EX-99.2 3 q12020bhffinancialsupp.htm EX-99.2

Exhibit 99.2

Brighthouse Financial, Inc.

Financial Supplement

First Quarter 2020

 

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Table of Contents

Financial Results

1

Key Metrics

2

GAAP Condensed Statements of Operations

3

GAAP Balance Sheets

Earnings and Select Metrics from Business Segments and Corporate & Other

5

Statements of Adjusted Earnings by Segment and Corporate & Other

6

Annuities — Statements of Adjusted Earnings

7

Annuities — Select Operating Metrics

9

Life — Statements of Adjusted Earnings

10

Life — Select Operating Metrics

12

Run-off — Statements of Adjusted Earnings

13

Run-off — Select Operating Metrics

14

Corporate & Other — Statements of Adjusted Earnings

Other Information

16

DAC and VOBA and Net Derivative Gains (Losses)

17

Notable Items

18

Variable Annuity Separate Account Returns and Allocations

19

Summary of Investments

20

Statutory Statement of Operations Information

21

Statutory Balance Sheet and Surplus Information

Appendix

A-1

Note Regarding Forward-Looking Statements

A-2

Non-GAAP and Other Financial Disclosures

A-6

Acronyms

A-7

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

A-8

Reconciliation of Return on Common Equity to Adjusted Return on Common Equity

A-9

Reconciliation of Total Revenues to Adjusted Revenues and Reconciliation of Total Expenses to Adjusted Expenses

A-10

Investment Reconciliation Details

Note: See the Appendix for non-GAAP financial information, definitions and reconciliations. Financial information, unless otherwise noted, is rounded to millions. Some financial information, therefore, may not sum to the corresponding total.

As used in this financial supplement, “Brighthouse Financial,” “Brighthouse,” the “Company,” “we,” “our” and “us” refer to Brighthouse Financial, Inc.

 

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Financial Results

 

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Financial Supplement

1

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

						As of or For the Three Months Ended
Financial Results and Metrics (1)						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Net income (loss) available to shareholders						$4,950						$(1,077)						$676						$377						$(737)
Adjusted earnings						$211						$282						$(169)						$254						$232
Adjusted earnings, less notable items (2)						$273						$265						$260						$296						$259
Total corporate expenses (3)						$214						$283						$248						$242						$225
Combined total adjusted capital (4)						$7,200						$9,694						$8,406						$6,897						$6,314
Combined risk-based capital ratio (4), (5)						515% - 535%						552%						N/A						N/A						N/A
Stockholders' Equity
Brighthouse Financial, Inc.’s stockholders’ equity						$20,374						$16,172						$17,695						$16,276						$14,999
Less: Preferred stock, net						412						412						412						412						412
Brighthouse Financial, Inc.’s common stockholders’ equity, including AOCI						$19,962						$15,760						$17,283						$15,864						$14,587
Less: AOCI						2,647						3,240						3,567						2,702						1,670
Brighthouse Financial, Inc.’s common stockholders’ equity, excluding AOCI						$17,315						$12,520						$13,716						$13,162						$12,917
Return on Common Equity (1)
Return on common equity						29.5%						(4.9)%						11.7%						5.7%						1.4%
Return on common equity, excluding AOCI						35.4%						(5.8)%						13.4%						6.3%						1.5%
Adjusted return on common equity						4.2%						4.5%						3.8%						7.3%						6.5%
Earnings Per Common Share, Diluted (1), (6)
Net income (loss) available to shareholders per common share						$47.11						$(10.02)						$6.06						$3.27						$(6.31)
Adjusted earnings per common share						$2.01						$2.61						$(1.52)						$2.19						$1.98
Adjusted earnings, less notable items per common share						$2.60						$2.46						$2.33						$2.56						$2.21
Weighted average common shares outstanding						105,093,515						107,840,324						111,527,480						115,536,654						117,229,854
Book Value Per Common Share
Book value per common share (1)						$198.62						$148.64						$158.18						$140.83						$125.55
Book value per common share, excluding AOCI (1)						$172.28						$118.08						$125.53						$116.85						$111.18
Ending common shares outstanding						100,502,488						106,027,301						109,264,305						112,644,952						116,182,687
(1) See definitions for Non-GAAP and Other Financial Disclosures in the Appendix beginning on page A-2.
(2) See additional information regarding notable items on page 17.
(3) Includes functional department expenses, public company expenses, certain investment expenses, retirement funding and incentive compensation; and excludes establishment costs.
(4) Reflects preliminary statutory results for the three months ended March 31, 2020. See additional information on page 5.
(5) RBC ratios prior to the implementation of variable annuity capital reform are not presented.
(6) For loss periods, dilutive shares were not included in the calculation of net income (loss) available to shareholders per common share or adjusted earnings per common share as inclusion of such shares would have an anti-dilutive effect.

 

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Financial Supplement

2

GAAP Condensed Statements of Operations (Unaudited, in millions)

						For the Three Months Ended																																																						For the Three Months Ended
Revenues						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019						March 31, 2020						March 31, 2019
Premiums						$198						$209						$214						$232						$227						$198						$227
Universal life and investment-type product policy fees						886						950						867						888						875						886						875
Net investment income						916						898						928						942						811						916						811
Other revenues						102						107						94						96						92						102						92
Revenues before NIGL and NDGL						2,102						2,164						2,103						2,158						2,005						2,102						2,005
Net investment gains (losses)						(19)						33						27						63						(11)						(19)						(11)
Net derivative gains (losses)						6,902						(1,891)						1,057						149						(1,303)						6,902						(1,303)
Total revenues						$8,985						$306						$3,187						$2,370						$691						$8,985						$691
Expenses
Interest credited to policyholder account balances						$259						$268						$272						$265						$258						$259						$258
Policyholder benefits and claims						1,187						734						1,319						845						772						1,187						772
Amortization of DAC and VOBA						770						9						181						170						22						770						22
Interest expense on debt						47						47						49						48						47						47						47
Other expenses						470						620						562						573						545						470						545
Total expenses						2,733						1,678						2,383						1,901						1,644						2,733						1,644
Income (loss) before provision for income tax						6,252						(1,372)						804						469						(953)						6,252						(953)
Provision for income tax expense (benefit)						1,293						(303)						119						85						(218)						1,293						(218)
Net income (loss)						4,959						(1,069)						685						384						(735)						4,959						(735)
Less: Net income (loss) attributable to noncontrolling interests						2						1						2						—						2						2						2
Net income (loss) attributable to Brighthouse Financial, Inc.						4,957						(1,070)						683						384						(737)						4,957						(737)
Less: Preferred stock dividends						7						7						7						7						—						7						—
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders						$4,950						$(1,077)						$676						$377						$(737)						$4,950						$(737)

 

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Financial Supplement

3

GAAP Balance Sheets (Unaudited, in millions)

						As of
ASSETS						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Investments:
Fixed maturity securities available-for-sale						$71,302						$71,036						$70,723						$67,211						$64,847
Equity securities						122						147						148						153						150
Mortgage loans, net						15,547						15,753						15,359						15,078						14,504
Policy loans						1,250						1,292						1,332						1,342						1,385
Limited partnerships and limited liability companies						2,505						2,380						2,353						2,296						2,253
Short-term investments						4,348						1,958						1,985						793						799
Other invested assets						9,658						3,216						4,734						3,064						2,302
Total investments						104,732						95,782						96,634						89,937						86,240
Cash and cash equivalents						8,930						2,877						4,289						3,981						3,864
Accrued investment income						868						684						732						747						791
Reinsurance recoverables						14,220						13,990						13,412						13,366						13,098
Premiums and other receivables						774						770						973						865						928
DAC and VOBA						4,862						5,448						5,317						5,492						5,680
Current income tax recoverable						9						17						14						—						—
Other assets						550						584						577						610						618
Separate account assets						89,008						107,107						103,928						106,214						105,211
Total assets						$223,953						$227,259						$225,876						$221,212						$216,430
LIABILITIES AND EQUITY
Liabilities
Future policy benefits						$40,653						$39,686						$39,846						$38,280						$37,157
Policyholder account balances						47,288						45,771						44,919						42,941						41,177
Other policy-related balances						3,169						3,111						3,079						3,041						3,005
Payables for collateral under securities loaned and other transactions						10,988						4,391						5,291						4,094						3,990
Long-term debt						4,365						4,365						4,365						4,365						4,364
Current income tax payable						—						—						—						14						19
Deferred income tax liability						2,482						1,355						1,749						1,364						1,005
Other liabilities						5,561						5,236						4,939						4,558						5,438
Separate account liabilities						89,008						107,107						103,928						106,214						105,211
Total liabilities						203,514						211,022						208,116						204,871						201,366
Equity
Preferred Stock, at par value						—						—						—						—						—
Common stock, at par value						1						1						1						1						1
Additional paid-in capital						12,911						12,908						12,897						12,893						12,889
Retained earnings (deficit)						5,521						585						1,662						986						609
Treasury stock						(706)						(562)						(432)						(306)						(170)
Accumulated other comprehensive income (loss)						2,647						3,240						3,567						2,702						1,670
Total Brighthouse Financial, Inc.’s stockholders’ equity						20,374						16,172						17,695						16,276						14,999
Noncontrolling interests						65						65						65						65						65
Total equity						20,439						16,237						17,760						16,341						15,064
Total liabilities and equity						$223,953						$227,259						$225,876						$221,212						$216,430

 

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Earnings and Select

Metrics from

Business Segments and Corporate & Other

 

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Financial Supplement

5

Statements of Adjusted Earnings by Segment and Corporate & Other (Unaudited, in millions)

						For the Three Months Ended March 31, 2020
Adjusted revenues						Annuities						Life						Run-off						Corporate & Other						Total
Premiums						$35						$141						$—						$22						$198
Universal life and investment-type product policy fees						566						93						162						—						821
Net investment income						460						116						324						20						920
Other revenues						90						4						7						—						101
Total adjusted revenues						$1,151						$354						$493						$42						$2,040
Adjusted expenses
Interest credited to policyholder account balances						$155						$27						$77						$—						$259
Policyholder benefits and claims						204						237						454						17						912
Amortization of DAC and VOBA						38						58						—						3						99
Interest expense on debt						—						—						—						47						47
Other operating costs						365						19						52						34						470
Total adjusted expenses						762						341						583						101						1,787
Adjusted earnings before provision for income tax						389						13						(90)						(59)						253
Provision for income tax expense (benefit)						73						2						(20)						(22)						33
Adjusted earnings after provision for income tax						316						11						(70)						(37)						220
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends						—						—						—						9						9
Adjusted earnings						$316						$11						$(70)						$(46)						$211
						For the Three Months Ended March 31, 2019
Adjusted revenues						Annuities						Life						Run-off						Corporate & Other						Total
Premiums						$58						$145						$1						$23						$227
Universal life and investment-type product policy fees						561						58						193						(3)						809
Net investment income						421						97						276						17						811
Other revenues						77						3						6						6						92
Total adjusted revenues						$1,117						$303						$476						$43						$1,939
Adjusted expenses
Interest credited to policyholder account balances						$137						$25						$96						$—						$258
Policyholder benefits and claims						143						181						380						14						718
Amortization of DAC and VOBA						82						11						—						4						97
Interest expense on debt						—						—						—						47						47
Other operating costs						394						55						46						50						545
Total adjusted expenses						756						272						522						115						1,665
Adjusted earnings before provision for income tax						361						31						(46)						(72)						274
Provision for income tax expense (benefit)						66						6						(10)						(22)						40
Adjusted earnings after provision for income tax						295						25						(36)						(50)						234
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends						—						—						—						2						2
Adjusted earnings						$295						$25						$(36)						$(52)						$232

 

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Financial Supplement

6

Annuities — Statements of Adjusted Earnings (Unaudited, in millions)

						For the Three Months Ended																																																						For the Three Months Ended
Adjusted revenues						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019						March 31, 2020						March 31, 2019
Premiums						$35						$32						$48						$60						$58						$35						$58
Universal life and investment-type product policy fees						566						585						596						584						561						566						561
Net investment income						460						457						461						470						421						460						421
Other revenues						90						79						79						80						77						90						77
Total adjusted revenues						$1,151						$1,153						$1,184						$1,194						$1,117						$1,151						$1,117
Adjusted expenses
Interest credited to policyholder account balances						$155						$151						$149						$147						$137						$155						$137
Policyholder benefits and claims						204						134						152						180						143						204						143
Amortization of DAC and VOBA						38						95						211						128						82						38						82
Interest expense on debt						—						—						—						—						—						—						—
Other operating costs						365						449						417						416						394						365						394
Total adjusted expenses						762						829						929						871						756						762						756
Adjusted earnings before provision for income tax						389						324						255						323						361						389						361
Provision for income tax expense (benefit)						73						59						52						58						66						73						66
Adjusted earnings						$316						$265						$203						$265						$295						$316						$295

 

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Financial Supplement

7

Annuities — Select Operating Metrics (Unaudited, in millions)

						For the Three Months Ended
VARIABLE & SHIELD LEVEL ANNUITIES ACCOUNT VALUE (1)						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Account value, beginning of period						$116,426						$112,707						$114,041						$112,247						$105,089
Deposits						1,607						1,608						1,490						1,511						1,327
Withdrawals, surrenders and contract benefits						(2,656)						(2,826)						(2,667)						(2,716)						(2,479)
Net flows (2)						(1,049)						(1,218)						(1,177)						(1,205)						(1,152)
Investment performance (3)						(14,066)						5,693						650						3,687						8,971
Policy charges and other						(620)						(756)						(807)						(688)						(661)
Account value, end of period						$100,691						$116,426						$112,707						$114,041						$112,247
FIXED ANNUITIES ACCOUNT VALUE (4)
Account value, beginning of period						$13,113						$13,069						$12,900						$12,734						$12,770
Deposits						402						314						355						410						416
Withdrawals, surrenders and contract benefits						(272)						(332)						(250)						(312)						(521)
Net flows (2)						130						(18)						105						98						(105)
Interest credited						89						88						92						87						90
Other						(19)						(26)						(28)						(19)						(21)
Account value, end of period						$13,313						$13,113						$13,069						$12,900						$12,734
INCOME ANNUITIES (1)
Income annuity insurance liabilities						$4,565						$4,588						$4,590						$4,515						$4,541
(1) Includes general account and separate account.
(2) Deposits and withdrawals include policy exchanges.
(3) Includes imputed interest on indexed annuities and the interest credited on the general account investment option of variable products.
(4) Includes fixed indexed annuities.

 

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Financial Supplement

8

Annuities — Select Operating Metrics (Cont.) (Unaudited, in millions)

						For the Three Months Ended																																																						For the Three Months Ended
VARIABLE & SHIELD LEVEL ANNUITY SALES						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019						March 31, 2020						March 31, 2019
Shield Level Annuities (1)						$1,140						$1,197						$1,137						$1,140						$985						$1,140						$985
GMWB/GMAB						322						264						223						227						198						322						198
GMDB only						87						80						72						80						78						87						78
GMIB						19						17						18						26						23						19						23
Total variable & Shield Level annuity sales						$1,568						$1,558						$1,450						$1,473						$1,284						$1,568						$1,284
FIXED ANNUITY SALES
Fixed indexed annuities (2)						$208						$261						$296						$291						$281						$208						$281
Fixed deferred annuities						191						49						55						114						133						191						133
Single premium immediate annuities						1						3						5						8						6						1						6
Other fixed annuities						1						—						2						4						3						1						3
Total fixed annuity sales						$401						$313						$358						$417						$423						$401						$423
(1) Shield Level Annuities refers to our suite of structured annuities consisting of products marketed under various names.
(2) Represents 90% of gross sales assumed via reinsurance agreements.

 

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Financial Supplement

9

Life — Statements of Adjusted Earnings (Unaudited, in millions)

						For the Three Months Ended																																																						For the Three Months Ended
Adjusted revenues						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019						March 31, 2020						March 31, 2019
Premiums						$141						$154						$143						$150						$145						$141						$145
Universal life and investment-type product policy fees						93						109						53						59						58						93						58
Net investment income						116						106						117						116						97						116						97
Other revenues						4						6						7						5						3						4						3
Total adjusted revenues						$354						$375						$320						$330						$303						$354						$303
Adjusted expenses
Interest credited to policyholder account balances						$27						$26						$30						$24						$25						$27						$25
Policyholder benefits and claims						237						190						179						169						181						237						181
Amortization of DAC and VOBA						58						4						(31)						21						11						58						11
Interest expense on debt						—						—						—						—						—						—						—
Other operating costs						19						61						51						44						55						19						55
Total adjusted expenses						341						281						229						258						272						341						272
Adjusted earnings before provision for income tax						13						94						91						72						31						13						31
Provision for income tax expense (benefit)						2						19						18						14						6						2						6
Adjusted earnings						$11						$75						$73						$58						$25						$11						$25

 

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Financial Supplement

10

Life — Select Operating Metrics (Unaudited, in millions)

						For the Three Months Ended
LIFE ACCOUNT VALUE: GENERAL ACCOUNT						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Variable universal and universal life account value, beginning of period						$2,682						$2,699						$2,707						$2,727						$2,747
Premiums and deposits (1)						74						62						62						58						65
Surrenders and contract benefits						(33)						(37)						(42)						(49)						(52)
Net flows						41						25						20						9						13
Net transfers from (to) separate account						19						12						17						18						13
Interest credited						25						26						26						26						25
Policy charges and other						(76)						(80)						(71)						(73)						(71)
Variable universal and universal life account value, end of period						$2,691						$2,682						$2,699						$2,707						$2,727
LIFE ACCOUNT VALUE: SEPARATE ACCOUNT
Variable universal life account value, beginning of period						$5,493						$5,200						$5,269						$5,138						$4,679
Premiums and deposits						52						54						54						55						59
Surrenders and contract benefits						(65)						(60)						(63)						(63)						(69)
Net flows						(13)						(6)						(9)						(8)						(10)
Investment performance						(928)						366						15						212						539
Net transfers from (to) general account						(19)						(12)						(17)						(18)						(15)
Policy charges and other						(55)						(55)						(58)						(55)						(55)
Variable universal life account value, end of period						$4,478						$5,493						$5,200						$5,269						$5,138
(1) Includes premiums and sales directed to the general account investment option of variable products.

 

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Financial Supplement

11

Life — Select Operating Metrics (Cont.) (Unaudited, in millions)

For the Three Months Ended

For the Three Months Ended

LIFE SALES

March 31, 2020

December 31, 2019

September 30, 2019

June 30, 2019

March 31, 2019

March 31, 2020

March 31, 2019

Total life sales

$16

$12

$8

$4

$1

$16

$1

						As of
LIFE INSURANCE IN-FORCE						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Whole Life
Life Insurance in-force, before reinsurance						$20,298						$20,602						$20,954						$21,212						$21,518
Life Insurance in-force, net of reinsurance						$3,105						$3,163						$3,150						$3,172						$3,638
Term Life
Life Insurance in-force, before reinsurance						$402,720						$409,427						$415,478						$421,507						$427,239
Life Insurance in-force, net of reinsurance						$309,500						$314,034						$317,274						$321,285						$324,941
Universal and Variable Universal Life
Life Insurance in-force, before reinsurance						$53,009						$54,269						$54,892						$55,628						$56,378
Life Insurance in-force, net of reinsurance						$39,466						$40,461						$38,543						$39,139						$39,844

 

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Financial Supplement

12

Run-off — Statements of Adjusted Earnings (Unaudited, in millions)

						For the Three Months Ended																																																						For the Three Months Ended
Adjusted revenues						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019						March 31, 2020						March 31, 2019
Premiums						$—						$1						$—						$—						$1						$—						$1
Universal life and investment-type product policy fees						162						191						150						182						193						162						193
Net investment income						324						323						327						339						276						324						276
Other revenues						7						7						7						6						6						7						6
Total adjusted revenues						$493						$522						$484						$527						$476						$493						$476
Adjusted expenses
Interest credited to policyholder account balances						$77						$91						$92						$94						$96						$77						$96
Policyholder benefits and claims						454						371						885						380						380						454						380
Amortization of DAC and VOBA						—						—						—						—						—						—						—
Interest expense on debt						—						—						—						—						—						—						—
Other operating costs						52						53						50						51						46						52						46
Total adjusted expenses						583						515						1,027						525						522						583						522
Adjusted earnings before provision for income tax						(90)						7						(543)						2						(46)						(90)						(46)
Provision for income tax expense (benefit)						(20)						1						(117)						—						(10)						(20)						(10)
Adjusted earnings						$(70)						$6						$(426)						$2						$(36)						$(70)						$(36)

 

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Financial Supplement

13

Run-off — Select Operating Metrics (Unaudited, in millions)

						For the Three Months Ended
UNIVERSAL LIFE WITH SECONDARY GUARANTEES ACCOUNT VALUE						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Account value, beginning of period						$6,018						$6,058						$6,084						$6,110						$6,154
Premiums and deposits (1)						180						186						184						191						187
Surrenders and contract benefits						(24)						(34)						(18)						(27)						(39)
Net flows						156						152						166						164						148
Interest credited						57						59						58						58						57
Policy charges and other						(252)						(251)						(250)						(248)						(249)
Account value, end of period						$5,979						$6,018						$6,058						$6,084						$6,110

						As of
LIFE INSURANCE IN-FORCE						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Universal Life with Secondary Guarantees
Life Insurance in-force, before reinsurance						$77,428						$78,008						$78,722						$79,243						$79,817
Life Insurance in-force, net of reinsurance						$37,481						$37,740						$36,698						$36,945						$37,233
(1) Includes premiums and sales directed to the general account investment option of variable products.

 

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Financial Supplement

14

Corporate & Other — Statements of Adjusted Earnings (Unaudited, in millions)

						For the Three Months Ended																																																						For the Three Months Ended
Adjusted revenues						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019						March 31, 2020						March 31, 2019
Premiums						$22						$22						$23						$22						$23						$22						$23
Universal life and investment-type product policy fees						—						—						—						(2)						(3)						—						(3)
Net investment income						20						18						23						17						17						20						17
Other revenues						—						4						1						5						6						—						6
Total adjusted revenues						$42						$44						$47						$42						$43						$42						$43
Adjusted expenses
Interest credited to policyholder account balances						$—						$—						$—						$—						$—						$—						$—
Policyholder benefits and claims						17						14						18						13						14						17						14
Amortization of DAC and VOBA						3						3						3						4						4						3						4
Interest expense on debt						47						47						49						48						47						47						47
Other operating costs						34						57						44						62						50						34						50
Total adjusted expenses						101						121						114						127						115						101						115
Adjusted earnings before provision for income tax						(59)						(77)						(67)						(85)						(72)						(59)						(72)
Provision for income tax expense (benefit)						(22)						(21)						(57)						(21)						(22)						(22)						(22)
Adjusted earnings after provision for income tax						(37)						(56)						(10)						(64)						(50)						(37)						(50)
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends						9						8						9						7						2						9						2
Adjusted earnings						$(46)						$(64)						$(19)						$(71)						$(52)						$(46)						$(52)

 

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Other

Information

 

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Financial Supplement

16

DAC and VOBA and Net Derivative Gains (Losses) (Unaudited, in millions)

						For the Three Months Ended
DAC AND VOBA ROLLFORWARD						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Balance, beginning of period						$5,448						$5,317						$5,492						$5,680						$5,717
Capitalization						98						95						93						96						86
Amortization:
Included in adjusted earnings, excluding notable items						(99)						(137)						(162)						(153)						(97)
Related to notable items, included in adjusted expenses						—						35						(21)						—						—
Related to items not included in adjusted expenses						(671)						93						2						(17)						75
Total amortization						(770)						(9)						(181)						(170)						(22)
Unrealized investment gains (losses)						86						45						(87)						(114)						(101)
Balance, end of period						$4,862						$5,448						$5,317						$5,492						$5,680
						As of
DAC AND VOBA BY SEGMENT AND CORPORATE & OTHER						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Annuities						$3,745						$4,327						$4,191						$4,382						$4,534
Life						1,018						1,019						1,021						1,001						1,034
Run-off						5						5						5						5						5
Corporate & Other						94						97						100						104						107
Total DAC and VOBA						$4,862						$5,448						$5,317						$5,492						$5,680

						For the Three Months Ended
NET DERIVATIVE GAINS (LOSSES)						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Net derivative gains (losses):
Variable annuity hedges and embedded derivatives, net						$5,181						$(1,419)						$418						$(194)						$(1,439)
ULSG hedges						1,583						(446)						656						312						122
Other hedges and embedded derivatives						134						(32)						(17)						31						14
Subtotal						6,898						(1,897)						1,057						149						(1,303)
Investment hedge adjustments						4						6						—						—						—
Total net derivative gains (losses)						$6,902						$(1,891)						$1,057						$149						$(1,303)

 

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Financial Supplement

17

Notable Items (Unaudited, in millions)

						For the Three Months Ended
NOTABLE ITEMS IMPACTING ADJUSTED EARNINGS						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Actuarial items and other insurance adjustments						$48						$(42)						$442						$12						$—
Establishment costs						14						25						10						30						27
Separation-related transactions						—						—						(23)						—						—
Total notable items (1)						$62						$(17)						$429						$42						$27
NOTABLE ITEMS BY SEGMENT AND CORPORATE & OTHER
Annuities						$—						$(42)						$30						$—						$—
Life						—						—						(19)						—						—
Run-off						48						—						431						12						—
Corporate & Other						14						25						(13)						30						27
Total notable items (1)						$62						$(17)						$429						$42						$27
(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.

 

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Financial Supplement

18

Variable Annuity Separate Account Returns and Allocations (Unaudited)

						For the Three Months Ended
VARIABLE ANNUITY SEPARATE ACCOUNT RETURNS						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Total Quarterly VA separate account gross returns						(14.31)%						6.14%						0.83%						3.84%						10.02%
TOTAL VARIABLE ANNUITY SEPARATE ACCOUNT ALLOCATIONS
Percent allocated to equity funds						24.11%						26.19%						25.52%						25.04%						25.72%
Percent allocated to bond funds/other funds						9.59%						8.23%						8.50%						8.23%						8.30%
Percent allocated to target volatility funds						24.41%						23.10%						23.51%						24.11%						22.97%
Percent allocated to balanced funds						41.89%						42.48%						42.47%						42.62%						43.01%

 

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Financial Supplement

19

Summary of Investments (Unaudited, dollars in millions)

						March 31, 2020																		December 31, 2019
						Amount						% of Total						Amount						% of Total
Fixed maturity securities:
U.S. corporate securities						$30,670						26.98%						$31,160						31.58%
Foreign corporate securities						9,244						8.13%						9,844						9.98%
Residential mortgage-backed securities						8,900						7.83%						9,118						9.24%
U.S. government and agency securities						8,926						7.85%						7,396						7.50%
Commercial mortgage-backed securities						5,745						5.06%						5,755						5.83%
State and political subdivision securities						4,143						3.65%						4,057						4.11%
Asset-backed securities						2,027						1.78%						1,955						1.98%
Foreign government securities						1,647						1.45%						1,751						1.78%
Total fixed maturity securities						71,302						62.73%						71,036						72.00%
Equity securities						122						0.11%						147						0.15%
Mortgage loans:
Commercial mortgage loans						9,512						8.37%						9,721						9.85%
Agricultural mortgage loans						3,403						2.99%						3,388						3.44%
Residential mortgage loans						2,701						2.38%						2,708						2.74%
Allowance for credit losses						(69)						(0.06)%						(64)						(0.06)%
Total mortgage loans, net						15,547						13.68%						15,753						15.97%
Policy loans						1,250						1.10%						1,292						1.31%
Limited partnerships and limited liability companies						2,505						2.20%						2,380						2.41%
Cash, cash equivalents and short-term investments						13,278						11.68%						4,835						4.90%
Other invested assets:
Derivatives:
Interest rate						5,950						5.23%						1,778						1.80%
Equity market						2,677						2.35%						921						0.93%
Foreign currency exchange rate						850						0.75%						286						0.29%
Credit						7						0.01%						36						0.04%
Total derivatives						9,484						8.34%						3,021						3.06%
FHLB common stock						39						0.04%						39						0.04%
Other						135						0.12%						156						0.16%
Total other invested assets						9,658						8.50%						3,216						3.26%
Total investments and cash and cash equivalents						$113,662						100.00%						$98,659						100.00%

For the Three Months Ended

March 31, 2020

December 31, 2019

September 30, 2019

June 30, 2019

March 31, 2019

Net investment income yield (1), (2)

4.30%

4.32%

4.52%

4.67%

4.10%

(1) Yields are calculated on investment income as a percent of average quarterly asset carrying values. Investment income includes investment hedge adjustments, excludes realized gains and losses and reflects the GAAP adjustments described beginning on page A-1 of the Appendix hereto. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.

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

 

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Financial Supplement

20

Statutory Statement of Operations Information (Unaudited, in millions except Normalized Statutory Earnings (Loss))

						For the Three Months Ended																																																						For the Three Months Ended
COMBINED REVENUES AND EXPENSES (1)						PRELIMINARY March 31, 2020 (2)						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019						PRELIMINARY March 31, 2020 (2)						March 31, 2019
Total revenues (Line 9)						$5,700						$2,086						$3,443						$3,436						$2,393						$5,700						$2,393
Total benefits and expenses before dividends to policyholders (Line 28)						$13,000						$1,008						$3,047						$2,839						$2,429						$13,000						$2,429
COMBINED NET INCOME (LOSS) (1)
Gain (loss) from operations net of taxes and dividends to policyholders (Line 33)						$(7,300)						$1,089						$314						$597						$(43)						$(7,300)						$(43)
Net realized capital gains (losses), net of taxes and certain transfers to interest maintenance reserve (Line 34)						500						(297)						185						(701)						(147)						500						(147)
Net income (loss) (Line 35)						$(6,800)						$792						$499						$(104)						$(190)						$(6,800)						$(190)
																																				For the Three Months Ended
NORMALIZED STATUTORY EARNINGS (LOSS) (3), (4)																																				PRELIMINARY March 31, 2020 (2)						March 31, 2019
																																				(In billions)
Statutory net gain (loss) from operations, pre-tax																																				$(7.4)						$—
Add: net realized capital gains (losses)																																				0.5						(0.1)
Add: change in CTE95 capital requirements, net of the change in VA reserves																																				1.1						1.6
Add: unrealized gains (losses) on VA hedging program																																				5.0						(1.2)
Normalized statutory earnings (loss)																																				$(0.8)						$0.3
(1) Combined statutory results are for Brighthouse Life Insurance Company, Brighthouse Life Insurance Company of NY and New England Life Insurance Company.
(2) Reflects preliminary statutory results for the three months ended March 31, 2020.
(3) See definitions for Non-GAAP and Other Financial Disclosures in the Appendix beginning on page A-2.
(4) Normalized statutory earnings (loss), presented in billions, is for Brighthouse Life Insurance Company and New England Life Insurance Company.

 

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Financial Supplement

21

Statutory Balance Sheet and Surplus Information (Unaudited, in millions)

						As of
COMBINED ASSETS, LIABILITIES, AND CAPITAL AND SURPLUS (1)						PRELIMINARY March 31, 2020 (2)						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Total assets (Line 28)						$185,000						$186,564						$185,743						$181,989						$178,745
Total liabilities (Line 28)						$178,700						$177,702						$178,103						$175,788						$172,788
Total capital and surplus (Line 38)						$6,300						$8,862						$7,640						$6,201						$5,957
COMBINED TAC AND RBC RATIO (1), (3)
Combined total adjusted capital						$7,200						$9,694						$8,406						$6,897						$6,314
Combined risk-based capital ratio (4)						515% - 535%						552%						N/A						N/A						N/A
						As of
COMBINED ORDINARY DIVIDEND CAPACITY (1)						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Dividends paid to Holding Company						$300						$131						$—						$—						$—
Remaining ordinary dividend capacity (5)						$1,827						$798						$929						$929						$929
(1) Combined statutory results are for Brighthouse Life Insurance Company and New England Life Insurance Company.
(2) Reflects preliminary statutory results as of March 31, 2020.
(3) See definitions for Non-GAAP and Other Financial Disclosures in the Appendix beginning on page A-2.
(4) RBC ratios prior to the implementation of variable annuity capital reform are not presented.
(5) Reflects remaining dividend amounts that may be paid during the respective calendar year without prior regulatory approval. However, because dividend tests may be based on dividends previously paid over rolling 12-month periods, if paid before a specified date during such calendar year, some or all of such dividends may require regulatory approval.

 

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Appendix

 

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Financial Supplement

A-1

Note Regarding Forward-Looking Statements

This financial supplement 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.

 

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Financial Supplement

A-2

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 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:

(i)

adjusted earnings

(i)

net income (loss) available to shareholders (1)

(ii)

adjusted earnings, less notable items

(ii)

net income (loss) available to shareholders (1)

(iii)

adjusted revenues

(iii)

revenues

(iv)

adjusted expenses

(iv)

expenses

(v)

adjusted earnings per common share

(v)

earnings per common share, diluted (1)

(vi)

adjusted earnings per common share, less notable items

(vi)

earnings per common share, diluted (1)

(vii)

adjusted return on common equity

(vii)

return on common equity (2)

(viii)

adjusted return on common equity, less notable items

(viii)

return on common equity (2)

(ix)

adjusted net investment income

(ix)

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.

 

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Financial Supplement

A-3

Non-GAAP and Other Financial Disclosures (Cont.)

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), 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 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.

 

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Financial Supplement

A-4

Non-GAAP and Other Financial Disclosures (Cont.)

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.

 

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Financial Supplement

A-5

Non-GAAP and Other Financial Disclosures (Cont.)

Other Financial Disclosures (cont.)

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 company sponsored 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.

 

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Financial Supplement

A-6

Acronyms

AOCI			Accumulated other comprehensive income (loss)
CTE			Conditional tail expectations
DAC			Deferred policy acquisition costs
FHLB			Federal Home Loan Bank
GAAP			Accounting principles generally accepted in the United States of America
GMAB			Guaranteed minimum accumulation benefits
GMDB			Guaranteed minimum death benefits
GMIB			Guaranteed minimum income benefits
GMWB			Guaranteed minimum withdrawal benefits
LIMRA			Life Insurance Marketing and Research Association
NDGL			Net derivative gains (losses)
NIGL			Net investment gains (losses)
RBC			Risk-based capital
TAC			Total adjusted capital
ULSG			Universal life insurance with secondary guarantees
VA			Variable annuity
VOBA			Value of business acquired

 

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Financial Supplement

A-7

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						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Net income (loss) available to shareholders						$4,950						$(1,077)						$676						$377						$(737)
Less: Net investment gains (losses)						(19)						33						27						63						(11)
Less: Net derivative gains (losses), excluding investment hedge adjustments						6,898						(1,897)						1,057						149						(1,303)
Less: GMIB Fees and GMIB Costs						(166)						34						(4)						(22)						35
Less: Amortization of DAC and VOBA						(671)						93						2						(17)						75
Less: Market value adjustments and other						(43)						17						(14)						(16)						(23)
Less: Provision for income tax (expense) benefit on reconciling adjustments						(1,260)						361						(223)						(34)						258
Adjusted earnings						211						282						(169)						254						232
Less: Notable items						(62)						17						(429)						(42)						(27)
Adjusted earnings, less notable items						$273						$265						$260						$296						$259
ADJUSTED EARNINGS, LESS NOTABLE ITEMS PER COMMON SHARE (1), (2)
Net income (loss) available to shareholders per common share						$47.11						$(10.02)						$6.06						$3.27						$(6.31)
Less: Net investment gains (losses)						(0.18)						0.31						0.24						0.55						(0.09)
Less: Net derivative gains (losses), excluding investment hedge adjustments						65.64						(17.65)						9.48						1.29						(11.16)
Less: GMIB Fees and GMIB Costs						(1.58)						0.32						(0.04)						(0.19)						0.30
Less: Amortization of DAC and VOBA						(6.38)						0.87						0.02						(0.15)						0.64
Less: Market value adjustments and other						(0.41)						0.16						(0.13)						(0.14)						(0.20)
Less: Provision for income tax (expense) benefit on reconciling adjustments						(11.99)						3.36						(2.00)						(0.29)						2.21
Less: Impact of inclusion of dilutive shares						—						0.01						—						—						0.01
Adjusted earnings per common share						2.01						2.61						(1.52)						2.19						1.98
Less: Notable items						(0.59)						0.16						(3.85)						(0.36)						(0.23)
Adjusted earnings, less notable items per common share						$2.60						$2.46						$2.33						$2.56						$2.21
(1) See definitions for Non-GAAP and Other Financial Disclosures in this Appendix.
(2) 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.

 

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Financial Supplement

A-8

Reconciliation of Return on Common Equity to Adjusted Return on Common Equity (Unaudited, dollars in millions)

						Four Quarters Cumulative Trailing Basis
ADJUSTED EARNINGS						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Net income (loss) available to shareholders						$4,926						$(761)						$1,758						$811						$195
Less: Net investment gains (losses)						104						112						(7)						(76)						(214)
Less: Net derivative gains (losses), excluding investment hedge adjustments						6,207						(1,994)						1,941						191						(274)
Less: GMIB Fees and GMIB Costs						(158)						43						(128)						(96)						(93)
Less: Amortization of DAC and VOBA						(593)						153						(173)						(153)						(232)
Less: Market value adjustments and other						(56)						(36)						(54)						(37)						(12)
Less: Provision for income tax (expense) benefit on reconciling adjustments						(1,156)						362						(324)						40						179
Adjusted earnings						$578						$599						$503						$942						$841
						Five Quarters Average Stockholders' Equity Basis
BRIGHTHOUSE FINANCIAL, INC.’S COMMON STOCKHOLDERS’ EQUITY, EXCLUDING AOCI						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Brighthouse Financial, Inc.’s stockholders’ equity						$17,103						$15,912						$15,254						$14,402						$13,864
Less: Preferred stock, net						412						330						247						165						82
Brighthouse Financial, Inc.’s common stockholders’ equity						16,691						15,582						15,007						14,237						13,782
Less: AOCI						2,765						2,379						1,841						1,291						898
Brighthouse Financial, Inc.’s common stockholders’ equity, excluding AOCI						$13,926						$13,203						$13,166						$12,946						$12,884
						Five Quarters Average Common Stockholders' Equity Basis
ADJUSTED RETURN ON COMMON EQUITY						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Return on common equity						29.5%						(4.9)%						11.7%						5.7%						1.4%
Return on AOCI						178.2%						(32.0)%						95.5%						62.8%						21.7%
Return on common equity, excluding AOCI						35.4%						(5.8)%						13.4%						6.3%						1.5%
Less: Return on net investment gains (losses)						0.7%						0.8%						—%						(0.6)%						(1.7)%
Less: Return on net derivative gains (losses), excluding investment hedge adjustments						44.6%						(15.1)%						14.7%						1.5%						(2.1)%
Less: Return on GMIB Fees and GMIB Costs						(1.1)%						0.3%						(0.9)%						(0.7)%						(0.7)%
Less: Return on amortization of DAC and VOBA						(4.3)%						1.2%						(1.3)%						(1.2)%						(1.8)%
Less: Return on market value adjustments and other						(0.4)%						(0.2)%						(0.4)%						(0.3)%						(0.1)%
Less: Return on provision for income tax (expense) benefit on reconciling adjustments						(8.3)%						2.7%						(2.5)%						0.3%						1.4%
Adjusted return on common equity						4.2%						4.5%						3.8%						7.3%						6.5%

 

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Financial Supplement

A-9

Reconciliation of Total Revenues to Adjusted Revenues and Reconciliation of Total Expenses to Adjusted Expenses (Unaudited, in millions)

						For the Three Months Ended																																																						For the Three Months Ended
						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019						March 31, 2020						March 31, 2019
Total revenues						$8,985						$306						$3,187						$2,370						$691						$8,985						$691
Less: Net investment gains (losses)						(19)						33						27						63						(11)						(19)						(11)
Less: Net derivative gains (losses)						6,902						(1,891)						1,057						149						(1,303)						6,902						(1,303)
Less: GMIB Fees						65						66						67						65						66						65						66
Less: Investment hedge adjustments						(4)						(6)						—						—						—						(4)						—
Less: Other						1						10						1						—						—						1						—
Total adjusted revenues						$2,040						$2,094						$2,035						$2,093						$1,939						$2,040						$1,939
Total expenses						$2,733						$1,678						$2,383						$1,901						$1,644						$2,733						$1,644
Less: Amortization of DAC and VOBA						671						(93)						(2)						17						(75)						671						(75)
Less: GMIB Costs						231						32						71						87						31						231						31
Less: Other						44						(7)						15						16						23						44						23
Total adjusted expenses						$1,787						$1,746						$2,299						$1,781						$1,665						$1,787						$1,665

 

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Financial Supplement

A-10

Investment Reconciliation Details (Unaudited, dollars in millions)

						For the Three Months Ended																																																						For the Three Months Ended
NET INVESTMENT GAINS (LOSSES)						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019						March 31, 2020						March 31, 2019
Investment portfolio gains (losses)						$2						$43						$30						$68						$(8)						$2						$(8)
Investment portfolio writedowns						(21)						(10)						(3)						(5)						(3)						(21)						(3)
Total net investment portfolio gains (losses)						(19)						33						27						63						(11)						(19)						(11)
Other incremental net investment income						—						—						—						—						—						—						—
Net investment gains (losses)						$(19)						$33						$27						$63						$(11)						$(19)						$(11)

						For the Three Months Ended
NET INVESTMENT INCOME YIELD						March 31, 2020						December 31, 2019						September 30, 2019						June 30, 2019						March 31, 2019
Investment income yield (1)						4.44%						4.43%						4.62%						4.79%						4.24%
Investment fees and expenses (2)						(0.14)%						(0.11)%						(0.10)%						(0.12)%						(0.14)%
Net investment income yield						4.30%						4.32%						4.52%						4.67%						4.10%
(1) Yields are calculated on investment income as a percent of average quarterly asset carrying values. Investment income includes investment hedge adjustments, excludes realized gains and losses and reflects the GAAP adjustments described beginning on page A-1 of this Appendix. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.
(2) Investment fee and expense yields are calculated as investment fees and expenses as a percent of average quarterly asset estimated fair values. Asset estimated fair values exclude collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.