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What changed in Brighthouse Financial, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Brighthouse Financial, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+551 added−571 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-22)

Top changes in Brighthouse Financial, Inc.'s 2024 10-K

551 paragraphs added · 571 removed · 483 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

161 edited+30 added−31 removed198 unchanged
Biggest changeThe Combination Death Benefit, which we no longer offer, consists of the Compounded-Plus Death Benefit and the Enhanced Death Benefit. The Compounded-Plus Death Benefit pays the greater of (i) the account value at the time of the claim, (ii) the highest anniversary “step-up” value or (iii) a roll-up Benefit Base, adjusted proportionately for any withdrawals.
Biggest changeThis benefit pays the greater of (i) the account value at the time of the claim, (ii) the total purchase payments or (iii) the highest anniversary “step-up” value, adjusted proportionately for any withdrawals. • Combination Death Benefit . The Combination Death Benefit, which we no longer offer, consists of the Compounded-Plus Death Benefit and the Enhanced Death Benefit.
The changes in product features and terms over time are driven partially by customer demand and also reflect our continually refined evaluation of the guarantees, their expected long-term claims costs and the most effective market risk management strategies.
The changes in product features and terms over time are driven partially by customer demand and also reflect our continually refined evaluation of product guarantees, their expected long-term claims costs and the most effective market risk management strategies.
Our in-force whole life products provide for participation in the returns generated by the business, delivered to the policyholder in the form of non-guaranteed dividend payments. The policyholder can elect to receive the dividends in cash or to use them to increase the paid-up policy death benefit or pay the required premium.
Our in-force whole life products provide for participation in the returns generated by the business, delivered to the policyholder in the form of non-guaranteed dividend payments. The policyholder can elect to receive the dividends in cash or use them to increase the paid-up policy death benefit or pay the required premium.
The Brighthouse Financial Foundation (the “Foundation”), a non-profit organization, was established in 2017 with the mission to improve the financial security, culture and opportunities afforded to communities in which the Company’s employees live and work by providing resources and support to other tax-exempt organizations which further that mission.
The Brighthouse Financial Foundation, a non-profit organization, was established in 2017 with the mission to improve the financial security, culture and opportunities afforded to the communities in which the Company’s employees live and work by providing resources and support to other tax-exempt organizations which further that mission.
The amended NYDFS Cybersecurity Regulation went into effect in phases beginning November 1, 2023 and continuing through December 2025, and it includes additional and new requirements regarding certification, governance, audit requirements, technology and business continuity, security control and training requirements, and notification obligations.
The amended NYDFS Cybersecurity Regulation went into effect in phases beginning November 1, 2023 and continuing through November 1, 2025, and it includes additional and new requirements regarding certification, governance, audit requirements, technology and business continuity, security control and training requirements, and notification obligations.
Run-off Our Run-off segment consists of products that are no longer actively sold and are separately managed, including ULSG, structured settlements, pension risk transfer contracts, certain company-owned life insurance policies and certain funding agreements.
Run-off Our Run-off segment consists primarily of products that are no longer actively sold and are separately managed, including ULSG, structured settlements, pension risk transfer contracts, certain company-owned life insurance policies and certain funding agreements.
To help maintain a safe and productive workplace, we establish and oversee programs to build awareness and train employees on important standards, policies and procedures, as required by applicable regulations, Company policy or best practices.
To help maintain a safe and productive workplace, we establish and oversee programs to build awareness of and train employees on important standards, policies and procedures, as required by applicable regulations, Company policy or best practices.
The CCPA, amended by the California Privacy Rights Act (the “CPRA”), effective as of January 1, 2023, and the implementing regulations require additional investment in compliance programs and potential modifications to business processes.
The CCPA, as amended by the California Privacy Rights Act (the “CPRA”), effective as of January 1, 2023, and its implementing regulations require additional investment in compliance programs and potential modifications to business processes.
Further, the CCPA, as amended, creates the California Privacy Protection Agency to enforce the statute as well as its regulations, and it imposes new requirements relating to additional consumer rights, data minimization, and other obligations.
Further, the CCPA, as amended, creates the California Privacy Protection Agency to enforce the statute as well as its regulations, and imposes new requirements relating to additional consumer rights, data minimization, and other obligations.
We reinsure, through 100% quota share reinsurance agreements, certain run-off long-term care and workers’ compensation business that we originally wrote. For products in our Run-off segment other than ULSG, we have periodically engaged in reinsurance activities on an opportunistic basis. Our ordinary course net reinsurance recoverables from unaffiliated third-party reinsurers at December 31, 2023 were as follows: Reinsurance Recoverables A.M.
We reinsure, through 100% quota share reinsurance agreements, certain run-off long-term care and workers’ compensation business that we originally wrote. For products in our Run-off segment other than ULSG, we have periodically engaged in reinsurance activities on an opportunistic basis. Our ordinary course net reinsurance recoverables from unaffiliated third-party reinsurers at December 31, 2024 were as follows: Reinsurance Recoverables A.M.
(“FINRA”) and, occasionally, the SEC, have conducted investigations or inquiries relating to sales or administration of individual life insurance policies, annuities or other products by our insurance subsidiaries.
(“FINRA”), and the SEC have conducted investigations or inquiries relating to sales or administration of individual life insurance policies, annuities or other products by our insurance subsidiaries.
Among other things, this regulatory package: • requires broker-dealers and their financial professionals to act in the best interest of retail customers when making recommendations to such customers without placing their own interests ahead of the customers’ interests, including by satisfying obligations relating to disclosure, care, mitigation of conflicts of interest, and compliance policies and procedures; • clarifies the nature of the fiduciary obligations owed by registered investment advisers to their clients; • imposes new requirements on broker-dealers and investment advisers to deliver Form CRS relationship summaries designed to assist customers in understanding key facts regarding their relationships with their investment professionals and differences between the broker-dealer and investment adviser business models; and 28 Table of Contents • restricts broker-dealers and their financial professionals from using certain compensation practices and the terms “adviser” or “advisor.” The intent of Regulation Best Interest is to impose an enhanced standard of care on broker-dealers and their financial professionals which is more similar to that of an investment adviser.
Among other things, this regulatory package: • requires broker-dealers and their financial professionals to act in the best interest of retail customers when making recommendations to such customers without placing their own interests ahead of the customers’ interests, including by satisfying obligations relating to disclosure, care, mitigation of conflicts of interest, and compliance policies and procedures; • clarifies the nature of the fiduciary obligations owed by registered investment advisers to their clients; • imposes requirements on broker-dealers and investment advisers to deliver Form CRS relationship summaries designed to assist customers in understanding key facts regarding their relationships with their investment professionals and differences between the broker-dealer and investment adviser business models; and • restricts broker-dealers and their financial professionals from using certain compensation practices and the terms “adviser” or “advisor.” The intent of Regulation Best Interest is to impose an enhanced standard of care on broker-dealers and their financial professionals which is more similar to that of an investment adviser.
Additionally, mutual fund companies with funds which are available to contract holders through the variable annuity subaccounts pay us fees consistent with the terms of administrative service agreements. These fees are funded from the fund companies’ net revenues. See Note 14 of the Notes to the Consolidated Financial Statements for additional information on 12b-1 fees. Death Benefit Rider Fees.
Additionally, mutual fund companies with funds which are available to contract holders through the variable annuity subaccounts pay us fees consistent with the terms of administrative service agreements. These fees are funded from the fund companies’ net revenues. See Note 13 of the Notes to the Consolidated Financial Statements for additional information on 12b-1 fees. Death Benefit Rider Fees.
Captive Reinsurer Regulation During 2014, the NAIC approved a regulatory framework applicable to the use of captive insurers in connection with Regulation XXX and Guideline AXXX transactions.
Captive Reinsurer Regulation During 2014, the NAIC approved a framework applicable to the use of captive insurers in connection with Regulation XXX and Guideline AXXX transactions.
Retail Distribution and Marketing (April 2016 – August 2017) Allie Lin 46 Brighthouse Financial: Executive Vice President and General Counsel (December 2022 – present); Head of Litigation and Employment Law (February 2021 – December 2022); Lead Litigation and Employment Attorney (September 2019 – February 2021); Corporate Counsel, Litigation Attorney (March 2018 – September 2019) AXA Equitable Life Insurance Company: Senior Director and Counsel (October 2013 – March 2018) John L.
Retail Distribution and Marketing (April 2016 – August 2017) Allie Lin 47 Brighthouse Financial: Executive Vice President and General Counsel (December 2022 – present); Head of Litigation and Employment Law (February 2021 – December 2022); Lead Litigation and Employment Attorney (September 2019 – February 2021); Corporate Counsel, Litigation Attorney (March 2018 – September 2019) AXA Equitable Life Insurance Company: Senior Director and Counsel (October 2013 – March 2018) John L.
GMWBs primarily come in two versions depending on if they are period certain or if they are lifetime payments. GMABs . GMABs guarantee a minimum amount of account value to the contract holder after a set period of time, which can also include locking in capital markets gains. This protects the value of the annuity from market fluctuations.
GMWBs primarily come in two versions depending on if they are period certain or if they are lifetime payments. GMABs . GMABs guarantee a minimum amount of account value to the contract holder after a set period of time, which can also include locking in capital markets gains. This can protect the value of the annuity from market fluctuations.
Since 2014, our new sales have primarily consisted of Shield ® Level Annuities (“Shield” and “Shield Annuities”) and variable annuities with simplified living benefits.
Since 2014, our new sales have primarily consisted of Shield ® Level Annuities (“Shield” and “Shield Annuities”), fixed annuities and variable annuities with simplified living benefits.
Information contained on or connected to any website referenced in this Annual Report on Form 10-K is not incorporated by reference in this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any website references are intended to be inactive textual references only, unless expressly noted. 33 Table of Contents
Information contained on or connected to any website referenced in this Annual Report on Form 10-K is not incorporated by reference in this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any website references are intended to be inactive textual references only, unless expressly noted. 34 Table of Contents
Contract holders must wait for a defined period, usually 10 years, before they can elect to receive income through guaranteed annuity payments. Contract holder behavior around choosing a particular option cannot be predicted with certainty at the time of contract issuance or thereafter.
Contract holders must wait for a defined period, usually ten years, before they can elect to receive income through guaranteed annuity payments. Contract holder behavior around choosing a particular option cannot be predicted with certainty at the time of contract issuance or thereafter.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies — Variable Annuity Exposure Risk Management.” Products Shield Annuities Our flagship suite of Shield Annuities provides for accumulation of retirement savings or other long-term investments and combines certain features found in both variable and fixed annuities.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies.” Products Shield Annuities Our flagship suite of Shield Annuities provides for accumulation of retirement savings or other long-term investments and combines certain features found in both variable and fixed annuities.
While we currently believe manufacturers do not have as much exposure to ERISA and the Tax Code as distributors, certain activities are subject to the restrictions imposed by ERISA and the Tax Code, including restrictions on the provision of investment advice to ERISA qualified plans, plan participants and individual retirement annuity and individual retirement account 26 Table of Contents (collectively, “IRAs”) owners if the investment recommendation results in fees paid to an individual advisor, the firm that employs the advisor or their affiliates.
While we currently believe manufacturers do not have as much exposure to ERISA and the Tax Code as distributors, certain activities are subject to the restrictions imposed by ERISA and the Tax Code, including restrictions on the provision of investment advice to ERISA qualified plans, plan participants and individual retirement annuity and individual retirement account (collectively, “IRAs”) owners if the investment recommendation results in fees paid to an individual advisor, the firm that employs the advisor or their affiliates.
See “Risk Factors — Risks Related to Our Business — Public health crises, extreme mortality events or similar occurrences may adversely impact our business, financial condition, or results of operations, as well as the economy in general.” Sales Distribution We distribute our annuity and life insurance products through multiple independent distribution channels and marketing arrangements with a geographically diverse network of over 400 distribution partners.
See “Risk Factors — Risks Related to Our Business — Public health crises, extreme mortality events or similar occurrences may adversely impact our business, financial condition, or results of operations, as well as the economy in general.” 17 Table of Contents Sales Distribution We distribute our annuity and life insurance products through multiple independent distribution channels and marketing arrangements with a geographically diverse network of over 400 distribution partners.
If contract holders take withdrawals early, the roll-up may be less than 10 years. This is in contrast to GMIBs, in which roll-ups may continue beyond 10 years. Therefore, the roll-up period for the Benefit Base on GMWBs is typically less uncertain and is shorter than those on GMIBs.
If contract holders take withdrawals early, the roll-up may be less than ten years. This is in contrast to GMIBs, in which roll-ups may continue beyond ten years. Therefore, the roll-up period for the Benefit Base on GMWBs is typically less uncertain and is shorter than those on GMIBs.
See Note 18 of the Notes to the Consolidated Financial Statements. Statutory Accounting, Reserves and Risk-Based Capital The 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.
See Note 17 of the Notes to the Consolidated Financial Statements. Statutory Accounting, Reserves and Risk-Based Capital The 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.
We believe we have the underwriting approach, product design capabilities and distribution relationships to permit us to offer new products that meet our risk-adjusted return objectives and that such capabilities will enhance our ability to maintain market presence and relevance over the long-term.
We believe we have the underwriting approach, product design capabilities and distribution relationships that allows us to offer new products that meet our risk-adjusted return objectives and that such capabilities will enhance our ability to maintain market presence and relevance over the long-term.
(August 2016 – August 2017); Executive Vice President, U.S. Retail (September 2012 – August 2017) Edward A. Spehar 58 Brighthouse Financial: Executive Vice President and Chief Financial Officer (August 2019 – present) MetLife: Executive Vice President and Treasurer (August 2018 – July 2019); Chief Financial Officer of Europe, Middle East and Africa Region (July 2016 – February 2019) Vonda R.
(August 2016 – August 2017); Executive Vice President, U.S. Retail (September 2012 – August 2017) Edward A. Spehar 59 Brighthouse Financial: Executive Vice President and Chief Financial Officer (August 2019 – present) MetLife: Executive Vice President and Treasurer (August 2018 – July 2019); Chief Financial Officer of Europe, Middle East and Africa Region (July 2016 – February 2019) Vonda R.
See “— Insurance Regulation — Insurance Regulatory Examinations and Other Activities.” Federal and state securities laws and regulations are primarily intended to ensure the integrity of the financial markets, to protect investors in the securities markets, and to protect investment advisory or brokerage clients, and generally grant regulatory agencies broad rulemaking and enforcement powers, including the power to limit or restrict the conduct of business for failure to comply with such laws and regulations.
See “— Insurance Regulation — Insurance Regulatory Examinations and Other Activities.” 26 Table of Contents Federal and state securities laws and regulations are primarily intended to ensure the integrity of the financial markets, to protect investors in the securities markets, and to protect investment advisory or brokerage clients, and generally grant regulatory agencies broad rulemaking and enforcement powers, including the power to limit or restrict the conduct of business for failure to comply with such laws and regulations.
BRCD’s admitted deferred tax asset could also serve to reduce the amount of funding required on a statutory basis under BRCD’s reinsurance financing. See Notes 12 and 13 of the Notes to the Consolidated Financial Statements for additional information regarding BRCD’s reinsurance financing.
BRCD’s admitted deferred tax asset could also serve to reduce the amount of funding required on a statutory basis under BRCD’s reinsurance financing. See Notes 11 and 12 of the Notes to the Consolidated Financial Statements for additional information regarding BRCD’s reinsurance financing.
In August 2022, the NAIC adopted amendments to the Valuation Manual that changed the requirements for reflecting hedge instruments in variable annuity reserves and RBC C3 Market Risk. The changes became effective on December 31, 2023, resulting in a decrease to our statutory capital and surplus and an insignificant change to our combined RBC ratio as of such date.
In August 2022, the NAIC adopted amendments to the Valuation Manual that changed the requirements for reflecting hedge instruments in variable annuity reserves and RBC C3 Market Risk. The changes became effective on December 31, 2023, which resulted in a decrease to our statutory capital and surplus and an insignificant change to our combined RBC ratio as of such date.
As part of our commitment to ethics and integrity, we require all employees to review and certify compliance with our code of conduct for employees on an annual basis, as well as complete more extensive training on the code of conduct on a biennial basis.
As part of our commitment to ethics and integrity, we require all employees to review and certify compliance with our employee code of conduct on an annual basis, as well as complete more extensive training on the employee code of conduct on a biennial basis.
A surrender charge is a deduction of a percentage of the contract holder’s account value prior to distribution to him or her. Surrender charges generally decline gradually over the surrender charge period, which can range from zero to 10 years.
A surrender charge is a deduction of a percentage of the contract holder’s account value prior to distribution to him or her. Surrender charges generally decline gradually over the surrender charge period, which can range from zero to ten years.
We believe that these risk mitigation actions at the fund level reduce the amount of hedging or reinsurance we require to manage our risks arising from guarantees we provide on the underlying variable annuity separate accounts. GMWBs . GMWBs have a Benefit Base that contract holders may roll up for up to 10 years.
We believe that these risk mitigation actions at the fund level reduce the amount of hedging or reinsurance we require to manage our risks arising from guarantees we provide on the underlying variable annuity separate accounts. 10 Table of Contents GMWBs . GMWBs have a Benefit Base that contract holders may roll up for up to ten years.
SRMs provide an enhanced level of service to partners that require more resources to support their larger distribution network. SRMs are responsible for tracking and providing certain key distributors with sales and activity data.
SRMs provide an enhanced level of service to partners that require more resources to support their larger distribution networks. SRMs are responsible for tracking and providing certain key distributors with sales and activity data.
Requests for coverage are reviewed on their merits and a policy is not issued unless the particular risk has been examined and approved in accordance with our underwriting guidelines. 14 Table of Contents The underwriting conducted by our corporate underwriting office and intermediaries is subject to periodic quality assurance reviews to maintain high standards of underwriting and consistency.
Requests for coverage are reviewed on their merits and a policy is not issued unless the particular risk has been examined and approved in accordance with our underwriting guidelines. The underwriting conducted by our corporate underwriting office and intermediaries is subject to periodic quality assurance reviews to maintain high standards of underwriting and consistency.
In addition, we help to ensure that employees are well informed of the Company’s reporting and escalation process, including options for anonymous whistleblower reporting, through regular communications. Attracting, Engaging, Developing and Retaining Talent We believe that our success depends, in large part, on our ability to attract and retain highly skilled employees.
In addition, through regular communications, we help to ensure that employees are well-informed of the Company’s reporting and escalation process, including options for anonymous whistleblower reporting. 31 Table of Contents Attracting, Engaging, Developing and Retaining Talent We believe that our success depends, in large part, on our ability to attract and retain highly skilled employees.
We continually review our underwriting guidelines (i) in light of applicable regulations and (ii) to ensure that our practices remain competitive and aligned with our marketing strategies, emerging industry trends and profitability goals.
We regularly review our underwriting guidelines (i) in light of applicable regulations and (ii) to ensure that our practices remain competitive and aligned with our marketing strategies, emerging industry trends and profitability goals.
We offer all of our employees benefits programs that are designed to help meet their financial, physical and mental needs. All employees are eligible to participate in our 401(k) savings plan, to which we make matching and annual nondiscretionary contributions, and in our Employee Stock Purchase Plan, through which employees can purchase BHF stock at a discounted price.
Compensation and Benefits We offer employees benefits programs that are designed to help meet their financial, physical and mental health needs. All employees are eligible to participate in our 401(k) savings plan, to which we make matching and annual nondiscretionary contributions, and in our Employee Stock Purchase Plan, through which employees can purchase BHF stock at a discounted price.
Brighthouse SmartCare ® , our index-linked universal life product launched in 2019, which we market as a hybrid life insurance and long-term care policy, allows policyholders to 13 Table of Contents pay for qualified long-term care expenses by accelerating a significant portion of the face amount of the policy over a period of time.
Brighthouse SmartCare ® , our index-linked universal life product launched in 2019, which we market as a hybrid life insurance and long-term care policy, allows policyholders to pay for qualified long-term care expenses by accelerating a significant portion of the face amount of the policy over a period of time.
In furtherance of our strategy, we provide certain key distributors with focused product, sales and technology support through our strategic relationship managers (“SRM”) and internal and external wholesalers. 17 Table of Contents Strategic Relationship Managers Our SRMs serve as the principal contact for our largest annuity and life insurance distributors and coordinate the relationship between Brighthouse Financial and the distributor.
In furtherance of our strategy, we provide certain key distributors with focused product, sales and technology support through our strategic relationship managers (“SRM”) and internal and external wholesalers. Strategic Relationship Managers Our SRMs serve as the principal contact for our largest annuity and life insurance distributors and coordinate the relationship between Brighthouse Financial and the distributor.
For example, the NYDFS’s Part 500 – Cybersecurity Regulation (the “NYDFS Cybersecurity Regulation”), which became effective in March 2017, requires companies to establish a cybersecurity program. In November 2023, the NYDFS announced amendments to the NYDFS Cybersecurity Regulation.
For example, the NYDFS’s Part 500 – Cybersecurity Regulation (the “NYDFS Cybersecurity Regulation”), which became effective in March 2017, requires companies to establish a cybersecurity risk management program. In November 2023, the NYDFS announced amendments to the NYDFS Cybersecurity Regulation.
We compete with major, well-established stock and mutual life insurance companies and non-insurance financial services companies (e.g., banks, broker-dealers and asset managers) in all of our product offerings, including certain of our distributors that currently manufacture competing products or may manufacture competing products in the future.
We compete with major, well-established stock and mutual life insurance companies and non-insurance financial services companies (e.g., banks, private equity firms, broker-dealers and asset managers) in all of our product offerings, including certain of our distributors that currently manufacture competing products or may manufacture competing products in the future.
Our product pricing reflects our pricing standards and guidelines. We continually review our pricing guidelines in light of applicable regulations and to ensure that our policies remain competitive and aligned with our marketing strategies and profitability goals.
Our product pricing reflects our pricing standards and guidelines. We regularly review our pricing guidelines in light of applicable regulations and to ensure that our policies remain competitive and aligned with our marketing strategies and profitability goals.
See Note 9 of the Notes to the Consolidated Financial Statements for a discussion on certain limitations and interests regarding our arrangements in or with variable interest entities.
See Note 8 of the Notes to the Consolidated Financial Statements for a discussion on certain limitations and interests regarding our arrangements in or with variable interest entities.
Huss 57 Brighthouse Financial: Executive Vice President and Chief Human Resources Officer (November 2017 – present) Wells Fargo, a financial services company: Executive Vice President, Co-Head of Human Resources (September 2015 – November 2017) Myles J.
Huss 58 Brighthouse Financial: Executive Vice President and Chief Human Resources Officer (November 2017 – present) Wells Fargo, a financial services company: Executive Vice President, Co-Head of Human Resources (September 2015 – November 2017) Myles J.
We have established a portfolio of trademarks in the U.S. that we consider important in the marketing of our products and services, including for our name, “Brighthouse Financial,” our logo design and taglines. Available Information and the Brighthouse Financial Website Our website is located at www.brighthousefinancial.com.
We have established a portfolio of trademarks in the U.S. that we consider important in the marketing of our products and services, including for our name, “Brighthouse Financial,” our logo design and taglines. 33 Table of Contents Available Information and the Brighthouse Financial Website Our website is located at www.brighthousefinancial.com.
Among other things, this would require broker-dealers to mitigate conflicts of interest arising from transaction-based financial arrangements for their employees. Regulation Best Interest may change the way broker-dealers sell securities such as variable annuities to their retail customers as well as their associated costs.
Among other things, this requires broker-dealers to mitigate conflicts of interest arising from transaction-based financial arrangements for their employees. Regulation Best Interest may change the way broker-dealers sell securities such as variable annuities to their retail customers as well as their associated costs.
The Enhanced Death Benefit pays the greater of (i) the highest anniversary “step-up” value or (ii) a roll-up benefit which allows for dollar-for-dollar withdrawals up to the permitted amount for that contract year and proportional adjustments for withdrawals in excess of the permitted amount. • Interval Reset Death Benefit .
The Enhanced Death Benefit pays the greater of (i) the highest anniversary “step-up” value or (ii) a roll-up benefit which allows for dollar-for-dollar withdrawals up to the permitted amount for that contract year and proportional adjustments for withdrawals in excess of the permitted amount. 9 Table of Contents • Interval Reset Death Benefit .
See “Risk Factors — Regulatory and Legal Risks — A decrease in the RBC ratio of our insurance subsidiaries (as a result of a reduction in statutory capital and surplus or an increase in the required RBC capital charges), or a change in the rating agency proprietary capital models for our insurance subsidiaries, could result in increased scrutiny by insurance regulators and rating agencies and could have a material adverse effect on our financial condition and results of operations,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and Note 13 of the Notes to the Consolidated Financial Statements.
See “Risk Factors — Regulatory and Legal Risks — A decrease in the RBC ratio of our insurance subsidiaries (as a result of a reduction in statutory capital and surplus or an increase in the required RBC capital charges), or a change in the rating agency proprietary capital models for our insurance subsidiaries, could result in increased scrutiny by insurance regulators and rating agencies or BHF contributing capital to its subsidiaries and could have a material adverse effect on our financial condition and results of operations,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and Note 12 of the Notes to the Consolidated Financial Statements.
(August 2016 – August 2017); Senior Managing Director, Head of Global Portfolio Management (2011 – August 2017) 32 Table of Contents Intellectual Property We rely on a combination of contractual rights with third parties and copyright, trademark, patent and trade secret laws to establish and protect our intellectual property.
(August 2016 – August 2017); Senior Managing Director, Head of Global Portfolio Management (2011 – August 2017) Intellectual Property We rely on a combination of contractual rights with third parties and copyright, trademark, patent and trade secret laws to establish and protect our intellectual property.
In addition to fee revenue, we also earn a spread on the portion of the account value allocated to the general account. 7 Table of Contents Mortality & Expense Fees and Administrative Fees. We earn mortality and expense fees (“M&E Fees”), as well as administrative fees on our variable annuity contracts.
In addition to fee revenue, we also earn a spread on the portion of the account value allocated to the general account. Mortality & Expense Fees and Administrative Fees. We earn mortality and expense fees (“M&E Fees”), as well as administrative fees on our variable annuity contracts.
The guidance provided by the DOL broadens the circumstances under which financial institutions, including insurance companies, could be considered fiduciaries under ERISA or the Tax Code.
The guidance provided by the DOL broadened the circumstances under which financial institutions, including insurance companies, could be considered fiduciaries under ERISA or the Tax Code.
Additionally, the administrative fees are charged either based on the daily average of the net asset values in the subaccounts or when contracts fall below minimum values based on a flat annual fee per contract. Surrender Charges.
Additionally, the administrative fees are charged either based on the daily average of the net asset values in the subaccounts or when contracts fall below minimum values based on a flat annual fee per contract. 7 Table of Contents Surrender Charges.
Over the past several years, there have been no material adverse findings in connection with any examinations of us conducted by state insurance departments, although there can be no assurance that there will not be any material adverse findings in the future. 23 Table of Contents Regulatory authorities in a small number of states, the Financial Industry Regulatory Authority, Inc.
Over the past several years, there have been no material adverse findings in connection with any examinations of us conducted by state insurance departments, although there can be no assurance that there will not be any material adverse findings in the future. 23 Table of Contents State regulatory authorities, the Financial Industry Regulatory Authority, Inc.
See “Risk Factors — Risks Related to Our Business — Factors affecting our competitiveness may adversely affect our market share and profitability” and “Risk Factors — Risks Related to Our Business — We may experience difficulty in marketing and distributing products through our distribution channels.” NYDFS Insurance Regulation 210 In March 2018, NYDFS Insurance Regulation 210: Life Insurance and Annuity Non-Guaranteed Elements took effect.
See “Risk Factors — Risks Related to Our Business — Factors affecting our competitiveness may adversely affect our market share and profitability” and “Risk Factors — Risks Related to Our Business — We may experience difficulty in marketing and distributing products through our distribution channels.” 24 Table of Contents NYDFS Insurance Regulation 210 In March 2018, NYDFS Insurance Regulation 210: Life Insurance and Annuity Non-Guaranteed Elements took effect.
Lambert 49 Brighthouse Financial: Executive Vice President and Chief Marketing and Distribution Officer (August 2017 – present) MetLife: Executive Vice President and Chief Marketing and Distribution Officer, Brighthouse Financial, Inc. (August 2016 – August 2017); Senior Vice President, U.S.
Lambert 50 Brighthouse Financial: Executive Vice President and Chief Marketing and Distribution Officer (August 2017 – present) MetLife: Executive Vice President and Chief Marketing and Distribution Officer, Brighthouse Financial, Inc. (August 2016 – August 2017); Senior Vice President, U.S.
Securities, Broker-Dealer and Investment Advisor Regulation Some of our activities in offering and selling variable insurance products, as well as certain fixed interest rate or index-linked contracts, are subject to extensive regulation under the federal securities laws administered by the SEC or state securities laws.
Securities, Broker-Dealer and Investment Adviser Regulation Some of our activities in offering and selling variable insurance products, as well as certain fixed interest rate or index-linked contracts (“Securities Products”), are subject to extensive regulation under the federal securities laws administered by the SEC or state securities laws.
In particular, the DOL states that a recommendation to “roll over” assets from a qualified retirement plan to an IRA or from an IRA to another IRA, can be considered fiduciary investment advice if provided by someone with an existing relationship with the ERISA Plan or an IRA owner (or in anticipation of establishing such a relationship).
In particular, the DOL stated that a recommendation to “roll over” assets from a qualified retirement plan to an IRA or from an IRA to another IRA, could be considered fiduciary investment advice if provided by someone with an existing relationship with the ERISA Plan or an IRA owner (or in anticipation of establishing such a relationship).
The office is also subject to periodic external audits by reinsurers with whom we do business. We have established oversight of the underwriting process that facilitates quality sales and serves the needs of our customers, while supporting our financial strength and business objectives.
The office is also subject to periodic external audits by reinsurers with whom we do business. 14 Table of Contents We believe we have established oversight of the underwriting process that facilitates quality sales and serves the needs of our customers, while supporting our financial strength and business objectives.
The relative percentage of our life insurance sales by our principal distribution channels were as follows: Distribution Channel Year Ended December 31, 2023 Financial intermediaries 83 % Brokerage general agencies 17 % Our top five distributors of life insurance policies produced 26%, 21%, 17%, 12% and 11% of our life insurance sales for the year ended December 31, 2023. 18 Table of Contents Regulation Index to Regulation Page Overview 20 Insurance Regulation 20 Privacy and Cybersecurity Regulation 25 Regulation of the Use of Artificial Intelligence 26 Securities, Broker-Dealer and Investment Advisor Regulation 26 Department of Labor and ERISA Considerations 26 Standard of Conduct Regulation 27 Federal Tax Reform 29 Regulation of Over-the-Counter Derivatives 29 Environmental Considerations 30 Unclaimed Property 30 19 Table of Contents Overview Our insurance subsidiaries and BRCD are primarily regulated at the state level, with some products and services also subject to federal regulation.
The relative percentage of our life insurance sales by our principal distribution channels were as follows: Distribution Channel Year Ended December 31, 2024 Financial intermediaries 87 % Brokerage general agencies 13 % Our top five distributors of life insurance policies produced 24%, 22%, 21%, 11% and 6% of our life insurance sales for the year ended December 31, 2024. 18 Table of Contents Regulation Index to Regulation Page Overview 20 Insurance Regulation 20 Privacy and Cybersecurity Regulation 25 Regulation of the Use of Artificial Intelligence 26 Securities, Broker-Dealer and Investment Advisor Regulation 26 Department of Labor and ERISA Considerations 27 Standard of Conduct Regulation 27 Federal Tax Reform 29 Regulation of Over-the-Counter Derivatives 30 Environmental Considerations 30 Unclaimed Property 30 19 Table of Contents Overview Our insurance subsidiaries and BRCD are primarily regulated at the state level, with some products and services also subject to federal regulation.
The Inflation Reduction Act establishes a 15% corporate alternative minimum tax (the “CAMT”) for corporations whose average annual adjusted financial statement income for any consecutive three–tax year period ending after December 31, 2021 and preceding the tax year exceeds $1.0 billion. Based on limited guidance issued by the U.S.
The Inflation Reduction Act establishes a 15% corporate alternative minimum tax (the “CAMT”) for corporations whose average annual adjusted financial statement income for any consecutive three–tax year period ending after December 31, 2021 and preceding the tax year exceeds $1.0 billion. Based on guidance issued by the U.S. Department of Treasury (the “U.S.
Our ability to successfully execute our business strategy and deliver on our mission to help people achieve financial security starts with our culture and values, which are brought to life every day by our employees. At December 31, 2023, we had approximately 1,500 employees.
Our ability to successfully execute our business strategy and deliver on our mission to help people achieve financial security starts with our culture and values, which are brought to life every day by our employees. At December 31, 2024, we had approximately 1,400 employees.
Our goal is to achieve the underwriting, mortality and morbidity levels reflected in the assumptions in our product pricing. This is accomplished by determining and establishing underwriting policies, guidelines, philosophies and strategies that are competitive and suitable for the customer, the agent and us.
Our goal is to achieve the underwriting, mortality and morbidity levels reflected in the assumptions in our product pricing. We seek to accomplish this by determining and establishing underwriting policies, guidelines, philosophies and strategies that are competitive and suitable for the customer, the agent and us.
In addition, we conduct annual pay equity reviews to help ensure that individual compensation is determined exclusively based on performance, experience, job level and other neutral factors. Our talent management and development strategies are built on continuous coaching and feedback, learning, training, collaboration and inclusivity.
In addition, we conduct annual pay equity reviews to help ensure that individual compensation is determined exclusively based on performance, experience, job level and other legitimate non-discriminatory factors. Developing Talent Our talent management and development strategies are built on continuous coaching and feedback, learning, training, collaboration and inclusivity.
The increased margin requirements, combined with increased capital charges for our counterparties and central clearinghouses with respect to non-cash collateral, will likely require increased holdings of cash and highly liquid securities with lower yields causing a reduction in income and less favorable pricing for cleared and OTC-bilateral derivatives transactions.
The increased margin requirements, combined with increased capital charges for our counterparties and central clearinghouses with respect to non-cash collateral, may result in increased holdings of cash and highly liquid securities with lower yields causing a reduction in income and less favorable pricing for cleared and OTC-bilateral derivatives transactions.
See “Risk Factors — Risks Related to Our Business — Guarantees within certain of our annuity products may decrease our earnings, decrease our capitalization, increase the volatility of our results, result in higher risk management costs and expose us to increased market risk” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates.” We employed several risk exposure reduction strategies at the product level.
See “Risk Factors — Risks Related to Our Business — Guarantees within certain of our annuity products may decrease our earnings, decrease our capitalization, increase the volatility of our results, result in higher risk management costs and expose us to increased market risk” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates.” Before we ceased offering GMIBs for purchase in 2016, we employed several risk exposure reduction strategies at the product level.
Shield Annuities are deferred annuity contracts that provide the contract holder with the ability to participate in the appreciation of certain financial markets up to a stated level, while offering protection from a portion of declines.
Shield Annuities are registered index-linked annuity contracts that provide the contract holder with the ability to participate in the appreciation of certain financial markets up to a stated level, while offering protection from a portion of declines.
Rosenthal 63 Brighthouse Financial: Executive Vice President and Chief Investment Officer (August 2017 – present) MetLife: Executive Vice President and Chief Investment Officer, Brighthouse Financial, Inc.
Rosenthal 64 Brighthouse Financial: Executive Vice President and Chief Investment Officer (August 2017 – present) MetLife: Executive Vice President and Chief Investment Officer, Brighthouse Financial, Inc.
Over the past several years, these and a number of investigations of our insurance subsidiaries by other regulatory authorities were resolved for monetary payments and certain other relief, including restitution payments. We may continue to receive, and may resolve, further investigations and actions on these matters in a similar manner.
Over the past several years, these and a number of investigations of our insurance subsidiaries by other regulatory authorities were resolved for monetary payments and certain other relief, including restitution payments. We may continue to receive, and may resolve, further investigations and actions on these matters through monetary payments or other relief, including restitution payments.
See “Risk Factors — Risks Related to Our Business — Guarantees within certain of our annuity products may decrease our earnings, decrease our capitalization, increase the volatility of our results, result in higher risk management costs and expose us to increased market risk.” 12 Table of Contents Life Our Life segment consists of insurance products, including term, universal, whole and variable life products designed to address policyholders’ needs for financial security and protected wealth transfer, which may be on a tax-advantaged basis.
See “Risk Factors — Risks Related to Our Business — Differences between actual experience and actuarial assumptions may adversely affect our financial results, capitalization and financial condition” and “Risk Factors — Risks Related to Our Business — Guarantees within certain of our annuity products may decrease our earnings, decrease our capitalization, increase the volatility of our results, result in higher risk management costs and expose us to increased market risk.” 12 Table of Contents Life Our Life segment consists of insurance products, including term, universal, whole and variable life products designed to address policyholders’ needs for financial security and protected wealth transfer, which may be on a tax-advantaged basis.
Based on total account value, approximately 76% and 77% of our variable annuity block included living benefit guarantees at December 31, 2023 and 2022, respectively. GMIBs. GMIBs are our largest block of living benefit guarantees based on in-force account value.
Based on total account value, approximately 75% and 76% of our variable annuity block included living benefit guarantees at December 31, 2024 and 2023, respectively. GMIBs. GMIBs are our largest block of living benefit guarantees based on in-force account value.
In addition, we offer all employees access to optional monthly learning sessions designed to further enhance their understanding of our corporate strategy and culture, as well as to provide the opportunity to build and enhance skills. We also offer a mentorship program designed to provide professional development opportunities through engagement with leaders across the Company.
In addition, throughout the year, we offer all employees access to education sessions designed to further their understanding of our corporate strategy and culture, as well as provide the opportunity to build and enhance skills. We also offer a mentorship program designed to provide our employees with professional development opportunities through engagement with leaders across the Company.
NR = Not rated In addition, a block of long-term care insurance business with reserves of $5.8 billion at December 31, 2023 is reinsured to Genworth Life Insurance Company and Genworth Life Insurance Company of New York (collectively, the “Genworth reinsurers”) who further retroceded this business to Union Fidelity Life Insurance Company (“UFLIC”), an indirect subsidiary of General Electric Company (“GE”).
NR = Not rated 16 Table of Contents In addition, a block of long-term care insurance business with reserves of $5.4 billion at December 31, 2024 is reinsured to Genworth Life Insurance Company and Genworth Life Insurance Company of New York (collectively, the “Genworth reinsurers”) who further retroceded this business to Union Fidelity Life Insurance Company (“UFLIC”), an indirect subsidiary of General Electric Company (“GE”).
For example, Dodd-Frank imposes requirements for (i) the mandatory clearing of certain OTC derivatives transactions that must be cleared and settled through central clearing counterparties (“OTC-cleared”), and (ii) the mandatory exchange of margin for OTC in-scope derivatives transactions that are bilateral contracts between two counterparties (“OTC-bilateral” or “uncleared”) entered into after the applicable phase-in period.
For example, Dodd-Frank imposes requirements for (i) the mandatory clearing of certain OTC derivatives transactions that must be cleared and settled through central clearing counterparties (“OTC-cleared”), and (ii) the mandatory exchange of margin for OTC in-scope derivatives transactions that are bilateral contracts between two counterparties (“OTC-bilateral” or “uncleared”).
However, based on information currently available to us, we believe that any costs associated with compliance with environmental laws and regulations or any remediation of properties in our investment portfolio will not have a material adverse effect on our results of operations or financial condition.
We cannot provide assurance that unexpected environmental liabilities will not arise. However, based on information currently available to us, we believe that any costs associated with compliance with environmental laws and regulations or any remediation of properties in our investment portfolio will not have a material adverse effect on our results of operations or financial condition.
Our subsidiary, Brighthouse Advisers is registered as an investment advisor with the SEC under the Investment Advisers Act of 1940, and its primary business is to serve as investment advisor to certain of the registered funds that underlie our variable annuity contracts and variable life insurance policies.
Our subsidiary, Brighthouse Advisers, is registered as an investment adviser with the SEC under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and its primary business is to serve as investment adviser to certain of the registered funds that underlie our variable annuity contracts and variable life insurance policies.
DIAs differ from SPIAs in that DIAs require the contract holder to wait at least 15 months before income payments commence. SPIAs and DIAs are priced based on considerations consistent with the annuitant’s age, gender and, in the case of DIAs, the deferral period. DIAs provide a pension-like stream of income payments after a specified deferral period.
DIAs differ from SPIAs in that DIAs require the contract holder to wait at least 15 months before income payments commence. SPIAs and DIAs are priced utilizing the annuitant’s age, gender and, in the case of DIAs, the deferral period. DIAs provide a pension-like stream of income payments after a specified deferral period.
In addition, through Brighthouse Scholar Connections, Inc., a non-profit organization established in 2022, scholarships are provided to expand educational opportunities for students who are members of historically underrepresented or disadvantaged populations due to race, ethnicity, socioeconomic status or other factors. Brighthouse Financial employees have the opportunity to serve as mentors for students who have been awarded scholarships by this organization.
In addition, through Brighthouse Scholar Connections, Inc., a non-profit organization established in 2022, scholarships are provided to expand educational opportunities for students who are members of historically underrepresented or disadvantaged populations. Brighthouse Financial employees have the opportunity to serve as mentors for students who have been awarded scholarships by this organization.
Information About Our Executive Officers The following table presents certain information regarding our executive officers as of February 22, 2024. Name Age Position with Brighthouse Financial and Certain Other Business Experience Eric T. Steigerwalt 62 Brighthouse Financial: President and Chief Executive Officer (August 2017 – present) MetLife: President and Chief Executive Officer, Brighthouse Financial, Inc.
Information About Our Executive Officers The following table presents certain information regarding our executive officers as of February 28, 2025. Name Age Position with Brighthouse Financial and Certain Other Business Experience Eric T. Steigerwalt 63 Brighthouse Financial: President and Chief Executive Officer (August 2017 – present) MetLife: President and Chief Executive Officer, Brighthouse Financial, Inc.
The Company’s Board of Directors and its Compensation and Human Capital Committee oversee our human capital matters, including pay equity; talent and leadership development; the Company’s efforts to attract, engage and retain talent; culture; and the development and execution of the Company’s strategy to advance its diversity, equity and inclusion (“DEI”) objectives.
The Company’s Board of Directors and its Compensation and Human Capital Committee oversee our human capital matters, including pay equity; talent and leadership development; the Company’s efforts to attract, engage and retain talent; culture; and the development and execution of the Company’s inclusion and belonging strategy.
While our in-force book reflects a broad range of life products, we are currently focused on term life products and universal life products with index-linked benefits, consistent with our financial objectives, with a concentration on design and profitability over volume.
While our in-force book reflects a broad range of life products, we are currently focused on term life products and universal life products with index-linked benefits, concentrating on design and profitability over volume.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny inquiry in connection with our analytics business practices, as well as any misuse or alleged misuse of those analytics insights, could cause reputational harm or result in regulatory enforcement actions or litigation, and any related limitations imposed on us could have a material impact on our business, financial condition and results of operations. 55 Table of Contents Risks Related to Our Separation from, and Continuing Relationship with, MetLife If the Separation were to fail to qualify for non-recognition treatment for federal income tax purposes, then we could be subject to significant tax liabilities In connection with the Separation, MetLife received a private letter ruling from the Internal Revenue Service (“IRS”) regarding certain significant issues under the Tax Code, as well as an opinion from its tax advisor that, subject to certain limited exceptions, the Separation qualifies for non-recognition of gain or loss to MetLife and MetLife’s shareholders pursuant to Sections 355 and 361 of the Tax Code.
Biggest changeRisks Related to Our Separation from, and Continuing Relationship with, MetLife If the Separation were to fail to qualify for non-recognition treatment for federal income tax purposes, then we could be subject to significant tax liabilities In connection with the Separation, MetLife received a private letter ruling from the IRS regarding certain significant issues under the Tax Code, as well as an opinion from its tax advisor that, subject to certain limited exceptions, the Separation qualifies for non-recognition of gain or loss to MetLife and MetLife’s shareholders pursuant to Sections 355 and 361 of the Tax Code.
This could in turn impact our RBC ratios and our financial strength ratings, which are necessary to support our product sales, and, in certain circumstances, ultimately impact our solvency.
This could in turn impact our RBC ratios and our financial strength ratings, which are necessary to support our product sales, and, in certain circumstances, ultimately impact our solvency.
Our insurance subsidiaries and BRCD are subject to regulation by their primary Delaware, Massachusetts and New York state regulators, as applicable, as well as other regulation in states in which they operate. Changes in these laws and regulations could adversely affect our business, financial condition and results of operations.
Our insurance subsidiaries and BRCD are subject to regulation by their primary Delaware, Massachusetts and New York state regulators, as applicable, as well as other regulations in states in which they operate. Changes in these laws and regulations could adversely affect our business, financial condition and results of operations.
Additionally, our data has been and could in the future be the subject of cyberattacks, and the misappropriation or intentional or unintentional inappropriate disclosure or misuse of employee or client information could occur, including as a result of us or our third-party service providers (or their suppliers, vendors or subcontractors) failing to maintain adequate internal controls or if our associates or any of our third-party service providers fail to comply with applicable policies and procedures.
Additionally, our data has been and could in the future be the subject of cyberattacks, and the misappropriation or intentional or unintentional inappropriate disclosure or misuse of employee or client information has occurred and could occur in the future, including as a result of us or our third-party service providers (or their suppliers, vendors or subcontractors) failing to maintain adequate internal controls or if our associates or any of our third-party service providers fail to comply with applicable policies and procedures.
An increase in our variable annuity guarantee liabilities for any of the above reasons, individually or in the aggregate, could have a material adverse effect on our financial condition and results of operations and our profitability measures, as well as materially impact our capitalization, our statutory free cash flow, our ability to receive dividends from our insurance subsidiaries and our liquidity.
An increase in our variable annuity or Shield Annuity guarantee liabilities for any of the above reasons, individually or in the aggregate, could have a material adverse effect on our financial condition and results of operations and our profitability measures, as well as materially impact our capitalization, our statutory free cash flow, our ability to receive dividends from our insurance subsidiaries and our liquidity.
We conduct an annual actuarial review (the “AAR”) of the key inputs into our actuarial models that rely on management judgment and update any models where we have credible evidence from actual experience, industry data or other relevant sources to ensure our price-setting criteria and reserve valuation practices continue to be appropriate.
We conduct an annual actuarial review (the “AAR”) of the key inputs into our actuarial models that rely on management judgment and update any models where we have credible evidence from actual experience, industry data or other relevant sources to seek to ensure our price-setting criteria and reserve valuation practices continue to be appropriate.
Any future declaration and payment of dividends or other distributions or returns of capital will be at the discretion of our Board of Directors and will depend on many factors, including our financial condition, earnings, cash needs, regulatory constraints, capital requirements (including capital requirements of our insurance subsidiaries), and any other factors that our Board of Directors deems relevant in making such a determination.
Any future declaration and payment of dividends or other distributions or returns of capital will be at the discretion of BHF’s Board of Directors and will depend on many factors, including our financial condition, earnings, cash needs, regulatory constraints, capital requirements (including capital requirements of our insurance subsidiaries), and any other factors that BHF’s Board of Directors deems relevant in making such a determination.
See “Business — Regulation — Insurance Regulation — Holding Company Regulation.” These regulatory restrictions may delay, deter or prevent a potential merger or sale of our company, even if our Board of Directors decides that it is in the best interests of stockholders for us to merge or be sold.
See “Business — Regulation — Insurance Regulation — Holding Company Regulation.” These regulatory restrictions may delay, deter or prevent a potential merger or sale of our company, even if BHF’s Board of Directors decides that it is in the best interests of stockholders for us to merge or be sold.
See also “— Risks Related to Our Business — Guarantees within certain of our annuity products may decrease our earnings, decrease our capitalization, increase the volatility of our results, result in higher risk management costs and expose us to increased market risk” and “— Risks Related to Our 45 Table of Contents Business — Public health crises, extreme mortality events or similar occurrences may adversely impact our business, financial condition, or results of operations, as well as the economy in general.” Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs and our access to capital The capital and credit markets may be subject to periods of extreme volatility.
See also “— Risks Related to Our Business — Guarantees within certain of our annuity products may decrease our earnings, decrease our capitalization, increase the volatility of our results, result in higher risk management costs and expose us to increased market risk” and “— Risks Related to Our 46 Table of Contents Business — Public health crises, extreme mortality events or similar occurrences may adversely impact our business, financial condition, or results of operations, as well as the economy in general.” Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs and our access to capital The capital and credit markets may be subject to periods of extreme volatility.
In addition, our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may deter coercive takeover practices and inadequate takeover bids and may encourage prospective acquirers to negotiate with our Board of Directors rather than attempt a hostile takeover.
In addition, our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may deter coercive takeover practices and inadequate takeover bids and may encourage prospective acquirers to negotiate with BHF’s Board of Directors rather than attempt a hostile takeover.
Persistency could be adversely affected by a number of factors, including adverse economic conditions, as well as by developments affecting policyholder perception of us, including perceptions arising from any potential adverse publicity or negative rating agency actions.
Persistency could be adversely affected by a number of factors, including adverse economic conditions, as well as by developments affecting policyholder perception of us, including perceptions arising from any potential adverse publicity or adverse rating agency actions.
Interest Rate Risk Some of our current or anticipated future products, principally traditional life, universal life, and fixed index-linked and income annuities, as well as funding agreements and structured settlements, expose us to the risk that changes in interest rates will reduce our investment margin or “net investment spread,” or the difference between the amounts that we are required to pay under the contracts in our general account and the rate of return we earn on general account investments intended to support the obligations under such contracts.
Interest Rate Risk Some of our current or anticipated future products, principally whole life, universal life, fixed, index-linked and income annuities, as well as funding agreements and structured settlements, expose us to the risk that changes in interest rates will reduce our investment margin or “net investment spread,” or the difference between the amounts that we are required to pay under the contracts in our general account and the rate of return we earn on general account investments intended to support the obligations under such contracts.
The above risks could adversely affect our business, financial condition and results of operations. 43 Table of Contents Public health crises, extreme mortality events or similar occurrences may adversely impact our business, financial condition, or results of operations, as well as the economy in general Public health crises, extreme mortality events or other similar occurrences could have a major impact on the global economy and the financial markets or the economies of particular countries or regions, including market volatility and disruptions to commerce, the health system, and the food supply, as well as reduced economic activity and labor shortages.
The above risks could adversely affect our business, financial condition and results of operations. 44 Table of Contents Public health crises, extreme mortality events or similar occurrences may adversely impact our business, financial condition, or results of operations, as well as the economy in general Public health crises, extreme mortality events or other similar occurrences could have a major impact on the global economy and the financial markets or the economies of particular countries or regions, including market volatility and disruptions to commerce, the health system, and the food supply, as well as reduced economic activity and labor shortages.
See “— Risks Related to Our Business — Guarantees within certain of our annuity products may decrease our earnings, decrease our capitalization, increase the volatility of our results, result in higher risk management costs and expose us to increased market risk.” Risks Related to Our Investment Portfolio Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations Credit Risk Fixed income securities and mortgage loans represent a significant portion of our investment portfolio.
See “— Risks Related to Our Business — Guarantees within certain of our annuity products may decrease our earnings, decrease our capitalization, increase the volatility of our results, result in higher risk management costs and expose us to increased market risk.” 48 Table of Contents Risks Related to Our Investment Portfolio Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations Credit Risk Fixed income securities and mortgage loans represent a significant portion of our investment portfolio.
Consolidation of distributors or other industry changes may also increase the likelihood that distributors will try to renegotiate the terms of any existing selling agreements to terms less favorable to us. 41 Table of Contents Because our products are distributed through unaffiliated firms, we may not be able to monitor or control the manner of their distribution despite our training and compliance programs.
Consolidation of distributors or other industry changes may also increase the likelihood that distributors will try to renegotiate the terms of any existing selling agreements to terms less favorable to us. 42 Table of Contents Because our products are distributed through unaffiliated firms, we may not be able to monitor or control the manner of their distribution despite our training and compliance programs.
Moreover, we may be unable to timely dissolve all contractual relationships with the divested business in the course of the proposed transaction, which may materially adversely affect our ability to realize value from the disposition. Such disposition could also adversely affect our internal controls and 44 Table of Contents procedures and impair our relationships with key customers, distributors and suppliers.
Moreover, we may be unable to timely dissolve all contractual relationships with the divested business in the course of the proposed transaction, which may materially adversely affect our ability to realize value from the disposition. Such disposition could also adversely affect our internal controls and 45 Table of Contents procedures and impair our relationships with key customers, distributors and suppliers.
Furthermore, if a third-party provider (or such third-party’s supplier, vendor or subcontractor) fails to meet contractual requirements (e.g., compliance with applicable laws and regulations or fails to provide material information on a timely basis), fails to provide required services due to the loss of key personnel or otherwise, or suffers a cyberattack or other security breach, then, in each case, we could suffer economic and reputational harm that could have a material adverse effect on our business and financial reporting.
Furthermore, if a third-party provider (or such third-party’s supplier, vendor or subcontractor) fails to meet contractual obligations or requirements (e.g., compliance with applicable laws and regulations or fails to provide material information on a timely basis) or fails to provide required services due to the result of a cyberattack or other security breach, the loss of key personnel or otherwise, then, in each case, we could suffer economic and reputational harm that could have a material adverse effect on our business and financial reporting.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Policyholder Liabilities.” 35 Table of Contents Guarantees within certain of our annuity products may decrease our earnings, decrease our capitalization, increase the volatility of our results, result in higher risk management costs and expose us to increased market risk Certain of the variable annuity products we offer include guaranteed benefits designed to protect contract holders against significant changes in equity markets and interest rates, including GMDBs and GMWBs.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Policyholder Liabilities.” 36 Table of Contents Guarantees within certain of our annuity products may decrease our earnings, decrease our capitalization, increase the volatility of our results, result in higher risk management costs and expose us to increased market risk Certain of the variable annuity and Shield Annuity products we offer include guaranteed benefits designed to protect contract holders against significant changes in equity markets and interest rates, including GMDBs and GMWBs.
Our net investment spread is a key component of our profitability measures. 46 Table of Contents Although reducing interest crediting rates can help offset decreases in net investment spreads on some products, our ability to reduce these rates is limited to the portion of our in-force product portfolio that has adjustable interest crediting rates and could be limited by the actions of our competitors or contractually guaranteed minimum rates and may not match the timing or magnitude of changes in asset yields.
Our net investment spread is a key component of our profitability measures. 47 Table of Contents Although reducing interest crediting rates can help offset decreases in net investment spreads on some products, our ability to reduce these rates is limited to the portion of our in-force product portfolio that has adjustable interest crediting rates and could also be limited by the actions of our competitors or contractually guaranteed minimum rates and may not match the timing or magnitude of changes in asset yields.
See “— Regulatory and Legal Risks — A decrease in the RBC ratio of our insurance subsidiaries (as a result of a reduction in statutory capital and surplus or an increase in the required RBC capital charges), or a change in the rating agency proprietary capital models for our insurance subsidiaries, could result in increased scrutiny by insurance regulators and rating agencies and could have a material adverse effect on our financial condition and results of operations.” See also “Business — Regulation — Insurance Regulation” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Parent Company — Liquidity and Capital — Statutory Capital and Dividends.” Risks associated with climate change could adversely affect our business, financial condition and results of operations.
See “— Regulatory and Legal Risks — A decrease in the RBC ratio of our insurance subsidiaries (as a result of a reduction in statutory capital and surplus or an increase in the required RBC capital charges), or a change in the rating agency proprietary capital models for our insurance subsidiaries, could result in increased scrutiny by insurance regulators and rating agencies or BHF contributing capital to its subsidiaries and could have a material adverse effect on our financial condition and results of operations.” See also “Business — Regulation — Insurance Regulation” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Parent Company — Liquidity and Capital — Statutory Capital and Dividends.” Risks associated with climate change could adversely affect our business, financial condition and results of operations.
Material pending litigation and other legal disputes, as well as regulatory matters affecting us and risks to our business presented by these proceedings, if any, are discussed in Note 18 of the Notes to the Consolidated Financial Statements.
Material pending litigation and other legal disputes, as well as regulatory matters affecting us and risks to our business presented by these proceedings, if any, are discussed in Note 17 of the Notes to the Consolidated Financial Statements.
There can be no assurances that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default. Any failure to do so could, in turn, have a material adverse effect on our ability to continue to operate as a 39 Table of Contents going concern.
There can be no assurances that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default. Any failure to do so could, in turn, have a material adverse effect on our ability to continue to operate as a going concern.
See “— Risks Related to Our Business — We may experience difficulty in marketing and distributing products through our distribution channels” and “— Operational Risks — Any failure in cyber- or other information security systems, as well as the occurrence of events unanticipated in Brighthouse Financial’s or our third-party service providers’ disaster recovery systems and business continuity planning could result in a loss or disclosure of confidential information, damage to our reputation and impairment of our ability to conduct business effectively.” Similarly, if any third-party provider (or such third-party’s supplier, vendor or subcontractor) experiences any deficiency in internal controls, determines that its practices and procedures used in providing services to us (including administering any of our policies or managing any of our investments) require review, or otherwise fails to provide services to us in accordance with appropriate standards, we could incur expenses and experience other adverse effects as a result.
See “— Risks Related to Our Business — We may experience difficulty in marketing and distributing products through our distribution channels” and “— Operational Risks — Any failure in our cybersecurity risk management program, as well as the occurrence of events unanticipated in Brighthouse Financial’s or our third-party service providers’ disaster recovery systems and business continuity planning, could result in a loss or disclosure of confidential information, damage to our reputation and impairment of our ability to conduct business effectively.” Similarly, if any third-party provider (or such third-party’s supplier, vendor or subcontractor) experiences any deficiency in internal controls, determines that its practices and procedures used in providing services to us (including administering any of our policies or managing any of our investments) require review, or otherwise fails to provide services to us in accordance with appropriate standards, we could incur expenses and experience other adverse effects as a result.
See “Business — Regulation — Regulation of Over-the-Counter Derivatives.” 50 Table of Contents Other Risks We are also exposed to other risks outside of our control, including foreign currency exchange rate risk relating to the variability in currency exchange rates for non-U.S. dollar denominated investments, as well as other financial and operational risks related to using external asset management firms.
See “Business — Regulation — Regulation of Over-the-Counter Derivatives.” Other Risks We are also exposed to other risks outside of our control, including foreign currency exchange rate risk relating to the variability in currency exchange rates for non-U.S. dollar denominated investments, as well as other financial and operational risks related to using external asset management firms.
The occurrence of a major economic downturn, acts of corporate malfeasance, widening mortgage or credit spreads, or other events that adversely affect the issuers, guarantors or underlying collateral of these 47 Table of Contents securities and mortgage loans could cause the estimated fair value of our portfolio of fixed income securities and mortgage loans and our earnings to decline and the default rate of the fixed income securities and mortgage loans in our investment portfolio to increase.
The occurrence of a major economic downturn, acts of corporate malfeasance, widening mortgage or credit spreads, or other events that adversely affect the issuers, guarantors or underlying collateral of these securities and mortgage loans could cause the estimated fair value of our portfolio of fixed income securities and mortgage loans and our earnings to decline and the default rate of the fixed income securities and mortgage loans in our investment portfolio to increase.
See “Business — Regulation.” A decrease in the RBC ratio of our insurance subsidiaries (as a result of a reduction in statutory capital and surplus or an increase in the required RBC capital charges), or a change in the rating agency proprietary capital models for our insurance subsidiaries, could result in increased scrutiny by insurance regulators and rating agencies and could have a material adverse effect on our financial condition and results of operations The NAIC has established model regulations that provide minimum capitalization requirements based on RBC formulas for insurance companies.
See “Business — Regulation.” A decrease in the RBC ratio of our insurance subsidiaries (as a result of a reduction in statutory capital and surplus or an increase in the required RBC capital charges), or a change in the rating agency proprietary capital models for our insurance subsidiaries, could result in increased scrutiny by insurance regulators and rating agencies or BHF contributing capital to its subsidiaries and could have a material adverse effect on our financial condition and results of operations The NAIC has established model regulations that provide minimum capitalization requirements based on RBC formulas for insurance companies.
Changes in regulatory approval processes, rules and other dynamics in the regulatory process could adversely impact our ability to react to such changing conditions. We cannot predict the impact that “best interest” or fiduciary standards adopted or proposed by various regulators may have on our business, financial condition or results of operations.
Changes in regulatory approval processes, rules and other dynamics in the regulatory process could adversely impact our ability to react to such changing conditions. 52 Table of Contents We cannot predict the impact that “best interest” or fiduciary standards adopted or proposed by various regulators may have on our business, financial condition or results of operations.
In some circumstances, national banks that sell annuity products of life insurers may also have a pre-existing customer base for financial services products. These competitive pressures may adversely affect the persistency of our products, as well as our ability to sell our products in the future. In addition, new and disruptive technologies may present competitive risks.
In some circumstances, national banks that sell annuity products of life insurers may also have a pre-existing customer base for financial services products. These competitive pressures may adversely affect the persistency of our products, as well as our ability or decision to sell certain products in the future. In addition, new and disruptive technologies may present competitive risks.
To help ensure we have sufficient assets to meet future ULSG policyholder obligations, we have employed an actuarial approach based upon Statutory Cash Flow Testing (“ULSG CFT”) to set our ULSG asset requirement target for BRCD, which reinsures the majority of the ULSG business written by certain of our insurance subsidiaries.
To help ensure we have sufficient assets to meet future ULSG policyholder obligations, we have employed an actuarial approach based upon Statutory Cash Flow Testing (“ULSG CFT”) to set our ULSG asset requirement target for BRCD, which reinsures the majority of the ULSG business that was previously written by certain of our insurance subsidiaries.
If our products are distributed by such firms in an inappropriate manner, or to customers for whom such products are not in the best interest, we may suffer reputational and other harm to our business.
If our products are distributed by such firms in an inappropriate manner, or to customers for whom such products are not in their best interest, we may suffer reputational and other harm to our business.
Tightening credit spreads may reduce our investment income and cause an increase in the reported value of certain liabilities that are valued using a discount rate that reflects our own credit spread. 48 Table of Contents • Risks Related to Equity Markets – A portion of our investments are in leveraged buy-out funds and other private equity funds.
Tightening credit spreads may reduce our investment income and cause an increase in the reported value of certain liabilities that are valued using a discount rate that reflects our own credit spread. • Risks Related to Equity Markets – A portion of our investments are in leveraged buy-out funds and other private equity funds.
The pricing of certain of our variable annuity products that contain certain living benefit guarantees is also based on assumptions about utilization rates (i.e., the percentage of contracts that will utilize the benefit during the contract duration), including the timing of the first withdrawal. Our earnings may vary based on differences between actual and expected benefit utilization.
The pricing of our annuity products that contain living benefit guarantees, including our variable annuity products, is also based on assumptions about utilization rates (i.e., the percentage of contracts that will utilize the benefit during the contract duration), including the timing of the first withdrawal. Differences between actual and expected benefit utilization may cause our earnings to vary.
The financing facility matures in 2039, and we may therefore need to refinance this facility in the future. The NAIC adopted AG 48, which regulates the terms of captive insurer arrangements that are entered into or amended in certain ways after December 31, 2014.
The financing facility matures in 2039, and we may therefore need to refinance this facility in the future. 41 Table of Contents The NAIC adopted AG 48, which regulates the terms of captive insurer arrangements that are entered into or amended in certain ways after December 31, 2014.
Regulators have imposed and likely will continue to impose ESG-related rules and guidance, which may conflict with one another and impose additional costs on us or expose us to new or additional risks.
Regulators have imposed and may continue to impose ESG-related rules and guidance, which may conflict with one another and impose additional costs on us or expose us to new or additional risks.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies — ULSG Market Risk Exposure Management.” Changes in accounting standards issued by the Financial Accounting Standards Board may adversely affect our financial statements Our financial statements are subject to the application of GAAP, which is periodically revised by the Financial Accounting Standards Board (“FASB”).
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies.” Changes in accounting standards issued by the Financial Accounting Standards Board may adversely affect our financial statements Our financial statements are subject to the application of GAAP, which is periodically revised by the Financial Accounting Standards Board (“FASB”).
In addition, our ability to withstand competitive pressures and to react to changes in the insurance industry could be impaired. Further, if we are unable to repay, refinance or restructure our secured indebtedness, the holders of such indebtedness could proceed against any collateral securing that indebtedness.
In addition, our ability to withstand competitive pressures and to react 40 Table of Contents to changes in the insurance industry could be impaired. Further, if we are unable to repay, refinance or restructure our secured indebtedness, the holders of such indebtedness could proceed against any collateral securing that indebtedness.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends and Uncertainties — Financial and Economic Environment” for a discussion of the current impacts of inflation. Market Valuation Risk Market valuation risk relates to the variability in the estimated fair value of investments associated with changes in market factors.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends and Uncertainties — Financial and Economic Environment” for a discussion of the current impacts of inflation. 49 Table of Contents Market Valuation Risk Market valuation risk relates to the variability in the estimated fair value of investments associated with changes in market factors.
Furthermore, the valuation of our derivatives could change based on changes to our valuation methodology or the discovery of errors. Substantially all of our derivative transactions require us to pledge or receive collateral or make payments related to any decline in the net estimated fair value of such derivative transactions.
Furthermore, the valuation of our derivatives could change based on changes to our valuation methodology or the discovery of errors. 51 Table of Contents Substantially all of our derivative transactions require us to pledge or receive collateral or make payments related to any decline in the net estimated fair value of such derivative transactions.
This could result in realized losses which could have a material adverse effect on our financial condition and results of operations, as well as our financial ratios, which could affect compliance with our credit instruments and rating 49 Table of Contents agency capital adequacy measures.
This could result in realized losses which could have a material adverse effect on our financial condition and results of operations, as well as our financial ratios, which could affect compliance with our credit instruments and rating agency capital adequacy measures.
These provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our Board of Directors determines is not in the best interests of Brighthouse Financial and our stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors. Item 1B.
These provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that BHF’s Board of Directors 58 Table of Contents determines is not in the best interests of Brighthouse Financial and our stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors. Item 1B.
As a result, any periods of significant and sustained negative or low separate account returns, increased equity volatility, or reduced interest rates could result in an increase in the valuation of our liabilities associated with variable annuity guarantees.
As a result, any periods of significant and sustained negative or low separate account returns, increased equity volatility, or reduced interest rates could result in an increase in the valuation of our liabilities associated with these guarantees.
Because fees generated by such products are primarily related to the value of the separate account assets and other AUM, a decline in the equity markets could reduce our revenues as a result of the reduction in the value of the investment assets supporting those products and services.
Because fees generated by such products are primarily related to the value of AUM, a decline in the equity markets could reduce our revenues as a result of the reduction in the value of the investment assets supporting those products and services.
In addition, hedging instruments we enter into may not effectively offset the costs of the guarantees within certain of our annuity products or may otherwise be insufficient in relation to our obligations. For example, in the event that derivative counterparties or central clearinghouses are unable or unwilling to pay, we remain liable for the guaranteed benefits.
In addition, hedging instruments we enter into may not effectively offset the costs of the guarantees within certain of our annuity products or may otherwise be insufficient in relation to our obligations. For example, in the event that derivative counterparties or central clearinghouses are unable or unwilling to honor their obligations, we would remain liable for the guaranteed benefits.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Annual Actuarial Review” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends and Uncertainties — Financial and Economic Environment.” Our variable annuity exposure risk management strategy may not be effective, may result in significant volatility in our profitability measures or may negatively affect our statutory capital Our variable annuity exposure risk management strategy seeks to mitigate the potential adverse effects of changes in capital markets, specifically equity markets and interest rates.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Annual Actuarial Review” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends and Uncertainties — Financial and Economic Environment.” Our hedging strategy may not be effective, which may result in significant volatility in our profitability measures or may negatively affect our statutory capital Our risk management strategy seeks to mitigate the potential adverse effects of changes in capital markets, specifically equity markets and interest rates.
There can be no assurance that in connection with any such conversions, transitions to new third-party service providers, or in connection with any of the services provided to us by third parties (or such third-party’s supplier, vendor or subcontractor), we will not incur unanticipated expenses or experience other economic or reputational harm, service delays or interruptions, or be subject to litigation or regulatory investigations and actions, any of which could have a material adverse effect on our business and financial results.
There can be no assurance that in connection with any such services, including the transition to new third-party service providers in the future, or in connection with any of the services provided to us by existing third parties (or such third-party’s supplier, vendor or subcontractor), we will not incur unanticipated expenses or experience other economic or reputational harm, service delays or interruptions, or be subject to litigation or regulatory investigations and actions, any of which could have a material adverse effect on our business and financial results.
Interest rates have increased and may continue to increase due to central bank policy responses to combat inflation, which may positively impact our business in certain respects, but could also increase the risk of a recession or an equity market downturn and could negatively impact various portions of our business, including our investment portfolio.
Interest rates may increase in the future due to central bank policy responses to combat inflation, which may positively impact our business in certain respects, but could also increase the risk of a recession or an equity market downturn and could negatively impact various portions of our business, including our investment portfolio.
Increasing scrutiny and evolving expectations from investors, customers, regulators and other stakeholders regarding environmental, social and governance matters may adversely affect our reputation or otherwise adversely impact our business and results of operations There is increasing scrutiny and evolving expectations from investors, customers, regulators and other stakeholders on environmental, social and governance (“ESG”) practices and disclosures, including those related to environmental stewardship, climate change, diversity, equity and inclusion, racial justice and workplace conduct.
Continued scrutiny and evolving expectations from investors, customers, regulators and other stakeholders regarding environmental, social and governance matters may adversely affect our reputation or otherwise adversely impact our business and results of operations There is continued scrutiny and evolving expectations, as well as conflicting expectations, from investors, customers, regulators and other stakeholders on environmental, social and governance (“ESG”) practices and disclosures, including those related to environmental stewardship, climate change, diversity, equity and inclusion, racial justice and workplace conduct.
In view of evolving regulatory expectations, growing investor interest, and changing consumer preferences and social expectations, ESG issues can represent emerging or unforeseen risks to our long-term operating performance and financial condition.
In view of evolving regulatory expectations, investor scrutiny, and changing consumer preferences and social expectations, ESG issues can represent emerging or unforeseen risks to our long-term operating performance and financial condition.
Furthermore, if implemented, any such refinements could cause us to increase the reserves we hold for our insurance policy and annuity contract liabilities. If models are misused or fail to serve their intended purposes, they could produce incorrect or inappropriate results.
Furthermore, if implemented, any such refinements could cause us to increase the reserves we hold for our insurance policy and annuity contract liabilities. If models are misused 54 Table of Contents or fail to serve their intended purposes, they could produce incorrect or inappropriate results.
In addition, if our business changes or the markets in which we operate evolve and new risks emerge, we may have to 53 Table of Contents implement more extensive and perhaps different policies, procedures or processes and our risk management framework may not evolve at the same pace as those changes.
In addition, if our business changes or the markets in which we operate evolve and new risks emerge, we may have to implement more extensive and perhaps different policies, procedures or processes and our risk management framework may not evolve at the same pace as those changes.
Similarly, a ratings downgrade affecting a security we hold could indicate the credit quality of that security has deteriorated and could increase the capital we must hold to support that security to maintain our RBC levels.
Similarly, a ratings downgrade affecting a security we hold could indicate the credit quality of that security has deteriorated and could increase the capital we must hold to support that security to maintain our RBC 50 Table of Contents levels.
Any such estimates, or the absence thereof, may, among other things, be associated with: (i) basis returns related to equity or fixed income indices; (ii) actuarial assumptions related to policyholder behavior and life expectancy; and (iii) management actions that may occur in response to developing facts, circumstances and experience for which no estimates are made in any market sensitivities.
Any such estimates may, among other things, be associated with: (i) basis returns related to equity or fixed income indices; (ii) actuarial assumptions related to policyholder behavior; and (iii) management actions that may occur in response to developing facts, circumstances and experience for which no estimates are made in any market sensitivities.
There can be no assurance that MetLife will be able to satisfy its indemnification obligation to us or that such indemnification will be sufficient to us in the event of a dispute or nonperformance by MetLife.
There can be no assurance that MetLife will be able to satisfy 57 Table of Contents its indemnification obligation to us or that such indemnification will be sufficient to us in the event of a dispute or nonperformance by MetLife.
In periods of rapidly increasing interest rates, similar to those experienced in 2022, we may not be able to replace, in a timely manner, the investments in our general account with higher-yielding investments needed to fund the higher crediting rates necessary to keep interest rate sensitive products competitive.
In periods of rapidly increasing interest rates, we may not be able to replace, in a timely manner, the investments in our general account with higher-yielding investments needed to fund the higher crediting rates necessary to keep interest rate sensitive products competitive.
Our distributors may elect to suspend, alter, reduce or terminate their distribution relationships with us for various reasons, including changes in our distribution strategy, adverse developments in our business, adverse rating agency actions, or concerns about market-related risks.
Our distributors may elect to suspend, alter, reduce or terminate their distribution relationships with us for various reasons, including changes in our distribution strategy, adverse developments in our business, adverse rating agency actions, changes in the products we offer, or concerns about market-related risks.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Mortgage Loans” and Notes 9 and 11 of the Notes to the Consolidated Financial Statements. Derivative Risk We use a variety of strategies to manage risk related to our ongoing business operations, including the use of derivatives.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Mortgage Loans” and Notes 8 and 10 of the Notes to the Consolidated Financial Statements. Derivative Risk We use a variety of strategies to manage risk related to our ongoing business operations, including the use of derivatives.
See “— Risks Related to Our Business — We may not have sufficient assets to meet our future ULSG policyholder obligations, and changes in interest rates may result in net income volatility” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies — ULSG Market Risk Exposure Management.” Inflation Risk Inflation increases expenses (including, among others, for labor and third-party services), potentially putting pressure on profitability in the event that such additional costs cannot be passed through to policyholders.
See “— Risks Related to Our Business — We may not have sufficient assets to meet our future ULSG policyholder obligations, and changes in interest rates may result in volatility of our profitability measures and capital” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies.” Inflation Risk Inflation increases our expenses (including, among others, for labor and third-party services), potentially putting pressure on our profitability in the event that such additional costs cannot be passed through to policyholders.
A downgrade or a potential downgrade in our financial strength or credit ratings could result in a loss of business and materially adversely affect our financial condition and results of operations Downgrades in our financial strength ratings or credit ratings or changes to our ratings outlooks could have a material adverse effect on our financial condition and results of operations in many ways, including: • reducing new sales of insurance products and annuity products; • losing existing distributors or negatively impacting our ability to establish relationships with new distributors; • adversely affecting our relationships with independent sales intermediaries; • increasing the number or amount of policy surrenders and withdrawals by contract holders and policyholders; • requiring us to reduce prices for many of our products and services to remain competitive; • providing termination rights for the benefit of our derivative instrument counterparties; • providing termination rights to cedents under assumed reinsurance contracts; • adversely affecting our ability to obtain reinsurance at reasonable prices, if at all; • subjecting us to potentially increased regulatory scrutiny; • limiting our access to capital markets or other contingent funding sources; and • increasing our cost of capital, which could adversely affect our liquidity. 38 Table of Contents Credit rating agencies may continue to review and adjust their ratings for the companies that they rate, including us.
A downgrade or a potential downgrade in our financial strength or credit ratings could result in a loss of business and materially adversely affect our financial condition and results of operations Downgrades in our financial strength ratings or credit ratings or changes to our ratings outlooks could have a material adverse effect on our financial condition and results of operations in many ways, including: • reducing new sales of insurance products and annuity products; • losing existing distributors or negatively impacting our ability to establish relationships with new distributors; • adversely affecting our relationships with independent sales intermediaries; • increasing the number or amount of policy surrenders and withdrawals by contract holders and policyholders; • requiring us to reduce prices for many of our products and services to remain competitive; • providing termination rights for the benefit of our derivative instrument counterparties; • providing termination rights to cedents under assumed reinsurance contracts; • adversely affecting our ability to obtain reinsurance at reasonable prices, if at all; • subjecting us to potentially increased regulatory scrutiny; • limiting our access to capital markets or other contingent funding sources; and • increasing our cost of capital, which could adversely affect our liquidity.
We may not have sufficient assets to meet our future ULSG policyholder obligations, and changes in interest rates may result in net income volatility The primary market risk associated with our ULSG block is the uncertainty around the future levels of U.S. interest rates and bond yields.
We may not have sufficient assets to meet our future ULSG policyholder obligations, and changes in interest rates may result in volatility of our profitability measures and capital The primary market risk associated with our ULSG block is the uncertainty around the future levels of U.S. interest rates and bond yields.
In connection with this financing arrangement, BRCD, with the explicit permission of the Delaware Commissioner, has included the value of credit-linked notes as admitted assets. See Notes 12 and 13 of the Notes to the Consolidated Financial 40 Table of Contents Statements for a description of the financing arrangement and this associated permitted practice.
In connection with this financing arrangement, BRCD, with the explicit permission of the Delaware Commissioner, has included the value of credit-linked notes as admitted assets. See Notes 11 and 12 of the Notes to the Consolidated Financial Statements for a description of the financing arrangement and this associated permitted practice.
See “— Risks Related to Our Business — Our variable annuity exposure risk management strategy may not be effective, may result in significant volatility in our profitability measures or may negatively affect our statutory capital.” Any failure in cyber- or other information security systems, as well as the occurrence of events unanticipated in Brighthouse Financial’s or our third-party service providers’ disaster recovery systems and business continuity planning could result in a loss or disclosure of confidential information, damage to our reputation and impairment of our ability to conduct business effectively We heavily rely on communications, information systems (both internal and provided by third parties), and the internet to conduct our business.
See “— Risks Related to Our Business — Our hedging strategy may not be effective, which may result in significant volatility in our profitability measures or may negatively affect our statutory capital.” Any failure in our cybersecurity risk management program, as well as the occurrence of events unanticipated in Brighthouse Financial’s or our third-party service providers’ disaster recovery systems and business continuity planning, could result in a loss or disclosure of confidential information, damage to our reputation and impairment of our ability to conduct business effectively We heavily rely on communications, information systems (both internal and provided by third parties), and the internet to conduct our business.
An increase in bank and broker-dealer consolidation activity could increase competition for access to distributors, result in greater distribution expenses and impair our ability to market products through these channels.
An increase in bank and broker-dealer consolidation activity could increase competition for access to distributors, resulting in greater distribution expenses and an impaired ability to market our products through these channels.
We may therefore have to accept a lower credit spread and lower profitability or face a decline in sales and greater loss of existing contracts and related assets.
We may therefore have to accept a lower investment return and lower profitability or face a decline in sales and greater loss of existing contracts and related assets.
Cybersecurity threats can originate from a wide variety of sources including terrorists, nation states, financially motivated actors, internal actors, or third parties, such as external service providers, and the techniques used change frequently or are often not recognized until after they have been launched.
Cybersecurity threats can originate from a wide variety of sources including terrorists, nation states, financially or politically motivated actors, internal actors such as employees (through malicious or accidental acts), or third parties, such as external service providers, and the techniques used to effectuate such threats change frequently or are often not recognized until after they have been launched.
We make assumptions regarding policyholder behavior at the time of pricing, including regarding the selection and utilization of the guaranteed options inherent within certain of our products, based in part on expected persistency of the products, which change the probability that a policy or contract will remain in-force from one period to the next.
We make assumptions regarding policyholder behavior at the time of pricing, including the selection and utilization of the guaranteed options inherent within certain of our products and persistency (i.e., the probability that a policy or contract will remain in-force from one period to the next).
Additionally, such a rate increase could result in our recapturing the reinsured business, which would result in a need to maintain additional reserves, reduce reinsurance receivables and expose us to greater risks.
Additionally, such a rate increase could result in our recapturing the reinsured business, which could reduce reinsurance receivables and expose us to greater risks. A premium rate increase or our recapturing reinsured business could, in each case, also result in a need to maintain additional reserves.
Risk Factors Index to Risk Factors Page Overview 35 Risks Related to Our Business 35 Economic Environment and Capital Markets-Related Risks 45 Risks Related to Our Investment Portfolio 47 Regulatory and Legal Risks 51 Operational Risks 53 Risks Related to Our Separation from, and Continuing Relationship with, MetLife 56 Risks Related to Our Securities 57 34 Table of Contents Overview You should carefully consider the factors described below, in addition to the other information set forth in this Annual Report on Form 10-K.
Risk Factors Index to Risk Factors Page Overview 36 Risks Related to Our Business 36 Economic Environment and Capital Markets-Related Risks 46 Risks Related to Our Investment Portfolio 49 Regulatory and Legal Risks 52 Operational Risks 54 Risks Related to Our Separation from, and Continuing Relationship with, MetLife 57 Risks Related to Our Securities 58 35 Table of Contents Overview You should carefully consider the factors described below, in addition to the other information set forth in this Annual Report on Form 10-K.
As a result, our net investment spread would decrease or potentially become negative, which could have a material adverse effect on our financial condition and results of operations.
As a result, a decrease in interest rates could cause our net investment spread to decrease or potentially become negative, which could have a material adverse effect on our financial condition and results of operations.
Changes in tax laws or interpretations of such laws could reduce our earnings and materially impact our operations by increasing our corporate taxes and making some of our products less attractive to consumers Changes in tax laws or interpretations of such laws could have a material adverse effect on our profitability and financial condition and could result in our incurring materially higher statutory taxes.
Changes in tax laws or interpretations of such laws could reduce our earnings and materially impact our operations by increasing our corporate taxes and making some of our products less attractive to consumers Changes in tax laws or interpretations of such laws, including in relation to the extension of expiring provisions of the 2017 Tax Cuts and Jobs Act, could have a material adverse effect on our profitability and financial condition and could result in our incurring materially higher statutory taxes.
This could in turn impact our RBC ratios and our financial strength ratings, which are necessary to support our product sales, and, in certain circumstances, ultimately impact our solvency.
This could in turn impact our ability to return capital to stockholders, as well as our RBC ratios and our financial strength ratings, which are necessary to support our product sales, and, in certain circumstances, ultimately impact our solvency.
Such actions may negatively affect our business and results of operations. If our associates fail to adhere to regulatory requirements or our policies and procedures, we may be subject to penalties, restrictions or other sanctions by applicable regulators, and we may suffer reputational harm.
If our associates fail to adhere to regulatory requirements or our policies and procedures, we may be subject to penalties, restrictions or other sanctions by applicable regulators, and we may suffer reputational harm.
Furthermore, we are subject to the risk that changes in policyholder behavior or mortality, combined with adverse market events, could produce economic losses not addressed by the risk management techniques employed. 36 Table of Contents Finally, the cost of our hedging program may be greater than anticipated because adverse market conditions can limit the availability, and increase the costs of, the derivatives we intend to employ, and such costs may not be recovered in the pricing of the underlying products we offer.
Furthermore, we are subject to the risk that changes in policyholder behavior or mortality, combined with adverse market events, could produce economic losses outside the scope of our risk management strategy. 37 Table of Contents The cost of our hedging strategy may also be greater than anticipated if adverse market conditions were to limit the availability, and increase the costs of, the derivatives we intend to employ, and such costs may not be recovered in the pricing of the underlying products we offer.
If, as a result of competitive factors or otherwise, we are unable to generate a sufficient return on insurance policies and annuity products we sell in the future, we may stop selling such policies and products, which could have a material adverse effect on our financial condition and results of operations.
If, as a result of competitive factors, our ability to generate profitability consistent with our strategic goals or otherwise, we are unable to generate a sufficient return on products we sell in the future, we may stop selling such products, which could result in adverse rating agency actions and have a material adverse effect on our financial condition and results of operations.
Accordingly, we may be forced to incur additional expenses for reinsurance or may not be able to obtain sufficient reinsurance on acceptable terms, which could adversely affect our ability to write future business or result in an increase in the amount of risk that we retain with respect to those policies we issue.
Accordingly, we may be forced to incur additional expenses for reinsurance or may not be able to obtain sufficient reinsurance on acceptable terms, which could limit our opportunities for growth and capital management or result in an increase in the amount of risk that we retain with respect to those policies we issue.
This risk mitigation strategy may negatively impact our GAAP stockholders’ equity and net income when interest rates rise and our ULSG Target likely declines, since our reported ULSG liabilities under GAAP are largely insensitive to actual fluctuations in interest rates.
This risk mitigation strategy may negatively impact our GAAP stockholders’ equity and net income when interest rates rise and our ULSG Target likely declines as a result, since our interest rate derivatives are measured at fair value, while our ULSG liabilities under GAAP are largely insensitive to actual fluctuations in interest rates.
See “Business — Segments and Corporate & Other — Annuities — Products — Variable Annuities” for further consideration of the risks associated with guaranteed benefits, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies — Variable Annuity Exposure Risk Management.” Our analyses of scenarios and sensitivities that we may utilize in connection with our variable annuity risk management strategies may involve significant estimates based on assumptions and may, therefore, result in material differences between actual outcomes and the sensitivities calculated under such scenarios As part of our variable annuity exposure risk management program, we estimate the impact of various market factors under certain scenarios on our variable annuity statutory free cash flow, our reserves, or our capital (collectively, the “market sensitivities”).
See “Business — Segment Information — Annuities — Products — Variable Annuities” for further consideration of the risks associated with guaranteed benefits, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management Strategies” and “— A downgrade or a potential downgrade in our financial strength or credit ratings could result in a loss of business and materially adversely affect our financial condition and results of operations.” Our analyses of scenarios and sensitivities that we may utilize in connection with our risk management strategy involve significant estimates based on assumptions, which inherently could result in material differences between actual outcomes and the sensitivities calculated under such scenarios As part of our risk management strategy, we estimate the impact of various market factors under certain scenarios on our variable annuity statutory free cash flow, our reserves, or our capital (collectively, the “market sensitivities”).
See “— Any failure in cyber- or other information security systems, as well as the occurrence of events unanticipated in Brighthouse Financial’s or our third-party service providers’ disaster recovery systems and business continuity planning could result in a loss or disclosure of confidential information, damage to our reputation and impairment of our ability to conduct business effectively.” In addition, compliance with complex variations in privacy and data security laws may require modifications to current business practices, including significant technology efforts that require long implementation timelines, increased costs and dedicated resources.
See “— Any failure in our cybersecurity risk management program, as well as the occurrence of events unanticipated in Brighthouse Financial’s or our third-party service providers’ disaster recovery systems and business continuity planning, could result in a loss or disclosure of confidential information, damage to our reputation and impairment of our ability to conduct business effectively.” In addition, compliance with complex variations in privacy and data security laws may require modifications to current business practices, including significant technology efforts that require long implementation timelines, increased costs and dedicated resources. 56 Table of Contents Furthermore, there has been increased scrutiny as well as enacted and proposed additional laws and regulations, including from state regulators, regarding the use of customer data.
Unanticipated problems with, or failures of, our disaster recovery systems and business continuity plans could have a material impact on our ability to conduct business and on our financial condition and results of operations. 54 Table of Contents A failure of our or relevant third-party (or such third-party’s supplier’s, vendor’s or subcontractor’s computer systems) computer systems could cause significant interruptions in our operations, result in a failure to maintain the security, confidentiality or privacy of sensitive data, harm our reputation, subject us to regulatory sanctions and legal claims, lead to a loss of customers and revenues, and otherwise adversely affect our business and financial results.
A failure of our or relevant third-party (or such third-party’s supplier’s, vendor’s or subcontractor’s computer systems) computer systems could cause significant interruptions in our operations, result in a failure to maintain the security, confidentiality or privacy of sensitive data, harm our reputation, subject us to regulatory sanctions and legal claims, lead to a loss of customers and revenues, and otherwise adversely affect our business and financial results.
The strategy primarily relies on a hedging strategy using derivative instruments and, to a lesser extent, reinsurance. We utilize a combination of short-term and longer-term derivative instruments to have a laddered maturity of protection and reduce roll-over risk during periods of market disruption or higher volatility. However, our hedging strategy may not be fully effective.
Our risk management strategy relies on selling products that provide a risk offset to each other, hedging using derivative instruments and, to a lesser extent, reinsurance. We utilize a combination of short-term and longer-term derivative instruments to have a laddered maturity of protection and reduce roll-over risk during periods of market disruption or higher volatility.
Our pending legal actions and regulatory investigations include proceedings specific to us, as well as other proceedings that raise issues that are generally applicable to business practices in the industries in which we operate. 52 Table of Contents In connection with our insurance operations, plaintiffs’ lawyers may bring or are bringing class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, claims payments and procedures, escheatment, product design, disclosure, administration, investments, denial or delay of benefits, lapse or termination of policies, cost of insurance and breaches of fiduciary or other duties to customers.
In connection with our insurance operations, plaintiffs’ lawyers may bring or are bringing class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, claims payments and procedures, escheatment, product design, disclosure, administration, investments, denial or delay of benefits, lapse or termination of policies, cost of insurance and breaches of fiduciary or other duties to customers.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe have not experienced any cybersecurity incidents to date, directly or indirectly, that have materially impacted our business, financial condition, or results of operations.
Biggest changeBased on the information available as of the filing date of this Annual Report on Form 10-K, we are not aware of any cybersecurity incidents, directly or indirectly, that have materially affected or are reasonably likely to materially affect our business, results of operations, or financial condition.
Item 1C. Cybersecurity Cybersecurity Risk Management Program and Strategy We understand the importance of maintaining a robust cybersecurity program to assess, identify, and manage the material risks associated with cybersecurity threats.
Item 1C. Cybersecurity Cybersecurity Risk Management Program and Strategy We understand the importance of maintaining a robust cybersecurity risk management program to assess, identify, and manage the material risks associated with cybersecurity threats.
Prior to joining Brighthouse Financial, both our CTO and CISO previously served in roles that involved leading and overseeing information technology and cybersecurity programs at other public companies in the financial services industry. In addition, our CTO serves on a cross-departmental, management-level risk committee that oversees the Company’s enterprise risks, including cybersecurity risks.
Prior to joining Brighthouse Financial, both our CTO and CISO previously served in roles that involved leading and overseeing information technology and cybersecurity risk management programs at other public companies in the financial services industry. In addition, our CTO serves on a cross-departmental, management-level risk committee that oversees the Company’s enterprise risks, including cybersecurity risks.
The Audit Committee and/or the Board of Directors generally meet with our CTO and CISO on a quarterly basis to review our information technology and cybersecurity risk profile and to discuss our activities to manage the related risks, including risk assessments, mitigation strategies, areas of emerging risks, incidents and industry trends, tabletop exercises, and other areas of importance.
The Audit Committee and/or the Board of Directors generally meet with our CTO and CISO on a quarterly basis to review our information technology and cybersecurity risk profile and to discuss our activities to manage the related risks, including risk assessments, mitigation strategies, areas of emerging risks, incidents, industry trends, tabletop exercises, and other areas of importance.
For more information regarding our risks from cybersecurity threats, see “Risk Factors — Operational Risks — Any failure in cyber- or other information security systems, as well as the occurrence of events unanticipated in Brighthouse Financial’s or our third-party service providers’ disaster recovery systems and business continuity planning could result in a loss or disclosure of confidential information, damage to our reputation and impairment of our ability to conduct business effectively” and “Risk Factors —Operational Risks — Any failure to protect the confidentiality of customer, employee, or other third-party information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operations.” Governance Board of Directors - Oversight and Management Reporting The Audit Committee of the Board of Directors (the “Audit Committee”) is primarily responsible for overseeing cybersecurity risks, and the Board of Directors is actively engaged with respect to these risks.
For more information regarding our risks from cybersecurity threats, see “Risk Factors — Operational Risks — Any failure in our cybersecurity risk management program, as well as the occurrence of events unanticipated in Brighthouse Financial’s or our third-party service providers’ disaster recovery systems and business continuity planning, could result in a loss or disclosure of confidential information, damage to our reputation and impairment of our ability to conduct business effectively” and “Risk Factors —Operational Risks — Any failure to protect the confidentiality of customer, employee, or other third-party information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operations.” Governance Board of Directors - Oversight and Management Reporting The Audit Committee of the Board of Directors (the “Audit Committee”) is primarily responsible for overseeing cybersecurity risks, and the Board of Directors is actively engaged with respect to these risks.
Our CTO has over 25 years of information technology experience, including systems development, technology strategy, and vendor management; our CISO has over 30 years of information technology and cybersecurity program management experience.
Our CTO has over 25 years of information technology experience, including systems development, technology strategy, and vendor management; our CISO has over 30 years of information technology and cybersecurity risk management program management experience.
This plan includes immediate actions to mitigate the impact, as well as long-term strategies for the remediation and prevention of future incidents. In accordance with this plan, we have established a cross-departmental Brighthouse Response Team that is responsible for coordinating enterprise-wide responses to cybersecurity incidents, as applicable.
This plan includes immediate actions to mitigate the impact of the incident, as well as long-term strategies for the remediation and prevention of future incidents. In accordance with this plan, we have established a cross-departmental Brighthouse Response Team that is responsible for coordinating enterprise-wide responses to cybersecurity incidents.
Our Chief Information Security Officer (“CISO”) is directly responsible for the Company’s cybersecurity program, which is designed to protect and preserve the integrity, confidentiality, and continued availability of the information owned by, or in the care of, the Company.
Our Chief Information Security Officer (“CISO”) is directly responsible for the Company’s cybersecurity risk management program, which is designed to protect and preserve the integrity, confidentiality, and continued availability of the information owned by, or in the care of, the Company.
In the event of a cybersecurity incident, the Company utilizes a well-defined incident response plan that coordinates the activities we take to prepare for, detect, respond to and recover from cybersecurity incidents, which include processes to triage, assess severity, escalate, contain, investigate, and remediate the incident, as well as to comply with potentially applicable legal obligations (including relevant securities laws) and mitigate brand and reputational damage.
In the event of a cybersecurity incident, the Company utilizes a well-defined incident response plan that is designed to coordinate the activities we take to prepare for, detect, respond to and recover from cybersecurity incidents, which include processes to triage, assess severity, escalate, contain, investigate, and remediate the incident, as well as to comply with potentially applicable legal obligations (including relevant securities laws) and mitigate brand and reputational damage.
This Brighthouse Response Team provides reports regarding cybersecurity incidents to the enterprise-level risk committee referenced above. Further, employees outside of our technology organization have a role in our cybersecurity defenses, and we encourage a corporate culture supportive of security, which we believe improves the effectiveness of our cybersecurity risk management program.
This Brighthouse Response Team provides reports regarding cybersecurity incidents to the enterprise-level risk committee referenced above. 59 Table of Contents Further, employees outside of our information technology organization have a role in our cybersecurity defenses, and we encourage a corporate culture supportive of security, which we believe improves the effectiveness of our cybersecurity risk management program.
Our Chief Compliance Officer also regularly reports to the Audit Committee regarding the Company’s compliance with applicable regulations relating to cybersecurity. Item 2. Properties Not material. Item 3. Legal Proceedings See Note 18 of the Notes to the Consolidated Financial Statements. Item 4. Mine Safety Disclosures Not applicable. 59 Table of Contents PART II
Our Chief Compliance Officer also regularly reports to the Audit Committee regarding the Company’s compliance with applicable regulations relating to cybersecurity. Item 2. Properties Not material. Item 3. Legal Proceedings See Note 17 of the Notes to the Consolidated Financial Statements. Item 4. Mine Safety Disclosures Not applicable. 60 Table of Contents PART II
Through our Security Awareness Program, we provide our employees with regular cybersecurity training and educational resources to help ensure that they remain vigilant against threats. These include frequent simulations, newsletters, alerts, e-mail reminders, and a mandatory annual cybersecurity awareness training course for all employees.
Through our Security Awareness Program, we provide our employees with regular cybersecurity training and educational resources to help ensure that they remain vigilant against threats. These include frequent simulated phishing campaigns, newsletters, alerts, e-mail reminders, and a mandatory annual cybersecurity awareness training course for all employees.
In addition to company policies that we make available to all employees, our awareness training provides clear reporting and escalation processes in the event of suspicious activity. 58 Table of Contents Third-Party Risk Management Our processes also address the cybersecurity risks associated with our use of third-party vendors, some of whom have access to our customer and employee data.
In addition to Company policies that we make available to all employees, our cybersecurity awareness training provides clear reporting and escalation processes in the event of suspicious activity. Third-Party Risk Management Our processes also address the cybersecurity risks associated with our use of third-party vendors, some of which have access to our customer and employee data.
Our cybersecurity team has also established Company-wide policies and procedures that cover cybersecurity matters, which are designed to enable us to effectively identify, evaluate, and respond to events that have the potential to impact our business.
The results of the most recent assessment of our cybersecurity risk management program confirmed the rigor of our cybersecurity risk management practices. Our cybersecurity team has also established company-wide policies and procedures that cover cybersecurity matters, which are designed to enable us to effectively identify, evaluate, and respond to events that have the potential to impact our business.
In addition, our cybersecurity team conducts regular reviews, conducts tabletop exercises, performs internal testing, and leverages the audits performed by our internal audit team, as well as the services of third-party consultants, to assess and evaluate the effectiveness of our controls (in alignment with the NIST framework) and to improve our security measures and strategy.
In addition, our cybersecurity team conducts regular reviews, conducts tabletop exercises, performs internal testing, and leverages the audits performed by our internal audit team.
Our cybersecurity program is designed to be aligned with the National Institute of Standards and Technology (“NIST”) framework, which organizes the management of cybersecurity risks into five categories: identify, protect, detect, respond, and recover. Our Chief Technology Officer (“CTO”) has overall responsibility for our information technology program, which includes the Company’s cybersecurity program.
Our Chief Technology Officer (“CTO”) has overall responsibility for our information technology program, which includes the Company’s cybersecurity risk management program.
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The cybersecurity team has also engaged a third party to measure our cybersecurity program against the NIST cybersecurity framework. The results of this assessment confirmed the rigor of our cybersecurity risk management practices.
Added
Our cybersecurity risk management program is designed to be aligned with the National Institute of Standards and Technology Cybersecurity Framework (“NIST Framework”), which provides standards, guidelines and best practices on managing cybersecurity risk, as well as the organization, improvement and assessment of the Company’s cybersecurity risk management program.
Added
We also engage the services of third-party consultants to assess and evaluate the effectiveness of our controls (in alignment with the NIST Framework), to improve our security measures and strategy, and to review our cybersecurity risk management program against the NIST Framework.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDec 31, 2018 Dec 31, 2019 Dec 31, 2020 Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 BHF common stock $ 100.00 $ 128.71 $ 118.78 $ 169.95 $ 168.21 $ 173.62 S&P 500 $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 S&P 500 Financials $ 100.00 $ 132.13 $ 129.89 $ 175.40 $ 156.92 $ 175.99 S&P 500 Life & Health Insurance $ 100.00 $ 123.18 $ 111.51 $ 152.41 $ 168.18 $ 176.00 60 Table of Contents Issuer Purchases of Equity Securities Purchases of BHF common stock made by or on behalf of BHF or its affiliates during the three months ended December 31, 2023 are set forth below: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) (In millions) October 1 — October 31, 2023 460,522 $ 47.24 461,248 $ 82 November 1 — November 30, 2023 423,457 $ 48.31 423,788 $ 811 December 1 — December 31, 2023 342,658 $ 53.14 342,658 $ 793 Total 1,226,637 1,227,694 _______________ (1) Where applicable, total number of shares purchased includes shares of common stock withheld with respect to option exercise costs and tax withholding obligations associated with the exercise or vesting of share-based compensation awards under our publicly announced benefit plans or programs.
Biggest changeDec 31, 2019 Dec 31, 2020 Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 Dec 31, 2024 BHF common stock $ 100.00 $ 92.29 $ 132.04 $ 130.69 $ 134.90 $ 122.46 S&P 500 $ 100.00 $ 118.40 $ 152.39 $ 124.79 $ 157.59 $ 197.02 S&P 500 Financials $ 100.00 $ 98.31 $ 132.75 $ 118.77 $ 133.20 $ 173.90 S&P 500 Life & Health Insurance $ 100.00 $ 90.52 $ 123.73 $ 136.53 $ 142.87 $ 171.87 61 Table of Contents Issuer Purchases of Equity Securities Purchases of BHF common stock made by or on behalf of BHF or its affiliates during the three months ended December 31, 2024 are set forth below: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) (In millions) October 1 — October 31, 2024 483,900 $ 46.69 483,900 $ 581 November 1 — November 30, 2024 392,451 $ 50.63 392,451 $ 561 December 1 — December 31, 2024 355,802 $ 49.44 355,802 $ 543 Total 1,232,153 1,232,153 _______________ (1) Where applicable, total number of shares purchased includes shares of common stock withheld with respect to option exercise costs and tax withholding obligations associated with the exercise or vesting of share-based compensation awards under our publicly announced benefit plans or programs.
See “Risk Factors — Risks Related to Our Securities — We currently have no plans to declare and pay dividends on our common stock, and legal restrictions could limit our ability to pay dividends on our capital stock and our ability to repurchase our common stock at the level we wish” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Capital.” Stock Performance Graph The graph and table below present BHF’s cumulative total shareholder return relative to the performance of (1) the S&P 500 Index, (2) the S&P 500 Financials Index and (3) the S&P 500 Life & Health Insurance Index, respectively, for the five-year period ended December 31, 2023.
See “Risk Factors — Risks Related to Our Securities — We currently have no plans to declare and pay dividends on our common stock, and legal restrictions could limit our ability to pay dividends on our capital stock and our ability to repurchase our common stock at the level we wish” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Capital.” Stock Performance Graph The graph and table below present BHF’s cumulative total shareholder return relative to the performance of (1) the S&P 500 Index, (2) the S&P 500 Financials Index and (3) the S&P 500 Life & Health Insurance Index, respectively, for the five-year period ended December 31, 2024.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Issuer Common Equity BHF’s common stock, par value $0.01 per share, trades on the Nasdaq under the symbol “BHF.” As of February 16, 2024, there were approximately 1.1 million registered holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Issuer Common Equity BHF’s common stock, par value $0.01 per share, trades on the Nasdaq under the symbol “BHF.” As of February 21, 2025, there were approximately 1.0 million registered holders of record of our common stock.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Primary Uses of Liquidity and Capital — Common Stock Repurchases” and Note 13 of the Notes to the Consolidated Financial Statements for more information on common stock repurchases. Item 6. [Reserved] 61 Table of Contents
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Primary Uses of Liquidity and Capital — Common Stock Repurchases” and Note 12 of the Notes to the Consolidated Financial Statements for more information on common stock repurchases. Item 6. [Reserved] 62 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeKey net favorable impacts were: • higher net investment spread due to: ◦ higher investment yields and average invested long-term assets from funding agreements issued in connection with our institutional spread margin business; ◦ higher average invested assets resulting from positive net flows in the general account; ◦ higher investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at higher yields than the portfolio average; and ◦ higher returns from short-term investments; partially offset by ◦ higher interest credited to policyholders due to higher account balances, net of changes made in the prior period in connection with the AAR, and current period actuarial modeling improvements; ◦ lower returns on investments in real estate limited partnerships and limited liability companies (“LLC”); and 78 Table of Contents ◦ lower income from our securities lending program; and • lower other expenses due to: ◦ the settlement of a reinsurance-related matter in the prior period; ◦ higher systems conversion costs in the prior period; ◦ lower asset-based variable annuity expenses resulting from lower average separate account balances, a portion of which is offset in fee income; and ◦ lower transition services agreement expenses; partially offset by ◦ higher deferred compensation and operational expenses; ◦ lower ceded cost of insurance expenses consistent with favorable equity market returns in our Life segment, which is offset in fee income; ◦ lower interest expenses in the prior period related to prior year tax matters; and ◦ higher legal reserves.
Biggest changeKey net favorable impacts were: • lower net costs associated with insurance-related activities due to: ◦ a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR in our Run-off and Annuities segments and other refinements; partially offset by ◦ an increase in liability balances in our Run-off segment resulting from a reinsurance premium rate increase associated with the conclusion of a reinsurance arbitration; and ◦ a decrease in income annuity underwriting margins; • higher net investment spread due to: ◦ higher average invested assets resulting from positive net flows in the general account; ◦ higher returns on other limited partnerships; and ◦ higher investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at higher yields than the portfolio average; partially offset by ◦ higher interest credited to policyholders due to higher account balances and current and prior period actuarial modeling improvements, net of changes made in the current period in connection with the AAR in our Annuities segment; and • lower other expenses due to: ◦ lower operational expenses; ◦ lower legal reserves; and ◦ lower transition services agreement expenses; partially offset by ◦ higher asset-based variable annuity expenses resulting from higher average separate account balances, a portion of which is offset in fee income; and ◦ higher variable compensation expenses. 78 Table of Contents Key net unfavorable impact was: • lower net fee income due to: ◦ higher ceded cost of insurance fees in our Life and Run-off segments related to the conclusion of the aforementioned reinsurance arbitration, as well as the aging in-force business in our Run-off segment; partially offset by ◦ higher reinsurance fees on our fixed annuity business resulting from higher account balances; and ◦ higher asset-based fees resulting from higher average separate account balances, a portion of which is offset in other expenses.
See “Risk Factors — Economic Environment and 67 Table of Contents Capital Markets-Related Risks — If difficult conditions in the capital markets and the U.S. economy generally persist or are perceived to persist, they may materially adversely affect our business and results of operations” and “Risk Factors — Risks Related to our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations.” The above factors affect our expectations regarding future margins.
See “Risk Factors — Economic Environment and Capital Markets-Related Risks — If difficult conditions in the capital markets and the U.S. economy generally persist or are perceived to persist, they may materially adversely affect our business and results of operations” and “Risk Factors — Risks Related to our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations.” 67 Table of Contents The above factors affect our expectations regarding future margins.
Interest is credited to the policyholder’s account at interest rates we determine which are influenced by current market rates, subject to specified minimums. A sustained low interest rate environment could negatively impact earnings as a result of the minimum credited rate guarantees present in most of these policyholder account balances.
Interest is credited to the policyholder’s account at interest rates we determine which are influenced by current market rates, subject to specified minimums. A sustained low interest rate environment could negatively impact earnings as a result of the minimum credited rate guarantees present in most of these policyholder account balances.
Any future declaration and payment of dividends or other distributions or returns of capital will be at the discretion of our Board of Directors and will depend on and be subject to our financial condition, results of operations, cash needs, regulatory and other constraints, capital requirements (including capital requirements of our insurance subsidiaries), contractual restrictions and any other factors that our Board of Directors deems relevant in making such a determination.
Any future declaration and payment of dividends or other distributions or returns of capital will be at the discretion of BHF’s Board of Directors and will depend on and be subject to our financial condition, results of operations, cash needs, regulatory and other constraints, capital requirements (including capital requirements of our insurance subsidiaries), contractual restrictions and any other factors that BHF’s Board of Directors deems relevant in making such a determination.
Our Board of Directors and senior management are directly involved in the governance of the capital management process, including proposed changes to the annual capital plan and capital targets. We continuously monitor and adjust our liquidity and capital plans in light of market conditions, as well as changing needs and opportunities.
BHF’s Board of Directors and senior management are directly involved in the governance of the capital management process, including proposed changes to the annual capital plan and capital targets. We continuously monitor and adjust our liquidity and capital plans in light of market conditions, as well as changing needs and opportunities.
See “Risk Factors — Risks Related to Our Business — As a holding company, BHF depends on the ability of its subsidiaries to pay dividends,” “Risk Factors — Economic Environment and Capital Markets-Related Risks — Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs and our access to capital” and “Risk Factors — Regulatory and Legal Risks — Our insurance business is highly regulated, and changes in regulation and in supervisory and enforcement policies or interpretations thereof may materially impact our capitalization or cash flows, reduce our profitability and limit our growth,” as well as Note 13 of the Notes to the Consolidated Financial Statements.
See “Risk Factors — Risks Related to Our Business — As a holding company, BHF depends on the ability of its subsidiaries to pay dividends,” “Risk Factors — Economic Environment and Capital Markets-Related Risks — Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs and our access to capital” and “Risk Factors — Regulatory and Legal Risks — Our insurance business is highly regulated, and changes in regulation and in supervisory and enforcement policies or interpretations thereof may materially impact our capitalization or cash flows, reduce our profitability and limit our growth,” as well as Note 12 of the Notes to the Consolidated Financial Statements.
The measurement of our ULSG liabilities can be significantly impacted by changes in assumptions for the general account rate of return, which is driven by our assumption for long-term treasury yields, and changes in assumptions for premium, premium persistency, mortality and lapses.
The measurement of our ULSG liabilities can be significantly impacted by changes in assumptions for the general account rate of return, which is driven by our assumption for long-term treasury yields, and changes in assumptions for mortality, premium persistency, lapses and withdrawals.
To support this forecast, we conduct cash flow and stress testing, which reflect the impact of various scenarios, including (i) the potential increase in our requirement to pledge additional collateral or return collateral to our counterparties, (ii) a reduction in new business sales, and (iii) the risk of early contract holder and policyholder withdrawals, as well as lapses and surrenders of existing policies and contracts.
To support this forecast, we conduct cash flow and stress testing, which reflects the impact of various scenarios, including (i) the potential increase in our requirement to pledge additional collateral or return collateral to our counterparties, (ii) a reduction in new business sales, and (iii) the risk of early contract holder and policyholder withdrawals, as well as lapses and surrenders of existing policies and contracts.
The primary liquidity concerns with respect to these cash flows are market disruption and the risk of early policyholder withdrawal. 99 Table of Contents Primary Sources of Liquidity and Capital In addition to the summary description of liquidity and capital sources discussed in “— Sources and Uses of Liquidity and Capital,” the following additional information is provided regarding our primary sources of liquidity and capital: Funding Sources Liquidity is provided by a variety of funding sources, including secured and unsecured funding agreements, unsecured credit facilities and secured committed facilities.
The primary liquidity concerns with respect to these cash flows are market disruption and the risk of early policyholder withdrawal. 98 Table of Contents Primary Sources of Liquidity and Capital In addition to the summary description of liquidity and capital sources discussed in “— Sources and Uses of Liquidity and Capital,” the following additional information is provided regarding our primary sources of liquidity and capital: Funding Sources Liquidity is provided by a variety of funding sources, including secured and unsecured funding agreements, unsecured credit facilities and secured committed facilities.
See “Risk Factors — Risks Related to Our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations,” and “Risk Factors — Risks Related to Our Investment Portfolio — Ongoing military actions, the continued threat of terrorism, climate change as well as other catastrophic events may adversely affect the value of our investment portfolio and the level of claim losses we incur.” 84 Table of Contents There has been an increased market focus on commercial real estate, including office properties, as a result of companies shifting to hybrid work arrangements and the resulting impact on the demand for office space.
See “Risk Factors — Risks Related to Our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations,” and “Risk Factors — Risks Related to Our Investment Portfolio — Ongoing military actions, the continued threat of terrorism, climate change as well as other catastrophic events may adversely affect the value of our investment portfolio and the level of claim losses we incur.” 84 Table of Contents There has been a continued market focus on commercial real estate, including office properties, as a result of hybrid work arrangements and the resulting impact on the demand for office space.
Our primary funding sources include: Preferred Stock See Note 13 of the Notes to the Consolidated Financial Statements for information on preferred stock issuances. Funding Agreements Brighthouse Life Insurance Company issues funding agreements and uses the proceeds from such issuances for spread lending purposes in connection with our institutional spread margin business or to provide additional liquidity.
Our primary funding sources include: Preferred Stock See Note 12 of the Notes to the Consolidated Financial Statements for information on preferred stock issuances. Funding Agreements Brighthouse Life Insurance Company issues funding agreements and uses the proceeds from such issuances for spread lending purposes in connection with our institutional spread margin business or to provide additional liquidity.
See Note 10 of the Notes to the Consolidated Financial Statements for additional information on significant inputs into the OTC derivative pricing models and credit risk adjustment. Embedded Derivatives in Index-Linked Annuities The Company issues, and assumes through reinsurance, index-linked annuities, including Shield, that contain crediting rates classified as embedded derivatives.
See Note 9 of the Notes to the Consolidated Financial Statements for additional information on significant inputs into the OTC derivative pricing models and credit risk adjustment. Embedded Derivatives in Index-Linked Annuities The Company issues, and assumes through reinsurance, index-linked annuities, including Shield, that contain crediting rates classified as embedded derivatives.
We have various interest rate derivative positions, as part of the Company’s interest rate hedging program, to partially mitigate the risks associated with such a scenario. A breakdown of account value subject to minimum guaranteed crediting rates can be found in Note 4 of the Notes to the Consolidated Financial Statements.
We have various interest rate derivative positions, as part of the Company’s interest rate hedging program, to partially mitigate the risks associated with such a scenario. A breakdown of account value subject to minimum guaranteed crediting rates can be found in Note 3 of the Notes to the Consolidated Financial Statements.
The institutional spread margin business is comprised of funding agreements issued in connection with the programs described in more detail below. Activity related to these programs are reported in Corporate & Other. See “Obligations Under Funding Agreements” in Note 4 of the Notes to the Consolidated Financial Statements for additional information on funding agreements.
The institutional spread margin business is comprised of funding agreements issued in connection with the programs described in more detail below. Activity related to these programs are reported in Corporate & Other. See “Obligations Under Funding Agreements” in Note 3 of the Notes to the Consolidated Financial Statements for additional information on funding agreements.
Embedded Derivatives See Note 11 of the Notes to the Consolidated Financial Statements for (i) information about embedded derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy and (ii) a rollforward of the fair value measurements for net embedded derivatives measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs.
Embedded Derivatives See Note 10 of the Notes to the Consolidated Financial Statements for (i) information about embedded derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy and (ii) a rollforward of the fair value measurements for net embedded derivatives measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs.
For our agricultural mortgage loans, our average loan-to-value ratio was 47% and 48% at December 31, 2023 and 2022, respectively. The values utilized in calculating the agricultural mortgage loan loan-to-value ratio are developed in connection with the ongoing review of the agricultural loan portfolio and are routinely updated. Mortgage Loan Allowance for Credit Losses.
For our agricultural mortgage loans, our average loan-to-value ratio was 48% and 47% at December 31, 2024 and 2023, respectively. The values utilized in calculating the agricultural mortgage loan loan-to-value ratio are developed in connection with the ongoing review of the agricultural loan portfolio and are routinely updated. Mortgage Loan Allowance for Credit Losses.
See “Business — Segments and Corporate & Other — Annuities” and “— Risk Management Strategies” for more information about our use of derivatives by major hedging programs, as well as “— Results of Operations — Annual Actuarial Review” and “Risk Factors — Risks Related to our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations.” Fair Value Hierarchy See Note 11 of the Notes to the Consolidated Financial Statements for derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy, as well as a rollforward of the fair value measurements for derivatives measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs as discussed below.
See “Business — Segment Information — Annuities” and “— Risk Management Strategies” for more information about our use of derivatives by major hedging programs, as well as “— Results of Operations — Annual Actuarial Review” and “Risk Factors — Risks Related to our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations.” Fair Value Hierarchy See Note 10 of the Notes to the Consolidated Financial Statements for derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy, as well as a rollforward of the fair value measurements for derivatives measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs as discussed below.
Best (1) Fitch (2) Moody’s (3) S&P (4) Current outlook Stable Stable Stable Stable Financial Strength Ratings: Brighthouse Life Insurance Company A A A3 A+ New England Life Insurance Company A A A3 A+ Brighthouse Life Insurance Company of NY A NR NR A+ Long-term Issuer Credit Ratings: Brighthouse Financial, Inc. bbb+ BBB+ Baa3 BBB+ Brighthouse Holdings, LLC bbb+ BBB+ Baa3 BBB+ _______________ (1) A.M.
Best (1) Fitch (2) Moody’s (3) S&P (4) Financial Strength Ratings: Outlook Stable Negative Stable Stable Brighthouse Life Insurance Company A A A3 A+ New England Life Insurance Company A A A3 A+ Brighthouse Life Insurance Company of NY A NR NR A+ Long-term Issuer Credit Ratings: Outlook Negative Negative Stable Stable Brighthouse Financial, Inc. bbb+ BBB+ Baa3 BBB+ Brighthouse Holdings, LLC bbb+ BBB+ Baa3 BBB+ _______________ (1) A.M.
See also Note 13 of the Notes to the Consolidated Financial Statements for additional information regarding the applicable dividend restrictions and certain of our subsidiaries’ ordinary dividend capacity, as well as the circumstances under which regulatory approval would be required.
See also Note 12 of the Notes to the Consolidated Financial Statements for additional information regarding the applicable dividend restrictions and certain of our subsidiaries’ ordinary dividend capacity, as well as the circumstances under which regulatory approval would be required.
The measurement of our LFPBs can be significantly impacted by changes in assumptions for mortality, policy lapses and market interest rates. See Note 4 of the Notes to the Consolidated Financial Statements for additional information on the effects of changes in assumptions on the measurement of our LFPBs.
The measurement of our LFPBs can be significantly impacted by changes in assumptions for mortality, policy lapses and market interest rates. See Note 3 of the Notes to the Consolidated Financial Statements for additional information on the effects of changes in assumptions on the measurement of our LFPBs.
We also updated other assumptions related to ULSG, see “— Results of Operations — Annual Actuarial Review” for more information. See Note 4 of the Notes to the Consolidated Financial Statements for additional information on the effects of inputs and assumptions on the measurement of ULSG liabilities.
We also updated other assumptions related to ULSG, see “— Results of Operations — Annual Actuarial Review” for more information. See Note 3 of the Notes to the Consolidated Financial Statements for additional information on the effects of inputs and assumptions on the measurement of ULSG liabilities.
At December 31, 2023, the carrying value as a percentage of total commercial and agricultural mortgage loans for the top three states in the U.S. was 17% for California, 11% for Texas and 8% for New York.
At December 31, 2024, the carrying value as a percentage of total commercial and agricultural mortgage loans for the top three states in the U.S. was 17% for California, 11% for Texas and 8% for New York.
Amounts for actuarial liabilities are computed and reported in the financial statements in conformity with GAAP. See “— Summary of Critical Accounting Estimates” and Notes 1, 4 and 5 of the Notes to the Consolidated Financial Statements for more details on policyholder liabilities.
Amounts for actuarial liabilities are computed and reported in the financial statements in conformity with GAAP. See “— Summary of Critical Accounting Estimates” and Notes 1, 3 and 4 of the Notes to the Consolidated Financial Statements for more details on policyholder liabilities.
The provision for income tax related to adjusted earnings is calculated using the statutory tax rate of 21%, net of impacts related to the dividends received deduction, tax credits and current period non-recurring items. 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 provision for income tax related to adjusted earnings is calculated using the statutory tax rate of 21%, net of impacts related to the dividends received deduction, tax credits and current period non-recurring items. 71 Table of Contents 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.
See Note 10 of the Notes to the Consolidated Financial Statements for: • a comprehensive description of the nature of our derivatives, including the strategies for which derivatives are used in managing various risks; • information about the gross notional amount, estimated fair value, and primary underlying risk exposure of our derivatives by type of hedge designation, excluding embedded derivatives held at December 31, 2023 and 2022; and • the effects of derivatives in cash flow, fair value, or non-qualifying hedge relationships on the statements of operations for the years ended December 31, 2023, 2022 and 2021.
See Note 9 of the Notes to the Consolidated Financial Statements for: • a comprehensive description of the nature of our derivatives, including the strategies for which derivatives are used in managing various risks; • information about the gross notional amount, estimated fair value, and primary underlying risk exposure of our derivatives by type of hedge designation, excluding embedded derivatives held at December 31, 2024 and 2023; and • the effects of derivatives in cash flow, fair value, or non-qualifying hedge relationships on the statements of operations for the years ended December 31, 2024, 2023 and 2022.
See “Risk Factors — Risks Related to Our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations.” Selected Sector Investments Recent elevated levels of market volatility have affected the performance of various asset classes.
See “Risk Factors — Risks Related to Our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations.” Selected Sector Investments Market volatility has affected the performance of various asset classes.
We include provisions limiting withdrawal rights in many of our products, which deter the customer from 96 Table of Contents making withdrawals prior to the maturity date of the product. If significant cash is required beyond our anticipated liquidity needs, we have various alternatives available depending on market conditions and the amount and timing of the liquidity need.
We include provisions limiting withdrawal rights in many of our products, which deter the customer from making withdrawals prior to the maturity date of the product. If significant cash is required beyond our anticipated liquidity needs, we have various alternatives available depending on market conditions and the amount and timing of the liquidity need.
Our portfolio does not have any exposure to any single issuer in excess of 1% of total investments and the top ten holdings in aggregate comprise 1% of total investments at both December 31, 2023 and 2022.
Our portfolio does not have any exposure to any single issuer in excess of 1% of total investments and the top ten holdings in aggregate comprise 1% of total investments at both December 31, 2024 and 2023.
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 3 of the Notes to the Consolidated Financial Statements.
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 Consolidated Financial Statements.
See Notes 1 and 9 of the Notes to the Consolidated Financial Statements for further information about fixed maturity securities by sector, contractual maturities, continuous gross unrealized losses and the allowance for credit losses.
See Notes 1 and 8 of the Notes to the Consolidated Financial Statements for further information about fixed maturity securities by sector, contractual maturities, continuous gross unrealized losses and the allowance for credit losses.
See “Business — Regulation — Insurance Regulation” and Note 13 of the Notes to the Consolidated Financial Statements for information regarding our statutory accounting and reserves, as well as the calculation of RBC and the regulatory RBC requirements.
See “Business — Regulation — Insurance Regulation” and Note 12 of the Notes to the Consolidated Financial Statements for information regarding our statutory accounting and reserves, as well as the calculation of RBC and the regulatory RBC requirements.
Normalized statutory earnings (loss) is calculated as statutory pre-tax net gain (loss) from operations adjusted for the favorable or unfavorable impacts of (i) net realized capital gains (losses), (ii) the change in total asset requirement at CTE98, net of the change in our variable annuity reserves, which are calculated at CTE70, and (iii) unrealized gains (losses) associated with our variable annuities and Shield hedging programs and other equity risk management strategies.
Normalized statutory earnings (loss) is calculated as statutory pre-tax net gain (loss) from operations adjusted for the favorable or unfavorable impacts of (i) net realized capital gains (losses), (ii) the change in total asset requirement at CTE98, net of the change in our variable annuity reserves, which are calculated at CTE70, and (iii) unrealized gains (losses) associated with our variable annuities and Shield hedges, net of reinsurance, and other equity risk management strategies.
The percentage of our commercial and agricultural mortgage loan portfolios collateralized by properties located in the U.S. was 98% at both December 31, 2023 and 2022. The remainder was collateralized by properties located outside of the U.S.
The percentage of our commercial and agricultural mortgage loan portfolios collateralized by properties located in the U.S. was 98% at both December 31, 2024 and 2023. The remainder was collateralized by properties located outside of the U.S.
Debt Repayments, Repurchases, Redemptions and Exchanges See Note 12 of the Notes to the Consolidated Financial Statements for information on debt repayments and repurchases, as well as debt maturities and the terms of our outstanding long-term debt.
Debt Repayments, Repurchases, Redemptions and Exchanges See Note 11 of the Notes to the Consolidated Financial Statements for information on debt repayments and repurchases, as well as debt maturities and the terms of our outstanding long-term debt.
As a result of acquisitions, we establish additional liabilities known as excess interest reserves for policies with credited rates in excess of market rates as of the applicable acquisition dates. Life Life policyholder account balance liabilities are held for retained asset accounts, universal life policies and the fixed account of universal variable life insurance policies.
As a result of acquisitions, we establish additional liabilities known as excess interest reserves for policies with credited rates in excess of market rates as of the applicable acquisition dates. 94 Table of Contents Life Life policyholder account balance liabilities are held for retained asset accounts, universal life policies and the fixed account of universal variable life insurance policies.
Primary Uses of Liquidity and Capital In addition to the summarized description of liquidity and capital uses discussed in “— Sources and Uses of Liquidity and Capital,” the following additional information is provided regarding our primary uses of liquidity and capital: Common Stock Repurchases See Note 13 of the Notes to the Consolidated Financial Statements for information relating to authorizations to repurchase BHF common stock, amounts of common stock repurchased pursuant to such authorizations and the amount remaining under such authorizations at December 31, 2023.
Primary Uses of Liquidity and Capital In addition to the summarized description of liquidity and capital uses discussed in “— Sources and Uses of Liquidity and Capital,” the following additional information is provided regarding our primary uses of liquidity and capital: Common Stock Repurchases See Note 12 of the Notes to the Consolidated Financial Statements for information relating to authorizations to repurchase BHF common stock, amounts of common stock repurchased pursuant to such authorizations and the amount remaining under such authorizations at December 31, 2024.
We receive non-cash collateral for securities lending from counterparties, which cannot be sold or re-pledged, and which is not recorded on our consolidated balance sheets. There was no non-cash collateral at both December 31, 2023 and 2022. See Note 9 of the Notes to the Consolidated Financial Statements for further discussion of our securities lending program.
We receive non-cash collateral for securities lending from counterparties, which cannot be sold or re-pledged, and which is not recorded on our consolidated balance sheets. There was no non-cash collateral at both December 31, 2024 and 2023. See Note 8 of the Notes to the Consolidated Financial Statements for further discussion of our securities lending program.
A summary of key informational sections is as follows: • “Executive Summary” provides summarized information regarding our business, segments and financial results. • “Risk Management Strategies” describes the Company’s risk management strategies to protect against capital markets risks specific to our variable annuity and ULSG businesses. • “Industry Trends and Uncertainties” discusses updates and changes to a number of trends and uncertainties that we believe may materially affect our future financial condition, results of operations or cash flows. • “Summary of Critical Accounting Estimates” explains the most critical estimates and judgments applied in determining our results in accordance with GAAP. • “Non-GAAP and Other Financial Disclosures” defines key financial measures presented in our results of operations discussion that are not calculated in accordance with GAAP but are used by management in evaluating company and segment performance.
A summary of key informational sections is as follows: • “Executive Summary” provides summarized information regarding our business, segments and financial results. • “Risk Management Strategies” describes the Company’s risk management strategies to protect against capital markets and other economic risks. • “Industry Trends and Uncertainties” discusses updates and changes to a number of trends and uncertainties that we believe may materially affect our future financial condition, results of operations or cash flows. • “Summary of Critical Accounting Estimates” explains what we believe to be the most critical estimates and judgments applied in determining our results in accordance with GAAP. • “Non-GAAP Financial Disclosures” defines key financial measures presented in our results of operations discussion that are not calculated in accordance with GAAP but are used by management in evaluating company and segment performance.
See Note 10 of the Notes to the Consolidated Financial Statements for additional information regarding pledged collateral. 102 Table of Contents Securities Lending We have a securities lending program that aims to enhance the total return on our investment portfolio, whereby securities are loaned to third parties, primarily brokerage firms and commercial banks.
See Note 9 of the Notes to the Consolidated Financial Statements for additional information regarding pledged collateral. 101 Table of Contents Securities Lending We have a securities lending program that aims to enhance the total return on our investment portfolio, whereby securities are loaned to third parties, primarily brokerage firms and commercial banks.
We obtain collateral, usually cash, from the borrower, which must be returned to the borrower when the loaned securities are returned to us. Generally, our securities lending contracts expire within twelve months of issuance. We were liable for cash collateral under our control of $3.3 billion and $3.7 billion at December 31, 2023 and 2022, respectively.
We obtain collateral, usually cash, from the borrower, which must be returned to the borrower when the loaned securities are returned to us. Generally, our securities lending contracts expire within twelve months of issuance. We were liable for cash collateral under our control of $3.2 billion and $3.3 billion at December 31, 2024 and 2023, respectively.
Prolonged and elevated inflation could adversely affect the financial markets and the economy generally and dispelling it may require governments to pursue a restrictive fiscal and monetary policy, which could constrain overall economic activity and inhibit revenue growth.
Prolonged and elevated inflation could adversely affect the financial markets and the economy generally and dispelling it may require governments to pursue restrictive fiscal and monetary policies, which could constrain overall economic activity and inhibit revenue growth.
Preferred Stock Dividends See Note 13 of the Notes to the Consolidated Financial Statements for information relating to dividends declared and paid on our preferred stock. 101 Table of Contents “Dividend Stopper” Provisions in BHF’s Preferred Stock and Junior Subordinated Debentures Terms applicable to our junior subordinated debentures may restrict our ability to pay interest on those debentures in certain circumstances.
Preferred Stock Dividends See Note 12 of the Notes to the Consolidated Financial Statements for information relating to dividends declared and paid on our preferred stock. 100 Table of Contents “Dividend Stopper” Provisions in BHF’s Preferred Stock and Junior Subordinated Debentures Terms applicable to our junior subordinated debentures may restrict our ability to pay interest on those debentures in certain circumstances.
All future estimated cash payments are presented gross of any reinsurance recoverable. At December 31, 2023, obligations under our institutional spread margin business totaled $10.6 billion and the related future estimated cash payments, including interest, totaled $11.0 billion, of which $5.9 billion is due in the next twelve months.
All future estimated cash payments are presented gross of any reinsurance recoverable. At December 31, 2024, obligations under our institutional spread margin business totaled $11.0 billion and the related future estimated cash payments, including interest, totaled $11.6 billion, of which $5.5 billion is due in the next twelve months.
We receive non-cash collateral from counterparties for derivatives, which can be sold or re-pledged subject to certain constraints, and which is not recorded on our consolidated balance sheets. The amount of this non-cash collateral at estimated fair value was $2.4 billion and $1.0 billion at December 31, 2023 and 2022, respectively.
We receive non-cash collateral from counterparties for derivatives, which can be sold or re-pledged subject to certain constraints, and which is not recorded on our consolidated balance sheets. The amount of this non-cash collateral at estimated fair value was $2.3 billion and $2.4 billion at December 31, 2024 and 2023, respectively.
See Note 11 of the Notes to the Consolidated Financial Statements for more information on the determination of estimated fair value of crediting rate embedded derivatives. Income Taxes We provide for federal and state income taxes currently payable, as well as those deferred due to temporary differences between the financial reporting and tax bases of assets and liabilities.
See Note 10 of the Notes to the Consolidated Financial Statements for more information on the determination of estimated fair value of crediting rate embedded derivatives. 70 Table of Contents Income Taxes We provide for federal and state income taxes currently payable, as well as those deferred due to temporary differences between the financial reporting and tax bases of assets and liabilities.
Our Results of Operations discussion and analysis for the year ended December 31, 2022, including a review of the 2022 AAR and year-over-year comparisons between the years ended December 31, 2022 and 2021 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022 (our “2022 Annual Report”), which was filed with the SEC on February 23, 2023, and such discussions are incorporated herein by reference.
Our Results of Operations discussion and analysis for the year ended December 31, 2023, including a review of the 2023 AAR and year-over-year comparisons between the years ended December 31, 2023 and 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023 (our “2023 Annual Report”), which was filed with the SEC on February 22, 2024, and such discussions are incorporated herein by reference.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations Page Introduction 63 Executive Summary 64 Risk Management Strategies 65 Industry Trends and Uncertainties 67 Summary of Critical Accounting Estimates 68 Non-GAAP and Other Financial Disclosures 71 Results of Operations 73 Investments 84 Derivatives 93 Policyholder Liabilities 94 Liquidity and Capital Resources 96 62 Table of Contents The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations Page Introduction 64 Executive Summary 65 Risk Management Strategies 66 Industry Trends and Uncertainties 67 Summary of Critical Accounting Estimates 68 Non-GAAP Financial Disclosures 71 Results of Operations 73 Investments 84 Derivatives 92 Policyholder Liabilities 93 Liquidity and Capital Resources 95 63 Table of Contents The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs.
To the extent the rider fees are insufficient, the Company may also include fees related to mortality and expense charges in the attributed fee ratio, provided the total fees included in the calculation do not exceed total contract fees and assessments collected from the contract holder.
To the extent the rider fees are insufficient, the Company may also include fees related to mortality and expense charges in the attributed fee ratio, provided the total fees included in the calculation do not exceed total contract fees and assessments collected from the contract holder. The attributed fee ratio is not updated in subsequent periods.
Mortgage Loan Credit Quality — Monitoring Process. Our mortgage loan investments are monitored on an ongoing basis, including a review of loans that are current, past due, restructured and under foreclosure. Quarterly, we conduct a formal review of the portfolio with our investment managers.
Our mortgage loan investments are monitored on an ongoing basis, including a review of loans that are current, past due, restructured and under foreclosure. Quarterly, we conduct a formal review of the portfolio with our investment managers.
A breakdown of account value subject to minimum guaranteed crediting rates can be found in Note 4 of the Notes to Consolidated Financial Statements. 95 Table of Contents As a result of acquisitions, we establish additional liabilities known as excess interest reserves for policies with credited rates in excess of market rates as of the applicable acquisition dates.
A breakdown of account value subject to minimum guaranteed crediting rates can be found in Note 3 of the Notes to the Consolidated Financial Statements. As a result of acquisitions, we establish additional liabilities known as excess interest reserves for policies with credited rates in excess of market rates as of the applicable acquisition dates.
At December 31, 2023 and 2022, BHF and certain of its non-insurance subsidiaries had liquid assets of $1.3 billion and $1.0 billion, respectively, of which $1.2 billion and $987 million, respectively, was held by BHF. Liquid assets are comprised of cash and cash equivalents, short-term investments and publicly-traded securities, excluding assets that are pledged or otherwise committed.
At December 31, 2024 and 2023, BHF and certain of its non-insurance subsidiaries had liquid assets of $1.1 billion and $1.3 billion, respectively, of which $1.1 billion and $1.2 billion, respectively, was held by BHF. Liquid assets are comprised of cash and cash equivalents, short-term investments and publicly-traded securities, excluding assets that are pledged or otherwise committed.
Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022 Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the year ended December 31, 2023, primarily driven by: • decreases in annuity guaranteed benefits liabilities due to increasing equity markets and interest rates, partially offset by changes made in connection with the AAR; • favorable changes in variable annuity hedges due to increasing equity markets, partially offset by increasing long-term interest rates; and • unfavorable changes in Shield embedded derivatives due to increasing equity markets. 83 Table of Contents Annuity guaranteed benefits and Shield annuity liabilities performance was favorable for the year ended December 31, 2022, primarily driven by: • decreases in annuity guaranteed benefits liabilities due to increasing interest rates, partially offset by decreasing equity markets and changes made in connection with the AAR; • unfavorable changes in variable annuity hedges due to increasing long-term interest rates, partially offset by decreasing equity markets; and • favorable changes in Shield embedded derivatives due to decreasing equity markets, partially offset by increasing interest rates.
Year Ended December 31, 2024 Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the year ended December 31, 2024, primarily driven by: • favorable decreases in annuity guaranteed benefits liabilities due to increasing long-term interest rates and equity markets, as well as changes made in connection with the AAR; • favorable changes in variable annuity hedges due to increasing equity markets, partially offset by increasing long-term interest rates; and • unfavorable changes in Shield embedded derivatives due to increasing equity markets, partially offset by increasing long-term interest rates and changes made in connection with the AAR. 83 Table of Contents Year Ended December 31, 2023 Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the year ended December 31, 2023, primarily driven by: • favorable decreases in annuity guaranteed benefits liabilities due to increasing equity markets and long-term interest rates, partially offset by changes made in connection with the AAR; • favorable changes in variable annuity hedges due to increasing equity markets, partially offset by increasing long-term interest rates; and • unfavorable changes in Shield embedded derivatives due to increasing equity markets.
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 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, tax credits and current period non-recurring items.
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 18% 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, tax credits and current period non-recurring items.
Short-term Liquidity and Liquid Assets At December 31, 2023 and 2022, BHF and certain of its non-insurance subsidiaries had short-term liquidity of $1.2 billion and $1.0 billion, respectively. Short-term liquidity is comprised of cash and cash equivalents and short-term investments, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include assets held in trust.
Short-term Liquidity and Liquid Assets At December 31, 2024 and 2023, BHF and certain of its non-insurance subsidiaries had short-term liquidity of $912 million and $1.2 billion, respectively. Short-term liquidity is comprised of cash and cash equivalents and short-term investments, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include assets held in trust.
See Note 9 of the Notes to the Consolidated Financial Statements for information about how the allowance for credit losses is established and monitored, as well as activity in and balances of the allowance for credit losses for the years ended December 31, 2023 and 2022.
See Note 8 of the Notes to the Consolidated Financial Statements for information about how the allowance for credit losses is established and monitored, as well as activity in and balances of the allowance for credit losses for the years ended December 31, 2024 and 2023.
However, because our hedging strategy places a lower priority on offsetting changes to GAAP liabilities, changes to markets over time, including market volatility, could result in GAAP net income volatility, which could potentially impact stockholders’ equity.
However, because our hedging strategies place a lower priority on offsetting changes to GAAP liabilities, changes to markets over time, including market volatility, could result in GAAP net income volatility, which could potentially impact stockholders’ equity.
See Note 9 of the Notes to the Consolidated Financial Statements for information on our evaluation of residential mortgage loans and related measurement of allowance for credit losses. 91 Table of Contents Loan-to-value ratios and debt-service coverage ratios are common measures in the assessment of the quality of commercial mortgage loans.
See Note 8 of the Notes to the Consolidated Financial Statements for information on our evaluation of residential mortgage loans and related measurement of allowance for credit losses. Loan-to-value ratios and debt-service coverage ratios are common measures in the assessment of the quality of commercial mortgage loans.
In 2023, the Company updated assumptions regarding policyholder behavior, mortality, separate account fund allocations and volatility. See Note 5 of the Notes to the Consolidated Financial Statements for additional information on the effects of changes in inputs and assumptions on the measurement of our liabilities for variable annuity guarantees.
In 2024, the Company updated assumptions regarding policyholder behavior, mortality and separate account fund allocations. See Note 4 of the Notes to the Consolidated Financial Statements for additional information on the effects of changes in inputs and assumptions on the measurement of our liabilities for variable annuity guarantees.
See “— Liquidity and Capital Resources — The Company — Primary Uses of Liquidity and Capital — Securities Lending” and Note 9 of the Notes to the Consolidated Financial Statements for information regarding our securities lending program. 89 Table of Contents Mortgage Loans Our mortgage loans are principally collateralized by commercial, agricultural and residential properties.
See “— Liquidity and Capital Resources — The Company — Primary Uses of Liquidity and Capital — Securities Lending” and Note 8 of the Notes to the Consolidated Financial Statements for information regarding our securities lending program. Mortgage Loans Our mortgage loans are principally collateralized by commercial, agricultural and residential properties.
For more information on the determination of estimated fair value of MRBs, see Note 11 of the Notes to the Consolidated Financial Statements. The valuation of MRBs includes an adjustment for the risk that the Company fails to satisfy its obligations, which is referred to as nonperformance risk.
For more information on the determination of estimated fair value of MRBs, see Note 10 of the Notes to the Consolidated Financial Statements. 69 Table of Contents The valuation of MRBs includes an adjustment for the risk that the Company fails to satisfy its obligations, which is referred to as nonperformance risk.
The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in a lower effective tax rate in the current period compared to 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.
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings (loss), resulted in a higher effective tax rate in the current period compared to 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 maintain a substantial short-term liquidity position, which was $3.8 billion and $3.6 billion at December 31, 2023 and 2022, respectively. Short-term liquidity is comprised of cash and cash equivalents and short-term investments, excluding assets that are pledged or otherwise committed.
We maintain a substantial short-term liquidity position, which was $5.2 billion and $3.8 billion at December 31, 2024 and 2023, respectively. Short-term liquidity is comprised of cash and cash equivalents and short-term investments, excluding assets that are pledged or otherwise committed.
For the year ended December 31, 2023, we had net loss available to shareholders of $1.2 billion and adjusted earnings of $969 million compared to net income available to shareholders of $3.8 billion and adjusted earnings of $1.2 billion for the year ended December 31, 2022.
For the year ended December 31, 2024, we had net income available to shareholders of $286 million and adjusted earnings of $1.3 billion compared to net loss available to shareholders of $1.2 billion and adjusted earnings of $969 million for the year ended December 31, 2023.
See Note 9 of the Notes to the Consolidated Financial Statements for information on mortgage loans by credit quality indicator, past due status, nonaccrual status and modified mortgage loans. Our commercial mortgage loans are reviewed on an ongoing basis.
See Note 8 of the Notes to the Consolidated Financial Statements for information on mortgage loans by credit quality indicator, past due status, nonaccrual status and modified mortgage loans. 90 Table of Contents Our commercial mortgage loans are reviewed on an ongoing basis.
Each agency has its own capital adequacy evaluation methodology, and assessments are generally based on a combination of factors. Financial strength ratings are not statements of fact nor are they recommendations to purchase, hold or sell any security, contract or policy.
Each agency has its own capital adequacy evaluation methodology, and assessments are generally based on a combination of factors. Financial strength ratings are not statements of fact nor are they recommendations to purchase, hold or sell any security, contract or policy. Each rating should be evaluated independently of any other rating.
As part of the 2022 AAR, for our ULSG business, we increased the long-term general account earned rate, driven by an increase in the mean reversion rate from 3.00% to 3.50%. Also, with respect to our ULSG business, we updated assumptions regarding policyholder behavior, including mortality, premium persistency, lapses, withdrawals and maintenance expenses.
As part of the 2024 AAR, for our ULSG business, we increased the long-term general account earned rate, driven by an increase in the mean reversion rate, from 3.75% to 4.00%. Also, with respect to our ULSG business, we updated assumptions regarding policyholder behavior, including mortality, premium persistency, lapses and withdrawals.
Key net favorable impacts were: • higher net investment spread due to: ◦ higher average invested assets resulting from positive net flows in the general account; ◦ higher investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at higher yields than the portfolio average; and ◦ higher returns from short-term investments; partially offset by 79 Table of Contents ◦ higher interest credited to policyholders due to higher account balances, net of changes made in the prior period in connection with the AAR, and current period actuarial modeling improvements; ◦ lower returns on investments in real estate limited partnerships and LLCs; and ◦ lower income from our securities lending program; • lower costs associated with insurance-related activities due to: ◦ a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR; and ◦ an increase in income annuity underwriting margins; and • lower other expenses due to: ◦ lower asset-based variable annuity expenses resulting from lower average separate account balances, a portion of which is offset in fee income; and ◦ lower transition services agreement expenses; partially offset by ◦ higher operational and deferred compensation expenses.
Key net unfavorable impacts were: • higher net costs associated with insurance-related activities due to: ◦ a decrease in income annuity underwriting margins; and ◦ a net increase in liability balances resulting from year-over-year changes made in connection with the AAR; • 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 variable compensation expenses; 79 Table of Contents partially offset by ◦ lower operational expenses; and ◦ lower transition services agreement expenses; and • lower net investment spread due to: ◦ higher interest credited to policyholders due to higher account balances and current and prior period actuarial modeling improvements, net of changes made in the current period in connection with the AAR; partially offset by ◦ higher average invested assets resulting from positive net flows in the general account; and ◦ higher investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at higher yields than the portfolio average.
At December 31, 2023 and 2022, we were obligated to return cash collateral pledged to us by counterparties of $393 million and $829 million, respectively. The timing of the return of the derivatives collateral is uncertain. We also pledge collateral from time to time in connection with our funding agreements.
At December 31, 2024 and 2023, we were obligated to return cash collateral pledged to us by counterparties of $812 million and $393 million, respectively. The timing of the return of the derivatives collateral is uncertain. We also pledge collateral from time to time in connection with certain funding agreements.
The net statutory reserves for the ULSG business in our insurance subsidiaries and BRCD (which is in part supported by reinsurance financings) were $24.1 billion and $23.4 billion for the years ended December 31, 2023 and 2022, respectively. Our ULSG Target is sensitive to the actual and future expected level of long-term U.S. interest rates.
The net statutory reserves for the ULSG business in our insurance subsidiaries and BRCD (which is in part supported by reinsurance financings) were $24.6 billion and $24.1 billion for the years ended December 31, 2024 and 2023, respectively. 66 Table of Contents Our ULSG Target is sensitive to the actual and future expected level of long-term U.S. interest rates.
Generally, the lower the debt-service coverage ratio, the higher the risk of experiencing a credit loss. For our commercial mortgage loans, our average loan-to-value ratio was 65% and 57% at December 31, 2023 and 2022, respectively, and our average debt-service coverage ratio was 2.3x and 2.2x at December 31, 2023 and 2022, respectively.
Generally, the lower the debt-service coverage ratio, the higher the risk of experiencing a credit loss. For our commercial mortgage loans, our average loan-to-value ratio was 69% and 65% at December 31, 2024 and 2023, respectively, and our average debt-service coverage ratio was 2.3x at both December 31, 2024 and 2023.
At December 31, 2023, we were in compliance with these financial covenants.
At December 31, 2024, we were in compliance with these financial covenants.
Net investment income yields are calculated on adjusted net investment income as a percentage 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.
Adjusted net investment income yield represents adjusted net investment income as a percentage 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.
At December 31, 2023, our insurance subsidiaries had a combined statutory TAC of approximately $6.3 billion, resulting in a combined RBC ratio of approximately 428%. The amount of dividends that our insurance subsidiaries can ultimately pay to BHF through their various parent entities provides an additional margin for risk protection and investment in our businesses.
At December 31, 2024, our insurance subsidiaries had a combined statutory TAC of approximately $5.4 billion, resulting in a Combined RBC Ratio of approximately 400%. The amount of dividends that our insurance subsidiaries can ultimately pay to BHF through their various parent entities provides an additional margin for risk protection and investment in our businesses.
We continue to closely monitor political and economic conditions that might contribute to market volatility and their impact on our business operations, investment portfolio and derivatives, such as global inflation, uncertainty and instability in certain asset classes (including commercial real estate), supply chain disruptions and recent geopolitical conflicts, including in Europe and the Middle East.
We continue to closely monitor political and economic conditions that might contribute to market volatility and their impact on our business operations, investment portfolio and derivatives, such as global inflation, tariffs imposed or threatened by the U.S. or foreign governments, uncertainty and instability in certain asset classes (including commercial real estate), supply chain disruptions and recent geopolitical conflicts, including in Europe and the Middle East.
Contingencies, Commitments and Guarantees We establish liabilities for litigation, regulatory and other loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. See “Contingencies” in Note 18 of the Notes to the Consolidated Financial Statements.
Contingencies, Commitments and Guarantees We establish liabilities for litigation, regulatory and other loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. See Note 17 of the Notes to the Consolidated Financial Statements for additional information regarding contingencies.
As part of our 2023 AAR, we increased our projected long-term general account earned rate, as well as our mean reversion rate over a period of ten years from 3.50% to 3.75%, which resulted in a decrease in our ULSG liabilities of $259 million.
As part of our 2024 AAR, we increased our projected long-term general account earned rate, as well as our mean reversion rate over a period of ten years, from 3.75% to 4.00%, which resulted in a decrease in our ULSG liabilities of $260 million.
See “Quantitative and Qualitative Disclosures About Market Risk — Market Risk - Fair Value Exposures — Interest Rates.” Liquidity and Capital Resources Our business and results of operations are materially affected by conditions in the global capital markets and the economy generally.
See Note 4 of the Notes to Consolidated Financial Statements and “Quantitative and Qualitative Disclosures About Market Risk — Market Risk - Fair Value Exposures — Interest Rates.” Liquidity and Capital Resources Our business and results of operations are materially affected by conditions in the global capital markets and the economy generally.
Pledged Collateral We enter into derivatives to manage various risks relating to our ongoing business operations. We pledge collateral to, and have collateral pledged to us by, counterparties in connection with our derivatives. At December 31, 2023 and 2022, we pledged cash collateral to counterparties of $16 million and $7 million, respectively.
Pledged Collateral We enter into derivatives to manage various risks relating to our ongoing business operations. We pledge collateral to, and have collateral pledged to us by, counterparties in connection with our derivatives. At December 31, 2024, we did not pledge any cash collateral to counterparties. At December 31, 2023, we pledged $16 million of cash collateral to counterparties.
Assets pledged or otherwise committed include amounts received in connection with securities lending, derivatives and assets held on deposit or in trust. An integral part of our liquidity management includes managing our level of liquid assets, which was $45.2 billion and $40.8 billion at December 31, 2023 and 2022, respectively.
Assets pledged or otherwise committed include amounts received in connection with securities lending, derivatives and assets held on deposit or in trust. 95 Table of Contents An integral part of our liquidity management includes managing our level of liquid assets, which was $48.1 billion and $45.2 billion at December 31, 2024 and 2023, respectively.
The changes in our variable annuities separate account balances are presented in Note 6 of the Notes to the Consolidated Financial Statements. Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022 Adjusted earnings were $1.2 billion in the current period, an increase of $99 million.
The changes in our variable annuities separate account balances are presented in Note 5 of the Notes to the Consolidated Financial Statements. Year Ended December 31, 2024 Compared with the Year Ended December 31, 2023 Adjusted earnings were $1.3 billion in the current period, an increase of $82 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe analyze interest rate risk using various models, including multi-scenario cash flow projection models that forecast cash flows of the liabilities and their supporting investments, including derivatives. These projections involve evaluating the potential gain or loss on most of our in-force business under various increasing and decreasing interest rate environments.
Biggest changeThese projections involve evaluating the potential gain or loss on most of our in-force business under various increasing and decreasing interest rate environments. State insurance department regulations require that we perform some of these analyses annually as part of our review of the sufficiency of our regulatory reserves.
We also employ product design strategies to mitigate the effect of changes in equity markets such as prioritizing products that provide a risk offset and diversification to our legacy variable products. Key management objectives include limiting losses, minimizing exposures to significant risks and providing additional capital capacity for future growth.
We also employ product design strategies to mitigate the effect of changes in equity markets such as prioritizing products that provide a risk offset and diversification to our variable annuity products. Key management objectives include limiting losses, minimizing exposures to significant risks and providing additional capital capacity for future growth.
As a result of that analysis, we have determined that the estimated fair values of certain assets and liabilities are significantly exposed to changes in interest rates, and to a lesser extent, to changes in equity market prices and foreign currency exchange rates. We have exposure to market risk through our insurance operations and general account investment activities.
As a result of that analysis, we have determined that the estimated fair values of certain assets and liabilities are significantly exposed to changes in interest rates, and to a lesser extent, to changes in equity market prices and foreign currency exchange rates. We have exposure to market risk through our insurance operations and investment activities.
As discussed above, we economically hedge substantially all of our foreign currency exposure such that sensitivity to changes in foreign currencies is minimal. 108 Table of Contents
As discussed above, we economically hedge substantially all of our foreign currency exposure such that sensitivity to changes in foreign currencies is minimal. 107 Table of Contents
In addition, we have exposure to equity markets through equity derivatives that we enter into to mitigate potential equity market exposure from our policyholder liabilities. Foreign Currency Exchange Rates Our fair value exposure to fluctuations in foreign currency exchange rates against the U.S. dollar results from our holdings in non-U.S. dollar denominated fixed maturity securities, mortgage loans and certain liabilities.
In addition, we have exposure to equity markets through equity derivatives that we enter into to mitigate potential equity market exposure from our policyholder liabilities. 105 Table of Contents Foreign Currency Exchange Rates Our fair value exposure to fluctuations in foreign currency exchange rates against the U.S. dollar results from our holdings in non-U.S. dollar denominated fixed maturity securities, mortgage loans and certain liabilities.
We also use interest rate derivatives to mitigate the exposure related to interest rate risks from our policyholder liabilities. 106 Table of Contents Equity Market Our fair value exposure to equity market risk primarily arises from policyholder liabilities with long-term guarantees on equity performance, including crediting rates on index-linked annuities accounted for as embedded derivatives and variable annuity guarantees.
We also use interest rate derivatives to mitigate the exposure related to interest rate risks from our policyholder liabilities. Equity Market Our fair value exposure to equity market risk primarily arises from policyholder liabilities with long-term guarantees on equity performance, including crediting rates on index-linked annuities accounted for as embedded derivatives and variable annuity guarantees.
(2) Excludes $36.4 billion of liabilities at carrying value pursuant to insurance contracts reported within future policy benefits and other policy-related balances on the consolidated balance sheet at December 31, 2023.
(2) Excludes $35.4 billion of liabilities at carrying value pursuant to insurance contracts reported within future policy benefits and other policy-related balances on the consolidated balance sheet at December 31, 2024.
In performing the analysis summarized below, we used market rates as of December 31, 2023.
In performing the analysis summarized below, we used market rates as of December 31, 2024.
Management believes that the changes in the economic value of those contracts under changing interest rates would offset a significant portion of the fair value changes of interest rate sensitive assets. (3) Embedded derivatives on index-linked annuities are recognized on the consolidated balance sheet in the same caption as the host contract.
Management believes that the changes in the economic value of those contracts under changing interest rates would offset a significant portion of the fair value changes of interest rate sensitive assets. (3) Embedded derivatives on index-linked annuities are recognized on the consolidated balance sheet in Policyholder account balances.
Risk Management We have an integrated process for managing risk exposures, which is coordinated among our Risk Management, Finance and Investment Departments. The process is designed to assess and manage exposures on a consolidated, company-wide basis.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Risk Management We have an integrated process for managing risk exposures, which is coordinated among our Risk Management, Finance and Investment Departments. The process is designed to assess and manage exposures on a consolidated, company-wide basis.
The sensitivity analysis is an estimate and should not be viewed as predictive of our future financial performance. Our actual losses in any particular period may vary from the amounts indicated in the table below. Limitations related to this sensitivity analysis include: • interest sensitive liabilities do not include $36.4 billion of insurance contract liabilities at December 31, 2023.
The sensitivity analysis is an estimate and should not be viewed as predictive of our future financial performance. Our actual losses in any particular period may vary from the amounts indicated in the table below. Limitations related to this sensitivity analysis include: • interest sensitive liabilities do not include a significant portion of our insurance contract liabilities.
Although we take measures to manage the economic risks of investing in a changing interest rate environment, we may not be able to mitigate completely 105 Table of Contents the interest rate or other mismatch risk of our fixed income investments relative to our interest rate sensitive liabilities.
Although we take measures to manage the economic risks of investing in a changing interest rate environment, we may not be able to mitigate completely the interest rate or other mismatch risk of our fixed income investments relative to our interest rate sensitive liabilities. The level of interest rates also affects our liabilities for benefits under our annuity contracts.
Accordingly, we use such models as tools and not as substitutes for the experience and judgment of our management. 107 Table of Contents The potential loss in the estimated fair value of our interest rate sensitive financial instruments due to a 100 basis point increase in the yield curve by type of asset and liability was as follows at: December 31, 2023 Notional Amount Estimated Fair Value (1) 100 Basis Point Increase in the Yield Curve (In millions) Financial assets with interest rate risk Fixed maturity securities $ 80,991 $ (5,247) Mortgage loans $ 20,609 (880) Policy loans $ 1,455 (97) Premiums, reinsurance and other receivables $ 7,724 (117) Reinsurance of market risk benefits $ 43 (30) Increase (decrease) in estimated fair value of assets (6,371) Financial liabilities with interest rate risk (2) Policyholder account balances $ 30,606 130 Long-term debt $ 2,769 222 Other liabilities $ 1,142 (7) Embedded derivatives on index-linked annuities (3) $ 8,186 (85) (Increase) decrease in estimated fair value of liabilities 260 Market risk benefits associated with variable annuities $ 9,701 (3,025) Derivative instruments with interest rate risk Interest rate contracts $ 92,499 $ (1,964) (1,730) Foreign currency contracts $ 5,221 $ 394 (26) Equity contracts $ 74,111 $ 169 13 Increase (decrease) in estimated fair value of derivative instruments (1,743) Net change $ (4,829) _______________ (1) Separate account assets and liabilities, which are interest rate sensitive, are not included herein as any interest rate risk is borne by the contract holder.
Accordingly, we use such models as tools and not as substitutes for the experience and judgment of our management. 106 Table of Contents The potential loss in the estimated fair value of our interest rate sensitive financial instruments due to a 100 basis point increase in the yield curve by type of asset and liability was as follows at: December 31, 2024 Notional Amount Estimated Fair Value (1) 100 Basis Point Increase in the Yield Curve (In millions) Financial assets with interest rate risk Fixed maturity securities $ 80,055 $ (4,641) Mortgage loans $ 21,373 (861) Policy loans $ 2,104 (99) Premiums, reinsurance and other receivables $ 9,277 (107) Reinsurance of market risk benefits $ 17 (26) Increase (decrease) in estimated fair value of assets (5,734) Financial liabilities with interest rate risk (2) Policyholder account balances $ 31,563 175 Long-term debt $ 2,787 208 Other liabilities $ 1,338 (6) Embedded derivatives on index-linked annuities (3) $ 11,540 1 (Increase) decrease in estimated fair value of liabilities 378 Market risk benefits associated with variable annuities $ 7,233 (2,188) Derivative instruments with interest rate risk Interest rate contracts $ 125,236 $ (2,448) (1,372) Foreign currency contracts $ 4,894 $ 539 (32) Equity contracts $ 146,514 $ 777 133 Increase (decrease) in estimated fair value of derivative instruments (1,271) Net change $ (4,439) _______________ (1) Separate account assets and liabilities, which are interest rate sensitive, are not included herein as any interest rate risk is borne by the contract holder.
The level of interest rates also affects our liabilities for benefits under our annuity contracts. As interest rates decline, we may need to increase our reserves for future benefits under our annuity contracts, which would adversely affect our financial condition and results of operations.
If interest rates continue to decline, we may need to increase our reserves for future benefits under our annuity contracts, which would adversely affect our financial condition and results of operations. 104 Table of Contents We also employ product design and pricing strategies to mitigate the potential effects of interest rate movements.
We also use common industry metrics, such as duration and convexity, to measure the relative sensitivity of asset and liability values to changes in interest rates. In computing the duration of liabilities, we consider all policyholder guarantees and how indeterminate policy elements such as interest credits or dividends are set.
In computing the duration of liabilities, we consider all policyholder guarantees and how indeterminate policy elements such as interest credits or dividends are set. Each asset portfolio has a duration target based on the liability duration and the investment objectives of that portfolio.
We also employ product design and pricing strategies to mitigate the potential effects of interest rate movements. These strategies include the use of surrender charges, market value adjustment features or restrictions on withdrawals, and for certain products, the ability to reset crediting rates.
These strategies include the use of surrender charges, market value adjustment features or restrictions on withdrawals, and for certain products, the ability to reset crediting rates. We analyze interest rate risk using various models, including multi-scenario cash flow projection models that forecast cash flows of the liabilities and their supporting investments, including derivatives.
These models reflect specific product characteristics and include assumptions based on current and anticipated experience regarding lapse, mortality and interest crediting rates. In addition, these models include asset cash flow projections reflecting interest payments, sinking fund payments, principal payments, bond calls, prepayments and defaults.
We measure relative sensitivities of the value of our assets and liabilities to changes in key assumptions using internal models. These models reflect specific product characteristics and include assumptions based on current and anticipated experience regarding lapse, mortality and interest crediting rates.
Sensitivity Summary Sensitivity to a 100 basis point rise in interest rates was $4.8 billion at December 31, 2023. Sensitivity to a 10% decrease in equity prices was $89 million at December 31, 2023.
Sensitivity Summary Sensitivity to a 100 basis point rise in interest rates decreased by $390 million, or 8% to $4.4 billion at December 31, 2024 from $4.8 billion at December 31, 2023, primarily as a result of a decrease in the estimated fair value of our fixed maturity securities due to higher interest rates, in line with management expectation.
Removed
Item 7A. Quantitative and Qualitative Disclosures About Market Risk The quantitative and qualitative disclosures about Market Risk reflect the impact of the adoption of LDTI, including the requirement that all variable annuity guarantees are classified as MRBs and measured at fair value.
Added
In addition, these models include asset cash flow projections reflecting interest payments, sinking fund payments, principal payments, bond calls, prepayments and defaults. We also use common industry metrics, such as duration and convexity, to measure the relative sensitivity of asset and liability values to changes in interest rates.
Removed
State insurance department regulations require that we perform some of these analyses annually as part of our review of the sufficiency of our regulatory reserves. We measure relative sensitivities of the value of our assets and liabilities to changes in key assumptions using internal models.
Added
Sensitivity to a 10% decrease in equity prices increased by $233 million, or 262% to $322 million at December 31, 2024 from $89 million at December 31, 2023, primarily as a result of increase sales of index-linked annuities.
Removed
Each asset portfolio has a duration target based on the liability duration and the investment objectives of that portfolio.

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