Brighthouse Boosts 4Q Reserves by $38M for MetLife-Related Group Annuities

Brighthouse Financial, which MetLife spun off in August, hiked reserves by $38 million in the fourth quarter to cover 14,000 group annuitants administered by its former parent company, Brighhouse executives said Tuesday.

Despite the reserve increase, the Brighthouse retail annuity business that is administered by MetLife won’t be affected, said Brighthouse president and CEO Eric Steigerwalt.

Last month, MetLife announced it would bolster reserves by as much as $575 million to make up for unrecorded pension liabilities as part of its pension risk transfer and group annuity business to group annuitants who went missing.

The January decision came on the heels of MetLife announcing it would undertake a review of practices and procedures used to estimate reserves related to group annuitants.

Based on the review, MetLife uncovered about 14,000 group annuitants across Brighthouse businesses “who may be owned annuity payments now or in the future,” Steigerwalt said.

Boosting reserves by $38 million amounts to less than 3 percent of reserves, said Peter Carlson, chief operating officer of Brighthouse.

MetLife booked a $62 million item in the fourth quarter against its Retirement and Income Solutions segment as a result of the group annuity pension liabilities, the company said.

The impact of the reserve charge on fourth quarter and full year earnings is “unacceptable and deeply disappointing," said Steven A. Kandarian, chairman, president and CEO of MetLife, in a news release posted Tuesday after market close.

MetLife executives were scheduled to address the issue in an earnings call early today.

For Brighthouse, breaking away from MetLife seems to be proving a bit more expensive than planned, at least in the short term.

4Q Marred by Nonfavorable Items

Brighthouse announced $152 million of “net unfavorable notable items” in the fourth quarter.

In addition to the $38 million increase in reserves related to group annuity contracts, Brighthouse incurred $53 million in “unfavorable reserve adjustments” connected to the company’s universal life with secondary guarantees business.

Brighthouse also set aside $47 million for planned technology and branding investments linked to its separation from MetLife.

Then there was $14 million in “unfavorable impact” attributable to tax items related to the separation from MetLife, Brighthouse said.

Last year, Brighthouse managed to close as many as 72 “exiting transition services agreements” with MetLife, but 147 agreements remain, company executives said.

Brighthouse reported fourth-quarter net income of $668 million.

The company said it had net income of $5.58 per share. Earnings, adjusted for non-recurring gains, came to 37 cents per share.

The results missed Wall Street expectations. The average estimate of five analysts surveyed by Zacks Investment Research was for earnings of $2.11 per share.

The annuity and life insurance company posted revenue of $1.88 billion in the period.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.