Thank you, John, and good morning, everyone. I hope you're all staying safe and healthy. I would like to start by repeating something I said on our March business update call. Prudence and flexibility are two words you will hear frequently from us and recent market movements was a reminder of the value of both for a financial services company.
Because of our focus on prudence and flexibility, we entered this challenging environment with a strong statutory balance sheet and a material reduction in our equity market risk profile. And as I believe our first quarter results illustrate, we have maintained a strong capital and liquidity position despite the steep decline in equities and interest rates in the first three months of the year.
I will begin my prepared remarks with comments on our statutory results. I will then discuss holding company liquidity and share repurchases and finish with comments on adjusted earnings. At the end of the quarter, combined statutory total adjusted capital or TAC was $7.2 billion, down from $9.7 billion at year-end 2019. There were three primary drivers of the change from year-end.
First, an increase in variable annuity or VA reserves as a result of the decline in equity markets and interest rates, which was only partially offset by the benefit from hedge gains and lower reserves for our Shield annuity products.
Second, a $300 million ordinary dividend paid from Brighthouse Life Insurance Company or BLIC to the holding company. And three, unfavorable results for our non-variable annuity business.
It is important to point out that we expected VA reserves to increase substantially in an environment like we experienced in the first quarter. And that this increase will have a negative impact on total adjusted capital.
As I said on our March 5th business update call, and as also discussed in our 2019 10-K, the impact on total adjusted capital could be greater than our maximum loss target for our hedging program. But if it was, we would expect a substantial offset in required capital, which would diminish the impact on the RBC ratio. This is how VA reform works and exactly what we saw in the first quarter. We estimate that our combined RBC ratio was in the range of 515% to 535% at March 31st. This compares to 552% at year-end 2019, and includes an approximately 20 point negative impact from the $300 million ordinary dividend paid by Brighthouse Life Insurance Company in the quarter.
We had a normalized statutory loss of approximately $800 million in the first quarter.
However, we did not use any of our up to $500 million first loss position, which is the revised hedge target we discussed with you on our fourth quarter earnings call and the March 5th business update call. Gains on our previously out of the money low interest rate hedges fully offset the negative impact of other market related items. Approximately two-thirds of the normalized statutory loss was attributable to increased volatility in tax liabilities associated with our adoption of VA reform. We view this impact as non-recurring, as we have incorporated this into our hedging program going forward. The remaining one-third of the loss was driven by non-variable annuity results below the level seen over the last two years, which was a function of unfavorable mortality, and an impact from low interest rates on our market value adjusted annuity book.
To summarize, our hedging program performed extremely well during a challenging market environment.
Our total asset requirement for variable annuities at CTE98 increased by $8.1 billion in this quarter or almost 90% but this was more than offset by an $8.3 billion increase in our variable annuity assets. The real test of hedge effectiveness is during a stressed market environment. And we believe that an $8.3 billion increase in assets relative to an $8.1 billion increase in asset requirement suggests a very effective hedging program. Success on variable annuity risk management is the key reason that we are reporting an RBC ratio in a stressed market environment that is well above our long-term target of 400% to 450% in a normal market environment.
I'd now like to discuss our holding company liquidity. We ended the first quarter with holding company cash of approximately $1 billion or almost 5 times annual fixed charges. Since the end of the first quarter, the holding company received an additional $500 million dividend from Brighthouse Life Insurance Company.
So, even after considering the shares of common stock repurchased in the second quarter to-date, we would anticipate a significant increase in holding company cash at the end of the second quarter.
Looking forward, we will continue to emphasize prudence and flexibility when evaluating dividend plans from our operating subsidiaries, including the $450 million remaining of our 2020 planned Brighthouse Life Insurance Company dividend of $1.25 billion. Also, as a reminder, we expect more than $200 million of annual inflows to the holding company before consideration of any operating company dividends, which covers most of our holding company fixed charges.
Additionally, we have a robust liquidity stress testing framework that helps ensure we maintain the liquidity necessary to support our business. We comfortably exceed our liquidity coverage targets under a scenario based analysis, which includes a capital stress scenario similar to the 2008 financial crisis, as well as a spike scenario for interest rates in equity markets.
I'd now like to take a moment to talk about our common stock purchases.
We have taken significant action to create value for our shareholders.
As Eric mentioned, in the year-to-date through May 8th, we repurchased $316 million of common stock at an average price of $24.26 per share, representing over 12% of our shares outstanding relative to year-end 2019.
Approximately 84% of the 2020 repurchase amount as of May 8th, was completed after our March 5th business update call at an average price of $22.51 per share.
As you heard from Eric, we have temporarily suspended our repurchase program and we will exercise prudence as we continually assess when to resume share buybacks.
Moving to adjusted earnings, last night we reported first quarter adjusted earnings, excluding the impact from notable items of $273 million, which compares with adjusted earnings on the same basis of $265 million in the fourth quarter of 2019 and $259 million in the first quarter of 2019. There were two notable items in the quarter, which decreased adjusted earnings by $62 million. The notable items on an after-tax basis were; a $48 million unfavorable impact to runoff related to a reinsurance recapture and a one-time adjustment from the transition to a new vendor and establishment costs of $14 million in corporate and other.
Sequentially adjusted earnings less notable items were driven by lower corporate expenses in the first quarter, along with favorable net investment income, partially offset by unfavorable market impacts, and an unfavorable underwriting margin.
Starting with corporate expenses: Corporate expenses were $214 million, down approximately $69 million compared with the fourth quarter.
As Eric mentioned, we remain committed to reducing corporate expenses by $150 million on a run rate basis by year-end 2020 and an additional $25 million of corporate expense reduction in 2021.
Moving to investment performance, net investment income increased sequentially. Alternative investment returns were 3.7% in the first quarter, which compared with 2% in the fourth quarter. Keep in mind that alternative returns this quarter reflected the favorable market returns in the fourth quarter of last year, as alternatives are reported on a one quarter lag.
Given equity market performance in the first quarter, we expect second quarter alternative returns to be negative, but it's too early to provide a meaningful estimate. Also, we continue to see asset growth, which contributed to the positive sequential change in net investment income in the quarter.
Turning to market performance, separate account returns were negative 14.3% in the quarter, driven by the significant decline in the stock market. Separate account return performance drove an increase in DAC amortization for variable annuities and life insurance, along with an increase in VA reserves.
However, the increase in VA DAC amortization was offset by lower Shield DAC amortization.
Moving on to our life insurance businesses, sequential results were impacted by unfavorable underwriting, which was driven by higher severity of claims in the first quarter. Claims frequency was relatively flat compared with the fourth quarter of 2019 the first quarter. Claims frequency was relatively flat compared with the fourth quarter of 2019, but above historical levels.
While the data we've seen does not suggest a significant impact from COVID-19 to-date, cause of death reporting isn't perfect.
In addition, there is still uncertainty around timing of the first U.S. infection and death related to this pandemic.
Turning to adjusted earnings at the segment level, starting with annuities, adjusted earnings excluding notable items were $316 million in the quarter. DAC amortization and expenses were lower sequentially, which had a favorable impact on earnings. This was partially offset by higher reserves and lower fees. Life segment adjusted earnings excluding notable items were $11 million in the quarter. Sequentially, results were impacted by higher claims and higher DAC amortization, partially offset by lower expenses and higher net investment income.
The Run-off segment reported adjusted loss excluding notable items of $22 million in the quarter. Sequentially, results were driven by higher claims partially offset by alternative investment income. Sequentially, Other had an adjusted loss, excluding notable results were driven by lower expenses.
Overall, I am very pleased with our results this quarter.
We have a strong capital and liquidity position and we continue to emphasize prudence and flexibility as we manage the balance sheet to protect the franchise through stressed markets.
With that, we'd like to turn the call over to the operator for your questions.