Author Topic: BHF - Brighthouse Financial  (Read 6765 times)

Spekulatius

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Re: BHF - Brighthouse Financial
« Reply #10 on: June 13, 2018, 04:19:39 PM »
I don’t like current setup with BHF, where the seller (MET) knows much more than we do. Then there is Einhorn owning a position, which is basically a leper touch.

I have done well with NN.AS, which was a spinoff from ING, but forced from the Dutch government. That was a much better setup, since it means that very likely the book were clean. My contrary experience was Delta Lloyd (also owned by Einhorn), which was IPO’d from AV, similar to the BHF spinoff from MET.
To be a realist, one has to believe in miracles.


mwtorock

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Re: BHF - Brighthouse Financial
« Reply #11 on: June 13, 2018, 06:23:58 PM »
this is in the too hard pile for me. it got my attention when greenlight disclosed large position. with my limited actuary knowledge and discussions with actuary analysts in the industry, i still dont have any confidence in whether the reserves are conservative enough to cover tail risks. only thing i achieved is probably to exclude it from my circle for all that time i put in.

Spekulatius

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Re: BHF - Brighthouse Financial
« Reply #12 on: June 14, 2018, 03:57:38 PM »
To be a realist, one has to believe in miracles.

JRM

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Re: BHF - Brighthouse Financial
« Reply #13 on: June 17, 2018, 05:33:56 AM »
A short thesis on BHF has also popped up on my non-member version of VIC.  It looks like the authors could almost be the same based on the similarity of the content as the Seeking Alpha article.  The short thesis seems pretty simple:

1. Interest rate and 10-year market return assumptions are overly aggressive and will not be met if there is a recession.
2. MetLife was using this spin-off to dispose of toxic assets similar to GE's Genworth Financial.

If BHF was trading at 2X BV then I'd say this may make sense as a short.  I'm not sure how you short BHF at .4 P/B unless you expect this to be a 0 by 2020. 

As I read the press release closer I see that MetLife is transferring its 19% equity position in BHF for debt held by Goldman Sachs, Morgan Stanley, Wells Fargo, and JP Morgan.  To me this looks like the banks are the sophisticated party and are taking advantage of impatient management at MetLife.

I like the fact that management has flexibility because they are not committed to a capital return program. They should be able to maintain an adequate capital buffer unless things really get bad.

bbarberayr

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Re: BHF - Brighthouse Financial
« Reply #14 on: June 23, 2018, 06:18:04 AM »
Ratings Agencies believe BHF has Strong Ability to pay claims, so not likely going to be a 0 - https://www.brighthousefinancial.com/content/bhf/admin/microsites/bhf-events/financial-ratings.html?campaign=701f1000001ny8v

But ambest, for example, states "Brighthouse’s future operating performance is correlated highly to the equity markets and the level of interest rates", so weaker stock markets and low interest rates will hurt their performance, if you think that is a likely scenario.

You can read the details of these ratings by creating a free account at the ratings company web site.

Spekulatius

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Re: BHF - Brighthouse Financial
« Reply #15 on: June 23, 2018, 11:24:04 AM »
Ratings Agencies believe BHF has Strong Ability to pay claims, so not likely going to be a 0 - https://www.brighthousefinancial.com/content/bhf/admin/microsites/bhf-events/financial-ratings.html?campaign=701f1000001ny8v

But ambest, for example, states "Brighthouse’s future operating performance is correlated highly to the equity markets and the level of interest rates", so weaker stock markets and low interest rates will hurt their performance, if you think that is a likely scenario.

You can read the details of these ratings by creating a free account at the ratings company web site.

The question is if the rating agency’s know BHF really that well. The problem is not just weaker stock market, it is the issue that in a typical down market stock markets are weak and volatility goes up. Higher volatily can really hurt because  it makes it more expensive to hedge. They also cause interest rates to go down, which doesn’t help either.
To be a realist, one has to believe in miracles.

bbarberayr

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Re: BHF - Brighthouse Financial
« Reply #16 on: June 24, 2018, 08:33:52 AM »
The ratings agencies are generally quite could at evaluating life and P&C companies and have been doing so for around 100 years - this is unlike the evaluations of the brand new products prior to the financial crisis.

from https://www.insurancejournal.com/magazines/mag-coverstory/2004/05/17/42616.htm

Both A.M. Best and S&P support the quality of their ratings with studies that calculate insolvency rates for insurers by rating level. S&P’s Dreyer pointed out that of 20 insolvencies among property/casualty insurers during 2003, 14 were unrated and the remaining six carried vulnerable ratings. Backing up another two years reveals that at the start of 2001 S&P rated nine of the failed insurers, six in the vulnerable range and three at BBB, the lowest secure rating.

At press time A.M. Best had another insolvency report in the works, and in March of this year published a slightly different study that looked at impairments of insurance companies. Because the definition of impairment is broader than insolvency or default, the study methodology may be better attuned to the needs of ratings users because it measures events that disrupt an insurer’s operations but do not necessarily result in failure to make timely payment on all financial obligations. The results indicate that 0.06 percent insurers in the highest rating group (A++ and A+) became impaired within one year. The impairment rate for this group does not reach 1percent until six years after the rating assignment, and is only 4.65 percent 15 years later. Comparable numbers for companies rated D are 7.2 percent at the end of one year, and 50.94 percent 15 years down the road.

Spekulatius

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Re: BHF - Brighthouse Financial
« Reply #17 on: June 24, 2018, 08:44:04 AM »
^ Great Data - thank you bbarberayr.

Also , an alternative to BHF is the recently IPo’d EQH, which also owns a majority stake in AB (asset manager). I think it may come with less baggage, but also has a lower discount to book value.
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Spekulatius

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Re: BHF - Brighthouse Financial
« Reply #18 on: June 27, 2018, 01:23:17 PM »
With so many companies buying back shares at 52 week highs it doesn't seem too surprising to see MetLife selling BHF at 52 week lows.  Perhaps they know something insightful, maybe they are just in a hurry to reduce debt and buy back shares.

With BHF raising $3 billion of cash above the required CTE95 level, my first thought was the book is garbage; at least for a little while.

Well, the stock is now almost 10% lower than after the secondary. Looks like the banks are stuck with bad paper. At some point, this ought to become interesting. I wonder what Einhorn is thinking- just another blunder. He really doesn’t seem to be good with insurance, just look at GLRE.
To be a realist, one has to believe in miracles.

Foreign Tuffett

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Re: BHF - Brighthouse Financial
« Reply #19 on: June 27, 2018, 01:35:35 PM »
With so many companies buying back shares at 52 week highs it doesn't seem too surprising to see MetLife selling BHF at 52 week lows.  Perhaps they know something insightful, maybe they are just in a hurry to reduce debt and buy back shares.

With BHF raising $3 billion of cash above the required CTE95 level, my first thought was the book is garbage; at least for a little while.

Well, the stock is now almost 10% lower than after the secondary. Looks like the banks are stuck with bad paper. At some point, this ought to become interesting. I wonder what Einhorn is thinking- just another blunder. He really doesn’t seem to be good with insurance, just look at GLRE.

I wouldn't compare the two situations. On a personal level, Einhorn has almost certainly benefited from the permanent capital GLRE has provided for his fund.