Brighthouse Financial’s Q1 Earnings Show Resilience Amid Market Volatility

Brighthouse Financial’s Q1 2025 earnings report offers a mixed but ultimately encouraging picture for investors, blending narrower losses, improved adjusted earnings, and solid capital metrics with lingering challenges in annuity sales and rising expenses. The results underscore the insurer’s efforts to navigate a volatile market environment while maintaining its financial footing.

The company reported a net loss of $294 million, or $5.04 per diluted share, compared to a $519 million loss in Q1 2024. While the headline figure remains negative, the adjusted earnings—excluding notable items—soared to $245 million ($4.17 per share), marking a dramatic turnaround from the $1.56 loss per share in the prior-year period. This improvement reflects stronger net investment income and underwriting margins, though it was partially offset by higher operating expenses and lower fees.

Sales Performance: Annuities Struggle, Life Insurance Grows
Annuity sales dropped 21% quarter-over-quarter to $2.3 billion, driven by weaker fixed annuity demand. However, the company highlighted growth in its Shield Level Annuities, which focus on inflation-protected income. Meanwhile, life insurance sales surged 24% YoY to $36 million, benefiting from steady demand for protection products. The sequential dip in annuity sales—despite a 1% rise from Q4 2024—raises questions about customer appetite for fixed-income products in a rising-rate environment.

Financial Health: Capital Strength Remains a Pillar
Brighthouse’s balance sheet continues to be a bright spot. Its combined risk-based capital (RBC) ratio sat between 420% and 440%, well above regulatory minimums and within its target range. Book value per share (excluding AOCI) rose to $141.87, reflecting disciplined capital management. The company also maintained $1.0 billion in liquid assets, signaling ample liquidity to weather market swings.

The net investment income of $1.297 billion, however, dipped sequentially by $85 million due to lower returns on alternative investments. This underscores the challenges of managing fixed-income portfolios in a volatile rate environment, a theme across the insurance sector.

Segment Breakdown: Life Improves, Annuities Stumble
- Annuities: Adjusted earnings of $314 million were flat sequentially (excluding notable items), as gains from higher investment yields offset weaker sales.
- Life Insurance: A turnaround story, with adjusted earnings jumping to $9 million from a $36 million loss in Q1 2024, driven by strong sales and cost discipline.
- Run-off: The legacy business narrowed its loss to $64 million from $341 million a year ago, a sign of progress in unwinding old obligations.
- Corporate & Other: The segment’s loss widened to $24 million due to higher expenses and reduced tax benefits, a red flag that operational costs remain a hurdle.

Share Repurchases: Confidence in Valuation
Brighthouse repurchased $85 million of its stock year-to-date, including $59 million in Q1. This activity, combined with its robust capital ratios, suggests management believes shares are undervalued.

Conclusion: A Resilient Foundation, But Challenges Linger
Brighthouse Financial’s Q1 results paint a picture of a company navigating choppy waters with resilience. The narrowing net loss, strong capital metrics, and life insurance growth provide solid footing. However, the annuity sales slump and rising corporate expenses highlight vulnerabilities.

Crucially, the adjusted earnings improvement—up $333 million year-over-year—demonstrates operational progress. The RBC ratio and liquidity position also reinforce financial stability, which is critical in an industry where market swings can amplify losses.

Investors should watch two key factors:
1. Annuity Sales Recovery: Can Brighthouse sustain Shield Level Annuities growth while reviving broader annuity demand?
2. Cost Discipline: Can the company rein in rising expenses, particularly in its corporate segment?

With a book value per share (excluding AOCI) of $141.87 and a stock price around $80 (as of May 2025), Brighthouse trades at a significant discount to its intrinsic value—a potential opportunity for long-term investors. The path forward hinges on stabilizing annuity sales and maintaining capital strength, both of which appear manageable given the company’s execution to date.

In summary, Brighthouse Financial’s Q1 results suggest a company in transition: not yet profitable in GAAP terms, but steadily building a stronger foundation for future growth. The road ahead is uneven, but the signals so far are cautiously optimistic.