Brighthouse Financial, Inc.

Brighthouse Financial, Inc. (BHF) is a prominent provider 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. 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 over time. Risk management of both its in-force book and new business is fundamental to its strategy, aiming to mitigate the effects of severe market disruptions and other economic events ³.

The core business model revolves around generating revenue from premiums, universal life and investment-type product policy fees, and investment income from its substantial asset base. The company's customer segments primarily include individuals seeking protected wealth accumulation on a tax-deferred basis, wealth transfer, and income security through annuity products, and those needing financial security and protected wealth transfer through life insurance products. The distribution strategy leverages independent channels, avoiding the fixed costs of a proprietary distribution network, and is supported by strategic relationship managers and wholesalers ⁴.

The Annuities segment offers variable, fixed, index-linked, and income annuities. As of December 31, 2025, this segment had total assets under management (AUM) of $152.745 billion ⁵, with general account investments of $76.560 billion ⁶ and separate account assets of $76.185 billion ⁷. Insurance liabilities for variable annuities were $79.321 billion ⁸, Shield Annuities $35.621 billion ⁹, fixed deferred annuities $19.007 billion ¹⁰, and income annuities $4.788 billion ¹¹. Fees and charges on variable annuity contracts, net of pass-through amounts, were $2.5 billion ¹² for the year ended December 31, 2025. The company's flagship Shield Annuities, registered index-linked annuity contracts, provide market appreciation participation up to a stated level while offering protection from declines. Newer versions may include a guaranteed lifetime withdrawal benefit feature. Fixed deferred annuities are designed for asset accumulation, crediting interest based on rates determined by the company or index performance, subject to guaranteed minimums. Income annuities provide a steady stream of retirement income for a specified period or life. Variable annuities offer tax-deferred wealth accumulation with investment options in separate or general accounts, often including guaranteed minimum living or death benefits (GMxBs) ¹³.

The Life segment provides term, universal, whole, and variable life products. As of December 31, 2025, this segment had total AUM of $15.821 billion ¹⁴, with general account investments of $8.961 billion ¹⁵ and separate account assets of $6.860 billion ¹⁶. Insurance liabilities for term life were $2.472 billion ¹⁷, whole life $3.493 billion ¹⁸, universal life $2.078 billion ¹⁹, and variable life $8.000 billion ²⁰. The in-force face amount for term life was $312.477 billion ²¹, whole life $16.098 billion ²², universal life $9.339 billion ²³, and variable life $31.714 billion ²⁴ at December 31, 2025. Direct premiums received for term life were $457 million ²⁵, whole life $316 million ²⁶, universal life $96 million ²⁷, and variable life $134 million ²⁸ for the year ended December 31, 2025. The company is currently focused on universal life products with index-linked benefits, emphasizing design and profitability over volume. 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. As of December 31, 2025, this segment had total AUM of $26.900 billion ²⁹, with general account investments of $24.417 billion ³⁰ and separate account assets of $2.483 billion ³¹. Insurance liabilities for ULSG were $17.137 billion ³², structured settlements $4.477 billion ³³, pension risk transfer $2.110 billion ³⁴, and company-owned life insurance $3.109 billion ³⁵. 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. It also covers long-term care business reinsured through 100% quota share agreements ³⁶.

For the fiscal year ended December 31, 2025, BHF reported net income available to shareholders of $331 million ³⁷, an increase from $286 million ³⁸ in the prior year. Income before provision for income tax was $367 million ³⁹, up from $315 million ⁴⁰ in 2024. Total revenues were $6.766 billion ⁴¹, compared to $4.724 billion ⁴² in 2024. Total expenses were $6.292 billion ⁴³, versus $4.302 billion ⁴⁴ in 2024. Adjusted earnings, a non-GAAP measure, increased to $1.617 billion ⁴⁵ from $1.319 billion ⁴⁶ in 2024. Cash and cash equivalents were not explicitly stated for the consolidated entity, but total investments were $206.157 billion ⁴⁷ at December 31, 2025. Total long-term consolidated indebtedness outstanding was $3.2 billion ⁴⁸ at December 31, 2025.

Year-over-year, net income available to shareholders increased by $45 million ⁴⁹. This was driven by higher pre-tax adjusted earnings, lower losses from interest rates on ULSG derivatives due to relatively flat long-term rates in 2025 compared to an increase in 2024, and lower net investment losses. 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. Adjusted earnings increased by $298 million ⁵⁰, 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. The Annuities segment's adjusted earnings increased by $3 million ⁵¹ to $1.254 billion ⁵², while the Life segment's adjusted earnings increased by $8 million ⁵³ to $41 million ⁵⁴. The Run-off segment's adjusted earnings increased significantly by $371 million ⁵⁵ to $436 million ⁵⁶. The Corporate & Other segment reported a higher adjusted loss of $84 million ⁵⁷, reaching $114 million ⁵⁸.

A significant operational development was the company's entry into an Agreement and Plan of Merger with Aquarian Holdings VI L.P. on November 6, 2025 ⁵⁹. Under this agreement, Merger Sub will merge with and into BHF, with BHF surviving as a wholly-owned subsidiary of Aquarian Parent. Each share of common stock will be converted into the right to receive $70.00 per share ⁶⁰, net in cash, without interest and less any amounts required to be deducted or withheld under applicable law. The Merger Agreement was adopted by stockholders on February 12, 2026 ⁶¹, and the applicable waiting period under the Hart-Scott Rodino Antitrust Improvement Act of 1976 has expired. The merger is expected to close in 2026 ⁶². Additionally, in 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 of these two product lines ⁶³. The company also launched updated versions of its Shield Annuities in 2024 ⁶⁴.

Management expects the Merger with Aquarian Holdings VI L.P. to close in 2026 ⁶⁵, 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 ⁶⁶.

The company 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 ⁶⁷. This strategic shift in product offerings is designed to meet customer and distributor needs and market conditions while aligning with the company's risk-adjusted return objectives. 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 ⁶⁸.

Operationally, the company's risk management strategies focus on protecting the capital and surplus of its insurance subsidiaries, targeting a Combined RBC Ratio of 400% to 450% ⁶⁹ in normal market conditions. In the third quarter of 2025, BHF established a standalone hedging program for its variable annuity and first generation Shield Annuity contracts, allowing for more effective separate management of risks for these products ⁷⁰. The company also manages risks for its updated Shield Annuity products, launched in 2024, on a standalone basis ⁷¹. The ULSG interest rate hedging program is intended to reduce risk to statutory capitalization and long-term economic exposures from sustained low interest rates, though this strategy may result in higher net income volatility due to differences in GAAP liability sensitivity to interest rate changes ⁷².

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, and carry out share or debt repurchases, as well as for general corporate purposes ⁷³. As of December 31, 2025, BHF had $441 million ⁷⁴ remaining under its common stock repurchase program, authorized by the Board of Directors on November 16, 2023, for up to $750 million ⁷⁵. However, pursuant to the Merger Agreement, the company is currently not 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 ⁷⁶.

The company faces material risks, including the uncertainty surrounding the completion of the Merger with Aquarian Holdings VI L.P. within the expected timeframe or at all, which could lead to significant expenses, negative publicity, and a potential decline in common stock price, and may require a termination fee of approximately $144 million ⁷⁷ in certain circumstances. The pendency of the Merger also imposes business uncertainties and contractual restrictions, potentially disrupting business relationships, diverting management's attention, and limiting strategic actions. Differences between actual experience and actuarial assumptions, particularly for annuity and life insurance products, may adversely affect financial results, capitalization, and financial condition, potentially requiring increases in liabilities. Guarantees within certain annuity products, such as GMDBs and GMWBs, expose the company to increased market risk, and if hedging strategies are ineffective, this could result in significant volatility in profitability measures or negatively affect statutory capital. The company may not have sufficient assets to meet future ULSG policyholder obligations, and changes in interest rates could cause volatility in profitability and capital. Downgrades in financial strength or credit ratings could lead to a loss of business and materially adverse effects on financial condition and results of operations. Indebtedness of $3.2 billion ⁷⁸ at December 31, 2025, and associated covenants, could limit operations and use of funds, with a failure to comply potentially leading to an event of default. Reinsurance may not be available, affordable, or adequate, and counterparty defaults on reinsurance or derivative arrangements could expose the company to unmitigated risks. Changes in accounting standards, particularly LDTI, or tax laws, such as the Inflation Reduction Act and the CAMT, could adversely affect financial statements and earnings. Legal disputes and regulatory investigations are common, potentially resulting in significant financial losses or reputational harm. Operational risks include gaps in policies, procedures, or processes, and model errors, which could adversely affect the business. Cybersecurity threats, including sophisticated cyberattacks and the use of AI by malicious actors, pose a risk of confidential information loss, reputational damage, and business disruption.

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 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 ⁷⁹, and management is actively engaged in satisfying the necessary conditions, including regulatory approvals. Another emphasis is on refining product offerings, with a stated intention to focus on selling the new suite of Shield Annuity products, along with variable annuities featuring GMWBs and GMDBs only ⁸⁰. Furthermore, management highlights its commitment to robust risk management strategies, evidenced by the establishment of standalone hedging programs for variable annuity and first generation Shield Annuity products in the third quarter of 2025 ⁸¹, and targeting a Combined RBC Ratio of 400% to 450% ⁸² in normal market conditions.