bhf-20210930

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, 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 November 2, 2021, 79,818,953 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, 2021 (Unaudited) and December 31, 2020 and for the Three Months and Nine Months Ended September 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	25
	Note 6 — Fair Value	31

	Note 7 — Equity	40
	Note 8 — Other Revenues and Other Expenses	43
	Note 9 — Earnings Per Common Share	44
	Note 10 — Contingencies, Commitments and Guarantees	45

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	93
Item 4.	Controls and Procedures	93

Part II — Other Information
Item 1.	Legal Proceedings	95
Item 1A.	Risk Factors	95
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	95

Item 6.	Exhibits	96

Signature		97

Table of Contents

Part I — Financial Information

Item 1. Financial Statements

Brighthouse Financial, Inc.

Interim Condensed Consolidated Balance Sheets

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

(In millions, except share and per share data)


	September 30, 2021		December 31, 2020
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $78,425 and $70,529, respectively; allowance for credit losses of $7 and $2, respectively)	$	87,074	$	82,495
Equity securities, at estimated fair value	90		138
Mortgage loans (net of allowance for credit losses of $100 and $94, respectively)	18,267		15,808
Policy loans	1,264		1,291
Limited partnerships and limited liability companies	3,959		2,810
Short-term investments, principally at estimated fair value	1,892		3,242
Other invested assets, principally at estimated fair value (net of allowance for credit losses of $13 and $13, respectively)	2,774		3,747
Total investments	115,320		109,531
Cash and cash equivalents	4,108		4,108
Accrued investment income	764		676
Premiums, reinsurance and other receivables (net of allowance for credit losses of $10 and $10, respectively)	16,298		16,158
Deferred policy acquisition costs and value of business acquired	5,356		4,911

Other assets	484		516
Separate account assets	112,361		111,969
Total assets	$	254,691	$	247,869
Liabilities and Equity
Liabilities
Future policy benefits	$	43,795	$	44,448
Policyholder account balances	63,748		54,508
Other policy-related balances	3,406		3,411
Payables for collateral under securities loaned and other transactions	5,639		5,252
Long-term debt	3,436		3,436
Current income tax payable	148		126
Deferred income tax liability	1,120		1,620
Other liabilities	4,942		5,011
Separate account liabilities	112,361		111,969
Total liabilities	238,595		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; 121,495,849 and 121,002,523 shares issued, respectively; 80,952,682 and 88,211,618 shares outstanding, respectively	1		1
Additional paid-in capital	13,830		13,878
Retained earnings (deficit)	(705)		(534)
Treasury stock, at cost; 40,543,167 and 32,790,905 shares, respectively	(1,385)		(1,038)
Accumulated other comprehensive income (loss)	4,290		5,716
Total Brighthouse Financial, Inc.’s stockholders’ equity	16,031		18,023
Noncontrolling interests	65		65
Total equity	16,096		18,088
Total liabilities and equity	$	254,691	$	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 Nine Months Ended September 30, 2021 and 2020 (Unaudited)

(In millions, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues
Premiums	$	193	$	184	$	539	$	575
Universal life and investment-type product policy fees	881		882		2,730		2,595
Net investment income	1,281		996		3,680		2,564
Other revenues	117		99		345		294
Net investment gains (losses)	(16)		5		(36)		(48)
Net derivative gains (losses)	56		(1,857)		(2,132)		2,392
Total revenues	2,512		309		5,126		8,372
Expenses
Policyholder benefits and claims	1,112		3,047		2,620		5,073
Interest credited to policyholder account balances	413		281		997		816
Amortization of deferred policy acquisition costs and value of business acquired	(82)		244		17		922
Other expenses	579		580		1,749		1,674
Total expenses	2,022		4,152		5,383		8,485
Income (loss) before provision for income tax	490		(3,843)		(257)		(113)
Provision for income tax expense (benefit)	105		(850)		(90)		(88)
Net income (loss)	385		(2,993)		(167)		(25)
Less: Net income (loss) attributable to noncontrolling interests	2		2		4		4
Net income (loss) attributable to Brighthouse Financial, Inc.	383		(2,995)		(171)		(29)
Less: Preferred stock dividends	22		17		68		31
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders	$	361	$	(3,012)	$	(239)	$	(60)
Comprehensive income (loss)	$	79	$	(2,577)	$	(1,593)	$	2,116
Less: Comprehensive income (loss) attributable to noncontrolling interests	2		2		4		4
Comprehensive income (loss) attributable to Brighthouse Financial, Inc.	$	77	$	(2,579)	$	(1,597)	$	2,112


Earnings per common share
Basic	$	4.37	$	(32.49)	$	(2.80)	$	(0.61)
Diluted	$	4.34	$	(32.49)	$	(2.80)	$	(0.61)

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 Nine Months Ended September 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									(192)				(192)				(192)
Share-based compensation			—		10				(6)				4				4
Dividends on preferred stock					(46)								(46)				(46)
Change in noncontrolling interests													—		(2)		(2)
Net income (loss)							(554)						(554)		2		(552)
Other comprehensive income (loss), net of income tax											(1,120)		(1,120)				(1,120)
Balance at June 30,2021	—		1		13,842		(1,088)		(1,236)		4,596		16,115		65		16,180
Treasury stock acquired in connection with share repurchases									(149)				(149)				(149)
Share-based compensation			—		10								10				10
Dividends on preferred stock					(22)								(22)				(22)
Change in noncontrolling interests													—		(2)		(2)
Net income (loss)							383						383		2		385
Other comprehensive income (loss), net of income tax											(306)		(306)				(306)
Balance at September 30, 2021	$	—	$	1	$	13,830	$	(705)	$	(1,385)	$	4,290	$	16,031	$	65	$	16,096


	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
Preferred stock issuance	—				390								390				390
Treasury stock acquired in connection with share repurchases									(322)				(322)				(322)
Share-based compensation			—		9				(3)				6				6
Dividends on preferred stock							(14)						(14)				(14)
Change in noncontrolling interests													—		(2)		(2)
Net income (loss)							2,966						2,966		2		2,968
Other comprehensive income (loss), net of income tax											1,722		1,722				1,722
Balance at June 30, 2020	—		1		13,307		3,523		(887)		4,965		20,909		65		20,974
Treasury stock acquired in connection with share repurchases									(54)				(54)				(54)
Share-based compensation			—		7								7				7
Dividends on preferred stock							(17)						(17)				(17)
Change in noncontrolling interests													—		(2)		(2)
Net income (loss)							(2,995)						(2,995)		2		(2,993)
Other comprehensive income (loss), net of income tax											416		416				416
Balance at September 30, 2020	$	—	$	1	$	13,314	$	511	$	(941)	$	5,381	$	18,266	$	65	$	18,331

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 Nine Months Ended September 30, 2021 and 2020 (Unaudited)

(In millions)


	Nine Months Ended September 30,
	2021		2020
Net cash provided by (used in) operating activities	$	644	$	515
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities	8,541		6,011
Equity securities	114		54
Mortgage loans	2,005		1,232
Limited partnerships and limited liability companies	168		124
Purchases of:
Fixed maturity securities	(16,168)		(9,639)
Equity securities	(7)		(4)
Mortgage loans	(4,421)		(1,239)
Limited partnerships and limited liability companies	(560)		(423)
Cash received in connection with freestanding derivatives	3,213		5,280
Cash paid in connection with freestanding derivatives	(3,914)		(3,281)



Net change in policy loans	28		3
Net change in short-term investments	1,349		(2,269)
Net change in other invested assets	(13)		(19)
Other, net	—		(14)
Net cash provided by (used in) investing activities	(9,665)		(4,184)
Cash flows from financing activities
Policyholder account balances:
Deposits	11,182		7,143
Withdrawals	(1,945)		(1,552)
Net change in payables for collateral under securities loaned and other transactions	387		2,598
Long-term debt issued	—		614
Long-term debt repaid	(1)		(1,001)
Preferred stock issued, net of issuance costs	—		390
Dividends on preferred stock	(68)		(31)
Treasury stock acquired in connection with share repurchases	(341)		(376)



Financing element on certain derivative instruments and other derivative related transactions, net	(183)		(764)
Other, net	(10)		(40)
Net cash provided by (used in) financing activities	9,021		6,981
Change in cash, cash equivalents and restricted cash	—		3,312
Cash, cash equivalents and restricted cash, beginning of period	4,108