Brighthouse Financial, Inc. - Quarter Report: 2023 March (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 March 31, 2023


☐			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

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 class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	BHF	The Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/1,000th interest in a share of 6.600% Non-Cumulative Preferred Stock, Series A	BHFAP	The Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/1,000th interest in a share of 6.750% Non-Cumulative Preferred Stock, Series B	BHFAO	The Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/1,000th interest in a share of 5.375% Non-Cumulative Preferred Stock, Series C	BHFAN	The Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/1,000th interest in a share of 4.625% Non-Cumulative Preferred Stock, Series D	BHFAM	The Nasdaq Stock Market LLC
6.250% Junior Subordinated Debentures due 2058	BHFAL	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (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 filer

Accelerated 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 May 5, 2023, 66,860,519 shares of the registrant’s common stock were outstanding.

Table of Contents


		Page
Part I — Financial Information
Item 1.	Consolidated Financial Statements (at March 31, 2023 (Unaudited) and December 31, 2022 and for the Three Months Ended March 31, 2023 and 2022 (Unaudited)):
	Interim Condensed Consolidated Balance Sheets	2
	Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	3
	Interim Condensed Consolidated Statements of Equity	4
	Interim Condensed Consolidated Statements of Cash Flows	5
	Notes to the Interim Condensed Consolidated Financial Statements (Unaudited):
	Note 1 — Business, Basis of Presentation and Summary of Significant Accounting Policies	6
	Note 2 — ASU 2018-12 Transition	11
	Note 3 — Segment Information	13
	Note 4 — Insurance	16
	Note 5 — Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles	23
	Note 6 — Investments	25
	Note 7 — Derivatives	36
	Note 8 — Fair Value	41

	Note 9 — Equity	50
	Note 10 — Other Revenues and Other Expenses	52
	Note 11 — Earnings Per Common Share	53
	Note 12 — Contingencies, Commitments and Guarantees	54

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	57
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	93
Item 4.	Controls and Procedures	97

Part II — Other Information
Item 1.	Legal Proceedings	97
Item 1A.	Risk Factors	97
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	98

Item 6.	Exhibits	99

Signature		100

Table of Contents

Part I — Financial Information

Item 1. Financial Statements

Brighthouse Financial, Inc.

Interim Condensed Consolidated Balance Sheets

March 31, 2023 (Unaudited) and December 31, 2022

(In millions, except share and per share data)


	March 31, 2023		December 31, 2022
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $84,693 and $84,344, respectively; allowance for credit losses of $5 and $7, respectively)	$	77,685	$	75,577
Equity securities, at estimated fair value	91		89
Mortgage loans (net of allowance for credit losses of $136 and $119, respectively)	22,823		22,936
Policy loans	1,273		1,282
Limited partnerships and limited liability companies	4,803		4,775
Short-term investments, principally at estimated fair value	1,386		1,081
Other invested assets, principally at estimated fair value (net of allowance for credit losses of $13 and $13, respectively)	3,229		2,852
Total investments	111,290		108,592
Cash and cash equivalents	3,685		4,115
Accrued investment income	985		885
Premiums, reinsurance and other receivables (net of allowance for credit losses of $10 and $10, respectively)	18,967		18,548
Deferred policy acquisition costs and value of business acquired	5,027		5,084
Current income tax recoverable	30		38
Deferred income tax asset	1,673		1,736
Market risk benefit assets	510		483
Other assets	395		401
Separate account assets	87,440		84,965
Total assets	$	230,002	$	224,847
Liabilities and Equity
Liabilities
Future policy benefits	$	32,286	$	31,497
Policyholder account balances	76,120		73,527
Market risk benefit liabilities	10,729		10,389
Other policy-related balances	3,816		4,098
Payables for collateral under securities loaned and other transactions	4,401		4,560
Long-term debt	3,157		3,156


Other liabilities	6,234		7,057
Separate account liabilities	87,440		84,965
Total liabilities	224,183		219,249
Contingencies, Commitments and Guarantees (Note 12)
Equity
Brighthouse Financial, Inc.’s stockholders’ equity:
Preferred stock, par value $0.01 per share; $1,753 aggregate liquidation preference	—		—
Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 122,717,866 and 122,153,422 shares issued, respectively; 67,401,618 and 68,278,068 shares outstanding, respectively	1		1
Additional paid-in capital	14,054		14,075
Retained earnings (deficit)	(894)		(395)
Treasury stock, at cost; 55,316,248 and 53,875,354 shares, respectively	(2,119)		(2,042)
Accumulated other comprehensive income (loss)	(5,288)		(6,106)
Total Brighthouse Financial, Inc.’s stockholders’ equity	5,754		5,533
Noncontrolling interests	65		65
Total equity	5,819		5,598
Total liabilities and equity	$	230,002	$	224,847

See accompanying notes to the interim condensed consolidated financial statements.

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Brighthouse Financial, Inc.

Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

(In millions, except per share data)


	Three Months Ended March 31,
		2023		2022
Revenues
Premiums		$	197	$	166
Universal life and investment-type product policy fees		606		680
Net investment income		1,059		1,151
Other revenues		93		138
Net investment gains (losses)		(96)		(68)
Net derivative gains (losses)		(575)		(54)
Total revenues		1,284		2,013
Expenses
Policyholder benefits and claims (including liability remeasurement gains (losses) of $0 and $0, respectively)		687		675
Interest credited to policyholder account balances		422		248
Amortization of deferred policy acquisition costs and value of business acquired		156		157
Change in market risk benefits		194		(1,579)
Other expenses		478		509
Total expenses		1,937		10
Income (loss) before provision for income tax		(653)		2,003
Provision for income tax expense (benefit)		(156)		416
Net income (loss)		(497)		1,587
Less: Net income (loss) attributable to noncontrolling interests		2		2
Net income (loss) attributable to Brighthouse Financial, Inc.		(499)		1,585
Less: Preferred stock dividends		26		27
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders		$	(525)	$	1,558
Comprehensive income (loss)		$	321	$	(1,001)
Less: Comprehensive income (loss) attributable to noncontrolling interests		2		2
Comprehensive income (loss) attributable to Brighthouse Financial, Inc.		$	319	$	(1,003)


Earnings per common share
Basic	$	(7.72)	$	20.27
Diluted	$	(7.72)	$	20.11

See accompanying notes to the interim condensed consolidated financial statements.

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Brighthouse Financial, Inc.

Interim Condensed Consolidated Statements of Equity

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

(In millions)


	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)		Treasury Stock at Cost		Accumulated Other Comprehensive Income (Loss)		Brighthouse Financial, Inc.’s Stockholders’ Equity		Noncontrolling Interests		Total Equity
Balance at December 31, 2022	$	—	$	1	$	14,075	$	(395)	$	(2,042)	$	(6,106)	$	5,533	$	65	$	5,598
Treasury stock acquired in connection with share repurchases									(62)				(62)				(62)
Share-based compensation			—		5				(15)				(10)				(10)
Dividends on preferred stock					(26)								(26)				(26)
Change in noncontrolling interests													—		(2)		(2)
Net income (loss)							(499)						(499)		2		(497)
Other comprehensive income (loss), net of income tax											818		818				818
Balance at March 31, 2023	$	—	$	1	$	14,054	$	(894)	$	(2,119)	$	(5,288)	$	5,754	$	65	$	5,819


	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)		Treasury Stock at Cost		Accumulated Other Comprehensive Income (Loss)		Brighthouse Financial, Inc.’s Stockholders’ Equity		Noncontrolling Interests		Total Equity
Balance at December 31, 2021	$	—	$	1	$	14,154	$	(4,274)	$	(1,543)	$	47	$	8,385	$	65	$	8,450
Treasury stock acquired in connection with share repurchases									(127)				(127)				(127)
Share-based compensation			—		6				(11)				(5)				(5)
Dividends on preferred stock					(27)								(27)				(27)
Change in noncontrolling interests													—		(2)		(2)
Net income (loss)							1,585						1,585		2		1,587
Other comprehensive income (loss), net of income tax											(2,588)		(2,588)				(2,588)
Balance at March 31, 2022	$	—	$	1	$	14,133	$	(2,689)	$	(1,681)	$	(2,541)	$	7,223	$	65	$	7,288

See accompanying notes to the interim condensed consolidated financial statements.

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Brighthouse Financial, Inc.

Interim Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

(In millions)


	Three Months Ended March 31,
	2023		2022
Net cash provided by (used in) operating activities	$	(500)	$	(199)
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities	1,474		3,715
Equity securities	2		20
Mortgage loans	262		461
Limited partnerships and limited liability companies	37		67
Purchases of:
Fixed maturity securities	(1,840)		(5,532)
Equity securities	(5)		—
Mortgage loans	(173)		(1,972)
Limited partnerships and limited liability companies	(121)		(279)
Cash received in connection with freestanding derivatives	1,106		1,440
Cash paid in connection with freestanding derivatives	(1,758)		(1,197)



Net change in policy loans	9		(5)
Net change in short-term investments	(299)		781
Net change in other invested assets	(19)		(18)

Net cash provided by (used in) investing activities	(1,325)		(2,519)
Cash flows from financing activities
Policyholder account balances:
Deposits	6,864		6,356
Withdrawals	(5,298)		(3,707)
Net change in payables for collateral under securities loaned and other transactions	(159)		(60)

Long-term debt repaid	—		(1)

Dividends on preferred stock	(26)		(27)
Treasury stock acquired in connection with share repurchases	(62)		(127)



Financing element on certain derivative instruments and other derivative related transactions, net	91		(76)
Other, net	(15)		(13)
Net cash provided by (used in) financing activities	1,395		2,345
Change in cash, cash equivalents and restricted cash	(430)		(373)
Cash, cash equivalents and restricted cash, beginning of period	4,115		4,474
Cash, cash equivalents and restricted cash, end of period	$	3,685	$	4,101
Supplemental disclosures of cash flow information
Net cash paid (received) for:
Interest	$	6	$	6
Income tax	$	(9)	$	1

See accompanying notes to the interim condensed consolidated financial statements.

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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, Inc. (“BHF” and together with its subsidiaries, “Brighthouse Financial” or the “Company”) 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 U.S. 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 (“LLC”) 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.

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, 2022 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, 2022 (the “2022 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 2022 Annual Report.

Reclassifications

Certain amounts in the prior year period’s interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform with the 2023 presentation as discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements. See “— Adoption of New Accounting Pronouncements” for discussion of the adoption of new guidance on long-duration contracts in the first quarter of 2023, parts of which were retrospectively applied to prior periods presented in the interim condensed consolidated financial statements.

Summary of Significant Accounting Policies

In connection with the adoption of new guidance on long-duration insurance contracts, the Company updated its impacted accounting policies as described below. See Note 1 of the Notes to the Consolidated Financial Statements included in the 2022 Annual Report for a description of the Company’s accounting policies that did not change.

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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)

Insurance Contract Obligations

The Company has obligations under insurance contracts to pay benefits over an extended period of time. The Company establishes liabilities for future obligations under long-duration insurance contracts based on the accounting model appropriate for each type of contract or contract feature. Liabilities for insurance contract benefits are generally accrued over time as revenue is recognized, or established based on the balance that accrues to the contract holder. In addition, certain insurance contracts may contain features that are required to be measured at fair value separately from the base contracts, either as a market risk benefit or embedded derivative.

The discussion below provides an overview of the different accounting models for insurance contract obligations and the applicability of such models to the Company’s insurance products.

Liability for Future Policy Benefits

The Company establishes a liability for future policy benefits (“LFPB”) for non-participating term and whole life insurance and income annuities. LFPBs are accrued over time as revenue is recognized based on a net premium ratio. The net premium ratio is the portion of gross premiums required to provide for all future benefits. LFPBs are established using the Company’s current assumptions of future cash flows, discounted at a rate that approximates a single A corporate bond curve. The Company generally aggregates insurance contracts into groupings by issue year, product and segment for determining the net premium ratio and related LFPBs.

The Company reviews cash flow assumptions regularly, and if they change significantly, LFPBs are adjusted by determining a revised net premium ratio. The revised net premium ratio is calculated as of contract inception using both actual historical experience and updated future cash flow assumptions. The recalculated net premium ratio is applied to derive a remeasurement gain or loss recognized in current period net income. For insurance policies in-force as of December 31, 2020, January 1, 2021 is considered the contract inception date. The net premium ratio is also updated quarterly for the difference between actual and expected experience.

The net premium ratio is not updated for changes in discount rate assumptions, as changes in the discount rate are updated quarterly and the impacts are reflected in other comprehensive income (loss) (“OCI”). The discount rate assumption is determined by developing a yield curve based on market observable yields for upper-medium fixed income instruments derived from an external index. The yield curve is applied to the expected future cash flows used in the measurement of LFPBs based on the duration characteristics of those liabilities.

The most significant cash flow assumptions used in the establishment of LFPBs are mortality, policy lapses and market interest rates. See Note 4 for more information on the effect of changes in assumptions on the measurement of LFPBs.

The Company also establishes an LFPB for participating term and whole life insurance using a net premium ratio and the Company’s current assumptions of future cash flows. Assumptions are determined at issuance of the policy and are not updated unless a premium deficiency exists. A premium deficiency exists when the LFPB plus the present value of expected future gross premiums are less than expected future benefits and expenses (based on current assumptions). When a premium deficiency exists, the Company will reduce any deferred acquisition costs and may also establish an additional liability to eliminate the deficiency. See Note 4 for more information on assumptions used in establishing LFPBs related to participating term and whole life insurance.

Policyholder Account Balances

The Company establishes a policyholder account balance liability for customer deposits on universal life insurance, universal life insurance with secondary guarantees (“ULSG”) and deferred annuity contracts. The policyholder account balance liability is equal to the sum of deposits, plus interest credited, less charges and withdrawals, excluding the impact of any applicable charge that may be incurred upon surrender. The Company also holds additional liabilities for certain product features including secondary guarantees on universal life insurance contracts and the crediting rates associated with index-linked annuities.

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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)

Additional Liabilities for ULSG

The Company establishes a liability in addition to the account balance for secondary guarantees on universal life insurance. These liabilities are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the contract period based on total expected assessments. The benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios. The Company also maintains a liability for profits followed by losses on ULSG determined by projecting future earnings and establishing a liability to offset losses that are expected to occur in later years. Both ULSG liabilities are adjusted for the effects of unrealized investment gains and losses.

The Company reviews cash flow assumptions regularly, and, if they change significantly, the liability for secondary guarantees is adjusted by a cumulative charge or credit to net income. Liabilities for secondary guarantees are presented within future policy benefits with changes in the liabilities reported in policyholder benefits and claims, except for the effects of unrealized investment gains and losses, which are reported in OCI.

The most significant assumptions used in estimating liabilities for secondary guarantees are the general account rate of return, premium persistency, mortality and lapses. See Note 4 for more information on the effect of changes in assumptions on the measurement of liabilities for secondary guarantees.

Market Risk Benefits on Annuity Guarantees

Market risk benefits (“MRB”) are contracts or contract features that provide protection to the policyholder from capital markets risk by transferring such risks to the Company. MRBs are required to be separated from the deferred annuity host contract and measured at fair value. The Company establishes MRB assets and liabilities for guaranteed minimum benefits on variable annuity contracts including guaranteed minimum death benefits (“GMDB”), guaranteed minimum income benefits (“GMIB”), guaranteed minimum accumulation benefits (“GMAB”) and guaranteed minimum withdrawal benefits (“GMWB”). MRB assets are also established for reinsured benefits related to these guarantees. Certain index-linked annuity products may also have guaranteed minimum benefits classified as MRBs.

The measurement of fair value includes an adjustment for the risk that the Company fails to satisfy its obligations, which is referred to as nonperformance risk, as well as risk margin to capture the non-capital markets risks of the instrument which represents the additional compensation a market participant would require to assume the risks related to the uncertainties in certain actuarial assumptions. MRBs are measured at estimated fair value, with changes reported in change in MRBs on the consolidated statements of operations, except for the change due to nonperformance risk, which is reported in OCI.

See Note 4 for more information on the effect of changes in inputs and assumptions on the measurement of MRBs and Note 8 for more information on the determination of fair value of MRBs.

Embedded Derivatives on Index-Linked Annuities

The Company issues, and assumes through reinsurance, index-linked annuities which allow the policyholder to participate in returns from certain specified equity indices. The crediting rates associated with these features are classified as embedded derivatives and measured at estimated fair value, 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.

Embedded derivative liabilities are required to be separated from the deferred annuity host contract and measured at fair value. The estimated fair value is determined using a combination of an option pricing model and an option-budget approach. Under this approach, the Company estimates the cost of funding the crediting rate using option pricing and establishes that cost on the balance sheet as a reduction to the initial deposit amount. The estimate of fair value includes an adjustment for nonperformance risk, as well as a risk margin.

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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)

Actuarial assumptions are reviewed at least annually, and if they change significantly, the estimated fair value is adjusted through net income. Capital market inputs used in the measurement of index-linked crediting rate embedded derivatives are updated quarterly through net income. The reduction to the initial deposit is accreted back up to the initial deposit over the estimated life of the contract. Embedded derivatives related to index-linked annuities are presented within policyholder account balances while changes in the estimated fair value are reported in net derivative gains (losses).

For more information on the determination of estimated fair value of embedded derivatives, see Note 8.

Recognition of Revenues and Deposits on Insurance Contracts

Premiums related to traditional long-duration contracts are recognized as revenues when due from policyholders. When premiums for income annuities are due over a significantly shorter period than the period over which policyholder benefits are incurred, the Company establishes a deferred profit liability (“DPL”) for the excess of the gross premium over the net premium. DPLs are amortized into net income in proportion to the amount of expected future benefit payments. Assumptions used in the measurement of the DPL are updated at the same time as the related LFPBs, with the updated estimates used to recalculate the DPL as of contract inception. The remeasurement gain or loss from updating DPLs is recognized in current period net income along with the related change in LFPBs.

Deposits related to universal life insurance, deferred annuity contracts and investment contracts are credited to policyholder account balances. Revenues from such contracts consist of asset-based investment management fees, cost of insurance charges, risk charges, policy administration fees and surrender charges. These fees, which are included in universal life and investment-type product policy fees, are recognized when assessed to the contract holder, except for non-level insurance charges which are deferred by the establishment of an unearned revenue liability and amortized over the expected life of the contracts.

Premiums and policy fees are presented net of reinsurance.

Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles

The Company incurs significant costs in connection with acquiring new and renewal insurance business. Costs that are directly related to the successful acquisition or renewal of insurance contracts are capitalized as deferred policy acquisition costs (“DAC”). These costs mainly consist of commissions and include the portion of employees’ compensation and benefits related to time spent selling, underwriting or processing the issuance of new insurance contracts. All other acquisition-related costs are expensed as incurred.

Value of business acquired (“VOBA”) is an intangible asset resulting from a business combination that represents the excess of book value over the estimated fair value of acquired insurance, annuity and investment-type contracts in-force as of the acquisition date.

The Company amortizes DAC and VOBA in a manner that approximates a straight-line basis over the expected life of the related contracts. For life insurance contracts, amortization is based on projections of amounts of insurance in-force, while projections of policy counts are used for deferred annuity contracts and expected future benefits payments for income annuities. These assumptions are reviewed at least annually, and if they change significantly, updates are recognized through changes to future amortization. VOBA balances are tested annually to determine if the balance is deemed unrecoverable from expected future profits. All changes in DAC and VOBA balances are recorded to net income.

Periodically, the Company modifies product benefits, features, rights or coverages that occur by the exchange of an existing contract for a new contract, or by amendment, endorsement, or rider to a contract, or by election or coverage within a contract. If a modification is considered to have substantially changed the contract, the associated DAC or VOBA is written off immediately through net income and any new acquisition costs associated with the replacement contract are deferred. If the modification does not substantially change the contract, the DAC or VOBA amortization on the original contract will continue and any acquisition costs associated with the related modification are expensed.

The Company also has intangible assets representing deferred sales inducements (“DSI”) included in other assets and unearned revenue liabilities included in other policy-related balances. The Company defers sales inducements and unearned revenue and amortizes the balances using the same methodology and assumptions used to amortize DAC and VOBA.

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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 (“ASU”) to the FASB Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. Except as noted below, there were no significant ASUs adopted during the period ended March 31, 2023.

In March 2022, the FASB issued new guidance on Troubled Debt Restructurings (“TDR”) (ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures). This ASU eliminates TDR recognition and measurement guidance and, instead, requires that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. The Company adopted this guidance on January 1, 2023. This ASU was applied prospectively and did not have a material impact on the consolidated financial statements upon adoption but could change the future recognition and measurement of modified loans and other receivables.

In August 2018, the FASB issued new guidance on long-duration contracts (ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (“LDTI”)). LDTI is effective for fiscal years beginning after January 1, 2023. LDTI resulted in significant changes to the measurement, presentation and disclosure requirements for long-duration insurance contracts. A summary of the most significant changes is provided below:

(1) Guaranteed benefits associated with variable annuity and certain fixed annuity contracts have been classified and presented separately on the consolidated balance sheets as MRBs. MRBs are now measured at estimated fair value through net income and reported separately on the consolidated statements of operations, except for nonperformance risk changes, which will be recognized in OCI.

(2) Cash flow assumptions used to measure the liability for LFPBs on traditional long-duration contracts (including term and non-participating whole life insurance and immediate annuities) have been updated on an annual basis using a retrospective method. The resulting remeasurement gain or loss is now reported separately on the consolidated statements of operations along with the remeasurement gain or loss on universal life-type contract liabilities.

(3) The discount rate assumption used to measure the liability for traditional long-duration contracts is now based on an upper-medium grade fixed income yield, updated quarterly, with changes recognized in OCI.

(4) DAC for all insurance products are required to be amortized on a constant-level basis over the expected term of the contracts, using amortization methods that are not a function of revenue or profit emergence. Changes in assumptions used to amortize DAC have been recognized as a revision to future amortization amounts.

(5) There was a significant increase in required disclosures, including disaggregated rollforwards of insurance contract assets and liabilities supplemented by qualitative and quantitative information regarding the cash flows, assumptions, methods and judgements used to measure those balances.

The transition date was January 1, 2021. MRB changes were required to be applied on a retrospective basis, while the changes for insurance liability assumption updates and DAC amortization were applied to existing carrying amounts on the transition date.

The cumulative effect, on an after-tax basis, of the adoption of ASU 2018-12 as of the transition date was a $5.4 billion decrease to retained earnings and a $3.9 billion decrease to accumulated other comprehensive income (loss) (“AOCI”). See Note 2 for more detailed information on the impacts of the ASU to the Company’s financial statements.

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

2. ASU 2018-12 Transition

The Company adopted ASU 2018-12 for LFPBs, DAC and other balances amortized on a basis consistent with DAC by applying the guidance to contracts in-force on the basis of their existing carrying amounts at the transition date. The Company adopted ASU 2018-12 for MRBs on a fully retrospective basis.

The effect of transition adjustments on stockholders’ equity at January 1, 2021 due to the adoption of ASU 2018-12 was as follows:


	Retained Earnings (Deficit)		AOCI
	(In millions)
Liability for future policy benefits	$	(436)	$	(2,073)
Market risk benefits and related adjustments	(6,237)		(3,454)
DAC and VOBA	—		520
Reinsurance recoverables	(141)		34
Deferred income tax asset	1,431		1,044
Total	$	(5,383)	$	(3,929)

For LFPBs, the transition adjustment to retained earnings relates to instances where net premiums exceed gross premiums resulting in LFPBs being increased to eliminate the premium deficiency. The premium deficiency primarily relates to structured settlement annuities. The transition adjustment related to AOCI represents the effect of the requirement to discount LFPBs based on an upper-medium grade fixed income rate as well as the removal of amounts previously recorded in AOCI for the effects of unrealized investment gains and losses.

For MRBs, the transition adjustment to AOCI relates to the cumulative effect of changes in the nonperformance risk between contract issue date and transition date. The remaining difference between the estimated fair value and carrying amount of MRBs at transition, excluding the amounts recorded in AOCI, was recorded as an adjustment to retained earnings as of the transition date.

For DAC and VOBA, the Company removed amounts previously recorded in AOCI for the effect of unrealized investment gains and losses.

For reinsurance, the adjustments to both retained earnings and AOCI were made to align the measurement of reinsurance recoverables with the related LFPBs.

The balances of and changes in LFPBs at January 1, 2021 due to the adoption of ASU 2018-12 were as follows:


	Term and Whole Life Insurance		Income Annuities		Structured Settlement and Pension Risk Transfer Annuities
	(In millions)
Balance at December 31, 2020	$	2,854	$	4,311	$	10,115
Removal of related balances in AOCI	—		(203)		(1,784)
Change in cash flow assumptions	14		(171)		200
Initial recognition of deferred profit liabilities	—		176		217
Change in discount rate assumptions	536		754		2,770
Adjusted balance at January 1, 2021	3,404		4,867		11,518
Less: Reinsurance recoverable	85		29		102
Adjusted balance at January 1, 2021, net of reinsurance	$	3,319	$	4,838	$	11,416

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

2. ASU 2018-12 Transition (continued)

The balance of and changes in liabilities classified as MRBs at January 1, 2021 due to the adoption of ASU 2018-12 were as follows:


	Variable Annuities
	(In millions)
Balance at December 31, 2020	$	8,924
Adjustment for the difference between carrying amount and estimated fair value, except for the difference due to nonperformance risk	6,010
Adjustment for cumulative effect of changes in nonperformance risk since issuance	3,454
Adjusted balance at January 1, 2021	18,388
Less: Reinsurance recoverable	169
Adjusted balance at January 1, 2021, net of reinsurance	$	18,219

The balances of and changes in DAC and VOBA on January 1, 2021 due to the adoption of ASU 2018-12 were as follows:


	Variable Annuities		Fixed Rate Annuities		Index-Linked Annuities		Term and Whole Life Insurance		Universal Life Insurance
	(In millions)
DAC:
Balance at December 31, 2020	$	2,440	$	64	$	886	$	527	$	492
Removal of related amounts in AOCI	472		—		—		—		(23)
Adjusted balance at January 1, 2021	$	2,912	$	64	$	886	$	527	$	469
VOBA:
Balance at December 31, 2020	$	363	$	76	$	—	$	8	$	55
Removal of related amounts in AOCI	65		—		—		—		6
Adjusted balance at January 1, 2021	$	428	$	76	$	—	$	8	$	61

The following tables present amounts previously reported in 2022 and 2021, the effect on those amounts of the change due to the adoption of ASU 2018-12 as described in Note 1, and the currently reported amounts in the Unaudited Interim Consolidated Balance Sheets and Unaudited Interim Consolidated Statements of Operations and Comprehensive Income (Loss). See Notes 4 and 5 for more information.


	December 31, 2022						December 31, 2021
	As Previously Reported		Effect of Change		As Currently Reported		As Previously Reported		Effect of Change		As Currently Reported
	(In millions)
Total assets	$	225,580	$	(733)	$	224,847	$	259,840	$	2,417	$	262,257
Future policy benefits	$	41,569	$	(10,072)	$	31,497	$	43,807	$	(3,817)	$	39,990
Policyholder account balances	$	74,836	$	(1,309)	$	73,527	$	66,851	$	(1,602)	$	65,249
Market risk benefit liabilities	$	—	$	10,389	$	10,389	$	—	$	16,034	$	16,034
Total liabilities	$	219,542	$	(293)	$	219,249	$	243,633	$	10,174	$	253,807
Retained earnings (deficit)	$	(637)	$	242	$	(395)	$	(642)	$	(3,632)	$	(4,274)
Accumulated other comprehensive income (loss)	$	(5,424)	$	(682)	$	(6,106)	$	4,172	$	(4,125)	$	47
Total equity	$	6,038	$	(440)	$	5,598	$	16,207	$	(7,757)	$	8,450
Total liabilities and equity	$	225,580	$	(733)	$	224,847	$	259,840	$	2,417	$	262,257

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

2. ASU 2018-12 Transition (continued)


	Year Ended December 31, 2022						Year Ended December 31, 2021
	As Previously Reported		Effect of Change		As Currently Reported		As Previously Reported		Effect of Change		As Currently Reported
	(In millions)
Universal life and investment-type product policy fees	$	3,141	$	(706)	$	2,435	$	3,636	$	(656)	$	2,980
Net derivative gains (losses)	$	304	$	(896)	$	(592)	$	(2,469)	$	(1,514)	$	(3,983)
Total revenues	$	8,473	$	(1,600)	$	6,873	$	7,142	$	(2,166)	$	4,976
Policyholder benefits and claims	$	4,165	$	(1,972)	$	2,193	$	3,443	$	(697)	$	2,746
Change in market risk benefits	$	—	$	(4,104)	$	(4,104)	$	—	$	(4,134)	$	(4,134)
Total expenses	$	8,645	$	(6,504)	$	2,141	$	7,350	$	(4,383)	$	2,967
Net income (loss)	$	10	$	3,874	$	3,884	$	(103)	$	1,751	$	1,648

3. 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, including term, universal, whole and variable life products designed to address policyholders’ needs for financial security and protected wealth transfer, which may be on a tax-advantaged basis.

Run-off

The Run-off segment consists of products that are no longer actively sold and are separately managed, including ULSG, structured settlements, pension risk transfer contracts, certain company-owned life insurance policies and certain funding agreements.

Corporate & Other

Corporate & Other contains the excess capital not allocated to the segments and interest expense related to 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 business reinsured through 100% quota share reinsurance agreements and activities related to funding agreements associated with the Company’s institutional spread margin business.

In connection with the adoption of ASU 2018-12, the Company reclassified direct-to-consumer life insurance that is no longer sold from Corporate & Other to the Life segment. The segment information below reflects the direct-to consumer life insurance in the Life segment for all periods presented.

Financial Measures and Segment Accounting Policies

Adjusted earnings is a financial measure used by management to evaluate performance 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 by highlighting the results of operations and the underlying profitability drivers of the business.

Adjusted earnings, which may be positive or negative, focuses on the Company’s primary businesses by excluding the impact of market volatility, which could distort trends.

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

3. Segment Information (continued)

The following are significant items excluded from total revenues in calculating adjusted earnings:

•Net investment gains (losses); and

•Net derivative gains (losses), excluding 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.

The following are significant items excluded from total expenses in calculating adjusted earnings:

•Change in MRBs; and

•Change in fair value of the crediting rate on experience-rated contracts.

The tax impact of the adjustments discussed above is calculated net of the statutory tax rate, which could differ from the Company’s effective tax rate.

The Company’s adjusted earnings definition and presentation has been updated for all periods presented to reflect the adoption of ASU 2018-12.

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 March 31, 2023
	Annuities		Life		Run-off		Corporate & Other		Total
	(In millions)
Pre-tax adjusted earnings	$	387	$	—	$	(134)	$	5	$	258
Provision for income tax expense (benefit)	73		(1)		(28)		(9)		35
Post-tax adjusted earnings	314		1		(106)		14		223
Less: Net income (loss) attributable to noncontrolling interests	—		—		—		2		2
Less: Preferred stock dividends	—		—		—		26		26
Adjusted earnings	$	314	$	1	$	(106)	$	(14)	195
Adjustments for:
Net investment gains (losses)									(96)
Net derivative gains (losses)									(575)
Change in market risk benefits									(194)
Other adjustments to net income (loss)									(46)
Provision for income tax (expense) benefit									191
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders									$	(525)

Interest revenue	$	594	$	100	$	254	$	149
Interest expense	$	—	$	—	$	—	$	38

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

3. Segment Information (continued)


	Three Months Ended March 31, 2022
	Annuities		Life		Run-off		Corporate & Other		Total
	(In millions)
Pre-tax adjusted earnings	$	438	$	83	$	31	$	(38)	$	514
Provision for income tax expense (benefit)	84		17		7		(3)		105
Post-tax adjusted earnings	354		66		24		(35)		409
Less: Net income (loss) attributable to noncontrolling interests	—		—		—		2		2
Less: Preferred stock dividends	—		—		—		27		27
Adjusted earnings	$	354	$	66	$	24	$	(64)	380
Adjustments for:
Net investment gains (losses)									(68)
Net derivative gains (losses)									(54)
Change in market risk benefits									1,579
Other adjustments to net income (loss)									32
Provision for income tax (expense) benefit									(311)
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders									$	1,558

Interest revenue	$	555	$	160	$	401	$	41
Interest expense	$	—	$	—	$	—	$	38

Total revenues by segment, as well as Corporate & Other, were as follows:


	Three Months Ended March 31,
		2023		2022
		(In millions)
Annuities		$	1,170	$	1,202
Life		304		363
Run-off		380		535
Corporate & Other		139		41
Adjustments		(709)		(128)
Total		$	1,284	$	2,013

Total assets by segment, as well as Corporate & Other, were as follows at:


	March 31, 2023		December 31, 2022
	(In millions)
Annuities	$	155,541	$	151,192
Life	22,621		22,057
Run-off	29,126		28,436
Corporate & Other	22,714		23,162
Total	$	230,002	$	224,847

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

4. Insurance

Liability for Future Policy Benefits

Information regarding LFPBs for non-participating traditional and limited-payment contracts was as follows:


	Three Months Ended March 31,
	2023									2022
	Term and Whole Life Insurance			Income Annuities			Structured Settlement and Pension Risk Transfer Annuities			Term and Whole Life Insurance			Income Annuities			Structured Settlement and Pension Risk Transfer Annuities
	(Dollars in millions)
Present value of expected net premiums:
Balance, beginning of period	$	2,871		$	—		$	—		$	3,325		$	—		$	—
Beginning balance at original discount rate	3,212			—			—			3,051			—			—
Effect of model refinements	—			—			—			122			—			—
Effect of changes in cash flow assumptions	—			—			—			(1)			—			—
Effect of actual variances from expected experience	(9)			—			—			77			—			—
Adjusted beginning of period balance	3,203			—			—			3,249			—			—
Issuances	24			—			—			20			—			—
Interest accrual	28			—			—			28			—			—
Net premiums collected	(90)			—			—			(107)			—			—
Ending balance at original discount rate	3,165			—			—			3,190			—			—
Effect of changes in discount rate assumptions	(270)			—			—			26			—			—
Balance, end of period	$	2,895		$	—		$	—		$	3,216		$	—		$	—
Present value of expected future policy benefits:
Balance, beginning of period	$	5,279		$	3,512		$	6,793		$	6,426		$	4,333		$	10,171
Beginning balance at original discount rate	5,922			3,897			7,410			5,820			3,865			8,165
Effect of model refinements	—			—			—			135			—			—
Effect of changes in cash flow assumptions	—			—			—			—			—			—
Effect of actual variances from expected experience	(9)			(31)			(31)			85			(9)			(22)
Adjusted beginning of period balance	5,913			3,866			7,379			6,040			3,856			8,143
Issuances	24			78			—			22			43			—
Interest accrual	54			36			80			56			37			87
Benefit payments	(131)			(89)			(146)			(208)			(93)			(161)
Ending balance at original discount rate	5,860			3,891			7,313			5,910			3,843			8,069
Effect of changes in discount rate assumptions	(501)			(287)			(385)			86			110			820
Balance, end of period	$	5,359		$	3,604		$	6,928		$	5,996		$	3,953		$	8,889
Net liability for future policy benefits, end of period	$	2,464		$	3,604		$	6,928		$	2,780		$	3,953		$	8,889
Less: Reinsurance recoverable, end of period	43			26			69			61			25			82
Net liability for future policy benefits, after reinsurance recoverable	$	2,421		$	3,578		$	6,859		$	2,719		$	3,928		$	8,807
Weighted-average duration of liability	8.4 years			8.4 years			11.6 years			8.4 years			8.5 years			12.7 years
Weighted-average interest accretion rate	3.96		%	3.87		%	4.46		%	3.98		%	3.95		%	4.45		%
Gross premiums or assessments recognized during period	$	153		$	102		$	—		$	171		$	45		$	—
Expected future gross premiums, undiscounted	$	6,618		$	—		$	—		$	6,954		$	—		$	—
Expected future gross premiums, discounted	$	4,905		$	—		$	—		$	5,138		$	—		$	—
Expected future benefit payments, undiscounted	$	8,099		$	5,375		$	14,224		$	8,195		$	5,479		$	17,046
Expected future benefit payments, discounted	$	5,860		$	3,891		$	7,313		$	5,910		$	3,843		$	8,069

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

4. Insurance (continued)

Information regarding the additional insurance liabilities for universal life-type contracts with secondary guarantees was as follows:


	Three Months Ended March 31,
	2023			2022
	(Dollars in millions)
Balance, beginning of period	$	6,935		$	7,168
Beginning balance before the effect of unrealized gains and losses	7,175			6,731
Effect of changes in cash flow assumptions	—			—
Effect of actual variances from expected experience	34			66
Adjusted beginning of period balance	7,209			6,797
Interest accrual	87			81
Net assessments collected	101			110
Benefit payments	(103)			(159)
Effect of realized capital gains (losses)	—			1
Ending balance before the effect of unrealized gains and losses	7,294			6,830
Effect of unrealized gains and losses	(171)			156
Balance, end of period	7,123			6,986
Less: Reinsurance recoverable, end of period	1,397			1,304
Net additional liability, after reinsurance recoverable	$	5,726		$	5,682
Weighted-average duration of liability	6.7 years			6.7 years
Weighted-average interest accretion rate	4.91		%	4.90		%
Gross premiums or assessments recognized during period	$	—		$	—

A reconciliation of the net LFPBs for nonparticipating traditional and limited-payment contracts and the additional insurance liabilities for universal life-type contracts with secondary guarantees reported in the preceding rollforward tables to LFPBs on the consolidated balance sheets was as follows at:


	March 31,
	2023		2022
	(In millions)
Liabilities reported in the preceding rollforward tables	$	20,119	$	22,608
Long-term care insurance (1)	5,763		6,708
ULSG liability for profits followed by losses	2,654		3,461
Participating whole life insurance (2)	2,986		2,788
Deferred profit liabilities	373		378
Other	391		430
Total liability for future policy benefits	$	32,286	$	36,373

_______________

(1)Includes liabilities related to fully reinsured individual long-term care insurance. See Note 3.

(2)Participating whole life insurance uses an interest assumption based on the non-forfeiture interest rate, ranging from 3.5% to 4.5%, and mortality rates guaranteed in calculating the cash surrender values described in such contracts, and also includes a liability for terminal dividends. Participating whole life insurance represented 3% of the Company’s life insurance in-force at both March 31, 2023 and 2022, and 39% and 34% of gross traditional life insurance premiums for the three months ended March 31, 2023 and 2022, respectively.

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

4. Insurance (continued)

Information regarding LFPBs for non-participating traditional and limited-payment contracts was as follows:


	Years Ended December 31,
	2022						2021
	Term and Whole Life Insurance		Income Annuities		Structured Settlement and Pension Risk Transfer Annuities		Term and Whole Life Insurance		Income Annuities		Structured Settlement and Pension Risk Transfer Annuities
	(Dollars in millions)
Present value of expected net premiums:
Balance, beginning of year	$	3,325	$	—	$	—	$	3,448	$	—	$	—
Beginning balance at original discount rate	3,051		—		—		2,994		—		—
Effect of model refinements	122		—		—		—		—		—
Effect of changes in cash flow assumptions	137		—		—		70		—		—
Effect of actual variances from expected experience	119		—		—		153		—		—
Adjusted beginning of year balance	3,429		—		—		3,217		—		—
Issuances	93		—		—		113		—		—
Interest accrual	116		—		—		111		—		—
Net premiums collected	(426)		—		—		(390)		—		—
Ending balance at original discount rate	3,212		—		—		3,051		—		—
Effect of changes in discount rate assumptions	(341)		—		—		274		—		—
Balance, end of year	$	2,871	$	—	$	—	$	3,325	$	—	$	—
Present value of expected future policy benefits:
Balance, beginning of year	$	6,426	$	4,333	$	10,171	$	6,852	$	4,691	$	11,301
Beginning balance at original discount rate	5,820		3,865		8,165		5,862		3,938		8,531
Effect of model refinements	135		—		(278)		—		—		—
Effect of changes in cash flow assumptions	157		56		(157)		70		(41)		(41)
Effect of actual variances from expected experience	155		(22)		(23)		153		(6)		(16)
Adjusted beginning of year balance	6,267		3,899		7,707		6,085		3,891		8,474
Issuances	101		224		—		128		198		—
Interest accrual	222		146		327		222		150		359
Benefit payments	(668)		(372)		(624)		(615)		(374)		(668)
Ending balance at original discount rate	5,922		3,897		7,410		5,820		3,865		8,165
Effect of changes in discount rate assumptions	(643)		(385)		(617)		606		468		2,006
Balance, end of year	$	5,279	$	3,512	$	6,793	$	6,426	$	4,333	$	10,171
Net liability for future policy benefits, end of year	$	2,408	$	3,512	$	6,793	$	3,101	$	4,333	$	10,171
Less: Reinsurance recoverable, end of year	45		24		68		64		27		93
Net liability for future policy benefits, after reinsurance recoverable	$	2,363	$	3,488	$	6,725	$	3,037	$	4,306	$	10,078

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

4. Insurance (continued)

Policyholder Account Balances

Information regarding policyholder account balances was as follows:


	Universal Life Insurance			Variable Annuities (1)			Index-linked Annuities			Fixed Rate Annuities			ULSG			Company-Owned Life Insurance (1)
	(Dollars in millions)
Three Months Ended March 31, 2023
Balance, beginning of period	$	2,658		$	4,908		$	33,896		$	14,274		$	5,307		$	641
Premiums and deposits	55			27			1,677			912			171			—
Surrenders and withdrawals	(70)			(177)			(785)			(506)			(6)			—
Benefit payments	(25)			(36)			(50)			(102)			(38)			(2)
Net transfers from (to) separate account	12			11			—			—			—			—
Interest credited	22			41			96			106			43			7
Policy charges	(57)			(7)			(2)			—			(258)			(2)
Changes related to embedded derivatives	—			—			1,090			—			—			—

Balance, end of period	$	2,595		$	4,767		$	35,922		$	14,684		$	5,219		$	644
Weighted-average crediting rate (2)	0.84		%	0.85		%	0.32		%	0.73		%	0.82		%	1.09		%
Three Months Ended March 31, 2022
Balance, beginning of period	$	2,694		$	4,743		$	32,000		$	11,849		$	5,569		$	646
Premiums and deposits	55			49			1,594			44			176			—
Surrenders and withdrawals	(21)			(131)			(473)			(155)			(10)			—
Benefit payments	(20)			(34)			(36)			(83)			(23)			(3)
Net transfers from (to) separate account	15			85			—			—			—			2
Interest credited	4			44			71			72			63			7
Policy charges	(56)			(7)			(2)			—			(263)			(2)
Changes related to embedded derivatives	—			—			(756)			—			—			—

Balance, end of period	$	2,671		$	4,749		$	32,398		$	11,727		$	5,512		$	650
Weighted-average crediting rate (2)	0.15		%	0.93		%	0.27		%	0.61		%	1.14		%	0.93		%

_______________

(1)Includes liabilities related to separate account products where the contract holder elected a general account investment option.

(2)Excludes the effects of embedded derivatives related to index-linked crediting rates.

A reconciliation of policyholder account balances reported in the preceding rollforward table to the liability for policyholder account balances on the consolidated balance sheets was as follows at:


	March 31,
	2023		2022
	(In millions)
Policyholder account balances reported in the preceding rollforward table	$	63,831	$	57,707
Funding agreements classified as investment contracts	11,151		7,705
Other investment contract liabilities	1,138		1,299
Total policyholder account balances	$	76,120	$	66,711

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

4. Insurance (continued)

The balance of account values by range of guaranteed minimum crediting rates and the related range of difference, in basis points, between rates being credited to policyholders and the respective guaranteed minimums was as follows at:


Range of Guaranteed Minimum Crediting Rate	At Guaranteed Minimum		1 to 50 Basis Points Above		51 to 150 Basis Points Above		Greater than 150 Basis Points Above		Total
	(In millions)
March 31, 2023
Annuities (1) (3):
Less than 2.00%	$	791	$	289	$	442	$	6,688	$	8,210
2.00% to 3.99%	5,574		4,745		737		12		11,068
Greater than 3.99%	512		—		—		—		512
Total	$	6,877	$	5,034	$	1,179	$	6,700	$	19,790
Life insurance (2) (3):
Less than 2.00%	$	—	$	—	$	—	$	183	$	183
2.00% to 3.99%	—		502		50		150		702
Greater than 3.99%	1,630		—		—		—		1,630
Total	$	1,630	$	502	$	50	$	333	$	2,515
ULSG (3):
Less than 2.00%	$	—	$	—	$	—	$	—	$	—
2.00% to 3.99%	1,200		1,552		1,706		264		4,722
Greater than 3.99%	521		—		—		—		521
Total	$	1,721	$	1,552	$	1,706	$	264	$	5,243
December 31, 2022
Annuities (1) (3):
Less than 2.00%	$	861	$	317	$	369	$	5,821	$	7,368
2.00% to 3.99%	6,119		4,872		596		10		11,597
Greater than 3.99%	525		—		—		—		525
Total	$	7,505	$	5,189	$	965	$	5,831	$	19,490
Life insurance (2) (3):
Less than 2.00%	$	—	$	—	$	—	$	172	$	172
2.00% to 3.99%	—		510		87		154		751
Greater than 3.99%	1,657		—		—		—		1,657
Total	$	1,657	$	510	$	87	$	326	$	2,580
ULSG (3):
Less than 2.00%	$	—	$	—	$	—	$	—	$	—
2.00% to 3.99%	1,225		1,581		1,729		266		4,801
Greater than 3.99%	527		—		—		—		527
Total	$	1,752	$	1,581	$	1,729	$	266	$	5,328

_______________

(1)Includes policyholder account balances for fixed rate annuities and the fixed account portion of variable annuities.

(2)Includes policyholder account balances for retained asset accounts, universal life policies and the fixed account portion of universal variable life insurance policies.

(3)Amounts are gross of policy loans and net of excess interest reserves.

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

4. Insurance (continued)

Market Risk Benefits

Information regarding MRB assets and liabilities associated with variable annuities was as follows:


	Three Months Ended March 31,				Years Ended December 31,
	2023		2022		2022		2021
	(Dollars in millions)
Balance, beginning of period	$	9,974	$	15,698	$	15,698	$	18,388
Balance, beginning of period, before effect of changes in nonperformance risk	8,230		11,611		11,611		14,934
Decrements	(28)		34		16		(68)
Effect of changes in future expected assumptions	—		—		210		41
Effect of actual different from expected experience	122		—		(48)		(86)
Effect of changes in interest rates	880		(2,860)		(8,394)		(1,829)
Effect of changes in fund returns	(1,002)		1,183		3,807		(2,578)
Issuances	(3)		(11)		(47)		(96)
Effect of changes in risk margin	9		(50)		(152)		(128)
Aging of the block and other	326		276		1,227		1,421
Balance, end of period, before effect of changes in nonperformance risk	8,534		10,183		8,230		11,611
Effect of changes in nonperformance risk	1,752		3,159		1,744		4,087
Balance, end of period	10,286		13,342		9,974		15,698
Less: Reinsurance recoverable, end of period	71		93		71		118
Balance, end of period, net of reinsurance (1)	$	10,215	$	13,249	$	9,903	$	15,580
Weighted-average attained age of contract holder	72.1 years		71.5 years		71.8 years		71.1 years

_______________

(1)Amounts represent the sum of MRB assets and MRB liabilities presented on the consolidated balance sheets at March 31, 2023 and 2022, with the exception of $4 million and $4 million, respectively, of index-linked annuities not included in this table, and at December 31, 2022 and 2021, with the exception of $3 million and $5 million, respectively, of index-linked annuities not included in this table.

Separate Accounts

Information regarding separate account liabilities was as follows:


	Three Months Ended March 31,
	2023						2022
	Variable Annuities		Universal Life Insurance		Company-Owned Life Insurance		Variable Annuities		Universal Life Insurance		Company-Owned Life Insurance
	(In millions)
Balance, beginning of period	$	77,653	$	5,218	$	1,932	$	105,023	$	6,862	$	2,384
Premiums and deposits	216		43		—		432		45		—
Surrenders and withdrawals	(1,496)		(41)		(3)		(1,744)		(51)		(7)
Benefit payments	(383)		(14)		(10)		(371)		(16)		(10)
Investment performance	4,310		341		111		(6,906)		(514)		(138)
Policy charges	(519)		(52)		(11)		(580)		(49)		(11)
Net transfers from (to) general account	(11)		(12)		—		(85)		(15)		(2)
Other	—		—		—		14		—		(1)
Balance, end of period	$	79,770	$	5,483	$	2,019	$	95,783	$	6,262	$	2,215

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

4. Insurance (continued)

A reconciliation of separate account liabilities reported in the preceding rollforward table to the separate account liabilities balance on the consolidated balance sheets was as follows at:


	March 31,
	2023		2022
	(In millions)
Separate account liabilities reported in the preceding rollforward table	$	87,272	$	104,260
Variable income annuities	150		161
Pension risk transfer annuities	18		20
Total separate account liabilities	$	87,440	$	104,441

The aggregate estimated fair value of assets, by major investment asset category, supporting separate accounts was as follows at:



	March 31, 2023		December 31, 2022
	(In millions)
Equity securities	$	87,164	$	84,667

Fixed maturity securities	260		278
Cash and cash equivalents	9		9
Other assets	7		11
Total aggregate estimated fair value of assets	$	87,440	$	84,965

Net Amount at Risk and Cash Surrender Values

Information regarding the net amount at risk (“NAR”) and cash surrender value (“CSV”) for insurance products was as follows at:


	Universal Life Insurance		Variable Annuities		Index-linked Annuities		Fixed Rate Annuities		ULSG		Company-Owned Life Insurance
	(In millions)
March 31, 2023
Account balances reported in the preceding rollforward tables:
Policyholder account balances	$	2,595	$	4,767	$	35,922	$	14,684	$	5,219	$	644
Separate account liabilities	5,483		79,770		—		—		—		2,019
Total account balances	$	8,078	$	84,537	$	35,922	$	14,684	$	5,219	$	2,663
Net amount at risk	$	37,420	$	14,894	N/A		N/A		$	70,062	$	3,422
Cash surrender value	$	7,449	$	84,090	$	33,567	$	14,106	$	6,203	$	2,443
March 31, 2022
Account balances reported in the preceding rollforward tables:
Policyholder account balances	$	2,671	$	4,749	$	32,398	$	11,727	$	5,512	$	650
Separate account liabilities	6,262		95,783		—		—		—		2,215
Total account balances	$	8,933	$	100,532	$	32,398	$	11,727	$	5,512	$	2,865
Net amount at risk	$	39,142	$	9,266	N/A		N/A		$	72,059	$	3,508
Cash surrender value	$	8,283	$	100,351	$	29,442	$	10,993	$	6,400	$	2,636

Products may contain both separate account and general account fund options; accordingly, net amount at risk and cash surrender value reported in the table above relate to the total account balance for each respective product grouping.

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

5. Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles

Deferred Policy Acquisition Costs and Value of Business Acquired

Information regarding DAC and VOBA was as follows:


	Variable Annuities		Fixed Rate Annuities		Index-linked Annuities		Term and Whole Life Insurance		Universal Life Insurance
	(In millions)
Three Months Ended March 31, 2023
DAC:
Balance, beginning of period	$	2,508	$	107	$	1,213	$	405	$	392
Capitalization	11		4		80		1		3
Amortization	(63)		(3)		(54)		(14)		(12)
Balance, end of period	2,456		108		1,239		392		383
VOBA:
Balance, beginning of period	341		65		—		5		48
Amortization	(8)		(1)		—		—		(1)
Balance, end of period	333		64		—		5		47
Total DAC and VOBA:
Balance, end of period	$	2,789	$	172	$	1,239	$	397	$	430
Three Months Ended March 31, 2022
DAC:
Balance, beginning of period	$	2,718	$	89	$	1,081	$	462	$	431
Capitalization	21		5		80		—		2
Amortization	(67)		(3)		(47)		(15)		(13)
Balance, end of period	2,672		91		1,114		447		420
VOBA:
Balance, beginning of period	377		70		—		6		54
Amortization	(9)		(1)		—		—		(2)
Balance, end of period	368		69		—		6		52
Total DAC and VOBA:
Balance, end of period	$	3,040	$	160	$	1,114	$	453	$	472

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

5. Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles (continued)


	Variable Annuities		Fixed Rate Annuities		Index-linked Annuities		Term and Whole Life Insurance		Universal Life Insurance
	(In millions)
DAC:
Adjusted balance at January 1, 2021 (1)	$	2,912	$	64	$	886	$	527	$	469
Capitalization	90		37		354		(3)		16
Amortization	(284)		(12)		(159)		(62)		(54)
Balance at December 31, 2021	2,718		89		1,081		462		431
Capitalization	55		30		330		(1)		11
Amortization	(265)		(12)		(198)		(56)		(50)
Balance at December 31, 2022	$	2,508	$	107	$	1,213	$	405	$	392
VOBA:
Adjusted balance at January 1, 2021 (1)	$	428	$	76	$	—	$	8	$	61
Amortization	(51)		(6)		—		(2)		(7)
Balance at December 31, 2021	377		70		—		6		54
Amortization	(36)		(5)		—		(1)		(6)
Balance at December 31, 2022	341		65		—		5		48
Total DAC and VOBA:
Balance at December 31, 2022	$	2,849	$	172	$	1,213	$	410	$	440
Balance at December 31, 2021	$	3,095	$	159	$	1,081	$	468	$	485

_______________

(1)Includes an adjustment to eliminate balances included in AOCI related to the adoption of ASU 2018-12 (see Note 2).

Deferred Sales Inducements

Information regarding DSI, included in other assets, was as follows:


	Three Months Ended March 31,
	2023				2022
	Variable Annuities		Fixed Rate Annuities		Variable Annuities		Fixed Rate Annuities
	(In millions)
Balance, beginning of period	$	245	$	9	$	272	$	10

Amortization	(7)		—		(7)		—
Balance, end of period	$	238	$	9	$	265	$	10

Unearned Revenue

Information regarding unearned revenue, included in other policy-related balances, was as follows:


	Three Months Ended March 31,
	2023						2022
	Universal Life Insurance		ULSG		Variable Annuities		Universal Life Insurance		ULSG		Variable Annuities
	(In millions)
Balance, beginning of period	$	356	$	488	$	74	$	358	$	344	$	80
Capitalization	10		44		—		10		46		—
Amortization	(10)		(11)		(1)		(10)		(8)		(1)
Balance, end of period	$	356	$	521	$	73	$	358	$	382	$	79

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

6. Investments

See Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the 2022 Annual Report for a description of the Company’s accounting policies for investments and the fair value hierarchy for investments and the related valuation methodologies.

Fixed Maturity Securities Available-for-sale

Fixed Maturity Securities by Sector

Fixed maturity securities by sector were as follows at:


	March 31, 2023										December 31, 2022
	Amortized Cost		Allowance for Credit Losses		Gross Unrealized				Estimated Fair Value		Amortized Cost		Allowance for Credit Losses		Gross Unrealized				Estimated Fair Value
					Gains		Losses								Gains		Losses
	(In millions)
U.S. corporate	$	37,171	$	—	$	320	$	3,879	$	33,612	$	36,926	$	1	$	203	$	4,521	$	32,607
Foreign corporate	12,465		—		56		1,638		10,883		12,471		1		38		1,932		10,576
U.S. government and agency	8,310		—		472		495		8,287		8,318		—		300		602		8,016
RMBS	8,357		2		46		811		7,590		8,431		2		44		945		7,528
CMBS	7,343		3		—		666		6,674		7,324		3		—		710		6,611
ABS	5,835		—		9		248		5,596		5,652		—		3		296		5,359
State and political subdivision	4,072		—		178		301		3,949		4,074		—		125		400		3,799
Foreign government	1,140		—		49		95		1,094		1,148		—		39		106		1,081
Total fixed maturity securities	$	84,693	$	5	$	1,130	$	8,133	$	77,685	$	84,344	$	7	$	752	$	9,512	$	75,577

The Company held non-income producing fixed maturity securities with an estimated fair value of $13 million at March 31, 2023. The Company did not hold non-income producing fixed maturity securities at December 31, 2022.

Maturities of Fixed Maturity Securities

The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at March 31, 2023:


	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	$	1,556	$	14,307	$	16,379	$	30,916	$	21,535	$	84,693
Estimated fair value	$	1,528	$	13,669	$	14,794	$	27,834	$	19,860	$	77,685

_______________

(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.

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

6. 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:


	March 31, 2023								December 31, 2022
	Less than 12 Months				12 Months or Greater				Less than 12 Months				12 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	$	15,735	$	1,324	$	12,122	$	2,555	$	24,509	$	3,351	$	3,979	$	1,170
Foreign corporate	4,986		423		4,828		1,215		8,260		1,413		1,601		519
U.S. government and agency	1,515		119		2,266		376		3,121		265		1,147		337
RMBS	3,017		209		3,942		602		4,731		497		2,246		448
CMBS	3,582		265		3,041		401		5,589		543		970		167
ABS	1,828		50		2,980		198		3,347		159		1,733		137
State and political subdivision	1,223		100		789		201		2,041		317		247		83
Foreign government	408		27		368		68		777		99		21		7
Total fixed maturity securities	$	32,294	$	2,517	$	30,336	$	5,616	$	52,375	$	6,644	$	11,944	$	2,868
Total number of securities in an unrealized loss position	4,595				4,746				7,309				2,049

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 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.

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 $656 million and $602 million at March 31, 2023 and December 31, 2022, respectively, and is included in accrued investment income.

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

6. Investments (continued)

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 $5 million, relating to fifteen securities at March 31, 2023. 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.

Allowance for Credit Losses for Fixed Maturity Securities

The allowance for credit losses for fixed maturity securities was $5 million and $7 million at March 31, 2023 and December 31, 2022, respectively. For both the three months ended March 31, 2023 and 2022, the change in the allowance for fixed maturity securities by sector was not significant. The Company recorded total write-offs of $7 million and $2 million for the three months ended March 31, 2023 and 2022, respectively.

Mortgage Loans

Mortgage Loans by Portfolio Segment

Mortgage loans are summarized as follows at:


	March 31, 2023				December 31, 2022
	Carrying Value		% of Total		Carrying Value		% of Total
	(Dollars in millions)
Commercial	$	13,529	59.3	%	$	13,574	59.2	%
Agricultural	4,388		19.2		4,365		19.0
Residential	5,042		22.1		5,116		22.3
Total mortgage loans (1)	22,959		100.6		23,055		100.5
Allowance for credit losses	(136)		(0.6)		(119)