AM Best Affirms Credit Ratings of Brighthouse Financial, Inc. and Its Subsidiaries

Rhea-AI Summary

AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) for Brighthouse Life Insurance Company and its affiliates, reflecting a stable outlook. Brighthouse Financial’s Long-Term Issuer Credit Rating (ICR) is affirmed at 'bbb+' with a stable outlook. Key factors include strong balance sheet strength, good operating profitability, and improved brand positioning through product diversification, including the Shield Annuity and SmartCare. Despite declining capital levels and risks associated with legacy liabilities, Brighthouse shows solid risk management capabilities.

Positive

• Strong balance sheet and very strong risk-adjusted capitalization.
• Good operating profitability on statutory, GAAP, and adjusted earnings bases.
• Growth in flagship Shield Annuity product line.
• Diversification into long-term care and life insurance with SmartCare.
• Strategic alliance with BlackRock for lifetime income solutions.

Negative

• Declining absolute capital on GAAP and statutory basis.
• Uncertainties related to legacy liabilities.
• Impact of lowering long-term mean reversion interest rate assumption on GAAP equity.
• Continued high exposure to interest rate and equity market sensitivities.

AM 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 (headquartered in Charlotte, NC), 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). 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+” and the Long-Term Issue Credit Ratings (Long-Term IR) of Brighthouse Financial. Additionally, AM 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 AM Best categorizes as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

Brighthouse has a very strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Absolute capital has been decreasing on a GAAP and a statutory basis, and there continues to be uncertainties within legacy liabilities. However, there is also good liquidity and available cash within the Brighthouse organization.

Brighthouse has maintained good operating profitability on a statutory, GAAP and adjusted earnings basis despite some earnings volatility. Brighthouse recently announced that it lowered its U.S. GAAP long-term mean reversion interest rate assumption by 75 basis points to 3.0%, which affected GAAP equity negatively. 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 meaningfully over the past several years and Brighthouse has become a major participant in the registered index-linked annuities marketplace. It has also entered in the long-term care and life insurance combination space with Brighthouse SmartCare. Continued improvement in the company’s brand, product and geographic diversification, as well as its ability to secure a strategic alliance with BlackRock to provide simplified access to lifetime income are all positive rating factors warranting the favorable business profile.

Partially offsetting these positive rating factors is the continued high level of exposure to interest rate and equity market sensitivities. However, Brighthouse’s ERM program is well-developed and designed to assess and manage exposures on a consolidated, company-wide basis. AM Best acknowledges that the economic risks associated with interest rate and equity market movements are well-hedged in many stress scenarios.

The following Long-Term IRs have been affirmed with stable outlooks:

Brighthouse Financial, Inc.

-- “bbb+” on $1.5 billion 3.7% senior unsecured notes due 2027 ($1.3 billion outstanding)

-- “bbb+” on $615 million 5.625% senior unsecured notes due 2030

-- “bbb+” on $1.5 billion 4.7% senior unsecured notes due 2047 ($1.15 billion outstanding)

-- “bbb-” on $375 million 6.25% junior subordinated debentures due 2058

-- “bbb-” on $425 million 6.6% non-cumulative preferred stock, Series A

-- “bbb-” on $402.5 million 6.75% non-cumulative preferred stock, Series B

-- “bbb-” on $575 million 5.375% non-cumulative preferred stock, Series C

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:

Brighthouse Financial Institutional Funding I, LLC—“a+” program rating

-- “a+” rating on the notes issued hereunder

The following indicative Long-Term IRs have been affirmed with stable outlooks:

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 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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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FAQ

What is the current Financial Strength Rating of Brighthouse Financial (BHF)?

AM Best has affirmed the Financial Strength Rating of A (Excellent) for Brighthouse Life Insurance Company.

What is the Long-Term Issuer Credit Rating for Brighthouse Financial (BHF)?

Brighthouse Financial has a Long-Term Issuer Credit Rating of 'bbb+' with a stable outlook.

How has Brighthouse Financial's operating performance been recently?

Brighthouse Financial has maintained good operating profitability despite some earnings volatility.

What is the impact of the lowered long-term mean reversion interest rate assumption on Brighthouse Financial (BHF)?

The reduction by 75 basis points to 3.0% negatively affected Brighthouse's GAAP equity.

What products are contributing to Brighthouse Financial's growth?

The growth is primarily attributed to the Shield Annuity product line and the new SmartCare offering.