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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2024
or
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___ to ___
Commission File Number: 001-37905
Brighthouse Financial, Inc.
(Exact name of registrant as specified in its charter)
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Delaware | | 81-3846992 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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11225 North Community House Road, Charlotte, North Carolina | | 28277 |
(Address of principal executive offices) | | (Zip Code) |
(980) 365-7100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | BHF | The Nasdaq Stock Market LLC |
Depositary Shares, each representing a 1/1,000th interest in a share of 6.600% Non-Cumulative Preferred Stock, Series A | BHFAP | The Nasdaq Stock Market LLC |
Depositary Shares, each representing a 1/1,000th interest in a share of 6.750% Non-Cumulative Preferred Stock, Series B | BHFAO | The Nasdaq Stock Market LLC |
Depositary Shares, each representing a 1/1,000th interest in a share of 5.375% Non-Cumulative Preferred Stock, Series C | BHFAN | The Nasdaq Stock Market LLC |
Depositary Shares, each representing a 1/1,000th interest in a share of 4.625% Non-Cumulative Preferred Stock, Series D | BHFAM | The Nasdaq Stock Market LLC |
6.250% Junior Subordinated Debentures due 2058 | BHFAL | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | þ | | Accelerated filer | | ¨ |
Non-accelerated filer | ¨ | | Smaller reporting company | ☐ |
| | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
As of August 2, 2024, 60,755,949 shares of the registrant’s common stock were outstanding.
Table of Contents
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Item 1. | Consolidated Financial Statements (at June 30, 2024 (Unaudited) and December 31, 2023 and for the Three Months and Six Months Ended June 30, 2024 and 2023 (Unaudited)): | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
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Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 5. | | |
Item 6. | | |
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Part I — Financial Information
Item 1. Financial Statements
Brighthouse Financial, Inc.
Interim Condensed Consolidated Balance Sheets
June 30, 2024 (Unaudited) and December 31, 2023
(In millions, except share and per share data)
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| | June 30, 2024 | | December 31, 2023 |
Assets | | | | |
Investments: | | | | |
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $88,176 and $87,131, respectively; allowance for credit losses of $45 and $21, respectively) | | $ | 80,581 | | | $ | 80,991 | |
Equity securities, at estimated fair value | | 85 | | | 102 | |
Mortgage loans (net of allowance for credit losses of $155 and $137, respectively) | | 22,641 | | | 22,508 | |
Policy loans | | 1,470 | | | 1,331 | |
Limited partnerships and limited liability companies | | 4,938 | | | 4,946 | |
Short-term investments, principally at estimated fair value | | 1,390 | | | 1,169 | |
Other invested assets, principally at estimated fair value (net of allowance for credit losses of $12 and $13, respectively) | | 4,194 | | | 4,409 | |
Total investments | | 115,299 | | | 115,456 | |
Cash and cash equivalents | | 4,441 | | | 3,851 | |
Accrued investment income | | 1,169 | | | 1,183 | |
Premiums, reinsurance and other receivables (net of allowance for credit losses of $3 and $3, respectively) | | 20,043 | | | 19,761 | |
Deferred policy acquisition costs and value of business acquired | | 4,791 | | | 4,872 | |
Current income tax recoverable | | 28 | | | 27 | |
Deferred income tax asset | | 2,087 | | | 1,893 | |
Market risk benefit assets | | 916 | | | 656 | |
Other assets | | 404 | | | 370 | |
Separate account assets | | 88,260 | | | 88,271 | |
Total assets | | $ | 237,438 | | | $ | 236,340 | |
Liabilities and Equity | | | | |
Liabilities | | | | |
Future policy benefits | | $ | 31,886 | | | $ | 32,569 | |
Policyholder account balances | | 85,865 | | | 81,068 | |
Market risk benefit liabilities | | 8,708 | | | 10,323 | |
Other policy-related balances | | 3,796 | | | 3,836 | |
Payables for collateral under securities loaned and other transactions | | 3,906 | | | 3,670 | |
Long-term debt | | 3,155 | | | 3,156 | |
| | | | |
| | | | |
Other liabilities | | 7,656 | | | 8,439 | |
Separate account liabilities | | 88,260 | | | 88,271 | |
Total liabilities | | 233,232 | | | 231,332 | |
Contingencies, Commitments and Guarantees (Note 13) | | | | |
Equity | | | | |
Brighthouse Financial, Inc.’s stockholders’ equity: | | | | |
Preferred stock, par value $0.01 per share; $1,753 aggregate liquidation preference | | — | | | — | |
Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 123,434,240 and 122,818,568 shares issued, respectively; 61,243,957 and 63,503,355 shares outstanding, respectively | | 1 | | | 1 | |
Additional paid-in capital | | 13,972 | | | 14,004 | |
Retained earnings (deficit) | | (1,966) | | | (1,507) | |
Treasury stock, at cost; 62,190,283 and 59,315,213 shares, respectively | | (2,447) | | | (2,309) | |
Accumulated other comprehensive income (loss) | | (5,419) | | | (5,246) | |
Total Brighthouse Financial, Inc.’s stockholders’ equity | | 4,141 | | | 4,943 | |
Noncontrolling interests | | 65 | | | 65 | |
Total equity | | 4,206 | | | 5,008 | |
Total liabilities and equity | | $ | 237,438 | | | $ | 236,340 | |
See accompanying notes to the interim condensed consolidated financial statements.
Brighthouse Financial, Inc.
Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
For the Three Months and Six Months Ended June 30, 2024 and 2023 (Unaudited)
(In millions, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Revenues | | | | | | | |
Premiums | $ | 181 | | | $ | 211 | | | $ | 383 | | | $ | 408 | |
Universal life and investment-type product policy fees | 580 | | | 601 | | | 1,016 | | | 1,207 | |
Net investment income | 1,307 | | | 1,196 | | | 2,561 | | | 2,255 | |
Other revenues | 141 | | | 130 | | | 286 | | | 223 | |
Net investment gains (losses) | (120) | | | (64) | | | (162) | | | (160) | |
Net derivative gains (losses) | (662) | | | (1,811) | | | (2,583) | | | (2,386) | |
Total revenues | 1,427 | | | 263 | | | 1,501 | | | 1,547 | |
Expenses | | | | | | | |
Policyholder benefits and claims (including liability remeasurement gains (losses) of $0, $0, $0 and $0, respectively) | 642 | | | 689 | | | 1,610 | | | 1,376 | |
Interest credited to policyholder account balances | 509 | | | 452 | | | 1,011 | | | 874 | |
Amortization of deferred policy acquisition costs and value of business acquired | 150 | | | 157 | | | 301 | | | 313 | |
Change in market risk benefits | (356) | | | (1,300) | | | (1,796) | | | (1,106) | |
Other expenses | 468 | | | 502 | | | 975 | | | 980 | |
Total expenses | 1,413 | | | 500 | | | 2,101 | | | 2,437 | |
Income (loss) before provision for income tax | 14 | | | (237) | | | (600) | | | (890) | |
Provision for income tax expense (benefit) | (20) | | | (62) | | | (143) | | | (218) | |
Net income (loss) | 34 | | | (175) | | | (457) | | | (672) | |
Less: Net income (loss) attributable to noncontrolling interests | — | | | — | | | 2 | | | 2 | |
Net income (loss) attributable to Brighthouse Financial, Inc. | 34 | | | (175) | | | (459) | | | (674) | |
Less: Preferred stock dividends | 25 | | | 25 | | | 51 | | | 51 | |
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders | $ | 9 | | | $ | (200) | | | $ | (510) | | | $ | (725) | |
Comprehensive income (loss) | $ | 28 | | | $ | (768) | | | $ | (630) | | | $ | (447) | |
Less: Comprehensive income (loss) attributable to noncontrolling interests | — | | | — | | | 2 | | | 2 | |
Comprehensive income (loss) attributable to Brighthouse Financial, Inc. | $ | 28 | | | $ | (768) | | | $ | (632) | | | $ | (449) | |
| | | | | | | | | | | | | | | | | | | | | | | |
Earnings per common share | | | | | | | |
Basic | $ | 0.12 | | | $ | (3.01) | | | $ | (8.17) | | | $ | (10.77) | |
Diluted | $ | 0.12 | | | $ | (3.01) | | | $ | (8.17) | | | $ | (10.77) | |
See accompanying notes to the interim condensed consolidated financial statements.
Brighthouse Financial, Inc.
Interim Condensed Consolidated Statements of Equity
For the Three Months and Six Months Ended June 30, 2024 and 2023 (Unaudited)
(In millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Preferred Stock | | Common Stock | | Additional Paid-in Capital | | Retained Earnings (Deficit) | | Treasury Stock at Cost | | Accumulated Other Comprehensive Income (Loss) | | Brighthouse Financial, Inc.’s Stockholders’ Equity | | Noncontrolling Interests | | Total Equity |
Balance at December 31, 2023 | | $ | — | | | $ | 1 | | | $ | 14,004 | | | $ | (1,507) | | | $ | (2,309) | | | $ | (5,246) | | | $ | 4,943 | | | $ | 65 | | | $ | 5,008 | |
Treasury stock acquired in connection with share repurchases | | | | | | | | | | (62) | | | | | (62) | | | | | (62) | |
Share-based compensation | | | | — | | | 11 | | | | | (11) | | | | | — | | | | | — | |
Dividends on preferred stock | | | | | | (26) | | | | | | | | | (26) | | | | | (26) | |
Change in noncontrolling interests | | | | | | | | | | | | | | — | | | (2) | | | (2) | |
Net income (loss) | | | | | | | | (493) | | | | | | | (493) | | | 2 | | | (491) | |
Other comprehensive income (loss), net of income tax | | | | | | | | | | | | (167) | | | (167) | | | | | (167) | |
Balance at March 31, 2024 | | — | | | 1 | | | 13,989 | | | (2,000) | | | (2,382) | | | (5,413) | | | 4,195 | | | 65 | | | 4,260 | |
Treasury stock acquired in connection with share repurchases | | | | | | | | | | (64) | | | | | (64) | | | | | (64) | |
Share-based compensation | | | | — | | | 8 | | | | | (1) | | | | | 7 | | | | | 7 | |
Dividends on preferred stock | | | | | | (25) | | | | | | | | | (25) | | | | | (25) | |
Change in noncontrolling interests | | | | | | | | | | | | | | — | | | — | | | — | |
Net income (loss) | | | | | | | | 34 | | | | | | | 34 | | | — | | | 34 | |
Other comprehensive income (loss), net of income tax | | | | | | | | | | | | (6) | | | (6) | | | | | (6) | |
Balance at June 30, 2024 | | $ | — | | | $ | 1 | | | $ | 13,972 | | | $ | (1,966) | | | $ | (2,447) | | | $ | (5,419) | | | $ | 4,141 | | | $ | 65 | | | $ | 4,206 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Preferred Stock | | Common Stock | | Additional Paid-in Capital | | Retained Earnings (Deficit) | | Treasury Stock at Cost | | Accumulated Other Comprehensive Income (Loss) | | Brighthouse Financial, Inc.’s Stockholders’ Equity | | Noncontrolling Interests | | Total Equity |
Balance at December 31, 2022 | | $ | — | | | $ | 1 | | | $ | 14,075 | | | $ | (395) | | | $ | (2,042) | | | $ | (6,106) | | | $ | 5,533 | | | $ | 65 | | | $ | 5,598 | |
Treasury stock acquired in connection with share repurchases | | | | | | | | | | (62) | | | | | (62) | | | | | (62) | |
Share-based compensation | | | | — | | | 5 | | | | | (15) | | | | | (10) | | | | | (10) | |
Dividends on preferred stock | | | | | | (26) | | | | | | | | | (26) | | | | | (26) | |
Change in noncontrolling interests | | | | | | | | | | | | | | — | | | (2) | | | (2) | |
Net income (loss) | | | | | | | | (499) | | | | | | | (499) | | | 2 | | | (497) | |
Other comprehensive income (loss), net of income tax | | | | | | | | | | | | 818 | | | 818 | | | | | 818 | |
Balance at March 31, 2023 | | — | | | 1 | | | 14,054 | | | (894) | | | (2,119) | | | (5,288) | | | 5,754 | | | 65 | | | 5,819 | |
Treasury stock acquired in connection with share repurchases | | | | | | | | | | (64) | | | | | (64) | | | | | (64) | |
Share-based compensation | | | | — | | | 10 | | | | | — | | | | | 10 | | | | | 10 | |
Dividends on preferred stock | | | | | | (25) | | | | | | | | | (25) | | | | | (25) | |
Change in noncontrolling interests | | | | | | | | | | | | | | — | | | — | | | — | |
Net income (loss) | | | | | | | | (175) | | | | | | | (175) | | | — | | | (175) | |
Other comprehensive income (loss), net of income tax | | | | | | | | | | | | (593) | | | (593) | | | | | (593) | |
Balance at June 30, 2023 | | $ | — | | | $ | 1 | | | $ | 14,039 | | | $ | (1,069) | | | $ | (2,183) | | | $ | (5,881) | | | $ | 4,907 | | | $ | 65 | | | $ | 4,972 | |
See accompanying notes to the interim condensed consolidated financial statements.
Brighthouse Financial, Inc.
Interim Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2024 and 2023 (Unaudited)
(In millions)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2024 | | 2023 |
Net cash provided by (used in) operating activities | $ | (196) | | | $ | (628) | |
Cash flows from investing activities | | | |
Sales, maturities and repayments of: | | | |
Fixed maturity securities | 5,550 | | | 2,970 | |
Equity securities | 32 | | | 10 | |
Mortgage loans | 685 | | | 574 | |
Limited partnerships and limited liability companies | 155 | | | 81 | |
Purchases of: | | | |
Fixed maturity securities | (6,423) | | | (4,186) | |
Equity securities | (2) | | | (6) | |
Mortgage loans | (886) | | | (342) | |
Limited partnerships and limited liability companies | (153) | | | (254) | |
Cash received in connection with freestanding derivatives | 5,627 | | | 2,634 | |
Cash paid in connection with freestanding derivatives | (5,743) | | | (3,024) | |
| | | |
| | | |
| | | |
Net change in policy loans | (138) | | | (6) | |
Net change in short-term investments | (220) | | | (22) | |
Net change in other invested assets | (191) | | | (88) | |
| | | |
Net cash provided by (used in) investing activities | (1,707) | | | (1,659) | |
Cash flows from financing activities | | | |
Policyholder account balances: | | | |
Deposits | 20,632 | | | 11,670 | |
Withdrawals | (18,009) | | | (9,086) | |
Net change in payables for collateral under securities loaned and other transactions | 236 | | | (427) | |
| | | |
Long-term debt repaid | (1) | | | (1) | |
| | | |
Dividends on preferred stock | (51) | | | (51) | |
Treasury stock acquired in connection with share repurchases | (126) | | | (126) | |
| | | |
| | | |
| | | |
Financing element on certain derivative instruments and other derivative related transactions, net | (175) | | | (54) | |
Other, net | (13) | | | (16) | |
Net cash provided by (used in) financing activities | 2,493 | | | 1,909 | |
Change in cash, cash equivalents and restricted cash | 590 | | | (378) | |
Cash, cash equivalents and restricted cash, beginning of period | 3,851 | | | 4,115 | |
Cash, cash equivalents and restricted cash, end of period | $ | 4,441 | | | $ | 3,737 | |
Supplemental disclosures of cash flow information | | | |
Net cash paid (received) for: | | | |
Interest | $ | 75 | | | $ | 75 | |
Income tax | $ | 6 | | | $ | (3) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
See accompanying notes to the interim condensed consolidated financial statements.
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies
Business
Brighthouse Financial, Inc. (“BHF” and together with its subsidiaries, “Brighthouse Financial” or the “Company”) is a holding company formed in 2016 to own the legal entities that historically operated a substantial portion of MetLife, Inc.’s former retail segment until becoming a separate, publicly-traded company in August 2017. Brighthouse Financial is 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. The Company is organized into three segments: Annuities; Life; and Run-off. In addition, the Company reports certain of its results of operations in Corporate & Other.
Basis of Presentation
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the interim condensed consolidated financial statements. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from these estimates.
Consolidation
The accompanying interim condensed consolidated financial statements include the accounts of Brighthouse Financial, as well as partnerships and limited liability companies (“LLC”) that the Company controls. Intercompany accounts and transactions have been eliminated.
The Company uses the equity method of accounting for investments in limited partnerships and LLCs when it has more than a minor ownership interest or more than a minor influence over the investee’s operations. The Company generally recognizes its share of the investee’s earnings on a three-month lag in instances where the investee’s financial information is not sufficiently timely or when the investee’s reporting period differs from the Company’s reporting period. When the Company has virtually no influence over the investee’s operations, the investment is carried at fair value.
The accompanying interim condensed consolidated financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2023 consolidated balance sheet data was derived from audited consolidated financial statements included in Brighthouse Financial, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”), which include all disclosures required by GAAP. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2023 Annual Report.
Adoption of New Accounting Pronouncements
Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASU”) to the FASB Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. There were no significant ASUs adopted during the period ended June 30, 2024.
Future Adoption of New Accounting Pronouncements
In December 2023, the FASB issued new guidance on Income Tax Disclosures (ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures). This ASU updates the required income tax disclosures to include disclosure of income taxes paid disaggregated by jurisdiction and greater disaggregation of information in the required rate reconciliation. This ASU is effective for fiscal years starting January 1, 2025, and will be applied on a prospective basis. The Company is currently evaluating the impact of this guidance on its financial statements.
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)
In November 2023, the FASB issued new guidance on Segment Reporting Disclosures (ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures). This ASU updates reportable segment disclosures primarily through enhanced disclosures about significant segment expenses. This ASU does not change how a company identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. This ASU is effective for fiscal years starting January 1, 2024, and for interim periods starting January 1, 2025, and will be applied on a retrospective basis. The Company is currently evaluating the impact of this guidance on its financial statements.
2. Segment Information
The Company is organized into three segments: Annuities; Life; and Run-off. In addition, the Company reports certain of its results of operations in Corporate & Other.
Annuities
The Annuities segment consists of a variety of variable, fixed, index-linked and income annuities designed to address contract holders’ needs for protected wealth accumulation on a tax-deferred basis, wealth transfer and income security.
Life
The Life segment consists of insurance products, including term, universal, whole and variable life products designed to address policyholders’ needs for financial security and protected wealth transfer, which may be on a tax-advantaged basis.
Run-off
The Run-off segment consists primarily of products that are no longer actively sold and are separately managed, including universal life with secondary guarantees (“ULSG”), structured settlements, pension risk transfer contracts, certain company-owned life insurance policies and certain funding agreements.
Corporate & Other
Corporate & Other contains the excess capital not allocated to the segments and interest expense related to the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. Corporate & Other also includes long-term care business reinsured through 100% quota share reinsurance agreements and activities related to funding agreements associated with the Company’s institutional spread margin business.
Financial Measures and Segment Accounting Policies
Adjusted earnings is a financial measure used by management to evaluate performance and facilitate comparisons to industry results. Consistent with GAAP guidance for segment reporting, adjusted earnings is also used to measure segment performance. The Company believes the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of its performance by the investor community by highlighting the results of operations and the underlying profitability drivers of the business.
Adjusted earnings, which may be positive or negative, focuses on the Company’s primary businesses by excluding the impact of market volatility, which could distort trends. The Company uses the term “adjusted loss” throughout this report to refer to negative adjusted earnings values.
The following are significant items excluded from total revenues in calculating adjusted earnings:
•Net investment gains (losses); 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 are significant items excluded from total expenses in calculating adjusted earnings:
•Change in market risk benefits (“MRB”); and
•Change in fair value of the crediting rate on experience-rated contracts (“Market Value Adjustments”).
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
2. Segment Information (continued)
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.
The segment accounting policies are the same as those used to prepare the Company’s interim condensed consolidated financial statements, except for the adjustments to calculate adjusted earnings described above. In addition, segment accounting policies include the methods of capital allocation described below.
Segment investment and capitalization targets are based on statutory oriented risk principles and metrics. Segment invested assets backing liabilities are based on net statutory liabilities plus excess capital. For the variable annuity business, the excess capital held is based on the target statutory total asset requirement consistent with the Company’s variable annuity risk management strategy. For insurance businesses other than variable annuities, excess capital held is based on a percentage of required statutory risk-based capital. Assets in excess of those allocated to the segments, if any, are held in Corporate & Other. Segment net investment income reflects the performance of each segment’s respective invested assets.
Operating results by segment, as well as Corporate & Other, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2024 |
| | Annuities | | Life | | Run-off | | Corporate & Other | | Total |
| | (In millions) |
Pre-tax adjusted earnings (loss) | | $ | 410 | | | $ | 52 | | | $ | (37) | | | $ | 18 | | | $ | 443 | |
Provision for income tax expense (benefit) | | 78 | | | 10 | | | (7) | | | (9) | | | 72 | |
Post-tax adjusted earnings (loss) | | 332 | | | 42 | | | (30) | | | 27 | | | 371 | |
Less: Net income (loss) attributable to noncontrolling interests | | — | | | — | | | — | | | — | | | — | |
Less: Preferred stock dividends | | — | | | — | | | — | | | 25 | | | 25 | |
Adjusted earnings (loss) | | $ | 332 | | | $ | 42 | | | $ | (30) | | | $ | 2 | | | 346 | |
Adjustments for: | | | | | | | | | | |
Net investment gains (losses) | | | | | | | | | | (120) | |
Net derivative gains (losses), excluding investment hedge adjustments of $9 | | | | | | | | | | (671) | |
Change in market risk benefits | | | | | | | | | | 356 | |
Market value adjustments | | | | | | | | | | 6 | |
Provision for income tax (expense) benefit | | | | | | | | | | 92 | |
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders | | | | | | | | | | $ | 9 | |
| | | | | | | | | | |
Interest revenue | | $ | 702 | | | $ | 121 | | | $ | 315 | | | $ | 178 | | | |
Interest expense | | $ | — | | | $ | — | | | $ | — | | | $ | 38 | | | |
Brighthouse Financial, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (continued)
2. Segment Information (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2023 |
| | Annuities | | Life | | Run-off | | Corporate & Other | | Total |
| | (In millions) |
Pre-tax adjusted earnings (loss) | | $ | 357 | | | $ | 18 | | | $ | (21) | | | $ | 5 | | | $ | 359 | |
Provision for income tax expense (benefit) | | 66 | | | 3 | | | (5) | | | (1) | | | 63 | |
Post-tax adjusted earnings (loss) | | 291 | | | 15 | | | (16) | | | 6 | | | 296 | |
Less: Net income (loss) attributable to noncontrolling interests | | — | | | — | | | — | | | — | | | — | |
Less: Preferred stock dividends | | — | | | — | | | — | | | 25 | | | 25 | |
Adjusted earnings (loss) | | $ | 291 | | | $ | 15 | | | $ | (16) | | | $ | (19) | | | 271 | |
Adjustments for: | | | | | | | | | | |
Net investment gains (losses) | | | | | | | | | | (64) | |
|