Brighthouse (BHF) Up 52.8% in a Year: What’s Driving It?


Shares of Brighthouse Financial, Inc. (BHF Quick QuoteBHF ) have gained 52.8% in a year compared with the industry’s increase of 4.2%. The Zacks S&P 500 composite has rallied 30.1% in the said time frame. With a market capitalization of $4 billion, average volume of shares traded in the last three months was 0.6 million.

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The rally was largely driven by strong sales, higher underwriting margin, sufficient liquidity and effective capital deployment.

The Zacks Consensus Estimate for 2021 earnings per share is pegged at $16.08, indicating an increase of 238.86% from the year-ago reported figure.

It has a decent earnings surprise history. Its bottom line beat estimates in each of the last four quarters, the average being 52.23%.

Will the Bull Run Continue?

Estimates for 2021 and 2022 have moved 15.1% and 1.2% up, respectively, in the past 30 days, reflecting investors’ optimism.

Brighthouse Financial is focused on surging sales. Both Annuity sales and life insurance sales came well above the expectations in the second quarter.

Continued strong sales are likely to drive the total annuity net inflows of Brighthouse Financial. The company expects to witness a continued shift in business mix profile over time as it adds more cash-flow generating and less capital-intensive new business coupled with the runoff of less profitable business.

In a bid to boost its existing suite of products and expand its distribution footprint, the company took several measures to enhance Shield Level annuities. These initiatives are expected to bolster the competitiveness of Shield as well as add value to its distribution partners. Also, distribution footprint for SmartCare is expanded.

Solid performance at the Annuities, Life and Run-off segments is likely to ramp up revenue growth. Higher premiums, other revenues, a well-diversified and high-quality portfolio as well as a conservative investment strategy will continue to boost the company’s top line.

The Run-off segment is likely to gain on the back of higher net investment income and a strong underwriting margin.

Moreover, the life insurer boasts balance sheet strength and continues to maintain a robust capital and cash position. Its combined statutory total adjusted capital or TAC remained at $9.4 billion. Brighthouse Financial estimated a combined risk-based capital or an RBC ratio in the range of 480-500%, which is well above its target range of 400-450% in normal market conditions. The company ended the quarter with liquid assets worth $1.6 billion at its holding company.

Banking on its robust capital position, the insurer is committed to enhance its shareholder value. In the third quarter, it authorized the repurchase of up to $1 billion of its common stock in addition to the $200-million stock stock buyback program declared in the first quarter. The new plan highlights the company’s financial strength and poises it well for achieving the target of returning $1.5 billion to its shareholders by the end of 2021.

The stock currently has a Zacks Rank #2 (Buy) and an impressive Value Score of A. Back-tested results show that stocks with a Value Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best opportunities in the value investing space.

Key Players

Some better-ranked players in the multi-line insurance industry are Athene Holding Ltd. (ATH Quick QuoteATH ) , Voya Financial, Inc. (VOYA Quick QuoteVOYA ) and Primerica, Inc. (PRI Quick QuotePRI ) , each carrying a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Athene has a trailing four-quarter earnings surprise of 47.47%, on average.

Voya Financial’s earnings surpassed estimates in two of the last four quarters (missing the mark in the other two), the average beat being 9.13%.

Primerica’s bottom line surpassed estimates in three of the last four quarters (missing expectations in the remaining one), the average beat being 7.55%.

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