Segment Information

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Segment Information

2. Segment Information

The Company is organized into three segments: Annuities; Life; and Run-off. In addition, the Company reports certain of its results of operations in Corporate & Other.

Annuities

The Annuities segment consists of a variety of variable, fixed, index-linked and income annuities designed to address contract holders’ needs for protected wealth accumulation on a tax-deferred basis, wealth transfer and income security.

Life

The Life segment consists of insurance products and services, including term, universal, whole and variable life products designed to address policyholders’ needs for financial security and protected wealth transfer, which may be provided on a tax-advantaged basis.

Run-off

The Run-off segment consists of products no longer actively sold and which are separately managed, including structured settlements, pension risk transfer contracts, certain company-owned life insurance policies, funding agreements and universal life with secondary guarantees.

Corporate & Other

Corporate & Other contains the excess capital not allocated to the segments and interest expense related to the majority of the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. Corporate & Other also includes long-term care and workers’ compensation business reinsured through 100% quota share reinsurance agreements and term life insurance sold direct to consumers, which is no longer being offered for new sales.

Financial Measures and Segment Accounting Policies

Adjusted earnings is a financial measure used by management to evaluate performance, allocate resources and facilitate comparisons to industry results. Consistent with GAAP guidance for segment reporting, adjusted earnings is also used to measure segment performance. The Company believes the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of its performance by the investor community. Adjusted earnings should not be viewed as a substitute for net income (loss) available to BHF’s common shareholders and excludes net income (loss) attributable to noncontrolling interests and preferred stock dividends.

Adjusted earnings, which may be positive or negative, focuses on the Company’s primary businesses principally by excluding the impact of market volatility, which could distort trends.

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

•Net investment gains (losses);

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

•Certain variable annuity guaranteed minimum income benefits (“GMIBs”) fees (“GMIB Fees”).

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

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

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

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

The tax impact of the adjustments mentioned above is calculated net of the statutory tax rate, which could differ from the Company’s effective tax rate.

The segment accounting policies are the same as those used to prepare the Company’s interim condensed consolidated financial statements, except for the adjustments to calculate adjusted earnings described above. In addition, segment accounting policies include the methods of capital allocation described below.

Segment investment and capitalization targets are based on statutory oriented risk principles and metrics. Segment invested assets backing liabilities are based on net statutory liabilities plus excess capital. For the variable annuity business, the excess capital held is based on the target statutory total asset requirement consistent with the Company’s variable annuity risk management strategy. For insurance businesses other than variable annuities, excess capital held is based on a percentage of required statutory risk-based capital. Assets in excess of those allocated to the segments, if any, are held in Corporate & Other. Segment net investment income reflects the performance of each segment’s respective invested assets.

Operating results by segment, as well as Corporate & Other, were as follows:

	Three Months Ended September 30, 2020
	Annuities		Life		Run-off		Corporate & Other		Total
	(In millions)
Pre-tax adjusted earnings	$	479	$	94	$	(1,443)	$	(32)	$	(902)
Provision for income tax expense (benefit)	92		18		(304)		(38)		(232)
Post-tax adjusted earnings	387		76		(1,139)		6		(670)
Less: Net income (loss) attributable to noncontrolling interests	—		—		—		2		2
Less: Preferred stock dividends	—		—		—		17		17
Adjusted earnings	$	387	$	76	$	(1,139)	$	(13)	(689)
Adjustments for:
Net investment gains (losses)									5
Net derivative gains (losses)									(1,857)
Other adjustments to net income (loss)									(1,089)
Provision for income tax (expense) benefit									618
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders									$	(3,012)
Interest revenue	$	469	$	131	$	383	$	18
Interest expense	$	—	$	—	$	—	$	47

	Three Months Ended September 30, 2019
	Annuities		Life		Run-off		Corporate & Other		Total
	(In millions)
Pre-tax adjusted earnings	$	255	$	91	$	(543)	$	(67)	$	(264)
Provision for income tax expense (benefit)	52		18		(117)		(57)		(104)
Post-tax adjusted earnings	203		73		(426)		(10)		(160)
Less: Net income (loss) attributable to noncontrolling interests	—		—		—		2		2
Less: Preferred stock dividends	—		—		—		7		7
Adjusted earnings	$	203	$	73	$	(426)	$	(19)	(169)
Adjustments for:
Net investment gains (losses)									27
Net derivative gains (losses)									1,057
Other adjustments to net income (loss)									(16)
Provision for income tax (expense) benefit									(223)
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders									$	676
Interest revenue	$	461	$	117	$	327	$	23
Interest expense	$	—	$	—	$	—	$	49

	Nine Months Ended September 30, 2020
	Annuities		Life		Run-off		Corporate & Other		Total
	(In millions)
Pre-tax adjusted earnings	$	1,073	$	167	$	(1,679)	$	(189)	$	(628)
Provision for income tax expense (benefit)	199		32		(355)		(72)		(196)
Post-tax adjusted earnings	874		135		(1,324)		(117)		(432)
Less: Net income (loss) attributable to noncontrolling interests	—		—		—		4		4
Less: Preferred stock dividends	—		—		—		31		31
Adjusted earnings	$	874	$	135	$	(1,324)	$	(152)	(467)
Adjustments for:
Net investment gains (losses)									(48)
Net derivative gains (losses)									2,392
Other adjustments to net income (loss)									(1,829)
Provision for income tax (expense) benefit									(108)
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders									$	(60)
Interest revenue	$	1,334	$	316	$	873	$	54
Interest expense	$	—	$	—	$	—	$	139

	Nine Months Ended September 30, 2019
	Annuities		Life		Run-off		Corporate & Other		Total
	(In millions)
Pre-tax adjusted earnings	$	939	$	194	$	(587)	$	(224)	$	322
Provision for income tax expense (benefit)	176		38		(127)		(100)		(13)
Post-tax adjusted earnings	763		156		(460)		(124)		335
Less: Net income (loss) attributable to noncontrolling interests	—		—		—		4		4
Less: Preferred stock dividends	—		—		—		14		14
Adjusted earnings	$	763	$	156	$	(460)	$	(142)	317
Adjustments for:
Net investment gains (losses)									79
Net derivative gains (losses)									(97)
Other adjustments to net income (loss)									16
Provision for income tax (expense) benefit									1
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders									$	316
Interest revenue	$	1,352	$	330	$	942	$	57
Interest expense	$	—	$	—	$	—	$	144

Total revenues by segment, as well as Corporate & Other, were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(In millions)
Annuities	$	1,157	$	1,184	$	3,360	$	3,495
Life	350		320		989		953
Run-off	553		484		1,378		1,487
Corporate & Other	39		47		118		132
Adjustments	(1,790)		1,152		2,527		181
Total	$	309	$	3,187	$	8,372	$	6,248

Total assets by segment, as well as Corporate & Other, were as follows at:

	September 30, 2020		December 31, 2019
	(In millions)
Annuities	$	162,285	$	156,965
Life	22,839		21,876
Run-off	38,256		35,112
Corporate & Other	16,301		13,306
Total	$	239,681	$	227,259