Thank you, David, and good morning, everyone. 2019 was a very strong year for Brighthouse Financial as we made significant progress executing our strategy. I’m very pleased with our outstanding results in 2019 as we exceeded our targets for sales, normalized statutory earnings and adjusted earnings per share less notable items.
Importantly, we significantly strengthened our capitalization, ending the year with approximately $9.7 billion of statutory total adjusted capital, up $2.3 billion compared with 2018 and with an estimated combined RBC ratio of approximately 550% for 2019.
We also achieved several strategic milestones.
First, we successfully managed through early adoption of variable annuity capital reform contributing to the significant growth of statutory total adjusted capital in 2019.
Second, we introduced Brighthouse SmartCare, our first new life insurance product launch as a public company. And finally, we completed the full transition to our multi-manager investment platform.
In addition to the strategic milestones, we continue to prudently manage our transition service agreements with MetLife to ensure a stage and systematic implementation of our operating platform. And we generated additional statutory capital through a focused effort on balance sheet optimization, including receiving approval to take a $600 million dividend from Brighthouse Reinsurance Company of Delaware.
Moving forward, we believe that we are well-positioned to continue the execution of our strategy, which we expect will drive shareholder value in 2020 and beyond.
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 $128 million of our common stock in the fourth quarter and we've continued repurchases in the first quarter of 2020 with approximately $23 million of our stock repurchased in January.
Since the announcement of our first stock repurchase authorization in August of 2018, we have repurchased a total of approximately $570 million of our common stock through January 2020, well ahead of our initial expectations. Last night we announced that the company authorized the repurchase of up to an additional $500 million of our common stock.
We currently anticipate fully utilizing this new authorization within the next 12 months.
Assuming full utilization of this new authorization, we will have repurchased $1.1 billion of our common stock more than 70% of the way towards our target of returning $1.5 billion to our shareholders by the end of 2021.
Now let me turn to fourth quarter results.
Our key highlights for the quarter are summarized on Slide 3 of our earnings presentation.
First, we had another strong sales quarter. We had approximately $1.9 billion of annuity sales, up 10% compared with the fourth quarter of 2018.
We continue to be very pleased with our sales as well as the quality of new business we are adding each quarter.
Additionally, we're continuing to see excitement from our long-standing distribution partners and remain focused on making our distribution network as broad as possible, as we help consumers in the United States achieve financial security. To that end, just last week, we launched our Secure Advantage 6-Year Fixed Indexed Annuity.
The launch of Secure Advantage Six-Year represents the collaboration of Brighthouse Financial and Market Synergy Group, which gives us access to an exclusive network of independent marketing organizations and reflects our continued commitment to provide a tailored set of products that respond directly to client needs in a changing retirement landscape.
Moving to life insurance.
We continue to focus on our hybrid life insurance product Brighthouse SmartCare. We generated approximately $19 million of deposits in 2019. I am very excited about the strong sales momentum as we enter the new year and we expect significant growth from SmartCare in 2020.
We have made good progress adding major distributors for our SmartCare product with access to a network of over 56,000 advisors. And we intend to roll out this product to additional distributors over time.
Second, total annuity net outflows were approximately $1.2 billion in the quarter, down from the fourth quarter of 2018 and up sequentially due to normal seasonal variation.
As we’ve said previously, we expect to see a continued shift in our business mix profile over time as we had more cash flow generating and less capital intensive new business coupled with the runoff of less profitable business.
Third, corporate expenses, which do not include establishment costs were $283 million in the fourth quarter, consistent with our expectations.
We are still projecting $150 million of corporate expense reduction on a run rate basis by year-end 2020 and an additional $25 million of corporate expense reduction in 2021.
Fourth, we continue to make necessary investments in our technology infrastructure and in our businesses. We refer to these investments as establishment costs. In the fourth quarter, establishment costs were approximately $32 million before tax and $118 million before tax for full year 2019. We believe establishment costs will be around $150 million to $160 million in 2020 and $25 million to $35 million in 2021, both on a pre-tax basis.
As I’ve said before, we are being prudent in how we are managing our way through our expected final couple of years of TSAs. These TSA exits and associated system transitions put us one step closer to our future state operating platform.
Next, let me touch on our earnings results. Normalized statutory earnings were very strong in the quarter at approximately $600 million, bringing the 2019 total to roughly $1.9 billion. Adjusted earnings less notable items increased sequentially to $265 million for the fourth quarter of 2019 or $2.46 per share.
Full-year adjusted earnings, less notable items were approximately $1.1 billion or $9.58 per share, a 15% growth in adjusted EPS less notable items compared with 2018. And finally, we continue to prudently manage our statutory capitalization.
As I mentioned, at year-end 2019, our estimated combined risk-based capital or RBC ratio was approximately 550% with total adjusted capital of approximately $9.7 billion and approximately $1.7 billion of assets above CTE98.
Going forward, we plan to discuss our capitalization using RBC rather than CTE, because under variable annuity capital reform the regulatory framework now aligns with how we manage the business.
Our hedging program continues to perform well across a wide range of economic conditions and in line with our expectations. In the fourth quarter, we made revisions to our variable annuity hedging strategy that fundamentally lowered the risk profile of the company and preserves distributable earnings across different capital market scenarios. Ed will discuss these revisions in a moment.
Before closing and as we announced last night, we plan to hold the business update teleconference and webcast for analysts and investors on March 5, 2020 at 8 AM.
We will provide additional details closer to the call.
To wrap up, we delivered outstanding results during 2019 as we continue to execute on our strategy.
Our sales remain strong, our variable annuity hedging program continued to perform well and we repurchased more of our common stock.
Additionally, we have taken steps to optimize our statutory balance sheet, resulting in significant capital generation as we reduced risk in our variable annuity hedging program.
Going forward, we remain confident in our strategy, which we continue to believe will enable us to generate long-term value for our shareholders, our distribution partners and the clients they serve.
With that, I'll turn the call over to Ed to discuss our financial results in more detail. Ed?