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 through annuities and life insurance 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. As of December 31, 2025, this segment had total assets under management (AUM) of $152.745 billion ⁷, comprising $76.560 billion in General Account Investments ⁸ and $76.185 billion in Separate Account Assets ⁹. Insurance liabilities for annuities totaled $138.737 billion ¹⁰, with variable annuities at $79.321 billion ¹¹, Shield Annuities at $35.621 billion ¹², fixed deferred annuities at $19.007 billion ¹³, and income annuities at $4.788 billion ¹⁴. The segment's adjusted earnings for the year ended December 31, 2025, were $1.254 billion ¹⁵, an increase of $3 million ¹⁶ from the prior year.

The Life segment provides term, universal, whole, and variable life products. As of December 31, 2025, the Life segment had total AUM of $15.821 billion ¹⁷, consisting of $8.961 billion in General Account Investments ¹⁸ and $6.860 billion in Separate Account Assets ¹⁹. Insurance liabilities for life products amounted to $16.043 billion ²⁰, with term life at $2.472 billion ²¹, whole life at $3.493 billion ²², universal life at $2.078 billion ²³, and variable life at $8.000 billion ²⁴. The in-force face amount for term life was $312.477 billion ²⁵, whole life was $16.098 billion ²⁶, universal life was $9.339 billion ²⁷, and variable life was $31.714 billion ²⁸ as of December 31, 2025. Direct premiums received for life products in 2025 were $457 million ²⁹ for term, $316 million ³⁰ for whole, $96 million ³¹ for universal, and $134 million ³² for variable. The segment's adjusted earnings for the year ended December 31, 2025, were $41 million ³³, an increase of $8 million ³⁴ from the prior year.

The Run-off segment primarily consists of products no longer actively sold, including universal life with secondary guarantees (ULSG), structured settlements, pension risk transfer contracts, and certain company-owned life insurance policies and funding agreements. As of December 31, 2025, this segment had total AUM of $26.900 billion ³⁵, with $24.417 billion in General Account Investments ³⁶ and $2.483 billion in Separate Account Assets ³⁷. Insurance liabilities for the Run-off segment totaled $26.885 billion ³⁸, including ULSG at $17.137 billion ³⁹, structured settlements at $4.477 billion ⁴⁰, pension risk transfer at $2.110 billion ⁴¹, company-owned life insurance at $3.109 billion ⁴², and other at $52 million ⁴³. The segment's adjusted earnings for the year ended December 31, 2025, were $436 million ⁴⁴, an increase of $371 million ⁴⁵ from the prior year.

For the fiscal year ended December 31, 2025, BHF reported total revenues of $6.766 billion ⁴⁶, an increase from $4.724 billion ⁴⁷ in the prior year. Net income available to common shareholders was $331 million ⁴⁸, up from $286 million ⁴⁹ in 2024. Pre-tax adjusted earnings, less net income attributable to noncontrolling interests and preferred stock dividends, were $1.996 billion ⁵⁰, compared to $1.623 billion ⁵¹ in the previous year. The provision for income tax expense was $36 million ⁵². Total assets under management (AUM) increased to $206.157 billion ⁵³ as of December 31, 2025, from $203.023 billion ⁵⁴ at December 31, 2024. Total long-term consolidated indebtedness outstanding was $3.2 billion ⁵⁵ at December 31, 2025.

Year-over-year, total revenues increased by $2.042 billion ⁵⁶. Net income available to shareholders increased by $45 million ⁵⁷. Adjusted earnings increased by $298 million ⁵⁸ to $1.617 billion ⁵⁹. The Annuities segment saw adjusted earnings increase by $3 million ⁶⁰, while the Life segment's adjusted earnings increased by $8 million ⁶¹. The Run-off segment experienced a significant increase in adjusted earnings of $371 million ⁶². The Corporate & Other segment reported a higher adjusted loss of $84 million ⁶³.

A significant operational development during the period was BHF entering into an Agreement and Plan of Merger with Aquarian Holdings VI L.P. on November 6, 2025 ⁶⁴. Under this agreement, Merger Sub will merge with and into BHF, with BHF surviving as a wholly-owned subsidiary of Aquarian Parent ⁶⁵. At the effective time of the Merger, each share of common stock will be converted into the right to receive $70.00 per share ⁶⁶, net in cash, without interest and less any amounts required to be deducted or withheld under applicable law ⁶⁷. The Merger Agreement was adopted by stockholders on February 12, 2026 ⁶⁸. Additionally, in the third quarter of 2025, BHF completed an initiative to establish standalone hedging programs for its variable annuity and first generation Shield Annuity products, allowing for separate risk management of these two product lines ⁶⁹.

Management expects the Merger with Aquarian Holdings VI L.P. to close in 2026 ⁷⁰, subject to the satisfaction or waiver of certain 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 ⁷¹. 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 ⁷².

BHF intends to focus on selling its new suite of Shield Annuity products, along with variable annuities with Guaranteed Minimum Withdrawal Benefits (GMWBs) and Guaranteed Minimum Death Benefits (GMDBs) only ⁷³. The company launched updated versions of its Shield Annuities in 2024 ⁷⁴, which are managed and hedged on a standalone basis ⁷⁵. Deposits for Shield Annuities were $8.008 billion ⁷⁶ in 2025, up from $7.671 billion ⁷⁷ in 2024 and $6.857 billion ⁷⁸ in 2023, indicating growing consumer demand ⁷⁹. The company believes its underwriting approach, product design capabilities, and distribution relationships will enable it to offer new products that meet its risk-adjusted return objectives and maintain market presence ⁸⁰.

Operationally, BHF aims to maximize profits in its Life segment by focusing on efficiency to reduce cost basis and underwriting expenses ⁸¹. The company also plans to continue hedging significant market risks associated with its existing annuity products and new business ⁸². In the third quarter of 2025, BHF established a standalone hedging program for its variable annuity block, intended to mitigate exposure to changes in interest rates arising from these contracts ⁸³. The company also continues to set individual hedge targets for products like ULSG, where the economics of interest rate derivatives are ceded through reinsurance to BRCD ⁸⁴.

Regarding capital allocation, BHF's Board of Directors authorized the repurchase of up to $750 million ⁸⁵ of common stock on November 16, 2023 ⁸⁶, with $441 million ⁸⁷ remaining under this program as of December 31, 2025 ⁸⁸. However, pursuant to the Merger Agreement, BHF is not currently permitted to purchase its common stock or pay dividends on common stock without the written consent of Aquarian Parent ⁸⁹. The company intends to use future statutory free cash flow to pay debt obligations, fund growth, develop its business, meet working capital needs, and for general corporate purposes ⁹⁰.

Management explicitly flagged several structural headwinds and execution risks. The completion of the Merger is subject to numerous conditions, including regulatory approvals, and failure to complete it could result in significant expenses and negative publicity, and potentially require BHF to pay a termination fee of approximately $144 million ⁹¹. The pendency of the Merger also imposes business uncertainties and contractual restrictions, potentially disrupting business relationships and diverting management attention ⁹². BHF's hedging strategy may not be fully effective, leading to significant volatility in profitability measures or negatively affecting statutory capital ⁹³. Changes in accounting standards, particularly the adoption of LDTI, have already had a significant impact on financial statements, and future changes could also adversely affect them ⁹⁴. Downgrades in financial strength or credit ratings could reduce new sales, impact distribution relationships, increase policy surrenders, and raise the cost of capital ⁹⁵.

Geographic, regulatory, or macro factors identified as constraints include the highly regulated nature of the insurance business, with changes in state and federal regulations potentially impacting capitalization, cash flows, profitability, and growth ⁹⁶. The NAIC's adoption of Actuarial Guideline LV (AG 55) and amendments to the Valuation Manual for non-variable annuities and the Generator of Economic Scenarios (GOES) could negatively impact statutory surplus and required capital ⁹⁷. The updated Fiduciary Advice Rule by the DOL and state law standard of conduct rules, such as NYDFS Insurance Regulation 187, could increase compliance burdens, alter compensation practices, and raise litigation risk ⁹⁸. Economic conditions, including capital market volatility, interest rate fluctuations, and inflation, materially affect BHF's business, impacting product demand, revenues, expenses, reserves, and risk management effectiveness ⁹⁹. Geopolitical conflicts, such as those in Europe and the Middle East, and other events like tariffs and trade disputes, may exacerbate market volatility and affect investment portfolio performance ¹⁰⁰.

The company faces material risks including the potential failure to complete the Merger with Aquarian Holdings VI L.P. within the expected timeframe or at all, which could result in significant expenses, including a termination fee of approximately $144 million ¹⁰¹, and negative impacts on its ongoing business and stock price. Business uncertainties and contractual restrictions during the Merger's pendency could disrupt business relationships, divert management's attention, and limit strategic actions. BHF's financial results are highly sensitive to differences between actual experience and actuarial assumptions, with potential increases in liabilities for future policy benefits and claims if actual outcomes deviate from estimates, which could impair solvency and impact RBC ratios. Guarantees within annuity products, particularly variable and Shield Annuities, expose BHF to increased market risk from equity market downturns, increased volatility, or reduced interest rates, potentially increasing liabilities and risk management costs. The hedging strategy, while designed to mitigate market risks, may not be fully effective, leading to significant volatility in profitability measures or negative impacts on statutory capital, and the cost of hedging may exceed expectations. BHF's substantial long-term consolidated indebtedness of $3.2 billion ¹⁰² at December 31, 2025, creates leverage that could impede its ability to withstand economic downturns or lead to rating agency actions, and failure to comply with debt covenants could trigger immediate repayment. Reinsurance may become unavailable, unaffordable, or inadequate, exposing BHF to greater retained risks, and the default or non-performance of reinsurance counterparties, such as the Genworth reinsurers for the $5.5 billion ¹⁰³ long-term care block, or derivative counterparties, could result in significant losses. Intense competition from other insurance and financial services companies, coupled with limited control over costs, could adversely affect market share and profitability. Difficulties in marketing and distributing products through third-party channels, including potential termination of agreements or shifts in distributor focus, could reduce sales. Reliance on third-party service providers for critical functions exposes BHF to risks of service failures, unanticipated expenses, and reputational harm. Changes in accounting standards, particularly LDTI, and future tax laws or interpretations, such as the Inflation Reduction Act's corporate alternative minimum tax, could adversely affect financial statements and increase tax liabilities. As a holding company, BHF depends on subsidiary dividends, which are subject to regulatory restrictions and business conditions, and any inability to receive sufficient cash could impair its ability to meet obligations. Risks associated with climate change, public health crises, and catastrophic events could adversely affect investment portfolio values and claim levels. Operational risks include potential gaps in policies and procedures, model errors, and the risk of excessive risk-taking by employees or third-party service providers. Cybersecurity threats, including sophisticated attacks and the use of AI by malicious actors, pose a significant risk of data loss, operational disruption, and reputational damage, with compliance with evolving privacy and data security regulations imposing additional costs and complexities.

Management's message to shareholders conveys a focus on disciplined financial operations and a strategic approach to product offerings and risk management. The company aims to enhance its ability to invest in the business and distribute cash to shareholders over time, underpinned by a commitment to maintaining a strong capital base and excess liquidity at the holding company. A key strategic priority is the ongoing Merger with Aquarian Holdings VI L.P., which is expected to close in 2026 ¹⁰⁴ and will result in BHF becoming a wholly-owned subsidiary of Aquarian Parent, with common shareholders receiving $70.00 per share ¹⁰⁵ in cash. Another strategic emphasis is on disciplined risk management, including the recent establishment of standalone hedging programs for variable annuity and first generation Shield Annuity products in the third quarter of 2025 ¹⁰⁶, to more effectively manage product-specific risks. Management also highlights a focus on selling new Shield Annuity products and variable annuities with GMWBs and GMDBs only, indicating a targeted product strategy. The company's preliminary Combined RBC Ratio of 456% ¹⁰⁷ for 2025, which is above its target range of 400% to 450% ¹⁰⁸ in normal market conditions, underscores its commitment to maintaining a strong capital position without requiring additional capital contributions to its insurance subsidiaries.