Brighthouse to Change How It Makes RILAs

Brighthouse Financial has increased sales of registered index-linked annuities so quickly that it will have to move to a different strategy for making RILAs, company executives said Wednesday.

Brighthouse has been managing the financial machinery behind the RILA benefit guarantees together with the financial machinery behind its traditional variable annuities.

Now, because the RILA business has grown so much, Brighthouse will be buying the RILAs their own basket of options, according to Ed Spehar, the Charlotte, North Carolina-based life and annuity issuer’s chief financial officer.

The options “will directly offset the guarantees that we are selling in the product,” Spehar said.

He and other Brighthouse executives talked about the RILA business capital needs during a conference call the company held to go over first-quarter earnings with securities analysts.

What it means: Life insurers are coming up with ways to support the capital needs of their RILA operations.

“We have no intention of slowing down sales here,” Eric Steigerwalt, the Brighthouse chief executive officer, told the analysts.

The earnings: Brighthouse reported a $491 million net loss for the first quarter on $74 million in revenue, compared with a $497 million net loss on $1.3 billion in revenue for the first quarter of 2023.

The results include the effects of fluctuations in the estimated value of the company’s benefits, investments and derivatives.

Securities analysts now mostly ignore life insurers’ net results and focus on adjusted operating performance figures that exclude the effects of the mark-to-market value changes.

Brighthouse reported a $98 million adjusted loss for the first quarter on $2 billion in operating revenue, compared with $195 million in adjusted earnings on $2 billion in operating revenue for the year-earlier quarter.

Here’s what happened to sales of some of the products Brighthouse sells between the first quarter of 2023 and the latest quarter:

RILAs: $1.9 billion (up from $1.6 billion)
Fixed-rate deferred annuities: $637 million (down from $909 million)
Non-variable indexed annuities: $191 million (up from $122 million)
Life insurance: $29 million (up from $23 million).

BlackRock LifePath: Brighthouse recently joined Equitable in serving as one of the two providers of annuities for the BlackRock lifetime income program for 401(k) plans. BlackRock executives have suggested that the program could reshape the world’s defined contribution retirement plan programs.

Steigerwalt declined to provide details about early program performance but noted that plan assets have started coming in.