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 with a focus on independent distribution and a targeted product set, 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 investment income from its general and separate accounts. The company's income is a mix of recurring fees and transactional income, primarily from its annuity and life insurance product offerings. Primary customer segments include individuals seeking protected wealth accumulation, wealth transfer, and income security ⁵. The company's strategy involves disciplined risk selection and innovative product design, balancing profitability with sales growth, and hedging significant market risks associated with its annuity products ⁶.

The Annuities segment offers variable, fixed, index-linked, and income annuities designed for tax-deferred wealth accumulation, wealth transfer, and income security ⁷. As of December 31, 2025, this segment had total assets under management (AUM) of $152.745 billion ⁸, with general account investments of $76.560 billion ⁹ and separate account assets of $76.185 billion ¹⁰. Insurance liabilities for annuities totaled $138.737 billion ¹¹, comprising $62.552 billion ¹² in the general account and $76.185 billion ¹³ in separate accounts. Shield Annuities, the flagship product, had liabilities of $35.621 billion ¹⁴ and deposits of $8.008 billion ¹⁵ for the year ended December 31, 2025. Variable annuities with Guaranteed Minimum Living Benefits (GMLBs) had an account value of $59.043 billion ¹⁶ and a Benefit Base of $78.766 billion ¹⁷ as of December 31, 2025.

The Life segment provides term, universal, whole, and variable life products for financial security and protected wealth transfer ¹⁸. As of December 31, 2025, this segment had total AUM of $15.821 billion ¹⁹, with general account investments of $8.961 billion ²⁰ and separate account assets of $6.860 billion ²¹. Insurance liabilities for life products totaled $16.043 billion ²², with $9.183 billion ²³ in the general account and $6.860 billion ²⁴ in separate accounts. 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 the year ended December 31, 2025, were $457 million ²⁹ for term, $316 million ³⁰ for whole, $96 million ³¹ for universal, and $134 million ³² for variable life.

The Run-off segment 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 ³³. As of December 31, 2025, this segment had total AUM of $26.900 billion ³⁴, with general account investments of $24.417 billion ³⁵ and separate account assets of $2.483 billion ³⁶. Insurance liabilities for Run-off products totaled $26.885 billion ³⁷, with ULSG liabilities at $17.137 billion ³⁸, structured settlements at $4.477 billion ³⁹, and pension risk transfer at $2.110 billion ⁴⁰. The Corporate & Other segment includes 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 ⁴¹. This segment had AUM of $10.691 billion ⁴² as of December 31, 2025.

For the fiscal year ended December 31, 2025, BHF reported total revenues of $6.766 billion ⁴³, an increase from $4.724 billion ⁴⁴ in the prior year. Total expenses were $6.292 billion ⁴⁵, up from $4.302 billion ⁴⁶. Income before provision for income tax was $474 million ⁴⁷, compared to $422 million ⁴⁸ in 2024. The provision for income tax expense was $36 million ⁴⁹. Net income attributable to Brighthouse Financial, Inc. was $433 million ⁵⁰, and after deducting preferred stock dividends of $102 million ⁵¹, net income available to common shareholders was $331 million ⁵². This represents an increase from $286 million ⁵³ in net income available to common shareholders in 2024. Adjusted earnings, a non-GAAP measure, increased to $1.617 billion ⁵⁴ in 2025 from $1.319 billion ⁵⁵ in 2024.

Year-over-year, total revenues increased by $2.042 billion [43, 44], primarily driven by lower net derivative losses. Net income available to shareholders increased by $45 million [52, 53]. Adjusted earnings increased by $298 million [54, 55]. This increase was primarily due to lower net costs associated with insurance-related activities, reflecting a net decrease in liability balances from the Annual Actuarial Review (AAR) in the Run-off and Life segments, and a decrease in Run-off liability balances from a reinsurance premium rate increase arbitration in the prior period. Higher net fee income also contributed, driven by lower ceded Cost of Insurance (COI) fees in the Life and Run-off segments. These favorable impacts were partially offset by lower net investment spread due to higher interest credited to policyholders and lower yields on institutional spread margin business, as well as higher other expenses and amortization of DAC and VOBA ⁵⁶.

During the third quarter of 2025, BHF completed an initiative to establish a standalone hedging program for its variable annuity and first-generation Shield Annuity products, allowing for separate risk management ⁵⁷. The company also launched updated versions of its Shield Annuities in 2024, which are managed and hedged on a standalone basis ⁵⁸. In the third quarter of 2025, as part of its GAAP AAR, BHF increased its projected long-term general account earned rate and mean reversion rate for ULSG business from 4.00% to 4.50% ⁵⁹, resulting in a $359 million ⁶⁰ decrease in ULSG liabilities. On November 6, 2025, BHF entered into a Merger Agreement with Aquarian Holdings VI L.P., under which BHF will become a wholly-owned subsidiary of Aquarian Parent, with each common stock share converted into the right to receive $70.00 per share in cash ⁶¹.

Management expects the Merger with Aquarian Holdings VI L.P. to close in 2026, subject to the satisfaction or waiver of certain customary conditions, including regulatory approvals from insurance regulators in Delaware, New York, and Massachusetts, and approval from FINRA for a change in control of Brighthouse Securities, LLC ⁶².

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 ⁶³. The company believes that general demographic trends in the U.S. population, the increase in under-insured individuals, potential risks to governmental social safety net programs, and the shifting responsibility for retirement planning and financial security to individuals will create opportunities for significant demand for its products ⁶⁴. By focusing product development and marketing efforts on targeted customer segments, BHF aims to offer a smaller number of appropriately priced products, which is expected to benefit its expense ratio and increase profitability ⁶⁵.

The company's operational outlook includes a continued focus on efficiency to reduce cost basis and underwriting expenses in its Life segment, aiming to maximize profits ⁶⁶. BHF also plans to continue hedging significant market risks associated with its existing and new annuity products to meet risk management objectives ⁶⁷. The company's 2025 statutory AAR resulted in an increase to statutory reserves, but its preliminary Combined RBC Ratio of 456% ⁶⁸ was above its target range of 400% to 450% ⁶⁹ in normal market conditions, without requiring capital contributions to its insurance subsidiaries ⁷⁰.

Regarding capital allocation, BHF's Board of Directors authorized the repurchase of up to $750 million ⁷¹ of common stock on November 16, 2023, with $441 million ⁷² remaining under this program as of December 31, 2025. However, due to the Merger Agreement, BHF 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 ⁷³. 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, carry out any share or debt repurchases, and for general corporate purposes ⁷⁴.

Management explicitly flagged several structural headwinds and execution risks. The completion of the Merger is subject to numerous conditions, and failure to satisfy or waive these conditions could prevent the Merger from closing within the expected timeframe or at all, potentially leading to a termination fee of approximately $144 million ⁷⁵. The pendency of the Merger creates business uncertainties and contractual restrictions, potentially disrupting business relationships, diverting management's attention, and affecting the ability to recruit and retain key personnel ⁷⁶. Furthermore, the company's hedging strategy may not be fully effective, leading to significant volatility in profitability measures or negatively affecting statutory capital ⁷⁷. Differences between actual experience and actuarial assumptions may adversely affect financial results, capitalization, and financial condition, potentially requiring increased liabilities ⁷⁸.

Geographic, regulatory, and macro factors also present constraints. The company's insurance business is highly regulated at the state level, with some products and services subject to federal regulation, and changes in these laws or interpretations could materially impact capitalization, cash flows, profitability, and growth ⁷⁹. Adverse capital and credit market conditions may significantly affect BHF's ability to meet liquidity needs and access capital, as disruptions could limit credit capacity or access to financing ⁸⁰. The company is exposed to significant financial and capital markets risks, including interest rate risk, inflation risk, equity risk, market valuation risk, liquidity risk, real estate risk, and derivatives risk, which may adversely affect financial condition, results of operations, and liquidity ⁸¹.

The company 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 ⁷⁵ if not completed. Operational risks include potential ineffectiveness of hedging strategies, leading to significant volatility in profitability measures or negative impacts on statutory capital, and the possibility of material differences between actual experience and actuarial assumptions, which could necessitate increased liabilities. The company's highly regulated insurance business is susceptible to changes in state and federal laws and interpretations, potentially impacting capitalization, cash flows, profitability, and growth. Adverse capital and credit market conditions, including interest rate fluctuations, inflation, and equity market volatility, pose significant financial risks to the investment portfolio and overall financial condition, results of operations, and liquidity. Cybersecurity threats and failures in risk management programs, or those of third-party service providers, could lead to loss or disclosure of confidential information, reputational damage, and operational disruptions.

Management's message to shareholders conveys a focus on disciplined financial operations and a strategic approach to product offerings and risk management. They emphasize their role as one of the largest providers of annuity and life insurance products in the U.S. and highlight their strategy of independent distribution and a targeted product set to enhance investment in the business and distribute cash to shareholders over time. A key strategic priority is risk management, with a focus on protecting the capital and surplus of insurance subsidiaries through hedging strategies and maintaining a Combined RBC Ratio target of 400% to 450% ⁶⁹ in normal market conditions. Another priority is the ongoing Merger with Aquarian Holdings VI L.P., which is expected to close in 2026 ⁶², and for which BHF has agreed not to pay any dividends on common stock or repurchase shares without Aquarian Parent's consent during the pendency of the Merger ⁷³. The company also stresses its commitment to efficiency in its Life segment to reduce costs and underwriting expenses, aiming to maximize profits.