What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-24 compared with 2021-02-24 · 369 added, 394 removed, 2468 unchanged (24% of the section changed)

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Note 15 — Contingencies, Commitments and Guarantees

Note 16 — Related Party Transactions

Note 17 — Subsequent Events

Note 16 — Subsequent Event

Financial Statement Schedules at December 31, 2021 and 2020 and for the Years Ended December 31, 2021, 2020 and 2019:

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• We tested the effectiveness of management’s controls over the assumption review process, including those over the selection of the significant assumptions used related to general account and separate account investment returns, and policyholder behavior including mortality, lapses, premium persistency, benefit election and utilization, and withdrawals.

• With the assistance of our actuarial specialists, we evaluated the appropriateness of the significant assumptions used, developed an independent estimate of the future policy benefit liability, and compared our estimates to management’s estimates.

• With the assistance of our actuarial specialists, we evaluated the appropriateness of the significant assumptions used, developed an independent estimate of the future policy benefit liability for a sample of policies, and compared our estimates to management’s estimates.

• We tested the completeness and accuracy of the underlying data that served as the basis for the actuarial analysis, including experience studies, to test that the inputs to the actuarial estimate were reasonable.

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Deferred policy acquisition costs and value of business acquired 5,377 4,911

Current income tax recoverable — 17

Other assets 482 516

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Balance at December 31, 2018 $ — $ 1 $ 12,473 $ 1,346 $ ( 118 ) $ 716 $ 14,418 $ 65 $ 14,483

Cumulative effect of change in accounting principle and other, net of income tax 75 ( 79 ) ( 4 ) ( 4 )

Balance at January 1, 2018 — 1 12,432 481 — 1,597 14,511 65 14,576

Preferred stock issuance — 412 412 412

Treasury stock acquired in connection with share repurchases ( 442 ) ( 442 ) ( 442 )

Share-based compensation — 23 ( 2 ) 21 21

Dividends on preferred stock ( 21 ) ( 21 ) ( 21 )

Change in noncontrolling interests — ( 5 ) ( 5 )

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Balance at December 31, 2019 — 1 12,908 585 ( 562 ) 3,240 16,172 65 16,237

Preferred stock issuance — 412 412 412

Cumulative effect of change in accounting principle, net of income tax ( 14 ) 3 ( 11 ) ( 11 )

Balance at January 1, 2020 — 1 12,908 571 ( 562 ) 3,243 16,161 65 16,226

Preferred stock issuances — 948 948 948

Treasury stock acquired in connection with share repurchases ( 473 ) ( 473 ) ( 473 )

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Balance at December 31, 2020 — 1 13,878 ( 534 ) ( 1,038 ) 5,716 18,023 65 18,088

Cumulative effect of change in accounting principle and other, net of income tax ( 14 ) 3 ( 11 ) ( 11 )

Balance at January 1, 2020 — 1 12,908 571 ( 562 ) 3,243 16,161 65 16,226

Preferred stock issuances — 948 948 948

Preferred stock issuance — 339 339 339

Treasury stock acquired in connection with share repurchases ( 499 ) ( 499 ) ( 499 )

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Long-term debt repaid ( 680 ) ( 1,552 ) ( 602 )

Treasury stock acquired in connection with share repurchases ( 473 ) ( 442 ) ( 105 )

Preferred stock issued, net of issuance costs 339 948 412

Dividends on preferred stock ( 89 ) ( 44 ) ( 21 )

Treasury stock acquired in connection with share repurchases ( 499 ) ( 473 ) ( 442 )

Financing element on certain derivative instruments and other derivative related transactions, net ( 368 ) ( 948 ) ( 203 )

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Business, Basis of Presentation and Summary of Significant Accounting Policies

“Brighthouse Financial” and the “Company” refer to Brighthouse Financial, Inc.

and its subsidiaries (formerly, MetLife U.S.

Retail Separation Business).

Brighthouse Financial, Inc.

(“BHF”) is a holding company formed to own the legal entities that historically operated a substantial portion of MetLife, Inc.’s (together with its subsidiaries and affiliates, “MetLife”) former Retail segment.

BHF was incorporated in Delaware in 2016 in preparation for MetLife, Inc.’s separation of a substantial portion of its former Retail segment, as well as certain portions of its former Corporate Benefit Funding segment (the “Separation”), which was completed on August 4, 2017.

In connection with the Separation, 80.8 % of MetLife, Inc.’s interest in BHF was distributed to holders of MetLife, Inc.’s common stock and MetLife, Inc.

retained the remaining 19.2 %.

On June 14, 2018, MetLife, Inc.

divested its remaining shares of BHF common stock (the “MetLife Divestiture”).

As a result, MetLife, Inc.

and its subsidiaries and affiliates are no longer considered related parties subsequent to the MetLife Divestiture.

Brighthouse Financial is one of the largest providers of annuity and life insurance products in the United States through multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners.

(“BHF” and together with its subsidiaries, “Brighthouse Financial” or the “Company”) is one of the largest providers of annuity and life insurance products in the U.S.

through multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners.

BHF is a holding company that was incorporated in Delaware in 2016 in preparation for the separation of a substantial portion of MetLife, Inc.’s (together with its subsidiaries and affiliates, “MetLife”) former Retail segment, as well as certain portions of its former Corporate Benefit Funding segment, into a separate, publicly-traded company, Brighthouse Financial (the “Separation”), which was completed on August 4, 2017.

The Company is organized into three segments:

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Consolidation

The accompanying consolidated financial statements include the accounts of Brighthouse Financial, as well as partnerships and limited liability companies (“LLCs”) that the Company controls.

The accompanying consolidated financial statements include the accounts of Brighthouse Financial, as well as partnerships and limited liability companies (“LLC”) that the Company controls.

Intercompany accounts and transactions have been eliminated.

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The most significant assumptions used in the establishment of liabilities for future policy benefits are mortality, benefit election and utilization, withdrawals, policy lapse, and investment returns as appropriate to the respective product type.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

For traditional long-duration insurance contracts (term, whole life insurance and income annuities), assumptions are determined at issuance of the policy and are not updated unless a premium deficiency exists.

For traditional long-duration insurance contracts (term, non-participating whole life insurance and income annuities), assumptions are determined at issuance of the policy and are not updated unless a premium deficiency exists.

A premium deficiency exists when the liability for future policy benefits plus the present value of expected future gross premiums are less than expected future benefits and expenses (based on current assumptions).

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In applying the profitability criteria, groupings are limited by segment.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

The Company is also required to reflect the effect of investment gains and losses in its premium deficiency testing.

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The Company may also hold additional liabilities for certain guaranteed benefits related to these contracts.

Policyholder account balances also include liabilities related to funding agreements which are equal to the unpaid principal balance, adjusted for any unamortized premium or discount.

Liabilities for secondary guarantees on universal life insurance contracts are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the contract period based on total expected assessments.

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The Company incurs significant costs in connection with acquiring new and renewal insurance business.

Costs that are related directly to the successful acquisition or renewal of insurance contracts are capitalized as DAC.

Costs that are related directly to the successful acquisition or renewal of insurance contracts are capitalized as deferred policy acquisition costs (“DAC”).

These costs mainly consist of commissions and include the portion of employees’ compensation and benefits related to time spent selling, underwriting or processing the issuance of new insurance contracts.

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

The Company updates the estimated fair value of guarantees in subsequent periods by projecting future benefits using capital market and actuarial assumptions including expectations of policyholder behavior.

A risk neutral valuation methodology is used to project the cash flows from the guarantees under multiple capital market scenarios to determine an economic liability.

The Company updates the estimated fair value of guarantees in subsequent periods by projecting future benefits using capital markets and actuarial assumptions including expectations of policyholder behavior.

A risk neutral valuation methodology is used to project the cash flows from the guarantees under multiple capital markets scenarios to determine an economic liability.

The reported estimated fair value is then determined by taking the present value of these risk-free generated cash flows using a discount rate that incorporates a spread over the risk-free rate to reflect the Company’s nonperformance risk and adding a risk margin.

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The Company receives asset-based distribution and service fees from mutual funds available to the variable life and annuity contract holders as investment options in its separate accounts.

These fees are recognized in the period in which the related services are performed and are included in other revenues in the statement of operations.

Income taxes as presented herein attribute current and deferred income taxes of MetLife, Inc., for periods up until the Separation, to Brighthouse Financial in a manner that is systematic, rational and consistent with the asset and liability method prescribed by the Financial Accounting Standards Board (“FASB”) guidance Accounting Standards Codification 740 — Income Taxes (“ASC 740”).

These fees are recognized in the period in which the related services are performed and are included in other revenues on the statements of operations.

The Company’s income tax provision was prepared following the modified separate return method.

The modified separate return method applies ASC 740 to the standalone financial statements of each member of the consolidated group as if the group member were a separate taxpayer and a standalone enterprise, after providing benefits for losses.

The modified separate return method applies the Accounting Standards Codification 740 — Income Taxes (“ASC 740”) to the standalone financial statements of each member of the consolidated group as if the member were a separate taxpayer and a standalone enterprise, after providing benefits for losses.

The Company’s accounting for income taxes represents management’s best estimate of various events and transactions.

Current and deferred income taxes included herein and attributable to periods up until the Separation have been allocated to the Company in a manner that is systematic, rational and consistent with the asset and liability method prescribed by ASC 740.

Deferred tax assets and liabilities resulting from temporary differences between the financial reporting and tax bases of assets and liabilities are measured at the balance sheet date using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse.

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Adoption of New Accounting Pronouncements

Changes to GAAP are established by the FASB in the form of accounting standards updates (“ASU”) to the FASB Accounting Standards Codification.

Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASU”) to the FASB Accounting Standards Codification.

The Company considers the applicability and impact of all ASUs.

ASUs not listed 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.

Effective January 1, 2020, using the modified retrospective method, the Company adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

The amendments to Topic 326 replace the incurred loss impairment methodology for certain financial instruments with one that reflects expected credit losses based on historical loss information, current conditions, and reasonable and supportable forecasts.

The new guidance also requires that an other-than-temporary impairment on a debt security will be recognized as an allowance going forward, such that improvements in expected future cash flows after an impairment will no longer be reflected as a prospective yield adjustment through net investment income, but rather a reversal of the previous impairment and recognized through realized investment gains and losses.

The Company recorded an after tax net decrease to retained earnings of $ 14 million and a net increase to AOCI of $ 3 million for the cumulative effect of adoption.

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

There were no significant ASUs adopted as of December 31, 2021.

Future Adoption of New Accounting Pronouncements

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This new guidance is effective for fiscal years beginning after January 1, 2023.

The amendments to Topic 944 will result in significant changes to the accounting for long-duration insurance contracts.

These changes (i) require all guarantees that qualify as market risk benefits to be measured at fair value, (ii) require more frequent updating of assumptions and modify existing discount rate requirements for certain insurance liabilities, (iii) modify the methods of amortization for deferred policy acquisition costs (“DAC”), and (iv) require new qualitative and quantitative disclosures around insurance contract asset and liability balances and the judgments, assumptions and methods used to measure those balances.

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

The most significant impact from the ASU is the requirement that all variable annuity guarantees will be considered market risk benefits and measured at fair value, whereas today a significant amount of variable annuity guarantees are classified as insurance liabilities.

The amendments to Topic 944 will result in significant changes to the measurement, presentation and disclosure requirements for long-duration insurance contracts.

A summary of the most significant changes is provided below:

(1) Guaranteed benefits associated with variable annuity and certain fixed annuity contracts will be classified and presented separately on the consolidated balance sheets as market risk benefits (“MRB”).

MRBs will be measured at fair value through net income and reported separately on the consolidated statements of operations, except for instrument-specific credit risk changes, which will be recognized in OCI.

(2) Cash flow assumptions used to measure the liability for future policy benefits on traditional long-duration contracts (including term and non-participating whole life insurance and immediate annuities) will be updated on an annual basis using a retrospective method.

The resulting remeasurement gain or loss will be reported separately on the consolidated statements of operations along with the remeasurement gain or loss on universal life-type contract liabilities.

(3) The discount rate assumption used to measure the liability for traditional long-duration contracts will be based on an upper-medium grade fixed income yield, updated quarterly, with changes recognized in OCI.

(4) DAC for all insurance products are required to be amortized on a constant-level basis over the expected term of the contracts, using amortization methods that are not a function of revenue or profit emergence.

Changes in assumptions used to amortize DAC will be recognized as a revision to future amortization amounts.

(5) There will be a significant increase in required disclosures, including disaggregated rollforwards of insurance contract assets and liabilities supplemented by qualitative and quantitative information regarding the cash flows, assumptions, methods and judgements used to measure those balances.

The amendments to Topic 944 will be applied to the earliest period presented in the financial statements, making the transition date January 1, 2021.

The MRB guidance is required to be applied on a retrospective basis, while the guidance for insurance liability assumption updates and DAC amortization will be applied to existing carrying amounts on the transition date.

The new guidance will have a significant impact to the Company’s financial statements upon adoption, and will change the pattern and market sensitivity of the Company’s earnings after the transition date.

The most significant impact will be the requirement that all variable annuity guarantees are considered MRBs and measured at fair value, because a significant amount of variable annuity guarantees are classified as insurance liabilities under current guidance.

The impacts to the financial statements at adoption are highly dependent on market conditions, especially interest rates.

The Company is, therefore, unable to currently estimate the ultimate impact of the new guidance on the financial statements;

however, at prevailing interest rate levels at the end of 2021, the Company expects the new guidance, upon adoption, would likely result in a material decrease in stockholders’ equity.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Segment Information

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The Annuities segment consists of a variety of variable, fixed, index-linked and income annuities designed to address contract holders’ needs for protected wealth accumulation on a tax-deferred basis, wealth transfer and income security.

The Life segment consists of insurance products and services, including term, universal, whole and variable life products designed to address policyholders’ needs for financial security and protected wealth transfer, which may be provided on a tax-advantaged basis.

The Run-off segment consists of products that are no longer actively sold and are separately managed, including structured settlements, pension risk transfer contracts, certain company-owned life insurance policies, funding agreements and ULSG.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Segment Information (continued)

The Run-off segment consists of products that are no longer actively sold and are separately managed, including ULSG, structured settlements, pension risk transfer contracts, certain company-owned life insurance policies and certain funding agreements.

Corporate & Other

Corporate & Other contains the excess capital not allocated to the segments and interest expense related to the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues.

Corporate & Other also includes long-term care and workers’ compensation business reinsured through 100% quota share reinsurance agreements and term life insurance sold direct to consumers, which is no longer being offered for new sales.

Corporate & Other also includes long-term care and workers’ compensation business reinsured through 100% quota share reinsurance agreements, activities related to funding agreements associated with the Company’s institutional spread margin business, as well as direct-to-consumer life insurance that is no longer actively sold.

Financial Measures and Segment Accounting Policies

Adjusted earnings is a financial measure used by management to evaluate performance, allocate resources and facilitate comparisons to industry results.

Adjusted earnings is a financial measure used by management to evaluate performance and facilitate comparisons to industry results.

Consistent with GAAP guidance for segment reporting, adjusted earnings is also used to measure segment performance.

The Company believes the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of its performance by the investor community.

Adjusted earnings should not be viewed as a substitute for net income (loss) available to BHF’s common shareholders and excludes net income (loss) attributable to noncontrolling interests and preferred stock dividends.

Adjusted earnings, which may be positive or negative, focuses on the Company’s primary businesses principally by excluding the impact of market volatility, which could distort trends.

The following are significant items excluded from total revenues, net of income tax, in calculating adjusted earnings:

The Company believes the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of its performance by the investor community by highlighting the results of operations and the underlying profitability drivers of the business.

Adjusted earnings, which may be positive or negative, focuses on the Company’s primary businesses by excluding the impact of market volatility, which could distort trends.

The following are significant items excluded from total revenues in calculating adjusted earnings:

• Net investment gains (losses);

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• Certain variable annuity GMIB fees (“GMIB Fees”).

The following are significant items excluded from total expenses, net of income tax, in calculating adjusted earnings:

The following are significant items excluded from total expenses in calculating adjusted earnings:

• Amounts associated with benefits related to GMIBs (“GMIB Costs”);

• Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”);

• Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets;

• Amortization of DAC and VOBA related to:

(i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments.

The tax impact of the adjustments mentioned above is calculated net of the statutory tax rate, which could differ from the Company’s effective tax rate.

(i) net investment gains (losses), (ii) net derivative gains (losses) and (iii) GMIB Fees and GMIB Costs.

The tax impact of the adjustments discussed above is calculated net of the statutory tax rate, which could differ from the Company’s effective tax rate.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Segment Information (continued)

The segment accounting policies are the same as those used to prepare the Company’s consolidated financial statements, except for the adjustments to calculate adjusted earnings described above.

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Segment net investment income reflects the performance of each segment’s respective invested assets.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Segment Information (continued)

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

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Interest expense $ — $ — $ — $ 163

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Segment Information (continued)

Year Ended December 31, 2020

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Interest expense $ — $ — $ — $ 184

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Segment Information (continued)

Year Ended December 31, 2019

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Interest expense $ — $ — $ — $ 191

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Segment Information (continued)

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

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Total $ 4,789 $ 4,642 $ 4,851

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Segment Information (continued)

Substantially all of the Company’s premiums, universal life and investment-type product policy fees and other revenues originated in the U.S.

Revenues derived from any individual customer did not exceed 10% of premiums, universal life and investment-type product policy fees and other revenues for the years ended December 31, 2021, 2020 and 2019.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Insurance Liabilities

Insurance liabilities are comprised of future policy benefits, policyholder account balances and other policy-related balances.

Information regarding insurance liabilities by segment, as well as Corporate & Other, was as follows at:

(In millions)

Annuities $ 54,236 $ 43,843

Life 9,327 8,960

Run-off 31,196 28,064

Corporate & Other 7,608 7,701

Total $ 102,367 $ 88,568

Insurance liabilities are comprised of future policy benefits, policyholder account balances and other policy-related balances included on the consolidated balance sheets.

Assumptions for Future Policyholder Benefits and Policyholder Account Balances

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Obligations Under Funding Agreements

Brighthouse Life Insurance Company has issued fixed and floating rate funding agreements, which are denominated in either U.S.

dollars or foreign currencies, to certain special purpose entities that have issued either debt securities or commercial paper for which payment of interest and principal is secured by such funding agreements.

The Company had obligations outstanding under the funding agreements of $ 144 million and $ 134 million at December 31, 2020 and 2019, respectively, which are reported in policyholder account balances.

Brighthouse Life Insurance Company is a member of the Federal Home Loan Bank (“FHLB”) of Atlanta and holds common stock in certain regional banks in the FHLB system.

Holdings of FHLB common stock carried at cost were $ 39 million at both December 31, 2020 and 2019.

Brighthouse Life Insurance Company has an active funding agreement program with FHLB of Atlanta, along with inactive funding agreement programs with certain regional banks in the FHLB system.

The Company had obligations outstanding under these funding agreements of $ 595 million at both December 31, 2020 and 2019, which are reported in policyholder account balances.

Funding agreements are issued to FHLBs in exchange for cash, for which the FHLBs have been granted liens on certain assets, some of which are in their custody, including RMBS, to collateralize the Company’s obligations under the funding agreements.

Institutional Spread Margin Business

Brighthouse Life Insurance Company has issued unsecured fixed and floating rate funding agreements to certain special purpose entities that have issued either debt securities or commercial paper for which payment of interest and principal is secured by such funding agreements.

The Company had obligations outstanding under these funding agreements of $ 4.7 billion and $ 0 at December 31, 2021 and 2020, respectively.

Brighthouse Life Insurance Company has a secured funding agreement program with the Federal Home Loan Bank (“FHLB”) of Atlanta.

The Company had obligations outstanding under this program of $ 900 million and $ 0 at December 31, 2021 and 2020, respectively.

Funding agreements are issued to FHLBs in exchange for cash, for which the FHLBs have been granted liens on certain assets, some of which are in their custody to collateralize the Company’s obligations under the funding agreements.

The Company is permitted to withdraw any portion of the collateral in the custody of the FHLBs as long as there is no event of default and the remaining qualified collateral is sufficient to satisfy the collateral maintenance level.

Upon any event of default by the Company, the FHLBs’ recovery on the collateral is limited to the amount of the Company’s liabilities to the FHLBs.

Brighthouse Life Insurance Company has a funding agreement program with the Federal Agricultural Mortgage Corporation and its affiliate Farmer Mac Mortgage Securities Corporation (“Farmer Mac”), pursuant to which the parties may agree to enter into funding agreements in an aggregate amount of up to $ 500 million.

Any such borrowings would be reported in policyholder account balances.

At both December 31, 2020 and 2019, there were no borrowings under this funding agreement program.

Funding agreements are issued to Farmer Mac in exchange for cash, for which Farmer Mac will be granted liens on certain assets, including agricultural loans, to collateralize the Company’s obligations under the funding agreements.

See Note 6 for information on invested assets pledged as collateral in connection with funding agreements.

Brighthouse Life Insurance Company has a secured funding agreement program with the Federal Agricultural Mortgage Corporation and its affiliate Farmer Mac Mortgage Securities Corporation (“Farmer Mac”).

The Company had obligations outstanding under this program of $ 125 million and $ 0 at December 31, 2021 and 2020, respectively.

Funding agreements are issued to Farmer Mac in exchange for cash, for which Farmer Mac have been granted liens on certain assets to collateralize the Company’s obligations under the funding agreements.

Upon any event of default by the Company, Farmer Mac’s recovery on the collateral is limited to the amount of the Company’s liabilities to Farmer Mac.

See Note 6 for information on invested assets pledged as collateral in connection with funding agreements.

Inactive Funding Agreement Programs

Brighthouse Life Insurance Company issued a floating rate funding agreement, which is denominated in foreign currency, to a special purpose entity that issued debt securities for which payment of interest and principal is secured by such funding agreement.

The Company had an obligation outstanding under this funding agreement of $ 134 million and $ 144 million at December 31, 2021 and 2020, respectively.

The remaining obligation at December 31, 2021 matures in June 2022.

Brighthouse Life Insurance Company had obligations with certain regional banks in the FHLB system outstanding under an inactive program of $ 500 million and $ 595 million at December 31, 2021 and 2020, respectively.

The remaining obligation at December 31, 2021 matures in February 2025.

Brighthouse Financial, Inc.

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Balance at December 31, $ 5,377 $ 4,911 $ 5,448

Information regarding total DAC and VOBA by segment, as well as Corporate & Other, was as follows at:

(In millions)

Annuities $ 3,829 $ 4,327

Life 971 1,019

Corporate & Other 106 97

Total $ 4,911 $ 5,448

The estimated future VOBA amortization expense to be reported in other expenses for the next five years is $ 73 million in 2022, $ 63 million in 2023, $ 54 million in 2024, $ 46 million in 2025 and $ 40 million in 2026.

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Balance at December 31, $ 307 $ 310 $ 379

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

The Company enters into reinsurance agreements primarily as a purchaser of reinsurance for its various insurance products and also as a provider of reinsurance for some insurance products issued by former affiliated and unaffiliated companies.

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The Company periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to establish assets and liabilities relating to ceded and assumed reinsurance and evaluates the financial strength of counterparties to its reinsurance agreements using criteria similar to that evaluated in the security impairment process discussed in Note 6.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Reinsurance (continued)

Annuities and Life

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Reinsurance Recoverables

The Company reinsures its business through a diversified group of highly rated reinsurers.

The Company reinsures its business through a diversified group of primarily highly rated reinsurers.

The Company analyzes recent trends in arbitration and litigation outcomes in disputes, if any, with its reinsurers and monitors ratings and the financial strength of its reinsurers.

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The Company had $ 6.0 billion and $ 5.9 billion of unsecured reinsurance recoverable balances with third-party reinsurers at December 31, 2021 and 2020, respectively.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Reinsurance (continued)

The Company records an allowance for credit losses which is a valuation account that reduces reinsurance recoverable balances to present the net amount expected to be collected from reinsurers.

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Impairments are then determined based on probable and estimable defaults.

At December 31, 2020, the Company had an allowance for credit losses of $ 10 million on its reinsurance recoverable balances.

At both December 31, 2021 and 2020, the Company had an allowance for credit losses of $ 10 million on its reinsurance recoverable balances.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Reinsurance (continued)

At December 31, 2021, the Company had $ 15.1 billion of net ceded reinsurance recoverables with third-party reinsurers.

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Net policyholder benefits and claims $ 3,443 $ 5,711 $ 3,670

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Reinsurance (continued)

The amounts on the consolidated balance sheets include the impact of reinsurance.

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Other liabilities $ 3,245 $ 32 $ 1,227 $ 4,504 $ 3,832 $ 31 $ 1,148 $ 5,011

Reinsurance agreements that do not expose the Company to a reasonable possibility of a significant loss from insurance risk are recorded using the deposit method of accounting.

The deposit assets on reinsurance were $ 3.2 billion and $ 2.2 billion at December 31, 2020 and 2019, respectively.

The deposit liabilities on reinsurance were $ 2.6 billion and $ 2.3 billion at December 31, 2020 and 2019, respectively.

Related Party Reinsurance Transactions

The Company has reinsurance agreements with certain MetLife, Inc.

subsidiaries, including Metropolitan Life Insurance Company (“MLIC”), Metropolitan Tower Life Insurance Company and MetLife Reinsurance Company of Vermont, all of which were related parties until the completion of the MetLife Divestiture (see Note 1).

Information regarding the significant effects of reinsurance with former MetLife affiliates included on the consolidated statements of operations was as follows:

December 31, 2018

(In millions)

Reinsurance assumed $ 6

Reinsurance ceded ( 201 )

Net premiums $ ( 195 )

Universal life and investment-type product policy fees

Reinsurance assumed $ 45

Reinsurance ceded 1

Net universal life and investment-type product policy fees $ 46

Other revenues

Reinsurance assumed $ —

Reinsurance ceded 18

Net other revenues $ 18

Policyholder benefits and claims

Reinsurance assumed $ 9

Reinsurance ceded ( 178 )

Net policyholder benefits and claims $ ( 169 )

The Company cedes risks to MLIC related to guaranteed minimum benefits written directly by the Company.

The ceded reinsurance agreement contains embedded derivatives and changes in the estimated fair value are also included within net derivative gains (losses).

Net derivative gains (losses) associated with the embedded derivatives were less than ($ 1 ) million for the year ended December 31, 2018.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Reinsurance (continued)

Reinsurance agreements that do not expose the Company to a reasonable possibility of a significant loss from insurance risk are recorded using the deposit method of accounting.

The deposit assets on reinsurance at both December 31, 2021 and 2020 were $ 3.2 billion.

The deposit liabilities on reinsurance were $ 3.3 billion and $ 2.6 billion at December 31, 2021 and 2020, respectively.

See Note 8 for information about the fair value hierarchy for investments and the related valuation methodologies.

In connection with the adoption of new guidance related to the credit losses (see Note 1), effective January 1, 2020, the Company updated its accounting policies on certain investments.

In connection with the adoption of new guidance related to the credit losses, effective January 1, 2020, the Company updated its accounting policies on certain investments.

Any accounting policy updates required by the new guidance are described in this footnote.

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Total fixed maturity securities $ 79,246 $ 11 $ 8,806 $ 459 $ 87,582 $ 70,529 $ 2 $ 12,117 $ 149 $ 82,495

The Company held non-income producing fixed maturity securities with an estimated fair value of $ 5 million at December 31, 2020.

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

The Company held non-income producing fixed maturity securities with an estimated fair value of $ 3 million and $ 5 million at December 31, 2021 and 2020, respectively.

Maturities of Fixed Maturity Securities

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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 $ 514 million at December 31, 2020 and is included in accrued investment income.

The accrued interest receivable on fixed maturity securities totaled $ 534 million and $ 514 million at December 31, 2021 and 2020, respectively, and is included in accrued investment income.

Brighthouse Financial, Inc.

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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 $ 2 million, relating to six securities at December 31, 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 $ 11 million, relating to eight securities at December 31, 2021.

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.

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The changes in the allowance for credit losses by sector were as follows:

Corporate Foreign Corporate Total

Corporate CMBS Foreign Corporate Total

(In millions)

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Balance at December 31, 2020 2 — — 2

Allowance on securities where credit losses were not previously recorded 2 2 7 11

Reductions for securities sold ( 2 ) — — ( 2 )

Change in allowance on securities with an allowance recorded in a previous period — — — —

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

Balance at December 31, 2021 $ 2 $ 2 $ 7 $ 11

_______________

(1) The Company recorded total write-offs of $ 13 million for the year ended December 31, 2020.

(1) The Company recorded total write-offs of $ 5 million and $ 13 million for the years ended December 31, 2021 and 2020, respectively.

Brighthouse Financial, Inc.

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(1) Purchases of mortgage loans from third parties were $ 815 million and $ 962 million for the years ended December 31, 2020 and 2019, respectively, and were primarily comprised of residential mortgage loans.

(1) Purchases of mortgage loans from third parties were $ 2.1 billion and $ 815 million for the years ended December 31, 2021 and 2020, respectively, and were primarily comprised of residential mortgage loans.

Allowance for Credit Losses for Mortgage Loans

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An allowance for credit losses is generally not estimated on an accrued interest receivable, rather when a loan is placed in nonaccrual status the associated accrued interest receivable balance is written off with a corresponding reduction to net investment income.

For mortgage loans that are granted payment deferrals due to the worldwide pandemic sparked by the novel coronavirus (“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 December 31, 2020.

The accrued interest receivable on mortgage loans is included in accrued investment income and totaled $ 89 million at December 31, 2020.

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 both December 31, 2021 and 2020.

The accrued interest receivable on mortgage loans is included in accrued investment income and totaled $ 95 million and $ 89 million at December 31, 2021 and 2020, respectively.

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.

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Balance at December 31, 2020

Current period provision 23 ( 3 ) 7 27

PCD credit allowance — — 2 2

Balance at December 31, 2021

$ 67 $ 12 $ 44 $ 123

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Purchases of PCD mortgage loans are summarized as follows:

Year Ended December 31, 2020

(In millions)

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Total $ 5,793 $ 1,349 $ 2,821 $ 2,384 $ 1,199 $ 6,427 $ 19,973

2020 2019 2018 2017 2016 Prior Total

(In millions)

December 31, 2020

Commercial mortgage loans

Loan-to-value ratios:

Less than 65% $ 317 $ 1,527 $ 1,004 $ 515 $ 1,109 $ 2,808 $ 7,280

65% to 75% 200 450 482 322 59 521 2,034

76% to 80% — — — 44 79 8 131

Greater than 80% — — 29 — 6 234 269

Total commercial mortgage loans 517 1,977 1,515 881 1,253 3,571 9,714

Agricultural mortgage loans

Loan-to-value ratios:

Less than 65% 569 526 749 391 417 663 3,315

65% to 75% 81 81 10 33 — 18 223

Total agricultural mortgage loans 650 607 759 424 417 681 3,538

Residential mortgage loans

Performing 214 381 413 131 70 1,375 2,584

Nonperforming 2 6 4 — 1 53 66

Total residential mortgage loans 216 387 417 131 71 1,428 2,650

Total $ 1,383 $ 2,971 $ 2,691 $ 1,436 $ 1,741 $ 5,680 $ 15,902

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

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

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A debt-service coverage ratio greater than 1.00 times indicates an excess of net operating income over the debt-service payments.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

Past Due Mortgage Loans by Portfolio Segment

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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.

At December 31, 2020, $ 38 million of the COVID-19 pandemic modified loans were classified as delinquent.

At December 31, 2021 and 2020, $ 30 million and $ 38 million, respectively, 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:

December 31, 2020

Commercial Agricultural Residential Total

Commercial Agricultural Residential Total Commercial Agricultural Residential Total

(In millions)

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Total $ 12,187 $ 4,163 $ 3,623 $ 19,973 $ 9,714 $ 3,538 $ 2,650 $ 15,902

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

Mortgage Loans in Nonaccrual Status by Portfolio Segment

Mortgage loans are placed in a nonaccrual status if there are concerns regarding collectability of future payments or the loan is past due, unless the past due loan is well collateralized and in the process of foreclosure.

Mortgage loans are placed in a nonaccrual status if there are concerns regarding collectability of future payments or the loan is past due, unless the past due loan is well collateralized.

To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the impacted loans generally will not be reported as in a nonaccrual status during the period of deferral.

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 December 31, 2020, $ 38 million of the COVID-19 pandemic modified loans were in nonaccrual status.

At December 31, 2021 and 2020, $ 30 million and $ 38 million, respectively, 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:

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December 31, 2021

$ — $ — $ 59 $ 59

December 31, 2020

$ — $ — $ 66 $ 66

(1) The Company had $ 7 million of residential mortgage loans in nonaccrual status for which there was no related allowance for credit losses for the year ended December 31, 2020.

Current period investment income on mortgage loans in nonaccrual status was $ 2 million for the year ended December 31, 2020.

_______________

(1) The Company had $ 0 and $ 7 million of residential mortgage loans in nonaccrual status for which there was no related allowance for credit losses for the years ended December 31, 2021 and 2020, respectively.

Current period investment income on mortgage loans in nonaccrual status was $ 1 million and $ 2 million for the years ended December 31, 2021 and 2020, respectively.

Modified Mortgage Loans by Portfolio Segment

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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 year ended December 31, 2020.

The Company did not have a significant amount of mortgage loans modified in a TDR during both the years ended December 31, 2021 and 2020.

Short-term modifications made on a good faith basis to borrowers who were not more than 30 days past due at December 31, 2019 and in response to the COVID-19 pandemic are not considered TDRs.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

Other Invested Assets

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See Note 7 for information about freestanding derivatives with positive estimated fair values.

Other invested assets also includes tax credit and renewable energy partnerships, leveraged leases and FHLB stock.

Other invested assets also includes FHLB stock, tax credit and renewable energy partnerships and leveraged leases.

Leveraged Leases

The carrying value of leveraged leases at December 31, 2020 and 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 was $ 49 million and $ 50 million at December 31, 2021 and 2020, respectively.

The allowance for credit losses was $ 13 million, at both December 31, 2021 and 2020.

Rental receivables are generally due in periodic installments.

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Unrealized investment gains (losses) on fixed maturity securities and the effect on DAC, VOBA, DSI and future policy benefits, that would result from the realization of the unrealized gains (losses), are included in net unrealized investment gains (losses) in AOCI.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

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

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(In millions)

Balance at December 31, $ 3,283 $ 763 $ 1,726

Unrealized investment gains (losses) change due to cumulative effect, net of income tax — — ( 79 )

Balance at January 1, $ 5,761 $ 3,283 $ 763

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government and its agencies, at both December 31, 2021 and 2020.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

Securities Lending

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Cash collateral received from counterparties (2) $ 4,611 $ 3,674

Securities collateral received from counterparties (3) $ 2 $ —

Reinvestment portfolio — estimated fair value $ 4,730 $ 3,830

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(2) Included within payables for collateral under securities loaned and other transactions.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

(3) Securities collateral received from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reported on the consolidated financial statements.

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

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government and agency $ 1,094 $ 2,125 $ 1,391 $ 4,610 $ 937 $ 2,300 $ 437 $ 3,674

corporate 1 — — 1 — — — —

Total $ 1,095 $ 2,125 $ 1,391 $ 4,611 $ 937 $ 2,300 $ 437 $ 3,674

_______________

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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 in normal market conditions, or both.

The estimated fair value of the securities on loan related to the cash collateral on open at December 31, 2020 was $ 920 million, primarily comprised of U.S.

The estimated fair value of the securities on loan related to the cash collateral on open at December 31, 2021 was $ 1.1 billion, primarily comprised of 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, 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 December 31, 2020.

government and agency securities, non-agency RMBS and CMBS) with 52 % invested in agency RMBS, U.S.

government and agency securities and short-term investments at December 31, 2021.

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.

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_______________

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

(1) The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $ 25 million and $ 60 million of the assets on deposit represents restricted cash and cash equivalents at December 31, 2021 and 2020, respectively.

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See “— Securities Lending” for information regarding securities on loan.

In addition, the Company’s investment in FHLB common stock, which is considered restricted until redeemed by the issuer, was $ 70 million and $ 39 million at redemption value at December 31, 2021 and 2020, respectively.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

Collectively Significant Equity Method Investments

The Company holds investments in limited partnerships and LLCs consisting of leveraged buy-out funds, hedge funds, private equity funds, joint ventures and other funds.

The Company holds investments in limited partnerships and LLCs consisting of leveraged buy-out funds, private equity funds, joint ventures and other funds.

The portion of these investments accounted for under the equity method had a carrying value of $ 4.3 billion at December 31, 2021.

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Variable Interest Entities

The Company has invested in legal entities that are variable interest entities (“VIE”).

VIEs are consolidated when the investor is the primary beneficiary.

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.

A variable interest entity (“VIE”) is a legal entity that does not have sufficient equity at risk to finance its activities or is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not substantively participate in the gains and losses of the entity.

The Company enters into various arrangements with VIEs in the normal course of business and has invested in legal entities that are VIEs.

VIEs are consolidated when it is determined that the Company is the primary beneficiary.

A primary beneficiary is the variable interest holder in a VIE with both (i) the power to 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.

In addition, the evaluation of whether a legal entity is a VIE and if the Company is a primary beneficiary includes a review of the capital structure of the VIE, the related contractual relationships and terms, the nature of the operations and purpose of the VIE, the nature of the VIE interests issued and the Company’s involvement with the entity.

There were no material VIEs for which the Company has concluded that it is the primary beneficiary at either December 31, 2021 or 2020.

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The Company holds investments in certain limited partnerships and LLCs which are VIEs.

These ventures include limited partnerships, LLCs, private equity funds, hedge funds, and to a lesser extent tax credit and renewable energy partnerships.

These ventures include limited partnerships, LLCs, private equity funds, and to a lesser extent tax credit and renewable energy partnerships.

The Company is not considered the primary beneficiary, or consolidator, when its involvement takes the form of a limited partner interest and is restricted to a role of a passive investor, as a limited partner’s interest does not provide the Company with any substantive kick-out or participating rights, nor does it provide the Company with the power to direct the activities of the fund.

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_______________

(1) Includes net investment income pertaining to other limited partnership interests of $ 225 million, $ 181 million and $ 211 million for the years ended December 31, 2020, 2019, and 2018, respectively.

See “— Related Party Investment Transactions” for discussion of related party investment expenses.

(1) Includes net investment income pertaining to other limited partnership interests of $ 1.3 billion, $ 225 million and $ 181 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Brighthouse Financial, Inc.

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Net investment gains (losses) $ ( 4 ) $ 312 $ 106

Related Party Investment Transactions

All of the transactions reported as related party activity occurred prior to the MetLife Divestiture (see Note 1).

The Company receives investment administrative services from MetLife Investment Management, LLC (formerly known as MetLife Investment Advisors, LLC), which was considered a related party investment manager until the completion of the MetLife Divestiture.

The related investment administrative service charges were $ 50 million for the year ended December 31, 2018.

Accounting for Derivatives

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Interest rate swaps are used in non-qualifying hedging relationships.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Derivatives (continued)

Interest rate caps:

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Interest rate caps are used in non-qualifying hedging relationships.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Derivatives (continued)

Interest rate swaptions:

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Credit default swaptions are used in non-qualifying hedging relationships.

Equity Derivatives

Equity Market Derivatives

Equity index options:

The Company uses equity index options primarily to hedge minimum guarantees embedded in certain variable annuity products against adverse changes in equity markets.

Additionally, the Company uses equity index options to hedge index-linked annuity products against adverse changes in equity markets.

Additionally, the Company uses equity index options to hedge index-linked annuity products and certain invested assets against adverse changes in equity markets.

Certain of these contracts may also contain settlement provisions linked to interest rates (“hybrid options”).

Equity index options are used in non-qualifying hedging relationships.

Equity total return swaps:

The Company uses equity total return swaps to hedge minimum guarantees embedded in certain variable annuity products against adverse changes equity markets.

The Company uses equity total return swaps to hedge minimum guarantees embedded in certain variable annuity products against adverse changes in equity markets.

Additionally, the Company uses equity total return swaps to hedge index-linked annuity products against adverse changes in equity markets.

Equity total return swaps are used in non-qualifying hedging relationships.

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Credit default swaps — written Credit 1,724 39 1 1,755 41 —

Credit default options Credit 100 — — — — —

Credit default swaptions Credit 150 — — 100 — —

Equity index options Equity market 24,692 1,155 877 30,976 1,071 838

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Equity total return swaps Equity market 32,719 493 588 15,056 143 822

Hybrid options Equity market 900 8 — 600 — —

Total non-designated or non-qualifying derivatives 87,469 2,867 1,622 89,515 3,382 1,912

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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;

(ii) derivatives that economically hedge insurance liabilities and generally do not qualify for hedge accounting because they do not meet the criteria of being “highly effective” as outlined in ASC 815;

(iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income;

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Year Ended December 31, 2021

Net Derivative Gains (Losses) Recognized for Derivatives Net Derivative Gains (Losses) Recognized for Hedged Items Net Investment Income Policyholder Benefits and Claims 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)

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Credit derivatives 17 — — —

Equity derivatives ( 1,367 ) — — — —

Equity market derivatives ( 486 ) — — —

Embedded derivatives ( 1,341 ) — — —

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Year Ended December 31, 2020

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)

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Credit derivatives 18 — — —

Equity derivatives ( 2,476 ) — — — —

Equity market derivatives ( 1,367 ) — — —

Embedded derivatives ( 2,221 ) — — —

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Year Ended December 31, 2019

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)

Derivatives Designated as Hedging Instruments:

Fair value hedges:

Interest rate derivatives $ ( 12 ) $ 12 $ 1 $ — $ —

Total fair value hedges ( 12 ) 12 1 — —

Cash flow hedges:

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Credit derivatives 44 — — —

Equity derivatives 632 — — — —

Equity market derivatives ( 2,476 ) — — —

Embedded derivatives ( 1,192 ) — — —

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Total $ ( 1,956 ) $ ( 32 ) $ 36 $ 40

At December 31, 2020 and 2019, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions was three years and four years, respectively.

At December 31, 2021 and 2020, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions was two years and three years, respectively.

At December 31, 2021 and 2020, the balance in AOCI associated with cash flow hedges was $ 329 million and $ 173 million, respectively.

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Baa 27 1,131 5.0 26 1,072 5.2

Caa and Lower ( 1 ) 4 4.0 — — 0.0

Total $ 38 $ 1,724 4.1 $ 41 $ 1,755 4.3

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If no rating is available from a rating agency, then an internally developed rating is used.

(2) The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.

Brighthouse Financial, Inc.

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Derivatives (continued)

(2) The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.

Counterparty Credit Risk

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Certain of these arrangements also include credit-contingent provisions which permit the party with positive fair value to terminate the derivative at the current fair value or demand immediate full collateralization from the party in a net liability position, in the event that the financial strength or credit rating of the party in a net liability position falls below a certain level.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Derivatives (continued)

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:

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

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Derivatives (continued)

(2) Substantially all of the Company’s collateral arrangements provide for daily posting of collateral for the full value of the derivative contract.

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Foreign currency exchange rate — 47 — 47

Credit — — 1 1

Equity market — 1,465 1 1,466

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The amounts are presented gross in the tables above to reflect the presentation on the consolidated balance sheets.

(2) Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables and other invested assets on the consolidated balance sheets.

(2) Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables on the consolidated balance sheets.

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

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These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets, with changes in estimated fair value reported in net derivative gains (losses).

The Company determines the fair value of these embedded derivatives by estimating the present value of projected future benefits minus the present value of projected future fees using actuarial and capital market assumptions including expectations of policyholder behavior.

The Company determines the fair value of these embedded derivatives by estimating the present value of projected future benefits minus the present value of projected future fees using actuarial and capital markets assumptions including expectations of policyholder behavior.

The calculation is based on in-force business and is performed using standard actuarial valuation software which projects future cash flows from the embedded derivative over multiple risk neutral stochastic scenarios using observable risk-free rates.

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

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.

Capital markets 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.

Implied volatilities beyond the observable period are extrapolated based on observable implied volatilities and historical volatilities.

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Fair Value (continued)

The valuation of these guarantee liabilities includes nonperformance risk adjustments and adjustments for a risk margin related to non-capital market inputs.

The valuation of these guarantee liabilities includes nonperformance risk adjustments and adjustments for a risk margin related to non-capital markets inputs.

The nonperformance adjustment is determined by taking into consideration publicly available information relating to spreads in the secondary market for BHF’s debt.

These observable spreads are then adjusted to reflect the priority of these liabilities and claims-paying ability of the issuing insurance subsidiaries as compared to BHF’s overall financial strength.

Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders.

Risk margins are established to capture the non-capital markets risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders.

The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees.

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Corporate (1) Structured Securities State and

Subdivision Equity

Subdivision Foreign Government Equity

Securities Short-term Investments Net Derivatives (2) Net Embedded Derivatives (3) Separate Account Assets (4)

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Balance, January 1, 2020

$ 461 $ 117 $ 73 $ — $ 8 $ 5 $ 16 $ ( 4,031 ) $ 3

Total realized/unrealized gains (losses) included in net income (loss) (5) (6)

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$ ( 3 ) $ 1 $ — $ — $ — $ — $ ( 9 ) $ — $ —

Changes in unrealized gains (losses) included in OCI for the instruments still held as of December 31, 2021 (9)

$ ( 6 ) $ — $ — $ — $ — $ — $ 12 $ — $ —

Gains (Losses) Data for the year ended December 31, 2019:

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_______________

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Fair Value (continued)

(1) Comprised of U.S.

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For the purpose of this disclosure, these changes are presented within net investment gains (losses).

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Fair Value (continued)

(5) Amortization of premium/accretion of discount is included within net investment income.

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These tables exclude the following financial instruments:

cash and cash equivalents, accrued investment income, payables for collateral under securities loaned and other transactions and those short-term investments that are not securities and therefore are not included in the three level hierarchy table disclosed in the “— Recurring Fair Value Measurements” section.

cash and cash equivalents, accrued investment income, and payables for collateral under securities loaned and other transactions.

The estimated fair value of the excluded financial instruments, which are primarily classified in Level 2, approximates carrying value as they are short-term in nature such that the Company believes there is minimal risk of material changes in interest rates or credit quality.

All remaining balance sheet amounts excluded from the tables below are not considered financial instruments subject to this disclosure.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Fair Value (continued)

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:

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Separate account liabilities $ 1,440 $ — $ 1,440 $ — $ 1,440

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Fair Value (continued)

December 31, 2020

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Separate account liabilities $ 1,334 $ — $ 1,334 $ — $ 1,334

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Long-term Debt

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Senior notes (1) 4.700 % 2047 1,014 1,000 1,150 1,134

Term loan LIBOR plus 1.5 %

2024 — — 1,000 1,000

Senior notes (1) 3.850 % 2051 400 396 — —

Junior subordinated debentures (1) 6.250 % 2058 375 363 375 363

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(3) Includes unamortized debt issuance costs, discounts and premiums, as applicable, totaling net $ 33 million and $ 35 million for the senior notes and junior subordinated debentures on a combined basis at December 31, 2021 and 2020, respectively.

The aggregate maturities of long-term debt at December 31, 2020 were $ 2 million in each of 2021, 2022, 2023 and 2024, $ 3 million in 2025 and $ 3.5 billion thereafter.

The aggregate maturities of long-term debt at December 31, 2021 were $ 2 million in each of 2022, 2023 and 2024, $ 3 million in each of 2025 and 2026, and $ 3.2 billion thereafter.

Unsecured senior notes rank highest in priority, followed by subordinated debt consisting of junior subordinated debentures.

Interest expense related to long-term debt of $ 163 million, $ 184 million and $ 191 million for the years ended December 31, 2021, 2020 and 2019, respectively, is included in other expenses.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Long-term Debt (continued)

The Company’s debt instruments and credit and committed facilities contain certain administrative, reporting and legal covenants.

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At December 31, 2021, the Company was in compliance with these financial covenants.

During the second quarter of 2020, BHF issued $ 615 million aggregate principal amount of senior notes due May 2030 (the “2030 Senior Notes”) for aggregate net cash proceeds of $ 614 million.

In November 2021, BHF used the net proceeds from the issuances of the Series D Depositary Shares (as defined in Note 10) and the 2051 Senior Notes (as defined below) to repurchase $ 543 million principal amount of senior notes due 2027 and $ 136 million principal amount of senior notes due 2047.

In connection with this repurchase, BHF recorded a premium of $ 71 million paid in excess of the debt principal and wrote off $ 4 million of unamortized debt issuance costs, which is included in other expenses.

In November 2021, BHF issued $ 400 million aggregate principal amount of senior notes due December 2051 (the “2051 Senior Notes”) for aggregate net cash proceeds of $ 396 million.

The 2051 Senior Notes bear interest at a fixed rate of 3.850 %, payable semi-annually.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Long-term Debt (continued)

During the fourth quarter of 2020, BHF used the net proceeds from the issuance of the Series C Depositary Shares (as defined in Note 10) to repurchase $ 200 million principal amount of senior notes due 2027 and $ 350 million principal amount of senior notes due 2047.

In connection with this repurchase, BHF recorded a premium of $ 37 million paid in excess of the debt principal and wrote off $ 6 million of unamortized debt issuance costs, which is included in other expenses.

Junior Subordinated Debentures

During the third quarter of 2018, BHF issued $ 375 million of junior subordinated debentures (the “Junior Debentures”) due September 2058, which bear interest at a fixed rate of 6.25 %, payable quarterly, subject to BHF’s right to defer interest payments in accordance with the terms of the debentures.

In connection with the issuance of the Junior Debentures, BHF capitalized $ 14 million of debt issuance costs.

During the second quarter of 2020, BHF issued $ 615 million aggregate principal amount of senior notes due May 2030 (the “2030 Senior Notes”) for aggregate net cash proceeds of $ 614 million.

The 2030 Senior Notes bear interest at a fixed rate of 5.625 %, payable semi-annually.

Credit Facilities

Revolving Credit Facility

On May 7, 2019, BHF entered into an amended and restated revolving credit agreement with respect to a new $ 1.0 billion senior unsecured revolving credit facility maturing May 7, 2024 (the “2019 Revolving Credit Facility”), all of which may be used for revolving loans or letters of credit.

The 2019 Revolving Credit Facility replaced a $ 2.0 billion senior unsecured revolving credit facility maturing December 2, 2021.

At December 31, 2021, BHF maintains a $ 1.0 billion senior unsecured revolving credit facility maturing May 7, 2024 (the “Revolving Credit Facility”), which may be used for revolving loans or letters of credit.

At December 31, 2021, there were no borrowings or letters of credit outstanding under the Revolving Credit Facility.

Term Loan Facility

On February 1, 2019, BHF entered into a new term loan agreement with respect to a new $ 1.0 billion unsecured term loan facility maturing February 1, 2024 (the “2019 Term Loan Facility”), borrowed $ 1.0 billion under the 2019 Term Loan Facility, terminated its then-existing $ 600 million unsecured delayed draw term loan facility (the “2017 Term Loan Facility”) without penalty and repaid $ 600 million of borrowings outstanding under the 2017 Term Loan Facility.

Debt issuance costs incurred related to the 2019 Term Loan Facility were not significant.

During the second quarter of 2020, BHF used the aggregate net proceeds from the issuances of the 2030 Senior Notes and the Series B Depositary Shares (as defined in Note 10) to repay all outstanding borrowings under the 2019 Term Loan Facility.

On June 2, 2020, BHF terminated the 2019 Term Loan Facility without penalty.

During the second quarter of 2020, BHF used the aggregate net proceeds from the issuances of the 2030 Senior Notes and the Series B Depositary Shares (as defined in Note 10) to repay $ 1.0 billion of borrowings outstanding under an unsecured term loan facility and terminated the facility without penalty.

For the years ended December 31, 2021, 2020 and 2019, fees associated with these credit facilities were not significant.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Long-term Debt (continued)

Committed Facilities

Reinsurance Financing Arrangement

On April 28, 2017, Brighthouse Reinsurance Company of Delaware (“BRCD”) entered into a $ 10.0 billion financing arrangement with a pool of highly rated third-party reinsurers consisting of credit-linked notes.

On June 11, 2020, BRCD amended its financing arrangement to increase the maximum amount to $ 12.0 billion and extend the term by two years to 2039.

At December 31, 2021, Brighthouse Reinsurance Company of Delaware (“BRCD”) maintains a $ 12.0 billion financing arrangement with a pool of highly rated third-party reinsurers consisting of credit-linked notes that each mature in 2039.

At December 31, 2021, there were no borrowings and there was $ 11.3 billion of funding available under this financing arrangement.

1 unchanged sentence

Repurchase Facilities

On November 20, 2020, Brighthouse Life Insurance Company terminated without penalty its existing $ 2.0 billion secured committed repurchase facility with a financial institution and concurrently entered into new secured committed repurchase facilities (the “2020 Repurchase Facilities”) under which Brighthouse Life Insurance Company may continue to enter into repurchase transactions in an aggregate amount up to $ 2.0 billion for a term of up to three years.

At December 31, 2021, Brighthouse Life Insurance Company maintains secured committed repurchase facilities (the “Repurchase Facilities”) under which Brighthouse Life Insurance Company may enter into repurchase transactions in an aggregate amount up to $ 2.0 billion for a term of up to three years.

Under the Repurchase Facilities, Brighthouse Life Insurance Company may sell certain eligible securities at a purchase price based on the market value of the securities less an applicable margin based on the types of securities sold, with a concurrent agreement to repurchase such securities at a predetermined future date (up to three months) and at a price which represents the original purchase price plus interest.

At December 31, 2021, there were no borrowings under the Repurchase Facilities.

For the years ended December 31, 2020, 2019 and 2018, fees associated with this committed facility were not significant.

For the years ended December 31, 2021, 2020 and 2019, fees associated with the Repurchase Facilities were not significant.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Preferred Stock

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23,000 23,000 23,000 23,000 23,000 23,000

4.625 % Non-Cumulative Preferred Stock, Series D

14,000 14,000 14,000 — — —

Not designated 99,929,900 — — 99,943,900 — —

Total 100,000,000 70,100 70,100 100,000,000 56,100 56,100

In November 2020, BHF issued depositary shares (the “Series C Depositary Shares”), each representing a 1/1,000th ownership interest in a share of BHF’s perpetual 5.375 % Series C non-cumulative preferred stock (the “Series C Preferred Stock”) and in the aggregate representing 23,000 shares of Series C Preferred Stock, with a stated amount of $ 25,000 per share, for aggregate net cash proceeds of $ 558 million.

In November 2021, BHF issued depositary shares (the “Series D Depositary Shares”), each representing a 1/1,000th ownership interest in a share of BHF’s perpetual 4.625 % Series D non-cumulative preferred stock (the “Series D Preferred Stock”) and in the aggregate representing 14,000 shares of Series D Preferred Stock, with a stated amount of $ 25,000 per share, for aggregate net cash proceeds of $ 339 million.

Dividends, if declared, will be payable commencing on March 25, 2022 and will accrue and be payable quarterly, in arrears, at an annual rate of 4.625 % on the stated amount per share.

In connection with the issuance of the Series D Depositary Shares and the underlying Series D Preferred Stock, BHF incurred $ 11 million of issuance costs, which have been recorded as a reduction of additional paid-in capital.

Dividends, if declared, will accrue and be payable quarterly, in arrears, at an annual rate of 5.375 % on the stated amount per share.

In connection with the issuance of the Series C Depositary Shares and the underlying Series C Preferred Stock, BHF incurred $ 17 million of issuance costs, which have been recorded as a reduction of additional paid-in capital.

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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.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Equity (continued)

In March 2019, BHF issued depositary shares, each representing a 1/1,000th ownership interest in a share of BHF’s perpetual 6.600 % Series A non-cumulative preferred stock (the “Series A Preferred Stock”) and in the aggregate representing 17,000 shares of Series A Preferred Stock, with a stated amount of $ 25,000 per share, for aggregate net cash proceeds of $ 412 million.

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

The Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock (together, the “Preferred Stock”) rank equally with each other.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Equity (continued)

The Series A Preferred Stock, the Series B Preferred Stock, Series C Preferred Stock and the Series D Preferred Stock (together, the “Preferred Stock”) rank equally with each other.

The Preferred Stock ranks senior to common stock with respect to the payment of dividends and distributions of assets upon liquidation, dissolution or winding-up of the Company.

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The Preferred Stock is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company or its subsidiaries and is not subject to any mandatory redemption, sinking fund, retirement fund, purchase fund or similar provisions.

Each series of the Preferred Stock is redeemable at the Company’s option in whole or in part on or after a specified optional redemption date applicable to that series (March 25, 2024 for the Series A Preferred Stock, June 25, 2025 for the Series B Preferred Stock and December 25, 2025 for the Series C Preferred Stock) at a redemption price equal to $ 25,000 per share, plus any accrued but unpaid dividends.

Each series of the Preferred Stock is redeemable at the Company’s option in whole or in part on or after a specified optional redemption date applicable to that series (March 25, 2024 for the Series A Preferred Stock, June 25, 2025 for the Series B Preferred Stock, December 25, 2025 for the Series C Preferred Stock and December 25, 2026 for the Series D Preferred Stock) at a redemption price equal to $ 25,000 per share, plus any accrued but unpaid dividends.

Prior to the optional redemption date applicable to each series of Preferred Stock, the Preferred Stock is redeemable at the Company’s option in whole but not in part within 90 days of the occurrence of (i) a specified rating agency event or (ii) a specified regulatory capital event, in each case at a specified redemption price.

The declaration, record and payment dates, as well as per share and aggregate dividend amounts for BHF’s preferred stock by series for the years ended December 31, 2021, 2020 and 2019 were as follows:

Series A Series B

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

Series A Series B Series C

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

(In millions, except per share data)

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

February 14, 2020 March 10, 2020 March 25, 2020 412.50 7 — — — —

$ 1,650.00 $ 28 $ 1,017.19 $ 16 $ — $ —

November 15, 2019 December 10, 2019 December 26, 2019 $ 412.50 $ 7 $ — $ — $ — $ —

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

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

$ 1,237.50 $ 21 $ — $ — $ — $ —

See Note 16 for information relating to preferred dividends declared subsequent to December 31, 2021.

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(1) Includes shares of common stock withheld with respect to tax withholding obligations associated with the vesting of share-based compensation awards under the Company’s publicly announced benefit plans or programs.

On August 5, 2018, BHF authorized the repurchase of up to $ 200 million of its common stock.

On May 3, 2019, BHF authorized the repurchase of up to an additional $ 400 million of its common stock.

On February 6, 2020, BHF authorized the repurchase of up to an additional $ 500 million of its common stock.

Future repurchases may be made through open market purchases, including pursuant to 10b5-1 plans or pursuant to accelerated stock repurchase plans, or through privately negotiated transactions, from time to time at management’s discretion in accordance with applicable legal requirements.

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

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

See Note 17 for information relating to the authorization of share repurchases subsequent to December 31, 2020.

On August 2, 2021, BHF authorized the repurchase of up to $ 1.0 billion of its common stock, which is in addition to the $ 200 million repurchase announced on February 10, 2021.

Repurchases under the August 2, 2021 authorization may be made through open market purchases, including pursuant to a 10b5-1 plan or pursuant to accelerated stock repurchase plans, or through privately negotiated transactions, from time to time at management’s discretion in accordance with applicable legal requirements.

During the years ended December 31, 2021, 2020 and 2019, BHF repurchased 10,703,165 shares, 18,097,084 shares and 11,658,208 shares, respectively, of its common stock through open market purchases pursuant to 10b5-1 plans for $ 499 million, $ 473 million and $ 442 million, respectively.

1 unchanged sentence

Share-Based Compensation Plans

The Company’s share-based compensation plans provide awards to employees and non-employee directors and may be in the form of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, or other share-based awards.

The Company’s share-based compensation plans provide awards to employees and non-employee directors and may be in the form of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units (“RSU”), performance shares, performance share units (“PSU”), or other share-based awards.

Additionally, employees may purchase shares at a discount under an employee stock purchase plan (the “ESPP”).

The Company also granted restricted stock units to certain employees and non-employee directors on September 8, 2017, shortly following the Separation (the “Founders’ Grant”).

The employee stock incentive plan and the non-employee director stock compensation plan were each approved at the BHF annual meeting of stockholders held on May 23, 2018.

The aggregate number of authorized shares available for issuance at December 31, 2021 under the Company’s various share-based compensation plans was 6,241,114 .

The Company issues new shares to satisfy vested RSUs and PSUs, as well as stock option exercises.

All share-based compensation is measured at fair value as of the grant date.

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Unless a material deviation from the assumed forfeiture rate is observed during the term in which the awards are expensed, the Company recognizes any adjustment necessary to reflect differences in actual experience in the period the award becomes payable or exercisable.

Compensation expense related to share-based awards, which is included in other expenses, is principally related to the issuance of restricted stock units and performance units with other costs incurred relating to stock options.

Compensation expense related to share-based awards, which is included in other expenses, is principally related to the issuance of restricted stock units and performance share units with other costs incurred relating to stock options.

The Company grants the majority of each year’s awards in the first quarter of the year.

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(In millions)

Restricted stock units, Founders’ Grant $ — $ — $ 31

Restricted stock units $ 15 $ 15 $ 7

RSUs $ 13 $ 15 $ 15

Stock options — — 1

Performance share units $ 5 $ 4 $ —

Employee stock purchase plan 1 1 1

The share-based compensation cost for the Founders’ Grant was fully recognized by September 30, 2018.

Unrecognized share-based compensation for other grants related to restricted stock units, stock options and performance share units was $ 17 million , $ 24 million and $ 13 million at December 31, 2020, 2019 and 2018, respectively, with a weighted average remaining recognition period of four quarters.

Total share-based compensation expense $ 23 $ 21 $ 21

Income tax benefit $ 5 $ 4 $ 4

At December 31, 2021, unrecognized share-based compensation and the weighted average remaining recognition period was $ 8 million and 0.8 years, respectively, for RSUs and $ 14 million and 1.3 years, respectively, for PSUs.

Equity Awards

Restricted Stock Units (“RSU”)

Restricted Stock Units

RSUs are units that, if vested, are payable in shares of BHF common stock.

The Company does not credit RSUs with dividend-equivalents as RSUs do not accrue dividends.

Accordingly, the estimated fair value of RSUs is based upon the closing price of shares on the date of grant, less a forfeiture rate.

With the exception of the Founders’ Grant, most RSUs use graded vesting and vest in thirds on, or shortly after, the first three anniversaries of their grant date, while other RSUs vest in their entirety on the specified anniversary of their grant date.

Accordingly, the estimated fair value of RSUs is based upon the closing price of shares on the date of grant.

Most RSUs use graded vesting and vest in thirds on, or shortly after, the first three anniversaries of their grant date, while other RSUs vest in their entirety on the specified anniversary of their grant date.

Vesting is subject to continued service, except for employees who meet specified age and service criteria, and in certain other limited circumstances.

Performance Share Units (“PSU”)

Performance Share Units

PSUs are units that, if vested, are multiplied by a performance factor to produce a final number of BHF common stock shares.

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Vesting is subject to continued service, except for employees who meet specified age and service criteria, and in certain other limited circumstances.

The performance factors are based on the achievement of corporate expense reductions, capital return targets and statutory expense ratio over the respective performance period depending on year of issue.

The performance factors are based on the achievement of corporate expense reduction, capital return, net cash flow to Brighthouse Holdings, LLC and statutory expense ratio targets over the respective performance period depending on year of issue.

For awards granted for performance periods in progress through December 31, 2021, the vested PSUs will be multiplied by a performance factor up to a maximum payout of 150 %.

Assuming the Company has met certain threshold performance goals, the Compensation Committee of BHF’s Board of Directors will determine the performance factor in its discretion.

The Company estimates the fair value of performance shares semi-annually until they become payable.

Assuming the Company has met certain threshold performance targets, the Compensation and Human Capital Committee of BHF’s Board of Directors will determine the performance factor at its discretion.

The following table presents a summary of PSU and RSU activity:

Units Weighted Average Grant Date Fair Value Units Weighted Average Grant Date Fair Value

Outstanding at January 1, 2020 588,729 $ 41.27 253,180 $ 41.21

Nonvested at January 1, 2021

791,100 $ 37.80 453,971 $ 38.64

Granted 309,036 $ 41.81 310,402 $ 41.26

Performance factor adjustment — $ — 17,110 $ 48.10

Forfeited 327 $ 40.80 ( 4,220 ) $ 41.26

Paid ( 241,974 ) $ 41.90 — $ —

Outstanding at December 31, 2020 791,100 $ 37.80 453,971 $ 38.64

Vested at December 31, 2020 — $ — — $ —

Vested ( 375,886 ) $ 39.14 ( 74,157 ) $ 48.10

Nonvested at December 31, 2021

724,577 $ 38.80 703,106 $ 39.01

Brighthouse Financial, Inc.

1 unchanged sentence

Equity (continued)

The weighted average grant date fair value of RSUs granted during the years ended December 31, 2020 and 2019, was $ 35.68 and $ 38.81 , respectively.

The weighted average grant date fair value of PSUs granted during the years ended December 31, 2020 and 2019, was $ 35.84 and $ 38.97 , respectively.

The total fair value of RSUs that vested during the years ended December 31, 2021, 2020 and 2019, was $ 15 million, $ 10 million and $ 6 million, respectively.

The total fair value of PSUs that vested during the years ended December 31, 2021, 2020 and 2019, was $ 4 million, $ 0 and $ 0 , respectively.

Stock Options

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Vesting is subject to continued service, except for employees who meet specified age and service criteria, and in certain other limited circumstances.

In May 2018, the Company granted 242,560 options at a weighted average exercise price of $ 53.47 for aggregate intrinsic value of $ 0 .

During the year ended December 31, 2020, no stock options were granted or exercised, and 9,121 options were forfeited or expired.

The Company estimates the fair value of stock options on the date of grant using the Black-Scholes model.

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and expected option life.

The following table presents the weighted average assumptions used to determine the grant-date fair value of stock options that BHF has granted:

Year Ended December 31, 2018 (1)

Risk-free rate of return 2.93 %

Expected volatility 25.00 %

Expected option life, years 5.8 years

Weighted average exercise price of stock options granted $ 53.47

Weighted average fair value of stock options granted $ 12.54

_______________

(1) There were no stock options granted during the years ended December 31, 2020 and 2019.

At December 31, 2021, there were 187,371 stock options outstanding and exercisable with a weighted average exercise price of $ 53.47 and aggregate intrinsic value of $ 0 , which expire on February 29, 2028.

During the year ended December 31, 2021, there were no stock options granted, exercised, forfeited or expired.

During the years ended December 31, 2020 and 2019, no stock options were granted or exercised.

Employee Stock Purchase Plan Shares

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Employees purchase a variable number of shares of stock through payroll deductions elected just prior to the beginning of the offering period.

During the years ended December 31, 2020, 2019 and 2018 117,950 shares, 68,897 shares and 38,898 shares, respectively, were purchased.

During the years ended December 31, 2021, 2020 and 2019, employees purchased 73,999 shares, 117,950 shares and 68,897 shares, respectively.

The weighted average per share fair value of the discount under the ESPP was $ 10.06 , $ 8.34 and $ 6.99 during the years ended December 31, 2021, 2020 and 2019, respectively, which was recorded in other expenses.

Statutory Equity and Income

Statutory Financial Information

The states of domicile of the Company’s insurance subsidiaries impose RBC requirements that were developed by the National Association of Insurance Commissioners (“NAIC”).

Regulatory compliance is determined by a ratio of a company’s total adjusted capital (“TAC”), calculated in the manner prescribed by the NAIC to its authorized control level RBC (“ACL RBC”), calculated in the manner prescribed by the NAIC, based on the statutory-based filed financial statements.

Companies below specific trigger levels or ratios are classified by their respective levels, each of which requires specified corrective action.

The minimum level of TAC before corrective action commences is twice ACL RBC.

The requirements are used by regulators to assess the minimum amount of statutory capital needed for an insurance company to support its operations, based on its size and risk profile.

RBC is based on the statutory financial statements and is calculated in a manner prescribed by the NAIC, with the RBC ratio equal to the Company’s Total Adjusted Capital (“TAC”) divided by the Company Action Level.

Companies below specific trigger levels or RBC ratios are subject to specified corrective action.

The minimum level of TAC before corrective action commences is the Company Action Level RBC.

The RBC ratios for the Company’s insurance subsidiaries were each in excess of 400% for all periods presented.

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The Company has a reinsurance subsidiary, BRCD which reinsures risks including level premium term life and ULSG assumed from other Brighthouse Financial life insurance subsidiaries.

BRCD, with the explicit permission of the Delaware Insurance Commissioner (“Delaware Commissioner”), has included, as admitted assets, the value of credit-linked notes, serving as collateral, which resulted in higher statutory capital and surplus of $ 8.0 billion and $ 9.0 billion for the years ended December 31, 2020 and 2019, respectively.

The statutory net income (loss) of BRCD was $ 145 million, ($ 316 ) million and ($ 1.1 ) billion for the years ended December 31, 2020, 2019 and 2018, respectively, and the combined statutory capital and surplus, including the aforementioned prescribed practices, were $ 624 million and $ 572 million at December 31, 2020 and 2019, respectively.

BRCD, with the explicit permission of the Delaware Insurance Commissioner (“Delaware Commissioner”), has included the value of credit-linked notes as admitted assets, which resulted in higher statutory capital and surplus of $ 8.6 billion and $ 8.0 billion for the years ended December 31, 2021 and 2020, respectively.

The statutory net income (loss) of BRCD was $ 543 million, $ 145 million and ($ 316 ) million for the years ended December 31, 2021, 2020 and 2019, respectively, and the combined statutory capital and surplus, including the aforementioned prescribed practices, were $ 644 million and $ 624 million at December 31, 2021 and 2020, respectively.

Dividend Restrictions

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(2) Reflects all amounts paid, including those requiring regulatory approval.

(3) Dividends paid by NELICO in 2018, including a $ 65 million ordinary cash dividend and a $ 335 million extraordinary dividend comprised of $ 135 million of cash and a $ 200 million surplus note, were paid to its parent, BH Holdings, LLC.

Brighthouse Financial, Inc.

14 unchanged sentences

Under BRCD’s plan of operations, no dividend or distribution may be made by BRCD without the prior approval of the Delaware Commissioner.

During the year ended December 31, 2021, BRCD paid an extraordinary dividend in the form of the settlement of affiliated reinsurance balances of $ 400 million, invested assets of $ 197 million and cash of $ 3 million.

During the year ended December 31, 2020, BRCD paid an extraordinary dividend in the form of invested assets of $ 423 million and the settlement of affiliated reinsurance balances of $ 177 million, which was approved by the Delaware Commissioner in December 2019.

BRCD did no t pay any extraordinary dividends during the years ended December 31, 2019 and 2018.

During the years ended December 31, 2020, 2019 and 2018, BRCD paid cash dividends of $ 1 million, $ 1 million and $ 2 million, respectively, to its preferred shareholders.

BRCD did no t pay any extraordinary dividends during the year ended December 31, 2019.

During each of the years ended December 31, 2021, 2020 and 2019, BRCD paid cash dividends of $ 1 million to its preferred shareholders.

Brighthouse Financial, Inc.

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Balance at December 31, 2018

Cumulative effect of change in accounting principle and other, net of income tax ( 79 ) — — — ( 79 )

Balance, January 1, 2018 1,493 154 ( 24 ) ( 26 ) 1,597

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

OCI before reclassifications 3,285 40 12 ( 10 ) 3,327

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Balance at December 31, 2019

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

OCI before reclassifications (2) 3,511 ( 52 ) 20 ( 14 ) 3,465

5 unchanged sentences

Balance at December 31, 2020

5,646 115 ( 8 ) ( 37 ) 5,716

OCI before reclassifications ( 2,122 ) 171 1 ( 3 ) ( 1,953 )

6 unchanged sentences

$ 3,982 $ 238 $ ( 7 ) $ ( 41 ) $ 4,172

_______________

(1) See Note 6 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI.

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

(2) Includes $ 3 million related to the adoption of the allowance for credit losses guidance.

(3) The effects of income taxes on amounts recorded to AOCI are also recognized in AOCI.

These income tax effects are released from AOCI when the related activity is reclassified into results from operations.

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

Brighthouse Financial, Inc.

1 unchanged sentence

Equity (continued)

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

AOCI Components Amounts Reclassified from AOCI Consolidated Statements of Operations Locations

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Net unrealized investment gains (losses) $ ( 4 ) $ 318 $ 113 Net investment gains (losses)

Net unrealized investment gains (losses) — — 1 Net investment income

Net unrealized investment gains (losses) ( 11 ) ( 15 ) ( 37 ) Net derivative gains (losses)

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Interest rate swaps 3 3 2 Net investment income

Interest rate forwards — — 31 Net derivative gains (losses)

Interest rate forwards — — 2 Net investment income

Foreign currency swaps 10 15 25 Net derivative gains (losses)

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Amortization of net actuarial gains (losses) 1 ( 1 ) —

Amortization of defined benefit plan items, before income tax ( 1 ) — ( 1 )

Income tax (expense) benefit — — —

Amortization of defined benefit plan items, net of income tax ( 1 ) — ( 1 )

Amortization of defined benefit plans, before income tax 1 ( 1 ) —

Amortization of defined benefit plans, net of income tax 1 ( 1 ) —

Total reclassifications, net of income tax $ 1 $ 254 $ 107

24 unchanged sentences

Interest expense on debt 163 184 191

Debt repayment costs 75 43 —

Other 84 125 145

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See Note 9 for attribution of interest expense by debt issuance.

Related Party Expenses

See Note 16 for a discussion of related party expenses included in the table above.

Employee Benefit Plans

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The qualified defined benefit pension plan had an accumulated benefit obligation of $ 174 million and $ 182 million at December 31, 2021 and 2020, respectively.

This plan was fully funded at December 31, 2020 and 2019 with assets in excess of the accumulated benefit obligation of $ 8 million and $ 7 million, respectively.

This plan was fully funded at both December 31, 2021 and 2020 with assets in excess of the accumulated benefit obligation of $ 8 million.

The Company did not make any employer contributions to this qualified plan during 2020 or 2019.

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Tax effect of:

Excess loss account - Separation from MetLife — — ( 2 )

Dividends received deduction ( 37 ) ( 42 ) ( 42 )

Tax credits ( 16 ) ( 25 ) ( 31 )

Release of valuation allowance — — ( 11 )

Change in valuation allowance 18 1 —

Return to provision

Adjustments to deferred tax

( 48 ) ( 5 ) ( 21 )

Other, net 8 4 3

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Deferred income tax assets:

Tax credit carryforwards $ 133 $ 106

Net operating loss carryforwards $ 1,254 $ 1,486

Tax credit carryforwards 151 133

Employee benefits 24 15

Intangibles 42 58

Investments, including derivatives

Total deferred income tax assets 1,477 1,692

Valuation allowance

Total net deferred income tax assets 1,458 1,692

Deferred income tax liabilities:

Policyholder liabilities and receivables 905 1,277

Net unrealized investment gains 1,122 1,532

Policyholder liabilities and receivables 404 905

Investments, including derivatives 196 154

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(In millions)

2020-2024 $ — $ 18

2025-2029 — 70

2030-2034 — 28

2035-2039 17 —

Indefinite — —

The Company’s liability for unrecognized tax benefits may increase or decrease in the next 12 months.

A reasonable estimate of the increase or decrease cannot be made at this time.

However, the Company continues to believe that the ultimate resolution of the pending issues will not result in a material change to its consolidated financial statements, although the resolution of income tax matters could impact the Company’s effective tax rate in the future.

The Company believes that it is more likely than not that the benefit from certain tax credit carryforwards will not be realized.

Accordingly, a valuation allowance of $ 18 million has been established on the deferred tax assets related to the tax credit carryforwards at December 31, 2021.

Brighthouse Financial, Inc.

1 unchanged sentence

Income Tax (continued)

The Company’s liability for unrecognized tax benefits may increase or decrease in the next 12 months.

A reasonable estimate of the increase or decrease cannot be made at this time.

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:

13 unchanged sentences

The Company had no penalties for each of the years ended December 31, 2021, 2020 and 2019.

The Company is under continuous examination by the Internal Revenue Service and other tax authorities in jurisdictions in which the Company has significant business operations.

The Company is subject to examination by the Internal Revenue Service and other tax authorities in jurisdictions in which the Company has significant business operations.

The income tax years under examination vary by jurisdiction and subsidiary.

2 unchanged sentences

Tax Sharing Agreements

For the periods prior to the Separation, Brighthouse Financial filed a consolidated federal life and non-life income tax return in accordance with the provisions of the Tax Code.

For the periods prior to the Separation, Brighthouse Financial filed a consolidated federal life and non-life income tax return in accordance with the provisions of the Internal Revenue Code of 1986, as amended.

Current taxes (and the benefits of tax attributes such as losses) are allocated to Brighthouse Financial, Inc., and its includable subsidiaries, under the consolidated tax return regulations and a tax sharing agreement with MetLife.

1 unchanged sentence

For periods after the Separation, Brighthouse Financial entered into two separate tax sharing agreements.

Brighthouse Life Insurance Company and any directly owned life insurance and reinsurance subsidiaries (including BHNY and BRCD) entered in a tax sharing agreement to join a life consolidated federal income tax return.

Brighthouse Life Insurance Company and any directly owned life insurance and reinsurance subsidiaries (including Brighthouse Life Insurance Company of NY and BRCD) entered in a tax sharing agreement to join a life consolidated federal income tax return.

Brighthouse Financial, Inc.

12 unchanged sentences

The tax separation agreement also allocates rights, obligations and responsibilities in connection with certain administrative matters relating to the preparation of tax returns and control of tax audits and other proceedings relating to taxes.

In November 2018, MetLife paid $ 909 million to Brighthouse Financial under the tax separation agreement.

For the years ended December 31, 2020 and 2019, Brighthouse Financial paid MetLife $ 0 and $ 3 million, respectively, under the tax separation agreement.

For the years ended December 31, 2021, 2020 and 2019, Brighthouse Financial paid MetLife $ 81 million, $ 0 and $ 3 million, respectively, under the tax separation agreement.

At December 31, 2021 and 2020, the current income tax liability included $ 76 million and $ 136 million, respectively, payable to MetLife related to this agreement.

13 unchanged sentences

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

For the year ended December 31, 2018, weighted average shares used for calculating diluted earnings per common share excludes 217,990 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 periods presented.

See Note 10 for further information on share-based compensation plans.

8 unchanged sentences

This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Contingencies, Commitments and Guarantees (continued)

The Company also receives and responds to subpoenas or other inquiries seeking a broad range of information from various state and federal regulators, agencies and officials.

The issues involved in information requests and regulatory matters vary widely, but can include inquiries or investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.

The Company cooperates in these inquiries.

Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be difficult to ascertain.

1 unchanged sentence

Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Contingencies, Commitments and Guarantees (continued)

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.

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The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices matters.

Cost of Insurance Class Action

Cost of Insurance Class Actions

Brighthouse Life Insurance Company (U.S.

5 unchanged sentences

Plaintiff seeks to recover damages, including punitive damages, interest and treble damages, attorneys’ fees, and injunctive and declaratory relief.

Brighthouse Life Insurance Company filed a motion to dismiss in June 2020 and intends to vigorously defend this matter.

Various litigations, claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, investor and taxpayer.

Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.

Brighthouse Life Insurance Company filed a motion to dismiss in June 2020, which was granted in part and denied in part in March 2021.

Plaintiff was granted leave to amend the complaint.

The Company intends to vigorously defend this matter.

Lawrence Martin v.

Brighthouse Life Insurance Company and Brighthouse Life Insurance Company of NY (U.S.

District Court, Southern District of New York, filed April 6, 2021).

Plaintiff has filed a purported class action lawsuit against Brighthouse Life Insurance Company and Brighthouse Life Insurance Company of NY.

Plaintiff is the owner of a universal life insurance policy issued by Travelers Insurance Company, a predecessor to Brighthouse Life Insurance Company.

Plaintiff seeks to certify a class of similarly situated owners of universal life insurance policies issued or administered by defendants and alleges that cost of insurance charges should have decreased over time due to improving mortality but did not.

Plaintiff alleges, among other things, causes of action for breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment.

Plaintiff seeks to recover compensatory damages, attorney’s fees, interest, and equitable relief including a constructive trust.

Brighthouse Life Insurance Company and Brighthouse Life Insurance Company of NY filed a motion to dismiss in June 2021, which was denied in February 2022.

The Company intends to vigorously defend this matter.

Brighthouse Financial, Inc.

1 unchanged sentence

Contingencies, Commitments and Guarantees (continued)

It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings.

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However, given the large or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.

Other Contingencies

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.

Other Loss Contingencies

As with litigation and regulatory loss contingencies, the Company considers establishing liabilities for loss contingencies associated with disputes or other matters involving third parties, including counterparties to contractual arrangements entered into by the Company (e.g., third-party vendors and reinsurers), as well as with tax authorities (“other loss contingencies”).

The Company establishes liabilities for such other 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 or reinsured benefit calculations, and in certain of such disputes the counterparty has made a request to arbitrate the dispute.

As of December 31, 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 approximately $ 125 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.

In the disputes where the Company’s subsidiaries are acting as the reinsured or the reinsurer, such matters involve assertions by third parties primarily related to rates, fees or reinsured benefit calculations, and in certain of such matters, the counterparty has made a request to arbitrate.

As of December 31, 2021, the Company estimates the range of reasonably possible losses in excess of the amounts accrued for certain other loss contingencies to be from zero up to approximately $ 250 million, which are primarily associated with the above reinsurance-related matters.

For certain other matters, the Company may not currently be 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 basis, the Company reviews relevant information with respect to other loss contingencies and, when applicable, updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.

Mortgage Loan Commitments

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The Company’s recorded liabilities were $ 1 million at both December 31, 2021 and 2020 for indemnities, guarantees and commitments.

Related Party Transactions

The Company has various existing arrangements with its Brighthouse affiliates and had previous arrangements with MetLife for services necessary to conduct its activities.

Certain of the MetLife services have continued, however, MetLife ceased to be a related party in June 2018.

See Note 11 for amounts related to continuing transition services.

Non-Broker-Dealer Transactions

The Company had income and expenses from transactions with MetLife (excluding broker-dealer transactions) of ($ 182 ) million and $ 133 million, respectively, for the year ended December 31, 2018.

The material arrangements between the Company and MetLife are as follows:

Reinsurance Agreements

The Company has reinsurance agreements with certain of MetLife subsidiaries.

See Note 5 for further discussion of the related party reinsurance agreements.

Investment Transactions

In the ordinary course of business, the Company had previously transferred invested assets, primarily consisting of fixed maturity securities, to and from former affiliates.

See Note 6 for further discussion of the related party investment transactions.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Related Party Transactions (continued)

Shared Services and Overhead Allocations

MetLife provides the Company certain services, which include, but are not limited to, treasury, financial planning and analysis, legal, human resources, tax planning, internal audit, financial reporting and information technology.

The Company is charged for these services through a transition services agreement and the costs are allocated to the legal entities and products within the Company.

When specific identification to a particular legal entity and/or product is not practicable, an allocation methodology based on various performance measures or activity-based costing, such as sales, new policies/contracts issued, reserves, and in-force policy counts is used.

The bases for such charges are modified and adjusted by management when necessary or appropriate to reflect fairly and equitably the actual incidence of cost incurred by the Company and/or affiliate.

Management believes that the methods used to allocate expenses under these arrangements are reasonable.

Costs incurred with MetLife prior to the MetLife Divestiture (see Note 1) under these arrangements, that were considered related party expenses, were $ 186 million for the year ended December 31, 2018 and were recorded in other expenses.

Subsequent Events

Common Stock Repurchase Authorization

On February 10, 2021, BHF authorized the repurchase of up to an additional $ 200 million of common stock.

No common stock repurchases have been made under the February 10, 2021 authorization as of February 24, 2021.

Subsequent Event

Preferred Stock Dividend

On February 16, 2021, BHF declared a dividend of $ 412.50 per share on its Series A Preferred Stock, $ 421.88 per share on its Series B Preferred Stock and $ 466.58 per share on its Series C Preferred Stock for a total of $ 25 million, which will be paid on March 25, 2021 to stockholders of record as of March 10, 2021.

On February 15, 2022, BHF declared a dividend of $ 412.50 per share on its Series A Preferred Stock, $ 421.88 per share on its Series B Preferred Stock, $ 335.94 per share on its Series C Preferred Stock and $ 395.05 per share on its Series D Preferred Stock for a total of $ 27 million, which will be paid on March 25, 2022 to stockholders of record as of March 10, 2022.

Brighthouse Financial, Inc.

44 unchanged sentences

Short-term investments, principally at estimated fair value 1,168 1,333

Other invested assets, at estimated fair value 3 —

Investment in subsidiary 18,557 20,326

35 unchanged sentences

Other revenues 13 19 24

Net investment gains (losses) 2 — —

Net derivative gains (losses) 2 8 —

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Purchases of fixed maturity securities — ( 12 ) ( 4 )

Cash received in connection with freestanding derivatives 7 — —

Cash paid in connection with freestanding derivatives ( 2 ) — —

Capital contributions to subsidiary — — ( 412 )

4 unchanged sentences

Long-term and short-term debt repaid ( 1,484 ) ( 2,590 ) ( 1,716 )

Treasury stock acquired in connection with share repurchases ( 473 ) ( 442 ) ( 105 )

Debt repayment costs ( 71 ) ( 37 ) —

Preferred stock issued, net of issuance costs 339 948 412

Dividends on preferred stock ( 89 ) ( 44 ) ( 21 )

Treasury stock acquired in connection with share repurchases ( 499 ) ( 473 ) ( 442 )

Other, net ( 7 ) ( 5 ) ( 2 )

6 unchanged sentences

Interest $ 158 $ 184 $ 187

Cash received from MetLife, Inc.

for income tax $ — $ — $ ( 7 )

Income tax paid (received) by Brighthouse Financial, Inc.

( 25 ) ( 4 ) 1

Net cash paid (received) for income tax $ ( 25 ) $ ( 4 ) $ ( 6 )

Income tax $ ( 86 ) $ ( 25 ) $ ( 4 )

See accompanying notes to the condensed financial information.

8 unchanged sentences

Investments in subsidiaries are accounted for using the equity method of accounting.

Beginning in 2020, the Parent Company elected to change the presentation of equity in earnings (losses) of subsidiaries, including it as a separate component on net income in the Condensed Statement of Operations.

This presentation was applied to all periods presented in the condensed financial information of the Parent Company.

Previously, this activity was presented as a component of total revenues.

The preparation of these condensed unconsolidated financial statements in conformity with GAAP requires management to adopt accounting policies and make certain estimates and assumptions.

2 unchanged sentences

Investment in Subsidiary

During the years ended December 31, 2020, 2019 and 2018, BHF made cash capital contributions of $ 0 , $ 412 million and $ 208 million, respectively, to BH Holdings and received cash distributions of $ 1.5 billion, $ 195 million and $ 52 million, respectively, from BH Holdings.

Distributions received during the year ended December 31, 2020 primarily relate to $ 1.3 billion of ordinary cash dividends paid by Brighthouse Life Insurance Company to BH Holdings.

During the years ended December 31, 2021, 2020 and 2019, BHF received cash distributions of $ 310 million, $ 1.5 billion and $ 195 million, respectively, from Brighthouse Holdings, LLC (“BH Holdings”) and made cash capital contributions of $ 0 , $ 0 and $ 412 million, respectively, to BH Holdings.

Distributions received during the years ended December 31, 2021 and 2020 primarily relate to $ 550 million and $ 1.3 billion, respectively, of ordinary cash dividends paid by Brighthouse Life Insurance Company to BH Holdings.

Long-term and Short-term Debt

5 unchanged sentences

Senior notes — unaffiliated 4.700 % 2047 1,000 1,134

Term loan — unaffiliated LIBOR plus 1.5 %

Senior notes — unaffiliated 3.850 % 2051 396 —

Junior subordinated debentures — unaffiliated 6.250 % 2058 363 363

6 unchanged sentences

Interest expense related to long-term and short-term debt of $ 159 million, $ 183 million and $ 191 million for the years ended December 31, 2021, 2020 and 2019, respectively, is included in other expenses.

Brighthouse Financial, Inc.

Notes to the Condensed Financial Information (continued)

(Parent Company Only)

Senior Notes and Junior Subordinated Debentures

1 unchanged sentence

Credit Facilities

See Note 9 of the Notes to the Consolidated Financial Statements for information regarding BHF’s credit facilities, including the unaffiliated term loan.

See Note 9 of the Notes to the Consolidated Financial Statements for information regarding BHF’s credit facilities.

Brighthouse Financial, Inc.

Notes to the Condensed Financial Information (continued)

(Parent Company Only)

Short-term Intercompany Loans

2 unchanged sentences

Each loan entered into under this intercompany loan agreement has a term not more than 364 days and bears interest on the unpaid principal amount at a variable rate, payable monthly.

During the years ended December 31, 2020, 2019 and 2018, BHF borrowed $ 1.2 billion, $ 1.2 billion and $ 478 million, respectively, from certain of its non-insurance subsidiaries and repaid $ 1.0 billion, $ 1.1 billion and $ 311 million of such borrowings during the years ended December 31, 2020, 2019 and 2018, respectively.

During the years ended December 31, 2021, 2020 and 2019, BHF borrowed $ 1.1 billion, $ 1.2 billion and $ 1.2 billion, respectively, from certain of its non-insurance subsidiaries and repaid $ 805 million, $ 1.0 billion and $ 1.1 billion of such borrowings during the years ended December 31, 2021, 2020 and 2019, respectively.

The weighted average interest rate on short-term intercompany loans outstanding at December 31, 2021, 2020 and 2019 was 0.05 %, 0.05 % and 0.95 %, respectively.

3 unchanged sentences

During the years ended December 31, 2021, 2020 and 2019, there were no borrowings or repayments by BHF under these facilities.

In the second quarter of 2018, BHF borrowed $ 40 million from NELICO under this facility and repaid such borrowing in the third quarter of 2018.

Brighthouse Financial, Inc.

68 unchanged sentences

(1) Includes annuities with life contingencies.

All of the transactions reported as related party activity occurred prior to the MetLife Divestiture (see Note 1).

For the year ended December 31, 2018, reinsurance ceded and assumed included related party transactions for life insurance premiums of $ 201 million and $ 6 million, respectively.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data