Best’s News & Research Service - November 15, 2018 03:28 PM (EST)
A.M. Best Affirms Credit Ratings of Brighthouse Financial, Inc. and Its Subsidiaries
- November 15, 2018 03:28 PM (EST)
Oldwick //BestWire// - A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” of Brighthouse Life Insurance Company (Wilmington, DE), the largest operating entity for the Brighthouse group of companies, New England Life Insurance Company (Boston, MA), and Brighthouse Life Insurance Company of NY (New York, NY), the New York marketing arm. These entities collectively are referred to as Brighthouse and are operating insurance subsidiaries of Brighthouse Financial, Inc. (Brighthouse Financial) (headquartered in Charlotte, NC) [NASDAQ: BHF]. The outlook of these Credit Ratings (rating) is stable.
Concurrently, A.M. Best has affirmed the Long-Term ICR of “bbb+” and the Long-Term Issue Credit Ratings (Long-Term IR) of Brighthouse Financial. Additionally, A.M. Best has affirmed the Long-Term ICR of “bbb+” and the Long-Term IR of Brighthouse Holdings, LLC, Brighthouse Financial’s intermediate holding company. The outlook of these ratings is stable. (See below for a detailed listing of the Long-Term IRs.)
The ratings reflect Brighthouse’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
Brighthouse, which is now fully separated from MetLife, Inc. ownership and operating as an independent public company, maintains a very strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Model, despite fluctuating levels of capital and surplus due to pre-separation stockholder dividends and the fact that a portion of capital and surplus remains unhedged in certain market conditions. There is also good liquidity within the Brighthouse organization with access to the parent company’s revolving credit and term loan facilities, in addition to operating company access to a repurchase facility and Federal Home Loan Bank borrowings.
Brighthouse has maintained good operating profitability on a GAAP and statutory accounting basis despite some earnings volatility over the past three years due to activities related to the separation from MetLife, including a re-segmentation charge in its universal life with secondary guarantee line of business and establishment costs associated with transitioning to an independent public company. While overall premiums have been impacted negatively by Brighthouse’s run-off blocks of legacy life and annuity business, the company’s flagship Shield Annuity product line has grown substantially over the past several years.
Partially offsetting these positive rating factors is the high level of exposure to interest rate and/or equity market sensitivities. A.M. Best notes that just under 25 percent of Brighthouse’s variable annuity account values are considered “in-the-money” and that a significant amount of the company’s interest sensitive business is at or near the guaranteed minimum interest rate, which could result in spread compression in a declining interest rate environment. Furthermore, a substantial amount of Brighthouse’s annuity business is past the surrender charge period, which increases the risk of disintermediation. However, A.M. Best acknowledges that the economic risks associated with interest rate and equity market movements are well-hedged in stress scenarios. In addition, Brighthouse’s ERM program is well-developed and designed to assess and manage exposures on a consolidated, company-wide basis.
The following Long-Term IRs have been affirmed with a stable outlook:
Brighthouse Financial, Inc.
— “bbb+” on $1.5 billion 3.7% senior unsecured notes due 2027
— “bbb+” on $1.5 billion 4.7% senior unsecured notes due 2047
— “bbb-” on $375 million 6.25% junior subordinated debentures due 2058
Brighthouse Holdings, LLC
— “bbb-” on $50 million fixed rate cumulative preferred units, Series A
The following Long-Term IR has been affirmed, with a stable outlook:
MetLife Institutional Funding I, LLC — “a+” program rating
— “a+” rating on the notes issued hereunder
The following indicative Long-Term IRs have been affirmed with a stable outlook:
Brighthouse Financial, Inc.
— “bbb+” on senior unsecured debt
— “bbb” on subordinated debt
— “bbb-” on preferred stock
— “bbb-” on junior subordinated debt
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
A.M. Best is a global rating agency and information provider with a unique focus on the insurance industry.