Brighthouse Financial Inc.
11/07/2025 | Press release | Distributed by Public on 11/07/2025 16:33
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
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
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Introduction
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61
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Executive Summary
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61
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Industry Trends and Uncertainties
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63
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Summary of Critical Accounting Estimates
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65
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Non-GAAP Financial Disclosures
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65
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Results of Operations
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67
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Investments
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80
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Derivatives
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89
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Policyholder Liabilities
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90
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Liquidity and Capital Resources
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92
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Note Regarding Forward-Looking Statements
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100
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For purposes of this discussion, "Brighthouse Financial," the "Company," "we," "our" and "us" refer to Brighthouse Financial, Inc. and its subsidiaries, and "BHF" refers solely to Brighthouse Financial, Inc., the ultimate holding company for all of our subsidiaries, and not to any of its subsidiaries. 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, 2024 (the "2024 Annual Report") filed with the U.S. Securities and Exchange Commission ("SEC") on February 28, 2025; (iii) our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 (the "First Quarter Form 10-Q") filed with the SEC on May 9, 2025; (iv) our Quarterly Report on Form 10-Q for the quarter ended June 30, 2025 (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, 2025; and (v) our current reports on Form 8-K filed in 2025.
Introduction
This Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations, financial condition and cash flows of Brighthouse Financial for the periods indicated. Prior to discussing our results of operations, we present information that we believe is useful to understanding the discussion of our financial results. This information precedes our results of operations discussion and is most beneficial when read in the sequence presented. A summary of key informational sections is as follows:
•"Executive Summary" provides summarized information regarding our business, segments and financial results.
•"Industry Trends and Uncertainties" discusses updates and changes to a number of trends and uncertainties included in our 2024 Annual Report that we believe may materially affect our future financial condition, results of operations or cash flows.
•"Summary of Critical Accounting Estimates" explains what we believe to be the most critical estimates and judgments applied in determining our results in accordance with accounting principles generally accepted in the United States of America ("GAAP").
•"Non-GAAP Financial Disclosures" defines key financial measures presented in our results of operations discussion that are not calculated in accordance with GAAP but are used by management in evaluating company and segment performance. As described in this section, adjusted earnings is presented by key business activities which are derived, but different, from the line items presented in the GAAP statements of operations. This section also refers to certain other terms used to describe our insurance business and financial and operating metrics but is not intended to be exhaustive.
Our Results of Operations discussion and analysis presents a review for the three months and nine months ended September 30, 2025 and 2024 and period-over-period, as well as year-over-year, comparisons between these periods.
Executive Summary
We are one of the largest providers of annuity and life insurance products in the U.S. through multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners. We are organized into the following reportable segments: Annuities; Life; Run-off; and Corporate & Other. See "Business - Segment Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Executive Summary" included in our 2024 Annual Report, as well as Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information regarding our segments.
Net income (loss) available to shareholders and adjusted earnings (loss), a non-GAAP financial measure, were as follows:
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
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Income (loss) available to shareholders before provision for income tax
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$ | 557 | $ | 160 | $ | 243 | $ | (493) | ||||||||||||||||||
| Less: Provision for income tax expense (benefit) | 104 | 10 | 24 | (133) | ||||||||||||||||||||||
| Net income (loss) available to shareholders (1) | $ | 453 | $ | 150 | $ | 219 | $ | (360) | ||||||||||||||||||
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Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends (1)
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$ | 1,211 | $ | 940 | $ | 1,742 | $ | 1,248 | ||||||||||||||||||
| Less: Provision for income tax expense (benefit) | 241 | 173 | 339 | 233 | ||||||||||||||||||||||
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Adjusted earnings (loss) (1)
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$ | 970 | $ | 767 | $ | 1,403 | $ | 1,015 | ||||||||||||||||||
__________________
(1)We use the term "net income (loss) available to shareholders" to refer to "net income (loss) available to Brighthouse Financial, Inc.'s common shareholders" and "adjusted loss" to refer to negative adjusted earnings values throughout the results of operations discussions.
For the three months ended September 30, 2025, we had net income available to shareholders of $453 million and adjusted earnings of $970 million compared to net income available to shareholders of $150 million and adjusted earnings of $767 million for the three months ended September 30, 2024. Net income available to shareholders for the three months ended September 30, 2025 primarily reflects favorable pre-tax adjusted earnings and a net investment gain on the sale of a subsidiary which owned certain mineral rights across the U.S. These favorable impacts were partially offset by net unfavorable changes in the estimated fair value of our variable annuity guaranteed benefit riders due to market factors.
For the nine months ended September 30, 2025, we had net income available to shareholders of $219 million and adjusted earnings of $1.4 billion compared to a net loss available to shareholders of $360 million and adjusted earnings of $1.0 billion for the nine months ended September 30, 2024. Net income available to shareholders for the nine months ended September 30, 2025 primarily reflects favorable pre-tax adjusted earnings and a net investment gain on the sale of a subsidiary which owned certain mineral rights across the U.S. These favorable impacts were partially offset by net unfavorable changes in the estimated fair value of our variable annuity guaranteed benefit riders due to market factors, an unfavorable change in the estimated fair value of freestanding interest rate derivatives we use to hedge our universal life with secondary guarantees ("ULSG") business resulting from decreasing interest rates, net investment losses on mortgage loans, net investment losses on sales of fixed maturity securities and the weakening of the U.S. dollar unfavorably impacting foreign currency forwards and swaps.
See "- Non-GAAP Financial Disclosures." See "- Results of Operations" for a detailed discussion of our results.
Recent Developments
On November 6, 2025, BHF entered into an Agreement and Plan of Merger (the "Merger Agreement") with Aquarian Holdings VI L.P., a Delaware limited partnership ("Parent"), Aquarian Beacon Merger Sub Inc., a Delaware corporation and an indirect wholly-owned subsidiary of Parent ("Merger Sub"), and Aquarian Holdings LLC, a Delaware limited liability company ("Aquarian Holdings"), solely for the purpose of certain provisions, pursuant to which, at the closing of the transactions contemplated by the Merger Agreement, Merger Sub will merge with and into BHF, with BHF surviving as a wholly owned subsidiary of Parent (the "Merger").
Pursuant to the Merger Agreement, at the effective time of the Merger (the "Effective Time"), each share of our common stock issued and outstanding immediately prior to the Effective Time will be converted into the right to receive $70.00 per share, net in cash, without interest and less any amounts that are required to be deducted or withheld under applicable law.
The consummation of the Merger is subject to the satisfaction or waiver of customary closing conditions, including, among others, the adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote thereon at a meeting of our stockholders and the receipt of certain regulatory approvals, including from insurance regulators in Delaware, New York and Massachusetts. Parent's and Merger Sub's obligations are also conditioned upon the absence of a Company Material Adverse Effect (as defined in the Merger Agreement) and the absence of a Burdensome Condition (as defined in the Merger Agreement). The Merger Agreement also contains customary representations, warranties and covenants by each of Parent, Merger Sub, Aquarian Holdings and BHF, including, among others, covenants by BHF to use its reasonable best efforts to conduct its business in the ordinary course consistent with past practice and to refrain from taking certain actions prior to the Effective Time, in each case except with Parent's consent.
Industry Trends and Uncertainties
Throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations, we discuss a number of trends and uncertainties that we believe may materially affect our future financial condition, results of operations or cash flows. Where these trends or uncertainties are specific to a particular aspect of our business, we often include such a discussion under the relevant caption of this Management's Discussion and Analysis of Financial Condition and Results of Operations, as part of our broader analysis of that area of our business. Refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations - Industry Trends and Uncertainties" included in our 2024 Annual Report, as amended or supplemented by our subsequent Quarterly Reports and herein, for a comprehensive discussion of some of the key general trends and uncertainties that have influenced the development of our business and our historical financial performance and that we believe will continue to influence our business and results of operations in the future.
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, Shield®Level Annuities ("Shield" and "Shield Annuity") 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 Federal Reserve Board (the "Federal Reserve") decreased the target range for the federal funds rate in September and October 2025, as well as in September, November and December 2024, and any additional future decrease may negatively impact our business in certain respects, including our investment portfolio, by lowering the level of long-term interest rates and changing the shape of the yield curve. 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, as well as 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. 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 restrictive fiscal and monetary policies, which could constrain overall economic activity and inhibit revenue growth. Events involving limited liquidity, defaults, nonperformance, fraud or other adverse developments that affect financial institutions or the financial services industry generally, or concerns or rumors about events of these kinds or other similar risks, could adversely affect market-wide liquidity, which could increase the risk of a recession or an equity market downturn and negatively impact various portions of our business, including our investment portfolio. See "Risk Factors - Economic Environment and Capital Markets-Related Risks - If difficult conditions in the capital markets and the U.S. economy generally persist or are perceived to persist, they may materially adversely affect our business and results of operations" and "Risk Factors - Risks Related to Our Investment Portfolio - Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations" included in our 2024 Annual Report.
The above factors affect our expectations regarding future margins. We review our long-term assumptions about capital markets returns and interest rates, along with other assumptions such as contract holder behavior, as part of our annual actuarial review ("AAR"). As additional company specific or industry information on contract holder behavior becomes available, related assumptions may change and may potentially have a material impact on liability valuations and net income.
We continue to closely monitor political and economic conditions that might contribute to market volatility and their impact on our business operations, investment portfolio and derivatives, such as global inflation, tariffs imposed or threatened by the U.S. or foreign governments, uncertainty and instability in certain asset classes (including commercial real estate), supply chain disruptions and recent geopolitical conflicts, including in Europe and the Middle East. See "- Investments - Current Environment" herein, as well as "Risk Factors - Economic Environment and Capital Markets-Related Risks," "Risk Factors - Risks Related to Our Investment Portfolio," "Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management Strategies," "Management's Discussion and Analysis of Financial Condition and Results of Operations - Industry Trends and Uncertainties" and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Investments" included in our 2024 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.
Regulatory Developments
Our insurance subsidiaries and Brighthouse Reinsurance Company of Delaware ("BRCD") are primarily regulated at the state level, with some products and services also subject to federal regulation. In addition, BHF and its insurance subsidiaries are subject to regulation under the insurance holding company laws of various U.S. jurisdictions. Furthermore, some of our operations, products and services are subject to the Employee Retirement Income Security Act of 1974, consumer protection laws, securities, broker-dealer and investment advisor regulations, as well as environmental and unclaimed property laws and regulations. See "Business - Regulation," as well as "Risk Factors - Regulatory and Legal Risks" included in our 2024 Annual Report, as amended or supplemented by our quarterly reports under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations - Industry Trends and Uncertainties - 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 (the "CAMT") for corporations whose average annual adjusted financial statement income for any consecutive three-tax year period ending after December 31, 2021 and preceding the tax year exceeds $1.0 billion. In addition, the Inflation Reduction Act also establishes a one percent excise tax on stock repurchases made by publicly-traded U.S. corporations.
On September 12, 2024, the Internal Revenue Service ("IRS") and the U.S. Department of Treasury (the "U.S. Treasury") issued proposed regulations with respect to the CAMT. On September 30, 2025, the IRS issued Notice 2025-46 and Notice 2025-49 (collectively, the "Notices") that provide interim guidance on certain matters and signal the Treasury's intent to partially withdraw and amend the prior proposed regulations. There remain significant uncertainties regarding the application of the CAMT, and there can be no assurance that final regulations, if adopted, will be adopted in a form consistent with the existing guidance. The Company is currently assessing the impact of the proposed regulations and the Notices, including the impact on the applicability of the CAMT.
Based on guidance issued by the U.S. Treasury and the IRS to date, the Company was not subject to the CAMT for the years ended December 31, 2023 and 2024 and does not currently expect to be subject to the CAMT for the year ended December 31, 2025. However, the Company will continue to assess the applicability of the CAMT on an annual basis and may be subject to the CAMT in future years.
On July 4, 2025, the U.S. enacted the One Big Beautiful Bill Act (the "OBBBA"), which includes certain changes to U.S. corporate tax provisions and extends many of the provisions of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. The Company does not currently expect the OBBBA to have a material impact on the Company.
California Climate Disclosure
In October 2023, California enacted the Climate Corporate Data Accountability Act ("CCDAA"), or SB 253, and the Climate-Related Financial Risk Act ("CRFRA"), or SB 261. The CCDAA requires companies with annual revenues exceeding $1.0 billion that conduct business in California to report their Scope 1 and 2 greenhouse gas ("GHG") emissions annually starting in 2026; and Scope 3 GHG emissions starting in 2027. The CRFRA applies to companies with annual revenues over $500 million that conduct business in California and requires disclosure of climate-related financial risks and mitigation measures taken to address such risks, with the first report due on January 1, 2026, and biennially thereafter. The Company intends to report under the CCDAA and under the CRFRA.
Summary of Critical Accounting Estimates
The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the Interim Condensed Consolidated Financial Statements.
The most critical estimates include those used in determining:
•liability for future policy benefits;
•estimated fair values of market risk benefits ("MRB");
•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 2024 Annual Report.
Non-GAAP Financial Disclosures
We present certain measures of our performance that are not calculated in accordance with GAAP. Our definitions of non-GAAP financial measures may differ from those used by other companies.
Adjusted Earnings
Adjusted earnings is a financial measure 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 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) available to Brighthouse Financial, Inc.'s common shareholders, which is the most directly comparable financial measure calculated in accordance with GAAP. See "- Results of Operations" for a reconciliation of adjusted earnings to net income (loss) available to Brighthouse Financial, Inc.'s common shareholders.
Adjusted earnings, which may be positive or negative, focuses on our primary businesses by excluding the impact of market volatility, which could distort trends. Adjusted earnings was updated during the first quarter of 2025 in connection with the establishment of a trading portfolio comprised of certain fixed income securities (classified as "trading securities" under GAAP). The Company did not have trading securities prior to the first quarter of 2025.
The following items are excluded from total revenues in calculating adjusted earnings:
•Net investment gains (losses);
•Investment gains (losses) on trading securities measured at estimated fair value through net investment income; and
•Net derivative gains (losses), excluding 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").
The following items are excluded from total expenses in calculating adjusted earnings:
•Change in MRBs; and
•Change in fair value of the crediting rate on experience-rated contracts and market value adjustments on institutional group annuities that are economically offset by gains (losses) on the related trading securities ("Market Value Adjustments").
The provision for income tax related to adjusted earnings is calculated using the statutory tax rate of 21%, net of impacts related to the dividends received deduction, tax credits and current period non-recurring items.
We present adjusted earnings in a manner consistent with management's view of the primary business activities that drive the profitability of our core businesses. The following table illustrates how each component of adjusted earnings is calculated from the GAAP statements of operations line items:
| Component of Adjusted Earnings | How Derived from GAAP (1) | ||||||||||
| (i) | Fee income | (i) |
Universal life and investment-type product policy feesplus Other revenues.
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| (ii) | Net investment spread | (ii) |
Net investment income (excluding investment gains (losses) on trading securities) plus Investment Hedge Adjustments reduced by Interest credited to policyholder account balances (excluding Market Value Adjustments) and interest on future policy benefits.
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| (iii) | Insurance-related activities | (iii) |
Premiums lessPolicyholder benefits and claims, excluding interest on future policy benefits.
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| (iv) | Amortization of DAC and VOBA | (iv) |
Amortization of deferred policy acquisition costs ("DAC") and value of business acquired ("VOBA").
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| (v) |
Other expenses
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(v) |
Other expenses.
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| (vi) | Provision for income tax expense (benefit) | (vi) |
Tax impact of the above items, calculated using the statutory tax rate of 21%, net of impacts related to the dividends received deduction, tax credits and current period non-recurring items.
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__________________
(1)Italicized items indicate GAAP statements of operations line items.
Consistent with GAAP guidance for segment reporting, adjusted earnings is also our GAAP measure of segment performance. Accordingly, we report adjusted earnings by segment in Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements.
Adjusted Net Investment Income
Adjusted net investment income is used by management to measure our performance, and we believe it enhances the understanding of our investment portfolio results. Adjusted net investment income represents GAAP net investment income plus Investment Hedge Adjustments less investment gains (losses) on trading securities. For a reconciliation of adjusted net investment income to net investment income, the most directly comparable GAAP measure, see table note (3) to the summary yield table located in "- Investments - Current Environment - Investment Portfolio Results."
Adjusted Net Investment Income Yield
Similar to adjusted net investment income, adjusted net investment income yield is used by management as a performance measure that we believe enhances the understanding of our investment portfolio results. Adjusted net investment income yield represents adjusted net investment income as a percentage of average quarterly asset carrying values. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties. Investment fee and expense yields are calculated as a percentage of average quarterly asset estimated fair values. Asset estimated fair values exclude collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties. For a reconciliation of adjusted net investment income yield to net investment income, the most directly comparable GAAP measure, see the summary yield table located in "- Investments - Current Environment - Investment Portfolio Results."
Results of Operations
Annual Actuarial Review
We conducted our GAAP AAR in the third quarter. As part of the 2025 GAAP AAR, for our ULSG business, we updated assumptions regarding policyholder behavior, including mortality, premium persistency, lapses and withdrawals. In addition, we increased the long-term general account earned rate, driven by an increase in the mean reversion rate, from 4.00% to 4.50%. For our variable annuity business, we updated assumptions regarding annuitization, mortality, guaranteed principal option utilization, lapses and withdrawals, as well as separate account assumptions, including fund fees and allocations. For the payout annuity business, we updated assumptions regarding mortality. For term participating and non-participating whole life insurance, we updated assumptions regarding mortality and lapses.
As part of the 2024 GAAP AAR, for our ULSG business, we increased the long-term general account earned rate, driven by an increase in the mean reversion rate, from 3.75% to 4.00%. Also, with respect to our ULSG business, we updated assumptions regarding policyholder behavior, including mortality, premium persistency, lapses and withdrawals. For our variable annuity business, we updated assumptions regarding annuitization, mortality, lapses and withdrawals, as well as separate account assumptions, including fund fees and allocations. For term participating and non-participating whole life insurance, we updated assumptions regarding mortality and lapses.
We are currently in the process of conducting our 2025 statutory AAR, the results of which will be included in our insurance subsidiaries' 2025 annual statutory financial statements. We anticipate that the 2025 statutory AAR will result in an increase to our statutory reserves; however, we expect to remain within our target combined risk-based capital ("RBC") ratio range of 400% to 450% in normal market conditions at the end of 2025, without contributing capital to our insurance subsidiaries. See "Risk Factors - Risks Related to Our Business - Differences between actual experience and actuarial assumptions may adversely affect our financial results, capitalization and financial condition" included in our 2024 Annual Report.
The impact on income (loss) available to shareholders before provision for income tax was as follows:
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Nine Months Ended September 30, |
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| 2025 | 2024 | |||||||||||||
| (In millions) | ||||||||||||||
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Market risk benefits
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$ | (488) | $ | 42 | ||||||||||
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Embedded derivatives
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(82) | 69 | ||||||||||||
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Total market risk benefits and embedded derivatives
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(570) | 111 | ||||||||||||
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Included in pre-tax adjusted earnings (loss):
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| Other annuity business | (9) | 26 | ||||||||||||
| Life business | 14 | (83) | ||||||||||||
| Run-off | 965 | 359 | ||||||||||||
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Total included in pre-tax adjusted earnings (loss)
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970 | 302 | ||||||||||||
| Total impact on income (loss) available to shareholders before provision for income tax | $ | 400 | $ | 413 | ||||||||||
Consolidated Results for the Three Months and Nine Months Ended September 30, 2025 and 2024
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.
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||
| Premiums | $ | 170 | $ | 180 | $ | 522 | $ | 563 | ||||||||||||||||||
| Universal life and investment-type product policy fees | 531 | 560 | 1,627 | 1,576 | ||||||||||||||||||||||
| Net investment income | 1,334 | 1,288 | 3,916 | 3,849 | ||||||||||||||||||||||
| Other revenues | 143 | 143 | 422 | 429 | ||||||||||||||||||||||
| Net investment gains (losses) | 48 | (60) | (74) | (222) | ||||||||||||||||||||||
| Net derivative gains (losses) | (410) | (93) | (1,336) | (2,676) | ||||||||||||||||||||||
| Total revenues | 1,816 | 2,018 | 5,077 | 3,519 | ||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||
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Policyholder benefits and claims (including liability remeasurement gains (losses) of ($273), ($978), ($273) and ($978), respectively)
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(252) | 22 | 1,108 | 1,632 | ||||||||||||||||||||||
| Interest credited to policyholder account balances | 561 | 556 | 1,659 | 1,567 | ||||||||||||||||||||||
| Amortization of DAC and VOBA | 153 | 150 | 450 | 451 | ||||||||||||||||||||||
| Change in market risk benefits | 289 | 610 | 81 | (1,186) | ||||||||||||||||||||||
| Interest expense on debt | 38 | 38 | 114 | 114 | ||||||||||||||||||||||
| Other expenses | 442 | 454 | 1,341 | 1,353 | ||||||||||||||||||||||
| Total expenses | 1,231 | 1,830 | 4,753 | 3,931 | ||||||||||||||||||||||
| Income (loss) before provision for income tax | 585 | 188 | 324 | (412) | ||||||||||||||||||||||
| Provision for income tax expense (benefit) | 104 | 10 | 24 | (133) | ||||||||||||||||||||||
| Net income (loss) | 481 | 178 | 300 | (279) | ||||||||||||||||||||||
| Less: Net income (loss) attributable to noncontrolling interests | 2 | 2 | 4 | 4 | ||||||||||||||||||||||
| Net income (loss) attributable to Brighthouse Financial, Inc. | 479 | 176 | 296 | (283) | ||||||||||||||||||||||
| Less: Preferred stock dividends | 26 | 26 | 77 | 77 | ||||||||||||||||||||||
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Net income (loss) available to Brighthouse Financial, Inc.'s common shareholders
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$ | 453 | $ | 150 | $ | 219 | $ | (360) | ||||||||||||||||||
The components of net income (loss) available to shareholders were as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Change in market risk benefits | $ | (289) | $ | (610) | $ | (81) | $ | 1,186 | ||||||||||||||||||
| Net investment gains (losses) | 48 | (60) | (74) | (222) | ||||||||||||||||||||||
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Investment gains (losses) on trading securities
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7 | - | 7 | - | ||||||||||||||||||||||
| Net derivative gains (losses), excluding investment hedge adjustments | (410) | (99) | (1,337) | (2,704) | ||||||||||||||||||||||
| Market value adjustments | (10) | (11) | (14) | (1) | ||||||||||||||||||||||
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Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends
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1,211 | 940 | 1,742 | 1,248 | ||||||||||||||||||||||
| Income (loss) available to shareholders before provision for income tax | 557 | 160 | 243 | (493) | ||||||||||||||||||||||
| Provision for income tax expense (benefit) | 104 | 10 | 24 | (133) | ||||||||||||||||||||||
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Net income (loss) available to shareholders
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$ | 453 | $ | 150 | $ | 219 | $ | (360) | ||||||||||||||||||
Three Months Ended September 30, 2025 Compared with the Three Months Ended September 30, 2024
Income available to shareholders before provision for income tax was $557 million ($453 million, net of income tax), an increase of $397 million ($303 million, net of income tax) from income available to shareholders before provision for income tax of $160 million ($150 million, net of income tax) in the prior period.
The increase in income before provision for income tax was driven by the following favorable items:
•higher pre-tax adjusted earnings, as discussed in greater detail below;
•net investment gains (losses) reflecting a gain on the sale of a subsidiary which owned certain mineral rights across the U.S., lower losses on sales of fixed maturity securities and a net decrease in impairments on fixed maturity securities;
•lower losses from variable annuity guaranteed benefit riders, see "- Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Three Months and Nine Months Ended September 30, 2025 and 2024"; and
•the strengthening of the U.S. dollar in the current period and weakening in the prior period, favorably impacting foreign currency forwards and swaps.
The increase in income before provision for income taxes was partially offset by the impact of long-term interest rates on interest rate derivatives used to manage interest rate exposure in our ULSG business, as the long-term interest rate decreased less in the current period combined with lower rate volatility, resulting in a loss of $10 million, and decreased more in the prior period combined with higher rate volatility, resulting in a gain of $113 million.
The provision for income tax, calculated as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of 18% in the current period compared to 5% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits.
Nine Months Ended September 30, 2025 Compared with the Nine Months Ended September 30, 2024
Income available to shareholders before provision for income tax was $243 million ($219 million, net of income tax), an increase of $736 million ($579 million, net of income tax) from loss available to shareholders before provision for income tax of $493 million ($360 million, net of income tax) in the prior period.
The increase in income before provision for income tax was driven by the following favorable items:
•higher pre-tax adjusted earnings, as discussed in greater detail below;
•net investment gains (losses) reflecting lower net losses on sales of fixed maturity securities, a net decrease in impairments on fixed maturity securities, and a gain on the sale of a subsidiary which owned certain mineral rights across the U.S., partially offset by higher losses on mortgage loans due to an increase in the allowance for credit losses;
•lower losses from variable annuity guaranteed benefit riders, see "- Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Three Months and Nine Months Ended September 30, 2025 and 2024"; and
•the impact of long-term interest rates on interest rate derivatives used to manage interest rate exposure in our ULSG business, as interest rates decreased more in the current period combined with lower rate volatility, resulting in a loss of $142 million, and decreased less in the prior period, resulting in a loss of $196 million.
The increase in income before provision for income taxes was partially offset by the U.S. dollar weakening more in the current period than the prior period, unfavorably impacting foreign currency forwards and swaps.
The provision for income tax, calculated as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of 7% in the current period compared to 32% 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.
Reconciliation of Net Income (Loss) Available to Shareholders to Adjusted Earnings (Loss)
The reconciliation of net income (loss) available to shareholders to adjusted earnings (loss) was as follows:
| Three Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||
| Annuities | Life | Run-off | Corporate & Other | Total | ||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||
| Net income (loss) available to shareholders | $ | (408) | $ | 44 | $ | 936 | $ | (119) | $ | 453 | ||||||||||||||||||||||
| Add: Provision for income tax expense (benefit) | 71 | 9 | (135) | 159 | 104 | |||||||||||||||||||||||||||
|
Income (loss) available to shareholders before provision for income tax
|
(337) | 53 | 801 | 40 | 557 | |||||||||||||||||||||||||||
| Less: Net investment gains (losses) | (18) | (1) | (3) | 70 | 48 | |||||||||||||||||||||||||||
|
Less: Investment gains (losses) on trading securities
|
7 | - | - | - | 7 | |||||||||||||||||||||||||||
|
Less: Net derivative gains (losses), excluding investment hedge adjustments of $0
|
(405) | 5 | (4) | (6) | (410) | |||||||||||||||||||||||||||
| Less: Change in market risk benefits | (289) | - | - | - | (289) | |||||||||||||||||||||||||||
| Less: Market value adjustments | (7) | - | (3) | - | (10) | |||||||||||||||||||||||||||
|
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends
|
375 | 49 | 811 | (24) | 1,211 | |||||||||||||||||||||||||||
| Less: Provision for income tax expense (benefit) | 71 | 9 | 170 | (9) | 241 | |||||||||||||||||||||||||||
|
Adjusted earnings (loss)
|
$ | 304 | $ | 40 | $ | 641 | $ | (15) | $ | 970 | ||||||||||||||||||||||
| Three Months Ended September 30, 2024 | ||||||||||||||||||||||||||||||||
| Annuities | Life | Run-off | Corporate & Other | Total | ||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||
| Net income (loss) available to shareholders | $ | (504) | $ | (36) | $ | 761 | $ | (71) | $ | 150 | ||||||||||||||||||||||
| Add: Provision for income tax expense (benefit) | 76 | (7) | (88) | 29 | 10 | |||||||||||||||||||||||||||
|
Income (loss) available to shareholders before provision for income tax
|
(428) | (43) | 673 | (42) | 160 | |||||||||||||||||||||||||||
| Less: Net investment gains (losses) | (20) | (10) | (22) | (8) | (60) | |||||||||||||||||||||||||||
|
Less: Investment gains (losses) on trading securities
|
- | - | - | - | - | |||||||||||||||||||||||||||
|
Less: Net derivative gains (losses), excluding investment hedge adjustments of $6
|
(201) | (1) | 122 | (19) | (99) | |||||||||||||||||||||||||||
| Less: Change in market risk benefits | (610) | - | - | - | (610) | |||||||||||||||||||||||||||
| Less: Market value adjustments | - | - | (11) | - | (11) | |||||||||||||||||||||||||||
|
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends
|
403 | (32) | 584 | (15) | 940 | |||||||||||||||||||||||||||
| Less: Provision for income tax expense (benefit) | 76 | (7) | 121 | (17) | 173 | |||||||||||||||||||||||||||
|
Adjusted earnings (loss)
|
$ | 327 | $ | (25) | $ | 463 | $ | 2 | $ | 767 | ||||||||||||||||||||||
| Nine Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||
| Annuities | Life | Run-off | Corporate & Other | Total | ||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||
| Net income (loss) available to shareholders | $ | (437) | $ | 3 | $ | 809 | $ | (156) | $ | 219 | ||||||||||||||||||||||
| Add: Provision for income tax expense (benefit) | 222 | 3 | (370) | 169 | 24 | |||||||||||||||||||||||||||
| Income (loss) available to shareholders before provision for income tax | (215) | 6 | 439 | 13 | 243 | |||||||||||||||||||||||||||
| Less: Net investment gains (losses) | (141) | (5) | (25) | 97 | (74) | |||||||||||||||||||||||||||
| Less: Investment gains (losses) on trading securities | 7 | - | - | - | 7 | |||||||||||||||||||||||||||
|
Less: Net derivative gains (losses), excluding investment hedge adjustments of $1
|
(1,165) | (15) | (154) | (3) | (1,337) | |||||||||||||||||||||||||||
| Less: Change in market risk benefits | (81) | - | - | - | (81) | |||||||||||||||||||||||||||
| Less: Market value adjustments | (7) | - | (7) | - | (14) | |||||||||||||||||||||||||||
| Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends | 1,172 | 26 | 625 | (81) | 1,742 | |||||||||||||||||||||||||||
| Less: Provision for income tax expense (benefit) | 222 | 3 | 131 | (17) | 339 | |||||||||||||||||||||||||||
| Adjusted earnings (loss) | $ | 950 | $ | 23 | $ | 494 | $ | (64) | $ | 1,403 | ||||||||||||||||||||||
| Nine Months Ended September 30, 2024 | ||||||||||||||||||||||||||||||||
| Annuities | Life | Run-off | Corporate & Other | Total | ||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||
| Net income (loss) available to shareholders | $ | (481) | $ | (44) | $ | 619 | $ | (454) | $ | (360) | ||||||||||||||||||||||
| Add: Provision for income tax expense (benefit) | 226 | (7) | (726) | 374 | (133) | |||||||||||||||||||||||||||
|
Income (loss) available to shareholders before provision for income tax
|
(255) | (51) | (107) | (80) | (493) | |||||||||||||||||||||||||||
| Less: Net investment gains (losses) | (125) | (33) | (43) | (21) | (222) | |||||||||||||||||||||||||||
|
Less: Investment gains (losses) on trading securities
|
- | - | - | - | - | |||||||||||||||||||||||||||
|
Less: Net derivative gains (losses), excluding investment hedge adjustments of $28
|
(2,514) | 8 | (178) | (20) | (2,704) | |||||||||||||||||||||||||||
| Less: Change in market risk benefits | 1,186 | - | - | - | 1,186 | |||||||||||||||||||||||||||
| Less: Market value adjustments | - | - | (1) | - | (1) | |||||||||||||||||||||||||||
|
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends
|
1,198 | (26) | 115 | (39) | 1,248 | |||||||||||||||||||||||||||
| Less: Provision for income tax expense (benefit) | 226 | (7) | 23 | (9) | 233 | |||||||||||||||||||||||||||
|
Adjusted earnings (loss)
|
$ | 972 | $ | (19) | $ | 92 | $ | (30) | $ | 1,015 | ||||||||||||||||||||||
Consolidated Results for the Three Months and Nine Months Ended September 30, 2025 and 2024 - Adjusted Earnings (Loss)
The components of adjusted earnings (loss) were as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Fee income | $ | 674 | $ | 703 | $ | 2,049 | $ | 2,005 | ||||||||||||||||||
| Net investment spread | 747 | 720 | 2,178 | 2,226 | ||||||||||||||||||||||
| Insurance-related activities | 451 | 187 | (499) | (984) | ||||||||||||||||||||||
| Amortization of DAC and VOBA | (153) | (150) | (450) | (451) | ||||||||||||||||||||||
| Other expenses | (480) | (492) | (1,455) | (1,467) | ||||||||||||||||||||||
|
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends
|
28 | 28 | 81 | 81 | ||||||||||||||||||||||
|
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends
|
1,211 | 940 | 1,742 | 1,248 | ||||||||||||||||||||||
| Provision for income tax expense (benefit) | 241 | 173 | 339 | 233 | ||||||||||||||||||||||
|
Adjusted earnings (loss)
|
$ | 970 | $ | 767 | $ | 1,403 | $ | 1,015 | ||||||||||||||||||
Three Months Ended September 30, 2025 Compared with the Three Months Ended September 30, 2024
Adjusted earnings were $970 million in the current period, an increase of $203 million.
Key net favorable impacts were:
•lower net costs associated with insurance-related activities due to:
◦a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR in our Run-off, Life and Annuities segments and other refinements;
partially offset by
◦an increase in liability balances in our Run-off segment resulting from a premium rate increase on an existing reinsurance agreement;
◦higher claims, net of reinsurance in our Life and Run-off segments; and
◦a decrease in income annuity underwriting margins;
•higher net investment spread due to:
◦higher returns on other limited partnerships;
partially offset by
◦higher interest credited to policyholders due to prior period changes made in connection with the AAR in our Annuities segment; and
•lower other expenses due to lower asset-based variable annuity expenses resulting from lower average separate account balances, a portion of which is offset in fee income.
The key unfavorable impact was 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; and
◦a decline in the net cost of insurance ("COI") fees driven by the aging in-force business in our Run-off segment.
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 19% in the current period compared to 18% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits.
Nine Months Ended September 30, 2025 Compared with the Nine Months Ended September 30, 2024
Adjusted earnings were $1.4 billion in the current period, an increase of $388 million.
Key net favorable impacts were:
•lower net costs associated with insurance-related activities due to:
◦a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR in our Run-off, Life and Annuities segments and other refinements;
◦a decrease in liability balances in our Run-off segment resulting from a reinsurance premium rate increase associated with the conclusion of a reinsurance arbitration in the prior period; and
◦an increase in income annuity underwriting margins;
partially offset by
◦higher claims, net of reinsurance, in our Life segment; and
◦an increase in liability balances in our Run-off segment resulting from a premium rate increase on an existing reinsurance agreement;
•higher net fee income due to:
◦lower ceded COI fees in our Life and Run-off segments related to the conclusion of the aforementioned reinsurance arbitration in the prior period;
partially offset by
◦lower asset-based fees resulting from lower average separate account balances, a portion of which is offset in other expenses; and
◦a decline in the net COI fees driven by the aging in-force business in our Run-off segment; and
•lower other expenses due to:
◦lower asset-based variable annuity expenses resulting from lower average separate account balances, a portion of which is offset in fee income;
◦the conclusion of the aforementioned reinsurance arbitration in our Life and Run-off segments in the prior period; and
◦lower transition services agreement expenses;
partially offset by
◦higher operational expenses.
The key unfavorable impact was a lower net investment spread due to:
◦higher interest credited to policyholders due to higher account balances, prior period changes made in connection with the AAR and current period actuarial modeling improvements in our Annuities segment; and
◦lower returns on other limited partnerships;
partially offset by
◦higher returns on real estate limited partnerships and limited liability companies ("LLC").
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 19% in the current period compared to 18% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction, tax credits and current period non-recurring items.
Segment Results for the Three Months and Nine Months Ended September 30, 2025 and 2024 - Adjusted Earnings (Loss)
Annuities
The components of adjusted earnings for our Annuities segment were as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Fee income | $ | 498 | $ | 523 | $ | 1,538 | $ | 1,617 | ||||||||||||||||||
| Net investment spread | 413 | 388 | 1,211 | 1,135 | ||||||||||||||||||||||
| Insurance-related activities | (57) | (26) | (140) | (134) | ||||||||||||||||||||||
| Amortization of DAC and VOBA | (131) | (127) | (384) | (380) | ||||||||||||||||||||||
| Other expenses | (348) | (355) | (1,053) | (1,040) | ||||||||||||||||||||||
| Pre-tax adjusted earnings | 375 | 403 | 1,172 | 1,198 | ||||||||||||||||||||||
| Provision for income tax expense (benefit) | 71 | 76 | 222 | 226 | ||||||||||||||||||||||
| Adjusted earnings | $ | 304 | $ | 327 | $ | 950 | $ | 972 | ||||||||||||||||||
A significant portion of our adjusted earnings is driven by separate account balances related to our variable annuity business, as these balances determine asset-based fee income and commissions. The changes in our variable annuities separate account balances are presented in Note 5 of the Notes to the Interim Condensed Consolidated Financial Statements.
Three Months Ended September 30, 2025 Compared with the Three Months Ended September 30, 2024
Adjusted earnings were $304 million in the current period, a decrease of $23 million.
Key net unfavorable impacts were:
•higher net costs associated with insurance-related activities due to:
◦a decrease in income annuity underwriting margins; and
◦a net increase in liability balances resulting from year-over-year changes made in connection with the AAR; and
•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.
Key net favorable impacts were:
•higher net investment spread due to:
◦higher average invested long-term assets; and
◦higher investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at higher yields than the portfolio average;
partially offset by
◦higher interest credited to policyholders due to changes made in connection with the AAR in the prior period; and
•lower other expenses due to lower asset-based variable annuity expenses resulting from lower average separate account balances, a portion of which is offset in fee income.
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 19% in both the current period and the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction.
Nine Months Ended September 30, 2025 Compared with the Nine Months Ended September 30, 2024
Adjusted earnings were $950 million in the current period, a decrease of $22 million.
Key net unfavorable impacts were:
•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 other expenses due to:
◦higher operational expenses;
partially offset by
◦lower asset-based variable annuity expenses resulting from lower average separate account balances, a portion of which is offset in fee income; and
◦lower transition services agreement expenses; and
•higher net costs associated with insurance-related activities due:
◦a net increase in liability balances resulting from year-over-year changes made in connection with the AAR;
partially offset by
◦an increase in income annuity underwriting margins.
The key favorable impact was a higher net investment spread due to:
◦higher average invested assets resulting from positive net flows in the general account;
◦higher investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at higher yields than the portfolio average; and
◦higher returns on real estate limited partnerships and LLCs;
partially offset by
◦higher interest credited to policyholders due to higher account balances, prior period changes made in connection with the AAR and current period actuarial modeling improvements.
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 19% in both the current period and the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.
Life
The components of adjusted earnings (loss) for our Life segment were as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Fee income | $ | 78 | $ | 74 | $ | 223 | $ | 123 | ||||||||||||||||||
| Net investment spread | 58 | 57 | 149 | 179 | ||||||||||||||||||||||
| Insurance-related activities | (11) | (101) | (128) | (113) | ||||||||||||||||||||||
| Amortization of DAC and VOBA | (22) | (23) | (66) | (71) | ||||||||||||||||||||||
| Other expenses | (54) | (39) | (152) | (144) | ||||||||||||||||||||||
|
Pre-tax adjusted earnings (loss)
|
49 | (32) | 26 | (26) | ||||||||||||||||||||||
| Provision for income tax expense (benefit) | 9 | (7) | 3 | (7) | ||||||||||||||||||||||
|
Adjusted earnings (loss)
|
$ | 40 | $ | (25) | $ | 23 | $ | (19) | ||||||||||||||||||
Three Months Ended September 30, 2025 Compared with the Three Months Ended September 30, 2024
Adjusted earnings were $40 million in the current period, an increase of $65 million.
The key favorable impact was lower net costs associated with insurance-related activities due to:
◦a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR;
partially offset by
◦higher claims, net of reinsurance.
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 18% in the current period compared to 22% in the prior period. Our effective tax rate may differ from the statutory tax rate primarily due to the impact of the dividends received deduction.
Nine Months Ended September 30, 2025 Compared with the Nine Months Ended September 30, 2024
Adjusted earnings were $23 million in the current period, an increase of $42 million.
The key favorable impact was higher fee income due to lower ceded COI fees related to the conclusion of the aforementioned reinsurance arbitration in the prior period.
Key net unfavorable impacts were:
•lower net investment spread due to:
◦lower average invested long-term assets; and
◦lower returns on other limited partnerships;
•higher net costs associated with insurance-related activities due to:
◦higher claims, net of reinsurance;
partially offset by
◦a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR; and
•higher other expenses due to:
◦higher operational expenses;
partially offset by
◦the conclusion of the aforementioned reinsurance arbitration in the prior period.
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 12% in the current period compared to 27% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.
Run-off
The components of adjusted earnings (loss) for our Run-off segment were as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Fee income | $ | 93 | $ | 101 | $ | 285 | $ | 255 | ||||||||||||||||||
| Net investment spread | 231 | 215 | 668 | 724 | ||||||||||||||||||||||
| Insurance-related activities | 519 | 314 | (231) | (737) | ||||||||||||||||||||||
| Amortization of DAC and VOBA | - | - | - | - | ||||||||||||||||||||||
| Other expenses | (32) | (46) | (97) | (127) | ||||||||||||||||||||||
|
Pre-tax adjusted earnings (loss)
|
811 | 584 | 625 | 115 | ||||||||||||||||||||||
| Provision for income tax expense (benefit) | 170 | 121 | 131 | 23 | ||||||||||||||||||||||
|
Adjusted earnings (loss)
|
$ | 641 | $ | 463 | $ | 494 | $ | 92 | ||||||||||||||||||
Three Months Ended September 30, 2025 Compared with the Three Months Ended September 30, 2024
Adjusted earnings were $641 million in the current period, an increase of $178 million.
Key net favorable impacts were:
•lower net costs associated with insurance-related activities due to:
◦a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR and other refinements;
partially offset by
◦an increase in liability balances resulting from a premium rate increase on an existing reinsurance agreement; and
◦higher claims, net of reinsurance; and
•higher net investment spread due to:
◦higher returns on other limited partnerships;
partially offset by
◦lower average invested long-term assets.
The key unfavorable impact was lower fee income due to a decline in the net COI fees driven by the aging in-force business.
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 21% in both the current period and the prior period.
Nine Months Ended September 30, 2025 Compared with the Nine Months Ended September 30, 2024
Adjusted earnings were $494 million in the current period, an increase of $402 million.
Key net favorable impacts were:
•lower net costs associated with insurance-related activities due to:
◦a decrease in liability balances resulting from a reinsurance premium rate increase associated with the conclusion of the aforementioned reinsurance arbitration in the prior period; and
◦a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR and other refinements;
partially offset by
◦an increase in liability balances resulting from a premium rate increase on an existing reinsurance agreement;
•lower other expenses due to:
◦the conclusion of the aforementioned reinsurance arbitration in the prior period;
partially offset by
◦higher operational expenses; and
•higher net fee income due to:
◦lower ceded COI fees related to the conclusion of the aforementioned reinsurance arbitration in the prior period;
partially offset by
◦a decline in the net COI fees driven by the aging in-force business.
The key unfavorable impact was a lower net investment spread due to:
◦lower average invested long-term assets; and
◦lower returns on other limited partnerships.
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 21% in the current period compared to 20% in the prior period.
Corporate & Other
The components of adjusted earnings (loss) for our Corporate & Other segment were as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Fee income | $ | 5 | $ | 5 | $ | 3 | $ | 10 | ||||||||||||||||||
| Net investment spread | 45 | 60 | 150 | 188 | ||||||||||||||||||||||
| Insurance-related activities | - | - | - | - | ||||||||||||||||||||||
| Amortization of DAC and VOBA | - | - | - | - | ||||||||||||||||||||||
| Other expenses | (46) | (52) | (153) | (156) | ||||||||||||||||||||||
|
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends
|
28 | 28 | 81 | 81 | ||||||||||||||||||||||
|
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends
|
(24) | (15) | (81) | (39) | ||||||||||||||||||||||
| Provision for income tax expense (benefit) | (9) | (17) | (17) | (9) | ||||||||||||||||||||||
|
Adjusted earnings (loss)
|
$ | (15) | $ | 2 | $ | (64) | $ | (30) | ||||||||||||||||||
Three Months Ended September 30, 2025 Compared with the Three Months Ended September 30, 2024
Adjusted loss was $15 million in the current period, a decrease of $17 million.
The key unfavorable impact was a lower net investment spread due to lower yields and lower average invested long-term assets on our institutional spread margin business.
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings (loss), resulted in a lower effective tax rate in the current period compared to the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits. We believe the effective tax rate for the Corporate & Other segment is not generally meaningful, neither on a standalone basis nor for comparison to prior periods, since taxes for the Corporate & Other segment are derived from the difference between the overall consolidated effective tax rate and total taxes for the combined operating segments.
Nine Months Ended September 30, 2025 Compared with the Nine Months Ended September 30, 2024
Adjusted loss was $64 million in the current period, a higher loss of $34 million.
The key unfavorable impact was a lower net investment spread due to lower yields and lower average invested long-term assets on our institutional spread margin business.
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings (loss), resulted in a higher effective tax rate in the current period compared to the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction, tax credits and current period non-recurring items. We believe the effective tax rate for the Corporate & Other segment is not generally meaningful, neither on a standalone basis nor for comparison to prior periods, since taxes for the Corporate & Other segment are derived from the difference between the overall consolidated effective tax rate and total taxes for the other operating segments.
Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Three Months and Nine Months Ended September 30, 2025 and 2024
The overall impact on income (loss) available to shareholders before provision for income tax from the performance of annuity guaranteed benefits and Shield Annuity liabilities, which includes (i) changes in the fair value of liabilities and related reinsurance, (ii) fees net of claims and (iii) the mark-to-market of hedges, was as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Market risk benefits mark-to-market | $ | (424) | $ | (791) | $ | (403) | $ | 780 | ||||||||||||||||||
| Annuity guaranteed benefit rider fees, net of claims | 136 | 172 | 328 | 423 | ||||||||||||||||||||||
| Ceded reinsurance | (1) | 9 | (6) | (17) | ||||||||||||||||||||||
|
Total changes attributable to annuity guaranteed benefits
|
(289) | (610) | (81) | 1,186 | ||||||||||||||||||||||
|
Variable annuity and Shield hedges
|
1,310 | 835 | 1,506 | 1,039 | ||||||||||||||||||||||
| Shield embedded derivatives | (1,694) | (976) | (2,626) | (3,490) | ||||||||||||||||||||||
|
Total
|
$ | (673) | $ | (751) | $ | (1,201) | $ | (1,265) | ||||||||||||||||||
Three Months Ended September 30, 2025
Annuity guaranteed benefits and Shield Annuity liabilities performance was unfavorable for the three months ended September 30, 2025, primarily driven by:
•unfavorable increases in annuity guaranteed benefits liabilities due to changes made in connection with the AAR and decreasing interest rates, partially offset by increasing equity markets;
•favorable changes in variable annuity and Shield hedges due to increasing equity markets; and
•unfavorable changes in Shield embedded derivatives due to increasing equity markets and changes made in connection with the AAR.
Three Months Ended September 30, 2024
Annuity guaranteed benefits and Shield Annuity liabilities performance was unfavorable for the three months ended September 30, 2024, primarily driven by:
•unfavorable increases in annuity guaranteed benefits liabilities due to decreasing interest rates, partially offset by increasing equity markets and changes made in connection with the AAR;
•favorable changes in variable annuity and Shield hedges due to decreasing long-term interest rates and increasing equity markets; and
•unfavorable changes in Shield embedded derivatives due to increasing equity markets and decreasing interest rates, partially offset by changes made in connection with the AAR.
Nine Months Ended September 30, 2025
Annuity guaranteed benefits and Shield Annuity liabilities performance was unfavorable for the nine months ended September 30, 2025, primarily driven by:
•unfavorable increases in annuity guaranteed benefits liabilities due to changes made in connection with the AAR and decreasing interest rates, partially offset by increasing equity markets;
•favorable changes in variable annuity and Shield hedges due to increasing equity markets and decreasing long-term interest rates; and
•unfavorable changes in Shield embedded derivatives due to increasing equity markets and changes made in connection with the AAR.
Nine Months Ended September 30, 2024
Annuity guaranteed benefits and Shield Annuity liabilities performance was unfavorable for the nine months ended September 30, 2024, primarily driven by:
•favorable decreases in annuity guaranteed benefits liabilities due to increasing equity markets and interest rates, as well as changes made in connection with the AAR;
•favorable changes in variable annuity and Shield hedges due to increasing equity markets; and
•unfavorable changes in Shield embedded derivatives due to increasing equity markets, partially offset by changes made in connection with the AAR.
Investments
Investment Risk Management Strategy
We manage the risks related to our investment portfolio through asset-type allocation as well as industry and issuer diversification. We also use risk limits to promote diversification by asset sector, avoid concentrations in any single issuer and limit overall aggregate credit and equity risk exposure. We manage real estate risk through geographic, property type and product type diversification and asset allocation. Interest rate risk is managed as part of our Asset Liability Management ("ALM") strategies. We also utilize product design to manage interest rate risk (e.g., market value adjustment features and surrender charges). These ALM strategies include maintaining an investment portfolio that targets a weighted average duration that reflects the duration of our estimated liability cash flow profile. For certain of our liability portfolios, it is not possible to invest assets for the full liability duration, thereby creating some asset/liability mismatch. We also use certain derivatives in the management of credit, interest rate, equity market and foreign currency exchange rate risks.
Investment Management Agreements
Other than our derivatives trading, which we manage in-house, we have engaged a select group of experienced external asset management firms to manage the investment of the assets comprising our general account portfolio and certain separate account assets of our insurance subsidiaries, as well as assets of BHF and our reinsurance subsidiary, BRCD.
Current Environment
Our business and results of operations are materially affected by conditions in capital markets and the economy, generally. As a U.S. insurance company, we are affected by the monetary policy of the Federal Reserve in the U.S. On September 17, 2025, the Federal Reserve decreased the target range for the federal funds rate from between 4.25% and 4.50% to between 4.00% and 4.25%. On October 29, 2025, the Federal Reserve further decreased the target range for the federal funds rate to between 3.75% and 4.00%. In 2024, the Federal Reserve decreased the target range for the federal funds rate three times - from between 5.25% and 5.50% to between 4.25% and 4.50%. The Federal Reserve may increase or decrease the federal funds rate in the future, which may have an impact on the pricing levels of risk-bearing investments and may adversely impact the level of product sales. We are also affected by the monetary policy of central banks around the world due to the diversification of our investment portfolio. See "- Industry Trends and Uncertainties - Financial and Economic Environment."
Interest rate increases have contributed to the net unrealized loss position in our investment portfolio. As a result of increases in interest rates, the unrealized losses on our fixed maturity securities exceeded the unrealized gains as of September 30, 2025.
See "Risk Factors - Risks Related to Our Investment Portfolio - Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations" included in our 2024 Annual Report.
Selected Sector Investments
Market volatility has affected the performance of various asset classes. See "Risk Factors - Risks Related to Our Investment Portfolio - Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations," and "Risk Factors - Risks Related to Our Investment Portfolio - Ongoing military actions, the continued threat of terrorism, climate change as well as other catastrophic events may
adversely affect the value of our investment portfolio and the level of claim losses we incur" included in our 2024 Annual Report.
There has been a continued market focus on commercial real estate, including office properties, as a result of hybrid work arrangements and the resulting impact on the demand for office space.
We have direct commercial real estate exposure through mortgage loans and certain structured securities, which include residential mortgage-backed securities ("RMBS"), commercial mortgage-backed securities ("CMBS") and asset-backed securities ("ABS") (collectively, "Structured Securities"). In addition, we have direct and indirect exposure through certain financial industry corporate fixed maturity securities. See "- Investments - Mortgage Loans" and Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information on mortgage loans, including credit quality by portfolio segment and commercial mortgage loans by property type. Additionally, see "- Investments - Fixed Maturity Securities Available-For-Sale - Structured Securities" for information on Structured Securities, including security type, risk profile and ratings profile as well as "- Investments - Fixed Maturity Securities Available-For-Sale - U.S. and Foreign Corporate Fixed Maturity Securities" for our exposure to the finance industry.
We monitor direct and indirect investment exposure across sectors and asset classes and adjust our level of investment exposure, as appropriate. At this time, we do not expect that our general account investments in these sectors and asset classes will have a material adverse effect on our results of operations or financial condition.
Investment Portfolio Results
The following summary yield table presents the yield and adjusted net investment income for our investment portfolio for the periods indicated. As described below, this table reflects certain differences from the presentation of net investment income presented in the GAAP statements of operations. This summary yield table presentation is consistent with how we measure our investment performance for management purposes, and we believe it enhances understanding of our investment portfolio results.
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| Yield % | Amount | Yield % | Amount | Yield % | Amount | Yield % | Amount | |||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment income (1) | 4.54 | % | $ | 1,366 | 4.40 | % | $ | 1,332 | 4.45 | % | $ | 4,025 | 4.44 | % | $ | 3,990 | ||||||||||||||||||||||||||||||||||
| Investment fees and expenses (2) | (0.14) | (39) | (0.14) | (38) | (0.14) | (115) | (0.14) | (113) | ||||||||||||||||||||||||||||||||||||||||||
| Adjusted net investment income (3) | 4.40 | % | $ | 1,327 | 4.26 | % | $ | 1,294 | 4.31 | % | $ | 3,910 | 4.30 | % | $ | 3,877 | ||||||||||||||||||||||||||||||||||
_______________
(1)Investment income yields are calculated as investment income as a percentage of average quarterly asset carrying values. Investment income excludes recognized gains and losses and reflects the adjustments discussed in table note (3) below to arrive at adjusted net investment income. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.
(2)Investment fee and expense yields are calculated as a percentage of average quarterly asset estimated fair values. Asset estimated fair values exclude collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.
(3)Adjusted net investment income presented in the yield table varies from the most directly comparable GAAP measure due to certain reclassifications, as presented below.
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Net investment income | $ | 1,334 | $ | 1,288 | $ | 3,916 | $ | 3,849 | ||||||||||||||||||
|
Add: Investment hedge adjustments
|
- | 6 | 1 | 28 | ||||||||||||||||||||||
|
Less: Investment gains (losses) on trading securities
|
7 | - | 7 | - | ||||||||||||||||||||||
| Adjusted net investment income - in the above yield table | $ | 1,327 | $ | 1,294 | $ | 3,910 | $ | 3,877 | ||||||||||||||||||
See "- Results of Operations - Consolidated Results for the Three Months and Nine Months Ended September 30, 2025 and 2024" for an analysis of the period-over-period changes in net investment income.
Fixed Maturity Securities Available-For-Sale
Fixed maturity securities held by type (public or private) were as follows at:
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Estimated Fair Value |
% of Total |
Estimated Fair Value |
% of Total |
|||||||||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||||||||
| Publicly-traded | $ | 67,014 | 82.2 | % | $ | 66,402 | 82.9 | % | ||||||||||||||||||
| Privately-placed | 14,523 | 17.8 | 13,653 | 17.1 | ||||||||||||||||||||||
| Total fixed maturity securities | $ | 81,537 | 100.0 | % | $ | 80,055 | 100.0 | % | ||||||||||||||||||
| Percentage of cash and invested assets | 64.0 | % | 65.4 | % | ||||||||||||||||||||||
See Note 9 of the Notes to the Interim Condensed Consolidated Financial Statements for further information on our valuation controls and procedures including our formal process to challenge any prices received from independent pricing services that are not considered representative of estimated fair value.
See Notes 1 and 7 of the Notes to the Interim Condensed Consolidated Financial Statements for further information about fixed maturity securities by sector, contractual maturities, continuous gross unrealized losses and the allowance for credit losses.
Fixed Maturity Securities Credit Quality - Ratings
See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Investments - Fixed Maturity Securities Available-For-Sale - Fixed Maturity Securities Credit Quality - Ratings" included in our 2024 Annual Report for a discussion of the credit quality ratings assigned by Nationally Recognized Statistical Rating Organizations ("NRSRO"), credit quality designations assigned by and methodologies used by the Securities Valuation Office of the National Association of Insurance Commissioners ("NAIC") for fixed maturity securities and the methodologies adopted by the NAIC for certain Structured Securities.
The following table presents total fixed maturity securities by NRSRO rating and the applicable NAIC designation from the NAIC published comparison of NRSRO ratings to NAIC designations, except for certain Structured Securities, which are presented using the NAIC methodologies, as well as the percentage, based on estimated fair value that each NAIC designation is comprised of at:
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
NAIC Designation
|
NRSRO Rating | Amortized Cost | Allowance for Credit Losses | Unrealized Gain (Loss) | Estimated Fair Value | % of Total | Amortized Cost | Allowance for Credit Losses | Unrealized Gain (Loss) | Estimated Fair Value | % of Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | Aaa/Aa/A | $ | 57,154 | $ | 4 | $ | (3,265) | $ | 53,885 | 66.1 | % | $ | 56,661 | $ | 5 | $ | (4,680) | $ | 51,976 | 64.9 | % | |||||||||||||||||||||||||||||||||||||||||||||||
| 2 | Baa | 26,846 | - | (1,606) | 25,240 | 31.0 | 28,446 | - | (2,640) | 25,806 | 32.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal investment grade | 84,000 | 4 | (4,871) | 79,125 | 97.1 | % | 85,107 | 5 | (7,320) | 77,782 | 97.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | Ba | 2,012 | 1 | (40) | 1,971 | 2.4 | 1,879 | - | (92) | 1,787 | 2.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4 | B | 338 | - | (22) | 316 | 0.4 | 383 | 2 | (32) | 349 | 0.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5 | Caa and lower | 164 | 35 | (19) | 110 | 0.1 | 151 | 31 | (13) | 107 | 0.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6 |
In or near default
|
50 | 24 | (11) | 15 | - | 83 | 43 | (10) | 30 | 0.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Subtotal below investment grade
|
2,564 | 60 | (92) | 2,412 | 2.9 | % | 2,496 | 76 | (147) | 2,273 | 2.8 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total fixed maturity securities | $ | 86,564 | $ | 64 | $ | (4,963) | $ | 81,537 | 100.0 | % | $ | 87,603 | $ | 81 | $ | (7,467) | $ | 80,055 | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
The following tables present total fixed maturity securities, based on estimated fair value, by sector classification and by NRSRO rating and the applicable NAIC designations from the NAIC published comparison of NRSRO ratings to NAIC designations, except for certain Structured Securities, which are presented using the NAIC methodologies as described above:
| Fixed Maturity Securities - by Sector & Credit Quality Rating | ||||||||||||||||||||||||||||||||||||||||||||
| NAIC Designation | 1 | 2 | 3 | 4 | 5 | 6 | Total Estimated Fair Value | |||||||||||||||||||||||||||||||||||||
| NRSRO Rating | Aaa/Aa/A | Baa | Ba | B |
Caa and Lower |
In or Near Default |
||||||||||||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| U.S. corporate | $ | 18,444 | $ | 18,031 | $ | 1,550 | $ | 240 | $ | 49 | $ | 15 | $ | 38,329 | ||||||||||||||||||||||||||||||
| Foreign corporate | 5,125 | 6,154 | 306 | 57 | 54 | - | 11,696 | |||||||||||||||||||||||||||||||||||||
| RMBS | 8,266 | 2 | 9 | - | - | - | 8,277 | |||||||||||||||||||||||||||||||||||||
| U.S. government and agency | 6,547 | 82 | - | - | - | - | 6,629 | |||||||||||||||||||||||||||||||||||||
| CMBS | 5,716 | 331 | 36 | 9 | 4 | - | 6,096 | |||||||||||||||||||||||||||||||||||||
| ABS | 5,723 | 242 | 27 | 10 | 3 | - | 6,005 | |||||||||||||||||||||||||||||||||||||
| State and political subdivision | 3,480 | 50 | - | - | - | - | 3,530 | |||||||||||||||||||||||||||||||||||||
| Foreign government | 584 | 348 | 43 | - | - | - | 975 | |||||||||||||||||||||||||||||||||||||
| Total fixed maturity securities | $ | 53,885 | $ | 25,240 | $ | 1,971 | $ | 316 | $ | 110 | $ | 15 | $ | 81,537 | ||||||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| U.S. corporate | $ | 17,036 | $ | 18,415 | $ | 1,303 | $ | 291 | $ | 49 | $ | 29 | $ | 37,123 | ||||||||||||||||||||||||||||||
| Foreign corporate | 5,327 | 6,026 | 391 | 41 | 45 | - | 11,830 | |||||||||||||||||||||||||||||||||||||
| RMBS | 7,254 | 15 | 16 | - | 1 | 1 | 7,287 | |||||||||||||||||||||||||||||||||||||
| U.S. government and agency | 6,636 | 111 | - | - | - | - | 6,747 | |||||||||||||||||||||||||||||||||||||
| CMBS | 5,985 | 344 | 17 | 6 | 4 | - | 6,356 | |||||||||||||||||||||||||||||||||||||
| ABS | 5,776 | 498 | 19 | 11 | 8 | - | 6,312 | |||||||||||||||||||||||||||||||||||||
| State and political subdivision | 3,390 | 51 | - | - | - | - | 3,441 | |||||||||||||||||||||||||||||||||||||
| Foreign government | 572 | 346 | 41 | - | - | - | 959 | |||||||||||||||||||||||||||||||||||||
| Total fixed maturity securities | $ | 51,976 | $ | 25,806 | $ | 1,787 | $ | 349 | $ | 107 | $ | 30 | $ | 80,055 | ||||||||||||||||||||||||||||||
U.S. and Foreign Corporate Fixed Maturity Securities
We maintain a diversified portfolio of corporate fixed maturity securities across industries and issuers. Our portfolio does not have any exposure to any single issuer in excess of 1% of total investments and the top ten holdings in aggregate comprise 1% total investments at both September 30, 2025 and December 31, 2024. Our U.S. and foreign corporate fixed maturity securities holdings by industry were as follows at:
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
|
Estimated
Fair Value
|
% of
Total
|
Estimated
Fair Value
|
% of
Total
|
|||||||||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||||||||
| Industrial | $ | 16,277 | 32.5 | % | $ | 15,448 | 31.6 | % | ||||||||||||||||||
| Finance | 12,772 | 25.5 | 13,279 | 27.1 | ||||||||||||||||||||||
| Consumer | 11,558 | 23.1 | 11,155 | 22.8 | ||||||||||||||||||||||
| Utility | 6,712 | 13.5 | 6,405 | 13.1 | ||||||||||||||||||||||
| Communications | 2,706 | 5.4 | 2,666 | 5.4 | ||||||||||||||||||||||
|
Total
|
$ | 50,025 | 100.0 | % | $ | 48,953 | 100.0 | % | ||||||||||||||||||
Structured Securities
We held $20.4 billion and $20.0 billion of Structured Securities, at estimated fair value, at September 30, 2025 and December 31, 2024, respectively, as presented in the RMBS, CMBS and ABS sections below.
RMBS
Our RMBS holdings are diversified by security type, risk profile and ratings profile, which were as follows at:
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||
| Estimated Fair Value |
% of Total |
Net Unrealized Gains (Losses) | Estimated Fair Value |
% of Total |
Net Unrealized Gains (Losses) | |||||||||||||||||||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||||||||||||||||||||
| Security type: | ||||||||||||||||||||||||||||||||||||||
| Collateralized mortgage obligations | $ | 4,472 | 54.0 | % | $ | (177) | $ | 3,906 | 53.6 | % | $ | (304) | ||||||||||||||||||||||||||
| Pass-through securities | 3,805 | 46.0 | (374) | 3,381 | 46.4 | (525) | ||||||||||||||||||||||||||||||||
| Total RMBS | $ | 8,277 | 100.0 | % | $ | (551) | $ | 7,287 | 100.0 | % | $ | (829) | ||||||||||||||||||||||||||
| Risk profile: | ||||||||||||||||||||||||||||||||||||||
| Agency | $ | 6,374 | 77.0 | % | $ | (556) | $ | 5,752 | 78.9 | % | $ | (800) | ||||||||||||||||||||||||||
| Prime | 217 | 2.6 | (13) | 220 | 3.0 | (19) | ||||||||||||||||||||||||||||||||
| Alt-A | 1,381 | 16.7 | 10 | 992 | 13.6 | (11) | ||||||||||||||||||||||||||||||||
| Sub-prime | 305 | 3.7 | 8 | 323 | 4.5 | 1 | ||||||||||||||||||||||||||||||||
| Total RMBS | $ | 8,277 | 100.0 | % | $ | (551) | $ | 7,287 | 100.0 | % | $ | (829) | ||||||||||||||||||||||||||
| Ratings profile: | ||||||||||||||||||||||||||||||||||||||
|
Rated Aaa
|
$ | 1,308 | 15.8 | % | $ | 892 | 12.2 | % | ||||||||||||||||||||||||||||||
| Designated NAIC 1 | $ | 8,266 | 99.9 | % | $ | 7,254 | 99.5 | % | ||||||||||||||||||||||||||||||
Historically, our exposure to sub-prime RMBS holdings has been managed by focusing primarily on senior tranche securities, stress-testing the portfolio with severe loss assumptions and closely monitoring the performance of the portfolio. Our sub-prime RMBS portfolio consists predominantly of securities that were purchased after 2012 at significant discounts to par value and discounts to the expected principal recovery value of these securities. The vast majority of these securities are investment grade under the NAIC designations (e.g., NAIC 1 and NAIC 2).
CMBS
Our CMBS holdings are diversified by vintage year, which were as follows at:
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Amortized Cost | Estimated Fair Value | Amortized Cost | Estimated Fair Value | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| 2005 - 2011 | $ | 59 | $ | 58 | $ | 81 | $ | 76 | ||||||||||||||||||
| 2012 | - | - | 2 | 1 | ||||||||||||||||||||||
| 2013 | 16 | 15 | 21 | 19 | ||||||||||||||||||||||
| 2014 | 118 | 106 | 143 | 125 | ||||||||||||||||||||||
| 2015 | 336 | 316 | 929 | 895 | ||||||||||||||||||||||
| 2016 | 444 | 436 | 460 | 442 | ||||||||||||||||||||||
| 2017 | 697 | 680 | 689 | 652 | ||||||||||||||||||||||
| 2018 | 1,582 | 1,539 | 1,612 | 1,524 | ||||||||||||||||||||||
| 2019 | 900 | 835 | 912 | 807 | ||||||||||||||||||||||
| 2020 | 503 | 449 | 501 | 425 | ||||||||||||||||||||||
| 2021 | 568 | 546 | 664 | 635 | ||||||||||||||||||||||
| 2022 | 372 | 368 | 419 | 411 | ||||||||||||||||||||||
| 2023 | 81 | 81 | 61 | 62 | ||||||||||||||||||||||
| 2024 | 358 | 362 | 282 | 282 | ||||||||||||||||||||||
| 2025 | 302 | 305 | - | - | ||||||||||||||||||||||
| Total | $ | 6,336 | $ | 6,096 | $ | 6,776 | $ | 6,356 | ||||||||||||||||||
The estimated fair value of CMBS rated Aaa using rating agency ratings was $4.1 billion, or 66.8% of total CMBS, and designated NAIC 1 was $5.7 billion, or 93.8% of total CMBS, at September 30, 2025. The estimated fair value of CMBS rated Aaa using rating agency ratings was $4.3 billion, or 67.7% of total CMBS, and designated NAIC 1 was $6.0 billion, or 94.2% of total CMBS, at December 31, 2024.
ABS
Our ABS holdings are diversified by both collateral type and issuer. Our ABS holdings by collateral type and ratings profile were as follows at:
| September 30, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| Estimated Fair Value |
% of Total |
Net Unrealized Gains (Losses) | Estimated Fair Value |
% of Total |
Net Unrealized Gains (Losses) | ||||||||||||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||||||||||||||
| Collateral type: | |||||||||||||||||||||||||||||||||||
| Collateralized obligations | $ | 3,023 | 50.3 | % | $ | - | $ | 3,258 | 51.6 | % | $ | 14 | |||||||||||||||||||||||
| Automobile loans | 743 | 12.4 | 8 | 670 | 10.6 | 2 | |||||||||||||||||||||||||||||
| Student loans | 433 | 7.2 | (5) | 383 | 6.1 | (12) | |||||||||||||||||||||||||||||
|
Consumer loans
|
382 | 6.4 | (1) | 354 | 5.6 | (8) | |||||||||||||||||||||||||||||
| Credit card loans | 273 | 4.5 | 1 | 326 | 5.2 | (2) | |||||||||||||||||||||||||||||
| Other loans | 1,151 | 19.2 | (22) | 1,321 | 20.9 | (36) | |||||||||||||||||||||||||||||
| Total | $ | 6,005 | 100.0 | % | $ | (19) | $ | 6,312 | 100.0 | % | $ | (42) | |||||||||||||||||||||||
| Ratings profile: | |||||||||||||||||||||||||||||||||||
| Rated Aaa | $ | 3,696 | 61.5 | % | $ | 3,764 | 59.6 | % | |||||||||||||||||||||||||||
| Designated NAIC 1 | $ | 5,723 | 95.3 | % | $ | 5,776 | 91.5 | % | |||||||||||||||||||||||||||
Allowance for Credit Losses for Fixed Maturity Securities
See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information about the evaluation of fixed maturity securities for an allowance for credit losses or write-offs due to uncollectibility.
Securities Lending
We participate in a securities lending program whereby securities are loaned to third parties, primarily brokerage firms and commercial banks. We obtain collateral, usually cash, in an amount generally equal to 102% of the estimated fair value of the securities loaned, which is obtained at the inception of a loan and maintained at a level greater than or equal to 100% for the duration of the loan. The estimated fair value of the securities loaned is monitored on a daily basis with additional collateral obtained as necessary throughout the duration of the loan. Securities loaned under such transactions may be sold or re-pledged by the transferee. We are liable to return to our counterparties the cash collateral under our control. Security collateral received from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reflected in the financial statements. These transactions are treated as financing arrangements and the associated cash collateral liability is recorded at the amount of the cash received.
See "- Liquidity and Capital Resources - The Company - Primary Uses of Liquidity and Capital - Securities Lending" and Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information regarding our securities lending program.
Mortgage Loans
Our mortgage loans are principally collateralized by commercial, agricultural and residential properties. Information regarding mortgage loans by portfolio segment is summarized as follows at:
| September 30, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost |
% of
Total
|
Allowance for Credit Losses | % of Amortized Cost | Amortized Cost |
% of
Total
|
Allowance for Credit Losses | % of Amortized Cost | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | $ | 12,634 | 54.8 | % | $ | 143 | 1.1 | % | $ | 13,330 | 56.8 | % | $ | 106 | 0.8 | % | |||||||||||||||||||||||||||||||
| Agricultural | 4,566 | 19.8 | 21 | 0.5 | % | 4,591 | 19.6 | 30 | 0.7 | % | |||||||||||||||||||||||||||||||||||||
| Residential | 5,867 | 25.4 | 41 | 0.7 | % | 5,543 | 23.6 | 42 | 0.8 | % | |||||||||||||||||||||||||||||||||||||
| Total | $ | 23,067 | 100.0 | % | $ | 205 | 0.9 | % | $ | 23,464 | 100.0 | % | $ | 178 | 0.8 | % | |||||||||||||||||||||||||||||||
Our mortgage loan portfolio is diversified by both geographic region and property type to reduce the risk of concentration. The percentage of our commercial and agricultural mortgage loan portfolios collateralized by properties located in the U.S. was 98% at both September 30, 2025 and December 31, 2024. The remainder was collateralized by properties located outside of the U.S. At September 30, 2025, the carrying value as a percentage of total commercial and agricultural mortgage loans for the top three states in the U.S. was 17% for California, 11% for Texas and 8% for New York. Additionally, we manage risk when originating commercial and agricultural mortgage loans by generally lending up to 75% of the estimated fair value of the underlying real estate collateral.
Our residential mortgage loan portfolio is managed in a similar manner to reduce risk of concentration. All residential mortgage loans were collateralized by properties located in the U.S. at both September 30, 2025 and December 31, 2024. At September 30, 2025, the carrying value as a percentage of total residential mortgage loans for the top three states in the U.S. was 37% for California, 10% for Florida and 6% for New York.
Commercial Mortgage Loans by Geographic Region and Property Type. Commercial mortgage loans are the largest component of the mortgage loan invested asset class. The diversification across geographic regions and property types of commercial mortgage loans was as follows at:
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Amount |
% of Total
|
Amount |
% of Total
|
|||||||||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||||||||
| Geographic region: | ||||||||||||||||||||||||||
| South Atlantic | $ | 2,635 | 20.8 | % | $ | 2,769 | 20.8 | % | ||||||||||||||||||
| Pacific | 2,536 | 20.1 | 2,644 | 19.8 | ||||||||||||||||||||||
| Middle Atlantic | 2,074 | 16.4 | 2,075 | 15.6 | ||||||||||||||||||||||
| West South Central | 1,544 | 12.2 | 1,555 | 11.7 | ||||||||||||||||||||||
| Mountain | 1,087 | 8.6 | 1,114 | 8.4 | ||||||||||||||||||||||
|
East North Central
|
758 | 6.0 | 834 | 6.2 | ||||||||||||||||||||||
|
New England
|
565 | 4.5 | 726 | 5.4 | ||||||||||||||||||||||
|
East South Central
|
362 | 2.9 | 363 | 2.7 | ||||||||||||||||||||||
|
West North Central
|
354 | 2.8 | 358 | 2.7 | ||||||||||||||||||||||
|
International
|
330 | 2.6 | 391 | 2.9 | ||||||||||||||||||||||
|
Multi-region and Other
|
389 | 3.1 | 501 | 3.8 | ||||||||||||||||||||||
| Total recorded investment | 12,634 | 100.0 | % | 13,330 | 100.0 | % | ||||||||||||||||||||
| Less: allowance for credit losses | 143 | 106 | ||||||||||||||||||||||||
| Carrying value, net of allowance for credit losses | $ | 12,491 | $ | 13,224 | ||||||||||||||||||||||
| Property type: | ||||||||||||||||||||||||||
| Apartment | $ | 4,811 | 38.1 | % | $ | 5,249 | 39.4 | % | ||||||||||||||||||
| Office | 2,821 | 22.3 | 3,019 | 22.7 | ||||||||||||||||||||||
| Industrial | 2,430 | 19.2 | 2,498 | 18.7 | ||||||||||||||||||||||
| Retail | 1,655 | 13.1 | 1,681 | 12.6 | ||||||||||||||||||||||
| Hotel | 917 | 7.3 | 883 | 6.6 | ||||||||||||||||||||||
| Total recorded investment | 12,634 | 100.0 | % | 13,330 | 100.0 | % | ||||||||||||||||||||
| Less: allowance for credit losses | 143 | 106 | ||||||||||||||||||||||||
| Carrying value, net of allowance for credit losses | $ | 12,491 | $ | 13,224 | ||||||||||||||||||||||
Mortgage Loan Credit Quality - Monitoring Process. Our mortgage loan investments are monitored on an ongoing basis, including a review of loans that are current, past due, restructured and under foreclosure. Quarterly, we conduct a formal review of the portfolio with our investment managers. See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information on mortgage loans by credit quality indicator, past due status, nonaccrual status and modified mortgage loans.
Our commercial mortgage loans are reviewed on an ongoing basis. These reviews may include an analysis of the property financial statements and rent roll, lease rollover analysis, property inspections, market analysis, estimated valuations of the underlying collateral, loan-to-value ratios, debt-service coverage ratios and tenant creditworthiness. The monitoring process focuses on higher risk loans, which include those that are classified as restructured, delinquent or in foreclosure, as well as loans with higher loan-to-value ratios and lower debt-service coverage ratios. The monitoring process for agricultural mortgage loans is generally similar, with a focus on higher risk loans, such as loans with higher loan-to-value ratios, including reviews on a geographic and sector basis. Our residential mortgage loans are reviewed on an ongoing basis. See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information on our evaluation of residential mortgage loans and related measurement of allowance for credit losses.
Loan-to-value ratios and debt-service coverage ratios are common measures in the assessment of the quality of commercial mortgage loans. Loan-to-value ratios are a common measure in the assessment of the quality of agricultural mortgage loans. Loan-to-value ratios compare the amount of the loan to the estimated fair value of the underlying collateral. A loan-to-value ratio greater than 100% indicates that the loan amount is greater than the collateral value. A loan-to-value ratio of less than 100% indicates an excess of collateral value over the loan amount. Generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss. The debt-service coverage ratio compares a property's net operating income to amounts needed to service the principal and interest due under the loan. Generally, the lower the debt-service coverage ratio, the higher the risk of experiencing a credit loss. For our commercial mortgage loans, our average loan-to-value ratio was 68% and 69% at September 30, 2025 and December 31, 2024, respectively, and our average debt-service coverage ratio was 2.2x and 2.3x at September 30, 2025 and December 31, 2024, respectively. The debt-service coverage ratio, as well as the values utilized in calculating the ratio, is updated annually on a rolling basis, with a portion of the portfolio updated each quarter. In addition, the loan-to-value ratio is routinely updated for all but the lowest risk loans as part of our ongoing review of our commercial mortgage loan portfolio. For our agricultural mortgage loans, our average loan-to-value ratio was 46% and 48% at September 30, 2025 and December 31, 2024, respectively. The values utilized in calculating the agricultural mortgage loan loan-to-value ratio are developed in connection with the ongoing review of the agricultural loan portfolio and are routinely updated.
Mortgage Loan Allowance for Credit Losses. See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information about how the allowance for credit losses is established and monitored, as well as activity in and balances of the allowance for credit losses for the nine months ended September 30, 2025 and 2024.
Limited Partnerships and Limited Liability Companies
The carrying values of our limited partnerships and LLCs were as follows at:
| September 30, 2025 | December 31, 2024 | |||||||||||||
| (In millions) | ||||||||||||||
| Other limited partnerships | $ | 4,157 | $ | 4,100 | ||||||||||
| Real estate limited partnerships and LLCs (1) | 659 | 727 | ||||||||||||
| Total | $ | 4,816 | $ | 4,827 | ||||||||||
__________________
(1)The estimated fair value of real estate limited partnerships and LLCs was $661 million and $836 million at September 30, 2025 and December 31, 2024, respectively.
Cash distributions on these investments are generated from investment gains, operating income from the underlying investments of the funds and liquidation of the underlying investments of the funds. We estimate that the underlying investment of the private equity funds will typically be liquidated over the next 10 to 20 years.
Other Invested Assets
The carrying value of our other invested assets by type was as follows at:
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
|
Carrying Value
|
% of
Total
|
Carrying Value |
% of
Total
|
|||||||||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||||||||
|
Freestanding derivatives with positive estimated fair values
|
$ | 7,700 | 87.1 | % | $ | 4,135 | 78.8 | % | ||||||||||||||||||
| Company-owned life insurance | 808 | 9.1 | 772 | 14.7 | ||||||||||||||||||||||
|
Federal Home Loan Bank stock
|
217 | 2.5 | 222 | 4.2 | ||||||||||||||||||||||
|
Leveraged leases, net of non-recourse debt
|
60 | 0.7 | 60 | 1.1 | ||||||||||||||||||||||
|
Tax credit and renewable energy partnerships
|
44 | 0.5 | 48 | 0.9 | ||||||||||||||||||||||
| Other | 13 | 0.1 | 13 | 0.3 | ||||||||||||||||||||||
| Total | $ | 8,842 | 100.0 | % | $ | 5,250 | 100.0 | % | ||||||||||||||||||
Derivatives
Derivative Risks
We are exposed to various risks relating to our ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market risks. We use a variety of strategies to manage these risks, including the use of derivatives. We have historically managed the risks related to our variable annuity and first generation Shield Annuity contracts on a combined basis. In the third quarter of 2025, we completed an initiative that established a stand-alone hedging program for each product allowing us to separately manage the risks related to these two products.
See Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements for:
•information about the gross notional amount, estimated fair value and primary underlying risk exposure of our derivatives by type of hedge designation, excluding embedded derivatives held at September 30, 2025 and December 31, 2024; and
•the effects of derivatives in cash flow, fair value or non-qualifying hedge relationships on the statements of operations for the nine months ended September 30, 2025 and 2024.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management Strategies" included in our 2024 Annual Report for more information about our hedging strategies. In addition, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Annual Actuarial Review" and "Risk Factors - Risks Related to Our Investment Portfolio - Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations" included in our 2024 Annual Report.
Fair Value Hierarchy
See Note 9 of the Notes to the Interim Condensed Consolidated Financial Statements for derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy, as well as a rollforward of the fair value measurements for derivatives measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs as discussed below.
The valuation of Level 3 derivatives involves the use of significant unobservable inputs and generally requires a higher degree of management judgment or estimation than the valuations of Level 1 and Level 2 derivatives. Although Level 3 inputs are unobservable, management believes they are consistent with what other market participants would use when pricing such instruments and are considered appropriate given the circumstances. The use of different inputs or methodologies could have a material effect on the estimated fair value of Level 3 derivatives and could materially affect net income.
Derivatives categorized as Level 3 at September 30, 2025 include: credit default swaps priced using unobservable credit spreads, or that are priced through independent broker quotations; and foreign currency swaps with certain unobservable inputs.
Credit Risk
See Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements for information about how we manage credit risk related to derivatives and for the estimated fair value of our net derivative assets and net derivative liabilities after the application of master netting agreements and collateral. See "Risk Factors - Risks Related to Our Investment Portfolio - Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations" included in our 2024 Annual Report.
Our policy is not to offset the fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement. This policy applies to the recognition of derivatives on the balance sheet and does not affect our legal right of offset.
Credit Derivatives
The gross notional amount and estimated fair value of credit default swaps were as follows at:
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
|
Gross Notional Amount
|
Estimated Fair Value
|
Gross Notional Amount
|
Estimated Fair Value
|
|||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Written | $ | 478 | $ | 11 | $ | 780 | $ | 19 | ||||||||||||||||||
The maximum amount at risk related to our written credit default swaps is equal to the corresponding gross notional amount. In a replication transaction, we pair an asset on our balance sheet with a written credit default swap to synthetically replicate a corporate bond, a core asset holding of life insurance companies. Replications are entered into in accordance with the guidelines approved by state insurance regulators and the NAIC and are an important tool in managing the overall corporate credit risk within the Company. In order to match our long-dated insurance liabilities, we seek to buy long-dated corporate bonds. In some instances, these may not be readily available in the market, or they may be issued by corporations to which we already have significant corporate credit exposure. For example, by purchasing Treasury bonds (or other high-quality assets) and associating them with written credit default swaps on the desired corporate credit name, we can replicate the desired bond exposures and meet our ALM needs. This can expose the Company to changes in credit spreads as the written credit default swap tenor is shorter than the maturity of Treasury bonds.
Embedded Derivatives
See Note 9 of the Notes to the Interim Condensed Consolidated Financial Statements for (i) information about embedded derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy and (ii) a rollforward of the fair value measurements for net embedded derivatives measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Summary of Critical Accounting Estimates - Derivatives" included in our 2024 Annual Report for additional information on the estimates and assumptions that affect embedded derivatives.
Policyholder Liabilities
We establish, and carry as liabilities, actuarially determined amounts that are calculated to meet policy obligations or to provide for future annuity and life insurance benefit payments. Amounts for actuarial liabilities are computed and reported in the financial statements in conformity with GAAP. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Summary of Critical Accounting Estimates" and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Policyholder Liabilities" included in our 2024 Annual Report for more details on policyholder liabilities.
Future Policy Benefits
We establish liabilities for future amounts payable under insurance policies. See Note 3 of the Notes to the Interim Condensed Consolidated Financial Statements.
Policyholder Account Balances
Policyholder account balance liabilities are established for products with an explicit account value and generally equal to the balance accrued to the contract holder, which includes accrued interest credited, but excludes the impact of any applicable charge that may be incurred upon surrender. See Note 3 of the Notes to the Interim Condensed Consolidated Financial Statements.
Market Risk Benefits
We issue certain variable annuity products with guaranteed minimum benefits ("GMxB") that provide the policyholder a minimum return based on their initial deposit (i.e., the Benefit Base) less withdrawals. In some cases, the Benefit Base may be increased by additional deposits, bonus amounts, accruals or optional market value step-ups. Variable annuity guaranteed benefits are classified as MRBs and measured at fair value. Certain index-linked annuity products may also have GMxBs classified as MRBs. See Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements and "Quantitative and Qualitative Disclosures About Market Risk."
Select information that management considers relevant to understanding our variable annuity risk management strategy has been included below.
Net Amount at Risk
The net amount at risk ("NAR") for the guaranteed minimum income benefits ("GMIB") is 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 our potential economic exposure to such guarantees in the event all contract holders were to annuitize on the balance sheet date, even though the guaranteed amount under the contract may not be annuitized until after the waiting period of the contract.
The NAR for the guaranteed minimum withdrawal benefits ("GMWB") is the amount of guaranteed benefits in excess of the account values (if any) as of the balance sheet date and assumes utilization of benefits by all contract holders as of the balance sheet date. Only a small portion of the Benefit Base is available for withdrawal on an annual basis.
The NAR for the guaranteed minimum accumulation benefits ("GMAB") is the amount of guaranteed benefits in excess of the account values (if any) as of the balance sheet date and assumes utilization of benefits by all contract holders as of the balance sheet. The NAR for the GMAB is not available until the GMAB maturity date.
The NAR for the guaranteed minimum death benefits ("GMDB") is the amount of death benefit in excess of the account value (if any) as of the balance sheet date. It represents the amount of the claim we would incur if death claims were made 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.
Our variable annuity account value and NAR by type of GMxB were as follows at:
|
September 30, 2025
|
December 31, 2024
|
||||||||||||||||||||||||||||||||||||||||||||||
| Account Value | Death Benefit NAR (1) | Living Benefit NAR (1) | % of Account Value In-the-Money (2) | Account Value | Death Benefit NAR (1) | Living Benefit NAR (1) | % of Account Value In-the-Money (2) | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| GMIB | $ | 29,978 | $ | 3,178 | $ | 3,599 | 28.0 | % | $ | 30,280 | $ | 3,660 | $ | 4,085 | 33.5 | % | |||||||||||||||||||||||||||||||
| GMIB Max with EDB (3) | 6,936 | 6,341 | 881 | 43.7 | % | 6,981 | 6,501 | 875 | 48.8 | % | |||||||||||||||||||||||||||||||||||||
| GMIB Max without EDB (3) | 3,916 | 55 | 246 | 29.6 | % | 3,941 | 111 | 247 | 33.6 | % | |||||||||||||||||||||||||||||||||||||
| GMWB | 19,468 | 143 | 195 | 6.3 | % | 19,263 | 237 | 276 | 10.1 | % | |||||||||||||||||||||||||||||||||||||
| GMAB | 188 | - | - | 0.1 | % | 359 | 1 | 1 | 2.9 | % | |||||||||||||||||||||||||||||||||||||
| GMDB only (other than EDB) (3) | 17,368 | 931 | - |
N/A
|
17,076 | 964 | - | N/A | |||||||||||||||||||||||||||||||||||||||
| EDB only (3) | 3,190 | 1,205 | - |
N/A
|
3,084 | 1,343 | - | N/A | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 81,044 | $ | 11,853 | $ | 4,921 | $ | 80,984 | $ | 12,817 | $ | 5,484 | |||||||||||||||||||||||||||||||||||
__________________
(1)The "Death Benefit NAR" and "Living Benefit NAR" are not additive at the contract level.
(2)In-the-money is defined as any contract with a living benefit NAR in excess of zero.
(3)Enhanced Death Benefit ("EDB").
Reserves
Under GAAP, variable annuity guarantees are classified as MRBs, measured at estimated fair value, and are reported in market risk benefit assets and liabilities on the consolidated balance sheets, with changes reported in change in market risk benefits on the consolidated statements of operations, except for changes related to nonperformance risk, which are reported in other comprehensive income on the consolidated statements of comprehensive income (loss). Additionally, the index protection and accumulation features of Shield Annuities are accounted for as embedded derivatives, measured at estimated fair value, and are reported in policyholder account balances on the consolidated balance sheets, with changes reported in net derivative gains (losses) on the consolidated statements of operations. The Shield embedded derivative liabilities were valued at $11.4 billion at September 30, 2025.
Our variable annuity MRBs by type of GMxB were as follows at:
| September 30, 2025 | December 31, 2024 | ||||||||||
| (In millions) | |||||||||||
| GMIB | $ | 7,711 | $ | 7,560 | |||||||
| GMWB | 8 | 7 | |||||||||
| GMDB | 781 | 740 | |||||||||
| Total | $ | 8,500 | $ | 8,307 | |||||||
The estimated fair value of these guarantees can change significantly due to changes in interest rates, equity indices, market volatility and variations in actuarial assumptions, including policyholder behavior, mortality and risk margins related to non-capital markets inputs, as well as changes in nonperformance risk. See "Risk Factors - Risks Related to Our Business - Differences between actual experience and actuarial assumptions may adversely affect our financial results, capitalization and financial condition" and "Risk Factors - Risks Related to Our Business - Guarantees within certain of our annuity products may decrease our earnings, decrease our capitalization, increase the volatility of our results, result in higher risk management costs and expose us to increased market risk" included in our 2024 Annual Report.
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. Changing conditions in the global capital markets and the economy may affect our financing costs and market interest rates for our debt or equity securities. For further information regarding market factors that could affect our ability to meet liquidity and capital needs, see "- Industry Trends and Uncertainties - Financial and Economic Environment," as well as "Risk Factors - Economic Environment and Capital Markets-Related Risks" and "Risk Factors - Risks Related to Our Investment Portfolio" included in our 2024 Annual Report.
Liquidity and Capital Management
Based upon our capitalization, expectations regarding maintaining our business mix, ratings and funding sources available to us, we believe we have sufficient liquidity to meet business requirements in current market conditions and certain stress scenarios. BHF's Board of Directors and senior management are directly involved in the governance of the capital management process, including proposed changes to the annual capital plan and capital targets. We continuously monitor and adjust our liquidity and capital plans in light of market conditions, as well as changing needs and opportunities.
We maintain a substantial short-term liquidity position, which was $5.2 billion at both September 30, 2025 and December 31, 2024. Short-term liquidity is comprised of cash and cash equivalents and short-term investments, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include amounts received in connection with securities lending, derivatives and assets held on deposit or in trust.
An integral part of our liquidity management includes managing our level of liquid assets, which was $50.4 billion and $48.1 billion at September 30, 2025 and December 31, 2024, respectively. Liquid assets are comprised of cash and cash equivalents, short-term investments and publicly-traded securities, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include amounts received in connection with securities lending, funding agreements, derivatives and assets held on deposit or in trust.
The Company
Liquidity
Liquidity refers to our ability to generate adequate cash flows from our normal operations to meet the cash requirements of our operating, investing and financing activities. We determine our liquidity needs based on a rolling 12-month forecast by portfolio of invested assets, which we monitor daily. We adjust the general account asset and derivatives mix and general account asset maturities based on this rolling 12-month forecast. To support this forecast, we conduct cash flow and stress testing, which reflects the impact of various scenarios, including (i) the potential increase in our requirement to pledge additional collateral or return collateral to our counterparties, (ii) a reduction in new business sales, and (iii) the risk of early contract holder and policyholder withdrawals, as well as lapses and surrenders of existing policies and contracts. We include provisions limiting withdrawal rights in many of our products, which deter the customer from making withdrawals prior to the maturity date of the product. If significant cash is required beyond our anticipated liquidity needs, we have various alternatives available depending on market conditions and the amount and timing of the liquidity need. These available alternative sources of liquidity include cash flows from operations, sales of liquid assets and funding sources, including secured funding agreements, unsecured credit facilities and secured committed facilities.
Under certain adverse market and economic conditions, our access to liquidity may deteriorate, or the cost to access liquidity may increase. See "Risk Factors - Economic Environment and Capital Markets-Related Risks - Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs and our access to capital" in our 2024 Annual Report.
Capital
We manage our capital position to maintain our financial strength and credit ratings. Our capital position is supported by our ability to generate cash flows within our insurance subsidiaries, our ability to effectively manage the risks of our businesses and our expected ability to borrow funds and raise additional capital to meet operating and growth needs under a variety of market and economic conditions.
We monitor our debt-to-capital ratio using an average of our key leverage ratios as calculated by A.M. Best, Fitch, Moody's and S&P, and we aim to maintain a ratio commensurate with our financial strength and credit ratings. As such, we may opportunistically look to pursue additional financing over time, which may include borrowings under credit facilities, the issuance of debt, equity or hybrid securities, the incurrence of term loans, or the refinancing or extinguishment of existing indebtedness. There can be no assurance that we will be able to complete any such financing transactions on terms and conditions favorable to us or at all.
In support of our target combined RBC ratio of 400% to 450% in normal market conditions, we expect to continue to maintain a capital and risk management strategy that targets total assets supporting our variable annuity and Shield Annuity contracts at or above the average of the worst two percent of a set of capital markets scenarios over the life of the contracts level in normal market conditions. With our risk management focus on the core drivers of our combined RBC ratio, we believe we can better manage our RBC in stressed market scenarios.
In November 2023, we authorized a $750 million share repurchase program under which repurchases may be made through open market purchases, including pursuant to Rule 10b5-1 plans or pursuant to accelerated stock repurchase plans, or through privately negotiated transactions, from time to time at management's discretion in accordance with applicable legal requirements. Common stock repurchases are dependent upon several factors, including our capital position, liquidity, financial strength and credit ratings, general market conditions, the market price of our common stock compared to management's assessment of the stock's underlying value and applicable regulatory approvals, as well as other legal and accounting factors.
On November 6, 2025, BHF entered into the Merger Agreement. Pursuant to the Merger Agreement, we have agreed that during the period beginning the date of the Merger Agreement through the earlier of the closing of the Merger and the termination of the Merger Agreement, we will not, without the written consent of Parent, pay any dividend or other distribution payable in cash, stock or property with respect to our common stock, or subject to certain exceptions, purchase directly or indirectly any of BHF's or its subsidiaries' capital stock or other equity or voting interests of BHF or any of its subsidiaries.
Further, the Merger Agreement permits us to pay periodic cash dividends on our preferred stock not in excess of $412.50 per share on the 6.600% Non-Cumulative Preferred Stock, Series A (the "Series A Preferred Stock"), $421.875 per share on the 6.750% Non-Cumulative Preferred Stock, Series B (the "Series B Preferred Stock"), $335.9375 per share on the 5.375% Non-Cumulative Preferred Stock, Series C (the "Series C Preferred Stock"); and $289.0625 per share on the 4.625% Non-Cumulative Preferred Stock, Series D (the "Series D Preferred Stock" and; together with the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock, the "Company Preferred Stock"), in each case, per quarter during the interim period, consistent with the per-quarter dividends due under each applicable Certificate of Designations.
Rating Agencies
Rating agencies continue to review and adjust our ratings. In July 2025, S&P revised the long-term issuer credit ratings for BHF and Brighthouse Holdings, LLC ("BH Holdings") to BBB from BBB+. In addition, S&P revised the financial strength ratings for certain of our insurance subsidiaries to A from A+, among other revisions. Following the announcement that BHF has entered into the Merger Agreement, S&P and Moody's have revised their outlook on our credit ratings. On November 6, 2025, S&P placed BHF, BH Holdings and certain of our insurance subsidiaries on CreditWatch Negative. On November 7, 2025, Moody's placed BHF, BH Holdings and certain of our insurance subsidiaries on review for a downgrade and changed the long-term issuer credit rating and financial strength rating outlooks for those entities to rating under review. See "Risk Factors - Risks Related to Our Business - A downgrade or a potential downgrade in our financial strength or credit ratings could result in a loss of business and materially adversely affect our financial condition and results of operations" included in our 2024 Annual Report for a description of the potential impact of a ratings downgrade.
Sources and Uses of Liquidity and Capital
Our primary sources and uses of liquidity and capital were as follows at:
|
Nine Months Ended September 30, |
|||||||||||
| 2025 | 2024 | ||||||||||
| (In millions) | |||||||||||
| Sources: | |||||||||||
| Operating activities, net | $ | 262 | $ | - | |||||||
| Investing activities, net | 2,047 | - | |||||||||
|
Changes in policyholder account balances, net
|
- | 3,672 | |||||||||
|
Changes in payables for collateral under securities loaned and other transactions, net
|
456 | 94 | |||||||||
|
Financing element on certain derivative instruments and other derivative related transactions, net
|
- | 305 | |||||||||
| Total sources | 2,765 | 4,071 | |||||||||
| Uses: | |||||||||||
| Operating activities, net | - | 172 | |||||||||
| Investing activities, net | - | 1,837 | |||||||||
|
Changes in policyholder account balances, net
|
636 | - | |||||||||
| Long-term debt repaid | 1 | 1 | |||||||||
|
Dividends on preferred stock
|
77 | 77 | |||||||||
| Treasury stock acquired in connection with share repurchases | 102 | 190 | |||||||||
|
Financing element on certain derivative instruments and other derivative related transactions, net
|
371 | - | |||||||||
| Other, net | 17 | 15 | |||||||||
| Total uses | 1,204 | 2,292 | |||||||||
| Net increase (decrease) in cash and cash equivalents | $ | 1,561 | $ | 1,779 | |||||||
Cash Flows from Operating Activities
The principal cash inflows from our insurance activities come from insurance premiums, annuity considerations and net investment income. The principal cash outflows are the result of various annuity and life insurance products, operating expenses and income tax, as well as interest expense. The primary liquidity concern with respect to these cash flows is the risk of early contract holder and policyholder withdrawal.
Cash Flows from Investing Activities
The principal cash inflows from our investment activities come from repayments of principal, proceeds from maturities and sales of investments, as well as settlements of freestanding derivatives. The principal cash outflows relate to purchases of investments and settlements of freestanding derivatives. We typically can have a net cash outflow from investing activities because cash inflows from insurance operations are reinvested in accordance with our ALM discipline to fund insurance liabilities. We closely monitor and manage these risks through our comprehensive investment risk management process. The primary liquidity concerns with respect to these cash flows are the risk of default by debtors and market disruption.
Cash Flows from Financing Activities
The principal cash inflows from our financing activities come from issuances of debt and equity securities, deposits of funds associated with policyholder account balances and lending of securities. The principal cash outflows come from repayments of debt, common stock repurchases, preferred stock dividends, withdrawals associated with policyholder account balances and the return of securities on loan. The primary liquidity concerns with respect to these cash flows are market disruption and the risk of early policyholder withdrawal.
Primary Sources of Liquidity and Capital
In addition to the summary description of liquidity and capital sources discussed in "- Sources and Uses of Liquidity and Capital," the following additional information is provided regarding our primary sources of liquidity and capital:
Funding Sources
Liquidity is provided by a variety of funding sources, including secured and unsecured funding agreements, unsecured credit facilities and secured committed facilities. Capital is provided by a variety of funding sources, including issuances of debt and equity securities, as well as borrowings under our credit facilities. We maintain a shelf registration statement with the SEC that permits the issuance of public debt, equity and hybrid securities. As a "Well-Known Seasoned Issuer" under SEC rules, our shelf registration statement provides for automatic effectiveness upon filing and has no stated issuance capacity. The diversity of our funding sources enhances our funding flexibility, limits dependence on any one market or source of funds and generally lowers the cost of funds. Our primary funding sources include:
Preferred Stock
See Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements and Note 12 of the Notes to the Consolidated Financial Statements included in our 2024 Annual Report for information on preferred stock issuances.
Funding Agreements
Brighthouse Life Insurance Company issues funding agreements and uses the proceeds from such issuances for spread lending purposes in connection with our institutional spread margin business or to provide additional liquidity. The institutional spread margin business is comprised of funding agreements issued in connection with the programs described in more detail below. Activity related to these programs is reported in the Corporate & Other segment. See Note 3 of the Notes to the Consolidated Financial Statements included in our 2024 Annual Report for additional information on funding agreements.
Funding Agreement-Backed Repurchase Agreement Program
In January 2024, Brighthouse Life Insurance Company established a secured funding agreement-backed repurchase agreement program (the "FABR Program"), pursuant to which Brighthouse Life Insurance Company may enter into repurchase agreements with bank counterparties and the proceeds of the repurchase agreements are then used by a special purpose entity to purchase funding agreements from Brighthouse Life Insurance Company.
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 $5.0 billion.
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 is $7.0 billion.
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.
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") with a term ending on December 1, 2026, pursuant to which the parties may enter into funding agreements in an aggregate amount of up to $750 million.
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, 2025 | December 31, 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||||||||
|
FABR Program
|
$ | 500 | $ | 500 | $ | - | $ | 500 | $ | - | $ | - | ||||||||||||||||||||||||||
| FABCP Program | 2,667 | 2,962 | 5,911 | 12,305 | 6,206 | 12,745 | ||||||||||||||||||||||||||||||||
| FABN Program | 2,000 | 2,550 | - | 1,150 | 550 | 700 | ||||||||||||||||||||||||||||||||
| FHLB Funding Agreements | 4,200 | 4,300 | 625 | 2,150 | 725 | 2,200 | ||||||||||||||||||||||||||||||||
| Farmer Mac Funding Agreements | 450 | 650 | - | 50 | 200 | 100 | ||||||||||||||||||||||||||||||||
| Total | $ | 9,817 | $ | 10,962 | $ | 6,536 | $ | 16,155 | $ | 7,681 | $ | 15,745 | ||||||||||||||||||||||||||
Debt Issuances
See Note 11 of the Notes to the Consolidated Financial Statements included in our 2024 Annual Report for information on debt issuances.
Credit and Committed Facilities
See Notes 11 and 12 of the Notes to the Consolidated Financial Statements included in our 2024 Annual Report for information regarding our credit and committed facilities.
We have no reason to believe that our lending counterparties would be unable to fulfill their respective contractual obligations under these facilities. As commitments under our credit and committed facilities may expire unused, these amounts do not necessarily reflect our actual future cash funding requirements.
Our Revolving Credit Facility contains financial covenants, including requirements to maintain a specified minimum adjusted consolidated net worth, to maintain a ratio of total indebtedness to total capitalization not in excess of a specified percentage and that place limitations on the dollar amount of indebtedness that may be incurred by our subsidiaries, which could restrict our operations and use of funds. At September 30, 2025, we were in compliance with these financial covenants.
Primary Uses of Liquidity and Capital
In addition to the summarized description of liquidity and capital uses discussed in "- Sources and Uses of Liquidity and Capital," the following additional information is provided regarding our primary uses of liquidity and capital:
Common Stock Repurchases
See Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements for information relating to authorizations to repurchase BHF common stock, amounts of common stock repurchased pursuant to such authorizations and the amount remaining under such authorizations at September 30, 2025.
Preferred Stock Dividends
See Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements for information relating to dividends declared and paid on our preferred stock.
"Dividend Stopper" Provisions in BHF's Preferred Stock and Junior Subordinated Debentures
Terms applicable to our junior subordinated debentures may restrict our ability to pay interest on those debentures in certain circumstances. Suspension of payments of interest on our junior subordinated debentures, whether required under the relevant indenture or optional, could cause "dividend stopper" provisions applicable under those and other instruments to restrict our ability to pay dividends, if any, on our common stock and repurchase our common stock in various situations, including situations where we may be experiencing financial stress, and may restrict our ability to pay dividends or interest on our preferred stock and junior subordinated debentures as well. Similarly, the terms of our outstanding preferred stock contain restrictions on our ability to repurchase our common stock or pay dividends thereon if we have not fulfilled our dividend obligations under such preferred stock or other preferred securities. In addition, the terms of the agreements governing any preferred stock, debt or other financial instruments that we may issue in the future, may limit or prohibit the payment of dividends on our common stock or preferred stock, or the payment of interest on our junior subordinated debentures.
Debt Repayments, Repurchases, Redemptions and Exchanges
See Note 11 of the Notes to the Consolidated Financial Statements included in our 2024 Annual Report for information on debt repayments and repurchases, as well as debt maturities and the terms of our outstanding long-term debt.
We may from time to time seek to retire or purchase our outstanding indebtedness through cash purchases or exchanges for other securities, purchases in the open market, privately negotiated transactions or otherwise. Any such repurchases or exchanges will be dependent upon several factors, including our liquidity requirements, contractual restrictions, general market conditions, as well as applicable regulatory, legal and accounting factors. Whether or not we repurchase any debt and the size and timing of any such repurchases will be determined at our discretion.
Insurance Liabilities
Liabilities arising from our insurance activities primarily relate to benefit payments under various annuity and life insurance products, as well as payments for policy surrenders, withdrawals and loans. See "- Primary Sources of Liquidity and Capital - Funding Sources - Funding Agreements" for additional information regarding our institutional spread margin business.
Pledged Collateral
We enter into derivatives to manage various risks relating to our ongoing business operations. We pledge collateral to, and have collateral pledged to us by, counterparties in connection with our derivatives. At September 30, 2025, we pledged $8 million of cash collateral to counterparties. At December 31, 2024, we did not pledge any cash collateral to counterparties. At September 30, 2025 and December 31, 2024, we were obligated to return cash collateral pledged to us by counterparties of $1.1 billion and $812 million, respectively. The timing of the return of the derivatives collateral is uncertain. We also pledge collateral from time to time in connection with certain funding agreements.
We receive non-cash collateral from counterparties for derivatives, which can be sold or re-pledged subject to certain constraints, and which is not recorded on our consolidated balance sheets. The amount of this non-cash collateral at estimated fair value was $2.9 billion and $2.3 billion at September 30, 2025 and December 31, 2024, respectively.
See Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information regarding pledged collateral.
Securities Lending
We have a securities lending program that aims to enhance the total return on our investment portfolio, whereby securities are loaned to third parties, primarily brokerage firms and commercial banks. We obtain collateral, usually cash, from the borrower, which must be returned to the borrower when the loaned securities are returned to us. Generally, our securities lending contracts expire within twelve months of issuance. We were liable for cash collateral under our control
of $3.3 billion and $3.2 billion at September 30, 2025 and December 31, 2024, respectively.
We receive non-cash collateral for securities lending from counterparties, which cannot be sold or re-pledged, and which is not recorded on our consolidated balance sheets. There was no non-cash collateral at both September 30, 2025 and December 31, 2024.
See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements for further discussion of our securities lending program.
Contingencies, Commitments and Guarantees
We establish liabilities for litigation, regulatory and other loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. See Note 13 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information regarding contingencies.
We enter into commitments for the purpose of enhancing the total return on our investment portfolio consisting of commitments to fund partnership investments, bank credit facilities and private corporate bond investments, as well as commitments to lend funds under mortgage loan commitments. We anticipate these commitments could be invested any time over the next five years. See Notes 7 and 13 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information regarding commitments.
In the normal course of our business, we have provided certain indemnities, guarantees and commitments to third parties such that we may be required to make payments now or in the future. See Note 13 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information regarding guarantees.
The Parent Company
Liquidity and Capital
In evaluating liquidity, it is important to distinguish the cash flow needs of the parent company from the cash flow needs of the combined group of companies. BHF is largely dependent on cash flows from its insurance subsidiaries to meet its obligations. Constraints on BHF's liquidity may occur as a result of operational demands or as a result of compliance with regulatory requirements.
Short-term Liquidity and Liquid Assets
At September 30, 2025 and December 31, 2024, BHF and certain of its non-insurance subsidiaries had short-term liquidity of $865 million and $912 million, respectively. Short-term liquidity is comprised of cash and cash equivalents and short-term investments, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include assets held in trust.
At September 30, 2025 and December 31, 2024, BHF and certain of its non-insurance subsidiaries had liquid assets of $970 million and $1.1 billion, respectively, of which $911 million and $1.1 billion, respectively, was held by BHF. Liquid assets are comprised of cash and cash equivalents, short-term investments and publicly-traded securities, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include assets held in trust. On February 11, 2025, Brighthouse Life Insurance Company received a $100 million capital contribution from BH Holdings.
Statutory Capital and Dividends
The NAIC and state insurance departments have established regulations that provide minimum capitalization requirements based on RBC formulas for insurance companies. RBC is based on a formula calculated by applying factors to various asset, premium, claim, expense and statutory reserve items. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk, market risk and business risk and is calculated on an annual basis. The formula is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not as a means to rank insurers generally. State insurance laws provide insurance regulators the authority to require various actions by, or take various actions against, insurers whose total adjusted capital ("TAC") does not meet or exceed the amounts required to attain certain RBC levels. As of the date of the most recent annual statutory financial statements filed with insurance regulators, the TAC of each of our insurance subsidiaries subject to these requirements was in excess of the amounts required to attain each of those RBC levels.
The amount of dividends that our insurance subsidiaries can ultimately pay to BHF through their various parent entities provides an additional margin for risk protection and investment in our businesses. Such dividends are constrained by the amount of surplus our insurance subsidiaries hold to maintain their ratings, which is generally higher than minimum RBC requirements. We proactively take actions to maintain capital consistent with these ratings objectives, which may include adjusting dividend amounts and deploying financial resources from internal or external sources of capital. Certain of these activities may require regulatory approval. Furthermore, the payment of dividends and other distributions by our insurance subsidiaries is governed by the insurance laws and regulations of the states where they are domiciled. Any payment of dividends by Brighthouse Life Insurance Company in 2025 would be subject to Delaware Department of Insurance approval. See Note 12 of the Notes to the Consolidated Financial Statements included in our 2024 Annual Report for additional information regarding the applicable dividend restrictions and certain of our subsidiaries' ordinary dividend capacity, as well as the circumstances under which regulatory approval would be required.
Primary Sources and Uses of Liquidity and Capital
The principal sources of funds available to BHF include distributions from BH Holdings, dividends and returns of capital from its insurance subsidiaries and BRCD, capital markets issuances, as well as its own cash and cash equivalents and short-term investments. These sources of funds may also be supplemented by alternate sources of liquidity either directly or indirectly through our insurance subsidiaries. For example, we have established internal liquidity facilities to provide liquidity within and across our regulated and non-regulated entities to support our businesses.
The primary uses of liquidity of BHF include debt-service obligations (including interest expense and debt repayments), preferred stock dividends, capital contributions to subsidiaries, common stock repurchases and payment of general operating expenses. Based on our analysis and comparison of our current and future cash inflows from the dividends we receive from subsidiaries that are permitted to be paid without prior insurance regulatory approval, our investment portfolio and other cash flows and anticipated access to the capital markets, we believe there will be sufficient liquidity and capital to enable BHF to make payments on debt, pay preferred stock dividends, contribute capital to its subsidiaries, repurchase its common stock, pay all general operating expenses and meet its cash needs.
In addition to the liquidity and capital sources discussed in "- The Company - Primary Sources of Liquidity and Capital" and "- The Company - Primary Uses of Liquidity and Capital," the following additional information is provided regarding BHF's primary sources and uses of liquidity and capital:
Distributions from and Capital Contributions to BH Holdings
During both the nine months ended September 30, 2025 and 2024, BHF did not receive any cash distributions from BH Holdings and did not make any cash capital contributions to BH Holdings.
Short-term Intercompany Loans
BHF, as borrower, has a short-term intercompany loan agreement with certain of its non-insurance subsidiaries, as lenders, for the purposes of facilitating the management of the available cash of the borrower and the lenders on a short-term and consolidated basis. Such intercompany loan agreement allows management to optimize the efficient use of and maximize the yield on cash between BHF and its subsidiary lenders. Each loan entered into under this intercompany loan agreement has a term not more than 364 days and bears interest on the unpaid principal amount at a variable rate, payable monthly. During the nine months ended September 30, 2025 and 2024, BHF borrowed $587 million and $420 million, respectively, from certain of its non-insurance subsidiaries and repaid $512 million and $180 million of such borrowings during the nine months ended September 30, 2025 and 2024, respectively. At September 30, 2025 and December 31, 2024, BHF had total obligations outstanding of $657 million and $582 million, respectively, under such agreements.
Intercompany Liquidity Facilities
BHF has established intercompany liquidity facilities with certain of its insurance and non-insurance subsidiaries to provide short-term liquidity within and across the combined group of companies. Under these facilities, which are 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 up to 364 days, depending on the agreement. During both the nine months ended September 30, 2025 and 2024, there were no borrowings or repayments by BHF under these facilities and, at both September 30, 2025 and December 31, 2024, BHF had no obligations outstanding under such facilities.
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 Brighthouse Financial. 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:
•our ability to complete the Merger in the timeframe or manner currently anticipated or at all, including due to a failure to obtain the regulatory approvals required for the closing of the Merger or the occurrence of any event, change or other circumstance that could give rise to the right of one or both of the parties to terminate the Merger Agreement;
•the effect of the pendency of the Merger on our ongoing business and operations, including disruption to our business relationships, the diversion of management's attention from ongoing business operations and opportunities, or the outcome of any legal proceedings that may be instituted against Parent or BHF following announcement of the Merger;
•restrictions on the conduct of our business prior to the closing of the Merger and on our ability to pursue alternatives to the Merger;
•the possibility that the Merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events;
•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 risk management strategy and the impacts of such strategy on volatility in our profitability measures and the negative effects on our statutory capital;
•material differences between actual outcomes and the sensitivities calculated under certain scenarios that we may utilize in connection with our risk management strategies;
•the impact of interest rates on our future ULSG policyholder obligations and net income volatility;
•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 or credit 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, product mix, scale, price, actual or perceived financial strength, claims-paying ratings, credit ratings, e-business capabilities and name recognition;
•our ability to market and distribute our products through distribution channels and maintain relationships with key distribution partners;
•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;
•the ability of our subsidiaries to pay dividends to us, and our ability to pay dividends to our shareholders and repurchase our common stock;
•the risks associated with climate change;
•the adverse impact of public health crises, extreme mortality events or similar occurrences on our business and the economy in general;
•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 geopolitical events, tariffs imposed or threatened by the U.S. or foreign governments, military actions or catastrophic events, on our profitability measures as well as our investment portfolio, including on realized and unrealized losses and impairments, net investment spread and net investment income;
•the financial risks that our investment portfolio is subject to, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control;
•the impact of changes in regulation and in supervisory and enforcement policies or interpretations thereof 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 or increase our tax liability;
•the effectiveness of our policies, procedures and processes 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; 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 2024 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.
Corporate Information
We routinely use our Investor Relations website to provide presentations, press releases, our insurance subsidiaries' statutory filings, and other information that may be deemed important or material to investors. Accordingly, we encourage investors and others interested in the Company to review the information that we share at http://investor.brighthousefinancial.com. In addition, our Investor Relations website allows interested persons to sign up to automatically receive e-mail alerts when we make filings with the SEC. Information contained on or connected to any website referenced in this report or any of our other filings with the SEC is not incorporated by reference in this report or in any other report or document we file with the SEC, and any website references are intended to be inactive textual references only unless expressly noted.
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