Brighthouse Financial, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations Page Introduction 52 Executive Summary 52 Industry Trends and Uncertainties 53 Summary of Critical Accounting Estimates 55 Non-GAAP and Other Financial Disclosures 55 Results of Operations 57 Investments 65 Derivatives 74 Policyholder Liabilities 75 Liquidity and Capital Resources 78 Note Regarding Forward-Looking Statements 86 51 Table of Contents For purposes of this discussion, “Brighthouse Financial,” the “Company,” “we,” “our” and “us” refer to Brighthouse Financial, Inc. and its subsidiaries, and “BHF” refers solely to Brighthouse Financial, Inc., the ultimate holding company for all of our subsidiaries, and not to any of its subsidiaries. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with (i) the Interim Condensed Consolidated Financial Statements and related notes included elsewhere herein; (ii) our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”) filed with the U.S. Securities and Exchange Commission (“SEC”) on February 22, 2024; and (iii) our current reports on Form 8-K filed in 2024. Introduction This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations, financial condition and cash flows of Brighthouse Financial for the periods indicated. Prior to discussing our results of operations, we present information that we believe is useful to understanding the discussion of our financial results. This information precedes our results of operations discussion and is most beneficial when read in the sequence presented. A summary of key informational sections is as follows: • “Executive Summary” provides summarized information regarding our business, segments and financial results. • “Industry Trends and Uncertainties” discusses updates and changes to a number of trends and uncertainties included in our 2023 Annual Report that we believe may materially affect our future financial condition, results of operations or cash flows. • “Summary of Critical Accounting Estimates” explains the most critical estimates and judgments applied in determining our results in accordance with accounting principles generally accepted in the United States of America (“GAAP”). • “Non-GAAP and Other Financial Disclosures” defines key financial measures presented in our results of operations discussion that are not calculated in accordance with GAAP but are used by management in evaluating company and segment performance. As described in this section, adjusted earnings is presented by key business activities which are derived, but different, from the line items presented in the GAAP statements of operations. This section also refers to certain other terms used to describe our insurance business and financial and operating metrics but is not intended to be exhaustive. Our Results of Operations discussion and analysis presents a review for the three months ended March 31, 2024 and 2023 and period-over-period comparisons between these periods. Executive Summary We are one of the largest providers of annuity and life insurance products in the U.S. through multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners. We are organized into three segments: (i) Annuities, (ii) Life and (iii) Run-off, which consists primarily of products that are no longer actively sold and are separately managed. In addition, we report certain of our results of operations in Corporate & Other. See “Business — Segments and Corporate & Other” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary” included in our 2023 Annual Report, as well as Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information regarding our segments and Corporate & Other. 52 Table of Contents Net income (loss) available to shareholders and adjusted earnings, a non-GAAP financial measure, were as follows: Three Months Ended March 31, 2024 2023 (In millions) Income (loss) available to shareholders before provision for income tax $ (642) $ (681) Less: Provision for income tax expense (benefit) (123) (156) Net income (loss) available to shareholders (1) $ (519) $ (525) Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends (1) $ (110) $ 230 Less: Provision for income tax expense (benefit) (12) 35 Adjusted earnings (loss) (1) $ (98) $ 195 __________________ (1) We use the term “net income (loss) available to shareholders” to refer to “net income (loss) available to Brighthouse Financial, Inc.’s common shareholders” and “adjusted loss” to refer to negative adjusted earnings values throughout the results of operations discussions. For the three months ended March 31, 2024, we had net loss available to shareholders of $519 million and an adjusted loss of $98 million compared to net loss available to shareholders of $525 million and adjusted earnings of $195 million for the three months ended March 31, 2023. Net loss available to shareholders for the three months ended March 31, 2024 primarily reflects net unfavorable changes in the estimated fair value of our variable annuity guaranteed benefit riders due to market factors, an unfavorable change in the estimated fair value of freestanding interest rate derivatives we use to hedge our universal life with secondary guarantees (“ULSG”) business resulting from increasing long-term interest rates, a pre-tax adjusted loss resulting from the conclusion of a reinsurance premium rate increase retroactive to September 2019 and the related impacts, and net investment losses on sales of fixed maturity securities. See “— Non-GAAP and Other Financial Disclosures.” See “— Results of Operations” for a detailed discussion of our results. Industry Trends and Uncertainties Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we discuss a number of trends and uncertainties that we believe may materially affect our future financial condition, results of operations or cash flows. Where these trends or uncertainties are specific to a particular aspect of our business, we often include such a discussion under the relevant caption of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, as part of our broader analysis of that area of our business. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends and Uncertainties” included in our 2023 Annual Report, as amended or supplemented herein, for a comprehensive discussion of some of the key general trends and uncertainties that have influenced the development of our business and our historical financial performance and that we believe will continue to influence our business and results of operations in the future. Financial and Economic Environment Our business and results of operations are materially affected by conditions in the capital markets and the economy generally. Stressed conditions, volatility and disruptions in the capital markets or financial asset classes can have an adverse effect on us. Equity market performance can affect our profitability for variable annuities and other separate account products as a result of the effects it has on product demand, revenues, expenses, reserves and our risk management effectiveness. The level of long-term interest rates and the shape of the yield curve can have a negative effect on the profitability for variable annuities, as well as the demand for, and the profitability of, spread-based products such as fixed annuities, index-linked annuities and universal life insurance. Low interest rates and risk premium, including credit spread, affect new money rates on invested assets and the cost of product guarantees. Insurance premium growth and demand for our products is impacted by the general health of U.S. economic activity. A sustained or material increase in inflation could also affect our business in several ways. During inflationary periods, the value of fixed income investments falls which could increase realized and unrealized losses. Interest rates have increased and may continue to increase due to central bank policy responses to combat inflation, which may positively impact our business in certain respects, but could also increase the risk of a recession or an 53 Table of Contents equity market downturn and could negatively impact various portions of our business, including our investment portfolio. Inflation also increases our expenses (including, among others, for labor and third-party services), potentially putting pressure on profitability if such costs cannot be passed through to policyholders in our product prices. Prolonged and elevated inflation could adversely affect the financial markets and the economy generally and dispelling it may require governments to pursue a restrictive fiscal and monetary policy, which could constrain overall economic activity and inhibit revenue growth. Events involving limited liquidity, defaults, nonperformance or other adverse developments that affect financial institutions or the financial services industry generally, or concerns or rumors about events of these kinds or other similar risks, could adversely affect market-wide liquidity, which could increase the risk of a recession or an equity market downturn and negatively impact various portions of our business, including our investment portfolio. See “Risk Factors — Economic Environment and Capital Markets-Related Risks — If difficult conditions in the capital markets and the U.S. economy generally persist or are perceived to persist, they may materially adversely affect our business and results of operations” and “Risk Factors — Risks Related to our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations” included in our 2023 Annual Report. We continue to closely monitor political and economic conditions that might contribute to market volatility and their impact on our business operations, investment portfolio and derivatives, such as global inflation, uncertainty and instability in certain asset classes (including commercial real estate), supply chain disruptions and recent geopolitical conflicts, including in Europe and the Middle East. See “— Investments — Current Environment” herein, as well as “Risk Factors — Economic Environment and Capital Markets-Related Risks,” “Risk Factors — Risks Related to our Investment Portfolio,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends and Uncertainties” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Investments” included in our 2023 Annual Report for a detailed discussion of financial and economic impacts on our business, including the potential impacts of interest rate risk and inflation risk on our investments and overall business. Regulatory Developments Our insurance subsidiaries and Brighthouse Reinsurance Company of Delaware (“BRCD”) are primarily regulated at the state level, with some products and services also subject to federal regulation. In addition, BHF and its insurance subsidiaries are subject to regulation under the insurance holding company laws of various U.S. jurisdictions. Furthermore, some of our operations, products and services are subject to the Employee Retirement Income Security Act of 1974, consumer protection laws, securities, broker-dealer and investment advisor regulations, as well as environmental and unclaimed property laws and regulations. See “Business — Regulation,” as well as “Risk Factors — Regulatory and Legal Risks” included in our 2023 Annual Report, as amended or supplemented by our subsequent quarterly reports under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends and Uncertainties — Regulatory Developments.” Department of Labor Fiduciary Advice Rule A regulatory action by the Department of Labor (“DOL”) (the “Fiduciary Advice Rule”), which became effective on February 16, 2021, reinstated the text of the DOL’s 1975 investment advice regulation defining what constitutes fiduciary “investment advice” to Employee Retirement Income Security Act (“ERISA”) Plans and Individual Retirement Accounts (“IRA”) and provides guidance interpreting such regulation. Under the Fiduciary Advice Rule, individuals or entities providing investment advice would be considered fiduciaries under ERISA or the Internal Revenue Code of 1986, as amended, as applicable, and would therefore be required to act solely in the interest of ERISA Plan participants or IRA beneficiaries, or risk exposure to fiduciary liability with respect to their advice. They would further be prohibited from receiving compensation for this advice, unless an exemption applied. On April 23, 2024, the DOL issued a final Fiduciary Advice Rule, which was originally proposed in October 2023, that updates the definition of an “investment advice fiduciary” under ERISA and amends related administrative Prohibited Transaction Exemptions (each, a “PTE”), including PTE 2020-02 (which allows fiduciaries to receive compensation in connection with providing investment advice, including advice with respect to roll overs, that would otherwise be prohibited as a result of their fiduciary relationship to the ERISA Plan or IRA) and PTE 84-24 (which, as amended by the final Fiduciary Advice Rule, is available exclusively to independent producer fiduciaries receiving reasonable compensation for products that are not considered securities in connection with providing investment advice, including advice with respect to roll overs, that would otherwise be prohibited as a result of their fiduciary relationship to an ERISA plan or IRA). The Fiduciary Advice Rule broadens the circumstances under which financial institutions, including insurance companies, could be considered fiduciaries to ERISA plans and IRA investors. We are assessing the potential 54 Table of Contents impacts of the Fiduciary Advice Rule and cannot currently predict whether, or the extent to which, the Fiduciary Advice Rule may impact us, including with respect to sales of our products through our independent distribution partners, changes in our compliance requirements, product offerings or compensation practices, or increase our litigation risk, any of which could adversely affect our financial condition and results of operations. We may also need to take certain additional actions to comply with, or assist our distributors in their compliance with, the Fiduciary Advice Rule. We will continue to monitor developments regarding the new rule. See “Business — Regulation — Standard of Conduct Regulation — Department of Labor Fiduciary Advice Rule” included in our 2023 Annual Report for additional information regarding the Fiduciary Advice Rule. Summary of Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the Interim Condensed Consolidated Financial Statements. The most critical estimates include those used in determining: • liability for future policy benefits; • estimated fair values of market risk benefits (“MRB”); • estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation; and • measurement of income taxes and the valuation of deferred tax assets. In applying our accounting policies, we make subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our business and operations. Actual results could differ from these estimates. The above critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and Note 1 of the Notes to the Consolidated Financial Statements included in our 2023 Annual Report. Non-GAAP and Other Financial Disclosures Our definitions of non-GAAP and other financial measures may differ from those used by other companies. Non-GAAP Financial Disclosures Adjusted Earnings In this report, we present adjusted earnings as a measure of our performance that is not calculated in accordance with GAAP. Adjusted earnings is used by management to evaluate performance and facilitate comparisons to industry results. We believe the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of our performance by the investor community by highlighting the results of operations and the underlying profitability drivers of our business. Adjusted earnings should not be viewed as a substitute for net income (loss) available to Brighthouse Financial, Inc.’s common shareholders, which is the most directly comparable financial measure calculated in accordance with GAAP. See “— Results of Operations” for a reconciliation of adjusted earnings to net income (loss) available to Brighthouse Financial, Inc.’s common shareholders. Adjusted earnings, which may be positive or negative, focuses on our primary businesses by excluding the impact of market volatility, which could distort trends. The Company uses the term “adjusted loss” throughout this report to refer to negative adjusted earnings values. The following are significant items excluded from total revenues in calculating adjusted earnings: • Net investment gains (losses); and • 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”). 55 Table of Contents The following are significant items excluded from total expenses in calculating adjusted earnings: • Change in MRBs; and • 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. We present adjusted earnings in a manner consistent with management’s view of the primary business activities that drive the profitability of our core businesses. The following table illustrates how each component of adjusted earnings is calculated from the GAAP statements of operations line items: Component of Adjusted Earnings How Derived from GAAP (1) (i) Fee income (i) Universal life and investment-type product policy fees plus Other revenues . (ii) Net investment spread (ii) Net investment income plus Investment Hedge Adjustments reduced by Interest credited to policyholder account balances (excluding Market Value Adjustments) and interest on future policy benefits. (iii) Insurance-related activities (iii) Premiums less Policyholder benefits and claims , excluding interest on future policy benefits. (iv) Amortization of DAC and VOBA (iv) Amortization of deferred policy acquisition costs (“DAC”) and value of business acquired (“VOBA”) . (v) Other expenses (v) Other expenses. (vi) Provision for income tax expense (benefit) (vi) Tax impact of the above items, 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. __________________ (1) Italicized items indicate GAAP statements of operations line items. Consistent with GAAP guidance for segment reporting, adjusted earnings is also our GAAP measure of segment performance. Accordingly, we report adjusted earnings by segment in Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements. Adjusted Net Investment Income We present adjusted net investment income to measure our performance for management purposes, and we believe it enhances the understanding of our investment portfolio results. Adjusted net investment income represents GAAP net investment income plus Investment Hedge Adjustments. For a reconciliation of adjusted net investment income to net investment income, the most directly comparable GAAP measure, see table note (3) to the summary yield table located in “— Investments — Current Environment — Investment Portfolio Results.” Other Financial Disclosures Similar to adjusted net investment income, we present net investment income yields as a performance measure we believe enhances the understanding of our investment portfolio results. Net investment income yields are calculated on adjusted net investment income as a percentage of average quarterly asset carrying values. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties. Investment fee and expense yields are calculated as a percentage of average quarterly asset estimated fair values. Asset estimated fair values exclude collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties. 56 Table of Contents Results of Operations Consolidated Results for the Three Months Ended March 31, 2024 and 2023 Unless otherwise noted, all amounts in the following discussions of our results of operations are stated before income tax except for adjusted earnings, which are presented net of income tax. Three Months Ended March 31, 2024 2023 (In millions) Revenues Premiums $ 202 $ 197 Universal life and investment-type product policy fees 436 606 Net investment income 1,254 1,059 Other revenues 145 93 Net investment gains (losses) (42) (96) Net derivative gains (losses) (1,921) (575) Total revenues 74 1,284 Expenses Policyholder benefits and claims (including liability remeasurement gains (losses) of $0 and $0, respectively) 968 687 Interest credited to policyholder account balances 502 422 Amortization of DAC and VOBA 151 156 Change in market risk benefits (1,440) 194 Interest expense on debt 38 38 Other expenses 469 440 Total expenses 688 1,937 Income (loss) before provision for income tax (614) (653) Provision for income tax expense (benefit) (123) (156) Net income (loss) (491) (497) Less: Net income (loss) attributable to noncontrolling interests 2 2 Net income (loss) attributable to Brighthouse Financial, Inc. (493) (499) Less: Preferred stock dividends 26 26 Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders $ (519) $ (525) The components of net income (loss) available to shareholders were as follows: Three Months Ended March 31, 2024 2023 (In millions) Change in market risk benefits $ 1,440 $ (194) Net investment gains (losses) (42) (96) Net derivative gains (losses), excluding investment hedge adjustments (1,934) (613) Market value adjustments 4 (8) Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends (110) 230 Income (loss) available to shareholders before provision for income tax (642) (681) Provision for income tax expense (benefit) (123) (156) Net income (loss) available to shareholders $ (519) $ (525) 57 Table of Contents Three Months Ended March 31, 2024 Compared with the Three Months Ended March 31, 2023 Loss available to shareholders before provision for income tax was $642 million ($519 million, net of income tax), a lower loss of $39 million ($6 million, net of income tax) from loss available to shareholders before provision for income tax of $681 million ($525 million, net of income tax) in the prior period. The lower loss before provision for income tax was driven by the following favorable items: • lower losses from variable annuity guaranteed benefit riders, see “— Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Three Months Ended March 31, 2024 and 2023”; • the impact of equity markets on equity options we use to hedge our non-variable annuity business, as equity markets increased more in the current period than the prior period; and • net investment gains (losses) reflecting lower net losses on sales of fixed maturity securities and lower net losses on mortgage loans due to a smaller increase in the allowance for credit losses. The lower loss before provision for income tax was partially offset by the following unfavorable items: • the impact of long-term interest rates on interest rate derivatives used to manage interest rate exposure in our ULSG business, as the long-term interest rate increased in the current period resulting in a loss of $212 million and decreased in the prior period resulting in a gain of $141 million; and • lower pre-tax adjusted earnings, as discussed in greater detail below. The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of 20% in the current period compared to 24% in the prior period. The decrease in the effective tax rate was driven by a lower loss before provision for income tax as discussed above. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction, tax credits and current period non-recurring items. Reconciliation of Net Income (Loss) Available to Shareholders to Adjusted Earnings The reconciliation of net income (loss) available to shareholders to adjusted earnings was as follows: Three Months Ended March 31, 2024 Annuities Life Run-off Corporate & Other Total (In millions) Net income (loss) available to shareholders $ (15) $ (46) $ (164) $ (294) $ (519) Add: Provision for income tax expense (benefit) 72 (10) (474) 289 (123) Income (loss) available to shareholders before provision for income tax 57 (56) (638) (5) (642) Less: Net investment gains (losses) (24) (16) (6) 4 (42) Less: Net derivative gains (losses), excluding investment hedge adjustments of $ 13 (1,744) 6 (204) 8 (1,934) Less: Change in market risk benefits 1,440 — — — 1,440 Less: Market value adjustments — — 4 — 4 Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends 385 (46) (432) (17) (110) Less: Provision for income tax expense (benefit) 72 (10) (91) 17 (12) Adjusted earnings (loss) $ 313 $ (36) $ (341) $ (34) $ (98) 58 Table of Contents Three Months Ended March 31, 2023 Annuities Life Run-off Corporate & Other Total (In millions) Net income (loss) available to shareholders $ (697) $ (2) $ 260 $ (86) $ (525) Add: Provision for income tax expense (benefit) 67 (1) (265) 43 (156) Income (loss) available to shareholders before provision for income tax (630) (3) (5) (43) (681) Less: Net investment gains (losses) (72) (3) (7) (14) (96) Less: Net derivative gains (losses), excluding investment hedge adjustments of $ 38 (751) — 144 (6) (613) Less: Change in market risk benefits (194) — — — (194) Less: Market value adjustments — — (8) — (8) Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends 387 — (134) (23) 230 Less: Provision for income tax expense (benefit) 73 (1) (28) (9) 35 Adjusted earnings (loss) $ 314 $ 1 $ (106) $ (14) $ 195 Consolidated Results for the Three Months Ended March 31, 2024 and 2023 — Adjusted Earnings The components of adjusted earnings were as follows: Three Months Ended March 31, 2024 2023 (In millions) Fee income $ 581 $ 699 Net investment spread 733 656 Insurance-related activities (738) (463) Amortization of DAC and VOBA (151) (156) Other expenses (507) (478) Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends 28 28 Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends (110) 230 Provision for income tax expense (benefit) (12) 35 Adjusted earnings (loss) $ (98) $ 195 Three Months Ended March 31, 2024 Compared with the Three Months Ended March 31, 2023 Adjusted loss was $98 million in the current period, a decrease of $293 million. Key net unfavorable impacts were: • higher net costs associated with insurance-related activities due to: ◦ an increase in liability balances in our Run-off segment resulting from a reinsurance premium rate increase associated with the conclusion of a reinsurance arbitration; and ◦ a decrease in income annuity underwriting margins; partially offset by ◦ lower paid claims, net of reinsurance, in our Life and Run-off segments; • lower net fee income due to: ◦ higher ceded cost of insurance fees in our Life and Run-off segments related to the conclusion of the aforementioned reinsurance arbitration; 59 Table of Contents partially offset by ◦ higher reinsurance fees commensurate with an increase in deposit balances resulting from increased sales in our Annuity segment; and • higher other expenses due to: ◦ the conclusion of the aforementioned reinsurance arbitration; and ◦ higher deferred compensation and operational expenses; partially offset by ◦ lower transition services agreement expenses. Key net favorable impact was: • higher net investment spread due to: ◦ higher returns on other limited partnerships; ◦ higher investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at higher yields than the portfolio average; and ◦ higher average invested assets resulting from positive net flows in the general account; partially offset by ◦ higher interest credited to policyholders due to higher account balances. The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 15% in the current period compared to 14% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction, tax credits and current period non-recurring items. 60 Table of Contents Segments and Corporate & Other Results for the Three Months Ended March 31, 2024 and 2023 — Adjusted Earnings Annuities The components of adjusted earnings for our Annuities segment were as follows: Three Months Ended March 31, 2024 2023 (In millions) Fee income $ 545 $ 510 Net investment spread 373 353 Insurance-related activities (62) (7) Amortization of DAC and VOBA (127) (129) Other expenses (344) (340) Pre-tax adjusted earnings 385 387 Provision for income tax expense (benefit) 72 73 Adjusted earnings $ 313 $ 314 A significant portion of our adjusted earnings is driven by separate account balances related to our variable annuity business, as these balances determine asset-based fee income and commissions. The changes in our variable annuities separate account balances are presented in Note 5 of the Notes to the Interim Condensed Consolidated Financial Statements. Three Months Ended March 31, 2024 Compared with the Three Months Ended March 31, 2023 Adjusted earnings were $313 million in the current period, a decrease of $1 million. Key unfavorable impact was higher costs associated with insurance-related activities due to a decrease in income annuity underwriting margins. Key net favorable impacts were: • higher fee income due to higher reinsurance fees commensurate with an increase in deposit balances resulting from increased sales; and • higher net investment spread due to: ◦ higher average invested assets resulting from positive net flows in the general account; and ◦ higher investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at higher yields than the portfolio average; partially offset by ◦ higher interest credited to policyholders due to higher account balances. The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 19% in both the current period and the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction. 61 Table of Contents Life The components of adjusted earnings for our Life segment were as follows: Three Months Ended March 31, 2024 2023 (In millions) Fee income $ (9) $ 73 Net investment spread 54 52 Insurance-related activities (3) (48) Amortization of DAC and VOBA (24) (27) Other expenses (64) (50) Pre-tax adjusted earnings (loss) (46) — Provision for income tax expense (benefit) (10) (1) Adjusted earnings (loss) $ (36) $ 1 Three Months Ended March 31, 2024 Compared with the Three Months Ended March 31, 2023 Adjusted loss was $36 million in the current period, a decrease of $37 million. Key unfavorable impacts were lower fee income due to higher ceded cost of insurance fees and higher other expenses, both related to the conclusion of a reinsurance arbitration. Key favorable impact was lower costs associated with insurance-related activities due to lower paid claims, net of reinsurance. The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in a higher effective tax rate in the current period compared to the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction. Run-off The components of adjusted earnings for our Run-off segment were as follows: Three Months Ended March 31, 2024 2023 (In millions) Fee income $ 40 $ 126 Net investment spread 247 188 Insurance-related activities (673) (408) Amortization of DAC and VOBA — — Other expenses (46) (40) Pre-tax adjusted earnings (loss) (432) (134) Provision for income tax expense (benefit) (91) (28) Adjusted earnings (loss) $ (341) $ (106) Three Months Ended March 31, 2024 Compared with the Three Months Ended March 31, 2023 Adjusted loss was $341 million in the current period, a higher loss of $235 million. Key net unfavorable impacts were: • higher net costs associated with insurance-related activities due to: ◦ an increase in liability balances resulting from a reinsurance premium rate increase associated with the conclusion of a reinsurance arbitration; partially offset by 62 Table of Contents ◦ lower paid claims, net of reinsurance; • lower fee income due to higher ceded cost of insurance fees and higher other expenses, both related to the conclusion of the aforementioned reinsurance arbitration. Key favorable impact was a higher net investment spread due to higher returns on other limited partnerships. The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 21% in both the current period and the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction. Corporate & Other The components of adjusted earnings for Corporate & Other were as follows: Three Months Ended March 31, 2024 2023 (In millions) Fee income $ 5 $ (10) Net investment spread 59 63 Insurance-related activities — — Amortization of DAC and VOBA — — Other expenses (53) (48) Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends 28 28 Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends (17) (23) Provision for income tax expense (benefit) 17 (9) Adjusted earnings (loss) $ (34) $ (14) Three Months Ended March 31, 2024 Compared with the Three Months Ended March 31, 2023 Adjusted loss was $34 million in the current period, a higher loss of $20 million. The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in a higher effective tax rate in the current period compared to the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction, tax credits and current period non-recurring items. We believe the effective tax rate for Corporate & Other is not generally meaningful, neither on a standalone basis nor for comparison to prior periods, since taxes for Corporate & Other are derived from the difference between the overall consolidated effective tax rate and total taxes for the combined operating segments. 63 Table of Contents Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Three Months Ended March 31, 2024 and 2023 The overall impact on income (loss) available to shareholders before provision for income tax from the performance of annuity guaranteed benefits and Shield ® Level Annuity (“Shield” and “Shield annuity”) liabilities, which includes (i) changes in the fair value of liabilities and reinsurance, (ii) fees net of claims and (iii) the mark-to-market of hedges, was as follows: Three Months Ended March 31, 2024 2023 (In millions) Market risk benefits mark-to-market $ 1,343 $ (304) Annuity guaranteed benefit rider fees, net of claims 116 118 Ceded reinsurance (19) (2) Total changes attributable to annuity guaranteed benefits 1,440 (188) Variable annuity hedges 67 365 Shield embedded derivatives (1,817) (1,073) Total $ (310) $ (896) Three Months Ended March 31, 2024 Compared with the Three Months Ended March 31, 2023 Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the three months ended March 31, 2024, primarily driven by: • decreases in annuity guaranteed benefits liabilities due to increasing interest rates and equity markets; • favorable changes in variable annuity hedges due to increasing equity markets, partially offset by increasing long-term interest rates; and • unfavorable changes in Shield embedded derivatives due to increasing equity markets. Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the three months ended March 31, 2023, primarily driven by: • increases in annuity guaranteed benefits liabilities due to decreasing interest rates, partially offset by increasing equity markets; • favorable changes in variable annuity hedges due to decreasing long-term interest rates, partially offset by increasing equity markets; and • unfavorable changes in Shield embedded derivatives due to increasing equity markets. 64 Table of Contents Investments Investment Risk Management Strategy We manage the risks related to our investment portfolio through asset-type allocation as well as industry and issuer diversification. We also use risk limits to promote diversification by asset sector, avoid concentrations in any single issuer and limit overall aggregate credit and equity risk exposure. We manage real estate risk through geographic, property type and product type diversification and asset allocation. Interest rate risk is managed as part of our Asset Liability Management (“ALM”) strategies. We also utilize product design to manage interest rate risk (e.g., market value adjustment features and surrender charges). These ALM strategies include maintaining an investment portfolio that targets a weighted average duration that reflects the duration of our estimated liability cash flow profile. For certain of our liability portfolios, it is not possible to invest assets for the full liability duration, thereby creating some asset/liability mismatch. We also use certain derivatives in the management of credit, interest rate, equity market and foreign currency exchange rate risks. Investment Management Agreements Other than our derivatives trading, which we manage in-house, we have engaged a select group of experienced external asset management firms to manage the investment of the assets comprising our general account portfolio and certain separate account assets of our insurance subsidiaries, as well as assets of BHF and our reinsurance subsidiary, BRCD. Current Environment Our business and results of operations are materially affected by conditions in capital markets and the economy, generally. As a U.S. insurance company, we are affected by the monetary policy of the Federal Reserve Board (the “Federal Reserve”) in the U.S. The Federal Reserve may increase or decrease the federal funds rate in the future, which may have an impact on the pricing levels of risk-bearing investments and may adversely impact the level of product sales. We are also affected by the monetary policy of central banks around the world due to the diversification of our investment portfolio. See “— Industry Trends and Uncertainties — Financial and Economic Environment.” In 2023, the Federal Reserve increased the target range for the federal funds rate four times — from between 4.25% and 4.50% to between 5.25% and 5.50%. These target range increases have contributed to the net unrealized loss position in our investment portfolio, and any additional target increases could similarly contribute to further increases in net unrealized losses. In the current period, as a result of recent increases in interest rates, the unrealized losses on our fixed maturity securities exceeded the unrealized gains. If interest rates rise further, our unrealized gains would decrease, and our unrealized losses would increase, perhaps substantially. See “Risk Factors — Risks Related to Our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations” included in our 2023 Annual Report. Selected Sector Investments Recent elevated levels of market volatility have affected the performance of various asset classes. See “Risk Factors — Risks Related to Our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations,” and “Risk Factors — Risks Related to Our Investment Portfolio — Ongoing military actions, the continued threat of terrorism, climate change as well as other catastrophic events may adversely affect the value of our investment portfolio and the level of claim losses we incur” included in our 2023 Annual Report. There has been an increased market focus on commercial real estate, including office properties, as a result of companies shifting to hybrid work arrangements and the resulting impact on the demand for office space. We have direct commercial real estate exposure through mortgage loans and certain structured securities, which include residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”). In addition, we have direct and indirect exposure through certain financial industry corporate fixed maturity securities. See “Risk Factors — Risks Related to Our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, 65 Table of Contents including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations” included in our 2023 Annual Report, as well as “— Investments — Mortgage Loans” and Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information on mortgage loans, including credit quality by portfolio segment and commercial mortgage loans by property type. Additionally, see “— Investments — Fixed Maturity Securities Available-for-sale — Structured Securities” for information on Structured Securities, including security type, risk profile and ratings profile as well as “— Investments — Fixed Maturity Securities Available-for-sale — U.S. and Foreign Corporate Fixed Maturity Securities” for our exposure to the finance industry. We monitor direct and indirect investment exposure across sectors and asset classes and adjust our level of investment exposure, as appropriate. At this time, we do not expect that our general account investments in these sectors and asset classes will have a material adverse effect on our results of operations or financial condition. Investment Portfolio Results The following summary yield table presents the yield and adjusted net investment income for our investment portfolio for the periods indicated. As described below, this table reflects certain differences from the presentation of net investment income presented in the GAAP statements of operations. This summary yield table presentation is consistent with how we measure our investment performance for management purposes, and we believe it enhances understanding of our investment portfolio results. Three Months Ended March 31, 2024 2023 Yield % Amount Yield % Amount (Dollars in millions) Investment income (1) 4.39 % $ 1,305 3.96 % $ 1,136 Investment fees and expenses (2) (0.14) (38) (0.15) (39) Adjusted net investment income (3) 4.25 % $ 1,267 3.81 % $ 1,097 _______________ (1) Investment income yields are calculated as investment income as a percentage of average quarterly asset carrying values. Investment income excludes recognized gains and losses and reflects the adjustments discussed in table note (3) below to arrive at adjusted net investment income. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties. (2) Investment fee and expense yields are calculated as a percentage of average quarterly asset estimated fair values. Asset estimated fair values exclude collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties. (3) Adjusted net investment income presented in the yield table varies from the most directly comparable GAAP measure due to certain reclassifications, as presented below. Three Months Ended March 31, 2024 2023 (In millions) Net investment income $ 1,254 $ 1,059 Less: Investment hedge adjustments (13) (38) Adjusted net investment income — in the above yield table $ 1,267 $ 1,097 See “— Results of Operations — Consolidated Results for the Three Months Ended March 31, 2024 and 2023” for an analysis of the period-over-period changes in net investment income. 66 Table of Contents Fixed Maturity Securities Available-for-sale Fixed maturity securities held by type (public or private) were as follows at: March 31, 2024 December 31, 2023 Estimated Fair Value % of Total Estimated Fair Value % of Total (Dollars in millions) Publicly-traded $ 66,747 82.9 % $ 67,056 82.8 % Privately-placed 13,727 17.1 13,935 17.2 Total fixed maturity securities $ 80,474 100.0 % $ 80,991 100.0 % Percentage of cash and invested assets 67.2 % 67.9 % See Note 9 of the Notes to the Interim Condensed Consolidated Financial Statements for further information on our valuation controls and procedures including our formal process to challenge any prices received from independent pricing services that are not considered representative of estimated fair value. See Notes 1 and 7 of the Notes to the Interim Condensed Consolidated Financial Statements for further information about fixed maturity securities by sector, contractual maturities, continuous gross unrealized losses and the allowance for credit losses. Fixed Maturity Securities Credit Quality — Ratings See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Fixed Maturity Securities Available-for-sale — Fixed Maturity Securities Credit Quality — Ratings” included in our 2023 Annual Report for a discussion of the credit quality ratings assigned by Nationally Recognized Statistical Rating Organizations (“NRSRO”), credit quality designations assigned by and methodologies used by the Securities Valuation Office of the National Association of Insurance Commissioners (“NAIC”) for fixed maturity securities and the methodologies adopted by the NAIC for certain Structured Securities. The following table presents total fixed maturity securities by NRSRO rating and the applicable NAIC designation from the NAIC published comparison of NRSRO ratings to NAIC designations, except for certain Structured Securities, which are presented using the NAIC methodologies, as well as the percentage, based on estimated fair value that each NAIC designation is comprised of at: March 31, 2024 December 31, 2023 NAIC Designation NRSRO Rating Amortized Cost Allowance for Credit Losses Unrealized Gain (Loss) Estimated Fair Value % of Total Amortized Cost Allowance for Credit Losses Unrealized Gain (Loss) Estimated Fair Value % of Total (Dollars in millions) 1 Aaa/Aa/A $ 57,451 $ 5 $ (4,301) $ 53,145 66.0 % $ 56,944 $ 5 $ (3,586) $ 53,353 65.8 % 2 Baa 27,623 — (2,558) 25,065 31.1 27,567 — (2,331) 25,236 31.2 Subtotal investment grade 85,074 5 (6,859) 78,210 97.1 % 84,511 5 (5,917) 78,589 97.0 % 3 Ba 1,775 — (120) 1,655 2.1 1,839 — (122) 1,717 2.1 4 B 523 8 (38) 477 0.6 593 3 (44) 546 0.7 5 Caa and lower 105 3 (21) 81 0.1 113 2 (24) 87 0.1 6 In or near default 78 11 (16) 51 0.1 75 11 (12) 52 0.1 Subtotal below investment grade 2,481 22 (195) 2,264 2.9 % 2,620 16 (202) 2,402 3.0 % Total fixed maturity securities $ 87,555 $ 27 $ (7,054) $ 80,474 100.0 % $ 87,131 $ 21 $ (6,119) $ 80,991 100.0 % 67 Table of Contents The following tables present total fixed maturity securities, based on estimated fair value, by sector classification and by NRSRO rating and the applicable NAIC designations from the NAIC published comparison of NRSRO ratings to NAIC designations, except for certain Structured Securities, which are presented using the NAIC methodologies as described above: Fixed Maturity Securities — by Sector & Credit Quality Rating NAIC Designation 1 2 3 4 5 6 Total Estimated Fair Value NRSRO Rating Aaa/Aa/A Baa Ba B Caa and Lower In or Near Default (In millions) March 31, 2024 U.S. corporate $ 16,839 $ 17,342 $ 1,249 $ 399 $ 57 $ 51 $ 35,937 Foreign corporate 5,162 6,212 324 61 — — 11,759 U.S. government and agency 7,521 112 — — — — 7,633 RMBS 7,432 10 15 4 1 — 7,462 CMBS 6,075 350 23 1 5 — 6,454 ABS 5,826 599 18 12 10 — 6,465 State and political subdivision 3,697 56 — — 8 — 3,761 Foreign government 593 384 26 — — — 1,003 Total fixed maturity securities $ 53,145 $ 25,065 $ 1,655 $ 477 $ 81 $ 51 $ 80,474 December 31, 2023 U.S. corporate $ 16,617 $ 17,260 $ 1,293 $ 476 $ 57 $ 52 $ 35,755 Foreign corporate 4,841 6,423 344 57 — — 11,665 U.S. government and agency 8,306 113 — — — — 8,419 RMBS 7,390 18 12 1 9 — 7,430 CMBS 6,039 344 24 — 3 — 6,410 ABS 5,746 621 17 12 10 — 6,406 State and political subdivision 3,808 57 1 — 8 — 3,874 Foreign government 606 400 26 — — — 1,032 Total fixed maturity securities $ 53,353 $ 25,236 $ 1,717 $ 546 $ 87 $ 52 $ 80,991 U.S. and Foreign Corporate Fixed Maturity Securities We maintain a diversified portfolio of corporate fixed maturity securities across industries and issuers. Our portfolio does not have any exposure to any single issuer in excess of 1% of total investments and the top ten holdings in aggregate comprise 1% of total investments at both March 31, 2024 and December 31, 2023. Our U.S. and foreign corporate fixed maturity securities holdings by industry were as follows at: March 31, 2024 December 31, 2023 Estimated Fair Value % of Total Estimated Fair Value % of Total (Dollars in millions) Industrial $ 14,719 30.9 % $ 14,751 31.1 % Finance 13,236 27.7 12,957 27.3 Consumer 10,800 22.6 10,683 22.6 Utility 6,283 13.2 6,273 13.2 Communications 2,658 5.6 2,756 5.8 Total $ 47,696 100.0 % $ 47,420 100.0 % Structured Securities We held $20.4 billion and $20.2 billion of Structured Securities, at estimated fair value, at March 31, 2024 and December 31, 2023, respectively, as presented in the RMBS, CMBS and ABS sections below. 68 Table of Contents RMBS Our RMBS holdings are diversified by security type, risk profile and ratings profile, which were as follows at: March 31, 2024 December 31, 2023 Estimated Fair Value % of Total Net Unrealized Gains (Losses) Estimated Fair Value % of Total Net Unrealized Gains (Losses) (Dollars in millions) Security type: Pass-through securities $ 3,887 52.1 % $ (564) $ 3,922 52.8 % $ (491) Collateralized mortgage obligations 3,575 47.9 (308) 3,508 47.2 (273) Total RMBS $ 7,462 100.0 % $ (872) $ 7,430 100.0 % $ (764) Risk profile: Agency $ 6,153 82.4 % $ (833) $ 6,152 82.8 % $ (724) Prime 154 2.1 (16) 152 2.0 (16) Alt-A 799 10.7 (22) 756 10.2 (23) Sub-prime 356 4.8 (1) 370 5.0 (1) Total RMBS $ 7,462 100.0 % $ (872) $ 7,430 100.0 % $ (764) Ratings profile: Rated Aaa (1) $ 618 8.3 % $ 554 7.5 % Designated NAIC 1 $ 7,432 99.6 % $ 7,390 99.5 % _______________ (1) During the year ended December 31, 2023, Fitch Ratings downgraded the U.S. credit rating from Aaa to Aa1, which resulted in a decrease in Aaa assets in our RMBS holdings. Historically, our exposure to sub-prime RMBS holdings has been managed by focusing primarily on senior tranche securities, stress-testing the portfolio with severe loss assumptions and closely monitoring the performance of the portfolio. Our sub-prime RMBS portfolio consists predominantly of securities that were purchased after 2012 at significant discounts to par value and discounts to the expected principal recovery value of these securities. The vast majority of these securities are investment grade under the NAIC designations (e.g., NAIC 1 and NAIC 2). CMBS Our CMBS holdings are diversified by vintage year, which were as follows at: March 31, 2024 December 31, 2023 Amortized Cost Estimated Fair Value Amortized Cost Estimated Fair Value (In millions) 2005 - 2011 $ 89 $ 80 $ 89 $ 83 2012 2 1 2 1 2013 37 32 43 36 2014 234 214 283 256 2015 948 887 949 876 2016 461 430 461 425 2017 717 660 717 655 2018 1,630 1,521 1,633 1,521 2019 952 834 993 869 2020 535 448 538 442 2021 799 758 813 760 2022 463 452 451 436 2023 59 59 51 50 2024 79 78 — — Total $ 7,005 $ 6,454 $ 7,023 $ 6,410 69 Table of Contents The estimated fair value of CMBS rated Aaa using rating agency ratings was $4.4 billion, or 68.5% of total CMBS, and designated NAIC 1 was $6.1 billion, or 94.1% of total CMBS, at March 31, 2024. The estimated fair value of CMBS Aaa rating agency ratings was $4.4 billion, or 68.5% of total CMBS, and designated NAIC 1 was $6.0 billion, or 94.2% of total CMBS, at December 31, 2023. ABS Our ABS holdings are diversified by both collateral type and issuer. Our ABS holdings by collateral type and ratings profile were as follows at: March 31, 2024 December 31, 2023 Estimated Fair Value % of Total Net Unrealized Gains (Losses) Estimated Fair Value % of Total Net Unrealized Gains (Losses) (Dollars in millions) Collateral type: Collateralized obligations $ 3,801 58.8 % $ 9 $ 3,819 59.6 % $ (9) Automobile loans 520 8.1 (3) 487 7.6 (2) Student loans 389 6.0 (19) 397 6.2 (22) Consumer loans 331 5.1 (16) 346 5.4 (19) Credit card loans 240 3.7 (5) 262 4.1 (6) Other loans 1,184 18.3 (48) 1,095 17.1 (50) Total $ 6,465 100.0 % $ (82) $ 6,406 100.0 % $ (108) Ratings profile: Rated Aaa $ 3,612 55.9 % $ 3,548 55.4 % Designated NAIC 1 $ 5,826 90.1 % $ 5,746 89.7 % Allowance for Credit Losses for Fixed Maturity Securities See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information about the evaluation of fixed maturity securities for an allowance for credit losses or write-offs due to uncollectibility. Securities Lending We participate in a securities lending program whereby securities are loaned to third parties, primarily brokerage firms and commercial banks. We obtain collateral, usually cash, in an amount generally equal to 102% of the estimated fair value of the securities loaned, which is obtained at the inception of a loan and maintained at a level greater than or equal to 100% for the duration of the loan. The estimated fair value of the securities loaned is monitored on a daily basis with additional collateral obtained as necessary throughout the duration of the loan. Securities loaned under such transactions may be sold or re-pledged by the transferee. We are liable to return to our counterparties the cash collateral under our control. Security collateral received from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reflected in the financial statements. These transactions are treated as financing arrangements and the associated cash collateral liability is recorded at the amount of the cash received. See “— Liquidity and Capital Resources — The Company — Primary Uses of Liquidity and Capital — Securities Lending” and Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information regarding our securities lending program. 70 Table of Contents Mortgage Loans Our mortgage loans are principally collateralized by commercial, agricultural and residential properties. Information regarding mortgage loans by portfolio segment is summarized as follows at: March 31, 2024 December 31, 2023 Amortized Cost % of Total Allowance for Credit Losses % of Amortized Cost Amortized Cost % of Total Allowance for Credit Losses % of Amortized Cost (Dollars in millions) Commercial $ 13,208 57.9 % $ 78 0.6 % $ 13,193 58.3 % $ 69 0.5 % Agricultural 4,539 19.9 19 0.4 % 4,445 19.6 19 0.4 % Residential 5,065 22.2 45 0.9 % 5,007 22.1 49 1.0 % Total $ 22,812 100.0 % $ 142 0.6 % $ 22,645 100.0 % $ 137 0.6 % Our mortgage loan portfolio is diversified by both geographic region and property type to reduce the risk of concentration. The percentage of our commercial and agricultural mortgage loan portfolios collateralized by properties located in the U.S. were 98% at both March 31, 2024 and December 31, 2023. The remainder was collateralized by properties located outside of the U.S. At March 31, 2024, the carrying value as a percentage of total commercial and agricultural mortgage loans for the top three states in the U.S. was 17% for California, 11% for Texas and 8% for New York. Additionally, we manage risk when originating commercial and agricultural mortgage loans by generally lending up to 75% of the estimated fair value of the underlying real estate collateral. Our residential mortgage loan portfolio is managed in a similar manner to reduce risk of concentration. All residential mortgage loans were collateralized by properties located in the U.S. at both March 31, 2024 and December 31, 2023. At March 31, 2024, the carrying value as a percentage of total residential mortgage loans for the top three states in the U.S. was 39% for California, 11% for Florida and 7% for New York. 71 Table of Contents Commercial Mortgage Loans by Geographic Region and Property Type . Commercial mortgage loans are the largest component of the mortgage loan invested asset class. The diversification across geographic regions and property types of commercial mortgage loans was as follows at: March 31, 2024 December 31, 2023 Amount % of Total Amount % of Total (Dollars in millions) Geographic region: South Atlantic $ 2,767 21.0 % $ 2,747 20.8 % Pacific 2,547 19.3 2,562 19.4 Middle Atlantic 2,150 16.3 2,153 16.3 West South Central 1,512 11.4 1,513 11.5 Mountain 1,181 8.9 1,182 9.0 East North Central 737 5.6 737 5.6 New England 728 5.5 735 5.6 International 399 3.0 409 3.1 East South Central 343 2.6 306 2.3 West North Central 342 2.6 347 2.6 Multi-region and Other 502 3.8 502 3.8 Total recorded investment 13,208 100.0 % 13,193 100.0 % Less: allowance for credit losses 78 69 Carrying value, net of allowance for credit losses $ 13,130 $ 13,124 Property type: Apartment $ 5,320 40.3 % $ 5,371 40.8 % Office 3,144 23.8 3,185 24.1 Industrial 2,122 16.1 2,092 15.9 Retail 1,797 13.6 1,747 13.2 Hotel 825 6.2 798 6.0 Total recorded investment 13,208 100.0 % 13,193 100.0 % Less: allowance for credit losses 78 69 Carrying value, net of allowance for credit losses $ 13,130 $ 13,124 Mortgage Loan Credit Quality — Monitoring Process. Our mortgage loan investments are monitored on an ongoing basis, including a review of loans that are current, past due, restructured and under foreclosure. Quarterly, we conduct a formal review of the portfolio with our investment managers. See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information on mortgage loans by credit quality indicator, past due status, nonaccrual status and modified mortgage loans. Our commercial mortgage loans are reviewed on an ongoing basis. These reviews may include an analysis of the property financial statements and rent roll, lease rollover analysis, property inspections, market analysis, estimated valuations of the underlying collateral, loan-to-value ratios, debt-service coverage ratios and tenant creditworthiness. The monitoring process focuses on higher risk loans, which include those that are classified as restructured, delinquent or in foreclosure, as well as loans with higher loan-to-value ratios and lower debt-service coverage ratios. The monitoring process for agricultural mortgage loans is generally similar, with a focus on higher risk loans, such as loans with higher loan-to-value ratios, including reviews on a geographic and sector basis. Our residential mortgage loans are reviewed on an ongoing basis. See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information on our evaluation of residential mortgage loans and related measurement of allowance for credit losses. 72 Table of Contents Loan-to-value ratios and debt-service coverage ratios are common measures in the assessment of the quality of commercial mortgage loans. Loan-to-value ratios are a common measure in the assessment of the quality of agricultural mortgage loans. Loan-to-value ratios compare the amount of the loan to the estimated fair value of the underlying collateral. A loan-to-value ratio greater than 100% indicates that the loan amount is greater than the collateral value. A loan-to-value ratio of less than 100% indicates an excess of collateral value over the loan amount. Generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss. The debt-service coverage ratio compares a property’s net operating income to amounts needed to service the principal and interest due under the loan. Generally, the lower the debt-service coverage ratio, the higher the risk of experiencing a credit loss. For our commercial mortgage loans, our average loan-to-value ratio was 65% at both March 31, 2024 and December 31, 2023, and our average debt-service coverage ratio was 2.3x at both March 31, 2024 and December 31, 2023. The debt-service coverage ratio, as well as the values utilized in calculating the ratio, is updated annually on a rolling basis, with a portion of the portfolio updated each quarter. In addition, the loan-to-value ratio is routinely updated for all but the lowest risk loans as part of our ongoing review of our commercial mortgage loan portfolio. For our agricultural mortgage loans, our average loan-to-value ratio was 47% at both March 31, 2024 and December 31, 2023. The values utilized in calculating the agricultural mortgage loan loan-to-value ratio are developed in connection with the ongoing review of the agricultural loan portfolio and are routinely updated. Mortgage Loan Allowance for Credit Losses . See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information about how the allowance for credit losses is established and monitored, as well as activity in and balances of the allowance for credit losses for the three months ended March 31, 2024 and 2023. Limited Partnerships and Limited Liability Companies The carrying values of our limited partnerships and limited liability companies (“LLC”) were as follows at: March 31, 2024 December 31, 2023 (In millions) Other limited partnerships $ 4,143 $ 4,140 Real estate limited partnerships and LLCs (1) 777 806 Total $ 4,920 $ 4,946 __________________ (1) The estimated fair value of real estate limited partnerships and LLCs was $887 million and $927 million at March 31, 2024 and December 31, 2023, respectively. Cash distributions on these investments are generated from investment gains, operating income from the underlying investments of the funds and liquidation of the underlying investments of the funds. We estimate that the underlying investment of the private equity funds will typically be liquidated over the next 10 to 20 years. Other Invested Assets The carrying value of our other invested assets by type was as follows at: March 31, 2024 December 31, 2023 Carrying Value % of Total Carrying Value % of Total (Dollars in millions) Freestanding derivatives with positive estimated fair values $ 3,845 81.0 % $ 3,714 84.2 % Company-owned life insurance 546 11.5 340 7.7 Federal Home Loan Bank stock 245 5.2 245 5.5 Tax credit and renewable energy partnerships 51 1.1 52 1.2 Leveraged leases, net of non-recourse debt 48 1.0 47 1.1 Other 11 0.2 11 0.3 Total $ 4,746 100.0 % $ 4,409 100.0 % 73 Table of Contents Derivatives Derivative Risks We are exposed to various risks relating to our ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market risks. We use a variety of strategies to manage these risks, including the use of derivatives. See Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements for: • information about the gross notional amount, estimated fair value, and primary underlying risk exposure of our derivatives by type of hedge designation, excluding embedded derivatives held at March 31, 2024 and December 31, 2023; and • the effects of derivatives in cash flow, fair value, or non-qualifying hedge relationships on the statements of operations for the three months ended March 31, 2024 and 2023. See “Business — Segments and Corporate & Other — Annuities,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies” included in our 2023 Annual Report for more information about our use of derivatives by major hedging programs. In addition, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Annual Actuarial Review” and “Risk Factors — Risks Related to our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations” included in our 2023 Annual Report. Fair Value Hierarchy See Note 9 of the Notes to the Interim Condensed Consolidated Financial Statements for derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy, as well as a rollforward of the fair value measurements for derivatives measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs as discussed below. The valuation of Level 3 derivatives involves the use of significant unobservable inputs and generally requires a higher degree of management judgment or estimation than the valuations of Level 1 and Level 2 derivatives. Although Level 3 inputs are unobservable, management believes they are consistent with what other market participants would use when pricing such instruments and are considered appropriate given the circumstances. The use of different inputs or methodologies could have a material effect on the estimated fair value of Level 3 derivatives and could materially affect net income. Derivatives categorized as Level 3 at March 31, 2024 include: credit default swaps priced using unobservable credit spreads, or that are priced through independent broker quotations; equity hybrid options with unobservable volatility inputs; and foreign currency swaps with certain unobservable inputs. Credit Risk See Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements for information about how we manage credit risk related to derivatives and for the estimated fair value of our net derivative assets and net derivative liabilities after the application of master netting agreements and collateral. See “Risk Factors — Risks Related to our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations” included in our 2023 Annual Report. Our policy is not to offset the fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement. This policy applies to the recognition of derivatives on the balance sheet and does not affect our legal right of offset. 74 Table of Contents Credit Derivatives The gross notional amount and estimated fair value of credit default swaps were as follows at: March 31, 2024 December 31, 2023 Gross Notional Amount Estimated Fair Value Gross Notional Amount Estimated Fair Value (In millions) Written $ 1,405 $ 29 $ 1,405 $ 27 Total $ 1,405 $ 29 $ 1,405 $ 27 The maximum amount at risk related to our written credit default swaps is equal to the corresponding gross notional amount. In a replication transaction, we pair an asset on our balance sheet with a written credit default swap to synthetically replicate a corporate bond, a core asset holding of life insurance companies. Replications are entered into in accordance with the guidelines approved by state insurance regulators and the NAIC and are an important tool in managing the overall corporate credit risk within the Company. In order to match our long-dated insurance liabilities, we seek to buy long-dated corporate bonds. In some instances, these may not be readily available in the market, or they may be issued by corporations to which we already have significant corporate credit exposure. For example, by purchasing Treasury bonds (or other high-quality assets) and associating them with written credit default swaps on the desired corporate credit name, we can replicate the desired bond exposures and meet our ALM needs. This can expose the Company to changes in credit spreads as the written credit default swap tenor is shorter than the maturity of Treasury bonds. Embedded Derivatives See Note 9 of the Notes to the Interim Condensed Consolidated Financial Statements for (i) information about embedded derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy and (ii) a rollforward of the fair value measurements for net embedded derivatives measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs. See “— Summary of Critical Accounting Estimates — Derivatives” for additional information on the estimates and assumptions that affect embedded derivatives. Policyholder Liabilities We establish, and carry as liabilities, actuarially determined amounts that are calculated to meet policy obligations or to provide for future annuity and life insurance benefit payments. Amounts for actuarial liabilities are computed and reported in the financial statements in conformity with GAAP. See “— Summary of Critical Accounting Estimates” for more details on policyholder liabilities. Future Policy Benefits We establish liabilities for future amounts payable under insurance policies. See Note 3 of the Notes to the Interim Condensed Consolidated Financial Statements. Policyholder Account Balances Policyholder account balance liabilities are established for products with an explicit account value and generally equal to the balance accrued to the contract holder, which includes accrued interest credited, but excludes the impact of any applicable charge that may be incurred upon surrender. See Note 3 of the Notes to the Interim Condensed Consolidated Financial Statements. Market Risk Benefits We issue certain variable annuity products with guaranteed minimum benefits (“GMxB”) that provide the policyholder a minimum return based on their initial deposit (i.e., 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. Variable annuity guaranteed benefits are classified as MRBs and measured at fair value. Certain index-linked annuity products may also have GMxBs classified as MRBs. See Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements and “Quantitative and Qualitative Disclosures About Market Risk.” Select information that management considers relevant to understanding our variable annuity risk management strategy has been included below. 75 Table of Contents Net Amount at Risk The net amount at risk (“NAR”) for the guaranteed minimum income benefits (“GMIB”) is 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 our potential economic exposure to such guarantees in the event all contract holders were to annuitize on the balance sheet date, even though the guaranteed amount under the contract may not be annuitized until after the waiting period of the contract. The NAR for the guaranteed minimum withdrawal benefits (“GMWB”) is the amount of guaranteed benefits in excess of the account values (if any) as of the balance sheet date and assumes utilization of benefits by all contract holders as of the balance sheet date. Only a small portion of the Benefit Base is available for withdrawal on an annual basis. The NAR for the guaranteed minimum accumulation benefits (“GMAB”) is the amount of guaranteed benefits in excess of the account values (if any) as of the balance sheet date and assumes utilization of benefits by all contract holders as of the balance sheet. The NAR for the GMAB is not available until the GMAB maturity date. The NAR for the guaranteed minimum death benefits (“GMDB”) is the amount of death benefit in excess of the account value (if any) as of the balance sheet date. It represents the amount of the claim we would incur if death claims were made 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. Our variable annuity account value and NAR by type of GMxB were as follows at: March 31, 2024 December 31, 2023 Account Value Death Benefit NAR (1) Living Benefit NAR (1) % of Account Value In-the-Money (2) Account Value Death Benefit NAR (1) Living Benefit NAR (1) % of Account Value In-the-Money (2) (Dollars in millions) GMIB $ 32,618 $ 3,595 $ 3,492 27.9 % $ 32,079 $ 4,089 $ 3,600 30.3 % GMIB Max with EDB (3) 7,630 6,029 495 32.0 % 7,605 6,092 470 31.9 % GMIB Max without EDB (3) 4,343 113 117 18.4 % 4,344 133 107 17.8 % GMWB 20,362 305 205 7.5 % 19,961 541 249 10.2 % GMAB 425 1 2 9.8 % 431 4 4 17.9 % GMDB only (other than EDB) (3) 17,404 972 — N/A 16,768 1,056 — N/A EDB only (3) 3,180 1,254 — N/A 3,109 1,325 — N/A Total $ 85,962 $ 12,269 $ 4,311 $ 84,297 $ 13,240 $ 4,430 __________________ (1) The “Death Benefit NAR” and “Living Benefit NAR” are not additive at the contract level. (2) In-the-money is defined as any contract with a living benefit NAR in excess of zero. (3) Enhanced Death Benefit (“EDB”). 76 Table of Contents Reserves Under GAAP, variable annuity guarantees are classified as MRBs, measured at estimated fair value, and are reported in market risk benefit assets and liabilities on the consolidated balance sheets, with changes reported in change in market risk benefits on the consolidated statements of operations, except for changes related to nonperformance risk, which are reported in other comprehensive income on the consolidated statements of comprehensive income (loss). Additionally, the index protection and accumulation features of Shield annuities are accounted for as embedded derivatives, measured at estimated fair value, and are reported in policyholder account balances on the consolidated balance sheets, with changes reported in net derivative gains (losses) on the consolidated statements of operations. These liabilities were valued at $9.4 billion at March 31, 2024. Our variable annuity MRBs by type of GMxB were as follows at: March 31, 2024 December 31, 2023 (In millions) GMIB $ 8,226 $ 9,485 GMWB 13 41 GMDB 717 788 Total $ 8,956 $ 10,314 The estimated fair value of these guarantees can change significantly due to changes in equity market performance, equity market volatility or interest rates. Fair values are also affected by our assumptions around mortality, separate account returns and policyholder behavior, including lapse, annuitization and withdrawal rates. See “Risk Factors — Risks Related to Our Business — Guarantees within certain of our annuity products may decrease our earnings, decrease our capitalization, increase the volatility of our results, result in higher risk management costs and expose us to increased market risk” included in our 2023 Annual Report. Derivatives Hedging Variable Annuity Guarantees The gross notional amount and estimated fair value of the derivatives hedging our in-force variable annuity guarantees and ULSG business viewed in aggregate in our interest rate hedging program were as follows at: March 31, 2024 December 31, 2023 Instrument Type Gross Notional Amount (1) Estimated Fair Value Gross Notional Amount (1) Estimated Fair Value Assets Liabilities Assets Liabilities (In millions) Interest rate swaps $ 31,188 $ 76 $ 144 $ 23,037 $ 71 $ 50 Interest rate options 23,580 20 269 33,680 47 167 Interest rate forwards 19,649 92 2,325 16,155 32 1,877 Hybrid options (2) 300 — — 270 — — Total $ 74,717 $ 188 $ 2,738 $ 73,142 $ 150 $ 2,094 __________________ (1) The gross notional amounts presented do not necessarily represent the relative economic coverage provided by derivative instruments because certain positions were closed out by entering into offsetting positions that are not netted in the above table. (2) Hybrid options have equity exposure in addition to interest rate exposure. 77 Table of Contents The gross notional amount and estimated fair value of the derivatives held in our variable annuity hedging program were as follows at: March 31, 2024 December 31, 2023 Instrument Type Gross Notional Amount (1) Estimated Fair Value Gross Notional Amount (1) Estimated Fair Value Assets Liabilities Assets Liabilities (In millions) Equity index options $ 19,463 $ 765 $ 876 $ 16,183 $ 472 $ 680 Equity total return swaps 65,287 1,940 1,719 53,742 2,236 2,137 Interest rate swaps 31,188 76 144 30,864 92 103 Interest rate options 17,080 20 144 27,580 39 123 Interest rate forwards 11,151 — 824 8,519 — 619 Hybrid options 300 1 — 270 — — Total $ 144,469 $ 2,802 $ 3,707 $ 137,158 $ 2,839 $ 3,662 __________________ (1) The gross notional amounts presented do not necessarily represent the relative economic coverage provided by option instruments because certain positions were closed out by entering into offsetting positions that are not netted in the above table. Period-to-period changes in the estimated fair value of these hedges affect our net income, as well as stockholders’ equity and these effects can be material in any given period. See “Risk Factors — Risks Related to Our Business — Our variable annuity exposure risk management strategy may not be effective, may result in significant volatility in our profitability measures or may negatively affect our statutory capital,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies” included in our 2023 Annual Report. Liquidity and Capital Resources Our business and results of operations are materially affected by conditions in the global capital markets and the economy generally. Stressed conditions, volatility or disruptions in global capital markets, particular markets or financial asset classes can impact us adversely, in part because we have a large investment portfolio and our insurance liabilities and derivatives are sensitive to changing market factors. Changing conditions in the global capital markets and the economy may affect our financing costs and market interest rates for our debt or equity securities. For further information regarding market factors that could affect our ability to meet liquidity and capital needs, see “— Industry Trends and Uncertainties — Financial and Economic Environment,” as well as “Risk Factors — Economic Environment and Capital Markets-Related Risks” and “Risk Factors — Risks Related to Our Investment Portfolio” included in our 2023 Annual Report. Liquidity and Capital Management Based upon our capitalization, expectations regarding maintaining our business mix, ratings, and funding sources available to us, we believe we have sufficient liquidity to meet business requirements in current market conditions and certain stress scenarios. Our Board of Directors and senior management are directly involved in the governance of the capital management process, including proposed changes to the annual capital plan and capital targets. We continuously monitor and adjust our liquidity and capital plans in light of market conditions, as well as changing needs and opportunities. We maintain a substantial short-term liquidity position, which was $4.0 billion and $3.8 billion at March 31, 2024 and December 31, 2023, respectively. Short-term liquidity is comprised of cash and cash equivalents and short-term investments, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include amounts received in connection with securities lending, derivatives and assets held on deposit or in trust. An integral part of our liquidity management includes managing our level of liquid assets, which was $44.5 billion and $45.2 billion at March 31, 2024 and December 31, 2023, respectively. Liquid assets are comprised of cash and cash equivalents, short-term investments and publicly-traded securities, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include amounts received in connection with securities lending, funding agreements, derivatives and assets held on deposit or in trust. 78 Table of Contents The Company Liquidity Liquidity refers to our ability to generate adequate cash flows from our normal operations to meet the cash requirements of our operating, investing and financing activities. We determine our liquidity needs based on a rolling 12-month forecast by portfolio of invested assets, which we monitor daily. We adjust the general account asset and derivatives mix and general account asset maturities based on this rolling 12-month forecast. To support this forecast, we conduct cash flow and stress testing, which reflect the impact of various scenarios, including (i) the potential increase in our requirement to pledge additional collateral or return collateral to our counterparties, (ii) a reduction in new business sales, and (iii) the risk of early contract holder and policyholder withdrawals, as well as lapses and surrenders of existing policies and contracts. We include provisions limiting withdrawal rights in many of our products, which deter the customer from making withdrawals prior to the maturity date of the product. If significant cash is required beyond our anticipated liquidity needs, we have various alternatives available depending on market conditions and the amount and timing of the liquidity need. These available alternative sources of liquidity include cash flows from operations, sales of liquid assets and funding sources, including secured funding agreements, unsecured credit facilities and secured committed facilities. Under certain adverse market and economic conditions, our access to liquidity may deteriorate, or the cost to access liquidity may increase. See “Risk Factors — Economic Environment and Capital Markets-Related Risks — Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs and our access to capital” in our 2023 Annual Report. Capital We manage our capital position to maintain our financial strength and credit ratings. Our capital position is supported by our ability to generate cash flows within our insurance subsidiaries, our ability to effectively manage the risks of our businesses and our expected ability to borrow funds and raise additional capital to meet operating and growth needs under a variety of market and economic conditions. We monitor our debt-to-capital ratio using an average of our key leverage ratios as calculated by A.M. Best, Fitch, Moody’s and S&P, and we aim to maintain a ratio commensurate with our financial strength and credit ratings. As such, we may opportunistically look to pursue additional financing over time, which may include borrowings under credit facilities, the issuance of debt, equity or hybrid securities, the incurrence of term loans, or the refinancing or extinguishment of existing indebtedness. There can be no assurance that we will be able to complete any such financing transactions on terms and conditions favorable to us or at all. In support of our target combined risk-based capital (“RBC”) ratio of 400% to 450% in normal market conditions, we expect to continue to maintain a capital and exposure risk management program that targets total assets supporting our variable annuity contracts at or above the average of the worst two percent of a set of capital markets scenarios over the life of the contracts level in normal market conditions. With our risk management focus on the core drivers of our combined RBC ratio, we believe we can better manage our RBC in stressed market scenarios. We have a share repurchase program under which repurchases may be made through open market purchases, including pursuant to 10b5-1 plans or pursuant to accelerated stock repurchase plans, or through privately negotiated transactions, from time to time at management’s discretion in accordance with applicable legal requirements. Common stock repurchases are dependent upon several factors, including our capital position, liquidity, financial strength and credit ratings, general market conditions, the market price of our common stock compared to management’s assessment of the stock’s underlying value and applicable regulatory approvals, as well as other legal and accounting factors. We currently have no plans to declare and pay dividends on our common stock. Any future declaration and payment of dividends or other distributions or returns of capital will be at the discretion of our Board of Directors and will depend on and be subject to our financial condition, results of operations, cash needs, regulatory and other constraints, capital requirements (including capital requirements of our insurance subsidiaries), contractual restrictions and any other factors that our Board of Directors deems relevant in making such a determination. Therefore, there can be no assurance that we will pay any dividends or make other distributions or returns of capital on our common stock, or as to the amount of any such dividends, distributions or returns of capital. 79 Table of Contents Sources and Uses of Liquidity and Capital Our primary sources and uses of liquidity and capital were as follows at: Three Months Ended March 31, 2024 2023 (In millions) Sources: Changes in policyholder account balances, net $ 1,367 $ 1,566 Financing element on certain derivative instruments and other derivative related transactions, net — 91 Total sources 1,367 1,657 Uses: Operating activities, net 530 500 Investing activities, net 625 1,325 Changes in payables for collateral under securities loaned and other transactions, net 17 159 Dividends on preferred stock 26 26 Treasury stock acquired in connection with share repurchases 62 62 Financing element on certain derivative instruments and other derivative related transactions, net 122 — Other, net 13 15 Total uses 1,395 2,087 Net increase (decrease) in cash and cash equivalents $ (28) $ (430) Cash Flows from Operating Activities The principal cash inflows from our insurance activities come from insurance premiums, annuity considerations and net investment income. The principal cash outflows are the result of various annuity and life insurance products, operating expenses and income tax, as well as interest expense. The primary liquidity concern with respect to these cash flows is the risk of early contract holder and policyholder withdrawal. Cash Flows from Investing Activities The principal cash inflows from our investment activities come from repayments of principal, proceeds from maturities and sales of investments, as well as settlements of freestanding derivatives. The principal cash outflows relate to purchases of investments and settlements of freestanding derivatives. We typically can have a net cash outflow from investing activities because cash inflows from insurance operations are reinvested in accordance with our ALM discipline to fund insurance liabilities. We closely monitor and manage these risks through our comprehensive investment risk management process. The primary liquidity concerns with respect to these cash flows are the risk of default by debtors and market disruption. Cash Flows from Financing Activities The principal cash inflows from our financing activities come from issuances of debt and equity securities, deposits of funds associated with policyholder account balances and lending of securities. The principal cash outflows come from repayments of debt, common stock repurchases, preferred stock dividends, withdrawals associated with policyholder account balances and the return of securities on loan. The primary liquidity concerns with respect to these cash flows are market disruption and the risk of early policyholder withdrawal. 80 Table of Contents Primary Sources of Liquidity and Capital In addition to the summary description of liquidity and capital sources discussed in “— Sources and Uses of Liquidity and Capital,” the following additional information is provided regarding our primary sources of liquidity and capital: Funding Sources Liquidity is provided by a variety of funding sources, including secured and unsecured funding agreements, unsecured credit facilities and secured committed facilities. Capital is provided by a variety of funding sources, including issuances of debt and equity securities, as well as borrowings under our credit facilities. We maintain a shelf registration statement with the SEC that permits the issuance of public debt, equity and hybrid securities. As a “Well-Known Seasoned Issuer” under SEC rules, our shelf registration statement provides for automatic effectiveness upon filing and has no stated issuance capacity. The diversity of our funding sources enhances our funding flexibility, limits dependence on any one market or source of funds and generally lowers the cost of funds. Our primary funding sources include: Preferred Stock See Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements and Note 13 of the Notes to the Consolidated Financial Statements included in our 2023 Annual Report for information on preferred stock issuances. Funding Agreements Brighthouse Life Insurance Company issues funding agreements and uses the proceeds from such issuances for spread lending purposes in connection with our institutional spread margin business or to provide additional liquidity. The institutional spread margin business is comprised of funding agreements issued in connection with the programs described in more detail below. Activity related to these programs are reported in Corporate & Other. See Note 4 of the Notes to the Consolidated Financial Statements included in our 2023 Annual Report for additional information on funding agreements. Funding Agreement-Backed Repurchase Agreement Program In January 2024, Brighthouse Life Insurance Company established a secured funding agreement-backed repurchase agreement program (the “FABR Program”), pursuant to which Brighthouse Life Insurance Company may enter into repurchase agreements with bank counterparties and the proceeds of the repurchase agreements are then used by a special-purpose entity to purchase funding agreements from Brighthouse Life Insurance Company. Funding Agreement-Backed Commercial Paper Program In July 2021, Brighthouse Life Insurance Company established a funding agreement-backed commercial paper program (the “FABCP Program”) for spread lending purposes, pursuant to which a special purpose limited liability company (the “SPLLC”) may issue commercial paper and deposit the proceeds with Brighthouse Life Insurance Company under a funding agreement issued by Brighthouse Life Insurance Company to the SPLLC. The maximum aggregate principal amount permitted to be outstanding at any one time under the FABCP Program is $5.0 billion. Funding Agreement-Backed Notes Program In April 2021, Brighthouse Life Insurance Company established a funding agreement-backed notes program (the “FABN Program”), pursuant to which Brighthouse Life Insurance Company may issue funding agreements to a special purpose statutory trust for spread lending purposes. The maximum aggregate principal amount permitted to be outstanding at any one time under the FABN Program is $7.0 billion. Federal Home Loan Bank Funding Agreements Brighthouse Life Insurance Company is a member of the Federal Home Loan Bank (“FHLB”) of Atlanta, where it maintains a secured funding agreement program, under which funding agreements may be issued. Farmer Mac Funding Agreements Brighthouse Life Insurance Company has a secured funding agreement program with the Federal Agricultural Mortgage Corporation and its affiliate Farmer Mac Mortgage Securities Corporation (“Farmer Mac”) with a term ending on December 1, 2026, pursuant to which the parties may enter into funding agreements in an aggregate amount of up to $750 million. 81 Table of Contents Information regarding funding agreements issued for spread lending purposes is as follows: Aggregate Principal Amount Outstanding Issuances Repayments Three Months Ended March 31, March 31, 2024 December 31, 2023 2024 2023 2024 2023 (In millions) FABR Program $ 500 $ — $ 500 $ — $ — $ — FABCP Program 2,998 3,442 3,804 2,598 4,248 2,187 FABN Program 2,100 2,100 — — — 400 FHLB Funding Agreements 4,350 4,350 575 800 575 350 Farmer Mac Funding Agreements 750 700 50 — — — Total $ 10,698 $ 10,592 $ 4,929 $ 3,398 $ 4,823 $ 2,937 Debt Issuances See Note 12 of the Notes to the Consolidated Financial Statements included in our 2023 Annual Report for information on debt issuances. Credit and Committed Facilities See Notes 12 and 13 of the Notes to the Consolidated Financial Statements included in our 2023 Annual Report for information regarding our credit and committed facilities. We have no reason to believe that our lending counterparties would be unable to fulfill their respective contractual obligations under these facilities. As commitments under our credit and committed facilities may expire unused, these amounts do not necessarily reflect our actual future cash funding requirements. Our Revolving Credit Facility contains financial covenants, including requirements to maintain a specified minimum adjusted consolidated net worth, to maintain a ratio of total indebtedness to total capitalization not in excess of a specified percentage and that place limitations on the dollar amount of indebtedness that may be incurred by our subsidiaries, which could restrict our operations and use of funds. At March 31, 2024, we were in compliance with these financial covenants. Primary Uses of Liquidity and Capital In addition to the summarized description of liquidity and capital uses discussed in “— Sources and Uses of Liquidity and Capital,” the following additional information is provided regarding our primary uses of liquidity and capital: Common Stock Repurchases See Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements for information relating to authorizations to repurchase BHF common stock, amounts of common stock repurchased pursuant to such authorizations and the amount remaining under such authorizations at March 31, 2024. Subsequent to March 31, 2024 and through May 3, 2024, BHF repurchased an additional 507,621 shares of its common stock through open market purchases pursuant to a 10b5-1 plan for $25 million. Preferred Stock Dividends See Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements for information relating to dividends declared and paid on our preferred stock. 82 Table of Contents “Dividend Stopper” Provisions in BHF’s Preferred Stock and Junior Subordinated Debentures Terms applicable to our junior subordinated debentures may restrict our ability to pay interest on those debentures in certain circumstances. Suspension of payments of interest on our junior subordinated debentures, whether required under the relevant indenture or optional, could cause “dividend stopper” provisions applicable under those and other instruments to restrict our ability to pay dividends, if any, on our common stock and repurchase our common stock in various situations, including situations where we may be experiencing financial stress, and may restrict our ability to pay dividends or interest on our preferred stock and junior subordinated debentures as well. Similarly, the terms of our outstanding preferred stock contain restrictions on our ability to repurchase our common stock or pay dividends thereon if we have not fulfilled our dividend obligations under such preferred stock or other preferred securities. In addition, the terms of the agreements governing any preferred stock, debt or other financial instruments that we may issue in the future, may limit or prohibit the payment of dividends on our common stock or preferred stock, or the payment of interest on our junior subordinated debentures. Debt Repayments, Repurchases, Redemptions and Exchanges See Note 12 of the Notes to the Consolidated Financial Statements included in our 2023 Annual Report for information on debt repayments and repurchases, as well as debt maturities and the terms of our outstanding long-term debt. We may from time to time seek to retire or purchase our outstanding indebtedness through cash purchases or exchanges for other securities, purchases in the open market, privately negotiated transactions or otherwise. Any such repurchases or exchanges will be dependent upon several factors, including our liquidity requirements, contractual restrictions, general market conditions, as well as applicable regulatory, legal and accounting factors. Whether or not we repurchase any debt and the size and timing of any such repurchases will be determined at our discretion. Insurance Liabilities Liabilities arising from our insurance activities primarily relate to benefit payments under various annuity and life insurance products, as well as payments for policy surrenders, withdrawals and loans. See “— Primary Sources of Liquidity and Capital — Funding Sources — Funding Agreements” for additional information regarding our institutional spread margin business. Pledged Collateral We enter into derivatives to manage various risks relating to our ongoing business operations. We pledge collateral to, and have collateral pledged to us by, counterparties in connection with our derivatives. At March 31, 2024 and December 31, 2023, we pledged $24 million and $16 million, respectively, of cash collateral to counterparties. At March 31, 2024 and December 31, 2023, we were obligated to return cash collateral pledged to us by counterparties of $483 million and $393 million, respectively. The timing of the return of the derivatives collateral is uncertain. See Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information about pledged collateral. We also pledge collateral from time to time in connection with our funding agreements. We receive non-cash collateral from counterparties for derivatives, which can be sold or re-pledged subject to certain constraints, and which is not recorded on our consolidated balance sheets. The amount of this non-cash collateral at estimated fair value was $2.0 billion and $2.4 billion at March 31, 2024 and December 31, 2023, respectively. Securities Lending We have a securities lending program that aims to enhance the total return on our investment portfolio, whereby securities are loaned to third parties, primarily brokerage firms and commercial banks. We obtain collateral, usually cash, from the borrower, which must be returned to the borrower when the loaned securities are returned to us. Generally, our securities lending contracts expire within twelve months of issuance. We were liable for cash collateral under our control of $3.2 billion and $3.3 billion at March 31, 2024 and December 31, 2023, respectively. We receive non-cash collateral for securities lending from counterparties, which cannot be sold or re-pledged, and which is not recorded on our consolidated balance sheets. There was no non-cash collateral at both March 31, 2024 and December 31, 2023. See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for further discussion of our securities lending program. 83 Table of Contents Contingencies, Commitments and Guarantees We establish liabilities for litigation, regulatory and other loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. See Note 13 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information regarding contingencies. We enter into commitments for the purpose of enhancing the total return on our investment portfolio consisting of commitments to fund partnership investments, bank credit facilities and private corporate bond investments, as well as commitments to lend funds under mortgage loan commitments. We anticipate these commitments could be invested any time over the next five years. See Notes 7 and 13 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information regarding commitments. In the normal course of our business, we have provided certain indemnities, guarantees and commitments to third parties such that we may be required to make payments now or in the future. See Note 13 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information regarding guarantees. The Parent Company Liquidity and Capital In evaluating liquidity, it is important to distinguish the cash flow needs of the parent company from the cash flow needs of the combined group of companies. BHF is largely dependent on cash flows from its insurance subsidiaries to meet its obligations. Constraints on BHF’s liquidity may occur as a result of operational demands or as a result of compliance with regulatory requirements. Short-term Liquidity and Liquid Assets At both March 31, 2024 and December 31, 2023, BHF and certain of its non-insurance subsidiaries had short-term liquidity of $1.2 billion. Short-term liquidity is comprised of cash and cash equivalents and short-term investments, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include assets held in trust. At both March 31, 2024 and December 31, 2023, BHF and certain of its non-insurance subsidiaries had liquid assets of $1.3 billion, of which $1.2 billion was held by BHF. Liquid assets are comprised of cash and cash equivalents, short-term investments and publicly-traded securities, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include assets held in trust. Statutory Capital and Dividends The NAIC and state insurance departments have established regulations that provide minimum capitalization requirements based on RBC formulas for insurance companies. RBC is based on a formula calculated by applying factors to various asset, premium, claim, expense and statutory reserve items. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk, market risk and business risk and is calculated on an annual basis. The formula is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not as a means to rank insurers generally. State insurance laws provide insurance regulators the authority to require various actions by, or take various actions against, insurers whose total adjusted capital (“TAC”) does not meet or exceed the amounts required to attain certain RBC levels. As of the date of the most recent annual statutory financial statements filed with insurance regulators, the TAC of each of our insurance subsidiaries subject to these requirements was in excess of the amounts required to attain each of those RBC levels. The amount of dividends that our insurance subsidiaries can ultimately pay to BHF through their various parent entities provides an additional margin for risk protection and investment in our businesses. Such dividends are constrained by the amount of surplus our insurance subsidiaries hold to maintain their ratings, which is generally higher than minimum RBC requirements. We proactively take actions to maintain capital consistent with these ratings objectives, which may include adjusting dividend amounts and deploying financial resources from internal or external sources of capital. Certain of these activities may require regulatory approval. Furthermore, the payment of dividends and other distributions by our insurance subsidiaries is governed by the insurance laws and regulations of the states where they are domiciled. Any payment of dividends by Brighthouse Life Insurance Company in 2024 would be subject to Delaware Department of Insurance approval. See Note 13 of the Notes to the Consolidated Financial Statements included in our 2023 Annual Report for additional information regarding the applicable dividend restrictions and certain of our subsidiaries’ ordinary dividend capacity, as well as the circumstances under which regulatory approval would be required. 84 Table of Contents Primary Sources and Uses of Liquidity and Capital The principal sources of funds available to BHF include distributions from Brighthouse Holdings, LLC (“BH Holdings”), dividends and returns of capital from its insurance subsidiaries and BRCD, capital markets issuances, as well as its own cash and cash equivalents and short-term investments. These sources of funds may also be supplemented by alternate sources of liquidity either directly or indirectly through our insurance subsidiaries. For example, we have established internal liquidity facilities to provide liquidity within and across our regulated and non-regulated entities to support our businesses. The primary uses of liquidity of BHF include debt-service obligations (including interest expense and debt repayments), preferred stock dividends, capital contributions to subsidiaries, common stock repurchases and payment of general operating expenses. Based on our analysis and comparison of our current and future cash inflows from the dividends we receive from subsidiaries that are permitted to be paid without prior insurance regulatory approval, our investment portfolio and other cash flows and anticipated access to the capital markets, we believe there will be sufficient liquidity and capital to enable BHF to make payments on debt, pay preferred stock dividends, contribute capital to its subsidiaries, repurchase its common stock, pay all general operating expenses and meet its cash needs. In addition to the liquidity and capital sources discussed in “— The Company — Primary Sources of Liquidity and Capital” and “— The Company — Primary Uses of Liquidity and Capital,” the following additional information is provided regarding BHF’s primary sources and uses of liquidity and capital: Distributions from and Capital Contributions to BH Holdings During both the three months ended March 31, 2024 and 2023, BHF did not receive any cash distributions from BH Holdings and did not make any cash capital contributions to BH Holdings. Short-term Intercompany Loans BHF, as borrower, has a short-term intercompany loan agreement with certain of its non-insurance subsidiaries, as lenders, for the purposes of facilitating the management of the available cash of the borrower and the lenders on a short-term and consolidated basis. Such intercompany loan agreement allows management to optimize the efficient use of and maximize the yield on cash between BHF and its subsidiary lenders. 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 three months ended March 31, 2024 and 2023, BHF borrowed $110 million and $217 million, respectively, from certain of its non-insurance subsidiaries and repaid $50 million and $172 million of such borrowings during the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024 and December 31, 2023, BHF had total obligations outstanding of $787 million and $727 million, respectively, under such agreements. Intercompany Liquidity Facilities BHF has established intercompany liquidity facilities with certain of its insurance and non-insurance subsidiaries to provide short-term liquidity within and across the combined group of companies. Under these facilities, which are comprised of a series of revolving loan agreements among BHF and its participating subsidiaries, each company may lend to or borrow from each other, subject to certain maximum limits for a term of up to 364 days, depending on the agreement. During both the three months ended March 31, 2024 and 2023, there were no borrowings or repayments by BHF under these facilities and, at both March 31, 2024 and December 31, 2023, BHF had no obligations outstanding under such facilities. 85 Table of Contents Note Regarding Forward-Looking Statements This report and other oral or written statements that we make from time to time may contain information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve substantial risks and uncertainties. We have tried, wherever possible, to identify such statements using words such as “anticipate,” “estimate,” “expect,” “project,” “may,” “will,” “could,” “intend,” “goal,” “target,” “guidance,” “forecast,” “preliminary,” “objective,” “continue,” “aim,” “plan,” “believe” and other words and terms of similar meaning, or that are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include, without limitation, statements relating to future actions, prospective services or products, financial projections, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, as well as trends in operating and financial results. Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of Brighthouse Financial. These statements are based on current expectations and the current economic environment and involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others: • differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models; • higher risk management costs and exposure to increased market risk due to guarantees within certain of our products; • the effectiveness of our variable annuity exposure risk management strategy and the impacts of such strategy on volatility in our profitability measures and the negative effects on our statutory capital; • material differences between actual outcomes and the sensitivities calculated under certain scenarios that we may utilize in connection with our variable annuity risk management strategies; • the impact of interest rates on our future ULSG policyholder obligations and net income volatility; • the potential material adverse effect of changes in accounting standards, practices or policies applicable to us, including changes in the accounting for long-duration contracts; • loss of business and other negative impacts resulting from a downgrade or a potential downgrade in our financial strength or credit ratings; • the availability of reinsurance and the ability of the counterparties to our reinsurance or indemnification arrangements to perform their obligations thereunder; • heightened competition, including with respect to service, product features, scale, price, actual or perceived financial strength, claims-paying ratings, credit ratings, e-business capabilities and name recognition; • our ability to market and distribute our products through distribution channels; • any failure of third parties to provide services we need, any failure of the practices and procedures of such third parties and any inability to obtain information or assistance we need from third parties; • the ability of our subsidiaries to pay dividends to us, and our ability to pay dividends to our shareholders and repurchase our common stock; • the risks associated with climate change; • the adverse impact of public health crises, extreme mortality events or similar occurrences on our business and the economy in general; • the impact of adverse capital and credit market conditions, including with respect to our ability to meet liquidity needs and access capital; • the impact of economic conditions in the capital markets and the U.S. and global economy, as well as geopolitical events, military actions or catastrophic events, on our profitability measures as well as our investment portfolio, including on realized and unrealized losses and impairments, net investment spread and net investment income; 86 Table of Contents • the financial risks that our investment portfolio is subject to, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control; • the impact of changes in regulation and in supervisory and enforcement policies or interpretations thereof on our insurance business or other operations; • the potential material negative tax impact of potential future tax legislation that could make some of our products less attractive to consumers or increase our tax liability; • the effectiveness of our policies, procedures and processes in managing risk; • the loss or disclosure of confidential information, damage to our reputation and impairment of our ability to conduct business effectively as a result of any failure in cyber- or other information security systems; • whether all or any portion of the tax consequences of our separation from MetLife, Inc. (together with its subsidiaries and affiliates, “MetLife”) are not as expected, leading to material additional taxes or material adverse consequences to tax attributes that impact us; and • other factors described in this report and from time to time in documents that we file with the SEC. For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements included and the risks, uncertainties and other factors identified in our 2023 Annual Report, particularly in the sections entitled “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk,” as well as in our other subsequent filings with the SEC. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law. Corporate Information We routinely use our Investor Relations website to provide presentations, press releases, our insurance subsidiaries’ statutory filings, and other information that may be deemed important or material to investors. Accordingly, we encourage investors and others interested in the Company to review the information that we share at http://investor.brighthousefinancial.com. In addition, our Investor Relations website allows interested persons to sign up to automatically receive e-mail alerts when we make filings with the SEC. Information contained on or connected to any website referenced in this report or any of our other filings with the SEC is not incorporated by reference in this report or in any other report or document we file with the SEC, and any website references are intended to be inactive textual references only unless expressly noted.