Annual Statements Open main menu

Brighthouse Financial, Inc. - Quarter Report: 2020 September (Form 10-Q)


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
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
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 $673 
Universal life and investment-type product policy fees882 867 2,595 2,630 
Net investment income996 928 2,564 2,681 
Other revenues99 94 294 282 
Net investment gains (losses)27 (48)79 
Net derivative gains (losses)(1,857)1,057 2,392 (97)
Total revenues309 3,187 8,372 6,248 
Expenses
Policyholder benefits and claims3,047 1,319 5,073 2,936 
Interest credited to policyholder account balances281 272 816 795 
Amortization of deferred policy acquisition costs and value of business acquired244 181 922 373 
Other expenses580 611 1,674 1,824 
Total expenses4,152 2,383 8,485 5,928 
Income (loss) before provision for income tax(3,843)804 (113)320 
Provision for income tax expense (benefit)(850)119 (88)(14)
Net income (loss)(2,993)685 (25)334 
Less: Net income (loss) attributable to noncontrolling interests
Net income (loss) attributable to Brighthouse Financial, Inc.(2,995)683 (29)330 
Less: Preferred stock dividends17 31 14 
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders$(3,012)$676 $(60)$316 
Comprehensive income (loss)$(2,577)$1,550 $2,116 $3,185 
Less: Comprehensive income (loss) attributable to noncontrolling interests
Comprehensive income (loss) attributable to Brighthouse Financial, Inc.$(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$— $$12,908 $585 $(562)$3,240 $16,172 $65 $16,237 
Cumulative effect of change in accounting principle, net of income tax (Note 1)
(14)(11)(11)
Balance at January 1, 2020
— 12,908 571 (562)3,243 16,161 65 16,226 
Preferred stock issuance
— 390390 390 
Treasury stock acquired in connection with share repurchases
(322)(322)(322)
Share-based compensation
— (3)
Dividends on preferred stock
(14)(14)(14)
Change in noncontrolling interests
— (2)(2)
Net income (loss)
2,966 2,966 2,968 
Other comprehensive income (loss), net of income tax
1,722 1,722 1,722 
Balance at June 30, 2020 — 13,307 3,523 (887)4,965 20,909 65 20,974 
Treasury stock acquired in connection with share repurchases
(54)(54)(54)
Share-based compensation
Dividends on preferred stock(17)(17)(17)
Change in noncontrolling interests— (2)(2)
Net income (loss)(2,995)(2,995)(2,993)
Other comprehensive income (loss), net of income tax
416 416 416 
Balance at September 30, 2020$— $$13,314 $511 $(941)$5,381 $18,266 $65 $18,331 
Preferred StockCommon StockAdditional Paid-in CapitalRetained Earnings (Deficit)Treasury Stock at CostAccumulated
Other
Comprehensive
Income (Loss)
Brighthouse Financial, Inc.’s Stockholders’ EquityNoncontrolling InterestsTotal Equity
Balance at December 31, 2018$— $$12,473 $1,346 $(118)$716 $14,418 $65 $14,483 
Preferred stock issuance
— 412 412 412 
Treasury stock acquired in connection with share repurchases
(188)(188)(188)
Share-based compensation
Dividends on preferred stock
(7)(7)(7)
Change in noncontrolling interests
— (2)(2)
Net income (loss)
(353)(353)(351)
Other comprehensive income (loss), net of income tax
1,986 1,986 1,986 
Balance at June 30, 2019— 12,893 986 (306)2,702 16,276 65 16,341 
Treasury stock acquired in connection with share repurchase
(126)(126)(126)
Share-based compensation
Dividends on preferred stock(7)(7)(7)
Change in noncontrolling interests
— (2)(2)
Net income (loss)
683 683 685 
Other comprehensive income (loss), net of income tax
865 865 865 
Balance at September 30, 2019$— $$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 loans89 
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)$
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)(670)
Less: Net income (loss) attributable to noncontrolling interests— — — 
Less: Preferred stock dividends— — — 17 17 
Adjusted earnings$387 $76 $(1,139)$(13)(689)
Adjustments for:
Net investment gains (losses)
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— — — 
Less: Preferred stock dividends— — — 
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— — — 
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— — — 
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) benefit
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 $$4,738 $133 $35,906 $28,375 $— $2,852 $67 $31,160 
Foreign corporate9,702 1,069 110 10,660 9,177 — 741 74 9,844 
RMBS7,807 652 8,449 8,692 — 438 12 9,118 
U.S. government and agency5,713 — 3,222 — 8,935 5,529 — 1,869 7,396 
CMBS5,865 — 569 6,425 5,500 — 264 5,755 
State and political subdivision3,478 — 953 4,429 3,358 — 701 4,057 
ABS2,681 — 54 21 2,714 1,945 — 21 11 1,955 
Foreign government1,512 — 314 1,820 1,503 — 250 1,751 
Total fixed maturity securities$68,061 $$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 11 — 857 386 
U.S. government and agency— — — — 40 — — 
CMBS344 59 559 171 
State and political subdivision123 — — 143 — 
ABS667 590 13 362 676 
Foreign government121 — 65 — — 
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$$— $$
Allowance on securities where credit losses were not previously recorded
Reductions for securities sold(1)— — (1)
Write-offs charged against allowance (1)(3)— (1)(4)
Balance at September 30, 2020
$$$$
_______________
(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 $$64 
Cumulative effect of change in accounting principle(20)15 
Balance at January 1, 202027 17 22 66 
Current period provision17 (1)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$77 
Allowance at acquisition date$
Discount or premium attributable to other factors$
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 13 197 226 
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 
Nonperforming— 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— 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)$$— 
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 corporate— — — — — — 
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 securities
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 investments30 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 $$28 $(26)$81 
Equity securities(3)14 
Mortgage loans(1)(23)(8)
Limited partnerships and LLCs(1)(3)(4)(8)
Other(2)— — 
Total net investment gains (losses)$$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)$$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 — 3,350 — 
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 — 138 — 
Credit default swaps — purchasedCredit18 — — 18 — — 
Credit default swaps — writtenCredit1,793 27 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 7,723 367 
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$— $— $$(1)
Foreign currency exchange rate derivatives10 (3)(184)
Total cash flow hedges10 (3)(185)
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives(435)— — — 
Foreign currency exchange rate derivatives(50)(3)— — 
Credit derivatives— — — 
Equity derivatives(752)— — — 
Embedded derivatives(628)— — — 
Total non-qualifying hedges(1,861)(3)— — 
Total$(1,851)$(6)$$(185)
Three Months Ended September 30, 2019
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives$— $— $$51 
Foreign currency exchange rate derivatives— — 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 derivatives— — — 
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$$— $$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 derivatives— — — 
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 $— $$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$$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 $(625)$
Derivative liabilities $1,495 $(1,068)$— $427 $(426)$
December 31, 2019
Derivative assets$3,062 $(1,458)$(1,115)$489 $(488)$
Derivative liabilities $2,522 $(1,458)$— $1,064 $(1,061)$
_______________
(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 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 99 117 
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 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 103,028 103,184 
Total assets$5,036 $185,459 $1,535 $192,030 
Liabilities
Derivative liabilities: (1)
Interest rate$— $226 $— $226 
Foreign currency exchange rate— 37 — 37 
Credit— — 
Equity market— 1,216 23 1,239 
Total derivative liabilities— 1,479 24 1,503 
Embedded derivatives within liability host contracts (2)— — 6,449 6,449 
Total liabilities$— $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 125 147 
Short-term investments1,271 682 1,958 
Derivative assets: (1)
Interest rate— 1,778 — 1,778 
Foreign currency exchange rate— 281 286 
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