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Item 2. Management’s Discussion and Analysis

2024-11-08 compared with 2024-08-08 · 285 added, 225 removed, 1006 unchanged (34% of the section changed)

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(iii) our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 (the “First Quarter Form 10-Q”) filed with the SEC on May 8, 2024;

and (iv) our current reports on Form 8-K filed in 2024.

(iv) our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 (the “Second Quarter Form 10-Q” and, together with the First Quarter Form 10-Q, the “Quarterly Reports”) filed with the SEC on August 8, 2024;

and (v) our current reports on Form 8-K filed in 2024.

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.

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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 and six months ended June 30, 2024 and 2023 and period-over-period, as well as year-over-year, comparisons between these periods.

Our Results of Operations discussion and analysis presents a review for the three months and nine months ended September 30, 2024 and 2023 and period-over-period, as well as year-over-year, comparisons between these periods.

Executive Summary

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through multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners.

We are organized into three segments:

We are organized into the following segments:

(i) Annuities, (ii) Life and (iii) Run-off, which consists primarily of products that are no longer actively sold and are separately managed.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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(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 June 30, 2024, we had net income available to shareholders of $9 million and adjusted earnings of $346 million compared to net loss available to shareholders of $200 million and adjusted earnings of $271 million for the three months ended June 30, 2023.

Net income available to shareholders for the three months ended June 30, 2024 primarily reflects favorable pre-tax adjusted earnings.

The favorable impact was partially offset by net unfavorable changes in the estimated fair value of our variable annuity guaranteed benefit riders due to market factors, net investment losses on sales of fixed maturity securities, net investment losses on mortgage loans and 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.

For the six months ended June 30, 2024, we had net loss available to shareholders of $510 million and adjusted earnings of $248 million compared to net loss available to shareholders of $725 million and adjusted earnings of $466 million for the six months ended June 30, 2023.

Net loss available to shareholders for the six months ended June 30, 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 ULSG business resulting from increasing long-term interest rates, net investment losses on sales of fixed maturity securities and net investment losses on mortgage loans.

For the three months ended September 30, 2024, we had net income available to shareholders of $150 million and adjusted earnings of $767 million compared to net income available to shareholders of $453 million and adjusted earnings of $326 million for the three months ended September 30, 2023.

Net income available to shareholders for the three months ended September 30, 2024 primarily reflects favorable pre-tax adjusted earnings and a favorable 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 decreasing long-term interest rates.

The favorable impacts were partially offset by net unfavorable changes in the estimated fair value of our variable annuity guaranteed benefit riders due to market factors, net investment losses on sales of fixed maturity securities and net investment losses on mortgage loans.

For the nine months ended September 30, 2024, we had net loss available to shareholders of $360 million and adjusted earnings of $1.0 billion compared to net loss available to shareholders of $272 million and adjusted earnings of $792 million for the nine months ended September 30, 2023.

Net loss available to shareholders for the nine months ended September 30, 2024 primarily reflects net unfavorable changes in the estimated fair value of our variable annuity guaranteed benefit riders due to market factors, net investment losses on sales of fixed maturity securities, net investment losses on mortgage loans and an unfavorable change in the estimated fair value of freestanding interest rate derivatives we use to hedge our ULSG business resulting from increasing long-term interest rates.

These unfavorable impacts were partially offset by favorable pre-tax adjusted earnings, net of an unfavorable impact due to a reinsurance premium rate increase retroactive to September 2019, which resulted from the conclusion of a reinsurance arbitration, and the related impacts.

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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 by our First Quarter Form 10-Q and 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.

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 by our subsequent Quarterly Reports and 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

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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 equity market downturn and could negatively impact various portions of our business, including our investment portfolio.

The Federal Reserve Board (the “Federal Reserve”) decreased the target range for the federal funds rate in September and November 2024, and may decrease the target range again, which may negatively impact our business in certain respects, including our investment portfolio, by lowering the level of long-term interest rates and changing the shape of the yield curve.

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.

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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 First Quarter Form 10-Q 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) (the “PTE 2020-02 Amendment”) 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 “PTE 84-24 Amendment” and, together with the PTE 2020-02 Amendment, the “PTE Amendments”).

On July 25, 2024, the U.S.

District Court for the Eastern District of Texas and, on July 26, 2024, the U.S.

District Court for the Northern District of Texas issued decisions, which together stayed the effective date for implementation of the Fiduciary Advice Rule and the PTE Amendments.

These rulings are subject to appeal by the DOL.

For further information about the potential effect and impact of the Fiduciary Advice Rule and the PTE Amendments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends and Uncertainties — Regulatory Developments” included in our First Quarter Form 10-Q and “Business — Regulation — Standard of Conduct Regulation — Department of Labor Fiduciary Advice Rule” included in our 2023 Annual Report.

We will continue to monitor developments regarding the new rule and related litigation.

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.”

Summary of Critical Accounting Estimates

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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 is used by management to measure our performance, 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.

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Adjusted Net Investment Income Yield

Similar to adjusted net investment income, we present adjusted net investment income yield as a performance measure we believe enhances the understanding of our investment portfolio results.

Similar to adjusted net investment income, adjusted net investment income yield is used by management as a performance measure that we believe enhances the understanding of our investment portfolio results.

Adjusted net investment income yield represents adjusted net investment income as a percentage of average quarterly asset carrying values.

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Results of Operations

Consolidated Results for the Three Months and Six Months Ended June 30, 2024 and 2023

Annual Actuarial Review

We typically conduct our annual actuarial review (“AAR”) in the third quarter of each year.

As part of the 2024 AAR, for our ULSG business, we increased the long-term general account earned rate, driven by an increase in the mean reversion rate, from 3.75% to 4.00%.

Also, with respect to our ULSG business, we updated assumptions regarding policyholder behavior, including mortality, premium persistency, lapses and withdrawals.

For our variable annuity business, we updated our annuitization, mortality, lapses and withdrawals, as well as separate account assumptions, including fund fees and allocations.

For term participating and non-participating whole life insurance, we updated assumptions regarding mortality and lapses.

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

Also, with respect to our ULSG business, we updated assumptions regarding policyholder behavior, including mortality, premium persistency, lapses, withdrawals and maintenance expenses.

For our variable annuity business, we updated our annuitization, mortality, lapses and withdrawals, as well as separate account assumptions, including fund fees, allocations and volatility.

For term participating and non-participating whole life insurance, we updated assumptions regarding mortality and lapses.

The impact on income (loss) available to shareholders before provision for income tax was as follows:

Nine Months Ended

September 30,

(In millions)

Market risk benefits

Embedded derivatives

Total market risk benefits and embedded derivatives

Included in pre-tax adjusted earnings (loss):

Other annuity business 26 15

Life business (83) (90)

Run-off 359 119

Total included in pre-tax adjusted earnings (loss)

Total impact on income (loss) available to shareholders before provision for income tax $ 413 $ (207)

Consolidated Results for the Three Months and Nine Months Ended September 30, 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

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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$ 150 $ 453 $ (360) $ (272)

Three Months Ended June 30, 2024 Compared with the Three Months Ended June 30, 2023

Loss available to shareholders before provision for income tax was $11 million (income of $9 million, net of income tax), a lower loss of $251 million ($209 million, net of income tax) from loss available to shareholders before provision for income tax of $262 million ($200 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 and Six Months Ended June 30, 2024 and 2023”;

Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023

Income available to shareholders before provision for income tax was $160 million ($150 million, net of income tax), a decrease of $402 million ($303 million, net of income tax) from income available to shareholders before provision for income tax of $562 million ($453 million, net of income tax) in the prior period.

The decrease in income before provision for income tax was driven by the following unfavorable items:

• losses from variable annuity guaranteed benefit riders, see “— Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Three Months and Nine Months Ended September 30, 2024 and 2023”;

• the net impact of embedded derivatives and equity options we use to hedge our non-variable annuity business, as equity markets increased in the current period, resulting in a loss of $26 million, and decreased in the prior period, resulting in a gain of $71 million.

The decrease in income before provision for income taxes was partially offset by the following favorable 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 decreased in the current period, resulting in a gain of $113 million, and increased in the prior period, resulting in a loss of $500 million;

• higher pre-tax adjusted earnings, as discussed in greater detail below.

The lower loss before provision for income taxes was partially offset by the following unfavorable items:

• net investment gains (losses) reflecting higher net losses on sales of fixed maturity securities and an increase in the allowance for credit losses, and higher net losses on mortgage loans due to an increase in the allowance for credit losses;

• the impact of equity markets on equity options we use to hedge our non-variable annuity business, as equity markets increased less in the current period than the prior period.

The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in a lower effective tax rate in the current period compared to the prior period.

The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of 5% in the current period compared to 18% in the prior period.

Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits.

Six Months Ended June 30, 2024 Compared with the Six Months Ended June 30, 2023

Loss available to shareholders before provision for income tax was $653 million ($510 million, net of income tax), a lower loss of $290 million ($215 million, net of income tax) from loss available to shareholders before provision for income tax of $943 million ($725 million, net of income tax) in the prior period.

The lower loss before provision for income tax was driven by the following favorable items:

• 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.

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 $309 million and decreased in the prior period resulting in a gain of $57 million;

• 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 24% in both the current period and the prior period.

Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023

Loss available to shareholders before provision for income tax was $493 million ($360 million, net of income tax), a higher loss of $112 million ($88 million, net of income tax) from loss available to shareholders before provision for income tax of $381 million ($272 million, net of income tax) in the prior period.

The higher loss before provision for income tax was driven by the following unfavorable items:

• higher losses from variable annuity guaranteed benefit riders, see “— Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Three Months and Nine Months Ended September 30, 2024 and 2023”;

• the net impact of embedded derivatives and equity options we use to hedge our non-variable annuity business, as equity markets increased more in the current period, resulting in a loss of $26 million, and increased less in the prior period, resulting in a gain of $74 million.

The higher loss before provision for income tax was partially offset by the following favorable items:

• higher pre-tax adjusted earnings, as discussed in greater detail below;

• 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 less in the current period, resulting in a loss of $196 million, and increased more in the prior period, resulting in a loss of $443 million.

The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of 32% in the current period compared to 36% 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.

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The reconciliation of net income (loss) available to shareholders to adjusted earnings (loss) was as follows:

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

Annuities Life Run-off Corporate & Other Total

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$ 327 $ (25) $ 463 $ 2 $ 767

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Annuities Life Run-off Corporate & Other Total

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$ 319 $ (73) $ 95 $ (15) $ 326

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Annuities Life Run-off Corporate & Other Total

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$ 972 $ (19) $ 92 $ (30) $ 1,015

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Annuities Life Run-off Corporate & Other Total

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$ 924 $ (57) $ (27) $ (48) $ 792

Consolidated Results for the Three Months and Six Months Ended June 30, 2024 and 2023 — Adjusted Earnings

Consolidated Results for the Three Months and Nine Months Ended September 30, 2024 and 2023 — Adjusted Earnings

The components of adjusted earnings were as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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$ 767 $ 326 $ 1,015 $ 792

Three Months Ended June 30, 2024 Compared with the Three Months Ended June 30, 2023

Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023

Adjusted earnings were $767 million in the current period, an increase of $441 million.

Key net favorable impacts were:

• higher net investment spread due to:

◦ 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;

◦ higher average invested assets resulting from positive net flows in the general account;

• lower net costs associated with insurance-related activities due to:

◦ a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR in our Run-off and Annuities segments and other refinements;

◦ an increase in income annuity underwriting margins;

partially offset by

◦ higher interest credited to policyholders due to higher account balances;

• lower other expenses due to:

◦ lower deferred compensation and operational expenses;

◦ higher ceded cost of insurance expenses consistent with less favorable equity market returns in our Life segment, which is offset in fee income;

◦ lower transition services agreement expenses;

• lower net costs associated with insurance-related activities due to an increase in income annuity underwriting margins.

Key net unfavorable impact was:

• lower net fee income due to:

◦ higher ceded cost of insurance fees driven by the aging in-force business in our Run-off segment, as well as less favorable equity market returns in our Life segment, which is mostly offset in other expenses;

◦ higher paid claims, net of reinsurance;

• higher net fee income due to:

◦ higher asset-based fees resulting from higher average separate account balances, a portion of which is offset in other expenses;

◦ higher reinsurance fees on our fixed annuity business resulting from higher account balances;

partially offset by

◦ higher reinsurance fees commensurate with an increase in deposit balances resulting from increased sales in our Annuity segment.

◦ a decline in the net cost of insurance fees driven by the aging in-force business in our Run-off segment.

Key net unfavorable impacts were:

• lower net investment spread due to:

◦ higher interest credited to policyholders due to higher account balances and prior period actuarial modeling improvements, net of changes made in the current period in connection with the AAR in our Annuities segment;

partially offset by

◦ higher average invested assets resulting from positive net flows in the general account;

◦ 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;

• higher other expenses due to:

◦ higher deferred compensation expenses;

◦ higher asset-based variable annuity expenses resulting from higher average separate account balances, a portion of which is offset in fee income;

partially offset by

◦ lower operational expenses.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 18% in the current period compared to 17% in the prior period.

Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits.

Six Months Ended June 30, 2024 Compared with the Six Months Ended June 30, 2023

Adjusted earnings were $248 million in the current period, a decrease of $218 million.

Key net unfavorable impacts were:

• higher net costs associated with insurance-related activities due to:

Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023

Adjusted earnings were $1.0 billion in the current period, an increase of $223 million.

Key net favorable impacts were:

• lower net costs associated with insurance-related activities due to:

◦ a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR in our Run-off and Annuities segments and other refinements;

◦ lower paid claims, net of reinsurance;

partially offset by

◦ 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;

◦ a decrease in income annuity underwriting margins;

• higher net investment spread due to:

◦ higher average invested assets resulting from positive net flows in the general account;

◦ 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;

◦ higher returns on other limited partnerships;

partially offset by

◦ lower paid claims, net of reinsurance, in our Life and Run-off segments;

Key net unfavorable impacts were:

• lower net fee income due to:

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partially offset by

◦ higher reinsurance fees commensurate with an increase in deposit balances resulting from increased sales in our Annuity segment.

Key net favorable impact was:

• higher net investment spread due to:

◦ 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;

◦ higher returns on other limited partnerships;

◦ higher average invested assets resulting from positive net flows in the general account;

◦ higher reinsurance fees on our fixed annuity business resulting from higher account balances;

◦ higher asset-based fees resulting from higher average separate account balances, a portion of which is offset in other expenses;

• higher other expenses due to:

◦ higher variable and deferred compensation expenses;

◦ higher asset-based variable annuity expenses resulting from higher average separate account balances, a portion of which is offset in fee income;

partially offset by

◦ higher interest credited to policyholders due to higher account balances.

◦ lower operational expenses;

◦ lower transition services agreement expenses.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 18% in the current period compared to 17% 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.

Segments and Corporate & Other Results for the Three Months and Six Months Ended June 30, 2024 and 2023 — Adjusted Earnings

Segments and Corporate & Other Results for the Three Months and Nine Months Ended September 30, 2024 and 2023 — Adjusted Earnings

The components of adjusted earnings for our Annuities segment were as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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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 June 30, 2024 Compared with the Three Months Ended June 30, 2023

Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023

Adjusted earnings were $327 million in the current period, an increase of $8 million.

Key net favorable impacts were:

• higher fee income due to higher reinsurance fees commensurate with an increase in deposit balances resulting from increased sales;

• lower other expenses due to lower operational expenses;

• lower costs associated with insurance-related activities due an increase in income annuity underwriting margins;

• higher net investment spread due to:

• higher fee income due to:

◦ higher asset-based fees resulting from higher average separate account balances, a portion of which is offset in other expenses;

◦ higher reinsurance fees on our fixed annuity business resulting from higher account balances;

• lower net costs associated with insurance-related activities due to:

◦ an increase in income annuity underwriting margins;

partially offset by

◦ a net increase in liability balances resulting from year-over-year changes made in connection with the AAR.

Key net unfavorable impacts were:

• lower net investment spread due to:

◦ higher interest credited to policyholders due to higher account balances and prior period actuarial modeling improvements, net of changes made in the current period in connection with the AAR;

partially offset by

◦ higher average invested assets resulting from positive net flows in the general account;

◦ 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;

• higher other expenses due to:

◦ higher asset-based variable annuity expenses resulting from higher average separate account balances, a portion of which is offset in fee income;

◦ higher deferred compensation expenses;

partially offset by

◦ higher interest credited to policyholders due to higher account balances;

◦ lower returns on other limited partnerships.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 19% in the current period compared to 18% in the prior period.

◦ lower operational expenses.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), 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 impacts of the dividends received deduction.

Six Months Ended June 30, 2024 Compared with the Six Months Ended June 30, 2023

Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023

Adjusted earnings were $972 million in the current period, an increase of $48 million.

Key net favorable impacts were:

• higher fee income due to higher reinsurance fees commensurate with an increase in deposit balances resulting from increased sales;

• higher fee income due to:

◦ higher reinsurance fees on our fixed annuity business resulting from higher account balances;

◦ higher asset-based fees resulting from higher average separate account balances, a portion of which is offset in other expenses;

• higher net investment spread due to:

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partially offset by

◦ higher interest credited to policyholders due to higher account balances;

• lower other expenses due to:

◦ higher interest credited to policyholders due to higher account balances and prior period actuarial modeling improvements, net of changes made in the current period in connection with the AAR.

Key net unfavorable impacts were:

• higher costs associated with insurance-related activities due to:

◦ a decrease in income annuity underwriting margins;

◦ a net increase in liability balances resulting from year-over-year changes made in connection with the AAR;

• higher other expenses due to:

◦ higher asset-based variable annuity expenses resulting from higher average separate account balances, a portion of which is offset in fee income;

◦ higher variable and deferred compensation expenses;

partially offset by

◦ lower operational expenses;

◦ lower transition services agreement expenses.

partially offset by

◦ higher variable compensation.

Key unfavorable impact was higher costs associated with insurance-related activities due to a decrease in income annuity underwriting margins.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 19% in both the current period and the prior period.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

6 unchanged sentences

Pre-tax adjusted earnings (loss)

(32) (93) (26) (75)

Provision for income tax expense (benefit) (7) (20) (7) (18)

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$ (25) $ (73) $ (19) $ (57)

Three Months Ended June 30, 2024 Compared with the Three Months Ended June 30, 2023

Adjusted earnings were $42 million in the current period, an increase of $27 million.

Key favorable impacts were:

• lower net costs associated with insurance-related activities due to lower paid claims, net of reinsurance;

• lower other expenses due to higher ceded cost of insurance expenses consistent with less favorable equity market returns, which is offset in fee income.

Key unfavorable impact was lower fee income due to higher ceded cost of insurance fees consistent with less favorable equity market returns, which is mostly offset in other expenses.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 19% in the current period compared to 17% in the prior period.

Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023

Adjusted loss was $25 million in the current period, a lower loss of $48 million.

The 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 (loss), resulted in an effective tax rate of 22% 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.

Six Months Ended June 30, 2024 Compared with the Six Months Ended June 30, 2023

Adjusted earnings were $6 million in the current period, a decrease of $10 million.

Key unfavorable impact was lower fee income due to higher ceded cost of insurance fees related to the conclusion of the aforementioned 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 (loss), resulted in a lower effective tax rate in the current period compared to the prior period.

Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023

Adjusted loss was $19 million in the current period, a lower loss of $38 million.

The key favorable impact was lower costs associated with insurance-related activities due to lower paid claims, net of reinsurance.

The key unfavorable impact was lower fee income due to higher ceded cost of insurance fees related to the conclusion of the aforementioned reinsurance arbitration.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 27% in the current period compared to 24% in the prior period.

Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

10 unchanged sentences

$ 463 $ 95 $ 92 $ (27)

Three Months Ended June 30, 2024 Compared with the Three Months Ended June 30, 2023

Adjusted loss was $30 million in the current period, a higher loss of $14 million.

Key unfavorable impacts were:

• higher costs associated with insurance-related activities due to higher paid claims, net of reinsurance;

• lower fee income due to higher ceded cost of insurance fees driven by the aging in-force business.

Key favorable impacts were:

• higher net investment spread due to lower interest credited to policyholders due to lower account balances;

• lower other expenses due to lower operational expenses.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 19% in the current period compared to 24% in the prior period.

Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.

Six Months Ended June 30, 2024 Compared with the Six Months Ended June 30, 2023

Adjusted loss was $371 million in the current period, a higher loss of $249 million.

Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023

Adjusted earnings were $463 million in the current period, an increase of $368 million.

The key net favorable impact was:

• lower net costs associated with insurance-related activities due to:

◦ a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR and other refinements;

partially offset by

◦ higher paid claims, net of reinsurance.

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 the aforementioned reinsurance arbitration;

• lower net investment spread due to:

◦ lower returns on real estate joint ventures;

◦ lower average invested long-term assets;

partially offset by

◦ lower paid claims, net of reinsurance;

• lower fee income due to higher ceded cost of insurance fees related to the conclusion of the aforementioned reinsurance arbitration and the aging in-force business.

Key favorable impact was:

◦ lower interest credited to policyholders due to lower account balances;

• lower fee income due to a decline in the net cost of insurance fees driven by the aging in-force business.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), 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.

Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023

Adjusted earnings were $92 million in the current period, an increase of $119 million.

Key net favorable impacts were:

• lower net costs associated with insurance-related activities due to:

◦ a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR and other refinements;

partially offset by

◦ an increase in liability balances resulting from a reinsurance premium rate increase associated with the conclusion of the aforementioned reinsurance arbitration;

◦ higher paid claims, net of reinsurance;

• higher net investment spread due to:

1 unchanged sentence

◦ lower interest credited to policyholders due to lower account balances;

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 21% in both the current period and the prior period.

partially offset by

◦ lower average invested long-term assets.

The key unfavorable impact was lower fee income due to higher ceded cost of insurance fees related to the conclusion of the aforementioned reinsurance arbitration and the aging in-force business.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 20% in the current period compared to 23% in the prior period.

Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

11 unchanged sentences

$ 2 $ (15) $ (30) $ (48)

Three Months Ended June 30, 2024 Compared with the Three Months Ended June 30, 2023

Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023

Adjusted earnings were $2 million in the current period, an increase of $17 million.

Key favorable impacts were:

• higher net investment spread due to higher investment yields and average invested long-term assets from funding agreements issued in connection with our institutional spread margin business;

• lower other expenses due to lower deferred compensation and operational expenses.

The key favorable impact was higher net investment spread due to higher investment yields and average invested long-term assets from funding agreements issued in connection with our institutional spread margin business.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in a lower effective tax rate in the current period compared to the prior period.

1 unchanged sentence

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.

Six Months Ended June 30, 2024 Compared with the Six Months Ended June 30, 2023

Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023

Adjusted loss was $30 million in the current period, a lower loss of $18 million.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in a higher effective tax rate in the current period compared to the prior period.

1 unchanged sentence

Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Three Months and Six Months Ended June 30, 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:

Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Three Months and Nine Months Ended September 30, 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 related reinsurance, (ii) fees net of claims and (iii) the mark-to-market of hedges, was as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

8 unchanged sentences

$ (751) $ 651 $ (1,265) $ (717)

Three Months Ended June 30, 2024

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the three months ended June 30, 2024, primarily driven by:

• favorable decreases in annuity guaranteed benefits liabilities due to increasing interest rates;

• favorable changes in variable annuity hedges due to increasing equity markets, partially offset by increasing long-term interest rates;

• unfavorable changes in Shield embedded derivatives due to increasing equity markets.

Three Months Ended June 30, 2023

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the three months ended June 30, 2023, primarily driven by:

• favorable decreases in annuity guaranteed benefits liabilities due to increasing interest rates and equity markets;

• unfavorable changes in variable annuity hedges due to increasing long-term interest rates, partially offset by increasing equity markets;

• unfavorable changes in Shield embedded derivatives due to increasing equity markets.

Six Months Ended June 30, 2024

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the six months ended June 30, 2024, primarily driven by:

• favorable 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;

• unfavorable changes in Shield embedded derivatives due to increasing equity markets.

Six Months Ended June 30, 2023

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the six months ended June 30, 2023, primarily driven by:

• favorable decreases in annuity guaranteed benefits liabilities due to increasing equity markets;

Three Months Ended September 30, 2024

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the three months ended September 30, 2024, primarily driven by:

• unfavorable increases in annuity guaranteed benefits liabilities due to decreasing interest rates, partially offset by increasing equity markets and changes made in connection with the AAR;

• favorable changes in variable annuity hedges due to decreasing long-term interest rates and increasing equity markets;

• unfavorable changes in Shield embedded derivatives due to increasing equity markets and decreasing interest rates, partially offset by changes made in connection with the AAR.

Three Months Ended September 30, 2023

Annuity guaranteed benefits and Shield annuity liabilities performance was favorable for the three months ended September 30, 2023, primarily driven by:

• favorable decreases in annuity guaranteed benefits liabilities due to increasing interest rates, partially offset by decreasing equity markets and changes made in connection with the AAR;

• unfavorable changes in variable annuity hedges due to increasing long-term interest rates and decreasing equity markets;

• favorable changes in Shield embedded derivatives due to decreasing equity markets and increasing interest rates.

Nine Months Ended September 30, 2024

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the nine months ended September 30, 2024, primarily driven by:

• favorable decreases in annuity guaranteed benefits liabilities due to increasing equity markets and interest rates, as well as changes made in connection with the AAR;

• favorable changes in variable annuity hedges due to increasing equity markets;

• unfavorable changes in Shield embedded derivatives due to increasing equity markets, partially offset by changes made in connection with the AAR.

Nine Months Ended September 30, 2023

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the nine months ended September 30, 2023, primarily driven by:

• favorable decreases in annuity guaranteed benefits liabilities due to increasing interest rates and equity markets, partially offset by changes made in connection with the AAR;

• unfavorable changes in variable annuity hedges due to increasing long-term interest rates;

• unfavorable changes in Shield embedded derivatives due to increasing equity markets.

12 unchanged sentences

Our business and results of operations are materially affected by conditions in capital markets and the economy, generally.

insurance company, we are affected by the monetary policy of the Federal Reserve Board (the “Federal Reserve”) in the U.S.

insurance company, we are affected by the monetary policy of 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.

1 unchanged sentence

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.

On September 18, 2024, the Federal Reserve decreased the target range for the federal funds rate from between 5.25% and 5.50% to between 4.75% and 5.00%.

On November 7, 2024, the Federal Reserve further decreased the target range for the federal funds rate from between 4.75% and 5.00% to between 4.50% and 4.75%.

In 2023, the Federal Reserve increased the target range four times — from between 4.25% and 4.50% to between 5.25% and 5.50%.

Target range increases have contributed to the net unrealized loss position in our investment portfolio.

As a result of increases in interest rates, the unrealized losses on our fixed maturity securities exceeded the unrealized gains as of September 30, 2024.

See “Risk Factors — Risks Related to Our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S.

1 unchanged sentence

Selected Sector Investments

Recent elevated levels of market volatility have affected the performance of various asset classes.

Market volatility has 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.

3 unchanged sentences

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,

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.

See “— 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.

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

12 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

3 unchanged sentences

Adjusted net investment income — in the above yield table $ 1,294 $ 1,227 $ 3,877 $ 3,543

See “— Results of Operations — Consolidated Results for the Three Months and Six Months Ended June 30, 2024 and 2023” for an analysis of the period-over-period changes in net investment income.

See “— Results of Operations — Consolidated Results for the Three Months and Nine Months Ended September 30, 2024 and 2023” for an analysis of the period-over-period changes in net investment income.

Fixed Maturity Securities Available-For-Sale

Fixed maturity securities held by type (public or private) were as follows at:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Fair Value % of

11 unchanged sentences

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:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Designation NRSRO Rating Amortized

22 unchanged sentences

(In millions)

June 30, 2024

September 30, 2024

corporate $ 17,711 $ 18,576 $ 1,343 $ 338 $ 52 $ 40 $ 38,060

19 unchanged sentences

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 2% and 1% of total investments at June 30, 2024 and December 31, 2023, respectively.

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 2% and 1% of total investments at September 30, 2024 and December 31, 2023, respectively.

and foreign corporate fixed maturity securities holdings by industry were as follows at:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Fair Value % of

9 unchanged sentences

Structured Securities

We held $20.6 billion and $20.2 billion of Structured Securities, at estimated fair value, at June 30, 2024 and December 31, 2023, respectively, as presented in the RMBS, CMBS and ABS sections below.

We held $20.7 billion and $20.2 billion of Structured Securities, at estimated fair value, at September 30, 2024 and December 31, 2023, respectively, as presented in the RMBS, CMBS and ABS sections below.

Our RMBS holdings are diversified by security type, risk profile and ratings profile, which were as follows at:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Fair Value % of

24 unchanged sentences

Our CMBS holdings are diversified by vintage year, which were as follows at:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Amortized Cost Estimated Fair Value Amortized Cost Estimated Fair Value

14 unchanged sentences

Total $ 6,855 $ 6,493 $ 7,023 $ 6,410

The estimated fair value of CMBS rated Aaa using rating agency ratings was $4.4 billion, or 68.9% of total CMBS, and designated NAIC 1 was $6.0 billion, or 94.6% of total CMBS, at June 30, 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.

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 93.9% of total CMBS, at September 30, 2024.

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 $6.0 billion, or 94.2% of total CMBS, at December 31, 2023.

Our ABS holdings are diversified by both collateral type and issuer.

Our ABS holdings by collateral type and ratings profile were as follows at:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Fair Value % of

31 unchanged sentences

Information regarding mortgage loans by portfolio segment is summarized as follows at:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Amortized Cost % of

8 unchanged sentences

The percentage of our commercial and agricultural mortgage loan portfolios collateralized by properties located in the U.S.

were 98% at both June 30, 2024 and December 31, 2023.

were 98% at both September 30, 2024 and December 31, 2023.

The remainder was collateralized by properties located outside of the U.S.

At June 30, 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.

At September 30, 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 Florida.

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.

1 unchanged sentence

All residential mortgage loans were collateralized by properties located in the U.S.

at both June 30, 2024 and December 31, 2023.

At June 30, 2024, the carrying value as a percentage of total residential mortgage loans for the top three states in the U.S.

at both September 30, 2024 and December 31, 2023.

At September 30, 2024, the carrying value as a percentage of total residential mortgage loans for the top three states in the U.S.

was 40% for California, 10% for Florida and 6% for New York.

2 unchanged sentences

The diversification across geographic regions and property types of commercial mortgage loans was as follows at:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Total Amount % of

6 unchanged sentences

Mountain 1,111 8.4 1,182 9.0

728 5.5 735 5.6

East North Central

1 unchanged sentence

International 405 3.1 409 3.1

East South Central

343 2.6 306 2.3

West North Central

383 2.9 347 2.6

East South Central

317 2.4 306 2.3

Multi-region and Other

30 unchanged sentences

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 66% and 65% at June 30, 2024 and December 31, 2023, respectively, and our average debt-service coverage ratio was 2.3x at both June 30, 2024 and December 31, 2023.

For our commercial mortgage loans, our average loan-to-value ratio was 68% and 65% at September 30, 2024 and December 31, 2023, respectively, and our average debt-service coverage ratio was 2.3x at both September 30, 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 June 30, 2024 and December 31, 2023.

For our agricultural mortgage loans, our average loan-to-value ratio was 48% and 47% at September 30, 2024 and December 31, 2023, respectively.

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 six months ended June 30, 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:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(In millions)

3 unchanged sentences

__________________

(1) The estimated fair value of real estate limited partnerships and LLCs was $915 million and $927 million at June 30, 2024 and December 31, 2023, respectively.

(1) The estimated fair value of real estate limited partnerships and LLCs was $888 million and $927 million at September 30, 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.

2 unchanged sentences

The carrying value of our other invested assets by type was as follows at:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Total Carrying

5 unchanged sentences

242 5.4 245 5.5

Tax credit and renewable energy partnerships 49 1.2 52 1.2

Leveraged leases, net of non-recourse debt

49 1.1 47 1.1

Tax credit and renewable energy partnerships

48 1.1 52 1.2

Other 12 0.3 11 0.3

4 unchanged sentences

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 June 30, 2024 and December 31, 2023;

• the effects of derivatives in cash flow, fair value, or non-qualifying hedge relationships on the statements of operations for the six months ended June 30, 2024 and 2023.

• the effects of derivatives in cash flow, fair value, or non-qualifying hedge relationships on the statements of operations for the nine months ended September 30, 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.

6 unchanged sentences

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 June 30, 2024 include:

Derivatives categorized as Level 3 at September 30, 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.

6 unchanged sentences

The gross notional amount and estimated fair value of credit default swaps were as follows at:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Gross Notional

42 unchanged sentences

Our variable annuity account value and NAR by type of GMxB were as follows at:

June 30, 2024

September 30, 2024

December 31, 2023

15 unchanged sentences

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 $10.0 billion at June 30, 2024.

These liabilities were valued at $10.8 billion at September 30, 2024.

Our variable annuity MRBs by type of GMxB were as follows at:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(In millions)

1 unchanged sentence

Total $ 9,534 $ 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.

The estimated fair value of these guarantees can change significantly due to changes in interest rates, equity indices, market volatility and variations in actuarial assumptions, including policyholder behavior, mortality and risk margins related to non-capital markets inputs, as well as changes in nonperformance risk.

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.

1 unchanged sentence

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:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Instrument Type Gross Notional Amount (1) Estimated Fair Value Gross Notional Amount (1) Estimated Fair Value

10 unchanged sentences

The gross notional amount and estimated fair value of the derivatives held in our variable annuity hedging program were as follows at:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Instrument Type Gross Notional Amount (1) Estimated Fair Value Gross Notional Amount (1) Estimated Fair Value

21 unchanged sentences

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 $4.3 billion and $3.8 billion at June 30, 2024 and December 31, 2023, respectively.

We maintain a substantial short-term liquidity position, which was $5.7 billion and $3.8 billion at September 30, 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 $48.5 billion and $45.2 billion at June 30, 2024 and December 31, 2023, respectively.

An integral part of our liquidity management includes managing our level of liquid assets, which was $51.5 billion and $45.2 billion at September 30, 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.

3 unchanged sentences

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.

To support this forecast, we conduct cash flow and stress testing, which reflects 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.

18 unchanged sentences

Our primary sources and uses of liquidity and capital were as follows at:

Six Months Ended

Nine Months Ended

September 30,

(In millions)

1 unchanged sentence

Changes in payables for collateral under securities loaned and other transactions, net 94 —

Financing element on certain derivative instruments and other derivative related transactions, net 305 43

Total sources 4,071 3,562

5 unchanged sentences

Treasury stock acquired in connection with share repurchases 190 190

Financing element on certain derivative instruments and other derivative related transactions, net 175 54

Other, net 15 18

46 unchanged sentences

Outstanding Issuances Repayments

Six Months Ended June 30,

June 30, 2024 December 31, 2023 2024 2023 2024 2023

Nine Months Ended September 30,

September 30, 2024 December 31, 2023 2024 2023 2024 2023

(In millions)

12 unchanged sentences

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 June 30, 2024, we were in compliance with these financial covenants.

At September 30, 2024, we were in compliance with these financial covenants.

Primary Uses of Liquidity and Capital

1 unchanged sentence

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 June 30, 2024.

Subsequent to June 30, 2024 and through August 2, 2024, BHF repurchased an additional 509,400 shares of its common stock through open market purchases pursuant to a Rule 10b5-1 plan for $24 million.

Subsequent to September 30, 2024 and through November 1, 2024, BHF repurchased an additional 506,800 shares of its common stock through open market purchases pursuant to a Rule 10b5-1 plan for $24 million.

Preferred Stock Dividends

16 unchanged sentences

We pledge collateral to, and have collateral pledged to us by, counterparties in connection with our derivatives.

At June 30, 2024 and December 31, 2023, we pledged $38 million and $16 million, respectively, of cash collateral to counterparties.

At June 30, 2024 and December 31, 2023, we were obligated to return cash collateral pledged to us by counterparties of $627 million and $393 million, respectively.

At September 30, 2024, we did not pledge any cash collateral to counterparties.

At December 31, 2023, we pledged $16 million of cash collateral to counterparties.

At September 30, 2024 and December 31, 2023, we were obligated to return cash collateral pledged to us by counterparties of $659 million and $393 million, respectively.

The timing of the return of the derivatives collateral is uncertain.

2 unchanged sentences

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 June 30, 2024 and December 31, 2023, respectively.

The amount of this non-cash collateral at estimated fair value was $2.4 billion at both September 30, 2024 and December 31, 2023.

Securities Lending

2 unchanged sentences

Generally, our securities lending contracts expire within twelve months of issuance.

We were liable for cash collateral under our control of $3.3 billion at both June 30, 2024 and December 31, 2023.

We were liable for cash collateral under our control of $3.3 billion at both September 30, 2024 and December 31, 2023.

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 June 30, 2024 and December 31, 2023.

There was no non-cash collateral at both September 30, 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.

13 unchanged sentences

Short-term Liquidity and Liquid Assets

At both June 30, 2024 and December 31, 2023, BHF and certain of its non-insurance subsidiaries had short-term liquidity of $1.2 billion.

At September 30, 2024 and December 31, 2023, BHF and certain of its non-insurance subsidiaries had short-term liquidity of $1.1 billion and $1.2 billion, 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 assets held in trust.

At June 30, 2024 and December 31, 2023, BHF and certain of its non-insurance subsidiaries had liquid assets of $1.2 billion and $1.3 billion, respectively, of which $1.2 billion and $1.2 billion, respectively, was held by BHF.

At both September 30, 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.

22 unchanged sentences

Distributions from and Capital Contributions to BH Holdings

During both the six months ended June 30, 2024 and 2023, BHF did not receive any cash distributions from BH Holdings and did not make any cash capital contributions to BH Holdings.

During both the nine months ended September 30, 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

2 unchanged sentences

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 six months ended June 30, 2024 and 2023, BHF borrowed $290 million and $397 million, respectively, from certain of its non-insurance subsidiaries and repaid $85 million and $279 million of such borrowings during the six months ended June 30, 2024 and 2023, respectively.

At June 30, 2024 and December 31, 2023, BHF had total obligations outstanding of $932 million and $727 million, respectively, under such agreements.

During the nine months ended September 30, 2024 and 2023, BHF borrowed $420 million and $569 million, respectively, from certain of its non-insurance subsidiaries and repaid $180 million and $369 million of such borrowings during the nine months ended September 30, 2024 and 2023, respectively.

At September 30, 2024 and December 31, 2023, BHF had total obligations outstanding of $967 million and $727 million, respectively, under such agreements.

Intercompany Liquidity Facilities

1 unchanged sentence

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 six months ended June 30, 2024 and 2023, there were no borrowings or repayments by BHF under these facilities and, at both June 30, 2024 and December 31, 2023, BHF had no obligations outstanding under such facilities.

During both the nine months ended September 30, 2024 and 2023, there were no borrowings or repayments by BHF under these facilities and, at both September 30, 2024 and December 31, 2023, BHF had no obligations outstanding under such facilities.

Note Regarding Forward-Looking Statements

43 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis