bhf-20210630

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 June 30, 2021


☐			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 of 6.600% Non-Cumulative Preferred Stock, Series A	BHFAP	The Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/1,000th interest in a share of 6.750% Non-Cumulative Preferred Stock, Series B	BHFAO	The Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/1,000th interest in a share of 5.375% Non-Cumulative Preferred Stock, Series C	BHFAN	The Nasdaq Stock Market LLC
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

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 August 4, 2021, 83,110,216 shares of the registrant’s common stock were outstanding.

Table of Contents


		Page
Part I — Financial Information
Item 1.	Consolidated Financial Statements (at June 30, 2021 (Unaudited) and December 31, 2020 and for the Three Months and Six Months Ended June 30, 2021 and 2020 (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	7
	Note 3 — Insurance	11
	Note 4 — Investments	12
	Note 5 — Derivatives	24
	Note 6 — Fair Value	30

	Note 7 — Equity	39
	Note 8 — Other Revenues and Other Expenses	42
	Note 9 — Earnings Per Common Share	43
	Note 10 — Contingencies, Commitments and Guarantees	44
	Note 11 — Subsequent Events	46
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	91
Item 4.	Controls and Procedures	91

Part II — Other Information
Item 1.	Legal Proceedings	93
Item 1A.	Risk Factors	93
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	93

Item 6.	Exhibits	94

Signature		95

Table of Contents

Part I — Financial Information

Item 1. Financial Statements

Brighthouse Financial, Inc.

Interim Condensed Consolidated Balance Sheets

June 30, 2021 (Unaudited) and December 31, 2020

(In millions, except share and per share data)


	June 30, 2021		December 31, 2020
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $75,454 and $70,529, respectively; allowance for credit losses of $9 and $2, respectively)	$	84,785	$	82,495
Equity securities, at estimated fair value	91		138
Mortgage loans (net of allowance for credit losses of $97 and $94, respectively)	16,732		15,808
Policy loans	1,255		1,291
Limited partnerships and limited liability companies	3,546		2,810
Short-term investments, principally at estimated fair value	1,293		3,242
Other invested assets, principally at estimated fair value (net of allowance for credit losses of $13 and $13, respectively)	2,863		3,747
Total investments	110,565		109,531
Cash and cash equivalents	4,882		4,108
Accrued investment income	827		676
Premiums, reinsurance and other receivables (net of allowance for credit losses of $10 and $10, respectively)	16,127		16,158
Deferred policy acquisition costs and value of business acquired	5,122		4,911

Other assets	494		516
Separate account assets	115,839		111,969
Total assets	$	253,856	$	247,869
Liabilities and Equity
Liabilities
Future policy benefits	$	43,427	$	44,448
Policyholder account balances	60,300		54,508
Other policy-related balances	3,356		3,411
Payables for collateral under securities loaned and other transactions	5,143		5,252
Long-term debt	3,436		3,436
Current income tax payable	150		126
Deferred income tax liability	1,109		1,620
Other liabilities	4,916		5,011
Separate account liabilities	115,839		111,969
Total liabilities	237,676		229,781
Contingencies, Commitments and Guarantees (Note 10)
Equity
Brighthouse Financial, Inc.’s stockholders’ equity:
Preferred stock, par value $0.01 per share; $1,403 aggregate liquidation preference	—		—
Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 121,475,669 and 121,002,523 shares issued, respectively; 84,223,669 and 88,211,618 shares outstanding, respectively	1		1
Additional paid-in capital	13,842		13,878
Retained earnings (deficit)	(1,088)		(534)
Treasury stock, at cost; 37,252,000 and 32,790,905 shares, respectively	(1,236)		(1,038)
Accumulated other comprehensive income (loss)	4,596		5,716
Total Brighthouse Financial, Inc.’s stockholders’ equity	16,115		18,023
Noncontrolling interests	65		65
Total equity	16,180		18,088
Total liabilities and equity	$	253,856	$	247,869

See accompanying notes to the interim condensed consolidated financial statements.

Table of Contents

Brighthouse Financial, Inc.

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

For the Three Months and Six Months Ended June 30, 2021 and 2020 (Unaudited)

(In millions, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenues
Premiums	$	162	$	193	$	346	$	391
Universal life and investment-type product policy fees	919		827		1,849		1,713
Net investment income	1,212		652		2,399		1,568
Other revenues	101		93		228		195
Net investment gains (losses)	(34)		(34)		(20)		(53)
Net derivative gains (losses)	(684)		(2,653)		(2,188)		4,249
Total revenues	1,676		(922)		2,614		8,063
Expenses
Policyholder benefits and claims	752		839		1,508		2,026
Interest credited to policyholder account balances	287		276		584		535
Amortization of deferred policy acquisition costs and value of business acquired	8		(92)		99		678
Other expenses	608		577		1,170		1,094
Total expenses	1,655		1,600		3,361		4,333
Income (loss) before provision for income tax	21		(2,522)		(747)		3,730
Provision for income tax expense (benefit)	(10)		(531)		(195)		762
Net income (loss)	31		(1,991)		(552)		2,968
Less: Net income (loss) attributable to noncontrolling interests	—		—		2		2
Net income (loss) attributable to Brighthouse Financial, Inc.	31		(1,991)		(554)		2,966
Less: Preferred stock dividends	21		7		46		14
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders	$	10	$	(1,998)	$	(600)	$	2,952
Comprehensive income (loss)	$	1,238	$	327	$	(1,672)	$	4,693
Less: Comprehensive income (loss) attributable to noncontrolling interests	—		—		2		2
Comprehensive income (loss) attributable to Brighthouse Financial, Inc.	$	1,238	$	327	$	(1,674)	$	4,691


Earnings per common share
Basic	$	0.12	$	(21.10)	$	(6.93)	$	29.60
Diluted	$	0.11	$	(21.10)	$	(6.93)	$	29.56

See accompanying notes to the interim condensed consolidated financial statements.

Table of Contents

Brighthouse Financial, Inc.

Interim Condensed Consolidated Statements of Equity

For the Three Months and Six Months Ended June 30, 2021 and 2020 (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, 2020	$	—	$	1	$	13,878	$	(534)	$	(1,038)	$	5,716	$	18,023	$	65	$	18,088
Treasury stock acquired in connection with share repurchases									(68)				(68)				(68)
Share-based compensation			—		5				(6)				(1)				(1)
Dividends on preferred stock					(25)								(25)				(25)
Change in noncontrolling interests													—		(2)		(2)
Net income (loss)							(585)						(585)		2		(583)
Other comprehensive income (loss), net of income tax											(2,327)		(2,327)				(2,327)
Balance at March 31, 2021	—		1		13,858		(1,119)		(1,112)		3,389		15,017		65		15,082
Treasury stock acquired in connection with share repurchases									(124)				(124)				(124)
Share-based compensation			—		5				—				5				5
Dividends on preferred stock					(21)								(21)				(21)
Change in noncontrolling interests													—		—		—
Net income (loss)							31						31		—		31
Other comprehensive income (loss), net of income tax											1,207		1,207				1,207
Balance at June 30, 2021	$	—	$	1	$	13,842	$	(1,088)	$	(1,236)	$	4,596	$	16,115	$	65	$	16,180


	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, 2019	$	—	$	1	$	12,908	$	585	$	(562)	$	3,240	$	16,172	$	65	$	16,237
Cumulative effect of change in accounting principle, net of income tax							(14)				3		(11)				(11)
Balance at January 1, 2020	—		1		12,908		571		(562)		3,243		16,161		65		16,226
Treasury stock acquired in connection with share repurchases									(142)				(142)				(142)
Share-based compensation					3				(2)				1				1
Dividends on preferred stock							(7)						(7)				(7)
Change in noncontrolling interests													—		(2)		(2)
Net income (loss)							4,957						4,957		2		4,959
Other comprehensive income (loss), net of income tax											(596)		(596)				(596)
Balance at March 31, 2020	—		1		12,911		5,521		(706)		2,647		20,374		65		20,439
Preferred stock issuance	—				390								390				390
Treasury stock acquired in connection with share repurchases									(180)				(180)				(180)
Share-based compensation			—		6				(1)				5				5
Dividends on preferred stock							(7)						(7)				(7)
Change in noncontrolling interests													—		—		—
Net income (loss)							(1,991)						(1,991)		—		(1,991)
Other comprehensive income (loss), net of income tax											2,318		2,318				2,318
Balance at June 30, 2020	$	—	$	1	$	13,307	$	3,523	$	(887)	$	4,965	$	20,909	$	65	$	20,974

See accompanying notes to the interim condensed consolidated financial statements.

Table of Contents

Brighthouse Financial, Inc.

Interim Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2021 and 2020 (Unaudited)

(In millions)


	Six Months Ended June 30,
	2021		2020
Net cash provided by (used in) operating activities	$	69	$	467
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities	5,238		3,729
Equity securities	101		27
Mortgage loans	1,384		827
Limited partnerships and limited liability companies	117		86
Purchases of:
Fixed maturity securities	(9,833)		(5,894)
Equity securities	(6)		—
Mortgage loans	(2,247)		(923)
Limited partnerships and limited liability companies	(379)		(298)
Cash received in connection with freestanding derivatives	2,140		4,958
Cash paid in connection with freestanding derivatives	(2,893)		(2,138)



Net change in policy loans	36		91
Net change in short-term investments	1,949		(2,565)
Net change in other invested assets	(19)		(25)

Net cash provided by (used in) investing activities	(4,412)		(2,125)
Cash flows from financing activities
Policyholder account balances:
Deposits	6,886		4,835
Withdrawals	(1,295)		(1,153)
Net change in payables for collateral under securities loaned and other transactions	(109)		3,485
Long-term debt issued	—		614
Long-term debt repaid	(1)		(1,001)
Preferred stock issued, net of issuance costs	—		390
Dividends on preferred stock	(46)		(14)
Treasury stock acquired in connection with share repurchases	(192)		(322)



Financing element on certain derivative instruments and other derivative related transactions, net	(118)		(698)
Other, net	(8)		(30)
Net cash provided by (used in) financing activities	5,117		6,106
Change in cash, cash equivalents and restricted cash	774		4,448
Cash, cash equivalents and restricted cash, beginning of period	4,108		2,877
Cash, cash equivalents and restricted cash, end of period	$	4,882	$	7,325
Supplemental disclosures of cash flow information
Net cash paid (received) for:
Interest	$	81	$	88