AM Best Revises Issuer Credit Rating Outlook to Negative for Brighthouse Financial, Inc. and Its Subsidiaries

AM Best has revised the outlooks to negative from stable for the Long-Term Issuer Credit Ratings (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs 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 are collectively referred to as Brighthouse and are operating as insurance subsidiaries of Brighthouse Financial, Inc. (Brighthouse Financial) (headquartered in Charlotte, NC) (NASDAQ:BHF). The outlook of the FSR is stable.

Concurrently, AM Best has revised the outlook of the Long-Term ICR to negative from stable and 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 revised the outlook to negative from stable and affirmed the Long-Term ICR of "bbb+" (Good) and the Long-Term IR of Brighthouse Holdings, LLC, Brighthouse Financial's intermediate holding company subsidiary. (See below for a detailed listing of the Long-Term IRs.)

These Credit Ratings (ratings) reflect Brighthouse's balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

The revision of the Long-Term ICRs outlook to negative was driven by the decline of Brighthouse's operating performance. The operating performance has been dragged by the performance of the variable annuity (VA) and growth in registered index linked annuity (RILA) lines of business, along with associated hedging programs. The losses in the VA and RILA lines of business were driven by strong equity markets and the structure of the hedging program. At the start of third-quarter 2024, Brighthouse began to hedge new sales of its RILA products separately from legacy VA, after previously hedging them together. The run-off block the company inherited when it spun off from MetLife, Inc. has also contributed negatively to earnings. The company has experienced a statutory net loss of ($2.6) billion at year-end 2023, and a net loss of ($1.3) billion through third-quarter 2024.

Brighthouse's risk-adjusted capitalization declined from the prior year's level, at year-end 2023, as measured by Best's Capital Adequacy Ratio (BCAR). The decline in BCAR was driven by an adjustment made to available capital for a portion of the net loss experienced in 2023. The balance sheet has experienced a 9.5% decline in statutory combined total adjusted capital at third-quarter 2024 to $5.7 billion from $6.3 billion at year-end 2023. While statutory combined total adjusted capital has declined, the company has expanded hedging on a standalone basis for new and existing Shield business that should provide greater protection of the RBC ratio, maintain sufficient assets above CTE98, and reduce new business strain. Brighthouse had an estimated combined RBC ratio of 400 to 420% at third-quarter 2024, consistent with its target range of 400 to 450% in normal markets. Brighthouse has employed a number of initiatives in 2024 to support the strength of its balance sheet, including completion of a reinsurance transaction with a third party to reinsure a legacy block of fixed and payout annuities, and a change in the company's hedging program to be less capital intensive.

Brighthouse's business profile assessment is indicative of its diverse product offerings, diverse distribution network and good geographic diversification, which is reflective of its exposure to riskier product lines such as its ULSG and VA legacy businesses. Brighthouse's ERM program is appropriate for its risk profile.

The following Long-Term IRs have been affirmed with revised outlooks to negative from stable:

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 revised outlook to negative from stable:

Brighthouse Financial Institutional Funding I, LLC—

— "a+" (Excellent) program rating

The following indicative Long-Term IRs have been affirmed with revised outlooks to negative from stable:

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. For more information, visit www.ambest.com.

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