Docoh
Loading...

BHF Brighthouse Financial

Filed: 6 Aug 21, 4:18pm

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 June 30, 2021
or
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: 001-37905
bhf-20210630_g1.jpg
Brighthouse Financial, Inc.
(Exact name of registrant as specified in its charter)
Delaware 81-3846992
(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:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareBHFThe Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/1,000th interest in a share of 6.600% Non-Cumulative Preferred Stock, Series ABHFAPThe Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/1,000th interest in a share of 6.750% Non-Cumulative Preferred Stock, Series BBHFAOThe Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/1,000th interest in a share of 5.375% Non-Cumulative Preferred Stock, Series CBHFANThe Nasdaq Stock Market LLC
6.250% Junior Subordinated Debentures due 2058BHFALThe Nasdaq Stock Market LLC
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 filerþAccelerated 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 August 4, 2021, 83,110,216 shares of the registrant’s common stock were outstanding.



Table of Contents


Part I — Financial Information
Item 1. Financial Statements
Brighthouse Financial, Inc.
Interim Condensed Consolidated Balance Sheets
June 30, 2021 (Unaudited) and December 31, 2020
(In millions, except share and per share data)
June 30, 2021December 31, 2020
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $75,454 and $70,529, respectively; allowance for credit losses of $9 and $2, respectively)$84,785 $82,495 
Equity securities, at estimated fair value91 138 
Mortgage loans (net of allowance for credit losses of $97 and $94, respectively)16,732 15,808 
Policy loans1,255 1,291 
Limited partnerships and limited liability companies3,546 2,810 
Short-term investments, principally at estimated fair value1,293 3,242 
Other invested assets, principally at estimated fair value (net of allowance for credit losses of $13 and $13, respectively)2,863 3,747 
Total investments110,565 109,531 
Cash and cash equivalents4,882 4,108 
Accrued investment income827 676 
Premiums, reinsurance and other receivables (net of allowance for credit losses of $10 and $10, respectively)16,127 16,158 
Deferred policy acquisition costs and value of business acquired5,122 4,911 
Other assets494 516 
Separate account assets115,839 111,969 
Total assets$253,856 $247,869 
Liabilities and Equity
Liabilities
Future policy benefits$43,427 $44,448 
Policyholder account balances60,300 54,508 
Other policy-related balances3,356 3,411 
Payables for collateral under securities loaned and other transactions5,143 5,252 
Long-term debt3,436 3,436 
Current income tax payable150 126 
Deferred income tax liability1,109 1,620 
Other liabilities4,916 5,011 
Separate account liabilities115,839 111,969 
Total liabilities237,676 229,781 
Contingencies, Commitments and Guarantees (Note 10)00
Equity
Brighthouse Financial, Inc.’s stockholders’ equity:
Preferred stock, par value $0.01 per share; $1,403 aggregate liquidation preference
Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 121,475,669 and 121,002,523 shares issued, respectively; 84,223,669 and 88,211,618 shares outstanding, respectively
Additional paid-in capital13,842 13,878 
Retained earnings (deficit)(1,088)(534)
Treasury stock, at cost; 37,252,000 and 32,790,905 shares, respectively(1,236)(1,038)
Accumulated other comprehensive income (loss)4,596 5,716 
Total Brighthouse Financial, Inc.’s stockholders’ equity16,115 18,023 
Noncontrolling interests65 65 
Total equity16,180 18,088 
Total liabilities and equity$253,856 $247,869 
See accompanying notes to the interim condensed consolidated financial statements.
2

Brighthouse Financial, Inc.
Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
For the Three Months and Six Months Ended June 30, 2021 and 2020 (Unaudited)
(In millions, except per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
Revenues
Premiums$162 $193 $346 $391 
Universal life and investment-type product policy fees919 827 1,849 1,713 
Net investment income1,212 652 2,399 1,568 
Other revenues101 93 228 195 
Net investment gains (losses)(34)(34)(20)(53)
Net derivative gains (losses)(684)(2,653)(2,188)4,249 
Total revenues1,676 (922)2,614 8,063 
Expenses
Policyholder benefits and claims752 839 1,508 2,026 
Interest credited to policyholder account balances287 276 584 535 
Amortization of deferred policy acquisition costs and value of business acquired(92)99 678 
Other expenses608 577 1,170 1,094 
Total expenses1,655 1,600 3,361 4,333 
Income (loss) before provision for income tax21 (2,522)(747)3,730 
Provision for income tax expense (benefit)(10)(531)(195)762 
Net income (loss)31 (1,991)(552)2,968 
Less: Net income (loss) attributable to noncontrolling interests
Net income (loss) attributable to Brighthouse Financial, Inc.31 (1,991)(554)2,966 
Less: Preferred stock dividends21 46 14 
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders$10 $(1,998)$(600)$2,952 
Comprehensive income (loss)$1,238 $327 $(1,672)$4,693 
Less: Comprehensive income (loss) attributable to noncontrolling interests
Comprehensive income (loss) attributable to Brighthouse Financial, Inc.$1,238 $327 $(1,674)$4,691 
Earnings per common share
Basic$0.12 $(21.10)$(6.93)$29.60 
Diluted$0.11 $(21.10)$(6.93)$29.56 
See accompanying notes to the interim condensed consolidated financial statements.
3

Brighthouse Financial, Inc.
Interim Condensed Consolidated Statements of Equity
For the Three Months and Six Months Ended June 30, 2021 and 2020 (Unaudited)
(In millions)
Preferred StockCommon StockAdditional Paid-in CapitalRetained Earnings (Deficit)Treasury Stock at CostAccumulated
Other
Comprehensive
Income (Loss)
Brighthouse Financial, Inc.’s Stockholders’ EquityNoncontrolling InterestsTotal Equity
Balance at December 31, 2020$$$13,878 $(534)$(1,038)$5,716 $18,023 $65 $18,088 
Treasury stock acquired in connection with share repurchases(68)(68)(68)
Share-based compensation(6)(1)(1)
Dividends on preferred stock(25)(25)(25)
Change in noncontrolling interests(2)(2)
Net income (loss)(585)(585)(583)
Other comprehensive income (loss), net of income tax(2,327)(2,327)(2,327)
Balance at March 31, 202113,858 (1,119)(1,112)3,389 15,017 65 15,082 
Treasury stock acquired in connection with share repurchases(124)(124)(124)
Share-based compensation
Dividends on preferred stock(21)(21)(21)
Change in noncontrolling interests
Net income (loss)31 31 31 
Other comprehensive income (loss), net of income tax1,207 1,207 1,207 
Balance at June 30, 2021$$$13,842 $(1,088)$(1,236)$4,596 $16,115 $65 $16,180 
Preferred StockCommon StockAdditional Paid-in CapitalRetained Earnings (Deficit)Treasury Stock at CostAccumulated
Other
Comprehensive
Income (Loss)
Brighthouse Financial, Inc.’s Stockholders’ EquityNoncontrolling InterestsTotal Equity
Balance at December 31, 2019$$$12,908 $585 $(562)$3,240 $16,172 $65 $16,237 
Cumulative effect of change in accounting principle, net of income tax(14)(11)(11)
Balance at January 1, 202012,908 571 (562)3,243 16,161 65 16,226 
Treasury stock acquired in connection with share repurchases(142)(142)(142)
Share-based compensation3(2)
Dividends on preferred stock(7)(7)(7)
Change in noncontrolling interests(2)(2)
Net income (loss)4,957 4,957 4,959 
Other comprehensive income (loss), net of income tax(596)(596)(596)
Balance at March 31, 202012,911 5,521 (706)2,647 20,374 65 20,439 
Preferred stock issuance390 390 390 
Treasury stock acquired in connection with share repurchases(180)(180)(180)
Share-based compensation(1)
Dividends on preferred stock(7)(7)(7)
Change in noncontrolling interests
Net income (loss)(1,991)(1,991)(1,991)
Other comprehensive income (loss), net of income tax2,318 2,318 2,318 
Balance at June 30, 2020$$$13,307 $3,523 $(887)$4,965 $20,909 $65 $20,974 
See accompanying notes to the interim condensed consolidated financial statements.
4

Brighthouse Financial, Inc.
Interim Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2021 and 2020 (Unaudited)
(In millions)
Six Months Ended
June 30,
20212020
Net cash provided by (used in) operating activities$69 $467 
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities5,238 3,729 
Equity securities101 27 
Mortgage loans1,384 827 
Limited partnerships and limited liability companies117 86 
Purchases of:
Fixed maturity securities(9,833)(5,894)
Equity securities(6)
Mortgage loans(2,247)(923)
Limited partnerships and limited liability companies(379)(298)
Cash received in connection with freestanding derivatives2,140 4,958 
Cash paid in connection with freestanding derivatives(2,893)(2,138)
Net change in policy loans36 91 
Net change in short-term investments1,949 (2,565)
Net change in other invested assets(19)(25)
Net cash provided by (used in) investing activities(4,412)(2,125)
Cash flows from financing activities
Policyholder account balances:
Deposits6,886 4,835 
Withdrawals(1,295)(1,153)
Net change in payables for collateral under securities loaned and other transactions(109)3,485 
Long-term debt issued614 
Long-term debt repaid(1)(1,001)
Preferred stock issued, net of issuance costs390 
Dividends on preferred stock(46)(14)
Treasury stock acquired in connection with share repurchases(192)(322)
Financing element on certain derivative instruments and other derivative related transactions, net(118)(698)
Other, net(8)(30)
Net cash provided by (used in) financing activities5,117 6,106 
Change in cash, cash equivalents and restricted cash774 4,448 
Cash, cash equivalents and restricted cash, beginning of period4,108 2,877 
Cash, cash equivalents and restricted cash, end of period$4,882 $7,325 
Supplemental disclosures of cash flow information
Net cash paid (received) for:
Interest$81 $88 
Income tax$(4)$
See accompanying notes to the interim condensed consolidated financial statements.
5

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies
Business
“Brighthouse Financial” and the “Company” refer to Brighthouse Financial, Inc. and its subsidiaries. Brighthouse Financial, Inc. (“BHF”) is a holding company formed in 2016 to own the legal entities that historically operated a substantial portion of MetLife, Inc.’s former retail segment until becoming a separate, publicly-traded company in August 2017. Brighthouse Financial is one of the largest providers of annuity and life insurance products in the United States through multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners. The Company is organized into 3 segments: Annuities; Life; and Run-off. In addition, the Company reports certain of its results of operations in Corporate & Other.
Basis of Presentation
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the interim condensed consolidated financial statements. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from these estimates.
Consolidation
The accompanying interim condensed consolidated financial statements include the accounts of Brighthouse Financial, as well as partnerships and limited liability companies (“LLCs”) that the Company controls. Intercompany accounts and transactions have been eliminated.
The Company uses the equity method of accounting for investments in limited partnerships and LLCs when it has more than a minor ownership interest or more than a minor influence over the investee’s operations. The Company generally recognizes its share of the investee’s earnings on a three-month lag in instances where the investee’s financial information is not sufficiently timely or when the investee’s reporting period differs from the Company’s reporting period. When the Company has virtually no influence over the investee’s operations, the investment is carried at fair value.
Reclassifications
Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform with the current period presentation as may be discussed when applicable in the Notes to the Interim Condensed Consolidated Financial Statements.
The accompanying interim condensed consolidated financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2020 consolidated balance sheet data was derived from audited consolidated financial statements included in Brighthouse Financial, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual Report”), which include all disclosures required by GAAP. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2020 Annual Report.
Adoption of New Accounting Pronouncements
Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASU”) to the FASB Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. There were no ASUs adopted as of June 30, 2021.
6

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)
Future Adoption of New Accounting Pronouncements
In August 2018, the FASB issued new guidance on long-duration contracts (ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts). This new guidance is effective for fiscal years beginning after January 1, 2023. The amendments to Topic 944 will result in significant changes to the accounting for long-duration insurance contracts. These changes (i) require all guarantees that qualify as market risk benefits to be measured at fair value, (ii) require more frequent updating of assumptions and modify existing discount rate requirements for certain insurance liabilities, (iii) modify the methods of amortization for deferred policy acquisition costs (“DAC”), and (iv) require new qualitative and quantitative disclosures around insurance contract asset and liability balances and the judgments, assumptions and methods used to measure those balances. The market risk benefit guidance is required to be applied on a retrospective basis, while the changes to guidance for insurance liabilities and DAC may be applied to existing carrying amounts on the effective date or on a retrospective basis.
The Company continues to evaluate the new guidance and therefore is unable to estimate the impact on its financial statements. The most significant impact from the ASU is the requirement that all variable annuity guarantees will be considered market risk benefits and measured at fair value, whereas currently a significant amount of variable annuity guarantees are classified as insurance liabilities.
2. Segment Information
The Company is organized into 3 segments: Annuities; Life; and Run-off. In addition, the Company reports certain of its results of operations in Corporate & Other.
Annuities
The Annuities segment consists of a variety of variable, fixed, index-linked and income annuities designed to address contract holders’ needs for protected wealth accumulation on a tax-deferred basis, wealth transfer and income security.
Life
The Life segment consists of insurance products and services, including term, universal, whole and variable life products designed to address policyholders’ needs for financial security and protected wealth transfer, which may be provided on a tax-advantaged basis.
Run-off
The Run-off segment consists of products that are no longer actively sold and are separately managed, including structured settlements, pension risk transfer contracts, certain company-owned life insurance policies, certain funding agreements and universal life with secondary guarantees.
Corporate & Other
Corporate & Other contains the excess capital not allocated to the segments and interest expense related to the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. Corporate & Other also includes long-term care and workers’ compensation business reinsured through 100% quota share reinsurance agreements, activities related to funding agreements associated with the Company’s institutional spread margin business, as well as direct-to-consumer life insurance that is no longer actively sold.
Financial Measures and Segment Accounting Policies
Adjusted earnings is a financial measure used by management to evaluate performance, allocate resources and facilitate comparisons to industry results. Consistent with GAAP guidance for segment reporting, adjusted earnings is also used to measure segment performance. The Company believes the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of its performance by the investor community by highlighting the results of operations and the underlying profitability drivers of the business. Adjusted earnings should not be viewed as a substitute for net income (loss) available to BHF’s common shareholders and excludes net income (loss) attributable to noncontrolling interests and preferred stock dividends.
Adjusted earnings, which may be positive or negative, focuses on the Company’s primary businesses principally by excluding the impact of market volatility, which could distort trends.
7

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
2. Segment Information (continued)
The following are significant items excluded from total revenues, net of income tax, in calculating adjusted earnings:
Net investment gains (losses);
Net derivative gains (losses) except earned income and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment; and
Certain variable annuity guaranteed minimum income benefits (“GMIB”) fees (“GMIB Fees”).
The following are significant items excluded from total expenses, net of income tax, in calculating adjusted earnings:
Amounts associated with benefits related to GMIBs (“GMIB Costs”);
Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”); and
Amortization of DAC and value of business acquired (“VOBA”) related to: (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments.
The tax impact of the adjustments mentioned above is calculated net of the statutory tax rate, which could differ from the Company’s effective tax rate.
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 June 30, 2021
AnnuitiesLifeRun-offCorporate & OtherTotal
(In millions)
Pre-tax adjusted earnings$417 $85 $140 $(82)$560 
Provision for income tax expense (benefit)79 17 18 (10)104 
Post-tax adjusted earnings338 68 122 (72)456 
Less: Net income (loss) attributable to noncontrolling interests
Less: Preferred stock dividends21 21 
Adjusted earnings$338 $68 $122 $(93)435 
Adjustments for:
Net investment gains (losses)(34)
Net derivative gains (losses)(684)
Other adjustments to net income (loss)179 
Provision for income tax (expense) benefit114 
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders$10 
Interest revenue$533 $168 $499 $17 
Interest expense$$$$40 
8

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
2. Segment Information (continued)
Three Months Ended June 30, 2020
AnnuitiesLifeRun-offCorporate & OtherTotal
(In millions)
Pre-tax adjusted earnings$205 $60 $(146)$(98)$21 
Provision for income tax expense (benefit)34 12 (31)(12)
Post-tax adjusted earnings171 48 (115)(86)18 
Less: Net income (loss) attributable to noncontrolling interests
Less: Preferred stock dividends
Adjusted earnings$171 $48 $(115)$(93)11 
Adjustments for:
Net investment gains (losses)(34)
Net derivative gains (losses)(2,653)
Other adjustments to net income (loss)144 
Provision for income tax (expense) benefit534 
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders$(1,998)
Interest revenue$405 $69 $166 $16 
Interest expense$$$$45 
Six Months Ended June 30, 2021
AnnuitiesLifeRun-offCorporate & OtherTotal
(In millions)
Pre-tax adjusted earnings$831 $137 $225 $(143)$1,050 
Provision for income tax expense (benefit)157 27 27 (29)182 
Post-tax adjusted earnings674 110 198 (114)868 
Less: Net income (loss) attributable to noncontrolling interests
Less: Preferred stock dividends46 46 
Adjusted earnings$674 $110 $198 $(162)820 
Adjustments for:
Net investment gains (losses)(20)
Net derivative gains (losses)(2,188)
Other adjustments to net income (loss)411 
Provision for income tax (expense) benefit377 
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders$(600)
Interest revenue$1,083 $334 $961 $31 
Interest expense$$$$81 
9

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
2. Segment Information (continued)
Six Months Ended June 30, 2020
AnnuitiesLifeRun-offCorporate & OtherTotal
(In millions)
Pre-tax adjusted earnings$594 $73 $(236)$(157)$274 
Provision for income tax expense (benefit)107 14 (51)(34)36 
Post-tax adjusted earnings487 59 (185)(123)238 
Less: Net income (loss) attributable to noncontrolling interests
Less: Preferred stock dividends14 14 
Adjusted earnings$487 $59 $(185)$(139)222 
Adjustments for:
Net investment gains (losses)(53)
Net derivative gains (losses)4,249 
Other adjustments to net income (loss)(740)
Provision for income tax (expense) benefit(726)
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders$2,952 
Interest revenue$865 $185 $490 $36 
Interest expense$$$$92 
Total revenues by segment, as well as Corporate & Other, were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
(In millions)
Annuities$1,257 $1,052 $2,555 $2,203 
Life383 285 793 639 
Run-off662 332 1,290 825 
Corporate & Other36 37 71 79 
Adjustments(662)(2,628)(2,095)4,317 
Total$1,676 $(922)$2,614 $8,063 
Total assets by segment, as well as Corporate & Other, were as follows at:
June 30, 2021December 31, 2020
(In millions)
Annuities$177,135 $172,233 
Life24,126 23,809 
Run-off37,039 38,366 
Corporate & Other15,556 13,461 
Total$253,856 $247,869 
10

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
3. Insurance
Guarantees
As discussed in Notes 1 and 3 of the Notes to the Consolidated Financial Statements included in the 2020 Annual Report, the Company issues variable annuity contracts with guaranteed minimum benefits. Guaranteed minimum death benefits, the life contingent portion of guaranteed minimum withdrawal benefits (“GMWB”) and certain portions of GMIBs are accounted for as insurance liabilities in future policyholder benefits, while other guarantees are accounted for in whole or in part as embedded derivatives in policyholder account balances and are further discussed in Note 5.
The Company also has secondary guarantees on universal and variable life insurance contracts accounted for as insurance liabilities.
Information regarding the Company’s guarantee exposure was as follows at:
June 30, 2021December 31, 2020
In the
Event of Death
At
Annuitization
In the
Event of Death
At
Annuitization
(Dollars in millions)
Annuity Contracts (1), (2)
Variable Annuity Guarantees
Total account value (3)$111,655 $61,567 $108,424 $60,674 
Separate account value$106,608 $60,358 $103,315 $59,419 
Net amount at risk$6,031 (4)$4,949 (5)$6,438 (4)$6,692 (5)
Average attained age of contract holders71 years70 years70 years70 years
June 30, 2021December 31, 2020
Secondary Guarantees
(Dollars in millions)
Universal Life Contracts
Total account value (3)$5,634 $5,772 
Net amount at risk (6)$68,043 $69,083 
Average attained age of policyholders67 years67 years
Variable Life Contracts
Total account value (3)$4,708 $3,926 
Net amount at risk (6)$19,440 $19,909 
Average attained age of policyholders51 years51 years
_______________
(1)The Company’s annuity contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive.
(2)Includes direct business, but excludes offsets from hedging or reinsurance, if any. Therefore, the net amount at risk presented reflects the economic exposures of living and death benefit guarantees associated with variable annuities, but not necessarily their impact on the Company. See Note 5 of the Notes to the Consolidated Financial Statements included in the 2020 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.
11

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
3. Insurance (continued)
(5)Defined as the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents the Company’s potential economic exposure to such guarantees in the event all contract holders were to annuitize on the balance sheet date, even though the contracts contain terms that allow annuitization of the guaranteed amount only after the 10th anniversary of the contract, which not all contract holders have achieved.
(6)Defined as the guarantee amount less the account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date.
4. Investments
See Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the 2020 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:
June 30, 2021December 31, 2020
Amortized
Cost
Allowance for Credit LossesGross UnrealizedEstimated
Fair
Value
Amortized
Cost
Allowance for Credit LossesGross UnrealizedEstimated
Fair
Value
GainsLossesGainsLosses
(In millions)
U.S. corporate$33,775 $$4,311 $168 $37,917 $32,608 $$5,370 $70 $37,906 
Foreign corporate10,755 1,151 71 11,829 10,060 1,501 50 11,511 
U.S. government and agency7,323 2,013 78 9,258 6,007 2,637 8,638 
RMBS8,195 541 13 8,723 7,653 644 8,294 
CMBS6,545 466 13 6,998 6,207 592 6,790 
State and political subdivision3,956 884 4,835 3,673 967 4,640 
ABS3,304 56 3,356 2,834 60 10 2,884 
Foreign government1,601 276 1,869 1,487 346 1,832 
Total fixed maturity securities$75,454 $$9,698 $358 $84,785 $70,529 $$12,117 $149 $82,495 
The Company held non-income producing fixed maturity securities with an estimated fair value of $5 million at both June 30, 2021 and December 31, 2020.
Maturities of Fixed Maturity Securities
The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at June 30, 2021:
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)
Amortized cost$1,203 $9,016 $16,101 $31,090 $18,044 $75,454 
Estimated fair value$1,222 $9,531 $17,440 $37,515 $19,077 $84,785 
_______________
(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.
12

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Continuous Gross Unrealized Losses for Fixed Maturity Securities by Sector
The estimated fair value and gross unrealized losses of fixed maturity securities in an unrealized loss position, by sector and by length of time that the securities have been in a continuous unrealized loss position, were as follows at:
June 30, 2021December 31, 2020
Less than 12 Months12 Months or GreaterLess than 12 Months12 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
(Dollars in millions)
U.S. corporate$3,917 $156 $300 $12 $1,737 $57 $185 $13 
Foreign corporate1,048 33 273 38 254 387 42 
U.S. government and agency1,710 78 236 
RMBS1,277 12 41 180 22 
CMBS606 11 59 332 44 
State and political subdivision268 48 
ABS759 185 506 629 
Foreign government147 54 
Total fixed maturity securities$9,732 $304 $858 $54 $3,347 $84 $1,267 $65 
Total number of securities in an unrealized loss position1,327 260 667 244 
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 make payments in the future or the issuer’s failure to make scheduled interest and principal payments. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss is deemed to exist and an allowance for credit losses is recorded, limited by the amount that the estimated fair value is less than the amortized cost basis, with a corresponding charge to net investment gains (losses). Any unrealized losses that have not been recorded through an allowance for credit losses are recognized in other comprehensive income (loss) (“OCI”).
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.
13

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Accrued interest receivables are presented separate from the amortized cost basis of 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 $527 million and $514 million at June 30, 2021 and December 31, 2020, respectively, and is included in accrued investment income.
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 $9 million, relating to 5 securities at June 30, 2021. 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.
Rollforward of the Allowance for Credit Losses for Fixed Maturity Securities by Sector
The changes in the allowance for credit losses by sector were as follows:
U.S. CorporateForeign CorporateForeign GovernmentTotal
(In millions)
Six Months Ended June 30, 2021
Balance, beginning of period$$$$
Allowance on securities where credit losses were not previously recorded
Change in allowance on securities with an allowance recorded in a previous period(1)(1)
Write-offs charged against allowance (1)
Balance, end of period$$$$
Six Months Ended June 30, 2020
Balance, beginning of period$$$$
Allowance on securities where credit losses were not previously recorded
Change in allowance on securities with an allowance recorded in a previous period(1)(1)
Write-offs charged against allowance (1)(3)(1)(4)
Balance, end of period$$$$
_______________
(1)The Company did 0t record any write-offs during the six months ended June 30, 2021. The Company recorded total write-offs of $13 million during the six months ended June 30, 2020.
14

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:
June 30, 2021December 31, 2020
Carrying
Value
% of
Total
Carrying
Value
% of
Total
(Dollars in millions)
Commercial$10,252 61.3 %$9,714 61.4 %
Agricultural3,791 22.7 3,538 22.4 
Residential2,786 16.6 2,650 16.8 
Total mortgage loans (1)16,829 100.6 15,902 100.6 
Allowance for credit losses(97)(0.6)(94)(0.6)
Total mortgage loans, net$16,732 100.0 %$15,808 100.0 %
_______________
(1)Purchases of mortgage loans from third parties were $621 million and $799 million for the three months and six months ended June 30, 2021, respectively, and $331 million and $488 million for the three months and six months ended June 30, 2020, 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.
Accrued interest receivables are presented separate from the amortized cost basis of mortgage loans. An allowance for credit losses is generally not estimated on an accrued interest receivable, rather when a loan is placed in nonaccrual status the associated accrued interest receivable balance is written off with a corresponding reduction to net investment income. For mortgage loans that are granted payment deferrals due to the impact of the ongoing worldwide pandemic sparked by the novel coronavirus (“COVID-19 pandemic”), interest continues to be accrued during the deferral period if the loan was less than 30 days past due at December 31, 2019 and performing at the onset of the pandemic. Accrued interest on COVID-19 pandemic impacted loans was not significant at both June 30, 2021 and December 31, 2020. The accrued interest receivable on mortgage loans is included in accrued investment income and totaled $88 million and $89 million at June 30, 2021 and December 31, 2020, respectively.
The allowance for credit losses is estimated using relevant available information, from internal and external sources, relating to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience provides the basis for estimating expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics and environmental conditions. A reasonable and supportable forecast period of two-years is used with an input reversion period of one-year.
Mortgage loans are evaluated in each of the three portfolio segments to determine the allowance for credit losses. The loan-level loss rates are determined using individual loan terms and characteristics, risk pools/internal ratings, national economic forecasts, prepayment speeds, and estimated default and loss severity. The resulting loss rates are applied to the mortgage loan’s amortized cost to generate an allowance for credit losses. In certain situations, the allowance for credit losses is measured as the difference between the loan’s amortized cost and liquidation value of the collateral. These situations include collateral dependent loans, expected troubled debt restructurings (“TDR”), foreclosure probable loans, and loans with dissimilar risk characteristics.
15

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 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:
CommercialAgriculturalResidentialTotal
(In millions)
Six Months Ended June 30, 2021
Balance, beginning of period$44 $15 $35 $94 
Current period provision(2)
Balance, end of period$47 $13 $37 $97 
Six Months Ended June 30, 2020
Balance, beginning of period$27 $17 $22 $66 
Current period provision10 (1)17 26 
Balance, end of period$37 $16 $39 $92 
PCD Mortgage Loans
Purchases of PCD mortgage loans are summarized as follows:
Six Months Ended June 30,
20212020
(In millions)
Purchase price$229 $77 
Allowance at acquisition date
Discount or premium attributable to other factors(16)
Par value$214 $81 

16

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. 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:
20212020201920182017PriorTotal
(In millions)
June 30, 2021
Commercial mortgage loans
Loan-to-value ratios:
Less than 65%$692 $333 $1,423 $972 $514 $3,565 $7,499 
65% to 75%219 199 552 512 294 576 2,352 
76% to 80%44 88 132 
Greater than 80%30 239 269 
Total commercial mortgage loans911 532 1,975 1,514 852 4,468 10,252 
Agricultural mortgage loans
Loan-to-value ratios:
Less than 65%433 543 538 717 354 934 3,519 
65% to 75%61 79 78 11 25 18 272 
Total agricultural mortgage loans494 622 616 728 379 952 3,791 
Residential mortgage loans
Performing66 208 351 332 177 1,594 2,728 
Nonperforming51 58 
Total residential mortgage loans66 210 353 334 178 1,645 2,786 
Total$1,471 $1,364 $2,944 $2,576 $1,409 $7,065 $16,829 
20202019201820172016PriorTotal
(In millions)
December 31, 2020
Commercial mortgage loans
Loan-to-value ratios:
Less than 65%$317 $1,527 $1,004 $515 $1,109 $2,808 $7,280 
65% to 75%200 450 482 322 59 521 2,034 
76% to 80%44 79 131 
Greater than 80%29 234 269 
Total commercial mortgage loans517 1,977 1,515 881 1,253 3,571 9,714 
Agricultural mortgage loans
Loan-to-value ratios:
Less than 65%569 526 749 391 417 663 3,315 
65% to 75%81 81 10 33 18 223 
Total agricultural mortgage loans650 607 759 424 417 681 3,538 
Residential mortgage loans
Performing214 381 413 131 70 1,375 2,584 
Nonperforming53 66 
Total residential mortgage loans216 387 417 131 71 1,428 2,650 
Total$1,383 $2,971 $2,691 $1,436 $1,741 $5,680 $15,902 
17

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. 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:
June 30, 2021December 31, 2020
Amortized Cost% of
Total
Amortized Cost% of
Total
(Dollars in millions)
Debt-service coverage ratios:
Greater than 1.20x$9,545 93.1 %$9,450 97.3 %
1.00x - 1.20x359 3.5 204 2.1 
Less than 1.00x348 3.4 60 0.6 
Total$10,252 100.0 %$9,714 100.0 %
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 June 30, 2021 and December 31, 2020. 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 June 30, 2021 and December 31, 2020, $33 million and $38 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:
June 30, 2021December 31, 2020
CommercialAgriculturalResidentialTotalCommercialAgriculturalResidentialTotal
(In millions)
Current$10,252 $3,774 $2,683 $16,709 $9,714 $3,538 $2,575 $15,827 
30-59 days past due45 45 
60-89 days past due14 14 24 24 
90-179 days past due15 28 43 27 27 
180+ days past due16 18 15 15 
Total$10,252 $3,791 $2,786 $16,829 $9,714 $3,538 $2,650 $15,902 
18

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Mortgage Loans in Nonaccrual Status by Portfolio Segment
Mortgage loans are placed in a nonaccrual status if there are concerns regarding collectability of future payments or the loan is past due, unless the past due loan is well collateralized. To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the impacted loans generally will not be reported as in a nonaccrual status during the period of deferral. A COVID-19 pandemic modified loan is only reported as a nonaccrual asset in the event a borrower declares bankruptcy, the borrower experiences significant credit deterioration such that the Company does not expect to collect all principal and interest due, or the loan was 90 days past due at the onset of the pandemic. At June 30, 2021 and December 31, 2020, $33 million and $38 million, respectively, of the COVID-19 pandemic modified loans were in nonaccrual status.
The amortized cost of mortgage loans in a nonaccrual status by portfolio segment were as follows at:
CommercialAgriculturalResidential (1)Total
(In millions)
June 30, 2021$$14 $58 $72 
December 31, 2020$$$66 $66 
_______________
(1)The Company had $9 million and $7 million of residential mortgage loans in nonaccrual status for which there was no related allowance for credit losses at June 30, 2021 and December 31, 2020, respectively.
Current period investment income on mortgage loans in nonaccrual status was less than $1 million for both the six months ended June 30, 2021 and 2020.
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 troubled debt restructuring during both the six months ended June 30, 2021 and 2020.
Short-term modifications made on a good faith basis to borrowers who were not more than 30 days past due at December 31, 2019 and in response to the COVID-19 pandemic are not considered TDRs.
Other Invested Assets
Over 90% of other invested assets is comprised of freestanding derivatives with positive estimated fair values. See Note 5 for information about freestanding derivatives with positive estimated fair values. Other invested assets also includes tax credit and renewable energy partnerships, leveraged leases and Federal Home Loan Bank (“FHLB”) stock.
Leveraged Leases
The carrying value of leveraged leases was $49 million and $50 million at June 30, 2021 and December 31, 2020, respectively. The allowance for credit losses was $13 million at both June 30, 2021 and December 31, 2020. Rental receivables are generally due in periodic installments. The payment periods for leveraged leases generally range from one to 12 years. For rental receivables, the primary credit quality indicator is whether the rental receivable is performing or nonperforming, which is assessed monthly. Nonperforming rental receivables are generally defined as those that are 90 days or more past due. At both June 30, 2021 and December 31, 2020, all leveraged leases were performing.
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”).
19

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
The components of net unrealized investment gains (losses), included in AOCI, were as follows at:
June 30, 2021December 31, 2020
(In millions)
Fixed maturity securities$9,340 $11,968 
Derivatives208 173 
Other(17)(16)
Subtotal9,531 12,125 
Amounts allocated from:
Future policy benefits(3,204)(4,313)
DAC, VOBA and DSI(444)(520)
Subtotal(3,648)(4,833)
Deferred income tax benefit (expense)(1,235)(1,531)
Net unrealized investment gains (losses)$4,648 $5,761 
The changes in net unrealized investment gains (losses) were as follows:
Six Months Ended June 30, 2021
(In millions)
Balance at December 31, 2020$5,761 
Unrealized investment gains (losses) during the period(2,594)
Unrealized investment gains (losses) relating to:
Future policy benefits1,109 
DAC, VOBA and DSI76 
Deferred income tax benefit (expense)296 
Balance at June 30, 2021$4,648 
Change in net unrealized investment gains (losses)$(1,113)
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 June 30, 2021 and December 31, 2020.
Securities Lending
Elements of the securities lending program are presented below at:
June 30, 2021December 31, 2020
(In millions)
Securities on loan: (1)
Amortized cost$3,071 $2,373 
Estimated fair value$3,969 $3,603 
Cash collateral received from counterparties (2)$4,025 $3,674 
Securities collateral received from counterparties (3)$$
Reinvestment portfolio — estimated fair value$4,193 $3,830 
_______________
(1)Included within fixed maturity securities.
(2)Included within payables for collateral under securities loaned and other transactions.
20

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
(3)Securities collateral received from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reported on the consolidated financial statements.
The cash collateral liability by loaned security type and remaining tenor of the agreements were as follows at:
June 30, 2021December 31, 2020
Open (1)1 Month or Less1 to 6 MonthsTotalOpen (1)1 Month or Less1 to 6 MonthsTotal
(In millions)
U.S. government and agency$1,255 $2,336 $433 $4,024 $937 $2,300 $437 $3,674 
U.S. corporate
Total$1,256 $2,336 $433 $4,025 $937 $2,300 $437 $3,674 
_______________
(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 June 30, 2021 was $1.2 billion, primarily comprised of U.S. government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement.
The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including agency RMBS, ABS, U.S. government and agency securities, non-agency RMBS and U.S. and foreign corporate securities) with 61% invested in agency RMBS, cash and cash equivalents and U.S. government and agency securities at June 30, 2021. 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:
June 30, 2021December 31, 2020
(In millions)
Invested assets on deposit (regulatory deposits) (1)$9,899 $10,135 
Invested assets held in trust (reinsurance agreements) (2)5,725 5,717 
Invested assets pledged as collateral (3)5,448 5,595 
Total invested assets on deposit, held in trust and pledged as collateral$21,072 $21,447 
_______________
(1)The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $112 million and $60 million of the assets on deposit represents restricted cash and cash equivalents at June 30, 2021 and December 31, 2020, respectively.
(2)The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions, of which $120 million and $101 million of the assets held in trust balance represents restricted cash and cash equivalents at June 30, 2021 and December 31, 2020, respectively.
(3)The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 3 of the Notes to the Consolidated Financial Statements included in the 2020 Annual Report) and derivative transactions (see Note 5).
See “— Securities Lending” for information regarding securities on loan. In addition, the Company’s investment in FHLB common stock, which is considered restricted until redeemed by the issuer, was $63 million and $39 million at redemption value at June 30, 2021 and December 31, 2020, respectively.
21

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Variable Interest Entities
A variable interest entity (“VIE”) is a legal entity that does not have sufficient equity at risk to finance its activities or is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not substantively participate in the gains and losses of the entity.
The Company enters into various arrangements with VIEs in the normal course of business and has invested in legal entities that are VIEs. VIEs are consolidated when it is determined that the Company is the primary beneficiary. A primary beneficiary is the variable interest holder in a VIE with both (i) the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In addition, the evaluation of whether a legal entity is a VIE and if the Company is a primary beneficiary includes a review of the capital structure of the VIE, the related contractual relationships and terms, the nature of the operations and purpose of the VIE, the nature of the VIE interests issued and the Company’s involvement with the entity.
There were no material VIEs for which the Company has concluded that it is the primary beneficiary at either June 30, 2021 or December 31, 2020.
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:
 June 30, 2021December 31, 2020
 Carrying
Amount
Maximum
Exposure
to Loss
Carrying
Amount
Maximum
Exposure
to Loss
 (In millions)
Fixed maturity securities$14,562 $13,641 $13,665 $12,581 
Limited partnerships and LLCs2,997 4,336 2,319 3,578 
Total$17,559 $17,977 $15,984 $16,159 
The Company’s investments in unconsolidated VIEs are described below.
Fixed Maturity Securities
The Company invests in U.S. corporate bonds, foreign corporate bonds and Structured Securities issued by VIEs. The Company is not obligated to provide any financial or other support to these VIEs, other than the original investment. The Company’s involvement with these entities is limited to that of a passive investor. The Company has no unilateral right to appoint or remove the servicer, special servicer, or investment manager, which are generally viewed as having the power to direct the activities that most significantly impact the economic performance of the VIE, nor does the Company function in any of these roles. The Company does not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity; as a result, the Company has determined it is not the primary beneficiary, or consolidator, of the VIE. The Company’s maximum exposure to loss on these fixed maturity securities is limited to the amortized cost of these investments. See “— Fixed Maturity Securities Available-for-sale” for information on these securities.
Limited Partnerships and LLCs
The Company holds investments in certain limited partnerships and LLCs which are VIEs. These ventures include limited partnerships, LLCs, private equity funds, hedge funds, and to a lesser extent tax credit and renewable energy partnerships. The Company is not considered the primary beneficiary, or consolidator, when its involvement takes the form of a limited partner interest and is restricted to a role of a passive investor, as a limited partner’s interest does not provide the Company with any substantive kick-out or participating rights, nor does it provide the Company with the power to direct the activities of the fund. The Company’s maximum exposure to loss on these investments is limited to: (i) the amount invested in debt or equity of the VIE and (ii) commitments to the VIE, as described in Note 10.
22

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Net Investment Income
The components of net investment income were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
(In millions)
Investment income:
Fixed maturity securities$703 $676 $1,393 $1,345 
Equity securities
Mortgage loans167 166 331 332 
Policy loans16 13 33 25 
Limited partnerships and LLCs (1)350 (189)688 (107)
Cash, cash equivalents and short-term investments14 37 
Other11 19 25 
Total investment income1,247 692 2,469 1,660 
Less: Investment expenses35 40 70 92 
Net investment income$1,212 $652 $2,399 $1,568 
_______________
(1)Includes net investment income pertaining to other limited partnership interests of $339 million and $670 million for the three months and six months ended June 30, 2021, respectively, and ($192) million and ($119) million for the three months and six months ended June 30, 2020, respectively.
Net Investment Gains (Losses)
Components of Net Investment Gains (Losses)
The components of net investment gains (losses) were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
(In millions)
Fixed maturity securities $(33)$(21)$(23)$(27)
Equity securities(7)
Mortgage loans(5)(22)(1)(26)
Limited partnerships and LLCs(2)(3)
Other10 
Total net investment gains (losses)$(34)$(34)$(20)$(53)

23

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Sales or Disposals of Fixed Maturity Securities
Investment gains and losses on sales of securities are determined on a specific identification basis. Proceeds from sales or disposals of fixed maturity securities and the components of fixed maturity securities net investment gains (losses) were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
(In millions)
Proceeds$977 $622 $2,239 $1,271 
Gross investment gains$$15 $41 $32 
Gross investment losses(40)(37)(57)(43)
Net investment gains (losses)$(32)$(22)$(16)$(11)
5. Derivatives
Accounting for Derivatives
See Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the 2020 Annual Report for a description of the Company’s accounting policies for derivatives and the fair value hierarchy for derivatives.
Derivative Strategies
Types of Derivative Instruments and Derivative Strategies
The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to minimize its exposure to various market risks. Commonly used derivative instruments include, but are not necessarily limited to:
Interest rate derivatives: swaps, caps, swaptions and forwards;
Foreign currency exchange rate derivatives: forwards and swaps;
Equity derivatives: options, total return swaps and variance swaps; and
Credit derivatives: single and index reference credit default swaps and swaptions.
For detailed information on these contracts and the related strategies, see Note 7 of the Notes to the Consolidated Financial Statements included in the 2020 Annual Report.
24

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)
Primary Risks Managed by Derivatives
The primary underlying risk exposure, gross notional amount and estimated fair value of derivatives held were as follows at:
June 30, 2021December 31, 2020
Primary Underlying Risk ExposureGross
Notional
Amount
Estimated Fair ValueGross
Notional
Amount
Estimated Fair Value
AssetsLiabilitiesAssetsLiabilities
(In millions)
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate forwardsInterest rate$240 $28 $$290 $66 $
Foreign currency swapsForeign currency exchange rate2,905 153 59 2,812 134 112 
Total qualifying hedges3,145 181 59 3,102 200 112 
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swapsInterest rate2,845 366 19 2,295 463 
Interest rate capsInterest rate3,100 2,350 
Interest rate optionsInterest rate28,590 302 178 25,980 712 122 
Interest rate forwardsInterest rate10,498 244 244 8,086 851 78 
Foreign currency swapsForeign currency exchange rate973 81 25 1,000 86 32 
Foreign currency forwardsForeign currency exchange rate460 201 
Credit default swaps — purchasedCredit18 18 
Credit default swaps — writtenCredit1,774 41 1,755 41 
Credit default optionsCredit300 100 
Equity index optionsEquity market29,176 1,188 944 31,576 1,071 838 
Equity variance swapsEquity market359 1,098 13 20 
Equity total return swapsEquity market25,760 259 403 15,056 143 822 
Total non-designated or non-qualifying derivatives103,853 2,500 1,822 89,515 3,382 1,912 
Embedded derivatives:
Ceded guaranteed minimum income benefitsOtherN/A219 N/A283 
Direct index-linked annuitiesOtherN/A5,466 N/A3,855 
Direct guaranteed minimum benefitsOtherN/A2,041 N/A2,920 
Assumed index-linked annuitiesOtherN/A427 N/A382 
Total embedded derivativesN/A219 7,934 N/A283 7,157 
Total$106,998 $2,900 $9,815 $92,617 $3,865 $9,181 
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 June 30, 2021 and December 31, 2020. 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 ASC 815; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income; and (iv) written credit default swaps that are used to create synthetic credit investments and that do not qualify for hedge accounting because they do not involve a hedging relationship.
25

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)
The amount and location of gains (losses), including earned income, recognized for derivatives and gains (losses) pertaining to hedged items presented in net derivative gains (losses) were as follows:
Net Derivative Gains (Losses) Recognized for DerivativesNet Derivative Gains (Losses) Recognized for Hedged ItemsNet Investment IncomeAmount of Gains (Losses) Deferred in AOCI
(In millions)
Three Months Ended June 30, 2021
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives$$$$19 
Foreign currency exchange rate derivatives95 
Total cash flow hedges114 
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives722 
Foreign currency exchange rate derivatives18 (2)
Credit derivatives
Equity derivatives(306)
Embedded derivatives(1,127)
Total non-qualifying hedges(685)(2)
Total$(682)$(2)$$114 
Three Months Ended June 30, 2020
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives$$$$(4)
Foreign currency exchange rate derivatives(3)10 (136)
Total cash flow hedges(3)10 (140)
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives(165)
Foreign currency exchange rate derivatives(27)(2)
Credit derivatives29 
Equity derivatives(1,605)
Embedded derivatives(883)
Total non-qualifying hedges(2,651)(2)
Total$(2,648)$(5)$10 $(140)
26

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)
Net Derivative Gains (Losses) Recognized for DerivativesNet Derivative Gains (Losses) Recognized for Hedged ItemsNet Investment IncomeAmount of Gains (Losses) Deferred in AOCI
(In millions)
Six Months Ended June 30, 2021
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives$$— $$(33)
Foreign currency exchange rate derivatives(3)16 79 
Total cash flow hedges(3)18 46 
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives(1,190)
Foreign currency exchange rate derivatives11 
Credit derivatives11 
Equity derivatives(448)
Embedded derivatives(579)
Total non-qualifying hedges(2,195)
Total$(2,186)$(2)$18 $46 
Six Months Ended June 30, 2020
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives$$$$93 
Foreign currency exchange rate derivatives(3)21 327 
Total cash flow hedges(3)22 420 
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives4,756 
Foreign currency exchange rate derivatives107 (9)
Credit derivatives(3)
Equity derivatives359 
Embedded derivatives(962)
Total non-qualifying hedges4,257 (9)
Total$4,261 $(12)$22 $420 
At June 30, 2021 and December 31, 2020, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions was two years and three years, respectively.
At June 30, 2021 and December 31, 2020, the balance in AOCI associated with cash flow hedges was $208 million and $173 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.
27

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)
The estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps were as follows at:
June 30, 2021December 31, 2020
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)
Aaa/Aa/A$14 $683 2.4$15 $683 2.9
Baa27 1,081 5.226 1,072 5.2
Ba4.5— 
Caa and Lower(1)4.5— 
Total$40 $1,774 4.1$41 $1,755 4.3
_______________
(1)The Company has written credit protection on both single name and index references. The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s, S&P and Fitch. If no rating is available from a rating agency, then an internally developed rating is used.
(2)The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.
Counterparty Credit Risk
The Company may be exposed to credit-related losses in the event of counterparty nonperformance on derivative instruments. Generally, the credit exposure is the fair value at the reporting date less any collateral received from the counterparty.
The Company manages its credit risk by: (i) entering into derivative transactions with creditworthy counterparties governed by master netting agreements; (ii) trading through regulated exchanges and central clearing counterparties; (iii) obtaining collateral, such as cash and securities, when appropriate; and (iv) setting limits on single party credit exposures which are subject to periodic management review.
See Note 6 for a description of the impact of credit risk on the valuation of derivatives.
The estimated fair values of net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
Gross Amounts Not Offset on the Consolidated Balance Sheets
Gross Amount RecognizedFinancial Instruments (1)Collateral Received/Pledged (2)Net AmountSecurities Collateral Received/Pledged (3)Net Amount After Securities Collateral
(In millions)
June 30, 2021
Derivative assets$2,685 $(1,326)$(1,004)$355 $(305)$50 
Derivative liabilities$1,872 $(1,326)$$546 $(475)$71 
December 31, 2020
Derivative assets$3,588 $(1,342)$(1,340)$906 $(840)$66 
Derivative liabilities$2,010 $(1,342)$$668 $(630)$38 
_______________
(1)Represents amounts subject to an enforceable master netting agreement or similar agreement.
28

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)
(2)The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreement.
(3)Securities collateral received from counterparties is not reported on the consolidated balance sheets and may not be sold or re-pledged unless the counterparty is in default. Amounts do not include excess of collateral pledged or received.
The Company’s collateral arrangements generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the amount owed by that counterparty reaches a minimum transfer amount. Certain of these arrangements also include credit-contingent provisions which permit the party with positive fair value to terminate the derivative at the current fair value or demand immediate full collateralization from the party in a net liability position, in the event that the financial strength or credit rating of the party in a net liability position falls below a certain level.
The aggregate estimated fair values of derivatives in a net liability position containing such credit-contingent provisions and the aggregate estimated fair value of assets posted as collateral for such instruments were as follows at:
June 30, 2021December 31, 2020
(In millions)
Estimated fair value of derivatives in a net liability position (1)$546 $668 
Estimated Fair Value of Collateral Provided: (2)
Fixed maturity securities$887 $1,205 
_______________
(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.
29

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value
Considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.
Recurring Fair Value Measurements
The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy are presented in the tables below. Investments that do not have a readily determinable fair value and are measured at net asset value (or equivalent) as a practical expedient to estimated fair value are excluded from the fair value hierarchy.
June 30, 2021
Fair Value HierarchyTotal Estimated
Fair Value
Level 1Level 2Level 3
(In millions)
Assets
Fixed maturity securities:
U.S. corporate$$37,389 $528 $37,917 
Foreign corporate11,468 361 11,829 
U.S. government and agency3,360 5,898 9,258 
RMBS8,689 34 8,723 
CMBS6,996 6,998 
State and political subdivision4,835 4,835 
ABS3,175 181 3,356 
Foreign government1,857 12 1,869 
Total fixed maturity securities3,360 80,307 1,118 84,785 
Equity securities26 62 91 
Short-term investments923 370 1,293 
Derivative assets: (1)
Interest rate948 948 
Foreign currency exchange rate230 236 
Credit27 14 41 
Equity market1,447 1,456 
Total derivative assets2,652 29 2,681 
Embedded derivatives within asset host contracts (2)219 219 
Separate account assets42 115,797 115,839 
Total assets$4,351 $199,188 $1,369 $204,908 
Liabilities
Derivative liabilities: (1)
Interest rate$$441 $$441 
Foreign currency exchange rate84 84 
Credit
Equity market1,347 1,354 
Total derivative liabilities1,872 1,881 
Embedded derivatives within liability host contracts (2)7,934 7,934 
Total liabilities$$1,872 $7,943 $9,815 
30

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
December 31, 2020
Fair Value HierarchyTotal Estimated
Fair Value
Level 1Level 2Level 3
(In millions)
Assets
Fixed maturity securities:
U.S. corporate$$37,415 $491 $37,906 
Foreign corporate11,314 197 11,511 
U.S. government and agency2,217 6,421 8,638 
RMBS8,272 22 8,294 
CMBS6,785 6,790 
State and political subdivision4,640 4,640 
ABS2,844 40 2,884 
Foreign government1,832 1,832 
Total fixed maturity securities2,217 79,523 755 82,495 
Equity securities36 99 138 
Short-term investments2,782 460 3,242 
Derivative assets: (1)
Interest rate2,094 2,094 
Foreign currency exchange rate219 220 
Credit27 14 41 
Equity market1,213 14 1,227 
Total derivative assets3,553 29 3,582 
Embedded derivatives within asset host contracts (2)283 283 
Separate account assets86 111,880 111,969 
Total assets$5,121 $195,515 $1,073 $201,709 
Liabilities
Derivative liabilities: (1)
Interest rate$$200 $$200 
Foreign currency exchange rate137 144 
Equity market1,660 20 1,680 
Total derivative liabilities1,997 27 2,024 
Embedded derivatives within liability host contracts (2)7,157 7,157 
Total liabilities$$1,997 $7,184 $9,181 
_______________
(1)Derivative assets are presented within other invested assets on the consolidated balance sheets and derivative liabilities are presented within other liabilities on the consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the consolidated balance sheets.
(2)Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables and other invested assets on the consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances on the consolidated balance sheets.
31

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
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.
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 six months ended June 30, 2021.
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.
32

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
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.
Equity securities and short-term investments: Fair value is determined using third-party commercial pricing services, with the primary input being quoted prices in markets that are not active.
Derivatives
Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are bilateral contracts between two counterparties (“OTC-bilateral”).
The fair values for exchange-traded derivatives are determined using the quoted market prices and are classified as Level 1 assets. For OTC-bilateral derivatives and OTC-cleared derivatives classified as Level 2 assets or liabilities, fair values are determined using the income approach. Valuations of non-option-based derivatives utilize present value techniques, whereas valuations of option-based derivatives utilize option pricing models which are based on market standard valuation methodologies and a variety of observable inputs.
The significant inputs to the pricing models for most OTC-bilateral and OTC-cleared derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. Certain OTC-bilateral and OTC-cleared derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and management believes they are consistent with what other market participants would use when pricing such instruments.
Most inputs for OTC-bilateral and OTC-cleared derivatives are mid-market inputs but, in certain cases, liquidity adjustments are made when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income.
The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all OTC-bilateral and OTC-cleared derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its OTC-bilateral and OTC-cleared derivatives using standard swap curves which may include a spread to the risk-free rate, depending upon specific collateral arrangements. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with similar collateral arrangements. As the Company and its significant derivative counterparties generally execute trades at such pricing levels and hold sufficient collateral, additional credit risk adjustments are not currently required in the valuation process. The Company’s ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. An evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period.
Embedded Derivatives
Embedded derivatives principally include certain direct and ceded variable annuity guarantees and equity crediting rates within index-linked annuity contracts. Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income.
33

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
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).
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 market 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 market 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 market 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 market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees.
The Company issues and assumes through reinsurance index-linked annuities which allow the policyholder to participate in returns from equity indices. The crediting rates associated with these features are embedded derivatives which are measured at estimated fair value separately from the host fixed annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets.
The estimated fair value of crediting rates associated with index-linked annuities is determined using a combination of an option pricing model and an option-budget approach. The valuation of these embedded derivatives also includes the establishment of a risk margin, as well as changes in nonperformance risk.
Transfers Into or Out of Level 3:
Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.
34

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)
Certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) were as follows at:
June 30, 2021December 31, 2020Impact of
Increase in Input
on Estimated
Fair Value
Valuation TechniquesSignificant
Unobservable Inputs
RangeRange
Embedded derivatives
Direct, assumed and ceded guaranteed minimum benefitsOption pricing techniquesMortality rates0.03%-12.13%0.03%-12.13%Decrease (1)
Lapse rates0.25%-15.00%0.25%-15.00%Decrease (2)
Utilization rates0.00%-25.00%0.00%-25.00%Increase (3)
Withdrawal rates0.25%-10.00%0.25%-10.00%(4)
Long-term equity volatilities16.66%-22.21%16.66%-22.21%Increase (5)
Nonperformance risk spread(0.26)%-1.37%0.47%-1.97%Decrease (6)
_______________
(1)Mortality rates vary by age and by demographic characteristics such as gender. The range shown reflects the mortality rate for policyholders between 35 and 90 years old, which represents the majority of the business with living benefits. Mortality rate assumptions are set based on company experience and include an assumption for mortality improvement.
(2)The range shown reflects base lapse rates for major product categories for duration 1-20, which represents majority of business with living benefit riders. Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in-the-money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies.
(3)The utilization rate assumption estimates the percentage of contract holders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible in a given year. The range shown represents the floor and cap of the GMIB dynamic election rates across varying levels of in-the-money. For lifetime withdrawal guarantee riders, the assumption is that everyone will begin withdrawals once account value reaches zero which is equivalent to a 100% utilization rate. Utilization rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder.
(4)The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value.
(5)Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.
(6)Nonperformance risk spread varies by duration. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative.
The Company does not develop unobservable inputs used in measuring fair value for all other assets and liabilities classified within Level 3; therefore, these are not included in the table above. The other Level 3 assets and liabilities primarily included fixed maturity securities and derivatives. For fixed maturity securities valued based on non-binding broker quotes, an increase (decrease) in credit spreads would result in a higher (lower) fair value. For derivatives valued
35

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
based on third-party pricing models, an increase (decrease) in credit spreads would generally result in a higher (lower) fair value.
The changes in assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3) were summarized as follows:
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Fixed Maturity Securities
Corporate (1)Structured SecuritiesState and
Political
Subdivision
Foreign
Government
Equity
Securities
Short-term
Investments
Net
Derivatives (2)
Net Embedded
Derivatives (3)
Separate
Account Assets (4)
(In millions)
Three Months Ended June 30, 2021
Balance, beginning of period$670 $126 $$$$$$(6,468)$
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)(1,127)— 
Total realized/unrealized gains (losses) included in AOCI21 10 
Purchases (7)231 163 12 
Sales (7)(12)(9)(6)
Issuances (7)
Settlements (7)(120)
Transfers into Level 3 (8)65 
Transfers out of Level 3 (8)(86)(64)(2)
Balance, end of period$889 $217 $$12 $$$20 $(7,715)$
Three Months Ended June 30, 2020
Balance, beginning of period$851 $218 $73 $$$$50 $(4,263)$
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)(2)(3)(883)
Total realized/unrealized gains (losses) included in AOCI59 (10)
Purchases (7)187 85 
Sales (7)(46)(1)(2)(17)
Issuances (7)
Settlements (7)(180)
Transfers into Level 3 (8)86 26 
Transfers out of Level 3 (8)(241)(158)(73)(7)(1)
Balance, end of period$894 $173 $$$$$20 $(5,326)$
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2021 (9)$$$$$$$$(1,104)$
Changes in unrealized gains (losses) included in other comprehensive income for the instruments still held at June 30, 2021 (9)$21 $$$$$$10 $$
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2020 (9)$$$$$$$$(928)$
Changes in unrealized gains (losses) included in other comprehensive income for the instruments still held at June 30, 2020 (9)$58 $$$$$$(10)$$
36

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Fixed Maturity Securities
Corporate (1)Structured SecuritiesState and
Political
Subdivision
Foreign
Government
Equity
Securities
Short-term
Investments
Net
Derivatives (2)
Net Embedded
Derivatives (3)
Separate
Account Assets (4)
(In millions)
Six Months Ended June 30, 2021
Balance, beginning of period$688 $67 $$$$$$(6,874)$
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)(1)16 (579)
Total realized/unrealized gains (losses) included in AOCI
Purchases (7)327 181 12 (1)
Sales (7)(10)(14)(6)
Issuances (7)
Settlements (7)(262)
Transfers into Level 3 (8)66 
Transfers out of Level 3 (8)(181)(18)(3)
Balance, end of period$889 $217 $$12 $$$20 $(7,715)$
Six Months Ended June 30, 2020
Balance, beginning of period$461 $117 $73 $$$$16 $(4,031)$
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)(4)(2)(962)
Total realized/unrealized gains (losses) included in AOCI15 20 
Purchases (7)433 104 
Sales (7)(51)(5)(5)(14)
Issuances (7)
Settlements (7)(333)
Transfers into Level 3 (8)153 30 
Transfers out of Level 3 (8)(113)(73)(73)(4)
Balance, end of period$894 $173 $$$$$20 $(5,326)$
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2021 (9)$(1)$$$$$$$(560)$
Changes in unrealized gains (losses) included in other comprehensive income for the instruments still held at June 30, 2021 (9)$$$$$$$$$
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2020 (9)$(1)$$$$$$(17)$(1,019)$
Changes in unrealized gains (losses) included in other comprehensive income for the instruments still held at June 30, 2020 (9)$16 $$$$$$20 $$
_______________
(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.
37

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
(4)Investment performance related to separate account assets is fully offset by corresponding amounts credited to contract holders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income (loss). For the purpose of this disclosure, these changes are presented within net investment gains (losses).
(5)Amortization of premium/accretion of discount is included within net investment income. Changes in the allowance for credit losses and direct write-offs are charged to net income (loss) on securities are included in net investment gains (losses). Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).
(6)Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.
(7)Items purchased/issued and then sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements.
(8)Gains and losses, in net income (loss) and OCI, are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and then out of Level 3 in the same period are excluded from the rollforward.
(9)Changes in unrealized gains (losses) included in net income (loss) for fixed maturities are reported in either net investment income or net investment gains (losses). Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).
Fair Value of Financial Instruments Carried at Other Than Fair Value
The following tables provide fair value information for financial instruments that are carried on the balance sheet at amounts other than fair value. These tables exclude the following financial instruments: cash and cash equivalents, accrued investment income, payables for collateral under securities loaned and other transactions and those short-term investments that are not securities and therefore are not included in the three level hierarchy table disclosed in the “— Recurring Fair Value Measurements” section. 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:
June 30, 2021
Fair Value Hierarchy
Carrying
Value
Level 1Level 2Level 3Total
Estimated
Fair Value
(In millions)
Assets
Mortgage loans$16,732 $$$17,690 $17,690 
Policy loans$1,255 $$498 $1,160 $1,658 
Other invested assets$75 $$63 $12 $75 
Premiums, reinsurance and other receivables$3,351 $$121 $4,036 $4,157 
Liabilities
Policyholder account balances$20,491 $$$22,197 $22,197 
Long-term debt$3,436 $$3,903 $$3,903 
Other liabilities$1,212 $$498 $714 $1,212 
Separate account liabilities$1,416 $$1,416 $$1,416 
38

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
December 31, 2020
Fair Value Hierarchy
Carrying
Value
Level 1Level 2Level 3Total
Estimated
Fair Value
(In millions)
Assets
Mortgage loans$15,808 $$$16,926 $16,926 
Policy loans$1,291 $$512 $1,530 $2,042 
Other invested assets$51 $$39 $12 $51 
Premiums, reinsurance and other receivables$3,277 $$90 $3,975 $4,065 
Liabilities
Policyholder account balances$17,497 $$$19,100 $19,100 
Long-term debt$3,436 $$3,858 $$3,858 
Other liabilities$807 $$163 $644 $807 
Separate account liabilities$1,334 $$1,334 $$1,334 
7. Equity
Preferred Stock
Preferred stock shares authorized, issued and outstanding were as follows at both June 30, 2021 and December 31, 2020:
Shares AuthorizedShares IssuedShares Outstanding
6.600% Non-Cumulative Preferred Stock, Series A17,000 17,000 17,000 
6.750% Non-Cumulative Preferred Stock, Series B16,100 16,100 16,100 
5.375% Non-Cumulative Preferred Stock, Series C23,000 23,000 23,000 
Not designated99,943,900 
Total100,000,000 56,100 56,100 
The declaration, record and payment dates, as well as per share and aggregate dividend amounts for BHF’s preferred stock by series for the six months ended June 30, 2021 and 2020 were as follows:
Series ASeries BSeries C
Declaration DateRecord DatePayment DatePer ShareAggregatePer ShareAggregatePer ShareAggregate
(In millions, except per share data)
May 17, 2021June 10, 2021June 25, 2021$412.50 $$421.88 $$335.94 $
February 16, 2021March 10, 2021March 25, 2021412.50 421.88 466.58 11 
$825.00 $14 $843.76 $14 $802.52 $18 
May 15, 2020June 10, 2020June 25, 2020$412.50 $$$$$
February 14, 2020March 10, 2020March 25, 2020412.50 
$825.00 $14 $$$$

39

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

Common Stock Repurchase Program
On February 10, 2021, BHF authorized the repurchase of up to $200 million of its common stock, which is in addition to the $1.1 billion aggregate stock repurchase authorizations announced in February 2020, May 2019 and August 2018. Repurchases under this authorization may be made through open market purchases, including pursuant to 10b5-1 plans or pursuant to accelerated stock repurchase plans, or through privately negotiated transactions, from time to time at management’s discretion in accordance with applicable legal requirements. See Note 11 for information relating to the authorization of share repurchases subsequent to June 30, 2021.
During the six months ended June 30, 2021 and 2020, BHF repurchased 4,312,267 and 13,250,927 shares, respectively, of its common stock through open market purchases pursuant to 10b5-1 plans for $192 million and $322 million, respectively. At June 30, 2021, BHF had $87 million remaining under its common stock repurchase program.
Accumulated Other Comprehensive Income (Loss)
Information regarding changes in the balances of each component of AOCI was as follows:
Three Months Ended June 30, 2021
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
Unrealized
Gains (Losses)
on Derivatives
Foreign
Currency
Translation
Adjustments
Defined Benefit Plans AdjustmentTotal
(In millions)
Balance at March 31, 2021$3,387 $55 $(14)$(39)$3,389 
OCI before reclassifications1,385 114 1,500 
Deferred income tax benefit (expense)(291)(24)(314)
AOCI before reclassifications, net of income tax4,481 145 (13)(38)4,575 
Amounts reclassified from AOCI32 (4)(1)27 
Deferred income tax benefit (expense)(7)(6)
Amounts reclassified from AOCI, net of income tax25 (3)(1)21 
Balance at June 30, 2021$4,506 $142 $(13)$(39)$4,596 
Three Months Ended June 30, 2020
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
Unrealized
Gains (Losses)
on Derivatives
Foreign
Currency
Translation
Adjustments
Defined Benefit Plans AdjustmentTotal
(In millions)
Balance at March 31, 2020$2,083 $612 $(19)$(29)$2,647 
OCI before reclassifications3,059 (140)2,925 
Deferred income tax benefit (expense)(643)30 (10)(623)
AOCI before reclassifications, net of income tax4,499 502 (24)(28)4,949 
Amounts reclassified from AOCI23 (3)20 
Deferred income tax benefit (expense)(5)(4)
Amounts reclassified from AOCI, net of income tax18 (2)16 
Balance at June 30, 2020$4,517 $500 $(24)$(28)$4,965 
40

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
7. Equity (continued)
Six Months Ended June 30, 2021
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
Unrealized
Gains (Losses)
on Derivatives
Foreign
Currency
Translation
Adjustments
Defined Benefit Plans AdjustmentTotal
(In millions)
Balance at December 31, 2020$5,646 $115 $(8)$(37)$5,716 
OCI before reclassifications(1,463)46 (6)(2)(1,425)
Deferred income tax benefit (expense)308 (10)300 
AOCI before reclassifications, net of income tax4,491 151 (13)(38)4,591 
Amounts reclassified from AOCI19 (11)(1)
Deferred income tax benefit (expense)(4)(2)
Amounts reclassified from AOCI, net of income tax15 (9)(1)
Balance at June 30, 2021$4,506 $142 $(13)$(39)$4,596 
Six Months Ended June 30, 2020
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
Unrealized
Gains (Losses)
on Derivatives
Foreign
Currency
Translation
Adjustments
Defined Benefit Plans AdjustmentTotal
(In millions)
Balance at December 31, 2019$3,111 $172 $(15)$(28)$3,240 
OCI before reclassifications (2)1,768 420 2,188 
Deferred income tax benefit (expense)(371)(88)(9)(468)
AOCI before reclassifications, net of income tax4,508 504 (24)(28)4,960 
Amounts reclassified from AOCI12 (5)
Deferred income tax benefit (expense)(3)(2)
Amounts reclassified from AOCI, net of income tax(4)
Balance at June 30, 2020$4,517 $500 $(24)$(28)$4,965 
__________________
(1)See Note 4 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI.
(2)Includes $3 million related to the adoption of the allowance for credit losses guidance.
41

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
7. Equity (continued)
Information regarding amounts reclassified out of each component of AOCI was as follows:
AOCI ComponentsAmounts Reclassified from AOCIConsolidated Statements of Operations and Comprehensive Income (Loss) Locations
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
(In millions)
Net unrealized investment gains (losses):
Net unrealized investment gains (losses)$(31)$(20)$(15)$(7)Net investment gains (losses)
Net unrealized investment gains (losses)(1)(3)(4)(5)Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax(32)(23)(19)(12)
Income tax (expense) benefit
Net unrealized investment gains (losses), net of income tax(25)(18)(15)(9)
Unrealized gains (losses) on derivatives - cash flow hedges:
Interest rate swapsNet derivative gains (losses)
Interest rate swapsNet investment income
Foreign currency swapsNet derivative gains (losses)
Gains (losses) on cash flow hedges, before income tax11 
Income tax (expense) benefit(1)(1)(2)(1)
Gains (losses) on cash flow hedges, net of income tax
Defined benefit plans adjustment:
Amortization of net actuarial gains (losses)
Amortization of defined benefit plans, before income tax
Income tax (expense) benefit
Amortization of defined benefit plans, net of income tax
Total reclassifications, net of income tax$(21)$(16)$(5)$(5)
8. Other Revenues and Other Expenses
Other Revenues
The Company has entered into contracts with mutual funds, fund managers, and their affiliates (collectively, the “Funds”) whereby the Company is paid monthly or quarterly fees (“12b-1 fees”) for providing certain services to customers and distributors of the Funds. The 12b-1 fees are generally equal to a fixed percentage of the average daily balance of the customer’s investment in a fund. The percentage is specified in the contract between the Company and the Funds. Payments are generally collected when due and are neither refundable nor able to offset future fees.
To earn these fees, the Company performs services such as responding to phone inquiries, maintaining records, providing information to distributors and shareholders about fund performance and providing training to account managers and sales agents. The passage of time reflects the satisfaction of the Company’s performance obligations to the Funds and is used to recognize revenue associated with 12b-1 fees.
Other revenues consisted primarily of 12b-1 fees of $91 million and $179 million for the three months and six months ended June 30, 2021, respectively, and $76 million and $157 million for the three months and six months ended June 30, 2020, respectively, of which substantially all were reported in the Annuities segment.
42

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
8. Other Revenues and Other Expenses (continued)
Other Expenses
Information on other expenses was as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
(In millions)
Compensation$96 $93 $188 $162 
Contracted services and other labor costs70 78 130 146 
Transition services agreements29 15 61 53 
Establishment costs29 35 46 53 
Premium and other taxes, licenses and fees12 14 27 26 
Separate account fees127 108 252 225 
Volume related costs, excluding compensation, net of DAC capitalization180 162 343 290 
Interest expense on debt40 45 81 92 
Other25 27 42 47 
Total other expenses$608 $577 $1,170 $1,094 
9. Earnings Per Common Share
The calculation of earnings per common share was as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
 2021202020212020
 (In millions, except share and per share data)
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders$10 $(1,998)$(600)$2,952 
Weighted average common shares outstanding — basic85,549,350 94,698,169 86,555,806 99,728,754 
Dilutive effect of share-based awards515,800 140,178 
Weighted average common shares outstanding — diluted86,065,150 94,698,169 86,555,806 99,868,932 
Earnings per common share:
Basic$0.12 $(21.10)$(6.93)$29.60 
Diluted$0.11 $(21.10)$(6.93)$29.56 
For both the six months ended June 30, 2021 and the three months ended June 30, 2020, basic loss per common share equaled diluted loss per common share. The diluted shares were not utilized in the per share calculation for this period as the inclusion of such shares would have an antidilutive effect.
For both the three months ended June 30, 2021 and the six months ended June 30, 2020, weighted average shares used for calculating diluted earnings per common share excludes 187,371 of out-of-the-money stock options, as the inclusion of these shares would be antidilutive to the earnings per common share calculation due to the average share price for the three months ended June 30, 2021 and the six months ended June 30, 2020.
43

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
10. 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.
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 June 30, 2021.
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 June 30, 2021, 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.
44

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
10. Contingencies, Commitments and Guarantees (continued)
Cost of Insurance Class Actions 
Richard A. Newton v. Brighthouse Life Insurance Company (U.S. District Court, Northern District of Georgia, Atlanta Division, filed May 8, 2020). Plaintiff has filed a purported class action lawsuit against Brighthouse Life Insurance Company. Plaintiff was the owner of a universal life insurance policy issued by Travelers Insurance Company, a predecessor to Brighthouse Life Insurance Company. Plaintiff seeks to certify a class of all persons who own or owned life insurance policies issued where the terms of the life insurance policy provide or provided, among other things, a guarantee that the cost of insurance rates would not be increased by more than a specified percentage in any contract year. Plaintiff alleges, among other things, causes of action for breach of contract, fraud, suppression and concealment, and violation of the Georgia Racketeer Influenced and Corrupt Organizations Act. Plaintiff seeks to recover damages, including punitive damages, interest and treble damages, attorneys’ fees, and injunctive and declaratory relief. Brighthouse Life Insurance Company filed a motion to dismiss in June 2020, which was granted in part and denied in part. Plaintiff was granted leave to amend the complaint. The Company intends to vigorously defend this matter.
Lawrence Martin v. Brighthouse Life Insurance Company and Brighthouse Life Insurance Company of NY (U.S. District Court, Southern District of New York, filed April 6, 2021). Plaintiff has filed a purported class action lawsuit against Brighthouse Life Insurance Company and Brighthouse Life Insurance Company of NY. Plaintiff is the owner of a universal life insurance policy issued by Travelers Insurance Company, a predecessor to Brighthouse Life Insurance Company. Plaintiff seeks to certify a class of similarly situated owners of universal life insurance policies issued or administered by defendants and alleges that cost of insurance charges should have decreased over time due to improving mortality but did not. Plaintiff alleges, among other things, causes of action for breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment. Plaintiff seeks to recover compensatory damages, attorney’s fees, interest, and equitable relief including a constructive trust. Brighthouse Life Insurance Company and Brighthouse Life Insurance Company of NY filed a motion to dismiss in June 2021. The Company intends to vigorously defend this matter.
Summary
Various litigations, claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, investor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.
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 Contingencies
As with litigation and regulatory loss contingencies, the Company considers establishing liabilities for certain non-litigation loss contingencies when assertions are made involving disputes or other matters with counterparties to contractual arrangements entered into by the Company, including with third-party vendors. The Company establishes liabilities for such non-litigation loss contingencies when it is probable that a loss will be incurred and the amount of the loss can be reasonably estimated. In matters where it is not probable, but is reasonably possible that a loss will be incurred and the amount of loss can be reasonably estimated, such losses or range of losses are disclosed, and no accrual is made. In the absence of sufficient information to support an assessment of the reasonably possible loss or range of loss, no accrual is made and no loss or range of loss is disclosed.
Disputes have arisen with counterparties in connection with reinsurance arrangements where the Company’s subsidiaries are acting as either the reinsured or the reinsurer. These disputes involve assertions by third parties primarily related to rates, fees or reinsured benefit calculations, and in certain of such disputes the counterparty has made a request to arbitrate the dispute.
45

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
10. Contingencies, Commitments and Guarantees (continued)
As of June 30, 2021, the Company estimates the amount of reasonably possible losses in excess of the amounts accrued for certain non-litigation loss contingencies to be up to approximately $125 million, which are primarily associated with reinsurance-related matters. For certain other reinsurance-related matters, the Company is not currently able to estimate the reasonably possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of such loss.
On a quarterly and annual basis, the Company reviews relevant information with respect to non-litigation contingencies and, when applicable, updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.
Commitments
Mortgage Loan Commitments
The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $646 million and $210 million at June 30, 2021 and December 31, 2020, respectively.
Commitments to Fund Partnership Investments, Bank Credit Facilities and Private Corporate Bond Investments
The Company commits to fund partnership investments and to lend funds under bank credit facilities and private corporate bond investments. The amounts of these unfunded commitments were $2.2 billion and $1.7 billion at June 30, 2021 and December 31, 2020, respectively.
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 less than $1 million to $112 million, with a cumulative maximum of $118 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments.
In addition, the Company indemnifies its directors and officers as provided in its charters and bylaws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company’s interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future.
The Company’s recorded liabilities were $1 million at both June 30, 2021 and December 31, 2020 for indemnities, guarantees and commitments.
11. Subsequent Events
Common Stock Repurchase Authorization
On August 2, 2021, the Company authorized the repurchase of up to an additional $1.0 billion of common stock. No common stock repurchases have been made under the August 2, 2021 authorization as of August 6, 2021. Future repurchases may be made through open market purchases, including pursuant to 10b5-1 plans or pursuant to accelerated stock repurchase plans, or through privately negotiated transactions, from time to time at management’s discretion in accordance with applicable legal requirements.
46

Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)
11. Subsequent Events (continued)

Dividend Transaction
On July 26, 2021, Brighthouse Reinsurance Company of Delaware received approval from the Delaware Department of Insurance for the payment of a $600 million extraordinary dividend to Brighthouse Life Insurance Company. Such dividend has not been paid as of August 6, 2021.
47

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
48

Introduction
For purposes of this discussion, unless otherwise mentioned or unless the context indicates otherwise, “Brighthouse,” “Brighthouse Financial,” the “Company,” “we,” “our” and “us” refer to Brighthouse Financial, Inc., a Delaware corporation, and its subsidiaries. We use the term “BHF” to refer solely to Brighthouse Financial, Inc., and not to any of its subsidiaries. Until August 4, 2017, BHF was a wholly-owned subsidiary of MetLife, Inc. (together with its subsidiaries and affiliates, “MetLife”). Following this summary is a discussion addressing the consolidated financial condition and results of operations of the Company for the periods indicated. 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, 2020, filed with the U.S. Securities and Exchange Commission (“SEC”) on February 24, 2021 (the “2020 Annual Report”); (iii) our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 (the “First Quarter Form 10-Q”) filed with the SEC on May 10, 2021; and (iv) our current reports on Form 8-K filed in 2021.
Presentation
Prior to discussing our Results of Operations, we present background information and definitions that we believe are useful to understanding the discussion of our financial results. This information precedes the Results of Operations and is most beneficial when read in the sequence presented. A summary of key informational sections is as follows:
“Executive Summary” provides information regarding our business, segments and results as discussed in the Results of Operations.
“Industry Trends” discusses updates and changes to a number of trends and uncertainties included in our 2020 Annual Report that we believe may materially affect our future financial condition, results of operations or cash flows, including from the worldwide pandemic sparked by the novel coronavirus (the “COVID-19 pandemic”).
“Summary of Critical Accounting Estimates” explains the most critical estimates and judgments applied in determining our results in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
“Non-GAAP and Other Financial Disclosures” defines key financial measures presented in the Results of Operations that are not calculated in accordance with GAAP but are used by management in evaluating company and segment performance. As described in this section, adjusted earnings is presented by key business activities which are derived from, but different than, the line items presented in the GAAP statement of operations. This section also refers to certain other terms used to describe our insurance business and financial and operating metrics, but is not intended to be exhaustive.
Certain amounts presented in prior periods within the following discussions of our financial results have been reclassified to conform with the current year presentation.
Executive Summary
We are one of the largest providers of annuity and life insurance products in the United States through multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners.
For operating purposes, we have established 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.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations, financial condition and cash flows of Brighthouse for the periods indicated. See “Business — Segments and Corporate & Other” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary — Overview” included in our 2020 Annual Report, as well as Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information regarding our segments and Corporate & Other.
49

Net income (loss) available to shareholders and adjusted earnings, a non-GAAP financial measure, were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
(In millions)
Income (loss) available to shareholders before provision for income tax$— $(2,529)$(795)$3,714 
Less: Provision for income tax expense (benefit)(10)(531)(195)762 
Net income (loss) available to shareholders (1)$10 $(1,998)$(600)$2,952 
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends$539 $14 $1,002 $258 
Less: Provision for income tax expense (benefit)104 182 36 
Adjusted earnings$435 $11 $820 $222 
__________________
(1)We use the term “net income (loss) available to shareholders” to refer to “net income (loss) available to Brighthouse Financial, Inc.’s common shareholders” throughout the results of operations discussions.
For the three months ended June 30, 2021, we had net income available to shareholders of $10 million and adjusted earnings of $435 million compared to a net loss available to shareholders of $2.0 billion and adjusted earnings of $11 million for the three months ended June 30, 2020. Net income available to shareholders for the three months ended June 30, 2021 primarily reflects a favorable impact from pre-tax adjusted earnings. Additionally, decreasing long-term interest rates resulted in favorable changes in the estimated fair value of freestanding interest rate derivatives we use to hedge our universal life with secondary guarantees (“ULSG”) business. These favorable impacts were partially offset by net unfavorable changes in the estimated fair value of our guaranteed minimum living benefits (“GMLB”) riders (“GMLB Riders”) due to market factors. Favorable equity markets and lower interest rates resulted in net unfavorable changes in variable annuity embedded derivative liabilities and the freestanding derivatives that hedge our variable annuity business. Favorable equity markets also unfavorably impacted the estimated fair value of the embedded derivative liabilities associated with Shield Level Annuities (“Shield”), which are referred to herein as “Shield liabilities.” In addition, the impact of widening credit spreads resulted in a favorable adjustment for non-performance risk related to variable annuity embedded derivative liabilities.
For the six months ended June 30, 2021, we had a net loss available to shareholders of $600 million and adjusted earnings of $820 million compared to net income available to shareholders of $3.0 billion and adjusted earnings of $222 million for the six months ended June 30, 2020. Net loss available to shareholders for the six months ended June 30, 2021 primarily reflects net unfavorable changes in the estimated fair value of our GMLB Riders due to market factors. Favorable equity markets and higher interest rates resulted in unfavorable changes to the freestanding derivatives that hedge our variable annuity business, net of favorable impacts to the underlying embedded derivative liabilities. Favorable equity markets also unfavorably impacted the estimated fair value of Shield liabilities. GMLB Riders were also unfavorably impacted by the adjustment for non-performance risk resulting from narrowing credit spreads. Increasing long-term interest rates resulted in unfavorable changes in the estimated fair value of freestanding interest rate derivatives we use to hedge our ULSG business. These unfavorable impacts were partially offset by favorable pre-tax adjusted earnings.
See “— Non-GAAP and Other Financial Disclosures.” For a detailed discussion of our results, see “— Results of Operations.”
Industry Trends
Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we discuss a number of trends and uncertainties that we believe may materially affect our future financial condition, results of operations or cash flows. Where these trends or uncertainties are specific to a particular aspect of our business, we often include such a discussion under the relevant caption of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, as part of our broader analysis of that area of our business. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends and Uncertainties” included in our 2020 Annual Report for a comprehensive discussion of some of the key general trends and uncertainties that have influenced the development of our business and our historical financial performance and that we believe will continue to influence our business and results of
50

operations in the future. In addition, significant changes or updates in certain of these trends and uncertainties are discussed below.
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 the severity or duration of the pandemic, including the severity, duration and frequency of any additional “waves” of the pandemic or the efficacy of any therapeutic treatments and vaccines for COVID-19, including their efficacy with respect to variants of COVID-19 that have emerged or could emerge in the future. It is likewise 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 aspects of our business model or targets previously provided to the markets. See “Business — Regulation,” “Risk Factors — Risks Related to Our Business — The ongoing COVID-19 pandemic could materially adversely affect our business, financial condition and results of operations, including our capitalization and liquidity” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — COVID-19 Pandemic” included in our 2020 Annual Report, as well as “— Investments — Current Environment — Selected Sector Investments,” “— Investments — Mortgage Loans — Loan Modifications Related to the COVID-19 Pandemic” and Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements.
Regulatory Developments
Our insurance subsidiaries and Brighthouse Reinsurance Company of Delaware (“BRCD”) are regulated primarily at the state level, with some products and services also subject to federal regulation. In addition, BHF and its insurance subsidiaries are subject to regulation under the insurance holding company laws of various U.S. jurisdictions. Furthermore, some of our operations, products and services are subject to the Employee Retirement Income Security Act of 1974, consumer protection laws, securities, broker-dealer and investment advisor regulations, as well as environmental and unclaimed property laws and regulations. See “Business — Regulation,” as well as “Risk Factors — Regulatory and Legal Risks” included in our 2020 Annual Report, as amended or supplemented herein.
Surplus and Capital; Risk-Based Capital
The National Association of Insurance Commissioners (“NAIC”) is an organization whose mission is to assist state insurance regulatory authorities in serving the public interest and achieving the insurance regulatory goals of its members, the state insurance regulatory officials. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews, and coordinate their regulatory oversight. The NAIC provides standardized insurance industry accounting and reporting guidance through its Accounting Practices and Procedures Manual (the “Manual”), which states have largely adopted by regulation. However, statutory accounting principles continue to be established by individual state laws, regulations and permitted practices, which may differ from the Manual. Changes to the Manual or modifications by the various states may impact our statutory capital and surplus.
The NAIC has established regulations that provide minimum capitalization requirements based on risk-based capital (“RBC”) formulas for insurance companies. Insurers are required to maintain their capital and surplus at or above minimum levels. Regulators have discretionary authority, in connection with the continued licensing of an insurer, to limit or prohibit the insurer’s sales to policyholders if, in their judgment, the regulators determine that such insurer has not maintained the minimum surplus or capital or that the further transaction of business will be hazardous to policyholders. Each of our insurance subsidiaries is subject to RBC requirements and other minimum statutory capital and surplus requirements imposed under the laws of its respective jurisdiction of domicile. RBC is based on a formula calculated by applying factors to various asset, premium, claim, expense and statutory reserve items. The formula takes into account the risk characteristics of the insurer and is calculated on an annual basis. The major categories of risk involved are asset risk, insurance risk, interest rate risk, market risk and business risk, including equity, interest rate and expense recovery risks associated with variable annuities that contain guaranteed minimum death and living benefits. The RBC framework is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not as a means to rank insurers generally. State insurance laws provide insurance regulators the authority to require various actions by, or take various actions against, insurers whose total adjusted capital (“TAC”) does not meet or exceed certain RBC levels. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and “Risk Factors — Regulatory and Legal Risks — A decrease in the RBC ratio (as a result of a reduction in statutory surplus or increase in RBC requirements) of our insurance subsidiaries could result in increased scrutiny by insurance regulators and rating agencies and could have a material adverse effect on
51

our financial condition and results of operations” and Note 10 of the Notes to the Consolidated Financial Statements in our 2020 Annual Report.
In June 2021, the NAIC adopted changes to the RBC factors for bonds and real estate and created a new set of RBC charges for longevity risk. These changes will become effective on December 31, 2021. The modified bond and real estate factors, in the aggregate, are expected to have a minimal impact on our RBC ratios.
In December 2020, the NAIC adopted a group capital calculation tool that uses an RBC aggregation methodology for all entities within an insurance holding company system. The NAIC has stated that the calculation will be a tool to assist regulators in assessing group risks and capital adequacy and does not constitute a minimum capital requirement or standard, however, there is no guarantee that will be the case in the future. It is unclear how the group capital calculation will interact with existing capital requirements for insurance companies in the United States.
In August 2018, the NAIC adopted the framework for variable annuity reserve and capital reform (“VA Reform”). The revisions, which have resulted in substantial changes in reserves, statutory surplus and capital requirements, are designed to mitigate the incentive for insurers to engage in captive reinsurance transactions by making improvements to Actuarial Guideline 43 and the Life Risk Based Capital C3 Phase II capital requirements. VA Reform is intended to (i) mitigate the asset-liability accounting mismatch between hedge instruments and statutory instruments and statutory liabilities, (ii) remove the non-economic volatility in statutory capital charges and the resulting solvency ratios and (iii) facilitate greater harmonization across insurers and their products for greater comparability. VA Reform became effective as of January 1, 2020, with early adoption permitted as of December 31, 2019. Brighthouse elected to early adopt the changes effective December 31, 2019. Further changes to this framework, including changes resulting from work currently underway by the NAIC to find a suitable replacement for the Economic Scenario Generators developed by the American Academy of Actuaries, could negatively impact our statutory surplus and required capital.
See “Risk Factors — Regulatory and Legal Risks — Our insurance business is highly regulated, and changes in regulation and in supervisory and enforcement policies may materially impact our capitalization or cash flows, reduce our profitability and limit our growth” included in our 2020 Annual Report.
Summary of Critical Accounting Estimates
The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the Interim Condensed Consolidated Financial Statements.
The most critical estimates include those used in determining:
liabilities for future policy benefits;
amortization of deferred policy acquisition costs (“DAC”);
estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation; and
measurement of income taxes and the valuation of deferred tax assets.
In applying our accounting policies, we make subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our business and operations. Actual results could differ from these estimates.
The above critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and Note 1 of the Notes to the Consolidated Financial Statements included in our 2020 Annual Report.

52

Non-GAAP and Other Financial Disclosures
Our definitions of the non-GAAP and other financial measures may differ from those used by other companies.
Non-GAAP Financial Disclosures
Adjusted Earnings
In this report, we present adjusted earnings, which excludes net income (loss) attributable to noncontrolling interests and preferred stock dividends, as a measure of our performance that is not calculated in accordance with GAAP. We believe the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of its performance by the investor community by highlighting the results of operations and the underlying profitability drivers of our business. However, adjusted earnings should not be viewed as a substitute for net income (loss) available to Brighthouse Financial, Inc.’s common shareholders, 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) available to Brighthouse Financial, Inc.’s common shareholders.
Adjusted earnings, which may be positive or negative, is used by management to evaluate performance, allocate resources and facilitate comparisons to industry results. This financial measure focuses on our primary businesses principally by excluding the impact of market volatility, which could distort trends.
The following are significant items excluded from total revenues, net of income tax, in calculating adjusted earnings:
Net investment gains (losses);
Net derivative gains (losses) except earned income and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment (“Investment Hedge Adjustments”); and
Certain variable annuity guaranteed minimum income benefits (“GMIB”) fees (“GMIB Fees”).
The following are significant items excluded from total expenses, net of income tax, in calculating adjusted earnings:
Amounts associated with benefits related to GMIBs (“GMIB Costs”);
Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”); and
Amortization of DAC and value of business acquired (“VOBA”) related to (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments.
The tax impact of the adjustments mentioned is calculated net of the statutory tax rate, which could differ from our effective tax rate.

53

We present adjusted earnings in a manner consistent with management’s view of the primary business activities that drive the profitability of our core businesses. The following table illustrates how each component of adjusted earnings is calculated from the GAAP statement of operations line items:
Component of Adjusted EarningsHow Derived from GAAP (1)
(i)Fee income(i)
Universal life and investment-type policy fees (excluding (a) unearned revenue adjustments related to net investment gains (losses) and net derivative gains (losses) and (b) GMIB Fees) plus Other revenues (excluding other revenues associated with related party reinsurance) and amortization of deferred gain on reinsurance.
(ii)Net investment spread(ii)
Net investment income plus Investment Hedge Adjustments and interest received on ceded fixed annuity reinsurance deposit funds reduced by Interest credited to policyholder account balances and interest on future policy benefits.
(iii)Insurance-related activities(iii)
Premiums less Policyholder benefits and claims (excluding (a) GMIB Costs, (b) Market Value Adjustments, (c) interest on future policy benefits and (d) amortization of deferred gain on reinsurance) plus the pass through of performance of ceded separate account assets.
(iv)Amortization of DAC and VOBA(iv)
Amortization of DAC and VOBA (excluding amounts related to (a) net investment gains (losses), (b) net derivative gains (losses), (c) GMIB Fees and GMIB Costs and (d) Market Value Adjustments).
(v)Other expenses, net of DAC capitalization(v)
Other expenses reduced by capitalization of DAC.
(vi)Provision for income tax expense (benefit)(vi)Tax impact of the above items.
__________________
(1)Italicized items indicate GAAP statement of operations line items.
Consistent with GAAP guidance for segment reporting, adjusted earnings is also our GAAP measure of segment performance. Accordingly, we report adjusted earnings by segment in Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements.
Adjusted Net Investment Income
We present adjusted net investment income, which is not calculated in accordance with GAAP. We present adjusted net investment income to measure our performance for management purposes, and we believe it enhances the understanding of our investment portfolio results. Adjusted net investment income represents net investment income, including Investment Hedge Adjustments. For a reconciliation of adjusted net investment income to net investment income, the most directly comparable GAAP measure, see footnote 3 to the summary yield table located in “— Investments — Current Environment — Investment Portfolio Results.”
Other Financial Disclosures
Similar to adjusted net investment income, we present net investment income yields as a performance measure we believe enhances the understanding of our investment portfolio results. Net investment income yields are calculated on adjusted net investment income as a percent of average quarterly asset carrying values. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.
54

Results of Operations
Consolidated Results for the Three Months and Six Months Ended June 30, 2021 and 2020
Unless otherwise noted, all amounts in the following discussions of our results of operations are stated before income tax except for adjusted earnings, which are presented net of income tax.
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2021202020212020
 (In millions)
Revenues
Premiums$162 $193 $346 $391 
Universal life and investment-type product policy fees919 827 1,849 1,713 
Net investment income1,212 652 2,399 1,568 
Other revenues101 93 228 195 
Net investment gains (losses)(34)(34)(20)(53)
Net derivative gains (losses)(684)(2,653)(2,188)4,249 
Total revenues1,676 (922)2,614 8,063 
Expenses
Policyholder benefits and claims752 839 1,508 2,026 
Interest credited to policyholder account balances287 276 584 535 
Capitalization of DAC(120)(91)(234)(189)
Amortization of DAC and VOBA(92)99 678 
Interest expense on debt40 45 81 92 
Other expenses688 623 1,323 1,191 
Total expenses1,655 1,600 3,361 4,333 
Income (loss) before provision for income tax21 (2,522)(747)3,730 
Provision for income tax expense (benefit)(10)(531)(195)762 
Net income (loss)31 (1,991)(552)2,968 
Less: Net income (loss) attributable to noncontrolling interests— — 
Net income (loss) attributable to Brighthouse Financial, Inc.31 (1,991)(554)2,966 
Less: Preferred stock dividends21 46 14 
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders$10 $(1,998)$(600)$2,952 
The components of net income (loss) available to shareholders were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
 (In millions)
GMLB Riders$(933)$(2,466)$(1,286)$1,906 
Other derivative instruments443 (82)(513)1,636 
Net investment gains (losses)(34)(34)(20)(53)
Other adjustments(15)39 22 (33)
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends539 14 1,002 258 
Income (loss) available to shareholders before provision for income tax— (2,529)(795)3,714 
Provision for income tax expense (benefit)(10)(531)(195)762 
Net income (loss) available to shareholders$10 $(1,998)$(600)$2,952 
55

Three Months Ended June 30, 2021 Compared with the Three Months Ended June 30, 2020
Income available to shareholders before provision for income tax was $0 ($10 million, net of income tax), an increase of $2.5 billion ($2.0 billion, net of income tax) from a loss available to shareholders before provision for income tax of $2.5 billion ($2.0 billion, net of income tax) in the prior period.
The increase in income before provision for income tax was driven by the following favorable items:
lower losses from GMLB Riders, see “— GMLB Riders for the Three Months and Six Months Ended June 30, 2021 and 2020”;
current period gains on interest rate derivatives used to manage interest rate exposure in our ULSG business due to the decrease in the long-term benchmark interest rate; and
higher pre-tax adjusted earnings, as discussed in greater detail below.
The increase in income before provision for income tax was partially offset by lower policyholder benefits and claims, included in other adjustments, resulting from the adjustment for market performance related to participating products in our Run-off segment.
The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of 48% in the current period compared to 21% in the prior period. The increase in the effective tax rate is driven by higher pre-tax adjusted earnings, as discussed in greater detail below. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits.
Six Months Ended June 30, 2021 Compared with the Six Months Ended June 30, 2020
Loss available to shareholders before provision for income tax was $795 million ($600 million, net of income tax), a decrease of $4.5 billion ($3.6 billion, net of income tax) from income available to shareholders before provision for income tax of $3.7 billion ($3.0 billion, net of income tax) in the prior period.
The decrease in income before provision for income tax was driven by the following unfavorable items:
losses from GMLB Riders in the current period compared to gains in the prior period, see “— GMLB Riders for the Three Months and Six Months Ended June 30, 2021 and 2020”; and
current period losses on interest rate derivatives used to manage interest rate exposure in our ULSG business due to the decrease in the long-term benchmark interest rate.
The decrease in income before provision for income tax was partially offset by the following favorable items:
higher pre-tax adjusted earnings, as discussed in greater detail below;
lower policyholder benefits and claims, included in other adjustments, resulting from the adjustment for market performance related to participating products in our Run-off segment; and
lower net investment losses reflecting:
lower current period net losses on changes in mortgage loans and fixed maturity security reserves; and
current period net mark-to-market gains on equity securities compared to prior period net losses.
The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of 26% in the current period compared to 21% in the prior period. The increase in the effective tax rate is driven by higher pre-tax adjusted earnings, as discussed in greater detail below. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits.
56

Reconciliation of Net Income (Loss) Available to Shareholders to Adjusted Earnings
The reconciliation of net income (loss) available to shareholders to adjusted earnings was as follows:
Three Months Ended June 30, 2021
AnnuitiesLifeRun-offCorporate & OtherTotal
(In millions)
Net income (loss) available to shareholders$(601)$61 $742 $(192)$10 
Add: Provision for income tax expense (benefit)79 17 (175)69 (10)
Income (loss) available to shareholders before provision for income tax(522)78 567 (123)— 
Less: GMLB Riders(933)— — — (933)
Less: Other derivative instruments12 427 — 443 
Less: Net investment gains (losses)(21)(10)17 (20)(34)
Less: Other adjustments(1)(17)— (15)
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends417 85 140 (103)539 
Less: Provision for income tax expense (benefit)79 17 18 (10)104 
Adjusted earnings$338 $68 $122 $(93)$435 
Three Months Ended June 30, 2020
AnnuitiesLifeRun-offCorporate & OtherTotal
(In millions)
Net income (loss) available to shareholders$(2,332)$43 $196 $95 $(1,998)
Add: Provision for income tax expense (benefit)34 12 (371)(206)(531)
Income (loss) available to shareholders before provision for income tax(2,298)55 (175)(111)(2,529)
Less: GMLB Riders(2,466)— — — (2,466)
Less: Other derivative instruments(23)(1)(60)(82)
Less: Net investment gains (losses)(29)(3)(8)(34)
Less: Other adjustments15 (1)25 — 39 
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends205 60 (146)(105)14 
Less: Provision for income tax expense (benefit)34 12 (31)(12)
Adjusted earnings$171 $48 $(115)$(93)$11 
57

Six Months Ended June 30, 2021
AnnuitiesLifeRun-offCorporate & OtherTotal
(In millions)
Net income (loss) available to shareholders$(585)$106 $61 $(182)$(600)
Add: Provision for income tax expense (benefit)157 27 (314)(65)(195)
Income (loss) available to shareholders before provision for income tax(428)133 (253)(247)(795)
Less: GMLB Riders(1,286)— — — (1,286)
Less: Other derivative instruments42 (557)— (513)
Less: Net investment gains (losses)(24)(5)65 (56)(20)
Less: Other adjustments(1)14 — 22 
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends831 137 225 (191)1,002 
Less: Provision for income tax expense (benefit)157 27 27 (29)182 
Adjusted earnings$674 $110 $198 $(162)$820 
Six Months Ended June 30, 2020
AnnuitiesLifeRun-offCorporate & OtherTotal
(In millions)
Net income (loss) available to shareholders$2,465 $$1,221 $(735)$2,952 
Add: Provision for income tax expense (benefit)107 14 116 525 762 
Income (loss) available to shareholders before provision for income tax2,572 15 1,337 (210)3,714 
Less: GMLB Riders1,906 — — — 1,906 
Less: Other derivative instruments126 (60)1,571 (1)1,636 
Less: Net investment gains (losses)(40)21 (36)(53)
Less: Other adjustments(14)— (19)— (33)
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends594 73 (236)(173)258 
Less: Provision for income tax expense (benefit)107 14 (51)(34)36 
Adjusted earnings$487 $59 $(185)$(139)$222 
Consolidated Results for the Three Months and Six Months Ended June 30, 2021 and 2020 — Adjusted Earnings
The components of adjusted earnings were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
(In millions)
Fee income$959 $857 $1,954 $1,779 
Net investment spread749 160 1,460 601 
Insurance-related activities(404)(262)(883)(756)
Amortization of DAC and VOBA(136)(157)(311)(256)
Other expenses, net of DAC capitalization(608)(577)(1,170)(1,094)
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends21 48 16 
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends539 14 1,002 258 
Provision for income tax expense (benefit)104 182 36 
Adjusted earnings$435 $11 $820 $222 
58

Three Months Ended June 30, 2021 Compared with the Three Months Ended June 30, 2020
Adjusted earnings were $435 million, an increase of $424 million.
Key net favorable impacts were:
higher net investment spread reflecting:
higher returns on other limited partnerships for the comparative measurement period; and
higher average invested assets resulting from positive net flows in the general account;
partially offset by
lower investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at lower yields than the portfolio average; and
higher interest credited to policyholders due to higher imputed interest on insurance liabilities related to modeling improvements resulting from an actuarial system conversion in our Life segment in the fourth quarter of 2020;
higher asset-based fees resulting from higher average separate account balances, a portion of which is offset in other expenses; and
lower net amortization of DAC and VOBA due to the impact on gross profits from less favorable equity markets in our Annuities segment and lower separate account returns in our Life segment.
Key net unfavorable impacts were:
higher net costs associated with insurance-related activities due to:
higher paid claims, net of reinsurance, in our Run-off and Life segments;
partially offset by
lower income annuity benefit payments and a decrease in guaranteed minimum death benefit (“GMDB”) liabilities resulting from less favorable equity market performance;
higher other expenses due to:
higher asset-based variable annuity expenses resulting from lower average separate account balances, a portion of which are offset in fee income;
a one-time credit in the prior period from the exit of various transition services agreements with MetLife; and
underwriting fees associated with funding agreements issued in connection with our institutional spread margin business;
partially offset by
lower legal reserves; and
lower establishment costs; and
the timing of our preferred stock dividend payments.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 19% in the current period compared to 21% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits.
Six Months Ended June 30, 2021 Compared with the Six Months Ended June 30, 2020
Adjusted earnings were $820 million, an increase of $598 million.
Key net favorable impacts were:
higher net investment spread due to:
higher returns on other limited partnerships for the comparative measurement period; and
higher average invested assets resulting from positive net flows in the general account;
59

partially offset by
lower investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at lower yields than the portfolio average; and
higher interest credited to policyholders due to higher imputed interest on insurance liabilities related to modeling improvements resulting from an actuarial system conversion in our Life segment in the fourth quarter of 2020; and
higher asset-based fees resulting from higher average separate account balances, a portion of which is offset in other expenses.
Key net unfavorable impacts were:
higher net costs associated with insurance-related activities due to:
higher paid claims, net of reinsurance, in our Run-off and Life segments;
partially offset by
a decrease in GMDB liabilities resulting from favorable equity market performance and lower income annuity benefit payments;
higher other expenses due to:
higher asset-based variable annuity expenses resulting from higher average separate account balances, a portion of which is offset in fee income; and
higher deferred compensation expenses;
partially offset by
lower establishment costs related to planned technology expenses; and
lower expenses resulting from the exit of various transition services agreements with MetLife;
higher net amortization of DAC and VOBA in our Annuities segment; and
the timing of our preferred stock dividend payments.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 17% in the current period compared to 14% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits.
Segments and Corporate & Other Results for the Three Months and Six Months Ended June 30, 2021 and 2020 — Adjusted Earnings
Annuities
The components of adjusted earnings for our Annuities segment were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
(In millions)
Fee income$706 $607 $1,418 $1,263 
Net investment spread310 201 633 463 
Insurance-related activities(59)(82)(154)(208)
Amortization of DAC and VOBA(123)(157)(250)(195)
Other expenses, net of DAC capitalization(417)(364)(816)(729)
Pre-tax adjusted earnings417 205 831 594 
Provision for income tax expense (benefit)79 34 157 107 
Adjusted earnings$338 $171 $674 $487 
60

A significant portion of our adjusted earnings is driven by separate account balances related to our variable annuity business. Most directly, these balances determine asset-based fee income, but they also impact DAC amortization and asset-based commissions. The changes in our variable annuities separate account balances are presented in the table below. Variable annuities separate account balances increased for the three months and the six months ended June 30, 2021 driven by favorable equity market performance, partially offset by negative net flows and policy charges.
Three Months Ended June 30, 2021 (1)Six Months Ended June 30, 2021 (1)
(In millions)
Balance, beginning of period$103,539 $103,450 
Deposits552 1,056 
Withdrawals, surrenders and benefits(2,588)(5,053)
Net flows(2,036)(3,997)
Investment performance5,944 8,738 
Policy charges(650)(1,252)
Net transfers from (to) general account(41)(183)
Balance, end of period$106,756 $106,756 
Average balance$106,101 $105,215 
_______________
(1)Includes income annuities for which separate account balances at June 30, 2021 were $149 million.
Three Months Ended June 30, 2021 Compared with the Three Months Ended June 30, 2020
Adjusted earnings were $338 million for the current period, an increase of $167 million.
Key net favorable impacts were:
higher net investment spread due to:
higher returns on other limited partnerships for the comparative measurement period; and
higher average invested assets resulting from positive net flows in the general account;
partially offset by
lower investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at lower yields than the portfolio average;
higher asset-based fees resulting from lower average separate account balances, a portion of which is offset in other expenses;
lower amortization of DAC and VOBA driven by the net decrease in future gross profits from less favorable equity markets; and
lower costs associated with insurance-related activities due to:
a decrease in GMDB death claims; and
a decrease in GMDB liabilities resulting from favorable equity market performance.
Key net unfavorable impacts were:
higher other expenses due to:
higher asset-based variable annuity expenses resulting from higher average separate account balances, a portion of which are offset in fee income;
partially offset by
a one-time credit in the prior period from the exit of various transition services agreements with MetLife.
61

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 19% in the current period compared to 17% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction.
Six Months Ended June 30, 2021 Compared with the Six Months Ended June 30, 2020
Adjusted earnings were $674 million for the current period, an increase of $187 million.
Key net favorable impacts were:
higher net investment spread due to:
higher returns on other limited partnerships for the comparative measurement period; and
higher average invested assets resulting from positive net flows in the general account;
partially offset by
lower investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at lower yields than the portfolio average;
higher asset-based fees resulting from higher average separate account balances, a portion of which is offset in other expenses; and
lower costs associated with insurance-related activities due to a decrease in GMDB liabilities and deferred sales inducements (“DSI”) resulting from favorable equity market performance.
Key unfavorable impacts were:
higher other expenses due to:
higher asset-based variable annuity expenses resulting from higher average separate account balances, a portion of which is offset in fee income; and
higher deferred compensation expenses; and
higher amortization of DAC and VOBA driven by the net decrease in future gross profits from favorable equity market performance.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 19% in the current period compared to 18% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.
Life
The components of adjusted earnings for our Life segment were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
(In millions)
Fee income$90 $84 $207 $181 
Net investment spread94 14 179 73 
Insurance-related activities(41)14 (102)(52)
Amortization of DAC and VOBA(10)(55)(54)
Other expenses, net of DAC capitalization(48)(56)(92)(75)
Pre-tax adjusted earnings85 60 137 73 
Provision for income tax expense (benefit)17 12 27 14 
Adjusted earnings$68 $48 $110 $59 
62

Three Months Ended June 30, 2021 Compared with the Three Months Ended June 30, 2020
Adjusted earnings were $68 million for the current period, an increase of $20 million.
Key net favorable impacts were:
higher net investment spread due to:
higher returns on other limited partnerships for the comparative measurement period;
partially offset by
higher interest credited to policyholders due to higher imputed interest on insurance liabilities related to modeling improvements resulting from an actuarial system conversion in the fourth quarter of 2020.
Key unfavorable impacts were:
higher costs associated with insurance-related activities due to higher paid claims, net of reinsurance; and
higher net amortization of DAC and VOBA due to the impact on gross profits from lower separate account returns.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 20% in both the current period and prior periods. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.
Six Months Ended June 30, 2021 Compared with the Six Months Ended June 30, 2020
Adjusted earnings were $110 million for the current period, an increase of $51 million.
Key net favorable impacts were:
higher net investment spread due to:
higher returns on other limited partnerships for the comparative measurement period;
partially offset by
higher interest credited to policyholders due to higher imputed interest on insurance liabilities related to modeling improvements resulting from an actuarial system conversion in the fourth quarter of 2020; and
higher fee income due to an adjustment in the current period related to modeling improvements resulting from an actuarial system conversion;
Key unfavorable impacts were:
higher costs associated with insurance-related activities due to higher paid claims, net of reinsurance; and
higher other expenses due to higher deferred compensation expenses.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 20% in the current period compared to 19% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.
63

Run-off
The components of adjusted earnings for our Run-off segment were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
(In millions)
Fee income$163 $166 $329 $335 
Net investment spread332 (70)623 30 
Insurance-related activities(309)(201)(637)(508)
Amortization of DAC and VOBA— — — — 
Other expenses, net of DAC capitalization(46)(41)(90)(93)
Pre-tax adjusted earnings140 (146)225 (236)
Provision for income tax expense (benefit)18 (31)27 (51)
Adjusted earnings$122 $(115)$198 $(185)
Three Months Ended June 30, 2021 Compared with the Three Months Ended June 30, 2020
Adjusted earnings were $122 million for the current period, an increase of $237 million.
The increase in adjusted earnings was driven by higher net investment spread due to higher returns on other limited partnerships for the comparative measurement period, partially offset by higher costs associated with insurance-related activities driven by an increase in paid claims, net of reinsurance.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 13% in the current period compared to 21% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.
Six Months Ended June 30, 2021 Compared with the Six Months Ended June 30, 2020
Adjusted earnings were $198 million for the current period, an increase of $383 million.
The increase in adjusted earnings was driven by higher net investment spread due to higher returns on other limited partnerships for the comparative measurement period, partially offset by higher costs associated with insurance-related activities driven by lower underwriting margin.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 12% in the current period compared to 22% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.
64

Corporate & Other
The components of adjusted earnings for Corporate & Other were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
(In millions)
Fee income$— $— $— $— 
Net investment spread13 15 25 35 
Insurance-related activities10 12 
Amortization of DAC and VOBA(3)(4)(6)(7)
Other expenses, net of DAC capitalization(97)(116)(172)(197)
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends21 48 16 
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests and preferred stock dividends(103)(105)(191)(173)
Provision for income tax expense (benefit)(10)(12)(29)(34)
Adjusted earnings$(93)$(93)$(162)$(139)
Three Months Ended June 30, 2021 Compared with the Three Months Ended June 30, 2020
Adjusted earnings were a loss of $93 million for the current period.
There was no change in adjusted earnings. Lower expenses from a decline in establishment costs, lower legal reserves and lower media spend, were partially offset by underwriting fees associated with funding agreements issued in connection with our institutional spread margin business and the timing of our preferred stock dividend payments.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 12% in the current period compared to 11% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits. We believe the effective tax rate for Corporate & Other is not generally meaningful, neither on a standalone basis nor for comparison to prior periods, since taxes for Corporate & Other are derived from the difference between the overall consolidated effective tax rate and total taxes for the combined operating segments.
Six Months Ended June 30, 2021 Compared with the Six Months Ended June 30, 2020
Adjusted earnings were a loss of $162 million, a higher loss of $23 million from the prior period.
Key net unfavorable impacts were:
the timing of our preferred stock dividend payments; and
lower net investment spread due to:
lower returns from short-term investments; and
lower investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at lower yields than the portfolio average;
partially offset by
higher returns on other limited partnerships for the comparative measurement period; and
higher average invested long-term assets from funding agreements issued in connection with our institutional spread margin business.
65

The increase in adjusted earnings was partially offset by lower expenses due to lower establishment costs and lower legal reserves.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 20% in both the current and prior periods. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits. We believe the effective tax rate for Corporate & Other is not generally meaningful, neither on a standalone basis nor for comparison to prior periods, since taxes for Corporate & Other are derived from the difference between the overall consolidated effective tax rate and total taxes for the combined operating segments.
GMLB Riders for the Three Months and Six Months Ended June 30, 2021 and 2020
The overall impact on income (loss) available to shareholders before provision for income tax from the performance of GMLB Riders, which includes (i) changes in carrying value of the GAAP liabilities, (ii) the mark-to-market of hedges and reinsurance, (iii) fees and (iv) associated DAC offsets, was as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
(In millions)
Liabilities$(1,239)$(1,186)$(686)$(1,805)
Hedges(43)(1,720)(1,140)3,617 
Ceded reinsurance21 (63)105 
Fees (1)204 198 401 396 
GMLB DAC124 234 202 (407)
Total GMLB Riders$(933)$(2,466)$(1,286)$1,906 
__________________
(1)Excludes living benefit fees, included as a component of adjusted earnings, of $15 million for both the three months ended June 30, 2021 and 2020 and $29 million for both the six months ended June 30, 2021 and 2020.
Three Months Ended June 30, 2021 Compared with the Three Months Ended June 30, 2020
Comparative results from GMLB Riders were favorable by $1.5 billion, primarily driven by:
favorable changes in our GMLB hedges; and
favorable changes to the estimated fair value of Shield liabilities;
partially offset by
unfavorable changes to the estimated fair value of variable annuity liability reserves; and
unfavorable changes in GMLB DAC.
Less favorable equity markets resulted in the following impacts:
favorable changes in our GMLB hedges;
favorable changes to the estimated fair value of Shield liabilities; and
favorable changes to GMLB DAC;
partially offset by
unfavorable changes to the estimated fair value of variable annuity liability reserves.
Higher interest rates resulted in the following impacts:
unfavorable changes to the estimated fair value of variable annuity liability reserves; and
unfavorable changes to the estimated fair value of Shield liabilities;
partially offset by
favorable changes in our GMLB hedges; and
66

favorable changes to GMLB DAC.
The widening of our credit default swap spreads combined with an increase in the underlying variable annuity liability reserves resulted in a favorable change in the adjustment for nonperformance risk, net of an unfavorable change in GMLB DAC.
Six Months Ended June 30, 2021 Compared with the Six Months Ended June 30, 2020
Comparative results from GMLB Riders were unfavorable by $3.2 billion, primarily driven by:
unfavorable changes in our GMLB hedges;
unfavorable changes to the estimated fair value of Shield liabilities; and
unfavorable changes in ceded reinsurance;
partially offset by
favorable changes to the estimated fair value of variable annuity liability reserves; and
favorable changes in GMLB DAC.
Higher relative equity markets resulted in the following impacts:
unfavorable changes to the estimated fair value of Shield liabilities;
unfavorable changes in our GMLB hedges; and
unfavorable changes in ceded reinsurance;
partially offset by
favorable changes to the estimated fair value of variable annuity liability reserves; and
favorable changes to GMLB DAC.
Higher interest rates resulted in the following impacts:
unfavorable changes in our GMLB hedges;
unfavorable changes to GMLB DAC;
unfavorable changes in ceded reinsurance; and
unfavorable changes to the estimated fair value of Shield liabilities;
partially offset by
favorable changes to the estimated fair value of variable annuity liability reserves.
The narrowing of our credit default swap spreads combined with a decrease in the underlying variable annuity liability reserves resulted in an unfavorable change in the adjustment for nonperformance risk, net of a favorable change in GMLB DAC.
Investments
Investment Risks
Our primary investment objective is to optimize risk-adjusted net investment income and risk-adjusted total return while appropriately matching assets and liabilities. In addition, the investment process is designed to ensure that the portfolio has an appropriate level of liquidity, quality and diversification.
We are exposed to the following primary sources of investment risks, which may be heightened or exacerbated by the factors discussed in “— Industry Trends — COVID-19 Pandemic”:
credit risk, relating to the uncertainty associated with the continued ability of a given obligor to make timely payments of principal and interest, which will likely result in a higher allowance for credit losses and write-offs for uncollectible balances for certain investments;
interest rate risk, relating to the market price and cash flow variability associated with changes in market interest rates. Changes in market interest rates will impact the net unrealized gain or loss position of our fixed income
67

investment portfolio and the rates of return we receive on both new funds invested and reinvestment of existing funds;
market valuation risk, relating to the variability in the estimated fair value of investments associated with changes in market factors such as credit spreads and equity market levels. A widening of credit spreads will adversely impact the net unrealized gain (loss) position of the fixed income investment portfolio and will increase losses associated with credit-based non-qualifying derivatives where we assume credit exposure. Credit spread tightening will reduce net investment income associated with new purchases of fixed maturity securities and will favorably impact the net unrealized gain (loss) position of the fixed income investment portfolio;
liquidity risk, relating to the diminished ability to sell certain investments, in times of strained market conditions;
real estate risk, relating to commercial, agricultural and residential real estate, and stemming from factors, which include, but are not limited to, market conditions, including the demand and supply of leasable commercial space, creditworthiness of borrowers and their tenants and joint venture partners, capital markets volatility and inherent interest rate movements;
currency risk, relating to the variability in currency exchange rates for non-U.S. dollar denominated investments; and
financial and operational risks related to using external investment managers.
See also “Risk Factors — Economic Environment and Capital markets-Related Risks — We are exposed to significant financial and capital markets risks which may adversely affect our financial condition, results of operations and liquidity, and may cause our net investment income and our profitability measures to vary from period-to-period” and “Risk Factors — Investments-Related Risks” in our 2020 Annual Report.
We manage these risks through asset-type allocation and industry and issuer diversification. Risk limits are also used to promote diversification by asset sector, avoid concentrations in any single issuer and limit overall aggregate credit and equity risk exposure. Real estate risk is managed through geographic and property type and product type diversification. Interest rate risk is managed as part of our Asset Liability Management (“ALM”) strategies. Product design, such as the use of market value adjustment features and surrender charges, is also utilized to manage interest rate risk. These strategies include maintaining an investment portfolio that targets a weighted average duration that reflects the duration of our estimated liability cash flow profile. For certain of our liability portfolios, it is not possible to invest assets to the full liability duration, thereby creating some asset/liability mismatch. We also use certain derivatives in the management of currency, credit, interest rate, and equity market risks.
Investment Management Agreements
Other than our derivatives trading, which we manage in-house, we have engaged a select group of experienced external asset management firms to manage the investment of the assets comprising our general account portfolio and certain separate account assets of our insurance subsidiaries, as well as assets of BHF and our reinsurance subsidiary BRCD.
Current Environment
Our business and results of operations are materially affected by conditions in capital markets and the economy, generally. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends and Uncertainties — Financial and Economic Environment” included in our 2020 Annual Report.
As a U.S. insurance company, we are affected by the monetary policy of the Federal Reserve Board in the United States. The Federal Reserve may increase or decrease the federal funds rate in the future, which may have an impact on the pricing levels of risk-bearing investments and may adversely impact the level of product sales. We are also affected by the monetary policy of central banks around the world due to the diversification of our investment portfolio.
Selected Sector Investments
Recent elevated levels of market volatility have affected the performance of various asset classes. Contributing factors include concerns about energy and oil prices impacting the energy sector, as well as the impact of the COVID-19 pandemic. See “Risk Factors — Risks Related to Our Business — The ongoing COVID-19 pandemic could materially adversely affect our business, financial condition and results of operations, including our capitalization and liquidity” included in our 2020 Annual Report.
There has been an increased market focus on energy sector investments as a result of volatile energy and oil prices. We maintain a diversified energy sector fixed maturity securities portfolio across sub-sectors and issuers. Our exposure to
68

energy sector fixed maturity securities was $3.2 billion, of which 90% were investment grade, with net unrealized gains (losses) of $333 million at June 30, 2021.
There has also been an increased market focus on retail sector investments as a result of the COVID-19 pandemic and uncertainty regarding its duration and severity. Our exposure to retail sector corporate fixed maturity securities was $1.9 billion, of which 96% were investment grade, with net unrealized gains (losses) of $211 million at June 30, 2021.
In addition to the fixed maturity securities discussed above, we have exposure to mortgage loans and certain residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”) that may be impacted by the COVID-19 pandemic. Our investment managers are actively working with borrowers who are experiencing short-term financial or operational problems as a result of the COVID-19 pandemic to provide temporary relief. See “— Investments — Mortgage Loans” and Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements for information on mortgage loans, including credit quality by portfolio segment and commercial mortgage loans by property type. Additionally, see “— Investments — Fixed Maturity Available-for-sale — Structured Securities” for information on Structured Securities, including security type, risk profile and ratings profile.
We monitor direct and indirect investment exposure across sectors and asset classes and adjust our level of investment exposure, as appropriate. At this time, we do not expect that our general account investments in these sectors and asset classes will have a material adverse effect on our results of operations or financial condition.
Investment Portfolio Results
The following summary yield table presents the yield and adjusted net investment income for our investment portfolio for the periods indicated. As described below, this table reflects certain differences from the presentation of net investment income presented in the GAAP statement of operations. This summary yield table presentation is consistent with how we measure our investment performance for management purposes, and we believe it enhances understanding of our investment portfolio results.
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
Yield %AmountYield %AmountYield %AmountYield %Amount
(Dollars in millions)
Investment income (1)5.21 %$1,251 3.11 %$688 5.23 %$2,476 3.76 %$1,640 
Investment fees and expenses (2)(0.13)(34)(0.13)(32)(0.13)(67)(0.13)(64)
Adjusted net investment income (3)5.08 %$1,217 2.98 %$656 5.10 %$2,409 3.63 %$1,576 
_______________
(1)Investment income yields are calculated as investment income as a percent of average quarterly asset carrying values. Investment income excludes recognized gains and losses and reflects the adjustments presented in footnote 3 below to arrive at adjusted net investment income. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.
(2)Investment fee and expense yields are calculated as investment fees and expenses as a percent of average quarterly asset estimated fair values. Asset estimated fair values exclude collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.
69

(3)Adjusted net investment income presented in the yield table varies from the most directly comparable GAAP measure due to certain reclassifications, as presented below.
Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
(In millions)
Net investment income$1,212 $652 $2,399 $1,568 
Less: Investment hedge adjustments(5)(4)(10)(8)
Adjusted net investment income — in the above yield table$1,217 $656 $2,409 $1,576 
See “— Results of Operations — Consolidated Results for the Three Months and Six Months Ended June 30, 2021 and 2020 for an analysis of the period over period changes in net investment income.
Fixed Maturity Securities Available-for-sale
Fixed maturity securities held by type (public or private) were as follows at:
 June 30, 2021December 31, 2020
 Estimated
Fair Value
% of
Total
Estimated
Fair Value
% of
Total
(Dollars in millions)
Publicly-traded$70,636 83.3 %$68,328 82.8 %
Privately-placed14,149 16.7 14,167 17.2 
Total fixed maturity securities$84,785 100.0 %$82,495 100.0 %
Percentage of cash and invested assets73.4 % 72.6 % 
See Note 6 of the Notes to the Interim Condensed Consolidated Financial Statements for further information on our valuation controls and procedures including our formal process to challenge any prices received from independent pricing services that are not considered representative of estimated fair value.
See Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements for further information about fixed maturity securities by sector, contractual maturities, continuous gross unrealized losses and the allowance for credit losses.
Fixed Maturity Securities Credit Quality — Ratings
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Fixed Maturity Securities AFS — Fixed Maturity Securities Credit Quality — Ratings” included in our 2020 Annual Report for a discussion of the credit quality ratings assigned by Nationally Recognized Statistical Rating Organizations (“NRSRO”), credit quality designations assigned by and methodologies used by the Securities Valuation Office of the NAIC for fixed maturity securities and the methodologies adopted by the NAIC for certain Structured Securities.
70

The following table presents total fixed maturity securities by NRSRO rating and the applicable NAIC designation from the NAIC published comparison of NRSRO ratings to NAIC designations, except for certain Structured Securities, which are presented using the NAIC methodologies, as well as the percentage, based on estimated fair value that each NAIC designation is comprised of at:
  June 30, 2021December 31, 2020
NAIC
Designation
NRSRO RatingAmortized
Cost
Allowance for Credit LossesUnrealized
Gain (Loss)
Estimated Fair Value% of
Total
Amortized
Cost
Allowance for Credit LossesUnrealized
Gain (Loss)
Estimated Fair Value% of
Total
  (Dollars in millions)
1Aaa/Aa/A$47,178 $— $6,580 $53,758 63.4 %$44,189 $— $8,492 $52,681 63.8 %
2Baa24,637 2,639 27,274 32.2 23,022 — 3,338 26,360 32.0 
Subtotal investment grade71,815 9,219 81,032 95.6 67,211 — 11,830 79,041 95.8 
3Ba2,504 — 106 2,610 3.1 2,408 — 118 2,526 3.1 
4B1,001 14 1,013 1.2 814 — 20 834 1.0 
5Caa and lower130 — 125 0.1 91 — 89 0.1 
6In or near default— — — — — 
Subtotal below investment grade3,639 121 3,753 4.4 3,318 138 3,454 4.2 
Total fixed maturity securities$75,454 $$9,340 $84,785 100.0 %$70,529 $$11,968 $82,495 100.0 %
The following tables present total fixed maturity securities, based on estimated fair value, by sector classification and by NRSRO rating and the applicable NAIC designations from the NAIC published comparison of NRSRO ratings to NAIC designations, except for certain Structured Securities, which are presented using the NAIC methodologies as described above:
<