Equity

12 Months Ended

Dec. 31, 2019

Equity [Abstract]

Equity

11. Equity

Capital Transactions

During the years ended December 31, 2019, 2018 and 2017, the Company received cash capital contributions totaling $0, $0 and $1.3 billion, respectively, from BH Holdings.

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 in connection with the Separation and MetLife, Inc. is responsible for this obligation through a tax separation agreement with MetLife, Inc. (the “Tax Separation Agreement”). See Note 13.

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.

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.

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.

Statutory Equity and Income

The states of domicile of Brighthouse Life Insurance Company and BHNY impose 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 (“TAC”), calculated in the manner prescribed by the NAIC to its authorized control level RBC (“ACL RBC”), calculated in the manner prescribed by the NAIC, 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.

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	2019			2018			2017
		(In millions)
Brighthouse Life Insurance Company	Delaware	$	1,074		$	(1,104	)	$	(425	)
Brighthouse Life Insurance Company of NY	New York	$	(139	)	$	19		$	22

Statutory capital and surplus was as follows at:

	December 31,
Company	2019		2018
	(In millions)
Brighthouse Life Insurance Company	$	8,746	$	6,731
Brighthouse Life Insurance Company of NY	$	579	$	279

The Company has a reinsurance subsidiary, BRCD which reinsures risks including level premium term life and ULSG assumed from other Brighthouse Financial life insurance 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 $9.0 billion and $8.7 billion for the years ended December 31, 2019 and 2018, respectively.

The statutory net income (loss) of BRCD was ($316) million, ($1.1) billion and ($1.6) billion for the years ended December 31, 2019, 2018 and 2017, respectively, and the combined statutory capital and surplus, including the aforementioned prescribed practices, were $572 million and $557 million at December 31, 2019 and 2018, respectively.

Dividend Restrictions

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

	2020		2019		2018		2017
Company	Permitted Without Approval (1)		Paid (2)		Paid (2)		Paid (2)
	(In millions)
Brighthouse Life Insurance Company	$	2,066	$	—	$	—	$	—
Brighthouse Life Insurance Company of NY	$	—	$	28	$	—	$	—

_______________ 

(1) Reflects dividend amounts that may be paid during 2020 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 2020, some or all of such dividends may require regulatory approval. See Note 16.

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

Under the Delaware Insurance Law, 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 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 Law, 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 BRCD’s plan of operations, no dividend or distribution may be made by BRCD without the prior approval of the Delaware Commissioner. On December 30, 2019, the Delaware Commissioner approved an extraordinary dividend of $600 million payable to Brighthouse Life Insurance Company (see Note 16). During the years ended December 31, 2018 and 2017, BRCD paid extraordinary cash dividends of $0 and $535 million, respectively. During the years ended December 31, 2019, 2018 and 2017, BRCD paid cash dividends of $1 million, $2 million and $0, respectively, to its preferred shareholders.

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 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
Cumulative effect of change in accounting principle and other, net of income tax	(79		)	—			—			(79		)
Balance, January 1, 2018	1,630			151			(23		)	1,758
OCI before reclassifications	(1,534		)	156			(4		)	(1,382		)
Deferred income tax benefit (expense)	327			54			1			382
AOCI before reclassifications, net of income tax	423			361			(26		)	758
Amounts reclassified from AOCI	179			(134		)	—			45
Deferred income tax benefit (expense)	(38		)	(47		)	—			(85		)
Amounts reclassified from AOCI, net of income tax	141			(181		)	—			(40		)
Balance at December 31, 2018	564			180			(26		)	718
OCI before reclassifications	3,224			37			12			3,273
Deferred income tax benefit (expense)	(677		)	(8		)	—			(685		)
AOCI before reclassifications, net of income tax	3,111			209			(14		)	3,306
Amounts reclassified from AOCI	(57		)	(58		)	—			(115		)
Deferred income tax benefit (expense)	12			12			—			24
Amounts reclassified from AOCI, net of income tax	(45		)	(46		)	—			(91		)
Balance at December 31, 2019	$	3,066		$	163		$	(14	)	$	3,215

_______________

(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 Cuts and Job Act (the “Tax Act”) related to unrealized investments gains (losses), net of related offsets.

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

AOCI Components	Amounts Reclassified from AOCI									Consolidated Statements of Operations Locations
	Years Ended December 31,
	2019			2018			2017
	(In millions)
Net unrealized investment gains (losses):
Net unrealized investment gains(losses)	$	94		$	(178	)	$	(15	)	Net investment gains (losses)
Net unrealized investment gains (losses)	—			1			1			Net investment income
Net unrealized investment gains (losses)	(37		)	(2		)	(47		)	Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax	57			(179		)	(61		)
Income tax (expense) benefit	(12		)	38			(306		)
Net unrealized investment gains (losses), net of income tax	45			(141		)	(367		)
Unrealized gains (losses) on derivatives - cash flow hedges:
Interest rate swaps	31			98			—			Net derivative gains (losses)
Interest rate swaps	2			3			3			Net investment income
Interest rate forwards	—			31			—			Net derivative gains (losses)
Interest rate forwards	—			2			3			Net investment income
Foreign currency swaps	25			—			8			Net derivative gains (losses)
Gains (losses) on cash flow hedges, before income tax	58			134			14
Income tax (expense) benefit	(12		)	47			(5		)
Gains (losses) on cash flow hedges, net of income tax	46			181			9
Total reclassifications, net of income tax	$	91		$	40		$	(358	)