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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 5, 2019
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Brighthouse Financial, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)

 
001-37905
(Commission File Number)

 
81-3846992
(IRS Employer Identification No.)

11225 North Community House Road
Charlotte, North Carolina
(Address of principal executive offices)


28277
(Zip Code)


Registrant’s telephone number, including area code: (980) 365-7100

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
BHF
The Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/1,000th interest in a share of 6.600% Non-Cumulative Preferred Stock, Series A
BHFAP
The Nasdaq Stock Market LLC
6.250% Junior Subordinated Debentures due 2058
BHFAL
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o




Item 2.02.   Results of Operations and Financial Condition.
On August 5, 2019, Brighthouse Financial, Inc. (“Brighthouse Financial” or the “Company”) issued (i) a news release announcing its results for the quarter ended June 30, 2019, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference, and (ii) a Financial Supplement for the quarter ended June 30, 2019, a copy of which is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the information in Items 2.02, 7.01 and Exhibits 99.1 and 99.2 listed in Item 9.01 of this Current Report on Form 8-K shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 7.01.  Regulation FD Disclosure.
In connection with its earnings call for the quarter ended June 30, 2019, Brighthouse Financial has prepared a presentation for use with investors and other members of the investment community. This presentation is available on the Brighthouse Financial investor relations website at http://investor.brighthousefinancial.com.

Brighthouse Financial routinely uses its investor relations website to provide presentations, press releases and other information that may be deemed material to investors. Accordingly, the Company encourages investors and others interested in the Company to review the information that it shares at http://investor.brighthousefinancial.com.

Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No.
Description





1

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

BRIGHTHOUSE FINANCIAL, INC.
 
 
 
By:
/s/ Lynn A. Dumais
 
Name:
Lynn A. Dumais
 
Title:
Chief Accounting Officer

Date: August 5, 2019





2
Exhibit
 
 
 
 
 
PUBLIC RELATIONS

Brighthouse Financial, Inc.
11225 N. Community House Rd.
Charlotte, NC 28277

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Exhibit 99.1
FOR IMMEDIATE RELEASE
Brighthouse Financial Announces Second Quarter 2019 Results
•
Second quarter 2019 net income available to shareholders of $377 million, or $3.27 on a per diluted share basis, driven primarily by net derivative mark-to-market gains
•
Adjusted earnings, less notable items*, of $296 million, or $2.56 on a per diluted share basis
•
Annuity sales grew 34 percent over the second quarter of 2018
•
Variable annuity assets of approximately $1.5 billion in excess of CTE98*
•
Company repurchased $136 million of its common stock during the quarter
CHARLOTTE, NC, August 5, 2019 — Brighthouse Financial, Inc. ("Brighthouse Financial" or the "company") (Nasdaq: BHF) announced today its financial results for the second quarter ended June 30, 2019.
Second Quarter 2019 Results
The company reported net income available to shareholders of $377 million in the second quarter of 2019, or $3.27 on a per diluted share basis, compared to a net loss available to shareholders of $239 million in the second quarter of 2018. The company ended the second quarter of 2019 with common stockholders' equity ("book value") of $15.9 billion, or $140.83 on a per common share basis, and book value, excluding accumulated other comprehensive income ("AOCI") of $13.2 billion, or $116.85 on a per common share basis.

For the second quarter of 2019, the company reported adjusted earnings* of $254 million, or $2.19 on a per diluted share basis.

The adjusted earnings for the quarter reflected $42 million after-tax of unfavorable notable items, or $0.36 on a per diluted share basis, including:

•
$30 million after-tax in establishment costs related to planned technology and branding expenses associated with the company's separation from its former parent company; and
•
$12 million after-tax impact related to reinsurance.
Corporate expenses in the second quarter of 2019 were $242 million pre-tax, up from $225 million pre-tax in the first quarter of 2019.

______________________
* Information regarding the non-GAAP and other financial measures included in this news release and a reconciliation of such non-GAAP financial measures to the most directly comparable GAAP measures is provided in the Non-GAAP and Other Financial Disclosures discussion below, as well as in the tables that accompany this news release and/or the Second Quarter 2019 Brighthouse Financial, Inc. Financial Supplement and/or the Second Quarter 2019 Brighthouse Financial, Inc. Earnings Call Presentation (which are available on the Brighthouse Financial Investor Relations web page at http://investor.brighthousefinancial.com). Additional information regarding notable items can be found on the last page of this news release.

1


 
 
 
 
 
PUBLIC RELATIONS

Brighthouse Financial, Inc.
11225 N. Community House Rd.
Charlotte, NC 28277

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-bhflogorgb970pxa39.jpg


Annuity sales increased 34 percent quarter-over-quarter and 11 percent sequentially.
During the second quarter of 2019, the company repurchased approximately $136 million of its common stock, with an additional $43 million of its common stock repurchased in July 2019. Since the announcement of the company's first repurchase authorization in August 2018, the company has repurchased a total of $336 million of its common stock through July 2019.

"We continued to execute our strategy during the second quarter of 2019 and are very pleased with our results. We delivered strong annuity sales, completed the repositioning of our investment portfolio and continued to repurchase our common stock," said Eric Steigerwalt, president and CEO, Brighthouse Financial. "As we approach the second anniversary of becoming an independent, publicly-traded company, we remain focused on growing life and annuity sales, reducing expenses, effectively managing our capital and driving long-term shareholder value."



Key Metrics (Unaudited, dollars in millions except share and per share amounts)

 
 
As of or For the Three Months Ended
 
 
June 30, 2019
 
June 30, 2018
 
 
Total
 
Per share
 
Total
 
Per share
Net income (loss) available to shareholders (1)
 
$377
 
$3.27
 
$(239)
 
$(2.01)
Adjusted earnings (1)
 
$254
 
$2.19
 
$153
 
$1.27
Weighted average common shares outstanding - diluted
 
115,536,654
 
N/A
 
120,200,149
 
N/A
 
 
 
 
 
 
 
 
 
Book value
 
$15,864
 
$140.83
 
$13,435
 
$112.17
Book value, excluding AOCI
 
$13,162
 
$116.85
 
$12,620
 
$105.37
Ending common shares outstanding
 
112,644,952
 
N/A
 
119,773,106
 
N/A
 
 
 
 
 
 
 
 
 
(1) Per share amounts are on a diluted basis and may not recalculate due to rounding. For loss periods, dilutive shares were not included in the calculation as inclusion of such shares would have an anti-dilutive effect.








2


 
 
 
 
 
PUBLIC RELATIONS

Brighthouse Financial, Inc.
11225 N. Community House Rd.
Charlotte, NC 28277

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Results by Business Segment and Corporate & Other (Unaudited, in millions)
 
 
For the Three Months Ended
Adjusted earnings
 
June 30,
2019
 
March 31,
2019
 
June 30,
2018
Annuities
 
$265
 
$295
 
$221
Life
 
$58
 
$25
 
$37
Run-off (1)
 
$2
 
$(36)
 
$(6)
Corporate & Other (1)
 
$(71)
 
$(52)
 
$(99)
 
 
 
 
 
 
 
(1) The company uses the term “adjusted loss” throughout this news release to refer to negative adjusted earnings values.

Sales (Unaudited, in millions)
 
 
For the Three Months Ended
 
 
June 30,
2019
 
March 31,
2019
 
June 30,
2018
Annuities (1)
 
$1,890
 
$1,707
 
$1,412
Life
 
$1
 
$1
 
$2
 
 
 
 
 
 
 
(1) Annuities sales include sales of a fixed indexed annuity product sold by Massachusetts Mutual Life Insurance Company, representing 90% of gross sales of that product. Sales of this product were $291 million for the second quarter of 2019, $281 million for the first quarter of 2019, and $272 million for the second quarter of 2018.

Annuities
Adjusted earnings in the Annuities segment were $265 million in the current quarter, compared to adjusted earnings of $221 million in the second quarter of 2018 and adjusted earnings of $295 million in the first quarter of 2019.
There were no notable items in the current quarter or the comparison quarters.
On a quarter-over-quarter basis, adjusted earnings reflect higher net investment income and lower expenses, partially offset by lower fees. On a sequential basis, adjusted earnings reflect higher deferred acquisition costs ("DAC") amortization, as well as higher reserves and expenses, partially offset by higher net investment income and higher fees.
As mentioned above, annuity sales increased 34 percent quarter-over-quarter and 11 percent sequentially.
Life
Adjusted earnings in the Life segment were $58 million in the current quarter, compared to adjusted earnings of $37 million in the second quarter of 2018 and adjusted earnings of $25 million in the first quarter of 2019.

3


 
 
 
 
 
PUBLIC RELATIONS

Brighthouse Financial, Inc.
11225 N. Community House Rd.
Charlotte, NC 28277

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-bhflogorgb970pxa39.jpg


There were no notable items in the current quarter or the comparison quarters.
On a quarter-over-quarter basis, adjusted earnings reflect lower expenses partially offset by lower fees. On a sequential basis, adjusted earnings reflect higher net investment income and lower claims driven by higher reinsurance recoveries, partially offset by higher DAC amortization.
Run-off
The Run-off segment had adjusted earnings of $2 million in the current quarter, compared to an adjusted loss of $6 million in the second quarter of 2018 and an adjusted loss of $36 million in the first quarter of 2019.
The current quarter included a $12 million unfavorable reinsurance notable item. There were no notable items in the second quarter of 2018 or the first quarter of 2019.
On a quarter-over-quarter basis, adjusted earnings, less notable items, reflect higher net investment income and lower expenses, partially offset by higher claims. On a sequential basis, adjusted earnings, less notable items, reflect higher net investment income.
Corporate & Other
Corporate & Other had an adjusted loss of $71 million in the current quarter, compared to an adjusted loss of $99 million in the second quarter of 2018 and an adjusted loss of $52 million in the first quarter of 2019.
The current quarter includes a $30 million unfavorable notable item related to establishment costs, as described above. The second quarter of 2018 included a $44 million unfavorable notable item and the first quarter of 2019 included a $27 million unfavorable notable item, both also related to establishment costs.
On a quarter-over-quarter basis, the adjusted loss, less notable items, reflects lower expenses and higher net investment income, partially offset by higher interest expense. On a sequential basis, the adjusted loss, less notable items, reflects higher expenses.

Net Investment Income and Adjusted Net Investment Income (Unaudited, in millions)
 
 
For the Three Months Ended
 
 
June 30,
2019
 
March 31,
2019
 
June 30,
2018
Net investment income
 
$942
 
$811
 
$806
Adjusted net investment income*
 
$942
 
$811
 
$812
 

4


 
 
 
 
 
PUBLIC RELATIONS

Brighthouse Financial, Inc.
11225 N. Community House Rd.
Charlotte, NC 28277

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Net Investment Income
Net investment income and adjusted net investment income for the second quarter of 2019 were each $942 million. On a quarter-over-quarter and sequential basis, adjusted net investment income increased $130 million and $131 million, respectively. The quarter-over-quarter results were primarily driven by asset growth, higher alternative investment income and prepayments, and repositioning of the investment portfolio. On a sequential basis, the results were primarily driven by higher alternative investment income and prepayments, as well as asset growth.
The net investment income yield was 4.67 percent during the quarter.

Statutory Capital and Liquidity (Unaudited, in billions)
 
 
As of
 
 
June 30,
2019 (1)
 
March 31,
2019
 
June 30,
2018
Statutory combined total adjusted capital
 
$6.9
 
$6.3
 
$6.0
 
 
 
 
 
 
 
(1) Reflects preliminary statutory results as of June 30, 2019.

Capitalization

Holding company liquid assets were approximately $0.9 billion at June 30, 2019.

Statutory combined total adjusted capital on a preliminary basis increased to approximately $6.9 billion at June 30, 2019, driven primarily by net derivative mark-to-market gains.

Variable annuity assets were approximately $1.5 billion above the CTE98 level at June 30, 2019.
 






5


 
 
 
 
 
PUBLIC RELATIONS

Brighthouse Financial, Inc.
11225 N. Community House Rd.
Charlotte, NC 28277

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Earnings Conference Call
Brighthouse Financial will hold a conference call and audio webcast to discuss its financial results for the second quarter of 2019 at 8:00 a.m. Eastern Time on Tuesday, August 6, 2019.

To listen to the audio webcast via the internet and to access the related presentation, please visit the Brighthouse Financial Investor Relations web page at http://investor.brighthousefinancial.com. To join the conference call via telephone, please dial (844) 358-9117 (+1 (209) 905-5952 from outside the U.S.) and use conference ID 7656195.

A replay of the conference call will be made available until Friday, August 23, 2019 on the Brighthouse Financial Investor Relations web page at http://investor.brighthousefinancial.com.






6


 
 
 
 
 
PUBLIC RELATIONS

Brighthouse Financial, Inc.
11225 N. Community House Rd.
Charlotte, NC 28277

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-bhflogorgb970pxa39.jpg


Note Regarding Forward-Looking Statements

This news release and other oral or written statements that we make from time to time may contain information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve substantial risks and uncertainties. We have tried, wherever possible, to identify such statements using words such as "anticipate," "estimate," "expect," "project," "may," "will," "could," "intend," "goal," "target," "guidance," "forecast," "preliminary," "objective," "continue," "aim," "plan," "believe" and other words and terms of similar meaning, or that are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include, without limitation, statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operating and financial results, as well as statements regarding the expected benefits of the separation (the "Separation") from MetLife, Inc. ("MetLife").

Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of Brighthouse Financial. These statements are based on current expectations and the current economic environment and involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others: differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models; higher risk management costs and exposure to increased market and counterparty risk due to guarantees within certain of our products; the effectiveness of our variable annuity exposure management strategy and the impact of such strategy on net income volatility and negative effects on our statutory capital; the reserves we are required to hold against our variable annuities as a result of actuarial guidelines; a sustained period of low equity market prices and interest rates that are lower than those we assumed when we issued our variable annuity products; the potential material adverse effect of changes in accounting standards, practices and/or policies applicable to us, including changes in the accounting for long-duration contracts; our degree of leverage due to indebtedness; the effect adverse capital and credit market conditions may have on our ability to meet liquidity needs and our access to capital; the impact of changes in regulation and in supervisory and enforcement policies on our insurance business or other operations; the effectiveness of our risk management policies and procedures; the availability of reinsurance and the ability of our counterparties to our reinsurance or indemnification arrangements to perform their obligations thereunder; heightened competition, including with respect to service, product features, scale, price, actual or perceived financial strength, claims-paying ratings, credit ratings, e-business capabilities and name recognition; the ability of our insurance subsidiaries to pay dividends to us, and our ability to pay dividends to our shareholders; our ability to market and distribute our products through distribution channels; any failure of third parties to provide services we need, any failure of the practices and procedures of these third parties and any inability to obtain information or assistance we need from third parties, including MetLife; whether all or any portion of the tax consequences of the Separation are not as expected, leading to material additional taxes or material adverse consequences to tax attributes that impact us; the uncertainty of the outcome of any disputes with MetLife over tax-related or other matters and agreements, including the potential of outcomes adverse to us that could cause us to owe MetLife material tax reimbursements or payments, or disagreements regarding MetLife's or our obligations under our other agreements; the impact on our business structure, profitability, cost of capital and flexibility due to restrictions we have agreed to that preserve the tax-free treatment of certain parts of the Separation; the potential material negative tax impact of potential future tax legislation that could decrease the value of our tax attributes and cause other cash expenses, such as reserves, to increase materially and make some of our products less attractive to consumers; whether the Separation will qualify for non-recognition treatment for federal income tax purposes and potential indemnification

7


 
 
 
 
 
PUBLIC RELATIONS

Brighthouse Financial, Inc.
11225 N. Community House Rd.
Charlotte, NC 28277

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-bhflogorgb970pxa39.jpg


to MetLife if the Separation does not so qualify; the impact of the Separation on our business and profitability due to MetLife’s strong brand and reputation, the increased costs related to replacing arrangements with MetLife with those of third parties and incremental costs as a public company; whether the operational, strategic and other benefits of the Separation can be achieved, and our ability to implement our business strategy; our ability to attract and retain key personnel; and other factors described from time to time in documents that we file with the U.S. Securities and Exchange Commission (the "SEC").

For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements included and the risks, uncertainties and other factors identified in our Annual Report on Form 10-K for the year ended December 31, 2018 and our subsequent Quarterly Reports on Form 10-Q, particularly in the sections entitled "Risk Factors" and "Quantitative and Qualitative Disclosures About Market Risk," as well as in our other subsequent filings with the SEC. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.


Non-GAAP and Other Financial Disclosures

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

Non-GAAP Financial Disclosures

We present certain measures of our performance that are not calculated in accordance with accounting principles generally accepted in the United States of America, also known as "GAAP." We believe that these non-GAAP financial measures highlight our results of operations and the underlying profitability drivers of our business, as well as enhance the understanding of our performance by the investor community.

The following non-GAAP financial measures, previously referred to as operating measures, should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP:
Non-GAAP financial measures:
Most directly comparable GAAP financial measures:
adjusted earnings
net income (loss) available to shareholders (1)
adjusted earnings, less notable items
net income (loss) available to shareholders (1)
adjusted revenues
revenues
adjusted expenses
expenses
adjusted earnings per common share
earnings per common share, diluted (1)
adjusted earnings per common share, less notable items
earnings per common share, diluted (1)
adjusted return on common equity
return on common equity (2)
adjusted return on common equity, less notable items
return on common equity (2)
adjusted net investment income
net investment income
__________________
 
(1) Brighthouse uses net income (loss) available to shareholders to refer to net income (loss) available to Brighthouse Financial, Inc.'s common shareholders, and earnings per common share, diluted to refer to net income (loss) available to shareholders per common share.
(2) Brighthouse uses return on common equity to refer to return on Brighthouse Financial, Inc.'s common stockholders' equity.

8


 
 
 
 
 
PUBLIC RELATIONS

Brighthouse Financial, Inc.
11225 N. Community House Rd.
Charlotte, NC 28277

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-bhflogorgb970pxa39.jpg


Reconciliations to the most directly comparable historical GAAP measures are included for those measures which are presented herein. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are not accessible on a forward-looking basis because we believe it is not possible without unreasonable efforts to provide other than a range of net investment gains and losses and net derivative gains and losses, which can fluctuate significantly within or outside the range and from period to period and may have a material impact on net income (loss) available to shareholders.

Adjusted Earnings, Adjusted Revenues and Adjusted Expenses
Adjusted earnings, which may be positive or negative, is used by management to evaluate performance, allocate resources and facilitate comparisons to industry results. This financial measure focuses on our primary businesses principally by excluding the impact of market volatility, which could distort trends.

Adjusted earnings reflects adjusted revenues less adjusted expenses, both net of income tax, and excludes net income (loss) attributable to noncontrolling interests and preferred stock dividends. Provided below are the adjustments to GAAP revenues and GAAP expenses used to calculate adjusted revenues and adjusted expenses, respectively.

The following are significant items excluded from total revenues, net of income tax, in calculating the adjusted revenues component of adjusted earnings:

•
Net investment gains (losses);
•
Net derivative gains (losses) ("NDGL"), except earned income on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment ("Investment Hedge Adjustments"); and
•
Certain variable annuity GMIB fees ("GMIB Fees") and amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses).
The following are significant items excluded from total expenses, net of income tax, in calculating the adjusted expenses component of adjusted earnings:

•
Amounts associated with benefits and hedging costs related to GMIBs ("GMIB Costs");
•
Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and market value adjustments associated with surrenders or terminations of contracts ("Market Value Adjustments"); and
•
Amortization of DAC and value of business acquired ("VOBA") related to (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments.
The tax impact of the adjustments mentioned is calculated net of the statutory tax rate, which could differ from our effective tax rate.
Consistent with GAAP guidance for segment reporting, adjusted earnings is also our GAAP measure of segment performance.


9


 
 
 
 
 
PUBLIC RELATIONS

Brighthouse Financial, Inc.
11225 N. Community House Rd.
Charlotte, NC 28277

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-bhflogorgb970pxa39.jpg


Adjusted Earnings per Common Share and Adjusted Return on Common Equity
Adjusted earnings per common share and adjusted return on common equity are measures used by management to evaluate the execution of our business strategy and align such strategy with our shareholders' interests.
Adjusted earnings per common share is defined as adjusted earnings for the period divided by the weighted average number of fully diluted shares of common stock outstanding for the period.
Adjusted return on common equity is defined as total annual adjusted earnings on a four quarter trailing basis, divided by the simple average of the most recent five quarters of total Brighthouse Financial, Inc.'s common stockholders' equity, excluding AOCI.

Adjusted Net Investment Income
We present adjusted net investment income to measure our performance for management purposes, and we believe it enhances the understanding of our investment portfolio results. Adjusted net investment income represents net investment income including investment hedge adjustments.

Other Financial Disclosures

Corporate Expenses
Corporate expenses includes functional department expenses, public company expenses, certain investment expenses, retirement funding and incentive compensation; and excludes establishment costs.

Notable items
Certain of the non-GAAP measures described above may be presented further adjusted to exclude notable items. Notable items reflect the impact on our results of certain unanticipated items and events, as well as certain items and events that were anticipated, such as establishment costs. The presentation of notable items and non-GAAP measures, less notable items is intended to help investors better understand our results and to evaluate and forecast those results.

Book Value per Common Share and Book Value per Common Share, excluding AOCI
Brighthouse uses the term "book value" to refer to "Brighthouse Financial, Inc.'s common stockholders' equity, including AOCI." Book value per common share is defined as ending Brighthouse Financial, Inc.'s common stockholders' equity, including AOCI, divided by ending common shares outstanding. Book value per common share, excluding AOCI, is defined as ending Brighthouse Financial, Inc.'s common stockholders' equity, excluding AOCI, divided by ending common shares outstanding.

CTE95
CTE95 is defined as the amount of assets required to satisfy contract holder obligations across market environments in the average of the worst five percent of a set of capital market scenarios over the life of the contracts.


10


 
 
 
 
 
PUBLIC RELATIONS

Brighthouse Financial, Inc.
11225 N. Community House Rd.
Charlotte, NC 28277

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-bhflogorgb970pxa39.jpg


CTE98
CTE98 is defined as the amount of assets required to satisfy contract holder obligations across market environments in the average of the worst two percent of a set of capital market scenarios over the life of the contracts.

Holding Company Liquid Assets
Holding company liquid assets include liquid assets in Brighthouse Financial, Inc., Brighthouse Holdings, LLC, and Brighthouse Services, LLC. Liquid assets include cash and cash equivalents, short-term investments and publicly traded securities excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include amounts received in connection with derivatives and collateral financing arrangements.

Sales
Statistical sales information for life sales is calculated using the LIMRA definition of sales for core direct sales, excluding company-sponsored internal exchanges, corporate-owned life insurance, bank-owned life insurance, and private placement variable universal life insurance. Annuity sales consist of 100 percent of direct statutory premiums, except for fixed indexed annuity sales distributed through MassMutual that consist of 90 percent of gross sales. Annuity sales exclude company sponsored internal exchanges. These sales statistics do not correspond to revenues under GAAP, but are used as relevant measures of business activity.

Net Investment Income Yield
Similar to adjusted net investment income, we present net investment income yields as a performance measure we believe enhances the understanding of our investment portfolio results. Net investment income yields are calculated on adjusted net investment income as a percent of average quarterly asset carrying values. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.

Adjusted Statutory Earnings
Adjusted statutory earnings is a measure of our insurance companies' ability to pay future distributions and are reflective of whether our hedging program functions as intended. Adjusted statutory earnings is calculated as statutory pre-tax income less the change in the variable annuities reserve methodology (Actuarial Guideline 43) while including the change in both the reserve and capital methodology based CTE95 calculation, as well as unrealized gains (losses) associated with the variable annuities risk management strategy. Adjusted statutory earnings may be further adjusted for certain unanticipated items that impacted our results in order to help management and investors better understand, evaluate and forecast those results.






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PUBLIC RELATIONS

Brighthouse Financial, Inc.
11225 N. Community House Rd.
Charlotte, NC 28277

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-bhflogorgb970pxa39.jpg


About Brighthouse Financial, Inc.
Brighthouse Financial, Inc. (Brighthouse Financial) (Nasdaq: BHF) is on a mission to help people achieve financial security. As one of the largest providers of annuities and life insurance in the U.S., we specialize in products designed to help people protect what they've earned and ensure it lasts. Learn more at brighthousefinancial.com.


CONTACT

FOR INVESTORS
David Rosenbaum
(980) 949-3326
david.rosenbaum@brighthousefinancial.com
FOR MEDIA
Meghan Lantier
(980) 949-4142
mlantier@brighthousefinancial.com


12


 
 
 
 
 
PUBLIC RELATIONS

Brighthouse Financial, Inc.
11225 N. Community House Rd.
Charlotte, NC 28277

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-bhflogorgb970pxa39.jpg


Condensed Statements of Operations (Unaudited, in millions)
 
 
For the Three Months Ended
Revenues
 
June 30,
2019
 
March 31,
2019
 
June 30,
2018
Premiums
 
$232
 
$227
 
$223
Universal life and investment-type product policy fees
 
888
 
875
 
962
Net investment income
 
942
 
811
 
806
Other revenues
 
96
 
92
 
98
Revenues before NIGL and NDGL
 
2,158
 
2,005
 
2,089
Net investment gains (losses)
 
63
 
(11)
 
(75)
Net derivative gains (losses)
 
149
 
(1,303)
 
(312)
Total revenues
 
$2,370
 
$691
 
$1,702
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
Interest credited to policyholder account balances
 
$265
 
$258
 
$269
Policyholder benefits and claims
 
845
 
772
 
813
Amortization of DAC and VOBA
 
170
 
22
 
246
Interest expense on debt
 
48
 
47
 
36
Other expenses
 
573
 
545
 
655
Total expenses
 
1,901
 
1,644
 
2,019
Income (loss) before provision for income tax
 
469
 
(953)
 
(317)
Provision for income tax expense (benefit)
 
85
 
(218)
 
(79)
Net income (loss)
 
384
 
(735)
 
(238)
Less: Net income (loss) attributable to noncontrolling interests
 
—
 
2
 
1
Net income (loss) attributable to Brighthouse Financial, Inc.
 
384
 
(737)
 
(239)
Less: Preferred stock dividends
 
7
 
—
 
—
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders
 
$377
 
$(737)
 
$(239)





13


 
 
 
 
 
PUBLIC RELATIONS

Brighthouse Financial, Inc.
11225 N. Community House Rd.
Charlotte, NC 28277

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-bhflogorgb970pxa39.jpg


Condensed Balance Sheets (Unaudited, in millions)
 
 
As of
ASSETS
 
June 30,
2019
 
March 31,
2019
 
June 30,
2018
Investments:
 
 
 
 
 
 
Fixed maturity securities available-for-sale
 
$67,211
 
$64,847
 
$62,343
Equity securities
 
153
 
150
 
153
Mortgage loans, net
 
15,078
 
14,504
 
12,337
Policy loans
 
1,342
 
1,385
 
1,458
Real estate limited partnerships and limited liability companies
 
462
 
453
 
449
Other limited partnership interests
 
1,834
 
1,800
 
1,706
Short-term investments
 
793
 
799
 
177
Other invested assets
 
3,064
 
2,302
 
2,305
Total investments
 
89,937
 
86,240
 
80,928
Cash and cash equivalents
 
3,981
 
3,864
 
2,135
Accrued investment income
 
747
 
791
 
607
Reinsurance recoverables
 
13,366
 
13,098
 
12,745
Premiums and other receivables
 
865
 
928
 
848
DAC and VOBA
 
5,492
 
5,680
 
5,968
Current income tax recoverable
 
—
 
—
 
814
Other assets
 
610
 
618
 
580
Separate account assets
 
106,214
 
105,211
 
111,587
Total assets
 
$221,212
 
$216,430
 
$216,212
LIABILITIES AND EQUITY
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
Future policy benefits
 
$38,280
 
$37,157
 
$35,816
Policyholder account balances
 
42,941
 
41,177
 
38,407
Other policy-related balances
 
3,041
 
3,005
 
2,941
Payables for collateral under securities loaned and other transactions
 
4,094
 
3,990
 
4,265
Long-term debt
 
4,365
 
4,364
 
3,607
Current income tax payable
 
14
 
19
 
—
Deferred income tax liability
 
1,364
 
1,005
 
684
Other liabilities
 
4,558
 
5,438
 
5,405
Separate account liabilities
 
106,214
 
105,211
 
111,587
Total liabilities
 
204,871
 
201,366
 
202,712
Equity
 
 
 
 
 
 
Preferred Stock, at par value
 
—
 
—
 
—
Common stock, at par value
 
1
 
1
 
1
Additional paid-in capital
 
12,893
 
12,889
 
12,444
Retained earnings (deficit)
 
986
 
609
 
175
Treasury stock
 
(306)
 
(170)
 
—
Accumulated other comprehensive income (loss)
 
2,702
 
1,670
 
815
Total Brighthouse Financial, Inc.’s stockholders’ equity
 
16,276
 
14,999
 
13,435
Noncontrolling interests
 
65
 
65
 
65
Total equity
 
16,341
 
15,064
 
13,500
Total liabilities and equity
 
$221,212
 
$216,430
 
$216,212
 
 
 
 
 
 
 

14


 
 
 
 
 
PUBLIC RELATIONS

Brighthouse Financial, Inc.
11225 N. Community House Rd.
Charlotte, NC 28277

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-bhflogorgb970pxa39.jpg


Reconciliation of Net Income (Loss) Available to Shareholders to Adjusted Earnings and Adjusted Earnings, Less Notable Items, and Reconciliation of Net Income (Loss) Available to Shareholders per Common Share to Adjusted Earnings per Common Share and Adjusted Earnings, Less Notable Items per Common Share (Unaudited, in millions except per share data)
 
 
For the Three Months Ended
ADJUSTED EARNINGS, LESS NOTABLE ITEMS
 
June 30,
2019
 
March 31,
2019
 
June 30,
2018
Net income (loss) available to shareholders
 
$377
 
$(737)
 
$(239)
Adjustments from net income (loss) available to shareholders to adjusted earnings:
 
 
 
 
 
 
Less: Net investment gains (losses)
 
63
 
(11)
 
(75)
Less: Net derivative gains (losses), excluding investment hedge adjustments
 
149
 
(1,303)
 
(316)
Less: GMIB Fees and GMIB Costs
 
(22)
 
35
 
(19)
Less: Amortization of DAC and VOBA
 
(17)
 
75
 
(96)
Less: Market value adjustments
 
(16)
 
(23)
 
8
Less: Other
 
—
 
—
 
1
Less: Provision for income tax (expense) benefit on reconciling adjustments
 
(34)
 
258
 
105
Adjusted earnings
 
254
 
232
 
153
Less: Notable items
 
(42)
 
(27)
 
(44)
Adjusted earnings, less notable items
 
$296
 
$259
 
$197
 
 
 
 
 
 
 
ADJUSTED EARNINGS, LESS NOTABLE ITEMS PER COMMON SHARE (1)
 
 
 
 
 
 
Net income (loss) available to shareholders per common share
 
$3.27
 
$(6.31)
 
$(2.01)
Less: Net investment gains (losses)
 
0.55
 
(0.09)
 
(0.64)
Less: Net derivative gains (losses), excluding investment hedge adjustments
 
1.29
 
(11.16)
 
(2.64)
Less: GMIB Fees and GMIB Costs
 
(0.19)
 
0.30
 
(0.16)
Less: Amortization of DAC and VOBA
 
(0.15)
 
0.64
 
(0.80)
Less: Market value adjustments
 
(0.14)
 
(0.20)
 
0.07
Less: Other
 
—
 
—
 
0.01
Less: Provision for income tax (expense) benefit on reconciling adjustments
 
(0.29)
 
2.21
 
0.88
Less: Impact of inclusion of dilutive shares
 
—
 
0.01
 
—
Adjusted earnings per common share
 
2.19
 
1.98
 
1.27
Less: Notable items
 
(0.36)
 
(0.23)
 
(0.37)
Adjusted earnings, less notable items per common share
 
$2.56
 
$2.21
 
$1.64
 
 
 
 
 
 
 
(1) Per share calculations are on a diluted basis and may not recalculate or foot due to rounding. For loss periods, dilutive shares were not included in the calculation as inclusion of such shares would have an anti-dilutive effect.

15


 
 
 
 
 
PUBLIC RELATIONS

Brighthouse Financial, Inc.
11225 N. Community House Rd.
Charlotte, NC 28277

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-bhflogorgb970pxa39.jpg


Reconciliation of Net Investment Income to Adjusted Net Investment Income (Unaudited, in millions)

 
 
For the Three Months Ended
 
 
June 30,
2019
 
March 31,
2019
 
June 30,
2018
Net investment income
 
$942
 
$811
 
$806
Less: Investment hedge adjustments
 
—
 
—
 
(3)
Less: Other incremental net investment income
 
—
 
—
 
(3)
Adjusted net investment income
 
$942
 
$811
 
$812


Notable Items (Unaudited, in millions)
 
 
For the Three Months Ended
 
For the Six Months Ended
NOTABLE ITEMS IMPACTING ADJUSTED EARNINGS
 
June 30,
2019
 
March 31,
2019
 
June 30,
2018
 
June 30,
2019
Actuarial items and other insurance adjustments
 
$12
 
$—
 
$—
 
$12
Establishment costs
 
30
 
27
 
44
 
57
Total notable items (1)
 
$42
 
$27
 
$44
 
$69
 
 
 
 
 
 
 
 
 
NOTABLE ITEMS BY SEGMENT AND CORPORATE & OTHER
 
 
 
 
 
 
 
 
Annuities
 
$—
 
$—
 
$—
 
$—
Life
 
—
 
—
 
—
 
—
Run-off
 
12
 
—
 
—
 
12
Corporate & Other
 
30
 
27
 
44
 
57
Total notable items (1)
 
$42
 
$27
 
$44
 
$69
 
 
 
(1) Notable items reflect the negative (positive) after-tax impact to adjusted earnings of certain unanticipated items and events, as well as certain items and events that were anticipated, such as establishment costs. The presentation of notable items is intended to help investors better understand our results and to evaluate and forecast those results.


16


Exhibit

 
 
 
 
 



Exhibit 99.2








Brighthouse Financial, Inc.
Financial Supplement

Second Quarter 2019













https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-bhflogorgb970pxa39.jpg



 
 
 
 
 



    
Table of Contents
 
 
Financial Results
Key Metrics
Condensed Statements of Operations
Balance Sheets
 
 
Earnings and Select Metrics from Business Segments and Corporate & Other
 
Statements of Adjusted Earnings by Segment and Corporate & Other
 
Annuities — Statements of Adjusted Earnings
 
Annuities — Select Operating Metrics
 
Life — Statements of Adjusted Earnings
 
Life — Select Operating Metrics
 
Run-off — Statements of Adjusted Earnings
 
Run-off — Select Operating Metrics
 
Corporate & Other — Statements of Adjusted Earnings
 
 
 
 
Other Information
 
DAC and VOBA and Net Derivative Gains (Losses)
 
Notable Items
 
Variable Annuity Separate Account Returns and Allocations
 
Summary of Investments
 
Select Actual and Preliminary Statutory Financial Results
 
 
 
 
Appendix
 
Note Regarding Forward-Looking Statements
 
Non-GAAP and Other Financial Disclosures
 
Acronyms
 
Reconciliation of Net Income (Loss) Available to Shareholders to Adjusted Earnings and Adjusted Earnings, Less Notable Items, and Reconciliation of Net Income (Loss) Available to Shareholders per Common Share to Adjusted Earnings per Common Share and Adjusted Earnings, Less Notable Items per Common Share
 
Reconciliation of Return on Common Equity to Adjusted Return on Common Equity
 
Reconciliation of Total Revenues to Adjusted Revenues and Reconciliation of Total Expenses to Adjusted Expenses
 
Investment Reconciliation Details

Note: See the Appendix for non-GAAP financial information, definitions and reconciliations. Financial information, unless otherwise noted, is rounded to millions. Some financial information, therefore, may not sum to the corresponding total.

As used in this financial supplement, “Brighthouse Financial,” “Brighthouse,” the “Company,” “we,” “our” and “us” refer to Brighthouse Financial, Inc.


 
 
 
 
 









Financial Results


 
 
Financial Supplement
 
1




Key Metrics (Unaudited, dollars in millions except per share amounts)

 
 
As of or For the Three Months Ended
Financial Results and Metrics
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Net income (loss) available to shareholders (1)
 
$377
 
$(737)
 
$1,442
 
$(271)
 
$(239)
Adjusted earnings (1)
 
$254
 
$232
 
$186
 
$270
 
$153
Total corporate expenses (2)
 
$242
 
$225
 
$233
 
$242
 
$288
 
 
 
 
 
 
 
 
 
 
 
Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
Brighthouse Financial, Inc.’s stockholders’ equity
 
$16,276
 
$14,999
 
$14,418
 
$12,884
 
$13,435
Less: Preferred stock, net
 
412
 
412
 
—
 
—
 
—
Brighthouse Financial, Inc.’s common stockholders’ equity, including AOCI
 
$15,864
 
$14,587
 
$14,418
 
$12,884
 
$13,435
Less: AOCI
 
2,702
 
1,670
 
716
 
552
 
815
Brighthouse Financial, Inc.’s common stockholders’ equity, excluding AOCI
 
$13,162
 
$12,917
 
$13,702
 
$12,332
 
$12,620
 
 
 
 
 
 
 
 
 
 
 
Return on Common Equity
 
 
 
 
 
 
 
 
 
 
Return on common equity (1)
 
5.7%
 
1.4%
 
6.3%
 
0.7%
 
(4.0)%
Return on common equity, excluding AOCI (1)
 
6.3%
 
1.5%
 
6.7%
 
0.7%
 
(4.5)%
Adjusted return on common equity (1)
 
7.3%
 
6.5%
 
6.9%
 
13.5%
 
5.8%
 
 
 
 
 
 
 
 
 
 
 
Earnings Per Common Share, Diluted
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to shareholders per common share (1), (3)
 
$3.27
 
$(6.31)
 
$12.14
 
$(2.26)
 
$(2.01)
Adjusted earnings per common share (1)
 
$2.19
 
$1.98
 
$1.56
 
$2.23
 
$1.27
Weighted average common shares outstanding
 
115,536,654
 
117,229,854
 
118,685,082
 
120,641,572
 
120,200,149
 
 
 
 
 
 
 
 
 
 
 
Book Value Per Common Share
 
 
 
 
 
 
 
 
 
 
Book value per common share (1), (4)
 
$140.83
 
$125.55
 
$122.67
 
$108.45
 
$112.17
Book value per common share, excluding AOCI (1)
 
$116.85
 
$111.18
 
$116.58
 
$103.80
 
$105.37
Ending common shares outstanding
 
112,644,952
 
116,182,687
 
117,532,336
 
118,800,611
 
119,773,106
 
 
 
 
 
 
 
 
 
 
 
(1) See definitions for Non-GAAP and Other Financial Disclosures in the Appendix beginning on page A-2.
(2) Includes functional department expenses, public company expenses, certain investment expenses, retirement funding and incentive compensation; and excludes establishment costs.
(3) For loss periods, dilutive shares were not included in the calculation of net income (loss) available to shareholders per common share as inclusion of such shares would have an anti-dilutive effect.
(4) Certain amounts prior to June 30, 2019 have been reclassified to conform to current period presentation.

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-croppedlogocopya05.jpg
 
 
 
 
 





 
 
Financial Supplement
 
2




Condensed Statements of Operations (Unaudited, in millions)

 
 
For the Three Months Ended
 
For the Six Months Ended
Revenues
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
Premiums
 
$232
 
$227
 
$223
 
$225
 
$223
 
$459
 
$452
Universal life and investment-type product policy fees
 
888
 
875
 
899
 
972
 
962
 
1,763
 
1,964
Net investment income
 
942
 
811
 
862
 
853
 
806
 
1,753
 
1,623
Other revenues
 
96
 
92
 
89
 
105
 
98
 
188
 
203
Revenues before NIGL and NDGL
 
2,158
 
2,005
 
2,073
 
2,155
 
2,089
 
4,163
 
4,242
Net investment gains (losses)
 
63
 
(11)
 
(86)
 
(42)
 
(75)
 
52
 
(79)
Net derivative gains (losses)
 
149
 
(1,303)
 
2,039
 
(691)
 
(312)
 
(1,154)
 
(646)
Total revenues
 
$2,370
 
$691
 
$4,026
 
$1,422
 
$1,702
 
$3,061
 
$3,517
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest credited to policyholder account balances
 
$265
 
$258
 
$270
 
$273
 
$269
 
$523
 
$536
Policyholder benefits and claims
 
845
 
772
 
899
 
822
 
813
 
1,617
 
1,551
Amortization of DAC and VOBA
 
170
 
22
 
469
 
30
 
246
 
192
 
551
Interest expense on debt
 
48
 
47
 
45
 
40
 
36
 
95
 
73
Other expenses
 
573
 
545
 
556
 
625
 
655
 
1,118
 
1,236
Total expenses
 
1,901
 
1,644
 
2,239
 
1,790
 
2,019
 
3,545
 
3,947
Income (loss) before provision for income tax
 
469
 
(953)
 
1,787
 
(368)
 
(317)
 
(484)
 
(430)
Provision for income tax expense (benefit)
 
85
 
(218)
 
345
 
(99)
 
(79)
 
(133)
 
(127)
Net income (loss)
 
384
 
(735)
 
1,442
 
(269)
 
(238)
 
(351)
 
(303)
Less: Net income (loss) attributable to noncontrolling interests
 
—
 
2
 
—
 
2
 
1
 
2
 
3
Net income (loss) attributable to Brighthouse Financial, Inc.
 
384
 
(737)
 
1,442
 
(271)
 
(239)
 
(353)
 
(306)
Less: Preferred stock dividends
 
7
 
—
 
—
 
—
 
—
 
7
 
—
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders
 
$377
 
$(737)
 
$1,442
 
$(271)
 
$(239)
 
$(360)
 
$(306)
 

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-croppedlogocopya05.jpg
 
 
 
 
 





 
 
Financial Supplement
 
3




Balance Sheets (Unaudited, in millions)
 
 
As of
ASSETS
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Investments:
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities available-for-sale
 
$67,211
 
$64,847
 
$62,608
 
$62,279
 
$62,343
Equity securities
 
153
 
150
 
140
 
150
 
153
Mortgage loans, net
 
15,078
 
14,504
 
13,694
 
13,033
 
12,337
Policy loans
 
1,342
 
1,385
 
1,421
 
1,443
 
1,458
Real estate limited partnerships and limited liability companies
 
462
 
453
 
451
 
444
 
449
Other limited partnership interests
 
1,834
 
1,800
 
1,840
 
1,765
 
1,706
Short-term investments
 
793
 
799
 
—
 
116
 
177
Other invested assets
 
3,064
 
2,302
 
3,027
 
2,099
 
2,305
Total investments
 
89,937
 
86,240
 
83,181
 
81,329
 
80,928
Cash and cash equivalents
 
3,981
 
3,864
 
4,145
 
2,144
 
2,135
Accrued investment income
 
747
 
791
 
724
 
675
 
607
Reinsurance recoverables
 
13,366
 
13,098
 
12,929
 
12,683
 
12,745
Premiums and other receivables
 
865
 
928
 
768
 
868
 
848
DAC and VOBA
 
5,492
 
5,680
 
5,717
 
6,050
 
5,968
Current income tax recoverable
 
—
 
—
 
1
 
878
 
814
Other assets
 
610
 
618
 
573
 
583
 
580
Separate account assets
 
106,214
 
105,211
 
98,256
 
111,736
 
111,587
Total assets
 
$221,212
 
$216,430
 
$206,294
 
$216,946
 
$216,212
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
Future policy benefits
 
$38,280
 
$37,157
 
$36,209
 
$35,748
 
$35,816
Policyholder account balances
 
42,941
 
41,177
 
40,054
 
39,446
 
38,407
Other policy-related balances
 
3,041
 
3,005
 
3,000
 
2,907
 
2,941
Payables for collateral under securities loaned and other transactions
 
4,094
 
3,990
 
5,057
 
4,043
 
4,265
Long-term debt
 
4,365
 
4,364
 
3,963
 
3,966
 
3,607
Current income tax payable
 
14
 
19
 
15
 
—
 
—
Deferred income tax liability
 
1,364
 
1,005
 
972
 
576
 
684
Other liabilities
 
4,558
 
5,438
 
4,285
 
5,575
 
5,405
Separate account liabilities
 
106,214
 
105,211
 
98,256
 
111,736
 
111,587
Total liabilities
 
204,871
 
201,366
 
191,811
 
203,997
 
202,712
Equity
 
 
 
 
 
 
 
 
 
 
Preferred Stock, at par value
 
—
 
—
 
—
 
—
 
—
Common stock, at par value
 
1
 
1
 
1
 
1
 
1
Additional paid-in capital
 
12,893
 
12,889
 
12,473
 
12,469
 
12,444
Retained earnings (deficit)
 
986
 
609
 
1,346
 
(96)
 
175
Treasury stock
 
(306)
 
(170)
 
(118)
 
(42)
 
—
Accumulated other comprehensive income (loss)
 
2,702
 
1,670
 
716
 
552
 
815
Total Brighthouse Financial, Inc.’s stockholders’ equity
 
16,276
 
14,999
 
14,418
 
12,884
 
13,435
Noncontrolling interests
 
65
 
65
 
65
 
65
 
65
Total equity
 
16,341
 
15,064
 
14,483
 
12,949
 
13,500
Total liabilities and equity
 
$221,212
 
$216,430
 
$206,294
 
$216,946
 
$216,212
 
 
 
 
 
 
 
 
 
 
 

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-croppedlogocopya05.jpg
 
 
 
 
 





 
 
 
 
 








Earnings and Select
Metrics from
Business Segments and Corporate & Other



 
 
Financial Supplement
 
5




Statements of Adjusted Earnings by Segment and Corporate & Other (Unaudited, in millions)
  
 
For the Three Months Ended June 30, 2019
Adjusted revenues
 
Annuities
 
Life
 
Run-off
 
Corporate & Other
 
Total
Premiums
 
$60
 
$150
 
$—
 
$22
 
$232
Universal life and investment-type product policy fees
 
584
 
59
 
182
 
(2)
 
823
Net investment income
 
470
 
116
 
339
 
17
 
942
Other revenues
 
80
 
5
 
6
 
5
 
96
Total adjusted revenues
 
$1,194
 
$330
 
$527
 
$42
 
$2,093
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
Interest credited to policyholder account balances
 
$147
 
$24
 
$94
 
$—
 
$265
Policyholder benefits and claims
 
180
 
169
 
380
 
13
 
742
Amortization of DAC and VOBA
 
128
 
21
 
—
 
4
 
153
Interest expense on debt
 
—
 
—
 
—
 
48
 
48
Other operating costs
 
416
 
44
 
51
 
62
 
573
Total adjusted expenses
 
871
 
258
 
525
 
127
 
1,781
Adjusted earnings before provision for income tax
 
323
 
72
 
2
 
(85)
 
312
Provision for income tax expense (benefit)
 
58
 
14
 
—
 
(21)
 
51
Adjusted earnings after provision for income tax
 
265
 
58
 
2
 
(64)
 
261
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends
 
—
 
—
 
—
 
7
 
7
Adjusted earnings
 
$265
 
$58
 
$2
 
$(71)
 
$254
 
 
 
 
 
 
 
 
 
 
 
  
 
For the Three Months Ended June 30, 2018
Adjusted revenues
 
Annuities
 
Life
 
Run-off
 
Corporate & Other
 
Total
Premiums
 
$48
 
$151
 
$—
 
$24
 
$223
Universal life and investment-type product policy fees
 
632
 
76
 
189
 
(4)
 
893
Net investment income
 
376
 
111
 
314
 
11
 
812
Other revenues
 
90
 
1
 
7
 
—
 
98
Total adjusted revenues
 
$1,146
 
$339
 
$510
 
$31
 
$2,026
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
Interest credited to policyholder account balances
 
$148
 
$28
 
$92
 
$—
 
$268
Policyholder benefits and claims
 
181
 
168
 
365
 
19
 
733
Amortization of DAC and VOBA
 
124
 
23
 
—
 
3
 
150
Interest expense on debt
 
—
 
—
 
—
 
37
 
37
Other operating costs
 
427
 
74
 
61
 
96
 
658
Total adjusted expenses
 
880
 
293
 
518
 
155
 
1,846
Adjusted earnings before provision for income tax
 
266
 
46
 
(8)
 
(124)
 
180
Provision for income tax expense (benefit)
 
45
 
9
 
(2)
 
(26)
 
26
Adjusted earnings after provision for income tax
 
221
 
37
 
(6)
 
(98)
 
154
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends
 
—
 
—
 
—
 
1
 
1
Adjusted earnings
 
$221
 
$37
 
$(6)
 
$(99)
 
$153

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-croppedlogocopya05.jpg
 
 
 
 
 





 
 
Financial Supplement
 
6




Statements of Adjusted Earnings by Segment and Corporate & Other (Cont.) (Unaudited, in millions)
  
 
For the Six Months Ended June 30, 2019
Adjusted revenues
 
Annuities
 
Life
 
Run-off
 
Corporate & Other
 
Total
Premiums
 
$118
 
$295
 
$1
 
$45
 
$459
Universal life and investment-type product policy fees
 
1,145
 
117
 
375
 
(5)
 
1,632
Net investment income
 
891
 
213
 
615
 
34
 
1,753
Other revenues
 
157
 
8
 
12
 
11
 
188
Total adjusted revenues
 
$2,311
 
$633
 
$1,003
 
$85
 
$4,032
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
Interest credited to policyholder account balances
 
$284
 
$49
 
$190
 
$—
 
$523
Policyholder benefits and claims
 
323
 
350
 
760
 
27
 
1,460
Amortization of DAC and VOBA
 
210
 
32
 
—
 
8
 
250
Interest expense on debt
 
—
 
—
 
—
 
95
 
95
Other operating costs
 
810
 
99
 
97
 
112
 
1,118
Total adjusted expenses
 
1,627
 
530
 
1,047
 
242
 
3,446
Adjusted earnings before provision for income tax
 
684
 
103
 
(44)
 
(157)
 
586
Provision for income tax expense (benefit)
 
124
 
20
 
(10)
 
(43)
 
91
Adjusted earnings after provision for income tax
 
560
 
83
 
(34)
 
(114)
 
495
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends
 
—
 
—
 
—
 
9
 
9
Adjusted earnings
 
$560
 
$83
 
$(34)
 
$(123)
 
$486
 
 
 
 
 
 
 
 
 
 
 
  
 
For the Six Months Ended June 30, 2018
Adjusted revenues
 
Annuities
 
Life
 
Run-off
 
Corporate & Other
 
Total
Premiums
 
$93
 
$309
 
$—
 
$50
 
$452
Universal life and investment-type product policy fees
 
1,272
 
179
 
388
 
(7)
 
1,832
Net investment income
 
739
 
219
 
657
 
22
 
1,637
Other revenues
 
189
 
1
 
13
 
—
 
203
Total adjusted revenues
 
$2,293
 
$708
 
$1,058
 
$65
 
$4,124
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
Interest credited to policyholder account balances
 
$294
 
$59
 
$182
 
$—
 
$535
Policyholder benefits and claims
 
361
 
333
 
712
 
33
 
1,439
Amortization of DAC and VOBA
 
267
 
52
 
—
 
8
 
327
Interest expense on debt
 
—
 
—
 
—
 
74
 
74
Other operating costs
 
833
 
137
 
109
 
160
 
1,239
Total adjusted expenses
 
1,755
 
581
 
1,003
 
275
 
3,614
Adjusted earnings before provision for income tax
 
538
 
127
 
55
 
(210)
 
510
Provision for income tax expense (benefit)
 
91
 
24
 
11
 
(55)
 
71
Adjusted earnings after provision for income tax
 
447
 
103
 
44
 
(155)
 
439
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends
 
—
 
—
 
—
 
3
 
3
Adjusted earnings
 
$447
 
$103
 
$44
 
$(158)
 
$436

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-croppedlogocopya05.jpg
 
 
 
 
 





 
 
Financial Supplement
 
7




Annuities — Statements of Adjusted Earnings (Unaudited, in millions)

  
 
For the Three Months Ended
 
For the Six Months Ended
Adjusted revenues
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
Premiums
 
$60
 
$58
 
$44
 
$48
 
$48
 
$118
 
$93
Universal life and investment-type product policy fees
 
584
 
561
 
594
 
625
 
632
 
1,145
 
1,272
Net investment income
 
470
 
421
 
398
 
399
 
376
 
891
 
739
Other revenues
 
80
 
77
 
78
 
88
 
90
 
157
 
189
Total adjusted revenues
 
$1,194
 
$1,117
 
$1,114
 
$1,160
 
$1,146
 
$2,311
 
$2,293
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest credited to policyholder account balances
 
$147
 
$137
 
$147
 
$152
 
$148
 
$284
 
$294
Policyholder benefits and claims
 
180
 
143
 
174
 
72
 
181
 
323
 
361
Amortization of DAC and VOBA
 
128
 
82
 
198
 
40
 
124
 
210
 
267
Interest expense on debt
 
—
 
—
 
—
 
—
 
—
 
—
 
—
Other operating costs
 
416
 
394
 
387
 
409
 
427
 
810
 
833
Total adjusted expenses
 
871
 
756
 
906
 
673
 
880
 
1,627
 
1,755
Adjusted earnings before provision for income tax
 
323
 
361
 
208
 
487
 
266
 
684
 
538
Provision for income tax expense (benefit)
 
58
 
66
 
33
 
86
 
45
 
124
 
91
Adjusted earnings
 
$265
 
$295
 
$175
 
$401
 
$221
 
$560
 
$447


https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-croppedlogocopya05.jpg
 
 
 
 
 





 
 
Financial Supplement
 
8




Annuities — Select Operating Metrics (Unaudited, in millions)

  
 
For the Three Months Ended
VARIABLE & SHIELD ANNUITIES ACCOUNT VALUE (1)
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Account value, beginning of period
 
$112,247
 
$105,089
 
$116,985
 
$116,283
 
$117,178
Deposits
 
1,511
 
1,327
 
1,295
 
1,243
 
1,129
Withdrawals, surrenders and contract benefits
 
(2,716)
 
(2,479)
 
(2,789)
 
(2,754)
 
(2,877)
Net flows (2)
 
(1,205)
 
(1,152)
 
(1,494)
 
(1,511)
 
(1,748)
Investment performance (3)
 
3,687
 
8,971
 
(9,711)
 
2,953
 
1,568
Policy charges and other
 
(688)
 
(661)
 
(691)
 
(740)
 
(715)
Account value, end of period
 
$114,041
 
$112,247
 
$105,089
 
$116,985
 
$116,283
 
 
 
 
 
 
 
 
 
 
 
FIXED ANNUITIES ACCOUNT VALUE (4)
 
 
 
 
 
 
 
 
 
 
Account value, beginning of period
 
$12,734
 
$12,770
 
$13,225
 
$13,112
 
$13,036
Deposits
 
410
 
416
 
439
 
330
 
305
Withdrawals, surrenders and contract benefits
 
(312)
 
(521)
 
(963)
 
(296)
 
(308)
Net flows (2)
 
98
 
(105)
 
(524)
 
34
 
(3)
Interest credited
 
87
 
90
 
94
 
105
 
105
Other
 
(19)
 
(21)
 
(25)
 
(26)
 
(26)
Account value, end of period
 
$12,900
 
$12,734
 
$12,770
 
$13,225
 
$13,112
 
 
 
 
 
 
 
 
 
 
 
INCOME ANNUITIES (1)
 
 
 
 
 
 
 
 
 
 
Income annuity insurance liabilities
 
$4,515
 
$4,541
 
$4,517
 
$4,561
 
$4,547
 
 
 
 
 
 
 
 
 
 
 
(1) Includes general account and separate account.
(2) Deposits and withdrawals include policy exchanges.
(3) Includes imputed interest on indexed annuities and the interest credited on the general account investment option of variable products.
(4) Includes fixed indexed annuities.

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-croppedlogocopya05.jpg
 
 
 
 
 





 
 
Financial Supplement
 
9




Annuities — Select Operating Metrics (Cont.) (Unaudited, in millions)

 
 
For the Three Months Ended
 
For the Six Months Ended
VARIABLE & INDEXED ANNUITY SALES
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
Shield Annuities (1)
 
$1,140
 
$985
 
$924
 
$867
 
$723
 
$2,125
 
$1,452
GMWB/GMAB
 
227
 
198
 
220
 
218
 
237
 
425
 
420
GMDB only
 
80
 
78
 
81
 
84
 
96
 
158
 
188
GMIB
 
26
 
23
 
20
 
22
 
33
 
49
 
65
Total variable & indexed annuity sales
 
$1,473
 
$1,284
 
$1,245
 
$1,191
 
$1,089
 
$2,757
 
$2,125
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FIXED ANNUITY SALES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed indexed annuities (2)
 
$291
 
$281
 
$368
 
$302
 
$272
 
$572
 
$445
Fixed deferred annuities
 
114
 
133
 
73
 
28
 
36
 
247
 
70
Single premium immediate annuities
 
8
 
6
 
8
 
16
 
13
 
14
 
22
Other fixed annuities
 
4
 
3
 
4
 
4
 
2
 
7
 
6
Total fixed annuity sales
 
$417
 
$423
 
$453
 
$350
 
$323
 
$840
 
$543
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Shield Annuities refers to our suite of structured annuities consisting of products marketed under various names.
(2) Represents 90% of gross sales assumed via reinsurance agreements.


https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-croppedlogocopya05.jpg
 
 
 
 
 





 
 
Financial Supplement
 
10




Life — Statements of Adjusted Earnings (Unaudited, in millions)

 
 
For the Three Months Ended
 
For the Six Months Ended
Adjusted revenues
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
Premiums
 
$150
 
$145
 
$155
 
$152
 
$151
 
$295
 
$309
Universal life and investment-type product policy fees
 
59
 
58
 
61
 
77
 
76
 
117
 
179
Net investment income
 
116
 
97
 
115
 
115
 
111
 
213
 
219
Other revenues
 
5
 
3
 
4
 
2
 
1
 
8
 
1
Total adjusted revenues
 
$330
 
$303
 
$335
 
$346
 
$339
 
$633
 
$708
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest credited to policyholder account balances
 
$24
 
$25
 
$25
 
$29
 
$28
 
$49
 
$59
Policyholder benefits and claims
 
169
 
181
 
153
 
169
 
168
 
350
 
333
Amortization of DAC and VOBA
 
21
 
11
 
35
 
8
 
23
 
32
 
52
Interest expense on debt
 
—
 
—
 
—
 
—
 
—
 
—
 
—
Other operating costs
 
44
 
55
 
42
 
62
 
74
 
99
 
137
Total adjusted expenses
 
258
 
272
 
255
 
268
 
293
 
530
 
581
Adjusted earnings before provision for income tax
 
72
 
31
 
80
 
78
 
46
 
103
 
127
Provision for income tax expense (benefit)
 
14
 
6
 
16
 
17
 
9
 
20
 
24
Adjusted earnings
 
$58
 
$25
 
$64
 
$61
 
$37
 
$83
 
$103

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-croppedlogocopya05.jpg
 
 
 
 
 





 
 
Financial Supplement
 
11




Life — Select Operating Metrics (Unaudited, in millions)

  
 
For the Three Months Ended
LIFE ACCOUNT VALUE: GENERAL ACCOUNT
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Variable universal and universal life account value, beginning of period
 
$2,727
 
$2,747
 
$2,753
 
$2,758
 
$2,763
Premiums and deposits (1)
 
58
 
65
 
64
 
58
 
62
Surrenders and contract benefits
 
(49)
 
(52)
 
(31)
 
(29)
 
(44)
Net flows
 
9
 
13
 
33
 
29
 
18
Net transfers from (to) separate account
 
18
 
13
 
8
 
12
 
17
Interest credited
 
26
 
25
 
27
 
28
 
29
Policy charges and other
 
(73)
 
(71)
 
(74)
 
(74)
 
(69)
Variable universal and universal life account value, end of period
 
$2,707
 
$2,727
 
$2,747
 
$2,753
 
$2,758
 
 
 
 
 
 
 
 
 
 
 
LIFE ACCOUNT VALUE: SEPARATE ACCOUNT
 
 
 
 
 
 
 
 
 
 
Variable universal life account value, beginning of period
 
$5,138
 
$4,679
 
$5,351
 
$5,222
 
$5,174
Premiums and deposits
 
55
 
59
 
59
 
57
 
59
Surrenders and contract benefits
 
(63)
 
(69)
 
(63)
 
(67)
 
(67)
Net flows
 
(8)
 
(10)
 
(4)
 
(10)
 
(8)
Investment performance
 
212
 
539
 
(603)
 
207
 
133
Net transfers from (to) general account
 
(18)
 
(15)
 
(8)
 
(12)
 
(17)
Policy charges and other
 
(55)
 
(55)
 
(57)
 
(56)
 
(60)
Variable universal life account value, end of period
 
$5,269
 
$5,138
 
$4,679
 
$5,351
 
$5,222
 
 
 
 
 
 
 
 
 
 
 
(1) Includes premiums and sales directed to the general account investment option of variable products.

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-croppedlogocopya05.jpg
 
 
 
 
 





 
 
Financial Supplement
 
12




Life — Select Operating Metrics (Cont.) (Unaudited, in millions)

 
 
For the Three Months Ended
 
For the Six Months Ended
LIFE SALES
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
Total life sales
 
$1
 
$1
 
$1
 
$2
 
$2
 
$2
 
$4

 
 
As of
LIFE INSURANCE IN-FORCE
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Whole Life
 
 
 
 
 
 
 
 
 
 
Life Insurance in-force, before reinsurance
 
$21,212
 
$21,518
 
$21,804
 
$22,127
 
$22,467
Life Insurance in-force, net of reinsurance
 
$3,172
 
$3,638
 
$3,648
 
$3,690
 
$3,713
 
 
 
 
 
 
 
 
 
 
 
Term Life
 
 
 
 
 
 
 
 
 
 
Life Insurance in-force, before reinsurance
 
$421,507
 
$427,239
 
$433,058
 
$438,564
 
$443,532
Life Insurance in-force, net of reinsurance
 
$321,285
 
$324,941
 
$328,876
 
$332,204
 
$335,524
 
 
 
 
 
 
 
 
 
 
 
Universal and Variable Universal Life
 
 
 
 
 
 
 
 
 
 
Life Insurance in-force, before reinsurance
 
$55,628
 
$56,378
 
$56,882
 
$58,108
 
$58,837
Life Insurance in-force, net of reinsurance
 
$39,139
 
$39,844
 
$40,052
 
$41,279
 
$41,146
 
 
 
 
 
 
 
 
 
 
 


https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-croppedlogocopya05.jpg
 
 
 
 
 





 
 
Financial Supplement
 
13




Run-off — Statements of Adjusted Earnings (Unaudited, in millions)

  
 
For the Three Months Ended
 
For the Six Months Ended
Adjusted revenues
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
Premiums
 
$—
 
$1
 
$1
 
$—
 
$—
 
$1
 
$—
Universal life and investment-type product policy fees
 
182
 
193
 
180
 
208
 
189
 
375
 
388
Net investment income
 
339
 
276
 
331
 
322
 
314
 
615
 
657
Other revenues
 
6
 
6
 
6
 
6
 
7
 
12
 
13
Total adjusted revenues
 
$527
 
$476
 
$518
 
$536
 
$510
 
$1,003
 
$1,058
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest credited to policyholder account balances
 
$94
 
$96
 
$98
 
$92
 
$92
 
$190
 
$182
Policyholder benefits and claims
 
380
 
380
 
351
 
532
 
365
 
760
 
712
Amortization of DAC and VOBA
 
—
 
—
 
—
 
—
 
—
 
—
 
—
Interest expense on debt
 
—
 
—
 
—
 
—
 
—
 
—
 
—
Other operating costs
 
51
 
46
 
47
 
46
 
61
 
97
 
109
Total adjusted expenses
 
525
 
522
 
496
 
670
 
518
 
1,047
 
1,003
Adjusted earnings before provision for income tax
 
2
 
(46)
 
22
 
(134)
 
(8)
 
(44)
 
55
Provision for income tax expense (benefit)
 
—
 
(10)
 
4
 
(29)
 
(2)
 
(10)
 
11
Adjusted earnings
 
$2
 
$(36)
 
$18
 
$(105)
 
$(6)
 
$(34)
 
$44

https://cdn.kscope.io/a54f62422ce0fefce789d55b842898c2-croppedlogocopya05.jpg
 
 
 
 
 





 
 
Financial Supplement
 
14




Run-off — Select Operating Metrics (Unaudited, in millions)

  
 
For the Three Months Ended
UNIVERSAL LIFE WITH SECONDARY GUARANTEES ACCOUNT VALUE
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Account value, beginning of period
 
$6,110
 
$6,154
 
$6,185
 
$6,204
 
$6,235
Premiums and deposits (1)
 
191
 
187
 
190
 
189
 
202
Surrenders and contract benefits
 
(27)
 
(39)
 
(38)
 
(26)
 
(44)
Net flows
 
164
 
148
 
152
 
163
 
158
Interest credited
 
58
 
57
 
60
 
60
 
58
Policy charges and other
 
(248)
 
(249)
 
(243)
 
(242)
 
(247)
Account value, end of period
 
$6,084
 
$6,110
 
$6,154
 
$6,185
 
$6,204

 
 
As of
LIFE INSURANCE IN-FORCE
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Universal Life with Secondary Guarantees
 
 
 
 
 
 
 
 
 
 
Life Insurance in-force, before reinsurance
 
$79,243
 
$79,817
 
$80,356
 
$80,963
 
$81,479
Life Insurance in-force, net of reinsurance
 
$36,945
 
$37,233
 
$37,601
 
$37,029
 
$36,619
 
 
 
 
 
 
 
 
 
 
 
(1) Includes premiums and sales directed to the general account investment option of variable products.

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Financial Supplement
 
15




Corporate & Other — Statements of Adjusted Earnings (Unaudited, in millions)

  
 
For the Three Months Ended
 
For the Six Months Ended
Adjusted revenues
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
Premiums
 
$22
 
$23
 
$23
 
$25
 
$24
 
$45
 
$50
Universal life and investment-type product policy fees
 
(2)
 
(3)
 
(3)
 
(3)
 
(4)
 
(5)
 
(7)
Net investment income
 
17
 
17
 
19
 
16
 
11
 
34
 
22
Other revenues
 
5
 
6
 
1
 
9
 
—
 
11
 
—
Total adjusted revenues
 
$42
 
$43
 
$40
 
$47
 
$31
 
$85
 
$65
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest credited to policyholder account balances
 
$—
 
$—
 
$—
 
$—
 
$—
 
$—
 
$—
Policyholder benefits and claims
 
13
 
14
 
16
 
15
 
19
 
27
 
33
Amortization of DAC and VOBA
 
4
 
4
 
3
 
5
 
3
 
8
 
8
Interest expense on debt
 
48
 
47
 
45
 
39
 
37
 
95
 
74
Other operating costs
 
62
 
50
 
80
 
105
 
96
 
112
 
160
Total adjusted expenses
 
127
 
115
 
144
 
164
 
155
 
242
 
275
Adjusted earnings before provision for income tax
 
(85)
 
(72)
 
(104)
 
(117)
 
(124)
 
(157)
 
(210)
Provision for income tax expense (benefit)
 
(21)
 
(22)
 
(33)
 
(32)
 
(26)
 
(43)
 
(55)
Adjusted earnings after provision for income tax
 
(64)
 
(50)
 
(71)
 
(85)
 
(98)
 
(114)
 
(155)
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends
 
7
 
2
 
—
 
2
 
1
 
9
 
3
Adjusted earnings
 
$(71)
 
$(52)
 
$(71)
 
$(87)
 
$(99)
 
$(123)
 
$(158)

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Other
Information



 
 
Financial Supplement
 
17




DAC and VOBA and Net Derivative Gains (Losses) (Unaudited, in millions)

 
 
For the Three Months Ended
DAC AND VOBA ROLLFORWARD
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Balance, beginning of period
 
$5,680
 
$5,717
 
$6,050
 
$5,968
 
$6,083
Capitalization
 
96
 
86
 
87
 
83
 
76
Amortization:
 
 
 
 
 
 
 
 
 
 
Included in adjusted earnings, excluding notable items
 
(153)
 
(97)
 
(236)
 
(148)
 
(150)
Related to notable items, included in adjusted expenses
 
—
 
—
 
—
 
96
 
—
Related to items not included in adjusted expenses
 
(17)
 
75
 
(233)
 
22
 
(96)
Total amortization
 
(170)
 
(22)
 
(469)
 
(30)
 
(246)
Unrealized investment gains (losses)
 
(114)
 
(101)
 
49
 
29
 
55
Other
 
—
 
—
 
—
 
—
 
—
Balance, end of period
 
$5,492
 
$5,680
 
$5,717
 
$6,050
 
$5,968
 
 
As of
DAC AND VOBA BY SEGMENT AND CORPORATE & OTHER
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Annuities
 
$4,382
 
$4,534
 
$4,550
 
$4,874
 
$4,783
Life
 
1,001
 
1,034
 
1,051
 
1,056
 
1,061
Run-off
 
5
 
5
 
5
 
5
 
5
Corporate & Other
 
104
 
107
 
111
 
115
 
119
Total DAC and VOBA
 
$5,492
 
$5,680
 
$5,717
 
$6,050
 
$5,968

 
 
For the Three Months Ended
NET DERIVATIVE GAINS (LOSSES)
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Net derivative gains (losses):
 
 
 
 
 
 
 
 
 
 
Variable annuity embedded derivatives
 
$(439)
 
$(194)
 
$(146)
 
$(40)
 
$196
Variable annuity hedges
 
245
 
(1,245)
 
1,844
 
(591)
 
(510)
ULSG hedges
 
312
 
122
 
217
 
(130)
 
(63)
Other hedges and embedded derivatives
 
31
 
14
 
123
 
68
 
62
Subtotal
 
149
 
(1,303)
 
2,038
 
(693)
 
(315)
Investment hedge adjustments
 
—
 
—
 
1
 
2
 
3
Total net derivative gains (losses)
 
$149
 
$(1,303)
 
$2,039
 
$(691)
 
$(312)

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Financial Supplement
 
18




Notable Items (Unaudited, in millions)

 
 
For the Three Months Ended
NOTABLE ITEMS IMPACTING ADJUSTED EARNINGS
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Actuarial items and other insurance adjustments
 
$12
 
$—
 
$(26)
 
$(25)
 
$—
Establishment costs
 
30
 
27
 
39
 
69
 
44
Total notable items (1)
 
$42
 
$27
 
$13
 
$44
 
$44
 
 
 
 
 
 
 
 
 
 
 
NOTABLE ITEMS BY SEGMENT AND CORPORATE & OTHER
 
 
 
 
 
 
 
 
 
 
Annuities
 
$—
 
$—
 
$(12)
 
$(154)
 
$—
Life
 
—
 
—
 
—
 
(11)
 
—
Run-off
 
12
 
—
 
(14)
 
140
 
—
Corporate & Other
 
30
 
27
 
39
 
69
 
44
Total notable items (1)
 
$42
 
$27
 
$13
 
$44
 
$44
 
 
 
 
 
 
 
 
 
 
 
(1) Notable items reflect the negative (positive) after-tax impact to adjusted earnings of certain unanticipated items and events, as well as certain items and events that were anticipated, such as establishment costs. The presentation of notable items is intended to help investors better understand our results and to evaluate and forecast those results.

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Financial Supplement
 
19




Variable Annuity Separate Account Returns and Allocations (Unaudited)

  
 
For the Three Months Ended
VARIABLE ANNUITY SEPARATE ACCOUNT RETURNS
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Total Quarterly VA separate account gross returns
 
3.84%
 
10.02%
 
(9.23)%
 
3.02%
 
1.76%
 
 
 
 
 
 
 
 
 
 
 
TOTAL VARIABLE ANNUITY SEPARATE ACCOUNT ALLOCATIONS
 
 
 
 
 
 
 
 
 
 
Percent allocated to equity funds
 
25.04%
 
25.72%
 
24.83%
 
26.06%
 
25.61%
Percent allocated to bond funds/other funds
 
8.23%
 
8.30%
 
8.79%
 
8.02%
 
8.14%
Percent allocated to target volatility funds
 
24.11%
 
22.97%
 
23.05%
 
22.62%
 
22.74%
Percent allocated to balanced funds
 
42.62%
 
43.01%
 
43.33%
 
43.30%
 
43.51%
 
 
 
 
 
 
 
 
 
 
 

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Financial Supplement
 
20




Summary of Investments (Unaudited, dollars in millions)
 
 
June 30, 2019
 
December 31, 2018
 
 
Amount
 
% of Total
 
Amount
 
% of Total
Fixed maturity securities:
 
 
 
 
 
 
 
 
U.S. corporate securities
 
$28,282
 
30.11%
 
$24,473
 
28.02%
U.S. government and agency securities
 
7,269
 
7.74%
 
9,095
 
10.41%
Residential mortgage-backed securities
 
9,411
 
10.02%
 
8,547
 
9.79%
Foreign corporate securities
 
9,585
 
10.21%
 
8,026
 
9.19%
Commercial mortgage-backed securities
 
5,312
 
5.66%
 
5,248
 
6.01%
State and political subdivision securities
 
3,846
 
4.10%
 
3,597
 
4.12%
Asset-backed securities
 
1,847
 
1.97%
 
2,126
 
2.44%
Foreign government securities
 
1,659
 
1.77%
 
1,496
 
1.71%
Total fixed maturity securities
 
67,211
 
71.58%
 
62,608
 
71.69%
Equity securities
 
153
 
0.16%
 
140
 
0.16%
Mortgage loans:
 
 
 
 
 
 
 
 
Commercial mortgage loans
 
9,267
 
9.87%
 
8,529
 
9.77%
Agricultural mortgage loans
 
3,248
 
3.45%
 
2,946
 
3.37%
Residential mortgage loans
 
2,627
 
2.80%
 
2,276
 
2.61%
Valuation allowances
 
(64)
 
(0.07)%
 
(57)
 
(0.07)%
Total mortgage loans, net
 
15,078
 
16.05%
 
13,694
 
15.68%
Policy loans
 
1,342
 
1.43%
 
1,421
 
1.63%
Real estate limited partnerships and limited liability companies
 
462
 
0.49%
 
451
 
0.52%
Other limited partnership interests
 
1,834
 
1.95%
 
1,840
 
2.11%
Cash, cash equivalents and short-term investments
 
4,774
 
5.08%
 
4,145
 
4.75%
Other invested assets:
 
 
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
 
 
 
Interest rate
 
1,646
 
1.75%
 
717
 
0.82%
Equity market
 
830
 
0.88%
 
1,732
 
1.98%
Foreign currency exchange rate
 
347
 
0.37%
 
313
 
0.36%
Credit
 
33
 
0.04%
 
16
 
0.02%
Total derivatives
 
2,856
 
3.04%
 
2,778
 
3.18%
FHLB common stock
 
50
 
0.05%
 
64
 
0.07%
Other
 
158
 
0.17%
 
185
 
0.21%
Total other invested assets
 
3,064
 
3.26%
 
3,027
 
3.46%
Total investments and cash and cash equivalents
 
$93,918
 
100.00%
 
$87,326
 
100.00%

 
 
For the Three Months Ended
 
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Net investment income yield (1)
 
4.67%
 
4.10%
 
4.48%
 
4.50%
 
4.37%
 
 
 
 
 
 
 
 
 
 
 
(1) Yields are calculated on investment income as a percent of average quarterly asset carrying values. Investment income includes investment hedge adjustments, excludes realized gains and losses and reflects the GAAP adjustments described beginning on page A-1 of the Appendix hereto. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.

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Financial Supplement
 
21




Select Actual and Preliminary Statutory Financial Results (Unaudited, in millions)

 
 
For the Three Months Ended
 
For the Six Months Ended
REVENUES AND EXPENSES (1)
 
June 30,
2019 (2)
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
June 30,
2019 (2)
 
June 30,
2018
Total revenues (Line 9)
 
$3,400
 
$2,393
 
$4,333
 
$2,921
 
$2,910
 
$5,793
 
$5,756
Total benefits and expenses before dividends to policyholders (Line 28)
 
$2,800
 
$2,429
 
$4,830
 
$2,383
 
$2,764
 
$5,229
 
$4,975
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
For the Six Months Ended
NET INCOME (LOSS) (1)
 
June 30,
2019 (2)
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
June 30,
2019 (2)
 
June 30,
2018
Gain (loss) from operations net of taxes and dividends to policyholders (Line 33)
 
$600
 
$(43)
 
$(493)
 
$582
 
$175
 
$557
 
$879
Net realized capital gains (losses), net of taxes and certain transfers to interest maintenance reserve (Line 34)
 
(700)
 
(147)
 
(203)
 
(388)
 
(313)
 
(847)
 
(1,332)
Net income (loss) (Line 35)
 
$(100)
 
$(190)
 
$(696)
 
$194
 
$(138)
 
$(290)
 
$(453)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of
 
 
COMBINED TOTAL ADJUSTED CAPITAL
 
June 30,
2019 (2)
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
 
 
 
Combined total adjusted capital
 
$6,900
 
$6,314
 
$7,354
 
$6,004
 
$6,042
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Combined statutory results for Brighthouse Life Insurance Company, Brighthouse Life Insurance Company of NY and New England Life Insurance Company.
(2) Reflects preliminary statutory results for the three months and six months ended June 30, 2019.

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Appendix



 
 
Financial Supplement
 
A-1




Note Regarding Forward-Looking Statements

This financial supplement and other oral or written statements that we make from time to time may contain information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve substantial risks and uncertainties. We have tried, wherever possible, to identify such statements using words such as “anticipate,” “estimate,” “expect,” “project,” “may,” “will,” “could,” “intend,” “goal,” “target,” “guidance,” “forecast,” “preliminary,” “objective,” “continue,” “aim,” “plan,” “believe” and other words and terms of similar meaning, or that are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include, without limitation, statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operating and financial results, as well as statements regarding the expected benefits of the separation (the “Separation”) from MetLife, Inc. (“MetLife”).
Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of Brighthouse Financial. These statements are based on current expectations and the current economic environment and involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others: differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models; higher risk management costs and exposure to increased market and counterparty risk due to guarantees within certain of our products; the effectiveness of our variable annuity exposure management strategy and the impact of such strategy on net income volatility and negative effects on our statutory capital; the reserves we are required to hold against our variable annuities as a result of actuarial guidelines; a sustained period of low equity market prices and interest rates that are lower than those we assumed when we issued our variable annuity products; the potential material adverse effect of changes in accounting standards, practices and/or policies applicable to us, including changes in the accounting for long-duration contracts; our degree of leverage due to indebtedness; the effect adverse capital and credit market conditions may have on our ability to meet liquidity needs and our access to capital; the impact of changes in regulation and in supervisory and enforcement policies on our insurance business or other operations; the effectiveness of our risk management policies and procedures; the availability of reinsurance and the ability of our counterparties to our reinsurance or indemnification arrangements to perform their obligations thereunder; heightened competition, including with respect to service, product features, scale, price, actual or perceived financial strength, claims-paying ratings, credit ratings, e-business capabilities and name recognition; the ability of our insurance subsidiaries to pay dividends to us, and our ability to pay dividends to our shareholders; our ability to market and distribute our products through distribution channels; any failure of third parties to provide services we need, any failure of the practices and procedures of these third parties and any inability to obtain information or assistance we need from third parties, including MetLife; whether all or any portion of the tax consequences of the Separation are not as expected, leading to material additional taxes or material adverse consequences to tax attributes that impact us; the uncertainty of the outcome of any disputes with MetLife over tax-related or other matters and agreements, including the potential of outcomes adverse to us that could cause us to owe MetLife material tax reimbursements or payments, or disagreements regarding MetLife’s or our obligations under our other agreements; the impact on our business structure, profitability, cost of capital and flexibility due to restrictions we have agreed to that preserve the tax-free treatment of certain parts of the Separation; the potential material negative tax impact of potential future tax legislation that could decrease the value of our tax attributes and cause other cash expenses, such as reserves, to increase materially and make some of our products less attractive to consumers; whether the Separation will qualify for non-recognition treatment for federal income tax purposes and potential indemnification to MetLife if the Separation does not so qualify; the impact of the Separation on our business and profitability due to MetLife's strong brand and reputation, the increased costs related to replacing arrangements with MetLife with those of third parties and incremental costs as a public company; whether the operational, strategic and other benefits of the Separation can be achieved, and our ability to implement our business strategy; our ability to attract and retain key personnel; and other factors described from time to time in documents that we file with the U.S. Securities and Exchange Commission (the “SEC”).
For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements included and the risks, uncertainties and other factors identified in our Annual Report on Form 10-K for the year ended December 31, 2018 and our subsequent Quarterly Reports on Form 10-Q, particularly in the sections entitled “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk,” as well as in our other subsequent filings with the SEC. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.


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Financial Supplement
 
A-2




Non-GAAP and Other Financial Disclosures

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

Non-GAAP Financial Disclosures

We present certain measures of our performance that are not calculated in accordance with GAAP. We believe that these non-GAAP financial measures highlight our results of operations and the underlying profitability drivers of our business, as well as enhance the understanding of our performance by the investor community.

The following non-GAAP financial measures, previously referred to as operating measures, should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP:
Non-GAAP financial measures:
 
Most directly comparable GAAP financial measures:
(i)
adjusted earnings
 
(i)
net income (loss) available to shareholders (1)
(ii)
adjusted earnings, less notable items
 
(ii)
net income (loss) available to shareholders (1)
(iii)
adjusted revenues
 
(iii)
revenues
(iv)
adjusted expenses
 
(iv)
expenses
(v)
adjusted earnings per common share
 
(v)
earnings per common share, diluted (1)
(vi)
adjusted earnings per common share, less notable items
 
(vi)
earnings per common share, diluted (1)
(vii)
adjusted return on common equity
 
(vii)
return on common equity (2)
(viii)
adjusted return on common equity, less notable items
 
(viii)
return on common equity (2)
(ix)
adjusted net investment income
 
(ix)
net investment income
__________________
(1) Brighthouse uses net income (loss) available to shareholders to refer to net income (loss) available to Brighthouse Financial, Inc.'s common shareholders, and earnings per common share, diluted to refer to net income (loss) available to shareholders per common share.
(2) Brighthouse uses return on common equity to refer to return on Brighthouse Financial, Inc.'s common stockholders' equity.

Reconciliations to the most directly comparable historical GAAP measures are included for those measures which are presented herein. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are not accessible on a forward-looking basis because we believe it is not possible without unreasonable efforts to provide other than a range of net investment gains and losses and net derivative gains and losses, which can fluctuate significantly within or outside the range and from period to period and may have a material impact on net income (loss) available to shareholders.

Adjusted Earnings, Adjusted Revenues and Adjusted Expenses

Adjusted earnings, which may be positive or negative, is used by management to evaluate performance, allocate resources and facilitate comparisons to industry results. This financial measure focuses on our primary businesses principally by excluding the impact of market volatility, which could distort trends.

Adjusted earnings reflects adjusted revenues less adjusted expenses, both net of income tax, and excludes net income (loss) attributable to noncontrolling interests and preferred stock dividends. Provided below are the adjustments to GAAP revenues and GAAP expenses used to calculate adjusted revenues and adjusted expenses, respectively.


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Financial Supplement
 
A-3




Non-GAAP and Other Financial Disclosures (Cont.)


The following are significant items excluded from total revenues, net of income tax, in calculating the adjusted revenues component of adjusted earnings:

•Net investment gains (losses);

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

•Certain variable annuity GMIB fees (“GMIB Fees”) and amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses).

The following are significant items excluded from total expenses, net of income tax, in calculating the adjusted expenses component of adjusted earnings:

•Amounts associated with benefits and hedging costs related to GMIBs (“GMIB Costs”);

•
Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”); and

•Amortization of DAC and VOBA related to (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments.

The tax impact of the adjustments mentioned is calculated net of the statutory tax rate, which could differ from our effective tax rate.

Consistent with GAAP guidance for segment reporting, adjusted earnings is also our GAAP measure of segment performance.


Adjusted Earnings per Common Share and Adjusted Return on Common Equity

Adjusted earnings per common share and adjusted return on common equity are measures used by management to evaluate the execution of our business strategy and align such strategy with our shareholders’ interests.

Adjusted earnings per common share is defined as adjusted earnings for the period divided by the weighted average number of fully diluted shares of common stock outstanding for the period.

Adjusted return on common equity is defined as total annual adjusted earnings on a four quarter trailing basis, divided by the simple average of the most recent five quarters of total Brighthouse Financial, Inc.'s common stockholders’ equity, excluding AOCI.

Adjusted Net Investment Income

We present adjusted net investment income to measure our performance for management purposes, and we believe it enhances the understanding of our investment portfolio results. Adjusted net investment income represents net investment income including investment hedge adjustments.


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Financial Supplement
 
A-4




Non-GAAP and Other Financial Disclosures (Cont.)


Other Financial Disclosures

Corporate Expenses

Corporate expenses includes functional department expenses, public company expenses, certain investment expenses, retirement funding and incentive compensation; and excludes establishment costs.

Notable items

Certain of the non-GAAP measures described above may be presented further adjusted to exclude notable items. Notable items reflect the impact on our results of certain unanticipated items and events, as well as certain items and events that were anticipated, such as establishment costs. The presentation of notable items and non-GAAP measures, less notable items is intended to help investors better understand our results and to evaluate and forecast those results.

Book Value per Common Share and Book Value per Common Share, excluding AOCI

Brighthouse uses the term “book value” to refer to “Brighthouse Financial, Inc.'s common stockholders’ equity, including AOCI.” Book value per common share is defined as ending Brighthouse Financial, Inc.'s common stockholders’ equity, including AOCI, divided by ending common shares outstanding. Book value per common share, excluding AOCI, is defined as ending Brighthouse Financial, Inc.'s common stockholders’ equity, excluding AOCI, divided by ending common shares outstanding.

CTE95

CTE95 is defined as the amount of assets required to satisfy contract holder obligations across market environments in the average of the worst five percent of a set of capital market scenarios over the life of the contracts.

CTE98

CTE98 is defined as the amount of assets required to satisfy contract holder obligations across market environments in the average of the worst two percent of a set of capital market scenarios over the life of the contracts.

Holding Company Liquid Assets

Holding company liquid assets include liquid assets in Brighthouse Financial, Inc., Brighthouse Holdings, LLC, and Brighthouse Services, LLC. Liquid assets include cash and cash equivalents, short-term investments and publicly traded securities excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include amounts received in connection with derivatives and collateral financing arrangements.

Sales

Statistical sales information for life sales is calculated using the LIMRA definition of sales for core direct sales, excluding company-sponsored internal exchanges, corporate-owned life insurance, bank-owned life insurance, and private placement variable universal life insurance. Annuity sales consist of 100 percent of direct statutory premiums, except for fixed indexed annuity sales distributed through MassMutual that consist of 90 percent of gross sales. Annuity sales exclude company sponsored internal exchanges. These sales statistics do not correspond to revenues under GAAP, but are used as relevant measures of business activity.


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Financial Supplement
 
A-5




Non-GAAP and Other Financial Disclosures (Cont.)


Net Investment Income Yield

Similar to adjusted net investment income, we present net investment income yields as a performance measure we believe enhances the understanding of our investment portfolio results. Net investment income yields are calculated on adjusted net investment income as a percent of average quarterly asset carrying values. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.

Adjusted Statutory Earnings

Adjusted statutory earnings is a measure of our insurance companies' ability to pay future distributions and are reflective of whether our hedging program functions as intended. Adjusted statutory earnings is calculated as statutory pre-tax income less the change in the variable annuities reserve methodology (Actuarial Guideline 43) while including the change in both the reserve and capital methodology based CTE95 calculation, as well as unrealized gains (losses) associated with the variable annuities risk management strategy. Adjusted statutory earnings may be further adjusted for certain unanticipated items that impacted our results in order to help management and investors better understand, evaluate and forecast those results.


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Financial Supplement
 
A-6




Acronyms

AOCI
Accumulated other comprehensive income (loss)
CTE
Conditional tail expectations
DAC
Deferred policy acquisition costs
FHLB
Federal Home Loan Bank
GAAP
Accounting principles generally accepted in the United States of America
GMAB
Guaranteed minimum accumulation benefits
GMDB
Guaranteed minimum death benefits
GMIB
Guaranteed minimum income benefits
GMWB
Guaranteed minimum withdrawal benefits
LIMRA
Life Insurance Marketing and Research Association
NDGL
Net derivative gains (losses)
NIGL
Net investment gains (losses)
ULSG
Universal life insurance with secondary guarantees
VA
Variable annuity
VOBA
Value of business acquired

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Financial Supplement
 
A-7




Reconciliation of Net Income (Loss) Available to Shareholders to Adjusted Earnings and Adjusted Earnings, Less Notable Items, and Reconciliation of Net Income (Loss) Available to Shareholders per Common Share to Adjusted Earnings per Common Share and Adjusted Earnings, Less Notable Items per Common Share (Unaudited, in millions except per share data)

 
 
For the Three Months Ended
ADJUSTED EARNINGS, LESS NOTABLE ITEMS
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Net income (loss) available to shareholders
 
$377
 
$(737)
 
$1,442
 
$(271)
 
$(239)
Adjustments from net income (loss) available to shareholders to adjusted earnings:
 
 
 
 
 
 
 
 
 
 
Less: Net investment gains (losses)
 
63
 
(11)
 
(86)
 
(42)
 
(75)
Less: Net derivative gains (losses), excluding investment hedge adjustments
 
149
 
(1,303)
 
2,038
 
(693)
 
(316)
Less: GMIB Fees and GMIB Costs
 
(22)
 
35
 
(137)
 
28
 
(19)
Less: Amortization of DAC and VOBA
 
(17)
 
75
 
(233)
 
22
 
(96)
Less: Market value adjustments
 
(16)
 
(23)
 
(1)
 
7
 
8
Less: Other
 
—
 
—
 
—
 
(4)
 
1
Less: Provision for income tax (expense) benefit on reconciling adjustments
 
(34)
 
258
 
(325)
 
141
 
105
Adjusted earnings
 
254
 
232
 
186
 
270
 
153
Less: Notable items
 
(42)
 
(27)
 
(13)
 
(44)
 
(44)
Adjusted earnings, less notable items
 
$296
 
$259
 
$199
 
$314
 
$197
 
 
 
 
 
 
 
 
 
 
 
ADJUSTED EARNINGS, LESS NOTABLE ITEMS PER COMMON SHARE (1)
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to shareholders per common share
 
$3.27
 
$(6.31)
 
$12.14
 
$(2.26)
 
$(2.01)
Less: Net investment gains (losses)
 
0.55
 
(0.09)
 
(0.73)
 
(0.35)
 
(0.64)
Less: Net derivative gains (losses), excluding investment hedge adjustments
 
1.29
 
(11.16)
 
17.17
 
(5.79)
 
(2.64)
Less: GMIB Fees and GMIB Costs
 
(0.19)
 
0.30
 
(1.15)
 
0.24
 
(0.16)
Less: Amortization of DAC and VOBA
 
(0.15)
 
0.64
 
(1.96)
 
0.18
 
(0.80)
Less: Market value adjustments
 
(0.14)
 
(0.20)
 
(0.01)
 
0.06
 
0.07
Less: Other
 
—
 
—
 
—
 
(0.03)
 
0.01
Less: Provision for income tax (expense) benefit on reconciling adjustments
 
(0.29)
 
2.21
 
(2.74)
 
1.18
 
0.88
Less: Impact of inclusion of dilutive shares
 
—
 
0.01
 
—
 
0.02
 
—
Adjusted earnings per common share
 
2.19
 
1.98
 
1.56
 
2.23
 
1.27
Less: Notable items
 
(0.36)
 
(0.23)
 
(0.11)
 
(0.36)
 
(0.37)
Adjusted earnings, less notable items per common share
 
$2.56
 
$2.21
 
$1.68
 
$2.60
 
$1.64
 
 
 
 
 
 
 
 
 
 
 
(1) Per share calculations are on a diluted basis and may not recalculate or foot due to rounding. For loss periods, dilutive shares were not included in the calculation as inclusion of such shares would have an anti-dilutive effect.

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Financial Supplement
 
A-8




Reconciliation of Return on Common Equity to Adjusted Return on Common Equity (Unaudited, dollars in millions)

 
 
Four Quarters Cumulative Trailing Basis
ADJUSTED EARNINGS
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Net income (loss) available to shareholders
 
$811
 
$195
 
$865
 
$91
 
$(581)
Adjustments from net income (loss) available to shareholders to adjusted earnings:
 
 
 
 
 
 
 
 
 
 
Less: Net investment gains (losses)
 
(76)
 
(214)
 
(207)
 
(115)
 
(52)
Less: Net derivative gains (losses), excluding investment hedge adjustments
 
191
 
(274)
 
687
 
(1,775)
 
(1,264)
Less: GMIB Fees and GMIB Costs
 
(96)
 
(93)
 
(124)
 
31
 
(282)
Less: Amortization of DAC and VOBA
 
(153)
 
(232)
 
(435)
 
(292)
 
(523)
Less: Market value adjustments
 
(33)
 
(9)
 
45
 
43
 
35
Less: Other
 
(4)
 
(3)
 
(7)
 
(11)
 
21
Less: Provision for income tax (expense) benefit on reconciling adjustments
 
40
 
179
 
14
 
512
 
732
Adjusted earnings
 
$942
 
$841
 
$892
 
$1,698
 
$752
 
 
Five Quarters Average Stockholders' Equity Basis
BRIGHTHOUSE FINANCIAL, INC.’S COMMON STOCKHOLDERS’ EQUITY, EXCLUDING AOCI
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Brighthouse Financial, Inc.’s stockholders’ equity
 
$14,402
 
$13,864
 
$13,767
 
$13,637
 
$14,343
Less: Preferred stock, net
 
165
 
82
 
—
 
—
 
—
Brighthouse Financial, Inc.’s common stockholders’ equity
 
14,237
 
13,782
 
13,767
 
13,637
 
14,343
Less: AOCI
 
1,291
 
898
 
899
 
1,018
 
1,286
Brighthouse Financial, Inc.’s common stockholders’ equity, excluding AOCI
 
$12,946
 
$12,884
 
$12,868
 
$12,619
 
$13,057
 
 
Five Quarters Average Common Stockholders' Equity Basis
ADJUSTED RETURN ON COMMON EQUITY
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Return on common equity
 
5.7%
 
1.4%
 
6.3%
 
0.7%
 
(4.0)%
Return on AOCI
 
62.8%
 
21.7%
 
96.2%
 
8.9%
 
(45.2)%
Return on common equity, excluding AOCI
 
6.3%
 
1.5%
 
6.7%
 
0.7%
 
(4.5)%
Return on adjustments from net income (loss) available to shareholders to adjusted earnings:
 
 
 
 
 
 
 
 
 
 
Less: Return on net investment gains (losses)
 
(0.6)%
 
(1.7)%
 
(1.6)%
 
(0.9)%
 
(0.4)%
Less: Return on net derivative gains (losses), excluding investment hedge adjustments
 
1.5%
 
(2.1)%
 
5.4%
 
(14.1)%
 
(9.8)%
Less: Return on GMIB Fees and GMIB Costs
 
(0.7)%
 
(0.7)%
 
(1.0)%
 
0.2%
 
(2.2)%
Less: Return on amortization of DAC and VOBA
 
(1.2)%
 
(1.8)%
 
(3.4)%
 
(2.2)%
 
(4.0)%
Less: Return on market value adjustments
 
(0.3)%
 
(0.1)%
 
0.3%
 
0.3%
 
0.3%
Less: Return on other
 
—%
 
—%
 
—%
 
(0.1)%
 
0.2%
Less: Return on provision for income tax (expense) benefit on reconciling adjustments
 
0.3%
 
1.4%
 
0.1%
 
4.0%
 
5.6%
Adjusted return on common equity
 
7.3%
 
6.5%
 
6.9%
 
13.5%
 
5.8%
 
 
 
 
 
 
 
 
 
 
 

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Financial Supplement
 
A-9




Reconciliation of Total Revenues to Adjusted Revenues and Reconciliation of Total Expenses to Adjusted Expenses (Unaudited, in millions)

 
 
For the Three Months Ended
 
For the Six Months Ended
 
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
Total revenues
 
$2,370
 
$691
 
$4,026
 
$1,422
 
$1,702
 
$3,061
 
$3,517
Less: Net investment gains (losses)
 
63
 
(11)
 
(86)
 
(42)
 
(75)
 
52
 
(79)
Less: Net derivative gains (losses)
 
149
 
(1,303)
 
2,039
 
(691)
 
(312)
 
(1,154)
 
(646)
Less: GMIB Fees
 
65
 
66
 
67
 
68
 
69
 
131
 
136
Less: Investment hedge adjustments
 
—
 
—
 
(1)
 
(2)
 
(3)
 
—
 
(11)
Less: Other
 
—
 
—
 
—
 
—
 
(3)
 
—
 
(7)
Total adjusted revenues
 
$2,093
 
$1,939
 
$2,007
 
$2,089
 
$2,026
 
$4,032
 
$4,124
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total expenses
 
$1,901
 
$1,644
 
$2,239
 
$1,790
 
$2,019
 
$3,545
 
$3,947
Less: Amortization of DAC and VOBA
 
17
 
(75)
 
233
 
(22)
 
96
 
(58)
 
224
Less: GMIB Costs
 
87
 
31
 
204
 
40
 
88
 
118
 
151
Less: Other
 
16
 
23
 
1
 
(3)
 
(11)
 
39
 
(42)
Total adjusted expenses
 
$1,781
 
$1,665
 
$1,801
 
$1,775
 
$1,846
 
$3,446
 
$3,614
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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Financial Supplement
 
A-10




Investment Reconciliation Details (Unaudited, dollars in millions)

 
 
For the Three Months Ended
 
For the Six Months Ended
NET INVESTMENT GAINS (LOSSES)
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
Investment portfolio gains (losses)
 
$68
 
$(8)
 
$(55)
 
$(35)
 
$(68)
 
$60
 
$(66)
Investment portfolio writedowns
 
(5)
 
(3)
 
(2)
 
(4)
 
(2)
 
(8)
 
(5)
Total net investment portfolio gains (losses)
 
63
 
(11)
 
(57)
 
(39)
 
(70)
 
52
 
(71)
Other incremental net investment income
 
—
 
—
 
(29)
 
(3)
 
(5)
 
—
 
(8)
Net investment gains (losses)
 
$63
 
$(11)
 
$(86)
 
$(42)
 
$(75)
 
$52
 
$(79)


 
 
For the Three Months Ended
NET INVESTMENT INCOME YIELD
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
Investment income yield (1)
 
4.79%
 
4.24%
 
4.62%
 
4.67%
 
4.53%
Investment fees and expenses
 
(0.12)%
 
(0.14)%
 
(0.14)%
 
(0.17)%
 
(0.16)%
Net investment income yield (1)
 
4.67%
 
4.10%
 
4.48%
 
4.50%
 
4.37%
 
 
 
 
 
 
 
 
 
 
 
(1) Yields are calculated on investment income as a percent of average quarterly asset carrying values. Investment income includes investment hedge adjustments, excludes realized gains and losses and reflects the GAAP adjustments described beginning on page A-1 of this Appendix. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.

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