Thank you, David, and good morning, everyone. Brighthouse delivered strong results during the second quarter of 2019. Equity markets were strong and while U.S. interest rates declined, which we will discuss later, we generated additional capital during the quarter. Investment income from alternative investments was higher, as expected, given first quarter market performance.
Claims results improved modestly sequentially, while expenses were higher in the second quarter as expected. Sales remained very strong and we completed the repositioning of our investment portfolio as well.
Moving forward, we remain focused on executing our strategy, which we continue to believe will generate long-term shareholder value.
Also, we recently announced the addition of Ed Spehar to the company as our Chief Financial Officer. Ed is with us today and will officially assume the CFO role on August 12. He is a seasoned leader with an in-depth knowledge of our business. I am confident that Ed's addition to our management team will help us continue to execute our strategy and deliver a long-term value to shareholders, partners and customers. I also want to take a moment to thank Conor Murphy for his leadership as the Interim CFO over the last six months.
As we have previously discussed, one of our goals is to be a consistent returner of capital over time and we continue to make progress toward achieving this goal. We repurchased approximately $136 million of our common stock in the second quarter. And we've continued repurchases in the third quarter of 2019 with approximately $43 million of our stock repurchased in July. Since the announcement of our first repurchase authorization in August of 2018, we have repurchased a total of $336 million of our common stock through July 2019.
Now let me turn to second quarter results.
Our key highlights for the quarter are summarized on slide three of our earnings presentation.
First, I'm very pleased with our outstanding sales results in the second quarter. We had approximately $1.9 billion of annuity sales, up 34% compared to the second quarter of 2018 and up 11% sequentially.
We continue to be pleased with our sales growth as well as the quality of new business we are adding each quarter.
In February, we launched our new hybrid life insurance product Brighthouse SmartCare. This launch marked our first life insurance product introduction since becoming an independent public company and is part of our strategy to reestablish a competitive presence in the life insurance market. The early feedback from our distribution partners has been extremely positive. Results are in line with our expectations in the second quarter, but I'm pleased with the very strong sales pipeline, as we move into the third quarter.
We continue to add major distributors for our SmartCare product in the second quarter, and intend to roll out this product to additional distributors throughout the rest of the year.
Second, we are continuing to make necessary investments in our technology infrastructure and in our businesses. We refer to these investments as establishment costs. In the second quarter, establishment costs were approximately $30 million post-tax.
Third, let me touch on our earnings results. Adjusted earnings, less notable items improved sequentially driven by higher investment income, primarily from our alternative investment portfolio given the favorable equity markets in the first quarter of 2019. Equity market performance in the second quarter provided a benefit to adjusted earnings, but to a lesser extent than in the first quarter.
And finally, we continue to prudently manage our variable annuity capitalization.
As we have talked about previously, we are managing our VA business to CTE98 or higher.
As of the second quarter, our VA assets were approximately $1.5 billion in excess of CTE98 consistent with our strategy.
Our hedging program continues to perform well, across a wide range of economic conditions and in line with our expectations.
Before turning the call over to Conor to discuss our second quarter results in more detail, let me provide a few perspectives on interest rates. Brighthouse, like all insurance companies, is impacted by the level of long-term interest rates.
With that said, we believe our balance sheet is well protected for a low rate environment.
We have successfully managed our capital markets exposures through the use of derivatives and existing capital on the balance sheet over the last two years.
During the first and second quarters of this year, we proactively added interest rate protection, reducing our sensitivity to changes in long-term interest rates on statutory capital.
The net result of our VA hedging strategy was an increase of assets above CTE98 in the quarter to approximately $1.5 billion, as I said previously. This is yet another example of Brighthouse prudently managing its balance sheet.
Despite the current low interest rate environment, we continue to believe in our ability to achieve our $1.5 billion capital return target by 2021. We believe we have multiple levers to achieve the remainder of our capital return target.
First, as I just discussed, we are prudently managing the capital backing our variable annuity block. Despite the low rate environment, we have generated more than $600 million of normalized statutory earnings given the strong equity market performance in the first half of 2019.
Although Brighthouse Life Insurance Company or BLIC has ordinary dividend capacity in 2019, we are currently planning for regular dividends for the holding company from BLIC to begin in 2020 post the implementation of variable annuity capital reform in our statutory financials.
Second, as we have said previously, our reinsurance subsidiary, Brighthouse Reinsurance Company of Delaware is robustly capitalized. And we believe it is possible that over time excess capital could be released.
Third, we anticipate that New England Life Insurance Company or NELICO will continue to be a stable source of capital for the holding company. NELICO's 2019 ordinary dividend capacity is over $100 million.
We intend to dividend this amount to the holding company later this year.
We expect NELICO will continue to generate approximately $60 million to $70 million of dividend capacity per year over the next several years.
And finally, we currently have excess capital at the holding company.
As a reminder, our goal is to have liquid assets at the holding company of at least 2 times our annual fixed charges. And as of the second quarter of 2019, we are well in excess of our target.
To wrap up, we had solid results this quarter and we continue to take proactive steps to ensure our balance sheet is well protected for a low interest rate environment.
We have made significant progress over the past two years as an independent company.
As we celebrate our second anniversary this week, I want to take a moment to thank all of our employees for their tremendous dedication, focus and hard work over the past two years.
Going forward, we remain focused on continuing to grow life and annuity sales, reducing expenses, effectively managing our capital, and driving long-term shareholder value.
With that, I'll turn the call over to Conor to discuss our second quarter financial results in more detail. Conor?