View:
Download DOC
Download PDF
Download XLS
Download XBRL
bhf-20200930
false2020Q30001685040--12-3110010000016850402020-01-012020-09-300001685040us-gaap:CommonStockMember2020-01-012020-09-300001685040us-gaap:SeriesAPreferredStockMember2020-01-012020-09-300001685040us-gaap:SeriesBPreferredStockMember2020-01-012020-09-300001685040us-gaap:JuniorSubordinatedDebtMember2020-01-012020-09-30xbrli:shares00016850402020-11-04iso4217:USD00016850402020-09-3000016850402019-12-31iso4217:USDxbrli:shares00016850402020-07-012020-09-3000016850402019-07-012019-09-3000016850402019-01-012019-09-300001685040us-gaap:PreferredStockMember2019-12-310001685040us-gaap:CommonStockMember2019-12-310001685040us-gaap:AdditionalPaidInCapitalMember2019-12-310001685040us-gaap:RetainedEarningsMember2019-12-310001685040us-gaap:TreasuryStockMember2019-12-310001685040us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001685040us-gaap:ParentMember2019-12-310001685040us-gaap:NoncontrollingInterestMember2019-12-310001685040us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310001685040srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001685040us-gaap:ParentMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310001685040srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310001685040srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:PreferredStockMember2020-06-300001685040srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:CommonStockMember2020-06-300001685040srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:AdditionalPaidInCapitalMember2020-06-300001685040us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2020-06-300001685040srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:TreasuryStockMember2020-06-300001685040srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001685040us-gaap:ParentMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2020-06-300001685040us-gaap:NoncontrollingInterestMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2020-06-300001685040srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2020-06-300001685040us-gaap:PreferredStockMember2020-01-012020-06-300001685040us-gaap:AdditionalPaidInCapitalMember2020-01-012020-06-300001685040us-gaap:ParentMember2020-01-012020-06-3000016850402020-01-012020-06-300001685040us-gaap:TreasuryStockMember2020-01-012020-06-300001685040us-gaap:CommonStockMember2020-01-012020-06-300001685040us-gaap:RetainedEarningsMember2020-01-012020-06-300001685040us-gaap:NoncontrollingInterestMember2020-01-012020-06-300001685040us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-06-300001685040us-gaap:PreferredStockMember2020-06-300001685040us-gaap:CommonStockMember2020-06-300001685040us-gaap:AdditionalPaidInCapitalMember2020-06-300001685040us-gaap:RetainedEarningsMember2020-06-300001685040us-gaap:TreasuryStockMember2020-06-300001685040us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001685040us-gaap:ParentMember2020-06-300001685040us-gaap:NoncontrollingInterestMember2020-06-3000016850402020-06-300001685040us-gaap:TreasuryStockMember2020-07-012020-09-300001685040us-gaap:ParentMember2020-07-012020-09-300001685040us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300001685040us-gaap:RetainedEarningsMember2020-07-012020-09-300001685040us-gaap:NoncontrollingInterestMember2020-07-012020-09-300001685040us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-300001685040us-gaap:PreferredStockMember2020-09-300001685040us-gaap:CommonStockMember2020-09-300001685040us-gaap:AdditionalPaidInCapitalMember2020-09-300001685040us-gaap:RetainedEarningsMember2020-09-300001685040us-gaap:TreasuryStockMember2020-09-300001685040us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-300001685040us-gaap:ParentMember2020-09-300001685040us-gaap:NoncontrollingInterestMember2020-09-300001685040us-gaap:PreferredStockMember2018-12-310001685040us-gaap:CommonStockMember2018-12-310001685040us-gaap:AdditionalPaidInCapitalMember2018-12-310001685040us-gaap:RetainedEarningsMember2018-12-310001685040us-gaap:TreasuryStockMember2018-12-310001685040us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310001685040us-gaap:ParentMember2018-12-310001685040us-gaap:NoncontrollingInterestMember2018-12-3100016850402018-12-310001685040us-gaap:PreferredStockMember2019-01-012019-06-300001685040us-gaap:AdditionalPaidInCapitalMember2019-01-012019-06-300001685040us-gaap:ParentMember2019-01-012019-06-3000016850402019-01-012019-06-300001685040us-gaap:TreasuryStockMember2019-01-012019-06-300001685040us-gaap:RetainedEarningsMember2019-01-012019-06-300001685040us-gaap:NoncontrollingInterestMember2019-01-012019-06-300001685040us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-06-300001685040us-gaap:PreferredStockMember2019-06-300001685040us-gaap:CommonStockMember2019-06-300001685040us-gaap:AdditionalPaidInCapitalMember2019-06-300001685040us-gaap:RetainedEarningsMember2019-06-300001685040us-gaap:TreasuryStockMember2019-06-300001685040us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-300001685040us-gaap:ParentMember2019-06-300001685040us-gaap:NoncontrollingInterestMember2019-06-3000016850402019-06-300001685040us-gaap:TreasuryStockMember2019-07-012019-09-300001685040us-gaap:ParentMember2019-07-012019-09-300001685040us-gaap:AdditionalPaidInCapitalMember2019-07-012019-09-300001685040us-gaap:RetainedEarningsMember2019-07-012019-09-300001685040us-gaap:NoncontrollingInterestMember2019-07-012019-09-300001685040us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-07-012019-09-300001685040us-gaap:PreferredStockMember2019-09-300001685040us-gaap:CommonStockMember2019-09-300001685040us-gaap:AdditionalPaidInCapitalMember2019-09-300001685040us-gaap:RetainedEarningsMember2019-09-300001685040us-gaap:TreasuryStockMember2019-09-300001685040us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-09-300001685040us-gaap:ParentMember2019-09-300001685040us-gaap:NoncontrollingInterestMember2019-09-3000016850402019-09-30bhf:Segment0001685040bhf:AnnuitiesMemberus-gaap:OperatingSegmentsMember2020-07-012020-09-300001685040us-gaap:OperatingSegmentsMemberbhf:LifeMember2020-07-012020-09-300001685040us-gaap:OperatingSegmentsMemberbhf:RunoffMember2020-07-012020-09-300001685040us-gaap:OperatingSegmentsMemberus-gaap:CorporateAndOtherMember2020-07-012020-09-300001685040us-gaap:OperatingSegmentsMember2020-07-012020-09-300001685040us-gaap:MaterialReconcilingItemsMember2020-07-012020-09-300001685040bhf:AnnuitiesMember2020-07-012020-09-300001685040bhf:LifeMember2020-07-012020-09-300001685040bhf:RunoffMember2020-07-012020-09-300001685040us-gaap:CorporateAndOtherMember2020-07-012020-09-300001685040bhf:AnnuitiesMemberus-gaap:OperatingSegmentsMember2019-07-012019-09-300001685040us-gaap:OperatingSegmentsMemberbhf:LifeMember2019-07-012019-09-300001685040us-gaap:OperatingSegmentsMemberbhf:RunoffMember2019-07-012019-09-300001685040us-gaap:OperatingSegmentsMemberus-gaap:CorporateAndOtherMember2019-07-012019-09-300001685040us-gaap:OperatingSegmentsMember2019-07-012019-09-300001685040us-gaap:MaterialReconcilingItemsMember2019-07-012019-09-300001685040bhf:AnnuitiesMember2019-07-012019-09-300001685040bhf:LifeMember2019-07-012019-09-300001685040bhf:RunoffMember2019-07-012019-09-300001685040us-gaap:CorporateAndOtherMember2019-07-012019-09-300001685040bhf:AnnuitiesMemberus-gaap:OperatingSegmentsMember2020-01-012020-09-300001685040us-gaap:OperatingSegmentsMemberbhf:LifeMember2020-01-012020-09-300001685040us-gaap:OperatingSegmentsMemberbhf:RunoffMember2020-01-012020-09-300001685040us-gaap:OperatingSegmentsMemberus-gaap:CorporateAndOtherMember2020-01-012020-09-300001685040us-gaap:OperatingSegmentsMember2020-01-012020-09-300001685040us-gaap:MaterialReconcilingItemsMember2020-01-012020-09-300001685040bhf:AnnuitiesMember2020-01-012020-09-300001685040bhf:LifeMember2020-01-012020-09-300001685040bhf:RunoffMember2020-01-012020-09-300001685040us-gaap:CorporateAndOtherMember2020-01-012020-09-300001685040bhf:AnnuitiesMemberus-gaap:OperatingSegmentsMember2019-01-012019-09-300001685040us-gaap:OperatingSegmentsMemberbhf:LifeMember2019-01-012019-09-300001685040us-gaap:OperatingSegmentsMemberbhf:RunoffMember2019-01-012019-09-300001685040us-gaap:OperatingSegmentsMemberus-gaap:CorporateAndOtherMember2019-01-012019-09-300001685040us-gaap:OperatingSegmentsMember2019-01-012019-09-300001685040us-gaap:MaterialReconcilingItemsMember2019-01-012019-09-300001685040bhf:AnnuitiesMember2019-01-012019-09-300001685040bhf:LifeMember2019-01-012019-09-300001685040bhf:RunoffMember2019-01-012019-09-300001685040us-gaap:CorporateAndOtherMember2019-01-012019-09-300001685040bhf:AnnuitiesMember2020-09-300001685040bhf:AnnuitiesMember2019-12-310001685040bhf:LifeMember2020-09-300001685040bhf:LifeMember2019-12-310001685040bhf:RunoffMember2020-09-300001685040bhf:RunoffMember2019-12-310001685040us-gaap:CorporateAndOtherMember2020-09-300001685040us-gaap:CorporateAndOtherMember2019-12-310001685040us-gaap:VariableAnnuityMemberus-gaap:GuaranteedMinimumDeathBenefitMember2020-09-300001685040us-gaap:AnnuitizationBenefitMemberus-gaap:VariableAnnuityMember2020-09-300001685040us-gaap:VariableAnnuityMemberus-gaap:GuaranteedMinimumDeathBenefitMember2019-12-310001685040us-gaap:AnnuitizationBenefitMemberus-gaap:VariableAnnuityMember2019-12-310001685040us-gaap:VariableAnnuityMemberus-gaap:GuaranteedMinimumDeathBenefitMember2020-01-012020-09-300001685040us-gaap:AnnuitizationBenefitMemberus-gaap:VariableAnnuityMember2020-01-012020-09-300001685040us-gaap:VariableAnnuityMemberus-gaap:GuaranteedMinimumDeathBenefitMember2019-01-012019-12-310001685040us-gaap:AnnuitizationBenefitMemberus-gaap:VariableAnnuityMember2019-01-012019-12-310001685040us-gaap:UniversalLifeMemberbhf:SecondaryGuaranteesMember2020-09-300001685040us-gaap:UniversalLifeMemberbhf:SecondaryGuaranteesMember2019-12-310001685040us-gaap:UniversalLifeMemberbhf:SecondaryGuaranteesMember2020-01-012020-09-300001685040us-gaap:UniversalLifeMemberbhf:SecondaryGuaranteesMember2019-01-012019-12-310001685040us-gaap:VariableLifeMemberbhf:SecondaryGuaranteesMember2020-09-300001685040us-gaap:VariableLifeMemberbhf:SecondaryGuaranteesMember2019-12-310001685040us-gaap:VariableLifeMemberbhf:SecondaryGuaranteesMember2020-01-012020-09-300001685040us-gaap:VariableLifeMemberbhf:SecondaryGuaranteesMember2019-01-012019-12-310001685040us-gaap:DomesticCorporateDebtSecuritiesMember2020-09-300001685040us-gaap:DomesticCorporateDebtSecuritiesMember2019-12-310001685040us-gaap:ForeignCorporateDebtSecuritiesMember2020-09-300001685040us-gaap:ForeignCorporateDebtSecuritiesMember2019-12-310001685040us-gaap:ResidentialMortgageBackedSecuritiesMember2020-09-300001685040us-gaap:ResidentialMortgageBackedSecuritiesMember2019-12-310001685040us-gaap:USTreasuryAndGovernmentMember2020-09-300001685040us-gaap:USTreasuryAndGovernmentMember2019-12-310001685040us-gaap:CommercialMortgageBackedSecuritiesMember2020-09-300001685040us-gaap:CommercialMortgageBackedSecuritiesMember2019-12-310001685040us-gaap:USStatesAndPoliticalSubdivisionsMember2020-09-300001685040us-gaap:USStatesAndPoliticalSubdivisionsMember2019-12-310001685040us-gaap:AssetBackedSecuritiesMember2020-09-300001685040us-gaap:AssetBackedSecuritiesMember2019-12-310001685040us-gaap:ForeignGovernmentDebtSecuritiesMember2020-09-300001685040us-gaap:ForeignGovernmentDebtSecuritiesMember2019-12-310001685040bhf:NonIncomeProducingMember2019-12-310001685040bhf:NonIncomeProducingMember2020-09-30xbrli:pure0001685040us-gaap:DebtSecuritiesMember2020-09-300001685040srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:DomesticCorporateDebtSecuritiesMember2019-12-310001685040srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:ResidentialMortgageBackedSecuritiesMember2019-12-310001685040srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:ForeignCorporateDebtSecuritiesMember2019-12-310001685040srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310001685040us-gaap:DomesticCorporateDebtSecuritiesMember2020-01-012020-09-300001685040us-gaap:ResidentialMortgageBackedSecuritiesMember2020-01-012020-09-300001685040us-gaap:ForeignCorporateDebtSecuritiesMember2020-01-012020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMember2019-12-310001685040us-gaap:RealEstateLoanMemberbhf:AgriculturalPortfolioSegmentMember2020-09-300001685040us-gaap:RealEstateLoanMemberbhf:AgriculturalPortfolioSegmentMember2019-12-310001685040us-gaap:RealEstateLoanMemberus-gaap:ResidentialPortfolioSegmentMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:ResidentialPortfolioSegmentMember2019-12-310001685040us-gaap:RealEstateLoanMember2020-09-300001685040us-gaap:RealEstateLoanMember2019-12-310001685040us-gaap:RealEstateLoanMember2020-07-012020-09-300001685040us-gaap:RealEstateLoanMember2020-01-012020-09-300001685040us-gaap:RealEstateLoanMember2019-07-012019-09-300001685040us-gaap:RealEstateLoanMember2019-01-012019-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310001685040us-gaap:RealEstateLoanMemberbhf:AgriculturalPortfolioSegmentMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310001685040us-gaap:RealEstateLoanMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:ResidentialPortfolioSegmentMember2019-12-310001685040us-gaap:RealEstateLoanMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310001685040us-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310001685040us-gaap:RealEstateLoanMemberbhf:AgriculturalPortfolioSegmentMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310001685040us-gaap:RealEstateLoanMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:ResidentialPortfolioSegmentMember2019-12-310001685040us-gaap:RealEstateLoanMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2019-12-310001685040us-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMember2020-01-012020-09-300001685040us-gaap:RealEstateLoanMemberbhf:AgriculturalPortfolioSegmentMember2020-01-012020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:ResidentialPortfolioSegmentMember2020-01-012020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMemberbhf:LtvLessThan65PercentMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMemberbhf:Ltv65To75PercentMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMemberbhf:Ltv76To80PercentMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMemberbhf:LtvGreaterThan80PercentMember2020-09-300001685040us-gaap:RealEstateLoanMemberbhf:AgriculturalPortfolioSegmentMemberbhf:LtvLessThan65PercentMember2020-09-300001685040us-gaap:RealEstateLoanMemberbhf:AgriculturalPortfolioSegmentMemberbhf:Ltv65To75PercentMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:PerformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:NonperformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMember2020-09-300001685040bhf:DscGreaterThan120PercentMemberus-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMember2020-09-300001685040bhf:DscGreaterThan120PercentMemberus-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMember2019-12-310001685040us-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMemberbhf:Dsc100To120PercentMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMemberbhf:Dsc100To120PercentMember2019-12-310001685040us-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMemberbhf:DscLessThan100PercentMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMemberbhf:DscLessThan100PercentMember2019-12-310001685040us-gaap:RealEstateLoanMembersrt:MinimumMemberus-gaap:PerformingFinancingReceivableMember2019-12-310001685040us-gaap:RealEstateLoanMembersrt:MinimumMemberus-gaap:PerformingFinancingReceivableMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:FinancingReceivables30To59DaysPastDueMemberus-gaap:CommercialPortfolioSegmentMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:FinancingReceivables30To59DaysPastDueMemberbhf:AgriculturalPortfolioSegmentMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:FinancingReceivables30To59DaysPastDueMemberus-gaap:ResidentialPortfolioSegmentMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:FinancingReceivables30To59DaysPastDueMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2020-09-300001685040us-gaap:RealEstateLoanMemberbhf:AgriculturalPortfolioSegmentMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:FinancingReceivables60To89DaysPastDueMemberus-gaap:ResidentialPortfolioSegmentMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:FinancingReceivables60To89DaysPastDueMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMemberbhf:FinancingReceivables90To179DaysPastDueMember2020-09-300001685040us-gaap:RealEstateLoanMemberbhf:AgriculturalPortfolioSegmentMemberbhf:FinancingReceivables90To179DaysPastDueMember2020-09-300001685040us-gaap:RealEstateLoanMemberbhf:FinancingReceivables90To179DaysPastDueMemberus-gaap:ResidentialPortfolioSegmentMember2020-09-300001685040us-gaap:RealEstateLoanMemberbhf:FinancingReceivables90To179DaysPastDueMember2020-09-300001685040us-gaap:RealEstateLoanMemberus-gaap:CommercialPortfolioSegmentMemberbhf:FinancingReceivablesEqualToGreaterThan180DaysPastDueMember2020-09-300001685040us-gaap:RealEstateLoanMemberbhf:AgriculturalPortfolioSegmentMemberbhf:FinancingReceivablesEqualToGreaterThan180DaysPastDueMember2020-09-300001685040us-gaap:RealEstateLoanMemberbhf:FinancingReceivablesEqualToGreaterThan180DaysPastDueMemberus-gaap:ResidentialPortfolioSegmentMember2020-09-300001685040us-gaap:RealEstateLoanMemberbhf:FinancingReceivablesEqualToGreaterThan180DaysPastDueMember2020-09-300001685040srt:MinimumMember2020-09-300001685040us-gaap:SecuritiesFinancingTransactionCostMember2020-09-300001685040us-gaap:SecuritiesFinancingTransactionCostMember2019-12-310001685040us-gaap:SecuritiesFinancingTransactionFairValueMember2020-09-300001685040us-gaap:SecuritiesFinancingTransactionFairValueMember2019-12-310001685040us-gaap:MaturityOvernightMemberus-gaap:USTreasuryAndGovernmentMember2020-09-300001685040us-gaap:MaturityUpTo30DaysMemberus-gaap:USTreasuryAndGovernmentMember2020-09-300001685040bhf:Maturity30to180DaysMemberus-gaap:USTreasuryAndGovernmentMember2020-09-300001685040us-gaap:MaturityOvernightMemberus-gaap:USTreasuryAndGovernmentMember2019-12-310001685040us-gaap:MaturityUpTo30DaysMemberus-gaap:USTreasuryAndGovernmentMember2019-12-310001685040bhf:Maturity30to180DaysMemberus-gaap:USTreasuryAndGovernmentMember2019-12-310001685040us-gaap:ForeignCorporateDebtSecuritiesMemberus-gaap:MaturityOvernightMember2020-09-300001685040us-gaap:ForeignCorporateDebtSecuritiesMemberus-gaap:MaturityUpTo30DaysMember2020-09-300001685040bhf:Maturity30to180DaysMemberus-gaap:ForeignCorporateDebtSecuritiesMember2020-09-300001685040us-gaap:ForeignCorporateDebtSecuritiesMemberus-gaap:MaturityOvernightMember2019-12-310001685040us-gaap:ForeignCorporateDebtSecuritiesMemberus-gaap:MaturityUpTo30DaysMember2019-12-310001685040bhf:Maturity30to180DaysMemberus-gaap:ForeignCorporateDebtSecuritiesMember2019-12-310001685040us-gaap:MaturityOvernightMember2020-09-300001685040us-gaap:MaturityUpTo30DaysMember2020-09-300001685040bhf:Maturity30to180DaysMember2020-09-300001685040us-gaap:MaturityOvernightMember2019-12-310001685040us-gaap:MaturityUpTo30DaysMember2019-12-310001685040bhf:Maturity30to180DaysMember2019-12-310001685040bhf:RestrictedCashAndCashEquivalentsMember2020-09-300001685040bhf:RestrictedCashAndCashEquivalentsMember2019-12-310001685040us-gaap:DebtSecuritiesMemberus-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember2020-09-300001685040us-gaap:DebtSecuritiesMemberus-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember2019-12-310001685040us-gaap:RealEstateInvestmentMemberus-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember2020-09-300001685040us-gaap:RealEstateInvestmentMemberus-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember2019-12-310001685040us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember2020-09-300001685040us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember2019-12-310001685040us-gaap:DebtSecuritiesMember2020-07-012020-09-300001685040us-gaap:DebtSecuritiesMember2019-07-012019-09-300001685040us-gaap:DebtSecuritiesMember2020-01-012020-09-300001685040us-gaap:DebtSecuritiesMember2019-01-012019-09-300001685040us-gaap:EquitySecuritiesMember2020-07-012020-09-300001685040us-gaap:EquitySecuritiesMember2019-07-012019-09-300001685040us-gaap:EquitySecuritiesMember2020-01-012020-09-300001685040us-gaap:EquitySecuritiesMember2019-01-012019-09-300001685040us-gaap:MortgagesMember2020-07-012020-09-300001685040us-gaap:MortgagesMember2019-07-012019-09-300001685040us-gaap:MortgagesMember2020-01-012020-09-300001685040us-gaap:MortgagesMember2019-01-012019-09-300001685040us-gaap:PolicyLoansMember2020-07-012020-09-300001685040us-gaap:PolicyLoansMember2019-07-012019-09-300001685040us-gaap:PolicyLoansMember2020-01-012020-09-300001685040us-gaap:PolicyLoansMember2019-01-012019-09-300001685040us-gaap:RealEstateInvestmentMember2020-07-012020-09-300001685040us-gaap:RealEstateInvestmentMember2019-07-012019-09-300001685040us-gaap:RealEstateInvestmentMember2020-01-012020-09-300001685040us-gaap:RealEstateInvestmentMember2019-01-012019-09-300001685040us-gaap:CashAndCashEquivalentsMember2020-07-012020-09-300001685040us-gaap:CashAndCashEquivalentsMember2019-07-012019-09-300001685040us-gaap:CashAndCashEquivalentsMember2020-01-012020-09-300001685040us-gaap:CashAndCashEquivalentsMember2019-01-012019-09-300001685040us-gaap:OtherInvestmentsMember2020-07-012020-09-300001685040us-gaap:OtherInvestmentsMember2019-07-012019-09-300001685040us-gaap:OtherInvestmentsMember2020-01-012020-09-300001685040us-gaap:OtherInvestmentsMember2019-01-012019-09-300001685040us-gaap:LimitedPartnerMember2020-07-012020-09-300001685040us-gaap:LimitedPartnerMember2020-01-012020-09-300001685040us-gaap:LimitedPartnerMember2019-07-012019-09-300001685040us-gaap:LimitedPartnerMember2019-01-012019-09-300001685040us-gaap:CashFlowHedgingMemberbhf:InterestrateforwardMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-09-300001685040us-gaap:CashFlowHedgingMemberbhf:InterestrateforwardMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-310001685040us-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:CurrencySwapMember2020-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:CurrencySwapMember2019-12-310001685040us-gaap:DesignatedAsHedgingInstrumentMember2020-09-300001685040us-gaap:DesignatedAsHedgingInstrumentMember2019-12-310001685040us-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2020-09-300001685040us-gaap:NondesignatedMemberus-gaap:InterestRateSwapMember2019-12-310001685040us-gaap:NondesignatedMemberus-gaap:InterestRateCapMember2020-09-300001685040us-gaap:NondesignatedMemberus-gaap:InterestRateCapMember2019-12-310001685040us-gaap:NondesignatedMemberus-gaap:InterestRateSwaptionMember2020-09-300001685040us-gaap:NondesignatedMemberus-gaap:InterestRateSwaptionMember2019-12-310001685040bhf:InterestrateforwardMemberus-gaap:NondesignatedMember2020-09-300001685040bhf:InterestrateforwardMemberus-gaap:NondesignatedMember2019-12-310001685040us-gaap:NondesignatedMemberus-gaap:CurrencySwapMember2020-09-300001685040us-gaap:NondesignatedMemberus-gaap:CurrencySwapMember2019-12-310001685040us-gaap:NondesignatedMemberus-gaap:ForeignExchangeForwardMember2020-09-300001685040us-gaap:NondesignatedMemberus-gaap:ForeignExchangeForwardMember2019-12-310001685040us-gaap:NondesignatedMemberus-gaap:CreditDefaultSwapBuyingProtectionMember2020-09-300001685040us-gaap:NondesignatedMemberus-gaap:CreditDefaultSwapBuyingProtectionMember2019-12-310001685040us-gaap:NondesignatedMemberus-gaap:CreditDefaultSwapSellingProtectionMember2020-09-300001685040us-gaap:NondesignatedMemberus-gaap:CreditDefaultSwapSellingProtectionMember2019-12-310001685040us-gaap:NondesignatedMemberus-gaap:StockOptionMember2020-09-300001685040us-gaap:NondesignatedMemberus-gaap:StockOptionMember2019-12-310001685040us-gaap:VarianceSwapMemberus-gaap:NondesignatedMember2020-09-300001685040us-gaap:VarianceSwapMemberus-gaap:NondesignatedMember2019-12-310001685040us-gaap:NondesignatedMemberbhf:EquityTotalReturnSwapsMember2020-09-300001685040us-gaap:NondesignatedMemberbhf:EquityTotalReturnSwapsMember2019-12-310001685040us-gaap:NondesignatedMember2020-09-300001685040us-gaap:NondesignatedMember2019-12-310001685040bhf:CededGuaranteedMinimumBenefitMember2020-09-300001685040bhf:CededGuaranteedMinimumBenefitMember2019-12-310001685040bhf:DirectindexlinkedannuitiesMember2020-09-300001685040bhf:DirectindexlinkedannuitiesMember2019-12-310001685040bhf:DirectGuaranteedMinimumBenefitMember2020-09-300001685040bhf:DirectGuaranteedMinimumBenefitMember2019-12-310001685040bhf:AssumedReinsuranceMemberbhf:DirectindexlinkedannuitiesMember2020-09-300001685040bhf:AssumedReinsuranceMemberbhf:DirectindexlinkedannuitiesMember2019-12-310001685040us-gaap:CashFlowHedgingMemberus-gaap:InterestRateContractMemberbhf:NetDerivativeGainLossMember2020-07-012020-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:InterestRateContractMember2020-07-012020-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:InterestRateContractMemberus-gaap:InvestmentIncomeMember2020-07-012020-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMemberbhf:NetDerivativeGainLossMember2020-07-012020-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMember2020-07-012020-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:InvestmentIncomeMember2020-07-012020-09-300001685040us-gaap:CashFlowHedgingMemberbhf:NetDerivativeGainLossMember2020-07-012020-09-300001685040us-gaap:CashFlowHedgingMember2020-07-012020-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:InvestmentIncomeMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:InterestRateContractMemberbhf:NetDerivativeGainLossMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:InterestRateContractMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:InterestRateContractMemberus-gaap:InvestmentIncomeMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberbhf:NetDerivativeGainLossMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:InvestmentIncomeMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberbhf:NetDerivativeGainLossMemberus-gaap:CreditRiskContractMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:CreditRiskContractMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:InvestmentIncomeMemberus-gaap:CreditRiskContractMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:EquityContractMemberbhf:NetDerivativeGainLossMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:EquityContractMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:EquityContractMemberus-gaap:InvestmentIncomeMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:EmbeddedDerivativeFinancialInstrumentsMemberbhf:NetDerivativeGainLossMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:EmbeddedDerivativeFinancialInstrumentsMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:EmbeddedDerivativeFinancialInstrumentsMemberus-gaap:InvestmentIncomeMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberbhf:NetDerivativeGainLossMember2020-07-012020-09-300001685040us-gaap:NondesignatedMember2020-07-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:InvestmentIncomeMember2020-07-012020-09-300001685040bhf:NetDerivativeGainLossMember2020-07-012020-09-300001685040us-gaap:InvestmentIncomeMember2020-07-012020-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:InterestRateContractMemberbhf:NetDerivativeGainLossMember2019-07-012019-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:InterestRateContractMember2019-07-012019-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:InterestRateContractMemberus-gaap:InvestmentIncomeMember2019-07-012019-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMemberbhf:NetDerivativeGainLossMember2019-07-012019-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMember2019-07-012019-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:InvestmentIncomeMember2019-07-012019-09-300001685040us-gaap:CashFlowHedgingMemberbhf:NetDerivativeGainLossMember2019-07-012019-09-300001685040us-gaap:CashFlowHedgingMember2019-07-012019-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:InvestmentIncomeMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:InterestRateContractMemberbhf:NetDerivativeGainLossMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:InterestRateContractMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:InterestRateContractMemberus-gaap:InvestmentIncomeMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberbhf:NetDerivativeGainLossMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:InvestmentIncomeMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberbhf:NetDerivativeGainLossMemberus-gaap:CreditRiskContractMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:CreditRiskContractMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:InvestmentIncomeMemberus-gaap:CreditRiskContractMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:EquityContractMemberbhf:NetDerivativeGainLossMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:EquityContractMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:EquityContractMemberus-gaap:InvestmentIncomeMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:EmbeddedDerivativeFinancialInstrumentsMemberbhf:NetDerivativeGainLossMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:EmbeddedDerivativeFinancialInstrumentsMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:EmbeddedDerivativeFinancialInstrumentsMemberus-gaap:InvestmentIncomeMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberbhf:NetDerivativeGainLossMember2019-07-012019-09-300001685040us-gaap:NondesignatedMember2019-07-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:InvestmentIncomeMember2019-07-012019-09-300001685040bhf:NetDerivativeGainLossMember2019-07-012019-09-300001685040us-gaap:InvestmentIncomeMember2019-07-012019-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:InterestRateContractMemberbhf:NetDerivativeGainLossMember2020-01-012020-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:InterestRateContractMember2020-01-012020-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:InterestRateContractMemberus-gaap:InvestmentIncomeMember2020-01-012020-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMemberbhf:NetDerivativeGainLossMember2020-01-012020-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMember2020-01-012020-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:InvestmentIncomeMember2020-01-012020-09-300001685040us-gaap:CashFlowHedgingMemberbhf:NetDerivativeGainLossMember2020-01-012020-09-300001685040us-gaap:CashFlowHedgingMember2020-01-012020-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:InvestmentIncomeMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:InterestRateContractMemberbhf:NetDerivativeGainLossMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:InterestRateContractMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:InterestRateContractMemberus-gaap:InvestmentIncomeMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberbhf:NetDerivativeGainLossMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:InvestmentIncomeMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberbhf:NetDerivativeGainLossMemberus-gaap:CreditRiskContractMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:CreditRiskContractMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:InvestmentIncomeMemberus-gaap:CreditRiskContractMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:EquityContractMemberbhf:NetDerivativeGainLossMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:EquityContractMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:EquityContractMemberus-gaap:InvestmentIncomeMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:EmbeddedDerivativeFinancialInstrumentsMemberbhf:NetDerivativeGainLossMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:EmbeddedDerivativeFinancialInstrumentsMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:EmbeddedDerivativeFinancialInstrumentsMemberus-gaap:InvestmentIncomeMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberbhf:NetDerivativeGainLossMember2020-01-012020-09-300001685040us-gaap:NondesignatedMember2020-01-012020-09-300001685040us-gaap:NondesignatedMemberus-gaap:InvestmentIncomeMember2020-01-012020-09-300001685040bhf:NetDerivativeGainLossMember2020-01-012020-09-300001685040us-gaap:InvestmentIncomeMember2020-01-012020-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:InterestRateContractMemberbhf:NetDerivativeGainLossMember2019-01-012019-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:InterestRateContractMember2019-01-012019-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:InterestRateContractMemberus-gaap:InvestmentIncomeMember2019-01-012019-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMemberbhf:NetDerivativeGainLossMember2019-01-012019-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMember2019-01-012019-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:InvestmentIncomeMember2019-01-012019-09-300001685040us-gaap:CashFlowHedgingMemberbhf:NetDerivativeGainLossMember2019-01-012019-09-300001685040us-gaap:CashFlowHedgingMember2019-01-012019-09-300001685040us-gaap:CashFlowHedgingMemberus-gaap:InvestmentIncomeMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:InterestRateContractMemberbhf:NetDerivativeGainLossMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:InterestRateContractMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:InterestRateContractMemberus-gaap:InvestmentIncomeMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberbhf:NetDerivativeGainLossMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:InvestmentIncomeMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberbhf:NetDerivativeGainLossMemberus-gaap:CreditRiskContractMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:CreditRiskContractMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:InvestmentIncomeMemberus-gaap:CreditRiskContractMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:EquityContractMemberbhf:NetDerivativeGainLossMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:EquityContractMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:EquityContractMemberus-gaap:InvestmentIncomeMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:EmbeddedDerivativeFinancialInstrumentsMemberbhf:NetDerivativeGainLossMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:EmbeddedDerivativeFinancialInstrumentsMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:EmbeddedDerivativeFinancialInstrumentsMemberus-gaap:InvestmentIncomeMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberbhf:NetDerivativeGainLossMember2019-01-012019-09-300001685040us-gaap:NondesignatedMember2019-01-012019-09-300001685040us-gaap:NondesignatedMemberus-gaap:InvestmentIncomeMember2019-01-012019-09-300001685040bhf:NetDerivativeGainLossMember2019-01-012019-09-300001685040us-gaap:InvestmentIncomeMember2019-01-012019-09-300001685040us-gaap:CreditDefaultSwapMemberbhf:AaaAaMember2020-09-300001685040us-gaap:CreditDefaultSwapMemberbhf:AaaAaMember2020-01-012020-09-300001685040us-gaap:CreditDefaultSwapMemberbhf:AaaAaMember2019-12-310001685040us-gaap:CreditDefaultSwapMemberbhf:AaaAaMember2019-01-012019-12-310001685040us-gaap:CreditDefaultSwapMemberbhf:BaaMember2020-09-300001685040us-gaap:CreditDefaultSwapMemberbhf:BaaMember2020-01-012020-09-300001685040us-gaap:CreditDefaultSwapMemberbhf:BaaMember2019-12-310001685040us-gaap:CreditDefaultSwapMemberbhf:BaaMember2019-01-012019-12-3100016850402019-01-012019-12-310001685040us-gaap:FixedMaturitiesMember2020-09-300001685040us-gaap:FixedMaturitiesMember2019-12-310001685040us-gaap:DomesticCorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:DomesticCorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:DomesticCorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:DomesticCorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignCorporateDebtSecuritiesMember2020-09-300001685040us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignCorporateDebtSecuritiesMember2020-09-300001685040us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignCorporateDebtSecuritiesMember2020-09-300001685040us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignCorporateDebtSecuritiesMember2020-09-300001685040us-gaap:ResidentialMortgageBackedSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:FairValueInputsLevel2Memberus-gaap:ResidentialMortgageBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:ResidentialMortgageBackedSecuritiesMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:ResidentialMortgageBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:FairValueInputsLevel2Memberus-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:FairValueInputsLevel1Memberus-gaap:CommercialMortgageBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:FairValueInputsLevel2Memberus-gaap:CommercialMortgageBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:FairValueInputsLevel3Memberus-gaap:CommercialMortgageBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:CommercialMortgageBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:FairValueInputsLevel2Memberus-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2020-09-300001685040us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2020-09-300001685040us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2020-09-300001685040us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2020-09-300001685040us-gaap:ForeignGovernmentDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:ForeignGovernmentDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:ForeignGovernmentDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:ForeignGovernmentDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:InterestRateContractMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:FairValueInputsLevel2Memberus-gaap:InterestRateContractMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:InterestRateContractMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:InterestRateContractMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeContractMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:ForeignExchangeContractMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:CreditRiskContractMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:FairValueInputsLevel2Memberus-gaap:CreditRiskContractMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:CreditRiskContractMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:CreditRiskContractMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:EquityContractMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:FairValueInputsLevel2Memberus-gaap:EquityContractMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:EquityContractMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:EquityContractMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001685040us-gaap:DomesticCorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:DomesticCorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:DomesticCorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:DomesticCorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignCorporateDebtSecuritiesMember2019-12-310001685040us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignCorporateDebtSecuritiesMember2019-12-310001685040us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignCorporateDebtSecuritiesMember2019-12-310001685040us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ForeignCorporateDebtSecuritiesMember2019-12-310001685040us-gaap:ResidentialMortgageBackedSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:FairValueInputsLevel2Memberus-gaap:ResidentialMortgageBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:ResidentialMortgageBackedSecuritiesMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:ResidentialMortgageBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:FairValueInputsLevel2Memberus-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:FairValueInputsLevel1Memberus-gaap:CommercialMortgageBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:FairValueInputsLevel2Memberus-gaap:CommercialMortgageBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:FairValueInputsLevel3Memberus-gaap:CommercialMortgageBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:CommercialMortgageBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:FairValueInputsLevel2Memberus-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2019-12-310001685040us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2019-12-310001685040us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2019-12-310001685040us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2019-12-310001685040us-gaap:ForeignGovernmentDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:ForeignGovernmentDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:ForeignGovernmentDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:ForeignGovernmentDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:InterestRateContractMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:FairValueInputsLevel2Memberus-gaap:InterestRateContractMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:InterestRateContractMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:InterestRateContractMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeContractMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:ForeignExchangeContractMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:CreditRiskContractMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:FairValueInputsLevel2Memberus-gaap:CreditRiskContractMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:CreditRiskContractMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:CreditRiskContractMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:EquityContractMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:FairValueInputsLevel2Memberus-gaap:EquityContractMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:EquityContractMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040us-gaap:EquityContractMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001685040srt:MinimumMemberus-gaap:MeasurementInputMortalityRateMemberus-gaap:FairValueInputsLevel3Member2020-09-300001685040srt:MaximumMemberus-gaap:MeasurementInputMortalityRateMemberus-gaap:FairValueInputsLevel3Member2020-09-300001685040srt:MinimumMemberus-gaap:MeasurementInputMortalityRateMemberus-gaap:FairValueInputsLevel3Member2019-12-310001685040srt:MaximumMemberus-gaap:MeasurementInputMortalityRateMemberus-gaap:FairValueInputsLevel3Member2019-12-310001685040srt:MinimumMemberus-gaap:MeasurementInputLapseRateMemberus-gaap:FairValueInputsLevel3Member2020-09-300001685040srt:MaximumMemberus-gaap:MeasurementInputLapseRateMemberus-gaap:FairValueInputsLevel3Member2020-09-300001685040srt:MinimumMemberus-gaap:MeasurementInputLapseRateMemberus-gaap:FairValueInputsLevel3Member2019-12-310001685040srt:MaximumMemberus-gaap:MeasurementInputLapseRateMemberus-gaap:FairValueInputsLevel3Member2019-12-310001685040srt:MinimumMemberus-gaap:MeasurementInputUtilizationRateMemberus-gaap:FairValueInputsLevel3Member2020-09-300001685040srt:MaximumMemberus-gaap:MeasurementInputUtilizationRateMemberus-gaap:FairValueInputsLevel3Member2020-09-300001685040srt:MinimumMemberus-gaap:MeasurementInputUtilizationRateMemberus-gaap:FairValueInputsLevel3Member2019-12-310001685040srt:MaximumMemberus-gaap:MeasurementInputUtilizationRateMemberus-gaap:FairValueInputsLevel3Member2019-12-310001685040srt:MinimumMemberus-gaap:MeasurementInputWithdrawalRateMemberus-gaap:FairValueInputsLevel3Member2020-09-300001685040srt:MaximumMemberus-gaap:MeasurementInputWithdrawalRateMemberus-gaap:FairValueInputsLevel3Member2020-09-300001685040srt:MinimumMemberus-gaap:MeasurementInputWithdrawalRateMemberus-gaap:FairValueInputsLevel3Member2019-12-310001685040srt:MaximumMemberus-gaap:MeasurementInputWithdrawalRateMemberus-gaap:FairValueInputsLevel3Member2019-12-310001685040bhf:MeasurementInputLongTermEquityVolatilitiesMembersrt:MinimumMemberus-gaap:FairValueInputsLevel3Member2020-09-300001685040bhf:MeasurementInputLongTermEquityVolatilitiesMembersrt:MaximumMemberus-gaap:FairValueInputsLevel3Member2020-09-300001685040bhf:MeasurementInputLongTermEquityVolatilitiesMembersrt:MinimumMemberus-gaap:FairValueInputsLevel3Member2019-12-310001685040bhf:MeasurementInputLongTermEquityVolatilitiesMembersrt:MaximumMemberus-gaap:FairValueInputsLevel3Member2019-12-310001685040srt:MinimumMemberus-gaap:MeasurementInputEntityCreditRiskMemberus-gaap:FairValueInputsLevel3Member2020-09-300001685040srt:MaximumMemberus-gaap:MeasurementInputEntityCreditRiskMemberus-gaap:FairValueInputsLevel3Member2020-09-300001685040srt:MinimumMemberus-gaap:MeasurementInputEntityCreditRiskMemberus-gaap:FairValueInputsLevel3Member2019-12-310001685040srt:MaximumMemberus-gaap:MeasurementInputEntityCreditRiskMemberus-gaap:FairValueInputsLevel3Member2019-12-310001685040us-gaap:CorporateDebtSecuritiesMember2020-06-300001685040bhf:StructuredSecuritiesMember2020-06-300001685040us-gaap:USStatesAndPoliticalSubdivisionsMember2020-06-300001685040us-gaap:EquitySecuritiesMember2020-06-300001685040us-gaap:ShortTermInvestmentsMember2020-06-300001685040bhf:NetDerivativesMember2020-06-300001685040us-gaap:EmbeddedDerivativeFinancialInstrumentsMember2020-06-300001685040bhf:SeparateAccountAssetsMember2020-06-300001685040us-gaap:CorporateDebtSecuritiesMember2020-07-012020-09-300001685040bhf:StructuredSecuritiesMember2020-07-012020-09-300001685040us-gaap:USStatesAndPoliticalSubdivisionsMember2020-07-012020-09-300001685040us-gaap:EquitySecuritiesMember2020-07-012020-09-300001685040us-gaap:ShortTermInvestmentsMember2020-07-012020-09-300001685040bhf:NetDerivativesMember2020-07-012020-09-300001685040us-gaap:EmbeddedDerivativeFinancialInstrumentsMember2020-07-012020-09-300001685040bhf:SeparateAccountAssetsMember2020-07-012020-09-300001685040us-gaap:CorporateDebtSecuritiesMember2020-09-300001685040bhf:StructuredSecuritiesMember2020-09-300001685040us-gaap:USStatesAndPoliticalSubdivisionsMember2020-09-300001685040us-gaap:EquitySecuritiesMember2020-09-300001685040us-gaap:ShortTermInvestmentsMember2020-09-300001685040bhf:NetDerivativesMember2020-09-300001685040us-gaap:EmbeddedDerivativeFinancialInstrumentsMember2020-09-300001685040bhf:SeparateAccountAssetsMember2020-09-300001685040us-gaap:CorporateDebtSecuritiesMember2019-06-300001685040bhf:StructuredSecuritiesMember2019-06-300001685040us-gaap:USStatesAndPoliticalSubdivisionsMember2019-06-300001685040us-gaap:EquitySecuritiesMember2019-06-300001685040us-gaap:ShortTermInvestmentsMember2019-06-300001685040bhf:NetDerivativesMember2019-06-300001685040us-gaap:EmbeddedDerivativeFinancialInstrumentsMember2019-06-300001685040bhf:SeparateAccountAssetsMember2019-06-300001685040us-gaap:CorporateDebtSecuritiesMember2019-07-012019-09-300001685040bhf:StructuredSecuritiesMember2019-07-012019-09-300001685040us-gaap:USStatesAndPoliticalSubdivisionsMember2019-07-012019-09-300001685040us-gaap:EquitySecuritiesMember2019-07-012019-09-300001685040us-gaap:ShortTermInvestmentsMember2019-07-012019-09-300001685040bhf:NetDerivativesMember2019-07-012019-09-300001685040us-gaap:EmbeddedDerivativeFinancialInstrumentsMember2019-07-012019-09-300001685040bhf:SeparateAccountAssetsMember2019-07-012019-09-300001685040us-gaap:CorporateDebtSecuritiesMember2019-09-300001685040bhf:StructuredSecuritiesMember2019-09-300001685040us-gaap:USStatesAndPoliticalSubdivisionsMember2019-09-300001685040us-gaap:EquitySecuritiesMember2019-09-300001685040us-gaap:ShortTermInvestmentsMember2019-09-300001685040bhf:NetDerivativesMember2019-09-300001685040us-gaap:EmbeddedDerivativeFinancialInstrumentsMember2019-09-300001685040bhf:SeparateAccountAssetsMember2019-09-300001685040us-gaap:CorporateDebtSecuritiesMember2019-12-310001685040bhf:StructuredSecuritiesMember2019-12-310001685040us-gaap:USStatesAndPoliticalSubdivisionsMember2019-12-310001685040us-gaap:EquitySecuritiesMember2019-12-310001685040us-gaap:ShortTermInvestmentsMember2019-12-310001685040bhf:NetDerivativesMember2019-12-310001685040us-gaap:EmbeddedDerivativeFinancialInstrumentsMember2019-12-310001685040bhf:SeparateAccountAssetsMember2019-12-310001685040us-gaap:CorporateDebtSecuritiesMember2020-01-012020-09-300001685040bhf:StructuredSecuritiesMember2020-01-012020-09-300001685040us-gaap:USStatesAndPoliticalSubdivisionsMember2020-01-012020-09-300001685040us-gaap:EquitySecuritiesMember2020-01-012020-09-300001685040us-gaap:ShortTermInvestmentsMember2020-01-012020-09-300001685040bhf:NetDerivativesMember2020-01-012020-09-300001685040us-gaap:EmbeddedDerivativeFinancialInstrumentsMember2020-01-012020-09-300001685040bhf:SeparateAccountAssetsMember2020-01-012020-09-300001685040us-gaap:CorporateDebtSecuritiesMember2018-12-310001685040bhf:StructuredSecuritiesMember2018-12-310001685040us-gaap:USStatesAndPoliticalSubdivisionsMember2018-12-310001685040us-gaap:EquitySecuritiesMember2018-12-310001685040us-gaap:ShortTermInvestmentsMember2018-12-310001685040bhf:NetDerivativesMember2018-12-310001685040us-gaap:EmbeddedDerivativeFinancialInstrumentsMember2018-12-310001685040bhf:SeparateAccountAssetsMember2018-12-310001685040us-gaap:CorporateDebtSecuritiesMember2019-01-012019-09-300001685040bhf:StructuredSecuritiesMember2019-01-012019-09-300001685040us-gaap:USStatesAndPoliticalSubdivisionsMember2019-01-012019-09-300001685040us-gaap:EquitySecuritiesMember2019-01-012019-09-300001685040us-gaap:ShortTermInvestmentsMember2019-01-012019-09-300001685040bhf:NetDerivativesMember2019-01-012019-09-300001685040us-gaap:EmbeddedDerivativeFinancialInstrumentsMember2019-01-012019-09-300001685040bhf:SeparateAccountAssetsMember2019-01-012019-09-300001685040us-gaap:CarryingReportedAmountFairValueDisclosureMember2020-09-300001685040us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel1Member2020-09-300001685040us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-09-300001685040us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel3Member2020-09-300001685040us-gaap:EstimateOfFairValueFairValueDisclosureMember2020-09-300001685040us-gaap:CarryingReportedAmountFairValueDisclosureMember2019-12-310001685040us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel1Member2019-12-310001685040us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2019-12-310001685040us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel3Member2019-12-310001685040us-gaap:EstimateOfFairValueFairValueDisclosureMember2019-12-310001685040bhf:BHFSeniorNotesDue2030Member2020-06-300001685040bhf:BHFSeniorNotesDue2030Member2020-04-012020-06-300001685040bhf:TermLoanDue2024Member2020-04-012020-06-300001685040bhf:BRCDCommittedCreditFacilityMember2020-06-100001685040bhf:BRCDCommittedCreditFacilityMember2020-06-110001685040bhf:BRCDCommittedCreditFacilityMember2020-09-300001685040us-gaap:SeriesAPreferredStockMember2019-01-012019-12-310001685040us-gaap:SeriesAPreferredStockMember2020-09-300001685040us-gaap:SeriesAPreferredStockMember2019-12-310001685040us-gaap:SeriesBPreferredStockMember2020-09-300001685040us-gaap:SeriesBPreferredStockMember2019-12-310001685040bhf:NotDesignatedPreferredStockMember2020-09-300001685040bhf:NotDesignatedPreferredStockMember2019-12-310001685040us-gaap:SeriesBPreferredStockMember2020-05-012020-05-310001685040us-gaap:SeriesBPreferredStockMember2020-05-310001685040us-gaap:SeriesAPreferredStockMember2020-08-172020-08-170001685040us-gaap:SeriesBPreferredStockMember2020-08-172020-08-170001685040us-gaap:SeriesAPreferredStockMember2020-05-152020-05-150001685040us-gaap:SeriesBPreferredStockMember2020-05-152020-05-150001685040us-gaap:SeriesAPreferredStockMember2020-02-142020-02-140001685040us-gaap:SeriesBPreferredStockMember2020-02-142020-02-140001685040us-gaap:SeriesAPreferredStockMember2019-08-152019-08-150001685040us-gaap:SeriesBPreferredStockMember2019-08-152019-08-150001685040us-gaap:SeriesAPreferredStockMember2019-05-152019-05-150001685040us-gaap:SeriesBPreferredStockMember2019-05-152019-05-150001685040us-gaap:SeriesAPreferredStockMember2019-01-012019-09-300001685040us-gaap:SeriesBPreferredStockMember2019-01-012019-09-300001685040bhf:AuthorizationUnder10b51PlanMember2020-02-060001685040bhf:AuthorizationUnder10b51PlanMember2020-01-012020-09-300001685040bhf:AuthorizationUnder10b51PlanMember2019-01-012019-09-300001685040bhf:AuthorizationUnder10b51PlanMember2020-09-300001685040us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-06-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-06-300001685040us-gaap:AccumulatedTranslationAdjustmentMember2020-06-300001685040us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-06-300001685040us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-07-012020-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-07-012020-09-300001685040us-gaap:AccumulatedTranslationAdjustmentMember2020-07-012020-09-300001685040us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-07-012020-09-300001685040us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-09-300001685040us-gaap:AccumulatedTranslationAdjustmentMember2020-09-300001685040us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-09-300001685040us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-06-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-06-300001685040us-gaap:AccumulatedTranslationAdjustmentMember2019-06-300001685040us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-06-300001685040us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-07-012019-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-07-012019-09-300001685040us-gaap:AccumulatedTranslationAdjustmentMember2019-07-012019-09-300001685040us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-07-012019-09-300001685040us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-09-300001685040us-gaap:AccumulatedTranslationAdjustmentMember2019-09-300001685040us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-09-300001685040us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-12-310001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-12-310001685040us-gaap:AccumulatedTranslationAdjustmentMember2019-12-310001685040us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-12-310001685040us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-01-012020-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-01-012020-09-300001685040us-gaap:AccumulatedTranslationAdjustmentMember2020-01-012020-09-300001685040us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-01-012020-09-300001685040us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2018-12-310001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-12-310001685040us-gaap:AccumulatedTranslationAdjustmentMember2018-12-310001685040us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2018-12-310001685040us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-01-012019-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-01-012019-09-300001685040us-gaap:AccumulatedTranslationAdjustmentMember2019-01-012019-09-300001685040us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-01-012019-09-300001685040us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-07-012020-09-300001685040us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-07-012019-09-300001685040us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-01-012020-09-300001685040us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-01-012019-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:InterestRateSwapMember2020-07-012020-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:InterestRateSwapMember2019-07-012019-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:InterestRateSwapMember2020-01-012020-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:InterestRateSwapMember2019-01-012019-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:CurrencySwapMember2020-07-012020-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:CurrencySwapMember2019-07-012019-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:CurrencySwapMember2020-01-012020-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:CurrencySwapMember2019-01-012019-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2019-07-012019-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2020-01-012020-09-300001685040us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2019-01-012019-09-300001685040us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-300001685040us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2019-07-012019-09-300001685040us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2020-01-012020-09-300001685040us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2019-01-012019-09-300001685040us-gaap:DistributionServiceMember2020-07-012020-09-300001685040us-gaap:DistributionServiceMember2020-01-012020-09-300001685040us-gaap:DistributionServiceMember2019-07-012019-09-300001685040us-gaap:DistributionServiceMember2019-01-012019-09-300001685040srt:MaximumMember2020-09-300001685040srt:MaximumMemberbhf:NonLitigationLossMember2020-09-300001685040us-gaap:LoanOriginationCommitmentsMember2020-09-300001685040us-gaap:LoanOriginationCommitmentsMember2019-12-310001685040us-gaap:CommitmentsToExtendCreditMember2019-12-310001685040us-gaap:CommitmentsToExtendCreditMember2020-09-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission File Number: 001-37905
https://cdn.kscope.io/1bf28b8f9b8ba340b308e438fc8b11c2-bhf-20200930_g1.jpg
Brighthouse Financial, Inc.
(Exact name of registrant as specified in its charter)
Delaware 81-3846992
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
11225 North Community House Road, Charlotte, North Carolina
 
28277
(Address of principal executive offices) (Zip Code)
(980) 365-7100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareBHFThe Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/1,000th interest in a share of 6.600% Non-Cumulative Preferred Stock, Series ABHFAPThe Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/1,000th interest in a share of 6.750% Non-Cumulative Preferred Stock, Series BBHFAOThe Nasdaq Stock Market LLC
6.250% Junior Subordinated Debentures due 2058BHFALThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ  No ¨   
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes þ    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerþAccelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company☐
Emerging growth company☐
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.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐ No þ
As of November 4, 2020, 89,504,324 shares of the registrant’s common stock were outstanding.
 


Table of Contents
Page
  Item 1.
Consolidated Financial Statements (at September 30, 2020 (Unaudited) and December 31, 2019 and for the Three Months and Nine Months Ended September 30, 2020 and 2019 (Unaudited)):
  Item 2.
  Item 3.
  Item 4.
  Item 1.
  Item 1A.
  Item 2.
  Item 6.

Table of Contents
Part I — Financial Information
Item 1. Financial Statements
Brighthouse Financial, Inc.
Interim Condensed Consolidated Balance Sheets
September 30, 2020 (Unaudited) and December 31, 2019
(In millions, except share and per share data)
September 30, 2020December 31, 2019
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $68,061 and $64,079, respectively; allowance for credit losses of $4 and $0, respectively)
$79,338 $71,036 
Equity securities, at estimated fair value117 147 
Mortgage loans (net of allowance for credit losses of $90 and $64, respectively)
15,746 15,753 
Policy loans1,289 1,292 
Limited partnerships and limited liability companies2,562 2,380 
Short-term investments, principally at estimated fair value4,239 1,958 
Other invested assets, principally at estimated fair value (net of allowance for credit losses of $13 and $0, respectively)
5,038 3,216 
Total investments
108,329 95,782 
Cash and cash equivalents6,189 2,877 
Accrued investment income781 684 
Premiums, reinsurance and other receivables16,087 14,760 
Deferred policy acquisition costs and value of business acquired4,664 5,448 
Current income tax recoverable— 17 
Other assets447 584 
Separate account assets103,184 107,107 
Total assets
$239,681 $227,259 
Liabilities and Equity
Liabilities
Future policy benefits$44,537 $39,686 
Policyholder account balances52,798 45,771 
Other policy-related balances3,088 3,111 
Payables for collateral under securities loaned and other transactions6,989 4,391 
Long-term debt3,979 4,365 
Current income tax payable72 — 
Deferred income tax liability1,816 1,355 
Other liabilities4,887 5,236 
Separate account liabilities103,184 107,107 
Total liabilities
221,350 211,022 
Contingencies, Commitments and Guarantees (Note 11)
Equity
Brighthouse Financial, Inc.’s stockholders’ equity:
Preferred stock, par value $0.01 per share; $828 and $425, respectively, aggregate liquidation preference
— — 
Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 120,970,368 and 120,647,871 shares issued, respectively; 91,158,927 and 106,027,301 shares outstanding, respectively
1 1 
Additional paid-in capital13,314 12,908 
Retained earnings (deficit)511 585 
Treasury stock, at cost; 29,811,441 and 14,620,570 shares, respectively
(941)(562)
Accumulated other comprehensive income (loss)5,381 3,240 
Total Brighthouse Financial, Inc.’s stockholders’ equity
18,266 16,172 
Noncontrolling interests65 65 
Total equity
18,331 16,237 
Total liabilities and equity
$239,681 $227,259 
See accompanying notes to the interim condensed consolidated financial statements.
2
Table of Contents
Brighthouse Financial, Inc.
Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
For the Three Months and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
(In millions, except per share data)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
Revenues
Premiums$184 $214 $575 $673 
Universal life and investment-type product policy fees882 867 2,595 2,630 
Net investment income996 928 2,564 2,681 
Other revenues99 94 294 282 
Net investment gains (losses)5 27 (48)79 
Net derivative gains (losses)(1,857)1,057 2,392 (97)
Total revenues309 3,187 8,372 6,248 
Expenses
Policyholder benefits and claims3,047 1,319 5,073 2,936 
Interest credited to policyholder account balances281 272 816 795 
Amortization of deferred policy acquisition costs and value of business acquired244 181 922 373 
Other expenses580 611 1,674 1,824 
Total expenses4,152 2,383 8,485 5,928 
Income (loss) before provision for income tax(3,843)804 (113)320 
Provision for income tax expense (benefit)(850)119 (88)(14)
Net income (loss)(2,993)685 (25)334 
Less: Net income (loss) attributable to noncontrolling interests2 2 4 4 
Net income (loss) attributable to Brighthouse Financial, Inc.(2,995)683 (29)330 
Less: Preferred stock dividends17 7 31 14 
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders$(3,012)$676 $(60)$316 
Comprehensive income (loss)$(2,577)$1,550 $2,116 $3,185 
Less: Comprehensive income (loss) attributable to noncontrolling interests2 2 4 4 
Comprehensive income (loss) attributable to Brighthouse Financial, Inc.$(2,579)$1,548 $2,112 $3,181 
Earnings per common share
Basic
$(32.49)$6.09 $(0.61)$2.77 
Diluted
$(32.49)$6.06 $(0.61)$2.75 
See accompanying notes to the interim condensed consolidated financial statements.
3
Table of Contents
Brighthouse Financial, Inc.
Interim Condensed Consolidated Statements of Equity
For the Three Months and Nine Months Ended September 30, 2020 and 2019 (Unaudited)
(In millions)
Preferred StockCommon StockAdditional Paid-in CapitalRetained Earnings (Deficit)Treasury Stock at CostAccumulated
Other
Comprehensive
Income (Loss)		Brighthouse Financial, Inc.’s Stockholders’ EquityNoncontrolling InterestsTotal Equity
Balance at December 31, 2019$— $1 $12,908 $585 $(562)$3,240 $16,172 $65 $16,237 
Cumulative effect of change in accounting principle, net of income tax (Note 1)
(14)3 (11)(11)
Balance at January 1, 2020
— 1 12,908 571 (562)3,243 16,161 65 16,226 
Preferred stock issuance
— 390390 390 
Treasury stock acquired in connection with share repurchases
(322)(322)(322)
Share-based compensation
— 9 (3)6 6 
Dividends on preferred stock
(14)(14)(14)
Change in noncontrolling interests
— (2)(2)
Net income (loss)
2,966 2,966 2 2,968 
Other comprehensive income (loss), net of income tax
1,722 1,722 1,722 
Balance at June 30, 2020 — 1 13,307 3,523 (887)4,965 20,909 65 20,974 
Treasury stock acquired in connection with share repurchases
(54)(54)(54)
Share-based compensation7 7 7 
Dividends on preferred stock(17)(17)(17)
Change in noncontrolling interests— (2)(2)
Net income (loss)(2,995)(2,995)2 (2,993)
Other comprehensive income (loss), net of income tax
416 416 416 
Balance at September 30, 2020$— $1 $13,314 $511 $(941)$5,381 $18,266 $65 $18,331 
Preferred StockCommon StockAdditional Paid-in CapitalRetained Earnings (Deficit)Treasury Stock at CostAccumulated
Other
Comprehensive
Income (Loss)		Brighthouse Financial, Inc.’s Stockholders’ EquityNoncontrolling InterestsTotal Equity
Balance at December 31, 2018$— $1 $12,473 $1,346 $(118)$716 $14,418 $65 $14,483 
Preferred stock issuance
— 412 412 412 
Treasury stock acquired in connection with share repurchases
(188)(188)(188)
Share-based compensation
8 8 8 
Dividends on preferred stock
(7)(7)(7)
Change in noncontrolling interests
— (2)(2)
Net income (loss)
(353)(353)2 (351)
Other comprehensive income (loss), net of income tax
1,986 1,986 1,986 
Balance at June 30, 2019— 1 12,893 986 (306)2,702 16,276 65 16,341 
Treasury stock acquired in connection with share repurchase
(126)(126)(126)
Share-based compensation
4 4 4 
Dividends on preferred stock(7)(7)(7)
Change in noncontrolling interests
— (2)(2)
Net income (loss)
683 683 2 685 
Other comprehensive income (loss), net of income tax
865 865 865 
Balance at September 30, 2019$— $1 $12,897 $1,662 $(432)$3,567 $17,695 $65 $17,760 
See accompanying notes to the interim condensed consolidated financial statements.
4
Table of Contents
Brighthouse Financial, Inc.
Interim Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2020 and 2019 (Unaudited)
(In millions)
Nine Months Ended
September 30,
20202019
Net cash provided by (used in) operating activities$515 $1,322 
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities6,011 11,888 
Equity securities54 29 
Mortgage loans1,232 933 
Limited partnerships and limited liability companies124 205 
Purchases of:
Fixed maturity securities(9,639)(13,412)
Equity securities(4)(3)
Mortgage loans(1,239)(2,625)
Limited partnerships and limited liability companies(423)(321)
Cash received in connection with freestanding derivatives5,280 1,179 
Cash paid in connection with freestanding derivatives(3,281)(1,705)
Net change in policy loans3 89 
Net change in short-term investments(2,269)(1,977)
Net change in other invested assets(19)21 
Other, net(14)— 
Net cash provided by (used in) investing activities
(4,184)(5,699)
Cash flows from financing activities
Policyholder account balances:
Deposits7,143 5,689 
Withdrawals(1,552)(2,021)
Net change in payables for collateral under securities loaned and other transactions2,598 234 
Long-term debt issued614 1,000 
Long-term debt repaid(1,001)(601)
Preferred stock issued, net of issuance costs390 412 
Dividends on preferred stock(31)(14)
Treasury stock acquired in connection with share repurchases(376)(314)
Financing element on certain derivative instruments and other derivative related transactions, net(764)179 
Other, net(40)(43)
Net cash provided by (used in) financing activities6,981 4,521 
Change in cash, cash equivalents and restricted cash3,312 144 
Cash, cash equivalents and restricted cash, beginning of period2,877 4,145 
Cash, cash equivalents and restricted cash, end of period$6,189 $4,289 
Supplemental disclosures of cash flow information
Net cash paid (received) for:
Interest$95 $108 
Income tax$(57)$8 
See accompanying notes to the interim condensed consolidated financial statements.
5
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies
Business
“Brighthouse Financial” and the “Company” refer to Brighthouse Financial, Inc. and its subsidiaries. Brighthouse Financial, Inc. (“BHF”) is a holding company formed in 2016 to own the legal entities that historically operated a substantial portion of MetLife, Inc.’s former retail segment until becoming a separate, publicly-traded company in August 2017. Brighthouse Financial is one of the largest providers of annuity and life insurance products in the United States through multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners. The Company is organized into three segments: Annuities; Life; and Run-off. In addition, the Company reports certain of its results of operations in Corporate & Other.
Basis of Presentation
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the interim condensed consolidated financial statements. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from these estimates.
Consolidation
The accompanying interim condensed consolidated financial statements include the accounts of Brighthouse Financial, as well as partnerships and limited liability companies (“LLCs”) that the Company controls. Intercompany accounts and transactions have been eliminated.
The Company uses the equity method of accounting for investments in limited partnerships and LLCs when it has more than a minor ownership interest or more than a minor influence over the investee’s operations. The Company generally recognizes its share of the investee’s earnings on a three-month lag in instances where the investee’s financial information is not sufficiently timely or when the investee’s reporting period differs from the Company’s reporting period. When the Company has virtually no influence over the investee’s operations, the investment is carried at fair value.
Reclassifications
Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform with the current period presentation as may be discussed when applicable in the Notes to the Interim Condensed Consolidated Financial Statements.
The accompanying interim condensed consolidated financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2019 consolidated balance sheet data was derived from audited consolidated financial statements included in Brighthouse Financial, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Annual Report”), which include all disclosures required by GAAP. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2019 Annual Report.
6
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)
Adoption of New Accounting Pronouncements
Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the Company’s consolidated financial statements. ASUs adopted as of September 30, 2020 are summarized as follows:
StandardDescriptionEffective DateImpact on Financial Statements
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”)The amendments to Topic 326 replace the incurred loss impairment methodology for certain financial instruments with one that reflects expected credit losses based on historical loss information, current conditions, and reasonable and supportable forecasts. The new guidance also requires that an other-than-temporary impairment on a debt security will be recognized as an allowance going forward, such that improvements in expected future cash flows after an impairment will no longer be reflected as a prospective yield adjustment through net investment income, but rather a reversal of the previous impairment and recognized through realized investment gains and losses.January 1, 2020 using the modified retrospective method
The Company recorded an after tax net decrease to retained earnings of $14 million and a net increase to accumulated other comprehensive income (loss) (“AOCI”) of $3 million for the cumulative effect of adoption. The adjustment included establishing or updating the allowance for credit losses on fixed maturity securities, mortgage loans, and other invested assets.
ASUs issued but not yet adopted as of September 30, 2020 are summarized as follows:
StandardDescriptionEffective DateImpact on Financial Statements
ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration ContractsThe amendments to Topic 944 will result in significant changes to the accounting for long-duration insurance contracts. These changes (1) require all guarantees that qualify as market risk benefits to be measured at fair value, (2) require more frequent updating of assumptions and modify existing discount rate requirements for certain insurance liabilities, (3) modify the methods of amortization for deferred policy acquisition costs (“DAC”), and (4) require new qualitative and quantitative disclosures around insurance contract asset and liability balances and the judgments, assumptions and methods used to measure those balances. The market risk benefit guidance is required to be applied on a retrospective basis, while the changes to guidance for insurance liabilities and DAC may be applied to existing carrying amounts on the effective date or on a retrospective basis.January 1, 2023The Company continues to evaluate the new guidance and therefore is unable to estimate the impact to its financial statements. The most significant impact is expected to be the measurement of liabilities for variable annuity guarantees.
CARES Act
In response to the worldwide pandemic sparked by the novel coronavirus (the “COVID-19 pandemic”), on March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act contains numerous provisions intended to provide swift aid, including through tax relief, to businesses and individuals affected by the COVID-19 pandemic. The Company does not believe that the CARES Act will have a material impact to its consolidated financial statements at this time. The Company will continue to closely monitor developments related to the COVID-19 pandemic and the CARES Act.

7
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

2. Segment Information
The Company is organized into three segments: Annuities; Life; and Run-off. In addition, the Company reports certain of its results of operations in Corporate & Other.
Annuities
The Annuities segment consists of a variety of variable, fixed, index-linked and income annuities designed to address contract holders’ needs for protected wealth accumulation on a tax-deferred basis, wealth transfer and income security.
Life
The Life segment consists of insurance products and services, including term, universal, whole and variable life products designed to address policyholders’ needs for financial security and protected wealth transfer, which may be provided on a tax-advantaged basis.
Run-off
The Run-off segment consists of products no longer actively sold and which are separately managed, including structured settlements, pension risk transfer contracts, certain company-owned life insurance policies, funding agreements and universal life with secondary guarantees.
Corporate & Other
Corporate & Other contains the excess capital not allocated to the segments and interest expense related to the majority of the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. Corporate & Other also includes long-term care and workers’ compensation business reinsured through 100% quota share reinsurance agreements and term life insurance sold direct to consumers, which is no longer being offered for new sales.
Financial Measures and Segment Accounting Policies
Adjusted earnings is a financial measure used by management to evaluate performance, allocate resources and facilitate comparisons to industry results. Consistent with GAAP guidance for segment reporting, adjusted earnings is also used to measure segment performance. The Company believes the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of its performance by the investor community. Adjusted earnings should not be viewed as a substitute for net income (loss) available to BHF’s common shareholders and excludes net income (loss) attributable to noncontrolling interests and preferred stock dividends.
Adjusted earnings, which may be positive or negative, focuses on the Company’s primary businesses principally by excluding the impact of market volatility, which could distort trends.
The following are significant items excluded from total revenues, net of income tax, in calculating adjusted earnings:
•Net investment gains (losses);
•Net derivative gains (losses) except earned income and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment; and
•Certain variable annuity guaranteed minimum income benefits (“GMIBs”) fees (“GMIB Fees”).
The following are significant items excluded from total expenses, net of income tax, in calculating adjusted earnings:
•Amounts associated with benefits 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 above is calculated net of the statutory tax rate, which could differ from the Company’s effective tax rate.
8
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
2. Segment Information (continued)
The segment accounting policies are the same as those used to prepare the Company’s interim condensed consolidated financial statements, except for the adjustments to calculate adjusted earnings described above. In addition, segment accounting policies include the methods of capital allocation described below.
Segment investment and capitalization targets are based on statutory oriented risk principles and metrics. Segment invested assets backing liabilities are based on net statutory liabilities plus excess capital. For the variable annuity business, the excess capital held is based on the target statutory total asset requirement consistent with the Company’s variable annuity risk management strategy. For insurance businesses other than variable annuities, excess capital held is based on a percentage of required statutory risk-based capital. Assets in excess of those allocated to the segments, if any, are held in Corporate & Other. Segment net investment income reflects the performance of each segment’s respective invested assets.
Operating results by segment, as well as Corporate & Other, were as follows:
Three Months Ended September 30, 2020
AnnuitiesLifeRun-offCorporate & OtherTotal
(In millions)
Pre-tax adjusted earnings$479 $94 $(1,443)$(32)$(902)
Provision for income tax expense (benefit)92 18 (304)(38)(232)
Post-tax adjusted earnings387 76 (1,139)6 (670)
Less: Net income (loss) attributable to noncontrolling interests— — — 2 2 
Less: Preferred stock dividends— — — 17 17 
Adjusted earnings$387 $76 $(1,139)$(13)(689)
Adjustments for:
Net investment gains (losses)5 
Net derivative gains (losses)(1,857)
Other adjustments to net income (loss)(1,089)
Provision for income tax (expense) benefit618 
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders$(3,012)
Interest revenue$469 $131 $383 $18 
Interest expense$— $— $— $47 
9
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
2. Segment Information (continued)
Three Months Ended September 30, 2019
AnnuitiesLifeRun-offCorporate & OtherTotal
(In millions)
Pre-tax adjusted earnings$255 $91 $(543)$(67)$(264)
Provision for income tax expense (benefit)52 18 (117)(57)(104)
Post-tax adjusted earnings203 73 (426)(10)(160)
Less: Net income (loss) attributable to noncontrolling interests— — — 2 2 
Less: Preferred stock dividends— — — 7 7 
Adjusted earnings$203 $73 $(426)$(19)(169)
Adjustments for:
Net investment gains (losses)27 
Net derivative gains (losses)1,057 
Other adjustments to net income (loss)(16)
Provision for income tax (expense) benefit(223)
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders
$676 
Interest revenue$461 $117 $327 $23 
Interest expense$— $— $— $49 
Nine Months Ended September 30, 2020
AnnuitiesLifeRun-offCorporate & OtherTotal
(In millions)
Pre-tax adjusted earnings$1,073 $167 $(1,679)$(189)$(628)
Provision for income tax expense (benefit)199 32 (355)(72)(196)
Post-tax adjusted earnings 874 135 (1,324)(117)(432)
Less: Net income (loss) attributable to noncontrolling interests— — — 4 4 
Less: Preferred stock dividends — — — 31 31 
Adjusted earnings$874 $135 $(1,324)$(152)(467)
Adjustments for:
Net investment gains (losses)(48)
Net derivative gains (losses)2,392 
Other adjustments to net income (loss)(1,829)
Provision for income tax (expense) benefit(108)
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders
$(60)
Interest revenue$1,334 $316 $873 $54 
Interest expense$— $— $— $139 
10
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
2. Segment Information (continued)
Nine Months Ended September 30, 2019
AnnuitiesLifeRun-offCorporate & OtherTotal
(In millions)
Pre-tax adjusted earnings$939 $194 $(587)$(224)$322 
Provision for income tax expense (benefit)176 38 (127)(100)(13)
Post-tax adjusted earnings 763 156 (460)(124)335 
Less: Net income (loss) attributable to noncontrolling interests— — — 4 4 
Less: Preferred stock dividends — — — 14 14 
Adjusted earnings$763 $156 $(460)$(142)317 
Adjustments for:
Net investment gains (losses)79 
Net derivative gains (losses)(97)
Other adjustments to net income (loss)16 
Provision for income tax (expense) benefit1 
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders
$316 
Interest revenue$1,352 $330 $942 $57 
Interest expense$— $— $— $144 
Total revenues by segment, as well as Corporate & Other, were as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Annuities$1,157 $1,184 $3,360 $3,495 
Life350 320 989 953 
Run-off553 484 1,378 1,487 
Corporate & Other39 47 118 132 
Adjustments(1,790)1,152 2,527 181 
Total$309 $3,187 $8,372 $6,248 
Total assets by segment, as well as Corporate & Other, were as follows at:
September 30, 2020December 31, 2019
(In millions)
Annuities$162,285 $156,965 
Life22,839 21,876 
Run-off38,256 35,112 
Corporate & Other16,301 13,306 
Total$239,681 $227,259 
11
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
3. Insurance
Guarantees
As discussed in Notes 1 and 3 of the Notes to the Consolidated Financial Statements included in the 2019 Annual Report, the Company issues variable annuity contracts with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMABs”), the non-life-contingent portion of guaranteed minimum withdrawal benefits (“GMWBs”) and the portion of certain GMIBs that do not require annuitization are accounted for as embedded derivatives in policyholder account balances and are further discussed in Note 5.
The Company also has universal and variable life insurance contracts with secondary guarantees.
Information regarding the Company’s guarantee exposure was as follows at:
September 30, 2020December 31, 2019
In the
Event of Death		At
Annuitization		In the
Event of Death		At
Annuitization
(Dollars in millions)
Annuity Contracts (1), (2)
Variable Annuity Guarantees
Total account value (3)$100,471 $56,552 $104,271 $59,859 
Separate account value$95,346 $55,266 $99,385 $58,694 
Net amount at risk$8,054 (4)$7,956 (5)$6,671 (4)$4,750 (5)
Average attained age of contract holders70 years70 years68 years68 years
September 30, 2020December 31, 2019
Secondary Guarantees
(Dollars in millions)
Universal Life Contracts
Total account value (3)$5,816 $5,957 
Net amount at risk (6)$69,664 $71,124 
Average attained age of policyholders67 years66 years
Variable Life Contracts
Total account value (3)$3,677 $3,526 
Net amount at risk (6)$20,309 $21,325 
Average attained age of policyholders51 years50 years
_______________
(1)The Company’s annuity contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive.
(2)Includes direct business, but excludes offsets from hedging or reinsurance, if any. Therefore, the net amount at risk presented reflects the economic exposures of living and death benefit guarantees associated with variable annuities, but not necessarily their impact on the Company. See Note 5 of the Notes to the Consolidated Financial Statements included in the 2019 Annual Report for a discussion of guaranteed minimum benefits which have been reinsured.
(3)Includes the contract holder’s investments in the general account and separate account, if applicable.
(4)Defined as the death benefit less the total account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death.
12
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
3. Insurance (continued)
(5)Defined as the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents the Company’s potential economic exposure to such guarantees in the event all contract holders were to annuitize on the balance sheet date, even though the contracts contain terms that allow annuitization of the guaranteed amount only after the 10th anniversary of the contract, which not all contract holders have achieved.
(6)Defined as the guarantee amount less the account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date.
4. Investments
See Note 1 of the Notes to the Consolidated Financial Statements included in the 2019 Annual Report for a description of the Company’s accounting policies for investments and Note 6 for information about the fair value hierarchy for investments and the related valuation methodologies. In connection with the adoption of new guidance related to the credit losses (see Note 1), effective January 1, 2020, the Company updated its accounting policies on certain investments. Any accounting policy updates required by the new guidance are described in this footnote.
Fixed Maturity Securities Available-for-sale
Fixed Maturity Securities by Sector
Fixed maturity securities by sector were as follows at:
September 30, 2020December 31, 2019
Amortized
Cost		Allowance for Credit LossesGross UnrealizedEstimated
Fair
Value		Amortized
Cost		Allowance for Credit LossesGross UnrealizedEstimated
Fair
Value
GainsLossesGainsLosses
(In millions)
U.S. corporate$31,303 $2 $4,738 $133 $35,906 $28,375 $— $2,852 $67 $31,160 
Foreign corporate9,702 1 1,069 110 10,660 9,177 — 741 74 9,844 
RMBS7,807 1 652 9 8,449 8,692 — 438 12 9,118 
U.S. government and agency5,713 — 3,222 — 8,935 5,529 — 1,869 2 7,396 
CMBS5,865 — 569 9 6,425 5,500 — 264 9 5,755 
State and political subdivision3,478 — 953 2 4,429 3,358 — 701 2 4,057 
ABS2,681 — 54 21 2,714 1,945 — 21 11 1,955 
Foreign government1,512 — 314 6 1,820 1,503 — 250 2 1,751 
Total fixed maturity securities$68,061 $4 $11,571 $290 $79,338 $64,079 $— $7,136 $179 $71,036 
The Company did not hold any non-income producing fixed maturity securities at either September 30, 2020 or December 31, 2019.
Maturities of Fixed Maturity Securities
The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at September 30, 2020:
Due in One
Year or Less		Due After One
Year Through
Five Years		Due After Five
Years Through Ten Years		Due After Ten
Years		Structured
Securities (1)		Total Fixed
Maturity
Securities
(In millions)
Amortized cost$1,535 $7,291 $14,164 $28,718 $16,353 $68,061 
Estimated fair value$1,549 $7,729 $15,661 $36,811 $17,588 $79,338 
_______________
(1)Structured securities include residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”).
Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity.
13
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Continuous Gross Unrealized Losses for Fixed Maturity Securities by Sector
The estimated fair value and gross unrealized losses of fixed maturity securities in an unrealized loss position, by sector and by length of time that the securities have been in a continuous unrealized loss position, were as follows at:
September 30, 2020December 31, 2019
Less than 12 Months12 Months or GreaterLess than 12 Months12 Months or Greater
Estimated
Fair
Value		Gross
Unrealized
Losses		Estimated
Fair
Value		Gross
Unrealized
Losses		Estimated
Fair
Value		Gross
Unrealized
Losses		Estimated
Fair
Value		Gross
Unrealized
Losses
(Dollars in millions)
U.S. corporate$2,993 $112 $188 $21 $2,017 $44 $326 $23 
Foreign corporate862 37 451 73 576 12 561 62 
RMBS420 9 11 — 857 8 386 4 
U.S. government and agency— — — — 40 2 — — 
CMBS344 7 59 2 559 7 171 2 
State and political subdivision123 2 — — 143 2 8 — 
ABS667 8 590 13 362 2 676 9 
Foreign government121 6 6 — 65 2 — — 
Total fixed maturity securities
$5,530 $181 $1,305 $109 $4,619 $79 $2,128 $100 
Total number of securities in an unrealized loss position1,069 248 720 302 
Allowance for Credit Losses for Fixed Maturity Securities
Evaluation and Measurement Methodologies
For fixed maturity securities in an unrealized loss position, management first assesses whether the Company intends to sell, or whether it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to estimated fair value through net investment gains (losses). For fixed maturity securities that do not meet the aforementioned criteria, management evaluates whether the decline in estimated fair value has resulted from credit losses or other factors. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used in the allowance for credit loss evaluation process include, but are not limited to: (i) the extent to which estimated fair value is less than amortized cost; (ii) any changes to the rating of the security by a rating agency; (iii) adverse conditions specifically related to the security, industry or geographic area; and (iv) payment structure of the fixed maturity security and the likelihood of the issuer being able to make payments in the future or the issuer’s failure to make scheduled interest and principal payments. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss is deemed to exist and an allowance for credit losses is recorded, limited by the amount that the estimated fair value is less than the amortized cost basis, with a corresponding charge to net investment gains (losses). Any unrealized losses that have not been recorded through an allowance for credit losses are recognized in other comprehensive income (loss) (“OCI”).
Once a security specific allowance for credit losses is established, the present value of cash flows expected to be collected from the security continues to be reassessed. Any changes in the security specific allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense in net investment gains (losses).
Fixed maturity securities are also evaluated to determine whether any amounts have become uncollectible. When all, or a portion, of a security is deemed uncollectible, the uncollectible portion is written-off with an adjustment to amortized cost and a corresponding reduction to the allowance for credit losses.
14
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Accrued interest receivables are presented separate from the amortized cost basis of fixed maturity securities. An allowance for credit losses is not estimated on an accrued interest receivable, rather receivable balances 90-days past due are deemed uncollectible and are written off with a corresponding reduction to net investment income. The accrued interest receivable on fixed maturity securities totaled $546 million at September 30, 2020 and is included in accrued investment income.
Fixed maturity securities are also evaluated to determine if they qualify as purchased financial assets with credit deterioration (“PCD”). To determine if the credit deterioration experienced since origination is more than insignificant, both (i) the extent of the credit deterioration and (ii) any rating agency downgrades are evaluated. For securities categorized as PCD assets, the present value of cash flows expected to be collected from the security are compared to the par value of the security. If the present value of cash flows expected to be collected is less than the par value, credit losses are embedded in the purchase price of the PCD asset. In this situation, both an allowance for credit losses and amortized cost gross-up is recorded, limited by the amount that the estimated fair value is less than the grossed-up amortized cost basis. Any difference between the purchase price and the present value of cash flows is amortized or accreted into net investment income over the life of the PCD asset. Any subsequent PCD asset allowance for credit losses is evaluated in a manner similar to the process described above for fixed maturity securities.
Current Period Evaluation
Based on the Company’s current evaluation of its fixed maturity securities in an unrealized loss position and the current intent or requirement to sell, the Company recorded an allowance for credit losses of $4 million, relating to 11 securities at September 30, 2020. Management concluded that for all other fixed maturity securities in an unrealized loss position, the unrealized loss was not due to issuer-specific credit-related factors and as a result was recognized in OCI. Where unrealized losses have not been recognized into income, it is primarily because the securities’ bond issuer(s) are of high credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in estimated fair value is largely due to changes in interest rates and non-issuer specific credit spreads. These issuers continued to make timely principal and interest payments and the estimated fair value is expected to recover as the securities approach maturity.
Rollforward of the Allowance for Credit Losses for Fixed Maturity Securities by Sector
The changes in the allowance for credit losses by sector were as follows:
U.S. CorporateRMBSForeign CorporateTotal
(In millions)
Balance at January 1, 2020$3 $— $1 $4 
Allowance on securities where credit losses were not previously recorded3 1 1 5 
Reductions for securities sold(1)— — (1)
Write-offs charged against allowance (1)(3)— (1)(4)
Balance at September 30, 2020
$2 $1 $1 $4 
_______________
(1)The Company recorded total write-offs of $13 million during the nine months ended September 30, 2020.
15
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Mortgage Loans
Mortgage Loans by Portfolio Segment
Mortgage loans are summarized as follows at:
September 30, 2020December 31, 2019
Carrying
Value		% of
Total		Carrying
Value		% of
Total
(Dollars in millions)
Commercial$9,830 62.4 %$9,721 61.7 %
Agricultural3,380 21.5 3,388 21.5 
Residential2,626 16.7 2,708 17.2 
Total mortgage loans (1)15,836 100.6 15,817 100.4 
Allowance for credit losses(90)(0.6)(64)(0.4)
Total mortgage loans, net$15,746 100.0 %$15,753 100.0 %
_______________
(1)Purchases of mortgage loans from third parties were $47 million and $535 million for the three months and nine months ended September 30, 2020, respectively, and $159 million and $722 million for the three months and nine months ended September 30, 2019, respectively, and were primarily comprised of residential mortgage loans.
Allowance for Credit Losses for Mortgage Loans
Evaluation and Measurement Methodologies
The allowance for credit losses is a valuation account that is deducted from the mortgage loan’s amortized cost basis to present the net amount expected to be collected on the mortgage loan. The loan balance, or a portion of the loan balance, is written-off against the allowance when management believes this amount is uncollectible.
Accrued interest receivables are presented separate from the amortized cost basis of mortgage loans. An allowance for credit losses is generally not estimated on an accrued interest receivable, rather when a loan is placed in nonaccrual status the associated accrued interest receivable balance is written off with a corresponding reduction to net investment income. For mortgage loans that are granted payment deferrals due to the COVID-19 pandemic, interest continues to be accrued during the deferral period if the loan was less than 30 days past due at December 31, 2019 and performing at the onset of the pandemic. Accrued interest on COVID-19 pandemic impacted loans was not significant at September 30, 2020. The accrued interest receivable on mortgage loans is included in accrued investment income and totaled $89 million at September 30, 2020.
The allowance for credit losses is estimated using relevant available information, from internal and external sources, relating to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience provides the basis for estimating expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics and environmental conditions. A reasonable and supportable forecast period of two-years is used with an input reversion period of one-year.
Mortgage loans are evaluated in each of the three portfolio segments to determine the allowance for credit losses. The loan-level loss rates are determined using individual loan terms and characteristics, risk pools/internal ratings, national economic forecasts, prepayment speeds, and estimated default and loss severity. The resulting loss rates are applied to the mortgage loan’s amortized cost to generate an allowance for credit losses. In certain situations, the allowance for credit losses is measured as the difference between the loan’s amortized cost and liquidation value of the collateral. These situations include collateral dependent loans, expected troubled debt restructurings (“TDRs”), foreclosure probable loans, and loans with dissimilar risk characteristics.
16
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Mortgage loans are also evaluated to determine if they qualify as PCD assets. To determine if the credit deterioration experienced since origination is more than insignificant, the extent of credit deterioration is evaluated. All re-performing/modified loan (“RPL”) pools purchased after December 31, 2019 are determined to have been acquired with evidence of more than insignificant credit deterioration since origination and are classified as PCD assets. RPLs are pools of residential mortgage loans acquired at discounts which have both credit and non-credit components. For PCD mortgage loans, the allowance for credit losses is determined using a similar methodology described above, except the loss-rate is determined at the pool level instead of the individual loan level. The initial allowance for credit losses, determined on a collective basis, is then allocated to the individual loans. The initial amortized cost of the loan is grossed-up to reflect the sum of the loan’s purchase price and allowance for credit losses. The difference between the grossed-up amortized cost basis and the par value of the loan is a noncredit discount, which is accreted into net investment income over the remaining life of the loan. Any subsequent PCD mortgage loan allowance for credit losses is evaluated in a manner similar to the process described above for each of the three portfolio segments.
Rollforward of the Allowance for Credit Losses for Mortgage Loans by Portfolio Segment
The changes in the allowance for credit losses by portfolio segment were as follows:
CommercialAgriculturalResidentialTotal
(In millions)
Balance at December 31, 2019$47 $10 $7 $64 
Cumulative effect of change in accounting principle(20)7 15 2 
Balance at January 1, 202027 17 22 66 
Current period provision17 (1)8 24 
Balance at September 30, 2020$44 $16 $30 $90 
PCD Mortgage Loans
Purchases of PCD mortgage loans are summarized as follows:
Nine Months Ended September 30, 2020
(In millions)
Purchase price$77 
Allowance at acquisition date$2 
Discount or premium attributable to other factors$2 
Par value$81 
17
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Credit Quality of Mortgage Loans by Portfolio Segment
The amortized cost of mortgage loans by year of origination and credit quality indicator was as follows at:
20202019201820172016PriorTotal
(In millions)
September 30, 2020
Commercial mortgage loans
Loan-to-value ratios:
Less than 65%$288 $1,645 $1,113 $572 $1,124 $3,210 $7,952 
65% to 75%114 345 452 340 40 277 1,568 
76% to 80%— — — — 84 — 84 
Greater than 80%— — 10 13 6 197 226 
Total commercial mortgage loans402 1,990 1,575 925 1,254 3,684 9,830 
Agricultural mortgage loans
Loan-to-value ratios:
Less than 65%202 556 754 438 486 765 3,201 
65% to 75%37 81 10 33 — 18 179 
Total agricultural mortgage loans239 637 764 471 486 783 3,380 
Residential mortgage loans
Performing200 428 478 116 43 1,261 2,526 
Nonperforming1 5 5 1 — 88 100 
Total residential mortgage loans201 433 483 117 43 1,349 2,626 
Total$842 $3,060 $2,822 $1,513 $1,783 $5,816 $15,836 
The loan-to-value ratio is a measure commonly used to assess the quality of commercial and agricultural mortgage loans. The loan-to-value ratio compares the amount of the loan to the estimated fair value of the underlying property collateralizing the loan and is commonly expressed as a percentage. A loan-to-value ratio less than 100% indicates an excess of collateral value over the loan amount. Loan-to-value ratios greater than 100% indicate that the loan amount exceeds the collateral value. Performing status is a measure commonly used to assess the quality of residential mortgage loans. A loan is considered performing when the borrower makes consistent and timely payments.
The amortized cost of commercial mortgage loans by debt-service coverage ratio was as follows at:
September 30, 2020December 31, 2019
Amortized Cost% of
Total		Amortized Cost% of
Total
(Dollars in millions)
Debt-service coverage ratios:
Greater than 1.20x$9,286 94.5 %$9,257 95.2 %
1.00x - 1.20x359 3.6 298 3.1 
Less than 1.00x185 1.9 166 1.7 
Total$9,830 100.0 %$9,721 100.0 %
The debt-service coverage ratio compares a property’s net operating income to its debt-service payments. Debt-service coverage ratios less than 1.00 times indicate that property operations do not generate enough income to cover the loan’s current debt payments. A debt-service coverage ratio greater than 1.00 times indicates an excess of net operating income over the debt-service payments.
18
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Past Due Mortgage Loans by Portfolio Segment
The Company has a high-quality, well-performing mortgage loan portfolio, with over 99% of all mortgage loans classified as performing at both September 30, 2020 and December 31, 2019. Delinquency is defined consistent with industry practice, when mortgage loans are past due as follows: commercial and residential mortgage loans — 60 days and agricultural mortgage loans — 90 days. To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the past due status of the impacted loans during the forbearance period is locked-in as of March 1, 2020, which reflects the date on which the COVID-19 pandemic began to affect the borrower’s ability to make payments, as provided in the CARES Act. At September 30, 2020, 5% of the COVID-19 pandemic modified loans were classified as delinquent.
The aging of the amortized cost of past due mortgage loans by portfolio segment was as follows at:
September 30, 2020
CommercialAgriculturalResidentialTotal
(In millions)
Current$9,830 $3,379 $2,461 $15,670 
30-59 days past due— — 65 65 
60-89 days past due— — 69 69 
90-179 days past due— 1 16 17 
180+ days past due— — 15 15 
Total
$9,830 $3,380 $2,626 $15,836 
Mortgage Loans in Nonaccrual Status by Portfolio Segment
Mortgage loans are placed in a nonaccrual status if there are concerns regarding collectability of future payments or the loan is past due, unless the past due loan is well collateralized and in the process of foreclosure. To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the impacted loans generally will not be reported as in a nonaccrual status during the period of deferral. A COVID-19 pandemic modified loan is only reported as a nonaccrual asset in the event a borrower declares bankruptcy, the borrower experiences significant credit deterioration such that the Company does not expect to collect all principal and interest due, or the loan was 90 days past due at the onset of the pandemic. At September 30, 2020, 5% of the COVID-19 pandemic modified loans were in nonaccrual status.
The amortized cost of mortgage loans in a nonaccrual status by portfolio segment were as follows at:
CommercialAgriculturalResidentialTotal
(In millions)
December 31, 2019
$— $21 $37 $58 
September 30, 2020 (1)
$— $14 $100 $114 
_______________
(1)The Company had $8 million of residential mortgage loans in nonaccrual status for which there was no related allowance for credit losses at September 30, 2020.
Current period investment income on mortgage loans in nonaccrual status was $1 million for the nine months ended September 30, 2020.
Modified Mortgage Loans by Portfolio Segment
Under certain circumstances, modifications are granted to nonperforming mortgage loans. Each modification is evaluated to determine if a TDR has occurred. A modification is a TDR when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the amount of debt owed, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company did not have a significant amount of mortgage loans modified in a troubled debt restructuring during the nine months ended September 30, 2020.
19
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Short-term modifications made on a good faith basis to borrowers who were not more than 30 days past due at December 31, 2019 and in response to the COVID-19 pandemic are not considered TDRs.
Other Invested Assets
Over 95% of other invested assets is comprised of freestanding derivatives with positive estimated fair values. See Note 5 for information about freestanding derivatives with positive estimated fair values. Other invested assets also includes tax credit and renewable energy partnerships, leveraged leases and Federal Home Loan Bank stock.
Leveraged Leases
The carrying value of leveraged leases at September 30, 2020 and December 31, 2019 was $51 million and $64 million, respectively, net of allowance for credit losses of $13 million and $0, respectively. Rental receivables are generally due in periodic installments. The payment periods for leveraged leases generally range from one to 13 years. For rental receivables, the primary credit quality indicator is whether the rental receivable is performing or nonperforming, which is assessed monthly. Nonperforming rental receivables are generally defined as those that are 90 days or more past due. At both September 30, 2020 and December 31, 2019, all leveraged leases were performing.
Net Unrealized Investment Gains (Losses)
Unrealized investment gains (losses) on fixed maturity securities and the effect on DAC, VOBA, deferred sales inducements (“DSI”) and future policy benefits, that would result from the realization of the unrealized gains (losses), are included in net unrealized investment gains (losses) in AOCI.
The components of net unrealized investment gains (losses), included in AOCI, were as follows at:
September 30, 2020December 31, 2019
(In millions)
Fixed maturity securities$11,281 $6,957 
Derivatives464 245 
Other(17)(13)
Subtotal11,728 7,189 
Amounts allocated from:
Future policy benefits(4,376)(2,692)
DAC, VOBA and DSI(482)(341)
Subtotal(4,858)(3,033)
Deferred income tax benefit (expense)(1,443)(873)
Net unrealized investment gains (losses)$5,427 $3,283 
The changes in net unrealized investment gains (losses) were as follows:
Nine Months Ended September 30, 2020
(In millions)
Balance at December 31, 2019$3,283 
Unrealized investment gains (losses) during the period4,539 
Unrealized investment gains (losses) relating to:
Future policy benefits(1,684)
DAC, VOBA and DSI(141)
Deferred income tax benefit (expense)(570)
Balance at September 30, 2020$5,427 
Change in net unrealized investment gains (losses)$2,144 
20
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Concentrations of Credit Risk
There were no investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, at both September 30, 2020 and December 31, 2019.
Securities Lending
Elements of the securities lending program are presented below at:
September 30, 2020December 31, 2019
(In millions)
Securities on loan: (1)
Amortized cost$2,037 $2,031 
Estimated fair value$3,531 $2,996 
Cash collateral received from counterparties (2)$3,625 $3,074 
Securities collateral received from counterparties (3)$6 $— 
Reinvestment portfolio — estimated fair value$3,764 $3,174 
_______________
(1)Included within fixed maturity securities.
(2)Included within payables for collateral under securities loaned and other transactions.
(3)Securities collateral received from counterparties is not reported on the consolidated balance sheets and may not be sold or re-pledged unless the counterparty is in default.
The cash collateral liability by loaned security type and remaining tenor of the agreements were as follows at:
September 30, 2020December 31, 2019
Open (1)1 Month or Less1 to 6 MonthsTotalOpen (1)1 Month or Less1 to 6 MonthsTotal
(In millions)
U.S. government and agency$1,229 $1,801 $593 $3,623 $1,279 $1,094 $701 $3,074 
Foreign corporate2 — — 2 — — — — 
Total$1,231 $1,801 $593 $3,625 $1,279 $1,094 $701 $3,074 
_______________
(1)The related loaned security could be returned to the Company on the next business day which would require the Company to immediately return the cash collateral.
If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell securities to meet the return obligation, it may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than what otherwise would have been realized under normal market conditions, or both. The estimated fair value of the securities on loan related to the cash collateral on open at September 30, 2020 was $1.2 billion, primarily U.S. government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement.
The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including agency RMBS, ABS, U.S. and foreign corporate securities, non-agency RMBS and U.S. government and agency securities) with 63% invested in agency RMBS, cash and cash equivalents and U.S. government and agency securities at September 30, 2020. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company.
21
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Invested Assets on Deposit, Held in Trust and Pledged as Collateral
Invested assets on deposit, held in trust and pledged as collateral at estimated fair value were as follows at:
September 30, 2020December 31, 2019
(In millions)
Invested assets on deposit (regulatory deposits) (1)$10,061 $9,349 
Invested assets held in trust (reinsurance agreements) (2)5,518 4,561 
Invested assets pledged as collateral (3)5,608 3,641 
Total invested assets on deposit, held in trust and pledged as collateral$21,187 $17,551 
_______________
(1)The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $83 million and $69 million of the assets on deposit represents restricted cash and cash equivalents at September 30, 2020 and December 31, 2019, respectively.
(2)The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions, of which $83 million and $124 million of the assets held in trust balance represents restricted cash and cash equivalents at September 30, 2020 and December 31, 2019, respectively.
(3)The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 3 of the Notes to the Consolidated Financial Statements included in the 2019 Annual Report) and derivative transactions (see Note 5).
See “— Securities Lending” for information regarding securities on loan.
Variable Interest Entities
The Company has invested in legal entities that are variable interest entities (“VIEs”). VIEs are consolidated when the investor is the primary beneficiary. A primary beneficiary is the variable interest holder in a VIE with both the power to (i) direct the activities of the VIE that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
There were no material VIEs for which the Company has concluded that it is the primary beneficiary at either September 30, 2020 or December 31, 2019.
The carrying amount and maximum exposure to loss related to the VIEs for which the Company has concluded that it holds a variable interest, but is not the primary beneficiary, were as follows at:
 September 30, 2020December 31, 2019
 Carrying
Amount		Maximum
Exposure
to Loss		Carrying
Amount		Maximum
Exposure
to Loss
 (In millions)
Fixed maturity securities$13,446 $12,393 $13,094 $12,454 
Limited partnerships and LLCs2,083 3,351 1,907 3,080 
Total$15,529 $15,744 $15,001 $15,534 






22
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
The Company’s investments in unconsolidated VIEs are described below.
Fixed Maturity Securities
The Company invests in U.S. corporate bonds, foreign corporate bonds, and Structured Securities issued by VIEs. The Company is not obligated to provide any financial or other support to these VIEs, other than the original investment. The Company’s involvement with these entities is limited to that of a passive investor. The Company has no unilateral right to appoint or remove the servicer, special servicer, or investment manager, which are generally viewed as having the power to direct the activities that most significantly impact the economic performance of the VIE, nor does the Company function in any of these roles. The Company does not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity; as a result, the Company has determined it is not the primary beneficiary, or consolidator, of the VIE. The Company’s maximum exposure to loss on these fixed maturity securities is limited to the amortized cost of these investments. See “— Fixed Maturity Securities Available-for-sale” for information on these securities.
Limited Partnerships and LLCs
The Company holds investments in certain limited partnerships and LLCs which are VIEs. These ventures include limited partnerships, LLCs, private equity funds, hedge funds, and to a lesser extent tax credit and renewable energy partnerships. The Company is not considered the primary beneficiary, or consolidator, when its involvement takes the form of a limited partner interest and is restricted to a role of a passive investor, as a limited partner’s interest does not provide the Company with any substantive kick-out or participating rights, nor does it provide the Company with the power to direct the activities of the fund. The Company’s maximum exposure to loss on these investments is limited to: (i) the amount invested in debt or equity of the VIE and (ii) commitments to the VIE, as described in Note 10.
Net Investment Income
The components of net investment income were as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Investment income:
Fixed maturity securities$676 $665 $2,021 $1,997 
Equity securities1 2 4 6 
Mortgage loans166 172 498 507 
Policy loans15 18 40 51 
Limited partnerships and LLCs (1)155 79 48 175 
Cash, cash equivalents and short-term investments7 30 44 67 
Other14 12 39 31 
Total investment income1,034 978 2,694 2,834 
Less: Investment expenses38 50 130 153 
Net investment income$996 $928 $2,564 $2,681 
_______________
(1)Includes net investment income pertaining to other limited partnership interests of $153 million and $34 million for the three months and nine months ended September 30, 2020, respectively, and $67 million and $143 million for the three months and nine months ended September 30, 2019, respectively.
23
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Net Investment Gains (Losses)
Components of Net Investment Gains (Losses)
The components of net investment gains (losses) were as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Fixed maturity securities $1 $28 $(26)$81 
Equity securities4 3 (3)14 
Mortgage loans3 (1)(23)(8)
Limited partnerships and LLCs(1)(3)(4)(8)
Other(2)— 8 — 
Total net investment gains (losses)$5 $27 $(48)$79 
Sales or Disposals of Fixed Maturity Securities
Investment gains and losses on sales of securities are determined on a specific identification basis. Proceeds from sales or disposals of fixed maturity securities and the components of fixed maturity securities net investment gains (losses) were as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Proceeds$897 $1,628 $2,168 $8,586 
Gross investment gains$30 $45 $62 $218 
Gross investment losses(29)(17)(72)(137)
Net investment gains (losses)$1 $28 $(10)$81 
5. Derivatives
Accounting for Derivatives
See Note 1 of the Notes to the Consolidated Financial Statements included in the 2019 Annual Report for a description of the Company’s accounting policies for derivatives and Note 8 for information about the fair value hierarchy for derivatives.
Derivative Strategies
Types of Derivative Instruments and Derivative Strategies
The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to minimize its exposure to various market risks. Commonly used derivative instruments include, but are not necessarily limited to:
•Interest rate derivatives: swaps, caps, swaptions and forwards;
•Foreign currency exchange rate derivatives: forwards and swaps;
•Equity derivatives: options, total return swaps and variance swaps; and
•Credit derivatives: single and index reference credit default swaps.
For detailed information on these contracts and the related strategies, see Note 7 of the Notes to the Consolidated Financial Statements included in the 2019 Annual Report.
24
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)
Primary Risks Managed by Derivatives
The primary underlying risk exposure, gross notional amount and estimated fair value of derivatives held were as follows at:
September 30, 2020December 31, 2019
Primary Underlying Risk ExposureGross
Notional
Amount		Estimated Fair ValueGross
Notional
Amount		Estimated Fair Value
AssetsLiabilitiesAssetsLiabilities
(In millions)
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate forwardsInterest rate$330 $90 $— $420 $22 $— 
Foreign currency swapsForeign currency exchange rate2,808 314 19 2,765 190 27 
Total qualifying hedges3,138 404 19 3,185 212 27 
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swapsInterest rate3,015 707 24 7,559 878 29 
Interest rate capsInterest rate2,350 1 — 3,350 2 — 
Interest rate optionsInterest rate 22,570 1,481 178 29,750 782 187 
Interest rate forwardsInterest rate7,332 1,179 24 5,418 94 114 
Foreign currency swapsForeign currency exchange rate1,002 141 16 1,051 96 15 
Foreign currency forwardsForeign currency exchange rate157 — 2 138 — 1 
Credit default swaps — purchasedCredit18 — — 18 — — 
Credit default swaps — writtenCredit1,793 27 1 1,635 36 — 
Equity index optionsEquity market37,493 815 995 51,509 850 1,728 
Equity variance swapsEquity market1,098 13 22 2,136 69 69 
Equity total return swapsEquity market12,997 63 222 7,723 2 367 
Total non-designated or non-qualifying derivatives
89,825 4,427 1,484 110,287 2,809 2,510 
Embedded derivatives:
Ceded guaranteed minimum income benefits
OtherN/A321 — N/A217 — 
Direct index-linked annuitiesOtherN/A— 2,256 N/A— 2,253 
Direct guaranteed minimum benefits
OtherN/A— 3,853 N/A— 1,656 
Assumed index-linked annuitiesOtherN/A— 340 N/A— 339 
Total embedded derivativesN/A321 6,449 N/A217 4,248 
Total$92,963 $5,152 $7,952 $113,472 $3,238 $6,785 
Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both September 30, 2020 and December 31, 2019. The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and generally do not qualify for hedge accounting because they do not meet the criteria required under portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities and generally do not qualify for hedge accounting because they do not meet the criteria of being “highly effective” as outlined in ASC 815; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income; and (iv) written credit default swaps that are used to create synthetic credit investments and that do not qualify for hedge accounting because they do not involve a hedging relationship.
25
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)
The amount and location of gains (losses), including earned income, recognized for derivatives and gains (losses) pertaining to hedged items presented in net derivative gains (losses) were as follows:
Net Derivative Gains (Losses) Recognized for DerivativesNet Derivative Gains (Losses) Recognized for Hedged ItemsNet Investment IncomeAmount of Gains (Losses) Deferred in AOCI
(In millions)
Three Months Ended September 30, 2020
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives$— $— $1 $(1)
Foreign currency exchange rate derivatives10 (3)8 (184)
Total cash flow hedges10 (3)9 (185)
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives(435)— — — 
Foreign currency exchange rate derivatives(50)(3)— — 
Credit derivatives4 — — — 
Equity derivatives(752)— — — 
Embedded derivatives(628)— — — 
Total non-qualifying hedges(1,861)(3)— — 
Total$(1,851)$(6)$9 $(185)
Three Months Ended September 30, 2019
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives$— $— $1 $51 
Foreign currency exchange rate derivatives— — 9 109 
Total cash flow hedges— — 10 160 
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives1,657 — — — 
Foreign currency exchange rate derivatives49 (3)— — 
Credit derivatives2 — — — 
Equity derivatives(18)— — — 
Embedded derivatives(630)— — — 
Total non-qualifying hedges1,060 (3)— — 
Total$1,060 $(3)$10 $160 
26
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)
Net Derivative Gains (Losses) Recognized for DerivativesNet Derivative Gains (Losses) Recognized for Hedged ItemsNet Investment IncomeAmount of Gains (Losses) Deferred in AOCI
(In millions)
Nine Months Ended September 30, 2020
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives$1 $— $2 $92 
Foreign currency exchange rate derivatives13 (6)29 143 
Total cash flow hedges14 (6)31 235 
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives4,321 — — — 
Foreign currency exchange rate derivatives57 (12)— — 
Credit derivatives1 — — — 
Equity derivatives(393)— — — 
Embedded derivatives(1,590)— — — 
Total non-qualifying hedges2,396 (12)— — 
Total$2,410 $(18)$31 $235 
Nine Months Ended September 30, 2019
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives$28 $— $2 $51 
Foreign currency exchange rate derivatives19 (23)26 150 
Total cash flow hedges47 (23)28 201 
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives2,906 — — — 
Foreign currency exchange rate derivatives71 (6)— — 
Credit derivatives32 — — — 
Equity derivatives(1,808)— — — 
Embedded derivatives(1,316)— — — 
Total non-qualifying hedges(115)(6)— — 
Total$(68)$(29)$28 $201 
At September 30, 2020 and December 31, 2019, the balance in AOCI associated with cash flow hedges was $464 million and $245 million, respectively.
Credit Derivatives
In connection with synthetically created credit investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation.
27
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)
The estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps were as follows at:
September 30, 2020December 31, 2019
Rating Agency Designation of Referenced
Credit Obligations (1)		Estimated
Fair Value
of Credit
Default
Swaps		Maximum
Amount of
Future
Payments under
Credit Default
Swaps		Weighted
Average
Years to
Maturity (2)		Estimated
Fair Value
of Credit
Default
Swaps		Maximum
Amount of
Future
Payments under
Credit Default
Swaps		Weighted
Average
Years to
Maturity (2)
(Dollars in millions)
Aaa/Aa/A$8 $879 2.5$11 $615 2.5
Baa18 914 5.525 1,020 5.1
Total$26 $1,793 4.0$36 $1,635 4.1
_______________
(1)The Company has written credit protection on both single name and index references. The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s, S&P and Fitch. If no rating is available from a rating agency, then an internally developed rating is used.
(2)The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.
Counterparty Credit Risk
The Company may be exposed to credit-related losses in the event of counterparty nonperformance on derivative instruments. Generally, the credit exposure is the fair value at the reporting date less any collateral received from the counterparty.
The Company manages its credit risk by: (i) entering into derivative transactions with creditworthy counterparties governed by master netting agreements; (ii) trading through regulated exchanges and central clearing counterparties; (iii) obtaining collateral, such as cash and securities, when appropriate; and (iv) setting limits on single party credit exposures which are subject to periodic management review.
See Note 6 for a description of the impact of credit risk on the valuation of derivatives.
The estimated fair values of net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
Gross Amounts Not Offset on the Consolidated Balance Sheets
Gross Amount RecognizedFinancial Instruments (1)Collateral Received/Pledged (2)Net AmountSecurities Collateral Received/Pledged (3)Net Amount After Securities Collateral
(In millions)
September 30, 2020
Derivative assets$4,861 $(1,068)$(3,159)$634 $(625)$9 
Derivative liabilities $1,495 $(1,068)$— $427 $(426)$1 
December 31, 2019
Derivative assets$3,062 $(1,458)$(1,115)$489 $(488)$1 
Derivative liabilities $2,522 $(1,458)$— $1,064 $(1,061)$3 
_______________
(1)Represents amounts subject to an enforceable master netting agreement or similar agreement.
(2)The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreement.
28
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)
(3)Securities collateral received from counterparties is not reported on the consolidated balance sheets and may not be sold or re-pledged unless the counterparty is in default. Amounts do not include excess of collateral pledged or received.
The Company’s collateral arrangements generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the amount owed by that counterparty reaches a minimum transfer amount. Certain of these arrangements also include credit-contingent provisions which permit the party with positive fair value to terminate the derivative at the current fair value or demand immediate full collateralization from the party in a net liability position, in the event that the financial strength or credit rating of the party in a net liability position falls below a certain level.
The aggregate estimated fair values of derivatives in a net liability position containing such credit-contingent provisions and the aggregate estimated fair value of assets posted as collateral for such instruments were as follows at:
September 30, 2020December 31, 2019
(In millions)
Estimated fair value of derivatives in a net liability position (1)$427 $1,064 
Estimated Fair Value of Collateral Provided (2):
Fixed maturity securities$691 $1,473 
_______________
(1)After taking into consideration the existence of netting agreements.
(2)Substantially all of the Company’s collateral arrangements provide for daily posting of collateral for the full value of the derivative contract. As a result, if the credit-contingent provisions of derivative contracts in a net liability position were triggered, minimal additional assets would be required to be posted as collateral or needed to settle the instruments immediately.
29
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value
Considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.
Recurring Fair Value Measurements
The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy, are presented in the tables below. Investments that do not have a readily determinable fair value and are measured at net asset value (or equivalent) as a practical expedient to estimated fair value are excluded from the fair value hierarchy.
September 30, 2020
Fair Value HierarchyTotal Estimated
Fair Value
Level 1Level 2Level 3
(In millions)
Assets
Fixed maturity securities:
U.S. corporate$— $35,207 $699 $35,906 
Foreign corporate— 10,281 379 10,660 
RMBS— 8,449 — 8,449 
U.S. government and agency1,849 7,086 — 8,935 
CMBS— 6,418 7 6,425 
State and political subdivision— 4,429 — 4,429 
ABS— 2,640 74 2,714 
Foreign government— 1,820 — 1,820 
Total fixed maturity securities1,849 76,330 1,159 79,338 
Equity securities15 99 3 117 
Short-term investments3,019 1,210 10 4,239 
Derivative assets: (1)
Interest rate— 3,458 — 3,458 
Foreign currency exchange rate— 438 17 455 
Credit— 18 9 27 
Equity market— 878 13 891 
Total derivative assets— 4,792 39 4,831 
Embedded derivatives within asset host contracts (2)— — 321 321 
Separate account assets153 103,028 3 103,184 
Total assets$5,036 $185,459 $1,535 $192,030 
Liabilities
Derivative liabilities: (1)
Interest rate$— $226 $— $226 
Foreign currency exchange rate— 37 — 37 
Credit— — 1 1 
Equity market— 1,216 23 1,239 
Total derivative liabilities— 1,479 24 1,503 
Embedded derivatives within liability host contracts (2)— — 6,449 6,449 
Total liabilities$— $1,479 $6,473 $7,952 
30
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
December 31, 2019
Fair Value HierarchyTotal Estimated
Fair Value
Level 1Level 2Level 3
(In millions)
Assets
Fixed maturity securities:
U.S. corporate$— $30,831 $329 $31,160 
Foreign corporate— 9,712 132 9,844 
RMBS— 9,074 44 9,118 
U.S. government and agency1,636 5,760 — 7,396 
CMBS— 5,755 — 5,755 
State and political subdivision— 3,984 73 4,057 
ABS— 1,882 73 1,955 
Foreign government— 1,751 — 1,751 
Total fixed maturity securities1,636 68,749 651 71,036 
Equity securities14 125 8 147 
Short-term investments1,271 682 5 1,958 
Derivative assets: (1)
Interest rate— 1,778 — 1,778 
Foreign currency exchange rate— 281 5 286 
Credit— 25 11 36 
Equity market— 850 71 921 
Total derivative assets— 2,934 87 3,021 
Embedded derivatives within asset host contracts (2)— — 217 217 
Separate account assets180 106,924 3 107,107 
Total assets$3,101 $179,414 $971 $183,486 
Liabilities
Derivative liabilities: (1)
Interest rate$— $330 $— $330 
Foreign currency exchange rate— 43 — 43 
Equity market— 2,093 71 2,164 
Total derivative liabilities— 2,466 71 2,537 
Embedded derivatives within liability host contracts (2)— — 4,248 4,248 
Total liabilities$— $2,466 $4,319 $6,785 
_______________
(1)Derivative assets are presented within other invested assets on the consolidated balance sheets and derivative liabilities are presented within other liabilities on the consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the consolidated balance sheets.
(2)Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables and other invested assets on the consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances on the consolidated balance sheets.
31
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
Valuation Controls and Procedures
The Company monitors and provides oversight of valuation controls and policies for securities, mortgage loans and derivatives, which are primarily executed by its valuation service providers. The valuation methodologies used to determine fair values prioritize the use of observable market prices and market-based parameters and determines that judgmental valuation adjustments, when applied, are based upon established policies and are applied consistently over time. The valuation methodologies for securities, mortgage loans and derivatives are reviewed on an ongoing basis and revised when necessary. In addition, the Chief Accounting Officer periodically reports to the Audit Committee of Brighthouse Financial’s Board of Directors regarding compliance with fair value accounting standards.
The fair value of financial assets and financial liabilities is based on quoted market prices, where available. Prices received are assessed to determine if they represent a reasonable estimate of fair value. Several controls are performed, including certain monthly controls, which include, but are not limited to, analysis of portfolio returns to corresponding benchmark returns, comparing a sample of executed prices of securities sold to the fair value estimates, reviewing the bid/ask spreads to assess activity, comparing prices from multiple independent pricing services and ongoing due diligence to confirm that independent pricing services use market-based parameters. The process includes a determination of the observability of inputs used in estimated fair values received from independent pricing services or brokers by assessing whether these inputs can be corroborated by observable market data. Independent non-binding broker quotes, also referred to herein as “consensus pricing,” are used for a non-significant portion of the portfolio. Prices received from independent brokers are assessed to determine if they represent a reasonable estimate of fair value by considering such pricing relative to the current market dynamics and current pricing for similar financial instruments.
A formal process is also applied to challenge any prices received from independent pricing services that are not considered representative of estimated fair value. If prices received from independent pricing services are not considered reflective of market activity or representative of estimated fair value, independent non-binding broker quotations are obtained. If obtaining an independent non-binding broker quotation is unsuccessful, the last available price will be used.
Additional controls are performed, such as, balance sheet analytics to assess reasonableness of period to period pricing changes, including any price adjustments. Price adjustments are applied if prices or quotes received from independent pricing services or brokers are not considered reflective of market activity or representative of estimated fair value. The Company did not have significant price adjustments during the nine months ended September 30, 2020.
Determination of Fair Value
Fixed Maturity Securities
The fair values for actively traded marketable bonds, primarily U.S. government and agency securities, are determined using the quoted market prices and are classified as Level 1 assets. For fixed maturity securities classified as Level 2 assets, fair values are determined using either a market or income approach and are valued based on a variety of observable inputs as described below.
U.S. corporate and foreign corporate securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, benchmark yields, spreads off benchmark yields, new issuances, issuer rating, trades of identical or comparable securities, or duration. Privately-placed securities are valued using the additional key inputs: market yield curve, call provisions, observable prices and spreads for similar public or private securities that incorporate the credit quality and industry sector of the issuer, and delta spread adjustments to reflect specific credit-related issues.
U.S. government and agency, state and political subdivision and foreign government securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, benchmark U.S. Treasury yield or other yields, spread off the U.S. Treasury yield curve for the identical security, issuer ratings and issuer spreads, broker-dealer quotes, and comparable securities that are actively traded.
32
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
Structured Securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, spreads for actively traded securities, spreads off benchmark yields, expected prepayment speeds and volumes, current and forecasted loss severity, ratings, geographic region, weighted average coupon and weighted average maturity, average delinquency rates and debt-service coverage ratios. Other issuance-specific information is also used, including, but not limited to; collateral type, structure of the security, vintage of the loans, payment terms of the underlying asset, payment priority within tranche, and deal performance.
Equity Securities and Short-term Investments
The fair value for actively traded equity securities and short-term investments are determined using quoted market prices and are classified as Level 1 assets. For financial instruments classified as Level 2 assets or liabilities, fair values are determined using a market approach and are valued based on a variety of observable inputs as described below.
Equity securities and short-term investments: Fair value is determined using third-party commercial pricing services, with the primary input being quoted prices in markets that are not active.
Derivatives
Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are bilateral contracts between two counterparties (“OTC-bilateral”).
The fair values for exchange-traded derivatives are determined using the quoted market prices and are classified as Level 1 assets. For OTC-bilateral derivatives and OTC-cleared derivatives classified as Level 2 assets or liabilities, fair values are determined using the income approach. Valuations of non-option-based derivatives utilize present value techniques, whereas valuations of option-based derivatives utilize option pricing models which are based on market standard valuation methodologies and a variety of observable inputs.
The significant inputs to the pricing models for most OTC-bilateral and OTC-cleared derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. Certain OTC-bilateral and OTC-cleared derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and management believes they are consistent with what other market participants would use when pricing such instruments.
Most inputs for OTC-bilateral and OTC-cleared derivatives are mid-market inputs but, in certain cases, liquidity adjustments are made when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income.
The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all OTC-bilateral and OTC-cleared derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its OTC-bilateral and OTC-cleared derivatives using standard swap curves which may include a spread to the risk-free rate, depending upon specific collateral arrangements. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with similar collateral arrangements. As the Company and its significant derivative counterparties generally execute trades at such pricing levels and hold sufficient collateral, additional credit risk adjustments are not currently required in the valuation process. The Company’s ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. An evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period.
Embedded Derivatives
Embedded derivatives principally include certain direct and ceded variable annuity guarantees and equity crediting rates within index-linked annuity contracts. Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income.
33
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
The Company issues certain variable annuity products with guaranteed minimum benefits. GMWBs, GMABs and certain GMIBs contain embedded derivatives, which are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets.
The Company determines the fair value of these embedded derivatives by estimating the present value of projected future benefits minus the present value of projected future fees using actuarial and capital market assumptions including expectations of policyholder behavior. The calculation is based on in-force business and is performed using standard actuarial valuation software which projects future cash flows from the embedded derivative over multiple risk neutral stochastic scenarios using observable risk-free rates. The percentage of fees included in the initial fair value measurement is not updated in subsequent periods.
Capital market assumptions, such as risk-free rates and implied volatilities, are based on market prices for publicly-traded instruments to the extent that prices for such instruments are observable. Implied volatilities beyond the observable period are extrapolated based on observable implied volatilities and historical volatilities. Actuarial assumptions, including mortality, lapse, withdrawal and utilization, are unobservable and are reviewed at least annually based on actuarial studies of historical experience.
The valuation of these guarantee liabilities includes nonperformance risk adjustments and adjustments for a risk margin related to non-capital market inputs. The nonperformance adjustment is determined by taking into consideration publicly available information relating to spreads in the secondary market for BHF’s debt. These observable spreads are then adjusted to reflect the priority of these liabilities and claims-paying ability of the issuing insurance subsidiaries as compared to BHF’s overall financial strength.
Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees.
The Company issues and assumes through reinsurance index-linked annuities which allow the policyholder to participate in returns from equity indices. The crediting rates associated with these features are embedded derivatives which are measured at estimated fair value separately from the host fixed annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets.
The estimated fair value of crediting rates associated with index-linked annuities is determined using a combination of an option pricing model and an option-budget approach. The valuation of these embedded derivatives also includes the establishment of a risk margin, as well as changes in nonperformance risk.
Transfers Into or Out of Level 3:
Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.
34
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)
Certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) were as follows at:
September 30, 2020December 31, 2019Impact of
Increase in Input
on Estimated
Fair Value
Valuation TechniquesSignificant
Unobservable Inputs		RangeRange
Embedded derivatives
Direct, assumed and ceded guaranteed minimum benefits •Option pricing techniques•Mortality rates0.03%-12.13%0.02%-11.31%Decrease (1)
•Lapse rates0.25%-15.00%0.25%-16.00%Decrease (2)
•Utilization rates0.00%-25.00%0.00%-25.00%Increase (3)
•Withdrawal rates0.25%-10.00%0.25%-10.00%(4)
•Long-term equity volatilities16.66%-22.21%16.24%-21.65%Increase (5)
•Nonperformance risk spread0.99%-2.39%0.54%-1.99%Decrease (6)
_______________
(1)Mortality rates vary by age and by demographic characteristics such as gender. The range shown reflects the mortality rate for policyholders between 35 and 90 years old, which represents the majority of the business with living benefits. Mortality rate assumptions are set based on company experience and include an assumption for mortality improvement.
(2)The range shown reflects base lapse rates for major product categories for duration 1-20, which represents majority of business with living benefit riders. Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in-the-money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies.
(3)The utilization rate assumption estimates the percentage of contract holders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible in a given year. The range shown represents the floor and cap of the GMIB dynamic election rates across varying levels of in-the-money. For lifetime withdrawal guarantee riders, the assumption is that everyone will begin withdrawals once account value reaches zero which is equivalent to a 100% utilization rate. Utilization rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder.
(4)The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value.
(5)Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.
(6)Nonperformance risk spread varies by duration. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative.
The Company does not develop unobservable inputs used in measuring fair value for all other assets and liabilities classified within Level 3; therefore, these are not included in the table above. The other Level 3 assets and liabilities primarily included fixed maturity securities and derivatives. For fixed maturity securities valued based on non-binding broker quotes, an increase (decrease) in credit spreads would result in a higher (lower) fair value. For derivatives valued based on third-party pricing models, an increase (decrease) in credit spreads would generally result in a higher (lower) fair value.
35
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
The changes in assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3) were summarized as follows:
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Fixed Maturity Securities
Corporate (1)Structured SecuritiesState and
Political
Subdivision		Equity
Securities		Short-term
Investments		Net
Derivatives (2)		Net Embedded
Derivatives (3)		Separate
Account Assets (4)
(In millions)
Three Months Ended September 30, 2020
Balance, beginning of period
$894 $173 $— $4 $— $20 $(5,326)$3 
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)
(1)— — (1)— 5 (628)— 
Total realized/unrealized gains (losses) included in AOCI
7 1 — — — (10)— — 
Purchases (7)199 11 — — 10 — — — 
Sales (7)(64)(1)— — — — — — 
Issuances (7)— — — — — — — — 
Settlements (7)— — — — — — (174)— 
Transfers into Level 3 (8)185 — — — — — — — 
Transfers out of Level 3 (8)(142)(103)— — — — — — 
Balance, end of period$1,078 $81 $— $3 $10 $15 $(6,128)$3 
Three Months Ended September 30, 2019
Balance, beginning of period
$765 $108 $74 $4 $6 $(134)$(3,121)$— 
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)
— — — — — (2)(630)— 
Total realized/unrealized gains (losses) included in AOCI
— 1 — — — 3 — — 
Purchases (7)118 61 — — — — — — 
Sales (7)(22)(6)(1)— (6)— — — 
Issuances (7)— — — — — — — — 
Settlements (7)— — — — — — (219)— 
Transfers into Level 3 (8)49 29 — — — — — — 
Transfers out of Level 3 (8)(84)(18)— — — 2 — — 
Balance, end of period$826 $175 $73 $4 $— $(131)$(3,970)$— 
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2020 (9)
$— $— $— $— $— $5 $(668)$— 
Changes in unrealized gains (losses) included in other comprehensive income for the instruments still held at September 30, 2020 (9)
$8 $1 $— $— $— $(10)$— $— 
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2019 (9)
$— $— $— $— $— $(2)$(705)$— 


36
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Fixed Maturity Securities
Corporate (1)Structured SecuritiesState and
Political
Subdivision		Equity
Securities		Short-term
Investments		Net
Derivatives (2)		Net Embedded
Derivatives (3)		Separate
Account Assets (4)
(In millions)
Nine Months Ended September 30, 2020
Balance, beginning of period
$461 $117 $73 $8 $5 $16 $(4,031)$3 
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)
(2)— — — — 3 (1,590)— 
Total realized/unrealized gains (losses) included in AOCI
12 1 — — — 10 — — 
Purchases (7)509 34 — — 10 — — — 
Sales (7)(103)(2)— — (5)(14)— — 
Issuances (7)— — — — — — — — 
Settlements (7)— — — — — — (507)— 
Transfers into Level 3 (8)285 9 — — — — — — 
Transfers out of Level 3 (8)(84)(78)(73)(5)— — — — 
Balance, end of period$1,078 $81 $— $3 $10 $15 $(6,128)$3 
Nine Months Ended September 30, 2019
Balance, beginning of period
$732 $173 $74 $3 $— $(122)$(1,998)$1 
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)
— 1 — — — (10)(1,316)— 
Total realized/unrealized gains (losses) included in AOCI
11 3 — — — 5 — — 
Purchases (7)179 75 — — — — — — 
Sales (7)(78)(24)(1)— — — — (1)
Issuances (7)— — — — — — — — 
Settlements (7)— — — — — — (656)— 
Transfers into Level 3 (8)147 92 — 1 — — — — 
Transfers out of Level 3 (8)(165)(145)— — — (4)— — 
Balance, end of period$826 $175 $73 $4 $— $(131)$(3,970)$— 
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2020 (9)
$(1)$— $— $— $— $(11)$(1,687)$— 
Changes in unrealized gains (losses) included in other comprehensive income for the instruments still held at September 30, 2020 (9)
$12 $2 $— $— $— $10 $— $— 
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2019 (9)
$— $1 $— $— $— $(11)$(1,531)$— 
_______________
(1)Comprised of U.S. and foreign corporate securities.
(2)Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.
(3)Embedded derivative assets and liabilities are presented net for purposes of the rollforward.
(4)Investment performance related to separate account assets is fully offset by corresponding amounts credited to contract holders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income (loss). For the purpose of this disclosure, these changes are presented within net investment gains (losses).
37
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
(5)Amortization of premium/accretion of discount is included within net investment income. Changes in the allowance for credit losses and direct write-offs are charged to net income (loss) on securities are included in net investment gains (losses). Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).
(6)Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.
(7)Items purchased/issued and then sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements.
(8)Gains and losses, in net income (loss) and OCI, are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and then out of Level 3 in the same period are excluded from the rollforward.
(9)Changes in unrealized gains (losses) included in net income (loss) for fixed maturities are reported in either net investment income or net investment gains (losses). Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).
Fair Value of Financial Instruments Carried at Other Than Fair Value
The following tables provide fair value information for financial instruments that are carried on the balance sheet at amounts other than fair value. These tables exclude the following financial instruments: cash and cash equivalents, accrued investment income, payables for collateral under securities loaned and other transactions and those short-term investments that are not securities and therefore are not included in the three level hierarchy table disclosed in the “— Recurring Fair Value Measurements” section. The estimated fair value of the excluded financial instruments, which are primarily classified in Level 2, approximates carrying value as they are short-term in nature such that the Company believes there is minimal risk of material changes in interest rates or credit quality. All remaining balance sheet amounts excluded from the tables below are not considered financial instruments subject to this disclosure.
The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:
September 30, 2020
Fair Value Hierarchy
Carrying
Value		Level 1Level 2Level 3Total
Estimated
Fair Value
(In millions)
Assets
Mortgage loans$15,746 $— $— $16,720 $16,720 
Policy loans$1,289 $— $506 $1,610 $2,116 
Other invested assets$93 $— $81 $12 $93 
Premiums, reinsurance and other receivables$3,088 $— $64 $3,706 $3,770 
Liabilities
Policyholder account balances$17,651 $— $— $18,843 $18,843 
Long-term debt$3,979 $— $4,169 $— $4,169 
Other liabilities$1,136 $— $480 $656 $1,136 
Separate account liabilities$1,207 $— $1,207 $— $1,207 
38
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
December 31, 2019
Fair Value Hierarchy
Carrying
Value		Level 1Level 2Level 3Total
Estimated
Fair Value
(In millions)
Assets
Mortgage loans$15,753 $— $— $16,383 $16,383 
Policy loans$1,292 $— $516 $1,062 $1,578 
Other invested assets$51 $— $39 $12 $51 
Premiums, reinsurance and other receivables$2,224 $— $41 $2,593 $2,634 
Liabilities
Policyholder account balances$15,614 $— $— $15,710 $15,710 
Long-term debt$4,365 $— $3,334 $1,000 $4,334 
Other liabilities$846 $— $191 $655 $846 
Separate account liabilities$1,189 $— $1,189 $— $1,189 
7. Long-term Debt
Senior Notes
During the second quarter of 2020, BHF issued $615 million aggregate principal amount of senior notes due May 2030 (the “2030 Senior Notes”) for aggregate net cash proceeds of $614 million. The 2030 Senior Notes bear interest at a fixed rate of 5.625%, payable semi-annually.
Term Loan Facility
During the second quarter of 2020, BHF used the aggregate net proceeds from the issuances of the 2030 Senior Notes and the Series B Depositary Shares (as defined in Note 8) to repay all outstanding borrowings under its $1.0 billion unsecured term loan facility (the “Term Loan Facility”). On June 2, 2020, BHF terminated the Term Loan Facility without penalty.
Reinsurance Financing Arrangement
On June 11, 2020, Brighthouse Reinsurance Company of Delaware, with the explicit permission of the Delaware Commissioner of Insurance, amended its financing arrangement with a pool of highly rated third-party reinsurers to increase the maximum amount from $10.0 billion to $12.0 billion and to extend the term by two years to 2039. At September 30, 2020, there were no borrowings and there was $10.8 billion of funding available under this financing arrangement.
8. Equity
Preferred Stock
Preferred stock shares authorized, issued and outstanding were as follows at:
September 30, 2020December 31, 2019
Shares AuthorizedShares IssuedShares OutstandingShares AuthorizedShares IssuedShares Outstanding
6.600% Non-Cumulative Preferred Stock, Series A
17,000 17,000 17,000 17,000 17,000 17,000 
6.750% Non-Cumulative Preferred Stock, Series B
16,100 16,100 16,100 — — — 
Not designated99,966,900 — — 99,983,000 — — 
Total100,000,000 33,100 33,100 100,000,000 17,000 17,000 
39
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
8. Equity (continued)
In May 2020, BHF issued depositary shares (the “Series B Depositary Shares”), each representing a 1/1,000th ownership interest in a share of its perpetual 6.750% non-cumulative preferred stock, Series B (the “Series B Preferred Stock”) and in the aggregate representing 16,100 shares of Series B Preferred Stock, with a stated amount of $25,000 per share, for aggregate net cash proceeds of $390 million. Dividends, if declared, will accrue and be payable quarterly, in arrears, at an annual rate of 6.750% on the stated amount per share. In connection with the issuance of the Series B Depositary Shares and the underlying Series B Preferred Stock, BHF incurred $13 million of issuance costs, which have been recorded as a reduction of additional paid-in capital.
The declaration, record and payment dates, as well as per share and aggregate dividend amounts for BHF’s preferred stock by series for the nine months ended September 30, 2020 and 2019 were as follows:
Series ASeries B
Declaration DateRecord DatePayment DatePer ShareAggregatePer ShareAggregate
(In millions, except per share data)
August 17, 2020September 10, 2020September 25, 2020$412.50 $7 $595.31 $10 
May 15, 2020June 10, 2020June 25, 2020412.50 7 — — 
February 14, 2020March 10, 2020March 25, 2020412.50 7 — — 
$1,237.50 $21 $595.31 $10 
August 15, 2019September 10, 2019September 25, 2019$412.50 $7 $— $— 
May 15, 2019June 10, 2019June 25, 2019412.50 7 — — 
$825.00 $14 $— $— 
Common Stock Repurchase Program
On February 6, 2020, BHF authorized the repurchase of up to an additional $500 million of its common stock. Repurchases under this authorization may be made through open market purchases, including pursuant to 10b5-1 plans or pursuant to accelerated stock repurchase plans, or through privately negotiated transactions, from time to time at management’s discretion in accordance with applicable legal requirements. On May 11, 2020, the Company announced that it had temporarily suspended repurchases of its common stock. On August 24, 2020, the Company resumed repurchases of its common stock, as was announced on August 21, 2020.
During the nine months ended September 30, 2020 and 2019, BHF repurchased 15,119,010 and 8,395,371 shares, respectively, of its common stock through open market purchases pursuant to 10b5-1 plans for $376 million and $314 million, respectively. At September 30, 2020, BHF had $177 million remaining under its common stock repurchase program.
40
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
8. Equity (continued)
Accumulated Other Comprehensive Income (Loss)
Information regarding changes in the balances of each component of AOCI was as follows:
Three Months Ended September 30, 2020
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)		Unrealized
Gains (Losses)
on Derivatives		Foreign
Currency
Translation
Adjustments		Defined Benefit Plans AdjustmentTotal
(In millions)
Balance at June 30, 2020$4,517 $500 $(24)$(28)$4,965 
OCI before reclassifications707 (185)9 (2)529 
Deferred income tax benefit (expense)(149)39 (1)— (111)
AOCI before reclassifications, net of income tax5,075 354 (16)(30)5,383 
Amounts reclassified from AOCI8 (11)— — (3)
Deferred income tax benefit (expense)(1)2 — — 1 
Amounts reclassified from AOCI, net of income tax7 (9)— — (2)
Balance at September 30, 2020$5,082 $345 $(16)$(30)$5,381 
Three Months Ended September 30, 2019
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)		Unrealized
Gains (Losses)
on Derivatives		Foreign
Currency
Translation
Adjustments		Defined Benefit Plans AdjustmentTotal
(In millions)
Balance at June 30, 2019$2,564 $181 $(20)$(23)$2,702 
OCI before reclassifications970 160 (3)— 1,127 
Deferred income tax benefit (expense)(204)(33)— — (237)
AOCI before reclassifications, net of income tax3,330 308 (23)(23)3,592 
Amounts reclassified from AOCI(30)(1)— — (31)
Deferred income tax benefit (expense)6 — — — 6 
Amounts reclassified from AOCI, net of income tax(24)(1)— — (25)
Balance at September 30, 2019$3,306 $307 $(23)$(23)$3,567 
Nine Months Ended September 30, 2020
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)		Unrealized
Gains (Losses)
on Derivatives		Foreign
Currency
Translation
Adjustments		Defined Benefit Plans AdjustmentTotal
(In millions)
Balance at December 31, 2019$3,111 $172 $(15)$(28)$3,240 
OCI before reclassifications (2)2,475 235 9 (2)2,717 
Deferred income tax benefit (expense)(520)(49)(10)— (579)
AOCI before reclassifications, net of income tax5,066 358 (16)(30)5,378 
Amounts reclassified from AOCI20 (16)— — 4 
Deferred income tax benefit (expense)(4)3 — — (1)
Amounts reclassified from AOCI, net of income tax16 (13)— — 3 
Balance at September 30, 2020$5,082 $345 $(16)$(30)$5,381 
41
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
8. Equity (continued)
Nine Months Ended September 30, 2019
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)		Unrealized
Gains (Losses)
on Derivatives		Foreign
Currency
Translation
Adjustments		Defined Benefit Plans AdjustmentTotal
(In millions)
Balance at December 31, 2018$576 $187 $(27)$(20)$716 
OCI before reclassifications3,515 201 4 (3)3,717 
Deferred income tax benefit (expense)(738)(42)— — (780)
AOCI before reclassifications, net of income tax3,353 346 (23)(23)3,653 
Amounts reclassified from AOCI(59)(49)— — (108)
Deferred income tax benefit (expense)12 10 — — 22 
Amounts reclassified from AOCI, net of income tax(47)(39)— — (86)
Balance at September 30, 2019$3,306 $307 $(23)$(23)$3,567 
__________________
(1)See Note 4 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI.
(2)Includes $3 million related to the adoption of ASU 2016-13, see Note 1.
Information regarding amounts reclassified out of each component of AOCI was as follows:
AOCI ComponentsAmounts Reclassified from AOCIConsolidated Statements of Operations and Comprehensive Income (Loss) Locations
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Net unrealized investment gains (losses):
Net unrealized investment gains (losses)$1 $31 $(6)$86 Net investment gains (losses)
Net unrealized investment gains (losses)(9)(1)(14)(27)Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax(8)30 (20)59 
Income tax (expense) benefit1 (6)4 (12)
 Net unrealized investment gains (losses), net of income tax(7)24 (16)47 
Unrealized gains (losses) on derivatives - cash flow hedges:
Interest rate swaps— — 1 28 Net derivative gains (losses)
Interest rate swaps1 1 2 2 Net investment income
Foreign currency swaps10 — 13 19 Net derivative gains (losses)
Gains (losses) on cash flow hedges, before income tax11 1 16 49 
Income tax (expense) benefit(2)— (3)(10)
Gains (losses) on cash flow hedges, net of income tax9 1 13 39 
Total reclassifications, net of income tax$2 $25 $(3)$86 
9. Other Revenues and Other Expenses
Other Revenues
The Company has entered into contracts with mutual funds, fund managers, and their affiliates (collectively, the “Funds”) whereby the Company is paid monthly or quarterly fees (“12b-1 fees”) for providing certain services to customers and distributors of the Funds. The 12b-1 fees are generally equal to a fixed percentage of the average daily balance of the customer’s investment in a fund. The percentage is specified in the contract between the Company and the Funds. Payments are generally collected when due and are neither refundable nor able to offset future fees.
To earn these fees, the Company performs services such as responding to phone inquiries, maintaining records, providing information to distributors and shareholders about fund performance and providing training to account managers and sales agents. The passage of time reflects the satisfaction of the Company’s performance obligations to the Funds and is used to recognize revenue associated with 12b-1 fees.
42
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
9. Other Revenues and Other Expenses (continued)
Other revenues consisted primarily of 12b-1 fees of $83 million and $240 million for the three months and nine months ended September 30, 2020, respectively, and $84 million and $251 million for the three months and nine months ended September 30, 2019, respectively, of which substantially all were reported in the Annuities segment.
Other Expenses
Information on other expenses was as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Compensation$85 $76 $247 $238 
Contracted services and other labor costs56 73 202 185 
Transition services agreements37 64 90 196 
Establishment costs19 13 72 85 
Premium and other taxes, licenses and fees11 15 37 35 
Separate account fees118 123 343 365 
Volume related costs, excluding compensation, net of DAC capitalization155 155 445 472 
Interest expense on debt47 49 139 144 
Other52 43 99 104 
Total other expenses$580 $611 $1,674 $1,824 
10. Earnings Per Common Share
The calculation of earnings per common share was as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
 2020201920202019
 (In millions, except share and per share data)
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders$(3,012)$676 $(60)$316 
Weighted average common shares outstanding — basic92,693,188 110,915,416 97,366,447 114,195,767 
Dilutive effect of share-based awards— 612,064 — 546,931 
Weighted average common shares outstanding — diluted92,693,188 111,527,480 97,366,447 114,742,698 
Earnings per common share:
Basic$(32.49)$6.09 $(0.61)$2.77 
Diluted$(32.49)$6.06 $(0.61)$2.75 
For both the three months and nine months ended September 30, 2020, basic loss per common share equaled diluted loss per common share. The diluted shares were not utilized in the per share calculation for this period as the inclusion of such shares would have an antidilutive effect.
For both the three months and nine months ended September 30, 2019, weighted average shares used for calculating diluted earnings per common share excludes 196,492 of out-of-the-money stock options, as the inclusion of these shares would be antidilutive to the earnings per common share calculation due to the average share price for the three and nine months ended September 30, 2019.
43
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
11. Contingencies, Commitments and Guarantees
Contingencies
Litigation
The Company is a defendant in a number of litigation matters. In some of the matters, large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value.
Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law.
The Company establishes liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. It is possible that some matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated at September 30, 2020.
Matters as to Which an Estimate Can Be Made
For some loss contingency matters, the Company is able to estimate a reasonably possible range of loss. For such matters where a loss is believed to be reasonably possible, but not probable, no accrual has been made. As of September 30, 2020, the Company estimates the aggregate range of reasonably possible losses in excess of amounts accrued for these matters to be $0 to $10 million.
Matters as to Which an Estimate Cannot Be Made
For other matters, the Company is not currently able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts, and the progress of settlement negotiations. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation contingencies and updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.
Sales Practices Claims
Over the past several years, the Company has faced claims and regulatory inquiries and investigations, alleging improper marketing or sales of individual life insurance policies, annuities or other products. The Company continues to defend vigorously against the claims in these matters. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices matters.
44
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
11. Contingencies, Commitments and Guarantees (continued)
Cost of Insurance Class Action 
Richard A. Newton v. Brighthouse Life Insurance Company (U.S. District Court, Northern District of Georgia, Atlanta Division, filed May 8, 2020). Plaintiff has filed a purported class action lawsuit against Brighthouse Life Insurance Company. Plaintiff was the owner of a universal life insurance policy issued by Travelers Insurance Company, a predecessor to Brighthouse Life Insurance Company. Plaintiff seeks to certify a class of all persons who own or owned life insurance policies issued where the terms of the life insurance policy provide or provided, among other things, a guarantee that the cost of insurance rates would not be increased by more than a specified percentage in any contract year. Plaintiff alleges, among other things, causes of action for breach of contract, fraud, suppression and concealment, and violation of the Georgia Racketeer Influenced and Corrupt Organizations Act. Plaintiff seeks to recover damages, including punitive damages, interest and treble damages, attorneys’ fees, and injunctive and declaratory relief. Brighthouse Life Insurance Company filed a motion to dismiss in June 2020 and intends to vigorously defend this matter.
Summary
Various litigations, claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, investor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.
It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to previously, large and/or indeterminate amounts, including punitive and treble damages, are sought. Although, in light of these considerations, it is possible that an adverse outcome in certain cases could have a material effect upon the Company’s financial position, based on information currently known by the Company’s management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.
Other Contingencies
As with litigation and regulatory loss contingencies, the Company considers establishing liabilities for certain non-litigation loss contingencies when assertions are made involving disputes or other matters with counterparties to contractual arrangements entered into by the Company, including with third-party vendors. The Company establishes liabilities for such non-litigation loss contingencies when it is probable that a loss will be incurred and the amount of the loss can be reasonably estimated. In matters where it is not probable, but is reasonably possible that a loss will be incurred and the amount of loss can be reasonably estimated, such losses or range of losses are disclosed, and no accrual is made. In the absence of sufficient information to support an assessment of the reasonably possible loss or range of loss, no accrual is made and no loss or range of loss is disclosed.
Disputes have arisen with counterparties in connection with reinsurance arrangements where the Company’s subsidiaries are acting as either the reinsured or the reinsurer. These disputes involve assertions by third parties primarily related to rates, fees and/or reinsured benefit calculations, and in certain of such disputes the counterparty has made a request to arbitrate the dispute.
As of September 30, 2020, the Company estimates the amount of reasonably possible losses in excess of the amounts accrued for certain non-litigation loss contingencies to be up to $50 million, which are primarily associated with reinsurance-related matters. For certain other reinsurance-related matters, the Company is not currently able to estimate the reasonably possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of such loss.
On a quarterly and annual basis, the Company reviews relevant information with respect to non-litigation contingencies and, when applicable, updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.
45
Table of Contents
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
11. Contingencies, Commitments and Guarantees (continued)
Commitments
Mortgage Loan Commitments
The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $271 million and $206 million at September 30, 2020 and December 31, 2019, respectively.
Commitments to Fund Partnership Investments, Bank Credit Facilities and Private Corporate Bond Investments
The Company commits to fund partnership investments and to lend funds under bank credit facilities and private corporate bond investments. The amounts of these unfunded commitments were $1.8 billion at both September 30, 2020 and December 31, 2019.
Guarantees
In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties such that it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third-party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from less than $1 million to $112 million, with a cumulative maximum of $118 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments.
In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company’s interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future.
The Company’s recorded liabilities were $1 million at both September 30, 2020 and December 31, 2019 for indemnities, guarantees and commitments.
46
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations
Page
47
Table of Contents
Introduction
For purposes of this discussion, unless otherwise mentioned or unless the context indicates otherwise, “Brighthouse,” “Brighthouse Financial,” the “Company,” “we,” “our” and “us” refer to Brighthouse Financial, Inc. a corporation incorporated in Delaware in 2016, and its subsidiaries. We use the term “BHF” to refer solely to Brighthouse Financial, Inc., and not to any of its subsidiaries. Until August 4, 2017, BHF was a wholly-owned subsidiary of MetLife, Inc. (together with its subsidiaries and affiliates, “MetLife”). Following this summary is a discussion addressing the consolidated results of operations and financial condition of the Company for the periods indicated. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with (i) the Interim Condensed Consolidated Financial Statements and related notes included elsewhere herein; (ii) our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the U.S. Securities and Exchange Commission (“SEC”) on February 26, 2020 (the “2019 Annual Report”); (iii) our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “First Quarter Form 10-Q”) filed with the SEC on May 11, 2020; (iv) our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 (the “Second Quarter Form 10-Q” and, together with the First Quarter Form 10-Q, the “Quarterly Reports”) filed with the SEC on August 7, 2020 and (v) our current reports on Form 8-K filed in 2020.
Presentation
Prior to discussing our Results of Operations, we present background information and definitions that we believe are useful to understanding the discussion of our financial results. This information precedes the Results of Operations and is most beneficial when read in the sequence presented. A summary of key informational sections is as follows:
•“Executive Summary” provides information regarding our business, segments and results as discussed in the Results of Operations.
•“Industry Trends” discusses updates and changes to a number of trends and uncertainties included in our 2019 Annual Report, as amended or supplemented by our subsequent Quarterly Reports on Form 10-Q, that we believe may materially affect our future financial condition, results of operations or cash flows, including from the worldwide pandemic sparked by the novel coronavirus (the “COVID-19 pandemic”).
•“Summary of Critical Accounting Estimates” explains the most critical estimates and judgments applied in determining our results in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
•“Non-GAAP and Other Financial Disclosures” defines key financial measures presented in the Results of Operations that are not calculated in accordance with GAAP but are used by management in evaluating company and segment performance. As described in this section, adjusted earnings is presented by key business activities which are derived from, but different than, the line items presented in the GAAP statement of operations. This section also refers to certain other terms used to describe our insurance business and financial and operating metrics, but is not intended to be exhaustive.
Certain amounts presented in prior periods within the foregoing discussions of our financial results have been reclassified to conform with the current year presentation.
Executive Summary
We are one of the largest providers of annuity and life insurance products in the United States through multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners.
For operating purposes, we have established three segments: (i) Annuities, (ii) Life and (iii) Run-off, which consists of operations relating to products we are not actively selling and which are separately managed. In addition, we report certain of our results of operations in Corporate & Other.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations, financial condition and cash flows of Brighthouse for the periods indicated. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary — Overview,” and “Business — Segments and Corporate & Other” included in our 2019 Annual Report along with Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information on our segments and Corporate & Other.
48
Table of Contents
Net income (loss) available to shareholders and adjusted earnings, a non-GAAP financial measure, were as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Income (loss) available to shareholders before provision for income tax
$(3,862)$795 $(148)$302 
Less: Provision for income tax expense (benefit)(850)119 (88)(14)
Net income (loss) available to shareholders (1)$(3,012)$676 $(60)$316 
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends
$(921)$(273)$(663)$304 
Less: Provision for income tax expense (benefit)(232)(104)(196)(13)
Adjusted earnings$(689)$(169)$(467)$317 
__________________
(1)We use the term “net income (loss) available to shareholders” to refer to “net income (loss) available to Brighthouse Financial, Inc.’s common shareholders” throughout the results of operations discussions.
For the three months ended September 30, 2020, we had a net loss available to shareholders of $3.0 billion and an adjusted loss of $689 million compared to net income available to shareholders of $676 million and an adjusted loss of $169 million for the three months ended September 30, 2019. Net loss available to shareholders for the three months ended September 30, 2020 primarily reflects an unfavorable impact from our annual actuarial review (“AAR”) and net unfavorable changes in the estimated fair value of our guaranteed minimum living benefits (“GMLB”) riders (“GMLB Riders”) due to higher equity markets, lower interest rates and tightening credit spreads.
For the nine months ended September 30, 2020, we had a net loss available to shareholders of $60 million and an adjusted loss of $467 million compared to net income available to shareholders of $316 million and adjusted earnings of $317 million for the nine months ended September 30, 2019. Net loss available to shareholders for the nine months ended September 30, 2020 was driven primarily by a net unfavorable impact from our AAR, which was largely offset by a favorable impact of declining long-term interest rates on the estimated fair value of the universal life with secondary guarantees (“ULSG”) hedge program.
See “— Non-GAAP and Other Financial Disclosures.” For a detailed discussion of our results see “— Results of Operations.”
See Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements for information regarding the adoption of new accounting pronouncements in 2020.
Administrative System Conversion
As we continue to execute on our strategy to leverage emerging technology and outsource our policy administration functions, during the third quarter of 2020, we completed the conversion of a significant portion of our in-force annuity business to a single third-party service provider. Following the conversion, a number of our customers and distribution partners experienced delays and service interruptions. While these issues have been largely resolved, there can be no assurance that in connection with this or any future conversion we will not incur unanticipated expenses or experience other economic or reputational harm, or be subject to litigation or regulatory investigations and actions, any of which could have a material adverse effect on our business, financial condition, and results of operations. See “Risk Factors — Risks Related to Our Business — The failure of third parties to provide various services, or any failure of the practices and procedures that these third parties use to provide services to us, could have a material adverse effect on our business,” “Risk Factors — General Risks — We may experience difficulty in marketing and distributing products through our distribution channels” and “Risk Factors — Regulatory and Legal Risks — Litigation and regulatory investigations are common in our businesses and may result in significant financial losses and/or harm to our reputation” in our 2019 Annual Report.
Industry Trends
Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we discuss a number of trends and uncertainties that we believe may materially affect our future financial condition, results of operations or cash flows. Where these trends or uncertainties are specific to a particular aspect of our business, we often include such a
49
Table of Contents
discussion under the relevant caption of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, as part of our broader analysis of that area of our business. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends and Uncertainties” included in our 2019 Annual Report, as amended or supplemented by our subsequent Quarterly Reports on Form 10-Q, for a comprehensive discussion of some of the key general trends and uncertainties that have influenced the development of our business and our historical financial performance and that we believe will continue to influence our business and results of operations in the future. In addition, significant changes or updates in certain of these trends and uncertainties are discussed below.
COVID-19 Pandemic
We continue to closely monitor developments related to the COVID-19 pandemic, which has negatively impacted us in certain respects, including as discussed below. At this time, it is not possible to estimate the severity or duration of the pandemic, including the severity, duration and frequency of any additional “waves” of the pandemic or the timetable for the development and implementation, and the efficacy, of any therapeutic treatment or vaccine for COVID-19. It is likewise not possible to predict or estimate the longer-term effects of the pandemic, or any actions taken to contain or address the pandemic, on the economy at large and on our business, results of operations, financial condition and prospects, including the impact on our investment portfolio and our ratings, or the need for us in the future to revisit or revise targets previously provided to the markets and/or aspects of our business model. See “Risk Factors — The ongoing COVID-19 pandemic may materially adversely affect our business, results of operations and financial condition, including capitalization and liquidity” in our First Quarter Form 10-Q.
In March, in response to this extraordinary event, management promptly implemented our business continuity plans, and quickly and successfully shifted all our employees to a work-from-home environment, where they currently remain. Our sales and support teams remain fully operational, and the COVID-19 pandemic has not interrupted our ability to service our distribution partners and customers. Additionally, we are closely monitoring all aspects of our business, including but not limited to, levels of sales and claims activity, policy lapses or surrenders, payments of premiums, sources and uses of liquidity, the valuation of our investments and the performance of our derivatives programs. We have observed varying degrees of impact in these areas, and we have taken prudent and proportionate measures to address such impacts; however, at this time it is impossible to predict if the COVID-19 pandemic will have a material adverse impact on our business, results of operations or financial condition. We continue to closely monitor this evolving situation as we remain focused on ensuring the health and safety of our employees, on supporting our partners and customers as usual and on mitigating potential adverse impacts to our business.
Increased economic uncertainty and increased unemployment resulting from the economic impacts of the COVID-19 pandemic have also impacted sales of certain of our products and have prompted us to take actions to provide relief to customers affected by adverse circumstances due to the COVID-19 pandemic, as previously disclosed in “— Regulatory Developments” in our First Quarter Form 10-Q. While the relief granted to customers to date has not had a material impact on our financial condition or results of operations, it is not possible to estimate the potential impact of any future relief. Circumstances resulting from the COVID-19 pandemic have also impacted the incidents of claims and may have impacted the utilization of benefits, lapses or surrenders of policies and payments on insurance premiums, though such impacts have not been material through the end of the third quarter of 2020. Additionally, circumstances resulting from the COVID-19 pandemic have not materially impacted services we receive from third-party vendors, nor have such circumstances led to the identification of new loss contingencies or any increases in existing loss contingencies. However, there can be no assurance that any future impact from the COVID-19 pandemic, including, without limitation, with respect to revenues and expenses associated with our products, services we receive from third-party vendors, or loss contingencies, will not be material.
Certain sectors of our investment portfolio have been, and are expected to continue to be, adversely affected as a result of the impact of the COVID-19 pandemic on capital markets and the global economy, as well as uncertainty regarding its duration and outcome. See “— Investments — Current Environment — Selected Sector Investments,” “— Investments — Mortgage Loans — Loan Modifications Related to the COVID-19 Pandemic” and Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements.
Credit rating agencies may continue to review and adjust their ratings for the companies that they rate, including us. The credit rating agencies also evaluate the insurance industry as a whole and may change our credit rating based on their overall view of our industry. For example, during the second quarter of 2020, Fitch revised the rating outlook for BHF and certain of its subsidiaries to negative from stable due to the disruption to economic activity and the financial markets from the COVID-19 pandemic. This action by Fitch followed its revision of the rating outlook on the U.S. life insurance industry to negative. Downgrades in our ratings or changes to our rating outlooks could have a material adverse effect on our results of operations and financial condition, including capitalization and liquidity. There can be no assurance that Fitch will not take
50
Table of Contents
further adverse action with respect to our ratings or that other rating agencies will not take similar actions in the future. Each rating should be evaluated independently of any other rating.
Regulatory Developments
Our life insurance companies are regulated primarily at the state level, with some products and services also subject to federal regulation. In addition, BHF and its subsidiaries are subject to regulation under the insurance holding company laws of various U.S. jurisdictions. Furthermore, some of our operations, products and services are subject to the Employee Retirement Income Security Act of 1974, consumer protection laws, securities, broker-dealer and investment advisor regulations, as well as environmental and unclaimed property laws and regulations. See “Business — Regulation,” as well as “Risk Factors — Regulatory and Legal Risks” included in our 2019 Annual Report, as amended or supplemented by our subsequent Quarterly Reports under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — Regulatory Developments.”
Summary of Critical Accounting Estimates
The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the Interim Condensed Consolidated Financial Statements.
The most critical estimates include those used in determining:
•liabilities for future policy benefits;
•amortization of deferred policy acquisition costs (“DAC”);
•investment credit losses;
•estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation; and
•measurement of income taxes and the valuation of deferred tax assets.
In applying our accounting policies, we make subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our business and operations. Actual results could differ from these estimates.
The above critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and Note 1 of the Notes to the Consolidated Financial Statements included in our 2019 Annual Report.
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
Adjusted Earnings
In this report, we present adjusted earnings, which excludes net income (loss) attributable to noncontrolling interests and preferred stock dividends, as a measure of our performance that is not calculated in accordance with GAAP. We believe that this non-GAAP financial measure highlights our results of operations and the underlying profitability drivers of our business, as well as enhances the understanding of our performance by the investor community. However, adjusted earnings should not be viewed as a substitute for net income (loss) available to Brighthouse Financial, Inc.’s common shareholders, which is the most directly comparable financial measure calculated in accordance with GAAP. See “— Results of Operations” for a reconciliation of adjusted earnings to net income (loss) available to Brighthouse Financial, Inc.’s common shareholders.
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.
The following are significant items excluded from total revenues, net of income tax, in calculating adjusted earnings:
•Net investment gains (losses);
51
Table of Contents
•Net derivative gains (losses) except earned income and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment (“Investment Hedge Adjustments”); and
•Certain variable annuity guaranteed minimum income benefits (“GMIBs”) fees (“GMIB Fees”).
The following are significant items excluded from total expenses, net of income tax, in calculating adjusted earnings:
•Amounts associated with benefits 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.
We present adjusted earnings in a manner consistent with management’s view of the primary business activities that drive the profitability of our core businesses. The following table illustrates how each component of adjusted earnings is calculated from the GAAP statement of operations line items:
Component of Adjusted EarningsHow Derived from GAAP (1)
(i)Fee income(i)
Universal life and investment-type policy fees (excluding (a) unearned revenue adjustments related to net investment gains (losses) and net derivative gains (losses) and (b) GMIB Fees) plus Other revenues (excluding other revenues associated with related party reinsurance) and amortization of deferred gain on reinsurance.
(ii)Net investment spread(ii)
Net investment income plus Investment Hedge Adjustments and interest received on ceded fixed annuity reinsurance deposit funds reduced by Interest credited to policyholder account balances and interest on future policy benefits.
(iii)Insurance-related activities(iii)
Premiums less Policyholder benefits and claims (excluding (a) GMIB Costs, (b) Market Value Adjustments, (c) interest on future policy benefits and (d) amortization of deferred gain on reinsurance) plus the pass through of performance of ceded separate account assets.
(iv)Amortization of DAC and VOBA(iv)
Amortization of DAC and VOBA (excluding amounts related to (a) net investment gains (losses), (b) net derivative gains (losses), (c) GMIB Fees and GMIB Costs and (d) Market Value Adjustments).
(v)Other expenses, net of DAC capitalization(v)
Other expenses reduced by capitalization of DAC.
(vi)Provision for income tax expense (benefit)(vi)Tax impact of the above items.
__________________
(1)Italicized items indicate GAAP statement of operations line items.
Consistent with GAAP guidance for segment reporting, adjusted earnings is also our GAAP measure of segment performance. Accordingly, we report adjusted earnings by segment in Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements.
Adjusted Net Investment Income
We present adjusted net investment income, which is not calculated in accordance with GAAP. 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. For a reconciliation of adjusted net investment income to net investment income, the most directly comparable GAAP measure, see footnote 3 to the summary yield table located in “— Investments — Current Environment — Investment Portfolio Results.”
52
Table of Contents
Other Financial Disclosures
Similar to adjusted net investment income, we present net investment income yields as a performance measure we believe enhances the understanding of our investment portfolio results. Net investment income yields are calculated on adjusted net investment income as a 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.
Results of Operations
Annual Actuarial Review
We typically conduct our AAR in the third quarter of each year. As a result of the 2020 AAR, we lowered the long-term general account earned rate, driven by a reduction in our mean reversion rate from 3.75% to 3.00%, which had the largest impact to our ULSG business. For our variable annuity business, in addition to the update in the long-term general account earned rate, we updated assumptions regarding policyholder behavior, mortality, separate account fund allocations and volatility, as well as maintenance expenses. In our life business, we updated assumptions related to policyholder behavior, mortality and expenses.
In 2019, the most significant impact from our AAR was decreasing the long-term general account earned rate, driven by a reduction in our mean reversion rate from 4.25% to 3.75%, which primarily impacted our ULSG business. For our variable annuity business, in addition to the update in the long-term general account earned rate, we updated assumptions regarding separate account fund allocations and volatility, as well as maintenance expenses. In our life business, we updated assumptions related to mortality and expenses.
The following table presents the impact of the AAR on pre-tax adjusted earnings and income (loss) available to shareholders before provision for income tax for the nine months ended September 30, 2020 and 2019. The impact related to GMLBs is included in income (loss) available to shareholders before provision for income tax, but is not included in pre-tax adjusted earnings. See “— Non-GAAP and Other Financial Disclosures.”
Nine Months Ended
September 30,
20202019
(In millions)
GMLBs$(1,431)$84 
Included in pre-tax adjusted earnings:
Other annuity business128 (38)
Life business(11)24 
Run-off(1,484)(545)
Total included in pre-tax adjusted earnings(1,367)(559)
Total impact on income (loss) available to shareholders before provision for income tax$(2,798)$(475)
53
Table of Contents
Consolidated Results for the Three Months and Nine Months Ended September 30, 2020 and 2019
Unless otherwise noted, all amounts in the following discussions of our results of operations are stated before income tax except for adjusted earnings, which are presented net of income tax.
 Three Months Ended
September 30,		Nine Months Ended
September 30,
 2020201920202019
 (In millions)
Revenues
Premiums$184 $214 $575 $673 
Universal life and investment-type product policy fees882 867 2,595 2,630 
Net investment income996 928 2,564 2,681 
Other revenues99 94 294 282 
Net investment gains (losses)5 27 (48)79 
Net derivative gains (losses)(1,857)1,057 2,392 (97)
Total revenues309 3,187 8,372 6,248 
Expenses
Policyholder benefits and claims3,047 1,319 5,073 2,936 
Interest credited to policyholder account balances281 272 816 795 
Capitalization of DAC(90)(93)(279)(274)
Amortization of DAC and VOBA244 181 922 373 
Interest expense on debt47 49 139 144 
Other expenses623 655 1,814 1,954 
Total expenses4,152 2,383 8,485 5,928 
Income (loss) before provision for income tax(3,843)804 (113)320 
Provision for income tax expense (benefit)(850)119 (88)(14)
Net income (loss)(2,993)685 (25)334 
Less: Net income (loss) attributable to noncontrolling interests2 2 4 4 
Net income (loss) attributable to Brighthouse Financial, Inc.(2,995)683 (29)330 
Less: Preferred stock dividends17 7 31 14 
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders
$(3,012)$676 $(60)$316 
54
Table of Contents
The components of net income (loss) available to shareholders were as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
 (In millions)
GMLB Riders$(2,739)$419 $(833)$(1,144)
Other derivative instruments(174)636 1,462 1,116 
Net investment gains (losses)5 27 (48)79 
Other adjustments(33)(14)(66)(53)
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends
(921)(273)(663)304 
Income (loss) available to shareholders before provision for income tax(3,862)795 (148)302 
Provision for income tax expense (benefit)(850)119 (88)(14)
Net income (loss) available to shareholders
$(3,012)$676 $(60)$316 
Three Months Ended September 30, 2020 Compared with the Three Months Ended September 30, 2019
Loss available to shareholders before provision for income tax was $3.9 billion ($3.0 billion, net of income tax), a decrease of $4.7 billion ($3.7 billion, net of income tax) from income before provision for income tax of $795 million ($676 million, net of income tax) in the prior period.
The decrease in income before provision for income tax was driven by the following key unfavorable items:
•losses from GMLB Riders in the current period, compared to gains in the prior period, see “— GMLB Riders for the Three Months and Nine Months Ended September 30, 2020 and 2019”;
•losses on other derivative instruments reflecting:
◦losses on interest rate derivatives used to manage interest rate exposure in our ULSG business due to the benchmark long-term interest rate increasing in the current period and decreasing in the prior period; and
◦an unfavorable impact from foreign currency swaps due to the U.S. dollar mostly weakening in the current period and strengthening in the prior period; and
•lower pre-tax adjusted earnings, discussed in greater detail below.
The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of 22% in the current period compared to 15% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deductions and tax credits.
Nine Months Ended September 30, 2020 Compared with the Nine Months Ended September 30, 2019
Loss available to shareholders before provision for income tax was $148 million ($60 million, net of income tax), a decrease of $450 million ($376 million, net of income tax) from income before provision for income tax of $302 million ($316 million, net of income tax) in the prior period.
The decrease in income before provision for income tax was driven by the following key unfavorable items:
•lower pre-tax adjusted earnings, discussed in greater detail below; and
•lower net investment gains (losses) reflecting:
◦net losses on sales of fixed maturity securities compared to prior period net gains;
◦current period mark-to-market losses on equity securities compared to prior period net gains;
◦net losses due to an increase in mortgage loan reserves; and
◦higher impairments on fixed maturity securities in the current period.
55
Table of Contents
The decrease in income before provision for income tax was partially offset by the following key net favorable items:
•long-term interest rates declining more and equity markets increasing less in the current period than in the prior period resulted in:
◦current period gains on interest rate derivatives used to manage interest rate exposure in our ULSG business; and
◦a favorable change in the estimated fair value of the embedded derivatives associated with our fixed indexed annuity business;
partially offset by
◦an unfavorable impact from equity options; and
•lower losses from GMLB Riders in the current period, see “— GMLB Riders for the Three Months and Nine Months Ended September 30, 2020 and 2019.”
The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of 78% in the current period compared to 5% in the prior period. The increase in the effective tax rate in the current period is driven by lower pre-tax adjusted earnings, discussed in greater detail below. Certain one-time tax adjustments recognized in the prior period, primarily due to the revaluation of certain liabilities related to our separation from MetLife (“separation-related liabilities”), resulted in an unusually low effective tax rate in the prior period. In addition to such one-time tax adjustments, our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deductions and tax credits.
Reconciliation of Net Income (Loss) Available to Shareholders to Adjusted Earnings
The reconciliation of net income (loss) available to shareholders to adjusted earnings was as follows:
Three Months Ended September 30, 2020
AnnuitiesLifeRun-offCorporate & OtherTotal
(In millions)
Net income (loss) available to shareholders$(2,398)$78 $(1,141)$449 $(3,012)
Add: Provision for income tax expense (benefit)92 18 (460)(500)(850)
Income (loss) available to shareholders before provision for income tax
(2,306)96 (1,601)(51)(3,862)
Less: GMLB Riders(2,739)— — — (2,739)
Less: Other derivative instruments(54)(4)(115)(1)(174)
Less: Net investment gains (losses)37 6 (39)1 5 
Less: Other adjustments(29)— (4)— (33)
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends
479 94 (1,443)(51)(921)
Less: Provision for income tax expense (benefit)92 18 (304)(38)(232)
Adjusted earnings$387 $76 $(1,139)$(13)$(689)
56
Table of Contents
Three Months Ended September 30, 2019
AnnuitiesLifeRun-offCorporate & OtherTotal
(In millions)
Net income (loss) available to shareholders$576 $92 $234 $(226)$676 
Add: Provision for income tax expense (benefit)52 18 (116)165 119 
Income (loss) available to shareholders before provision for income tax
628 110 118 (61)795 
Less: GMLB Riders419 — — — 419 
Less: Other derivative instruments(43)1 678 — 636 
Less: Net investment gains (losses)(2)18 (4)15 27 
Less: Other adjustments(1)— (13)— (14)
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends
255 91 (543)(76)(273)
Less: Provision for income tax expense (benefit)52 18 (117)(57)(104)
Adjusted earnings$203 $73 $(426)$(19)$(169)
Nine Months Ended September 30, 2020
AnnuitiesLifeRun-offCorporate & OtherTotal
(In millions)
Net income (loss) available to shareholders$67 $79 $80 $(286)$(60)
Add: Provision for income tax expense (benefit)199 32 (344)25 (88)
Income (loss) available to shareholders before provision for income tax
266 111 (264)(261)(148)
Less: GMLB Riders(833)— — — (833)
Less: Other derivative instruments72 (64)1,456 (2)1,462 
Less: Net investment gains (losses)(3)8 (18)(35)(48)
Less: Other adjustments(43)— (23)— (66)
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends
1,073 167 (1,679)(224)(663)
Less: Provision for income tax expense (benefit)199 32 (355)(72)(196)
Adjusted earnings$874 $135 $(1,324)$(152)$(467)
Nine Months Ended September 30, 2019
AnnuitiesLifeRun-offCorporate & OtherTotal
(In millions)
Net income (loss) available to shareholders$(434)$186 $924 $(360)$316 
Add: Provision for income tax expense (benefit)165 38 (305)88 (14)
Income (loss) available to shareholders before provision for income tax
(269)224 619 (272)302 
Less: GMLB Riders(1,144)— — — (1,144)
Less: Other derivative instruments(78)22 1,173 (1)1,116 
Less: Net investment gains (losses)15 8 85 (29)79 
Less: Other adjustments(1)— (52)— (53)
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends
939 194 (587)(242)304 
Less: Provision for income tax expense (benefit)176 38 (127)(100)(13)
Adjusted earnings$763 $156 $(460)$(142)$317 
57
Table of Contents
Consolidated Results for the Three Months and Nine Months Ended September 30, 2020 and 2019 — Adjusted Earnings
The components of adjusted earnings were as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Fee income$914 $893 $2,693 $2,713 
Net investment spread474 433 1,075 1,227 
Insurance-related activities(1,589)(796)(2,345)(1,361)
Amortization of DAC and VOBA(158)(183)(414)(433)
Other expenses, net of DAC capitalization(543)(611)(1,637)(1,824)
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends
19 9 35 18 
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends
(921)(273)(663)304 
Provision for income tax expense (benefit)(232)(104)(196)(13)
Adjusted earnings$(689)$(169)$(467)$317 
Three Months Ended September 30, 2020 Compared with the Three Months Ended September 30, 2019
Adjusted earnings were a loss of $689 million, a decrease of $520 million.
Key net unfavorable impacts were:
•higher net costs associated with insurance-related activities due to:
◦a net increase in liability balances resulting from changes in connection with the AAR in our Run-off and Annuities segments;
partially offset by
◦a one-time adjustment in the current period related to modeling improvements resulting from an actuarial system conversion, primarily in our Life segment;
Key net favorable impacts were:
•lower other expenses due to:
◦the exit of various transition service agreements with MetLife;
◦interest expense recognized in the prior period on a tax liability associated with our separation from MetLife; and
◦lower asset-based variable annuity expenses resulting from lower average separate account balances, a portion of which are offset in fee income;
•higher net investment spread reflecting:
◦higher returns on other limited partnerships for the comparative measurement period; and
◦higher average invested assets resulting from positive net flows in the general account;
partially offset by
◦lower investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at lower yields than the portfolio average;
•lower net amortization of DAC and VOBA due to:
◦a favorable change in our variable annuity business from changes in actual to expected experience in our in-force blocks;
partially offset by
58
Table of Contents
◦a net unfavorable impact resulting from changes in connection with the AAR in our Annuities and Life segments; and
•higher net fee income due to:
◦higher unearned revenue amortization from changes in maintenance expense and policyholder behavior assumptions in connection with the AAR, primarily in our Life segment;
partially offset by
◦lower asset-based fees from lower average separate account balances, a portion of which is offset in other expenses.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 26% in the current period compared to 38% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deductions and tax credits.
Nine Months Ended September 30, 2020 Compared with the Nine Months Ended September 30, 2019
Adjusted earnings were a loss of $467 million, a decrease of $784 million.
Key net unfavorable impacts were:
•higher net costs associated with insurance-related activities due to:
◦a net increase in liability balances resulting from changes in connection with the AAR in our Run-off and Annuities segments;
partially offset by
◦a one-time adjustment in the current period related to modeling improvements resulting from an actuarial system conversion, primarily in our Life segment;
•lower net investment spread due to:
◦lower returns on other limited partnerships for the comparative measurement period; and
◦lower investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at lower yields than the portfolio average;
partially offset by
◦higher average invested assets resulting from positive net flows in the general account;
•lower net fee income due to:
◦lower asset-based fees from lower average separate account balances, a portion of which is offset in other expenses;
partially offset by
◦higher unearned revenue amortization from changes in maintenance expense and policyholder behavior assumptions made in connection with the AAR, primarily in our Life segment.
Key net favorable impacts were:
•lower other expenses due to:
◦the exit of various transition service agreements with MetLife;
◦lower asset-based variable annuity expenses resulting from lower average separate account balances, a portion of which are offset in fee income; and
◦interest expense recognized in the prior period on a tax liability associated with our separation from MetLife;
•lower net amortization of DAC and VOBA due to:
◦a favorable change in our variable annuity business from changes in actual to expected experience in our in-force blocks;
59
Table of Contents
partially offset by
◦a net unfavorable impact resulting from changes in connection with the AAR in our Annuities and Life segments.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 31% in the current period compared to 4% in the prior period. Certain one-time tax adjustments recognized in the prior period, primarily due to the revaluation of certain separation-related liabilities, resulted in an unusually low effective tax rate in the prior period. In addition to such one-time tax adjustments, our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deductions and tax credits.
Segments and Corporate & Other Results for the Three Months and Nine Months Ended September 30, 2020 and 2019 — Adjusted Earnings
Annuities
The components of adjusted earnings for our Annuities segment were as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Fee income$654 $675 $1,917 $1,977 
Net investment spread257 268 720 789 
Insurance-related activities68 (60)(140)(179)
Amortization of DAC and VOBA(127)(211)(322)(421)
Other expenses, net of DAC capitalization(373)(417)(1,102)(1,227)
Pre-tax adjusted earnings479 255 1,073 939 
Provision for income tax expense (benefit)92 52 199 176 
Adjusted earnings$387 $203 $874 $763 
A significant portion of our adjusted earnings is driven by separate account balances related to our variable annuity business. Most directly, these balances determine asset-based fee income, but they also impact DAC amortization and asset-based commissions. The changes in our variable annuities separate account balances are presented in the table below. Variable annuities separate account balances increased for the three months ended September 30, 2020 driven by positive equity markets partially offset by negative net flows and policy charges. Variable annuities separate account balances decreased for the nine months ended September 30, 2020 driven by negative net flows and policy charges partially offset by positive equity market performance.
Three Months Ended
September 30, 2020		Nine Months Ended
September 30, 2020
(In millions)
Balance, beginning of period$92,211 $99,498 
Deposits443 1,210 
Withdrawals, surrenders and benefits(1,755)(5,679)
Net flows(1,312)(4,469)
Investment performance 5,337 2,636 
Policy charges(630)(1,789)
Net transfers from (to) general account (145)(415)
Balance, end of period$95,461 $95,461 
Average balance$95,718 $92,927 
Three Months Ended September 30, 2020 Compared with the Three Months Ended September 30, 2019
Adjusted earnings were $387 million for the current period, an increase of $184 million.
Key net favorable impacts were:
60
Table of Contents
•lower costs associated with insurance-related activities due to:
◦a decrease in guaranteed minimum death benefit (“GMDB”) liabilities and a favorable adjustment to deferred sales inducements (“DSI”) resulting from changes in connection with the AAR; and
◦a decrease in GMDB liabilities resulting from favorable equity market performance in the current period;
•lower amortization of DAC and VOBA due to:
◦a favorable impact in the current period resulting primarily from changes in policyholder behavior and long-term general account earned rate assumptions made in connection with the AAR; and
◦a favorable change in our variable annuity business from changes in actual to expected experience in our in-force blocks; and
•lower other expenses due to:
◦the exit of various transition service agreements with MetLife; and
◦lower asset-based variable annuity expenses resulting from lower average separate account balances, a portion of which are offset in fee income.
Key net unfavorable impacts were:
•lower asset-based fees from lower average separate account balances, a portion of which is offset in other expenses; and
•lower net investment spread due to:
◦higher interest credited on average policyholder account balances resulting from positive net flows; and
◦lower investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at lower yields than the portfolio average;
partially offset by
◦higher average invested assets resulting from positive net flows in the general account; and
◦higher returns on other limited partnerships for the comparative measurement period.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 19% in the current period compared to 20% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deductions.
Nine Months Ended September 30, 2020 Compared with the Nine Months Ended September 30, 2019
Adjusted earnings were $874 million for the current period, an increase of $111 million.
Key net favorable impacts were:
•lower other expenses due to:
◦the exit of various transition service agreements with MetLife; and
◦lower asset-based variable annuity expenses resulting from lower average separate account balances, a portion of which are offset in fee income;
•lower amortization of DAC and VOBA due to:
◦a favorable impact in the current period resulting primarily from changes in policyholder behavior and long-term general account earned rate assumptions made in connection with the AAR; and
◦a favorable change in our variable annuity business from changes in actual to expected experience in our in-force blocks net of the impact on estimated gross profits from lower separate account returns; and
•lower costs associated with insurance-related activities due to:
61
Table of Contents
◦a decrease in GMDB liabilities and a favorable adjustment to DSI resulting from changes in connection with the AAR;
partially offset by
◦an increase in GMDB liabilities resulting from less favorable equity market performance in the current period, net of lower income annuity benefit payments.
Key net unfavorable impacts were:
•lower net investment spread due to:
◦lower investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at lower yields than the portfolio average; and
◦lower returns on other limited partnerships for the comparative measurement period;
partially offset by
◦higher average invested assets resulting from positive net flows in the general account; and
•lower asset-based fees from lower average separate account balances, a portion of which is offset in other expenses.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 19% in both the current and prior periods. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deductions.
Life
The components of adjusted earnings for our Life segment were as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Fee income$90 $60 $271 $185 
Net investment spread53 52 126 155 
Insurance-related activities48 (1)(4)5 
Amortization of DAC and VOBA(50)31 (104)(1)
Other expenses, net of DAC capitalization(47)(51)(122)(150)
Pre-tax adjusted earnings94 91 167 194 
Provision for income tax expense (benefit)18 18 32 38 
Adjusted earnings$76 $73 $135 $156 
Three Months Ended September 30, 2020 Compared with the Three Months Ended September 30, 2019
Adjusted earnings were $76 million for the current period, an increase of $3 million.
Key favorable impacts were:
•lower costs associated with insurance-related activities due to:
◦a one-time adjustment in the current period related to modeling improvements resulting from an actuarial system conversion; and
◦lower paid claims, net of reinsurance; and
•higher fee income due to higher unearned revenue amortization from changes in maintenance expense and policyholder behavior assumptions made in connection with the AAR.
Key net unfavorable impacts were:
•higher net amortization of DAC and VOBA due to:
◦changes in maintenance expense and policyholder assumptions in connection with the AAR; and
62
Table of Contents
◦a one-time adjustment in the current period related to modeling improvements resulting from an actuarial system conversion;
partially offset by
◦the impact on gross profits from higher separate account returns.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 19% in the current period compared to 20% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deductions.
Nine Months Ended September 30, 2020 Compared with the Nine Months Ended September 30, 2019
Adjusted earnings were $135 million for the current period, a decrease of $21 million.
Key net unfavorable impacts were:
•higher amortization of DAC and VOBA due to:
◦changes in maintenance expense and policyholder assumptions in connection with the AAR; and
◦a one-time adjustment in the current period related to modeling improvements resulting from an actuarial system conversion;
•lower net investment spread due to:
◦lower investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at lower yields than the portfolio average; and
◦lower returns on other limited partnerships for the comparative measurement period; and
•higher costs associated with insurance-related activities due to:
◦higher paid claims, net of reinsurance;
partially offset by
◦a one-time adjustment in the current period related to modeling improvements resulting from an actuarial system conversion.
Key favorable impacts were:
•higher fee income due to:
◦higher unearned revenue amortization from changes in maintenance expense and policyholder behavior assumptions made in connection with the AAR; and
◦lower ongoing net reinsurance costs as a result of reinsurance recaptured in prior periods; and
•lower other expenses due to the exit of various transition services agreements with MetLife.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 19% in the current period compared to 20% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deductions.
63
Table of Contents
Run-off
The components of adjusted earnings for our Run-off segment were as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Fee income$170 $157 $505 $544 
Net investment spread149 90 179 226 
Insurance-related activities(1,718)(740)(2,226)(1,210)
Amortization of DAC and VOBA— — — — 
Other expenses, net of DAC capitalization(44)(50)(137)(147)
Pre-tax adjusted earnings(1,443)(543)(1,679)(587)
Provision for income tax expense (benefit)(304)(117)(355)(127)
Adjusted earnings$(1,139)$(426)$(1,324)$(460)
Three Months Ended September 30, 2020 Compared with the Three Months Ended September 30, 2019
Adjusted earnings were a loss of $1.1 billion for the current period, a higher loss of $713 million.
Key unfavorable impacts were:
•higher costs associated with insurance-related activities, primarily in our ULSG business, due to:
◦an increase in liability balances resulting primarily from changes in the long-term general account earned rate assumptions made in connection with the AAR; and
◦higher paid claims, net of reinsurance in the current period.
Key favorable impacts were:
•higher net investment spread due to higher returns on other limited partnerships for the comparative measurement period; and
•higher fee income in our ULSG business due to higher unearned revenue amortization resulting from changes in premium assumptions made in connection with the AAR.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 21% in the current period compared to 22% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deductions.
Nine Months Ended September 30, 2020 Compared with the Nine Months Ended September 30, 2019
Adjusted earnings were a loss of $1.3 billion for the current period, a higher loss of $864 million.
Key net unfavorable impacts were:
•higher costs associated with insurance-related activities, primarily in our ULSG business, due to:
◦an increase in liability balances resulting primarily from changes in the long-term general account earned rate assumptions made in connection with the AAR; and
◦higher paid claims, net of reinsurance in the current period;
•lower net investment spread due to lower returns on other limited partnerships for the comparative measurement period, net of decreases in average crediting rates in connection with the low interest rate environment; and
•lower net fee income in our ULSG business due to:
◦a decline in the net cost of insurance fees driven by the aging in-force business; and
◦a decrease in policyholder fees consistent with lower average account balances;
partially offset by
64
Table of Contents
◦higher unearned revenue amortization resulting from changes in premium assumptions made in connection with the AAR.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 21% in the current period compared to 22% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deductions and tax credits.
Corporate & Other
The components of adjusted earnings for Corporate & Other were as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Fee income$— $1 $— $7 
Net investment spread15 23 50 57 
Insurance-related activities13 5 25 23 
Amortization of DAC and VOBA19 (3)12 (11)
Other expenses, net of DAC capitalization(79)(93)(276)(300)
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends
19 9 35 18 
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends
(51)(76)(224)(242)
Provision for income tax expense (benefit)(38)(57)(72)(100)
Adjusted earnings$(13)$(19)$(152)$(142)
Three Months Ended September 30, 2020 Compared with the Three Months Ended September 30, 2019
Adjusted earnings were a loss of $13 million, a lower loss of $6 million from the prior period.
Key favorable impacts were:
•lower amortization of DAC and VOBA due to a one-time adjustment in the current period related to modeling improvements resulting from an actuarial system conversion; and
•lower other expenses driven by interest expense recognized in the prior period on a tax liability associated with our separation from MetLife.
The lower adjusted loss was partially offset by the timing of our preferred stock dividend payments.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 119% in the current period compared to 75% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deductions and tax credits. We believe the effective tax rate for Corporate & Other is not generally meaningful, neither on a standalone basis nor for comparison to prior periods, since taxes for Corporate & Other are derived from the difference between the overall consolidated effective tax rate and total taxes for the combined operating segments.
Nine Months Ended September 30, 2020 Compared with the Nine Months Ended September 30, 2019
Adjusted earnings were a loss of $152 million, a higher loss of $10 million from the prior period.
The higher adjusted loss was primarily due to the timing of our preferred stock dividend payments.
Key favorable impacts were:
•lower other expenses driven by:
◦lower establishment costs in the current period related to planned technology expenses; and
◦interest expense recognized in the prior period on a tax liability associated with our separation from MetLife; and
65
Table of Contents
•lower amortization of DAC and VOBA due to a one-time adjustment in the current period related to modeling improvements resulting from an actuarial system conversion.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 38% in the current period compared to 41% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deductions and tax credits. We believe the effective tax rate for Corporate & Other is not generally meaningful, neither on a standalone basis nor for comparison to prior periods, since taxes for Corporate & Other are derived from the difference between the overall consolidated effective tax rate and total taxes for the combined operating segments.
GMLB Riders for the Three Months and Nine Months Ended September 30, 2020 and 2019
The overall impact to income (loss) available to shareholders before provision for income tax from the performance of GMLB Riders, which includes (i) changes in carrying value of the GAAP liabilities, (ii) the mark-to-market of hedges and reinsurance, (iii) fees and (iv) associated DAC offsets, was as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Liabilities $(1,787)$(810)$(3,591)$(1,856)
Hedges(1,078)948 2,538 (51)
Ceded reinsurance(3)50 101 75 
Fees (1)223 228 621 628 
GMLB DAC(94)3 (502)60 
Total GMLB Riders$(2,739)$419 $(833)$(1,144)
__________________
(1)Excludes living benefit fees, included as a component of adjusted earnings, of $15 million and $44 million for the three months and nine months ended September 30, 2020, respectively, and $16 million and $48 million for the three months and nine months ended September 30, 2019, respectively.
Three Months Ended September 30, 2020 Compared with the Three Months Ended September 30, 2019
Comparative results from GMLB Riders were unfavorable by $3.2 billion.
The AAR resulted in unfavorable changes in the current period primarily due to higher reserves and higher DAC amortization recognized in the current period.
Results were also driven by:
•unfavorable changes in our GMLB hedges;
•unfavorable changes to the estimated fair value of Shield Annuity liabilities, net of favorable changes to the estimated fair value of the related hedges;
•unfavorable changes to the estimated fair value of variable annuity liability reserves; and
•unfavorable changes in GMLB DAC.
Higher relative equity markets in the current period resulted in the following significant impacts:
•unfavorable changes to the estimated fair value of our GMLB hedges; and
•unfavorable changes to the estimated fair value of Shield Annuity liabilities, net of favorable changes to the estimated fair value of the related hedges;
partially offset by
•favorable changes to the estimated fair value of variable annuity liability reserves; and
•favorable changes to GMLB DAC.
66
Table of Contents
Interest rates increasing in the current period, compared to decreasing in the prior period, resulted in the following impacts:
•unfavorable changes to the estimated fair value of our GMLB hedges; and
•unfavorable changes to GMLB DAC;
partially offset by
•favorable changes to the estimated fair value of variable annuity liability reserves.
The narrowing of credit default swap spreads in the current period resulted in an unfavorable change in the adjustment for nonperformance risk, net of an offsetting favorable change in GMLB DAC.
Nine Months Ended September 30, 2020 Compared with the Nine Months Ended September 30, 2019
Comparative results from GMLB Riders were favorable by $311 million, primarily driven by:
•favorable changes in our GMLB hedges; and
•favorable changes to the estimated fair value of Shield Annuity liabilities, net of unfavorable changes to the estimated fair value of the related hedges;
partially offset by
•unfavorable changes to the estimated fair value of variable annuity liability reserves; and
•unfavorable changes in GMLB DAC.
Equity markets increasing less in the current period than in the prior period resulted in the following significant impacts:
•favorable changes to the estimated fair value of our GMLB hedges;
•favorable changes to the estimated fair value of Shield Annuity liabilities, net of unfavorable changes to the estimated fair value of the related hedges; and
•favorable changes to GMLB DAC;
partially offset by
•unfavorable changes to the estimated fair value of the variable annuity liability reserves.
Lower interest rates in the current period resulted in the following significant impacts:
•favorable changes to the estimated fair value of our GMLB hedges;
•favorable changes to the estimated fair value of Shield Annuity liabilities, net of unfavorable changes to the estimated fair value of the related hedges; and
•favorable changes to GMLB DAC;
partially offset by
•unfavorable changes to the estimated fair value of the variable annuity liability reserves.
The widening of credit default swap spreads combined with a larger increase in the underlying variable annuity liability reserves in the current period resulted in a favorable change in the adjustment for nonperformance risk, net of an unfavorable change in GMLB DAC.
The AAR resulted in unfavorable changes in the current period primarily due to higher reserves and higher DAC amortization recognized in the current period.
Investments
Investment Risks
Our primary investment objective is to optimize risk-adjusted net investment income and risk-adjusted total return while appropriately matching assets and liabilities. In addition, the investment process is designed to ensure that the portfolio has an appropriate level of liquidity, quality and diversification.
67
Table of Contents
We are exposed to the following primary sources of investment risks, which may be heightened or exacerbated by the factors discussed in “— Industry Trends — COVID-19 Pandemic”:
•credit risk, relating to the uncertainty associated with the continued ability of a given obligor to make timely payments of principal and interest, which will likely result in a higher allowance for credit losses and write-offs for uncollectible balances for certain investments;
•interest rate risk, relating to the market price and cash flow variability associated with changes in market interest rates. Changes in market interest rates will impact the net unrealized gain or loss position of our fixed income investment portfolio and the rates of return we receive on both new funds invested and reinvestment of existing funds;
•market valuation risk, relating to the variability in the estimated fair value of investments associated with changes in market factors such as credit spreads and equity market levels. A widening of credit spreads will adversely impact the net unrealized gain (loss) position of the fixed income investment portfolio and will increase losses associated with credit-based non-qualifying derivatives where we assume credit exposure. Credit spread tightening will reduce net investment income associated with new purchases of fixed maturity securities and will favorably impact the net unrealized gain (loss) position of the fixed income investment portfolio;
•liquidity risk, relating to the diminished ability to sell certain investments, in times of strained market conditions;
•real estate risk, relating to commercial, agricultural and residential real estate, and stemming from factors, which include, but are not limited to, market conditions, including the demand and supply of leasable commercial space, creditworthiness of borrowers and their tenants and joint venture partners, capital markets volatility and inherent interest rate movements;
•currency risk, relating to the variability in currency exchange rates for non-U.S. dollar denominated investments; and
•financial and operational risks related to using external investment managers.
We manage these risks through asset-type allocation and industry and issuer diversification. Risk limits are also used to promote diversification by asset sector, avoid concentrations in any single issuer and limit overall aggregate credit and equity risk exposure. Real estate risk is managed through geographic and property type and product type diversification. Interest rate risk is managed as part of our Asset Liability Management (“ALM”) strategies. Product design, such as the use of market value adjustment features and surrender charges, is also utilized to manage interest rate risk. These strategies include maintaining an investment portfolio that targets a weighted average duration that reflects the duration of our estimated liability cash flow profile. For certain of our liability portfolios, it is not possible to invest assets to the full liability duration, thereby creating some asset/liability mismatch. We also use certain derivatives in the management of currency, credit, interest rate, and equity market risks.
Investment Management Agreements
Other than our derivatives trading, which we manage in-house, we have engaged a select group of experienced external asset management firms to manage the investment of the assets comprising our general account portfolio and certain separate account assets of our insurance subsidiaries, as well as assets of BHF and our reinsurance subsidiary, Brighthouse Reinsurance Company of Delaware (“BRCD”).
Current Environment
Our business and results of operations are materially affected by conditions in capital markets and the economy, generally. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends and Uncertainties — Financial and Economic Environment” included in our 2019 Annual Report.
As a U.S. insurance company, we are affected by the monetary policy of the Federal Reserve Board in the United States. The Federal Reserve may increase or decrease the federal funds rate in the future, which may have an impact on the pricing levels of risk-bearing investments and may adversely impact the level of product sales. We are also affected by the monetary policy of central banks around the world due to the diversification of our investment portfolio.
68
Table of Contents
Selected Sector Investments
Recent elevated levels of market volatility have affected the performance of various asset classes. Contributing factors include concerns about lower energy and oil prices impacting the energy sector and the COVID-19 pandemic. See “Risk Factors — The ongoing COVID-19 pandemic may materially adversely affect our business, results of operations and financial condition, including capitalization and liquidity” in our First Quarter Form 10-Q.
There has been an increased market focus on energy sector investments as a result of lower energy and oil prices. We maintain a diversified energy sector fixed maturity securities portfolio across sub-sectors and issuers. Our exposure to energy sector fixed maturity securities was $3.0 billion, of which 91% were investment grade, with net unrealized gains (losses) of $236 million at September 30, 2020.
There has also been an increased market focus on retail sector investments as a result of the COVID-19 pandemic and uncertainty regarding its outcome. Our exposure to retail sector corporate fixed maturity securities was $1.9 billion, of which 97% were investment grade, with net unrealized gains (losses) of $213 million at September 30, 2020.
In addition to the fixed maturity securities disclosed above, we have exposure to mortgage loans and certain residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”) that may be impacted by the COVID-19 pandemic. Our investment managers are actively working with borrowers who are experiencing short-term financial or operational problems as a result of the COVID-19 pandemic to provide temporary relief. See “— Investments — Mortgage Loans” and Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements for information on mortgage loans, including credit quality by portfolio segment and commercial mortgage loans by property type. Additionally, see “— Investments — Structured Securities” for information on Structured Securities, including security type, risk profile and ratings profile.
We monitor direct and indirect investment exposure across sectors and asset classes and adjust our level of investment exposure, as appropriate. At this time, we do not expect that our general account investments in these sectors and asset classes will have a material adverse effect on our results of operations or financial condition.
Investment Portfolio Results
The following summary yield table presents the yield and adjusted net investment income for our investment portfolio for the periods indicated. As described below, this table reflects certain differences from the presentation of net investment income presented in the GAAP statement of operations. This summary yield table presentation is consistent with how we measure our investment performance for management purposes, and we believe it enhances understanding of our investment portfolio results.
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
Yield %AmountYield %AmountYield %AmountYield %Amount
(Dollars in millions)
Investment income (1)4.56 %$1,036 4.62 %$951 4.04 %$2,676 4.56 %$2,757 
Investment fees and expenses (2)(0.14)(35)(0.10)(23)(0.13)(99)(0.12)(76)
Adjusted net investment income (3)4.42 %$1,001 4.52 %$928 3.91 %$2,577 4.44 %$2,681 
_______________
(1)Investment income yields are calculated as investment income as a percent of average quarterly asset carrying values. Investment income excludes recognized gains and losses and reflects the adjustments presented in footnote 3 below to arrive at adjusted net investment income. 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.
(2)Investment fee and expense yields are calculated as investment fees and expenses as a percent of average quarterly asset estimated fair values. Asset estimated fair values exclude collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.
69
Table of Contents
(3)Adjusted net investment income presented in the yield table varies from the most directly comparable GAAP measure due to certain reclassifications, as presented below.
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Net investment income$996 $928 $2,564 $2,681 
Less: Investment hedge adjustments(5)— (13)— 
Adjusted net investment income — in the above yield table$1,001 $928 $2,577 $2,681 
See “— Results of Operations — Consolidated Results for the Three Months and Nine Months Ended September 30, 2020 and 2019 — Adjusted Earnings” for an analysis of the period over period changes in net investment income.
Fixed Maturity Securities Available-for-sale (“AFS”)
Fixed maturity securities held by type (public or private) were as follows at:
 September 30, 2020December 31, 2019
 Estimated
Fair Value		% of
Total		Estimated
Fair Value		% of
Total
(Dollars in millions)
Publicly-traded$65,812 83.0 %$58,099 81.8 %
Privately-placed13,526 17.0 12,937 18.2 
Total fixed maturity securities$79,338 100.0 %$71,036 100.0 %
Percentage of cash and invested assets69.3 % 72.0 % 
See Note 6 of the Notes to the Interim Condensed Consolidated Financial Statements for further information on our valuation controls and procedures including our formal process to challenge any prices received from independent pricing services that are not considered representative of estimated fair value.
See Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements for further information about fixed maturity securities by sector, contractual maturities, continuous gross unrealized losses and the allowance for credit losses.
Fixed Maturity Securities Credit Quality — Ratings
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Fixed Maturity AFS — Fixed Maturity Securities Credit Quality — Ratings” included in our 2019 Annual Report for a discussion of the credit quality ratings assigned by Nationally Recognized Statistical Rating Organizations (“NRSRO”), credit quality designations assigned by and methodologies used by the Securities Valuation Office of the National Association of Insurance Commissioners (“NAIC”) for fixed maturity securities and the methodologies adopted by the NAIC for certain Structured Securities.
70
Table of Contents
The following table presents total fixed maturity securities by NRSRO rating and the applicable NAIC designation from the NAIC published comparison of NRSRO ratings to NAIC designations, except for certain Structured Securities, which are presented using the NAIC methodologies, as well as the percentage, based on estimated fair value that each NAIC designation is comprised of at:
  September 30, 2020December 31, 2019
NAIC
Designation		NRSRO RatingAmortized
Cost		Allowance for Credit LossesUnrealized
Gain (Loss)		Estimated Fair Value% of
Total		Amortized
Cost		Allowance for Credit LossesUnrealized
Gain (Loss)		Estimated Fair Value% of
Total
  (Dollars in millions)
1Aaa/Aa/A$43,320 $— $8,752 $52,072 65.7 %$41,463 $— $5,252 $46,715 65.8 %
2Baa21,534 — 2,503 24,037 30.3 19,838 — 1,610 21,448 30.2 
Subtotal investment grade64,854 — 11,255 76,109 96.0 61,301 — 6,862 68,163 96.0 
3Ba2,290 — 33 2,323 2.9 2,015 — 72 2,087 2.9 
4B802 1 (2)799 1.0 673 — 23 696 1.0 
5Caa and lower115 3 (5)107 0.1 90 — — 90 0.1 
6
In or near default
— — — — — — — — — — 
Subtotal below investment grade
3,207 4 26 3,229 4.0 2,778 — 95 2,873 4.0 
Total fixed maturity securities$68,061 $4 $11,281 $79,338 100.0 %$64,079 $— $6,957 $71,036 100.0 %
The following tables present total fixed maturity securities, based on estimated fair value, by sector classification and by NRSRO rating and the applicable NAIC designations from the NAIC published comparison of NRSRO ratings to NAIC designations, except for certain Structured Securities, which are presented using the NAIC methodologies as described above:
Fixed Maturity Securities — by Sector & Credit Quality Rating
NAIC Designation123456Total
Estimated
Fair Value
NRSRO RatingAaa/Aa/ABaaBaBCaa and
Lower		In or Near
Default
(In millions)
September 30, 2020
U.S. corporate$17,758 $15,782 $1,673 $630 $63 $— $35,906 
Foreign corporate3,325 6,659 530 140 6 — 10,660 
RMBS8,376 15 19 12 27 — 8,449 
U.S. government and agency8,836 99 — — — — 8,935 
CMBS6,287 127 2 9 — — 6,425 
State and political subdivision4,236 185 1 — 7 — 4,429 
ABS2,400 298 12 4 — — 2,714 
Foreign government854 872 86 4 4 — 1,820 
Total fixed maturity securities$52,072 $24,037 $2,323 $799 $107 $— $79,338 
December 31, 2019
U.S. corporate$15,313 $13,770 $1,479 $556 $42 $— $31,160 
Foreign corporate3,162 6,113 466 90 13 — 9,844 
RMBS9,020 59 15 3 21 — 9,118 
U.S. government and agency7,303 93 — — — — 7,396 
CMBS5,612 126 6 11 — — 5,755 
State and political subdivision3,863 185 — — 9 — 4,057 
ABS1,696 240 19 — — — 1,955 
Foreign government746 862 102 36 5 — 1,751 
Total fixed maturity securities$46,715 $21,448 $2,087 $696 $90 $— $71,036 
U.S. and Foreign Corporate Fixed Maturity Securities
We maintain a diversified portfolio of corporate fixed maturity securities across industries and issuers. Our portfolio does not have any exposure to any single issuer in excess of 1% of total investments, and the top ten holdings in aggregate
71
Table of Contents
comprise 2% of total investments at both September 30, 2020 and December 31, 2019. Our U.S. and foreign corporate fixed maturity securities holdings by industry were as follows at:
September 30, 2020December 31, 2019
Estimated
Fair Value		% of
Total		Estimated
Fair Value		% of
Total
(Dollars in millions)
Industrial$14,575 31.3 %$12,633 30.9 %
Consumer10,981 23.6 9,719 23.7 
Finance10,614 22.8 9,448 23.0 
Utility7,069 15.2 6,247 15.2 
Communications3,327 7.1 2,957 7.2 
Total
$46,566 100.0 %$41,004 100.0 %
Structured Securities
We held $17.6 billion and $16.8 billion of Structured Securities, at estimated fair value, at September 30, 2020 and December 31, 2019, respectively, as presented in the RMBS, CMBS and ABS sections below.
RMBS
Our RMBS holdings are diversified by security type, risk profile and ratings profile, which were as follows at:
 September 30, 2020December 31, 2019
 Estimated
Fair Value		% of
Total		Net Unrealized Gains (Losses)Estimated
Fair Value		% of
Total		Net Unrealized Gains (Losses)
 (Dollars in millions)
Security type:
Collateralized mortgage obligations$4,913 58.1 %$516 $4,857 53.3 %$360 
Pass-through securities3,536 41.9 127 4,261 46.7 66 
Total RMBS$8,449 100.0 %$643 $9,118 100.0 %$426 
Risk profile:
Agency$6,659 78.8 %$507 $7,216 79.2 %$256 
Prime128 1.5 2 141 1.5 9 
Alt-A822 9.7 65 883 9.7 96 
Sub-prime840 10.0 69 878 9.6 65 
Total RMBS$8,449 100.0 %$643 $9,118 100.0 %$426 
Ratings profile:
Rated Aaa$6,843 81.0 %$7,329 80.4 %
Designated NAIC 1$8,376 99.1 %$9,020 98.9 %
Historically, our exposure to sub-prime RMBS holdings has been managed by focusing primarily on senior tranche securities, stress-testing the portfolio with severe loss assumptions and closely monitoring the performance of the portfolio. Our sub-prime RMBS portfolio consists predominantly of securities that were purchased after 2012 at significant discounts to par value and discounts to the expected principal recovery value of these securities. The vast majority of these securities are investment grade under the NAIC designations (e.g., NAIC 1 and NAIC 2). The estimated fair value of our sub-prime RMBS holdings purchased since 2012 was $816 million and $851 million at September 30, 2020 and December 31, 2019, with unrealized gains (losses) of $66 million and $61 million at September 30, 2020 and December 31, 2019, respectively.
72
Table of Contents
CMBS
Our CMBS holdings are diversified by vintage year, which were as follows at:
September 30, 2020December 31, 2019
Amortized CostEstimated Fair ValueAmortized CostEstimated Fair Value
(In millions)
2003 - 2010$94 $113 $109 $123 
2011114 115 223 223 
2012146 148 138 141 
2013214 217 199 205 
2014342 362 332 346 
2015954 1,031 938 977 
2016462 500 480 497 
2017701 777 683 717 
20181,660 1,897 1,580 1,700 
2019920 1,001 818 826 
2020258 264 — — 
Total$5,865 $6,425 $5,500 $5,755 
The estimated fair value of CMBS rated Aaa using rating agency ratings was $4.8 billion, or 75.2% of total CMBS, and designated NAIC 1 was $6.3 billion, or 97.9% of total CMBS, at September 30, 2020. CMBS Aaa rating agency ratings was $4.3 billion, or 74.9% of total CMBS, and designated NAIC 1 was $5.6 billion, or 97.5% of total CMBS at December 31, 2019.
ABS
Our ABS holdings are diversified by both collateral type and issuer. Our ABS holdings by collateral type and ratings profile were as follows at:
 September 30, 2020December 31, 2019
 Estimated
Fair Value		% of
Total		Net Unrealized
Gains (Losses)		Estimated
Fair Value		% of
Total		Net Unrealized
Gains (Losses)
 (Dollars in millions)
Collateral type:
Collateralized obligations$1,647 60.7 %$(5)$1,058 54.2 %$(8)
Student loans202 7.4 1 196 10.0 2 
Consumer loans239 8.8 5 171 8.7 2 
Automobile loans99 3.7 4 114 5.8 2 
Credit card loans58 2.1 7 60 3.1 3 
Other loans469 17.3 21 356 18.2 9 
Total$2,714 100.0 %$33 $1,955 100.0 %$10 
Ratings profile:
Rated Aaa$1,443 53.2 %$879 45.0 %
Designated NAIC 1$2,400 88.4 %$1,696 86.8 %
Allowance for Credit Losses for Fixed Maturity Securities
See Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements for information about the evaluation of fixed maturity securities for an allowance for credit losses or write-offs due to uncollectability.
Securities Lending
We participate in a securities lending program whereby securities are loaned to third parties, primarily brokerage firms and commercial banks. We obtain collateral, usually cash, in an amount generally equal to 102% of the estimated fair value of the securities loaned, which is obtained at the inception of a loan and maintained at a level greater than or equal to 100%
73
Table of Contents
for the duration of the loan. The estimated fair value of the securities loaned is monitored on a daily basis with additional collateral obtained as necessary throughout the duration of the loan. Securities loaned under such transactions may be sold or re-pledged by the transferee. We are liable to return to our counterparties the cash collateral under our control. Security collateral received from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reflected in the financial statements. These transactions are treated as financing arrangements and the associated cash collateral liability is recorded at the amount of the cash received.
See “— Liquidity and Capital Resources — The Company — Primary Uses of Liquidity and Capital — Securities Lending” and Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements for information regarding our securities lending program.
Mortgage Loans
Our mortgage loans are principally collateralized by commercial, agricultural and residential properties. Information regarding mortgage loans by portfolio segment was summarized as follows at:
 September 30, 2020December 31, 2019
 Amortized Cost% of
Total		Allowance for Credit Losses% of Amortized CostAmortized Cost% of
Total		Allowance for Credit Losses% of Amortized Cost
 (Dollars in millions)
Commercial$9,830 62.1 %$44 0.5 %$9,721 61.5 %$47 0.5 %
Agricultural3,380 21.3 %16 0.5 %3,388 21.4 %10 0.3 %
Residential2,626 16.6 %30 1.1 %2,708 17.1 %7 0.3 %
Total$15,836 100.0 %$90 0.6 %$15,817 100.0 %$64 0.4 %
Our mortgage loan portfolio is diversified by both geographic region and property type to reduce the risk of concentration. The percentage of our commercial and agricultural mortgage loan portfolios collateralized by properties located in the U.S. were 97% at both September 30, 2020 and December 31, 2019, and the remainder was collateralized by properties located outside of the U.S. The carrying value as a percentage of total commercial and agricultural mortgage loans for the top three states in the U.S. was as follows at:
September 30, 2020
California24%
New York12%
Florida8%
Additionally, we manage risk when originating commercial and agricultural mortgage loans by generally lending up to 75% of the estimated fair value of the underlying real estate collateral.
Our residential mortgage loan portfolio is managed in a similar manner to reduce risk of concentration. All residential mortgage loans were collateralized by properties located in the U.S. at both September 30, 2020 and December 31, 2019. The carrying value as a percentage of total residential mortgage loans for the top three states in the U.S. was as follows at:
September 30, 2020
California37%
Florida10%
New York7%
74
Table of Contents
Commercial Mortgage Loans by Geographic Region and Property Type. Commercial mortgage loans are the largest component of the mortgage loan invested asset class. The diversification across geographic regions and property types of commercial mortgage loans was as follows at:
 September 30, 2020December 31, 2019
 Amount% of
Total		Amount% of
Total
 (Dollars in millions)
Geographic Region:
Pacific$2,648 26.9 %$2,666 27.4 %
South Atlantic1,939 19.7 1,887 19.4 
Middle Atlantic1,872 19.0 1,875 19.3 
West South Central802 8.2 809 8.3 
Mountain697 7.1 668 6.9 
East North Central608 6.2 555 5.7 
International494 5.0 494 5.1 
New England463 4.7 412 4.2 
West North Central123 1.3 125 1.3 
East South Central84 0.9 85 0.9 
Multi-Region and Other100 1.0 145 1.5 
Total recorded investment9,830 100.0 %9,721 100.0 %
Less: allowance for credit losses44 47 
Carrying value, net of allowance for credit losses$9,786 $9,674 
Property Type:
Office$3,803 38.7 %$3,839 39.5 %
Apartment2,200 22.4 2,181 22.4 
Retail2,103 21.4 2,115 21.8 
Hotel928 9.4 930 9.6 
Industrial766 7.8 626 6.4 
Other30 0.3 30 0.3 
Total recorded investment9,830 100.0 %9,721 100.0 %
Less: allowance for credit losses44 47 
Carrying value, net of allowance for credit losses$9,786 $9,674 
Mortgage Loan Credit Quality — Monitoring Process. Our mortgage loan investments are monitored on an ongoing basis, including a review of loans that are current, past due, restructured and under foreclosure. Quarterly, we conduct a formal review of the portfolio with our investment managers. See Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements for information on mortgage loans by credit quality indicator, past due status, nonaccrual status and modified mortgage loans.
Our commercial mortgage loans are reviewed on an ongoing basis. These reviews may include an analysis of the property financial statements and rent roll, lease rollover analysis, property inspections, market analysis, estimated valuations of the underlying collateral, loan-to-value ratios, debt-service coverage ratios and tenant creditworthiness. The monitoring process focuses on higher risk loans, which include those that are classified as restructured, delinquent or in foreclosure, as well as loans with higher loan-to-value ratios and lower debt-service coverage ratios. The monitoring process for agricultural mortgage loans is generally similar, with a focus on higher risk loans, such as loans with higher loan-to-value ratios, including reviews on a geographic and sector basis. Our residential mortgage loans are reviewed on an ongoing basis. See Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements for information on our evaluation of residential mortgage loans and related valuation allowance methodology.
Loan-to-value ratios and debt-service coverage ratios are common measures in the assessment of the quality of commercial mortgage loans. Loan-to-value ratios are a common measure in the assessment of the quality of agricultural mortgage loans. Loan-to-value ratios compare the amount of the loan to the estimated fair value of the underlying collateral.
75
Table of Contents
A loan-to-value ratio greater than 100% indicates that the loan amount is greater than the collateral value. A loan-to-value ratio of less than 100% indicates an excess of collateral value over the loan amount. Generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss. The debt-service coverage ratio compares a property’s net operating income to amounts needed to service the principal and interest due under the loan. Generally, the lower the debt-service coverage ratio, the higher the risk of experiencing a credit loss. For our commercial mortgage loans, our average loan-to-value ratio was 56% and 53% at September 30, 2020 and December 31, 2019, respectively, and our average debt-service coverage ratio was 2.2x at both September 30, 2020 and December 31, 2019. The debt-service coverage ratio, as well as the values utilized in calculating the ratio, is updated annually on a rolling basis, with a portion of the portfolio updated each quarter. In addition, the loan-to-value ratio is routinely updated for all but the lowest risk loans as part of our ongoing review of our commercial mortgage loan portfolio. For our agricultural mortgage loans, our average loan-to-value ratio was 47% at both September 30, 2020 and December 31, 2019. The values utilized in calculating the agricultural mortgage loan loan-to-value ratio are developed in connection with the ongoing review of the agricultural loan portfolio and are routinely updated.
Loan Modifications Related to the COVID-19 Pandemic. Our underwriting and credit management practices are proactively refined to meet the changing economic environment. To actively mitigate losses and enhance borrower support across the mortgage loan portfolio segments, we have expanded loan modification and customer assistance infrastructures.
Since March 1, 2020, we have completed loan modifications and have provided waivers to certain covenants, including the furniture, fixture and expense reserves, tenant rent payment deferrals or lease modifications, rate reductions, maturity date extensions, and other actions with a number of our borrowers impacted by the COVID-19 pandemic. A subset of these modifications included short-term principal and interest forbearance. At September 30, 2020, the recorded investment on mortgage loans where borrowers were offered debt service forbearance and were not making payments was $700 million, comprised of $581 million commercial mortgage loans, $24 million of agricultural mortgage loans and $95 million of residential mortgage loans. These types of modifications are generally not considered troubled debt restructurings (“TDRs”) due to the relief granted by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). For more information on TDRs, see Note 4 to the Interim Condensed Consolidated Financial Statements.
Mortgage Loan Allowance for Credit Losses. See Notes 4 and 6 of the Notes to the Interim Condensed Consolidated Financial Statements for information about how the allowance for credit losses is established and monitored and activity in and balances of the allowance for credit losses for the nine months ended September 30, 2020 and 2019.
Limited Partnerships and Limited Liability Companies
The carrying value of our limited partnerships and limited liability companies (“LLCs”) was as follows at:
September 30, 2020December 31, 2019
(In millions)
Other limited partnerships interests$2,125 $1,941 
Real estate limited partnerships and LLCs (1)437 439 
Total$2,562 $2,380 
__________________
(1)The estimated fair value of real estate limited partnerships and LLCs was $502 million and $529 million at September 30, 2020 and December 31, 2019, respectively.
Cash distributions on these investments are generated from investment gains, operating income from the underlying investments of the funds and liquidation of the underlying investments of the funds. We estimate that the underlying investment of the private equity funds will typically be liquidated over the next 10 to 20 years.
76
Table of Contents
Other Invested Assets
The carrying value of our other invested assets by type was as follows at:
September 30, 2020December 31, 2019
Carrying
Value		% of
Total		Carrying
Value		% of
Total
(Dollars in millions)
Freestanding derivatives with positive estimated fair values
$4,831 95.9 %$3,021 93.9 %
FHLB stock81 1.6 39 1.2 
Tax credit renewable energy partnership63 1.3 82 2.6 
Leveraged leases, net of non-recourse debt51 1.0 64 2.0 
Other12 0.2 10 0.3 
Total$5,038 100.0 %$3,216 100.0 %
Derivatives
Derivative Risks
We are exposed to various risks relating to our ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market. We use a variety of strategies to manage these risks, including the use of derivatives. See Note 5 of the Notes to the Interim Condensed Consolidated Financial Statements:
•Information about the gross notional amount, estimated fair value, and primary underlying risk exposure of our derivatives by type of hedge designation, excluding embedded derivatives held at September 30, 2020 and December 31, 2019.
•The statement of operations effects of derivatives in cash flow, fair value or non-qualifying hedge relationships for the three months and nine months ended September 30, 2020 and 2019.
See “Business — Segments and Corporate & Other — Annuities,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies — ULSG Market Risk Exposure Management” and “— Annual Actuarial Review” included in our 2019 Annual Report for more information about our use of derivatives by major hedging programs.
Fair Value Hierarchy
See Note 6 of the Notes to the Interim Condensed Consolidated Financial Statements for derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy, as well as a rollforward of the fair value measurements for derivatives measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs as discussed below.
The valuation of Level 3 derivatives involves the use of significant unobservable inputs and generally requires a higher degree of management judgment or estimation than the valuations of Level 1 and Level 2 derivatives. Although Level 3 inputs are unobservable, management believes they are consistent with what other market participants would use when pricing such instruments and are considered appropriate given the circumstances. The use of different inputs or methodologies could have a material effect on the estimated fair value of Level 3 derivatives and could materially affect net income.
Derivatives categorized as Level 3 at September 30, 2020 include: credit default swaps priced using unobservable credit spreads, or that are priced through independent broker quotations; equity variance swaps with unobservable volatility inputs; foreign currency swaps with certain unobservable inputs and equity index options with unobservable correlation inputs.
Credit Risk
See Note 5 of the Notes to the Interim Condensed Consolidated Financial Statements for information about how we manage credit risk related to derivatives and for the estimated fair value of our net derivative assets and net derivative liabilities after the application of master netting agreements and collateral.
Our policy is not to offset the fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement. This policy applies to the recognition of derivatives in the balance sheets and does not affect our legal right of offset.
77
Table of Contents
Credit Derivatives
The gross notional amount and estimated fair value of credit default swaps were as follows at:
September 30, 2020December 31, 2019
Gross Notional
Amount		Estimated
Fair Value		Gross Notional
Amount		Estimated
Fair Value
(In millions)
Written $1,793 $26 $1,635 $36 
Purchased 18 — 18 — 
Total$1,811 $26 $1,653 $36 
The maximum amount at risk related to our written credit default swaps is equal to the corresponding gross notional amount. In a replication transaction, we pair an asset on our balance sheet with a written credit default swap to synthetically replicate a corporate bond, a core asset holding of life insurance companies. Replications are entered into in accordance with the guidelines approved by state insurance regulators and the NAIC and are an important tool in managing the overall corporate credit risk within the Company. In order to match our long-dated insurance liabilities, we seek to buy long-dated corporate bonds. In some instances, these may not be readily available in the market, or they may be issued by corporations to which we already have significant corporate credit exposure. For example, by purchasing Treasury bonds (or other high-quality assets) and associating them with written credit default swaps on the desired corporate credit name, we can replicate the desired bond exposures and meet our ALM needs. This can expose the Company to changes in credit spreads as the written credit default swap tenor is shorter than the maturity of Treasury bonds.
Off-Balance Sheet Arrangements
Collateral for Securities Lending and Derivatives
We have a securities lending program for the purpose of enhancing the total return on our investment portfolio. Periodically we receive non-cash collateral for securities lending from counterparties, which cannot be sold or re-pledged, and which is not recorded on our consolidated balance sheets. The amount of this collateral was $6 million at estimated fair value at September 30, 2020. The Company did not hold non-cash collateral at December 31, 2019. See Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements, as well as “— Investments — Securities Lending” for discussion of our securities lending program, the classification of revenues and expenses, and the nature of the secured financing arrangement and associated liability.
We enter into derivatives to manage various risks relating to our ongoing business operations. We have non-cash collateral from counterparties for derivatives, which can be sold or re-pledged subject to certain constraints, and which has not been recorded on our consolidated balance sheets. The amount of this non-cash collateral was $784 million and $593 million at September 30, 2020 and December 31, 2019, respectively. See Note 5 of the Notes to the Interim Condensed Consolidated Financial Statements for information regarding the earned income and the gross notional amount, estimated fair value of assets and liabilities and primary underlying risk exposure of our derivatives.
Guarantees
See “Guarantees” in Note 11 of the Notes to the Interim Condensed Consolidated Financial Statements.
Other
Additionally, we enter into commitments for the purpose of enhancing the total return on our investment portfolio: mortgage loan commitments and commitments to fund partnership investments, bank credit facilities and private corporate bond investments. See “Commitments” in Note 11 of the Notes to the Interim Condensed Consolidated Financial Statements. For further information on commitments to fund partnership investments, mortgage loans, bank credit facilities and private corporate bond investments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Contractual Obligations” included in our 2019 Annual Report.
78
Table of Contents
Policyholder Liabilities
We establish, and carry as liabilities, actuarially determined amounts that are calculated to meet policy obligations or to provide for future annuity payments. Amounts for actuarial liabilities are computed and reported in the financial statements in conformity with GAAP. For more details on policyholder liabilities, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Policyholder Liabilities” included in our 2019 Annual Report. Except as otherwise discussed below, there have been no material changes to our actuarial liabilities.
Future Policy Benefits
We establish liabilities for amounts payable under insurance policies. See Note 3 of the Notes to the Interim Condensed Consolidated Financial Statements. A discussion of future policy benefits by segment, as well as Corporate & Other, can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Policyholder Liabilities” included in our 2019 Annual Report.
Policyholder Account Balances
Policyholder account balances (“PABs”) are generally equal to the account value, which includes accrued interest credited, but excludes the impact of any applicable charge that may be incurred upon surrender. See Note 3 of the Notes to the Interim Condensed Consolidated Financial Statements. A discussion of PABs by segment, as well as Corporate & Other, can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Policyholder Liabilities” included in our 2019 Annual Report.
Variable Annuity Guarantees
We issue certain variable annuity products with guaranteed minimum benefits that provide the policyholder a minimum return based on their initial deposit (i.e., the Benefit Base) less withdrawals. In some cases, the Benefit Base may be increased by additional deposits, bonus amounts, accruals or optional market value step-ups. See Note 3 of the Notes to the Interim Condensed Consolidated Financial Statements. See also “Quantitative and Qualitative Disclosures About Market Risk — Market Risk - Fair Value Exposures — Interest Rates” and “Business — Segments and Corporate & Other — Annuities — Overview — Current Products — Variable Annuities” included in our 2019 Annual Report for additional information.
Select information that management considers relevant to understanding our variable annuity risk management strategy has been included below.
Net Amount at Risk
The net amount at risk (“NAR”) for the net GMDB is the amount of death benefit in excess of the account value (if any) as of the balance sheet date. It represents the amount of the claim we would incur if death claims were made on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death.
The NAR for the guaranteed minimum withdrawal benefits (“GMWB”) and guaranteed minimum accumulation benefits (“GMAB”) is the amount of guaranteed benefits in excess of the account values (if any) as of the balance sheet date. The NAR assumes utilization of benefits by all contract holders as of the balance sheet date. For the GMWB benefits, only a small portion of the Benefit Base is available for withdrawal on an annual basis. For the GMAB, the NAR would not be available until the GMAB maturity date.
The NAR for the GMWB with lifetime payments (“GMWB4L”) is the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream based on current annuity rates, equal to the lifetime amount provided under the guaranteed benefit. For contracts where the GMWB4L provides for a guaranteed cumulative dollar amount of payments, the NAR is based on the purchase of a lifetime with period certain income stream where the period certain ensures payment of this cumulative dollar amount. The NAR represents our potential economic exposure to such guarantees in the event all contract holders were to begin lifetime withdrawals on the balance sheet date regardless of age. Only a small portion of the Benefit Base is available for withdrawal on an annual basis.
The NAR for the GMIB is the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents our potential economic exposure to such guarantees in the event all contract holders were to annuitize on the balance sheet date, even though the guaranteed amount under the contracts may not be annuitized until after the waiting period of the contract.
79
Table of Contents
A detailed description of NAR by type of guaranteed minimum benefit can be found in “Business — Segments and Corporate & Other — Annuities — Overview — Net Amount at Risk” included in our 2019 Annual Report.
The account values and NAR of contract holders by type of guaranteed minimum benefit for variable annuity contracts were as follows at:
September 30, 2020 (1)December 31, 2019 (1)
Account ValueDeath Benefit NAR (1)Living Benefit NAR (1)% of Account Value In-the-Money (2)Account ValueDeath Benefit NAR (1)Living Benefit NAR (1)% of Account Value In-the-Money (2)
 (Dollars in millions)
GMIB$39,330 $2,693 $7,705 59.4 %$41,302 $2,302 $4,722 42.0 %
GMIB Max with EDB (3)10,943 3,435 207 21.8 %11,807 2,673 23 2.3 %
GMIB Max without EDB6,249 10 44 10.0 %6,750 2 5 0.8 %
GMWB4L (FlexChoiceSM)
5,050 12 194 40.1 %4,130 3 25 13.4 %
GMAB670 1 2 1.7 %672 1 1 0.6 %
GMWB2,589 44 11 7.5 %2,783 39 8 1.4 %
GMWB4L14,063 106 1,022 38.6 %14,904 71 509 23.7 %
EDB Only3,652 763 — N/A3,740 609 — N/A
GMDB Only (Other than EDB)17,925 990 — N/A18,183 971 — N/A
Total$100,471 $8,054 $9,185 $104,271 $6,671 $5,293 
__________________
(1)The “Death Benefit NAR” and “Living Benefit NAR” are not additive at the contract level.
(2)In-the-money is defined as any contract with a living benefit NAR in excess of zero.
(3)EDB is defined as enhanced death benefits.
Reserves
Under GAAP, certain of our variable annuity guarantee features are accounted for as insurance liabilities and reported on the consolidated balance sheets in future policy benefits with changes reported in policyholder benefits and claims. These liabilities are accounted for using long-term assumptions of equity and bond market returns and the level of interest rates. Therefore, these liabilities, valued at $6.2 billion at September 30, 2020, are less sensitive than derivative instruments to periodic changes to equity and fixed income market returns and the level of interest rates. Guarantees accounted for in this manner include GMDBs, as well as the life contingent portion of GMIBs and certain GMWBs. All other variable annuity guarantee features are accounted for as embedded derivatives and reported on the consolidated balance sheets in PABs with changes reported in net derivative gains (losses). These liabilities, valued at $3.9 billion at September 30, 2020, are accounted for at estimated fair value. Guarantees accounted for in this manner include GMABs, GMWBs and the non-life contingent portions of GMIBs. In some cases, a guarantee will have multiple features or options that require separate accounting such that the guarantee is not fully accounted for under only one of the accounting models (known as “split accounting”). Additionally, the index protection and accumulation features of Shield Annuities are accounted for as embedded derivatives, reported on the consolidated balance sheets in PABs with changes reported in net derivative gains (losses) and valued at $2.2 billion at September 30, 2020. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” included in our 2019 Annual Report.
80
Table of Contents
The GAAP variable annuity reserve balances by guarantee type and accounting model were as follows at:
Reserves
September 30, 2020December 31, 2019
Future Policy Benefits Policyholder Account Balances Total ReservesFuture Policy BenefitsPolicyholder Account BalancesTotal Reserves
(In millions)
GMDB$1,346 $— $1,346 $1,362 $— $1,362 
GMIB3,692 3,111 6,803 2,677 1,844 4,521 
GMIB Max859 269 1,128 560 (84)476 
GMAB— 3 3 — (17)(17)
GMWB— 55 55 — 6 6 
GMWB4L269 342 611 258 (93)165 
GMWB4L (FlexChoiceSM)
— 73 73 — — — 
Total$6,166 $3,853 $10,019 $4,857 $1,656 $6,513 
Derivatives Hedging Variable Annuity Guarantees
The gross notional amount and estimated fair value of the derivatives held in our macro interest rate hedging program were as follows at:
September 30, 2020December 31, 2019
Instrument TypeGross Notional Amount (1)Estimated Fair ValueGross Notional Amount (1)Estimated Fair Value
AssetsLiabilitiesAssetsLiabilities
(In millions)
Interest rate swaps$2,845 $593 $— $7,344 $798 $29 
Interest rate options22,570 1,481 178 29,750 782 187 
Interest rate forwards7,332 1,179 25 5,418 94 114 
Total$32,747 $3,253 $203 $42,512 $1,674 $330 
__________________
(1)The gross notional amounts presented do not necessarily represent the relative economic coverage provided by option instruments because certain positions were closed out by entering into offsetting positions that are not netted in the above table.
81
Table of Contents
The gross notional amount and estimated fair value of the derivatives in our variable annuity hedging program were as follows at:
September 30, 2020December 31, 2019
Instrument TypeGross Notional Amount (1)Estimated Fair ValueGross Notional Amount (1)Estimated Fair Value
AssetsLiabilitiesAssetsLiabilities
 (In millions)
Equity index options$33,361 $727 $991 $46,968 $814 $1,713 
Equity total return swaps12,997 63 222 7,723 2 367 
Equity variance swaps1,098 13 22 2,136 69 69 
Interest rate swaps2,845 593 — 7,344 798 29 
Interest rate options21,370 1,203 178 27,950 712 176 
Interest rate forwards2,774 308 9 — — — 
Total$74,445 $2,907 $1,422 $92,121 $2,395 $2,354 
__________________
(1)The gross notional amounts presented do not necessarily represent the relative economic coverage provided by option instruments because certain positions were closed out by entering into offsetting positions that are not netted in the above table.
Period to period changes in the estimated fair value of these hedges affect our net income, as well as stockholders’ equity and these effects can be material in any given period. See “Risk Factors — Risks Related to Our Business — Our variable annuity exposure risk management strategy may not be effective, may result in significant volatility in our profitability measures and may negatively affect our statutory capital,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies” all included in our 2019 Annual Report.
Liquidity and Capital Resources
Our business and results of operations are materially affected by conditions in the global capital markets and the economy generally. Stressed conditions, volatility or disruptions in global capital markets, particular markets or financial asset classes can impact us adversely, in part because we have a large investment portfolio and our insurance liabilities and derivatives are sensitive to changing market factors. Changing conditions in the global capital markets and the economy may affect our financing costs and market interest rates for our debt or equity securities. For further information regarding market factors that could affect our ability to meet liquidity and capital needs, including those related to the COVID-19 pandemic, see “— Industry Trends — COVID-19 Pandemic,” “— Investments — Current Environment” herein, as well as (i) “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends and Uncertainties” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Current Environment” in our 2019 Annual Report and (ii) “Risk Factors — The ongoing COVID-19 pandemic may materially adversely affect our business, results of operations and financial condition, including capitalization and liquidity” in our First Quarter Form 10-Q.
Liquidity and Capital Management
Based upon our capitalization, expectations regarding maintaining our business mix, ratings, and funding sources available to us, we believe we have sufficient liquidity to meet business requirements under current market conditions and certain stress scenarios. Our Board of Directors and senior management are directly involved in the governance of the capital management process, including proposed changes to the annual capital plan and capital targets. We are targeting a debt-to-capital ratio commensurate with our parent company credit ratings and our insurance subsidiaries’ financial strength ratings. We continuously monitor and adjust our liquidity and capital plans in light of market conditions, as well as changing needs and opportunities.
We maintain a substantial short-term liquidity position, which was $5.6 billion and $2.8 billion at September 30, 2020 and December 31, 2019, respectively. Short-term liquidity is comprised of cash and cash equivalents and short-term investments, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include amounts received in connection with securities lending, derivatives and assets held on deposit or in trust.
82
Table of Contents
An integral part of our liquidity management includes managing our level of liquid assets, which was $50.5 billion and $42.6 billion at September 30, 2020 and December 31, 2019, respectively. Liquid assets are comprised of cash and cash equivalents, short-term investments and publicly-traded securities, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include amounts received in connection with securities lending, derivatives and assets held on deposit or in trust.
The Company
Liquidity
Liquidity refers to our ability to generate adequate cash flows from our normal operations to meet the cash requirements of our operating, investing and financing activities. We determine our liquidity needs based on a rolling 12-month forecast by portfolio of invested assets which we monitor daily. We adjust the general account asset and derivatives mix and general account asset maturities based on this rolling 12-month forecast. To support this forecast, we conduct cash flow and stress testing, which reflect the impact of various scenarios, including (i) the potential increase in our requirement to pledge additional collateral or return collateral to our counterparties, (ii) a reduction in new business sales, and (iii) the risk of early contract holder and policyholder withdrawals, as well as lapses and surrenders of existing policies and contracts. We include provisions limiting withdrawal rights in many of our products, which deter the customer from making withdrawals prior to the maturity date of the product. If significant cash is required beyond our anticipated liquidity needs, we have various alternatives available depending on market conditions and the amount and timing of the liquidity need. These available alternative sources of liquidity include cash flows from operations, sales of liquid assets and funding sources including secured funding agreements, unsecured credit facilities and secured committed facilities.
Under certain adverse market and economic conditions, our access to liquidity may deteriorate, or the cost to access liquidity may increase.
Capital
We manage our capital position to maintain our financial strength and credit ratings. Our capital position is supported by our ability to generate cash flows within our insurance companies, our ability to effectively manage the risks of our businesses and our expected ability to borrow funds and raise additional capital to meet operating and growth needs in the event of adverse market and economic conditions.
We target to maintain a debt-to-capital ratio of approximately 25%, which we monitor using an average of our key leverage ratios as calculated by A.M. Best, Fitch, Moody’s and S&P. As such, we may opportunistically look to pursue additional financing over time, which may include the incurrence of additional term loans, borrowings under credit facilities, the issuance of debt, equity or hybrid securities or the refinancing of existing indebtedness. There can be no assurance that we will be able to complete any such financing transactions on terms and conditions favorable to us or at all.
In support of our target combined risk-based capital (“RBC”) ratio between 400% and 450%, we expect to continue to maintain a capital and exposure risk management program that targets total assets supporting our variable annuity contracts at or above the average of the worst two percent of a set of capital market scenarios over the life of the contracts (“CTE98”) level in normal market conditions. We refer to our target level of assets as our “Variable Annuity Target Funding Level.” While total assets supporting our variable annuity capital may exceed the CTE98 level, under stressed conditions, we intend to allow such assets supporting our variable annuity contracts to range between CTE98 and a target floor level of CTE95 (the average of the worst five percent of a set of capital market scenarios over the life of the contracts).
On February 6, 2020, we authorized the repurchase of up to $500 million of our common stock, which is in addition to the $600 million aggregate stock repurchase authorizations announced in May 2019 and August 2018. On May 11, 2020, we announced that we had temporarily suspended repurchases of our common stock. On August 24, 2020, we resumed repurchases of our common stock, as was announced on August 21, 2020. Repurchases made under the February 6, 2020 authorization may be made through open market purchases, including pursuant to 10b5-1 plans or pursuant to accelerated stock repurchase plans, or through privately negotiated transactions, from time to time at management’s discretion in accordance with applicable legal requirements. Common stock repurchases are dependent upon several factors, including our capital position, liquidity, financial strength and credit ratings, general market conditions, the market price of our common stock compared to management’s assessment of the stock’s underlying value and applicable regulatory approvals, as well as other legal and accounting factors.
We currently have no plans to declare and pay dividends on our common stock. Any future declaration and payment of dividends or other distributions or returns of capital will be at the discretion of our Board of Directors and will depend on and be subject to our financial condition, results of operations, cash needs, regulatory and other constraints, capital
83
Table of Contents
requirements (including capital requirements of our subsidiaries), contractual restrictions and any other factors that our Board of Directors deems relevant in making such a determination. Therefore, there can be no assurance that we will pay any dividends or make other distributions or returns of capital on our common stock, or as to the amount of any such dividends, distributions or returns of capital.
Sources and Uses of Liquidity and Capital
Our primary sources and uses of liquidity and capital were as follows at:
Nine Months Ended
September 30,
20202019
(In millions)
Sources:
Operating activities, net$515 $1,322 
Changes in policyholder account balances, net5,591 3,668 
Changes in payables for collateral under securities loaned and other transactions, net2,598 234 
Long-term debt issued614 1,000 
Preferred stock issued, net of issuance costs390 412 
Financing element on certain derivative instruments and other derivative related transactions, net— 179 
Total sources9,708 6,815 
Uses:
Investing activities, net4,184 5,699 
Long-term debt repaid1,001 601 
Dividends on preferred stock31 14 
Treasury stock acquired in connection with share repurchases376 314 
Financing element on certain derivative instruments and other derivative related transactions, net764 — 
Other, net40 43 
Total uses6,396 6,671 
Net increase (decrease) in cash and cash equivalents$3,312 $144 
Cash Flows from Operating Activities
The principal cash inflows from our insurance activities come from insurance premiums, annuity considerations and net investment income. The principal cash outflows are the result of various annuity and life insurance products, operating expenses and income tax, as well as interest expense. The primary liquidity concern with respect to these cash flows is the risk of early contract holder and policyholder withdrawal.
Cash Flows from Investing Activities
The principal cash inflows from our investment activities come from repayments of principal, proceeds from maturities and sales of investments, as well as settlements of freestanding derivatives. The principal cash outflows relate to purchases of investments and settlements of freestanding derivatives. We typically can have a net cash outflow from investing activities because cash inflows from insurance operations are reinvested in accordance with our ALM discipline to fund insurance liabilities. We closely monitor and manage these risks through our comprehensive investment risk management process. The primary liquidity concerns with respect to these cash flows are the risk of default by debtors and market disruption.
Cash Flows from Financing Activities
The principal cash inflows from our financing activities come from issuances of debt and equity securities, deposits of funds associated with policyholder account balances and lending of securities. The principal cash outflows come from repayments of debt, common stock repurchases, preferred stock dividends, withdrawals associated with policyholder account balances and the return of securities on loan. The primary liquidity concerns with respect to these cash flows are market disruption and the risk of early policyholder withdrawal.
84
Table of Contents
Primary Sources of Liquidity and Capital
In addition to the summary description of liquidity and capital sources discussed in “— Sources and Uses of Liquidity and Capital,” the following additional information is provided regarding our primary sources of liquidity and capital:
Funding Sources
Liquidity is provided by a variety of funding sources, including secured funding agreements, unsecured credit facilities and secured committed facilities. Capital is provided by a variety of funding sources, including issuances of debt and equity securities, as well as borrowings under our credit facilities. We maintain a shelf registration statement with the SEC that permits the issuance of public debt, equity and hybrid securities. As a “Well-Known Seasoned Issuer” under SEC rules, our shelf registration statement provides for automatic effectiveness upon filing and has no stated issuance capacity. The diversity of our funding sources enhances our funding flexibility, limits dependence on any one market or source of funds and generally lowers the cost of funds. Our primary funding sources include:
Preferred Stock
In May 2020, BHF issued depositary shares (the “Series B Depositary Shares”), each representing a 1/1,000th ownership interest in a share of its perpetual 6.750% non-cumulative preferred stock, Series B (the “Series B Preferred Stock”) and in the aggregate representing 16,100 shares of Series B Preferred Stock, with a stated amount of $25,000 per share, for aggregate net cash proceeds of $390 million. Under the terms of the Series B Preferred Stock, our ability to declare or pay dividends on, or purchase, redeem or otherwise acquire, shares of our common stock or shares of any other class or series of our capital stock (if any) that ranks junior to the Series B Preferred Stock will be subject to certain restrictions in the event that we do not declare and pay (or set aside) full dividends on the Series B Preferred Stock for the latest completed dividend period, and our ability to declare and pay full dividends on our perpetual 6.600% non-cumulative preferred stock, Series A or any other series of preferred stock that ranks equally with the Series B Preferred Stock (if any) will be subject to certain limitations in the event we do not declare and pay full dividends on the Series B Preferred Stock. See Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements.
Federal Home Loan Bank Funding Agreements, Reported in Policyholder Account Balances
Brighthouse Life Insurance Company is a member of the Federal Home Loan Bank (“FHLB”) of Atlanta, where we maintain an active funding agreement program, along with inactive funding agreement programs with certain other FHLBs. On April 2, 2020, Brighthouse Life Insurance Company issued funding agreements for an aggregate collateralized borrowing of $1.0 billion (the “April 2020 funding agreements”) to provide a readily available source of contingent liquidity. Brighthouse Life Insurance Company had obligations outstanding under funding agreements of $1.6 billion and $595 million at September 30, 2020 and December 31, 2019, respectively. During the nine months ended September 30, 2020, there were the aforementioned $1.0 billion of issuances and no repayments under funding agreements. During the nine months ended September 30, 2019, there were no issuances or repayments under funding agreements. Upon maturity on October 9, 2020, Brighthouse Life Insurance Company repaid $250 million borrowed under the April 2020 funding agreements with the remainder maturing in December 2020. For additional information regarding the funding agreement program, see Note 3 of the Notes to the Consolidated Financial Statements included in our 2019 Annual Report.
Farmer Mac Funding Agreements, Reported in Policyholder Account Balances
Brighthouse Life Insurance Company has a funding agreement program with the Federal Agricultural Mortgage Corporation and its affiliate Farmer Mac Mortgage Securities Corporation (“Farmer Mac”), pursuant to which the parties may enter into funding agreements in an aggregate amount of up to $500 million. At September 30, 2020, there were no borrowings under this funding agreement program.
Debt Issuances
During the second quarter of 2020, BHF issued $615 million aggregate principal amount of 5.625% unsecured senior notes due 2030 (the “2030 Senior Notes”) for aggregate net cash proceeds of $614 million. See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements.
Credit Facilities
We maintain a $1.0 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”) scheduled to mature in May 2024, all of which may be used for revolving loans and/or letters of credit. At September 30, 2020, there were no borrowings or letters of credit outstanding under the Revolving Credit Facility. In connection with the
85
Table of Contents
repayment of all outstanding borrowings under our $1.0 billion unsecured term loan facility (the “Term Loan Facility”), the Term Loan Facility was terminated without penalty on June 2, 2020, as discussed further in “— Primary Uses of Liquidity and Capital — Debt Repayments.”
Committed Facilities
Repurchase Facility
Brighthouse Life Insurance Company maintains a secured committed repurchase facility (the “Repurchase Facility”) with a financial institution, pursuant to which Brighthouse Life Insurance Company may enter into repurchase transactions in an aggregate amount of up to $2.0 billion. The Repurchase Facility has a term ending on July 31, 2021. Under the Repurchase Facility, Brighthouse Life Insurance Company may sell certain eligible securities at a purchase price based on the market value of the securities less an applicable margin based on the types of securities sold, with a concurrent agreement to repurchase such securities at a predetermined future date (ranging from two weeks to three months) and at a price which represents the original purchase price plus interest. At September 30, 2020, there were no borrowings under the Repurchase Facility.
Reinsurance Financing Arrangement
Our reinsurance subsidiary, BRCD, was formed to manage our capital and risk exposures and to support our term and ULSG businesses through the use of affiliated reinsurance arrangements and related reserve financing. BRCD maintains a financing arrangement with a pool of highly rated third-party reinsurers consisting of credit-linked notes. On June 11, 2020, BRCD, with the explicit permission of the Delaware Commissioner of Insurance, amended its financing arrangement to increase the maximum amount from $10.0 billion to $12.0 billion and to extend the term by two years to 2039. At September 30, 2020, there were no borrowings and there was $10.8 billion of funding available under this financing arrangement.
BRCD is capitalized with cash and invested assets, including funds withheld (“Minimum Initial Target Assets”) at a level we believe to be sufficient to satisfy its future cash obligations assuming a permanent level yield curve, consistent with NAIC cash flow testing scenarios. BRCD utilizes the above referenced financing arrangement to cover the difference between full required statutory assets (i.e., NAIC Valuation of Life Insurance Policies Model Regulation (Regulation XXX) and NAIC Actuarial Guideline 38 (Guideline AXXX) reserves plus target risk margin appropriate to meet capital needs) and Minimum Initial Target Assets. An admitted deferred tax asset could also serve to reduce the amount of funding required under the above referenced financing arrangement.
Outstanding Long-term Debt
Our outstanding long-term debt was as follows at:
 September 30, 2020December 31, 2019
 (In millions)
Senior notes (1)$3,585 $2,970 
Term loan— 1,000 
Junior subordinated debentures (1)363 363 
Other long-term debt (2)31 32 
Total long-term debt$3,979 $4,365 
__________________
(1)Includes unamortized debt issuance costs, discounts and premiums, as applicable, totaling $42 million at both September 30, 2020 and December 31, 2019 for senior notes and junior subordinated debentures on a combined basis.
(2)Represents non-recourse debt for which creditors have no access, subject to customary exceptions, to the general assets of the Company other than recourse to certain investment companies.
Debt and Facility Covenants
Our debt instruments and credit and committed facilities contain certain administrative, reporting and legal covenants. Additionally, our Revolving Credit Facility contains financial covenants, including requirements to maintain a specified minimum adjusted consolidated net worth, to maintain a ratio of total indebtedness to total capitalization not in excess of a specified percentage and that place limitations on the dollar amount of indebtedness that we may incur, which could restrict our operations and use of funds. At September 30, 2020, we were in compliance with these financial covenants.
86
Table of Contents
Primary Uses of Liquidity and Capital
In addition to the summarized description of liquidity and capital uses discussed in “— Sources and Uses of Liquidity and Capital,” the following additional information is provided regarding our primary uses of liquidity and capital:
Common Stock Repurchases
During the nine months ended September 30, 2020 and 2019, we repurchased 15,119,010 shares and 8,395,371 shares, respectively, of our common stock through open market purchases pursuant to 10b5-1 plans for $376 million and $314 million, respectively. On May 11, 2020, we announced that we had temporarily suspended repurchases of our common stock. On August 24, 2020, we resumed repurchases of our common stock, as was announced on August 21, 2020.
Preferred Stock Dividends
During the nine months ended September 30, 2020 and 2019, we paid dividends on our preferred stock of $31 million and $14 million, respectively. See Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements.
Debt Repayments
During the second quarter of 2020, BHF used the aggregate net proceeds from the issuances of the 2030 Senior Notes and the Series B Depositary Shares to repay $1.0 billion of borrowings outstanding under the Term Loan Facility. See Notes 7 and 8 of the Notes to the Interim Condensed Consolidated Financial Statements.
Debt Repurchases
We may from time to time seek to retire or purchase our outstanding indebtedness through cash purchases and/or exchanges for other securities, purchases in the open market, privately negotiated transactions or otherwise. Any such repurchases or exchanges will be dependent upon several factors, including our liquidity requirements, contractual restrictions, general market conditions, and applicable regulatory, legal and accounting factors. Whether or not we repurchase any debt and the size and timing of any such repurchases will be determined at our discretion.
Insurance Liabilities
Liabilities arising from our insurance activities primarily relate to benefit payments under various annuity and life insurance products, as well as payments for policy surrenders, withdrawals and loans. Surrender or lapse behavior differs somewhat by product but tends to occur in the ordinary course of business. During the nine months ended September 30, 2020, general account surrenders and withdrawals totaled $1.5 billion, almost all of which was attributable to products within the Annuities segment. During the nine months ended September 30, 2019, general account surrenders and withdrawals totaled $1.7 billion, of which $1.5 billion was attributable to products within the Annuities segment.
Pledged Collateral
We pledge collateral to, and have collateral pledged to us by, counterparties in connection with our derivatives. At both September 30, 2020 and December 31, 2019, we did not pledge any cash collateral to counterparties. At September 30, 2020 and December 31, 2019, we were obligated to return cash collateral pledged to us by counterparties of $3.4 billion and $1.3 billion, respectively. See Note 5 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information about pledged collateral. We also pledge collateral from time to time in connection with funding agreements.
Securities Lending
We have a securities lending program whereby securities are loaned to third parties, primarily brokerage firms and commercial banks. We obtain collateral, usually cash, from the borrower, which must be returned to the borrower when the loaned securities are returned to us. Under our securities lending program, we were liable for cash collateral under our control of $3.6 billion and $3.1 billion at September 30, 2020 and December 31, 2019, respectively. Of these amounts, $1.2 billion and $1.3 billion at September 30, 2020 and December 31, 2019, respectively, were on open, meaning that the related loaned security could be returned to us on the next business day requiring the immediate return of cash collateral we hold. The estimated fair value of the securities on loan related to the cash collateral on open at September 30, 2020 was $1.2 billion, primarily U.S. government and agency securities that, if put back to us, could be immediately sold to satisfy the cash requirement. See Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements.
87
Table of Contents
Litigation
Putative or certified class action litigation and other litigation, and claims and assessments against us, in addition to those discussed elsewhere herein and those otherwise provided for in the financial statements, have arisen in the course of our business, including, but not limited to, in connection with our activities as an insurer, employer, investor, investment advisor, and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning our compliance with applicable insurance and other laws and regulations. See Note 11 of the Notes to the Interim Condensed Consolidated Financial Statements.
The Parent Company
Liquidity and Capital
In evaluating liquidity, it is important to distinguish the cash flow needs of the parent company from the cash flow needs of the combined group of companies. BHF is largely dependent on cash flows from its insurance subsidiaries to meet its obligations. Constraints on BHF’s liquidity may occur as a result of operational demands and/or as a result of compliance with regulatory requirements.
Short-term Liquidity and Liquid Assets
At September 30, 2020 and December 31, 2019, BHF and certain of its non-insurance subsidiaries had short-term liquidity of $1.3 billion and $723 million, respectively. Short-term liquidity is comprised of cash and cash equivalents and short-term investments.
At September 30, 2020 and December 31, 2019, BHF and certain of its non-insurance subsidiaries had liquid assets of $1.3 billion and $767 million, respectively, of which $1.3 billion and $715 million, respectively, was held by BHF. Liquid assets are comprised of cash and cash equivalents, short-term investments and publicly-traded securities.
Statutory Capital and Dividends
The NAIC and state insurance departments have established regulations that provide minimum capitalization requirements based on RBC formulas for insurance companies. RBC is based on a formula calculated by applying factors to various asset, premium, claim, expense and statutory reserve items. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk, market risk and business risk and is calculated on an annual basis. The formula is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not as a means to rank insurers generally. State insurance laws provide insurance regulators the authority to require various actions by, or take various actions against, insurers whose total adjusted capital (“TAC”) does not meet or exceed certain RBC levels. As of the date of the most recent annual statutory financial statements filed with insurance regulators, the TAC of each of our insurance subsidiaries subject to these requirements was in excess of each of those RBC levels.
The amount of dividends that our insurance subsidiaries can ultimately pay to BHF through their various parent entities provides an additional margin for risk protection and investment in our businesses. Such dividends are constrained by the amount of surplus our insurance subsidiaries hold to maintain their ratings, which is generally higher than minimum RBC requirements. We proactively take actions to maintain capital consistent with these ratings objectives, which may include adjusting dividend amounts and deploying financial resources from internal or external sources of capital. Certain of these activities may require regulatory approval. Furthermore, the payment of dividends and other distributions by our insurance subsidiaries is governed by insurance laws and regulations. See Notes 10 and 18 of the Notes to the Consolidated Financial Statements in our 2019 Annual Report.
Primary Sources and Uses of Liquidity and Capital
The principal sources of funds available to BHF include distributions from Brighthouse Holdings, LLC (“BH Holdings”), dividends and returns of capital from its insurance subsidiaries, capital markets issuances, as well as its own cash and cash equivalents and short-term investments. These sources of funds may also be supplemented by alternate sources of liquidity either directly or indirectly through our insurance subsidiaries. For example, we have established internal liquidity facilities to provide liquidity within and across our regulated and non-regulated entities to support our businesses.
88
Table of Contents
The primary uses of liquidity of BHF include debt service obligations (including interest expense and debt repayments), preferred stock dividends, capital contributions to subsidiaries, common stock repurchases and payment of general operating expenses. Based on our analysis and comparison of our current and future cash inflows from the dividends we receive from subsidiaries that are permitted to be paid without prior insurance regulatory approval, our investment portfolio and other cash flows and anticipated access to the capital markets, we believe there will be sufficient liquidity and capital to enable BHF to make payments on debt, pay preferred stock dividends, contribute capital to its subsidiaries, repurchase its common stock, pay all general operating expenses and meet its cash needs.
In addition to the liquidity and capital sources discussed in “— The Company — Primary Sources of Liquidity and Capital” and “— The Company — Primary Uses of Liquidity and Capital,” the following additional information is provided regarding BHF’s primary sources and uses of liquidity and capital:
Distributions from and Capital Contributions to BH Holdings
During the nine months ended September 30, 2020 and 2019, BHF received cash distributions of $988 million and $195 million, respectively, from BH Holdings and made cash capital contributions of $0 and $412 million, respectively, to BH Holdings. Distributions received in 2020 primarily relate to $800 million of ordinary cash dividends paid by Brighthouse Life Insurance Company to BH Holdings.
Short-term Intercompany Loans
As of September 30, 2020, BHF, as borrower, had a short-term intercompany loan agreement with certain of its non-insurance subsidiaries, as lenders, for the purposes of facilitating the management of the available cash of the borrower and the lenders on a short-term and consolidated basis. Such intercompany loan agreement allows management to optimize the efficient use of and maximize the yield on cash between BHF and its subsidiary lenders. Each loan entered into under this intercompany loan agreement has a term not more than 364 days and bears interest on the unpaid principal amount at a variable rate, payable monthly. During the nine months ended September 30, 2020 and 2019, BHF borrowed $454 million and $736 million, respectively, from certain of its non-insurance subsidiaries under short-term intercompany loan agreements and repaid $415 million and $837 million, respectively, to certain of its non-insurance company subsidiaries under short-term intercompany loan agreements. At September 30, 2020 and December 31, 2019, BHF had total obligations outstanding of $382 million and $343 million, respectively, under such agreements.
Intercompany Liquidity Facilities
As of September 30, 2020, we maintained intercompany liquidity facilities with certain of our insurance and non-insurance company subsidiaries to provide short-term liquidity within and across the combined group of companies. Under these facilities, which are comprised of a series of revolving loan agreements among BHF and its participating subsidiaries, each company may lend to or borrow from each other, subject to certain maximum limits for a term not more than 364 days. During both the nine months ended September 30, 2020 and 2019, there were no borrowings or repayments by BHF under intercompany liquidity facilities and, at both September 30, 2020 and December 31, 2019, BHF had no obligations outstanding under such facilities.
89
Table of Contents
Note Regarding Forward-Looking Statements
This report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, 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, financial projections, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, as well as trends in operating and financial results.
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. 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:
•the impact of the ongoing COVID-19 pandemic;
•differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models;
•higher risk management costs and exposure to increased market risk due to guarantees within certain of our products;
•the effectiveness of our variable annuity exposure risk management strategy and the impact of such strategy on volatility in our profitability measures and negative effects on our statutory capital;
•the reserves we are required to hold against our variable annuities as a result of actuarial guidelines;
•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 impact of adverse capital and credit market conditions, including with respect to our ability to meet liquidity needs and access capital;
•the impact of changes in regulation and in supervisory and enforcement policies on our insurance business or other operations;
•the availability of reinsurance and the ability of the counterparties to our reinsurance or indemnification arrangements to perform their obligations thereunder;
•the adverse impact to liabilities for policyholder claims as a result of extreme mortality events;
•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;
•any failure of third parties to provide services we need, any failure of the practices and procedures of such third parties and any inability to obtain information or assistance we need from third parties;
•the ability of our insurance subsidiaries to pay dividends to us, and our ability to pay dividends to our shareholders and repurchase our common stock;
•the effectiveness of our policies and procedures in managing risk;
•our ability to market and distribute our products through distribution channels;
•whether all or any portion of the tax consequences of our separation from MetLife are not as expected, leading to material additional taxes or material adverse consequences to tax attributes that impact us;
90
Table of Contents
•the uncertainty of the outcome of any disputes with MetLife over tax-related or other matters and agreements or disagreements regarding MetLife’s or our obligations under our other agreements;
•the potential material negative tax impact of potential future tax legislation that could make some of our products less attractive to consumers; and
•other factors described in this report and from time to time in documents that we file with 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 2019 Annual Report, 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.
Corporate Information
We routinely use our Investor Relations website to provide presentations, press releases and other information that may be deemed material to investors. Accordingly, we encourage investors and others interested in the Company to review the information that we share at http://investor.brighthousefinancial.com. In addition, our Investor Relations website allows interested persons to sign up to automatically receive e-mail alerts when we post financial information. Information contained on or connected to any website referenced in this report or any of our other filings with the SEC is not incorporated by reference in this report or in any other report or document we file with the SEC, and any website references are intended to be inactive textual references only unless expressly noted.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We regularly analyze our market risk exposure to interest rate, equity market price, credit spreads and foreign currency exchange rate risks. As a result of that analysis, we have determined that the estimated fair values of certain assets and liabilities are significantly exposed to changes in interest rates, and to a lesser extent, to changes in equity market prices and foreign currency exchange rates. We have exposure to market risk through our insurance and annuity operations and general account investment activities. For purposes of this discussion, “market risk” is defined as changes in estimated fair value resulting from changes in interest rates, equity market prices, credit spreads and foreign currency exchange rates. We may have additional financial impacts other than changes in estimated fair value, which are beyond the scope of this discussion. A description of our market risk exposures may be found under “Quantitative and Qualitative Disclosures About Market Risk” in our 2019 Annual Report.
There have been no material changes to our market risk exposures from the market risk exposures previously disclosed in our 2019 Annual Report, with the exception of sensitivity to changes in interest rates previously disclosed in the First Quarter Form 10-Q.
Item 4. Controls and Procedures
Management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of September 30, 2020.
MetLife provides certain services to the Company on a transitional basis through services agreements. The Company continues to change business processes, implement systems and establish new third-party arrangements. We consider these in aggregate to be material changes in our internal control over financial reporting.
Other than as noted above, there were no changes to the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, these internal controls over financial reporting.
91
Table of Contents
Part II — Other Information
Item 1. Legal Proceedings
 See Note 11 of the Notes to the Interim Condensed Consolidated Financial Statements. Except as disclosed in the Notes to the Interim Condensed Consolidated Financial Statements, there have been no new material legal proceedings and no material developments in legal proceedings previously disclosed in our 2019 Annual Report, as amended or supplemented by our subsequent Quarterly Reports.
Item 1A. Risk Factors
We discuss in this report, in our 2019 Annual Report and in our other filings with the SEC, various risks that may materially affect our business. In addition, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Note Regarding Forward-Looking Statements” included herein. There have been no material changes to our risk factors from the risk factors previously disclosed in our 2019 Annual Report, as amended or supplemented by our First Quarter Form 10-Q.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
Purchases of BHF common stock made by or on behalf of BHF or its affiliates during the three months ended September 30, 2020 are set forth below:
PeriodTotal Number of Shares Purchased (1)Average Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
(In millions)
July 1 — July 31, 2020— $— — $231 
August 1 — August 31, 2020233,003 $31.15 233,003 $224 
September 1 — September 30, 20201,636,846 $28.69 1,635,080 $177 
Total1,869,849 1,868,083 
__________________
(1)Where applicable, total number of shares purchased includes shares of common stock withheld with respect to option exercise costs and tax withholding obligations associated with the exercise or vesting of share-based compensation awards under our publicly announced benefit plans or programs.
(2)On February 6, 2020, we authorized the repurchase of up to $500 million of our common stock, which is in addition to the $600 million aggregate stock repurchase authorizations announced in May 2019 and August 2018. On May 11, 2020, we announced that we had temporarily suspended repurchases of our common stock. On August 24, 2020, we resumed repurchases of our common stock, as was announced on August 21, 2020. For more information on common stock repurchases, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Primary Uses of Liquidity and Capital — Common Stock Repurchases” as well as Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements.
92
Table of Contents
Item 6. Exhibits
(Note Regarding Reliance on Statements in Our Contracts: In reviewing the agreements included as exhibits herein, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about Brighthouse Financial, Inc. and its subsidiaries or affiliates, or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and (i) should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; (iii) may apply standards of materiality in a way that is different from what may be viewed as material to investors; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about Brighthouse Financial, Inc. and its subsidiaries and affiliates may be found elsewhere herein and Brighthouse Financial, Inc.’s other public filings, which are available without charge through the U.S. Securities and Exchange Commission website at www.sec.gov.)
Exhibit No.Description
10.1#
31.1*
31.2*
32.1**
32.2**
101.INS*XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*Inline XBRL Taxonomy Extension Schema Document.
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document.
104*
The cover page of Brighthouse Financial, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in Inline XBRL (included within the Exhibit 101 attachments).
* Filed herewith.
** Furnished herewith.
# Denotes management contracts or compensation plans or arrangements.
93
Table of Contents
SIGNATURE
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 thereunto duly authorized.

BRIGHTHOUSE FINANCIAL, INC.
By:/s/ Edward A. Spehar
Name:Edward A. Spehar
Title:Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)
Date: November 6, 2020
94
Document

Exhibit 31.1


CERTIFICATIONS
I, Eric T. Steigerwalt, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Brighthouse Financial, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 6, 2020
/s/ Eric T. Steigerwalt
Eric T. Steigerwalt
President and Chief Executive Officer


Document

Exhibit 31.2


CERTIFICATIONS
I, Edward A. Spehar, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Brighthouse Financial, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 6, 2020
/s/ Edward A. Spehar
Edward A. Spehar
Executive Vice President and Chief Financial Officer


Document

Exhibit 32.1


SECTION 906 CERTIFICATION
CERTIFICATION PURSUANT TO SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE
I, Eric T. Steigerwalt, certify that, to my knowledge, (i) Brighthouse Financial, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Brighthouse Financial, Inc.
Date: November 6, 2020
 
/s/ Eric T. Steigerwalt
Eric T. Steigerwalt
President and Chief Executive Officer
This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by Brighthouse Financial, Inc. (the “Company”) for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

Document

Exhibit 32.2

SECTION 906 CERTIFICATION
CERTIFICATION PURSUANT TO SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE
I, Edward A. Spehar, certify that, to my knowledge, (i) Brighthouse Financial, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Brighthouse Financial, Inc.
Date: November 6, 2020
 
/s/ Edward A. Spehar
Edward A. Spehar
Executive Vice President and Chief Financial Officer
This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by Brighthouse Financial, Inc. (the “Company”) for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.