What changed in this filing

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Item 1. Financial Statements

2023-05-09 compared with 2022-11-08 · 779 added, 529 removed, 1189 unchanged (52% of the section changed)

2 unchanged sentences

Interim Condensed Consolidated Balance Sheets

September 30, 2022 (Unaudited) and December 31, 2021

March 31, 2023 (Unaudited) and December 31, 2022

(In millions, except share and per share data)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

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

10 unchanged sentences

Total investments 111,290 108,592

108,504 118,225

Cash and cash equivalents 3,685 4,115

5 unchanged sentences

Deferred income tax asset 1,673 1,736

Market risk benefit assets 510 483

Other assets 395 401

Separate account assets 87,440 84,965

$ 221,641 $ 259,840

Total assets $ 230,002 $ 224,847

Liabilities and Equity

1 unchanged sentence

Policyholder account balances 76,120 73,527

Market risk benefit liabilities 10,729 10,389

Other policy-related balances 3,816 4,098

1 unchanged sentence

Long-term debt 3,157 3,156

Current income tax payable — 62

Deferred income tax liability — 1,062

Other liabilities 6,234 7,057

1 unchanged sentence

Total liabilities 224,183 219,249

215,762 243,633

Contingencies, Commitments and Guarantees (Note 12)

14 unchanged sentences

Noncontrolling interests 65 65

Total equity 5,819 5,598

Total liabilities and equity $ 230,002 $ 224,847

$ 221,641 $ 259,840

See accompanying notes to the interim condensed consolidated financial statements.

1 unchanged sentence

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

For the Three Months and Nine Months Ended September 30, 2022 and 2021 (Unaudited)

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

(In millions, except per share data)

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Premiums $ 197 $ 166

5 unchanged sentences

Total revenues 1,284 2,013

Policyholder benefits and claims 1,246 1,112 3,260 2,620

Policyholder benefits and claims (including liability remeasurement gains (losses) of $ 0 and $ 0 , respectively)

Interest credited to policyholder account balances 422 248

Amortization of deferred policy acquisition costs and value of business acquired 156 157

Change in market risk benefits 194 ( 1,579 )

Other expenses 478 509

18 unchanged sentences

Interim Condensed Consolidated Statements of Equity

For the Three Months and Nine Months Ended September 30, 2022 and 2021 (Unaudited)

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

(In millions)

14 unchanged sentences

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

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

Balance at March 31, 2023 $ — $ 1 $ 14,054 $ ( 894 ) $ ( 2,119 ) $ ( 5,288 ) $ 5,754 $ 65 $ 5,819

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

13 unchanged sentences

( 2,588 ) ( 2,588 ) ( 2,588 )

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

Treasury stock acquired in connection with share repurchases

( 149 ) ( 149 ) ( 149 )

Share-based compensation

Dividends on preferred stock

( 22 ) ( 22 ) ( 22 )

Change in noncontrolling interests

— ( 2 ) ( 2 )

Net income (loss)

383 383 2 385

Other comprehensive income (loss), net of income tax

( 306 ) ( 306 ) ( 306 )

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

Balance at March 31, 2022 $ — $ 1 $ 14,133 $ ( 2,689 ) $ ( 1,681 ) $ ( 2,541 ) $ 7,223 $ 65 $ 7,288

See accompanying notes to the interim condensed consolidated financial statements.

1 unchanged sentence

Interim Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2022 and 2021 (Unaudited)

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

(In millions)

Nine Months Ended

September 30,

Three Months Ended

Net cash provided by (used in) operating activities $ ( 500 ) $ ( 199 )

61 unchanged sentences

Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2022 Annual Report.

Reclassifications

Certain amounts in the prior year period’s interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform with the 2023 presentation as discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements.

See “— Adoption of New Accounting Pronouncements” for discussion of the adoption of new guidance on long-duration contracts in the first quarter of 2023, parts of which were retrospectively applied to prior periods presented in the interim condensed consolidated financial statements.

Summary of Significant Accounting Policies

In connection with the adoption of new guidance on long-duration insurance contracts, the Company updated its impacted accounting policies as described below.

See Note 1 of the Notes to the Consolidated Financial Statements included in the 2022 Annual Report for a description of the Company’s accounting policies that did not change.

Brighthouse Financial, Inc.

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

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

Insurance Contract Obligations

The Company has obligations under insurance contracts to pay benefits over an extended period of time.

The Company establishes liabilities for future obligations under long-duration insurance contracts based on the accounting model appropriate for each type of contract or contract feature.

Liabilities for insurance contract benefits are generally accrued over time as revenue is recognized, or established based on the balance that accrues to the contract holder.

In addition, certain insurance contracts may contain features that are required to be measured at fair value separately from the base contracts, either as a market risk benefit or embedded derivative.

The discussion below provides an overview of the different accounting models for insurance contract obligations and the applicability of such models to the Company’s insurance products.

Liability for Future Policy Benefits

The Company establishes a liability for future policy benefits (“LFPB”) for non-participating term and whole life insurance and income annuities.

LFPBs are accrued over time as revenue is recognized based on a net premium ratio.

The net premium ratio is the portion of gross premiums required to provide for all future benefits.

LFPBs are established using the Company’s current assumptions of future cash flows, discounted at a rate that approximates a single A corporate bond curve.

The Company generally aggregates insurance contracts into groupings by issue year, product and segment for determining the net premium ratio and related LFPBs.

The Company reviews cash flow assumptions regularly, and if they change significantly, LFPBs are adjusted by determining a revised net premium ratio.

The revised net premium ratio is calculated as of contract inception using both actual historical experience and updated future cash flow assumptions.

The recalculated net premium ratio is applied to derive a remeasurement gain or loss recognized in current period net income.

For insurance policies in-force as of December 31, 2020, January 1, 2021 is considered the contract inception date.

The net premium ratio is also updated quarterly for the difference between actual and expected experience.

The net premium ratio is not updated for changes in discount rate assumptions, as changes in the discount rate are updated quarterly and the impacts are reflected in other comprehensive income (loss) (“OCI”).

The discount rate assumption is determined by developing a yield curve based on market observable yields for upper-medium fixed income instruments derived from an external index.

The yield curve is applied to the expected future cash flows used in the measurement of LFPBs based on the duration characteristics of those liabilities.

The most significant cash flow assumptions used in the establishment of LFPBs are mortality, policy lapses and market interest rates.

See Note 4 for more information on the effect of changes in assumptions on the measurement of LFPBs.

The Company also establishes an LFPB for participating term and whole life insurance using a net premium ratio and the Company’s current assumptions of future cash flows.

Assumptions are determined at issuance of the policy and are not updated unless a premium deficiency exists.

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

When a premium deficiency exists, the Company will reduce any deferred acquisition costs and may also establish an additional liability to eliminate the deficiency.

See Note 4 for more information on assumptions used in establishing LFPBs related to participating term and whole life insurance.

Policyholder Account Balances

The Company establishes a policyholder account balance liability for customer deposits on universal life insurance, universal life insurance with secondary guarantees (“ULSG”) and deferred annuity contracts.

The policyholder account balance liability is equal to the sum of deposits, plus interest credited, less charges and withdrawals, excluding the impact of any applicable charge that may be incurred upon surrender.

The Company also holds additional liabilities for certain product features including secondary guarantees on universal life insurance contracts and the crediting rates associated with index-linked annuities.

Brighthouse Financial, Inc.

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

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

Additional Liabilities for ULSG

The Company establishes a liability in addition to the account balance for secondary guarantees on universal life insurance.

These liabilities are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the contract period based on total expected assessments.

The benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios.

The Company also maintains a liability for profits followed by losses on ULSG determined by projecting future earnings and establishing a liability to offset losses that are expected to occur in later years.

Both ULSG liabilities are adjusted for the effects of unrealized investment gains and losses.

The Company reviews cash flow assumptions regularly, and, if they change significantly, the liability for secondary guarantees is adjusted by a cumulative charge or credit to net income.

Liabilities for secondary guarantees are presented within future policy benefits with changes in the liabilities reported in policyholder benefits and claims, except for the effects of unrealized investment gains and losses, which are reported in OCI.

The most significant assumptions used in estimating liabilities for secondary guarantees are the general account rate of return, premium persistency, mortality and lapses.

See Note 4 for more information on the effect of changes in assumptions on the measurement of liabilities for secondary guarantees.

Market Risk Benefits on Annuity Guarantees

Market risk benefits (“MRB”) are contracts or contract features that provide protection to the policyholder from capital markets risk by transferring such risks to the Company.

MRBs are required to be separated from the deferred annuity host contract and measured at fair value.

The Company establishes MRB assets and liabilities for guaranteed minimum benefits on variable annuity contracts including guaranteed minimum death benefits (“GMDB”), guaranteed minimum income benefits (“GMIB”), guaranteed minimum accumulation benefits (“GMAB”) and guaranteed minimum withdrawal benefits (“GMWB”).

MRB assets are also established for reinsured benefits related to these guarantees.

Certain index-linked annuity products may also have guaranteed minimum benefits classified as MRBs.

The measurement of fair value includes an adjustment for the risk that the Company fails to satisfy its obligations, which is referred to as nonperformance risk, as well as risk margin to capture the non-capital markets risks of the instrument which represents the additional compensation a market participant would require to assume the risks related to the uncertainties in certain actuarial assumptions.

MRBs are measured at estimated fair value, with changes reported in change in MRBs on the consolidated statements of operations, except for the change due to nonperformance risk, which is reported in OCI.

See Note 4 for more information on the effect of changes in inputs and assumptions on the measurement of MRBs and Note 8 for more information on the determination of fair value of MRBs.

Embedded Derivatives on Index-Linked Annuities

The Company issues, and assumes through reinsurance, index-linked annuities which allow the policyholder to participate in returns from certain specified equity indices.

The crediting rates associated with these features are classified as embedded derivatives and measured at estimated fair value, 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.

Embedded derivative liabilities are required to be separated from the deferred annuity host contract and measured at fair value.

The estimated fair value is determined using a combination of an option pricing model and an option-budget approach.

Under this approach, the Company estimates the cost of funding the crediting rate using option pricing and establishes that cost on the balance sheet as a reduction to the initial deposit amount.

The estimate of fair value includes an adjustment for nonperformance risk, as well as a risk margin.

Brighthouse Financial, Inc.

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

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

Actuarial assumptions are reviewed at least annually, and if they change significantly, the estimated fair value is adjusted through net income.

Capital market inputs used in the measurement of index-linked crediting rate embedded derivatives are updated quarterly through net income.

The reduction to the initial deposit is accreted back up to the initial deposit over the estimated life of the contract.

Embedded derivatives related to index-linked annuities are presented within policyholder account balances while changes in the estimated fair value are reported in net derivative gains (losses).

For more information on the determination of estimated fair value of embedded derivatives, see Note 8.

Recognition of Revenues and Deposits on Insurance Contracts

Premiums related to traditional long-duration contracts are recognized as revenues when due from policyholders.

When premiums for income annuities are due over a significantly shorter period than the period over which policyholder benefits are incurred, the Company establishes a deferred profit liability (“DPL”) for the excess of the gross premium over the net premium.

DPLs are amortized into net income in proportion to the amount of expected future benefit payments.

Assumptions used in the measurement of the DPL are updated at the same time as the related LFPBs, with the updated estimates used to recalculate the DPL as of contract inception.

The remeasurement gain or loss from updating DPLs is recognized in current period net income along with the related change in LFPBs.

Deposits related to universal life insurance, deferred annuity contracts and investment contracts are credited to policyholder account balances.

Revenues from such contracts consist of asset-based investment management fees, cost of insurance charges, risk charges, policy administration fees and surrender charges.

These fees, which are included in universal life and investment-type product policy fees, are recognized when assessed to the contract holder, except for non-level insurance charges which are deferred by the establishment of an unearned revenue liability and amortized over the expected life of the contracts.

Premiums and policy fees are presented net of reinsurance.

Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles

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

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

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

All other acquisition-related costs are expensed as incurred.

Value of business acquired (“VOBA”) is an intangible asset resulting from a business combination that represents the excess of book value over the estimated fair value of acquired insurance, annuity and investment-type contracts in-force as of the acquisition date.

The Company amortizes DAC and VOBA in a manner that approximates a straight-line basis over the expected life of the related contracts.

For life insurance contracts, amortization is based on projections of amounts of insurance in-force, while projections of policy counts are used for deferred annuity contracts and expected future benefits payments for income annuities.

These assumptions are reviewed at least annually, and if they change significantly, updates are recognized through changes to future amortization.

VOBA balances are tested annually to determine if the balance is deemed unrecoverable from expected future profits.

All changes in DAC and VOBA balances are recorded to net income.

Periodically, the Company modifies product benefits, features, rights or coverages that occur by the exchange of an existing contract for a new contract, or by amendment, endorsement, or rider to a contract, or by election or coverage within a contract.

If a modification is considered to have substantially changed the contract, the associated DAC or VOBA is written off immediately through net income and any new acquisition costs associated with the replacement contract are deferred.

If the modification does not substantially change the contract, the DAC or VOBA amortization on the original contract will continue and any acquisition costs associated with the related modification are expensed.

The Company also has intangible assets representing deferred sales inducements (“DSI”) included in other assets and unearned revenue liabilities included in other policy-related balances.

The Company defers sales inducements and unearned revenue and amortizes the balances using the same methodology and assumptions used to amortize DAC and VOBA.

Brighthouse Financial, Inc.

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

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

Adoption of New Accounting Pronouncements

1 unchanged sentence

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

Except as noted below, there were no significant ASUs adopted during the period ended March 31, 2023.

In March 2022, the FASB issued new guidance on Troubled Debt Restructurings (“TDR”) (ASU 2022-02, Financial Instruments—Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures).

This ASU eliminates TDR recognition and measurement guidance and, instead, requires that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan.

The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

The Company adopted this guidance on January 1, 2023.

This ASU was applied prospectively and did not have a material impact on the consolidated financial statements upon adoption but could change the future recognition and measurement of modified loans and other receivables.

In August 2018, the FASB issued new guidance on long-duration contracts (ASU 2018-12, Financial Services-Insurance (Topic 944):

1 unchanged sentence

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.

LDTI resulted 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

(1) Guaranteed benefits associated with variable annuity and certain fixed annuity contracts have been classified and presented separately on the consolidated balance sheets as MRBs.

MRBs are now measured at estimated fair value through net income and reported separately on the consolidated statements of operations, except for nonperformance risk changes, which will be recognized in OCI.

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

The resulting remeasurement gain or loss is now 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 is now based on an upper-medium grade fixed income yield, updated quarterly, with changes recognized in OCI.

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

Changes in assumptions used to amortize DAC have been recognized as a revision to future amortization amounts.

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

The transition date was January 1, 2021.

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

The cumulative effect, on an after-tax basis, of the adoption of ASU 2018-12 as of the transition date was a $ 5.4 billion decrease to retained earnings and a $ 3.9 billion decrease to accumulated other comprehensive income (loss) (“AOCI”).

See Note 2 for more detailed information on the impacts of the ASU to the Company’s financial statements.

Brighthouse Financial, Inc.

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

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.

ASU 2018-12 Transition

The Company adopted ASU 2018-12 for LFPBs, DAC and other balances amortized on a basis consistent with DAC by applying the guidance to contracts in-force on the basis of their existing carrying amounts at the transition date.

The Company adopted ASU 2018-12 for MRBs on a fully retrospective basis.

The effect of transition adjustments on stockholders’ equity at January 1, 2021 due to the adoption of ASU 2018-12 was as follows:

Retained Earnings (Deficit) AOCI

(In millions)

Liability for future policy benefits $ ( 436 ) $ ( 2,073 )

Market risk benefits and related adjustments ( 6,237 ) ( 3,454 )

DAC and VOBA — 520

Reinsurance recoverables ( 141 ) 34

Deferred income tax asset 1,431 1,044

Total $ ( 5,383 ) $ ( 3,929 )

For LFPBs, the transition adjustment to retained earnings relates to instances where net premiums exceed gross premiums resulting in LFPBs being increased to eliminate the premium deficiency.

The premium deficiency primarily relates to structured settlement annuities.

The transition adjustment related to AOCI represents the effect of the requirement to discount LFPBs based on an upper-medium grade fixed income rate as well as the removal of amounts previously recorded in AOCI for the effects of unrealized investment gains and losses.

For MRBs, the transition adjustment to AOCI relates to the cumulative effect of changes in the nonperformance risk between contract issue date and transition date.

The remaining difference between the estimated fair value and carrying amount of MRBs at transition, excluding the amounts recorded in AOCI, was recorded as an adjustment to retained earnings as of the transition date.

For DAC and VOBA, the Company removed amounts previously recorded in AOCI for the effect of unrealized investment gains and losses.

For reinsurance, the adjustments to both retained earnings and AOCI were made to align the measurement of reinsurance recoverables with the related LFPBs.

The balances of and changes in LFPBs at January 1, 2021 due to the adoption of ASU 2018-12 were as follows:

Term and Whole Life Insurance Income Annuities Structured Settlement and Pension Risk Transfer Annuities

(In millions)

Balance at December 31, 2020 $ 2,854 $ 4,311 $ 10,115

Removal of related balances in AOCI — ( 203 ) ( 1,784 )

Change in cash flow assumptions 14 ( 171 ) 200

Initial recognition of deferred profit liabilities — 176 217

Change in discount rate assumptions 536 754 2,770

Adjusted balance at January 1, 2021 3,404 4,867 11,518

Reinsurance recoverable 85 29 102

Adjusted balance at January 1, 2021, net of reinsurance $ 3,319 $ 4,838 $ 11,416

Brighthouse Financial, Inc.

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

ASU 2018-12 Transition (continued)

The balance of and changes in liabilities classified as MRBs at January 1, 2021 due to the adoption of ASU 2018-12 were as follows:

Variable Annuities

(In millions)

Balance at December 31, 2020 $ 8,924

Adjustment for the difference between carrying amount and estimated fair value, except for the difference due to nonperformance risk 6,010

Adjustment for cumulative effect of changes in nonperformance risk since issuance 3,454

Adjusted balance at January 1, 2021 18,388

Reinsurance recoverable 169

Adjusted balance at January 1, 2021, net of reinsurance $ 18,219

The balances of and changes in DAC and VOBA on January 1, 2021 due to the adoption of ASU 2018-12 were as follows:

Variable Annuities Fixed Rate Annuities Index-Linked Annuities Term and Whole Life Insurance Universal Life Insurance

(In millions)

Balance at December 31, 2020 $ 2,440 $ 64 $ 886 $ 527 $ 492

Removal of related amounts in AOCI 472 — — — ( 23 )

Adjusted balance at January 1, 2021 $ 2,912 $ 64 $ 886 $ 527 $ 469

Balance at December 31, 2020 $ 363 $ 76 $ — $ 8 $ 55

Removal of related amounts in AOCI 65 — — — 6

Adjusted balance at January 1, 2021 $ 428 $ 76 $ — $ 8 $ 61

The following tables present amounts previously reported in 2022 and 2021, the effect on those amounts of the change due to the adoption of ASU 2018-12 as described in Note 1, and the currently reported amounts in the Unaudited Interim Consolidated Balance Sheets and Unaudited Interim Consolidated Statements of Operations and Comprehensive Income (Loss).

See Notes 4 and 5 for more information.

December 31, 2022 December 31, 2021

As Previously

Reported Effect of

Change As Currently

Reported As Previously

Reported Effect of

Change As Currently

(In millions)

Total assets $ 225,580 $ ( 733 ) $ 224,847 $ 259,840 $ 2,417 $ 262,257

Future policy benefits $ 41,569 $ ( 10,072 ) $ 31,497 $ 43,807 $ ( 3,817 ) $ 39,990

Policyholder account balances $ 74,836 $ ( 1,309 ) $ 73,527 $ 66,851 $ ( 1,602 ) $ 65,249

Market risk benefit liabilities $ — $ 10,389 $ 10,389 $ — $ 16,034 $ 16,034

Total liabilities $ 219,542 $ ( 293 ) $ 219,249 $ 243,633 $ 10,174 $ 253,807

Retained earnings (deficit) $ ( 637 ) $ 242 $ ( 395 ) $ ( 642 ) $ ( 3,632 ) $ ( 4,274 )

Accumulated other comprehensive income (loss) $ ( 5,424 ) $ ( 682 ) $ ( 6,106 ) $ 4,172 $ ( 4,125 ) $ 47

Total equity $ 6,038 $ ( 440 ) $ 5,598 $ 16,207 $ ( 7,757 ) $ 8,450

Total liabilities and equity $ 225,580 $ ( 733 ) $ 224,847 $ 259,840 $ 2,417 $ 262,257

Brighthouse Financial, Inc.

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

ASU 2018-12 Transition (continued)

Year Ended December 31, 2022 Year Ended December 31, 2021

As Previously

Reported Effect of

Change As Currently

Reported As Previously

Reported Effect of

Change As Currently

(In millions)

Universal life and investment-type product policy fees $ 3,141 $ ( 706 ) $ 2,435 $ 3,636 $ ( 656 ) $ 2,980

Net derivative gains (losses) $ 304 $ ( 896 ) $ ( 592 ) $ ( 2,469 ) $ ( 1,514 ) $ ( 3,983 )

Total revenues $ 8,473 $ ( 1,600 ) $ 6,873 $ 7,142 $ ( 2,166 ) $ 4,976

Policyholder benefits and claims $ 4,165 $ ( 1,972 ) $ 2,193 $ 3,443 $ ( 697 ) $ 2,746

Change in market risk benefits $ — $ ( 4,104 ) $ ( 4,104 ) $ — $ ( 4,134 ) $ ( 4,134 )

Total expenses $ 8,645 $ ( 6,504 ) $ 2,141 $ 7,350 $ ( 4,383 ) $ 2,967

Net income (loss) $ 10 $ 3,874 $ 3,884 $ ( 103 ) $ 1,751 $ 1,648

Segment Information

2 unchanged sentences

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

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

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.

The Life segment consists of insurance products, 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.

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

Corporate & Other

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

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

Brighthouse Financial, Inc.

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

Segment Information (continued)

Corporate & Other also includes long-term care business reinsured through 100% quota share reinsurance agreements and activities related to funding agreements associated with the Company’s institutional spread margin business.

In connection with the adoption of ASU 2018-12, the Company reclassified direct-to-consumer life insurance that is no longer sold from Corporate & Other to the Life segment.

The segment information below reflects the direct-to consumer life insurance in the Life segment for all periods presented.

Financial Measures and Segment Accounting Policies

3 unchanged sentences

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.

Brighthouse Financial, Inc.

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

Segment Information (continued)

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;

• Certain variable annuity guaranteed minimum income benefits (“GMIB”) fees (“GMIB Fees”).

• Net derivative gains (losses), excluding 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.

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;

• 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.

• Change in MRBs;

• Change in fair value of the crediting rate on experience-rated contracts.

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 Company’s adjusted earnings definition and presentation has been updated for all periods presented to reflect the adoption of ASU 2018-12.

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.

6 unchanged sentences

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

Brighthouse Financial, Inc.

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

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

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

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

Three Months Ended March 31, 2023

Annuities Life Run-off Corporate & Other Total

9 unchanged sentences

Net derivative gains (losses) ( 575 )

Change in market risk benefits ( 194 )

Other adjustments to net income (loss) ( 46 )

6 unchanged sentences

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

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

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

Interest revenue $ 1,648 $ 339 $ 919 $ 221

Interest expense $ — $ — $ — $ 114

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Annuities Life Run-off Corporate & Other Total

9 unchanged sentences

Net derivative gains (losses) ( 54 )

Change in market risk benefits 1,579

Other adjustments to net income (loss) 32

3 unchanged sentences

Interest expense $ — $ — $ — $ 38

Brighthouse Financial, Inc.

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

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 $ 1,170 $ 1,202

Life 255 345 871 1,138

Run-off 380 535

3 unchanged sentences

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(In millions)

4 unchanged sentences

Total $ 230,002 $ 224,847

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

Event of Death At

Annuitization In the

Event of Death At

Annuitization

Brighthouse Financial, Inc.

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

Liability for Future Policy Benefits

Information regarding LFPBs for non-participating traditional and limited-payment contracts was as follows:

Three Months Ended March 31,

Term and Whole Life Insurance Income Annuities Structured Settlement and Pension Risk Transfer Annuities Term and Whole Life Insurance Income Annuities Structured Settlement and Pension Risk Transfer Annuities

(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

Present value of expected net premiums:

Balance, beginning of period $ 2,871 $ — $ — $ 3,325 $ — $ —

Beginning balance at original discount rate 3,212 — — 3,051 — —

Effect of model refinements — — — 122 — —

Effect of changes in cash flow assumptions — — — ( 1 ) — —

Effect of actual variances from expected experience ( 9 ) — — 77 — —

Adjusted beginning of period balance 3,203 — — 3,249 — —

Issuances 24 — — 20 — —

Interest accrual 28 — — 28 — —

Net premiums collected ( 90 ) — — ( 107 ) — —

Ending balance at original discount rate 3,165 — — 3,190 — —

Effect of changes in discount rate assumptions ( 270 ) — — 26 — —

Balance, end of period $ 2,895 $ — $ — $ 3,216 $ — $ —

Present value of expected future policy benefits:

Balance, beginning of period $ 5,279 $ 3,512 $ 6,793 $ 6,426 $ 4,333 $ 10,171

Beginning balance at original discount rate 5,922 3,897 7,410 5,820 3,865 8,165

Effect of model refinements — — — 135 — —

Effect of changes in cash flow assumptions — — — — — —

Effect of actual variances from expected experience ( 9 ) ( 31 ) ( 31 ) 85 ( 9 ) ( 22 )

Adjusted beginning of period balance 5,913 3,866 7,379 6,040 3,856 8,143

Issuances 24 78 — 22 43 —

Interest accrual 54 36 80 56 37 87

Benefit payments ( 131 ) ( 89 ) ( 146 ) ( 208 ) ( 93 ) ( 161 )

Ending balance at original discount rate 5,860 3,891 7,313 5,910 3,843 8,069

Effect of changes in discount rate assumptions ( 501 ) ( 287 ) ( 385 ) 86 110 820

Balance, end of period $ 5,359 $ 3,604 $ 6,928 $ 5,996 $ 3,953 $ 8,889

Net liability for future policy benefits, end of period $ 2,464 $ 3,604 $ 6,928 $ 2,780 $ 3,953 $ 8,889

Reinsurance recoverable, end of period 43 26 69 61 25 82

Net liability for future policy benefits, after reinsurance recoverable $ 2,421 $ 3,578 $ 6,859 $ 2,719 $ 3,928 $ 8,807

Weighted-average duration of liability 8.4 years 8.4 years 11.6 years 8.4 years 8.5 years 12.7 years

Weighted-average interest accretion rate 3.96 % 3.87 % 4.46 % 3.98 % 3.95 % 4.45 %

Gross premiums or assessments recognized during period $ 153 $ 102 $ — $ 171 $ 45 $ —

Expected future gross premiums, undiscounted $ 6,618 $ — $ — $ 6,954 $ — $ —

Expected future gross premiums, discounted $ 4,905 $ — $ — $ 5,138 $ — $ —

Expected future benefit payments, undiscounted $ 8,099 $ 5,375 $ 14,224 $ 8,195 $ 5,479 $ 17,046

Expected future benefit payments, discounted $ 5,860 $ 3,891 $ 7,313 $ 5,910 $ 3,843 $ 8,069

Brighthouse Financial, Inc.

1 unchanged sentence

Insurance (continued)

September 30, 2022 December 31, 2021

Secondary Guarantees

Information regarding the additional insurance liabilities for universal life-type contracts with secondary guarantees was as follows:

Three Months Ended March 31,

(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

Balance, beginning of period $ 6,935 $ 7,168

Beginning balance before the effect of unrealized gains and losses 7,175 6,731

Effect of changes in cash flow assumptions — —

Effect of actual variances from expected experience 34 66

Adjusted beginning of period balance 7,209 6,797

Interest accrual 87 81

Net assessments collected 101 110

Benefit payments ( 103 ) ( 159 )

Effect of realized capital gains (losses) — 1

Ending balance before the effect of unrealized gains and losses 7,294 6,830

Effect of unrealized gains and losses ( 171 ) 156

Balance, end of period 7,123 6,986

Reinsurance recoverable, end of period 1,397 1,304

Net additional liability, after reinsurance recoverable $ 5,726 $ 5,682

Weighted-average duration of liability 6.7 years 6.7 years

Weighted-average interest accretion rate 4.91 % 4.90 %

Gross premiums or assessments recognized during period $ — $ —

A reconciliation of the net LFPBs for nonparticipating traditional and limited-payment contracts and the additional insurance liabilities for universal life-type contracts with secondary guarantees reported in the preceding rollforward tables to LFPBs on the consolidated balance sheets was as follows at:

(In millions)

Liabilities reported in the preceding rollforward tables $ 20,119 $ 22,608

Long-term care insurance (1) 5,763 6,708

ULSG liability for profits followed by losses 2,654 3,461

Participating whole life insurance (2) 2,986 2,788

Deferred profit liabilities 373 378

Other 391 430

Total liability for future policy benefits $ 32,286 $ 36,373

_______________

(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.

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.

(1) Includes liabilities related to fully reinsured individual long-term care insurance.

(2) Participating whole life insurance uses an interest assumption based on the non-forfeiture interest rate, ranging from 3.5 % to 4.5 %, and mortality rates guaranteed in calculating the cash surrender values described in such contracts, and also includes a liability for terminal dividends.

Participating whole life insurance represented 3 % of the Company’s life insurance in-force at both March 31, 2023 and 2022, and 39 % and 34 % of gross traditional life insurance premiums for the three months ended March 31, 2023 and 2022, respectively.

Brighthouse Financial, Inc.

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

Investments (continued)

Insurance (continued)

Information regarding LFPBs for non-participating traditional and limited-payment contracts was as follows:

Years Ended December 31,

(Dollars in millions)

Present value of expected net premiums:

Balance, beginning of year $ 3,325 $ — $ — $ 3,448 $ — $ —

Beginning balance at original discount rate 3,051 — — 2,994 — —

Effect of model refinements 122 — — — — —

Effect of changes in cash flow assumptions 137 — — 70 — —

Effect of actual variances from expected experience 119 — — 153 — —

Adjusted beginning of year balance 3,429 — — 3,217 — —

Issuances 93 — — 113 — —

Interest accrual 116 — — 111 — —

Net premiums collected ( 426 ) — — ( 390 ) — —

Ending balance at original discount rate 3,212 — — 3,051 — —

Effect of changes in discount rate assumptions ( 341 ) — — 274 — —

Balance, end of year $ 2,871 $ — $ — $ 3,325 $ — $ —

Present value of expected future policy benefits:

Balance, beginning of year $ 6,426 $ 4,333 $ 10,171 $ 6,852 $ 4,691 $ 11,301

Beginning balance at original discount rate 5,820 3,865 8,165 5,862 3,938 8,531

Effect of model refinements 135 — ( 278 ) — — —

Effect of changes in cash flow assumptions 157 56 ( 157 ) 70 ( 41 ) ( 41 )

Effect of actual variances from expected experience 155 ( 22 ) ( 23 ) 153 ( 6 ) ( 16 )

Adjusted beginning of year balance 6,267 3,899 7,707 6,085 3,891 8,474

Issuances 101 224 — 128 198 —

Interest accrual 222 146 327 222 150 359

Benefit payments ( 668 ) ( 372 ) ( 624 ) ( 615 ) ( 374 ) ( 668 )

Ending balance at original discount rate 5,922 3,897 7,410 5,820 3,865 8,165

Effect of changes in discount rate assumptions ( 643 ) ( 385 ) ( 617 ) 606 468 2,006

Balance, end of year $ 5,279 $ 3,512 $ 6,793 $ 6,426 $ 4,333 $ 10,171

Net liability for future policy benefits, end of year $ 2,408 $ 3,512 $ 6,793 $ 3,101 $ 4,333 $ 10,171

Reinsurance recoverable, end of year 45 24 68 64 27 93

Net liability for future policy benefits, after reinsurance recoverable $ 2,363 $ 3,488 $ 6,725 $ 3,037 $ 4,306 $ 10,078

Brighthouse Financial, Inc.

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

Insurance (continued)

Policyholder Account Balances

Information regarding policyholder account balances was as follows:

Universal Life Insurance Variable Annuities (1) Index-linked Annuities Fixed Rate Annuities ULSG Company-Owned Life Insurance (1)

(Dollars in millions)

Three Months Ended March 31, 2023

Balance, beginning of period $ 2,658 $ 4,908 $ 33,896 $ 14,274 $ 5,307 $ 641

Premiums and deposits 55 27 1,677 912 171 —

Surrenders and withdrawals ( 70 ) ( 177 ) ( 785 ) ( 506 ) ( 6 ) —

Benefit payments ( 25 ) ( 36 ) ( 50 ) ( 102 ) ( 38 ) ( 2 )

Net transfers from (to) separate account 12 11 — — — —

Interest credited 22 41 96 106 43 7

Policy charges ( 57 ) ( 7 ) ( 2 ) — ( 258 ) ( 2 )

Changes related to embedded derivatives — — 1,090 — — —

Balance, end of period $ 2,595 $ 4,767 $ 35,922 $ 14,684 $ 5,219 $ 644

Weighted-average crediting rate (2) 0.84 % 0.85 % 0.32 % 0.73 % 0.82 % 1.09 %

Three Months Ended March 31, 2022

Balance, beginning of period $ 2,694 $ 4,743 $ 32,000 $ 11,849 $ 5,569 $ 646

Premiums and deposits 55 49 1,594 44 176 —

Surrenders and withdrawals ( 21 ) ( 131 ) ( 473 ) ( 155 ) ( 10 ) —

Benefit payments ( 20 ) ( 34 ) ( 36 ) ( 83 ) ( 23 ) ( 3 )

Net transfers from (to) separate account 15 85 — — — 2

Interest credited 4 44 71 72 63 7

Policy charges ( 56 ) ( 7 ) ( 2 ) — ( 263 ) ( 2 )

Changes related to embedded derivatives — — ( 756 ) — — —

Balance, end of period $ 2,671 $ 4,749 $ 32,398 $ 11,727 $ 5,512 $ 650

Weighted-average crediting rate (2) 0.15 % 0.93 % 0.27 % 0.61 % 1.14 % 0.93 %

_______________

(1) Includes liabilities related to separate account products where the contract holder elected a general account investment option.

(2) Excludes the effects of embedded derivatives related to index-linked crediting rates.

A reconciliation of policyholder account balances reported in the preceding rollforward table to the liability for policyholder account balances on the consolidated balance sheets was as follows at:

(In millions)

Policyholder account balances reported in the preceding rollforward table $ 63,831 $ 57,707

Funding agreements classified as investment contracts 11,151 7,705

Other investment contract liabilities 1,138 1,299

Total policyholder account balances $ 76,120 $ 66,711

Brighthouse Financial, Inc.

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

Insurance (continued)

The balance of account values by range of guaranteed minimum crediting rates and the related range of difference, in basis points, between rates being credited to policyholders and the respective guaranteed minimums was as follows at:

Range of Guaranteed Minimum Crediting Rate At Guaranteed Minimum 1 to 50 Basis Points Above 51 to 150 Basis Points Above Greater than 150 Basis Points Above Total

(In millions)

March 31, 2023

Annuities (1) (3):

Less than 2.00% $ 791 $ 289 $ 442 $ 6,688 $ 8,210

2.00% to 3.99% 5,574 4,745 737 12 11,068

Greater than 3.99% 512 — — — 512

$ 6,877 $ 5,034 $ 1,179 $ 6,700 $ 19,790

Life insurance (2) (3):

Less than 2.00% $ — $ — $ — $ 183 $ 183

2.00% to 3.99% — 502 50 150 702

Greater than 3.99% 1,630 — — — 1,630

$ 1,630 $ 502 $ 50 $ 333 $ 2,515

Less than 2.00% $ — $ — $ — $ — $ —

2.00% to 3.99% 1,200 1,552 1,706 264 4,722

Greater than 3.99% 521 — — — 521

$ 1,721 $ 1,552 $ 1,706 $ 264 $ 5,243

December 31, 2022

Annuities (1) (3):

Less than 2.00% $ 861 $ 317 $ 369 $ 5,821 $ 7,368

2.00% to 3.99% 6,119 4,872 596 10 11,597

Greater than 3.99% 525 — — — 525

$ 7,505 $ 5,189 $ 965 $ 5,831 $ 19,490

Life insurance (2) (3):

Less than 2.00% $ — $ — $ — $ 172 $ 172

2.00% to 3.99% — 510 87 154 751

Greater than 3.99% 1,657 — — — 1,657

$ 1,657 $ 510 $ 87 $ 326 $ 2,580

Less than 2.00% $ — $ — $ — $ — $ —

2.00% to 3.99% 1,225 1,581 1,729 266 4,801

Greater than 3.99% 527 — — — 527

$ 1,752 $ 1,581 $ 1,729 $ 266 $ 5,328

_______________

(1) Includes policyholder account balances for fixed rate annuities and the fixed account portion of variable annuities.

(2) Includes policyholder account balances for retained asset accounts, universal life policies and the fixed account portion of universal variable life insurance policies.

(3) Amounts are gross of policy loans and net of excess interest reserves.

Brighthouse Financial, Inc.

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

Insurance (continued)

Market Risk Benefits

Information regarding MRB assets and liabilities associated with variable annuities was as follows:

Three Months Ended March 31, Years Ended

2023 2022 2022 2021

(Dollars in millions)

Balance, beginning of period $ 9,974 $ 15,698 $ 15,698 $ 18,388

Balance, beginning of period, before effect of changes in nonperformance risk 8,230 11,611 11,611 14,934

Decrements ( 28 ) 34 16 ( 68 )

Effect of changes in future expected assumptions — — 210 41

Effect of actual different from expected experience 122 — ( 48 ) ( 86 )

Effect of changes in interest rates 880 ( 2,860 ) ( 8,394 ) ( 1,829 )

Effect of changes in fund returns ( 1,002 ) 1,183 3,807 ( 2,578 )

Issuances ( 3 ) ( 11 ) ( 47 ) ( 96 )

Effect of changes in risk margin 9 ( 50 ) ( 152 ) ( 128 )

Aging of the block and other 326 276 1,227 1,421

Balance, end of period, before effect of changes in nonperformance risk 8,534 10,183 8,230 11,611

Effect of changes in nonperformance risk 1,752 3,159 1,744 4,087

Balance, end of period 10,286 13,342 9,974 15,698

Reinsurance recoverable, end of period 71 93 71 118

Balance, end of period, net of reinsurance (1) $ 10,215 $ 13,249 $ 9,903 $ 15,580

Weighted-average attained age of contract holder 72.1 years 71.5 years 71.8 years 71.1 years

_______________

(1) Amounts represent the sum of MRB assets and MRB liabilities presented on the consolidated balance sheets at March 31, 2023 and 2022, with the exception of $ 4 million and $ 4 million, respectively, of index-linked annuities not included in this table, and at December 31, 2022 and 2021, with the exception of $ 3 million and $ 5 million, respectively, of index-linked annuities not included in this table.

Separate Accounts

Information regarding separate account liabilities was as follows:

Three Months Ended March 31,

Variable Annuities Universal Life Insurance Company-Owned Life Insurance Variable Annuities Universal Life Insurance Company-Owned Life Insurance

(In millions)

Balance, beginning of period $ 77,653 $ 5,218 $ 1,932 $ 105,023 $ 6,862 $ 2,384

Premiums and deposits 216 43 — 432 45 —

Surrenders and withdrawals ( 1,496 ) ( 41 ) ( 3 ) ( 1,744 ) ( 51 ) ( 7 )

Benefit payments ( 383 ) ( 14 ) ( 10 ) ( 371 ) ( 16 ) ( 10 )

Investment performance 4,310 341 111 ( 6,906 ) ( 514 ) ( 138 )

Policy charges ( 519 ) ( 52 ) ( 11 ) ( 580 ) ( 49 ) ( 11 )

Net transfers from (to) general account ( 11 ) ( 12 ) — ( 85 ) ( 15 ) ( 2 )

Other — — — 14 — ( 1 )

Balance, end of period $ 79,770 $ 5,483 $ 2,019 $ 95,783 $ 6,262 $ 2,215

Brighthouse Financial, Inc.

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

Insurance (continued)

A reconciliation of separate account liabilities reported in the preceding rollforward table to the separate account liabilities balance on the consolidated balance sheets was as follows at:

(In millions)

Separate account liabilities reported in the preceding rollforward table $ 87,272 $ 104,260

Variable income annuities 150 161

Pension risk transfer annuities 18 20

Total separate account liabilities $ 87,440 $ 104,441

The aggregate estimated fair value of assets, by major investment asset category, supporting separate accounts was as follows at:

March 31, 2023 December 31, 2022

(In millions)

Equity securities

$ 87,164 $ 84,667

Fixed maturity securities

Cash and cash equivalents 9 9

Other assets 7 11

Total aggregate estimated fair value of assets $ 87,440 $ 84,965

Net Amount at Risk and Cash Surrender Values

Information regarding the net amount at risk (“NAR”) and cash surrender value (“CSV”) for insurance products was as follows at:

Universal Life Insurance Variable Annuities Index-linked Annuities Fixed Rate Annuities ULSG Company-Owned Life Insurance

(In millions)

March 31, 2023

Account balances reported in the preceding rollforward tables:

Policyholder account balances $ 2,595 $ 4,767 $ 35,922 $ 14,684 $ 5,219 $ 644

Separate account liabilities 5,483 79,770 — — — 2,019

Total account balances $ 8,078 $ 84,537 $ 35,922 $ 14,684 $ 5,219 $ 2,663

Net amount at risk $ 37,420 $ 14,894 N/A N/A $ 70,062 $ 3,422

Cash surrender value $ 7,449 $ 84,090 $ 33,567 $ 14,106 $ 6,203 $ 2,443

March 31, 2022

Account balances reported in the preceding rollforward tables:

Policyholder account balances $ 2,671 $ 4,749 $ 32,398 $ 11,727 $ 5,512 $ 650

Separate account liabilities 6,262 95,783 — — — 2,215

Total account balances $ 8,933 $ 100,532 $ 32,398 $ 11,727 $ 5,512 $ 2,865

Net amount at risk $ 39,142 $ 9,266 N/A N/A $ 72,059 $ 3,508

Cash surrender value $ 8,283 $ 100,351 $ 29,442 $ 10,993 $ 6,400 $ 2,636

Products may contain both separate account and general account fund options;

accordingly, net amount at risk and cash surrender value reported in the table above relate to the total account balance for each respective product grouping.

Brighthouse Financial, Inc.

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

Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles

Deferred Policy Acquisition Costs and Value of Business Acquired

Information regarding DAC and VOBA was as follows:

Variable Annuities Fixed Rate Annuities Index-linked Annuities Term and Whole Life Insurance Universal Life Insurance

(In millions)

Three Months Ended March 31, 2023

Balance, beginning of period $ 2,508 $ 107 $ 1,213 $ 405 $ 392

Capitalization 11 4 80 1 3

Amortization ( 63 ) ( 3 ) ( 54 ) ( 14 ) ( 12 )

Balance, end of period 2,456 108 1,239 392 383

Balance, beginning of period 341 65 — 5 48

Amortization ( 8 ) ( 1 ) — — ( 1 )

Balance, end of period 333 64 — 5 47

Total DAC and VOBA:

Balance, end of period $ 2,789 $ 172 $ 1,239 $ 397 $ 430

Three Months Ended March 31, 2022

Balance, beginning of period $ 2,718 $ 89 $ 1,081 $ 462 $ 431

Capitalization 21 5 80 — 2

Amortization ( 67 ) ( 3 ) ( 47 ) ( 15 ) ( 13 )

Balance, end of period 2,672 91 1,114 447 420

Balance, beginning of period 377 70 — 6 54

Amortization ( 9 ) ( 1 ) — — ( 2 )

Balance, end of period 368 69 — 6 52

Total DAC and VOBA:

Balance, end of period $ 3,040 $ 160 $ 1,114 $ 453 $ 472

Brighthouse Financial, Inc.

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

Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles (continued)

Variable Annuities Fixed Rate Annuities Index-linked Annuities Term and Whole Life Insurance Universal Life Insurance

(In millions)

Adjusted balance at January 1, 2021 (1) $ 2,912 $ 64 $ 886 $ 527 $ 469

Capitalization 90 37 354 ( 3 ) 16

Amortization ( 284 ) ( 12 ) ( 159 ) ( 62 ) ( 54 )

Balance at December 31, 2021 2,718 89 1,081 462 431

Capitalization 55 30 330 ( 1 ) 11

Amortization ( 265 ) ( 12 ) ( 198 ) ( 56 ) ( 50 )

Balance at December 31, 2022 $ 2,508 $ 107 $ 1,213 $ 405 $ 392

Adjusted balance at January 1, 2021 (1) $ 428 $ 76 $ — $ 8 $ 61

Amortization ( 51 ) ( 6 ) — ( 2 ) ( 7 )

Balance at December 31, 2021 377 70 — 6 54

Amortization ( 36 ) ( 5 ) — ( 1 ) ( 6 )

Balance at December 31, 2022 341 65 — 5 48

Total DAC and VOBA:

Balance at December 31, 2022 $ 2,849 $ 172 $ 1,213 $ 410 $ 440

Balance at December 31, 2021 $ 3,095 $ 159 $ 1,081 $ 468 $ 485

_______________

(1) Includes an adjustment to eliminate balances included in AOCI related to the adoption of ASU 2018-12 (see Note 2).

Deferred Sales Inducements

Information regarding DSI, included in other assets, was as follows:

Three Months Ended March 31,

Variable Annuities Fixed Rate Annuities Variable Annuities Fixed Rate Annuities

(In millions)

Balance, beginning of period $ 245 $ 9 $ 272 $ 10

Amortization ( 7 ) — ( 7 ) —

Balance, end of period $ 238 $ 9 $ 265 $ 10

Unearned Revenue

Information regarding unearned revenue, included in other policy-related balances, was as follows:

Three Months Ended March 31,

Universal Life Insurance ULSG Variable Annuities Universal Life Insurance ULSG Variable Annuities

(In millions)

Balance, beginning of period $ 356 $ 488 $ 74 $ 358 $ 344 $ 80

Capitalization 10 44 — 10 46 —

Amortization ( 10 ) ( 11 ) ( 1 ) ( 10 ) ( 8 ) ( 1 )

Balance, end of period $ 356 $ 521 $ 73 $ 358 $ 382 $ 79

Brighthouse Financial, Inc.

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

See Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the 2022 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.

Fixed Maturity Securities Available-for-sale

1 unchanged sentence

Fixed maturity securities by sector were as follows at:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Cost Allowance for Credit Losses Gross Unrealized Estimated

8 unchanged sentences

CMBS 7,343 3 — 666 6,674 7,324 3 — 710 6,611

State and political subdivision 4,110 — 120 399 3,831 3,995 — 846 6 4,835

ABS 5,835 — 9 248 5,596 5,652 — 3 296 5,359

State and political subdivision 4,072 — 178 301 3,949 4,074 — 125 400 3,799

Foreign government 1,140 — 49 95 1,094 1,148 — 39 106 1,081

Total fixed maturity securities $ 84,693 $ 5 $ 1,130 $ 8,133 $ 77,685 $ 84,344 $ 7 $ 752 $ 9,512 $ 75,577

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.

The Company held non-income producing fixed maturity securities with an estimated fair value of $ 13 million at March 31, 2023.

The Company did no t hold non-income producing fixed maturity securities at December 31, 2022.

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:

The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at March 31, 2023:

Year or Less Due After One

17 unchanged sentences

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

March 31, 2023 December 31, 2022

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

8 unchanged sentences

CMBS 3,582 265 3,041 401 5,589 543 970 167

State and political subdivision 2,173 369 99 30 356 6 7 —

ABS 1,828 50 2,980 198 3,347 159 1,733 137

State and political subdivision 1,223 100 789 201 2,041 317 247 83

Foreign government 408 27 368 68 777 99 21 7

21 unchanged sentences

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

The accrued interest receivable on fixed maturity securities totaled $ 634 million and $ 534 million at September 30, 2022 and December 31, 2021, respectively, and is included in accrued investment income.

The accrued interest receivable on fixed maturity securities totaled $ 656 million and $ 602 million at March 31, 2023 and December 31, 2022, respectively, and is included in accrued investment income.

Brighthouse Financial, Inc.

9 unchanged sentences

Current Period Evaluation

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

2 unchanged sentences

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.

The allowance for credit losses for fixed maturity securities was $ 5 million and $ 7 million at March 31, 2023 and December 31, 2022, respectively.

For both the three months ended March 31, 2023 and 2022, the change in the allowance for fixed maturity securities by sector was not significant.

The Company recorded total write-offs of $ 7 million and $ 2 million for the three months ended March 31, 2023 and 2022, respectively.

Mortgage Loans

1 unchanged sentence

Mortgage loans are summarized as follows at:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Total Carrying

7 unchanged sentences

_______________

(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.

Brighthouse Financial, Inc.

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

Investments (continued)

(1) Purchases of mortgage loans from third parties were $ 32 million and $ 840 million for the three months ended March 31, 2023 and 2022, respectively, and were primarily comprised of residential mortgage loans.

Allowance for Credit Losses for Mortgage Loans

2 unchanged sentences

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

Brighthouse Financial, Inc.

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

Investments (continued)

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

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

For mortgage loans that are granted payment deferrals due to the 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 accrued interest receivable on mortgage loans is included in accrued investment income and totaled $ 109 million and $ 115 million at March 31, 2023 and December 31, 2022, 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.

6 unchanged sentences

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.

These situations include collateral dependent loans, modifications, foreclosure probable loans, and loans with dissimilar risk characteristics.

Mortgage loans are also evaluated to determine if they qualify as PCD assets.

5 unchanged sentences

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.

The difference between the grossed-up amortized cost basis and the par value of the loan is a non-credit 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.

Brighthouse Financial, Inc.

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

Investments (continued)

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

2 unchanged sentences

(In millions)

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Balance, beginning of period $ 49 $ 15 $ 55 $ 119

Current period provision 15 ( 1 ) 3 17

Charge-offs, net of recoveries ( 23 ) — — ( 23 )

Balance, end of period $ 64 $ 14 $ 58 $ 136

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

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

Current period provision 2 3 ( 1 ) 4

PCD credit allowance — — 2 2

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

Brighthouse Financial, Inc.

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

Investments (continued)

Credit Quality of Mortgage Loans by Portfolio Segment

2 unchanged sentences

(In millions)

September 30, 2022

March 31, 2023

Commercial mortgage loans

16 unchanged sentences

Total $ 85 $ 4,390 $ 6,189 $ 1,078 $ 2,626 $ 8,591 $ 22,959

Brighthouse Financial, Inc.

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

Investments (continued)

2022 2021 2020 2019 2018 Prior Total

12 unchanged sentences

65% to 75% 148 90 59 56 1 16 370

Greater than 80% — — — — 1 — 1

Total agricultural mortgage loans 680 1,253 479 552 645 756 4,365

4 unchanged sentences

Total $ 4,369 $ 6,197 $ 1,091 $ 2,648 $ 2,191 $ 6,559 $ 23,055

Brighthouse Financial, Inc.

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

Investments (continued)

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

5 unchanged sentences

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Amortized Cost % of

9 unchanged sentences

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

Brighthouse Financial, Inc.

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

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.

The Company has a high-quality, well-performing mortgage loan portfolio, with over 99 % of all mortgage loans classified as performing at both March 31, 2023 and December 31, 2022.

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

1 unchanged sentence

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

March 31, 2023 December 31, 2022

Commercial Agricultural Residential Total Commercial Agricultural Residential Total

6 unchanged sentences

$ 13,529 $ 4,388 $ 5,042 $ 22,959 $ 13,574 $ 4,365 $ 5,116 $ 23,055

Brighthouse Financial, Inc.

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

Investments (continued)

Mortgage Loans in Nonaccrual Status by Portfolio Segment

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

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:

1 unchanged sentence

(In millions)

September 30, 2022

March 31, 2023

$ 29 $ 2 $ 71 $ 102

1 unchanged sentence

$ 11 $ 3 $ 64 $ 78

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 .

Brighthouse Financial, Inc.

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

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.

_______________

(1) The Company had $ 2 million of mortgage loans in nonaccrual status for which there was no related allowance for credit losses at March 31, 2023.

All mortgage loans in nonaccrual status had an allowance for credit losses at December 31, 2022.

Mortgage loans in nonaccrual status 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 less than $ 1 million for both the three months ended March 31, 2023 and 2022 .

Other Invested Assets

1 unchanged sentence

See Note 7 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.

Other invested assets also includes the Company’s investment in company-owned life insurance, 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”).

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

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(In millions)

5 unchanged sentences

Future policy benefits 646 917

DAC, VOBA and DSI 503 ( 403 )

Subtotal 823 ( 3,306 )

Deferred income tax benefit (expense) 1,211 1,512

Net unrealized investment gains (losses) $ ( 4,556 ) $ ( 5,690 )

Brighthouse Financial, Inc.

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

Investments (continued)

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

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

(In millions)

3 unchanged sentences

Future policy benefits ( 271 )

DAC, VOBA and DSI 906

Deferred income tax benefit (expense) ( 301 )

Balance at September 30, 2022 $ ( 6,545 )

Balance at March 31, 2023 $ ( 4,556 )

Change in net unrealized investment gains (losses) $ 1,134

Brighthouse Financial, Inc.

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

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.

government and its agencies, at both March 31, 2023 and December 31, 2022.

Securities Lending

Elements of the securities lending program are presented below at:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(In millions)

3 unchanged sentences

Cash collateral received from counterparties (2) $ 3,692 $ 3,731

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

Reinvestment portfolio — estimated fair value $ 3,590 $ 3,603

_______________

(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.

(1) Included in fixed maturity securities.

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

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

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

7 unchanged sentences

(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.

Brighthouse Financial, Inc.

1 unchanged sentence

Investments (continued)

The estimated fair value of the securities on loan related to the cash collateral on open at March 31, 2023 was $ 775 million, 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 ABS, agency RMBS, U.S.

government and agency securities, U.S.

and foreign corporate securities, non-agency RMBS and CMBS) with 54 % invested in U.S.

government and agency securities, agency RMBS and cash and cash equivalents at March 31, 2023.

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

March 31, 2023 December 31, 2022

(In millions)

4 unchanged sentences

_______________

(1) The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $ 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.

(1) The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $ 58 million and $ 21 million of the assets on deposit represents restricted cash and cash equivalents at March 31, 2023 and December 31, 2022, respectively.

(2) The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions, of which $ 266 million and $ 240 million of the assets held in trust balance represents restricted cash and cash equivalents at March 31, 2023 and December 31, 2022, 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 2022 Annual Report) and derivative transactions (see Note 7).

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.

In addition, the Company’s investment in FHLB common stock, which is considered restricted until redeemed by the issuer, was $ 220 million and $ 201 million at redemption value at March 31, 2023 and December 31, 2022, respectively.

Variable Interest Entities

4 unchanged sentences

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

There were no material VIEs for which the Company has concluded that it is the primary beneficiary at either September 30, 2022 or December 31, 2021.

Brighthouse Financial, Inc.

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

Investments (continued)

There were no material VIEs for which the Company has concluded that it is the primary beneficiary at either March 31, 2023 or December 31, 2022.

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

March 31, 2023 December 31, 2022

Amount Maximum

5 unchanged sentences

Total $ 20,201 $ 22,840 $ 20,032 $ 22,962

Brighthouse Financial, Inc.

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

Investments (continued)

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

15 unchanged sentences

(i) the amount invested in debt or equity of the VIE and (ii) commitments to the VIE, as described in Note 12.

Brighthouse Financial, Inc.

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

Investments (continued)

Net Investment Income

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(In millions)

1 unchanged sentence

Fixed maturity securities $ 837 $ 718

Equity securities 1 1 2 3

Mortgage loans 239 203

2 unchanged sentences

Cash, cash equivalents and short-term investments 50 1

Other 20 13 52 32

Total investment income 1,150 1,192

2 unchanged sentences

_______________

(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.

Brighthouse Financial, Inc.

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

Investments (continued)

(1) Includes net investment income pertaining to other limited partnership interests of ($ 1 ) million and $ 212 million for the three months ended March 31, 2023 and 2022, respectively.

Net Investment Gains (Losses)

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(In millions)

3 unchanged sentences

Limited partnerships and LLCs — ( 16 )

Other ( 3 ) ( 9 ) ( 3 ) ( 9 )

Total net investment gains (losses) $ ( 96 ) $ ( 68 )

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.

Gains (losses) from foreign currency transactions included within net investment gains (losses) were $ 2 million and ($ 16 ) million for the three months ended March 31, 2023 and 2022, respectively.

Brighthouse Financial, Inc.

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

Investments (continued)

Sales or Disposals of Fixed Maturity Securities

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(In millions)

9 unchanged sentences

• Interest rate derivatives:

swaps, floors, caps, swaptions, futures and forwards;

swaps, floors, caps, swaptions and forwards;

• Foreign currency exchange rate derivatives:

1 unchanged sentence

• Equity market derivatives:

options, total return swaps and variance swaps;

options and total return swaps;

• Credit derivatives:

5 unchanged sentences

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

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

March 31, 2023 December 31, 2022

Primary Underlying Risk Exposure Gross

19 unchanged sentences

Equity index options Equity market 17,056 521 390 17,229 697 351

Equity variance swaps Equity market 281 9 1 281 9 1

Equity total return swaps Equity market 43,941 998 858 32,909 520 747

Hybrid options Equity market — — — 900 8 —

Total non-designated or non-qualifying derivatives 138,489 2,090 3,240 112,905 1,688 3,900

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 $ 142,534 $ 2,642 $ 3,253 $ 116,991 $ 2,284 $ 3,920

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.

Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both March 31, 2023 and December 31, 2022.

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;

(iii) derivatives that economically hedge MRBs that do not qualify for hedge accounting because the changes in estimated fair value of the MRBs 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.

2 unchanged sentences

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

Brighthouse Financial, Inc.

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

Derivatives (continued)

The amount and location of gains (losses), including earned income, recognized for derivatives and gains (losses) pertaining to hedged items reported 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)

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Derivatives Designated as Hedging Instruments:

11 unchanged sentences

Total $ ( 585 ) $ 10 $ 15 $ ( 40 )

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Derivatives Designated as Hedging Instruments:

11 unchanged sentences

Total $ ( 46 ) $ ( 7 ) $ 12 $ 19

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.

At March 31, 2023 and December 31, 2022, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions was less than one year and one year , respectively.

At March 31, 2023 and December 31, 2022, the balance in AOCI associated with cash flow hedges was $ 598 million and $ 638 million, respectively.

Credit Derivatives

5 unchanged sentences

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Rating Agency Designation of Referenced Credit Obligations (1) Estimated

32 unchanged sentences

(In millions)

September 30, 2022

March 31, 2023

Derivative assets $ 2,597 $ ( 1,997 ) $ ( 527 ) $ 73 $ ( 43 ) $ 30

14 unchanged sentences

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(In millions)

13 unchanged sentences

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

September 30, 2022

March 31, 2023

Fair Value Hierarchy Total Estimated

7 unchanged sentences

CMBS — 6,641 33 6,674

State and political subdivision — 3,831 — 3,831

ABS — 5,293 303 5,596

State and political subdivision — 3,949 — 3,949

Foreign government — 1,055 39 1,094

8 unchanged sentences

Total derivative assets — 2,608 34 2,642

Embedded derivatives within asset host contracts (2) — — 129 129

Market risk benefit assets — — 510 510

Separate account assets 20 87,420 — 87,440

Total assets $ 4,585 $ 162,275 $ 2,894 $ 169,754

Market risk benefit liabilities $ — $ — $ 10,729 $ 10,729

Derivative liabilities:

4 unchanged sentences

Total derivative liabilities — 3,252 1 3,253

Embedded derivatives within liability host contracts (2) — — 4,062 4,062

Embedded derivatives on index-linked annuities (2) — — 5,164 5,164

Total liabilities $ — $ 3,252 $ 15,894 $ 19,146

12 unchanged sentences

CMBS — 6,578 33 6,611

State and political subdivision — 4,835 — 4,835

ABS — 5,041 318 5,359

State and political subdivision — 3,799 — 3,799

Foreign government — 1,043 38 1,081

8 unchanged sentences

Total derivative assets — 2,247 37 2,284

Embedded derivatives within asset host contracts (2) — — 186 186

Market risk benefit assets — — 483 483

Separate account assets 29 84,936 — 84,965

Total assets $ 4,352 $ 157,390 $ 2,737 $ 164,479

Market risk benefit liabilities $ — $ — $ 10,389 $ 10,389

Derivative liabilities:

4 unchanged sentences

Total derivative liabilities — 3,918 2 3,920

Embedded derivatives within liability host contracts (2) — — 8,496 8,496

Embedded derivatives on index-linked annuities (2) — — 3,932 3,932

Total liabilities $ — $ 3,918 $ 14,323 $ 18,241

_______________

(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.

(1) Derivative assets are reported in other invested assets and derivative liabilities are reported in other liabilities.

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.

(2) Embedded derivative liabilities on index-linked annuities are reported in policyholder account balances .

Brighthouse Financial, Inc.

17 unchanged sentences

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

The Company did not have significant price adjustments during the nine months ended September 30, 2022.

The Company did not have significant price adjustments during the three months ended March 31, 2023.

Determination of Fair Value

40 unchanged sentences

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.

Brighthouse Financial, Inc.

1 unchanged sentence

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).

Market Risk Benefits

MRBs principally include guaranteed minimum benefits on variable annuity contracts including benefits reinsured related to these guarantees.

The estimated fair value of variable annuity guarantees accounted for as MRBs is determined based on the present value of projected future benefits less the present value of projected future fees attributable to the guarantees.

At policy inception, the Company determines an attributed fee ratio by solving for a percentage of projected future rider fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits.

To the extent the rider fees are insufficient, the Company may also include fees related to mortality and expense charges in the attributed fee ratio, provided the total fees included in the calculation do not exceed total contract fees and assessments collected from the contract holder.

Any additional fees not included in the attributed fee ratio are considered revenue and reported in universal life and investment-type product policy fees.

The attributed fee ratio is not updated in subsequent periods.

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

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

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

The valuation of MRBs includes an adjustment for the risk that the Company fails to satisfy its obligations, which is referred to as nonperformance risk.

The nonperformance risk adjustment is captured as an additional spread applied to the risk-free rate in determining the rate to discount the cash flows of the liability.

The spread over the risk-free rate is based on the Company’s creditworthiness taking into consideration publicly available information relating to spreads in the secondary market for Brighthouse Financial’s debt.

These observable spreads are then adjusted, as necessary, to reflect the financial strength ratings of the issuing insurance subsidiaries as compared to the credit rating of Brighthouse Financial.

The establishment of risk margins requires the use of significant actuarial judgment, including assumptions of the amount needed to cover the guarantees.

Actuarial assumptions are reviewed at least annually, and if they change significantly, the estimated fair value is adjusted through net income.

Capital market inputs used in the measurement of variable annuity guarantees are updated quarterly through net income, except for the change attributable to the Company’s nonperformance risk, which is reported in OCI.

Embedded Derivatives

Embedded derivatives include crediting rates associated with index-linked annuity contracts.

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

The crediting rates associated with these features are embedded derivatives which are measured at estimated fair value separately from the host fixed annuity contract.

These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets.

1 unchanged sentence

The valuation of these embedded derivatives also includes the establishment of a risk margin, as well as changes in nonperformance risk.

Actuarial assumptions including policyholder behavior and expectations for renewals at the end of the term period are reviewed at least annually, and if they change significantly, the estimated fair value is adjusted through net income.

Capital market inputs used in the measurement of crediting rate embedded derivatives are updated quarterly through net income.

Brighthouse Financial, Inc.

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

Fair Value (continued)

Transfers Into or Out of Level 3:

3 unchanged sentences

This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.

Brighthouse Financial, Inc.

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

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

March 31, 2023 December 31, 2022 Impact of

Increase in Input

1 unchanged sentence

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)

Market Risk Benefits

Variable annuity guaranteed minimum benefits • Option pricing techniques • Mortality rates 0.04 % - 12.90 % 0.04 % - 12.90 % Decrease (1)

• Lapse rates 1.00 % - 24.11 % 1.00 % - 24.11 % Decrease (2)

3 unchanged sentences

• Nonperformance risk spread 1.08 % - 2.22 % ( 2.73 )% - 4.52 % Decrease (6)

Embedded Derivatives

Index-linked annuity crediting rates • Option pricing techniques • Mortality rates 0.03 % - 9.24 % 0.03 % - 9.24 % Decrease (1)

• Lapse rates 1.00 % - 62.30 % 1.00 % - 62.30 % Decrease (2)

• Withdrawal rates 0.50 % - 9.00 % 0.50 % - 9.00 % (4)

• Nonperformance risk spread 0.73 % - 2.12 % 0.00 % - 1.98 % 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.

The range shown reflects the mortality rate for policyholders between 35 and 90 years old.

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.

(2) The lapse rate range reflects base lapse rates for major product categories for duration 1-20.

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.

For variable annuity guarantees, 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.

Brighthouse Financial, Inc.

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

Fair Value (continued)

(3) The utilization rate assumption for variable annuity guarantees 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.

4 unchanged sentences

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.

For variable annuity GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees.

For variable annuity 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.

For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing MRBs.

(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.

Brighthouse Financial, Inc.

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

Fair Value (continued)

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 MRB or embedded derivative.

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

3 unchanged sentences

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 $ — $ —

Brighthouse Financial, Inc.

1 unchanged sentence

Fair Value (continued)

The changes in assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (excluding MRBs disclosed in Note 4) were summarized as follows:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

4 unchanged sentences

Investments Net

Derivatives (2) Net Embedded

Derivatives (3) Separate

Account Assets (4)

Derivatives (2) Embedded Derivatives on Index-Linked Annuities

(In millions)

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Balance, beginning of period

1 unchanged sentence

Total realized/unrealized gains (losses) included in net income (loss) (3) (4) 1 ( 1 ) — ( 2 ) — — ( 1,090 )

( 6 ) — — 1 — ( 11 ) 4,605 —

Total realized/unrealized gains (losses) included in AOCI

7 unchanged sentences

Balance, end of period $ 1,936 $ 350 $ 39 $ 25 $ — $ 33 $ ( 5,164 )

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Balance, beginning of period

1 unchanged sentence

Total realized/unrealized gains (losses) included in net income (loss) (3) (4) — — — — — ( 10 ) 763

— — — — — 10 ( 505 ) —

Total realized/unrealized gains (losses) included in AOCI

7 unchanged sentences

Balance, end of period $ 1,618 $ 194 $ 23 $ 13 $ — $ 30 $ ( 5,674 )

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2022 (9)

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2023 (7)

$ 1 $ ( 1 ) $ — $ ( 2 ) $ — $ — $ ( 1,166 )

Changes in unrealized gains (losses) included in OCI for the instruments still held at September 30, 2022 (9)

Changes in unrealized gains (losses) included in OCI for the instruments still held at March 31, 2023 (7)

$ 23 $ 1 $ 1 $ — $ — $ ( 1 ) $ —

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

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2022 (7)

$ — $ — $ — $ — $ — $ ( 10 ) $ 687

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

Changes in unrealized gains (losses) included in OCI for the instruments still held at March 31, 2022 (7)

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

2 unchanged sentences

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).

Brighthouse Financial, Inc.

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

Fair Value (continued)

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

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

(3) Amortization of premium/accretion of discount is included in 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).

2 unchanged sentences

(4) Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.

Brighthouse Financial, Inc.

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

Fair Value (continued)

(5) Items purchased/issued and then sold/settled in the same period are excluded from the rollforward.

11 unchanged sentences

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

September 30, 2022

March 31, 2023

Fair Value Hierarchy

24 unchanged sentences

Separate account liabilities $ 1,024 $ — $ 1,024 $ — $ 1,024

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.

Preferred Stock

Preferred stock shares authorized, issued and outstanding were as follows at both September 30, 2022 and December 31, 2021:

Preferred stock shares authorized, issued and outstanding were as follows at both March 31, 2023 and December 31, 2022:

Shares Authorized Shares Issued Shares Outstanding

9 unchanged sentences

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

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

Three Months Ended March 31,

Series Per Share Aggregate Per Share Aggregate

(In millions, except per share data)

4 unchanged sentences

Total $ 26 $ 27

Common Stock Repurchase Program

During the three months ended March 31, 2023 and 2022, BHF repurchased 1,200,124 and 2,398,636 shares, respectively, of its common stock through open market purchases pursuant to 10b5-1 plans for $ 62 million and $ 127 million, respectively.

At March 31, 2023, BHF had $ 231 million remaining under its common stock repurchase program.

Brighthouse Financial, Inc.

1 unchanged sentence

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

Investment Gains

(Losses), Net of

Related Offsets (1) Unrealized

Gains (Losses)

on Derivatives Foreign

Adjustments Defined Benefit Plans Adjustment Total

(In millions)

Balance at June 30, 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

Investment Gains

(Losses), Net of

Related Offsets (1) Unrealized

Gains (Losses)

on Derivatives Foreign

Adjustments Defined Benefit Plans Adjustment Total

(In millions)

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

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

Deferred income tax benefit (expense) (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

Brighthouse Financial, Inc.

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

Equity (continued)

Nine Months Ended September 30, 2022

Investment Gains

(Losses), Net of

Related Offsets (1) Unrealized

Three Months Ended March 31, 2023

Unrealized Investment Gains (Losses), Net of Related Offsets (1) Unrealized

Gains (Losses)

on Derivatives Foreign

Adjustments Defined Benefit Plans Adjustment Total

on Derivatives Changes in Nonperformance Risk on Market Risk Benefits Changes in Discount Rates on the Liability for Future Policy Benefits Other (2) Total

(In millions)

7 unchanged sentences

Amounts reclassified from AOCI, net of income tax 48 — — — 2 50

Balance at September 30, 2022

Balance at March 31, 2023

$ ( 5,028 ) $ 472 $ ( 1,383 ) $ 706 $ ( 55 ) $ ( 5,288 )

Nine Months Ended September 30, 2021

Investment Gains

(Losses), Net of

Related Offsets (1) Unrealized

Three Months Ended March 31, 2022

Unrealized Investment Gains (Losses), Net of Related Offsets (1) Unrealized

Gains (Losses)

on Derivatives Foreign

Adjustments Defined Benefit Plans Adjustment Total

on Derivatives Changes in Nonperformance Risk on Market Risk Benefits Changes in Discount Rates on the Liability for Future Policy Benefits Other (2) Total

(In millions)

7 unchanged sentences

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

Balance at September 30, 2021

Balance at March 31, 2022

$ 459 $ 329 $ ( 2,496 ) $ ( 776 ) $ ( 57 ) $ ( 2,541 )

__________________

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

(1) See Note 6 for information on offsets to investments related to future policy benefits.

(2) Includes OCI related to foreign currency translation and defined benefit plan gains and losses.

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

6 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(In millions)

26 unchanged sentences

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

Other revenues consisted primarily of 12b-1 fees of $ 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.

Other revenues consisted primarily of 12b-1 fees of $ 67 million and $ 82 million for the three months ended March 31, 2023 and 2022, respectively, of which substantially all were reported in the Annuities segment.

Brighthouse Financial, Inc.

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(In millions)

7 unchanged sentences

Interest expense on debt 38 38

Other 18 17 211 59

Total other expenses $ 478 $ 509

Capitalization of DAC

See Note 5 for additional information on the capitalization of DAC.

Earnings Per Common Share

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(In millions, except share and per share data)

6 unchanged sentences

Diluted $ ( 7.72 ) $ 20.11

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.

For the three months ended March 31, 2023, basic loss per common share equaled diluted loss per common share.

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

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

Brighthouse Financial, Inc.

16 unchanged sentences

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

It is possible that some matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated at September 30, 2022.

It is possible that some matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated at March 31, 2023.

Matters as to Which an Estimate Can Be Made

1 unchanged sentence

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

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.

In addition to amounts accrued for probable and reasonably estimable losses, as of March 31, 2023, 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

15 unchanged sentences

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 also alleges that cost of insurance charges were based on improper factors and should have decreased over time due to improving mortality but did not .

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.

2 unchanged sentences

Plaintiff was granted leave to amend the complaint.

On January 18, 2023, the plaintiff filed a motion on consent to amend the second amended class action complaint to narrow the scope of the class sought to those persons who own or owned life insurance policies issued in Georgia.

The motion was granted on January 23, 2023, and the third amended class action complaint was filed on January 23, 2023.

The Company intends to vigorously defend this matter.

4 unchanged sentences

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 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 were based on improper factors and 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.

10 unchanged sentences

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.

1 unchanged sentence

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.

Brighthouse Financial, Inc.

1 unchanged sentence

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.

As of March 31, 2023, 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.

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.

The amounts of these mortgage loan commitments were $ 318 million and $ 247 million at March 31, 2023 and December 31, 2022, 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.

The amounts of these unfunded commitments were $ 1.6 billion and $ 1.9 billion at March 31, 2023 and December 31, 2022, respectively.

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

8 unchanged sentences

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

The Company’s recorded liabilities were $ 1 million at both September 30, 2022 and December 31, 2021 for indemnities, guarantees and commitments.

The Company’s recorded liabilities were $ 1 million at both March 31, 2023 and December 31, 2022 for indemnities, guarantees and commitments.

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

What changed 10-Q

Item 1. Financial Statements