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, 2022~~March 31, 2023


☐			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 10, 2022,~~May 11, 2023, 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, 2022~~March 31, 2023 (Unaudited) and December 31, ~~2021~~2022 and for the Three Months Ended March 31, 2023 and ~~Nine Months Ended September 30,~~ 2022 ~~and 2021~~ (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~~ASU 2018-12 Transition	710
	Note 3 — ~~Insurance~~Segment Information	1113
	Note 4 — ~~Investments~~Insurance	1216
	Note 5 — ~~Derivatives~~Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles	2423
	Note 6 — ~~Fair Value~~Investments	3025
	Note 7 — ~~Long-term and Short-term Debt~~Derivatives	3936
	Note 8 — ~~Equity~~	39
	~~Note 9 — Other Revenues and Other Expenses~~Fair Value	41
	Note 9 — Long-term and Short-term Debt	49
	Note 10 — Equity	49
	Note 11 — Other Revenues and Other Expenses	51
	Note 12 — Contingencies, Commitments and Guarantees	4252
	Note 1113 — Related Party Transactions	4555

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4757
Item 3.	Quantitative and Qualitative Disclosure s About Market Risk	69
Item 4.	Controls and Procedures	5972

Part II — Other Information
Item 1.	Legal Proceedings	5972
Item 1A.	Risk Factors	6072
Item 6.	Exhibits	6073

Signature		6174

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, 2022~~March 31, 2023 (Unaudited) and December 31, ~~2021~~2022

(In millions, except share and per share data)


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Assets	Assets					Assets
Investments:	Investments:					Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $84,308 and $78,287, respectively; allowance for credit losses of $4 and $11, respectively)		$	74,419	$	86,527
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $83,751 and $83,395, respectively; allowance for credit losses of $4 and $6, respectively)						Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $83,751 and $83,395, respectively; allowance for credit losses of $4 and $6, respectively)	$	76,852	$	74,757
Equity securities, at estimated fair value	Equity securities, at estimated fair value	75		95		Equity securities, at estimated fair value	63		66
Mortgage loans (net of allowance for credit losses of $99 and $123, respectively)		22,030		19,787
Mortgage loans (net of allowance for credit losses of $136 and $119, respectively)						Mortgage loans (net of allowance for credit losses of $136 and $119, respectively)	22,788		22,877
Policy loans	Policy loans	886		869		Policy loans	888		898
Limited partnerships and limited liability companies	Limited partnerships and limited liability companies	4,607		4,271		Limited partnerships and limited liability companies	4,802		4,774

Short-term investments, principally at estimated fair value	Short-term investments, principally at estimated fair value	278		662		Short-term investments, principally at estimated fair value	498		299
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)	4,161		3,324		Other invested assets, principally at estimated fair value (net of allowance for credit losses of $13 and $13, respectively)	3,309		2,984
Total investments	Total investments	106,456		115,535		Total investments	109,200		106,655
Cash and cash equivalents	Cash and cash equivalents	4,384		3,904		Cash and cash equivalents	3,402		3,752
Accrued investment income	Accrued investment income	889		706		Accrued investment income	966		868
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)	17,465		15,649		Premiums, reinsurance and other receivables (net of allowance for credit losses of $10 and $10, respectively)	18,570		18,145
Deferred policy acquisition costs and value of business acquired	Deferred policy acquisition costs and value of business acquired	5,159		4,851		Deferred policy acquisition costs and value of business acquired	4,600		4,642
Current income tax recoverable	Current income tax recoverable	28		—		Current income tax recoverable	20		18
Deferred income tax asset	Deferred income tax asset	1,566		—		Deferred income tax asset	1,627		1,673
Market risk benefit assets						Market risk benefit assets	510		483
Other assets	Other assets	359		385		Other assets	314		322
Separate account assets	Separate account assets	76,067		106,225		Separate account assets	81,124		78,880
Total assets	Total assets	$	212,373	$	247,255	Total assets	$	220,333	$	215,438
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Liabilities	Liabilities					Liabilities
Future policy benefits	Future policy benefits	$	41,259	$	43,589	Future policy benefits	$	31,970	$	31,146
Policyholder account balances	Policyholder account balances	70,599		66,195		Policyholder account balances	75,209		72,602
Market risk benefit liabilities						Market risk benefit liabilities	10,751		10,411
Other policy-related balances	Other policy-related balances	3,104		3,153		Other policy-related balances	3,580		3,860
Payables for collateral under securities loaned and other transactions	Payables for collateral under securities loaned and other transactions	6,518		6,253		Payables for collateral under securities loaned and other transactions	4,388		4,547
Long-term and short-term debt	Long-term and short-term debt	964		841		Long-term and short-term debt	913		963
Current income tax payable		—		57
Deferred income tax liability		—		981

Other liabilities	Other liabilities	7,165		3,850		Other liabilities	5,616		6,515
Separate account liabilities	Separate account liabilities	76,067		106,225		Separate account liabilities	81,124		78,880
Total liabilities	Total liabilities	205,676		231,144		Total liabilities	213,551		208,924
Contingencies, Commitments and Guarantees (Note 10)
Contingencies, Commitments and Guarantees (Note 12)						Contingencies, Commitments and Guarantees (Note 12)
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	17,773		17,773		Additional paid-in capital	17,773		17,773
Retained earnings (deficit)	Retained earnings (deficit)	(4,704)		(5,653)		Retained earnings (deficit)	(5,943)		(5,418)
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(6,462)		3,901		Accumulated other comprehensive income (loss)	(5,138)		(5,931)
Total Brighthouse Life Insurance Company’s stockholder’s equity	Total Brighthouse Life Insurance Company’s stockholder’s equity	6,682		16,096		Total Brighthouse Life Insurance Company’s stockholder’s equity	6,767		6,499
Noncontrolling interests	Noncontrolling interests	15		15		Noncontrolling interests	15		15
Total equity	Total equity	6,697		16,111		Total equity	6,782		6,514
Total liabilities and equity	Total liabilities and equity	$	212,373	$	247,255	Total liabilities and equity	$	220,333	$	215,438

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, 2023 and ~~Nine Months Ended September 30,~~ 2022 ~~and 2021~~ (Unaudited)

(In millions)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Revenues	Revenues									Revenues
Premiums	Premiums	$	160	$	189	$	482	$	526	Premiums		$	190	$	161
Universal life and investment-type product policy fees	Universal life and investment-type product policy fees	635		736		1,953		2,240		Universal life and investment-type product policy fees		474		526
Net investment income	Net investment income	857		1,264		3,036		3,629		Net investment income		1,035		1,135
Other revenues	Other revenues	109		92		326		262		Other revenues		87		114
Net investment gains (losses)	Net investment gains (losses)	(40)		(16)		(171)		(37)		Net investment gains (losses)		(96)		(67)
Net derivative gains (losses)	Net derivative gains (losses)	(408)		56		1,909		(2,049)		Net derivative gains (losses)		(588)		(61)
Total revenues	Total revenues	1,313		2,321		7,535		4,571		Total revenues		1,102		1,808
Expenses	Expenses									Expenses
Policyholder benefits and claims		1,267		1,062		3,212		2,420
Policyholder benefits and claims (including liability remeasurement gains (losses) of $0 and $0, respectively)										Policyholder benefits and claims (including liability remeasurement gains (losses) of $0 and $0, respectively)		644		627
Interest credited to policyholder account balances	Interest credited to policyholder account balances	422		406		1,019		978		Interest credited to policyholder account balances		416		242
Amortization of deferred policy acquisition costs and value of business acquired	Amortization of deferred policy acquisition costs and value of business acquired	147		(70)		888		(14)		Amortization of deferred policy acquisition costs and value of business acquired		142		141
Change in market risk benefits										Change in market risk benefits		198		(1,580)
Other expenses	Other expenses	407		435		1,278		1,324		Other expenses		394		392
Total expenses	Total expenses	2,243		1,833		6,397		4,708		Total expenses		1,794		(178)
Income (loss) before provision for income tax	Income (loss) before provision for income tax	(930)		488		1,138		(137)		Income (loss) before provision for income tax		(692)		1,986
Provision for income tax expense (benefit)	Provision for income tax expense (benefit)	(208)		96		188		(68)		Provision for income tax expense (benefit)		(167)		412
Net income (loss)	Net income (loss)	(722)		392		950		(69)		Net income (loss)		(525)		1,574
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	$	(722)	$	392	$	949	$	(70)	Net income (loss) attributable to Brighthouse Life Insurance Company		$	(525)	$	1,574
Comprehensive income (loss)	Comprehensive income (loss)	$	(4,175)	$	114	$	(9,413)	$	(1,456)	Comprehensive income (loss)		$	268	$	(813)
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	$	(4,175)	$	114	$	(9,414)	$	(1,457)	Comprehensive income (loss) attributable to Brighthouse Life Insurance Company		$	268	$	(813)

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, 2023 and ~~Nine Months Ended September 30,~~ 2022 ~~and 2021~~ (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, 2021 $ 75 $ 17,773 $ (5,653) $ 3,901 $ 16,096 $ 15 $ 16,111
Change in noncontrolling interests — (1) (1)
Net income (loss) 1,671 1,671 1 1,672
Other comprehensive income (loss), net of income tax (6,910) (6,910) (6,910)
Balance at June 30, 2022 75 17,773 (3,982) (3,009) 10,857 15 10,872
Change in noncontrolling interests — —
Net income (loss) (722) (722) (722)
Other comprehensive income (loss), net of income tax (3,453) (3,453) (3,453)
Balance at September 30, 2022 $ 75 $ 17,773 $ (4,704) $ (6,462) $ 6,682 $ 15 $ 6,697


	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, 2022	$	75	$	17,773	$	(5,418)	$	(5,931)	$	6,499	$	15	$	6,514
Net income (loss)					(525)				(525)				(525)
Other comprehensive income (loss), net of income tax							793		793				793
Balance at March 31, 2023	$	75	$	17,773	$	(5,943)	$	(5,138)	$	6,767	$	15	$	6,782

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	$	(9,128)	$	(199)	$	8,521	$	15	$	8,536


Net income (loss)					1,574				1,574				1,574
Other comprehensive income (loss), net of income tax							(2,387)		(2,387)				(2,387)
Balance at March 31, 2022	$	75	$	17,773	$	(7,554)	$	(2,586)	$	7,708	$	15	$	7,723

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, 2023 and 2022 ~~and 2021~~ (Unaudited)

(In millions)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	$	(628)	$	1,051	Net cash provided by (used in) operating activities	$	(511)	$	(90)
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	8,442		8,396		Fixed maturity securities	1,459		3,705
Equity securities	Equity securities	41		114		Equity securities	2		20
Mortgage loans	Mortgage loans	1,767		1,998		Mortgage loans	262		461
Limited partnerships and limited liability companies	Limited partnerships and limited liability companies	180		168		Limited partnerships and limited liability companies	37		67
Purchases of:	Purchases of:					Purchases of:
Fixed maturity securities	Fixed maturity securities	(14,255)		(16,077)		Fixed maturity securities	(1,854)		(5,487)
Equity securities	Equity securities	(14)		(7)		Equity securities	(1)		—
Mortgage loans	Mortgage loans	(4,060)		(4,421)		Mortgage loans	(173)		(1,972)
Limited partnerships and limited liability companies	Limited partnerships and limited liability companies	(619)		(560)		Limited partnerships and limited liability companies	(121)		(279)
Cash received in connection with freestanding derivatives	Cash received in connection with freestanding derivatives	3,737		3,211		Cash received in connection with freestanding derivatives	1,106		1,437
Cash paid in connection with freestanding derivatives	Cash paid in connection with freestanding derivatives	(3,395)		(3,912)		Cash paid in connection with freestanding derivatives	(1,752)		(1,196)
Receipts on loans to affiliate						Receipts on loans to affiliate	50		—

Issuances of loans to affiliate		(125)		(1)
Net change in policy loans	Net change in policy loans	(17)		20		Net change in policy loans	10		(7)
Net change in short-term investments	Net change in short-term investments	384		1,120		Net change in short-term investments	(195)		551
Net change in other invested assets	Net change in other invested assets	(101)		(13)		Net change in other invested assets	(18)		(17)
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(8,035)		(9,964)		Net cash provided by (used in) investing activities	(1,188)		(2,717)
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	23,139		10,761		Deposits	6,743		6,218
Withdrawals	Withdrawals	(14,246)		(1,910)		Withdrawals	(5,269)		(3,689)
Net change in payables for collateral under securities loaned and other transactions	Net change in payables for collateral under securities loaned and other transactions	265		390		Net change in payables for collateral under securities loaned and other transactions	(159)		(58)
Short-term debt issued		125		—
Long-term debt repaid		(2)		(1)

Dividends paid to parent		—		(250)
Long-term and short-term debt repaid						Long-term and short-term debt repaid	(50)		(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	(137)		(183)		Financing element on certain derivative instruments and other derivative related transactions, net	84		(76)
Other, net		(1)		(1)

Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	9,143		8,806		Net cash provided by (used in) financing activities	1,349		2,394
Change in cash, cash equivalents and restricted cash	Change in cash, cash equivalents and restricted cash	480		(107)		Change in cash, cash equivalents and restricted cash	(350)		(413)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	3,904		3,684		Cash, cash equivalents and restricted cash, beginning of period	3,752		3,904
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	4,384	$	3,577	Cash, cash equivalents and restricted cash, end of period	$	3,402	$	3,491
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	$	36	$	34
Income tax	Income tax	$	93	$	(20)	Income tax	$	—	$	1

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, “Brighthouse Financial”). BLIC offers a range of annuity and life insurance products to individuals. The Company is organized into three segments: Annuities; Life; and Run-off. In addition, the Company reports certain of its results of operations in Corporate & Other.

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.

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, ~~2021~~2022 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, ~~2021~~2022 (the ~~“2021~~“2022 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 ~~2021~~2022 Annual Report.

Reclassifications

Certain amounts in the prior year period’s interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform with the 2023 presentation as discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements. See “— Adoption of New Accounting ~~Pronouncements~~

~~Changes to GAAP are established by~~Pronouncements” for discussion of the ~~Financial Accounting Standards Board (“FASB”)~~adoption of new guidance on long-duration contracts in the ~~form~~first quarter of 2023, parts of which were retrospectively applied to prior periods presented in the interim condensed consolidated financial statements.

Summary of Significant Accounting Policies

In connection with the adoption of new guidance on long-duration insurance contracts, the Company updated its impacted accounting ~~standards updates (“ASU”)~~policies as described below. See Note 1 of the Notes to the ~~FASB Accounting Standards Codification. The Company considers~~Consolidated Financial Statements included in the ~~applicability and impact~~2022 Annual Report for a description of ~~all ASUs. There were no significant ASUs adopted during~~ the ~~period ended September 30, 2022.~~Company’s accounting policies that did not change.

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)

Insurance Contract Obligations

The Company has obligations under insurance contracts to pay benefits over an extended period of time. The Company establishes liabilities for future obligations under long-duration insurance contracts based on the accounting model appropriate for each type of contract or contract feature. Liabilities for insurance contract benefits are generally accrued over time as revenue is recognized, or established based on the balance that accrues to the contract holder. In addition, certain insurance contracts may contain features that are required to be measured at fair value separately from the base contracts, either as a market risk benefit or embedded derivative.

The discussion below provides an overview of the different accounting models for insurance contract obligations and the applicability of such models to the Company’s insurance products.

Liability for Future Policy Benefits

The Company establishes a liability for future policy benefits (“LFPB”) for non-participating term and whole life insurance and income annuities. LFPBs are accrued over time as revenue is recognized based on a net premium ratio. The net premium ratio is the portion of gross premiums required to provide for all future benefits. LFPBs are established using the Company’s current assumptions of future cash flows, discounted at a rate that approximates a single A corporate bond curve. The Company generally aggregates insurance contracts into groupings by issue year, product and segment for determining the net premium ratio and related LFPBs.

The Company reviews cash flow assumptions regularly, and if they change significantly, LFPBs are adjusted by determining a revised net premium ratio. The revised net premium ratio is calculated as of contract inception using both actual historical experience and updated future cash flow assumptions. The recalculated net premium ratio is applied to derive a remeasurement gain or loss recognized in current period net income. For insurance policies in-force as of December 31, 2020, January 1, 2021 is considered the contract inception date. The net premium ratio is also updated quarterly for the difference between actual and expected experience.

The net premium ratio is not updated for changes in discount rate assumptions, as changes in the discount rate are updated quarterly and the impacts are reflected in other comprehensive income (loss) (“OCI”). The discount rate assumption is determined by developing a yield curve based on market observable yields for upper-medium fixed income instruments derived from an external index. The yield curve is applied to the expected future cash flows used in the measurement of LFPBs based on the duration characteristics of those liabilities.

The most significant cash flow assumptions used in the establishment of LFPBs are mortality, policy lapses and market interest rates. See Note 4 for more information on the effect of changes in assumptions on the measurement of LFPBs.

The Company also establishes an LFPB for participating term and whole life insurance using a net premium ratio and the Company’s current assumptions of future cash flows. Assumptions are determined at issuance of the policy and are not updated unless a premium deficiency exists. A premium deficiency exists when the LFPB plus the present value of expected future gross premiums are less than expected future benefits and expenses (based on current assumptions). When a premium deficiency exists, the Company will reduce any deferred acquisition costs and may also establish an additional liability to eliminate the deficiency. See Note 4 for more information on assumptions used in establishing LFPBs related to participating term and whole life insurance.

Policyholder Account Balances

The Company establishes a policyholder account balance liability for customer deposits on universal life insurance, universal life insurance with secondary guarantees (“ULSG”) and deferred annuity contracts. The policyholder account balance liability is equal to the sum of deposits, plus interest credited, less charges and withdrawals, excluding the impact of any applicable charge that may be incurred upon surrender. The Company also holds additional liabilities for certain product features including secondary guarantees on universal life insurance contracts and the crediting rates associated with index-linked annuities.

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)

Additional Liabilities for ULSG

The Company establishes a liability in addition to the account balance for secondary guarantees on universal life insurance. These liabilities are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the contract period based on total expected assessments. The benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios. The Company also maintains a liability for profits followed by losses on ULSG determined by projecting future earnings and establishing a liability to offset losses that are expected to occur in later years. Both ULSG liabilities are adjusted for the effects of unrealized investment gains and losses.

The Company reviews cash flow assumptions regularly, and, if they change significantly, the liability for secondary guarantees is adjusted by a cumulative charge or credit to net income. Liabilities for secondary guarantees are presented within future policy benefits with changes in the liabilities reported in policyholder benefits and claims, except for the effects of unrealized investment gains and losses, which are reported in OCI.

The most significant assumptions used in estimating liabilities for secondary guarantees are the general account rate of return, premium persistency, mortality and lapses. See Note 4 for more information on the effect of changes in assumptions on the measurement of liabilities for secondary guarantees.

Market Risk Benefits on Annuity Guarantees

Market risk benefits (“MRB”) are contracts or contract features that provide protection to the policyholder from capital markets risk by transferring such risks to the Company. MRBs are required to be separated from the deferred annuity host contract and measured at fair value. The Company establishes MRB assets and liabilities for guaranteed minimum benefits on variable annuity contracts including guaranteed minimum death benefits (“GMDB”), guaranteed minimum income benefits (“GMIB”), guaranteed minimum accumulation benefits (“GMAB”) and guaranteed minimum withdrawal benefits (“GMWB”). MRB assets are also established for reinsured benefits related to these guarantees. Certain index-linked annuity products may also have guaranteed minimum benefits classified as MRBs.

The measurement of fair value includes an adjustment for the risk that the Company fails to satisfy its obligations, which is referred to as nonperformance risk, as well as risk margin to capture the non-capital markets risks of the instrument which represents the additional compensation a market participant would require to assume the risks related to the uncertainties in certain actuarial assumptions. MRBs are measured at estimated fair value, with changes reported in change in MRBs on the consolidated statements of operations, except for the change due to nonperformance risk, which is reported in OCI.

See Note 4 for more information on the effect of changes in inputs and assumptions on the measurement of MRBs and Note 8 for more information on the determination of fair value of MRBs.

Embedded Derivatives on Index-Linked Annuities

The Company issues, and assumes through reinsurance, index-linked annuities which allow the policyholder to participate in returns from certain specified equity indices. The crediting rates associated with these features are classified as embedded derivatives and measured at estimated fair value, 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.

Embedded derivative liabilities are required to be separated from the deferred annuity host contract and measured at fair value. The estimated fair value is determined using a combination of an option pricing model and an option-budget approach. Under this approach, the Company estimates the cost of funding the crediting rate using option pricing and establishes that cost on the balance sheet as a reduction to the initial deposit amount. The estimate of fair value includes an adjustment for nonperformance risk, as well as a risk margin.

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)

Actuarial assumptions are reviewed at least annually, and if they change significantly, the estimated fair value is adjusted through net income. Capital market inputs used in the measurement of index-linked crediting rate embedded derivatives are updated quarterly through net income. The reduction to the initial deposit is accreted back up to the initial deposit over the estimated life of the contract. Embedded derivatives related to index-linked annuities are presented within policyholder account balances while changes in the estimated fair value are reported in net derivative gains (losses).

For more information on the determination of estimated fair value of embedded derivatives, see Note 8.

Recognition of Revenues and Deposits on Insurance Contracts

Premiums related to traditional long-duration contracts are recognized as revenues when due from policyholders. When premiums for income annuities are due over a significantly shorter period than the period over which policyholder benefits are incurred, the Company establishes a deferred profit liability (“DPL”) for the excess of the gross premium over the net premium. DPLs are amortized into net income in proportion to the amount of expected future benefit payments. Assumptions used in the measurement of the DPL are updated at the same time as the related LFPBs, with the updated estimates used to recalculate the DPL as of contract inception. The remeasurement gain or loss from updating DPLs is recognized in current period net income along with the related change in LFPBs.

Deposits related to universal life insurance, deferred annuity contracts and investment contracts are credited to policyholder account balances. Revenues from such contracts consist of asset-based investment management fees, cost of insurance charges, risk charges, policy administration fees and surrender charges. These fees, which are included in universal life and investment-type product policy fees, are recognized when assessed to the contract holder, except for non-level insurance charges which are deferred by the establishment of an unearned revenue liability and amortized over the expected life of the contracts.

Premiums and policy fees are presented net of reinsurance.

Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles

The Company incurs significant costs in connection with acquiring new and renewal insurance business. Costs that are directly related to the successful acquisition or renewal of insurance contracts are capitalized as deferred policy acquisition costs (“DAC”). These costs mainly consist of commissions and include the portion of employees’ compensation and benefits related to time spent selling, underwriting or processing the issuance of new insurance contracts. All other acquisition-related costs are expensed as incurred.

Value of business acquired (“VOBA”) is an intangible asset resulting from a business combination that represents the excess of book value over the estimated fair value of acquired insurance, annuity and investment-type contracts in-force as of the acquisition date.

The Company amortizes DAC and VOBA in a manner that approximates a straight-line basis over the expected life of the related contracts. For life insurance contracts, amortization is based on projections of amounts of insurance in-force, while projections of policy counts are used for deferred annuity contracts and expected future benefits payments for income annuities. These assumptions are reviewed at least annually, and if they change significantly, updates are recognized through changes to future amortization. VOBA balances are tested annually to determine if the balance is deemed unrecoverable from expected future profits. All changes in DAC and VOBA balances are recorded to net income.

Periodically, the Company modifies product benefits, features, rights or coverages that occur by the exchange of an existing contract for a new contract, or by amendment, endorsement, or rider to a contract, or by election or coverage within a contract. If a modification is considered to have substantially changed the contract, the associated DAC or VOBA is written off immediately through net income and any new acquisition costs associated with the replacement contract are deferred. If the modification does not substantially change the contract, the DAC or VOBA amortization on the original contract will continue and any acquisition costs associated with the related modification are expensed.

The Company also has intangible assets representing deferred sales inducements (“DSI”) included in other assets and unearned revenue liabilities included in other policy-related balances. The Company defers sales inducements and unearned revenue and amortizes the balances using the same methodology and assumptions used to amortize DAC and VOBA.

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)

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. Except as noted below, there were no significant ASUs adopted during the period ended March 31, 2023.

In March 2022, the FASB issued new guidance on Troubled Debt Restructurings (“TDR”) (ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures). This ASU eliminates TDR recognition and measurement guidance and, instead, requires that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. The Company adopted this guidance on January 1, 2023. This ASU was applied prospectively and did not have a material impact on the consolidated financial statements upon adoption but could change the future recognition and measurement of modified loans and other receivables.

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 (“LDTI”)). LDTI is effective for fiscal years beginning after January 1, 2023. LDTI ~~will result~~resulted 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:

(1) Guaranteed benefits associated with variable annuity and certain fixed annuity contracts ~~will be~~have been classified and presented separately on the consolidated balance sheets as ~~market risk benefits (“MRB”).~~MRBs. MRBs ~~will be~~are now measured at estimated fair value through net income and reported separately on the consolidated statements of operations, except for ~~instrument-specific credit~~nonperformance risk changes, which will be recognized in ~~other comprehensive income (loss) (“OCI”).~~OCI.

(2) Cash flow assumptions used to measure the liability for ~~future policy benefits~~LFPBs on traditional long-duration contracts (including term and non-participating whole life insurance and immediate annuities) ~~will be~~have been updated on an annual basis using a retrospective method. The resulting remeasurement gain or loss ~~will be~~is now 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 liability for traditional long-duration contracts ~~will be~~is now based on an upper-medium grade fixed income yield, updated quarterly, with changes recognized in OCI.

(4) ~~Deferred policy acquisition costs (“DAC”)~~DAC for 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~~have been recognized as a revision to future amortization amounts.

(5) There ~~will be~~was 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.

~~LDTI will be applied to the earliest period presented in the financial statements, making the~~The transition date was January 1, 2021. ~~The~~ MRB changes ~~are~~were required to be applied on a retrospective basis, while the changes for insurance liability assumption updates and DAC amortization ~~will be~~were applied to existing carrying amounts on the transition date.

~~LDTI will have~~The cumulative effect, on an after-tax basis, of the adoption of ASU 2018-12 as of the transition date was a ~~significant impact~~$5.2 billion decrease to retained earnings and a $3.9 billion decrease to accumulated other comprehensive income (loss) (“AOCI”). See Note 2 for more detailed information on the impacts of the ASU to the Company’s financial ~~statements~~statements.

2. ASU 2018-12 Transition

The Company adopted ASU 2018-12 for LFPBs, DAC and ~~will change~~other balances amortized on a basis consistent with DAC by applying the ~~pattern and market sensitivity~~guidance to contracts in-force on the basis of ~~the Company’s earnings after~~their existing carrying amounts at the transition date. The ~~most significant impact will be~~Company adopted ASU 2018-12 for MRBs on a fully retrospective basis.

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. ASU 2018-12 Transition (continued)

The effect of transition adjustments on stockholder’s equity at January 1, 2021 due to the adoption of ASU 2018-12 was as follows:


	Retained Earnings (Deficit)		AOCI
	(In millions)
Liability for future policy benefits	$	(434)	$	(2,053)
Market risk benefits and related adjustments	(5,971)		(3,452)
DAC and VOBA	—		494
Reinsurance recoverables	(141)		30
Deferred income tax asset	1,375		1,046
Total	$	(5,171)	$	(3,935)

For LFPBs, the transition adjustment to retained earnings relates to instances where net premiums exceed gross premiums resulting in LFPBs being increased to eliminate the premium deficiency. The premium deficiency primarily relates to structured settlement annuities. The transition adjustment related to AOCI represents the effect of the requirement ~~that all variable annuity guarantees be considered~~to discount LFPBs based on an upper-medium grade fixed income rate as well as the removal of amounts previously recorded in AOCI for the effects of unrealized investment gains and losses.

For MRBs, the transition adjustment to AOCI relates to the cumulative effect of changes in the nonperformance risk between contract issue date and ~~measured at~~transition date. The remaining difference between the estimated fair value ~~because a significant~~and carrying amount of ~~variable annuity guarantees are~~MRBs at transition, excluding the amounts recorded in AOCI, was recorded as an adjustment to retained earnings as of the transition date.

For DAC and VOBA, the Company removed amounts previously recorded in AOCI for the effect of unrealized investment gains and losses.

For reinsurance, the adjustments to both retained earnings and AOCI were made to align the measurement of reinsurance recoverables with the related LFPBs.

The balances of and changes in LFPBs at January 1, 2021 due to the adoption of ASU 2018-12 were as follows:


	Term and Whole Life Insurance		Income Annuities		Structured Settlement and Pension Risk Transfer Annuities
	(In millions)
Balance at December 31, 2020	$	2,797	$	4,260	$	10,115
Removal of related balances in AOCI	—		(203)		(1,784)
Change in cash flow assumptions	13		(168)		200
Initial recognition of deferred profit liabilities	—		172		217
Change in discount rate assumptions	522		748		2,770
Adjusted balance at January 1, 2021	3,332		4,809		11,518
Less: Reinsurance recoverable	59		29		102
Adjusted balance at January 1, 2021, net of reinsurance	$	3,273	$	4,780	$	11,416

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. ASU 2018-12 Transition (continued)

The balance of and changes in liabilities classified as ~~insurance liabilities under current GAAP. The impacts~~MRBs at January 1, 2021 due to the financial statements are highly dependent on market conditions, especially interest rates. The Company estimates the impact of LDTI to total stockholder’s equity as of December 31, 2021 to be a reduction of between $6 billion and $8 billion, and a reduction to total stockholder’s equity excluding accumulated other comprehensive income of between $3 billion and $4 billion, both primarily driven by the MRB changes. Based on prevailing interest rates at September 30, 2022, post adoption of ~~LDTI, the Company expects the impact to total stockholder’s equity~~ASU 2018-12 were as ~~of September 30, 2022 to have significantly improved since December 31, 2021.~~follows:


	Variable Annuities
	(In millions)
Balance at December 31, 2020	$	8,622
Adjustment for the difference between carrying amount and estimated fair value, except for the difference due to nonperformance risk	6,347
Adjustment for cumulative effect of changes in nonperformance risk since issuance	3,452
Adjusted balance at January 1, 2021	18,421
Less: Reinsurance recoverable	169
Adjusted balance at January 1, 2021, net of reinsurance	$	18,252

The ~~Company has made significant progress toward adopting~~balances of and changes in DAC and VOBA on January 1, 2021 due to the ~~new guidance, including updating systems, validating computations, establishing proper controls, finalizing accounting policies and developing disclosures.~~adoption of ASU 2018-12 were as follows:


	Variable Annuities		Fixed Rate Annuities		Index-Linked Annuities		Term and Whole Life Insurance		Universal Life Insurance
	(In millions)
DAC:
Balance at December 31, 2020	$	2,326	$	64	$	886	$	451	$	144
Removal of related amounts in AOCI	460		—		—		—		(37)
Adjusted balance at January 1, 2021	$	2,786	$	64	$	886	$	451	$	107
VOBA:
Balance at December 31, 2020	$	363	$	76	$	—	$	8	$	38
Removal of related amounts in AOCI	65		—		—		—		6
Adjusted balance at January 1, 2021	$	428	$	76	$	—	$	8	$	44

The following tables present amounts previously reported in 2022 and 2021, the effect on those amounts of the change due to the adoption of ASU 2018-12 as described in Note 1, and the currently reported amounts in the Unaudited Interim Consolidated Balance Sheets and Unaudited Interim Consolidated Statements of Operations and Comprehensive Income (Loss). See Notes 4 and 5 for more information.


	December 31, 2022						December 31, 2021
	As Previously Reported		Effect of Change		As Currently Reported		As Previously Reported		Effect of Change		As Currently Reported
	(In millions)
Total assets	$	216,151	$	(713)	$	215,438	$	247,255	$	2,476	$	249,731
Future policy benefits	$	41,105	$	(9,959)	$	31,146	$	43,589	$	(3,759)	$	39,830
Policyholder account balances	$	74,112	$	(1,510)	$	72,602	$	66,195	$	(1,905)	$	64,290
Market risk benefit liabilities	$	—	$	10,411	$	10,411	$	—	$	16,062	$	16,062
Total liabilities	$	209,287	$	(363)	$	208,924	$	231,144	$	10,051	$	241,195
Retained earnings (deficit)	$	(5,717)	$	299	$	(5,418)	$	(5,653)	$	(3,475)	$	(9,128)
Accumulated other comprehensive income (loss)	$	(5,282)	$	(649)	$	(5,931)	$	3,901	$	(4,100)	$	(199)
Total equity	$	6,864	$	(350)	$	6,514	$	16,111	$	(7,575)	$	8,536
Total liabilities and equity	$	216,151	$	(713)	$	215,438	$	247,255	$	2,476	$	249,731

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. ASU 2018-12 Transition (continued)


	Year Ended December 31, 2022						Year Ended December 31, 2021
	As Previously Reported		Effect of Change		As Currently Reported		As Previously Reported		Effect of Change		As Currently Reported
	(In millions)
Universal life and investment-type product policy fees	$	2,562	$	(686)	$	1,876	$	2,986	$	(666)	$	2,320
Net derivative gains (losses)	$	402	$	(987)	$	(585)	$	(2,359)	$	(1,627)	$	(3,986)
Total revenues	$	7,832	$	(1,670)	$	6,162	$	6,400	$	(2,290)	$	4,110
Policyholder benefits and claims	$	4,143	$	(1,957)	$	2,186	$	3,213	$	(728)	$	2,485
Change in market risk benefits	$	—	$	(4,105)	$	(4,105)	$	—	$	(4,142)	$	(4,142)
Total expenses	$	8,103	$	(6,447)	$	1,656	$	6,404	$	(4,436)	$	1,968
Net income (loss)	$	(63)	$	3,774	$	3,711	$	67	$	1,696	$	1,763

3. Segment Information

The Company is organized into three segments: Annuities; Life; and Run-off. In addition, the Company reports certain of its results of operations in Corporate & Other.

Annuities

The Annuities segment consists of a variety of variable, fixed, index-linked and income annuities designed to address contract holders’ needs for protected wealth accumulation on a tax-deferred basis, wealth transfer and income security.

Life

The Life segment consists of insurance products, ~~and services,~~ including term, universal, whole and variable life products designed to address policyholders’ needs for financial security and protected wealth transfer, which may be on a tax-advantaged basis.

~~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)~~

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,~~ULSG, structured settlements, pension risk transfer contracts, certain company-owned life insurance policies and certain funding agreements.

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 and activities related to funding agreements associated with the Company’s institutional spread margin ~~business, as well as~~business.

In connection with the adoption of ASU 2018-12, the Company reclassified direct-to-consumer life insurance that is no longer ~~actively sold.~~sold from Corporate & Other to the Life segment. The segment information below reflects the direct-to consumer life insurance in the Life segment for all periods presented.

Financial Measures and Segment Accounting Policies

Adjusted earnings is a financial measure used by management to evaluate performance 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 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)

3. Segment Information (continued)

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

•Net investment gains (losses); and

•Net derivative gains (losses) ~~except~~, excluding 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”).~~treatment.

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;~~Change in MRBs; and

•~~Amortization of DAC and~~Change in fair value of ~~business acquired (“VOBA”) related to (i) net investment gains (losses), (ii) net derivative gains (losses) and (iii) GMIB Fees and GMIB Costs.~~the crediting rate on experience-rated contracts.

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 Company’s adjusted earnings definition and presentation has been updated for all periods presented to reflect the adoption of ASU 2018-12.

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.

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


	Three Months Ended March 31, 2023
	Annuities		Life		Run-off		Corporate & Other		Total
	(In millions)
Pre-tax adjusted earnings	$	362	$	26	$	(133)	$	(18)	$	237
Provision for income tax expense (benefit)	68		5		(28)		(16)		29
Post-tax adjusted earnings	294		21		(105)		(2)		208
Less: Net income (loss) attributable to noncontrolling interests	—		—		—		—		—
Adjusted earnings	$	294	$	21	$	(105)	$	(2)	208
Adjustments for:
Net investment gains (losses)									(96)
Net derivative gains (losses)									(588)
Change in market risk benefits									(206)
Other adjustments to net income (loss)									(39)
Provision for income tax (expense) benefit									196
Net income (loss) attributable to Brighthouse Life Insurance Company									$	(525)

Interest revenue	$	592	$	89	$	254	$	139
Interest expense	$	—	$	—	$	—	$	18

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. Segment Information (continued)


	Three Months Ended March 31, 2022
	Annuities		Life		Run-off		Corporate & Other		Total
	(In millions)
Pre-tax adjusted earnings	$	428	$	89	$	30	$	(45)	$	502
Provision for income tax expense (benefit)	82		18		6		(5)		101
Post-tax adjusted earnings	346		71		24		(40)		401
Less: Net income (loss) attributable to noncontrolling interests	—		—		—		—		—
Adjusted earnings	$	346	$	71	$	24	$	(40)	401
Adjustments for:
Net investment gains (losses)									(67)
Net derivative gains (losses)									(61)
Change in market risk benefits									1,580
Other adjustments to net income (loss)									32
Provision for income tax (expense) benefit									(311)
Net income (loss) attributable to Brighthouse Life Insurance Company									$	1,574

Interest revenue	$	553	$	146	$	401	$	41
Interest expense	$	—	$	—	$	—	$	17

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


	Three Months Ended March 31,
		2023		2022
		(In millions)
Annuities		$	1,058	$	1,067
Life		248		300
Run-off		380		534
Corporate & Other		139		41
Adjustments		(723)		(134)
Total		$	1,102	$	1,808

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


	March 31, 2023		December 31, 2022
	(In millions)
Annuities	$	152,800	$	148,228
Life	17,415		17,214
Run-off	31,110		28,466
Corporate & Other	19,008		21,530
Total	$	220,333	$	215,438

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~~

4. Insurance

Liability for Future Policy Benefits

Information regarding LFPBs for non-participating traditional and limited-payment contracts was as follows:


	Three Months Ended March 31,
	2023									2022
	Term and Whole Life Insurance			Income Annuities			Structured Settlement and Pension Risk Transfer Annuities			Term and Whole Life Insurance			Income Annuities			Structured Settlement and Pension Risk Transfer Annuities
	(Dollars in millions)
Present value of expected net premiums:
Balance, beginning of period	$	2,804		$	—		$	—		$	3,212		$	—		$	—
Beginning balance at original discount rate	3,146			—			—			2,964			—			—
Effect of model refinements	—			—			—			121			—			—
Effect of changes in cash flow assumptions	—			—			—			(1)			—			—
Effect of actual variances from expected experience	(6)			—			—			74			—			—
Adjusted beginning of period balance	3,140			—			—			3,158			—			—
Issuances	24			—			—			20			—			—
Interest accrual	27			—			—			27			—			—
Net premiums collected	(89)			—			—			(103)			—			—
Ending balance at original discount rate	3,102			—			—			3,102			—			—
Effect of changes in discount rate assumptions	(273)			—			—			10			—			—
Balance, end of period	$	2,829		$	—		$	—		$	3,112		$	—		$	—
Present value of expected future policy benefits:
Balance, beginning of period	$	5,172		$	3,469		$	6,793		$	6,253		$	4,283		$	10,171
Beginning balance at original discount rate	5,816			3,848			7,410			5,682			3,817			8,165
Effect of model refinements	—			—			—			134			—			—
Effect of changes in cash flow assumptions	—			—			—			—			—			—
Effect of actual variances from expected experience	(6)			(18)			(31)			83			(9)			(22)
Adjusted beginning of period balance	5,810			3,830			7,379			5,899			3,808			8,143
Issuances	25			77			—			22			43			—
Interest accrual	53			36			79			53			36			87
Benefit payments	(129)			(89)			(145)			(202)			(91)			(161)
Ending balance at original discount rate	5,759			3,854			7,313			5,772			3,796			8,069
Effect of changes in discount rate assumptions	(505)			(282)			(385)			65			111			820
Balance, end of period	$	5,254		$	3,572		$	6,928		$	5,837		$	3,907		$	8,889
Net liability for future policy benefits, end of period	$	2,425		$	3,572		$	6,928		$	2,725		$	3,907		$	8,889
Less: Reinsurance recoverable, end of period	31			27			69			40			26			82
Net liability for future policy benefits, after reinsurance recoverable	$	2,394		$	3,545		$	6,859		$	2,685		$	3,881		$	8,807
Weighted-average duration of liability	8.4 years			8.4 years			11.6 years			8.5 years			8.5 years			12.7 years
Weighted-average interest accretion rate	3.93		%	3.88		%	4.46		%	3.95		%	3.96		%	4.45		%
Gross premiums or assessments recognized during period	$	150		$	95		$	—		$	163		$	44		$	—
Expected future gross premiums, undiscounted	$	6,426		$	—		$	—		$	6,680		$	—		$	—
Expected future gross premiums, discounted	$	4,793		$	—		$	—		$	4,979		$	—		$	—
Expected future benefit payments, undiscounted	$	7,937		$	5,292		$	14,224		$	7,974		$	5,401		$	17,046
Expected future benefit payments, discounted	$	5,759		$	3,854		$	7,313		$	5,772		$	3,796		$	8,069

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. Insurance (continued)

~~Operating results by segment, as well as Corporate & Other, were~~Information regarding the additional insurance liabilities for universal life-type contracts with secondary guarantees was as follows:

Three Months Ended September 30, 2022
Annuities Life Run-off Corporate
& Other Total
(In millions)
Pre-tax adjusted earnings $ 127 $ (64) $ (27) $ (4) $ 32
Provision for income tax expense (benefit) 18 (13) (5) (6) (6)
Post-tax adjusted earnings 109 (51) (22) 2 38
Less: Net income (loss) attributable to noncontrolling interests — — — — —
Adjusted earnings $ 109 $ (51) $ (22) $ 2 38
Adjustments for:
Net investment gains (losses) (40)
Net derivative gains (losses) (408)
Other adjustments to net income (loss) (514)
Provision for income tax (expense) benefit 202
Net income (loss) attributable to Brighthouse Life Insurance Company $ (722)
Interest revenue $ 546 $ 65 $ 168 $ 101
Interest expense $ — $ — $ — $ 18


	Three Months Ended March 31,
	2023			2022
	(Dollars in millions)
Balance, beginning of period	$	6,935		$	7,168
Beginning balance before the effect of unrealized gains and losses	7,175			6,731
Effect of changes in cash flow assumptions	—			—
Effect of actual variances from expected experience	34			66
Adjusted beginning of period balance	7,209			6,797
Interest accrual	87			81
Net assessments collected	101			110
Benefit payments	(103)			(159)
Effect of realized capital gains (losses)	—			1
Ending balance before the effect of unrealized gains and losses	7,294			6,830
Effect of unrealized gains and losses	(171)			156
Balance, end of period	7,123			6,986
Less: Reinsurance recoverable, end of period	1,397			1,304
Net additional liability, after reinsurance recoverable	$	5,726		$	5,682
Weighted-average duration of liability	6.7 years			6.7 years
Weighted-average interest accretion rate	4.91		%	4.90		%
Gross premiums or assessments recognized during period	$	—		$	—

Three Months Ended September 30, 2021
Annuities Life Run-off Corporate
& Other Total
(In millions)
Pre-tax adjusted earnings $ 482 $ 139 $ 43 $ (64) $ 600
Provision for income tax expense (benefit) 96 30 4 (13) 117
Post-tax adjusted earnings 386 109 39 (51) 483
Less: Net income (loss) attributable to noncontrolling interests — — — — —
Adjusted earnings $ 386 $ 109 $ 39 $ (51) 483
Adjustments for:
Net investment gains (losses) (16)
Net derivative gains (losses) 56
Other adjustments to net income (loss) (152)
Provision for income tax (expense) benefit 21
Net income (loss) attributable to Brighthouse Life Insurance Company $ 392
Interest revenue $ 564 $ 168 $ 505 $ 33
Interest expense $ — $ — $ — $ 17
A reconciliation of the net LFPBs for nonparticipating traditional and limited-payment contracts and the additional insurance liabilities for universal life-type contracts with secondary guarantees reported in the preceding rollforward tables to LFPBs on the consolidated balance sheets was as follows at:


	March 31,
	2023		2022
	(In millions)
Liabilities reported in the preceding rollforward tables	$	20,048	$	22,507
Long-term care insurance (1)	5,763		6,708
ULSG liability for profits followed by losses	2,654		3,461
Participating whole life insurance (2)	2,729		2,525
Deferred profit liabilities	369		375
Other	407		490
Total liability for future policy benefits	$	31,970	$	36,066

_______________

(1)Includes liabilities related to fully reinsured individual long-term care insurance. See Note 3.

(2)Participating whole life insurance uses an interest assumption based on the non-forfeiture interest rate, ranging from 3.5% to 4.0%, and mortality rates guaranteed in calculating the cash surrender values described in such contracts, and also includes a liability for terminal dividends. Participating whole life insurance represented 4% of the Company’s life insurance in-force at both March 31, 2023 and 2022, and 42% and 36% of gross traditional life insurance premiums for the three months ended March 31, 2023 and 2022, respectively.

917

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~~4. Insurance (continued)

Nine Months Ended September 30, 2022
Annuities Life Run-off Corporate
& Other Total
(In millions)
Pre-tax adjusted earnings $ 743 $ (9) $ (214) $ (91) $ 429
Provision for income tax expense (benefit) 132 (2) (45) (46) 39
Post-tax adjusted earnings 611 (7) (169) (45) 390
Less: Net income (loss) attributable to noncontrolling interests — — — 1 1
Adjusted earnings $ 611 $ (7) $ (169) $ (46) 389
Adjustments for:
Net investment gains (losses) (171)
Net derivative gains (losses) 1,909
Other adjustments to net income (loss) (1,029)
Provision for income tax (expense) benefit (149)
Net income (loss) attributable to Brighthouse Life Insurance Company $ 949
Interest revenue $ 1,643 $ 304 $ 919 $ 208
Interest expense $ — $ — $ — $ 51

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

~~Total revenues by segment, as well as Corporate & Other, were~~Information regarding LFPBs for non-participating traditional and limited-payment contracts was as follows:

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
(In millions)
Annuities $ 1,071 $ 1,195 $ 3,292 $ 3,446
Life 195 309 689 965
Run-off 339 671 1,415 1,960
Corporate & Other 119 52 263 121
Adjustments (411) 94 1,876 (1,921)
Total $ 1,313 $ 2,321 $ 7,535 $ 4,571


	Years Ended December 31,
	2022						2021
	Term and Whole Life Insurance		Income Annuities		Structured Settlement and Pension Risk Transfer Annuities		Term and Whole Life Insurance		Income Annuities		Structured Settlement and Pension Risk Transfer Annuities
	(Dollars in millions)
Present value of expected net premiums:
Balance, beginning of year	$	3,212	$	—	$	—	$	3,274	$	—	$	—
Beginning balance at original discount rate	2,964		—		—		2,868		—		—
Effect of model refinements	121		—		—		—		—		—
Effect of changes in cash flow assumptions	159		—		—		100		—		—
Effect of actual variances from expected experience	114		—		—		158		—		—
Adjusted beginning of year balance	3,358		—		—		3,126		—		—
Issuances	93		—		—		112		—		—
Interest accrual	112		—		—		107		—		—
Net premiums collected	(417)		—		—		(381)		—		—
Ending balance at original discount rate	3,146		—		—		2,964		—		—
Effect of changes in discount rate assumptions	(342)		—		—		248		—		—
Balance, end of year	$	2,804	$	—	$	—	$	3,212	$	—	$	—
Present value of expected future policy benefits:
Balance, beginning of year	$	6,253	$	4,283	$	10,171	$	6,606	$	4,636	$	11,301
Beginning balance at original discount rate	5,682		3,817		8,165		5,678		3,889		8,531
Effect of model refinements	134		—		(278)		—		—		—
Effect of changes in cash flow assumptions	179		55		(157)		100		(40)		(41)
Effect of actual variances from expected experience	150		(21)		(23)		158		(6)		(16)
Adjusted beginning of year balance	6,145		3,851		7,707		5,936		3,843		8,474
Issuances	101		220		—		128		193		—
Interest accrual	216		144		327		214		149		359
Benefit payments	(646)		(367)		(624)		(596)		(368)		(668)
Ending balance at original discount rate	5,816		3,848		7,410		5,682		3,817		8,165
Effect of changes in discount rate assumptions	(644)		(379)		(617)		571		466		2,006
Balance, end of year	$	5,172	$	3,469	$	6,793	$	6,253	$	4,283	$	10,171
Net liability for future policy benefits, end of year	$	2,368	$	3,469	$	6,793	$	3,041	$	4,283	$	10,171
Less: Reinsurance recoverable, end of year	32		25		68		42		28		93
Net liability for future policy benefits, after reinsurance recoverable	$	2,336	$	3,444	$	6,725	$	2,999	$	4,255	$	10,078

1018

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. Insurance (continued)

Policyholder Account Balances

Information regarding policyholder account balances was as follows:


	Universal Life Insurance			Variable Annuities (1)			Index-linked Annuities			Fixed Rate Annuities			ULSG			Company-Owned Life Insurance (1)
	(Dollars in millions)
Three Months Ended March 31, 2023
Balance, beginning of period	$	2,100		$	4,664		$	33,896		$	14,274		$	5,307		$	641
Premiums and deposits	49			27			1,677			912			171			—
Surrenders and withdrawals	(61)			(163)			(785)			(506)			(6)			—
Benefit payments	(23)			(31)			(50)			(102)			(38)			(2)
Net transfers from (to) separate account	3			9			—			—			—			—
Interest credited	16			39			96			106			43			7
Policy charges	(51)			(6)			(2)			—			(258)			(2)
Changes related to embedded derivatives	—			—			1,090			—			—			—

Balance, end of period	$	2,033		$	4,539		$	35,922		$	14,684		$	5,219		$	644

Weighted-average crediting rate (2)	0.77		%	0.85		%	0.32		%	0.73		%	0.82		%	1.09		%
Three Months Ended March 31, 2022
Balance, beginning of period	$	2,134		$	4,475		$	32,000		$	11,849		$	5,569		$	646
Premiums and deposits	51			48			1,594			44			176			—
Surrenders and withdrawals	(13)			(118)			(473)			(155)			(10)			1
Benefit payments	(19)			(31)			(36)			(83)			(22)			(3)
Net transfers from (to) separate account	7			76			—			—			—			2
Interest credited	—			42			71			72			62			6
Policy charges	(51)			(6)			(2)			—			(263)			(2)
Changes related to embedded derivatives	—			—			(756)			—			—			—

Balance, end of period	$	2,109		$	4,486		$	32,398		$	11,727		$	5,512		$	650

Weighted-average crediting rate (2)	—		%	0.94		%	0.27		%	0.61		%	1.12		%	0.93		%

_______________

(1)Includes liabilities related to separate account products where the contract holder elected a general account investment option.

(2)Excludes the effects of embedded derivatives related to index-linked crediting rates.

A reconciliation of policyholder account balances reported in the preceding rollforward table to the liability for policyholder account balances on the consolidated balance sheets was as follows at:


	March 31,
	2023		2022
	(In millions)
Policyholder account balances reported in the preceding rollforward table	$	63,041	$	56,882
Funding agreements classified as investment contracts	11,151		7,705
Other investment contract liabilities	1,017		1,165
Total policyholder account balances	$	75,209	$	65,752

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~~4. Insurance (continued)

~~Total assets~~The balance of account values by ~~segment, as well as Corporate & Other, were as follows at:~~

September 30, 2022 December 31, 2021
(In millions)
Annuities $ 144,709 $ 174,489
Life 16,385 18,190
Run-off 28,648 37,069
Corporate & Other 22,631 17,507
Total $ 212,373 $ 247,255

~~3. Insurance~~

~~Guarantees~~

As discussed in Notes 1 and 3 of the Notes to the Consolidated Financial Statements included in the 2021 Annual Report, the Company issues variable annuity contracts with guaranteed minimum benefits. Guaranteed minimum death benefits, the life contingent portionrange of guaranteed minimum ~~withdrawal benefits (“GMWB”)~~crediting rates and ~~certain portions~~the related range of ~~GMIBs are accounted for as insurance liabilities~~difference, in ~~future policyholder benefits, while other guarantees are accounted for in whole or in part as embedded derivatives in policyholder account balances~~basis points, between rates being credited to policyholders 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~~respective guaranteed minimums was as follows at:

September 30, 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) $ 76,894 $ 40,589 $ 105,784 $ 56,966
Separate account value $ 72,232 $ 39,542 $ 101,108 $ 55,910
Net amount at risk $ 18,250 (4) $ 6,439 (5) $ 6,315 (4) $ 4,992 (5)
Average attained age of contract holders 72 years 71 years 71 years 71 years

September 30, 2022 December 31, 2021
Secondary Guarantees
(Dollars in millions)
Universal Life Contracts
Total account value (3) $ 5,317 $ 5,518
Net amount at risk (6) $ 65,935 $ 67,248
Average attained age of policyholders 69 years 68 years
Variable Life Contracts
Total account value (3) $ 1,103 $ 1,448
Net amount at risk (6) $ 10,366 $ 10,508
Average attained age of policyholders 48 years 47 years


Range of Guaranteed Minimum Crediting Rate	At Guaranteed Minimum		1 to 50 Basis Points Above		51 to 150 Basis Points Above		Greater than 150 Basis Points Above		Total
	(In millions)
March 31, 2023
Annuities (1) (3):
Less than 2.00%	$	738	$	266	$	426	$	6,672	$	8,102
2.00% to 3.99%	4,746		4,744		727		10		10,227
Greater than 3.99%	458		—		—		—		458
Total	$	5,942	$	5,010	$	1,153	$	6,682	$	18,787
Life insurance (2) (3):
Less than 2.00%	$	—	$	—	$	—	$	184	$	184
2.00% to 3.99%	—		454		50		145		649
Greater than 3.99%	1,119		—		—		—		1,119
Total	$	1,119	$	454	$	50	$	329	$	1,952
ULSG (3):
Less than 2.00%	$	—	$	—	$	—	$	—	$	—
2.00% to 3.99%	1,200		1,552		1,705		264		4,721
Greater than 3.99%	521		—		—		—		521
Total	$	1,721	$	1,552	$	1,705	$	264	$	5,242
December 31, 2022
Annuities (1) (3):
Less than 2.00%	$	805	$	293	$	356	$	5,805	$	7,259
2.00% to 3.99%	5,224		4,871		594		8		10,697
Greater than 3.99%	470		—		—		—		470
Total	$	6,499	$	5,164	$	950	$	5,813	$	18,426
Life insurance (2) (3):
Less than 2.00%	$	—	$	—	$	—	$	172	$	172
2.00% to 3.99%	—		462		87		150		699
Greater than 3.99%	1,148		—		—		—		1,148
Total	$	1,148	$	462	$	87	$	322	$	2,019
ULSG (3):
Less than 2.00%	$	—	$	—	$	—	$	—	$	—
2.00% to 3.99%	1,224		1,581		1,729		266		4,800
Greater than 3.99%	527		—		—		—		527
Total	$	1,751	$	1,581	$	1,729	$	266	$	5,327

_______________

(1)~~The Company’s annuity contracts with guarantees may offer more than one type~~Includes policyholder account balances for fixed rate annuities and the fixed account portion of ~~guarantee in each contract. Therefore,~~variable annuities.

(2)Includes policyholder account balances for retained asset accounts, universal life policies and the ~~amounts listed above may not be mutually exclusive.~~fixed account portion of universal variable life insurance policies.

(3)Amounts are gross of policy loans and net of excess interest reserves.

1120

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. Insurance (continued)

Market Risk Benefits

Information regarding MRB assets and liabilities associated with variable annuities was as follows:


	Three Months Ended March 31,				Years Ended December 31,
	2023		2022		2022		2021
	(Dollars in millions)
Balance, beginning of period	$	9,997	$	15,726	$	15,726	$	18,421
Balance, beginning of period, before effect of changes in nonperformance risk	8,253		11,639		11,639		14,969
Decrements	(27)		34		16		(70)
Effect of changes in future expected assumptions	—		—		212		41
Effect of actual different from expected experience	122		(1)		(48)		(86)
Effect of changes in interest rates	880		(2,862)		(8,397)		(1,831)
Effect of changes in fund returns	(1,001)		1,184		3,806		(2,578)
Issuances	(3)		(11)		(47)		(96)
Effect of changes in risk margin	9		(50)		(152)		(128)
Aging of the block and other	324		275		1,224		1,418
Balance, end of period, before effect of changes in nonperformance risk	8,557		10,208		8,253		11,639
Effect of changes in nonperformance risk	1,751		3,158		1,744		4,087
Balance, end of period	10,308		13,366		9,997		15,726
Less: Reinsurance recoverable, end of period	70		93		71		118
Balance, end of period, net of reinsurance (1)	$	10,238	$	13,273	$	9,926	$	15,608
Weighted-average attained age of contract holder	72.2 years		71.5 years		71.8 years		71.1 years

_______________

(1)Amounts represent the sum of MRB assets and MRB liabilities presented on the consolidated balance sheets at March 31, 2023 and 2022, with the exception of $3 million and $4 million, respectively, of index-linked annuities not included in this table, and at December 31, 2022 and 2021, with the exception of $2 million and $5 million, respectively, of index-linked annuities not included in this table.

Separate Accounts

Information regarding separate account liabilities was as follows:


	Three Months Ended March 31,
	2023						2022
	Variable Annuities		Universal Life Insurance		Company-Owned Life Insurance		Variable Annuities		Universal Life Insurance		Company-Owned Life Insurance
	(In millions)
Balance, beginning of period	$	74,845	$	1,970	$	1,919	$	101,108	$	2,577	$	2,367
Premiums and deposits	215		22		—		430		23		—
Surrenders and withdrawals	(1,437)		(16)		(3)		(1,646)		(16)		(7)
Benefit payments	(373)		(3)		(10)		(362)		(5)		(10)
Investment performance	4,141		137		111		(6,629)		(197)		(138)
Policy charges	(503)		(21)		(12)		(561)		(17)		(11)
Net transfers from (to) general account	(9)		(3)		—		(76)		(7)		(2)
Other	2		—		—		12		(1)		—
Balance, end of period	$	76,881	$	2,086	$	2,005	$	92,276	$	2,357	$	2,199

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)

3.4. Insurance (continued)

~~(2)Includes direct business, but excludes offsets from hedging or reinsurance, if any. Therefore,~~A reconciliation of separate account liabilities reported in the preceding rollforward table to the separate account liabilities balance on the consolidated balance sheets was as follows at:


	March 31,
	2023		2022
	(In millions)
Separate account liabilities reported in the preceding rollforward table	$	80,972	$	96,832
Variable income annuities	134		143
Pension risk transfer annuities	18		20
Total separate account liabilities	$	81,124	$	96,995

The aggregate estimated fair value of assets, by major investment asset category, supporting separate accounts was as follows at:



	March 31, 2023		December 31, 2022
	(In millions)
Equity securities	$	80,848	$	78,583

Fixed maturity securities	259		277
Cash and cash equivalents	9		9
Other assets	8		11
Total aggregate estimated fair value of assets	$	81,124	$	78,880

Net Amount at Risk and Cash Surrender Values

Information regarding the net amount at risk ~~presented reflects the economic exposures of living~~(“NAR”) 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~~cash surrender value (“CSV”) for insurance products was as follows at:


	Universal Life Insurance		Variable Annuities		Index-linked Annuities		Fixed Rate Annuities		ULSG		Company-Owned Life Insurance
	(In millions)
March 31, 2023
Account balances reported in the preceding rollforward tables:
Policyholder account balances	$	2,033	$	4,539	$	35,922	$	14,684	$	5,219	$	644
Separate account liabilities	2,086		76,881		—		—		—		2,005
Total account balances	$	4,119	$	81,420	$	35,922	$	14,684	$	5,219	$	2,649
Net amount at risk	$	23,332	$	14,757	N/A		N/A		$	70,062	$	3,407
Cash surrender value	$	3,862	$	81,110	$	33,567	$	14,106	$	6,203	$	2,430
March 31, 2022
Account balances reported in the preceding rollforward tables:
Policyholder account balances	$	2,109	$	4,486	$	32,398	$	11,727	$	5,512	$	650
Separate account liabilities	2,357		92,276		—		—		—		2,199
Total account balances	$	4,466	$	96,762	$	32,398	$	11,727	$	5,512	$	2,849
Net amount at risk	$	24,777	$	9,189	N/A		N/A		$	72,059	$	3,494
Cash surrender value	$	4,183	$	96,744	$	29,442	$	10,993	$	6,400	$	2,619

Products may contain both separate account and general account fund options; accordingly, net amount at risk and cash surrender value reported in the ~~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~~table above relate to the total account ~~value to purchase a lifetime income stream, based on current annuity rates, equal~~balance for each respective product grouping.

Table of Contents

Brighthouse Life Insurance Company

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

Notes to the ~~minimum amount provided under~~Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

5. Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles

Deferred Policy Acquisition Costs and Value of Business Acquired

Information regarding DAC and VOBA was as follows:


	Variable Annuities		Fixed Rate Annuities		Index-linked Annuities		Term and Whole Life Insurance		Universal Life Insurance
	(In millions)
Three Months Ended March 31, 2023
DAC:
Balance, beginning of period	$	2,414	$	107	$	1,213	$	347	$	115
Capitalization	11		4		81		1		3
Amortization	(60)		(3)		(55)		(11)		(2)
Balance, end of period	2,365		108		1,239		337		116
VOBA:
Balance, beginning of period	341		65		—		5		35
Amortization	(9)		(1)		—		—		(1)
Balance, end of period	332		64		—		5		34
Total DAC and VOBA:
Balance, end of period	$	2,697	$	172	$	1,239	$	342	$	150
Three Months Ended March 31, 2022
DAC:
Balance, beginning of period	$	2,614	$	88	$	1,081	$	397	$	114
Capitalization	21		5		81		(1)		2
Amortization	(65)		(3)		(47)		(13)		(2)
Balance, end of period	2,570		90		1,115		383		114
VOBA:
Balance, beginning of period	377		70		—		6		39
Amortization	(9)		(1)		—		—		(1)
Balance, end of period	368		69		—		6		38
Total DAC and VOBA:
Balance, end of period	$	2,938	$	159	$	1,115	$	389	$	152

Table of Contents

Brighthouse Life Insurance Company

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

Notes to the ~~guaranteed benefit. This amount represents~~Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

5. Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles (continued)


	Variable Annuities		Fixed Rate Annuities		Index-linked Annuities		Term and Whole Life Insurance		Universal Life Insurance
	(In millions)
DAC:
Adjusted balance at January 1, 2021 (1)	$	2,786	$	64	$	886	$	451	$	107
Capitalization	90		36		355		(3)		16
Amortization	(262)		(12)		(160)		(51)		(9)
Balance at December 31, 2021	2,614		88		1,081		397		114
Capitalization	54		31		330		(1)		10
Amortization	(254)		(12)		(198)		(49)		(9)
Balance at December 31, 2022	2,414		107		1,213		347		115
VOBA:
Adjusted balance at January 1, 2021 (1)	$	428	$	76	$	—	$	8	$	44
Amortization	(51)		(6)		—		(2)		(5)
Balance at December 31, 2021	377		70		—		6		39
Amortization	(36)		(5)		—		(1)		(4)
Balance at December 31, 2022	341		65		—		5		35
Total DAC and VOBA:
Balance at December 31, 2022	$	2,755	$	172	$	1,213	$	352	$	150
Balance at December 31, 2021	$	2,991	$	158	$	1,081	$	403	$	153

_______________

(1)Includes an adjustment to eliminate balances included in AOCI related to 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 annuitizationadoption 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.ASU 2018-12 (see Note 2).

4.Deferred Sales Inducements

Information regarding DSI, included in other assets, was as follows:


	Three Months Ended March 31,
	2023				2022
	Variable Annuities		Fixed Rate Annuities		Variable Annuities		Fixed Rate Annuities
	(In millions)
Balance, beginning of period	$	233	$	9	$	259	$	10

Amortization	(6)		—		(7)		—
Balance, end of period	$	227	$	9	$	252	$	10

Unearned Revenue

Information regarding unearned revenue, included in other policy-related balances, was as follows:


	Three Months Ended March 31,
	2023						2022
	Universal Life Insurance		ULSG		Variable Annuities		Universal Life Insurance		ULSG		Variable Annuities
	(In millions)
Balance, beginning of period	$	143	$	488	$	73	$	118	$	344	$	79
Capitalization	9		44		—		9		46		—
Amortization	(3)		(11)		(2)		(2)		(8)		(2)
Balance, end of period	$	149	$	521	$	71	$	125	$	382	$	77

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. Investments

See Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the ~~2021~~2022 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.

Fixed Maturity Securities Available-for-sale

Fixed Maturity Securities by Sector

Fixed maturity securities by sector were as follows at:


		September 30, 2022												December 31, 2021																				March 31, 2023																	December 31, 2022
		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	$	36,646	$	1	$	122	$	5,104			$	31,663			$	34,773			$	2			$	3,890			$	187					$	38,474	U.S. corporate	$	36,648		$	—		$	316			$	3,803		$	33,161		$	36,399		$	1		$	200		$	4,436		$	32,162
Foreign corporate	Foreign corporate	12,386		—		20		2,348		10,058				10,813				7				902				103					11,605		Foreign corporate	12,366				—			56			1,621				10,801			12,368			1			37			1,912			10,492
U.S. government and agency																																	U.S. government and agency	8,185				—			470			491				8,164			8,195			—			299			596			7,898
RMBS	RMBS	8,718		1		59		954		7,822				8,838				—				433				51					9,220		RMBS	8,312				1			46			803				7,554			8,384			1			44			936			7,491
U.S. government and agency		8,555		—		332		607		8,280				7,188				—				2,040				60					9,168
CMBS	CMBS	7,235		2		—		691		6,542				6,890				2				329				24					7,193		CMBS	7,258				3			—			655				6,600			7,239			3			—			699			6,537
ABS																																	ABS	5,830				—			8			247				5,591			5,647			—			3			295			5,355
State and political subdivision	State and political subdivision	4,050		—		115		393		3,772				3,937				—				829				6					4,760		State and political subdivision	4,011				—			171			295				3,887			4,015			—			120			394			3,741
ABS		5,533		—		2		336		5,199				4,255				—				34				14					4,275
Foreign government	Foreign government	1,185		—		36		138		1,083				1,593				—				244				5					1,832		Foreign government	1,141				—			48			95				1,094			1,148			—			39			106			1,081
Total fixed maturity securities	Total fixed maturity securities	$	84,308	$	4	$	686	$	10,571	$	74,419			$	78,287			$	11			$	8,701			$	450				$	86,527	Total fixed maturity securities	$	83,751			$	4		$	1,115		$	8,010			$	76,852		$	83,395		$	6		$	742		$	9,374		$	74,757

The Company held non-income producing fixed maturity securities with an estimated fair value of ~~$15 million and $3~~$13 million at ~~September 30, 2022 and~~March 31, 2023. The Company did not hold non-income producing fixed maturity securities at December 31, ~~2021, respectively.~~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)~~

~~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, 2022:~~March 31, 2023:


		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	$	1,178	$	13,349	$	17,187	$	31,108	$	21,486	$	84,308	Amortized cost	$	1,536	$	14,118	$	16,183	$	30,514	$	21,400	$	83,751
Estimated fair value	Estimated fair value	$	1,158	$	12,521	$	14,788	$	26,389	$	19,563	$	74,419	Estimated fair value	$	1,508	$	13,498	$	14,607	$	27,494	$	19,745	$	76,852

_______________

(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)

6. 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, 2022								December 31, 2021									March 31, 2023								December 31, 2022
		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	$	26,073	$	4,173	$	2,653	$	931	$	5,051	$	111	$	887	$	76	U.S. corporate	$	15,556	$	1,304	$	11,901	$	2,499	$	24,163	$	3,279	$	3,915	$	1,157
Foreign corporate	Foreign corporate	8,553		1,906		1,050		442		2,016		60		305		43		Foreign corporate	4,962		423		4,774		1,198		8,219		1,407		1,560		505
U.S. government and agency																		U.S. government and agency	1,474		115		2,265		376		3,037		259		1,146		337
RMBS	RMBS	5,277		572		1,806		382		3,481		50		32		1		RMBS	3,026		210		3,895		593		4,693		489		2,245		447
U.S. government and agency		3,410		286		1,076		321		1,712		40		222		20
CMBS	CMBS	5,919		565		603		126		1,390		21		95		3		CMBS	3,575		264		2,973		391		5,524		534		961		165
ABS																		ABS	1,828		50		2,975		197		3,347		159		1,728		136
State and political subdivision	State and political subdivision	2,172		364		94		29		347		6		6		—		State and political subdivision	1,264		104		750		191		2,026		313		239		81
ABS		4,333		265		773		71		2,454		13		93		1
Foreign government	Foreign government	848		138		—		—		278		4		18		1		Foreign government	410		27		368		68		779		98		21		8
Total fixed maturity securities	Total fixed maturity securities	$	56,585	$	8,269	$	8,055	$	2,302	$	16,729	$	305	$	1,658	$	145	Total fixed maturity securities	$	32,095	$	2,497	$	29,901	$	5,513	$	51,788	$	6,538	$	11,815	$	2,836
Total number of securities in an unrealized loss position	Total number of securities in an unrealized loss position	7,987				1,377				2,423				368				Total number of securities in an unrealized loss position	4,585				4,666				7,261				2,018

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 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 ~~$627~~$649 million and ~~$527~~$595 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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)

6. 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 $4 million, relating to ~~twelve~~thirteen securities at ~~September 30, 2022.~~March 31, 2023. 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.

Allowance for Credit Losses for Fixed Maturity Securities

The allowance for credit losses for fixed maturity securities was $4 million and ~~$11~~$6 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. For both the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the change in the allowance for fixed maturity securities by sector was ~~immaterial.~~not significant. The Company recorded total write-offs of ~~$10~~$7 million and $2 million for the ~~nine~~three months ended ~~September 30, 2022. The Company did not record any write-offs for the nine months ended September 30, 2021.~~March 31, 2023 and 2022, 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)~~

Mortgage Loans

Mortgage Loans by Portfolio Segment

Mortgage loans are summarized as follows at:


		September 30, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		Carrying Value		% of Total		Carrying Value		% of Total			Carrying Value		% of Total		Carrying Value		% of Total
		(Dollars in millions)									(Dollars in millions)
Commercial	Commercial	$	13,259	60.2	%	$	12,159	61.4	%	Commercial	$	13,525	59.4	%	$	13,547	59.2	%
Agricultural	Agricultural	4,184		19.0		4,128		20.9		Agricultural	4,357		19.1		4,333		18.9
Residential	Residential	4,686		21.3		3,623		18.3		Residential	5,042		22.1		5,116		22.4
Total mortgage loans (1)	Total mortgage loans (1)	22,129		100.5		19,910		100.6		Total mortgage loans (1)	22,924		100.6		22,996		100.5
Allowance for credit losses	Allowance for credit losses	(99)		(0.5)		(123)		(0.6)		Allowance for credit losses	(136)		(0.6)		(119)		(0.5)
Total mortgage loans, net	Total mortgage loans, net	$	22,030	100.0	%	$	19,787	100.0	%	Total mortgage loans, net	$	22,788	100.0	%	$	22,877	100.0	%

_______________

(1)Purchases of mortgage loans from third parties were ~~$387~~$32 million and ~~$1.6 billion~~$840 million for the three months ended March 31, 2023 and ~~nine months ended September 30,~~ 2022, ~~respectively, and$698 million and $1.5 billion for the three months and nine months ended September 30, 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.

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. 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 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, 2022 and December 31, 2021. The accrued interest receivable on mortgage loans is included in accrued investment income and totaled ~~$102~~$108 million and ~~$95~~$115 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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”),~~modifications, foreclosure probable loans, and loans with dissimilar risk characteristics.

~~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 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~~non-credit 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, 2022
Three Months Ended March 31, 2023										Three Months Ended March 31, 2023
Balance, beginning of period	Balance, beginning of period	$	67	$	12	$	44	$	123	Balance, beginning of period	$	49	$	15	$	55	$	119
Current period provision	Current period provision	1		3		(5)		(1)		Current period provision	15		(1)		3		17

Charge-offs, net of recoveries		(23)		—		—		(23)

Balance, end of period	Balance, end of period	$	45	$	15	$	39	$	99	Balance, end of period	$	64	$	14	$	58	$	136
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	$	44	$	15	$	35	$	94	Balance, beginning of period	$	67	$	12	$	44	$	123
Current period provision	Current period provision	6		(2)		—		4		Current period provision	2		3		(1)		4
PCD credit allowance		—		—		2		2

Balance, end of period	Balance, end of period	$	50	$	13	$	37	$	100	Balance, end of period	$	69	$	15	$	43	$	127

1628

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)

4.6. Investments (continued)

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:


		2022		2021		2020		2019		2018		Prior		Total			2023		2022		2021		2020		2019		Prior		Total
		(In millions)															(In millions)
September 30, 2022
March 31, 2023																March 31, 2023
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%	$	1,500	$	2,754	$	406	$	1,474	$	946	$	3,773	$	10,853	Less than 65%	$	47	$	1,914	$	2,840	$	404	$	1,481	$	4,488	$	11,174
65% to 75%	65% to 75%	427		470		—		302		403		311		1,913		65% to 75%	—		503		354		—		270		714		1,841
76% to 80%	76% to 80%	—		—		40		105		29		37		211		76% to 80%	—		—		18		39		40		119		216
Greater than 80%	Greater than 80%	—		—		—		—		57		225		282		Greater than 80%	—		—		—		—		75		219		294
Total commercial mortgage loans	Total commercial mortgage loans	1,927		3,224		446		1,881		1,435		4,346		13,259		Total commercial mortgage loans	47		2,417		3,212		443		1,866		5,540		13,525
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%	373		1,166		413		497		648		763		3,860		Less than 65%	36		560		1,138		410		498		1,333		3,975
65% to 75%	65% to 75%	93		90		66		56		1		17		323		65% to 75%	—		139		116		59		49		18		381

Greater than 80%	Greater than 80%	—		—		—		—		1		—		1		Greater than 80%	—		—		—		—		—		1		1
Total agricultural mortgage loans	Total agricultural mortgage loans	466		1,256		479		553		650		780		4,184		Total agricultural mortgage loans	36		699		1,254		469		547		1,352		4,357
Residential mortgage loans	Residential mortgage loans															Residential mortgage loans
Performing	Performing	892		1,701		164		216		173		1,481		4,627		Performing	2		1,269		1,713		163		211		1,613		4,971
Nonperforming	Nonperforming	1		6		2		2		1		47		59		Nonperforming	—		5		10		1		2		53		71
Total residential mortgage loans	Total residential mortgage loans	893		1,707		166		218		174		1,528		4,686		Total residential mortgage loans	2		1,274		1,723		164		213		1,666		5,042
Total	Total	$	3,286	$	6,187	$	1,091	$	2,652	$	2,259	$	6,654	$	22,129	Total	$	85	$	4,390	$	6,189	$	1,076	$	2,626	$	8,558	$	22,924


		2021		2020		2019		2018		2017		Prior		Total			2022		2021		2020		2019		2018		Prior		Total
		(In millions)															(In millions)
December 31, 2021
December 31, 2022																December 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%	$	2,771	$	437	$	1,539	$	986	$	553	$	3,300	$	9,586	Less than 65%	$	1,916	$	2,819	$	405	$	1,493	$	888	$	3,624	$	11,145
65% to 75%	65% to 75%	633		92		383		406		127		458		2,099		65% to 75%	503		354		—		271		367		402		1,897
76% to 80%	76% to 80%	—		—		55		29		59		31		174		76% to 80%	—		18		40		90		65		48		261
Greater than 80%	Greater than 80%	—		—		—		30		—		270		300		Greater than 80%	—		—		—		25		57		162		244
Total commercial mortgage loans	Total commercial mortgage loans	3,404		529		1,977		1,451		739		4,059		12,159		Total commercial mortgage loans	2,419		3,191		445		1,879		1,377		4,236		13,547
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%	1,150		539		510		674		284		608		3,765		Less than 65%	532		1,163		418		496		643		710		3,962
65% to 75%	65% to 75%	114		77		61		26		33		52		363		65% to 75%	148		90		59		56		1		16		370

Greater than 80%																Greater than 80%	—		—		—		—		1		—		1
Total agricultural mortgage loans	Total agricultural mortgage loans	1,264		616		571		700		317		660		4,128		Total agricultural mortgage loans	680		1,253		477		552		645		726		4,333
Residential mortgage loans	Residential mortgage loans															Residential mortgage loans
Performing	Performing	1,124		202		270		230		132		1,606		3,564		Performing	1,266		1,745		167		215		168		1,491		5,052
Nonperforming	Nonperforming	1		—		3		3		1		51		59		Nonperforming	4		8		—		2		1		49		64
Total residential mortgage loans	Total residential mortgage loans	1,125		202		273		233		133		1,657		3,623		Total residential mortgage loans	1,270		1,753		167		217		169		1,540		5,116
Total	Total	$	5,793	$	1,347	$	2,821	$	2,384	$	1,189	$	6,376	$	19,910	Total	$	4,369	$	6,197	$	1,089	$	2,648	$	2,191	$	6,502	$	22,996

1729

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)

4.6. Investments (continued)

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, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		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	$	11,782	88.9	%	$	10,263	84.4	%	Greater than 1.20x	$	12,363	91.4	%	$	12,132	89.6	%
1.00x - 1.20x	1.00x - 1.20x	581		4.4		595		4.9		1.00x - 1.20x	420		3.1		589		4.3
Less than 1.00x	Less than 1.00x	896		6.7		1,301		10.7		Less than 1.00x	742		5.5		826		6.1
Total	Total	$	13,259	100.0	%	$	12,159	100.0	%	Total	$	13,525	100.0	%	$	13,547	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.

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, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. 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, 2022 and December 31, 2021, $23 million and $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, 2022								December 31, 2021									March 31, 2023								December 31, 2022
		Commercial		Agricultural		Residential		Total		Commercial		Agricultural		Residential		Total			Commercial		Agricultural		Residential		Total		Commercial		Agricultural		Residential		Total
		(In millions)																	(In millions)
Current	Current	$	13,259	$	4,161	$	4,569	$	21,989	$	12,159	$	4,128	$	3,550	$	19,837	Current	$	13,508	$	4,351	$	4,969	$	22,828	$	13,547	$	4,314	$	5,041	$	22,902
30-59 days past due	30-59 days past due	—		—		58		58		—		—		14		14		30-59 days past due	17		—		2		19		—		—		11		11
60-89 days past due	60-89 days past due	—		7		17		24		—		—		14		14		60-89 days past due	—		4		31		35		—		—		16		16
90-179 days past due	90-179 days past due	—		—		26		26		—		—		29		29		90-179 days past due	—		—		6		6		—		3		31		34
180+ days past due	180+ days past due	—		16		16		32		—		—		16		16		180+ days past due	—		2		34		36		—		16		17		33
Total	Total	$	13,259	$	4,184	$	4,686	$	22,129	$	12,159	$	4,128	$	3,623	$	19,910	Total	$	13,525	$	4,357	$	5,042	$	22,924	$	13,547	$	4,333	$	5,116	$	22,996

1830

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)

4.6. 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, 2022 and December 31, 2021, $23 million and $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 was as follows at:

Commercial Agricultural Residential Total
(In millions)
September 30, 2022 $ — $ 3 $ 59 $ 62
December 31, 2021 $ — $ — $ 59 $ 59


	Commercial		Agricultural		Residential (1)		Total
	(In millions)
March 31, 2023	$	29	$	2	$	71	$	102
December 31, 2022	$	11	$	3	$	64	$	78

_______________

(1)The Company had $2 million ~~and $0~~ of mortgage loans in nonaccrual status for which there was no related allowance for credit losses at ~~September 30, 2022 and~~March 31, 2023. All mortgage loans in nonaccrual status had an allowance for credit losses at December 31, ~~2021, respectively. The $2 million of mortgage~~2022. Mortgage loans in nonaccrual status for which there was no related allowance for credit losses pertains to collateral dependent loans where the collateral value exceeds amortized cost.

Current period investment income on mortgage loans in nonaccrual status was ~~$1 million and~~ less than $1 million for both the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021, respectively.~~

~~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 months ended September 30, 2022 and 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.~~2022.

Other Invested Assets

Over ~~85%~~79% of other invested assets is comprised of freestanding derivatives with positive estimated fair values. See Note 57 for information about freestanding derivatives with positive estimated fair values. Other invested assets also includes the Company’s investment in company-owned life insurance, Federal Home Loan Bank (“FHLB”) stock, the intercompany lending facility, tax credit and renewable energy partnerships and leveraged 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”).~~AOCI.

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


	March 31, 2023		December 31, 2022
	(In millions)
Fixed maturity securities	$	(6,895)	$	(8,632)
Derivatives	588		628
Other	(6)		(7)
Subtotal	(6,313)		(8,011)
Amounts allocated from:
Future policy benefits	690		992
Deferred income tax benefit (expense)	1,181		1,474
Net unrealized investment gains (losses)	$	(4,442)	$	(5,545)

1931

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)

4.6. Investments (continued)

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

September 30, 2022 December 31, 2021
(In millions)
Fixed maturity securities $ (9,885) $ 8,251
Derivatives 917 320
Other (7) (27)
Subtotal (8,975) 8,544
Amounts allocated from:
Future policy benefits 379 (3,210)
DAC, VOBA and DSI 481 (387)
Subtotal 860 (3,597)
Deferred income tax benefit (expense) 1,704 (1,039)
Net unrealized investment gains (losses) $ (6,411) $ 3,908

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


	~~Nine~~Three Months Ended ~~September 30, 2022~~March 31, 2023
	(In millions)
Balance at December 31, ~~2021~~2022	$	~~3,908~~ (5,545)
Unrealized investment gains (losses) during the period	~~(17,519)~~1,698
Unrealized investment gains (losses) relating to:
Future policy benefits	~~3,589~~
~~DAC, VOBA and DSI~~	~~868~~ (302)
Deferred income tax benefit (expense)	~~2,743~~ (293)
Balance at ~~September 30, 2022~~March 31, 2023	$	~~(6,411)~~(4,442)
Change in net unrealized investment gains (losses)	$	~~(10,319)~~1,103

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, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

Securities Lending

Elements of the securities lending program are presented below at:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(In millions)					(In millions)
Securities on loan: (1)	Securities on loan: (1)					Securities on loan: (1)
Amortized cost	Amortized cost	$	5,049	$	3,573	Amortized cost	$	3,819	$	3,995
Estimated fair value	Estimated fair value	$	4,719	$	4,539	Estimated fair value	$	3,626	$	3,638
Cash collateral received from counterparties (2)	Cash collateral received from counterparties (2)	$	4,844	$	4,611	Cash collateral received from counterparties (2)	$	3,692	$	3,731
Securities collateral received from counterparties (3)		$	—	$	2

Reinvestment portfolio — estimated fair value	Reinvestment portfolio — estimated fair value	$	4,590	$	4,730	Reinvestment portfolio — estimated fair value	$	3,590	$	3,603

_______________

(1)Included ~~within~~in fixed maturity securities.

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

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


	March 31, 2023						December 31, 2022
	Open (1)		1 Month or Less		1 to 6 Months		Total		Open (1)		1 Month or Less		1 to 6 Months		Total
	(In millions)

U.S. government and agency	$	790	$	1,055	$	1,293	$	3,138	$	640	$	1,527	$	984	$	3,151
U.S. corporate	—		359		—		359		2		410		—		412

Foreign corporate	—		178		—		178		—		152		—		152
Foreign government	—		17		—		17		—		16		—		16
Total	$	790	$	1,609	$	1,293	$	3,692	$	642	$	2,105	$	984	$	3,731

_______________

~~(3)~~(1)~~Securities collateral received from counterparties may not~~The related loaned security could be ~~sold or re-pledged, unless~~returned to the ~~counterparty is in default, and is not reported~~Company on the ~~interim condensed consolidated financial statements.~~next business day which would require the Company to immediately return the cash collateral.

2032

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)

4.6. Investments (continued)

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

September 30, 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
(In millions)
U.S. government and agency $ 1,342 $ 1,373 $ 1,520 $ 4,235 $ 1,094 $ 2,125 $ 1,391 $ 4,610
U.S. corporate — 456 — 456 1 — — 1
Foreign corporate — 137 — 137 — — — —
Foreign government — 16 — 16 — — — —
Total $ 1,342 $ 1,982 $ 1,520 $ 4,844 $ 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, 2022~~March 31, 2023 was ~~$1.3 billion,~~$775 million, 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 ABS, agency RMBS, U.S. government and agency securities, ~~ABS, agency RMBS,~~ U.S. and foreign corporate securities, non-agency RMBS and CMBS) with ~~52%~~54% invested in U.S. government and agency securities, agency RMBS and cash and cash equivalents at ~~September 30, 2022.~~March 31, 2023. 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.

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, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(In millions)					(In millions)
Invested assets on deposit (regulatory deposits) (1)	Invested assets on deposit (regulatory deposits) (1)	$	7,787	$	9,996	Invested assets on deposit (regulatory deposits) (1)	$	8,325	$	7,996
Invested assets held in trust (reinsurance agreements) (2)	Invested assets held in trust (reinsurance agreements) (2)	5,266		6,023		Invested assets held in trust (reinsurance agreements) (2)	5,825		5,592
Invested assets pledged as collateral (3)	Invested assets pledged as collateral (3)	12,173		5,116		Invested assets pledged as collateral (3)	12,829		13,920
Total invested assets on deposit, held in trust and pledged as collateral	Total invested assets on deposit, held in trust and pledged as collateral	$	25,226	$	21,135	Total invested assets on deposit, held in trust and pledged as collateral	$	26,979	$	27,508

_______________

(1)The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which ~~$32~~$58 million and ~~$25~~$21 million of the assets on deposit represents restricted cash and cash equivalents at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

(2)The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions, of which ~~$277~~$263 million and ~~$118~~$233 million of the assets held in trust balance represents restricted cash and cash equivalents at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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 ~~2021~~2022 Annual Report) and derivative transactions (see Note 5)7).

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 ~~$176~~$220 million and ~~$70~~$201 million at redemption value at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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.

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. Investments (continued)

There were no material VIEs for which the Company has concluded that it is the primary beneficiary at either ~~September 30, 2022~~March 31, 2023 or December 31, ~~2021.~~2022.

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, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		Carrying Amount		Maximum Exposure to Loss		Carrying Amount		Maximum Exposure to Loss			Carrying Amount		Maximum Exposure to Loss		Carrying Amount		Maximum Exposure to Loss
		(In millions)									(In millions)
Fixed maturity securities	Fixed maturity securities	$	14,863	$	16,355	$	16,326	$	15,659	Fixed maturity securities	$	15,902	$	17,274	$	15,781	$	17,334
Limited partnerships and LLCs	Limited partnerships and LLCs	3,949		5,352		3,666		5,101		Limited partnerships and LLCs	4,171		5,417		4,123		5,478
Total	Total	$	18,812	$	21,707	$	19,992	$	20,760	Total	$	20,073	$	22,691	$	19,904	$	22,812

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, 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 ~~10.~~12.

2234

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)

4.6. Investments (continued)

Net Investment Income

The components of net investment income were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
		(In millions)										(In millions)
Investment income:	Investment income:									Investment income:
Fixed maturity securities	Fixed maturity securities	$	779	$	706	$	2,221	$	2,080	Fixed maturity securities		$	830	$	709
Equity securities		1		—		2		2

Mortgage loans	Mortgage loans	207		171		614		500		Mortgage loans		238		202
Policy loans	Policy loans	10		10		31		31		Policy loans		9		9
Limited partnerships and LLCs (1)	Limited partnerships and LLCs (1)	(106)		402		257		1,090		Limited partnerships and LLCs (1)		(13)		241
Cash, cash equivalents and short-term investments	Cash, cash equivalents and short-term investments	17		1		22		3		Cash, cash equivalents and short-term investments		40		1
Other	Other	20		12		50		30		Other		22		14
Total investment income	Total investment income	928		1,302		3,197		3,736		Total investment income		1,126		1,176
Less: Investment expenses	Less: Investment expenses	71		38		161		107		Less: Investment expenses		91		41
Net investment income	Net investment income	$	857	$	1,264	$	3,036	$	3,629	Net investment income		$	1,035	$	1,135

_______________

(1)Includes net investment income pertaining to other limited partnership interests of ($~~127)~~1) million and ~~$178~~$212 million for the three months ended March 31, 2023 and ~~nine months ended September 30,~~ 2022, ~~respectively, and $378 million and $1.0 billion for the three months and nine months ended September 30, 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,
		2022		2021		2022		2021				2023		2022
		(In millions)										(In millions)
Fixed maturity securities	Fixed maturity securities	$	(37)	$	—	$	(138)	$	(23)	Fixed maturity securities		$	(74)	$	(41)
Equity securities	Equity securities	(1)		(2)		(11)		1		Equity securities		(5)		(6)
Mortgage loans	Mortgage loans	2		(5)		(1)		(6)		Mortgage loans		(17)		(4)
Limited partnerships and LLCs	Limited partnerships and LLCs	(4)		—		(21)		1		Limited partnerships and LLCs		—		(16)
Other		—		(9)		—		(10)

Total net investment gains (losses)	Total net investment gains (losses)	$	(40)	$	(16)	$	(171)	$	(37)	Total net investment gains (losses)		$	(96)	$	(67)

Gains (losses) from foreign currency transactions included within net investment gains (losses) were ~~($3)~~less than $1 million and ($~~19)~~15) million for the three months ended March 31, 2023 and ~~nine months ended September 30,~~ 2022, ~~respectively, and $0 and $1 million for the three months and nine months ended September 30, 2021,~~ respectively.

2335

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)

4.6. 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,
		2022		2021		2022		2021				2023		2022
		(In millions)										(In millions)
Proceeds	Proceeds	$	1,115	$	1,925	$	5,219	$	4,092	Proceeds		$	766	$	2,540
Gross investment gains	Gross investment gains	$	1	$	23	$	50	$	62	Gross investment gains		$	3	$	47
Gross investment losses	Gross investment losses	(37)		(21)		(183)		(76)		Gross investment losses		(71)		(86)
Net investment gains (losses)	Net investment gains (losses)	$	(36)	$	2	$	(133)	$	(14)	Net investment gains (losses)		$	(68)	$	(39)

5.7. Derivatives

Accounting for Derivatives

See Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the ~~2021~~2022 Annual Report for a description of the Company’s accounting policies for derivatives and the fair value hierarchy for derivatives.

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, floors, caps, swaptions ~~futures~~ and forwards;

•Foreign currency exchange rate derivatives: forwards and swaps;

•Equity market derivatives: options and 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 ~~2021~~2022 Annual Report.

2436

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)

5.7. Derivatives (continued)

Primary Risks Managed by Derivatives

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


			September 30, 2022						December 31, 2021								March 31, 2023						December 31, 2022
		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	$	90	$	—	$	17	$	180	$	30	$	—	Interest rate forwards	Interest rate	$	40	$	—	$	6	$	60	$	—	$	12
Foreign currency swaps	Foreign currency swaps	Foreign currency exchange rate	4,004		870		8		3,237		220		22		Foreign currency swaps	Foreign currency exchange rate	3,959		541		7		3,981		584		8

Total qualifying hedges	Total qualifying hedges		4,094		870		25		3,417		250		22		Total qualifying hedges		3,999		541		13		4,041		584		20
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	3,900		156		54		2,595		325		17		Interest rate swaps	Interest rate	14,850		163		94		3,145		98		46
Interest rate floors	Interest rate floors	Interest rate	2,250		7		2		—		—		—		Interest rate floors	Interest rate	3,000		7		2		3,250		12		3
Interest rate caps	Interest rate caps	Interest rate	5,350		182		5		5,100		29		4		Interest rate caps	Interest rate	6,300		103		35		6,350		137		43

Interest rate options	Interest rate options	Interest rate	20,438		41		189		8,050		83		—		Interest rate options	Interest rate	32,388		60		133		28,688		22		232

Interest rate forwards	Interest rate forwards	Interest rate	15,969		33		2,550		9,808		627		109		Interest rate forwards	Interest rate	17,886		74		1,725		18,168		35		2,466
Foreign currency swaps	Foreign currency swaps	Foreign currency exchange rate	825		207		—		956		94		21		Foreign currency swaps	Foreign currency exchange rate	800		137		1		810		147		—
Foreign currency forwards	Foreign currency forwards	Foreign currency exchange rate	423		—		6		288		—		4		Foreign currency forwards	Foreign currency exchange rate	305		—		—		295		1		1

Credit default swaps — written	Credit default swaps — written	Credit	1,869		7		11		1,724		39		1		Credit default swaps — written	Credit	1,760		23		1		1,757		18		2
Credit default swaptions	Credit default swaptions	Credit	—		—		—		150		—		—		Credit default swaptions	Credit	—		—		—		100		—		—

Equity index options	Equity index options	Equity market	17,053		696		350		24,692		1,155		877		Equity index options	Equity market	17,056		521		390		17,229		697		351
Equity variance swaps		Equity market	281		9		1		281		9		1

Equity total return swaps	Equity total return swaps	Equity market	33,069		1,515		1,519		32,719		493		588		Equity total return swaps	Equity market	43,941		998		858		32,909		520		747
Hybrid options		Equity market	—		—		—		900		8		—

Total non-designated or non-qualifying derivatives	Total non-designated or non-qualifying derivatives		101,427		2,853		4,687		87,263		2,862		1,622		Total non-designated or non-qualifying derivatives		138,286		2,086		3,239		112,701		1,687		3,891
Embedded derivatives:
Ceded guaranteed minimum income benefits		Other	N/A		129		—		N/A		186		—
Direct index-linked annuities		Other	N/A		—		2,034		N/A		—		6,211
Direct guaranteed minimum benefits		Other	N/A		—		1,622		N/A		—		1,725
Assumed guaranteed minimum benefits		Other	N/A		—		313		N/A		—		427
Assumed index-linked annuities		Other	N/A		—		308		N/A		—		437
Total embedded derivatives			N/A		129		4,277		N/A		186		8,800
Total	Total		$	105,521	$	3,852	$	8,989	$	90,680	$	3,298	$	10,444	Total		$	142,285	$	2,627	$	3,252	$	116,742	$	2,271	$	3,911

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, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. 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~~MRBs that do not qualify for hedge accounting because the changes in estimated fair value of the ~~embedded derivatives~~MRBs 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.

2537

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)

5.7. Derivatives (continued)

The amount and location of gains (losses), including earned income, recognized for derivatives and gains (losses) pertaining to hedged items ~~presented~~reported 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			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)						(In millions)
Three Months Ended September 30, 2022
Three Months Ended March 31, 2023											Three Months Ended March 31, 2023
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	Interest rate	$	—	$	—	$	1		$	(8)	Interest rate	$	—	$	—	$	1	$	—
Foreign currency exchange rate	Foreign currency exchange rate	8		(7)		17			339		Foreign currency exchange rate	(1)		—		14		(40)
Total cash flow hedges	Total cash flow hedges	8		(7)		18			331		Total cash flow hedges	(1)		—		15		(40)
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	Interest rate	(1,233)		—		—			—		Interest rate	610		—		—		—
Foreign currency exchange rate	Foreign currency exchange rate	91		(12)		—			—		Foreign currency exchange rate	(10)		2		—		—
Credit	Credit	5		—		—			—		Credit	10		—		—		—
Equity market	Equity market	40		—		—			—		Equity market	(109)		—		—		—
Embedded	Embedded	700		—		—			—		Embedded	(1,090)		—		—		—
Total non-qualifying hedges	Total non-qualifying hedges	(397)		(12)		—			—		Total non-qualifying hedges	(589)		2		—		—
Total	Total	$	(389)	$	(19)	$	18		$	331	Total	$	(590)	$	2	$	15	$	(40)
Three Months Ended September 30, 2021
Three Months Ended March 31, 2022											Three Months Ended March 31, 2022
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	Interest rate	$	—	$	—	$	1		$	3	Interest rate	$	1	$	—	$	1	$	(21)
Foreign currency exchange rate	Foreign currency exchange rate	(1)		1		10			99		Foreign currency exchange rate	—		—		10		41
Total cash flow hedges	Total cash flow hedges	(1)		1		11			102		Total cash flow hedges	1		—		11		20
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	Interest rate	(6)		—		—			—		Interest rate	(1,131)		—		—		—
Foreign currency exchange rate	Foreign currency exchange rate	32		(2)		—			—		Foreign currency exchange rate	10		(5)		—		—
Credit	Credit	2		—		—			—		Credit	(7)		—		—		—
Equity market	Equity market	(48)		—		—			—		Equity market	308		—		—		—
Embedded	Embedded	78		—		—			—		Embedded	763		—		—		—
Total non-qualifying hedges	Total non-qualifying hedges	58		(2)		—			—		Total non-qualifying hedges	(57)		(5)		—		—
Total	Total	$	57	$	(1)	$	11		$	102	Total	$	(56)	$	(5)	$	11	$	20

~~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, 2022
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate $ 4 $ — $ 3 $ (49)
Foreign currency exchange rate 9 (8) 41 662
Total cash flow hedges 13 (8) 44 613
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate (3,671) — — —
Foreign currency exchange rate 173 (25) — —
Credit (27) — — —
Equity market 768 — — —
Embedded 4,686 — — —
Total non-qualifying hedges 1,929 (25) — —
Total $ 1,942 $ (33) $ 44 $ 613
Nine Months Ended September 30, 2021
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate $ 1 $ — $ 3 $ (30)
Foreign currency exchange rate 5 (2) 25 179
Total cash flow hedges 6 (2) 28 149
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate (1,196) — — —
Foreign currency exchange rate 43 1 — —
Credit 13 — — —
Equity market (496) — — —
Embedded (418) — — —
Total non-qualifying hedges (2,054) 1 — —
Total $ (2,048) $ (1) $ 28 $ 149

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions was less than one year and~~twoyears,~~ one year, respectively.

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the balance in AOCI associated with cash flow hedges was ~~$917~~$588 million and ~~$320~~$628 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.

2738

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)

5.7. 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, 2022					December 31, 2021						March 31, 2023					December 31, 2022
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	$	5	$	664	2.1	$	12	$	589	2.4	Aaa/Aa/A	$	8	$	544	2.0	$	7	$	544	2.2
Baa	Baa	(8)		1,177		5.2	27		1,131		5.0	Baa	13		1,188		5.1	8		1,185		5.0
Ba	Ba	1		24		4.2	—		—		0.0	Ba	2		24		3.7	2		24		4.0
Caa and Lower	Caa and Lower	(2)		4		3.2	(1)		4		4.0	Caa and Lower	(1)		4		2.7	(1)		4		3.0
Total	Total	$	(4)	$	1,869	4.1	$	38	$	1,724	4.1	Total	$	22	$	1,760	4.1	$	16	$	1,757	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 68 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 Amount Recognized Financial Instruments (1) Collateral Received/Pledged (2) Net Amount Securities Collateral Received/Pledged (3) Net Amount After Securities Collateral
(In millions)
September 30, 2022
Derivative assets $ 3,803 $ (2,172) $ (1,521) $ 110 $ (28) $ 82
Derivative liabilities $ 4,744 $ (2,172) $ (4) $ 2,568 $ (2,566) $ 2
December 31, 2021
Derivative assets $ 3,113 $ (1,155) $ (1,480) $ 478 $ (413) $ 65
Derivative liabilities $ 1,632 $ (1,155) $ — $ 477 $ (477) $ —

~~_______________~~

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

2839

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)

5.7. Derivatives (continued)

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 Amount Recognized		Financial Instruments (1)		Collateral Received/Pledged (2)		Net Amount		Securities Collateral Received/Pledged (3)		Net Amount After Securities Collateral
	(In millions)
March 31, 2023
Derivative assets	$	2,582	$	(1,997)	$	(514)	$	71	$	(42)	$	29
Derivative liabilities	$	3,183	$	(1,997)	$	—	$	1,186	$	(1,186)	$	—
December 31, 2022
Derivative assets	$	2,295	$	(1,659)	$	(629)	$	7	$	(5)	$	2
Derivative liabilities	$	3,910	$	(1,659)	$	—	$	2,251	$	(2,251)	$	—

_______________

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

(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, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(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)	$	2,572	$	477	Estimated fair value of derivatives in a net liability position (1)	$	1,186	$	2,251
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	$	4,583	$	839	Fixed maturity securities	$	4,057	$	4,894

_______________

(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. Additionally, the Company is required to pledge initial margin for certain new over-the-counter (“OTC”) bilateral contracts between two counterparties (“OTC-bilateral”) derivative transactions to ~~third party~~third-party custodians.

2940

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)

6.8. 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, 2022									March 31, 2023
		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	$	—	$	30,625	$	1,038	$	31,663	U.S. corporate	$	—	$	31,832	$	1,329	$	33,161
Foreign corporate	Foreign corporate	—		9,541		517		10,058		Foreign corporate	—		10,194		607		10,801
U.S. government and agency										U.S. government and agency	3,551		4,613		—		8,164
RMBS	RMBS	—		7,795		27		7,822		RMBS	—		7,540		14		7,554
U.S. government and agency		3,886		4,394		—		8,280
CMBS	CMBS	—		6,523		19		6,542		CMBS	—		6,567		33		6,600
ABS										ABS	—		5,288		303		5,591
State and political subdivision	State and political subdivision	—		3,772		—		3,772		State and political subdivision	—		3,887		—		3,887
ABS		—		4,906		293		5,199
Foreign government	Foreign government	—		1,048		35		1,083		Foreign government	—		1,055		39		1,094
Total fixed maturity securities	Total fixed maturity securities	3,886		68,604		1,929		74,419		Total fixed maturity securities	3,551		70,976		2,325		76,852
Equity securities	Equity securities	11		36		28		75		Equity securities	14		24		25		63
Short-term investments	Short-term investments	169		109		—		278		Short-term investments	398		100		—		498

Derivative assets: (1)	Derivative assets: (1)									Derivative assets: (1)
Interest rate	Interest rate	—		419		—		419		Interest rate	—		407		—		407
Foreign currency exchange rate	Foreign currency exchange rate	—		1,026		51		1,077		Foreign currency exchange rate	—		652		26		678
Credit	Credit	—		1		6		7		Credit	—		15		8		23
Equity market	Equity market	—		2,211		9		2,220		Equity market	—		1,519		—		1,519
Total derivative assets	Total derivative assets	—		3,657		66		3,723		Total derivative assets	—		2,593		34		2,627
Embedded derivatives within asset host contracts (2)		—		—		129		129
Market risk benefit assets										Market risk benefit assets	—		—		510		510
Separate account assets	Separate account assets	39		76,028		—		76,067		Separate account assets	20		81,104		—		81,124
Total assets	Total assets	$	4,105	$	148,434	$	2,152	$	154,691	Total assets	$	3,983	$	154,797	$	2,894	$	161,674
Liabilities	Liabilities									Liabilities
Market risk benefit liabilities										Market risk benefit liabilities	$	—	$	—	$	10,751	$	10,751
Derivative liabilities: (1)	Derivative liabilities: (1)									Derivative liabilities: (1)
Interest rate	Interest rate	$	—	$	2,817	$	—	$	2,817	Interest rate	—		1,995		—		1,995
Foreign currency exchange rate	Foreign currency exchange rate	—		14		—		14		Foreign currency exchange rate	—		8		—		8
Credit	Credit	—		8		3		11		Credit	—		—		1		1
Equity market	Equity market	—		1,869		1		1,870		Equity market	—		1,248		—		1,248
Total derivative liabilities	Total derivative liabilities	—		4,708		4		4,712		Total derivative liabilities	—		3,251		1		3,252
Embedded derivatives within liability host contracts (2)		—		—		4,277		4,277
Embedded derivatives on index-linked annuities (2)										Embedded derivatives on index-linked annuities (2)	—		—		5,164		5,164

Total liabilities	Total liabilities	$	—	$	4,708	$	4,281	$	8,989	Total liabilities	$	—	$	3,251	$	15,916	$	19,167

3041

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)

6.8. Fair Value (continued)


		December 31, 2021									December 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	$	—	$	37,568	$	906	$	38,474	U.S. corporate	$	—	$	30,973	$	1,189	$	32,162
Foreign corporate	Foreign corporate	—		11,112		493		11,605		Foreign corporate	—		9,894		598		10,492
U.S. government and agency										U.S. government and agency	3,507		4,391		—		7,898
RMBS	RMBS	—		9,209		11		9,220		RMBS	—		7,477		14		7,491
U.S. government and agency		3,159		6,009		—		9,168
CMBS	CMBS	—		7,149		44		7,193		CMBS	—		6,504		33		6,537
ABS										ABS	—		5,037		318		5,355
State and political subdivision	State and political subdivision	—		4,760		—		4,760		State and political subdivision	—		3,741		—		3,741
ABS		—		4,110		165		4,275
Foreign government	Foreign government	—		1,806		26		1,832		Foreign government	—		1,043		38		1,081
Total fixed maturity securities	Total fixed maturity securities	3,159		81,723		1,645		86,527		Total fixed maturity securities	3,507		69,060		2,190		74,757
Equity securities	Equity securities	21		61		13		95		Equity securities	12		27		27		66
Short-term investments	Short-term investments	640		20		2		662		Short-term investments	206		93		—		299
Derivative assets: (1)	Derivative assets: (1)									Derivative assets: (1)
Interest rate	Interest rate	—		1,094		—		1,094		Interest rate	—		304		—		304
Foreign currency exchange rate	Foreign currency exchange rate	—		304		10		314		Foreign currency exchange rate	—		703		29		732
Credit	Credit	—		27		12		39		Credit	—		10		8		18
Equity market	Equity market	—		1,649		16		1,665		Equity market	—		1,217		—		1,217
Total derivative assets	Total derivative assets	—		3,074		38		3,112		Total derivative assets	—		2,234		37		2,271
Embedded derivatives within asset host contracts (2)		—		—		186		186
Market risk benefit assets										Market risk benefit assets	—		—		483		483
Separate account assets	Separate account assets	41		106,184		—		106,225		Separate account assets	29		78,851		—		78,880
Total assets	Total assets	$	3,861	$	191,062	$	1,884	$	196,807	Total assets	$	3,754	$	150,265	$	2,737	$	156,756
Liabilities	Liabilities									Liabilities
Market risk benefit liabilities										Market risk benefit liabilities	$	—	$	—	$	10,411	$	10,411
Derivative liabilities: (1)	Derivative liabilities: (1)									Derivative liabilities: (1)
Interest rate	Interest rate	$	—	$	130	$	—	$	130	Interest rate	—		2,802		—		2,802
Foreign currency exchange rate	Foreign currency exchange rate	—		47		—		47		Foreign currency exchange rate	—		9		—		9
Credit	Credit	—		—		1		1		Credit	—		—		2		2
Equity market	Equity market	—		1,465		1		1,466		Equity market	—		1,098		—		1,098
Total derivative liabilities	Total derivative liabilities	—		1,642		2		1,644		Total derivative liabilities	—		3,909		2		3,911
Embedded derivatives within liability host contracts (2)		—		—		8,800		8,800
Embedded derivatives on index-linked annuities (2)										Embedded derivatives on index-linked annuities (2)	—		—		3,932		3,932

Total liabilities	Total liabilities	$	—	$	1,642	$	8,802	$	10,444	Total liabilities	$	—	$	3,909	$	14,345	$	18,254

_______________

(1)Derivative assets are ~~presented within~~reported in other invested assets ~~on the consolidated balance sheets~~ and derivative liabilities are ~~presented within~~reported in other ~~liabilities on the consolidated balance sheets.~~liabilities. 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~~derivative liabilities on index-linked annuities are ~~presented within premiums, reinsurance and other receivables on the consolidated balance sheets. Embedded derivatives within liability host contracts are presented within~~reported in policyholder account ~~balances on the consolidated balance sheets.~~balances.

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.

3142

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)

6.8. 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, 2022.~~March 31, 2023.

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.

3243

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)

6.8. 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 OTC market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are 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.

Market Risk Benefits

MRBs principally include guaranteed minimum benefits on variable annuity contracts including benefits reinsured related to these guarantees.

The estimated fair value of variable annuity guarantees accounted for as MRBs is determined based on the present value of projected future benefits less the present value of projected future fees attributable to the guarantees. At policy inception, the Company determines an attributed fee ratio by solving for a percentage of projected future rider fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits. To the extent the rider fees are insufficient, the Company may also include fees related to mortality and expense charges in the attributed fee ratio, provided the total fees included in the calculation do not exceed total contract fees and assessments collected from the contract holder. Any additional fees not included in the attributed fee ratio are considered revenue and reported in universal life and investment-type product policy fees. The attributed fee ratio is not updated in subsequent periods.

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. Fair Value (continued)

The Company updates the estimated fair value of variable annuity guarantees in subsequent periods by projecting future benefits using capital markets inputs and actuarial assumptions including expectations of policyholder behavior. A risk neutral valuation methodology is used to project the cash flows from the guarantees under multiple capital markets scenarios. The reported estimated fair value is then determined by taking the present value of these cash flows using a discount rate that incorporates a spread over the risk-free rate to reflect the Company’s nonperformance risk and adding a risk margin.

The valuation of MRBs includes an adjustment for the risk that the Company fails to satisfy its obligations, which is referred to as nonperformance risk. The nonperformance risk adjustment is captured as an additional spread applied to the risk-free rate in determining the rate to discount the cash flows of the liability. The spread over the risk-free rate is based on the Company’s creditworthiness taking into consideration publicly available information relating to spreads in the secondary market for Brighthouse Financial’s debt. These observable spreads are then adjusted, as necessary, to reflect the financial strength ratings of the issuing insurance subsidiaries as compared to the credit rating of Brighthouse Financial.

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 in certain actuarial assumptions. The establishment of risk margins requires the use of significant actuarial judgment, including assumptions of the amount needed to cover the guarantees.

Actuarial assumptions are reviewed at least annually, and if they change significantly, the estimated fair value is adjusted through net income. Capital market inputs used in the measurement of variable annuity guarantees are updated quarterly through net income, except for the change attributable to the Company’s nonperformance risk, which is reported in OCI.

Embedded Derivatives

Embedded derivatives ~~principally~~ include ~~certain direct and ceded variable annuity guarantees and equity~~ crediting rates ~~within~~associated with 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).

~~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).~~contract. 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.

Actuarial assumptions including policyholder behavior and expectations for renewals at the end of the term period are reviewed at least annually, and if they change significantly, the estimated fair value is adjusted through net income. Capital market inputs used in the measurement of crediting rate embedded derivatives are updated quarterly through net income.

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.

3445

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)

6.8. 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, 2022 December 31, 2021 Impact of
Increase in Input
on Estimated
Fair Value
Valuation
Techniques Significant
Unobservable Inputs
Range Range
Embedded derivatives
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% 0.30% - 14.50% Decrease (2)
• Utilization rates 0.00% - 25.00% 0.00% - 25.00% Increase (3)
• Withdrawal rates 0.25% - 10.00% 0.25% - 10.00% (4)
• Long-term equity volatilities 16.46% - 22.01% 16.44% - 22.16% Increase (5)
• Nonperformance risk spread 0.00% - 2.23% (0.38)% - 1.49% Decrease (6)


					March 31, 2023			December 31, 2022			Impact of Increase in Input on Estimated Fair Value
	Valuation Techniques		Significant Unobservable Inputs		Range			Range
Market Risk Benefits
Variable annuity guaranteed minimum benefits	•	Option pricing techniques	•	Mortality rates	0.04%	-	12.90%	0.04%	-	12.90%	Decrease (1)
			•	Lapse rates	1.00%	-	24.11%	1.00%	-	24.11%	Decrease (2)
			•	Utilization rates	0.00%	-	25.00%	0.00%	-	25.00%	Increase (3)
			•	Withdrawal rates	0.00%	-	10.00%	0.00%	-	10.00%	(4)
			•	Long-term equity volatilities	15.96%	-	24.53%	19.99%	-	28.45%	Increase (5)
			•	Nonperformance risk spread	1.08%	-	2.22%	(2.73)%	-	4.52%	Decrease (6)
Embedded Derivatives
Index-linked annuity crediting rates	•	Option pricing techniques	•	Mortality rates	0.03%	-	9.24%	0.03%	-	9.24%	Decrease (1)
			•	Lapse rates	1.00%	-	62.30%	1.00%	-	62.30%	Decrease (2)

			•	Withdrawal rates	0.50%	-	9.00%	0.50%	-	9.00%	(4)

			•	Nonperformance risk spread	0.73%	-	2.12%	0.00%	-	1.98%	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.~~old. Mortality rate assumptions are set based on company experience and include an assumption for mortality improvement.

(2)The lapse rate range ~~shown~~ reflects base lapse rates for major product categories for duration ~~1-20, which represents majority of business with living benefit riders.~~1-20. 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. AFor variable annuity guarantees, 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 for variable annuity guarantees 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 variable annuity GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For variable annuity 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 MRBs.

Table of Contents

Brighthouse Life Insurance Company

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

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

8. Fair Value (continued)

(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 MRB or embedded derivative.

~~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 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 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)~~(excluding MRBs disclosed in Note 4) were summarized as follows:


		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		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)		Embedded Derivatives on Index-Linked Annuities
		(In millions)																(In millions)
Three Months Ended September 30, 2022
Three Months Ended March 31, 2023																			Three Months Ended March 31, 2023
Balance, beginning of period	Balance, beginning of period	$	1,710	$	345	$	40	$	27	$	—	$	38	$	(4,667)	$	—		Balance, beginning of period	$	1,787	$	365	$	38	$	27	$	—	$	35	$	(3,932)
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)		—		—		—		1		—		3		700		—
Total realized/unrealized gains (losses) included in net income (loss) (3) (4)																			Total realized/unrealized gains (losses) included in net income (loss) (3) (4)	1		(1)		—		(2)		—		—		(1,090)
Total realized/unrealized gains (losses) included in AOCI	Total realized/unrealized gains (losses) included in AOCI	(108)		(11)		(4)		—		—		21		—		—			Total realized/unrealized gains (losses) included in AOCI	24		1		1		—		—		(1)		—
Purchases ~~(7)~~(5)	Purchases ~~(7)~~(5)	278		125		—		—		—		—		—		—			Purchases ~~(7)~~(5)	142		19		—		—		—		—		—
Sales ~~(7)~~(5)	Sales ~~(7)~~(5)	(22)		(1)		(1)		—		—		—		—		—			Sales ~~(7)~~(5)	(13)		(4)		—		—		—		—		—
Issuances ~~(7)~~(5)	Issuances ~~(7)~~(5)	—		—		—		—		—		—		—		—			Issuances ~~(7)~~(5)	—		—		—		—		—		—		—
Settlements ~~(7)~~(5)	Settlements ~~(7)~~(5)	—		—		—		—		—		—		(181)		—			Settlements ~~(7)~~(5)	—		—		—		—		—		—		(142)
Transfers into Level 3 ~~(8)~~(6)	Transfers into Level 3 ~~(8)~~(6)	16		19		—		—		—		—		—		—			Transfers into Level 3 ~~(8)~~(6)	19		1		—		—		—		—		—
Transfers out of Level 3 ~~(8)~~(6)	Transfers out of Level 3 ~~(8)~~(6)	(319)		(138)		—		—		—		—		—		—			Transfers out of Level 3 ~~(8)~~(6)	(24)		(31)		—		—		—		(1)		—
Balance, end of period	Balance, end of period	$	1,555	$	339	$	35	$	28	$	—	$	62	$	(4,148)	$	—		Balance, end of period	$	1,936	$	350	$	39	$	25	$	—	$	33	$	(5,164)
Three 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	$	877	$	217	$	12	$	3	$	—	$	20	$	(8,053)	$	—		Balance, beginning of period	$	1,399	$	220	$	26	$	13	$	2	$	36	$	(6,641)
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)		1		—		—		—		—		(6)		78		—
Total realized/unrealized gains (losses) included in net income (loss) (3) (4)																			Total realized/unrealized gains (losses) included in net income (loss) (3) (4)	—		—		—		—		—		(10)		763
Total realized/unrealized gains (losses) included in AOCI	Total realized/unrealized gains (losses) included in AOCI	(8)		(1)		—		—		—		3		—		—			Total realized/unrealized gains (losses) included in AOCI	(99)		(5)		(3)		—		—		4		—
Purchases ~~(7)~~(5)	Purchases ~~(7)~~(5)	304		195		—		—		—		22		—		—			Purchases ~~(7)~~(5)	422		87		—		—		—		—		—
Sales ~~(7)~~(5)	Sales ~~(7)~~(5)	(14)		(5)		—		—		—		—		—		—			Sales ~~(7)~~(5)	(93)		(2)		—		—		(2)		—		—
Issuances ~~(7)~~(5)	Issuances ~~(7)~~(5)	—		—		—		—		—		—		—		—			Issuances ~~(7)~~(5)	—		—		—		—		—		—		—
Settlements ~~(7)~~(5)	Settlements ~~(7)~~(5)	—		—		—		—		—		—		46		—			Settlements ~~(7)~~(5)	—		—		—		—		—		—		204
Transfers into Level 3 ~~(8)~~(6)	Transfers into Level 3 ~~(8)~~(6)	223		8		—		—		—		—		—		—			Transfers into Level 3 ~~(8)~~(6)	86		1		—		—		—		—		—
Transfers out of Level 3 ~~(8)~~(6)	Transfers out of Level 3 ~~(8)~~(6)	(94)		(149)		(12)		—		—		—		—		—			Transfers out of Level 3 ~~(8)~~(6)	(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	$	(5,674)
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2022(9)		$	—	$	—	$	—	$	1	$	—	$	3	$	596	$	—
Changes in unrealized gains (losses) included in OCI for the instruments still held at September 30, 2022 (9)		$	(109)	$	(11)	$	(4)	$	—	$	—	$	21	$	—	$	—
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 March 31, 2023 (7)																			Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2023 (7)	$	1	$	(1)	$	—	$	(2)	$	—	$	—	$	(1,166)
Changes in unrealized gains (losses) included in OCI for the instruments still held at March 31, 2023 (7)																			Changes in unrealized gains (losses) included in OCI for the instruments still held at March 31, 2023 (7)	$	23	$	1	$	1	$	—	$	—	$	(1)	$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2022 (7)																			Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2022 (7)	$	—	$	—	$	—	$	—	$	—	$	(10)	$	687
Changes in unrealized gains (losses) included in OCI for the instruments still held at March 31, 2022 (7)																			Changes in unrealized gains (losses) included in OCI for the instruments still held at March 31, 2022 (7)	$	(98)	$	(5)	$	(3)	$	—	$	—	$	4	$	—

_______________

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

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

3647

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)

6.8. Fair Value (continued)

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Fixed Maturity Securities
Corporate (1) Structured Securities Foreign
Government Equity
Securities Short-term
Investments Net
Derivatives (2) Net Embedded
Derivatives (3) Separate
Account Assets (4)
(In millions)
Nine Months Ended September 30, 2022
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) (6) — — 1 — (11) 4,686 —
Total realized/unrealized gains (losses) included in AOCI (286) (23) (13) — — 36 — —
Purchases (7) 760 230 5 14 — 1 — —
Sales (7) (159) (12) (2) — (2) — — —
Issuances (7) — — — — — — — —
Settlements (7) — — — — — — (220) —
Transfers into Level 3 (8) 31 25 19 — — — — —
Transfers out of Level 3 (8) (184) (101) — — — — — —
Balance, end of period $ 1,555 $ 339 $ 35 $ 28 $ — $ 62 $ (4,148) $ —
Nine Months Ended September 30, 2021
Balance, beginning of period $ 684 $ 67 $ — $ 3 $ — $ 2 $ (7,301) $ 3
Total realized/unrealized gains (losses) included in net income (loss) (5) (6) — — — — — 10 (418) —
Total realized/unrealized gains (losses) included in AOCI (9) — — — — 12 — —
Purchases (7) 694 239 — — — 20 — —
Sales (7) (53) (21) — — — (6) — —
Issuances (7) — — — — — — — —
Settlements (7) — — — — — — (210) —
Transfers into Level 3 (8) 175 14 — — — — — —
Transfers out of Level 3 (8) (202) (34) — — — 1 — (3)
Balance, end of period $ 1,289 $ 265 $ — $ 3 $ — $ 39 $ (7,929) $ —
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2022 (9) $ — $ — $ — $ 1 $ — $ (4) $ 4,676 $ —
Changes in unrealized gains (losses) included in OCI for the instruments still held at September 30, 2022 (9) $ (288) $ (23) $ (13) $ — $ — $ 36 $ — $ —
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 $ — $ —

~~_______________~~

~~(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.~~

~~(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).

~~(5)~~Amortization of premium/accretion of discount is included ~~within~~in 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).

~~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)~~

~~(6)~~(4)Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.

~~(7)~~(5)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)~~(6)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)~~(7)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. 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, 2022											March 31, 2023
				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	$	22,030	$	—	$	—	$	19,899	$	19,899	Mortgage loans	$	22,788	$	—	$	—	$	21,023	$	21,023
Policy loans	Policy loans	$	886	$	—	$	470	$	450	$	920	Policy loans	$	888	$	—	$	460	$	481	$	941
Other invested assets	Other invested assets	$	316	$	—	$	176	$	140	$	316	Other invested assets	$	310	$	—	$	220	$	90	$	310
Premiums, reinsurance and other receivables	Premiums, reinsurance and other receivables	$	4,798	$	—	$	115	$	4,893	$	5,008	Premiums, reinsurance and other receivables	$	6,578	$	—	$	81	$	6,657	$	6,738
Liabilities	Liabilities											Liabilities
Policyholder account balances	Policyholder account balances	$	29,394	$	—	$	—	$	28,526	$	28,526	Policyholder account balances	$	31,387	$	—	$	—	$	30,405	$	30,405
Short-term debt	Short-term debt	$	125	$	—	$	—	$	125	$	125	Short-term debt	$	75	$	—	$	—	$	75	$	75
Long-term debt	Long-term debt	$	839	$	—	$	29	$	678	$	707	Long-term debt	$	838	$	—	$	28	$	707	$	735
Other liabilities	Other liabilities	$	1,140	$	—	$	329	$	811	$	1,140	Other liabilities	$	1,020	$	—	$	233	$	787	$	1,020
Separate account liabilities	Separate account liabilities	$	989	$	—	$	989	$	—	$	989	Separate account liabilities	$	1,067	$	—	$	1,067	$	—	$	1,067

3848

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)

6.8. Fair Value (continued)


		December 31, 2021											December 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	$	19,787	$	—	$	—	$	20,591	$	20,591	Mortgage loans	$	22,877	$	—	$	—	$	20,760	$	20,760
Policy loans	Policy loans	$	869	$	—	$	470	$	568	$	1,038	Policy loans	$	898	$	—	$	477	$	453	$	930
Other invested assets	Other invested assets	$	85	$	—	$	70	$	15	$	85	Other invested assets	$	341	$	—	$	201	$	140	$	341
Premiums, reinsurance and other receivables	Premiums, reinsurance and other receivables	$	3,075	$	—	$	20	$	3,583	$	3,603	Premiums, reinsurance and other receivables	$	5,915	$	—	$	77	$	5,988	$	6,065
Liabilities	Liabilities											Liabilities
Policyholder account balances	Policyholder account balances	$	23,507	$	—	$	—	$	23,487	$	23,487	Policyholder account balances	$	31,223	$	—	$	—	$	30,303	$	30,303
Short- term debt												Short- term debt	$	125	$	—	$	—	$	125	$	125
Long-term debt	Long-term debt	$	841	$	—	$	36	$	1,087	$	1,123	Long-term debt	$	838	$	—	$	28	$	714	$	742
Other liabilities	Other liabilities	$	886	$	—	$	60	$	816	$	876	Other liabilities	$	1,009	$	—	$	212	$	797	$	1,009
Separate account liabilities	Separate account liabilities	$	1,437	$	—	$	1,437	$	—	$	1,437	Separate account liabilities	$	1,022	$	—	$	1,022	$	—	$	1,022

7.9. Long-term and Short-term Debt

Intercompany Liquidity Facilities

BHF has established an intercompany liquidity facility with certain of its insurance and non-insurance subsidiaries to provide short-term liquidity within and across the combined group of companies. Under the facility, which is comprised of a series of revolving loan agreements among BHF and its participating subsidiaries, each company may lend to or borrow from each other, subject to certain maximum limits for a term of ~~not more than~~up to 364 ~~days.~~days, depending on the agreement.

On May 16, 2022, BH Holdings issued a $125 million promissory note to Brighthouse Life Insurance Company and Brighthouse Life Insurance Company of NY (“BHNY”) issued a $125 million promissory note to BH Holdings (the “May 2022 Promissory Notes”), in which both notes bore interest at a fixed rate of 2.5363%. Upon maturity on August 16, 2022, the May 2022 Promissory Notes were replaced by two new promissory notes which bore interest at a fixed rate of 4.0466% (the “August 2022 Promissory Notes”). Upon maturity on November 16, 2022, the August 2022 Promissory Notes were replaced by two new promissory notes that bear interest at a fixed rate of ~~4.0466%~~5.7689% and 5.4504%, respectively, and both matured on February 16, 2023 (the “November 2022 Promissory Notes”). Upon maturity the November 2022 Promissory Notes were replaced with two new $125 million promissory notes that bear interest at a fixed rate of 5.9966% and 5.9937%, respectively, and both mature on ~~November~~May 16, ~~2022.~~2023 (the “May 2023 Promissory Notes”). On March 28, 2023, BHNY repaid to BH Holdings, and BH Holdings repaid to Brighthouse Life Insurance Company, each $50 million of principal plus accrued interest in cash on the respective May 2023 Promissory Notes.

8.10. Equity

Capital Contribution

During the ~~second~~first quarter of ~~2022,~~2023, Brighthouse Life Insurance Company paid a ~~cash~~ capital contribution in the form of invested assets of $100 million to Brighthouse Life Insurance Company of NY.

~~Accumulated Other Comprehensive Income (Loss)~~

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

Three Months Ended September 30, 2022
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, 2022 $ (3,445) $ 469 $ (33) $ (3,009)
OCI before reclassifications (4,715) 331 (24) (4,408)
Deferred income tax benefit (expense) (2) 1,064 (143) 6 927
AOCI before reclassifications, net of income tax (7,096) 657 (51) (6,490)
Amounts reclassified from AOCI 45 (9) — 36
Deferred income tax benefit (expense) (2) (10) 2 — (8)
Amounts reclassified from AOCI, net of income tax 35 (7) — 28
Balance at September 30, 2022 $ (7,061) $ 650 $ (51) $ (6,462)

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)

8.10. Equity (continued)

Accumulated Other Comprehensive Income (Loss)

Three 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 June 30, 2021 $ 4,187 $ 138 $ (13) $ 4,312
OCI before reclassifications (462) 102 9 (351)
Deferred income tax benefit (expense) (2) 96 (21) (1) 74
AOCI before reclassifications, net of income tax 3,821 219 (5) 4,035
Amounts reclassified from AOCI (2) — — (2)
Deferred income tax benefit (expense) (2) 1 — — 1
Amounts reclassified from AOCI, net of income tax (1) — — (1)
Balance at September 30, 2021 $ 3,820 $ 219 $ (5) $ 4,034
Information regarding changes in the balances of each component of AOCI was as follows:


		Nine Months Ended September 30, 2022									Three Months Ended March 31, 2023
		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		Changes in Nonperformance Risk on Market Risk Benefits		Changes in Discount Rates on the Liability for Future Policy Benefits		Foreign Currency Translation Adjustments		Total
		(In millions)									(In millions)
Balance at December 31, 2021		$	3,675	$	233	$	(7)	$	3,901
Balance at December 31, 2022										Balance at December 31, 2022	$	(6,041)	$	496	$	(1,377)	$	1,016	$	(25)	$	(5,931)
OCI before reclassifications	OCI before reclassifications	(13,806)		613		(56)		(13,249)		OCI before reclassifications	1,367		(40)		(7)		(394)		8		934
Deferred income tax benefit (expense) (2)	Deferred income tax benefit (expense) (2)	2,954		(183)		12		2,783		Deferred income tax benefit (expense) (2)	(287)		8		2		83		(2)		(196)
AOCI before reclassifications, net of income tax	AOCI before reclassifications, net of income tax	(7,177)		663		(51)		(6,565)		AOCI before reclassifications, net of income tax	(4,961)		464		(1,382)		705		(19)		(5,193)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	147		(16)		—		131		Amounts reclassified from AOCI	69		—		—		—		—		69
Deferred income tax benefit (expense) (2)	Deferred income tax benefit (expense) (2)	(31)		3		—		(28)		Deferred income tax benefit (expense) (2)	(14)		—		—		—		—		(14)
Amounts reclassified from AOCI, net of income tax	Amounts reclassified from AOCI, net of income tax	116		(13)		—		103		Amounts reclassified from AOCI, net of income tax	55		—		—		—		—		55

Balance at September 30, 2022		$	(7,061)	$	650	$	(51)	$	(6,462)
Balance at March 31, 2023										Balance at March 31, 2023	$	(4,906)	$	464	$	(1,382)	$	705	$	(19)	$	(5,138)


		Nine 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		Changes in Nonperformance Risk on Market Risk Benefits		Changes in Discount Rates on the Liability for Future Policy Benefits		Foreign Currency Translation Adjustments		Total
		(In millions)									(In millions)
Balance at December 31, 2020		$	5,321	$	108	$	(8)	$	5,421
Balance at December 31, 2021										Balance at December 31, 2021	$	4,996	$	233	$	(3,229)	$	(2,192)	$	(7)	$	(199)
OCI before reclassifications	OCI before reclassifications	(1,915)		149		3		(1,763)		OCI before reclassifications	(5,797)		20		929		1,795		(8)		(3,061)
Deferred income tax benefit (expense) (2)	Deferred income tax benefit (expense) (2)	401		(31)		—		370		Deferred income tax benefit (expense) (2)	1,144		69		(195)		(377)		2		643
AOCI before reclassifications, net of income tax	AOCI before reclassifications, net of income tax	3,807		226		(5)		4,028		AOCI before reclassifications, net of income tax	343		322		(2,495)		(774)		(13)		(2,617)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	16		(9)		—		7		Amounts reclassified from AOCI	41		(2)		—		—		—		39
Deferred income tax benefit (expense) (2)	Deferred income tax benefit (expense) (2)	(3)		2		—		(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	13		(7)		—		6		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	$	375	$	321	$	(2,495)	$	(774)	$	(13)	$	(2,586)

_______________

(1)See Note 46 for information on offsets to investments related to future policy ~~benefits, DAC, VOBA and DSI.~~benefits.

(2)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 activity is reclassified into results from operations.

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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)

8.10. 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,
		2022		2021		2022		2021				2023		2022
		(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)	$	(36)	$	2	$	(133)	$	(14)	Net investment gains (losses)	Net unrealized investment gains (losses)	$	(68)	$	(39)	Net investment gains (losses)

Net unrealized investment gains (losses)											Net unrealized investment gains (losses)					Net investment income
Net unrealized investment gains (losses)	Net unrealized investment gains (losses)	(9)		—		(14)		(2)		Net derivative gains (losses)	Net unrealized investment gains (losses)	(1)		(2)		Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax	Net unrealized investment gains (losses), before income tax	(45)		2		(147)		(16)			Net unrealized investment gains (losses), before income tax	(69)		(41)
Income tax (expense) benefit	Income tax (expense) benefit	10		(1)		31		3			Income tax (expense) benefit	14		9
Net unrealized investment gains (losses), net of income tax	Net unrealized investment gains (losses), net of income tax	(35)		1		(116)		(13)			Net unrealized investment gains (losses), net of income tax	(55)		(32)
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	—		—		4		1		Net derivative gains (losses)	Interest rate swaps	—		1		Net derivative gains (losses)
Interest rate swaps	Interest rate swaps	1		1		3		3		Net investment income	Interest rate swaps	1		1		Net investment income

Interest rate forwards											Interest rate forwards					Net derivative gains (losses)
Interest rate forwards											Interest rate forwards					Net investment income
Foreign currency swaps	Foreign currency swaps	8		(1)		9		5		Net derivative gains (losses)	Foreign currency swaps	(1)		—		Net derivative gains (losses)

Foreign currency swaps											Foreign currency swaps					Net investment income
Credit forwards											Credit forwards					Net investment income
Gains (losses) on cash flow hedges, before income tax	Gains (losses) on cash flow hedges, before income tax	9		—		16		9			Gains (losses) on cash flow hedges, before income tax	—		2
Income tax (expense) benefit	Income tax (expense) benefit	(2)		—		(3)		(2)			Income tax (expense) benefit	—		(1)
Gains (losses) on cash flow hedges, net of income tax	Gains (losses) on cash flow hedges, net of income tax	7		—		13		7			Gains (losses) on cash flow hedges, net of income tax	—		1
Total reclassifications, net of income tax	Total reclassifications, net of income tax	$	(28)	$	1	$	(103)	$	(6)		Total reclassifications, net of income tax	$	(55)	$	(31)

9.11. 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 ~~$53~~$50 million and ~~$168~~$61 million for the three months ended March 31, 2023 and ~~nine months ended September 30,~~ 2022, ~~respectively, and $67 million and $198 million for the three months and nine months ended September 30, 2021,~~ respectively, of which substantially all were reported in the Annuities segment.

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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)

9.11. 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,
		2022		2021		2022		2021				2023		2022
		(In millions)										(In millions)
Compensation	Compensation	$	85	$	92	$	247	$	266	Compensation		$	89	$	81
Contracted services and other labor costs	Contracted services and other labor costs	65		60		175		175		Contracted services and other labor costs		62		50
Transition services agreements	Transition services agreements	15		30		42		89		Transition services agreements		11		26
Establishment costs	Establishment costs	20		24		45		68		Establishment costs		—		14
Premium and other taxes, licenses and fees	Premium and other taxes, licenses and fees	12		11		37		35		Premium and other taxes, licenses and fees		13		12
Volume related costs, excluding compensation, net of DAC capitalization	Volume related costs, excluding compensation, net of DAC capitalization	122		149		349		477		Volume related costs, excluding compensation, net of DAC capitalization		135		143
Interest expense on debt	Interest expense on debt	18		17		51		50		Interest expense on debt		18		17
Other	Other	70		52		332		164		Other		66		49
Total other expenses	Total other expenses	$	407	$	435	$	1,278	$	1,324	Total other expenses		$	394	$	392

Capitalization of DAC

See Note 5 for additional information on the capitalization of DAC.

Related Party Expenses

See Note 1113 for a discussion of related party expenses included in the table above.

~~10.~~12. 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, 2022.~~March 31, 2023.

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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.~~12. 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, 2022,~~March 31, 2023, the Company estimates the aggregate range of reasonably possible losses to be up to approximately $10 million.

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 also alleges that cost of insurance charges were based on improper factors and should have decreased over time due to improving mortality but did not. 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 in March 2021. Plaintiff was granted leave to amend the complaint. On January 18, 2023, the plaintiff filed a motion on consent to amend the second amended class action complaint to narrow the scope of the class sought to those persons who own or owned life insurance policies issued in Georgia. The motion was granted on January 23, 2023, and the third amended class action complaint was filed on January 23, 2023. The Company intends to vigorously defend this matter.

Lawrence Martin v. Brighthouse Life Insurance Company (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. 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 were based on improper factors and 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 filed a motion to dismiss in June 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.

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)

12. Contingencies, Commitments and Guarantees (continued)

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.

~~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)~~

~~10. 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 loss contingencies associated with disputes or other matters involving third parties, including counterparties to contractual arrangements entered into by the Company (e.g., third-party vendors and reinsurers), as well as with tax or other authorities (“other loss contingencies”). The Company establishes liabilities for such 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.

In the matters where the Company’s subsidiaries are acting as the reinsured or the reinsurer, such matters involve assertions by third parties primarily related to rates, fees or reinsured benefit calculations, and in certain of such matters, the counterparty has made a request to arbitrate.

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

As of ~~September 30, 2022,~~March 31, 2023, the Company estimates the range of reasonably possible losses in excess of the amounts accrued for certain other loss contingencies to be from zero up to approximately $125 million, which are primarily associated with the reinsurance-related matters described above. For certain other matters, the Company may 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. ~~During the second quarter of 2022, the Company settled a reinsurance-related matter with a third party for $140 million, which is reported in other expenses.~~

Commitments

Mortgage Loan Commitments

The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were ~~$439~~$318 million and ~~$719~~$247 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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 ~~$2.2~~$1.6 billion and ~~$2.3~~$1.9 billion at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

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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.~~12. 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~~$92 million, with a cumulative maximum of ~~$118~~$98 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, 2022~~March 31, 2023 and December 31, ~~2021~~2022 for indemnities, guarantees and commitments.

~~11.~~13. 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~~debt and equity transactions (see Notes 9 ~~for amounts related to continuing transition services.~~and 10). 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,
		2022		2021		2022		2021				2023		2022
		(In millions)										(In millions)
Premiums	Premiums	$	2	$	—	$	2	$	2	Premiums		$	2	$	—

Universal life and investment-type product policy fees		$	1	$	2	$	4	$	5

Other revenues		$	—	$	—	$	1	$	1

Policyholder benefits and claims	Policyholder benefits and claims	$	18	$	7	$	47	$	18	Policyholder benefits and claims		$	18	$	3

Change in market risk benefits										Change in market risk benefits		$	5	$	(81)
Other expenses	Other expenses	$	(5)	$	(8)	$	(17)	$	(21)	Other expenses		$	—	$	(2)

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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)

~~11.~~13. 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, 2022 December 31, 2021
(In millions)
Assets
Premiums, reinsurance and other receivables (net of allowance for credit losses) $ 30 $ 26
Liabilities
Future policy benefits $ 138 $ 119
Policyholder account balances $ 312 $ 427
Other policy-related balances $ 12 $ 9
Other liabilities $ 25 $ 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 $312 million and $427 million at September 30, 2022 and December 31, 2021, respectively. Net derivative gains (losses) associated with the embedded derivatives were $11 million and $116 million for the three months and nine months ended September 30, 2022, respectively, and $2 million and $128 million for the three months and nine months ended September 30, 2021, respectively.


	March 31, 2023		December 31, 2022
	(In millions)
Assets
Premiums, reinsurance and other receivables (net of allowance for credit losses)	$	28		$	29

Liabilities
Future policy benefits	$	45		$	31

Market risk benefit liabilities	$	434		$	428
Other policy-related balances	$	13		$	11
Other liabilities	$	4		$	11

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 ~~$47~~$44 million and ~~$149~~$54 million for the three months ended March 31, 2023 and ~~nine months ended September 30,~~ 2022, ~~respectively, and $60 million and $176 million for the three months and nine months ended September 30, 2021,~~ respectively. Costs incurred under these arrangements were ~~$246~~$226 million and ~~$671~~$223 million for the three months ended March 31, 2023 and ~~nine months ended September 30,~~ 2022, ~~respectively, and $252 million and $736 million for the three months and nine months ended September 30, 2021,~~ respectively, and were recorded in other expenses.

The Company had net receivables from/(payables to) affiliates, related to the items discussed above, of ($~~160)~~156) million and ($~~182)~~188) million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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 ~~$44~~$42 million and ~~$143~~$52 million for the three months ended March 31, 2023 and ~~nine months ended September 30,~~ 2022, ~~respectively, and $57 million and $168 million for the three months and nine months ended September 30, 2021,~~ respectively. Commission expenses incurred related to these transactions and recorded in other expenses was ~~$240~~$225 million and ~~$696~~$230 million for the three months ended March 31, 2023 and ~~nine months ended September 30,~~ 2022, ~~respectively, and $254 million and $741 million for the three months and nine months ended September 30, 2021,~~ respectively. The Company also had related party fee income receivables of $14 million ~~and $19 million~~ at ~~September 30, 2022~~both March 31, 2023 and December 31, ~~2021, respectively.~~2022.

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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
Overview			4858
Regulatory Developments			4959
Summary of Critical Accounting Estimates			5059
Non-GAAP Financial Disclosures			5062
Results of Operations			5263
Liquidity and Capital Resources			5766
Note Regarding Forward-Looking Statements			5867

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For purposes of this discussion, “BLIC,” the “Company,” “we,” “our” and “us” refer to Brighthouse Life Insurance Company 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 an indirect wholly-owned subsidiary of Brighthouse Financial, Inc. (“BHF” and together with its subsidiaries, “Brighthouse Financial”). This Management’s Discussion and Analysis of Financial Condition and Results of 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, ~~2021,~~2022, filed with the U.S. Securities and Exchange Commission (“SEC”) on March ~~2, 2022~~1, 2023 (the ~~“2021~~“2022 Annual Report”); (iii) our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (the “First Quarter Form 10-Q”) filed with the SEC on May 11, 2022; (iv) our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 (the “Second Quarter Form 10-Q” and ~~together with the First Quarter Form 10-Q, the “Quarterly Reports”) filed with the SEC on August 8, 2022; and (v)~~(iii) our current reports on Form 8-K filed in ~~2022.~~2023.

Overview

We offer a range of annuity and life insurance products to individuals and 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 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. Brighthouse Life Insurance Company of NY (“BHNY”), a wholly-owned subsidiary of Brighthouse Life Insurance Company, is domiciled in New York and licensed to write business only in New York.

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 ~~2021~~2022 Annual Report, as well as Note 23 of the Notes to the Interim Condensed Consolidated Financial Statements for further information regarding our segments and Corporate & Other.

Financial and Economic Environment

Our business and results of operations are materially affected by conditions in the capital markets and the economy generally. Stressed conditions, volatility and disruptions in the capital markets or financial asset classes can have an adverse effect on us. Equity market performance can affect our profitability for variable annuities and other separate account products as a result of the effects it has on product demand, revenues, expenses, reserves and our risk management effectiveness. The level of long-term interest rates and the shape of the yield curve can have a negative effect on the profitability for variable annuities and the demand for, and the profitability of, spread-based products such as fixed annuities, index-linked annuities and universal life insurance. Low interest rates and risk premium, including credit spread, affect new money rates on invested assets and the cost of product guarantees. Insurance premium growth and demand for our products is impacted by the general health of U.S. economic activity. A sustained or material increase in inflation could also affect our business in several ways. During inflationary periods, the value of fixed income investments falls which could increase realized and unrealized losses. Interest rates have increased and may continue to increase due to central bank policy responses to combat inflation, which may positively impact our business in certain respects, but could also increase the risk of a recession or an equity market downturn and could negatively impact various portions of our business, including our investment portfolio. Inflation also increases our expenses (including, among others, for labor and third-party services), potentially putting pressure on profitability if such costs cannot be passed through to policyholders in our product prices. Prolonged and elevated inflation could adversely affect the financial markets and the economy generally and dispelling it may require governments to pursue a restrictive fiscal and monetary policy, which could constrain overall economic activity and inhibit revenue growth. Events involving limited liquidity, defaults, nonperformance or other adverse developments that affect financial institutions or the financial services industry generally, or concerns or rumors about events of these kinds or other similar risks, could adversely affect market-wide liquidity, which could increase the risk of a recession or an equity market downturn and negatively impact various portions of our business, including our investment portfolio. See “Risk Factors — Economic Environment and Capital Markets-Related Risks — If difficult conditions in the capital markets and the U.S. economy generally persist or are perceived to persist, they may materially adversely affect our business and results of operations” and “Risk Factors — Risks Related to our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations” included in our 2022 Annual Report.

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We continue to closely monitor political and economic conditions that might contribute to market volatility and ~~its~~their impact on our business operations, investment portfolio and derivatives, such as global inflation, uncertainty and instability in certain asset classes (including commercial real estate), supply chain disruptions and the Russia-Ukraine ~~conflict and the COVID-19 pandemic.~~conflict. See “Risk Factors — Economic Environment and Capital Markets-Related ~~Risks,”~~Risks” and “Risk Factors — ~~Investments-Related Risks” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview”~~Risks Related to our Investment Portfolio” included in our ~~2021~~2022 Annual Report for a detailed discussion of financial and economic impacts on our business, including the potential impacts of interest rate risk and inflation risk on our investments and overall business.

COVID-19 Pandemic

We continue to closely monitor developments related to the 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 ~~COVID-19 or (ii) the efficacy or~~

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~~utilization of any therapeutic treatments and vaccines for COVID-19 or variants thereof.~~COVID-19. It 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. See “Business — Regulation,” “Risk Factors — Risks Related to Our Business — ~~The ongoing COVID-19 pandemic could materially~~Public health crises, extreme mortality events or similar occurrences may adversely ~~affect~~impact our business, financial condition, ~~and~~or 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”~~as well as the economy in general” included in our ~~2021~~2022 Annual ~~Report, as well as Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements.~~Report.

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 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 ~~2021~~2022 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.”

~~Federal Tax Reform~~

On August 16, 2022, the Inflation Reduction Act was signed into law by President Biden. The Inflation Reduction Act establishes a 15% corporate alternative minimum tax (“CAMT”) effective for tax years beginning after December 31, 2022 for controlled groups whose average annual adjusted financial statement income for any consecutive three-tax year period ending after December 31, 2021 and preceding the tax year exceeds $1 billion.

The U.S. Department of Treasury is expected to issue further guidance regarding the CAMT. Accordingly, the Company is currently unable to assess the applicability of the CAMT or the potential impact the CAMT may have on the Company’s financial statements. It is possible that the CAMT could result in an additional tax liability over the regular federal corporate tax liability in a given year based on differences between book and taxable income (including as a result of temporary differences). The CAMT could result in our incurring materially higher federal income taxes.

~~New York Regulation 47~~

In August 2022, the New York Department of Financial Services (“NYDFS”) amended Insurance Regulation 47 (as amended, “Regulation 47”), which implemented new requirements for certain annuity products. Certain sections of Regulation 47 will be effective as of January 1, 2023, with the remainder effective January 1, 2024. The regulation is likely to open the New York market to new competitors and will impact some components of our current product designs. We continue to assess the impact of these new factors on our sales in New York. See “Risk Factors — Risks Related to our Business — Factors affecting our competitiveness may adversely affect our market share or profitability” and “Risk Factors — Risks Related to our Business — Brighthouse Financial may experience difficulty in marketing and distributing products through our distribution channels” in our 2021 Annual Report.

~~New York Regulation 187~~

In July 2018, the NYDFS amended Insurance Regulation 187 (as amended, “Regulation 187”), adopting a “best interest” standard for the sale of annuities and life insurance products in New York. Regulation 187 generally requires that an insurance producer or insurer consider only a consumer’s best interest, and not the financial interests of the producer or insurer, in making a recommendation as to which life insurance or annuity product a consumer should purchase. In addition, Regulation 187 imposes a best interest standard on consumer in-force transactions. We have assessed the impact to our annuity and life insurance businesses and have adopted certain changes to promote compliance with the provisions by their respective effective dates. On April 29, 2021, the Appellate Division of the New York State Supreme Court overturned the amendment to Regulation 187 for being unconstitutionally vague, and the NYDFS filed an appeal to the New York Court of Appeals on May 27, 2021. On October 20, 2022, the New York Court of Appeals held that the amendment to Regulation 187 is constitutional, which leaves Regulation 187 in effect.

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Summary of Critical Accounting Estimates

In connection with the adoption of new guidance on long-duration contracts (ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (“LDTI”)), the Company updated its impacted critical accounting estimates as described below.

The most critical estimates include those used in determining:

•~~liabilities~~liability for future policy ~~benefits;~~benefits (“LFPB”);

•~~amortization~~estimated fair values of ~~deferred policy acquisition costs~~market risk benefits (“~~DAC”~~MRB”);

•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 below and in Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” in the 2022 Annual Report for a description of income taxes and the valuation of deferred tax assets, which remains unchanged following the adoption of LDTI.

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Liability for Future Policy Benefits

The Company establishes an LFPB for non-participating term and whole life insurance and income annuities. LFPBs are accrued over time as revenue is recognized based on a net premium ratio. The net premium ratio is the portion of gross premiums required to provide for all future benefits. LFPBs are established using the Company’s current assumptions of future cash flows, discounted at a rate that approximates a single A corporate bond curve. The Company generally aggregates insurance contracts into groupings by issue year, product and segment for determining the net premium ratio and related LFPBs.

The Company reviews cash flow assumptions regularly, and, if they change significantly, LFPBs are adjusted by determining a revised net premium ratio. The revised net premium ratio is calculated as of contract inception using both actual historical experience and updated future cash flow assumptions. The recalculated net premium ratio is applied to derive a remeasurement gain or loss recognized in current period net income. The net premium ratio is also updated for the difference between actual and expected experience.

The measurement of our LFPBs can be significantly impacted by changes in assumptions for mortality, policy lapses and market interest rates. See Note 14 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information on the effects of changes in assumptions on the measurement of our LFPBs.

The Company establishes a liability in addition to the account balance for secondary guarantees on universal life insurance. These liabilities are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the contract period based on total expected assessments. The benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios. The Company also maintains a liability for profits followed by losses on universal life with secondary guarantees (“ULSG”) determined by projecting future earnings and establishing a liability to offset losses that are expected to occur in later years.

The Company reviews cash flow assumptions regularly, and, if they change significantly, the liability for secondary guarantees is adjusted by a cumulative charge or credit to net income.

The measurement of our ULSG liabilities can be significantly impacted by changes in assumptions for the general account rate of return, which is driven by our assumption for long-term treasury yields, and changes in assumptions for premium, premium persistency, mortality and lapses. The Company’s practice of projecting treasury yields uses a mean reversion approach that assumes that long-term interest rates are less influenced by short-term fluctuations and are only changed when sustained interim deviations are expected. As part of our 2022 annual actuarial review, we increased our projected long-term general account earned rate, as well as our mean reversion rate over a period of ten years from 3.00% to 3.50%. We also updated other assumptions related to ULSG, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Annual Actuarial Review” included in our ~~2021~~2022 Annual Report.

See Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information on the effects of inputs and assumptions on the measurement of ULSG liabilities.

Market Risk Benefits

MRBs principally include guaranteed minimum benefits on variable annuity contracts, including reinsured benefits related to these guarantees.

The estimated fair value of variable annuity guarantees accounted for as MRBs is determined based on the present value of projected future benefits, less the present value of projected future fees attributable to the guarantees. At policy inception, the Company determines an attributed fee ratio by solving for a percentage of projected future rider fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits. To the extent the rider fees are insufficient, the Company may also include fees related to mortality and expense charges in the attributed fee ratio, provided the total fees included in the calculation do not exceed total contract fees and assessments collected from the contract holder. The attributed fee ratio is not updated in subsequent periods.

The Company updates the estimated fair value of variable annuity guarantees in subsequent periods by projecting future benefits using capital markets inputs and actuarial assumptions, including expectations of policyholder behavior. A risk neutral valuation methodology is used to project the cash flows from the guarantees under multiple capital markets scenarios. The reported estimated fair value is then determined by taking the present value of these cash flows using a discount rate that incorporates a spread over the risk-free rate to reflect the Company’s nonperformance risk and adding a risk margin (as

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discussed below). For more information on the determination of estimated fair value of MRBs, see Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements.

The valuation of MRBs includes an adjustment for the risk that the Company fails to satisfy its obligations, which is referred to as nonperformance risk. The nonperformance risk adjustment is captured as an additional spread applied to the risk-free rate in determining the rate to discount the cash flows of the liability. The spread over the risk-free rate is based on our creditworthiness taking into consideration publicly available information relating to spreads in the secondary market for Brighthouse Financial’s debt. These observable spreads are then adjusted, as necessary, to reflect the financial strength ratings of the issuing insurance subsidiaries as compared to the credit rating of Brighthouse Financial.

Actuarial assumptions are reviewed at least annually, and if they change significantly, the estimated fair value is adjusted through net income. Capital market inputs used in the measurement of variable annuity guarantees are updated quarterly through net income, except for the change attributable to the Company’s nonperformance risk, which is reported in other comprehensive income (loss) (“OCI”).

Market conditions, including, but not limited to, changes in interest rates, equity indices, market volatility and variations in actuarial assumptions, including policyholder behavior, mortality and risk margins related to non-capital markets inputs, as well as changes in nonperformance risk, may result in significant fluctuations in the estimated fair value of the guarantees. In 2022, the Company updated fund allocations, market volatility and maintenance expenses, as well as assumptions regarding policyholder behavior, including mortality, lapses and withdrawals. See Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information on the effects of changes in inputs and assumptions on the measurement of our liabilities for variable annuity guarantees.

Derivatives

We use freestanding derivative instruments to hedge various capital markets risks in our products, including: (i) certain variable annuity guarantees, which are reported as MRBs; (ii) index-linked interest credited features, which are reported as embedded derivatives; (iii) current or future changes in the fair value of our assets and liabilities; and (iv) current or future changes in cash flows. All derivatives, whether freestanding or embedded, are required to be carried on the balance sheet at fair value with changes reflected in either net income (loss) attributable to Brighthouse Life Insurance Company or in OCI, depending on the type of hedge. Below is a summary of critical accounting estimates by type of derivative.

Freestanding Derivatives

The determination of the estimated fair value of freestanding derivatives, when quoted market values are not available, is based on market standard valuation methodologies and inputs that management believes are consistent with what other market participants would use when pricing such instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk, nonperformance risk, volatility, liquidity and changes in estimates and assumptions used in the pricing models. See Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information on significant inputs into the over-the-counter derivative pricing models and credit risk adjustment.

Embedded Derivatives in Index-Linked Annuities

The Company issues, and assumes through reinsurance, index-linked annuities, including Shield® Level Annuities (“Shield” and “Shield Annuities”), that contain crediting rates classified as embedded derivatives. The crediting rates are measured at estimated fair value separately from the fixed annuity host contracts, which is determined using a combination of an option pricing methodology and an option-budget approach. The estimated fair value includes capital market inputs and actuarial policyholder behavior assumptions, including expectations for renewals at the end of the term period. Actuarial assumptions are reviewed at least annually, and, if they change significantly, the estimated fair value is adjusted through net income. Capital market inputs used in the measurement of crediting rate embedded derivatives are updated quarterly through net income.

Market conditions, including interest rates and implied volatilities, and variations in actuarial assumptions and risk margins, as well as changes in our nonperformance risk adjustment, may result in significant fluctuations in the estimated fair value that could have a material impact on net income. See Note 8 of the Notes to the Interim Condensed Consolidated

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Financial Statements for more information on the determination of estimated fair value of crediting rate embedded derivatives.

Non-GAAP Financial Disclosures

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

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 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 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 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); 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 (“Market Value Adjustments”);~~Change in MRBs; and

•~~Amortization of DAC and~~Change in fair value of ~~business acquired~~the crediting rate on experience-rated contracts (“~~VOBA”~~Market Value Adjustments”) ~~related to (i) net investment gains (losses), (ii) net derivative gains (losses) and (iii) GMIB Fees and GMIB Costs.~~.

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

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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~~statements of operations line items:


Component of Adjusted Earnings		How Derived from GAAP (1)
(i)	Fee income	(i)	Universal life and investment-type product 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 ~~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(excluding Market Value Adjustments) and interest on future policy benefits.
(iii)	Insurance-related activities	(iii)	Premiumsless ~~less~~ Policyholder benefits and claims ~~(excluding (a) GMIB Costs, (b) Market Value Adjustments, (c)~~, excluding interest on future policy ~~benefits and (d) amortization of deferred gain on reinsurance) plus the pass through of performance of ceded separate account assets.~~benefits.
(iv)	Amortization of DAC and VOBA	(iv)	Amortization of ~~DAC~~deferred policy acquisition costs (“DAC”) and ~~VOBA~~value of business acquired (“VOBA”) ~~(excluding amounts related to (a) net investment gains (losses), (b) net derivative gains (losses) and (c) GMIB Fees and GMIB Costs)~~.
(v)	Other expenses ~~net of DAC capitalization~~	(v)	Other ~~expenses~~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~~statements 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 23 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 2022 AAR, we increased the long-term general account earned rate, driven by an increase in our mean reversion rate from 3.00% to 3.50%, which had the largest impact on our universal life with secondary guarantees (“ULSG”) business. For our variable annuity business, in addition to the update in the long-term general account earned rate, we updated fund allocations, market volatility and maintenance expenses, as well as assumptions regarding policyholder behavior, including mortality, lapses and withdrawals. For our life business, in addition to the update in the long-term general account earned rate, we updated assumptions regarding policyholder behavior, including mortality, premium persistency, lapses, withdrawals, as well as maintenance expenses.

Consolidated Results for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~

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,
2022 2021
(In millions)
Revenues
Premiums $ 482 $ 526
Universal life and investment-type product policy fees 1,953 2,240
Net investment income 3,036 3,629
Other revenues 326 262
Net investment gains (losses) (171) (37)
Net derivative gains (losses) 1,909 (2,049)
Total revenues 7,535 4,571
Expenses
Policyholder benefits and claims 3,212 2,420
Interest credited to policyholder account balances 1,019 978
Capitalization of DAC (328) (360)
Amortization of DAC and VOBA 888 (14)
Interest expense on debt 51 50
Other expenses 1,555 1,634
Total expenses 6,397 4,708
Income (loss) before provision for income tax 1,138 (137)
Provision for income tax expense (benefit) 188 (68)
Net income (loss) 950 (69)
Less: Net income (loss) attributable to noncontrolling interests 1 1
Net income (loss) attributable to Brighthouse Life Insurance Company $ 949 $ (70)

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	Three Months Ended March 31,
	2023		2022
	(In millions)
Revenues
Premiums	$	190	$	161
Universal life and investment-type product policy fees	474		526
Net investment income	1,035		1,135
Other revenues	87		114
Net investment gains (losses)	(96)		(67)
Net derivative gains (losses)	(588)		(61)
Total revenues	1,102		1,808
Expenses
Policyholder benefits and claims (including liability remeasurement gains (losses) of $0 and $0, respectively)	644		627
Interest credited to policyholder account balances	416		242
Amortization of DAC and VOBA	142		141
Change in market risk benefits	198		(1,580)
Interest expense on debt	18		17
Other expenses	376		375
Total expenses	1,794		(178)
Income (loss) before provision for income tax	(692)		1,986
Provision for income tax expense (benefit)	(167)		412
Net income (loss)	(525)		1,574
Less: Net income (loss) attributable to noncontrolling interests	—		—
Net income (loss) attributable to Brighthouse Life Insurance Company	$	(525)	$	1,574

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


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
		(In millions)					(In millions)
GMLB Riders		$	2,261	$	(1,412)
Other derivative instruments		(1,453)		(407)
Change in market risk benefits						Change in market risk benefits	$	(198)	$	1,580
Net investment gains (losses)	Net investment gains (losses)	(171)		(37)		Net investment gains (losses)	(96)		(67)
Net derivative gains (losses)						Net derivative gains (losses)	(588)		(61)
Other adjustments	Other adjustments	72		19		Other adjustments	(47)		32
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	428		1,699		Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	237		502
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	1,137		(138)		Income (loss) attributable to Brighthouse Life Insurance Company before provision for income tax	(692)		1,986
Provision for income tax expense (benefit)	Provision for income tax expense (benefit)	188		(68)		Provision for income tax expense (benefit)	(167)		412
Net income (loss) attributable to Brighthouse Life Insurance Company	Net income (loss) attributable to Brighthouse Life Insurance Company	$	949	$	(70)	Net income (loss) attributable to Brighthouse Life Insurance Company	$	(525)	$	1,574

~~Nine~~Three Months Ended ~~September 30, 2022~~March 31, 2023 Compared with the ~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022

~~Income~~Loss before provision for income tax was ~~$1.1 billion~~$692 million ($~~949~~525 million, net of income tax), ~~an increase~~a decrease of ~~$1.3~~$2.7 billion ($~~1.0~~2.1 billion, net of income tax) from ~~a loss~~income before provision for income tax of ~~$138 million~~$2.0 billion ($~~70 million,~~1.6 billion, net of income tax) in the prior period.

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

•~~gains~~losses from variable annuity guaranteed ~~minimum living benefits (“GMLB”)~~benefit riders, ~~(“GMLB Riders”),~~ see “— ~~GMLB Riders~~Annuity Guaranteed Benefits and Shield Annuity Liabilities for the ~~Nine~~Three Months Ended ~~September 30, 2022~~March 31, 2023 and ~~2021.”~~2022”; and

•lower pre-tax adjusted earnings, as discussed in greater detail below.

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

•~~lower pre-tax adjusted earnings, as discussed in greater detail below;~~

•~~the unfavorable~~favorable impact of long-term ~~benchmark~~ interest rates on interest rate derivatives used to manage interest rate exposure in our ULSG business, as the long-term ~~benchmark~~ interest rate ~~increased more~~decreased in the current period ~~than~~resulting in a gain of $141 million and increased in the prior ~~period; and~~

•~~net investment losses reflecting higher current~~ period ~~net losses on sales~~resulting in a loss of fixed maturity securities, as well as net losses on limited partnerships and limited liability companies (“LLC”) and net mark-to-market losses on equity securities compared to prior period net gains.$540 million.

The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of ~~17%~~24% in the current period compared to ~~50%~~21% in the prior period. The ~~decrease~~increase in the effective tax rate was driven by 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, tax credits and current period non-recurring items.

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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,
		2022		2021			2023		2022
		(In millions)					(In millions)
Net income (loss) attributable to Brighthouse Life Insurance Company	Net income (loss) attributable to Brighthouse Life Insurance Company	$	949	$	(70)	Net income (loss) attributable to Brighthouse Life Insurance Company	$	(525)	$	1,574
Add: Provision for income tax expense (benefit)	Add: Provision for income tax expense (benefit)	188		(68)		Add: Provision for income tax expense (benefit)	(167)		412
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	1,137		(138)		Income (loss) attributable to Brighthouse Life Insurance Company before provision for income tax	(692)		1,986
Less: GMLB Riders		2,261		(1,412)
Less: Other derivative instruments		(1,453)		(407)
Less: Net investment gains (losses)	Less: Net investment gains (losses)	(171)		(37)		Less: Net investment gains (losses)	(96)		(67)
Less: Net derivative gains (losses)						Less: Net derivative gains (losses)	(588)		(61)
Less: Change in market risk benefits						Less: Change in market risk benefits	(198)		1,580
Less: Other adjustments	Less: Other adjustments	72		19		Less: Other adjustments	(47)		32
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	428		1,699		Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	237		502
Less: Provision for income tax expense (benefit)	Less: Provision for income tax expense (benefit)	39		316		Less: Provision for income tax expense (benefit)	29		101
Adjusted earnings	Adjusted earnings	$	389	$	1,383	Adjusted earnings	$	208	$	401

Consolidated Results for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ — Adjusted Earnings

The components of adjusted earnings were as follows:


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
		(In millions)					(In millions)
Fee income	Fee income	$	2,103	$	2,321	Fee income	$	561	$	640
Net investment spread	Net investment spread	1,538		2,137		Net investment spread	645		841
Insurance-related activities	Insurance-related activities	(1,664)		(1,301)		Insurance-related activities	(433)		(446)
Amortization of DAC and VOBA	Amortization of DAC and VOBA	(270)		(133)		Amortization of DAC and VOBA	(142)		(141)
Other expenses, net of DAC capitalization		(1,278)		(1,324)
Other expenses						Other expenses	(394)		(392)
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	428		1,699		Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	237		502
Provision for income tax expense (benefit)	Provision for income tax expense (benefit)	39		316		Provision for income tax expense (benefit)	29		101
Adjusted earnings	Adjusted earnings	$	389	$	1,383	Adjusted earnings	$	208	$	401

~~Nine~~Three Months Ended ~~September 30, 2022~~March 31, 2023 Compared with the ~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022

Adjusted earnings were ~~$389~~$208 million in the current period, a decrease of ~~$994~~$193 million.

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Key net unfavorable impacts were:

•lower net investment spread due to:

◦lower returns on other limited partnerships ~~for~~compared to the ~~comparative measurement~~prior period;

◦higher interest credited to policyholders consistent with higher account balances; and

◦lower ~~investment yields~~returns on ~~our fixed income portfolio, as proceeds from maturing investments~~real estate limited partnerships and ~~the growth in the investment portfolio were invested at lower yields than the portfolio average;~~limited liability companies (“LLCs”);

partially offset by

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

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

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

◦higher returns ~~on real estate limited partnerships~~from short-term investments; and ~~LLCs;~~

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

◦~~a net increase in guaranteed minimum death benefit liabilities resulting from unfavorable equity market performance;~~

◦~~higher paid claims, net of reinsurance, in our annuities, run-off and life businesses;~~

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

◦~~higher liabilities in our ULSG business from the impact of new reinsurance agreements entered into in the current period;~~

~~partially offset by~~

◦a net decrease in liability balances resulting primarily from changes in policyholder behavior and capital markets assumptions, as well as model refinements made in connection with the AAR in our run-off and annuities businesses;

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

◦~~an adjustment in the current period related to actuarial model refinements in corporate & other;~~

•lower fee income due ~~to:~~

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

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

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

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

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

◦an unfavorable impact resulting primarily from changes in policyholder behavior and capital markets assumptions, as well as model refinements made in connection with the AAR in our life and annuities businesses; and

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

~~partially offset by~~

◦~~an adjustment in the current period related to actuarial model refinements in corporate & other.~~expenses.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 9%12% in the current period compared to ~~19%~~20% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction, tax credits and current period non-recurring items.

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~~GMLB Riders~~Annuity Guaranteed Benefits and Shield Annuity Liabilities for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~

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

Nine Months Ended
September 30,
2022 2021
(In millions)
Liabilities $ 3,576 $ (875)
Hedges (1,276) (1,216)
Ceded reinsurance (58) (76)
Fees (1) 620 610
GMLB DAC (601) 145
Total GMLB Riders $ 2,261 $ (1,412)

~~______________~~


	Three Months Ended March 31,
	2023		2022
	(In millions)
Market risk benefits mark-to-market	$	(304)	$	1,432
Annuity guaranteed benefit rider fees, net of claims	115		176
Ceded reinsurance	(2)		(27)
Total changes attributable to annuity guaranteed benefits liabilities	(191)		1,581
Variable annuity hedges	365		(317)
Shield embedded derivatives	(1,073)		701
Total annuity guaranteed benefits and Shield annuity liabilities	$	(899)	$	1,965

~~(1)~~Market Risk Benefits Mark-to-Market. ~~Excludes living benefit fees, included~~Annuity guaranteed rider benefits are accounted for as MRBs. Liabilities related to guarantee rider benefits represent the current estimated fair value of the obligation to protect policyholders against the possibility that a ~~component~~downturn in the markets will reduce the specified benefits that can be claimed under the base annuity contract. Any periods of ~~adjusted earnings,~~significant or sustained downturns in equity markets, increased equity volatility, or reduced interest rates could result in an increase in the valuation of ~~$39 million and $45 million for the nine months ended September 30, 2022 and 2021, respectively.~~these liabilities. An increase in these liabilities would result in a decrease to our net income (loss) available to shareholders, which could be significant.

~~Nine~~Annuity Guaranteed Benefit Rider Fees, Net of Claims. We earn fees from the guarantee rider benefits, which are calculated based on the policyholder’s Benefit Base. Fees calculated based on the Benefit Base are more stable in market downturns, compared to fees based on the account value because the Benefit Base excludes the impact of a decline in the market value of the policyholder’s account value. We use the fees directly earned from the guarantee riders to fund the reserves, future claims and costs associated with the hedges of market risks inherent in these liabilities. The future fees are included in the estimated fair value of MRB liabilities, with changes recorded in MRBs.

Variable Annuity Hedges and Reinsurance. We enter into freestanding derivatives to hedge certain aspects of the annuity guaranteed benefits accounted for as MRBs and index-linked crediting rates accounted for as embedded derivatives. Generally, the same market factors that impact the estimated fair value of the guarantee rider impact the value of the hedges,

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though in the opposite direction. However, the changes in value of MRBs and related hedges may not be symmetrical and the divergence could be significant due to certain factors, including unhedged risks within MRBs. We may also use reinsurance to manage our exposure related to MRBs.

Shield Embedded Derivatives. Shield Annuities provide the contract holder the ability to participate in the appreciation of certain financial markets up to a stated level, while offering protection from a portion of declines in the applicable indices or benchmark. We believe that Shield Annuities provide us with a risk offset to liabilities related to guarantee rider benefits.

Three Months Ended ~~September 30, 2022~~March 31, 2023 Compared with the ~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022

~~Comparative results from GMLB Riders were favorable by $3.7 billion,~~Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the three months ended March 31, 2023, primarily driven by:

•~~favorable changes~~increases in annuity guaranteed benefits liabilities due to ~~the estimated fair value of embedded derivative liabilities associated with Shield Level Annuities (“Shield liabilities”);~~

decreasing interest rates, partially offset by

•~~unfavorable changes to the estimated fair value of variable annuity liability reserves;~~ increasing equity markets;

•~~unfavorable~~favorable changes in variable annuity hedges due to ~~GMLB DAC;~~decreasing long-term interest rates, partially offset by the negative impact from increasing equity markets; and

•unfavorable changes in Shield embedded derivatives due to ~~the estimated fair value of our GMLB hedges.~~increasing equity markets.

~~Lower equity markets resulted in~~Annuity guaranteed benefits and Shield annuity liabilities performance was favorable for the ~~following impacts:~~three months ended March 31, 2022, primarily driven by:

•~~favorable changes~~decreases in annuity guaranteed benefits liabilities due to ~~the estimated fair value of Shield liabilities;~~increasing interest rates, partially offset by decreasing equity markets;

•~~favorable~~unfavorable changes in variable annuity hedges due to increasing long-term interest rates, partially offset by the ~~estimated fair value of our GMLB hedges;~~positive impact from decreasing equity markets; and

•favorable changes in ~~ceded reinsurance;~~

Shield embedded derivatives due to decreasing equity markets, partially offset by

•~~unfavorable changes to the estimated fair value of variable annuity liability reserves; and~~ increasing interest rates.

•~~unfavorable changes to GMLB DAC.~~

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

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

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

•~~unfavorable changes to GMLB DAC; and~~

•~~unfavorable changes in ceded reinsurance;~~

~~partially offset by~~

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

~~There was a favorable change in the adjustment for nonperformance risk in the current period.~~

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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 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. Changing conditions in the global capital markets and the economy may affect our financing costs and market interest rates for our debt issuances. 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.~~Financial and Economic Environment,” as well as “Risk Factors — Economic Environment and Capital Markets-Related Risks” and “Risk Factors — Risks Related to Our Investment Portfolio” included in our 2022 Annual Report.

Sources and Uses of Liquidity and Capital

In addition to the summary description of liquidity and capital sources discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Sources and Uses of Liquidity and Capital” in our ~~2021~~2022 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 funding agreements issued in connection with the programs described in more detail below. See Note 3 of the Notes to the Consolidated Financial Statements included in our ~~2021~~2022 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

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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.

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 ~~was increased from $5.0 billion to~~is $7.0 ~~billion in August 2022.~~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 ~~it maintains~~we maintain 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 1, 2026, pursuant to which the parties may enter into funding agreements in an aggregate amount of up to $750 million either (i) for spread lending purposes or (ii) to provide additional liquidity. In September 2022, Brighthouse Life Insurance Company amended this program to (i) extend the term from December 31, 2023 to December 1, 2026 and (ii) increase the maximum aggregate principal amount permitted to be outstanding from $500 million to $750 million. Activity related to these funding agreements is reported in Corporate & Other.

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


		Aggregate Principal Amount Outstanding						Issuances						Repayments						Aggregate Principal Amount Outstanding						Issuances						Repayments
							Nine Months Ended September 30,																		Three Months Ended March 31,
				September 30, 2022			December 31, 2021			2022			2021			2022			2021			March 31, 2023			December 31, 2022			2023			2022			2023			2022
		(In millions)																		(In millions)
FABCP Program	FABCP Program	$	1,718		$	1,848		$	8,980		$	1,989		$	9,110		$	326	FABCP Program	$	2,508		$	2,097		$	2,598		$	2,158		$	2,187		$	2,213
FABN Program	FABN Program	3,450			2,900			550			2,400			—			—		FABN Program	3,050			3,450			—			550			400			—
FHLB Funding Agreements	FHLB Funding Agreements	3,750			900			5,350			951			2,500			351		FHLB Funding Agreements	4,350			3,900			800			1,350			350			850
Farmer Mac Funding Agreements	Farmer Mac Funding Agreements	500			125			400			25			25			—		Farmer Mac Funding Agreements	700			700			—			300			—			—
Total	Total	$	9,418		$	5,773		$	15,280		$	5,365		$	11,635		$	677	Total	$	10,608		$	10,147		$	3,398		$	4,358		$	2,937		$	3,063

Note Regarding Forward-Looking Statements

This report 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;

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•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~~between actual outcomes ~~compared to~~and 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;

~~Table~~•Brighthouse Life Insurance Company’s ability to pay dividends, as well as the ability of ~~Contents~~its subsidiaries to pay dividends or distributions to Brighthouse Life Insurance Company;

•the risks associated with climate change;

•the adverse impact ~~on liabilities for policyholder claims as a result~~ of public health crises, extreme mortality ~~events;~~events or similar occurrences on our business and the economy in general;

•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~~geopolitical events, military actions or catastrophic events, on our profitability measures as well as our investment portfolio, including on realized and unrealized losses and impairments, net investment spread and net investment income;

•the ~~impact of events~~financial risks that ~~adversely affect issuers, guarantors or collateral relating~~our investment portfolio is subject to, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our ~~investments or our derivatives counterparties, on impairments, valuation allowances, reserves, net investment income and changes in unrealized gain or loss positions;~~control;

•the impact of changes in regulation and in supervisory and enforcement policies or interpretations thereof 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;~~consumers or increase our tax liability;

•the effectiveness of our policies, procedures and ~~procedures~~processes 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 ~~2021~~2022 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.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

The quantitative and qualitative disclosures about Market Risk reflect the impact of the adoption of LDTI, including the requirement that all variable annuity guarantees are classified as MRBs and measured at fair value.

Risk Management

We have an integrated process for managing risk exposures, which is coordinated among our Risk Management, Finance and Investment Departments. The process is designed to assess and manage exposures on a consolidated, company-wide basis. Brighthouse Financial, Inc. has established a Balance Sheet Committee (“BSC”). The BSC is responsible for periodically reviewing all material financial risks to us and, in the event risks exceed desired tolerances, informs the Finance and Risk Committee of the Board of Directors, considers possible courses of action and determines how best to resolve or mitigate such risks. In taking such actions, the BSC considers industry best practices and the current economic environment. The BSC also reviews and approves target investment portfolios in order to align them with our liability profile and establishes guidelines and limits for various risk-taking departments, such as the Investment Department. Our Finance Department and our Investment Department, together with Risk Management, are responsible for coordinating our ALM strategies throughout the enterprise. The membership of the BSC is comprised of the following members of senior management: Chief Executive Officer, Chief Risk Officer, Chief Financial Officer, Chief Investment Officer and Head of Product Strategy and Pricing.

Our significant market risk management practices include, but are not limited to, the following:

Managing Interest Rate Risk

We manage interest rate risk as part of our asset and liability management strategies, which include (i) maintaining an investment portfolio that has a weighted average duration approximately equal to the duration of our estimated liability cash flow profile, and (ii) maintaining hedging programs, including a macro interest rate hedging program. For certain of our liability portfolios, it is not possible to invest assets to the full liability duration, thereby creating some asset/liability mismatch. Where a liability cash flow may exceed the maturity of available assets, as is the case with certain retirement products, we may support such liabilities with equity investments, derivatives or other mismatch mitigation strategies. Although we take measures to manage the economic risks of investing in a changing interest rate environment, we may not be able to mitigate completely the interest rate or other mismatch risk of our fixed income investments relative to our interest rate sensitive liabilities. The level of interest rates also affects our liabilities for benefits under our annuity contracts. As interest rates decline, we may need to increase our reserves for future benefits under our annuity contracts, which would adversely affect our financial condition and results of operations.

We also employ product design and pricing strategies to mitigate the potential effects of interest rate movements. These strategies include the use of surrender charges or restrictions on withdrawals in some products and the ability to reset crediting rates for certain products.

We analyze interest rate risk using various models, including multi-scenario cash flow projection models that forecast cash flows of the liabilities and their supporting investments, including derivatives. These projections involve evaluating the potential gain or loss on most of our in-force business under various increasing and decreasing interest rate environments. State insurance department regulations require that we perform some of these analyses annually as part of our review of the sufficiency of our regulatory reserves. We measure relative sensitivities of the value of our assets and liabilities to changes in key assumptions using internal models. These models reflect specific product characteristics and include assumptions based on current and anticipated experience regarding lapse, mortality and interest crediting rates. In addition, these models include asset cash flow projections reflecting interest payments, sinking fund payments, principal payments, bond calls, prepayments and defaults.

We also use common industry metrics, such as duration and convexity, to measure the relative sensitivity of asset and liability values to changes in interest rates. In computing the duration of liabilities, we consider all policyholder guarantees and how indeterminate policy elements such as interest credits or dividends are set. Each asset portfolio has a duration target based on the liability duration and the investment objectives of that portfolio.

Managing Equity Market and Foreign Currency Risks

We manage equity market risk in a coordinated process across our Risk Management, Investment and Finance Departments primarily by holding sufficient capital to permit us to absorb modest losses, which may be temporary, from changes in equity markets and interest rates without adversely affecting our financial strength ratings and through the use of derivatives, such as equity futures, equity index options contracts, equity variance swaps and equity total return swaps. We may also employ reinsurance strategies to manage these exposures. Key management objectives include limiting

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losses, minimizing exposures to significant risks and providing additional capital capacity for future growth. The Investment and Finance Departments are also responsible for managing the exposure to foreign currency denominated investments. We use foreign currency swaps and forwards to mitigate the exposure, risk of loss and financial statement volatility associated with foreign currency denominated fixed income investments.

Market Risk - Fair Value Exposures

We regularly analyze our market risk exposure to interest rate, equity market price, credit spreads and foreign currency exchange rate risks. As a result of that analysis, we have determined that the estimated fair values of certain assets and liabilities are significantly exposed to changes in interest rates, and to a lesser extent, to changes in equity market prices and foreign currency exchange rates. We have exposure to market risk through our insurance and annuity operations and general account investment activities. For purposes of this discussion, “market risk” is defined as changes in estimated fair value resulting from changes in interest rates, equity market prices, credit spreads and foreign currency exchange rates. We may have additional financial impacts, other than changes in estimated fair value, which are beyond the scope of this discussion. See “Risk Factors” included in our 2022 Annual Report for additional disclosure regarding our market risk and related sensitivities.

Interest Rates

Our fair value exposure to changes in interest rates arises most significantly from our interest rate sensitive liabilities and our holdings of fixed maturity securities, mortgage loans and derivatives that are used to support our policyholder liabilities. Our interest rate sensitive liabilities include long-term debt, policyholder account balances related to certain investment-type contracts, and variable annuity guarantees accounted for as MRBs. Our fixed maturity securities including U.S. and foreign government bonds, securities issued by government agencies, corporate bonds, mortgage-backed and other ABS, and our commercial, agricultural and residential mortgage loans, are exposed to changes in interest rates. We also use derivatives including swaps, caps, floors, forwards and options to mitigate the exposure related to interest rate risks from our product liabilities.

Equity Market

Along with investments in equity securities, we have fair value exposure to equity market risk through certain liabilities that involve long-term guarantees on equity performance such as variable annuity guarantees accounted for as MRBs, as well as certain policyholder account balances. In addition, we have exposure to equity markets through derivatives including options and swaps that we enter into to mitigate potential equity market exposure from our product liabilities.

Foreign Currency Exchange Rates

Our fair value exposure to fluctuations in foreign currency exchange rates against the U.S. dollar results from our holdings in non-U.S. dollar denominated fixed maturity securities, mortgage loans and certain liabilities. The principal currencies that create foreign currency exchange rate risk in our investment portfolios and liabilities are the Euro and the British pound. We economically hedge substantially all of our foreign currency exposure.

Risk Measurement: Sensitivity Analysis

In the following discussion and analysis, we measure market risk related to our market sensitive assets and liabilities based on changes in interest rates, equity market prices and foreign currency exchange rates using a sensitivity analysis. This analysis estimates the potential changes in estimated fair value based on a hypothetical 100 basis point change (increase or decrease) in interest rates, or a 10% change in equity market prices or foreign currency exchange rates. We believe that these changes in market rates and prices are reasonably possible in the near-term. In performing the analysis summarized below, we used market rates as of March 31, 2023. We modeled the impact of changes in market rates and prices on the estimated fair values of our market sensitive assets and liabilities as follows:

•the estimated fair value of our interest rate sensitive exposures resulting from a 100 basis point change (increase or decrease) in interest rates;

•the estimated fair value of our equity positions due to a 10% change (increase or decrease) in equity market prices; and

•the U.S. dollar equivalent of estimated fair values of our foreign currency exposures due to a 10% change (increase in the value of the U.S. dollar compared to the foreign currencies or decrease in the value of the U.S. dollar compared to the foreign currencies) in foreign currency exchange rates.

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The sensitivity analysis is an estimate and should not be viewed as predictive of our future financial performance. Our actual losses in any particular period may vary from the amounts indicated in the table below. Limitations related to this sensitivity analysis include:

•interest sensitive liabilities do not include $35.6 billion of insurance contracts at March 31, 2023, which are accounted for on a book value basis. Management believes that the changes in the economic value of those contracts under changing interest rates would offset a significant portion of the fair value changes of interest sensitive assets;

•the market risk information is limited by the assumptions and parameters established in creating the related sensitivity analysis, including the impact of prepayment rates on mortgage loans;

•foreign currency exchange rate risk is not isolated for certain embedded derivatives on index-linked annuities within host asset and liability contracts, as the risk on these instruments is reflected as equity;

•for derivatives that qualify for hedge accounting, the impact on reported earnings may be materially different from the change in market values;

•the analysis excludes limited partnership interests; and

•the model assumes that the composition of assets and liabilities remains unchanged throughout the period.

Accordingly, we use such models as tools and not as substitutes for the experience and judgment of our management.

The potential loss in the estimated fair value of our interest rate sensitive financial instruments due to a 100 basis point increase in the yield curve by type of asset and liability was as follows at:


	March 31, 2023
	Notional Amount		Estimated Fair Value (1)		100 Basis Point Increase in the Yield Curve
	(In millions)
Financial assets with interest rate risk
Fixed maturity securities			$	76,852	$	(5,372)
Mortgage loans			$	21,023	(909)
Policy loans			$	941	(48)
Premiums, reinsurance and other receivables			$	6,738	(115)
Reinsurance of market risk benefits			$	70	(37)
Increase (decrease) in estimated fair value of assets					(6,481)

Financial liabilities with interest rate risk (2)
Policyholder account balances			$	30,405	(212)
Long-term debt			$	735	(59)
Other liabilities			$	1,020	7
Embedded derivatives on index-linked annuities (3)			$	5,164	152
(Increase) decrease in estimated fair value of liabilities					(112)

Market risk benefits associated with variable annuities			$	10,308	(2,900)

Derivative instruments with interest rate risk
Interest rate contracts	$	74,464	$	(1,588)	(1,951)
Foreign currency contracts	$	5,064	$	670	(48)

Equity contracts	$	60,997	$	271	4
Increase (decrease) in estimated fair value of derivative instruments					(1,995)
Net change					$	(5,464)

_______________

(1)Separate account assets and liabilities, which are interest rate sensitive, are not included herein as any interest rate risk is borne by the contract holder.

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(2)Excludes $35.6 billion of liabilities at carrying value pursuant to insurance contracts reported within future policy benefits and other policy-related balances on the consolidated balance sheet at March 31, 2023. Management believes that the changes in the economic value of those contracts under changing interest rates would offset a significant portion of the fair value changes of interest rate sensitive assets.

(3)Embedded derivatives on index-linked annuities are recognized on the consolidated balance sheet in the same caption as the host contract.

Sensitivity Summary

Sensitivity to a 100 basis point rise in interest rates was $5.5 billion at March 31, 2023.

Sensitivity to a 10% rise in equity prices was $102 million at March 31, 2023.

As discussed above, we economically hedge substantially all of our foreign currency exposure such that sensitivity to changes in foreign currencies is minimal.

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, 2022.~~March 31, 2023.

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, 2022~~March 31, 2023 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 1012 of the Notes to the Interim Condensed Consolidated Financial Statements.

In addition, as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022 under “Business—Reinsurance Activity—Unaffiliated Third-Party Reinsurance,” we received a demand for arbitration in February 2021 relating to a block of long-term care insurance business with reserves of $6.5 billion at December 31, 2022 that is reinsured to Genworth Life Insurance Company and Genworth Life Insurance Company of New York (collectively, the “Genworth reinsurers”). The Genworth reinsurers have established trust accounts for our benefit to secure their obligations under such arrangements requiring that they maintain qualifying collateral with an aggregate fair market value equal to at least 102% of the statutory reserves attributable to the long-term care business, and the demand for arbitration sought authorization to withdraw certain amounts from the trust accounts. In August 2022, we participated in an arbitration hearing with the Genworth reinsurers. In March 2023, the arbitration panel ruled that the trusts were funded in excess of the amount required and that such excess amounts are to be released from the trusts. We have complied with the arbitration panel’s ruling.

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Item 1A. Risk Factors

We discuss in this report, in our ~~2021~~2022 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 ~~2021~~2022 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, 2022,~~March 31, 2023, formatted in Inline XBRL (included within the Exhibit 101 attachments).

* Filed herewith.

** Furnished herewith.

6073

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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 10, 2022~~May 11, 2023

6174


	September 30, 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)	$	76,894		$	40,589		$	105,784		$	56,966
Separate account value	$	72,232		$	39,542		$	101,108		$	55,910
Net amount at risk	$	18,250	(4)	$	6,439	(5)	$	6,315	(4)	$	4,992	(5)
Average attained age of contract holders	72 years			71 years			71 years			71 years


	September 30, 2022		December 31, 2021
	Secondary Guarantees
	(Dollars in millions)
Universal Life Contracts
Total account value (3)	$	5,317	$	5,518
Net amount at risk (6)	$	65,935	$	67,248
Average attained age of policyholders	69 years		68 years

Variable Life Contracts
Total account value (3)	$	1,103	$	1,448
Net amount at risk (6)	$	10,366	$	10,508
Average attained age of policyholders	48 years		47 years