bhf-20220630

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, 2022


☐			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
Depositary Shares, each representing a 1/1,000th interest in a share of 4.625% Non-Cumulative Preferred Stock, Series D	BHFAM	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 2, 2022, 71,817,368 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, 2022 (Unaudited) and December 31, 2021 and for the Three Months and Six Months Ended June 30, 2022 and 2021 (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 — 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	44
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	47
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	88
Item 4.	Controls and Procedures	89

Part II — Other Information
Item 1.	Legal Proceedings	90
Item 1A.	Risk Factors	90
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	90

Item 6.	Exhibits	91

Signature		92

Table of Contents

Part I — Financial Information

Item 1. Financial Statements

Brighthouse Financial, Inc.

Interim Condensed Consolidated Balance Sheets

June 30, 2022 (Unaudited) and December 31, 2021

(In millions, except share and per share data)


	June 30, 2022		December 31, 2021
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $83,613 and $79,246, respectively; allowance for credit losses of $4 and $11, respectively)	$	78,606	$	87,582
Equity securities, at estimated fair value	96		101
Mortgage loans (net of allowance for credit losses of $103 and $123, respectively)	21,508		19,850
Policy loans	1,277		1,264
Limited partnerships and limited liability companies	4,683		4,271
Short-term investments, principally at estimated fair value	920		1,841
Other invested assets, principally at estimated fair value (net of allowance for credit losses of $13 and $13, respectively)	3,345		3,316
Total investments	110,435		118,225
Cash and cash equivalents	5,071		4,474
Accrued investment income	852		724
Premiums, reinsurance and other receivables (net of allowance for credit losses of $10 and $10, respectively)	16,642		16,094
Deferred policy acquisition costs and value of business acquired	5,434		5,377
Current income tax recoverable	18		—
Deferred income tax asset	471		—
Other assets	445		482
Separate account assets	88,843		114,464
Total assets	$	228,211	$	259,840
Liabilities and Equity
Liabilities
Future policy benefits	$	41,142	$	43,807
Policyholder account balances	68,293		66,851
Other policy-related balances	3,273		3,457
Payables for collateral under securities loaned and other transactions	6,675		6,269
Long-term debt	3,157		3,157
Current income tax payable	—		62
Deferred income tax liability	—		1,062
Other liabilities	6,572		4,504
Separate account liabilities	88,843		114,464
Total liabilities	217,955		243,633
Contingencies, Commitments and Guarantees (Note 11)
Equity
Brighthouse Financial, Inc.’s stockholders’ equity:
Preferred stock, par value $0.01 per share; $1,753 aggregate liquidation preference	—		—
Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 122,095,823 and 121,513,442 shares issued, respectively; 73,072,766 and 77,870,072 shares outstanding, respectively	1		1
Additional paid-in capital	14,113		14,154
Retained earnings (deficit)	981		(642)
Treasury stock, at cost; 49,023,057 and 43,643,370 shares, respectively	(1,813)		(1,543)
Accumulated other comprehensive income (loss)	(3,091)		4,172
Total Brighthouse Financial, Inc.’s stockholders’ equity	10,191		16,142
Noncontrolling interests	65		65
Total equity	10,256		16,207
Total liabilities and equity	$	228,211	$	259,840

See accompanying notes to the interim condensed consolidated financial statements.

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Brighthouse Financial, Inc.

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

For the Three Months and Six Months Ended June 30, 2022 and 2021 (Unaudited)

(In millions, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues
Premiums	$	167	$	162	$	333	$	346
Universal life and investment-type product policy fees	784		919		1,625		1,849
Net investment income	1,061		1,212		2,212		2,399
Other revenues	118		101		255		228
Net investment gains (losses)	(66)		(34)		(134)		(20)
Net derivative gains (losses)	1,733		(684)		2,246		(2,188)
Total revenues	3,797		1,676		6,537		2,614
Expenses
Policyholder benefits and claims	1,108		752		2,014		1,508
Interest credited to policyholder account balances	319		287		609		584
Amortization of deferred policy acquisition costs and value of business acquired	566		8		793		99
Other expenses	591		608		1,101		1,170
Total expenses	2,584		1,655		4,517		3,361
Income (loss) before provision for income tax	1,213		21		2,020		(747)
Provision for income tax expense (benefit)	230		(10)		395		(195)
Net income (loss)	983		31		1,625		(552)
Less: Net income (loss) attributable to noncontrolling interests	—		—		2		2
Net income (loss) attributable to Brighthouse Financial, Inc.	983		31		1,623		(554)
Less: Preferred stock dividends	26		21		53		46
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders	$	957	$	10	$	1,570	$	(600)
Comprehensive income (loss)	$	(2,471)	$	1,238	$	(5,638)	$	(1,672)
Less: Comprehensive income (loss) attributable to noncontrolling interests	—		—		2		2
Comprehensive income (loss) attributable to Brighthouse Financial, Inc.	$	(2,471)	$	1,238	$	(5,640)	$	(1,674)


Earnings per common share
Basic	$	12.84	$	0.12	$	20.74	$	(6.93)
Diluted	$	12.77	$	0.11	$	20.62	$	(6.93)

See accompanying notes to the interim condensed consolidated financial statements.

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Brighthouse Financial, Inc.

Interim Condensed Consolidated Statements of Equity

For the Three Months and Six Months Ended June 30, 2022 and 2021 (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, 2021	$	—	$	1	$	14,154	$	(642)	$	(1,543)	$	4,172	$	16,142	$	65	$	16,207
Treasury stock acquired in connection with share repurchases									(127)				(127)				(127)
Share-based compensation			—		6				(11)				(5)				(5)
Dividends on preferred stock					(27)								(27)				(27)
Change in noncontrolling interests													—		(2)		(2)
Net income (loss)							640						640		2		642
Other comprehensive income (loss), net of income tax											(3,809)		(3,809)				(3,809)
Balance at March 31, 2022	—		1		14,133		(2)		(1,681)		363		12,814		65		12,879
Treasury stock acquired in connection with share repurchases									(132)				(132)				(132)
Share-based compensation			—		6				—				6				6
Dividends on preferred stock					(26)								(26)				(26)
Change in noncontrolling interests													—		—		—
Net income (loss)							983						983		—		983
Other comprehensive income (loss), net of income tax											(3,454)		(3,454)				(3,454)
Balance at June 30, 2022	$	—	$	1	$	14,113	$	981	$	(1,813)	$	(3,091)	$	10,191	$	65	$	10,256


	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

See accompanying notes to the interim condensed consolidated financial statements.

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Brighthouse Financial, Inc.

Interim Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

(In millions)


	Six Months Ended June 30,
	2022		2021
Net cash provided by (used in) operating activities	$	18	$	69
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities	6,250		5,238
Equity securities	41		101
Mortgage loans	1,382		1,384
Limited partnerships and limited liability companies	134		117
Purchases of:
Fixed maturity securities	(10,653)		(9,833)
Equity securities	(20)		(6)
Mortgage loans	(3,098)		(2,247)
Limited partnerships and limited liability companies	(432)		(379)
Cash received in connection with freestanding derivatives	2,749		2,140
Cash paid in connection with freestanding derivatives	(2,220)		(2,893)



Net change in policy loans	(12)		36
Net change in short-term investments	923		1,949
Net change in other invested assets	(63)		(19)

Net cash provided by (used in) investing activities	(5,019)		(4,412)
Cash flows from financing activities
Policyholder account balances:
Deposits	14,107		6,886
Withdrawals	(8,477)		(1,295)
Net change in payables for collateral under securities loaned and other transactions	406		(109)

Long-term debt repaid	(1)		(1)

Dividends on preferred stock	(53)		(46)
Treasury stock acquired in connection with share repurchases	(259)		(192)



Financing element on certain derivative instruments and other derivative related transactions, net	(112)		(118)
Other, net	(13)		(8)
Net cash provided by (used in) financing activities	5,598		5,117
Change in cash, cash equivalents and restricted cash	597		774
Cash, cash equivalents and restricted cash, beginning of period	4,474		4,108
Cash, cash equivalents and restricted cash, end of period	$	5,071	$	4,882
Supplemental disclosures of cash flow information
Net cash paid (received) for:
Interest	$	77	$	81
Income tax	$	106	$	(4)

See accompanying notes to the interim condensed consolidated financial statements.

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Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies

Business

Brighthouse Financial, Inc. (“BHF” and together with its subsidiaries, “Brighthouse Financial” or the “Company”) is a holding company formed in 2016 to own the legal entities that historically operated a substantial portion of MetLife, Inc.’s former retail segment until becoming a separate, publicly-traded company in August 2017. Brighthouse Financial is one of the largest providers of annuity and life insurance products in the U.S. through multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners. 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.

Basis of Presentation

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the interim condensed consolidated financial statements. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from these estimates.

Consolidation

The accompanying interim condensed consolidated financial statements include the accounts of Brighthouse Financial, as well as partnerships and limited liability companies (“LLC”) that the Company controls. Intercompany accounts and transactions have been eliminated.

The Company uses the equity method of accounting for investments in limited partnerships and LLCs when it has more than a minor ownership interest or more than a minor influence over the investee’s operations. The Company generally recognizes its share of the investee’s earnings on a three-month lag in instances where the investee’s financial information is not sufficiently timely or when the investee’s reporting period differs from the Company’s reporting period. When the Company has virtually no influence over the investee’s operations, the investment is carried at fair value.

The accompanying interim condensed consolidated financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2021 consolidated balance sheet data was derived from audited consolidated financial statements included in Brighthouse Financial, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”), which include all disclosures required by GAAP. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2021 Annual Report.

Adoption of New Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASU”) to the FASB Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. There were no significant ASUs adopted during the period ended June 30, 2022.

Future Adoption of New Accounting Pronouncements

In August 2018, the FASB issued new guidance on long-duration contracts (ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts). This new guidance is effective for fiscal years beginning after January 1, 2023. The amendments to Topic 944 will result in significant changes to the measurement, presentation and disclosure requirements for long-duration insurance contracts. A summary of the most significant changes is provided below:

(1) Guaranteed benefits associated with variable annuity and certain fixed annuity contracts will be classified and presented separately on the consolidated balance sheets as market risk benefits (“MRB”). MRBs will be measured at fair value through net income and reported separately on the consolidated statements of operations, except for instrument-specific credit risk changes, which will be recognized in other comprehensive income (loss) (“OCI”).

Table of Contents

Brighthouse Financial, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

(2) Cash flow assumptions used to measure the liability for future policy benefits on traditional long-duration contracts (including term and non-participating whole life insurance and immediate annuities) will be updated on an annual basis using a retrospective method. The resulting remeasurement gain or loss will be reported separately on the consolidated statements of operations along with the remeasurement gain or loss on universal life-type contract liabilities.

(3) The discount rate assumption used to measure the liability for traditional long-duration contracts will be based on an upper-medium grade fixed income yield, updated quarterly, with changes recognized in OCI.

(4) Deferred policy acquisition costs (“DAC”) for all insurance products are required to be amortized on a constant-level basis over the expected term of the contracts, using amortization methods that are not a function of revenue or profit emergence. Changes in assumptions used to amortize DAC will be recognized as a revision to future amortization amounts.

(5) There will be a significant increase in required disclosures, including disaggregated rollforwards of insurance contract assets and liabilities supplemented by qualitative and quantitative information regarding the cash flows, assumptions, methods and judgements used to measure those balances.

The amendments to Topic 944 will be applied to the earliest period presented in the financial statements, making the transition date January 1, 2021. The MRB guidance is required to be applied on a retrospective basis, while the guidance for insurance liability assumption updates and DAC amortization will be applied to existing carrying amounts on the transition date.

The new guidance will have a significant impact on the Company’s financial statements upon adoption, and will change the pattern and market sensitivity of the Company’s earnings after the transition date. The most significant impact will be the requirement that all variable annuity guarantees be considered MRBs and measured at fair value, because a significant amount of variable annuity guarantees are classified as insurance liabilities under current guidance. The impacts to the financial statements at adoption are highly dependent on market conditions, especially interest rates. The Company is, therefore, unable to currently estimate the ultimate impact of the new guidance on the financial statements; however, at prevailing interest rate levels at December 31, 2021, the Company expects the new guidance, upon adoption, would likely result in a material decrease in stockholders’ equity. Based on prevailing interest rate levels at June 30, 2022, while still anticipated to be material, the impact is expected to be less significant compared to prevailing interest rates at December 31, 2021.

The Company has made significant progress toward adopting the new guidance, including updating systems, validating computations, establishing proper controls, finalizing accounting policies and developing disclosures.

2. Segment Information