Brighthouse ratings placed on negative watch as Aquarian deal review drags on

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Brighthouse ratings on watch

Highlights

Fitch places all Brighthouse Financial and subsidiary ratings on Rating Watch Negative due to prolonged Aquarian Capital LLC acquisition review, heightening uncertainty for over six months.
Fitch warns Aquarian's weaker credit quality and higher leverage could increase integration and strategy execution risks, portfolio risk, and pressure on Brighthouse's financial flexibility post-acquisition.
Brighthouse's Prism score strengthens to 'Very Strong' and NAIC RBC ratio reaches 456% at 2025 year-end, but legacy liability exposures and nearly doubled risky asset ratio leave the capital profile vulnerable.

Acquisition review extends rating uncertainty

As reported by Fitch Ratings, all ratings of Brighthouse Financial, Brighthouse Holdings and their insurance operating subsidiaries are placed on Rating Watch Negative, including the holding companies' 'BBB' Long-Term Issuer Default Ratings and the 'A-' Insurer Financial Strength ratings of Brighthouse Life Insurance Company and New England Life Insurance Company.

Fitch says the watch action reflects its continuing analysis of Brighthouse's pending acquisition by Aquarian Capital LLC and the possible effects on the insurer's company profile, investment portfolio and financial flexibility. The agency views Aquarian's credit quality as weaker than Brighthouse's and expects the transaction to increase the leverage, size and complexity of the wider Aquarian organization.

The acquisition, announced in November 2025, remains subject to regulatory review and has run beyond its original expected completion timeline. Fitch says that uncertainty over timing and completion means the Rating Watch may take more than six months to resolve.

Brighthouse is expected to continue operating as a standalone entity within Aquarian, but Fitch says the ownership change could create negative pressure from integration and strategy execution risks. The agency also flags the potential for higher portfolio risk and pressure on financial resources because of Aquarian's elevated leverage and the asset management fees tied to the relationship.

Capital strength offsets legacy liability risks

Fitch says Brighthouse's risk-adjusted capitalization strengthens in 2025, with a Prism score at the lower end of its 'Very Strong' category and an NAIC RBC ratio of 456% at year-end 2025. Still, the agency continues to view the capital profile as vulnerable to volatility because of the insurer's significant exposure to legacy variable annuity liabilities and universal life policies with secondary guarantees.

Those market-sensitive exposures have historically contributed to swings in statutory capital and earnings, including through reserve assumption changes and required capital levels. Fitch says strong capitalization remains an important counterbalance to Brighthouse's elevated legacy liability risk.

Financial leverage stands at about 23% at year-end 2025 and in the first half of 2026, which Fitch says is in line with rating expectations. While the agency does not expect Brighthouse to add debt directly for the acquisition, it warns the insurer's standalone leverage ratio could rise if the below-book-value purchase price reduces its equity base.

Fitch also says Brighthouse's financial flexibility could weaken after the deal because of Aquarian's organizational leverage, debt-service needs and expected partial reliance on investment management fees from Brighthouse. The insurer also keeps an elevated total financing and commitments ratio because it uses an onshore captive to finance redundant statutory reserves.

Brighthouse retains meaningful scale and an established annuity franchise, but Fitch says its business profile remains constrained by sizeable exposure to market-sensitive variable annuities with guaranteed minimum benefits and run-off universal life business with secondary guarantees. The agency adds that Brighthouse Life Insurance Company currently has no ordinary dividend capacity because of its negative unassigned surplus position, while New England Life Insurance Company has $50 million of ordinary dividend capacity.

On investments, Brighthouse's risky asset ratio falls to 129% at year-end 2025 from 144% a year earlier, helped by lower troubled real estate exposure relative to total adjusted capital. Fitch notes, however, that the ratio nearly doubles over the past five years, largely because of declining statutory capital, and says the portfolio could gradually shift toward less-liquid assets if Aquarian completes the acquisition.

Hainan Rubber’s proposed subordinated perpetual securities were the focus of our earlier coverage, detailing Fitch’s BBB- rating on the planned notes to be issued via Halcyon Agri and guaranteed on a subordinated basis. We highlighted how subordination and the option to defer coupons shaped the rating, alongside Fitch’s view of the group’s leverage and liquidity profile and the role of state-linked support in maintaining funding access.

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