EX-99.3 4 bhffinancialsupplement-q119.htm EXHIBIT 99.3 Exhibit

 
 
 
 
 



Exhibit 99.3








Brighthouse Financial, Inc.
Financial Supplement

First Quarter 2019













bhflogorgb970pxa35.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
 
Note Regarding Forward-Looking Statements
 
Non-GAAP and Other Financial Disclosures
 
Acronyms
 
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
 
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.

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



 
 
 
 
 









Financial Results



 
 
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
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Net income (loss) available to shareholders
 
$(737)
 
$1,442
 
$(271)
 
$(239)
 
$(67)
Adjusted earnings (1)
 
$232
 
$186
 
$270
 
$153
 
$283
Total corporate expenses (2)
 
$225
 
$233
 
$242
 
$288
 
$230
 
 
 
 
 
 
 
 
 
 
 
Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
Brighthouse Financial, Inc.’s stockholders’ equity (3)
 
$14,999
 
$14,418
 
$12,884
 
$13,435
 
$13,584
Less: Preferred stock
 
412
 
 
 
 
Less: AOCI (3)
 
1,670
 
716
 
552
 
815
 
737
Brighthouse Financial, Inc.’s stockholders’ equity, excluding preferred stock and AOCI
 
$12,917
 
$13,702
 
$12,332
 
$12,620
 
$12,847
 
 
 
 
 
 
 
 
 
 
 
Return on Equity
 
 
 
 
 
 
 
 
 
 
Return on equity
 
1.4%
 
6.3%
 
0.7%
 
(4.0)%
 
(0.7)%
Return on equity, excluding preferred stock and AOCI (1)
 
1.5%
 
6.7%
 
0.7%
 
(4.5)%
 
(0.7)%
Adjusted return on equity (1)
 
6.5%
 
6.9%
 
13.5%
 
5.8%
 
7.0%
 
 
 
 
 
 
 
 
 
 
 
Earnings Per Common Share, Diluted
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to shareholders per common share (4)
 
$(6.31)
 
$12.14
 
$(2.26)
 
$(2.01)
 
$(0.56)
Adjusted earnings per common share (1)
 
$1.98
 
$1.56
 
$2.23
 
$1.27
 
$2.36
Weighted average common shares outstanding
 
117,229,854
 
118,685,082
 
120,641,572
 
120,200,149
 
119,773,106
 
 
 
 
 
 
 
 
 
 
 
Book Value Per Common Share
 
 
 
 
 
 
 
 
 
 
Book value per common share (1), (3)
 
$129.10
 
$122.67
 
$108.45
 
$112.17
 
$113.41
Book value per common share, excluding preferred stock and AOCI (1), (3)
 
$111.18
 
$116.58
 
$103.80
 
$105.37
 
$107.26
Ending common shares outstanding
 
116,182,687
 
117,532,336
 
118,800,611
 
119,773,106
 
119,773,106
 
 
 
 
 
 
 
 
 
 
 
(1) See definitions for Non-GAAP and Other Financial Disclosures in the Appendix beginning on page A-2.
(2) Includes functional department expenses, public company expenses, certain investment expenses, retirement funding and incentive compensation; and excludes establishment costs.
(3) See Note (1) to the Balance Sheets on page 3 for information regarding changes to amounts originally reported for the first quarter of 2018.
(4) For loss periods, dilutive shares were not included in the calculation of net income (loss) available to shareholders per common share as inclusion of such shares would have an anti-dilutive effect.

croppedlogocopya04.jpg
 
 
 
 
 






 
 
Financial Supplement
 
2




Condensed Statements of Operations (Unaudited, in millions)

 
 
For the Three Months Ended
 
For the Three Months Ended
Revenues
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
March 31,
2019
 
March 31,
2018
Premiums
 
$227
 
$223
 
$225
 
$223
 
$229
 
$227
 
$229
Universal life and investment-type product policy fees
 
875
 
899
 
972
 
962
 
1,002
 
875
 
1,002
Net investment income
 
811
 
862
 
853
 
806
 
817
 
811
 
817
Other revenues
 
92
 
89
 
105
 
98
 
105
 
92
 
105
Revenues before NIGL and NDGL
 
2,005
 
2,073
 
2,155
 
2,089
 
2,153
 
2,005
 
2,153
Net investment gains (losses)
 
(11)
 
(86)
 
(42)
 
(75)
 
(4)
 
(11)
 
(4)
Net derivative gains (losses)
 
(1,303)
 
2,039
 
(691)
 
(312)
 
(334)
 
(1,303)
 
(334)
Total revenues
 
$691
 
$4,026
 
$1,422
 
$1,702
 
$1,815
 
$691
 
$1,815
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest credited to policyholder account balances
 
$258
 
$270
 
$273
 
$269
 
$267
 
$258
 
$267
Policyholder benefits and claims
 
772
 
899
 
822
 
813
 
738
 
772
 
738
Amortization of DAC and VOBA
 
22
 
469
 
30
 
246
 
305
 
22
 
305
Interest expense on debt
 
47
 
45
 
40
 
36
 
37
 
47
 
37
Other expenses
 
545
 
556
 
625
 
655
 
581
 
545
 
581
Total expenses
 
1,644
 
2,239
 
1,790
 
2,019
 
1,928
 
1,644
 
1,928
Income (loss) before provision for income tax
 
(953)
 
1,787
 
(368)
 
(317)
 
(113)
 
(953)
 
(113)
Provision for income tax expense (benefit)
 
(218)
 
345
 
(99)
 
(79)
 
(48)
 
(218)
 
(48)
Net income (loss)
 
(735)
 
1,442
 
(269)
 
(238)
 
(65)
 
(735)
 
(65)
Less: Net income (loss) attributable to noncontrolling interests
 
2
 
 
2
 
1
 
2
 
2
 
2
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders
 
$(737)
 
$1,442
 
$(271)
 
$(239)
 
$(67)
 
$(737)
 
$(67)
 

croppedlogocopya04.jpg
 
 
 
 
 






 
 
Financial Supplement
 
3




Balance Sheets (Unaudited, in millions)
 
 
As of
ASSETS
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Investments:
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities available-for-sale
 
$64,847
 
$62,608
 
$62,279
 
$62,343
 
$63,178
Equity securities
 
150
 
140
 
150
 
153
 
160
Mortgage loans, net
 
14,504
 
13,694
 
13,033
 
12,337
 
11,308
Policy loans
 
1,385
 
1,421
 
1,443
 
1,458
 
1,517
Real estate limited partnerships and limited liability companies
 
453
 
451
 
444
 
449
 
441
Other limited partnership interests
 
1,800
 
1,840
 
1,765
 
1,706
 
1,700
Short-term investments
 
799
 
 
116
 
177
 
293
Other invested assets
 
2,302
 
3,027
 
2,099
 
2,305
 
2,452
Total investments
 
86,240
 
83,181
 
81,329
 
80,928
 
81,049
Cash and cash equivalents
 
3,864
 
4,145
 
2,144
 
2,135
 
1,888
Accrued investment income
 
791
 
724
 
675
 
607
 
640
Reinsurance recoverables
 
13,098
 
12,929
 
12,683
 
12,745
 
12,746
Premiums and other receivables
 
928
 
768
 
868
 
848
 
781
DAC and VOBA
 
5,680
 
5,717
 
6,050
 
5,968
 
6,083
Current income tax recoverable
 
 
1
 
878
 
814
 
832
Other assets
 
618
 
573
 
583
 
580
 
593
Separate account assets
 
105,211
 
98,256
 
111,736
 
111,587
 
114,385
Total assets
 
$216,430
 
$206,294
 
$216,946
 
$216,212
 
$218,997
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
Future policy benefits
 
$37,157
 
$36,209
 
$35,748
 
$35,816
 
$36,223
Policyholder account balances
 
41,177
 
40,054
 
39,446
 
38,407
 
37,940
Other policy-related balances
 
3,005
 
3,000
 
2,907
 
2,941
 
2,991
Payables for collateral under securities loaned and other transactions
 
3,990
 
5,057
 
4,043
 
4,265
 
4,244
Long-term debt
 
4,364
 
3,963
 
3,966
 
3,607
 
3,609
Current income tax payable
 
19
 
15
 
 
 
Deferred income tax liability (1)
 
1,005
 
972
 
576
 
684
 
730
Other liabilities (1)
 
5,438
 
4,285
 
5,575
 
5,405
 
5,226
Separate account liabilities
 
105,211
 
98,256
 
111,736
 
111,587
 
114,385
Total liabilities
 
201,366
 
191,811
 
203,997
 
202,712
 
205,348
Equity
 
 
 
 
 
 
 
 
 
 
Preferred Stock, at par value
 
 
 
 
 
Common stock, at par value
 
1
 
1
 
1
 
1
 
1
Additional paid-in capital
 
12,889
 
12,473
 
12,469
 
12,444
 
12,432
Retained earnings (deficit) (1)
 
609
 
1,346
 
(96)
 
175
 
414
Treasury stock
 
(170)
 
(118)
 
(42)
 
 
Accumulated other comprehensive income (loss) (1)
 
1,670
 
716
 
552
 
815
 
737
Total Brighthouse Financial, Inc.’s stockholders’ equity
 
14,999
 
14,418
 
12,884
 
13,435
 
13,584
Noncontrolling interests
 
65
 
65
 
65
 
65
 
65
Total equity
 
15,064
 
14,483
 
12,949
 
13,500
 
13,649
Total liabilities and equity
 
$216,430
 
$206,294
 
$216,946
 
$216,212
 
$218,997
 
 
 
 
 
 
 
 
 
 
 
(1) During the second quarter of 2018, and effective January 1, 2018, the Company recorded adjustments related to accretion of certain investments in equity securities. As a result, amounts originally reported as of March 31, 2018 have been revised to conform to such changes. Additionally, certain key metrics for the first quarter of 2018, as well as amounts affecting the adjusted return on equity for certain periods, have also been revised for such impact.

croppedlogocopya04.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 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
 
 
 
 
2
 
2
Adjusted earnings
 
$295
 
$25
 
$(36)
 
$(52)
 
$232
 
 
 
 
 
 
 
 
 
 
 
  
 
For the Three Months Ended March 31, 2018
Adjusted revenues
 
Annuities
 
Life
 
Run-off
 
Corporate & Other
 
Total
Premiums
 
$45
 
$158
 
$—
 
$26
 
$229
Universal life and investment-type product policy fees
 
640
 
103
 
199
 
(3)
 
939
Net investment income
 
363
 
108
 
343
 
11
 
825
Other revenues
 
99
 
 
6
 
 
105
Total adjusted revenues
 
$1,147
 
$369
 
$548
 
$34
 
$2,098
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
Interest credited to policyholder account balances
 
$146
 
$31
 
$90
 
$—
 
$267
Policyholder benefits and claims
 
180
 
165
 
347
 
14
 
706
Amortization of DAC and VOBA
 
143
 
29
 
 
5
 
177
Interest expense on debt
 
 
 
 
37
 
37
Other operating costs
 
406
 
63
 
48
 
64
 
581
Total adjusted expenses
 
875
 
288
 
485
 
120
 
1,768
Adjusted earnings before provision for income tax
 
272
 
81
 
63
 
(86)
 
330
Provision for income tax expense (benefit)
 
46
 
15
 
13
 
(29)
 
45
Adjusted earnings after provision for income tax
 
226
 
66
 
50
 
(57)
 
285
Less: Net income (loss) attributable to noncontrolling interests
 
 
 
 
2
 
2
Adjusted earnings
 
$226
 
$66
 
$50
 
$(59)
 
$283

croppedlogocopya04.jpg
 
 
 
 
 






 
 
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,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
March 31,
2019
 
March 31,
2018
Premiums
 
$58
 
$44
 
$48
 
$48
 
$45
 
$58
 
$45
Universal life and investment-type product policy fees
 
561
 
594
 
625
 
632
 
640
 
561
 
640
Net investment income
 
421
 
398
 
399
 
376
 
363
 
421
 
363
Other revenues
 
77
 
78
 
88
 
90
 
99
 
77
 
99
Total adjusted revenues
 
$1,117
 
$1,114
 
$1,160
 
$1,146
 
$1,147
 
$1,117
 
$1,147
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest credited to policyholder account balances
 
$137
 
$147
 
$152
 
$148
 
$146
 
$137
 
$146
Policyholder benefits and claims
 
143
 
174
 
72
 
181
 
180
 
143
 
180
Amortization of DAC and VOBA
 
82
 
198
 
40
 
124
 
143
 
82
 
143
Interest expense on debt
 
 
 
 
 
 
 
Other operating costs
 
394
 
387
 
409
 
427
 
406
 
394
 
406
Total adjusted expenses
 
756
 
906
 
673
 
880
 
875
 
756
 
875
Adjusted earnings before provision for income tax
 
361
 
208
 
487
 
266
 
272
 
361
 
272
Provision for income tax expense (benefit)
 
66
 
33
 
86
 
45
 
46
 
66
 
46
Adjusted earnings
 
$295
 
$175
 
$401
 
$221
 
$226
 
$295
 
$226


croppedlogocopya04.jpg
 
 
 
 
 






 
 
Financial Supplement
 
7




Annuities — Select Operating Metrics (Unaudited, in millions)

  
 
For the Three Months Ended
VARIABLE & SHIELD ANNUITIES ACCOUNT VALUE (1)
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Account value, beginning of period
 
$105,089
 
$116,985
 
$116,283
 
$117,178
 
$120,333
Deposits
 
1,327
 
1,295
 
1,243
 
1,129
 
1,074
Withdrawals, surrenders and contract benefits
 
(2,479)
 
(2,789)
 
(2,754)
 
(2,877)
 
(2,853)
Net flows (2)
 
(1,152)
 
(1,494)
 
(1,511)
 
(1,748)
 
(1,779)
Investment performance (3)
 
8,971
 
(9,711)
 
2,953
 
1,568
 
(695)
Policy charges and other
 
(661)
 
(691)
 
(740)
 
(715)
 
(681)
Account value, end of period
 
$112,247
 
$105,089
 
$116,985
 
$116,283
 
$117,178
 
 
 
 
 
 
 
 
 
 
 
FIXED ANNUITIES ACCOUNT VALUE (4)
 
 
 
 
 
 
 
 
 
 
Account value, beginning of period
 
$12,770
 
$13,225
 
$13,112
 
$13,036
 
$13,062
Deposits
 
416
 
439
 
330
 
305
 
205
Withdrawals, surrenders and contract benefits
 
(521)
 
(963)
 
(296)
 
(308)
 
(320)
Net flows (2)
 
(105)
 
(524)
 
34
 
(3)
 
(115)
Interest credited
 
90
 
94
 
105
 
105
 
105
Other
 
(21)
 
(25)
 
(26)
 
(26)
 
(16)
Account value, end of period
 
$12,734
 
$12,770
 
$13,225
 
$13,112
 
$13,036
 
 
 
 
 
 
 
 
 
 
 
INCOME ANNUITIES (1)
 
 
 
 
 
 
 
 
 
 
Income annuity insurance liabilities
 
$4,541
 
$4,517
 
$4,561
 
$4,547
 
$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 income annuities.

croppedlogocopya04.jpg
 
 
 
 
 






 
 
Financial Supplement
 
8




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

 
 
For the Three Months Ended
 
For the Three Months Ended
VARIABLE & INDEXED ANNUITY SALES
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
March 31,
2019
 
March 31,
2018
Shield Annuities (1)
 
$985
 
$924
 
$867
 
$723
 
$729
 
$985
 
$729
GMWB/GMAB
 
198
 
220
 
218
 
237
 
183
 
198
 
183
GMDB only
 
78
 
81
 
84
 
96
 
92
 
78
 
92
GMIB
 
23
 
20
 
22
 
33
 
32
 
23
 
32
Total variable & indexed annuity sales
 
$1,284
 
$1,245
 
$1,191
 
$1,089
 
$1,036
 
$1,284
 
$1,036
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FIXED ANNUITY SALES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed indexed annuities (2)
 
$281
 
$368
 
$302
 
$272
 
$173
 
$281
 
$173
Fixed deferred annuities
 
133
 
73
 
28
 
36
 
34
 
133
 
34
Single premium immediate annuities
 
6
 
8
 
16
 
13
 
9
 
6
 
9
Other fixed annuities
 
3
 
4
 
4
 
2
 
4
 
3
 
4
Total fixed annuity sales
 
$423
 
$453
 
$350
 
$323
 
$220
 
$423
 
$220
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Shield 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.


croppedlogocopya04.jpg
 
 
 
 
 






 
 
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,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
March 31,
2019
 
March 31,
2018
Premiums
 
$145
 
$155
 
$152
 
$151
 
$158
 
$145
 
$158
Universal life and investment-type product policy fees
 
58
 
61
 
77
 
76
 
103
 
58
 
103
Net investment income
 
97
 
115
 
115
 
111
 
108
 
97
 
108
Other revenues
 
3
 
4
 
2
 
1
 
 
3
 
Total adjusted revenues
 
$303
 
$335
 
$346
 
$339
 
$369
 
$303
 
$369
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest credited to policyholder account balances
 
$25
 
$25
 
$29
 
$28
 
$31
 
$25
 
$31
Policyholder benefits and claims
 
181
 
153
 
169
 
168
 
165
 
181
 
165
Amortization of DAC and VOBA
 
11
 
35
 
8
 
23
 
29
 
11
 
29
Interest expense on debt
 
 
 
 
 
 
 
Other operating costs
 
55
 
42
 
62
 
74
 
63
 
55
 
63
Total adjusted expenses
 
272
 
255
 
268
 
293
 
288
 
272
 
288
Adjusted earnings before provision for income tax
 
31
 
80
 
78
 
46
 
81
 
31
 
81
Provision for income tax expense (benefit)
 
6
 
16
 
17
 
9
 
15
 
6
 
15
Adjusted earnings
 
$25
 
$64
 
$61
 
$37
 
$66
 
$25
 
$66

croppedlogocopya04.jpg
 
 
 
 
 






 
 
Financial Supplement
 
10




Life — Select Operating Metrics (Unaudited, in millions)

  
 
For the Three Months Ended
LIFE ACCOUNT VALUE: GENERAL ACCOUNT
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Variable universal and universal life account value, beginning of period
 
$2,747
 
$2,753
 
$2,758
 
$2,763
 
$2,775
Premiums and deposits (1)
 
65
 
64
 
58
 
62
 
66
Surrenders and contract benefits
 
(52)
 
(31)
 
(29)
 
(44)
 
(43)
Net flows
 
13
 
33
 
29
 
18
 
23
Net transfers from (to) separate account
 
13
 
8
 
12
 
17
 
14
Interest credited
 
25
 
27
 
28
 
29
 
26
Policy charges and other
 
(71)
 
(74)
 
(74)
 
(69)
 
(75)
Variable universal and universal life account value, end of period
 
$2,727
 
$2,747
 
$2,753
 
$2,758
 
$2,763
 
 
 
 
 
 
 
 
 
 
 
LIFE ACCOUNT VALUE: SEPARATE ACCOUNT
 
 
 
 
 
 
 
 
 
 
Variable universal life account value, beginning of period
 
$4,679
 
$5,351
 
$5,222
 
$5,174
 
$5,250
Premiums and deposits
 
59
 
59
 
57
 
59
 
62
Surrenders and contract benefits
 
(69)
 
(63)
 
(67)
 
(67)
 
(68)
Net flows
 
(10)
 
(4)
 
(10)
 
(8)
 
(6)
Investment performance
 
539
 
(603)
 
207
 
133
 
(2)
Net transfers from (to) general account
 
(15)
 
(8)
 
(12)
 
(17)
 
(14)
Policy charges and other
 
(55)
 
(57)
 
(56)
 
(60)
 
(54)
Variable universal life account value, end of period
 
$5,138
 
$4,679
 
$5,351
 
$5,222
 
$5,174
 
 
 
 
 
 
 
 
 
 
 
(1) Includes premiums and sales directed to the general account investment option of variable products.

croppedlogocopya04.jpg
 
 
 
 
 






 
 
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,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
March 31,
2019
 
March 31,
2018
Total life sales
 
$1
 
$1
 
$2
 
$2
 
$2
 
$1
 
$2

 
 
As of
LIFE INSURANCE IN-FORCE
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Whole Life
 
 
 
 
 
 
 
 
 
 
Life Insurance in-force, before reinsurance
 
$21,518
 
$21,804
 
$22,127
 
$22,467
 
$22,890
Life Insurance in-force, net of reinsurance
 
$3,638
 
$3,648
 
$3,690
 
$3,713
 
$3,764
 
 
 
 
 
 
 
 
 
 
 
Term Life
 
 
 
 
 
 
 
 
 
 
Life Insurance in-force, before reinsurance
 
$427,239
 
$433,058
 
$438,564
 
$443,532
 
$448,431
Life Insurance in-force, net of reinsurance
 
$324,941
 
$328,876
 
$332,204
 
$335,524
 
$338,841
 
 
 
 
 
 
 
 
 
 
 
Universal and Variable Universal Life
 
 
 
 
 
 
 
 
 
 
Life Insurance in-force, before reinsurance
 
$56,378
 
$56,882
 
$58,108
 
$58,837
 
$59,625
Life Insurance in-force, net of reinsurance
 
$39,844
 
$40,052
 
$41,279
 
$41,146
 
$41,601
 
 
 
 
 
 
 
 
 
 
 


croppedlogocopya04.jpg
 
 
 
 
 






 
 
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,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
March 31,
2019
 
March 31,
2018
Premiums
 
$1
 
$1
 
$—
 
$—
 
$—
 
$1
 
$—
Universal life and investment-type product policy fees
 
193
 
180
 
208
 
189
 
199
 
193
 
199
Net investment income
 
276
 
331
 
322
 
314
 
343
 
276
 
343
Other revenues
 
6
 
6
 
6
 
7
 
6
 
6
 
6
Total adjusted revenues
 
$476
 
$518
 
$536
 
$510
 
$548
 
$476
 
$548
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest credited to policyholder account balances
 
$96
 
$98
 
$92
 
$92
 
$90
 
$96
 
$90
Policyholder benefits and claims
 
380
 
351
 
532
 
365
 
347
 
380
 
347
Amortization of DAC and VOBA
 
 
 
 
 
 
 
Interest expense on debt
 
 
 
 
 
 
 
Other operating costs
 
46
 
47
 
46
 
61
 
48
 
46
 
48
Total adjusted expenses
 
522
 
496
 
670
 
518
 
485
 
522
 
485
Adjusted earnings before provision for income tax
 
(46)
 
22
 
(134)
 
(8)
 
63
 
(46)
 
63
Provision for income tax expense (benefit)
 
(10)
 
4
 
(29)
 
(2)
 
13
 
(10)
 
13
Adjusted earnings
 
$(36)
 
$18
 
$(105)
 
$(6)
 
$50
 
$(36)
 
$50

croppedlogocopya04.jpg
 
 
 
 
 






 
 
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,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Account value, beginning of period
 
$6,154
 
$6,185
 
$6,204
 
$6,235
 
$6,285
Premiums and deposits (1)
 
187
 
190
 
189
 
202
 
197
Surrenders and contract benefits
 
(39)
 
(38)
 
(26)
 
(44)
 
(69)
Net flows
 
148
 
152
 
163
 
158
 
128
Interest credited
 
57
 
60
 
60
 
58
 
59
Policy charges and other
 
(249)
 
(243)
 
(242)
 
(247)
 
(237)
Account value, end of period
 
$6,110
 
$6,154
 
$6,185
 
$6,204
 
$6,235

 
 
As of
LIFE INSURANCE IN-FORCE
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Universal Life with Secondary Guarantees
 
 
 
 
 
 
 
 
 
 
Life Insurance in-force, before reinsurance
 
$79,817
 
$80,356
 
$80,963
 
$81,479
 
$82,126
Life Insurance in-force, net of reinsurance
 
$37,233
 
$37,601
 
$37,029
 
$36,619
 
$36,870
 
 
 
 
 
 
 
 
 
 
 
(1) Includes premiums and sales directed to the general account investment option of variable products.

croppedlogocopya04.jpg
 
 
 
 
 






 
 
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,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
March 31,
2019
 
March 31,
2018
Premiums
 
$23
 
$23
 
$25
 
$24
 
$26
 
$23
 
$26
Universal life and investment-type product policy fees
 
(3)
 
(3)
 
(3)
 
(4)
 
(3)
 
(3)
 
(3)
Net investment income
 
17
 
19
 
16
 
11
 
11
 
17
 
11
Other revenues
 
6
 
1
 
9
 
 
 
6
 
Total adjusted revenues
 
$43
 
$40
 
$47
 
$31
 
$34
 
$43
 
$34
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest credited to policyholder account balances
 
$—
 
$—
 
$—
 
$—
 
$—
 
$—
 
$—
Policyholder benefits and claims
 
14
 
16
 
15
 
19
 
14
 
14
 
14
Amortization of DAC and VOBA
 
4
 
3
 
5
 
3
 
5
 
4
 
5
Interest expense on debt
 
47
 
45
 
39
 
37
 
37
 
47
 
37
Other operating costs
 
50
 
80
 
105
 
96
 
64
 
50
 
64
Total adjusted expenses
 
115
 
144
 
164
 
155
 
120
 
115
 
120
Adjusted earnings before provision for income tax
 
(72)
 
(104)
 
(117)
 
(124)
 
(86)
 
(72)
 
(86)
Provision for income tax expense (benefit)
 
(22)
 
(33)
 
(32)
 
(26)
 
(29)
 
(22)
 
(29)
Adjusted earnings after provision for income tax
 
(50)
 
(71)
 
(85)
 
(98)
 
(57)
 
(50)
 
(57)
Less: Net income (loss) attributable to noncontrolling interests
 
2
 
 
2
 
1
 
2
 
2
 
2
Adjusted earnings
 
$(52)
 
$(71)
 
$(87)
 
$(99)
 
$(59)
 
$(52)
 
$(59)

croppedlogocopya04.jpg
 
 
 
 
 






 
 
 
 
 









Other
Information




 
 
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,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Balance, beginning of period
 
$5,717
 
$6,050
 
$5,968
 
$6,083
 
$6,286
Capitalization
 
86
 
87
 
83
 
76
 
76
Amortization:
 
 
 
 
 
 
 
 
 
 
Included in adjusted earnings, excluding notable items
 
(97)
 
(236)
 
(148)
 
(150)
 
(177)
Related to notable items, included in adjusted expenses
 
 
 
96
 
 
Related to items not included in adjusted expenses
 
75
 
(233)
 
22
 
(96)
 
(128)
Total amortization
 
(22)
 
(469)
 
(30)
 
(246)
 
(305)
Unrealized investment gains (losses)
 
(101)
 
49
 
29
 
55
 
26
Other
 
 
 
 
 
Balance, end of period
 
$5,680
 
$5,717
 
$6,050
 
$5,968
 
$6,083
 
 
As of
DAC AND VOBA BY SEGMENT AND CORPORATE & OTHER
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Annuities
 
$4,534
 
$4,550
 
$4,874
 
$4,783
 
$4,873
Life
 
1,034
 
1,051
 
1,056
 
1,061
 
1,082
Run-off
 
5
 
5
 
5
 
5
 
5
Corporate & Other
 
107
 
111
 
115
 
119
 
123
Total DAC and VOBA
 
$5,680
 
$5,717
 
$6,050
 
$5,968
 
$6,083

 
 
For the Three Months Ended
NET DERIVATIVE GAINS (LOSSES)
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Net derivative gains (losses):
 
 
 
 
 
 
 
 
 
 
Variable annuity embedded derivatives
 
$(194)
 
$(146)
 
$(40)
 
$196
 
$503
Variable annuity hedges
 
(1,245)
 
1,844
 
(591)
 
(510)
 
(371)
ULSG hedges
 
122
 
217
 
(130)
 
(63)
 
(448)
Other hedges and embedded derivatives
 
14
 
123
 
68
 
62
 
(26)
Subtotal
 
(1,303)
 
2,038
 
(693)
 
(315)
 
(342)
Investment hedge adjustments
 
 
1
 
2
 
3
 
8
Total net derivative gains (losses)
 
$(1,303)
 
$2,039
 
$(691)
 
$(312)
 
$(334)

croppedlogocopya04.jpg
 
 
 
 
 






 
 
Financial Supplement
 
17




Notable Items (Unaudited, in millions)

 
 
For the Three Months Ended
NOTABLE ITEMS IMPACTING ADJUSTED EARNINGS
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Actuarial items and other insurance adjustments
 
$—
 
$(26)
 
$(25)
 
$—
 
$(32)
Establishment costs
 
27
 
39
 
69
 
44
 
37
Total notable items (1)
 
$27
 
$13
 
$44
 
$44
 
$5
 
 
 
 
 
 
 
 
 
 
 
NOTABLE ITEMS BY SEGMENT AND CORPORATE & OTHER
 
 
 
 
 
 
 
 
 
 
Annuities
 
$—
 
$(12)
 
$(154)
 
$—
 
$—
Life
 
 
 
(11)
 
 
(16)
Run-off
 
 
(14)
 
140
 
 
(16)
Corporate & Other
 
27
 
39
 
69
 
44
 
37
Total notable items (1)
 
$27
 
$13
 
$44
 
$44
 
$5
 
 
 
 
 
 
 
 
 
 
 
(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.

croppedlogocopya04.jpg
 
 
 
 
 






 
 
Financial Supplement
 
18




Variable Annuity Separate Account Returns and Allocations (Unaudited)

  
 
For the Three Months Ended
VARIABLE ANNUITY SEPARATE ACCOUNT RETURNS
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Total Quarterly VA separate account gross returns
 
10.02%
 
(9.23)%
 
3.02%
 
1.76%
 
(0.51)%
 
 
 
 
 
 
 
 
 
 
 
TOTAL VARIABLE ANNUITY SEPARATE ACCOUNT ALLOCATIONS
 
 
 
 
 
 
 
 
 
 
Percent allocated to equity funds
 
25.72%
 
24.83%
 
26.06%
 
25.61%
 
25.24%
Percent allocated to bond funds/other funds
 
8.30%
 
8.79%
 
8.02%
 
8.14%
 
8.26%
Percent allocated to target volatility funds
 
22.97%
 
23.05%
 
22.62%
 
22.74%
 
22.69%
Percent allocated to balanced funds
 
43.01%
 
43.33%
 
43.30%
 
43.51%
 
43.81%
 
 
 
 
 
 
 
 
 
 
 

croppedlogocopya04.jpg
 
 
 
 
 






 
 
Financial Supplement
 
19




Summary of Investments (Unaudited, dollars in millions)
 
 
March 31, 2019
 
December 31, 2018
 
 
Amount
 
% of Total
 
Amount
 
% of Total
Fixed maturity securities:
 
 
 
 
 
 
 
 
U.S. corporate securities
 
$25,856
 
28.70%
 
$24,473
 
28.02%
U.S. government and agency securities
 
8,088
 
8.98%
 
9,095
 
10.41%
Residential mortgage-backed securities
 
8,883
 
9.86%
 
8,547
 
9.79%
Foreign corporate securities
 
9,073
 
10.07%
 
8,026
 
9.19%
State and political subdivision securities
 
3,811
 
4.23%
 
3,597
 
4.12%
Commercial mortgage-backed securities
 
5,427
 
6.02%
 
5,248
 
6.01%
Asset-backed securities
 
2,078
 
2.30%
 
2,126
 
2.44%
Foreign government securities
 
1,631
 
1.81%
 
1,496
 
1.71%
Total fixed maturity securities
 
64,847
 
71.97%
 
62,608
 
71.69%
Equity securities
 
150
 
0.17%
 
140
 
0.16%
Mortgage loans:
 
 
 
 
 
 
 
 
Commercial mortgage loans
 
8,748
 
9.72%
 
8,529
 
9.77%
Agricultural mortgage loans
 
3,155
 
3.50%
 
2,946
 
3.37%
Residential mortgage loans
 
2,661
 
2.95%
 
2,276
 
2.61%
Valuation allowances
 
(60)
 
(0.07)%
 
(57)
 
(0.07)%
Total mortgage loans, net
 
14,504
 
16.10%
 
13,694
 
15.68%
Policy loans
 
1,385
 
1.54%
 
1,421
 
1.63%
Real estate limited partnerships and limited liability companies
 
453
 
0.50%
 
451
 
0.52%
Other limited partnership interests
 
1,800
 
2.00%
 
1,840
 
2.11%
Cash, cash equivalents and short-term investments
 
4,663
 
5.17%
 
4,145
 
4.75%
Other invested assets:
 
 
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
 
 
 
Interest rate
 
916
 
1.01%
 
717
 
0.82%
Equity market
 
862
 
0.96%
 
1,732
 
1.98%
Foreign currency exchange rate
 
270
 
0.30%
 
313
 
0.36%
Credit
 
25
 
0.03%
 
16
 
0.02%
Total derivatives
 
2,073
 
2.30%
 
2,778
 
3.18%
FHLB common stock
 
50
 
0.06%
 
64
 
0.07%
Other
 
179
 
0.19%
 
185
 
0.21%
Total other invested assets
 
2,302
 
2.55%
 
3,027
 
3.46%
Total investments and cash and cash equivalents
 
$90,104
 
100.00%
 
$87,326
 
100.00%

 
 
For the Three Months Ended
 
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Net investment income yield (1)
 
4.10%
 
4.48%
 
4.50%
 
4.37%
 
4.50%
 
 
 
 
 
 
 
 
 
 
 
(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.

croppedlogocopya04.jpg
 
 
 
 
 






 
 
Financial Supplement
 
20




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

 
 
For the Three Months Ended
 
For the Three Months Ended
REVENUES AND EXPENSES (1)
 
March 31,
2019 (2)
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
March 31,
2019 (2)
 
March 31,
2018
Total revenues (Line 9)
 
$2,400
 
$4,333
 
$2,921
 
$2,910
 
$2,846
 
$2,400
 
$2,846
Total benefits and expenses before dividends to policyholders (Line 28)
 
$2,400
 
$4,830
 
$2,383
 
$2,764
 
$2,211
 
$2,400
 
$2,211
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
For the Three Months Ended
NET INCOME (LOSS) (1)
 
March 31,
2019 (2)
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
March 31,
2019 (2)
 
March 31,
2018
Gain (loss) from operations net of taxes (Line 33)
 
$(50)
 
$(493)
 
$582
 
$175
 
$704
 
$(50)
 
$704
Net realized capital gains (losses), net of federal income tax and transfers to interest maintenance reserve (Line 34)
 
(150)
 
(203)
 
(388)
 
(313)
 
(1,019)
 
(150)
 
(1,019)
Net income (loss) (Line 35)
 
$(200)
 
$(696)
 
$194
 
$(138)
 
$(315)
 
$(200)
 
$(315)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of
 
 
COMBINED TOTAL ADJUSTED CAPITAL
 
March 31,
2019 (2)
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
 
 
 
Combined total adjusted capital
 
$6,300
 
$7,354
 
$6,004
 
$6,042
 
$6,469
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 ended March 31, 2019.

croppedlogocopya04.jpg
 
 
 
 
 






 
 
 
 
 









Appendix




 
 
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, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operating and financial results, as well as statements regarding the expected benefits of the separation (the “Separation”) from MetLife, Inc. (“MetLife”).
Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of Brighthouse Financial. These statements are based on current expectations and the current economic environment and involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others: differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models; higher risk management costs and exposure to increased market and counterparty risk due to guarantees within certain of our products; the effectiveness of our variable annuity exposure management strategy and the impact of such strategy on net income volatility and negative effects on our statutory capital; the reserves we are 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; 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 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; 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; any failure of third parties to provide services we need, any failure of the practices and procedures of these third parties and any inability to obtain information or assistance we need from third parties, including MetLife; whether all or any portion of the tax consequences of the Separation 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 including the potential of outcomes adverse to us that could cause us to owe MetLife material tax reimbursements or payments or disagreements regarding MetLife’s or our obligations under our other agreements; 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 potential future tax legislation that could decrease the value of our tax attributes and cause other cash expenses, such as reserves, to increase materially and make some of our products less attractive to consumers; whether the Separation will qualify for non-recognition treatment for federal income tax purposes and potential indemnification to MetLife if the Separation does not so qualify; 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; 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 our Annual Report on Form 10-K for the year ended December 31, 2018, particularly in the sections entitled “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk,” as well as in our 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 equity
 
(vii)
return on equity
(viii)
adjusted return on equity, less notable items
 
(viii)
return on equity
(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.

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. 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 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”) and amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses).

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”);

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 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 Brighthouse Financial, Inc.'s stockholders’ equity, excluding preferred stock and 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 Preferred Stock and AOCI

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

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




Non-GAAP and Other Financial Disclosures (Cont.)


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.

Adjusted Statutory Earnings

Adjusted statutory earnings is a measure of our insurance companies' ability to pay future distributions and are reflective of whether our hedging program functions as intended. Adjusted statutory earnings is calculated as statutory pre-tax income less the change in the variable annuities reserve methodology (Actuarial Guideline 43) while including the change in both the reserve and capital methodology based CTE95 calculation, as well as unrealized gains (losses) associated with the variable annuities risk management strategy. Adjusted statutory earnings 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.


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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)
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,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Net income (loss) available to shareholders
 
$(737)
 
$1,442
 
$(271)
 
$(239)
 
$(67)
Adjustments from net income (loss) available to shareholders to adjusted earnings:
 
 
 
 
 
 
 
 
 
 
Less: Net investment gains (losses)
 
(11)
 
(86)
 
(42)
 
(75)
 
(4)
Less: Net derivative gains (losses), excluding investment hedge adjustments
 
(1,303)
 
2,038
 
(693)
 
(316)
 
(342)
Less: GMIB Fees and GMIB Costs (1)
 
35
 
(137)
 
28
 
(19)
 
4
Less: Amortization of DAC and VOBA (1)
 
75
 
(233)
 
22
 
(96)
 
(128)
Less: Market value adjustments
 
(23)
 
(1)
 
7
 
8
 
31
Less: Other
 
 
 
(4)
 
1
 
(4)
Less: Provision for income tax (expense) benefit on reconciling adjustments
 
258
 
(325)
 
141
 
105
 
93
Adjusted earnings
 
232
 
186
 
270
 
153
 
283
Less: Notable items
 
(27)
 
(13)
 
(44)
 
(44)
 
(5)
Adjusted earnings, less notable items
 
$259
 
$199
 
$314
 
$197
 
$288
 
 
 
 
 
 
 
 
 
 
 
ADJUSTED EARNINGS, LESS NOTABLE ITEMS PER COMMON SHARE (2)
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to shareholders per common share
 
$(6.31)
 
$12.14
 
$(2.26)
 
$(2.01)
 
$(0.56)
Less: Net investment gains (losses)
 
(0.09)
 
(0.73)
 
(0.35)
 
(0.64)
 
(0.03)
Less: Net derivative gains (losses), excluding investment hedge adjustments
 
(11.16)
 
17.17
 
(5.79)
 
(2.64)
 
(2.86)
Less: GMIB Fees and GMIB Costs (1)
 
0.30
 
(1.15)
 
0.24
 
(0.16)
 
0.03
Less: Amortization of DAC and VOBA (1)
 
0.64
 
(1.96)
 
0.18
 
(0.80)
 
(1.07)
Less: Market value adjustments
 
(0.20)
 
(0.01)
 
0.06
 
0.07
 
0.26
Less: Other
 
 
 
(0.03)
 
0.01
 
(0.03)
Less: Provision for income tax (expense) benefit on reconciling adjustments
 
2.21
 
(2.74)
 
1.18
 
0.88
 
0.78
Less: Impact of inclusion of dilutive shares
 
0.01
 
 
0.02
 
 
Adjusted earnings per common share
 
1.98
 
1.56
 
2.23
 
1.27
 
2.36
Less: Notable items
 
(0.23)
 
(0.11)
 
(0.36)
 
(0.37)
 
(0.04)
Adjusted earnings, less notable items per common share
 
$2.21
 
$1.68
 
$2.60
 
$1.64
 
$2.40
 
 
 
 
 
 
 
 
 
 
 
(1) Certain amounts prior to March 31, 2019 have been reclassified to conform to the current period presentation.
(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 Equity to Adjusted Return on Equity (Unaudited, dollars in millions)

 
 
Four Quarters Cumulative Trailing Basis
ADJUSTED EARNINGS
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Net income (loss) available to shareholders
 
$195
 
$865
 
$91
 
$(581)
 
$(96)
Adjustments from net income (loss) available to shareholders to adjusted earnings:
 
 
 
 
 
 
 
 
 
 
Less: Net investment gains (losses)
 
(214)
 
(207)
 
(115)
 
(52)
 
23
Less: Net derivative gains (losses), excluding investment hedge adjustments
 
(274)
 
687
 
(1,775)
 
(1,264)
 
(1,053)
Less: GMIB Fees and GMIB Costs (1)
 
(93)
 
(124)
 
31
 
(282)
 
(332)
Less: Amortization of DAC and VOBA (1)
 
(232)
 
(435)
 
(292)
 
(523)
 
(322)
Less: Market value adjustments
 
(9)
 
45
 
43
 
35
 
16
Less: Other
 
(3)
 
(7)
 
(11)
 
21
 
(5)
Less: Provision for income tax (expense) benefit on reconciling adjustments
 
179
 
14
 
512
 
732
 
654
Adjusted earnings
 
$841
 
$892
 
$1,698
 
$752
 
$923
 
 
Five Quarters Average Stockholders' Equity Basis
BRIGHTHOUSE FINANCIAL, INC.’S STOCKHOLDERS’ EQUITY, EXCLUDING PREFERRED STOCK AND AOCI
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Brighthouse Financial, Inc.’s stockholders’ equity (2)
 
$13,864
 
$13,767
 
$13,637
 
$14,343
 
$14,679
Less: Preferred stock
 
82
 
 
 
 
Less: AOCI (2)
 
898
 
899
 
1,018
 
1,286
 
1,424
Brighthouse Financial, Inc.’s stockholders’ equity, excluding preferred stock and AOCI
 
$12,884
 
$12,868
 
$12,619
 
$13,057
 
$13,255
 
 
Five Quarters Average Stockholders' Equity Basis
ADJUSTED RETURN ON EQUITY
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Return on equity
 
1.4%
 
6.3%
 
0.7%
 
(4.0)%
 
(0.7)%
Return on preferred stock
 
237.8%
 
—%
 
—%
 
—%
 
—%
Return on AOCI (2)
 
21.7%
 
96.2%
 
8.9%
 
(45.2)%
 
(6.7)%
Return on equity, excluding preferred stock and AOCI
 
1.5%
 
6.7%
 
0.7%
 
(4.5)%
 
(0.7)%
Return on adjustments from net income (loss) available to shareholders to adjusted earnings:
 
 
 
 
 
 
 
 
 
 
Less: Return on net investment gains (losses)
 
(1.7)%
 
(1.6)%
 
(0.9)%
 
(0.4)%
 
0.2%
Less: Return on net derivative gains (losses), excluding investment hedge adjustments
 
(2.1)%
 
5.4%
 
(14.1)%
 
(9.8)%
 
(8.0)%
Less: Return on GMIB Fees and GMIB Costs (1)
 
(0.7)%
 
(1.0)%
 
0.2%
 
(2.2)%
 
(2.5)%
Less: Return on amortization of DAC and VOBA (1)
 
(1.8)%
 
(3.4)%
 
(2.2)%
 
(4.0)%
 
(2.4)%
Less: Return on market value adjustments
 
(0.1)%
 
0.3%
 
0.3%
 
0.3%
 
0.1%
Less: Return on other
 
—%
 
—%
 
(0.1)%
 
0.2%
 
—%
Less: Return on provision for income tax (expense) benefit on reconciling adjustments
 
1.4%
 
0.1%
 
4.0%
 
5.6%
 
4.9%
Adjusted return on equity
 
6.5%
 
6.9%
 
13.5%
 
5.8%
 
7.0%
 
 
 
 
 
 
 
 
 
 
 
(1) Certain amounts prior to March 31, 2019 have been reclassified to conform to the current period presentation.
(2) See Note (1) to the Balance Sheets on page 3 for information regarding changes to amounts originally reported for the first quarter of 2018.

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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,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
March 31,
2019
 
March 31,
2018
Total revenues
 
$691
 
$4,026
 
$1,422
 
$1,702
 
$1,815
 
$691
 
$1,815
Less: Net investment gains (losses)
 
(11)
 
(86)
 
(42)
 
(75)
 
(4)
 
(11)
 
(4)
Less: Net derivative gains (losses)
 
(1,303)
 
2,039
 
(691)
 
(312)
 
(334)
 
(1,303)
 
(334)
Less: GMIB Fees
 
66
 
67
 
68
 
69
 
67
 
66
 
67
Less: Investment hedge adjustments
 
 
(1)
 
(2)
 
(3)
 
(8)
 
 
(8)
Less: Other
 
 
 
 
(3)
 
(4)
 
 
(4)
Total adjusted revenues
 
$1,939
 
$2,007
 
$2,089
 
$2,026
 
$2,098
 
$1,939
 
$2,098
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total expenses
 
$1,644
 
$2,239
 
$1,790
 
$2,019
 
$1,928
 
$1,644
 
$1,928
Less: Amortization of DAC and VOBA (1)
 
(75)
 
233
 
(22)
 
96
 
128
 
(75)
 
128
Less: GMIB Costs (1)
 
31
 
204
 
40
 
88
 
63
 
31
 
63
Less: Other
 
23
 
1
 
(3)
 
(11)
 
(31)
 
23
 
(31)
Total adjusted expenses
 
$1,665
 
$1,801
 
$1,775
 
$1,846
 
$1,768
 
$1,665
 
$1,768
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Certain amounts prior to March 31, 2019 have been reclassified to conform to the current period presentation.
 
 
 
 

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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,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
March 31,
2019
 
March 31,
2018
Investment portfolio gains (losses)
 
$(8)
 
$(55)
 
$(35)
 
$(68)
 
$2
 
$(8)
 
$2
Investment portfolio writedowns
 
(3)
 
(2)
 
(4)
 
(2)
 
(3)
 
(3)
 
(3)
Total net investment portfolio gains (losses)
 
(11)
 
(57)
 
(39)
 
(70)
 
(1)
 
(11)
 
(1)
Other incremental net investment income
 
 
(29)
 
(3)
 
(5)
 
(3)
 
 
(3)
Net investment gains (losses)
 
$(11)
 
$(86)
 
$(42)
 
$(75)
 
$(4)
 
$(11)
 
$(4)


 
 
For the Three Months Ended
NET INVESTMENT INCOME YIELD
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
Investment income yield (1)
 
4.24%
 
4.62%
 
4.67%
 
4.53%
 
4.65%
Investment fees and expenses
 
(0.14)%
 
(0.14)%
 
(0.17)%
 
(0.16)%
 
(0.15)%
Net investment income yield (1)
 
4.10%
 
4.48%
 
4.50%
 
4.37%
 
4.50%
 
 
 
 
 
 
 
 
 
 
 
(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.

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