What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-22 compared with 2023-02-23 · 912 added, 532 removed, 2314 unchanged (38% of the section changed)

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Note 1 — Business, Basis of Presentation and Summary of Significant Accounting Policies

Note 2 — ASU 2018-12 Transition

Note 3 — Segment Information

Note 3 — Insurance

Note 4 — Deferred Policy Acquisition Costs, Value of Business Acquired and Deferred Sales Inducements

Note 4 — Insurance Liabilities

Note 5 — Market Risk Benefits

Note 6 — Separate Accounts

Note 7 — Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles

Note 8 — Reinsurance

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Note 18 — Contingencies, Commitments and Guarantees

Note 19 — Quarterly Results of Operations (Unaudited)

Note 20 — Subsequent Event

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Notes 1 and 2 to the financial statements, the Company has changed its method of accounting for long-duration contracts due to the adoption of ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts (“ASU 2018-12”), effective January 1, 2023, with a transition date of January 1, 2021.

Basis for Opinion

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Liability for Future Policy Benefits – Refer to Notes 1 and 3 to the consolidated financial statements

Certain Assumptions Used in the Valuation of Liability for Future Policy Benefits – Refer to Notes 1 and 4 to the financial statements

Critical Audit Matter Description

As of December 31, 2022, the liability for future policy benefits totaled $41.6 billion, and included benefits related to variable annuity contracts with guaranteed benefit riders and universal life insurance contracts with secondary guarantees.

Management regularly reviews its assumptions supporting the estimates of these actuarial liabilities and differences between actual experience and the assumptions used in pricing the policies and guarantees may require a change to the assumptions

recorded at inception as well as an adjustment to the related liabilities.

Updating such assumptions can result in variability of profits or the recognition of losses.

Given the future policy benefit obligation for these contracts is sensitive to changes in the assumptions related to general account and separate account investment returns, and policyholder behavior including mortality, lapses, premium persistency, benefit election and utilization, and withdrawals, auditing management’s selection of these assumptions involves an especially high degree of estimation.

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

The Company establishes a liability for future policy benefits (“LFPB”) for nonparticipating traditional and limited-payment contracts and the additional insurance liabilities for universal life-type contracts with secondary guarantees.

Management regularly reviews its cash flow assumptions supporting the estimates of these actuarial liabilities and, if such assumptions change significantly, the associated liability is adjusted.

The measurement of LFPBs can be significantly impacted by changes in economic assumptions related to market interest rates and the general account rate of return and changes in assumptions for policyholder behavior including premium persistency, mortality and lapses.

Given the future policy benefit obligation for certain contracts is sensitive to changes in these economic and policyholder behavior assumptions and the significant uncertainty inherent in estimating these actuarial liabilities, we identified management’s evaluation of these assumptions in the valuation of certain LFPBs as a critical audit matter.

This required a high degree of auditor judgment and an increased extent of effort, including the involvement of our actuarial specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the updating of assumptions by management included the following, among others:

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

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

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

Our audit procedures related to these assumptions in the valuation of certain LFPBs included the following, among others:

• We tested the effectiveness of management’s controls over the assumption review process, including those over the selection of the significant economic and policyholder behavior assumptions.

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

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

• We evaluated the methods and significant assumptions used by management to identify potential bias.

• We evaluated whether the significant assumptions used were consistent with evidence obtained in other areas of the audit.

Deferred Policy Acquisition Costs (DAC) – Refer to Notes 1 and 4 to the consolidated financial statements

Critical Audit Matter Description

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

These deferred costs, amounting to $5.7 billion as of December 31, 2022, are amortized over the expected life of the policy contract in proportion to actual and expected future gross profits, premiums, or margins.

For deferred annuities and universal life contracts, expected future gross profits utilized in the amortization calculation are derived using assumptions such as separate account and general account investment returns, mortality, in-force or persistency, benefit elections and utilization, and withdrawals.

The assumptions used in the calculation of expected future gross profits are reviewed at least annually.

Given the significance of the estimates and uncertainty associated with the long-term assumptions utilized in the determination of expected future gross profits, auditing management’s determination of the appropriateness of the assumptions used in the calculation of DAC amortization involves an especially high degree of estimation.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s determination of DAC amortization included the following, among others:

• We tested the effectiveness of management’s controls related to the determination of expected future gross profits, including those over management’s review that the significant assumptions utilized related to separate account and general account investment returns, mortality, in-force or persistency, benefit elections and utilization, and withdrawals represented a reasonable estimate.

• With assistance from our actuarial specialists, we evaluated the data included in the estimate provided by the Company’s actuaries and the methodology utilized, and evaluated the process used by the Company to determine whether the significant assumptions used were reasonable estimates based on the Company’s own experience and industry studies.

• We inquired of the Company’s actuarial specialists whether there were any changes in the methodology utilized during the year in the determination of expected future gross profits.

• We inspected supporting documentation underlying the Company’s experience studies and, utilizing our actuarial specialists, independently recalculated the amortization for a sample of policies, and compared our estimates to management’s estimates.

• We evaluated whether the significant assumptions used by the Company were consistent with evidence obtained in other areas of the audit and to identify potential bias.

• We evaluated the sufficiency of the Company’s disclosures related to DAC amortization.

Embedded Derivative Liabilities Related to Variable Annuity Guarantees – Refer to Notes 1, 7, and 8 to the consolidated financial statements.

Certain Assumptions Used in the Valuation of Market Risk Benefits – Refer to Notes 1 , 5, and 11 to the financial statements

Critical Audit Matter Description

The Company sells index-linked annuities and variable annuity products with guaranteed minimum benefits, some of which are embedded derivatives that are required to be bifurcated from the host contract, separately accounted for, and measured at fair value.

As of December 31, 2022, the fair value of the embedded derivative liability associated with certain of the Company’s annuity contracts was $5.4 billion.

Management utilizes various assumptions in order to measure the embedded liability including expectations concerning policyholder behavior, mortality and risk margins, as well as changes in the Company’s own nonperformance risk.

These assumptions are reviewed at least annually by management, and if they change significantly, the estimated fair value is adjusted by a cumulative charge or credit to net income.

Given the embedded derivative liability is sensitive to changes in these assumptions, auditing management’s selection of these assumptions involves an especially high degree of estimation.

Market risk benefits are measured at fair value and separately presented on the consolidated balance sheet.

The Company estimates market risk benefit assets and liabilities using significant judgment including discount rate assumptions, nonperformance risk, and actuarially determined assumptions including policyholder behavior, mortality and risk margins.

Given the sensitivity of certain market risk benefits to changes in these assumptions and the significant uncertainty inherent in estimating the market risk benefits, we identified management’s evaluation of these assumptions in the valuation of certain market risk benefits as a critical audit matter.

This required a high degree of auditor judgment and an increased extent of effort, including the involvement of our actuarial and fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the assumptions selected by management for the embedded derivative liability included the following, among others:

• We tested the effectiveness of management’s controls over the embedded derivative liability, including those over the selection of the significant assumptions related to policyholder behavior, mortality, risk margins and the Company’s nonperformance risk.

• With the assistance of our actuarial specialists, we evaluated the appropriateness of the significant assumptions, tested the completeness and accuracy of the underlying data and the mathematical accuracy of the Company’s valuation model.

• We evaluated the reasonableness of the Company’s assumptions by comparing those selected by management to those independently derived by our actuarial specialists, drawing upon standard actuarial and industry practice.

• We evaluated the methods and assumptions used by management to identify potential bias in the determination of the embedded liability.

Our audit procedures related to these assumptions in the valuation of certain market risk benefits included the following, among others:

• We tested the effectiveness of management’s controls over the assumption review process, including those over the selection of the significant assumptions related to policyholder behavior, mortality and risk margins, as well as changes in nonperformance risk.

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

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

• We evaluated the reasonableness of the Company’s assumptions by comparing those selected by management to those independently derived by our fair value and actuarial specialists, drawing upon standard actuarial and industry practice.

• We evaluated the methods and assumptions used by management to identify potential bias in the determination of the market risk benefits.

• We evaluated whether the assumptions used were consistent with evidence obtained in other areas of the audit.

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Deferred income tax asset 1,893 1,736

Market risk benefit assets 656 483

Other assets 370 401

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Policyholder account balances 81,068 73,527

Market risk benefit liabilities 10,323 10,389

Other policy-related balances 3,836 4,098

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Long-term debt 3,156 3,156

Current income tax payable — 62

Deferred income tax liability — 1,062

Other liabilities 8,439 7,057

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Total revenues 4,117 6,873 4,976

Policyholder benefits and claims 4,165 3,443 5,711

Policyholder benefits and claims (including liability remeasurement gains (losses) of ($ 234 ), $ 137 , ($ 50 ), respectively)

2,676 2,193 2,746

Interest credited to policyholder account balances 1,825 1,338 1,269

Amortization of deferred policy acquisition costs and value of business acquired 620 629 637

Change in market risk benefits ( 1,507 ) ( 4,104 ) ( 4,134 )

Other expenses 1,977 2,085 2,449

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Unrealized gains (losses) on derivatives ( 287 ) 309 156

Changes in instrument-specific credit risk on market risk benefits ( 636 ) 2,344 ( 634 )

Changes in discount rates on the liability for future policy benefits ( 380 ) 4,075 1,242

Foreign currency translation adjustments 18 ( 22 ) 1

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Balance at December 31, 2021 — 1 14,154 ( 4,274 ) ( 1,543 ) 47 8,385 65 8,450

Preferred stock issuances — 339 339 339

Treasury stock acquired in connection with share repurchases ( 488 ) ( 488 ) ( 488 )

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Universal life and investment-type product policy fees ( 2,295 ) ( 2,435 ) ( 2,980 )

Change in market risk benefits, net

( 875 ) ( 3,335 ) ( 3,271 )

Change in accrued investment income ( 215 ) ( 113 ) ( 44 )

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

Reclassifications

Certain amounts in the prior years’ consolidated financial statements and related footnotes thereto have been reclassified to conform with the 2023 presentation as discussed throughout the Notes to the Consolidated Financial Statements.

See “— Adoption of New Accounting Pronouncements” for discussion of the adoption of new guidance on long-duration contracts as of January 1, 2023, parts of which were retrospectively applied to prior periods presented in the consolidated financial statements.

Summary of Significant Accounting Policies

Future Policy Benefit Liabilities and Policyholder Account Balances

The Company establishes liabilities for future amounts payable under insurance policies.

Insurance liabilities are generally equal to the present value of future expected benefits to be paid, reduced by the present value of future expected net premiums.

Assumptions used to measure the liability are based on the Company’s experience and include a margin for adverse deviation.

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

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

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

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

To assess whether a premium deficiency exists, the Company groups insurance contracts based on the manner acquired, serviced and measured for profitability.

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

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

When a premium deficiency exists related to unrealized gains and losses, any reductions in deferred acquisition costs or increases in insurance liabilities are recorded to other comprehensive income (loss) (“OCI”).

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 (“MRB”) 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.

Brighthouse Financial, Inc.

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

Policyholder account balances primarily relate to customer deposits on universal life insurance and deferred annuity contracts and are equal to the sum of deposits, plus interest credited, less charges and withdrawals.

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

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

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 the 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 grade 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.

Additional Liabilities for ULSG

The Company establishes a liability in addition to the account balance for ULSG.

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 universal life with secondary guarantees (“ULSG”) determined by projecting future earnings and establishing a liability to offset losses that are expected to occur in later years.

Changes in ULSG liabilities are recorded to net income, except for the effects of unrealized gains and losses, which are recorded to OCI.

Recognition of Insurance Revenues and Deposits

Premiums related to traditional life insurance and annuity 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, any excess profit is deferred and recognized into earnings in proportion to the amount of expected future benefit payments.

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.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

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

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

MRBs are contracts or contract features that provide protection to the policyholder from capital markets risks 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 5 for more information on the effect of changes in inputs and assumptions on the measurement of MRBs and Note 11 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.

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 11.

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.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

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

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 and amortized over the life of the contracts.

Premiums, policy fees, policyholder benefits and expenses are reported net of reinsurance.

Deferred Policy Acquisition Costs, Value of Business Acquired and Deferred Sales Inducements

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

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.

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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 related to term non-participating whole life insurance over the appropriate premium paying period in proportion to the actual and expected future gross premiums that were set at contract issue.

The expected premiums are based upon the premium requirement of each policy and assumptions for mortality, in-force or persistency and investment returns at policy issuance, or policy acquisition (as it relates to VOBA), include provisions for adverse deviation, and are consistent with the assumptions used to calculate future policy benefit liabilities.

These assumptions are not revised after policy issuance or acquisition unless the DAC or VOBA balance is deemed to be unrecoverable from future expected profits.

The Company amortizes DAC and VOBA on deferred annuities and universal life insurance contracts over the estimated lives of the contracts in proportion to actual and expected future gross profits.

The amortization includes interest based on rates in effect at inception or acquisition of the contracts.

The amount of future gross profits is dependent principally upon investment returns in excess of the amounts credited to policyholders, mortality, in-force or persistency, benefit elections and utilization, and withdrawals.

When significant negative gross profits are expected in future periods, the Company substitutes the amount of insurance in-force for expected future gross profits as the amortization basis for DAC.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

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

Assumptions for DAC and VOBA are reviewed at least annually, and if they change significantly, the cumulative DAC and VOBA amortization is re-estimated and adjusted by a cumulative charge or credit to net income.

When expected future gross profits are below those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to net income.

The opposite result occurs when the expected future gross profits are above the previously estimated expected future gross profits.

The Company updates expected future gross profits to reflect the actual gross profits for each period, including changes to its nonperformance risk related to embedded derivatives and the actual amount of business remaining in-force.

When actual gross profits exceed those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to net income.

The opposite result occurs when the actual gross profits are below the previously expected future gross profits.

DAC and VOBA balances on deferred annuities and universal life insurance contracts are also adjusted to reflect the effect of investment gains and losses and certain embedded derivatives (including changes in nonperformance risk).

These adjustments can create fluctuations in net income from period to period.

Changes in DAC and VOBA balances related to unrealized gains and losses are recorded to OCI.

DAC and VOBA balances and amortization for variable contracts can be significantly impacted by changes in expected future gross profits related to projected separate account rates of return.

The Company’s practice of determining changes in separate account returns assumes that long-term appreciation in equity markets is only changed when sustained interim deviations are expected.

The Company monitors these events and only changes the assumption when its long-term expectation changes.

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 as net income and any new acquisition costs associated with the replacement contract are deferred.

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”) which are included in other assets.

The Company defers sales inducements and amortizes them over the life of the policy using the same methodology and assumptions used to amortize DAC.

The amortization of DSI is included in policyholder benefits and claims.

Each year, or more frequently if circumstances indicate a possible impairment exists, the Company reviews DSI to determine whether the assets are impaired.

The Company also has intangible assets representing deferred sales inducements (“DSI”), which are included in other assets, and unearned revenue liabilities, which are 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.

The Company enters into reinsurance arrangements pursuant to which it cedes certain insurance risks to unaffiliated reinsurers.

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Certain funds withheld arrangements may also contain embedded derivatives measured at fair value that are related to the investment return on the assets withheld.

The Company accounts for assumed reinsurance similar to directly written business, except for guaranteed minimum income benefits (“GMIB”), where a portion of the directly written GMIBs are accounted for as insurance liabilities, but the associated reinsurance agreements contain embedded derivatives.

Variable Annuity Guarantees

The Company issues certain variable annuity products with guaranteed minimum benefits that provide the policyholder a minimum return based on their initial deposit (the “Benefit Base”) less withdrawals.

In some cases, the Benefit Base may be increased by additional deposits, bonus amounts, accruals or optional market value step-ups.

Certain of the Company’s variable annuity guarantee features are accounted for as insurance liabilities and recorded in future policy benefits while others are accounted for at fair value as embedded derivatives and recorded in policyholder account balances.

Generally, a guarantee is accounted for as an insurance liability if the guarantee is paid only upon either the occurrence of a specific insurable event, or annuitization.

Alternatively, a guarantee is accounted for as an embedded derivative if a guarantee is paid without requiring the occurrence of specific insurable event, or the policyholder to annuitize, that is, the policyholder can receive the guarantee on a net basis.

In certain cases, a guarantee may have elements of both an insurance liability and an embedded derivative and in such cases the guarantee is split and accounted for under both models.

Further, changes in assumptions, principally involving policyholder behavior, can result in a change of expected future cash outflows of a guarantee between portions accounted for as insurance liabilities and portions accounted for as embedded derivatives.

Guarantees accounted for as insurance liabilities in future policy benefits include guaranteed minimum death benefits (“GMDB”), the life contingent portion of the guaranteed minimum withdrawal benefits (“GMWB”) and the portion of the GMIBs that require annuitization, as well as the life contingent portion of the expected annuitization when the policyholder is forced into an annuitization upon depletion of their account value.

These insurance liabilities are accrued over the accumulation phase of the contract in proportion to actual and future expected policy assessments based on the level of guaranteed minimum benefits generated using multiple scenarios of separate account returns.

The scenarios are based on best estimate assumptions consistent with those used to amortize DAC.

When current estimates of future benefits exceed those previously projected or when current estimates of future assessments are lower than those previously projected, liabilities will increase, resulting in a current period charge to net income.

The opposite result occurs when the current estimates of future benefits are lower than those previously projected or when current estimates of future assessments exceed those previously projected.

At each reporting period, the actual amount of business remaining in-force is updated, which impacts expected future assessments and the projection of estimated future benefits resulting in a current period charge or increase to earnings.

Guarantees accounted for as embedded derivatives in policyholder account balances include the non-life contingent portion of GMWBs, guaranteed minimum accumulation benefits (“GMAB”), and for GMIBs the non-life contingent portion of the expected annuitization when the policyholder is forced into an annuitization upon depletion of their account value, as well as the guaranteed principal option.

The estimated fair values of guarantees accounted for as embedded derivatives are determined based on the present value of projected future benefits minus the present value of projected future fees.

At policy inception, the Company attributes to the embedded derivative a portion of the projected future guarantee fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits.

Any additional fees are considered revenue and are reported in universal life and investment-type product policy fees.

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

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

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

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

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

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

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

Assumptions for all variable guarantees are reviewed at least annually, and if they change significantly, the estimated fair value is adjusted by a cumulative charge or credit to net income.

Index-linked Annuities

The Company issues and assumes through reinsurance index-linked annuities.

The crediting rate associated with index-linked annuities is accounted for at fair value as an embedded derivative.

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.

In subsequent periods, the embedded derivative is remeasured at fair value while the reduction in initial deposit is accreted back up to the initial deposit over the estimated life of the contract.

Embedded derivatives related to funds withheld arrangements are presented within policyholder account balances on the consolidated balance sheets, with changes in the estimated fair value reported in net derivative gains (losses).

Reinsurance arrangements may also contain features classified as MRBs, including reinsurance of guaranteed minimum benefits associated with variable annuity contracts.

The Company accounts for assumed reinsurance similar to directly written business.

Net Investment Income and Net Investment Gains (Losses)

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The Company’s short-term investments generally involve large dollar amounts that turn over quickly and have short maturities.

For the year ended December 31, 2022, gross cash receipts from sales and purchases of short-term investments were $ 4.9 billion and $ 4.1 billion, respectively.

For the years ended December 31, 2023, 2022 and 2021, cash proceeds from sales, maturities and repayments of short-term investments were $ 4.2 billion, $ 4.9 billion and $ 6.3 billion, respectively.

For the years ended December 31, 2023, 2022 and 2021, cash payments on purchases of short-term investments were $ 4.2 billion, $ 4.1 billion and $ 4.9 billion, respectively.

Other Invested Assets

Other invested assets consist principally of freestanding derivatives with positive estimated fair values which are described in “— Derivatives” below.

Securities Lending Program

Securities lending transactions whereby blocks of securities are loaned to third parties, primarily brokerage firms and commercial banks, are treated as financing arrangements and the associated liability is recorded at the amount of cash received.

Income and expenses associated with securities lending transactions are reported as investment income and investment expense, respectively, in net investment income.

Brighthouse Financial, Inc.

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

Securities Lending Program

Income and expenses associated with securities lending transactions are reported as investment income and investment expense, respectively, in net investment income.

The Company obtains collateral at the inception of the loan, usually cash, in an amount generally equal to 102% of the estimated fair value of the securities loaned and maintains it at a level greater than or equal to 100% for the duration of the loan.

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Embedded Derivatives

The Company has certain insurance and reinsurance contracts that contain embedded derivatives which are required to be separated from their host contracts and reported as derivatives.

These host contracts include:

variable annuities with guaranteed minimum benefits, including GMWBs, GMABs and certain GMIBs;

index-linked annuities that are directly written or assumed through reinsurance;

and ceded reinsurance of variable annuity GMIBs.

Embedded derivatives within asset host contracts are reported in premiums, reinsurance and other receivables.

Embedded derivatives within liability host contracts are reported in policyholder account balances.

Changes in the estimated fair value of the embedded derivative are reported in net derivative gains (losses).

See “— Variable Annuity Guarantees,” “— Index-Linked Annuities” and “— Reinsurance” for additional information on the accounting policies for embedded derivatives bifurcated from variable annuity and reinsurance host contracts.

The Company has index-linked annuities that are directly written or assumed through reinsurance contracts that contain embedded derivatives which are required to be separated from their host contracts and reported as derivatives.

Certain funds withheld arrangements associated with reinsurance may also contain embedded derivatives.

See “— Insurance Contract Obligations” and “— Reinsurance” for additional information on the accounting policies for embedded derivatives.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

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When making such determination, the Company considers many factors, including the jurisdiction in which the deferred tax asset was generated, the length of time that carryforward can be utilized in the various taxing jurisdictions, future taxable income exclusive of reversing temporary differences and carryforwards, future reversals of existing taxable temporary differences, taxable income in prior carryback years, tax planning strategies and the nature, frequency, and amount of cumulative financial reporting income and losses in recent years.

On August 16, 2022, the Inflation Reduction Act was signed into law by President Biden.

The Inflation Reduction Act establishes a 15% corporate alternative minimum tax (“CAMT”) for corporations whose average annual adjusted financial statement income for any consecutive three–tax year period ending after December 31, 2021, and preceding the tax year exceeds $1 billion.

The Inflation Reduction Act also establishes a one percent excise tax on stock repurchases made by publicly traded U.S.

corporations.

Both provisions are effective for tax years beginning after December 31, 2022.

The Company elects not to consider any future effects resulting from potential applicability of the CAMT when assessing the valuation allowance for regular deferred taxes.

The Inflation Reduction Act, which was enacted in 2022, established a 15% corporate alternative minimum tax (“CAMT”) for corporations whose average annual adjusted financial statement income for any consecutive three–tax year period ending after December 31, 2021, and preceding the tax year exceeds $1.0 billion.

The Company elects not to consider any future effects resulting from applicability of the CAMT when assessing the valuation allowance for regular deferred tax assets.

The Company may be required to change its provision for income taxes when estimates used in determining valuation allowances on deferred tax assets significantly change or when receipt of new information indicates the need for adjustment in valuation allowances.

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Cash equivalents are stated at estimated fair value or amortized cost, which approximates estimated fair value.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

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

Employee Benefit Plans

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Brighthouse Services and NELICO are both indirect wholly-owned subsidiaries.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

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

Actuarial gains and losses result from differences between the actual experience and the assumed experience on plan assets or PBO during a particular period and are recorded in accumulated other comprehensive income (loss) (“AOCI”).

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The Company considers the applicability and impact of all ASUs.

There were no significant ASUs adopted as of December 31, 2022.

Future Adoption of New Accounting Pronouncements

Except as noted below, there were no significant ASUs adopted during the year ended December 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):

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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 reported separately on the consolidated balance sheets as market risk benefits (“MRB”).

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

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

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

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

(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 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 will be recognized as a revision to future amortization amounts.

(5) There will be a significant increase in required disclosures, including disaggregated roll-forwards 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 reported 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.

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.

Brighthouse Financial, Inc.

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

LDTI will have a significant impact on the Company’s financial statements upon adoption and is expected to 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 adoption as of January 1, 2021 (the transition date) will be to reduce opening stockholders’ equity by $ 8 billion — $ 10 billion, and total stockholders’ equity excluding accumulated other comprehensive income by $ 5 billion — $ 6 billion.

The impact of LDTI to total stockholders’ equity as of December 31, 2021 is estimated to be a reduction of $ 6 billion — $ 8 billion, and a reduction to total stockholders’ equity excluding accumulated other comprehensive income of $ 3 billion — $ 4 billion.

The impact of LDTI on net income for the year ended December 31, 2021 is estimated to be an increase of $ 1 billion — $ 2 billion.

The changes from the adoption of LDTI are primarily driven by the MRB changes and to a lesser extent the requirement to update the discount rate quarterly in the measurement of the liability for traditional long-duration contracts.

Based on prevailing interest rates at December 31, 2022, the Company expects the impact of LDTI to total stockholders’ equity as of December 31, 2022 to be significantly lower as compared to such impact as of 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 preparing financial disclosures.

Implementation remains in process as of December 31, 2022 as the Company continues to refine its internal controls and processes in advance of formal implementation for the reporting of first quarter of 2023 results.

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 AOCI.

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

Future Adoption of New Accounting Pronouncements

In November 2023, the FASB issued new guidance on Segment Reporting Disclosures (ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures ).

This ASU updates reportable segment disclosures primarily through enhanced disclosures about significant segment expenses.

This ASU does not change how a company identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments.

This ASU is effective for fiscal years starting January 1, 2024, and for interim periods starting January 1, 2025, and will be applied on a retrospective basis.

The Company is currently evaluating the impact of this guidance on its financial statements.

In December 2023, the FASB issued new guidance on Income Tax Disclosures (ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures ).

This ASU updates the required income tax disclosures to include disclosure of income taxes paid disaggregated by jurisdiction and greater disaggregation of information in the required rate reconciliation.

This ASU is effective for fiscal years starting January 1, 2025, and will be applied on a prospective basis.

The Company is currently evaluating the impact of this guidance on its financial statements.

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

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.

In aggregate, the additional spread applied to the risk-free rate decreased from contract inception to the transition date, which had a negative impact on equity.

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.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

ASU 2018-12 Transition (continued)

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

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

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

Adjustment for cumulative effect of changes in nonperformance risk since issuance

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 Consolidated Balance Sheets and Consolidated Statements of Operations.

See Notes 4, 5, 6 and 7 for more information.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

ASU 2018-12 Transition (continued)

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

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

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

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

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.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Segment Information (continued)

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.

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

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

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Segment Information (continued)

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.

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• 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 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 (“Investment Hedge Adjustments”).

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

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

• Change in MRBs;

• Change in fair value of the crediting rate on experience-rated contracts (“Market Value Adjustments”).

The provision for income tax related to adjusted earnings is calculated using the statutory tax rate of 21%, net of impacts related to the dividends received deduction, tax credits and current period non-recurring items.

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 consolidated financial statements, except for the adjustments to calculate adjusted earnings described above.

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

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Segment Information (continued)

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

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Net investment gains (losses) ( 246 )

Net derivative gains (losses) 304

Other adjustments to net income (loss) ( 1,012 )

Net derivative gains (losses), excluding investment hedge adjustments of $ 105

Change in market risk benefits 1,507

Market value adjustments

Provision for income tax (expense) benefit 580

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Interest expense $ — $ — $ — $ 153

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Segment Information (continued)

Year Ended December 31, 2022

9 unchanged sentences

Net investment gains (losses) ( 248 )

Net derivative gains (losses) ( 2,469 )

Other adjustments to net income (loss) 265

Net derivative gains (losses), excluding investment hedge adjustments of $ 71

Change in market risk benefits 4,104

Market value adjustments

Provision for income tax (expense) benefit ( 689 )

2 unchanged sentences

Interest expense $ — $ — $ — $ 153

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Segment Information (continued)

Year Ended December 31, 2021

9 unchanged sentences

Net investment gains (losses) ( 59 )

Net derivative gains (losses) ( 18 )

Other adjustments to net income (loss) ( 1,307 )

Net derivative gains (losses), excluding investment hedge adjustments of $ 21

Change in market risk benefits 4,134

Market value adjustments

Provision for income tax (expense) benefit ( 20 )

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Interest expense $ — $ — $ — $ 163

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Segment Information (continued)

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

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Total $ 236,340 $ 224,847

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Segment Information (continued)

Total premiums, universal life and investment-type product policy fees and other revenues by major product group were as follows:

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Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Notes to the Consolidated Financial Statements

Insurance Liabilities

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

Assumptions for Future Policyholder Benefits and Policyholder Account Balances

For term and non-participating whole life insurance, assumptions for mortality and persistency are based upon the Company’s experience.

Interest rate assumptions for the aggregate future policy benefit liabilities range from 3 % to 9 %.

The liability for single premium immediate annuities is based on the present value of expected future payments using the Company’s experience for mortality assumptions, with interest rate assumptions used in establishing such liabilities ranging from 0 % to 9 %.

Participating whole life insurance uses an interest assumption based upon non-forfeiture interest rate, ranging from 4 % to 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 December 31, 2022 and 2021, and 40 %, 39 % and 40 % of gross traditional life insurance premiums for the years ended December 31, 2022, 2021 and 2020, respectively.

The liability for future policyholder benefits for long-term care insurance (included in Corporate & Other) includes assumptions for morbidity, withdrawals and interest.

Interest rate assumptions used for establishing long-term care claim liabilities range from 3 % to 6 %.

Claim reserves for long-term care insurance include best estimate assumptions for claim terminations, expenses and interest.

Policyholder account balances liabilities for fixed deferred annuities and universal life insurance have interest credited rates ranging from 1 % to 7 %.

The Company issues variable annuity contracts with guaranteed minimum benefits.

GMDBs, the life contingent portion of GMWBs 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 7.

The most significant assumptions for variable annuity guarantees included in future policyholder benefits are projected general account and separate account investment returns, and policyholder behavior including mortality, benefit election and utilization, and withdrawals.

The Company also has secondary guarantees on universal and variable life insurance contracts accounted for as insurance liabilities.

The most significant assumptions used in estimating the secondary guarantee liabilities are general account rates of return, premium persistency, mortality and lapses, which are reviewed and updated at least annually.

See Note 1 for more information on guarantees accounted for as insurance liabilities.

Liability for Future Policy Benefits

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

Years Ended December 31,

2023 2022 2021

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

(Dollars in millions)

Present value of expected net premiums:

Balance, beginning of year $ 2,871 $ — $ — $ 3,325 $ — $ — $ 3,448 $ — $ —

Beginning balance at original discount rate 3,212 — — 3,051 — — 2,994 — —

Effect of model refinements — — — 122 — — — — —

Effect of changes in cash flow assumptions 215 — — 137 — — 70 — —

Effect of actual variances from expected experience ( 14 ) — — 119 — — 153 — —

Adjusted beginning of year balance 3,413 — — 3,429 — — 3,217 — —

Issuances 93 — — 93 — — 113 — —

Interest accrual 112 — — 116 — — 111 — —

Net premiums collected ( 384 ) — — ( 426 ) — — ( 390 ) — —

Ending balance at original discount rate 3,234 — — 3,212 — — 3,051 — —

Effect of changes in discount rate assumptions ( 260 ) — — ( 341 ) — — 274 — —

Balance, end of year $ 2,974 $ — $ — $ 2,871 $ — $ — $ 3,325 $ — $ —

Present value of expected future policy benefits:

Balance, beginning of year $ 5,279 $ 3,512 $ 6,793 $ 6,426 $ 4,333 $ 10,171 $ 6,852 $ 4,691 $ 11,301

Beginning balance at original discount rate 5,922 3,897 7,410 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 309 — — 157 56 ( 157 ) 70 ( 41 ) ( 41 )

Effect of actual variances from expected experience ( 15 ) ( 34 ) ( 47 ) 155 ( 22 ) ( 23 ) 153 ( 6 ) ( 16 )

Adjusted beginning of year balance 6,216 3,863 7,363 6,267 3,899 7,707 6,085 3,891 8,474

Issuances 99 374 — 101 224 — 128 198 —

Interest accrual 217 140 314 222 146 327 222 150 359

Benefit payments ( 509 ) ( 346 ) ( 592 ) ( 668 ) ( 372 ) ( 624 ) ( 615 ) ( 374 ) ( 668 )

Ending balance at original discount rate 6,023 4,031 7,085 5,922 3,897 7,410 5,820 3,865 8,165

Effect of changes in discount rate assumptions ( 516 ) ( 277 ) ( 388 ) ( 643 ) ( 385 ) ( 617 ) 606 468 2,006

Balance, end of year $ 5,507 $ 3,754 $ 6,697 $ 5,279 $ 3,512 $ 6,793 $ 6,426 $ 4,333 $ 10,171

Net liability for future policy benefits, end of year $ 2,533 $ 3,754 $ 6,697 $ 2,408 $ 3,512 $ 6,793 $ 3,101 $ 4,333 $ 10,171

Reinsurance recoverable, end of year 42 31 65 45 24 68 64 27 93

Net liability for future policy benefits, after reinsurance recoverable $ 2,491 $ 3,723 $ 6,632 $ 2,363 $ 3,488 $ 6,725 $ 3,037 $ 4,306 $ 10,078

Weighted-average duration of liability 8.7 years 8.2 years 11.6 years 8.4 years 8.5 years 11.6 years 8.4 years 8.5 years 12.7 years

Weighted-average interest accretion rate 3.94 % 3.97 % 4.46 % 3.97 % 3.87 % 4.45 % 3.97 % 3.96 % 4.45 %

Current discount rate 4.94 % 4.95 % 5.03 % 5.26 % 5.27 % 5.32 % 2.53 % 2.55 % 2.81 %

Gross premiums or assessments recognized during period $ 611 $ 488 $ — $ 639 $ 257 $ — $ 666 $ 253 $ —

Expected future gross premiums, undiscounted $ 6,172 $ — $ — $ 6,734 $ — $ — $ 7,027 $ — $ —

Expected future gross premiums, discounted $ 4,642 $ — $ — $ 4,991 $ — $ — $ 5,179 $ — $ —

Expected future benefit payments, undiscounted $ 8,332 $ 5,710 $ 13,767 $ 8,184 $ 5,520 $ 14,418 $ 8,103 $ 5,523 $ 17,241

Expected future benefit payments, discounted $ 6,023 $ 4,031 $ 7,085 $ 5,922 $ 3,897 $ 7,410 $ 5,820 $ 3,865 $ 8,165

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Insurance (continued)

Information regarding the liabilities for guarantees (excluding policyholder account balances and embedded derivatives) relating to variable annuity contracts and universal and variable life insurance contracts was as follows:

Variable Annuity Contracts Universal and Variable Life Contracts

GMDBs GMIBs Secondary Guarantees Total

Notes to the Consolidated Financial Statements

Insurance Liabilities (continued)

The measurement of LFPBs can be significantly impacted by changes in assumptions for policyholder behavior.

As part of the 2023 and 2022 annual actuarial review (“AAR”), the Company updated assumptions regarding mortality and lapses for term and non-participating whole life insurance.

The impact from changes in assumptions is presented in effect of changes in cash flow assumptions in the table above.

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

Years Ended December 31,

2023 2022 2021

(Dollars in millions)

Balance, beginning of year $ 6,935 $ 7,168 $ 6,743

Beginning balance before the effect of unrealized gains and losses 7,175 6,731 6,203

Effect of changes in cash flow assumptions 52 ( 37 ) 153

Effect of actual variances from expected experience 145 179 ( 124 )

Adjusted beginning of year balance 7,372 6,873 6,232

Interest accrual 357 333 308

Net assessments collected 414 416 475

Benefit payments ( 359 ) ( 447 ) ( 286 )

Effect of realized capital gains (losses) — — 2

Ending balance before the effect of unrealized gains and losses 7,784 7,175 6,731

Effect of unrealized gains and losses ( 177 ) ( 240 ) 437

Balance, end of year 7,607 6,935 7,168

Reinsurance recoverable, end of year 1,438 1,384 1,294

Net additional liability, after reinsurance recoverable $ 6,169 $ 5,551 $ 5,874

Weighted-average duration of liability 6.7 years 6.7 years 6.7 years

Weighted-average interest accretion rate 4.92 % 4.90 % 4.90 %

Gross assessments recognized during period $ 1,064 $ 1,070 $ 1,255

The measurement of liabilities for secondary guarantees can be significantly impacted by changes in the expected general account rate of return, which is driven by the Company’s assumption for long-term treasury yields.

The Company’s practice of projecting treasury yields uses a mean reversion approach that assumes that long-term interest rates are less influenced by short-term fluctuations and are only changed when sustained interim deviations are expected.

As part of the 2023 AAR, the Company increased the long-term general account earned rate, driven by an increase in the mean reversion rate from 3.50 % to 3.75 %.

The Company also updated assumptions regarding policyholder behavior, including mortality, premium persistency, lapses, withdrawals and maintenance expenses.

As part of the 2022 AAR, the Company increased the long-term general account earned rate, driven by an increase in the mean reversion rate from 3.00 % to 3.50 %.

Both period assumption updates are reflected in the table above.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements

Insurance Liabilities (continued)

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)

Balance at January 1, 2020 $ 1,620 $ 3,237 $ 5,590 $ 10,447

Incurred guaranteed benefits 129 1,133 1,244 2,506

Paid guaranteed benefits ( 103 ) — ( 169 ) ( 272 )

Balance at December 31, 2020 1,646 4,370 6,665 12,681

Incurred guaranteed benefits 295 ( 29 ) 688 954

Paid guaranteed benefits ( 78 ) — ( 275 ) ( 353 )

Balance at December 31, 2021 1,863 4,341 7,078 13,282

Incurred guaranteed benefits 531 670 261 1,462

Paid guaranteed benefits ( 60 ) — ( 434 ) ( 494 )

Balance at December 31, 2022 $ 2,334 $ 5,011 $ 6,905 $ 14,250

Net Ceded/(Assumed)

Balance at January 1, 2020 $ 9 $ — $ 1,083 $ 1,092

Incurred guaranteed benefits 96 — 102 198

Paid guaranteed benefits ( 101 ) — ( 39 ) ( 140 )

Balance at December 31, 2020 4 — 1,146 1,150

Incurred guaranteed benefits 71 — 102 173

Paid guaranteed benefits ( 76 ) — ( 39 ) ( 115 )

Balance at December 31, 2021 ( 1 ) — 1,209 1,208

Incurred guaranteed benefits 38 — 178 216

Paid guaranteed benefits ( 38 ) — ( 75 ) ( 113 )

Balance at December 31, 2022 $ ( 1 ) $ — $ 1,312 $ 1,311

Balance at January 1, 2020 $ 1,611 $ 3,237 $ 4,507 $ 9,355

Incurred guaranteed benefits 33 1,133 1,142 2,308

Paid guaranteed benefits ( 2 ) — ( 130 ) ( 132 )

Balance at December 31, 2020 1,642 4,370 5,519 11,531

Incurred guaranteed benefits 224 ( 29 ) 586 781

Paid guaranteed benefits ( 2 ) — ( 236 ) ( 238 )

Balance at December 31, 2021 1,864 4,341 5,869 12,074

Incurred guaranteed benefits 493 670 83 1,246

Paid guaranteed benefits ( 22 ) — ( 359 ) ( 381 )

Balance at December 31, 2022 $ 2,335 $ 5,011 $ 5,593 $ 12,939

Liabilities reported in the preceding rollforward tables $ 20,591 $ 19,648

Long-term care insurance (1) 5,581 5,686

ULSG liabilities, including liability for profits followed by losses 2,427 2,449

Participating whole life insurance (2) 3,102 2,949

Deferred profit liabilities 479 373

Other 389 392

Total liability for future policy benefits $ 32,569 $ 31,497

_______________

(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 December 31, 2023 and 2022, and 40 % and 41 % of gross traditional life insurance premiums for the years ended December 31, 2023 and 2022, respectively.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Insurance (continued)

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

Event of Death At

Annuitization In the

Event of Death At

Annuitization

(Dollars in millions)

Annuity Contracts (1), (2)

Variable Annuity Guarantees

Total account value (3) $ 82,410 $ 43,873 $ 109,968 $ 59,735

Separate account value $ 77,653 $ 42,765 $ 105,023 $ 58,555

Net amount at risk $ 16,504 (4) $ 4,991 (5) $ 6,361 (4) $ 5,240 (5)

Average attained age of contract holders 72 years 71 years 71 years 70 years

Secondary Guarantees

Notes to the Consolidated Financial Statements

Insurance Liabilities (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)

Universal Life Contracts

Total account value (3) $ 5,242 $ 5,518

Net amount at risk (6) $ 65,473 $ 67,248

Average attained age of policyholders 69 years 68 years

Variable Life Contracts

Total account value (3) $ 3,835 $ 4,785

Net amount at risk (6) $ 18,045 $ 18,857

Average attained age of policyholders 53 years 52 years

Year Ended December 31, 2023

Balance, beginning of year $ 2,658 $ 4,908 $ 33,897 $ 14,274 $ 5,307 $ 641

Premiums and deposits 230 76 7,183 2,694 660 —

Surrenders and withdrawals ( 163 ) ( 693 ) ( 3,732 ) ( 2,405 ) ( 23 ) —

Benefit payments ( 67 ) ( 111 ) ( 240 ) ( 377 ) ( 85 ) ( 8 )

Net transfers from (to) separate account 46 18 — — — 1

Interest credited 66 133 445 486 208 28

Policy charges ( 220 ) ( 24 ) ( 11 ) — ( 1,015 ) ( 9 )

Changes related to embedded derivatives — — 4,085 — — —

Balance, end of year $ 2,550 $ 4,307 $ 41,627 $ 14,672 $ 5,052 $ 653

Weighted-average crediting rate (2) 2.56 % 2.90 % 1.47 % 3.31 % 4.02 % 4.33 %

Year Ended December 31, 2022

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

Premiums and deposits 219 146 6,632 3,676 697 —

Surrenders and withdrawals ( 88 ) ( 495 ) ( 2,220 ) ( 904 ) ( 32 ) —

Benefit payments ( 65 ) ( 113 ) ( 180 ) ( 345 ) ( 84 ) ( 8 )

Net transfers from (to) separate account 47 151 — — — ( 13 )

Interest credited 76 501 392 ( 2 ) 197 23

Policy charges ( 225 ) ( 25 ) ( 8 ) — ( 1,040 ) ( 7 )

Changes related to embedded derivatives — — ( 2,719 ) — — —

Balance, end of year $ 2,658 $ 4,908 $ 33,897 $ 14,274 $ 5,307 $ 641

Weighted-average crediting rate (2) 2.84 % 10.47 % 1.16 % ( 0.02 ) % 3.62 % 3.41 %

Year Ended December 31, 2021

Balance, beginning of year $ 2,674 $ 4,895 $ 23,274 $ 12,349 $ 5,823 $ 679

Premiums and deposits 312 196 7,054 114 687 —

Surrenders and withdrawals ( 94 ) ( 644 ) ( 1,419 ) ( 610 ) ( 46 ) 1

Benefit payments ( 63 ) ( 107 ) ( 151 ) ( 342 ) ( 77 ) ( 10 )

Net transfers from (to) separate account 47 296 — — — ( 35 )

Interest credited 106 148 365 338 186 24

Policy charges ( 288 ) ( 41 ) ( 6 ) — ( 1,004 ) ( 13 )

Changes related to embedded derivatives — — 2,883 — — —

Balance, end of year $ 2,694 $ 4,743 $ 32,000 $ 11,849 $ 5,569 $ 646

Weighted-average crediting rate (2) 3.96 % 3.06 % 1.12 % 2.79 % 3.27 % 3.66 %

_______________

(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 reported 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 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.

(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.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Insurance (continued)

Account balances of contracts with guarantees were invested in separate account asset classes as follows at:

Notes to the Consolidated Financial Statements

Insurance Liabilities (continued)

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)

Fund Groupings:

Balanced $ 47,095 $ 64,449

Equity 25,237 34,894

Bond 7,347 9,297

Money Market 15 15

Policyholder account balances reported in the preceding rollforward table $ 68,861 $ 61,685

Funding agreements classified as investment contracts 11,115 10,689

Other investment contract liabilities 1,092 1,153

Total policyholder account balances $ 81,068 $ 73,527

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)

December 31, 2023

Annuities (1):

Less than 2.00% $ 697 $ 223 $ 310 $ 7,652 $ 8,882

2.00% to 3.99% 8,827 242 225 356 9,650

Greater than 3.99% 874 — — — 874

Total $ 10,398 $ 465 $ 535 $ 8,008 $ 19,406

Life insurance (2) (3):

Less than 2.00% $ — $ — $ — $ 236 $ 236

2.00% to 3.99% — 492 49 136 677

Greater than 3.99% 1,595 — — — 1,595

Total $ 1,595 $ 492 $ 49 $ 372 $ 2,508

Less than 2.00% $ — $ — $ — $ — $ —

2.00% to 3.99% 1,135 1,485 1,663 254 4,537

Greater than 3.99% 506 — — — 506

Total $ 1,641 $ 1,485 $ 1,663 $ 254 $ 5,043

December 31, 2022

Annuities (1):

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

Total $ 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

Total $ 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

Total $ 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.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements

Insurance Liabilities (continued)

(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.

See Note 6 for information regarding net amount at risk and cash surrender values.

Obligations Under Funding Agreements

1 unchanged sentence

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

The Company had obligations outstanding under these funding agreements of $ 5.5 billion and $ 4.7 billion at December 31, 2022 and 2021, respectively.

The Company had obligations outstanding under these funding agreements of $ 5.5 billion at both December 31, 2023 and 2022.

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

The Company had obligations outstanding under this program of $ 3.9 billion and $ 900 million at December 31, 2022 and 2021, respectively.

The Company had obligations outstanding under this program of $ 4.4 billion and $ 3.9 billion at December 31, 2023 and 2022, respectively.

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

3 unchanged sentences

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

The Company had obligations outstanding under this program of $ 700 million and $ 125 million at December 31, 2022 and 2021, respectively.

The Company had obligations outstanding under this program of $ 700 million at both December 31, 2023 and 2022.

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

2 unchanged sentences

Inactive Funding Agreement Programs

Brighthouse Life Insurance Company has obligations outstanding under inactive funding agreement programs of $ 525 million and $ 634 million at December 31, 2022 and 2021, respectively.

Brighthouse Life Insurance Company has obligations outstanding under inactive funding agreement programs of $ 525 million at both December 31, 2023 and 2022.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Deferred Policy Acquisition Costs, Value of Business Acquired and Deferred Sales Inducements

See Note 1 for a description of capitalized acquisition costs.

Information regarding DAC and VOBA was as follows:

Market Risk Benefits

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

Years Ended December 31,

2023 2022 2021

(Dollars in millions)

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

Balance, beginning of year, before effect of changes in nonperformance risk

8,230 11,611 14,934

Decrements ( 176 ) 16 ( 68 )

Effect of changes in future expected assumptions 259 210 41

Effect of actual different from expected experience 187 ( 48 ) ( 86 )

Effect of changes in interest rates ( 428 ) ( 8,394 ) ( 1,829 )

Effect of changes in fund returns ( 2,203 ) 3,807 ( 2,578 )

Issuances ( 7 ) ( 47 ) ( 96 )

Effect of changes in risk margin ( 34 ) ( 152 ) ( 128 )

Aging of the block and other 1,498 1,227 1,421

Balance, end of year, before effect of changes in nonperformance risk

7,326 8,230 11,611

Effect of changes in nonperformance risk 2,375 1,744 4,087

Balance, end of year 9,701 9,974 15,698

Reinsurance recoverable, end of year 43 71 118

Balance, end of year, net of reinsurance (1) $ 9,658 $ 9,903 $ 15,580

Weighted-average attained age of contract holder 72.9 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 December 31, 2023, 2022 and 2021, with the exception of $ 9 million, $ 3 million and $ 5 million, respectively, of index-linked annuities not included in this table.

Market conditions, including, but not limited to, changes in interest rates, equity indices, market volatility and variations in actuarial assumptions, including policyholder behavior, mortality and risk margins related to non-capital markets inputs, as well as changes in nonperformance risk, may result in significant fluctuations in the estimated fair value of the guarantees.

As part of the AAR in 2023 and 2022, the Company updated assumptions regarding policyholder behavior, mortality, separate account fund allocations and volatility, which are reflected in the table above.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Separate Accounts

Information regarding separate account liabilities was as follows:

Years Ended December 31,

2023 2022 2021

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

(In millions)

Balance at January 1, $ 4,847 $ 4,407 $ 4,946

Capitalizations 425 493 408

Amortization related to net investment gains (losses) and net derivative gains (losses) ( 401 ) 61 95

All other amortization ( 489 ) ( 212 ) ( 833 )

Total amortization ( 890 ) ( 151 ) ( 738 )

Unrealized investment gains (losses) 690 98 ( 209 )

Balance, beginning of year $ 77,653 $ 5,218 $ 1,932 $ 105,023 $ 6,862 $ 2,384 $ 103,315 $ 6,229 $ 2,269

Premiums and deposits 766 162 — 1,207 175 — 2,089 188 3

Surrenders and withdrawals ( 6,346 ) ( 180 ) ( 19 ) ( 6,256 ) ( 159 ) ( 18 ) ( 8,481 ) ( 207 ) ( 68 )

Benefit payments ( 1,434 ) ( 68 ) ( 28 ) ( 1,337 ) ( 67 ) ( 33 ) ( 1,632 ) ( 70 ) ( 38 )

Investment performance 11,549 1,041 328 ( 18,583 ) ( 1,342 ) ( 358 ) 12,609 986 235

Policy charges ( 2,160 ) ( 206 ) ( 49 ) ( 2,292 ) ( 203 ) ( 61 ) ( 2,559 ) ( 214 ) ( 46 )

Net transfers from (to) general account ( 18 ) ( 46 ) ( 1 ) ( 151 ) ( 47 ) 13 ( 296 ) ( 47 ) 35

Other ( 20 ) — ( 1 ) 42 ( 1 ) 5 ( 22 ) ( 3 ) ( 6 )

Balance, end of year $ 79,990 $ 5,921 $ 2,162 $ 77,653 $ 5,218 $ 1,932 $ 105,023 $ 6,862 $ 2,384

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 $ 88,073 $ 84,803

Variable income annuities 179 145

Pension risk transfer annuities 19 17

Total separate account liabilities $ 88,271 $ 84,965

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

(In millions)

Equity securities

$ 87,999 $ 84,667

Fixed maturity securities

Cash and cash equivalents 7 9

Other assets 7 11

Total aggregate estimated fair value of assets

$ 88,271 $ 84,965

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Separate Accounts (continued)

Net Amount at Risk and Cash Surrender Values

Information regarding the net amount at risk and cash surrender value 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)

December 31, 2023

Account balances reported in the preceding rollforward tables:

Policyholder account balances $ 2,550 $ 4,307 $ 41,627 $ 14,672 $ 5,052 $ 653

Separate account liabilities 5,921 79,990 — — — 2,162

Total account balances $ 8,471 $ 84,297 $ 41,627 $ 14,672 $ 5,052 $ 2,815

Net amount at risk $ 35,583 $ 13,240 N/A N/A $ 65,299 $ 2,659

Cash surrender value $ 7,881 $ 83,852 $ 39,270 $ 14,068 $ 4,498 $ 2,593

December 31, 2022

Account balances reported in the preceding rollforward tables:

Policyholder account balances $ 2,658 $ 4,908 $ 33,897 $ 14,274 $ 5,307 $ 641

Separate account liabilities 5,218 77,653 — — — 1,932

Total account balances $ 7,876 $ 82,561 $ 33,897 $ 14,274 $ 5,307 $ 2,573

Net amount at risk $ 38,146 $ 16,504 N/A N/A $ 66,926 $ 3,382

Cash surrender value $ 7,225 $ 82,125 $ 31,293 $ 13,723 $ 4,671 $ 2,357

December 31, 2021

Account balances reported in the preceding rollforward tables:

Policyholder account balances $ 2,694 $ 4,743 $ 32,000 $ 11,849 $ 5,569 $ 646

Separate account liabilities 6,862 105,023 — — — 2,384

Total account balances $ 9,556 $ 109,766 $ 32,000 $ 11,849 $ 5,569 $ 3,030

Net amount at risk $ 39,549 $ 6,361 N/A N/A $ 68,905 $ 3,678

Cash surrender value $ 8,884 $ 109,592 $ 29,848 $ 11,112 $ 4,821 $ 2,811

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 Consolidated Financial Statements (continued)

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

Deferred Policy Acquisition Costs and Value of Business Acquired

See Note 1 for a description of capitalized acquisition costs.

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)

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

Balance at January 1, 530 504 502

Capitalization 55 30 330 ( 1 ) 11

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

Unrealized investment gains (losses) 123 19 30

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

Capitalization 36 14 343 2 13

Amortization ( 243 ) ( 11 ) ( 225 ) ( 53 ) ( 45 )

Balance at December 31, 2023 $ 2,301 $ 110 $ 1,331 $ 354 $ 360

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

Amortization ( 32 ) ( 5 ) — ( 1 ) ( 5 )

Balance at December 31, 2023 $ 309 $ 60 $ — $ 4 $ 43

Total DAC and VOBA:

Balance at December 31, 2023 $ 2,610 $ 170 $ 1,331 $ 358 $ 403

The estimated future VOBA amortization expense to be reported in other expenses for the next five years is $ 58 million in 2023, $ 52 million in 2024, $ 46 million in 2025, $ 41 million in 2026 and $ 37 million in 2027.

Information regarding DSI was as follows:

Years Ended December 31,

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:

2023 2022 2021

Variable Annuities Fixed Rate Annuities Variable Annuities Fixed Rate Annuities Variable Annuities Fixed Rate Annuities

(In millions)

Balance at January 1, $ 307 $ 310 $ 379

Balance, beginning of year $ 245 $ 9 $ 272 $ 10 $ 298 $ 12

Capitalization 1 — 1 — 1 —

Amortization ( 26 ) ( 1 ) ( 28 ) ( 1 ) ( 27 ) ( 2 )

Balance at December 31, $ 293 $ 307 $ 310

Balance, end of year $ 220 $ 8 $ 245 $ 9 $ 272 $ 10

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Deferred Policy Acquisition Costs, Value of Business Acquired and Deferred Sales Inducements (continued)

Unearned Revenue

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

2023 2022 2021

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

(In millions)

Balance, beginning of year $ 357 $ 488 $ 74 $ 358 $ 344 $ 80 $ 350 $ 184 $ 86

Capitalization 38 174 — 39 181 2 49 185 1

Amortization ( 39 ) ( 50 ) ( 7 ) ( 40 ) ( 37 ) ( 8 ) ( 41 ) ( 25 ) ( 7 )

Balance, end of year $ 356 $ 612 $ 67 $ 357 $ 488 $ 74 $ 358 $ 344 $ 80

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

2 unchanged sentences

The Company periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to establish assets and liabilities relating to ceded and assumed reinsurance and evaluates the financial strength of counterparties to its reinsurance agreements using criteria similar to that evaluated in the security impairment process discussed in Note 9.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Reinsurance (continued)

Annuities and Life

1 unchanged sentence

Under these reinsurance agreements, the Company pays a reinsurance premium generally based on fees associated with the guarantees collected from policyholders and receives reimbursement for benefits paid or accrued in excess of account values, subject to certain limitations.

The value of embedded derivatives on the ceded risk is determined using a methodology consistent with the guarantees directly written by the Company with the exception of the input for nonperformance risk that reflects the credit of the reinsurer.

The value of MRBs on the ceded risk is determined using a methodology consistent with the guarantees directly written by the Company with the exception of the input for nonperformance risk that reflects the credit of the reinsurer.

The Company cedes certain fixed rate annuities to unaffiliated third-party reinsurers and assumes certain index-linked annuities from an unaffiliated third-party insurer.

11 unchanged sentences

Additionally, the Company is indemnified for losses and certain other payment obligations it might incur with respect to such reinsured long-term care insurance business.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Reinsurance (continued)

Catastrophe Coverage

11 unchanged sentences

Impairments are then determined based on probable and estimable defaults.

The Company had an allowance for credit losses of $ 10 million on its reinsurance recoverable balances at both December 31, 2022 and 2021.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Reinsurance (continued)

The Company had an allowance for credit losses of $ 3 million and $ 10 million on its reinsurance recoverable balances at December 31, 2023 and 2022, respectively.

In 2023, the Company had $ 3 million of additions to the allowance and $ 10 million of impairments charged against the allowance.

At December 31, 2023, the Company had $ 18.9 billion of net ceded reinsurance recoverables with third-party reinsurers.

2 unchanged sentences

Of this total, $ 15.4 billion, or 88 %, were with the Company’s five largest ceded reinsurers, including $ 4.3 billion of net ceded reinsurance recoverables which were unsecured.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Reinsurance (continued)

The amounts on the consolidated statements of operations include the impact of reinsurance.

22 unchanged sentences

Net policyholder benefits and claims $ 2,676 $ 2,193 $ 2,746

Change in market risk benefits

Direct change in market risk benefits $ ( 1,537 ) $ ( 4,154 ) $ ( 4,192 )

Reinsurance assumed ( 1 ) ( 1 ) 1

Reinsurance ceded 31 51 57

Net change in market risk benefits $ ( 1,507 ) $ ( 4,104 ) $ ( 4,134 )

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

4 unchanged sentences

Premiums, reinsurance and other receivables (net of allowance for credit losses) $ 463 $ 4 $ 19,294 $ 19,761 $ 417 $ — $ 18,131 $ 18,548

Market risk benefit assets $ 613 $ — $ 43 $ 656 $ 412 $ — $ 71 $ 483

Future policy benefits $ 32,456 $ 113 $ — $ 32,569 $ 31,402 $ 95 $ — $ 31,497

Policyholder account balances $ 76,768 $ 4,300 $ — $ 81,068 $ 69,334 $ 4,193 $ — $ 73,527

Market risk benefit liabilities $ 10,318 $ 5 $ — $ 10,323 $ 10,386 $ 3 $ — $ 10,389

Other policy-related balances $ 2,253 $ 1,583 $ — $ 3,836 $ 2,477 $ 1,621 $ — $ 4,098

24 unchanged sentences

Total fixed maturity securities $ 87,131 $ 21 $ 1,037 $ 7,156 $ 80,991 $ 84,344 $ 7 $ 752 $ 9,512 $ 75,577

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

The Company held non-income producing fixed maturity securities with an estimated fair value of $ 52 million at December 31, 2023.

The Company did not hold non-income producing fixed maturity securities at December 31, 2022.

Maturities of Fixed Maturity Securities

60 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 $ 7 million, relating to twenty-one securities at December 31, 2022.

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 $ 21 million, relating to 17 securities at December 31, 2023.

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

1 unchanged sentence

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

Allowance for Credit Losses for Fixed Maturity Securities

The allowance for credit losses for fixed maturity securities was $ 7 million and $ 11 million at December 31, 2022 and 2021, respectively.

During the period, the change in allowance for fixed maturity securities by sector was immaterial.

The Company recorded total write-offs of $ 10 million and $ 5 million for December 31, 2022 and 2021, respectively.

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

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

Corporate RMBS CMBS Foreign Corporate Total

(In millions)

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

Allowance on securities where credit losses were not previously recorded — 2 — — 2

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

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

Write-offs charged against allowance (1) — — — ( 6 ) ( 6 )

Balance at December 31, 2022

Allowance on securities where credit losses were not previously recorded 15 3 — — 18

Reductions for securities sold ( 1 ) — ( 1 ) — ( 2 )

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

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

Balance at December 31, 2023

$ 15 $ 5 $ 1 $ — $ 21

_______________

(1) The Company recorded total write-offs of $ 8 million and $ 10 million for the years ended December 31, 2023 and 2022, respectively.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

Mortgage Loans

10 unchanged sentences

_______________

(1) Purchases of mortgage loans from third parties were $ 2.2 billion and $ 2.1 billion for the years ended December 31, 2022 and 2021, respectively, and were primarily comprised of residential mortgage loans.

(1) Purchases of mortgage loans from third parties were $ 311 million and $ 2.2 billion for the years ended December 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 Consolidated Financial Statements (continued)

Investments (continued)

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

9 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.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

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.

3 unchanged sentences

(In millions)

Balance at January 1, 2020

$ 27 $ 17 $ 22 $ 66

Current period provision 17 ( 2 ) 13 28

Balance at December 31, 2021

$ 67 $ 12 $ 44 $ 123

Current period provision 5 3 11 19

PCD credit allowance — — 2 2

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

Balance at December 31, 2022

3 unchanged sentences

$ 69 $ 19 $ 49 $ 137

PCD Mortgage Loans

There were no new purchases of PCD mortgage loans during the year ended December 31, 2023.

Purchases of PCD mortgage loans were $ 69 million at December 31, 2022.

Brighthouse Financial, Inc.

1 unchanged sentence

Investments (continued)

PCD Mortgage Loans

Purchases of PCD mortgage loans are summarized as follows:

(In millions)

Purchase price $ 62 $ 462

Allowance at acquisition date — 2

Discount or premium attributable to other factors 7 ( 29 )

Par value $ 69 $ 435

Credit Quality of Mortgage Loans by Portfolio Segment

21 unchanged sentences

Total $ 514 $ 4,423 $ 6,136 $ 1,044 $ 2,600 $ 7,928 $ 22,645

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

2022 2021 2020 2019 2017 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 Consolidated Financial Statements (continued)

Investments (continued)

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

16 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 Consolidated Financial Statements (continued)

Investments (continued)

Past Due Mortgage Loans by Portfolio Segment

13 unchanged sentences

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.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

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

6 unchanged sentences

_______________

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

Current period investment income on mortgage loans in nonaccrual status was $ 2 million and $ 1 million for the years ended December 31, 2022 and 2021, respectively.

(1) The Company had no mortgage loans in nonaccrual status for which there was no related allowance for credit losses at both December 31, 2023 and 2022.

Current period investment income on mortgage loans in nonaccrual status was $ 2 million for both years ended December 31, 2023 and 2022.

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 years ended December 31, 2022 and 2021.

Generally, the types of concessions may include interest rate reduction, term extension, principal forgiveness, or a combination of all three.

The Company did not have a significant amount of mortgage loans modified during both years ended December 31, 2023 and 2022.

Other Invested Assets

2 unchanged sentences

Other invested assets also includes the Company’s investment in company-owned life insurance, FHLB stock, tax credit and renewable energy partnerships and leveraged leases.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

Leveraged Leases

2 unchanged sentences

Rental receivables are generally due in periodic installments.

The payment periods for leveraged leases generally range from one to 10 years.

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

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

2 unchanged sentences

Net Unrealized Investment Gains (Losses)

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

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:

8 unchanged sentences

Future policy benefits 652 917 ( 1,655 )

DAC and VOBA 410 ( 403 ) ( 520 )

Subtotal 1,326 ( 3,306 ) ( 4,833 )

Deferred income tax benefit (expense) 1,074 1,512 ( 1,468 )

Net unrealized investment gains (losses) $ ( 4,040 ) $ ( 5,690 ) $ 5,524

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

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

2 unchanged sentences

(In millions)

Balance at December 31,

$ ( 5,690 ) $ 5,524 $ 5,761

Unrealized investment gains (losses) change due to cumulative effect, net of income tax — — 1,980

Balance at January 1, $ ( 5,690 ) $ 5,524 $ 7,741

2 unchanged sentences

Future policy benefits ( 265 ) 2,572 671

DAC and VOBA 813 117 ( 179 )

Deferred income tax benefit (expense) ( 438 ) 2,980 590

4 unchanged sentences

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

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

Securities Lending

5 unchanged sentences

Cash collateral received from counterparties (2) $ 3,277 $ 3,731

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

Reinvestment portfolio — estimated fair value $ 3,246 $ 3,603

2 unchanged sentences

(2) Included in 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 consolidated financial statements.

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

9 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.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

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

The estimated fair value of the securities on loan related to the cash collateral on open at December 31, 2022 was $ 627 million, comprised of U.S.

government and agency and U.S.

corporate 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.

The estimated fair value of the securities on loan related to the cash collateral on open at December 31, 2023 was $ 631 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 agency RMBS, ABS, U.S.

government and agency securities, U.S.

2 unchanged sentences

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.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

Invested Assets on Deposit, Held in Trust and Pledged as Collateral

19 unchanged sentences

This aggregated summarized financial data does not represent the Company’s proportionate share of the assets, liabilities or earnings of such entities.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

The aggregated summarized financial data presented below reflects the latest available financial information and is as of and for the years ended December 31, 2023, 2022 and 2021.

3 unchanged sentences

Aggregate net income (loss) from the underlying entities in which the Company invests is primarily comprised of investment income, including recurring investment income and realized and unrealized investment gains (losses).

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

Variable Interest Entities

13 unchanged sentences

Total $ 19,759 $ 22,026 $ 20,032 $ 22,962

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (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 18.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

Net Investment Income

15 unchanged sentences

_______________

(1) Includes net investment income pertaining to other limited partnership interests of $ 170 million, $ 1.3 billion and $ 225 million for the years ended December 31, 2022, 2021 and 2020, respectively.

(1) Includes net investment income pertaining to other limited partnership interests of $ 187 million, $ 170 million and $ 1.3 billion for the years ended December 31, 2023, 2022 and 2021, respectively.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Investments (continued)

Net Investment Gains (Losses)

32 unchanged sentences

Interest rate swaps:

The Company uses interest rate swaps to manage the collective interest rate risks primarily in variable annuity products and ULSG.

The Company uses interest rate swaps to manage the interest rate risks primarily in variable annuity products and ULSG.

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

6 unchanged sentences

Interest rate swaptions:

The Company uses interest rate swaptions to manage the collective interest rate risks primarily in variable annuity products and ULSG.

The Company uses interest rate swaptions to manage the interest rate risks primarily in variable annuity products and ULSG.

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

1 unchanged sentence

Interest rate forwards:

The Company uses interest rate forwards to manage the collective interest rate risks primarily in variable annuity products and ULSG.

The Company uses interest rate forwards to manage the interest rate risks primarily in variable annuity products and ULSG.

Interest rate forwards are used in cash flow and non-qualifying hedging relationships.

33 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:

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

Primary Underlying Risk Exposure Gross Notional Amount Estimated Fair Value Gross Notional Amount Estimated Fair Value

14 unchanged sentences

Foreign currency forwards Foreign currency exchange rate 535 — 9 487 1 10

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

Credit default swaps — written Credit 1,405 27 — 1,757 18 2

1 unchanged sentence

Equity index options Equity market 20,099 757 687 17,229 697 351

Equity variance swaps Equity market — — — 281 9 1

Equity total return swaps Equity market 53,742 2,236 2,137 32,909 520 747

1 unchanged sentence

Total non-designated or non-qualifying derivatives 169,297 3,366 5,043 112,905 1,688 3,900

Embedded derivatives:

Ceded guaranteed minimum income benefits Other N/A 117 — N/A 186 —

Direct index-linked annuities Other N/A — 3,564 N/A — 6,211

Direct guaranteed minimum benefits Other N/A — 1,454 N/A — 1,848

Assumed index-linked annuities Other N/A — 369 N/A — 437

Total embedded derivatives N/A 117 5,387 N/A 186 8,496

Total $ 173,236 $ 3,714 $ 5,088 $ 116,991 $ 2,284 $ 3,920

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Derivatives (continued)

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 December 31, 2023 and 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;

The Company’s use of derivatives includes (i) derivatives that serve as 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.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (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:

50 unchanged sentences

Total $ ( 3,972 ) $ ( 11 ) $ 39 $ 171

At December 31, 2022 and 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 December 31, 2023, the Company held no qualified derivatives hedging exposure to future cash flows for forecasted asset purchases.

At 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 .

At December 31, 2023 and 2022, the balance in AOCI associated with cash flow hedges was $ 351 million and $ 638 million, respectively.

92 unchanged sentences

government and agency 3,786 4,633 — 8,419

RMBS — 7,514 14 7,528

— 7,415 15 7,430

CMBS — 6,371 39 6,410

ABS — 5,041 318 5,359

— 6,080 326 6,406

State and political subdivision — 3,874 — 3,874

9 unchanged sentences

Total derivative assets — 3,696 18 3,714

Embedded derivatives within asset host contracts (2) — — 117 117

Market risk benefit assets

Separate account assets 20 88,251 — 88,271

Total assets $ 4,475 $ 167,993 $ 2,435 $ 174,903

Market risk benefit liabilities $ — $ — $ 10,323 $ 10,323

Derivative liabilities:

4 unchanged sentences

Total derivative liabilities — 5,088 — 5,088

Embedded derivatives within liability host contracts (2) — — 5,387 5,387

Embedded derivatives on index-linked annuities (2)

— — 8,186 8,186

Total liabilities $ — $ 5,088 $ 18,509 $ 23,597

24 unchanged sentences

Total derivative assets — 2,247 37 2,284

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

Market risk benefit assets

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

2 unchanged sentences

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 reported in premiums, reinsurance and other receivables.

Embedded derivatives within liability host contracts are reported in policyholder account balances.

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

Valuation Controls and Procedures

33 unchanged sentences

Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, spreads for actively traded securities, spreads off benchmark yields, expected prepayment speeds and volumes, current and forecasted loss severity, ratings, geographic region, weighted average coupon and weighted average maturity, average delinquency rates and debt-service coverage ratios.

Other issuance-specific information is also used, including, but not limited to;

collateral type, structure of the security, vintage of the loans, payment terms of the underlying asset, payment priority within tranche, and deal performance.

Other issuance-specific information is also used, including, but not limited to, collateral type, structure of the security, vintage of the loans, payment terms of the underlying asset, payment priority within tranche, and deal performance.

Equity Securities and Short-term Investments

21 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.

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

GMABs, 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 in policyholder account balances, 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.

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.

Brighthouse Financial, Inc.

1 unchanged sentence

Fair Value (continued)

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

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

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

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

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

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

The crediting rates associated with these features are embedded derivatives which are measured at estimated fair value separately from the host fixed annuity contract, with changes in estimated fair value reported in net derivative gains (losses).

These embedded derivatives are classified in policyholder account balances.

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.

The estimated fair value of crediting rates associated with index-linked annuities is determined using a combination of an option pricing model and an option-budget approach.

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

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.

Transfers Into or Out of Level 3:

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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 Consolidated Financial Statements (continued)

Fair Value (continued)

Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)

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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 % - 22.80 % 1.00 % - 24.11 % Decrease (2)

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• Nonperformance risk spread 0.76 % - 1.63 % ( 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 0.45 % - 1.74 % 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.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Fair Value (continued)

(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.

(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.

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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.

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.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Fair Value (continued)

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

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

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Fair Value (continued)

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:

The changes in assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (excluding MRBs disclosed in Note 5) were summarized as follows:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

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Corporate (1) Structured Securities Foreign Government Equity

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

Securities Short-term Investments Net Derivatives (2) Embedded Derivatives on Index-Linked Annuities

(In millions)

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Purchases (5)

Sales (7) ( 53 ) ( 12 ) — — — — — —

933 251 5 14 — 1 —

( 184 ) ( 16 ) ( 2 ) — ( 2 ) ( 9 ) —

Issuances (5)

— — — — — — —

Settlements (5)

— — — — — — ( 34 )

Transfers into Level 3 (6)

94 33 19 — — — —

Transfers out of Level 3 (6)

( 184 ) ( 101 ) — — — ( 1 ) —

Balance, December 31, 2022

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Purchases (5)

Sales (7) ( 184 ) ( 16 ) ( 2 ) — ( 2 ) ( 9 ) — —

162 85 — 2 — 4 —

( 116 ) ( 22 ) ( 2 ) ( 1 ) — — —

Issuances (5)

— — — — — — —

Settlements (5)

— — — — — — ( 157 )

Transfers into Level 3 (6)

188 3 — — — — —

Transfers out of Level 3 (6)

( 718 ) ( 56 ) ( 3 ) — — ( 12 ) —

Balance, December 31, 2023

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$ ( 11 ) $ — $ — $ ( 2 ) $ — $ ( 5 ) $ ( 4,513 )

Changes in unrealized gains (losses) included in OCI for the instruments still held at December 31, 2020 (9)

Changes in unrealized gains (losses) included in OCI for the instruments still held as of December 31, 2021 (7)

$ ( 6 ) $ — $ — $ — $ — $ 12 $ —

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

$ ( 1 ) $ — $ — $ — $ — $ 1 $ ( 2,855 )

Total realized/unrealized gains (losses) included in AOCI $ ( 7 ) $ — $ — $ — $ — $ 12 $ —

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

(3) Embedded derivative assets and liabilities are reported 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 reported in net investment gains (losses).

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

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(6) Gains and losses, in net income (loss) and OCI, are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period.

Items transferred into and then out of Level 3 in the same period are excluded from the rollforward.

Items transferred into and out of Level 3 in the same period are excluded from the rollforward.

(7) Changes in unrealized gains (losses) included in net income (loss) for fixed maturities are reported in either net investment income or net investment gains (losses).

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

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Fair Value (continued)

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

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Separate account liabilities $ 1,150 $ — $ 1,150 $ — $ 1,150

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Fair Value (continued)

December 31, 2022

10 unchanged sentences

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

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Long-term Debt

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(3) Includes unamortized debt issuance costs, discounts and premiums, as applicable, totaling net $ 30 million and $ 32 million for the senior notes and junior subordinated debentures on a combined basis at December 31, 2023 and 2022, respectively.

The aggregate maturities of long-term debt at December 31, 2022 were $ 2 million in each of 2023 and 2024, $ 3 million in each of 2025 and 2026, $ 761 million in 2027, and $ 2.4 billion thereafter.

The aggregate maturities of long-term debt at December 31, 2023 were $ 2 million in 2024, $ 3 million in each of 2025 and 2026, $ 761 million in 2027, $ 3 million in 2028, and $ 2.4 billion thereafter.

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

Interest expense related to long-term debt of $ 153 million, $ 153 million and $ 163 million for the years ended December 31, 2023, 2022 and 2021, respectively, is included in other expenses.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Long-term Debt (continued)

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

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

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Long-term Debt (continued)

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

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

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

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

Credit Facilities

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At December 31, 2023, there were no borrowings or letters of credit outstanding under the 2022 Revolving Credit Facility.

Term Loan Facility

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

For the years ended December 31, 2022, 2021 and 2020, fees associated with these credit facilities were not significant.

Committed Facilities

Reinsurance Financing Arrangement

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

Effective December 31, 2022, with the explicit permission of the Delaware Commissioner, BRCD amended its financing agreement to increase the maximum facility from $ 12.0 billion to $ 15.0 billion.

Brighthouse Reinsurance Company of Delaware (“BRCD”) maintains a $ 15.0 billion financing arrangement with a pool of highly rated third-party reinsurers consisting of credit-linked notes that each mature in 2039.

At December 31, 2023, there were no borrowings and there was $ 15.0 billion of funding available under this financing arrangement.

1 unchanged sentence

Repurchase Facilities

At December 31, 2022, Brighthouse Life Insurance Company maintains secured committed repurchase facilities (the “Repurchase Facilities”) under which Brighthouse Life Insurance Company may enter into repurchase transactions in an aggregate amount up to $ 2.0 billion for a term of up to three years.

At December 31, 2023, Brighthouse Life Insurance Company maintains secured committed repurchase facilities (the “Repurchase Facilities”) with terms of up to three years under which Brighthouse Life Insurance Company may enter into repurchase transactions in an aggregate amount up to $ 2.5 billion.

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

64 unchanged sentences

Equity (continued)

At December 31, 2022, book value per common share was $ 62.60 .

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

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

On November 16, 2023, BHF authorized the repurchase of up to $ 750 million of its common stock, which is in addition to the $ 1.2 billion total repurchases authorized in 2021.

Repurchases under the November 16, 2023 authorization may be made through open market purchases, including pursuant to a 10b5-1 plan or pursuant to accelerated stock repurchase plans, or through privately negotiated transactions, from time to time at management’s discretion in accordance with applicable legal requirements.

During the years ended December 31, 2023, 2022 and 2021, BHF repurchased 5,195,832 shares, 10,000,026 shares and 10,703,165 shares, respectively, of its common stock through open market purchases pursuant to 10b5-1 plans for $ 250 million, $ 488 million and $ 499 million, respectively.

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

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

For awards granted for performance periods in progress through December 31, 2023, the performance factors are based on the achievement of net cash flow to Brighthouse Holdings, LLC and statutory expense ratio targets over the respective performance period depending on year of issue.

For awards granted for performance periods in progress through December 31, 2023, the vested PSUs will be multiplied by a performance factor up to a maximum payout of 150 %.

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The weighted average grant date fair value of PSUs granted during the years ended December 31, 2022 and 2021, was $ 48.06 and $ 41.26 , respectively.

The total fair value of RSUs that vested during the years ended December 31, 2022, 2021 and 2020, was $ 15 million, $ 15 million and $ 10 million, respectively.

The total fair value of PSUs that vested during the years ended December 31, 2022, 2021 and 2020, was $ 7 million, $ 4 million and $ 0 , respectively.

The total fair value of RSUs that vested during each of the years ended December 31, 2023, 2022 and 2021 was $ 15 million.

The total fair value of PSUs that vested during the years ended December 31, 2023, 2022 and 2021, was $ 9 million, $ 7 million and $ 4 million, respectively.

Stock Options

22 unchanged sentences

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

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

RBC is based on the statutory financial statements and is calculated in a manner prescribed by the NAIC, with the RBC ratio equal to the total adjusted capital (“TAC”) divided by the applicable company action level.

Companies below minimum RBC ratios are subject to corrective action.

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

Such requirements are used by regulators to assess the minimum amount of statutory capital and surplus needed for an insurance company to support its operations, based on its size and risk profile (referred to as “company action level RBC”).

RBC is based on statutory financial statements and is calculated in a manner prescribed by the NAIC.

The RBC ratio, which is the basis for determining regulatory compliance, is equal to total adjusted capital (“TAC”) divided by the applicable company action level RBC.

Companies below 100% of the company action level RBC are subject to corrective action.

As of December 31, 2023, the annual RBC ratios for the Company’s insurance subsidiaries were each in excess of 400 %.

The Company’s insurance subsidiaries prepare statutory-basis financial statements in accordance with statutory accounting practices prescribed or permitted by the insurance department of the state of domicile.

25 unchanged sentences

Brighthouse Life Insurance Company (3)

$ — $ 266 $ — $ 550

New England Life Insurance Company $ 40 $ 84 $ 38 $ 44

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

(3) Any payment of dividends in 2024 would be considered an extraordinary dividend subject to regulatory approval due to negative unassigned funds (surplus).

Under the Delaware Insurance Law, Brighthouse Life Insurance Company is permitted, without prior insurance regulatory clearance, to pay a stockholder dividend as long as the amount of the dividend when aggregated with all other dividends in the preceding 12 months does not exceed the greater of:

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(i) 10% of its surplus to policyholders as of the end of the immediately preceding calendar year or (ii) its statutory net gain from operations for the immediately preceding calendar year (excluding realized capital gains).

In addition, BHNY will be permitted to pay a dividend to its parent in excess of the amounts allowed under both standards only if it files notice of its intention to declare such a dividend and the amount thereof with the NY Superintendent, and the NY Superintendent either approves the distribution of the dividend or does not disapprove the dividend within 30 days of its filing.

In addition, BHNY will be permitted to pay a dividend to its parent in excess of the amounts allowed under both standards only if it files notice of its intention to declare such a dividend and the amount thereof with the New York Superintendent of Financial Services (the “NY Superintendent”), and the NY Superintendent either approves the distribution of the dividend or does not disapprove the dividend within 30 days of its filing.

To the extent BHNY pays a stockholder dividend, such dividend will be paid to Brighthouse Life Insurance Company, its direct parent and sole stockholder.

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

BRCD did no t pay any extraordinary dividends during the year ended December 31, 2022.

BRCD did no t pay any extraordinary dividends during the years ended December 31, 2023 and 2022.

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

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

During each of the years ended December 31, 2023, 2022 and 2021, BRCD paid cash dividends of $ 1 million to its preferred shareholders.

4 unchanged sentences

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

Investment Gains

(Losses), Net of

Related Offsets (1) Unrealized

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)

Balance at December 31, 2020 $ 5,646 $ 115 $ — $ — $ ( 45 ) $ 5,716

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

1,980 — ( 2,729 ) ( 3,180 ) — ( 3,929 )

Balance at January 1, 2021

7,626 115 ( 2,729 ) ( 3,180 ) ( 45 ) 1,787

OCI before reclassifications ( 2,978 ) 171 ( 634 ) 1,242 ( 3 ) ( 2,202 )

Deferred income tax benefit (expense) (4)

625 ( 35 ) 133 ( 261 ) 1 463

AOCI before reclassifications, net of income tax 5,273 251 ( 3,230 ) ( 2,199 ) ( 47 ) 48

1 unchanged sentence

Deferred income tax benefit (expense) (4)

( 3 ) 3 — — — —

Amounts reclassified from AOCI, net of income tax 12 ( 12 ) — — ( 1 ) ( 1 )

Balance at December 31, 2021 5,285 239 ( 3,230 ) ( 2,199 ) ( 48 ) 47

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

OCI before reclassifications ( 14,741 ) 331 2,344 4,075 ( 16 ) ( 8,007 )

Deferred income tax benefit (expense) (4)

3,074 ( 48 ) ( 492 ) ( 856 ) 4 1,682

AOCI before reclassifications, net of income tax ( 6,382 ) 522 ( 1,378 ) 1,020 ( 60 ) ( 6,278 )

1 unchanged sentence

Deferred income tax benefit (expense) (4)

( 50 ) 4 — — — ( 46 )

Amounts reclassified from AOCI, net of income tax 188 ( 18 ) — — 2 172

Balance at December 31, 2022 ( 6,194 ) 504 ( 1,378 ) 1,020 ( 58 ) ( 6,106 )

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

OCI before reclassifications 2,149 ( 276 ) ( 636 ) ( 380 ) 9 866

Deferred income tax benefit (expense) (4)

( 451 ) 58 133 80 ( 2 ) ( 182 )

AOCI before reclassifications, net of income tax ( 4,496 ) 286 ( 1,881 ) 720 ( 51 ) ( 5,422 )

1 unchanged sentence

Deferred income tax benefit (expense) (4)

( 47 ) 2 — — ( 1 ) ( 46 )

Amounts reclassified from AOCI, net of income tax 179 ( 9 ) — — 6 176

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_______________

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

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

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

(1) See Note 9 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) See Notes 1 and 2 for information on the adoption of ASU 2018-12.

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

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

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Amortization of defined benefit plans, before income tax ( 7 ) ( 2 ) 1

Income tax (expense) benefit 1 — —

Amortization of defined benefit plans, net of income tax ( 6 ) ( 2 ) 1

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This plan was fully funded at December 31, 2023 and 2022 with assets in excess of the accumulated benefit obligation of $ 5 million and $ 3 million, respectively.

The Company did not make any employer contributions to this qualified plan during 2022 or 2021.

The Company did no t make any employer contributions to this qualified plan during 2023 or 2022.

The non-qualified defined benefit pension plan and the postretirement plan had a combined accumulated benefit obligation totaling $ 83 million and $ 82 million at December 31, 2023 and 2022, respectively.

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Resolution of prior years

— ( 76 ) ( 4 )

Dividends received deduction ( 34 ) ( 36 ) ( 37 )

2 unchanged sentences

Return to provision

( 5 ) ( 6 ) 14

Adjustments to deferred tax

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Net unrealized investment losses

$ 1,074 $ 1,513

Net operating loss carryforwards 1,845 1,247

1 unchanged sentence

Tax credit carryforwards 190 183

Intangibles 40 42

Employee benefits 29 13

Intangibles 64 52

Total deferred income tax assets 3,415 3,397

3 unchanged sentences

Policyholder liabilities and receivables 863 954

Net unrealized investment gains — 1,122

Investments, including derivatives — 196

Total deferred income tax liabilities 1,521 1,642

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(In millions)

2024-2028 $ — $ 44

2029-2033 — 122

2034-2038 20 —

2039-2043 5 —

Indefinite — —

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Income Tax (continued)

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

Accordingly, a valuation allowance of $ 18 million has been established on the deferred tax assets related to the tax credit carryforwards at December 31, 2022.

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

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Tax Sharing Agreements

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

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

This tax sharing agreement states that federal taxes will be computed on a modified separate return basis with benefits for losses.

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

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

Brighthouse Financial, Inc.

and its includable subsidiaries entered into a tax sharing agreement to join a non-life consolidated federal income tax return.

NELICO and the non-life subsidiaries of Brighthouse Life Insurance Company will file their own federal income tax returns.

For the periods prior to the Separation, BHF and certain of its subsidiaries filed a consolidated federal income tax return with MetLife and its insurance and non-insurance subsidiaries.

Current taxes (and the benefits of tax attributes such as losses) are allocated to BHF, and its includable subsidiaries, under a tax sharing agreement with MetLife.

This tax sharing agreement states that federal taxes are computed on a modified separate return basis with benefits for losses.

For periods after the Separation through the year ended December 31, 2022, BHF entered into two separate tax sharing agreements.

Brighthouse Life Insurance Company, BHNY and BRCD entered into a tax sharing agreement to join a consolidated federal income tax return.

BHF and certain of its non-insurance subsidiaries entered into a tax sharing agreement to join a consolidated federal income tax return.

The tax sharing agreements state that federal taxes are computed on a modified separate return basis with benefit for losses.

NELICO and the non-insurance subsidiaries of Brighthouse Life Insurance Company filed their own federal income tax returns.

BHF and certain of its subsidiaries, including its insurance and reinsurance subsidiaries, intend to file a consolidated federal income tax return for the year ended December 31, 2023 and future years.

In furtherance thereof, such parties intend to join a single tax sharing agreement, pursuant to which federal taxes are computed on a modified separate return basis with benefits for losses.

Brighthouse Financial, Inc.

8 unchanged sentences

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

For the year ended December 31, 2022, MetLife paid Brighthouse Financial $ 7 million, and for the years ended December 31, 2021 and 2020, Brighthouse Financial paid MetLife $ 81 million and $ 0 , respectively, under the tax separation agreement.

At December 31, 2022, there was a current income tax receivable of $ 19 million, and at December 31, 2021, there was a current income tax payable of $ 76 million related to this agreement.

For the years ended December 31, 2023 and 2022, MetLife paid Brighthouse Financial $ 0 and $ 7 million, respectively, and for the year ended December 31, 2021, Brighthouse Financial paid MetLife $ 81 million, under the tax separation agreement.

At December 31, 2023 and 2022, there was a current income tax receivable of $ 21 million and $ 19 million, respectively, related to this agreement.

Earnings Per Common Share

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Diluted $ ( 18.39 ) $ 51.30 $ 18.39

For the years ended December 31, 2022, 2021 and 2020, 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 year ended December 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 years ended December 31, 2022 and 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 years ended December 31, 2022 and 2021.

See Note 13 for further information on share-based compensation plans.

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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 who own or owned policies issued in Georgia;

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

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.

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The Company intends to vigorously defend this matter.

MOVEit Data Security Incident Litigation

Progress Software Corporation, et al .

District Court, District of Massachusetts, filed October 3, 2023).

BHF has been named as a defendant in a purported class action lawsuit.

The action relates to a data security incident at an alleged third-party vendor, PBI Research Services (“PBI”), and allegedly involves the MOVEit file transfer system that PBI uses in its provision of services (“MOVEit Incident”).

As it relates to BHF, plaintiff seeks to certify a subclass of persons whose private information was allegedly maintained by BHF and accessed or acquired in connection with the MOVEit Incident.

Plaintiff alleges, among other things, that BHF negligently chose to utilize PBI to store and transfer plaintiff’s and purported class members’ private information despite PBI’s use of the MOVEit software which plaintiff contends contained security vulnerabilities.

The complaint asserts claims against BHF for negligence, negligence per se, and unjust enrichment, and plaintiff seeks declaratory and injunctive relief, damages, attorneys’ fees and prejudgment interest.

BHF intends to vigorously defend this matter.

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

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

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Contingencies, Commitments and Guarantees (continued)

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

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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.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Contingencies, Commitments and Guarantees (continued)

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.

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 December 31, 2022, the Company estimates the range of reasonably possible losses in excess of the amounts accrued for certain other loss contingencies to be from zero up to approximately $ 125 million, which are primarily associated with the reinsurance-related matters described above.

In the matters where the Company’s subsidiaries are acting as the reinsured or the reinsurer, such matters have involved 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.

For tax-related matters, this has involved disputes with taxing authorities, ongoing audits, evaluation of filing positions and any potential assessments related thereto.

As of December 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 $ 200 million for the aforementioned matters.

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

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The amounts of these unfunded commitments were $ 1.4 billion and $ 1.9 billion at December 31, 2023 and 2022, respectively.

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Contingencies, Commitments and Guarantees (continued)

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.

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

Brighthouse Financial, Inc.

Notes to the Consolidated Financial Statements (continued)

Quarterly Results of Operations (Unaudited)

As described in Note 1, the Company adopted LDTI effective January 1, 2023.

LDTI resulted in significant changes to the measurement, presentation and disclosure requirements for long-duration insurance contracts.

The transition date was January 1, 2021.

The unaudited quarterly results of operations for 2023 and 2022, which include the impacts of LDTI, are summarized in the table below:

Three Months Ended

March 31, June 30, September 30, December 31,

(In millions, except per share data)

Total revenues $ 1,284 $ 263 $ 1,170 $ 1,400

Total expenses $ 1,937 $ 500 $ 580 $ 2,574

Net income (loss) $ ( 497 ) $ ( 175 ) $ 481 $ ( 916 )

Net income (loss) attributable to noncontrolling interests $ 2 $ — $ 2 $ 1

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

$ ( 499 ) $ ( 175 ) $ 479 $ ( 917 )

Preferred stock dividends $ 26 $ 25 $ 26 $ 25

Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders $ ( 525 ) $ ( 200 ) $ 453 $ ( 942 )

Basic earnings per common share (1) $ ( 7.72 ) $ ( 3.01 ) $ 6.92 $ ( 14.70 )

Diluted earnings per common share (1) $ ( 7.72 ) $ ( 3.01 ) $ 6.89 $ ( 14.70 )

Total revenues $ 2,013 $ 3,866 $ 1,121 $ ( 127 )

Total expenses $ 10 $ 1,689 $ 609 $ ( 167 )

Net income (loss) $ 1,587 $ 1,745 $ 415 $ 137

Net income (loss) attributable to noncontrolling interests $ 2 $ — $ 2 $ 1

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

$ 1,585 $ 1,745 $ 413 $ 136

Preferred stock dividends $ 27 $ 26 $ 25 $ 26

Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders $ 1,558 $ 1,719 $ 388 $ 110

Basic earnings per common share (1) $ 20.27 $ 23.04 $ 5.42 $ 1.61

Diluted earnings per common share (1) $ 20.11 $ 22.91 $ 5.39 $ 1.59

_______________

(1) See Note 17 for additional information on the calculation of EPS.

Subsequent Event

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Condensed Balance Sheets

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

$ 106 and $ 0 , respectively;

allowance for credit losses of $ 0 and $ 0 , respectively)

Short-term investments, principally at estimated fair value 580 763

Other invested assets, at estimated fair value — 3

Investment in subsidiary 7,710 8,297

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Long-term and short-term debt $ 3,859 $ 3,643

Deferred income tax liability 17 —

Other liabilities 347 349

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

Certain amounts in the prior years’ condensed financial statements of the Parent Company have changed.

See Note 1 of the Notes to the Consolidated Financial Statements for information regarding the adoption of new guidance on long-duration contracts as of January 1, 2023.

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

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Investment in Subsidiary

During the year ended December 31, 2022, BHF received non-cash distributions of $ 350 million from Brighthouse Holdings, LLC (“BH Holdings”) and did not make any capital contributions to BH Holdings.

The non-cash distributions received related to reductions of short-term intercompany loans of $ 250 million from Brighthouse Services, LLC to BH Holdings and of $ 100 million from BH Holdings to BHF.

During the years ended December 31, 2021 and 2020, BHF received cash distributions of $ 310 million and $ 1.5 billion, respectively, from BH Holdings and did not make any capital contributions to BH Holdings.

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

During the year ended December 31, 2023, BHF received cash distributions of $ 350 million and non-cash distributions of $ 100 million from Brighthouse Holdings, LLC (“BH Holdings”) and did not make any capital contributions to BH Holdings.

Cash distributions received during the year ended December 31, 2023 primarily related to $ 266 million of ordinary cash dividends paid by Brighthouse Life Insurance Company to BH Holdings.

The non-cash distributions received related to reductions of short-term intercompany loans of $ 50 million from Brighthouse Services, LLC to BH Holdings (which was then contributed to BHF) and an additional $ 50 million from BH Holdings to BHF.

During the year ended December 31, 2022, BHF received non-cash distributions of $ 350 million from BH Holdings and did not make any capital contributions to BH Holdings.

The non-cash distributions received related to reductions of short-term intercompany loans of $ 250 million from Brighthouse Services, LLC to BH Holdings (which was then contributed to BHF) and an additional $ 100 million from BH Holdings to BHF.

During the year ended December 31, 2021, BHF received cash distributions of $ 310 million from BH Holdings and did not make any capital contributions to BH Holdings.

Distributions received during the year ended December 31, 2021 primarily related to $ 550 million of ordinary cash dividends paid by Brighthouse Life Insurance Company to BH Holdings.

Long-term and Short-term Debt

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(1) Includes unamortized debt issuance costs, discounts and premiums, as applicable, totaling net $ 30 million and $ 32 million for the senior notes and junior subordinated debentures on a combined basis at December 31, 2023 and 2022, respectively.

The aggregate maturities of long-term and short-term debt at December 31, 2022 were $ 513 million in 2023, $ 0 in each of 2024, 2025, and 2026, $ 757 million in 2027, and $ 2.4 billion thereafter.

Interest expense related to long-term and short-term debt of $ 155 million, $ 159 million and $ 183 million for the years ended December 31, 2022, 2021 and 2020, respectively, is included in other expenses.

Senior Notes and Junior Subordinated Debentures

See Note 9 of the Notes to the Consolidated Financial Statements for information regarding the unaffiliated senior notes and junior subordinated debentures.

Brighthouse Financial, Inc.

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(Parent Company Only)

The aggregate maturities of long-term and short-term debt at December 31, 2023 were $ 727 million in 2024, $ 0 in each of 2025 and 2026, $ 757 million in 2027, $ 0 in 2028, and $ 2.4 billion thereafter.

Interest expense related to long-term and short-term debt of $ 178 million, $ 155 million and $ 159 million for the years ended December 31, 2023, 2022 and 2021, respectively, is included in other expenses.

Senior Notes and Junior Subordinated Debentures

See Note 12 of the Notes to the Consolidated Financial Statements for information regarding the unaffiliated senior notes and junior subordinated debentures.

Credit Facilities

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

During the years ended December 31, 2022, 2021 and 2020, BHF borrowed $ 1.0 billion, $ 1.1 billion and $ 1.2 billion, respectively, from certain of its non-insurance subsidiaries and repaid $ 811 million, $ 805 million and $ 1.0 billion of such borrowings during the years ended December 31, 2022, 2021 and 2020, respectively.

During the years ended December 31, 2023, 2022 and 2021, BHF borrowed $ 753 million, $ 1.0 billion and $ 1.1 billion, respectively, from certain of its non-insurance subsidiaries and repaid $ 439 million, $ 811 million and $ 805 million of such borrowings during the years ended December 31, 2023, 2022 and 2021, respectively.

The weighted average interest rate on short-term intercompany loans outstanding at December 31, 2023, 2022 and 2021 was 4.73 %, 3.73 % and 0.05 %, respectively.

75 unchanged sentences

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data