US Aging Demographics Will Boost Annuity Demand

Key Takeaways

• Strong demand for retirement solutions and product innovation are driving revenue growth, sales volume, and market competitiveness for Brighthouse.
  
• Solid capital strength, disciplined expense management, and demographic tailwinds underpin profitability, financial flexibility, and long-term earnings stability.
  
• Elevated surrender rates, heightened competition, and capital generation challenges threaten asset growth, revenue stability, and shareholder value due to structural and scale limitations.

Catalysts

Provides annuity and life insurance products in the United States.

• Brighthouse's strong growth in annuity and life insurance sales-especially in its flagship Shield annuity suite and expansion into employer-sponsored retirement plans via BlackRock's LifePath Paycheck product-positions the company to benefit from increasing demand for retirement solutions as more Americans face insufficient personal savings and a shift towards self-directed retirement planning; these trends are likely to drive top-line revenue growth.
  
• Continued investments in product updates and simplification (for example, recent enhancements to Shield products and the focus on simplifying hedging strategies) are increasing the competitiveness and transparency of Brighthouse's offerings, which can improve sales volumes, support future revenue, and reduce operational complexity-a catalyst for margin stability and improved earnings quality.
  
• Ongoing cost optimization and disciplined expense management, with expectations for normalized corporate expenses for the remainder of 2025, should help enhance net margins and profitability as scale grows from recent and expected product sales momentum.
  
• The company's demonstrated capital strength-robust liquidity, high holding company assets, and consistently strong risk-based capital ratios-provides financial flexibility to support growth initiatives, manage regulatory requirements, and continue share repurchases, which in turn can boost EPS growth and shareholder returns.
  
• Brighthouse stands to benefit from the long-term demographic tailwind of an aging U.S. population and growing retirement uncertainty, fueling expanded demand for annuities and guaranteed income products, which supports durable, long-duration premium inflows and earnings stability-key drivers for sustained revenue and profit expansion.

Brighthouse Financial Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Brighthouse Financial's revenue will grow by 2.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.9% today to 10.6% in 3 years time.
• Analysts expect earnings to reach $988.0 million (and earnings per share of $20.66) by about May 2028, up from $511.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $1.3 billion in earnings, and the most bearish expecting $728 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 3.9x on those 2028 earnings, down from 6.5x today. This future PE is lower than the current PE for the US Insurance industry at 14.9x.
• Analysts expect the number of shares outstanding to decline by 5.51% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.96%, as per the Simply Wall St company report.

Brighthouse Financial Future Earnings Per Share Growth

Risks

• Persistently elevated surrender rates in both Shield and VA products, especially as more business exits the surrender period and legacy variable annuity blocks continue to see heightened outflows, may limit asset growth, pressure future premium inflows, and constrain top-line revenue expansion.
  
• Increasing competition and rate sensitivity in the fixed annuity market, along with reliance on competitive pricing to maintain sales momentum, risks ongoing or future declines in fixed annuity sales and could reduce total annuity segment revenues and earnings.
  
• Heavy structural reliance on legacy variable annuity and Shield blocks, combined with ongoing complexity in hedging strategies and model refinements, exposes Brighthouse to spread compression risks, increased hedging costs, and continued volatility in net investment income and net margins.
  
• Delays and uncertainty in the release and upward inflection of statutory free cash flow projections from the in-force block imply challenges in capital generation, potential reserve strain, and the risk that earnings or distributable cash flow will not materially improve, limiting the ability to fund growth or support shareholder returns.
  
• Brighthouse's comparatively limited scale, standalone operating structure, and high capital intensity-highlighted by the static share price and lack of operating leverage versus larger peers-may continue to result in relatively high expense ratios, restricted ROE, and underperformance in delivering shareholder value.

Valuation

• The analysts have a consensus price target of $60.375 for Brighthouse Financial based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $76.0, and the most bearish reporting a price target of just $45.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $9.3 billion, earnings will come to $988.0 million, and it would be trading on a PE ratio of 3.9x, assuming you use a discount rate of 10.0%.
  
• Given the current share price of $57.91, the analyst price target of $60.38 is 4.1% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.