UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___                    

Commission File Number: 001-37905

Brighthouse Financial, Inc.

(Exact name of registrant as specified in its charter)

Delaware			81-3846992
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
11225 North Community House Road,	Charlotte,	North Carolina	28277
(Address of principal executive offices)			(Zip Code)

(980) 365-7100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	BHF	The Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/1,000th interest in a share	BHFAP	The Nasdaq Stock Market LLC
of 6.600% Non-Cumulative Preferred Stock, Series A
6.250% Junior Subordinated Debentures due 2058	BHFAL	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ  No ¨   

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes þ    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	þ	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company		☐
		Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐ No þ

As of November 1, 2019, 107,943,076 shares of the registrant’s common stock were outstanding.

Table of Contents

		Page
Part I — Financial Information
Item 1.	Consolidated Financial Statements (at September 30, 2019 (Unaudited) and December 31, 2018 and for the Three Months and Nine Months Ended September 30, 2019 and 2018 (Unaudited)):
	Interim Condensed Consolidated Balance Sheets	2
	Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	3
	Interim Condensed Consolidated Statements of Equity	4
	Interim Condensed Consolidated Statements of Cash Flows	5
	Notes to the Interim Condensed Consolidated Financial Statements (Unaudited):
	Note 1 — Business, Basis of Presentation and Summary of Significant Accounting Policies	6
	Note 2 — Segment Information	8
	Note 3 — Insurance	12
	Note 4 — Investments	13
	Note 5 — Derivatives	22
	Note 6 — Fair Value	30
	Note 7 — Long-term Debt	39
	Note 8 — Equity	39
	Note 9 — Other Revenues and Other Expenses	42
	Note 10 — Earnings Per Common Share	43
	Note 11 — Contingencies, Commitments and Guarantees	43
	Note 12 — Related Party Transactions	45
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	87
Item 4.	Controls and Procedures	88
Part II — Other Information
Item 1.	Legal Proceedings	89
Item 1A.	Risk Factors	89
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	89
Item 6.	Exhibits	90
Signatures		91

Part I — Financial Information

Item 1. Financial Statements

Brighthouse Financial, Inc.

Interim Condensed Consolidated Balance Sheets

September 30, 2019 (Unaudited) and December 31, 2018

(In millions, except share and per share data)

	September 30, 2019			December 31, 2018
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $63,115 and $60,920, respectively)	$	70,723		$	62,608
Equity securities, at estimated fair value	148			140
Mortgage loans (net of valuation allowances of $64 and $57, respectively)	15,359			13,694
Policy loans	1,332			1,421
Real estate limited partnerships and limited liability companies	458			451
Other limited partnership interests	1,895			1,840
Short-term investments, principally at estimated fair value	1,985			—
Other invested assets, principally at estimated fair value	4,734			3,027
Total investments	96,634			83,181
Cash and cash equivalents	4,289			4,145
Accrued investment income	732			724
Premiums, reinsurance and other receivables	14,385			13,697
Deferred policy acquisition costs and value of business acquired	5,317			5,717
Current income tax recoverable	14			1
Other assets	577			573
Separate account assets	103,928			98,256
Total assets	$	225,876		$	206,294
Liabilities and Equity
Liabilities
Future policy benefits	$	39,846		$	36,209
Policyholder account balances	44,919			40,054
Other policy-related balances	3,079			3,000
Payables for collateral under securities loaned and other transactions	5,291			5,057
Long-term debt	4,365			3,963
Current income tax payable	—			15
Deferred income tax liability	1,749			972
Other liabilities	4,939			4,285
Separate account liabilities	103,928			98,256
Total liabilities	208,116			191,811
Contingencies, Commitments and Guarantees (Note 11)
Equity
Brighthouse Financial, Inc.’s stockholders’ equity:
Preferred stock, par value $0.01 per share; $425 aggregate liquidation preference at September 30, 2019	—			—
Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 120,614,815 and 120,448,018 shares issued, respectively; 109,264,305 and 117,532,336 shares outstanding, respectively	1			1
Additional paid-in capital	12,897			12,473
Retained earnings (deficit)	1,662			1,346
Treasury stock, at cost; 11,350,510 and 2,915,682 shares, respectively	(432		)	(118		)
Accumulated other comprehensive income (loss)	3,567			716
Total Brighthouse Financial, Inc.’s stockholders’ equity	17,695			14,418
Noncontrolling interests	65			65
Total equity	17,760			14,483
Total liabilities and equity	$	225,876		$	206,294

See accompanying notes to the interim condensed consolidated financial statements.

2

Brighthouse Financial, Inc.

Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Three Months and Nine Months Ended September 30, 2019 and 2018 (Unaudited)

(In millions, except per share data)

	Three Months Ended  September 30,					Nine Months Ended  September 30,
	2019		2018			2019			2018
Revenues
Premiums	$	214	$	225		$	673		$	677
Universal life and investment-type product policy fees	867		972			2,630			2,936
Net investment income	928		853			2,681			2,476
Other revenues	94		105			282			308
Net investment gains (losses)	27		(42		)	79			(121		)
Net derivative gains (losses)	1,057		(691		)	(97		)	(1,337		)
Total revenues	3,187		1,422			6,248			4,939
Expenses
Policyholder benefits and claims	1,319		822			2,936			2,373
Interest credited to policyholder account balances	272		273			795			809
Amortization of deferred policy acquisition costs and value of business acquired	181		30			373			581
Other expenses	611		665			1,824			1,974
Total expenses	2,383		1,790			5,928			5,737
Income (loss) before provision for income tax	804		(368		)	320			(798		)
Provision for income tax expense (benefit)	119		(99		)	(14		)	(226		)
Net income (loss)	685		(269		)	334			(572		)
Less: Net income (loss) attributable to noncontrolling interests	2		2			4			5
Net income (loss) attributable to Brighthouse Financial, Inc.	683		(271		)	330			(577		)
Less: Preferred stock dividends	7		—			14			—
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders	$	676	$	(271	)	$	316		$	(577	)
Comprehensive income (loss)	$	1,550	$	(532	)	$	3,185		$	(1,617	)
Less: Comprehensive income (loss) attributable to noncontrolling interests	2		2			4			5
Comprehensive income (loss) attributable to Brighthouse Financial, Inc.	$	1,548	$	(534	)	$	3,181		$	(1,622	)

Earnings per common share
Basic	$	6.09	$	(2.26	)	$	2.77	$	(4.82	)
Diluted	$	6.06	$	(2.26	)	$	2.75	$	(4.82	)

See accompanying notes to the interim condensed consolidated financial statements.

3

Brighthouse Financial, Inc.

Interim Condensed Consolidated Statements of Equity

For the Three Months and Nine Months Ended September 30, 2019 and 2018 (Unaudited)

(In millions)

	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)			Treasury Stock at Cost			Accumulated Other Comprehensive Income (Loss)		Brighthouse Financial, Inc.’s Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2018	$	—	$	1	$	12,473	$	1,346		$	(118	)	$	716	$	14,418		$	65		$	14,483
Preferred stock issuance	—				412										412						412
Treasury stock acquired in connection with share repurchases										(188		)			(188		)				(188		)
Share-based compensation					8										8						8
Dividends on preferred stock							(7		)						(7		)				(7		)
Change in noncontrolling interests															—			(2		)	(2		)
Net income (loss)							(353		)						(353		)	2			(351		)
Other comprehensive income (loss), net of income tax													1,986		1,986						1,986
Balance at June 30, 2019	—		1		12,893		986			(306		)	2,702		16,276			65			16,341
Treasury stock acquired in connection with share repurchases										(126		)			(126		)				(126		)
Share-based compensation					4										4						4
Dividends on preferred stock							(7		)						(7		)				(7		)
Change in noncontrolling interests															—			(2		)	(2		)
Net income (loss)							683								683			2			685
Other comprehensive income (loss), net of income tax													865		865						865
Balance at September 30, 2019	$	—	$	1	$	12,897	$	1,662		$	(432	)	$	3,567	$	17,695		$	65		$	17,760

	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)			Treasury Stock at Cost		Accumulated Other Comprehensive Income (Loss)			Brighthouse Financial, Inc.’s Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2017	$	—	$	1	$	12,432	$	406		$	—	$	1,676		$	14,515		$	65		$	14,580
Cumulative effect of change in accounting principle and other, net of income tax							75					(79		)	(4		)				(4		)
Balance at January 1, 2018	—		1		12,432		481			—		1,597			14,511			65			14,576
Share-based compensation					12										12						12
Change in noncontrolling interests															—			(3		)	(3		)
Net income (loss)							(306		)						(306		)	3			(303		)
Other comprehensive income (loss), net of income tax												(782		)	(782		)				(782		)
Balance at June 30, 2018	—		1