Equity

12 Months Ended

Dec. 31, 2017

11. Equity

Capital Transactions

During the first quarter of 2017, the Company sold an operating joint venture to a former affiliate and the resulting $202 million gain was treated as a cash capital contribution. See Note 7.

In April 2017, in connection with the Contribution Transactions, the Company recognized a $2.7 billion return of capital to MetLife, Inc. See Note 3 for additional information regarding the Contribution Transactions. During the years ended December 31, 2016 and 2015, the Company recognized non-cash returns of capital to MetLife, Inc. of $26 million and $50 million, respectively.

During the second quarter of 2017, MetLife, Inc. forgave Brighthouse Life Insurance Company’s obligation to pay the principal amount of $750 million of surplus notes held by MetLife, Inc. The forgiveness of these notes was a non-cash capital contribution. See Note 10 for additional information regarding the surplus notes.

During the third quarter of 2017, the Company recognized a $1.1 billion non-cash tax charge and corresponding capital contribution from MetLife, Inc. This tax obligation was triggered prior to the Separation and MetLife, Inc. is responsible for this obligation through a Tax Separation Agreement. See Note 13 for additional information regarding the tax charge.

During the year ended December 31, 2017, the Company received cash capital contributions totaling $1.3 billion from Brighthouse Holdings, LLC.

During the years ended December 31, 2016 and 2015, the Company received cash capital contributions of $1.6 billion and $21 million, respectively and recognized non-cash capital contributions of $69 million and $181 million, respectively, from MetLife, Inc.

In December 2015 and 2014, the Company accrued capital contributions from MetLife, Inc. of $120 million and $385 million, respectively, in premiums, reinsurance and other receivables and additional paid-in capital, which were settled for cash in 2016 and 2015, respectively.

Statutory Equity and Income

The states of domicile of Brighthouse Life Insurance Company and BHNY impose risk-based capital (“RBC”) requirements that were developed by the National Association of Insurance Commissioners (“NAIC”). Regulatory compliance is determined by a ratio of a company’s total adjusted capital, calculated in the manner prescribed by the NAIC (“TAC”) to its authorized control level RBC, calculated in the manner prescribed by the NAIC (“ACL RBC”), based on the statutory-based filed financial statements. Companies below specific trigger levels or ratios are classified by their respective levels, each of which requires specified corrective action. The minimum level of TAC before corrective action commences is twice ACL RBC. The RBC ratios for Brighthouse Life Insurance Company and BHNY were each in excess of 400% for all periods presented.

Brighthouse Life Insurance Company and BHNY prepare statutory-basis financial statements in accordance with statutory accounting practices prescribed or permitted by the insurance department of the state of domicile.

Statutory accounting principles differ from GAAP primarily by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions, reporting of reinsurance agreements and valuing investments and deferred tax assets on a different basis. Brighthouse Life Insurance Company and BHNY have no material state prescribed accounting practices.

The tables below present amounts from Brighthouse Life Insurance Company and BHNY, which are derived from the statutory-basis financial statements as filed with the insurance regulators.

Statutory net income (loss) was as follows:



		Years Ended December 31,
Company	State of Domicile	2017			2016			2015
		(In millions)
Brighthouse Life Insurance Company	Delaware	$	(425	)	$	1,186		$	(1,022	)
Brighthouse Life Insurance Company of NY	New York	$	22		$	(87	)	$	17

Statutory capital and surplus was as follows at:



	December 31,
Company	2017		2016
	(In millions)
Brighthouse Life Insurance Company	$	5,594	$	4,374
Brighthouse Life Insurance Company of NY	$	294	$	196

Brighthouse Life Insurance Company has a reinsurance subsidiary, BRCD that was formed in 2017 as the result of the merger of certain other affiliated captive reinsurance subsidiaries. BRCD reinsures risks including level premium term life and ULSG assumed from other Brighthouse Life Insurance Company subsidiaries. BRCD, with the explicit permission of the Delaware Commissioner, has included, as admitted assets, the value of credit-linked notes, serving as collateral, which resulted in higher statutory capital and surplus of $8.3 billion for the year ended December 31, 2017. BRCD’s RBC would have triggered a regulatory event without the use of the state prescribed practice.

Prior to the formation of BRCD and related merger, the legacy MetLife captive reinsurance subsidiaries included in the statutory merger and formation of BRCD had certain state prescribed accounting practices. A protected designated cell of MetLife Reinsurance Company of Vermont’s (“MRV Cell”), with the explicit permission of the Commissioner of Insurance of the State of Vermont, included, as admitted assets, the value of letters of credit serving as collateral for reinsurance credit taken by various affiliated cedants, in connection with reinsurance agreements entered into between MRV Cell and the various affiliated cedants, which resulted in higher statutory capital and surplus of $3.0 billion for the year ended December 31, 2016. MRV Cell’s RBC would have triggered a regulatory event without the use of the state prescribed practice. MetLife Reinsurance Company of Delaware (“MRD”), with the explicit permission of the Delaware Commissioner, previously included, as admitted assets, the value of letters of credit issued to MRD, serving as collateral, which resulted in higher statutory capital and surplus of $260 million for the year ended December 31, 2016. MRD’s RBC would not have triggered a regulatory event without the use of the state prescribed practice.

The statutory net income (loss) of the Company’s affiliate reinsurance companies was ($1.6) billion, ($363) million and ($372) million for the years ended December 2017, 2016 and 2015, respectively, and the combined statutory capital and surplus, including the aforementioned prescribed practices, were $972 million and $2.6 billion at December 31, 2017 and 2016, respectively.

Dividend Restrictions

The table below sets forth the dividends permitted to be paid by the Company’s insurance companies without insurance regulatory approval and dividends paid:



	2018		2017		2016
Company	Permitted Without Approval (1)		Paid (2)		Paid (2)
	(In millions)
Brighthouse Life Insurance Company	$	84	$	—	$	261
Brighthouse Life Insurance Company of NY	$	21	$	—	$	—

______________


(1)	Reflects dividend amounts that may be paid during 2018 without prior regulatory approval. However, because dividend tests may be based on dividends previously paid over rolling 12-month periods, if paid before a specified date during 2018, some or all of such dividends may require regulatory approval.


(2)	Reflects all amounts paid, including those requiring regulatory approval.

Under the Delaware Insurance Code, Brighthouse Life Insurance Company is permitted, without prior insurance regulatory clearance, to pay a stockholder dividend as long as the amount of the dividend when aggregated with all other dividends in the preceding 12 months does not exceed the greater of: (i) 10% of its surplus to policyholders as of the end of the immediately preceding calendar year; or (ii) its net statutory gain from operations for the immediately preceding calendar year (excluding realized capital gains), not including pro rata distributions of Brighthouse Life Insurance Company’s own securities. Brighthouse Life Insurance Company will be permitted to pay a stockholder dividend in excess of the greater of such two amounts only if it files notice of the declaration of such a dividend and the amount thereof with the Delaware Commissioner and the Delaware Commissioner either approves the distribution of the dividend or does not disapprove the distribution within 30 days of its filing. In addition, any dividend that exceeds earned surplus (defined as “unassigned funds (surplus)”) as of the immediately preceding calendar year requires insurance regulatory approval. Under the Delaware Insurance Code, the Delaware Commissioner has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its stockholders.

Under the New York Insurance Law, BHNY may not pay stockholder dividends without prior approval of the New York Superintendent of Financial Services.

Under BRCD’s plan of operations, no dividend or distribution may be made by BRCD without the prior approval of the Delaware Commissioner. During the year ended December 31, 2017, BRCD paid an extraordinary cash dividend of $535 million to Brighthouse Life Insurance Company.

Accumulated Other Comprehensive Income (Loss)

Information regarding changes in the balances of each component of AOCI was as follows:



	Unrealized Investment Gains (Losses), Net of Related Offsets (1)			Unrealized Gains (Losses) on Derivatives			Foreign Currency Translation Adjustments			Total
	(In millions)
Balance at January 1, 2015	$	2,445		$	183		$	(6	)	$	2,622
OCI before reclassifications	(1,759		)	95			(29		)	(1,693		)
Deferred income tax benefit (expense)	643			(33		)	9			619
AOCI before reclassifications, net of income tax	1,329			245			(26		)	1,548
Amounts reclassified from AOCI	78			(6		)	—			72
Deferred income tax benefit (expense)	(28		)	2			—			(26		)
Amounts reclassified from AOCI, net of income tax	50			(4		)	—			46
Balance at December 31, 2015	1,379			241			(26		)	1,594
OCI before reclassifications	(565		)	70			(3		)	(498		)
Deferred income tax benefit (expense)	185			(25		)	—			160
AOCI before reclassifications, net of income tax	999			286			(29		)	1,256
Amounts reclassified from AOCI	30			(43		)	—			(13		)
Deferred income tax benefit (expense)	(10		)	15			—			5
Amounts reclassified from AOCI, net of income tax	20			(28		)	—			(8		)
Balance at December 31, 2016	1,019			258			(29		)	1,248
OCI before reclassifications	529			(152		)	9			386
Deferred income tax benefit (expense)	(206		)	54			(3		)	(155		)
AOCI before reclassifications, net of income tax	1,342			160			(23		)	1,479
Amounts reclassified from AOCI	61			(14		)	—			47
Deferred income tax benefit (expense) (2)	306			5			—			311
Amounts reclassified from AOCI, net of income tax	367			(9		)	—			358
Balance at December 31, 2017	$	1,709		$	151		$	(23	)	$	1,837

__________________


(1)	See Note 7 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI.


(2)	Includes the $330 million impact of the Tax Act related to unrealized investments gains (losses), net of related offsets. See Note 1 for more information.

Information regarding amounts reclassified out of each component of AOCI was as follows:



AOCI Components	Amounts Reclassified from AOCI									Consolidated Statements of Operations and Comprehensive Income (Loss) Locations
	Years Ended December 31,
	2017			2016			2015
	(In millions)
Net unrealized investment gains (losses):
Net unrealized investment gains(losses)	$	(15	)	$	(39	)	$	(81	)	Net investment gains (losses)
Net unrealized investment gains (losses)	1			3			13			Net investment income
Net unrealized investment gains (losses)	(47		)	6			(10		)	Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax	(61		)	(30		)	(78		)
Income tax (expense) benefit	(306		)	10			28
Net unrealized investment gains (losses), net of income tax	$	(367	)	$	(20	)	$	(50	)
Unrealized gains (losses) on derivatives - cash flow hedges:
Interest rate swaps	$	—		$	33		$	1		Net derivative gains (losses)
Interest rate swaps	3			3			1			Net investment income
Interest rate forwards	—			2			2			Net derivative gains (losses)
Interest rate forwards	3			2			2			Net investment income
Foreign currency swaps	8			3			—			Net derivative gains (losses)
Gains (losses) on cash flow hedges, before income tax	14			43			6
Income tax (expense) benefit	(5		)	(15		)	(2		)
Gains (losses) on cash flow hedges, net of income tax	$	9		$	28		$	4
Total reclassifications, net of income tax	$	(358	)	$	8		$	(46	)