BHF - Raymond James initiates Brighthouse at Market Perform based on P/CF valuation

Raymond James on Wednesday initiated coverage of Brighthouse Financial ( NASDAQ: BHF ) at Market Perform based on price-to-cash-flow valuation.

The stock is trading at ~9.7x P/CF, in line with its historical average range of 9-10x (excluding 2020, due to COVID impacts).

"BHF's variable annuity profile improved due to focus on writing efficiently hedged registered-index linked annuities," said analyst Wilma Burdis. "However, it takes time for legacy VAs with guaranteed living benefits to run off organically, and BHF does not appear inclined to complete VA block sales."

Burdis noted that VA hedging appears sound as Brighthouse ( BHF ) reduced its first loss position to <$500M as of Q3 and added substantial interest rate hedging throughout 2022. "However, BHF has historically taken on more risk, with a first loss position of up to $2.5B in 2019."

Raymond James' Q4 EPS estimate for Brighthouse ( BHF ) is $1.80 vs. $2.36 consensus , reflecting expected market pressures on VAs and alternative investments.

The brokerage is cautious over Brighthouse's ( BHF ) Q4 earnings as it posted net unfavorable actuarial items in Q4 2021. The insurer will report Q4 results on February 10.

Raymond James' stance is in line with sell-side ratings and SA Quant's Hold rating .

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