DEF 14A
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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  ☐

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  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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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

2019 Annual Meeting of Stockholders (the “Annual Meeting”)

of Brighthouse Financial, Inc. (“Brighthouse”)

Date and Time

Thursday, June 13, 2019 at 8:00 a.m., Eastern Time

Location

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

Agenda

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

 

  1.

Proposal 1: Election of four (4) Class II Directors to serve a one-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 2019;

  3.

Proposal 3: Advisory vote to approve the compensation paid to Brighthouse’s Named Executive Officers; and

  4.

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 “FOR” the election of each of the nominees named in Proposal 1 of this Proxy Statement, “FOR” Proposal 2 and “FOR” Proposal 3. Information about the matters to be acted upon at the Annual Meeting is contained in the accompanying Proxy Statement.

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 April 15, 2019 are 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 Time, on Wednesday, June 12, 2019.
LOGO   Telephone
  Please call 1-800-690-6903 until 11:59 p.m., Eastern Time, on Wednesday, June 12, 2019.
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.
LOGO   In Person
  You may attend the Annual Meeting in person 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.”

 


 

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Notice of Annual Meeting of Stockholders   Brighthouse Financial, Inc.

 

This notice is being delivered to the holders of Shares as of the close of business on April 15, 2019, 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 29, 2019

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on June 13, 2019

The accompanying Proxy Statement, our 2018 Annual Report to Stockholders and directions to the location of the 2019 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.   Letter from the Board of Directors to Our Stockholders

 

Letter from the Board of Directors to Our Stockholders

Dear Fellow Stockholders:

We are excited to be writing to you after the completion of Brighthouse Financial’ s first full year as an independent public company. We are proud of the progress Brighthouse has made in the further development and execution of its business strategy, guided by the Company’s mission to help people achieve financial security and its goal of creating long-term value for our stockholders. We would like to take this opportunity to share our priorities and provide an overview of the work we performed on your behalf in 2018.

The Board of Directors (the “Board”). We are a majority independent, highly-qualified and diverse Board dedicated to overseeing Brighthouse. Collectively, we have strong experience in areas relevant to Brighthouse’s business and strategy, including insurance, financial services, investments, governance, operations and cybersecurity. The value we place on diversity is evidenced by the Board’s composition, which includes four women and two individuals of ethnically diverse backgrounds, resulting in a Board that is 56% diverse by gender or race. We regularly review our board refreshment and director succession plans and annually assess our performance, both individually and collectively, to help ensure we are well-positioned to effectively carry out our duties.

Overseeing Strategy and Risk. One of our Board’s most important and vital functions is to provide oversight, guidance and direction regarding Brighthouse’s strategy. The Board is actively engaged in shaping – and challenging, as appropriate – Brighthouse’s short- and long-term strategy to grow the company and create stockholder value. We review and discuss strategy topics in our meetings throughout the year. Annually, we devote an entire Board meeting to strategy, including deep dives into Brighthouse’s product and sales strategy, the competitive landscape, Brighthouse’s operational model and financial and capital plans. As the Board of one of the largest annuities and life insurance companies in the United States, we take seriously our role in risk oversight to ensure an effective enterprise risk management program is in place, including an appropriate enterprise risk management framework and governance structure. Throughout the year, the Board and its committees monitor Brighthouse’s performance and management of key risks, including risks relating to finance, markets, operations, cybersecurity and human capital.

Engagement and Responsiveness. We want to know what Brighthouse’s stockholders think about our company. Soon after Brighthouse’s establishment as an independent company in 2017, we launched a robust engagement program that we have enhanced and expanded in 2018. Our Chairman is available to meet with our stockholders so that we can directly engage in meaningful conversations about our strategy, governance and executive compensation program. We are grateful for our stockholders’ candid feedback and are pleased that they generally support our governance and executive compensation practices. We pledge to continue to build upon our relationships with our stockholders and to be responsive to your feedback. We will continue to assess our governance and executive compensation programs to ensure that they remain appropriate as Brighthouse matures.

Culture and Values. Brighthouse’s corporate culture and values of collaboration, focus and accountability are aligned with its strategy and integral to its success. Brighthouse’s culture is, and will continue to be, a focus of our oversight of management and discussions in the boardroom. We also recognize the benefit of observing and experiencing how Brighthouse operates firsthand and believe that by interacting with Brighthouse’s employees outside of the boardroom we are able to gain meaningful insights into Brighthouse’s culture. We regularly visit Brighthouse’s headquarters and other offices to observe Brighthouse’s operations and interact with associates. During 2018, our Chairman led a Town Hall from Brighthouse’s corporate headquarters that was broadcast to all Brighthouse associates. In celebration of Women’s History Month, in early 2019 our four women directors participated in a panel to share with Brighthouse employees their views on the importance of diversity and creating a culture of inclusion.

 


 

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Letter from the Board of Directors to Our Stockholders   Brighthouse Financial, Inc.

 

Talent Management. Brighthouse’s success depends on having a skilled and engaged workforce that believes in Brighthouse’s mission and values. The Board and the Compensation Committee regularly discuss human capital management issues, including succession planning, talent development, employee engagement and diversity and inclusion. We have adopted an executive compensation program that we believe is aligned with Brighthouse’s strategy and stockholder interests and that aims to attract and retain talented associates, and to appropriately reward them for their performance.

Your vote is important. We encourage you to read these proxy materials and to vote your shares “FOR” each proposal.

Thank you for your continuing investment in and support of Brighthouse.

Sincerely,

The Board of Directors

April 29, 2019

 


 

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Brighthouse Financial, Inc.   Proxy Statement

 

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 June 13, 2019, at 8:00 a.m., Eastern Time (the “Annual Meeting”), at The Ballantyne Hotel, 10000 Ballantyne 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, of the Company (“Shares”) as of the close of business on April 15, 2019, (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 29, 2019.

Contents

 

  3       Proxy Summary
    5      Our Board of Directors: Composition, Qualifications and Diversity
    8      Brighthouse Culture
    9      Executive Compensation Highlights
  11      
Proposal 1: Election of four (4) Class  II Directors to serve a one-year term ending at the 2020 Annual
Meeting of Stockholders
    12      The Board of Directors
    19      Skills Matrix
  20       Board and Corporate Governance Practices
    20      Building Our Board of Directors
    22      Board Leadership Structure
    23      Director Independence
    23      Executive Sessions
    24      Stockholder Engagement
    25      Succession Planning and Talent Management
    25      Risk Oversight
    26      Information About Our Board Committees
    31      Board Meetings and Director Attendance
    31      Director Compensation
    32      2018 Director Compensation Table
    33      Director Stock Ownership Guidelines
    33      Compensation Committee Interlocks and Insider Participation
    33      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 2019
    34      Fees Paid to Deloitte & Touche LLP
    35      Audit Committee Pre-Approval Policy
    35      Audit Committee Report
  37       Proposal 3: Advisory vote to approve the compensation paid to Brighthouse’s Named Executive Officers
  38       Compensation Discussion and Analysis
    38      Section 1 – Executive Summary
    38     

The Brighthouse Story

    38     

Named Executive Officers

    39     

Compensation Philosophy

    39     

What’s New in Our 2018 Compensation Program

 


 

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Contents   Brighthouse Financial, Inc.

 

    40     

2018 Say-on-Pay Vote and Stockholder Engagement

    40     

Compensation Highlights

    40     

CEO Compensation

    41     

Key Executive Compensation Practices

    42     

Planned Changes for 2019

    42      Section 2 – Our 2018 Executive Compensation Program
    42     

2018 Compensation Setting Process

    42     

Role of the Compensation Committee and Others in Determining Compensation

    44     

2018 Target Total Direct Compensation

    45     

Elements of 2018 Compensation

    46     

2018 Short-Term Incentive Awards

    49     

2018 Long-Term Incentive Awards

    50     

Founders’ Grants

    51     

Temporary Incentive Deferred Compensation Plan

    52      Section 3 – Additional Compensation Practices and Policies
    52     

2018 Say-on-Pay Vote and Stockholder Engagement

    53     

Stock Ownership and Retention Guidelines

    53     

Benefit Plans

    54     

Termination and Change in Control Benefits

    54     

Stock-Based Award Timing Practices

    55     

Tax Deductibility of Executive Compensation

    55     

Hedging and Pledging Prohibition

    55     

Clawback Policy

    55     

Risk Assessment

    56      Section 4 – 2019 Compensation Program Preview
    57      Compensation Committee Report
  58       Compensation Tables
    58      Summary Compensation Table for 2018
    62      Grants of Plan-Based Awards in 2018
    67      Outstanding Equity at 2018 Fiscal Year-End
    68      Option Exercises and Stock Vested in 2018
    69      Nonqualified Deferred Compensation in 2018
    71      Potential Payments Upon Termination or Change in Control
    74      Equity Compensation Plan Information as of December 31, 2018
  75       CEO Pay Ratio
  76       Certain Relationships and Related Person Transactions
    76      Relationships and Transactions Related to the Separation
    84      Other Related Person Transactions
    85      Related Person Transaction Approval Policy
    86      Security Ownership of Certain Beneficial Owners and Management
    88      Section 16(a) Beneficial Ownership Reporting Compliance
  89       The Annual Meeting, Voting and Other Information
  96       Forward-Looking Statements

 


 

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Brighthouse Financial, Inc.   Proxy Summary

 

Proxy Summary

This section summarizes important information contained in this Proxy Statement and in our 2018 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

 

      

Board Recommendation

 

      

Page(s)

 

 

1.  Election of four (4) Class  II Directors to serve a one-year term ending at the 2020 Annual Meeting of Stockholders

   

FOR each of the

Board’s nominees

      11  

 

   

 

   

 

 

 

2.  Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s independent registered public accounting firm for fiscal year 2019

   

FOR

      34  

 

   

 

   

 

 

 

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

   

FOR

      37  

The Brighthouse Story

Brighthouse became an independent company on August 4, 2017, the effective date of our 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 “Separation”). 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. In June 2018, MetLife divested all of its remaining Shares.

Our mission is to help people achieve financial security. We are one of the largest providers of annuities and life insurance in the United States. We specialize in products that are designed to help people protect what they have 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 our decision to outsource a significant portion of our client administration and service processes is consistent with our focus on reducing our expense structure over time.

2018 Highlights

During 2018, our first full year as an independent company, we made significant progress toward executing our strategy that we believe will deliver long-term value for our stockholders. Below are some of the key events of 2018 and highlights of our strategy and recent performance.

Executing Our Strategy

 

Sales – our 2018 full year annuity sales (approximately $5.9 billion) were up 36% compared to 2017 (approximately $4.3 billion), and our fourth quarter 2018 annuity sales (approximately $1.7 billion) were our highest since becoming an independent company.

 

Product Development – we updated our FlexChoice Variable Annuity (“VA”) offering, launched two new fixed rate annuity products and developed and prepared to launch Brighthouse SmartCaresm (”SmartCare), our new hybrid life insurance product (launched in February 2019).

 

Operational Performance – we exited 66 transition service agreements (“TSAs”) with MetLife in 2018, in line with our target, to position us for further expense reductions and cost control to achieve our previously communicated expense reduction target of $150 million in run-rate savings by year-end 2020.

 


 

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Proxy Summary   Brighthouse Financial, Inc.

 

 

Investments – through the end of 2018, we completed approximately 80% of our portfolio repositioning program.

Executing our strategy has resulted in strong financial performance, including:

 

Capital Return – we announced a $200 million common stock repurchase program in August 2018, two years ahead of our original expectation to start returning capital in 2020, and repurchased $105 million of our common stock in 2018.

 

Financial Strength – VA assets remained in excess of CTE98 at December 31, 2018. (“CTE” is a statistical measure that assesses the “worst case” loss by calculating the average amount of total assets required to satisfy obligations over the life of a contract or policy in the worst x% of future market scenarios, represented by CTE(100 less x) (e.g., CTE98 represents the total assets required in the worst two percent of a set of future market scenarios)).

Board Oversight of Our Strategy

One of the Board’s most important duties is to oversee our strategy to grow the Company and deliver long-term value to our stockholders. Throughout the year, the Board discusses with management and receives updates on key strategy topics. Additionally, the Board devotes one entire meeting each year to a review of the Company’s strategy. In January 2019, the Board and senior management engaged in constructive dialogue and feedback regarding our multi-year strategic and financial plan, including the following key topics:

 

the competitive landscape in which we operate;

 

our product and sales growth strategy and plans;

 

our business pricing process, including the Company’s pricing program that evaluates the profitability of new business;

 

our operational model, including our business process outsourcing strategy;

 

our future state technology platform;

 

our investment strategy and investment operating model;

 

our financial and risk profile under various capital market scenarios; and

 

key financial drivers of our financial plan, including capital return and other targets.

Key Elements of Our Strategy

We remain 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 our advisors and clients, as well as 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 management of Brighthouse 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 of our business strategy by management. 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 Term
(1)

 

   

Independent

 

   

Committee

Memberships

 

 

Irene Chang Britt(2)

 

 

 

 

56

 

 

 

 

Senior Vice President, Campbell Soup Company and President, Pepperidge Farm Inc. (Retired)

 

 

 

 

2020

 

 

 

 

 

 

Yes

 

 

  •    

•  

•  

 

 

Compensation

Investment

Nominating and Corporate Governance (Chair)

 

 

Chuck Chaplin(2)

Chairman of the Board

 

 

 

 

62

 

 

 

 

President, Chief Financial Officer and Chief Administrative Officer, MBIA Inc. (Retired)

 

 

 

 

2020

 

 

 

 

 

 

Yes

 

 

  •  

•  

•  

 

 

Audit

Executive

Finance and Risk (Chair)

 

 

Eileen Mallesch(2)

 

 

 

 

63

 

 

 

 

Senior Vice President and Chief Financial Officer of the property and casualty business of Nationwide Mutual Insurance Company (Retired)

 

 

 

 

 

2020

 

 

 

 

 

 

Yes

 

 

  •  

•  
•  

 

 

Compensation

Investment

Nominating and Corporate Governance

 

 

Meg McCarthy

 

 

 

 

65

 

 

 

 

Executive Vice President of Operations and Technology, CVS Health Corporation (acquired Aetna, Inc.)

 

 

 

 

 

2020

 

 

 

 

 

 

Yes

 

 

  •  

•  

 

 

Audit

Finance and Risk

 

Diane Offereins

 

 

 

 

61

 

 

 

 

Executive Vice President and President – Payments Services, Discover Financial Services

 

 

 

 

2020

 

 

 

 

 

 

Yes

 

 

  •  

•  

•  

 

 

Compensation (Chair)

Finance and Risk

Nominating and Corporate Governance

 

 

Pat Shouvlin

 

 

 

 

68

 

 

 

 

Partner, PricewaterhouseCoopers LLP (Retired)

 

 

 

 

2020

 

 

 

 

 

 

Yes

 

 

  •  

•  

•  

 

 

Audit (Chair)

Executive

Investment

 

 

Eric Steigerwalt

 

 

 

 

57

 

 

 

 

President and Chief Executive Officer, Brighthouse

 

 

 

 

 

2020

 

 

 

 

 

 

No

 

 

  •    

 

Executive (Chair)

 

Bill Wallace

 

 

 

 

71

 

 

 

 

Managing director and co-head of the Global Insurance Investor Client Practice, J.P. Morgan Chase & Co. (Retired)

 

 

 

 

 

2020

 

 

 

 

 

 

Yes

 

 

  •  

•  

 

 

Audit

Investment (Chair)

 

Paul Wetzel(2)

 

 

 

 

59

 

 

 

 

Chairman of the Global Financial Institutions Group, Deutsche Bank Securities Inc. (Retired)

 

 

 

 

2020

 

 

 

 

 

 

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 at this Annual Meeting.

Board Skills and Experience

The Board seeks Directors who possess a broad range of skills, experience and perspectives that position the Board to effectively oversee Brighthouse’s management. Our Directors were carefully selected for their mix of skills and

 


 

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Proxy Summary   Brighthouse Financial, Inc.

 

experience, which align with, and facilitate effective oversight of, Brighthouse’s strategy and risks. Our Directors possess substantive skills and experience in the following key areas 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 (see “Skills Matrix”).

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 recognizes that gender and ethnic diversity add to the overall mix of perspectives of our Board as a whole. In 2018, we added two new Directors, both of whom are women. The following charts present our current Board diversity profile:

 

 

LOGO

Directors who are diverse by gender or race 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; and

 

Chair of the Nominating and Corporate Governance Committee.

Stockholder Engagement Highlights

In 2018-2019, we continued the robust stockholder engagement program we instituted in 2017 following the Separation. As part of this program, we contacted 16 stockholders representing approximately 42% of our Shares (at that time) and met with a substantial portion of those we contacted. We also offered several stockholders the opportunity to engage with our Chairman, and one accepted. Discussion during our engagements 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 profile to ensure it reflects the evolving governance landscape and appropriately supports and serves 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  

All committees of the Board (other than the Executive Committee) (each a “Committee” and collectively, the “Committees”) are comprised solely of Independent Directors (as defined below, see “Director Independence”)

 

     
Board Effectiveness     LOGO  

Directors possess a deep and diverse set of skills and experience 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, including an action plan to implement Directors’ suggestions

 

    LOGO  

Commitment to Board diversity of perspective, gender and ethnicity

 

    LOGO  

Regular executive sessions of the Independent Directors

 

     
Responsiveness and Accountability     LOGO  

Robust stockholder engagement program, with the participation of the Chairman, to share our perspectives and solicit feedback

 

    LOGO  

 

Majority voting for Directors, with 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  

Annual assessment of Committee charters and the Board’s Corporate Governance Principles

 

    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.

 

Brighthouse Culture

Brighthouse is on a mission to help people achieve financial security. We are committed to building a company that creates sustainable long-term value for our stockholders while delivering on that mission. When we launched the Company, management sought to build an inclusive culture that supports our strategic goals. In our first full year as an independent company, we are proud of what we have accomplished to reinforce our culture and lay the foundation for sustainable growth. Highlights include:

 

 

LOGO

   

Our Values

 

We aim to build an organization where talented, passionate people from all backgrounds can make meaningful contributions to our success and grow their careers. We value collaboration, accountability and respect, and the health and safety of our employees, customers and communities. We strive to create a diverse and inclusive work environment, practice fair labor standards at every level, and recognize and respect basic human rights for all. We demonstrate our commitment to ethical practices through mandatory training on anti-harassment and on our Code of Conduct – which includes our commitment to maintaining the highest standard of ethical awareness, integrity and business conduct, and putting honesty, fairness and trustworthiness at the center of everything we do.

 

 

LOGO

   

Diversity and Inclusion

 

We foster a culture where diverse backgrounds and experiences are celebrated, and different ideas are heard and respected. We believe that by creating an inclusive workplace, we are better able to attract and retain talent and provide valuable solutions that meet the needs of our distribution partners, our advisors and their clients. We have established a Diversity and Inclusion Council that develops policies designed to increase inclusion in our offices and educate the Brighthouse community about the impact of diversity and inclusion on our corporate culture and business results.

 

Brighthouse is a proud equal opportunity employer committed to attracting, retaining and maximizing the performance of a diverse and inclusive workforce. It is Brighthouse’s policy to ensure equal employment opportunity without discrimination or harassment based on race, color, religion, sex (including pregnancy, childbirth, or related medical conditions), sexual orientation, gender identity or expression, age, disability, national origin, marital or domestic/civil partnership status, genetic information, citizenship status, uniformed service member or veteran status, or any other characteristic protected by law.

 

 

LOGO

   

Community Involvement

 

Brighthouse is committed to making a positive impact on our communities, and we encourage employees to take advantage of three paid volunteer days per year to help support local organizations. As a company, Brighthouse directly supports charitable endeavors through corporate contributions, fundraising campaigns and engagement in community groups such as Habitat for Humanity, Operation Sandwich (food drive for the hungry), Dress for Success (support services and professional attire for women in need) and many others.

 

 

LOGO

   

Brighthouse Foundation

 

The Brighthouse Foundation (the “Foundation”) was founded to enhance the quality of life in communities in which we live and work. The Foundation provides grants to high-impact, non-profit organizations, with a specific focus on organizations supporting women, children, veterans and the arts. Some of these organizations include the Foundation for the Carolinas, Habitat for Humanity and the Bechtler Museum of Modern Art.

 

 


 

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Brighthouse Financial, Inc.   Proxy Summary

 

 

LOGO

   

Sustainability

 

Brighthouse understands and respects our impact on the environment. Our headquarters in Charlotte, North Carolina, is LEED Platinum certified and our involvement in the construction process ensured we had a say in sourcing local building materials, and implementing a recycling program and light-harvesting system. These actions have allowed us to take meaningful steps toward conserving energy and resources.

Executive Compensation Highlights

Executive Compensation Philosophy

Our Compensation Committee and Board established a compensation program rooted in a pay-for-performance philosophy that incentivizes and rewards our named executive officers (each an “NEO”) for achievement of performance metrics that are aligned with key strategic goals. Our 2018 compensation program incentivizes our NEOs to achieve goals that support Brighthouse’s long-term strategy and rewards them for their contributions to Brighthouse’s performance. Our 2018 compensation program objectives include:

 

Pay-for-performance by tying variable compensation to achievement of Company and individual goals;

 

Aligning the interests of our executives 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 market best practices into our compensation program; and

 

Reinforcing strong risk management by avoiding incentives that encourage NEOs 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 our executives’ interests with those of our stockholders.

The Compensation Committee also considered stockholder feedback in designing 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 Brighthouse’s strategy.

Key Components of Our 2018 Executive Compensation Program

 

Base Salary

 

   

•  Fixed compensation for services during the year

Short-Term

Incentive

   

•  Annual cash award based on Company and individual performance

•  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, which is vital to the stability of our business

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

 

Long-Term

Incentive

   

•  Variable equity awards, in a mix of three equally-weighted elements: Restricted Stock Units (“RSUs”), Performance Share Units (“PSUs”) and Nonqualified Stock Options (“NQSOs”)

•  Performance metrics apply only to our PSUs and measure our achievement of two strategic goals over the 2018-2020 performance period:

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

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

 

 


 

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Prosy Summary   Brighthouse Financial, Inc.

 

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.

Key Executive Compensation Practices

 

     
What we do     LOGO   Pay-for-Performance. A substantial portion of our NEOs’ Target Total Direct Compensation is in the form of variable, at-risk elements that reward our executives only if we achieve performance goals that create stockholder value.
    LOGO   Stock Ownership Guidelines. We have established stock ownership and retention guidelines that call for our NEOs to maintain significant stock ownership, thereby aligning their interests with those of our stockholders.
    LOGO   Clawback Policy. We adopted a robust clawback policy that allows the Company to recoup incentive compensation earned by executive officers or other employees in the event of a material restatement of the Company’s financial statements or certain misconduct.
    LOGO   Minimum Vesting Periods. Equity awards that are subject to achievement of performance goals or that vest based solely on continued service generally have three-year vesting periods (the latter at a rate not greater than one-third per year).
    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 consider their feedback in the design of our compensation program.
    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.
    LOGO  

Double-Trigger Vesting of Equity Awards upon a Change of Control. Outstanding awards that are substituted or assumed in a change of control only vest if the NEO is terminated or resigns with good reason.

 

     
What we don’t do    

LOGO

  Gross-ups on Excise Taxes. We do not provide tax gross-up benefits in connection with payments upon a change of 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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Brighthouse Financial, Inc.   Proposal 1 - Election of Directors

 

Proposal 1

Election of four (4) Class II Directors to serve a one-year term ending at the 2020 Annual Meeting of Stockholders

The Board has nominated each of our Class II Directors, Irene Chang Britt, C. Edward Chaplin, Eileen A. Mallesch and Paul M. Wetzel, 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 II 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 Irene Chang Britt, C. Edward Chaplin, Eileen A. Mallesch and Paul M. Wetzel.

Our Board is currently composed of nine Directors. Biographical information for each Director, including the Class II Director nominees, and a description of each Director’s skills and qualifications, follows this proposal.

As described in our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), our Board was initially divided into three classes. Our Certificate of Incorporation provides for the declassification of our Board by our 2020 Annual Meeting. Following our 2018 Annual Meeting, our Board consists of two classes: Class III Directors (which includes the former Class I Directors) whose terms expire at the 2020 Annual Meeting; and Class II Directors up for election at this 2019 Annual Meeting, for a term expiring at the 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 two annual meetings and the terms they will serve if elected.

 

     

Meeting

 

     

Directors Standing for Election

 

     

Term

 

2019 Annual Meeting     Class II Directors    

One-year term expiring at 2020 Annual Meeting

 

2020 Annual Meeting and all

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 is unable to serve as Director at any point before the Annual Meeting or any adjournment or postponement thereof, the Board may reduce the size of the Board or nominate another candidate for election as a Class II 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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The Board of Directors   Brighthouse Financial, Inc.

 

The Board of Directors

Class II – Nominees for Election as Directors for Terms Expiring in 2020

 

 

 

LOGO  

Irene Chang Britt

 

Independent Director

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

 

Age: 56

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 Inc., 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 in
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 various 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 a director of Dunkin’ Brands Group, Inc. since May 2014, currently
serving on the Audit and Nominating and Corporate Governance (Chair) Committees, and as a
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 a director of TerraVia Holdings, Inc., from
March 2016 to January 2018, and as non-executive chairperson from March 2017. Ms. Chang Britt
is a National Association of Corporate Directors (“
NACD”) Board Leadership Fellow and a member
of the board of directors of the NACD New York Chapter.

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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Brighthouse Financial, Inc.   The Board of Directors

 

 

 

LOGO  

C. Edward (“Chuck”) Chaplin

 

Independent Director

Chairman of the Board

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

 

Age: 62

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 for the public and structured finance markets, 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 director of MGIC Investment Corporation since January 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.

 

 

 


 

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The Board of Directors   Brighthouse Financial, Inc.

 

 

 

LOGO  

Eileen A. Mallesch

 

Independent Director

Committee memberships: Compensation; Investment; Nominating and
Corporate Governance

 

Age: 63

Director since: 2018

Other public company directorships: State Auto Financial Corporation; Libbey Inc.; Fifth Third Bancorp

Past public company directorships: Bob Evans Farms, Inc.

Professional Experience: Ms. Mallesch served as Senior Vice President and Chief Financial Officer
of the property and casualty insurance business of Nationwide Mutual Insurance Company, a U.S.
insurance and financial services company, from 2005 to 2009. Previously, Ms. Mallesch was
employed by General Electric, a multinational conglomerate, where she served as Senior Vice
President and Chief Financial Officer of Genworth Financial Life Insurance Company from 2003 to
2005; Vice President and Chief Financial Officer of GE Financial Employer Services Group from
2000 to 2003; and Controller for GE Americom from 1998 to 2000. Ms. Mallesch’s positions prior to
2000 include International Business Area Controller, Energy Ventures, for Asea Brown Boveri, Inc., a
multinational power and automation technologies company, and financial management positions
with PepsiCo, Inc., a food and beverage company. Ms. Mallesch is a certified public accountant and
began her career as a senior auditor with Arthur Andersen, an accounting and professional services
firm. She is a director of State Auto Financial Corporation (since 2010), currently serving on the
Audit (Chair) and Compensation Committees; Libbey Inc. (since 2016), currently serving on the
Audit and Compensation Committees; and Fifth Third Bancorp (since 2016), currently serving on
the Audit and Human Capital and Compensation Committees. Ms. Mallesch also served on the
board of directors of Bob Evans Farms, Inc. from 2008 to January 2018, when it was sold to Post
Holdings, Inc. Ms. Mallesch is an NACD Governance Fellow.

Skills and Qualifications: Ms. Mallesch is qualified to serve on our Board on the basis of her financial
expertise, experience in the insurance industry and service on various public company boards.

 


 

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Brighthouse Financial, Inc.   The Board of Directors

 

 

 

LOGO  

Paul M. Wetzel

 

Independent Director

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

 

Age: 59

Director since: 2017

Professional Experience: Mr. Wetzel has served as a Senior Advisor to Rockefeller Capital
Management, a financial services firm, since October 2018. Mr. Wetzel retired from Deutsche Bank
Securities Inc., a subsidiary of global investment bank and financial services firm Deutsche Bank
AG (“
Deutsche Bank”) providing broker-dealer and investment advisory services, in October 2016.
Mr. Wetzel held positions of increasing responsibility at Deutsche Bank or its subsidiaries 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., Inc., a global investment bank and financial services firm, in investment
banking for 17 years, with positions of increasing responsibility and a focus on financial
institutions. Mr. Wetzel is an NACD Board Leadership Fellow.

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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The Board of Directors   Brighthouse Financial, Inc.

 

Class III (includes former Class I Directors) – Continuing Directors Whose Terms Expire in 2020

 

 

 

LOGO  

Margaret M. (“Meg”) McCarthy

 

Independent Director

Committee memberships: Audit; Finance and Risk

 

Age: 65

Director since: 2018

Other public company directorships: First American Financial Corporation; Marriott International, Inc.

Professional Experience: Ms. McCarthy is currently Executive Vice President of Operations and
Technology for CVS Health Corporation, a pharmacy and healthcare company which acquired
Aetna, Inc. (“
Aetna”) in November 2018, where she is responsible for technology, data security,
procurement, real estate and service operations. Prior to the acquisition, Ms. McCarthy held the
same position for Aetna, a diversified healthcare benefits company, since 2010. Prior to joining
Aetna in 2003, she served as Senior Vice President of Information Technology at CIGNA
Healthcare, a global health services company, and in information technology-related roles at
Catholic Health Initiatives, a nonprofit health system. Ms. McCarthy also worked in technology
consulting at Accenture and was a consulting partner at Ernst & Young, an accounting and
professional services firm. She has served as a director of First American Financial Corporation
since 2015, currently serving on its Nominating and Corporate Governance Committee (Chair), and
of Marriott International, Inc., since 2019, currently serving on its Audit Committee. Ms. McCarthy
also has served as a director of vArmour, a privately-owned data center and cloud security
company, since 2015, and serves on various advisory boards and councils, including the Financial
Services Information Sharing and Analysis Center, Oracle Presidents Council, MIT Center for
Information Systems Research and the Board of Trustees of Providence College.

Skills and Qualifications: Ms. McCarthy is qualified to serve on our Board on the basis of her deep
expertise in technology, cybersecurity and operations and her public company board experience.

 


 

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Brighthouse Financial, Inc.   The Board of Directors

 

 

 

LOGO  

Diane E. Offereins

 

Independent Director

Committee memberships: Compensation (Chair); Finance and Risk;

Nominating and Corporate Governance

 

Age: 61

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 at Discover as Executive Vice President, Payment Services (2008
to 2010) and Executive Vice President and Chief Information Officer (1998 to 2010). Ms. Offereins
served as a director of West Corporation, 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.

 

 

 

LOGO  

Patrick J. (“Pat”) Shouvlin

 

Independent Director

Committee memberships: Audit (Chair); Executive; Investment

 

Age: 68

Director since: 2017

Professional Experience: Mr. Shouvlin retired from PricewaterhouseCoopers LLP (“PwC”), an
accounting and professional services firm, 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 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 served on the board and as Chair of the Audit Committee of Cunningham
Lindsey, a privately-owned global claims management outsourcing firm, from 2013 to 2018.

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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The Board of Directors   Brighthouse Financial, Inc.

 

 

 

LOGO  

Eric T. Steigerwalt

 

Committee Memberships: Executive (Chair)

 

Age: 57

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, a global insurance and
financial services company, from 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); Senior Vice President and Chief Financial Officer of Individual Business (July 2003 – May
2007); and Vice President, Financial Management (May 1998 – July 2003). Prior to joining MetLife,
Mr. Steigerwalt was a Vice President of AXA S.A., a financial services and insurance company from
1993 to 1998. Mr. Steigerwalt has been a member of the board of directors of The American
Council of Life Insurers (“ACLI”) since October 2018.

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

Committee Memberships: Audit; Investment (Chair)

 

Age: 71

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 various 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 Group Inc., 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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Brighthouse Financial, Inc.   Skills Matrix

 

Skills Matrix

The Board seeks Directors who possess a broad range of skills, experience and perspectives that position the Board to effectively oversee Brighthouse’s strategy and risks. In its oversight of Board succession planning and refreshment, the Nominating and Corporate Governance Committee utilizes a skills matrix to track our current Directors’ skills and expertise. To create the skills matrix, presented below, each Director periodically self-evaluates those areas in which he or she has meaningful and substantive skills or experience.

 

               
 

Irene

  Chang   Britt

 

 

  Chuck  

  Chaplin  

 

 

Eileen

  Mallesch  

 

 

Meg   McCarthy  

 

 

Diane

  Offereins  

 

 

Pat

  Shouvlin  

 

 

Eric

  Steigerwalt  

 

 

Bill

  Wallace  

 

 

Paul

  Wetzel  

 

                   

 

Senior Management Experience

 

  LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO
                   

 

Financial Services

 

      LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO
                   

 

Insurance

 

      LOGO   LOGO   LOGO       LOGO   LOGO   LOGO   LOGO
                   

 

Risk Management

 

  LOGO   LOGO   LOGO   LOGO   LOGO       LOGO   LOGO   LOGO
                   

 

Accounting

 

      LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO
                   

 

Brand and Marketing

 

  LOGO               LOGO       LOGO        
                   

 

Compensation/Human Resources

 

  LOGO       LOGO   LOGO   LOGO       LOGO   LOGO   LOGO
                   

 

Information Technology/Cybersecurity

 

  LOGO       LOGO   LOGO   LOGO                
                   

 

Investments

 

      LOGO   LOGO           LOGO   LOGO   LOGO   LOGO
                   

 

Legal/Regulatory

 

      LOGO   LOGO   LOGO   LOGO       LOGO   LOGO   LOGO
                   

 

Public Company Board Experience

 

  LOGO   LOGO   LOGO   LOGO   LOGO                

 


 

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Board and Corporate Governance Practices   Brighthouse Financial, Inc.

 

Board and Corporate Governance Practices

We believe effective corporate governance policies and practices will 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. The Board believes a balanced governance profile will help the Company deliver long-term value to our stockholders. The Board continually assesses our governance profile to ensure it remains appropriate as we continue to evolve as a public company.

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, well-functioning board that we believe is 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

 

   

Experience in insurance or financial services

 

   

Financial literacy

 

   

Risk management expertise, including in the areas of market, liquidity and cybersecurity risk

 

   

Investments expertise, including oversight of strategic asset allocation and portfolio construction

 

   

Gender and ethnic diversity

 

   

Information technology expertise

 

   

Experience serving on a public company board

 

   

Commitment to Brighthouse values

 

 

Director Independence – At least a majority of the Board is required to consist of 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 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. In determining Ms. McCarthy’s independence, the Board considered Brighthouse’s relationship with her current employer, CVS Health Corporation (which acquired Aetna in November 2018). Aetna provides and administers insurance and other employee benefits services to Brighthouse and our employees. The Board

 


 

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Brighthouse Financial, Inc.   Board and Corporate Governance Practices

 

 

determined that this relationship does not exceed thresholds in applicable independence standards and does not interfere with Ms. McCarthy’s exercise of independent judgement in carrying out her responsibilities as a Director.

 

 

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) Directors who serve on more than three public company audit committees should not serve on our Audit Committee if their ability to effectively serve on our Audit Committee is impaired, as determined by the Nominating and Corporate Governance Committee Chair and the Board.

 

 

Director Nomination Process – Nominations for election as a Director at our annual meetings may be made by our Board 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 our 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 retained a professional search firm to identify and recruit candidates for the two directorships we filled in 2018. 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 annual meetings, see “Other stockholder proposals and director nominations.”

Board Composition, Refreshment and Ongoing Education

 

Board Diversity – The Board believes 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, experience and perspectives, and who contribute to the ethnic and gender diversity of our Board.

 

 

Board Refreshment – The Board recognizes it must refresh itself to address Brighthouse’s oversight needs as it evolves over time. The Nominating and Corporate Governance Committee and Board annually review the skills and experience that allow the Board to best oversee Brighthouse’s strategy. We previously disclosed our intent for the Board to consist of nine directors as soon as reasonably practicable following the Separation. In September 2018, following MetLife’s divestiture of its remaining Shares, John McCallion resigned from the Board. In November 2018 (and as discussed in greater detail below), we added two new Directors, resulting in a Board consisting of nine Directors. During 2018, the Nominating and Corporate Governance Committee led a Director self-evaluation process where each Director ranked his or her expertise and experience in a number of key skill areas that are relevant to service on our Board. The Nominating and Corporate Governance Committee considered the Directors’ self-evaluations in analyzing the aggregate representation of skills on the Board, and identified an opportunity to improve the Board’s effectiveness by adding one or more Directors with skills and experience in the areas of (i) information technology and cybersecurity and (ii) investments and overall finance expertise. The Nominating and Corporate Governance Committee, with the assistance of management and a third-party director search firm, led the director search and recruitment, and, in November 2018, the Board appointed two new Independent Directors who possessed the desired skills and fit, and who also added to the diversity of our Board. Ms. Mallesch brings more than 25 years of finance and strategy experience in a variety of industries, including insurance, telecommunications, consumer products and manufacturing. Ms. McCarthy brings over 30 years of experience as a senior leader in the insurance and healthcare industries with expertise in information technology, cybersecurity and operations.

 


 

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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 oversees the overall process for the assessment, as well as the substantive matters to be addressed during the assessment. In 2018, each Director completed assessments of the Board’s and each Committee’s effectiveness, including with respect to: Board and Committee composition; the quality of meeting materials and discussions during Board and Committee meetings; appropriateness of meeting agenda topics; and interactions with management. Each Director also provided feedback on the other Directors. The Nominating and Corporate Governance Committee reviewed and reported the results of the assessments to the full Board and to management. The chair of the Nominating and Corporate Governance Committee discussed with each Director the results of the individual feedback. The Board addressed issues raised in the self-assessments with concrete steps, including discussions with management to enhance meeting materials, refining the focus on key areas and other actions to maximize the Board’s and Committees’ effectiveness.

 

 

Mandatory Retirement Age – Our Corporate Governance Principles state that Directors may not stand for re-election or be appointed to the Board after reaching the age of 72. The Board 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 when 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. In 2018, the entire Board participated in continuing education programs. We also 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 having an independent chairman leading the Board is the best board leadership structure for Brighthouse at this time. This structure enhances the Board’s ability to exercise independent oversight of Brighthouse’s management on behalf of its stockholders. Furthermore, the duties of the chairman of the Board (the “Chairman”) and the CEO are particularly demanding for a new public company. Separating these roles allows each to focus on his 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:

 

promoting the highest standards of corporate governance;

 

providing thought leadership for the Board, through understanding the views of our Directors, stockholders and management;

 

setting the agenda for Board meetings with input from the CEO;

 

presiding over Board meetings and executive sessions of the Independent Directors;

 

promoting effective communication and serve as the primary conduit between the Board and the CEO and other members of management;

 

setting 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;

 


 

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establishing a 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, overseeing CEO and management succession planning; and

 

with the Chair of the Nominating and Corporate Governance Committee, reviewing Committee and Committee chair assignments, lead recruitment of Director candidates and oversee annual evaluations for the Board and its Committees.

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 affirmatively 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 all our Directors, except for Mr. Steigerwalt, our President and CEO, are Independent Directors. 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.

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.

 


 

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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 constructive 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 comprises a year-round cycle of communication, feedback and action, which is described in the following diagram.

 

 

LOGO

2018-2019 Engagement – Our Board believes it is important to engage directly with our stockholders. During the fourth quarter of 2018 and the first quarter of 2019, we invited 16 of our largest stockholders owning approximately 42% of our Shares (at that time) to engage with us, and met with nine of those stockholders representing 26% of our Shares. We also met with two major proxy advisory firms, Institutional Stockholder Services (ISS) and Glass Lewis. We also offered several stockholders the opportunity to engage with our Chairman, and one accepted. Both the Chairman and the stockholder reported that the engagement provided a valuable opportunity to deeply discuss the Board’s oversight of Brighthouse.

During our stockholder engagements, we discussed:

 

our first full year as an independent company, including our publicly disclosed strategic objectives and performance;

 

the Board’s oversight of our Company’s strategy and business plan;

 

Board composition and refreshment, including our recent addition of two new Directors; our Board’s diverse mix of skills, experience and perspectives; the Board’s gender and ethnic diversity; and our commitment to building a well-functioning, effective Board through meaningful assessments and refreshment;

 

the Board’s annual evaluation of our governance profile and its commitment to continual assessment of our policies and practices;

 


 

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our 2018 executive compensation programs, including our use of objective, quantitative metrics that are aligned with our long-term strategy; and

 

our corporate culture and the Board’s oversight of human capital management.

During each engagement, we solicited feedback on our Board, governance practices and executive compensation programs. Our stockholders generally expressed support for our governance and our executive compensation programs; commended the composition of our Board, including their qualifications and diversity; encouraged the Board and management to regularly evaluate our governance and compensation practices to ensure that they remain appropriate as we evolve over time; and shared their views on specific policies and practices that the Board may consider adopting in the future. Our Corporate Secretary discussed our engagement activities with the Nominating and Corporate Governance Committee and shared the feedback we received from our stockholders.

Succession Planning and Talent Management

Succession planning and oversight of our talent management practices are central to the Board’s responsibilities. The Board, in coordination with the Compensation Committee, oversees the Company’s succession plans for the CEO and other members of senior management. The Board discusses, 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 and the Compensation Committee regularly discuss with management succession plans for other senior management positions, including identifying potential candidates and plans to develop their skills in anticipation of potential succession. To support talent development and allow the Board to meet and assess potential successors, non-executive officers and mid-level management regularly participate and make presentations in Board and Committee meetings. The Board also meets in executive session to discuss whether the Company has the managerial talent available to replace current executives should the need arise.

Risk Oversight

We believe 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 significant risk policies and regularly discuss with management our performance against 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 targets in key risk areas, including credit, market, liquidity, operational, model, cyber and IT, and third-party risk. 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. In its discussions with the Board, senior management, including the CEO, the Chief Operating Officer (“COO”) and the Chief Financial Officer (“CFO”), reviews the key risks relating to the execution of our strategy and describes management’s activities to identify, assess and mitigate such risks.

 

 

Cybersecurity – The Board periodically meets with our Chief Technology Officer and Chief Information Security Officer to review our information technology and cybersecurity risk profile and to discuss our activities to manage those risks. The Chief Information Security Officer is responsible for the Company’s cybersecurity program which is designed to protect and preserve the integrity, confidentiality, and continued availability of the information owned by, or in the care of, the Company. The Company’s cybersecurity program also establishes operational standards

 


 

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that are designed to enable the Company to effectively identify, evaluate and respond to events that have the potential to negatively impact the Company’s operations. 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.

 

 

Human Capital Management – The Board recognizes the importance of maintaining a highly skilled and engaged workforce and a strong corporate culture that reinforces our values of collaboration, focus and accountability. The Board periodically meets with our Human Resources organization to discuss key human capital metrics. The Board and the Committees also assess employee engagement, turnover and workloads to help ensure that the Company has adequate resources to execute on its strategy.

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 established 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 that describes the Committee’s role and responsibilities. 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 U.S. 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 conducts an evaluation of its performance and reviews the adequacy of, and proposes changes to, its charter for Board approval. Each Committee has full authority to retain, at Brighthouse’s expense, independent advisors or consultants.

Additional information about our Committees follows, including their composition, the number of meetings they held in 2018 and their primary roles and responsibilities, including their roles in the oversight of risk management.

 

 

Audit Committee

Members:

Pat Shouvlin (Chair)

Chuck Chaplin

Meg McCarthy

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 applicable SEC rules.

Number of Meetings in 2018: 10

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 audit of the Company’s financial statements and recommend to the Board whether the audited financial statements should be included in our Annual Report on Form 10-K (“Form 10-K”).

 


 

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Review and discuss with management and the independent auditor our unaudited quarterly financial statements and the Company’s statutory financial results.

 

Review earnings press releases prior to their release to the public.

 

Oversee our compliance with legal and regulatory requirements.

 

Oversee the internal audit function.

 

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.

 

Oversee our operational risks.

 

Review reports on our compliance processes and programs.

 

Appoint, engage, evaluate, approve the compensation of, and oversee the work and the continued independence of our independent auditor (the Audit Committee’s role in oversight of Brighthouse’s independent auditor is discussed further in Proposal 2).

 

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 policies and practices.

 

Oversee the management of our risks relating to financial statements, financial systems, financial reporting processes, internal control over financial reporting, compliance and auditing, as well as the policies 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, as well as the policies for monitoring and mitigating such risks.

 

Discuss with management the state of regulatory compliance risk.

 

 

Compensation Committee

Members:

Diane Offereins (Chair)

Irene Chang Britt

Eileen Mallesch

Paul 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 2018: 9

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 Directors 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 the CEO’s initial recommendations and evaluation of their performance.

 

Review and approve the Company’s equity and non-equity incentive compensation plans and arrangements, and approve awards to employees under such plans.

 


 

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Review and discuss with management the Company’s Compensation Discussion and Analysis, and recommend to the Board that it be included in the Company’s Form 10-K 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.

 

Oversee the Company’s succession planning for its CEO and other executive officers.

Role in Risk Oversight

 

Review, with the assistance of the Compensation Committee’s independent compensation consultant and Brighthouse’s Chief Risk Officer, incentive compensation arrangements to confirm that incentive compensation does not encourage unnecessary risk taking.

 

Review and discuss the relationship between risk management policies and practices, corporate strategy and compensation of senior executives.

 

 

Executive Committee

Members:

Eric Steigerwalt (Chair)

Chuck Chaplin

Pat Shouvlin

Number of Meetings in 2018: 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:

Chuck Chaplin (Chair)

Meg McCarthy

Diane Offereins

Paul Wetzel

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

Number of Meetings in 2018: 5

Key Roles and Responsibilities

 

Oversee the Company’s financial plans, policies and strategies.

 

Review business and financial metrics to measure Brighthouse’s performance against its business and financial plans, in alignment with our multi-year strategy.

 

Approve, or recommend for Board approval, equity and debt issuances, share repurchase programs, dividends and mergers and acquisitions.

 

Oversee the Company’s capital management and liquidity management strategies, including the review and approval of capital and liquidity policies and plans, the availability and use of liquidity management tools and the review of liquidity benchmarks and metrics.

 

Oversee the capitalization of Brighthouse and its subsidiaries.

 


 

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Oversee the Company’s hedging strategy, including the use of derivative instruments.

 

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, and review of our significant risk policies and our performance against risk metrics and targets.

 

Discuss with 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.

 

Oversee management’s use of risk metrics and targets and monitor performance against such benchmarks and targets.

 

Coordinate, through the Finance and Risk Committee’s chair, with management, and with the chairs of the other Committees, to help ensure that all Committees receive necessary information to oversee our risks.

 

Coordinate, through the Finance and Risk Committee’s chair, with management and the Compensation Committee chair, the Compensation Committee’s oversight of compensation-related risk matters.

 

Review management’s Own Risk and Solvency Assessment report, a required regulatory filing which assesses our risk exposures and solvency, and describes our risk management organization, structure and processes.

 

 

Investment Committee

Members:

Bill Wallace (Chair)

Irene Chang Britt

Eileen Mallesch

Pat Shouvlin

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

Number of Meetings in 2018: 7

Key Roles and Responsibilities

 

Oversee, on a consolidated basis, the investment activities of Brighthouse and its subsidiaries’ general accounts and consolidated separate accounts.

 

Oversee the enterprise investment strategy, including strategic and tactical asset allocation decisions.

 

Review the performance of the investments in our general and consolidated separate accounts, including our derivatives activity.

 

Review and approve Enterprise Investment Authorities (“EIAs”) relating to our general accounts and consolidated separate accounts.

 

Review the compliance of our investments with our EIAs.

 

Authorize or approve investments and the retention and termination of investment advisers, as required by the EIAs.

 

Oversee the implementation and execution of our investments operating model.

 

Oversee our engagement of investment advisers to manage general account and the separate account investments.

 

Review the investment activities and performance of the separate accounts.

 

Discuss with management the economic and market outlook, and the Company’s invested asset sectors and asset allocation.

 

Review Brighthouse’s annual investment plan and monitor performance against it.

 


 

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Role in Risk Oversight

 

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

 

Oversee the management and mitigation of the risks associated with our investments operating model.

 

 

Nominating and Corporate Governance Committee

Members:

Irene Chang Britt (Chair)

Eileen Mallesch

Diane Offereins

Paul Wetzel

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

Number of Meetings in 2018: 5

Key Roles and Responsibilities

 

Review our corporate governance policies and practices, and recommend appropriate changes to the Board.

 

Recommend qualifications for director candidates to the Board, and periodically review such qualifications with the Board.

 

Lead the search for qualified director candidates, including the development of search criteria and specifications, and consider director candidates recommended by our stockholders pursuant to the procedures set forth in our Corporate Governance Principles.

 

Oversee the Director orientation process 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.

 

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 an investigation or 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 director independence 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.

 

Oversee the Company’s government relations and political activities in accordance with its political strategy and public policy objectives.

Role in Risk Oversight

 

Oversee risks related to the Company’s governance.

 

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 Meetings and Director Attendance

In 2018, the Board held ten meetings and the Committees held a total of 36 meetings. Every Director attended at least 75% of the aggregate number of meetings of the Board and the Committees on which he or she served.

Director Compensation

Our director compensation program is designed to fairly compensate our Independent Directors 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. To benchmark Director compensation, the Independent Directors targeted compensation at the median of the same Comparator Group we used for our NEOs (see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program – Role of the Compensation Committee and Others in Determining Compensation – Establishing a Compensation Comparator Group”). The table below sets forth the details of the compensation program for independent members of the Board.

 

   

 

  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

Other Committees (Compensation Committee; Nominating and Corporate Governance Committee; Finance and Risk Committee; Investment Committee)

   $ 17,500      100% cash

In November 2018, on the recommendation of the Nominating and Corporate Governance Committee, the Board approved the award of prorated compensation in consideration of interim service on the Board until the next quarterly or annual payment for two new Directors (Ms. Mallesch and Ms. McCarthy) who were appointed in November 2018.

Annual Equity Awards

The Board approved annual RSU awards as part of our independent director compensation program. Annual awards to Independent Directors generally vest on the earlier of the one-year anniversary of the grant date or the date of the next annual meeting of stockholders. The number of RSUs to be granted to each Independent Director is determined by dividing the value of the equity portion of the annual retainer ($120,000), or a prorated amount of the retainer for service of less than a year, by the closing price of the Company’s common stock on the grant date, rounded down to the nearest whole number. The number of RSUs to be granted to the Chairman for the additional Chairman retainer is determined by dividing the equity portion of the Chairman retainer ($100,000) by the closing price of the Company’s common stock on the grant date, rounded down to the nearest whole number. The RSU grants are made pursuant to the Brighthouse Financial, Inc. 2017 Non-Management Director Stock Compensation Plan (the “Director Plan”), which was approved by stockholders at the 2018 Annual Meeting.

Director Founders’ Grants

To further align the interests of our Independent Directors with our stockholders, on August 9, 2017, 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 Directors then in office (the “Director Founders’ Grant”). The Director Founders’ Grants were made under the Director Plan, effective September 8, 2017, and were subject to stockholder approval of the Director Plan. The number of RSUs was determined by dividing 50% of the annual retainer for independent

 


 

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members of the Board ($120,000) by $54.54, the closing price of Brighthouse common stock on the effective award date, rounded down to the nearest whole number.

Compensation paid to our Independent Directors in 2018 is presented in the following table and the accompanying narrative.

2018 Director Compensation Table

 

     

 Name

 

 

Fees Earned or
Paid in Cash
(1)

 

   

Stock Awards(2, 3)

 

   

Total

 

 

 Irene Chang Britt

 

 

$137,500     

 

 

 

$225,781     

 

 

 

$363,281

 

 Chuck Chaplin(4)

 

 

$237,500     

 

 

 

$325,781     

 

 

 

$563,281

 

 Eileen Mallesch(5)

 

 

$30,000     

 

 

 

$59,962     

 

 

 

$89,962

 

 Meg McCarthy(6)

 

 

$30,000     

 

 

 

$59,962     

 

 

 

$89,962

 

 Diane Offereins

 

 

$137,500     

 

 

 

$225,781     

 

 

 

$363,281

 

 Pat Shouvlin

 

 

$142,500     

 

 

 

$225,781     

 

 

 

$368,281

 

 Bill Wallace

 

 

$137,500     

 

 

 

$225,781     

 

 

 

$363,281

 

 Paul Wetzel

 

 

$120,000     

 

 

 

$225,781     

 

 

 

$345,781

 

 

(1)

Fees Earned or Paid in Cash. Each Independent Director is entitled to receive an annual cash retainer of $120,000, or a prorated amount for a lesser period of service. 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 their service in 2018, Ms. Mallesch and Ms. McCarthy each received one installment of the annual cash retainer.

 

(2)

Stock Awards. Amounts in this column represent the aggregate grant date fair value of each applicable award of RSUs, computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718.

 

(3)

Annual and Prorated Awards. As part of their annual retainers, each of Ms. Britt, Ms. Offereins, Mr. Shouvlin, Mr. Wallace and Mr. Wetzel was granted an equity award of 2,494 RSUs on May 23, 2018, each with an aggregate grant date fair value equal to $119,961. Mr. Chaplin was granted an equity award of 4,573 RSUs on May 23, 2018 for his service as Director (2,494 RSUs) and Chairman of the Board (2,079 RSUs), with an aggregate grant date fair value equal to $219,961. The Directors’ awards will vest on May 23, 2019, the one-year anniversary of the grant. Ms. Mallesch and Ms. McCarthy were each granted a prorated annual equity award of 1,482 RSUs on November 15, 2018, each with a grant date fair value equal to $59,962, which will vest on the date of the 2019 Annual Meeting.

Director Founders Grants. Each of the Independent Directors serving as of August 9, 2017 (excludes Ms. Mallesch and Ms. McCarthy) also received a grant of 2,200 RSUs under the Director Plan effective September 8, 2017, subject to stockholder approval of the Director Plan, which was received at the 2018 Annual Meeting on May 23, 2018. Since the Director Founders’ Grants were subject to stockholder approval as of their effective date, no grant date fair value was determinable in 2017 under ASC Topic 718 and no value was included in the Fiscal 2017 Director Compensation Table. The value is instead recorded in this column along with the grant date fair value of the annual award of RSUs made in respect of the 2018 fiscal year. Upon stockholder approval of the Director Plan at the 2018 Annual Meeting, the grant date fair value of the Director Founders’ Grants was determined to be $105,820, based on the closing price of the Company’s common stock of $48.10. The fair value of the Director Founders’ Grant RSUs on September 8, 2017 was $119,988. The Director Founders’ Grant RSUs vested and were paid out on September 30, 2018.

 


 

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Brighthouse Financial, Inc.   Board and Corporate Governance Practices

 

(4)

The amount includes cash and equity payments for service as Chairman of the Board.

 

(5)

Ms. Mallesch joined the Board on November 15, 2018 and was assigned to the Compensation, Investment, and Nominating and Corporate Governance Committees.

 

(6)

Ms. McCarthy joined the Board on November 15, 2018 and was assigned to the Audit and Finance and Risk Committees.

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 Independent Directors. Pursuant to these guidelines, each Independent Director is expected to acquire 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) or the date the Director commences service. Directors are required to retain at least 50% of the net shares acquired upon vesting of equity awards until the ownership guidelines are satisfied. No Directors have sold any vested equity awarded to them.

Compensation Committee Interlocks and Insider Participation

There are no interlocking relationships between any member of our Compensation Committee and any of our executive officers that require disclosure under applicable rules.

Codes of Conduct

Brighthouse’s strength depends on the trust of our associates, distribution partners, 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 Employees applies to all Brighthouse officers and employees.

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

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 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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Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s

independent registered public accounting firm for fiscal year 2019

  Brighthouse Financial, Inc.

 

Proposal 2

Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s independent registered public accounting firm for fiscal year 2019

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, 2019. 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 and the effectiveness of the Company’s internal controls over financial reporting 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 Company’s independent auditor for fiscal year 2019. 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 2018.

The Board of Directors recommends that stockholders vote “FOR” the ratification of the appointment of Deloitte as our independent registered public accounting firm for fiscal year 2019.

Fees Paid to Deloitte & Touche LLP

The following table shows the fees incurred by the Company for professional services rendered by Deloitte for the fiscal year ending December 31, 2018. Prior to the Separation, and until the end of the first quarter of 2017, MetLife, as our then-parent company, paid all audit, audit-related, tax and other fees of Deloitte. As a result, the 2017 fees listed below exclude the fees paid by MetLife for the first quarter of 2017 (ending March 31, 2017). All services provided to the Company were approved by the Audit Committee.

 

  Fees (in Thousands)   2018     2017  

  Audit Fees(1)

    $14,505       $15,250  

  Audit-Related Fees(2)

    $390       $1,140  

  Tax Fees(3)

    $790       $980  

  All Other Fees(4)

    $2       $8  

  Total

    $15,687       $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

 


 

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Brighthouse Financial, Inc.  

Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s

independent registered public accounting firm for fiscal year 2019

 

  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, 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 has established a policy requiring its pre-approval of all audit and non-audit services provided by the independent auditor, and this policy is designed to ensure that the independent auditor’s independence is not impaired. The policy provides for the Audit Committee’s general pre-approval, on an annual basis, of audit, audit-related and permissible non-audit services up to amounts reasonably determined by the Audit Committee to be appropriate. The Audit Committee must specifically pre-approve (i) any proposed services that exceed such general pre-approval limits, (ii) tax services and (iii) any additional services that have not been generally pre-approved by the Audit Committee. The independent auditor is required to periodically report to the Audit Committee the extent of the services that it has provided to the Company and 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 between meetings for individual projects up to $250,000 (up to a total annual maximum of $750,000) if management deems it reasonably necessary to begin the services before the next scheduled meeting of the Audit Committee. The Audit Committee Chair must report any pre-approval decisions to the Audit Committee at its next scheduled meeting.

Audit Committee Report

The Audit Committee currently consists of four Independent Directors, and operates under a written charter adopted by the Board. The Board 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 Nasdaq standards.

Management is responsible for the preparation and presentation of the Company’s financial statements, the reporting process, the accounting policies and procedures, and 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, (v) the Company’s operational risks and (vi) the performance of the Company’s internal audit function and independent auditor. As part of its meetings, the Audit Committee regularly meets in executive session without management present. Prior to the filing of each quarterly report on Form 10-Q and annual report on Form 10-K and prior to each earnings release to the public, the Audit Committee discusses such reports with management, the Company’s Chief Auditor and the Company’s independent auditor. As part of these

 


 

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Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s

independent registered public accounting firm for fiscal year 2019

  Brighthouse Financial, Inc.

 

discussions, the Audit Committee also reviews the Company’s statutory financial results and the Company’s internal controls over financial reporting.

The Chief Auditor regularly attends meetings of the Audit Committee and reports directly to the Audit Committee Chair, 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 its internal controls over financial reporting. 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 Audit 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. In accordance with the requirements set forth in the Audit Committee Charter, the Audit Committee (i) reviewed and amended the Audit Committee Charter, (ii) approved the charter governing the internal audit function, and (iii) approved the procedures for the confidential submission of complaints to the Audit Committee regarding accounting, internal accounting controls or auditing matters (the “Audit Committee Complaint Procedures”). A copy of the Audit Committee Complaint Procedures is also available on our website.

In the performance of its oversight function, the Audit Committee has reviewed and discussed the audited consolidated financial statements for fiscal year 2018 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 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 2018 be included in our Annual Report on Form 10-K for the year ended December 31, 2018, for filing with the SEC.

Audit Committee

Pat Shouvlin (Chair)

Chuck Chaplin

Meg McCarthy

Bill Wallace

 


 

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Brighthouse Financial, Inc.  

Proposal 3 - Advisory vote to approve the compensation paid

to Brighthouse’s Named Executive Officers

 

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 (the “NEOs”). Our compensation approach is described in the Compensation Discussion and Analysis (“CD&A”), compensation tables and accompanying narrative discussion.

The CD&A summarizes our executive compensation program. Since the Separation and our establishment as an independent company, our Board of Directors and Compensation Committee have 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 NEOs’ compensation is in the form of variable, at-risk compensation that requires us to achieve performance objectives that are aligned with our strategy and 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 are intended to 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 NEOs. To that end, we have engaged our stockholders in discussions about our executive compensation program, philosophy and objectives. We solicited feedback from stockholders on our executive compensation program for fiscal 2017 and on our 2018 executive compensation program that we previewed in our 2018 Proxy Statement. The feedback we received was generally supportive.

We are asking stockholders to approve the following resolution:

RESOLVED, that the compensation paid to Brighthouse’s NEOs, 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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Compensation Discussion and Analysis

Section 1 – Executive Summary

  Brighthouse Financial, Inc.

 

Compensation Discussion and Analysis

This CD&A describes our executive compensation philosophy, policies, practices and objectives in the context of our compensation decisions for our NEOs for 2018, our first full year as an independent company.

The CD&A is organized into four sections:

 

Section 1 – Executive Summary

 

Section 2 – Our 2018 Executive Compensation Program

 

Section 3 – Additional Compensation Practices and Policies

 

Section 4 – 2019 Compensation Program Preview

Section 1 – Executive Summary

The Brighthouse Story

Brighthouse became an independent company on August 4, 2017, the effective date of our Separation from MetLife. We are one of the largest providers of annuities and life insurance in the United States. We specialize in products that are designed to help people protect what they have 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 our decision to outsource a significant portion of our client administration and service processes is consistent with our focus on reducing our expense structure over time.

During 2018, our first full year as an independent company, we made significant progress toward executing our strategy that we believe will deliver long-term value for our stockholders.

Named Executive Officers

For 2018, our NEOs are our CEO, former CFO, the next three most highly compensated executive officers as of the end of 2018, and one former executive officer who was not serving as of end of 2018.

 

  Name   Title

  Eric Steigerwalt

  President and Chief Executive Officer

  Anant Bhalla

  Former Executive Vice President and Chief Financial Officer(1)

  John Rosenthal

  Executive Vice President and Chief Investment Officer

  Christine DeBiase

  Executive Vice President, Chief Administrative Officer and General Counsel(2)

  Conor Murphy

  Executive Vice President, Chief Operating Officer and Interim Chief Financial Officer(3)

  Peter Carlson

  Former Executive Vice President and Chief Operating Officer(4)

 

(1)

Mr. Bhalla ceased serving as Chief Financial Officer effective February 27, 2019, and departed Brighthouse effective March 14, 2019.

 

(2)

Ms. DeBiase’s title was changed from Executive Vice President, General Counsel and Corporate Secretary, effective February 2, 2018.

 

(3)

Mr. Murphy was appointed Executive Vice President and Chief Operating Officer, effective June 5, 2018. Until that date, Mr. Murphy served as Executive Vice President and Chief Product and Strategy Officer. Mr. Murphy was also appointed Interim Chief Financial Officer, effective February 27, 2019.

 

(4)

Mr. Carlson stepped down from the position of Executive Vice President and Chief Operating Officer effective June 4, 2018, and remained employed with Brighthouse through December 31, 2018.

 


 

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Brighthouse Financial, Inc.  

Compensation Discussion and Analysis

Section 1 – Executive Summary

 

Compensation Philosophy

The Compensation Committee has established a compensation program rooted in a pay-for-performance philosophy, which is intended to align the interests and incentives of our NEOs with those of our stockholders by tying a substantial portion of our NEOs’ compensation to the achievement of performance metrics that are aligned with our strategy. 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 increases in stockholder value;

 

providing competitive Target Total Direct Compensation (Target TDC) opportunities (defined as base salary plus short-term incentive (“STI”) and long-term incentive (“LTI”) compensation opportunities): we aim to offer compensation that enables Brighthouse to attract, motivate and retain high-performing employees;

 

aligning executives’ interests with stockholders’ interests: a significant portion of our NEOs’ Target TDC will be delivered in the form of stock-based incentives;

 

encouraging long-term decision-making: our long-term incentive compensation programs 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 reprice stock options without stockholder approval; and

 

reinforcing strong risk management: our compensation program is designed to avoid providing our employees with incentives to take excessive risks.

What’s New in Our 2018 Compensation Program

We regularly review our compensation program to help ensure that it motivates and rewards our associates for performance that supports our strategic goals. In 2018, our first full year as an independent company, we made the following changes to our compensation program:

 

 

  Element of Our
  Compensation Program

 

 

Changes in 2018

 

  STI Awards

 

•  Established quantitative metrics focusing on areas critical to the work of establishing us as an independent company and that drive long-term value creation.

•  For 2018, three equally-weighted metrics were used:

•  TSA Exits;

•  Annuity Sales; and

•  Adjusted Statutory Earnings.

 

  LTI Awards

 

•  Established an equity mix for 2018 LTI awards with three equally-weighted components: PSUs, RSUs and NQSOs.

•  Selected the following PSU performance metrics, which measure the Company’s success in executing its long-term strategy over the 2018-2020 performance period: corporate expense reduction (weighted 60%); and capital return (weighted 40%).

 

  Clawback Policy

 

•  Adopted a robust clawback policy that allows the Company to recoup incentive compensation earned by executive officers or other employees in the event of a material restatement of the Company’s financial statements or certain misconduct. For additional information about our clawback policy, see “Compensation Discussion and Analysis – Section 3 – Additional Compensation Practices and Policies – Clawback Policy.

 

For more information about our 2018 Compensation Program, see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program.”

 


 

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Compensation Discussion and Analysis

Section 1 – Executive Summary

  Brighthouse Financial, Inc.

 

2018 Say-on-Pay Vote and Stockholder Engagement

Our stockholders expressed strong support for our compensation program during our engagement meetings and through their overwhelming approval of our 2018 Say-on-Pay vote (97% of votes in favor of our Say-on-Pay proposal). The Compensation Committee considered stockholder feedback and the Say-on-Pay vote results in reviewing our 2018 executive compensation program and making compensation decisions for our NEOs. In particular, the Compensation Committee has adopted quantitative compensation metrics for both STI and LTI awards that are aligned with our near- and long-term strategy.

Compensation Highlights

2018 Performance. As a newly independent company, Brighthouse’s strategic focus is on establishing the foundation for future growth. Consistent with our pay-for-performance philosophy, the Compensation Committee established metrics for STI and LTI awards that directly align with Brighthouse’s strategy. Although 2018 was a challenging year for our stock performance, the Board believes that management has developed a strategy that will lead to long-term growth and that the Company has successfully executed on that strategy in 2018. To align the interests of our NEOs with those of our stockholders, their compensation is weighted heavily toward equity-based compensation whose realized value depends both on the performance of our stock and select performance metrics which we believe will be drivers of long-term value creation.

2018 STI Awards. The table below presents our 2018 metrics for STI Awards (“STI Metrics”), which measure our performance in the areas that are critical to meeting our strategic goals over time. Brighthouse met or exceeded all 2018 STI Metrics targets, resulting in an aggregate Company Performance Factor of 118%. For additional information about our STI Awards, see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program – Elements of 2018 Compensation” and “– 2018 STI Awards for Our NEOs.” STI Awards are made under the Amended and Restated Brighthouse Services, LLC Short-Term Incentive Plan (the “STI Plan”).

 

STI Metric

 

      Performance Link

 

     

Performance (Payout
Percentage)

 

TSA Exits     Exiting our TSAs with MetLife is critical to achieving our strategic goal of controlling corporate expenses and establishing a cost-competitive company.     Target Achieved (100%)
Annuity Sales     Key indicator of our growth prospects and franchise stability.     Maximum Achieved (150%)
Adjusted Statutory Earnings       Important indicator of our financial health that measures our insurance companies’ ability to pay future distributions and the effectiveness of our hedging program.     Target Exceeded (105%)
2018 Company Performance Factor     118%

CEO Compensation

2018 STI Award. The Independent Directors, on the Compensation Committee’s recommendation, approved CEO compensation that reflects our pay-for-performance philosophy. Mr. Steigerwalt’s 2018 goals were a mix of strategic and operational objectives that measured his performance in leading Brighthouse and laying the foundation for achieving our strategic goals. In setting the STI payout percentage at the Company’s aggregate performance factor, the Independent Directors considered Brighthouse’s performance against the 2018 STI Metrics and Mr. Steigerwalt’s accomplishments of his 2018 goals. The following table highlights Mr. Steigerwalt’s 2018 STI Award for performance in 2018, as approved by the Independent Directors in January 2019.

 

Name   Base Salary   2018 STI Target   2018 STI Payout
Percentage
  2018 STI Award

Eric Steigerwalt

  $900,000   $1,800,000   118%   $2,124,000

 


 

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Brighthouse Financial, Inc.  

Compensation Discussion and Analysis

Section 1 – Executive Summary

 

2018 LTI Award. In February 2018, the Independent Directors granted Mr. Steigerwalt a 2018 LTI Award at his LTI target of $4,500,000, consisting of 1/3rd RSUs, 1/3rd PSUs and 1/3rd NQSOs. The actual number of PSUs issued will depend on Brighthouse’s actual performance at the end of the 2018-2020 performance period.

Additional information about Mr. Steigerwalt’s 2018 STI and LTI Awards is presented in “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program” and “2018 Compensation Tables.”

2019 LTI Award. In January 2019, the Independent Directors also granted Mr. Steigerwalt a 2019 LTI Award at his LTI target of $4,500,000, consisting of 70% PSUs and 30% RSUs. The actual number of PSUs issued will depend on Brighthouse’s actual performance at the end of the 2019-2021 performance period. For more information about 2019 LTI Awards, see “Compensation Discussion and Analysis – Section 4 – 2019 Compensation Program Preview – 2019 LTI Awards.” Pursuant to SEC disclosure rules, 2019 LTI Awards are not included in the “2018 Compensation Tables.

Key Executive Compensation Practices

 

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

 

LOGO

 

 

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

    LOGO   Clawback Policy. We adopted a robust clawback policy that allows the Company to recoup incentive compensation earned by executive officers or other employees in the event of a material restatement of the Company’s financial statements or certain misconduct.
    LOGO   Minimum Vesting Periods. Equity awards that are subject to achievement of performance goals generally have a vesting period of three years, and equity awards that vest based solely on continued service have a three-year vesting period (at a rate not greater than one-third per year).
    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 consider their feedback in the design of our compensation programs.
    LOGO   Independent Compensation Consultant. Our Compensation Committee retained SBCG as its independent compensation consultant to advise on all aspects of our executive compensation program.
    LOGO  

Double-Trigger Vesting of Equity Awards upon a Change of Control. Outstanding awards that are substituted or assumed in a change of control only vest if the NEO is terminated or resigns with good reason.

 

     
What we don’t do     LOGO   Gross-ups on Excise Taxes. We do not provide tax gross-up benefits in connection with payments upon a change of 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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Compensation Discussion and Analysis

Section 2 – Our 2018 Executive Compensation Program

  Brighthouse Financial, Inc.

 

Planned Changes for 2019

We have committed to a regular review of our compensation program to help ensure that it evolves with our maturing organization and continues to motivate and reward our associates for performance that supports our strategic goals. To this end, the Compensation Committee has approved several changes to our compensation program, which are described in “Section 4 – 2019 Compensation Program Preview.

Section 2 – Our 2018 Executive Compensation Program

2018 Compensation Setting Process

Our Human Resources organization (“HR”) was primarily responsible for performing market benchmarking and setting context for 2018 compensation recommendations for our NEOs and other members of our senior management, which we collectively refer to as the Senior Leadership Management Group (the “SLMG”). In developing its recommendations, HR consulted with Willis Towers Watson (“WTW”), which serves as management’s compensation consultant.

Our executive compensation pay positioning strategy aims to provide our executives with Target TDC that uses market median as an important reference point, but recognizes that the positioning of individual executives may vary due to a variety of factors, including criticality of role, skills, experience and strategic priorities. To determine pay positioning, we used WTW’s proprietary database of executive compensation at large diversified insurers (“DIS”) as our primary data point.

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 and structure. 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 recommending, 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 for approval by the Board and/or our stockholders; and

 

Reviewing incentive compensation arrangements to confirm that incentive pay does not encourage our executive officers to take unnecessary risks, and reviewing and discussing the relationship between risk management policies and practices, corporate strategy and senior executive compensation.

Management’s Role. As discussed above, HR, in consultation with WTW, is primarily responsible for preparing Target TDC recommendations for our SLMG, which includes the NEOs. As part of our year-end compensation process, our CEO oversaw the review of each SLMG member’s performance during 2018. Based on the CEO’s assessment of each SLMG member’s performance, HR prepared and presented compensation recommendations for each SLMG member to the Compensation Committee.

HR consulted with WTW to gather compensation data that was used to prepare Target TDC recommendations for the SLMG, which includes the NEOs. The CEO developed recommendations for all elements of pay for the members of the SLMG, other than himself, and discussed these recommendations with the Compensation Committee. The Compensation Committee, in consultation with SBCG, reviewed and approved management’s compensation recommendations for all other members of the SLMG, including our NEOs, as described below. The Independent

 


 

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Brighthouse Financial, Inc.  

Compensation Discussion and Analysis

Section 2 – Our 2018 Executive Compensation Program

 

Directors approved the Target TDC and final compensation for our CEO, Mr. Steigerwalt, on the recommendation of the Compensation Committee.

Compensation Consultants’ Role. Under its written charter, the Compensation Committee has the authority to retain advisers to assist it in the discharge of its duties. 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 TDC. SBCG has 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 STI and LTI compensation arrangements, including the STI and LTI metrics for 2018 and the forms of equity-based incentives awarded to members of the SLMG in 2018.

HR has retained WTW to provide assistance related to our executive compensation program. It is expected that WTW will continue to advise HR on matters related to our executive compensation program. Additional information about WTW’s role is provided above under the heading “Management’s Role.”

Establishing a Compensation Comparator Group. For compensation benchmarking purposes, we also used 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”). HR, with input from WTW, initially constructed the Comparator Group and used the companies in the Comparator Group as the market reference for benchmarking and setting context for developing pay recommendations for our NEOs and other members of the SLMG. In constructing the Comparator Group, we aimed to select the most appropriate companies against which Brighthouse’s compensation-related performance should be measured. The Comparator Group consists of thirteen publicly-traded companies in the insurance industry with assets and/or revenues between approximately 0.5 to 2.0 times those of Brighthouse. As Brighthouse exclusively sells individual life and annuities products in the U.S., comparably-sized insurers with a meaningfully different business mix or with significant global operations were excluded from the Comparator Group.

Applying these criteria, in August 2018, the Compensation Committee approved the below Comparator Group, which reflects the following changes from our 2017 comparator group: removed Aflac Incorporated, American National Insurance Company and Genworth Financial; and added Athene Holding Ltd. and AXA Equitable Holdings, Inc. The Comparator Group is divided into a primary tier of companies that the Compensation Committee considered more directly comparable to Brighthouse and a secondary tier of companies that the Compensation Committee considered relevant but less comparable, due to size, revenues, business mix or other factor.

 

Primary Tier       Secondary Tier
American Equity Investment Life Holding Company     Assurant, Inc.

Ameriprise Financial, Inc.

    Principal Financial Group, Inc.

Athene Holding Ltd.

    Sun Life Financial lnc.

AXA Equitable Holdings, Inc.

    Unum Group

CNO Financial Group, Inc.

    Voya Financial, Inc.

Lincoln National Corp.

   

Reinsurance Group of America, Inc.

   

Torchmark Corp.

   

The Compensation Committee will continue to annually review the composition of the Comparator Group to include companies of a similar size and business mix and with which Brighthouse competes in the talent market.

 


 

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Table of Contents

 

Compensation Discussion and Analysis

Section 2 – Our 2018 Executive Compensation Program

  Brighthouse Financial, Inc.

 

2018 Target Total Direct Compensation

The following table shows the base salary, target STI opportunity (as a percentage of base salary) and target LTI opportunity (as a percentage of base salary) for each NEO that the Independent Directors (for Mr. Steigerwalt) and the Compensation Committee (for all other NEOs) approved in early 2018.

 

  Name Base Salary Target STI
(as % of Base Salary)
Target LTI
(as % of Base Salary)
Target TDC

  Eric Steigerwalt

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

  Anant Bhalla

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

  John Rosenthal

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

  Christine DeBiase

$600,000 120% 175% $2,370,000

  Conor Murphy (1)

$600,000 140% 150% $2,340,000

  Peter Carlson

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

 

(1)

Reflects Mr. Murphy’s Target TDC as Executive Vice President and Chief Operating Officer, effective June 5, 2018. Prior to that date, Mr. Murphy’s Target TDC as Executive Vice President and Chief Product and Strategy Officer included base salary of $515,000, Target STI of 100%, and Target LTI of 150%. In January 2019, Mr. Murphy’s Target STI was changed to 145% and his Target LTI to 190%.

As shown in the graphs below, our CEO’s Target TDC and the average Target TDC for our other NEOs (excluding Mr. Carlson) are heavily weighted toward variable, at-risk elements.

 

LOGO

 


 

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Brighthouse Financial, Inc.  

Compensation Discussion and Analysis

Section 2 – Our 2018 Executive Compensation Program

 

Elements of 2018 Compensation

 

     

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. In line with our pay-for-performance philosophy, Target TDC has been structured so that base salary is the smallest component.

 

Short-Term Incentive (STI) Awards     Cash (Variable)    

STI awards are our annual cash incentive awards that reward our associates for their performance in 2018. Payout amounts were based upon the Company’s achievement of our 2018 STI Metrics approved by the Compensation Committee and upon the associate’s individual performance.

 

Long-Term Incentive (LTI) Awards     Equity (Variable)    

LTI awards are our stock-based awards that reward our associates for their contributions to Brighthouse’s long-term success. 2018 LTI awards consisted of PSUs, RSUs and NQSOs. PSUs will be paid out at the end of a three-year performance period based on Brighthouse’s performance against quantitative goals.

 

2018 STI Metrics. The Compensation Committee established metrics for the 2018 STI Awards that directly align with Brighthouse’s strategic goals. This is consistent with our pay-for-performance philosophy and helps ensure that the NEOs are compensated for their contributions to the Company’s achievement of the business goals set forth in the strategic plan. For each STI Metric, the Compensation Committee approved a threshold (payout of 50% of target value), target (100% of target value) and maximum (150% of target value) level of performance based on its evaluation of the likelihood of management achieving those performance levels. STI payouts were based upon the Company’s achievement of these metrics, as well as qualitative factors the Compensation Committee deemed appropriate, including each SLMG member’s performance and accomplishments during 2018. The Compensation Committee believes the underlying goals for each STI metric were appropriately rigorous and represented a significant challenge for management to achieve. A summary of our 2018 STI Metrics and the rationale for their selection follows.

 

     

STI Metric

 

     

Weighting

 

     

Performance Link

 

TSA Exits     1/3rd    

Exiting our TSAs with MetLife is a significant component of achieving our strategic goal of controlling corporate expenses and establishing a cost-competitive company. TSA Exits in 2018 represent a key directional indicator for reducing corporate expenses. Meeting our TSA Exits goal required extraordinary effort from organizations throughout Brighthouse, continued engagement with MetLife, and selection and onboarding of replacement systems and vendors.

 

Annuity Sales     1/3rd    

Annuity sales are important to our long-term value and vital to our growth prospects and franchise stability. Meeting our Annuity Sales goal involved achievement by organizations across the Company. Key challenges for achieving sales goals included building relationships with our distribution partners; building brand awareness and trust among our customers as a newly independent company; and aggressive and unexpected product lines and pricing from our competitors.

 

 


 

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Compensation Discussion and Analysis

Section 2 – Our 2018 Executive Compensation Program

  Brighthouse Financial, Inc.

 

     

STI Metric

 

     

Weighting

 

     

Performance Link

 

Adjusted Statutory Earnings     1/3rd    

Adjusted Statutory Earnings is a key metric that measures our ability to grow distributable earnings while prudently managing risk. The payout target is anchored in Brighthouse’s 2018 base case financial plan. As an STI metric, it also reflects factors that the broad population of STI participants are most able to directly impact and influence. This metric is the product of performance across key aspects of management’s strategy: sales; capital management; and expense control. Adjusted Statutory Earnings (which we disclose in our 2018 Form 10-K, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – The Parent Company – Liquidity and Capital – Adjusted Statutory Earnings”) begins with Statutory pre-tax net gain from operations (which is publicly disclosed in the statutory financial statements of our insurance companies) and includes certain adjustments to help management and investors better understand and evaluate those results.

 

The Compensation Committee reviewed Brighthouse’s actual performance to confirm that Brighthouse’s actions to achieve these results were carried out safely and prudently and did not create unwarranted risk for the Company. In addition, our Internal Audit department reviewed and certified the Company’s actual performance results for each metric. The following table reflects the Company’s performance against each STI metric (payout percentages were rounded to the nearest whole number) and the 2018 Company Performance Factor approved by the Compensation Committee.

 

  STI Metrics Payout Level Target Actual Results Payout Percentage  

  TSA Exits

  66 exits   66 exits   100 %

  Annuity Sales

$ 4.69B $ 5.90B   150 %

  Adjusted Statutory Earnings

$ 300M $ 324M   105 %

  2018 Company Performance Factor

  118 %

2018 Short-Term Incentive Awards

CEO Compensation. In early 2018, Mr. Steigerwalt and members of HR developed corporate performance goals (“CEO Goals”) that would be used to assess Mr. Steigerwalt’s performance during 2018. In February 2018, the Compensation Committee approved the CEO Goals and discussed the quantitative and qualitative metrics to measure performance against the CEO Goals. The CEO Goals, described in the table below, were a mix of strategic and operational objectives, and were intended to provide a framework for assessing Mr. Steigerwalt’s performance in leading Brighthouse and laying the foundation for achieving our strategic goals.

In February 2019, the Compensation Committee and the Independent Directors considered the Company’s performance overall, Mr. Steigerwalt’s performance against the CEO Goals, his other accomplishments in 2018 and Mr. Steigerwalt’s self-assessment of his performance. The following table describes the 2018 CEO Goals and Mr. Steigerwalt’s key accomplishments.

 

   

CEO
Goal

 

     

2018 Accomplishments

 

Reduce corporate expenses    

•  Delivered TSA exits in line with plan.

•  Exceeded corporate expense reduction target, including reduction by more than $40 million in the second half of 2018 relative to the first half of 2018, keeping Brighthouse on track to deliver our planned $150 million of expense saves by year-end 2020 (relative to the first twelve months post-Separation).

 

Increase sales

 

   

•  Achieved $5.9 billion in total annuity sales, significantly exceeding plan despite competitive headwinds.

 

 


 

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Brighthouse Financial, Inc.  

Compensation Discussion and Analysis

Section 2 – Our 2018 Executive Compensation Program

 

   

CEO Goal

 

     

2018 Accomplishments

 

Protect book value    

•  Oversaw hedging program to protect statutory capitalization and cash flows.

•  GAAP net income and book value results in line with expectations.

 

Maturation and establishment of BHF, including product development and distribution growth

 

   

•  Introduced FlexChoice Access, a new version of a lifetime withdrawal guarantee rider for our VA products.

•  Launched two new Fixed Deferred Annuity products with competitive crediting rates.

•  Launched arrangements for distribution of Shield product with key partners.

•  Developed SmartCare, a hybrid indexed universal life insurance product with long- term care benefits, which received regulatory approval in 47 jurisdictions.

 

Develop strong talent management and leadership    

•  Restructured the Senior Leadership Team, including the appointment of Conor Murphy as COO with responsibility for strategy and financial and operational matters, and Christine DeBiase as Chief Administrative Officer and General Counsel with responsibility for HR, Communications, Law, Government Relations and Tax.

•  Drove succession planning for senior officers and all critical roles.

•  Performed a comprehensive review of all target operating models to assess staffing levels and talent needs and optimize our human capital structure.

•  Developed a human capital scorecard to measure key employment metrics and launched a diversity and inclusion council to support our corporate culture and development goals.

 

Other accomplishments    

•  Drove the Company’s incorporation of capital requirements under NAIC VA capital reform into our CTE calculations.

•  Initiated our first stock repurchase program, two years ahead of plan.

•  Drove significant progress on our future state technology platform.

•  Supported execution of the sale of MetLife’s remaining stake in Brighthouse.

 

The CEO delivered meaningful achievements against all 2018 CEO Goals. Based on the Company’s and Mr. Steigerwalt’s accomplishments, the Compensation Committee recommended, and the Independent Directors approved, that Mr. Steigerwalt’s STI payout percentage be set at the Company’s aggregate performance factor of 118%, resulting in a 2018 STI Award of $2,124,000.

Compensation of the Other NEOs. In February 2019, the Compensation Committee considered the NEOs’ overall performance and achievements in 2018. Mr. Steigerwalt also provided the Compensation Committee with his assessment of the NEOs’ 2018 performance. Our NEOs’ 2018 performance highlights are summarized below. Mr. Carlson stepped down from the position of Executive Vice President and Chief Operating Officer effective June 4, 2018. Mr. Carlson’s compensation in 2018 reflects base salary and other payments described in a letter agreement between Mr. Carlson and Brighthouse Services, LLC (“Brighthouse Services”), dated June 8, 2018. See “Potential Payments Upon Termination or Change in Control” for additional information regarding the payments made to Mr. Carlson upon the termination of his employment.

 

 

Anant Bhalla, Former Executive Vice President and Chief Financial Officer

 

 

Oversaw the successful execution of the Company’s hedging program, which mitigated the adverse effects of volatility in equity markets and interest rates on the Company’s statutory capitalization and statutory distributable cash flows, resulting in performance in line with expectations.

 

Commenced the Company’s implementation of NAIC VA capital reform to address a more than $1.0 billion increase in NAIC VA capital requirements. Led engagement with NAIC and consultants regarding development of the requirements. Prudently managed the Company’s balance sheet to address initial impacts of new requirements.

 

Partnered with business organizations to improve the Company’s profitability and capital profile.

 


 

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Compensation Discussion and Analysis

Section 2 – Our 2018 Executive Compensation Program

  Brighthouse Financial, Inc.

 

 

John Rosenthal, Executive Vice President and Chief Investment Officer

 

 

Successfully executed comprehensive program to outsource or retain management of all investment asset classes.

 

Drove substantial annualized cost savings.

 

Implemented the target operating model for the Investments department’s asset management organization.

 

Planned and executed Treasury rotation trades that management believes will contribute substantial annualized net investment income. Identified additional trades to be implemented in 2019.

 

 

Christine DeBiase, Executive Vice President, Chief Administrative Officer and General Counsel

 

 

Led the Chief Administrative Officer organization in advising business partners on legal and regulatory matters, including with respect to capital actions, regulatory compliance, tax, corporate governance and government relations.

 

Executed comprehensive exercise to validate and reduce expenses across all organizations within the Chief Administrative Office.

 

Partnered with the Nominating and Governance Committee to recruit two new qualified director candidates, enhancing our Board’s skill set and diversity.

 

Key partner in presenting Board training and legal guidance on emerging issues.

 

Successfully drove a substantial number of TSA exits across the Chief Administrative Officer organization and supported business partners in planning and executing TSA exit strategy.

 

 

Conor Murphy, Executive Vice President and Chief Operating Officer

 

 

Assumed the COO role, and incorporated oversight of the finance, investor relations and operations functions.

 

Created SmartCare, our new hybrid life insurance policy with a long-term care rider, from idea generation to market-ready product approved in 47 jurisdictions (as of the end of 2018).

 

Created a new set of fixed annuity products, launched in conjunction with a reinsurance partnership with Athene Holding Ltd.

 

Launched various tailored and fee-based versions of our Shield annuity product and managed the Shield pricing process through an increasingly competitive landscape.

 

Designed and led the first full Board strategy session, which took place in January 2019.

 

 

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

 

  Name

 

STI Payout Percentage

 

2018 STI Award      

 

  Anant Bhalla

 

 

 

114.46

 

%

 

  $961,464

 

  John Rosenthal

 

 

 

118

 

%

 

$1,265,550

 

  Christine DeBiase

 

 

 

118

 

%

 

  $849,600

 

  Conor Murphy(1)

 

 

 

118

 

%

 

  $828,344

 

 

(1)

Mr. Murphy’s 2018 STI Award reflects his change of title during 2018 and has been prorated based on his service in two roles. The Committee approved Mr. Murphy’s promotion from Chief Product and Strategy Officer to COO, as of June 5, 2018. In accordance with the STI Plan, Mr. Murphy’s compensation was prorated for 155 days in his former role ($515,000 salary with 100% STI) and 210 days in his current role ($600,000 salary with 140% STI).

 


 

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Brighthouse Financial, Inc.  

Compensation Discussion and Analysis

Section 2 – Our 2018 Executive Compensation Program

 

The 2018 STI amounts paid to all of our NEOs are reported in the “Non-Equity Incentive Compensation Plan” column of the “Summary Compensation Table.”

2018 Long-Term Incentive Awards

In February 2018, the Independent Directors, on the recommendation of the Compensation Committee, approved an 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

 

      

Vesting Schedule

 

Performance Share Units      1/3rd     

Cliff vest after year 3; the actual number of shares vested, if any, is subject to achievement of pre-established performance goals over the 2018-2020 performance period

 

Restricted Stock

Units

 

     1/3rd     

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

 

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)

 

Our 2018 LTI Awards were issued on March 1, 2018 (the “Grant Date”), subject to stockholder approval of the Brighthouse Financial, Inc. 2017 Stock and Incentive Compensation Plan (the “Employee Plan”). The number of RSUs and PSUs awarded were determined by multiplying the dollar amount of the 2018 LTI Award by 1/3rd, and dividing the product by the closing price of Brighthouse’s common stock on the Grant Date (rounded down to the nearest whole share). The number of NQSOs to be granted was determined based upon a Black-Scholes valuation (rounded down to the nearest whole number). For NQSOs, the exercise price is the closing price of the Company’s common stock on the Grant Date. The table below shows each NEO’s LTI award based on the value of the LTI Award on the Grant Date.

 

  Name LTI Award Value

 

Number of RSUs

 

Number of PSUs

Number of NQSOs

  Eric Steigerwalt

$ 4,500,000   28,053   28,053   92,137

  Anant Bhalla

$ 1,050,000   6,545   6,545   21,498

  John Rosenthal

$ 1,100,000   6,857   6,857   22,522

  Christine DeBiase

$ 1,006,250   6,272   6,273   20,602

  Conor Murphy

$ 772,500   4,815   4,815   15,816

  Peter Carlson

$ 1,200,000   7,480   7,480   24,570

 


 

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Compensation Discussion and Analysis

Section 2 – Our 2018 Executive Compensation Program

  Brighthouse Financial, Inc.

 

Detailed information on the 2018 LTI Awards for each NEO is reported in the “Grants of Plan-Based Awards” table.

The 2018 PSUs will reward our NEOs for 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. This is consistent with our pay-for-performance philosophy and helps ensure that the NEOs are compensated for their contributions to the Company’s achievement of the business goals set forth in the strategic plan. Each PSU compensation metric (“PSU Metric”) has a threshold (payout of 50% of target value), target (100% of target value) and maximum (150% of target value) level of performance. The Compensation Committee believes the underlying goals for each PSU Metric are appropriately rigorous and represent a significant challenge for management to achieve. A 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 publicly disclosed targets. 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%      

Our capital return goal is consistent with our publicly disclosed targets. Capital return (e.g., through dividends or stock repurchases) is a key metric that demonstrates alignment with stockholders’ interests.

 

The treatment of outstanding equity awards upon a termination of employment or a change in control are described below under the heading “Potential Payments Upon Termination or Change in Control.

Founders’ Grants

Founders’ Grants, in the form of RSUs under the Employee Plan, were a one-time award that were a central element of the total compensation delivered to our NEOs in Fiscal 2017. The Founders’ Grants were authorized by the Board on August 9, 2017. For all NEOs other than Mr. Murphy, 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. For Mr. Murphy, the number of RSUs awarded was based on the amount of the award divided by the closing price of the Company’s common stock on September 11, 2017 (the date he was hired), which was $55.11. Since the Founders’ Grants were subject to stockholder approval of the Employee Plan at our 2018 Annual Meeting, for the purposes of SEC disclosure rules, the Founders’ Grant awards were deemed granted in 2018, and accordingly are reported in our Fiscal 2018 compensation tables. For additional information about the Founders’ Grants, see our 2018 Proxy Statement.

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

 

  Name Founders’ Grant Value Number of RSUs

  Eric Steigerwalt

$9,000,000   165,016

  Anant Bhalla

$2,100,000   38,503

  John Rosenthal

$2,200,000   40,337

  Christine DeBiase

$2,012,500   36,899

  Conor Murphy

$1,545,000   28,034

  Peter Carlson

$2,400,000   44,004

 


 

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Brighthouse Financial, Inc.  

Compensation Discussion and Analysis

Section 2 – Our 2018 Executive Compensation Program

 

Founders’ Grants awarded to our NEOs were subject to the Company’s achievement of one or more performance criteria during the performance period that began on September 8, 2017 and ended 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% on an authorized control level as of the end of the Performance Period;

 

Positive GAAP operating return on equity 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; or

 

VA funding at a level of CTE95 or above as of the end of the Performance Period.

At the end of the Performance Period, our CFO (at that time) and Compensation Committee certified that Brighthouse achieved an Insurer Financial Strength Rating of at least ‘A-’, allowing vesting and payout of the Founders’ Grants on September 30, 2018.

Temporary Incentive Deferred Compensation Plan

The Temporary Incentive Deferred Compensation Plan (the “Temporary Plan”) was established prior to the Separation to help Brighthouse attract, retain and motivate employees who forfeited MetLife equity awards in connection with the Separation and/or did not receive MetLife equity awards in 2017 in anticipation of the Separation. (For additional information about the Temporary Plan, see our 2018 Proxy Statement.) Deferred compensation 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 credits in respect of forgone 2017 MetLife equity awards vest over three years from the grant date at a rate of one-third per year. Deferred compensation credits in respect of forfeited RSUs vest one-third per year from the date MetLife granted the forfeited award, while deferred compensation credits in respect of forfeited stock options and forfeited performance shares cliff vest on the third anniversary of the date MetLife granted the forfeited award. Amounts credited under the Temporary Plan earn interest based upon the Applicable Federal Rate published by the Internal Revenue Service, as described in the Temporary Plan, and which is reset annually on December 1. For 2018, amounts under the Temporary Plan were credited with interest at a rate of 3.08% for the period of January 1, 2018 to November 30, 2018, and a rate of 3.80% for the period of December 1, 2018 to December 31, 2018. In the event of a change of control of Brighthouse, no amendments can be made to the Temporary Plan 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.

 


 

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Compensation Discussion and Analysis

Section 3 – Additional Compensation Practices and Policies

  Brighthouse Financial, Inc.

 

The table below shows the total amount of each type of deferred compensation credited to each NEO under the Temporary Plan in 2017. Certain awards to our NEOs under the Temporary Plan were subject to stockholder approval of the Temporary Plan and accordingly under the SEC’s disclosure rules such awards are treated as though granted in 2018 and are reported in the “Grants of Plan-Based Awards” table.

 

  Name Credit in Lieu of
2017 MetLife
Equity Award

Credit for

Forfeited MetLife

Equity Awards –
RSUs

Credit for
Forfeited MetLife
Equity Awards –
Performance
Shares
Credit for
Forfeited MetLife
Equity Awards –
Stock Options
Total
Temporary
Plan
Credits

  Eric Steigerwalt

$ 1,200,000 $ - $ - $ - $ 1,200,000

  Anant Bhalla

$ 368,000 $ 150,000 $ 300,000 $ - $ 818,000

  John Rosenthal

$ 700,200 $ - $ - $ - $ 700,200

  Christine DeBiase

$ 307,100 $ - $ - $ - $ 307,100

  Conor Murphy

$ - $ 305,900 $ 458,600 $ - $ 764,500

  Peter Carlson

$ - $ 398,000 $ 1,187,500 $ 507,373 $ 2,092,873

Awards to our NEOs under the Temporary Plan are 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 2018 performance period, the performance goals established by our Compensation Committee were:

 

Insurer financial strength ratings for Brighthouse Life Insurance Company of at least “A-” from one or more of the four major credit rating agencies;

 

Funding backing the variable annuity segment at a level of CTE95 or above; or

 

Positive pre-tax income from continuing operations excluding (i) net derivative gains/losses and (ii) net investment gains/losses.

In February 2019, the CFO (at that time) and 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 2018 performance period. As a result, we made payments to our NEOs under the Temporary Plan in respect of 2018. These payments in respect of 2018 are reported in the “Non-Equity Incentive Compensation Plan” column of the “Summary Compensation Table.” The Compensation Committee did not consider the Founders’ Grants as a component of Fiscal 2018 Target TDC.

Awards to our NEOs under the Temporary Plan that will be paid after our 2019 Annual Meeting were subject to stockholder approval of the material terms of the performance goals under the Temporary Plan, which was received at our 2018 Annual Meeting. In February 2019, the Compensation Committee established new 162(m) performance goals for the 2019 performance period under the Temporary Plan.

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.

Section 3 – Additional Compensation Practices and Policies

2018 Say-on-Pay Vote and Stockholder Engagement

At our 2018 Annual Meeting, greater than 97% of the votes cast by our stockholders voted “FOR” our Say-on-Pay proposal to approve the compensation paid to our NEOs. The Compensation Committee considered the results of this vote in reviewing our 2018 executive compensation program and making compensation decisions for our NEOs. The

 


 

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Compensation Discussion and Analysis

Section 3 – Additional Compensation Practices and Policies

 

Compensation Committee also considered stockholders’ views and feedback they shared during our 2018-2019 stockholder engagement program, as discussed in greater detail above (see “Stockholder Engagement”). During our engagements, stockholders overwhelmingly expressed approval of our 2017 compensation program and the quality of our compensation-related disclosures. Our stockholders also expressed support for our 2018 executive compensation program, including our use of quantitative compensation metrics that are aligned with the Company’s strategy to drive long-term value creation.

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 and call for the officers subject to the guidelines to obtain and maintain significant ownership in our stock. The ownership guidelines were set as a multiple of the officer’s base salary as in effect on January 1, 2018, converted into a number of Shares based upon the closing price of our common stock on January 2, 2018, which was $57.67, and then rounded up to the nearest hundred. The ownership levels applicable to our current NEOs are as follows.

 

  Name Multiple of Base Salary Number of Shares

  Eric Steigerwalt

6x 93,700

  John Rosenthal

3x 28,700

  Christine DeBiase

3x 30,000

  Conor Murphy

3x 26,800

Officers 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. Officers 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 officer’s stock ownership level include Shares owned outright (or jointly with a spouse or in a trust over which an executive has investment control) and net Shares received from exercise and/or settlement of stock-based awards under the Employee Plan. Shares underlying unvested equity awards are not included in determining an officer’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 employees, including our NEOs, are eligible to participate in the Brighthouse Services, LLC Auxiliary Savings Plan (the “Auxiliary Plan”). Participants in the Auxiliary Plan receive company matching and profit-sharing contributions that cannot be made to the Brighthouse Savings Plan because a participant’s compensation exceeds certain tax qualified plan contribution 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. For the Company matching and profit-sharing contributions made under the Brighthouse Savings Plan and Auxiliary Plan during 2018, see the “All Other Compensation” column in the Summary Compensation Table. 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

 


 

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Compensation Discussion and Analysis

Section 3 – Additional Compensation Practices and Policies

  Brighthouse Financial, Inc.

 

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 timing of payment.

Voluntary Deferred Compensation Plan. The VDCP, a nonqualified deferred compensation plan, allows a select group of highly compensated employees 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

In November 2018, the Compensation Committee approved and adopted the Brighthouse Services, LLC Executive Severance Pay Plan (the “Severance Plan”) to provide severance pay and related benefits to certain terminated executive officers in consideration of a release of employment-related claims. See the “Potential Payments Upon Termination or Change in Control” table for additional information about amounts that would be payable to our NEOs under the Severance Plan.

In November 2018, the Compensation Committee also approved and adopted the Brighthouse Services, LLC Change of Control Severance Pay Plan (the “Change of Control Plan”) to retain our senior executive officers while a transaction is pending or during the two-year transition period following the close of a transaction and align their interests with those of our stockholders, promoting maximum stockholder value without impinging on Brighthouse’s flexibility to engage in or successfully transition after a transaction. Under the terms of the Change of Control Plan, a covered participant is eligible to receive severance payments if the participant is terminated involuntarily without cause or if the participant discontinues employment for “good reason,” in either case within two years of a change of control, or following the occurrence of a potential change of control, if the participant is terminated involuntarily without cause within six months prior to a change of control. See the “Potential Payments Upon Termination or Change in Control” table for additional information about amounts that would be payable to our NEOs under the Change of Control Plan.

As of December 31, 2018, we had no employment agreements or offer letters with any of our NEOs that provide for individual severance or change in control benefits. On June 8, 2018, Mr. Carlson entered into a letter agreement with Brighthouse Services in connection with his retirement from Brighthouse. On March 15, 2019, Mr. Bhalla entered into a Separation Agreement, Waiver and General Release with Brighthouse Services in connection with his separation from Brighthouse. Payments made pursuant to these individual agreements are described in detail following the Potential Payments Upon Termination or Change in Control” table.

Equity awards held by our NEOs may vest and become payable in the event of termination or a change of control in accordance with the terms of the Employee Plan and the applicable award agreement (including the award agreement supplement).

In addition, 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 NEO’s “Rule of 65 Date,” which is the date that the sum of a participant’s age plus years of service (which includes MetLife service) equals or exceeds 65, provided the participant has at least five years of service. See the “Potential Payments Upon Termination or Change in Control” table for additional information about amounts that would be payable to our NEOs under the Employee Plan and the Temporary Plan.

Stock-Based Award Timing Practices

Stock-based LTI 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

 


 

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Brighthouse Financial, Inc.  

Compensation Discussion and Analysis

Section 3 – Additional Compensation Practices and Policies

 

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

The Tax Cuts and Jobs Act (“TCJA”), which was signed into law on December 22, 2017, eliminated the exception for deductibility of performance-based compensation under Section 162(m) of the Code, except for compensation payable pursuant to binding contracts in effect on November 2, 2017 that are not materially modified after that date. As a result, compensation payable to any of our NEOs in excess of $1 million after 2017 will not be deductible, except to the extent paid pursuant to a grandfathered arrangement. While the Company and the Compensation Committee considered the availability of 162(m) deductions when we designed our executive compensation program prior to this change in tax law, the Company and the Compensation Committee reserved the right to pay non-deductible compensation if necessary or appropriate to retain and incent key executives whose performance is important to our success. As a result of the elimination of the exception to the limit in Section 162(m) for performance-based compensation, the amount of non-deductible compensation paid after 2017 will increase.

Hedging and Pledging Prohibition

Our insider trading policy prohibits all Directors and employees, including our NEOs, from engaging in speculative transactions, including 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.

Clawback Policy

Our Board believes that it is in the best interests of the Company and its stockholders to create and maintain a culture that emphasizes integrity and accountability and that reinforces the Company’s pay-for-performance compensation philosophy. In August 2018, the Board approved and adopted a performance-based compensation recoupment policy (the “Clawback Policy”) that allows Brighthouse to seek recoupment of incentive compensation in the circumstances described in the following table. The Board delegated to the Compensation Committee authority to administer the Clawback Policy, including authority to determine in its judgment and sole discretion whether to seek recoupment of any compensation.

 

       

Conduct or Event

 

     

Covered Persons

 

     

Compensation Subject to
Recoupment

 

     

Covered Period

 

Fraud or misconduct causing a material financial restatement    

CEO, CFO, Chief Accounting Officer or any employee who materially contributed to the fraud or misconduct

 

    Any incentive compensation     Three years prior to the date the Company determines a restatement is necessary

Conduct, or failure to supervise, which results in material financial or reputational harm

 

    Any employee who engaged in the misconduct     Any incentive compensation     Period of misconduct
Material inaccuracy in performance metrics     Executive officers and any employee who materially contributed to, or failed to supervise with respect to, the material inaccuracy     Excess incentive compensation that was, or will be, paid based on the inaccurate metric     Three years prior to achievement of the performance metric

Risk Assessment

At the Compensation Committee’s March 2019 meeting, SBCG presented a compensation risk assessment report that it prepared and developed in consultation with Brighthouse’s management, including our Chief Risk Officer, based on

 


 

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Compensation Discussion and Analysis

Section 4 – 2019 Compensation Program Review

  Brighthouse Financial, Inc.

 

—its review of our compensation programs. SBCG highlighted the compensation governance policies and Board-level controls in place to manage compensation-related risk and the risk-balancing and risk-mitigating features of our 2018 compensation program, including our strong Clawback Policy, balanced pay mix, caps on incentive payouts and the Compensation Committee’s ability to exercise discretion. Following a discussion of SBCG’s 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.

Section 4 – 2019 Compensation Program Preview

This section provides a preview of our 2019 executive compensation program, including changes we have made from our 2018 executive compensation program.

2019 STI Metrics

The Compensation Committee approved metrics for the 2019 STI Awards that directly align with Brighthouse’s strategic goals. The below table presents a summary of each of the three equally-weighted metrics and the rationale for selecting each.

 

     

STI Metric

 

     

Weighting

 

     

Performance Link

 

Corporate Expense Target     1/3rd    

Prudent corporate expense control supports our pursuit of becoming a best-in-cost company. This metric aligns with our publicly disclosed target of reducing costs by $150 million on a run-rate basis by 2020 and an additional $25 million in 2021.

 

Sales     1/3rd    

Key indicator of our growth prospects and franchise stability. Annuity sales are the core component of the metric; sales of SmartCare, our new hybrid life insurance product, will act as a payout modifier.

 

Normalized Statutory Earnings     1/3rd    

Key metric that measures our ability to grow distributable earnings while prudently managing risk. Calculation of the metric begins with Statutory pre-tax net gain from operations (which is publicly disclosed in the statutory financial statements of our insurance companies) and includes certain adjustments to help management and investors better understand, evaluate and forecast those results. (Calculation of this metric is consistent with the 2018 STI Metric “Adjusted Statutory Earnings.”)

 

All other features of the 2019 STI Awards are fundamentally unchanged from 2018.

2019 LTI Awards

The Compensation Committee carefully considered the decision to use PSUs as part of its 2018 LTI pay mix. In our 2018 Proxy Statement, we stated that as the Company matures and gains historical data that would make long-term goal setting more precise, we expect to adopt a heavier weighting of PSUs for future LTI awards. Over the past year, the Compensation Committee has continued to review the LTI program, taking into account the Company’s long-term strategy and feedback from our stockholders, and has increased the weighting to 70% PSUs/30% RSUs for the CEO and to 60% PSUs/40% RSUs for all other members of our SLMG.

 


 

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Compensation Discussion and Analysis

Section 4 – 2019 Compensation Program Review

 

The 2019 PSUs measure Brighthouse’s performance over the 2019-2021 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.

 

     

LTI Metric

 

     

Weighting

 

     

Performance Link

 

Statutory Expense Ratio     60%    

This metric reflects the ratio of statutory earnings expenses to statutory premiums and fee income, and measures our performance in key strategic areas of expense management and top line growth.

 

Capital Return     40%    

Our capital return goal is consistent with our publicly disclosed targets. Capital return (e.g., through dividends or stock repurchases) is a key metric that demonstrates alignment with stockholders’ interests.

 

2019 Target TDC Opportunities

Target TDC for all of our NEOs, except for Mr. Murphy, remains the same for 2019. In January 2019, the Compensation Committee approved changes to Mr. Murphy’s Target TDC, setting his Target STI at 145% of base salary, and his Target LTI at 190% of base salary.

Compensation Committee Report

The Compensation Committee has reviewed the CD&A 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 Proxy Statement.

Compensation Committee

Diane Offereins (Chair)

Irene Chang Britt

Eileen Mallesch

Paul Wetzel

 


 

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Compensation Tables

Summary Compensation Table

  Brighthouse Financial, Inc.

 

Compensation Tables

The information reported in the Summary Compensation Table for 2018 is for the entire 2018 fiscal year. The information reported for 2017 is for the period from August 5, 2017, the first day following the Separation, to December 31, 2017, which we refer to as “Fiscal 2017.” The footnotes to the Summary Compensation Table and the accompanying narrative describe the manner in which the 2018 compensation for our NEOs was calculated.

Summary Compensation Table for 2018

 

                 

Name and Title

 

 

Year

 

   

Salary
($) (1)

 

   

Bonus
($)

 

 

Stock
Awards ($)
(2)

 

   

Option
Awards
($) (3)

 

   

Non-Equity
Incentive Plan
Compensation
($) (4)

 

   

Nonqualified
Deferred
Compensation
Earnings ($)

 

 

All Other
Compensation
($) (5)

 

    

Total
($)

 

 

Eric Steigerwalt
President and Chief Executive Officer

 

 

 

 

 

 

2018

 

 

 

    $900,000     $-     $10,635,968       $1,155,398       $2,550,703     $-     $295,302        $15,537,371  
 

 

 

 

2017

 

 

 

 

 

 

$349,049

 

 

 

 

$-

                 

 

 

 

$1,507,192

 

 

 

 

$-

 

 

 

 

$115,853

 

 

  

 

 

 

$1,972,094

 

 

Anant Bhalla
Former Executive Vice President and Chief Financial Officer (6)

    2018       $600,000     $-     $2,481,623       $269,585       $1,311,796     $-     $146,731        $4,809,735  
 

 

2017

 

 

 

$233,641

 

 

$-

                 

 

$688,444

 

 

$-

 

 

$63,753

 

  

 

$985,838

 

John Rosenthal
Executive Vice President and Chief Investment Officer

 

 

 

 

2018

 

 

    $550,000     $-     $2,599,853       $282,426       $1,514,531     $-     $177,069        $5,123,879  
 

 

 

 

2017

 

 

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

Christine DeBiase
Executive Vice President, Chief Administrative Officer and General Counsel

    2018       $597,917     $-     $2,378,256       $258,349       $958,800     $-     $137,120        $4,330,442  
 

 

2017

 

 

 

$224,232

 

 

$-

                 

 

$534,024

 

 

$-

 

 

$50,041

 

  

 

$808,297

 

Conor Murphy
Executive Vice President and Chief Operating Officer (7)

 

 

 

 

 

2018

 

 

 

 

    $557,500     $-     $1,811,638       $198,333       $1,095,097     $-     $218,113        $3,880,681  
                  
                                                                

Peter Carlson
Former Executive Vice President and Chief Operating Officer (8)

    2018       $600,000     $-     $2,836,168       $308,108       $700,000     $-     $3,013,080        $7,457,356  
 

 

 

2017

 

 

 

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

 

(1)

Salary. Amounts reported in the Salary column reflect the actual amount of base salary earned by each NEO in that year for services to Brighthouse and its subsidiaries. Mr. Murphy’s salary reflects his base salary at the rate of $515,000 from January 1, 2018 to June 4, 2018, and at the rate of $600,000 from June 5, 2018 to December 31, 2018. Ms. DeBiase’s salary reflects her base salary at the rate of $575,000 from January 1, 2018 to February 1, 2018, and at the rate of $600,000 from February 2, 2018 to December 31, 2018. For the relationship of each NEO’s 2018 base salary earnings to that officer’s 2018 Total TDC, see page “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program – 2018 Target Total Direct Compensation.”

 

(2)

Stock Awards. Amounts reported in this column reflect the aggregate grant date fair value calculated in accordance with ASC Topic 718, modified to exclude the effect of estimated forfeitures, of both the 2018 LTI awards granted as RSUs and PSUs under the Employee Plan and the Founders’ Grant awards described below. For a description of the methodology and assumptions made in determining the aggregate grant date fair value of Share awards, see Note 10 of the Notes to the Consolidated and Combined Financial Statements in our 2018 Form 10-K.

 


 

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Compensation Tables

Summary Compensation Table

 

2018 LTI Awards – For further discussion of the performance goals applicable to the PSU awards in 2018, see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program – 2018 Long-Term Incentive Awards.” The table below reports the grant date fair value of the RSUs and PSUs (at the target performance level) granted as part of the 2018 LTI Award.

 

Name

 

 

Grant Date Value of
2018 RSUs

 

 

Grant Date Value of

2018 PSUs at Target

Performance Level

 

Eric Steigerwalt

 

 

 

$1,349,349

 

 

 

 

$1,349,349

 

 

Anant Bhalla

 

 

 

$314,815

 

 

 

 

$314,815

 

 

John Rosenthal

 

 

 

$329,822

 

 

 

 

$329,822

 

 

Christine DeBiase

 

 

 

$301,683

 

 

 

 

$301,731

 

 

Conor Murphy

 

 

 

$231,602

 

 

 

 

$231,602

 

 

Peter Carlson

 

 

 

 

 

$359,788

 

 

 

 

 

 

 

$359,788

 

 

 

 

The following table reports the hypothetical grant date fair value of the PSUs if maximum performance was achieved, in each case as of the date of stockholder approval of the Employee Plan. Maximum payout of the PSUs is 150% of target.

 

Name

 

   

 

Grant Date Value of 2018
PSUs at Maximum
Performance Level

 

Eric Steigerwalt

 

 

 

$2,024,000

 

 

Anant Bhalla

 

 

 

$472,198

 

 

John Rosenthal

 

 

 

$494,709

 

 

Christine DeBiase

 

 

 

$452,573

 

 

Conor Murphy

 

 

 

$347,378

 

 

Peter Carlson

 

 

 

$539,682

 

 

 


 

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Compensation Tables

Summary Compensation Table

  Brighthouse Financial, Inc.

 

Founders’ Grants – In 2017, each NEO received a Founders’ Grant in the form of RSUs under the Employee Plan, subject to stockholder approval of our Employee Plan, which was received at our 2018 Annual Meeting on May 23, 2018. Founders’ Grants were a one-time award and were a central element of the total compensation delivered to our NEOs in Fiscal 2017. For all NEOs other than Mr. Murphy, the number of RSUs awarded was based on the amount of the award 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. For Mr. Murphy, the number of RSUs awarded was based on the amount of the award divided by the closing price of the Company’s common stock on September 11, 2017 (the date he was hired), which was $55.11. For a detailed discussion of the Founders’ Grants, see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program – Founders’ Grants.” The table below shows for each NEO the value of the Founders’ Grant award in Fiscal 2017, the number of RSUs granted and the grant date fair value of the Founders’ Grant award on the date of stockholder approval.

 

Name

 

Founders’ Grant Award

 

Number of RSUs

 

 

Grant Date Fair Value

 

Eric Steigerwalt

 

 

 

$9,000,000

 

 

 

 

165,016

 

 

 

 

$7,937,270

 

 

Anant Bhalla

 

 

 

$2,100,000

 

 

 

 

38,503

 

 

 

 

$1,851,994

 

 

John Rosenthal

 

 

 

$2,200,000

 

 

 

 

40,337

 

 

 

 

$1,940,210

 

 

Christine DeBiase

 

 

 

$2,012,500

 

 

 

 

36,899

 

 

 

 

$1,774,842

 

 

Conor Murphy

 

 

 

$1,545,000

 

 

 

 

28,034

 

 

 

 

$1,348,435

 

 

Peter Carlson

 

 

 

$2,400,000

 

 

 

 

44,004

 

 

 

 

$2,116,592

 

 

 

(3)

Option Awards. Amounts reported in this column reflect 2018 LTI awards granted as stock options under the Employee Plan. Each of these awards had a per option exercise price equal to the closing price of a Share on the grant date of $53.47. Amounts in this column reflect the grant date fair value (as of May 23, 2018) calculated in accordance with ASC Topic 718, modified to exclude the effect of estimated forfeitures. For a description of the methodology and assumptions made in determining the aggregate grant date fair value of the option awards, see Note 10 of the Notes to the Consolidated and Combined Financial Statements in our 2018 Form 10-K.

 

(4)

Non-Equity Incentive Plan Compensation. The amounts in this column include (i) each NEO’s 2018 STI Award earned in respect of service in 2018, and (ii) the cash payments, including interest, earned by each NEO under the Temporary Plan in respect of service to Brighthouse during 2018. The terms of the STI Award are summarized under “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program – 2018 STI Metrics.” The terms of the Temporary Plan are summarized above under “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program – Temporary Deferred Incentive Compensation Plan” and in the narrative footnotes accompanying the “Grants of Plan-Based Awards” table. The table below shows the amount earned by each NEO in 2018 under the STI Award and Temporary Plan.

 

Name

 

          

STI Award

 

    

 

Temporary Plan

 

 

Eric Steigerwalt

 

            $

 

2,124,000

 

 

 

   $

 

426,703

 

 

 

Anant Bhalla

 

            $

 

961,464

 

 

 

   $

 

350,332

 

 

 

John Rosenthal

 

            $

 

1,265,550

 

 

 

   $

 

248,981

 

 

 

Christine DeBiase

 

            $

 

849,600

 

 

 

   $

 

109,200

 

 

 

Conor Murphy

 

            $

 

828,344

 

 

 

   $

 

266,753

 

 

 

Peter Carlson

 

 

            $

 

 

-

 

 

 

 

 

   $

 

 

700,000

 

 

 

 

 

 


 

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Brighthouse Financial, Inc.  

Compensation Tables

Summary Compensation Table

 

The table below shows the amount, including interest, earned by each NEO for 2018 in respect of the different types of credits under the Temporary Plan.

 

Name

 

Fiscal 2018
Payment for Credit
in Lieu of 2017
MetLife Equity
Award

 

Fiscal 2018
Payment for Credit
for Forfeited

MetLife Equity
Awards – RSUs

 

Fiscal 2018
Payment for Credit
for Forfeited

MetLife Equity
Awards –
Performance

Shares

 

Fiscal 2018
Payment for Credit
for Forfeited
MetLife Equity
Awards – Stock
Options

 

Eric Steigerwalt

 

$

 

426,703

 

 

$

 

-

 

 

$

 

-

 

 

$

 

-

 

 

Anant Bhalla

 

$

 

140,000

 

 

$

 

52,583

 

 

$

 

157,749

 

 

$

 

-

 

 

John Rosenthal

 

$

 

248,981

 

 

$

 

-

 

 

$

 

-

 

 

$

 

-

 

 

Christine DeBiase

 

$

 

109,200

 

 

$

 

-

 

 

$

 

-

 

 

$

 

-

 

 

Conor Murphy

 

$

 

-

 

 

$

 

106,859

 

 

$

 

159,895

 

 

$

 

-

 

 

Peter Carlson

 

$

 

-

 

 

$

 

144,257

 

 

$

 

422,665

 

 

$

 

133,078

 

 

 

(5)

All Other Compensation. This column includes contributions made by the Company for each NEO in respect of 2018 to the Brighthouse Savings Plan and the Auxiliary Plan, in the following amounts:

 

Name

 

  

Brighthouse
Savings Plan

 

    

Auxiliary Plan

 

 

Eric Steigerwalt

 

    

 

$23,857

 

 

 

    

 

$271,445

 

 

 

Anant Bhalla

 

    

 

$24,263

 

 

 

    

 

$122,468

 

 

 

John Rosenthal

 

    

 

$24,313

 

 

 

    

 

$152,756

 

 

 

Christine DeBiase

 

    

 

$24,137

 

 

 

    

 

$112,983

 

 

 

Conor Murphy

 

    

 

$23,408

 

 

 

    

 

$85,293

 

 

 

Peter Carlson

 

    

 

$12,258

 

 

 

    

 

$78,178

 

 

 

For Mr. Murphy, the amount disclosed in this column also includes amounts paid by the Company for relocation and related expenses ($106,593, of which $46,880 was reimbursements for the payment of taxes) under the Brighthouse relocation policy, annual corporate credit card fees and his spouse’s travel, meals and related incidental expenses for a business conference in 2018 to which spouses were invited.

For Mr. Carlson, the amount disclosed in this column also includes the following amounts to be paid to Mr. Carlson in connection with his separation from the Company in 2018: a cash payment of $900,000 in lieu of his participation in the STI Plan; an additional cash payment of $1,300,000; and $722,643 under the Temporary Plan for credits that vested upon his separation from the Company. For additional information regarding the separation benefits paid to Mr. Carlson, see “Potential Payments on Termination or Change of Control.”

 

(6)

Mr. Bhalla ceased serving as Chief Financial Officer effective February 27, 2019, and departed Brighthouse effective March 14, 2019.

 

(7)

Mr. Murphy was appointed Executive Vice President and Chief Operating Officer effective June 5, 2018. Until that date, Mr. Murphy served as Executive Vice President and Chief Product and Strategy Officer. Mr. Murphy was appointed Interim Chief Financial Officer effective February 27, 2019.

 

(8)

Mr. Carlson stepped down from the position of Executive Vice President and Chief Operating Officer effective June 4, 2018, and remained employed with Brighthouse through December 31, 2018.

 


 

2019 Proxy Statement  |  61


Table of Contents

 

Compensation Tables

Grants of Plan-Based Awards

  Brighthouse Financial, Inc.

 

Grants of Plan-Based Awards in 2018

The table below presents individual awards granted to each NEO for 2018. For information about these awards, see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program.”

 

Name

 

 

Grant Type

 

 

Grant

Date (1)

 

   

Estimated future payouts under non-equity
incentive

plan awards

 

   

Estimated future payouts under
equity incentive plan awards

 

   

All Other
Stock
Awards:
Number of
Shares of
Stock

(#)

 

   

All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)

 

   

Exercise
or Base
Price of
Option
Awards
($/Sh)

 

   

Grant

Date

Fair

Value of

Stock

and

Option

Awards

(3)

 

 
 

Threshold

($) (2)

 

   

Target

($)

 

   

Maximum

($) (2)

 

   

Threshold
(#) (2)

 

   

Target

(#)

 

   

Maximum
(#) (2)

 

 

Eric Steigerwalt

 

 

Short-Term Incentive

 

          $

 

900,000

 

 

 

  $

 

1,800,000

 

 

 

  $

 

2,700,000

 

 

 

                                                       
 

Founders’ Grant (RSUs) (4)

 

   

 

5/23/18

 

 

 

                                   

 

165,016

 

 

 

                                  $

 

7,937,270

 

 

 

 

Credit In Lieu of 2017 Award (5)

 

   

 

2/16/18

 

 

 

          $