DEF 14A
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under Rule 14a-12

BRIGHTHOUSE FINANCIAL, INC.

(Name of Registrant as Specified In Its Charter)

 

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Table of Contents

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Table of Contents

 

Brighthouse Financial, Inc.  

Notice of Annual Meeting of Stockholders

 

Notice of Annual

Meeting of Stockholders

On behalf of the Board of Directors, I am honored to

invite you to attend the 2018 Annual Meeting of

Stockholders (the “Annual Meeting”) of Brighthouse

Financial, Inc. (“ Brighthouse”)

Date and Time

Wednesday, May 23, 2018 at 8:30 a.m., Eastern Daylight Time

Location

The Ballantyne Hotel, 10000 Ballantyne Hotel Commons Parkway, Charlotte, North Carolina 28277

Agenda

At the meeting, stockholders will consider and vote on the following matters:

 

  1. Proposal 1: Election of three (3) Class I Directors for a two-year term ending at the 2020 Annual Meeting of Stockholders;
  2. Proposal 2: Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s independent registered public accounting firm for fiscal year 2018;
  3. Proposal 3: Advisory vote to approve the compensation paid to Brighthouse’s Named Executive Officers;
  4. Proposal 4: Advisory vote on the frequency of future advisory votes to approve the compensation paid to Brighthouse’s Named Executive Officers;
  5. Proposal 5: Approval of the Brighthouse Financial, Inc. 2017 Stock and Incentive Compensation Plan;
  6. Proposal 6: Approval of the Brighthouse Financial, Inc. 2017 Non-Management Director Stock Compensation Plan;
  7. Proposal 7: Approval of the material terms of the performance goals under the Brighthouse Services, LLC Temporary Incentive Deferred Compensation Plan; and
  8. Any such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.

Our Board of Directors recommends that you vote FORthe election of each of the nominees named in Proposal 1 of this Proxy Statement, FOReach of Proposals 2, 3, 5, 6 and 7, and for a frequency of ONE YEARfor future advisory votes to approve compensation paid to Brighthouse’s Named Executive Officers in Proposal 4. Information about the matters to be acted upon at the Annual Meeting is contained in the accompanying Proxy Statement.

 


 

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Notice of Annual Meeting of Stockholders

  Brighthouse Financial, Inc.

 

Voting Your Shares

Stockholders of record holding shares of Brighthouse common stock, par value $0.01 per share (“Shares”), as of the close of business on March 26, 2018 will be entitled to vote at the Annual Meeting.

 

 

LOGO

 

  Internet
  Please log on to www.ProxyVote.com and submit a proxy to vote your Shares by 11:59 p.m., Eastern Daylight Time, on Tuesday, May 22, 2018.
LOGO   Telephone
 

Please call 1-800-690-6903 until 11:59 p.m., Eastern Daylight Time, on Tuesday, May 22, 2018.

 

 

LOGO

  Mail
  If you received printed copies of the proxy materials, please complete, sign, date and return your proxy card by mail so that it is received by Brighthouse c/o Broadridge Financial Solutions, Inc. prior to the Annual Meeting.
  Solutions, Inc. prior to the Annual Meeting.
LOGO   In Person
 

You may attend the Annual Meeting and cast your vote.

 

Beneficial owners whose Shares are held at a brokerage firm or by a bank or other nominee should follow the voting instructions that they received from the nominee. Participants in retirement and savings plans should refer to the voting instructions in the Proxy Statement under “Voting by Participants in Retirement Plans.”

This notice is being delivered to the holders of Shares as of the close of business on March 26, 2018, the record date fixed by the Board of Directors for the purposes of determining the stockholders of Brighthouse entitled to receive notice of and to vote at the Annual Meeting, and constitutes notice of the Annual Meeting under Delaware law.

By Order of the Board of Directors,

 

LOGO

D. Burt Arrington

Corporate Secretary

Charlotte, North Carolina

April 10, 2018

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 23, 2018

The accompanying Proxy Statement, our 2017 Annual Report to Stockholders and directions to the location of the 2018 Annual Meeting of Stockholders are available at http://investor.brighthousefinancial.com by selecting the appropriate link under “Financial Information.”

 


 

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Brighthouse Financial, Inc.  

Proxy Statement

 

LOGO

Proxy Statement

The Board of Directors (the “Board” or the “Board of Directors”) of Brighthouse Financial, Inc. (“Brighthouse” or the “Company”) is providing this Proxy Statement in connection with the Annual Meeting of Stockholders to be held on May 23, 2018, at 8:30 a.m., Eastern Daylight Time (the “Annual Meeting”), at The Ballantyne Hotel, 10000 Ballantyne Hotel Commons Parkway, Charlotte, North Carolina 28277, and at any adjournment or postponement thereof. Stockholders holding shares of common stock, par value $0.01 per share (the “Common Stock”), of the Company (“Shares”) as of the close of business on March 26, 2018 (the “Record Date”) are entitled to vote at the Annual Meeting. Proxy materials or a Notice of Internet Availability were first made available, sent or given to the Company’s stockholders on or about April 10, 2018.

 


 

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Contents

  Brighthouse Financial, Inc.

 

Contents

 

  4       Proxy Summary
  12      
Proposal 1: Election of three (3)  Class I Directors to serve a two-year term ending at the 2020
Annual Meeting of Stockholders
    13     The Board of Directors
    18     Skills Matrix
  19       Board and Corporate Governance Practices
    19     Building Our Board of Directors
    21     Board Leadership Structure
    22     Director Independence
    22     Executive Sessions
    22     Stockholder Engagement
    24     Succession Planning and Talent Management
    24     Risk Oversight
    24     Information about Our Board Committees
    30     Board Meetings and Director Attendance
    30     Director Compensation
    32     Codes of Conduct
  34      
Proposal 2: Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s
independent registered public accounting firm for fiscal year 2018
    36     Audit Committee Report
  38      
Proposal 3: Advisory vote to approve the compensation paid to Brighthouse’s Named Executive
Officers
    39     Compensation Discussion and Analysis
    40     Section 1 – Executive Summary
    40    

The Brighthouse Story

    40    

Compensation Approach

    40    

Fiscal 2017 Compensation Highlights

    42     Section 2 – Features of Our Fiscal 2017 Executive Compensation Program
    42    

Key Executive Compensation Practices

    43    

Fiscal 2017 Compensation Setting Process

    44    

Fiscal 2017 Target Total Compensation Opportunities

    46    

Elements of Fiscal 2017 Compensation

    54    

Role of the Compensation Committee and Others in Determining Compensation

    55     Section 3 – The Brighthouse Vision and Strategy – Establishing the 2018 Executive Compensation Program
    56    

2018 Short-Term Incentive Metrics

    56    

2018 Long-Term Incentive Awards

    58    

2018 Target Total Compensation Opportunities

    58     Section 4 – Additional Compensation Practices and Policies
    61     Compensation Committee Report

 


 

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Brighthouse Financial, Inc.  

Contents

 

  62      Fiscal 2017 Compensation Tables
  72      Proposal 4: Advisory vote on the frequency of future advisory votes to approve the compensation paid to Brighthouse’s Named Executive Officers
  73      Proposal 5: Approval of the Brighthouse Financial, Inc. 2017 Stock and Incentive Compensation Plan
  83      Proposal 6: Approval of the Brighthouse Financial, Inc. 2017 Non-Management Director Stock Compensation Plan
  87      Proposal 7: Approval of the material terms of the performance goals under the Brighthouse Services, LLC Temporary Incentive Deferred Compensation Plan, as amended
  89      New Plan Benefits
  90      Equity Compensation Plan Information as of December 31, 2017
  91      Certain Relationships and Related Person Transactions
  107      Security Ownership of Certain Beneficial Owners and Management
  109      Section 16(a) Beneficial Ownership Reporting Compliance
  110      The Annual Meeting, Voting and Other Information
  119      Forward-Looking Statements
  120      Appendix 1: Brighthouse Financial, Inc. 2017 Stock and Incentive Compensation Plan
  142      Appendix 2: Brighthouse Financial, Inc. 2017 Non-Management Director Stock Compensation Plan
  156      Appendix 3: Brighthouse Services, LLC Temporary Incentive Deferred Compensation Plan

 


 

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Proxy Summary

  Brighthouse Financial, Inc.

 

Proxy Summary

This section summarizes important information contained in this Proxy Statement and in our 2017 Annual Report to Stockholders (the “Annual Report”), but does not contain all the information that you should consider when casting your vote. Please review the entire Proxy Statement and Annual Report carefully before voting.

Proposals for Your Vote

 

 

   

 

   

 

Proposal

 

1.  Election of three (3) Class I Directors for a two-year term ending at the 2020 Annual Meeting of Stockholders

 

   

Board Recommendation

 

FOR each of the

Board’s nominees

    Page(s)

 

12

 

   

 

   

 

2.  Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s independent registered public accounting firm for fiscal year 2018

 

    FOR     34

 

   

 

   

 

3.  Advisory vote to approve the compensation paid to Brighthouse’s Named Executive Officers (the “Say-on-Pay” vote)

 

    FOR     38

 

   

 

   

 

4.  Advisory vote on frequency of future Say-on-Pay votes

 

    ONE YEAR     72

 

   

 

   

 

5.  Approval of the Brighthouse Financial, Inc. 2017 Stock and Incentive Compensation Plan

 

    FOR     73 - 82

 

   

 

   

 

6.  Approval of the Brighthouse Financial, Inc. 2017 Non-Management Director Stock Compensation Plan

 

    FOR     83 - 86

 

   

 

   

 

7.  Approval of the material terms of the performance goals under the Brighthouse Services, LLC Temporary Incentive Deferred Compensation Plan

 

    FOR     87 - 88

 


 

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Brighthouse Financial, Inc.  

Proxy Summary

 

Business and Strategy Highlights

Brighthouse became an independent company on August 4, 2017, the effective date of our separation (the “Separation”) from MetLife, Inc. (“MetLife”) through the distribution of approximately 80.8% of MetLife’s interest in Brighthouse to holders of MetLife common stock (the “Distribution”). We became a publicly-traded company when our Common Stock began “regular-way” trading on The Nasdaq Stock Market LLC (“Nasdaq”) on August 7, 2017.

We are a major provider of annuities and life insurance solutions in the United States. Our mission is to help people achieve financial security. We specialize in products that play an essential role in helping people protect what they’ve earned and ensure it lasts. Our goal is to build a focused and best-in-cost culture that creates value for our customers and our stockholders. We believe that our strategy of offering a targeted set of products to serve our customers and distribution partners, each of which is intended to produce positive statutory distributable cash flows on an accelerated basis compared to our legacy products, will enhance our ability to invest in our business and distribute cash to our stockholders over time. We also believe that our product strategy of offering a more tailored set of new products and the outsourcing of a significant portion of our client administration and service processes is consistent with our focus on reducing our expense structure over time.

Below we describe some of the key events of 2017 and highlights of our strategy and recent performance.

Key Events

 

LOGO   March 2017
 

 

Launch of Brighthouse brand

LOGO   June 2017
 

 

Established the foundation of our long-term capital structure with a successful inaugural debt offering of $3.0 billion in bonds

LOGO   August 4, 2017
 

 

Completed our separation from MetLife and became an independent company

LOGO   August 7, 2017
 

 

Began “regular-way” trading on the Nasdaq stock exchange (Ticker Symbol: BHF)

 


 

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Proxy Summary

  Brighthouse Financial, Inc.

 

Business Highlights

  Increased annuity sales in the fourth quarter of 2017, compared to both the third quarter of 2017 and the fourth quarter of 2016 (see Fig. 1)
  Successfully transitioned our variable annuity hedging strategy
  Growth in assets in excess of our Variable Annuity Target Funding Level, which we have set at Conditional Tail Expectation 95 (“CTE95,” defined as the amount of assets required to satisfy contract holder obligations across market environments in the average of the worst five percent of 1,000 capital market scenarios over the life of the contracts) (see Fig. 2)
  Exited 72 transition services agreements (“TSAs”) with MetLife, in line with our expectations
  Established a robust risk management framework
  Executed on our investment strategy

 

LOGO

Board Oversight of Our Strategy

The Board annually reviews Brighthouse’s strategy to help ensure that we deliver long-term value to our stockholders. In February 2018, the Board and senior management, including our executive officers, engaged in constructive dialogue and feedback regarding our multi-year strategic and financial plan. The Board also reviewed with management our financial and risk profile under various capital market scenarios. The topics discussed covered key aspects of our business, including:

  our mission and vision;
  building our corporate culture with focus on risk management and “best-in-cost” philosophy;
  the competitive landscape in which we operate;
  our product and sales growth strategy and plans;
  our operational model, including our business process outsourcing strategy; and
  key financial drivers of our financial plan, including capital return and other targets.

Key Elements of Our Strategy

We are focused on executing the key elements of our strategy, namely to:

  offer a tailored set of annuity and life insurance solutions that are simpler, more transparent and provide value to advisors, clients and our stockholders;
  sell our products to clients through a broad network of independent distribution partners; and
  leverage our strong expense management discipline to become a cost-competitive manufacturer over time.

 


 

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Brighthouse Financial, Inc.  

Proxy Summary

 

Our Board of Directors: Composition, Qualifications and Diversity

The fundamental duty of our Board is to oversee the Company for the benefit of our stockholders. It is essential that the Board be composed of directors (“Directors”) who are qualified to oversee the development and execution by our management of our business strategies. The Board seeks Directors who possess a broad range of skills, expertise and perspectives and who contribute to the ethnic and gender diversity of our Board. The composition of our Board, as reflected in the tables and charts below, demonstrates our commitment to these principles.

Board Composition Summary

 

         

        Name        

 

  

Age

 

   

Principal Professional
Experience

 

 

Expiration

of Term1

 

 

Independent

 

 

Committee

Memberships

 

Irene Chang

Britt

     55    

Senior Vice President, Campbell

Soup Company (Retired)

          2019                       Yes              

  

  

  Compensation

Nominating and
Corporate Governance
(Chair)

Investment

C. Edward

(“Chuck”)

Chaplin

Chairman of

the Board

     61    

President, Chief Financial Officer

and Chief Administrative Officer,

MBIA (Retired)

  2019   Yes  

  Audit

Executive

Finance and Risk (Chair)

John D.

McCallion2

     44    

Executive Vice President and

Treasurer, MetLife

  2018   No     Finance and Risk

Diane E.

Offereins2

     60    

Executive Vice President and

President - Payments Services,

Discover Financial Services

  2018   Yes  

  Compensation (Chair)

Finance and Risk

Nominating and
Corporate Governance

Patrick J.

(“Pat”)

Shouvlin2

     67    

Partner, PricewaterhouseCoopers

LLP (Retired)

  2018   Yes  

  Audit (Chair)

Executive

Investment

Eric T.

Steigerwalt

     56    

President and Chief Executive

Officer, Brighthouse

  2020   No     Executive

William

F. (“Bill”)

Wallace

     70    

Managing director and co-head of

the Global Insurance Investor Client

Practice, J.P. Morgan Chase & Co.

(Retired)

  2020   Yes  

  Audit

Investment (Chair)

Paul M.

Wetzel

     58    

Chairman of the Global Financial

Institutions Group, Deutsche Bank

Securities Inc. (Retired)

  2019   Yes  

  Compensation

Finance and Risk

Nominating and
Corporate Governance

 

 

1  The Board will be declassified by the 2020 Annual Meeting.
2  These Directors are nominated for election during this Annual Meeting.

 


 

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Proxy Summary

  Brighthouse Financial, Inc.

 

Board Skills and Experience

The Board seeks Directors who possess a broad range of skills, experience, expertise and perspectives that position the Board to effectively oversee Brighthouse’s strategies and risks. Our Directors were carefully selected for their mix of skills and expertise, which align with, and facilitate effective oversight of, Brighthouse’s strategy. Our Directors possess substantive skills and experience in the following key areas, which are relevant to the Board’s oversight of Brighthouse: the financial services and insurance industries; senior management; audit and accounting; information technology and cybersecurity; brand and marketing; public company board service; risk management; investments; and compensation and human resources.

Board Diversity

The Board believes that a diverse board is better able to effectively oversee our management and strategy, and position Brighthouse to deliver long-term value for our stockholders. Our Board considers gender and ethnic diversity as adding to the overall mix of perspectives of our Board as a whole. The following charts present our current Board diversity profile:

 

LOGO

Diverse Directors serve in a majority of our Board leadership positions, including as:

  Chairman of the Board
  Chair of the Compensation Committee
  Chair of the Finance and Risk Committee
  Chair of the Nominating and Corporate Governance Committee

Stockholder Engagement Highlights

Following the Separation, management worked with the Board and the Nominating and Corporate Governance Committee to develop a robust and proactive stockholder engagement program to share our perspectives and solicit feedback on the Company. As part of this program, we contacted 19 stockholders representing approximately 33% of our Shares then outstanding and met with a substantial portion of those we contacted. These discussions largely focused on our Board, corporate governance and executive compensation practices, as well as our business profile, strategy and performance. For additional information about our program, see “Stockholder Engagement.”

 


 

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Brighthouse Financial, Inc.  

Proxy Summary

 

Corporate Governance Highlights

Brighthouse is committed to good governance practices that protect and promote the long-term value of the Company for our stockholders. The Board regularly reviews our governance practices to ensure they reflect the evolving governance landscape and appropriately support and serve the best interests of the Company and our stockholders.

 

     
Independent
Oversight
      LOGO  

Independent Chairman of the Board

 

      LOGO  

Majority of our Board is independent

 

        LOGO  

Key committees of the Board (each a “Committee” and collectively, the
Committees”) (Audit, Compensation, Nominating and Corporate
Governance) are comprised solely of independent directors

 

     
Board Effectiveness       LOGO  

Directors possess deep and diverse set of skills and expertise relevant to
oversight of our business strategies

 

      LOGO  

Proactive assessment of director skills and commitment to director
refreshment to ensure the Board meets the Company’s evolving oversight
needs

 

        LOGO  

Robust risk oversight framework to assess and manage risks

 

        LOGO  

Comprehensive annual self-assessment of the Board and Committees

 

        LOGO  

Commitment to Board diversity of perspective, gender and ethnicity

 

        LOGO  

Regular executive sessions of the independent directors

 

     

Responsiveness

and Accountability

     

LOGO

 

Initiated stockholder engagement program to share our perspectives and
solicit feedback

 

    LOGO  

Resignation policy for Directors who do not receive a majority of the votes cast

 

    LOGO  

Development and regular review of succession plans for the Chief Executive Officer (the “CEO”) and other members of senior management

 

    LOGO  

All Directors to be elected annually for one-year terms beginning with 2020 Annual Meeting

 

 


 

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Proxy Summary

  Brighthouse Financial, Inc.

 

Executive Compensation Highlights

Executive Compensation Philosophy: 2017 and Onward

Our Compensation Committee and Board established a compensation program rooted in a pay-for-performance philosophy that incents and rewards our named executive officers (each an “NEO”) for achievement of performance metrics that are aligned with key strategic goals. In particular, the compensation paid to our NEOs for the period from the Separation to year-end 2017 (“Fiscal 2017”) was intended primarily to incent them to achieve key objectives related to the Separation and establish Brighthouse as an independent company. The broader objectives of our 2017 compensation program included:

  Pay-for-performance by tying variable compensation to achievement of Company and individual goals;
  Aligning executives’ interests with stockholders’ by having a significant portion of our NEOs’ total compensation delivered in the form of stock-based incentives;
  Avoiding problematic pay practices by incorporating best practices into our compensation program; and
  Reinforcing strong risk management by avoiding incentives to take excessive risks.

2018 Executive Compensation Program

In designing our executive compensation program for 2018, our first full year as an independent company, the Compensation Committee built on the guiding principles of our 2017 compensation program, including a pay-for-performance philosophy, strong governance practices and aligning interests with those of our stockholders.

The Compensation Committee also considered stockholder feedback, and designed a compensation program that aims to align our NEOs’ compensation opportunities with achievement of the Company’s short- and long-term business goals, as approved by the Board as part of its annual review of the Company’s strategy. For further information regarding our executive compensation program structure for 2018, please see “Compensation Discussion and Analysis – Section 3 – The Brighthouse Vision and Strategy — Establishing the 2018 Executive Compensation Program.”

Key Components of Our 2018 Executive Compensation Program

 

 

Base Salary

 

    

 

•  Fixed compensation for services during the year

 

Short-Term

Incentive

    

•  Variable cash award

•  Performance metrics measure our achievement of three equally-weighted key strategic goals:

•  TSA Exits – measures our ability to reduce expenses and operate as a cost- competitive company

•  Annuity Sales – measures our growth and is vital to stability of our business

•  Adjusted Statutory Earnings – measures our ability to pay future distributions and the performance of our hedging program

 


 

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Brighthouse Financial, Inc.  

Proxy Summary

    

 

   

Long-Term

Incentive

    

•  Variable equity awards, in a mix of three equally-weighted elements: Performance Share Units, Nonqualified Stock Options and Restricted Stock Units

•  Performance metrics measure our achievement of two strategic goals over the 2018-2020 performance period

•  Corporate Expense Reduction (60%) - measures reduction in our annualized expenses

•  Capital Return (40%) - measures alignment of our financial and operational goals with long-term stockholder interests

Executive Compensation Governance Practices

We are committed to building a compensation program with strong governance features that reflect best practices in the market and stockholder feedback. The table below provides a summary of our executive compensation governance practices.

 

     
What we do       LOGO  

Pay for Performance. A substantial portion of our NEOs’ Target Total Compensation
is in the form of variable, at-risk elements that rewards them only if we achieve
performance goals that create stockholder value.     

 

      LOGO   Stock Ownership Guidelines. We have established stock ownership and retention
guidelines to encourage our NEOs to obtain and maintain significant stock
ownership, thereby aligning their interests with those of our stockholders.
        LOGO   Minimum Vesting Requirements. Full value equity awards to our employees are
generally subject to minimum vesting periods of one year for awards subject to
achievement of performance goals and three years (at a rate of not greater than
1/3rd per year) for awards that vest based solely on continued service.
        LOGO   Stockholder Engagement. Since the Separation, we have actively engaged with our
stockholders on various topics, including our executive compensation program. We
recognize the importance of our stockholders’ perspectives in the compensation
setting process and intend to incorporate their feedback into the design of our
compensation programs.
        LOGO  

Independent Compensation Consultant. Our Compensation Committee has
retained Semler Brossy Consulting Group (“
SBCG”) as its independent
compensation consultant to advise on all aspects of our executive compensation
program.

 

     
What we don’t       LOGO  

Gross-ups on Excise Taxes. We do not provide tax gross-up benefits in connection
with a change in control.

 

    LOGO   Reprice Stock Options. Our equity incentive plans prohibit us from repricing stock options or stock appreciation rights without stockholder approval.
    LOGO   Excessive Perquisites. We provide limited perquisites to our executive officers.
    LOGO   Hedging and Pledging. Our insider trading policy prohibits all employees and Directors from engaging in hedging or pledging transactions.

 


 

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Proposal 1 - Election of Directors

    

  Brighthouse Financial, Inc.

 

Proposal 1

Election of three (3) Class I Directors to serve

a two-year term ending at the 2020 Annual

Meeting of Stockholders

The Board has nominated each of our Class I Directors, John D. McCallion, Diane E. Offereins and Patrick J. Shouvlin, for election at the Annual Meeting. The Board believes that each of these nominees has the necessary skills and experience to effectively oversee our business. Each of these nominees currently serves as a Class I Director, and each has consented to being named in this Proxy Statement and agreed to serve if elected.

The Board recommends that you vote FOR the election of each of John D. McCallion, Diane E. Offereins and Patrick J. Shouvlin.

Our Board is currently composed of eight Directors. A biography of each Director, including the Class I Director nominees, and a description of each Director’s skills and qualifications, follow this proposal.

As described in our Amended and Restated Certificate of Incorporation (the Certificate of Incorporation”), our Board is currently divided into three classes. The term of our Class I Directors currently in office expires at this 2018 Annual Meeting, the term of our Class II Directors expires at the 2019 Annual Meeting, and the term of our Class III Directors expires at the 2020 Annual Meeting. Our Certificate of Incorporation provides for the declassification of our Board by our 2020 Annual Meeting. Beginning with our 2020 Annual Meeting, all director nominees will stand for election for one-year terms that expire at the following annual meeting. The following table describes the schedule for the election of our Directors over the next three annual meetings and the terms they will serve if elected.

 

Meeting

 

     

 

Directors Standing for Election

 

     

Term

 

2018 Annual Meeting     Class I Directors    

Two-year term expiring at

2020 Annual Meeting

 

2019 Annual Meeting     Class II Directors    

One-year term expiring at

2020 Annual Meeting

 

2020 Annual Meeting and

future Annual Meetings

    All Directors    

One-year term expiring at

the following Annual Meeting

Unless otherwise instructed, the proxyholders will vote proxies FOR the nominees of the Board. The Board has no reason to believe that any of its nominees will be unable or unwilling to serve if elected. However, if any of the Board’s nominees are unable to serve as Director at any point before the Annual Meeting or any adjournment or postponement of the meeting, the Board may reduce the size of the Board or nominate another candidate for election as a Class I Director. If the Board nominates a new candidate, unless otherwise provided, the form of proxy attached to this Proxy Statement permits the proxyholders to use their discretion to vote for that candidate.

 


 

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Brighthouse Financial, Inc.   Board of Directors

 

The Board of Directors

Class I - Nominees for Election as Directors for Terms Expiring in 2020

 

 

 

LOGO  

John D. McCallion

 

Committee memberships: Finance and Risk

 

Age: 44

Director since: 2016

Professional Experience: Mr. McCallion serves as Executive Vice President and
Treasurer of MetLife and is responsible for the enterprise’s capital and liquidity
management. Mr. McCallion previously served in various roles within MetLife, including
as Chief Financial Officer of the EMEA (Europe, the Middle East and Africa) region,
head of Investor Relations, and Chief Financial Officer of the Investments Department.
From 1996 to 2006, Mr. McCallion worked in the insurance audit practice of
PricewaterhouseCoopers LLP (“
PwC”), an international audit, consulting and tax
services firm.

Skills and Qualifications: Mr. McCallion is qualified to serve on our Board on the basis
of his knowledge of financial management, investments and investor relations, and
extensive experience in the insurance industry.

 

 

 

 

LOGO  

Diane E. Offereins

 

Independent Director

Committee memberships: Compensation (Chair); Finance and Risk;
Nominating and Corporate Governance

 

Age: 60

Director since: 2017

Past public company directorships: West Corporation

Professional Experience: Ms. Offereins has served as Executive Vice President and
President - Payments Services for Discover Financial Services (“
Discover”), a direct
banking and payment services company, since April 2010. She is also a member of the
Discover Executive Committee. Previously, Ms. Offereins served as Executive Vice
President, Payment Services (2008 to 2010) and Executive Vice President and Chief
Information Officer (1998 to 2010) for Discover. Ms. Offereins served on the board of
West Corporation, a telecommunications services provider, from April 2017 until it was
taken private in October 2017.

Skills and Qualifications: Ms. Offereins is qualified to serve on our Board on the basis
of her financial services industry experience and her information technology and
cybersecurity expertise. Ms. Offereins also brings to the Board valuable experience
gained as a senior officer of Discover during its spinoff from Morgan Stanley.

 

 

 


 

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Board of Directors

  Brighthouse Financial, Inc.

 

 

 

LOGO  

Patrick J. (“Pat”) Shouvlin

 

Independent Director

Committee memberships: Audit (Chair); Executive; Investment

 

Age: 67

Director since: 2017

Professional Experience: Mr. Shouvlin retired from PwC in 2012 after 35 years of
service. During his career at PwC, Mr. Shouvlin served as the Global Engagement
Partner for several large, global insurance and financial services companies.
Mr. Shouvlin also served in various leadership roles while at PwC, including leading its
U.S. Insurance Group from 1996 to 2003. From 2005 to 2011, Mr. Shouvlin served on
PwC’s U.S. Board of Partners, including service during that time as Chair of the Finance
Committee and a member of the Governance Committee. Since 2015, Mr. Shouvlin has
been Chairman of the Board, Chair of the Governance, Nominations and Remuneration
Committee, and a member of the Investment Committee of L&F Holdings Limited and
L&F Indemnity Limited, PwC’s global reinsurers based in Bermuda. He has served on
the Board and as Chair of the Audit Committee of Cunningham Lindsey, a
privately-owned global claims management outsourcing firm, since 2013.

Skills and Qualifications: Mr. Shouvlin is qualified to serve on our Board on the basis
of his extensive accounting and auditing experience, along with his deep knowledge of
the insurance industry.

 

 

 


 

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Brighthouse Financial, Inc.   Board of Directors

 

Class II - Continuing Directors Whose Terms Expire in 2019

 

 

 

LOGO  

Irene Chang Britt

 

Independent Director

Board Committee Memberships: Compensation; Investment; Nominating
and Corporate Governance (Chair)

 

Age: 55

Director since: 2017

Other public company directorships: Dunkin’ Brands Group, Inc.; Tailored Brands, Inc.

Past public company directorships: TerraVia Holdings, Inc.

Professional Experience: Ms. Chang Britt retired from Campbell Soup Company
(“
Campbell”), a food and beverage company, in February 2015. At Campbell, Ms. Chang
Britt served in positions of increasing responsibility, culminating with her service from
August 2012 through February 2015 as President of Pepperidge Farm, a subsidiary of
Campbell, and from March 2012 through February 2015 as Senior Vice President of
Global Baking and Snacking. Ms. Chang Britt joined Campbell in 2005 as General
Manager, Sauces and Beverages, and served in senior positions at multiple brand
divisions. She also served as Global Chief Strategy Officer of Campbell from October
2010 to July 2012. Prior to joining Campbell, Ms. Chang Britt served in executive roles
at Kraft Foods and Kraft/Nabisco from 1999 to 2005 and Kimberly- Clark from 1986 to
1999. Ms. Chang Britt has served as an independent director of Dunkin’ Brands Group
since May 2014, currently serving on the Audit and Nominating and Corporate
Governance (Chair) Committees, and as an independent director of Tailored Brands,
Inc. (formerly Men’s Warehouse, Inc.) since December 2015, currently serving as Chair
of the Nominating and Corporate Governance Committee and a member of the Audit
Committee. Ms. Chang Britt previously served as an independent director of TerraVia
Holdings, Inc., a food, nutrition and specialty ingredients company, from March 2016 to
January 2018, and as non-executive chairperson from March 2017.

Skills and Qualifications: Ms. Chang Britt is qualified to serve on our Board on the
basis of her brand and marketing expertise, corporate governance expertise, and public
company board experience.

 

 


 

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Board of Directors

  Brighthouse Financial, Inc.

 

 

 

LOGO  

C. Edward (“Chuck”) Chaplin

 

Independent Director

Chairman of the Board

Board Committee Memberships: Audit; Executive; Finance and Risk (Chair)

 

Age: 61

Director since: 2017

Other public company directorships: MGIC Investment Corp.

Professional Experience: Mr. Chaplin retired from MBIA, Inc. (“MBIA”), a provider of
financial guarantee insurance and the largest municipal bond-only insurer, in January
2017. At MBIA, Mr. Chaplin served as the President, Chief Financial Officer and Chief
Administrative Officer from 2008 through March 2016, after beginning his MBIA tenure
as the Chief Financial Officer in 2006. Prior to joining MBIA, Mr. Chaplin had a 23-year
career with Prudential Financial, Inc., a global insurance and financial services firm,
with positions of increasing responsibility culminating with his service as Senior Vice
President and Treasurer. Mr. Chaplin has been a member of the Board of MGIC
Investment Corp., a publicly-traded provider of private mortgage insurance, since 2014,
and serves on its Risk Management and Securities Investment committees.

Skills and Qualifications: Mr. Chaplin is qualified to serve on our Board on the basis of
his leadership skills, finance experience, and deep knowledge of the insurance
industry.

 

 

 

 

LOGO  

Paul M. Wetzel

 

Independent Director

Board Committee Memberships: Compensation; Finance and Risk;
Nominating and Corporate Governance

 

Age: 58

Director since: 2017

Professional Experience: Mr. Wetzel retired from Deutsche Bank Securities Inc.
(“
Deutsche Bank”), a global investment bank providing broker-dealer and investment
advisory services, in October 2016. Mr. Wetzel had positions of increasing
responsibility at Deutsche Bank and served as the Chairman of the Global Financial
Institutions Group from 2013 until his retirement. He was the Head of the Japan
Investment Banking Coverage and Advisory Group at Deutsche Bank and was based in
Japan from 2011 to 2013. Prior to joining Deutsche Bank, Mr. Wetzel worked at Merrill
Lynch & Co. in investment banking for 17 years, with positions of increasing
responsibility and a focus on financial institutions.

Skills and Qualifications: Mr. Wetzel is qualified to serve on our Board on the basis of
his extensive experience advising financial services firms and knowledge of
investment banking and corporate strategy.

 

 


 

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Brighthouse Financial, Inc.   Board of Directors

 

Class III - Continuing Directors Whose Terms Expire in 2020

 

 

 

LOGO  

Eric T. Steigerwalt

 

Board Committee Memberships: Executive (Chair)

 

Age: 56

Director since: 2016

Professional Experience: Mr. Steigerwalt has served as President and CEO of
Brighthouse since August 2016. Previously, Mr. Steigerwalt held various positions at
MetLife from May 1998, including: Executive Vice President, U.S. Retail (September
2012 – August 2017); Executive Vice President and interim Chief Financial Officer
(November 2011 – September 2012); Executive Vice President, Chief Financial Officer
of U.S. Business (January 2010 – November 2011); Senior Vice President and Chief
Financial Officer of U.S. Business (September 2009 – January 2010); Senior Vice
President and Treasurer (May 2007 – September 2009); and Senior Vice President and
Chief Financial Officer of Individual Business (July 2003 – May 2007). Before joining
MetLife, Mr. Steigerwalt was a Vice President of AXA S.A., a financial services and
insurance company from May 1993 to May 1998.

Skills and Qualifications: Mr. Steigerwalt is qualified to serve on our Board on the
basis of his deep knowledge of our business, extensive experience in the insurance
industry, leadership skills, and broad knowledge of corporate strategy, finance and
investments.

 

 

 

 

LOGO  

William F. (“Bill”) Wallace

 

Independent Director

Board Committee Memberships: Audit; Investment (Chair)

 

Age: 70

Director since: 2017

Professional Experience: Mr. Wallace retired from J.P. Morgan Chase & Co.
(“
J.P. Morgan”), a global financial services firm and banking institution, in March 2017
after 20 years of service. During his career at J.P. Morgan, Mr. Wallace held positions
of increasing responsibility and served as managing director and co-head of the Global
Insurance Investor Client Practice from 2009 to 2017. Mr. Wallace served as the
Deputy Managing Director of the Office of Finance of the Federal Home Loan Banks, a
group of government-sponsored banks, from 1995 to 1996, and as a managing director
at Morgan Stanley, a global financial services firm and banking institution, from 1980
to 1994.

Skills and Qualifications: Mr. Wallace is qualified to serve on our Board on the basis of
his deep knowledge of investments, including asset allocation and risk management,
and experience advising insurance companies.

 

 


 

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Skills Matrix   Brighthouse Financial, Inc.

 

Skills Matrix

The Board seeks Directors who possess a broad range of skills, experience, expertise and perspectives that position the Board to effectively oversee Brighthouse’s strategies and risks. The following table presents the areas in which each Director has meaningful and substantive experience, skills or expertise.

 

             
 

Irene

    Chang    

Britt

 

 

    C. Edward    

(“Chuck”)

Chaplin

 

 

John D.     McCallion    

 

 

Diane E.     Offereins    

 

 

Patrick

J. (“Pat”)     Shouvlin    

 

 

Eric T.     Steigerwalt    

 

 

William

F. (“Bill”)     Wallace    

 

 

    Paul M.     Wetzel

 

                 

Senior

Management

Experience

 

  LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO
               

Financial

Services

 

      LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO
               

Insurance

 

      LOGO   LOGO       LOGO   LOGO   LOGO   LOGO
               

Risk

Management

 

  LOGO   LOGO   LOGO   LOGO       LOGO   LOGO   LOGO
               

Accounting

 

      LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO
               

Brand and

Marketing

 

  LOGO           LOGO       LOGO        
               

Compensation/

Human

Resources

 

  LOGO           LOGO       LOGO   LOGO   LOGO
               

Information

Technology/

Cybersecurity

 

  LOGO           LOGO                
               

Investments

 

      LOGO   LOGO       LOGO   LOGO   LOGO   LOGO
               

Legal/

Regulatory

 

      LOGO   LOGO   LOGO       LOGO   LOGO   LOGO
               

Public

Company Board

Experience

 

  LOGO   LOGO       LOGO                

 


 

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Brighthouse Financial, Inc.   Board and Corporate Governance Practices

 

Board and Corporate Governance Practices

We believe that effective corporate governance policies and practices help Brighthouse deliver sustainable, long-term value to our stockholders.

These policies and practices are contained in our governance documents, including our Certificate of Incorporation, Amended and Restated Bylaws (the “Bylaws”), Corporate Governance Principles, and Committee charters. This section describes the key features of our Board practices and corporate governance program.

Building Our Board of Directors

Our stockholders rely on our Board to oversee Brighthouse on their behalf. The Board has adopted the following key policies and practices to guide it in building an effective, high-functioning board that is well- equipped to fulfill its duties and responsibilities to our stockholders.

Director Criteria and Nomination Process

  Board Membership Criteria – The Nominating and Corporate Governance Committee leads the search for, and recommends, candidates to serve on the Board based on their business and professional experience, judgment, diversity, age, skills and background. All candidates must possess high integrity and be able to meet the demands of serving on our Board.

 

  Director Qualifications – In seeking qualified director candidates, the Nominating and Corporate Governance Committee, in consultation with the Board, the Chairman of the Board and the CEO, seeks individuals who possess the skills, experience and background appropriate for overseeing the development and execution of Brighthouse’s business strategies. The Board has identified the following qualifications, among others, in considering director candidates:
    Leadership experience
    Financial expertise
    Risk management expertise including in the areas of market, liquidity and cybersecurity risk
    Gender and ethnic diversity
    Information technology expertise
    Experience serving on a public company board

 

 

Director Independence – At least a majority of the Board consists of “independent” Directors who satisfy the independence standards prescribed by various laws and regulations applicable to the Company, including the Nasdaq listing rules, the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder. To determine independence, the Nominating and Corporate Governance Committee and the Board consider the

 


 

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Board and Corporate Governance Practices

  Brighthouse Financial, Inc.

 

 

independence requirements under the applicable Nasdaq listing rules, Exchange Act requirements and other factors that contribute to effective oversight and decision-making by the Board. Additionally, the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee are solely comprised of Independent Directors.

 

  Other Directorships – Directors must confirm the absence of, or disclose, any material actual or potential conflict of interest and receive the consent of the Chair of the Nominating and Corporate Governance Committee before accepting an invitation to serve on the board or committee of another organization. To ensure that Directors have requisite time to devote sufficient attention to their duties and responsibilities, the Board believes that: (1) Directors should not serve on more than three other public company boards; (2) Independent Directors who serve as chief executive officer of another public company and also serve on that company’s board of directors should not serve on any additional public company board other than our Board; and (3) members of the Audit Committee should not serve on more than three public company Audit Committees in total without obtaining the Nominating and Corporate Governance Committee and Board’s approval.

 

  Director Nomination Process – Nominations for election as a Director at our annual meetings may be made by our Board or any Committee in the Company’s notice of meeting or any supplement thereto, or by a stockholder or stockholders in compliance with the stockholder nomination requirements set forth in the Bylaws. Our Board nominates Director-nominees upon the recommendation of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee and the Board may identify potential nominees through a variety of means, including referrals from current Directors, executive officers and stockholders or recommendations from professional search firms. We did not retain a professional search firm to identify or recruit any of our current Directors. In recommending candidates for nomination by the Board, the Nominating and Corporate Governance Committee takes into consideration the candidate’s skills and qualifications, the Nasdaq listing requirements, the ability of candidates to enhance the diversity of our Board as a whole and any other criteria the Board may establish from time to time. The Nominating and Governance Committee will consider candidates recommended by stockholders. Our stockholders may bring nominations for Director before an annual meeting of our stockholders by following the procedures described in our Bylaws. For more information on how and when to submit a nomination for future meetings, see “Other stockholder proposals and director nominations.”

Board Composition, Refreshment and Ongoing Education

  Board Diversity – The Board believes that a diverse board is better able to effectively oversee Brighthouse and deliver long-term value for our stockholders. The Board seeks Directors who possess a broad range of skills, experiences, expertise and perspectives and who contribute to the ethnic and gender diversity of our Board.

 

  Board Refreshment – As Brighthouse grows and evolves overtime, the Board recognizes that it must refresh itself to address Brighthouse’s strategies and oversight needs. The Board will regularly assess its composition to identify the qualifications and skills that Directors and candidates should possess.

 

  Assessing the Board’s Performance – The Board views self-assessment as an important tool for candid evaluation of its composition, performance and proper functioning, as well as an important component of our board refreshment strategy. The Nominating and Corporate Governance Committee will develop and propose to the Board a process for annual self-evaluation of the Board and the Committees and will present the results of the evaluation for discussion by the Board.

 


 

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Brighthouse Financial, Inc.   Board and Corporate Governance Practices

 

  Mandatory Retirement Age–Pursuant to our Corporate Governance Principles, Directors may not stand for election or be appointed to the Board after reaching the age of 72. The Board, in rare circumstances, may approve exceptions to this policy. We have not adopted term limits for our Directors.

 

  Director Orientation and Continuing Education–The Board views orientation and continuing education as vital tools for building an effective Board. We provide all new Directors with an orientation program as soon as practicable around the time they join the Board. The orientation consists of presentations by our senior management to familiarize the Directors with our business, operations, financial condition, risk management and governance, as well as Directors’ legal duties and requirements. We also encourage and will provide funding for both new and longer-serving Directors to attend continuing education programs delivered by third parties to develop and enhance their skills and knowledge. We intend to incorporate continuing education into our regular Board and Committee meetings from time to time.

 

  Attendance at Meetings–Directors are expected to regularly attend meetings of the Board and the Committees of which they are members, and to spend the time needed outside of meetings to keep themselves informed about Brighthouse’s business and operations.

Board Leadership Structure

The Board has determined that the best leadership structure for Brighthouse at this time is separate chief executive officer and chairman roles, with an independent chairman leading the Board. This structure enhances the Board’s ability to exercise independent oversight of management of Brighthouse on behalf of its stockholders. Furthermore, as a newly independent company, Brighthouse is engaged in establishing and stabilizing itself for the future. During this crucial and transformative period, the duties of the chairman of the Board (the “Chairman”) and the CEO are particularly demanding. Separating these roles allows each to focus on their respective duties.

Our Chairman’s duties and responsibilities focus on promoting sound corporate governance practices, building the Board and fostering a culture of effective oversight on behalf of our stockholders and overseeing management’s development and execution of its business strategies. These duties include the following:

  promote the highest standards of corporate governance;
  provide coherent leadership for the Board, through understanding the views of our Directors, stockholders and management;
  set the agenda for Board meetings with input from the CEO;
  preside over Board meetings and executive sessions of the Independent Directors (as defined below);
  promote effective communication and serve as the primary conduit between the Board and the CEO and other members of management;
  set the tone of Board discussions to promote a Board culture of the highest level of integrity, active engagement, open communication, constructive debate, and effective decision-making;
  establish close relationship of trust with the CEO, providing support and advice while respecting the executive responsibility of the CEO;
  with the Chair of the Nominating and Corporate Governance Committee, oversee CEO and management succession planning; and
  with the Chair of the Nominating and Corporate Governance Committee, lead the Board’s recruitment of Director candidates, oversee development of Director orientation and continuing education programs, review Committee and Committee Chair assignments, and oversee annual evaluations for the Board and its Committees.

 


 

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Board and Corporate Governance Practices   Brighthouse Financial, Inc.

 

The Board elected Mr. Chaplin to serve as Chairman on the basis of his independence from management, his experience as president, chief financial officer and chief administrative officer of a major financial services company, experience as a director of a public company, leadership skills and ability to devote the time and effort to effectively oversee Brighthouse.

Mr. Steigerwalt, Brighthouse’s President and CEO, also serves as a Director. Mr. Steigerwalt works closely with the Chairman to help focus the Board on matters of strategic importance for Brighthouse.

The Board believes it is important to retain its flexibility to allocate the responsibilities of the Chairman of the Board in the best interests of the Company and will continue to evaluate the best leadership structure for Brighthouse as it evolves.

Director Independence

Our Board annually considers whether our Directors are independent in accordance with applicable Nasdaq and Exchange Act rules. An “Independent Director” is a Director who the Board has determined (i) is independent of management and free from any material relationship with the Company and its subsidiaries (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company or its subsidiaries) that would interfere with the exercise of the Director’s independent judgment as a member of the Board and (ii) meets the independence standards for directors set forth in the Nasdaq listing standards. Our Board has determined that the following six Directors, out of our eight total Directors, are Independent Directors: Ms. Chang Britt; Mr. Chaplin; Ms. Offereins; Mr. Shouvlin; Mr. Wallace; and Mr. Wetzel. In making this determination, the Board considered information provided by the Directors about their and their family members’ business and professional relationships with Brighthouse and with entities that have business interactions with Brighthouse, including MetLife.

Executive Sessions

As part of each regular meeting of the Board, Brighthouse’s Independent Directors meet in an executive session without management present. The Chairman presides over these executive sessions. In addition, each Board Committee typically holds an executive session as part of its regular meeting, which is presided over by the Committee Chair.

Stockholder Engagement

Building relationships with our stockholders is important and beneficial to Brighthouse and our stockholders. Following the Separation, management worked with our Board, and our Nominating and Corporate Governance Committee in particular, to develop a robust and proactive stockholder engagement program. In our engagements, we aim to create dialogue in which we communicate the perspectives of management and the Board on the issues that are important to our stockholders and solicit our stockholders’ insights and feedback, which the Board considers in developing our governance and compensation practices. Our stockholder engagement program will comprise a year-round cycle of communication, feedback and action, which is described in the diagram on the following page.

 


 

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Brighthouse Financial, Inc.  

Board and Corporate Governance Practices

 

LOGO

2017-2018 Engagement – During the fourth quarter of 2017, only months after we became an independent company, we launched our stockholder engagement program. We invited 19 of our largest stockholders owning approximately 33% of our common stock outstanding at such time to engage with us, and met with a substantial number of those 19 stockholders. We also met with two major proxy advisory firms, Institutional Stockholder Services (ISS) and Glass Lewis.

During these meetings, we:

  Provided an overview of Brighthouse, our industry, and our publicly disclosed strategic objectives and performance.
  Discussed our Board composition, including: the Board’s diverse mix of skills, experience and perspectives; the Board’s gender and ethnic diversity; and our commitment to building a high- functioning, effective Board through meaningful assessments and refreshment.
  Discussed decisions we made in connection with the Separation, particularly with respect to corporate governance and executive compensation, as disclosed publicly.
  Solicited feedback on our Board, governance practices and executive compensation program.

Our Corporate Secretary discussed with the Nominating and Corporate Governance Committee our engagement activities and the feedback that we received from our stockholders. In particular, the Corporate Secretary reported that our stockholders generally expressed support for our governance program, the composition of our Board and our disclosed compensation practices. He further reported that our stockholders encouraged the Board and management to regularly evaluate our governance and compensation practices to ensure that they are appropriate for the Company.

 


 

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Board and Corporate Governance Practices   Brighthouse Financial, Inc.

 

Succession Planning and Talent Management

Succession planning and oversight of our talent management practices are central to the Board’s responsibilities. The Board oversees the Company’s succession plans for the CEO and other senior members of management. The Board will discuss, at least annually, the Company’s succession plans, including identifying potential candidates to succeed the CEO, both in cases of orderly succession and in the event of an emergency. In addition, the Board will regularly discuss with management succession plans for other senior manager positions, including identifying potential candidates and plans to develop their skills in anticipation of a potential succession.

Risk Oversight

Effective risk oversight is fundamental to delivering long-term value for our stockholders. Our Board, with the assistance of the Committees, oversees the development and execution of our business strategies to help ensure that risks are appropriately assessed and mitigated and that our business plans align to our overall risk appetite. The Board and its Committees review and approve our risk appetite statement, review our most significant risk policies and regularly discuss with management our performance against our risk targets.

In connection with each regular meeting of the Board and Committees, the Chief Risk Officer prepares an enterprise risk dashboard that assesses our risk profile and our performance against our risk targets in areas including credit risk, market risk, liquidity risk, operational risk and model risk. In addition, the Chief Risk Officer presents a report on enterprise risk at regular meetings of the Finance and Risk Committee. The Chief Risk Officer, or his designee, also periodically presents reports to the Board on key risks and to the other Committees on risk topics within the scope of the Committees’ respective responsibilities.

The Board exercises direct oversight over certain key risks, including the following:

  Strategic Risk – In connection with its annual review of our strategy and ongoing oversight of our performance against the strategy, the Board oversees the management of strategic risks. Senior management, including the CEO, the Chief Product and Strategy Officer and the Chief Financial Officer (“CFO”), and discuss with the Board the key risks to the execution of our strategy and describe management’s activities to identify, assess and mitigate risk.
  Cybersecurity – The Board meets with our Chief Technology Officer and Chief Information Security Officer to review our information technology and cybersecurity risk profile and discuss our activities to manage those risks. In addition, our Chief Compliance Officer reports to the Board on our compliance with regulations and guidance regarding information technology and cybersecurity. The Audit Committee will provide ongoing oversight of information technology and cybersecurity risk.

The roles of the Board Committees in overseeing risk are discussed in greater detail in “Information about Our Board Committees.”

Information about Our Board Committees

The Board has designated six standing Board Committees to assist the Board in carrying out its duties: Audit; Compensation; Executive; Finance and Risk; Nominating and Corporate Governance; and Investment. Each Committee has a Board-approved, written charter, which describes that Committee’s role and

 


 

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Brighthouse Financial, Inc.   Board and Corporate Governance Practices

 

responsibilities. Current, printable copies of the charters of the Audit, Compensation and Nominating and Corporate Governance Committees, are posted on our website at http://investor.brighthousefinancial.com/ corporate-governance/governance-overview. The Audit, Compensation and Nominating and Corporate Governance Committees all comply with applicable requirements of the Securities and Exchange Commission (“SEC”) and Nasdaq, and are chaired by and consist solely of Independent Directors. The Committee Chairs approve the meeting agendas for their respective Committees.

Each Committee regularly reports on the matters discussed during its meetings to the full Board and presents recommendations on actions requiring Board approval. On an annual basis, each Committee will conduct an evaluation of its performance and will review the adequacy of and propose changes to its charter for Board approval. Each Committee has full authority to retain, at Brighthouse’s expense, independent advisors or consultants.

The table below provides additional information about our Committees: their composition; number of meetings held in 2017 (from August 4, 2017, when we became an independent company); and their primary roles and responsibilities, including their roles in the oversight of risk management.

 

 

Audit Committee

Members:

Patrick J. (“Pat”) Shouvlin (Chair)

C. Edward (“Chuck”) Chaplin

William F. (“Bill”) Wallace

All Audit Committee members are independent under applicable SEC and Nasdaq rules and are “financially literate.” The Board has determined that Pat Shouvlin, the Committee’s Chair, is an “audit committee financial expert” under the SEC rules.

Number of Meetings in 2017: 4

Key Roles and Responsibilities

  Oversee our accounting and financial reporting processes, internal control over financial reporting and disclosure controls and procedures, to help preserve the integrity of our financial statements.
  Oversee the audits of the financial statements of the Company and recommend to the Board whether the audited financial statements should be included in our Annual Report on Form 10-K (“Form 10-K”).
  Review and discuss with management and the independent auditor our unaudited quarterly financial statements.
  Review earnings press releases prior to their release to the public.
  Oversee our compliance with legal and regulatory requirements.
  Oversee the internal audit functions. Oversee procedures for the receipt, analysis and resolution of complaints concerning accounting, internal control over financial reporting, or auditing matters, as well as for confidential, anonymous submissions by Company employees of concerns regarding accounting or auditing matters.
  Review reports on our compliance processes and programs.
  Appoint, engage, evaluate, compensate and oversee the work our independent auditor (the Audit Committee’s role in oversight of Brighthouse’s independent auditor is discussed further in Proposal 2).

 


 

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Board and Corporate Governance Practices   Brighthouse Financial, Inc.

 

  Coordinate with the Nominating and Corporate Governance Committee regarding the review of transactions between the Company and Related Persons (see “Certain Relationships and Related Party Transactions”), where appropriate.

Role in Risk Oversight

  Discuss with management our risk assessment and risk management practices and the guidelines, policies and processes for risk assessment and risk management.
  Oversee our risk policies and processes relating to financial statements, financial systems, financial reporting processes, internal control over financial reporting, compliance and auditing, as well as the guidelines, policies and processes for monitoring and mitigating such risks.
  Oversee the disclosure of material risks in our public filings.
  Provide ongoing oversight of operational risk, including information technology and cybersecurity risk.

 

 

Compensation Committee

Members:

Diane E. Offereins (Chair)

Irene Chang Britt

Paul M. Wetzel

All Compensation Committee members are independent under applicable SEC and Nasdaq rules and are “non-employee directors” for purposes of Section 16 of the Exchange Act, and “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

Number of Meetings in 2017: 2

Key Roles and Responsibilities

  Review and approve, on an annual basis, our corporate goals and objectives with respect to CEO compensation, evaluate the CEO’s performance in light of these goals and objectives and recommend to the independent members of the Board for approval the CEO’s annual compensation, including salary, bonus and equity and non-equity incentive compensation.
  Review and approve on an annual basis the compensation for our other executive officers, including such officers’ salary, bonus and equity and non-equity incentive compensation, based on initial recommendations and evaluation of performance from the CEO.
  Review and approve the Company’s equity and non-equity incentive compensation plans and arrangements, and approve awards to employees under such plans.
  Review and discuss with management the Company’s Compensation Discussion and Analysis (“CD&A”) for inclusion in the Company’s annual report or proxy statement.
  Consider the results of the most recent stockholder advisory vote on executive compensation as required by Section 14A of the Exchange Act.
  Review and approve the Company’s severance arrangements and related plans.
  Approve and oversee compensation-related policies, including stock ownership guidelines, and hedging, pledging and clawback policies.

 


 

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Brighthouse Financial, Inc.   Board and Corporate Governance Practices

 

Role in Risk Oversight

  Review, with the assistance of the Chief Risk Officer and the Compensation Committee’s independent compensation consultant, incentive compensation arrangements to confirm that incentive pay does not encourage unnecessary risk-taking.
  Review and discuss the relationship between risk management policies and practices, corporate strategy and senior executive compensation.

 

 

Executive Committee

Members:

Eric T. Steigerwalt (Chair)

C. Edward (“Chuck”) Chaplin

Patrick J. (“Pat”) Shouvlin

Number of Meetings in 2017: None

Key Roles and Responsibilities

  Act on behalf of the entire Board with respect to certain exigent matters between meetings of the Board.

 

 

Finance and Risk Committee

Members:

C. Edward (“Chuck”) Chaplin (Chair)

John D. McCallion

Diane E. Offereins

Paul M. Wetzel

All Finance and Risk Committee members, other than Mr. McCallion, are independent under applicable SEC and Nasdaq rules.

Number of Meetings in 2017: 2

Key Roles and Responsibilities

  Review key metrics to measure Brighthouse’s performance against its business and financial plans, in alignment with our multi-year strategy.
  Oversee the Company’s financial management policies and practices.
  Approve, or recommend for Board approval, equity and debt issuances, share repurchase programs, dividend payments, and mergers and acquisitions.
  Oversee the Company’s capital management strategy, including the review and approval of capital and liquidity policies and plans.
  Oversee the capitalization of Brighthouse subsidiaries.
  Oversee the management, budget and business plan of Brighthouse’s finance and risk management organizations.

Role in Risk Oversight

  Broad oversight of risk management, including approval of our risk appetite statement, review of most significant risk policies, and review of our performance against targets.

 


 

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Board and Corporate Governance Practices   Brighthouse Financial, Inc.

 

  Discuss with the Chief Risk Officer and other members of management our risk management practices, including how we measure, monitor and manage risk exposures in the enterprise.
  Regularly review with the Chief Risk Officer an assessment of our risk profile, including credit risk, market risk, liquidity risk, operational risk and model risk.
  Review the finance and risk management functions including their management, budget and business plan.
  Review the risk associated with internal policies and procedures relating to financial controls, as well as strategies to mitigate those risks.
  Oversee management’s use of risk metrics and targets and monitor performance against such benchmarks and targets.
  Coordinate, through the Committee’s chair, with the Chief Risk Officer and other members of management, and with the chairs of the other committees, to help ensure that all committees receive necessary information to oversee our risks.
  Coordinate with the Chief Risk Officer and the chair of the Compensation Committee, the Compensation Committee’s oversight of compensation-related risk matters.
  Review the Own Risk and Solvency Assessment report, which summarizes our risk management organization, structure and processes and analysis of our risk exposures and capital adequacy.

 

 

Investment Committee

Members:

William F. (“Bill”) Wallace (Chair)

Irene Chang Britt

Patrick J. (“Pat”) Shouvlin

All Investment Committee members are independent under applicable SEC and Nasdaq rules.

Number of Meetings in 2017: 2

Key Roles and Responsibilities

  Oversee, on a consolidated basis, the investment activities of Brighthouse and its subsidiaries’ general accounts and consolidated separate accounts.
  Review the performance of the investments in our general and separate accounts, including our derivatives activity.
  Review and approve Enterprise Investment Authorities for the separate accounts.
  Review the compliance of our investments with our Enterprise Investment Authorities and applicable laws and regulations.
  Oversee our engagement of investment advisers to manage the separate accounts’ investments.
  Review the investment activities and performance of the separate accounts.
  Discuss with management the economic and market outlook, asset sectors and asset allocation.
  Review our annual investment plan for Brighthouse and monitor performance against the investment plan.

Role in Risk Oversight

  Oversee the management and mitigation of risks associated with our investment portfolios, including credit risk, portfolio allocation and diversification risk, derivatives risk and counterparty risk.

 


 

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Brighthouse Financial, Inc.   Board and Corporate Governance Practices

 

 

Nominating and Corporate Governance Committee

Members:

Irene Chang Britt (Chair)

Diane E. Offereins

Paul M. Wetzel

All Committee members are independent under applicable SEC and Nasdaq rules.

Number of Meetings in 2017: 2

Key Roles and Responsibilities

  Develop, implement and periodically review our corporate governance policies and practices.
  Develop and recommend to the Board the qualifications for director candidates.
  Lead the search for qualified director candidates and consider director candidates recommended by our stockholders pursuant to the procedures set forth in our Corporate Governance Principles.
  Oversee the Director orientation and continuing education programs.
  Recommend to the Board policies and procedures to enhance the Board’s effectiveness, the size and composition of the Board, and the frequency and structure of Board meetings.
  Review the Board’s committee structure and composition and recommend committee appointments to the Board for its approval.
  Review the Company’s Code of Conduct for Directors, Code of Conduct for Financial Management and Code of Conduct for Employees.
  Review transactions between the Company and related persons, and coordinate with the Audit Committee where appropriate.
  Review and evaluate any conflicts of interest of prospective and current Directors and executive officers. If it is determined that such review involves a complaint within the purview of the Audit Committee, the Nominating and Corporate Governance Committee may seek guidance from and coordinate the review with the Audit Committee.
  Develop standards for determining whether a Director is independent from Brighthouse and make recommendations regarding such determinations to the Board.
  Develop and oversee the annual self-evaluations for the Board and Committees.
  Review Director compensation on an annual basis.
  Assist the Board in developing our succession plan for the CEO and other executive officers, and develop and evaluate potential candidates.

Role in Risk Oversight

  Oversee risks related to the Company’s governance.
  Develop and oversee CEO succession planning and emergency succession planning.
  Oversee our related person transaction policy.
  Oversee our regulatory and compliance programs, including the development and implementation of our codes of conduct.

 


 

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Board and Corporate Governance Practices   Brighthouse Financial, Inc.

 

Board Meetings and Director Attendance

In 2017, the Board held five meetings and the Committees held a total of 12 meetings. Every current Director attended more than 75% of the aggregate number of meetings of the Board and the Committees on which the Director served.

Director Compensation

In August 2017, shortly after the completion of the Separation, the Board, on the recommendation of the Nominating and Governance Committee, established a compensation program for the independent members of the Board. In establishing this compensation program, the Board considered benchmarking data for non-management director compensation at companies in our Comparator Group (as defined below) provided by the Company’s compensation consultant, Willis Towers Watson, prior to the Separation.

Our director compensation program is intended to compensate our Independent Directors fairly for their work as members of the Board and to align their interests with those of our stockholders by delivering half of the annual retainer in the form of equity-based awards. Annual equity-based awards are expected to be granted at the Board meeting held around the time of the annual meeting of stockholders and will be eligible to vest on the earlier of the first anniversary of the grant date and the date of the next annual meeting of stockholders.

The table below sets forth the details of the compensation program for independent members of the Board. Each element of the program is described in greater detail in the narrative following the table.

 

 

Description

 

     

 

Amount ($)        

 

     

 

Form

 

Pay for Board Service

 

       

Annual retainer

    240,000

 

   

50% cash and 50% equity

 

 

Pay For Service As Chair Of The Board Or A Board Committee

 

   

Chairman of the Board retainer

 

    200,000

 

   

50% cash and 50% equity

 

Audit Committee

 

    22,500

 

   

100% cash

 

Compensation Committee

 

    17,500

 

   

100% cash

 

Nominating and Corporate Governance Committee

 

    17,500

 

   

100% cash

 

Finance and Risk Committee

 

    17,500

 

   

100% cash

 

Investment Committee

 

    17,500

 

   

100% cash

 

Annual Equity Awards

In connection with the approval of our independent director compensation program, the Board approved annual Restricted Stock Unit (“RSU”) awards for the independent members of our Board. Beginning in 2018, each independent member of the Board continuing in service at the annual meeting of stockholders will receive an award of RSUs. Annual awards to independent members of the Board generally vest on the earlier of the first anniversary of the grant date and the date of the next annual meeting of stockholders. The number of RSUs to be granted to each independent member of the Board will be determined by

 


 

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Brighthouse Financial, Inc.  

Board and Corporate Governance Practices

 

dividing the value of the equity portion of the annual retainer ($120,000) by the closing price of the Company’s common stock on the date of grant. The annual RSU grants will be made pursuant to the Brighthouse Financial, Inc. 2017 Non-Management Director Stock Compensation Plan (the “Director Plan”), subject to stockholder approval of the Director Plan (see Proposal 6 – Approval of the Brighthouse Financial, Inc. 2017 Non-Management Director Stock Compensation Plan).

Director Founders’ Grants

To further align the interests of our Independent Directors with our stockholders, the Board, on the recommendation of the Nominating and Corporate Governance Committee, authorized an equity award in the form of RSUs to each of the six independent members of the Board (the “Director Founders’ Grants”) on August 9, 2017. The number of RSUs subject to each Director Founders’ Grant was determined by dividing $120,000 by the closing price of Brighthouse common stock on September 8, 2017 ($54.54), resulting in each independent member of the Board receiving 2,200 RSUs. The Director Founders’ Grants were made pursuant to the Director Plan and are subject to stockholder approval of the Director Plan (see Proposal 6 – Approval of the Brighthouse Financial, Inc. 2017 Non-Management Director Stock Compensation Plan). If stockholders approve the Director Plan, the RSUs granted pursuant to the Director Founders’ Grants will vest on September 30, 2018. If stockholders do not approve the Director Plan, the Director Founders’ Grants will be void.

Fiscal 2017 Director Compensation Table

 

       

Name

 

  

Fees Earned or

Paid in Cash

 

  

Stock

Awards1

 

  

All Other

Compensation

Financial Services 

 

  

Total

 

 Irene Chang Britt

 

  

$68,750

 

  

-

 

  

$0

 

  

$68,750

 

 C. Edward

 (“Chuck”) Chaplin

 

  

$118,750  

 

 

  

-

 

  

$0

 

 

  

$118,750  

 

 

 Diane E. Offereins

 

  

$68,750

 

  

-

 

  

$0

 

  

$68,750

 

 Patrick J. Shouvlin

 

  

$71,250

 

  

-

 

  

$0

 

  

$71,250

 

 William F. Wallace

 

  

$68,750

 

  

-

 

  

$0

 

  

$68,750

 

 Paul M. Wetzel

 

  

$60,000

 

  

-

 

  

$0

 

  

$60,000

 

 

 

 

1  On August 9, 2017, the Board authorized a Director Founders’ Grant to each of the six independent members of the Board. The number of RSUs for each Director subject to the Director Founders’ Grants was 2,200, which was determined by dividing $120,000 (which is equal to 50% of the annual retainer for independent members of the Board) by the closing price of Brighthouse common stock on September 8, 2017, which was $54.54. The Director Founders’ Grants were made pursuant to the Director Plan and are subject to stockholder approval of the Director Plan at the Annual Meeting. Because the Director Founders’ Grants are subject to stockholder approval and will be void if stockholder approval is not obtained, no value is included in the Stock Awards column since the grant date fair value calculated under Financial Accounting Standards Board Accounting Standards Codification Topic 718 cannot be determined.

 


 

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Board and Corporate Governance Practices

  Brighthouse Financial, Inc.

 

Fees Earned or Paid in Cash

Each of the six independent members of the Board is entitled to receive an annual cash retainer of $120,000. We provide additional retainers to the Chairman of the Board and to each Director who serves as the Chair of a standing Committee, the amounts of which are set forth above under the heading “Director Compensation.” All cash retainers are paid in quarterly installments in arrears. For Fiscal 2017, each independent member of the Board received two installments of the annual cash retainer, and if applicable, the additional retainer.

Director Stock Ownership Guidelines

In February 2018, the Board, on the recommendation of the Nominating and Corporate Governance Committee, established stock ownership and retention guidelines for the independent members of the Board. Pursuant to the guidelines, each Independent Director is expected to acquire ownership of a number of Shares equal to at least four times the equity portion of the Director’s annual retainer, including for Mr. Chaplin the portion of his annual Chairman of the Board retainer paid in the form of RSUs. Directors are expected to achieve the applicable ownership level within five years from the later of the date the guidelines became effective (January 1, 2018) and the date the Director commences service. Directors are expected to retain at least 50% of the net shares acquired upon vesting of equity awards until the ownership guideline is satisfied.

Codes of Conduct

We understand that our strength depends on the trust of our associates, customers and stockholders. We strive to adhere to the highest standards of business conduct at all times, and put honesty, fairness and trustworthiness at the center of all that we do. We have adopted codes of conduct that reflect these values and enshrine them in our corporate culture.

The Code of Conduct for Financial Management is a “code of ethics” (as defined under the rules of the SEC) that applies to Brighthouse’s CEO, CFO, Chief Accounting Officer (“CAO”), Corporate Controller, and all Brighthouse associates who perform similar functions or who may obtain access to any financial records.

The Code of Conduct for Employees applies to all Brighthouse officers and employees.

The Code of Conduct for Directors applies to members of the Board.

Current, printable versions of these codes of conduct are available on Brighthouse’s website at http://investor.brighthousefinancial.com/corporate-governance/governance-overview.

 


 

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Brighthouse Financial, Inc.  

Board and Corporate Governance Practices

 

LOGO

 


 

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Proposal 2 – Ratification of the Appointment of Deloitte & Touche LLP as Brighthouse’s

independent registered public accounting firm for fiscal year 2018

  Brighthouse Financial, Inc.

 

Proposal 2

Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s independent registered public accounting firm for fiscal year 2018

The Audit Committee is responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm (“independent auditor”). To execute on this responsibility, the Audit Committee annually evaluates the independent auditor’s qualifications, performance and independence. The Audit Committee has appointed Deloitte & Touche LLP (“Deloitte”) as the Company’s independent auditor for the fiscal year ending December 31, 2018. Deloitte’s background knowledge of Brighthouse and its subsidiaries, combined with its industry expertise, has enabled it to carry out its audits of the Company’s financial statements with effectiveness and efficiency. The members of the Audit Committee believe that the continued retention of Deloitte as the Company’s independent auditor is in the best interest of the Company and its stockholders.

In addition, the Audit Committee is involved in the selection of Deloitte’s lead engagement partner and ensures that the lead partner’s engagement is limited to no more than five consecutive years of service (in accordance with SEC rules). The current lead Deloitte engagement partner was designated commencing with the 2017 audit and is eligible to serve in that capacity through the end of the 2021 audit.

We request that our stockholders ratify the appointment of Deloitte as the independent auditor for fiscal year 2018. If the stockholders do not ratify such appointment, the Audit Committee will take note and may reconsider its retention of Deloitte. If such appointment is ratified, the Audit Committee will still have the discretion to replace Deloitte at any time during the year. Representatives of Deloitte are expected to be present at the Annual Meeting and will have the opportunity to make a statement. They will also be available to respond to questions from stockholders regarding their audit of our consolidated financial statements for fiscal year 2017.

The Board of Directors recommends that stockholders vote FOR the ratification of the appointment of Deloitte as our independent registered accounting firm for fiscal year 2018.

Fees Paid to Deloitte & Touche LLP

The following table shows the fees paid by the Company to Deloitte for professional services rendered for the fiscal year ending December 31, 2017. Prior to the Separation, and until the end of the first quarter of 2017, MetLife, as our then-parent, paid all audit, audit-related, tax and other fees of Deloitte. As a result, (i) no fees are reflected for the Company for the fiscal year ending December 31, 2016 and (ii) the 2017 fees listed below exclude the fees paid by MetLife for the first quarter of 2017 (ending March 31, 2017). All services (and related fees) paid by the Company were approved by the Audit Committee.

 


 

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Brighthouse Financial, Inc.  

Proposal 2 – Ratification of the Appointment of Deloitte & Touche LLP as Brighthouse’s

independent registered public accounting firm for fiscal year 2018

 

 

Fees (in Thousands)

 

 

2017                            

  Audit Fees (1)

  $15,250                             

  Audit-Related Fees (2)                     

  $1,140                             

  Tax Fees (3)

  $980                             

  All Other Fees (4)

  $8                             

  Total

  $17,378                             

 

1. Audit Fees. Fees billed for professional services for the integrated audit of the consolidated financial statements of the Company and its subsidiaries (as required), including the annual financial statement audit, the reviews of the interim financial statements included in quarterly reports on Form 10-Q for the Company and its subsidiaries (as required), statutory audits or other financial statement audits of subsidiaries, the audit of the effectiveness of our internal controls over financial reporting (as required), assistance with and review of documents filed with the SEC and other services that enable the independent auditor to form an opinion of the consolidated financial statements of the Company and its subsidiaries (as required).
2. Audit-Related Fees. Fees billed for assurance and related services that are reasonably related to the audit or review of the financial statements of the Company and its subsidiaries (as required) and for other services that are traditionally performed by the independent auditor. Such services consist of fees for employee benefit plan audits, assessments and testing of internal controls, and accounting consultations not directly associated with the annual audit or quarterly reviews.
3. Tax Fees. Fees billed for permitted tax services, including tax compliance, tax advice and tax planning.
4. All Other Fees. Fees billed for this category primarily represent accounting research subscription fees.

Audit Committee Pre-Approval Policy

The Audit Committee established a policy requiring its pre-approval of all audit and non-audit services provided by the independent auditor, and the policy is designed to ensure that the independent auditor’s independence is not impaired. The policy provides for the Committee’s general pre-approval, on an annual basis, of audit, audit-related, tax and permissible non-audit services up to amounts reasonably determined by the Audit Committee to be appropriate. Any proposed services exceeding such general pre-approval limits will require the specific pre-approval by the Audit Committee. Specific approval of the Audit Committee is also required for any other services that have not been generally pre-approved by the Audit Committee. The independent auditor is required to periodically report to the Audit Committee regarding (i) the extent of the services it has provided in accordance with the Audit Committee’s pre-approval and (ii) the fees for the services performed to date. The Audit Committee annually reviews the policy to ensure its continued appropriateness and compliance with applicable laws and listing standards.

The policy delegates to the Audit Committee Chair the authority to pre-approve audit, audit-related or non-audit services up to a maximum of $750,000 between Audit Committee meetings if management deems it reasonably necessary to begin the services before the next scheduled meeting of the Audit Committee. The Chair must report any pre-approval decisions to the Audit Committee at its next scheduled meeting.

 


 

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Proposal 2 – Ratification of the Appointment of Deloitte & Touche LLP as Brighthouse’s

independent registered public accounting firm for fiscal year 2018

  Brighthouse Financial, Inc.

 

Audit Committee Report

The Audit Committee currently consists of three Independent Directors, and it operates under a written charter adopted by the Board. The Board of Directors has determined that Patrick J. Shouvlin has the requisite experience to be designated an audit committee financial expert as such term is defined under Item 407(d)(5) of Regulation S-K under the Securities Act of 1933, as amended (the Securities Act”) and the applicable standards of Nasdaq.

Management is responsible for the preparation and presentation of the Company’s financial statements and the reporting process, for its accounting policies and procedures, and for the establishment of effective internal controls and procedures.

The primary duties of the Audit Committee are to assist the Board in its oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the Company’s systems of internal controls regarding finance, accounting, legal compliance and ethics, (iv) the independence and qualifications of the Company’s independent auditor and (v) the performance of the Company’s internal audit function and independent auditor. The Audit Committee also discusses with management, including the CFO, the CAO, the Chief Auditor, and the Head of Investor Relations, and with the Company’s independent auditor, each quarterly report on Form 10-Q and annual report on Form 10-K prior to their filing, as well as earnings releases prior to their release to the public. As part of its meetings, the Audit Committee regularly meets in executive session without management present.

The Chief Auditor regularly attends meetings of the Audit Committee and reports directly to the Chair of the Audit Committee, which supports her independence from management and the objectivity of her work. The Audit Committee regularly discusses with the Chief Auditor, both in general session and executive session, the adequacy and effectiveness of the Company’s financial reporting processes, internal control over financial reporting and disclosure controls and procedures, as well as the performance of the internal audit function.

The independent auditor is responsible for performing an independent audit of our financial statements and, as required, of our internal controls over financial reporting, in each case, in accordance with standards established by the Public Company Accounting Oversight Board (PCAOB”), and the independent auditor issues a report with respect to each of the foregoing items. The independent auditor must also express an opinion as to the conformity of the Company’s financial statements with generally accepted accounting principles and the effectiveness of our internal controls over financial reporting (beginning with the Company’s Annual Report on Form 10-K for the year ending December 31, 2018). The independent auditor regularly affirms to the Audit Committee that it remains independent from the Company. The Audit Committee regularly meets with the independent auditor, both in general session and in executive session, to discuss the Company’s financial reporting processes, internal control over financial reporting, disclosure controls and procedures, required communications to the Audit Committee, fraud risks and any other matters that the Committee or the independent auditor deem appropriate.

More information on the Audit Committee and its responsibilities is included in the Audit Committee Charter available on our website at http://investor.brighthousefinancial.com/corporate-governance/ governance-overview.

 


 

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Brighthouse Financial, Inc.  

Proposal 2 – Ratification of the Appointment of Deloitte & Touche LLP as Brighthouse’s

independent registered public accounting firm for fiscal year 2018

 

In the performance of its oversight function, the Audit Committee has reviewed and discussed the audited consolidated financial statements for fiscal year 2017 with each of management and the independent auditor. The Audit Committee and the independent auditor have also discussed the matters required to be discussed by them under the applicable rules of the PCAOB.

The Audit Committee has received from its independent auditor the written disclosures and the letters required by the applicable rules of the PCAOB, as currently in effect, regarding the firm’s communications with the Audit Committee relating to independence, and it has discussed the independent auditor’s independence with the independent auditor.

Based on the review and discussions described in this Audit Committee Report, the Audit Committee recommended to the Board of Directors that the audited financial statements for fiscal year 2017 be included in our Annual Report on Form 10-K for the year ended December 31, 2017 for filing with the SEC.

Audit Committee

Patrick J. Shouvlin (Chair)

C. Edward Chaplin

William F. Wallace

 


 

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Proposal 3 - Say-on-Pay Vote   Brighthouse Financial, Inc.

 

Proposal 3

Advisory vote to approve the compensation paid to

Brighthouse’s Named Executive Officers

In accordance with Section 14A of the Exchange Act, we are providing our stockholders with an advisory (non-binding) vote on the compensation paid to our named executive officers. Details on our approach are described in the Compensation Discussion and Analysis (CD&A”) and the accompanying compensation tables and the narrative discussion in accordance with the compensation and disclosure rules of the SEC.

The CD&A summarizes our executive compensation program. Following the Separation and our establishment as an independent company, our Board of Directors and Compensation Committee implemented an executive compensation program that is intended to align the interests of our executive officers with those of our stockholders. A substantial portion of our named executive officers’ compensation is in the form of variable, at-risk compensation that requires us to achieve performance objectives that are intended to create long-term stockholder value. Furthermore, we intend to continue to align our executives’ interests with those of our stockholders by utilizing metrics in our short- and long-term incentive programs that are tied to performance outcomes that will enhance stockholder value.

As a newly public company with a diversified stockholder base, we believe it is critical to understand the views of our stockholders with respect to how we compensate our named executive officers. To that end, shortly after the Separation, we engaged our stockholders in discussions about our executive compensation program, philosophy and objectives. We solicited feedback from stockholders on the decisions we made in connection with the Separation regarding our publicly-disclosed executive compensation program. The feedback we received was generally supportive.

We are asking stockholders to approve the following resolution:

RESOLVED, that the compensation paid to Brighthouse’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative disclosure, is hereby APPROVED.

Although this vote is advisory, the Board of Directors and the Compensation Committee intend to consider the results of the vote, as well as other relevant factors, as we continue to develop our executive compensation program.

The Board of Directors recommends that stockholders vote FOR the approval of the compensation of our Named Executive Officers, as disclosed in this Proxy Statement.

 


 

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Brighthouse Financial, Inc.   Compensation Discussion and Analysis

 

Compensation Discussion and Analysis

The Compensation Discussion and Analysis (CD&A”) describes our executive compensation philosophy, policies, practices and objectives in the context of our compensation decisions for our named executive officers (the NEOs”) for the period from August 5, 2017, the first day following the Separation, through December 31, 2017. We refer to this period as Fiscal 2017” throughout the CD&A. Prior to August 5, 2017, compensation to our NEOs and all other employees was paid by one of MetLife’s subsidiaries. Following the completion of the Separation, our NEOs and other employees were compensated by Brighthouse Services, LLC (Brighthouse Services”) as a subsidiary of Brighthouse and not a subsidiary of MetLife. Brighthouse Services is a payroll and services company and is the employer of all our NEOs and other employees. Please note that, except to the extent an amount is specified as relating to calendar year 2017, all compensation figures and amounts reported in this CD&A, and in the tabular disclosures following, reflect compensation paid and/or granted during Fiscal 2017 only and does not include compensation paid prior to the Separation.

For Fiscal 2017, our NEOs are comprised of our CEO, CFO and the next three most highly compensated executive officers whose names appear below:

 

Name    Title

Eric T. Steigerwalt

   President and Chief Executive Officer

Anant Bhalla

   Executive Vice President and Chief Financial Officer

John L. Rosenthal

   Executive Vice President and Chief Investment Officer

Peter M. Carlson

   Executive Vice President and Chief Operating Officer

Christine M. DeBiase

   Executive Vice President, General Counsel and Corporate Secretary*

 

* Effective February 2, 2018, Ms. DeBiase’s title was changed to Executive Vice President, Chief Administrative Officer and General Counsel. As of that date, Ms. DeBiase ceased serving as the Company’s Corporate Secretary.

The CD&A is organized into four sections:

  Section 1 – Executive Summary
  Section 2 – Features of our Fiscal 2017 Executive Compensation Program
  Section 3 – The Brighthouse Vision and Strategy – Establishing the 2018 Executive Compensation Program
  Section 4 – Additional Compensation Practices and Policies

 


 

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Compensation Discussion and Analysis   Brighthouse Financial, Inc.

 

Section 1 – Executive Summary

The Brighthouse Story

Brighthouse became an independent, publicly-traded company following the completion of the Separation on August 4, 2017, culminating with the listing of Brighthouse’s stock on the Nasdaq Stock Market on August 7, 2017. Since our first day as an independent company, we have been a major provider of life insurance and annuity solutions in the United States. Our mission is to assist our customers to achieve financial security by offering annuity and life insurance solutions.

Compensation Approach

Prior to the Separation, our executive officers were officers or employees of MetLife and its subsidiaries, although some or all of the work they performed prior to the Separation related to us or our subsidiaries.

On August 9, 2017, at its first meeting after the Separation, the Compensation Committee of our Board of Directors met and determined the compensation arrangements for our NEOs. The Compensation Committee approved compensation arrangements for our NEOs that are rooted in a pay-for-performance philosophy.

Our executive compensation program has been designed to:

 

  Provide competitive Target Total Compensation” opportunities (defined as base salary plus short-and long-term incentive compensation opportunities) to enable Brighthouse to attract, motivate and retain high-performing executives;

 

  Align our compensation plans and programs with our short-and long-term business strategies and objectives;

 

  Align the interests of our NEOs with those of our stockholders by delivering a substantial portion of our NEO’s compensation in the form of variable, at-risk incentives, with a particular emphasis on stock-based incentives, where payouts are based on Company and individual performance. The Company is seeking stockholder approval of the Brighthouse Financial, Inc. 2017 Stock and Incentive Compensation Plan (the Employee Plan”) (see Proposal 5 – Approval of the Brighthouse Financial, Inc. 2017 Stock and Incentive Compensation Plan); and

 

  Incorporate strong risk management practices to avoid creating incentives for executives to take excessive risks, encourage prudent decision-making, and capture the results of risk-based decisions in awards and payouts.

Our pay-for-performance philosophy is intended to align the interests and incentives of our NEOs with those of our stockholders by tying a substantial portion of our NEO’s compensation to the achievement of performance metrics that are aligned with the core elements of our strategy.

Fiscal 2017 Compensation Highlights

Calendar year 2017 was a year of transformation for Brighthouse. Throughout 2017, our employees were focused on completing the Separation and establishing Brighthouse as an independent public company. Accordingly, the Fiscal 2017 compensation program was established to support these objectives.

Highlights of our Fiscal 2017 compensation program are described below.

 


 

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Brighthouse Financial, Inc.  

Compensation Discussion and Analysis

 

Compensation Highlights

 

 

Base Salary and Target Total Compensation

Synopsis: Post-Separation base salaries and Target Total Compensation opportunities were established.

Rationale: Base salaries and Target Total Compensation opportunities were determined by reference to the market median of the Comparator Group (as defined below) and established to reflect the NEO’s responsibilities as top executives of a standalone public company.

 

 

Annual Variable Incentive Plan (“AVIP”)

Synopsis: AVIP pool for calendar year 2017 was funded at 105% of target level, with NEO payout percentages determined based on individual performance.

Rationale: AVIP is our annual cash incentive plan. The AVIP award pool was approved at slightly above target levels to reflect the Compensation Committee’s quantitative and qualitative assessment of management’s success in accomplishing the Separation.

 

 

Separation Bonus

Synopsis: A one-time 25% bonus enhancement for all Brighthouse employees eligible for AVIP awards.

Rationale: Based on the successful Separation, our NEOs and other employees received an additional cash incentive bonus equal to 25% of his or her respective calendar year 2017 bonus payout under AVIP (“Separation Bonus”). The Separation Bonus was based upon the Company’s achievement of critical post-Separation transition milestones and reflects the extraordinary efforts by all employees to effectuate the Separation.

 

 

Founders’ Grants

Synopsis: Shortly following the Separation, these Brighthouse equity awards were issued to all employees of the Company who participate in the Employee Plan. Awards were issued as Restricted Stock Units (“RSUs”) that 100% cliff vest a short time after the anniversary of the grant date, subject to the achievement of one or more performance goals. Founders’ Grants are subject to stockholder approval of the Employee Plan.

Rationale: Founders’ Grants were used to accelerate Brighthouse equity ownership by our officers and to immediately align our NEOs’ interests with those of our stockholders.

 

 

Temporary Incentive Deferred Compensation

Synopsis: Deferred compensation credits under the Temporary Incentive Deferred Compensation Plan, as restated (the “Temporary Plan”) to our NEOs as a “make-whole” for equity-based compensation that was forfeited or otherwise forgone as a result of the Separation. Credits under the Temporary Plan are subject to achievement of one or more performance goals. We are seeking stockholder approval of the material terms of the performance goals for certain credits under the Temporary Plan.

Rationale: Our NEOs and other employees received deferred compensation credits under the Temporary Plan to retain and motivate the participating employees through the Separation. These credits were equal to the sum of: (i) outstanding MetLife equity awards that were forfeited upon the Separation, if any, and (ii) 2017 MetLife equity grants that were forgone in light of the planned Separation.

 


 

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Compensation Discussion and Analysis

  Brighthouse Financial, Inc.

 

See “Section 3 – The Brighthouse Vision and Strategy – Establishing the 2018 Executive Compensation Program,” for an overview of the key elements of our strategy and the ways in which our compensation program for 2018 is designed to promote and reward achievement of goals that are central to our strategy.

Section 2 – Features of Our Fiscal 2017 Executive Compensation Program

Since the Separation, the Compensation Committee has been responsible for overseeing the development and implementation of our executive compensation program. The Compensation Committee is guided by the following general principles and practices:

  paying for performance: variable compensation should be based on Company and individual performance and results that drive stockholder value;
  aligning executives’ interests with stockholders’: a significant portion of our NEOs’ Target Total Compensation will be delivered in the form of stock-based incentives;
  encouraging long-term decision-making: our long-term incentive compensation programs should include awards with multi-year, overlapping incentive performance or restriction periods;
  avoiding problematic pay practices: we do not provide excessive perquisites, excessive change-in-control severance pay, or excise tax gross-ups, and we will not reprise stock options without stockholder approval; and
  reinforcing strong risk management: our compensation programs are intended to avoid incentives to take excessive risks.

Key Executive Compensation Practices

 

     
What we do      

LOGO

  Pay for Performance. A substantial portion of our NEOs’ Target Total
Compensation is in the form of variable, at-risk elements that rewards our
executives only if we achieve performance goals that create stockholder value.
     

 

LOGO

 

 

Stock Ownership Guidelines. We have established stock ownership and retention
guidelines to encourage our NEOs to obtain and maintain significant stock
ownership, thereby aligning their interests with those of our stockholders.

       

LOGO

  Minimum Vesting Requirements. Full value equity awards to our employees are
generally subject to minimum vesting periods of one year for award subject to
achievement of performance goals and three years (at a rate of not greater than
1/3rd per year) for awards that vest based solely on continued service.
       

LOGO

  Stockholder Engagement. Since the Separation, we have actively engaged with our
stockholders on various topics, including our executive compensation program. We
recognize the importance of our stockholders’ perspectives in the compensation
setting process and intend to incorporate their feedback into the design of our
compensation programs.
       

LOGO

  Independent Compensation Consultant. Our Compensation Committee retained
Semler Brossy Consulting Group (“
SBCG”) as its independent compensation
consultant to advise on all aspects of our executive compensation program.

 


 

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Brighthouse Financial, Inc.  

Compensation Discussion and Analysis

 

     
What we don’t    

LOGO

  Gross-ups on Excise Taxes. We do not provide tax gross-up benefits in connection with a change in control.
   

 

LOGO

 

 

Reprice Stock Options. Our equity incentive plans prohibit us from repricing stock options or stock appreciation rights without stockholder approval.

   

LOGO

  Excessive Perquisites. We provide limited perquisites to our executive officers.
   

LOGO

  Hedging and Pledging. Our insider trading policy prohibits all employees and Directors from engaging in hedging or pledging transactions.

Fiscal 2017 Compensation Setting Process

Prior to the Separation, we were a subsidiary of MetLife and our NEOs and all other employees were compensated by a subsidiary of MetLife based on MetLife’s compensation program for similarly-situated employees of MetLife and its subsidiaries. In addition, because we were not yet an independent public company, we did not have a compensation committee comprised of Independent Directors prior to the Separation. We and MetLife believed it would be appropriate for our post-Separation Compensation Committee and Board to make determinations and decisions about how our NEOs should be compensated.

Because the Separation occurred more than half-way through calendar year 2017, we believed it was appropriate for our Human Resources department in consultation with Willis Towers Watson (“WTW”), to be primarily responsible for preparing compensation recommendations for Fiscal 2017 for our NEOs and other members of our senior management, which we collectively refer to as the Senior Leadership Management Group (the “SLMG”). As described below, shortly after the Separation, our newly formed Compensation Committee considered the compensation recommendations prepared in the period leading up to the Separation and ultimately determined to adopt such recommendations for the NEOs and other members of the SLMG. Going forward, our Compensation Committee, with input from SBCG, will be primarily responsible for reviewing and determining all elements of Total Compensation for our NEOs and other members of the SLMG.

Our executive compensation program and accompanying pay positioning strategy have been designed to provide Target Total Compensation that uses market median as an important reference point, but recognize that the positioning of individual executives may vary from that strategy with consideration to a variety of factors, including criticality of role, skills, experience, and strategic priorities. For compensation benchmarking purposes, we use a group of peer companies within our industry that are similar to us in terms of assets and revenues and with which we compete for executive talent (the “Comparator Group”).

In anticipation of the Separation, our Human Resources department and WTW constructed the Comparator Group and used the companies in the Comparator Group as the market reference for developing pay recommendations for our NEOs and other members of the SLMG. The Comparator Group consists of fourteen publicly-traded companies in the insurance industry with assets between 0. 25 to 2.0 times those of Brighthouse and/or revenues between 0.4 to 2.5 times those of Brighthouse. As Brighthouse markets its products solely in the U.S., comparably-sized insurers with significant global operations (e.g., MetLife) were excluded from the Comparator Group.

 


 

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Compensation Discussion and Analysis   Brighthouse Financial, Inc.

 

In August 2017, shortly after the Separation, our Human Resources department recommended and the Compensation Committee approved the following Comparator Group:

•  Aflac Incorporated

•  American Equity Investment Life Holding Company

•  American National Insurance Company

•  Ameriprise Financial, Inc.

•  Assurant, Inc.

•  CNO Financial Group, Inc.

•  Genworth Financial, Inc.

 

•  Lincoln National Corp.

•  Principal Financial Group, Inc.

•  Reinsurance Group of America, Inc.

•  Sun Life Financial lnc.

•  Torchmark Corp.

•  Unum Group

•  Voya Financial, Inc.

In connection with the construction of the Comparator Group, our Human Resources department consulted with WTW to gather compensation data that was used to prepare Target Total Compensation recommendations for the SLMG, including the NEOs. Target Total Compensation recommendations were prepared for each member of the SLMG by reference to the compensation data and presented to the Compensation Committee at its first meeting on August 9, 2017. The Compensation Committee reviewed the recommendation for our Chief Executive Officer and recommended that the independent members of the Board approve the Target Total Compensation for our Chief Executive Officer, Mr. Steigerwalt. The independent members of the Board, on the recommendation of the Compensation Committee, approved Mr. Steigerwalt’s Target Total Compensation at their meeting on August 9, 2017. The Compensation Committee reviewed and approved the compensation recommendations for all other members of the SLMG, including our NEOs. Our Chief Executive Officer was involved in discussions with our Human Resources department and our Compensation Committee regarding Target Total Compensation recommendations for members of the SLMG other than himself.

In November 2017, the Compensation Committee retained SBCG as its independent compensation consultant. From such date, SBCG has advised, and will continue to advise, the Compensation Committee on the Company’s overall executive compensation program, including executive pay levels and mix, design of our short- and long-term incentive programs, and competitiveness of the Company’s executive compensation. See “Role of the Compensation Committee and Others in Determining Compensation – Compensation Consultant’s Role,” below, for additional information regarding SBCG’s role in our executive compensation program.

Fiscal 2017 Target Total Compensation Opportunities

The table below shows the post-Separation base salary, target annual incentive opportunity (as a percentage of base salary) and target long-term equity incentive opportunity (as a percentage of base salary) for each NEO that the independent members of the Board (for Mr. Steigerwalt) and the Compensation Committee (for all other NEOs) approved in August 2017. The base salary amounts became effective on August 15, 2017. The AVIP payouts, Separation Bonuses and Founders’ Grants values for our NEOs were based on the amounts in the below on the following page.

 


 

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  Compensation Discussion and Analysis

 

 

Name

 

 

Base    

Salary    

 

 

 

Target Annual        
Incentive        

(as % of Base Salary)        

 

 

 

Target Long-Term        
Incentive        

(as % of Base Salary)        

 

 

Target Total        
Compensation        

 

Eric T.

Steigerwalt

  $900,000       200%       500%       $7,200,000        

Anant

Bhalla

  $600,000       140%       175%       $2,490,000        

John L.

Rosenthal

  $550,000       195%       200%       $2,722,500        

Peter M.

Carlson

  $600,000       150%       200%       $2,700,000        

Christine M.

DeBiase

  $575,000       110%       175%       $2,213,750        

The amount of each element of Target Total Compensation for our NEOs was informed by market data regarding senior executive compensation at companies within the Comparator Group, as well as survey data from WTW’s proprietary database of executive compensation at large diversified insurers. In preparing the recommendations, our Human Resources department sought to provide Target Total Compensation to members of the SLMG, including the NEOs, based on Brighthouse’s median pay positioning strategy and individual factors (including criticality of role, skills, experience, and strategic priorities) that may influence positioning relative to the median. The Human Resources department did not specifically target individual elements or overall levels of compensation at a specific percentage of the median. Instead, the Human Resources department considered ranges for each element of compensation because it viewed market data as an approximation for the overall market for a particular position, with ultimate recommendations based on the factors referenced above.

The Compensation Committee expects to periodically assess the competitiveness of our NEOs’ Target Total Compensation against the Comparator Group and periodically review the composition of the Comparator Group to assess whether it remains an appropriate source of comparison.

As shown in the graphs below, our CEO’s Target Total Compensation and the average Target Total Compensation for our other NEOs as set in August 2017 is heavily weighted towards variable, at-risk elements.

 

LOGO

 


 

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Compensation Discussion and Analysis

  Brighthouse Financial, Inc.

 

Elements of Fiscal 2017 Compensation

The elements of Fiscal 2017 compensation are as follows, each as discussed in greater detail below:

 

Component

 

      

Form

 

      

Purpose

 

Base Salary      Cash (Fixed)     

Base salary is intended to provide a fixed amount of compensation for services during the year. Base salary is determined based upon a variety of factors, including scope of responsibilities, individual performance, and market data.

 

Annual Cash Incentive (AVIP)      Cash (Variable)     

AVIP awards, which are annual cash incentive awards, were the primary compensation arrangement for recognizing and rewarding each NEO’s contribution to the Company’s overall performance in calendar year 2017. Payouts were based upon the Company’s achievement of performance goals tied to the Separation and establishment of Brighthouse as an independent publicly-traded company. See discussion below for additional information regarding AVIP.

 

Separation Bonus     

Cash

(Variable);

Non-Recurring

    

Our NEOs and other employees received a Separation Bonus equal to 25% of his or her calendar year 2017 payout under AVIP. The Separation Bonus was based upon the Company’s achievement of critical post-Separation transition milestones. See discussion below for additional information regarding the Separation Bonus.

 

Founders’ Grants     

Equity

(Variable);

Non-Recurring

    

Founders’ Grants were awarded under the Employee Plan to our NEOs and other employees eligible to participate in the Employee Plan in recognition of their leadership through the Separation.

In addition, Founders’ Grants are intended to align our NEOs’ interests with those of our stockholders by providing them with an equity interest in Brighthouse. Founders’ Grants are subject to stockholder approval of the Employee Plan. See discussion below for additional information regarding Founders’ Grants.

 

Temporary Incentive Deferred Compensation      Cash (Variable)     

We provided deferred compensation credits to our NEOs and other employees to compensate them for forfeiting and/or forgoing MetLife equity awards as a result of the Separation. The deferred compensation credits are intended to retain and motivate our NEOs during the process that culminated in the Separation. We are seeking stockholder approval of the material terms of the performance goals for certain credits under the Temporary Plan. See discussion below for additional information about the Temporary Plan.

 

 


 

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Base Salary

Base salary is intended to provide our NEOs a fixed level of compensation for their services during the year. Our Target Total Compensation has been structured so that base salary is the smallest component.

Annual Incentives

Annual incentive awards are the primary compensation arrangement for differentiating and rewarding individual performance during the year. For 2017, annual incentive awards were paid pursuant to the Brighthouse Services, LLC Amended and Restated Annual Variable Incentive Plan. The purpose of AVIP is to align total annual pay with business results, provide competitive levels of pay for performance and make a substantial portion of Target Total Compensation variable based on both Company and individual performance. The amount of the payouts is tied to the Company’s and the employee’s achievement of annual performance goals that contribute to our long-term success without creating an incentive to take excessive risk.

Because 2017 was a year of transformation for the Company, the pre-Separation Board of Directors recognized it would be difficult to establish performance goals for AVIP for the 2017 calendar year that related to traditional performance metrics. In establishing performance goals for 2017, it was necessary to set qualitative goals that could be objectively measured but also not expected to be unduly affected by the Separation. In addition, as further discussed under “Tax Considerations” below, we intended to structure our 2017 AVIP awards to qualify for the then-available performance-based compensation deduction under Section 162(m) of the Code, which limited our ability to make adjustments or reflect changing circumstances. Therefore, the performance goals established for AVIP awards focused on measuring the Company’s overall performance during the pre- and post-Separation portions of calendar year 2017, with a particular emphasis on successfully separating from MetLife and establishing Brighthouse as a standalone public company.

At its first post-Separation meeting in August 2017, the Compensation Committee ratified the performance goals adopted by the pre-Separation Board of Directors.

In order for AVIP funding to occur for 2017, the Company needed to achieve one or more of the pre established performance goals outlined below:

  positive GAAP Operating Earnings (we now refer to Operating Earnings as “Adjusted Earnings”);
  positive GAAP Operating ROE (we now refer to Operating ROE as “Adjusted ROE”);
  improvement in Variable Annuity (“VA”) Target Funding adequacy level;
  combined Risk Based Capital Ratio of at least 400% on an authorized control level;
  positive Value of New Business for Annuity Segment; or
  insurer financial strength ratings of at least “A-” from one or more credit rating agencies.

In January 2018, the Compensation Committee certified that the Company achieved an insurer financial strength rating of A- from one or more credit rating agencies, allowing the AVIP to be funded.

In determining the actual AVIP funding level, the Compensation Committee considered the Company’s performance against the pre-established performance goals above, the Company’s performance overall and the efforts made by our NEOs and employees to effectuate the Separation. Although the Separation ultimately occurred in August 2017, multiple potential Separation dates were considered beginning in 2016. As a consequence of the uncertain timing, there were many internal processes and engagements that were established, periodically paused, and then restarted throughout the period leading up to the Separation.

 


 

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Compensation Discussion and Analysis

  Brighthouse Financial, Inc.

 

In addition, the Compensation Committee considered several other factors that it viewed as integral to the Company’s future success, including developing relationships with key distributors of our products, implementing an overall risk management framework for our business, and establishing and implementing the Brighthouse culture.

With consideration to these factors, our Human Resources department recommended, and the Compensation Committee ultimately approved, funding of the AVIP at 105% of target to reflect both the work required to complete the Separation, but also the financial, operational, and strategic results achieved despite the additional workstreams associated with the transition to a standalone public company.

Separation Bonus

In addition to awards under AVIP, our NEOs and all other administrative (non-wholesaler) employees were eligible to receive a Separation Bonus equal to 25% of each employee’s calendar year 2017 AVIP award based upon the Company’s achievement of performance goals and milestones in connection with the Separation and the establishment of Brighthouse as a standalone public company. The Separation Bonus was awarded to all NEOs based upon the determination by the Head of Compensation and Benefits that Brighthouse achieved each of the following pre-established objectives during the period from the Separation through December 31, 2017:

 

  achieved investor community confidence through an insurer financial strength rating of at least “A-”;
  met at least 90% of expected Transition Services Agreement (“TSA”) transition targets scheduled for 2017;
  implemented separate Human Resources and payroll systems by January 1, 2018; and
  implemented key risk mitigation measures.

Fiscal 2017 AVIP and Separation Bonus Decisions for Our NEOs

Prior to the Separation, Mr. Steigerwalt and members of our Human Resources department established general performance goals that would be used to assess Mr. Steigerwalt’s performance during calendar year 2017, and in particular, Fiscal 2017. These goals were reviewed and ratified by our Compensation Committee in November 2017 following the Separation. For Fiscal 2017, Mr. Steigerwalt’s goals were a mix of strategic and operational objectives that were intended to assess Mr. Steigerwalt’s performance in leading the Company through the Separation and establishing Brighthouse as an independent public company.

In November, the Compensation Committee ratified the following 2017 calendar year goals for Mr. Steigerwalt:

 

  separate and stabilize Brighthouse as an independent company;
  increase relevance within value-creating distribution channels;
  grow book value;
  oversee implementation of Brighthouse’s risk management framework;
  establish the Brighthouse culture and core values; and
  complete recruitment and hiring of senior leadership team.

In February 2018, the Compensation Committee and the independent members of our Board considered the Company’s performance overall, Mr. Steigerwalt’s performance against the performance goals listed above, as well as a self-assessment of accomplishments provided by Mr. Steigerwalt. In completing the recruitment of his SLMG, Mr. Steigerwalt was able to drive the Company toward the following accomplishments:

 


 

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Compensation Discussion and Analysis

 

  Successfully separated and established Brighthouse as an independent public company;
  Increased relevance within value-creating distribution channels, despite a Fitch ratings downgrade and other inherent challenges associated with the Separation, during which period annuity sales outpaced planned target by approximately 11%;
  Protected and grew book value to approximately $12.4 billion (excluding accumulated other comprehensive income, or AOCI), by increased annuity sales, maintaining positive adjusted earnings, and modifying the hedging program to enhance downside protection;
  Implemented a risk management framework; and
  Established Brighthouse culture and values, by implementing ongoing coaching and feedback training programs, launching a performance management program, and consistent communication efforts to substantiate our culture and values across the organization.

Based on the foregoing achievements, the Compensation Committee recommended, and the independent members of the Board approved, the following AVIP and Separation Bonus payments to Mr. Steigerwalt:

 

Name  

 

    AVIP Payout    

Percentage

 

 

    Calendar Year 2017    
AVIP Payment

 

 

    Fiscal 2017 AVIP    
Payment(1)

 

 

    Separation Bonus    
Payment(1)

Eric T.

Steigerwalt

  105%   $1,890,000   $771,534   $472,500

 

(1) This amount represents the portion of Mr. Steigerwalt’s AVIP payout earned in respect of service during Fiscal 2017 (i.e., the period post-Separation). The Separation bonus represents 25% of Mr. Steigerwalt’s calendar year 2017 AVIP payout. See the footnotes and narrative disclosure accompanying the Summary Compensation Table for additional information about the AVIP payment made to Mr. Steigerwalt.

Beginning in 2018, the Compensation Committee with SBCG’s input and assistance expects to establish qualitative and quantitative goals against which Mr. Steigerwalt’s performance will be assessed.

Also in February 2018, the Compensation Committee considered the overall performance of each of the other NEOs, including against their 2017 performance goals referenced below. Mr. Steigerwalt also provided the Compensation Committee with his assessment of the NEOs’ 2017 performance, including the material performance highlights summarized below.

 

 

Anant Bhalla, Executive Vice President and Chief Financial Officer:

 

2017 Goals

 

•  Execute on separation from MetLife and establishment of Brighthouse;

•  Establish and run standalone finance processes for Brighthouse;

•  Build new capabilities; and

•  Embed the Brighthouse culture and develop talent.

  

2017 Performance Highlights

 

•  Demonstrated strong financial skills, analytics, and innovative financial modeling that supported the successful separation effort;

•  Effectively managed the challenges that rose from the Separation, including regulatory and reserve matters; and

•  Drove the establishment of a new hedging strategy and played an important role in our successful initial debt offering.

 


 

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Compensation Discussion and Analysis

  Brighthouse Financial, Inc.

 

 

John L. Rosenthal, Executive Vice President and Chief Investment Officer:

 

2017 Goals

  Establish robust asset management capability;
  Deliver foundational components of the target operating model;
  Partner with finance and product to create an effective asset liability management and pricing process;
  Capital preservation;
  Partner with risk and finance functions;
  Ensure appropriate risk-based returns; and
  Build a cohesive investments department.

 

2017 Performance Highlights

  Established an appropriate Investments department structure and determined where to build versus outsource;
  Effectively partnered with Treasury on VA hedging strategy; and
  Made strategic asset allocation decisions for Brighthouse and continues to oversee the Asset Manager selection process.
 

 

 

Peter M. Carlson, Executive Vice President and Chief Operating Officer:

 

2017 Goals

  Serve as the primary liaison with MetLife Senior Management for post-Separation activities;
  Serve as Lead Director of the New England Life Insurance Company and Brighthouse Life Insurance Company of New York subsidiary boards;
  Establish solid processes for all critical finance functions;
  Define an efficient and effective operating model to oversee operations through MetLife and outsourced partners;
  Ensure compliance with the Brighthouse Board process; and
  Reinforce Brighthouse cultural values through the Chief Operating Officer organization.

2017 Performance Highlights

  Provided strategic oversight and leadership guidance over the Finance department;
  Spearheaded partnering effort with MetLife and Mr. Steigerwalt on oversight of the multiple work streams involved in disaffiliation; and
  Played an integral role in TSA negotiation and management to facilitate Separation from MetLife.
 

 

 

Christine M. DeBiase, Executive Vice President, General Counsel and Corporate Secretary (during 2017):

 

2017 Goals

  Establish the Law Group;
  Develop and temporarily lead the Human Resource function;
  Advise and facilitate the legal separation from MetLife;
  Advise on stabilizing and establishing an independent public company;
  Embed the Brighthouse culture and develop Law Group associates; and
  Support the product development through legal advice and government relations activities.

2017 Performance Highlights

  Strong collaboration with the senior leadership team during the Separation;
  Assumed management of Human Resources in addition to her other groups during a critical time for the Company: Legal, Compliance, Office of Corporate Secretary, Corporate Communications, and Government Relations; and
  Proactive leadership in the General Counsel capacity throughout the Separation.
 

 


 

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Brighthouse Financial, Inc.  

Compensation Discussion and Analysis

 

The Compensation Committee considered the foregoing accomplishments and, based on Mr. Steigerwalt’s recommendations, approved the following AVIP and Separation Bonus payments to our other NEOs:

 

Name

 

 

 

AVIP Payout      
Percentage      

 

 

Calendar Year 2017      

AVIP Payment      

 

 

Fiscal 2017 AVIP      
Payment (1)      

 

 

Separation Bonus      
Payment (1)      

 

 

Anant Bhalla

 

 

 

100%    

 

 

 

   $840,000    

 

 

 

$342,904    

 

 

 

$210,000    

 

 

John L. Rosenthal

 

 

 

105%    

 

 

 

$1,126,000    

 

 

 

$459,655    

 

 

 

$281,500    

 

 

Peter M. Carlson

 

 

 

  99%    

 

 

 

   $891,000    

 

 

 

$363,723    

 

 

 

$222,750    

 

 

Christine M. DeBiase

 

 

 

112%    

 

 

 

   $709,000    

 

 

 

$289,427    

 

 

 

$177,250    

 

 

* The amounts in this column represent the portion of each NEO’s AVIP payout in respect of service during Fiscal 2017 (i.e., the period post-Separation). The Separation Bonus represents 25% of each NEO’s calendar year 2017 AVIP payout. See the footnotes and narrative disclosure accompanying the Summary Compensation Table for additional information about the AVIP payment made to the NEOs.

The AVIP and Separation Bonus amounts paid to all of our NEOs in respect of Fiscal 2017 are reported in the “Non-Equity Incentive Compensation Plan” column of the “Summary Compensation Table.”

Founders’ Grants

In Fiscal 2017, each NEO received a Founders’ Grant in the form of RSUs under the Employee Plan. The Founders’ Grants were authorized on August 9, 2017. The number of RSUs awarded was based on the amount of value being delivered, divided by the closing price of the Company’s common stock on September 8, 2017 (the first Friday after one month of public trading), which was $54.54. The September 8, 2017 award date was established at the August 9, 2017 meeting and was determined to be the appropriate award date for the Founders’ Grants given the uncertainty of our stock performance immediately following the Separation. Founders’ Grants are subject to and conditioned upon stockholder approval of the Employee Plan (see “Proposal 5 - Approval of the Brighthouse Financial, Inc. 2017 Stock and Incentive Compensation Plan”).

The Compensation Committee determined that it was appropriate to award Founders’ Grants in order to both align the interests of our NEOs with those of our stockholders, and to reward NEOs and other employees for their contributions toward the successful Separation and establishment of Brighthouse as an independent public company. The Founders’ Grant awarded to each NEO is equal to two times the NEO’s target long-term equity incentive opportunity approved for each NEO in August 2017. Awarding Founders’ Grants with a value equal to two-times each NEO’s target annual long-term incentive opportunity was intended to provide our NEOs with the ability to acquire a substantial ownership interest in Brighthouse, while also delivering a substantial amount of Fiscal 2017 Total Compensation in the form of stock-based incentives.

The table below shows the value of each NEO’s Founders’ Grant approved in August 2017 as well as the number of the RSUs into which the value was converted based on the closing price of the Company’s common stock on September 8, 2017.

 


 

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Compensation Discussion and Analysis   Brighthouse Financial, Inc.

 

 

 

Name

 

 

 

    Founders’ Grant Value    

 

 

 

    Number of RSUs    

 

Eric T. Steigerwalt

 

 

$9,000,000

 

 

165,016

 

Anant Bhalla

 

 

$2,100,000

 

 

  38,503

 

John L. Rosenthal

 

 

$2,200,000

 

 

  40,337

 

Peter M. Carlson

 

 

$2,400,000

 

 

  44,004

 

Christine M. DeBiase

 

 

$2,012,500

 

 

  36,899

 

Founders’ Grants awarded to our NEOs are subject to the Company’s achievement of one or more performance criteria during the performance period that began on September 8, 2017 and ends on September 30, 2018 (the “Performance Period”). The performance criteria, which are listed below, were established in order to qualify the Founders’ Grants as performance-based compensation under Section 162(m) of the Code.

  Improvement in the Company’s Statutory Surplus position over the Performance Period;
  Combined Risk Based Capital ratio of at least 400% as of the end of the Performance Period on an Authorized Control Level;
  Positive GAAP Operating ROE as of the end of the Performance Period;
  Insurer Financial Strength Rating of at least ‘A-’ from one or more credit rating agencies as of the end of the Performance Period;
  Positive Value of New Business sold during the Performance Period for the annuity segment of the Company measured as of the end of the Performance Period; and
  Variable Annuity funding at a level of CTE 95 or above as of the end of the Performance Period.

In the event we achieve one or more of the foregoing performance goals, and subject further to stockholder approval of the Employee Plan, the RSUs subject to the Founders’ Grants will vest on September 30, 2018.

Founders’ Grants are not reported in the Summary Compensation Table, Grants of Plan-Based Awards Table or Outstanding Equity Awards at Fiscal Year End Table because Founders’ Grants are subject to stockholder approval of the Employee Plan. If stockholders approve the Employee Plan, the Founders’ Grants will be reported under Securities and Exchange Commission rules as compensation to our NEOs for the fiscal year ending December 31, 2018. However, Founders’ Grants were intended to be a one-time award and were a central element of the Total Compensation delivered to our NEOs in Fiscal 2017.

Temporary Incentive Deferred Compensation Plan

Prior to the Separation, many of our employees, including all of our NEOs, were employees of an affiliate of MetLife and participated in benefit and compensation programs sponsored by MetLife or an affiliate. Certain employees, including our NEOs, received equity awards from MetLife during their employment.

In anticipation of the Separation, certain employees, including all of our NEOs, who had been eligible to receive equity awards from MetLife, ceased participating in MetLife’s equity compensation plan as of December 31, 2016 and, therefore, did not receive long-term equity awards from MetLife during 2017. In addition, certain employees, including some of our NEOs, forfeited their outstanding and unvested MetLife equity awards upon the Separation because these employees did not satisfy certain age and service requirements under MetLife’s equity compensation plan that would have allowed such employees’ outstanding equity awards to continue to vest.

 


 

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As a result of the foregoing, and in order to attract, retain and motivate our employees who forfeited MetLife equity awards and/or did not receive such awards in 2017, the Temporary Plan was established prior to the Separation. The Temporary Plan allows us to provide affected employees, including our NEOs, cash-based deferred compensation credits in respect of forgone 2017 MetLife equity awards and forfeited MetLife equity awards. Credits for forgone awards under the Temporary Plan were established at the level consistent with the equity award the recipient would have been eligible to receive from MetLife. Deferred compensation credited in respect of forgone 2017 MetLife equity awards vests over three years from the grant date at a rate of one-third per year. Deferred compensation credited in respect of forfeited MetLife equity is subject to the same vesting schedule as the forfeited award. Credits in respect of forfeited RSUs vest one-third per year from the date of grant by MetLife, while credits in respect of forfeited stock options and forfeited performance shares cliff vest on the third anniversary of the date of grant by MetLife. Amounts credited under the Temporary Plan earn interest based upon the 120%AFR/Long Term/Monthly rate, which is reset effective December 1. For calendar year 2017, including Fiscal 2017, amounts under the Temporary Plan were credited with interest at a rate of 3.2%. In the event of a change of control, no amendments can be made to the Temporary Plan after a change of control that would decrease the amount of deferred compensation credited to participants under the Temporary Plan as of the date of the change of control or modify the time or form of distributions under the Temporary Plan.

The table below shows the amount of each type of deferred compensation credited to each NEO under the Temporary Plan:

 

Name

 

 

Credit in    

Lieu of 2017    
MetLife Equity    
Award    

 

 

 

Credit for

Forfeited

    MetLife Equity    

Awards –
Performance
Shares

 

 

Credit for    
Forfeited    
MetLife Equity    
Awards – RSUs    

 

 

Credit for    
Forfeited    
MetLife Equity

Awards –

Stock Options    

 

 

Total    

Temporary    
Plan Credits    

 

Eric T. Steigerwalt

 

     

 

$1,200,000      

 

 

     

 

$-        

 

 

     

 

$-        

 

 

     

 

$-        

 

 

     

 

$1,200,000      

 

 

Anant Bhalla

 

     

 

$368,000      

 

 

     

 

$300,000        

 

 

     

 

$150,000        

 

 

     

 

$-        

 

 

     

 

$818,000      

 

 

John L. Rosenthal

 

     

 

$700,200      

 

 

     

 

$-        

 

 

     

 

$-        

 

 

     

 

$-        

 

 

     

 

$700,200      

 

 

Peter M. Carlson

 

     

 

$-      

 

 

     

 

$1,187,500        

 

 

     

 

$398,000        

 

 

     

 

$507,373        

 

 

     

 

$2,092,873      

 

 

Christine M. DeBiase

 

     

 

$307,100      

 

 

     

 

$-        

 

 

     

 

$-        

 

 

     

 

$-        

 

 

     

 

$307,100      

 

 

Awards to our NEOs under the Temporary Plan are further subject to the achievement of one or more performance goals, which were established in order to qualify such awards as performance-based compensation under Section 162(m) of the Code. For the performance period ended December 31, 2017, the performance goals were:

  Positive Operating GAAP Earnings;
  Positive GAAP Operating ROE;
  Improvement in Variable Annuity Target Funding adequacy level;
  Combined Risk Based Capital Ratio of at least 400% on an authorized control level;

 


 

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  Positive Value of New Business for Annuity Segment;
  Termination of at least 20% of TSAs with MetLife measured by expenses; and
  Insurer financial strength ratings of at least “A-” from one or more credit rating agencies.

In January 2018, the Compensation Committee certified that the Company maintained an insurer financial strength rating of at least A- from one or more credit rating agencies for the 2017 performance period. As a result, we made payments to our NEOs under the Temporary Plan in respect of Fiscal 2017. The payments in respect of Fiscal 2017 made to our NEOs under the Temporary Plan are reported in the “Non-Equity Incentive Compensation Plan” column of the “Summary Compensation Table.” In addition, payments under the Temporary Plan may be made to our NEOs in connection with certain terminations of employment. See the Potential Payments Upon Termination or Change in Control table and accompanying narrative disclosure below for additional information.

We are seeking stockholder approval of the material terms of the performance goals under the Temporary Plan for credits to our NEOs under the Temporary Plan paid after our annual meeting of stockholders in 2019 (see Proposal 7 - Approval of the Material Terms of the Performance Goals under the Brighthouse Services, LLC Temporary Incentive Deferred Compensation Plan).

Role of the Compensation Committee and Others in Determining Compensation

Compensation Committee’s Role

The Compensation Committee is responsible for establishing and implementing our executive compensation philosophy. Pursuant to its written charter, the responsibilities of the Compensation Committee include, among other things:

 

  Assisting the Board in fulfilling its responsibility to oversee the development and administration of compensation programs for our executives and other employees;
  Approving the goals and objectives relevant to our CEO’s compensation, evaluating at least annually our CEO’s performance in light of such goals and objectives, and endorsing, for approval by the Independent Directors, the CEO’s annual compensation based on such evaluation;
  Reviewing and approving on an annual basis the compensation of the other executive officers of the Company (as determined by the Compensation Committee);
  Reviewing and approving our equity and non-equity incentive compensation plans and arrangements, and where appropriate or required, recommending such plans and arrangements to the Board for approval, including by stockholders of the Company; and
  Reviewing incentive compensation arrangements to confirm that incentive pay does not encourage unnecessary risk-taking and reviewing and discussing the relationship between risk management policies and practices, corporate strategy and senior executive compensation.

As discussed above, in November 2017, the Compensation Committee retained SBCG as its independent compensation consultant. The Compensation Committee assessed SBCG’s independence in light of SEC standards and determined that no conflicts of interest or independence concerns exist. SBCG reports directly to the Compensation Committee, and the Compensation Committee has the sole authority to approve the fees and other terms of the retention of SBCG as its independent compensation consultant. SBCG is expected to attend all Compensation Committee meetings and to provide advice to the Compensation Committee on all aspects of the Company’s executive compensation program, including the form, mix and amount of Target Total Compensation.

Management’s Role

As discussed above, prior to the Separation, members of our Human Resources department worked

 


 

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with the Company’s compensation consultant, WTW, to gather and review compensation information from companies within the Comparator Group, as well as data from WTW’s proprietary diversified insurance survey database. Based on information from WTW, the Human Resources department prepared compensation recommendations for each member of the SLMG, including each NEO. Given that the Separation occurred more than half way through 2017, and also due to the fact that we did not have a Compensation Committee comprised of Independent Directors until the Separation, our Human Resources department, with assistance from WTW, was primarily responsible for preparing Fiscal 2017 compensation recommendations for all members of the SLMG, including each NEO. The compensation recommendations were provided to the members of our Compensation Committee in advance of its first post-Separation meeting in August 2017, and the Compensation Committee ultimately adopted the recommendations at its first post-Separation meeting in August 2017.

As part of our year-end compensation process that began in December 2017, our Chief Executive Officer met with each of our other NEOs and members of the SLMG to review performance during calendar year 2017. Based on the CEO’s assessment of each of our other NEO’s performance, he provided recommendations to the Compensation Committee as to the amount and form of the compensation of our NEOs other than himself.

Compensation Consultant’s Role

Under its written charter, the Compensation Committee has the authority to retain advisers to assist it in the discharge of its duties. Since its retention in November 2017 shortly after the Separation, SBCG has attended Compensation Committee meetings and assisted the Compensation Committee in its implementation of our compensation principles and practices. SBCG has advised the Compensation Committee on the development of the Company’s 2018 short- and long-term incentive compensation arrangements, including the short- and long-term incentive plan metrics for 2018 and the forms of equity-based incentives awarded to members of the SLMG in 2018. See “2018 Compensation-Setting Process – 2018 Compensation Decisions,” below, for additional information.

In 2017, our Human Resources department retained WTW to provide assistance related to our executive compensation program that was implemented in August 2017 in connection with the Separation. It is expected that WTW will continue to advise our Human Resources department on matters related to our executive compensation program. Details of WTW’s role are set forth above under the heading “Management’s Role.”

Section 3 – The Brighthouse Vision and Strategy – Establishing the 2018 Executive Compensation Program

Brighthouse is a focused provider of annuities and life insurance products. Our mission is to help people achieve financial security. The products that we offer, particularly annuities, have historically been considered complex and costly. We intend to achieve our mission by offering simpler, more transparent, and valuable protection solutions. Our business goal is to build a focused, best-in-cost culture that creates value. We believe that by embedding best-in-cost into our culture at the outset of our existence as an independent public company, we will drive value for all our stakeholders, including our stockholders, community, employees, insurance customers, and our distribution partners.

On February 2, 2018, the Board and senior management, including our NEOs, engaged in constructive dialogue and feedback regarding our strategic and financial plan. The topics discussed covered all aspects of our business, including our mission and vision, our best-in-cost culture, the competitive

 


 

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landscape, our sales strategy and growth projections, our annuity and life insurance product strategy, our business process outsourcing strategy, our path to expense optimization, our capital return goals, and our financial plan through 2020 in a variety of economic scenarios.

As a result of these strategic sessions, on February 2, 2018, the Compensation Committee focused on establishing performance metrics that aligned all aspects of the Company’s strategy: sales, expense management, and cashflow. Adjusted Statutory Earnings was deemed an appropriate 2018 short-term incentive (“STI”) award metric that aligns to our ability as an independent company to return cash to stockholders. These conversations became the basis for establishing our 2018 compensation program. On February 16, 2018, the Compensation Committee approved the 2018 compensation program that applies to the NEOs and the SLMG. The 2018 compensation program will be discussed in detail in the proxy statement related to the 2019 annual meeting of stockholders. Due to the mid-year timing of the Separation, the 2018 compensation program is the first compensation program for Brighthouse that relates to a full annual performance period(s) as an independent public company. Accordingly, we believe it is appropriate to preview the 2018 compensation program and articulate the alignment to the Company’s strategic and financial plan.

2018 Short-Term Incentive Metrics

The Compensation Committee approved metrics for the 2018 STI award that directly align with Brighthouse’s strategic plans. This is consistent with our pay-for-performance philosophy and will ensure that the NEOs are compensated relative to the achievement of the business goals set forth in the strategic plan. A brief summary of each of the three equally-weighted metrics and the rationale for selecting each follow.

 

 

2018 STI Metrics            

 

      

 

Weighting            

 

      

 

Performance Link

 

TSA Exits      1/3rd     

Exiting our TSAs with MetLife is a key driver in 2018 of establishing a cost-competitive company. We also believe that TSA Exits in 2018 represent a key directional indicator for reducing corporate expenses in 2019 and 2020.

 

     

Annuity Sales

 

    

1/3rd

 

    

Annuity sales are vital to our growth prospects and franchise stability.

 

     

Adjusted Statutory Earnings

 

    

1/3rd

 

    

Adjusted Statutory Earnings measure Brighthouse’s ability to pay future distributions and are reflective of whether our hedging program functions as intended. As an STI metric, it also reflects factors that the broad population of STI participants are most able to directly impact and influence.

 

Each 2018 STI metric has a threshold (50%), target (100%) and maximum (150%) level of performance. Short-term incentive plan payouts, if any, will be based upon the Company’s achievement of the metrics specified above, as well as qualitative factors the Compensation Committee deems appropriate, including each SLMG member’s accomplishments during 2018. We believe the underlying goals for each STI metric are appropriately rigorous. If earned, STI awards for 2018 will be paid in calendar year 2019.

2018 Long-Term Incentive Awards

In February 2018, the independent members of the Board, on the recommendation of the Compensation

 


 

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Committee, approved a long-term equity incentive (“LTI”) award for Mr. Steigerwalt, and the Compensation Committee approved LTI awards for our other NEOs. The table below shows the breakdown of award vehicles chosen for 2018 long-term equity incentive awards.

 

     

Type of Award

 

     

Percentage of Total LTI Value

 

     

Vesting

 

Performance Share

Units (“PSUs”)

    1/3rd    

Cliff vest after year 3, subject to achievement of pre-established performance goals over the 2018-2020 performance period

 

Nonqualified Stock

Options

 

    1/3rd    

Ratable vesting over 3 years (1/3rd vests at each anniversary; 10-year term; exercise price is closing price on grant date)

 

Restricted Stock

Units

    1/3rd     Ratable vesting over 3 years (1/3rd vests at each anniversary)

The decision to use PSUs, and the mix of PSUs relative to the other long-term equity elements, was carefully considered by the Compensation Committee in light of the challenges of setting long-term performance goals as a new public company. The Compensation Committee will consider a heavier weighting of PSUs in future awards as the Company matures and gains historical data that makes long-term goal setting more precise. The 2018 long-term equity incentive awards are subject to stockholder approval of the Employee Plan, which will be presented at the Annual Meeting.

The 2018 PSUs measure Brighthouse’s performance over the 2018-2020 performance period. The actual number of shares issued, if any, at the end of the performance period will depend on the Company’s actual performance. We believe the underlying goals for each PSU metric are appropriately rigorous. A brief summary of the PSU metrics, the weighting and the rationale for each follow.

 

     

2018 PSU Metrics

 

     

Weighting

 

     

Performance Link

 

Corporate Expense

Reduction

    60%    

Expense reduction by 2020 aligns with Brighthouse’s outlook, as previously disclosed in public filings. As a result of Brighthouse’s mid-year separation from MetLife, the comparative measurement period is July 1, 2017 – June 30, 2018 versus annualized expenses from July 1, 2020 – December 31, 2020.

 

Capital Return     40%    

Capital returns are a key metric evaluated by stockholders.

Capital return is often the best way to demonstrate alignment to stockholders’ interests, especially if the stock trades below book value. Return on stockholders’ capital, in the form of dividends or stock buybacks, for example, would demonstrate such an alignment, and goals will align with stockholder communications.

 


 

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Compensation Discussion and Analysis

  Brighthouse Financial, Inc.

 

2018 Target Total Compensation Opportunities

With the exception of the changes described below to Ms. DeBiase’s Target Total Compensation opportunity, no adjustments were made to the Target Total Compensation opportunities of the CEO or any of the other NEOs. In February 2018, Ms. DeBiase was named the Company’s Chief Administrative Officer, in addition to her position as the Company’s General Counsel. In connection with Ms. DeBiase’s expanded role as the Chief Administrative Officer, the Compensation Committee adjusted Ms. DeBiase’s base salary to $600,000 from $575,000 and also increased Ms. DeBiase’s target annual incentive opportunity to 120% of her base salary from 110%. Her long-term incentive opportunity was unchanged.

Section 4 – Additional Compensation Practices and Policies

Stock Ownership and Retention Guidelines

We have implemented stock ownership and retention guidelines for members of the SLMG, including our NEOs, effective January 1, 2018. The guidelines are intended to align the interests of the SLMG members with those of our stockholders by requiring the executives subject to the guidelines to obtain and maintain significant ownership in our stock. The ownership guidelines are set as a multiple of the executive’s base salary as in effect on January 1, 2018, which is then converted into a number of shares of common stock based upon the closing price of our common stock on January 2, 2018, which was $57.67. The ownership levels applicable to our NEOs are as follows.

 

 

            Name            

 

 

 

    Multiple of Base Salary    

 

 

 

    Number of Shares    

 

Eric T. Steigerwalt

 

 

6x

 

 

93,637

 

Anant Bhalla

 

 

3x

 

 

31,213

 

John L. Rosenthal

 

 

3x

 

 

28,612

 

Peter M. Carlson

 

 

3x

 

 

31,213

 

Christine M. DeBiase

 

 

3x

 

 

29,912

 

Executives subject to the guidelines must retain at least 50% of the net after-tax shares acquired from settlement or exercise of stock-based awards until the applicable ownership level is achieved. Executives are expected to meet the applicable stock ownership guideline within five years of becoming subject to the guidelines. Shares that are included in determining an executive’s stock ownership level include shares owned outright (or jointly with a spouse or in a trust over which an executive has investment control), net shares received from exercise and/or settlement of stock-based awards under the Employee Plan, and shares acquired pursuant to the Company’s Employee Stock Purchase Plan. Shares underlying unvested equity awards are not included in determining an executive’s ownership level.

Benefit Plans

Brighthouse Savings Plan and Auxiliary Savings Plan

Our employees, including our NEOs, are eligible to participate in the Brighthouse Services, LLC Savings Plan and Trust (the “Brighthouse Savings Plan”), which is a tax-qualified 401(k) plan. In addition, certain of our employees, including our NEOs, are eligible to participate in the Brighthouse Services,

 


 

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LLC Auxiliary Savings Plan (the “Auxiliary Plan”). Participants in the Auxiliary Plan receive company matching and profit sharing contributions that would have been made to the Brighthouse Savings Plan except that the participant’s compensation exceeds certain tax qualified plan limits imposed under the Code. Employees who elect to participate in the Brighthouse Savings Plan and who also elect to participate in the Brighthouse Services, LLC Voluntary Deferred Compensation Plan (“VDCP”) will be eligible to receive matching contributions in the Auxiliary Plan on amounts deferred into the VDCP equal to the amount of matching contributions that would have been made to the Brighthouse Savings Plan. As explained below, the VDCP was not in effect during Fiscal 2017. For the Company matching and profit sharing contributions made under the Brighthouse Savings Plan and Auxiliary Plan in respect of Fiscal 2017, see the “All Other Compensation” column in the Summary Compensation Table, below. Company matching and profit sharing contributions in the Brighthouse Savings Plan and the Auxiliary Plan become 100% vested after the participant completes two years of service. Under the Auxiliary Plan, in the event of a change of control, all participants will be fully vested in all contributions, including earnings, under the Auxiliary Plan. In addition, no amendments can be made to the Auxiliary Plan after a change of control that would decrease the value of benefits accrued to any participant under the Auxiliary Plan as of the date of the change of control or change the time or form of distribution under the Auxiliary Plan to eliminate lump sum distributions or further defer the time of payment.

Voluntary Deferred Compensation Plan

In December 2017, Brighthouse Services adopted the VDCP, which is a non-qualified deferred compensation plan. Effective January 1, 2018, the VDCP allows a select group of management the opportunity to defer between 10% and 50% of eligible base salary and from 10% to 80% of STI awards. Amounts deferred are notionally invested in investment tracking funds selected by the participant. Participants can elect to have deferred compensation accounts paid, or begin to be paid, in a specific year, which cannot be earlier than May of the third calendar year following the year the compensation was earned, and may elect to receive distributions in either a single lump sum or up to 15 annual installments. In the event of a participant’s death before distributions commence or are completed, the participant’s account balance will be paid in a single lump sum to the participant’s beneficiary. In the event of a change of control, no amendments can be made to the VDCP after a change of control that would decrease the amount in a participant’s deferred compensation account accrued under the VDCP as of the date of the change of control or modify the time or form of distributions under the VDCP.

Termination and Change in Control Benefits

As of December 31, 2017, we had no employment agreements or offer letters with any of our NEOs that provide for severance or change in control benefits. As we previously disclosed, we intend to provide severance pay and related benefits to employees discontinued due to job elimination in order to encourage a focus on transition to other opportunities and allow us to obtain a release of employment-related claims and to adopt change-in-control arrangements in order to retain senior executive officers while a transaction is pending and encourage them to act in the best interests of stockholders, promoting maximum stockholder value without impinging on flexibility to engage in a transaction.

 


 

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Compensation Discussion and Analysis

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During Fiscal 2017, we did not have any outstanding equity awards because we did not have a stockholder-approved equity compensation plan. We are seeking stockholder approval of the Employee Plan (see “Proposal 5 – Approval of the Brighthouse Financial, Inc. 2017 Stock and Incentive Compensation Plan”). Awards under the Employee Plan may become payable in the event of an NEO’s termination, retirement, or death, or upon the occurrence of a change in control of Brighthouse. Under the Auxiliary Plan, in the event of a change of control, all participants will be fully vested in all contributions, including earnings, under the Auxiliary Plan. As of December 31, 2017, all of our NEOs were fully vested in their account balances under the Auxiliary Plan. See the Fiscal 2017 Nonqualified Deferred Compensation table on page 67 for each NEO’s aggregate account balance as of December 31, 2017.

Certain amounts credited to our NEOs under the Temporary Plan may vest and become payable in the event of the NEO’s death or termination on or following the date the NEO satisfies the “rule of 65” (generally, an age and service requirement). See the “Potential Payments Upon Termination or Change in Control” table, below, for additional information about amounts that would be payable to our NEOs under the Temporary Plan.

Stock-Based Award Timing Practices

Stock-based long-term incentive awards are expected to be granted on an annual basis to our executive officers, including the NEOs, in connection with Board and Compensation Committee meetings occurring in the first quarter of each year, although stock-based awards may be granted from time-to-time in connection with the hiring or change in responsibilities of an executive officer.

Tax Deductibility of Executive Compensation

For 2017, Section 162(m) of the Code placed a $1 million limit on the compensation that could be deducted for our chief executive officer and next three most highly compensated NEOs, except for compensation that qualified as performance-based compensation under Section 162(m). Certain elements of the compensation we provided in 2017 were intended to qualify for the performance-based compensation exception to Section 162(m), although the Compensation Committee retained discretion to pay non-deductible compensation if it determined doing so was in our best interest. The Tax Cuts and Jobs Act (“TCJA”), which was signed into law on December 22, 2017, eliminated the exception for performance based compensation under Section 162(m), although the TCJA does include a provision that grandfathers certain binding contracts in effect on November 2, 2017 that are not materially modified after that date. In light of the change in law, beginning in 2018 any compensation paid to our NEOs in excess of $1 million will not be deductible, except with respect to such grandfathered contracts.

Hedging and Pledging Prohibition

Our insider trading policy prohibits all Directors and employees, including our NEOs, from engaging in short sales, hedging, and trading in put and call options, with respect to the Company’s securities. The insider trading policy also prohibits Directors and employees, including our NEOs, from pledging Company securities.

 


 

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Clawback Policy

We expect to adopt a performance-based compensation recoupment policy that would allow us to seek recoupment of performance-based compensation if an employee engages in or contributes to fraudulent or other wrongful conduct that causes financial or reputational harm to Brighthouse or its affiliates. All awards granted under our Employee Plan are subject to any performance-based compensation recoupment policy in effect from time to time.

Risk Assessment

At its March 2018 meeting, the Compensation Committee reviewed the results of a 2017 annual compensation risk assessment prepared by SBCG and developed in consultation with management. Such assessment highlighted the inherently risk-balancing and risk-mitigating nature of the Company’s largely discretionary compensation program in 2017, other risk-mitigating features of the compensation program (such as caps on incentive payouts and balance in pay mix), and the associated compensation governance policies and Board-level controls in place to manage compensation-related risk. Following a discussion of such assessment and findings, the Compensation Committee concluded that the risks arising from the Company’s compensation programs are not reasonably likely to have a material adverse impact on the Company.

Compensation Committee Report

The Compensation Committee has reviewed the Compensation Discussion and Analysis and discussed the CD&A with management. Based on the Compensation Committee’s review and discussion with management, the Compensation Committee recommended to the Board that the CD&A be included in the Company’s annual report on Form 10-K and in the Company’s Proxy Statement.

This report is provided by the following independent members of the Board, who comprise the Compensation Committee:

Compensation Committee

Diane E. Offereins (Chair)

Irene Chang Britt

Paul M. Wetzel

 


 

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Fiscal 2017 Compensation Tables

  Brighthouse Financial, Inc.

 

Fiscal 2017

Compensation Tables

The information reported in the Summary Compensation Table is for the period from August 5, 2017, which is the first day following the Separation, to December 31, 2017. We refer to this period as “Fiscal 2017.” The footnotes to the Summary Compensation Table and the accompanying narrative disclosure discuss the manner in which the Fiscal 2017 compensation for our NEOs was calculated.

Fiscal 2017 Summary Compensation Table

 

         

Name and Title

 

 

Year    

 

 

Salary (1)    

 

 

Non-Equity    
Incentive Plan    
Compensation    

(2), (3)    

 

 

All Other    
Compensation (4)    

 

 

Total    

 

Eric T. Steigerwalt

President and Chief

Executive Officer

 

  2017       $349,049       $1,507,192       $115,853       $1,972,094    

Anant Bhalla

Executive Vice President

and Chief Financial Officer

 

  2017       $233,641       $688,444       $63,753       $985,838    

John L. Rosenthal

Executive Vice President

and Chief Investment Officer

 

  2017       $218,109       $894,708       $75,297       $1,188,114    

Peter M. Carlson

Executive Vice President

and Chief Operating Officer

 

  2017       $237,862       $771,139       $55,044       $1,064,045    

Christine M. DeBiase

Executive Vice President,

General Counsel and

Corporate Secretary*

 

  2017       $224,232       $534,024       $50,041       $808,297    

 

* Effective February 2, 2018, Ms. DeBiase’s title was changed to Executive Vice President, Chief Administrative Officer and General Counsel. As of that date, Ms. DeBiase ceased serving as the Company’s Corporate Secretary.

 

(1) The amounts in this column report the actual amount of base salary paid to each NEO during Fiscal 2017. Each NEO’s base salary as approved on August 9, 2017 is $900,000 for Mr. Steigerwalt, $600,000 for Mr. Bhalla, $550,000 for Mr. Rosenthal, $600,000 for Mr. Carlson, and $575,000 for Ms. DeBiase.

 


 

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(2) The amount in this column includes (i) the portion of each NEO’s award under the Brighthouse Services, LLC Amended and Restated Annual Variable Incentive Plan earned in respect of each NEO’s service to Brighthouse during Fiscal 2017, (ii) the Separation Bonus paid to each NEO, and (iii) the pro-rated portion of the aggregate payments, including interest, received by each NEO under the Temporary Plan in respect of service to Brighthouse during Fiscal 2017. The terms of AVIP and the Separation Bonus are summarized under “Compensation Discussion and Analysis – Elements of Compensation – Annual Variable Incentive Plan” and “Separation Bonus” above. The terms of the Temporary Plan are summarized below in the narrative disclosure accompanying the “Grants of Plan-Based Awards” table.

The table below shows the amount earned by each NEO in Fiscal 2017 under the AVIP, the Separation Bonus and the Temporary Plan.

 

Name

 

Annual Variable

Incentive Plan

 

Separation

Bonus

 

 

Temporary Incentive Deferred

Compensation Plan

 

Eric T. Steigerwalt

 

$771,534

 

$472,500

 

$263,158

 

Anant Bhalla

 

$342,904

 

$210,000

 

$135,540

 

John L. Rosenthal

 

$459,655

 

$281,500

 

$153,553

 

Peter M. Carlson

 

$363,723

 

$222,750 $184,666

 

Christine M. DeBiase

 

$289,427

 

$177,250

 

$67,347

 

The table below shows the amount, including interest, paid to each NEO for Fiscal 2017 in respect of the different types of credits under the Temporary Plan.

 

Name

 

Fiscal 2017

Payment for

Credit in Lieu

of 2017 MetLife

Equity Award

 

 

Fiscal 2017

Payment for

Credit for

Forfeited MetLife

Equity Awards

– Performance

Shares

 

Fiscal 2017

Payment for

Credit for

Forfeited MetLife

Equity Awards –

RSUs

 

 

Fiscal 2017

Payment for

Credit for

Forfeited

MetLife Equity

Awards – Stock

Options

 

Eric T. Steigerwalt

 

 

 

$263,158

 

 

 

 

$-

 

 

 

 

$-

 

 

 

 

$-

 

 

Anant Bhalla

 

 

 

$80,702

 

 

 

 

$29,796

 

 

 

 

$24,726

 

 

 

 

$-

 

 

John L. Rosenthal

 

 

 

$153,553

 

 

 

 

$-

 

 

 

 

$-

 

 

 

 

$-

 

 

Peter M. Carlson

 

 

 

$-

 

 

 

 

$76,973

 

 

 

 

$71,378

 

 

 

 

$36,315

 

 

Christine M. DeBiase

 

 

 

$67,347

 

 

 

 

$-

 

 

 

 

$-

 

 

 

 

$-

 

 

 


 

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Fiscal 2017 Compensation Tables

  Brighthouse Financial, Inc.

 

(3) The full amount received by each NEO under the Temporary Plan for calendar year 2017, including interest, is $409,712 for Mr. Steigerwalt, $378,815 for Mr. Bhalla, $239,067 for Mr. Rosenthal, $777,964 for Mr. Carlson, and $104,852 for Ms. DeBiase. The full amount of each NEO’s AVIP award for calendar year 2017 is $1,890,000 for Mr. Steigerwalt, $840,000 for Mr. Bhalla, $1,126,000 for Mr. Rosenthal, $891,000 for Mr. Carlson, and $709,000 for Ms. DeBiase.

(4) All Other Compensation

The amounts reported in this column include for each NEO Company contributions in respect of Fiscal 2017 to the Brighthouse Savings Plan and the Auxiliary Plan, in the following amounts:

 

 

Name

 

 

 

Brighthouse Savings Plan

 

 

 

Auxiliary Plan

 

Eric T. Steigerwalt

 

 

  $7,221

 

 

$108,632

 

Anant Bhalla

 

 

$12,214

 

 

  $51,539

 

John L. Rosenthal

 

 

  $9,061

 

 

  $66,236

 

Peter M. Carlson

 

 

$12,384

 

 

  $42,660

 

Christine M. DeBiase

 

 

  $8,895

 

 

  $41,146

 

Fiscal 2017 Grants of Plan-Based Awards

Prior to the Separation, many of our employees, including all of our NEOs, were employees of MetLife. In anticipation of the Separation, we established the Temporary Plan to provide a means of compensating such employees in respect of forgone 2017 equity awards from MetLife and/or MetLife equity awards that were forfeited due to the Separation. The amounts credited to our NEOs under the Temporary Plan for Fiscal 2017 are reported in the table below.

The dollar value reported in the Non-Equity Incentive Plan column of the Summary Compensation Table for payments under the Temporary Plan has been pro-rated to show the portion of such payments that were made in respect of our NEOs service during Fiscal 2017. Prior to August 5, 2017, Brighthouse Services, which is the entity that employs our employees, was a wholly-owned subsidiary of MetLife, and as a result, compensation received prior to August 5, 2017 is not reportable under Securities and Exchange Commission rules as compensation paid by Brighthouse. The total Temporary Plan credits awarded to our NEOs is disclosed above under the heading “Compensation Discussion and Analysis - Features of our Fiscal 2017 Executive Compensation Program - Elements of Fiscal 2017 Compensation - Temporary Incentive Deferred Compensation Plan.”

The amounts reported in the table below awarded under the Temporary Plan are not subject to stockholder approval due to the spin-off transition rules under Section 162(m) of the Code. We are seeking stockholder approval of the material terms of the performance goals for certain future tranches payable under the Temporary Plan.

 


 

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Brighthouse Financial, Inc.  

Fiscal 2017 Compensation Tables

 

         

Grant Date      

 

  

 

Estimated future payouts under

non-equity incentive plan awards

 

 

Name

 

  

Grant Type

 

     

 

Threshold    

 

  

Target        

 

 

Maximum      

 

Eric T.

Steigerwalt

 

  

AVIP

 

        $-

 

    

 

$1,800,000

 

     

 

   

 

$7,000,000

 

     

 

  

Separation Bonus

 

        $-

 

    

 

$450,000

 

 

 

   

 

$-

 

 

 

    

Temporary Plan – Credit

in Lieu of 2017 MetLife

Award

 

   8/9/17

 

   $-

 

    

 

$263,158

 

(1) 

 

   

 

 

 

 

                                 

Anant

Bhalla

 

  

AVIP

 

        $-

 

    

 

$840,000

 

 

 

   

 

$7,000,000

 

 

 

  

Separation Bonus

 

        $-

 

    

 

$210,000

 

 

 

   

 

$-

 

 

 

  

Temporary Plan – Credit

in Lieu of 2017 MetLife

Award

 

   3/28/17

 

   $-

 

    

 

$80,702

 

(1) 

 

   

 

$-

 

 

 

  

Temporary Plan – Credit

for Forfeited 2015 MetLife

RSUs

 

   8/7/17

 

   $-

 

    

 

$9,932

 

(2) 

 

   

 

$-

 

 

 

  

Temporary Plan – Credit

for Forfeited 2016

MetLife RSUs

 

   8/7/17

 

   $-

 

    

 

$14,794

 

(3) 

 

   

 

$-

 

 

 

    

Temporary Plan – Credit

for Forfeited 2015 MetLife

Performance Shares

 

   8/7/17

 

   $-

 

    

 

$29,796

 

(4) 

 

   

 

$-

 

 

 

                                 

John L.

Rosenthal

 

  

AVIP

 

        $-

 

    

 

$1,072,500

 

 

 

   

 

$7,000,000

 

 

 

  

Separation Bonus

 

        $-

 

    

 

$268,125

 

 

 

   

 

$-

 

 

 

    

Temporary Plan – Credit

in Lieu of 2017 MetLife

Award

   3/28/17    $-      $153,553 (1)      $-  

 


 

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Fiscal 2017 Compensation Tables

  Brighthouse Financial, Inc.

 

                 

 

Estimated future payouts under
non-equity incentive plan awards

 

 

Name

 

  

 

Grant Type

 

 

 

Grant Date

 

     

 

Threshold

 

     

 

Target

 

   

 

Maximum    

 

 

Peter M.

Carlson

 

  

 

AVIP

 

         

 

$-

 

     

 

 

 

 

$900,000

 

 

 

 

 

 

$7,000,000    

 

  

 

Separation Bonus

 

         

 

$-

 

     

 

 

 

 

$225,000

 

 

 

 

 

 

$-    

 

  

 

Temporary Plan – Credit

for Forfeited 2015 MetLife

RSUs

 

 

 

8/7/17

 

     

 

$-

 

     

 

 

 

 

$12,832

 

 

(2) 

 

 

 

$-    

 

  

 

Temporary Plan – Credit

for Forfeited 2016

MetLife RSUs

 

 

 

8/7/17

 

     

 

$-

 

     

 

 

 

 

$19,735

 

 

(3) 

 

 

 

$-    

 

  

 

Temporary Plan – Credit

for Forfeited 2017

MetLife RSUs

 

 

 

8/7/17

 

     

 

$-

 

     

 

 

 

 

$38,811

 

 

(5) 

 

 

 

$-    

 

  

 

Temporary Plan – Credit

for Forfeited 2015 MetLife

Performance Shares

 

 

 

8/7/17

 

     

 

$-

 

     

 

 

 

 

$76,973

 

 

(4) 

 

 

 

$-    

 

    

 

Temporary Plan – Credit

for Forfeited 2015 MetLife

Stock Options

 

 

 

8/7/17

 

     

 

$-

 

     

 

 

 

 

$36,315

 

 

(6) 

 

 

 

$-    

 

 

    

 

  

 

    

 

                           

 

Christine M.

DeBiase

   AVIP           $-         $632,500     $7,000,000    
  

 

Separation Bonus

 

         

 

$-

 

     

 

 

 

 

$177,250

 

 

 

 

 

 

$-    

 

    

 

Temporary Plan – Credit

in Lieu of 2017 MetLife

Award

 

  3/28/17       $-         $67,347 (1)    $-    

 

(1) Represents a pro-rated portion, including interest, of the credit under the Temporary Plan awarded in respect of forgone 2017 equity awards from MetLife. This first tranche of the credit vests on March 28, 2018 and was subject to the achievement of one or more performance goals established for purposes of Section 162(m) of the Code.
(2) Represents a pro-rated portion, including interest, of the credit under the Temporary Plan award in respect of a MetLife restricted stock unit award granted by MetLife in 2015 that was forfeited as a result of the Separation. This credit vested on February 24, 2018 and was subject to the achievement of one or more performance goals established for purposes of Section 162(m) of the Code.
(3) Represents a pro-rated portion, including interest, of the credit under the Temporary Plan award in respect of a MetLife restricted stock unit award granted by MetLife in 2016 that was forfeited as a result of the Separation. This portion of the credit in respect of this award vested on March 1, 2018 and was subject to the achievement of one or more performance goals established for purposes of Section 162(m) of the Code.

 


 

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Brighthouse Financial, Inc.  

Fiscal 2017 Compensation Tables

 

(4) Represents a pro-rated portion, including interest, of the credit under the Temporary Plan award in respect of MetLife performance shares granted by MetLife in 2015 that were forfeited as a result of the Separation. This credit vested on February 24, 2018 and was subject to the achievement of one or more performance goals established for purposes of Section 162(m) of the Code.
(5) Represents the pro-rated portion, including interest, of the credit under the Temporary Plan award in respect of a MetLife restricted stock unit award granted by MetLife in 2017 that was forfeited as a result of the Separation. This portion of the credit vested on March 1, 2018 and was subject to the achievement of one or more performance goals established for purposes of Section 162(m) of the Code.
(6) Represents a pro-rated portion, including interest, of the credit under the Temporary Plan awarded in respect of a MetLife stock option award granted by MetLife in 2015 that was forfeited as a result of the Separation. This credit vested on February 24, 2018 and was subject to the achievement of one or more performance goals established for purposes of Section 162(m) of the Code.

Fiscal 2017 Nonqualified Deferred Compensation

 

 

Name

 

 

 

Plan Name

 

     

 

Executive
contributions
in last Fiscal
Year

 

     

 

Registrant
contributions
in last Fiscal
Year (1)

 

     

 

Aggregate
earnings in

last Fiscal

Year

 

     

 

Aggregate

withdrawals/

distributions

 

     

 

Aggregate
balance at

last Fiscal

Year end

 

   

 

Eric T. Steigerwalt

 

 

 

Auxiliary

Plan

 

      $0

 

      $108,632

 

      $2,110

 

      $0

 

      $257,469

 

   

Anant Bhalla

 

 

Auxiliary

Plan

 

      $0         $51,539       $1,536       $0       $100,018    

 

John L. Rosenthal

 

 

 

Auxiliary

Plan

 

      $0         $66,236       $1,367       $0       $177,677    

 

Peter M. Carlson

 

 

 

Auxiliary

Plan

 

      $0         $42,660         $209       $0         $74,775    

 

Christine M. DeBiase

 

 

 

Auxiliary

Plan

 

      $0         $41,146         $610       $0         $80,164    

 

(1) Amounts in this column are reported as components of employer contributions to the Auxiliary Plan for Fiscal 2017 in the “All Other Compensation” column of the Summary Compensation Table above.

Auxiliary Plan

NEOs and other eligible employees who elected to contribute a portion of their eligible compensation under the tax-qualified Brighthouse Savings Plan in 2017 received a Company matching contribution which is equal to 100% of the first 6% of their eligible compensation in that plan in 2017. In addition, a non-elective Company contribution equal to 3% of the compensation is allocated to eligible employees in that plan in 2017. Amounts reported in the Nonqualified Deferred Compensation table have been prorated to reflect the portion of the employer contributions to the Auxiliary Plan that relate to each NEO’s service during Fiscal 2017.

The Code limits compensation that is eligible for employer contributions under the Brighthouse Savings Plan. In 2017, the Company could not make contributions based on compensation over $270,000.

 


 

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Fiscal 2017 Compensation Tables

  Brighthouse Financial, Inc.

 

NEOs and other eligible employees who elected to participate in the Brighthouse Savings Plan during 2017 were credited with a percentage of their eligible compensation beyond that limit. The Company contribution, both the matching and non-elective contribution, was determined using the same employee contribution rate and Company contribution rate as applied under the Brighthouse Savings Plan. This Company contribution is credited to an account established for the employee under the nonqualified Auxiliary Plan.

Auxiliary Plan balances are paid in a lump sum as soon as administratively practicable after termination of employment.

Amounts in the Auxiliary Plan are subject to the requirements of Section 409A. Payments to the top 50 highest paid officers that are due upon separation from service are delayed for six months following their separation, in compliance with Section 409A.

Employees may choose from a number of simulated investments for their Auxiliary Plan accounts. These simulated investments were identical to the core funds offered under the Brighthouse Savings Plan in 2017. Employees may change the simulated investments for new Company contributions to their Auxiliary Plan accounts at any time.

The following table shows the simulated investment return for each of the alternatives under the Auxiliary Plan for calendar year 2017.

 

 

 

 

 

Fund Name

 

 

 

2017 Return  

 

 

 

 

 

Schwab Government Money Fund - Investor Shares

 

 

 

0.50%

 

 

 

 

 

Western Asset Core Bond Fund Class Investor Shares

 

 

 

5.23%

 

 

 

 

 

Vanguard Inflation-Protected Securities Fund Admiral Shares

 

 

 

2.91%

 

 

 

 

 

Vanguard Value Index Fund Admiral Shares

 

 

 

17.13%

 

 

 

 

 

Vanguard 500 Index Fund Admiral Shares

 

 

 

21.79%

 

 

 

 

 

Vanguard Mid-Cap Index Fund Admiral Shares

 

 

 

19.25%

 

 

 

 

 

Vanguard Small Cap Index Fund Admiral Shares

 

 

 

16.24%

 

 

 

 

 

Fidelity Nasdaq Composite Index

 

 

 

29.25%

 

 

 

 

 

Fidelity Overseas Fund

 

 

 

29.65%

 

 

 

 

 

Vanguard Emerging Markets Stock Index Fund Admiral Shares

 

 

 

31.38%

 

 

 

 

 

Cohen & Steers Real Estate Securities Fund, Inc. Class Institutional

 

 

 

8.09%

 

 

 

 

 

American Funds 2010 Target Date Retirement Fund - Class R6

 

 

 

10.41%

 

 

 

 

 

American Funds 2015 Target Date Retirement Fund - Class R6

 

 

 

11.19%

 

 

 

 

 

American Funds 2020 Target Date Retirement Fund - Class R6

 

 

 

12.87%

 

 

 

 

 

American Funds 2025 Target Date Retirement Fund - Class R6

 

 

 

15.33%

 

 


 

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Brighthouse Financial, Inc.  

Fiscal 2017 Compensation Tables

 

 

 

 

 

Fund Name

 

 

 

2017 Return  

 

 

 

 

 

American Funds 2030 Target Date Retirement Fund - Class R6

 

 

 

18.40%

 

 

 

 

 

American Funds 2035 Target Date Retirement Fund - Class R6

 

 

 

21.04%

 

 

 

 

 

American Funds 2040 Target Date Retirement Fund - Class R6

 

 

 

21.98%

 

 

 

 

 

American Funds 2045 Target Date Retirement Fund - Class R6

 

 

 

22.44%

 

 

 

 

 

American Funds 2050 Target Date Retirement Fund - Class R6

 

 

 

22.61%

 

 

 

 

 

American Funds 2055 Target Date Retirement Fund - Class R6

 

 

 

22.63%

 

 

 

 

 

American Funds 2060 Target Date Retirement Fund - Class R6

 

 

 

22.49%

 

Potential Payments Upon Termination or Change in Control

Temporary Incentive Deferred Compensation Plan

Our NEOs may be eligible to receive payments under the Temporary Plan in the event of a termination of employment under certain circumstances, as described below.

Credits in respect of forfeited MetLife equity awards

The following provisions apply to NEOs who received credits under the Temporary Plan in respect of MetLife equity awards that were forfeited as a result of the Separation:

Termination followed by entry into a separation agreement with Brighthouse Services

If Brighthouse Services agrees to enter into a separation agreement with the NEO under a severance program of Brighthouse Services and the separation agreement is effective no later than March 15th of the year after the separation agreement is offered to the NEOs, the NEO’s outstanding Temporary Plan credits in respect of forfeited MetLife equity awards will vest when the separation agreement becomes final. Payments will be made as soon as administratively practicable following the original vesting date(s), subject to the achievement of the Section 162(m) performance metrics established for each year. There is currently no, and during Fiscal 2017 there was no, severance program in which our NEOs are eligible to participate.

Death

In the event of an NEO’s termination due to death, the NEO’s credits in respect of forfeited MetLife equity awards will vest immediately prior to such termination. Payments in respect of such credits will be made as soon as administratively practicable following the original vesting date(s), without regard to the requirement that the Section 162(m) performance metrics established for each year are achieved.

All other terminations

In the event of an NEO’s termination for any other reason, all unvested credits in respect of forfeited MetLife equity awards will be forfeited, provided that if an NEO is terminated for “Cause,” all outstanding credits, whether vested or unvested, will be forfeited.

 


 

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Fiscal 2017 Compensation Tables   Brighthouse Financial, Inc.

 

Credits in respect of forgone 2017 MetLife equity awards

The following provisions apply to NEOs who received credits under the Temporary Plan in respect of forgone 2017 equity awards from MetLife:

Rule of 65

If an NEO’s employment terminates on or after the NEO’s “Rule of 65 Date” (other than a termination for “Cause”), the tranche(s) of the credits in respect of forgone 2017 MetLife equity awards that have not yet vested will become vested as of immediately after the termination, and will be paid as soon as administratively practicable after six months following the original vesting date for each such tranche, subject to the achievement of the Section 162(m) performance metrics established for such tranche. “Rule of 65 Date” means the date that the sum of a participant’s age plus years of service equals or exceed 65, provided the participant has at least five (5) years of service.

Termination followed by entry into a separation agreement with Brighthouse Services

If Brighthouse Services agrees to enter into a separation agreement with the NEO under a severance program of Brighthouse Services and the separation agreement is effective no later than March 15th of the year after the separation agreement is offered to the NEOs, the tranche(s) of the credits in respect of forgone 2017 MetLife equity awards that have not yet vested will become vested when the separation agreement becomes final, and will be paid as soon as administratively practicable after six months following the original vesting date(s) for each such tranche, subject to the achievement of the Section 162(m) performance metrics established for each year. There is currently no, and during Fiscal 2017 there was no, severance program in which our NEOs are eligible to participate.

Death

In the event of an NEO’s termination due to death, all unvested tranche(s) of the credits in respect of forgone 2017 MetLife equity awards that have not yet vested will become vested as of immediately after the termination. Payment will be made as soon as administratively practicable following the original vesting date(s), without regard to the requirement that the Section 162(m) performance metrics established for each year are achieved.

All other terminations

In the event of an NEO’s termination for any other reason, all unvested credits in respect of forgone 2017 MetLife equity awards will be forfeited provided that if an NEO is terminated for “Cause,” all outstanding credits, whether vested or unvested, will be forfeited.

Under the Temporary Plan, “Cause” generally means: (i) willful failure to substantially perform duties (other than due to physical or mental illness) after reasonable notice of such failure; (ii) engaging in serious misconduct that is injurious to Brighthouse or any affiliate in any way, including damage to reputation or standing; (iii) being convicted of, or entering a plea of nolo contendere to, a felony; or (iv) breach of any written covenant or agreement with Brighthouse or any affiliate not to disclose or misuse any information pertaining to, or misuse and property of Brighthouse or any affiliate or not to complete or interfere with Brighthouse or any affiliate.

The Temporary Plan does not provide for any payments upon or following the occurrence of a change in control of Brighthouse or any of its affiliates, including Brighthouse Services.

The following table summarizes estimated payments and benefits that would be provided to our NEOs under the Temporary Plan in connection with a termination of employment under various scenarios described above, assuming such event occurred on December 31, 2017.

 


 

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Brighthouse Financial, Inc.   Fiscal 2017 Compensation Tables

 

Credits in respect of forfeited MetLife equity awards

 

 

Name

 

  

 

Trigger and Amount

 

Anant Bhalla

 

  

Death - $450,000, plus interest

 

Peter M. Carlson

 

  

Death - $2,092,873, plus interest

 

Credits in respect of forgone 2017 MetLife Equity Awards

 

 

Name

 

  

 

Trigger and Amount

 

Eric T. Steigerwalt

  

Rule of 65 - $400,000, plus interest

Death - $1,200,000, plus interest

 

Anant Bhalla

 

  

Death - $368,000, plus interest

 

John L. Rosenthal

 

  

Rule of 65 - $233,400, plus interest

Death - $700,200, plus interest

 

Christine M. DeBiase

  

Rule of 65 - $102,367, plus interest

Death - $307,100, plus interest

 

 


 

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Proposal 4 - Frequency of Future Say-on-Pay Votes

  Brighthouse Financial, Inc.

 

Proposal 4

Advisory vote on the frequency of future

advisory votes to approve the compensation

paid to Brighthouse’s Named Executive Officers

In accordance with Section 14A of the Exchange Act, we are also providing stockholders with an advisory (non-binding) vote to express their preference on the frequency of votes to approve the compensation paid to Brighthouse’s NEOs, commonly referred to as say-on-pay. Stockholders may cast a vote in favor of an advisory vote on executive compensation being held every one, two, or three years, or they may abstain.

This is the first opportunity for our stockholders to express their preference regarding how frequently Brighthouse should submit say-on-pay proposals for advisory votes by stockholders. The Board recommends an annual vote frequency, as this will enable stockholders to provide timely feedback regarding Brighthouse’s executive compensation programs and practices, and is consistent with having regular dialogue with stockholders.

The vote on frequency of future say-on-pay votes is advisory only. The result will not be binding on the Board, although the Board does intend to consider the outcome of the vote when determining the frequency with which future say-on-pay votes will be conducted.

The Board expects to make its determination and disclose its decision to stockholders within 150 days of the Annual Meeting.

Unless the Board decides to hold an earlier say-on-pay frequency vote, the Company will not be required to hold another such vote until 2024.

The Compensation Committee and the Board of Directors believe that an annual advisory vote on executive compensation is in the best interests of Brighthouse and its stockholders.

Accordingly, the Board of Directors recommends that stockholders vote in favor of a ONE YEAR frequency for future advisory votes on executive compensation.

 


 

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Proposal 5

Approval of the Brighthouse Financial, Inc.

2017 Stock and Incentive Compensation Plan

In August 2017, following our establishment as an independent company, the Board adopted the Brighthouse Financial, Inc. 2017 Stock and Incentive Compensation Plan (“Employee Plan”), subject to stockholder approval.

The purpose of the Employee Plan is to promote the success and enhance the value of Brighthouse and its affiliates by linking the personal interests of employees to those of Brighthouse’s stockholders, and by providing participants with an incentive for strong performance. The Employee Plan is further intended to provide flexibility to Brighthouse in our ability to motivate, attract, and retain the services of employees upon whose judgment, interest, and special effort the successful conduct of our operation largely is dependent.

If stockholders decline to approve the Employee Plan, we will not be authorized to compensate employees in Shares, which will limit and impair our ability to motivate, attract, and retain qualified individuals. As a result, we would need to make significant changes to our compensation practices that would limit our flexibility to provide competitive compensation and thus our ability to motivate, attract, and retain highly qualified talent.

Section 162(m) of the Code (“Section 162(m)”) limits the deductibility of compensation paid to certain executives to $1 million, but exempts certain “performance-based” compensation from those limits. The Tax Cuts and Jobs Act (“TCJA”) eliminated the exception for performance-based compensation under Section 162(m), although the TCJA includes a provision that grandfathers certain arrangements in place on November 2, 2017 that are not materially modified after that date. Under the Employee Plan, the Compensation Committee has the flexibility to grant awards that are intended to be eligible to qualify as performance-based compensation and, as a result, are intended to be eligible to be fully deductible. In approving the Employee Plan, stockholders would approve the material terms of the performance goals set forth in that plan for purposes of qualifying awards granted in 2017 as performance-based compensation under Section 162(m). Even if stockholders approve the Employee Plan, amounts payable in respect of awards granted by the Compensation Committee that are intended to satisfy the requirements for performance-based compensation under Section 162(m) may ultimately be non-deductible. In addition, even if stockholders approve the Employee Plan, the Compensation Committee may grant awards, and is expected to grant awards as a result of TCJA, that are not intended to be eligible to be performance-based compensation under Section 162(m) and are not deductible, if it determines that it is in the Company’s best interests to do so.

Assuming stockholder approval of the Employee Plan, at the Company’s forecasted pace of granting awards that normally pay out in Shares or allow the purchase of Shares, assuming stable future rates (based on current rates) of compensation, award recipient population, award forfeitures, Shares withheld for tax purposes, and Share price, the Company currently expects the total number of Shares reserved for issuance to last for at least three years, beginning with awards made in 2017 subject to stockholder approval.

 


 

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Plan Highlights

The Employee Plan affords flexibility in designing long-term equity and equity-based incentives that are responsive to evolving regulatory changes, compensation best practices and the strategy of Brighthouse through the incorporation of tailored, performance-based measures. The Employee Plan also contains a number of features that are designed to protect and promote stockholder interests and ensure that awards are granted through a disciplined and thoughtful process, including the following:

No Discounted Stock Options

The Employee Plan prohibits the grant of stock options with an exercise price less than the fair market value of our Common Stock on the date of grant.

No Repricing of Awards Without Prior Stockholder Approval

The Employee Plan prohibits the repricing of stock options and stock appreciation rights without stockholder approval.

No Grants of “Reload” Awards Without Stockholder Approval

The Employee Plan does not provide for “reload” awards (the automatic substitution of a new award of like kind and amount upon the exercise of a previously granted award) without stockholder approval.

No Annual “Evergreen” Provision

The Employee Plan provides a specific maximum share limitation of 7,000,000 Shares and does not contain an annual or automatic increase in the number of shares available for awards.

Cap on Full-Value Awards

The Employee Plan includes a limit on the number of Shares (1,000,000) that may be issued as full-value awards (i.e., awards other than stock options or stock appreciation rights) to any one participant.

Prohibition of Certain Share Recycling, or “Liberal Share Counting,” Practices

The Employee Plan prohibits adding back to the total share authorization shares that were withheld, deducted, or delivered for tax payments relating to stock options or stock appreciation rights; used to pay the exercise price of stock options; repurchased on the open market with proceeds of stock option exercises; or not issued upon exercise for any reason (including as a result of the net settlement or net exercise) of an outstanding stock option or share-settled stock appreciation right.

No Dividends Paid Out on Unearned Performance Awards

The Employee Plan provides that dividend equivalents payable on performance awards may be paid only when the underlying award is paid or settled.

No “Liberal Change in Control” Definition

The Employee Plan’s definition of “change of control” for purposes of accelerating vesting of awards is not considered “liberal.” For example, mergers, consolidations, reorganizations, asset sales and asset dispositions only give rise to a change of control if they are consummated (with existing stockholders owning less than a majority of the voting power after the transaction), and not if they are merely approved by stockholders.

Minimum Vesting Requirement

Subject to the terms of the Plan, full value awards under the Employee Plan have a minimum vesting period of at least one year for awards subject to the achievement of performance goals and three years (at a rate of not greater than 1/3rd per year) for awards that vest solely based upon continued service.

 


 

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Ten-Year Plan Term

The Employee Plan prohibits granting awards after August 8, 2027 and limits the exercise term of stock options and stock appreciation rights to ten years from the grant date.

Independent Committee Administration

The Employee Plan is administered by our Compensation Committee, which is comprised solely of independent, outside, non-employee directors.

Plan Summary

The following is a summary of the material provisions of the Employee Plan and is qualified in its entirety by reference to the complete text of the Employee Plan included in this Proxy Statement as Appendix 1.

Purpose, Duration, and Governance

The purpose of the Employee Plan is to promote the success and enhance the value of Brighthouse and its affiliates by linking the personal interests of participants in the Employee Plan to the interests of Brighthouse’s stockholders and to provide an incentive for outstanding performance. Subject to stockholder approval, the Employee Plan will remain in effect until the earlier of its termination in accordance with its terms, the tenth anniversary of the date it became effective, or the purchase or acquisition of all of the shares subject to the Employee Plan.

The Compensation Committee (or another Committee designated by the Board) may make grants of nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, and Stock-Based Awards and determines all of the terms of awards. Each award will be evidenced by a written Award Agreement, which may take electronic form.

Each award under the Employee Plan will constitute compensation for services performed or to be performed by the recipient. The Employee Plan does not require anyone eligible to receive an award to pay any monetary consideration for the award.

Share Authorization and Limits

The number of Shares reserved for issuance under the Employee Plan is seven million (7,000,000).

Awards intended to be eligible to be Performance-Based Compensation (as defined below) under Section 162(m) are subject to the following limits in any one fiscal year to any one individual:

  Stock Options or Stock Appreciation Rights: 2,000,000 Shares;
  Restricted Stock or Restricted Stock Units: 1,000,000 Shares;
  Performance Shares or Performance Units: 1,000,000 Shares;
  Cash-Based Awards: $10,000,000; and
  Stock-Based Awards: 1,000,000 Shares.

Brighthouse does not currently anticipate that anyone will be granted awards in the amount of any of the award limits.

Upon the consummation of certain corporate events, such as a change in capitalization of Brighthouse, merger, or stock split, the Compensation Committee will, in order to prevent dilution or enlargement of award-holders’ rights, substitute or adjust share limits and terms of awards under the Employee Plan. The Compensation Committee may make adjustments in the terms and conditions of awards due to other unusual or nonrecurring events affecting Brighthouse or changes in applicable laws, regulations, or accounting principles, whenever the Committee determines appropriate to prevent unintended dilution or enlargement of the benefits of the award (“Award Adjustments”).

 


 

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Eligibility

All employees of Brighthouse and its affiliates are eligible for awards under the Employee Plan. Directors who are not otherwise employed by Brighthouse or any affiliate are not eligible to receive awards under the Employee Plan (see Proposal 6, which seeks stockholder approval of the Brighthouse Financial, Inc. 2017 Non-Management Director Stock Compensation Plan, pursuant to which independent, non-employee members of the Board are eligible to receive equity-based awards). As of December 31, 2017, there were approximately 1,263 individuals who would have been eligible to participate in the Employee Plan.

Administration

The Compensation Committee will administer the Employee Plan. Actions taken by the Compensation Committee are final, conclusive, and binding. The Compensation Committee has discretion to interpret the Employee Plan, determine eligibility for awards under the plan, establish the terms of awards and adopt rules and regulations for administering the Employee Plan. Subject to applicable restrictions in the Compensation Committee Charter, the Compensation Committee may delegate any of its administrative duties to any other person or persons. The Compensation Committee may also delegate any of its duties, except with respect to awards intended to be Performance-Based Compensation, to one or more Compensation Committee members or to one or more officers of Brighthouse or its affiliates, subject to periodic reports to the Compensation Committee regarding the nature and scope of the awards granted under such delegation, and subject to applicable restrictions in the Committee’s Charter.

Fair Market Value

For purposes of the Employee Plan, the Compensation Committee has the authority to determine fair market value with respect to Shares using any of several alternative methods commonly used in compensation practices, including the average trading values of the stock over a period of days. The Compensation Committee may elect to use different methods of establishing fair market value at different times, or for different purposes, under the Employee Plan (such as using the average of a single day’s high and low trading prices for establishing the exercise price of a Stock Option, but a multi-day average for valuing Shares delivered in lieu of a cash payment).

Minimum Vesting or Restriction Period

Awards under the Employee Plan are generally subject to minimum vesting or restriction periods. For awards that vest in whole or in part on the attainment of one or more performance goals, the vesting period will not be less than one year. For awards that vest solely based upon the participant’s continued service, the award cannot become vested as to more than one-third of the Shares on each of the first and second anniversaries of the grant date.

Stock Options

Under the Employee Plan, the Compensation Committee may grant options to purchase Shares (“Stock Options”) that are not intended to be incentive stock options within the meaning of Section 422 of the Code. No Stock Option may be exercised later than the tenth anniversary date of its grant. The Compensation Committee determines, in each Award Agreement, the extent to which an individual has

 


 

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the right to exercise each Stock Option following termination of employment with Brighthouse or its affiliates. The Compensation Committee may substitute Stock Appreciation Rights (as defined below) for any outstanding Stock Options, on terms and economic benefit equivalent to such Stock Options (“SAR Substitution”).

The exercise price of each Stock Option must be based on 100% of the fair market value of our Common Stock on the date of grant, set at a premium to the fair market value of our Common Stock on the date of grant, or indexed (as determined by the Compensation Committee) to the fair market value of our Common Stock on the date of grant but in no event less than the fair market value of our Common Stock on the date of grant. The Compensation Committee may impose such restrictions on Shares acquired pursuant to exercise of a Stock Option as it determines advisable. The Compensation Committee determines, in each Award Agreement, the extent to which an individual has the right to retain and exercise Stock Options following termination of employment with Brighthouse or its affiliates.

Stock Appreciation Rights

Under the Employee Plan, the Compensation Committee may grant awards in the form of the right to receive the difference in fair market value of a share of common stock on the date of exercise over the per-share price at which such right is granted (a “Stock Appreciation Right”).

Each Stock Appreciation Right would be evidenced by an Award Agreement that specifies the exercise price, the number of shares of common stock on which the Stock Appreciation Right is based, and other conditions and provisions determined by the Compensation Committee. No Stock Appreciation Right may be exercised later than the tenth anniversary of its date of grant. The Compensation Committee would determine, in each Award Agreement, the extent to which an individual has the right to exercise each Stock Appreciation Right following termination of employment with Brighthouse or its affiliates.

The grant price of each Stock Appreciation Right must be based on 100% of the fair market value of our Common Stock on the date of grant, set at a premium to the fair market value of our Common Stock on the date of grant, or indexed (as determined by the Compensation Committee) to the fair market value of our Common Stock on the date of grant but in no event may be less than the fair market value of a share of Common Stock on the date of grant. Stock Appreciation Rights (subject to certain limitations) may be exercised on terms determined by the Compensation Committee. The Compensation Committee determines, in each Award Agreement, the extent to which an individual has the right to retain and exercise a Stock Appreciation Right following termination of employment with Brighthouse or its affiliates.

In the Compensation Committee’s discretion, payment for an exercised Stock Appreciation Right may be in cash, Shares (based on fair market value on the date of exercise), or in a combination of the foregoing. The Compensation Committee may impose such restrictions on Shares acquired pursuant to exercise of a Stock Appreciation Right as it determines advisable.

United States Federal Income Tax Consequences of Stock Options and Stock

Appreciation Rights

The following is a brief summary of the federal income tax aspects of the issuance and exercise of Stock Options and Stock Appreciation Rights under the Employee Plan, based upon the federal income tax laws in effect on the date of this Proxy Statement. This summary is not intended to be exhaustive, and the exact tax consequences to anyone will depend upon his or her particular circumstances and other factors.

 


 

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Generally, with respect to Stock Options, the individual will not recognize income at the time the Stock Option is granted. On exercise of the Stock Option, the individual recognizes ordinary income in an amount equal to the difference between the fair market value (as defined in the Code) of a Share on the date of exercise and the exercise price. At disposition of the Shares acquired upon the exercise of a Stock Option, any appreciation (or depreciation) after the date of exercise is treated as either short-term or long-term capital gain or loss, depending upon the length of time that the individual has held the Shares.

A Brighthouse subsidiary that employs a Stock Option recipient generally will be entitled to a tax deduction equal to the amount recognized as ordinary income by the individual in connection with the exercise of a Stock Option.

Generally, with respect to Stock Appreciation Rights, the individual will not recognize income at the time the Stock Appreciation Rights are granted. On exercise of the Stock Appreciation Rights, the individual recognizes ordinary income in an amount equal to the difference between the fair market value (as defined in the Code) of a Share on the date of exercise and the exercise price. If the individual received Shares upon exercise, any appreciation (or depreciation) after the date of exercise is treated as either short-term or long-term capital gain or loss, depending upon the length of time that the individual has held the Shares. A Company subsidiary that employs a Stock Appreciation Right recipient generally will be entitled to a tax deduction equal to the amount recognized as ordinary income by the individual in connection with the exercise of the Stock Appreciation Right.

Restricted Stock and Restricted Stock Units

Under the Employee Plan, the Compensation Committee may grant Shares subject to a period in which such Shares are subject to forfeiture based on discontinued service, the failure to achieve performance criteria, and/or the occurrence of other events as determined by the Compensation Committee (“Restricted Stock”), and may grant awards denominated in units subject to forfeiture (“Restricted Stock Unit”). Restricted Stock Units may be paid in cash, Shares, or a combination thereof as determined by the Compensation Committee.

The Compensation Committee may impose such conditions or restrictions on Restricted Stock or Restricted Stock Units as it deems advisable. No Restricted Stock Unit will confer any voting rights, although holders of Restricted Stock do have voting rights during the period of restriction applicable to such awards. The Compensation Committee will determine, in each Award Agreement, the extent to which an individual has the right to retain each Share of Restricted Stock or Restricted Stock Unit following termination of employment with Brighthouse or its affiliates.

Performance Shares and Performance Units

Under the Employee Plan, the Compensation Committee may grant awards denominated in Shares (“Performance Shares”) or units (“Performance Units”) whose value is determined as a function of the extent to which specified performance criteria have been achieved. Each Performance Share will have an initial value equal to the fair market value of a Share on the date of grant. To the extent the Compensation Committee establishes the initial value of a Performance Unit in relation to the value of a Share, each Performance Unit will have an initial value equal to the fair market value of a Share on the date of grant. The Compensation Committee may determine that a Performance Share or Performance Unit is payable in the form of cash, Shares, or a combination of the two, and may require the individual to

 


 

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retain any Shares received for a specified period of time. The Compensation Committee determines, in each Award Agreement, the extent to which an individual has the right to retain each Performance Share or Performance Unit following termination of employment with Brighthouse or its affiliates.

Cash-Based Awards and Stock-Based Awards

Under the Employee Plan, the Compensation Committee may grant awards denominated in cash (“Cash-Based Awards”) and equity-based or equity-related awards not otherwise described by the terms of the Employee Plan (“Stock-Based Awards”). The Compensation Committee would determine the value, and any predicate performance criteria, of each Cash-Based Award, and would determine whether the Cash-Based Award will be payable in cash, Shares (subject to such restrictions as are determined by the Compensation Committee), or a combination of the two, having a fair market value equal to the value of the Cash-Based Award. Stock-Based Awards may include the grant of Shares or payment of cash in such amounts and subject to such terms and conditions including, but not limited to, being subject to performance criteria, or in satisfaction of such obligations, as the Compensation Committee determines. The Compensation Committee determines, in each Award Agreement, the extent to which an individual has the right to receive each Cash-Based Award or Stock-Based Award following termination of employment with Brighthouse or its affiliates.

Dividends and Dividend Equivalents

Holders of Stock Options, Stock Appreciation Rights, Performance Shares, or Performance Units will not be credited with dividends or dividend equivalents on account of dividends declared or paid on Shares. The Compensation Committee may, in its discretion, provide for Restricted Stock or Restricted Stock Units to be credited with dividends paid on Shares or with dividend equivalents, and may determine in its discretion the form of payment of those dividends or dividend equivalents. The Compensation Committee can apply any restrictions on dividends or dividend equivalents that it deems appropriate, including not permitting payment of dividends or dividend equivalents while the amount is subject to an ongoing period of restrictions.

Performance-Based Compensation

The Compensation Committee may grant awards other than a Stock Option or Stock Appreciation Right that are intended to provide remuneration solely on account of the attainment of one or more pre-established, objective performance criteria under circumstances that are intended to be eligible to satisfy the requirements of Section 162(m) of the Code, as applicable (“Performance-Based Compensation”). The vesting, payment, or value of Performance-Based Compensation will be determined by the attainment of one or more goals based on one or more of the following “Performance Measures”:

  capital targets (including but not limited to, variable annuity target funding and risk based capital ratios);
  cash flow (including but not limited to, free cash flow, gross cash flow, statutory cash flow and return on capital measured on a consolidated basis or by Company/Affiliate);
  customer satisfaction;
  decrease in fixed expenses;
  earnings before or after taxes, interest, depreciation, and/or amortization and including/excluding capital gains and losses;
  earnings per share;
  gross or operating margins;
  growth of assets under management;

 


 

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  expense targets or ratio or other expense-related target measures;
  net earnings or net income (before or after taxes);
  net sales and/or sales growth;
  net operating earnings;
  operating earnings (on a consolidated basis or by Company/Affiliate);
  operating earnings per share;
  operating efficiency (including but not limited to, decreases in operating expense);
  operating return on equity;
  productivity ratios;
  ratings from rating agencies (including but not limited to, maintaining a minimum rating or an increase in rating)
  return measures (including, but not limited to, return on assets, capital, equity, or sales);
  revenue growth;
  share price (may include, but is not limited to, growth measures and total stockholder return); and
  value of new business.

The Compensation Committee has the discretion to alter the Performance Measures without obtaining stockholder approval of such changes to the extent that applicable tax or securities laws permit such alterations.

No Performance-Based Compensation will be payable unless the Compensation Committee certifies in writing that the performance measures applicable to the award were satisfied. The Compensation Committee may not increase the value of an award of Performance-Based Compensation above the maximum value determined under the performance formula by the attainment of the applicable performance goal(s), but the Compensation Committee may retain the discretion to reduce the value below such maximum.

As discussed above, the Compensation Committee retains the right to pay compensation that is not Performance-Based Compensation.

Change of Control

The following paragraphs describe how awards under the Employee Plan would be affected in the event of a Change of Control (as defined below), except as otherwise provided in the Award Agreement or other agreement between the individual and Brighthouse.

Change of Control, as defined in the Employee Plan, occurs if:

  a person acquires (other than directly from Brighthouse) securities representing 30% or more of the combined voting power of Brighthouse’s outstanding securities;
  within any 24-month period the persons who were serving as members of Brighthouse’s Board (the “Incumbent Directors”) cease to constitute a majority of the members of Brighthouse’s Board (provided that any Directors elected to the Board by a majority of the Incumbent Directors then still in office will be treated as Incumbent Directors for this purpose); or
  a merger, reorganization, or similar transaction (including a sale of substantially all assets) occurs, where Brighthouse’s stockholders immediately prior to such transaction control less than a majority of the voting power in the surviving, resulting, or acquiring entity immediately after the transaction.

The Compensation Committee may reasonably determine in good faith prior to the occurrence of a Change of Control that a successor to Brighthouse will honor or assume an award under the Employee Plan, or that the successor will substitute new rights (in each case as defined in the Employee Plan,

 


 

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an “Alternative Award”). In the event that a participant holds an Alternative Award, the vesting or exercisability of the award will not be accelerated by reason of the Change of Control. If the successor makes no Alternative Award, the Change of Control will affect awards as described below.

If a successor does not honor or assume outstanding awards, outstanding Stock Options and Stock Appreciation Rights will become immediately exercisable and, if an individual’s employment is involuntarily terminated for any reason other than Cause (as defined in the Employee Plan) within 12 months following the Change of Control, the individual will have until the earlier of the term of the Stock Option or Stock Appreciation Right or 12 months following such termination date to exercise the Stock Options or Stock Appreciation Rights. Any forfeiture provisions or other restrictions on Restricted Stock or Restricted Stock Units will lapse. The target payout opportunities attainable under al