What changed in this filing

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Item 1. Financial Statements

2022-05-10 compared with 2021-11-05 · 200 added, 446 removed, 1293 unchanged (33% of the section changed)

2 unchanged sentences

Interim Condensed Consolidated Balance Sheets

September 30, 2021 (Unaudited) and December 31, 2020

March 31, 2022 (Unaudited) and December 31, 2021

(In millions, except share and per share data)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

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

54 unchanged sentences

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

For the Three Months and Nine Months Ended September 30, 2021 and 2020 (Unaudited)

For the Three Months Ended March 31, 2022 and 2021 (Unaudited)

(In millions, except per share data)

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Premiums $ 166 $ 184

15 unchanged sentences

Net income (loss) attributable to Brighthouse Financial, Inc.

383 ( 2,995 ) ( 171 ) ( 29 )

Preferred stock dividends 27 25

10 unchanged sentences

Interim Condensed Consolidated Statements of Equity

For the Three Months and Nine Months Ended September 30, 2021 and 2020 (Unaudited)

For the Three Months Ended March 31, 2022 and 2021 (Unaudited)

(In millions)

15 unchanged sentences

( 3,809 ) ( 3,809 ) ( 3,809 )

Balance at June 30,2021 — 1 13,842 ( 1,088 ) ( 1,236 ) 4,596 16,115 65 16,180

Treasury stock acquired in connection with share repurchases

( 149 ) ( 149 ) ( 149 )

Share-based compensation

Dividends on preferred stock

( 22 ) ( 22 ) ( 22 )

Change in noncontrolling interests

— ( 2 ) ( 2 )

Net income (loss)

383 383 2 385

Other comprehensive income (loss), net of income tax

( 306 ) ( 306 ) ( 306 )

Balance at September 30, 2021 $ — $ 1 $ 13,830 $ ( 705 ) $ ( 1,385 ) $ 4,290 $ 16,031 $ 65 $ 16,096

Balance at March 31, 2022 $ — $ 1 $ 14,133 $ ( 2 ) $ ( 1,681 ) $ 363 $ 12,814 $ 65 $ 12,879

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

2 unchanged sentences

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, 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 issuance

— 390 390 390

Treasury stock acquired in connection with share repurchases

9 unchanged sentences

( 2,327 ) ( 2,327 ) ( 2,327 )

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

Treasury stock acquired in connection with share repurchases

( 54 ) ( 54 ) ( 54 )

Share-based compensation

Dividends on preferred stock

( 17 ) ( 17 ) ( 17 )

Change in noncontrolling interests

— ( 2 ) ( 2 )

Net income (loss)

( 2,995 ) ( 2,995 ) 2 ( 2,993 )

Other comprehensive income (loss), net of income tax

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

Balance at March 31, 2021 $ — $ 1 $ 13,858 $ ( 1,119 ) $ ( 1,112 ) $ 3,389 $ 15,017 $ 65 $ 15,082

See accompanying notes to the interim condensed consolidated financial statements.

1 unchanged sentence

Interim Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2021 and 2020 (Unaudited)

For the Three Months Ended March 31, 2022 and 2021 (Unaudited)

(In millions)

Nine Months Ended

September 30,

Three Months Ended

Net cash provided by (used in) operating activities $ ( 163 ) $ ( 104 )

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Net change in other invested assets ( 18 ) —

Other, net — ( 14 )

Net cash provided by (used in) investing activities

5 unchanged sentences

Net change in payables for collateral under securities loaned and other transactions ( 60 ) ( 971 )

Long-term debt issued — 614

Long-term debt repaid ( 1 ) —

Preferred stock issued, net of issuance costs — 390

Dividends on preferred stock ( 27 ) ( 25 )

14 unchanged sentences

Business, Basis of Presentation and Summary of Significant Accounting Policies

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

and its subsidiaries.

Brighthouse Financial, Inc.

(“BHF”) is a holding company formed in 2016 to own the legal entities that historically operated a substantial portion of MetLife, Inc.’s former retail segment until becoming a separate, publicly-traded company in August 2017.

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 a holding company formed in 2016 to own the legal entities that historically operated a substantial portion of MetLife, Inc.’s former retail segment until becoming a separate, publicly-traded company in August 2017.

Brighthouse Financial 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.

The Company is organized into three segments:

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When the Company has virtually no influence over the investee’s operations, the investment is carried at fair value.

Reclassifications

Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform with the current period presentation as may be discussed when applicable in the Notes to the Interim Condensed Consolidated Financial Statements.

The accompanying interim condensed consolidated financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP.

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The Company considers the applicability and impact of all ASUs.

There were no ASUs adopted as of September 30, 2021.

Brighthouse Financial, Inc.

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

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

There were no significant ASUs adopted during the period ended March 31, 2022.

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 will be applied to existing carrying amounts on the effective date.

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 currently 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 other comprehensive income (loss) (“OCI”).

Brighthouse Financial, Inc.

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

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

(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) Deferred policy acquisition costs (“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 on 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 be 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.

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, certain funding agreements and universal life with secondary guarantees.

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

Corporate & Other

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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.

Brighthouse Financial, Inc.

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

Segment Information (continued)

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 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 principally by excluding the impact of market volatility, which could distort trends.

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);

Brighthouse Financial, Inc.

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

Segment Information (continued)

• Net derivative gains (losses) except earned income and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment;

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• 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”);

• Amortization of DAC and value of business acquired (“VOBA”) related to:

(i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) 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 value of business acquired (“VOBA”) related to (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.

7 unchanged sentences

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

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

Three Months Ended September 30, 2021

Annuities Life Run-off Corporate & Other Total

(In millions)

Pre-tax adjusted earnings $ 481 $ 141 $ 42 $ ( 63 ) $ 601

Provision for income tax expense (benefit) 96 31 4 ( 4 ) 127

Post-tax adjusted earnings 385 110 38 ( 59 ) 474

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

Preferred stock dividends — — — 22 22

Adjusted earnings $ 385 $ 110 $ 38 $ ( 83 ) 450

Adjustments for:

Net investment gains (losses) ( 16 )

Net derivative gains (losses) 56

Other adjustments to net income (loss) ( 151 )

Provision for income tax (expense) benefit 22

Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders $ 361

Interest revenue $ 567 $ 183 $ 505 $ 32

Interest expense $ — $ — $ — $ 41

Brighthouse Financial, Inc.

1 unchanged sentence

Segment Information (continued)

Three Months Ended September 30, 2020

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

Three Months Ended March 31, 2022

Annuities Life Run-off Corporate & Other Total

14 unchanged sentences

Interest expense $ — $ — $ — $ 38

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2021

Annuities Life Run-off Corporate & Other Total

17 unchanged sentences

Segment Information (continued)

Nine Months Ended September 30, 2020

Annuities Life Run-off Corporate & Other Total

(In millions)

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

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

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

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

Preferred stock dividends — — — 31 31

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

Adjustments for:

Net investment gains (losses) ( 48 )

Net derivative gains (losses) 2,392

Other adjustments to net income (loss) ( 1,829 )

Provision for income tax (expense) benefit ( 108 )

Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders

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

Interest expense $ — $ — $ — $ 139

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(In millions)

Annuities $ 1,272 $ 1,298

Life 345 350 1,138 989

Run-off 562 628

3 unchanged sentences

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(In millions)

4 unchanged sentences

Total $ 245,052 $ 259,840

Brighthouse Financial, Inc.

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

As discussed in Notes 1 and 3 of the Notes to the Consolidated Financial Statements included in the 2021 Annual Report, the Company issues variable annuity contracts with guaranteed minimum benefits.

2 unchanged sentences

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Event of Death At

9 unchanged sentences

Average attained age of contract holders 71 years 70 years 71 years 70 years

September 30, 2021 December 31, 2020

Brighthouse Financial, Inc.

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

Insurance (continued)

March 31, 2022 December 31, 2021

Secondary Guarantees

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It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death.

Brighthouse Financial, Inc.

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

Insurance (continued)

(5) Defined as the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit.

3 unchanged sentences

See Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the 2021 Annual Report for a description of the Company’s accounting policies for investments and the fair value hierarchy for investments and the related valuation methodologies.

Brighthouse Financial, Inc.

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

Investments (continued)

Fixed Maturity Securities Available-for-sale

1 unchanged sentence

Fixed maturity securities by sector were as follows at:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Cost Allowance for Credit Losses Gross Unrealized Estimated

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Total fixed maturity securities $ 81,242 $ 11 $ 3,904 $ 2,639 $ 82,496 $ 79,246 $ 11 $ 8,806 $ 459 $ 87,582

The Company held non-income producing fixed maturity securities with an estimated fair value of $ 5 million at both September 30, 2021 and December 31, 2020.

The Company held non-income producing fixed maturity securities with an estimated fair value of $ 44 million and $ 3 million at March 31, 2022 and December 31, 2021, respectively.

Maturities of Fixed Maturity Securities

The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at September 30, 2021:

The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at March 31, 2022:

Year or Less Due After One

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

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

26 unchanged sentences

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss is deemed to exist and an allowance for credit losses is recorded, limited by the amount that the estimated fair value is less than the amortized cost basis, with a corresponding charge to net investment gains (losses).

Any unrealized losses that have not been recorded through an allowance for credit losses are recognized in other comprehensive income (loss) (“OCI”).

Any unrealized losses that have not been recorded through an allowance for credit losses are recognized in OCI.

Once a security specific allowance for credit losses is established, the present value of cash flows expected to be collected from the security continues to be reassessed.

2 unchanged sentences

When all, or a portion, of a security is deemed uncollectible, the uncollectible portion is written-off with an adjustment to amortized cost and a corresponding reduction to the allowance for credit losses.

Accrued interest receivables are presented separate from the amortized cost basis of fixed maturity securities.

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 $ 580 million and $ 534 million at March 31, 2022 and December 31, 2021, respectively, and is included in accrued investment income.

Brighthouse Financial, Inc.

1 unchanged sentence

Investments (continued)

Accrued interest receivables are presented separate from the amortized cost basis of fixed maturity securities.

The accrued interest receivable on fixed maturity securities totaled $ 580 million and $ 514 million at September 30, 2021 and December 31, 2020, respectively, and is included in accrued investment income.

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

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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 $ 7 million, relating to five securities at September 30, 2021.

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 March 31, 2022.

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.

1 unchanged sentence

These issuers continued to make timely principal and interest payments and the estimated fair value is expected to recover as the securities approach maturity.

Brighthouse Financial, Inc.

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

Investments (continued)

Rollforward of the Allowance for Credit Losses for Fixed Maturity Securities by Sector

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

Corporate RMBS Foreign Corporate CMBS Total

(In millions)

Nine Months Ended September 30, 2021

Balance, beginning of period $ 2 $ — $ — $ — $ 2

Allowance on securities where credit losses were not previously recorded — — 6 1 7

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

Change in allowance on securities with an allowance recorded in a previous period ( 1 ) — — — ( 1 )

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

Balance, end of period $ — $ — $ 6 $ 1 $ 7

Nine Months Ended September 30, 2020

Balance, beginning of period $ 3 $ — $ 1 $ — $ 4

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

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

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

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

Balance, end of period $ 2 $ 1 $ 1 $ — $ 4

_______________

(1) The Company did no t record any write-offs during the nine months ended September 30, 2021.

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

Allowance for Credit Losses for Fixed Maturity Securities

The allowance for credit losses for fixed maturity securities was $ 11 million at both March 31, 2022 and December 31, 2021.

For both the three months ended March 31, 2022 and 2021, the change in the allowance for fixed maturity securities by sector was immaterial.

The Company recorded total write-offs of $ 2 million for the three months ended March 31, 2022.

The Company did no t record any write-offs for the three months ended March 31, 2021.

Mortgage Loans

1 unchanged sentence

Mortgage loans are summarized as follows at:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Total Carrying

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_______________

(1) Purchases of mortgage loans from third parties were $ 698 million and $ 1.5 billion for the three months and nine months ended September 30, 2021, respectively, and $ 47 million and $ 535 million for the three months and nine months ended September 30, 2020, respectively, and were primarily comprised of residential mortgage loans.

Brighthouse Financial, Inc.

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

Investments (continued)

(1) Purchases of mortgage loans from third parties were $ 840 million and $ 178 million for the three months ended March 31, 2022 and 2021, respectively, and were primarily comprised of residential mortgage loans.

Allowance for Credit Losses for Mortgage Loans

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The loan balance, or a portion of the loan balance, is written-off against the allowance when management believes this amount is uncollectible.

Brighthouse Financial, Inc.

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

Investments (continued)

Accrued interest receivables are presented separate from the amortized cost basis of mortgage loans.

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 impact of the ongoing 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 both September 30, 2021 and December 31, 2020.

The accrued interest receivable on mortgage loans is included in accrued investment income and totaled $ 91 million and $ 89 million at September 30, 2021 and December 31, 2020, respectively.

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 March 31, 2022 and December 31, 2021.

The accrued interest receivable on mortgage loans is included in accrued investment income and totaled $ 93 million and $ 95 million at March 31, 2022 and December 31, 2021, 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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Any subsequent PCD mortgage loan allowance for credit losses is evaluated in a manner similar to the process described above for each of the three portfolio segments.

Brighthouse Financial, Inc.

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

Investments (continued)

Rollforward of the Allowance for Credit Losses for Mortgage Loans by Portfolio Segment

2 unchanged sentences

(In millions)

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Balance, beginning of period $ 67 $ 12 $ 44 $ 123

Current period provision 2 3 ( 1 ) 4

PCD credit allowance — — 2 2

Balance, end of period $ 69 $ 15 $ 43 $ 127

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Balance, beginning of period $ 44 $ 15 $ 35 $ 94

1 unchanged sentence

Balance, end of period $ 45 $ 13 $ 33 $ 91

PCD Mortgage Loans

Purchases of PCD mortgage loans are summarized as follows:

Nine Months Ended September 30,

(In millions)

Purchase price $ 436 $ 77

Allowance at acquisition date 2 2

Discount or premium attributable to other factors ( 25 ) 2

Par value $ 413 $ 81

Brighthouse Financial, Inc.

5 unchanged sentences

(In millions)

September 30, 2021

March 31, 2022

Commercial mortgage loans

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Amortized Cost % of

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Past Due Mortgage Loans by Portfolio Segment

The Company has a high-quality, well-performing mortgage loan portfolio, with over 99 % of all mortgage loans classified as performing at both September 30, 2021 and December 31, 2020.

The Company has a high-quality, well-performing mortgage loan portfolio, with over 99 % of all mortgage loans classified as performing at both March 31, 2022 and December 31, 2021.

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

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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 September 30, 2021 and December 31, 2020, $ 30 million and $ 38 million, respectively, of the COVID-19 pandemic modified loans were classified as delinquent.

At March 31, 2022 and December 31, 2021, $ 31 million and $ 30 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:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Commercial Agricultural Residential Total Commercial Agricultural Residential Total

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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 September 30, 2021 and December 31, 2020, $ 30 million and $ 38 million, respectively, of the COVID-19 pandemic modified loans were in nonaccrual status.

At March 31, 2022 and December 31, 2021, $ 31 million and $ 30 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:

1 unchanged sentence

(In millions)

September 30, 2021

March 31, 2022

$ — $ — $ 63 $ 63

2 unchanged sentences

_______________

(1) The Company had $ 7 million of residential mortgage loans in nonaccrual status for which there was no related allowance for credit losses at both September 30, 2021 and December 31, 2020.

Current period investment income on mortgage loans in nonaccrual status was $ 1 million for both the nine months ended September 30, 2021 and 2020.

(1) All residential mortgage loans in nonaccrual status had an allowance for credit losses at both March 31, 2022 and December 31, 2021.

Current period investment income on mortgage loans in nonaccrual status was less than $ 1 million for both the three months ended March 31, 2022 and 2021 .

Modified Mortgage Loans by Portfolio Segment

3 unchanged sentences

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 TDR during both the nine months ended September 30, 2021 and 2020.

The Company did not have a significant amount of mortgage loans modified in a TDR during both the three months ended March 31, 2022 and 2021.

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.

2 unchanged sentences

See Note 5 for information about freestanding derivatives with positive estimated fair values.

Other invested assets also includes tax credit and renewable energy partnerships, leveraged leases and Federal Home Loan Bank (“FHLB”) stock.

Leveraged Leases

The carrying value of leveraged leases was $ 50 million at both September 30, 2021 and December 31, 2020.

The allowance for credit losses was $ 13 million at both September 30, 2021 and December 31, 2020.

Rental receivables are generally due in periodic installments.

The payment periods for leveraged leases generally range from one to 12 years.

For rental receivables, the primary credit quality indicator is whether the rental receivable is performing or nonperforming, which is assessed monthly.

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

At both September 30, 2021 and December 31, 2020, all leveraged leases were performing.

Other invested assets also includes Federal Home Loan Bank (“FHLB”) stock, tax credit and renewable energy partnerships and leveraged leases.

Net Unrealized Investment Gains (Losses)

4 unchanged sentences

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(In millions)

10 unchanged sentences

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

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

(In millions)

5 unchanged sentences

Deferred income tax benefit (expense) 1,010

Balance at September 30, 2021 $ 4,333

Balance at March 31, 2022 $ 419

Change in net unrealized investment gains (losses) $ ( 3,801 )

1 unchanged sentence

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

government and its agencies, at both September 30, 2021 and December 31, 2020.

government and its agencies, at both March 31, 2022 and December 31, 2021.

Securities Lending

Elements of the securities lending program are presented below at:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(In millions)

3 unchanged sentences

Cash collateral received from counterparties (2) $ 5,168 $ 4,611

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

Reinvestment portfolio — estimated fair value $ 5,202 $ 4,730

5 unchanged sentences

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 interim condensed consolidated financial statements.

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

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

2 unchanged sentences

corporate 1 479 — 480 1 — — 1

Foreign corporate — 143 — 143 — — — —

Total $ 1,160 $ 2,257 $ 1,751 $ 5,168 $ 1,095 $ 2,125 $ 1,391 $ 4,611

2 unchanged sentences

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 September 30, 2021 was $ 1.6 billion, primarily comprised of U.S.

The estimated fair value of the securities on loan related to the cash collateral on open at March 31, 2022 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.

government and agency securities, non-agency RMBS and U.S.

and foreign corporate securities) with 57 % invested in agency RMBS, U.S.

government and agency securities and cash and cash equivalents at September 30, 2021.

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

government and agency securities, agency RMBS, ABS, non-agency RMBS and CMBS) with 55 % invested in U.S.

government and agency securities, agency RMBS and cash and cash equivalents at March 31, 2022.

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.

1 unchanged sentence

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(In millions)

4 unchanged sentences

_______________

(1) The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $ 50 million and $ 60 million of the assets on deposit represents restricted cash and cash equivalents at September 30, 2021 and December 31, 2020, respectively.

(2) The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions, of which $ 121 million and $ 101 million of the assets held in trust balance represents restricted cash and cash equivalents at September 30, 2021 and December 31, 2020, respectively.

(1) The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $ 41 million and $ 25 million of the assets on deposit represents restricted cash and cash equivalents at March 31, 2022 and December 31, 2021, respectively.

(2) The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions, of which $ 102 million and $ 119 million of the assets held in trust balance represents restricted cash and cash equivalents at March 31, 2022 and December 31, 2021, respectively.

(3) The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 3 of the Notes to the Consolidated Financial Statements included in the 2021 Annual Report) and derivative transactions (see Note 5).

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 $ 59 million and $ 39 million at redemption value at September 30, 2021 and December 31, 2020, respectively.

Brighthouse Financial, Inc.

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

Investments (continued)

In addition, the Company’s investment in FHLB common stock, which is considered restricted until redeemed by the issuer, was $ 89 million and $ 70 million at redemption value at March 31, 2022 and December 31, 2021, respectively.

Variable Interest Entities

4 unchanged sentences

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 September 30, 2021 or December 31, 2020.

There were no material VIEs for which the Company has concluded that it is the primary beneficiary at either March 31, 2022 or December 31, 2021.

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Amount Maximum

18 unchanged sentences

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.

7 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(In millions)

6 unchanged sentences

Cash, cash equivalents and short-term investments 1 2

Other 13 14 32 39

Total investment income 1,192 1,222

2 unchanged sentences

_______________

(1) Includes net investment income pertaining to other limited partnerships of $ 378 million and $ 1.0 billion for the three months and nine months ended September 30, 2021, respectively, and $ 153 million and $ 34 million for the three months and nine months ended September 30, 2020, respectively.

(1) Includes net investment income pertaining to other limited partnership interests of $ 212 million and $ 331 million for the three months ended March 31, 2022 and 2021, respectively.

Net Investment Gains (Losses)

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(In millions)

3 unchanged sentences

Limited partnerships and LLCs ( 16 ) —

Other ( 9 ) ( 2 ) ( 9 ) 8

Total net investment gains (losses) $ ( 68 ) $ 14

Gains (losses) from foreign currency transactions included within net investment gains (losses) were ($ 16 ) million and $ 0 for the three months ended March 31, 2022 and 2021, respectively.

Brighthouse Financial, Inc.

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(In millions)

5 unchanged sentences

See Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the 2021 Annual Report for a description of the Company’s accounting policies for derivatives and the fair value hierarchy for derivatives.

Derivative Strategies

Types of Derivative Instruments and Derivative Strategies

5 unchanged sentences

forwards and swaps;

• Equity derivatives:

• Equity market derivatives:

options, total return swaps and variance swaps;

7 unchanged sentences

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Primary Underlying Risk Exposure Gross

15 unchanged sentences

Foreign currency forwards Foreign currency exchange rate 495 10 3 483 3 4

Credit default swaps — purchased Credit 18 — 1 18 — —

Credit default swaps — written Credit 1,793 29 2 1,724 39 1

Credit default options Credit — — — 100 — —

Credit default swaptions Credit — — — 150 — —

Equity index options Equity market 24,143 981 776 24,692 1,155 877

10 unchanged sentences

Total $ 86,796 $ 2,511 $ 8,923 $ 90,931 $ 3,312 $ 10,140

Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both September 30, 2021 and December 31, 2020.

Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both March 31, 2022 and December 31, 2021.

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;

8 unchanged sentences

(In millions)

Three Months Ended September 30, 2021

Derivatives Designated as Hedging Instruments:

Cash flow hedges:

Interest rate derivatives $ — $ — $ 1 $ 3

Foreign currency exchange rate derivatives — — 9 101

Total cash flow hedges — — 10 104

Derivatives Not Designated or Not Qualifying as Hedging Instruments:

Interest rate derivatives ( 6 ) — — —

Foreign currency exchange rate derivatives 34 ( 1 ) — —

Credit derivatives 3 — — —

Equity derivatives ( 48 ) — — —

Embedded derivatives 74 — — —

Total non-qualifying hedges 57 ( 1 ) — —

Total $ 57 $ ( 1 ) $ 10 $ 104

Three Months Ended September 30, 2020

Derivatives Designated as Hedging Instruments:

Cash flow hedges:

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

Foreign currency exchange rate derivatives 10 ( 3 ) 8 ( 184 )

Total cash flow hedges 10 ( 3 ) 9 ( 185 )

Derivatives Not Designated or Not Qualifying as Hedging Instruments:

Interest rate derivatives ( 435 ) — — —

Foreign currency exchange rate derivatives ( 50 ) ( 3 ) — —

Credit derivatives 4 — — —

Equity derivatives ( 752 ) — — —

Embedded derivatives ( 628 ) — — —

Total non-qualifying hedges ( 1,861 ) ( 3 ) — —

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

Brighthouse Financial, Inc.

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

Derivatives (continued)

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)

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Derivatives Designated as Hedging Instruments:

Cash flow hedges:

Interest rate derivatives $ 1 $ — $ 3 $ ( 30 )

Foreign currency exchange rate derivatives 8 ( 3 ) 25 180

Interest rate $ 1 $ — $ 1 $ ( 21 )

Foreign currency exchange rate — — 11 40

Total cash flow hedges 1 — 12 19

Derivatives Not Designated or Not Qualifying as Hedging Instruments:

Interest rate derivatives ( 1,196 ) — — —

Foreign currency exchange rate derivatives 45 — — —

Credit derivatives 14 — — —

Equity derivatives ( 496 ) — — —

Embedded derivatives ( 505 ) — — —

Interest rate ( 1,131 ) — — —

Foreign currency exchange rate 20 ( 7 ) — —

Credit ( 7 ) — — —

Equity market 308 — — —

Embedded 1,329 — — —

Total non-qualifying hedges 519 ( 7 ) — —

Total $ 520 $ ( 7 ) $ 12 $ 19

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Derivatives Designated as Hedging Instruments:

Cash flow hedges:

Interest rate derivatives $ 1 $ — $ 2 $ 92

Foreign currency exchange rate derivatives 13 ( 6 ) 29 143

Interest rate $ 1 $ — $ 1 $ ( 52 )

Foreign currency exchange rate 5 ( 3 ) 8 ( 16 )

Total cash flow hedges 6 ( 3 ) 9 ( 68 )

Derivatives Not Designated or Not Qualifying as Hedging Instruments:

Interest rate derivatives 4,321 — — —

Foreign currency exchange rate derivatives 57 ( 12 ) — —

Credit derivatives 1 — — —

Equity derivatives ( 393 ) — — —

Embedded derivatives ( 1,590 ) — — —

Interest rate ( 1,912 ) — — —

Foreign currency exchange rate ( 7 ) 3 — —

Credit 3 — — —

Equity market ( 142 ) — — —

Embedded 548 — — —

Total non-qualifying hedges ( 1,510 ) 3 — —

Total $ ( 1,504 ) $ — $ 9 $ ( 68 )

At September 30, 2021 and December 31, 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 September 30, 2021 and December 31, 2020, the balance in AOCI associated with cash flow hedges was $ 311 million and $ 173 million, respectively.

At March 31, 2022 and December 31, 2021, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions was one year and two years, respectively.

At March 31, 2022 and December 31, 2021, the balance in AOCI associated with cash flow hedges was $ 346 million and $ 329 million, respectively.

Credit Derivatives

5 unchanged sentences

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Rating Agency Designation of Referenced Credit Obligations (1) Estimated

32 unchanged sentences

(In millions)

September 30, 2021

March 31, 2022

Derivative assets $ 2,384 $ ( 1,321 ) $ ( 847 ) $ 216 $ ( 189 ) $ 27

14 unchanged sentences

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(In millions)

12 unchanged sentences

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

September 30, 2021

March 31, 2022

Fair Value Hierarchy Total Estimated

61 unchanged sentences

Foreign currency exchange rate — 47 — 47

Credit — — 1 1

Equity market — 1,465 1 1,466

26 unchanged sentences

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

The Company did not have significant price adjustments during the nine months ended September 30, 2021.

The Company did not have significant price adjustments during the three months ended March 31, 2022.

Determination of Fair Value

75 unchanged sentences

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

September 30, 2021 December 31, 2020 Impact of

March 31, 2022 December 31, 2021 Impact of

Increase in Input

29 unchanged sentences

For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative.

Brighthouse Financial, Inc.

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

Fair Value (continued)

The Company does not develop unobservable inputs used in measuring fair value for all other assets and liabilities classified within Level 3;

2 unchanged sentences

For fixed maturity securities valued based on non-binding broker quotes, an increase (decrease) in credit spreads would result in a higher (lower) fair value.

For derivatives valued

For derivatives valued based on third-party pricing models, an increase (decrease) in credit spreads would generally result in a higher (lower) fair value.

Brighthouse Financial, Inc.

1 unchanged sentence

Fair Value (continued)

based on third-party pricing models, an increase (decrease) in credit spreads would generally result in a higher (lower) fair value.

The changes in assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3) were summarized as follows:

1 unchanged sentence

Fixed Maturity Securities

Corporate (1) Structured Securities State and

Subdivision Foreign

Government Equity

Securities Short-term

Investments Net

Derivatives (2) Net Embedded

Derivatives (3) Separate

Account Assets (4)

(In millions)

Three Months Ended September 30, 2021

Balance, beginning of period

$ 889 $ 217 $ — $ 12 $ 3 $ — $ 20 $ ( 7,715 ) $ —

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

— — — — — — ( 6 ) 74 —

Total realized/unrealized gains (losses) included in AOCI

( 8 ) — — — — — 3 — —

Purchases (7) 305 195 — — — — 22 — —

Sales (7) ( 14 ) ( 5 ) — — — — — — —

Issuances (7) — — — — — — — — —

Settlements (7) — — — — — — — 45 —

Transfers into Level 3 (8) 227 8 — — — — — — —

Transfers out of Level 3 (8) ( 106 ) ( 149 ) — ( 12 ) — — — — —

Balance, end of period $ 1,293 $ 266 $ — $ — $ 3 $ — $ 39 $ ( 7,596 ) $ —

Three Months Ended September 30, 2020

Balance, beginning of period

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

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

( 1 ) — — — ( 1 ) — 5 ( 628 ) —

Total realized/unrealized gains (losses) included in AOCI

7 1 — — — — ( 10 ) — —

Purchases (7) 199 11 — — — 10 — — —

Sales (7) ( 64 ) ( 1 ) — — — — — — —

Issuances (7) — — — — — — — — —

Settlements (7) — — — — — — — ( 174 ) —

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

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

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

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2021 (9)

$ — $ — $ — $ — $ — $ — $ ( 5 ) $ 258 $ —

Changes in unrealized gains (losses) included in OCI for the instruments still held at September 30, 2021 (9)

$ ( 8 ) $ — $ — $ — $ — $ — $ 3 $ — $ —

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

$ — $ — $ — $ — $ — $ — $ 5 $ ( 668 ) $ —

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

$ 8 $ 1 $ — $ — $ — $ — $ ( 10 ) $ — $ —

Brighthouse Financial, Inc.

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

Fair Value (continued)

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Fixed Maturity Securities

Corporate (1) Structured Securities State and

Subdivision Foreign

Corporate (1) Structured Securities Foreign

Government Equity

5 unchanged sentences

(In millions)

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Balance, beginning of period

11 unchanged sentences

Balance, end of period $ 1,618 $ 194 $ 23 $ 13 $ — $ 30 $ ( 6,911 ) $ —

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Balance, beginning of period

11 unchanged sentences

Balance, end of period $ 670 $ 126 $ — $ 3 $ — $ 8 $ ( 6,468 ) $ 2

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2021 (9)

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2022 (9)

$ — $ — $ — $ — $ — $ ( 10 ) $ 1,464 $ —

Changes in unrealized gains (losses) included in OCI for the instruments still held at September 30, 2021 (9)

Changes in unrealized gains (losses) included in OCI for the instruments still held at March 31, 2022 (9)

$ ( 98 ) $ ( 5 ) $ ( 3 ) $ — $ — $ 4 $ — $ —

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

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2021 (9)

$ ( 1 ) $ — $ — $ — $ — $ 8 $ 544 $ —

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

Changes in unrealized gains (losses) included in OCI for the instruments still held at March 31, 2021 (9)

$ ( 22 ) $ — $ — $ — $ — $ ( 1 ) $ — $ —

3 unchanged sentences

(2) Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.

(3) Embedded derivative assets and liabilities are presented net for purposes of the rollforward.

Brighthouse Financial, Inc.

1 unchanged sentence

Fair Value (continued)

(3) Embedded derivative assets and liabilities are presented net for purposes of the rollforward.

(4) Investment performance related to separate account assets is fully offset by corresponding amounts credited to contract holders within separate account liabilities.

15 unchanged sentences

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.

1 unchanged sentence

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:

September 30, 2021

March 31, 2022

Fair Value Hierarchy

25 unchanged sentences

Preferred Stock

Preferred stock shares authorized, issued and outstanding were as follows at both September 30, 2021 and December 31, 2020:

Preferred stock shares authorized, issued and outstanding were as follows at both March 31, 2022 and December 31, 2021:

Shares Authorized Shares Issued Shares Outstanding

5 unchanged sentences

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 — —

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

The declaration, record and payment dates, as well as per share and aggregate dividend amounts for BHF’s preferred stock by series for the nine months ended September 30, 2021 and 2020 were as follows:

Series A Series B Series C

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

The per share and aggregate dividend declared for BHF’s preferred stock by series was as follows:

Three Months Ended March 31,

Series Per Share Aggregate Per Share Aggregate

(In millions, except per share data)

August 16, 2021 September 10, 2021 September 27, 2021 $ 412.50 $ 7 $ 421.88 $ 7 $ 335.94 $ 8

May 17, 2021 June 10, 2021 June 25, 2021 412.50 7 421.88 7 335.94 7

February 16, 2021 March 10, 2021 March 25, 2021 412.50 7 421.88 7 466.58 11

$ 1,237.50 $ 21 $ 1,265.64 $ 21 $ 1,138.46 $ 26

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

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

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

$ 1,237.50 $ 21 $ 595.31 $ 10 $ — $ —

A $ 412.50 $ 7 $ 412.50 $ 7

B $ 421.88 7 $ 421.88 7

C $ 335.94 8 $ 466.58 11

D $ 395.05 5 $ — —

Total $ 27 $ 25

Common Stock Repurchase Program

During the three months ended March 31, 2022 and 2021, BHF repurchased 2,398,636 and 1,659,872 shares, respectively, of its common stock through open market purchases pursuant to 10b5-1 plans for $ 127 million and $ 68 million, respectively.

At March 31, 2022, BHF had $ 654 million remaining under its common stock repurchase program.

Brighthouse Financial, Inc.

1 unchanged sentence

Equity (continued)

Common Stock Repurchase Program

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 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.

During the nine months ended September 30, 2021 and 2020, BHF repurchased 7,603,089 and 15,119,010 shares, respectively, of its common stock through open market purchases pursuant to 10b5-1 plans for $ 341 million and $ 376 million, respectively.

At September 30, 2021, BHF had $ 939 million remaining under its common stock repurchase program.

Dividend Restrictions

During the third quarter of 2021, with the approval of the Delaware Department of Insurance, Brighthouse Reinsurance Company of Delaware paid a $ 600 million extraordinary dividend to Brighthouse Life Insurance Company in the form of the settlement of affiliated reinsurance balances of $ 400 million, invested assets of $ 197 million and cash of $ 3 million.

Accumulated Other Comprehensive Income (Loss)

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

Three Months Ended September 30, 2021

Investment Gains

(Losses), Net of

Related Offsets (1) Unrealized

Gains (Losses)

on Derivatives Foreign

Adjustments Defined Benefit Plans Adjustment Total

(In millions)

Balance at June 30, 2021 $ 4,506 $ 142 $ ( 13 ) $ ( 39 ) $ 4,596

OCI before reclassifications ( 499 ) 104 10 — ( 385 )

Deferred income tax benefit (expense) 104 ( 22 ) ( 2 ) 1 81

AOCI before reclassifications, net of income tax 4,111 224 ( 5 ) ( 38 ) 4,292

Amounts reclassified from AOCI ( 2 ) ( 1 ) — — ( 3 )

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

Amounts reclassified from AOCI, net of income tax ( 1 ) ( 1 ) — — ( 2 )

Balance at September 30, 2021

$ 4,110 $ 223 $ ( 5 ) $ ( 38 ) $ 4,290

Three Months Ended September 30, 2020

Investment Gains

(Losses), Net of

Related Offsets (1) Unrealized

Gains (Losses)

on Derivatives Foreign

Adjustments Defined Benefit Plans Adjustment Total

(In millions)

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

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

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

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

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

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

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

Balance at September 30, 2020

$ 5,082 $ 345 $ ( 16 ) $ ( 30 ) $ 5,381

Brighthouse Financial, Inc.

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

Equity (continued)

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Investment Gains

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Amounts reclassified from AOCI, net of income tax 34 ( 1 ) — — 33

Balance at September 30, 2021

Balance at March 31, 2022

$ 167 $ 252 $ ( 13 ) $ ( 43 ) $ 363

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Investment Gains

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Amounts reclassified from AOCI, net of income tax ( 10 ) ( 6 ) — — ( 16 )

Balance at September 30, 2020

Balance at March 31, 2021

$ 3,387 $ 55 $ ( 14 ) $ ( 39 ) $ 3,389

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(1) See Note 4 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI.

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

(2) 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.

Brighthouse Financial, Inc.

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(In millions)

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Gains (losses) on cash flow hedges, net of income tax 1 6

Defined benefit plans adjustment:

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

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

Income tax (expense) benefit — — — —

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

Total reclassifications, net of income tax $ ( 33 ) $ 16

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

Other revenues consisted primarily of 12b-1 fees of $ 91 million and $ 270 million for the three months and nine months ended September 30, 2021, respectively, and $ 83 million and $ 240 million for the three months and nine months ended September 30, 2020, respectively, of which substantially all were reported in the Annuities segment.

Other revenues consisted primarily of 12b-1 fees of $ 82 million and $ 88 million for the three months ended March 31, 2022 and 2021, respectively, of which substantially all were reported in the Annuities segment.

Brighthouse Financial, Inc.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(In millions)

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Interest expense on debt 38 41

Other 17 52 59 99

Total other expenses $ 510 $ 562

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(In millions, except share and per share data)

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Diluted $ 7.91 $ ( 6.96 )

For the three months ended September 30, 2021, weighted average shares used for calculating diluted earnings per common share excludes 187,371 of out-of-the-money stock options, as the inclusion of such shares would be antidilutive to the earnings per common share calculation due to the average share price for the three months ended September 30, 2021.

For the nine months ended September 30, 2021 and the three months and nine months ended September 30, 2020, basic loss per common share equaled diluted loss per common share.

For the three months ended March 31, 2022, weighted average shares used for calculating diluted earnings per common share excludes 187,371 of out-of-the-money stock options, as the inclusion of such shares would be antidilutive to the earnings per common share calculation due to the average share price for the three months ended March 31, 2022.

For the three months ended March 31, 2021, basic loss per common share equaled diluted loss per common share.

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

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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.

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.

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

It is possible that some matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated at September 30, 2021.

It is possible that some matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated at March 31, 2022.

Matters as to Which an Estimate Can Be Made

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

In addition to amounts accrued for probable and reasonably estimable losses, as of September 30, 2021, the Company estimates the aggregate range of reasonably possible losses to be up to approximately $ 10 million.

In addition to amounts accrued for probable and reasonably estimable losses, as of March 31, 2022, the Company estimates the aggregate range of reasonably possible losses to be up to approximately $ 10 million.

Matters as to Which an Estimate Cannot Be Made

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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, which was granted in part and denied in part.

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.

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Lawrence Martin v.

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

Brighthouse Life Insurance Company (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 has filed a purported class action lawsuit against Brighthouse Life Insurance Company.

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

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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.

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

Brighthouse Life Insurance Company of NY was initially named as a defendant when the lawsuit was filed, but was dismissed as a defendant, without prejudice, in April 2022.

The Company intends to vigorously defend this matter.

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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.

In the matters 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.

Brighthouse Financial, Inc.

1 unchanged sentence

Contingencies, Commitments and Guarantees (continued)

As of September 30, 2021, the Company estimates the range of reasonably possible losses in excess of the amounts accrued for certain non-litigation loss contingencies to be from zero up to approximately $ 250 million, which are 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.

As of March 31, 2022, 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

The Company commits to lend funds under mortgage loan commitments.

The amounts of these mortgage loan commitments were $ 734 million and $ 210 million at September 30, 2021 and December 31, 2020, respectively.

The amounts of these mortgage loan commitments were $ 651 million and $ 719 million at March 31, 2022 and December 31, 2021, respectively.

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

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

The amounts of these unfunded commitments were $ 2.3 billion and $ 1.7 billion at September 30, 2021 and December 31, 2020, respectively.

The amounts of these unfunded commitments were $ 2.3 billion at both March 31, 2022 and December 31, 2021.

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

8 unchanged sentences

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

The Company’s recorded liabilities were $ 1 million at both September 30, 2021 and December 31, 2020 for indemnities, guarantees and commitments.

The Company’s recorded liabilities were $ 1 million at both March 31, 2022 and December 31, 2021 for indemnities, guarantees and commitments.

Subsequent Event

On April 15, 2022, BHF entered into a new revolving credit agreement with respect to a new $ 1.0 billion senior unsecured revolving credit facility maturing April 15, 2027 (the “2022 Revolving Credit Facility”), all of which may be used for revolving loans or letters of credit.

The 2022 Revolving Credit Facility refinanced and replaced BHF’s former $ 1.0 billion senior unsecured revolving credit facility that was scheduled to mature May 7, 2024.

At May 10, 2022, there were no borrowings or letters of credit outstanding under the 2022 Revolving Credit Facility.

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

What changed 10-Q

Item 1. Financial Statements