Brighthouse Financial's Q1 Earnings Miss: A Storm Cloud Over the Annuity Sector?

Brighthouse Financial (BHF) reported its first-quarter 2025 earnings with a notable miss against market expectations, underscoring challenges in its core annuity business and rising operational costs. The insurer’s adjusted EPS of $4.17 fell short of the $4.72 consensus estimate—a 11.6% shortfall—marking a 1.8% year-over-year decline compared to Q1 2024. While the company highlighted improvements in capital metrics and select segments, the results raise questions about its ability to navigate a challenging environment for annuity providers.

Key Drivers of the Earnings Miss

1. Revenue Growth Stalls Amid Cost Surge
2. Total operating revenues rose 6.1% year-over-year to $2.2 billion, driven by higher fees from universal life and investment products. However, premiums plunged 7.9% to $186 million, missing estimates by $32.3 million. This decline was largely due to weaker sales of fixed annuities, which dropped 21% year-over-year, despite growth in its flagship Shield Level Annuity product.

3. Expenses surged 212% year-over-year to $2.7 billion, with corporate costs rising 15.4% to $239 million. Analysts cited this as the primary culprit for the miss, noting that costs “offset gains in revenue” and highlighted operational inefficiencies.

4. Segment Performance Mixed, Annuities Lag

5. Annuities: Adjusted operating income edged up 0.3% to $314 million but faced headwinds from lower fixed annuity sales. Total annuity sales fell to $2.3 billion—a 21% YoY drop—though Shield Level Annuities saw a 5% sequential sales increase.
6. Life Insurance: Improved to a $9 million adjusted profit (vs. a $36 million loss in Q1 2024), driven by 24% sequential sales growth to $36 million.

7. Run-off Segment: Widened its loss to $64 million (from $34 million in Q1 2024) due to lower investment income.

8. Capital Strength Remains a Lifeline

9. Brighthouse maintained robust liquidity, with $1.0 billion in liquid assets and an estimated 420-440% risk-based capital (RBC) ratio—well above regulatory minimums.
10. Book value per share (excluding AOCI) rose 12.3% year-over-year to $141.87, reflecting disciplined capital management.

This visual would chart BHF’s quarterly adjusted EPS against consensus estimates over the past year, highlighting the Q1 2025 miss.

Market Reaction and Analyst Take

• Brighthouse’s shares dipped slightly in after-hours trading despite its strong 21.6% year-to-date performance (outperforming the S&P 500’s -4.3% decline). The Zacks Rank remains at #3 (Hold), citing mixed near-term prospects.
• Analysts at Zacks noted that Brighthouse’s parent industry—Life Insurance—ranks in the bottom 32% of all Zacks industries, reflecting sector-wide challenges like interest rate volatility and regulatory pressures.

Comparisons to Peers Highlight Broader Industry Struggles

• Voya Financial (VOYA) beat estimates with $2.15 EPS but saw revenues fall 4% to $2 billion.
• Manulife (MFC) narrowly missed estimates, with core earnings down 1.4%, though its new business value surged 29%.
• Reinsurance Group of America (RGA) reported a 6% EPS decline to $5.66, despite strong capital ratios.

This chart would illustrate Brighthouse’s net investment income growth, highlighting the 2% year-over-year rise to $1.3 billion in Q1 2025.

What’s Ahead for Brighthouse?

• Expense Control is Critical: With corporate costs up 15.4%, management must address rising expenses to avoid further margin pressure.
• Annuity Sales Recovery Needed: Fixed annuity sales have been a drag, but the Shield Level Annuity’s sequential growth offers hope. Brighthouse will need to balance innovation with cost discipline.
• Share Buybacks Continue: The company repurchased $59 million of shares in Q1, adding to $26 million in additional repurchases through May 6. This signals confidence in long-term value.

Conclusion: A Miss, but Not a Disaster—Yet

Brighthouse’s Q1 miss is a warning sign but not an existential threat. Its $8.2 billion book value excluding AOCI and 420-440% RBC ratio provide a sturdy foundation. However, the 212% YoY expense surge demands urgent attention.

The insurer’s fate hinges on two factors:
1. Can it stabilize annuity sales and reduce costs? If fixed annuity sales rebound and operational efficiency improves, Brighthouse could regain momentum.
2. How will the annuity sector perform broadly? With peers like VOYA and MFC also facing headwinds, Brighthouse’s success will depend on its ability to differentiate itself in a competitive and volatile market.

For now, investors should remain cautiously optimistic. Brighthouse’s capital strength and strategic focus on Shield Level Annuities are positives, but the road to recovery will be bumpy until expenses are tamed.

This visual would compare BHF’s stock performance against the broader market, highlighting its outperformance YTD despite the Q1 earnings miss.

In sum, Brighthouse’s Q1 miss is a setback but not a death knell. The real test lies in execution over the next 12 months.