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Item 7. Management’s Discussion and Analysis

2025-02-28 compared with 2024-02-22 · 241 added, 319 removed, 1027 unchanged (35% of the section changed)

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Summary of Critical Accounting Estimates

Non-GAAP and Other Financial Disclosures

Non-GAAP Financial Disclosures

Results of Operations

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• “Executive Summary” provides summarized information regarding our business, segments and financial results.

• “Risk Management Strategies” describes the Company’s risk management strategies to protect against capital markets risks specific to our variable annuity and ULSG businesses.

• “Risk Management Strategies” describes the Company’s risk management strategies to protect against capital markets and other economic risks.

• “Industry Trends and Uncertainties” discusses updates and changes to a number of trends and uncertainties 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 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.

• “Summary of Critical Accounting Estimates” explains what we believe to be the most critical estimates and judgments applied in determining our results in accordance with GAAP.

• “Non-GAAP 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.

• “Results of Operations” begins with a discussion of our AAR, including a summary of the changes made to the key assumptions in 2024 and 2023, as well as the resulting impact on net income (loss) available to shareholders in each period.

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Our Results of Operations discussion and analysis for the year ended December 31, 2023, including a review of the 2023 AAR and year-over-year comparisons between the years ended December 31, 2023 and 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023 (our “2023 Annual Report”), which was filed with the SEC on February 22, 2024, and such discussions are incorporated herein by reference.

Certain amounts presented in prior periods within the following discussions of our financial results have been reclassified to conform with the current year presentation, including amounts related to the adoption of LDTI.

See Note 1 of the Notes to the Consolidated Financial Statements for further information.

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:

(i) Annuities, (ii) Life and (iii) Run-off, which consists 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 Note 3 of the Notes to the Consolidated Financial Statements for further information regarding our segments and Corporate & Other.

Net income (loss) available to shareholders and adjusted earnings, a non-GAAP financial measure, were as follows:

We are organized into the following reportable segments:

and Corporate & Other.

See “Business — Segment Information” and Note 2 of the Notes to the Consolidated Financial Statements for further information regarding our segments.

Net income (loss) available to shareholders and adjusted earnings (loss), a non-GAAP financial measure, were as follows:

Years Ended December 31,

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Net income (loss) available to shareholders (1) $ 286 $ (1,214)

Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends $ 1,182 $ 1,343

Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends (1) $ 1,623 $ 1,182

Provision for income tax expense (benefit) 304 213

Adjusted earnings $ 969 $ 1,184

Adjusted earnings (loss) (1) $ 1,319 $ 969

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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” throughout the results of operations discussions.

For the year ended December 31, 2023, we had net loss available to shareholders of $1.2 billion and adjusted earnings of $969 million compared to net income available to shareholders of $3.8 billion and adjusted earnings of $1.2 billion for the year ended December 31, 2022.

Net loss available to shareholders for the year ended December 31, 2023 primarily reflects net unfavorable changes in the estimated fair value of our variable annuity guaranteed benefit riders due to market factors, net losses on sales of fixed maturity securities 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.

See “— Non-GAAP and Other Financial Disclosures.” See “— Results of Operations” for a detailed discussion of our results.

(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 year ended December 31, 2024, we had net income available to shareholders of $286 million and adjusted earnings of $1.3 billion compared to net loss available to shareholders of $1.2 billion and adjusted earnings of $969 million for the year ended December 31, 2023.

Net income available to shareholders for the year ended December 31, 2024 primarily reflects 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.

Favorable pre-tax adjusted earnings was partially offset by 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 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.

See “— Non-GAAP Financial Disclosures.” See “— Results of Operations” for a detailed discussion of our results.

Risk Management Strategies

We employ risk management strategies to protect against capital markets risks specific to our variable annuity and ULSG businesses, which includes the utilization of a combined RBC ratio.

Combined RBC ratio reflects the aggregate RBC ratio of our insurance subsidiaries, defined as aggregate TAC of our insurance subsidiaries divided by the total of their respective company action level RBCs.

Combined RBC ratio is an internal metric used by the Company to manage the risk associated with its insurance products through our capital and exposure risk management program;

We employ risk management strategies to mitigate the effects of severe market disruptions and other economic events on our business.

These strategies currently include macro hedge programs that manage market risks across all products, hedging certain market risk exposures at the product level, and, to a lesser extent, reinsurance.

Our risk management strategies focus on protecting the capital and surplus of our insurance subsidiaries, through the use of metrics aligned with regulatory capital requirements.

We continually review our risk management strategies in the context of our overall capitalization targets as well as monitor the capital markets for opportunities to adjust our derivative positions to manage our market risk exposure, as appropriate.

A metric we utilize to manage our risk is the combined RBC ratio (“Combined RBC Ratio”), which reflects the aggregate RBC ratio of our insurance subsidiaries, defined as aggregate TAC of our insurance subsidiaries divided by the total of their respective company action level RBCs.

Combined RBC Ratio is an internal metric used by the Company to manage the risk associated with its insurance products through our risk management strategy;

it is not a metric required or used by regulators.

Interest Rate Hedging

Brighthouse Financial targets a Combined RBC Ratio of 400% to 450% in normal market conditions.

We manage our variable annuity and first generation Shield Annuity contracts together, consistent with how we determine statutory reserves and required capital.

These products have natural risk offsets because our obligations under Shield Annuity contracts decrease in falling equity markets when variable annuity guarantee obligations increase, and our obligations under Shield Annuity contracts increase in rising equity markets when variable annuity guarantee obligations decrease.

In managing the risks associated with this block, we continue to operate with a first loss position of no more than $500 million.

The first loss position is relative to our target funding level, which is based on regulatory capital requirements.

We launched updated versions of our Shield Annuity products in 2024, which we manage and hedge on a standalone basis separately from our variable annuity and first generation Shield Annuity products.

We believe the level of our capital protection provides us financial flexibility and supports deploying capital for growing long-term, sustainable shareholder value.

However, because our hedging strategies place a lower priority on offsetting changes to GAAP liabilities, changes to markets over time, including market volatility, could result in GAAP net income volatility, which could potentially impact stockholders’ equity.

See “Risk Factors — Risks Related to Our Business — Our hedging strategy may not be effective, which may result in significant volatility in our profitability measures or may negatively affect our statutory capital” and “— Summary of Critical Accounting Estimates.”

Interest Rate Risk Management

We are exposed to interest rate risk in most of our products, with the more significant longer-dated exposure residing in our in-force variable annuity guarantees and ULSG business.

We individually manage the interest rate risk in these two blocks with hedge targets based on statutory metrics designed principally to protect the capital of our largest insurance subsidiary, BLIC.

Historically, we have managed interest rate exposure in aggregate across the Company, while also setting individual hedge targets for certain products such as ULSG, where the economics of the interest rate derivatives are ceded through reinsurance to BRCD.

Our current macro hedge program is used to manage interest rate risk in aggregate, with rebalancing and trade executions determined by net exposure.

By managing the interest rate exposure on a net basis, we expect to more efficiently manage the derivative portfolio, protect capital and reduce costs.

Our interest rate hedge programs may also include hybrid options that have other risk exposure in addition to interest rate exposure.

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:

December 31, 2023 December 31, 2022

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 $ 23,037 $ 71 $ 50 $ 2,330 $ 38 $ 46

Interest rate options 33,680 47 167 28,688 22 232

Interest rate forwards 16,155 32 1,877 16,848 35 2,387

Hybrid options (2) 270 — — — — —

Total $ 73,142 $ 150 $ 2,094 $ 47,866 $ 95 $ 2,665

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(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.

This aggregate view includes all interest rate derivatives used to manage the variable annuity and ULSG product exposures based on the hedge targets of the respective programs as of the balance sheet date.

We intend to maintain an adequate amount of liquid investments in the investment portfolios supporting these businesses to cover any contingent collateral posting requirements from this hedging strategy.

Variable Annuity Exposure Risk Management

With the adoption of VA Reform, our management of, and our hedging strategy associated with, our variable annuity business aligns with the regulatory framework.

Given this alignment and our large non-variable annuity business, among other things, we utilize a combined RBC ratio to manage the risk associated with our insurance products through our capital and exposure risk management program.

In support of our target combined RBC ratio of 400% to 450% in normal market conditions, we expect to maintain a capital and exposure risk management program that targets total assets supporting our variable annuity contracts at or above the CTE98 level in normal market conditions.

We refer to our target level of assets as our “Variable Annuity Target Funding Level.” With our risk management focus on the core drivers of our combined RBC ratio, we can also better manage our RBC in stressed market scenarios.

See “Glossary” for the definition of CTE.

When setting our hedge target, we consider the fact that our obligations under Shield Annuity contracts decrease in falling equity markets when variable annuity guarantee obligations increase, and increase in rising equity markets when variable annuity guarantee obligations decrease.

Shield Annuities are included with variable annuities in our statutory reserve requirements, as well as in our CTE estimates.

Our exposure risk management program seeks to mitigate the potential adverse effects of changes in capital markets, specifically equity markets and interest rates, on our Variable Annuity Target Funding Level, as well as on our statutory free cash flow.

We utilize a combination of short-term and longer-term derivative instruments to establish a layered maturity of protection, which we believe will reduce rollover risk during periods of market disruption or higher volatility.

We continually review our hedging strategy in the context of our overall capitalization targets and monitor the capital markets for opportunities to adjust our derivative positions to manage our variable annuity exposure, as appropriate.

Under this strategy, we plan to operate with a first loss position of no more than $500 million.

The first loss position is relative to our Variable Annuity Target Funding Level such that the impact on reserves, and thus TAC, could be greater than the first loss position.

However, under such a scenario there would be an offset in required statutory capital.

In addition, while recent amendments to the Valuation Manual, which became effective on December 31, 2023, changed the requirements for reflecting hedge instruments in reserves and capital, the key pillars of our hedging strategy (including our targeted combined RBC ratio in normal markets, our Variable Annuity Target Funding Level, and our first loss position) were not impacted by this new statutory requirement.

See “Business — Regulation — Insurance Regulation — Statutory Accounting, Reserves and Risk-Based Capital” for more information regarding the new statutory requirement and the related impacts.

We believe the level of our capital protection provides us financial flexibility and supports deploying capital for growing long-term, sustainable shareholder value.

However, because our hedging strategy places a lower priority on offsetting changes to GAAP liabilities, changes to markets over time, including market volatility, could result in GAAP net income volatility, which could potentially impact stockholders’ equity.

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” and “— Summary of Critical Accounting Estimates.”

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

December 31, 2023 December 31, 2022

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 $ 16,183 $ 472 $ 680 $ 13,862 $ 525 $ 350

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

Interest rate swaps 30,864 92 103 2,330 38 46

Interest rate options 27,580 39 123 27,088 21 126

Interest rate forwards 8,519 — 619 10,565 35 1,255

Hybrid options 270 — — — — —

Total $ 137,158 $ 2,839 $ 3,662 $ 86,754 $ 1,139 $ 2,524

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(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.

ULSG Market Risk Exposure Management

The ULSG block includes the business retained by our insurance subsidiaries and the portion of it that is ceded to BRCD for providing redundant, non-economic reinsurance financing support.

The ULSG block, which is no longer actively sold, includes the business retained by our insurance subsidiaries and the portion of it that is ceded to BRCD for providing redundant, non-economic reinsurance financing support.

The primary market risk associated with our ULSG block is the uncertainty around the future levels of U.S.

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For the business retained by our insurance subsidiaries, we set our ULSG asset requirement target to equal the actuarially determined statutory reserves, which, taken together with our ULSG asset requirement target of BRCD, comprises our ULSG Target.

Under the ULSG CFT approach, we assume that interest rates remain flat or lower than current levels and our actuarial assumptions include a provision for adverse deviation.

These underlying assumptions used in ULSG CFT include scenarios that are more conservative than those required under GAAP, which assumes a long-term upward mean reversion of interest rates and best estimate actuarial assumptions without additional provisions for adverse deviation.

We seek to mitigate interest rate exposures associated with these liabilities by holding ULSG Assets to closely match our ULSG Target under different interest rate environments.

We seek to mitigate interest rate exposures associated with our ULSG business by holding ULSG Assets to closely match our ULSG Target under different interest rate environments.

“ULSG Assets” are defined as (i) total general account assets supporting statutory reserves and capital in the ULSG portfolios of our insurance subsidiaries and BRCD and (ii) interest rate derivative instruments to mitigate ULSG interest rate exposures.

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Likewise, if interest rates rise, our ULSG Target declines.

The interest rate derivatives allocated to ULSG Assets prioritizes the ULSG Target (comprised of ULSG CFT and statutory considerations).

The interest rate derivatives allocated to ULSG Assets prioritize the ULSG Target.

This could increase the period-to-period volatility of net income and equity due to differences in the sensitivity of the ULSG Target and GAAP liabilities to the changes in interest rates.

We closely monitor the sensitivity of our ULSG Assets and ULSG Target to changes in interest rates.

We closely monitor the sensitivity of our ULSG Target to changes in interest rates.

We seek to maintain ULSG Assets above the ULSG Target across a wide range of interest rate scenarios.

At December 31, 2024, BRCD assets exceeded the ULSG CFT requirement.

Maintaining ULSG Assets that closely match our ULSG Target supports our target combined RBC ratio of 400% to 450% in normal market conditions.

Equity Risk Management

We are exposed to equity market risk from policyholder liabilities with long-term guarantees based on equity performance, with our most significant exposures found in crediting rates on Shield Annuities and variable annuity guarantees.

We manage equity risk primarily through the use of product-specific hedging strategies and have a macro hedging program for managing residual equity risk.

As discussed above, we have historically managed equity risk of variable annuities and Shield Annuities together, recognizing the natural risk offset between the two products.

In 2024, we launched updated versions of our Shield Annuity products, which we manage on a standalone basis separately from our variable annuity and first generation Shield Annuity products.

As we write new business, we use equity derivatives that are intended to offset the embedded options related to the crediting rate in Shield Annuity contracts.

Since it is not practical to hedge each policy individually, we may group individual policies into cohorts or use other industry methods to reduce the number of hedge trades.

Industry Trends and Uncertainties

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In addition, the following factors represent 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.

Changes in Accounting Standards

Our financial statements are subject to the application of GAAP, which is periodically revised by the FASB.

The FASB issued new guidance, effective January 1, 2023, that resulted in significant changes to the accounting for long-duration insurance contracts, including a requirement that all variable annuity guarantees be considered MRBs and measured at fair value.

See Notes 1 and 2 of the Notes to the Consolidated Financial Statements for a discussion of the impacts.

See also “Risk Factors — Risks Related to Our Business — Changes in accounting standards issued by the Financial Accounting Standards Board may adversely affect our financial statements.”

Financial and Economic Environment

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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.

Equity market performance can affect our profitability for variable annuities, Shield 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.

In September, November and December 2024, the Federal Reserve Board (the “Federal Reserve”) decreased the target range for the federal funds rate, and any additional future decrease 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.

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.

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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.

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.

Prolonged and elevated inflation could adversely affect the financial markets and the economy generally and dispelling it may require governments to pursue restrictive fiscal and monetary policies, 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.

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.

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As additional company specific or industry information on contract holder behavior becomes available, related assumptions may change and may potentially have a material impact on liability valuations and net income.

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.

or foreign governments, 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” and “— Risk Management Strategies” 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.

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Actual results could differ from these estimates.

The above critical accounting estimates are described below and in Note 1 of the Notes to the Consolidated Financial Statements, which reflect updates related to the adoption of LDTI.

The above critical accounting estimates are described below and in Note 1 of the Notes to the Consolidated Financial Statements.

Liability for Future Policy Benefits

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

The measurement of our ULSG liabilities can be significantly impacted by changes in assumptions for the general account rate of return, which is driven by our assumption for long-term treasury yields, and changes in assumptions for premium, premium persistency, mortality and lapses.

The measurement of our ULSG liabilities can be significantly impacted by changes in assumptions for the general account rate of return, which is driven by our assumption for long-term treasury yields, and changes in assumptions for mortality, premium persistency, lapses and withdrawals.

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

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

In 2023, the Company updated assumptions regarding policyholder behavior, mortality, separate account fund allocations and volatility.

In 2024, the Company updated assumptions regarding policyholder behavior, mortality and separate account fund allocations.

See Note 4 of the Notes to the Consolidated Financial Statements for additional information on the effects of changes in inputs and assumptions on the measurement of our liabilities for variable annuity guarantees.

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See Notes 1 and 15 of the Notes to the Consolidated Financial Statements as well as “Business — Regulation — Federal Tax Reform” for additional information on our income taxes.

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

We present certain measures of our performance that are not calculated in accordance with GAAP.

Our definitions of non-GAAP financial measures may differ from those used by other companies.

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.

Adjusted earnings is a financial measure 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.

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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 following are significant items excluded from total revenues in calculating adjusted earnings:

The following items are excluded from total revenues in calculating adjusted earnings:

• Net investment gains (losses);

• Net derivative gains (losses), excluding earned income and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment (“Investment Hedge Adjustments”).

The following are significant items excluded from total expenses in calculating adjusted earnings:

The following items are excluded from total expenses in calculating adjusted earnings:

• Change in MRBs;

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(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.

(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.

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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.

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.

Adjusted Net Investment Income Yield

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.

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.

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Asset estimated fair values exclude collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.

For a reconciliation of adjusted net investment income yield to net investment income, the most directly comparable GAAP measure, see the summary yield table located in “— Investments — Current Environment — Investment Portfolio Results.”

Results of Operations

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Consolidated Results for the Years Ended December 31, 2024 and 2023

Reconciliation of Net Income (Loss) Available to Shareholders to Adjusted Earnings

Consolidated Results for the Years Ended December 31, 2023 and 2022 - Adjusted Earnings

Segments and Corporate & Other Results for the Years Ended December 31, 2023 and 2022 - Adjusted Earnings

Reconciliation of Net Income (Loss) Available to Shareholders to Adjusted Earnings (Loss)

Consolidated Results for the Years Ended December 31, 2024 and 2023 - Adjusted Earnings (Loss)

Segment Results for the Years Ended December 31, 2024 and 2023 - Adjusted Earnings (Loss)

Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Years Ended December 31, 2024 and 2023

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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, 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.

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.

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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 fund allocations, mortality, lapses and withdrawals.

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

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:

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Market risk benefits

$ (251) $ (210)

Included in pre-tax adjusted earnings:

Embedded derivatives

Total market risk benefits and embedded derivatives

Included in pre-tax adjusted earnings (loss):

Other annuity business 26 15

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Run-off 359 119

Total included in pre-tax adjusted earnings 44 174

Total included in pre-tax adjusted earnings (loss)

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

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Income (loss) before provision for income tax

(1,474) 4,732

Provision for income tax expense (benefit)

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

(1,112) 3,879

Preferred stock dividends

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Market value adjustments 13 (12)

Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends

Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends

Income (loss) available to shareholders before provision for income tax

(1,581) 4,623

Provision for income tax expense (benefit)

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The change in MRBs reflects changes in the projected value of annuity guaranteed benefits discounted at current risk-free rates, plus a nonperformance risk spread that is locked-in at policy issuance.

Net Investment Gains (Losses).

Includes gains and losses on sales of investments, impairments losses and changes in allowances for credit losses.

Net Derivative Gains (Losses), Excluding Investment Hedge Adjustments.

We have certain derivative instruments for which changes in estimated fair value are recognized in net derivative gains (losses).

See “— Non-GAAP and Other Financial Disclosures — Non-GAAP Financial Disclosures — Adjusted Earnings.”

Freestanding Derivatives.

We have freestanding derivatives that economically hedge certain invested assets and insurance liabilities.

The majority of this hedging activity is focused in the following areas:

• use of a proprietary mix of derivative instruments to hedge variable annuity guaranteed benefit riders against adverse changes in capital markets;

• use of interest rate swaps, swaptions and interest rate forwards in connection with our ULSG business;

• use of interest rate swaps when we have duration mismatches where suitable assets with maturities similar to those of our long-dated liabilities are not readily available in the market;

• use of interest rate forwards hedging reinvestment risk from maturing assets with higher yields than currently available in the market that support long-dated liabilities;

• use of foreign currency swaps when we hold fixed maturity securities denominated in foreign currencies that are matching insurance liabilities denominated in U.S.

• use of equity index options to hedge index-linked annuity products against adverse changes in equity markets.

Embedded Derivatives.

The changes in liability values of our fixed index-linked annuity and Shield products that result from changes in the underlying equity index are accounted for as embedded derivatives.

In addition, certain ceded reinsurance agreements in our Life and Run-off segments are written on a coinsurance with funds withheld basis.

The funds withheld component is accounted for as an embedded derivative with changes in the estimated fair value recognized in net income (loss) in the period in which they occur.

We use derivative instruments to minimize exposure to various market risks, including interest rates and equity markets.

In addition, the crediting rates associated with index-linked annuities, including Shield Annuities, are classified as embedded derivatives.

The change in fair value of derivative instruments that do not qualify for hedge accounting and embedded derivatives are recognized in net derivative gains (losses).

Market Value Adjustments.

See “— Non-GAAP and Other Financial Disclosures — Non-GAAP Financial Disclosures — Adjusted Earnings.”

Includes the change in fair value of the crediting rate on experience-rated contracts.

Pre-tax Adjusted Earnings.

See “— Non-GAAP and Other Financial Disclosures — Non-GAAP Financial Disclosures — Adjusted Earnings.”

Adjusted earnings is a financial measure used by management to evaluate performance and facilitate comparisons to industry results.

See “— Non-GAAP Financial Disclosures — Adjusted Earnings” for more information on the items described above.

Year Ended December 31, 2024 Compared with the Year Ended December 31, 2023

Loss available to shareholders before provision for income tax was $1.6 billion ($1.2 billion, net of income tax), a decrease of $6.2 billion ($5.0 billion, net of income tax) from income available to shareholders before provision for income tax of $4.6 billion ($3.8 billion, 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 Years Ended December 31, 2023 and 2022,” and

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

The decrease in income before provision for income tax was partially offset by the favorable 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 $197 million and increased more in the prior period resulting in a loss of $1.9 billion;

The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of 25% in the current period compared to 18% in the prior period.

Income available to shareholders before provision for income tax was $315 million ($286 million, net of income tax), an increase of $1.9 billion ($1.5 billion, net of income tax) from loss available to shareholders before provision for income tax of $1.6 billion ($1.2 billion, net of income tax) in the prior period.

The increase in income 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 Years Ended December 31, 2024 and 2023”;

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

The increase in income before provision for income tax was partially offset by the unfavorable 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 more in the current period resulting in a loss of $557 million and increased less in the prior period resulting in a loss of $197 million.

The provision for income tax, calculated as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of 7% in the current period compared to 25% 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.

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:

Reconciliation of Net Income (Loss) Available to Shareholders to Adjusted Earnings (Loss)

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

Year Ended December 31, 2024

9 unchanged sentences

Market value adjustments — — 13 — 13

Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends

Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends

1,548 38 81 (44) 1,623

Provision for income tax expense (benefit) 297 5 16 (14) 304

Adjusted earnings $ 1,169 $ (53) $ (77) $ (70) $ 969

Adjusted earnings (loss)

$ 1,251 $ 33 $ 65 $ (30) $ 1,319

Year Ended December 31, 2023

9 unchanged sentences

Market value adjustments — — (12) — (12)

Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends

Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends

1,437 (69) (100) (86) 1,182

Provision for income tax expense (benefit) 268 (16) (23) (16) 213

Adjusted earnings $ 1,070 $ 78 $ 87 $ (51) $ 1,184

Consolidated Results for the Years Ended December 31, 2023 and 2022 - Adjusted Earnings

Adjusted earnings (loss)

$ 1,169 $ (53) $ (77) $ (70) $ 969

Consolidated Results for the Years Ended December 31, 2024 and 2023 - Adjusted Earnings (Loss)

The components of adjusted earnings were as follows:

7 unchanged sentences

Net income (loss) attributable to noncontrolling interests and preferred stock dividends

Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends

Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends

Provision for income tax expense (benefit) 304 213

Adjusted earnings $ 969 $ 1,184

Adjusted earnings (loss)

$ 1,319 $ 969

Year Ended December 31, 2024 Compared with the Year Ended December 31, 2023

Adjusted earnings were $969 million in the current period, a decrease of $215 million.

Key net unfavorable impacts were:

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

◦ an increase in liability balances resulting from actuarial model refinements in the prior period;

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

partially offset by

◦ lower liabilities from the impact of new reinsurance agreements entered into in the prior period;

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

• lower net fee income due to:

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

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

partially offset by

◦ lower ceded cost of insurance fees consistent with favorable equity market returns in our Life segment, which is mostly offset in other expenses.

Adjusted earnings were $1.3 billion in the current period, an increase of $350 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;

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

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

◦ 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;

◦ higher returns from short-term investments;

partially offset by

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

◦ lower returns on investments in real estate limited partnerships and limited liability companies (“LLC”);

◦ lower income from our securities lending program;

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

• lower other expenses due to:

◦ the settlement of a reinsurance-related matter in the prior period;

◦ higher systems conversion costs in the prior period;

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

◦ lower operational expenses;

◦ lower legal reserves;

◦ lower transition services agreement expenses;

partially offset by

◦ higher deferred compensation and operational expenses;

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

◦ lower interest expenses in the prior period related to prior year tax matters;

◦ higher legal reserves.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 17% in the current period compared to 11% in the prior period.

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

◦ higher variable compensation expenses.

Key net unfavorable impact was:

• 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, as well as the aging in-force business in our Run-off segment;

partially offset by

◦ 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.

The provision for income tax, calculated 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, tax credits and current period non-recurring items.

Segments and Corporate & Other Results for the Years Ended December 31, 2023 and 2022 — Adjusted Earnings

Segment Results for the Years Ended December 31, 2024 and 2023 — Adjusted Earnings (Loss)

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

13 unchanged sentences

Adjusted earnings were $1.3 billion in the current period, an increase of $82 million.

Key net favorable impacts were:

• 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 from short-term investments;

Key favorable impact was:

• 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.

Key net unfavorable impacts were:

• higher net 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 compensation expenses;

partially offset by

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

◦ lower returns on investments in real estate limited partnerships and LLCs;

◦ lower income from our securities lending program;

• lower 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;

◦ an increase in income annuity underwriting margins;

• lower other expenses due to:

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

◦ lower operational expenses;

◦ lower transition services agreement expenses;

• lower net investment spread due to:

partially offset by

◦ higher operational and deferred compensation expenses.

Key unfavorable impact was lower fee income due to lower asset-based fees resulting from lower average separate account balances, a portion of which is offset in other expenses.

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.

◦ 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.

The provision for income tax, calculated 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.

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

The components of adjusted earnings (loss) for our Life segment were as follows:

Years Ended December 31,

5 unchanged sentences

Other expenses (188) (203)

Pre-tax adjusted earnings (69) 94

Pre-tax adjusted earnings (loss)

Provision for income tax expense (benefit) 5 (16)

Adjusted earnings $ (53) $ 78

Adjusted earnings (loss)

Year Ended December 31, 2024 Compared with the Year Ended December 31, 2023

Adjusted earnings were a loss of $53 million in the current period, a decrease of $131 million.

Key net unfavorable impacts were:

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

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

Adjusted earnings were $33 million in the current period, an increase of $86 million.

Key net favorable impacts were:

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

• higher net investment spread due to:

◦ higher returns on other limited partnerships;

partially offset by

◦ lower paid claims, net of reinsurance;

• higher other expenses due to:

◦ lower ceded cost of insurance expenses consistent with favorable equity market returns, which is offset in fee income;

◦ higher deferred compensation and operational expenses;

• lower net investment spread due to lower income from our securities lending program.

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

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 23% in the current period compared to 17% in the prior period.

◦ lower average invested long-term assets;

• lower other expenses due to:

◦ lower operational expenses;

◦ lower transition services agreement expenses.

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, calculated as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 13% 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.

The components of adjusted earnings for our Run-off segment were as follows:

The components of adjusted earnings (loss) for our Run-off segment were as follows:

Years Ended December 31,

5 unchanged sentences

Other expenses (166) (167)

Pre-tax adjusted earnings (100) 109

Pre-tax adjusted earnings (loss)

Provision for income tax expense (benefit) 16 (23)

Adjusted earnings $ (77) $ 87

Adjusted earnings (loss)

Year Ended December 31, 2024 Compared with the Year Ended December 31, 2023

Adjusted earnings were a loss of $77 million in the current period, a decrease of $164 million.

Key net unfavorable impacts were:

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

◦ an increase in liability balances resulting from actuarial model refinements in the prior period;

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

Adjusted earnings were $65 million in the current period, an increase of $142 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

◦ lower liabilities from the impact of new reinsurance agreements entered into in the prior period;

◦ lower paid claims, net of reinsurance;

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

• lower net investment spread due to:

◦ lower average invested assets;

◦ lower income from our securities lending program.

Key favorable impact was lower other expenses due to the settlement of a reinsurance-related matter in the prior period.

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

◦ 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:

◦ higher returns on other limited partnerships;

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

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, calculated 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.

Corporate & Other

The components of adjusted earnings for Corporate & Other were as follows:

The components of adjusted earnings (loss) for our Corporate & Other segment were as follows:

Years Ended December 31,

6 unchanged sentences

Net income (loss) attributable to noncontrolling interests and preferred stock dividends 107 107

Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends

Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends

Provision for income tax expense (benefit) (14) (16)

Adjusted earnings $ (70) $ (51)

Adjusted earnings (loss)

$ (30) $ (70)

Year Ended December 31, 2024 Compared with the Year Ended December 31, 2023

Adjusted earnings were a loss of $70 million in the current period, a higher loss of $19 million.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in a lower 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 and tax credits.

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.

Key net favorable pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends 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;

◦ higher returns from short-term investments;

partially offset by

◦ lower income from our securities lending program;

Adjusted loss was $30 million in the current period, a lower loss of $40 million.

Key favorable impacts were:

• lower other expenses due to:

◦ higher systems conversion costs in the prior period;

partially offset by

◦ lower interest expenses in the prior period related to prior year tax matters;

◦ higher legal reserves.

◦ lower legal reserves;

◦ lower operational expenses;

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

The provision for income tax, calculated 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.

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

Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Years Ended December 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 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:

The overall impact on income (loss) available to shareholders before provision for income tax from the performance of annuity guaranteed benefits 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:

Years Ended December 31,

26 unchanged sentences

We believe that Shield Annuities provide us with a risk offset to liabilities related to guaranteed rider benefits.

See “— Risk Management Strategies — Variable Annuity Exposure Risk Management” for discussion of our management of our hedging strategy associated with our variable annuity business, which remains unchanged following the adoption of LDTI.

Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022

See “— Risk Management Strategies” for a discussion of our management of our hedging strategy.

Year Ended December 31, 2024

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the year ended December 31, 2024, primarily driven by:

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

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

• 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, partially offset by increasing long-term interest rates and changes made in connection with the AAR.

Year Ended December 31, 2023

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the year ended December 31, 2023, primarily driven by:

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

• 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.

Annuity guaranteed benefits and Shield annuity liabilities performance was favorable for the year ended December 31, 2022, primarily driven by:

• 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, partially offset by decreasing equity markets;

• favorable changes in Shield embedded derivatives due to decreasing equity markets, partially offset by increasing interest rates.

Investment Risk Management Strategy

15 unchanged sentences

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% as of December 31, 2023.

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.

In September, November and December 2024, the Federal Reserve decreased the target range for the federal funds rate from between 5.25% and 5.50% to between 4.25% and 4.50% as of December 31, 2024.

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%.

Interest rate 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 December 31, 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.

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.”

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.

There has been a continued market focus on commercial real estate, including office properties, as a result of 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 RMBS, CMBS and ABS.

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,” as well as “— Investments — Mortgage Loans” and Note 9 of the Notes to the 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 8 of the Notes to the 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.

75 unchanged sentences

Foreign corporate 5,327 6,026 391 41 45 — 11,830

government and agency 8,306 113 — — — — 8,419

RMBS 7,254 15 16 — 1 1 7,287

government and agency 6,636 111 — — — — 6,747

CMBS 5,985 344 17 6 4 — 6,356

6 unchanged sentences

Foreign corporate 4,841 6,423 344 57 — — 11,665

government and agency 7,887 129 — — — — 8,016

RMBS 7,390 18 12 1 9 — 7,430

government and agency 8,306 113 — — — — 8,419

CMBS 6,039 344 24 — 3 — 6,410

28 unchanged sentences

Security type:

Pass-through securities $ 3,922 52.8 % $ (491) $ 3,846 51.1 % $ (590)

Collateralized mortgage obligations $ 3,906 53.6 % $ (304) $ 3,508 47.2 % $ (273)

Pass-through securities 3,381 46.4 (525) 3,922 52.8 (491)

Total RMBS $ 7,287 100.0 % $ (829) $ 7,430 100.0 % $ (764)

6 unchanged sentences

Ratings profile:

Rated Aaa (1)

$ 892 12.2 % $ 554 7.5 %

Designated NAIC 1 $ 7,254 99.5 % $ 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.

17 unchanged sentences

419 411 451 436

451 436 462 442

Total $ 6,776 $ 6,356 $ 7,023 $ 6,410

The estimated fair value of CMBS rated Aaa using rating agency ratings was $4.3 billion, or 67.7% of total CMBS, and designated NAIC 1 was $6.0 billion, or 94.2% of total CMBS, at December 31, 2024.

The estimated fair value of CMBS Aaa rating agency ratings was $4.6 billion, or 70.0% of total CMBS, and designated NAIC 1 was $6.2 billion, or 94.4% of total CMBS, at December 31, 2022.

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.

63 unchanged sentences

South Atlantic $ 2,769 20.8 % $ 2,747 20.8 %

2,562 19.4 2,765 20.4

Pacific 2,644 19.8 2,562 19.4

Middle Atlantic 2,075 15.6 2,153 16.3

2 unchanged sentences

East North Central 834 6.2 737 5.6

737 5.6 794 5.8

735 5.6 741 5.4

New England 726 5.4 735 5.6

International 391 2.9 409 3.1

West North Central 347 2.6 361 2.7

East South Central 363 2.7 306 2.3

West North Central 358 2.7 347 2.6

Multi-region and Other 501 3.8 502 3.8

502 3.8 65 0.5

Total recorded investment 13,330 100.0 % 13,193 100.0 %

10 unchanged sentences

Carrying value, net of allowance for credit losses $ 13,224 $ 13,124

_______________

(1) During the year, certain commercial mortgage loans were reclassified into the Multi-region and Other geographic region.

Mortgage Loan Credit Quality — Monitoring Process.

16 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 65% and 57% at December 31, 2023 and 2022, respectively, and our average debt-service coverage ratio was 2.3x and 2.2x at December 31, 2023 and 2022, respectively.

For our commercial mortgage loans, our average loan-to-value ratio was 69% and 65% at December 31, 2024 and 2023, respectively, and our average debt-service coverage ratio was 2.3x at both December 31, 2024 and 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.

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Federal Home Loan Bank stock 222 4.2 245 5.5

245 5.5 201 7.0

Tax credit and renewable energy partnerships 52 1.2 55 1.9

Leveraged leases, net of non-recourse debt 60 1.1 47 1.1

Tax credit and renewable energy partnerships 48 0.9 52 1.2

Other 13 0.3 11 0.3

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• the effects of derivatives in cash flow, fair value, or non-qualifying hedge relationships on the statements of operations for the years ended December 31, 2024, 2023 and 2022.

See “Business — Segments and Corporate & Other — Annuities” and “— Risk Management Strategies” for more information about our use of derivatives by major hedging programs, as well as “— 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.

See “Business — Segment Information — Annuities” and “— Risk Management Strategies” for more information about our use of derivatives by major hedging programs, as well as “— 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.

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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.

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Written $ 780 $ 19 $ 1,405 $ 27

Total $ 1,405 $ 27 $ 1,757 $ 16

The maximum amount at risk related to our written credit default swaps is equal to the corresponding gross notional amount.

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We establish liabilities for future amounts payable under insurance policies.

A discussion of future policy benefits by segment, as well as Corporate & Other follows.

A discussion of future policy benefits by segment follows.

Future policy benefits for the annuities business are comprised mainly of liabilities for life contingent income annuities.

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As a result of acquisitions, we establish additional liabilities known as excess interest reserves for policies with credited rates in excess of market rates as of the applicable acquisition dates.

Corporate & Other

Policyholder account balance liabilities in Corporate & Other are primarily comprised of funding agreements related to our institutional spread margin business.

Market Risk Benefits

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Certain index-linked annuity products may also have GMxBs classified as MRBs.

See “Quantitative and Qualitative Disclosures About Market Risk — Market Risk - Fair Value Exposures — Interest Rates.”

See Note 4 of the Notes to Consolidated Financial Statements and “Quantitative and Qualitative Disclosures About Market Risk — Market Risk - Fair Value Exposures — Interest Rates.”

Liquidity and Capital Resources

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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.

BHF’s 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.

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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.

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.

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.

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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 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 CTE98 level in normal market conditions.

In support of our target Combined RBC Ratio of 400% to 450% in normal market conditions, we expect to continue to maintain a capital and risk management strategy that targets total assets supporting our variable annuity and Shield Annuity contracts at or above the CTE98 level in normal market conditions.

See “Glossary” for the definition of CTE.

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.

On November 16, 2023, we authorized the repurchase of up to $750 million of our common stock, which was in addition to our prior $1.2 billion total repurchases authorized in 2021.

Repurchases under the authorizations, of which a combined $793 million was remaining at December 31, 2023, 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.

Repurchases under the latest authorization, of which $543 million was remaining at December 31, 2024, may be made through open market purchases, including pursuant to Rule 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.

Any future declaration and payment of dividends or other distributions or returns of capital will be at the discretion of BHF’s 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 BHF’s 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.

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Best (1) Fitch (2) Moody’s (3) S&P (4)

Current outlook Stable Stable Stable Stable

Financial Strength Ratings:

Stable Negative Stable Stable

Brighthouse Life Insurance Company A A A3 A+

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Long-term Issuer Credit Ratings:

Outlook Negative

Negative Stable Stable

Brighthouse Financial, Inc.

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Rating agencies may continue to review and adjust our ratings.

For example, in November 2024, Fitch revised the outlooks on the financial strength rating and the long-term issuer credit rating for BHF and certain of its subsidiaries to negative from stable.

In addition, in January 2025, A.M.

Best revised the outlook on the long-term issuer credit rating for BHF and certain of its subsidiaries to negative from stable.

See “Risk Factors — Risks Related to Our Business — A downgrade or a potential downgrade in our financial strength or credit ratings could result in a loss of business and materially adversely affect our financial condition and results of operations” for a description of the impact of a potential ratings downgrade.

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(In millions)

Operating activities, net $ — $ — $ 641

Changes in policyholder account balances, net $ 4,032 $ 4,242 $ 11,650

Changes in payables for collateral under securities loaned and other transactions, net 221 — —

Long-term debt issued — — 400

Preferred stock issued, net of issuance costs — — 339

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

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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 was increased from $3.0 billion to $5.0 billion in June 2023.

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

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(In millions)

FABR Program (1)

$ 500 $ — $ 500 $ — $ — $ — $ — $ —

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Total $ 10,962 $ 10,592 $ 19,651 $ 10,396 $ 20,107 $ 19,281 $ 9,951 $ 15,733

_______________

(1) On February 16, 2024, there was $500 million of FABR funding agreements outstanding.

Debt Issuances

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See Note 12 of the Notes to the 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 December 31, 2024.

In 2024, through February 16, 2024, BHF repurchased an additional 636,454 shares of its common stock through open market purchases, pursuant to a 10b5-1 plan, for $33 million.

In 2025, through February 21, 2025, BHF repurchased an additional 603,909 shares of its common stock through open market purchases, pursuant to a Rule 10b5-1 plan, for $33 million.

Preferred Stock Dividends

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

At December 31, 2023 and 2022, we pledged cash collateral to counterparties of $16 million and $7 million, respectively.

At December 31, 2024, we did not pledge any cash collateral to counterparties.

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

At December 31, 2024 and 2023, we were obligated to return cash collateral pledged to us by counterparties of $812 million and $393 million, respectively.

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

We also pledge collateral from time to time in connection with our funding agreements.

We also pledge collateral from time to time in connection with certain 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.

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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 “Contingencies” in Note 18 of the Notes to the Consolidated Financial Statements.

See Note 17 of the Notes to the 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 Note 9 of the Notes to the Consolidated Financial Statements.

See “Commitments” in Note 18 of the Notes to the Consolidated Financial Statements.

See Notes 8 and 17 of the Notes to the 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 “Guarantees” in Note 18 of the Notes to the Consolidated Financial Statements.

See Note 17 of the Notes to the Consolidated Financial Statements for additional information regarding guarantees.

The Parent Company

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Short-term Liquidity and Liquid Assets

At December 31, 2023 and 2022, BHF and certain of its non-insurance subsidiaries had short-term liquidity of $1.2 billion and $1.0 billion, respectively.

At December 31, 2024 and 2023, BHF and certain of its non-insurance subsidiaries had short-term liquidity of $912 million 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 December 31, 2023 and 2022, BHF and certain of its non-insurance subsidiaries had liquid assets of $1.3 billion and $1.0 billion, respectively, of which $1.2 billion and $987 million, respectively, was held by BHF.

At December 31, 2024 and 2023, BHF and certain of its non-insurance subsidiaries had liquid assets of $1.1 billion and $1.3 billion, respectively, of which $1.1 billion and $1.2 billion, respectively, 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.

See Note 18 of the Notes to the Consolidated Financial Statements for a discussion of a capital contribution to BLIC made subsequent to December 31, 2024.

Statutory Capital and Dividends

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Normalized Statutory Earnings

Normalized statutory earnings (loss) is used by management to measure our insurance subsidiaries’ ability to pay future distributions and is reflective of whether our hedging program functions as intended.

Normalized statutory earnings (loss) is calculated as statutory pre-tax net gain (loss) from operations adjusted for the favorable or unfavorable impacts of (i) net realized capital gains (losses), (ii) the change in total asset requirement at CTE98, net of the change in our variable annuity reserves, which are calculated at CTE70, and (iii) unrealized gains (losses) associated with our variable annuities and Shield hedging programs and other equity risk management strategies.

See “Glossary” for the definition of CTE.

Normalized statutory earnings (loss) is used by management to measure our insurance subsidiaries’ ability to pay future distributions and incorporates the effectiveness of our hedging program as well as other factors related to our business.

Normalized statutory earnings (loss) is calculated as statutory pre-tax net gain (loss) from operations adjusted for the favorable or unfavorable impacts of (i) net realized capital gains (losses), (ii) the change in total asset requirement at CTE98, net of the change in our variable annuity reserves, which are calculated at CTE70, and (iii) unrealized gains (losses) associated with our variable annuities and Shield hedges, net of reinsurance, and other equity risk management strategies.

Normalized statutory earnings (loss) may be further adjusted for certain unanticipated items that impact our results in order to help management and investors better understand, evaluate and forecast those results.

Our variable annuity block has been managed by funding the balance sheet with assets equal to or greater than a CTE98 level.

We have also managed market-related risks of increases in these asset requirements by hedging the market sensitivity of the CTE98 level to changes in the capital markets.

By including hedge gains and losses related to our variable annuity risk management strategy in our calculation of normalized statutory earnings (loss), we are able to fully reflect the change in value of the hedges, as well as the change in the value of the underlying CTE98 total asset requirement level.

We believe this allows us to determine whether our hedging program is providing the desired level of protection.

See “— Risk Management Strategies — Variable Annuity Exposure Risk Management” for additional details regarding our hedge program.

The following table presents the components of combined normalized statutory earnings for Brighthouse Life Insurance Company and NELICO:

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change in total asset requirement at CTE98, net of the change in variable annuity reserves (1)

unrealized gains (losses) on variable annuity & Shield hedging programs and other equity risk management strategies 1.2 (1.6)

unrealized gains (losses) on variable annuity & Shield hedges, net of reinsurance, and other equity risk management strategies (0.1) 1.2

impact of actuarial items and other insurance adjustments (1)

other adjustments, net — 0.1

Normalized statutory earnings (loss) $ (1.3) $ (0.2)

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(1) As a result of implementing a new statutory requirement as of December 31, 2023 under which all future hedges must be reflected in reserves and required capital, CTE70 increased $870 million and the total asset requirement at CTE98

decreased $1.1 billion for the year ended December 31, 2023.

The $1.1 billion impact to CTE98 is reflected in ‘impact of actuarial and other insurance adjustments’ to normalize the effect of implementing this new statutory requirement.

(1) As a result of variable annuity and Shield Annuity model refinements, actions to hedge Shield Annuity new business on a standalone basis and related actions to develop a separate hedging strategy for the variable annuity and first generation Shield Annuity blocks, CTE70 decreased approximately $700 million and the total asset requirement at CTE98 increased approximately $735 million for the year ended December 31, 2024.

The approximately $735 million impact to CTE98 is reflected in ‘impact of actuarial items and other insurance adjustments’ to normalize the effect of these model refinements and actions.

Primary Sources and Uses of Liquidity and Capital

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

What changed 10-K

Item 7. Management’s Discussion and Analysis