Thank you, Eric, and good morning, everyone. Last night, we reported third quarter earnings, along with preliminary statutory results.
As these results illustrate, we have maintained a strong capital and liquidity position, which is a function of our focus on prudence and flexibility.
Turning to key statutory metrics, our combined statutory total adjusted capital or TAC increased to $8.4 billion as September 30th.
Our estimated combined risk-based capital or RBC ratio increased to a range of 525% to 545%. And we had a normalized statutory loss of approximately $200 million in the quarter. The improvement in our capital metrics reflects the continued strong equity markets in the quarter, and the impact of the annual actuarial review.
Before discussing current period performance drivers, I would like to spend some time on the actuarial review completed in the quarter.
As part of this review, we examine long-term assumptions, including capital markets and interest rates. There was an impact on both statutory and GAAP results as a result of the 2020 review, but in different directions. The statutory impact was a benefit of approximately 40 points on our risk-based capital ratio.
We have continued to refine our models and assumptions to better align with variable annuity or VA reform, which we adopted at the end of 2019.
During this process, we determined that we had been more conservative than we needed to be with respect to how we reflected invested assets backing VA.
Specifically, the invested assets that support our VA total asset requirement have averaged yields above current market levels, and those yields were not fully reflected in the calculation of the total asset requirement. A model revision to align with VA reform on this issue was the driver of a $600 million statutory capital benefit from the assumption update. On a GAAP basis, the total net income impact was a $2.2 billion charge with $1.7 billion driven by a reduction in the assumed GAAP long-term mean reversion rate for the 10-year treasury from 3.75% to 3.0%.
We continue to assume that mean reversion occurs over 10 years. The interest rate related charge was split between our runoff block of universal life with secondary guarantees, and VA. The change in the mean reversion rate had no impact on statutory results. The balance of the GAAP charge was related to a number of different items, with mortality updates being the largest driver.
Turning to our third quarter results, TAC increased to $8.4 billion at September 30th, from $7.7 billion at June 30th. The increase was driven by equity market returns and the actuarial review. Despite the favorable markets in the third quarter, we had a normalized statutory loss of approximately $200 million. This loss was driven by an increase in the 20-year swap rate, which caused a modest unwind of the substantial unrealized gains in our interest rate derivatives. Overall, we believe we are conservatively positioned in the hedge portfolio for both equities and interest rates, given the elevated level of market, economic and political uncertainty.
Our estimated combined RBC ratio increased to a range of 525% to 545% as the normalized statutory loss in the quarter was more than offset by the favorable statutory impact from the actuarial review. In the current uncertain environment, we continue to place heavy emphasis on the RBC ratio, which as a reminder, is well above our target range of 400% to 450% in normal markets. To close my statutory comments, I'd like to focus on capital release and dividends. In the year-to-date, we have generated $1.6 billion of capital release related to our VA business.
First, early this year, we revised our VA hedging strategy. This revision contributed to a lower risk profile, allowing for the release of $1 billion of capital.
Second, by removing excess conservatism in our models to better align with VA reform, we released approximately $600 million of additional capital as part of this year's actuarial review.
Given our strong capital position, in the fourth quarter, we intend to take the remaining $450 million of our planned $1.25 billion ordinary dividend from Brighthouse Life Insurance Company or BLIC, as well as a $60 million ordinary dividend from New England Life Insurance Company, or NELICO.
As a reminder, this is consistent with the plan that we communicated on our Business Update Call in early March.
Moving to the holding company, we ended the third quarter with cash of approximately $1.3 billion, which is consistent with the second quarter and roughly 5 times annual fixed charges. We believe it is appropriate to have a conservative position at the holding company in the current environment.
Moving to adjusted earnings. Last night, we reported third quarter adjusted earnings excluding the impact from notable items of $388 million, which compares with adjusted earnings on the same basis of $39 million in the second quarter of 2020 and $260 million in the third quarter of 2019. There were two notable items in the quarter, which lowered adjusted earnings by approximately $1.1 billion. The notable items on an after-tax basis were: a $1.1 billion charge from the actuarial review; and establishment costs of $15 million included in Corporate & Other. When we look at third quarter adjusted earnings, less notable items, there are four underlying themes.
First, alternative investment returns were strong, as our alternative investment yield was 7.6% in the third quarter, driven by the favorable market performance in the second quarter.
Our year-to-date alternative investment yield was 1.7% through September 30th.
Second, separate account returns were 6% in the quarter. This was well above our assumed return and contributed approximately $0.15 per share above a normal quarter's results.
Third, expenses were lower than expected. Corporate expenses were $204 million which was modestly below the second quarter and lower than a normal level. The fourth and final theme, our underwriting margin was slightly lower than a normal quarter, as COVID claims remained modest. Net claims from COVID-19 were approximately $14 million pre-tax in the third quarter, which is down from $25 million in the second quarter.
Turning to adjusted earnings at the segment level. Annuities adjusted earnings, excluding notable items, were $285 million in the quarter. Sequentially, results reflect higher net investment income, along with higher fees and lower DAC amortization, partially offset by higher expenses. Life adjusted earnings excluding notable items were $87 million in the quarter. Sequentially, results were impacted by higher net investment income, partially offset by higher DAC amortization. The runoff segment reported adjusted earnings excluding notable items of $33 million in the quarter. Sequentially, results were driven by higher net investment income, partially offset by a lower underwriting margin. Corporate & Other had an adjusted loss, excluding notable items of $17 million. Sequentially, results were driven by lower expenses and lower taxes, partially offset by higher preferred stock dividends.
Before I conclude, I want to emphasize that our top financial priority remains balance sheet strength and excess cash at the holding company, in order to protect our distribution franchise and validate that we have a full cycle business model. I believe our continued strong capital and liquidity position at the end of the third quarter highlights our emphasis on prudence and flexibility in the current uncertain environment. With that, we'd like to turn the call over to the operator for your questions.