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Segment Information
 12 Months Ended
Dec. 31, 2018
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 (“ULSG”).
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 the elimination of intersegment amounts, 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 highlighting the results of operations and the underlying profitability drivers of the business. Adjusted earnings should not be viewed as a substitute for net income (loss) attributable to Brighthouse Life Insurance Company and excludes net income (loss) attributable to noncontrolling interests.
Adjusted earnings, which may be positive or negative, focuses on the Company’s primary businesses principally by excluding (i) the impact of market volatility, which could distort trends, and (ii) businesses that have been or will be sold or exited by the Company, referred to as divested businesses.
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 on derivatives 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
•
Amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses) and certain variable annuity GMIB fees (“GMIB Fees”).
The following are significant items excluded from total expenses, net of income tax, in calculating adjusted earnings:
•
Amounts associated with benefits and hedging costs 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 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.
Set forth in the tables below is certain financial information with respect to the Company’s segments, as well as Corporate & Other, for the years ended December 31, 2018, 2017 and 2016 and at December 31, 2018 and 2017. The segment accounting policies are the same as those used to prepare the Company’s 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.
Beginning in the first quarter of 2018, the Company changed the methodology for how capital is allocated to segments and, in some cases, products (the “Portfolio Realignment”). Segment investment and capitalization targets are now 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 (“RBC”). 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.
Previously, invested assets held in the segments were based on net GAAP liabilities. Excess capital was retained in Corporate & Other and allocated to segments based on an internally developed statistics based capital model intended to capture the material risks to which the Company was exposed (referred to as “allocated equity”). Surplus assets in excess of the combined allocations to the segments were held in Corporate & Other with net investment income being credited back to the segments at a predetermined rate. Any excess or shortfall in net investment income from surplus assets was recognized in Corporate & Other.
The Portfolio Realignment had no effect on the Company’s consolidated net income (loss) attributable to Brighthouse Life Insurance Company or adjusted earnings, but it did impact segment results for the year ended December 31, 2018. It was not practicable to determine the impact of the Portfolio Realignment to adjusted earnings in prior periods; however, the Company estimates that pre-tax adjusted earnings in the Life segment for the year ended December 31, 2018 increased between $80 million and $100 million as a result of the change, with most of the offsetting impact in the Run-off segment. Impacts to the Annuities segment and Corporate & Other would not have been significantly different under the previous allocation method.
In addition, the total assets recognized in the segments changed as a result of the Portfolio Realignment. Total assets (on a book value basis) in the Annuities and Life segments increased approximately $2 billion and approximately $3 billion, respectively, under the new allocation method. The Run-off segment and Corporate & Other experienced decreases in total assets of approximately $3 billion and approximately $2 billion, respectively, as a result of the Portfolio Realignment.
 
 
Operating Results
Year Ended December 31, 2018
 
Annuities
 
Life
 
Run-off
 
Corporate
& Other
 
Total
 
 
(In millions)
Pre-tax adjusted earnings
 
$
1,179

 
$
211

 
$
(58
)
 
$
(229
)
 
$
1,103

Provision for income tax expense (benefit)
 
201

 
43

 
(14
)
 
(73
)
 
157

Post-tax adjusted earnings
 
978

 
168

 
(44
)
 
(156
)
 
946

Less: Net income (loss) attributable to noncontrolling interests
 
—

 
—

 
—

 
1

 
1

Adjusted earnings
 
$
978

 
$
168

 
$
(44
)
 
$
(157
)
 
945

Adjustments for:
 
 
 
 
 
 
 
 
 
 
Net investment gains (losses)
 
 
 
 
 
 
 
 
 
(204
)
Net derivative gains (losses)
 
 
 
 
 
 
 
 
 
745

Other adjustments to net income
 
 
 
 
 
 
 
 
 
(523
)
Provision for income tax (expense) benefit
 
 
 
 
 
 
 
 
 
4

Net income (loss) attributable to Brighthouse Life Insurance Company
 
 
 
 
 
 
 
 
 
$
967

 
 
 
 
 
 
 
 
 
 
 
Interest revenue
 
$
1,523

 
$
373

 
$
1,309

 
$
44

 
 
Interest expense
 
$
—

 
$
—

 
$
—

 
$
6

 
 
Balance at December 31, 2018

Annuities

Life

Run-off
 
Corporate & Other

Total


(In millions)
Total assets

$
137,079

 
$
14,928

 
$
32,390

 
$
11,433


$
195,830

Separate account assets

$
88,138

 
$
1,732

 
$
1,641

 
$
—


$
91,511

Separate account liabilities

$
88,138

 
$
1,732

 
$
1,641

 
$
—


$
91,511

 
 
Operating Results
Year Ended December 31, 2017
 
Annuities
 
Life
 
Run-off
 
Corporate
& Other
 
Total
 
 
(In millions)
Pre-tax adjusted earnings
 
$
1,230

 
$
(68
)
 
$
(466
)
 
$
(114
)
 
$
582

Provision for income tax expense (benefit)
 
323

 
(30
)
 
(172
)
 
338

 
459

Post-tax adjusted earnings
 
907

 
(38
)
 
(294
)
 
(452
)
 
123

Less: Net income (loss) attributable to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

Adjusted earnings
 
$
907

 
$
(38
)
 
$
(294
)
 
$
(452
)
 
123

Adjustments for:
 
 
 
 
 
 
 
 
 
 
Net investment gains (losses)
 
 
 
 
 
 
 
 
 
(27
)
Net derivative gains (losses)
 
 
 
 
 
 
 
 
 
(1,468
)
Other adjustments to net income
 
 
 
 
 
 
 
 
 
(708
)
Provision for income tax (expense) benefit
 
 
 
 
 
 
 
 
 
1,197

Net income (loss) attributable to Brighthouse Life Insurance Company
 
 
 
 
 
 
 
 
 
$
(883
)
 
 
 
 
 
 
 
 
 
 
 
Interest revenue
 
$
1,263

 
$
300

 
$
1,399

 
$
142

 
 
Interest expense
 
$
—

 
$
(4
)
 
$
23

 
$
39

 
 
Balance at December 31, 2017

Annuities

Life

Run-off
 
Corporate & Other

Total
 
 
(In millions)
Total assets
 
$
149,920

 
$
13,044

 
$
36,719

 
$
12,362

 
$
212,045

Separate account assets
 
$
105,140

 
$
1,915

 
$
3,101

 
$
—

 
$
110,156

Separate account liabilities
 
$
105,140

 
$
1,915

 
$
3,101

 
$
—

 
$
110,156

 
 
Operating Results
Year Ended December 31, 2016
 
Annuities
 
Life
 
Run-off
 
Corporate
& Other
 
Total
 
 
(In millions)
Pre-tax adjusted earnings
 
$
1,494

 
$
6

 
$
(249
)
 
$
23

 
$
1,274

Provision for income tax expense (benefit)
 
441

 
—

 
(90
)
 
(10
)
 
341

Post-tax adjusted earnings
 
1,053

 
6

 
(159
)
 
33

 
933

Less: Net income (loss) attributable to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

Adjusted earnings
 
$
1,053

 
$
6

 
$
(159
)
 
$
33

 
933

Adjustments for:
 
 
 
 
 
 
 
 
 
 
Net investment gains (losses)
 
 
 
 
 
 
 
 
 
(67
)
Net derivative gains (losses)
 
 
 
 
 
 
 
 
 
(5,770
)
Other adjustments to net income
 
 
 
 
 
 
 
 
 
98

Provision for income tax (expense) benefit
 
 
 
 
 
 
 
 
 
2,031

Net income (loss) attributable to Brighthouse Life Insurance Company
 
 
 
 
 
 
 
 
 
$
(2,775
)
 
 
 
 
 
 
 
 
 
 
 
Interest revenue
 
$
1,446

 
$
351

 
$
1,411

 
$
197

 
 
Interest expense
 
$
—

 
$
—

 
$
60

 
$
67

 
 
 
 
Years Ended December 31,
 
 
2018
 
2017
 
2016
 
 
(In millions)
Annuities
 
$
3,921

 
$
3,721

 
$
4,423

Life
 
1,160

 
1,036

 
1,036

Run-off
 
2,112

 
2,148

 
2,313

Corporate & Other
 
147

 
250

 
338

Adjustments
 
782

 
(1,357
)
 
(5,850
)
Total
 
$
8,122

 
$
5,798

 
$
2,260


The following table presents total premiums, universal life and investment-type product policy fees and other revenues by major product groups of the Company’s segments, as well as Corporate & Other:
 
Years Ended December 31,
 
2018
 
2017
 
2016
 
(In millions)
Annuity products
$
2,662

 
$
2,729

 
$
3,411

Life insurance products
1,677

 
1,587

 
1,552

Other products
7

 
4

 
23

Total
$
4,346

 
$
4,320

 
$
4,986

Substantially all of the Company’s premiums, universal life and investment-type product policy fees and other revenues originated in the U.S.
Revenues derived from any individual customer did not exceed 10% of premiums, universal life and investment-type product policy fees and other revenues for the years ended December 31, 2018, 2017 and 2016.