Insurance

12 Months Ended

Dec. 31, 2022

3. Insurance

Insurance Liabilities

Insurance liabilities are comprised of future policy benefits, policyholder account balances and other policy-related balances included on the consolidated balance sheets.

Assumptions for Future Policyholder Benefits and Policyholder Account Balances

For term and non-participating whole life insurance, assumptions for mortality and persistency are based upon the Company’s experience. Interest rate assumptions for the aggregate future policy benefit liabilities range from 3% to 8%. The liability for single premium immediate annuities is based on the present value of expected future payments using the Company’s experience for mortality assumptions, with interest rate assumptions used in establishing such liabilities ranging from 1% to 9%.

Participating whole life insurance uses an interest assumption based upon a non-forfeiture interest rate of 4% and mortality rates guaranteed in calculating the cash surrender values described in such contracts, and also includes a liability for terminal dividends. Participating whole life insurance represented 3% of the Company’s life insurance in-force at both December 31, 2022 and 2021, and 40%, 39% and 40% of gross traditional life insurance premiums for the years ended December 31, 2022, 2021 and 2020, respectively.

The liability for future policyholder benefits for long-term care insurance (included in Corporate & Other) includes assumptions for morbidity, withdrawals and interest. Interest rate assumptions used for establishing long-term care claim liabilities range from 3% to 6%. Claim reserves for long-term care insurance include best estimate assumptions for claim terminations, expenses and interest.

Policyholder account balances liabilities for fixed deferred annuities and universal life insurance have interest credited rates ranging from 1% to 7%.

Guarantees

The Company issues variable annuity contracts with guaranteed minimum benefits. GMDBs, the life contingent portion of GMWBs and certain portions of GMIBs are accounted for as insurance liabilities in future policyholder benefits, while other guarantees are accounted for in whole or in part as embedded derivatives in policyholder account balances and are further discussed in Note 7. The most significant assumptions for variable annuity guarantees included in future policyholder benefits are projected general account and separate account investment returns, and policyholder behavior including mortality, benefit election and utilization, and withdrawals.

The Company also has secondary guarantees on universal and variable life insurance contracts accounted for as insurance liabilities. The most significant assumptions used in estimating the secondary guarantee liabilities are general account rates of return, premium persistency, mortality and lapses, which are reviewed and updated at least annually.

See Note 1 for more information on guarantees accounted for as insurance liabilities.

Information regarding the liabilities for guarantees (excluding policyholder account balances and embedded derivatives) relating to variable annuity contracts and universal and variable life insurance contracts was as follows:


	Variable Annuity Contracts				Universal and Variable Life Contracts
	GMDBs		GMIBs		Secondary Guarantees		Total
	(In millions)
Direct
Balance at January 1, 2020	$	1,596	$	3,076	$	5,589	$	10,261
Incurred guaranteed benefits	128		1,089		1,244		2,461
Paid guaranteed benefits	(103)		—		(169)		(272)
Balance at December 31, 2020	1,621		4,165		6,664		12,450
Incurred guaranteed benefits	294		(8)		686		972
Paid guaranteed benefits	(77)		—		(275)		(352)
Balance at December 31, 2021	1,838		4,157		7,075		13,070
Incurred guaranteed benefits	525		647		263		1,435
Paid guaranteed benefits	(60)		—		(434)		(494)
Balance at December 31, 2022	$	2,303	$	4,804	$	6,904	$	14,011
Net Ceded/(Assumed)
Balance at January 1, 2020	$	(15)	$	(51)	$	1,083	$	1,017
Incurred guaranteed benefits	95		(21)		102		176
Paid guaranteed benefits	(101)		—		(39)		(140)
Balance at December 31, 2020	(21)		(72)		1,146		1,053
Incurred guaranteed benefits	70		7		100		177
Paid guaranteed benefits	(75)		—		(39)		(114)
Balance at December 31, 2021	(26)		(65)		1,207		1,116
Incurred guaranteed benefits	31		(6)		181		206
Paid guaranteed benefits	(37)		—		(76)		(113)
Balance at December 31, 2022	$	(32)	$	(71)	$	1,312	$	1,209
Net
Balance at January 1, 2020	$	1,611	$	3,127	$	4,506	$	9,244
Incurred guaranteed benefits	33		1,110		1,142		2,285
Paid guaranteed benefits	(2)		—		(130)		(132)
Balance at December 31, 2020	1,642		4,237		5,518		11,397
Incurred guaranteed benefits	224		(15)		586		795
Paid guaranteed benefits	(2)		—		(236)		(238)
Balance at December 31, 2021	1,864		4,222		5,868		11,954
Incurred guaranteed benefits	494		653		82		1,229
Paid guaranteed benefits	(23)		—		(358)		(381)
Balance at December 31, 2022	$	2,335	$	4,875	$	5,592	$	12,802

Information regarding the Company’s guarantee exposure was as follows at:


	December 31,
	2022						2021
	In the Event of Death			At Annuitization			In the Event of Death			At Annuitization
	(Dollars in millions)
Annuity Contracts (1), (2)
Variable Annuity Guarantees
Total account value (3)	$	79,359		$	41,855		$	105,784		$	56,966
Separate account value	$	74,845		$	40,861		$	101,108		$	55,910
Net amount at risk	$	16,334	(4)	$	4,777	(5)	$	6,315	(4)	$	4,992	(5)
Average attained age of contract holders	72 years			71 years			71 years			71 years


	December 31,
	2022		2021
	Secondary Guarantees
	(Dollars in millions)
Universal Life Contracts
Total account value (3)	$	5,242	$	5,518
Net amount at risk (6)	$	65,473	$	67,248
Average attained age of policyholders	69 years		68 years

Variable Life Contracts
Total account value (3)	$	1,169	$	1,448
Net amount at risk (6)	$	10,149	$	10,508
Average attained age of policyholders	48 years		47 years

_______________

(1)The Company’s annuity contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive.

(2)Includes direct business, but excludes offsets from hedging or reinsurance, if any. Therefore, the net amount at risk reported reflects the economic exposures of living and death benefit guarantees associated with variable annuities, but not necessarily their impact on the Company. See Note 5 for a discussion of guaranteed minimum benefits which have been reinsured.

(3)Includes the contract holder’s investments in the general account and separate account, if applicable.

(4)Defined as the death benefit less the total account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death.

(5)Defined as the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents the Company’s potential economic exposure to such guarantees in the event all contract holders were to annuitize on the balance sheet date, even though the contracts contain terms that allow annuitization of the guaranteed amount only after the 10th anniversary of the contract, which not all contract holders have achieved.

(6)Defined as the guarantee amount less the account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date.

Account balances of contracts with guarantees were invested in separate account asset classes as follows at:


	December 31,
	2022		2021
	(In millions)
Fund Groupings:
Balanced	$	45,702	$	62,553
Equity	21,979		30,185
Bond	6,749		8,510
Money Market	15		15
Total	$	74,445	$	101,263

Obligations Under Funding Agreements

Institutional Spread Margin Business

Brighthouse Life Insurance Company has issued unsecured fixed and floating rate funding agreements to certain special purpose entities that have issued either debt securities or commercial paper for which payment of interest and principal is secured by such funding agreements. The Company had obligations outstanding under these funding agreements of $5.5 billion and $4.7 billion at December 31, 2022 and 2021, respectively.

Brighthouse Life Insurance Company has a secured funding agreement program with the Federal Home Loan Bank (“FHLB”) of Atlanta. The Company had obligations outstanding under this program of $3.9 billion and $900 million at December 31, 2022 and 2021, respectively. Funding agreements are issued to FHLBs in exchange for cash, for which the FHLBs have been granted liens on certain assets, some of which are in their custody to collateralize the Company’s obligations under the funding agreements. The Company is permitted to withdraw any portion of the collateral in the custody of the FHLBs as long as there is no event of default and the remaining qualified collateral is sufficient to satisfy the collateral maintenance level. Upon any event of default by the Company, the FHLBs’ recovery on the collateral is limited to the amount of the Company’s liabilities to the FHLBs. See Note 6 for information on invested assets pledged as collateral in connection with funding agreements.

Brighthouse Life Insurance Company has a secured funding agreement program with the Federal Agricultural Mortgage Corporation and its affiliate Farmer Mac Mortgage Securities Corporation (“Farmer Mac”). The Company had obligations outstanding under this program of $700 million and $125 million at December 31, 2022 and 2021, respectively. Funding agreements are issued to Farmer Mac in exchange for cash, for which Farmer Mac have been granted liens on certain assets to collateralize the Company’s obligations under the funding agreements. Upon any event of default by the Company, Farmer Mac’s recovery on the collateral is limited to the amount of the Company’s liabilities to Farmer Mac. See Note 6 for information on invested assets pledged as collateral in connection with funding agreements.

Inactive Funding Agreement Programs

Brighthouse Life Insurance Company has obligations outstanding under inactive funding agreement programs of $525 million and $634 million at December 31, 2022 and 2021, respectively.