0000733076 us-gaap:FairValueInputsLevel3Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20192020
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from___from ___ to ___
Commission File Number: 033-03094
bhl-20200930_g1.jpg
Brighthouse Life Insurance Company
(Exact name of registrant as specified in its charter)
Delaware06-0566090
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
11225 North Community House Road,Charlotte,North Carolina28277
(Address of principal executive offices)(Zip Code)
(980) (980) 365-7100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Title of each classTrading symbol(s)Name of each exchange on which registered
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ    No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes þ    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer¨Accelerated filer¨
Non-accelerated filerþSmaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐ No þ
As of November 6, 2019,9, 2020, 3,000 shares of the registrant’s common stock were outstanding, all of which were owned indirectly by Brighthouse Financial, Inc.
REDUCED DISCLOSURE FORMAT
The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is, therefore, filing this Form 10-Q with the reduced disclosure format.


Table of Contents


Table of Contents
Page
Item 1.Consolidated Financial Statements (at September 30, 20192020 (Unaudited) and December 31, 20182019 and for the Three Months and Nine Months Ended September 30, 20192020 and 20182019 (Unaudited)):
Interim Condensed Consolidated Balance Sheets
2
Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
3
Interim Condensed Consolidated Statements of Equity
4
Interim Condensed Consolidated Statements of Cash Flows
5
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited):
Note 1 — Business, Basis of Presentation and Summary of Significant Accounting Policies
6
Note 2 — Segment Information
78
Note 3 — Insurance
11
Note 4 — Investments
12
Note 5 — Derivatives
2223
Note 6 — Fair Value
3029
Note 7 — Long-term and Short-term Debt
3938
Note 8 — Equity
3938
Note 9 — Other Revenues and Other Expenses
4140
Note 10 — Contingencies, Commitments and Guarantees
4241
Note 11 — Related Party Transactions
44
Item 2.
4746
Item 4.
57
Item 1.
57
Item 1A.
57
Item 6.
58
59


Table of Contents
Part I — Financial Information
Item 1. Financial Statements
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Interim Condensed Consolidated Balance Sheets
September 30, 20192020 (Unaudited) and December 31, 20182019
(In millions, except share and per share data)
 September 30, 2019 December 31, 2018September 30, 2020December 31, 2019
Assets    Assets
Investments:    Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $62,138 and $59,672, respectively) $69,676
 $61,348
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $66,992 and $63,083, respectively; allowance for credit losses of $3 and $0, respectively)Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $66,992 and $63,083, respectively; allowance for credit losses of $3 and $0, respectively)$78,139 $69,977 
Equity securities, at estimated fair value 148
 140
Equity securities, at estimated fair value114 147 
Mortgage loans (net of valuation allowances of $64 and $56, respectively) 15,269
 13,596
Mortgage loans (net of allowance for credit losses of $90 and $64, respectively)Mortgage loans (net of allowance for credit losses of $90 and $64, respectively)15,659 15,664 
Policy loans 915
 1,001
Policy loans879 875 
Real estate limited partnerships and limited liability companies 458
 451
Other limited partnership interests 1,894
 1,839
Limited partnerships and limited liability companiesLimited partnerships and limited liability companies2,561 2,379 
Short-term investments, principally at estimated fair value 1,483
 —
Short-term investments, principally at estimated fair value3,341 1,482 
Other invested assets, principally at estimated fair value 4,738
 3,037
Other invested assets, principally at estimated fair value (net of allowance for credit losses of $13 and $0, respectively)Other invested assets, principally at estimated fair value (net of allowance for credit losses of $13 and $0, respectively)5,044 3,224 
Total investments 94,581
 81,412
Total investments105,737 93,748 
Cash and cash equivalents 3,720
 3,494
Cash and cash equivalents5,663 2,493 
Accrued investment income 709
 704
Accrued investment income759 663 
Premiums, reinsurance and other receivables 13,847
 13,113
Premiums, reinsurance and other receivables15,542 14,287 
Deferred policy acquisition costs and value of business acquired 4,711
 5,086
Deferred policy acquisition costs and value of business acquired4,122 4,809 
Current income tax recoverable 21
 1
Current income tax recoverable0 21 
Other assets 476
 509
Other assets382 464 
Separate account assets 96,782
 91,511
Separate account assets95,955 99,668 
Total assets $214,847
 $195,830
Total assets$228,160 $216,153 
Liabilities and Equity    Liabilities and Equity
Liabilities    Liabilities
Future policy benefits $39,232
 $35,588
Future policy benefits$44,322 $39,081 
Policyholder account balances 44,325
 39,330
Policyholder account balances52,294 45,121 
Other policy-related balances 2,778
 2,728
Other policy-related balances2,808 2,801 
Payables for collateral under securities loaned and other transactions 5,271
 5,047
Payables for collateral under securities loaned and other transactions6,970 4,374 
Long-term debt 845
 434
Long-term and short-term debtLong-term and short-term debt843 844 
Current income tax payable —
 2
Current income tax payable50 0 
Deferred income tax liability 1,680
 944
Deferred income tax liability1,666 1,301 
Other liabilities 4,112
 3,455
Other liabilities4,019 4,484 
Separate account liabilities 96,782
 91,511
Separate account liabilities95,955 99,668 
Total liabilities 195,025
 179,039
Total liabilities208,927 197,674 
Contingencies, Commitments and Guarantees (Note 10) 

 

Contingencies, Commitments and Guarantees (Note 10)
Equity    Equity
Brighthouse Life Insurance Company’s stockholder’s equity:    Brighthouse Life Insurance Company’s stockholder’s equity:
Common stock, par value $25,000 per share; 4,000 shares authorized; 3,000 shares issued and outstanding 75
 75
Common stock, par value $25,000 per share; 4,000 shares authorized; 3,000 shares issued and outstanding7575
Additional paid-in capital 19,073
 19,073
Additional paid-in capital18,773 19,073 
Retained earnings (deficit) (2,873) (3,090)Retained earnings (deficit)(4,738)(3,899)
Accumulated other comprehensive income (loss) 3,532
 718
Accumulated other comprehensive income (loss)5,108 3,215 
Total Brighthouse Life Insurance Company’s stockholder’s equity 19,807
 16,776
Total Brighthouse Life Insurance Company’s stockholder’s equity19,218 18,464 
Noncontrolling interests 15
 15
Noncontrolling interests15 15 
Total equity 19,822
 16,791
Total equity19,233 18,479 
Total liabilities and equity $214,847
 $195,830
Total liabilities and equity$228,160 $216,153 
See accompanying notes to the interim condensed consolidated financial statements.

2
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
For the Three Months and Nine Months Ended September 30, 20192020 and 20182019 (Unaudited)
(In millions)
Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		Three Months Ended
September 30,		Nine Months Ended
September 30,
2019 2018 2019 20182020201920202019
Revenues       Revenues
Premiums$206
 $218
 $649
 $653
Premiums$173 $206 $549 $649 
Universal life and investment-type product policy fees725
 826
 2,190
 2,447
Universal life and investment-type product policy fees716 725 2,114 2,190 
Net investment income904
 828
 2,610
 2,400
Net investment income977 904 2,508 2,610 
Other revenues68
 73
 199
 222
Other revenues73 68 224 199 
Net investment gains (losses)14
 (42) 60
 (120)Net investment gains (losses)6 14 (46)60 
Net derivative gains (losses)984
 (665) (218) (1,230)Net derivative gains (losses)(1,870)984 2,227 (218)
Total revenues2,901
 1,238
 5,490
 4,372
Total revenues75 2,901 7,576 5,490 
Expenses       Expenses
Policyholder benefits and claims1,282
 805
 2,836
 2,312
Policyholder benefits and claims3,150 1,282 5,094 2,836 
Interest credited to policyholder account balances263
 265
 771
 785
Interest credited to policyholder account balances272 263 792 771 
Amortization of deferred policy acquisition costs and value of business acquired184
 66
 358
 582
Amortization of deferred policy acquisition costs and value of business acquired208 184 833 358 
Other expenses464
 509
 1,353
 1,353
Other expenses469 464 1,326 1,353 
Total expenses2,193
 1,645
 5,318
 5,032
Total expenses4,099 2,193 8,045 5,318 
Income (loss) before provision for income tax708
 (407) 172
 (660)Income (loss) before provision for income tax(4,024)708 (469)172 
Provision for income tax expense (benefit)99
 (108) (46) (195)Provision for income tax expense (benefit)(858)99 (145)(46)
Net income (loss)609
 (299) 218
 (465)Net income (loss)(3,166)609 (324)218 
Less: Net income (loss) attributable to noncontrolling interests—
 —
 1
 —
Less: Net income (loss) attributable to noncontrolling interests0 0 1 1 
Net income (loss) attributable to Brighthouse Life Insurance Company$609
 $(299) $217
 $(465)Net income (loss) attributable to Brighthouse Life Insurance Company$(3,166)$609 $(325)$217 
Comprehensive income (loss)$1,467
 $(554) $3,032
 $(1,663)Comprehensive income (loss)$(2,668)$1,467 $1,569 $3,032 
Less: Comprehensive income (loss) attributable to noncontrolling interests—
 —
 1
 —
Less: Comprehensive income (loss) attributable to noncontrolling interests0 0 1 1 
Comprehensive income (loss) attributable to Brighthouse Life Insurance Company$1,467
 $(554) $3,031
 $(1,663)Comprehensive income (loss) attributable to Brighthouse Life Insurance Company$(2,668)$1,467 $1,568 $3,031 
See accompanying notes to the interim condensed consolidated financial statements.

3
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Interim Condensed Consolidated Statements of Equity
For the Three Months and Nine Months Ended September 30, 20192020 and 20182019 (Unaudited)
(In millions)
Common
Stock		Additional
Paid-in
Capital		Retained
Earnings
(Deficit)		Accumulated
Other
Comprehensive
Income (Loss)		Brighthouse Life Insurance Company’s Stockholder’s EquityNoncontrolling InterestsTotal
Equity
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
(Deficit)
 
Accumulated
Other
Comprehensive
Income (Loss)
 Brighthouse Life Insurance Company’s Stockholder’s Equity Noncontrolling Interests 
Total
Equity
Balance at December 31, 2018$75
 $19,073
 $(3,090) $718
 $16,776
 $15
 $16,791
Balance at December 31, 2019Balance at December 31, 2019$75 $19,073 $(3,899)$3,215 $18,464 $15 $18,479 
Cumulative effect of change in accounting principle, net of income tax (Note 1)Cumulative effect of change in accounting principle, net of income tax (Note 1)(14)3 (11)(11)
Balance at January 1, 2020Balance at January 1, 202075 19,073 (3,913)3,218 18,453 15 18,468 
Dividends paid to parentDividends paid to parent(300)(500)(800)(800)
Change in noncontrolling interests        —
 (1) (1)Change in noncontrolling interests0 (1)(1)
Net income (loss)    (392)   (392) 1
 (391)Net income (loss)2,841 2,841 1 2,842 
Other comprehensive income (loss), net of income tax      1,956
 1,956
   1,956
Other comprehensive income (loss), net of income tax1,392 1,392 1,392 
Balance at June 30, 201975
 19,073
 (3,482) 2,674
 18,340
 15
 18,355
Balance at June 30, 2020Balance at June 30, 202075 18,773 (1,572)4,610 21,886 15 21,901 
Net income (loss)    609
   609
   609
Net income (loss)(3,166)(3,166)(3,166)
Other comprehensive income (loss), net of income tax      858
 858
   858
Other comprehensive income (loss), net of income tax498 498 498 
Balance at September 30, 2019$75
 $19,073
 $(2,873) $3,532
 $19,807
 $15
 $19,822
Balance at September 30, 2020Balance at September 30, 2020$75 $18,773 $(4,738)$5,108 $19,218 $15 $19,233 
 
Common
Stock
 
Additional
Paid-in
Capital
 Retained
Earnings
(Deficit)		 
Accumulated
Other
Comprehensive
Income (Loss)
 Brighthouse Life Insurance Company’s Stockholder’s Equity Noncontrolling Interests 
Total
Equity
Balance at December 31, 2017$75
 $19,073
 $(4,132) $1,837
 $16,853
 $15
 $16,868
Cumulative effect of change in accounting principle and other, net of income tax    75
 (79) (4)   (4)
Balance at January 1, 201875
 19,073
 (4,057) 1,758
 16,849
 15
 16,864
Net income (loss)    (166)   (166)   (166)
Other comprehensive income (loss), net of income tax      (943) (943)   (943)
Balance at June 30, 201875
 19,073
 (4,223) 815
 15,740
 15
 15,755
Net income (loss)    (299)   (299)   (299)
Other comprehensive income (loss), net of income tax      (255) (255)   (255)
Balance at September 30, 2018$75
 $19,073
 $(4,522) $560
 $15,186
 $15
 $15,201

Common
Stock		Additional
Paid-in
Capital		Retained
Earnings
(Deficit)		Accumulated
Other
Comprehensive
Income (Loss)		Brighthouse Life Insurance Company’s Stockholder’s EquityNoncontrolling InterestsTotal
Equity
Balance at December 31, 2018$75 $19,073 $(3,090)$718 $16,776 $15 $16,791 
Change in noncontrolling interests0 (1)(1)
Net income (loss)(392)(392)1 (391)
Other comprehensive income (loss), net of income tax1,956 1,956 1,956 
Balance at June 30, 201975 19,073 (3,482)2,674 18,340 15 18,355 
Net income (loss)609 609 609 
Other comprehensive income (loss), net of income tax858 858 858 
Balance at September 30, 2019$75 $19,073 $(2,873)$3,532 $19,807 $15 $19,822 
See accompanying notes to the interim condensed consolidated financial statements.


4
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Interim Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 20192020 and 20182019 (Unaudited)
(In millions)
 Nine Months Ended 
 September 30,
 2019 2018
Net cash provided by (used in) operating activities$1,643
 $1,960
Cash flows from investing activities   
Sales, maturities and repayments of:   
Fixed maturity securities11,160
 11,533
Equity securities29
 15
Mortgage loans924
 443
Real estate limited partnerships and limited liability companies2
 87
Other limited partnership interests203
 137
Purchases of:   
Fixed maturity securities(12,982) (11,802)
Equity securities(3) (1)
Mortgage loans(2,625) (2,771)
Real estate limited partnerships and limited liability companies(13) (31)
Other limited partnership interests(308) (194)
Cash received in connection with freestanding derivatives1,178
 1,140
Cash paid in connection with freestanding derivatives(1,704) (2,284)
Issuance of loan to affiliate—
 (2)
Net change in policy loans86
 80
Net change in short-term investments(1,477) 154
Net change in other invested assets21
 35
Net cash provided by (used in) investing activities(5,509) (3,461)
Cash flows from financing activities   
Policyholder account balances:   
Deposits5,279
 4,259
Withdrawals(1,963) (2,129)
Net change in payables for collateral under securities loaned and other transactions224
 (125)
Long-term debt issued412
 200
Long-term debt repaid(1) (9)
Financing element on certain derivative instruments and other derivative related transactions, net179
 (386)
Other, net(38) (39)
Net cash provided by (used in) financing activities4,092
 1,771
Change in cash, cash equivalents and restricted cash226
 270
Cash, cash equivalents and restricted cash, beginning of period3,494
 1,363
Cash, cash equivalents and restricted cash, end of period$3,720
 $1,633
Supplemental disclosures of cash flow information   
Net cash paid (received) for:   
Interest$30
 $2
Income tax$—
 $3

Nine Months Ended
September 30,
20202019
Net cash provided by (used in) operating activities$648 $1,643 
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities5,921 11,160 
Equity securities54 29 
Mortgage loans1,227 924 
Limited partnerships and limited liability companies124 205 
Purchases of:
Fixed maturity securities(9,485)(12,982)
Equity securities(1)(3)
Mortgage loans(1,236)(2,625)
Limited partnerships and limited liability companies(423)(321)
Cash received in connection with freestanding derivatives5,280 1,178 
Cash paid in connection with freestanding derivatives(3,281)(1,704)
Receipt on loan to affiliate100 0 
Issuance of loan to affiliate(100)0 
Net change in policy loans(4)86 
Net change in short-term investments(1,849)(1,477)
Net change in other invested assets(17)21 
Net cash provided by (used in) investing activities(3,690)(5,509)
Cash flows from financing activities
Policyholder account balances:
Deposits6,749 5,279 
Withdrawals(1,535)(1,963)
Net change in payables for collateral under securities loaned and other transactions2,596 224 
Long-term and short-term debt issued100 412 
Long-term and short-term debt repaid(101)(1)
Dividends paid to parent(800)0 
Financing element on certain derivative instruments and other derivative related transactions, net(765)179 
Other, net(32)(38)
Net cash provided by (used in) financing activities6,212 4,092 
Change in cash, cash equivalents and restricted cash3,170 226 
Cash, cash equivalents and restricted cash, beginning of period2,493 3,494 
Cash, cash equivalents and restricted cash, end of period$5,663 $3,720 
Supplemental disclosures of cash flow information
Net cash paid (received) for:
Interest$67 $30 
Income tax$(66)$0 
See accompanying notes to the interim condensed consolidated financial statements.


5
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies
Business
“BLIC” and the “Company” refer to Brighthouse Life Insurance Company, a Delaware corporation originally incorporated in Connecticut in 1863, and its subsidiaries. Brighthouse Life Insurance Company is a wholly-owned subsidiary of Brighthouse Holdings, LLC (“BrighthouseBH Holdings”), which is a direct wholly-owned subsidiary of Brighthouse Financial, Inc. (“BHF” together with its subsidiaries and affiliates, “Brighthouse Financial”).
BLIC offers a range of individual annuities and individual life insurance products. The Company is organized into 3 segments: Annuities; Life; and Run-off. In addition, the Company reports certain of its results of operations in Corporate & Other.
In 2016, MetLife, Inc. (together with its subsidiaries and affiliates, “MetLife”) announced its plan to pursue the separation of a substantial portion of its former U.S. retail business (the “Separation”).In connection with the Separation, 80.8% of MetLife, Inc.’s interest in BHF was distributed to holders of MetLife, Inc.’s common stock. On June 14, 2018, MetLife, Inc. divested its remaining shares of BHF common stock (the “MetLife Divestiture”). As a result, MetLife, Inc. and its subsidiaries and affiliates are no longer considered related parties subsequent to the MetLife Divestiture.
Basis of Presentation
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the interim condensed consolidated financial statements. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from these estimates.
Consolidation
The accompanying interim condensed consolidated financial statements include the accounts of Brighthouse Life Insurance Company and its subsidiaries, as well as partnerships and limited liability companies (“LLCs”) in whichthat the Company has control.controls. Intercompany accounts and transactions have been eliminated.
The Company uses the equity method of accounting for investments in limited partnerships and LLCs when it has more than a minor ownership interest or more than a minor influence over the investee’s operations. The Company generally recognizes its share of the investee’s earnings on a three-month lag in instances where the investee’s financial information is not sufficiently timely or when the investee’s reporting period differs from the Company’s reporting period. When the Company has virtually no influence over the investee’s operations, the investment is carried at fair value.
Reclassifications
Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform with the 2019current period presentation as may be discussed throughoutwhen applicable in the Notes to the Interim Condensed Consolidated Financial Statements.
Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a stand-alone entity.
The accompanying interim condensed consolidated financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 20182019 consolidated balance sheet data was derived from audited consolidated financial statements included in Brighthouse Life Insurance Company’s Annual Report on Form 10-K for the year ended December 31, 20182019 (the “2018“2019 Annual Report”), which include all disclosures required by GAAP. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 20182019 Annual Report.

6
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Adoption of New Accounting Pronouncements
Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the Company’s consolidated financial statements. There were no ASUs adopted during 2019 that had a material impact on the Company’s financial statements.as of September 30, 2020 are summarized as follows:
StandardDescriptionEffective DateImpact on Financial Statements
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”)The amendments to Topic 326 replace the incurred loss impairment methodology for certain financial instruments with one that reflects expected credit losses based on historical loss information, current conditions, and reasonable and supportable forecasts. The new guidance also requires that an other-than- temporary impairment on a debt security will be recognized as an allowance going forward, such that improvements in expected future cash flows after an impairment will no longer be reflected as a prospective yield adjustment through net investment income, but rather a reversal of the previous impairment and recognized through realized investment gains and losses.January 1, 2020 using the modified retrospective methodThe Company recorded an after tax net decrease to retained earnings of $14 million and a net increase to accumulated other comprehensive income (loss) (“AOCI”) of $3 million for the cumulative effect of adoption. The adjustment included establishing or updating the allowance for credit losses on fixed maturity securities, mortgage loans, and other invested assets.
ASUs issued but not yet adopted as of September 30, 20192020 are summarized in the table below.as follows:
StandardDescriptionEffective DateImpact on Financial Statements
ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration ContractsThe amendments to Topic 944 will result in significant changes to the accounting for long-duration insurance contracts. These changes (1) require all guarantees that qualify as market risk benefits to be measured at fair value, (2) require more frequent updating of assumptions and modify existing discount rate requirements for certain insurance liabilities, (3) modify the methods of amortization for deferred policy acquisition costs (“DAC”), and (4) require new qualitative and quantitative disclosures around insurance contract asset and liability balances and the judgments, assumptions and methods used to measure those balances. The market risk benefit guidance is required to be applied on a retrospective basis, while the changes to guidance for insurance liabilities and DAC may be applied to existing carrying amounts on the effective date or on a retrospective basis.The amendments were originally effective on January 1, 2021. On October 16, 2019, the FASB voted to change the effective date of the ASU to January 1, 2022.2023The Company is in the early stages of evaluatingcontinues to evaluate the new guidance and therefore is unable to estimate the impact to its financial statements. The most significant impact willis expected to be the measurement of liabilities for variable annuity guarantees.
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial InstrumentsThe amendments to Topic 326 replace the incurred loss impairment methodology for certain financial instruments with one that reflects expected credit losses based on historical loss information, current conditions, and reasonable and supportable forecasts. The new guidance also requires that an other-than- temporary impairment (“OTTI”) on a debt security will be recognized as an allowance going forward, such that improvements in expected future cash flows after an impairment will no longer be reflected as a prospective yield adjustment through net investment income, but rather a reversal of the previous impairment and recognized through realized investment gains and losses.January 1, 2020 using the modified retrospective method (with early adoption permitted beginning January 1, 2019)The Company expects to reduce retained earnings upon adoption due to an increase in its allowance for credit losses; the amount is not expected to be material.
CARES Act
In response to the worldwide pandemic sparked by the novel coronavirus (the “COVID-19 pandemic”), on March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act contains numerous provisions intended to provide swift aid, including through tax relief, to businesses and individuals affected by the COVID-19 pandemic. The Company does not believe that the CARES Act will have a material impact to its consolidated financial statements at this time. The Company will continue to closely monitor developments related to the COVID-19 pandemic and the CARES Act.
7

Table of Contents
Brighthouse Life Insurance Company
(A Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
2. Segment Information
The Company is organized into 3 segments: Annuities; Life; and Run-off. In addition, the Company reports certain of its results of operations in Corporate & Other.
Annuities
The Annuities segment consists of a variety of variable, fixed, index-linked and income annuities designed to address contract holders’ needs for protected wealth accumulation on a tax-deferred basis, wealth transfer and income security.
Life
The Life segment consists of insurance products and services, including term, universal, whole and variable life products designed to address policyholders’ needs for financial security and protected wealth transfer, which may be provided on a tax-advantaged basis.

7
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
2. Segment Information (continued)

Run-off
The Run-off segment consists of products no longer actively sold and which are separately managed, including structured settlements, pension risk transfer contracts, certain company-owned life insurance policies, funding agreements and universal life with secondary guarantees.
Corporate & Other
Corporate & Other contains the excess capital not allocated to the segments and interest expense related to the majority of the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. Corporate & Other also includes the elimination of intersegment amounts, long-term care and workers’ compensation business reinsured through 100% quota share reinsurance agreements and term life insurance sold direct to consumers, which is no longer being offered for new sales.
Financial Measures and Segment Accounting Policies
Adjusted earnings is a financial measure used by management to evaluate performance, allocate resources and facilitate comparisons to industry results. Consistent with GAAP guidance for segment reporting, adjusted earnings is also used to measure segment performance. The Company believes the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of its performance by highlighting the results of operations and the underlying profitability drivers of the business. Adjusted earnings should not be viewed as a substitute for net income (loss) attributable to Brighthouse Life Insurance Company and excludes net income (loss) attributable to noncontrolling interests.
Adjusted earnings, which may be positive or negative, focuses on the Company’s primary businesses principally by excluding the impact of market volatility, which could distort trends.
The following are significant items excluded from total revenues, net of income tax, in calculating adjusted earnings:
•Net investment gains (losses);
•Net derivative gains (losses) except earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment; and
•Certain variable annuity guaranteed minimum income benefits (“GMIBs”) fees (“GMIB Fees”) and amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses).
The following are significant items excluded from total expenses, net of income tax, in calculating adjusted earnings:
•Amounts associated with benefits related to GMIBs (“GMIB Costs”);
•Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”); and
•Amortization of DAC and value of business acquired (“VOBA”) related to: (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments.
8
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
2. Segment Information (continued)
The tax impact of the adjustments mentioned above is calculated net of the statutory tax rate, which could differ from the Company’s effective tax rate.
The segment accounting policies are the same as those used to prepare the Company’s interim condensed consolidated financial statements, except for the adjustments to calculate adjusted earnings described above. In addition, segment accounting policies include the methods of capital allocation described below.
Segment investment and capitalization targets are based on statutory oriented risk principles and metrics. Segment invested assets backing liabilities are based on net statutory liabilities plus excess capital. For the variable annuity business, the excess capital held is based on the target statutory total asset requirement consistent with the Company’s variable annuity risk management strategy. For insurance businesses other than variable annuities, excess capital held is based on a percentage of required statutory risk-based capital. Assets in excess of those allocated to the segments, if any, are held in Corporate & Other. Segment net investment income reflects the performance of each segment’s respective invested assets.

Operating results by segment, as well as Corporate & Other, were as follows:
Three Months Ended September 30, 2020
AnnuitiesLifeRun-offCorporate
& Other		Total
(In millions)
Pre-tax adjusted earnings$466 $(75)$(1,443)$(60)$(1,112)
Provision for income tax expense (benefit)90 (17)(304)(15)(246)
Post-tax adjusted earnings376 (58)(1,139)(45)(866)
Less: Net income (loss) attributable to noncontrolling interests0 0 0 0 0 
Adjusted earnings$376 $(58)$(1,139)$(45)(866)
Adjustments for:
Net investment gains (losses)6 
Net derivative gains (losses)(1,870)
Other adjustments to net income (loss)(1,048)
Provision for income tax (expense) benefit612 
Net income (loss) attributable to Brighthouse Life Insurance Company$(3,166)
Interest revenue$467 $116 $383 $17 
Interest expense$0 $0 $0 $17 
Three Months Ended September 30, 2019
AnnuitiesLifeRun-offCorporate
& Other		Total
(In millions)
Pre-tax adjusted earnings$247 $88 $(543)$(70)$(278)
Provision for income tax expense (benefit)50 18 (117)(60)(109)
Post-tax adjusted earnings197 70 (426)(10)(169)
Less: Net income (loss) attributable to noncontrolling interests0 0 0 0 0 
Adjusted earnings$197 $70 $(426)$(10)(169)
Adjustments for:
Net investment gains (losses)14 
Net derivative gains (losses)984 
Other adjustments to net income (loss)(12)
Provision for income tax (expense) benefit(208)
Net income (loss) attributable to Brighthouse Life Insurance Company$609 
Interest revenue$458 $101 $327 $18 
Interest expense$0 $0 $0 $17 
8
9
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
2. Segment Information (continued)

Nine Months Ended September 30, 2020
AnnuitiesLifeRun-offCorporate
& Other		Total
(In millions)
Pre-tax adjusted earnings$1,042 $(8)$(1,679)$(241)$(886)
Provision for income tax expense (benefit)194 (3)(355)(68)(232)
Post-tax adjusted earnings848 (5)(1,324)(173)(654)
Less: Net income (loss) attributable to noncontrolling interests0 0 0 1 1 
Adjusted earnings$848 $(5)$(1,324)$(174)(655)
Adjustments for:
Net investment gains (losses)(46)
Net derivative gains (losses)2,227 
Other adjustments to net income (loss)(1,764)
Provision for income tax (expense) benefit(87)
Net income (loss) attributable to Brighthouse Life Insurance Company$(325)
Interest revenue$1,327 $273 $873 $48 
Interest expense$0 $0 $0 $51 
Set forth in the tables below are the operating results with respect to the Company’s segments,
Nine Months Ended September 30, 2019
AnnuitiesLifeRun-offCorporate
& Other		Total
(In millions)
Pre-tax adjusted earnings$915 $185 $(587)$(210)$303 
Provision for income tax expense (benefit)172 38 (127)(102)(19)
Post-tax adjusted earnings743 147 (460)(108)322 
Less: Net income (loss) attributable to noncontrolling interests0 0 0 1 1 
Adjusted earnings$743 $147 $(460)$(109)321 
Adjustments for:
Net investment gains (losses)60 
Net derivative gains (losses)(218)
Other adjustments to net income (loss)27 
Provision for income tax (expense) benefit27 
Net income (loss) attributable to Brighthouse Life Insurance Company$217 
Interest revenue$1,344 $284 $942 $40 
Interest expense$0 $0 $0 $43 
Total revenues by segment, as well as Corporate & Other, for the three months and nine months ended September 30, 2019 and 2018.were as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Annuities$1,014 $1,037 $2,949 $3,052 
Life274 278 780 807 
Run-off553 484 1,378 1,487 
Corporate & Other39 40 112 110 
Adjustments(1,805)1,062 2,357 34 
Total$75 $2,901 $7,576 $5,490 
10
  Operating Results
Three Months Ended September 30, 2019 Annuities Life Run-off Corporate & Other Total
  (In millions)
Pre-tax adjusted earnings $247
 $88
 $(543) $(70) $(278)
Provision for income tax expense (benefit) 50
 18
 (117) (60) (109)
Post-tax adjusted earnings 197
 70
 (426) (10) (169)
Less: Net income (loss) attributable to noncontrolling interests —
 —
 —
 —
 —
Adjusted earnings $197
 $70
 $(426) $(10) (169)
Adjustments for:          
Net investment gains (losses)         14
Net derivative gains (losses)         984
Other adjustments to net income         (12)
Provision for income tax (expense) benefit         (208)
Net income (loss) attributable to Brighthouse Life Insurance Company         $609
           
Interest revenue $458
 $101
 $327
 $18
  
Interest expense $—
 $—
 $—
 $17
  
  Operating Results
Three Months Ended September 30, 2018 Annuities Life Run-off Corporate & Other Total
  (In millions)
Pre-tax adjusted earnings $469
 $52
 $(135) $(120) $266
Provision for income tax expense (benefit) 81
 10
 (29) (30) 32
Post-tax adjusted earnings 388
 42
 (106) (90) 234
Less: Net income (loss) attributable to noncontrolling interests —
 —
 —
 —
 —
Adjusted earnings $388
 $42
 $(106) $(90) 234
Adjustments for:          
Net investment gains (losses)         (42)
Net derivative gains (losses)         (665)
Other adjustments to net income         34
Provision for income tax (expense) benefit         140
Net income (loss) attributable to Brighthouse Life Insurance Company         $(299)
           
Interest revenue $395
 $96
 $322
 $12
  
Interest expense $—
 $—
 $—
 $—
  


9
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
2. Segment Information (continued)

  Operating Results
Nine Months Ended September 30, 2019 Annuities Life Run-off Corporate & Other Total
  (In millions)
Pre-tax adjusted earnings $915
 $185
 $(587) $(210) $303
Provision for income tax expense (benefit) 172
 38
 (127) (102) (19)
Post-tax adjusted earnings 743
 147
 (460) (108) 322
Less: Net income (loss) attributable to noncontrolling interests —
 —
 —
 1
 1
Adjusted earnings $743
 $147
 $(460) $(109) 321
Adjustments for:          
Net investment gains (losses)         60
Net derivative gains (losses)         (218)
Other adjustments to net income         27
Provision for income tax (expense) benefit         27
Net income (loss) attributable to Brighthouse Life Insurance Company         $217
           
Interest revenue $1,344
 $284
 $942
 $40
  
Interest expense $—
 $—
 $—
 $43
  
  Operating Results
Nine Months Ended September 30, 2018 Annuities Life Run-off Corporate & Other Total
  (In millions)
Pre-tax adjusted earnings $979
 $142
 $(79) $(175) $867
Provision for income tax expense (benefit) 168
 28
 (18) (53) 125
Post-tax adjusted earnings 811
 114
 (61) (122) 742
Less: Net income (loss) attributable to noncontrolling interests —
 —
 —
 —
 —
Adjusted earnings $811
 $114
 $(61) $(122) 742
Adjustments for:          
Net investment gains (losses)         (120)
Net derivative gains (losses)         (1,230)
Other adjustments to net income         (177)
Provision for income tax (expense) benefit         320
Net income (loss) attributable to Brighthouse Life Insurance Company         $(465)
           
Interest revenue $1,128
 $276
 $979
 $29
  
Interest expense $—
 $—
 $—
 $2
  

The following table presents total revenues with respect to the Company’s segments, as well as Corporate & Other:
  Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
  2019 2018 2019
2018
  (In millions)
Annuities $1,037
 $995
 $3,052
 $2,957
Life 278
 307
 807
 885
Run-off 484
 536
 1,487
 1,594
Corporate & Other 40
 41
 110
 108
Adjustments 1,062
 (641) 34
 (1,172)
Total $2,901
 $1,238
 $5,490
 $4,372


10
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
2. Segment Information (continued)

The following table presents totalTotal assets with respect to the Company’s segments,by segment, as well as Corporate & Other, were as follows at:

 September 30, 2019
December 31, 2018

 (In millions)
Annuities $150,615
 $137,079
Life 15,553
 14,928
Run-off 36,096
 32,390
Corporate & Other 12,583
 11,433
Total $214,847

$195,830

September 30, 2020December 31, 2019
(In millions)
Annuities$158,154 $152,740 
Life17,288 16,389 
Run-off38,262 35,132 
Corporate & Other14,456 11,892 
Total$228,160 $216,153 
3. Insurance
Guarantees
As discussed inNotes 1and 4 of the Notes to the Consolidated Financial Statements included in the2018 2019 Annual Report, the Company issues variable annuity contracts with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMABs”), the non-life contingentnon-life-contingent portion of guaranteed minimum withdrawal benefits (“GMWBs”) and the portion of certain portions of GMIBs that do not require the policyholder to annuitizeannuitization are accounted for as embedded derivatives in policyholder account balances and are further discussed in Note 5.5.
The Company also has universal and variable life insurance contracts with secondary guarantees.
Information regarding the Company’s guarantee exposure was as follows at:
September 30, 2020December 31, 2019
In the
Event of Death		At
Annuitization		In the
Event of Death		At
Annuitization
(Dollars in millions)
Annuity Contracts (1), (2)
Variable Annuity Guarantees
Total account value (3)$96,451 $53,870 $100,034 $57,069 
Separate account value$91,617 $52,745 $95,430 $56,027 
Net amount at risk$8,000 (4)$7,515 (5)$6,617 (4)$4,495 (5)
Average attained age of contract holders70 years70 years69 years69 years
 September 30, 2019 December 31, 2018 
 
In the
Event of Death
 
At
Annuitization
 
In the
Event of Death
 
At
Annuitization
 
 (Dollars in millions) 
Annuity Contracts (1), (2)        
Variable Annuity Guarantees        
Total account value (3)$97,460
 $55,859
 $92,794
 $53,330
 
Separate account value$92,798
 $54,801
 $88,065
 $52,225
 
Net amount at risk$7,335
(4)$4,729
(5)$10,945
(4)$3,903
(5)
Average attained age of contract holders69 years
 69 years
 69 years
 68 years
 
September 30, 2020December 31, 2019
Secondary Guarantees
(Dollars in millions)
Universal Life Contracts
Total account value (3)$5,816 $5,957 
Net amount at risk (6)$69,664 $71,124 
Average attained age of policyholders67 years66 years
Variable Life Contracts
Total account value (3)$1,174 $1,133 
Net amount at risk (6)$11,511 $12,082 
Average attained age of policyholders46 years45 years
_______________
 September 30, 2019 December 31, 2018
 Secondary Guarantees
 (Dollars in millions)
Universal Life Contracts   
Total account value (3)$6,000
 $6,099
Net amount at risk (6)$71,641
 $73,131
Average attained age of policyholders66 years
 65 years
    
Variable Life Contracts   
Total account value (3)$1,072
 $954
Net amount at risk (6)$12,345
 $13,040
Average attained age of policyholders45 years
 45 years
(1)The Company’s annuity contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive.
__________________
(1)The Company’s annuity contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive.

11
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
3. Insurance (continued)

(2)Includes direct business, but excludes offsets from hedging or reinsurance, if any. Therefore, the net amount at risk presented reflects the economic exposures of living and death benefit guarantees associated with variable annuities, but not necessarily their impact on the Company. See Note 6 of the Notes to the Consolidated Financial Statements included in the 2019 Annual Report for a discussion of guaranteed minimum benefits which have been reinsured.
(2)
(3)Includes the contract holder’s investments in the general account and separate account, if applicable.
(4)Defined as the death benefit less the total account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death.
(5)Defined as the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents the Company’s potential economic exposure to such guarantees in the event all contract holders were to annuitize on the balance sheet date, even though the contracts contain terms that allow annuitization of the guaranteed amount only after the 10th anniversary of the contract, which not all contract holders have achieved.
(6)Defined as the guarantee amount less the account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date.
Includes direct business, but excludes offsets from hedging or reinsurance, if any. Therefore, the net amount at risk presented reflects the economic exposures of living and death benefit guarantees associated with variable annuities, but not necessarily their impact on the Company. SeeNote 6of the Notes to the Consolidated Financial Statements included in the 2018 Annual Report for a discussion of guaranteed minimum benefits which have been reinsured.
(3)Includes the contract holder’s investments in the general account and separate account, if applicable.
(4)Defined as the death benefit less the total account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death.
(5)Defined as the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents the Company’s potential economic exposure to such guarantees in the event all contract holders were to annuitize on the balance sheet date, even though the contracts contain terms that allow annuitization of the guaranteed amount only after the 10th anniversary of the contract, which not all contract holders have achieved.
(6)Defined as the guarantee amount less the account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date.
4. Investments
See Note 1 of the Notes to the Consolidated Financial Statements included in the 20182019 Annual Report for a description of the Company’s accounting policies for investments and Note 6 for information about the fair value hierarchy for investments and the related valuation methodologies. In connection with the adoption of new guidance related to the credit losses (see Note 1), effective January 1, 2020, the Company updated its accounting policies on certain investments. Any accounting policy updates required by the new guidance are described in this footnote.
Fixed Maturity Securities Available-for-sale (“AFS”)
Fixed Maturity Securities AFS by Sector
The following table presents the fixedFixed maturity securities AFS by sector were as follows at:
September 30, 2020December 31, 2019
September 30, 2019 December 31, 2018Amortized
Cost		Allowance
for Credit Losses		Gross UnrealizedEstimated
Fair
Value		Amortized
Cost		Allowance
for Credit Losses		Gross UnrealizedEstimated
Fair
Value
Amortized
Cost		 Gross Unrealized Estimated
Fair
Value		 Amortized
Cost		 Gross Unrealized Estimated
Fair
Value		GainsLossesGainsLosses
Gains Temporary
Losses		 OTTI
Losses (1)		 Gains Temporary
Losses		 OTTI
Losses (1)		 (In millions)
(In millions)
Fixed maturity securities:                   
U.S. corporate$27,409
 $2,972
 $74
 $—
 $30,307
 $23,902
 $816
 $659
 $—
 $24,059
U.S. corporate$30,759 $2 $4,669 $132 $35,294 $27,841 $0 $2,815 $65 $30,591 
Foreign corporateForeign corporate9,553 1 1,063 100 10,515 9,017 0 736 67 9,686 
RMBSRMBS7,727 0 652 9 8,370 8,600 0 440 10 9,030 
U.S. government and agency5,387
 2,203
 —
 —
 7,590
 7,503
 1,251
 110
 —
 8,644
U.S. government and agency5,574 0 3,179 0 8,753 5,396 0 1,848 0 7,244 
RMBS8,634
 513
 12
 (5) 9,140
 8,309
 246
 122
 (2) 8,435
Foreign corporate8,922
 675
 109
 —
 9,488
 8,044
 157
 306
 —
 7,895
CMBS5,208
 340
 3
 —
 5,545
 5,177
 42
 87
 (1) 5,133
CMBS5,778 0 563 9 6,332 5,460 0 263 9 5,714 
State and political subdivision3,205

765

—

—

3,970

3,202

399

15

—

3,586
State and political subdivision3,413 0 935 2 4,346 3,326 0 687 2 4,011 
ABS1,894
 27
 10
 —
 1,911
 2,120
 13
 22
 —
 2,111
ABS2,676 0 55 21 2,710 1,940 0 21 11 1,950 
Foreign government1,479
 251
 5
 —
 1,725
 1,415
 101
 31
 —
 1,485
Foreign government1,512 0 313 6 1,819 1,503 0 250 2 1,751 
Total fixed maturity securities$62,138

$7,746

$213

$(5)
$69,676

$59,672

$3,025

$1,352

$(3)
$61,348
Total fixed maturity securities$66,992 $3 $11,429 $279 $78,139 $63,083 $0 $7,060 $166 $69,977 

__________________
(1)Noncredit OTTI losses included in accumulated other comprehensive income (loss) (“AOCI”) in an unrealized gain position are due to increases in estimated fair value subsequent to initial recognition of noncredit losses on such securities.
The Company held 0did 0t hold any non-income producing fixed maturity securities at either September 30, 2019. The Company held non-income producing fixed maturity securities with an estimated fair value of less than $1 million at2020 or December 31, 2018.2019.

12
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)

Maturities of Fixed Maturity Securities
The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at September 30, 2019:2020:
Due in One
Year or Less		Due After One
Year Through
Five Years		Due After
Five Years
Through Ten Years		Due After Ten
Years		Structured
Securities (1)		Total Fixed
Maturity
Securities
(In millions)
Amortized cost$1,465 $7,192 $13,928 $28,226 $16,181 $66,992 
Estimated fair value$1,480 $7,623 $15,397 $36,227 $17,412 $78,139 
 
Due in One
Year or Less
 
Due After One
Year Through
Five Years
 
Due After
Five Years
Through Ten Years
 
Due After Ten
Years
 
Structured
Securities (1)
 
Total Fixed
Maturity
Securities
 (In millions)
Amortized cost$1,873
 $6,610
 $12,382
 $25,537
 $15,736
 $62,138
Estimated fair value$1,877
 $6,803
 $13,211
 $31,189
 $16,596
 $69,676
_______________

(1)Structured securities include residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”).
__________________
(1)Structured securities include residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”).
Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity.
Continuous Gross Unrealized Losses for Fixed Maturity Securities AFS by Sector
The following table presents the estimated fair value and gross unrealized losses of fixed maturity securities AFS in an unrealized loss position, aggregated by sector and by length of time that the securities have been in a continuous unrealized loss position, were as follows at:
 September 30, 2019 December 31, 2018
 Less than 12 Months 
Equal to or Greater
than 12 Months
 Less than 12 Months 
Equal to or Greater
than 12 Months
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 (Dollars in millions)
Fixed maturity securities:               
U.S. corporate$1,541
 $42
 $404
 $32
 $10,450
 $465
 $2,290
 $194
U.S. government and agency75
 —
 —
 —
 359
 7
 1,355
 103
RMBS524
 3
 411
 4
 1,550
 21
 2,567
 99
Foreign corporate831
 28
 581
 81
 3,916
 199
 746
 107
CMBS102
 —
 190
 3
 2,264
 52
 800
 34
State and political subdivision15
 —
 8
 —
 346
 7
 158
 8
ABS445
 3
 504
 7
 1,407
 21
 70
 1
Foreign government52
 5
 —
 —
 520
 25
 132
 6
Total fixed maturity securities$3,585

$81

$2,098

$127

$20,812

$797

$8,118

$552
Total number of securities in an unrealized loss position669
   309
   2,988
   1,022
  

September 30, 2020December 31, 2019
Less than 12 Months12 Months or GreaterLess than 12 Months12 Months or Greater
Estimated
Fair
Value		Gross
Unrealized
Losses		Estimated
Fair
Value		Gross
Unrealized
Losses		Estimated
Fair
Value		Gross
Unrealized
Losses		Estimated
Fair
Value		Gross
Unrealized
Losses
(Dollars in millions)
U.S. corporate$2,965 $111 $185 $21 $1,931 $43 $320 $22 
Foreign corporate849 36 403 64 577 12 510 55 
RMBS419 9 12 0 802 6 346 4 
U.S. government and agency0 0 0 0 14 0 0 0 
CMBS342 7 60 2 552 7 171 2 
State and political subdivision104 2 0 0 120 2 8 0 
ABS667 8 590 13 358 2 676 9 
Foreign government122 6 6 0 65 2 0 0 
Total fixed maturity securities$5,468 $179 $1,256 $100 $4,419 $74 $2,031 $92 
Total number of securities in an unrealized loss position1,052 244 686 297 

Allowance for Credit Losses for Fixed Maturity Securities
Evaluation and Measurement Methodologies
For fixed maturity securities in an unrealized loss position, management first assesses whether the Company intends to sell, or whether it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to estimated fair value through net investment gains (losses). For fixed maturity securities that do not meet the aforementioned criteria, management evaluates whether the decline in estimated fair value has resulted from credit losses or other factors. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used in the allowance for credit loss evaluation process include, but are not limited to: (i) the extent to which estimated fair value is less than amortized cost; (ii) any changes to the rating of the security by a rating agency; (iii) adverse conditions specifically related to the security, industry or geographic area; and (iv) payment structure of the fixed maturity security and the likelihood of the issuer being able to make payments in the future or the issuer’s failure to make scheduled interest and principal payments. If this assessment
13
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)

Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS Securities
Evaluation and Measurement Methodologies
Management considersindicates that a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used in the impairment evaluation process include, but are not limited to: (i) the length of time and the extent to which the estimated fair value has been below amortized cost; (ii) the potential for impairments when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments where the issuer, series of issuers or industry has suffered a catastrophiccredit loss or has exhausted natural resources; (vi) whether the Company has the intent to sell or will more likely than not be required to sell a particular security before the decline in estimated fair value below amortized cost recovers; (vii) with respect to Structured Securities, changes in forecasted cash flows after considering the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying assets backing a particular security, and the payment priority within the tranche structure of the security; (viii) the potential for impairments due to weakening of foreign currencies on non-functional currency denominated fixed maturity securities that are near maturity; and (ix) other subjective factors, including concentrations and information obtained from regulators and rating agencies.
For securities in an unrealized loss position, an OTTI is recognized in earnings when it is anticipated that the amortized cost will not be recovered. When either: (i) the Company has the intent to sell the security; or (ii) it is more likely than not that the Company will be required to sell the security before recovery, the OTTI recognized in earnings is the entire difference between the security’s amortized cost and estimated fair value. If neither of these conditions exists, the difference between the amortized cost of the security and the present value of projected futurecash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is recognized asless than the amortized cost basis, a credit loss is deemed to exist and an OTTI in earnings (“allowance for credit loss”). Iflosses is recorded, limited by the amount that the estimated fair value is less than the amortized cost basis, with a corresponding charge to net investment gains (losses). Any unrealized losses that have not been recorded through an allowance for credit losses are recognized in other comprehensive income (loss) (“OCI”).
Once a security specific allowance for credit losses is established, the present value of projected future cash flows expected to be collected thisfrom the security continues to be reassessed. Any changes in the security specific allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense in net investment gains (losses).
Fixed maturity securities are also evaluated to determine whether any amounts have become uncollectible. When all, or a portion, of OTTI relateda security is deemed uncollectible, the uncollectible portion is written-off with an adjustment to other-than-credit factorsamortized cost and a corresponding reduction to the allowance for credit losses.
Accrued interest receivables are presented separate from the amortized cost basis of fixed maturity securities. An allowance for credit losses is not estimated on an accrued interest receivable, rather receivable balances 90-days past due are deemed uncollectible and are written off with a corresponding reduction to net investment income. The accrued interest receivable on fixed maturity securities totaled $537 million at September 30, 2020 and is included in accrued investment income.
Fixed maturity securities are also evaluated to determine if they qualify as purchased financial assets with credit deterioration (“noncredit loss”PCD”). To determine if the credit deterioration experienced since origination is more than insignificant, both (i) the extent of the credit deterioration and (ii) any rating agency downgrades are evaluated. For securities categorized as PCD assets, the present value of cash flows expected to be collected from the security are compared to the par value of the security. If the present value of cash flows expected to be collected is less than the par value, credit losses are embedded in the purchase price of the PCD asset. In this situation, both an allowance for credit losses and amortized cost gross-up is recorded, limited by the amount that the estimated fair value is less than the grossed-up amortized cost basis. Any difference between the purchase price and the present value of cash flows is amortized or accreted into net investment income over the life of the PCD asset. Any subsequent PCD asset allowance for credit losses is evaluated in other comprehensive income (“OCI”).a manner similar to the process described above for fixed maturity securities.
Current Period Evaluation
Based on the Company’s current evaluation of its AFSfixed maturity securities in an unrealized loss position in accordance with its impairment policy, and the Company’s current intentions and assessments (as applicable to the type of security) about holding, selling and any requirementsintent or requirement to sell, these securities, the Company concluded that theserecorded an allowance for credit losses of $3 million, relating to 10 securities were not other-than-temporarily impaired at September 30, 2019.
Gross unrealized losses on2020. Management concluded that for all other fixed maturity securities decreased $1.1 billion duringin an unrealized loss position, the nine months endedSeptember 30, 2019unrealized loss was not due to$208 million. The decrease issuer-specific credit-related factors and as a result was recognized in grossOCI. Where unrealized losses have not been recognized into income, it is primarily because the securities’ bond issuer(s) are of high credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in estimated fair value is largely due to changes in interest rates and non-issuer specific credit spreads. These issuers continued to make timely principal and interest payments and the estimated fair value is expected to recover as the securities approach maturity.
Rollforward of the Allowance for Credit Losses for Fixed Maturity Securities by Sector
The changes in the allowance for credit losses by sector were as follows:
U.S. CorporateForeign CorporateTotal
(In millions)
Balance at January 1, 2020$3 $1 $4 
Allowance on securities where credit losses were not previously recorded3 1 4 
Reductions for securities sold(1)0 (1)
Write-offs charged against allowance (1)(3)(1)(4)
Balance at September 30, 2020$2 $1 $3 
_______________
(1)The Company recorded total write-offs of $13 million during the nine months ended September 30, 2019 was primarily attributable to decreasing longer-term interest rates and narrowing credit spreads.2020.
At September 30, 2019, $10 million of the total $208 million of gross unrealized losses were from 11 fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for six months or greater.

14
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)

Mortgage Loans
Mortgage Loans by Portfolio Segment
Mortgage loans are summarized as follows at:
September 30, 2020December 31, 2019
Carrying
Value		% of
Total		Carrying
Value		% of
Total
(Dollars in millions)
Commercial$9,803 62.6 %$9,694 61.9 %
Agricultural3,320 21.2 3,326 21.2 
Residential2,626 16.8 2,708 17.3 
Total mortgage loans (1)15,749 100.6 15,728 100.4 
Allowance for credit losses(90)(0.6)(64)(0.4)
Total mortgage loans, net$15,659 100.0 %$15,664 100.0 %
 September 30, 2019 December 31, 2018
 
Carrying
Value
 
% of
Total
 
Carrying
Value
 
% of
Total
 (Dollars in millions)
Mortgage loans:       
Commercial$9,446
 61.9 % $8,502
 62.6 %
Agricultural3,228
 21.1
 2,874
 21.1
Residential2,659
 17.4
 2,276
 16.7
Subtotal (1)15,333
 100.4
 13,652
 100.4
Valuation allowances (2)(64) (0.4) (56) (0.4)
Total mortgage loans, net$15,269
 100.0 % $13,596
 100.0 %
_______________
__________________(1)    Purchases of mortgage loans from third parties were $47 million and $535 million for the three months and nine months ended September 30, 2020, respectively, and $159 million and $722 million for the three months and nine months ended September 30, 2019, respectively, and were primarily comprised of residential mortgage loans.
(1)Purchases of mortgage loans from third parties were $159 million and $722 million for the three months and nine months ended September 30, 2019, respectively, and $816 million and $1.4 billion for the three months and nine months ended September 30, 2018, respectively, and were primarily comprised of residential mortgage loans.
(2)The valuation allowances were primarily from collective evaluation (non-specific loan related).
InformationAllowance for Credit Losses for Mortgage Loans
Evaluation and Measurement Methodologies
The allowance for credit losses is a valuation account that is deducted from the mortgage loan’s amortized cost basis to present the net amount expected to be collected on commercial, agriculturalthe mortgage loan. The loan balance, or a portion of the loan balance, is written-off against the allowance when management believes this amount is uncollectible.
Accrued interest receivables are presented separate from the amortized cost basis of mortgage loans. An allowance for credit losses is generally not estimated on an accrued interest receivable, rather when a loan is placed in nonaccrual status the associated accrued interest receivable balance is written off with a corresponding reduction to net investment income. For mortgage loans that are granted payment deferrals due to the COVID-19 pandemic, interest continues to be accrued during the deferral period if the loan was less than 30 days past due at December 31, 2019 and residentialperforming at the onset of the pandemic. Accrued interest on COVID-19 pandemic impacted loans was not significant at September 30, 2020. The accrued interest receivable on mortgage loans is presentedincluded in accrued investment income and totaled $88 million at September 30, 2020.
The allowance for credit losses is estimated using relevant available information, from internal and external sources, relating to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience provides the tables below.
Valuation Allowance Methodologybasis for estimating expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics and environmental conditions. A reasonable and supportable forecast period of two-years is used with an input reversion period of one-year.
Mortgage loans are considered to be impaired when it is probable that, based upon current information and events,evaluated in each of the Company will be unable to collect all amounts due under the loan agreement. Specific valuation allowances are established using the same methodology for all three portfolio segments to determine the allowance for credit losses. The loan-level loss rates are determined using individual loan terms and characteristics, risk pools/internal ratings, national economic forecasts, prepayment speeds, and estimated default and loss severity.
The resulting loss rates are applied to the mortgage loan’s amortized cost to generate an allowance for credit losses. In certain situations, the allowance for credit losses is measured as the excess carrying value of a loan over either (i) the present value of expected future cash flows discounted atdifference between the loan’s original effective interest rate, (ii) the estimated fairamortized cost and liquidation value of the loan’s underlying collateral if the loan is in the process of foreclosure or otherwisecollateral. These situations include collateral dependent or (iii) the loan’s observable market price. A common evaluation framework is used for establishing non-specific valuation allowances for all loan portfolio segments; however, a separate non-specific valuation allowance is calculatedloans, expected troubled debt restructurings (“TDRs”), foreclosure probable loans, and maintained for each loan portfolio segment that is based on inputs unique to each loan portfolio segment. Non-specific valuation allowances are established for pools of loans with similardissimilar risk characteristics where a property-specific or market-specific risk has not been identified, but for which the Company expects to incur a credit loss. These evaluations are based upon several loan portfolio segment-specific factors, including the Company’s experience for loan losses, defaults and loss severity, and loss expectations for loans with similar risk characteristics. These evaluations are revised as conditions change and new information becomes available.

15
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)

Mortgage loans are also evaluated to determine if they qualify as PCD assets. To determine if the credit deterioration experienced since origination is more than insignificant, the extent of credit deterioration is evaluated. All re-performing/modified loan (“RPL”) pools purchased after December 31, 2019 are determined to have been acquired with evidence of more than insignificant credit deterioration since origination and are classified as PCD assets. RPLs are pools of residential mortgage loans acquired at discounts which have both credit and non-credit components. For PCD mortgage loans, the allowance for credit losses is determined using a similar methodology described above, except the loss-rate is determined at the pool level instead of the individual loan level. The initial allowance for credit losses, determined on a collective basis, is then allocated to the individual loans. The initial amortized cost of the loan is grossed-up to reflect the sum of the loan’s purchase price and allowance for credit losses. The difference between the grossed-up amortized cost basis and the par value of the loan is a noncredit discount, which is accreted into net investment income over the remaining life of the loan. Any subsequent PCD mortgage loan allowance for credit losses is evaluated in a manner similar to the process described above for each of the three portfolio segments.
Rollforward of the Allowance for Credit Quality of CommercialLosses for Mortgage Loans by Portfolio Segment
The changes in the allowance for credit losses by portfolio segment were as follows:
CommercialAgriculturalResidentialTotal
(In millions)
Balance at December 31, 2019$47 $10 $7 $64 
Cumulative effect of change in accounting principle(20)6 14 0 
Balance at January 1, 202027 16 21 64 
Current period provision17 0 9 26 
Balance at September 30, 2020$44 $16 $30 $90 
PCD Mortgage Loans
The credit qualityPurchases of commercialPCD mortgage loans wasare summarized as follows at:follows:
 Recorded Investment    
 Debt Service Coverage Ratios   
% of
Total
 
Estimated
Fair
Value
 
% of
Total
 > 1.20x 1.00x - 1.20x < 1.00x Total 
 (Dollars in millions)
September 30, 2019             
Loan-to-value ratios:             
Less than 65%$8,328
 $128
 $141
 $8,597
 91.0% $9,083
 91.2%
65% to 75%684
 18
 —
 702
 7.4
 729
 7.3
76% to 80%138
 —
 9
 147
 1.6
 146
 1.5
Total$9,150

$146

$150

$9,446
 100.0% $9,958
 100.0%
              
December 31, 2018             
Loan-to-value ratios:             
Less than 65%$7,444
 $89
 $34
 $7,567
 89.0% $7,642
 89.0%
65% to 75%762
 —
 24
 786
 9.2
 797
 9.3
76% to 80%141
 —
 8
 149
 1.8
 145
 1.7
Total$8,347

$89

$66

$8,502
 100.0% $8,584
 100.0%

Nine Months Ended September 30, 2020
(In millions)
Purchase price$77 
Allowance at acquisition date$2 
Discount or premium attributable to other factors$2 
Par value$81 
Credit Quality of Agricultural Mortgage Loans
The credit quality of agricultural mortgage loans was as follows at: 
 September 30, 2019 December 31, 2018
 
Recorded
Investment
 
% of
Total
 
Recorded
Investment 
 
% of
Total
 (Dollars in millions)
Loan-to-value ratios:       
Less than 65%$2,983
 92.4% $2,551
 88.8%
65% to 75%244
 7.6
 322
 11.2
76% to 80%1
 —
 1
 —
Total$3,228
 100.0% $2,874
 100.0%

The estimated fair value of agricultural mortgage loans was $3.3 billion and $2.9 billion at September 30, 2019 and December 31, 2018, respectively.

16
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)

Credit Quality of Residential Mortgage Loans by Portfolio Segment
The amortized cost of mortgage loans by year of origination and credit quality indicator was as follows at:
20202019201820172016PriorTotal
(In millions)
September 30, 2020
Commercial mortgage loans
Loan-to-value ratios:
Less than 65%$288 $1,645 $1,113 $571 $1,121 $3,187 $7,925 
65% to 75%114 345 453 340 40 277 1,569 
76% to 80%0 0 0 0 84 0 84 
Greater than 80%0 0 10 12 6 197 225 
Total commercial mortgage loans402 1,990 1,576 923 1,251 3,661 9,803 
Agricultural mortgage loans
Loan-to-value ratios:
Less than 65%200 556 753 423 481 728 3,141 
65% to 75%37 81 10 33 0 18 179 
Total agricultural mortgage loans237 637 763 456 481 746 3,320 
Residential mortgage loans
Performing200 428 478 116 43 1,261 2,526 
Nonperforming1 5 5 1 0 88 100 
Total residential mortgage loans201 433 483 117 43 1,349 2,626 
Total$840 $3,060 $2,822 $1,496 $1,775 $5,756 $15,749 
The loan-to-value ratio is a measure commonly used to assess the quality of commercial and agricultural mortgage loans. The loan-to-value ratio compares the amount of the loan to the estimated fair value of the underlying property collateralizing the loan and is commonly expressed as a percentage. A loan-to-value ratio less than 100% indicates an excess of collateral value over the loan amount. Loan-to-value ratios greater than 100% indicate that the loan amount exceeds the collateral value. Performing status is a measure commonly used to assess the quality of residential mortgage loans. A loan is considered performing when the borrower makes consistent and timely payments.
The amortized cost of commercial mortgage loans by debt-service coverage ratio was as follows at:
 September 30, 2019 December 31, 2018
 Recorded Investment 
% of
Total
 Recorded Investment 
% of
Total
 (Dollars in millions)
Performance indicators:       
Performing$2,621
 98.6% $2,240
 98.4%
Nonperforming38
 1.4
 36
 1.6
Total$2,659
 100.0% $2,276
 100.0%

September 30, 2020December 31, 2019
Amortized Cost% of
Total		Amortized Cost% of
Total
(Dollars in millions)
Debt-service coverage ratios:
Greater than 1.20x$9,259 94.4 %$9,230 95.2 %
1.00x - 1.20x359 3.7 298 3.1 
Less than 1.00x185 1.9 166 1.7 
Total$9,803 100.0 %$9,694 100.0 %
The estimated fair valuedebt-service coverage ratio compares a property’s net operating income to its debt-service payments. Debt-service coverage ratios less than 1.00 times indicate that property operations do not generate enough income to cover the loan’s current debt payments. A debt-service coverage ratio greater than 1.00 times indicates an excess of residential mortgage loans was $2.7 billion and $2.3 billion at September 30, 2019 and December 31, 2018, respectively.net operating income over the debt-service payments.
17
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Past Due Nonaccrual and Modified Mortgage Loans by Portfolio Segment
The Company has a high quality, well performinghigh-quality, well-performing mortgage loan portfolio, with over 99% of all mortgage loans classified as performing at both September 30, 20192020 and December 31, 2018. The Company defines delinquency2019. Delinquency is defined consistent with industry practice, when mortgage loans are past due as follows: commercial and residential mortgage loans — 60 days and agricultural mortgage loans — 90 days. To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the past due status of the impacted loans during the forbearance period is locked-in as of March 1, 2020, which reflects the date on which the COVID-19 pandemic began to affect the borrower’s ability to make payments, as provided in the CARES Act. At September 30, 2020, 5% of the COVID-19 pandemic modified loans were classified as delinquent.
The aging of the amortized cost of past due mortgage loans by portfolio segment was as follows at:
September 30, 2020
CommercialAgriculturalResidentialTotal
(In millions)
Current$9,803 $3,319 $2,461 $15,583 
30-59 days past due0 0 65 65 
60-89 days past due0 0 69 69 
90-179 days past due0 1 16 17 
180+ days past due0 0 15 15 
Total$9,803 $3,320 $2,626 $15,749 
Mortgage Loans in Nonaccrual Status by Portfolio Segment
Mortgage loans are placed in a nonaccrual status if there are concerns regarding collectability of future payments or the loan is past due, unless the past due loan is well collateralized and in the process of foreclosure. To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the impacted loans generally will not be reported as in a nonaccrual status during the period of deferral. A COVID-19 pandemic modified loan is only reported as a nonaccrual asset in the event a borrower declares bankruptcy, the borrower experiences significant credit deterioration such that the Company does not expect to collect all principal and interest due, or the loan was 90 days past due at the onset of the pandemic. At September 30, 2020, 5% of the COVID-19 pandemic modified loans were in nonaccrual status.
The amortized cost of mortgage loans in a nonaccrual status by portfolio segment were as follows at:
CommercialAgriculturalResidentialTotal
(In millions)
December 31, 2019$0 $21 $37 $58 
September 30, 2020 (1)$0 $14 $100 $114 
_______________
(1)The Company had 0 commercial mortgage loans past due or in nonaccrual status at either September 30, 2019 or December 31, 2018. Agricultural mortgage loans past due totaled $7$8 million and less than $1 million at September 30, 2019 and December 31, 2018, respectively. The Company had 0 agriculturalof residential mortgage loans in nonaccrual status for which there was no related allowance for credit losses at either September 30, 2019 or December 31, 2018. Residential2020.
Current period investment income on mortgage loans past due and in nonaccrual status totaled $38was $1 million and $36 million at September 30, 2019 and December 31, 2018, respectively. Duringfor the three months and nine months ended September 30, 20192020.
Modified Mortgage Loans by Portfolio Segment
Under certain circumstances, modifications are granted to nonperforming mortgage loans. Each modification is evaluated to determine if a TDR has occurred. A modification is a TDR when the borrower is in financial difficulty and 2018, the creditor makes concessions. Generally, the types of concessions may include reducing the amount of debt owed, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company did not have a significant numberamount of mortgage loans modified in a troubled debt restructuring.restructuring during the nine months ended September 30, 2020.
18
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
Short-term modifications made on a good faith basis to borrowers who were not more than 30 days past due at December 31, 2019 and in response to the COVID-19 pandemic are not considered TDRs.
Other Invested Assets
FreestandingOver 95% of other invested assets is comprised of freestanding derivatives with positive estimated fair values comprise over 90% of other invested assets.values. See Note 5 for information about freestanding derivatives with positive estimated fair values. Other invested assets also includes tax credit and renewable energy partnerships, leveraged leases and Federal Home Loan Bank stock.
Leveraged Leases
The carrying value of leveraged leases at September 30, 2020 and December 31, 2019 was $51 million and $64 million, respectively, net of allowance for credit losses of $13 million and $0, respectively. Rental receivables are generally due in periodic installments. The payment periods for leveraged leases generally range from one to 13 years. For rental receivables, the primary credit quality indicator is whether the rental receivable is performing or nonperforming, which is assessed monthly. Nonperforming rental receivables are generally defined as those that are 90 days or more past due. At both September 30, 2020 and December 31, 2019, all leveraged leases were performing.
Net Unrealized Investment Gains (Losses)
Unrealized investment gains (losses) on fixed maturity securities and the effect on DAC, VOBA, deferred sales inducements (“DSI”) and future policy benefits, that would result from the realization of the unrealized gains (losses), are included in net unrealized investment gains (losses) in AOCI.

17
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)

The components of net unrealized investment gains (losses), included in AOCI, were as follows:follows at:
 September 30, 2019 December 31, 2018
 (In millions)
Fixed maturity securities$7,538
 $1,679
Derivatives399
 253
Other(15) (15)
Subtotal7,922
 1,917
Amounts allocated from:   
Future policy benefits(3,049) (885)
DAC, VOBA and DSI(373) (90)
Subtotal(3,422) (975)
Deferred income tax benefit (expense)(945) (198)
Net unrealized investment gains (losses)$3,555
 $744

September 30, 2020December 31, 2019
(In millions)
Fixed maturity securities$11,150 $6,894 
Derivatives448 232 
Other(17)(15)
Subtotal11,581 7,111 
Amounts allocated from:
Future policy benefits(4,631)(2,691)
DAC, VOBA and DSI(462)(332)
Subtotal(5,093)(3,023)
Deferred income tax benefit (expense)(1,363)(859)
Net unrealized investment gains (losses)$5,125 $3,229 
The changes in net unrealized investment gains (losses) were as follows:
 Nine Months Ended 
 September 30, 2019
 (In millions)
Balance, December 31, 2018$744
Unrealized investment gains (losses) during the period6,005
Unrealized investment gains (losses) relating to: 
Future policy benefits(2,164)
DAC, VOBA and DSI(283)
Deferred income tax benefit (expense)(747)
Balance, September 30, 2019$3,555
Change in net unrealized investment gains (losses)$2,811

Nine Months Ended September 30, 2020
(In millions)
Balance at December 31, 2019$3,229 
Unrealized investment gains (losses) during the period4,470 
Unrealized investment gains (losses) relating to:
Future policy benefits(1,940)
DAC, VOBA and DSI(130)
Deferred income tax benefit (expense)(504)
Balance at September 30, 2020$5,125 
Change in net unrealized investment gains (losses)$1,896 
Concentrations of Credit Risk
There were no investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, at both September 30, 20192020 and December 31, 2018.
Securities Lending
Elements of the securities lending program are presented below at:2019.
19
 September 30, 2019 December 31, 2018
 (In millions)
Securities on loan: (1)   
Amortized cost$2,055
 $3,056
Estimated fair value$3,214
 $3,628
Cash collateral received from counterparties (2)$3,244
 $3,646
Security collateral received from counterparties (3)$35
 $55
Reinvestment portfolio — estimated fair value$3,354
 $3,658
__________________
(1)Included within fixed maturity securities.
(2)Included within payables for collateral under securities loaned and other transactions.

18
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)

Securities Lending
(3)Security collateral received from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reflected on the consolidated financial statements.
Elements of the securities lending program are presented below at:
September 30, 2020December 31, 2019
(In millions)
Securities on loan: (1)
Amortized cost$2,037 $2,031 
Estimated fair value$3,531 $2,996 
Cash collateral received from counterparties (2)$3,625 $3,074 
Securities collateral received from counterparties (3)$6 $0 
Reinvestment portfolio — estimated fair value$3,764 $3,174 
_______________
(1)Included within fixed maturity securities.
(2)Included within payables for collateral under securities loaned and other transactions.
(3)Securities collateral received from counterparties is not reported on the consolidated balance sheets and may not be sold or re-pledged unless the counterparty is in default.
The cash collateral liability by loaned security type and remaining tenor of the agreements were as follows at:
September 30, 2020December 31, 2019
Open (1)1 Month or Less1 to 6 MonthsTotalOpen (1)1 Month or Less1 to 6 MonthsTotal
(In millions)
U.S. government and agency$1,229 $1,801 $593 $3,623 $1,279 $1,094 $701 $3,074 
Foreign corporate2 0 0 2 0 0 0 0 
Total$1,231 $1,801 $593 $3,625 $1,279 $1,094 $701 $3,074 
 September 30, 2019 December 31, 2018
 Remaining Tenor of Securities Lending Agreements   Remaining Tenor of Securities Lending Agreements  
 Open (1) 1 Month or Less 1 to 6 Months Total Open (1) 1 Month or Less 1 to 6 Months Total
 (In millions)
U.S. government and agency$1,561
 $1,283
 $400
 $3,244
 $1,474
 $1,823
 $349
 $3,646
_______________
__________________(1)The related loaned security could be returned to the Company on the next business day which would require the Company to immediately return the cash collateral.
(1)The related loaned security could be returned to the Company on the next business day which would require the Company to immediately return the cash collateral.
If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell securities to meet the return obligation, it may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than what otherwise would have been realized under normal market conditions, or both. The estimated fair value of the securities on loan related to the cash collateral on open at September 30, 20192020 was $1.5$1.2 billion, all of which wereprimarily U.S. government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement.
The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including agency RMBS, ABS, U.S. and foreign corporate securities, ABS, non-agency RMBS and U.S. government and agency securities) with 55%63% invested in agency RMBS, cash and cash equivalents and U.S. government and agency securities at September 30, 2019.2020. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company.
Invested Assets on Deposit, Held in Trust and Pledged as Collateral
Invested assets on deposit, held in trust and pledged as collateral are presented below at estimated fair value at:
20
 September 30, 2019 December 31, 2018
 (In millions)
Invested assets on deposit (regulatory deposits) (1)$9,439
 $8,172
Invested assets held in trust (reinsurance agreements) (2)4,429
 3,455
Invested assets pledged as collateral (3)3,469
 3,340
Total invested assets on deposit, held in trust and pledged as collateral$17,337

$14,967
__________________
(1)The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $75 million and $55 million of the assets on deposit balance represents restricted cash at September 30, 2019 and December 31, 2018, respectively.
(2)The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions. $132 million and $87 million of the assets held in trust balance represents restricted cash at September 30, 2019 and December 31, 2018, respectively.
(3)
The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (seeNote 4of the Notes to the Consolidated Financial Statements included in the 2018 Annual Report) and derivative transactions (seeNote 5).
See “— Securities Lending” for information regarding securities on loan.

19
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)

Invested Assets on Deposit, Held in Trust and Pledged as Collateral
Invested assets on deposit, held in trust and pledged as collateral at estimated fair value were as follows at:
September 30, 2020December 31, 2019
(In millions)
Invested assets on deposit (regulatory deposits) (1)$10,056 $9,345 
Invested assets held in trust (reinsurance agreements) (2)5,518 4,561 
Invested assets pledged as collateral (3)5,608 3,640 
Total invested assets on deposit, held in trust and pledged as collateral$21,182 $17,546 
_______________
(1)The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $83 million and $69 million of the assets on deposit represents restricted cash and cash equivalents at September 30, 2020 and December 31, 2019, respectively.
(2)The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions, of which $83 million and $124 million of the assets held in trust balance represents restricted cash and cash equivalents at September 30, 2020 and December 31, 2019, respectively.
(3)The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 4 of the Notes to the Consolidated Financial Statements included in the 2019 Annual Report) and derivative transactions (see Note 5).
See “— Securities Lending” for information regarding securities on loan.
Variable Interest Entities
The Company has invested in legal entities that are variable interest entities (“VIEs”). VIEs are consolidated when the investor is the primary beneficiary. A primary beneficiary is the variable interest holder in a VIE with both the power to (i) direct the activities of the VIE that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
There were 0no material VIEs for which the Company has concluded that it is the primary beneficiary at either September 30, 20192020 or December 31, 2018.2019.
The carrying amount and maximum exposure to loss related to the VIEs for which the Company has concluded that it holds a variable interest, but is not the primary beneficiary, were as follows at:
September 30, 2020December 31, 2019
Carrying
Amount		Maximum
Exposure
to Loss		Carrying
Amount		Maximum
Exposure
to Loss
(In millions)
Fixed maturity securities$13,270 $12,221 $12,959 $12,317 
Limited partnerships and LLCs2,070 3,338 1,892 3,065 
Total$15,340 $15,559 $14,851 $15,382 
The Company’s investments in unconsolidated VIEs are described below.
Fixed Maturity Securities
The Company invests in U.S. corporate bonds, foreign corporate bonds, and Structured Securities issued by VIEs. The Company is not obligated to provide any financial or other support to these VIEs, other than the original investment. The Company’s involvement with these entities is limited to that of a passive investor. The Company has no unilateral right to appoint or remove the servicer, special servicer, or investment manager, which are generally viewed as having the power to direct the activities that most significantly impact the economic performance of the VIE, nor does the Company function in any of these roles. The Company does not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity; as a result, the Company has determined it is not the primary
21
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)
beneficiary, or consolidator, of the VIE. The Company’s maximum exposure to loss on these fixed maturity securities is limited to the amortized cost of these investments. See “— Fixed Maturity Securities AFS”Available-for-sale” for information on these securities.
Limited Partnerships and LLCs
The Company holds investments in certain limited partnerships and LLCs which are VIEs. These ventures include real estate limited partnerships/partnerships, LLCs, private equity funds, hedge funds, and to a lesser extent tax credit and renewable energy partnerships. The Company is not considered the primary beneficiary, or consolidator, when its involvement takes the form of a limited partner interest and is restricted to a role of a passive investor, as a limited partner’s interest does not provide the Company with any substantive kick-out or participating rights, nor does it provide the Company with the power to direct the activities of the fund. The Company’s maximum exposure to loss on these investments is limited to: (i) the amount invested in debt or equity of the VIE and (ii) commitments to the VIE, as described in Note 10.
Net Investment Income
The carrying amount and maximum exposure to loss related to the VIEs in which the Company concluded that it holds a variable interest, but is not the primary beneficiary,components of net investment income were as follows at:follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Investment income:
Fixed maturity securities$665 $654 $1,990 $1,962 
Equity securities1 1 4 6 
Mortgage loans163 172 495 505 
Policy loans9 12 23 34 
Limited partnerships and LLCs (1)156 80 48 175 
Cash, cash equivalents and short-term investments6 25 38 52 
Other14 10 38 28 
Total investment income1,014 954 2,636 2,762 
Less: Investment expenses37 50 128 152 
Net investment income$977 $904 $2,508 $2,610 
_______________
(1)Includes net investment income pertaining to other limited partnership interests of $154 million and $34 million for the three months and nine months ended September 30, 2020, respectively, and $68 million and $143 million for the three months and nine months ended September 30, 2019, respectively.
Net Investment Gains (Losses)
Components of Net Investment Gains (Losses)
The components of net investment gains (losses) were as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Fixed maturity securities $2 $16 $(24)$63 
Equity securities3 3 (4)14 
Mortgage loans3 (1)(23)(8)
Limited partnerships and LLCs(1)(3)(4)(8)
Other(1)(1)9 (1)
Total net investment gains (losses)$6 $14 $(46)$60 
 September 30, 2019 December 31, 2018
 
Carrying
Amount
 
Maximum
Exposure
to Loss
 
Carrying
Amount
 
Maximum
Exposure
to Loss
 (In millions)
Fixed maturity securities$13,246
 $12,475
 $12,848
 $12,848
Limited partnerships and LLCs1,833
 3,052
 1,743
 3,130
Total$15,079
 $15,527
 $14,591
 $15,978
22


20
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)

Net Investment Income
The components of net investment income were as follows:

Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,

2019 2018 2019
2018

(In millions)
Investment income:    


Fixed maturity securities$654
 $624
 $1,962
 $1,857
Equity securities1
 1
 6
 5
Mortgage loans172
 137
 505
 381
Policy loans12
 12
 34
 50
Real estate limited partnerships and limited liability companies12
 12
 32
 36
Other limited partnership interests68
 70
 143
 159
Cash, cash equivalents and short-term investments25
 5
 52
 15
Other10
 20
 28
 40
Subtotal954
 881
 2,762

2,543
Less: Investment expenses50
 53
 152
 143
Net investment income$904
 $828
 $2,610

$2,400

See “— Related Party Investment Transactions” for discussion of related party investment expenses.
Net Investment Gains (Losses)
Components of Net Investment Gains (Losses)
The components of net investment gains (losses) were as follows:

Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2019 2018 2019 2018

(In millions)
Fixed maturity securities $16
 $(34) $63
 $(137)
Equity securities3
 (2) 14
 (5)
Mortgage loans(1) (5) (8) (12)
Real estate limited partnerships and limited liability companies—
 —
 —
 42
Other limited partnership interests(3) —
 (8) —
Other(1) (1) (1) (8)
Total net investment gains (losses)$14
 $(42) $60

$(120)


21
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Investments (continued)

Sales or Disposals of Fixed Maturity Securities
Investment gains and losses on sales of securities are determined on a specific identification basis. Proceeds from sales or disposals of fixed maturity securities and the components of fixed maturity securities net investment gains (losses) were as shown in the table below.follows:
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2019 2018 2019 2018
 (In millions)
Proceeds$1,371
 $3,070
 $8,007
 $8,358
Gross investment gains$31
 $57
 $194
 $69
Gross investment losses(15) (91) (131) (206)
Net investment gains (losses)$16
 $(34) $63
 $(137)

Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Proceeds$889 $1,371 $2,155 $8,007 
Gross investment gains$30 $31 $61 $194 
Gross investment losses(28)(15)(70)(131)
Net investment gains (losses)$2 $16 $(9)$63 
Related Party Investment Transactions
The Company receives investment administrative services from MetLife Investment Management, LLC (formerly known as MetLife Investment Advisors, LLC), which was considered a related party investment manager until the completion of the MetLife Divestiture. The related investment administrative service charges were $0 and $49 million for the three months and nine months ended September 30, 2018, respectively. All of the charges reported as related party activity in 2018 occurred prior to the MetLife Divestiture. See Note 1 regarding the MetLife Divestiture.
5. Derivatives
Accounting for Derivatives
Freestanding Derivatives
Freestanding derivatives are carried onSee Note 1 of the Notes to the Consolidated Financial Statements included in the 2019 Annual Report for a description of the Company’s balance sheet either as assets within other invested assets or as liabilities within other liabilities at estimated fair value. The Company does not offsetaccounting policies for derivatives and Note 9 for information about the estimated fair value amounts recognizedhierarchy for derivatives executed with the same counterparty under the same master netting agreement.derivatives.
If a derivative is not designated or did not qualify as an accounting hedge, changes in the estimated fair value
Derivative Strategies
Types of the derivative are reported in net derivative gains (losses) except for economic hedges of limited partnershipsDerivative Instruments and LLCs which are presented in net investment income.Derivative Strategies
The Company generally reports cash received or paid for amaintains an overall risk management strategy that incorporates the use of derivative instruments to minimize its exposure to various market risks. Commonly used derivative instruments include, but are not necessarily limited to:
•Interest rate derivatives: swaps, caps, swaptions and forwards;
•Foreign currency exchange rate derivatives: forwards and swaps;
•Equity derivatives: options, total return swaps and variance swaps; and
•Credit derivatives: single and index reference credit default swaps.
For detailed information on these contracts and the related strategies, see Note 8 of the Notes to the Consolidated Financial Statements included in the investing activity section of the statement of cash flows except for cash flows of certain derivative options with deferred premiums, which are reported in the financing activity section of the statement of cash flows.
Hedge Accounting
The Company primarily designates derivatives as a hedge of a forecasted transaction or a variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). When a derivative is designated as a cash flow hedge and is determined to be highly effective, changes in fair value are recorded in OCI and subsequently reclassified into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item.
To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge. In its hedge documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and at least quarterly throughout the life of the designated hedging relationship.

2019 Annual Report.
22
23
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)

Primary Risks Managed by Derivatives
The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in theprimary underlying risk exposure, gross notional amount and estimated fair value of derivatives held were as follows at:
September 30, 2020December 31, 2019
Primary Underlying Risk ExposureGross
Notional
Amount		Estimated Fair ValueGross
Notional
Amount		Estimated Fair Value
AssetsLiabilitiesAssetsLiabilities
(In millions)
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate forwardsInterest rate$330 $90 $0 $420 $22 $0 
Foreign currency swapsForeign currency exchange rate2,746 299 19 2,701 176 27 
Total qualifying hedges3,076 389 19 3,121 198 27 
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swapsInterest rate3,015 707 24 7,559 878 29 
Interest rate capsInterest rate2,350 1 0 3,350 2 0 
Interest rate optionsInterest rate22,570 1,481 178 29,750 782 187 
Interest rate forwardsInterest rate7,332 1,179 25 5,418 94 114 
Foreign currency swapsForeign currency exchange rate991 138 15 1,040 94 15 
Foreign currency forwardsForeign currency exchange rate157 0 2 138 0 1 
Credit default swaps — purchasedCredit18 0 0 18 0 0 
Credit default swaps — writtenCredit1,793 27 1 1,613 36 0 
Equity index optionsEquity market37,493 815 995 51,509 850 1,728 
Equity variance swapsEquity market1,098 13 22 2,136 69 69 
Equity total return swapsEquity market12,997 63 222 7,723 2 367 
Total non-designated or non-qualifying derivatives89,814 4,424 1,484 110,254 2,807 2,510 
Embedded derivatives:
Ceded guaranteed minimum income benefitsOtherN/A321 0 N/A217 0 
Direct index-linked annuitiesOtherN/A0 2,256 N/A0 2,253 
Direct guaranteed minimum benefitsOtherN/A0 3,649 N/A0 1,548 
Assumed guaranteed minimum benefitsOtherN/A0 694 N/A0 442 
Assumed index-linked annuitiesOtherN/A0 340 N/A0 339 
Total embedded derivativesN/A321 6,939 N/A217 4,582 
Total$92,890 $5,134 $8,442 $113,375 $3,222 $7,119 
Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or cash flowsdid not qualify as part of a hedged item; (ii)hedging relationship at both September 30, 2020 and December 31, 2019. The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the derivative or hedged item expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; or (iv) the derivative is de-designated as a hedging instrument.
WhenCompany’s exposure to various risks and generally do not qualify for hedge accounting is discontinuedbecause they do not meet the derivative is carried at its estimated fair value oncriteria required under portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities and generally do not qualify for hedge accounting because they do not meet the balance sheet, with changescriteria of being “highly effective” as outlined in its estimated fair value recognized inASC 815; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the current period as net derivative gains (losses). The changes in estimated fair value of the embedded derivatives previouslyare already recorded in OCI related to discontinued cash flow hedges are released into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item. When the hedged item matures or is sold, or the forecasted transaction is not probable of occurring, the Company immediately reclassifies any remaining balances in OCI to net derivative gains (losses).
Embedded Derivatives
The Company has certain insuranceincome; and reinsurance contracts that contain embedded derivatives which are required to be separated from their host contracts and reported as derivatives. These host contracts include: variable annuities with guaranteed minimum benefits, including GMWBs, GMABs and certain GMIBs; index-linked annuities(iv) written credit default swaps that are directly written or assumed through reinsurance;used to create synthetic credit investments and ceded reinsurance of variable annuity GMIBs. Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables on the consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances on the consolidated balance sheets. Changes in the estimated fair value of the embedded derivative are reported in net derivative gains (losses).
Derivative Strategies
The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to minimize its exposure to various market risks, including interest rate, foreign currency exchange rate, credit and equity market.
Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are bilateral contracts between two counterparties (“OTC-bilateral”).
Interest Rate Derivatives
Interest rate swaps: The Company primarily uses interest rate swaps todo not qualify for hedge interest rate exposure in variable annuity products and minimum guarantees embedded in universal life products. Interest rate swaps are used in nonqualifyingaccounting because they do not involve a hedging relationships.
Interest rate caps: The Company uses interest rate caps to protect its floating rate liabilities against rises in interest rates above a specified level, and against interest rate exposure arising from mismatches between assets and liabilities. Interest rate caps are used in nonqualifying hedging relationships.
Interest rate futures: The Company uses exchange-traded interest rate futures contracts to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. Exchange-traded interest rate futures are used in nonqualifying hedging relationships.
Swaptions: The Company uses swaptions to hedge interest rate risk associated with the Company’s variable annuity and universal life products. Swaptions are used in nonqualifying hedging relationships. Swaptions are included in interest rate options.
Interest rate forwards: The Company uses interest rate forwards to hedge minimum guarantees embedded in universal life products. Interest rate forwards are used in cash flow and nonqualifying hedging relationships.
Foreign Currency Exchange Rate Derivatives
Foreign currency swaps: The Company uses foreign currency swaps to convert foreign currency denominated cash flows to U.S. dollars to reduce cash flow fluctuations due to changes in currency exchange rates. Foreign currency swaps are used in cash flow and nonqualifying hedging relationships.
Foreign currency forwards: The Company uses foreign currency forwards to hedge currency exposure on its invested assets. Foreign currency forwards are used in nonqualifying hedging relationships.

relationship.
23
24
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)
The amount and location of gains (losses), including earned income, recognized for derivatives and gains (losses) pertaining to hedged items presented in net derivative gains (losses) were as follows:
Net Derivative Gains (Losses) Recognized for DerivativesNet Derivative Gains (Losses) Recognized for Hedged ItemsNet Investment IncomeAmount of Gains (Losses) Deferred in AOCI
(In millions)
Three Months Ended September 30, 2020
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives$0 $0 $1 $(1)
Foreign currency exchange rate derivatives8 (3)8 (182)
Total cash flow hedges8 (3)9 (183)
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives(435)0 0 0 
Foreign currency exchange rate derivatives(49)(2)0 0 
Credit derivatives3 0 0 0 
Equity derivatives(751)0 0 0 
Embedded derivatives(641)0 0 0 
Total non-qualifying hedges(1,873)(2)0 0 
Total$(1,865)$(5)$9 $(183)
Three Months Ended September 30, 2019
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives$0 $0 $1 $51 
Foreign currency exchange rate derivatives0 0 9 106 
Total cash flow hedges0 0 10 157 
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives1,656 0 0 0 
Foreign currency exchange rate derivatives49 (2)0 0 
Credit derivatives2 0 0 0 
Equity derivatives(18)0 0 0 
Embedded derivatives(703)0 0 0 
Total non-qualifying hedges986 (2)0 0 
Total$986 $(2)$10 $157 

25
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)
Net Derivative Gains (Losses) Recognized for DerivativesNet Derivative Gains (Losses) Recognized for Hedged ItemsNet Investment IncomeAmount of Gains (Losses) Deferred in AOCI
(In millions)
Nine Months Ended September 30, 2020
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives$1 $0 $2 $92 
Foreign currency exchange rate derivatives12 (6)28 139 
Total cash flow hedges13 (6)30 231 
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives4,321 0 0 0 
Foreign currency exchange rate derivatives56 (11)0 0 
Credit derivatives1 0 0 0 
Equity derivatives(393)0 0 0 
Embedded derivatives(1,754)0 0 0 
Total non-qualifying hedges2,231 (11)0 0 
Total$2,244 $(17)$30 $231 
Nine Months Ended September 30, 2019
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives$28 $0 $2 $51 
Foreign currency exchange rate derivatives20 (23)25 145 
Total cash flow hedges48 (23)27 196 
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives2,905 0 0 0 
Foreign currency exchange rate derivatives71 (6)0 0 
Credit derivatives31 0 0 0 
Equity derivatives(1,808)0 0 0 
Embedded derivatives(1,436)0 0 0 
Total non-qualifying hedges(237)(6)0 0 
Total$(189)$(29)$27 $196 
At September 30, 2020 and December 31, 2019, the balance in AOCI associated with cash flow hedges was $448 million and $232 million, respectively.
Credit Derivatives
Credit default swaps: The Company uses credit default swaps to create synthetic credit investments to replicate credit exposure that is more economically attractive than what is available in the market or otherwise unavailable (written credit protection), or to reduce credit loss exposure on certain assets that the Company owns (purchased credit protection). Credit default swaps are used in nonqualifying hedging relationships.
Equity Derivatives
Equity futures: The Company uses exchange-traded equity futures to hedge minimum guarantees embedded in certain variable annuity products against adverse changes in equity markets. Exchange-traded equity futures are used in nonqualifying hedging relationships.
Equity index options: The Company uses equity index options primarily to hedge minimum guarantees embedded in certain variable annuity products against adverse changes in equity markets. Additionally, the Company uses equity index options to hedge index-linked annuity products against adverse changes in equity markets. Equity index options are used in nonqualifying hedging relationships.
Equity total return swaps: The Company uses equity total return swaps to hedge minimum guarantees embedded in certain variable annuity products against adverse changes equity markets. Equity total return swaps are used in nonqualifying hedging relationships.
Equity variance swaps: The Company uses equity variance swaps to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. Equity variance swaps are used in nonqualifying hedging relationships.

24
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)

Primary Risks Managed by Derivatives
The following table presents the primary underlying risk exposure, gross notional amount, and estimated fair value of the Company’s derivatives, held at:
   September 30, 2019 December 31, 2018
 Primary Underlying Risk Exposure 
Gross
Notional
Amount
 Estimated Fair Value 
Gross
Notional
Amount
 Estimated Fair Value
 Assets Liabilities Assets Liabilities
   (In millions)
Derivatives Designated as Hedging Instruments:            
Cash flow hedges:             
Interest rate forwardsInterest rate $460
 $51
 $—
 $—
 $—
 $—
Foreign currency swapsForeign currency exchange rate 2,674
 304
 16
 2,461
 200
 30
Total qualifying hedges  3,134
 355
 16
 2,461
 200
 30
Derivatives Not Designated or Not Qualifying as Hedging Instruments:            
Interest rate swapsInterest rate 8,730
 1,049
 32
 10,747
 528
 558
Interest rate capsInterest rate 3,350
 2
 —
 3,350
 21
 —
Interest rate futuresInterest rate —
 —
 —
 53
 —
 —
Interest rate optionsInterest rate 27,250
 1,771
 375
 17,168
 168
 61
Interest rate forwardsInterest rate 4,143
 241
 15
 —
 —
 —
Foreign currency swapsForeign currency exchange rate 1,066
 143
 13
 1,398
 99
 18
Foreign currency forwardsForeign currency exchange rate 118
 2
 —
 125
 —
 —
Credit default swaps — purchasedCredit 12
 —
 —
 98
 3
 —
Credit default swaps — writtenCredit 1,712
 30
 —
 1,798
 14
 3
Equity futuresEquity market —
 —
 —
 169
 —
 —
Equity index optionsEquity market 46,098
 766
 1,503
 45,815
 1,372
 1,207
Equity variance swapsEquity market 5,574
 95
 249
 5,574
 80
 232
Equity total return swapsEquity market 5,037
 41
 33
 3,920
 280
 3
Total non-designated or nonqualifying derivatives  103,090
 4,140
 2,220
 90,215
 2,565
 2,082
Embedded derivatives:             
Ceded guaranteed minimum income benefitsOther N/A
 303
 —
 N/A
 228
 —
Direct guaranteed minimum benefitsOther N/A
 —
 2,250
 N/A
 —
 1,546
Direct index-linked annuitiesOther N/A
 —
 1,566
 N/A
 —
 488
Assumed guaranteed minimum benefitsOther N/A
 —
 541
 N/A
 —
 386
Assumed index-linked annuitiesOther N/A
 —
 316
 N/A
 —
 96
Total embedded derivatives  N/A
 303
 4,673
 N/A
 228
 2,516
Total  $106,224
 $4,798
 $6,909
 $92,676
 $2,993
 $4,628

Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both September 30, 2019 and December 31, 2018. The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and generally do not qualify for hedge accounting because they do not meet the criteria required under portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities and generally do not qualify for hedge accounting because they do not meet the criteria of being “highly effective” as outlined in ASC 815; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income; and (iv) written credit default swaps that are used to create synthetic credit investments and that do not qualify for hedge accounting because they do not involve a hedging relationship.

25
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)

The following tables present the amount and location of gains (losses), including earned income, recognized for derivatives and gains (losses) pertaining to hedged items presented in net derivative gains (losses):
 Net Derivative Gains (Losses) Recognized for Derivatives Net Derivative Gains (Losses) Recognized for Hedged Items Net Investment Income Policyholder Benefits and Claims Amount of Gains (Losses) deferred in AOCI
 (In millions)
Three Months Ended September 30, 2019         
Derivatives Designated as Hedging Instruments:         
Cash flow hedges:         
Interest rate derivatives$—
 $—
 $1
 $—
 $51
Foreign currency exchange rate derivatives—
 —
 9
 —
 106
Total cash flow hedges—
 —
 10
 —
 157
Derivatives Not Designated or Not Qualifying as Hedging Instruments:         
Interest rate derivatives1,656
 —
 —
 —
 —
Foreign currency exchange rate derivatives49
 (2) —
 —
 —
Credit derivatives2
 —
 —
 —
 —
Equity derivatives(18) —
 —
 —
 —
Embedded derivatives(703) —
 —
 —
 —
Total non-qualifying hedges986
 (2) —
 —
 —
Total$986
 $(2) $10
 $—
 $157
Three Months Ended September 30, 2018         
Derivatives Designated as Hedging Instruments:         
Fair value hedges:         
Interest rate derivatives$(2) $2
 $—
 $—
 $—
Total fair value hedges(2) 2
 —
 —
 —
Cash flow hedges:         
Interest rate derivatives45
 —
 1
 —
 (3)
Foreign currency exchange rate derivatives


 —
 6
 —
 (4)
Total cash flow hedges45
 —
 7
 —
 (7)
Derivatives Not Designated or Not Qualifying as Hedging Instruments:         
Interest rate derivatives(266) —
 —
 —
 —
Foreign currency exchange rate derivatives6
 (2) —
 —
 —
Credit derivatives11
 —
 —
 —
 —
Equity derivatives(446) —
 —
 —
 —
Embedded derivatives(13) —
 —
 (2) —
Total non-qualifying hedges(708) (2) —
 (2) —
Total$(665) $—
 $7
 $(2) $(7)



26
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)

 Net Derivative Gains (Losses) Recognized for Derivatives Net Derivative Gains (Losses) Recognized for Hedged Items Net Investment Income Policyholder Benefits and Claims Amount of Gains (Losses) deferred in AOCI
 (In millions)
Nine Months Ended September 30, 2019         
Derivatives Designated as Hedging Instruments:         
Cash flow hedges:         
Interest rate derivatives$28
 $—
 $2
 $—
 $51
Foreign currency exchange rate derivatives20
 (23) 25
 —
 145
Total cash flow hedges48
 (23) 27
 —
 196
Derivatives Not Designated or Not Qualifying as Hedging Instruments:         
Interest rate derivatives2,905
 —
 —
 —
 —
Foreign currency exchange rate derivatives71
 (6) —
 —
 —
Credit derivatives31
 —
 —
 —
 —
Equity derivatives(1,808) —
 —
 —
 —
Embedded derivatives(1,436) —
 —
 —
 —
Total non-qualifying hedges(237) (6) —
 —
 —
Total$(189)
$(29)
$27

$—

$196
Nine Months Ended September 30, 2018         
Derivatives Designated as Hedging Instruments:         
Fair value hedges:         
Interest rate derivatives$(12) $12
 $1
 $—
 $—
Total fair value hedges(12) 12
 1
 —
 —
Cash flow hedges:         
Interest rate derivatives62
 —
 4
 —
 (5)
Foreign currency exchange rate derivatives(1) —
 17
 —
 33
Total cash flow hedges61
 —
 21
 —
 28
Derivatives Not Designated or Not Qualifying as Hedging Instruments:         
Interest rate derivatives(1,190) —
 —
 —
 —
Foreign currency exchange rate derivatives29
 (4) —
 —
 —
Credit derivatives7
 —
 —
 —
 —
Equity derivatives(904) —
 —
 —
 —
Embedded derivatives771
 —
 —
 (4) —
Total non-qualifying hedges(1,287) (4) —
 (4) —
Total$(1,238) $8
 $22
 $(4) $28
At September 30, 2019 and December 31, 2018, the balance in AOCI associated with cash flow hedges was $399 million and $253 million, respectively.
Credit Derivatives
In connection with synthetically created credit investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation.

2726
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)

The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps were as follows at:
September 30, 2020December 31, 2019
Rating Agency Designation of Referenced Credit Obligations (1)Estimated
Fair Value
of Credit
Default
Swaps		Maximum
Amount of
Future
Payments under
Credit Default
Swaps		Weighted
Average
Years to
Maturity (2)		Estimated
Fair Value
of Credit
Default
Swaps		Maximum
Amount of
Future
Payments under
Credit Default
Swaps		Weighted
Average
Years to
Maturity (2)
(Dollars in millions)
Aaa/Aa/A$8 $879 2.5$11 $615 2.5
Baa18 914 5.525 998 5.1
Total$26 $1,793 4$36 $1,613 4.1
  September 30, 2019 December 31, 2018
Rating Agency Designation of Referenced Credit Obligations (1) 
Estimated
Fair Value
of Credit
Default
Swaps
 
Maximum
Amount of
Future
Payments under
Credit Default
Swaps
 
Weighted
Average
Years to
Maturity (2)
 
Estimated
Fair Value
of Credit
Default
Swaps
 
Maximum
Amount of
Future
Payments under
Credit Default
Swaps
 
Weighted
Average
Years to
Maturity (2)
  (Dollars in millions)
Aaa/Aa/A $9
 $615
 2.4 $8
 $689
 2.0
Baa 21
 1,097
 5.3 3
 1,109
 5.0
Total $30
 $1,712
 4.3 $11
 $1,798
 3.9
_______________
__________________(1)The Company has written credit protection on both single name and index references. The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s, S&P and Fitch. If no rating is available from a rating agency, then an internally developed rating is used.
(1)The Company has written credit protection on both single name and index references. The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s Investors Service, Standard & Poor’s Global Ratings and Fitch Ratings. If no rating is available from a rating agency, then an internally developed rating is used.
(2)The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.
(2)The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.
Counterparty Credit Risk
The Company may be exposed to credit-related losses in the event of counterparty nonperformance on derivative instruments. Generally, the credit exposure is the fair value at the reporting date less any collateral received from the counterparty.
The Company manages its credit risk by: (i) entering into derivative transactions with creditworthy counterparties governed by master netting agreements; (ii) trading through regulated exchanges and central clearing counterparties; (iii) obtaining collateral, such as cash and securities, when appropriate; and (iv) setting limits on single party credit exposures which are subject to periodic management review.
SeeNote 6 for a description of the impact of credit risk on the valuation of derivatives.
The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
Gross Amounts Not Offset on the Consolidated Balance Sheets
Gross Amount RecognizedFinancial Instruments (1)Collateral Received/Pledged (2)Net AmountSecurities Collateral Received/Pledged (3)Net Amount After Securities Collateral
(In millions)
September 30, 2020
Derivative assets$4,843 $(1,068)$(3,141)$634 $(625)$9 
Derivative liabilities$1,495 $(1,068)$0 $427 $(426)$1 
December 31, 2019
Derivative assets$3,046 $(1,458)$(1,100)$488 $(487)$1 
Derivative liabilities$2,522 $(1,458)$0 $1,064 $(1,061)$3 
    Gross Amounts Not Offset on the Consolidated Balance Sheets      
  Gross Amount Recognized Financial Instruments (1) Collateral Received/Pledged (2) Net Amount Off-balance Sheet Securities Collateral (3) Net Amount After Securities Collateral
  (In millions)
September 30, 2019            
Derivative assets $4,555
 $(1,599) $(1,831) $1,125
 $(1,088) $37
Derivative liabilities $2,232
 $(1,599) $—
 $633
 $(633) $—
December 31, 2018            
Derivative assets $2,820
 $(1,671) $(1,053) $96
 $(83) $13
Derivative liabilities $2,104
 $(1,671) $—
 $433
 $(433) $—
_______________
__________________(1)Represents amounts subject to an enforceable master netting agreement or similar agreement.
(1)Represents amounts subject to an enforceable master netting agreement or similar agreement.
(2)The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreement.

(2)The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreement.
28
27
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Derivatives (continued)

(3)Securities collateral received from counterparties is not reported on the consolidated balance sheets and may not be sold or re-pledged unless the counterparty is in default. Amounts do not include excess of collateral pledged or received.
(3)Securities collateral received by the Company is not recorded on the balance sheet. Amounts do not include excess of collateral pledged or received.
The Company’s collateral arrangements generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the amount owed by that counterparty reaches a minimum transfer amount. Certain of these arrangements also include credit contingentcredit-contingent provisions which permit the party with positive fair value to terminate the derivative at the current fair value or demand immediate full collateralization from the party in a net liability position, in the event that the financial strength or credit rating of the party in a net liability position falls below a certain level.
The following table presents the aggregate estimated fair valuevalues of derivatives in a net liability position containing such credit contingentcredit-contingent provisions and the aggregate estimated fair value of assets posted as collateral for such instruments.instruments were as follows at:
September 30, 2020December 31, 2019
(In millions)
Estimated fair value of derivatives in a net liability position (1)$427 $1,064 
Estimated Fair Value of Collateral Provided (2):
Fixed maturity securities$691 $1,473 
_______________
(1)After taking into consideration the existence of netting agreements.
(2)Substantially all of the Company’s collateral arrangements provide for daily posting of collateral for the full value of the derivative contract. As a result, if the credit-contingent provisions of derivative contracts in a net liability position were triggered, minimal additional assets would be required to be posted as collateral or needed to settle the instruments immediately.
28
  September 30, 2019 December 31, 2018
  (In millions)
Estimated fair value of derivatives in a net liability position (1) $633
 $433
Estimated Fair Value of Collateral Provided (2):    
Fixed maturity securities $1,250
 $797
__________________
(1)After taking into consideration the existence of netting agreements.
(2)Substantially all of the Company’s collateral arrangements provide for daily posting of collateral for the full value of the derivative contract. As a result, if the credit contingent provisions of derivative contracts in a net liability position were triggered, minimal additional assets would be required to be posted as collateral or needed to settle the instruments immediately.

29
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

6. Fair Value
Considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.
Recurring Fair Value Measurements
The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy, are presented in the tables below. Investments that do not have a readily determinable fair value and are measured at net asset value (or equivalent) as a practical expedient to estimated fair value are excluded from the fair value hierarchy.
 September 30, 2019
 Fair Value Hierarchy  
 Level 1 Level 2 Level 3 Total Estimated
Fair Value
 (In millions)
Assets       
Fixed maturity securities:       
U.S. corporate$—
 $29,875
 $432
 $30,307
U.S. government and agency1,570
 6,020
 —
 7,590
RMBS—
 9,063
 77
 9,140
Foreign corporate—
 9,112
 376
 9,488
CMBS—
 5,511
 34
 5,545
State and political subdivision—
 3,897
 73
 3,970
ABS—
 1,847
 64
 1,911
Foreign government—
 1,725
 —
 1,725
Total fixed maturity securities1,570
 67,050
 1,056
 69,676
Equity securities11
 133
 4
 148
Short-term investments1,018
 465
 —
 1,483
Derivative assets: (1)       
Interest rate—
 3,114
 —
 3,114
Foreign currency exchange rate—
 436
 13
 449
Credit—
 21
 9
 30
Equity market—
 803
 99
 902
Total derivative assets—
 4,374
 121
 4,495
Embedded derivatives within asset host contracts (2)—
 —
 303
 303
Separate account assets224
 96,558
 —
 96,782
Total assets$2,823

$168,580

$1,484

$172,887
Liabilities       
Derivative liabilities: (1)       
Interest rate$—
 $422
 $—
 $422
Foreign currency exchange rate—
 28
 1
 29
Equity market—
 1,534
 251
 1,785
Total derivative liabilities—
 1,984
 252
 2,236
Embedded derivatives within liability host contracts (2)—
 —
 4,673
 4,673
Total liabilities$—
 $1,984
 $4,925
 $6,909

September 30, 2020
Fair Value HierarchyTotal Estimated
Fair Value
Level 1Level 2Level 3
(In millions)
Assets
Fixed maturity securities:
U.S. corporate$0 $34,595 $699 $35,294 
Foreign corporate0 10,155 360 10,515 
RMBS0 8,370 0 8,370 
U.S. government and agency1,733 7,020 0 8,753 
CMBS0 6,325 7 6,332 
State and political subdivision0 4,346 0 4,346 
ABS0 2,636 74 2,710 
Foreign government0 1,819 0 1,819 
Total fixed maturity securities1,733 75,266 1,140 78,139 
Equity securities12 99 3 114 
Short-term investments2,451 880 10 3,341 
Derivative assets: (1)
Interest rate0 3,458 0 3,458 
Foreign currency exchange rate0 420 17 437 
Credit0 18 9 27 
Equity market0 878 13 891 
Total derivative assets0 4,774 39 4,813 
Embedded derivatives within asset host contracts (2)0 0 321 321 
Separate account assets153 95,799 3 95,955 
Total assets$4,349 $176,818 $1,516 $182,683 
Liabilities
Derivative liabilities: (1)
Interest rate$0 $227 $0 $227 
Foreign currency exchange rate0 36 0 36 
Credit0 0 1 1 
Equity market0 1,216 23 1,239 
Total derivative liabilities0 1,479 24 1,503 
Embedded derivatives within liability host contracts (2)0 0 6,939 6,939 
Total liabilities$0 $1,479 $6,963 $8,442 
30
29
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)

December 31, 2019
Fair Value HierarchyTotal Estimated
Fair Value
Level 1Level 2Level 3
(In millions)
Assets
Fixed maturity securities:
U.S. corporate$0 $30,266 $325 $30,591 
Foreign corporate0 9,554 132 9,686 
RMBS0 8,986 44 9,030 
U.S. government and agency1,542 5,702 0 7,244 
CMBS0 5,714 0 5,714 
State and political subdivision0 3,938 73 4,011 
ABS0 1,877 73 1,950 
Foreign government0 1,751 0 1,751 
Total fixed maturity securities1,542 67,788 647 69,977 
Equity securities14 125 8 147 
Short-term investments1,004 473 5 1,482 
Derivative assets: (1)
Interest rate0 1,778 0 1,778 
Foreign currency exchange rate0 265 5 270 
Credit0 25 11 36 
Equity market0 850 71 921 
Total derivative assets0 2,918 87 3,005 
Embedded derivatives within asset host contracts (2)0 0 217 217 
Separate account assets180 99,485 3 99,668 
Total assets$2,740 $170,789 $967 $174,496 
Liabilities
Derivative liabilities: (1)
Interest rate$0 $330 $0 $330 
Foreign currency exchange rate0 43 0 43 
Equity market0 2,093 71 2,164 
Total derivative liabilities0 2,466 71 2,537 
Embedded derivatives within liability host contracts (2)0 0 4,582 4,582 
Total liabilities$0 $2,466 $4,653 $7,119 
_______________
(1)Derivative assets are presented within other invested assets on the consolidated balance sheets and derivative liabilities are presented within other liabilities on the consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the consolidated balance sheets.
(2)Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables and other invested assets on the consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances on the consolidated balance sheets.
 December 31, 2018
 Fair Value Hierarchy  
 Level 1 Level 2 Level 3 Total Estimated
Fair Value
 (In millions)
Assets       
Fixed maturity securities:       
U.S. corporate$—
 $23,740
 $319
 $24,059
U.S. government and agency2,334
 6,310
 —
 8,644
RMBS—
 8,429
 6
 8,435
Foreign corporate—
 7,503
 392
 7,895
CMBS—
 5,004
 129
 5,133
State and political subdivision—
 3,512
 74
 3,586
ABS—
 2,072
 39
 2,111
Foreign government—
 1,485
 —
 1,485
Total fixed maturity securities2,334
 58,055
 959
 61,348
Equity securities13
 124
 3
 140
Derivative assets: (1)       
Interest rate—
 717
 —
 717
Foreign currency exchange rate—
 288
 11
 299
Credit—
 10
 7
 17
Equity market—
 1,634
 98
 1,732
Total derivative assets—
 2,649
 116
 2,765
Embedded derivatives within asset host contracts (2)—
 —
 228
 228
Separate account assets217
 91,293
 1
 91,511
Total assets$2,564

$152,121

$1,307

$155,992
Liabilities       
Derivative liabilities: (1)       
Interest rate$—
 $619
 $—
 $619
Foreign currency exchange rate—
 48
 —
 48
Credit—
 2
 1
 3
Equity market—
 1,205
 237
 1,442
Total derivative liabilities—
 1,874
 238
 2,112
Embedded derivatives within liability host contracts (2)—
 —
 2,516
 2,516
Total liabilities$—
 $1,874
 $2,754
 $4,628
__________________
(1)Derivative assets are presented within other invested assets on the consolidated balance sheets and derivative liabilities are presented within other liabilities on the consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the consolidated balance sheets, but are presented net for purposes of the rollforward in the Fair Value Measurements Using Significant Unobservable Inputs (Level 3) tables.
(2)Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables and other invested assets on the consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances on the consolidated balance sheets.

31
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)

Valuation Controls and Procedures
The Company monitors and provides oversight of valuation controls and policies for securities, mortgage loans and derivatives, which are primarily executed by its valuation service providers. The valuation methodologies used to determine fair values prioritize the use of observable market prices and market-based parameters and determines that judgmental valuation adjustments, when applied, are based upon established policies and are applied consistently over time. The valuation methodologies for securities, mortgage loans and derivatives are reviewed on an ongoing basis and revised when necessary. In addition, the Chief Accounting Officer periodically reports to the Audit Committee of Brighthouse Financial’s Board of Directors regarding compliance with fair value accounting standards.
30
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
The fair value of financial assets and financial liabilities is based on quoted market prices, where available. The Company assesses whether pricesPrices received are assessed to determine if they represent a reasonable estimate of fair value throughvalue. Several controls designed to ensure valuations represent an exit price. Valuation service providers perform several controls,are performed, including certain monthly controls, which include, but are not limited to, analysis of portfolio returns to corresponding benchmark returns, comparing a sample of executed prices of securities sold to the fair value estimates, reviewing the bid/ask spreads to assess activity, comparing prices from multiple independent pricing services and ongoing due diligence to confirm that independent pricing services use market-based parameters. The process includes a determination of the observability of inputs used in estimated fair values received from independent pricing services or brokers by assessing whether these inputs can be corroborated by observable market data. Independent non-binding broker quotes, also referred to herein as “consensus pricing,” are used for a non-significant portion of the portfolio. Prices received from independent brokers are assessed to determine if they represent a reasonable estimate of fair value by considering such pricing relative to the current market dynamics and current pricing for similar financial instruments.
Valuation service providersA formal process is also apply a formal processapplied to challenge any prices received from independent pricing services that are not considered representative of estimated fair value. If prices received from independent pricing services are not considered reflective of market activity or representative of estimated fair value, independent non-binding broker quotations are obtained. If obtaining an independent non-binding broker quotation is unsuccessful, valuation service providers will use the last available price.price will be used.
The Company reviews outputs of the valuation service providers’Additional controls and performs additional controls, including certain monthly controls, which include but are not limited to, performingperformed, such as, balance sheet analytics to assess reasonableness of period to period pricing changes, including any price adjustments. Price adjustments are applied if prices or quotes received from independent pricing services or brokers are not considered reflective of market activity or representative of estimated fair value. The Company did not have significant price adjustments during the nine months ended September 30, 2019.2020.
Determination of Fair Value
Fixed Maturity Securities
The fair values for actively traded marketable bonds, primarily U.S. government and agency securities, are determined using the quoted market prices and are classified as Level 1 assets. For fixed maturity securities classified as Level 2 assets, fair values are determined using either a market or income approach and are valued based on a variety of observable inputs as described below.
U.S. corporate and foreign corporate securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, benchmark yields, spreads off benchmark yields, new issuances, issuer rating, trades of identical or comparable securities, or duration. Privately-placed securities are valued using the additional key inputs: market yield curve, call provisions, observable prices and spreads for similar public or private securities that incorporate the credit quality and industry sector of the issuer, and delta spread adjustments to reflect specific credit-related issues.
U.S. government and agency, state and political subdivision and foreign government securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, benchmark U.S. Treasury yield or other yields, spread off the U.S. Treasury yield curve for the identical security, issuer ratings and issuer spreads, broker dealerbroker-dealer quotes, and comparable securities that are actively traded.

32
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)

Structured Securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, spreads for actively traded securities, spreads off benchmark yields, expected prepayment speeds and volumes, current and forecasted loss severity, ratings, geographic region, weighted average coupon and weighted average maturity, average delinquency rates and debt servicedebt-service coverage ratios. Other issuance-specific information is also used, including, but not limited to; collateral type, structure of the security, vintage of the loans, payment terms of the underlying asset, payment priority within tranche, and deal performance.
Equity Securities and Short-term Investments
The fair value for actively traded equity securities and short-term investments are determined using quoted market prices and are classified as Level 1 assets. For financial instruments classified as Level 2 assets or liabilities, fair values are determined using a market approach and are valued based on a variety of observable inputs as described below.
31
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
Equity securities and short-term investments: Fair value is determined using third-party commercial pricing services, with the primary input being quoted prices in markets that are not active.
Derivatives
Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are bilateral contracts between two counterparties (“OTC-bilateral”).
The fair values for exchange-traded derivatives are determined using the quoted market prices and are classified as Level 1 assets. For OTC-bilateral derivatives and OTC-cleared derivatives classified as Level 2 assets or liabilities, fair values are determined using the income approach. Valuations of non-option-based derivatives utilize present value techniques, whereas valuations of option-based derivatives utilize option pricing models which are based on market standard valuation methodologies and a variety of observable inputs.
The significant inputs to the pricing models for most OTC-bilateral and OTC-cleared derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. Certain OTC-bilateral and OTC-cleared derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and management believes they are consistent with what other market participants would use when pricing such instruments.
Most inputs for OTC-bilateral and OTC-cleared derivatives are mid-market inputs but, in certain cases, liquidity adjustments are made when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income.
The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all OTC-bilateral and OTC-cleared derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its OTC-bilateral and OTC-cleared derivatives using standard swap curves which may include a spread to the risk-free rate, depending upon specific collateral arrangements. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with similar collateral arrangements. As the Company and its significant derivative counterparties generally execute trades at such pricing levels and hold sufficient collateral, additional credit risk adjustments are not currently required in the valuation process. The Company’s ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. An evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period.
Embedded Derivatives
Embedded derivatives principally include certain direct and ceded variable annuity guarantees and equity crediting rates within index-linked annuity contracts. Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income.

33
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)

The Company issues certain variable annuity products with guaranteed minimum benefits. GMWBs, GMABs and certain GMIBs contain embedded derivatives, which are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets.
The Company determines the fair value of these embedded derivatives by estimating the present value of projected future benefits minus the present value of projected future fees using actuarial and capital market assumptions including expectations of policyholder behavior. The calculation is based on in-force business and is performed using standard actuarial valuation software which projects future cash flows from the embedded derivative over multiple risk neutral stochastic scenarios using observable risk-free rates. The percentage of fees included in the initial fair value measurement is not updated in subsequent periods.
32
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)
Capital market assumptions, such as risk-free rates and implied volatilities, are based on market prices for publicly tradedpublicly-traded instruments to the extent that prices for such instruments are observable. Implied volatilities beyond the observable period are extrapolated based on observable implied volatilities and historical volatilities. Actuarial assumptions, including mortality, lapse, withdrawal and utilization, are unobservable and are reviewed at least annually based on actuarial studies of historical experience.
The valuation of these guarantee liabilities includes nonperformance risk adjustments and adjustments for a risk margin related to non-capital market inputs. The nonperformance adjustment is determined by taking into consideration publicly available information relating to spreads in the secondary market for BHF’s debt. These observable spreads are then adjusted to reflect the priority of these liabilities and claims payingclaims-paying ability of the issuing insurance subsidiaries as compared to BHF’s overall financial strength.
Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees.
The Company issues and assumes through reinsurance index-linked annuities which allow the policyholder to participate in returns from equity indices. The crediting rates associated with these features are embedded derivatives which are measured at estimated fair value separately from the host fixed annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets.
The estimated fair value of crediting rates associated with index-linked annuities is determined using a combination of an option pricing model and an option-budget approach. The valuation of these embedded derivatives also includes the establishment of a risk margin, as well as changes in nonperformance risk.
Transfers Into or Out of Level 3:
Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.

33
34
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)

Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)
The following table presents certainCertain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) were as follows at:
September 30, 2020December 31, 2019Impact of
Increase in Input
on Estimated
Fair Value
Valuation
Techniques		Significant
Unobservable Inputs
Range		Range
Embedded derivatives
Direct, assumed and ceded guaranteed minimum benefits•Option pricing techniques•Mortality rates0.03%-12.13%0.02%-11.31%Decrease (1)
•Lapse rates0.25%-15.00%0.25%-16.00%Decrease (2)
•Utilization rates0.00%-25.00%0.00%-25.00%Increase (3)
•Withdrawal rates0.25%-10.00%0.25%-10.00%(4)
•Long-term equity volatilities16.66%-22.21%16.24%-21.65%Increase (5)
•Nonperformance risk spread0.99%-2.39%0.54%-1.99%Decrease (6)
       September 30, 2019 December 31, 2018 
Impact of
Increase in Input
on Estimated
Fair Value
 Valuation
Techniques		 
Significant
Unobservable Inputs
 
Range		 Range 
Embedded derivatives          
Direct, assumed and ceded guaranteed minimum benefits•Option pricing techniques •Mortality rates 0.02%-11.31% 0.02%-11.31% Decrease (1)
    •Lapse rates 0.25%-16.00% 0.25%-16.00% Decrease (2)
    •Utilization rates 0.00%-25.00% 0.00%-25.00% Increase (3)
    •Withdrawal rates 0.25%-10.00% 0.25%-10.00% (4)
    •Long-term equity volatilities 16.50%-22.00% 16.50%-22.00% Increase (5)
    •Nonperformance risk spread 0.61%-2.37% 1.91%-2.66% Decrease (6)
_______________
___________________(1)Mortality rates vary by age and by demographic characteristics such as gender. The range shown reflects the mortality rate for policyholders between 35 and 90 years old, which represents the majority of the business with living benefits. Mortality rate assumptions are set based on company experience and include an assumption for mortality improvement.
(1)Mortality rates vary by age and by demographic characteristics such as gender. Range
(2)The range shown reflects the mortality rate for policyholders between 35 and 90 years old, which represents the majority of the business with living benefits. Mortality rate assumptions are set based on company experience and include an assumption for mortality improvement.
(2)
Range reflects base lapse rates for major product categories for duration 1-20, which represents majority of business with living benefit riders. Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in-the-money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies.
(3)The utilization rate assumption estimates the percentage of contract holders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible in a given year. The range shown represents the floor and cap of the GMIB dynamic election rates across varying levels of in-the-money. For lifetime withdrawal guarantee riders, the assumption is that everyone will begin withdrawals once account value reaches zero which is equivalent to a 100% utilization rate. Utilization rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder.
(4)The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value.
(5)Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.
(6)Nonperformance risk spread varies by duration. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative.
(3)
The utilization rate assumption estimates the percentage of contract holders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible in a given year. The range shown represents the floor and cap of the GMIB dynamic election rates across varying levels of in-the-money. For lifetime withdrawal guarantee riders, the assumption is that everyone will begin withdrawals once account value reaches zero which is equivalent to a 100% utilization rate. Utilization rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder.
(4)The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value.
(5)Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.
(6)Nonperformance risk spread varies by duration. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative.
The Company does not develop unobservable inputs used in measuring fair value for all other assets and liabilities classified within Level 3; therefore, these are not included in the table above. The other Level 3 assets and liabilities primarily included fixed maturity securities and derivatives. For fixed maturity securities valued based on non-binding broker quotes, an increase (decrease) in credit spreads would result in a higher (lower) fair value. For derivatives valued based on third-party pricing models, an increase (decrease) in credit spreads would generally result in a higher (lower) fair value.

34
35
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)

The following tables summarize the change of allchanges in assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3): were summarized as follows:
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Fixed Maturity Securities
Corporate (1)Structured SecuritiesState and
Political
Subdivision		Equity
Securities		Short-term
Investments		Net
Derivatives (2)		Net Embedded
Derivatives (3)		Separate
Account Assets (4)
(In millions)
Three Months Ended
September 30, 2020
Balance, beginning of period$894 $173 $0 $3 $0 $20 $(5,804)$3 
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)(1)0 0 0 0 5 (641)0 
Total realized/unrealized gains (losses) included in AOCI9 0 0 0 0 (10)0 0 
Purchases (7)199 12 0 0 10 0 0 0 
Sales (7)(64)(1)0 0 0 0 0 0 
Issuances (7)0 0 0 0 0 0 0 0 
Settlements (7)0 0 0 0 0 0 (173)0 
Transfers into Level 3 (8)164 0 0 0 0 0 0 0 
Transfers out of Level 3 (8)(142)(103)0 0 0 0 0 0 
Balance, end of period$1,059 $81 $0 $3 $10 $15 $(6,618)$3 
Three Months Ended
September 30, 2019
Balance, beginning of period$748 $108 $74 $4 $0 $(134)$(3,450)$0 
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)0 0 0 0 0 (2)(703)0 
Total realized/unrealized gains (losses) included in AOCI0 1 0 0 0 3 0 0 
Purchases (7)117 61 0 0 0 0 0 0 
Sales (7)(22)(6)(1)0 0 0 0 0 
Issuances (7)0 0 0 0 0 0 0 0 
Settlements (7)0 0 0 0 0 0 (217)0 
Transfers into Level 3 (8)49 29 0 0 0 0 0 0 
Transfers out of Level 3 (8)(84)(18)0 0 0 2 0 0 
Balance, end of period$808 $175 $73 $4 $0 $(131)$(4,370)$0 
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2020 (9)$0 $0 $0 $0 $0 $5 $(682)$0 
Changes in unrealized gains (losses) included in other comprehensive income for the instruments still held at September 30, 2020 (9)$10 $0 $0 $0 $0 $(10)$0 $0 
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2019 (9)$0 $0 $0 $0 $0 $(2)$(778)$0 

35
  Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
  Fixed Maturity Securities          
  Corporate (1) Structured Securities State and
Political
Subdivision		 Foreign
Government		 Equity
Securities		 Short-term
Investments		 Net
Derivatives (2)		 Net Embedded
Derivatives (3)		 Separate
Account Assets (4)
  (In millions)
Three Months Ended 
 September 30, 2019		                  
Balance, beginning of period $748
 $108
 $74
 $—
 $4
 $—
 $(134) $(3,450) $—
Total realized/unrealized gains (losses) included in net income (loss) (5) (6) —
 —
 —
 —
 —
 —
 (2) (703) —
Total realized/unrealized gains (losses)
included in AOCI		 —
 1
 —
 —
 —
 —
 3
 —
 —
Purchases (7) 117
 61
 —
 —
 —
 —
 —
 —
 —
Sales (7) (22) (6) (1) —
 —
 —
 —
 —
 —
Issuances (7) —
 —
 —
 —
 —
 —
 —
 —
 —
Settlements (7) —
 —
 —
 —
 —
 —
 —
 (217) —
Transfers into Level 3 (8) 49
 29
 —
 —
 —
 —
 —
 —
 —
Transfers out of Level 3 (8) (84) (18) —
 —
 —
 —
 2
 —
 —
Balance, end of period $808
 $175
 $73
 $—
 $4
 $—
 $(131) $(4,370) $—
Three Months Ended 
 September 30, 2018		                  
Balance, beginning of period $1,815
 $1,261
 $8
 $—
 $120
 $—
 $(284) $(1,498) $4
Total realized/unrealized gains (losses) included in net income (loss) (5) (6) —
 10
 2
 —
 (2) —
 (4) (15) —
Total realized/unrealized gains (losses)
included in AOCI		 (44) (8) (2) —
 —
 —
 —
 —
 —
Purchases (7) 56
 287
 —
 —
 —
 —
 —
 —
 1
Sales (7) (50) (114) (6) —
 —
 —
 —
 —
 —
Issuances (7) —
 —
 —
 —
 —
 —
 —
 —
 —
Settlements (7) —
 —
 —
 —
 —
 —
 —
 (152) —
Transfers into Level 3 (8) 20
 3
 —
 —
 9
 —
 —
 —
 —
Transfers out of Level 3 (8) (208) (170) (2) —
 (5) —
 —
 —
 (1)
Balance, end of period $1,589
 $1,269
 $—
 $—
 $122
 $—
 $(288) $(1,665) $4
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2019 (9) $—
 $—
 $—
 $—
 $—
 $—
 $(2) $(778) $—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2018 (9) $—
 $4
 $—
 $—
 $—
 $—
 $(4) $(13) $—


36
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Fixed Maturity Securities
Corporate (1)Structured SecuritiesState and
Political
Subdivision		Equity
Securities		Short-term
Investments		Net
Derivatives (2)		Net Embedded
Derivatives (3)		Separate
Account Assets (4)
(In millions)
Nine Months Ended
September 30, 2020
Balance, beginning of period$457 $117 $73 $8 $5 $16 $(4,365)$3 
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)(2)0 0 (1)0 3 (1,754)0 
Total realized/unrealized gains (losses) included in AOCI14 2 0 0 0 10 0 0 
Purchases (7)510 34 0 0 10 0 0 0 
Sales (7)(103)(3)0 0 (5)(14)0 0 
Issuances (7)0 0 0 0 0 0 0 0 
Settlements (7)0 0 0 0 0 0 (499)0 
Transfers into Level 3 (8)263 9 0 0 0 0 0 0 
Transfers out of Level 3 (8)(80)(78)(73)(4)0 0 0 0 
Balance, end of period$1,059 $81 $0 $3 $10 $15 $(6,618)$3 
Nine Months Ended
September 30, 2019
Balance, beginning of period$711 $174 $74 $3 $0 $(122)$(2,288)$1 
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)0 1 0 0 0 (10)(1,436)0 
Total realized/unrealized gains (losses) included in AOCI11 3 0 0 0 5 0 0 
Purchases (7)178 74 0 0 0 0 0 0 
Sales (7)(78)(24)(1)0 0 0 0 (1)
Issuances (7)0 0 0 0 0 0 0 0 
Settlements (7)0 0 0 0 0 0 (646)0 
Transfers into Level 3 (8)147 92 0 1 0 0 0 0 
Transfers out of Level 3 (8)(161)(145)0 0 0 (4)0 0 
Balance, end of period$808 $175 $73 $4 $0 $(131)$(4,370)$0 
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2020 (9)$(1)$0 $0 $0 $0 $(11)$(1,848)$0 
Changes in unrealized gains (losses) included in other comprehensive income for the instruments still held at September 30, 2020 (9)$15 $2 $0 $0 $0 $10 $0 $0 
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2019 (9)$0 $1 $0 $0 $0 $(11)$(1,647)$0 
_______________
(1)Comprised of U.S. and foreign corporate securities.
(2)Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.
(3)Embedded derivative assets and liabilities are presented net for purposes of the rollforward.
(4)Investment performance related to separate account assets is fully offset by corresponding amounts credited to contract holders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income (loss). For the purpose of this disclosure, these changes are presented within net investment gains (losses).
(5)Amortization of premium/accretion of discount is included within net investment income. Changes in the allowance for credit losses and direct write-offs are charged to net income (loss) on securities are included in net investment gains (losses). Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).
36
  Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
  Fixed Maturity Securities          
  Corporate (1) Structured Securities State and
Political
Subdivision		 Foreign
Government		 Equity
Securities		 Short-term
Investments		 Net
Derivatives (2)		 Net Embedded
Derivatives (3)		 Separate
Account Assets (4)
  (In millions)
Nine Months Ended September 30, 2019                  
Balance, beginning of period $711
 $174
 $74
 $—
 $3
 $—
 $(122) $(2,288) $1
Total realized/unrealized gains (losses) included in net income (loss) (5) (6) —
 1
 —
 —
 —
 —
 (10) (1,436) —
Total realized/unrealized gains (losses)
included in AOCI		 11
 3
 —
 —
 —
 —
 5
 


 —
Purchases (7) 178
 74
 —
 —
 —
 —
 —
 —
 —
Sales (7) (78) (24) (1) —
 —
 —
 —
 —
 (1)
Issuances (7) —
 —
 —
 —
 —
 —
 —
 —
 —
Settlements (7) —
 —
 —
 —
 —
 —
 —
 (646) —
Transfers into Level 3 (8) 147
 92
 —
 —
 1
 —
 —
 —
 —
Transfers out of Level 3 (8) (161) (145) —
 —
 —
 —
 (4) —
 —
Balance, end of period $808
 $175
 $73
 $—
 $4
 $—
 $(131) $(4,370) $—
Nine Months Ended September 30, 2018                  
Balance, beginning of period $1,937
 $1,222
 $—
 $5
 $124
 $14
 $(279) $(2,007) $5
Total realized/unrealized gains (losses) included in net income (loss) (5) (6) 2
 21
 —
 —
 (4) —
 (12) 767
 —
Total realized/unrealized gains (losses)
included in AOCI		 (118) (10) —
 —
 —
 —
 —
 —
 —
Purchases (7) 164
 339
 —
 —
 —
 —
 3
 —
 1
Sales (7) (183) (227) —
 —
 (3) (14) —
 —
 (1)
Issuances (7) —
 —
 —
 —
 —
 —
 —
 —
 —
Settlements (7) —
 —
 —
 —
 —
 —
 —
 (425) (1)
Transfers into Level 3 (8) 20
 —
 —
 —
 10
 —
 —
 —
 —
Transfers out of Level 3 (8) (233) (76) —
 (5) (5) —
 —
 —
 —
Balance, end of period $1,589
 $1,269
 $—
 $—
 $122
 $—
 $(288) $(1,665) $4
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2019 (9) $—
 $1
 $—
 $—
 $—
 $—
 $(11) $(1,647) $—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2018 (9) $(1) $14
 $—
 $—
 $(4) $—
 $(12) $739
 $—
__________________
(1)Comprised of U.S. and foreign corporate securities.
(2)Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.
(3)Embedded derivative assets and liabilities are presented net for purposes of the rollforward.
(4)Investment performance related to separate account assets is fully offset by corresponding amounts credited to contract holders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income (loss). For the purpose of this disclosure, these changes are presented within net investment gains (losses).

37
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)

(6)Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.
(5)Amortization of premium/accretion of discount is included within net investment income. Impairments charged to net income (loss) on securities are included in net investment gains (losses). Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).
(6)Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.
(7)Items purchased/issued and then sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements.
(8)Gains and losses, in net income (loss) and OCI, are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and then out of Level 3 in the same period are excluded from the rollforward.
(9)Changes in unrealized gains (losses) included in net income (loss) relate to assets and liabilities still held at the end of the respective periods. Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).
(7)Items purchased/issued and then sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements.
(8)Gains and losses, in net income (loss) and OCI, are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and then out of Level 3 in the same period are excluded from the rollforward.
(9)Changes in unrealized gains (losses) included in net income (loss) for fixed maturities are reported in either net investment income or net investment gains (losses). Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).
Fair Value of Financial Instruments Carried at Other Than Fair Value
The following tables provide fair value information for financial instruments that are carried on the balance sheet at amounts other than fair value. These tables exclude the following financial instruments: cash and cash equivalents, accrued investment income, payables for collateral under securities loaned and other transactions and those short-term investments that are not securities and therefore are not included in the three level hierarchy table disclosed in the “— Recurring Fair Value Measurements” section. The estimated fair value of the excluded financial instruments, which are primarily classified in Level 2, approximates carrying value as they are short-term in nature such that the Company believes there is minimal risk of material changes in interest rates or credit quality. All remaining balance sheet amounts excluded from the tables below are not considered financial instruments subject to this disclosure.
The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:
 September 30, 2019
   Fair Value Hierarchy  
 Carrying
Value		Level 1 Level 2 Level 3 
Total
Estimated
Fair Value
 (In millions)
Assets         
Mortgage loans$15,269
 $—
 $—
 $15,980
 $15,980
Policy loans$915
 $—
 $518
 $522
 $1,040
Other invested assets$63
 $—
 $50
 $13
 $63
Premiums, reinsurance and other receivables$1,612
 $—
 $46
 $1,982
 $2,028
Liabilities         
Policyholder account balances$15,469
 $—
 $—
 $15,682
 $15,682
Long-term debt$845
 $—
 $40
 $887
 $927
Other liabilities$898
 $—
 $553
 $349
 $902
Separate account liabilities$1,122
 $—
 $1,122
 $—
 $1,122

September 30, 2020
Fair Value Hierarchy
Carrying
Value		Level 1Level 2Level 3Total
Estimated
Fair Value
(In millions)
Assets
Mortgage loans$15,659 $0 $0 $16,628 $16,628 
Policy loans$879 $0 $469 $940 $1,409 
Other invested assets$96 $0 $81 $15 $96 
Premiums, reinsurance and other receivables$2,923 $0 $63 $3,539 $3,602 
Liabilities
Policyholder account balances$17,514 $0 $0 $18,707 $18,707 
Long-term debt$843 $0 $39 $914 $953 
Other liabilities$1,154 $0 $372 $793 $1,165 
Separate account liabilities$1,204 $0 $1,204 $0 $1,204 
38
37
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Fair Value (continued)

December 31, 2019
Fair Value Hierarchy
Carrying
Value		Level 1Level 2Level 3Total
Estimated
Fair Value
(In millions)
Assets
Mortgage loans$15,664 $0 $0 $16,291 $16,291 
Policy loans$875 $0 $479 $504 $983 
Other invested assets$51 $0 $39 $12 $51 
Premiums, reinsurance and other receivables$2,053 $0 $41 $2,427 $2,468 
Liabilities
Policyholder account balances$15,474 $0 $0 $15,576 $15,576 
Long-term debt$844 $0 $39 $903 $942 
Other liabilities$943 $0 $169 $777 $946 
Separate account liabilities$1,186 $0 $1,186 $0 $1,186 
 December 31, 2018
   Fair Value Hierarchy  
 Carrying
Value		Level 1 Level 2 Level 3
Total
Estimated
Fair Value
 (In millions)
Assets         
Mortgage loans$13,596
 $—
 $—
 $13,761
 $13,761
Policy loans$1,001
 $—
 $619
 $452
 $1,071
Other invested assets$77
 $—
 $64
 $13
 $77
Premiums, reinsurance and other receivables$1,426
 $—
 $31
 $1,501
 $1,532
Liabilities         
Policyholder account balances$15,183
 $—
 $—
 $13,732
 $13,732
Long-term debt$434
 $—
 $38
 $380
 $418
Other liabilities$395
 $—
 $54
 $323
 $377
Separate account liabilities$1,025
 $—
 $1,025
 $—
 $1,025

7. Long-term and Short-term Debt
Surplus NoteIntercompany Liquidity Facilities
BHF has established an intercompany liquidity facility with certain of its insurance and non-insurance subsidiaries to provide short-term liquidity within and across the combined group of companies. Under the facility, which is comprised of a series of revolving loan agreements among BHF and its participating subsidiaries, each company may lend to or borrow from each other, subject to certain maximum limits for a term not more than 364 days. For each insurance subsidiary, the borrowing and lending limit is 3% of the respective insurance subsidiary’s statutory admitted assets as of the previous year end. For BHF and each non-insurance subsidiary, the borrowing and lending limit is based on a formula tied to the statutory admitted assets of the respective insurance subsidiaries.
On March 25, 2019,30, 2020, BH Holdings issued a $100 million promissory note to Brighthouse Life Insurance Company, issued a $412 million surplus note due March 2059 to Brighthouse Holdings, LLC, which bearsbore interest at a fixed rate of 8.07%, payable annually. Payments2.4996% and was repaid upon maturity on June 30, 2020. Additionally, on March 30, 2020, Brighthouse Life Insurance Company of NY issued a $100 million promissory note to BH Holdings, which bore interest at a fixed rate of 2.4996% and principalwas repaid upon maturity on this surplus note may be made onlyJune 30, 2020.
Reinsurance Financing Arrangement
On June 11, 2020, Brighthouse Reinsurance Company of Delaware, with the prior approvalexplicit permission of the Delaware DepartmentCommissioner of Insurance.Insurance, amended its financing arrangement with a pool of highly rated third-party reinsurers to increase the maximum amount from $10.0 billion to $12.0 billion and to extend the term by two years to 2039. At September 30, 2020, there were 0 borrowings and there was $10.8 billion of funding available under this financing arrangement.
8. Equity
Accumulated Other Comprehensive Income (Loss)Capital Transactions
Information regarding changes inDuring the balancesfirst quarter of each component2020, Brighthouse Life Insurance Company paid an ordinary cash dividend of AOCI$300 million to BH Holdings, which was accounted for as follows:a return of capital. During the second quarter of 2020, Brighthouse Life Insurance Company paid an ordinary cash dividend of $500 million to BH Holdings.
38
 Three Months Ended 
 September 30, 2019
 Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)		 Unrealized
Gains (Losses)
on Derivatives		 Foreign
Currency
Translation
Adjustments		 Total
 (In millions)
Balance, June 30, 2019$2,521
 $172
 $(19) $2,674
OCI before reclassifications952
 157
 (4) 1,105
Deferred income tax benefit (expense)(200) (33) —
 (233)
AOCI before reclassifications, net of income tax3,273
 296
 (23) 3,546
Amounts reclassified from AOCI(17) (1) —
 (18)
Deferred income tax benefit (expense)3
 1
 —
 4
Amounts reclassified from AOCI, net of income tax(14) —
 —
 (14)
Balance, September 30, 2019$3,259
 $296
 $(23) $3,532

39
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
8. Equity (continued)
Accumulated Other Comprehensive Income (Loss)
Information regarding changes in the balances of each component of AOCI was as follows:
Three Months Ended September 30, 2020
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)		Unrealized
Gains (Losses)
on Derivatives		Foreign
Currency
Translation
Adjustments		Total
(In millions)
Balance at June 30, 2020$4,148 $485 $(23)$4,610 
OCI before reclassifications810 (183)8 635 
Deferred income tax benefit (expense)(171)39 (2)(134)
AOCI before reclassifications, net of income tax4,787 341 (17)5,111 
Amounts reclassified from AOCI5 (9)0 (4)
Deferred income tax benefit (expense)(1)2 0 1 
Amounts reclassified from AOCI, net of income tax4 (7)0 (3)
Balance at September 30, 2020$4,791 $334 $(17)$5,108 
Three Months Ended September 30, 2019
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)		Unrealized
Gains (Losses)
on Derivatives		Foreign
Currency
Translation
Adjustments		Total
(In millions)
Balance at June 30, 2019$2,521 $172 $(19)$2,674 
OCI before reclassifications952 157 (4)1,105 
Deferred income tax benefit (expense)(200)(33)0 (233)
AOCI before reclassifications, net of income tax3,273 296 (23)3,546 
Amounts reclassified from AOCI(17)(1)0 (18)
Deferred income tax benefit (expense)3 1 0 4 
Amounts reclassified from AOCI, net of income tax(14)0 0 (14)
Balance at September 30, 2019$3,259 $296 $(23)$3,532 
Nine Months Ended September 30, 2020
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)		Unrealized
Gains (Losses)
on Derivatives		Foreign
Currency
Translation
Adjustments		Total
(In millions)
Balance at December 31, 2019$3,066 $163 $(14)$3,215 
OCI before reclassifications (2)2,166 231 8 2,405 
Deferred income tax benefit (expense)(455)(48)(11)(514)
AOCI before reclassifications, net of income tax4,777 346 (17)5,106 
Amounts reclassified from AOCI18 (15)0 3 
Deferred income tax benefit (expense)(4)3 0 (1)
Amounts reclassified from AOCI, net of income tax14 (12)0 2 
Balance at September 30, 2020$4,791 $334 $(17)$5,108 

39
 Three Months Ended 
 September 30, 2018
 Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)		 Unrealized
Gains (Losses)
on Derivatives		 Foreign
Currency
Translation
Adjustments		 Total
 (In millions)
Balance, June 30, 2018$671
 $162
 $(18) $815
OCI before reclassifications(298) (7) (8) (313)
Deferred income tax benefit (expense)61
 2
 1
 64
AOCI before reclassifications, net of income tax434
 157
 (25) 566
Amounts reclassified from AOCI37
 (46) —
 (9)
Deferred income tax benefit (expense)(8) 11
 —
 3
Amounts reclassified from AOCI, net of income tax29
 (35) —
 (6)
Balance, September 30, 2018$463
 $122
 $(25) $560
 Nine Months Ended 
 September 30, 2019
 Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)		 Unrealized
Gains (Losses)
on Derivatives		 Foreign
Currency
Translation
Adjustments		 Total
 (In millions)
Balance, December 31, 2018$564
 $180
 $(26) $718
OCI before reclassifications3,452
 196
 3
 3,651
Deferred income tax benefit (expense)(725) (41) —
 (766)
AOCI before reclassifications, net of income tax3,291
 335
 (23) 3,603
Amounts reclassified from AOCI(40) (50) —
 (90)
Deferred income tax benefit (expense)8
 11
 —
 19
Amounts reclassified from AOCI, net of income tax(32) (39) —
 (71)
Balance, September 30, 2019$3,259
 $296
 $(23) $3,532
 Nine Months Ended 
 September 30, 2018
 Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)		 Unrealized
Gains (Losses)
on Derivatives		 Foreign
Currency
Translation
Adjustments		 Total
 (In millions)
Balance, December 31, 2017$1,709
 $151
 $(23) $1,837
Cumulative effect of change in accounting principle, net of income tax(79) —
 —
 (79)
Balance, January 1, 20181,630
 151
 (23) 1,758
OCI before reclassifications(1,633) 28
 (2) (1,607)
Deferred income tax benefit (expense)361
 (6) —
 355
AOCI before reclassifications, net of income tax358
 173
 (25) 506
Amounts reclassified from AOCI136
 (65) —
 71
Deferred income tax benefit (expense)(31) 14
 —
 (17)
Amounts reclassified from AOCI, net of income tax105
 (51) —
 54
Balance, September 30, 2018$463
 $122
 $(25) $560
__________________
(1)
See Note 4 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI.

40
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
8. Equity (continued)

Nine Months Ended September 30, 2019
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)		Unrealized
Gains (Losses)
on Derivatives		Foreign
Currency
Translation
Adjustments		Total
(In millions)
Balance at December 31, 2018$564 $180 $(26)$718 
OCI before reclassifications3,452 196 3 3,651 
Deferred income tax benefit (expense)(725)(41)0 (766)
AOCI before reclassifications, net of income tax3,291 335 (23)3,603 
Amounts reclassified from AOCI(40)(50)0 (90)
Deferred income tax benefit (expense)8 11 0 19 
Amounts reclassified from AOCI, net of income tax(32)(39)0 (71)
Balance at September 30, 2019$3,259 $296 $(23)$3,532 
_______________
(1)See Note 4 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI.
(2)Includes $3 million related to the adoption of ASU 2016-13, see Note 1.
Information regarding amounts reclassified out of each component of AOCI was as follows:
AOCI Components Amounts Reclassified from AOCI Consolidated Statements of Operations and Comprehensive Income (Loss) Locations
  Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		  
  2019 2018 2019 2018  
  (In millions)  
Net unrealized investment gains (losses):          
Net unrealized investment gains (losses) $17
 $(36) $67
 $(136) Net investment gains (losses)
Net unrealized investment gains (losses) —
 —
 —
 1
 Net investment income
Net unrealized investment gains (losses) —
 (1) (27) (1) Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax 17
 (37) 40
 (136)  
Income tax (expense) benefit (3) 8
 (8) 31
  
Net unrealized investment gains (losses), net of income tax 14
 (29) 32
 (105)  
Unrealized gains (losses) on derivatives - cash flow hedges:          
Interest rate swaps —
 15
 28
 31
 Net derivative gains (losses)
Interest rate swaps 1
 —
 2
 2
 Net investment income
Interest rate forwards —
 30
 —
 31
 Net derivative gains (losses)
Interest rate forwards —
 1
 —
 2
 Net investment income
Foreign currency swaps —
 —
 20
 (1) Net derivative gains (losses)
Gains (losses) on cash flow hedges, before income tax 1
 46
 50
 65
  
Income tax (expense) benefit (1) (11) (11) (14)  
Gains (losses) on cash flow hedges, net of income tax —
 35
 39
 51
  
Total reclassifications, net of income tax $14
 $6
 $71
 $(54)  

AOCI ComponentsAmounts Reclassified from AOCIConsolidated Statements of Operations and Comprehensive Income (Loss) Locations
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
(In millions)
Net unrealized investment gains (losses):
Net unrealized investment gains (losses)$3 $17 $(4)$67 Net investment gains (losses)
Net unrealized investment gains (losses)(8)0 (14)(27)Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax(5)17 (18)40 
Income tax (expense) benefit1 (3)4 (8)
Net unrealized investment gains (losses), net of income tax(4)14 (14)32 
Unrealized gains (losses) on derivatives - cash flow hedges:
Interest rate swaps0 0 1 28 Net derivative gains (losses)
Interest rate swaps1 1 2 2 Net investment income
Foreign currency swaps8 0 12 20 Net derivative gains (losses)
Gains (losses) on cash flow hedges, before income tax9 1 15 50 
Income tax (expense) benefit(2)(1)(3)(11)
Gains (losses) on cash flow hedges, net of income tax7 0 12 39 
Total reclassifications, net of income tax$3 $14 $(2)$71 
9. Other Revenues and Other Expenses
Other Revenues
The Company has entered into contracts with mutual funds, fund managers, and their affiliates (collectively, the “Funds”) whereby the Company is paid monthly or quarterly fees (“12b-1 fees”) for providing certain services to customers and distributors of the Funds. The 12b-1 fees are generally equal to a fixed percentage of the average daily balance of the customer’s investment in a fund. The percentage is specified in the contract between the Company and the Funds. Payments are generally collected when due and are neither refundable nor able to offset future fees.
To earn these fees, the Company performs services such as responding to phone inquiries, maintaining records, providing information to distributors and shareholders about fund performance and providing training to account managers and sales agents. The passage of time reflects the satisfaction of the Company’s performance obligations to the Funds and is used to recognize revenue associated with 12b-1 fees.
Other revenues consisted primarily of 12b-1 fees of $60 million and $179 million for the three months and nine months ended September 30, 2019, respectively, and $65 million and $195 million for the three months and nine months ended September 30, 2018, respectively, of which substantially all were reported in the Annuities segment.

4140
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
9. Other Revenues and Other Expenses (continued)

Other revenues consisted primarily of 12b-1 fees of $59 million and $173 million for the three months and nine months ended September 30, 2020, respectively, and $60 million and $179 million for the three months and nine months ended September 30, 2019, respectively, of which substantially all were reported in the Annuities segment.
Other Expenses
Information on other expenses was as follows:
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2019 2018 2019 2018
 (In millions)
Compensation$71
 $63
 $217
 $213
Contracted services and other labor costs66
 53
 162
 152
Transition services agreements62
 67
 189
 206
Establishment costs20
 100
 93
 100
Premium and other taxes, licenses and fees14
 11
 30
 51
Separate account fees—
 —
 2
 1
Volume related costs, excluding compensation, net of DAC capitalization144
 154
 436
 462
Interest expense on debt17
 —
 43
 2
Other70
 61
 181
 166
Total other expenses$464
 $509
 $1,353
 $1,353

Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(In millions)
Compensation$79 $71 $234 $217 
Contracted services and other labor costs50 66 180 162 
Transition services agreements35 62 86 189 
Establishment costs40 20 133 93 
Premium and other taxes, licenses and fees10 14 33 30 
Volume related costs, excluding compensation, net of DAC capitalization147 144 419 436 
Interest expense on debt17 17 51 43 
Other91 70 190 183 
Total other expenses$469 $464 $1,326 $1,353 
Related Party Expenses
See Note 11 for a discussion of related party expenses included in the table above.
10. Contingencies, Commitments and Guarantees
Contingencies
Litigation
The Company is a defendant in a number of litigation matters. In some of the matters, large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value.
Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law.
The Company establishes liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. It is possible that some matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated at September 30, 2019.2020.
41
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
10. Contingencies, Commitments and Guarantees (continued)
Matters as to Which an Estimate Can Be Made
For some loss contingency matters, the Company is able to estimate a reasonably possible range of loss. For such matters where a loss is believed to be reasonably possible, but not probable, no accrual has been made. As of September 30, 2019,2020, the Company estimates the aggregate range of reasonably possible losses in excess of amounts accrued for these matters was not material.

42
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
10. Contingencies, Commitments and Guarantees (continued)

be $0 to $10 million.
Matters as to Which an Estimate Cannot Be Made
For other matters, the Company is not currently able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts, and the progress of settlement negotiations. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation contingencies and updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.
Sales Practices Claims
Over the past several years, the Company has faced claims and regulatory inquiries and investigations, alleging improper marketing or sales of individual life insurance policies, annuities or other products. The Company continues to defend vigorously against the claims in these matters. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices matters.
Cost of Insurance Class Action 
Richard A. Newton v. Brighthouse Life Insurance Company (U.S. District Court, Northern District of Georgia, Atlanta Division, filed May 8, 2020). Plaintiff has filed a purported class action lawsuit against Brighthouse Life Insurance Company. Plaintiff was the owner of a universal life insurance policy issued by Travelers Insurance Company, a predecessor to Brighthouse Life Insurance Company. Plaintiff seeks to certify a class of all persons who own or owned life insurance policies issued where the terms of the life insurance policy provide or provided, among other things, a guarantee that the cost of insurance rates would not be increased by more than a specified percentage in any contract year. Plaintiff alleges, among other things, causes of action for breach of contract, fraud, suppression and concealment, and violation of the Georgia Racketeer Influenced and Corrupt Organizations Act. Plaintiff seeks to recover damages, including punitive damages, interest and treble damages, attorneys’ fees, and injunctive and declaratory relief. Brighthouse Life Insurance Company filed a motion to dismiss in June 2020 and intends to vigorously defend this matter.
Summary
Various litigation,litigations, claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, investor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.
It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to previously, large and/or indeterminate amounts, including punitive and treble damages, are sought. Although, in light of these considerations, it is possible that an adverse outcome in certain cases could have a material effect upon the Company’s financial position, based on information currently known by the Company’s management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.
42
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
10. Contingencies, Commitments and Guarantees (continued)
Other Contingencies
As with litigation and regulatory loss contingencies, the Company considers establishing liabilities for certain non-litigation loss contingencies when assertions are made involving disputes or other matters with counterparties to contractual arrangements entered into by the Company, including with third-party vendors. The Company establishes liabilities for such non-litigation loss contingencies when it is probable that a loss will be incurred and the amount of the loss can be reasonably estimated. In matters where it is not probable, but is reasonably possible that a loss will be incurred and the amount of loss can be reasonably estimated, such losses or range of losses are disclosed, and no accrual is made. In the absence of sufficient information to support an assessment of the reasonably possible loss or range of loss, no accrual is made and no loss or range of loss is disclosed.
Disputes have arisen with counterparties in connection with reinsurance arrangements where the Company is acting as either the reinsured or the reinsurer. These disputes involve assertions by third parties primarily related to rates, fees and/or reinsured benefit calculations, and in certain of such disputes the counterparty has made a request to arbitrate the dispute.
As of September 30, 2020, the Company estimates the amount of reasonably possible losses in excess of the amounts accrued for certain non-litigation loss contingencies to be up to $50 million, which are primarily associated with reinsurance-related matters. For certain other reinsurance-related matters, the Company is not currently able to estimate the reasonably possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of such loss.
On a quarterly and annual basis, the Company reviews relevant information with respect to non-litigation contingencies and, when applicable, updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.
Commitments
Mortgage Loan Commitments
The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $235$271 million and $492$206 million at September 30, 20192020 and December 31, 2018,2019, respectively.
Commitments to Fund Partnership Investments and Private Corporate Bond Investments
The Company commits to fund partnership investments and to lend funds under private corporate bond investments. The amounts of these unfunded commitments were $1.9$1.8 billion at both September 30, 20192020 and December 31, 2018.2019.

43
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
10. Contingencies, Commitments and Guarantees (continued)

Guarantees
In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties such that it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third-party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from $6 million to $122$112 million, with a cumulative maximum of $128$118 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments.
In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company’s interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future.
43
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
10. Contingencies, Commitments and Guarantees (continued)
The Company’s recorded liabilities were $1 million and $2 million at both September 30, 20192020 and December 31, 2018, respectively,2019 for indemnities, guarantees and commitments.
11. Related Party Transactions
The Company has various existing arrangements with its Brighthouse affiliates and had previous arrangements with MetLife, Inc. (together with its subsidiaries and affiliates, “MetLife”) for services necessary to conduct its activities. Certain of the MetLife services have continued, however, MetLife was no longer consideredceased to be a related party upon the completion of the MetLife Divestiture onin June 14, 2018 (see2018. See Note 1).9 for amounts related to continuing transition services. The Company also has related party investmentdebt and debtequity transactions (see Notes 47 and 7)8). Other material arrangements between the Company and its related parties not disclosed elsewhere are as follows:
Reinsurance Agreements
The Company enters into reinsurance agreements primarily as a purchaser of reinsurance for its various insurance products and also as a provider of reinsurance for some insurance products issued by related parties. The Company participates in reinsurance activities in order to limit losses, minimize exposure to significant risks and provide additional capacity for future growth.

44
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
11. Related Party Transactions (continued)

Information regarding the significant effects of reinsurance with New England Life Insurance Company (“NELICO”) and former MetLife affiliates, an affiliate, included on the interim condensed consolidated statements of operations and comprehensive income (loss) was as follows:
Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		Three Months Ended
September 30,		Nine Months Ended
September 30,
2019 2018 2019 20182020201920202019
(In millions)(In millions)
Premiums       Premiums
Reinsurance assumed$(1) $1
 $—
 $8
Reinsurance assumed$2 $(1)$2 $0 
Reinsurance ceded—
 —
 —
 (201)
Net premiums$(1) $1
 $—
 $(193)
Universal life and investment-type product policy fees       Universal life and investment-type product policy fees
Reinsurance assumed$2
 $2
 $5
 $49
Reinsurance assumed$1 $2 $5 $5 
Reinsurance ceded—
 —
 —
 1
Net universal life and investment-type product policy fees$2
 $2
 $5
 $50
Other revenues       Other revenues
Reinsurance assumed$1
 $—
 $2
 $1
Reinsurance assumed$0 $1 $1 $2 
Reinsurance ceded—
 —
 —
 18
Net other revenues$1
 $—
 $2
 $19
Policyholder benefits and claims       Policyholder benefits and claims
Reinsurance assumed$8
 $8
 $25
 $38
Reinsurance assumed$31 $8 $54 $25 
Reinsurance ceded—
 —
 —
 (177)
Net policyholder benefits and claims$8
 $8
 $25
 $(139)
Other expensesOther expenses
Reinsurance assumedReinsurance assumed$(7)$(7)$(19)$(23)
Information regarding the significant effects of reinsurance with NELICO and former MetLife affiliates included on the interim condensed consolidated balance sheets was as follows at:
 September 30, 2019 December 31, 2018
 Assumed Ceded Assumed Ceded
 (In millions)
Assets       
Premiums, reinsurance and other receivables$21
 $—
 $21
 $—
Liabilities       
Policyholder account balances$542
 $—
 $386
 $—
Other policy-related balances$10
 $—
 $14
 $—
Other liabilities$(26) $—
 $(38) $—

September 30, 2020December 31, 2019
AssumedAssumed
(In millions)
Assets
Premiums, reinsurance and other receivables$24 $26 
Liabilities
Future policy benefits$125 $97 
Policyholder account balances$694 $443 
Other policy-related balances$12 $11 
Other liabilities$(7)$(21)
The Company assumes risks from NELICO related to guaranteed minimum benefits written directly by the cedent. The assumed reinsurance agreements contain embedded derivatives and changes in the estimated fair value are included within net derivative gains (losses). The embedded derivatives associated with these agreements are included within policyholder account balances and were $542 million and $386 million at September 30, 2019 and December 31, 2018, respectively. Net derivative gains (losses) associated with the embedded derivatives were ($106) million and ($154) million for the three months and nine months ended September 30, 2019, respectively, and $33 million and $150 million for the three months and nine months ended September 30, 2018, respectively.

45
44
Table of Contents
Brighthouse Life Insurance Company
(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
11. Related Party Transactions (continued)

account balances and were $694 million and $443 million at September 30, 2020 and December 31, 2019, respectively. Net derivative gains (losses) associated with the embedded derivatives were ($13) million and ($249) million for the three months and nine months ended September 30, 2020, respectively, and ($106) million and ($154) million for the three months and nine months ended September 30, 2019, respectively.
Shared Services and Overhead Allocations
Brighthouse affiliatesServices, LLC, an affiliate, currently provide and previously MetLife providedprovides the Company certain services, which include, but are not limited to, treasury, financial planning and analysis, legal, human resources, tax planning, internal audit, financial reporting and information technology. Costs incurred under these arrangements with Brighthouse affiliates, as well as with MetLife prior to the MetLife Divestiture, were $274 million and $846 million for the three months and nine months ended September 30, 2019, respectively, and $386 million and $887 million for the three months and nine months ended September 30, 2018, respectively, and were recorded in other expenses. Revenues received from affiliatesan affiliate related to these agreements, recorded in universal life and investment-type product policy fees, were $54 million and $157 million for the three months and nine months ended September 30, 2020, respectively, and $56 million and $165 million for the three months and nine months endedSeptember 30, 2019, respectively, and $59respectively. Costs incurred under these arrangements were $249 million and $179$766 million for the three months and nine months ended September 30, 2018, respectively.
The Company had net receivables (payables) from/to affiliates, related to the items discussed above, of ($93)2020, respectively, and $274 million and ($50)$846 million at for the three months and nine months endedSeptember 30, 2019, respectively, and December 31, 2018, respectively.were recorded in other expenses.
Brighthouse affiliates incurIncluded in these costs are those incurred related to the establishment of services and infrastructure to replace those previously provided by MetLife. The Company incurred costs of $23 million and $65 million for the three months and nine months ended September 30, 2020, respectively, and did 0t incur any costs for the three months and nine months endedSeptember 30, 2019. The Company is charged a fee to reflect the value of the available infrastructure and services provided by these costs. While management believes the method used to allocate expenses under this arrangement is reasonable, the allocated expenses may not be indicative of those of a stand-alone entity. If expenses were allocated
The Company had net receivables (payables) from/to affiliates, related to the Company under this arrangement as incurred by Brighthouse affiliates, the Company would not have incurred additional expenses for the three monthsitems discussed above, of $5 million and nine months ended($43) million at September 30, 2019. The Company would have incurred additional expenses of $27 million2020 and $56 million under this arrangement for the three months and nine months ended September 30, 2018,December 31, 2019, respectively.
Broker-Dealer Transactions
The related party expense for the Company was commissions paid on the sale of variable products and passed through to the broker-dealer affiliate. The related party revenue for the Company was fee income passed through the broker-dealer affiliate from trusts and mutual funds whose shares serve as investment options of policyholders of the Company. Fee income received related to these transactions and recorded in other revenues was $51 million and $147 million for the three months and nine months ended September 30, 2020, respectively, and $52 million and $153 million for the three months and nine months ended September 30, 2019, respectively, $55 million and $166 million for the three months and nine months ended September 30, 2018, respectively. Commission expenses incurred related to these transactions and recorded in other expenses was $212 million and $613 million for the three months and nine months ended September 30, 2020, respectively, and $397 million and $603 million for the three months and nine months ended September 30, 2019, respectively, and $214 million and $540 million for the three months and nine months ended September 30, 2018, respectively. The Company also had related party fee income receivables of $17 million and $18 million at both September 30, 20192020 and December 31, 2018.2019, respectively.

45
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations
Page
4847
4847
48
4948
49
51
56

46
Table of Contents
Introduction
For purposes of this discussion, unless otherwise mentioned or unless the context indicates otherwise, “BLIC,” the “Company,” “we,” “our” and “us” refer to Brighthouse Life Insurance Company (formerly, MetLife Insurance Company USA), a Delaware corporation originally incorporated in Connecticut in 1863, and its subsidiaries. Brighthouse Life Insurance Company is a wholly-owned subsidiary of Brighthouse Holdings, LLC, which is a wholly-owned subsidiary of Brighthouse Financial, Inc. (together with its subsidiaries and affiliates, “Brighthouse”). Management’s narrative analysis of the results of operations is presented pursuant to General Instruction H(2)(a) of Form 10-Q. This narrative analysis should be read in conjunction with (i) the unaudited interim condensed consolidated financial statementsInterim Condensed Consolidated Financial Statements and related notes included elsewhere herein; (ii) our Annual Report on Form 10-K for the year ended December 31, 2018,2019, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 5, 20194, 2020 (the “2018“2019 Annual Report”); (iii) our Quarterly Report on Form 10-Q for the quarter ended March 31, 20192020 (the “First Quarter Form 10-Q”) filed with the SEC on May 8, 2019;12, 2020; (iv) our Quarterly Report on Form 10-Q for the quarter ended June 30, 20192020 (the “Second Quarter Form 10-Q” and, together with the First Quarter Form 10-Q, the “Quarterly Reports”) filed with the SEC on August 7, 2019;10, 2020; and (v) our current reports on Form 8-K filed in 2019.2020.
The term “Separation” refers to the separation of MetLife, Inc.’s (together with its subsidiaries and affiliates, “MetLife”) former Brighthouse Financial segment from MetLife’s other businesses and the creation of a separate, publicly traded company, Brighthouse Financial, Inc. (we use the term “BHF” to refer solely to Brighthouse Financial, Inc., and not to any of its subsidiaries), as well as the distribution on August 4, 2017 of 96,776,670, or 80.8%, of the 119,773,106 shares of BHF common stock outstanding immediately prior to the distribution date by MetLife, Inc. to holders of MetLife, Inc. common stock as of the record date for the distribution. The term “MetLife Divestiture” refers to the disposition by MetLife, Inc. on June 14, 2018 of all its remaining shares of BHF common stock. Effective with the MetLife Divestiture, MetLife, Inc. and its subsidiaries and affiliates are no longer considered related parties to BHF and its subsidiaries and affiliates.
Overview
We offer a range of individual annuities and individual life insurance products. We are licensed and regulated in each U.S. jurisdiction where we conduct insurance business. Brighthouse Life Insurance Company is licensed to issue insurance products in all U.S. states (except New York), the District of Columbia, the Bahamas, Guam, Puerto Rico, the British Virgin Islands and the U.S. Virgin Islands. Our insurance subsidiary, Brighthouse Life Insurance Company of NY (“BHNY”), is only licensed to issue insurance products in New York.
For operating purposes, we have established three segments: (i) Annuities, (ii) Life and (iii) Run-off, which consists of operations relating to products we are not actively selling and which are separately managed. In addition, we report certain of our results of operations in Corporate & Other. See “Business — Segments and Corporate & Other” included in the 2018our 2019 Annual Report along with Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information on our segments and Corporate & Other.
See Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements for information regarding the adoption of new accounting pronouncements in 2019.2020.
Administrative System Conversion
As we continue to execute on our strategy to leverage emerging technology and outsource our policy administration functions, during the third quarter of 2020, we completed the conversion of a significant portion of our in-force annuity business to a single third-party service provider. Following the conversion, a number of our customers and distribution partners experienced delays and service interruptions. While these issues have been largely resolved, there can be no assurance that in connection with this or any future conversion we will not incur unanticipated expenses or experience other economic or reputational harm, or be subject to litigation or regulatory investigations and actions, any of which could have a material adverse effect on our business, financial condition, and results of operations. See “Risk Factors — Risks Related to Our Business — The failure of third parties to provide various services, or any failure of the practices and procedures that these third parties use to provide services to us, could have a material adverse effect on our business,” “Risk Factors — General Risks — Brighthouse may experience difficulty in marketing and distributing products through our distribution channels” and “Risk Factors — Regulatory and Legal Risks — Litigation and regulatory investigations are common in our businesses and may result in significant financial losses and/or harm to our reputation” in our 2019 Annual Report.
COVID-19 Pandemic
We continue to closely monitor developments related to the worldwide pandemic sparked by the novel coronavirus (“COVID-19 pandemic”), which has negatively impacted us in certain respects, including as discussed below. At this time, it is not possible to estimate the severity or duration of the pandemic, including the severity, duration and frequency of any additional “waves” of the pandemic or the timetable for the development and implementation, and the efficacy, of any therapeutic treatment or vaccine for COVID-19. It is likewise not possible to predict or estimate the longer-term effects of the pandemic, or any actions taken to contain or address the pandemic, on the economy at large and on our business, results of operations, financial condition and prospects, including the impact on our investment portfolio and our ratings, or the need for us in the future to revisit or revise targets previously provided to the markets and/or aspects of our business model. See “Risk Factors — The ongoing COVID-19 pandemic may materially adversely affect our business, results of operations and financial condition, including capitalization and liquidity” in our First Quarter Form 10-Q.
47
Table of Contents
In March, in response to this extraordinary event, management promptly implemented our business continuity plans, and quickly and successfully shifted all our employees to a work-from-home environment, where they currently remain. Our sales and support teams remain fully operational, and the COVID-19 pandemic has not interrupted our ability to service our distribution partners and customers. Additionally, we are closely monitoring all aspects of our business, including but not limited to, levels of sales and claims activity, policy lapses or surrenders, payments of premiums, sources and uses of liquidity, the valuation of our investments and the performance of our derivatives programs. We have observed varying degrees of impact in these areas, and we have taken prudent and proportionate measures to address such impacts; however, at this time it is impossible to predict if the COVID-19 pandemic will have a material adverse impact on our business, results of operations or financial condition. We continue to closely monitor this evolving situation as we remain focused on ensuring the health and safety of our employees, on supporting our partners and customers as usual and on mitigating potential adverse impacts to our business.
Increased economic uncertainty and increased unemployment resulting from the economic impacts of the COVID-19 pandemic have also impacted sales of certain of our products and have prompted us to take actions to provide relief to customers affected by adverse circumstances due to the COVID-19 pandemic, as previously disclosed in “— Regulatory Developments” in our First Quarter Form 10-Q. While the relief granted to customers to date has not had a material impact on our financial condition or results of operations, it is not possible to estimate the potential impact of any future relief. Circumstances resulting from the COVID-19 pandemic have also impacted the incidents of claims and may have impacted the utilization of benefits, lapses or surrenders of policies and payments on insurance premiums, though such impacts have not been material through the end of the third quarter of 2020. Additionally, circumstances resulting from the COVID-19 pandemic have not materially impacted services we receive from third-party vendors, nor have such circumstances led to the identification of new loss contingencies or any increases in existing loss contingencies. However, there can be no assurance that any future impact from the COVID-19 pandemic, including, without limitation, with respect to revenues and expenses associated with our products, services we receive from third-party vendors, or loss contingencies, will not be material.
Certain sectors of our investment portfolio have been, and are expected to continue to be, adversely affected as a result of the impact of the COVID-19 pandemic on capital markets and the global economy, as well as uncertainty regarding its duration and outcome. See Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements.
Credit rating agencies may continue to review and adjust their ratings for the companies that they rate, including us. The credit rating agencies also evaluate the insurance industry as a whole and may change our credit rating based on their overall view of our industry. For example, during the second quarter of 2020, Fitch revised the rating outlook of Brighthouse Life Insurance Company and certain of its affiliated companies to negative from stable due to the disruption to economic activity and the financial markets from the COVID-19 pandemic. This action by Fitch followed its revision of the rating outlook on the U.S. life insurance industry to negative. Downgrades in our ratings or changes to our rating outlooks could have a material adverse effect on our results of operations and financial condition, including capitalization and liquidity. There can be no assurance that Fitch will not take further adverse action with respect to our ratings or that other rating agencies will not take similar actions in the future. Each rating should be evaluated independently of any other rating.
Regulatory Developments
We and our life insurance subsidiaries,subsidiary, BHNY, and our reinsurance subsidiary, Brighthouse Reinsurance Company of Delaware, and BHNY, are regulated primarily at the state level, with some products and services also subject to federal regulation. In addition, Brighthouse Life Insurance Company and its affiliates are subject to regulation under the insurance holding company laws of various U.S. jurisdictions. Furthermore, some of our operations, products and services are subject to the Employee Retirement Income Security Act of 1974, (“ERISA”), consumer protection laws, securities, broker-dealer and investment advisor regulations, as well as environmental and unclaimed property laws and regulations. See “Business — Regulation,” as well as “Risk Factors — Regulatory and Legal Risks” included in our 20182019 Annual Report, as amended or supplemented herein and inby our Second Quarter Form 10-Qsubsequent Quarterly Reports under the headingsheading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — NAIC” and “ — Standard of Conduct Regulation.Regulatory Developments.”
Standard of Conduct Regulation
As a result of overlapping efforts by the Department of Labor (the “DOL”), the National Association of Insurance Commissioners, individual states, and the SEC to impose fiduciary-like requirements in connection with the sale of annuities, life insurance policies and securities, there have been a number of proposed or adopted changes to the laws and regulations that govern the conduct of our business and the firms that distribute our products. While we manufacture annuity and life insurance products,

we do not directly distribute our products to consumers. However, regulations establishing standards of conduct in connection with the distribution and sale of these products could affect our business by imposing greater compliance, oversight, disclosure and notification requirements on our distributors and/or us, which may in either case increase our costs or limit distribution of our products. Earlier this year, the DOL indicated that it may issue a new proposed rule on fiduciary investment advice under ERISA in 2019. At this time, we cannot predict the content or form of any such rule or its impact on our business, results of operations and financial condition. See “Business — Regulation — Standard of Conduct Regulation — Department of Labor Fiduciary Rule” and “Risk Factors — Regulatory and Legal Risks — Our business is highly regulated, and changes in regulation and in supervisory and enforcement policies may materially impact our capitalization or cash flows, reduce our profitability and limit our growth” in our 2018 Annual Report.
Summary of Critical Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the Interim Condensed Consolidated Financial Statements.
The most critical estimates include those used in determining:
(i)liabilities for future policy benefits;
(ii)accounting for reinsurance;
(iii)capitalization and amortization of deferred policy acquisition costs (“DAC”) and amortization of value of business acquired (“VOBA”);
(iv)estimated fair values of investments in the absence of quoted market values;
(v)investment impairments;
(vi)estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation;
(vii)measurement of income taxes and the valuation of deferred tax assets; and
(viii)liabilities for litigation and regulatory matters.
•liabilities for future policy benefits;
48
Table of Contents
•amortization of deferred policy acquisition costs (“DAC”);
•investment credit losses;
•estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation; and
•measurement of income taxes and the valuation of deferred tax assets.
In applying our accounting policies, we make subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our business and operations. Actual results could differ from these estimates.
The above critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and Note 1 of the Notes to the Consolidated Financial Statements included in the 2018our 2019 Annual Report.
Non-GAAP and Other Financial Disclosures
Our definitions of the non-GAAP and other financial measures may differ from those used by other companies.
Non-GAAP Financial Disclosures
Adjusted Earnings
In this report, we present adjusted earnings, which excludes net income (loss) attributable to noncontrolling interests, as a measure of our performance that is not calculated in accordance with GAAP. We believe that this non-GAAP financial measure highlights our results of operations and the underlying profitability drivers of our business, as well as enhances the understanding of our performance by the investor community. However, adjusted earnings should not be viewed as a substitute for net income (loss) attributable to Brighthouse Life Insurance Company, which is the most directly comparable financial measure calculated in accordance with GAAP. See “— Results of Operations” for a reconciliation of adjusted earnings to net income (loss) attributable to Brighthouse Life Insurance Company.
Adjusted earnings, which may be positive or negative, is used by management to evaluate performance, allocate resources and facilitate comparisons to industry results. This financial measure focuses on our primary businesses principally by excluding the impact of market volatility, which could distort trends.
The following are significant items excluded from total revenues, net of income tax, in calculating adjusted earnings:

•Net investment gains (losses);
•Net derivative gains (losses) except earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment (“Investment Hedge Adjustments”); and
•Certain variable annuity guaranteed minimum income benefits (“GMIBs”) fees (“GMIB Fees”) and amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses).
The following are significant items excluded from total expenses, net of income tax, in calculating adjusted earnings:
•Amounts associated with benefits related to GMIBs (“GMIB Costs”);
•Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”); and
•Amortization of DAC and VOBAvalue of business acquired (“VOBA”) related to (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments.
The tax impact of the adjustments mentioned is calculated net of the statutory tax rate, which could differ from our effective tax rate.
49
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. The following table illustrates how each component of adjusted earnings is calculated from the GAAP statement of operations line items:
Component of Adjusted EarningsHow Derived from GAAP (1)
(i)Fee income(i)
Universal life and investment-type policy feefeess (excluding (a) unearned revenue adjustments related to net investment gains (losses) and net derivative gains (losses) and (b) GMIB Fees) plus Other revenues (excluding other revenues associated with related party reinsurance) and amortization of deferred gain on reinsurance.
(ii)Net investment spread(ii)
Net investment incomeplus Investment Hedge Adjustments and interest received on ceded fixed annuity reinsurance deposit funds reduced by Interest credited to policyholder account balancesand interest on future policy benefits.
(iii)Insurance-related activities(iii)
Premiums less Policyholder benefits and claims (excluding (a) GMIB Costs, (b) Market Value Adjustments, (c) interest on future policy benefits and (d) amortization of deferred gain on reinsurance) plus the pass through of performance of ceded separate account assets.
(iv)Amortization of DAC and VOBA(iv)
Amortization of DAC and VOBA (excluding amounts related to (a) net investment gains (losses), (b) net derivative gains (losses), (c) GMIB Fees and GMIB Costs and (d) Market Value Adjustments).
(v)Other expenses, net of DAC capitalization(v)
Other expenses reduced by capitalization of DAC.
(vi)Provision for income tax expense (benefit)(vi)Tax impact of the above items.
______________
(1)Italicized items indicate GAAP statement of operations line items.
(1)Italicized items indicate GAAP statement of operations line items.
Consistent with GAAP guidance for segment reporting, adjusted earnings is also our GAAP measure of segment performance. Accordingly, we report adjusted earnings by segment in Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements.
Other Financial Disclosures
50
We sometimes refer to sales activity for various products. Statistical sales information for life sales are calculated using the LIMRA (Life Insurance Marketing and Research Association) definition
Table of sales for core direct sales, excluding company-sponsored internal exchanges, corporate-owned life insurance, bank-owned life insurance, and private placement variable universal life insurance. Annuity sales consist of 10% of direct statutory premiums, excluding company-sponsored internal exchanges. These sales statistics do not correspond to revenues under GAAP, but are used as relevant measures of business activity.Contents

Results of Operations
Annual Actuarial Review
Generally,We typically conduct our annual actuarial review (“AAR”) in the third quarter of each yearyear. As a result of the 2020 AAR, we conduct an annual actuarial review (“AAR”). The most significant impact from the 2019 AAR reflected the change inlowered the long-term general account earned rate, for GAAP, which lowered the base 10-year U.S. Treasurydriven by a reduction in our mean reversion rate from 4.25%3.75% to 3.75%3.00%, which had the largest impact to our ULSGuniversal life with secondary guarantees (“ULSG”) business. For our variable annuity business, in addition to the update in the long-term general account earned rate, we updated assumptions regarding policyholder behavior, mortality, separate account fund allocations and volatility, as well as maintenance expenses. In our life business, we updated assumptions related to policyholder behavior, mortality and expenses.
Consolidated Results for the Nine Months Ended September 30, 20192020 and 2018
Business Overview.Annuity sales increased 28% compared to the first nine months of 2018 driven by higher sales of our suite of structured annuities consisting of products marketed under various names (collectively, “Shield Annuities” or “Shield”), fixed indexed annuities and fixed annuities.
A significant portion of our net income is driven by separate account balances related to our variable annuity business. Most directly, these balances determine asset-based fee income but they also impact DAC amortization and asset-based commissions. Separate account balances are driven by sales, movements in the market, surrenders, withdrawals, benefit payments, transfers and policy charges. Variable annuities separate account balances increased for the nine months ended September 30, 2019 compared to December 31, 2018, driven by positive equity market performance, partially offset by negative net flows and policy charges.
Unless otherwise noted, all amounts in the following discussions of our results of operations are stated before income tax except for adjusted earnings, which are presented net of income tax.
Nine Months Ended
September 30,
20202019
(In millions)
Revenues
Premiums$549 $649 
Universal life and investment-type product policy fees2,114 2,190 
Net investment income2,508 2,610 
Other revenues224 199 
Net investment gains (losses)(46)60 
Net derivative gains (losses)2,227 (218)
Total revenues7,576 5,490 
Expenses
Policyholder benefits and claims5,094 2,836 
Interest credited to policyholder account balances792 771 
Capitalization of DAC(276)(271)
Amortization of DAC and VOBA833 358 
Interest expense on debt51 43 
Other expenses1,551 1,581 
Total expenses8,045 5,318 
Income (loss) before provision for income tax(469)172 
Provision for income tax expense (benefit)(145)(46)
Net income (loss)(324)218 
Less: Net income (loss) attributable to noncontrolling interests1 1 
Net income (loss) attributable to Brighthouse Life Insurance Company$(325)$217 
51
Table of Contents
  Nine Months Ended 
 September 30,
  2019 2018
  (In millions)
Revenues    
Premiums $649
 $653
Universal life and investment-type product policy fees 2,190
 2,447
Net investment income 2,610
 2,400
Other revenues 199
 222
Net investment gains (losses) 60
 (120)
Net derivative gains (losses) (218) (1,230)
Total revenues 5,490
 4,372
Expenses    
Policyholder benefits and claims 2,836
 2,312
Interest credited to policyholder account balances 771
 785
Capitalization of DAC (271) (233)
Amortization of DAC and VOBA 358
 582
Interest expense on debt 43
 2
Other expenses 1,581
 1,584
Total expenses 5,318
 5,032
Income (loss) before provision for income tax 172
 (660)
Provision for income tax expense (benefit) (46) (195)
Net income (loss) 218
 (465)
Less: Net income (loss) attributable to noncontrolling interests 1
 —
Net income (loss) attributable to Brighthouse Life Insurance Company $217
 $(465)

The following table presents the components of net income (loss). were as follows:
 Nine Months Ended 
 September 30,		Nine Months Ended
September 30,
 2019 201820202019
 (In millions) (In millions)
GMLB Riders $(1,252) $(919)GMLB Riders$(933)$(1,252)
Other derivative instruments 1,114
 (534)Other derivative instruments1,461 1,114 
Net investment gains (losses) 60
 (120)Net investment gains (losses)(46)60 
Other adjustments (53) 46
Other adjustments(65)(53)
Pre-tax adjusted earnings, less net income attributable to noncontrolling interests 302
 867
Net income (loss) before provision for income tax 171
 (660)
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interestsPre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests(887)302 
Income (loss) attributable to Brighthouse Life Insurance Company before provision for income taxIncome (loss) attributable to Brighthouse Life Insurance Company before provision for income tax(470)171 
Provision for income tax expense (benefit) (46) (195)Provision for income tax expense (benefit)(145)(46)
Net income (loss) attributable to Brighthouse Life Insurance Company $217
 $(465)Net income (loss) attributable to Brighthouse Life Insurance Company$(325)$217 
Nine Months Ended September 30, 20192020 Compared with the Nine Months Ended September 30, 20182019
NetLoss before provision for income tax was $470 million ($325 million, net of income tax), a decrease of $641 million ($542 million, net of income tax) from income before provision for income tax wasof $171 million ($217 million, net of income tax), an increase of $831 million ($682 million, net of income tax) from a loss before provision for income tax of $660 million ($465 million, net of income tax) in the prior period.
The increasedecrease in income before provision for income tax was driven by the following key favorableunfavorable items:
current period gains on interest rate swaps•lower pre-tax adjusted earnings, discussed in greater detail below; and swaptions in our ULSG hedging program from declining long-term interest rates;
the change in•lower net investment gains (losses) reflecting:
◦current period net gains on sales of fixed maturity securities compared to prior period losses; and
◦current period net mark-to-market gains on equity securities compared to prior period net losses,    
partially offset by◦net losses on sales of fixed maturity securities compared to prior period net gains;
◦prior period net gains on real estate joint ventures.
◦current period mark-to-market losses on equity securities compared to prior period net gains;
◦net losses due to an increase in mortgage loan reserves; and
◦higher impairments on fixed maturity securities in the current period.
The increasedecrease in income before provision for income tax was partially offset by the following key unfavorablenet favorable items:
lower adjusted earnings, discussed•long-term interest rates declining more and equity markets increasing less in greater detail below;the current period than in the prior period resulted in:
higher◦current period gains on interest rate derivatives used to manage interest rate exposure in our ULSG business; and
◦a favorable change in the estimated fair value of the embedded derivatives associated with our fixed indexed annuity business;
partially offset by
◦an unfavorable impact from equity options; and
•lower losses from guaranteed minimum living benefits (“GMLB”) riders (“GMLB Riders”), discussed in greater detail inthe current period, see “— GMLB Riders for the Nine Months Ended September 30, 20192020 and 2018”; and
higher policyholder benefits and claims, included in other adjustments, resulting from the adjustment for market performance related to participating products in the Run-off segment.2019.”
The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in the current period led to an effective tax rate of 27%,31% in the current period compared to 30%27% in the prior period. Our effective tax rate primarily differs from the statutory tax rate primarily due to the impacts of the dividends received deductions and tax credits.

52
Table of Contents
Reconciliation of Net Income (Loss) Attributableto Adjusted Earnings
The reconciliation of net income (loss) attributable to Brighthouse Life Insurance Company to Adjusted Earningsadjusted earnings was as follows:
Nine Months Ended
September 30,
20202019
(In millions)
Net income (loss) attributable to Brighthouse Life Insurance Company$(325)$217 
Add: Provision for income tax expense (benefit)(145)(46)
Income (loss) attributable to Brighthouse Life Insurance Company before provision for income tax(470)171 
Less: GMLB Riders(933)(1,252)
Less: Other derivative instruments1,461 1,114 
Less: Net investment gains (losses)(46)60 
Less: Other adjustments(65)(53)
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests(887)302 
Less: Provision for income tax expense (benefit)(232)(19)
Adjusted earnings$(655)$321 
  Nine Months Ended 
 September 30,
  2019 2018
  (In millions)
Net income (loss) attributable to Brighthouse Life Insurance Company $217
 $(465)
Add: Provision for income tax expense (benefit) (46) (195)
Net income (loss) before provision for income tax 171
 (660)
Less: GMLB Riders (1,252) (919)
Less: Other derivative instruments 1,114
 (534)
Less: Net investment gains (losses) 60
 (120)
Less: Other adjustments (53) 46
Pre-tax adjusted earnings, less net income attributable to noncontrolling interests 302

867
Less: Provision for income tax expense (benefit) (19) 125
Adjusted earnings $321
 $742
Consolidated Results for the Nine Months Ended September 30, 20192020 and 20182019 — Adjusted Earnings
The following table presents the components of adjusted earnings:earnings were as follows:
 Nine Months Ended 
 September 30,		Nine Months Ended
September 30,
 2019 201820202019
 (In millions)(In millions)
Fee income $2,197
 $2,472
Fee income$2,149 $2,197 
Net investment spread 1,196
 998
Net investment spread1,060 1,196 
Insurance-related activities (1,301) (872)Insurance-related activities(2,448)(1,301)
Amortization of DAC and VOBA (436) (378)Amortization of DAC and VOBA(358)(436)
Other expenses, net of DAC capitalization (1,353) (1,353)Other expenses, net of DAC capitalization(1,289)(1,353)
Less: Net income (loss) attributable to noncontrolling interests 1
 —
Less: Net income (loss) attributable to noncontrolling interests1 1 
Pre-tax adjusted earnings, less net income attributable to noncontrolling interests 302
 867
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interestsPre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests(887)302 
Provision for income tax expense (benefit) (19) 125
Provision for income tax expense (benefit)(232)(19)
Adjusted earnings $321
 $742
Adjusted earnings$(655)$321 
Nine Months Ended September 30, 20192020 Compared with the Nine Months Ended September 30, 20182019
Adjusted earnings were $321a loss of $655 million, a decrease of $421$976 million.
Key net unfavorable impacts were:
•higher net costs associated with insurance-related activities due to:
◦an increase in liability balances in our ULSG and annuities businesses resulting from changes in connection with the AAR, most notably the change in the long-term general account earned rate in the current period,
◦a net increase in liability balances resulting from changes in connection with the AAR in our life, ULSG and annuities businesses, primarily due to changes in the long-term general account earned rate assumptions;
partially offset by
◦a decrease
◦a one-time adjustment in liability balances, primarily in our ULSG business, from the current period related to modeling improvements resulting from an actuarial system conversion in our life business;
•lower net investment spread due to:
◦lower returns on other limited partnerships for the comparative measurement period; and
◦lower investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at lower yields than the portfolio average;
partially offset by
53
Table of Contents
◦higher average invested assets resulting from positive net flows in the general account; and
•lower net impact of recapture transactions in the prior period;
lower fee income due to:
◦lower asset-based fees resulting from lower average separate account balances, a portion of which are offset in other expenses;
◦lower unearned revenue amortization in our life business from changes in expense and mortality assumptions in connection with the AAR; and
◦the reimbursement of fees for recaptured universal life business in the prior period; and

◦lower asset-based fees from lower average separate account balances, a portion of which is offset in other expenses; and
◦a decline in the net cost of insurance fees driven by the aging in-force ULSG business;
partially offset by
◦higher unearned revenue amortization resulting from changes in maintenance expense and policyholder behavior assumptions made in connection with the AAR in our life business.
Key net favorable impacts were:
•lower net amortization of DAC drivenand VOBA due to:
◦a favorable impact in the current period resulting primarily from changes in policyholder behavior and long-term general account earned rate assumptions made in connection with the AAR in our annuities business; and
◦a favorable change in our variable annuity business from changes in actual to expected experience in our in-force blocks;
partially offset by
◦a benefit recordedone-time adjustment in the current period related to modeling improvements resulting from an actuarial system conversion in our life business; and
•lower other expenses due to:
◦the exit of various transition service agreements with our former parent MetLife, Inc. (“MetLife”);
◦interest expense recognized in the prior period on a tax liability associated with our separation from MetLife; and
◦lower asset-based variable annuity expenses resulting from lower average separate account balances, a portion of which are offset in connection with the AAR.fee income.
The decrease inprovision for income tax, expressed as a percentage of pre-tax adjusted earnings, was partially offset by:
higher net investment spread reflecting:
◦higher average invested assets resulting from positive net flows in the general account; and
◦the repositioning of the investment portfolio out of U.S. Treasuries into higher yielding assets.    
resulted in an effective tax rate of 26% in the current period compared to 6% in the prior period. Certain one-time tax adjustments recognized in the currentprior period, primarily due to the revaluation of certain liabilities related to our separation from MetLife, resulted in an unusually low effective tax rate that was unusually low, compared to 14% in the prior period. OurIn addition to such one-time tax adjustments, our effective tax rate primarily differs from the statutory tax rate primarily due to the impacts of the dividends received deductions and tax credits.
GMLB Riders for the Nine Months Ended September 30, 20192020 and 20182019
The following table presents the overall impact to income (loss) before provision for income tax from the performance of GMLB Riders, which includes (i) changes in carrying value of the GAAP liabilities, (ii) the mark-to-market of hedges and reinsurance, (iii) fees and (iv) associated DAC offsets:offsets, was as follows:
Nine Months Ended
September 30,
 Nine Months Ended 
 September 30,		20202019
 2019 2018(In millions)
 (In millions)
Liabilities (1) $(1,968) $206
Hedging program (51) (1,472)
LiabilitiesLiabilities$(3,710)$(1,968)
HedgesHedges2,538 (51)
Ceded reinsurance 75
 (65)Ceded reinsurance99 75 
Fees (2) 614
 624
Fees (1)Fees (1)608 614 
GMLB DAC 78
 (212)GMLB DAC(468)78 
Total GMLB Riders $(1,252) $(919)Total GMLB Riders$(933)$(1,252)
______________
(1)Includes changes in estimated fair value of the Shield Annuities embedded derivatives of $918 million and $531 million for the nine months ended September 30, 2019 and 2018, respectively.
(2)Excludes living benefit fees, included as a component of adjusted earnings, of $48 million and $52 million for the nine months ended September 30, 2019 and 2018, respectively.
(1)Excludes living benefit fees, included as a component of adjusted earnings, of $43 million and $48 million for the nine months ended September 30, 2020 and 2019, respectively.
54
Table of Contents
Nine Months Ended September 30, 20192020 Compared with the Nine Months Ended September 30, 20182019
Comparative results from GMLB Riders were unfavorablefavorable by $333$319 million, primarily driven by:
•favorable changes in our GMLB hedges; and
•favorable changes to the estimated fair value of Shield Level Annuities (“Shield” and “Shield Annuities”), a suite of structured annuities consisting of products marketed under various names, embedded derivative liabilities (“Shield Annuity liabilities”), net of unfavorable change inchanges to the estimated fair value of the related hedges;
partially offset by
•unfavorable changes to the estimated fair value of variable annuity liability reserves; and
•unfavorable changes in Shield Annuities liability reserves,GMLB DAC.
largely offset by:
a net favorable change in the GMLB hedging program;
favorable changes in GMLB DAC; and
favorable changes in the ceded reinsurance.
Higher relative equityEquity markets increasing less in the current period significantly impactedthan in the following:prior period resulted in the following significant impacts:
unfavorable•favorable changes to the estimated fair value of freestanding derivatives in our GMLB hedging program;hedges;
unfavorable•favorable changes to the estimated fair value of the Shield liability reserves,Annuity liabilities, net of favorableunfavorable changes to the estimated fair value of the related hedges; and
unfavorable•favorable changes into GMLB DAC,DAC;
partially offset by
favorable changes to the estimated fair value of the variable annuity liability reserve.

Lower interest rates in the current period significantly impacted the following:
favorable changes to the estimated fair value of freestanding derivatives in our GMLB hedging program;
favorable changes to GMLB DAC; and
favorable changes in ceded reinsurance,
partially offset by
•unfavorable changes to the estimated fair value of variable annuity liability reserves.
Lower interest rates in the current period resulted in the following significant impacts:
•favorable changes to the estimated fair value of our GMLB hedges;
•favorable changes to the estimated fair value of Shield Annuity liabilities, net of unfavorable changes to the estimated fair value of the related hedges; and
•favorable changes to GMLB DAC;
partially offset by
•unfavorable changes to the estimated fair value of variable annuity liability reserves.
The widening of credit default swap spreads combined with a larger increase in the underlying variable annuity liability reserves in the current period resulted in a favorable change in the adjustment for nonperformance risk, net of an unfavorable change in GMLB DAC.
The AAR resulted in favorableunfavorable changes in the current period primarily due to higher reserves and higher DAC amortization recognized in the prior period, netcurrent period.
55
Table of a corresponding decrease in GMLB DAC relative to the prior period.Contents

Note Regarding Forward-Looking Statements
This report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other oral or written statements that we make from time to time may contain information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve substantial risks and uncertainties. We have tried, wherever possible, to identify such statements using words such as “anticipate,” “estimate,” “expect,” “project,” “may,” “will,” “could,” “intend,” “goal,” “target,” “guidance,” “forecast,” “preliminary,” “objective,” “continue,” “aim,” “plan,” “believe” and other words and terms of similar meaning, or that are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include, without limitation, statements relating to future actions, prospective services or products, financial projections, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, as well as trends in operating and financial results, as well as statements regarding the expected benefits of the Separation.results.
Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of BLIC. These statements are based on current expectations and the current economic environment and involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others:
•the impact of the ongoing COVID-19 pandemic;
•differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models;
•higher risk management costs and exposure to increased market and counterparty risk due to guarantees within certain of our products;
•the effectiveness of our variable annuity exposure risk management strategy and the impact of such strategy on net income volatility in our profitability measures and negative effects on our statutory capital;
•the reserves we are required to hold against our variable annuities as a result of actuarial guidelines;
a sustained period of low equity market prices and interest rates that are lower than those we assumed when we issued our variable annuity products;
•the potential material adverse effect of changes in accounting standards, practices and/or policies applicable to us, including changes in the accounting for long-duration contracts;
•the effectimpact of adverse capital and credit market conditions, may have onincluding with respect to our ability to meet liquidity needs and our access to capital;
•the impact of changes in regulation and in supervisory and enforcement policies on our insurance business or other operations;
the effectiveness of our risk management policies and procedures;
•the availability of reinsurance and the ability of ourthe counterparties to our reinsurance or indemnification arrangements to perform their obligations thereunder;
•the adverse impact to liabilities for policyholder claims as a result of extreme mortality events;
•heightened competition, including with respect to service, product features, scale, price, actual or perceived financial strength, claims-paying ratings, financial strength ratings, e-business capabilities and name recognition;
the ability of our insurance subsidiaries to pay dividends to us;
our ability to market and distribute our products through distribution channels;
•any failure of third parties to provide services we need, any failure of the practices and procedures of thesesuch third parties and any inability to obtain information or assistance we need from third parties, including MetLife;parties;
•the effectiveness of our policies and procedures in managing risk;
•our ability to market and distribute our products through distribution channels;
•whether all or any portion of the tax consequences of the Separationour separation from MetLife are not as expected, leading to material additional taxes or material adverse consequences to tax attributes that impact us;
•the uncertainty of the outcome of any disputes with MetLife over tax-related or other matters and agreements including the potential of outcomes adverse to us that could cause us to owe MetLife material tax reimbursements or payments, or disagreements regarding MetLife’s or our obligations under our other agreements;
the impact on our business structure, profitability, cost of capital and flexibility due to restrictions we have agreed to that preserve the tax-free treatment of certain parts of the Separation;

•the potential material negative tax impact of potential future tax legislation that could decrease the value of our tax attributes and cause other cash expenses, such as reserves, to increase materially and make some of our products less attractive to consumers; and
whether the Separation will qualify for non-recognition treatment for federal income tax purposes and potential indemnification to MetLife if the Separation does not so qualify;
56
Table of Contents
the impact of the Separation on our business and profitability due to MetLife’s strong brand and reputation, the increased costs related to replacing arrangements with MetLife with those of third parties and incremental costs as a public company;
whether the operational, strategic and other benefits of the Separation can be achieved, and our ability to implement our business strategy;
our ability to attract and retain key personnel; and
•other factors described in this report and from time to time in documents that we file with the SEC.
For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements included and the risks, uncertainties and other factors identified in our 20182019 Annual Report, our subsequent Quarterly Reports on Form 10-Q, particularly in the sections entitled “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk,” as well as in our other subsequent filings with the SEC. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.
Item 4. Controls and Procedures
Management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of September 30, 2019.2020.
MetLife provides certain services to the Company on a transitional basis through services agreements. The Company continues to change business processes, implement systems and establish new third-party arrangements, as a subsidiary of Brighthouse Financial, Inc. We consider these in aggregate to be material changes in our internal control over financial reporting.
Other than as noted above, there were no changes to the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 20192020 that have materially affected, or are reasonably likely to materially affect, the Company’sthese internal controlcontrols over financial reporting.
Part II — Other Information
Item 1. Legal Proceedings
See Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements. Except as disclosed in the Notes to the Interim Condensed Consolidated Financial Statements, included in this report. Therethere have been no new material legal proceedings and no material developments in legal proceedings previously disclosed in the 2018our 2019 Annual Report,. as amended or supplemented by our subsequent Quarterly Reports.
Item 1A. Risk Factors
We discuss in this report, in the 2018our 2019 Annual Report and in our other filings with the SEC, various risks that may materially affect our business. In addition, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Note Regarding Forward-Looking Statements” included in this report.herein. There have been no material changes to our risk factors from the risk factors previously disclosed in the 2018our 2019 Annual Report, as amended or supplemented by such information in our subsequent Quarterly Reports onFirst Quarter Form 10-Q.

57
Table of Contents
Item 6. Exhibits
(Note Regarding Reliance on Statements in Our Contracts: In reviewing the agreements included as exhibits herein, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about Brighthouse Life Insurance Company, its subsidiaries or affiliates, or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and (i) should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; (iii) may apply standards of materiality in a way that is different from what may be viewed as material to investors; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about Brighthouse Life Insurance Company, its subsidiaries and affiliates may be found elsewhere herein and Brighthouse Life Insurance Company’s other public filings, which are available without charge through the U.S. Securities and Exchange Commission website at www.sec.gov.)
Exhibit
No.		Description
10.131.1*
31.1*
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
32.1**
32.2**
101.INS*XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*Inline XBRL Taxonomy Extension Schema Document.
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document.
104*The cover page of Brighthouse Life Insurance Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019,2020, formatted in Inline XBRL (included within the Exhibit 101 attachments).
* Filed herewith.
** Furnished herewith.

58
Signatures
Table of Contents
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BRIGHTHOUSE LIFE INSURANCE COMPANY
By:/s/ Lynn A. Dumais
Name:Lynn A. Dumais
Title:Vice President and Chief Accounting Officer
(Duly Authorized SignatoryOfficer and Principal Accounting Officer)
Date: November 6, 20199, 2020

59