Best’s News & Research Service - December 16, 2022 09:03 AM (EST)
AM Best Affirms Credit Ratings of Brighthouse Financial, Inc. and Its Subsidiaries
- December 16, 2022 09:03 AM (EST)
Oldwick //BestWire// - AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” (Excellent) of Brighthouse Life Insurance Company (headquartered in Charlotte, NC), New England Life Insurance Company (Boston, MA) and Brighthouse Life Insurance Company of NY (New York, NY). 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, AM Best has affirmed the Long-Term ICR of “bbb+” (Good) and the Long-Term Issue Credit Ratings (Long-Term IR) of Brighthouse Financial. Additionally, AM Best has affirmed the Long-Term ICR of “bbb+” (Good) 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 AM Best assesses as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
Brighthouse’s risk-adjusted capitalization has been assessed within the very strong category, as measured by Best’s Capital Adequacy Ratio (BCAR), for its second consecutive year. Statutory combined total adjusted capital reached $8 billion as of Sept. 30, 2022 – approximately a 15% decline from year-end 2021 – with an estimated NAIC combined risk-based capital ratio in the range of 450% to 470%. The year-to-date (YTD) decline in capital is partially attributable to new business initiatives, but AM Best expects Brighthouse’s BCAR to remain within the very strong assessment category in the near term. Brighthouse’s balance sheet strength assessment is also indicative of its liquidity, financial flexibility, and access to cash at the holding company. However, these factors are offset partly by Brighthouse’s use of captive solutions primarily for its universal life with secondary guarantees (ULSG).
Brighthouse continues to report good earnings with annuity sales exceeding $9 billion as of year-end 2021 primarily due to sales of the Shield Level Annuity products. Through third-quarter 2022, annuity sales reached more than $8 billion. As markets shifted during the third quarter of 2022, fixed deferred annuity sales increased significantly representing about one-quarter of total YTD annuity sales. Further, earnings on a GAAP and statutory basis continue to reflect volatility as net income is impacted partially by derivatives used for hedging the company’s ULSG and variable annuity (VA) business, as well as the mark-to-market of its alternative investment portfolio. As of year-end 2021, Brighthouse reported a statutory net loss but has since recovered through September 2022 with a YTD net favorable position of approximately $1 billion. AM Best expects that Brighthouse will maintain overall favorable underlying core operating results as rising interest rates benefit spread compression within its legacy books of business with some continued volatility expected due to market impacts.
Brightouse’s business profile assessment is indicative of its diverse product offerings and good geographic diversification but also is reflective of its exposure to riskier product lines such as its ULSG and VA legacy business. Lastly, Brighthouse’s ERM program is appropriate for its risk profile.
The following Long-Term IRs have been affirmed with stable outlooks:
Brighthouse Financial, Inc.—
— “bbb+” (Good) on $1.5 billion 3.7% senior unsecured notes, due 2027 ($757 million remains outstanding)
— “bbb+” (Good) on $615 million 5.625% senior unsecured notes, due 2030
— “bbb+” (Good) on $1.5 billion 4.7% senior unsecured notes, due 2047 ($1.0 billion remains outstanding)
— “bbb+” (Good) on $400 million 3.85% senior unsecured notes, due 2051
— “bbb-” (Good) on $375 million 6.25% junior subordinated debentures, due 2058
— “bbb-” (Good) on $425 million 6.6% non-cumulative preferred stock, Series A
— “bbb-” (Good) on $402.5 million 6.75% non-cumulative preferred stock, Series B
— “bbb-” (Good) on $575 million 5.375% non-cumulative preferred stock, Series C
— “bbb-” (Good) on $350 million 4.625% non-cumulative preferred stock, Series D
Brighthouse Holdings, LLC—
— “bbb-” (Good) on $50 million fixed rate cumulative preferred units, Series A
The following Long-Term IR has been affirmed with a stable outlook:
Brighthouse Financial Institutional Funding I, LLC—
— “a+” (Excellent) program rating
The following indicative Long-Term IRs have been affirmed with stable outlooks:
Brighthouse Financial, Inc.—
— “bbb+” (Good) on senior unsecured debt
— “bbb” (Good) on subordinated debt
— “bbb-” (Good) on preferred stock
— “bbb-” (Good) on junior subordinated debt
This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.