Prepared remarks
Good morning, ladies and gentlemen, and welcome to Brighthouse Financial's Fourth Quarter and Full Year 2024 Earnings Conference Call. My name is Michelle and I will be your coordinator today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of the conference call. In fairness to all participants, please limit yourself to one question and one follow-up. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to Dana Amante, Head of Investor Relations. Ms. Amante, you may proceed.
Thank you, and good morning. Welcome to Brighthouse Financial's fourth quarter and full year 2024 earnings call. Materials for today's call were released last night and can be found on the Investor Relations section of our website. We encourage you to review all of these materials. Today, you will hear from Eric Steigerwalt, our President and Chief Executive Officer; and Ed Spehar, our Chief Financial Officer. Following our prepared remarks, we will open the call up for a question and answer period. Also, here with us today to participate in the discussions are Myles Lambert, our Chief Distribution and Marketing Officer; David Rosenbaum, Head of Product and Underwriting; and John Rosenthal, our Chief Investment Officer. Before we begin, I would like to note that our discussion during this call may include forward-looking statements within the meaning of the federal securities laws. Brighthouse Financial's actual results may differ materially from the results anticipated in the forward-looking statements as a result of risks and uncertainties described from time to time in Brighthouse Financial's filings with the SEC. Information discussed on today's call speaks only as of today, February 12, 2025. The company undertakes no obligation to update any information discussed on today's call. During this call, we will be discussing certain financial measures that are not based on generally accepted accounting principles, also known as non-GAAP measures. Reconciliation of these non-GAAP measures on a historical basis to the most directly comparable GAAP measures and related definitions may be found in our earnings release, slide presentation, and financial supplement. And finally, references to statutory results, including certain statutory-based measures used by management are preliminary due to the timing of the filing of the statutory statements. And now, I'll turn the call over to our CEO, Eric Steigerwalt.
Thank you, Dana. Good morning, everyone, and thanks for joining the call today. 2024 was a year of successes and also some challenges for Brighthouse Financial. While we made significant strides in our growth strategy last year, our statutory results, as we have discussed over the past few quarters, have been disappointing. However, as we have said before, we have been actively engaged in and continue to make progress on several strategic initiatives designed to improve capital efficiency, unlock capital, and remain within our target combined risk-based capital or RBC ratio range in normal market conditions. And I'm very pleased with the progress that we have made on those initiatives. First, I'd like to take a moment to highlight some of our accomplishments in 2024, including the significant strides we made in our growth strategy. This is demonstrated by our consistent growth in sales of our flagship Shield product suite and fixed-indexed annuity product. Our entrance into the work site channel with the launch of BlackRock's LifePath paycheck, our continued steady growth in our life insurance product sales, and our launch of the newest iteration of our shield product, as well as enhancements to our SmartCare product suite. Regarding annuity sales, we reported $10 billion of total annuity sales in 2024. In addition, we delivered record sales of our flagship shield-level annuities product suite of $7.7 billion, which is an increase of 12% compared with 2023. As a reminder, our Shield products are what are known as registered index-linked annuities or RILA, and we remain proud to be a leader in the RILA marketplace. In 2024, we also announced updates to our Shield product suite, designed to help our Shield suite remain competitive, adapt to changes in the industry, and reflect our ongoing focus on meeting clients' evolving needs. I'm also pleased with the accomplishments we achieved last year in our life insurance business. We delivered steady growth of $120 million of life insurance sales for the full year, which is an 18% increase over 2023. We also launched new enhancements to our flagship life insurance product, SmartCare. Also last year, we joined BlackRock in announcing the availability of BlackRock's LifePath paycheck or LPP solution in defined contribution plans, and we received our first deposits from LPP, all of which is extremely exciting. Last month, BlackRock announced that LPP is now live in six employer retirement plans totaling $16 billion in assets under management, which we're also very excited about. We remain thrilled to work with BlackRock on this innovative retirement solution and expect our involvement with LPP to enable us to reach new customers through the work site channel. As we've said in the past, expense discipline is extremely important. Therefore, I'm pleased that our full year corporate expenses were down over 7% compared with last year. Our accomplishments in 2024 reflect an ongoing commitment to an execution of our focus strategy, which I've spoken about before. As you've heard us discuss in 2024, the tremendous success we have had in growing our Shield annuity block of business over the past several years, with our Shield block now making up approximately 30% of our total annuity account value, has created increased complexity associated with managing our variable annuity, or VA, and Shield business on a combined basis. This resulted in a strain in our statutory results last year or in 2024. However, as you have heard us talk about in recent months, we continue to execute our capital-focused strategic initiatives, and we've made significant progress against those initiatives. For instance, as we said in our third quarter earnings conference call, we have made substantial progress on simplifying our VA and Shield hedging strategy. As of the end of the year, we have fully transitioned to hedging all Shield annuity new business on a standalone basis, and we continue to work on revising our hedging strategy for our In-Force VA and Shield book, which is now managed as a closed block of business. As a reminder, despite the refinements to our hedging program, the overall focus of our financial and risk management strategy remains the same, which is to protect our statutory balance sheet under adverse market scenarios. Our strategic initiatives also include reinsurance opportunities. As we announced on our third quarter earnings call, effective as of September 30th, 2024, we completed a reinsurance transaction with a third party to reinsure a legacy block of our fixed and payout annuities. That transaction helped to create capital efficiencies and reduced our required capital and helped to bring our estimated combined RBC ratio back to within our target range of 400% to 450% in normal market conditions as of September 30th. I'm also pleased to announce that in the fourth quarter, we entered into another reinsurance agreement with a third party to reinsure a legacy block of universal life and variable universal life products residing within our life insurance segment. This reinsurance agreement resulted in additional capital benefit in the fourth quarter. As I mentioned a moment ago, the focus of our financial and risk management strategy remains the same, which is to protect our statutory balance sheet under adverse market scenarios. This is especially important to support our distribution franchise, including our distribution partners and the customers that they serve. As of December 31st, 2024, our estimated combined RBC ratio was approximately 400% at the low end of our target range of 400% to 450% in normal markets. This reflects a $100 million capital contribution made to Brighthouse Life Insurance Company, or BLIC, from the holding company. Ed will provide more detail on our statutory results in a moment. Liquid assets at the holding company were $1.1 billion as of December 31st, '24. Pro forma for the contribution to BLIC, liquid assets at the holding company continue to be a robust $1 billion. Additionally, in 2024, we returned capital to our shareholders through the repurchase of $250 million of common stock, which included $60 million of common stock repurchased in the fourth quarter. As of year-end 2024, we have reduced the number of shares outstanding by over 50% since we began our common stock repurchase program in August of 2018. And year-to-date through February 7th, we repurchased an additional $25 million of our common stock. As we look toward 2025, we remain committed to further executing on our business strategy and we continue to focus on delivering on our capital focus strategic initiatives to improve capital efficiency, unlock capital, and remain within our combined RBC ratio target range. To wrap up, I am proud of all that we accomplished in 2024. Despite certain challenges that we faced, we maintained our robust liquidity position and our corporate expenses were down 7% versus 2023, as we also maintained our focus on expense discipline. We delivered record sales of our shield-level annuities product suite, and we received our first deposits with the launch of BlackRock's LifePath paycheck product. We ended the year with an estimated combined RBC ratio of approximately 400% and continue to make progress against our capital focus strategic initiatives. With that, I'll turn the call over to Ed to discuss the financial results.
Thank you, Eric, and good morning, everyone. As Eric mentioned, we contributed $100 million to BLIC effective for year-end statutory financial statements to bring our estimated combined RBC ratio to approximately 400% or the low end of our target range in normal market conditions. Given that it is year-end, which is the only time our subsidiaries officially report an RBC figure. We felt it was appropriate to be in our range. Our combined total adjusted capital or TAC was approximately $5.4 billion at December 31st, which also reflects the capital contribution. Without the contribution, we estimate that our combined RBC ratio would've been in the mid-390s. I would like to make a few comments on the decision to contribute capital to BLIC. First, we have repeatedly stated that we believe our franchise value is driven by distribution and that we are committed to our distribution partners and the customers that they serve. Given the importance of both distribution and the financial strength of our operating companies, we determined it was prudent to make a relatively modest contribution from the holding company to our largest operating subsidiary. Second, we have consistently highlighted the importance of maintaining a conservative position at the holding company, both in terms of cash and capital structure. It is critical to have flexibility to deal with the uncertainty that is inherent in the financial services industry, and our results last year illustrate this fact. After the contribution, we still have approximately $1 billion of cash and liquid assets at the holding company. Finally, while we do not typically provide a forward look on RBC, we're making an exception in this instance, given this is the first time we've contributed cash from the holding company to an operating subsidiary since our early days as a public company. Our financial plan currently anticipates that our combined RBC ratio will be relatively stable over the next few years without additional support from the holding company. As Eric discussed, we made significant progress in 2024 on our capital-focused strategic initiatives designed to improve capital efficiency, unlock capital, and return our combined RBC ratio to our target range and normal market conditions. Keep in mind that while our statutory results benefited from the reinsurance agreement entered in the fourth quarter, as well as us hedging Shield new business on a standalone basis, our VA and Shield business is not immune to large quarterly market moves. Specifically, in the fourth quarter, interest rates were up approximately 80 basis points, as measured by the 10-year U.S. Treasury, and there was a significant steepening in the yield curve. The combined impact of the significant changes in interest rates and the yield curve shape resulted in a negative impact on our annuity statutory results, which contributed to the $300 million decline in TAC in the quarter. As I have discussed in the past, there is an element of timing for market impacts. In this case, there was a current period cost from the movement in rates; however, we would expect to see the benefit from higher interest rates over time. Additionally, there was a net $200 million increase in asset adequacy testing reserves, which contributed to the decline in TAC, driven by legacy fixed annuity blocks. At December 31st, holding company liquid assets were approximately $1.1 billion. Pro forma for the capital contribution, holding company liquid assets are approximately $1 billion. Now turning to adjusted earnings results in the fourth quarter. Adjusted earnings for the quarter of $304 million reflect a $48 million unfavorable notable item, or $0.80 per share, related to actuarial model updates. Adjusted earnings, excluding the impact from the notable item, were $352 million, which compares with adjusted earnings on the same basis of $243 million in the third quarter of 2024 and $189 million in the fourth quarter of 2023. Excluding the impact of the notable item, the adjusted earnings results in the fourth quarter were approximately $70 million, or $1.17 per share, above our average quarterly run rate expectation. Our underwriting margin was approximately $40 million higher than our average quarterly expectation, driven by lower claim volume net of reinsurance in both our life and runoff segments. There was also a benefit of approximately $30 million versus our average quarterly run rate expectation from non-trendable items, equally split among investments, tax, and corporate expenses. Alternative investment income was at the upper end of our long-term expectation of a 9% to 11% annual return, yielding approximately 2.6% in the fourth quarter. This contributed to higher net investment income compared with the third quarter, shifting to results by segment. The annuity segment reported adjusted earnings, less notable items of $327 million. Sequentially, annuity results were driven by higher net investment income, partially offset by a lower underwriting margin. The life segment reported adjusted earnings of $52 million and were higher sequentially, which was driven by higher net investment income and a higher underwriting margin. This was partially offset by higher expenses. The runoff segment had an adjusted loss of $27 million. Sequentially, results reflected higher net investment income and a higher underwriting margin. The corporate and other segment reported zero adjusted earnings, which reflected a lower tax benefit in the quarter, partially offset by lower expenses sequentially. In closing, we are pleased with our progress on strategic initiatives and believe we have illustrated our commitment to maintaining a strong statutory balance sheet. Finally, we continue to have substantial cash at the holding company. We will now turn the call over to the operator to begin the question-and-answer session.
Questions and answers
Our first question is from Wes Carmichael with Autonomous Research. Your line is open. Please go ahead.
Good morning, Ed, I was hoping you could touch a little bit on the driver's RBC in the quarter. I think it declined if you exclude the capital contribution reinsurance, but maybe you could just touch on, I know you quantified the capital contribution, but reinsurance transaction as well. That'd be great. Thank you.
Yes, good morning, Wes. This is going to be a lengthy response, but I hope it clarifies the quarter for you. There was quite a bit happening this quarter. We benefited from our strategic initiatives, including the reinsurance you mentioned, the standalone hedging for Shield new business, and some market factors. Additionally, we have the year-end asset adequacy testing. Let’s start with the strategic initiatives. If you check our supplement, you'll notice we made some normalizing adjustments for norm stat, and it shows a positive number in the fourth quarter despite the AAT impact. When you do the math, it reveals around $300 million. The actual effect from these positive elements exceeds $400 million, and the advantages from our strategic initiatives are reflected there. There are essentially two key points. First, we discussed hedging Shield new business on a standalone basis since July. The real benefit comes when you incorporate this into your statutory modeling. In the fourth quarter, we executed the necessary adjustments in our statutory modeling related to the standalone hedging of Shield new business, along with our Shield level pay plus product, covering both the new and old versions. This is significant because when you include it in your financial statements, it mandates consideration of the future hedges connected to this standalone hedging strategy in your liability cash flows. Consequently, we observed a substantial benefit from that impact in the fourth quarter. The second positive strategic initiative was the reinsurance deal. We executed a reinsurance deal on a legacy block of UL, VUL, and life, which improved our RBC by about 10 to 15 points. So, that's a real plus from the strategic initiatives, which I emphasized was significant and over $400 million. Now, concerning norm stat, we experienced about a $200 million loss this quarter. I previously mentioned the interest rate effects, wherein norm stat saw roughly a $350 million negative impact from rates. To clarify, higher interest rates fundamentally benefit a VA block by reducing the present value of future claims and lowering future claims, albeit partly offset by declining bond fund values. That’s the essential effect of rising interest rates for VA. Let’s delve into the statutory impact, both in the near and long term. In the short term, with long rates up and the yield curve steepening, you incur losses on the derivatives that hedge the rate risk, and you don't receive the full benefit you would anticipate from the rate change because the yield curve hasn’t moved evenly. The statutory framework heavily relies on the one-year and twenty-year rates. As such, the rise in long rates impacted your hedge assets more, and the lack of parallel movement in the yield curve didn’t significantly benefit your liabilities as expected. Over time, the most apparent benefit will come from the mean reversion point adjustment in the statutory framework for the twenty-year treasury. To illustrate, at the end of September, we projected two MRP increases over three years in our financial plan. Now, considering year-end actuals, we expect three MRP increases. There’s a timing issue tied to rates. Lastly, I want to mention the asset adequacy testing reserve, which increased by approximately $200 million. This relates to a legacy block of fixed annuities, amounting to about $8 billion in reserves. It consists of an older block of business with negligible surrender charge protection. Our testing this year indicated that in high-rate scenarios, we might see a significant rise in lapses within this block, which could necessitate selling bonds at a loss to cover outflows. Therefore, we consider a variety of conservative scenarios during cash flow testing. This year, we determined that the up-rate scenario would lead to some shortfalls, prompting us to establish the $200 million reserve. I realize this was a lot of information, but I hope you can piece it together for a clearer understanding of what influenced the quarter's results.
No, appreciate it. And I guess my follow up is just on hedging. I know Shield is fully transitioned. Can you just comment on where you are with the legacy VA portfolio and maybe just any update on timing of long-term free cash flow projections would be helpful?
Sure. So, we continue to focus on what our strategy will be for this legacy block of VA and shield, the old shield. That is, there's a lot of work that's still underway. This is a very important initiative for us. I want to remind everyone, though, that our underlying approach to managing this risk has not changed, which is we have a maximum loss tolerance of up to $500 million and we are on a statutory basis, and we are focused on relative to CTE98 and we are focused on managing that risk so that there is no issue for market movements and interest rate movements. So, there's no change in managing the risk itself. But we are looking at what is the appropriate strategy going forward for that back book now that we are hedging all our new business on a standalone basis. The long-term statutory free cash flow projections, I think I had a question. Well, I know I had a question last quarter about timing and related to our work on the hedging change, we need to complete the work on what we do with this back book before we would complete those free cash flow projections. So, we said last quarter that we were targeting mid-year; I said that it is going to be dependent on the progress we make on this key strategic initiative. And so, I think I would just say we're going to have to wait and see what the timing is. If I had to guess, I would say it's probably going to slip from what I said last quarter, but it's much more important for us to get this back-book hedging strategy factored into those projections than it is to rush getting those projections out.
Got it. Thank you.
Our next question comes from Suneet Kamath with Jefferies. Please go ahead.
Good morning. First question, just on the stable RBC, should we think stable meaning at 400% or somewhere in that range that you target? And then does that outlook contemplate any subsidiary dividends out of BLIC?
Good morning, Suneet. We're not going to be more specific than stating that it's stable. You could interpret stable in various ways, but I would say that if it's around 400% at year-end and we aim to be within our target range in normal markets, that should provide you with an idea of what stable means. Regarding dividends, our financial plan does include taking funds from operating companies after this year.
I have a follow-up question for Eric. While I understand the strategy, I'm curious about whether it makes sense for this company to operate as a standalone public entity. My concern stems from Ed's detailed discussion about the quarterly changes in RBC, which involve a lot of complexities and confusion that seem unique compared to other companies. These other companies are generally more diversified and have additional business lines beyond mainly annuities. How do you view the complexity of your situation in relation to the decision of remaining public in the future? Thank you.
You got it, Suneet. You broke up a touch there, but I think I got it all. Look, we've been dealing with complexity for seven and a half years now. There have been a number of periods where that complexity has been far less. Recently, as we've discussed, and whether it's part of Ed's answer here or answers we've given in the past, when we ended up with as much Shield on the books as we were hoping for to sort of balance the old VA book, that created an interesting situation for us. And I would agree that that situation not only sounds complex but is complex. And so, what we've done is broken it apart into, essentially two pieces. I'm overly simplifying here. One, for all Shield new business to be hedged on a standalone basis. And then two, as Ed's previous answer sort of illuminated, figuring out how we're going to hedge what I called previously kind of a closed block of VA and older Shield. So, when we think about what we've got to do to manage this complexity, some years it's been far more simple. This last year, 2024, I agree, it was complicated. And so, whether it's running the company as efficiently as we can on sort of a BAU basis, right? Everything that we do on a normal basis to run this company. And then adding in these strategic initiatives, whether it's things like reinsurance, or other initiatives that we're thinking about, we're always trying to think of new initiatives, or the fairly large initiative associated with the hedging program. We are a public company, and we're running this company every day to, over time, create long-term shareholder value. Even as you think about it, we're roughly at year seven and a half. We've repurchased $2.5 billion of stock, and that adds up to more than 50% of the original shares outstanding. So, all I can tell you is we're going to continue to run the company as we have. And when you do hit periods of complexity, you just power through it, which is exactly what you've seen us do over the last couple of quarters, including the fourth quarter. And that won't stop as we go through 2025.
Okay, thanks for the answer.
Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of Wilma Burdis with Raymond James. Your line is open. Please go ahead.
Good morning. Can you provide a general overview of what has contributed to the normalized debt losses in the recent quarters? Is it related to RILA with higher equity markets or hedging on traditional VAs? Please share your insights.
Sure. Good morning. We've discussed the usual market volatility that we experience, which we've addressed in prior quarters, and we're happy to follow up on those discussions. Additionally, we've noted the pressure from new business, which influenced our decision to adjust our hedging strategy. Once we reached a balance in our risk profile between VA and Shield, we found that the previous benefits of our management approach were no longer applicable, necessitating a change. Consequently, there is some extra strain expected in 2024 that goes beyond our future projections for a couple of reasons. First, it's due to our new hedging management strategy, and second, we’re exploring flow reinsurance deals for Shield's new business that could ease capital strain. We are actively pursuing this and have multiple parties interested in such a deal, so it's an important initiative for us this year.
Are there additional opportunities to expand the portfolios, and if so, how much capital would that require? Additionally, you've done well with expense management this year; is there room for further cost-cutting to enhance organic cash flow generation?
Wilma, it's John. Yes, there are likely opportunities to enhance yield. Overall, our portfolio allocation has largely remained stable this year. We are still adopting a more cautious approach. We invest across various fixed-income asset classes. Since spreads are tight, we don't find any strong reasons to focus heavily on one sector, but we are ready to take advantage of widening spreads and market dislocations if they occur. Eric, would you like to add to this?
Yes, I'll take the second half, Wilma. Yes, we had a good year with respect to expenses in 2024, expenses down 7% year-over-year. As I've said over the years, actually, my real focus is on the expense ratio, right? So, keeping that expense ratio down has been a focus, frankly, since day 1, and that was a long time ago. We're not afraid, though, to invest in growth. So, I would just sort of say, Wilma, as you think about 2025, certainly, there are inflationary effects out there, and they will affect all companies, including ours. But my real focus is to grow revenues sort of faster than our expense margins. And I expect that to continue in 2025. So, the expense discipline is alive and well.
Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of Jimmy Bhullar with J.P. Morgan. Your line is open. Please go ahead.
Good morning. Ed, could you share your thoughts on the company's target RBC ratio and whether you plan to take any additional measures, like insurance, to increase it beyond 400%, or are you comfortable maintaining it at that level?
Good morning, Jimmy. First of all, I want to emphasize that we are comfortable operating at a 400% level. Under normal market conditions, we typically mention a range of 400% to 450%. As the mix evolves over time, it could make sense for that range to decrease, not in the short term but in the long run, due to the company’s changing risk profile. Additionally, we are constantly seeking ways to unlock capital. This is consistent with our approach over the years in various forms and will continue to be a focus for us. The strategic initiatives we have implemented, such as the strategy for the back book of VA and Shield, along with any potential reinsurance efforts, should enhance capital efficiency and may lead to capital being unlocked. That’s why we remain committed to those initiatives.
Hey, Jimmy, it's Eric. I'll just add a little bit because I think it's a good question. So, remember, you know this very well. You've got the interplay between what's your capital level at your insurance subsidiaries, especially BLIC, and then when you got the holding company. And of course, we still got $1 billion up at the holding company. And Ed and I have talked about that for years. We always felt that was prudent and we still think it's prudent, obviously. But yeah, we can run at 400%. You've got the liquidity of the holding company. And we've never pushed money down. But we just thought, as you heard Ed say, I don't know, maybe 20 minutes ago, that it just made a lot of sense to get the RBC ratio at the end of the year within the range. It's really helpful for distributors. And I like helping our distributors. So even after we did that, we still got $1 billion up at the holding company. And as you heard Ed say, we do in our three-year plan expect to have dividends up to the holding company. So yes, we are comfortable.
And just on the dividend point, are you expecting dividends every year, or was that more of a cumulative comment?
That is more of a cumulative comment. I think, as we've done in the past, we prefer to talk about any forward-looking metrics on a multi-year basis rather than any single period.
Okay. And then on fixed annuity sales, they were down this quarter, a decent amount. So is that because of competition or something from distribution or just a desire to sort of preserve capital. Can you talk about what drove the decline there?
Good morning, Jimmy, it's Myles speaking. So, FIA sales were down for the year as expected. As a reminder, midyear, we had a transition into a new reinsurance partner. Our FIA sales were up for the year, driven by our successful launch of our SecureKey product. On a combined basis, we exceeded our expectations for fixed sales but we continue to balance growth, pricing discipline, and managing capital, and we're happy with our overall results.
And our next question comes from the line of John Barnidge with Piper Sandler. Your line is open. Please go ahead.
My question is on the investment management of the portfolio. How much expense is there associated with the outsourcing of that?
John, it's John. We don't really provide that. We provide an overall investment expense number. You can see in our financials and you can assume that IMA type fees are the majority of that.
My follow-up question. How much outsourcing is concentrated in the most hands as a percent basis, I'm not looking for who?
We have about a dozen external managers that we trust for their exceptional capabilities across various sectors. I don't think we want to disclose how much money is managed by each.
Our next question comes from the line of Ryan Krueger with KBW. Your line is open. Please go ahead.
Thanks. Good morning. I guess a question on reinsurance. So, you've done a couple of in-force deals. I guess when you look forward, are you still looking to do more things like that and I guess, would you broaden the scope to also perhaps include some of the liabilities, the SUL liabilities in BRCD as well?
Good morning, Ryan. In response to Jimmy's question, I mentioned that we are continually exploring ways to make sound capital decisions. If additional transactions are beneficial for us, we will pursue them, evaluating everything to ensure they make sense. So far, we've completed some legacy blocks, including the annuity block we discussed last quarter and the life deal involving UL and VUL this quarter. Our focus has been on straightforward transactions, which, while requiring significant effort, were relatively simpler. However, as we consider other legacy businesses you referenced, they may involve more complexity and require additional work, but we are keeping that in mind.
And then going back to the stable RBC comment. Over the next few years, I think there's some different moving parts over the next few years when you, I guess, on your own company-specific side, the change to the hedging of the closed block of variable annuities and Shield, and then you have some changes going into effect, I think are on pace, scheduled for next year on variable annuity capital and reserving requirements. I guess, have you tried to contemplate all of these moving parts into that forward outlook already or give any thoughts there?
Sure. So, you highlight two areas that will create some level of uncertainty about what the framework will look like. Most, I would say in particular, you're referring to the upcoming change in the economic scenario generator, which is scheduled at this point for the 2026 financial statements, correct? That's what you're asking about.
That was part of it. I also believe that your changes to the legacy hedging play a role as well.
Yeah. So, those are not factored in my comments because, first of all, there's no way to assess what the framework will look like, the final framework for the ESG, for example, and I would make the case that, for example, if you institute a very conservative economic scenario generator, that you would not have to have as high an RBC ratio. That's one possible way to look at it because if you're going to reflect a lot of the risk in your balance sheet today, the excess, the capital cushion that you need for adverse deviation should be less. So, that is not factored into my comments. Just another thing, just to underscore, I think it's clear to everyone on this call, but our expectations about the RBC ratio are going to be driven by normal markets. So, when we look at our financial plan, I would say we have a moderate type of scenario going forward. It's not, I would say somewhat less than normal market returns, somewhat higher than normal credit losses, nothing that I would identify as that significant outside of normal markets. And so, that's why we talk about stable. If you had something different than that in terms of market environment, you would have a different outcome for your RBC ratio, either positive or negative. And then on the hedging piece, one of our overarching goals of everything we're doing here is to try to simplify. This is never going to be simple, as you probably got from my very long answer to the first question, but our goal is to make it simpler. And so, we might decide, if it made sense for a more straightforward and clearer picture of managing the risk, you might choose to take some sort of a capital impact from doing that if you thought it made sense. So, I'm not saying that that is going to happen. I expect that to happen. I'm just saying that that would be a trade-off that we might make, which is not contemplated in anything that I have talked about today in terms of stable RBC ratio.
Our next question is going to come from the line of Nick Annitto with Wells Fargo. Your line is open. Please go ahead.
Good morning. Maybe just more of a high-level question, maybe for Miles or David, but can you just comment on the kind of competitive environment or dynamics in the RILA business? It just seems like a lot of companies are already in it and starting to launch newer refreshed products would be good to get your kind of near-term or intermediate-term outlook on it?
It's Myles. I'll take it, and David can certainly chime in. But look, there's a lot of demand for these products in the marketplace. Customers are looking to stay invested with protection. They're focused on retirement planning. So, the market has expanded quite a bit. It's expanded as it relates to new distributors selling these products. There's a lot of new features on these products, including income riders. But we feel really great about our competitive positioning. Last year was our best year yet as it relates to Shield sales. And we continue to do a number of different things to enhance our offering, whether it's Shield Level Play Plus, which is Shield with an income rider or a Step Rate Edge, which is a new crediting strategy. David, anything you want to add on that?
No, I think you covered it.
Our next question comes from the line of Tom Gallagher with Evercore ISI. Your line is open. Please go ahead.
Good morning. I have a few questions. So, regarding the stable RBC, should we assume that it indicates you'll have positive statutory earnings but an increase in required capital? That's my first question. Additionally, do you expect to continue with share repurchases here, which will likely depend on drawing down HoldCo excess in the near term?
Tom, so I don't want to go too far down the path of this forward-looking plan topic. But the answer to your question is yes, it does assume that the results over the plan period would be positive earnings.
Yes, he's pointing at me, Tom. Look, generally, as Ed just said and as you know, we don't talk about share repurchases going forward. We just haven't done that. All I can do to help you out is point to history, which is pretty consistent. And as I mentioned, I'm not sure on whose question, maybe Jimmy's, over our history as a public company has added up to repurchases of north of $2.5 billion.
Got you. And then for my follow-up, can you provide more details on the risk transfer deals you executed, specifically the annuity deal? What were the deposit sizes on those fixed annuities and the payout on annuities? Additionally, how substantial were the life deals? Perhaps you could share information on reserves or insurance in force? How large were those?
Hey, Tom. I'm not sure how much I want to discuss the reserves for the life deal because we are still exploring other opportunities. Earlier, in response to Wes's question, I mentioned that you could probably assume 10 RBC to 15 RBC points, driven by the numerator of the calculation. You can do some math to arrive at a range, but I won't provide more specifics on that. Can you please repeat your question regarding the annuity side?
Yeah, just the size of the 3Q annuity deal. How big were the assets or deposits on those?
Yeah, it was approximately $8 billion.
Can I just sneak in one more just from a standpoint of BRCD?
I would expect nothing less, Tom.
Hey, I'm at the end of the chain here. So, I'm doing my best. But anyway, the BRCD, is there any way you can frame that? Because I think investors are trying to figure out, is that still a source of value? It certainly has been in the past. Because when I look at the $5.4 billion of TAC and BLIC and NELICO, I think there's also some additional value from BRCD. Do you have a surplus number that's back in the $24 billion of SUL reserves? Or do you really just fund the reserves?
It's more of the latter. Regarding BRCD, we've taken $1.2 billion in dividends from BRCD, with $600 million twice. Each time, we required regulatory approval since all dividends from BRCD are extraordinary. Clearly, we were able to demonstrate that it was justifiable to withdraw the funds. I have mentioned several times that I do not consider BRCD a continuous source of capital for Brighthouse. It is appropriately capitalized but represents a runoff block of old business, and I do not see it as a source of additional cash for BLIC or the holding company.
Thank you. Ladies and gentlemen, I will now turn the call over to Dana Amante for closing remarks.
Thank you, Michelle. Thank you, everyone, for joining today's call, and have a good day.
This concludes today's conference call. Thank you for participating, and you may now disconnect.