Brighthouse Financial, Inc. - Quarter Report: 2024 September (Form 10-Q)

Net change in policy loans()()Net change in short-term investments() Net change in other invested assets()()Other, net()

Net cash provided by (used in) investing activities

()()Cash flows from financing activitiesPolicyholder account balances:Deposits Withdrawals()()Net change in payables for collateral under securities loaned and other transactions ()Long-term debt repaid()()Dividends on preferred stock()()Treasury stock acquired in connection with share repurchases()()Financing element on certain derivative instruments and other derivative related transactions, net Other, net()()Net cash provided by (used in) financing activities Change in cash, cash equivalents and restricted cash ()Cash, cash equivalents and restricted cash, beginning of period Cash, cash equivalents and restricted cash, end of period$ $ Supplemental disclosures of cash flow informationNet cash paid (received) for:Interest$ $ Income tax$ $

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)

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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)

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Brighthouse Financial, Inc.

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

2. Segment Information (continued)

$()$ $ $ Provision for income tax expense (benefit) () ()

Post-tax adjusted earnings (loss)

() Less: Net income (loss) attributable to noncontrolling interests Less: Preferred stock dividends

Adjusted earnings (loss)

$ $()$ $ Adjustments for:Net investment gains (losses)()

Net derivative gains (losses), excluding investment hedge adjustments of $

()Change in market risk benefits()Market value adjustments()Provision for income tax (expense) benefit Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders$ Interest revenue$ $ $ $ Interest expense$ $ $ $

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Brighthouse Financial, Inc.

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

2. Segment Information (continued)

$()$ $ $ Provision for income tax expense (benefit) () ()

Post-tax adjusted earnings (loss)

() Less: Net income (loss) attributable to noncontrolling interests Less: Preferred stock dividends

Adjusted earnings (loss)

$ $()$ $() Adjustments for:Net investment gains (losses)()

Net derivative gains (losses), excluding investment hedge adjustments of $

()Change in market risk benefits Market value adjustments Provision for income tax (expense) benefit()

Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders

$ Interest revenue$ $ $ $ Interest expense$ $ $ $

$()$ $ $ Provision for income tax expense (benefit) () ()

Post-tax adjusted earnings (loss)

() Less: Net income (loss) attributable to noncontrolling interests Less: Preferred stock dividends

Adjusted earnings (loss)

$ $()$ $() Adjustments for:Net investment gains (losses)()

Net derivative gains (losses), excluding investment hedge adjustments of $

()Change in market risk benefits Market value adjustments()Provision for income tax (expense) benefit

Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders

$()Interest revenue$ $ $ $ Interest expense$ $ $ $

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Brighthouse Financial, Inc.

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

2. Segment Information (continued)

$()$()$ $ Provision for income tax expense (benefit) ()()()

Post-tax adjusted earnings (loss)

()() Less: Net income (loss) attributable to noncontrolling interests Less: Preferred stock dividends

Adjusted earnings (loss)

$ $()$()$() Adjustments for:Net investment gains (losses)()

Net derivative gains (losses), excluding investment hedge adjustments of $

()Change in market risk benefits Market value adjustments Provision for income tax (expense) benefit

Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders

$()Interest revenue$ $ $ $ Interest expense$ $ $ $ $ $ $ Life Run-off Corporate & Other Adjustments()()()()Total$ $ $ $ $ Life Run-off Corporate & Other Total$ $

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Brighthouse Financial, Inc.

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

$ $ $ $ $ Beginning balance at original discount rate Effect of model refinements Effect of changes in cash flow assumptions Effect of actual variances from expected experience () Adjusted beginning of period balance Issuances Interest accrual Net premiums collected() () Ending balance at original discount rate Effect of changes in discount rate assumptions() () Balance, end of period$ $ $ $ $ $ Present value of expected future policy benefits:Balance, beginning of period$ $ $ $ $ $ Beginning balance at original discount rate Effect of model refinements Effect of changes in cash flow assumptions () Effect of actual variances from expected experience ()()() ()Adjusted beginning of period balance Issuances Interest accrual Benefit payments()()()()()()Ending balance at original discount rate Effect of changes in discount rate assumptions()()()()()()Balance, end of period$ $ $ $ $ $ Net liability for future policy benefits, end of period$ $ $ $ $ $ Less: Reinsurance recoverable, end of period Net liability for future policy benefits, after reinsurance recoverable$ $ $ $ $ $ Weighted-average duration of liability years years years years years yearsWeighted-average interest accretion rate % % % % % %Current discount rate % % % % % %Gross premiums or assessments recognized during period$ $ $ $ $ $ Expected future gross premiums, undiscounted$ $ $ $ $ $ Expected future gross premiums, discounted$ $ $ $ $ $ Expected future benefit payments, undiscounted$ $ $ $ $ $ Expected future benefit payments, discounted$ $ $ $ $ $

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Brighthouse Financial, Inc.

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

3. Insurance Liabilities (continued)

$ Beginning balance before the effect of unrealized gains and losses Effect of changes in cash flow assumptions Effect of actual variances from expected experience Adjusted beginning of period balance Interest accrual Net assessments collected Benefit payments()()Ending balance before the effect of unrealized gains and losses Effect of unrealized gains and losses()()Balance, end of period Less: Reinsurance recoverable, end of period Net additional liability, after reinsurance recoverable$ $ Weighted-average duration of liability years yearsWeighted-average interest accretion rate % %

Gross assessments recognized during period

$ $

% to %. The impact from changes in assumptions, excluding the effects on the ULSG liability for profits followed by losses, is presented in effect of changes in cash flow assumptions in the table above.

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Brighthouse Financial, Inc.

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

3. Insurance Liabilities (continued)

$ Long-term care insurance (1)

ULSG liabilities, including liability for profits followed by losses

Participating whole life insurance (2)

Deferred profit liabilities

Other Total liability for future policy benefits$ $

_______________

(1)Includes liabilities related to fully reinsured individual long-term care insurance. See Note 2.

(2)Participating whole life insurance uses an interest assumption based on the non-forfeiture interest rate, ranging from % to %, 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 % of the Company’s life insurance in-force at both September 30, 2024 and 2023, and % and % of gross traditional life insurance premiums for the nine months ended September 30, 2024 and 2023, respectively.

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Brighthouse Financial, Inc.

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

3. Insurance Liabilities (continued)

$ $ $ $ $ Premiums and deposits Surrenders and withdrawals()()()()() Benefit payments()()()()()()Net transfers from (to) separate account Interest credited Policy charges()()() ()()Changes related to embedded derivatives Balance, end of period$ $ $ $ $ $ Weighted-average crediting rate (2) % % % % % %Nine Months Ended September 30, 2023Balance, beginning of period$ $ $ $ $ $ Premiums and deposits Surrenders and withdrawals()()()()() Benefit payments()()()()()()Net transfers from (to) separate account Interest credited Policy charges()()() ()()Changes related to embedded derivatives )) ))() ) years years

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(1)Amounts represent the sum of MRB assets and MRB liabilities presented on the consolidated balance sheets at September 30, 2024 and 2023, with the exception of $ million and ($) million, respectively, of index-linked annuities not included in this table.

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Brighthouse Financial, Inc.

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

$ $ $ $ $ Premiums and deposits Surrenders and withdrawals()()()()()()Benefit payments()()()()()()Investment performance Policy charges()()()()()()Net transfers from (to) general account()()()()() Other() () ()Balance, end of period$ $ $ $ $ $

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:


	September 30,
	2024	2023
	(In millions)
Separate account liabilities reported in the preceding rollforward table	$	$
Variable income annuities
Pension risk transfer annuities
Total separate account liabilities	$	$

$ ) ) ))

_______________

(1)The Company recorded total write-offs of $ million and $ million for the nine months ended September 30, 2024 and 2023, respectively.

%$ %Agricultural Residential Total mortgage loans (1) Allowance for credit losses()()()()Total mortgage loans, net$ %$ %

_______________

(1)Purchases of mortgage loans from third parties were $ million and $ million for the three months and nine months ended September 30, 2024, respectively, and $ million and $ million for the three months and nine months ended September 30, 2023, respectively, and were primarily comprised of residential mortgage loans.

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Brighthouse Financial, Inc.

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

7. Investments (continued)

The accrued interest receivable on mortgage loans is included in accrued investment income and totaled $ million and $ million at September 30, 2024 and December 31, 2023, respectively.

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Brighthouse Financial, Inc.

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

7. Investments (continued)

$ $ $ Current period provision () Charge-offs, net of recoveries() ()Balance, end of period$ $ $ $ Nine Months Ended September 30, 2023Balance, beginning of period$ $ $ $ Current period provision Charge-offs, net of recoveries()() ()Balance, end of period$ $ $ $

Credit Quality of Mortgage Loans by Portfolio Segment

$ $ $ $ $ $ 65% to 75% 76% to 80% Greater than 80% Total commercial mortgage loans Agricultural mortgage loansLoan-to-value ratios:Less than 65% 65% to 75% 76% to 80% Greater than 80% Total agricultural mortgage loans Residential mortgage loansPerforming Nonperforming Total residential mortgage loans Total$ $ $ $ $ $ $

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Brighthouse Financial, Inc.

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

7. Investments (continued)

$ $ $ $ $ $ 65% to 75% 76% to 80% Greater than 80% Total commercial mortgage loans Agricultural mortgage loansLoan-to-value ratios:Less than 65% 65% to 75% Total agricultural mortgage loans Residential mortgage loansPerforming Nonperforming Total residential mortgage loans Total$ $ $ $ $ $ $

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.

%$ %1.00x - 1.20x Less than 1.00x Total$ %$ %

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.

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Brighthouse Financial, Inc.

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

7. Investments (continued)

% of all mortgage loans classified as performing at both September 30, 2024 and December 31, 2023. $ $ $ $ $ $ $ 30-59 days past due 60-89 days past due 90-179 days past due 180+ days past due

Total

$ $ $ $ $ $ $ $

$ $ $

December 31, 2023

$ $ $ $

mortgage loans in nonaccrual status for which there was no related allowance for credit losses at both September 30, 2024 and December 31, 2023.

Current period investment income on mortgage loans in nonaccrual status was $ million and $ million for the nine months ended September 30, 2024 and 2023, respectively.

Modified Mortgage Loans by Portfolio Segment

Under certain circumstances, modifications are granted to nonperforming mortgage loans. Generally, the types of concessions may include interest rate reduction, term extension, principal forgiveness, or a combination of all three. The Company did not have a significant amount of mortgage loans modified during both the nine months ended September 30, 2024 and 2023.

% of other invested assets is comprised of freestanding derivatives with positive estimated fair values. See Note 8 for information about freestanding derivatives with positive estimated fair values. Other invested assets also includes the Company’s investment in company-owned life insurance, Federal Home Loan Bank (“FHLB”) stock, leveraged leases and tax credit and renewable energy partnerships.

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Brighthouse Financial, Inc.

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

7. Investments (continued)

)$()Derivatives Other() Subtotal()()Amounts allocated from:Future policy benefits Deferred income tax benefit (expense) Net unrealized investment gains (losses)$()$()

)Unrealized investment gains (losses) during the period Unrealized investment gains (losses) relating to:Future policy benefits()Deferred income tax benefit (expense)()Balance at September 30, 2024$()Change in net unrealized investment gains (losses)$

$ Estimated fair value$ $ Cash collateral received from counterparties (2)$ $ (In millions)

_______________

(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 in normal market conditions, or both. The estimated fair value of the securities on loan related to the cash collateral on open at September 30, 2024 was $ million, primarily comprised of 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, U.S. government and agency securities, non-agency RMBS and CMBS) with % invested in agency RMBS, U.S. government and agency securities and cash and cash equivalents at September 30, 2024. 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.

$ Invested assets held in trust (reinsurance agreements) (2) Invested assets pledged as collateral (3) Total invested assets on deposit, held in trust and pledged as collateral$ $

_______________

(1)The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $ million and $ million of the assets on deposit represents restricted cash and cash equivalents at September 30, 2024 and December 31, 2023, respectively.

(2)The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions, of which $ million and $ million of the assets held in trust balance represents restricted cash and cash equivalents at September 30, 2024 and December 31, 2023, respectively.

(3)The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 4 of the Notes to the Consolidated Financial Statements included in the 2023 Annual Report) and derivative transactions (see Note 8).

See “— Securities Lending” for information regarding securities on loan. In addition, the Company’s investment in FHLB common stock, which is considered restricted until redeemed by the issuer, was $ million and $ million at redemption value at September 30, 2024 and December 31, 2023, respectively.

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Brighthouse Financial, Inc.

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

7. Investments (continued)

$ $ $ Limited partnerships and LLCs Total$ $ $ $

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.

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Brighthouse Financial, Inc.

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

7. Investments (continued)

$ $ $ Equity securities Mortgage loans Policy loans Limited partnerships and LLCs (1) Cash, cash equivalents and short-term investments Other Total investment income Less: Investment expenses Net investment income$ $ $ $

_______________

(1)Includes net investment income pertaining to other limited partnership interests of $ million and $ million for the three months and nine months ended September 30, 2024, respectively, and $ million and $ million for the three months and nine months ended September 30, 2023, respectively.

Net Investment Gains (Losses)

Components of Net Investment Gains (Losses)

)$()$()$()Equity securities () ()Mortgage loans() ()()Limited partnerships and LLCs () Other () ()Total net investment gains (losses)$()$()$()$()

Gains (losses) from foreign currency transactions included within net investment gains (losses) were not significant for the three months and nine months ended September 30, 2024 and 2023.

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Brighthouse Financial, Inc.

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

7. Investments (continued)

$ $ $ Gross investment gains$ $ $ $ Gross investment losses()()()()Net investment gains (losses)$()$()$()$()

For detailed information on these contracts and the related strategies, see Note 7 of the Notes to the Consolidated Financial Statements included in the 2023 Annual Report. In the third quarter of 2024, the Company began utilizing equity futures as non-qualified hedges to manage risk related to certain of its index-linked annuity products. In the second quarter of 2024, the Company began utilizing interest rate futures as non-qualified hedges to manage risk related to policyholder liabilities for institutional group annuities. In the first quarter of 2024, the Company entered into interest rate swaps that qualify for hedge accounting to manage the interest rate risk in certain of its funding agreement liabilities.

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Brighthouse Financial, Inc.

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

8. Derivatives (continued)

$ $ $ $ $ Foreign currency swapsForeign currency exchange rate Total qualifying hedges Derivatives Not Designated or Not Qualifying as Hedging Instruments:Interest rate swapsInterest rate Interest rate floorsInterest rate Interest rate capsInterest rate Interest rate futuresInterest rate Interest rate optionsInterest rate Interest rate forwardsInterest rate Foreign currency swapsForeign currency exchange rate Foreign currency forwardsForeign currency exchange rate Credit default swaps — writtenCredit Equity futuresEquity market Equity index optionsEquity market Equity total return swapsEquity market Hybrid optionsEquity market Total non-designated or non-qualifying derivatives Total$ $ $ $ $ $

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, 2024 and December 31, 2023. The Company’s use of derivatives includes (i) derivatives that serve as 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 Accounting Standards Codification 815 — Derivatives and Hedging; (iii) derivatives that economically hedge MRBs that do not qualify for hedge accounting because the changes in estimated fair value of the MRBs 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.

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Brighthouse Financial, Inc.

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

8. Derivatives (continued)

)$ $ $ $()Foreign currency exchange rate () ()Total cash flow hedges () ()

Derivatives Not Designated or Not Qualifying as Hedging Instruments:

Interest rate Foreign currency exchange rate() Credit Equity market Embedded() Total non-qualifying hedges() Total$()$ $ $ $()Three Months Ended September 30, 2023Derivatives Designated as Hedging Instruments: Cash flow hedges:Interest rate$ $ $ $ $()Foreign currency exchange rate () ()Total cash flow hedges () ()

Derivatives Not Designated or Not Qualifying as Hedging Instruments:

Interest rate() Foreign currency exchange rate () Credit Equity market() Embedded Total non-qualifying hedges()() Total$()$()$ $ $()

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Brighthouse Financial, Inc.

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

8. Derivatives (continued)

$ $ $ $()Foreign currency exchange rate () ()Total cash flow hedges () ()

Derivatives Not Designated or Not Qualifying as Hedging Instruments:

Interest rate() Foreign currency exchange rate Credit Equity market Embedded() Total non-qualifying hedges() Total$()$()$ $ $()Nine Months Ended September 30, 2023Derivatives Designated as Hedging Instruments: Cash flow hedges:Interest rate$()$ $ $ $()Foreign currency exchange rate () ()Total cash flow hedges () ()

Derivatives Not Designated or Not Qualifying as Hedging Instruments:

Interest rate() Foreign currency exchange rate () Credit Equity market Embedded() Total non-qualifying hedges()() Total$()$()$ $ $()

At September 30, 2024 and December 31, 2023, the Company held no qualified derivatives hedging exposure to future cash flows for forecasted asset purchases.

At September 30, 2024 and December 31, 2023, the balance in AOCI associated with cash flow hedges was $ million and $ million, respectively.

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Brighthouse Financial, Inc.

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

8. Derivatives (continued)

$ $ $ Baa Ba Caa and Lower Total$ $ $ $

_______________

(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.

The Company may be exposed to credit-related losses in the event of counterparty nonperformance on derivative instruments.

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 9 for a description of the impact of credit risk on the valuation of derivatives.

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Brighthouse Financial, Inc.

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

8. Derivatives (continued)

$()$()$ $()$ Derivative liabilities $ $()$ $ $()$ December 31, 2023Derivative assets$ $()$()$ $()$ Derivative liabilities $ $()$()$ $()$

_______________

(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.

(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.

$ Estimated fair value of collateral provided (2):Fixed maturity securities$ $

_______________

(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. Additionally, the Company is required to pledge initial margin for certain new over-the-counter (“OTC”) bilateral contracts between two counterparties (“OTC-bilateral”) derivative transactions to third-party custodians.

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Brighthouse Financial, Inc.

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

$ $ $ Foreign corporate U.S. government and agency RMBS CMBS ABS State and political subdivision Foreign government Total fixed maturity securities Equity securities Short-term investments Derivative assets: (1)Interest rate Foreign currency exchange rate Credit Equity market Total derivative assets

Embedded derivatives on index-linked annuities (2)

Market risk benefit assets Separate account assets Total assets$ $ $ $ LiabilitiesMarket risk benefit liabilities$ $ $ $ Derivative liabilities: (1)Interest rate Foreign currency exchange rate Equity market Total derivative liabilities Embedded derivatives on index-linked annuities (2) Total liabilities$ $ $ $

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Brighthouse Financial, Inc.

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

9. Fair Value (continued)

Embedded derivatives on index-linked annuities (2)

_______________

(1)Derivative assets are reported in other invested assets and derivative liabilities are reported in other liabilities. The amounts are presented gross in the tables above to reflect the presentation on the consolidated balance sheets.

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Brighthouse Financial, Inc.

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

9. Fair Value (continued)

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Brighthouse Financial, Inc.

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

9. Fair Value (continued)

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Brighthouse Financial, Inc.

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

9. Fair Value (continued)

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Brighthouse Financial, Inc.

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

9. Fair Value (continued)

%-%%-%Decrease (1)•Lapse rates%-%%-%Decrease (2)•Utilization rates%-%%-%Increase (3)•Withdrawal rates%-%%-%(4)•Long-term equity volatilities%-%%-%Increase (5)•Nonperformance risk spread%-%%-%Decrease (6)Embedded DerivativesIndex-linked annuity crediting rates•Option pricing techniques•Mortality rates%-%%-%Decrease (1)•Lapse rates%-%%-%Decrease (2)•Withdrawal rates%-%%-%(4)•Nonperformance risk spread%-%%-%Decrease (6)

_______________

(1)Mortality rates vary by age and by demographic characteristics such as gender. The range shown reflects the mortality rate for policyholders between 35 and 90 years old. Mortality rate assumptions are set based on company experience and include an assumption for mortality improvement.

(2)The lapse rate range reflects base lapse rates for major product categories for duration 1-20. Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. For variable annuity guarantees, a dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in-the-money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies.

(3)The utilization rate assumption for variable annuity guarantees estimates the percentage of contract holders with a guaranteed minimum income benefit (“GMIB”) or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible in a given year. The range shown represents the floor and cap of the GMIB dynamic election rates across varying levels of in-the-money. For lifetime withdrawal guarantee riders, the assumption is that everyone will begin withdrawals once account value reaches zero which is equivalent to a 100% utilization rate. Utilization rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder.

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Brighthouse Financial, Inc.

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

9. Fair Value (continued)

The Company does not develop unobservable inputs used in measuring fair value for all other assets and liabilities classified within Level 3; therefore, these are not included in the table above. The other Level 3 assets and liabilities primarily included fixed maturity securities and derivatives. For fixed maturity securities valued based on non-binding broker quotes, an increase (decrease) in credit spreads would result in a (lower) higher fair value. For derivatives valued based on third-party pricing models, an increase (decrease) in credit spreads would generally result in a (lower) higher fair value.

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Brighthouse Financial, Inc.

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

9. Fair Value (continued)

$ $ $ $() () () $ $ $ $()

Three Months Ended September 30, 2023

$ $ $ $() ) () ) () ) $ $ $ $() $()$ $()$() $ $ $ $ $ $ $ $ ()$ $ $()$

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Brighthouse Financial, Inc.

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

9. Fair Value (continued)

$ $ $ $() () ()() ) () $ $ $ $()

Nine Months Ended September 30, 2023

$ $ $ $() () ()() () ) () ) () $ $ $ $() $()$ $()$() $ $ $ $ $()$ $()$() $ $ $()$

_______________

(1)Comprised of U.S. and foreign corporate securities.

(2)Freestanding derivative assets and liabilities are reported net for purposes of the rollforward.

(3)Amortization of premium/accretion of discount is included in net investment income. Changes in the allowance for credit losses and direct write-offs are charged to net income (loss) on securities are included in net investment gains (losses). Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).

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Brighthouse Financial, Inc.

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

9. Fair Value (continued)

$ $ $ $ Policy loans$ $ $ $ $ Other invested assets$ $ $ $ $ Premiums, reinsurance and other receivables$ $ $ $ $ LiabilitiesPolicyholder account balances$ $ $ $ $ Long-term debt$ $ $ $ $ Other liabilities$ $ $ $ $ Separate account liabilities$ $ $ $ $

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Brighthouse Financial, Inc.

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

9. Fair Value (continued)

% Non-Cumulative Preferred Stock, Series A

% Non-Cumulative Preferred Stock, Series B

% Non-Cumulative Preferred Stock, Series C

% Non-Cumulative Preferred Stock, Series D

Not designated Total $ $ $ $ $ $ $ B$ $ $ $ C$ $ $ $ D$ $ $ $ Total$ $ $ $

and shares, respectively, of its common stock through open market purchases pursuant to Rule 10b5-1 plans for $ million for both periods. At September 30, 2024, BHF had $ million remaining under its common stock repurchase program.

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Brighthouse Financial, Inc.

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

10. Equity (continued)

)$ $()$ $()$()OCI before reclassifications ()()() Deferred income tax benefit (expense) (3)() ()()AOCI before reclassifications, net of income tax() () ()()Amounts reclassified from AOCI () Deferred income tax benefit (expense) (3)() ()Amounts reclassified from AOCI, net of income tax ()

Balance at September 30, 2024

$()$ $()$ $()$()

Three Months Ended September 30, 2023

Unrealized Investment Gains (Losses), Net of Related Offsets (1)

Unrealized
Gains (Losses)
on Derivatives

Changes in Nonperformance Risk on Market Risk Benefits

Changes in Discount Rates on the Liability for Future Policy Benefits

Other (2)

Total

(In millions)

Balance at June 30, 2023

()

OCI before reclassifications

()

Deferred income tax benefit (expense) (3)

()

AOCI before reclassifications, net of income tax

()

Amounts reclassified from AOCI

()

Deferred income tax benefit (expense) (3)

()

Amounts reclassified from AOCI, net of income tax

()

Balance at September 30, 2023

()

)$ $()$ $()$()OCI before reclassifications () () Deferred income tax benefit (expense) (3)() () ()()AOCI before reclassifications, net of income tax() () ()()Amounts reclassified from AOCI () Deferred income tax benefit (expense) (3)() ()()Amounts reclassified from AOCI, net of income tax ()

Balance at September 30, 2024

$()$ $()$ $()$()

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Brighthouse Financial, Inc.

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

10. Equity (continued)

)$ $()$ $()$()OCI before reclassifications()() ()()Deferred income tax benefit (expense) (3) ()() AOCI before reclassifications, net of income tax() () ()()Amounts reclassified from AOCI () Deferred income tax benefit (expense) (3)() ()()Amounts reclassified from AOCI, net of income tax ()

Balance at September 30, 2023

$()$ $()$ $()$()

__________________

(1)See Note 7 for information on offsets to investments related to future policy benefits.

(2)Includes OCI related to foreign currency translation and defined benefit plan gains and losses.

(3)

)$()$()$()Net investment gains (losses)Net unrealized investment gains (losses) ()()()Net derivative gains (losses)Net unrealized investment gains (losses), before income tax()()()()Income tax (expense) benefit Net unrealized investment gains (losses), net of income tax()()()()Unrealized gains (losses) on derivatives - cash flow hedges:Interest rate swaps() ()Net derivative gains (losses)Interest rate swaps Net investment incomeForeign currency swaps Net derivative gains (losses)Gains (losses) on cash flow hedges, before income tax Income tax (expense) benefit() ()()Gains (losses) on cash flow hedges, net of income tax Defined benefit plans adjustment:Amortization of net actuarial gains (losses)() ()()Amortization of defined benefit plans, before income tax() ()()Income tax (expense) benefit Amortization of defined benefit plans, net of income tax() ()()Total reclassifications, net of income tax$()$()$()$()

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Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

million and $ million for the three months and nine months ended September 30, 2024, respectively, and $ million and $ million for the three months and nine months ended September 30, 2023, respectively, of which substantially all were reported in the Annuities segment.

$ $ $ Contracted services and other labor costs Transition services agreements Premium and other taxes, licenses and fees Separate account fees Volume related costs, excluding compensation, net of DAC capitalization Interest expense on debt Other Total other expenses$ $ $ $

Capitalization of DAC

See Note 6 for additional information on the capitalization of DAC.

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Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

$ $()$()Weighted average common shares outstanding — basic Dilutive effect of share-based awards Weighted average common shares outstanding — diluted Earnings per common share:Basic$ $ $()$()Diluted$ $ $()$()

For both the three months ended September 30, 2024 and 2023, weighted average shares used for calculating diluted earnings per common share excludes shares underlying out-of-the-money stock options, as the inclusion of such shares would be antidilutive under the treasury stock method to the earnings per common share calculation due to the average share price for both the three months ended September 30, 2024 and 2023.

For both the nine months ended September 30, 2024 and 2023, basic loss per common share equaled diluted loss per common share. The diluted shares were not included in the per share calculation for these periods as the inclusion of such shares would have an antidilutive effect.

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Brighthouse Financial, Inc.

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

13. Contingencies, Commitments and Guarantees (continued)

million.

Matters as to Which an Estimate Cannot Be Made

For other matters, the Company is not currently able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts, and the progress of settlement negotiations. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation contingencies and updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.

Sales Practices Claims

Over the past several years, the Company has faced claims and regulatory inquiries and investigations, alleging improper marketing or sales of individual life insurance policies, annuities or other products. The Company continues to defend vigorously against the claims in these matters. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices matters.

Cost of Insurance Class Actions

Richard A. Newton v. Brighthouse Life Insurance Company (U.S. District Court, Northern District of Georgia, Atlanta Division, filed May 8, 2020). Plaintiff has filed a purported class action lawsuit against Brighthouse Life Insurance Company, a subsidiary of Brighthouse Financial, Inc. Plaintiff was the owner of a universal life insurance policy issued by Travelers Insurance Company, a predecessor to Brighthouse Life Insurance Company. Plaintiff seeks to certify a class of all persons who own or owned life insurance policies issued where the terms of the life insurance policy provide or provided, among other things, a guarantee that the cost of insurance rates would not be increased by more than a specified percentage in any contract year. Plaintiff also alleges that cost of insurance charges were based on improper factors and should have decreased over time due to improving mortality but did not. Plaintiff alleges, among other things, causes of action for breach of contract, fraud, suppression and concealment, and violation of the Georgia Racketeer Influenced and Corrupt Organizations Act. Plaintiff seeks to recover damages, including punitive damages, interest and treble damages, attorneys’ fees, and injunctive and declaratory relief. Brighthouse Life Insurance Company filed a motion to dismiss in June 2020, which was granted in part and denied in part in March 2021. Plaintiff was granted leave to amend the complaint. On January 18, 2023, Plaintiff filed a motion on consent to amend the second amended class action complaint to narrow the scope of the class sought to those who own or owned policies issued in Georgia; the motion was granted on January 23, 2023, and the third amended class action complaint was filed on January 23, 2023. The Company intends to vigorously defend this matter.

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Brighthouse Financial, Inc.

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

13. Contingencies, Commitments and Guarantees (continued)

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Brighthouse Financial, Inc.

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

13. Contingencies, Commitments and Guarantees (continued)

up to approximately $ million relating to certain tax matters, as described above. For certain other matters, the Company may not currently be able to estimate the reasonably possible loss or estimated range of loss until developments in such matters have provided sufficient information to support an assessment of such loss. During the first quarter of 2024, an arbitration panel ruled in favor of a reinsurer seeking a premium rate increase retroactive to September 2019 resulting in a $ million loss, of which $ million was reported in universal life and investment product-type policy fees and $ million was reported in other expenses.

million and $ million at September 30, 2024 and December 31, 2023, respectively.

Commitments to Fund Partnership Investments, Bank Credit Facilities and Private Corporate Bond Investments

The Company commits to fund partnership investments and to lend funds under bank credit facilities and private corporate bond investments. The amounts of these unfunded commitments were $ billion and $ billion at September 30, 2024 and December 31, 2023, respectively.

million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments.

In addition, the Company indemnifies its directors and officers as provided in its charters and bylaws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company’s interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future.

t have any liabilities recorded at September 30, 2024 and had recorded liabilities of $ million at December 31, 2023 for indemnities, guarantees and commitments.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations

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For purposes of this discussion, “Brighthouse Financial,” the “Company,” “we,” “our” and “us” refer to Brighthouse Financial, Inc. and its subsidiaries, and “BHF” refers solely to Brighthouse Financial, Inc., the ultimate holding company for all of our subsidiaries, and not to any of its subsidiaries. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with (i) the Interim Condensed Consolidated Financial Statements and related notes included elsewhere herein; (ii) our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”) filed with the U.S. Securities and Exchange Commission (“SEC”) on February 22, 2024; (iii) our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 (the “First Quarter Form 10-Q”) filed with the SEC on May 8, 2024; (iv) our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 (the “Second Quarter Form 10-Q” and, together with the First Quarter Form 10-Q, the “Quarterly Reports”) filed with the SEC on August 8, 2024; and (v) our current reports on Form 8-K filed in 2024.

Introduction

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations, financial condition and cash flows of Brighthouse Financial for the periods indicated. Prior to discussing our results of operations, we present information that we believe is useful to understanding the discussion of our financial results. This information precedes our results of operations discussion and is most beneficial when read in the sequence presented. A summary of key informational sections is as follows:

•“Executive Summary” provides summarized information regarding our business, segments and financial results.

•“Industry Trends and Uncertainties” discusses updates and changes to a number of trends and uncertainties included in our 2023 Annual Report that we believe may materially affect our future financial condition, results of operations or cash flows.

•“Summary of Critical Accounting Estimates” explains the most critical estimates and judgments applied in determining our results in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

•“Non-GAAP Financial Disclosures” defines key financial measures presented in our results of operations discussion that are not calculated in accordance with GAAP but are used by management in evaluating company and segment performance. As described in this section, adjusted earnings is presented by key business activities which are derived, but different, from the line items presented in the GAAP statements of operations. This section also refers to certain other terms used to describe our insurance business and financial and operating metrics but is not intended to be exhaustive.

Our Results of Operations discussion and analysis presents a review for the three months and nine months ended September 30, 2024 and 2023 and period-over-period, as well as year-over-year, comparisons between these periods.

Executive Summary

We are 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. We are organized into the following segments: (i) Annuities, (ii) Life and (iii) Run-off, which consists primarily of products that are no longer actively sold and are separately managed. In addition, we report certain of our results of operations in Corporate & Other. See “Business — Segments and Corporate & Other” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary” included in our 2023 Annual Report, as well as Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information regarding our segments and Corporate & Other.

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Net income (loss) available to shareholders and adjusted earnings, a non-GAAP financial measure, were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In millions)
Income (loss) available to shareholders before provision for income tax	$	160	$	562	$	(493)	$	(381)
Less: Provision for income tax expense (benefit)	10		109		(133)		(109)
Net income (loss) available to shareholders (1)	$	150	$	453	$	(360)	$	(272)

Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends (1)	$	940	$	401	$	1,248	$	965
Less: Provision for income tax expense (benefit)	173		75		233		173
Adjusted earnings (loss) (1)	$	767	$	326	$	1,015	$	792

__________________

(1)We use the term “net income (loss) available to shareholders” to refer to “net income (loss) available to Brighthouse Financial, Inc.’s common shareholders” and “adjusted loss” to refer to negative adjusted earnings values throughout the results of operations discussions.

For the three months ended September 30, 2024, we had net income available to shareholders of $150 million and adjusted earnings of $767 million compared to net income available to shareholders of $453 million and adjusted earnings of $326 million for the three months ended September 30, 2023. Net income available to shareholders for the three months ended September 30, 2024 primarily reflects favorable pre-tax adjusted earnings and a favorable change in the estimated fair value of freestanding interest rate derivatives we use to hedge our universal life with secondary guarantees (“ULSG”) business resulting from decreasing long-term interest rates. The favorable impacts were partially offset by net unfavorable changes in the estimated fair value of our variable annuity guaranteed benefit riders due to market factors, net investment losses on sales of fixed maturity securities and net investment losses on mortgage loans.

For the nine months ended September 30, 2024, we had net loss available to shareholders of $360 million and adjusted earnings of $1.0 billion compared to net loss available to shareholders of $272 million and adjusted earnings of $792 million for the nine months ended September 30, 2023. Net loss available to shareholders for the nine months ended September 30, 2024 primarily reflects net unfavorable changes in the estimated fair value of our variable annuity guaranteed benefit riders due to market factors, net investment losses on sales of fixed maturity securities, net investment losses on mortgage loans and an unfavorable change in the estimated fair value of freestanding interest rate derivatives we use to hedge our ULSG business resulting from increasing long-term interest rates. These unfavorable impacts were partially offset by favorable pre-tax adjusted earnings, net of an unfavorable impact due to a reinsurance premium rate increase retroactive to September 2019, which resulted from the conclusion of a reinsurance arbitration, and the related impacts.

See “— Non-GAAP Financial Disclosures.” See “— Results of Operations” for a detailed discussion of our results.

Industry Trends and Uncertainties

Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we discuss a number of trends and uncertainties that we believe may materially affect our future financial condition, results of operations or cash flows. Where these trends or uncertainties are specific to a particular aspect of our business, we often include such a discussion under the relevant caption of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, as part of our broader analysis of that area of our business. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends and Uncertainties” included in our 2023 Annual Report, as amended or supplemented by our subsequent Quarterly Reports and herein, for a comprehensive discussion of some of the key general trends and uncertainties that have influenced the development of our business and our historical financial performance and that we believe will continue to influence our business and results of operations in the future.

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Financial and Economic Environment

Our business and results of operations are materially affected by conditions in the capital markets and the economy generally. Stressed conditions, volatility and disruptions in the capital markets or financial asset classes can have an adverse effect on us. Equity market performance can affect our profitability for variable annuities and other separate account products as a result of the effects it has on product demand, revenues, expenses, reserves and our risk management effectiveness. The level of long-term interest rates and the shape of the yield curve can have a negative effect on the profitability for variable annuities, as well as the demand for, and the profitability of, spread-based products such as fixed annuities, index-linked annuities and universal life insurance. Low interest rates and risk premium, including credit spread, affect new money rates on invested assets and the cost of product guarantees. Insurance premium growth and demand for our products is impacted by the general health of U.S. economic activity. A sustained or material increase in inflation could also affect our business in several ways. During inflationary periods, the value of fixed income investments falls which could increase realized and unrealized losses. The Federal Reserve Board (the “Federal Reserve”) decreased the target range for the federal funds rate in September and November 2024, and may decrease the target range again, which may negatively impact our business in certain respects, including our investment portfolio, by lowering the level of long-term interest rates and changing the shape of the yield curve. Inflation also increases our expenses (including, among others, for labor and third-party services), potentially putting pressure on profitability if such costs cannot be passed through to policyholders in our product prices. Prolonged and elevated inflation could adversely affect the financial markets and the economy generally and dispelling it may require governments to pursue restrictive fiscal and monetary policies, which could constrain overall economic activity and inhibit revenue growth. Events involving limited liquidity, defaults, nonperformance or other adverse developments that affect financial institutions or the financial services industry generally, or concerns or rumors about events of these kinds or other similar risks, could adversely affect market-wide liquidity, which could increase the risk of a recession or an equity market downturn and negatively impact various portions of our business, including our investment portfolio. See “Risk Factors — Economic Environment and Capital Markets-Related Risks — If difficult conditions in the capital markets and the U.S. economy generally persist or are perceived to persist, they may materially adversely affect our business and results of operations” and “Risk Factors — Risks Related to our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations” included in our 2023 Annual Report.

We continue to closely monitor political and economic conditions that might contribute to market volatility and their impact on our business operations, investment portfolio and derivatives, such as global inflation, uncertainty and instability in certain asset classes (including commercial real estate), supply chain disruptions and recent geopolitical conflicts, including in Europe and the Middle East. See “— Investments — Current Environment” herein, as well as “Risk Factors — Economic Environment and Capital Markets-Related Risks,” “Risk Factors — Risks Related to our Investment Portfolio,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends and Uncertainties” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Investments” included in our 2023 Annual Report for a detailed discussion of financial and economic impacts on our business, including the potential impacts of interest rate risk and inflation risk on our investments and overall business.

Regulatory Developments

Our insurance subsidiaries and Brighthouse Reinsurance Company of Delaware (“BRCD”) are primarily regulated at the state level, with some products and services also subject to federal regulation. In addition, BHF and its insurance subsidiaries are subject to regulation under the insurance holding company laws of various U.S. jurisdictions. Furthermore, some of our operations, products and services are subject to the Employee Retirement Income Security Act of 1974, consumer protection laws, securities, broker-dealer and investment advisor regulations, as well as environmental and unclaimed property laws and regulations. See “Business — Regulation,” as well as “Risk Factors — Regulatory and Legal Risks” included in our 2023 Annual Report, as amended or supplemented by our subsequent Quarterly Reports under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends and Uncertainties — Regulatory Developments.”

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Summary of Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the Interim Condensed Consolidated Financial Statements.

The most critical estimates include those used in determining:

•liability for future policy benefits;

•estimated fair values of market risk benefits (“MRB”);

•estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation; and

•measurement of income taxes and the valuation of deferred tax assets.

In applying our accounting policies, we make subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our business and operations. Actual results could differ from these estimates.

The above critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and Note 1 of the Notes to the Consolidated Financial Statements included in our 2023 Annual Report.

Non-GAAP Financial Disclosures

We present certain measures of our performance that are not calculated in accordance with GAAP. Our definitions of non-GAAP financial measures may differ from those used by other companies.

Adjusted Earnings

Adjusted earnings is a financial measure used by management to evaluate performance and facilitate comparisons to industry results. We believe the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of our performance by the investor community by highlighting the results of operations and the underlying profitability drivers of our business. Adjusted earnings should not be viewed as a substitute for net income (loss) available to Brighthouse Financial, Inc.’s common shareholders, which is the most directly comparable financial measure calculated in accordance with GAAP. See “— Results of Operations” for a reconciliation of adjusted earnings to net income (loss) available to Brighthouse Financial, Inc.’s common shareholders.

Adjusted earnings, which may be positive or negative, focuses on our primary businesses by excluding the impact of market volatility, which could distort trends. The Company uses the term “adjusted loss” throughout this report to refer to negative adjusted earnings values.

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 (“Investment Hedge Adjustments”).

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 (“Market Value Adjustments”).

The provision for income tax related to adjusted earnings is calculated using the statutory tax rate of 21%, net of impacts related to the dividends received deduction, tax credits and current period non-recurring items.

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We present adjusted earnings in a manner consistent with management’s view of the primary business activities that drive the profitability of our core businesses. The following table illustrates how each component of adjusted earnings is calculated from the GAAP statements of operations line items:


Component of Adjusted Earnings		How Derived from GAAP (1)
(i)	Fee income	(i)	Universal life and investment-type product policy fees plus Other revenues.
(ii)	Net investment spread	(ii)	Net investment income plus Investment Hedge Adjustments reduced by Interest credited to policyholder account balances (excluding Market Value Adjustments) and interest on future policy benefits.
(iii)	Insurance-related activities	(iii)	Premiums less Policyholder benefits and claims, excluding interest on future policy benefits.
(iv)	Amortization of DAC and VOBA	(iv)	Amortization of deferred policy acquisition costs (“DAC”) and value of business acquired (“VOBA”).
(v)	Other expenses	(v)	Other expenses.
(vi)	Provision for income tax expense (benefit)	(vi)	Tax impact of the above items, calculated using the statutory tax rate of 21%, net of impacts related to the dividends received deduction, tax credits and current period non-recurring items.

__________________

(1)Italicized items indicate GAAP statements of operations line items.

Consistent with GAAP guidance for segment reporting, adjusted earnings is also our GAAP measure of segment performance. Accordingly, we report adjusted earnings by segment in Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements.

Adjusted Net Investment Income

Adjusted net investment income is used by management to measure our performance, and we believe it enhances the understanding of our investment portfolio results. Adjusted net investment income represents GAAP net investment income plus Investment Hedge Adjustments. For a reconciliation of adjusted net investment income to net investment income, the most directly comparable GAAP measure, see table note (3) to the summary yield table located in “— Investments — Current Environment — Investment Portfolio Results.”

Adjusted Net Investment Income Yield

Similar to adjusted net investment income, adjusted net investment income yield is used by management as a performance measure that we believe enhances the understanding of our investment portfolio results. Adjusted net investment income yield represents adjusted net investment income as a percentage of average quarterly asset carrying values. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties. Investment fee and expense yields are calculated as a percentage of average quarterly asset estimated fair values. Asset estimated fair values exclude collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties. For a reconciliation of adjusted net investment income yield to net investment income, the most directly comparable GAAP measure, see the summary yield table located in “— Investments — Current Environment — Investment Portfolio Results.”

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Results of Operations

Annual Actuarial Review

We typically conduct our annual actuarial review (“AAR”) in the third quarter of each year. As part of the 2024 AAR, for our ULSG business, we increased the long-term general account earned rate, driven by an increase in the mean reversion rate, from 3.75% to 4.00%. Also, with respect to our ULSG business, we updated assumptions regarding policyholder behavior, including mortality, premium persistency, lapses and withdrawals. For our variable annuity business, we updated our annuitization, mortality, lapses and withdrawals, as well as separate account assumptions, including fund fees and allocations. For term participating and non-participating whole life insurance, we updated assumptions regarding mortality and lapses.

As part of the 2023 AAR, for our ULSG business, we increased the long-term general account earned rate, driven by an increase in the mean reversion rate, from 3.50% to 3.75%. Also, with respect to our ULSG business, we updated assumptions regarding policyholder behavior, including mortality, premium persistency, lapses, withdrawals and maintenance expenses. For our variable annuity business, we updated our annuitization, mortality, lapses and withdrawals, as well as separate account assumptions, including fund fees, allocations and volatility. For term participating and non-participating whole life insurance, we updated assumptions regarding mortality and lapses.

The impact on income (loss) available to shareholders before provision for income tax was as follows:


	Nine Months Ended September 30,
	2024		2023
	(In millions)
Market risk benefits	$	42	$	(251)
Embedded derivatives	69		—
Total market risk benefits and embedded derivatives	111		(251)
Included in pre-tax adjusted earnings (loss):
Other annuity business	26		15
Life business	(83)		(90)
Run-off	359		119
Total included in pre-tax adjusted earnings (loss)	302		44
Total impact on income (loss) available to shareholders before provision for income tax	$	413	$	(207)

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Consolidated Results for the Three Months and Nine Months Ended September 30, 2024 and 2023

Unless otherwise noted, all amounts in the following discussions of our results of operations are stated before income tax except for adjusted earnings, which are presented net of income tax.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In millions)
Revenues
Premiums	$	180	$	194	$	563	$	602
Universal life and investment-type product policy fees	560		542		1,576		1,749
Net investment income	1,288		1,202		3,849		3,457
Other revenues	143		125		429		348
Net investment gains (losses)	(60)		(53)		(222)		(213)
Net derivative gains (losses)	(93)		(840)		(2,676)		(3,226)
Total revenues	2,018		1,170		3,519		2,717
Expenses
Policyholder benefits and claims (including liability remeasurement gains (losses) of ($978), ($234), ($978) and ($234), respectively)	22		590		1,632		1,966
Interest credited to policyholder account balances	556		426		1,567		1,300
Amortization of DAC and VOBA	150		155		451		468
Change in market risk benefits	610		(1,064)		(1,186)		(2,170)
Interest expense on debt	38		38		114		114
Other expenses	454		435		1,353		1,339
Total expenses	1,830		580		3,931		3,017
Income (loss) before provision for income tax	188		590		(412)		(300)
Provision for income tax expense (benefit)	10		109		(133)		(109)
Net income (loss)	178		481		(279)		(191)
Less: Net income (loss) attributable to noncontrolling interests	2		2		4		4
Net income (loss) attributable to Brighthouse Financial, Inc.	176		479		(283)		(195)
Less: Preferred stock dividends	26		26		77		77
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders	$	150	$	453	$	(360)	$	(272)

The components of net income (loss) available to shareholders were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In millions)
Change in market risk benefits	$	(610)	$	1,064	$	1,186	$	2,170
Net investment gains (losses)	(60)		(53)		(222)		(213)
Net derivative gains (losses), excluding investment hedge adjustments	(99)		(865)		(2,704)		(3,312)
Market value adjustments	(11)		15		(1)		9
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends	940		401		1,248		965
Income (loss) available to shareholders before provision for income tax	160		562		(493)		(381)
Provision for income tax expense (benefit)	10		109		(133)		(109)
Net income (loss) available to shareholders	$	150	$	453	$	(360)	$	(272)

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Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023

Income available to shareholders before provision for income tax was $160 million ($150 million, net of income tax), a decrease of $402 million ($303 million, net of income tax) from income available to shareholders before provision for income tax of $562 million ($453 million, net of income tax) in the prior period.

The decrease in income before provision for income tax was driven by the following unfavorable items:

•losses from variable annuity guaranteed benefit riders, see “— Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Three Months and Nine Months Ended September 30, 2024 and 2023” and

•the net impact of embedded derivatives and equity options we use to hedge our non-variable annuity business, as equity markets increased in the current period, resulting in a loss of $26 million, and decreased in the prior period, resulting in a gain of $71 million.

The decrease in income before provision for income taxes was partially offset by the following favorable items:

•the impact of long-term interest rates on interest rate derivatives used to manage interest rate exposure in our ULSG business, as the long-term interest rate decreased in the current period, resulting in a gain of $113 million, and increased in the prior period, resulting in a loss of $500 million; and

•higher pre-tax adjusted earnings, as discussed in greater detail below.

The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of 5% in the current period compared to 18% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits.

Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023

Loss available to shareholders before provision for income tax was $493 million ($360 million, net of income tax), a higher loss of $112 million ($88 million, net of income tax) from loss available to shareholders before provision for income tax of $381 million ($272 million, net of income tax) in the prior period.

The higher loss before provision for income tax was driven by the following unfavorable items:

•higher losses from variable annuity guaranteed benefit riders, see “— Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Three Months and Nine Months Ended September 30, 2024 and 2023” and

•the net impact of embedded derivatives and equity options we use to hedge our non-variable annuity business, as equity markets increased more in the current period, resulting in a loss of $26 million, and increased less in the prior period, resulting in a gain of $74 million.

The higher loss before provision for income tax was partially offset by the following favorable items:

•higher pre-tax adjusted earnings, as discussed in greater detail below; and

•the impact of long-term interest rates on interest rate derivatives used to manage interest rate exposure in our ULSG business, as the long-term interest rate increased less in the current period, resulting in a loss of $196 million, and increased more in the prior period, resulting in a loss of $443 million.

The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of 32% in the current period compared to 36% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction, tax credits and current period non-recurring items.

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Reconciliation of Net Income (Loss) Available to Shareholders to Adjusted Earnings (Loss)

The reconciliation of net income (loss) available to shareholders to adjusted earnings (loss) was as follows:


	Three Months Ended September 30, 2024
	Annuities		Life		Run-off		Corporate & Other		Total
	(In millions)
Net income (loss) available to shareholders	$	(504)	$	(36)	$	761	$	(71)	$	150
Add: Provision for income tax expense (benefit)	76		(7)		(88)		29		10
Income (loss) available to shareholders before provision for income tax	(428)		(43)		673		(42)		160
Less: Net investment gains (losses)	(20)		(10)		(22)		(8)		(60)
Less: Net derivative gains (losses), excluding investment hedge adjustments of $6	(201)		(1)		122		(19)		(99)
Less: Change in market risk benefits	(610)		—		—		—		(610)
Less: Market value adjustments	—		—		(11)		—		(11)
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends	403		(32)		584		(15)		940
Less: Provision for income tax expense (benefit)	76		(7)		121		(17)		173
Adjusted earnings (loss)	$	327	$	(25)	$	463	$	2	$	767


	Three Months Ended September 30, 2023
	Annuities		Life		Run-off		Corporate & Other		Total
	(In millions)
Net income (loss) available to shareholders	$	1,017	$	(88)	$	(573)	$	97	$	453
Add: Provision for income tax expense (benefit)	75		(20)		182		(128)		109
Income (loss) available to shareholders before provision for income tax	1,092		(108)		(391)		(31)		562
Less: Net investment gains (losses)	(31)		(10)		(12)		—		(53)
Less: Net derivative gains (losses), excluding investment hedge adjustments of $25	(334)		(5)		(514)		(12)		(865)
Less: Change in market risk benefits	1,064		—		—		—		1,064
Less: Market value adjustments	—		—		15		—		15
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends	393		(93)		120		(19)		401
Less: Provision for income tax expense (benefit)	74		(20)		25		(4)		75
Adjusted earnings (loss)	$	319	$	(73)	$	95	$	(15)	$	326

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	Nine Months Ended September 30, 2024
	Annuities		Life		Run-off		Corporate & Other		Total
	(In millions)
Net income (loss) available to shareholders	$	(481)	$	(44)	$	619	$	(454)	$	(360)
Add: Provision for income tax expense (benefit)	226		(7)		(726)		374		(133)
Income (loss) available to shareholders before provision for income tax	(255)		(51)		(107)		(80)		(493)
Less: Net investment gains (losses)	(125)		(33)		(43)		(21)		(222)
Less: Net derivative gains (losses), excluding investment hedge adjustments of $	(2,514)		8		(178)		(20)		(2,704)
Less: Change in market risk benefits	1,186		—		—		—		1,186
Less: Market value adjustments	—		—		(1)		—		(1)
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends	1,198		(26)		115		(39)		1,248
Less: Provision for income tax expense (benefit)	226		(7)		23		(9)		233
Adjusted earnings (loss)	$	972	$	(19)	$	92	$	(30)	$	1,015


	Nine Months Ended September 30, 2023
	Annuities		Life		Run-off		Corporate & Other		Total
	(In millions)
Net income (loss) available to shareholders	$	99	$	(76)	$	(60)	$	(235)	$	(272)
Add: Provision for income tax expense (benefit)	209		(18)		(451)		151		(109)
Income (loss) available to shareholders before provision for income tax	308		(94)		(511)		(84)		(381)
Less: Net investment gains (losses)	(159)		(17)		(26)		(11)		(213)
Less: Net derivative gains (losses), excluding investment hedge adjustments of $	(2,840)		(2)		(459)		(11)		(3,312)
Less: Change in market risk benefits	2,170		—		—		—		2,170
Less: Market value adjustments	—		—		9		—		9
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends	1,137		(75)		(35)		(62)		965
Less: Provision for income tax expense (benefit)	213		(18)		(8)		(14)		173
Adjusted earnings (loss)	$	924	$	(57)	$	(27)	$	(48)	$	792

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Consolidated Results for the Three Months and Nine Months Ended September 30, 2024 and 2023 — Adjusted Earnings

The components of adjusted earnings were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In millions)
Fee income	$	703	$	667	$	2,005	$	2,097
Net investment spread	720		758		2,226		2,152
Insurance-related activities	187		(368)		(984)		(1,282)
Amortization of DAC and VOBA	(150)		(155)		(451)		(468)
Other expenses	(492)		(473)		(1,467)		(1,453)
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends	28		28		81		81
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends	940		401		1,248		965
Provision for income tax expense (benefit)	173		75		233		173
Adjusted earnings (loss)	$	767	$	326	$	1,015	$	792

Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023

Adjusted earnings were $767 million in the current period, an increase of $441 million.

Key net favorable impacts were:

•lower net costs associated with insurance-related activities due to:

◦a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR in our Run-off and Annuities segments and other refinements; and

◦an increase in income annuity underwriting margins;

partially offset by

◦higher paid claims, net of reinsurance; and

•higher net fee income due to:

◦higher asset-based fees resulting from higher average separate account balances, a portion of which is offset in other expenses; and

◦higher reinsurance fees on our fixed annuity business resulting from higher account balances;

partially offset by

◦a decline in the net cost of insurance fees driven by the aging in-force business in our Run-off segment.

Key net unfavorable impacts were:

•lower net investment spread due to:

◦higher interest credited to policyholders due to higher account balances and prior period actuarial modeling improvements, net of changes made in the current period in connection with the AAR in our Annuities segment;

partially offset by

◦higher average invested assets resulting from positive net flows in the general account; and

◦higher investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at higher yields than the portfolio average; and

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•higher other expenses due to:

◦higher deferred compensation expenses; and

◦higher asset-based variable annuity expenses resulting from higher average separate account balances, a portion of which is offset in fee income;

partially offset by

◦lower operational expenses.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 18% in the current period compared to 17% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits.

Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023

Adjusted earnings were $1.0 billion in the current period, an increase of $223 million.

Key net favorable impacts were:

•lower net costs associated with insurance-related activities due to:

◦a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR in our Run-off and Annuities segments and other refinements; and

◦lower paid claims, net of reinsurance;

partially offset by

◦an increase in liability balances in our Run-off segment resulting from a reinsurance premium rate increase associated with the conclusion of a reinsurance arbitration; and

◦a decrease in income annuity underwriting margins; and

•higher net investment spread due to:

◦higher average invested assets resulting from positive net flows in the general account;

◦higher returns on other limited partnerships;

partially offset by

Key net unfavorable impacts were:

•lower net fee income due to:

◦higher ceded cost of insurance fees related to the conclusion of the aforementioned reinsurance arbitration in our Life and Run-off segments, as well as the aging in-force business in our Run-off segment;

partially offset by

◦higher reinsurance fees on our fixed annuity business resulting from higher account balances; and

◦higher asset-based fees resulting from higher average separate account balances, a portion of which is offset in other expenses; and

•higher other expenses due to:

◦higher variable and deferred compensation expenses; and

◦higher asset-based variable annuity expenses resulting from higher average separate account balances, a portion of which is offset in fee income;

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partially offset by

◦lower operational expenses; and

◦lower transition services agreement expenses.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 18% in the current period compared to 17% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction, tax credits and current period non-recurring items.

Segments and Corporate & Other Results for the Three Months and Nine Months Ended September 30, 2024 and 2023 — Adjusted Earnings

Annuities

The components of adjusted earnings for our Annuities segment were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In millions)
Fee income	$	523	$	494	$	1,617	$	1,533
Net investment spread	388		406		1,135		1,126
Insurance-related activities	(26)		(37)		(134)		(101)
Amortization of DAC and VOBA	(127)		(129)		(380)		(388)
Other expenses	(355)		(341)		(1,040)		(1,033)
Pre-tax adjusted earnings	403		393		1,198		1,137
Provision for income tax expense (benefit)	76		74		226		213
Adjusted earnings	$	327	$	319	$	972	$	924

A significant portion of our adjusted earnings is driven by separate account balances related to our variable annuity business, as these balances determine asset-based fee income and commissions. The changes in our variable annuities separate account balances are presented in Note 5 of the Notes to the Interim Condensed Consolidated Financial Statements.

Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023

Adjusted earnings were $327 million in the current period, an increase of $8 million.

Key net favorable impacts were:

•higher fee income due to:

◦higher asset-based fees resulting from higher average separate account balances, a portion of which is offset in other expenses; and

◦higher reinsurance fees on our fixed annuity business resulting from higher account balances; and

•lower net costs associated with insurance-related activities due to:

◦an increase in income annuity underwriting margins;

partially offset by

◦a net increase in liability balances resulting from year-over-year changes made in connection with the AAR.

Key net unfavorable impacts were:

•lower net investment spread due to:

◦higher interest credited to policyholders due to higher account balances and prior period actuarial modeling improvements, net of changes made in the current period in connection with the AAR;

partially offset by

◦higher average invested assets resulting from positive net flows in the general account; and

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•higher other expenses due to:

◦higher asset-based variable annuity expenses resulting from higher average separate account balances, a portion of which is offset in fee income; and

◦higher deferred compensation expenses;

partially offset by

◦lower operational expenses.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 19% in both the current period and the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction.

Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023

Adjusted earnings were $972 million in the current period, an increase of $48 million.

Key net favorable impacts were:

•higher fee income due to:

◦higher reinsurance fees on our fixed annuity business resulting from higher account balances; and

◦higher asset-based fees resulting from higher average separate account balances, a portion of which is offset in other expenses; and

•higher net investment spread due to:

◦higher average invested assets resulting from positive net flows in the general account; and

◦higher investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at higher yields than the portfolio average;

partially offset by

◦higher interest credited to policyholders due to higher account balances and prior period actuarial modeling improvements, net of changes made in the current period in connection with the AAR.

Key net unfavorable impacts were:

•higher costs associated with insurance-related activities due to:

◦a decrease in income annuity underwriting margins; and

◦a net increase in liability balances resulting from year-over-year changes made in connection with the AAR; and

•higher other expenses due to:

◦higher asset-based variable annuity expenses resulting from higher average separate account balances, a portion of which is offset in fee income; and

◦higher variable and deferred compensation expenses;

partially offset by

◦lower operational expenses; and

◦lower transition services agreement expenses.

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Life

The components of adjusted earnings for our Life segment were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In millions)
Fee income	$	74	$	60	$	123	$	200
Net investment spread	57		62		179		183
Insurance-related activities	(101)		(150)		(113)		(234)
Amortization of DAC and VOBA	(23)		(26)		(71)		(80)
Other expenses	(39)		(39)		(144)		(144)
Pre-tax adjusted earnings (loss)	(32)		(93)		(26)		(75)
Provision for income tax expense (benefit)	(7)		(20)		(7)		(18)
Adjusted earnings (loss)	$	(25)	$	(73)	$	(19)	$	(57)

Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023

Adjusted loss was $25 million in the current period, a lower loss of $48 million.

The key favorable impact was lower costs associated with insurance-related activities due to lower paid claims, net of reinsurance.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 22% in both the current period and the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.

Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023

Adjusted loss was $19 million in the current period, a lower loss of $38 million.

The key favorable impact was lower costs associated with insurance-related activities due to lower paid claims, net of reinsurance.

The key unfavorable impact was lower fee income due to higher ceded cost of insurance fees related to the conclusion of the aforementioned reinsurance arbitration.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 27% in the current period compared to 24% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.

Run-off

The components of adjusted earnings for our Run-off segment were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In millions)
Fee income	$	101	$	111	$	255	$	368
Net investment spread	215		233		724		667
Insurance-related activities	314		(181)		(737)		(947)
Amortization of DAC and VOBA	—		—		—		—
Other expenses	(46)		(43)		(127)		(123)
Pre-tax adjusted earnings (loss)	584		120		115		(35)
Provision for income tax expense (benefit)	121		25		23		(8)
Adjusted earnings (loss)	$	463	$	95	$	92	$	(27)

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Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023

Adjusted earnings were $463 million in the current period, an increase of $368 million.

The key net favorable impact was:

•lower net costs associated with insurance-related activities due to:

◦a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR and other refinements;

partially offset by

◦higher paid claims, net of reinsurance.

Key net unfavorable impacts were:

•lower net investment spread due to:

◦lower returns on real estate joint ventures; and

◦lower average invested long-term assets;

partially offset by

◦lower interest credited to policyholders due to lower account balances; and

•lower fee income due to a decline in the net cost of insurance fees driven by the aging in-force business.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 21% in both the current period and the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.

Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023

Adjusted earnings were $92 million in the current period, an increase of $119 million.

Key net favorable impacts were:

•lower net costs associated with insurance-related activities due to:

◦a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR and other refinements;

partially offset by

◦an increase in liability balances resulting from a reinsurance premium rate increase associated with the conclusion of the aforementioned reinsurance arbitration; and

◦higher paid claims, net of reinsurance; and

•higher net investment spread due to:

◦higher returns on other limited partnerships; and

◦lower interest credited to policyholders due to lower account balances;

partially offset by

◦lower average invested long-term assets.

The key unfavorable impact was lower fee income due to higher ceded cost of insurance fees related to the conclusion of the aforementioned reinsurance arbitration and the aging in-force business.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 20% in the current period compared to 23% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.

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Corporate & Other

The components of adjusted earnings for Corporate & Other were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In millions)
Fee income	$	5	$	2	$	10	$	(4)
Net investment spread	60		57		188		176
Insurance-related activities	—		—		—		—
Amortization of DAC and VOBA	—		—		—		—
Other expenses	(52)		(50)		(156)		(153)
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends	28		28		81		81
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends	(15)		(19)		(39)		(62)
Provision for income tax expense (benefit)	(17)		(4)		(9)		(14)
Adjusted earnings (loss)	$	2	$	(15)	$	(30)	$	(48)

Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023

Adjusted earnings were $2 million in the current period, an increase of $17 million.

The key favorable impact was higher net investment spread due to higher investment yields and average invested long-term assets from funding agreements issued in connection with our institutional spread margin business.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in a lower effective tax rate in the current period compared to the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits. We believe the effective tax rate for Corporate & Other is not generally meaningful, neither on a standalone basis nor for comparison to prior periods, since taxes for Corporate & Other are derived from the difference between the overall consolidated effective tax rate and total taxes for the combined operating segments.

Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023

Adjusted loss was $30 million in the current period, a lower loss of $18 million.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in a higher effective tax rate in the current period compared to the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction, tax credits and current period non-recurring items. We believe the effective tax rate for Corporate & Other is not generally meaningful, neither on a standalone basis nor for comparison to prior periods, since taxes for Corporate & Other are derived from the difference between the overall consolidated effective tax rate and total taxes for the combined operating segments.

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Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Three Months and Nine Months Ended September 30, 2024 and 2023

The overall impact on income (loss) available to shareholders before provision for income tax from the performance of annuity guaranteed benefits and Shield® Level Annuity (“Shield” and “Shield annuity”) liabilities, which includes (i) changes in the fair value of liabilities and related reinsurance, (ii) fees net of claims and (iii) the mark-to-market of hedges, was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In millions)
Market risk benefits mark-to-market	$	(791)	$	886	$	780	$	1,755
Annuity guaranteed benefit rider fees, net of claims	172		193		423		453
Ceded reinsurance	9		(15)		(17)		(38)
Total changes attributable to annuity guaranteed benefits	(610)		1,064		1,186		2,170
Variable annuity hedges	835		(1,186)		1,039		(894)
Shield embedded derivatives	(976)		773		(3,490)		(1,993)
Total	$	(751)	$	651	$	(1,265)	$	(717)

Three Months Ended September 30, 2024

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the three months ended September 30, 2024, primarily driven by:

•unfavorable increases in annuity guaranteed benefits liabilities due to decreasing interest rates, partially offset by increasing equity markets and changes made in connection with the AAR;

•favorable changes in variable annuity hedges due to decreasing long-term interest rates and increasing equity markets; and

•unfavorable changes in Shield embedded derivatives due to increasing equity markets and decreasing interest rates, partially offset by changes made in connection with the AAR.

Three Months Ended September 30, 2023

Annuity guaranteed benefits and Shield annuity liabilities performance was favorable for the three months ended September 30, 2023, primarily driven by:

•favorable decreases in annuity guaranteed benefits liabilities due to increasing interest rates, partially offset by decreasing equity markets and changes made in connection with the AAR;

•unfavorable changes in variable annuity hedges due to increasing long-term interest rates and decreasing equity markets; and

•favorable changes in Shield embedded derivatives due to decreasing equity markets and increasing interest rates.

Nine Months Ended September 30, 2024

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the nine months ended September 30, 2024, primarily driven by:

•favorable decreases in annuity guaranteed benefits liabilities due to increasing equity markets and interest rates, as well as changes made in connection with the AAR;

•favorable changes in variable annuity hedges due to increasing equity markets; and

•unfavorable changes in Shield embedded derivatives due to increasing equity markets, partially offset by changes made in connection with the AAR.

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Nine Months Ended September 30, 2023

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the nine months ended September 30, 2023, primarily driven by:

•favorable decreases in annuity guaranteed benefits liabilities due to increasing interest rates and equity markets, partially offset by changes made in connection with the AAR;

•unfavorable changes in variable annuity hedges due to increasing long-term interest rates; and

•unfavorable changes in Shield embedded derivatives due to increasing equity markets.

Investments

Investment Risk Management Strategy

We manage the risks related to our investment portfolio through asset-type allocation as well as industry and issuer diversification. We also use risk limits to promote diversification by asset sector, avoid concentrations in any single issuer and limit overall aggregate credit and equity risk exposure. We manage real estate risk through geographic, property type and product type diversification and asset allocation. Interest rate risk is managed as part of our Asset Liability Management (“ALM”) strategies. We also utilize product design to manage interest rate risk (e.g., market value adjustment features and surrender charges). These ALM strategies include maintaining an investment portfolio that targets a weighted average duration that reflects the duration of our estimated liability cash flow profile. For certain of our liability portfolios, it is not possible to invest assets for the full liability duration, thereby creating some asset/liability mismatch. We also use certain derivatives in the management of credit, interest rate, equity market and foreign currency exchange rate risks.

Investment Management Agreements

Other than our derivatives trading, which we manage in-house, we have engaged a select group of experienced external asset management firms to manage the investment of the assets comprising our general account portfolio and certain separate account assets of our insurance subsidiaries, as well as assets of BHF and our reinsurance subsidiary, BRCD.

Current Environment

Our business and results of operations are materially affected by conditions in capital markets and the economy, generally. As a U.S. insurance company, we are affected by the monetary policy of the Federal Reserve in the U.S. The Federal Reserve may increase or decrease the federal funds rate in the future, which may have an impact on the pricing levels of risk-bearing investments and may adversely impact the level of product sales. We are also affected by the monetary policy of central banks around the world due to the diversification of our investment portfolio. See “— Industry Trends and Uncertainties — Financial and Economic Environment.”

On September 18, 2024, the Federal Reserve decreased the target range for the federal funds rate from between 5.25% and 5.50% to between 4.75% and 5.00%. On November 7, 2024, the Federal Reserve further decreased the target range for the federal funds rate from between 4.75% and 5.00% to between 4.50% and 4.75%. In 2023, the Federal Reserve increased the target range four times — from between 4.25% and 4.50% to between 5.25% and 5.50%. Target range increases have contributed to the net unrealized loss position in our investment portfolio. As a result of increases in interest rates, the unrealized losses on our fixed maturity securities exceeded the unrealized gains as of September 30, 2024.

See “Risk Factors — Risks Related to Our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations” included in our 2023 Annual Report.

Selected Sector Investments

Market volatility has affected the performance of various asset classes. See “Risk Factors — Risks Related to Our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations,” and “Risk Factors — Risks Related to Our Investment Portfolio — Ongoing military actions, the continued threat of terrorism, climate change as well as other catastrophic events may adversely affect the value of our investment portfolio and the level of claim losses we incur” included in our 2023 Annual Report.

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There has been an increased market focus on commercial real estate, including office properties, as a result of companies shifting to hybrid work arrangements and the resulting impact on the demand for office space.

We have direct commercial real estate exposure through mortgage loans and certain structured securities, which include residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”). In addition, we have direct and indirect exposure through certain financial industry corporate fixed maturity securities. See “— Investments — Mortgage Loans” and Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information on mortgage loans, including credit quality by portfolio segment and commercial mortgage loans by property type. Additionally, see “— Investments — Fixed Maturity Securities Available-For-Sale — Structured Securities” for information on Structured Securities, including security type, risk profile and ratings profile as well as “— Investments — Fixed Maturity Securities Available-For-Sale — U.S. and Foreign Corporate Fixed Maturity Securities” for our exposure to the finance industry.

We monitor direct and indirect investment exposure across sectors and asset classes and adjust our level of investment exposure, as appropriate. At this time, we do not expect that our general account investments in these sectors and asset classes will have a material adverse effect on our results of operations or financial condition.

Investment Portfolio Results

The following summary yield table presents the yield and adjusted net investment income for our investment portfolio for the periods indicated. As described below, this table reflects certain differences from the presentation of net investment income presented in the GAAP statements of operations. This summary yield table presentation is consistent with how we measure our investment performance for management purposes, and we believe it enhances understanding of our investment portfolio results.


	Three Months Ended September 30,								Nine Months Ended September 30,
	2024				2023				2024				2023
	Yield %		Amount		Yield %		Amount		Yield %		Amount		Yield %		Amount
	(Dollars in millions)
Investment income (1)	4.40	%	$	1,332	4.34	%	$	1,264	4.44	%	$	3,990	4.22	%	$	3,656
Investment fees and expenses (2)	(0.14)		(38)		(0.14)		(37)		(0.14)		(113)		(0.14)		(113)
Adjusted net investment income (3)	4.26	%	$	1,294	4.20	%	$	1,227	4.30	%	$	3,877	4.08	%	$	3,543

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(1)Investment income yields are calculated as investment income as a percentage of average quarterly asset carrying values. Investment income excludes recognized gains and losses and reflects the adjustments discussed in table note (3) below to arrive at adjusted net investment income. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.

(2)Investment fee and expense yields are calculated as a percentage of average quarterly asset estimated fair values. Asset estimated fair values exclude collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.

(3)Adjusted net investment income presented in the yield table varies from the most directly comparable GAAP measure due to certain reclassifications, as presented below.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In millions)
Net investment income	$	1,288	$	1,202	$	3,849	$	3,457
Less: Investment hedge adjustments	(6)		(25)		(28)		(86)
Adjusted net investment income — in the above yield table	$	1,294	$	1,227	$	3,877	$	3,543

See “— Results of Operations — Consolidated Results for the Three Months and Nine Months Ended September 30, 2024 and 2023” for an analysis of the period-over-period changes in net investment income.

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Fixed Maturity Securities Available-For-Sale

Fixed maturity securities held by type (public or private) were as follows at:


	September 30, 2024					December 31, 2023
	Estimated Fair Value			% of Total		Estimated Fair Value			% of Total
	(Dollars in millions)
Publicly-traded	$	69,052		82.9	%	$	67,056		82.8	%
Privately-placed	14,246			17.1		13,935			17.2
Total fixed maturity securities	$	83,298		100.0	%	$	80,991		100.0	%
Percentage of cash and invested assets	66.9		%			67.9		%

See Note 9 of the Notes to the Interim Condensed Consolidated Financial Statements for further information on our valuation controls and procedures including our formal process to challenge any prices received from independent pricing services that are not considered representative of estimated fair value.

See Notes 1 and 7 of the Notes to the Interim Condensed Consolidated Financial Statements for further information about fixed maturity securities by sector, contractual maturities, continuous gross unrealized losses and the allowance for credit losses.

Fixed Maturity Securities Credit Quality — Ratings

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Fixed Maturity Securities Available-For-Sale — Fixed Maturity Securities Credit Quality — Ratings” included in our 2023 Annual Report for a discussion of the credit quality ratings assigned by Nationally Recognized Statistical Rating Organizations (“NRSRO”), credit quality designations assigned by and methodologies used by the Securities Valuation Office of the National Association of Insurance Commissioners (“NAIC”) for fixed maturity securities and the methodologies adopted by the NAIC for certain Structured Securities.

The following table presents total fixed maturity securities by NRSRO rating and the applicable NAIC designation from the NAIC published comparison of NRSRO ratings to NAIC designations, except for certain Structured Securities, which are presented using the NAIC methodologies, as well as the percentage, based on estimated fair value that each NAIC designation is comprised of at:


		September 30, 2024										December 31, 2023
NAIC Designation	NRSRO Rating	Amortized Cost		Allowance for Credit Losses		Unrealized Gain (Loss)		Estimated Fair Value		% of Total		Amortized Cost		Allowance for Credit Losses		Unrealized Gain (Loss)		Estimated Fair Value		% of Total
		(Dollars in millions)
1	Aaa/Aa/A	$	57,257	$	5	$	(2,643)	$	54,609	65.6	%	$	56,944	$	5	$	(3,586)	$	53,353	65.8	%
2	Baa	28,067		—		(1,722)		26,345		31.6		27,567		—		(2,331)		25,236		31.2
Subtotal investment grade		85,324		5		(4,365)		80,954		97.2	%	84,511		5		(5,917)		78,589		97.0	%
3	Ba	1,858		3		(64)		1,791		2.2		1,839		—		(122)		1,717		2.1
4	B	466		18		(30)		418		0.5		593		3		(44)		546		0.7
5	Caa and lower	110		7		(8)		95		0.1		113		2		(24)		87		0.1
6	In or near default	80		28		(12)		40		—		75		11		(12)		52		0.1
Subtotal below investment grade		2,514		56		(114)		2,344		2.8	%	2,620		16		(202)		2,402		3.0	%
Total fixed maturity securities		$	87,838	$	61	$	(4,479)	$	83,298	100.0	%	$	87,131	$	21	$	(6,119)	$	80,991	100.0	%

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The following tables present total fixed maturity securities, based on estimated fair value, by sector classification and by NRSRO rating and the applicable NAIC designations from the NAIC published comparison of NRSRO ratings to NAIC designations, except for certain Structured Securities, which are presented using the NAIC methodologies as described above:


	Fixed Maturity Securities — by Sector & Credit Quality Rating
NAIC Designation	1		2		3		4		5		6		Total Estimated Fair Value
NRSRO Rating	Aaa/Aa/A		Baa		Ba		B		Caa and Lower		In or Near Default
	(In millions)
September 30, 2024
U.S. corporate	$	17,711	$	18,576	$	1,343	$	338	$	52	$	40	$	38,060
Foreign corporate	5,631		6,318		367		59		24		—		12,399
U.S. government and agency	7,456		113		—		—		—		—		7,569
RMBS	7,919		16		2		5		1		—		7,943
CMBS	6,097		369		17		5		5		—		6,493
ABS	5,698		535		19		11		9		—		6,272
State and political subdivision	3,484		53		—		—		4		—		3,541
Foreign government	613		365		43		—		—		—		1,021
Total fixed maturity securities	$	54,609	$	26,345	$	1,791	$	418	$	95	$	40	$	83,298
December 31, 2023
U.S. corporate	$	16,617	$	17,260	$	1,293	$	476	$	57	$	52	$	35,755
Foreign corporate	4,841		6,423		344		57		—		—		11,665
U.S. government and agency	8,306		113		—		—		—		—		8,419
RMBS	7,390		18		12		1		9		—		7,430
CMBS	6,039		344		24		—		3		—		6,410
ABS	5,746		621		17		12		10		—		6,406
State and political subdivision	3,808		57		1		—		8		—		3,874
Foreign government	606		400		26		—		—		—		1,032
Total fixed maturity securities	$	53,353	$	25,236	$	1,717	$	546	$	87	$	52	$	80,991

U.S. and Foreign Corporate Fixed Maturity Securities

We maintain a diversified portfolio of corporate fixed maturity securities across industries and issuers. Our portfolio does not have any exposure to any single issuer in excess of 1% of total investments and the top ten holdings in aggregate comprise 2% and 1% of total investments at September 30, 2024 and December 31, 2023, respectively. Our U.S. and foreign corporate fixed maturity securities holdings by industry were as follows at:


	September 30, 2024				December 31, 2023
	Estimated Fair Value		% of Total		Estimated Fair Value		% of Total
	(Dollars in millions)
Industrial	$	15,718	31.1	%	$	14,751	31.1	%
Finance	13,831		27.4		12,957		27.3
Consumer	11,487		22.8		10,683		22.6
Utility	6,669		13.2		6,273		13.2
Communications	2,754		5.5		2,756		5.8

Total	$	50,459	100.0	%	$	47,420	100.0	%

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Structured Securities

We held $20.7 billion and $20.2 billion of Structured Securities, at estimated fair value, at September 30, 2024 and December 31, 2023, respectively, as presented in the RMBS, CMBS and ABS sections below.

RMBS

Our RMBS holdings are diversified by security type, risk profile and ratings profile, which were as follows at:


	September 30, 2024						December 31, 2023
	Estimated Fair Value		% of Total		Net Unrealized Gains (Losses)		Estimated Fair Value		% of Total		Net Unrealized Gains (Losses)
	(Dollars in millions)
Security type:
Pass-through securities	$	3,973	50.0	%	$	(380)	$	3,922	52.8	%	$	(491)
Collateralized mortgage obligations	3,970		50.0		(183)		3,508		47.2		(273)
Total RMBS	$	7,943	100.0	%	$	(563)	$	7,430	100.0	%	$	(764)
Risk profile:
Agency	$	6,477	81.5	%	$	(555)	$	6,152	82.8	%	$	(724)
Prime	190		2.4		(16)		152		2.0		(16)
Alt-A	937		11.8		—		756		10.2		(23)
Sub-prime	339		4.3		8		370		5.0		(1)
Total RMBS	$	7,943	100.0	%	$	(563)	$	7,430	100.0	%	$	(764)
Ratings profile:
Rated Aaa (1)	$	809	10.2	%			$	554	7.5	%
Designated NAIC 1	$	7,919	99.7	%			$	7,390	99.5	%

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(1)During the year ended December 31, 2023, Fitch Ratings downgraded the U.S. credit rating from Aaa to Aa1, which resulted in a decrease in Aaa assets in our RMBS holdings.

Historically, our exposure to sub-prime RMBS holdings has been managed by focusing primarily on senior tranche securities, stress-testing the portfolio with severe loss assumptions and closely monitoring the performance of the portfolio. Our sub-prime RMBS portfolio consists predominantly of securities that were purchased after 2012 at significant discounts to par value and discounts to the expected principal recovery value of these securities. The vast majority of these securities are investment grade under the NAIC designations (e.g., NAIC 1 and NAIC 2).

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CMBS

Our CMBS holdings are diversified by vintage year, which were as follows at:


	September 30, 2024				December 31, 2023
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(In millions)
2005 - 2011	$	81	$	79	$	89	$	83
2012	2		1		2		1
2013	22		19		43		36
2014	187		170		283		256
2015	934		899		949		876
2016	460		441		461		425
2017	703		665		717		655
2018	1,615		1,555		1,633		1,521
2019	914		826		993		869
2020	504		436		538		442
2021	704		674		813		760
2022	439		434		451		436
2023	64		65		51		50
2024	226		229		—		—
Total	$	6,855	$	6,493	$	7,023	$	6,410

The estimated fair value of CMBS rated Aaa using rating agency ratings was $4.4 billion, or 68.5% of total CMBS, and designated NAIC 1 was $6.1 billion, or 93.9% of total CMBS, at September 30, 2024. The estimated fair value of CMBS rated Aaa using rating agency ratings was $4.4 billion, or 68.5% of total CMBS, and designated NAIC 1 was $6.0 billion, or 94.2% of total CMBS, at December 31, 2023.

ABS

Our ABS holdings are diversified by both collateral type and issuer. Our ABS holdings by collateral type and ratings profile were as follows at:


	September 30, 2024						December 31, 2023
	Estimated Fair Value		% of Total		Net Unrealized Gains (Losses)		Estimated Fair Value		% of Total		Net Unrealized Gains (Losses)
	(Dollars in millions)
Collateral type:
Collateralized obligations	$	3,519	56.1	%	$	14	$	3,819	59.6	%	$	(9)
Automobile loans	587		9.3		5		487		7.6		(2)
Student loans	387		6.2		(10)		397		6.2		(22)
Consumer loans	325		5.2		(7)		346		5.4		(19)
Credit card loans	264		4.2		(1)		262		4.1		(6)
Other loans	1,190		19.0		(23)		1,095		17.1		(50)
Total	$	6,272	100.0	%	$	(22)	$	6,406	100.0	%	$	(108)
Ratings profile:
Rated Aaa	$	3,548	56.6	%			$	3,548	55.4	%
Designated NAIC 1	$	5,698	90.8	%			$	5,746	89.7	%

Allowance for Credit Losses for Fixed Maturity Securities

See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information about the evaluation of fixed maturity securities for an allowance for credit losses or write-offs due to uncollectibility.

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Securities Lending

We participate in a securities lending program whereby securities are loaned to third parties, primarily brokerage firms and commercial banks. We obtain collateral, usually cash, in an amount generally equal to 102% of the estimated fair value of the securities loaned, which is obtained at the inception of a loan and maintained at a level greater than or equal to 100% for the duration of the loan. The estimated fair value of the securities loaned is monitored on a daily basis with additional collateral obtained as necessary throughout the duration of the loan. Securities loaned under such transactions may be sold or re-pledged by the transferee. We are liable to return to our counterparties the cash collateral under our control. Security collateral received from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reflected in the financial statements. These transactions are treated as financing arrangements and the associated cash collateral liability is recorded at the amount of the cash received.

See “— Liquidity and Capital Resources — The Company — Primary Uses of Liquidity and Capital — Securities Lending” and Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information regarding our securities lending program.

Mortgage Loans

Our mortgage loans are principally collateralized by commercial, agricultural and residential properties. Information regarding mortgage loans by portfolio segment is summarized as follows at:


	September 30, 2024								December 31, 2023
	Amortized Cost		% of Total		Allowance for Credit Losses		% of Amortized Cost		Amortized Cost		% of Total		Allowance for Credit Losses		% of Amortized Cost
	(Dollars in millions)
Commercial	$	13,255	57.4	%	$	95	0.7	%	$	13,193	58.3	%	$	69	0.5	%
Agricultural	4,521		19.6		30		0.7	%	4,445		19.6		19		0.4	%
Residential	5,329		23.0		42		0.8	%	5,007		22.1		49		1.0	%
Total	$	23,105	100.0	%	$	167	0.7	%	$	22,645	100.0	%	$	137	0.6	%

Our mortgage loan portfolio is diversified by both geographic region and property type to reduce the risk of concentration. The percentage of our commercial and agricultural mortgage loan portfolios collateralized by properties located in the U.S. were 98% at both September 30, 2024 and December 31, 2023. The remainder was collateralized by properties located outside of the U.S. At September 30, 2024, the carrying value as a percentage of total commercial and agricultural mortgage loans for the top three states in the U.S. was 17% for California, 11% for Texas and 8% for Florida. Additionally, we manage risk when originating commercial and agricultural mortgage loans by generally lending up to 75% of the estimated fair value of the underlying real estate collateral.

Our residential mortgage loan portfolio is managed in a similar manner to reduce risk of concentration. All residential mortgage loans were collateralized by properties located in the U.S. at both September 30, 2024 and December 31, 2023. At September 30, 2024, the carrying value as a percentage of total residential mortgage loans for the top three states in the U.S. was 40% for California, 10% for Florida and 6% for New York.

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Commercial Mortgage Loans by Geographic Region and Property Type. Commercial mortgage loans are the largest component of the mortgage loan invested asset class. The diversification across geographic regions and property types of commercial mortgage loans was as follows at:


	September 30, 2024				December 31, 2023
	Amount		% of Total		Amount		% of Total
	(Dollars in millions)
Geographic region:
South Atlantic	$	2,798	21.1	%	$	2,747	20.8	%
Pacific	2,653		20.0		2,562		19.4
Middle Atlantic	2,080		15.7		2,153		16.3
West South Central	1,555		11.7		1,513		11.5
Mountain	1,111		8.4		1,182		9.0
New England	728		5.5		735		5.6
East North Central	723		5.4		737		5.6
International	405		3.1		409		3.1
West North Central	383		2.9		347		2.6
East South Central	317		2.4		306		2.3
Multi-region and Other	502		3.8		502		3.8
Total recorded investment	13,255		100.0	%	13,193		100.0	%
Less: allowance for credit losses	95				69
Carrying value, net of allowance for credit losses	$	13,160			$	13,124
Property type:
Apartment	$	5,293	39.9	%	$	5,371	40.8	%
Office	3,095		23.4		3,185		24.1
Industrial	2,310		17.4		2,092		15.9
Retail	1,710		12.9		1,747		13.2
Hotel	847		6.4		798		6.0

Total recorded investment	13,255		100.0	%	13,193		100.0	%
Less: allowance for credit losses	95				69
Carrying value, net of allowance for credit losses	$	13,160			$	13,124

Mortgage Loan Credit Quality — Monitoring Process. Our mortgage loan investments are monitored on an ongoing basis, including a review of loans that are current, past due, restructured and under foreclosure. Quarterly, we conduct a formal review of the portfolio with our investment managers. See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information on mortgage loans by credit quality indicator, past due status, nonaccrual status and modified mortgage loans.

Our commercial mortgage loans are reviewed on an ongoing basis. These reviews may include an analysis of the property financial statements and rent roll, lease rollover analysis, property inspections, market analysis, estimated valuations of the underlying collateral, loan-to-value ratios, debt-service coverage ratios and tenant creditworthiness. The monitoring process focuses on higher risk loans, which include those that are classified as restructured, delinquent or in foreclosure, as well as loans with higher loan-to-value ratios and lower debt-service coverage ratios. The monitoring process for agricultural mortgage loans is generally similar, with a focus on higher risk loans, such as loans with higher loan-to-value ratios, including reviews on a geographic and sector basis. Our residential mortgage loans are reviewed on an ongoing basis. See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information on our evaluation of residential mortgage loans and related measurement of allowance for credit losses.

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Loan-to-value ratios and debt-service coverage ratios are common measures in the assessment of the quality of commercial mortgage loans. Loan-to-value ratios are a common measure in the assessment of the quality of agricultural mortgage loans. Loan-to-value ratios compare the amount of the loan to the estimated fair value of the underlying collateral. A loan-to-value ratio greater than 100% indicates that the loan amount is greater than the collateral value. A loan-to-value ratio of less than 100% indicates an excess of collateral value over the loan amount. Generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss. The debt-service coverage ratio compares a property’s net operating income to amounts needed to service the principal and interest due under the loan. Generally, the lower the debt-service coverage ratio, the higher the risk of experiencing a credit loss. For our commercial mortgage loans, our average loan-to-value ratio was 68% and 65% at September 30, 2024 and December 31, 2023, respectively, and our average debt-service coverage ratio was 2.3x at both September 30, 2024 and December 31, 2023. The debt-service coverage ratio, as well as the values utilized in calculating the ratio, is updated annually on a rolling basis, with a portion of the portfolio updated each quarter. In addition, the loan-to-value ratio is routinely updated for all but the lowest risk loans as part of our ongoing review of our commercial mortgage loan portfolio. For our agricultural mortgage loans, our average loan-to-value ratio was 48% and 47% at September 30, 2024 and December 31, 2023, respectively. The values utilized in calculating the agricultural mortgage loan loan-to-value ratio are developed in connection with the ongoing review of the agricultural loan portfolio and are routinely updated.

Mortgage Loan Allowance for Credit Losses. See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information about how the allowance for credit losses is established and monitored, as well as activity in and balances of the allowance for credit losses for the nine months ended September 30, 2024 and 2023.

Limited Partnerships and Limited Liability Companies

The carrying values of our limited partnerships and limited liability companies (“LLC”) were as follows at:


	September 30, 2024		December 31, 2023
	(In millions)
Other limited partnerships	$	4,124	$	4,140
Real estate limited partnerships and LLCs (1)	746		806
Total	$	4,870	$	4,946

__________________

(1)The estimated fair value of real estate limited partnerships and LLCs was $888 million and $927 million at September 30, 2024 and December 31, 2023, respectively.

Cash distributions on these investments are generated from investment gains, operating income from the underlying investments of the funds and liquidation of the underlying investments of the funds. We estimate that the underlying investment of the private equity funds will typically be liquidated over the next 10 to 20 years.

Other Invested Assets

The carrying value of our other invested assets by type was as follows at:


	September 30, 2024				December 31, 2023
	Carrying Value		% of Total		Carrying Value		% of Total
	(Dollars in millions)
Freestanding derivatives with positive estimated fair values	$	3,450	77.3	%	$	3,714	84.2	%
Company-owned life insurance	661		14.8		340		7.7
Federal Home Loan Bank stock	242		5.4		245		5.5
Leveraged leases, net of non-recourse debt	49		1.1		47		1.1
Tax credit and renewable energy partnerships	48		1.1		52		1.2
Other	12		0.3		11		0.3
Total	$	4,462	100.0	%	$	4,409	100.0	%

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Derivatives

Derivative Risks

We are exposed to various risks relating to our ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market risks. We use a variety of strategies to manage these risks, including the use of derivatives. See Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements for:

•information about the gross notional amount, estimated fair value, and primary underlying risk exposure of our derivatives by type of hedge designation, excluding embedded derivatives held at September 30, 2024 and December 31, 2023; and

•the effects of derivatives in cash flow, fair value, or non-qualifying hedge relationships on the statements of operations for the nine months ended September 30, 2024 and 2023.

See “Business — Segments and Corporate & Other — Annuities,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies” included in our 2023 Annual Report for more information about our use of derivatives by major hedging programs. In addition, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Annual Actuarial Review” and “Risk Factors — Risks Related to our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations” included in our 2023 Annual Report.

Fair Value Hierarchy

See Note 9 of the Notes to the Interim Condensed Consolidated Financial Statements for derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy, as well as a rollforward of the fair value measurements for derivatives measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs as discussed below.

The valuation of Level 3 derivatives involves the use of significant unobservable inputs and generally requires a higher degree of management judgment or estimation than the valuations of Level 1 and Level 2 derivatives. Although Level 3 inputs are unobservable, management believes they are consistent with what other market participants would use when pricing such instruments and are considered appropriate given the circumstances. The use of different inputs or methodologies could have a material effect on the estimated fair value of Level 3 derivatives and could materially affect net income.

Derivatives categorized as Level 3 at September 30, 2024 include: credit default swaps priced using unobservable credit spreads, or that are priced through independent broker quotations; and foreign currency swaps with certain unobservable inputs.

Credit Risk

See Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements for information about how we manage credit risk related to derivatives and for the estimated fair value of our net derivative assets and net derivative liabilities after the application of master netting agreements and collateral. See “Risk Factors — Risks Related to our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations” included in our 2023 Annual Report.

Our policy is not to offset the fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement. This policy applies to the recognition of derivatives on the balance sheet and does not affect our legal right of offset.

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Credit Derivatives

The gross notional amount and estimated fair value of credit default swaps were as follows at:


	September 30, 2024				December 31, 2023
	Gross Notional Amount		Estimated Fair Value		Gross Notional Amount		Estimated Fair Value
	(In millions)
Written	$	1,095	$	20	$	1,405	$	27

Total	$	1,095	$	20	$	1,405	$	27

The maximum amount at risk related to our written credit default swaps is equal to the corresponding gross notional amount. In a replication transaction, we pair an asset on our balance sheet with a written credit default swap to synthetically replicate a corporate bond, a core asset holding of life insurance companies. Replications are entered into in accordance with the guidelines approved by state insurance regulators and the NAIC and are an important tool in managing the overall corporate credit risk within the Company. In order to match our long-dated insurance liabilities, we seek to buy long-dated corporate bonds. In some instances, these may not be readily available in the market, or they may be issued by corporations to which we already have significant corporate credit exposure. For example, by purchasing Treasury bonds (or other high-quality assets) and associating them with written credit default swaps on the desired corporate credit name, we can replicate the desired bond exposures and meet our ALM needs. This can expose the Company to changes in credit spreads as the written credit default swap tenor is shorter than the maturity of Treasury bonds.

Embedded Derivatives

See Note 9 of the Notes to the Interim Condensed Consolidated Financial Statements for (i) information about embedded derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy and (ii) a rollforward of the fair value measurements for net embedded derivatives measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Derivatives” included in our 2023 Annual Report for additional information on the estimates and assumptions that affect embedded derivatives.

Policyholder Liabilities

We establish, and carry as liabilities, actuarially determined amounts that are calculated to meet policy obligations or to provide for future annuity and life insurance benefit payments. Amounts for actuarial liabilities are computed and reported in the financial statements in conformity with GAAP. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Policyholder Liabilities” included in our 2023 Annual Report for more details on policyholder liabilities.

Future Policy Benefits

We establish liabilities for future amounts payable under insurance policies. See Note 3 of the Notes to the Interim Condensed Consolidated Financial Statements.

Policyholder Account Balances

Policyholder account balance liabilities are established for products with an explicit account value and generally equal to the balance accrued to the contract holder, which includes accrued interest credited, but excludes the impact of any applicable charge that may be incurred upon surrender. See Note 3 of the Notes to the Interim Condensed Consolidated Financial Statements.

Market Risk Benefits

We issue certain variable annuity products with guaranteed minimum benefits (“GMxB”) that provide the policyholder a minimum return based on their initial deposit (i.e., the Benefit Base) less withdrawals. In some cases, the Benefit Base may be increased by additional deposits, bonus amounts, accruals or optional market value step-ups. Variable annuity guaranteed benefits are classified as MRBs and measured at fair value. Certain index-linked annuity products may also have GMxBs classified as MRBs. See Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements and “Quantitative and Qualitative Disclosures About Market Risk.”

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Select information that management considers relevant to understanding our variable annuity risk management strategy has been included below.

Net Amount at Risk

The net amount at risk (“NAR”) for the guaranteed minimum income benefits (“GMIB”) is the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents our potential economic exposure to such guarantees in the event all contract holders were to annuitize on the balance sheet date, even though the guaranteed amount under the contract may not be annuitized until after the waiting period of the contract.

The NAR for the guaranteed minimum withdrawal benefits (“GMWB”) is the amount of guaranteed benefits in excess of the account values (if any) as of the balance sheet date and assumes utilization of benefits by all contract holders as of the balance sheet date. Only a small portion of the Benefit Base is available for withdrawal on an annual basis.

The NAR for the guaranteed minimum accumulation benefits (“GMAB”) is the amount of guaranteed benefits in excess of the account values (if any) as of the balance sheet date and assumes utilization of benefits by all contract holders as of the balance sheet. The NAR for the GMAB is not available until the GMAB maturity date.

The NAR for the guaranteed minimum death benefits (“GMDB”) is the amount of death benefit in excess of the account value (if any) as of the balance sheet date. It represents the amount of the claim we would incur if death claims were made on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death.

Our variable annuity account value and NAR by type of GMxB were as follows at:


	September 30, 2024								December 31, 2023
	Account Value		Death Benefit NAR (1)		Living Benefit NAR (1)		% of Account Value In-the-Money (2)		Account Value		Death Benefit NAR (1)		Living Benefit NAR (1)		% of Account Value In-the-Money (2)
	(Dollars in millions)
GMIB	$	32,047	$	3,309	$	3,729	29.3	%	$	32,079	$	4,089	$	3,600	30.3	%
GMIB Max with EDB (3)	7,589		5,978		628		36.0	%	7,605		6,092		470		31.9	%
GMIB Max without EDB (3)	4,293		77		159		22.3	%	4,344		133		107		17.8	%
GMWB	20,132		200		218		7.5	%	19,961		541		249		10.2	%
GMAB	391		1		1		0.3	%	431		4		4		17.9	%
GMDB only (other than EDB) (3)	17,470		944		—		N/A		16,768		1,056		—		N/A
EDB only (3)	3,242		1,202		—		N/A		3,109		1,325		—		N/A
Total	$	85,164	$	11,711	$	4,735			$	84,297	$	13,240	$	4,430

__________________

(1)The “Death Benefit NAR” and “Living Benefit NAR” are not additive at the contract level.

(2)In-the-money is defined as any contract with a living benefit NAR in excess of zero.

(3)Enhanced Death Benefit (“EDB”).

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Reserves

Under GAAP, variable annuity guarantees are classified as MRBs, measured at estimated fair value, and are reported in market risk benefit assets and liabilities on the consolidated balance sheets, with changes reported in change in market risk benefits on the consolidated statements of operations, except for changes related to nonperformance risk, which are reported in other comprehensive income on the consolidated statements of comprehensive income (loss). Additionally, the index protection and accumulation features of Shield annuities are accounted for as embedded derivatives, measured at estimated fair value, and are reported in policyholder account balances on the consolidated balance sheets, with changes reported in net derivative gains (losses) on the consolidated statements of operations. These liabilities were valued at $10.8 billion at September 30, 2024.

Our variable annuity MRBs by type of GMxB were as follows at:


	September 30, 2024		December 31, 2023
	(In millions)
GMIB	$	8,734	$	9,485
GMWB	21		41
GMDB	779		788
Total	$	9,534	$	10,314

The estimated fair value of these guarantees can change significantly due to changes in interest rates, equity indices, market volatility and variations in actuarial assumptions, including policyholder behavior, mortality and risk margins related to non-capital markets inputs, as well as changes in nonperformance risk. See “Risk Factors — Risks Related to Our Business — Guarantees within certain of our annuity products may decrease our earnings, decrease our capitalization, increase the volatility of our results, result in higher risk management costs and expose us to increased market risk” included in our 2023 Annual Report.

Derivatives Hedging Variable Annuity Guarantees

The gross notional amount and estimated fair value of the derivatives hedging our in-force variable annuity guarantees and ULSG business viewed in aggregate in our interest rate hedging program were as follows at:


	September 30, 2024						December 31, 2023
Instrument Type	Gross Notional Amount (1)		Estimated Fair Value				Gross Notional Amount (1)		Estimated Fair Value
			Assets		Liabilities				Assets		Liabilities
	(In millions)
Interest rate swaps	$	58,241	$	113	$	193	$	23,037	$	71	$	50
Interest rate options	21,400		38		208		33,680		47		167
Interest rate forwards	16,692		69		1,162		16,155		32		1,877
Hybrid options (2)	—		—		—		270		—		—
Total	$	96,333	$	220	$	1,563	$	73,142	$	150	$	2,094

__________________

(1)The gross notional amounts presented do not necessarily represent the relative economic coverage provided by derivative instruments because certain positions were closed out by entering into offsetting positions that are not netted in the above table.

(2)Hybrid options have equity exposure in addition to interest rate exposure.

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The gross notional amount and estimated fair value of the derivatives held in our variable annuity hedging program were as follows at:


	September 30, 2024						December 31, 2023
Instrument Type	Gross Notional Amount (1)		Estimated Fair Value				Gross Notional Amount (1)		Estimated Fair Value
			Assets		Liabilities				Assets		Liabilities
	(In millions)
Equity index options	$	10,620	$	360	$	404	$	16,183	$	472	$	680
Equity total return swaps	108,562		1,891		1,923		53,742		2,236		2,137

Interest rate swaps	58,241		113		193		30,864		92		103
Interest rate options	14,900		38		113		27,580		39		123
Interest rate forwards	7,657		17		276		8,519		—		619
Hybrid options	—		—		—		270		—		—
Total	$	199,980	$	2,419	$	2,909	$	137,158	$	2,839	$	3,662

__________________

(1)The gross notional amounts presented do not necessarily represent the relative economic coverage provided by option instruments because certain positions were closed out by entering into offsetting positions that are not netted in the above table.

Period-to-period changes in the estimated fair value of these hedges affect our net income, as well as stockholders’ equity and these effects can be material in any given period. See “Risk Factors — Risks Related to Our Business — Our variable annuity exposure risk management strategy may not be effective, may result in significant volatility in our profitability measures or may negatively affect our statutory capital,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies” included in our 2023 Annual Report.

Liquidity and Capital Resources

Our business and results of operations are materially affected by conditions in the global capital markets and the economy generally. Stressed conditions, volatility or disruptions in global capital markets, particular markets or financial asset classes can impact us adversely, in part because we have a large investment portfolio and our insurance liabilities and derivatives are sensitive to changing market factors. Changing conditions in the global capital markets and the economy may affect our financing costs and market interest rates for our debt or equity securities. For further information regarding market factors that could affect our ability to meet liquidity and capital needs, see “— Industry Trends and Uncertainties — Financial and Economic Environment,” as well as “Risk Factors — Economic Environment and Capital Markets-Related Risks” and “Risk Factors — Risks Related to Our Investment Portfolio” included in our 2023 Annual Report.

Liquidity and Capital Management

Based upon our capitalization, expectations regarding maintaining our business mix, ratings, and funding sources available to us, we believe we have sufficient liquidity to meet business requirements in current market conditions and certain stress scenarios. BHF’s Board of Directors and senior management are directly involved in the governance of the capital management process, including proposed changes to the annual capital plan and capital targets. We continuously monitor and adjust our liquidity and capital plans in light of market conditions, as well as changing needs and opportunities.

We maintain a substantial short-term liquidity position, which was $5.7 billion and $3.8 billion at September 30, 2024 and December 31, 2023, respectively. Short-term liquidity is comprised of cash and cash equivalents and short-term investments, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include amounts received in connection with securities lending, derivatives and assets held on deposit or in trust.

An integral part of our liquidity management includes managing our level of liquid assets, which was $51.5 billion and $45.2 billion at September 30, 2024 and December 31, 2023, respectively. Liquid assets are comprised of cash and cash equivalents, short-term investments and publicly-traded securities, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include amounts received in connection with securities lending, funding agreements, derivatives and assets held on deposit or in trust.

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The Company

Liquidity

Liquidity refers to our ability to generate adequate cash flows from our normal operations to meet the cash requirements of our operating, investing and financing activities. We determine our liquidity needs based on a rolling 12-month forecast by portfolio of invested assets, which we monitor daily. We adjust the general account asset and derivatives mix and general account asset maturities based on this rolling 12-month forecast. To support this forecast, we conduct cash flow and stress testing, which reflects the impact of various scenarios, including (i) the potential increase in our requirement to pledge additional collateral or return collateral to our counterparties, (ii) a reduction in new business sales, and (iii) the risk of early contract holder and policyholder withdrawals, as well as lapses and surrenders of existing policies and contracts. We include provisions limiting withdrawal rights in many of our products, which deter the customer from making withdrawals prior to the maturity date of the product. If significant cash is required beyond our anticipated liquidity needs, we have various alternatives available depending on market conditions and the amount and timing of the liquidity need. These available alternative sources of liquidity include cash flows from operations, sales of liquid assets and funding sources, including secured funding agreements, unsecured credit facilities and secured committed facilities.

Under certain adverse market and economic conditions, our access to liquidity may deteriorate, or the cost to access liquidity may increase. See “Risk Factors — Economic Environment and Capital Markets-Related Risks — Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs and our access to capital” in our 2023 Annual Report.

Capital

We manage our capital position to maintain our financial strength and credit ratings. Our capital position is supported by our ability to generate cash flows within our insurance subsidiaries, our ability to effectively manage the risks of our businesses and our expected ability to borrow funds and raise additional capital to meet operating and growth needs under a variety of market and economic conditions.

We monitor our debt-to-capital ratio using an average of our key leverage ratios as calculated by A.M. Best, Fitch, Moody’s and S&P, and we aim to maintain a ratio commensurate with our financial strength and credit ratings. As such, we may opportunistically look to pursue additional financing over time, which may include borrowings under credit facilities, the issuance of debt, equity or hybrid securities, the incurrence of term loans, or the refinancing or extinguishment of existing indebtedness. There can be no assurance that we will be able to complete any such financing transactions on terms and conditions favorable to us or at all.

In support of our target combined risk-based capital (“RBC”) ratio of 400% to 450% in normal market conditions, we expect to continue to maintain a capital and exposure risk management program that targets total assets supporting our variable annuity contracts at or above the average of the worst two percent of a set of capital markets scenarios over the life of the contracts level in normal market conditions. With our risk management focus on the core drivers of our combined RBC ratio, we believe we can better manage our RBC in stressed market scenarios.

We have a share repurchase program under which repurchases may be made through open market purchases, including pursuant to Rule 10b5-1 plans or pursuant to accelerated stock repurchase plans, or through privately negotiated transactions, from time to time at management’s discretion in accordance with applicable legal requirements. Common stock repurchases are dependent upon several factors, including our capital position, liquidity, financial strength and credit ratings, general market conditions, the market price of our common stock compared to management’s assessment of the stock’s underlying value and applicable regulatory approvals, as well as other legal and accounting factors.

We currently have no plans to declare and pay dividends on our common stock. Any future declaration and payment of dividends or other distributions or returns of capital will be at the discretion of BHF’s Board of Directors and will depend on and be subject to our financial condition, results of operations, cash needs, regulatory and other constraints, capital requirements (including capital requirements of our insurance subsidiaries), contractual restrictions and any other factors that BHF’s Board of Directors deems relevant in making such a determination. Therefore, there can be no assurance that we will pay any dividends or make other distributions or returns of capital on our common stock, or as to the amount of any such dividends, distributions or returns of capital.

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Sources and Uses of Liquidity and Capital

Our primary sources and uses of liquidity and capital were as follows at:


	Nine Months Ended September 30,
	2024		2023
	(In millions)
Sources:
Changes in policyholder account balances, net	$	3,672	$	3,519
Changes in payables for collateral under securities loaned and other transactions, net	94		—
Financing element on certain derivative instruments and other derivative related transactions, net	305		43
Total sources	4,071		3,562
Uses:
Operating activities, net	172		289
Investing activities, net	1,837		2,644
Changes in payables for collateral under securities loaned and other transactions, net	—		619
Long-term debt repaid	1		1
Dividends on preferred stock	77		77
Treasury stock acquired in connection with share repurchases	190		190
Other, net	15		18
Total uses	2,292		3,838
Net increase (decrease) in cash and cash equivalents	$	1,779	$	(276)

Cash Flows from Operating Activities

The principal cash inflows from our insurance activities come from insurance premiums, annuity considerations and net investment income. The principal cash outflows are the result of various annuity and life insurance products, operating expenses and income tax, as well as interest expense. The primary liquidity concern with respect to these cash flows is the risk of early contract holder and policyholder withdrawal.

Cash Flows from Investing Activities

The principal cash inflows from our investment activities come from repayments of principal, proceeds from maturities and sales of investments, as well as settlements of freestanding derivatives. The principal cash outflows relate to purchases of investments and settlements of freestanding derivatives. We typically can have a net cash outflow from investing activities because cash inflows from insurance operations are reinvested in accordance with our ALM discipline to fund insurance liabilities. We closely monitor and manage these risks through our comprehensive investment risk management process. The primary liquidity concerns with respect to these cash flows are the risk of default by debtors and market disruption.

Cash Flows from Financing Activities

The principal cash inflows from our financing activities come from issuances of debt and equity securities, deposits of funds associated with policyholder account balances and lending of securities. The principal cash outflows come from repayments of debt, common stock repurchases, preferred stock dividends, withdrawals associated with policyholder account balances and the return of securities on loan. The primary liquidity concerns with respect to these cash flows are market disruption and the risk of early policyholder withdrawal.

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Primary Sources of Liquidity and Capital

In addition to the summary description of liquidity and capital sources discussed in “— Sources and Uses of Liquidity and Capital,” the following additional information is provided regarding our primary sources of liquidity and capital:

Funding Sources

Liquidity is provided by a variety of funding sources, including secured and unsecured funding agreements, unsecured credit facilities and secured committed facilities. Capital is provided by a variety of funding sources, including issuances of debt and equity securities, as well as borrowings under our credit facilities. We maintain a shelf registration statement with the SEC that permits the issuance of public debt, equity and hybrid securities. As a “Well-Known Seasoned Issuer” under SEC rules, our shelf registration statement provides for automatic effectiveness upon filing and has no stated issuance capacity. The diversity of our funding sources enhances our funding flexibility, limits dependence on any one market or source of funds and generally lowers the cost of funds. Our primary funding sources include:

Preferred Stock

See Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements and Note 13 of the Notes to the Consolidated Financial Statements included in our 2023 Annual Report for information on preferred stock issuances.

Funding Agreements

Brighthouse Life Insurance Company issues funding agreements and uses the proceeds from such issuances for spread lending purposes in connection with our institutional spread margin business or to provide additional liquidity. The institutional spread margin business is comprised of funding agreements issued in connection with the programs described in more detail below. Activity related to these programs are reported in Corporate & Other. See Note 4 of the Notes to the Consolidated Financial Statements included in our 2023 Annual Report for additional information on funding agreements.

Funding Agreement-Backed Repurchase Agreement Program

In January 2024, Brighthouse Life Insurance Company established a secured funding agreement-backed repurchase agreement program (the “FABR Program”), pursuant to which Brighthouse Life Insurance Company may enter into repurchase agreements with bank counterparties and the proceeds of the repurchase agreements are then used by a special purpose entity to purchase funding agreements from Brighthouse Life Insurance Company.

Funding Agreement-Backed Commercial Paper Program

In July 2021, Brighthouse Life Insurance Company established a funding agreement-backed commercial paper program (the “FABCP Program”) for spread lending purposes, pursuant to which a special purpose limited liability company (the “SPLLC”) may issue commercial paper and deposit the proceeds with Brighthouse Life Insurance Company under a funding agreement issued by Brighthouse Life Insurance Company to the SPLLC. The maximum aggregate principal amount permitted to be outstanding at any one time under the FABCP Program is $5.0 billion.

Funding Agreement-Backed Notes Program

In April 2021, Brighthouse Life Insurance Company established a funding agreement-backed notes program (the “FABN Program”), pursuant to which Brighthouse Life Insurance Company may issue funding agreements to a special purpose statutory trust for spread lending purposes. The maximum aggregate principal amount permitted to be outstanding at any one time under the FABN Program is $7.0 billion.

Federal Home Loan Bank Funding Agreements

Brighthouse Life Insurance Company is a member of the Federal Home Loan Bank (“FHLB”) of Atlanta, where it maintains a secured funding agreement program, under which funding agreements may be issued.

Farmer Mac Funding Agreements

Brighthouse Life Insurance Company has a secured funding agreement program with the Federal Agricultural Mortgage Corporation and its affiliate Farmer Mac Mortgage Securities Corporation (“Farmer Mac”) with a term ending on December 1, 2026, pursuant to which the parties may enter into funding agreements in an aggregate amount of up to $750 million.

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Information regarding funding agreements issued for spread lending purposes is as follows:


	Aggregate Principal Amount Outstanding				Issuances				Repayments
					Nine Months Ended September 30,
	September 30, 2024		December 31, 2023		2024		2023		2024		2023
	(In millions)
FABR Program	$	500	$	—	$	500	$	—	$	—	$	—
FABCP Program	3,002		3,442		12,305		5,618		12,745		4,906
FABN Program	2,550		2,100		1,150		—		700		850
FHLB Funding Agreements	4,300		4,350		2,150		1,925		2,200		1,425
Farmer Mac Funding Agreements	650		700		50		—		100		—
Total	$	11,002	$	10,592	$	16,155	$	7,543	$	15,745	$	7,181

Debt Issuances

See Note 12 of the Notes to the Consolidated Financial Statements included in our 2023 Annual Report for information on debt issuances.

Credit and Committed Facilities

See Notes 12 and 13 of the Notes to the Consolidated Financial Statements included in our 2023 Annual Report for information regarding our credit and committed facilities.

We have no reason to believe that our lending counterparties would be unable to fulfill their respective contractual obligations under these facilities. As commitments under our credit and committed facilities may expire unused, these amounts do not necessarily reflect our actual future cash funding requirements.

Our Revolving Credit Facility contains financial covenants, including requirements to maintain a specified minimum adjusted consolidated net worth, to maintain a ratio of total indebtedness to total capitalization not in excess of a specified percentage and that place limitations on the dollar amount of indebtedness that may be incurred by our subsidiaries, which could restrict our operations and use of funds. At September 30, 2024, we were in compliance with these financial covenants.

Primary Uses of Liquidity and Capital

In addition to the summarized description of liquidity and capital uses discussed in “— Sources and Uses of Liquidity and Capital,” the following additional information is provided regarding our primary uses of liquidity and capital:

Common Stock Repurchases

See Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements for information relating to authorizations to repurchase BHF common stock, amounts of common stock repurchased pursuant to such authorizations and the amount remaining under such authorizations at September 30, 2024. Subsequent to September 30, 2024 and through November 1, 2024, BHF repurchased an additional 506,800 shares of its common stock through open market purchases pursuant to a Rule 10b5-1 plan for $24 million.

Preferred Stock Dividends

See Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements for information relating to dividends declared and paid on our preferred stock.

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“Dividend Stopper” Provisions in BHF’s Preferred Stock and Junior Subordinated Debentures

Terms applicable to our junior subordinated debentures may restrict our ability to pay interest on those debentures in certain circumstances. Suspension of payments of interest on our junior subordinated debentures, whether required under the relevant indenture or optional, could cause “dividend stopper” provisions applicable under those and other instruments to restrict our ability to pay dividends, if any, on our common stock and repurchase our common stock in various situations, including situations where we may be experiencing financial stress, and may restrict our ability to pay dividends or interest on our preferred stock and junior subordinated debentures as well. Similarly, the terms of our outstanding preferred stock contain restrictions on our ability to repurchase our common stock or pay dividends thereon if we have not fulfilled our dividend obligations under such preferred stock or other preferred securities. In addition, the terms of the agreements governing any preferred stock, debt or other financial instruments that we may issue in the future, may limit or prohibit the payment of dividends on our common stock or preferred stock, or the payment of interest on our junior subordinated debentures.

Debt Repayments, Repurchases, Redemptions and Exchanges

See Note 12 of the Notes to the Consolidated Financial Statements included in our 2023 Annual Report for information on debt repayments and repurchases, as well as debt maturities and the terms of our outstanding long-term debt.

We may from time to time seek to retire or purchase our outstanding indebtedness through cash purchases or exchanges for other securities, purchases in the open market, privately negotiated transactions or otherwise. Any such repurchases or exchanges will be dependent upon several factors, including our liquidity requirements, contractual restrictions, general market conditions, as well as applicable regulatory, legal and accounting factors. Whether or not we repurchase any debt and the size and timing of any such repurchases will be determined at our discretion.

Insurance Liabilities

Liabilities arising from our insurance activities primarily relate to benefit payments under various annuity and life insurance products, as well as payments for policy surrenders, withdrawals and loans. See “— Primary Sources of Liquidity and Capital — Funding Sources — Funding Agreements” for additional information regarding our institutional spread margin business.

Pledged Collateral

We enter into derivatives to manage various risks relating to our ongoing business operations. We pledge collateral to, and have collateral pledged to us by, counterparties in connection with our derivatives. At September 30, 2024, we did not pledge any cash collateral to counterparties. At December 31, 2023, we pledged $16 million of cash collateral to counterparties. At September 30, 2024 and December 31, 2023, we were obligated to return cash collateral pledged to us by counterparties of $659 million and $393 million, respectively. The timing of the return of the derivatives collateral is uncertain. See Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information about pledged collateral. We also pledge collateral from time to time in connection with our funding agreements.

We receive non-cash collateral from counterparties for derivatives, which can be sold or re-pledged subject to certain constraints, and which is not recorded on our consolidated balance sheets. The amount of this non-cash collateral at estimated fair value was $2.4 billion at both September 30, 2024 and December 31, 2023.

Securities Lending

We have a securities lending program that aims to enhance the total return on our investment portfolio, whereby securities are loaned to third parties, primarily brokerage firms and commercial banks. We obtain collateral, usually cash, from the borrower, which must be returned to the borrower when the loaned securities are returned to us. Generally, our securities lending contracts expire within twelve months of issuance. We were liable for cash collateral under our control of $3.3 billion at both September 30, 2024 and December 31, 2023.

We receive non-cash collateral for securities lending from counterparties, which cannot be sold or re-pledged, and which is not recorded on our consolidated balance sheets. There was no non-cash collateral at both September 30, 2024 and December 31, 2023.

See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for further discussion of our securities lending program.

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Contingencies, Commitments and Guarantees

We establish liabilities for litigation, regulatory and other loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. See Note 13 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information regarding contingencies.

We enter into commitments for the purpose of enhancing the total return on our investment portfolio consisting of commitments to fund partnership investments, bank credit facilities and private corporate bond investments, as well as commitments to lend funds under mortgage loan commitments. We anticipate these commitments could be invested any time over the next five years. See Notes 7 and 13 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information regarding commitments.

In the normal course of our business, we have provided certain indemnities, guarantees and commitments to third parties such that we may be required to make payments now or in the future. See Note 13 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information regarding guarantees.

The Parent Company

Liquidity and Capital

In evaluating liquidity, it is important to distinguish the cash flow needs of the parent company from the cash flow needs of the combined group of companies. BHF is largely dependent on cash flows from its insurance subsidiaries to meet its obligations. Constraints on BHF’s liquidity may occur as a result of operational demands or as a result of compliance with regulatory requirements.

Short-term Liquidity and Liquid Assets

At September 30, 2024 and December 31, 2023, BHF and certain of its non-insurance subsidiaries had short-term liquidity of $1.1 billion and $1.2 billion, respectively. Short-term liquidity is comprised of cash and cash equivalents and short-term investments, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include assets held in trust.

At both September 30, 2024 and December 31, 2023, BHF and certain of its non-insurance subsidiaries had liquid assets of $1.3 billion, of which $1.2 billion was held by BHF. Liquid assets are comprised of cash and cash equivalents, short-term investments and publicly-traded securities, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include assets held in trust.

Statutory Capital and Dividends

The NAIC and state insurance departments have established regulations that provide minimum capitalization requirements based on RBC formulas for insurance companies. RBC is based on a formula calculated by applying factors to various asset, premium, claim, expense and statutory reserve items. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk, market risk and business risk and is calculated on an annual basis. The formula is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not as a means to rank insurers generally. State insurance laws provide insurance regulators the authority to require various actions by, or take various actions against, insurers whose total adjusted capital (“TAC”) does not meet or exceed the amounts required to attain certain RBC levels. As of the date of the most recent annual statutory financial statements filed with insurance regulators, the TAC of each of our insurance subsidiaries subject to these requirements was in excess of the amounts required to attain each of those RBC levels.

The amount of dividends that our insurance subsidiaries can ultimately pay to BHF through their various parent entities provides an additional margin for risk protection and investment in our businesses. Such dividends are constrained by the amount of surplus our insurance subsidiaries hold to maintain their ratings, which is generally higher than minimum RBC requirements. We proactively take actions to maintain capital consistent with these ratings objectives, which may include adjusting dividend amounts and deploying financial resources from internal or external sources of capital. Certain of these activities may require regulatory approval. Furthermore, the payment of dividends and other distributions by our insurance subsidiaries is governed by the insurance laws and regulations of the states where they are domiciled. Any payment of dividends by Brighthouse Life Insurance Company in 2024 would be subject to Delaware Department of Insurance approval. See Note 13 of the Notes to the Consolidated Financial Statements included in our 2023 Annual Report for additional information regarding the applicable dividend restrictions and certain of our subsidiaries’ ordinary dividend capacity, as well as the circumstances under which regulatory approval would be required.

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Primary Sources and Uses of Liquidity and Capital

The principal sources of funds available to BHF include distributions from Brighthouse Holdings, LLC (“BH Holdings”), dividends and returns of capital from its insurance subsidiaries and BRCD, capital markets issuances, as well as its own cash and cash equivalents and short-term investments. These sources of funds may also be supplemented by alternate sources of liquidity either directly or indirectly through our insurance subsidiaries. For example, we have established internal liquidity facilities to provide liquidity within and across our regulated and non-regulated entities to support our businesses.

The primary uses of liquidity of BHF include debt-service obligations (including interest expense and debt repayments), preferred stock dividends, capital contributions to subsidiaries, common stock repurchases and payment of general operating expenses. Based on our analysis and comparison of our current and future cash inflows from the dividends we receive from subsidiaries that are permitted to be paid without prior insurance regulatory approval, our investment portfolio and other cash flows and anticipated access to the capital markets, we believe there will be sufficient liquidity and capital to enable BHF to make payments on debt, pay preferred stock dividends, contribute capital to its subsidiaries, repurchase its common stock, pay all general operating expenses and meet its cash needs.

In addition to the liquidity and capital sources discussed in “— The Company — Primary Sources of Liquidity and Capital” and “— The Company — Primary Uses of Liquidity and Capital,” the following additional information is provided regarding BHF’s primary sources and uses of liquidity and capital:

Distributions from and Capital Contributions to BH Holdings

During both the nine months ended September 30, 2024 and 2023, BHF did not receive any cash distributions from BH Holdings and did not make any cash capital contributions to BH Holdings.

Short-term Intercompany Loans

BHF, as borrower, has a short-term intercompany loan agreement with certain of its non-insurance subsidiaries, as lenders, for the purposes of facilitating the management of the available cash of the borrower and the lenders on a short-term and consolidated basis. Such intercompany loan agreement allows management to optimize the efficient use of and maximize the yield on cash between BHF and its subsidiary lenders. Each loan entered into under this intercompany loan agreement has a term not more than 364 days and bears interest on the unpaid principal amount at a variable rate, payable monthly. During the nine months ended September 30, 2024 and 2023, BHF borrowed $420 million and $569 million, respectively, from certain of its non-insurance subsidiaries and repaid $180 million and $369 million of such borrowings during the nine months ended September 30, 2024 and 2023, respectively. At September 30, 2024 and December 31, 2023, BHF had total obligations outstanding of $967 million and $727 million, respectively, under such agreements.

Intercompany Liquidity Facilities

BHF has established intercompany liquidity facilities with certain of its insurance and non-insurance subsidiaries to provide short-term liquidity within and across the combined group of companies. Under these facilities, which are comprised of a series of revolving loan agreements among BHF and its participating subsidiaries, each company may lend to or borrow from each other, subject to certain maximum limits for a term of up to 364 days, depending on the agreement. During both the nine months ended September 30, 2024 and 2023, there were no borrowings or repayments by BHF under these facilities and, at both September 30, 2024 and December 31, 2023, BHF had no obligations outstanding under such facilities.

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Note Regarding Forward-Looking Statements

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

Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of Brighthouse Financial. These statements are based on current expectations and the current economic environment and involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others:

•differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models;

•higher risk management costs and exposure to increased market risk due to guarantees within certain of our products;

•the effectiveness of our variable annuity exposure risk management strategy and the impacts of such strategy on volatility in our profitability measures and the negative effects on our statutory capital;

•material differences between actual outcomes and the sensitivities calculated under certain scenarios that we may utilize in connection with our variable annuity risk management strategies;

•the impact of interest rates on our future ULSG policyholder obligations and net income volatility;

•the potential material adverse effect of changes in accounting standards, practices or policies applicable to us, including changes in the accounting for long-duration contracts;

•loss of business and other negative impacts resulting from a downgrade or a potential downgrade in our financial strength or credit ratings;

•the availability of reinsurance and the ability of the counterparties to our reinsurance or indemnification arrangements to perform their obligations thereunder;

•heightened competition, including with respect to service, product features, scale, price, actual or perceived financial strength, claims-paying ratings, credit ratings, e-business capabilities and name recognition;

•our ability to market and distribute our products through distribution channels;

•any failure of third parties to provide services we need, any failure of the practices and procedures of such third parties and any inability to obtain information or assistance we need from third parties;

•the ability of our subsidiaries to pay dividends to us, and our ability to pay dividends to our shareholders and repurchase our common stock;

•the risks associated with climate change;

•the adverse impact of public health crises, extreme mortality events or similar occurrences on our business and the economy in general;

•the impact of adverse capital and credit market conditions, including with respect to our ability to meet liquidity needs and access capital;

•the impact of economic conditions in the capital markets and the U.S. and global economy, as well as geopolitical events, military actions or catastrophic events, on our profitability measures as well as our investment portfolio, including on realized and unrealized losses and impairments, net investment spread and net investment income;

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•the financial risks that our investment portfolio is subject to, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control;

•the impact of changes in regulation and in supervisory and enforcement policies or interpretations thereof on our insurance business or other operations;

•the potential material negative tax impact of potential future tax legislation that could make some of our products less attractive to consumers or increase our tax liability;

•the effectiveness of our policies, procedures and processes in managing risk;

•the loss or disclosure of confidential information, damage to our reputation and impairment of our ability to conduct business effectively as a result of any failure in cyber- or other information security systems;

•whether all or any portion of the tax consequences of our separation from MetLife, Inc. (together with its subsidiaries and affiliates, “MetLife”) are not as expected, leading to material additional taxes or material adverse consequences to tax attributes that impact us; and

•other factors described in this report and from time to time in documents that we file with the SEC.

For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements included and the risks, uncertainties and other factors identified in our 2023 Annual Report, particularly in the sections entitled “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk,” as well as in our other subsequent filings with the SEC. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

Corporate Information

We routinely use our Investor Relations website to provide presentations, press releases, our insurance subsidiaries’ statutory filings, and other information that may be deemed important or material to investors. Accordingly, we encourage investors and others interested in the Company to review the information that we share at http://investor.brighthousefinancial.com. In addition, our Investor Relations website allows interested persons to sign up to automatically receive e-mail alerts when we make filings with the SEC. Information contained on or connected to any website referenced in this report or any of our other filings with the SEC is not incorporated by reference in this report or in any other report or document we file with the SEC, and any website references are intended to be inactive textual references only unless expressly noted.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have exposure to market risk through our insurance operations and general account investment activities. For purposes of this discussion, “market risk” is defined as changes in estimated fair value resulting from changes in interest rates, equity market prices, credit spreads and foreign currency exchange rates. We regularly analyze our market risk exposure. As a result of that analysis, we have determined that the estimated fair values of certain assets and liabilities are significantly exposed to changes in interest rates, and to a lesser extent, to changes in equity market prices and foreign currency exchange rates. We may have additional financial impacts other than changes in estimated fair value, which are beyond the scope of this discussion. A description of our market risk exposures may be found under “Quantitative and Qualitative Disclosures About Market Risk” in our 2023 Annual Report.

There have been no material changes to our market risk exposures from the market risk exposures previously disclosed in our 2023 Annual Report.

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Item 4. Controls and Procedures

Management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of September 30, 2024.

MetLife provides certain services to the Company on a transitional basis through services agreements. The Company continues to change business processes, implement systems and establish new third-party arrangements. We consider these in aggregate to be material changes in our internal control over financial reporting.

Other than as noted above, there were no changes to the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, these internal controls over financial reporting.

Part II — Other Information

Item 1. Legal Proceedings

See Note 13 of the Notes to the Interim Condensed Consolidated Financial Statements.

Item 1A. Risk Factors

We discuss in this report, in our 2023 Annual Report and in our other filings with the SEC, various risks that may materially affect our business. In addition, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Note Regarding Forward-Looking Statements” included herein. There have been no material changes to our risk factors from the risk factors previously disclosed in our 2023 Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Purchases of BHF common stock made by or on behalf of BHF or its affiliates during the three months ended September 30, 2024 are set forth below:


Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
				(In millions)
July 1 — July 31, 2024	467,000	$46.83	467,000	$645
August 1 — August 31, 2024	489,232	$44.14	489,232	$624
September 1 — September 30, 2024	471,774	$43.54	471,774	$603
Total	1,428,006		1,428,006

__________________

(1)On November 16, 2023, we authorized the repurchase of up to $750 million of our common stock, which does not have an expiration date. This authorization was in addition to the $1.2 billion total repurchases authorized in 2021, which were completed in the first quarter of 2024. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Primary Uses of Liquidity and Capital — Common Stock Repurchases” and Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements for more information on common stock repurchases.

Item 5. Other Information

Director and Officer Rule 10b5-1 Plans

During the three months ended September 30, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) or a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933, as amended).

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Item 6. Exhibits

(Note Regarding Reliance on Statements in Our Contracts: In reviewing the agreements included as exhibits herein, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about Brighthouse Financial, Inc. and its subsidiaries or affiliates or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and (i) should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; (iii) may apply standards of materiality in a way that is different from what may be viewed as material to investors; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about Brighthouse Financial, Inc. and its subsidiaries and affiliates may be found elsewhere herein and in Brighthouse Financial, Inc.’s other public filings, which are available without charge through the U.S. Securities and Exchange Commission website at www.sec.gov.)


Exhibit No.						Description
31.1*						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*						Inline XBRL Taxonomy Extension Schema Document.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.
104*						The cover page of Brighthouse Financial, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in Inline XBRL (included within the Exhibit 101 attachments).

* Filed herewith.

** Furnished herewith.

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SIGNATURE

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


BRIGHTHOUSE FINANCIAL, INC.

By:	/s/ Edward A. Spehar
	Name:	Edward A. Spehar
	Title:	Executive Vice President and Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer)

Date: November 8, 2024

100


			Page
Introduction			57
Executive Summary			57
Industry Trends and Uncertainties			58
Summary of Critical Accounting Estimates			60
Non-GAAP Financial Disclosures			60
Results of Operations			62
Investments			75
Derivatives			84
Policyholder Liabilities			85
Liquidity and Capital Resources			88
Note Regarding Forward-Looking Statements			96

Brighthouse Financial, Inc. - Quarter Report: 2024 September (Form 10-Q)

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