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 ~~September 30, 2021~~March 31, 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: 033-03094

Brighthouse Life Insurance Company

(Exact name of registrant as specified in its charter)

Delaware

06-0566090

(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: None


Title of each class	Trading symbol(s)	Name of each exchange on which registered

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 ~~November 8, 2021,~~May 11, 2022, 3,000 shares of the registrant’s common stock were outstanding, all of which were owned indirectly by Brighthouse Financial, Inc.

REDUCED DISCLOSURE FORMAT

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is, therefore, filing this Form 10-Q with the reduced disclosure format.

Table of Contents


		Page
Part I — Financial Information
Item 1.	Consolidated Financial Statements (at ~~September 30, 2021~~March 31, 2022 (Unaudited) and December 31, ~~2020~~2021 and for the Three Months Ended March 31, 2022 and ~~Nine Months Ended September 30,~~ 2021 ~~and 2020~~ (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	1110
	Note 4 — Investments	1211
	Note 5 — Derivatives	2423
	Note 6 — Fair Value	3028
	Note 7 — Equity	3936
	Note 8 — Other Revenues and Other Expenses	4137
	Note 9 — Contingencies, Commitments and Guarantees	4238
	Note 10 — Related Party Transactions	4541

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4743
Item 4.	Controls and Procedures	5853

Part II — Other Information
Item 1.	Legal Proceedings	5853
Item 1A.	Risk Factors	5853
Item 6.	Exhibits	5954

Signature		6055

Table of Contents

Part I — Financial Information

Item 1. Financial Statements

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Interim Condensed Consolidated Balance Sheets

~~September 30, 2021~~March 31, 2022 (Unaudited) and December 31, ~~2020~~2021

(In millions, except share and per share data)


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Assets	Assets					Assets
Investments:	Investments:					Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $77,427 and $69,483, respectively; allowance for credit losses of $7 and $2, respectively)		$	85,979	$	81,299
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $80,247 and $78,287, respectively; allowance for credit losses of $11 and $11, respectively)						Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $80,247 and $78,287, respectively; allowance for credit losses of $11 and $11, respectively)	$	81,502	$	86,527
Equity securities, at estimated fair value	Equity securities, at estimated fair value	85		133		Equity securities, at estimated fair value	75		95
Mortgage loans (net of allowance for credit losses of $100 and $94, respectively)		18,188		15,722
Mortgage loans (net of allowance for credit losses of $127 and $123, respectively)						Mortgage loans (net of allowance for credit losses of $127 and $123, respectively)	21,295		19,787
Policy loans	Policy loans	864		884		Policy loans	876		869
Limited partnerships and limited liability companies	Limited partnerships and limited liability companies	3,958		2,809		Limited partnerships and limited liability companies	4,586		4,271

Short-term investments, principally at estimated fair value	Short-term investments, principally at estimated fair value	765		1,885		Short-term investments, principally at estimated fair value	111		662
Other invested assets, principally at estimated fair value (net of allowance for credit losses of $13 and $13, respectively)	Other invested assets, principally at estimated fair value (net of allowance for credit losses of $13 and $13, respectively)	2,782		3,757		Other invested assets, principally at estimated fair value (net of allowance for credit losses of $13 and $13, respectively)	2,570		3,324
Total investments	Total investments	112,621		106,489		Total investments	111,015		115,535
Cash and cash equivalents	Cash and cash equivalents	3,577		3,684		Cash and cash equivalents	3,491		3,904
Accrued investment income	Accrued investment income	744		656		Accrued investment income	735		706
Premiums, reinsurance and other receivables (net of allowance for credit losses of $10 and $10, respectively)	Premiums, reinsurance and other receivables (net of allowance for credit losses of $10 and $10, respectively)	15,853		15,721		Premiums, reinsurance and other receivables (net of allowance for credit losses of $10 and $10, respectively)	15,834		15,649
Deferred policy acquisition costs and value of business acquired	Deferred policy acquisition costs and value of business acquired	4,823		4,357		Deferred policy acquisition costs and value of business acquired	5,060		4,851

Other assets	Other assets	386		395		Other assets	376		385
Separate account assets	Separate account assets	104,322		103,986		Separate account assets	96,995		106,225
Total assets	Total assets	$	242,326	$	235,288	Total assets	$	233,506	$	247,255
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Liabilities	Liabilities					Liabilities
Future policy benefits	Future policy benefits	$	43,546	$	44,266	Future policy benefits	$	41,571	$	43,589
Policyholder account balances	Policyholder account balances	63,105		53,946		Policyholder account balances	67,182		66,195
Other policy-related balances	Other policy-related balances	3,113		3,114		Other policy-related balances	3,154		3,153
Payables for collateral under securities loaned and other transactions	Payables for collateral under securities loaned and other transactions	5,627		5,237		Payables for collateral under securities loaned and other transactions	6,195		6,253
Long-term debt	Long-term debt	842		843		Long-term debt	840		841
Current income tax payable	Current income tax payable	133		110		Current income tax payable	56		57
Deferred income tax liability	Deferred income tax liability	1,024		1,461		Deferred income tax liability	198		981
Other liabilities	Other liabilities	4,206		4,210		Other liabilities	4,123		3,850
Separate account liabilities	Separate account liabilities	104,322		103,986		Separate account liabilities	96,995		106,225
Total liabilities	Total liabilities	225,918		217,173		Total liabilities	220,314		231,144
Contingencies, Commitments and Guarantees (Note 9)	Contingencies, Commitments and Guarantees (Note 9)	0		0		Contingencies, Commitments and Guarantees (Note 9)	0		0
Equity	Equity					Equity
Brighthouse Life Insurance Company’s stockholder’s equity:	Brighthouse Life Insurance Company’s stockholder’s equity:					Brighthouse Life Insurance Company’s stockholder’s equity:
Common stock, par value $25,000 per share; 4,000 shares authorized; 3,000 shares issued and outstanding	Common stock, par value $25,000 per share; 4,000 shares authorized; 3,000 shares issued and outstanding	75		75		Common stock, par value $25,000 per share; 4,000 shares authorized; 3,000 shares issued and outstanding	75		75
Additional paid-in capital	Additional paid-in capital	18,073		18,323		Additional paid-in capital	17,773		17,773
Retained earnings (deficit)	Retained earnings (deficit)	(5,789)		(5,719)		Retained earnings (deficit)	(4,982)		(5,653)
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	4,034		5,421		Accumulated other comprehensive income (loss)	311		3,901
Total Brighthouse Life Insurance Company’s stockholder’s equity	Total Brighthouse Life Insurance Company’s stockholder’s equity	16,393		18,100		Total Brighthouse Life Insurance Company’s stockholder’s equity	13,177		16,096
Noncontrolling interests	Noncontrolling interests	15		15		Noncontrolling interests	15		15
Total equity	Total equity	16,408		18,115		Total equity	13,192		16,111
Total liabilities and equity	Total liabilities and equity	$	242,326	$	235,288	Total liabilities and equity	$	233,506	$	247,255

See accompanying notes to the interim condensed consolidated financial statements.

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

For the Three Months Ended March 31, 2022 and ~~Nine Months Ended September 30,~~ 2021 ~~and 2020~~ (Unaudited)

(In millions)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Revenues	Revenues									Revenues
Premiums	Premiums	$	189	$	173	$	526	$	549	Premiums		$	161	$	181
Universal life and investment-type product policy fees	Universal life and investment-type product policy fees	736		716		2,240		2,114		Universal life and investment-type product policy fees		683		743
Net investment income	Net investment income	1,264		977		3,629		2,508		Net investment income		1,135		1,169
Other revenues	Other revenues	92		73		262		224		Other revenues		112		96
Net investment gains (losses)	Net investment gains (losses)	(16)		6		(37)		(46)		Net investment gains (losses)		(67)		12
Net derivative gains (losses)	Net derivative gains (losses)	56		(1,870)		(2,049)		2,227		Net derivative gains (losses)		555		(1,387)
Total revenues	Total revenues	2,321		75		4,571		7,576		Total revenues		2,579		814
Expenses	Expenses									Expenses
Policyholder benefits and claims	Policyholder benefits and claims	1,062		3,150		2,420		5,094		Policyholder benefits and claims		861		644
Interest credited to policyholder account balances	Interest credited to policyholder account balances	406		272		978		792		Interest credited to policyholder account balances		284		290
Amortization of deferred policy acquisition costs and value of business acquired	Amortization of deferred policy acquisition costs and value of business acquired	(70)		208		(14)		833		Amortization of deferred policy acquisition costs and value of business acquired		205		50
Other expenses	Other expenses	435		469		1,324		1,326		Other expenses		386		424
Total expenses	Total expenses	1,833		4,099		4,708		8,045		Total expenses		1,736		1,408
Income (loss) before provision for income tax	Income (loss) before provision for income tax	488		(4,024)		(137)		(469)		Income (loss) before provision for income tax		843		(594)
Provision for income tax expense (benefit)	Provision for income tax expense (benefit)	96		(858)		(68)		(145)		Provision for income tax expense (benefit)		172		(141)
Net income (loss)	Net income (loss)	392		(3,166)		(69)		(324)		Net income (loss)		671		(453)
Less: Net income (loss) attributable to noncontrolling interests	Less: Net income (loss) attributable to noncontrolling interests	—		—		1		1		Less: Net income (loss) attributable to noncontrolling interests		—		—
Net income (loss) attributable to Brighthouse Life Insurance Company	Net income (loss) attributable to Brighthouse Life Insurance Company	$	392	$	(3,166)	$	(70)	$	(325)	Net income (loss) attributable to Brighthouse Life Insurance Company		$	671	$	(453)
Comprehensive income (loss)	Comprehensive income (loss)	$	114	$	(2,668)	$	(1,456)	$	1,569	Comprehensive income (loss)		$	(2,919)	$	(2,689)
Less: Comprehensive income (loss) attributable to noncontrolling interests	Less: Comprehensive income (loss) attributable to noncontrolling interests	—		—		1		1		Less: Comprehensive income (loss) attributable to noncontrolling interests		—		—
Comprehensive income (loss) attributable to Brighthouse Life Insurance Company	Comprehensive income (loss) attributable to Brighthouse Life Insurance Company	$	114	$	(2,668)	$	(1,457)	$	1,568	Comprehensive income (loss) attributable to Brighthouse Life Insurance Company		$	(2,919)	$	(2,689)

See accompanying notes to the interim condensed consolidated financial statements.

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Interim Condensed Consolidated Statements of Equity

For the Three Months Ended March 31, 2022 and ~~Nine Months Ended September 30,~~ 2021 ~~and 2020~~ (Unaudited)

(In millions)

Common
Stock Additional
Paid-in
Capital Retained
Earnings
(Deficit) Accumulated
Other
Comprehensive
Income (Loss) Brighthouse Life Insurance Company’s Stockholder’s Equity Noncontrolling Interests Total
Equity
Balance at December 31, 2020 $ 75 $ 18,323 $ (5,719) $ 5,421 $ 18,100 $ 15 $ 18,115
Dividends paid to parent (250) (250) (250)
Change in noncontrolling interests — (1) (1)
Net income (loss) (462) (462) 1 (461)
Other comprehensive income (loss), net of income tax (1,109) (1,109) (1,109)
Balance at June 30, 2021 75 18,073 (6,181) 4,312 16,279 15 16,294
Net income (loss) 392 392 392
Other comprehensive income (loss), net of income tax (278) (278) (278)
Balance at September 30, 2021 $ 75 $ 18,073 $ (5,789) $ 4,034 $ 16,393 $ 15 $ 16,408


	Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Brighthouse Life Insurance Company’s Stockholder’s Equity		Noncontrolling Interests		Total Equity
Balance at December 31, 2021	$	75	$	17,773	$	(5,653)	$	3,901	$	16,096	$	15	$	16,111
Net income (loss)					671				671				671
Other comprehensive income (loss), net of income tax							(3,590)		(3,590)				(3,590)
Balance at March 31, 2022	$	75	$	17,773	$	(4,982)	$	311	$	13,177	$	15	$	13,192

Common
Stock Additional
Paid-in
Capital Retained
Earnings
(Deficit) Accumulated
Other
Comprehensive
Income (Loss) Brighthouse Life Insurance Company’s Stockholder’s Equity Noncontrolling Interests Total
Equity
Balance at December 31, 2019 $ 75 $ 19,073 $ (3,899) $ 3,215 $ 18,464 $ 15 $ 18,479
Cumulative effect of change in accounting principle, net of income tax (14) 3 (11) (11)
Balance at January 1, 2020 75 19,073 (3,913) 3,218 18,453 15 18,468
Dividends paid to parent (300) (500) (800) (800)
Change in noncontrolling interests — (1) (1)
Net income (loss) 2,841 2,841 1 2,842
Other comprehensive income (loss), net of income tax 1,392 1,392 1,392
Balance at June 30, 2020 75 18,773 (1,572) 4,610 21,886 15 21,901
Net income (loss) (3,166) (3,166) (3,166)
Other comprehensive income (loss), net of income tax 498 498 498
Balance at September 30, 2020 $ 75 $ 18,773 $ (4,738) $ 5,108 $ 19,218 $ 15 $ 19,233


	Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Brighthouse Life Insurance Company’s Stockholder’s Equity		Noncontrolling Interests		Total Equity
Balance at December 31, 2020	$	75	$	18,323	$	(5,719)	$	5,421	$	18,100	$	15	$	18,115
Net income (loss)					(453)				(453)				(453)
Other comprehensive income (loss), net of income tax							(2,236)		(2,236)				(2,236)
Balance at March 31, 2021	$	75	$	18,323	$	(6,172)	$	3,185	$	15,411	$	15	$	15,426

See accompanying notes to the interim condensed consolidated financial statements.

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Interim Condensed Consolidated Statements of Cash Flows

For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (Unaudited)

(In millions)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	$	1,051	$	648	Net cash provided by (used in) operating activities	$	(55)	$	80
Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Sales, maturities and repayments of:	Sales, maturities and repayments of:					Sales, maturities and repayments of:
Fixed maturity securities	Fixed maturity securities	8,396		5,921		Fixed maturity securities	3,705		2,595
Equity securities	Equity securities	114		54		Equity securities	20		53
Mortgage loans	Mortgage loans	1,998		1,227		Mortgage loans	461		724
Limited partnerships and limited liability companies	Limited partnerships and limited liability companies	168		124		Limited partnerships and limited liability companies	67		49
Purchases of:	Purchases of:					Purchases of:
Fixed maturity securities	Fixed maturity securities	(16,077)		(9,485)		Fixed maturity securities	(5,487)		(3,945)
Equity securities	Equity securities	(7)		(1)		Equity securities	—		(6)
Mortgage loans	Mortgage loans	(4,421)		(1,236)		Mortgage loans	(1,972)		(568)
Limited partnerships and limited liability companies	Limited partnerships and limited liability companies	(560)		(423)		Limited partnerships and limited liability companies	(279)		(204)
Cash received in connection with freestanding derivatives	Cash received in connection with freestanding derivatives	3,211		5,280		Cash received in connection with freestanding derivatives	1,437		1,012
Cash paid in connection with freestanding derivatives	Cash paid in connection with freestanding derivatives	(3,912)		(3,281)		Cash paid in connection with freestanding derivatives	(1,196)		(1,581)
Receipts on loans to affiliate		—		100
Issuances of loans to affiliate		(1)		(100)

Net change in policy loans	Net change in policy loans	20		(4)		Net change in policy loans	(7)		40
Net change in short-term investments	Net change in short-term investments	1,120		(1,849)		Net change in short-term investments	551		1,573
Net change in other invested assets	Net change in other invested assets	(13)		(17)		Net change in other invested assets	(17)		—
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(9,964)		(3,690)		Net cash provided by (used in) investing activities	(2,717)		(258)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Policyholder account balances:	Policyholder account balances:					Policyholder account balances:
Deposits	Deposits	10,761		6,749		Deposits	6,208		1,921
Withdrawals	Withdrawals	(1,910)		(1,535)		Withdrawals	(3,714)		(682)
Net change in payables for collateral under securities loaned and other transactions	Net change in payables for collateral under securities loaned and other transactions	390		2,596		Net change in payables for collateral under securities loaned and other transactions	(58)		(968)
Long-term and short-term debt issued		—		100
Long-term and short-term debt repaid		(1)		(101)

Dividends paid to parent		(250)		(800)
Long-term debt repaid						Long-term debt repaid	(1)		—

Financing element on certain derivative instruments and other derivative related transactions, net	Financing element on certain derivative instruments and other derivative related transactions, net	(183)		(765)		Financing element on certain derivative instruments and other derivative related transactions, net	(76)		(67)
Other, net		(1)		(32)

Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	8,806		6,212		Net cash provided by (used in) financing activities	2,359		204
Change in cash, cash equivalents and restricted cash	Change in cash, cash equivalents and restricted cash	(107)		3,170		Change in cash, cash equivalents and restricted cash	(413)		26
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	3,684		2,493		Cash, cash equivalents and restricted cash, beginning of period	3,904		3,684
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	3,577	$	5,663	Cash, cash equivalents and restricted cash, end of period	$	3,491	$	3,710
Supplemental disclosures of cash flow information	Supplemental disclosures of cash flow information					Supplemental disclosures of cash flow information
Net cash paid (received) for:	Net cash paid (received) for:					Net cash paid (received) for:
Interest	Interest	$	67	$	67	Interest	$	34	$	34
Income tax	Income tax	$	(20)	$	(66)	Income tax	$	1	$	(21)

See accompanying notes to the interim condensed consolidated financial statements.

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

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

Business

“BLIC” and the “Company” refer to Brighthouse Life Insurance Company, a Delaware corporation originally incorporated in Connecticut in 1863, and its subsidiaries. Brighthouse Life Insurance Company is a wholly-owned subsidiary of Brighthouse Holdings, LLC (“BH Holdings”) and an indirect wholly-owned subsidiary of Brighthouse Financial, Inc. (“BHF” and together with its subsidiaries, ~~and affiliates,~~ “Brighthouse Financial”). BLIC offers a range of ~~individual annuities~~annuity and ~~individual~~ life insurance ~~products.~~products to individuals. The Company is organized into 3 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 Life Insurance Company and its subsidiaries, 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.

~~Reclassifications~~

Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform with the current period presentation as may be discussed when applicable in the Notes to the Interim Condensed Consolidated Financial Statements.

Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a standalone entity.

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, ~~2020~~2021 consolidated balance sheet data was derived from audited consolidated financial statements included in Brighthouse Life Insurance Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (the ~~“2020~~“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 ~~2020~~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 asduring the period ended March 31, 2022.

Future Adoption of ~~September 30, 2021~~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:

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of 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)

~~Future Adoption~~(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 ~~New Accounting Pronouncements~~operations, except for instrument-specific credit risk changes, which will be recognized in other comprehensive income (loss) (“OCI”).

~~In August 2018,~~(2) Cash flow assumptions used to measure the ~~FASB issued new guidance~~liability for future policy benefits on traditional long-duration contracts ~~(ASU 2018-12,~~ ~~Financial Services-Insurance (Topic 944): Targeted Improvements~~(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 ~~Accounting~~liability for ~~Long-Duration Contracts). This new guidance is effective~~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 ~~fiscal years beginning after January 1, 2023.~~ 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 ~~result in significant changes~~be applied to the accounting for long-duration insurance contracts. These changes (i) require all guarantees that qualify as market risk benefits to be measured at fair value, (ii) require more frequent updating of assumptions and modify existing discount rate requirements for certain insurance liabilities, (iii) modifyearliest period presented in the ~~methods of amortization for deferred policy acquisition costs (“DAC”), and (iv) require new qualitative and quantitative disclosures around insurance contract asset and liability balances and~~financial statements, making the ~~judgments, assumptions and methods used to measure those balances.~~transition date January 1, 2021. The ~~market risk benefit~~MRB guidance is required to be applied on a retrospective basis, while the ~~changes to~~ guidance for insurance ~~liabilities~~liability assumption updates and DAC amortization will be applied to existing carrying amounts on the ~~effective~~transition date.

The ~~Company continues to evaluate the~~ new guidance ~~and therefore is unable to estimate the~~will have a significant impact on ~~its~~the Company’s financial ~~statements.~~statements upon adoption, and will change the pattern and market sensitivity of the Company’s earnings after the transition date. The most significant impact ~~from the ASU is~~will be the requirement that all variable annuity guarantees ~~will~~ be considered ~~market risk benefits~~MRBs and measured at fair value, ~~whereas currently~~because a significant amount of variable annuity guarantees are classified as insurance ~~liabilities.~~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 the end of 2021, the Company expects the new guidance, upon adoption, would likely result in a material decrease in stockholder’s equity.

2. Segment Information

The Company is organized into 3 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 that are no longer actively sold and are separately managed, including universal life with secondary guarantees, structured settlements, pension risk transfer contracts, certain company-owned life insurance policies and certain funding ~~agreements and universal life with secondary guarantees.~~agreements.

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

2. Segment Information (continued)

Corporate & Other

Corporate & Other contains the excess capital not allocated to the segments and interest expense related to the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. Corporate & Other also includes long-term care and workers’ compensation business reinsured through 100% quota share reinsurance agreements, activities related to funding agreements associated with the Company’s institutional spread margin business, as well as direct-to-consumer life insurance that is no longer actively sold.

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 the investor community and contract holders by highlighting the results of operations and the underlying profitability drivers of the business.

Adjusted earnings, which may be positive or negative, focuses on the Company’s primary businesses ~~principally~~ by excluding the impact of market volatility, which could distort trends.

~~Table of Contents~~

~~Brighthouse Life Insurance Company~~

~~(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)~~

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

~~2. Segment Information (continued)~~

The following are significant items excluded from total revenues in calculating adjusted earnings:

•Net investment gains (losses);

•Net derivative gains (losses) except earned income 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

•Certain variable annuity guaranteed minimum income benefits (“GMIB”) fees (“GMIB Fees”).

The following are significant items excluded from total expenses in calculating adjusted earnings:

•Amounts associated with benefits 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”);~~assets; and

•Amortization of DAC and value of business acquired (“VOBA”) related ~~to:~~to (i) net investment gains (losses), (ii) net derivative gains (losses), and (iii) GMIB Fees and GMIB ~~Costs and (iv) Market Value Adjustments.~~Costs.

The tax impact of the adjustments discussed above is calculated net of the statutory tax rate, which could differ from the Company’s effective tax rate.

The segment accounting policies are the same as those used to prepare the Company’s interim condensed 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.

Segment investment and capitalization targets are 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. 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.

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

2. Segment Information (continued)

Operating results by segment, as well as Corporate & Other, were as follows:


		Three Months Ended September 30, 2021											Three Months Ended March 31, 2022
		Annuities		Life		Run-off		Corporate & Other		Total			Annuities		Life		Run-off		Corporate & Other		Total
		(In millions)											(In millions)
Pre-tax adjusted earnings	Pre-tax adjusted earnings	$	482	$	139	$	43	$	(64)	$	600	Pre-tax adjusted earnings	$	374	$	39	$	19	$	(39)	$	393
Provision for income tax expense (benefit)	Provision for income tax expense (benefit)	96		30		4		(13)		117		Provision for income tax expense (benefit)	71		8		4		(5)		78
Post-tax adjusted earnings	Post-tax adjusted earnings	386		109		39		(51)		483		Post-tax adjusted earnings	303		31		15		(34)		315
Less: Net income (loss) attributable to noncontrolling interests	Less: Net income (loss) attributable to noncontrolling interests	—		—		—		—		—		Less: Net income (loss) attributable to noncontrolling interests	—		—		—		—		—
Adjusted earnings	Adjusted earnings	$	386	$	109	$	39	$	(51)	483		Adjusted earnings	$	303	$	31	$	15	$	(34)	315
Adjustments for:	Adjustments for:											Adjustments for:
Net investment gains (losses)	Net investment gains (losses)									(16)		Net investment gains (losses)									(67)
Net derivative gains (losses)	Net derivative gains (losses)									56		Net derivative gains (losses)									555
Other adjustments to net income (loss)	Other adjustments to net income (loss)									(152)		Other adjustments to net income (loss)									(38)
Provision for income tax (expense) benefit	Provision for income tax (expense) benefit									21		Provision for income tax (expense) benefit									(94)
Net income (loss) attributable to Brighthouse Life Insurance Company	Net income (loss) attributable to Brighthouse Life Insurance Company									$	392	Net income (loss) attributable to Brighthouse Life Insurance Company									$	671

Interest revenue	Interest revenue	$	564	$	168	$	505	$	33			Interest revenue	$	553	$	140	$	401	$	47
Interest expense	Interest expense	$	—	$	—	$	—	$	17			Interest expense	$	—	$	—	$	—	$	17


		Three Months Ended September 30, 2020											Three Months Ended March 31, 2021
		Annuities		Life		Run-off		Corporate & Other		Total			Annuities		Life		Run-off		Corporate & Other		Total
		(In millions)											(In millions)
Pre-tax adjusted earnings	Pre-tax adjusted earnings	$	466	$	(75)	$	(1,443)	$	(60)	$	(1,112)	Pre-tax adjusted earnings	$	396	$	141	$	85	$	(66)	$	556
Provision for income tax expense (benefit)	Provision for income tax expense (benefit)	90		(17)		(304)		(15)		(246)		Provision for income tax expense (benefit)	75		29		9		(12)		101
Post-tax adjusted earnings	Post-tax adjusted earnings	376		(58)		(1,139)		(45)		(866)		Post-tax adjusted earnings	321		112		76		(54)		455
Less: Net income (loss) attributable to noncontrolling interests	Less: Net income (loss) attributable to noncontrolling interests	—		—		—		—		—		Less: Net income (loss) attributable to noncontrolling interests	—		—		—		—		—
Adjusted earnings	Adjusted earnings	$	376	$	(58)	$	(1,139)	$	(45)	(866)		Adjusted earnings	$	321	$	112	$	76	$	(54)	455
Adjustments for:	Adjustments for:											Adjustments for:
Net investment gains (losses)	Net investment gains (losses)									6		Net investment gains (losses)									12
Net derivative gains (losses)	Net derivative gains (losses)									(1,870)		Net derivative gains (losses)									(1,387)
Other adjustments to net income (loss)	Other adjustments to net income (loss)									(1,048)		Other adjustments to net income (loss)									225
Provision for income tax (expense) benefit	Provision for income tax (expense) benefit									612		Provision for income tax (expense) benefit									242
Net income (loss) attributable to Brighthouse Life Insurance Company	Net income (loss) attributable to Brighthouse Life Insurance Company									$	(3,166)	Net income (loss) attributable to Brighthouse Life Insurance Company									$	(453)

Interest revenue	Interest revenue	$	467	$	116	$	383	$	17			Interest revenue	$	547	$	150	$	463	$	14
Interest expense	Interest expense	$	—	$	—	$	—	$	17			Interest expense	$	—	$	—	$	—	$	17

~~Table of Contents~~

~~Brighthouse Life Insurance Company~~

~~(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)~~

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

~~2. Segment Information (continued)~~

Nine Months Ended September 30, 2021
Annuities Life Run-off Corporate
& Other Total
(In millions)
Pre-tax adjusted earnings $ 1,288 $ 364 $ 267 $ (219) $ 1,700
Provision for income tax expense (benefit) 249 76 31 (40) 316
Post-tax adjusted earnings 1,039 288 236 (179) 1,384
Less: Net income (loss) attributable to noncontrolling interests — — — 1 1
Adjusted earnings $ 1,039 $ 288 $ 236 $ (180) 1,383
Adjustments for:
Net investment gains (losses) (37)
Net derivative gains (losses) (2,049)
Other adjustments to net income (loss) 249
Provision for income tax (expense) benefit 384
Net income (loss) attributable to Brighthouse Life Insurance Company $ (70)
Interest revenue $ 1,643 $ 474 $ 1,466 $ 62
Interest expense $ — $ — $ — $ 50

Nine Months Ended September 30, 2020
Annuities Life Run-off Corporate
& Other Total
(In millions)
Pre-tax adjusted earnings $ 1,042 $ (8) $ (1,679) $ (241) $ (886)
Provision for income tax expense (benefit) 194 (3) (355) (68) (232)
Post-tax adjusted earnings 848 (5) (1,324) (173) (654)
Less: Net income (loss) attributable to noncontrolling interests — — — 1 1
Adjusted earnings $ 848 $ (5) $ (1,324) $ (174) (655)
Adjustments for:
Net investment gains (losses) (46)
Net derivative gains (losses) 2,227
Other adjustments to net income (loss) (1,764)
Provision for income tax (expense) benefit (87)
Net income (loss) attributable to Brighthouse Life Insurance Company $ (325)
Interest revenue $ 1,327 $ 273 $ 873 $ 48
Interest expense $ — $ — $ — $ 51

~~Total revenues by segment, as well as Corporate & Other, were as follows:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
(In millions)
Annuities $ 1,195 $ 1,014 $ 3,446 $ 2,949
Life 309 274 965 780
Run-off 671 553 1,960 1,378
Corporate & Other 52 39 121 112
Adjustments 94 (1,805) (1,921) 2,357
Total $ 2,321 $ 75 $ 4,571 $ 7,576

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

2. Segment Information (continued)

Total revenues by segment, as well as Corporate & Other, were as follows:


	Three Months Ended March 31,
		2022		2021
		(In millions)
Annuities		$	1,135	$	1,147
Life		276		324
Run-off		562		628
Corporate & Other		66		35
Adjustments		540		(1,320)
Total		$	2,579	$	814

Total assets by segment, as well as Corporate & Other, were as follows at:


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(In millions)					(In millions)
Annuities	Annuities	$	171,461	$	167,806	Annuities	$	163,983	$	174,489
Life	Life	17,947		17,796		Life	17,600		18,190
Run-off	Run-off	36,389		38,366		Run-off	34,059		37,069
Corporate & Other	Corporate & Other	16,529		11,320		Corporate & Other	17,864		17,507
Total	Total	$	242,326	$	235,288	Total	$	233,506	$	247,255

3. Insurance

Guarantees

As discussed in Notes 1 and 3 of the Notes to the Consolidated Financial Statements included in the ~~2020~~2021 Annual Report, the Company issues variable annuity contracts with guaranteed minimum benefits. Guaranteed minimum death benefits, the life contingent portion of guaranteed minimum withdrawal benefits (“GMWB”) 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 5.

The Company also has secondary guarantees on universal and variable life insurance contracts accounted for as insurance liabilities.

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

September 30, 2021 December 31, 2020
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) $ 104,128 $ 56,489 $ 104,075 $ 57,790
Separate account value $ 99,376 $ 55,416 $ 99,257 $ 56,668
Net amount at risk $ 6,742 (4) $ 5,709 (5) $ 6,392 (4) $ 6,341 (5)
Average attained age of contract holders 71 years 70 years 70 years 70 years

September 30, 2021 December 31, 2020
Secondary Guarantees
(Dollars in millions)
Universal Life Contracts
Total account value (3) $ 5,579 $ 5,772
Net amount at risk (6) $ 67,671 $ 69,083
Average attained age of policyholders 68 years 67 years
Variable Life Contracts
Total account value (3) $ 1,398 $ 1,306
Net amount at risk (6) $ 10,732 $ 11,234
Average attained age of policyholders 47 years 46 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.~~


	March 31, 2022						December 31, 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)	$	96,960		$	51,769		$	105,784		$	56,966
Separate account value	$	92,277		$	50,709		$	101,108		$	55,910
Net amount at risk	$	9,189	(4)	$	5,468	(5)	$	6,315	(4)	$	4,992	(5)
Average attained age of contract holders	72 years			71 years			71 years			71 years

1110

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

3. Insurance (continued)


	March 31, 2022		December 31, 2021
	Secondary Guarantees
	(Dollars in millions)
Universal Life Contracts
Total account value (3)	$	5,447	$	5,518
Net amount at risk (6)	$	66,682	$	67,248
Average attained age of policyholders	68 years		68 years

Variable Life Contracts
Total account value (3)	$	1,348	$	1,448
Net amount at risk (6)	$	10,496	$	10,508
Average attained age of policyholders	47 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 presented 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 of the Notes to the Consolidated Financial Statements included in the ~~2020~~2021 Annual Report 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.

4. Investments

See Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the ~~2020~~2021 Annual Report for a description of the Company’s accounting policies for investments and the fair value hierarchy for investments and the related valuation methodologies.

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

4. Investments (continued)

Fixed Maturity Securities Available-for-sale

Fixed Maturity Securities by Sector

Fixed maturity securities by sector were as follows at:


		September 30, 2021												December 31, 2020																				March 31, 2022																	December 31, 2021
		Amortized Cost		Allowance for Credit Losses		Gross Unrealized				Estimated Fair Value				Amortized Cost				Allowance for Credit Losses				Gross Unrealized									Estimated Fair Value			Amortized Cost				Allowance for Credit Losses			Gross Unrealized							Estimated Fair Value			Amortized Cost			Allowance for Credit Losses			Gross Unrealized						Estimated Fair Value
						Gains		Losses												Gains				Losses						Gains											Losses					Gains											Losses
		(In millions)																																	(In millions)
U.S. corporate	U.S. corporate	$	34,238	$	—	$	4,014	$	191			$	38,061			$	32,062			$	2			$	5,286			$	70					$	37,276	U.S. corporate	$	35,220		$	2		$	1,434			$	1,201		$	35,451		$	34,773		$	2		$	3,890		$	187		$	38,474
Foreign corporate	Foreign corporate	10,723		6		968		92		11,593				9,926				—				1,493				44					11,375		Foreign corporate	11,172				7			276			494				10,947			10,813			7			902			103			11,605
RMBS																																	RMBS	8,782				—			185			275				8,692			8,838			—			433			51			9,220
U.S. government and agency	U.S. government and agency	7,457		—		1,945		80		9,322				5,871				—				2,599				6					8,464		U.S. government and agency	8,344				—			1,342			223				9,463			7,188			—			2,040			60			9,168
RMBS		9,001		—		500		24		9,477				7,578				—				644				3					8,219
CMBS	CMBS	6,608		1		415		17		7,005				6,120				—				586				9					6,697		CMBS	7,023				2			46			173				6,894			6,890			2			329			24			7,193
State and political subdivision	State and political subdivision	3,940		—		835		7		4,768				3,607				—				948				—					4,555		State and political subdivision	3,885				—			456			101				4,240			3,937			—			829			6			4,760
ABS	ABS	3,857		—		48		4		3,901				2,831				—				60				10					2,881		ABS	4,594				—			8			98				4,504			4,255			—			34			14			4,275
Foreign government	Foreign government	1,603		—		255		6		1,852				1,488				—				345				1					1,832		Foreign government	1,227				—			116			32				1,311			1,593			—			244			5			1,832
Total fixed maturity securities	Total fixed maturity securities	$	77,427	$	7	$	8,980	$	421	$	85,979			$	69,483			$	2			$	11,961			$	143				$	81,299	Total fixed maturity securities	$	80,247			$	11		$	3,863		$	2,597			$	81,502		$	78,287		$	11		$	8,701		$	450		$	86,527

The Company held non-income producing fixed maturity securities with an estimated fair value of $5$44 million and $3 million at ~~both September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021, respectively.

~~Table of Contents~~

~~Brighthouse Life Insurance Company~~

~~(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)~~

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

~~4. Investments (continued)~~

Maturities of Fixed Maturity Securities

The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at ~~September 30, 2021:~~March 31, 2022:


		Due in One Year or Less		Due After One Year Through Five Years		Due After Five Years Through Ten Years		Due After Ten Years		Structured Securities (1)		Total Fixed Maturity Securities			Due in One Year or Less		Due After One Year Through Five Years		Due After Five Years Through Ten Years		Due After Ten Years		Structured Securities (1)		Total Fixed Maturity Securities
		(In millions)													(In millions)
Amortized cost	Amortized cost	$	1,121	$	9,835	$	16,011	$	30,994	$	19,466	$	77,427	Amortized cost	$	916	$	11,564	$	16,844	$	30,524	$	20,399	$	80,247
Estimated fair value	Estimated fair value	$	1,133	$	10,313	$	17,136	$	37,014	$	20,383	$	85,979	Estimated fair value	$	921	$	11,478	$	16,493	$	32,520	$	20,090	$	81,502

_______________

(1)Structured securities include residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”).

Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity.

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

4. Investments (continued)

Continuous Gross Unrealized Losses for Fixed Maturity Securities by Sector

The estimated fair value and gross unrealized losses of fixed maturity securities in an unrealized loss position, by sector and by length of time that the securities have been in a continuous unrealized loss position, were as follows at:


		September 30, 2021								December 31, 2020									March 31, 2022								December 31, 2021
		Less than 12 Months				12 Months or Greater				Less than 12 Months				12 Months or Greater					Less than 12 Months				12 Months or Greater				Less than 12 Months				12 Months or Greater
		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
		(Dollars in millions)																	(Dollars in millions)
U.S. corporate	U.S. corporate	$	4,358	$	125	$	621	$	66	$	1,726	$	57	$	181	$	13	U.S. corporate	$	14,235	$	884	$	1,971	$	317	$	5,051	$	111	$	887	$	76
Foreign corporate	Foreign corporate	1,607		50		271		42		243		7		345		37		Foreign corporate	5,532		387		555		107		2,016		60		305		43
RMBS																		RMBS	4,934		236		410		39		3,481		50		32		1
U.S. government and agency	U.S. government and agency	2,282		80		—		—		236		6		—		—		U.S. government and agency	2,845		98		574		125		1,712		40		222		20
RMBS		2,725		23		30		1		180		2		22		1
CMBS	CMBS	722		14		64		3		331		7		44		2		CMBS	4,077		129		391		44		1,390		21		95		3
State and political subdivision	State and political subdivision	371		7		13		—		46		—		—		—		State and political subdivision	997		97		24		4		347		6		6		—
ABS	ABS	1,263		3		127		1		506		3		629		7		ABS	3,732		94		148		4		2,454		13		93		1
Foreign government	Foreign government	218		5		8		1		55		1		—		—		Foreign government	452		32		—		—		278		4		18		1
Total fixed maturity securities	Total fixed maturity securities	$	13,546	$	307	$	1,134	$	114	$	3,323	$	83	$	1,221	$	60	Total fixed maturity securities	$	36,804	$	1,957	$	4,073	$	640	$	16,729	$	305	$	1,658	$	145
Total number of securities in an unrealized loss position	Total number of securities in an unrealized loss position	1,743				300				665				241				Total number of securities in an unrealized loss position	5,202				710				2,423				368

Allowance for Credit Losses for Fixed Maturity Securities

Evaluation and Measurement Methodologies

For fixed maturity securities in an unrealized loss position, management first assesses whether the Company intends to sell, or whether it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to estimated fair value through net investment gains (losses). For fixed maturity securities that do not meet the aforementioned criteria, management evaluates whether the decline in estimated fair value has resulted from credit losses or other factors. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used in the allowance for credit loss evaluation process include, but are not limited to: (i) the extent to which estimated fair value is less than amortized cost; (ii) any changes to the rating of the security by a rating agency; (iii) adverse conditions specifically related to the security, industry or geographic area; and (iv) payment structure of the fixed maturity security and the likelihood of the issuer being able to

~~Table of Contents~~

~~Brighthouse Life Insurance Company~~

~~(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)~~

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

~~4. Investments (continued)~~

make payments in the future or the issuer’s failure to make scheduled interest and principal payments. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss is deemed to exist and an allowance for credit losses is recorded, limited by the amount that the estimated fair value is less than the amortized cost basis, with a corresponding charge to net investment gains (losses). Any unrealized losses that have not been recorded through an allowance for credit losses are recognized in ~~other comprehensive income (loss) (“OCI”).~~OCI.

Once a security specific allowance for credit losses is established, the present value of cash flows expected to be collected from the security continues to be reassessed. Any changes in the security specific allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense in net investment gains (losses).

Fixed maturity securities are also evaluated to determine whether any amounts have become uncollectible. When all, or a portion, of a security is deemed uncollectible, the uncollectible portion is written-off with an adjustment to amortized cost and a corresponding reduction to the allowance for credit losses.

Accrued interest receivables are presented separate from the amortized cost basis of fixed maturity securities. An allowance for credit losses is not estimated on an accrued interest receivable, rather receivable balances 90-days past due are deemed uncollectible and are written off with a corresponding reduction to net investment income. The accrued interest receivable on fixed maturity securities totaled $572 million and ~~$506~~$527 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, and is included in accrued investment income.

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

4. Investments (continued)

Fixed maturity securities are also evaluated to determine if they qualify as purchased financial assets with credit deterioration (“PCD”). To determine if the credit deterioration experienced since origination is more than insignificant, both (i) the extent of the credit deterioration and (ii) any rating agency downgrades are evaluated. For securities categorized as PCD assets, the present value of cash flows expected to be collected from the security are compared to the par value of the security. If the present value of cash flows expected to be collected is less than the par value, credit losses are embedded in the purchase price of the PCD asset. In this situation, both an allowance for credit losses and amortized cost gross-up is recorded, limited by the amount that the estimated fair value is less than the grossed-up amortized cost basis. Any difference between the purchase price and the present value of cash flows is amortized or accreted into net investment income over the life of the PCD asset. Any subsequent PCD asset allowance for credit losses is evaluated in a manner similar to the process described above for fixed maturity securities.

Current Period Evaluation

Based on the Company’s current evaluation of its fixed maturity securities in an unrealized loss position and the current intent or requirement to sell, the Company recorded an allowance for credit losses of $7$11 million, relating to 47 securities at ~~September 30, 2021.~~March 31, 2022. Management concluded that for all other fixed maturity securities in an unrealized loss position, the unrealized loss was not due to issuer-specific credit-related factors and as a result was recognized in OCI. Where unrealized losses have not been recognized into income, it is primarily because the securities’ bond issuer(s) are of high credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in estimated fair value is largely due to changes in interest rates and non-issuer specific credit spreads. These issuers continued to make timely principal and interest payments and the estimated fair value is expected to recover as the securities approach maturity.

~~Table of Contents~~

~~Brighthouse Life Insurance Company~~

~~(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)~~

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

~~4. Investments (continued)~~

~~Rollforward of the~~ Allowance for Credit Losses for Fixed Maturity Securities ~~by Sector~~

The ~~changes~~allowance for credit losses for fixed maturity securities was $11 million at both March 31, 2022 and December 31, 2021. For both the three months ended March 31, 2022 and 2021, the change in the allowance for ~~credit losses~~fixed maturity securities by sector ~~were as follows:~~

U.S. Corporate Foreign Corporate CMBS Total
(In millions)
Nine Months Ended September 30, 2021
Balance, beginning of period $ 2 $ — $ — $ 2
Allowance on securities where credit losses were not previously recorded — 6 1 7
Reductions for securities sold (1) — — (1)
Change in allowance on securities with an allowance recorded in a previous period (1) — — (1)
Write-offs charged against allowance (1) — — — —
Balance, end of period $ — $ 6 $ 1 $ 7
Nine Months Ended September 30, 2020
Balance, beginning of period $ 3 $ 1 $ — $ 4
Allowance on securities where credit losses were not previously recorded 3 1 — 4
Reductions for securities sold (1) — — (1)
Change in allowance on securities with an allowance recorded in a previous period — — — —
Write-offs charged against allowance (1) (3) (1) — (4)
Balance, end of period $ 2 $ 1 $ — $ 3

~~_______________~~

~~(1)~~was immaterial. The Company recorded total write-offs of $2 million for the three months ended March 31, 2022. The Company did not record any write-offs ~~during~~for the ~~nine~~three months ended ~~September 30,~~March 31, 2021. ~~The Company recorded total write-offs of $13 million during the nine months ended September 30, 2020.~~

Mortgage Loans

Mortgage Loans by Portfolio Segment

Mortgage loans are summarized as follows at:


		September 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021
		Carrying Value		% of Total		Carrying Value		% of Total			Carrying Value		% of Total		Carrying Value		% of Total
		(Dollars in millions)									(Dollars in millions)
Commercial	Commercial	$	11,129	61.2	%	$	9,687	61.6	%	Commercial	$	13,092	61.5	%	$	12,159	61.4	%
Agricultural	Agricultural	3,945		21.7		3,479		22.1		Agricultural	4,104		19.3		4,128		20.9
Residential	Residential	3,214		17.7		2,650		16.9		Residential	4,226		19.8		3,623		18.3
Total mortgage loans (1)	Total mortgage loans (1)	18,288		100.6		15,816		100.6		Total mortgage loans (1)	21,422		100.6		19,910		100.6
Allowance for credit losses	Allowance for credit losses	(100)		(0.6)		(94)		(0.6)		Allowance for credit losses	(127)		(0.6)		(123)		(0.6)
Total mortgage loans, net	Total mortgage loans, net	$	18,188	100.0	%	$	15,722	100.0	%	Total mortgage loans, net	$	21,295	100.0	%	$	19,787	100.0	%

_______________

(1)Purchases of mortgage loans from third parties were ~~$698 million and $1.5 billion for the three months and nine months ended September 30, 2021, respectively, and~~ $47840 million and ~~$535~~$178 million for the three months ended March 31, 2022 and ~~nine months ended September 30, 2020,~~2021, respectively, and were primarily comprised of residential mortgage loans.

Allowance for Credit Losses for Mortgage Loans

Evaluation and Measurement Methodologies

The allowance for credit losses is a valuation account that is deducted from the mortgage loan’s amortized cost basis to present the net amount expected to be collected on the mortgage loan. The loan balance, or a portion of the loan balance, is written-off against the allowance when management believes this amount is uncollectible.

1514

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

4. Investments (continued)

Accrued interest receivables are presented separate from the amortized cost basis of mortgage loans. An allowance for credit losses is generally not estimated on an accrued interest receivable, rather when a loan is placed in nonaccrual status the associated accrued interest receivable balance is written off with a corresponding reduction to net investment income. For mortgage loans that are granted payment deferrals due to the ~~impact of the ongoing worldwide~~COVID-19 pandemic, ~~sparked by the novel coronavirus (“COVID-19 pandemic”),~~ interest continues to be accrued during the deferral period if the loan was less than 30 days past due at December 31, 2019 and performing at the onset of the pandemic. Accrued interest on COVID-19 pandemic impacted loans was not significant at both ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. The accrued interest receivable on mortgage loans is included in accrued investment income and totaled ~~$91~~$93 million and ~~$88~~$95 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

The allowance for credit losses is estimated using relevant available information, from internal and external sources, relating to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience provides the basis for estimating expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics and environmental conditions. A reasonable and supportable forecast period of two-years is used with an input reversion period of one-year.

Mortgage loans are evaluated in each of the three portfolio segments to determine the allowance for credit losses. The loan-level loss rates are determined using individual loan terms and characteristics, risk pools/internal ratings, national economic forecasts, prepayment speeds, and estimated default and loss severity.

The resulting loss rates are applied to the mortgage loan’s amortized cost to generate an allowance for credit losses. In certain situations, the allowance for credit losses is measured as the difference between the loan’s amortized cost and liquidation value of the collateral. These situations include collateral dependent loans, expected troubled debt restructurings (“TDR”), foreclosure probable loans, and loans with dissimilar risk characteristics.

Mortgage loans are also evaluated to determine if they qualify as PCD assets. To determine if the credit deterioration experienced since origination is more than insignificant, the extent of credit deterioration is evaluated. All re-performing/modified loan (“RPL”) pools purchased after December 31, 2019 are determined to have been acquired with evidence of more than insignificant credit deterioration since origination and are classified as PCD assets. RPLs are pools of residential mortgage loans acquired at a discount or premium which have both credit and non-credit components. For PCD mortgage loans, the allowance for credit losses is determined using a similar methodology described above, except the loss-rate is determined at the pool level instead of the individual loan level. The initial allowance for credit losses, determined on a collective basis, is then allocated to the individual loans. The initial amortized cost of the loan is grossed-up to reflect the sum of the loan’s purchase price and allowance for credit losses. The difference between the grossed-up amortized cost basis and the par value of the loan is a noncredit discount or premium, which is accreted or amortized into net investment income over the remaining life of the loan. Any subsequent PCD mortgage loan allowance for credit losses is evaluated in a manner similar to the process described above for each of the three portfolio segments.

Rollforward of the Allowance for Credit Losses for Mortgage Loans by Portfolio Segment

The changes in the allowance for credit losses by portfolio segment were as follows:


		Commercial		Agricultural		Residential		Total			Commercial		Agricultural		Residential		Total
		(In millions)									(In millions)
Nine Months Ended September 30, 2021
Balance, beginning of period		$	44	$	15	$	35	$	94
Current period provision		6		(2)		—		4
PCD credit allowance		—		—		2		2

Balance, end of period		$	50	$	13	$	37	$	100
Nine Months Ended September 30, 2020
Three Months Ended March 31, 2022										Three Months Ended March 31, 2022
Balance, beginning of period	Balance, beginning of period	$	27	$	16	$	21	$	64	Balance, beginning of period	$	67	$	12	$	44	$	123
Current period provision	Current period provision	17		—		9		26		Current period provision	2		3		(1)		4

Balance, end of period	Balance, end of period	$	44	$	16	$	30	$	90	Balance, end of period	$	69	$	15	$	43	$	127
Three Months Ended March 31, 2021										Three Months Ended March 31, 2021
Balance, beginning of period										Balance, beginning of period	$	44	$	15	$	35	$	94
Current period provision										Current period provision	1		(2)		(3)		(4)

Balance, end of period										Balance, end of period	$	45	$	13	$	32	$	90

1615

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

4. Investments (continued)

~~PCD Mortgage Loans~~

~~Purchases of PCD mortgage loans are summarized as follows:~~

Nine Months Ended September 30,
2021 2020
(In millions)
Purchase price $ 436 $ 77
Allowance at acquisition date 2 2
Discount or premium attributable to other factors (25) 2
Par value $ 413 $ 81

Credit Quality of Mortgage Loans by Portfolio Segment

The amortized cost of mortgage loans by year of origination and credit quality indicator was as follows at:


		2021		2020		2019		2018		2017		Prior		Total			2022		2021		2020		2019		2018		Prior		Total
		(In millions)															(In millions)
September 30, 2021
March 31, 2022																March 31, 2022
Commercial mortgage loans	Commercial mortgage loans															Commercial mortgage loans
Loan-to-value ratios:	Loan-to-value ratios:															Loan-to-value ratios:
Less than 65%	Less than 65%	$	1,513	$	378	$	1,465	$	967	$	583	$	3,444	$	8,350	Less than 65%	$	637	$	2,772	$	436	$	1,538	$	986	$	3,835	$	10,204
65% to 75%	65% to 75%	519		153		510		482		208		525		2,397		65% to 75%	346		631		92		383		406		579		2,437
76% to 80%	76% to 80%	—		—		—		—		44		70		114		76% to 80%	—		—		—		55		29		68		152
Greater than 80%	Greater than 80%	—		—		—		30		—		238		268		Greater than 80%	—		—		—		—		29		270		299
Total commercial mortgage loans	Total commercial mortgage loans	2,032		531		1,975		1,479		835		4,277		11,129		Total commercial mortgage loans	983		3,403		528		1,976		1,450		4,752		13,092
Agricultural mortgage loans	Agricultural mortgage loans															Agricultural mortgage loans
Loan-to-value ratios:	Loan-to-value ratios:															Loan-to-value ratios:
Less than 65%	Less than 65%	771		545		505		699		301		861		3,682		Less than 65%	90		1,149		426		503		669		904		3,741
65% to 75%	65% to 75%	55		77		78		10		25		18		263		65% to 75%	49		114		77		61		20		42		363

Total agricultural mortgage loans	Total agricultural mortgage loans	826		622		583		709		326		879		3,945		Total agricultural mortgage loans	139		1,263		503		564		689		946		4,104
Residential mortgage loans	Residential mortgage loans															Residential mortgage loans
Performing	Performing	499		223		302		267		151		1,715		3,157		Performing	132		1,773		187		243		202		1,626		4,163
Nonperforming	Nonperforming	—		—		3		3		—		51		57		Nonperforming	—		3		—		2		2		56		63
Total residential mortgage loans	Total residential mortgage loans	499		223		305		270		151		1,766		3,214		Total residential mortgage loans	132		1,776		187		245		204		1,682		4,226
Total	Total	$	3,357	$	1,376	$	2,863	$	2,458	$	1,312	$	6,922	$	18,288	Total	$	1,254	$	6,442	$	1,218	$	2,785	$	2,343	$	7,380	$	21,422


	2021		2020		2019		2018		2017		Prior		Total
	(In millions)
December 31, 2021
Commercial mortgage loans
Loan-to-value ratios:
Less than 65%	$	2,771	$	437	$	1,539	$	986	$	553	$	3,300	$	9,586
65% to 75%	633		92		383		406		127		458		2,099
76% to 80%	—		—		55		29		59		31		174
Greater than 80%	—		—		—		30		—		270		300
Total commercial mortgage loans	3,404		529		1,977		1,451		739		4,059		12,159
Agricultural mortgage loans
Loan-to-value ratios:
Less than 65%	1,150		539		510		674		284		608		3,765
65% to 75%	114		77		61		26		33		52		363


Total agricultural mortgage loans	1,264		616		571		700		317		660		4,128
Residential mortgage loans
Performing	1,124		202		270		230		132		1,606		3,564
Nonperforming	1		—		3		3		1		51		59
Total residential mortgage loans	1,125		202		273		233		133		1,657		3,623
Total	$	5,793	$	1,347	$	2,821	$	2,384	$	1,189	$	6,376	$	19,910

1716

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

4. Investments (continued)

2020 2019 2018 2017 2016 Prior Total
(In millions)
December 31, 2020
Commercial mortgage loans
Loan-to-value ratios:
Less than 65% $ 317 $ 1,527 $ 1,004 $ 514 $ 1,106 $ 2,808 $ 7,276
65% to 75% 200 450 482 322 59 498 2,011
76% to 80% — — — 44 79 8 131
Greater than 80% — — 29 — 6 234 269
Total commercial mortgage loans 517 1,977 1,515 880 1,250 3,548 9,687
Agricultural mortgage loans
Loan-to-value ratios:
Less than 65% 566 526 749 377 412 627 3,257
65% to 75% 81 80 10 33 — 18 222
Total agricultural mortgage loans 647 606 759 410 412 645 3,479
Residential mortgage loans
Performing 214 381 413 131 70 1,375 2,584
Nonperforming 2 6 4 — 1 53 66
Total residential mortgage loans 216 387 417 131 71 1,428 2,650
Total $ 1,380 $ 2,970 $ 2,691 $ 1,421 $ 1,733 $ 5,621 $ 15,816

The loan-to-value ratio is a measure commonly used to assess the quality of commercial and agricultural mortgage loans. The loan-to-value ratio compares the amount of the loan to the estimated fair value of the underlying property collateralizing the loan and is commonly expressed as a percentage. A loan-to-value ratio less than 100% indicates an excess of collateral value over the loan amount. Loan-to-value ratios greater than 100% indicate that the loan amount exceeds the collateral value. Performing status is a measure commonly used to assess the quality of residential mortgage loans. A loan is considered performing when the borrower makes consistent and timely payments.

The amortized cost of commercial mortgage loans by debt-service coverage ratio was as follows at:


		September 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021
		Amortized Cost		% of Total		Amortized Cost		% of Total			Amortized Cost		% of Total		Amortized Cost		% of Total
		(Dollars in millions)									(Dollars in millions)
Debt-service coverage ratios:	Debt-service coverage ratios:									Debt-service coverage ratios:
Greater than 1.20x	Greater than 1.20x	$	10,001	89.9	%	$	9,423	97.3	%	Greater than 1.20x	$	10,986	83.9	%	$	10,263	84.4	%
1.00x - 1.20x	1.00x - 1.20x	428		3.8		204		2.1		1.00x - 1.20x	569		4.4		595		4.9
Less than 1.00x	Less than 1.00x	700		6.3		60		0.6		Less than 1.00x	1,537		11.7		1,301		10.7
Total	Total	$	11,129	100.0	%	$	9,687	100.0	%	Total	$	13,092	100.0	%	$	12,159	100.0	%

The debt-service coverage ratio compares a property’s net operating income to its debt-service payments. Debt-service coverage ratios less than 1.00 times indicate that property operations do not generate enough income to cover the loan’s current debt payments. A debt-service coverage ratio greater than 1.00 times indicates an excess of net operating income over the debt-service payments.

~~Table of Contents~~

~~Brighthouse Life Insurance Company~~

~~(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)~~

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

~~4. Investments (continued)~~

Past Due Mortgage Loans by Portfolio Segment

The Company has a high-quality, well-performing mortgage loan portfolio, with over 99% of all mortgage loans classified as performing at both ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. Delinquency is defined consistent with industry practice, when mortgage loans are past due as follows: commercial and residential mortgage loans — 60 days; and agricultural mortgage loans — 90 days. To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the past due status of the impacted loans during the forbearance period is locked-in as of March 1, 2020, which reflects the date on which the COVID-19 pandemic began to affect the borrower’s ability to make payments. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020, $30~~2021, $31 million and ~~$38~~$30 million, respectively, of the COVID-19 pandemic modified loans were classified as delinquent.

The aging of the amortized cost of past due mortgage loans by portfolio segment was as follows at:


		September 30, 2021								December 31, 2020									March 31, 2022								December 31, 2021
		Commercial		Agricultural		Residential		Total		Commercial		Agricultural		Residential		Total			Commercial		Agricultural		Residential		Total		Commercial		Agricultural		Residential		Total
		(In millions)																	(In millions)
Current	Current	$	11,129	$	3,945	$	3,117	$	18,191	$	9,687	$	3,479	$	2,575	$	15,741	Current	$	13,092	$	4,035	$	4,147	$	21,274	$	12,159	$	4,128	$	3,550	$	19,837
30-59 days past due	30-59 days past due	—		—		40		40		—		—		9		9		30-59 days past due	—		51		16		67		—		—		14		14
60-89 days past due	60-89 days past due	—		—		14		14		—		—		24		24		60-89 days past due	—		16		17		33		—		—		14		14
90-179 days past due	90-179 days past due	—		—		28		28		—		—		27		27		90-179 days past due	—		2		31		33		—		—		29		29
180+ days past due	180+ days past due	—		—		15		15		—		—		15		15		180+ days past due	—		—		15		15		—		—		16		16
Total	Total	$	11,129	$	3,945	$	3,214	$	18,288	$	9,687	$	3,479	$	2,650	$	15,816	Total	$	13,092	$	4,104	$	4,226	$	21,422	$	12,159	$	4,128	$	3,623	$	19,910

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

4. Investments (continued)

Mortgage Loans in Nonaccrual Status by Portfolio Segment

Mortgage loans are placed in a nonaccrual status if there are concerns regarding collectability of future payments or the loan is past due, unless the past due loan is well collateralized. To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the impacted loans generally will not be reported as in a nonaccrual status during the period of deferral. A COVID-19 pandemic modified loan is only reported as a nonaccrual asset in the event a borrower declares bankruptcy, the borrower experiences significant credit deterioration such that the Company does not expect to collect all principal and interest due, or the loan was 90 days past due at the onset of the pandemic. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020, $30~~2021, $31 million and ~~$38~~$30 million, respectively, of the COVID-19 pandemic modified loans were in nonaccrual status.

The amortized cost of mortgage loans in a nonaccrual status by portfolio segment were as follows at:

Commercial Agricultural Residential (1) Total
(In millions)
September 30, 2021 $ — $ — $ 57 $ 57
December 31, 2020 $ — $ — $ 66 $ 66


	Commercial		Agricultural		Residential (1)		Total
	(In millions)
March 31, 2022	$	—	$	—	$	63	$	63
December 31, 2021	$	—	$	—	$	59	$	59

_______________

(1)~~The Company had $7 million of~~All residential mortgage loans in nonaccrual status ~~for which there was no related~~had an allowance for credit losses at both ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

Current period investment income on mortgage loans in nonaccrual status was less than $1 million for both the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

Modified Mortgage Loans by Portfolio Segment

Under certain circumstances, modifications are granted to nonperforming mortgage loans. Each modification is evaluated to determine if a TDR has occurred. A modification is a TDR when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the amount of debt owed, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company did not have a significant amount of mortgage loans modified in a TDR during both the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~

~~Table of Contents~~

~~Brighthouse Life Insurance Company~~

~~(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)~~

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

~~4. Investments (continued)~~

2021.

Short-term modifications made on a good faith basis to borrowers who were not more than 30 days past due at December 31, 2019 and in response to the COVID-19 pandemic are not considered TDRs.

Other Invested Assets

Over 90% of other invested assets is comprised of freestanding derivatives with positive estimated fair values. See Note 5 for information about freestanding derivatives with positive estimated fair values. Other invested assets also includes Federal Home Loan Bank (“FHLB”) stock, tax credit and renewable energy partnerships and leveraged ~~leases and Federal Home Loan Bank (“FHLB”) stock.~~

~~Leveraged Leases~~

The carrying value of leveraged leases was $50 million at both September 30, 2021 and December 31, 2020. The allowance for credit losses was $13 million at both September 30, 2021 and December 31, 2020. Rental receivables are generally due in periodic installments. The payment periods for leveraged leases generally range from one to 12 years. For rental receivables, the primary credit quality indicator is whether the rental receivable is performing or nonperforming, which is assessed monthly. Nonperforming rental receivables are generally defined as those that are 90 days or more past due. At both September 30, 2021 and December 31, 2020, all leveraged leases were performing.leases.

Net Unrealized Investment Gains (Losses)

Unrealized investment gains (losses) on fixed maturity securities and the effect on DAC, VOBA, deferred sales inducements (“DSI”) and future policy benefits, that would result from the realization of the unrealized gains (losses), are included in net unrealized investment gains (losses) in accumulated other comprehensive income (loss) (“AOCI”).

~~The components of net unrealized investment gains (losses), included in AOCI, were as follows at:~~

September 30, 2021 December 31, 2020
(In millions)
Fixed maturity securities $ 8,559 $ 11,818
Derivatives 302 162
Other (26) (16)
Subtotal 8,835 11,964
Amounts allocated from:
Future policy benefits (3,321) (4,598)
DAC, VOBA and DSI (401) (494)
Subtotal (3,722) (5,092)
Deferred income tax benefit (expense) (1,074) (1,443)
Net unrealized investment gains (losses) $ 4,039 $ 5,429

~~The changes in net unrealized investment gains (losses) were as follows:~~


	~~Nine Months Ended September 30, 2021~~
	~~(In millions)~~
~~Balance at December 31, 2020~~	$	~~5,429~~
~~Unrealized investment gains (losses) during the period~~	~~(3,129)~~
~~Unrealized investment gains (losses) relating to:~~
~~Future policy benefits~~	~~1,277~~
~~DAC, VOBA and DSI~~	93
~~Deferred income tax benefit (expense)~~	~~369~~
~~Balance at September 30, 2021~~	$	~~4,039~~
~~Change in net unrealized investment gains (losses)~~	$	~~(1,390)~~

2018

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

4. Investments (continued)

The components of net unrealized investment gains (losses), included in AOCI, were as follows at:


	March 31, 2022		December 31, 2021
	(In millions)
Fixed maturity securities	$	1,266	$	8,251
Derivatives	338		320
Other	(10)		(27)
Subtotal	1,594		8,544
Amounts allocated from:
Future policy benefits	(1,102)		(3,210)
DAC, VOBA and DSI	(81)		(387)
Subtotal	(1,183)		(3,597)
Deferred income tax benefit (expense)	(86)		(1,039)
Net unrealized investment gains (losses)	$	325	$	3,908

The changes in net unrealized investment gains (losses) were as follows:


	Three Months Ended March 31, 2022
	(In millions)
Balance at December 31, 2021	$	3,908
Unrealized investment gains (losses) during the period	(6,950)
Unrealized investment gains (losses) relating to:
Future policy benefits	2,108
DAC, VOBA and DSI	306
Deferred income tax benefit (expense)	953
Balance at March 31, 2022	$	325
Change in net unrealized investment gains (losses)	$	(3,583)

Concentrations of Credit Risk

There were no investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, at both ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

Securities Lending

Elements of the securities lending program are presented below at:


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(In millions)					(In millions)
Securities on loan: (1)	Securities on loan: (1)					Securities on loan: (1)
Amortized cost	Amortized cost	$	3,568	$	2,373	Amortized cost	$	4,491	$	3,573
Estimated fair value	Estimated fair value	$	4,439	$	3,603	Estimated fair value	$	5,073	$	4,539
Cash collateral received from counterparties (2)	Cash collateral received from counterparties (2)	$	4,539	$	3,674	Cash collateral received from counterparties (2)	$	5,168	$	4,611

Securities collateral received from counterparties (3)						Securities collateral received from counterparties (3)	$	—	$	2
Reinvestment portfolio — estimated fair value	Reinvestment portfolio — estimated fair value	$	4,677	$	3,830	Reinvestment portfolio — estimated fair value	$	5,202	$	4,730

_______________

(1)Included within fixed maturity securities.

(2)Included within payables for collateral under securities loaned and other transactions.

(3)Securities collateral received from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reported on the interim condensed consolidated financial statements.

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

4. Investments (continued)

The cash collateral liability by loaned security type and remaining tenor of the agreements were as follows at:


		September 30, 2021						December 31, 2020						March 31, 2022									December 31, 2021
		Open (1)		1 Month or Less		1 to 6 Months		Total		Open (1)		1 Month or Less			1 to 6 Months		Total						Open (1)			1 Month or Less		1 to 6 Months			Total				Open (1)			1 Month or Less		1 to 6 Months			Total
		(In millions)												(In millions)

U.S. government and agency	U.S. government and agency	$	1,619	$	2,292	$	627	$	4,538	$	937	$	2,300		$	437	$	3,674			U.S. government and agency		$	1,159		$	1,635	$	1,751		$	4,545			$	1,094		$	2,125	$	1,391		$	4,610
U.S. corporate	U.S. corporate	1		—		—		1		—		—			—		—				U.S. corporate		1			479		—			480				1			—		—			1

Foreign corporate																			Foreign corporate	—		143			—					143			—	—			—					—

Total	Total	$	1,620	$	2,292	$	627	$	4,539	$	937	$	2,300		$	437	$	3,674			Total		$	1,160		$	2,257	$	1,751		$	5,168			$	1,095		$	2,125	$	1,391		$	4,611

_______________

(1)The related loaned security could be returned to the Company on the next business day which would require the Company to immediately return the cash collateral.

If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell securities to meet the return obligation, it may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than what otherwise would have been realized in normal market conditions, or both. The estimated fair value of the securities on loan related to the cash collateral on open at ~~September 30, 2021~~March 31, 2022 was ~~$1.6~~$1.1 billion, primarily comprised of U.S. government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement.

The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including ~~agency RMBS, ABS,~~ U.S. government and agency securities, agency RMBS, ABS, non-agency RMBS and ~~U.S. and foreign corporate securities)~~CMBS) with ~~57%~~55% invested in ~~agency RMBS,~~ U.S. government and agency securities, agency RMBS and cash and cash equivalents at ~~September 30, 2021.~~March 31, 2022. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company.

~~Table of Contents~~

~~Brighthouse Life Insurance Company~~

~~(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)~~

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

~~4. Investments (continued)~~

Invested Assets on Deposit, Held in Trust and Pledged as Collateral

Invested assets on deposit, held in trust and pledged as collateral at estimated fair value were as follows at:


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(In millions)					(In millions)
Invested assets on deposit (regulatory deposits) (1)	Invested assets on deposit (regulatory deposits) (1)	$	9,879	$	10,131	Invested assets on deposit (regulatory deposits) (1)	$	9,113	$	9,996
Invested assets held in trust (reinsurance agreements) (2)	Invested assets held in trust (reinsurance agreements) (2)	5,828		5,711		Invested assets held in trust (reinsurance agreements) (2)	5,693		6,023
Invested assets pledged as collateral (3)	Invested assets pledged as collateral (3)	5,158		5,595		Invested assets pledged as collateral (3)	6,030		5,116
Total invested assets on deposit, held in trust and pledged as collateral	Total invested assets on deposit, held in trust and pledged as collateral	$	20,865	$	21,437	Total invested assets on deposit, held in trust and pledged as collateral	$	20,836	$	21,135

_______________

(1)The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which ~~$50~~$41 million and ~~$59~~$25 million of the assets on deposit represents restricted cash and cash equivalents at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

(2)The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions, of which ~~$120~~$101 million and ~~$101~~$118 million of the assets held in trust balance represents restricted cash and cash equivalents at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

(3)The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 3 of the Notes to the Consolidated Financial Statements included in the ~~2020~~2021 Annual Report) and derivative transactions (see Note 5).

See “— Securities Lending” for information regarding securities on loan. In addition, the Company’s investment in FHLB common stock, which is considered restricted until redeemed by the issuer, was ~~$59~~$89 million and ~~$39~~$70 million at redemption value at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

4. Investments (continued)

Variable Interest Entities

A variable interest entity (“VIE”) is a legal entity that does not have sufficient equity at risk to finance its activities or is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not substantively participate in the gains and losses of the entity.

The Company enters into various arrangements with VIEs in the normal course of business and has invested in legal entities that are VIEs. VIEs are consolidated when it is determined that the Company is the primary beneficiary. A primary beneficiary is the variable interest holder in a VIE with both (i) the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In addition, the evaluation of whether a legal entity is a VIE and if the Company is a primary beneficiary includes a review of the capital structure of the VIE, the related contractual relationships and terms, the nature of the operations and purpose of the VIE, the nature of the VIE interests issued and the Company’s involvement with the entity.

There were no material VIEs for which the Company has concluded that it is the primary beneficiary at either ~~September 30, 2021~~March 31, 2022 or December 31, ~~2020.~~2021.

The carrying amount and maximum exposure to loss related to the VIEs for which the Company has concluded that it holds a variable interest, but is not the primary beneficiary, were as follows at:

September 30, 2021 December 31, 2020
Carrying
Amount Maximum
Exposure
to Loss Carrying
Amount Maximum
Exposure
to Loss
(In millions)
Fixed maturity securities $ 15,870 $ 15,042 $ 13,494 $ 12,416
Limited partnerships and LLCs 3,396 4,860 2,307 3,565
Total $ 19,266 $ 19,902 $ 15,801 $ 15,981

~~Table of Contents~~

~~Brighthouse Life Insurance Company~~

~~(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)~~

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

~~4. Investments (continued)~~


	March 31, 2022				December 31, 2021
	Carrying Amount		Maximum Exposure to Loss		Carrying Amount		Maximum Exposure to Loss
	(In millions)
Fixed maturity securities	$	15,748	$	15,912	$	16,326	$	15,659
Limited partnerships and LLCs	3,875		5,241		3,666		5,101
Total	$	19,623	$	21,153	$	19,992	$	20,760

The Company’s investments in unconsolidated VIEs are described below.

Fixed Maturity Securities

The Company invests in U.S. corporate bonds, foreign corporate bonds and Structured Securities issued by VIEs. The Company is not obligated to provide any financial or other support to these VIEs, other than the original investment. The Company’s involvement with these entities is limited to that of a passive investor. The Company has no unilateral right to appoint or remove the servicer, special servicer, or investment manager, which are generally viewed as having the power to direct the activities that most significantly impact the economic performance of the VIE, nor does the Company function in any of these roles. The Company does not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity; as a result, the Company has determined it is not the primary beneficiary, or consolidator, of the VIE. The Company’s maximum exposure to loss on these fixed maturity securities is limited to the amortized cost of these investments. See “— Fixed Maturity Securities Available-for-sale” for information on these securities.

Limited Partnerships and LLCs

The Company holds investments in certain limited partnerships and LLCs which are VIEs. These ventures include limited partnerships, LLCs, private equity funds, ~~hedge funds,~~ and, to a lesser extent, tax credit and renewable energy partnerships. The Company is not considered the primary beneficiary, or consolidator, when its involvement takes the form of a limited partner interest and is restricted to a role of a passive investor, as a limited partner’s interest does not provide the Company with any substantive kick-out or participating rights, nor does it provide the Company with the power to direct the activities of the fund. The Company’s maximum exposure to loss on these investments is limited to: (i) the amount invested in debt or equity of the VIE and (ii) commitments to the VIE, as described in Note 9.

~~Net Investment Income~~

~~The components of net investment income were as follows:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
(In millions)
Investment income:
Fixed maturity securities $ 706 $ 665 $ 2,080 $ 1,990
Equity securities — 1 2 4
Mortgage loans 171 163 500 495
Policy loans 10 9 31 23
Limited partnerships and LLCs (1) 402 156 1,090 48
Cash, cash equivalents and short-term investments 1 6 3 38
Other 12 14 30 38
Total investment income 1,302 1,014 3,736 2,636
Less: Investment expenses 38 37 107 128
Net investment income $ 1,264 $ 977 $ 3,629 $ 2,508

~~_______________~~

~~(1)Includes net investment income pertaining to other limited partnerships of $378 million and $1.0 billion for the three monthsand nine months ended September 30, 2021, respectively, and $154 million and $34 million for the three monthsandnine months ended September 30, 2020, respectively.~~

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

4. Investments (continued)

Net Investment Income

The components of net investment income were as follows:


	Three Months Ended March 31,
		2022		2021
		(In millions)
Investment income:
Fixed maturity securities		$	709	$	680
Equity securities		—		1
Mortgage loans		202		163
Policy loans		9		10
Limited partnerships and LLCs (1)		241		338
Cash, cash equivalents and short-term investments		1		1
Other		14		10
Total investment income		1,176		1,203
Less: Investment expenses		41		34
Net investment income		$	1,135	$	1,169

_______________

(1)Includes net investment income pertaining to other limited partnership interests of $212 million and $331 million for the three months ended March 31, 2022 and 2021, respectively.

Net Investment Gains (Losses)

Components of Net Investment Gains (Losses)

The components of net investment gains (losses) were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
		(In millions)										(In millions)
Fixed maturity securities	Fixed maturity securities	$	—	$	2	$	(23)	$	(24)	Fixed maturity securities		$	(41)	$	8
Equity securities	Equity securities	(2)		3		1		(4)		Equity securities		(6)		—
Mortgage loans	Mortgage loans	(5)		3		(6)		(23)		Mortgage loans		(4)		4
Limited partnerships and LLCs	Limited partnerships and LLCs	—		(1)		1		(4)		Limited partnerships and LLCs		(16)		—
Other		(9)		(1)		(10)		9

Total net investment gains (losses)	Total net investment gains (losses)	$	(16)	$	6	$	(37)	$	(46)	Total net investment gains (losses)		$	(67)	$	12

Gains (losses) from foreign currency transactions included within net investment gains (losses) were ($15) million and $0 for the three months ended March 31, 2022 and 2021, respectively.

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

4. Investments (continued)

Sales or Disposals of Fixed Maturity Securities

Investment gains and losses on sales of securities are determined on a specific identification basis. Proceeds from sales or disposals of fixed maturity securities and the components of fixed maturity securities net investment gains (losses) were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
		(In millions)										(In millions)
Proceeds	Proceeds	$	1,925	$	889	$	4,092	$	2,155	Proceeds		$	2,540	$	1,218
Gross investment gains	Gross investment gains	$	23	$	30	$	62	$	61	Gross investment gains		$	47	$	31
Gross investment losses	Gross investment losses	(21)		(28)		(76)		(70)		Gross investment losses		(86)		(17)
Net investment gains (losses)	Net investment gains (losses)	$	2	$	2	$	(14)	$	(9)	Net investment gains (losses)		$	(39)	$	14

5. Derivatives

Accounting for Derivatives

See Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the ~~2020~~2021 Annual Report for a description of the Company’s accounting policies for derivatives and the fair value hierarchy for derivatives.

~~Derivative Strategies~~

Types of Derivative Instruments and Derivative Strategies

The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to minimize its exposure to various market risks. Commonly used derivative instruments include, but are not necessarily limited to:

•Interest rate derivatives: swaps, caps, swaptions and forwards;

•Foreign currency exchange rate derivatives: forwards and swaps;

•Equity market derivatives: options, total return swaps and variance swaps; and

•Credit derivatives: single and index reference credit default swaps and swaptions.

For detailed information on these contracts and the related strategies, see Note 7 of the Notes to the Consolidated Financial Statements included in the ~~2020~~2021 Annual Report.

2423

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

5. Derivatives (continued)

Primary Risks Managed by Derivatives

The primary underlying risk exposure, gross notional amount and estimated fair value of derivatives held were as follows at:


			September 30, 2021						December 31, 2020								March 31, 2022						December 31, 2021
		Primary Underlying Risk Exposure	Gross Notional Amount		Estimated Fair Value				Gross Notional Amount		Estimated Fair Value					Primary Underlying Risk Exposure	Gross Notional Amount		Estimated Fair Value				Gross Notional Amount		Estimated Fair Value
					Assets		Liabilities				Assets		Liabilities						Assets		Liabilities				Assets		Liabilities
			(In millions)														(In millions)
Derivatives Designated as Hedging Instruments:	Derivatives Designated as Hedging Instruments:														Derivatives Designated as Hedging Instruments:

Cash flow hedges:	Cash flow hedges:														Cash flow hedges:
Interest rate forwards	Interest rate forwards	Interest rate	$	210	$	25	$	—	$	290	$	66	$	—	Interest rate forwards	Interest rate	$	150	$	6	$	—	$	180	$	30	$	—
Foreign currency swaps	Foreign currency swaps	Foreign currency exchange rate	2,952		212		27		2,750		122		112		Foreign currency swaps	Foreign currency exchange rate	3,584		256		20		3,237		220		22

Total qualifying hedges	Total qualifying hedges		3,162		237		27		3,040		188		112		Total qualifying hedges		3,734		262		20		3,417		250		22
Derivatives Not Designated or Not Qualifying as Hedging Instruments:	Derivatives Not Designated or Not Qualifying as Hedging Instruments:														Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swaps	Interest rate swaps	Interest rate	2,945		341		14		2,295		463		—		Interest rate swaps	Interest rate	2,770		222		11		2,595		325		17

Interest rate caps	Interest rate caps	Interest rate	5,100		14		2		2,350		2		—		Interest rate caps	Interest rate	5,100		91		17		5,100		29		4

Interest rate options	Interest rate options	Interest rate	8,750		89		1		25,980		712		122		Interest rate options	Interest rate	8,380		50		9		8,050		83		—

Interest rate forwards	Interest rate forwards	Interest rate	10,502		276		225		8,086		851		78		Interest rate forwards	Interest rate	11,839		65		544		9,808		627		109
Foreign currency swaps	Foreign currency swaps	Foreign currency exchange rate	957		96		20		989		85		32		Foreign currency swaps	Foreign currency exchange rate	993		94		22		956		94		21
Foreign currency forwards	Foreign currency forwards	Foreign currency exchange rate	267		4		—		201		—		—		Foreign currency forwards	Foreign currency exchange rate	303		—		3		288		—		4
Credit default swaps — purchased		Credit	18		—		1		18		—		—

Credit default swaps — written	Credit default swaps — written	Credit	1,774		39		1		1,755		41		—		Credit default swaps — written	Credit	1,793		29		2		1,724		39		1
Credit default options		Credit	—		—		—		100		—		—
Credit default swaptions															Credit default swaptions	Credit	—		—		—		150		—		—

Equity index options	Equity index options	Equity market	29,441		1,039		1,105		30,976		1,071		838		Equity index options	Equity market	24,143		981		776		24,692		1,155		877
Equity variance swaps	Equity variance swaps	Equity market	359		9		7		1,098		13		20		Equity variance swaps	Equity market	281		9		1		281		9		1
Equity total return swaps	Equity total return swaps	Equity market	31,782		421		324		15,056		143		822		Equity total return swaps	Equity market	26,311		536		456		32,719		493		588
Hybrid options	Hybrid options	Equity market	900		16		—		600		—		—		Hybrid options	Equity market	900		—		—		900		8		—
Total non-designated or non-qualifying derivatives	Total non-designated or non-qualifying derivatives		92,795		2,344		1,700		89,504		3,381		1,912		Total non-designated or non-qualifying derivatives		82,813		2,077		1,841		87,263		2,862		1,622
Embedded derivatives:	Embedded derivatives:														Embedded derivatives:
Ceded guaranteed minimum income benefits	Ceded guaranteed minimum income benefits	Other	N/A		208		—		N/A		283		—		Ceded guaranteed minimum income benefits	Other	N/A		151		—		N/A		186		—
Direct index-linked annuities	Direct index-linked annuities	Other	N/A		—		5,218		N/A		—		3,855		Direct index-linked annuities	Other	N/A		—		5,309		N/A		—		6,211
Direct guaranteed minimum benefits	Direct guaranteed minimum benefits	Other	N/A		—		2,076		N/A		—		2,751		Direct guaranteed minimum benefits	Other	N/A		—		1,285		N/A		—		1,725
Assumed guaranteed minimum benefits	Assumed guaranteed minimum benefits	Other	N/A		—		470		N/A		—		596		Assumed guaranteed minimum benefits	Other	N/A		—		350		N/A		—		427
Assumed index-linked annuities	Assumed index-linked annuities	Other	N/A		—		373		N/A		—		382		Assumed index-linked annuities	Other	N/A		—		367		N/A		—		437
Total embedded derivatives	Total embedded derivatives		N/A		208		8,137		N/A		283		7,584		Total embedded derivatives		N/A		151		7,311		N/A		186		8,800
Total	Total		$	95,957	$	2,789	$	9,864	$	92,544	$	3,852	$	9,608	Total		$	86,547	$	2,490	$	9,172	$	90,680	$	3,298	$	10,444

Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and generally do not qualify for hedge accounting because they do not meet the criteria required under portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities and generally do not qualify for hedge accounting because they do not meet the criteria of being “highly effective” as outlined in Accounting Standards Codification 815 — Derivatives and Hedging; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income; and (iv) written credit default swaps that are used to create synthetic credit investments and that do not qualify for hedge accounting because they do not involve a hedging relationship.

2524

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

5. Derivatives (continued)

The amount and location of gains (losses), including earned income, recognized for derivatives and gains (losses) pertaining to hedged items presented in net derivative gains (losses) were as follows:

Net Derivative Gains (Losses) Recognized for Derivatives Net Derivative Gains (Losses) Recognized for Hedged Items Net Investment Income Amount of Gains (Losses) Deferred in AOCI
(In millions)
Three Months Ended September 30, 2021
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives $ — $ — $ 1 $ 3
Foreign currency exchange rate derivatives (1) 1 10 99
Total cash flow hedges (1) 1 11 102
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives (6) — — —
Foreign currency exchange rate derivatives 32 (2) — —
Credit derivatives 2 — — —
Equity derivatives (48) — — —
Embedded derivatives 78 — — —
Total non-qualifying hedges 58 (2) — —
Total $ 57 $ (1) $ 11 $ 102
Three Months Ended September 30, 2020
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives $ — $ — $ 1 $ (1)
Foreign currency exchange rate derivatives 8 (3) 8 (182)
Total cash flow hedges 8 (3) 9 (183)
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives (435) — — —
Foreign currency exchange rate derivatives (49) (2) — —
Credit derivatives 3 — — —
Equity derivatives (751) — — —
Embedded derivatives (641) — — —
Total non-qualifying hedges (1,873) (2) — —
Total $ (1,865) $ (5) $ 9 $ (183)

~~Table of Contents~~

~~Brighthouse Life Insurance Company~~

~~(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)~~

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

~~5. Derivatives (continued)~~

Net Derivative Gains (Losses) Recognized for Derivatives Net Derivative Gains (Losses) Recognized for Hedged Items Net Investment Income Amount of Gains (Losses) Deferred in AOCI
(In millions)
Nine Months Ended September 30, 2021
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives $ 1 $ — $ 3 $ (30)
Foreign currency exchange rate derivatives 5 (2) 25 179
Total cash flow hedges 6 (2) 28 149
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives (1,196) — — —
Foreign currency exchange rate derivatives 43 1 — —
Credit derivatives 13 — — —
Equity derivatives (496) — — —
Embedded derivatives (418) — — —
Total non-qualifying hedges (2,054) 1 — —
Total $ (2,048) $ (1) $ 28 $ 149
Nine Months Ended September 30, 2020
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives $ 1 $ — $ 2 $ 92
Foreign currency exchange rate derivatives 12 (6) 28 139
Total cash flow hedges 13 (6) 30 231
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives 4,321 — — —
Foreign currency exchange rate derivatives 56 (11) — —
Credit derivatives 1 — — —
Equity derivatives (393) — — —
Embedded derivatives (1,754) — — —
Total non-qualifying hedges 2,231 (11) — —
Total $ 2,244 $ (17) $ 30 $ 231


	Net Derivative Gains (Losses) Recognized for Derivatives		Net Derivative Gains (Losses) Recognized for Hedged Items		Net Investment Income		Amount of Gains (Losses) Deferred in AOCI
	(In millions)
Three Months Ended March 31, 2022
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate	$	1	$	—	$	1	$	(21)
Foreign currency exchange rate	—		—		10		41
Total cash flow hedges	1		—		11		20
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(1,131)		—		—		—
Foreign currency exchange rate	10		(5)		—		—
Credit	(7)		—		—		—
Equity market	308		—		—		—
Embedded	1,379		—		—		—
Total non-qualifying hedges	559		(5)		—		—
Total	$	560	$	(5)	$	11	$	20
Three Months Ended March 31, 2021
Derivatives Designated as Hedging Instruments:



Cash flow hedges:
Interest rate	$	1	$	—	$	1	$	(52)
Foreign currency exchange rate	5		(3)		8		(15)
Total cash flow hedges	6		(3)		9		(67)
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(1,912)		—		—		—
Foreign currency exchange rate	(7)		3		—		—
Credit	3		—		—		—
Equity market	(142)		—		—		—
Embedded	665		—		—		—
Total non-qualifying hedges	(1,393)		3		—		—
Total	$	(1,387)	$	—	$	9	$	(67)

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions wasone year and two years, ~~and~~ ~~three~~ ~~years,~~ respectively.

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the balance in AOCI associated with cash flow hedges was ~~$302~~$338 million and ~~$162~~$320 million, respectively.

Credit Derivatives

In connection with synthetically created credit investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation.

2725

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

5. Derivatives (continued)

The estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps were as follows at:


		September 30, 2021					December 31, 2020						March 31, 2022					December 31, 2021
Rating Agency Designation of Referenced Credit Obligations (1)	Rating Agency Designation of Referenced Credit Obligations (1)	Estimated Fair Value of Credit Default Swaps		Maximum Amount of Future Payments under Credit Default Swaps		Weighted Average Years to Maturity (2)	Estimated Fair Value of Credit Default Swaps		Maximum Amount of Future Payments under Credit Default Swaps		Weighted Average Years to Maturity (2)	Rating Agency Designation of Referenced Credit Obligations (1)	Estimated Fair Value of Credit Default Swaps		Maximum Amount of Future Payments under Credit Default Swaps		Weighted Average Years to Maturity (2)	Estimated Fair Value of Credit Default Swaps		Maximum Amount of Future Payments under Credit Default Swaps		Weighted Average Years to Maturity (2)
		(Dollars in millions)											(Dollars in millions)
Aaa/Aa/A	Aaa/Aa/A	$	13	$	683	2.2	$	15	$	683	2.9	Aaa/Aa/A	$	9	$	599	2.2	$	12	$	589	2.4
Baa	Baa	26		1,081		5.0	26		1,072		5.2	Baa	16		1,166		5.3	27		1,131		5.0
Ba	Ba	—		6		4.2	—		—		—	Ba	3		24		4.7	—		—		0.0
Caa and Lower	Caa and Lower	(1)		4		4.2	—		—		—	Caa and Lower	(1)		4		3.7	(1)		4		4.0
Total	Total	$	38	$	1,774	3.9	$	41	$	1,755	4.3	Total	$	27	$	1,793	4.3	$	38	$	1,724	4.1

_______________

(1)The Company has written credit protection on both single name and index references. The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s, S&P and Fitch. If no rating is available from a rating agency, then an internally developed rating is used.

(2)The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.

Counterparty Credit Risk

The Company may be exposed to credit-related losses in the event of counterparty nonperformance on derivative instruments. Generally, the credit exposure is the fair value at the reporting date less any collateral received from the counterparty.

The Company manages its credit risk by: (i) entering into derivative transactions with creditworthy counterparties governed by master netting agreements; (ii) trading through regulated exchanges and central clearing counterparties; (iii) obtaining collateral, such as cash and securities, when appropriate; and (iv) setting limits on single party credit exposures which are subject to periodic management review.

See Note 6 for a description of the impact of credit risk on the valuation of derivatives.

The estimated fair values of net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:


				Gross Amounts Not Offset on the Consolidated Balance Sheets													Gross Amounts Not Offset on the Consolidated Balance Sheets
		Gross Amount Recognized		Financial Instruments (1)		Collateral Received/Pledged (2)		Net Amount		Securities Collateral Received/Pledged (3)		Net Amount After Securities Collateral			Gross Amount Recognized		Financial Instruments (1)		Collateral Received/Pledged (2)		Net Amount		Securities Collateral Received/Pledged (3)		Net Amount After Securities Collateral
		(In millions)													(In millions)
September 30, 2021
March 31, 2022														March 31, 2022
Derivative assets	Derivative assets	$	2,615	$	(1,356)	$	(864)	$	395	$	(390)	$	5	Derivative assets	$	2,363	$	(1,321)	$	(837)	$	205	$	(188)	$	17
Derivative liabilities	Derivative liabilities	$	1,731	$	(1,356)	$	—	$	375	$	(333)	$	42	Derivative liabilities	$	1,854	$	(1,321)	$	—	$	533	$	(533)	$	—
December 31, 2020
December 31, 2021														December 31, 2021
Derivative assets	Derivative assets	$	3,574	$	(1,342)	$	(1,327)	$	905	$	(840)	$	65	Derivative assets	$	3,113	$	(1,155)	$	(1,480)	$	478	$	(413)	$	65
Derivative liabilities	Derivative liabilities	$	2,010	$	(1,342)	$	—	$	668	$	(630)	$	38	Derivative liabilities	$	1,632	$	(1,155)	$	—	$	477	$	(477)	$	—

_______________

(1)Represents amounts subject to an enforceable master netting agreement or similar agreement.

2826

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

5. Derivatives (continued)

(2)The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreement.

(3)Securities collateral received from counterparties is not reported on the consolidated balance sheets and may not be sold or re-pledged unless the counterparty is in default. Amounts do not include excess of collateral pledged or received.

The Company’s collateral arrangements generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the amount owed by that counterparty reaches a minimum transfer amount. Certain of these arrangements also include credit-contingent provisions which permit the party with positive fair value to terminate the derivative at the current fair value or demand immediate full collateralization from the party in a net liability position, in the event that the financial strength or credit rating of the party in a net liability position falls below a certain level.

The aggregate estimated fair values of derivatives in a net liability position containing such credit-contingent provisions and the aggregate estimated fair value of assets posted as collateral for such instruments were as follows at:


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(In millions)					(In millions)
Estimated fair value of derivatives in a net liability position (1)	Estimated fair value of derivatives in a net liability position (1)	$	375	$	668	Estimated fair value of derivatives in a net liability position (1)	$	533	$	477
Estimated Fair Value of Collateral Provided: (2)
Estimated Fair Value of Collateral Provided (2):						Estimated Fair Value of Collateral Provided (2):
Fixed maturity securities	Fixed maturity securities	$	701	$	1,205	Fixed maturity securities	$	1,465	$	839

_______________

(1)After taking into consideration the existence of netting agreements.

(2)Substantially all of the Company’s collateral arrangements provide for daily posting of collateral for the full value of the derivative contract. As a result, if the credit-contingent provisions of derivative contracts in a net liability position were triggered, minimal additional assets would be required to be posted as collateral or needed to settle the instruments immediately.

2927

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

6. Fair Value

Considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.

Recurring Fair Value Measurements

The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy are presented in the tables below. Investments that do not have a readily determinable fair value and are measured at net asset value (or equivalent) as a practical expedient to estimated fair value are excluded from the fair value hierarchy.


		September 30, 2021									March 31, 2022
		Fair Value Hierarchy						Total Estimated Fair Value			Fair Value Hierarchy						Total Estimated Fair Value
		Level 1		Level 2		Level 3					Level 1		Level 2		Level 3
		(In millions)									(In millions)
Assets	Assets									Assets
Fixed maturity securities:	Fixed maturity securities:									Fixed maturity securities:
U.S. corporate	U.S. corporate	$	—	$	37,195	$	866	$	38,061	U.S. corporate	$	—	$	34,416	$	1,035	$	35,451
Foreign corporate	Foreign corporate	—		11,170		423		11,593		Foreign corporate	—		10,364		583		10,947
RMBS										RMBS	—		8,675		17		8,692
U.S. government and agency	U.S. government and agency	3,483		5,839		—		9,322		U.S. government and agency	4,093		5,370		—		9,463
RMBS		—		9,452		25		9,477
CMBS	CMBS	—		6,963		42		7,005		CMBS	—		6,888		6		6,894
State and political subdivision	State and political subdivision	—		4,768		—		4,768		State and political subdivision	—		4,240		—		4,240
ABS	ABS	—		3,703		198		3,901		ABS	—		4,333		171		4,504
Foreign government	Foreign government	—		1,852		—		1,852		Foreign government	—		1,288		23		1,311
Total fixed maturity securities	Total fixed maturity securities	3,483		80,942		1,554		85,979		Total fixed maturity securities	4,093		75,574		1,835		81,502
Equity securities	Equity securities	21		61		3		85		Equity securities	20		42		13		75
Short-term investments	Short-term investments	705		60		—		765		Short-term investments	90		21		—		111

Derivative assets: (1)	Derivative assets: (1)									Derivative assets: (1)
Interest rate	Interest rate	—		745		—		745		Interest rate	—		434		—		434
Foreign currency exchange rate	Foreign currency exchange rate	—		302		10		312		Foreign currency exchange rate	—		335		15		350
Credit	Credit	—		26		13		39		Credit	—		20		9		29
Equity market	Equity market	—		1,460		25		1,485		Equity market	—		1,517		9		1,526
Total derivative assets	Total derivative assets	—		2,533		48		2,581		Total derivative assets	—		2,306		33		2,339
Embedded derivatives within asset host contracts (2)	Embedded derivatives within asset host contracts (2)	—		—		208		208		Embedded derivatives within asset host contracts (2)	—		—		151		151
Separate account assets	Separate account assets	46		104,276		—		104,322		Separate account assets	44		96,951		—		96,995
Total assets	Total assets	$	4,255	$	187,872	$	1,813	$	193,940	Total assets	$	4,247	$	174,894	$	2,032	$	181,173
Liabilities	Liabilities									Liabilities
Derivative liabilities: (1)	Derivative liabilities: (1)									Derivative liabilities: (1)
Interest rate	Interest rate	$	—	$	242	$	—	$	242	Interest rate	$	—	$	581	$	—	$	581
Foreign currency exchange rate	Foreign currency exchange rate	—		47		—		47		Foreign currency exchange rate	—		45		—		45
Credit	Credit	—		—		2		2		Credit	—		—		2		2
Equity market	Equity market	—		1,429		7		1,436		Equity market	—		1,232		1		1,233
Total derivative liabilities	Total derivative liabilities	—		1,718		9		1,727		Total derivative liabilities	—		1,858		3		1,861
Embedded derivatives within liability host contracts (2)	Embedded derivatives within liability host contracts (2)	—		—		8,137		8,137		Embedded derivatives within liability host contracts (2)	—		—		7,311		7,311

Total liabilities	Total liabilities	$	—	$	1,718	$	8,146	$	9,864	Total liabilities	$	—	$	1,858	$	7,314	$	9,172

3028

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

6. Fair Value (continued)


		December 31, 2020									December 31, 2021
		Fair Value Hierarchy						Total Estimated Fair Value			Fair Value Hierarchy						Total Estimated Fair Value
		Level 1		Level 2		Level 3					Level 1		Level 2		Level 3
		(In millions)									(In millions)
Assets	Assets									Assets
Fixed maturity securities:	Fixed maturity securities:									Fixed maturity securities:
U.S. corporate	U.S. corporate	$	—	$	36,789	$	487	$	37,276	U.S. corporate	$	—	$	37,568	$	906	$	38,474
Foreign corporate	Foreign corporate	—		11,178		197		11,375		Foreign corporate	—		11,112		493		11,605
RMBS										RMBS	—		9,209		11		9,220
U.S. government and agency	U.S. government and agency	2,108		6,356		—		8,464		U.S. government and agency	3,159		6,009		—		9,168
RMBS		—		8,197		22		8,219
CMBS	CMBS	—		6,692		5		6,697		CMBS	—		7,149		44		7,193
State and political subdivision	State and political subdivision	—		4,555		—		4,555		State and political subdivision	—		4,760		—		4,760
ABS	ABS	—		2,841		40		2,881		ABS	—		4,110		165		4,275
Foreign government	Foreign government	—		1,832		—		1,832		Foreign government	—		1,806		26		1,832
Total fixed maturity securities	Total fixed maturity securities	2,108		78,440		751		81,299		Total fixed maturity securities	3,159		81,723		1,645		86,527
Equity securities	Equity securities	31		99		3		133		Equity securities	21		61		13		95
Short-term investments	Short-term investments	1,669		216		—		1,885		Short-term investments	640		20		2		662
Derivative assets: (1)	Derivative assets: (1)									Derivative assets: (1)
Interest rate	Interest rate	—		2,094		—		2,094		Interest rate	—		1,094		—		1,094
Foreign currency exchange rate	Foreign currency exchange rate	—		206		1		207		Foreign currency exchange rate	—		304		10		314
Credit	Credit	—		27		14		41		Credit	—		27		12		39
Equity market	Equity market	—		1,213		14		1,227		Equity market	—		1,649		16		1,665
Total derivative assets	Total derivative assets	—		3,540		29		3,569		Total derivative assets	—		3,074		38		3,112
Embedded derivatives within asset host contracts (2)	Embedded derivatives within asset host contracts (2)	—		—		283		283		Embedded derivatives within asset host contracts (2)	—		—		186		186
Separate account assets	Separate account assets	86		103,897		3		103,986		Separate account assets	41		106,184		—		106,225
Total assets	Total assets	$	3,894	$	186,192	$	1,069	$	191,155	Total assets	$	3,861	$	191,062	$	1,884	$	196,807
Liabilities	Liabilities									Liabilities
Derivative liabilities: (1)	Derivative liabilities: (1)									Derivative liabilities: (1)
Interest rate	Interest rate	$	—	$	200	$	—	$	200	Interest rate	$	—	$	130	$	—	$	130
Foreign currency exchange rate	Foreign currency exchange rate	—		137		7		144		Foreign currency exchange rate	—		47		—		47

Credit										Credit	—		—		1		1
Equity market	Equity market	—		1,660		20		1,680		Equity market	—		1,465		1		1,466
Total derivative liabilities	Total derivative liabilities	—		1,997		27		2,024		Total derivative liabilities	—		1,642		2		1,644
Embedded derivatives within liability host contracts (2)	Embedded derivatives within liability host contracts (2)	—		—		7,584		7,584		Embedded derivatives within liability host contracts (2)	—		—		8,800		8,800

Total liabilities	Total liabilities	$	—	$	1,997	$	7,611	$	9,608	Total liabilities	$	—	$	1,642	$	8,802	$	10,444

_______________

(1)Derivative assets are presented within other invested assets on the consolidated balance sheets and derivative liabilities are presented within other liabilities on the consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the consolidated balance sheets.

(2)Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables on the consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances on the consolidated balance sheets.

Valuation Controls and Procedures

The Company monitors and provides oversight of valuation controls and policies for securities, mortgage loans and derivatives, which are primarily executed by its valuation service providers. The valuation methodologies used to determine fair values prioritize the use of observable market prices and market-based parameters and determines that judgmental valuation adjustments, when applied, are based upon established policies and are applied consistently over time. The valuation methodologies for securities, mortgage loans and derivatives are reviewed on an ongoing basis and revised when necessary. In addition, the Chief Accounting Officer periodically reports to the Audit Committee of Brighthouse Financial’s Board of Directors regarding compliance with fair value accounting standards.

3129

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

6. Fair Value (continued)

The fair value of financial assets and financial liabilities is based on quoted market prices, where available. Prices received are assessed to determine if they represent a reasonable estimate of fair value. Several controls are performed, including certain monthly controls, which include, but are not limited to, analysis of portfolio returns to corresponding benchmark returns, comparing a sample of executed prices of securities sold to the fair value estimates, reviewing the bid/ask spreads to assess activity, comparing prices from multiple independent pricing services and ongoing due diligence to confirm that independent pricing services use market-based parameters. The process includes a determination of the observability of inputs used in estimated fair values received from independent pricing services or brokers by assessing whether these inputs can be corroborated by observable market data. Independent non-binding broker quotes, also referred to herein as “consensus pricing,” are used for a non-significant portion of the portfolio. Prices received from independent brokers are assessed to determine if they represent a reasonable estimate of fair value by considering such pricing relative to the current market dynamics and current pricing for similar financial instruments.

A formal process is also applied to challenge any prices received from independent pricing services that are not considered representative of estimated fair value. If prices received from independent pricing services are not considered reflective of market activity or representative of estimated fair value, independent non-binding broker quotations are obtained. If obtaining an independent non-binding broker quotation is unsuccessful, the last available price will be used.

Additional controls are performed, such as, balance sheet analytics to assess reasonableness of period-to-period pricing changes, including any price adjustments. Price adjustments are applied if prices or quotes received from independent pricing services or brokers are not considered reflective of market activity or representative of estimated fair value. The Company did not have significant price adjustments during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

Determination of Fair Value

Fixed Maturity Securities

The fair values for actively traded marketable bonds, primarily U.S. government and agency securities, are determined using the quoted market prices and are classified as Level 1 assets. For fixed maturity securities classified as Level 2 assets, fair values are determined using either a market or income approach and are valued based on a variety of observable inputs as described below.

U.S. corporate and foreign corporate securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, benchmark yields, spreads off benchmark yields, new issuances, issuer rating, trades of identical or comparable securities, or duration. Privately-placed securities are valued using the additional key inputs: market yield curve, call provisions, observable prices and spreads for similar public or private securities that incorporate the credit quality and industry sector of the issuer, and delta spread adjustments to reflect specific credit-related issues.

U.S. government and agency, state and political subdivision and foreign government securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, benchmark U.S. Treasury yield or other yields, spread off the U.S. Treasury yield curve for the identical security, issuer ratings and issuer spreads, broker-dealer quotes, and comparable securities that are actively traded.

Structured Securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, spreads for actively traded securities, spreads off benchmark yields, expected prepayment speeds and volumes, current and forecasted loss severity, ratings, geographic region, weighted average coupon and weighted average maturity, average delinquency rates and debt-service coverage ratios. Other issuance-specific information is also used, including, but not limited to, collateral type, structure of the security, vintage of the loans, payment terms of the underlying asset, payment priority within tranche, and deal performance.

Equity Securities and Short-term Investments

The fair value for actively traded equity securities and short-term investments are determined using quoted market prices and are classified as Level 1 assets. For financial instruments classified as Level 2 assets, fair values are determined using a market approach and are valued based on a variety of observable inputs as described below.

3230

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

6. Fair Value (continued)

Equity securities and short-term investments: Fair value is determined using third-party commercial pricing services, with the primary input being quoted prices in markets that are not active.

Derivatives

Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are bilateral contracts between two counterparties (“OTC-bilateral”).

The fair values for exchange-traded derivatives are determined using the quoted market prices and are classified as Level 1 assets. For OTC-bilateral derivatives and OTC-cleared derivatives classified as Level 2 assets or liabilities, fair values are determined using the income approach. Valuations of non-option-based derivatives utilize present value techniques, whereas valuations of option-based derivatives utilize option pricing models which are based on market standard valuation methodologies and a variety of observable inputs.

The significant inputs to the pricing models for most OTC-bilateral and OTC-cleared derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. Certain OTC-bilateral and OTC-cleared derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and management believes they are consistent with what other market participants would use when pricing such instruments.

Most inputs for OTC-bilateral and OTC-cleared derivatives are mid-market inputs but, in certain cases, liquidity adjustments are made when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income.

The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all OTC-bilateral and OTC-cleared derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its OTC-bilateral and OTC-cleared derivatives using standard swap curves which may include a spread to the risk-free rate, depending upon specific collateral arrangements. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with similar collateral arrangements. As the Company and its significant derivative counterparties generally execute trades at such pricing levels and hold sufficient collateral, additional credit risk adjustments are not currently required in the valuation process. The Company’s ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. An evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period.

Embedded Derivatives

Embedded derivatives principally include certain direct and ceded variable annuity guarantees and equity crediting rates within index-linked annuity contracts. Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income.

The Company issues certain variable annuity products with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMAB”), the non-life contingent portion of GMWBs and certain portions of GMIBs are accounted for as embedded derivatives and measured at estimated fair value separately from the host variable annuity contract. These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets, with changes in estimated fair value reported in net derivative gains (losses).

3331

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

6. Fair Value (continued)

The Company determines the fair value of these embedded derivatives by estimating the present value of projected future benefits minus the present value of projected future fees using actuarial and capital markets assumptions including expectations of policyholder behavior. The calculation is based on in-force business and is performed using standard actuarial valuation software which projects future cash flows from the embedded derivative over multiple risk neutral stochastic scenarios using observable risk-free rates. The percentage of fees included in the initial fair value measurement is not updated in subsequent periods.

Capital markets assumptions, such as risk-free rates and implied volatilities, are based on market prices for publicly-traded instruments to the extent that prices for such instruments are observable. Implied volatilities beyond the observable period are extrapolated based on observable implied volatilities and historical volatilities. Actuarial assumptions, including mortality, lapse, withdrawal and utilization, are unobservable and are reviewed at least annually based on actuarial studies of historical experience.

The valuation of these guarantee liabilities includes nonperformance risk adjustments and adjustments for a risk margin related to non-capital markets inputs. The nonperformance adjustment is determined by taking into consideration publicly available information relating to spreads in the secondary market for BHF’s debt. These observable spreads are then adjusted to reflect the priority of these liabilities and claims-paying ability of the issuing insurance subsidiaries as compared to BHF’s overall financial strength.

Risk margins are established to capture the non-capital markets risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees.

The Company issues and assumes through reinsurance index-linked annuities which allow the policyholder to participate in returns from equity indices. The crediting rates associated with these features are embedded derivatives which are measured at estimated fair value separately from the host fixed annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets.

The estimated fair value of crediting rates associated with index-linked annuities is determined using a combination of an option pricing model and an option-budget approach. The valuation of these embedded derivatives also includes the establishment of a risk margin, as well as changes in nonperformance risk.

Transfers Into or Out of Level 3:

Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.

3432

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

6. Fair Value (continued)

Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)

Certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) were as follows at:


						September 30, 2021			December 31, 2020			Impact of Increase in Input on Estimated Fair Value						March 31, 2022			December 31, 2021			Impact of Increase in Input on Estimated Fair Value
		Valuation Techniques		Significant Unobservable Inputs		Range			Range					Valuation Techniques		Significant Unobservable Inputs		Range			Range
Embedded derivatives	Embedded derivatives												Embedded derivatives
Direct, assumed and ceded guaranteed minimum benefits	Direct, assumed and ceded guaranteed minimum benefits	•	Option pricing techniques	•	Mortality rates	0.03%	-	12.62%	0.03%	-	12.13%	Decrease (1)	Direct, assumed and ceded guaranteed minimum benefits	•	Option pricing techniques	•	Mortality rates	0.03%	-	12.62%	0.03%	-	12.62%	Decrease (1)
				•	Lapse rates	0.30%	-	14.50%	0.25%	-	15.00%	Decrease (2)				•	Lapse rates	0.30%	-	14.50%	0.30%	-	14.50%	Decrease (2)
				•	Utilization rates	0.00%	-	25.00%	0.00%	-	25.00%	Increase (3)				•	Utilization rates	0.00%	-	25.00%	0.00%	-	25.00%	Increase (3)
				•	Withdrawal rates	0.25%	-	10.00%	0.25%	-	10.00%	(4)				•	Withdrawal rates	0.25%	-	10.00%	0.25%	-	10.00%	(4)
				•	Long-term equity volatilities	16.44%	-	22.16%	16.66%	-	22.21%	Increase (5)				•	Long-term equity volatilities	16.44%	-	22.16%	16.44%	-	22.16%	Increase (5)
				•	Nonperformance risk spread	(0.50)%	-	1.28%	0.47%	-	1.97%	Decrease (6)				•	Nonperformance risk spread	0.10%	-	1.74%	(0.38)%	-	1.49%	Decrease (6)

_______________

(1)Mortality rates vary by age and by demographic characteristics such as gender. The range shown reflects the mortality rate for policyholders between 35 and 90 years old, which represents the majority of the business with living benefits. Mortality rate assumptions are set based on company experience and include an assumption for mortality improvement.

(2)The range shown reflects base lapse rates for major product categories for duration 1-20, which represents majority of business with living benefit riders. Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in-the-money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies.

(3)The utilization rate assumption estimates the percentage of contract holders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible in a given year. The range shown represents the floor and cap of the GMIB dynamic election rates across varying levels of in-the-money. For lifetime withdrawal guarantee riders, the assumption is that everyone will begin withdrawals once account value reaches zero which is equivalent to a 100% utilization rate. Utilization rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder.

(4)The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value.

(5)Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.

(6)Nonperformance risk spread varies by duration. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative.

The Company does not develop unobservable inputs used in measuring fair value for all other assets and liabilities classified within Level 3; therefore, these are not included in the table above. The other Level 3 assets and liabilities primarily included fixed maturity securities and derivatives. For fixed maturity securities valued based on non-binding broker quotes, an increase (decrease) in credit spreads would result in a higher (lower) fair value. For derivatives valued

3533

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

6. Fair Value (continued)

based on third-party pricing models, an increase (decrease) in credit spreads would generally result in a higher (lower) fair value.

The changes in assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3) were summarized as follows:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Fixed Maturity Securities
Corporate (1) Structured Securities State and
Political
Subdivision Foreign
Government Equity
Securities Short-term
Investments Net
Derivatives (2) Net Embedded
Derivatives (3) Separate
Account Assets (4)
(In millions)
Three Months Ended September 30, 2021
Balance, beginning of period $ 877 $ 217 $ — $ 12 $ 3 $ — $ 20 $ (8,053) $ —
Total realized/unrealized gains (losses) included in net income (loss) (5) (6) 1 — — — — — (6) 78 —
Total realized/unrealized gains (losses) included in AOCI (8) (1) — — — — 3 — —
Purchases (7) 304 195 — — — — 22 — —
Sales (7) (14) (5) — — — — — — —
Issuances (7) — — — — — — — — —
Settlements (7) — — — — — — — 46 —
Transfers into Level 3 (8) 223 8 — — — — — — —
Transfers out of Level 3 (8) (94) (149) — (12) — — — — —
Balance, end of period $ 1,289 $ 265 $ — $ — $ 3 $ — $ 39 $ (7,929) $ —
Three Months Ended September 30, 2020
Balance, beginning of period $ 894 $ 173 $ — $ — $ 3 $ — $ 20 $ (5,804) $ 3
Total realized/unrealized gains (losses) included in net income (loss) (5) (6) (1) — — — — — 5 (641) —
Total realized/unrealized gains (losses) included in AOCI 9 — — — — — (10) — —
Purchases (7) 199 12 — — — 10 — — —
Sales (7) (64) (1) — — — — — — —
Issuances (7) — — — — — — — — —
Settlements (7) — — — — — — — (173) —
Transfers into Level 3 (8) 164 — — — — — — — —
Transfers out of Level 3 (8) (142) (103) — — — — — — —
Balance, end of period $ 1,059 $ 81 $ — $ — $ 3 $ 10 $ 15 $ (6,618) $ 3
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2021(9) $ — $ — $ — $ — $ — $ — $ (5) $ 261 $ —
Changes in unrealized gains (losses) included in OCI for the instruments still held at September 30, 2021 (9) $ (8) $ — $ — $ — $ — $ — $ 3 $ — $ —
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2020 (9) $ — $ — $ — $ — $ — $ — $ 5 $ (682) $ —
Changes in unrealized gains (losses) included in OCI for the instruments still held at September 30, 2020 (9) $ 10 $ — $ — $ — $ — $ — $ (10) $ — $ —

~~Table of Contents~~

~~Brighthouse Life Insurance Company~~

~~(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)~~

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

~~6. Fair Value (continued)~~


		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)																			Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
		Fixed Maturity Securities																			Fixed Maturity Securities
		Corporate (1)		Structured Securities		State and Political Subdivision		Foreign Government		Equity Securities		Short-term Investments		Net Derivatives (2)		Net Embedded Derivatives (3)		Separate Account Assets (4)			Corporate (1)		Structured Securities		Foreign Government		Equity Securities		Short-term Investments		Net Derivatives (2)		Net Embedded Derivatives (3)		Separate Account Assets (4)
		(In millions)																			(In millions)
Nine Months Ended September 30, 2021
Three Months Ended March 31, 2022																				Three Months Ended March 31, 2022
Balance, beginning of period	Balance, beginning of period	$	684	$	67	$	—	$	—	$	3	$	—	$	2	$	(7,301)	$	3	Balance, beginning of period	$	1,399	$	220	$	26	$	13	$	2	$	36	$	(8,614)	$	—
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	—		—		—		—		—		—		10		(418)		—		Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	—		—		—		—		—		(10)		1,379		—
Total realized/unrealized gains (losses) included in AOCI	Total realized/unrealized gains (losses) included in AOCI	(9)		—		—		—		—		—		12		—		—		Total realized/unrealized gains (losses) included in AOCI	(99)		(5)		(3)		—		—		4		—		—
Purchases (7)	Purchases (7)	694		239		—		—		—		—		20		—		—		Purchases (7)	422		87		—		—		—		—		—		—
Sales (7)	Sales (7)	(53)		(21)		—		—		—		—		(6)		—		—		Sales (7)	(93)		(2)		—		—		(2)		—		—		—
Issuances (7)	Issuances (7)	—		—		—		—		—		—		—		—		—		Issuances (7)	—		—		—		—		—		—		—		—
Settlements (7)	Settlements (7)	—		—		—		—		—		—		—		(210)		—		Settlements (7)	—		—		—		—		—		—		75		—
Transfers into Level 3 (8)	Transfers into Level 3 (8)	175		14		—		—		—		—		—		—		—		Transfers into Level 3 (8)	86		1		—		—		—		—		—		—
Transfers out of Level 3 (8)	Transfers out of Level 3 (8)	(202)		(34)		—		—		—		—		1		—		(3)		Transfers out of Level 3 (8)	(97)		(107)		—		—		—		—		—		—
Balance, end of period	Balance, end of period	$	1,289	$	265	$	—	$	—	$	3	$	—	$	39	$	(7,929)	$	—	Balance, end of period	$	1,618	$	194	$	23	$	13	$	—	$	30	$	(7,160)	$	—
Nine Months Ended September 30, 2020
Three Months Ended March 31, 2021																				Three Months Ended March 31, 2021
Balance, beginning of period	Balance, beginning of period	$	457	$	117	$	73	$	—	$	8	$	5	$	16	$	(4,365)	$	3	Balance, beginning of period	$	684	$	67	$	—	$	3	$	—	$	2	$	(7,301)	$	3
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	(2)		—		—		—		(1)		—		3		(1,754)		—		Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	(1)		—		—		—		—		8		665		—
Total realized/unrealized gains (losses) included in AOCI	Total realized/unrealized gains (losses) included in AOCI	14		2		—		—		—		—		10		—		—		Total realized/unrealized gains (losses) included in AOCI	(22)		—		—		—		—		(1)		—		—
Purchases (7)	Purchases (7)	510		34		—		—		—		10		—		—		—		Purchases (7)	118		80		—		—		—		(2)		—		—
Sales (7)	Sales (7)	(103)		(3)		—		—		—		(5)		(14)		—		—		Sales (7)	(4)		(3)		—		—		—		—		—		(1)
Issuances (7)	Issuances (7)	—		—		—		—		—		—		—		—		—		Issuances (7)	—		—		—		—		—		—		—		—
Settlements (7)	Settlements (7)	—		—		—		—		—		—		—		(499)		—		Settlements (7)	—		—		—		—		—		—		(138)		—
Transfers into Level 3 (8)	Transfers into Level 3 (8)	263		9		—		—		—		—		—		—		—		Transfers into Level 3 (8)	4		3		—		—		—		—		—		—
Transfers out of Level 3 (8)	Transfers out of Level 3 (8)	(80)		(78)		(73)		—		(4)		—		—		—		—		Transfers out of Level 3 (8)	(112)		(21)		—		—		—		1		—		—
Balance, end of period	Balance, end of period	$	1,059	$	81	$	—	$	—	$	3	$	10	$	15	$	(6,618)	$	3	Balance, end of period	$	667	$	126	$	—	$	3	$	—	$	8	$	(6,774)	$	2
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2021 (9)		$	—	$	—	$	—	$	—	$	—	$	—	$	(3)	$	(215)	$	—
Changes in unrealized gains (losses) included in OCI for the instruments still held at September 30, 2021 (9)		$	(9)	$	1	$	—	$	—	$	—	$	—	$	12	$	—	$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2020 (9)		$	(1)	$	—	$	—	$	—	$	—	$	—	$	(11)	$	(1,848)	$	—
Changes in unrealized gains (losses) included in OCI for the instruments still held at September 30, 2020 (9)		$	15	$	2	$	—	$	—	$	—	$	—	$	10	$	—	$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2022 (9)																				Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2022 (9)	$	—	$	—	$	—	$	—	$	—	$	(10)	$	1,517	$	—
Changes in unrealized gains (losses) included in OCI for the instruments still held at March 31, 2022 (9)																				Changes in unrealized gains (losses) included in OCI for the instruments still held at March 31, 2022 (9)	$	(98)	$	(5)	$	(3)	$	—	$	—	$	4	$	—	$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2021 (9)																				Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2021 (9)	$	(1)	$	—	$	—	$	—	$	—	$	8	$	663	$	—
Changes in unrealized gains (losses) included in OCI for the instruments still held at March 31, 2021 (9)																				Changes in unrealized gains (losses) included in OCI for the instruments still held at March 31, 2021 (9)	$	(22)	$	—	$	—	$	—	$	—	$	(1)	$	—	$	—

_______________

(1)Comprised of U.S. and foreign corporate securities.

(2)Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.

(3)Embedded derivative assets and liabilities are presented net for purposes of the rollforward.

~~Table of Contents~~

~~Brighthouse Life Insurance Company~~

~~(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)~~

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

~~6. Fair Value (continued)~~

(4)Investment performance related to separate account assets is fully offset by corresponding amounts credited to contract holders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income (loss). For the purpose of this disclosure, these changes are presented within net investment gains (losses).

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

6. Fair Value (continued)

(5)Amortization of premium/accretion of discount is included within net investment income. Changes in the allowance for credit losses and direct write-offs are charged to net income (loss) on securities are included in net investment gains (losses). Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).

(6)Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.

(7)Items purchased/issued and then sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements.

(8)Gains and losses, in net income (loss) and OCI, are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and then out of Level 3 in the same period are excluded from the rollforward.

(9)Changes in unrealized gains (losses) included in net income (loss) for fixed maturities are reported in either net investment income or net investment gains (losses). Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).

Fair Value of Financial Instruments Carried at Other Than Fair Value

The following tables provide fair value information for financial instruments that are carried on the balance sheet at amounts other than fair value. These tables exclude the following financial instruments: cash and cash equivalents, accrued investment income and payables for collateral under securities loaned and other transactions and those short-term investments that are not securities and therefore are not included in the three level hierarchy table disclosed in the “— Recurring Fair Value Measurements” section.transactions. The estimated fair value of the excluded financial instruments, which are primarily classified in Level 2, approximates carrying value as they are short-term in nature such that the Company believes there is minimal risk of material changes in interest rates or credit quality. All remaining balance sheet amounts excluded from the tables below are not considered financial instruments subject to this disclosure.

The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:


		September 30, 2021											March 31, 2022
				Fair Value Hierarchy											Fair Value Hierarchy
		Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value			Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
		(In millions)											(In millions)
Assets	Assets											Assets
Mortgage loans	Mortgage loans	$	18,188	$	—	$	—	$	19,107	$	19,107	Mortgage loans	$	21,295	$	—	$	—	$	21,083	$	21,083
Policy loans	Policy loans	$	864	$	—	$	469	$	561	$	1,030	Policy loans	$	876	$	—	$	477	$	506	$	983
Other invested assets	Other invested assets	$	74	$	—	$	59	$	15	$	74	Other invested assets	$	104	$	—	$	89	$	15	$	104
Premiums, reinsurance and other receivables	Premiums, reinsurance and other receivables	$	3,303	$	—	$	229	$	3,934	$	4,163	Premiums, reinsurance and other receivables	$	3,080	$	—	$	31	$	3,519	$	3,550
Liabilities	Liabilities											Liabilities
Policyholder account balances	Policyholder account balances	$	22,386	$	—	$	—	$	24,079	$	24,079	Policyholder account balances	$	24,881	$	—	$	—	$	24,366	$	24,366

Long-term debt	Long-term debt	$	842	$	—	$	37	$	1,099	$	1,136	Long-term debt	$	840	$	—	$	33	$	903	$	936
Other liabilities	Other liabilities	$	1,230	$	—	$	394	$	853	$	1,247	Other liabilities	$	1,089	$	—	$	269	$	820	$	1,089
Separate account liabilities	Separate account liabilities	$	1,370	$	—	$	1,370	$	—	$	1,370	Separate account liabilities	$	1,304	$	—	$	1,304	$	—	$	1,304

3835

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

6. Fair Value (continued)


		December 31, 2020											December 31, 2021
				Fair Value Hierarchy											Fair Value Hierarchy
		Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value			Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
		(In millions)											(In millions)
Assets	Assets											Assets
Mortgage loans	Mortgage loans	$	15,722	$	—	$	—	$	16,836	$	16,836	Mortgage loans	$	19,787	$	—	$	—	$	20,591	$	20,591
Policy loans	Policy loans	$	884	$	—	$	475	$	881	$	1,356	Policy loans	$	869	$	—	$	470	$	568	$	1,038
Other invested assets	Other invested assets	$	54	$	—	$	39	$	15	$	54	Other invested assets	$	85	$	—	$	70	$	15	$	85
Premiums, reinsurance and other receivables	Premiums, reinsurance and other receivables	$	3,114	$	—	$	90	$	3,808	$	3,898	Premiums, reinsurance and other receivables	$	3,075	$	—	$	20	$	3,583	$	3,603
Liabilities	Liabilities											Liabilities
Policyholder account balances	Policyholder account balances	$	17,361	$	—	$	—	$	18,962	$	18,962	Policyholder account balances	$	23,507	$	—	$	—	$	23,487	$	23,487
Long-term debt	Long-term debt	$	843	$	—	$	39	$	1,031	$	1,070	Long-term debt	$	841	$	—	$	36	$	1,087	$	1,123
Other liabilities	Other liabilities	$	891	$	—	$	121	$	787	$	908	Other liabilities	$	886	$	—	$	60	$	816	$	876
Separate account liabilities	Separate account liabilities	$	1,331	$	—	$	1,331	$	—	$	1,331	Separate account liabilities	$	1,437	$	—	$	1,437	$	—	$	1,437

7. Equity

~~Dividend Restrictions~~

During the third quarter of 2021, with the approval of the Delaware Department of Insurance, Brighthouse Reinsurance Company of Delaware paid a $600 million extraordinary dividend to Brighthouse Life Insurance Company in the form of the settlement of affiliated reinsurance balances of $400 million, invested assets of $197 million and cash of $3 million.

~~During the second quarter of 2021, Brighthouse Life Insurance Company paid an ordinary cash dividend of $250 million to BH Holdings, which was accounted for as a return of capital.~~

Accumulated Other Comprehensive Income (Loss)

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


		Three Months Ended September 30, 2021									Three Months Ended March 31, 2022
		Unrealized Investment Gains (Losses), Net of Related Offsets (1)		Unrealized Gains (Losses) on Derivatives		Foreign Currency Translation Adjustments		Total			Unrealized Investment Gains (Losses), Net of Related Offsets (1)		Unrealized Gains (Losses) on Derivatives		Foreign Currency Translation Adjustments		Total
		(In millions)									(In millions)
Balance at June 30, 2021		$	4,187	$	138	$	(13)	$	4,312
Balance at December 31, 2021										Balance at December 31, 2021	$	3,675	$	233	$	(7)	$	3,901
OCI before reclassifications	OCI before reclassifications	(462)		102		9		(351)		OCI before reclassifications	(4,595)		20		(8)		(4,583)
Deferred income tax benefit (expense)(2)	Deferred income tax benefit (expense)(2)	96		(21)		(1)		74		Deferred income tax benefit (expense)(2)	965		(4)		1		962
AOCI before reclassifications, net of income tax	AOCI before reclassifications, net of income tax	3,821		219		(5)		4,035		AOCI before reclassifications, net of income tax	45		249		(14)		280
Amounts reclassified from AOCI	Amounts reclassified from AOCI	(2)		—		—		(2)		Amounts reclassified from AOCI	41		(2)		—		39
Deferred income tax benefit (expense)(2)	Deferred income tax benefit (expense)(2)	1		—		—		1		Deferred income tax benefit (expense)(2)	(9)		1		—		(8)
Amounts reclassified from AOCI, net of income tax	Amounts reclassified from AOCI, net of income tax	(1)		—		—		(1)		Amounts reclassified from AOCI, net of income tax	32		(1)		—		31

Balance at September 30, 2021		$	3,820	$	219	$	(5)	$	4,034
Balance at March 31, 2022										Balance at March 31, 2022	$	77	$	248	$	(14)	$	311


	Three Months Ended March 31, 2021
	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, 2020	$	5,321	$	108	$	(8)	$	5,421
OCI before reclassifications	(2,737)		(67)		(8)		(2,812)
Deferred income tax benefit (expense) (2)	575		14		2		591
AOCI before reclassifications, net of income tax	3,159		55		(14)		3,200
Amounts reclassified from AOCI	(12)		(7)		—		(19)
Deferred income tax benefit (expense) (2)	3		1		—		4
Amounts reclassified from AOCI, net of income tax	(9)		(6)		—		(15)



Balance at March 31, 2021	$	3,150	$	49	$	(14)	$	3,185

_______________

(1)See Note 4 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI.

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

7. Equity (continued)

Three Months Ended September 30, 2020
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1) Unrealized
Gains (Losses)
on Derivatives Foreign
Currency
Translation
Adjustments Total
(In millions)
Balance at June 30, 2020 $ 4,148 $ 485 $ (23) $ 4,610
OCI before reclassifications 810 (183) 8 635
Deferred income tax benefit (expense) (171) 39 (2) (134)
AOCI before reclassifications, net of income tax 4,787 341 (17) 5,111
Amounts reclassified from AOCI 5 (9) — (4)
Deferred income tax benefit (expense) (1) 2 — 1
Amounts reclassified from AOCI, net of income tax 4 (7) — (3)
Balance at September 30, 2020 $ 4,791 $ 334 $ (17) $ 5,108

Nine Months Ended September 30, 2021
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, 2020 $ 5,321 $ 108 $ (8) $ 5,421
OCI before reclassifications (1,915) 149 3 (1,763)
Deferred income tax benefit (expense) 401 (31) — 370
AOCI before reclassifications, net of income tax 3,807 226 (5) 4,028
Amounts reclassified from AOCI 16 (9) — 7
Deferred income tax benefit (expense) (3) 2 — (1)
Amounts reclassified from AOCI, net of income tax 13 (7) — 6
Balance at September 30, 2021 $ 3,820 $ 219 $ (5) $ 4,034

Nine Months Ended September 30, 2020
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, 2019 $ 3,066 $ 163 $ (14) $ 3,215
OCI before reclassifications (2) 2,166 231 8 2,405
Deferred income tax benefit (expense) (455) (48) (11) (514)
AOCI before reclassifications, net of income tax 4,777 346 (17) 5,106
Amounts reclassified from AOCI 18 (15) — 3
Deferred income tax benefit (expense) (4) 3 — (1)
Amounts reclassified from AOCI, net of income tax 14 (12) — 2
Balance at September 30, 2020 $ 4,791 $ 334 $ (17) $ 5,108

~~_______________~~

~~(1)See Note 4 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI.~~

(2)~~Includes $3 million~~The effects of income taxes on amounts recorded to AOCI are also recognized in AOCI. These income tax effects are released from AOCI when the related ~~to the adoption of the allowance for credit losses guidance.~~activity is reclassified into results from operations.

~~Table of Contents~~

~~Brighthouse Life Insurance Company~~

~~(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)~~

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

~~7. Equity (continued)~~

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


AOCI Components	AOCI Components	Amounts Reclassified from AOCI								Consolidated Statements of Operations and Comprehensive Income (Loss) Locations	AOCI Components	Amounts Reclassified from AOCI				Consolidated Statements of Operations and Comprehensive Income (Loss) Locations
		Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
		(In millions)										(In millions)
Net unrealized investment gains (losses):	Net unrealized investment gains (losses):										Net unrealized investment gains (losses):
Net unrealized investment gains (losses)	Net unrealized investment gains (losses)	$	2	$	3	$	(14)	$	(4)	Net investment gains (losses)	Net unrealized investment gains (losses)	$	(39)	$	15	Net investment gains (losses)

Net unrealized investment gains (losses)	Net unrealized investment gains (losses)	—		(8)		(2)		(14)		Net derivative gains (losses)	Net unrealized investment gains (losses)	(2)		(3)		Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax	Net unrealized investment gains (losses), before income tax	2		(5)		(16)		(18)			Net unrealized investment gains (losses), before income tax	(41)		12
Income tax (expense) benefit	Income tax (expense) benefit	(1)		1		3		4			Income tax (expense) benefit	9		(3)
Net unrealized investment gains (losses), net of income tax	Net unrealized investment gains (losses), net of income tax	1		(4)		(13)		(14)			Net unrealized investment gains (losses), net of income tax	(32)		9
Unrealized gains (losses) on derivatives - cash flow hedges:	Unrealized gains (losses) on derivatives - cash flow hedges:										Unrealized gains (losses) on derivatives - cash flow hedges:
Interest rate swaps	Interest rate swaps	—		—		1		1		Net derivative gains (losses)	Interest rate swaps	1		1		Net derivative gains (losses)
Interest rate swaps	Interest rate swaps	1		1		3		2		Net investment income	Interest rate swaps	1		1		Net investment income

Foreign currency swaps	Foreign currency swaps	(1)		8		5		12		Net derivative gains (losses)	Foreign currency swaps	—		5		Net derivative gains (losses)

Gains (losses) on cash flow hedges, before income tax	Gains (losses) on cash flow hedges, before income tax	—		9		9		15			Gains (losses) on cash flow hedges, before income tax	2		7
Income tax (expense) benefit	Income tax (expense) benefit	—		(2)		(2)		(3)			Income tax (expense) benefit	(1)		(1)
Gains (losses) on cash flow hedges, net of income tax	Gains (losses) on cash flow hedges, net of income tax	—		7		7		12			Gains (losses) on cash flow hedges, net of income tax	1		6
Total reclassifications, net of income tax	Total reclassifications, net of income tax	$	1	$	3	$	(6)	$	(2)		Total reclassifications, net of income tax	$	(31)	$	15

8. Other Revenues and Other Expenses

Other Revenues

The Company has entered into contracts with mutual funds, fund managers, and their affiliates (collectively, the “Funds”) whereby the Company is paid monthly or quarterly fees (“12b-1 fees”) for providing certain services to customers and distributors of the Funds. The 12b-1 fees are generally equal to a fixed percentage of the average daily balance of the customer’s investment in a fund. The percentage is specified in the contract between the Company and the Funds. Payments are generally collected when due and are neither refundable nor able to offset future fees.

To earn these fees, the Company performs services such as responding to phone inquiries, maintaining records, providing information to distributors and shareholders about fund performance and providing training to account managers and sales agents. The passage of time reflects the satisfaction of the Company’s performance obligations to the Funds and is used to recognize revenue associated with 12b-1 fees.

Other revenues consisted primarily of 12b-1 fees of ~~$67~~$61 million and ~~$198~~$65 million for the three months ended March 31, 2022 and ~~nine months ended September 30,~~ 2021, ~~respectively, and $59 million and $173 million for the three months and nine months ended September 30, 2020,~~ respectively, of which substantially all were reported in the Annuities segment.

4137

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

8. Other Revenues and Other Expenses (continued)

Other Expenses

Information on other expenses was as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
		(In millions)										(In millions)
Compensation	Compensation	$	92	$	79	$	266	$	234	Compensation		$	81	$	85
Contracted services and other labor costs	Contracted services and other labor costs	60		50		175		180		Contracted services and other labor costs		50		53
Transition services agreements	Transition services agreements	30		35		89		86		Transition services agreements		26		30
Establishment costs	Establishment costs	24		40		68		133		Establishment costs		14		16
Premium and other taxes, licenses and fees	Premium and other taxes, licenses and fees	11		10		35		33		Premium and other taxes, licenses and fees		12		13
Volume related costs, excluding compensation, net of DAC capitalization	Volume related costs, excluding compensation, net of DAC capitalization	149		147		477		419		Volume related costs, excluding compensation, net of DAC capitalization		137		158
Interest expense on debt	Interest expense on debt	17		17		50		51		Interest expense on debt		17		17
Other	Other	52		91		164		190		Other		49		52
Total other expenses	Total other expenses	$	435	$	469	$	1,324	$	1,326	Total other expenses		$	386	$	424

Related Party Expenses

See Note 10 for a discussion of related party expenses included in the table above.

9. Contingencies, Commitments and Guarantees

Contingencies

Litigation

The Company is a defendant in a number of litigation matters. In some of the matters, large or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value.

The Company also receives and responds to subpoenas or other inquiries seeking a broad range of information from various state and federal regulators, agencies and officials. The issues involved in information requests and regulatory matters vary widely, but can include inquiries or investigations concerning the Company’s compliance with applicable insurance and other laws and regulations. The Company cooperates in these inquiries.

Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law.

The Company establishes liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. It is possible that some matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated at ~~September 30, 2021.~~March 31, 2022.

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

9. Contingencies, Commitments and Guarantees (continued)

Matters as to Which an Estimate Can Be Made

For some loss contingency matters, the Company is able to estimate a reasonably possible range of loss. For such matters where a loss is believed to be reasonably possible, but not probable, no accrual has been made. In addition to amounts accrued for probable and reasonably estimable losses, as of ~~September 30, 2021,~~March 31, 2022, the Company estimates the aggregate range of reasonably possible losses to be up to approximately $10 million.

~~Table of Contents~~

~~Brighthouse Life Insurance Company~~

~~(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)~~

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

~~9. Contingencies, Commitments and Guarantees (continued)~~

Matters as to Which an Estimate Cannot Be Made

For other matters, the Company is not currently able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts, and the progress of settlement negotiations. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation contingencies and updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.

Sales Practices Claims

Over the past several years, the Company has faced claims and regulatory inquiries and investigations, alleging improper marketing or sales of individual life insurance policies, annuities or other products. The Company continues to defend vigorously against the claims in these matters. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices matters.

Cost of Insurance Class Actions

Richard A. Newton v. Brighthouse Life Insurance Company (U.S. District Court, Northern District of Georgia, Atlanta Division, filed May 8, 2020). Plaintiff has filed a purported class action lawsuit against Brighthouse Life Insurance Company. Plaintiff was the owner of a universal life insurance policy issued by Travelers Insurance Company, a predecessor to Brighthouse Life Insurance Company. Plaintiff seeks to certify a class of all persons who own or owned life insurance policies issued where the terms of the life insurance policy provide or provided, among other things, a guarantee that the cost of insurance rates would not be increased by more than a specified percentage in any contract year. Plaintiff alleges, among other things, causes of action for breach of contract, fraud, suppression and concealment, and violation of the Georgia Racketeer Influenced and Corrupt Organizations Act. Plaintiff seeks to recover damages, including punitive damages, interest and treble damages, attorneys’ fees, and injunctive and declaratory relief. Brighthouse Life Insurance Company filed a motion to dismiss in June 2020, which was granted in part and denied in ~~part.~~part in March 2021. Plaintiff was granted leave to amend the complaint. The Company intends to vigorously defend this matter.

Lawrence Martin v. Brighthouse Life Insurance Company ~~and Brighthouse Life Insurance Company of NY~~ (U.S. District Court, Southern District of New York, filed April 6, 2021). Plaintiff has filed a purported class action lawsuit against Brighthouse Life Insurance ~~Company and Brighthouse Life Insurance Company of NY.~~Company. Plaintiff is the owner of a universal life insurance policy issued by Travelers Insurance Company, a predecessor to Brighthouse Life Insurance Company. Plaintiff seeks to certify a class of similarly situated owners of universal life insurance policies issued or administered by defendants and alleges that cost of insurance charges should have decreased over time due to improving mortality but did not. Plaintiff alleges, among other things, causes of action for breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment. Plaintiff seeks to recover compensatory damages, attorney’s fees, interest, and equitable relief including a constructive trust. Brighthouse Life Insurance Company ~~and Brighthouse Life Insurance Company of NY~~ filed a motion to dismiss in June ~~2021.~~2021, which was denied in February 2022. Brighthouse Life Insurance Company of NY was initially named as a defendant when the lawsuit was filed, but was dismissed as a defendant, without prejudice, in April 2022. The Company intends to vigorously defend this matter.

Summary

Various litigations, claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, investor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.

4339

Table of Contents

Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

9. Contingencies, Commitments and Guarantees (continued)

It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to previously, large or indeterminate amounts, including punitive and treble damages, are sought. Although, in light of these considerations, it is possible that an adverse outcome in certain cases could have a material effect upon the Company’s financial position, based on information currently known by the Company’s management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.

Other Loss Contingencies

As with litigation and regulatory loss contingencies, the Company considers establishing liabilities for ~~certain non-litigation~~ loss contingencies ~~when assertions are made involving~~associated with disputes or other matters ~~with~~involving third parties, including counterparties to contractual arrangements entered into by the Company ~~including~~(e.g., third-party vendors and reinsurers), as well as with ~~third-party vendors.~~tax authorities (“other loss contingencies”). The Company establishes liabilities for such ~~non-litigation~~other loss contingencies when it is probable that a loss will be incurred and the amount of the loss can be reasonably estimated. In matters where it is not probable, but is reasonably possible that a loss will be incurred and the amount of loss can be reasonably estimated, such losses or range of losses are disclosed, and no accrual is made. In the absence of sufficient information to support an assessment of the reasonably possible loss or range of loss, no accrual is made and no loss or range of loss is disclosed.

~~Disputes have arisen with counterparties in connection with reinsurance arrangements~~In the matters where the ~~Company is~~Company’s subsidiaries are acting as ~~either~~ the reinsured or the ~~reinsurer. These disputes~~reinsurer, such matters involve assertions by third parties primarily related to rates, fees or reinsured benefit calculations, and in certain of such ~~disputes~~matters, the counterparty has made a request to ~~arbitrate the dispute.~~arbitrate.

As of ~~September 30, 2021,~~March 31, 2022, the Company estimates the range of reasonably possible losses in excess of the amounts accrued for certain ~~non-litigation~~other loss contingencies to be from zero up to approximately $250 million, which are primarily associated with the above reinsurance-related matters. For certain other ~~reinsurance-related~~ matters, the Company ismay not currently be able to estimate the reasonably possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of such loss.

On a quarterly ~~and annual~~ basis, the Company reviews relevant information with respect to ~~non-litigation~~other loss contingencies and, when applicable, updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.

Commitments

Mortgage Loan Commitments

The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were ~~$734~~$651 million and ~~$210~~$719 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

Commitments to Fund Partnership Investments and Private Corporate Bond Investments

The Company commits to fund partnership investments and to lend funds under private corporate bond investments. The amounts of these unfunded commitments were $2.3 billion ~~and $1.7 billion~~ at ~~September 30, 2021~~both March 31, 2022 and December 31, ~~2020, respectively.~~2021.

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Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

9. Contingencies, Commitments and Guarantees (continued)

Guarantees

In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties such that it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third-party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from $6 million to $112 million, with a cumulative maximum of $118 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments.

In addition, the Company indemnifies its directors and officers as provided in its charters and bylaws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company’s interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future.

The Company’s recorded liabilities were $1 million at both ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 for indemnities, guarantees and commitments.

10. Related Party Transactions

The Company has various existing arrangements with its Brighthouse Financial affiliates and had previous arrangements with MetLife, Inc. (together with its subsidiaries and affiliates, “MetLife”) for services necessary to conduct its activities. Certain of the MetLife services have continued, however, MetLife ceased to be a related party in June 2018. See Note 8 for amounts related to continuing transition services. Other material arrangements between the Company and its related parties not disclosed elsewhere are as follows:

Reinsurance Agreements

The Company enters into reinsurance agreements primarily as a purchaser of reinsurance for its various insurance products and also as a provider of reinsurance for some insurance products issued by related parties. The Company participates in reinsurance activities in order to limit losses, minimize exposure to significant risks and provide additional capacity for future growth.

Information regarding the significant effects of assumed reinsurance with New England Life Insurance Company (“NELICO”), an affiliate, included on the interim condensed consolidated statements of operations and comprehensive income (loss) was as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
		(In millions)										(In millions)
Premiums	Premiums	$	—	$	2	$	2	$	2	Premiums		$	—	$	2

Universal life and investment-type product policy fees	Universal life and investment-type product policy fees	$	2	$	1	$	5	$	5	Universal life and investment-type product policy fees		$	1	$	2

Other revenues	Other revenues	$	—	$	—	$	1	$	1	Other revenues		$	—	$	1

Policyholder benefits and claims	Policyholder benefits and claims	$	7	$	31	$	18	$	54	Policyholder benefits and claims		$	7	$	7

Other expenses	Other expenses	$	(8)	$	(7)	$	(21)	$	(19)	Other expenses		$	(7)	$	(4)

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Brighthouse Life Insurance Company

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

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

10. Related Party Transactions (continued)

Information regarding the significant effects of assumed reinsurance with NELICO included on the interim condensed consolidated balance sheets was as follows at:


		September 30, 2021		December 31, 2020	March 31, 2022			December 31, 2021
		(In millions)			(In millions)
Assets	Assets								Assets
Premiums, reinsurance and other receivables (net of allowance for credit losses)	Premiums, reinsurance and other receivables (net of allowance for credit losses)	$	25			$	24		Premiums, reinsurance and other receivables (net of allowance for credit losses)	$	27	$	26
Liabilities	Liabilities								Liabilities
Future policy benefits	Future policy benefits	$	119			$	120		Future policy benefits	$	120	$	119
Policyholder account balances	Policyholder account balances	$	470			$	596		Policyholder account balances	$	350	$	427
Other policy-related balances	Other policy-related balances	$	12			$	10		Other policy-related balances	$	10	$	9
Other liabilities	Other liabilities	$	11			$	9		Other liabilities	$	23	$	26

The Company assumes risks from NELICO related to guaranteed minimum benefits written directly by the cedent. The assumed reinsurance agreements contain embedded derivatives and changes in the estimated fair value are included within net derivative gains (losses). The embedded derivatives associated with these agreements are included within policyholder account balances and were ~~$470~~$350 million and ~~$596~~$427 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. Net derivative gains (losses) associated with the embedded derivatives were $2$77 million and ~~$128~~$176 million for the three months ended March 31, 2022 and ~~nine months ended September 30,~~ 2021, ~~respectively, and ($13) million and ($249) million for the three months and nine months ended September 30, 2020,~~ respectively.

Shared Services and Overhead Allocations

Brighthouse Services, LLC, an affiliate, currently provides the Company certain services, which include, but are not limited to, treasury, financial planning and analysis, legal, human resources, tax planning, internal audit, financial reporting and information technology. Revenues received from an affiliate related to these agreements, recorded in universal life and investment-type product policy fees, were ~~$60~~$54 million and ~~$176~~$57 million for the three months ended March 31, 2022 and ~~nine months ended September 30,~~ 2021, ~~respectively, and $54 million and $157 million for the three months and nine months ended September 30, 2020,~~ respectively. Costs incurred under these arrangements were ~~$252~~$223 million and ~~$736~~$228 million for the three months ended March 31, 2022 and ~~nine months ended September 30,~~ 2021, ~~respectively, and $249 million and $766 million for the three months and nine months ended September 30, 2020,~~ respectively, and were recorded in other expenses.

Included in these costs were those incurred related to the establishment of services and infrastructure to replace those previously provided by MetLife. The Company did not incur any costs for the three months and nine months ended September 30, 2021 and incurred costs of $23 million and $65 million for the three months and nine months ended September 30, 2020, respectively. The Company has been charged a fee to reflect the value of the available infrastructure and services provided by these costs. While management believes the method used to allocate expenses under this arrangement has been reasonable, the allocated expenses may not have been indicative of those of a standalone entity. These establishment costs were fully allocated as of December 31, 2020.

The Company had net receivables from/(payables to) affiliates, related to the items discussed above, of ($~~126)~~145) million and ($~~21)~~182) million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

Broker-Dealer Transactions

The related party expense for the Company was commissions paid on the sale of variable products and passed through to the broker-dealer affiliate. The related party revenue for the Company was fee income passed through the broker-dealer affiliate from trusts and mutual funds whose shares serve as investment options of policyholders of the Company. Fee income received related to these transactions and recorded in other revenues was ~~$57~~$52 million and ~~$168~~$55 million for the three months ended March 31, 2022 and ~~nine months ended September 30,~~ 2021, ~~respectively, and $51 million and $147 million for the three months and nine months ended September 30, 2020,~~ respectively. Commission expenses incurred related to these transactions and recorded in other expenses was ~~$254~~$230 million and ~~$741~~$236 million for the three months ended March 31, 2022 and ~~nine months ended September 30,~~ 2021, ~~respectively, and $212 million and $613 million for the three months and nine months ended September 30, 2020,~~ respectively. The Company also had related party fee income receivables of $17 million and $19 million ~~and $18 million~~ at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations


			Page
~~Introduction~~			48
Overview			4844
Regulatory Developments			4844
Summary of Critical Accounting Estimates			4945
Non-GAAP Financial Disclosures			4945
Results of Operations			5147
Liquidity and Capital Resources			5550
Note Regarding Forward-Looking Statements			5752

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~~Introduction~~

For purposes of this discussion, ~~unless otherwise mentioned or unless the context indicates otherwise,~~ “BLIC,” the “Company,” “we,” “our” and “us” refer to Brighthouse Life Insurance Company ~~a Delaware corporation originally incorporated in Connecticut in 1863,~~ and its subsidiaries, and “Brighthouse Life Insurance Company” refers solely to Brighthouse Life Insurance Company and not to any of its subsidiaries. Brighthouse Life Insurance Company is ~~a wholly-owned subsidiary of Brighthouse Holdings, LLC and~~ an indirect wholly-owned subsidiary of Brighthouse Financial, Inc. ~~(together~~(“BHF” and together with its subsidiaries, ~~and affiliates,~~ “Brighthouse Financial”). This Management’s ~~narrative analysis~~Discussion and Analysis of ~~the results~~Financial Condition and Results of ~~operations is presented pursuant to General Instruction H(2)(a) of Form 10-Q. This narrative analysis~~Operations should be read in conjunction with (i) the Interim Condensed Consolidated Financial Statements and related notes included elsewhere herein; (ii) our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 3,2, 2021 (the ~~“2020~~“2021 Annual Report”); (iii) our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 (the “First Quarter Form 10-Q”) filed with the SEC on May 11, 2021; (iv) our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 (the “Second Quarter Form 10-Q” and ~~together with the First Quarter Form 10-Q, the “Quarterly Reports”) filed with the SEC on August 9, 2021; and (v)~~(iii) our current reports on Form 8-K filed in ~~2021.~~

2022.

Overview

We offer a range of ~~individual annuities~~annuity and ~~individual~~ life insurance ~~products. We are licensed~~products to individuals and ~~regulated in each U.S. jurisdiction where we conduct insurance business.~~deliver our products through multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners. Brighthouse Life Insurance Company, a Delaware corporation, is licensed to ~~issue insurance products~~write business in all U.S. states (except New York), the District of Columbia, the Bahamas, Guam, Puerto Rico, the British Virgin Islands and the U.S. Virgin Islands. ~~Our insurance subsidiary,~~ Brighthouse Life Insurance Company of NY (“BHNY”), a wholly-owned subsidiary of Brighthouse Life Insurance Company, is ~~only~~domiciled in New York and licensed to ~~issue insurance products~~write business only in New York.

~~For operating purposes, we have established~~We are organized into three segments: (i) Annuities, (ii) Life and (iii) Run-off, which consists of products that are no longer actively sold and are separately managed. In addition, we report certain of our results of operations in Corporate & Other. See “Business — Segments and Corporate & Other” included in our ~~2020~~2021 Annual Report, as well as Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information regarding our segments and Corporate & Other.

COVID-19 Pandemic

We continue to closely monitor developments related to the ~~worldwide~~COVID-19 pandemic, ~~sparked by the novel coronavirus (“COVID-19 pandemic”),~~ which has negatively impacted us in certain respects. At this time, it continues to not be possible to estimate (i) the severity or duration of the pandemic, including the severity, duration and frequency of any additional “waves” or emerging variants of ~~the pandemic~~COVID-19 or (ii) the efficacy or utilization of any therapeutic treatments and vaccines for COVID-19 ~~including their efficacy with respect to~~or variants ~~of COVID-19 that have emerged or could emerge in the future.~~thereof. It is likewise remains not possible to predict or estimate the longer-term effects of the pandemic, or any actions taken to contain or address the pandemic, on the economy at large and on our business, financial condition, results of operations and prospects, including the impact on our investment portfolio and our ratings, or the need for us in the future to revisit or revise any targets we may provide to the markets or any aspects of our business ~~model or targets previously provided to the markets.~~model. See “Business — Regulation,” “Risk Factors — Risks Related to Our Business — The ongoing COVID-19 pandemic could materially adversely affect our business, financial condition and results of operations, including our capitalization and liquidity” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — COVID-19 Pandemic” included in our ~~2020~~2021 Annual Report, as well as Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements.

Regulatory Developments

We, including our insurance subsidiary, BHNY, and our reinsurance subsidiary, Brighthouse Reinsurance Company of Delaware, are regulated primarily at the state level, with some products and services also subject to federal regulation. In addition, Brighthouse Life Insurance Company and ~~its affiliates~~BHNY are subject to regulation under the insurance holding company laws of various U.S. jurisdictions. Furthermore, some of our operations, products and services are subject to the Employee Retirement Income Security Act of 1974, consumer protection laws, securities, broker-dealer and investment advisor regulations, as well as environmental and unclaimed property laws and regulations. See “Business — Regulation,” as well as “Risk Factors — Regulatory and Legal Risks” included in our ~~2020~~2021 Annual Report, as amended or supplemented by our subsequent Quarterly Reports under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Regulatory Developments.”

Transition from LIBOR

On March 15, 2022, the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) was signed into law, which provided a replacement framework for outstanding financial contracts tied to LIBOR once LIBOR ceases to be published. The LIBOR Act is substantially similar to the law passed in New York in April 2021 that aimed at ensuring legal clarity for legacy contracts governed by New York law. The LIBOR Act provides a statutory mechanism and safe harbor that applies on a nationwide basis to replace LIBOR with a benchmark rate, selected by the Federal Reserve Board based on a secured overnight funding rate, for certain contracts that reference LIBOR and contain no or insufficient fallback provisions. The LIBOR Act preempts and supersedes any state or local law, statute, rule, regulation or standard relating to the selection or use

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of a benchmark replacement or related changes and allows parties that already have effective fallback provisions to opt out of the legislation. See “Business — Regulation — Transition from LIBOR” and “Risk Factors — Economic Environment and Capital Markets-Related Risks — We are exposed to significant financial and capital markets risks which may adversely affect our financial condition, results of operations and liquidity, and may cause our net investment income and our profitability measures to vary from period to period — Changes to LIBOR” included in our 2021 Annual Report, as amended or supplemented herein.

Summary of Critical Accounting Estimates

The most critical estimates include those used in determining:

•liabilities for future policy benefits;

•amortization of deferred policy acquisition costs (“DAC”);

•estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation; and

•measurement of income taxes and the valuation of deferred tax assets.

In applying our accounting policies, we make subjective and complex judgments that frequently require estimates 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 our business and operations. Actual results could differ from these estimates.

The above critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and Note 1 of the Notes to the Consolidated Financial Statements included in our ~~2020~~2021 Annual Report.

Non-GAAP Financial Disclosures

Our definitions of ~~the~~ non-GAAP financial measures may differ from those used by other companies.

~~Non-GAAP Financial Disclosures~~

Adjusted Earnings

In this report, we present adjusted earnings as a measure of our performance that is not calculated in accordance with GAAP. Adjusted earnings is used by management to evaluate performance ~~allocate resources~~ and facilitate comparisons to industry results. We believe the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of ~~its~~our performance by the investor community and contract holders by highlighting the results of operations and the underlying profitability drivers of our business. Adjusted earnings should not be viewed as a substitute for net income (loss) attributable to Brighthouse Life Insurance Company, which is the most directly comparable financial measure calculated in accordance with GAAP. See “— Results of Operations” for a reconciliation of adjusted earnings to net income (loss) attributable to Brighthouse Life Insurance Company.

Adjusted earnings, which may be positive or negative, focuses on our primary businesses ~~principally~~ by excluding the impact of market volatility, which could distort trends.

The following are significant items excluded from total revenues in calculating adjusted earnings:

•Net investment gains (losses);

•Certain variable annuity guaranteed minimum income benefits (“GMIB”) fees (“GMIB Fees”).

The following are significant items excluded from total expenses in calculating adjusted earnings:

•Amounts associated with benefits related to GMIBs (“GMIB Costs”);

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•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 value of business acquired (“VOBA”) related to (i) net investment gains (losses), (ii) net derivative gains (losses), and (iii) GMIB Fees and GMIB ~~Costs and (iv) Market Value Adjustments.~~Costs.

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The tax impact of the adjustments discussed above is calculated net of the statutory tax rate, which could differ from our effective tax rate.

We present adjusted earnings in a manner consistent with management’s view of the primary business activities that drive the profitability of our core businesses. The following table illustrates how each component of adjusted earnings is calculated from the GAAP statement of operations line items:


Component of Adjusted Earnings		How Derived from GAAP (1)
(i)	Fee income	(i)	Universal life and investment-type policy fees (excluding (a) unearned revenue adjustments related to net investment gains (losses) and net derivative gains (losses) and (b) GMIB Fees) plus Other revenues ~~(excluding other revenues associated with related party reinsurance)~~ and amortization of deferred gain on reinsurance.
(ii)	Net investment spread	(ii)	Net investment income plus Investment Hedge Adjustments and interest received on ceded fixed annuity reinsurance deposit funds reduced by Interest credited to policyholder account balances and interest on future policy benefits.
(iii)	Insurance-related activities	(iii)	Premiums less Policyholder benefits and claims (excluding (a) GMIB Costs, (b) Market Value Adjustments, (c) interest on future policy benefits and (d) amortization of deferred gain on reinsurance) plus the pass through of performance of ceded separate account assets.
(iv)	Amortization of DAC and VOBA	(iv)	Amortization of DAC and VOBA (excluding amounts related to (a) net investment gains (losses), (b) net derivative gains (losses), and (c) GMIB Fees and GMIB ~~Costs and (d) Market Value Adjustments)~~Costs).
(v)	Other expenses, net of DAC capitalization	(v)	Other expenses reduced by capitalization of DAC.
(vi)	Provision for income tax expense (benefit)	(vi)	Tax impact of the above items.

______________

(1)Italicized items indicate GAAP statement of operations line items.

Consistent with GAAP guidance for segment reporting, adjusted earnings is also our GAAP measure of segment performance. Accordingly, we report adjusted earnings by segment in Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements.

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Results of Operations

~~Annual Actuarial Review~~

We typically conduct our annual actuarial review (“AAR”) in the third quarter of each year. As a result of the 2021 AAR, we updated assumptions regarding policyholder behavior, including mortality, premium persistency, lapses, withdrawals and maintenance expenses. This update had the largest impact on our universal life with secondary guarantees (“ULSG”) business. We also increased our long-term general account earned rate, while maintaining our mean reversion rate at 3.00%. For our variable annuity business, we updated our annuitization and separate account assumptions, including fund fees, allocations and volatility, in addition to the policyholder behavior assumptions noted above.

Consolidated Results for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

Unless otherwise noted, all amounts in the following discussions of our results of operations are stated before income tax except for adjusted earnings, which are presented net of income tax.


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
		(In millions)					(In millions)
Revenues	Revenues					Revenues
Premiums	Premiums	$	526	$	549	Premiums	$	161	$	181
Universal life and investment-type product policy fees	Universal life and investment-type product policy fees	2,240		2,114		Universal life and investment-type product policy fees	683		743
Net investment income	Net investment income	3,629		2,508		Net investment income	1,135		1,169
Other revenues	Other revenues	262		224		Other revenues	112		96
Net investment gains (losses)	Net investment gains (losses)	(37)		(46)		Net investment gains (losses)	(67)		12
Net derivative gains (losses)	Net derivative gains (losses)	(2,049)		2,227		Net derivative gains (losses)	555		(1,387)
Total revenues	Total revenues	4,571		7,576		Total revenues	2,579		814
Expenses	Expenses					Expenses
Policyholder benefits and claims	Policyholder benefits and claims	2,420		5,094		Policyholder benefits and claims	861		644
Interest credited to policyholder account balances	Interest credited to policyholder account balances	978		792		Interest credited to policyholder account balances	284		290
Capitalization of DAC	Capitalization of DAC	(360)		(276)		Capitalization of DAC	(109)		(113)
Amortization of DAC and VOBA	Amortization of DAC and VOBA	(14)		833		Amortization of DAC and VOBA	205		50
Interest expense on debt	Interest expense on debt	50		51		Interest expense on debt	17		17
Other expenses	Other expenses	1,634		1,551		Other expenses	478		520
Total expenses	Total expenses	4,708		8,045		Total expenses	1,736		1,408
Income (loss) before provision for income tax	Income (loss) before provision for income tax	(137)		(469)		Income (loss) before provision for income tax	843		(594)
Provision for income tax expense (benefit)	Provision for income tax expense (benefit)	(68)		(145)		Provision for income tax expense (benefit)	172		(141)
Net income (loss)	Net income (loss)	(69)		(324)		Net income (loss)	671		(453)
Less: Net income (loss) attributable to noncontrolling interests	Less: Net income (loss) attributable to noncontrolling interests	1		1		Less: Net income (loss) attributable to noncontrolling interests	—		—
Net income (loss) attributable to Brighthouse Life Insurance Company	Net income (loss) attributable to Brighthouse Life Insurance Company	$	(70)	$	(325)	Net income (loss) attributable to Brighthouse Life Insurance Company	$	671	$	(453)

The components of net income (loss) were as follows:


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
		(In millions)					(In millions)
GMLB Riders	GMLB Riders	$	(1,412)	$	(933)	GMLB Riders	$	943	$	(243)
Other derivative instruments	Other derivative instruments	(407)		1,461		Other derivative instruments	(453)		(956)
Net investment gains (losses)	Net investment gains (losses)	(37)		(46)		Net investment gains (losses)	(67)		12
Other adjustments	Other adjustments	19		(65)		Other adjustments	27		37
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	1,699		(887)		Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	393		556
Income (loss) attributable to Brighthouse Life Insurance Company before provision for income tax	Income (loss) attributable to Brighthouse Life Insurance Company before provision for income tax	(138)		(470)		Income (loss) attributable to Brighthouse Life Insurance Company before provision for income tax	843		(594)
Provision for income tax expense (benefit)	Provision for income tax expense (benefit)	(68)		(145)		Provision for income tax expense (benefit)	172		(141)
Net income (loss) attributable to Brighthouse Life Insurance Company	Net income (loss) attributable to Brighthouse Life Insurance Company	$	(70)	$	(325)	Net income (loss) attributable to Brighthouse Life Insurance Company	$	671	$	(453)

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~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared with the ~~Nine~~Three Months Ended ~~September 30, 2020~~March 31, 2021

~~Loss~~Income before provision for income tax was ~~$138~~$843 million ($70671 million, net of income tax), ~~a lower loss~~an increase of ~~$332 million~~$1.4 billion ($~~255 million,~~1.1 billion, net of income tax) from a loss before provision for income tax of ~~$470~~$594 million ($~~325~~453 million, net of income tax) in the prior period.

The increase in income before provision for income tax was driven by the following favorable items:

•~~higher pre-tax adjusted earnings, as discussed in greater detail below;~~gains from guaranteed minimum living benefits (“GMLB”) riders (“GMLB Riders”), see “— GMLB Riders for the Three Months Ended March 31, 2022 and 2021”; and

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•~~lower policyholder benefits and claims, included in other adjustments, resulting from~~ the ~~adjustment for market performance related~~favorable impact of long-term benchmark interest rates on interest rate derivatives used to ~~participating products~~manage interest rate exposure in our ~~run-off business.~~universal life with secondary guarantees (“ULSG”) business, as the long-term benchmark interest rate increased less in the current period than in the prior period.

The increase in income before provision for income tax was partially offset by the following unfavorable items:

•~~losses on interest rate derivatives used to manage interest rate exposure~~lower pre-tax adjusted earnings, as discussed in ~~our ULSG business due to the long-term benchmark interest rate increasing in the current period and decreasing in the prior period;~~greater detail below; and

•~~higher~~net investment losses ~~from guaranteed minimum living benefits (“GMLB”) riders (“GMLB Riders”), see “— GMLB Riders for the Nine Months Ended September 30, 2021~~reflecting current period net losses on sales of fixed maturity securities compared to prior period net gains, as well as net losses on limited partnerships and ~~2020.~~limited liability companies.

The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of ~~50%~~20% in the current period compared to ~~31%~~24% in the prior period. The ~~increase~~decrease in the effective tax rate iswas driven by ~~higher~~lower pre-tax adjusted earnings, as discussed in greater detail below. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits.

Reconciliation of Net Income (Loss) to Adjusted Earnings

The reconciliation of net income (loss) attributable to Brighthouse Life Insurance Company to adjusted earnings was as follows:


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
		(In millions)					(In millions)
Net income (loss) attributable to Brighthouse Life Insurance Company	Net income (loss) attributable to Brighthouse Life Insurance Company	$	(70)	$	(325)	Net income (loss) attributable to Brighthouse Life Insurance Company	$	671	$	(453)
Add: Provision for income tax expense (benefit)	Add: Provision for income tax expense (benefit)	(68)		(145)		Add: Provision for income tax expense (benefit)	172		(141)
Income (loss) attributable to Brighthouse Life Insurance Company before provision for income tax	Income (loss) attributable to Brighthouse Life Insurance Company before provision for income tax	(138)		(470)		Income (loss) attributable to Brighthouse Life Insurance Company before provision for income tax	843		(594)
Less: GMLB Riders	Less: GMLB Riders	(1,412)		(933)		Less: GMLB Riders	943		(243)
Less: Other derivative instruments	Less: Other derivative instruments	(407)		1,461		Less: Other derivative instruments	(453)		(956)
Less: Net investment gains (losses)	Less: Net investment gains (losses)	(37)		(46)		Less: Net investment gains (losses)	(67)		12
Less: Other adjustments	Less: Other adjustments	19		(65)		Less: Other adjustments	27		37
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	1,699		(887)		Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	393		556
Less: Provision for income tax expense (benefit)	Less: Provision for income tax expense (benefit)	316		(232)		Less: Provision for income tax expense (benefit)	78		101
Adjusted earnings	Adjusted earnings	$	1,383	$	(655)	Adjusted earnings	$	315	$	455

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Consolidated Results for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ — Adjusted Earnings

The components of adjusted earnings were as follows:


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
		(In millions)					(In millions)
Fee income	Fee income	$	2,321	$	2,149	Fee income	$	737	$	779
Net investment spread	Net investment spread	2,137		1,060		Net investment spread	684		708
Insurance-related activities	Insurance-related activities	(1,301)		(2,448)		Insurance-related activities	(497)		(374)
Amortization of DAC and VOBA	Amortization of DAC and VOBA	(133)		(358)		Amortization of DAC and VOBA	(145)		(133)
Other expenses, net of DAC capitalization	Other expenses, net of DAC capitalization	(1,324)		(1,289)		Other expenses, net of DAC capitalization	(386)		(424)
Less: Net income (loss) attributable to noncontrolling interests	Less: Net income (loss) attributable to noncontrolling interests	1		1		Less: Net income (loss) attributable to noncontrolling interests	—		—
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	1,699		(887)		Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	393		556
Provision for income tax expense (benefit)	Provision for income tax expense (benefit)	316		(232)		Provision for income tax expense (benefit)	78		101
Adjusted earnings	Adjusted earnings	$	1,383	$	(655)	Adjusted earnings	$	315	$	455

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared with the ~~Nine~~Three Months Ended ~~September 30, 2020~~March 31, 2021

Adjusted earnings were ~~$1.4 billion~~$315 million in the current period, ~~an increase~~a decrease of ~~$2.0 billion.~~$140 million.

Key net ~~favorable~~unfavorable impacts were:

•~~lower net~~higher costs associated with insurance-related activities due to:

◦a net decrease in liability balances resulting primarily from changes in assumptions made in connection with the AAR in our ULSG and annuities businesses, which included changes in the long-term general account earned rate and policyholder behavior assumptions;Table of Contents

~~partially offset by~~

◦higher paid claims, net of reinsurance, in our life business;

◦higher volume and severity of guaranteed minimum death benefits (“GMDB”) claims in our annuities business; and

◦an increase in income annuity benefit payments;

•lower fee income due to:

◦lower asset-based fees resulting from lower average separate account balances, a portion of which is offset in other expenses;

◦an adjustment in the prior period related to modeling improvements resulting from an actuarial system conversion ~~primarily~~ in our life business; and

◦higher ceded cost of insurance fees consistent with unfavorable equity market returns in our life business, which is offset in other expenses;

•~~higher~~lower net investment spread due to:

◦~~higher~~lower returns on other limited partnerships for the comparative measurement period; and

◦~~higher average invested assets resulting from positive net flows in the general account;~~

~~partially offset by~~

◦~~higher interest credited resulting from changes in interest accrual assumptions in connection with the AAR and the related modeling changes in our annuities business;~~

◦lower investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at lower yields than the portfolio average;

partially offset by

◦higher average invested long-term assets from funding agreements issued in connection with our institutional spread margin business;

◦higher average invested assets resulting from positive net flows in the general account;

◦higher returns on real estate limited partnerships and limited liability companies; and

◦~~higher~~lower interest credited to policyholders consistent with lower account balances in our life business;

•higher net amortization of DAC and VOBA due ~~to higher imputed interest~~to:

◦the impact on ~~insurance liabilities~~future gross profits from lower separate account returns and unfavorable equity market performance;

partially offset by

◦an adjustment in the current period related to modeling improvements resulting from changes in in-force in our annuities business; and

◦an adjustment in the prior period related to modeling improvements resulting from an actuarial system conversion in our life ~~business;~~business.

•lower amortization of DAC and VOBA due to a favorable impact in our annuities and life businesses resulting from changes in assumptions, as well as model refinements made in connection with the AAR, which included changes in policyholder behavior and capital markets assumptions; and

•~~higher asset-based fees resulting from higher average separate account balances, a portion of which is offset in other expenses.~~

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Key ~~net unfavorable~~favorable impacts were:

•~~higher~~lower other expenses due to:

◦~~higher~~lower asset-based variable annuity expenses resulting from ~~higher~~lower average separate account balances, a portion of which is offset in fee income;

◦higher ceded cost of insurance expenses consistent with unfavorable equity market returns in our life business, which is offset in fee income; and

◦~~higher corporate spending related to distribution~~lower deferred compensation and ~~operations;~~

~~partially offset by~~

◦~~lower establishment costs related to planned technology~~operational expenses.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of ~~19%~~20% in the current period compared to ~~26%~~18% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits.

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GMLB Riders for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

The overall impact on income (loss) before provision for income tax from the performance of GMLB Riders, which includes (i) changes in carrying value of the GAAP liabilities, (ii) the mark-to-market of hedges and reinsurance, (iii) fees and (iv) associated DAC offsets, was as follows:


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
		(In millions)					(In millions)
Liabilities	Liabilities	$	(875)	$	(3,710)	Liabilities	$	1,149	$	669
Hedges	Hedges	(1,216)		2,538		Hedges	(317)		(1,097)
Ceded reinsurance	Ceded reinsurance	(76)		99		Ceded reinsurance	(34)		(85)
Fees (1)	Fees (1)	610		608		Fees (1)	195		193
GMLB DAC	GMLB DAC	145		(468)		GMLB DAC	(50)		77
Total GMLB Riders	Total GMLB Riders	$	(1,412)	$	(933)	Total GMLB Riders	$	943	$	(243)

______________

(1)Excludes living benefit fees, included as a component of adjusted earnings, of ~~$45~~$13 million and ~~$43~~$14 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared with the ~~Nine~~Three Months Ended ~~September 30, 2020~~March 31, 2021

Comparative results from GMLB Riders were ~~unfavorable~~favorable by ~~$479 million.~~

~~The AAR~~$1.2 billion, primarily ~~resulted in favorable changes in reserves and DAC amortization recognized in the current period.~~

~~Results were also~~ driven by:

•~~unfavorable changes in our GMLB hedges;~~

•~~unfavorable~~favorable changes to the estimated fair value of embedded derivative liabilities associated with Shield Level Annuities (“Shield liabilities”); and

•~~unfavorable~~favorable changes ~~in ceded reinsurance;~~to the estimated fair value of our GMLB hedges;

partially offset by

•~~favorable~~unfavorable changes to the estimated fair value of variable annuity liability reserves; and

•unfavorable changes to GMLB DAC.

Lower equity markets resulted in the following impacts:

•favorable changes into the estimated fair value of Shield liabilities; and

•favorable changes to the estimated fair value of our GMLB hedges;

partially offset by

•unfavorable changes to the estimated fair value of variable annuity liability reserves; and

•unfavorable changes to GMLB DAC.

Higher ~~equity markets~~interest rates resulted in the following impacts:

•unfavorable changes to the estimated fair value of ~~Shield liabilities;~~

•~~unfavorable changes to the estimated fair value of our GMLB hedges; and~~

•~~unfavorable changes in ceded reinsurance;~~

~~partially offset by~~

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•~~favorable changes to the estimated fair value of~~ variable annuity liability reserves; ~~and~~

•~~favorable changes to GMLB DAC.~~

~~Interest rates increasing in the current period resulted in the following impacts:~~

•~~unfavorable changes to the estimated fair value of our GMLB hedges;~~

•~~unfavorable changes to GMLB DAC;~~

•~~unfavorable changes in ceded reinsurance;~~ and

•unfavorable changes to the estimated fair value of Shield liabilities;

partially offset by

•favorable changes to the estimated fair value of ~~variable annuity liability reserves.~~our GMLB hedges; and

•favorable changes to GMLB DAC.

The ~~narrowing~~widening of our credit spreads in the current period combined with a decrease in the underlying variable annuity liability reserves resulted in ~~an unfavorable~~a favorable change in the adjustment for nonperformance risk, net of ~~a favorable~~an unfavorable change in GMLB DAC.

Liquidity and Capital Resources

Our business and results of operations are materially affected by conditions in the global capital markets and the economy generally. Stressed conditions, volatility or disruptions in global capital markets, particular markets or financial

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asset classes can impact us adversely, in part because we have a large investment portfolio and our insurance liabilities and derivatives are sensitive to changing market factors. For further information regarding market factors that could affect our ability to meet liquidity and capital needs, including those related to the COVID-19 pandemic, see “— Overview — COVID-19 Pandemic.”

~~Rating Agencies~~

Credit rating agencies may continue to review and adjust our ratings. For example, in April 2020, Fitch revised the rating outlook for Brighthouse Life Insurance Company and certain affiliates to negative from stable due to the disruption to economic activity and the financial markets from the COVID-19 pandemic. This action by Fitch followed its revision of the rating outlook on the U.S. life insurance industry to negative. In April 2021, Fitch revised the rating outlook for Brighthouse Life Insurance Company and certain affiliates from negative back to stable. See “Risk Factors — Risks Related to Our Business — A downgrade or a potential downgrade in our financial strength ratings could result in a loss of business and materially adversely affect our financial condition and results of operations” included in our 2020 Annual Report for an in-depth description of the impact of a potential ratings downgrade.

Sources and Uses of Liquidity and Capital

In addition to the summary description of liquidity and capital sources discussed in “— Sources and Uses of Liquidity and Capital” in our ~~2020~~2021 Annual Report, the following additional information is provided regarding our primary sources of liquidity and capital:

Funding Agreements

From time to time, Brighthouse Life Insurance Company issues funding agreements and uses the proceeds from such issuances for spread lending purposes in connection with our institutional spread margin business or to provide additional liquidity. The institutional spread margin business is comprised of ~~active~~ funding agreements issued in connection with the programs described in more detail below. ~~The activity under all such funding agreements is reported in policyholder account balances.~~ See Note 3 of the Notes to the Consolidated Financial Statements included in our ~~2020~~2021 Annual Report for additional information on funding agreements.

Funding Agreement-Backed Commercial Paper Program

In July 2021, Brighthouse Life Insurance Company established a funding agreement-backed commercial paper program (the “FABCP Program”) for spread lending purposes, pursuant to which a special purpose limited liability company (the “SPLLC”) may issue commercial paper and deposit the proceeds with Brighthouse Life Insurance Company under a funding agreement issued by Brighthouse Life Insurance Company to the SPLLC. The maximum aggregate principal amount permitted to be outstanding at any one time under the FABCP Program is $3.0 billion. Activity related to this funding agreement is reported in Corporate & Other.

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Funding Agreement-Backed Notes Program

In April 2021, Brighthouse Life Insurance Company established a funding agreement-backed notes program (the “FABN Program”), pursuant to which Brighthouse Life Insurance Company may issue funding agreements to a special purpose statutory trust for spread lending purposes. The maximum aggregate principal amount permitted to be outstanding at any one time under the FABN Program is $5.0 billion. Activity related to these funding agreements is reported in Corporate & Other.

Federal Home Loan Bank Funding Agreements

Brighthouse Life Insurance Company is a member of the Federal Home Loan Bank (“FHLB”) of Atlanta, where ~~we maintain an active~~it maintains a secured funding agreement program, under which funding agreements may be issued either (i) for spread lending purposes or (ii) to provide additional liquidity. Activity related to these funding agreements is reported in Corporate & Other.

Farmer Mac 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”) with a term ending on December 31, 2023, pursuant to which the parties may enter into funding agreements in an aggregate amount of up to $500 million either (i) for spread lending purposes or (ii) to provide additional liquidity. Activity related to these funding agreements is reported in Corporate & Other.

Information regarding funding agreements issued for spread lending purposes is as follows:

Aggregate Principal Amount
Outstanding Issuances Repayments
Nine Months Ended September 30,
September 30, 2021 December 31, 2020 2021 2020 2021 2020
(In millions)
FABCP Program $ 1,663 $ — $ 1,989 $ — $ 326 $ —
FABN Program 2,400 — 2,400 — — —
FHLB Funding Agreements (1) 600 — 951 — 351 —
Farmer Mac Funding Agreements 25 — 25 — — —
Total $ 4,688 $ — $ 5,365 $ — $ 677 $ —

~~__________________~~

~~(1)~~Additionally, in April 2020, Brighthouse Life Insurance Company issued funding agreements for an aggregate collateralized borrowing of $1.0 billion to provide a readily available source of contingent liquidity and repaid such borrowing during the fourth quarter of 2020.


	Aggregate Principal Amount Outstanding				Issuances				Repayments
					Three Months Ended March 31,
	March 31, 2022		December 31, 2021		2022		2021		2022		2021
	(In millions)
FABCP Program	$	1,793	$	1,848	$	2,158	$	—	$	2,213	$	—
FABN Program	3,450		2,900		550		—		—		—
FHLB Funding Agreements	1,400		900		1,350		—		850		—
Farmer Mac Funding Agreements	425		125		300		—		—		—
Total	$	7,068	$	5,773	$	4,358	$	—	$	3,063	$	—

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Note Regarding Forward-Looking Statements

This report ~~including Management’s Discussion and Analysis of Financial Condition and Results of Operations,~~ and other oral or written statements that we make from time to time may contain information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve substantial risks and uncertainties. We have tried, wherever possible, to identify such statements using words such as “anticipate,” “estimate,” “expect,” “project,” “may,” “will,” “could,” “intend,” “goal,” “target,” “guidance,” “forecast,” “preliminary,” “objective,” “continue,” “aim,” “plan,” “believe” and other words and terms of similar meaning, or that are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include, without limitation, statements relating to future actions, prospective services or products, financial projections, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, as well as trends in operating and financial results.

Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of BLIC. These statements are based on current expectations and the current economic environment and involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others:

•differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models;

•higher risk management costs and exposure to increased market risk due to guarantees within certain of our products;

•the effectiveness of our variable annuity exposure risk management strategy and the impact of such strategy on volatility in our profitability measures and negative effects on our statutory capital;

•material differences from actual outcomes compared to the sensitivities calculated under certain scenarios and sensitivities that we may utilize in connection with our variable annuity risk management strategies;

•the impact of interest rates on our future ULSG policyholder obligations and net income volatility;

•the impact of the ongoing COVID-19 pandemic;

•the potential material adverse effect of changes in accounting standards, practices or policies applicable to us, including changes in the accounting for long-duration contracts;

•loss of business and other negative impacts resulting from a downgrade or a potential downgrade in our financial strength ratings;

•the availability of reinsurance and the ability of the counterparties to our reinsurance or indemnification arrangements to perform their obligations thereunder;

•heightened competition, including with respect to service, product features, scale, price, actual or perceived financial strength, claims-paying ratings, financial strength ratings, e-business capabilities and name recognition;

•our ability to market and distribute our products through distribution channels;

•any failure of third parties to provide services we need, any failure of the practices and procedures of such third parties and any inability to obtain information or assistance we need from third parties;

•the risks associated with climate change;

•the adverse impact on liabilities for policyholder claims as a result of extreme mortality events;

•the impact of adverse capital and credit market conditions, including with respect to our ability to meet liquidity needs and access capital;

•the impact of economic conditions in the capital markets and the U.S. and global economy, as well as geo-political events, military actions or catastrophic events, on our investment portfolio, including on realized and unrealized losses and impairments, net investment spread and net investment income;

•the impact of events that adversely affect issuers, guarantors or collateral relating to our investments or our derivatives counterparties, on impairments, valuation allowances, reserves, net investment income and changes in unrealized gain or loss positions;

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•the impact of changes in regulation and in supervisory and enforcement policies on our insurance business or other operations;

•the potential material negative tax impact of potential future tax legislation that could make some of our products less attractive to consumers;

•the effectiveness of our policies and procedures in managing risk;

•the loss or disclosure of confidential information, damage to our reputation and impairment of our ability to conduct business effectively as a result of any failure in cyber- or other information security systems;

•whether all or any portion of the tax consequences of our separation from MetLife, Inc. (together with its subsidiaries and affiliates, “MetLife”) are not as expected, leading to material additional taxes or material adverse consequences to tax attributes that impact us;

•the uncertainty of the outcome of any disputes with MetLife over tax-related or other matters and agreements or disagreements regarding MetLife’s or our obligations under our other agreements; and

•other factors described in this report and from time to time in documents that we file with the SEC.

For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements included and the risks, uncertainties and other factors identified in our ~~2020~~2021 Annual Report, particularly in the sections entitled “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk,” as well as in our other subsequent filings with the SEC. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

Item 4. Controls and Procedures

Management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of ~~September 30, 2021.~~March 31, 2022.

MetLife provides certain services to the Company on a transitional basis through services agreements. The Company continues to change business processes, implement systems and establish new third-party arrangements, as a subsidiary of Brighthouse Financial, Inc. We consider these in aggregate to be material changes in our internal control over financial reporting.

Other than as noted above, there were no changes to the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended ~~September 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, these internal controls over financial reporting.

Part II — Other Information

Item 1. Legal Proceedings

See Note 9 of the Notes to the Interim Condensed Consolidated Financial Statements.

Item 1A. Risk Factors

We discuss in this report, in our ~~2020~~2021 Annual Report and in our other filings with the SEC, various risks that may materially affect our business. In addition, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Note Regarding Forward-Looking Statements” included herein. There have been no material changes to our risk factors from the risk factors previously disclosed in our ~~2020~~2021 Annual Report.

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Item 6. Exhibits

(Note Regarding Reliance on Statements in Our Contracts: In reviewing the agreements included as exhibits herein, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about Brighthouse Life Insurance Company, its subsidiaries or affiliates or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and (i) should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; (iii) may apply standards of materiality in a way that is different from what may be viewed as material to investors; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about Brighthouse Life Insurance Company, its subsidiaries and affiliates may be found elsewhere herein and Brighthouse Life Insurance Company’s other public filings, which are available without charge through the U.S. Securities and Exchange Commission website at www.sec.gov.)


Exhibit No.						Description
31.1*						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*						Inline XBRL Taxonomy Extension Schema Document.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.
104*						The cover page of Brighthouse Life Insurance Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2021,~~March 31, 2022, formatted in Inline XBRL (included within the Exhibit 101 attachments).

* Filed herewith.

** Furnished herewith.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BRIGHTHOUSE LIFE INSURANCE COMPANY

By:

/s/ Kristine H. Toscano

Name:

Kristine H. Toscano

Title:

Vice President and Chief Accounting Officer

(Duly Authorized Officer and Principal Accounting Officer)

Date: ~~November 8, 2021~~May 11, 2022

6055


	Nine Months Ended September 30,
	2021		2020
	(In millions)
Purchase price	$	436	$	77
Allowance at acquisition date	2		2
Discount or premium attributable to other factors	(25)		2
Par value	$	413	$	81