EX-99.2 3 bhfsupplement-q42017.htm EXHIBIT 99.2 Exhibit

 
 
 
 
 


Exhibit 99.2








Brighthouse Financial, Inc.
Financial Supplement

Fourth Quarter 2017











bhflogocoverpagea02.jpg



 
 
 
 
 


    
Table of Contents
 
 
Financial Results
Key Metrics
Condensed Statements of Operations
Balance Sheets
 
 
Earnings and Select Metrics from Business Segments and Corporate & Other
 
Statements of Adjusted Earnings by Segment and Corporate & Other
 
Annuities — Statements of Adjusted Earnings
 
Annuities — Select Operating Metrics
 
Life — Statements of Adjusted Earnings
 
Life — Select Operating Metrics
 
Run-off — Statements of Adjusted Earnings
 
Run-off — Select Operating Metrics
 
Corporate & Other — Statements of Adjusted Earnings
 
 
 
 
Other Information
 
DAC and VOBA and Net Derivative Gains (Losses)
 
Notable Items
 
Variable Annuity Separate Account Returns and Allocations
 
Summary of Investments
 
Select Actual and Preliminary Statutory Financial Results
 
 
 
 
Appendix
 
Non-GAAP and Other Financial Disclosures
 
Acronyms
 
Reconciliation of Net Income (Loss) to Adjusted Earnings and Reconciliation of Net Income (Loss) per Common Share to Adjusted Earnings per Common Share
 
Reconciliation of Return on Equity to Adjusted Return on Equity
 
Reconciliation of Total Revenues to Adjusted Revenues and Reconciliation of Total Expenses to Adjusted Expenses
 
Investment Reconciliation Details

Note: See 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.
The information presented in this financial supplement is derived from the consolidated financial statements of Brighthouse Financial, Inc. for periods subsequent to the separation from MetLife, Inc. that occurred on August 4, 2017, and is derived from the combined financial information of the MetLife U.S. Retail Separation Business for periods prior to the separation. The combined financial information was prepared in connection with the separation of a substantial portion of MetLife, Inc.’s former Retail segment as well as certain portions of its former Corporate Benefit Funding segment, and presents the combined results of operations and financial condition of certain former direct and indirect subsidiaries and certain of its current and former affiliates. As used in this financial supplement, “Brighthouse Financial,” “Brighthouse,” the “Company,” “we,” “our” and “us” refer to Brighthouse Financial, Inc., the entity that subsequent to the separation holds, through its subsidiaries, the assets (including the equity interests of certain former MetLife, Inc. subsidiaries) and liabilities associated with MetLife, Inc.’s former Brighthouse Financial segment.



 
 
 
 
 








Financial Results




 
 
Financial Supplement
 
1

Key Metrics (Unaudited, dollars in millions except share and per share amounts)
 
 
As of or for the Three Months Ended
Financial Results and Metrics
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Net income (loss) (1)
 
$668
 
$(943)
 
$246
 
$(349)
 
$(1,765)
Adjusted earnings (1)
 
$992
 
$(676)
 
$324
 
$280
 
$(61)
Total corporate expenses (2)
 
$287
 
$241
 
$226
 
$215
 
$198
 
 
 
 
 
 
 
 
 
 
 
Stockholders' Equity (3)
 
 
 
 
 
 
 
 
 
 
Ending stockholders' equity
 
$14,515
 
$13,766
 
$16,415
 
$15,116
 
$14,862
Ending AOCI
 
1,375
 
1,308
 
1,894
 
1,506
 
1,265
   Ending stockholders' equity, excluding AOCI
 
$13,140
 
$12,458
 
$14,521
 
$13,610
 
$13,597
   Pro forma ending stockholders' equity, excluding AOCI (4)
 
$12,840
 
N/A
 
$12,170
 
N/A
 
N/A
 
 
 
 
 
 
 
 
 
 
 
Return on Equity
 
 
 
 
 
 
 
 
 
 
Return on equity
 
(2.5)%
 
(17.9)%
 
(12.2)%
 
(21.4)%
 
(16.7)%
Return on equity, excluding AOCI (5)
 
(2.8)%
 
(20.1)%
 
(13.8)%
 
(24.3)%
 
(18.9)%
Adjusted return on equity (6)
 
6.8%
 
(1.0)%
 
5.9%
 
4.1%
 
4.4%
 
 
 
 
 
 
 
 
 
 
 
Per Common Share
 
 
 
 
 
 
 
 
 
 
Net income (loss) per common share (7)
 
$5.58
 
$(7.87)
 
N/A
 
N/A
 
N/A
Adjusted earnings per common share (8)
 
$8.28
 
$(5.64)
 
N/A
 
N/A
 
N/A
 
 
 
 
 
 
 
 
 
 
 
Book value per common share (9)
 
$121.19
 
$114.93
 
N/A
 
N/A
 
N/A
Book value per common share, excluding AOCI (10)
 
$109.71
 
$104.01
 
N/A
 
N/A
 
N/A
 
 
 
 
 
 
 
 
 
 
 
Common Shares
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
119,773,106
 
119,773,106
 
N/A
 
N/A
 
N/A
Weighted average common shares outstanding - diluted (7)(8)
 
119,773,106
 
119,773,106
 
N/A
 
N/A
 
N/A
 
 
 
 
 
 
 
 
 
 
 
Ending common shares outstanding
 
119,773,106
 
119,773,106
 
N/A
 
N/A
 
N/A
Ending common shares outstanding - diluted (9)(10)
 
119,773,106
 
119,773,106
 
N/A
 
N/A
 
N/A
 
 
 
 
 
 
 
 
 
 
 
(1) The Company recorded a non-cash tax expense of $1.1 billion in the third quarter of 2017 related to a tax obligation triggered prior to the separation, recognized by the Company's former parent. This tax expense had no impact on the book value of Brighthouse.
(2) Includes functional department expenses, public company expenses, certain investment expenses, retirement funding and incentive compensation; and excludes establishment costs.
(3) For periods ending prior to the separation, stockholders' equity was previously reported as shareholder's net investment.
(4) December 31, 2017 amounts have been adjusted for an estimated $300 million of tax reform impact related to the unwinding of previously recognized amounts of unrealized gains (losses) at the former statutory tax rate. June 30, 2017 amounts have been adjusted for subsequent separation transactions, including the distribution to MetLife, Inc. of $1.8 billion and a tax separation liability of $600 million.
(5) Return on equity, excluding AOCI, is defined as total annual net income (loss) on a four quarter trailing basis, divided by the simple average of the most recent five quarters of total stockholders' equity, excluding AOCI.
(6) Adjusted return on 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 stockholders' equity, excluding AOCI.
(7) Net income (loss) per common share is defined as net income (loss), divided by weighted average common shares outstanding - diluted.
(8) Adjusted earnings per common share is defined as adjusted earnings, divided by weighted average common shares outstanding - diluted.
(9) Book value per common share is defined as ending stockholders' equity, including AOCI, divided by ending common shares outstanding - diluted.
(10) Book value per common share, excluding AOCI, is defined as ending stockholders' equity, excluding AOCI, divided by ending common shares outstanding - diluted.

bhflogobandwwordsonlya02.jpg
 
 
 
 
 




 
 
Financial Supplement
 
2

Condensed Statements of Operations (Unaudited, in millions)

 
 
For the Three Months Ended
 
For the Years Ended
Revenues
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
December 31, 2017
 
December 31,
2016
Premiums
 
$233
 
$236
 
$218
 
$176
 
$201
 
$863
 
$1,222
Universal life and investment-type product policy fees
 
963
 
1,025
 
957
 
953
 
939
 
3,898
 
3,782
Net investment income
 
769
 
761
 
766
 
782
 
785
 
3,078
 
3,207
Other revenues
 
322
 
93
 
162
 
74
 
255
 
651
 
736
Revenues before NIGL and NDGL
 
2,287
 
2,115
 
2,103
 
1,985
 
2,180
 
8,490
 
8,947
Net investment gains (losses)
 
6
 
21
 
 
(55)
 
(63)
 
(28)
 
(78)
Net derivative gains (losses)
 
(413)
 
(164)
 
(78)
 
(965)
 
(2,670)
 
(1,620)
 
(5,851)
Total revenues
 
$1,880
 
$1,972
 
$2,025
 
$965
 
$(553)
 
$6,842
 
$3,018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest credited
 
$273
 
$279
 
$284
 
$275
 
$294
 
$1,111
 
$1,165
Policyholder benefits and claims
 
904
 
1,083
 
785
 
864
 
955
 
3,636
 
3,903
Amortization of DAC and VOBA
 
231
 
123
 
21
 
(148)
 
416
 
227
 
371
Interest expense on debt
 
37
 
34
 
37
 
45
 
42
 
153
 
175
Other expenses
 
657
 
577
 
577
 
519
 
517
 
2,330
 
2,109
Total expenses
 
2,102
 
2,096
 
1,704
 
1,555
 
2,224
 
7,457
 
7,723
Income (loss) before provision for income tax
 
(222)
 
(124)
 
321
 
(590)
 
(2,777)
 
(615)
 
(4,705)
Provision for income tax expense (benefit)
 
(890)
 
819
 
75
 
(241)
 
(1,012)
 
(237)
 
(1,766)
Net income (loss)
 
$668
 
$(943)
 
$246
 
$(349)
 
$(1,765)
 
$(378)
 
$(2,939)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

bhflogobandwwordsonlya02.jpg
 
 
 
 
 




 
 
Financial Supplement
 
3

Balance Sheets (Unaudited, in millions)
 
 
As of
ASSETS
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Investments:
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities available-for-sale
 
$64,991
 
$63,565
 
$63,507
 
$60,870
 
$61,388
Equity securities available-for-sale
 
232
 
265
 
278
 
290
 
300
Mortgage loans, net
 
10,742
 
10,431
 
10,263
 
9,908
 
9,378
Policy loans
 
1,523
 
1,522
 
1,513
 
1,512
 
1,517
Real estate and real estate joint ventures
 
433
 
407
 
302
 
242
 
215
Other limited partnership interests
 
1,669
 
1,654
 
1,623
 
1,596
 
1,642
Short-term investments
 
312
 
1,149
 
1,286
 
1,058
 
1,288
Other invested assets
 
2,436
 
2,666
 
3,037
 
3,817
 
4,904
Total investments
 
82,338
 
81,659
 
81,809
 
79,293
 
80,632
Cash and cash equivalents
 
1,857
 
1,698
 
4,443
 
5,812
 
5,228
Accrued investment income
 
601
 
641
 
608
 
641
 
693
Reinsurance recoverables
 
12,763
 
12,727
 
12,732
 
12,869
 
13,455
Premiums and other receivables
 
762
 
864
 
683
 
817
 
1,192
DAC and VOBA
 
6,286
 
6,414
 
6,464
 
6,500
 
6,293
Current income tax recoverable
 
740
 
1,772
 
1,423
 
1,247
 
778
Other assets
 
588
 
647
 
600
 
644
 
616
Separate account assets
 
118,257
 
116,857
 
115,566
 
115,365
 
113,043
Total assets
 
$224,192
 
$223,279
 
$224,328
 
$223,188
 
$221,930
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES, STOCKHOLDERS' EQUITY AND NONCONTROLLING INTERESTS
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
Future policy benefits
 
$36,616
 
$36,035
 
$34,352
 
$33,622
 
$33,372
Policyholder account balances
 
37,783
 
37,298
 
37,296
 
36,986
 
37,526
Other policy-related balances
 
2,985
 
2,964
 
2,985
 
3,009
 
3,045
Payables for collateral under securities loaned and other transactions
 
4,169
 
4,569
 
7,121
 
7,177
 
7,390
Long-term financing obligations:
 
 
 
 
 
 
 
 
 
 
Debt
 
3,612
 
3,615
 
3,016
 
807
 
810
Reserve financing
 
 
 
 
3,897
 
3,897
Deferred income tax liability
 
927
 
2,116
 
2,337
 
2,445
 
2,056
Other liabilities
 
5,263
 
5,994
 
5,190
 
4,764
 
5,929
Separate account liabilities
 
118,257
 
116,857
 
115,566
 
115,365
 
113,043
Total liabilities
 
209,612
 
209,448
 
207,863
 
208,072
 
207,068
Stockholders' Equity and Noncontrolling Interests
 
 
 
 
 
 
 
 
 
 
Common stock
 
1
 
1
 
 
 
Additional paid-in capital
 
12,432
 
12,418
 
 
 
Retained earnings
 
707
 
39
 
 
 
Shareholder's net investment
 
 
 
14,521
 
13,610
 
13,597
Accumulated other comprehensive income (loss)
 
1,375
 
1,308
 
1,894
 
1,506
 
1,265
Total stockholders' equity
 
14,515
 
13,766
 
16,415
 
15,116
 
14,862
Noncontrolling interests
 
65
 
65
 
50
 
 
Total stockholders' equity and noncontrolling interests
 
14,580
 
13,831
 
16,465
 
15,116
 
14,862
Total liabilities, stockholders' equity and noncontrolling interests
 
$224,192
 
$223,279
 
$224,328
 
$223,188
 
$221,930

bhflogobandwwordsonlya02.jpg
 
 
 
 
 



 
 
 
 
 







Earnings and Select
Metrics from
Business Segments and Corporate & Other





 
 
Financial Supplement
 
5

Statements of Adjusted Earnings by Segment and Corporate & Other (Unaudited, in millions)
  
 
For the Three Months Ended December 31, 2017
Adjusted revenues
 
Annuities
 
Life
 
Run-off
 
Corporate & Other
 
Total
Premiums
 
$33
 
$172
 
$—
 
$28
 
$233
Universal life and investment-type product policy fees
 
645
 
81
 
169
 
(3)
 
892
Net investment income
 
329
 
79
 
339
 
33
 
780
Other revenues
 
93
 
1
 
8
 
222
 
324
Total adjusted revenues
 
$1,100
 
$333
 
$516
 
$280
 
$2,229
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
Interest credited
 
$148
 
$48
 
$76
 
$—
 
$272
Policyholder benefits and claims
 
153
 
187
 
493
 
14
 
847
Amortization of DAC and VOBA
 
102
 
33
 
1
 
5
 
141
Interest expense on debt
 
 
 
 
38
 
38
Other operating costs
 
422
 
58
 
71
 
105
 
656
Total adjusted expenses
 
825
 
326
 
641
 
162
 
1,954
Adjusted earnings before provision for income tax
 
275
 
7
 
(125)
 
118
 
275
Provision for income tax expense (benefit)
 
67
 
2
 
(45)
 
(741)
 
(717)
Adjusted earnings
 
$208
 
$5
 
$(80)
 
$859
 
$992
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
For the Three Months Ended December 31, 2016
Adjusted revenues
 
Annuities
 
Life
 
Run-off
 
Corporate & Other
 
Total
Premiums
 
$58
 
$114
 
$1
 
$29
 
$202
Universal life and investment-type product policy fees
 
629
 
12
 
232
 
(3)
 
870
Net investment income
 
376
 
66
 
384
 
52
 
878
Other revenues
 
86
 
128
 
6
 
32
 
252
Total adjusted revenues
 
$1,149
 
$320
 
$623
 
$110
 
$2,202
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
Interest credited
 
$153
 
$31
 
$110
 
$—
 
$294
Policyholder benefits and claims
 
182
 
138
 
390
 
17
 
727
Amortization of DAC and VOBA
 
92
 
162
 
556
 
3
 
813
Interest expense on debt
 
 
 
15
 
29
 
44
Other operating costs
 
314
 
31
 
88
 
48
 
481
Total adjusted expenses
 
741
 
362
 
1,159
 
97
 
2,359
Adjusted earnings before provision for income tax
 
408
 
(42)
 
(536)
 
13
 
(157)
Provision for income tax expense (benefit)
 
116
 
(18)
 
(187)
 
(7)
 
(96)
Adjusted earnings
 
$292
 
$(24)
 
$(349)
 
$20
 
$(61)

bhflogobandwwordsonlya02.jpg
 
 
 
 
 




 
 
Financial Supplement
 
6

Statements of Adjusted Earnings by Segment and Corporate & Other (Cont.) (Unaudited, in millions)
  
 
For the Year Ended December 31, 2017
Adjusted revenues
 
Annuities
 
Life
 
Run-off
 
Corporate & Other
 
Total
Premiums
 
$175
 
$578
 
$1
 
$109
 
$863
Universal life and investment-type product policy fees
 
2,545
 
373
 
713
 
(13)
 
3,618
Net investment income
 
1,277
 
342
 
1,399
 
192
 
3,210
Other revenues
 
373
 
22
 
34
 
222
 
651
Total adjusted revenues
 
$4,370
 
$1,315
 
$2,147
 
$510
 
$8,342
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
Interest credited
 
$605
 
$156
 
$347
 
$—
 
$1,108
Policyholder benefits and claims
 
734
 
664
 
1,367
 
62
 
2,827
Amortization of DAC and VOBA
 
80
 
223
 
7
 
20
 
330
Interest expense on debt
 
 
 
23
 
132
 
155
Other operating costs
 
1,565
 
265
 
256
 
239
 
2,325
Total adjusted expenses
 
2,984
 
1,308
 
2,000
 
453
 
6,745
Adjusted earnings before provision for income tax
 
1,386
 
7
 
147
 
57
 
1,597
Provision for income tax expense (benefit)
 
369
 
(9)
 
43
 
274
 
677
Adjusted earnings
 
$1,017
 
$16
 
$104
 
$(217)
 
$920
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
For the Year Ended December 31, 2016
Adjusted revenues
 
Annuities
 
Life
 
Run-off
 
Corporate & Other
 
Total
Premiums
 
$444
 
$493
 
$146
 
$139
 
$1,222
Universal life and investment-type product policy fees
 
2,521
 
248
 
731
 
(11)
 
3,489
Net investment income
 
1,451
 
371
 
1,441
 
239
 
3,502
Other revenues
 
540
 
138
 
24
 
33
 
735
Total adjusted revenues
 
$4,956
 
$1,250
 
$2,342
 
$400
 
$8,948
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
Interest credited
 
$627
 
$114
 
$421
 
$—
 
$1,162
Policyholder benefits and claims
 
1,079
 
567
 
1,519
 
87
 
3,252
Amortization of DAC and VOBA
 
368
 
284
 
961
 
22
 
1,635
Interest expense on debt
 
 
 
61
 
111
 
172
Other operating costs
 
1,246
 
259
 
214
 
141
 
1,860
Total adjusted expenses
 
3,320
 
1,224
 
3,176
 
361
 
8,081
Adjusted earnings before provision for income tax
 
1,636
 
26
 
(834)
 
39
 
867
Provision for income tax expense (benefit)
 
484
 
 
(295)
 
(8)
 
181
Adjusted earnings
 
$1,152
 
$26
 
$(539)
 
$47
 
$686

bhflogobandwwordsonlya02.jpg
 
 
 
 
 




 
 
Financial Supplement
 
7

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

  
 
For the Three Months Ended
 
For the Years Ended
Adjusted revenues
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
December 31, 2017
 
December 31,
2016
Premiums
 
$33
 
$44
 
$48
 
$50
 
$58
 
$175
 
$444
Universal life and investment-type product policy fees
 
645
 
629
 
639
 
632
 
629
 
2,545
 
2,521
Net investment income
 
329
 
310
 
311
 
327
 
376
 
1,277
 
1,451
Other revenues
 
93
 
87
 
128
 
65
 
86
 
373
 
540
Total adjusted revenues
 
$1,100
 
$1,070
 
$1,126
 
$1,074
 
$1,149
 
$4,370
 
$4,956
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest credited
 
$148
 
$153
 
$152
 
$152
 
$153
 
$605
 
$627
Policyholder benefits and claims
 
153
 
258
 
163
 
160
 
182
 
734
 
1,079
Amortization of DAC and VOBA
 
102
 
(228)
 
112
 
94
 
92
 
80
 
368
Interest expense on debt
 
 
 
 
 
 
 
Other operating costs
 
422
 
399
 
386
 
358
 
314
 
1,565
 
1,246
Total adjusted expenses
 
825
 
582
 
813
 
764
 
741
 
2,984
 
3,320
Adjusted earnings before provision for income tax
 
275
 
488
 
313
 
310
 
408
 
1,386
 
1,636
Provision for income tax expense (benefit)
 
67
 
133
 
87
 
82
 
116
 
369
 
484
Adjusted earnings
 
$208
 
$355
 
$226
 
$228
 
$292
 
$1,017
 
$1,152


bhflogobandwwordsonlya02.jpg
 
 
 
 
 




 
 
Financial Supplement
 
8

Annuities — Select Operating Metrics (Unaudited, in millions)

  
 
For the Three Months Ended
FIXED ANNUITIES ACCOUNT VALUE
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Account value, beginning of period
 
$13,123
 
$13,230
 
$13,369
 
$13,523
 
$13,715
Premiums and deposits
 
232
 
113
 
47
 
48
 
56
Surrenders and contract benefits
 
(374)
 
(331)
 
(298)
 
(313)
 
(358)
Net flows
 
(142)
 
(218)
 
(251)
 
(265)
 
(302)
Interest credited
 
106
 
111
 
112
 
111
 
110
Policy charges and other
 
(25)
 
 
 
 
Account value, end of period
 
$13,062
 
$13,123
 
$13,230
 
$13,369
 
$13,523
 
 
 
 
 
 
 
 
 
 
 
VARIABLE & INDEXED ANNUITIES ACCOUNT VALUE (1)
 
 
 
 
 
 
 
 
 
 
Account value, beginning of period
 
$118,574
 
$116,830
 
$115,920
 
$113,271
 
$115,099
Premiums and deposits
 
1,128
 
981
 
965
 
930
 
1,015
Surrenders and contract benefits
 
(2,799)
 
(2,402)
 
(2,689)
 
(2,585)
 
(2,413)
Net flows
 
(1,671)
 
(1,421)
 
(1,724)
 
(1,655)
 
(1,398)
Investment performance (2)
 
4,129
 
3,873
 
3,330
 
4,949
 
224
Policy charges and other
 
(699)
 
(708)
 
(696)
 
(645)
 
(654)
Account value, end of period
 
$120,333
 
$118,574
 
$116,830
 
$115,920
 
$113,271
 
 
 
 
 
 
 
 
 
 
 
INCOME ANNUITIES (1)
 
 
 
 
 
 
 
 
 
 
Income annuity insurance liabilities
 
$4,544
 
$4,544
 
$4,531
 
$4,518
 
$4,521
 
 
 
 
 
 
 
 
 
 
 
(1) Includes general account and separate account.
(2) Includes imputed interest on indexed annuities and the interest credited on the general account investment option of variable products.

bhflogobandwwordsonlya02.jpg
 
 
 
 
 




 
 
Financial Supplement
 
9

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

 
 
For the Three Months Ended
 
For the Years Ended
VARIABLE & INDEXED ANNUITY SALES
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
December 31, 2017
 
December 31,
2016
Shield Annuities (1)
 
$794
 
$653
 
$570
 
$458
 
$456
 
$2,475
 
$1,655
Fixed indexed annuity (2)
 
203
 
69
 
 
 
 
272
 
GMWB/GMAB
 
173
 
190
 
215
 
234
 
326
 
812
 
1,371
GMDB only
 
94
 
92
 
107
 
115
 
142
 
408
 
574
GMIB (3)
 
36
 
25
 
43
 
51
 
56
 
155
 
356
Total variable & indexed annuity sales
 
$1,300
 
$1,029
 
$935
 
$858
 
$980
 
$4,122
 
$3,956
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FIXED ANNUITY SALES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed deferred annuities
 
$32
 
$37
 
$47
 
$49
 
$56
 
$165
 
$275
Single premium immediate annuities
 
6
 
7
 
8
 
12
 
17
 
33
 
192
Other fixed annuities
 
3
 
1
 
5
 
12
 
14
 
21
 
140
Total fixed annuity sales
 
$41
 
$45
 
$60
 
$73
 
$87
 
$219
 
$607
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Shield Annuities is the suite of deferred index-linked annuities consisting of products marketed under the names Shield Level SelectorSM, Shield Level SelectSM and Shield Level 10SM.
(2) Represents 90% of gross sales assumed via reinsurance agreement.
(3) Ceased issuing GMIBs for new purchase in February 2016.


bhflogobandwwordsonlya02.jpg
 
 
 
 
 




 
 
Financial Supplement
 
10

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

 
 
For the Three Months Ended
 
For the Years Ended
Adjusted revenues
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
December 31, 2017
 
December 31,
2016
Premiums
 
$172
 
$164
 
$142
 
$100
 
$114
 
$578
 
$493
Universal life and investment-type product policy fees
 
81
 
134
 
75
 
83
 
12
 
373
 
248
Net investment income
 
79
 
87
 
69
 
107
 
66
 
342
 
371
Other revenues
 
1
 
2
 
19
 
 
128
 
22
 
138
Total adjusted revenues
 
$333
 
$387
 
$305
 
$290
 
$320
 
$1,315
 
$1,250
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest credited
 
$48
 
$40
 
$40
 
$28
 
$31
 
$156
 
$114
Policyholder benefits and claims
 
187
 
161
 
169
 
147
 
138
 
664
 
567
Amortization of DAC and VOBA
 
33
 
138
 
7
 
45
 
162
 
223
 
284
Interest expense on debt
 
 
 
 
 
 
 
Other operating costs
 
58
 
56
 
66
 
85
 
31
 
265
 
259
Total adjusted expenses
 
326
 
395
 
282
 
305
 
362
 
1,308
 
1,224
Adjusted earnings before provision for income tax
 
7
 
(8)
 
23
 
(15)
 
(42)
 
7
 
26
Provision for income tax expense (benefit)
 
2
 
(14)
 
11
 
(8)
 
(18)
 
(9)
 
Adjusted earnings
 
$5
 
$6
 
$12
 
$(7)
 
$(24)
 
$16
 
$26

bhflogobandwwordsonlya02.jpg
 
 
 
 
 




 
 
Financial Supplement
 
11

Life — Select Operating Metrics (Unaudited, in millions)

  
 
For the Three Months Ended
LIFE ACCOUNT VALUE: GENERAL ACCOUNT
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Variable universal and universal life account value, beginning of period
 
$2,800
 
$2,818
 
$2,823
 
$2,914
 
$2,891
Premiums and deposits (1)
 
66
 
64
 
76
 
77
 
94
Surrender and contract benefits
 
(49)
 
(49)
 
(36)
 
(124)
 
(41)
Net flows
 
17
 
15
 
40
 
(47)
 
53
Net transfers from (to) separate account
 
7
 
14
 
17
 
17
 
17
Interest credited
 
30
 
29
 
19
 
22
 
34
Policy charges and other
 
(79)
 
(76)
 
(81)
 
(83)
 
(81)
Variable universal and universal life account value, end of period
 
$2,775
 
$2,800
 
$2,818
 
$2,823
 
$2,914
 
 
 
 
 
 
 
 
 
 
 
LIFE ACCOUNT VALUE: SEPARATE ACCOUNT
 
 
 
 
 
 
 
 
 
 
Variable universal life account value, beginning of period
 
$5,107
 
$4,977
 
$4,886
 
$4,704
 
$4,730
Premiums and deposits
 
60
 
65
 
70
 
70
 
69
Surrender and contract benefits
 
(69)
 
(58)
 
(71)
 
(67)
 
(68)
Net flows
 
(9)
 
7
 
(1)
 
3
 
1
Investment performance
 
215
 
196
 
171
 
250
 
55
Net transfers from (to) general account
 
(7)
 
(14)
 
(17)
 
(17)
 
(17)
Policy charges and other
 
(56)
 
(59)
 
(62)
 
(54)
 
(65)
Variable universal life account value, end of period
 
$5,250
 
$5,107
 
$4,977
 
$4,886
 
$4,704
 
 
 
 
 
 
 
 
 
 
 
(1) Includes premiums and sales directed to the general account investment option of variable products.

bhflogobandwwordsonlya02.jpg
 
 
 
 
 




 
 
Financial Supplement
 
12

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

 
 
For the Three Months Ended
 
For the Years Ended
LIFE SALES
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
December 31, 2017
 
December 31,
2016
Whole life
 
$—
 
$1
 
$5
 
$9
 
$11
 
$15
 
$75
Term life
 
1
 
2
 
3
 
6
 
10
 
12
 
54
Variable universal life
 
 
 
2
 
1
 
2
 
3
 
11
Universal life without secondary guarantees
 
2
 
2
 
1
 
1
 
10
 
6
 
18
Total life sales
 
$3
 
$5
 
$11
 
$17
 
$33
 
$36
 
$158

 
 
As of
LIFE INSURANCE IN-FORCE
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Whole Life
 
 
 
 
 
 
 
 
 
 
Life Insurance in-force, before reinsurance
 
$23,204
 
$23,532
 
$23,881
 
$24,090
 
$24,280
Life Insurance in-force, net of reinsurance
 
$3,820
 
$3,747
 
$3,827
 
$3,089
 
$3,165
 
 
 
 
 
 
 
 
 
 
 
Term Life
 
 
 
 
 
 
 
 
 
 
Life Insurance in-force, before reinsurance
 
$453,804
 
$459,001
 
$464,872
 
$470,405
 
$471,857
Life Insurance in-force, net of reinsurance
 
$342,487
 
$329,833
 
$333,685
 
$120,791
 
$120,090
 
 
 
 
 
 
 
 
 
 
 
Universal and Variable Universal Life
 
 
 
 
 
 
 
 
 
 
Life Insurance in-force, before reinsurance
 
$60,514
 
$61,408
 
$62,142
 
$62,760
 
$63,709
Life Insurance in-force, net of reinsurance (1)
 
$42,009
 
$40,183
 
$39,909
 
$32,602
 
$32,930
 
 
 
 
 
 
 
 
 
 
 
(1) $675 million associated with certain universal life business was recaptured by the Company in the first quarter of 2018.


bhflogobandwwordsonlya02.jpg
 
 
 
 
 




 
 
Financial Supplement
 
13

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

  
 
For the Three Months Ended
 
For the Years Ended
Adjusted revenues
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
December 31, 2017
 
December 31,
2016
Premiums
 
$—
 
$—
 
$1
 
$—
 
$1
 
$1
 
$146
Universal life and investment-type product policy fees
 
169
 
196
 
175
 
173
 
232
 
713
 
731
Net investment income
 
339
 
348
 
354
 
358
 
384
 
1,399
 
1,441
Other revenues
 
8
 
3
 
15
 
8
 
6
 
34
 
24
Total adjusted revenues
 
$516
 
$547
 
$545
 
$539
 
$623
 
$2,147
 
$2,342
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest credited
 
$76
 
$86
 
$91
 
$94
 
$110
 
$347
 
$421
Policyholder benefits and claims
 
493
 
287
 
288
 
299
 
390
 
1,367
 
1,519
Amortization of DAC and VOBA
 
1
 
 
 
6
 
556
 
7
 
961
Interest expense on debt
 
 
 
8
 
15
 
15
 
23
 
61
Other operating costs
 
71
 
55
 
79
 
51
 
88
 
256
 
214
Total adjusted expenses
 
641
 
428
 
466
 
465
 
1,159
 
2,000
 
3,176
Adjusted earnings before provision for income tax
 
(125)
 
119
 
79
 
74
 
(536)
 
147
 
(834)
Provision for income tax expense (benefit)
 
(45)
 
36
 
27
 
25
 
(187)
 
43
 
(295)
Adjusted earnings
 
$(80)
 
$83
 
$52
 
$49
 
$(349)
 
$104
 
$(539)

bhflogobandwwordsonlya02.jpg
 
 
 
 
 




 
 
Financial Supplement
 
14

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

  
 
For the Three Months Ended
UNIVERSAL LIFE WITH SECONDARY GUARANTEES ACCOUNT VALUE
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Account value, beginning of period
 
$6,292
 
$6,282
 
$6,258
 
$6,252
 
$6,227
Premiums and deposits (1)
 
199
 
200
 
215
 
208
 
211
       Surrenders and contract benefits
 
(27)
 
(17)
 
(30)
 
(42)
 
(22)
Net flows
 
172
 
183
 
185
 
166
 
189
Interest credited
 
59
 
61
 
76
 
65
 
67
Policy charges and other
 
(238)
 
(234)
 
(237)
 
(225)
 
(231)
Account value, end of period
 
$6,285
 
$6,292
 
$6,282
 
$6,258
 
$6,252

 
 
As of
LIFE INSURANCE IN-FORCE
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Universal Life with Secondary Guarantees
 
 
 
 
 
 
 
 
 
 
Life Insurance in-force, before reinsurance
 
$82,747
 
$83,325
 
$83,645
 
$83,587
 
$83,566
Life Insurance in-force, net of reinsurance (2)
 
$37,133
 
$35,243
 
$35,356
 
$24,556
 
$24,287
 
 
 
 
 
 
 
 
 
 
 
(1) Includes premiums and sales directed to the general account investment option of variable products.
(2) $1.1 billion associated with certain ULSG business was recaptured by the Company in the first quarter of 2018.

bhflogobandwwordsonlya02.jpg
 
 
 
 
 




 
 
Financial Supplement
 
15

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

  
 
For the Three Months Ended
 
For the Years Ended
Adjusted revenues
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
December 31, 2017
 
December 31,
2016
Premiums
 
$28
 
$28
 
$27
 
$26
 
$29
 
$109
 
$139
Universal life and investment-type product policy fees
 
(3)
 
(4)
 
(3)
 
(3)
 
(3)
 
(13)
 
(11)
Net investment income
 
33
 
35
 
58
 
66
 
52
 
192
 
239
Other revenues
 
222
 
 
 
 
32
 
222
 
33
Total adjusted revenues
 
$280
 
$59
 
$82
 
$89
 
$110
 
$510
 
$400
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest credited
 
$—
 
$—
 
$—
 
$—
 
$—
 
$—
 
$—
Policyholder benefits and claims
 
14
 
21
 
17
 
10
 
17
 
62
 
87
Amortization of DAC and VOBA
 
5
 
4
 
6
 
5
 
3
 
20
 
22
Interest expense on debt
 
38
 
36
 
28
 
30
 
29
 
132
 
111
Other operating costs
 
105
 
93
 
20
 
21
 
48
 
239
 
141
Total adjusted expenses
 
162
 
154
 
71
 
66
 
97
 
453
 
361
Adjusted earnings before provision for income tax
 
118
 
(95)
 
11
 
23
 
13
 
57
 
39
Provision for income tax expense (benefit)
 
(741)
 
1,025
 
(23)
 
13
 
(7)
 
274
 
(8)
Adjusted earnings
 
$859
 
$(1,120)
 
$34
 
$10
 
$20
 
$(217)
 
$47

bhflogobandwwordsonlya02.jpg
 
 
 
 
 



 
 
 
 
 








Other
Information





 
 
Financial Supplement
 
17

DAC and VOBA and Net Derivative Gains (Losses) (Unaudited, in millions)
 
 
For the Three Months Ended
DAC AND VOBA ROLLFORWARD
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Balance, beginning of period
 
$6,414
 
$6,464
 
$6,500
 
$6,293
 
$6,589
Capitalization
 
73
 
72
 
47
 
68
 
79
Amortization:
 
 
 
 
 
 
 
 
 
 
Related to net investment gains (losses) and net derivative gains (losses) (1)
 
(90)
 
(209)
 
105
 
297
 
397
Notable items, included in adjusted expenses
 
 
229
 
 
 
(539)
Other amortization, included in adjusted expenses
 
(140)
 
(143)
 
(125)
 
(149)
 
(274)
Total amortization
 
(230)
 
(123)
 
(20)
 
148
 
(416)
Unrealized investment gains (losses)
 
29
 
1
 
(63)
 
(9)
 
90
Other
 
 
 
 
 
(49)
Balance, end of period
 
$6,286
 
$6,414
 
$6,464
 
$6,500
 
$6,293
 
 
As of
DAC AND VOBA BY SEGMENT AND CORPORATE & OTHER
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Annuities
 
$5,046
 
$5,142
 
$5,076
 
$5,106
 
$4,878
Life
 
1,106
 
1,134
 
1,248
 
1,253
 
1,261
Run-off
 
6
 
6
 
2
 
5
 
6
Corporate & Other
 
128
 
132
 
138
 
136
 
148
Total DAC and VOBA
 
$6,286
 
$6,414
 
$6,464
 
$6,500
 
$6,293

 
 
For the Three Months Ended
NET DERIVATIVE GAINS (LOSSES)
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Net derivative gains (losses):
 
 
 
 
 
 
 
 
 
 
Variable annuity embedded derivatives (2)
 
$190
 
$579
 
$212
 
$291
 
$1,753
Variable annuity hedges
 
(548)
 
(730)
 
(471)
 
(1,070)
 
(2,538)
ULSG hedges
 
(43)
 
(9)
 
267
 
(44)
 
(1,388)
Other hedges and embedded derivatives
 
(23)
 
(22)
 
(113)
 
(218)
 
(590)
Subtotal
 
(424)
 
(182)
 
(105)
 
(1,041)
 
(2,763)
Investment hedge adjustments
 
11
 
18
 
27
 
76
 
93
Total net derivative gains (losses)
 
$(413)
 
$(164)
 
$(78)
 
$(965)
 
$(2,670)
(1) Includes amounts related to GMIB fees and GMIB costs that are also included as an adjustment from net income (loss) to adjusted earnings.
(2) Beginning with the period ended September 30, 2017, in connection with the transition to our new variable annuity hedge program, the change in value of embedded derivative liabilities associated with Shield Annuities is included in and presented with variable annuity embedded derivatives.

bhflogobandwwordsonlya02.jpg
 
 
 
 
 




 
 
Financial Supplement
 
18

Notable Items (Unaudited, in millions)

 
 
For the Three Months Ended
NOTABLE ITEMS IMPACTING ADJUSTED EARNINGS
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Actuarial assumption review and other insurance adjustments
 
$91
 
$(134)
 
$—
 
$—
 
$399
Establishment costs
 
47
 
31
 
 
 
Separation related transactions
 
14
 
1,073
 
(42)
 
 
(23)
Tax reform adjustment (1)
 
(947)
 
 
 
 
Other
 
 
 
 
 
(23)
Total notable items (2)
 
$(795)
 
$970
 
$(42)
 
$—
 
$353
 
 
 
 
 
 
 
 
 
 
 
NOTABLE ITEMS BY SEGMENT AND CORPORATE & OTHER
 
 
 
 
 
 
 
 
 
 
Annuities
 
$—
 
$(142)
 
$(25)
 
$—
 
$(46)
Life
 
 
17
 
(12)
 
 
Run-off
 
91
 
(9)
 
(5)
 
 
399
Corporate & Other
 
(886)
 
1,104
 
 
 
Total notable items (2)
 
$(795)
 
$970
 
$(42)
 
$—
 
$353
 
 
 
 
 
 
 
 
 
 
 
(1) The notable item for the three month period ended December 31, 2017 includes a reduction of $222 in a tax-related obligation to our former parent, MetLife, Inc.
(2) 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 the Company's results and to evaluate and forecast those results.

bhflogobandwwordsonlya02.jpg
 
 
 
 
 




 
 
Financial Supplement
 
19

Variable Annuity Separate Account Returns and Allocations (Unaudited)

  
 
For the Three Months Ended
VARIABLE ANNUITY SEPARATE ACCOUNT RETURNS
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Total Quarterly VA separate account gross returns
 
3.81%
 
3.61%
 
3.11%
 
4.72%
 
0.20%
 
 
 
 
 
 
 
 
 
 
 
TOTAL VARIABLE ANNUITY SEPARATE ACCOUNT ALLOCATIONS
 
 
 
 
 
 
 
 
 
 
Percent allocated to equity funds
 
28.04%
 
27.87%
 
27.77%
 
27.70%
 
27.41%
Percent allocated to bond funds/other funds
 
8.65%
 
8.82%
 
8.94%
 
9.01%
 
9.23%
Percent allocated to target volatility funds
 
14.90%
 
14.82%
 
14.78%
 
14.69%
 
14.76%
Percent allocated to balanced funds
 
48.41%
 
48.49%
 
48.52%
 
48.60%
 
48.60%

bhflogobandwwordsonlya02.jpg
 
 
 
 
 




 
 
Financial Supplement
 
20

Summary of Investments (Unaudited, dollars in millions)
 
 
December 31, 2017
 
December 31, 2016
 
 
Amount
 
% of Total
 
Amount
 
% of Total
Fixed maturity securities:
 
 
 
 
 
 
 
 
U.S. corporate securities
 
$22,957
 
27.27%
 
$22,311
 
25.99%
U.S. government and agency securities
 
16,292
 
19.35%
 
13,090
 
15.25%
Residential mortgage-backed securities
 
7,977
 
9.47%
 
8,023
 
9.34%
Foreign corporate securities
 
7,023
 
8.34%
 
6,393
 
7.45%
State and political subdivision securities
 
4,181
 
4.97%
 
3,945
 
4.59%
Commercial mortgage-backed securities
 
3,423
 
4.07%
 
3,812
 
4.44%
Asset-backed securities
 
1,829
 
2.17%
 
2,652
 
3.09%
Foreign government securities
 
1,309
 
1.55%
 
1,162
 
1.35%
Total fixed maturity securities
 
64,991
 
77.19%
 
61,388
 
71.50%
Equity securities
 
232
 
0.28%
 
300
 
0.35%
Mortgage loans:
 
 
 
 
 
 
 
 
Commercial mortgage loans
 
7,260
 
8.62%
 
6,523
 
7.60%
Agricultural mortgage loans
 
2,276
 
2.70%
 
1,892
 
2.20%
Residential mortgage loans
 
1,138
 
1.35%
 
867
 
1.01%
Valuation allowances
 
(47)
 
(0.06)%
 
(40)
 
(0.05)%
Commercial mortgage loans held by CSEs
 
115
 
0.14%
 
136
 
0.16%
Total mortgage loans
 
10,742
 
12.75%
 
9,378
 
10.92%
Policy loans
 
1,523
 
1.81%
 
1,517
 
1.77%
Real estate and real estate joint ventures
 
433
 
0.51%
 
215
 
0.25%
Other limited partnership interests
 
1,669
 
1.98%
 
1,642
 
1.91%
Cash, cash equivalents and short-term investments
 
2,169
 
2.58%
 
6,516
 
7.59%
Other invested assets:
 
 
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
 
 
 
Interest rate
 
1,112
 
1.32%
 
2,152
 
2.51%
Equity markets
 
937
 
1.11%
 
1,076
 
1.25%
Foreign currency exchange rate
 
165
 
0.20%
 
366
 
0.43%
Credit
 
40
 
0.05%
 
28
 
0.03%
Total derivatives
 
2,254
 
2.68%
 
3,622
 
4.22%
Loans to affiliates
 
 
0.00%
 
1,090
 
1.27%
Other
 
182
 
0.22%
 
192
 
0.22%
Total other invested assets
 
2,436
 
2.90%
 
4,904
 
5.71%
Total invested assets and cash and cash equivalents
 
$84,195
 
100.00%
 
$85,860
 
100.00%

 
 
For the Three Months Ended
 
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Net investment income yield (1)
 
4.30%
 
4.32%
 
4.40%
 
4.74%
 
4.69%
 
 
 
 
 
 
 
 
 
 
 
(1) Yields are calculated on investment income as a percent of average quarterly asset carrying values. Investment income includes investment hedge adjustments, excludes recognized 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, collateral received from derivative counterparties and the effects of consolidating under GAAP certain VIEs that are treated as CSEs.

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Financial Supplement
 
21

Select Actual and Preliminary Statutory Financial Results (1) (Unaudited, in millions)

 
 
For the Three Months Ended
 
For the Years Ended
REVENUE AND EXPENSES
 
December 31, 2017 (2)
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
December 31,
2017 (2)
 
December 31,
2016
Total revenues (Line 9)
 
$2,800
 
$2,647
 
$3,194
 
$8,889
 
$3,022
 
$17,500
 
$16,151
Total benefits and expenses before dividends to policyholders (Line 28)
 
$2,000
 
$1,763
 
$2,501
 
$9,246
 
$1,387
 
$15,500
 
$12,605
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
For the Years Ended
NET INCOME (LOSS)
 
December 31, 2017 (2)
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
December 31,
2017 (2)
 
December 31,
2016
Gain (loss) from operations net of taxes (Line 33)
 
$800
 
$686
 
$114
 
$(279)
 
$1,620
 
$1,300
 
$2,685
Net realized capital gains (losses), net of federal income tax and transfers to interest maintenance reserve (Line 34)
 
(600)
 
(403)
 
(234)
 
(463)
 
(569)
 
(1,700)
 
(1,478)
Net income (loss) (Line 35)
 
$200
 
$283
 
$(120)
 
$(742)
 
$1,051
 
$(400)
 
$1,207
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of
 
 
COMBINED TOTAL ADJUSTED CAPITAL
 
December 31, 2017 (2)
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
 
 
 
Combined total adjusted capital
 
$6,600
 
$6,648
 
$6,377
 
$4,217
 
$5,377
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Combined statutory results 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 and the year to date periods ended December 31, 2017.

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Appendix





 
 
Financial Supplement
 
A-1


This financial supplement may contain information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “will,” “intend,” “plan,” “believe” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, statements regarding the separation from MetLife, including the expected benefits thereof, the recapitalization actions, including the expected benefits thereof, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations 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, its subsidiaries and affiliates. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others: differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models; higher risk management costs and exposure to increased counterparty risk due to guarantees within certain of our products; the effectiveness of our exposure management strategy and the impact of such strategy on net income volatility and negative effects on our statutory capital; the additional reserves we will be required to hold against our variable annuities as a result of actuarial guidelines; a sustained period of low equity market prices and interest rates that are lower than those we assumed when we issued our variable annuity products; our degree of leverage following the separation due to indebtedness incurred in connection with the separation; the effect adverse capital and credit market conditions may have on our ability to meet liquidity needs and our access to capital; the impact of changes in regulation and in supervisory and enforcement policies on our insurance business or other operations; the effectiveness of our risk management policies and procedures; the availability of reinsurance and the ability of our counterparties to our reinsurance or indemnification arrangements to perform their obligations thereunder; heightened competition, including with respect to service, product features, scale, price, actual or perceived financial strength, claims-paying ratings, credit ratings, e-business capabilities and name recognition; changes in accounting standards, practices and/or policies applicable to us; the ability of our insurance subsidiaries to pay dividends to us, and our ability to pay dividends to our shareholders; our ability to market and distribute our products through distribution channels; the impact of the separation on our business and profitability due to MetLife’s strong brand and reputation, the increased costs related to replacing arrangements with MetLife with those of third parties and incremental costs as a public company; whether the operational, strategic and other benefits of the separation can be achieved, and our ability to implement our business strategy; whether all or any portion of the separation tax consequences are not as expected, leading to material additional taxes or material adverse consequences to tax attributes booked to us; the uncertainty of the outcome of any disputes with MetLife over tax-related matters and agreements including the potential of outcomes adverse to us that could cause us to owe MetLife material tax reimbursements or payments; the impact on our business structure, profitability, cost of capital and flexibility due to restrictions we have agreed to that preserve the tax-free treatment of certain parts of the separation; the potential material negative tax impact of proposed legislation that could decrease the value of our tax attributes, lead to increased RBC requirements and cause other cash expenses, such as reserves, to increase materially; whether the distribution will qualify for non-recognition treatment for U.S. federal income tax purposes and potential indemnification to MetLife if the distribution does not so qualify; our ability to attract and retain key personnel; 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 the Preliminary Information Statement of Brighthouse Financial, Inc., subject to completion, dated June 30, 2017 included as Exhibit 99.1 to Amendment No. 5 to Brighthouse Financial, Inc.’s Registration Statement on Form 10, filed with the SEC on June 30, 2017 and in Brighthouse Financial, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed with the SEC on November 9, 2017, including under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Note Regarding Forward-Looking Statements” and “Risk Factors.” 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. Please consult any further disclosures Brighthouse Financial, Inc. makes on related subjects in reports to the SEC.


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Financial Supplement
 
A-2

Non-GAAP and Other Financial Disclosures

Non-GAAP Financial Disclosures

In this financial supplement, we present certain measures of our performance that are not calculated in accordance with GAAP. We believe that these non-GAAP financial measures enhance the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of our business.

The following non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP:
Non-GAAP financial measures:

 
Comparable GAAP financial measures:

(i)
adjusted earnings
 
(i)
net income (loss)
(ii)
adjusted revenues
 
(ii)
revenues
(iii)
adjusted expenses
 
(iii)
expenses
(iv)
adjusted earnings per common share
 
(iv)
earnings per share
(v)
adjusted return on equity
 
(v)
return on equity

Reconciliations of these measures to the most directly comparable historical GAAP measures are included in this financial supplement. These adjusted measures were previously referred to as operating measures.

Our definitions of the non-GAAP and other financial measures discussed in this financial supplement may differ from those used by other companies. For example, as indicated below, we exclude GMIB revenues and related embedded derivatives gains (losses) as well as GMIB benefits and associated DAC and VOBA offsets from adjusted earnings, thereby excluding substantially all GMLB activity from adjusted earnings.

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, as well as businesses that have been or will be sold or exited by us, referred to as divested businesses.

Provided below are the adjustments to GAAP revenues and GAAP expenses used to calculate adjusted revenues and adjusted expenses, respectively. Adjusted earnings, as presented in this financial supplement, reflects adjusted revenues less adjusted expenses, both net of income tax.

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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 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
Amortization of unearned revenue related to net investment gains (loss) and net derivative gains (losses) and certain variable annuity GMIB fees (“GMIB Fees”)(1).

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 and hedging costs related to GMIBs (“GMIB Costs”)(1);
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(1).

The tax impact of the adjustments mentioned is calculated net of the U.S. 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.

(1) Collectively, amounts related to GMIB, excluding amounts recorded in NDGL, may be referred to as “GMIB adjustments”.

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Financial Supplement
 
A-4

Non-GAAP and Other Financial Disclosures (Cont.)


Adjusted Earnings per Common Share and Adjusted Return on Equity

Adjusted earnings per common share and adjusted return on 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.

Adjusted return on 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 stockholders’ equity, excluding AOCI.

Other Financial Disclosures

Book Value per Common Share, excluding AOCI

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

Sales

Statistical sales information for Life sales is calculated using the LIMRA definition of sales for core direct sales, excluding company-sponsored internal exchanges, corporate-owned life insurance, bank-owned life insurance, and private placement variable universal life insurance. 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.


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Financial Supplement
 
A-5

Acronyms

AOCI
Accumulated other comprehensive income (loss)
CSE
Consolidated securitization entity
DAC
Deferred policy acquisition costs
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
GMLB
Guaranteed minimum living benefits
GMWB
Guaranteed minimum withdrawal benefits
LIMRA
Life Insurance Marketing and Research Association
NDGL
Net derivative gains (losses)
NIGL
Net investment gains (losses)
PAB
Policyholder account balances
ULSG
Universal life insurance with secondary guarantees
VA
Variable annuity
VIE
Variable interest entity
VOBA
Value of business acquired

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Financial Supplement
 
A-6

Reconciliation of Net Income (Loss) to Adjusted Earnings and Reconciliation of Net Income (Loss) per Common Share to Adjusted Earnings per Common Share
(Unaudited, in millions except per share data)
 
 
For the Three Months Ended
 
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Net income (loss)
 
$668
 
$(943)
 
$246
 
$(349)
 
$(1,765)
Adjustments from net income (loss) to adjusted earnings:
 
 
 
 
 
 
 
 
 
 
Less: Net investment gains (losses)
 
6
 
21
 
 
(55)
 
(63)
Less: Net derivative gains (losses)
 
(424)
 
(182)
 
(105)
 
(1,041)
 
(2,767)
Less: GMIB adjustments
 
(76)
 
(488)
 
42
 
132
 
179
Less: Market value adjustments
 
(3)
 
(1)
 
(11)
 
(6)
 
34
Less: Other
 
 
22
 
(31)
 
(12)
 
(3)
Less: Provision for income tax (expense) benefit on reconciling adjustments
 
173
 
361
 
27
 
353
 
917
Adjusted earnings
 
$992
 
$(676)
 
$324
 
$280
 
$(62)
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per common share
 
$5.58
 
$(7.87)
 
N/A
 
N/A
 
N/A
Less: Net investment gains (losses)
 
0.05
 
0.18
 
N/A
 
N/A
 
N/A
Less: Net derivative gains (losses)
 
(3.54)
 
(1.52)
 
N/A
 
N/A
 
N/A
Less: GMIB adjustments
 
(0.63)
 
(4.07)
 
N/A
 
N/A
 
N/A
Less: Market value adjustments
 
(0.02)
 
(0.01)
 
N/A
 
N/A
 
N/A
Less: Other
 
 
0.18
 
N/A
 
N/A
 
N/A
Less: Provision for income tax (expense) benefit on reconciling adjustments
 
1.44
 
3.01
 
N/A
 
N/A
 
N/A
Adjusted earnings per common share
 
$8.28
 
$(5.64)
 
N/A
 
N/A
 
N/A

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Financial Supplement
 
A-7

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

 
 
Four Quarters Cumulative Trailing Basis
ADJUSTED EARNINGS
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Net income (loss)
 
$(378)
 
$(2,811)
 
$(2,026)
 
$(3,695)
 
$(2,939)
Adjustments from net income (loss) to adjusted earnings:
 
 
 
 
 
 
 
 
 
 
Less: Net investment gains (losses)
 
(28)
 
(97)
 
(92)
 
(72)
 
(78)
Less: Net derivative gains (losses)
 
(1,752)
 
(4,095)
 
(4,490)
 
(7,421)
 
(6,152)
Less: GMIB adjustments
 
(390)
 
(135)
 
312
 
1,206
 
1,101
Less: Market value adjustments
 
(21)
 
16
 
15
 
4
 
(11)
Less: Other
 
(21)
 
(24)
 
(199)
 
(375)
 
(432)
Less: Provision for income tax (expense) benefit on reconciling adjustments
 
914
 
1,658
 
1,557
 
2,337
 
1,947
Adjusted earnings
 
$920
 
$(134)
 
$871
 
$626
 
$686
 
 
 
 
 
 
 
 
 
 
 
 
 
Five Quarters Average Stockholders' Equity Basis
STOCKHOLDERS' EQUITY, EXCLUDING AOCI
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Stockholders' equity
 
$14,935
 
$15,666
 
$16,605
 
$17,258
 
$17,603
Accumulated other comprehensive income (loss) (AOCI)
 
1,470
 
1,682
 
1,947
 
2,060
 
2,063
Stockholders' equity, excluding AOCI
 
$13,465
 
$13,983
 
$14,658
 
$15,198
 
$15,540
 
 
 
 
 
 
 
 
 
 
 
 
 
Five Quarters Average Stockholders' Equity Basis
ADJUSTED RETURN ON EQUITY
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
  Return on equity
 
(2.5)%
 
(17.9)%
 
(12.2)%
 
(21.4)%
 
(16.7)%
Return on AOCI
 
(25.7)%
 
(167.1)%
 
(104.1)%
 
(179.4)%
 
(142.5)%
Return on equity, excluding AOCI
 
(2.8)%
 
(20.1)%
 
(13.8)%
 
(24.3)%
 
(18.9)%
Return on adjustments from net income (loss) to adjusted earnings:
 
 
 
 
 
 
 
 
 
 
Less: Return on Net investment gains (losses)
 
(0.2)%
 
(0.7)%
 
(0.6)%
 
(0.5)%
 
(0.5)%
Less: Return on Net derivative gains (losses)
 
(13.0)%
 
(29.3)%
 
(30.6)%
 
(48.8)%
 
(39.6)%
Less: Return on GMIB adjustments
 
(2.9)%
 
(1.0)%
 
2.1%
 
7.9%
 
7.1%
Less: Return on Market value adjustments
 
(0.2)%
 
0.1%
 
0.1%
 
—%
 
(0.1)%
Less: Return on Other
 
(0.2)%
 
(0.2)%
 
(1.4)%
 
(2.5)%
 
(2.8)%
Less: Return on Provision for income tax (expense) benefit on reconciling adjustments
 
6.8%
 
11.9%
 
10.6%
 
15.4%
 
12.5%
Adjusted return on equity
 
6.8%
 
(1.0)%
 
5.9%
 
4.1%
 
4.4%

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Financial Supplement
 
A-8

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 Years Ended
 
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
December 31, 2017
 
December 31,
2016
Total revenues
 
$1,880
 
$1,972
 
$2,025
 
$965
 
$(553)
 
$6,842
 
$3,018
Less: Net investment gains (losses)
 
6
 
21
 
 
(55)
 
(63)
 
(28)
 
(78)
Less: Net derivative gains (losses)
 
(413)
 
(164)
 
(78)
 
(965)
 
(2,670)
 
(1,620)
 
(5,851)
Less: Other GMIB adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GMIB fees
 
71
 
70
 
70
 
69
 
73
 
280
 
295
Investment hedge adjustments
 
(11)
 
(19)
 
(27)
 
(76)
 
(92)
 
(133)
 
(296)
Other
 
(2)
 
1
 
2
 
 
(3)
 
1
 
Total adjusted revenues
 
$2,229
 
$2,063
 
$2,058
 
$1,992
 
$2,202
 
$8,342
 
$8,948
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Total expenses
 
$2,102
 
$2,096
 
$1,704
 
$1,555
 
$2,224
 
$7,457
 
$7,723
Less: Amortization of DAC and VOBA related to net investment gains (losses) and net derivative gains (losses)
 
37
 
78
 
(124)
 
(240)
 
(325)
 
(249)
 
(1,401)
Less: Other adjustments to expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GMIB costs and amortization of DAC and VOBA related to GMIB fees and GMIB costs
 
106
 
486
 
158
 
185
 
190
 
935
 
778
Other
 
5
 
(1)
 
12
 
6
 
(36)
 
22
 
178
Less: Divested business
 
 
(26)
 
26
 
4
 
36
 
4
 
87
Total adjusted expenses
 
$1,954
 
$1,559
 
$1,632
 
$1,600
 
$2,359
 
$6,745
 
$8,081

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Financial Supplement
 
A-9

Investment Reconciliation Details (Unaudited, dollars in millions)

 
 
For the Three Months Ended
 
For the Years Ended
NET INVESTMENT GAINS (LOSSES)
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
 
December 31, 2017
 
December 31,
2016
Investment portfolio gains (losses)
 
$13
 
$23
 
$4
 
$(51)
 
$(67)
 
$(11)
 
$(16)
Investment portfolio writedowns
 
(6)
 
(1)
 
(3)
 
(4)
 
2
 
(14)
 
(63)
Total net Investment portfolio gains (losses)
 
7
 
22
 
1
 
(55)
 
(65)
 
(25)
 
(79)
Net investment gains (losses) related to CSEs
 
(1)
 
(1)
 
(1)
 
 
1
 
(3)
 
(1)
Other
 
 
 
 
 
1
 
 
2
Net Investment Gains (Losses)
 
$6
 
$21
 
$—
 
$(55)
 
$(63)
 
$(28)
 
$(78)


 
 
For the Three Months Ended
NET INVESTMENT YIELD
 
December 31, 2017
 
September 30,
2017
 
June 30,
2017
 
March 31,
2017
 
December 31,
2016
Investment income yield (1)
 
4.46%
 
4.47%
 
4.55%
 
4.89%
 
4.84%
Investment fees and expenses
 
(0.16)%
 
(0.15)%
 
(0.15)%
 
(0.15)%
 
(0.15)%
Net investment income yield (1)
 
4.30%
 
4.32%
 
4.40%
 
4.74%
 
4.69%
 
 
 
 
 
 
 
 
 
 
 
(1) Yields are calculated on investment income as a percent of average quarterly asset carrying values. Investment income includes investment hedge adjustments, excludes recognized 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, collateral received from derivative counterparties and the effects of consolidating under GAAP certain VIEs that are treated as CSEs.

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