and an increase of 30% compared with the third quarter of 2021.

Additionally, we generated approximately $35 million of life insurance sales in the fourth quarter of 2021.

An increase of 133% compared with the fourth quarter of 2020.

And an increase of 30% compared with the third quarter of 2021.

Speaker 3: As I said, we delivered steady growth in life insurance sales in 2021, which is a result of the focus and execution on our life insurance strategy, including the addition of new distribution partners and bringing on additional wholesalers.

As I said, we delivered steady growth in life insurance sales in 2021.

As a result of the focus and execution on our life insurance strategy, including the addition of new distribution partners and bringing on additional wholesalers.

Speaker 3: We couldn't be more pleased with our sales results last year. Before moving your expenses, I would like to thank our distribution partners for all they do on behalf of their clients and our customers every day.

We couldnt be more pleased with our sales results last year.

Before moving to expenses I would like to thank our distribution partners for all they do on behalf of their clients and our customers every day.

Speaker 3: Now turning to expenses. Corporate expenses, which do not include establishment costs, were $247 million before tax in the fourth quarter.

Now turning to expenses corporate expenses, which do not include establishment costs were $247 million before tax in the fourth quarter.

Speaker 3: Establishment costs were approximately $27 million before tax.

Establishment costs were approximately $27 million before tax.

Speaker 3: I am pleased with the results for both the full year and fourth quarter of 2021.

I am pleased with the results for both the full year and fourth quarter of 2021.

Speaker 3: We have made significant progress in 2021, and we believe we remain well positioned to continue to execute on our focused strategy in 2022.

We have made significant progress in 2021, and we believe we remain well positioned to continue to execute on our focused strategy in 2022.

Speaker 3: We continue to prudently manage statutory capital and target a combined RBC ratio of between 400 and 450% in normal markets.

We continue to prudently manage statutory capital.

And target a combined RBC ratio of between 400 and 450% in normal markets.

Speaker 3: In addition, our business mix will continue to evolve by adding more high quality new business.

In addition, our business mix will continue to evolve by adding more high quality new business, we expect to see a continued shift in our business mix profile over time, as we add more higher cash flow generating and less capital intensive business copper.

Speaker 3: We expect to see a continued shift in our business mix profile over time as we add more, higher cash flow generating and less capital intensive business.

Speaker 3: coupled with the runoff of older, less profitable business.

Coupled with the runoff of older less profitable business.

Speaker 3: As we enhance our existing products, develop new ones, and expand our distribution reach, we expect to see continued sales growth across annuities and life insurance.

As we enhance our existing products develop new ones and expand our distribution reach we expect to see continued sales growth across annuities and life insurance.

Speaker 3: And we remain very excited about being one of two annuity providers selected to help deliver BlackRock's LifePath Paycheck, an investment solution that is designed to provide millions of American workers with simplified access to lifetime income throughout their retirement.

And we remain very excited about being one of two annuity provider selected to help deliver blackhawks lifestyle paycheck and investment solution that is designed to provide millions of American workers with simplified access to lifetime income throughout their retirement.

Speaker 3: We have significantly reduced corporate expenses, and we plan to continue to manage expenses effectively to drive our statutory expense ratio down over time.

We have significantly reduced corporate expenses.

And we plan to continue to manage expenses effectively to drive our statutory expense ratio down over time.

Speaker 3: Additionally, we will continue to prudently manage the exit of the remaining transition services agreements as we implement our future state operations and technology platform.

Additionally, we will continue to prudently manage the exit of the remaining transition services agreements as we implement our future state operations and technology platform.

Speaker 3: We expect the remaining establishment costs to occur in 2022.

We expect the remaining establishment costs to occur in 2022.

Speaker 3: Lastly, we intend to continue to deliver on our ongoing commitment to return capital to our shareholders.

Lastly, we intend to continue to deliver on our ongoing commitment to return capital to our shareholders.

Speaker 3: Year to date through February 8th of this year, we have repurchased $57 million of our common stock.

Year to date through February eight of this year, we have repurchased $57 million of our common stock.

Speaker 3: To wrap up, Bright House Financial made significant progress in 2021. We continue to believe that we have the right strategy in place, and we remain focused and well positioned to continue the execution of our strategy.

To wrap up Brighthouse financial made significant progress in 2021, we continue to believe that we have the right strategy in place and we remain focused and well positioned to continue the execution of our strategy.

Speaker 3: As the Bright House financial franchise grows and evolves to include a more diversified business mix, we are committed to consistently driving shareholder value.

As the Brighthouse financial franchise grows and evolves to include a more diversified business mix, we are committed to consistently driving shareholder value.

Speaker 3: With that, I will turn the call over to Ed to discuss financial results. Ed, thank you.

With that I will turn the call over to Ed to discuss financial results.

Ed.

Thank you Eric good morning, everyone.

Speaker 5: Bright House Financial reported strong results for the fourth quarter and full year of 2021.

Brighthouse financial reported strong results for the fourth quarter and full year of 2021.

Speaker 5: Favorable equity market performance and higher interest rates provided a positive backdrop for the year.

Favorable equity market performance and higher interest rates provided a positive backdrop for the year.

Speaker 5: We further strengthened the balance sheet and ended the year with an estimated combined risk-based capital, or RBC, ratio of approximately 500%.

We further strengthened the balance sheet and ended the year with an estimated combined risk based capital or RBC ratio of approximately 500%.

Speaker 5: well above our target range of 400% to 450% in normal markets.

Well above our target range of 400% to 450% in normal markets.

Speaker 5: and up from our year-end 2020 combined RBC ratio of 487%.

And up from our year end 2020, combined RBC ratio of 487%.

Speaker 5: Statutory Combined Total Adjusted Capital, or TAC, was approximately $9.5 billion on December 31st.

Statutory combined total adjusted capital or TAC was approximately $9 5 billion at December 31.

Speaker 5: compared with $9.8 billion at September 30.

Compared with $9 8 billion at September 30th.

Speaker 5: The decrease is explained by $344 million of subsidiary ordinary dividends paid to the holding company in the quarter.

The decrease is explained by $344 million of subsidiary ordinary dividends paid to the holding company in the quarter.

Looking at year over year.

Speaker 5: Favorable equity markets and rising interest rates help drive a $900 million increase in TAC from year end 2020.

Favorable equity markets and rising interest rates helped drive a $900 million increase in Tac from year end 2020.

Speaker 5: Additionally, in 2021, the operating companies paid total ordinary dividends of $594 million to the holding company.

Additionally, in 2021, the operating companies paid total ordinary dividends of $594 million to the holding company.

Speaker 5: The total Bright House Life Insurance Company, or BLIC, ordinary dividend paid in 2021 was more than double our initial plan for last year. Turning to not only

The total Brighthouse life insurance company or blip ordinary dividend paid in 2021.

It was more than double our initial plan for last year.

Turning to normalized statutory earnings.

This metric was close to breakeven in the fourth quarter.

Speaker 5: For the full year, the normalized statutory loss was approximately $300 million.

For the full year, the normalized statutory loss was approximately $300 million.

Speaker 5: Strong Core Variable Annuity, or VA, results were more than offset by a $200 million to $250 million negative impact.

Strong core variable annuity or VA results were more than offset by a 200 million to $250 million negative impact from a decline in the statutory mean reversion point for interest rates and.

Speaker 5: from a decline in the statutory mean reversion point for interest rates and a loss in non-VA.

And a loss in non VA.

As I discussed on our last earnings call normalized statutory earnings is meant to give an indication of excess capital generation and normal to good markets and to measure our performance managing risk in bad markets.

Speaker 5: Normalized statutory earnings is meant to give an indication of excess capital generation in normal to good markets and to measure our performance managing...

Speaker 5: Importantly, this measure in its current form was introduced prior to the adoption of VA reform.

Importantly, this measure in its current form was introduced prior to the adoption of VA reform.

Speaker 5: Starting this year, we are redefining normalized statutory earnings to better align with VA reform, and therefore movement in the RBC ratio.

Starting this year, we are redefining normalized statutory earnings to better align with VA reform and therefore, a movement in the RBC ratio.

Speaker 5: At an operating company level, we believe that the RBC ratio is the best indicator of excess capital generation over time.

At an operating company level, we believe that the RBC ratio is the best indicator of excess capital generation over time.

Speaker 5: Cash at the holding company is the other important indicator of excess capital.

Cash at the holding company is the other important indicator of excess capital.

Speaker 5: Holding company Liquid Assets were $1.6 billion at December 31st.

Holding company liquid assets were $1 6 billion at December 31.

Speaker 5: up from $1.5 billion at September 30th.

Up from $1 5 billion at September 30.

Speaker 5: Also, in the fourth quarter, we took advantage of historically low holding company funding.

Also in the fourth quarter, we took advantage of historically low holding company funding costs by extending debt maturities and adding more fixed for life preferred equity capital.

Speaker 5: by extending debt maturities and adding more fixed-for-life preferred equity capital.

Speaker 5: We issued $400 million of 30-year senior notes and $350 million of preferred stock.

We issued $400 million.

30 year senior notes and $350 million of preferred stock.

Speaker 5: The net proceeds were used to repurchase approximately $680 million of senior notes with a weighted average maturity of approximately 10 years. As we looked at 2020, the net proceeds were used to repurchase approximately $680 million of senior notes with a weighted average maturity of approximately 10 years.

The net proceeds were used to repurchase approximately $680 million of senior notes with a weighted average weighted average maturity of approximately 10 years.

As we look to 2022.

Alan sheet strength remains a top priority.

Speaker 5: And we continue to manage the company using a multi-year, multi-scenario framework to evaluate capital, liquidity, and subsidiary dividend plans to the whole.

And we continue to manage the company using a multi year multi scenario framework to evaluate capital liquidity and subsidiary dividend plans to the holding company.

Speaker 5: In 2022, total subsidiary ordinary dividend capacity is approximately $1.3 billion.

In 2022 total subsidiary ordinary dividend capacity is approximately $1 3 billion.

Speaker 5: and we currently expect to pay ordinary dividends to the holding company of approximately $300 million.

And we currently expect to pay ordinary dividends to the holding company of approximately $300 million.

Shifting to adjusted earnings.

Speaker 5: Fourth quarter adjusted earnings, excluding the impact from notable items, were $416 million.

Fourth quarter adjusted earnings excluding the impact from notable items were $416 million.

Speaker 5: which compares with adjusted earnings on the same basis of $514 million in the third quarter of 2021 and $272 million in the fourth quarter of 2020.

Which compares with adjusted earnings on the same basis of $514 million in the third quarter of 2021.

And $272 million in the fourth quarter of 2020.

The notable items on an after tax basis were.

Speaker 5: $59 million debt repayment expense in corporate and other associated with the repurchase of the company's senior notes

A $59 million debt repayment expense in corporate and other associated with the repurchase of the company's senior notes.

Speaker 5: establishment costs of $21 million, included in corporate and other,

Establishment costs of $21 million included in corporate and other.

Speaker 5: and $13 million net unfavorable actuary lighting.

And $13 million net unfavorable actuarial items, including reinsurance recaptures and the runoff segment.

Speaker 5: including reinsurance recaptures in the runoff segment, refinements to certain actuarial assumptions.

Refinements to certain actuarial assumptions.

Speaker 5: and valuation systems conversions associated with our transition to the future state platform.

And valuation systems conversions associated with our transition to the future state platform.

Speaker 5: There are two key themes when we think about the fourth quarter adjusted earnings results, compared with the quarterly adjusted earnings expectations.

There are two key themes when we think about the fourth quarter adjusted earnings results compared with Accordingly adjusted earnings expectation.

Speaker 5: First, while net investment income was lower sequentially, it was still very strong in the fourth quarter.

First while net investment income was lower sequentially. It was still very strong in the fourth quarter.

Speaker 5: primarily due to a 7.5% alternative investment return.

Primarily due to a seven 5% alternative investment return.

Speaker 5: Net investment income was approximately $165 million above a quarterly run rate expectation on an after tax base.

Net investment income was approximately $165 million above our quarterly run rate expectation on an after tax basis.

Speaker 5: For the full year, the Alternative Investment Return was 42.6%, which greatly exceeded the 9% to 11% annual return we anticipate for this asset class.

For the full year. The alternative investment return was 42, 6%, which greatly exceeded the 9% to 11% annual return we anticipate for this asset class.

Second the fourth quarter underwriting margin, which included $34 million of PAH.

Speaker 5: which included $34 million of pretax net claims related to COVID-19, was lower sequentially.

Pre tax net claims related to COVID-19 was lower sequentially.

Speaker 5: There is variability in the underwriting margin throughout the year, driven by fluctuations in a number of factors.

There is variability in the underwriting margin throughout the year driven by fluctuations in a number of factors <unk>.

Speaker 5: including frequency of claims, severity of claims, and the offset from re-insurance.

Including frequency of claims.

Verity of claims and the offset from reinsurance.

Speaker 5: As we have previously communicated, we expect direct claims on a quarterly basis to average between $400 million and $500 million.

As we have previously communicated we expect direct claims on a quarterly basis to average between $400 million and $500 million.

Speaker 5: In the fourth quarter, we were at the higher end of that range as we experienced a higher volume of direct claims.

In the fourth quarter, we were at the higher end of that range as we experienced a higher volume of direct claims.

Moving to adjusted earnings at the segment level.

Speaker 5: Annuity Adjusted Earnings, excluding notable items, were $361 million in the quarter.

Annuity adjusted earnings excluding notable items were $361 million in the quarter.

Speaker 5: Sequentially, annuity results were driven by lower amortization of Deferred Acquisition Costs, or DAC, and a small amount of

Sequentially annuity results were driven by lower amortization of deferred acquisition costs or DAC and.

And a smaller increase in reserves.

Speaker 5: both as a result of the favorable market performance in the quarter.

Both as a result of the favorable market performance in the quarter.

Speaker 5: This was partially offset by lower fees and higher expenses.

This was partially offset by lower fees and higher expenses.

Speaker 5: The life segment reported adjusted earnings, excluding notable items, of $58 million in the quarter.

The life segment reported adjusted earnings excluding notable items of $58 million in the quarter.

On a sequential basis results reflect lower net investment income.

Speaker 5: Results reflect lower net investment income, a lower underwriting margin, and higher expense.

Underwriting margin and higher expenses.

Speaker 5: Adjusted earnings in the runoff segment, excluding notable items, were $6 million in the quarter.

Adjusted earnings in the run off segment, excluding notable items were $6 million in the quarter.

Speaker 5: Sequentially, results were driven by lower net investment income, a lower underwriting margin,

Sequentially results were driven by lower net investment income.

A lower underwriting margin.

Speaker 5: and a tax true-up that was offset in the corporate and other sectors.

And a tax true up that was offset in the corporate and other segment.

Corporate and other had an adjusted loss excluding notable items of $9 million.

Speaker 5: Corporate and other had an adjusted loss, excluding notable items, of $9 million.

Speaker 5: Sequentially, results reflect a higher tax benefit and the previously mentioned tax truer.

Sequentially results reflect a higher tax benefit and the previously.

<unk> mentioned tax true up.

Speaker 5: Before I conclude, I would like to mention that we plan to provide an update in March on distributable learnings, as we have done in prior years.

Before I conclude I would like to mention that we plan to provide an update in March on distributable earnings as we have done in prior years.

Speaker 5: Overall, I'm very pleased with the fourth quarter and full year 2021 results.

Overall, I'm very pleased with the fourth quarter and full year 2021 results.

Speaker 5: We continued to optimize statutory capital, strengthen the balance sheet, and return a substantial amount of capital to share.

We continued to optimize statutory capital strengthen the balance sheet and return a substantial amount of capital to shareholders.

Speaker 5: With that, we would like to turn the call over to the operator for your questions.

With that we would like to turn the call over to the operator for your questions.

Thank you.

Speaker 1: You as a reminder: to ask the question you will need to press star one or your telephone to withdraw your question. Press the pounkey. Please stand by, wecome.

A reminder to ask a question you will need to press star one on your telephone.

Draw your question press the pound key please standby, while we compile the Q&A roster.

Speaker 1: Our first question comes from Tom Gallagher with Evercore. Your line is up.

Our first question comes from Tom Gallagher with Evercore. Your line is open.

Speaker 5: Good morning. First, just a question on capital generation in the quarter. Ed, I think I heard you mention 200 to 250 million negative mean reversion interest rate adjustment. Was that done this quarter? Was that like a true up done this quarter?

Good morning.

First just a question on capital generation in the quarter, Ed I think I heard you had mentioned $200 million to $250 million negative mean reversion interest rate.

<unk> was that was that done this quarter was that like a true up on this quarter.

Speaker 5: Hey, good morning, Tom. No, that was the impact we had in the first quarter.

Hey, Good morning, Tom No that was the impact we had in the first quarter of last year.

Speaker 5: So what you're talking about in the fourth quarter, I think, is...

So what youre talking about in the fourth quarter I think is.

Speaker 5: norm adjustments on a statutory basis. So the actuarial items and other insurance adjustments line when we talk about the norm stat earnings disclosure in the supplement.

Norm adjustments on a statutory basis, so the actuarial items and other insurance adjustments line when we talk about that.

Norm Stat earnings disclosure in the supplement.

Speaker 5: Let me give you a little color on it. I think it's important to understand the movement and the RBC ratio. In the fourth quarter, we made substantial progress on transitioning to our future state platform in actuarial. And as a reminder, this is movement away from multiple valuation systems and customized models to one valuation platform and more standardized.

And let me give you a little color on I think it is important to understand the movement. The RBC ratio in the fourth quarter, we made substantial progress on transitioning to our future state platform in actuarial and as a reminder, this is movement away from multiple valuation systems and customized models too.

<unk>, one valuation platform and more standardized models and so this has created and will continue to create more time for value added analysis more flexibility and also a better control environment. The fourth quarter was a busy quarter for this and we had three models that were fully.

Speaker 5: And so this is created and will continue to create more time for value added analysis, more flexibility, and also a better control environment. The fourth quarter was a busy quarter for this.

Speaker 5: three models that were fully put into production for three product lines. The total statutory reserves we're talking about is around $33 billion.

Put into production.

For three product lines. The total statutory reserves were talking about is around $33 billion. So one thing to think about when you look at these conversions, it's sort of like an actuarial assumption review for the associated product line. So while we had gone through a review in the third quarter every time you do this model.

Speaker 5: So, you know, one thing to think about when you look at these conversions, it's sort of like an actuarial assumption review for the associated product line. So, while we had gone through our review in the third quarter, every time you do this model conversion, you're looking very closely at the one model versus the other model and the difference.

Conversion you are looking very closely at the one model versus the other model and the differences.

Speaker 5: And so as a result of this, in the fourth quarter, there was a negative impact on TAC and the RBC from the transition to the future state. And this really explains the sequential change in the RBC ratio that you see on top of the impact you calculated from the dividends we paid up to the holding.

And so as a result of this in the fourth quarter. There was a negative impact on Tac and the RBC from the transition to the future state and this really explains the sequential change in the RBC ratio.

That you see.

On top of the impact you calculated from the dividends, we paid up to the holding company.

Speaker 5: So, you know, that's really the driver of this incremental change in RBC in the fourth quarter. The final thing I'd say is it's important to note that if you look at these actuarial adjustments on a full year basis for statutory, it was a positive impact on our RBC rate.

So.

That's really the driver of this incremental change in RBC in the fourth quarter. The final thing I'd say is it's important to note that if you look at these actuarial adjustments on a full year basis for statutory it was a positive impact on our RBC ratio.

Speaker 5: Gotcha. So that's helpful, Ed. So tell me if these numbers sound directionally correct.

Got you so.

That's helpful. Ed So if I tell me if these numbers sound Directionally correct.

Speaker 5: If I solve for a 30 point RBC drop, that equates to $500 to $600 million of TAC, keeping the denominator constant. So the dividend clearly accounted for the majority of your drop in RBC.

Solve for a 30 point RBC drop that equates to $5 to $600 million of pack keeping the denominator content.

So the dividend clearly accounted for the majority of your drop in RBC.

Speaker 5: or say actually a little less than half of the drop in the RBC. And so this systems conversion then would have been

Or.

Actually a little less than half of the drop in the RBC and so this systems conversion than would have been.

Speaker 5: you know, several hundred million dollars, it sounds like. I mean, I was calculating upwards of half a billion negative impact on your RBC, assuming you would have had a normal level of stacked capital generation in the quarter. Is it, is it kind of that order of magnitude in the RBC adjustment or, um, and any, any help there would be appreciated. Yeah, yeah, that's high. It's not, it's not a half a billion dollar.

Several hundred million dollars. It sounds like I mean, I was calculating upwards of half a billion negative impact on your RBC, assuming you would've had a normal level of stat capital generation in the quarter is it is it kind of that order of magnitude in the RBC adjustment or.

Any help there would be appreciated yet yes, that's high it's not it's not half a billion dollar impact.

Speaker 5: Because just, I would say this, remember I said the total impact for the year of actuarial adjustments was positive, right? Right. On a stat basis. And I think on the third quarter call I discussed that the statutory impact from our actuarial assumption review was positive by something around 20 RBC points.

Because just.

I would say this remember I said the total impact for the year of actuarial adjustments was positive right right on a stat basis, and I think on the third quarter call I discussed that the statutory impact from our actuarial assumption review was positive by something around 20 RBC points.

Speaker 5: I think it was 21 RBC points. Right. I think you could use that as a.

I think it was 21 RBC points.

I think you could use that as a.

Speaker 5: as an anchor to think about like how much of a negative impact must there have been in the fourth quarter if I could you know if we can still say it's positive for the full year.

As an as an anchor to think about like how much of a negative impact must they have been in the fourth quarter. If I could if we can still say it's positive for the full year.

Speaker 5: Gotcha. Okay. And then just follow up to this. I totally get it, but are there any further large systems conversions left where there could be adjustments here? How many of these are left when you think about the next couple of years?

Got you, Okay, and then just follow up to this.

Yes, I totally get it but are there any further large systems conversions left where where there could be.

Adjustments here.

These are last when you think about the next couple of years.

Speaker 5: Yeah, so we have the VA transformation, which is going to occur this year. So that's it for Actuware.

Yes, so we have the VA.

Transformation, which is going to occur this year. So that's it for actuarial.

Speaker 5: Okay. Is that a really big one or I assume it is when I hear VA, but maybe dimension that a little bit. Thanks.

Okay.

Is that a really big one or I assume it is just when I hear VA.

But but how maybe dimension that a little bit thanks.

Speaker 13: Yeah, I don't know how to demand. I would say using an actuarially approved term, it's a big one. I think that that is probably fair to say. But we've learned an awful lot along the way here with the model conversions that we've completed already. So I think we're very well positioned here and...

Yes, I don't know how to dimension I would say using.

Using an actuarially approved term, it's a big one I think that that is probably fair to say, but we've learned an awful lot along the way here with the model conversions that we've completed already so.

I think we're very well positioned here and.

Speaker 13: You know, we'll have to see what happens, but, you know, I don't, you know, I think we're very well positioned, obviously, from a capital standpoint. And, you know, the movements we're talking about here, like I said, have not been that significant in total. Again, positive for full year.

We'll have to see what happens but.

I.

I think we're very well positioned obviously from a capital standpoint, and the movements we're talking about here.

Like I said have not been that significant in total again positive for full year.

Speaker 13: 2021 when we had an awful lot of activity on the actuarial transformation front.

2021, when we had in.

An awful lot of.

Activity on the actuarial transformation front.

Got you thanks.

Speaker 1: Our next question comes from Tracy Bingigi with Barclays. Your line is open.

Thank you. Our next question comes from Tracy <unk> with Barclays. Your line is open.

Good morning.

Speaker 6: In the past, you referenced buying back stock at an average daily trading volume of 4 to 6 percent. But if I look at the last two quarters, you're well above that. I would say around 9 percent or so.

You referenced buying back stock on an average daily trading volume of 4% to 6%, but if I look at the last two quarter, you're well above that I would say around 9% or so.

Speaker 6: But on the other hand, your stock may not be as cheap as it once was.

But in the other hand, your stock may not be as cheap as it. Once was so are you still targeting that 4% to 6% range or have you changed your thinking behind that and also coupling on your expanded ordinary dividend capacity, you're healthy holdco liquidity in your RBC question.

Speaker 6: So are you still targeting this four to 6% range or have you changed your thinking behind that? Also coupling on your expanded ordinary dividend capacity, your healthy whole co-liquidity and your RBC cushion.

Speaker 3: Oops, my mic didn't work. Hi Tracy, it's Eric.

I hope so my Mic didn't work Hi, Tracy it's Eric.

Okay.

Speaker 3: Look, let me just start out by saying we are laser focused on the strategy that we laid out a couple of years ago and that has not changed at all. So you're trying to get a sense of what we're going to do going forward and Ed will jump in here on dividend capacity. We have returned a lot of capital to shareholders as you're very well aware.

Look let me just start out by saying we are laser focused on the strategy that we laid out a couple of years ago and that has not changed at all so you're you're trying to get a sense of what we're going to do going forward.

Ed will jump in here on the dividend capacity.

We have returned a lot of capital to shareholders as you're very well aware and we still have over $700 million of buyback authorization.

Speaker 3: And we still have over 700 million of buyback authorization.

Speaker 3: I think it's fair to say either today or anytime in the future when we get buyback authorization, we intend to carry out the buyback.

I think it's fair to say either today or anytime in the future when we get buyback authorization, we intend to carry out the buyback.

Speaker 3: Now you're mentioning four to six percent. In 2021, we accounted for roughly eight percent. So slightly more than that. Yes, I understand the stock price is higher. We still think it's undervalued. And as a result, we are buying back stock. You see what we've bought back so far in 2022. So while I'm not going to give an exact number.

Now youre mentioning 4% to 6% in 2021 .

We accounted for roughly 8% so slightly more than that yes, I understand the stock price is higher.

Still think its undervalued and as a result, we are buying back stock.

You see what we've bought back so far in 2022, so while I'm not going to give an exact number.

Speaker 3: you know, 4, 6, 8% and it was 8% in 2021.

Now for six 8%.

And it was 8% in 2021.

Speaker 3: sounds like a reasonable guide and of course...

It sounds like a reasonable guide and of course.

Speaker 3: That excludes any time that we think there's an opportunity to purchase even more. I know Ed wanted to say this, but I guess I'll say it. We bought back 17% of our shares in 2020 at around $26 a share.

That excludes any time that we think theres an opportunity to purchase even more.

I know Ed wanted to say this but I guess I'll say it we bought back 17% of our shares in 2020.

At around 26 Bucks a share.

Speaker 3: So I think all of what I just said gives you some guidance on what we intend to do going forward. I know you want to add.

So I think all of what I. Just said gives you some guidance on what we intend to do going forward and I know you want to add.

Speaker 13: Yeah. Hi, Tracy. The only thing I would add is, you know, we don't target a percentage of average daily volume. The reason that we've quoted those statistics, you know, today and in the past is just to give you a sense of how much, you know, how much we're buying back and how active we are. So, you know, we bought back 12% of our shares outstanding last year.

Yes, Hi, Tracy the only thing I would add is we don't target a percentage of average daily volume. The reason that we've quoted those statistics.

Today and in the past is just to give you a sense of how much.

How much we're buying back and how active we are so we bought back 12% of our shares outstanding last year.

Speaker 13: As I think Eric said, we bought back 35% or shares outstanding of decline by 35% since we separated

As as I think Eric said, we bought back 35% of shares outstanding have declined by 35% since.

We separated.

Speaker 13: You know, obviously we take capital return very seriously and we've been very active and you know, it's our strategy and I don't really see our strategy change.

Obviously, we take capital returned very seriously and we've we've been very active and it's our strategy and I don't really see our strategy changing.

Speaker 13: Got it. I'm sorry. What was that? Yeah, sorry. Sorry. I know you had another question. Just if you could repeat that.

Got it.

I'm sorry, yes.

Yes, sorry, sorry, I know you had another question just if you could repeat that.

No I think you answered my first question.

Speaker 6: And then I guess my second question is, you mentioned in March you're going to provide a refresh of your detruable earnings scenarios, but should we expect it to be directionally more positive, particularly given the 10-year Treasury is now sitting above 2%? I think the assumptions last year you shared was at 0.93% as of year-end 2020. Or is it really not comparable because of what you said earlier about redefining normalized patterns?

And then I guess my second question is you mentioned in March we're going to provide a refresh of the Articulable earnings scenarios.

But should we expect it to be Directionally more positive, particularly given the 10 year Treasury is now getting about 2% and I think the assumptions last year, you shared was that 9% to 8% as of year end 2020 or is it really not comparable call comparable because of what you said earlier about redefining normally.

That earnings.

Speaker 13: Well, I wouldn't say that the change in the

Well I wouldn't say that the change in the.

Speaker 13: definition of norm stat earnings is really going to be a meaningful factor here i mean we are you know we are lining norm stat with the rbc ratio in the rbc ratio as i said is the best indicator over time of uh... of excess capital generation and so uh... you know when we think about distributable earnings we think about what can we pay up to the holding company while still maintaining a strong capital position at the operating company level

Definition of norm Stat earnings is really going to be a meaningful factor here I mean, we are.

We are aligning norm stat with the RBC ratio in the RBC ratio as I said is the best indicator over time.

Of excess capital generation and so.

When we think about distributable earnings we think about what can we pay up to the holding company, while still maintaining a strong capital position at the operating company level.

Speaker 13: Just to be clear, I would be like... And just in terms of the... Sorry. Go ahead. I'm not going to give a preview of what we're going to say in March. I mean, clearly we are happy that interest rates are higher than they were when we did it last.

And just in terms of the sorry.

Sorry, Anna.

Im not going to I'm not going to give a preview of what we're going to say in March I mean, clearly we are happy that interest rates are higher.

And then they were when we did it last time.

Speaker 6: Okay. I mean, just considering that you early adopted VA capital reform, so it's been a little bit wild. So it's almost like same store basis because that's how you were thinking about it last year. So it should be on the same basis. Is that fair?

Okay. I mean, just considering that your early adopt VA capital reform. So it's been a little bit while so it's almost like same store base.

That's how you were thinking about it last year.

It should be.

Is that fair.

Sorry, what should be on the same basis.

Speaker 6: viewing your view of distributed capital being some derivative of excess RBC.

Viewing your view of distributable capital being some derivatives.

It's RBC.

Speaker 13: Yeah, I'm not 100% sure what you're asking, but let me try this. When we give you distributable earnings disclosures for VA and for the company under various scenarios, we're looking at what can we pay up to the holding company and still support the appropriate level of capital at the operating company.

Yes.

No.

I guess I'm not 100% sure what you're asking but let me try this when we give you distributable earnings disclosures for VA and for the company under various scenarios. We're looking at what can we pay up to the holding company and still support the appropriate level of capital.

At the operating company so.

Speaker 13: You know, nothing's changed in terms of how we think about that today versus a year ago, because as you said, VA reform was in place a year ago and it's in place...

Nothing's changed in terms of how we think about that today versus a year ago, because as you said VA reform was in place a year ago and it's in place today.

Speaker 6: Yeah, I guess the big difference would be, you know, under RBC, you're looking at CT98. And I think under your definition of normalized stat earnings, you're looking at CT95. So I just wanted to make sure that the assumptions would be similar. If I just want to make a comparison, you know, your disclosure this in March versus what you shared last year. Yeah, I.

Yes, I guess, the big difference would be under.

Under RBC Youre looking at Cte 98, and I think under your definition of normalized Stat earnings Youre looking at the $2 95. So I just wanted to make sure that the assumptions will be similar.

I just wanted to make a comparison.

Youre a disclosure in there.

Versus what you shared last year.

Yes, I don't think youre going to have a problem.

Okay. Thank you Sir.

Thank you. Our next question is from Ryan Krueger with <unk>. Your line is open.

Speaker 7: Hey, good morning. Ed, based on where rates are right now, would you expect the mean reversion rate to come down 25 basis points in the first quarter of 2022? And if so, is the impact bill 200 to 250 million?

Hey, good morning.

And based on where rates are right now would you expect the mean reversion rate to come down 25 basis points in the first quarter of 2022.

If so is the impact.

$250 million.

Yes, and yes.

Speaker 7: All right, that was easy. And then I guess, secondly, just on the subsidiary dividend to the whole co. I guess is there your RBC is, you know, a fair amount above your target.

Alright.

And then.

I guess secondly, just on the subsidiary dividends to the Holdco.

I guess is there.

RBC has a fair amount above your target.

Speaker 7: you know, would you consider at some point starting to take additional dividends to work down closer towards your the high end of the 400 to 450% target or, or at this point, are you just still looking to run the stack capital within the subs with more of a cushion?

Would you consider at some point starting to take additional dividend to work down closer towards the high end of the 400% to 450% target for at this point or are you just still looking.

Rather the stat capital within the subs with more of a cushion.

Speaker 13: Yeah, so, you know, obviously we have a high RBC ratio and a lot of cash.

Yes, so obviously, we have a higher RBC ratio in a lot of cash at the holding company and I guess I would just say with $1 $6 billion of cash at the holding company.

Speaker 13: And I guess I would just say with $1.6 billion cash the holding company.

Speaker 13: Most of our fixed charges covered by non-dividend flows from the operating companies, and with our first debt maturity in 2027.

Most of our fixed charge is covered by non dividend flows from the operating companies and with our first debt maturity.

In 2027, which by the way has been reduced by more than 40% because of the capital transactions. We did late last year. So.

Speaker 13: which by the way has been reduced by more than 40% because of the capital transactions we did late last year. So, you know, I, we issued $750 million of

We issued <unk>.

$750 million of.

Speaker 13: a combination of 30-year debt and fixed-for-life preferred, and took out

A combination of 30 year debt and fixed for life preferred and took out.

Speaker 13: that shorter debt, most of it in the 2027. So we're very happy we locked in historically low funding costs for us. As you can imagine, the yields on our debt and preferred are up a fair amount from where they were at that point in time. It also means that there's less, even in 2027, the amount that's maturing is small. We have the ability to...

That shorter debt most of it that in the 2027. So we're very happy we locked in historically low funding cost for us.

As you can imagine.

The yields on our debt and preferred are up a fair amount from where they were at that point in time.

It also means that there's less even in 2027 the amount that's coming that's maturing is small so we are we have the ability to.

Speaker 13: you know, complete the authorization without any reliance on dividends anywhere.

Complete the authorization without any reliance on dividends.

Anywhere certainly not from Blake.

Speaker 13: over time. I mean, so, you know, I don't really, you know, that's point number one. Point number two, we look at taking dividends based on, as you've heard me say repeatedly, this, you know, in a multi-year, multi-scenario framework. And so, it's great to have a lot of dividend capacity, but, you know, that's not what's going to drive us to determine what we're going to take up in any one year. That makes sense. Thanks, Ed.

Over time I mean, so.

I don't really.

That's point number one point number two we look at taking dividends based on as you've heard me say repeatedly this.

And a multiyear multi scenario framework and so it's great to have a lot of dividend capacity, but that's not what's going to drive us to.

To determine what we're going to take up in any one year.

That makes sense. Thanks, Ed.

Thank you. Our next question comes from Alex Scott with Goldman Sachs. Your line is open.

Hi, Thanks for taking the question I just wanted to circle back on the comments about trends transforming the platform for variable annuities.

Speaker 8: the platform for variable annuities. Could you talk about...

Could you talk about what that entails what are some of the changes that are made and I guess, specifically on the scenario generator. I mean is that one of the changes that occurs with that kind of a platform switch.

Speaker 8: Specifically on the scenario generator, I mean is that one of the changes?

Okay.

Where you could help us.

By that.

Speaker 13: Yeah, there's no change in the scenario generator. I think you're referring to the discussions around the new scenario generator for statutory, which is going to be a...

Yes, there is.

No. There is no change in the scenario generator I think you're referring to the discussions around the new scenario generator.

Statutory which is going to be a.

Speaker 13: I think it's going to be a long process. Obviously, we're very engaged. There's a lot of work to do. As you can imagine, it's extremely complicated. And it's going to take time. And I'm optimistic that the industry and regulators will come to a good framework.

I think it is going to be a long process. Obviously, we're we're very engaged there is a lot of work to do as you can imagine it's extremely complicated.

And it's going to take time.

I'm optimistic that the industry and regulators will come to a a good framework.

Speaker 13: And I just say, look, we've proven we can manage through VA reform. We've got a lot of capital. I'm not really concerned about the change in the ESG. In terms of

And I would just say look we've proven we can manage through VA reform, we've got a lot of capital I'm not.

I'm not really concerned about the change in the ESG in terms of.

Speaker 13: The VA, you know, I would just say that, you know, we have, there are multiple systems that are in place now, and we're going to, as I said, a single environment for all of our products. So it does provide simplification. It does provide, I think, ease of use and frees up the time for people to do more value-added analysis. So I'm really looking forward to the opportunities we're going to have as a result of.

The VA.

I would just say that we have.

There are multiple systems that are in that are in place now and we're going to as I said.

A single environment for all of our products. So it does provide simplification.

Does provide I think ease of use and frees up the time for people to do more value added analysis. So I'm really looking forward to the opportunities we're going to have as a result of completing fully completing this transformation.

Speaker 13: completing fully completing this transformation and the benefits.

And the benefits that we'll realize.

Speaker 13: But I don't know if there's anything specific I would go into on the VA.

But I don't know that Theres anything specific I would go into.

The VA system.

Speaker 8: Got it. And so should I take that to mean that when we think through what you're going to bring forward in March or in cash flow scenarios and so forth, that's not really...

Got it.

Should I take that to mean that when we think through where youre going to bring forward in march or in cash flow scenarios and so forth that's not really a consideration that we need to.

Into account.

Speaker 13: That is correct. You do not need to take it into account.

That is correct you do not need to take it into account.

Speaker 8: And maybe for my follow-up, I just wanted to find out how you guys are thinking about inflation on the expenses and just is there any impact that we should expect from the people that are feeling beach meaner most experienced time around, probably not helping people with financial problems and then fixing goals and everything like that. That flat statement makes me racks on my phone and says I have a problem and I sometimes

And then maybe for my follow up I, just wanted to find out.

How you guys are thinking about inflation on the.

Expenses in Gist.

Is there any impact that we should expect from that into next year.

And maybe if you could shed any light around how much the institutional platform investments in <unk>.

Speaker 13: Well, I'll start on inflation.

Well I'll start on <unk>.

Inflation.

Speaker 13: You know, I would say if we assume that inflation translates to higher interest rates, which certainly yesterday's market action would suggest that's a reasonable linkage to think about, you know, inflation is an overall good guy.

I would say if we assume that inflation.

Translates to higher interest rates, which certainly yesterdays market action would suggest that's a reasonable.

Linkage to think about.

Inflation is an overall good guy for us.

Speaker 13: And, you know, obviously people have to deal with wage inflation across all industries and we'll have to do the same, but, you know, higher interest rates, higher inflation is not something that we're afraid of.

And.

Obviously people have to deal with wage inflation across all industries, and we will have to do the same but.

Higher interest rates higher inflation is not something that.

We're afraid of.

Speaker 3: Yeah, it's Eric, I'll add to that. So I think over time here, you can count on us talking about our sort of static expense rate.

Yeah, it's Eric I'll add to that.

So I think overtime here you can count on us talking about our sort of stat expense ratio continuing to go down just despite any effects that might hit us with respect to inflation.

Speaker 3: continuing to go down despite any effects that might hit us with respect to inflation. You should expect continued sales growth.

You should expect continued sales growth.

Speaker 3: and margin expansion as we think about the stat expense ratio coming down. This particular year, 2021, we did start up, you know, it's a new business for Bright House, certainly for some of us it's a business we've been in for a long time, but the institutional spread margin business and I think you specifically asked about that.

And.

And margin expansion as we think about the stat expense ratio coming down.

This particular.

Year 2021, we did startup.

A new business for Brighthouse certainly for some of US it's a business we've been in for a long time, but the institutional spread margin business and I think you specifically asked about that so it was in the neighborhood of 10 ish million to get that all up and running.

Speaker 3: So it was in the neighborhood of 10-ish million.

Speaker 3: to get that all up and running in 2021. And of course, that affected our expenses, right? That made them 10-ish million higher. And you didn't ask this question, but I'll answer it anyway.

In 2021 and of course that that affected our expenses right that made them 10 ish million higher.

And you didn't ask this question, but I'll answer it anyway. So we had originally set out to save $150 million off are sort of starting expense space and then another $25 million in 2021. So we did not hit that for two reasons one.

Speaker 3: So we had originally set out to save 150 million off our sort of starting expense base.

Speaker 3: and then another $25 million in 2021. So we did not hit that for two reasons. One, the institutional spread margin business, which was about half of the difference. And then we did a lot of investing this year, and we'll continue to do that in distribution.

On the institutional spread margin business, which was about half of the difference and then we did a lot of investing this year and we'll continue to do that.

In distribution.

Speaker 3: You will see that in 2022 as well and probably in 2023. And along with your comments on inflation, we will still lower our stat expense ratio. So hope that helps.

You will see that in 2022, as well and probably in 2023.

Along with your comments on inflation, we will still lower our stat expense ratio. So I hope that helps.

Thank you.

Thank you. Our next question comes release Greenspan with Wells Fargo. Your line is open.

Speaker 1: Our next question comes from Lisa Greenspan with Wells Fargo.

Speaker 14: Thanks. Good morning. My first question goes back to capital return, I guess. I'm assuming, you know, you guys, I'm assuming given where your stock price is, even though I think someone pointed out earlier, it's obviously more expensive than where it was, that you would still look for share repurchase, you know, for your return of capital as opposed to instituting a dividend, but I wasn't sure if you had any updated thoughts there.

Thanks, Good morning, My first question.

Back to capital return I guess.

I'm, assuming you guys.

I mean, given where your stock price is even though I think someone pointed out earlier is obviously more expensive than where it was that you would still look for share repurchase.

For your return of capital as opposed to.

Instituting the dividend, but I wasn't sure if you had any updated thoughts there.

Speaker 3: Yeah, I think that's a good assumption.

Yes, I think Thats thats a good assumption.

Speaker 14: Okay, thanks. And then my second question, you guys had a reinsurance recapture that you pulled out of earnings in the quarter. Can you just give us any additional color there?

Okay. Thanks, and then my.

Second question.

Reinsurance recapture that you pulled out earnings in the quarter can you just give us any additional color there.

Speaker 13: Yeah, sure. Hi, Elise. So, you know, the recapture was not a meaningful impact.

Yes sure.

<unk>.

So the recapture was not.

A meaningful impact from a statutory basis.

Speaker 13: In the total items on a GAAP basis, which had a net unfavorable impact of $13 million, the reinsurance recaptures had a $36 million unfavorable impact included in that.

In the total items on a GAAP basis, which had a net unfavorable impact of $13 million.

The reinsurance Recaptures had $36 million unfavorable impact included in that number.

Speaker 13: And I think as you know, when we're presented with a rate increase, we evaluate whether it makes sense to accept that or just to recapture the business. And in this instance, we decided it made sense to do the latter.

And I think as you know.

When we are presented with the rate increase we evaluate whether it makes sense to accept that or just to recapture the business and in this instance, we decided it made sense to do the latter.

Okay. Thank you.

Speaker 1: Our next question comes from Johnnage with Piper Sandler. Your line is open.

Thank you. Our next question comes from John inch with Piper Sandler Your line is open.

Speaker 9: Thank you. Maybe if we talk about other companies have announced cost-cutting programs after close to two years in a heavily hybrid world. Totally understand you're able to start up your company and digitize it very quickly, but with establishment costs set to end in 22, how do you approach future expense, right size and opportunities?

Thank you.

Maybe if we talk about other companies have announced cost cutting programs after close to two years in a heavily hybrid world.

Totally understand you were able to start up your company and digitize it very quickly, but with establishment costs in 'twenty two how do you approach future expense right sizing opportunities.

Hi, John .

Sure.

Speaker 3: We will, I think there's still room for us to take out some expenses.

We will.

I think there are theres still room for us to take out some expenses.

Speaker 3: You mentioned the digitization. It's taken a while, by the way. You know, we started this a number of years ago.

You mentioned the Digitization, it's taken a while by the way we started this a number of years ago. So.

Speaker 3: So, you know, it's finally coming to fruition here after a number of years. There will be still some areas where we can take some expenses out.

It's finally coming to fruition here after a number of years.

There will be still some areas, where we can take some expenses out.

Speaker 3: um... maybe some rent overtime here uh... i think from a previous question obviously inflation will will be a factor it is not going to preclude us as i said twice now uh... lowering our stat expense ratio uh... but also we are never going to shy away from making investments in growth uh... we've made investments for the black rock l p p product

Maybe some rent over time here.

But I think from a previous question, obviously inflation will be a factor it is not going to preclude us as I've said twice now from lowering our <unk> expense ratio.

But also we are never going to shy away from making investments in growth.

We've made investments for the Blackrock LPP product.

Speaker 3: We've made investments in new products, which you'll see this year and next year. And we will continue our sort of digitization for the financial professionals that we work with. So there are going to be opportunities, but frankly, I'm pretty focused on growth and investing in growth as well.

We've made investments in new products, which will youll see this year and next year and we will continue our sort of digitization.

For the financial professionals that we work with so there are going to be opportunities, but frankly, I'm pretty focused on on growth and investing in growth as well.

Speaker 9: That's very helpful. Thank you very much. And maybe my follow up. Last quarter, you added 13,000 agents to the 50,000 you had previously. Can you talk about performance of those new agents in the quarter and then success in recruitment of new agents as well? Thank you.

That's very helpful. Thank you very much and maybe my follow up.

Last quarter, you added 13000 agents to the 50000 you had previously can you talk about performance of those new agents in the quarter and then success in recruitment of new agents as well. Thank you.

Speaker 15: Yes, hi, it's Miles Lambert speaking. So we did launch several new relationships and I think you're referencing specifically for our SmartCare product.

Yes, Hi, it's Myles Lambert speaking so.

We did launch several new relationships and I think youre referencing specifically for our smart care product.

Speaker 15: in August and throughout the fall of last year. We brought on about 13 new distributors, giving us access to approximately 14,000 additional advisors. And we also expanded into the BGA channel. And it happened, like I said, throughout the summer and the fall, and we're starting to slowly see some growth from that new distribution opportunity, from those new distribution opportunities.

In August and throughout the fall of last year, we brought on about 13, new distributors, giving us access to approximately 14000.

<unk> advisors.

And we also expanded into the PGA channel and.

It happened like I said throughout the summer and the fall and we're starting to slowly see some growth from that new distribution opportunity from those new distribution opportunities.

Thank you.

Yes.

Thank you. Our next question comes from Humphrey Lee with <unk>.

Okay.

Speaker 10: Good morning and thank you for taking my question. Just looking at the motel...

Good morning, and thank you for taking my question.

Just looking at the mortality claims.

Definitely ups and downs throughout the quarters, but we're taking a step back and look at kind of the direct claims maybe say over the past four to six quarters and compare to the reinsurance recoveries, where do you and.

Speaker 10: But we are taking a step back and look at the direct claims.

Speaker 10: say over the past four to six quarters and compared to the reinsurance recoveries, where do you end up relative to your...............

Relative to your expectations.

Yes, Hi, Humphrey it's Ed.

Speaker 13: So yeah, we pointed out that underwriting was a little less favorable than what we would consider to be normal. And you know, I think that has been the case.

So yes, we pointed out that underwriting was a little less favorable than what we would consider to be normal and I think that has been the case.

Speaker 13: generally in the pandemic. And we talk about obviously there's the COVID impact that's direct, that explains part of that.

<unk>.

Generally.

In the pandemic and we talk about obviously there is the COVID-19 impact Thats direct that explains part of that.

Speaker 13: You know, I also think, and I don't believe we can prove this, but there could be a knock-on effect here, right, where you have people that aren't as quick to go to the hospital, they're not as quick to go to the emergency room.

I also think and.

I don't believe we can prove this but there could be a knock on effect here right, where you have people that aren't as quick to go to the hospital and they're not as quick to go to the emergency room.

Speaker 13: We know the cause of death reporting is imperfect. So what we identify as COVID related deaths are the deaths that are

We know the cause of death reporting is imperfect so what we identify as COVID-19 related deaths are the debts that are tagged as COVID-19 and we know that that has to be I would say the minimum number of COVID-19 deaths. Because there are others that are possibly not categorize correctly. So I think it.

Speaker 13: tagged as COVID. And, you know, we know that that has to be, I would say, the minimum number of COVID deaths because there are others that are possibly not categorized correctly. So, I think it's difficult to really be that precise about what's pandemic and what's not.

Difficult to to really be that precise about what's pandemic and what's not.

Speaker 13: I would say that this is not something that is an issue for us. I talked about in the third quarter how we generally had very little change in our mortality expectations based on our experience studies, so our heavy third quarter actuarial assumption update analysis of this issue. We continue to look at it.

I would say that this is not something that is.

An issue for us I talked about in the third quarter, how we generally had very little change in our mortality expectations based on our experience study. So our heavy third quarter actuarial assumption update analysis of this issue we continue to look at it.

Speaker 13: You know, reinsurance percentage was a little lighter this quarter than what we would consider to be the average. It can bounce around a lot. And you know, the direct claims themselves, the fact that I give a range of $400 to $500 million gives you some indication of the type of volatility you can see. So I would say there's nothing to see here, but you know, I think there is probably somewhat of a pandemic impact that's affected the last.

Reinsurance percentage was a little lighter this quarter than what we would consider to be the average it can bounce around a lot.

And the direct claims themselves. The fact that I gave a range of $400 million to $500 million gives you. Some indication of the type of volatility you can see so I would say, there's nothing to see here, but.

<unk>.

I think there is probably somewhat of a pandemic impact thats affected the last year or two.

Speaker 10: Okay, thank you for the color. My second question is related to kind of how to think about the market impact running through annuities. I think you used to provide some guidance.

Okay. Thank you for the color.

My second question is related to kind of how to think about the market impact running through annuities. I think you used to provide some guidance in the past, but the product mix continue to shift to shield from your legacy <unk> can.

Speaker 10: Product makes continued shift to shield from your legacy GMIB.

Speaker 10: Can you just give us an updated rule of thumb in terms of how to think about market impact?

Can you just give us an update a roof in terms of how to think about the market impact.

Speaker 13: Sure. So we're not identifying a specific market impact. I think we qualitatively said that if you look at market impact, that it was an offset to say that slightly less favorable expenses as well as the underwriting issue that we talked about when we if you're thinking about run rate.

Sure. So we're not identifying a specific market impact I think we qualitatively said that if you look at market impact.

That it was an offset to say slightly less favorable.

<unk> as well as the underwriting issue that we talked about.

If youre thinking about run rate.

Speaker 13: If you look at the annuities segment...

If you look at the annuity segment the.

Speaker 13: The DAC this quarter, I believe, was $49 million. Now, that has an impact from the systems conversions that we talked about, so there's actually a DAC benefit. So unlike statutory, where there was the negative impact, there was a positive impact for GAP because of DAC.

The DAC this quarter I believe was $49 million now that has an impact from the systems conversions that we talked about so theres actually a DAC benefit so unlike statutory where there was the negative impact that was a positive impact for GAAP because of the DAC.

Speaker 13: So if you adjust for that, the run rate or the number in the quarter for DAC related to adjusted earnings in annuities was more like 80 to $90 million. And I have said in the past that a more normal quarter for DAC amortization is probably in the neighborhood of a hundred. I think it's fair to say that it's a higher number than that now. So that should give you some indication of how to think about the market impact. Got it. Thank you for that.

So if you adjust for that the run rate or the number in the quarter for DAC related to adjusted earnings in annuities was more like $80 million to $90 million.

And I have said in the past that a more normal quarter for DAC amortization is probably in the neighborhood of 100, I think it's fair to say that it's a higher number than that now so that should give you some indication of how to think about the market impact.

Got it thank you for that.

Thank you. Our next question comes from Erik Bass with Autonomous Research. Your line is open.

Speaker 4: Hi, thank you. I want to follow up on Elisa's question about a potential common dividend. And well, certainly it's hard to argue with the value of buying back your stock. A dividend could potentially expand your shareholder base and send a strong signal about your confidence in the sustainability of cash flow. So just interested in getting a little bit more thoughts on how you're thinking about that.

Hi, Thank you I wanted to follow up on our leases question about a potential common dividend well. It certainly it's hard to argue with the value of buying back your stock dividend you could potentially expand your shareholder base and send a strong signal that our confidence in the sustainability of cash flow. So just interested in getting a little bit more thoughts on how you are.

Youre thinking about that.

Yeah.

Speaker 3: higher comportant haven't problems with this microphone today uh...

Hi, Eric, but I'm, having problems with his microphone today.

Speaker 3: Look, it's not like we never discuss it. And certainly this is a board topic as well. But at this point, it still strikes us that buying back our stock is the right way to go. Does that preclude eventually a dividend? No, it does not. And as I kind of hinted, and I'll say it more formally, we will talk about it.

Look it's not like we never discuss it.

And certainly this is a board topic as well.

But but at this point.

Still strikes us that buying back our stock is the right way to go does that preclude eventually a dividend no it does not and.

As I kind of hinted and I'll say it more formally.

We will talk about this this is a topic that we should be talking about both as a management team as a board and overtime. There is certainly there is a possibility that we will play a common dividend, but for the time being and I think the words I used were buying back stock is probably a good assumption when you think about capital.

Speaker 3: This is a topic that we should be talking about both as a management team and as a board. And over time, certainly there is a possibility that we will play a common dividend. But for the time being, and I think the words I used were, you know, buying back stock is probably a good assumption when you think about capital return for us right now.

<unk> for us right now.

Speaker 4: Got it. Thank you. And then I know you'll provide obviously the update on VA cash flows in a month or so. I was just hoping you could remind us of kind of the relative sensitivity to interest rates versus equity markets. And if we have an environment of higher rates but modestly declining markets like we've seen year to date, is that still something we should think of as a net positive for you?

Got it thank you.

I know youll provide obviously the update on VA cash flows in a month or so was just hoping you could remind us of kind of the relative sensitivity to interest rates versus equity markets. We are in an environment of higher rates, but modestly declining markets like we've seen year to date is that still something we should think of as a net positive for you.

Speaker 13: Yeah, Eric, I'm not going to get into the specifics here like ahead of the DE tables. The only thing I'd point out is when we did this last year, I remember we talked about how our DEs...

Yeah, Eric I am not going to get into the specifics here like ahead of the day tables. The only thing I would point out is when we did this last year.

I remember, we talked about how our our D R.

Speaker 13: our DE tables look very similar to the prior year.

Our day tables look very similar to the prior year adjusted for the $1 billion of additional capital that we took out.

Speaker 13: adjusted for the $1 billion of additional capital that we took out.

Speaker 13: you know, two years ago because of the de-risking of the hedge strategy, right? and the point that I was making then

Two years ago, because of the Derisking of the hedge strategy right and the point that I was making then was.

Speaker 13: Look, its interest rates had come down a lot.

Look its interest rates had come down a lot.

Speaker 13: down 100 basis points, but at the same time, the equity market had performed.

It gets down 100 basis points.

But at the same time the equity market had performed.

Speaker 13: very well. So, it gave you an indication that they're both important.

Very well so.

It gave you an indication that they're both important right.

Speaker 4: Yeah, certainly. But we'll stay tuned. Thank you. Our next question.

Yes, certainly.

Well, we'll stay tuned.

Thank you. Our next question comes from Mike <unk> with Wolfe Research. Your line is open.

Okay great.

Happy Friday.

Speaker 11: One question, when you talk about your RBC ratio target, you use the word normal market.

One question.

When you talk about.

The RBC ratio target you used the world the word.

Normal markets, maybe you can comment on.

Speaker 11: Maybe you can comment on what is your view of normal markets and has it evolved over recent quarters.

What is your view of normal markets and hesitant evolved.

Over recent quarters.

Speaker 13: Mike, happy Friday to you. And it probably won't be a surprise that Eric just waved a hand to me to discuss the answer to this question. We were just sort of having a few laughs about what exactly does normal markets mean, right? Um, cause it doesn't feel like a normal, uh, maybe ever, you know, it's a guide for us to say that, um,

Mike Happy Friday to you and it probably won't be a surprise that Eric just waive the hand to me to discuss the answer to this question we were just.

Sort of having a few laughs about what exactly does normal markets mean right.

Because it doesn't feel like.

Normal maybe ever.

As a guide for us to say that.

Speaker 13: 400 to 450 percent is it feels like the right number for an RBC ratio during a, you know, kind of on a full cycle.

400% to 450% is it feels like the right.

Number four in RBC ratio during a kind of on a full cycle basis.

Speaker 13: And so, you know, when times are really good, you would expect it to be above that. And if times got tough, certainly would you'd expect it to be below that. So that's why I think you want to make sure that you are positioned. You know, we've had a very good run here. I mean, the stock market's done very well. Interest rates, not so much. But until recently now, we're seeing, you know, rates going up, too. So I don't know that now's the time.

And so when times are really good you would expect it to be above that and if times got tough certainly would you would expect it to be below that so that's why I think you want to make sure that you are positioned.

We've had a very good run here I mean, the stock market has done very well interest rates not so much but until recently now we're seeing rates going up too so.

I don't know that now is the time to.

Speaker 13: to get too aggressive in terms of how you think about your capitalization at the operating company level.

To get too aggressive in terms of how you think about your <unk>.

Capitalization at the operating company level.

Understood. Thank you.

Thank you.

Ladies and gentlemen, I will now turn the call over to Dana Monty for closing remarks.

Speaker 2: Thank you, Shannon. And thank you all for joining us today and for your interest in Bright House Financial. Have a great day.

Thank you Shannon and thank you all for joining us today and for your interest in Brighthouse financial have a great day.

This concludes today's conference call. Thank you for participating you may now disconnect.