Brighthouse Financial, Inc.

Brighthouse Financial, Inc. (BHF) is 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 operates through multiple independent distribution 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 independent distribution and a strategy of offering a targeted set of products, aiming to enhance its ability to invest in the business and distribute cash to shareholders over time ⁴.

BHF's core business model revolves around generating revenue from premiums, universal life and investment-type product policy fees, and net investment income from its annuity and life insurance product offerings. The company's income is a mix of recurring fees and transactional income, primarily serving individuals seeking protected wealth accumulation, wealth transfer, and income security ⁵. BHF also manages a "Run-off" segment consisting of products no longer actively sold, and a "Corporate & Other" segment for institutional spread margin business, excess capital, and corporate expenses ⁶.

The Annuities segment offers variable, fixed, index-linked, and income annuities. As of December 31, 2025, this segment had $76.560 billion in General Account Investments and $76.185 billion in Separate Account Assets, totaling $152.745 billion in AUM ⁷. Key products include Shield® Level Annuities, fixed deferred annuities, income annuities (SPIA and DIA), and variable annuities, many of which include Guaranteed Minimum Benefits (GMxBs) ⁸. Fees and charges on variable annuity contracts, net of pass-through amounts, were $2.5 billion for the year ended December 31, 2025 ⁹. Shield Annuities are registered index-linked annuity contracts that provide market appreciation participation up to a stated level while offering protection from a portion of declines ¹⁰. Deposits for Shield Annuities were $8.008 billion in 2025 ¹¹, while GMWB, GMDB only, and GMIB variable annuity deposits were $445 million ¹², $249 million ¹³, and $13 million ¹⁴, respectively, for the same period. The estimated fair value of Shield embedded derivative liabilities was $11.0 billion at December 31, 2025 ¹⁵.

The Life segment provides term, universal, whole, and variable life products. As of December 31, 2025, this segment had $8.961 billion in General Account Investments and $6.860 billion in Separate Account Assets, totaling $15.821 billion in AUM ¹⁶. The company is currently focused on universal life products with index-linked benefits, prioritizing design and profitability over volume ¹⁷. In-force face amounts at December 31, 2025, were $312.477 billion for Term life ¹⁸, $16.098 billion for Whole life ¹⁹, $9.339 billion for Universal life ²⁰, and $31.714 billion for Variable life ²¹. Direct premiums received in 2025 were $457 million for Term life ²², $316 million for Whole life ²³, $96 million for Universal life ²⁴, and $134 million for Variable life ²⁵.

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 $24.417 billion in General Account Investments and $2.483 billion in Separate Account Assets, totaling $26.900 billion in AUM ²⁶. Insurance liabilities for ULSG were $17.137 billion ²⁷, structured settlements were $4.477 billion ²⁸, pension risk transfer was $2.110 billion ²⁹, and company-owned life insurance was $3.109 billion ³⁰ at December 31, 2025. The Corporate & Other segment manages funding agreements for institutional spread margin business, unallocated excess capital, interest expense on debt, preferred stock dividends, and expenses from legal proceedings and income tax audits ³¹. This segment had $10.691 billion in General Account Investments at December 31, 2025 ³².

For the fiscal year ended December 31, 2025, BHF reported net income available to shareholders of $331 million ³³, an increase from $286 million in the prior year ³⁴. Income before provision for income tax was $367 million ³⁵, up from $315 million in 2024 ³⁶. Total revenues for 2025 were $6.766 billion ³⁷, compared to $4.724 billion in 2024 ³⁸. Total expenses were $6.292 billion ³⁹ in 2025, versus $4.302 billion in 2024 ⁴⁰. The provision for income tax expense was $36 million ⁴¹ in 2025, compared to $29 million in 2024 ⁴². Adjusted earnings, a non-GAAP measure, increased to $1.617 billion ⁴³ in 2025 from $1.319 billion in 2024 ⁴⁴.

Year-over-year, the increase in income before provision for income tax was driven by higher pre-tax adjusted earnings, lower losses from the impact of interest rates on derivatives used to manage ULSG business, and lower net investment losses ⁴⁵. These favorable impacts were partially offset by higher losses from variable annuity guaranteed benefit riders and the weakening of the U.S. dollar unfavorably impacting foreign currency forwards and swaps ⁴⁶. Adjusted earnings increased by $298 million ⁴⁷, primarily due to lower net costs associated with insurance-related activities and higher net fee income, partially offset by lower net investment spread, higher other expenses, and higher amortization of DAC and VOBA ⁴⁸.

On November 6, 2025, BHF entered into a Merger Agreement with Aquarian Holdings VI L.P., under which Merger Sub will merge with and into BHF, with BHF surviving as a wholly-owned subsidiary of Aquarian Parent ⁴⁹. At the effective time of the Merger, each share of common stock will be converted into the right to receive $70.00 per share ⁵⁰, net in cash, without interest and less any amounts required to be deducted or withheld under applicable law ⁵¹. The Merger Agreement was adopted by stockholders on February 12, 2026 ⁵², and the applicable waiting period under the Hart-Scott Rodino Antitrust Improvement Act of 1976 has expired ⁵³. The Merger is expected to close in 2026 ⁵⁴.

Management expects the Merger with Aquarian Holdings VI L.P. to close in 2026 ⁵⁵, 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 of a change in control of Brighthouse Securities, LLC ⁵⁶. At the effective time of the Merger, each share of common stock will be converted into the right to receive $70.00 per share ⁵⁷, net in cash, without interest and less any amounts required to be deducted or withheld under applicable law ⁵⁸.

BHF intends to focus on selling its new suite of Shield Annuity products, along with variable annuities with GMWBs and GMDBs only ⁵⁹. The company aims to meet its risk-adjusted return objectives in the Annuities segment through disciplined risk selection and innovative product design, balancing profitability with sales growth ⁶⁰. In the Life segment, BHF is currently focused on universal life products with index-linked benefits, concentrating on design and profitability over volume ⁶¹. The company believes that general demographic trends in the U.S. population, the increase in under-insured individuals, the potential risk to governmental social safety net programs, and the shifting of responsibility for retirement planning and financial security from employers to individuals will create opportunities for significant demand for its products ⁶².

Operationally, BHF completed an initiative in the third quarter of 2025 that established a standalone hedging program for its variable annuity and first generation Shield Annuity products, allowing for separate risk management ⁶³. The company also manages the risks associated with its updated Shield Annuity product, launched in 2024, on a standalone basis ⁶⁴. BHF targets a Combined RBC Ratio of 400% to 450% in normal market conditions ⁶⁵. The 2025 statutory AAR resulted in an increase to statutory reserves, but the preliminary Combined RBC Ratio was 456% ⁶⁶, above the target range, without contributing capital to insurance subsidiaries ⁶⁷.

Planned capital allocation includes using future statutory free cash flow, if any, to pay debt obligations, fund growth, develop the business, meet working capital needs, carry out share or debt repurchases, and for general corporate purposes ⁶⁸. As of December 31, 2025, BHF had $441 million ⁶⁹ remaining under its common stock repurchase program ⁷⁰. However, pursuant to the Merger Agreement, BHF is not currently permitted to declare and pay dividends on its common stock or purchase its capital stock or other equity interests without the written consent of Aquarian Parent ⁷¹.

Management has flagged several structural headwinds and execution risks. The completion of the Merger is subject to various conditions, including regulatory approvals, and there is no assurance these will be satisfied or waived in a timely manner or at all ⁷². Failure to complete the Merger could result in significant expenses, negative publicity, and potentially a termination fee of approximately $144 million ⁷³. During the pendency of the Merger, BHF is subject to restrictions on business conduct, limiting strategic transactions and financing activities ⁷⁴. The company also faces risks from potential litigation related to the Merger ⁷⁵.

Geographic, regulatory, and macro factors are also identified as 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 ⁷⁶. Amendments to the Valuation Manual establishing a new principle-based reserving framework for non-variable annuities became effective on January 1, 2026, with a three-year implementation period ⁷⁷. The NAIC also 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 ⁷⁸. The NAIC adopted a new principles-based bond definition and related financial reporting changes effective January 1, 2025 ⁷⁹. The NAIC is updating the methodology for determining RBC on collateralized loan obligations, with a proposal to delay the effective date of changes to December 31, 2026 ⁸⁰. The Federal Reserve decreased the target range for the federal funds rate in September, October, and December 2025, as well as in September, November, and December 2024 ⁸¹.

BHF faces material risks, including the uncertainty surrounding the completion of the Merger with Aquarian Holdings VI L.P., which is subject to regulatory approvals and other conditions, and could result in a termination fee of approximately $144 million ⁸³ if not completed. Operational risks include potential ineffectiveness of hedging strategies, which could lead to significant volatility in profitability measures or negatively affect statutory capital, and the possibility of not having sufficient assets to meet future ULSG policyholder obligations, especially with changes in interest rates ⁸⁴. The company's financial strength and credit ratings could be downgraded, as S&P revised BHF's long-term issuer credit ratings to BBB from BBB+ ⁸⁵ and financial strength ratings for certain insurance subsidiaries to A from A+ ⁸⁶ in July 2025, which could reduce new sales, impact distribution relationships, and increase policy surrenders ⁸⁷. Indebtedness of $3.2 billion ⁸⁸ at December 31, 2025, and associated covenants, could limit operations and use of funds, with failure to comply potentially leading to immediate debt repayment ⁸⁹. Reinsurance may not be available or affordable, and counterparties to reinsurance or derivative arrangements could default, exposing BHF to unmitigated risks ⁹⁰. Changes in accounting standards, such as LDTI, or tax laws, like the Inflation Reduction Act's CAMT, could adversely affect financial statements and earnings ⁹¹. Cybersecurity threats, including sophisticated attacks potentially facilitated by AI, pose risks of data loss, operational disruption, and reputational harm, despite a robust cybersecurity risk management program ⁹². Legal disputes and regulatory investigations are common, carrying risks of significant financial losses, fines, and reputational damage ⁹³.

Management's message to shareholders emphasizes the strategic importance of the pending Merger with Aquarian Holdings VI L.P., which is expected to close in 2026 ⁹⁴ and will result in shareholders receiving $70.00 per share ⁹⁵ in cash. The company is focused on maintaining a financially disciplined approach, with an emphasis on independent distribution and offering a targeted set of products to serve customers and distribution partners. Key strategic priorities include risk management of both the in-force book and new business to enhance sustained, long-term shareholder value, and maintaining a strong capital base and excess liquidity at the holding company ⁹⁶. Management also highlights the ongoing efforts to innovate product design in response to customer and distributor needs and market conditions, particularly in the Annuities segment with the focus on new Shield Annuity products and variable annuities with GMWBs and GMDBs ⁹⁷. In the Life segment, the focus is on universal life products with index-linked benefits, prioritizing design and profitability over volume ⁹⁸.