What changed in this filing

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Item 1. Financial Statements

2020-11-06 compared with 2020-08-07 · 258 added, 459 removed, 1433 unchanged (33% of the section changed)

2 unchanged sentences

Interim Condensed Consolidated Balance Sheets

June 30, 2020 (Unaudited) and December 31, 2019

September 30, 2020 (Unaudited) and December 31, 2019

(In millions, except share and per share data)

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Fixed maturity securities available-for-sale, at estimated fair value (amortized cost:

25 unchanged sentences

Long-term debt 3,979 4,365

Current income tax payable 72 —

Deferred income tax liability 1,816 1,355

26 unchanged sentences

Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Three Months and Six Months Ended June 30, 2020 and 2019 (Unaudited)

For the Three Months and Nine Months Ended September 30, 2020 and 2019 (Unaudited)

(In millions, except per share data)

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Premiums $ 184 $ 214 $ 575 $ 673

Universal life and investment-type product policy fees 882 867 2,595 2,630

827 888 1,713 1,763

Net investment income 996 928 2,564 2,681

652 942 1,568 1,753

Other revenues 99 94 294 282

93 96 195 188

Net investment gains (losses) 5 27 ( 48 ) 79

( 34 ) 63 ( 53 ) 52

Net derivative gains (losses) ( 1,857 ) 1,057 2,392 ( 97 )

( 2,653 ) 149 4,249 ( 1,154 )

Total revenues 309 3,187 8,372 6,248

( 922 ) 2,370 8,063 3,061

Policyholder benefits and claims 3,047 1,319 5,073 2,936

839 845 2,026 1,617

Interest credited to policyholder account balances 281 272 816 795

276 265 535 523

Amortization of deferred policy acquisition costs and value of business acquired 244 181 922 373

( 92 ) 170 678 192

Other expenses 580 611 1,674 1,824

577 621 1,094 1,213

Total expenses 4,152 2,383 8,485 5,928

1,600 1,901 4,333 3,545

Income (loss) before provision for income tax ( 3,843 ) 804 ( 113 ) 320

( 2,522 ) 469 3,730 ( 484 )

Provision for income tax expense (benefit) ( 850 ) 119 ( 88 ) ( 14 )

( 531 ) 85 762 ( 133 )

Net income (loss) ( 2,993 ) 685 ( 25 ) 334

( 1,991 ) 384 2,968 ( 351 )

Net income (loss) attributable to noncontrolling interests 2 2 4 4

3 unchanged sentences

Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders $ ( 3,012 ) $ 676 $ ( 60 ) $ 316

$ ( 1,998 ) $ 377 $ 2,952 $ ( 360 )

Comprehensive income (loss) $ ( 2,577 ) $ 1,550 $ 2,116 $ 3,185

8 unchanged sentences

Interim Condensed Consolidated Statements of Equity

For the Three Months and Six Months Ended June 30, 2020 and 2019 (Unaudited)

For the Three Months and Nine Months Ended September 30, 2020 and 2019 (Unaudited)

(In millions)

7 unchanged sentences

— 1 12,908 571 ( 562 ) 3,243 16,161 65 16,226

Preferred stock issuance

— 390 390 390

Treasury stock acquired in connection with share repurchases

1 unchanged sentence

Share-based compensation

— 9 ( 3 ) 6 6

Dividends on preferred stock

6 unchanged sentences

1,722 1,722 1,722

Balance at March 31, 2020

— 1 12,911 5,521 ( 706 ) 2,647 20,374 65 20,439

Preferred stock issuance

— 390 390 390

Balance at June 30, 2020 — 1 13,307 3,523 ( 887 ) 4,965 20,909 65 20,974

Treasury stock acquired in connection with share repurchases

1 unchanged sentence

Share-based compensation 7 7 7

— 6 ( 1 ) 5 5

Dividends on preferred stock ( 17 ) ( 17 ) ( 17 )

( 7 ) ( 7 ) ( 7 )

Change in noncontrolling interests — ( 2 ) ( 2 )

Net income (loss) ( 2,995 ) ( 2,995 ) 2 ( 2,993 )

( 1,991 ) ( 1,991 ) — ( 1,991 )

Other comprehensive income (loss), net of income tax

2,318 2,318 2,318

Balance at June 30, 2020 $ — $ 1 $ 13,307 $ 3,523 $ ( 887 ) $ 4,965 $ 20,909 $ 65 $ 20,974

Balance at September 30, 2020 $ — $ 1 $ 13,314 $ 511 $ ( 941 ) $ 5,381 $ 18,266 $ 65 $ 18,331

Preferred Stock Common Stock Additional Paid-in Capital Retained Earnings (Deficit) Treasury Stock at Cost Accumulated

7 unchanged sentences

Share-based compensation

Dividends on preferred stock

( 7 ) ( 7 ) ( 7 )

Change in noncontrolling interests

3 unchanged sentences

Other comprehensive income (loss), net of income tax

Balance at March 31, 2019 — 1 12,889 609 ( 170 ) 1,670 14,999 65 15,064

Treasury stock acquired in connection with share repurchases

1,986 1,986 1,986

Balance at June 30, 2019 — 1 12,893 986 ( 306 ) 2,702 16,276 65 16,341

Treasury stock acquired in connection with share repurchase

( 126 ) ( 126 ) ( 126 )

Share-based compensation

Dividends on preferred stock ( 7 ) ( 7 ) ( 7 )

( 7 ) ( 7 ) ( 7 )

Change in noncontrolling interests

— ( 2 ) ( 2 )

Net income (loss)

1 unchanged sentence

Other comprehensive income (loss), net of income tax

1,032 1,032 1,032

Balance at June 30, 2019

$ — $ 1 $ 12,893 $ 986 $ ( 306 ) $ 2,702 $ 16,276 $ 65 $ 16,341

Balance at September 30, 2019 $ — $ 1 $ 12,897 $ 1,662 $ ( 432 ) $ 3,567 $ 17,695 $ 65 $ 17,760

See accompanying notes to the interim condensed consolidated financial statements.

1 unchanged sentence

Interim Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2020 and 2019 (Unaudited)

For the Nine Months Ended September 30, 2020 and 2019 (Unaudited)

(In millions)

Six Months Ended

Nine Months Ended

September 30,

Net cash provided by (used in) operating activities $ 515 $ 1,322

15 unchanged sentences

Net change in other invested assets ( 19 ) 21

Other, net ( 14 ) —

Net cash provided by (used in) investing activities

56 unchanged sentences

ASUs not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the Company’s consolidated financial statements.

ASUs adopted as of June 30, 2020 are summarized as follows:

ASUs adopted as of September 30, 2020 are summarized as follows:

Standard Description Effective Date Impact on Financial Statements

4 unchanged sentences

The adjustment included establishing or updating the allowance for credit losses on fixed maturity securities, mortgage loans, and other invested assets.

ASUs issued but not yet adopted as of June 30, 2020 are summarized as follows:

ASUs issued but not yet adopted as of September 30, 2020 are summarized as follows:

Standard Description Effective Date Impact on Financial Statements

3 unchanged sentences

The market risk benefit guidance is required to be applied on a retrospective basis, while the changes to guidance for insurance liabilities and DAC may be applied to existing carrying amounts on the effective date or on a retrospective basis.

The amendments are currently effective for the Company on January 1, 2022.

On July 7, the FASB released an exposure draft which if adopted, will change the effective date of the amendments to January 1, 2023.

The Company continues to evaluate the new guidance and therefore is unable to estimate the impact to its financial statements.

January 1, 2023 The Company continues to evaluate the new guidance and therefore is unable to estimate the impact to its financial statements.

The most significant impact is expected to be the measurement of liabilities for variable annuity guarantees.

42 unchanged sentences

Operating results by segment, as well as Corporate & Other, were as follows:

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Annuities Life Run-off Corporate & Other Total

1 unchanged sentence

Pre-tax adjusted earnings $ 479 $ 94 $ ( 1,443 ) $ ( 32 ) $ ( 902 )

$ 205 $ 60 $ ( 146 ) $ ( 98 ) $ 21

Provision for income tax expense (benefit) 92 18 ( 304 ) ( 38 ) ( 232 )

34 12 ( 31 ) ( 12 ) 3

Post-tax adjusted earnings 387 76 ( 1,139 ) 6 ( 670 )

2 unchanged sentences

Adjusted earnings $ 387 $ 76 $ ( 1,139 ) $ ( 13 ) ( 689 )

$ 171 $ 48 $ ( 115 ) $ ( 93 ) 11

Adjustments for:

5 unchanged sentences

Interest revenue $ 469 $ 131 $ 383 $ 18

$ 405 $ 69 $ 166 $ 16

Interest expense $ — $ — $ — $ 47

$ — $ — $ — $ 45

Brighthouse Financial, Inc.

1 unchanged sentence

Segment Information (continued)

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Annuities Life Run-off Corporate & Other Total

1 unchanged sentence

Pre-tax adjusted earnings $ 255 $ 91 $ ( 543 ) $ ( 67 ) $ ( 264 )

$ 323 $ 72 $ 2 $ ( 85 ) $ 312

Provision for income tax expense (benefit) 52 18 ( 117 ) ( 57 ) ( 104 )

58 14 — ( 21 ) 51

Post-tax adjusted earnings 203 73 ( 426 ) ( 10 ) ( 160 )

2 unchanged sentences

Adjusted earnings $ 203 $ 73 $ ( 426 ) $ ( 19 ) ( 169 )

$ 265 $ 58 $ 2 $ ( 71 ) 254

Adjustments for:

5 unchanged sentences

Interest revenue $ 461 $ 117 $ 327 $ 23

$ 470 $ 116 $ 339 $ 17

Interest expense $ — $ — $ — $ 49

$ — $ — $ — $ 48

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Annuities Life Run-off Corporate & Other Total

1 unchanged sentence

Pre-tax adjusted earnings $ 1,073 $ 167 $ ( 1,679 ) $ ( 189 ) $ ( 628 )

$ 594 $ 73 $ ( 236 ) $ ( 157 ) $ 274

Provision for income tax expense (benefit) 199 32 ( 355 ) ( 72 ) ( 196 )

107 14 ( 51 ) ( 34 ) 36

Post-tax adjusted earnings 874 135 ( 1,324 ) ( 117 ) ( 432 )

2 unchanged sentences

Adjusted earnings $ 874 $ 135 $ ( 1,324 ) $ ( 152 ) ( 467 )

$ 487 $ 59 $ ( 185 ) $ ( 139 ) 222

Adjustments for:

5 unchanged sentences

Interest revenue $ 1,334 $ 316 $ 873 $ 54

$ 865 $ 185 $ 490 $ 36

Interest expense $ — $ — $ — $ 139

$ — $ — $ — $ 92

Brighthouse Financial, Inc.

1 unchanged sentence

Segment Information (continued)

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Annuities Life Run-off Corporate & Other Total

1 unchanged sentence

Pre-tax adjusted earnings $ 939 $ 194 $ ( 587 ) $ ( 224 ) $ 322

$ 684 $ 103 $ ( 44 ) $ ( 157 ) $ 586

Provision for income tax expense (benefit) 176 38 ( 127 ) ( 100 ) ( 13 )

124 20 ( 10 ) ( 43 ) 91

Post-tax adjusted earnings 763 156 ( 460 ) ( 124 ) 335

2 unchanged sentences

Adjusted earnings $ 763 $ 156 $ ( 460 ) $ ( 142 ) 317

$ 560 $ 83 $ ( 34 ) $ ( 123 ) 486

Adjustments for:

5 unchanged sentences

Interest revenue $ 1,352 $ 330 $ 942 $ 57

$ 891 $ 213 $ 615 $ 34

Interest expense $ — $ — $ — $ 144

$ — $ — $ — $ 95

Total revenues by segment, as well as Corporate & Other, were as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

(In millions)

$ 1,052 $ 1,194 $ 2,203 $ 2,311

285 330 639 633

332 527 825 1,003

Annuities $ 1,157 $ 1,184 $ 3,360 $ 3,495

Life 350 320 989 953

Run-off 553 484 1,378 1,487

Corporate & Other 39 47 118 132

Adjustments ( 1,790 ) 1,152 2,527 181

$ ( 922 ) $ 2,370 $ 8,063 $ 3,061

Total $ 309 $ 3,187 $ 8,372 $ 6,248

Total assets by segment, as well as Corporate & Other, were as follows at:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(In millions)

10 unchanged sentences

Information regarding the Company’s guarantee exposure was as follows at:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Event of Death At

7 unchanged sentences

Separate account value $ 95,346 $ 55,266 $ 99,385 $ 58,694

$ 92,105 $ 53,830 $ 99,385 $ 58,694

Net amount at risk $ 8,054 (4) $ 7,956 (5) $ 6,671 (4) $ 4,750 (5)

$ 8,812 (4) $ 8,045 (5) $ 6,671 (4) $ 4,750 (5)

Average attained age of contract holders 70 years 70 years 68 years 68 years

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Secondary Guarantees

2 unchanged sentences

Total account value (3) $ 5,816 $ 5,957

$ 5,866 $ 5,957

Net amount at risk (6) $ 69,664 $ 71,124

$ 70,092 $ 71,124

Average attained age of policyholders 67 years 66 years

1 unchanged sentence

Total account value (3) $ 3,677 $ 3,526

$ 3,330 $ 3,526

Net amount at risk (6) $ 20,309 $ 21,325

$ 20,701 $ 21,325

Average attained age of policyholders 51 years 50 years

21 unchanged sentences

Fixed maturity securities by sector were as follows at:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Cost Allowance for Credit Losses Gross Unrealized Estimated

12 unchanged sentences

Total fixed maturity securities $ 68,061 $ 4 $ 11,571 $ 290 $ 79,338 $ 64,079 $ — $ 7,136 $ 179 $ 71,036

The Company held non-income producing fixed maturity securities with an estimated fair value of $ 1 million at June 30, 2020.

The Company did no t hold any non-income producing fixed maturity securities at December 31, 2019.

The Company did no t hold any non-income producing fixed maturity securities at either September 30, 2020 or December 31, 2019.

Maturities of Fixed Maturity Securities

The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at June 30, 2020:

The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at September 30, 2020:

Year or Less Due After One

8 unchanged sentences

(1) Structured securities include residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”).

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

Investments (continued)

Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options.

1 unchanged sentence

Structured Securities are shown separately, as they are not due at a single maturity.

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

Investments (continued)

Continuous Gross Unrealized Losses for Fixed Maturity Securities by Sector

The estimated fair value and gross unrealized losses of fixed maturity securities in an unrealized loss position, by sector and by length of time that the securities have been in a continuous unrealized loss position, were as follows at:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Less than 12 Months 12 Months or Greater Less than 12 Months 12 Months or Greater

12 unchanged sentences

Total fixed maturity securities

Total number of securities in an unrealized loss position

$ 5,530 $ 181 $ 1,305 $ 109 $ 4,619 $ 79 $ 2,128 $ 100

Total number of securities in an unrealized loss position 1,069 248 720 302

Allowance for Credit Losses for Fixed Maturity Securities

21 unchanged sentences

An allowance for credit losses is not estimated on an accrued interest receivable, rather receivable balances 90-days past due are deemed uncollectible and are written off with a corresponding reduction to net investment income.

The accrued interest receivable on fixed maturity securities totaled $ 504 million at June 30, 2020 and is included in accrued investment income.

The accrued interest receivable on fixed maturity securities totaled $ 546 million at September 30, 2020 and is included in accrued investment income.

Fixed maturity securities are also evaluated to determine if they qualify as purchased financial assets with credit deterioration (“PCD”).

6 unchanged sentences

Current Period Evaluation

Based on the Company’s current evaluation of its fixed maturity securities in an unrealized loss position and the current intent or requirement to sell, the Company recorded an allowance for credit losses of $ 5 million, relating to 18 securities at June 30, 2020.

Based on the Company’s current evaluation of its fixed maturity securities in an unrealized loss position and the current intent or requirement to sell, the Company recorded an allowance for credit losses of $ 4 million, relating to 11 securities at September 30, 2020.

Management concluded that for all other fixed maturity securities in an unrealized loss position, the unrealized loss was not due to issuer-specific credit-related factors and as a result was recognized in OCI.

6 unchanged sentences

Balance at January 1, 2020 $ 3 $ — $ 1 $ 4

$ 3 $ — $ 1 $ 4

Allowance on securities where credit losses were not previously recorded 3 1 1 5

Allowance on securities that had an allowance recorded in a previous period

( 1 ) — — ( 1 )

Reductions for securities sold ( 1 ) — — ( 1 )

Write-offs charged against allowance (1) ( 3 ) — ( 1 ) ( 4 )

( 3 ) — ( 1 ) ( 4 )

Balance at June 30, 2020

Balance at September 30, 2020

$ 2 $ 1 $ 1 $ 4

_______________

(1) The Company recorded total write-offs of $ 13 million during the six months ended June 30, 2020.

(1) The Company recorded total write-offs of $ 13 million during the nine months ended September 30, 2020.

Brighthouse Financial, Inc.

4 unchanged sentences

Mortgage loans are summarized as follows at:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Total Carrying

(Dollars in millions)

$ 9,715 61.5 % $ 9,721 61.7 %

3,361 21.3 3,388 21.5

2,807 17.8 2,708 17.2

Commercial $ 9,830 62.4 % $ 9,721 61.7 %

Agricultural 3,380 21.5 3,388 21.5

Residential 2,626 16.7 2,708 17.2

Total mortgage loans (1) 15,836 100.6 15,817 100.4

15,883 100.6 15,817 100.4

Allowance for credit losses ( 90 ) ( 0.6 ) ( 64 ) ( 0.4 )

1 unchanged sentence

_______________

(1) Purchases of mortgage loans from third parties were $ 331 million and $ 488 million for the three months and six months ended June 30, 2020, respectively, and $ 86 million and $ 563 million for the three months and six months ended June 30, 2019, respectively, and were primarily comprised of residential mortgage loans.

(1) Purchases of mortgage loans from third parties were $ 47 million and $ 535 million for the three months and nine months ended September 30, 2020, respectively, and $ 159 million and $ 722 million for the three months and nine months ended September 30, 2019, respectively, and were primarily comprised of residential mortgage loans.

Allowance for Credit Losses for Mortgage Loans

5 unchanged sentences

For mortgage loans that are granted payment deferrals due to the COVID-19 pandemic, interest continues to be accrued during the deferral period if the loan was less than 30 days past due at December 31, 2019 and performing at the onset of the pandemic.

Accrued interest on COVID-19 pandemic impacted loans was not significant at June 30, 2020.

The accrued interest receivable on mortgage loans is included in accrued investment income and totaled $ 86 million at June 30, 2020.

Accrued interest on COVID-19 pandemic impacted loans was not significant at September 30, 2020.

The accrued interest receivable on mortgage loans is included in accrued investment income and totaled $ 89 million at September 30, 2020.

The allowance for credit losses is estimated using relevant available information, from internal and external sources, relating to past events, current conditions, and a reasonable and supportable forecast.

24 unchanged sentences

Balance at December 31, 2019 $ 47 $ 10 $ 7 $ 64

$ 47 $ 10 $ 7 $ 64

Cumulative effect of change in accounting principle ( 20 ) 7 15 2

( 20 ) 7 15 2

Balance at January 1, 2020 27 17 22 66

Current period provision 17 ( 1 ) 8 24

10 ( 1 ) 17 26

Balance at June 30, 2020

$ 37 $ 16 $ 39 $ 92

Balance at September 30, 2020 $ 44 $ 16 $ 30 $ 90

PCD Mortgage Loans

Purchases of PCD mortgage loans are summarized as follows:

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

(In millions)

10 unchanged sentences

(In millions)

June 30, 2020

September 30, 2020

Commercial mortgage loans

1 unchanged sentence

Less than 65% $ 288 $ 1,645 $ 1,113 $ 572 $ 1,124 $ 3,210 $ 7,952

$ 193 $ 1,683 $ 1,109 $ 572 $ 1,124 $ 3,247 $ 7,928

59 306 456 340 10 275 1,446

— — — — 114 — 114

65% to 75% 114 345 452 340 40 277 1,568

76% to 80% — — — — 84 — 84

Greater than 80% — — 10 13 6 197 226

Total commercial mortgage loans 402 1,990 1,575 925 1,254 3,684 9,830

252 1,989 1,575 925 1,254 3,720 9,715

Agricultural mortgage loans

1 unchanged sentence

Less than 65% 202 556 754 438 486 765 3,201

110 564 784 445 492 801 3,196

2 76 10 45 — 19 152

8 5 — — — — 13

65% to 75% 37 81 10 33 — 18 179

Total agricultural mortgage loans 239 637 764 471 486 783 3,380

120 645 794 490 492 820 3,361

Residential mortgage loans

168 497 540 132 51 1,371 2,759

Performing 200 428 478 116 43 1,261 2,526

Nonperforming 1 5 5 1 — 88 100

— 1 1 — 1 45 48

Total residential mortgage loans 201 433 483 117 43 1,349 2,626

168 498 541 132 52 1,416 2,807

$ 540 $ 3,132 $ 2,910 $ 1,547 $ 1,798 $ 5,956 $ 15,883

Total $ 842 $ 3,060 $ 2,822 $ 1,513 $ 1,783 $ 5,816 $ 15,836

The loan-to-value ratio is a measure commonly used to assess the quality of commercial and agricultural mortgage loans.

5 unchanged sentences

The amortized cost of commercial mortgage loans by debt-service coverage ratio was as follows at:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Amortized Cost % of

3 unchanged sentences

Greater than 1.20x $ 9,286 94.5 % $ 9,257 95.2 %

$ 9,198 94.7 % $ 9,257 95.2 %

1.00x - 1.20x 359 3.6 298 3.1

314 3.2 298 3.1

Less than 1.00x 185 1.9 166 1.7

203 2.1 166 1.7

$ 9,715 100.0 % $ 9,721 100.0 %

Total $ 9,830 100.0 % $ 9,721 100.0 %

The debt-service coverage ratio compares a property’s net operating income to its debt-service payments.

5 unchanged sentences

Past Due Mortgage Loans by Portfolio Segment

The Company has a high-quality, well-performing mortgage loan portfolio, with over 99 % of all mortgage loans classified as performing at both June 30, 2020 and December 31, 2019.

The Company has a high-quality, well-performing mortgage loan portfolio, with over 99 % of all mortgage loans classified as performing at both September 30, 2020 and December 31, 2019.

Delinquency is defined consistent with industry practice, when mortgage loans are past due as follows:

commercial and residential mortgage loans — 60 days and agricultural mortgage loans — 90 days.

To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the past due status of the impacted loans is locked-in as of March 1, 2020, which reflects the date on which the COVID-19 pandemic began to affect the borrower’s ability to make payments, as provided in the CARES Act.

At June 30, 2020, 1 % of the COVID-19 pandemic modified loans were classified as delinquent.

To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the past due status of the impacted loans during the forbearance period is locked-in as of March 1, 2020, which reflects the date on which the COVID-19 pandemic began to affect the borrower’s ability to make payments, as provided in the CARES Act.

At September 30, 2020, 5 % of the COVID-19 pandemic modified loans were classified as delinquent.

The aging of the amortized cost of past due mortgage loans by portfolio segment was as follows at:

June 30, 2020

September 30, 2020

Commercial Agricultural Residential Total

(In millions)

$ 9,715 $ 3,350 $ 2,705 $ 15,770

Current $ 9,830 $ 3,379 $ 2,461 $ 15,670

30-59 days past due — — 65 65

7 unchanged sentences

A COVID-19 pandemic modified loan is only reported as a nonaccrual asset in the event a borrower declares bankruptcy, the borrower experiences significant credit deterioration such that the Company does not expect to collect all principal and interest due, or the loan was 90 days past due at the onset of the pandemic.

At June 30, 2020, 1 % of the COVID-19 pandemic modified loans were in nonaccrual status.

At September 30, 2020, 5 % of the COVID-19 pandemic modified loans were in nonaccrual status.

The amortized cost of mortgage loans in a nonaccrual status by portfolio segment were as follows at:

3 unchanged sentences

$ — $ 21 $ 37 $ 58

June 30, 2020 (1)

September 30, 2020 (1)

$ — $ 14 $ 100 $ 114

_______________

(1) The Company had $ 8 million of residential mortgage loans in nonaccrual status for which there was no related allowance for credit losses at June 30, 2020.

Current period investment income on mortgage loans in nonaccrual status was less than $ 1 million for the six months ended June 30, 2020.

(1) The Company had $ 8 million of residential mortgage loans in nonaccrual status for which there was no related allowance for credit losses at September 30, 2020.

Current period investment income on mortgage loans in nonaccrual status was $ 1 million for the nine months ended September 30, 2020.

Modified Mortgage Loans by Portfolio Segment

Under certain circumstances, modifications are granted to non-performing mortgage loans.

Under certain circumstances, modifications are granted to nonperforming mortgage loans.

Each modification is evaluated to determine if a TDR has occurred.

1 unchanged sentence

Generally, the types of concessions may include reducing the amount of debt owed, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest.

The Company did not have a significant amount of mortgage loans modified in a troubled debt restructuring during the six months ended June 30, 2020.

The Company did not have a significant amount of mortgage loans modified in a troubled debt restructuring during the nine months ended September 30, 2020.

Brighthouse Financial, Inc.

7 unchanged sentences

Leveraged Leases

The carrying value of leveraged leases at June 30, 2020 and December 31, 2019 was $ 50 million and $ 64 million, respectively, net of allowance for credit losses of $ 13 million and $ 0 , respectively.

The carrying value of leveraged leases at September 30, 2020 and December 31, 2019 was $ 51 million and $ 64 million, respectively, net of allowance for credit losses of $ 13 million and $ 0 , respectively.

Rental receivables are generally due in periodic installments.

2 unchanged sentences

Nonperforming rental receivables are generally defined as those that are 90 days or more past due.

At both June 30, 2020 and December 31, 2019, all leveraged leases were performing.

At both September 30, 2020 and December 31, 2019, all leveraged leases were performing.

Net Unrealized Investment Gains (Losses)

1 unchanged sentence

The components of net unrealized investment gains (losses), included in AOCI, were as follows at:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(In millions)

Fixed maturity securities $ 11,281 $ 6,957

$ 10,305 $ 6,957

( 16 ) ( 13 )

Derivatives 464 245

Other ( 17 ) ( 13 )

Subtotal 11,728 7,189

Amounts allocated from:

Future policy benefits ( 4,376 ) ( 2,692 )

( 4,153 ) ( 2,692 )

DAC, VOBA and DSI ( 482 ) ( 341 )

( 445 ) ( 341 )

( 4,598 ) ( 3,033 )

Subtotal ( 4,858 ) ( 3,033 )

Deferred income tax benefit (expense) ( 1,443 ) ( 873 )

( 1,334 ) ( 873 )

Net unrealized investment gains (losses) $ 5,427 $ 3,283

$ 5,017 $ 3,283

The changes in net unrealized investment gains (losses) were as follows:

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

(In millions)

5 unchanged sentences

Deferred income tax benefit (expense) ( 570 )

Balance at June 30, 2020

Balance at September 30, 2020 $ 5,427

Change in net unrealized investment gains (losses) $ 2,144

4 unchanged sentences

There were no investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S.

government and its agencies, at both June 30, 2020 and December 31, 2019.

government and its agencies, at both September 30, 2020 and December 31, 2019.

Securities Lending

Elements of the securities lending program are presented below at:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(In millions)

10 unchanged sentences

The cash collateral liability by loaned security type and remaining tenor of the agreements were as follows at:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Open (1) 1 Month or Less 1 to 6 Months Total Open (1) 1 Month or Less 1 to 6 Months Total

1 unchanged sentence

government and agency $ 1,229 $ 1,801 $ 593 $ 3,623 $ 1,279 $ 1,094 $ 701 $ 3,074

$ 1,284 $ 2,012 $ 373 $ 3,669 $ 1,279 $ 1,094 $ 701 $ 3,074

2 — — 2 — — — —

Foreign corporate 2 — — 2 — — — —

3 — — 3 — — — —

$ 1,289 $ 2,012 $ 373 $ 3,674 $ 1,279 $ 1,094 $ 701 $ 3,074

Total $ 1,231 $ 1,801 $ 593 $ 3,625 $ 1,279 $ 1,094 $ 701 $ 3,074

_______________

1 unchanged sentence

If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell securities to meet the return obligation, it may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than what otherwise would have been realized under normal market conditions, or both.

The estimated fair value of the securities on loan related to the cash collateral on open at June 30, 2020 was $ 1.3 billion, primarily U.S.

The estimated fair value of the securities on loan related to the cash collateral on open at September 30, 2020 was $ 1.2 billion, primarily U.S.

government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement.

The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including agency RMBS, U.S.

and foreign corporate securities, ABS, non-agency RMBS and U.S.

The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including agency RMBS, ABS, U.S.

and foreign corporate securities, non-agency RMBS and U.S.

government and agency securities) with 63 % invested in agency RMBS, cash and cash equivalents and U.S.

government and agency securities at June 30, 2020.

government and agency securities at September 30, 2020.

If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company.

4 unchanged sentences

Invested assets on deposit, held in trust and pledged as collateral at estimated fair value were as follows at:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(In millions)

4 unchanged sentences

_______________

(1) The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $ 147 million and $ 69 million of the assets on deposit represents restricted cash and cash equivalents at June 30, 2020 and December 31, 2019, respectively.

(2) The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions, of which $ 102 million and $ 124 million of the assets held in trust balance represents restricted cash and cash equivalents at June 30, 2020 and December 31, 2019, respectively.

(1) The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $ 83 million and $ 69 million of the assets on deposit represents restricted cash and cash equivalents at September 30, 2020 and December 31, 2019, respectively.

(2) The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions, of which $ 83 million and $ 124 million of the assets held in trust balance represents restricted cash and cash equivalents at September 30, 2020 and December 31, 2019, respectively.

(3) The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 3 of the Notes to the Consolidated Financial Statements included in the 2019 Annual Report) and derivative transactions (see Note 5).

4 unchanged sentences

A primary beneficiary is the variable interest holder in a VIE with both the power to (i) direct the activities of the VIE that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

There were no material VIEs for which the Company has concluded that it is the primary beneficiary at June 30, 2020 or December 31, 2019.

There were no material VIEs for which the Company has concluded that it is the primary beneficiary at either September 30, 2020 or December 31, 2019.

The carrying amount and maximum exposure to loss related to the VIEs for which the Company has concluded that it holds a variable interest, but is not the primary beneficiary, were as follows at:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Amount Maximum

5 unchanged sentences

Total $ 15,529 $ 15,744 $ 15,001 $ 15,534

The Company’s investments in unconsolidated VIEs are described below.

Brighthouse Financial, Inc.

1 unchanged sentence

Investments (continued)

The Company’s investments in unconsolidated VIEs are described below.

Fixed Maturity Securities

17 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

2 unchanged sentences

Fixed maturity securities $ 676 $ 665 $ 2,021 $ 1,997

$ 676 $ 679 $ 1,345 $ 1,332

Equity securities 1 2 4 6

Mortgage loans 166 172 498 507

166 176 332 335

Policy loans 15 18 40 51

Limited partnerships and LLCs (1) 155 79 48 175

( 189 ) 88 ( 107 ) 96

Cash, cash equivalents and short-term investments 7 30 44 67

Other 14 12 39 31

Total investment income 1,034 978 2,694 2,834

692 990 1,660 1,856

Investment expenses 38 50 130 153

1 unchanged sentence

_______________

(1) Includes net investment income pertaining to other limited partnership interests of ($ 192 ) million and ($ 119 ) million for the three months and six months ended June 30, 2020, respectively, and $ 76 million for both the three months and six months ended June 30, 2019.

(1) Includes net investment income pertaining to other limited partnership interests of $ 153 million and $ 34 million for the three months and nine months ended September 30, 2020, respectively, and $ 67 million and $ 143 million for the three months and nine months ended September 30, 2019, respectively.

Brighthouse Financial, Inc.

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

1 unchanged sentence

Fixed maturity securities $ 1 $ 28 $ ( 26 ) $ 81

$ ( 21 ) $ 68 $ ( 27 ) $ 53

Equity securities 4 3 ( 3 ) 14

1 unchanged sentence

Limited partnerships and LLCs ( 1 ) ( 3 ) ( 4 ) ( 8 )

( 2 ) ( 2 ) ( 3 ) ( 5 )

Other ( 2 ) — 8 —

Total net investment gains (losses) $ 5 $ 27 $ ( 48 ) $ 79

$ ( 34 ) $ 63 $ ( 53 ) $ 52

Sales or Disposals of Fixed Maturity Securities

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

(In millions)

$ 622 $ 3,679 $ 1,271 $ 6,958

Proceeds $ 897 $ 1,628 $ 2,168 $ 8,586

Gross investment gains $ 30 $ 45 $ 62 $ 218

$ 15 $ 106 $ 32 $ 173

Gross investment losses ( 29 ) ( 17 ) ( 72 ) ( 137 )

( 37 ) ( 38 ) ( 43 ) ( 120 )

Net investment gains (losses) $ 1 $ 28 $ ( 10 ) $ 81

$ ( 22 ) $ 68 $ ( 11 ) $ 53

Accounting for Derivatives

18 unchanged sentences

The primary underlying risk exposure, gross notional amount and estimated fair value of derivatives held were as follows at:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Primary Underlying Risk Exposure Gross

5 unchanged sentences

Cash flow hedges:

Interest rate forwards

Interest rate

$ 360 $ 101 $ — $ 420 $ 22 $ —

Foreign currency swaps

Foreign currency exchange rate

2,811 492 1 2,765 190 27

Interest rate forwards Interest rate $ 330 $ 90 $ — $ 420 $ 22 $ —

Foreign currency swaps Foreign currency exchange rate 2,808 314 19 2,765 190 27

Total qualifying hedges 3,138 404 19 3,185 212 27

Derivatives Not Designated or Not Qualifying as Hedging Instruments:

Interest rate swaps

Interest rate

3,434 746 9 7,559 878 29

Interest rate caps

Interest rate

2,350 1 — 3,350 2 —

Interest rate options

Interest rate

24,170 2,306 256 29,750 782 187

Interest rate forwards

Interest rate

7,160 1,349 — 5,418 94 114

Foreign currency swaps

Foreign currency exchange rate

1,020 186 14 1,051 96 15

Foreign currency forwards

Foreign currency exchange rate

147 — — 138 — 1

Credit default swaps — purchased

18 — — 18 — —

Credit default swaps — written

1,788 19 2 1,635 36 —

Equity index options

Equity market

46,537 834 1,246 51,509 850 1,728

Equity variance swaps

Equity market

1,098 11 27 2,136 69 69

Equity total return swaps

Equity market

10,120 105 696 7,723 2 367

Interest rate swaps Interest rate 3,015 707 24 7,559 878 29

Interest rate caps Interest rate 2,350 1 — 3,350 2 —

Interest rate options Interest rate 22,570 1,481 178 29,750 782 187

Interest rate forwards Interest rate 7,332 1,179 24 5,418 94 114

Foreign currency swaps Foreign currency exchange rate 1,002 141 16 1,051 96 15

Foreign currency forwards Foreign currency exchange rate 157 — 2 138 — 1

Credit default swaps — purchased Credit 18 — — 18 — —

Credit default swaps — written Credit 1,793 27 1 1,635 36 —

Equity index options Equity market 37,493 815 995 51,509 850 1,728

Equity variance swaps Equity market 1,098 13 22 2,136 69 69

Equity total return swaps Equity market 12,997 63 222 7,723 2 367

Total non-designated or non-qualifying derivatives

2 unchanged sentences

Ceded guaranteed minimum income benefits

N/A 323 — N/A 217 —

Direct index-linked annuities

N/A — 1,526 N/A — 2,253

Other N/A 321 — N/A 217 —

Direct index-linked annuities Other N/A — 2,256 N/A — 2,253

Direct guaranteed minimum benefits

N/A — 3,813 N/A — 1,656

Assumed index-linked annuities

N/A — 310 N/A — 339

Other N/A — 3,853 N/A — 1,656

Assumed index-linked annuities Other N/A — 340 N/A — 339

Total embedded derivatives N/A 321 6,449 N/A 217 4,248

Total $ 92,963 $ 5,152 $ 7,952 $ 113,472 $ 3,238 $ 6,785

Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both June 30, 2020 and December 31, 2019.

Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both September 30, 2020 and December 31, 2019.

The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and generally do not qualify for hedge accounting because they do not meet the criteria required under portfolio hedging rules;

6 unchanged sentences

The amount and location of gains (losses), including earned income, recognized for derivatives and gains (losses) pertaining to hedged items presented in net derivative gains (losses) were as follows:

Net Derivative Gains (Losses) Recognized for Derivatives

Net Derivative Gains (Losses) Recognized for Hedged Items Net Investment Income Amount of Gains (Losses) Deferred in AOCI

Net Derivative Gains (Losses) Recognized for Derivatives Net Derivative Gains (Losses) Recognized for Hedged Items Net Investment Income Amount of Gains (Losses) Deferred in AOCI

(In millions)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Derivatives Designated as Hedging Instruments:

11 unchanged sentences

Total $ ( 1,851 ) $ ( 6 ) $ 9 $ ( 185 )

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Derivatives Designated as Hedging Instruments:

16 unchanged sentences

(In millions)

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Derivatives Designated as Hedging Instruments:

11 unchanged sentences

Total $ 2,410 $ ( 18 ) $ 31 $ 235

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Derivatives Designated as Hedging Instruments:

11 unchanged sentences

Total $ ( 68 ) $ ( 29 ) $ 28 $ 201

At June 30, 2020 and December 31, 2019, the balance in AOCI associated with cash flow hedges was $ 660 million and $ 245 million, respectively.

At September 30, 2020 and December 31, 2019, the balance in AOCI associated with cash flow hedges was $ 464 million and $ 245 million, respectively.

Credit Derivatives

5 unchanged sentences

The estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps were as follows at:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Rating Agency Designation of Referenced

Credit Obligations (1)

Credit Obligations (1) Estimated

Swaps Maximum

8 unchanged sentences

(Dollars in millions)

$ 7 $ 879 2.8 $ 11 $ 615 2.5

10 909 5.3 25 1,020 5.1

Aaa/Aa/A $ 8 $ 879 2.5 $ 11 $ 615 2.5

Baa 18 914 5.5 25 1,020 5.1

Total $ 26 $ 1,793 4.0 $ 36 $ 1,635 4.1

17 unchanged sentences

(In millions)

June 30, 2020

September 30, 2020

Derivative assets $ 4,861 $ ( 1,068 ) $ ( 3,159 ) $ 634 $ ( 625 ) $ 9

$ 6,166 $ ( 1,733 ) $ ( 3,715 ) $ 718 $ ( 705 ) $ 13

Derivative liabilities $ 1,495 $ ( 1,068 ) $ — $ 427 $ ( 426 ) $ 1

$ 2,248 $ ( 1,733 ) $ — $ 515 $ ( 514 ) $ 1

December 31, 2019

Derivative assets $ 3,062 $ ( 1,458 ) $ ( 1,115 ) $ 489 $ ( 488 ) $ 1

$ 3,062 $ ( 1,458 ) $ ( 1,115 ) $ 489 $ ( 488 ) $ 1

Derivative liabilities $ 2,522 $ ( 1,458 ) $ — $ 1,064 $ ( 1,061 ) $ 3

_______________

(1) Represents amounts subject to an enforceable master netting agreement or similar agreement.

8 unchanged sentences

The aggregate estimated fair values of derivatives in a net liability position containing such credit-contingent provisions and the aggregate estimated fair value of assets posted as collateral for such instruments were as follows at:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(In millions)

Estimated fair value of derivatives in a net liability position (1) $ 427 $ 1,064

$ 515 $ 1,064

Estimated Fair Value of Collateral Provided (2):

1 unchanged sentence

_______________

(1) After taking into consideration the existence of netting agreements.

7 unchanged sentences

Investments that do not have a readily determinable fair value and are measured at net asset value (or equivalent) as a practical expedient to estimated fair value are excluded from the fair value hierarchy.

June 30, 2020

Fair Value Hierarchy

Level 1 Level 2 Level 3 Total Estimated

September 30, 2020

Fair Value Hierarchy Total Estimated

Level 1 Level 2 Level 3

(In millions)

Fixed maturity securities:

$ — $ 33,566 $ 699 $ 34,265

corporate $ — $ 35,207 $ 699 $ 35,906

Foreign corporate — 10,281 379 10,660

— 10,096 195 10,291

— 8,544 40 8,584

RMBS — 8,449 — 8,449

government and agency 1,849 7,086 — 8,935

1,858 7,067 — 8,925

— 6,229 26 6,255

CMBS — 6,418 7 6,425

State and political subdivision — 4,429 — 4,429

— 4,232 — 4,232

— 2,356 107 2,463

ABS — 2,640 74 2,714

Foreign government — 1,820 — 1,820

— 1,781 — 1,781

Total fixed maturity securities 1,849 76,330 1,159 79,338

1,858 73,871 1,067 76,796

Equity securities 15 99 3 117

Short-term investments 3,019 1,210 10 4,239

3,007 1,530 — 4,537

Derivative assets:

Interest rate — 3,458 — 3,458

— 4,503 — 4,503

Foreign currency exchange rate — 438 17 455

Credit — 18 9 27

Equity market — 878 13 891

Total derivative assets — 4,792 39 4,831

— 6,100 50 6,150

Embedded derivatives within asset host contracts (2) — — 321 321

Separate account assets 153 103,028 3 103,184

159 99,437 3 99,599

$ 5,036 $ 181,051 $ 1,447 $ 187,534

Total assets $ 5,036 $ 185,459 $ 1,535 $ 192,030

Derivative liabilities:

4 unchanged sentences

Total derivative liabilities — 1,479 24 1,503

— 2,221 30 2,251

Embedded derivatives within liability host contracts (2) — — 6,449 6,449

Total liabilities $ — $ 1,479 $ 6,473 $ 7,952

$ — $ 2,221 $ 5,679 $ 7,900

Brighthouse Financial, Inc.

2 unchanged sentences

December 31, 2019

Fair Value Hierarchy

Level 1 Level 2 Level 3 Total Estimated

Fair Value Hierarchy Total Estimated

Level 1 Level 2 Level 3

(In millions)

Fixed maturity securities:

$ — $ 30,831 $ 329 $ 31,160

corporate $ — $ 30,831 $ 329 $ 31,160

Foreign corporate — 9,712 132 9,844

— 9,712 132 9,844

— 9,074 44 9,118

RMBS — 9,074 44 9,118

government and agency 1,636 5,760 — 7,396

1,636 5,760 — 7,396

— 5,755 — 5,755

CMBS — 5,755 — 5,755

State and political subdivision — 3,984 73 4,057

— 3,984 73 4,057

— 1,882 73 1,955

ABS — 1,882 73 1,955

Foreign government — 1,751 — 1,751

— 1,751 — 1,751

Total fixed maturity securities 1,636 68,749 651 71,036

1,636 68,749 651 71,036

Equity securities 14 125 8 147

Short-term investments 1,271 682 5 1,958

1,271 682 5 1,958

Derivative assets:

Interest rate — 1,778 — 1,778

— 1,778 — 1,778

Foreign currency exchange rate — 281 5 286

Credit — 25 11 36

Equity market — 850 71 921

Total derivative assets — 2,934 87 3,021

— 2,934 87 3,021

Embedded derivatives within asset host contracts (2) — — 217 217

Separate account assets 180 106,924 3 107,107

180 106,924 3 107,107

$ 3,101 $ 179,414 $ 971 $ 183,486

Total assets $ 3,101 $ 179,414 $ 971 $ 183,486

Derivative liabilities:

Interest rate $ — $ 330 $ — $ 330

$ — $ 330 $ — $ 330

Foreign currency exchange rate — 43 — 43

Equity market — 2,093 71 2,164

— 2,093 71 2,164

Total derivative liabilities — 2,466 71 2,537

— 2,466 71 2,537

Embedded derivatives within liability host contracts (2) — — 4,248 4,248

1 unchanged sentence

_______________

(1) Derivative assets are presented within other invested assets on the consolidated balance sheets and derivative liabilities are presented within other liabilities on the consolidated balance sheets.

2 unchanged sentences

Embedded derivatives within liability host contracts are presented within policyholder account balances on the consolidated balance sheets.

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

Fair Value (continued)

Valuation Controls and Procedures

3 unchanged sentences

In addition, the Chief Accounting Officer periodically reports to the Audit Committee of Brighthouse Financial’s Board of Directors regarding compliance with fair value accounting standards.

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

Fair Value (continued)

The fair value of financial assets and financial liabilities is based on quoted market prices, where available.

9 unchanged sentences

Price adjustments are applied if prices or quotes received from independent pricing services or brokers are not considered reflective of market activity or representative of estimated fair value.

The Company did not have significant price adjustments during the six months ended June 30, 2020.

The Company did not have significant price adjustments during the nine months ended September 30, 2020.

Determination of Fair Value

11 unchanged sentences

Treasury yield curve for the identical security, issuer ratings and issuer spreads, broker-dealer quotes, and comparable securities that are actively traded.

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

Fair Value (continued)

Structured Securities:

7 unchanged sentences

Fair value is determined using third-party commercial pricing services, with the primary input being quoted prices in markets that are not active.

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

Fair Value (continued)

Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices.

19 unchanged sentences

Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income.

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

Fair Value (continued)

The Company issues certain variable annuity products with guaranteed minimum benefits.

4 unchanged sentences

The percentage of fees included in the initial fair value measurement is not updated in subsequent periods.

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

Fair Value (continued)

Capital market assumptions, such as risk-free rates and implied volatilities, are based on market prices for publicly-traded instruments to the extent that prices for such instruments are observable.

21 unchanged sentences

Certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) were as follows at:

June 30, 2020 December 31, 2019 Impact of

September 30, 2020 December 31, 2019 Impact of

Increase in Input

2 unchanged sentences

Embedded derivatives

Direct, assumed and ceded guaranteed minimum benefits

Option pricing techniques

Mortality rates 0.02 % - 11.31 % 0.02 % - 11.31 % Decrease (1)

Direct, assumed and ceded guaranteed minimum benefits • Option pricing techniques • Mortality rates 0.03 % - 12.13 % 0.02 % - 11.31 % Decrease (1)

• Lapse rates 0.25 % - 15.00 % 0.25 % - 16.00 % Decrease (2)

1 unchanged sentence

• Withdrawal rates 0.25 % - 10.00 % 0.25 % - 10.00 % (4)

Long-term equity volatilities

16.24 % - 21.65 % 16.24 % - 21.65 % Increase (5)

Nonperformance risk spread

0.52 % - 2.78 % 0.54 % - 1.99 % Decrease (6)

• Long-term equity volatilities 16.66 % - 22.21 % 16.24 % - 21.65 % Increase (5)

• Nonperformance risk spread 0.99 % - 2.39 % 0.54 % - 1.99 % Decrease (6)

_______________

31 unchanged sentences

Corporate (1) Structured Securities State and

Subdivision Foreign

Government Equity

Subdivision Equity

Securities Short-term

4 unchanged sentences

(In millions)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Balance, beginning of period

2 unchanged sentences

( 1 ) — — ( 1 ) — 5 ( 628 ) —

Total realized/unrealized gains (losses)

included in AOCI

Total realized/unrealized gains (losses) included in AOCI

7 1 — — — ( 10 ) — —

Purchases (7) 199 11 — — 10 — — —

187 85 — — — — — — —

( 46 ) ( 1 ) — — — ( 2 ) ( 17 ) — —

Sales (7) ( 64 ) ( 1 ) — — — — — —

Issuances (7) — — — — — — — —

— — — — — — — — —

Settlements (7) — — — — — — ( 174 ) —

— — — — — — — ( 180 ) —

Transfers into Level 3 (8) 185 — — — — — — —

86 26 — — — — — — —

Transfers out of Level 3 (8) ( 142 ) ( 103 ) — — — — — —

( 241 ) ( 158 ) ( 73 ) ( 7 ) — — — — ( 1 )

Balance, end of period $ 1,078 $ 81 $ — $ 3 $ 10 $ 15 $ ( 6,128 ) $ 3

$ 894 $ 173 $ — $ — $ 4 $ — $ 20 $ ( 5,326 ) $ 3

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Balance, beginning of period

2 unchanged sentences

— — — — — ( 2 ) ( 630 ) —

Total realized/unrealized gains (losses)

included in AOCI

Total realized/unrealized gains (losses) included in AOCI

— 1 — — — 3 — —

Purchases (7) 118 61 — — — — — —

64 15 — — — 6 — — —

( 49 ) ( 9 ) — — — — — — —

Sales (7) ( 22 ) ( 6 ) ( 1 ) — ( 6 ) — — —

Issuances (7) — — — — — — — —

— — — — — — — — —

Settlements (7) — — — — — — ( 219 ) —

— — — — — — — ( 223 ) —

Transfers into Level 3 (8) 49 29 — — — — — —

124 61 — — — — — — —

Transfers out of Level 3 (8) ( 84 ) ( 18 ) — — — 2 — —

( 72 ) ( 188 ) — — — — ( 1 ) — —

Balance, end of period $ 826 $ 175 $ 73 $ 4 $ — $ ( 131 ) $ ( 3,970 ) $ —

$ 765 $ 108 $ 74 $ — $ 4 $ 6 $ ( 134 ) $ ( 3,121 ) $ —

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2020 (9)

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2020 (9)

$ — $ — $ — $ — $ — $ 5 $ ( 668 ) $ —

Changes in unrealized gains (losses) included in other comprehensive income for the instruments still held at June 30, 2020 (9)

Changes in unrealized gains (losses) included in other comprehensive income for the instruments still held at September 30, 2020 (9)

$ 8 $ 1 $ — $ — $ — $ ( 10 ) $ — $ —

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2019 (9)

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2019 (9)

$ — $ — $ — $ — $ — $ ( 2 ) $ ( 705 ) $ —

5 unchanged sentences

Corporate (1) Structured Securities State and

Subdivision Foreign

Government Equity

Subdivision Equity

Securities Short-term

4 unchanged sentences

(In millions)

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Balance, beginning of period

2 unchanged sentences

( 2 ) — — — — 3 ( 1,590 ) —

Total realized/unrealized gains (losses)

included in AOCI

Total realized/unrealized gains (losses) included in AOCI

12 1 — — — 10 — —

Purchases (7) 509 34 — — 10 — — —

433 104 — — — — — — —

( 51 ) ( 5 ) — — — ( 5 ) ( 14 ) — —

Sales (7) ( 103 ) ( 2 ) — — ( 5 ) ( 14 ) — —

Issuances (7) — — — — — — — —

— — — — — — — — —

Settlements (7) — — — — — — ( 507 ) —

— — — — — — — ( 333 ) —

Transfers into Level 3 (8) 285 9 — — — — — —

153 30 — — — — — — —

Transfers out of Level 3 (8) ( 84 ) ( 78 ) ( 73 ) ( 5 ) — — — —

( 113 ) ( 73 ) ( 73 ) — ( 4 ) — — — —

Balance, end of period $ 1,078 $ 81 $ — $ 3 $ 10 $ 15 $ ( 6,128 ) $ 3

$ 894 $ 173 $ — $ — $ 4 $ — $ 20 $ ( 5,326 ) $ 3

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Balance, beginning of period

2 unchanged sentences

— 1 — — — ( 10 ) ( 1,316 ) —

Total realized/unrealized gains (losses)

included in AOCI

Total realized/unrealized gains (losses) included in AOCI

11 3 — — — 5 — —

Purchases (7) 179 75 — — — — — —

67 15 — — — 6 — — —

( 55 ) ( 27 ) — — — — — — ( 1 )

Sales (7) ( 78 ) ( 24 ) ( 1 ) — — — — ( 1 )

Issuances (7) — — — — — — — —

— — — — — — — — —

Settlements (7) — — — — — — ( 656 ) —

— — — — — — — ( 437 ) —

Transfers into Level 3 (8) 147 92 — 1 — — — —

141 87 — — 1 — — — —

Transfers out of Level 3 (8) ( 165 ) ( 145 ) — — — ( 4 ) — —

( 130 ) ( 142 ) — — — — ( 3 ) — —

Balance, end of period $ 826 $ 175 $ 73 $ 4 $ — $ ( 131 ) $ ( 3,970 ) $ —

$ 765 $ 108 $ 74 $ — $ 4 $ 6 $ ( 134 ) $ ( 3,121 ) $ —

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2020 (9)

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2020 (9)

$ ( 1 ) $ — $ — $ — $ — $ ( 11 ) $ ( 1,687 ) $ —

Changes in unrealized gains (losses) included in other comprehensive income for the instruments still held at June 30, 2020 (9)

Changes in unrealized gains (losses) included in other comprehensive income for the instruments still held at September 30, 2020 (9)

$ 12 $ 2 $ — $ — $ — $ 10 $ — $ —

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2019 (9)

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2019 (9)

$ — $ 1 $ — $ — $ — $ ( 11 ) $ ( 1,531 ) $ —

28 unchanged sentences

The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:

June 30, 2020

September 30, 2020

Fair Value Hierarchy

2 unchanged sentences

Mortgage loans $ 15,746 $ — $ — $ 16,720 $ 16,720

$ 15,791 $ — $ — $ 16,439 $ 16,439

$ 1,201 $ — $ 424 $ 1,588 $ 2,012

Policy loans $ 1,289 $ — $ 506 $ 1,610 $ 2,116

Other invested assets $ 93 $ — $ 81 $ 12 $ 93

$ 93 $ — $ 81 $ 12 $ 93

Premiums, reinsurance and other receivables $ 3,088 $ — $ 64 $ 3,706 $ 3,770

$ 2,518 $ — $ 56 $ 3,025 $ 3,081

Policyholder account balances $ 17,651 $ — $ — $ 18,843 $ 18,843

$ 16,926 $ — $ — $ 17,670 $ 17,670

Long-term debt $ 3,979 $ — $ 4,169 $ — $ 4,169

$ 3,979 $ — $ 4,017 $ — $ 4,017

Other liabilities $ 1,136 $ — $ 480 $ 656 $ 1,136

$ 998 $ — $ 351 $ 647 $ 998

Separate account liabilities $ 1,207 $ — $ 1,207 $ — $ 1,207

$ 1,146 $ — $ 1,146 $ — $ 1,146

Brighthouse Financial, Inc.

6 unchanged sentences

Mortgage loans $ 15,753 $ — $ — $ 16,383 $ 16,383

$ 15,753 $ — $ — $ 16,383 $ 16,383

$ 1,292 $ — $ 516 $ 1,062 $ 1,578

Policy loans $ 1,292 $ — $ 516 $ 1,062 $ 1,578

Other invested assets $ 51 $ — $ 39 $ 12 $ 51

$ 51 $ — $ 39 $ 12 $ 51

Premiums, reinsurance and other receivables $ 2,224 $ — $ 41 $ 2,593 $ 2,634

$ 2,224 $ — $ 41 $ 2,593 $ 2,634

Policyholder account balances $ 15,614 $ — $ — $ 15,710 $ 15,710

$ 15,614 $ — $ — $ 15,710 $ 15,710

Long-term debt $ 4,365 $ — $ 3,334 $ 1,000 $ 4,334

$ 4,365 $ — $ 3,334 $ 1,000 $ 4,334

Other liabilities $ 846 $ — $ 191 $ 655 $ 846

$ 846 $ — $ 191 $ 655 $ 846

Separate account liabilities $ 1,189 $ — $ 1,189 $ — $ 1,189

$ 1,189 $ — $ 1,189 $ — $ 1,189

Long-term Debt

6 unchanged sentences

On June 11, 2020, Brighthouse Reinsurance Company of Delaware, with the explicit permission of the Delaware Commissioner of Insurance, amended its financing arrangement with a pool of highly rated third-party reinsurers to increase the maximum amount from $ 10.0 billion to $ 12.0 billion and to extend the term by two years to 2039.

At June 30, 2020, there were no borrowings and there was $ 10.6 billion of funding available under this financing arrangement.

At September 30, 2020, there were no borrowings and there was $ 10.8 billion of funding available under this financing arrangement.

Preferred Stock

Preferred stock authorized, issued and outstanding were as follows at:

June 30, 2020 December 31, 2019

Preferred stock shares authorized, issued and outstanding were as follows at:

September 30, 2020 December 31, 2019

Shares Authorized Shares Issued Shares Outstanding Shares Authorized Shares Issued Shares Outstanding

11 unchanged sentences

In connection with the issuance of the Series B Depositary Shares and the underlying Series B Preferred Stock, BHF incurred $ 13 million of issuance costs, which have been recorded as a reduction of additional paid-in capital.

The declaration, record and payment dates, as well as per share and aggregate dividend amounts for BHF’s perpetual 6.600 % non-cumulative preferred stock, Series A for the six months ended June 30, 2020 and 2019 were as follows:

Declaration Date Record Date Payment Date Per Share Aggregate

(In millions)

The declaration, record and payment dates, as well as per share and aggregate dividend amounts for BHF’s preferred stock by series for the nine months ended September 30, 2020 and 2019 were as follows:

Series A Series B

Declaration Date Record Date Payment Date Per Share Aggregate Per Share Aggregate

(In millions, except per share data)

August 17, 2020 September 10, 2020 September 25, 2020 $ 412.50 $ 7 $ 595.31 $ 10

May 15, 2020 June 10, 2020 June 25, 2020 412.50 7 — —

1 unchanged sentence

$ 1,237.50 $ 21 $ 595.31 $ 10

August 15, 2019 September 10, 2019 September 25, 2019 $ 412.50 $ 7 $ — $ —

May 15, 2019 June 10, 2019 June 25, 2019 412.50 7 — —

$ 825.00 $ 14 $ — $ —

Common Stock Repurchase Program

2 unchanged sentences

On May 11, 2020, the Company announced that it had temporarily suspended repurchases of its common stock.

The temporary suspension remains in effect while the Company continues to assess market conditions and other factors.

During the six months ended June 30, 2020 and 2019, BHF repurchased 13,250,927 and 4,993,424 shares, respectively, of its common stock through open market purchases pursuant to 10b5-1 plans for $ 322 million and $ 188 million, respectively.

At June 30, 2020, BHF had $ 231 million remaining under its common stock repurchase program.

On August 24, 2020, the Company resumed repurchases of its common stock, as was announced on August 21, 2020.

During the nine months ended September 30, 2020 and 2019, BHF repurchased 15,119,010 and 8,395,371 shares, respectively, of its common stock through open market purchases pursuant to 10b5-1 plans for $ 376 million and $ 314 million, respectively.

At September 30, 2020, BHF had $ 177 million remaining under its common stock repurchase program.

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

Equity (continued)

Accumulated Other Comprehensive Income (Loss)

Information regarding changes in the balances of each component of AOCI was as follows:

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Investment Gains

5 unchanged sentences

(In millions)

Balance at March 31, 2020

$ 2,083 $ 612 $ ( 19 ) $ ( 29 ) $ 2,647

Balance at June 30, 2020 $ 4,517 $ 500 $ ( 24 ) $ ( 28 ) $ 4,965

OCI before reclassifications 707 ( 185 ) 9 ( 2 ) 529

3,059 ( 140 ) 5 1 2,925

Deferred income tax benefit (expense) ( 149 ) 39 ( 1 ) — ( 111 )

AOCI before reclassifications, net of income tax 5,075 354 ( 16 ) ( 30 ) 5,383

4,499 502 ( 24 ) ( 28 ) 4,949

Amounts reclassified from AOCI 8 ( 11 ) — — ( 3 )

23 ( 3 ) — — 20

Deferred income tax benefit (expense) ( 1 ) 2 — — 1

Amounts reclassified from AOCI, net of income tax 7 ( 9 ) — — ( 2 )

18 ( 2 ) — — 16

Balance at June 30, 2020

$ 4,517 $ 500 $ ( 24 ) $ ( 28 ) $ 4,965

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

Equity (continued)

Three Months Ended June 30, 2019

Balance at September 30, 2020 $ 5,082 $ 345 $ ( 16 ) $ ( 30 ) $ 5,381

Three Months Ended September 30, 2019

Investment Gains

5 unchanged sentences

(In millions)

Balance at March 31, 2019

$ 1,580 $ 140 $ ( 27 ) $ ( 23 ) $ 1,670

Balance at June 30, 2019 $ 2,564 $ 181 $ ( 20 ) $ ( 23 ) $ 2,702

OCI before reclassifications 970 160 ( 3 ) — 1,127

1,293 75 7 — 1,375

Deferred income tax benefit (expense) ( 204 ) ( 33 ) — — ( 237 )

AOCI before reclassifications, net of income tax 3,330 308 ( 23 ) ( 23 ) 3,592

2,602 199 ( 20 ) ( 23 ) 2,758

Amounts reclassified from AOCI ( 30 ) ( 1 ) — — ( 31 )

( 48 ) ( 22 ) — — ( 70 )

Deferred income tax benefit (expense) 6 — — — 6

Amounts reclassified from AOCI, net of income tax ( 24 ) ( 1 ) — — ( 25 )

( 38 ) ( 18 ) — — ( 56 )

Balance at June 30, 2019

$ 2,564 $ 181 $ ( 20 ) $ ( 23 ) $ 2,702

Six Months Ended June 30, 2020

Balance at September 30, 2019 $ 3,306 $ 307 $ ( 23 ) $ ( 23 ) $ 3,567

Nine Months Ended September 30, 2020

Investment Gains

6 unchanged sentences

Balance at December 31, 2019 $ 3,111 $ 172 $ ( 15 ) $ ( 28 ) $ 3,240

$ 3,111 $ 172 $ ( 15 ) $ ( 28 ) $ 3,240

OCI before reclassifications (2) 2,475 235 9 ( 2 ) 2,717

1,768 420 — — 2,188

Deferred income tax benefit (expense) ( 520 ) ( 49 ) ( 10 ) — ( 579 )

AOCI before reclassifications, net of income tax 5,066 358 ( 16 ) ( 30 ) 5,378

4,508 504 ( 24 ) ( 28 ) 4,960

Amounts reclassified from AOCI 20 ( 16 ) — — 4

12 ( 5 ) — — 7

Deferred income tax benefit (expense) ( 4 ) 3 — — ( 1 )

Amounts reclassified from AOCI, net of income tax 16 ( 13 ) — — 3

9 ( 4 ) — — 5

Balance at June 30, 2020

$ 4,517 $ 500 $ ( 24 ) $ ( 28 ) $ 4,965

Six Months Ended June 30, 2019

Balance at September 30, 2020 $ 5,082 $ 345 $ ( 16 ) $ ( 30 ) $ 5,381

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

Equity (continued)

Nine Months Ended September 30, 2019

Investment Gains

6 unchanged sentences

Balance at December 31, 2018 $ 576 $ 187 $ ( 27 ) $ ( 20 ) $ 716

$ 576 $ 187 $ ( 27 ) $ ( 20 ) $ 716

OCI before reclassifications 3,515 201 4 ( 3 ) 3,717

2,545 41 7 ( 3 ) 2,590

Deferred income tax benefit (expense) ( 738 ) ( 42 ) — — ( 780 )

AOCI before reclassifications, net of income tax 3,353 346 ( 23 ) ( 23 ) 3,653

2,587 219 ( 20 ) ( 23 ) 2,763

Amounts reclassified from AOCI ( 59 ) ( 49 ) — — ( 108 )

( 29 ) ( 48 ) — — ( 77 )

Deferred income tax benefit (expense) 12 10 — — 22

Amounts reclassified from AOCI, net of income tax ( 47 ) ( 39 ) — — ( 86 )

( 23 ) ( 38 ) — — ( 61 )

Balance at June 30, 2019

$ 2,564 $ 181 $ ( 20 ) $ ( 23 ) $ 2,702

Balance at September 30, 2019 $ 3,306 $ 307 $ ( 23 ) $ ( 23 ) $ 3,567

__________________

1 unchanged sentence

(2) Includes $ 3 million related to the adoption of ASU 2016-13, see Note 1.

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

Equity (continued)

Information regarding amounts reclassified out of each component of AOCI was as follows:

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

1 unchanged sentence

Net unrealized investment gains (losses):

Net unrealized investment gains (losses)

$ ( 20 ) $ 70 $ ( 7 ) $ 55 Net investment gains (losses)

Net unrealized investment gains (losses)

( 3 ) ( 22 ) ( 5 ) ( 26 ) Net derivative gains (losses)

Net unrealized investment gains (losses) $ 1 $ 31 $ ( 6 ) $ 86 Net investment gains (losses)

Net unrealized investment gains (losses) ( 9 ) ( 1 ) ( 14 ) ( 27 ) Net derivative gains (losses)

Net unrealized investment gains (losses), before income tax ( 8 ) 30 ( 20 ) 59

( 23 ) 48 ( 12 ) 29

Income tax (expense) benefit 1 ( 6 ) 4 ( 12 )

5 ( 10 ) 3 ( 6 )

Net unrealized investment gains (losses), net of income tax ( 7 ) 24 ( 16 ) 47

( 18 ) 38 ( 9 ) 23

Unrealized gains (losses) on derivatives - cash flow hedges:

Interest rate swaps

— 6 1 28 Net derivative gains (losses)

Interest rate swaps

— — 1 1 Net investment income

Foreign currency swaps

3 16 3 19 Net derivative gains (losses)

Interest rate swaps — — 1 28 Net derivative gains (losses)

Interest rate swaps 1 1 2 2 Net investment income

Foreign currency swaps 10 — 13 19 Net derivative gains (losses)

Gains (losses) on cash flow hedges, before income tax 11 1 16 49

Income tax (expense) benefit ( 2 ) — ( 3 ) ( 10 )

( 1 ) ( 4 ) ( 1 ) ( 10 )

Gains (losses) on cash flow hedges, net of income tax 9 1 13 39

Total reclassifications, net of income tax $ 2 $ 25 $ ( 3 ) $ 86

$ ( 16 ) $ 56 $ ( 5 ) $ 61

Other Revenues and Other Expenses

6 unchanged sentences

The passage of time reflects the satisfaction of the Company’s performance obligations to the Funds and is used to recognize revenue associated with 12b-1 fees.

Other revenues consisted primarily of 12b-1 fees of $ 76 million and $ 157 million for the three months and six months ended June 30, 2020, respectively, and $ 85 million and $ 167 million for the three months and six months ended June 30, 2019, respectively, of which substantially all were reported in the Annuities segment.

Brighthouse Financial, Inc.

1 unchanged sentence

Other Revenues and Other Expenses (continued)

Other revenues consisted primarily of 12b-1 fees of $ 83 million and $ 240 million for the three months and nine months ended September 30, 2020, respectively, and $ 84 million and $ 251 million for the three months and nine months ended September 30, 2019, respectively, of which substantially all were reported in the Annuities segment.

Other Expenses

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

13 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

1 unchanged sentence

Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders $ ( 3,012 ) $ 676 $ ( 60 ) $ 316

$ ( 1,998 ) $ 377 $ 2,952 $ ( 360 )

Weighted average common shares outstanding — basic 92,693,188 110,915,416 97,366,447 114,195,767

4 unchanged sentences

Diluted $ ( 32.49 ) $ 6.06 $ ( 0.61 ) $ 2.75

For the six months ended June 30, 2020 and the three months ended June 30, 2019, weighted average shares used for calculating diluted earnings per common share excludes 187,371 and 196,492 , respectively, of out-of-the-money stock options, as the inclusion of these shares would be antidilutive to the earnings per common share calculation due to the average share price for the six months ended June 30, 2020 and the three months ended June 30, 2019.

For the three months ended June 30, 2020 and the six months ended June 30, 2019, basic loss per common share equaled diluted loss per common share.

For both the three months and nine months ended September 30, 2020, basic loss per common share equaled diluted loss per common share.

The diluted shares were not utilized in the per share calculation for this period as the inclusion of such shares would have an antidilutive effect.

For both the three months and nine months ended September 30, 2019, weighted average shares used for calculating diluted earnings per common share excludes 196,492 of out-of-the-money stock options, as the inclusion of these shares would be antidilutive to the earnings per common share calculation due to the average share price for the three and nine months ended September 30, 2019.

Brighthouse Financial, Inc.

13 unchanged sentences

The Company establishes liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated.

It is possible that some matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated at June 30, 2020.

It is possible that some matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated at September 30, 2020.

Matters as to Which an Estimate Can Be Made

1 unchanged sentence

For such matters where a loss is believed to be reasonably possible, but not probable, no accrual has been made.

As of June 30, 2020, the Company estimates the aggregate range of reasonably possible losses in excess of amounts accrued for these matters to be $ 0 to $ 10 million.

As of September 30, 2020, the Company estimates the aggregate range of reasonably possible losses in excess of amounts accrued for these matters to be $ 0 to $ 10 million.

Matters as to Which an Estimate Cannot Be Made

25 unchanged sentences

Other Contingencies

The Company applies the same standard of recognition for non-litigation loss contingencies when assertions are made involving disputes with counterparties to contractual arrangements entered into by the Company, including with third-party vendors.

In such cases, the Company establishes liabilities when it is probable that a loss will be incurred and the amount of the loss can be reasonably estimated.

In cases where it is not probable, but is reasonably possible that a loss will be incurred, no accrual is made.

The Company estimates the aggregate range of reasonably possible losses associated with such matters in excess of amounts accrued to be between $ 25 million and $ 75 million.

For all other asserted claims, the Company is not currently able to estimate any reasonably possible unrecorded loss or range of loss, and will be unable to do so until sufficient information to support any such assessments is available.

As with litigation and regulatory loss contingencies, the Company considers establishing liabilities for certain non-litigation loss contingencies when assertions are made involving disputes or other matters with counterparties to contractual arrangements entered into by the Company, including with third-party vendors.

The Company establishes liabilities for such non-litigation loss contingencies when it is probable that a loss will be incurred and the amount of the loss can be reasonably estimated.

In matters where it is not probable, but is reasonably possible that a loss will be incurred and the amount of loss can be reasonably estimated, such losses or range of losses are disclosed, and no accrual is made.

In the absence of sufficient information to support an assessment of the reasonably possible loss or range of loss, no accrual is made and no loss or range of loss is disclosed.

Disputes have arisen with counterparties in connection with reinsurance arrangements where the Company’s subsidiaries are acting as either the reinsured or the reinsurer.

These disputes involve assertions by third parties primarily related to rates, fees and/or reinsured benefit calculations, and in certain of such disputes the counterparty has made a request to arbitrate the dispute.

As of September 30, 2020, the Company estimates the amount of reasonably possible losses in excess of the amounts accrued for certain non-litigation loss contingencies to be up to $ 50 million, which are primarily associated with reinsurance-related matters.

For certain other reinsurance-related matters, the Company is not currently able to estimate the reasonably possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of such loss.

On a quarterly and annual basis, the Company reviews relevant information with respect to non-litigation contingencies and, when applicable, updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

Contingencies, Commitments and Guarantees (continued)

Mortgage Loan Commitments

The Company commits to lend funds under mortgage loan commitments.

The amounts of these mortgage loan commitments were $ 229 million and $ 206 million at June 30, 2020 and December 31, 2019, respectively.

The amounts of these mortgage loan commitments were $ 271 million and $ 206 million at September 30, 2020 and December 31, 2019, respectively.

Commitments to Fund Partnership Investments, Bank Credit Facilities and Private Corporate Bond Investments

The Company commits to fund partnership investments and to lend funds under bank credit facilities and private corporate bond investments.

The amounts of these unfunded commitments were $ 1.8 billion at both June 30, 2020 and December 31, 2019.

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

Contingencies, Commitments and Guarantees (continued)

The amounts of these unfunded commitments were $ 1.8 billion at both September 30, 2020 and December 31, 2019.

In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties such that it may be required to make payments now or in the future.

8 unchanged sentences

Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future.

The Company’s recorded liabilities were $ 1 million at both June 30, 2020 and December 31, 2019 for indemnities, guarantees and commitments.

The Company’s recorded liabilities were $ 1 million at both September 30, 2020 and December 31, 2019 for indemnities, guarantees and commitments.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements