BRIGHTHOUSE LIFE INSURANCE 10-Q 2022 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission File Number: 033-03094

Brighthouse Life Insurance Company

(Exact name of registrant as specified in its charter)

Delaware	06-0566090
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
11225 North Community House Road, Charlotte, North Carolina	28277
(Address of principal executive offices)	(Zip Code)

(980) 365-7100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class Trading symbol(s) Name of each exchange on which registered

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ    No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes þ    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	☐
Non-accelerated filer	þ	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐ No þ

As of November 10, 2022, 3,000 shares of the registrant’s common stock were outstanding, all of which were owned indirectly by Brighthouse Financial, Inc.

REDUCED DISCLOSURE FORMAT

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is, therefore, filing this Form 10-Q with the reduced disclosure format.

Table of Contents

		Page
Part I — Financial Information
Item 1.	Consolidated Financial Statements (at September 30, 2022 (Unaudited) and December 31, 2021 and for the Three Months and Nine Months Ended September 30, 2022 and 2021 (Unaudited)):
	Interim Condensed Consolidated Balance Sheets	2
	Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	3
	Interim Condensed Consolidated Statements of Equity	4
	Interim Condensed Consolidated Statements of Cash Flows	5
	Notes to the Interim Condensed Consolidated Financial Statements (Unaudited):
	Note 1 — Business, Basis of Presentation and Summary of Significant Accounting Policies	6
	Note 2 — Segment Information	7
	Note 3 — Insurance	11
	Note 4 — Investments	12
	Note 5 — Derivatives	24
	Note 6 — Fair Value	30
	Note 7 — Long-term and Short-term Debt	39
	Note 8 — Equity	39
	Note 9 — Other Revenues and Other Expenses	41
	Note 10 — Contingencies, Commitments and Guarantees	42
	Note 11 — Related Party Transactions	45
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	47
Item 4.	Controls and Procedures	59
Part II — Other Information
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	60
Item 6.	Exhibits	60
Signature		61

Part I — Financial Information

Item 1. Financial Statements

Brighthouse Life Insurance Company

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

Interim Condensed Consolidated Balance Sheets

September 30, 2022 (Unaudited) and December 31, 2021

(In millions, except share and per share data)

	September 30, 2022		December 31, 2021
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $84,308 and $78,287, respectively; allowance for credit losses of $4 and $11, respectively)	$	74,419	$	86,527
Equity securities, at estimated fair value	75		95
Mortgage loans (net of allowance for credit losses of $99 and $123, respectively)	22,030		19,787
Policy loans	886		869
Limited partnerships and limited liability companies	4,607		4,271
Short-term investments, principally at estimated fair value	278		662
Other invested assets, principally at estimated fair value (net of allowance for credit losses of $13 and $13, respectively)	4,161		3,324
Total investments	106,456		115,535
Cash and cash equivalents	4,384		3,904
Accrued investment income	889		706
Premiums, reinsurance and other receivables (net of allowance for credit losses of $10 and $10, respectively)	17,465		15,649
Deferred policy acquisition costs and value of business acquired	5,159		4,851
Current income tax recoverable	28		—
Deferred income tax asset	1,566		—
Other assets	359		385
Separate account assets	76,067		106,225
Total assets	$	212,373	$	247,255
Liabilities and Equity
Liabilities
Future policy benefits	$	41,259	$	43,589
Policyholder account balances	70,599		66,195
Other policy-related balances	3,104		3,153
Payables for collateral under securities loaned and other transactions	6,518		6,253
Long-term and short-term debt	964		841
Current income tax payable	—		57
Deferred income tax liability	—		981
Other liabilities	7,165		3,850
Separate account liabilities	76,067		106,225
Total liabilities	205,676		231,144
Contingencies, Commitments and Guarantees (Note 10)
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
Additional paid-in capital	17,773		17,773
Retained earnings (deficit)	(4,704)		(5,653)
Accumulated other comprehensive income (loss)	(6,462)		3,901
Total Brighthouse Life Insurance Company’s stockholder’s equity	6,682		16,096
Noncontrolling interests	15		15
Total equity	6,697		16,111
Total liabilities and equity	$	212,373	$	247,255

See accompanying notes to the interim condensed consolidated financial statements.

2

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, 2022 and 2021 (Unaudited)

(In millions)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues
Premiums	$	160	$	189	$	482	$	526
Universal life and investment-type product policy fees	635		736		1,953		2,240
Net investment income	857		1,264		3,036		3,629
Other revenues	109		92		326		262
Net investment gains (losses)	(40)		(16)		(171)		(37)
Net derivative gains (losses)	(408)		56		1,909		(2,049)
Total revenues	1,313		2,321		7,535		4,571
Expenses
Policyholder benefits and claims	1,267		1,062		3,212		2,420
Interest credited to policyholder account balances	422		406		1,019		978
Amortization of deferred policy acquisition costs and value of business acquired	147		(70)		888		(14)
Other expenses	407		435		1,278		1,324
Total expenses	2,243		1,833		6,397		4,708
Income (loss) before provision for income tax	(930)		488		1,138		(137)
Provision for income tax expense (benefit)	(208)		96		188		(68)
Net income (loss)	(722)		392		950		(69)
Less: Net income (loss) attributable to noncontrolling interests	—		—		1		1
Net income (loss) attributable to Brighthouse Life Insurance Company	$	(722)	$	392	$	949	$	(70)
Comprehensive income (loss)	$	(4,175)	$	114	$	(9,413)	$	(1,456)
Less: Comprehensive income (loss) attributable to noncontrolling interests	—		—		1		1
Comprehensive income (loss) attributable to Brighthouse Life Insurance Company	$	(4,175)	$	114	$	(9,414)	$	(1,457)

See accompanying notes to the interim condensed consolidated financial statements.

3

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, 2022 and 2021 (Unaudited)

(In millions)

	Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Brighthouse Life Insurance Company’s Stockholder’s Equity		Noncontrolling Interests		Total Equity
Balance at December 31, 2021	$	75	$	17,773	$	(5,653)	$	3,901	$	16,096	$	15	$	16,111
Change in noncontrolling interests									—		(1)		(1)
Net income (loss)					1,671				1,671		1		1,672
Other comprehensive income (loss), net of income tax							(6,910)		(6,910)				(6,910)
Balance at June 30, 2022	75		17,773		(3,982)		(3,009)		10,857		15		10,872
Change in noncontrolling interests									—				—
Net income (loss)					(722)				(722)				(722)
Other comprehensive income (loss), net of income tax							(3,453)		(3,453)				(3,453)
Balance at September 30, 2022	$	75	$	17,773	$	(4,704)	$	(6,462)	$	6,682	$	15	$	6,697

	Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Brighthouse Life Insurance Company’s Stockholder’s Equity		Noncontrolling Interests		Total Equity
Balance at December 31, 2020	$	75	$	18,323	$	(5,719)	$	5,421	$	18,100	$	15	$	18,115
Dividends paid to parent			(250)						(250)				(250)
Change in noncontrolling interests									—		(1)		(1)
Net income (loss)					(462)				(462)		1		(461)
Other comprehensive income (loss), net of income tax							(1,109)		(1,109)				(1,109)
Balance at June 30, 2021	75		18,073		(6,181)		4,312		16,279		15		16,294
Net income (loss)					392				392				392
Other comprehensive income (loss), net of income tax							(278)		(278)				(278)
Balance at September 30, 2021	$	75	$	18,073	$	(5,789)	$	4,034	$	16,393	$	15	$	16,408

See accompanying notes to the interim condensed consolidated financial statements.

4

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, 2022 and 2021 (Unaudited)

(In millions)

	Nine Months Ended September 30,
	2022		2021
Net cash provided by (used in) operating activities	$	(628)	$	1,051
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities	8,442		8,396
Equity securities	41		114
Mortgage loans	1,767		1,998
Limited partnerships and limited liability companies	180		168
Purchases of:
Fixed maturity securities	(14,255)		(16,077)
Equity securities	(14)		(7)
Mortgage loans	(4,060)		(4,421)
Limited partnerships and limited liability companies	(619)		(560)
Cash received in connection with freestanding derivatives	3,737		3,211
Cash paid in connection with freestanding derivatives	(3,395)		(3,912)
Issuances of loans to affiliate	(125)		(1)
Net change in policy loans	(17)		20
Net change in short-term investments	384		1,120
Net change in other invested assets	(101)		(13)
Net cash provided by (used in) investing activities	(8,035)		(9,964)
Cash flows from financing activities
Policyholder account balances:
Deposits	23,139		10,761
Withdrawals	(14,246)		(1,910)
Net change in payables for collateral under securities loaned and other transactions	265		390
Short-term debt issued	125		—
Long-term debt repaid	(2)		(1)
Dividends paid to parent	—		(250)
Financing element on certain derivative instruments and other derivative related transactions, net	(137)		(183)
Other, net	(1)		(1)
Net cash provided by (used in) financing activities	9,143		8,806
Change in cash, cash equivalents and restricted cash	480		(107)
Cash, cash equivalents and restricted cash, beginning of period	3,904		3,684
Cash, cash equivalents and restricted cash, end of period	$	4,384	$	3,577
Supplemental disclosures of cash flow information
Net cash paid (received) for:
Interest	$	67	$	67
Income tax	$	93	$	(20)

See accompanying notes to the interim condensed consolidated financial statements.

5

Brighthouse Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies

Business

“BLIC” and the “Company” refer to Brighthouse Life Insurance Company, a Delaware corporation originally incorporated in Connecticut in 1863, and its subsidiaries. Brighthouse Life Insurance Company is a wholly-owned subsidiary of Brighthouse Holdings, LLC (“BH Holdings”) and an indirect wholly-owned subsidiary of Brighthouse Financial, Inc. (“BHF” and together with its subsidiaries, “Brighthouse Financial”). BLIC offers a range of annuity and life insurance products to individuals. The Company is organized into three segments: Annuities; Life; and Run-off. In addition, the Company reports certain of its results of operations in Corporate & Other.

Basis of Presentation

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the interim condensed consolidated financial statements. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from these estimates.

Consolidation

The accompanying interim condensed consolidated financial statements include the accounts of Brighthouse Life Insurance Company and its subsidiaries, as well as partnerships and limited liability companies (“LLC”) that the Company controls. Intercompany accounts and transactions have been eliminated.

The Company uses the equity method of accounting for investments in limited partnerships and LLCs when it has more than a minor ownership interest or more than a minor influence over the investee’s operations. The Company generally recognizes its share of the investee’s earnings on a three-month lag in instances where the investee’s financial information is not sufficiently timely or when the investee’s reporting period differs from the Company’s reporting period. When the Company has virtually no influence over the investee’s operations, the investment is carried at fair value.

Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a standalone entity.

The accompanying interim condensed consolidated financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2021 consolidated balance sheet data was derived from audited consolidated financial statements included in Brighthouse Life Insurance Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”), which include all disclosures required by GAAP. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2021 Annual Report.

Adoption of New Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASU”) to the FASB Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. There were no significant ASUs adopted during the period ended September 30, 2022.

6

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)

Future Adoption of New Accounting Pronouncements

In August 2018, the FASB issued new guidance on long-duration contracts (ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (“LDTI”)). LDTI is effective for fiscal years beginning after January 1, 2023. LDTI will result in significant changes to the measurement, presentation and disclosure requirements for long-duration insurance contracts. A summary of the most significant changes is provided below:

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

(2) Cash flow assumptions used to measure the liability for future policy benefits on traditional long-duration contracts (including term and non-participating whole life insurance and immediate annuities) will be updated on an annual basis using a retrospective method. The resulting remeasurement gain or loss will be reported separately on the consolidated statements of operations along with the remeasurement gain or loss on universal life-type contract liabilities.

(3) The discount rate assumption used to measure the liability for traditional long-duration contracts will be based on an upper-medium grade fixed income yield, updated quarterly, with changes recognized in OCI.

(4) Deferred policy acquisition costs (“DAC”) for all insurance products are required to be amortized on a constant-level basis over the expected term of the contracts, using amortization methods that are not a function of revenue or profit emergence. Changes in assumptions used to amortize DAC will be recognized as a revision to future amortization amounts.

(5) There will be a significant increase in required disclosures, including disaggregated rollforwards of insurance contract assets and liabilities supplemented by qualitative and quantitative information regarding the cash flows, assumptions, methods and judgements used to measure those balances.

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

LDTI will have a significant impact on the Company’s financial statements and will change the pattern and market sensitivity of the Company’s earnings after the transition date. The most significant impact will be the requirement that all variable annuity guarantees be considered MRBs and measured at fair value, because a significant amount of variable annuity guarantees are classified as insurance liabilities under current GAAP. The impacts to the financial statements are highly dependent on market conditions, especially interest rates. The Company estimates the impact of LDTI to total stockholder’s equity as of December 31, 2021 to be a reduction of between $6 billion and $8 billion, and a reduction to total stockholder’s equity excluding accumulated other comprehensive income of between $3 billion and $4 billion, both primarily driven by the MRB changes. Based on prevailing interest rates at September 30, 2022, post adoption of LDTI, the Company expects the impact to total stockholder’s equity as of September 30, 2022 to have significantly improved since December 31, 2021.

The Company has made significant progress toward adopting the new guidance, including updating systems, validating computations, establishing proper controls, finalizing accounting policies and developing disclosures.

2. Segment Information

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

Annuities

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

Life

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

7

Brighthouse Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

2. Segment Information (continued)

Run-off

The Run-off segment consists of products that are no longer actively sold and are separately managed, including universal life with secondary guarantees, structured settlements, pension risk transfer contracts, certain company-owned life insurance policies and certain funding agreements.

Corporate & Other

Corporate & Other contains the excess capital not allocated to the segments and interest expense related to the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. Corporate & Other also includes long-term care and workers’ compensation business reinsured through 100% quota share reinsurance agreements, activities related to funding agreements associated with the Company’s institutional spread margin business, as well as direct-to-consumer life insurance that is no longer actively sold.

Financial Measures and Segment Accounting Policies

Adjusted earnings is a financial measure used by management to evaluate performance and facilitate comparisons to industry results. Consistent with GAAP guidance for segment reporting, adjusted earnings is also used to measure segment performance. The Company believes the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of its performance by the investor community and contract holders by highlighting the results of operations and the underlying profitability drivers of the business.

Adjusted earnings, which may be positive or negative, focuses on the Company’s primary businesses by excluding the impact of market volatility, which could distort trends.

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

•Net investment gains (losses);

•Net derivative gains (losses) except earned income and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment; and

•Certain variable annuity guaranteed minimum income benefits (“GMIB”) fees (“GMIB Fees”).

The following are significant items excluded from total expenses 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

•Amortization of DAC and value of business acquired (“VOBA”) related to (i) net investment gains (losses), (ii) net derivative gains (losses) and (iii) GMIB Fees and GMIB Costs.

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

The 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.

8

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

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

	Three Months Ended September 30, 2021
	Annuities		Life		Run-off		Corporate & Other		Total
	(In millions)
Pre-tax adjusted earnings	$	482	$	139	$	43	$	(64)	$	600
Provision for income tax expense (benefit)	96		30		4		(13)		117
Post-tax adjusted earnings	386		109		39		(51)		483
Less: Net income (loss) attributable to noncontrolling interests	—		—		—		—		—
Adjusted earnings	$	386	$	109	$	39	$	(51)	483
Adjustments for:
Net investment gains (losses)									(16)
Net derivative gains (losses)									56
Other adjustments to net income (loss)									(152)
Provision for income tax (expense) benefit									21
Net income (loss) attributable to Brighthouse Life Insurance Company									$	392
Interest revenue	$	564	$	168	$	505	$	33
Interest expense	$	—	$	—	$	—	$	17

9

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

	Nine Months Ended September 30, 2021
	Annuities		Life		Run-off		Corporate & Other		Total
	(In millions)
Pre-tax adjusted earnings	$	1,288	$	364	$	267	$	(219)	$	1,700
Provision for income tax expense (benefit)	249		76		31		(40)		316
Post-tax adjusted earnings	1,039		288		236		(179)		1,384
Less: Net income (loss) attributable to noncontrolling interests	—		—		—		1		1
Adjusted earnings	$	1,039	$	288	$	236	$	(180)	1,383
Adjustments for:
Net investment gains (losses)									(37)
Net derivative gains (losses)									(2,049)
Other adjustments to net income (loss)									249
Provision for income tax (expense) benefit									384
Net income (loss) attributable to Brighthouse Life Insurance Company									$	(70)
Interest revenue	$	1,643	$	474	$	1,466	$	62
Interest expense	$	—	$	—	$	—	$	50

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

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

10

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)

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

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

3. Insurance

Guarantees

As discussed in Notes 1 and 3 of the Notes to the Consolidated Financial Statements included in the 2021 Annual Report, the Company issues variable annuity contracts with guaranteed minimum benefits. Guaranteed minimum death benefits, the life contingent portion of guaranteed minimum withdrawal benefits (“GMWB”) and certain portions of GMIBs are accounted for as insurance liabilities in future policyholder benefits, while other guarantees are accounted for in whole or in part as embedded derivatives in policyholder account balances and are further discussed in Note 5.

The Company also has secondary guarantees on universal and variable life insurance contracts accounted for as insurance liabilities.

Information regarding the Company’s guarantee exposure was as follows at:

	September 30, 2022						December 31, 2021
	In the Event of Death			At Annuitization			In the Event of Death			At Annuitization
	(Dollars in millions)
Annuity Contracts (1), (2)
Variable Annuity Guarantees
Total account value (3)	$	76,894		$	40,589		$	105,784		$	56,966
Separate account value	$	72,232		$	39,542		$	101,108		$	55,910
Net amount at risk	$	18,250	(4)	$	6,439	(5)	$	6,315	(4)	$	4,992	(5)
Average attained age of contract holders	72 years			71 years			71 years			71 years

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

_______________

(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

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 5 of the Notes to the Consolidated Financial Statements included in the 2021 Annual Report for a discussion of guaranteed minimum benefits which have been reinsured.

(3)Includes the contract holder’s investments in the general account and separate account, if applicable.

(4)Defined as the death benefit less the total account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death.

(5)Defined as the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents the Company’s potential economic exposure to such guarantees in the event all contract holders were to annuitize on the balance sheet date, even though the contracts contain terms that allow annuitization of the guaranteed amount only after the 10th anniversary of the contract, which not all contract holders have achieved.

(6)Defined as the guarantee amount less the account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date.

4. Investments

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

Fixed Maturity Securities Available-for-sale

Fixed Maturity Securities by Sector

Fixed maturity securities by sector were as follows at:

	September 30, 2022										December 31, 2021
	Amortized Cost		Allowance for Credit Losses		Gross Unrealized				Estimated Fair Value		Amortized Cost		Allowance for Credit Losses		Gross Unrealized				Estimated Fair Value
					Gains		Losses								Gains		Losses
	(In millions)
U.S. corporate	$	36,646	$	1	$	122	$	5,104	$	31,663	$	34,773	$	2	$	3,890	$	187	$	38,474
Foreign corporate	12,386		—		20		2,348		10,058		10,813		7		902		103		11,605
RMBS	8,718		1		59		954		7,822		8,838		—		433		51		9,220
U.S. government and agency	8,555		—		332		607		8,280		7,188		—		2,040		60		9,168
CMBS	7,235		2		—		691		6,542		6,890		2		329		24		7,193
State and political subdivision	4,050		—		115		393		3,772		3,937		—		829		6		4,760
ABS	5,533		—		2		336		5,199		4,255		—		34		14		4,275
Foreign government	1,185		—		36		138		1,083		1,593		—		244		5		1,832
Total fixed maturity securities	$	84,308	$	4	$	686	$	10,571	$	74,419	$	78,287	$	11	$	8,701	$	450	$	86,527

The Company held non-income producing fixed maturity securities with an estimated fair value of $15 million and $3 million at September 30, 2022 and December 31, 2021, respectively.

12

Brighthouse Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

4. Investments (continued)

Maturities of Fixed Maturity Securities

The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at September 30, 2022:

	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	$	1,178	$	13,349	$	17,187	$	31,108	$	21,486	$	84,308
Estimated fair value	$	1,158	$	12,521	$	14,788	$	26,389	$	19,563	$	74,419

_______________

(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 by Sector

The estimated fair value and gross unrealized losses of fixed maturity securities in an unrealized loss position, by sector and by length of time that the securities have been in a continuous unrealized loss position, were as follows at:

	September 30, 2022								December 31, 2021
	Less than 12 Months				12 Months or Greater				Less than 12 Months				12 Months or Greater
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
	(Dollars in millions)
U.S. corporate	$	26,073	$	4,173	$	2,653	$	931	$	5,051	$	111	$	887	$	76
Foreign corporate	8,553		1,906		1,050		442		2,016		60		305		43
RMBS	5,277		572		1,806		382		3,481		50		32		1
U.S. government and agency	3,410		286		1,076		321		1,712		40		222		20
CMBS	5,919		565		603		126		1,390		21		95		3
State and political subdivision	2,172		364		94		29		347		6		6		—
ABS	4,333		265		773		71		2,454		13		93		1
Foreign government	848		138		—		—		278		4		18		1
Total fixed maturity securities	$	56,585	$	8,269	$	8,055	$	2,302	$	16,729	$	305	$	1,658	$	145
Total number of securities in an unrealized loss position	7,987				1,377				2,423				368

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

13

Brighthouse Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

4. Investments (continued)

make payments in the future or the issuer’s failure to make scheduled interest and principal payments. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss is deemed to exist and an allowance for credit losses is recorded, limited by the amount that the estimated fair value is less than the amortized cost basis, with a corresponding charge to net investment gains (losses). Any unrealized losses that have not been recorded through an allowance for credit losses are recognized in OCI.

Once a security specific allowance for credit losses is established, the present value of cash flows expected to be collected from the security continues to be reassessed. Any changes in the security specific allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense in net investment gains (losses).

Fixed maturity securities are also evaluated to determine whether any amounts have become uncollectible. When all, or a portion, of a security is deemed uncollectible, the uncollectible portion is written-off with an adjustment to amortized cost and a corresponding reduction to the allowance for credit losses.

Accrued interest receivables are presented separate from the amortized cost basis of fixed maturity securities. An allowance for credit losses is not estimated on an accrued interest receivable, rather receivable balances 90-days past due are deemed uncollectible and are written off with a corresponding reduction to net investment income. The accrued interest receivable on fixed maturity securities totaled $627 million and $527 million at September 30, 2022 and December 31, 2021, respectively, and is included in accrued investment income.

Fixed maturity securities are also evaluated to determine if they qualify as purchased financial assets with credit deterioration (“PCD”). To determine if the credit deterioration experienced since origination is more than insignificant, both (i) the extent of the credit deterioration and (ii) any rating agency downgrades are evaluated. For securities categorized as PCD assets, the present value of cash flows expected to be collected from the security are compared to the par value of the security. If the present value of cash flows expected to be collected is less than the par value, credit losses are embedded in the purchase price of the PCD asset. In this situation, both an allowance for credit losses and amortized cost gross-up is recorded, limited by the amount that the estimated fair value is less than the grossed-up amortized cost basis. Any difference between the purchase price and the present value of cash flows is amortized or accreted into net investment income over the life of the PCD asset. Any subsequent PCD asset allowance for credit losses is evaluated in a manner similar to the process described above for fixed maturity securities.

Current Period Evaluation

Based on the Company’s current evaluation of its fixed maturity securities in an unrealized loss position and the current intent or requirement to sell, the Company recorded an allowance for credit losses of $4 million, relating to twelve securities at September 30, 2022. Management concluded that for all other fixed maturity securities in an unrealized loss position, the unrealized loss was not due to issuer-specific credit-related factors and as a result was recognized in OCI. Where unrealized losses have not been recognized into income, it is primarily because the securities’ bond issuer(s) are of high credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in estimated fair value is largely due to changes in interest rates and non-issuer specific credit spreads. These issuers continued to make timely principal and interest payments and the estimated fair value is expected to recover as the securities approach maturity.

Allowance for Credit Losses for Fixed Maturity Securities

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

14

Brighthouse Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

4. Investments (continued)

Mortgage Loans

Mortgage Loans by Portfolio Segment

Mortgage loans are summarized as follows at:

	September 30, 2022				December 31, 2021
	Carrying Value		% of Total		Carrying Value		% of Total
	(Dollars in millions)
Commercial	$	13,259	60.2	%	$	12,159	61.4	%
Agricultural	4,184		19.0		4,128		20.9
Residential	4,686		21.3		3,623		18.3
Total mortgage loans (1)	22,129		100.5		19,910		100.6
Allowance for credit losses	(99)		(0.5)		(123)		(0.6)
Total mortgage loans, net	$	22,030	100.0	%	$	19,787	100.0	%

_______________

(1)Purchases of mortgage loans from third parties were $387 million and $1.6 billion for the three months and nine months ended September 30, 2022, respectively, and $698 million and $1.5 billion for the three months and nine months ended September 30, 2021, respectively, and were primarily comprised of residential mortgage loans.

Allowance for Credit Losses for Mortgage Loans

Evaluation and Measurement Methodologies

The allowance for credit losses is a valuation account that is deducted from the mortgage loan’s amortized cost basis to present the net amount expected to be collected on the mortgage loan. The loan balance, or a portion of the loan balance, is written-off against the allowance when management believes this amount is uncollectible.

Accrued interest receivables are presented separate from the amortized cost basis of mortgage loans. An allowance for credit losses is generally not estimated on an accrued interest receivable, rather when a loan is placed in nonaccrual status the associated accrued interest receivable balance is written off with a corresponding reduction to net investment income. For mortgage loans that are granted payment deferrals due to the COVID-19 pandemic, interest continues to be accrued during the deferral period if the loan was less than 30 days past due at December 31, 2019 and performing at the onset of the pandemic. Accrued interest on COVID-19 pandemic impacted loans was not significant at both September 30, 2022 and December 31, 2021. The accrued interest receivable on mortgage loans is included in accrued investment income and totaled $102 million and $95 million at September 30, 2022 and December 31, 2021, respectively.

The allowance for credit losses is estimated using relevant available information, from internal and external sources, relating to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience provides the basis for estimating expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics and environmental conditions. A reasonable and supportable forecast period of two-years is used with an input reversion period of one-year.

Mortgage loans are evaluated in each of the three portfolio segments to determine the allowance for credit losses. The loan-level loss rates are determined using individual loan terms and characteristics, risk pools/internal ratings, national economic forecasts, prepayment speeds, and estimated default and loss severity.

The resulting loss rates are applied to the mortgage loan’s amortized cost to generate an allowance for credit losses. In certain situations, the allowance for credit losses is measured as the difference between the loan’s amortized cost and liquidation value of the collateral. These situations include collateral dependent loans, expected troubled debt restructurings (“TDR”), foreclosure probable loans, and loans with dissimilar risk characteristics.

15

Brighthouse Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

4. Investments (continued)

Mortgage loans are also evaluated to determine if they qualify as PCD assets. To determine if the credit deterioration experienced since origination is more than insignificant, the extent of credit deterioration is evaluated. All re-performing/modified loan (“RPL”) pools purchased after December 31, 2019 are determined to have been acquired with evidence of more than insignificant credit deterioration since origination and are classified as PCD assets. RPLs are pools of residential mortgage loans acquired at a discount or premium which have both credit and non-credit components. For PCD mortgage loans, the allowance for credit losses is determined using a similar methodology described above, except the loss-rate is determined at the pool level instead of the individual loan level. The initial allowance for credit losses, determined on a collective basis, is then allocated to the individual loans. The initial amortized cost of the loan is grossed-up to reflect the sum of the loan’s purchase price and allowance for credit losses. The difference between the grossed-up amortized cost basis and the par value of the loan is a noncredit discount or premium, which is accreted or amortized into net investment income over the remaining life of the loan. Any subsequent PCD mortgage loan allowance for credit losses is evaluated in a manner similar to the process described above for each of the three portfolio segments.

Rollforward of the Allowance for Credit Losses for Mortgage Loans by Portfolio Segment

The changes in the allowance for credit losses by portfolio segment were as follows:

	Commercial		Agricultural		Residential		Total
	(In millions)
Nine Months Ended September 30, 2022
Balance, beginning of period	$	67	$	12	$	44	$	123
Current period provision	1		3		(5)		(1)
Charge-offs, net of recoveries	(23)		—		—		(23)
Balance, end of period	$	45	$	15	$	39	$	99
Nine Months Ended September 30, 2021
Balance, beginning of period	$	44	$	15	$	35	$	94
Current period provision	6		(2)		—		4
PCD credit allowance	—		—		2		2
Balance, end of period	$	50	$	13	$	37	$	100

16

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 Mortgage Loans by Portfolio Segment

The amortized cost of mortgage loans by year of origination and credit quality indicator was as follows at:

	2022		2021		2020		2019		2018		Prior		Total
	(In millions)
September 30, 2022
Commercial mortgage loans
Loan-to-value ratios:
Less than 65%	$	1,500	$	2,754	$	406	$	1,474	$	946	$	3,773	$	10,853
65% to 75%	427		470		—		302		403		311		1,913
76% to 80%	—		—		40		105		29		37		211
Greater than 80%	—		—		—		—		57		225		282
Total commercial mortgage loans	1,927		3,224		446		1,881		1,435		4,346		13,259
Agricultural mortgage loans
Loan-to-value ratios:
Less than 65%	373		1,166		413		497		648		763		3,860
65% to 75%	93		90		66		56		1		17		323
Greater than 80%	—		—		—		—		1		—		1
Total agricultural mortgage loans	466		1,256		479		553		650		780		4,184
Residential mortgage loans
Performing	892		1,701		164		216		173		1,481		4,627
Nonperforming	1		6		2		2		1		47		59
Total residential mortgage loans	893		1,707		166		218		174		1,528		4,686
Total	$	3,286	$	6,187	$	1,091	$	2,652	$	2,259	$	6,654	$	22,129

	2021		2020		2019		2018		2017		Prior		Total
	(In millions)
December 31, 2021
Commercial mortgage loans
Loan-to-value ratios:
Less than 65%	$	2,771	$	437	$	1,539	$	986	$	553	$	3,300	$	9,586
65% to 75%	633		92		383		406		127		458		2,099
76% to 80%	—		—		55		29		59		31		174
Greater than 80%	—		—		—		30		—		270		300
Total commercial mortgage loans	3,404		529		1,977		1,451		739		4,059		12,159
Agricultural mortgage loans
Loan-to-value ratios:
Less than 65%	1,150		539		510		674		284		608		3,765
65% to 75%	114		77		61		26		33		52		363
Total agricultural mortgage loans	1,264		616		571		700		317		660		4,128
Residential mortgage loans
Performing	1,124		202		270		230		132		1,606		3,564
Nonperforming	1		—		3		3		1		51		59
Total residential mortgage loans	1,125		202		273		233		133		1,657		3,623
Total	$	5,793	$	1,347	$	2,821	$	2,384	$	1,189	$	6,376	$	19,910

17

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 loan-to-value ratio is a measure commonly used to assess the quality of commercial and agricultural mortgage loans. The loan-to-value ratio compares the amount of the loan to the estimated fair value of the underlying property collateralizing the loan and is commonly expressed as a percentage. A loan-to-value ratio less than 100% indicates an excess of collateral value over the loan amount. Loan-to-value ratios greater than 100% indicate that the loan amount exceeds the collateral value. Performing status is a measure commonly used to assess the quality of residential mortgage loans. A loan is considered performing when the borrower makes consistent and timely payments.

The amortized cost of commercial mortgage loans by debt-service coverage ratio was as follows at:

	September 30, 2022				December 31, 2021
	Amortized Cost		% of Total		Amortized Cost		% of Total
	(Dollars in millions)
Debt-service coverage ratios:
Greater than 1.20x	$	11,782	88.9	%	$	10,263	84.4	%
1.00x - 1.20x	581		4.4		595		4.9
Less than 1.00x	896		6.7		1,301		10.7
Total	$	13,259	100.0	%	$	12,159	100.0	%

The debt-service coverage ratio compares a property’s net operating income to its debt-service payments. Debt-service coverage ratios less than 1.00 times indicate that property operations do not generate enough income to cover the loan’s current debt payments. A debt-service coverage ratio greater than 1.00 times indicates an excess of net operating income over the debt-service payments.

Past Due Mortgage Loans by Portfolio Segment

The Company has a high-quality, well-performing mortgage loan portfolio, with over 99% of all mortgage loans classified as performing at both September 30, 2022 and December 31, 2021. Delinquency is defined consistent with industry practice, when mortgage loans are past due as follows: commercial and residential mortgage loans — 60 days; and agricultural mortgage loans — 90 days. To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the past due status of the impacted loans during the forbearance period is locked-in as of March 1, 2020, which reflects the date on which the COVID-19 pandemic began to affect the borrower’s ability to make payments. At September 30, 2022 and December 31, 2021, $23 million and $30 million, respectively, of the COVID-19 pandemic modified loans were classified as delinquent.

The aging of the amortized cost of past due mortgage loans by portfolio segment was as follows at:

	September 30, 2022								December 31, 2021
	Commercial		Agricultural		Residential		Total		Commercial		Agricultural		Residential		Total
	(In millions)
Current	$	13,259	$	4,161	$	4,569	$	21,989	$	12,159	$	4,128	$	3,550	$	19,837
30-59 days past due	—		—		58		58		—		—		14		14
60-89 days past due	—		7		17		24		—		—		14		14
90-179 days past due	—		—		26		26		—		—		29		29
180+ days past due	—		16		16		32		—		—		16		16
Total	$	13,259	$	4,184	$	4,686	$	22,129	$	12,159	$	4,128	$	3,623	$	19,910

18

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 in Nonaccrual Status by Portfolio Segment

Mortgage loans are placed in a nonaccrual status if there are concerns regarding collectability of future payments or the loan is past due, unless the past due loan is well collateralized. To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the impacted loans generally will not be reported as in a nonaccrual status during the period of deferral. A COVID-19 pandemic modified loan is only reported as a nonaccrual asset in the event a borrower declares bankruptcy, the borrower experiences significant credit deterioration such that the Company does not expect to collect all principal and interest due, or the loan was 90 days past due at the onset of the pandemic. At September 30, 2022 and December 31, 2021, $23 million and $30 million, respectively, of the COVID-19 pandemic modified loans were in nonaccrual status.

The amortized cost of mortgage loans in a nonaccrual status by portfolio segment was as follows at:

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

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

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

Modified Mortgage Loans by Portfolio Segment

Under certain circumstances, modifications are granted to nonperforming mortgage loans. Each modification is evaluated to determine if a TDR has occurred. A modification is a TDR when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the amount of debt owed, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company did not have a significant amount of mortgage loans modified in a TDR during both the nine months ended September 30, 2022 and 2021.

Short-term modifications made on a good faith basis to borrowers who were not more than 30 days past due at December 31, 2019 and in response to the COVID-19 pandemic are not considered TDRs.

Other Invested Assets

Over 85% of other invested assets is comprised of freestanding derivatives with positive estimated fair values. See Note 5 for information about freestanding derivatives with positive estimated fair values. Other invested assets also includes Federal Home Loan Bank (“FHLB”) stock, tax credit and renewable energy partnerships and leveraged leases.

Net Unrealized Investment Gains (Losses)

Unrealized investment gains (losses) on fixed maturity securities and the effect on DAC, VOBA, deferred sales inducements (“DSI”) and future policy benefits, that would result from the realization of the unrealized gains (losses), are included in net unrealized investment gains (losses) in accumulated other comprehensive income (loss) (“AOCI”).

19

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 at:

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

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

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

Concentrations of Credit Risk

There were no investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, at both September 30, 2022 and December 31, 2021.

Securities Lending

Elements of the securities lending program are presented below at:

	September 30, 2022		December 31, 2021
	(In millions)
Securities on loan: (1)
Amortized cost	$	5,049	$	3,573
Estimated fair value	$	4,719	$	4,539
Cash collateral received from counterparties (2)	$	4,844	$	4,611
Securities collateral received from counterparties (3)	$	—	$	2
Reinvestment portfolio — estimated fair value	$	4,590	$	4,730

_______________

(1)Included within fixed maturity securities.

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

(3)Securities collateral received from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reported on the interim condensed consolidated financial statements.

20

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

	September 30, 2022						December 31, 2021
	Open (1)		1 Month or Less		1 to 6 Months		Total		Open (1)		1 Month or Less		1 to 6 Months		Total
	(In millions)
U.S. government and agency	$	1,342	$	1,373	$	1,520	$	4,235	$	1,094	$	2,125	$	1,391	$	4,610
U.S. corporate	—		456		—		456		1		—		—		1
Foreign corporate	—		137		—		137		—		—		—		—
Foreign government	—		16		—		16		—		—		—		—
Total	$	1,342	$	1,982	$	1,520	$	4,844	$	1,095	$	2,125	$	1,391	$	4,611

_______________

(1)The related loaned security could be returned to the Company on the next business day which would require the Company to immediately return the cash collateral.

If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell securities to meet the return obligation, it may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than what otherwise would have been realized in normal market conditions, or both. The estimated fair value of the securities on loan related to the cash collateral on open at September 30, 2022 was $1.3 billion, primarily comprised of U.S. government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement.

The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including U.S. government and agency securities, ABS, agency RMBS, U.S. and foreign corporate securities and CMBS) with 52% invested in U.S. government and agency securities, agency RMBS and cash and cash equivalents at September 30, 2022. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company.

Invested Assets on Deposit, Held in Trust and Pledged as Collateral

Invested assets on deposit, held in trust and pledged as collateral at estimated fair value were as follows at:

	September 30, 2022		December 31, 2021
	(In millions)
Invested assets on deposit (regulatory deposits) (1)	$	7,787	$	9,996
Invested assets held in trust (reinsurance agreements) (2)	5,266		6,023
Invested assets pledged as collateral (3)	12,173		5,116
Total invested assets on deposit, held in trust and pledged as collateral	$	25,226	$	21,135

_______________

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

(2)The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions, of which $277 million and $118 million of the assets held in trust balance represents restricted cash and cash equivalents at September 30, 2022 and December 31, 2021, respectively.

(3)The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 3 of the Notes to the Consolidated Financial Statements included in the 2021 Annual Report) and derivative transactions (see Note 5).

See “— Securities Lending” for information regarding securities on loan. In addition, the Company’s investment in FHLB common stock, which is considered restricted until redeemed by the issuer, was $176 million and $70 million at redemption value at September 30, 2022 and December 31, 2021, respectively.

21

Brighthouse Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

4. Investments (continued)

Variable Interest Entities

A variable interest entity (“VIE”) is a legal entity that does not have sufficient equity at risk to finance its activities or is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not substantively participate in the gains and losses of the entity.

The Company enters into various arrangements with VIEs in the normal course of business and has invested in legal entities that are VIEs. VIEs are consolidated when it is determined that the Company is the primary beneficiary. A primary beneficiary is the variable interest holder in a VIE with both (i) the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In addition, the evaluation of whether a legal entity is a VIE and if the Company is a primary beneficiary includes a review of the capital structure of the VIE, the related contractual relationships and terms, the nature of the operations and purpose of the VIE, the nature of the VIE interests issued and the Company’s involvement with the entity.

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

The carrying amount and maximum exposure to loss related to the VIEs for which the Company has concluded that it holds a variable interest, but is not the primary beneficiary, were as follows at:

	September 30, 2022				December 31, 2021
	Carrying Amount		Maximum Exposure to Loss		Carrying Amount		Maximum Exposure to Loss
	(In millions)
Fixed maturity securities	$	14,863	$	16,355	$	16,326	$	15,659
Limited partnerships and LLCs	3,949		5,352		3,666		5,101
Total	$	18,812	$	21,707	$	19,992	$	20,760

The Company’s investments in unconsolidated VIEs are described below.

Fixed Maturity Securities

The Company invests in U.S. corporate bonds, foreign corporate bonds and Structured Securities issued by VIEs. The Company is not obligated to provide any financial or other support to these VIEs, other than the original investment. The Company’s involvement with these entities is limited to that of a passive investor. The Company has no unilateral right to appoint or remove the servicer, special servicer, or investment manager, which are generally viewed as having the power to direct the activities that most significantly impact the economic performance of the VIE, nor does the Company function in any of these roles. The Company does not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity; as a result, the Company has determined it is not the primary beneficiary, or consolidator, of the VIE. The Company’s maximum exposure to loss on these fixed maturity securities is limited to the amortized cost of these investments. See “— Fixed Maturity Securities Available-for-sale” for information on these securities.

Limited Partnerships and LLCs

The Company holds investments in certain limited partnerships and LLCs which are VIEs. These ventures include limited partnerships, LLCs, private equity funds, and, to a lesser extent, tax credit and renewable energy partnerships. The Company is not considered the primary beneficiary, or consolidator, when its involvement takes the form of a limited partner interest and is restricted to a role of a passive investor, as a limited partner’s interest does not provide the Company with any substantive kick-out or participating rights, nor does it provide the Company with the power to direct the activities of the fund. The Company’s maximum exposure to loss on these investments is limited to: (i) the amount invested in debt or equity of the VIE and (ii) commitments to the VIE, as described in Note 10.

22

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,
	2022		2021		2022		2021
	(In millions)
Investment income:
Fixed maturity securities	$	779	$	706	$	2,221	$	2,080
Equity securities	1		—		2		2
Mortgage loans	207		171		614		500
Policy loans	10		10		31		31
Limited partnerships and LLCs (1)	(106)		402		257		1,090
Cash, cash equivalents and short-term investments	17		1		22		3
Other	20		12		50		30
Total investment income	928		1,302		3,197		3,736
Less: Investment expenses	71		38		161		107
Net investment income	$	857	$	1,264	$	3,036	$	3,629

_______________

(1)Includes net investment income pertaining to other limited partnership interests of ($127) million and $178 million for the three months and nine months ended September 30, 2022, respectively, and $378 million and $1.0 billion for the three months and nine months ended September 30, 2021, respectively.

Net Investment Gains (Losses)

Components of Net Investment Gains (Losses)

The components of net investment gains (losses) were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(In millions)
Fixed maturity securities	$	(37)	$	—	$	(138)	$	(23)
Equity securities	(1)		(2)		(11)		1
Mortgage loans	2		(5)		(1)		(6)
Limited partnerships and LLCs	(4)		—		(21)		1
Other	—		(9)		—		(10)
Total net investment gains (losses)	$	(40)	$	(16)	$	(171)	$	(37)

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

23

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 follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(In millions)
Proceeds	$	1,115	$	1,925	$	5,219	$	4,092
Gross investment gains	$	1	$	23	$	50	$	62
Gross investment losses	(37)		(21)		(183)		(76)
Net investment gains (losses)	$	(36)	$	2	$	(133)	$	(14)

5. Derivatives

Accounting for Derivatives

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

Types of Derivative Instruments and Derivative Strategies

The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to minimize its exposure to various market risks. Commonly used derivative instruments include, but are not necessarily limited to:

•Interest rate derivatives: swaps, floors, caps, swaptions, futures and forwards;

•Foreign currency exchange rate derivatives: forwards and swaps;

•Equity market derivatives: options, total return swaps and variance swaps; and

•Credit derivatives: single and index reference credit default swaps and swaptions.

For detailed information on these contracts and the related strategies, see Note 7 of the Notes to the Consolidated Financial Statements included in the 2021 Annual Report.

24

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

		September 30, 2022						December 31, 2021
	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 forwards	Interest rate	$	90	$	—	$	17	$	180	$	30	$	—
Foreign currency swaps	Foreign currency exchange rate	4,004		870		8		3,237		220		22
Total qualifying hedges		4,094		870		25		3,417		250		22
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swaps	Interest rate	3,900		156		54		2,595		325		17
Interest rate floors	Interest rate	2,250		7		2		—		—		—
Interest rate caps	Interest rate	5,350		182		5		5,100		29		4
Interest rate options	Interest rate	20,438		41		189		8,050		83		—
Interest rate forwards	Interest rate	15,969		33		2,550		9,808		627		109
Foreign currency swaps	Foreign currency exchange rate	825		207		—		956		94		21
Foreign currency forwards	Foreign currency exchange rate	423		—		6		288		—		4
Credit default swaps — written	Credit	1,869		7		11		1,724		39		1
Credit default swaptions	Credit	—		—		—		150		—		—
Equity index options	Equity market	17,053		696		350		24,692		1,155		877
Equity variance swaps	Equity market	281		9		1		281		9		1
Equity total return swaps	Equity market	33,069		1,515		1,519		32,719		493		588
Hybrid options	Equity market	—		—		—		900		8		—
Total non-designated or non-qualifying derivatives		101,427		2,853		4,687		87,263		2,862		1,622
Embedded derivatives:
Ceded guaranteed minimum income benefits	Other	N/A		129		—		N/A		186		—
Direct index-linked annuities	Other	N/A		—		2,034		N/A		—		6,211
Direct guaranteed minimum benefits	Other	N/A		—		1,622		N/A		—		1,725
Assumed guaranteed minimum benefits	Other	N/A		—		313		N/A		—		427
Assumed index-linked annuities	Other	N/A		—		308		N/A		—		437
Total embedded derivatives		N/A		129		4,277		N/A		186		8,800
Total		$	105,521	$	3,852	$	8,989	$	90,680	$	3,298	$	10,444

Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both September 30, 2022 and December 31, 2021. The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and generally do not qualify for hedge accounting because they do not meet the criteria required under portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities and generally do not qualify for hedge accounting because they do not meet the criteria of being “highly effective” as outlined in Accounting Standards Codification 815 — Derivatives and Hedging; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income; and (iv) written credit default swaps that are used to create synthetic credit investments and that do not qualify for hedge accounting because they do not involve a hedging relationship.

25

Brighthouse 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 Derivatives		Net Derivative Gains (Losses) Recognized for Hedged Items		Net Investment Income		Amount of Gains (Losses) Deferred in AOCI
	(In millions)
Three Months Ended September 30, 2022
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate	$	—	$	—	$	1	$	(8)
Foreign currency exchange rate	8		(7)		17		339
Total cash flow hedges	8		(7)		18		331
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(1,233)		—		—		—
Foreign currency exchange rate	91		(12)		—		—
Credit	5		—		—		—
Equity market	40		—		—		—
Embedded	700		—		—		—
Total non-qualifying hedges	(397)		(12)		—		—
Total	$	(389)	$	(19)	$	18	$	331
Three Months Ended September 30, 2021
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate	$	—	$	—	$	1	$	3
Foreign currency exchange rate	(1)		1		10		99
Total cash flow hedges	(1)		1		11		102
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(6)		—		—		—
Foreign currency exchange rate	32		(2)		—		—
Credit	2		—		—		—
Equity market	(48)		—		—		—
Embedded	78		—		—		—
Total non-qualifying hedges	58		(2)		—		—
Total	$	57	$	(1)	$	11	$	102

26

Brighthouse Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

5. Derivatives (continued)

	Net Derivative Gains (Losses) Recognized for Derivatives		Net Derivative Gains (Losses) Recognized for Hedged Items		Net Investment Income		Amount of Gains (Losses) Deferred in AOCI
	(In millions)
Nine Months Ended September 30, 2022
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate	$	4	$	—	$	3	$	(49)
Foreign currency exchange rate	9		(8)		41		662
Total cash flow hedges	13		(8)		44		613
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(3,671)		—		—		—
Foreign currency exchange rate	173		(25)		—		—
Credit	(27)		—		—		—
Equity market	768		—		—		—
Embedded	4,686		—		—		—
Total non-qualifying hedges	1,929		(25)		—		—
Total	$	1,942	$	(33)	$	44	$	613
Nine Months Ended September 30, 2021
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate	$	1	$	—	$	3	$	(30)
Foreign currency exchange rate	5		(2)		25		179
Total cash flow hedges	6		(2)		28		149
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(1,196)		—		—		—
Foreign currency exchange rate	43		1		—		—
Credit	13		—		—		—
Equity market	(496)		—		—		—
Embedded	(418)		—		—		—
Total non-qualifying hedges	(2,054)		1		—		—
Total	$	(2,048)	$	(1)	$	28	$	149

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

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

Credit Derivatives

In connection with synthetically created credit investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation.

27

Brighthouse 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 estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps were as follows at:

	September 30, 2022					December 31, 2021
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	$	5	$	664	2.1	$	12	$	589	2.4
Baa	(8)		1,177		5.2	27		1,131		5.0
Ba	1		24		4.2	—		—		0.0
Caa and Lower	(2)		4		3.2	(1)		4		4.0
Total	$	(4)	$	1,869	4.1	$	38	$	1,724	4.1

_______________

(1)The Company has written credit protection on both single name and index references. The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s, S&P and Fitch. If no rating is available from a rating agency, then an internally developed rating is used.

(2)The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.

Counterparty Credit Risk

The Company may be exposed to credit-related losses in the event of counterparty nonperformance on derivative instruments. Generally, the credit exposure is the fair value at the reporting date less any collateral received from the counterparty.

The Company manages its credit risk by: (i) entering into derivative transactions with creditworthy counterparties governed by master netting agreements; (ii) trading through regulated exchanges and central clearing counterparties; (iii) obtaining collateral, such as cash and securities, when appropriate; and (iv) setting limits on single party credit exposures which are subject to periodic management review.

See Note 6 for a description of the impact of credit risk on the valuation of derivatives.

The estimated fair values of net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:

			Gross Amounts Not Offset on the Consolidated Balance Sheets
	Gross Amount Recognized		Financial Instruments (1)		Collateral Received/Pledged (2)		Net Amount		Securities Collateral Received/Pledged (3)		Net Amount After Securities Collateral
	(In millions)
September 30, 2022
Derivative assets	$	3,803	$	(2,172)	$	(1,521)	$	110	$	(28)	$	82
Derivative liabilities	$	4,744	$	(2,172)	$	(4)	$	2,568	$	(2,566)	$	2
December 31, 2021
Derivative assets	$	3,113	$	(1,155)	$	(1,480)	$	478	$	(413)	$	65
Derivative liabilities	$	1,632	$	(1,155)	$	—	$	477	$	(477)	$	—

_______________

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

28

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)

(2)The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreement.

(3)Securities collateral received from counterparties is not reported on the consolidated balance sheets and may not be sold or re-pledged unless the counterparty is in default. Amounts do not include excess of collateral pledged or received.

The Company’s collateral arrangements generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the amount owed by that counterparty reaches a minimum transfer amount. Certain of these arrangements also include credit-contingent provisions which permit the party with positive fair value to terminate the derivative at the current fair value or demand immediate full collateralization from the party in a net liability position, in the event that the financial strength or credit rating of the party in a net liability position falls below a certain level.

The aggregate estimated fair values of derivatives in a net liability position containing such credit-contingent provisions and the aggregate estimated fair value of assets posted as collateral for such instruments were as follows at:

	September 30, 2022		December 31, 2021
	(In millions)
Estimated fair value of derivatives in a net liability position (1)	$	2,572	$	477
Estimated Fair Value of Collateral Provided (2):
Fixed maturity securities	$	4,583	$	839

_______________

(1)After taking into consideration the existence of netting agreements.

(2)Substantially all of the Company’s collateral arrangements provide for daily posting of collateral for the full value of the derivative contract. As a result, if the credit-contingent provisions of derivative contracts in a net liability position were triggered, minimal additional assets would be required to be posted as collateral or needed to settle the instruments immediately. Additionally, the Company is required to pledge initial margin for certain new over-the-counter (“OTC”) bilateral contracts between two counterparties (“OTC-bilateral”) derivative transactions to third party custodians.

29

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, 2022
	Fair Value Hierarchy						Total Estimated Fair Value
	Level 1		Level 2		Level 3
	(In millions)
Assets
Fixed maturity securities:
U.S. corporate	$	—	$	30,625	$	1,038	$	31,663
Foreign corporate	—		9,541		517		10,058
RMBS	—		7,795		27		7,822
U.S. government and agency	3,886		4,394		—		8,280
CMBS	—		6,523		19		6,542
State and political subdivision	—		3,772		—		3,772
ABS	—		4,906		293		5,199
Foreign government	—		1,048		35		1,083
Total fixed maturity securities	3,886		68,604		1,929		74,419
Equity securities	11		36		28		75
Short-term investments	169		109		—		278
Derivative assets: (1)
Interest rate	—		419		—		419
Foreign currency exchange rate	—		1,026		51		1,077
Credit	—		1		6		7
Equity market	—		2,211		9		2,220
Total derivative assets	—		3,657		66		3,723
Embedded derivatives within asset host contracts (2)	—		—		129		129
Separate account assets	39		76,028		—		76,067
Total assets	$	4,105	$	148,434	$	2,152	$	154,691
Liabilities
Derivative liabilities: (1)
Interest rate	$	—	$	2,817	$	—	$	2,817
Foreign currency exchange rate	—		14		—		14
Credit	—		8		3		11
Equity market	—		1,869		1		1,870
Total derivative liabilities	—		4,708		4		4,712
Embedded derivatives within liability host contracts (2)	—		—		4,277		4,277
Total liabilities	$	—	$	4,708	$	4,281	$	8,989

30

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, 2021
	Fair Value Hierarchy						Total Estimated Fair Value
	Level 1		Level 2		Level 3
	(In millions)
Assets
Fixed maturity securities:
U.S. corporate	$	—	$	37,568	$	906	$	38,474
Foreign corporate	—		11,112		493		11,605
RMBS	—		9,209		11		9,220
U.S. government and agency	3,159		6,009		—		9,168
CMBS	—		7,149		44		7,193
State and political subdivision	—		4,760		—		4,760
ABS	—		4,110		165		4,275
Foreign government	—		1,806		26		1,832
Total fixed maturity securities	3,159		81,723		1,645		86,527
Equity securities	21		61		13		95
Short-term investments	640		20		2		662
Derivative assets: (1)
Interest rate	—		1,094		—		1,094
Foreign currency exchange rate	—		304		10		314
Credit	—		27		12		39
Equity market	—		1,649		16		1,665
Total derivative assets	—		3,074		38		3,112
Embedded derivatives within asset host contracts (2)	—		—		186		186
Separate account assets	41		106,184		—		106,225
Total assets	$	3,861	$	191,062	$	1,884	$	196,807
Liabilities
Derivative liabilities: (1)
Interest rate	$	—	$	130	$	—	$	130
Foreign currency exchange rate	—		47		—		47
Credit	—		—		1		1
Equity market	—		1,465		1		1,466
Total derivative liabilities	—		1,642		2		1,644
Embedded derivatives within liability host contracts (2)	—		—		8,800		8,800
Total liabilities	$	—	$	1,642	$	8,802	$	10,444

_______________

(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 on the consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances on the consolidated balance sheets.

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.

31

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. Prices received are assessed to determine if they represent a reasonable estimate of fair value. Several controls are performed, including certain monthly controls, which include, but are not limited to, analysis of portfolio returns to corresponding benchmark returns, comparing a sample of executed prices of securities sold to the fair value estimates, reviewing the bid/ask spreads to assess activity, comparing prices from multiple independent pricing services and ongoing due diligence to confirm that independent pricing services use market-based parameters. The process includes a determination of the observability of inputs used in estimated fair values received from independent pricing services or brokers by assessing whether these inputs can be corroborated by observable market data. Independent non-binding broker quotes, also referred to herein as “consensus pricing,” are used for a non-significant portion of the portfolio. Prices received from independent brokers are assessed to determine if they represent a reasonable estimate of fair value by considering such pricing relative to the current market dynamics and current pricing for similar financial instruments.

A formal process is also applied to challenge any prices received from independent pricing services that are not considered representative of estimated fair value. If prices received from independent pricing services are not considered reflective of market activity or representative of estimated fair value, independent non-binding broker quotations are obtained. If obtaining an independent non-binding broker quotation is unsuccessful, the last available price will be used.

Additional controls are performed, such as, balance sheet analytics to assess reasonableness of period-to-period pricing changes, including any price adjustments. Price adjustments are applied if prices or quotes received from independent pricing services or brokers are not considered reflective of market activity or representative of estimated fair value. The Company did not have significant price adjustments during the nine months ended September 30, 2022.

Determination of Fair Value

Fixed Maturity Securities

The fair values for actively traded marketable bonds, primarily U.S. government and agency securities, are determined using the quoted market prices and are classified as Level 1 assets. For fixed maturity securities classified as Level 2 assets, fair values are determined using either a market or income approach and are valued based on a variety of observable inputs as described below.

U.S. corporate and foreign corporate securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, benchmark yields, spreads off benchmark yields, new issuances, issuer rating, trades of identical or comparable securities, or duration. Privately-placed securities are valued using the additional key inputs: market yield curve, call provisions, observable prices and spreads for similar public or private securities that incorporate the credit quality and industry sector of the issuer, and delta spread adjustments to reflect specific credit-related issues.

U.S. government and agency, state and political subdivision and foreign government securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, benchmark U.S. Treasury yield or other yields, spread off the U.S. Treasury yield curve for the identical security, issuer ratings and issuer spreads, broker-dealer quotes, and comparable securities that are actively traded.

Structured Securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, spreads for actively traded securities, spreads off benchmark yields, expected prepayment speeds and volumes, current and forecasted loss severity, ratings, geographic region, weighted average coupon and weighted average maturity, average delinquency rates and debt-service coverage ratios. Other issuance-specific information is also used, including, but not limited to, collateral type, structure of the security, vintage of the loans, payment terms of the underlying asset, payment priority within tranche, and deal performance.

Equity Securities and Short-term Investments

The fair value for actively traded equity securities and short-term investments are determined using quoted market prices and are classified as Level 1 assets. For financial instruments classified as Level 2 assets, fair values are determined using a market approach and are valued based on a variety of observable inputs as described below.

32

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

The fair values for exchange-traded derivatives are determined using the quoted market prices and are classified as Level 1 assets. For OTC-bilateral derivatives and OTC-cleared derivatives classified as Level 2 assets or liabilities, fair values are determined using the income approach. Valuations of non-option-based derivatives utilize present value techniques, whereas valuations of option-based derivatives utilize option pricing models which are based on market standard valuation methodologies and a variety of observable inputs.

The significant inputs to the pricing models for most OTC-bilateral and OTC-cleared derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. Certain OTC-bilateral and OTC-cleared derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and management believes they are consistent with what other market participants would use when pricing such instruments.

Most inputs for OTC-bilateral and OTC-cleared derivatives are mid-market inputs but, in certain cases, liquidity adjustments are made when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income.

The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all OTC-bilateral and OTC-cleared derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its OTC-bilateral and OTC-cleared derivatives using standard swap curves which may include a spread to the risk-free rate, depending upon specific collateral arrangements. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with similar collateral arrangements. As the Company and its significant derivative counterparties generally execute trades at such pricing levels and hold sufficient collateral, additional credit risk adjustments are not currently required in the valuation process. The Company’s ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. An evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period.

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.

The Company issues certain variable annuity products with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMAB”), the non-life contingent portion of GMWBs and certain portions of GMIBs are accounted for as embedded derivatives and measured at estimated fair value separately from the host variable annuity contract. These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets, with changes in estimated fair value reported in net derivative gains (losses).

33

Brighthouse Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

6. Fair Value (continued)

The Company determines the fair value of these embedded derivatives by estimating the present value of projected future benefits minus the present value of projected future fees using actuarial and capital markets assumptions including expectations of policyholder behavior. The calculation is based on in-force business and is performed using standard actuarial valuation software which projects future cash flows from the embedded derivative over multiple risk neutral stochastic scenarios using observable risk-free rates. The percentage of fees included in the initial fair value measurement is not updated in subsequent periods.

Capital markets assumptions, such as risk-free rates and implied volatilities, are based on market prices for publicly-traded instruments to the extent that prices for such instruments are observable. Implied volatilities beyond the observable period are extrapolated based on observable implied volatilities and historical volatilities. Actuarial assumptions, including mortality, lapse, withdrawal and utilization, are unobservable and are reviewed at least annually based on actuarial studies of historical experience.

The valuation of these guarantee liabilities includes nonperformance risk adjustments and adjustments for a risk margin related to non-capital markets inputs. The nonperformance adjustment is determined by taking into consideration publicly available information relating to spreads in the secondary market for BHF’s debt. These observable spreads are then adjusted to reflect the priority of these liabilities and claims-paying ability of the issuing insurance subsidiaries as compared to BHF’s overall financial strength.

Risk margins are established to capture the non-capital markets risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees.

The Company issues and assumes through reinsurance index-linked annuities which allow the policyholder to participate in returns from equity indices. The crediting rates associated with these features are embedded derivatives which are measured at estimated fair value separately from the host fixed annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets.

The estimated fair value of crediting rates associated with index-linked annuities is determined using a combination of an option pricing model and an option-budget approach. The valuation of these embedded derivatives also includes the establishment of a risk margin, as well as changes in nonperformance risk.

Transfers Into or Out of Level 3:

Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.

34

Brighthouse 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)

Certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) were as follows at:

					September 30, 2022			December 31, 2021			Impact of Increase in Input on Estimated Fair Value
	Valuation Techniques		Significant Unobservable Inputs		Range			Range
Embedded derivatives
Direct, assumed and ceded guaranteed minimum benefits	•	Option pricing  techniques	•	Mortality rates	0.03%	-	12.62%	0.03%	-	12.62%	Decrease (1)
			•	Lapse rates	0.30%	-	14.50%	0.30%	-	14.50%	Decrease (2)
			•	Utilization rates	0.00%	-	25.00%	0.00%	-	25.00%	Increase (3)
			•	Withdrawal rates	0.25%	-	10.00%	0.25%	-	10.00%	(4)
			•	Long-term equity volatilities	16.46%	-	22.01%	16.44%	-	22.16%	Increase (5)
			•	Nonperformance risk spread	0.00%	-	2.23%	(0.38)%	-	1.49%	Decrease (6)

_______________

(1)Mortality rates vary by age and by demographic characteristics such as gender. The range shown reflects the mortality rate for policyholders between 35 and 90 years old, which represents the majority of the business with living benefits. Mortality rate assumptions are set based on company experience and include an assumption for mortality improvement.

(2)The range shown reflects base lapse rates for major product categories for duration 1-20, which represents majority of business with living benefit riders. Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in-the-money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies.

(3)The utilization rate assumption estimates the percentage of contract holders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible in a given year. The range shown represents the floor and cap of the GMIB dynamic election rates across varying levels of in-the-money. For lifetime withdrawal guarantee riders, the assumption is that everyone will begin withdrawals once account value reaches zero which is equivalent to a 100% utilization rate. Utilization rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder.

(4)The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value.

(5)Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.

(6)Nonperformance risk spread varies by duration. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative.

35

Brighthouse Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

6. Fair Value (continued)

The Company does not develop unobservable inputs used in measuring fair value for all other assets and liabilities classified within Level 3; therefore, these are not included in the table above. The other Level 3 assets and liabilities primarily included fixed maturity securities and derivatives. For fixed maturity securities valued based on non-binding broker quotes, an increase (decrease) in credit spreads would result in a higher (lower) fair value. For derivatives valued based on third-party pricing models, an increase (decrease) in credit spreads would generally result in a higher (lower) fair value.

The changes in assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3) were summarized as follows:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Fixed Maturity Securities
	Corporate (1)		Structured Securities		Foreign Government		Equity Securities		Short-term Investments		Net Derivatives (2)		Net Embedded Derivatives (3)		Separate Account Assets (4)
	(In millions)
Three Months Ended September 30, 2022
Balance, beginning of period	$	1,710	$	345	$	40	$	27	$	—	$	38	$	(4,667)	$	—
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	—		—		—		1		—		3		700		—
Total realized/unrealized gains (losses) included in AOCI	(108)		(11)		(4)		—		—		21		—		—
Purchases (7)	278		125		—		—		—		—		—		—
Sales (7)	(22)		(1)		(1)		—		—		—		—		—
Issuances (7)	—		—		—		—		—		—		—		—
Settlements (7)	—		—		—		—		—		—		(181)		—
Transfers into Level 3 (8)	16		19		—		—		—		—		—		—
Transfers out of Level 3 (8)	(319)		(138)		—		—		—		—		—		—
Balance, end of period	$	1,555	$	339	$	35	$	28	$	—	$	62	$	(4,148)	$	—
Three Months Ended September 30, 2021
Balance, beginning of period	$	877	$	217	$	12	$	3	$	—	$	20	$	(8,053)	$	—
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	1		—		—		—		—		(6)		78		—
Total realized/unrealized gains (losses) included in AOCI	(8)		(1)		—		—		—		3		—		—
Purchases (7)	304		195		—		—		—		22		—		—
Sales (7)	(14)		(5)		—		—		—		—		—		—
Issuances (7)	—		—		—		—		—		—		—		—
Settlements (7)	—		—		—		—		—		—		46		—
Transfers into Level 3 (8)	223		8		—		—		—		—		—		—
Transfers out of Level 3 (8)	(94)		(149)		(12)		—		—		—		—		—
Balance, end of period	$	1,289	$	265	$	—	$	3	$	—	$	39	$	(7,929)	$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2022(9)	$	—	$	—	$	—	$	1	$	—	$	3	$	596	$	—
Changes in unrealized gains (losses) included in OCI for the instruments still held at September 30, 2022 (9)	$	(109)	$	(11)	$	(4)	$	—	$	—	$	21	$	—	$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2021 (9)	$	—	$	—	$	—	$	—	$	—	$	(5)	$	261	$	—
Changes in unrealized gains (losses) included in OCI for the instruments still held at September 30, 2021 (9)	$	(8)	$	—	$	—	$	—	$	—	$	3	$	—	$	—

36

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 Securities		Foreign Government		Equity Securities		Short-term Investments		Net Derivatives (2)		Net Embedded Derivatives (3)		Separate Account Assets (4)
	(In millions)
Nine Months Ended September 30, 2022
Balance, beginning of period	$	1,399	$	220	$	26	$	13	$	2	$	36	$	(8,614)	$	—
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	(6)		—		—		1		—		(11)		4,686		—
Total realized/unrealized gains (losses) included in AOCI	(286)		(23)		(13)		—		—		36		—		—
Purchases (7)	760		230		5		14		—		1		—		—
Sales (7)	(159)		(12)		(2)		—		(2)		—		—		—
Issuances (7)	—		—		—		—		—		—		—		—
Settlements (7)	—		—		—		—		—		—		(220)		—
Transfers into Level 3 (8)	31		25		19		—		—		—		—		—
Transfers out of Level 3 (8)	(184)		(101)		—		—		—		—		—		—
Balance, end of period	$	1,555	$	339	$	35	$	28	$	—	$	62	$	(4,148)	$	—
Nine Months Ended September 30, 2021
Balance, beginning of period	$	684	$	67	$	—	$	3	$	—	$	2	$	(7,301)	$	3
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	—		—		—		—		—		10		(418)		—
Total realized/unrealized gains (losses) included in AOCI	(9)		—		—		—		—		12		—		—
Purchases (7)	694		239		—		—		—		20		—		—
Sales (7)	(53)		(21)		—		—		—		(6)		—		—
Issuances (7)	—		—		—		—		—		—		—		—
Settlements (7)	—		—		—		—		—		—		(210)		—
Transfers into Level 3 (8)	175		14		—		—		—		—		—		—
Transfers out of Level 3 (8)	(202)		(34)		—		—		—		1		—		(3)
Balance, end of period	$	1,289	$	265	$	—	$	3	$	—	$	39	$	(7,929)	$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2022 (9)	$	—	$	—	$	—	$	1	$	—	$	(4)	$	4,676	$	—
Changes in unrealized gains (losses) included in OCI for the instruments still held at September 30, 2022 (9)	$	(288)	$	(23)	$	(13)	$	—	$	—	$	36	$	—	$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2021 (9)	$	—	$	—	$	—	$	—	$	—	$	(3)	$	(215)	$	—
Changes in unrealized gains (losses) included in OCI for the instruments still held at September 30, 2021 (9)	$	(9)	$	1	$	—	$	—	$	—	$	12	$	—	$	—

_______________

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

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

(3)Embedded derivative assets and liabilities are presented net for purposes of the rollforward.

(4)Investment performance related to separate account assets is fully offset by corresponding amounts credited to contract holders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income (loss). For the purpose of this disclosure, these changes are presented within net investment gains (losses).

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

37

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.

(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 and payables for collateral under securities loaned and other transactions. The estimated fair value of the excluded financial instruments, which are primarily classified in Level 2, approximates carrying value as they are short-term in nature such that the Company believes there is minimal risk of material changes in interest rates or credit quality. All remaining balance sheet amounts excluded from the tables below are not considered financial instruments subject to this disclosure.

The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:

	September 30, 2022
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	22,030	$	—	$	—	$	19,899	$	19,899
Policy loans	$	886	$	—	$	470	$	450	$	920
Other invested assets	$	316	$	—	$	176	$	140	$	316
Premiums, reinsurance and other receivables	$	4,798	$	—	$	115	$	4,893	$	5,008
Liabilities
Policyholder account balances	$	29,394	$	—	$	—	$	28,526	$	28,526
Short-term debt	$	125	$	—	$	—	$	125	$	125
Long-term debt	$	839	$	—	$	29	$	678	$	707
Other liabilities	$	1,140	$	—	$	329	$	811	$	1,140
Separate account liabilities	$	989	$	—	$	989	$	—	$	989

38

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, 2021
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	19,787	$	—	$	—	$	20,591	$	20,591
Policy loans	$	869	$	—	$	470	$	568	$	1,038
Other invested assets	$	85	$	—	$	70	$	15	$	85
Premiums, reinsurance and other receivables	$	3,075	$	—	$	20	$	3,583	$	3,603
Liabilities
Policyholder account balances	$	23,507	$	—	$	—	$	23,487	$	23,487
Long-term debt	$	841	$	—	$	36	$	1,087	$	1,123
Other liabilities	$	886	$	—	$	60	$	816	$	876
Separate account liabilities	$	1,437	$	—	$	1,437	$	—	$	1,437

7. Long-term and Short-term Debt

Intercompany Liquidity Facilities

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

On May 16, 2022, BH Holdings issued a $125 million promissory note to Brighthouse Life Insurance Company and Brighthouse Life Insurance Company of NY issued a $125 million promissory note to BH Holdings (the “May 2022 Promissory Notes”), in which both notes bore interest at a fixed rate of 2.5363%. Upon maturity on August 16, 2022, the May 2022 Promissory Notes were replaced by two new promissory notes that bear interest at a fixed rate of 4.0466% and mature on November 16, 2022.

8. Equity

Capital Contribution

During the second quarter of 2022, Brighthouse Life Insurance Company paid a cash capital contribution of $100 million to Brighthouse Life Insurance Company of NY.

Accumulated Other Comprehensive Income (Loss)

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

	Three Months Ended September 30, 2022
	Unrealized Investment Gains (Losses), Net of Related Offsets (1)		Unrealized Gains (Losses) on Derivatives		Foreign Currency Translation Adjustments		Total
	(In millions)
Balance at June 30, 2022	$	(3,445)	$	469	$	(33)	$	(3,009)
OCI before reclassifications	(4,715)		331		(24)		(4,408)
Deferred income tax benefit (expense) (2)	1,064		(143)		6		927
AOCI before reclassifications, net of income tax	(7,096)		657		(51)		(6,490)
Amounts reclassified from AOCI	45		(9)		—		36
Deferred income tax benefit (expense) (2)	(10)		2		—		(8)
Amounts reclassified from AOCI, net of income tax	35		(7)		—		28
Balance at September 30, 2022	$	(7,061)	$	650	$	(51)	$	(6,462)

39

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)

	Three Months Ended September 30, 2021
	Unrealized Investment Gains (Losses), Net of Related Offsets (1)		Unrealized Gains (Losses) on Derivatives		Foreign Currency Translation Adjustments		Total
	(In millions)
Balance at June 30, 2021	$	4,187	$	138	$	(13)	$	4,312
OCI before reclassifications	(462)		102		9		(351)
Deferred income tax benefit (expense) (2)	96		(21)		(1)		74
AOCI before reclassifications, net of income tax	3,821		219		(5)		4,035
Amounts reclassified from AOCI	(2)		—		—		(2)
Deferred income tax benefit (expense) (2)	1		—		—		1
Amounts reclassified from AOCI, net of income tax	(1)		—		—		(1)
Balance at September 30, 2021	$	3,820	$	219	$	(5)	$	4,034

	Nine Months Ended September 30, 2022
	Unrealized Investment Gains (Losses), Net of Related Offsets (1)		Unrealized Gains (Losses) on Derivatives		Foreign Currency Translation Adjustments		Total
	(In millions)
Balance at December 31, 2021	$	3,675	$	233	$	(7)	$	3,901
OCI before reclassifications	(13,806)		613		(56)		(13,249)
Deferred income tax benefit (expense) (2)	2,954		(183)		12		2,783
AOCI before reclassifications, net of income tax	(7,177)		663		(51)		(6,565)
Amounts reclassified from AOCI	147		(16)		—		131
Deferred income tax benefit (expense) (2)	(31)		3		—		(28)
Amounts reclassified from AOCI, net of income tax	116		(13)		—		103
Balance at September 30, 2022	$	(7,061)	$	650	$	(51)	$	(6,462)

	Nine Months Ended September 30, 2021
	Unrealized Investment Gains (Losses), Net of Related Offsets (1)		Unrealized Gains (Losses) on Derivatives		Foreign Currency Translation Adjustments		Total
	(In millions)
Balance at December 31, 2020	$	5,321	$	108	$	(8)	$	5,421
OCI before reclassifications	(1,915)		149		3		(1,763)
Deferred income tax benefit (expense) (2)	401		(31)		—		370
AOCI before reclassifications, net of income tax	3,807		226		(5)		4,028
Amounts reclassified from AOCI	16		(9)		—		7
Deferred income tax benefit (expense) (2)	(3)		2		—		(1)
Amounts reclassified from AOCI, net of income tax	13		(7)		—		6
Balance at September 30, 2021	$	3,820	$	219	$	(5)	$	4,034

_______________

(1)See Note 4 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI.

(2)The effects of income taxes on amounts recorded to AOCI are also recognized in AOCI. These income tax effects are released from AOCI when the related activity is reclassified into results from operations.

40

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)

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,
	2022		2021		2022		2021
	(In millions)
Net unrealized investment gains (losses):
Net unrealized investment gains (losses)	$	(36)	$	2	$	(133)	$	(14)	Net investment gains (losses)
Net unrealized investment gains (losses)	(9)		—		(14)		(2)		Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax	(45)		2		(147)		(16)
Income tax (expense) benefit	10		(1)		31		3
Net unrealized investment gains (losses), net of income tax	(35)		1		(116)		(13)
Unrealized gains (losses) on derivatives - cash flow hedges:
Interest rate swaps	—		—		4		1		Net derivative gains (losses)
Interest rate swaps	1		1		3		3		Net investment income
Foreign currency swaps	8		(1)		9		5		Net derivative gains (losses)
Gains (losses) on cash flow hedges, before income tax	9		—		16		9
Income tax (expense) benefit	(2)		—		(3)		(2)
Gains (losses) on cash flow hedges, net of income tax	7		—		13		7
Total reclassifications, net of income tax	$	(28)	$	1	$	(103)	$	(6)

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

41

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 Expenses

Information on other expenses was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(In millions)
Compensation	$	85	$	92	$	247	$	266
Contracted services and other labor costs	65		60		175		175
Transition services agreements	15		30		42		89
Establishment costs	20		24		45		68
Premium and other taxes, licenses and fees	12		11		37		35
Volume related costs, excluding compensation, net of DAC capitalization	122		149		349		477
Interest expense on debt	18		17		51		50
Other	70		52		332		164
Total other expenses	$	407	$	435	$	1,278	$	1,324

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 or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value.

The Company also receives and responds to subpoenas or other inquiries seeking a broad range of information from various state and federal regulators, agencies and officials. The issues involved in information requests and regulatory matters vary widely, but can include inquiries or investigations concerning the Company’s compliance with applicable insurance and other laws and regulations. The Company cooperates in these inquiries.

Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law.

The Company establishes liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. It is possible that some matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated at September 30, 2022.

42

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. In addition to amounts accrued for probable and reasonably estimable losses, as of September 30, 2022, the Company estimates the aggregate range of reasonably possible losses to be up to approximately $10 million.

Matters as to Which an Estimate Cannot Be Made

For other matters, the Company is not currently able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts, and the progress of settlement negotiations. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation contingencies and updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.

Sales Practices Claims

Over the past several years, the Company has faced claims and regulatory inquiries and investigations, alleging improper marketing or sales of individual life insurance policies, annuities or other products. The Company continues to defend vigorously against the claims in these matters. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices matters.

Cost of Insurance Class Actions

Richard A. Newton v. Brighthouse Life Insurance Company (U.S. District Court, Northern District of Georgia, Atlanta Division, filed May 8, 2020). Plaintiff has filed a purported class action lawsuit against Brighthouse Life Insurance Company. Plaintiff was the owner of a universal life insurance policy issued by Travelers Insurance Company, a predecessor to Brighthouse Life Insurance Company. Plaintiff seeks to certify a class of all persons who own or owned life insurance policies issued where the terms of the life insurance policy provide or provided, among other things, a guarantee that the cost of insurance rates would not be increased by more than a specified percentage in any contract year. Plaintiff alleges, among other things, causes of action for breach of contract, fraud, suppression and concealment, and violation of the Georgia Racketeer Influenced and Corrupt Organizations Act. Plaintiff seeks to recover damages, including punitive damages, interest and treble damages, attorneys’ fees, and injunctive and declaratory relief. Brighthouse Life Insurance Company filed a motion to dismiss in June 2020, which was granted in part and denied in part in March 2021. Plaintiff was granted leave to amend the complaint. The Company intends to vigorously defend this matter.

Lawrence Martin v. Brighthouse Life Insurance Company (U.S. District Court, Southern District of New York, filed April 6, 2021). Plaintiff has filed a purported class action lawsuit against Brighthouse Life Insurance Company. Plaintiff is the owner of a universal life insurance policy issued by Travelers Insurance Company, a predecessor to Brighthouse Life Insurance Company. Plaintiff seeks to certify a class of similarly situated owners of universal life insurance policies issued or administered by defendants and alleges that cost of insurance charges should have decreased over time due to improving mortality but did not. Plaintiff alleges, among other things, causes of action for breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment. Plaintiff seeks to recover compensatory damages, attorney’s fees, interest, and equitable relief including a constructive trust. Brighthouse Life Insurance Company filed a motion to dismiss in June 2021, which was denied in February 2022. Brighthouse Life Insurance Company of NY was initially named as a defendant when the lawsuit was filed, but was dismissed as a defendant, without prejudice, in April 2022. The Company intends to vigorously defend this matter.

Summary

Various litigations, claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, investor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.

43

Brighthouse Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)

10. Contingencies, Commitments and Guarantees (continued)

It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to previously, large or indeterminate amounts, including punitive and treble damages, are sought. Although, in light of these considerations, it is possible that an adverse outcome in certain cases could have a material effect upon the Company’s financial position, based on information currently known by the Company’s management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.

Other Loss Contingencies

As with litigation and regulatory loss contingencies, the Company considers establishing liabilities for loss contingencies associated with disputes or other matters involving third parties, including counterparties to contractual arrangements entered into by the Company (e.g., third-party vendors and reinsurers), as well as with tax authorities (“other loss contingencies”). The Company establishes liabilities for such other loss contingencies when it is probable that a loss will be incurred and the amount of the loss can be reasonably estimated. In matters where it is not probable, but is reasonably possible that a loss will be incurred and the amount of loss can be reasonably estimated, such losses or range of losses are disclosed, and no accrual is made. In the absence of sufficient information to support an assessment of the reasonably possible loss or range of loss, no accrual is made and no loss or range of loss is disclosed.

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

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

As of September 30, 2022, the Company estimates the range of reasonably possible losses in excess of the amounts accrued for certain other loss contingencies to be from zero up to approximately $125 million, which are primarily associated with the reinsurance-related matters described above. For certain other matters, the Company may not currently be able to estimate the reasonably possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of such loss. During the second quarter of 2022, the Company settled a reinsurance-related matter with a third party for $140 million, which is reported in other expenses.

Commitments

Mortgage Loan Commitments

The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $439 million and $719 million at September 30, 2022 and December 31, 2021, respectively.

Commitments to Fund Partnership Investments and Private Corporate Bond Investments

The Company commits to fund partnership investments and to lend funds under private corporate bond investments. The amounts of these unfunded commitments were $2.2 billion and $2.3 billion at September 30, 2022 and December 31, 2021, respectively.

44

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 $112 million, with a cumulative maximum of $118 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments.

In addition, the Company indemnifies its directors and officers as provided in its charters and bylaws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company’s interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future.

The Company’s recorded liabilities were $1 million at both September 30, 2022 and December 31, 2021 for indemnities, guarantees and commitments.

11. Related Party Transactions

The Company has various existing arrangements with its Brighthouse Financial affiliates and had previous arrangements with MetLife, Inc. (together with its subsidiaries and affiliates, “MetLife”) for services necessary to conduct its activities. Certain of the MetLife services have continued, however, MetLife ceased to be a related party in June 2018. See Note 9 for amounts related to continuing transition services. Other material arrangements between the Company and its related parties not disclosed elsewhere are as follows:

Reinsurance Agreements

The Company enters into reinsurance agreements primarily as a purchaser of reinsurance for its various insurance products and also as a provider of reinsurance for some insurance products issued by related parties. The Company participates in reinsurance activities in order to limit losses, minimize exposure to significant risks and provide additional capacity for future growth.

Information regarding the significant effects of assumed reinsurance with New England Life Insurance Company (“NELICO”), an affiliate, included on the interim condensed consolidated statements of operations and comprehensive income (loss) was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(In millions)
Premiums	$	2	$	—	$	2	$	2
Universal life and investment-type product policy fees	$	1	$	2	$	4	$	5
Other revenues	$	—	$	—	$	1	$	1
Policyholder benefits and claims	$	18	$	7	$	47	$	18
Other expenses	$	(5)	$	(8)	$	(17)	$	(21)

45

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 assumed reinsurance with NELICO included on the interim condensed consolidated balance sheets was as follows at:

	September 30, 2022		December 31, 2021
	(In millions)
Assets
Premiums, reinsurance and other receivables (net of allowance for credit losses)	$	30		$	26
Liabilities
Future policy benefits	$	138		$	119
Policyholder account balances	$	312		$	427
Other policy-related balances	$	12		$	9
Other liabilities	$	25		$	26

The Company assumes risks from NELICO related to guaranteed minimum benefits written directly by the cedent. The assumed reinsurance agreements contain embedded derivatives and changes in the estimated fair value are included within net derivative gains (losses). The embedded derivatives associated with these agreements are included within policyholder account balances and were $312 million and $427 million at September 30, 2022 and December 31, 2021, respectively. Net derivative gains (losses) associated with the embedded derivatives were $11 million and $116 million for the three months and nine months ended September 30, 2022, respectively, and $2 million and $128 million for the three months and nine months ended September 30, 2021, respectively.

Shared Services and Overhead Allocations

Brighthouse Services, LLC, an affiliate, currently provides the Company certain services, which include, but are not limited to, treasury, financial planning and analysis, legal, human resources, tax planning, internal audit, financial reporting and information technology. Revenues received from an affiliate related to these agreements, recorded in universal life and investment-type product policy fees, were $47 million and $149 million for the three months and nine months ended September 30, 2022, respectively, and $60 million and $176 million for the three months and nine months ended September 30, 2021, respectively. Costs incurred under these arrangements were $246 million and $671 million for the three months and nine months ended September 30, 2022, respectively, and $252 million and $736 million for the three months and nine months ended September 30, 2021, respectively, and were recorded in other expenses.

The Company had net receivables from/(payables to) affiliates, related to the items discussed above, of ($160) million and ($182) million at September 30, 2022 and December 31, 2021, respectively.

Broker-Dealer Transactions

The related party expense for the Company was commissions paid on the sale of variable products and passed through to the broker-dealer affiliate. The related party revenue for the Company was fee income passed through the broker-dealer affiliate from trusts and mutual funds whose shares serve as investment options of policyholders of the Company. Fee income received related to these transactions and recorded in other revenues was $44 million and $143 million for the three months and nine months ended September 30, 2022, respectively, and $57 million and $168 million for the three months and nine months ended September 30, 2021, respectively. Commission expenses incurred related to these transactions and recorded in other expenses was $240 million and $696 million for the three months and nine months ended September 30, 2022, respectively, and $254 million and $741 million for the three months and nine months ended September 30, 2021, respectively. The Company also had related party fee income receivables of $14 million and $19 million at September 30, 2022 and December 31, 2021, respectively.

46

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Page
Overview	48
Regulatory Developments	49
Summary of Critical Accounting Estimates	50
Non-GAAP Financial Disclosures	50
Results of Operations	52
Liquidity and Capital Resources	57
Note Regarding Forward-Looking Statements	58

47

For purposes of this discussion, “BLIC,” the “Company,” “we,” “our” and “us” refer to Brighthouse Life Insurance Company and its subsidiaries, and “Brighthouse Life Insurance Company” refers solely to Brighthouse Life Insurance Company and not to any of its subsidiaries. Brighthouse Life Insurance Company is an indirect wholly-owned subsidiary of Brighthouse Financial, Inc. (“BHF” and together with its subsidiaries, “Brighthouse Financial”). This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with (i) the Interim Condensed Consolidated Financial Statements and related notes included elsewhere herein; (ii) our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 2, 2022 (the “2021 Annual Report”); (iii) our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (the “First Quarter Form 10-Q”) filed with the SEC on May 11, 2022; (iv) our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 (the “Second Quarter Form 10-Q” and, together with the First Quarter Form 10-Q, the “Quarterly Reports”) filed with the SEC on August 8, 2022; and (v) our current reports on Form 8-K filed in 2022.

Overview

We offer a range of annuity and life insurance products to individuals and deliver our products through multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners. Brighthouse Life Insurance Company, a Delaware corporation, is licensed to write business in all U.S. states (except New York), the District of Columbia, the Bahamas, Guam, Puerto Rico, the British Virgin Islands and the U.S. Virgin Islands. Brighthouse Life Insurance Company of NY (“BHNY”), a wholly-owned subsidiary of Brighthouse Life Insurance Company, is domiciled in New York and licensed to write business only in New York.

We are organized into three segments: (i) Annuities, (ii) Life and (iii) Run-off, which consists of products that are no longer actively sold and are separately managed. In addition, we report certain of our results of operations in Corporate & Other. See “Business — Segments and Corporate & Other” included in our 2021 Annual Report, as well as Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information regarding our segments and Corporate & Other.

Financial and Economic Environment

Our business and results of operations are materially affected by conditions in the capital markets and the economy generally. Stressed conditions, volatility and disruptions in the capital markets or financial asset classes can have an adverse effect on us. Equity market performance can affect our profitability for variable annuities and other separate account products as a result of the effects it has on product demand, revenues, expenses, reserves and our risk management effectiveness. The level of long-term interest rates and the shape of the yield curve can have a negative effect on the profitability for variable annuities and the demand for, and the profitability of, spread-based products such as fixed annuities, index-linked annuities and universal life insurance. Low interest rates and risk premium, including credit spread, affect new money rates on invested assets and the cost of product guarantees. Insurance premium growth and demand for our products is impacted by the general health of U.S. economic activity. A sustained or material increase in inflation could also affect our business in several ways. During inflationary periods, the value of fixed income investments falls which could increase realized and unrealized losses. Interest rates have increased and may continue to increase due to central bank policy responses to combat inflation, which may positively impact our business in certain respects, but could also increase the risk of a recession or an equity market downturn and could negatively impact various portions of our business, including our investment portfolio. Inflation also increases our expenses (including, among others, for labor and third-party services), potentially putting pressure on profitability if such costs cannot be passed through to policyholders in our product prices. Prolonged and elevated inflation could adversely affect the financial markets and the economy generally and dispelling it may require governments to pursue a restrictive fiscal and monetary policy, which could constrain overall economic activity and inhibit revenue growth.

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

COVID-19 Pandemic

We continue to closely monitor developments related to the COVID-19 pandemic, which has negatively impacted us in certain respects. At this time, it continues to not be possible to estimate (i) the severity or duration of the pandemic, including the severity, duration and frequency of any additional “waves” or emerging variants of COVID-19 or (ii) the efficacy or

48

utilization of any therapeutic treatments and vaccines for COVID-19 or variants thereof. It likewise remains not possible to predict or estimate the longer-term effects of the pandemic, or any actions taken to contain or address the pandemic, on the economy at large and on our business, financial condition, results of operations and prospects, including the impact on our investment portfolio and our ratings, or the need for us in the future to revisit or revise any targets we may provide to the markets or any aspects of our business model. See “Business — Regulation,” “Risk Factors — Risks Related to Our Business — The ongoing COVID-19 pandemic could materially adversely affect our business, financial condition and results of operations, including our capitalization and liquidity” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — COVID-19 Pandemic” included in our 2021 Annual Report, as well as Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements.

Regulatory Developments

We, including our insurance subsidiary, BHNY, and our reinsurance subsidiary, Brighthouse Reinsurance Company of Delaware, are regulated primarily at the state level, with some products and services also subject to federal regulation. In addition, Brighthouse Life Insurance Company and BHNY are subject to regulation under the insurance holding company laws of various U.S. jurisdictions. Furthermore, some of our operations, products and services are subject to the Employee Retirement Income Security Act of 1974, consumer protection laws, securities, broker-dealer and investment advisor regulations, as well as environmental and unclaimed property laws and regulations. See “Business — Regulation,” as well as “Risk Factors — Regulatory and Legal Risks” included in our 2021 Annual Report, as amended or supplemented by our subsequent Quarterly Reports under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Regulatory Developments.”

Federal Tax Reform

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

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

New York Regulation 47

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

New York Regulation 187

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

49

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:

•liabilities for future policy benefits;

•amortization of deferred policy acquisition costs (“DAC”);

•estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation; and

•measurement of income taxes and the valuation of deferred tax assets.

In applying our accounting policies, we make subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our business and operations. Actual results could differ from these estimates.

The above critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and Note 1 of the Notes to the Consolidated Financial Statements included in our 2021 Annual Report.

Non-GAAP Financial Disclosures

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

Adjusted Earnings

In this report, we present adjusted earnings as a measure of our performance that is not calculated in accordance with GAAP. Adjusted earnings is used by management to evaluate performance and facilitate comparisons to industry results. We believe the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of our performance by the investor community and contract holders by highlighting the results of operations and the underlying profitability drivers of our business. Adjusted earnings should not be viewed as a substitute for net income (loss) attributable to Brighthouse Life Insurance Company, which is the most directly comparable financial measure calculated in accordance with GAAP. See “— Results of Operations” for a reconciliation of adjusted earnings to net income (loss) attributable to Brighthouse Life Insurance Company.

Adjusted earnings, which may be positive or negative, focuses on our primary businesses by excluding the impact of market volatility, which could distort trends.

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

•Net investment gains (losses);

•Net derivative gains (losses) except earned income and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment (“Investment Hedge Adjustments”); and

•Certain variable annuity guaranteed minimum income benefits (“GMIB”) fees (“GMIB Fees”).

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

•Amounts associated with benefits related to GMIBs (“GMIB Costs”);

•Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets (“Market Value Adjustments”); and

•Amortization of DAC and value of business acquired (“VOBA”) related to (i) net investment gains (losses), (ii) net derivative gains (losses) and (iii) GMIB Fees and GMIB Costs.

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

50

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 Earnings		How Derived from GAAP (1)
(i)	Fee income	(i)	Universal life and investment-type product policy fees (excluding (a) unearned revenue adjustments related to net investment gains (losses) and net derivative gains (losses) and (b) GMIB Fees) plus Other revenues and amortization of deferred gain on reinsurance.
(ii)	Net investment spread	(ii)	Net investment income plus Investment Hedge Adjustments and interest received on ceded fixed annuity reinsurance deposit funds reduced by Interest credited to policyholder account balances and interest on future policy benefits.
(iii)	Insurance-related activities	(iii)	Premiums less Policyholder benefits and claims (excluding (a) GMIB Costs, (b) Market Value Adjustments, (c) interest on future policy benefits and (d) amortization of deferred gain on reinsurance) plus the pass through of performance of ceded separate account assets.
(iv)	Amortization of DAC and VOBA	(iv)	Amortization of DAC and VOBA (excluding amounts related to (a) net investment gains (losses), (b) net derivative gains (losses) and (c) GMIB Fees and GMIB Costs).
(v)	Other expenses, net of DAC capitalization	(v)	Other expenses reduced by capitalization of DAC.
(vi)	Provision for income tax expense (benefit)	(vi)	Tax impact of the above items.

______________

(1)Italicized items indicate GAAP statement of operations line items.

Consistent with GAAP guidance for segment reporting, adjusted earnings is also our GAAP measure of segment performance. Accordingly, we report adjusted earnings by segment in Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements.

51

Results of Operations

Annual Actuarial Review

We typically conduct our annual actuarial review (“AAR”) in the third quarter of each year. As a result of the 2022 AAR, we increased the long-term general account earned rate, driven by an increase in our mean reversion rate from 3.00% to 3.50%, which had the largest impact on our universal life with secondary guarantees (“ULSG”) business. For our variable annuity business, in addition to the update in the long-term general account earned rate, we updated fund allocations, market volatility and maintenance expenses, as well as assumptions regarding policyholder behavior, including mortality, lapses and withdrawals. For our life business, in addition to the update in the long-term general account earned rate, we updated assumptions regarding policyholder behavior, including mortality, premium persistency, lapses, withdrawals, as well as maintenance expenses.

Consolidated Results for the Nine Months Ended September 30, 2022 and 2021

Unless otherwise noted, all amounts in the following discussions of our results of operations are stated before income tax except for adjusted earnings, which are presented net of income tax.

	Nine Months Ended September 30,
	2022		2021
	(In millions)
Revenues
Premiums	$	482	$	526
Universal life and investment-type product policy fees	1,953		2,240
Net investment income	3,036		3,629
Other revenues	326		262
Net investment gains (losses)	(171)		(37)
Net derivative gains (losses)	1,909		(2,049)
Total revenues	7,535		4,571
Expenses
Policyholder benefits and claims	3,212		2,420
Interest credited to policyholder account balances	1,019		978
Capitalization of DAC	(328)		(360)
Amortization of DAC and VOBA	888		(14)
Interest expense on debt	51		50
Other expenses	1,555		1,634
Total expenses	6,397		4,708
Income (loss) before provision for income tax	1,138		(137)
Provision for income tax expense (benefit)	188		(68)
Net income (loss)	950		(69)
Less: Net income (loss) attributable to noncontrolling interests	1		1
Net income (loss) attributable to Brighthouse Life Insurance Company	$	949	$	(70)

52

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

	Nine Months Ended September 30,
	2022		2021
	(In millions)
GMLB Riders	$	2,261	$	(1,412)
Other derivative instruments	(1,453)		(407)
Net investment gains (losses)	(171)		(37)
Other adjustments	72		19
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	428		1,699
Income (loss) attributable to Brighthouse Life Insurance Company before provision for income tax	1,137		(138)
Provision for income tax expense (benefit)	188		(68)
Net income (loss) attributable to Brighthouse Life Insurance Company	$	949	$	(70)

Nine Months Ended September 30, 2022 Compared with the Nine Months Ended September 30, 2021

Income before provision for income tax was $1.1 billion ($949 million, net of income tax), an increase of $1.3 billion ($1.0 billion, net of income tax) from a loss before provision for income tax of $138 million ($70 million, net of income tax) in the prior period.

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

•gains from guaranteed minimum living benefits (“GMLB”) riders (“GMLB Riders”), see “— GMLB Riders for the Nine Months Ended September 30, 2022 and 2021.”

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

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

•the unfavorable impact of long-term benchmark interest rates on interest rate derivatives used to manage interest rate exposure in our ULSG business, as the long-term benchmark interest rate increased more in the current period than in the prior period; and

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

The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of 17% in the current period compared to 50% in the prior period. The decrease in the effective tax rate was driven by lower pre-tax adjusted earnings, as discussed in greater detail below. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction, tax credits and current period non-recurring items.

53

Reconciliation of Net Income (Loss) to Adjusted Earnings

The reconciliation of net income (loss) attributable to Brighthouse Life Insurance Company to adjusted earnings was as follows:

	Nine Months Ended September 30,
	2022		2021
	(In millions)
Net income (loss) attributable to Brighthouse Life Insurance Company	$	949	$	(70)
Add: Provision for income tax expense (benefit)	188		(68)
Income (loss) attributable to Brighthouse Life Insurance Company before provision for income tax	1,137		(138)
Less: GMLB Riders	2,261		(1,412)
Less: Other derivative instruments	(1,453)		(407)
Less: Net investment gains (losses)	(171)		(37)
Less: Other adjustments	72		19
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	428		1,699
Less: Provision for income tax expense (benefit)	39		316
Adjusted earnings	$	389	$	1,383

Consolidated Results for the Nine Months Ended September 30, 2022 and 2021 — Adjusted Earnings

The components of adjusted earnings were as follows:

	Nine Months Ended September 30,
	2022		2021
	(In millions)
Fee income	$	2,103	$	2,321
Net investment spread	1,538		2,137
Insurance-related activities	(1,664)		(1,301)
Amortization of DAC and VOBA	(270)		(133)
Other expenses, net of DAC capitalization	(1,278)		(1,324)
Less: Net income (loss) attributable to noncontrolling interests	1		1
Pre-tax adjusted earnings, less net income (loss) attributable to noncontrolling interests	428		1,699
Provision for income tax expense (benefit)	39		316
Adjusted earnings	$	389	$	1,383

Nine Months Ended September 30, 2022 Compared with the Nine Months Ended September 30, 2021

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

Key net unfavorable impacts were:

•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

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

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

◦higher returns on real estate limited partnerships and LLCs;

54

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

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

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

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

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

partially offset by

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

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

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

•lower fee income due to:

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

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

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

•higher net amortization of DAC and VOBA due to:

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

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

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

partially offset by

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

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

55

GMLB Riders for the Nine Months Ended September 30, 2022 and 2021

The overall impact on 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, was as follows:

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

______________

(1)Excludes living benefit fees, included as a component of adjusted earnings, of $39 million and $45 million for the nine months ended September 30, 2022 and 2021, respectively.

Nine Months Ended September 30, 2022 Compared with the Nine Months Ended September 30, 2021

Comparative results from GMLB Riders were favorable by $3.7 billion, primarily driven by:

•favorable changes to the estimated fair value of embedded derivative liabilities associated with Shield Level Annuities (“Shield liabilities”);

partially offset by

•unfavorable changes to the estimated fair value of variable annuity liability reserves;

•unfavorable changes to GMLB DAC; and

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

Lower equity markets resulted in the following impacts:

•favorable changes to the estimated fair value of Shield liabilities;

•favorable changes to the estimated fair value of our GMLB hedges; and

•favorable changes in ceded reinsurance;

partially offset by

•unfavorable changes to the estimated fair value of variable annuity liability reserves; and

•unfavorable changes to GMLB DAC.

Higher interest rates resulted in the following impacts:

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

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

•unfavorable changes to GMLB DAC; and

•unfavorable changes in ceded reinsurance;

partially offset by

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

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

56

Liquidity and Capital Resources

Our business and results of operations are materially affected by conditions in the global capital markets and the economy generally. Stressed conditions, volatility or disruptions in global capital markets, particular markets or financial asset classes can impact us adversely, in part because we have a large investment portfolio and our insurance liabilities and derivatives are sensitive to changing market factors. For further information regarding market factors that could affect our ability to meet liquidity and capital needs, including those related to the COVID-19 pandemic, see “— Overview — COVID-19 Pandemic.”

Sources and Uses of Liquidity and Capital

In addition to the summary description of liquidity and capital sources discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Sources and Uses of Liquidity and Capital” in our 2021 Annual Report, the following additional information is provided regarding our primary sources of liquidity and capital:

Funding Agreements

From time to time, Brighthouse Life Insurance Company issues funding agreements and uses the proceeds from such issuances for spread lending purposes in connection with our institutional spread margin business or to provide additional liquidity. The institutional spread margin business is comprised of funding agreements issued in connection with the programs described in more detail below. See Note 3 of the Notes to the Consolidated Financial Statements included in our 2021 Annual Report for additional information on funding agreements.

Funding Agreement-Backed Commercial Paper Program

In July 2021, Brighthouse Life Insurance Company established a funding agreement-backed commercial paper program (the “FABCP Program”) for spread lending purposes, pursuant to which a special purpose limited liability company (the “SPLLC”) may issue commercial paper and deposit the proceeds with Brighthouse Life Insurance Company under a funding agreement issued by Brighthouse Life Insurance Company to the SPLLC. The maximum aggregate principal amount permitted to be outstanding at any one time under the FABCP Program is $3.0 billion. Activity related to this funding agreement is reported in Corporate & Other.

Funding Agreement-Backed Notes Program

In April 2021, Brighthouse Life Insurance Company established a funding agreement-backed notes program (the “FABN Program”), pursuant to which Brighthouse Life Insurance Company may issue funding agreements to a special purpose statutory trust for spread lending purposes. The maximum aggregate principal amount permitted to be outstanding at any one time under the FABN Program was increased from $5.0 billion to $7.0 billion in August 2022. Activity related to these funding agreements is reported in Corporate & Other.

Federal Home Loan Bank Funding Agreements

Brighthouse Life Insurance Company is a member of the Federal Home Loan Bank (“FHLB”) of Atlanta, where it maintains a secured funding agreement program, under which funding agreements may be issued either (i) for spread lending purposes or (ii) to provide additional liquidity. Activity related to these funding agreements is reported in Corporate & Other.

Farmer Mac Funding Agreements

Brighthouse Life Insurance Company has a secured funding agreement program with the Federal Agricultural Mortgage Corporation and its affiliate Farmer Mac Mortgage Securities Corporation (“Farmer Mac”) pursuant to which the parties may enter into funding agreements either (i) for spread lending purposes or (ii) to provide additional liquidity. In September 2022, Brighthouse Life Insurance Company amended this program to (i) extend the term from December 31, 2023 to December 1, 2026 and (ii) increase the maximum aggregate principal amount permitted to be outstanding from $500 million to $750 million. Activity related to these funding agreements is reported in Corporate & Other.

57

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

	Aggregate Principal Amount Outstanding				Issuances				Repayments
					Nine Months Ended September 30,
	September 30, 2022		December 31, 2021		2022		2021		2022		2021
	(In millions)
FABCP Program	$	1,718	$	1,848	$	8,980	$	1,989	$	9,110	$	326
FABN Program	3,450		2,900		550		2,400		—		—
FHLB Funding Agreements	3,750		900		5,350		951		2,500		351
Farmer Mac Funding Agreements	500		125		400		25		25		—
Total	$	9,418	$	5,773	$	15,280	$	5,365	$	11,635	$	677

Note Regarding Forward-Looking Statements

This report and other oral or written statements that we make from time to time may contain information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve substantial risks and uncertainties. We have tried, wherever possible, to identify such statements using words such as “anticipate,” “estimate,” “expect,” “project,” “may,” “will,” “could,” “intend,” “goal,” “target,” “guidance,” “forecast,” “preliminary,” “objective,” “continue,” “aim,” “plan,” “believe” and other words and terms of similar meaning, or that are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include, without limitation, statements relating to future actions, prospective services or products, financial projections, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, as well as trends in operating and financial results.

Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of BLIC. These statements are based on current expectations and the current economic environment and involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others:

•differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models;

•higher risk management costs and exposure to increased market risk due to guarantees within certain of our products;

•the effectiveness of our variable annuity exposure risk management strategy and the impact of such strategy on volatility in our profitability measures and negative effects on our statutory capital;

•material differences from actual outcomes compared to the sensitivities calculated under certain scenarios and sensitivities that we may utilize in connection with our variable annuity risk management strategies;

•the impact of interest rates on our future ULSG policyholder obligations and net income volatility;

•the impact of the ongoing COVID-19 pandemic;

•the potential material adverse effect of changes in accounting standards, practices or policies applicable to us, including changes in the accounting for long-duration contracts;

•loss of business and other negative impacts resulting from a downgrade or a potential downgrade in our financial strength ratings;

•the availability of reinsurance and the ability of the counterparties to our reinsurance or indemnification arrangements to perform their obligations thereunder;

•heightened competition, including with respect to service, product features, scale, price, actual or perceived financial strength, claims-paying ratings, financial strength ratings, e-business capabilities and name recognition;

•our ability to market and distribute our products through distribution channels;

•any failure of third parties to provide services we need, any failure of the practices and procedures of such third parties and any inability to obtain information or assistance we need from third parties;

58

•the risks associated with climate change;

•the adverse impact on liabilities for policyholder claims as a result of extreme mortality events;

•the impact of adverse capital and credit market conditions, including with respect to our ability to meet liquidity needs and access capital;

•the impact of economic conditions in the capital markets and the U.S. and global economy, as well as geo-political events, military actions or catastrophic events, on our investment portfolio, including on realized and unrealized losses and impairments, net investment spread and net investment income;

•the impact of events that adversely affect issuers, guarantors or collateral relating to our investments or our derivatives counterparties, on impairments, valuation allowances, reserves, net investment income and changes in unrealized gain or loss positions;

•the impact of changes in regulation and in supervisory and enforcement policies on our insurance business or other operations;

•the potential material negative tax impact of potential future tax legislation that could make some of our products less attractive to consumers;

•the effectiveness of our policies and procedures in managing risk;

•the loss or disclosure of confidential information, damage to our reputation and impairment of our ability to conduct business effectively as a result of any failure in cyber- or other information security systems;

•whether all or any portion of the tax consequences of our separation from MetLife, Inc. (together with its subsidiaries and affiliates, “MetLife”) are not as expected, leading to material additional taxes or material adverse consequences to tax attributes that impact us;

•the uncertainty of the outcome of any disputes with MetLife over tax-related or other matters and agreements or disagreements regarding MetLife’s or our obligations under our other agreements; and

•other factors described in this report and from time to time in documents that we file with the SEC.

For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements included and the risks, uncertainties and other factors identified in our 2021 Annual Report, particularly in the sections entitled “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk,” as well as in our other subsequent filings with the SEC. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

Item 4. Controls and Procedures

Management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of September 30, 2022.

MetLife provides certain services to the Company on a transitional basis through services agreements. The Company continues to change business processes, implement systems and establish new third-party arrangements, as a subsidiary of Brighthouse Financial, Inc. We consider these in aggregate to be material changes in our internal control over financial reporting.

Other than as noted above, there were no changes to the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, these internal controls over financial reporting.

Part II — Other Information

Item 1. Legal Proceedings

See Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements.

59

Item 1A. Risk Factors

We discuss in this report, in our 2021 Annual Report and in our other filings with the SEC, various risks that may materially affect our business. In addition, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Note Regarding Forward-Looking Statements” included herein. There have been no material changes to our risk factors from the risk factors previously disclosed in our 2021 Annual Report.

Item 6. Exhibits

(Note Regarding Reliance on Statements in Our Contracts: In reviewing the agreements included as exhibits herein, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about Brighthouse Life Insurance Company, its subsidiaries or affiliates or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and (i) should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; (iii) may apply standards of materiality in a way that is different from what may be viewed as material to investors; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about Brighthouse Life Insurance Company, its subsidiaries and affiliates may be found elsewhere herein and Brighthouse Life Insurance Company’s other public filings, which are available without charge through the U.S. Securities and Exchange Commission website at www.sec.gov.)

Exhibit No.	Description
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*	Inline XBRL Taxonomy Extension Schema Document.
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.
104*	The cover page of Brighthouse Life Insurance Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in Inline XBRL (included within the Exhibit 101 attachments).

* Filed herewith.

** Furnished herewith.

60

SIGNATURE

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

BRIGHTHOUSE LIFE INSURANCE COMPANY
By:	/s/ Kristine H. Toscano
	Name:	Kristine H. Toscano
	Title:	Vice President and Chief Accounting Officer
		(Duly Authorized Officer and Principal Accounting Officer)

Date: November 10, 2022

61