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Brighthouse Financial Announces Third Quarter 2020 Results

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·28 min read
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  • Third quarter 2020 net loss available to shareholders of $3,012 million, or $32.49 per diluted share, driven primarily by the impact from the company's annual actuarial review and net derivative mark-to-market losses

  • Third quarter 2020 adjusted earnings, less notable items*, of $388 million, or $4.19 per diluted share

  • Annuity sales increased 29 percent and life sales increased 63 percent compared with the third quarter of 2019

  • Estimated combined risk-based capital ("RBC") ratio between 525 and 545 percent

  • The company resumed repurchases of its common stock on August 24, 2020, and repurchased $432 million of common stock year-to-date through November 4

Brighthouse Financial, Inc. ("Brighthouse Financial" or the "company") (Nasdaq: BHF) announced today its financial results for the third quarter ended September 30, 2020.

Third Quarter 2020 Results

The company reported a net loss available to shareholders of $3,012 million in the third quarter of 2020, or $32.49 per diluted share, compared with net income available to shareholders of $676 million in the third quarter of 2019. The company ended the third quarter of 2020 with common stockholders' equity ("book value") of $17.5 billion, or $191.58 per common share, and book value, excluding accumulated other comprehensive income ("AOCI") of $12.1 billion, or $132.55 per common share.

In the third quarter of 2020, the company completed its annual actuarial review where it reviews long-term assumptions, including capital market returns and interest rates. In addition to other updates, the company lowered its U.S. GAAP long-term mean reversion interest rate assumption from 3.75 percent to 3.0 percent. The impact to net income from the annual actuarial review was $2,210 million after tax. In addition, during the quarter, as a result of significantly higher equity markets, the value of our hedges, which the company uses to protect its balance sheet against adverse market conditions, decreased, as expected. Most of the corresponding liabilities are not reflected at fair value under U.S. GAAP accounting and are, therefore, less sensitive to market movements.

For the third quarter of 2020, the company reported an adjusted loss* of $689 million, or $7.43 per diluted share, compared with an adjusted loss of $169 million, or $1.52 per diluted share, in the third quarter of 2019, driven primarily by the impact from the annual actuarial review.

_______________

* Information regarding the non-GAAP and other financial measures included in this news release and a reconciliation of such non-GAAP financial measures to the most directly comparable GAAP measures are provided in the Non-GAAP and Other Financial Disclosures discussion below, as well as in the tables that accompany this news release and/or the Third Quarter 2020 Brighthouse Financial, Inc. Financial Supplement and/or the Third Quarter 2020 Brighthouse Financial, Inc. Earnings Call Presentation (which are available on the Brighthouse Financial Investor Relations web page at http://investor.brighthousefinancial.com). Additional information regarding notable items can be found on the last page of this news release.

The adjusted loss for the quarter reflected $1,077 million after tax of unfavorable notable items, or $11.62 per diluted share, including:

  • $1,062 million unfavorable impact primarily related to the annual actuarial review, and

  • $15 million for establishment costs related to planned technology and other expenses associated with the company's separation from its former parent company.

Corporate expenses in the third quarter of 2020 were $204 million, down from $210 million in the second quarter of 2020, both on a pre-tax basis.

Annuity sales increased 29 percent quarter-over-quarter and 27 percent sequentially. Life sales increased 63 percent quarter-over-quarter and 8 percent sequentially.

As previously announced, the company resumed repurchases of its common stock on August 24, 2020. During the third quarter of 2020, the company repurchased $54 million of its common stock, and year-to-date through November 4, 2020, the company repurchased $432 million of its common stock, representing approximately 16 percent of shares outstanding relative to year-end 2019. Since the announcement of the company's first stock repurchase authorization in August 2018, the company has repurchased a total of $980 million of its common stock through November 4, 2020.

"I am pleased with the sales results we delivered in the third quarter of 2020," said Eric Steigerwalt, president and CEO, Brighthouse Financial. "As we have said, we entered the current climate from a position of strength and we continue to believe that we are well-positioned to weather this uncertain environment. We remain confident in our strategy and are focused on delivering for our partners, customers and shareholders."

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

As of or For the Three Months Ended

September 30, 2020

September 30, 2019

Total

Per share

Total

Per share

Net income (loss) available to shareholders (1)

$(3,012)

$(32.49)

$676

$6.06

Adjusted earnings (1)

$(689)

$(7.43)

$(169)

$(1.52)

Adjusted earnings, less notable items (1)

$388

$4.19

$260

$2.33

Weighted average common shares outstanding - diluted (1)

92,693,188

N/A

111,527,480

N/A

Book value

$17,464

$191.58

$17,283

$158.18

Book value, excluding AOCI

$12,083

$132.55

$13,716

$125.53

Ending common shares outstanding

91,158,927

N/A

109,264,305

N/A

(1) Per share amounts are on a diluted basis and may not recalculate due to rounding. For loss periods, dilutive shares were not included in the calculation as inclusion of such shares would have an anti-dilutive effect. See Non-GAAP and Other Financial Disclosures discussion in this news release.

Results by Business Segment and Corporate & Other (Unaudited, in millions)

For the Three Months Ended

ADJUSTED EARNINGS

September 30,
2020

June 30,
2020

September 30,
2019

Annuities

$387

$171

$203

Life

$76

$48

$73

Run-off (1)

$(1,139)

$(115)

$(426)

Corporate & Other (1)

$(13)

$(93)

$(19)

(1) The company uses the term "adjusted loss" throughout this news release to refer to negative adjusted earnings values.

Sales (Unaudited, in millions)

For the Three Months Ended

September 30,
2020

June 30,
2020

September 30,
2019

Annuities (1)

$2,335

$1,838

$1,808

Life

$13

$12

$8

(1) Annuities sales include sales of a fixed indexed annuity product sold by Massachusetts Mutual Life Insurance Company, representing 90% of gross sales of that product. Sales of this product were $234 million for the third quarter of 2020, $309 million for the second quarter of 2020, and $296 million for the third quarter of 2019.

Annuities

Adjusted earnings in the Annuities segment were $387 million in the current quarter, compared with adjusted earnings of $203 million in the third quarter of 2019 and adjusted earnings of $171 million in the second quarter of 2020.

The current quarter included a $102 million favorable notable item and the third quarter of 2019 included a $30 million unfavorable notable item, both related to the annual actuarial review completed in the respective quarters. There were no notable items in the second quarter of 2020.

On a quarter-over-quarter basis, adjusted earnings reflect lower expenses, lower deferred acquisition costs ("DAC") amortization and reserves, partially offset by lower fees. On a sequential basis, adjusted earnings reflect higher net investment income and higher fees, as well as lower DAC amortization, partially offset by higher expenses.

As mentioned above, annuity sales increased 29 percent quarter-over-quarter and 27 percent sequentially.

Life

Adjusted earnings in the Life segment were $76 million in the current quarter, compared with adjusted earnings of $73 million in the third quarter of 2019 and adjusted earnings of $48 million in the second quarter of 2020.

The current quarter included an $11 million unfavorable notable item and the third quarter of 2019 included a $19 million favorable notable item, both related to the annual actuarial review completed in the respective quarters. There were no notable items in the second quarter of 2020.

On a quarter-over-quarter basis, adjusted earnings reflect higher net investment income and lower DAC amortization. On a sequential basis, adjusted earnings reflect higher net investment income, partially offset by higher DAC amortization.

As mentioned above, life sales increased 63 percent quarter-over-quarter and 8 percent sequentially.

Run-off

The Run-off segment had an adjusted loss of $1,139 million in the current quarter, compared with an adjusted loss of $426 million in the third quarter of 2019 and an adjusted loss of $115 million in the second quarter of 2020.

The current quarter included a $1,172 million unfavorable notable item and the third quarter of 2019 included a $431 million unfavorable notable item, both related to the annual actuarial review completed in the respective quarters. There were no notable items in the second quarter of 2020.

On both a quarter-over-quarter and sequential basis, adjusted earnings, less notable items, reflect higher net investment income, partially offset by a lower underwriting margin.

Corporate & Other

Corporate & Other had an adjusted loss of $13 million in the current quarter, compared with an adjusted loss of $19 million in the third quarter of 2019 and an adjusted loss of $93 million in the second quarter of 2020.

The current quarter included $4 million of net favorable notable items, as described above. The third quarter of 2019 included $13 million of net favorable notable items and the second quarter of 2020 included a $28 million unfavorable notable item.

On a quarter-over-quarter and sequential basis, the adjusted loss, less notable items, reflects lower expenses and lower taxes, partially offset by higher total preferred stock dividends.

Net Investment Income and Adjusted Net Investment Income (Unaudited, in millions)

For the Three Months Ended

September 30,
2020

June 30,
2020

September 30,
2019

Net investment income

$996

$652

$928

Adjusted net investment income

$1,001

$656

$928

Net Investment Income

Net investment income was $996 million and adjusted net investment income* was $1,001 million for the third quarter of 2020. On a quarter-over-quarter basis, adjusted net investment income increased $73 million and increased $345 million on a sequential basis. The quarter-over-quarter and sequential results were driven by higher alternative investment income.

The net investment income yield was 4.42 percent during the quarter.

Statutory Capital and Liquidity (Unaudited, in billions)

As of

September 30,

2020 (1)

June 30,
2020

September 30,
2019

Statutory combined total adjusted capital

$8.4

$7.7

$8.4

(1) Reflects preliminary statutory results as of September 30, 2020.

Capitalization

At September 30, 2020:

  • Holding company liquid assets were approximately $1.3 billion

  • Statutory combined total adjusted capital on a preliminary basis increased to approximately $8.4 billion, driven by the recovery in capital markets in the quarter and the favorable statutory impact of the annual actuarial review

  • Estimated combined RBC ratio between 525 and 545 percent

Earnings Conference Call

Brighthouse Financial will hold a conference call and audio webcast to discuss its financial results for the third quarter of 2020 at 8:00 a.m. Eastern Time on Friday, November 6, 2020. In connection with this call, the company has prepared a presentation for use with investors and other members of the investment community. This presentation is available on the Brighthouse Financial Investor Relations web page at http://investor.brighthousefinancial.com.

To listen to the audio webcast via the internet and to access the related presentation, please visit the Brighthouse Financial Investor Relations web page at http://investor.brighthousefinancial.com. To join the conference call via telephone, please dial (844) 358-9117 (+1 (209) 905-5952 from outside the U.S.) and use conference ID 3108067.

A replay of the conference call will be made available until Friday, November 27, 2020, on the Brighthouse Financial Investor Relations web page at http://investor.brighthousefinancial.com.

About Brighthouse Financial, Inc.

Brighthouse Financial, Inc. (Brighthouse Financial) (Nasdaq: BHF) is on a mission to help people achieve financial security. As one of the largest providers of annuities and life insurance in the U.S.,(1) we specialize in products designed to help people protect what they've earned and ensure it lasts. Learn more at brighthousefinancial.com.

(1) Ranked by 2019 admitted assets. Best's Review®: Top 200 U.S. Life/Health Insurers. A.M. Best, 2020.

Note Regarding Forward-Looking Statements

This news release and other oral or written statements that we make from time to time may contain information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve substantial risks and uncertainties. We have tried, wherever possible, to identify such statements using words such as "anticipate," "estimate," "expect," "project," "may," "will," "could," "intend," "goal," "target," "guidance," "forecast," "preliminary," "objective," "continue," "aim," "plan," "believe" and other words and terms of similar meaning, or that are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include, without limitation, statements relating to future actions, prospective services or products, 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: the impact of the ongoing COVID-19 pandemic; differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models; higher risk management costs and exposure to increased market risk due to guarantees within certain of our products; the effectiveness of our variable annuity exposure risk management strategy and the impact of such strategy on volatility in our profitability measures and negative effects on our statutory capital; the reserves we are required to hold against our variable annuities as a result of actuarial guidelines; the potential material adverse effect of changes in accounting standards, practices and/or policies applicable to us, including changes in the accounting for long-duration contracts; our degree of leverage due to indebtedness; the impact of adverse capital and credit market conditions, including with respect to our ability to meet liquidity needs and access capital; the impact of changes in regulation and in supervisory and enforcement policies on our insurance business or other operations; the availability of reinsurance and the ability of the counterparties to our reinsurance or indemnification arrangements to perform their obligations thereunder; the adverse impact to liabilities for policyholder claims as a result of extreme mortality events; heightened competition, including with respect to service, product features, scale, price, actual or perceived financial strength, claims-paying ratings, credit ratings, e-business capabilities and name recognition; any failure of third parties to provide services we need, any failure of the practices and procedures of such third parties and any inability to obtain information or assistance we need from third parties; the ability of our insurance subsidiaries to pay dividends to us, and our ability to pay dividends to our shareholders and repurchase our common stock; the effectiveness of our policies and procedures in managing risk; our ability to market and distribute our products through distribution channels; whether all or any portion of the tax consequences of our separation from MetLife, Inc. ("MetLife") are not as expected, leading to material additional taxes or material adverse consequences to tax attributes that impact us; the uncertainty of the outcome of any disputes with MetLife over tax-related or other matters and agreements or disagreements regarding MetLife’s or our obligations under our other agreements; the potential material negative tax impact of potential future tax legislation that could make some of our products less attractive to consumers; and other factors described from time to time in documents that we file with the U.S. Securities and Exchange Commission (the "SEC").

For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements included and the risks, uncertainties and other factors identified in our Annual Report on Form 10-K for the year ended December 31, 2019, particularly in the sections entitled "Risk Factors" and "Quantitative and Qualitative Disclosures About Market Risk," as well as in our other subsequent filings with the SEC. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

Non-GAAP and Other Financial Disclosures

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

Non-GAAP Financial Disclosures

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

The following non-GAAP financial measures, previously referred to as operating measures, should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP:

Non-GAAP financial measures:

Most directly comparable GAAP financial measures:

adjusted earnings

net income (loss) available to shareholders (1)

adjusted earnings, less notable items

net income (loss) available to shareholders (1)

adjusted revenues

revenues

adjusted expenses

expenses

adjusted earnings per common share

earnings per common share, diluted (1)

adjusted earnings per common share, less notable items

earnings per common share, diluted (1)

adjusted return on common equity

return on common equity (2)

adjusted return on common equity, less notable items

return on common equity (2)

adjusted net investment income

net investment income

__________________

(1) Brighthouse uses net income (loss) available to shareholders to refer to net income (loss) available to Brighthouse Financial, Inc.'s common shareholders, and earnings per common share, diluted to refer to net income (loss) available to shareholders per common share.

(2) Brighthouse uses return on common equity to refer to return on Brighthouse Financial, Inc.'s common stockholders' equity.

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

Adjusted Earnings, Adjusted Revenues and Adjusted Expenses

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

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

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

  • Net investment gains (losses);

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

  • Certain variable annuity GMIB fees ("GMIB Fees").

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

  • Amounts associated with benefits related to GMIBs ("GMIB Costs");

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

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

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

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

Adjusted Earnings per Common Share and Adjusted Return on Common Equity

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

Adjusted earnings per common share is defined as adjusted earnings for the period divided by the weighted average number of fully diluted shares of common stock outstanding for the period. The weighted average common shares outstanding used to calculate adjusted earnings per share will differ from such shares used to calculate diluted net income (loss) available to shareholders per common share when the inclusion of dilutive shares has an anti-dilutive effect for one calculation but not for the other.

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

Adjusted Net Investment Income

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

Other Financial Disclosures

Corporate Expenses

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

Notable items

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

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

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

CTE95

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

CTE98

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

Holding Company Liquid Assets

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

Total Adjusted Capital

Total adjusted capital primarily consists of statutory capital and surplus, as well as the statutory asset valuation reserve. When referred to as "combined," represents that of our insurance subsidiaries as a whole.

Sales

Life insurance sales consist of 100 percent of annualized new premium for term life, first-year paid premium for whole life, universal life, and variable universal life, and total paid premium for indexed universal life. We exclude company-sponsored internal exchanges, corporate-owned life insurance, bank-owned life insurance, and private placement variable universal life.

Annuity sales consist of 100 percent of direct statutory premiums, except for fixed indexed annuity sales distributed through MassMutual that consist of 90 percent of gross sales. Annuity sales exclude certain internal exchanges. These sales statistics do not correspond to revenues under GAAP, but are used as relevant measures of business activity.

Net Investment Income Yield

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

Normalized Statutory Earnings (Loss)

Normalized statutory earnings (loss) is used by management to measure our insurance companies’ ability to pay future distributions and is reflective of whether our hedging program functions as intended. Normalized statutory earnings (loss) is calculated as statutory pre-tax net gain from operations adjusted for the favorable or unfavorable impacts of (i) net realized capital gains (losses), (ii) the change in both the reserve-based and capital methodology-based CTE95 calculation, net of the change in our variable annuity reserves, and (iii) unrealized gains (losses) associated with our variable annuities risk management strategy. Normalized statutory earnings (loss) may be further adjusted for certain unanticipated items that impacted our results in order to help management and investors better understand, evaluate and forecast those results.

Risk-Based Capital Ratio

The risk-based capital ratio is a method of measuring an insurance company’s capital, taking into consideration its relative size and risk profile, in order to ensure compliance with minimum regulatory capital requirements set by the National Association of Insurance Commissioners. When referred to as "combined," represents that of our insurance subsidiaries as a whole. The reporting of our combined risk-based capital ratio is not intended for the purpose of ranking any insurance company or for use in connection with any marketing, advertising or promotional activities.

Condensed Statements of Operations (Unaudited, in millions)

For the Three Months Ended

Revenues

September 30,
2020

June 30,
2020

September 30,
2019

Premiums

$184

$193

$214

Universal life and investment-type product policy fees

882

827

867

Net investment income

996

652

928

Other revenues

99

93

94

Revenues before NIGL and NDGL

2,161

1,765

2,103

Net investment gains (losses)

5

(34)

27

Net derivative gains (losses)

(1,857)

(2,653)

1,057

Total revenues

$309

$(922)

$3,187

Expenses

Interest credited to policyholder account balances

$281

$276

$272

Policyholder benefits and claims

3,047

839

1,319

Amortization of DAC and VOBA

244

(92)

181

Interest expense on debt

47

45

49

Other expenses

533

532

562

Total expenses

4,152

1,600

2,383

Income (loss) before provision for income tax

(3,843)

(2,522)

804

Provision for income tax expense (benefit)

(850)

(531)

119

Net income (loss)

(2,993)

(1,991)

685

Less: Net income (loss) attributable to noncontrolling interests

2

2

Net income (loss) attributable to Brighthouse Financial, Inc.

(2,995)

(1,991)

683

Less: Preferred stock dividends

17

7

7

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

$(3,012)

$(1,998)

$676

Condensed Balance Sheets (Unaudited, in millions)

As of

ASSETS

September 30,
2020

June 30,
2020

September 30,
2019

Investments:

Fixed maturity securities available-for-sale

$79,338

$76,796

$70,723

Equity securities

117

129

148

Mortgage loans

15,746

15,791

15,359

Policy loans

1,289

1,201

1,332

Limited partnerships and limited liability companies

2,562

2,354

2,353

Short-term investments

4,239

4,537

1,985

Other invested assets

5,038

6,364

4,734

Total investments

108,329

107,172

96,634

Cash and cash equivalents

6,189

7,325

4,289

Accrued investment income

781

664

732

Reinsurance recoverables

15,052

14,359

13,412

Premiums and other receivables

1,035

859

973

DAC and VOBA

4,664

4,856

5,317

Current income tax recoverable

1

14

Other assets

447

532

577

Separate account assets

103,184

99,599

103,928

Total assets

$239,681

$235,367

$225,876

LIABILITIES AND EQUITY

Liabilities

Future policy benefits

$44,537

$41,841

$39,846

Policyholder account balances

52,798

50,338

44,919

Other policy-related balances

3,088

3,152

3,079

Payables for collateral under securities loaned and other transactions

6,989

7,876

5,291

Long-term debt

3,979

3,979

4,365

Current income tax payable

72

Deferred income tax liability

1,816

2,567

1,749

Other liabilities

4,887

5,041

4,939

Separate account liabilities

103,184

99,599

103,928

Total liabilities

221,350

214,393

208,116

Equity

Preferred stock, at par value

Common stock, at par value

1

1

1

Additional paid-in capital

13,314

13,307

12,897

Retained earnings (deficit)

511

3,523

1,662

Treasury stock

(941)

(887)

(432)

Accumulated other comprehensive income (loss)

5,381

4,965

3,567

Total Brighthouse Financial, Inc.’s stockholders’ equity

18,266

20,909

17,695

Noncontrolling interests

65

65

65

Total equity

18,331

20,974

17,760

Total liabilities and equity

$239,681

$235,367

$225,876

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

For the Three Months Ended

ADJUSTED EARNINGS, LESS NOTABLE ITEMS

September 30,
2020

June 30,
2020

September 30,
2019

Net income (loss) available to shareholders

$(3,012)

$(1,998)

$676

Less: Net investment gains (losses)

5

(34)

27

Less: Net derivative gains (losses), excluding investment hedge adjustments

(1,862)

(2,657)

1,057

Less: GMIB Fees and GMIB Costs

(957)

(125)

(4)

Less: Amortization of DAC and VOBA

(86)

249

2

Less: Market value adjustments and other

(41)

24

(14)

Less: Provision for income tax (expense) benefit on reconciling adjustments

618

534

(223)

Adjusted earnings

(689)

11

(169)

Less: Notable items

(1,077)

(28)

(429)

Adjusted earnings, less notable items

$388

$39

$260

ADJUSTED EARNINGS, LESS NOTABLE ITEMS PER COMMON SHARE (1)

Net income (loss) available to shareholders per common share

$(32.49)

$(21.10)

$6.06

Less: Net investment gains (losses)

0.05

(0.36)

0.24

Less: Net derivative gains (losses), excluding investment hedge adjustments

(20.09)

(28.06)

9.48

Less: GMIB Fees and GMIB Costs

(10.32)

(1.32)

(0.04)

Less: Amortization of DAC and VOBA

(0.93)

2.63

0.02

Less: Market value adjustments and other

(0.44)

0.25

(0.13)

Less: Provision for income tax (expense) benefit on reconciling adjustments

6.67

5.64

(2.00)

Adjusted earnings per common share

(7.43)

0.11

(1.52)

Less: Notable items

(11.62)

(0.30)

(3.85)

Adjusted earnings, less notable items per common share

$4.19

$0.41

$2.33

(1) Per share calculations are on a diluted basis and may not recalculate or foot due to rounding. For loss periods, dilutive shares were not included in the calculation as inclusion of such shares would have an anti-dilutive effect. See Non-GAAP and Other Financial Disclosures discussion in this news release.

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

For the Three Months Ended

September 30,
2020

June 30,
2020

September 30,
2019

Net investment income

$996

$652

$928

Less: Investment hedge adjustments

(5)

(4)

Adjusted net investment income

$1,001

$656

$928

Notable Items (Unaudited, in millions)

For the Three Months Ended

NOTABLE ITEMS IMPACTING ADJUSTED EARNINGS

September 30,
2020

June 30,
2020

September 30,
2019

Actuarial items and other insurance adjustments

$1,062

$—

$442

Establishment costs

15

28

10

Separation-related transactions

(23)

Total notable items (1)

$1,077

$28

$429

NOTABLE ITEMS BY SEGMENT AND CORPORATE & OTHER

Annuities

$(102)

$—

$30

Life

11

(19)

Run-off

1,172

431

Corporate & Other

(4)

28

(13)

Total notable items (1)

$1,077

$28

$429

(1) Notable items reflect the negative (positive) after-tax impact to adjusted earnings of certain unanticipated items and events, as well as certain items and events that were anticipated, such as establishment costs. The presentation of notable items is intended to help investors better understand our results and to evaluate and forecast those results.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201105006054/en/

Contacts

FOR INVESTORS
David Rosenbaum
(980) 949-3326
david.rosenbaum@brighthousefinancial.com

FOR MEDIA
Deon Roberts
(980) 949-3071
deon.roberts@brighthousefinancial.com