Brighthouse Financial, Inc.

Brighthouse Financial, Inc. (BHF) operates as one of the largest providers of annuity and life insurance products in the U.S., serving over 2.0 million annuity contracts and insurance policies in force as of December 31, 2025 ¹. The company distributes its products through multiple independent channels and marketing arrangements with a diverse network of over 400 distribution partners ². BHF primarily transacts business through its insurance subsidiaries, Brighthouse Life Insurance Company, Brighthouse Life Insurance Company of NY (BHNY), and New England Life Insurance Company (NELICO), though NELICO does not currently write new business ³. The company emphasizes financially disciplined operations, independent distribution, and a strategy of offering a targeted set of products to enhance its ability to invest in the business and distribute cash to shareholders ⁴.

BHF's core business model revolves around generating revenue from premiums, universal life and investment-type product policy fees, and investment income from its substantial general and separate account assets. The company's income is a mix of recurring fees and investment spreads, with customer segments primarily consisting of individuals seeking protected wealth accumulation, wealth transfer, and income security ⁵. BHF's strategy includes disciplined risk selection and innovative product design, balancing profitability with sales growth, and maintaining a strong capital base and excess liquidity at the holding company level ⁶.

The Annuities segment offers a variety of variable, fixed, index-linked, and income annuities designed for tax-deferred wealth accumulation, wealth transfer, and income security ⁷. New sales since 2014 have primarily focused on Shield® Level Annuities, fixed annuities, and variable annuities with simplified living benefits ⁸. For the year ended December 31, 2025, the Annuities segment generated $2.024 billion in fee income ⁹ and $1.635 billion in net investment spread ¹⁰, contributing $1.254 billion to adjusted earnings ¹¹. Insurance liabilities for variable annuities were $79.321 billion ¹², Shield Annuities $35.621 billion ¹³, fixed deferred annuities $19.007 billion ¹⁴, and income annuities $4.788 billion ¹⁵ as of December 31, 2025.

The Life segment provides term, universal, whole, and variable life products for financial security and protected wealth transfer ¹⁶. The current focus is on universal life products with index-linked benefits, prioritizing design and profitability over volume ¹⁷. For the year ended December 31, 2025, the Life segment reported $309 million in fee income ¹⁸ and $200 million in net investment spread ¹⁹, resulting in adjusted earnings of $41 million ²⁰. In-force face amounts as of December 31, 2025, included $312.477 billion for Term ²¹, $16.098 billion for Whole ²², $9.339 billion for Universal ²³, and $31.714 billion for Variable life products ²⁴.

The Run-off segment comprises products no longer actively sold, including universal life with secondary guarantees (ULSG), structured settlements, pension risk transfer contracts, certain company-owned life insurance policies, and funding agreements ²⁵. For the year ended December 31, 2025, this segment generated $378 million in fee income ²⁶ and $917 million in net investment spread ²⁷, contributing $436 million to adjusted earnings ²⁸. Insurance liabilities as of December 31, 2025, included $17.137 billion for ULSG ²⁹, $4.477 billion for structured settlements ³⁰, and $2.110 billion for pension risk transfer ³¹.

For the fiscal year ended December 31, 2025, BHF reported total revenues of $6.766 billion ³² and total expenses of $6.292 billion ³³. Income before provision for income tax was $474 million ³⁴, with a provision for income tax expense of $36 million ³⁵, leading to net income available to Brighthouse Financial, Inc. of $433 million ³⁶. After preferred stock dividends of $102 million ³⁷, net income available to common shareholders was $331 million ³⁸. Adjusted earnings for the period were $1.617 billion ³⁹. As of December 31, 2025, total assets under management were $206.157 billion ⁴⁰. The company had $3.2 billion of total long-term consolidated indebtedness outstanding ⁴¹.

Comparing fiscal year 2025 to 2024, net income available to shareholders increased by $45 million, from $286 million ⁴² in 2024 to $331 million ⁴³ in 2025. This increase was primarily driven by higher pre-tax adjusted earnings, lower losses from interest rates on ULSG derivatives, and net investment gains, partially offset by higher losses from variable annuity guaranteed benefit riders and the weakening U.S. dollar impacting foreign currency derivatives ⁴⁴. Adjusted earnings increased by $298 million, from $1.319 billion ⁴⁵ in 2024 to $1.617 billion ⁴⁶ in 2025, primarily due to lower net costs in insurance-related activities and higher net fee income, partially offset by lower net investment spread and higher other expenses ⁴⁷.

On November 6, 2025, BHF entered into an Agreement and Plan of Merger with Aquarian Holdings VI L.P., under which Merger Sub will merge into BHF, with BHF surviving as a wholly-owned subsidiary of Aquarian Parent ⁴⁸. At the effective time of the Merger, each share of common stock will be converted into the right to receive $70.00 per share in cash ⁴⁹. The Merger Agreement was adopted by stockholders on February 12, 2026 ⁵⁰, and the applicable waiting period under the Hart-Scott Rodino Antitrust Improvement Act of 1976 has expired ⁵¹.

Management expects the Merger with Aquarian Holdings VI L.P. to close in 2026, though its completion is subject to customary conditions, including receipt of required regulatory approvals from insurance regulators in Delaware, New York, and Massachusetts, and approval from FINRA for a change in control of Brighthouse Securities, LLC ⁵². The company has agreed to certain restrictions on business conduct prior to the closing of the Merger, which may impact its ability to pursue strategic transactions or significant financing activities ⁵³.

BHF intends to focus on selling its new suite of Shield Annuity products, along with variable annuities that include Guaranteed Minimum Withdrawal Benefits (GMWBs) and Guaranteed Minimum Death Benefits (GMDBs) only ⁵⁴. This strategic shift follows an initiative completed in the third quarter of 2025 to establish standalone hedging programs for variable annuity and first-generation Shield Annuity contracts, allowing for more effective risk management of these products ⁵⁵. The company also manages risks associated with its updated Shield Annuity product, launched in 2024, on a standalone basis ⁵⁶.

The company's operational outlook includes a continued focus on efficiency to reduce the cost basis and underwriting expenses in its Life segment, aiming to maximize profits ⁵⁷. In the third quarter of 2025, BHF completed an initiative that established a standalone hedging program for its variable annuity block, intended to mitigate exposure to changes in interest rates arising from these contracts ⁵⁸. The company continues to set individual hedge targets for products like ULSG, where the economics of interest rate derivatives are ceded through reinsurance to BRCD ⁵⁹.

For capital allocation, BHF's Board of Directors authorized the repurchase of up to $750 million of common stock on November 16, 2023, with $441 million remaining under this program as of December 31, 2025 ⁶⁰. However, pursuant to the Merger Agreement, the company is currently not permitted to declare and pay dividends on its common stock or repurchase its capital stock without the written consent of Aquarian Parent ⁶¹. The company intends to use its future statutory free cash flow, if any, to pay debt obligations, fund growth, develop its business, meet working capital needs, and for general corporate purposes ⁶².

Management has flagged several structural headwinds and execution risks. The company's ability to complete the Merger in the anticipated timeframe or at all is a significant risk, with potential adverse effects on business, results of operations, or financial condition if conditions are not met or if a termination fee of approximately $144 million ⁶³ is required to be paid ⁶⁴. The pendency of the Merger also creates business uncertainties and contractual restrictions, potentially disrupting business relationships, diverting management's attention, and affecting the ability to recruit and retain key personnel ⁶⁵.

Geographic, regulatory, and macro factors also present constraints. The NAIC adopted Actuarial Guideline LV (AG 55) in August 2025, establishing asset adequacy testing requirements for U.S. life insurers ceding "asset-intensive" business to offshore reinsurers, effective for year-end 2025 reporting on a disclosure-only basis ⁶⁶. The NAIC also adopted amendments to the Valuation Manual in August 2025, establishing a new principle-based reserving framework for non-variable annuities, effective January 1, 2026, with a three-year implementation period ⁶⁷. Additionally, the NAIC adopted amendments requiring companies to use a new Generator of Economic Scenarios (GOES) for principles-based reserve and RBC market risk calculations, effective January 1, 2026, with adoption required by December 31, 2026, and a three-year phase-in option ⁶⁸. These changes, along with potential future changes to RBC market risk requirements, could negatively impact statutory surplus and required capital ⁶⁹.

The company faces material risks, including the uncertainty surrounding the completion of the Merger with Aquarian Holdings VI L.P., which could be delayed or terminated if regulatory approvals are not obtained or other conditions are not satisfied, potentially requiring a termination fee of approximately $144 million ⁷⁰. Operational risks include the potential for significant volatility in profitability measures or negative impacts on statutory capital if hedging strategies are ineffective, or if actual experience deviates from actuarial assumptions, which could necessitate increasing liabilities and impact RBC ratios and financial strength ratings. The company is exposed to significant financial risks from capital markets, including credit, interest rate, inflation, market valuation, liquidity, real estate, and derivatives risks, which could adversely affect its financial condition and results of operations. Regulatory changes, such as new NAIC guidelines on reserving and capital, or evolving standards of conduct, could increase compliance costs, limit product offerings, or increase litigation risk. Furthermore, the company's reliance on third-party service providers introduces risks of service failures, data breaches, or non-compliance, which could lead to economic and reputational harm. Cybersecurity threats, exacerbated by geopolitical conflicts and the increasing sophistication of AI, pose a continuous risk of unauthorized access, data loss, or operational disruption, despite robust risk management programs.

Management's message to shareholders conveys a focus on disciplined financial management and strategic product offerings, particularly in annuities and life insurance, to drive long-term shareholder value. The company emphasizes its commitment to maintaining a strong capital base and excess liquidity, supported by a risk management approach designed to mitigate severe market disruptions. A key strategic priority is the successful completion of the Merger with Aquarian Holdings VI L.P., which is expected to close in 2026, subject to regulatory approvals. Management also highlights the ongoing evolution of its product portfolio, specifically the shift towards new Shield Annuity products and variable annuities with GMWBs and GMDBs, and the establishment of standalone hedging programs to more effectively manage product-specific risks. The company's preliminary Combined RBC Ratio of 456% ⁷¹ for 2025, which is above its target range of 400% to 450% ⁷² in normal market conditions, underscores its strong capital position without requiring additional capital contributions to its insurance subsidiaries.