Brighthouse Financial, Inc. 10-Q

Item 1. Financial Statements Brighthouse Financial, Inc. Interim Condensed Consolidated Balance Sheets September 30, 2022 (Unaudited) and December 31, 2021 (In millions, except share and per share data) September 30, 2022 December 31, 2021 Assets Investments: Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $ 85,307 and $ 79,246 , respectively; allowance for credit losses of $ 5 and $ 11 , respectively) $ 75,271 $ 87,582 Equity securities, at estimated fair value 100 101 Mortgage loans (net of allowance for credit losses of $ 99 and $ 123 , respectively) 22,089 19,850 Policy loans 1,274 1,264 Limited partnerships and limited liability companies 4,607 4,271 Short-term investments, principally at estimated fair value 1,130 1,841 Other invested assets, principally at estimated fair value (net of allowance for credit losses of $ 13 and $ 13 , respectively) 4,033 3,316 Total investments 108,504 118,225 Cash and cash equivalents 4,793 4,474 Accrued investment income 909 724 Premiums, reinsurance and other receivables (net of allowance for credit losses of $ 10 and $ 10 , respectively) 17,877 16,094 Deferred policy acquisition costs and value of business acquired 5,639 5,377 Current income tax recoverable 18 — Deferred income tax asset 1,619 — Other assets 446 482 Separate account assets 81,836 114,464 Total assets $ 221,641 $ 259,840 Liabilities and Equity Liabilities Future policy benefits $ 41,786 $ 43,807 Policyholder account balances 71,323 66,851 Other policy-related balances 3,364 3,457 Payables for collateral under securities loaned and other transactions 6,532 6,269 Long-term debt 3,156 3,157 Current income tax payable — 62 Deferred income tax liability — 1,062 Other liabilities 7,765 4,504 Separate account liabilities 81,836 114,464 Total liabilities 215,762 243,633 Contingencies, Commitments and Guarantees (Note 11) Equity Brighthouse Financial, Inc.’s stockholders’ equity: Preferred stock, par value $ 0.01 per share; $ 1,753 aggregate liquidation preference — — Common stock, par value $ 0.01 per share; 1,000,000,000 shares authorized; 122,129,392 and 121,513,442 shares issued, respectively; 70,060,560 and 77,870,072 shares outstanding, respectively 1 1 Additional paid-in capital 14,095 14,154 Retained earnings (deficit) 304 ( 642 ) Treasury stock, at cost; 52,068,832 and 43,643,370 shares, respectively ( 1,949 ) ( 1,543 ) Accumulated other comprehensive income (loss) ( 6,637 ) 4,172 Total Brighthouse Financial, Inc.’s stockholders’ equity 5,814 16,142 Noncontrolling interests 65 65 Total equity 5,879 16,207 Total liabilities and equity $ 221,641 $ 259,840 See accompanying notes to the interim condensed consolidated financial statements. 2 Table of Contents Brighthouse Financial, Inc. Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) For the Three Months and Nine Months Ended September 30, 2022 and 2021 (Unaudited) (In millions, except per share data) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Revenues Premiums $ 162 $ 193 $ 495 $ 539 Universal life and investment-type product policy fees 783 881 2,408 2,730 Net investment income 877 1,281 3,089 3,680 Other revenues 121 117 376 345 Net investment gains (losses) ( 45 ) ( 16 ) ( 179 ) ( 36 ) Net derivative gains (losses) ( 416 ) 56 1,830 ( 2,132 ) Total revenues 1,482 2,512 8,019 5,126 Expenses Policyholder benefits and claims 1,246 1,112 3,260 2,620 Interest credited to policyholder account balances 430 413 1,039 997 Amortization of deferred policy acquisition costs and value of business acquired 179 ( 82 ) 972 17 Other expenses 495 579 1,596 1,749 Total expenses 2,350 2,022 6,867 5,383 Income (loss) before provision for income tax ( 868 ) 490 1,152 ( 257 ) Provision for income tax expense (benefit) ( 193 ) 105 202 ( 90 ) Net income (loss) ( 675 ) 385 950 ( 167 ) Less: Net income (loss) attributable to noncontrolling interests 2 2 4 4 Net income (loss) attributable to Brighthouse Financial, Inc. ( 677 ) 383 946 ( 171 ) Less: Preferred stock dividends 25 22 78 68 Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders $ ( 702 ) $ 361 $ 868 $ ( 239 ) Comprehensive income (loss) $ ( 4,221 ) $ 79 $ ( 9,859 ) $ ( 1,593 ) Less: Comprehensive income (loss) attributable to noncontrolling interests 2 2 4 4 Comprehensive income (loss) attributable to Brighthouse Financial, Inc. $ ( 4,223 ) $ 77 $ ( 9,863 ) $ ( 1,597 ) Earnings per common share Basic $ ( 9.82 ) $ 4.37 $ 11.68 $ ( 2.80 ) Diluted $ ( 9.82 ) $ 4.34 $ 11.61 $ ( 2.80 ) See accompanying notes to the interim condensed consolidated financial statements. 3 Table of Contents Brighthouse Financial, Inc. Interim Condensed Consolidated Statements of Equity For the Three Months and Nine Months Ended September 30, 2022 and 2021 (Unaudited) (In millions) Preferred Stock Common Stock Additional Paid-in Capital Retained Earnings (Deficit) Treasury Stock at Cost Accumulated Other Comprehensive Income (Loss) Brighthouse Financial, Inc.’s Stockholders’ Equity Noncontrolling Interests Total Equity Balance at December 31, 2021 $ — $ 1 $ 14,154 $ ( 642 ) $ ( 1,543 ) $ 4,172 $ 16,142 $ 65 $ 16,207 Treasury stock acquired in connection with share repurchases ( 259 ) ( 259 ) ( 259 ) Share-based compensation — 12 ( 11 ) 1 1 Dividends on preferred stock ( 53 ) ( 53 ) ( 53 ) Change in noncontrolling interests — ( 2 ) ( 2 ) Net income (loss) 1,623 1,623 2 1,625 Other comprehensive income (loss), net of income tax ( 7,263 ) ( 7,263 ) ( 7,263 ) Balance at June 30, 2022 — 1 14,113 981 ( 1,813 ) ( 3,091 ) 10,191 65 10,256 Treasury stock acquired in connection with share repurchases ( 136 ) ( 136 ) ( 136 ) Share-based compensation — 7 7 7 Dividends on preferred stock ( 25 ) ( 25 ) ( 25 ) Change in noncontrolling interests — ( 2 ) ( 2 ) Net income (loss) ( 677 ) ( 677 ) 2 ( 675 ) Other comprehensive income (loss), net of income tax ( 3,546 ) ( 3,546 ) ( 3,546 ) Balance at September 30, 2022 $ — $ 1 $ 14,095 $ 304 $ ( 1,949 ) $ ( 6,637 ) $ 5,814 $ 65 $ 5,879 Preferred Stock Common Stock Additional Paid-in Capital Retained Earnings (Deficit) Treasury Stock at Cost Accumulated Other Comprehensive Income (Loss) Brighthouse Financial, Inc.’s Stockholders’ Equity Noncontrolling Interests Total Equity Balance at December 31, 2020 $ — $ 1 $ 13,878 $ ( 534 ) $ ( 1,038 ) $ 5,716 $ 18,023 $ 65 $ 18,088 Treasury stock acquired in connection with share repurchases ( 192 ) ( 192 ) ( 192 ) Share-based compensation — 10 ( 6 ) 4 4 Dividends on preferred stock ( 46 ) ( 46 ) ( 46 ) Change in noncontrolling interests — ( 2 ) ( 2 ) Net income (loss) ( 554 ) ( 554 ) 2 ( 552 ) Other comprehensive income (loss), net of income tax ( 1,120 ) ( 1,120 ) ( 1,120 ) 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 — 10 10 10 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 See accompanying notes to the interim condensed consolidated financial statements. 4 Table of Contents Brighthouse Financial, Inc. Interim Condensed Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2022 and 2021 (Unaudited) (In millions) Nine Months Ended September 30, 2022 2021 Net cash provided by (used in) operating activities $ ( 939 ) $ 644 Cash flows from investing activities Sales, maturities and repayments of: Fixed maturity securities 8,479 8,541 Equity securities 41 114 Mortgage loans 1,770 2,005 Limited partnerships and limited liability companies 180 168 Purchases of: Fixed maturity securities ( 14,333 ) ( 16,168 ) Equity securities ( 37 ) ( 7 ) Mortgage loans ( 4,059 ) ( 4,421 ) Limited partnerships and limited liability companies ( 619 ) ( 560 ) Cash received in connection with freestanding derivatives 3,778 3,213 Cash paid in connection with freestanding derivatives ( 3,395 ) ( 3,914 ) Net change in policy loans ( 9 ) 28 Net change in short-term investments 716 1,349 Net change in other invested assets ( 108 ) ( 13 ) Net cash provided by (used in) investing activities ( 7,596 ) ( 9,665 ) Cash flows from financing activities Policyholder account balances: Deposits 23,503 11,182 Withdrawals ( 14,285 ) ( 1,945 ) Net change in payables for collateral under securities loaned and other transactions 263 387 Long-term debt repaid ( 2 ) ( 1 ) Dividends on preferred stock ( 78 ) ( 68 ) Treasury stock acquired in connection with share repurchases ( 395 ) ( 341 ) Financing element on certain derivative instruments and other derivative related transactions, net ( 137 ) ( 183 ) Other, net ( 15 ) ( 10 ) Net cash provided by (used in) financing activities 8,854 9,021 Change in cash, cash equivalents and restricted cash 319 — Cash, cash equivalents and restricted cash, beginning of period 4,474 4,108 Cash, cash equivalents and restricted cash, end of period $ 4,793 $ 4,108 Supplemental disclosures of cash flow information Net cash paid (received) for: Interest $ 83 $ 88 Income tax $ 120 $ 10 See accompanying notes to the interim condensed consolidated financial statements. 5 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) 1. Business, Basis of Presentation and Summary of Significant Accounting Policies Business Brighthouse Financial, Inc. (“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: Annuities; Life; and Run-off. In addition, the Company reports certain of its results of operations in Corporate & Other. Basis of Presentation The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the interim condensed consolidated financial statements. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from these estimates. Consolidation The accompanying interim condensed 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. The Company uses the equity method of accounting for investments in limited partnerships and LLCs when it has more than a minor ownership interest or more than a minor influence over the investee’s operations. The Company generally recognizes its share of the investee’s earnings on a three-month lag in instances where the investee’s financial information is not sufficiently timely or when the investee’s reporting period differs from the Company’s reporting period. When the Company has virtually no influence over the investee’s operations, the investment is carried at fair value. 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. Interim results are not necessarily indicative of full year performance. The December 31, 2021 consolidated balance sheet data was derived from audited consolidated financial statements included in Brighthouse Financial, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”), which include all disclosures required by GAAP. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2021 Annual Report. Adoption of New Accounting Pronouncements 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. There were no significant ASUs adopted during the period ended September 30, 2022. Future Adoption of New Accounting Pronouncements In August 2018, the FASB issued new guidance on long-duration contracts (ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (“LDTI”)). LDTI is effective for fiscal years beginning after January 1, 2023. LDTI 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”). (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 6 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued) 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. LDTI will be applied to the earliest period presented in the financial statements, making the transition date January 1, 2021. The MRB changes are required to be applied on a retrospective basis, while the changes for insurance liability assumption updates and DAC amortization will be applied to existing carrying amounts on the transition date. LDTI will have a significant impact on the Company’s financial statements 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 GAAP. The impacts to the financial statements are highly dependent on market conditions, especially interest rates. The Company estimates the impact of LDTI to total stockholders’ equity as of December 31, 2021 to be a reduction of between $ 6 billion and $ 8 billion, and a reduction to total stockholders’ equity excluding accumulated other comprehensive income of between $ 3 billion and $ 4 billion, both primarily driven by the MRB changes. Based on prevailing interest rates at September 30, 2022, post adoption of LDTI, the Company expects the impact to total stockholders’ equity as of September 30, 2022 to have significantly improved since December 31, 2021. The Company has made significant progress toward adopting the new guidance, including updating systems, validating computations, establishing proper controls, finalizing accounting policies and developing disclosures. 2. Segment Information The Company is organized into three segments: Annuities; Life; and Run-off. In addition, the Company reports certain of its results of operations in Corporate & Other. Annuities 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. Life 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 on a tax-advantaged basis. Run-off 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 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, 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. 7 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 2. Segment Information (continued) Financial Measures and Segment Accounting Policies 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 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); • 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; and • Certain variable annuity guaranteed minimum income benefits (“GMIB”) fees (“GMIB Fees”). 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 • 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. The segment accounting policies are the same as those used to prepare the Company’s interim condensed consolidated financial statements, except for the adjustments to calculate adjusted earnings described above. In addition, segment accounting policies include the methods of capital allocation described below. Segment investment and capitalization targets are based on statutory oriented risk principles and metrics. Segment invested assets backing liabilities are based on net statutory liabilities plus excess capital. For the variable annuity business, the excess capital held is based on the target statutory total asset requirement consistent with the Company’s variable annuity risk management strategy. For insurance businesses other than variable annuities, excess capital held is based on a percentage of required statutory risk-based capital. Assets in excess of those allocated to the segments, if any, are held in Corporate & Other. Segment net investment income reflects the performance of each segment’s respective invested assets. 8 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 2. Segment Information (continued) Operating results by segment, as well as Corporate & Other, were as follows: Three Months Ended September 30, 2022 Annuities Life Run-off Corporate & Other Total (In millions) Pre-tax adjusted earnings $ 148 $ ( 9 ) $ ( 27 ) $ 31 $ 143 Provision for income tax expense (benefit) 23 ( 2 ) ( 6 ) 4 19 Post-tax adjusted earnings 125 ( 7 ) ( 21 ) 27 124 Less: Net income (loss) attributable to noncontrolling interests — — — 2 2 Less: Preferred stock dividends — — — 25 25 Adjusted earnings $ 125 $ ( 7 ) $ ( 21 ) $ — 97 Adjustments for: Net investment gains (losses) ( 45 ) Net derivative gains (losses) ( 416 ) Other adjustments to net income (loss) ( 550 ) Provision for income tax (expense) benefit 212 Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders $ ( 702 ) Interest revenue $ 547 $ 74 $ 168 $ 111 Interest expense $ — $ — $ — $ 38 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 Less: Net income (loss) attributable to noncontrolling interests — — — 2 2 Less: 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 9 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 2. Segment Information (continued) Nine Months Ended September 30, 2022 Annuities Life Run-off Corporate & Other Total (In millions) Pre-tax adjusted earnings $ 779 $ 51 $ ( 214 ) $ ( 38 ) $ 578 Provision for income tax expense (benefit) 139 9 ( 45 ) ( 22 ) 81 Post-tax adjusted earnings 640 42 ( 169 ) ( 16 ) 497 Less: Net income (loss) attributable to noncontrolling interests — — — 4 4 Less: Preferred stock dividends — — — 78 78 Adjusted earnings $ 640 $ 42 $ ( 169 ) $ ( 98 ) 415 Adjustments for: Net investment gains (losses) ( 179 ) Net derivative gains (losses) 1,830 Other adjustments to net income (loss) ( 1,077 ) Provision for income tax (expense) benefit ( 121 ) Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders $ 868 Interest revenue $ 1,648 $ 339 $ 919 $ 221 Interest expense $ — $ — $ — $ 114 Nine Months Ended September 30, 2021 Annuities Life Run-off Corporate & Other Total (In millions) Pre-tax adjusted earnings $ 1,312 $ 278 $ 267 $ ( 206 ) $ 1,651 Provision for income tax expense (benefit) 253 58 31 ( 33 ) 309 Post-tax adjusted earnings 1,059 220 236 ( 173 ) 1,342 Less: Net income (loss) attributable to noncontrolling interests — — — 4 4 Less: Preferred stock dividends — — — 68 68 Adjusted earnings $ 1,059 $ 220 $ 236 $ ( 245 ) 1,270 Adjustments for: Net investment gains (losses) ( 36 ) Net derivative gains (losses) ( 2,132 ) Other adjustments to net income (loss) 260 Provision for income tax (expense) benefit 399 Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders $ ( 239 ) Interest revenue $ 1,650 $ 517 $ 1,466 $ 63 Interest expense $ — $ — $ — $ 122 10 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 2. Segment Information (continued) Total revenues by segment, as well as Corporate & Other, were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (In millions) Annuities $ 1,183 $ 1,351 $ 3,662 $ 3,906 Life 255 345 871 1,138 Run-off 339 670 1,415 1,960 Corporate & Other 128 51 276 122 Adjustments ( 423 ) 95 1,795 ( 2,000 ) Total $ 1,482 $ 2,512 $ 8,019 $ 5,126 Total assets by segment, as well as Corporate & Other, were as follows at: September 30, 2022 December 31, 2021 (In millions) Annuities $ 147,599 $ 178,700 Life 21,109 24,514 Run-off 28,626 37,055 Corporate & Other 24,307 19,571 Total $ 221,641 $ 259,840 3. Insurance Guarantees 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. Guaranteed minimum death benefits, the life contingent portion of guaranteed minimum withdrawal benefits (“GMWB”) and certain portions of GMIBs are accounted for as insurance liabilities in future policyholder benefits, while other guarantees are accounted for in whole or in part as embedded derivatives in policyholder account balances and are further discussed in Note 5. The Company also has secondary guarantees on universal and variable life insurance contracts accounted for as insurance liabilities. Information regarding the Company’s guarantee exposure was as follows at: September 30, 2022 December 31, 2021 In the Event of Death At Annuitization In the Event of Death At Annuitization (Dollars in millions) Annuity Contracts (1), (2) Variable Annuity Guarantees Total account value (3) $ 79,834 $ 42,520 $ 109,968 $ 59,735 Separate account value $ 74,918 $ 41,356 $ 105,023 $ 58,555 Net amount at risk $ 18,461 (4) $ 6,761 (5) $ 6,361 (4) $ 5,240 (5) Average attained age of contract holders 72 years 71 years 71 years 70 years 11 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 3. Insurance (continued) September 30, 2022 December 31, 2021 Secondary Guarantees (Dollars in millions) Universal Life Contracts Total account value (3) $ 5,317 $ 5,518 Net amount at risk (6) $ 65,935 $ 67,248 Average attained age of policyholders 69 years 68 years Variable Life Contracts Total account value (3) $ 3,677 $ 4,785 Net amount at risk (6) $ 18,366 $ 18,857 Average attained age of policyholders 53 years 52 years _______________ (1) The Company’s annuity contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive. (2) Includes direct business, but excludes offsets from hedging or reinsurance, if any. Therefore, the net amount at risk presented reflects the economic exposures of living and death benefit guarantees associated with variable annuities, but not necessarily their impact on the Company. See Note 5 of the Notes to the Consolidated Financial Statements included in the 2021 Annual Report for a discussion of guaranteed minimum benefits which have been reinsured. (3) Includes the contract holder’s investments in the general account and separate account, if applicable. (4) Defined as the death benefit less the total account value, as of the balance sheet date. 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. (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. This amount represents the Company’s potential economic exposure to such guarantees in the event all contract holders were to annuitize on the balance sheet date, even though the contracts contain terms that allow annuitization of the guaranteed amount only after the 10th anniversary of the contract, which not all contract holders have achieved. (6) Defined as the guarantee amount less the account value, as of the balance sheet date. 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. 4. Investments 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. 12 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 4. Investments (continued) Fixed Maturity Securities Available-for-sale Fixed Maturity Securities by Sector Fixed maturity securities by sector were as follows at: September 30, 2022 December 31, 2021 Amortized Cost Allowance for Credit Losses Gross Unrealized Estimated Fair Value Amortized Cost Allowance for Credit Losses Gross Unrealized Estimated Fair Value Gains Losses Gains Losses (In millions) U.S. corporate $ 37,214 $ 1 $ 125 $ 5,200 $ 32,138 $ 35,326 $ 2 $ 3,946 $ 189 $ 39,081 Foreign corporate 12,493 — 20 2,373 10,140 10,916 7 906 109 11,706 U.S. government and agency 8,682 — 332 612 8,402 7,301 — 2,066 60 9,307 RMBS 8,764 2 60 963 7,859 8,878 — 432 51 9,259 CMBS 7,321 2 — 703 6,616 6,976 2 333 25 7,282 State and political subdivision 4,110 — 120 399 3,831 3,995 — 846 6 4,835 ABS 5,538 — 1 336 5,203 4,261 — 33 14 4,280 Foreign government 1,185 — 36 139 1,082 1,593 — 244 5 1,832 Total fixed maturity securities $ 85,307 $ 5 $ 694 $ 10,725 $ 75,271 $ 79,246 $ 11 $ 8,806 $ 459 $ 87,582 The Company held non-income producing fixed maturity securities with an estimated fair value of $ 15 million and $ 3 million at September 30, 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, 2022: Due in One Year or Less Due After One Year Through Five Years Due After Five Years Through Ten Years Due After Ten Years Structured Securities (1) Total Fixed Maturity Securities (In millions) Amortized cost $ 1,192 $ 13,566 $ 17,400 $ 31,526 $ 21,623 $ 85,307 Estimated fair value $ 1,171 $ 12,716 $ 14,982 $ 26,724 $ 19,678 $ 75,271 _______________ (1) Structured securities include residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”). Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity. 13 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 4. Investments (continued) Continuous Gross Unrealized Losses for Fixed Maturity Securities by Sector The estimated fair value and gross unrealized losses of fixed maturity securities in an unrealized loss position, by sector and by length of time that the securities have been in a continuous unrealized loss position, were as follows at: September 30, 2022 December 31, 2021 Less than 12 Months 12 Months or Greater Less than 12 Months 12 Months or Greater Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses (Dollars in millions) U.S. corporate $ 26,463 $ 4,258 $ 2,704 $ 942 $ 5,131 $ 113 $ 888 $ 76 Foreign corporate 8,598 1,915 1,085 458 2,044 62 326 47 U.S. government and agency 3,500 292 1,076 320 1,716 40 222 20 RMBS 5,307 580 1,807 383 3,488 51 32 — CMBS 5,984 574 612 129 1,401 21 95 4 State and political subdivision 2,173 369 99 30 356 6 7 — ABS 4,333 265 778 71 2,459 13 93 1 Foreign government 847 139 — — 278 4 18 1 Total fixed maturity securities $ 57,205 $ 8,392 $ 8,161 $ 2,333 $ 16,873 $ 310 $ 1,681 $ 149 Total number of securities in an unrealized loss position 8,049 1,400 2,454 369 Allowance for Credit Losses for Fixed Maturity Securities Evaluation and Measurement Methodologies For fixed maturity securities in an unrealized loss position, management first assesses whether the Company intends to sell, or whether it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to estimated fair value through net investment gains (losses). For fixed maturity securities that do not meet the aforementioned criteria, management evaluates whether the decline in estimated fair value has resulted from credit losses or other factors. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used in the allowance for credit loss evaluation process include, but are not limited to: (i) the extent to which estimated fair value is less than amortized cost; (ii) any changes to the rating of the security by a rating agency; (iii) adverse conditions specifically related to the security, industry or geographic area; and (iv) payment structure of the fixed maturity security and the likelihood of the issuer being able to make payments in the future or the issuer’s failure to make scheduled interest and principal payments. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. 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 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. Any changes in the security specific allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense in net investment gains (losses). Fixed maturity securities are also evaluated to determine whether any amounts have become uncollectible. 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 $ 634 million and $ 534 million at September 30, 2022 and December 31, 2021, respectively, and is included in accrued investment income. 14 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 4. Investments (continued) Fixed maturity securities are also evaluated to determine if they qualify as purchased financial assets with credit deterioration (“PCD”). To determine if the credit deterioration experienced since origination is more than insignificant, both (i) the extent of the credit deterioration and (ii) any rating agency downgrades are evaluated. For securities categorized as PCD assets, the present value of cash flows expected to be collected from the security are compared to the par value of the security. If the present value of cash flows expected to be collected is less than the par value, credit losses are embedded in the purchase price of the PCD asset. In this situation, both an allowance for credit losses and amortized cost gross-up is recorded, limited by the amount that the estimated fair value is less than the grossed-up amortized cost basis. Any difference between the purchase price and the present value of cash flows is amortized or accreted into net investment income over the life of the PCD asset. Any subsequent PCD asset allowance for credit losses is evaluated in a manner similar to the process described above for fixed maturity securities. Current Period Evaluation Based on the Company’s current evaluation of its fixed maturity securities in an unrealized loss position and the current intent or requirement to sell, the Company recorded an allowance for credit losses of $ 5 million, relating to thirteen securities at September 30, 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. Where unrealized losses have not been recognized into income, it is primarily because the securities’ bond issuer(s) are of high credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in estimated fair value is largely due to changes in interest rates and non-issuer specific credit spreads. These issuers continued to make timely principal and interest payments and the estimated fair value is expected to recover as the securities approach maturity. Allowance for Credit Losses for Fixed Maturity Securities The allowance for credit losses for fixed maturity securities was $ 5 million and $ 11 million at September 30, 2022 and December 31, 2021, respectively. For both the nine months ended September 30, 2022 and 2021, the change in the allowance for fixed maturity securities by sector was immaterial. The Company recorded total write-offs of $ 10 million for the nine months ended September 30, 2022. The Company did no t record any write-offs for the nine months ended September 30, 2021. Mortgage Loans Mortgage Loans by Portfolio Segment Mortgage loans are summarized as follows at: September 30, 2022 December 31, 2021 Carrying Value % of Total Carrying Value % of Total (Dollars in millions) Commercial $ 13,286 60.2 % $ 12,187 61.4 % Agricultural 4,216 19.1 4,163 21.0 Residential 4,686 21.2 3,623 18.2 Total mortgage loans (1) 22,188 100.5 19,973 100.6 Allowance for credit losses ( 99 ) ( 0.5 ) ( 123 ) ( 0.6 ) Total mortgage loans, net $ 22,089 100.0 % $ 19,850 100.0 % _______________ (1) Purchases of mortgage loans from third parties were $ 387 million and $ 1.6 billion for the three months and nine months ended September 30, 2022, respectively, and $ 698 million and $ 1.5 billion for the three months and nine months ended September 30, 2021, respectively, and were primarily comprised of residential mortgage loans. 15 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 4. Investments (continued) Allowance for Credit Losses for Mortgage Loans Evaluation and Measurement Methodologies The allowance for credit losses is a valuation account that is deducted from the mortgage loan’s amortized cost basis to present the net amount expected to be collected on the mortgage loan. The loan balance, or a portion of the loan balance, is written-off against the allowance when management believes this amount is uncollectible. 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 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, 2022 and December 31, 2021. The accrued interest receivable on mortgage loans is included in accrued investment income and totaled $ 103 million and $ 95 million at September 30, 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. Historical credit loss experience provides the basis for estimating expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics and environmental conditions. A reasonable and supportable forecast period of two-years is used with an input reversion period of one-year. Mortgage loans are evaluated in each of the three portfolio segments to determine the allowance for credit losses. The loan-level loss rates are determined using individual loan terms and characteristics, risk pools/internal ratings, national economic forecasts, prepayment speeds, and estimated default and loss severity. The resulting loss rates are applied to the mortgage loan’s amortized cost to generate an allowance for credit losses. In certain situations, the allowance for credit losses is measured as the difference between the loan’s amortized cost and liquidation value of the collateral. These situations include collateral dependent loans, expected troubled debt restructurings (“TDR”), foreclosure probable loans, and loans with dissimilar risk characteristics. Mortgage loans are also evaluated to determine if they qualify as PCD assets. To determine if the credit deterioration experienced since origination is more than insignificant, the extent of credit deterioration is evaluated. All re-performing/modified loan (“RPL”) pools purchased after December 31, 2019 are determined to have been acquired with evidence of more than insignificant credit deterioration since origination and are classified as PCD assets. RPLs are pools of residential mortgage loans acquired at a discount or premium which have both credit and non-credit components. For PCD mortgage loans, the allowance for credit losses is determined using a similar methodology described above, except the loss-rate is determined at the pool level instead of the individual loan level. The initial allowance for credit losses, determined on a collective basis, is then allocated to the individual loans. The initial amortized cost of the loan is grossed-up to reflect the sum of the loan’s purchase price and allowance for credit losses. The difference between the grossed-up amortized cost basis and the par value of the loan is a noncredit discount or premium, which is accreted or amortized into net investment income over the remaining life of the loan. 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. 16 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 4. Investments (continued) Rollforward of the Allowance for Credit Losses for Mortgage Loans by Portfolio Segment The changes in the allowance for credit losses by portfolio segment were as follows: Commercial Agricultural Residential Total (In millions) Nine Months Ended September 30, 2022 Balance, beginning of period $ 67 $ 12 $ 44 $ 123 Current period provision 1 3 ( 5 ) ( 1 ) Charge-offs, net of recoveries ( 23 ) — — ( 23 ) Balance, end of period $ 45 $ 15 $ 39 $ 99 Nine Months Ended September 30, 2021 Balance, beginning of period $ 44 $ 15 $ 35 $ 94 Current period provision 6 ( 2 ) — 4 PCD credit allowance — — 2 2 Balance, end of period $ 50 $ 13 $ 37 $ 100 Credit Quality of Mortgage Loans by Portfolio Segment The amortized cost of mortgage loans by year of origination and credit quality indicator was as follows at: 2022 2021 2020 2019 2018 Prior Total (In millions) September 30, 2022 Commercial mortgage loans Loan-to-value ratios: Less than 65% $ 1,500 $ 2,754 $ 406 $ 1,474 $ 946 $ 3,776 $ 10,856 65% to 75% 427 470 — 302 403 334 1,936 76% to 80% — — 40 105 29 38 212 Greater than 80% — — — — 57 225 282 Total commercial mortgage loans 1,927 3,224 446 1,881 1,435 4,373 13,286 Agricultural mortgage loans Loan-to-value ratios: Less than 65% 373 1,166 415 497 648 793 3,892 65% to 75% 93 90 66 56 1 17 323 Greater than 80% — — — — 1 — 1 Total agricultural mortgage loans 466 1,256 481 553 650 810 4,216 Residential mortgage loans Performing 892 1,701 164 216 173 1,481 4,627 Nonperforming 1 6 2 2 1 47 59 Total residential mortgage loans 893 1,707 166 218 174 1,528 4,686 Total $ 3,286 $ 6,187 $ 1,093 $ 2,652 $ 2,259 $ 6,711 $ 22,188 17 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 4. Investments (continued) 2021 2020 2019 2018 2017 Prior Total (In millions) December 31, 2021 Commercial mortgage loans Loan-to-value ratios: Less than 65% $ 2,771 $ 437 $ 1,539 $ 986 $ 554 $ 3,303 $ 9,590 65% to 75% 633 92 383 406 128 481 2,123 76% to 80% — — 55 29 59 31 174 Greater than 80% — — — 30 — 270 300 Total commercial mortgage loans 3,404 529 1,977 1,451 741 4,085 12,187 Agricultural mortgage loans Loan-to-value ratios: Less than 65% 1,150 541 510 674 292 633 3,800 65% to 75% 114 77 61 26 33 52 363 Total agricultural mortgage loans 1,264 618 571 700 325 685 4,163 Residential mortgage loans Performing 1,124 202 270 230 132 1,606 3,564 Nonperforming 1 — 3 3 1 51 59 Total residential mortgage loans 1,125 202 273 233 133 1,657 3,623 Total $ 5,793 $ 1,349 $ 2,821 $ 2,384 $ 1,199 $ 6,427 $ 19,973 The loan-to-value ratio is a measure commonly used to assess the quality of commercial and agricultural mortgage loans. The loan-to-value ratio compares the amount of the loan to the estimated fair value of the underlying property collateralizing the loan and is commonly expressed as a percentage. A loan-to-value ratio less than 100% indicates an excess of collateral value over the loan amount. Loan-to-value ratios greater than 100% indicate that the loan amount exceeds the collateral value. Performing status is a measure commonly used to assess the quality of residential mortgage loans. A loan is considered performing when the borrower makes consistent and timely payments. The amortized cost of commercial mortgage loans by debt-service coverage ratio was as follows at: September 30, 2022 December 31, 2021 Amortized Cost % of Total Amortized Cost % of Total (Dollars in millions) Debt-service coverage ratios: Greater than 1.20x $ 11,808 88.9 % $ 10,289 84.4 % 1.00x - 1.20x 581 4.4 596 4.9 Less than 1.00x 897 6.7 1,302 10.7 Total $ 13,286 100.0 % $ 12,187 100.0 % The debt-service coverage ratio compares a property’s net operating income to its debt-service payments. Debt-service coverage ratios less than 1.00 times indicate that property operations do not generate enough income to cover the loan’s current debt payments. A debt-service coverage ratio greater than 1.00 times indicates an excess of net operating income over the debt-service payments. 18 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 4. Investments (continued) 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, 2022 and December 31, 2021. Delinquency is defined consistent with industry practice, when mortgage loans are past due as follows: commercial and residential mortgage loans — 60 days; and agricultural mortgage loans — 90 days. To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the past due status of the impacted loans 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, 2022 and December 31, 2021, $ 23 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, 2022 December 31, 2021 Commercial Agricultural Residential Total Commercial Agricultural Residential Total (In millions) Current $ 13,286 $ 4,193 $ 4,569 $ 22,048 $ 12,187 $ 4,163 $ 3,550 $ 19,900 30-59 days past due — — 58 58 — — 14 14 60-89 days past due — 7 17 24 — — 14 14 90-179 days past due — — 26 26 — — 29 29 180+ days past due — 16 16 32 — — 16 16 Total $ 13,286 $ 4,216 $ 4,686 $ 22,188 $ 12,187 $ 4,163 $ 3,623 $ 19,973 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. 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 September 30, 2022 and December 31, 2021, $ 23 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 was as follows at: Commercial Agricultural Residential Total (In millions) September 30, 2022 $ — $ 3 $ 59 $ 62 December 31, 2021 $ — $ — $ 59 $ 59 The Company had $ 2 million and $ 0 of loans in nonaccrual status for which there was no related allowance for credit losses at September 30, 2022 and December 31, 2021, respectively. The $ 2 million of mortgage loans for which there was no related allowance for credit losses pertains to collateral dependent loans where the collateral value exceeds amortized cost. Current period investment income on mortgage loans in nonaccrual status was $ 1 million for both the nine months ended September 30, 2022 and 2021 . 19 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 4. Investments (continued) Modified Mortgage Loans by Portfolio Segment Under certain circumstances, modifications are granted to nonperforming mortgage loans. Each modification is evaluated to determine if a TDR has occurred. A modification is a TDR when the borrower is in financial difficulty and the creditor makes concessions. 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, 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. Other Invested Assets Over 90 % of other invested assets is comprised of freestanding derivatives with positive estimated fair values. See Note 5 for information about freestanding derivatives with positive estimated fair values. 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) Unrealized investment gains (losses) on fixed maturity securities and the effect on DAC, VOBA, deferred sales inducements (“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 accumulated other comprehensive income (loss) (“AOCI”). The components of net unrealized investment gains (losses), included in AOCI, were as follows at: September 30, 2022 December 31, 2021 (In millions) Fixed maturity securities $ ( 10,031 ) $ 8,347 Derivatives 930 329 Other ( 7 ) ( 29 ) Subtotal ( 9,108 ) 8,647 Amounts allocated from: Future policy benefits 320 ( 2,903 ) DAC, VOBA and DSI 503 ( 403 ) Subtotal 823 ( 3,306 ) Deferred income tax benefit (expense) 1,740 ( 1,121 ) Net unrealized investment gains (losses) $ ( 6,545 ) $ 4,220 The changes in net unrealized investment gains (losses) were as follows: Nine Months Ended September 30, 2022 (In millions) Balance at December 31, 2021 $ 4,220 Unrealized investment gains (losses) during the period ( 17,755 ) Unrealized investment gains (losses) relating to: Future policy benefits 3,223 DAC, VOBA and DSI 906 Deferred income tax benefit (expense) 2,861 Balance at September 30, 2022 $ ( 6,545 ) Change in net unrealized investment gains (losses) $ ( 10,765 ) 20 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 4. Investments (continued) Concentrations of Credit Risk 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, 2022 and December 31, 2021. Securities Lending Elements of the securities lending program are presented below at: September 30, 2022 December 31, 2021 (In millions) Securities on loan: (1) Amortized cost $ 5,049 $ 3,573 Estimated fair value $ 4,719 $ 4,539 Cash collateral received from counterparties (2) $ 4,844 $ 4,611 Securities collateral received from counterparties (3) $ — $ 2 Reinvestment portfolio — estimated fair value $ 4,590 $ 4,730 _______________ (1) Included within fixed maturity securities. (2) Included within payables for collateral under securities loaned and other transactions. (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, 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 (In millions) U.S. government and agency $ 1,342 $ 1,373 $ 1,520 $ 4,235 $ 1,094 $ 2,125 $ 1,391 $ 4,610 U.S. corporate — 456 — 456 1 — — 1 Foreign corporate — 137 — 137 — — — — Foreign government — 16 — 16 — — — — Total $ 1,342 $ 1,982 $ 1,520 $ 4,844 $ 1,095 $ 2,125 $ 1,391 $ 4,611 _______________ (1) The related loaned security could be returned to the Company on the next business day which would require the Company to immediately return the cash collateral. 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, 2022 was $ 1.3 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 U.S. government and agency securities, ABS, agency RMBS, U.S. and foreign corporate securities and CMBS) with 52 % invested in U.S. government and agency securities, agency RMBS and cash and cash equivalents at September 30, 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. 21 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 4. Investments (continued) Invested Assets on Deposit, Held in Trust and Pledged as Collateral Invested assets on deposit, held in trust and pledged as collateral at estimated fair value were as follows at: September 30, 2022 December 31, 2021 (In millions) Invested assets on deposit (regulatory deposits) (1) $ 7,790 $ 10,000 Invested assets held in trust (reinsurance agreements) (2) 5,294 6,029 Invested assets pledged as collateral (3) 12,173 5,116 Total invested assets on deposit, held in trust and pledged as collateral $ 25,257 $ 21,145 _______________ (1) The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $ 32 million and $ 25 million of the assets on deposit represents restricted cash and cash equivalents at September 30, 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 $ 281 million and $ 119 million of the assets held in trust balance represents restricted cash and cash equivalents at September 30, 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 $ 176 million and $ 70 million at redemption value at September 30, 2022 and December 31, 2021, respectively. Variable Interest Entities 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 September 30, 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, 2022 December 31, 2021 Carrying Amount Maximum Exposure to Loss Carrying Amount Maximum Exposure to Loss (In millions) Fixed maturity securities $ 14,979 $ 16,493 $ 16,472 $ 15,802 Limited partnerships and LLCs 3,961 5,365 3,679 5,115 Total $ 18,940 $ 21,858 $ 20,151 $ 20,917 22 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 4. Investments (continued) The Company’s investments in unconsolidated VIEs are described below. Fixed Maturity Securities The Company invests in U.S. corporate bonds, foreign corporate bonds and Structured Securities issued by VIEs. The Company is not obligated to provide any financial or other support to these VIEs, other than the original investment. The Company’s involvement with these entities is limited to that of a passive investor. The Company has no unilateral right to appoint or remove the servicer, special servicer, or investment manager, which are generally viewed as having the power to direct the activities that most significantly impact the economic performance of the VIE, nor does the Company function in any of these roles. The Company does not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity; as a result, the Company has determined it is not the primary beneficiary, or consolidator, of the VIE. The Company’s maximum exposure to loss on these fixed maturity securities is limited to the amortized cost of these investments. See “— Fixed Maturity Securities Available-for-sale” for information on these securities. Limited Partnerships and LLCs The Company holds investments in certain limited partnerships and LLCs which are VIEs. 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. The Company’s maximum exposure to loss on these investments is limited to: (i) the amount invested in debt or equity of the VIE and (ii) commitments to the VIE, as described in Note 11. Net Investment Income The components of net investment income were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (In millions) Investment income: Fixed maturity securities $ 787 $ 716 $ 2,247 $ 2,109 Equity securities 1 1 2 3 Mortgage loans 208 171 616 502 Policy loans 16 16 48 49 Limited partnerships and LLCs (1) ( 106 ) 402 257 1,090 Cash, cash equivalents and short-term investments 22 1 29 4 Other 20 13 52 32 Total investment income 948 1,320 3,251 3,789 Less: Investment expenses 71 39 162 109 Net investment income $ 877 $ 1,281 $ 3,089 $ 3,680 _______________ (1) Includes net investment income pertaining to other limited partnership interests of ($ 127 ) million and $ 178 million for the three months and nine months ended September 30, 2022, respectively, and $ 378 million and $ 1.0 billion for the three months and nine months ended September 30, 2021, respectively. 23 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 4. Investments (continued) Net Investment Gains (Losses) Components of Net Investment Gains (Losses) The components of net investment gains (losses) were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (In millions) Fixed maturity securities $ ( 38 ) $ — $ ( 140 ) $ ( 23 ) Equity securities ( 2 ) ( 2 ) ( 14 ) 1 Mortgage loans 2 ( 5 ) ( 1 ) ( 6 ) Limited partnerships and LLCs ( 4 ) — ( 21 ) 1 Other ( 3 ) ( 9 ) ( 3 ) ( 9 ) Total net investment gains (losses) $ ( 45 ) $ ( 16 ) $ ( 179 ) $ ( 36 ) Gains (losses) from foreign currency transactions included within net investment gains (losses) were ($ 1 ) million and ($ 22 ) million for the three months and nine months ended September 30, 2022, respectively, and $ 1 million for both the three months and nine months ended September 30, 2021. Sales or Disposals of Fixed Maturity Securities Investment gains and losses on sales of securities are determined on a specific identification basis. Proceeds from sales or disposals of fixed maturity securities and the components of fixed maturity securities net investment gains (losses) were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (In millions) Proceeds $ 1,146 $ 1,928 $ 5,261 $ 4,167 Gross investment gains $ 1 $ 23 $ 47 $ 64 Gross investment losses ( 38 ) ( 22 ) ( 181 ) ( 79 ) Net investment gains (losses) $ ( 37 ) $ 1 $ ( 134 ) $ ( 15 ) 5. Derivatives Accounting for Derivatives 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. Types of Derivative Instruments and Derivative Strategies The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to minimize its exposure to various market risks. Commonly used derivative instruments include, but are not necessarily limited to: • Interest rate derivatives: swaps, floors, caps, swaptions, futures and forwards; • Foreign currency exchange rate derivatives: forwards and swaps; • Equity market derivatives: options, total return swaps and variance swaps; and • Credit derivatives: single and index reference credit default swaps and swaptions. For detailed information on these contracts and the related strategies, see Note 7 of the Notes to the Consolidated Financial Statements included in the 2021 Annual Report. 24 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 5. Derivatives (continued) Primary Risks Managed by Derivatives The primary underlying risk exposure, gross notional amount and estimated fair value of derivatives held were as follows at: September 30, 2022 December 31, 2021 Primary Underlying Risk Exposure Gross Notional Amount Estimated Fair Value Gross Notional Amount Estimated Fair Value Assets Liabilities Assets Liabilities (In millions) Derivatives Designated as Hedging Instruments: Cash flow hedges: Interest rate forwards Interest rate $ 90 $ — $ 17 $ 180 $ 30 $ — Foreign currency swaps Foreign currency exchange rate 4,050 885 8 3,282 229 22 Total qualifying hedges 4,140 885 25 3,462 259 22 Derivatives Not Designated or Not Qualifying as Hedging Instruments: Interest rate swaps Interest rate 3,900 156 54 2,595 325 17 Interest rate floors Interest rate 2,250 7 2 — — — Interest rate caps Interest rate 5,350 182 5 5,100 29 4 Interest rate options Interest rate 20,438 41 189 8,050 83 — Interest rate forwards Interest rate 15,969 33 2,550 9,808 627 109 Foreign currency swaps Foreign currency exchange rate 836 209 — 967 96 21 Foreign currency forwards Foreign currency exchange rate 423 — 6 483 3 4 Credit default swaps — written Credit 1,869 7 11 1,724 39 1 Credit default swaptions Credit — — — 150 — — Equity index options Equity market 17,053 696 350 24,692 1,155 877 Equity variance swaps Equity market 281 9 1 281 9 1 Equity total return swaps Equity market 33,069 1,515 1,519 32,719 493 588 Hybrid options Equity market — — — 900 8 — Total non-designated or non-qualifying derivatives 101,438 2,855 4,687 87,469 2,867 1,622 Embedded derivatives: Ceded guaranteed minimum income benefits Other N/A 129 — N/A 186 — Direct index-linked annuities Other N/A — 2,034 N/A — 6,211 Direct guaranteed minimum benefits Other N/A — 1,720 N/A — 1,848 Assumed index-linked annuities Other N/A — 308 N/A — 437 Total embedded derivatives N/A 129 4,062 N/A 186 8,496 Total $ 105,578 $ 3,869 $ 8,774 $ 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, 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; (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 Accounting Standards Codification 815 — Derivatives and Hedging; (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; and (iv) written credit default swaps that are used to create synthetic credit investments and that do not qualify for hedge accounting because they do not involve a hedging relationship. 25 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 5. Derivatives (continued) The amount and location of gains (losses), including earned income, recognized for derivatives and gains (losses) pertaining to hedged items presented in net derivative gains (losses) were as follows: Net Derivative Gains (Losses) Recognized for Derivatives Net Derivative Gains (Losses) Recognized for Hedged Items Net Investment Income Amount of Gains (Losses) Deferred in AOCI (In millions) Three Months Ended September 30, 2022 Derivatives Designated as Hedging Instruments: Cash flow hedges: Interest rate $ — $ — $ 1 $ ( 8 ) Foreign currency exchange rate 8 ( 6 ) 17 341 Total cash flow hedges 8 ( 6 ) 18 333 Derivatives Not Designated or Not Qualifying as Hedging Instruments: Interest rate ( 1,233 ) — — — Foreign currency exchange rate 99 ( 23 ) — — Credit 5 — — — Equity market 40 — — — Embedded 694 — — — Total non-qualifying hedges ( 395 ) ( 23 ) — — Total $ ( 387 ) $ ( 29 ) $ 18 $ 333 Three Months Ended September 30, 2021 Derivatives Designated as Hedging Instruments: Cash flow hedges: Interest rate $ — $ — $ 1 $ 3 Foreign currency exchange rate — — 9 101 Total cash flow hedges — — 10 104 Derivatives Not Designated or Not Qualifying as Hedging Instruments: Interest rate ( 6 ) — — — Foreign currency exchange rate 34 ( 1 ) — — Credit 3 — — — Equity market ( 48 ) — — — Embedded 74 — — — Total non-qualifying hedges 57 ( 1 ) — — Total $ 57 $ ( 1 ) $ 10 $ 104 26 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 5. 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, 2022 Derivatives Designated as Hedging Instruments: Cash flow hedges: Interest rate $ 4 $ — $ 3 $ ( 49 ) Foreign currency exchange rate 9 ( 8 ) 42 666 Total cash flow hedges 13 ( 8 ) 45 617 Derivatives Not Designated or Not Qualifying as Hedging Instruments: Interest rate ( 3,671 ) — — — Foreign currency exchange rate 212 ( 62 ) — — Credit ( 27 ) — — — Equity market 768 — — — Embedded 4,605 — — — Total non-qualifying hedges 1,887 ( 62 ) — — Total $ 1,900 $ ( 70 ) $ 45 $ 617 Nine Months Ended September 30, 2021 Derivatives Designated as Hedging Instruments: Cash flow hedges: Interest rate $ 1 $ — $ 3 $ ( 30 ) Foreign currency exchange rate 8 ( 3 ) 25 180 Total cash flow hedges 9 ( 3 ) 28 150 Derivatives Not Designated or Not Qualifying as Hedging Instruments: Interest rate ( 1,196 ) — — — Foreign currency exchange rate 45 — — — Credit 14 — — — Equity market ( 496 ) — — — Embedded ( 505 ) — — — Total non-qualifying hedges ( 2,138 ) — — — Total $ ( 2,129 ) $ ( 3 ) $ 28 $ 150 At September 30, 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 September 30, 2022 and December 31, 2021, the balance in AOCI associated with cash flow hedges was $ 930 million and $ 329 million, respectively. Credit Derivatives In connection with synthetically created credit investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. 27 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 5. Derivatives (continued) 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, 2022 December 31, 2021 Rating Agency Designation of Referenced Credit Obligations (1) Estimated Fair Value of Credit Default Swaps Maximum Amount of Future Payments under Credit Default Swaps Weighted Average Years to Maturity (2) Estimated Fair Value of Credit Default Swaps Maximum Amount of Future Payments under Credit Default Swaps Weighted Average Years to Maturity (2) (Dollars in millions) Aaa/Aa/A $ 5 $ 664 2.1 $ 12 $ 589 2.4 Baa ( 8 ) 1,177 5.2 27 1,131 5.0 Ba 1 24 4.2 — — 0.0 Caa and Lower ( 2 ) 4 3.2 ( 1 ) 4 4.0 Total $ ( 4 ) $ 1,869 4.1 $ 38 $ 1,724 4.1 _______________ (1) The Company has written credit protection on both single name and index references. The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s, S&P and Fitch. 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. Counterparty Credit Risk The Company may be exposed to credit-related losses in the event of counterparty nonperformance on derivative instruments. Generally, the credit exposure is the fair value at the reporting date less any collateral received from the counterparty. The Company manages its credit risk by: (i) entering into derivative transactions with creditworthy counterparties governed by master netting agreements; (ii) trading through regulated exchanges and central clearing counterparties; (iii) obtaining collateral, such as cash and securities, when appropriate; and (iv) setting limits on single party credit exposures which are subject to periodic management review. See Note 6 for a description of the impact of credit risk on the valuation of derivatives. The estimated fair values of net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at: Gross Amounts Not Offset on the Consolidated Balance Sheets Gross Amount Recognized Financial Instruments (1) Collateral Received/Pledged (2) Net Amount Securities Collateral Received/Pledged (3) Net Amount After Securities Collateral (In millions) September 30, 2022 Derivative assets $ 3,821 $ ( 2,172 ) $ ( 1,535 ) $ 114 $ ( 29 ) $ 85 Derivative liabilities $ 4,744 $ ( 2,172 ) $ ( 4 ) $ 2,568 $ ( 2,566 ) $ 2 December 31, 2021 Derivative assets $ 3,128 $ ( 1,155 ) $ ( 1,494 ) $ 479 $ ( 413 ) $ 66 Derivative liabilities $ 1,632 $ ( 1,155 ) $ — $ 477 $ ( 477 ) $ — _______________ (1) Represents amounts subject to an enforceable master netting agreement or similar agreement. 28 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 5. Derivatives (continued) (2) The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreement. (3) Securities collateral received from counterparties is not reported on the consolidated balance sheets and may not be sold or re-pledged unless the counterparty is in default. Amounts do not include excess of collateral pledged or received. The Company’s collateral arrangements generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the amount owed by that counterparty reaches a minimum transfer amount. 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. 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, 2022 December 31, 2021 (In millions) Estimated fair value of derivatives in a net liability position (1) $ 2,572 $ 477 Estimated Fair Value of Collateral Provided (2): Fixed maturity securities $ 4,583 $ 839 _______________ (1) After taking into consideration the existence of netting agreements. (2) Substantially all of the Company’s collateral arrangements provide for daily posting of collateral for the full value of the derivative contract. As a result, if the credit-contingent provisions of derivative contracts in a net liability position were triggered, minimal additional assets would be required to be posted as collateral or needed to settle the instruments immediately. Additionally, the Company is required to pledge initial margin for certain new over-the-counter (“OTC”) bilateral contracts between two counterparties (“OTC-bilateral”) derivative transactions to third party custodians. 29 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 6. Fair Value Considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. Recurring Fair Value Measurements The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy are presented in the tables below. 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, 2022 Fair Value Hierarchy Total Estimated Fair Value Level 1 Level 2 Level 3 (In millions) Assets Fixed maturity securities: U.S. corporate $ — $ 31,100 $ 1,038 $ 32,138 Foreign corporate — 9,623 517 10,140 U.S. government and agency 3,949 4,453 — 8,402 RMBS — 7,832 27 7,859 CMBS — 6,597 19 6,616 State and political subdivision — 3,831 — 3,831 ABS — 4,910 293 5,203 Foreign government — 1,047 35 1,082 Total fixed maturity securities 3,949 69,393 1,929 75,271 Equity securities 36 36 28 100 Short-term investments 673 457 — 1,130 Derivative assets: (1) Interest rate — 419 — 419 Foreign currency exchange rate — 1,043 51 1,094 Credit — 1 6 7 Equity market — 2,211 9 2,220 Total derivative assets — 3,674 66 3,740 Embedded derivatives within asset host contracts (2) — — 129 129 Separate account assets 39 81,797 — 81,836 Total assets $ 4,697 $ 155,357 $ 2,152 $ 162,206 Liabilities Derivative liabilities: (1) Interest rate $ — $ 2,817 $ — $ 2,817 Foreign currency exchange rate — 14 — 14 Credit — 8 3 11 Equity market — 1,869 1 1,870 Total derivative liabilities — 4,708 4 4,712 Embedded derivatives within liability host contracts (2) — — 4,062 4,062 Total liabilities $ — $ 4,708 $ 4,066 $ 8,774 30 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 6. Fair Value (continued) December 31, 2021 Fair Value Hierarchy Total Estimated Fair Value Level 1 Level 2 Level 3 (In millions) Assets Fixed maturity securities: U.S. corporate $ — $ 38,176 $ 905 $ 39,081 Foreign corporate — 11,212 494 11,706 U.S. government and agency 3,236 6,071 — 9,307 RMBS — 9,247 12 9,259 CMBS — 7,239 43 7,282 State and political subdivision — 4,835 — 4,835 ABS — 4,115 165 4,280 Foreign government — 1,806 26 1,832 Total fixed maturity securities 3,236 82,701 1,645 87,582 Equity securities 27 61 13 101 Short-term investments 1,503 336 2 1,841 Derivative assets: (1) Interest rate — 1,094 — 1,094 Foreign currency exchange rate — 318 10 328 Credit — 27 12 39 Equity market — 1,649 16 1,665 Total derivative assets — 3,088 38 3,126 Embedded derivatives within asset host contracts (2) — — 186 186 Separate account assets 41 114,423 — 114,464 Total assets $ 4,807 $ 200,609 $ 1,884 $ 207,300 Liabilities Derivative liabilities: (1) Interest rate $ — $ 130 $ — $ 130 Foreign currency exchange rate — 47 — 47 Credit — — 1 1 Equity market — 1,465 1 1,466 Total derivative liabilities — 1,642 2 1,644 Embedded derivatives within liability host contracts (2) — — 8,496 8,496 Total liabilities $ — $ 1,642 $ 8,498 $ 10,140 _______________ (1) Derivative assets are presented within other invested assets on the consolidated balance sheets and derivative liabilities are presented within other liabilities on the consolidated balance sheets. 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 on the consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances on the consolidated balance sheets. 31 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 6. Fair Value (continued) Valuation Controls and Procedures The Company monitors and provides oversight of valuation controls and policies for securities, mortgage loans and derivatives, which are primarily executed by its valuation service providers. The valuation methodologies used to determine fair values prioritize the use of observable market prices and market-based parameters and determines that judgmental valuation adjustments, when applied, are based upon established policies and are applied consistently over time. The valuation methodologies for securities, mortgage loans and derivatives are reviewed on an ongoing basis and revised when necessary. In addition, the Chief Accounting Officer periodically reports to the Audit Committee of Brighthouse Financial’s Board of Directors regarding compliance with fair value accounting standards. The fair value of financial assets and financial liabilities is based on quoted market prices, where available. Prices received are assessed to determine if they represent a reasonable estimate of fair value. Several controls are performed, including certain monthly controls, which include, but are not limited to, analysis of portfolio returns to corresponding benchmark returns, comparing a sample of executed prices of securities sold to the fair value estimates, reviewing the bid/ask spreads to assess activity, comparing prices from multiple independent pricing services and ongoing due diligence to confirm that independent pricing services use market-based parameters. The process includes a determination of the observability of inputs used in estimated fair values received from independent pricing services or brokers by assessing whether these inputs can be corroborated by observable market data. Independent non-binding broker quotes, also referred to herein as “consensus pricing,” are used for a non-significant portion of the portfolio. Prices received from independent brokers are assessed to determine if they represent a reasonable estimate of fair value by considering such pricing relative to the current market dynamics and current pricing for similar financial instruments. A formal process is also applied to challenge any prices received from independent pricing services that are not considered representative of estimated fair value. If prices received from independent pricing services are not considered reflective of market activity or representative of estimated fair value, independent non-binding broker quotations are obtained. If obtaining an independent non-binding broker quotation is unsuccessful, the last available price will be used. Additional controls are performed, such as, balance sheet analytics to assess reasonableness of period-to-period pricing changes, including any price adjustments. 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, 2022. Determination of Fair Value Fixed Maturity Securities The fair values for actively traded marketable bonds, primarily U.S. government and agency securities, are determined using the quoted market prices and are classified as Level 1 assets. For fixed maturity securities classified as Level 2 assets, fair values are determined using either a market or income approach and are valued based on a variety of observable inputs as described below. U.S. corporate and foreign corporate securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, benchmark yields, spreads off benchmark yields, new issuances, issuer rating, trades of identical or comparable securities, or duration. Privately-placed securities are valued using the additional key inputs: market yield curve, call provisions, observable prices and spreads for similar public or private securities that incorporate the credit quality and industry sector of the issuer, and delta spread adjustments to reflect specific credit-related issues. U.S. government and agency, state and political subdivision and foreign government securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, benchmark U.S. Treasury yield or other yields, spread off the U.S. Treasury yield curve for the identical security, issuer ratings and issuer spreads, broker-dealer quotes, and comparable securities that are actively traded. 32 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 6. Fair Value (continued) Structured Securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, spreads for actively traded securities, spreads off benchmark yields, expected prepayment speeds and volumes, current and forecasted loss severity, ratings, geographic region, weighted average coupon and weighted average maturity, average delinquency rates and debt-service coverage ratios. Other issuance-specific information is also used, including, but not limited to, collateral type, structure of the security, vintage of the loans, payment terms of the underlying asset, payment priority within tranche, and deal performance. Equity Securities and Short-term Investments The fair value for actively traded equity securities and short-term investments are determined using quoted market prices and are classified as Level 1 assets. For financial instruments classified as Level 2 assets, fair values are determined using a market approach and are valued based on a variety of observable inputs as described below. Equity securities and short-term investments: Fair value is determined using third-party commercial pricing services, with the primary input being quoted prices in markets that are not active. Derivatives Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the OTC market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are OTC-bilateral. The fair values for exchange-traded derivatives are determined using the quoted market prices and are classified as Level 1 assets. For OTC-bilateral derivatives and OTC-cleared derivatives classified as Level 2 assets or liabilities, fair values are determined using the income approach. Valuations of non-option-based derivatives utilize present value techniques, whereas valuations of option-based derivatives utilize option pricing models which are based on market standard valuation methodologies and a variety of observable inputs. The significant inputs to the pricing models for most OTC-bilateral and OTC-cleared derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. Certain OTC-bilateral and OTC-cleared derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and management believes they are consistent with what other market participants would use when pricing such instruments. Most inputs for OTC-bilateral and OTC-cleared derivatives are mid-market inputs but, in certain cases, liquidity adjustments are made when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income. The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all OTC-bilateral and OTC-cleared derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its OTC-bilateral and OTC-cleared derivatives using standard swap curves which may include a spread to the risk-free rate, depending upon specific collateral arrangements. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with similar collateral arrangements. As the Company and its significant derivative counterparties generally execute trades at such pricing levels and hold sufficient collateral, additional credit risk adjustments are not currently required in the valuation process. The Company’s ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. An evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period. Embedded Derivatives Embedded derivatives principally include certain direct and ceded variable annuity guarantees and equity crediting rates within index-linked annuity contracts. Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income. 33 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 6. Fair Value (continued) The Company issues certain variable annuity products with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMAB”), the non-life contingent portion of GMWBs and certain portions of GMIBs are accounted for as embedded derivatives and measured at estimated fair value separately from the host variable annuity contract. 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 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 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. Actuarial assumptions, including mortality, lapse, withdrawal and utilization, are unobservable and are reviewed at least annually based on actuarial studies of historical experience. 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 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. The Company issues and assumes through reinsurance index-linked annuities which allow the policyholder to participate in returns from equity indices. The crediting rates associated with these features are embedded derivatives which are measured at estimated fair value separately from the host fixed annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets. The estimated fair value of crediting rates associated with index-linked annuities is determined using a combination of an option pricing model and an option-budget approach. The valuation of these embedded derivatives also includes the establishment of a risk margin, as well as changes in nonperformance risk. Transfers Into or Out of Level 3: Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable. 34 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 6. Fair Value (continued) Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3) 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, 2022 December 31, 2021 Impact of Increase in Input on Estimated Fair Value Valuation Techniques Significant Unobservable Inputs Range Range Embedded derivatives Direct, assumed and ceded guaranteed minimum benefits • Option pricing techniques • Mortality rates 0.03 % - 12.62 % 0.03 % - 12.62 % Decrease (1) • Lapse rates 0.30 % - 14.50 % 0.30 % - 14.50 % Decrease (2) • Utilization rates 0.00 % - 25.00 % 0.00 % - 25.00 % Increase (3) • Withdrawal rates 0.25 % - 10.00 % 0.25 % - 10.00 % (4) • Long-term equity volatilities 16.46 % - 22.01 % 16.44 % - 22.16 % Increase (5) • Nonperformance risk spread 0.00 % - 2.23 % ( 0.38 )% - 1.49 % Decrease (6) _______________ (1) Mortality rates vary by age and by demographic characteristics such as gender. The range shown reflects the mortality rate for policyholders between 35 and 90 years old, which represents the majority of the business with living benefits. Mortality rate assumptions are set based on company experience and include an assumption for mortality improvement. (2) The range shown reflects base lapse rates for major product categories for duration 1-20, which represents majority of business with living benefit riders. Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in-the-money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies. (3) The utilization rate assumption estimates the percentage of contract holders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible in a given year. The range shown represents the floor and cap of the GMIB dynamic election rates across varying levels of in-the-money. For lifetime withdrawal guarantee riders, the assumption is that everyone will begin withdrawals once account value reaches zero which is equivalent to a 100% utilization rate. Utilization rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder. (4) The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value. (5) Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. (6) Nonperformance risk spread varies by duration. 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. 35 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 6. 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; therefore, these are not included in the table above. The other Level 3 assets and liabilities primarily included fixed maturity securities and derivatives. 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 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: Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Fixed Maturity Securities Corporate (1) Structured Securities 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, 2022 Balance, beginning of period $ 1,710 $ 345 $ 40 $ 27 $ — $ 38 $ ( 4,445 ) $ — Total realized/unrealized gains (losses) included in net income (loss) (5) (6) — — — 1 — 3 694 — Total realized/unrealized gains (losses) included in AOCI ( 108 ) ( 11 ) ( 4 ) — — 21 — — Purchases (7) 278 125 — — — — — — Sales (7) ( 22 ) ( 1 ) ( 1 ) — — — — — Issuances (7) — — — — — — — — Settlements (7) — — — — — — ( 182 ) — Transfers into Level 3 (8) 16 19 — — — — — — Transfers out of Level 3 (8) ( 319 ) ( 138 ) — — — — — — Balance, end of period $ 1,555 $ 339 $ 35 $ 28 $ — $ 62 $ ( 3,933 ) $ — 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 ) $ — Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2022 (9) $ — $ — $ — $ 1 $ — $ 3 $ 589 $ — Changes in unrealized gains (losses) included in OCI for the instruments still held at September 30, 2022 (9) $ ( 109 ) $ ( 11 ) $ ( 4 ) $ — $ — $ 21 $ — $ — 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 $ — $ — 36 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 6. Fair Value (continued) Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Fixed Maturity Securities Corporate (1) Structured Securities Foreign Government Equity Securities Short-term Investments Net Derivatives (2) Net Embedded Derivatives (3) Separate Account Assets (4) (In millions) Nine Months Ended September 30, 2022 Balance, beginning of period $ 1,399 $ 220 $ 26 $ 13 $ 2 $ 36 $ ( 8,310 ) $ — Total realized/unrealized gains (losses) included in net income (loss) (5) (6) ( 6 ) — — 1 — ( 11 ) 4,605 — Total realized/unrealized gains (losses) included in AOCI ( 286 ) ( 23 ) ( 13 ) — — 36 — — Purchases (7) 760 230 5 14 — 1 — — Sales (7) ( 159 ) ( 12 ) ( 2 ) — ( 2 ) — — — Issuances (7) — — — — — — — — Settlements (7) — — — — — — ( 228 ) — Transfers into Level 3 (8) 31 25 19 — — — — — Transfers out of Level 3 (8) ( 184 ) ( 101 ) — — — — — — Balance, end of period $ 1,555 $ 339 $ 35 $ 28 $ — $ 62 $ ( 3,933 ) $ — Nine Months Ended September 30, 2021 Balance, beginning of period $ 688 $ 67 $ — $ 3 $ — $ 2 $ ( 6,874 ) $ 3 Total realized/unrealized gains (losses) included in net income (loss) (5) (6) — — — — — 10 ( 505 ) — Total realized/unrealized gains (losses) included in AOCI ( 9 ) — — — — 12 — — Purchases (7) 695 239 — — — 20 — — Sales (7) ( 53 ) ( 21 ) — — — ( 6 ) — — Issuances (7) — — — — — — — — Settlements (7) — — — — — — ( 217 ) — Transfers into Level 3 (8) 174 14 — — — — — — Transfers out of Level 3 (8) ( 202 ) ( 33 ) — — — 1 — ( 3 ) Balance, end of period $ 1,293 $ 266 $ — $ 3 $ — $ 39 $ ( 7,596 ) $ — Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2022 (9) $ — $ — $ — $ 1 $ — $ ( 4 ) $ 4,590 $ — Changes in unrealized gains (losses) included in OCI for the instruments still held at September 30, 2022 (9) $ ( 288 ) $ ( 23 ) $ ( 13 ) $ — $ — $ 36 $ — $ — Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2021 (9) $ — $ — $ — $ — $ — $ ( 3 ) $ ( 302 ) $ — Changes in unrealized gains (losses) included in OCI for the instruments still held at September 30, 2021 (9) $ ( 9 ) $ 1 $ — $ — $ — $ 12 $ — $ — _______________ (1) Comprised of U.S. and foreign corporate securities. (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. (4) Investment performance related to separate account assets is fully offset by corresponding amounts credited to contract holders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income (loss). For the purpose of this disclosure, these changes are presented within net investment gains (losses). 37 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 6. Fair Value (continued) (5) Amortization of premium/accretion of discount is included within net investment income. Changes in the allowance for credit losses and direct write-offs are charged to net income (loss) on securities are included in net investment gains (losses). Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses). (6) Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward. (7) Items purchased/issued and then sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements. (8) Gains and losses, in net income (loss) and OCI, are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and then out of Level 3 in the same period are excluded from the rollforward. (9) Changes in unrealized gains (losses) included in net income (loss) for fixed maturities are reported in either net investment income or net investment gains (losses). Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses). Fair Value of Financial Instruments Carried at Other Than Fair Value The following tables provide fair value information for financial instruments that are carried on the balance sheet at amounts other than fair value. These tables exclude the following financial instruments: 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. 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, 2022 Fair Value Hierarchy Carrying Value Level 1 Level 2 Level 3 Total Estimated Fair Value (In millions) Assets Mortgage loans $ 22,089 $ — $ — $ 19,956 $ 19,956 Policy loans $ 1,274 $ — $ 509 $ 881 $ 1,390 Other invested assets $ 188 $ — $ 176 $ 12 $ 188 Premiums, reinsurance and other receivables $ 4,957 $ — $ 115 $ 5,053 $ 5,168 Liabilities Policyholder account balances $ 29,522 $ — $ — $ 28,653 $ 28,653 Long-term debt $ 3,156 $ — $ 2,595 $ — $ 2,595 Other liabilities $ 1,106 $ — $ 401 $ 705 $ 1,106 Separate account liabilities $ 991 $ — $ 991 $ — $ 991 38 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 6. Fair Value (continued) December 31, 2021 Fair Value Hierarchy Carrying Value Level 1 Level 2 Level 3 Total Estimated Fair Value (In millions) Assets Mortgage loans $ 19,850 $ — $ — $ 20,656 $ 20,656 Policy loans $ 1,264 $ — $ 508 $ 1,148 $ 1,656 Other invested assets $ 82 $ — $ 70 $ 12 $ 82 Premiums, reinsurance and other receivables $ 3,242 $ — $ 20 $ 3,749 $ 3,769 Liabilities Policyholder account balances $ 23,637 $ — $ — $ 23,614 $ 23,614 Long-term debt $ 3,157 $ — $ 3,504 $ — $ 3,504 Other liabilities $ 854 $ — $ 138 $ 716 $ 854 Separate account liabilities $ 1,440 $ — $ 1,440 $ — $ 1,440 7. Long-term Debt 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 September 30, 2022, there were no borrowings or letters of credit outstanding under the 2022 Revolving Credit Facility. 8 . Equity Preferred Stock Preferred stock shares authorized, issued and outstanding were as follows at both September 30, 2022 and December 31, 2021: Shares Authorized Shares Issued Shares Outstanding 6.600 % Non-Cumulative Preferred Stock, Series A 17,000 17,000 17,000 6.750 % Non-Cumulative Preferred Stock, Series B 16,100 16,100 16,100 5.375 % Non-Cumulative Preferred Stock, Series C 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 per share and aggregate dividend declared for BHF’s preferred stock by series was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Series Per Share Aggregate Per Share Aggregate Per Share Aggregate Per Share Aggregate (In millions, except per share data) A $ 412.50 $ 7 $ 412.50 $ 7 $ 1,237.50 $ 21 $ 1,237.50 $ 21 B $ 421.88 7 $ 421.88 7 $ 1,265.64 21 $ 1,265.64 21 C $ 335.94 7 $ 335.94 8 $ 1,007.82 23 $ 1,138.46 26 D $ 289.06 4 $ — — $ 973.17 13 $ — — Total $ 25 $ 22 $ 78 $ 68 39 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 8. Equity (continued) Common Stock Repurchase Program During the nine months ended September 30, 2022 and 2021, BHF repurchased 8,194,191 and 7,603,089 shares, respectively, of its common stock through open market purchases pursuant to 10b5-1 plans for $ 395 million and $ 341 million, respectively. At September 30, 2022, BHF had $ 386 million remaining under its common stock repurchase program. Accumulated Other Comprehensive Income (Loss) Information regarding changes in the balances of each component of AOCI was as follows: Three Months Ended September 30, 2022 Unrealized Investment Gains (Losses), Net of Related Offsets (1) Unrealized Gains (Losses) on Derivatives Foreign Currency Translation Adjustments Defined Benefit Plans Adjustment Total (In millions) Balance at June 30, 2022 $ ( 3,495 ) $ 478 $ ( 32 ) $ ( 42 ) $ ( 3,091 ) OCI before reclassifications ( 4,850 ) 333 ( 24 ) 1 ( 4,540 ) Deferred income tax benefit (expense) (2) 1,095 ( 146 ) 5 — 954 AOCI before reclassifications, net of income tax ( 7,250 ) 665 ( 51 ) ( 41 ) ( 6,677 ) Amounts reclassified from AOCI 60 ( 9 ) — — 51 Deferred income tax benefit (expense) (2) ( 13 ) 2 — — ( 11 ) Amounts reclassified from AOCI, net of income tax 47 ( 7 ) — — 40 Balance at September 30, 2022 $ ( 7,203 ) $ 658 $ ( 51 ) $ ( 41 ) $ ( 6,637 ) Three Months Ended September 30, 2021 Unrealized Investment Gains (Losses), Net of Related Offsets (1) Unrealized Gains (Losses) on Derivatives Foreign Currency Translation 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) (2) 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) (2) 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 40 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 8. Equity (continued) Nine Months Ended September 30, 2022 Unrealized Investment Gains (Losses), Net of Related Offsets (1) Unrealized Gains (Losses) on Derivatives Foreign Currency Translation Adjustments Defined Benefit Plans Adjustment Total (In millions) Balance at December 31, 2021 $ 3,982 $ 238 $ ( 7 ) $ ( 41 ) $ 4,172 OCI before reclassifications ( 14,411 ) 617 ( 56 ) ( 3 ) ( 13,853 ) Deferred income tax benefit (expense) (2) 3,081 ( 184 ) 12 1 2,910 AOCI before reclassifications, net of income tax ( 7,348 ) 671 ( 51 ) ( 43 ) ( 6,771 ) Amounts reclassified from AOCI 184 ( 16 ) — 2 170 Deferred income tax benefit (expense) (2) ( 39 ) 3 — — ( 36 ) Amounts reclassified from AOCI, net of income tax 145 ( 13 ) — 2 134 Balance at September 30, 2022 $ ( 7,203 ) $ 658 $ ( 51 ) $ ( 41 ) $ ( 6,637 ) Nine Months Ended September 30, 2021 Unrealized Investment Gains (Losses), Net of Related Offsets (1) Unrealized Gains (Losses) on Derivatives Foreign Currency Translation Adjustments Defined Benefit Plans Adjustment Total (In millions) Balance at December 31, 2020 $ 5,646 $ 115 $ ( 8 ) $ ( 37 ) $ 5,716 OCI before reclassifications ( 1,962 ) 150 4 ( 2 ) ( 1,810 ) Deferred income tax benefit (expense) (2) 412 ( 32 ) ( 1 ) 2 381 AOCI before reclassifications, net of income tax 4,096 233 ( 5 ) ( 37 ) 4,287 Amounts reclassified from AOCI 17 ( 12 ) — ( 1 ) 4 Deferred income tax benefit (expense) (2) ( 3 ) 2 — — ( 1 ) Amounts reclassified from AOCI, net of income tax 14 ( 10 ) — ( 1 ) 3 Balance at September 30, 2021 $ 4,110 $ 223 $ ( 5 ) $ ( 38 ) $ 4,290 __________________ (1) See Note 4 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI. (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. 41 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 8. 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 and Comprehensive Income (Loss) Locations Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (In millions) Net unrealized investment gains (losses): Net unrealized investment gains (losses) $ ( 39 ) $ 1 $ ( 133 ) $ ( 14 ) Net investment gains (losses) Net unrealized investment gains (losses) ( 21 ) 1 ( 51 ) ( 3 ) Net derivative gains (losses) Net unrealized investment gains (losses), before income tax ( 60 ) 2 ( 184 ) ( 17 ) Income tax (expense) benefit 13 ( 1 ) 39 3 Net unrealized investment gains (losses), net of income tax ( 47 ) 1 ( 145 ) ( 14 ) Unrealized gains (losses) on derivatives - cash flow hedges: Interest rate swaps — — 4 1 Net derivative gains (losses) Interest rate swaps 1 1 3 3 Net investment income Foreign currency swaps 8 — 9 8 Net derivative gains (losses) Gains (losses) on cash flow hedges, before income tax 9 1 16 12 Income tax (expense) benefit ( 2 ) — ( 3 ) ( 2 ) Gains (losses) on cash flow hedges, net of income tax 7 1 13 10 Defined benefit plans adjustment: Amortization of net actuarial gains (losses) — — ( 2 ) 1 Amortization of defined benefit plans, before income tax — — ( 2 ) 1 Income tax (expense) benefit — — — — Amortization of defined benefit plans, net of income tax — — ( 2 ) 1 Total reclassifications, net of income tax $ ( 40 ) $ 2 $ ( 134 ) $ ( 3 ) 9 . Other Revenues and Other Expenses Other Revenues The Company has entered into contracts with mutual funds, fund managers, and their affiliates (collectively, the “Funds”) whereby the Company is paid monthly or quarterly fees (“12b-1 fees”) for providing certain services to customers and distributors of the Funds. The 12b-1 fees are generally equal to a fixed percentage of the average daily balance of the customer’s investment in a fund. The percentage is specified in the contract between the Company and the Funds. Payments are generally collected when due and are neither refundable nor able to offset future fees. To earn these fees, the Company performs services such as responding to phone inquiries, maintaining records, providing information to distributors and shareholders about fund performance and providing training to account managers and sales agents. 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 $ 70 million and $ 226 million for the three months and nine months ended September 30, 2022, respectively, and $ 91 million and $ 270 million for the three months and nine months ended September 30, 2021, respectively, of which substantially all were reported in the Annuities segment. 42 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 9. Other Revenues and Other Expenses (continued) Other Expenses Information on other expenses was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (In millions) Compensation $ 89 $ 96 $ 254 $ 284 Contracted services and other labor costs 73 67 197 197 Transition services agreements 15 32 44 93 Establishment costs 21 25 47 71 Premium and other taxes, licenses and fees 13 12 41 39 Separate account fees 98 129 314 381 Volume related costs, excluding compensation, net of DAC capitalization 130 160 374 503 Interest expense on debt 38 41 114 122 Other 18 17 211 59 Total other expenses $ 495 $ 579 $ 1,596 $ 1,749 10. Earnings Per Common Share The calculation of earnings per common share was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (In millions, except share and per share data) Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders $ ( 702 ) $ 361 $ 868 $ ( 239 ) Weighted average common shares outstanding — basic 71,517,500 82,701,032 74,294,329 85,256,761 Dilutive effect of share-based awards — 543,955 482,846 — Weighted average common shares outstanding — diluted 71,517,500 83,244,987 74,777,175 85,256,761 Earnings per common share: Basic $ ( 9.82 ) $ 4.37 $ 11.68 $ ( 2.80 ) Diluted $ ( 9.82 ) $ 4.34 $ 11.61 $ ( 2.80 ) For the nine months ended September 30, 2022 and 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 nine months ended September 30, 2022 and the three months ended September 30, 2021. For the three months ended September 30, 2022 and the nine months ended September 30, 2021, basic loss per common share equaled diluted loss per common share. 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. 43 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 11. Contingencies, Commitments and Guarantees Contingencies Litigation The Company is a defendant in a number of litigation matters. In some of the matters, large or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. 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. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law. 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, 2022. Matters as to Which an Estimate Can Be Made For some loss contingency matters, the Company is able to estimate a reasonably possible range of loss. 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, 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 For other matters, the Company is not currently able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts, and the progress of settlement negotiations. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation contingencies and updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews. Sales Practices Claims Over the past several years, the Company has faced claims and regulatory inquiries and investigations, alleging improper marketing or sales of individual life insurance policies, annuities or other products. The Company continues to defend vigorously against the claims in these matters. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices matters. 44 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 11. Contingencies, Commitments and Guarantees (continued) Cost of Insurance Class Actions Richard A. Newton v. Brighthouse Life Insurance Company (U.S. District Court, Northern District of Georgia, Atlanta Division, filed May 8, 2020). Plaintiff has filed a purported class action lawsuit against Brighthouse Life Insurance Company. Plaintiff was 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 all persons who own or owned life insurance policies issued where the terms of the life insurance policy provide or provided, among other things, a guarantee that the cost of insurance rates would not be increased by more than a specified percentage in any contract year. Plaintiff alleges, among other things, causes of action for breach of contract, fraud, suppression and concealment, and violation of the Georgia Racketeer Influenced and Corrupt Organizations Act. 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 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 (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. 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 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. Summary 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. It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to previously, large or indeterminate amounts, including punitive and treble damages, are sought. Although, in light of these considerations, it is possible that an adverse outcome in certain cases could have a material effect upon the Company’s financial position, based on information currently known by the Company’s management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. 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 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. 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. 45 Table of Contents Brighthouse Financial, Inc. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued) 11. Contingencies, Commitments and Guarantees (continued) 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. As of September 30, 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 $ 125 million, which are primarily associated with the reinsurance-related matters described above. 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. During the second quarter of 2022, the Company settled a reinsurance-related matter with a third party for $ 140 million, which is reported in other expenses. Commitments Mortgage Loan Commitments The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $ 439 million and $ 719 million at September 30, 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 $ 2.2 billion and $ 2.3 billion at September 30, 2022 and December 31, 2021, respectively. Guarantees 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. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third-party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from less than $ 1 million to $ 112 million, with a cumulative maximum of $ 118 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments. In addition, the Company indemnifies its directors and officers as provided in its charters and bylaws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company’s interests. 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, 2022 and December 31, 2021 for indemnities, guarantees and commitments. 46 Table of Contents