Brighthouse Shows That Net Income Is Having Problems: Earnings
February 11, 2020 by Allison Bell
Brighthouse Financial Inc. posted a net loss over $1 billion late Monday — and its share price rose about 12% this morning, to close to $48.
The Charlotte, North Carolina-based life insurer showed that an accounting approach that’s supposed to make financial services companies’ strength easier to track has instead caused investors to pay less attention to net income.
Brighthouse uses financial instruments called derivatives to limit life insurance and annuity investment risk. Many accounting experts say that financial services companies that use derivatives should include changes in the value of the derivatives in the ultimate measure of how the companies are doing: their net income.
Brighthouse adds changes in the value of its derivatives to its net income every quarter.
The result: Brighthouse investors are now focusing mainly on adjusted revenue and income figures that leave out of the effects of short-term changes in the value of the derivatives.
Brighthouse controls individual life and annuity operations that were once part of MetLife Inc. MetLife spun Brighthouse off as a separate company in 2017.