QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
of 6.600% Non-Cumulative Preferred Stock, Series A | ||
þ | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ | Smaller reporting company | |||
Emerging growth company |
Page | ||
Item 1. | Consolidated Financial Statements (at June 30, 2019 (Unaudited) and December 31, 2018 and for the Three Months and Six Months Ended June 30, 2019 and 2018 (Unaudited)): | |
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 5. | ||
Item 6. | ||
June 30, 2019 | December 31, 2018 | |||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $61,362 and $60,920, respectively) | $ | $ | ||||||
Equity securities, at estimated fair value | ||||||||
Mortgage loans (net of valuation allowances of $64 and $57, respectively) | ||||||||
Policy loans | ||||||||
Real estate limited partnerships and limited liability companies | ||||||||
Other limited partnership interests | ||||||||
Short-term investments, principally at estimated fair value | ||||||||
Other invested assets, principally at estimated fair value | ||||||||
Total investments | ||||||||
Cash and cash equivalents | ||||||||
Accrued investment income | ||||||||
Premiums, reinsurance and other receivables | ||||||||
Deferred policy acquisition costs and value of business acquired | ||||||||
Current income tax recoverable | ||||||||
Other assets | ||||||||
Separate account assets | ||||||||
Total assets | $ | $ | ||||||
Liabilities and Equity | ||||||||
Liabilities | ||||||||
Future policy benefits | $ | $ | ||||||
Policyholder account balances | ||||||||
Other policy-related balances | ||||||||
Payables for collateral under securities loaned and other transactions | ||||||||
Long-term debt | ||||||||
Current income tax payable | ||||||||
Deferred income tax liability | ||||||||
Other liabilities | ||||||||
Separate account liabilities | ||||||||
Total liabilities | ||||||||
Contingencies, Commitments and Guarantees (Note 11) | ||||||||
Equity | ||||||||
Brighthouse Financial, Inc.’s stockholders’ equity: | ||||||||
Preferred stock, par value $0.01 per share; $425 aggregate liquidation preference at June 30, 2019 | ||||||||
Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 120,593,413 and 120,448,018 shares issued, respectively; 112,644,952 and 117,532,336 shares outstanding, respectively | ||||||||
Additional paid-in capital | ||||||||
Retained earnings (deficit) | ||||||||
Treasury stock, at cost; 7,948,461 and 2,915,682 shares, respectively | ( | ) | ( | ) | ||||
Accumulated other comprehensive income (loss) | ||||||||
Total Brighthouse Financial, Inc.’s stockholders’ equity | ||||||||
Noncontrolling interests | ||||||||
Total equity | ||||||||
Total liabilities and equity | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues | |||||||||||||||
Premiums | $ | $ | $ | $ | |||||||||||
Universal life and investment-type product policy fees | |||||||||||||||
Net investment income | |||||||||||||||
Other revenues | |||||||||||||||
Net investment gains (losses) | ( | ) | ( | ) | |||||||||||
Net derivative gains (losses) | ( | ) | ( | ) | ( | ) | |||||||||
Total revenues | |||||||||||||||
Expenses | |||||||||||||||
Policyholder benefits and claims | |||||||||||||||
Interest credited to policyholder account balances | |||||||||||||||
Amortization of deferred policy acquisition costs and value of business acquired | |||||||||||||||
Other expenses | |||||||||||||||
Total expenses | |||||||||||||||
Income (loss) before provision for income tax | ( | ) | ( | ) | ( | ) | |||||||||
Provision for income tax expense (benefit) | ( | ) | ( | ) | ( | ) | |||||||||
Net income (loss) | ( | ) | ( | ) | ( | ) | |||||||||
Less: Net income (loss) attributable to noncontrolling interests | |||||||||||||||
Net income (loss) attributable to Brighthouse Financial, Inc. | ( | ) | ( | ) | ( | ) | |||||||||
Less: Preferred stock dividends | |||||||||||||||
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
Comprehensive income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Less: Comprehensive income (loss) attributable to noncontrolling interests | |||||||||||||||
Comprehensive income (loss) attributable to Brighthouse Financial, Inc. | $ | $ | ( | ) | $ | $ | ( | ) |
Earnings per common share: | |||||||||||||||
Basic | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
Diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) |
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, 2018 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||||||||||||
Preferred stock issuance | ||||||||||||||||||||||||||||||||||||
Treasury stock acquired in connection with share repurchases | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Share-based compensation | ||||||||||||||||||||||||||||||||||||
Change in noncontrolling interests | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of income tax | ||||||||||||||||||||||||||||||||||||
Balance at March 31, 2019 | ( | ) | ||||||||||||||||||||||||||||||||||
Treasury stock acquired in connection with share repurchases | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Share-based compensation | ||||||||||||||||||||||||||||||||||||
Dividends on preferred stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Net income (loss) | ||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of income tax | ||||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ |
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, 2017 | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Cumulative effect of change in accounting principle and other, net of income tax | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Balance at January 1, 2018 | ||||||||||||||||||||||||||||||||||||
Change in noncontrolling interests | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of income tax | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Balance at March 31, 2018 | ||||||||||||||||||||||||||||||||||||
Share-based compensation | ||||||||||||||||||||||||||||||||||||
Change in noncontrolling interests | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of income tax | ||||||||||||||||||||||||||||||||||||
Balance at June 30, 2018 | $ | $ | $ | $ | $ | $ | $ | $ | $ |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Net cash provided by (used in) operating activities | $ | $ | |||||
Cash flows from investing activities | |||||||
Sales, maturities and repayments of: | |||||||
Fixed maturity securities | |||||||
Equity securities | |||||||
Mortgage loans | |||||||
Real estate limited partnerships and limited liability companies | |||||||
Other limited partnership interests | |||||||
Purchases of: | |||||||
Fixed maturity securities | ( | ) | ( | ) | |||
Equity securities | ( | ) | ( | ) | |||
Mortgage loans | ( | ) | ( | ) | |||
Real estate limited partnerships and limited liability companies | ( | ) | ( | ) | |||
Other limited partnership interests | ( | ) | ( | ) | |||
Cash received in connection with freestanding derivatives | |||||||
Cash paid in connection with freestanding derivatives | ( | ) | ( | ) | |||
Net change in policy loans | |||||||
Net change in short-term investments | ( | ) | |||||
Net change in other invested assets | ( | ) | |||||
Net cash provided by (used in) investing activities | ( | ) | ( | ) | |||
Cash flows from financing activities | |||||||
Policyholder account balances: | |||||||
Deposits | |||||||
Withdrawals | ( | ) | ( | ) | |||
Net change in payables for collateral under securities loaned and other transactions | ( | ) | |||||
Long-term debt issued | |||||||
Long-term debt repaid | ( | ) | ( | ) | |||
Preferred stock issued, net of issuance costs | |||||||
Dividends on preferred stock | ( | ) | |||||
Treasury stock acquired in connection with share repurchases | ( | ) | |||||
Financing element on certain derivative instruments and other derivative related transactions, net | ( | ) | |||||
Other, net | ( | ) | ( | ) | |||
Net cash provided by (used in) financing activities | |||||||
Change in cash, cash equivalents and restricted cash | ( | ) | |||||
Cash, cash equivalents and restricted cash, beginning of period | |||||||
Cash, cash equivalents and restricted cash, end of period | $ | $ | |||||
Supplemental disclosures of cash flow information | |||||||
Net cash paid (received) for: | |||||||
Interest | $ | $ | |||||
Income tax | $ | $ |
Standard | Description | Effective Date | Impact on Financial Statements |
ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract | The amendments to Topic 350 require the capitalization of certain implementation costs incurred in a cloud computing arrangement that is a service contract. The requirements align with the existing requirements to capitalize implementation costs incurred to develop or obtain internal-use software. | January 1, 2020 using the prospective method or retrospective method (with early adoption permitted) | The Company is currently evaluating the impact of this guidance on its financial statements. |
ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts | The amendments to Topic 944 will result in significant changes to the accounting for long-duration insurance contracts. These changes (1) require all guarantees that qualify as market risk benefits to be measured at fair value, (2) require more frequent updating of assumptions and modify existing discount rate requirements for certain insurance liabilities, (3) modify the methods of amortization for deferred acquisition costs (“DAC”), and (4) require new qualitative and quantitative disclosures around insurance contract asset and liability balances and the judgments, assumptions and methods used to measure those balances. The market risk benefit guidance is required to be applied on a retrospective basis, while the changes to guidance for insurance liabilities and DAC may be applied to existing carrying amounts on the effective date or on a retrospective basis. | The amendments are currently effective on January 1, 2021. On July 17, 2019 the FASB tentatively decided to extend the effective date of the ASU by one year. The FASB intends to release an exposure draft, which if adopted, will change the effective date for the Company to January 1, 2022. | The Company is in the early stages of evaluating the new guidance and therefore is unable to estimate the impact to its financial statements. The most significant impact will be the measurement of liabilities for variable annuity guarantees. |
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments | The amendments to Topic 326 replace the incurred loss impairment methodology for certain financial instruments with one that reflects expected credit losses based on historical loss information, current conditions, and reasonable and supportable forecasts. The new guidance also requires that an other-than- temporary impairment (“OTTI”) on a debt security will be recognized as an allowance going forward, such that improvements in expected future cash flows after an impairment will no longer be reflected as a prospective yield adjustment through net investment income, but rather a reversal of the previous impairment and recognized through realized investment gains and losses. | January 1, 2020 using the modified retrospective method (with early adoption permitted beginning January 1, 2019) | The Company is currently evaluating the impact of this guidance on its financial statements, with the most significant impact expected to be earlier recognition of credit losses on mortgage loan investments. |
• | Net investment gains (losses); |
• | Net derivative gains (losses) except earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment; and |
• | Certain variable annuity guaranteed minimum income benefits (“GMIBs”) fees (“GMIB Fees”) and amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses). |
• | Amounts associated with benefits and hedging costs related to GMIBs (“GMIB Costs”); |
• | Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”); and |
• | Amortization of DAC and value of business acquired (“VOBA”) related to: (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments. |
Operating Results | ||||||||||||||||||||
Three Months Ended June 30, 2019 | Annuities | Life | Run-off | Corporate & Other | Total | |||||||||||||||
(In millions) | ||||||||||||||||||||
Pre-tax adjusted earnings | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Provision for income tax expense (benefit) | ( | ) | ||||||||||||||||||
Post-tax adjusted earnings | ( | ) | ||||||||||||||||||
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends | ||||||||||||||||||||
Adjusted earnings | $ | $ | $ | $ | ( | ) | ||||||||||||||
Adjustments for: | ||||||||||||||||||||
Net investment gains (losses) | ||||||||||||||||||||
Net derivative gains (losses) | ||||||||||||||||||||
Other adjustments to net income | ( | ) | ||||||||||||||||||
Provision for income tax (expense) benefit | ( | ) | ||||||||||||||||||
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders | $ | |||||||||||||||||||
Interest revenue | $ | $ | $ | $ | ||||||||||||||||
Interest expense | $ | $ | $ | $ |
Operating Results | ||||||||||||||||||||
Three Months Ended June 30, 2018 | Annuities | Life | Run-off | Corporate & Other | Total | |||||||||||||||
(In millions) | ||||||||||||||||||||
Pre-tax adjusted earnings | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
Provision for income tax expense (benefit) | ( | ) | ( | ) | ||||||||||||||||
Post-tax adjusted earnings | ( | ) | ( | ) | ||||||||||||||||
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends | ||||||||||||||||||||
Adjusted earnings | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
Adjustments for: | ||||||||||||||||||||
Net investment gains (losses) | ( | ) | ||||||||||||||||||
Net derivative gains (losses) | ( | ) | ||||||||||||||||||
Other adjustments to net income | ( | ) | ||||||||||||||||||
Provision for income tax (expense) benefit | ||||||||||||||||||||
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders | $ | ( | ) | |||||||||||||||||
Interest revenue | $ | $ | $ | $ | ||||||||||||||||
Interest expense | $ | $ | $ | $ |
Operating Results | ||||||||||||||||||||
Six Months Ended June 30, 2019 | Annuities | Life | Run-off | Corporate & Other | Total | |||||||||||||||
(In millions) | ||||||||||||||||||||
Pre-tax adjusted earnings | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
Provision for income tax expense (benefit) | ( | ) | ( | ) | ||||||||||||||||
Post-tax adjusted earnings | ( | ) | ( | ) | ||||||||||||||||
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends | ||||||||||||||||||||
Adjusted earnings | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
Adjustments for: | ||||||||||||||||||||
Net investment gains (losses) | ||||||||||||||||||||
Net derivative gains (losses) | ( | ) | ||||||||||||||||||
Other adjustments to net income | ||||||||||||||||||||
Provision for income tax (expense) benefit | ||||||||||||||||||||
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders | $ | ( | ) | |||||||||||||||||
Interest revenue | $ | $ | $ | $ | ||||||||||||||||
Interest expense | $ | $ | $ | $ |
Operating Results | ||||||||||||||||||||
Six Months Ended June 30, 2018 | Annuities | Life | Run-off | Corporate & Other | Total | |||||||||||||||
(In millions) | ||||||||||||||||||||
Pre-tax adjusted earnings | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Provision for income tax expense (benefit) | ( | ) | ||||||||||||||||||
Post-tax adjusted earnings | ( | ) | ||||||||||||||||||
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends | ||||||||||||||||||||
Adjusted earnings | $ | $ | $ | $ | ( | ) | ||||||||||||||
Adjustments for: | ||||||||||||||||||||
Net investment gains (losses) | ( | ) | ||||||||||||||||||
Net derivative gains (losses) | ( | ) | ||||||||||||||||||
Other adjustments to net income | ( | ) | ||||||||||||||||||
Provision for income tax (expense) benefit | ||||||||||||||||||||
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders | $ | ( | ) | |||||||||||||||||
Interest revenue | $ | $ | $ | $ | ||||||||||||||||
Interest expense | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In millions) | ||||||||||||||||
Annuities | $ | $ | $ | $ | ||||||||||||
Life | ||||||||||||||||
Run-off | ||||||||||||||||
Corporate & Other | ||||||||||||||||
Adjustments | ( | ) | ( | ) | ( | ) | ||||||||||
Total | $ | $ | $ | $ |
June 30, 2019 | December 31, 2018 | |||||||
(In millions) | ||||||||
Annuities | $ | $ | ||||||
Life | ||||||||
Run-off | ||||||||
Corporate & Other | ||||||||
Total | $ | $ |
June 30, 2019 | December 31, 2018 | |||||||||||||||
In the Event of Death | At Annuitization | In the Event of Death | At Annuitization | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Annuity Contracts (1), (2) | ||||||||||||||||
Variable Annuity Guarantees | ||||||||||||||||
Total account value (3) | $ | $ | $ | $ | ||||||||||||
Separate account value | $ | $ | $ | $ | ||||||||||||
Net amount at risk | $ | (4) | $ | (5) | $ | (4) | $ | (5) | ||||||||
Average attained age of contract holders |
June 30, 2019 | December 31, 2018 | ||||||
Secondary Guarantees | |||||||
(Dollars in millions) | |||||||
Universal Life Contracts | |||||||
Total account value (3) | $ | $ | |||||
Net amount at risk (6) | $ | $ | |||||
Average attained age of policyholders | |||||||
Variable Life Contracts | |||||||
Total account value (3) | $ | $ | |||||
Net amount at risk (6) | $ | $ | |||||
Average attained age of policyholders |
(1) | The Company’s annuity contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive. |
(2) | Includes direct business, but excludes offsets from hedging or reinsurance, if any. Therefore, the net amount at risk presented reflects the economic exposures of living and death benefit guarantees associated with variable annuities, but not necessarily their impact on the Company. See Note 5 of the Notes to the Consolidated and Combined Financial Statements included in the 2018 Annual Report for a discussion of guaranteed minimum benefits which have been reinsured. |
(3) | Includes the contract holder’s investments in the general account and separate account, if applicable. |
(4) | Defined as the death benefit less the total account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death. |
(5) | Defined as the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents the Company’s potential economic exposure to such guarantees in the event all contract holders were to annuitize on the balance sheet date, even though the contracts contain terms that allow annuitization of the guaranteed amount only after the 10th anniversary of the contract, which not all contract holders have achieved. |
(6) | Defined as the guarantee amount less the account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date. |
June 30, 2019 | December 31, 2018 | ||||||||||||||||||||||||||||||||||||||
Amortized Cost | Gross Unrealized | Estimated Fair Value | Amortized Cost | Gross Unrealized | Estimated Fair Value | ||||||||||||||||||||||||||||||||||
Gains | Temporary Losses | OTTI Losses (1) | Gains | Temporary Losses | OTTI Losses (1) | ||||||||||||||||||||||||||||||||||
(In millions) | |||||||||||||||||||||||||||||||||||||||
Fixed maturity securities: (2) | |||||||||||||||||||||||||||||||||||||||
U.S. corporate | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
U.S. government and agency | |||||||||||||||||||||||||||||||||||||||
RMBS | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
Foreign corporate | |||||||||||||||||||||||||||||||||||||||
CMBS | ( | ) | |||||||||||||||||||||||||||||||||||||
State and political subdivision | |||||||||||||||||||||||||||||||||||||||
ABS | |||||||||||||||||||||||||||||||||||||||
Foreign government | |||||||||||||||||||||||||||||||||||||||
Total fixed maturity securities | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ | ( | ) | $ |
(1) | Noncredit OTTI losses included in accumulated other comprehensive income (loss) (“AOCI”) in an unrealized gain position are due to increases in estimated fair value subsequent to initial recognition of noncredit losses on such securities. |
(2) | Redeemable preferred stock is reported within U.S. corporate and foreign corporate fixed maturity securities. Included within fixed maturity securities are structured securities including residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”). |
Due in One Year or Less | Due After One Year Through Five Years | Due After Five Years Through Ten Years | Due After Ten Years | Structured Securities | Total Fixed Maturity Securities | ||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Amortized cost | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Estimated fair value | $ | $ | $ | $ | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||||||||||||||||||||||||||
Less than 12 Months | Equal to or Greater than 12 Months | Less than 12 Months | Equal to or Greater than 12 Months | ||||||||||||||||||||||||||||
Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | ||||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||||||||||
U.S. corporate | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
U.S. government and agency | |||||||||||||||||||||||||||||||
RMBS | |||||||||||||||||||||||||||||||
Foreign corporate | |||||||||||||||||||||||||||||||
CMBS | |||||||||||||||||||||||||||||||
State and political subdivision | |||||||||||||||||||||||||||||||
ABS | |||||||||||||||||||||||||||||||
Foreign government | |||||||||||||||||||||||||||||||
Total fixed maturity securities | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Total number of securities in an unrealized loss position |
June 30, 2019 | December 31, 2018 | ||||||||||||
Carrying Value | % of Total | Carrying Value | % of Total | ||||||||||
(Dollars in millions) | |||||||||||||
Mortgage loans: | |||||||||||||
Commercial | $ | % | $ | % | |||||||||
Agricultural | |||||||||||||
Residential | |||||||||||||
Subtotal (1) | |||||||||||||
Valuation allowances (2) | ( | ) | ( | ) | ( | ) | ( | ) | |||||
Total mortgage loans, net | $ | % | $ | % |
(1) | Purchases of mortgage loans from third parties were $ |
(2) | The valuation allowances were primarily from collective evaluation (non-specific loan related). |
Recorded Investment | |||||||||||||||||||||||||
Debt Service Coverage Ratios | % of Total | Estimated Fair Value | % of Total | ||||||||||||||||||||||
> 1.20x | 1.00x - 1.20x | < 1.00x | Total | ||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||
June 30, 2019 | |||||||||||||||||||||||||
Loan-to-value ratios: | |||||||||||||||||||||||||
Less than 65% | $ | $ | $ | $ | % | $ | % | ||||||||||||||||||
65% to 75% | |||||||||||||||||||||||||
76% to 80% | |||||||||||||||||||||||||
Total | $ | $ | $ | $ | % | $ | % | ||||||||||||||||||
December 31, 2018 | |||||||||||||||||||||||||
Loan-to-value ratios: | |||||||||||||||||||||||||
Less than 65% | $ | $ | $ | $ | % | $ | % | ||||||||||||||||||
65% to 75% | |||||||||||||||||||||||||
76% to 80% | |||||||||||||||||||||||||
Total | $ | $ | $ | $ | % | $ | % |
June 30, 2019 | December 31, 2018 | ||||||||||||
Recorded Investment | % of Total | Recorded Investment | % of Total | ||||||||||
(Dollars in millions) | |||||||||||||
Loan-to-value ratios: | |||||||||||||
Less than 65% | $ | % | $ | % | |||||||||
65% to 75% | |||||||||||||
76% to 80% | |||||||||||||
Total | $ | % | $ | % |
June 30, 2019 | December 31, 2018 | ||||||||||||
Recorded Investment | % of Total | Recorded Investment | % of Total | ||||||||||
(Dollars in millions) | |||||||||||||
Performance indicators: | |||||||||||||
Performing | $ | % | $ | % | |||||||||
Nonperforming | |||||||||||||
Total | $ | % | $ | % |
June 30, 2019 | December 31, 2018 | ||||||
(In millions) | |||||||
Fixed maturity securities | $ | $ | |||||
Derivatives | |||||||
Other | ( | ) | ( | ) | |||
Subtotal | |||||||
Amounts allocated from: | |||||||
Future policy benefits | ( | ) | ( | ) | |||
DAC, VOBA and DSI | ( | ) | ( | ) | |||
Subtotal | ( | ) | ( | ) | |||
Deferred income tax benefit (expense) | ( | ) | ( | ) | |||
Net unrealized investment gains (losses) | $ | $ |
Six Months Ended June 30, 2019 | |||
(In millions) | |||
Balance, December 31, 2018 | $ | ||
Unrealized investment gains (losses) during the period | |||
Unrealized investment gains (losses) relating to: | |||
Future policy benefits | ( | ) | |
DAC, VOBA and DSI | ( | ) | |
Deferred income tax benefit (expense) | ( | ) | |
Balance, June 30, 2019 | $ | ||
Change in net unrealized investment gains (losses) | $ |
June 30, 2019 | December 31, 2018 | ||||||
(In millions) | |||||||
Securities on loan: (1) | |||||||
Amortized cost | $ | $ | |||||
Estimated fair value | $ | $ | |||||
Cash collateral received from counterparties (2) | $ | $ | |||||
Security collateral received from counterparties (3) | $ | $ | |||||
Reinvestment portfolio — estimated fair value | $ | $ |
(1) | Included within fixed maturity securities. |
(2) | Included within payables for collateral under securities loaned and other transactions. |
(3) | Security collateral received from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reflected on the consolidated financial statements. |
June 30, 2019 | December 31, 2018 | ||||||||||||||||||||||||||||||
Remaining Tenor of Securities Lending Agreements | Remaining Tenor of Securities Lending Agreements | ||||||||||||||||||||||||||||||
Open (1) | 1 Month or Less | 1 to 6 Months | Total | Open (1) | 1 Month or Less | 1 to 6 Months | Total | ||||||||||||||||||||||||
(In millions) | |||||||||||||||||||||||||||||||
U.S. government and agency | $ | $ | $ | $ | $ | $ | $ | $ |
(1) | The related loaned security could be returned to the Company on the next business day which would require the Company to immediately return the cash collateral. |
June 30, 2019 | December 31, 2018 | ||||||
(In millions) | |||||||
Invested assets on deposit (regulatory deposits) (1) | $ | $ | |||||
Invested assets held in trust (reinsurance agreements) (2) | |||||||
Invested assets pledged as collateral (3) | |||||||
Total invested assets on deposit, held in trust and pledged as collateral | $ | $ |
(1) | The Company has assets, primarily fixed maturity securities, on deposit with governmental authorities relating to certain policyholder liabilities, of which $ |
(2) | The Company has assets, primarily fixed maturity securities, held in trust relating to certain reinsurance transactions. $ |
(3) | The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 3 of the Notes to the Consolidated and Combined Financial Statements included in the 2018 Annual Report) and derivative transactions (see Note 5). |
June 30, 2019 | December 31, 2018 | ||||||||||||||
Carrying Amount | Maximum Exposure to Loss | Carrying Amount | Maximum Exposure to Loss | ||||||||||||
(In millions) | |||||||||||||||
Fixed maturity securities | $ | $ | $ | $ | |||||||||||
Limited partnerships and LLCs | |||||||||||||||
Total | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In millions) | |||||||||||||||
Investment income: | |||||||||||||||
Fixed maturity securities | $ | $ | $ | $ | |||||||||||
Equity securities | |||||||||||||||
Mortgage loans | |||||||||||||||
Policy loans | |||||||||||||||
Real estate limited partnerships and limited liability companies | |||||||||||||||
Other limited partnership interests | |||||||||||||||
Cash, cash equivalents and short-term investments | |||||||||||||||
Other | |||||||||||||||
Subtotal | |||||||||||||||
Less: Investment expenses | |||||||||||||||
Net investment income | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In millions) | |||||||||||||||
Fixed maturity securities | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Equity securities | ( | ) | ( | ) | |||||||||||
Mortgage loans | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Real estate limited partnerships and limited liability companies | |||||||||||||||
Other limited partnership interests | ( | ) | ( | ) | |||||||||||
Other | ( | ) | ( | ) | ( | ) | |||||||||
Total net investment gains (losses) | $ | $ | ( | ) | $ | $ | ( | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In millions) | |||||||||||||||
Proceeds | $ | $ | $ | $ | |||||||||||
Gross investment gains | $ | $ | $ | $ | |||||||||||
Gross investment losses | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net investment gains (losses) | $ | $ | ( | ) | $ | $ | ( | ) |
June 30, 2019 | December 31, 2018 | ||||||||||||||||||||||||
Primary Underlying Risk Exposure | Gross Notional Amount | Estimated Fair Value | Gross Notional Amount | Estimated Fair Value | |||||||||||||||||||||
Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||||||
(In millions) | |||||||||||||||||||||||||
Derivatives Designated as Hedging Instruments: | |||||||||||||||||||||||||
Cash flow hedges: | |||||||||||||||||||||||||
Foreign currency swaps | Foreign currency exchange rate | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Total qualifying hedges | |||||||||||||||||||||||||
Derivatives Not Designated or Not Qualifying as Hedging Instruments: | |||||||||||||||||||||||||
Interest rate swaps | Interest rate | ||||||||||||||||||||||||
Interest rate caps | Interest rate | ||||||||||||||||||||||||
Interest rate futures | Interest rate | ||||||||||||||||||||||||
Interest rate options | Interest rate | ||||||||||||||||||||||||
Interest rate forwards | Interest rate | ||||||||||||||||||||||||
Foreign currency swaps | Foreign currency exchange rate | ||||||||||||||||||||||||
Foreign currency forwards | Foreign currency exchange rate | ||||||||||||||||||||||||
Credit default swaps — purchased | Credit | ||||||||||||||||||||||||
Credit default swaps — written | Credit | ||||||||||||||||||||||||
Equity futures | Equity market | ||||||||||||||||||||||||
Equity index options | Equity market | ||||||||||||||||||||||||
Equity variance swaps | Equity market | ||||||||||||||||||||||||
Equity total return swaps | Equity market | ||||||||||||||||||||||||
Total non-designated or nonqualifying derivatives | |||||||||||||||||||||||||
Embedded derivatives: | |||||||||||||||||||||||||
Ceded guaranteed minimum income benefits | Other | N/A | N/A | ||||||||||||||||||||||
Direct guaranteed minimum benefits | Other | N/A | N/A | ||||||||||||||||||||||
Direct index-linked annuities | Other | N/A | N/A | ||||||||||||||||||||||
Assumed index-linked annuities | Other | N/A | N/A | ||||||||||||||||||||||
Total embedded derivatives | N/A | N/A | |||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ |
Net Derivative Gains (Losses) Recognized for Derivatives | Net Derivative Gains (Losses) Recognized for Hedged Items | Net Investment Income | Policyholder Benefits and Claims | Amount of Gains (Losses) deferred in AOCI | |||||||||||||||
(In millions) | |||||||||||||||||||
Three Months Ended June 30, 2019 | |||||||||||||||||||
Derivatives Designated as Hedging Instruments: | |||||||||||||||||||
Cash flow hedges: | |||||||||||||||||||
Interest rate derivatives | $ | $ | $ | $ | $ | ||||||||||||||
Foreign currency exchange rate derivatives | ( | ) | |||||||||||||||||
Total cash flow hedges | ( | ) | |||||||||||||||||
Derivatives Not Designated or Not Qualifying as Hedging Instruments: | |||||||||||||||||||
Interest rate derivatives | |||||||||||||||||||
Foreign currency exchange rate derivatives | ( | ) | |||||||||||||||||
Credit derivatives | |||||||||||||||||||
Equity derivatives | ( | ) | |||||||||||||||||
Embedded derivatives | ( | ) | |||||||||||||||||
Total non-qualifying hedges | ( | ) | |||||||||||||||||
Total | $ | $ | ( | ) | $ | $ | $ | ||||||||||||
Three Months Ended June 30, 2018 | |||||||||||||||||||
Derivatives Designated as Hedging Instruments: | |||||||||||||||||||
Fair value hedges: | |||||||||||||||||||
Interest rate derivatives | $ | ( | ) | $ | $ | $ | $ | ||||||||||||
Total fair value hedges | ( | ) | |||||||||||||||||
Cash flow hedges: | |||||||||||||||||||
Interest rate derivatives | |||||||||||||||||||
Foreign currency exchange rate derivatives | ( | ) | |||||||||||||||||
Total cash flow hedges | |||||||||||||||||||
Derivatives Not Designated or Not Qualifying as Hedging Instruments: | |||||||||||||||||||
Interest rate derivatives | ( | ) | |||||||||||||||||
Foreign currency exchange rate derivatives | ( | ) | |||||||||||||||||
Credit derivatives | |||||||||||||||||||
Equity derivatives | ( | ) | |||||||||||||||||
Embedded derivatives | ( | ) | |||||||||||||||||
Total non-qualifying hedges | ( | ) | ( | ) | ( | ) | |||||||||||||
Total | $ | ( | ) | $ | $ | $ | ( | ) | $ |
Net Derivative Gains (Losses) Recognized for Derivatives | Net Derivative Gains (Losses) Recognized for Hedged Items | Net Investment Income | Policyholder Benefits and Claims | Amount of Gains (Losses) deferred in AOCI | |||||||||||||||
(In millions) | |||||||||||||||||||
Six Months Ended June 30, 2019 | |||||||||||||||||||
Derivatives Designated as Hedging Instruments: | |||||||||||||||||||
Cash flow hedges: | |||||||||||||||||||
Interest rate derivatives | $ | $ | $ | $ | $ | ||||||||||||||
Foreign currency exchange rate derivatives | ( | ) | |||||||||||||||||
Total cash flow hedges | ( | ) | |||||||||||||||||
Derivatives Not Designated or Not Qualifying as Hedging Instruments: | |||||||||||||||||||
Interest rate derivatives | |||||||||||||||||||
Foreign currency exchange rate derivatives | ( | ) | |||||||||||||||||
Credit derivatives | |||||||||||||||||||
Equity derivatives | ( | ) | |||||||||||||||||
Embedded derivatives | ( | ) | |||||||||||||||||
Total non-qualifying hedges | ( | ) | ( | ) | |||||||||||||||
Total | $ | ( | ) | $ | ( | ) | $ | $ | $ | ||||||||||
Six Months Ended June 30, 2018 | |||||||||||||||||||
Derivatives Designated as Hedging Instruments: | |||||||||||||||||||
Fair value hedges: | |||||||||||||||||||
Interest rate derivatives | $ | ( | ) | $ | $ | $ | $ | ||||||||||||
Total fair value hedges | ( | ) | |||||||||||||||||
Cash flow hedges: | |||||||||||||||||||
Interest rate derivatives | ( | ) | |||||||||||||||||
Foreign currency exchange rate derivatives | ( | ) | |||||||||||||||||
Total cash flow hedges | |||||||||||||||||||
Derivatives Not Designated or Not Qualifying as Hedging Instruments: | |||||||||||||||||||
Interest rate derivatives | ( | ) | |||||||||||||||||
Foreign currency exchange rate derivatives | ( | ) | |||||||||||||||||
Credit derivatives | ( | ) | |||||||||||||||||
Equity derivatives | ( | ) | |||||||||||||||||
Embedded derivatives | ( | ) | |||||||||||||||||
Total non-qualifying hedges | ( | ) | ( | ) | ( | ) | |||||||||||||
Total | $ | ( | ) | $ | $ | $ | ( | ) | $ |
June 30, 2019 | December 31, 2018 | |||||||||||||||||||
Rating Agency Designation of Referenced Credit Obligations (1) | Estimated Fair Value of Credit Default Swaps | Maximum Amount of Future Payments under Credit Default Swaps | Weighted Average Years to Maturity (2) | Estimated Fair Value of Credit Default Swaps | Maximum Amount of Future Payments under Credit Default Swaps | Weighted Average Years to Maturity (2) | ||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Aaa/Aa/A | $ | $ | $ | $ | ||||||||||||||||
Baa | ||||||||||||||||||||
Total | $ | $ | $ | $ |
(1) | The Company has written credit protection on both single name and index references. The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s Investors Service, Standard & Poor’s Global Ratings and Fitch Ratings. If no rating is available from a rating agency, then an internally developed rating is used. |
(2) | The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts. |
Gross Amounts Not Offset on the Consolidated Balance Sheets | ||||||||||||||||||||||||
Gross Amount Recognized | Financial Instruments (1) | Collateral Received/Pledged (2) | Net Amount | Off-balance Sheet Securities Collateral (3) | Net Amount After Securities Collateral | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
June 30, 2019 | ||||||||||||||||||||||||
Derivative assets | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||
Derivative liabilities | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
December 31, 2018 | ||||||||||||||||||||||||
Derivative assets | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||
Derivative liabilities | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ |
(1) | Represents amounts subject to an enforceable master netting agreement or similar agreement. |
(2) | The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreement. |
(3) | Securities collateral received by the Company is not recorded on the balance sheet. Amounts do not include excess of collateral pledged or received. |
June 30, 2019 | December 31, 2018 | |||||||
(In millions) | ||||||||
Estimated fair value of derivatives in a net liability position (1) | $ | $ | ||||||
Estimated Fair Value of Collateral Provided (2): | ||||||||
Fixed maturity securities | $ | $ |
(1) | After taking into consideration the existence of netting agreements. |
(2) | Substantially all of the Company’s collateral arrangements provide for daily posting of collateral for the full value of the derivative contract. As a result, if the credit contingent provisions of derivative contracts in a net liability position were triggered minimal additional assets would be required to be posted as collateral or needed to settle the instruments immediately. |
June 30, 2019 | |||||||||||||||
Fair Value Hierarchy | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total Estimated Fair Value | ||||||||||||
(In millions) | |||||||||||||||
Assets | |||||||||||||||
Fixed maturity securities: | |||||||||||||||
U.S. corporate | $ | $ | $ | $ | |||||||||||
U.S. government and agency | |||||||||||||||
RMBS | |||||||||||||||
Foreign corporate | |||||||||||||||
CMBS | |||||||||||||||
State and political subdivision | |||||||||||||||
ABS | |||||||||||||||
Foreign government | |||||||||||||||
Total fixed maturity securities | |||||||||||||||
Equity securities | |||||||||||||||
Short-term investments | |||||||||||||||
Derivative assets: (1) | |||||||||||||||
Interest rate | |||||||||||||||
Foreign currency exchange rate | |||||||||||||||
Credit | |||||||||||||||
Equity market | |||||||||||||||
Total derivative assets | |||||||||||||||
Embedded derivatives within asset host contracts (2) | |||||||||||||||
Separate account assets | |||||||||||||||
Total assets | $ | $ | $ | $ | |||||||||||
Liabilities | |||||||||||||||
Derivative liabilities: (1) | |||||||||||||||
Interest rate | $ | $ | $ | $ | |||||||||||
Foreign currency exchange rate | |||||||||||||||
Equity market | |||||||||||||||
Total derivative liabilities | |||||||||||||||
Embedded derivatives within liability host contracts (2) | |||||||||||||||
Total liabilities | $ | $ | $ | $ |
December 31, 2018 | |||||||||||||||
Fair Value Hierarchy | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total Estimated Fair Value | ||||||||||||
(In millions) | |||||||||||||||
Assets | |||||||||||||||
Fixed maturity securities: | |||||||||||||||
U.S. corporate | $ | $ | $ | $ | |||||||||||
U.S. government and agency | |||||||||||||||
RMBS | |||||||||||||||
Foreign corporate | |||||||||||||||
CMBS | |||||||||||||||
State and political subdivision | |||||||||||||||
ABS | |||||||||||||||
Foreign government | |||||||||||||||
Total fixed maturity securities | |||||||||||||||
Equity securities | |||||||||||||||
Derivative assets: (1) | |||||||||||||||
Interest rate | |||||||||||||||
Foreign currency exchange rate | |||||||||||||||
Credit | |||||||||||||||
Equity market | |||||||||||||||
Total derivative assets | |||||||||||||||
Embedded derivatives within asset host contracts (2) | |||||||||||||||
Separate account assets | |||||||||||||||
Total assets | $ | $ | $ | $ | |||||||||||
Liabilities | |||||||||||||||
Derivative liabilities: (1) | |||||||||||||||
Interest rate | $ | $ | $ | $ | |||||||||||
Foreign currency exchange rate | |||||||||||||||
Credit | |||||||||||||||
Equity market | |||||||||||||||
Total derivative liabilities | |||||||||||||||
Embedded derivatives within liability host contracts (2) | |||||||||||||||
Total liabilities | $ | $ | $ | $ |
(1) | Derivative assets are presented within other invested assets on the consolidated balance sheets and derivative liabilities are presented within other liabilities on the consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the consolidated balance sheets, but are presented net for purposes of the rollforward in the Fair Value Measurements Using Significant Unobservable Inputs (Level 3) tables. |
(2) |
June 30, 2019 | December 31, 2018 | Impact of Increase in Input on Estimated Fair Value | |||||||||||||
Valuation Techniques | Significant Unobservable Inputs | Range | Range | ||||||||||||
Embedded derivatives | |||||||||||||||
Direct, assumed and ceded guaranteed minimum benefits | • | Option pricing techniques | • | Mortality rates | Decrease (1) | ||||||||||
• | Lapse rates | Decrease (2) | |||||||||||||
• | Utilization rates | Increase (3) | |||||||||||||
• | Withdrawal rates | (4) | |||||||||||||
• | Long-term equity volatilities | Increase (5) | |||||||||||||
• | Nonperformance risk spread | Decrease (6) |
(1) | Mortality rates vary by age and by demographic characteristics such as gender. Range shown reflects the mortality rate for policyholders between 35 and 90 years old, which represents the majority of the business with living benefits. Mortality rate assumptions are set based on company experience and include an assumption for mortality improvement. |
(2) | Range reflects base lapse rates for major product categories for duration 1-20, which represents majority of business with living benefit riders. Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in-the-money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies. |
(3) | The utilization rate assumption estimates the percentage of contract holders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible in a given year. The range shown represents the floor and cap of the GMIB dynamic election rates across varying levels of in-the-money. For lifetime withdrawal guarantee riders, the assumption is that everyone will begin withdrawals once account value reaches zero which is equivalent to a 100% utilization rate. Utilization rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder. |
(4) | The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value. |
(5) | Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. |
(6) | Nonperformance risk spread varies by duration. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative. |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||||||
Fixed Maturity Securities | ||||||||||||||||||||||||||||||||||||
Corporate (1) | Structured Securities | State and Political Subdivision | Foreign Government | Equity Securities | Short-term Investments | Net Derivatives (2) | Net Embedded Derivatives (3) | Separate Account Assets (4) | ||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, 2019 | ||||||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
Total realized/unrealized gains (losses) included in net income (loss) (5) (6) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Total realized/unrealized gains (losses) included in AOCI | ||||||||||||||||||||||||||||||||||||
Purchases (7) | ||||||||||||||||||||||||||||||||||||
Sales (7) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Issuances (7) | ||||||||||||||||||||||||||||||||||||
Settlements (7) | ( | ) | ||||||||||||||||||||||||||||||||||
Transfers into Level 3 (8) | ||||||||||||||||||||||||||||||||||||
Transfers out of Level 3 (8) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Balance, end of period | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
Three Months Ended June 30, 2018 | ||||||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
Total realized/unrealized gains (losses) included in net income (loss) (5) (6) | ( | ) | ||||||||||||||||||||||||||||||||||
Total realized/unrealized gains (losses) included in AOCI | ( | ) | ||||||||||||||||||||||||||||||||||
Purchases (7) | ||||||||||||||||||||||||||||||||||||
Sales (7) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
Issuances (7) | ||||||||||||||||||||||||||||||||||||
Settlements (7) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Transfers into Level 3 (8) | ||||||||||||||||||||||||||||||||||||
Transfers out of Level 3 (8) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Balance, end of period | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2019 (9) | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2018 (9) | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||||||
Fixed Maturity Securities | ||||||||||||||||||||||||||||||||||||
Corporate (1) | Structured Securities | State and Political Subdivision | Foreign Government | Equity Securities | Short-term Investments | Net Derivatives (2) | Net Embedded Derivatives (3) | Separate Account Assets (4) | ||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||
Six Months Ended June 30, 2019 | ||||||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
Total realized/unrealized gains (losses) included in net income (loss) (5) (6) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Total realized/unrealized gains (losses) included in AOCI | ||||||||||||||||||||||||||||||||||||
Purchases (7) | ||||||||||||||||||||||||||||||||||||
Sales (7) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Issuances (7) | ||||||||||||||||||||||||||||||||||||
Settlements (7) | ( | ) | ||||||||||||||||||||||||||||||||||
Transfers into Level 3 (8) | ||||||||||||||||||||||||||||||||||||
Transfers out of Level 3 (8) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Balance, end of period | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
Six Months Ended June 30, 2018 | ||||||||||||||||||||||||||||||||||||
Balance, beginning of period | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
Total realized/unrealized gains (losses) included in net income (loss) (5) (6) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Total realized/unrealized gains (losses) included in AOCI | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Purchases (7) | ||||||||||||||||||||||||||||||||||||
Sales (7) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
Issuances (7) | ||||||||||||||||||||||||||||||||||||
Settlements (7) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
Transfers into Level 3 (8) | ||||||||||||||||||||||||||||||||||||
Transfers out of Level 3 (8) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
Balance, end of period | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2019 (9) | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2018 (9) | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ |
(1) | Comprised of U.S. and foreign corporate securities. |
(2) | Freestanding derivative assets and liabilities are presented net for purposes of the rollforward. |
(3) | Embedded derivative assets and liabilities are presented net for purposes of the rollforward. |
(4) | Investment performance related to separate account assets is fully offset by corresponding amounts credited to contract holders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income (loss). For the purpose of this disclosure, these changes are presented within net investment gains (losses). |
(5) | Amortization of premium/accretion of discount is included within net investment income. Impairments charged to net income (loss) on securities are included in net investment gains (losses). Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses). |
(6) | Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward. |
(7) | Items purchased/issued and then sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements. |
(8) | Gains and losses, in net income (loss) and OCI, are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and then out of Level 3 in the same period are excluded from the rollforward. |
(9) | Changes in unrealized gains (losses) included in net income (loss) relate to assets and liabilities still held at the end of the respective periods. Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses). |
June 30, 2019 | |||||||||||||||||||
Fair Value Hierarchy | |||||||||||||||||||
Carrying Value | Level 1 | Level 2 | Level 3 | Total Estimated Fair Value | |||||||||||||||
(In millions) | |||||||||||||||||||
Assets | |||||||||||||||||||
Mortgage loans | $ | $ | $ | $ | $ | ||||||||||||||
Policy loans | $ | $ | $ | $ | $ | ||||||||||||||
Other invested assets | $ | $ | $ | $ | $ | ||||||||||||||
Premiums, reinsurance and other receivables | $ | $ | $ | $ | $ | ||||||||||||||
Liabilities | |||||||||||||||||||
Policyholder account balances | $ | $ | $ | $ | $ | ||||||||||||||
Long-term debt | $ | $ | $ | $ | $ | ||||||||||||||
Other liabilities | $ | $ | $ | $ | $ | ||||||||||||||
Separate account liabilities | $ | $ | $ | $ | $ |
December 31, 2018 | |||||||||||||||||||
Fair Value Hierarchy | |||||||||||||||||||
Carrying Value | Level 1 | Level 2 | Level 3 | Total Estimated Fair Value | |||||||||||||||
(In millions) | |||||||||||||||||||
Assets | |||||||||||||||||||
Mortgage loans | $ | $ | $ | $ | $ | ||||||||||||||
Policy loans | $ | $ | $ | $ | $ | ||||||||||||||
Other invested assets | $ | $ | $ | $ | $ | ||||||||||||||
Premiums, reinsurance and other receivables | $ | $ | $ | $ | $ | ||||||||||||||
Liabilities | |||||||||||||||||||
Policyholder account balances | $ | $ | $ | $ | $ | ||||||||||||||
Long-term debt | $ | $ | $ | $ | $ | ||||||||||||||
Other liabilities | $ | $ | $ | $ | $ | ||||||||||||||
Separate account liabilities | $ | $ | $ | $ | $ |
Three Months Ended June 30, 2019 | |||||||||||||||||||
Unrealized Investment Gains (Losses), Net of Related Offsets (1) | Unrealized Gains (Losses) on Derivatives | Foreign Currency Translation Adjustments | Defined Benefit Plans Adjustment | Total | |||||||||||||||
(In millions) | |||||||||||||||||||
Balance, March 31, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||
OCI before reclassifications | |||||||||||||||||||
Deferred income tax benefit (expense) | ( | ) | ( | ) | ( | ) | |||||||||||||
AOCI before reclassifications, net of income tax | ( | ) | ( | ) | |||||||||||||||
Amounts reclassified from AOCI | ( | ) | ( | ) | ( | ) | |||||||||||||
Deferred income tax benefit (expense) | |||||||||||||||||||
Amounts reclassified from AOCI, net of income tax | ( | ) | ( | ) | ( | ) | |||||||||||||
Balance, June 30, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ |
Three Months Ended June 30, 2018 | |||||||||||||||||||
Unrealized Investment Gains (Losses), Net of Related Offsets (1) | Unrealized Gains (Losses) on Derivatives | Foreign Currency Translation Adjustments | Defined Benefit Plans Adjustment | Total | |||||||||||||||
(In millions) | |||||||||||||||||||
Balance, March 31, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||
OCI before reclassifications | ( | ) | |||||||||||||||||
Deferred income tax benefit (expense) | ( | ) | ( | ) | ( | ) | |||||||||||||
AOCI before reclassifications, net of income tax | ( | ) | ( | ) | |||||||||||||||
Amounts reclassified from AOCI | ( | ) | |||||||||||||||||
Deferred income tax benefit (expense) | ( | ) | ( | ) | |||||||||||||||
Amounts reclassified from AOCI, net of income tax | ( | ) | |||||||||||||||||
Balance, June 30, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | $ |
Six Months Ended June 30, 2019 | |||||||||||||||||||
Unrealized Investment Gains (Losses), Net of Related Offsets (1) | Unrealized Gains (Losses) on Derivatives | Foreign Currency Translation Adjustments | Defined Benefit Plans Adjustment | Total | |||||||||||||||
(In millions) | |||||||||||||||||||
Balance, December 31, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||
OCI before reclassifications | ( | ) | |||||||||||||||||
Deferred income tax benefit (expense) | ( | ) | ( | ) | ( | ) | |||||||||||||
AOCI before reclassifications, net of income tax | ( | ) | ( | ) | |||||||||||||||
Amounts reclassified from AOCI | ( | ) | ( | ) | ( | ) | |||||||||||||
Deferred income tax benefit (expense) | |||||||||||||||||||
Amounts reclassified from AOCI, net of income tax | ( | ) | ( | ) | ( | ) | |||||||||||||
Balance, June 30, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ |
Six Months Ended June 30, 2018 | |||||||||||||||||||
Unrealized Investment Gains (Losses), Net of Related Offsets (1) | Unrealized Gains (Losses) on Derivatives | Foreign Currency Translation Adjustments | Defined Benefit Plans Adjustment | Total | |||||||||||||||
(In millions) | |||||||||||||||||||
Balance, December 31, 2017 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||
Cumulative effect of change in accounting principle, net of income tax | ( | ) | ( | ) | |||||||||||||||
Balance, January 1, 2018 | ( | ) | ( | ) | |||||||||||||||
OCI before reclassifications | ( | ) | ( | ) | |||||||||||||||
Deferred income tax benefit (expense) | ( | ) | ( | ) | ( | ) | |||||||||||||
AOCI before reclassifications, net of income tax | ( | ) | ( | ) | |||||||||||||||
Amounts reclassified from AOCI | ( | ) | |||||||||||||||||
Deferred income tax benefit (expense) | ( | ) | ( | ) | |||||||||||||||
Amounts reclassified from AOCI, net of income tax | ( | ) | |||||||||||||||||
Balance, June 30, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | $ |
(1) | See Note 4 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI. |
AOCI Components | Amounts Reclassified from AOCI | Consolidated Statements of Operations and Comprehensive Income (Loss) Locations | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||
(In millions) | ||||||||||||||||||
Net unrealized investment gains (losses): | ||||||||||||||||||
Net unrealized investment gains (losses) | $ | $ | ( | ) | $ | $ | ( | ) | Net investment gains (losses) | |||||||||
Net unrealized investment gains (losses) | Net investment income | |||||||||||||||||
Net unrealized investment gains (losses) | ( | ) | ( | ) | Net derivative gains (losses) | |||||||||||||
Net unrealized investment gains (losses), before income tax | ( | ) | ( | ) | ||||||||||||||
Income tax (expense) benefit | ( | ) | ( | ) | ||||||||||||||
Net unrealized investment gains (losses), net of income tax | ( | ) | ( | ) | ||||||||||||||
Unrealized gains (losses) on derivatives - cash flow hedges: | ||||||||||||||||||
Interest rate swaps | Net derivative gains (losses) | |||||||||||||||||
Interest rate swaps | Net investment income | |||||||||||||||||
Interest rate forwards | ( | ) | Net derivative gains (losses) | |||||||||||||||
Interest rate forwards | Net investment income | |||||||||||||||||
Foreign currency swaps | ( | ) | ( | ) | Net derivative gains (losses) | |||||||||||||
Gains (losses) on cash flow hedges, before income tax | ||||||||||||||||||
Income tax (expense) benefit | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
Gains (losses) on cash flow hedges, net of income tax | ||||||||||||||||||
Total reclassifications, net of income tax | $ | $ | ( | ) | $ | $ | ( | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In millions) | |||||||||||||||
Compensation | $ | $ | $ | $ | |||||||||||
Contracted services and other labor costs | |||||||||||||||
Transition services agreements | |||||||||||||||
Establishment costs | |||||||||||||||
Premium and other taxes, licenses and fees | |||||||||||||||
Separate account fees | |||||||||||||||
Volume related costs, excluding compensation, net of DAC capitalization | |||||||||||||||
Interest expense on debt | |||||||||||||||
Other | |||||||||||||||
Total other expenses | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In millions, except share and per share data) | ||||||||||||||||
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Weighted average common shares outstanding — basic | ||||||||||||||||
Dilutive effect of share-based awards | ||||||||||||||||
Weighted average common shares outstanding — diluted | ||||||||||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In millions) | |||||||||||||||
Income (1) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||
Expense (2) | $ | $ | $ | $ |
(1) | Primarily includes the net impact of reinsurance ceded to MetLife. |
(2) | Primarily includes costs incurred with MetLife related to shared services, offset by reinsurance ceded to MetLife. |
Page | |
• | “Executive Summary” provides information regarding our business, segments and results as discussed in the Results of Operations. |
• | “Industry Trends” discusses updates and changes to a number of trends and uncertainties included in the 2018 Annual Report that we believe may materially affect our future financial condition, results of operations or cash flows. |
• | “Summary of Critical Accounting Estimates” explains the most critical estimates and judgments applied in determining our GAAP results. |
• | “Non-GAAP and Other Financial Disclosures” defines key financial measures presented in the Results of Operations that are not calculated in accordance with accounting principles generally accepted in the United States of America (“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 from, but different than, the line items presented in the GAAP statement 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. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In millions) | ||||||||||||||||
Net income (loss) available to shareholders before provision for income tax | $ | 462 | $ | (318 | ) | $ | (493 | ) | $ | (433 | ) | |||||
Less: Provision for income tax expense (benefit) | 85 | (79 | ) | (133 | ) | (127 | ) | |||||||||
Net income (loss) available to shareholders (1) | $ | 377 | $ | (239 | ) | $ | (360 | ) | $ | (306 | ) | |||||
Pre-tax adjusted earnings, less net income attributable to noncontrolling interests and preferred stock dividends | $ | 305 | $ | 179 | $ | 577 | $ | 507 | ||||||||
Less: Provision for income tax expense (benefit) | 51 | 26 | 91 | 71 | ||||||||||||
Adjusted earnings | $ | 254 | $ | 153 | $ | 486 | $ | 436 |
(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” throughout the results of operations discussions. |
(i) | liabilities for future policy benefits; |
(ii) | accounting for reinsurance; |
(iii) | capitalization and amortization of deferred policy acquisition costs (“DAC”) and amortization of value of business acquired (“VOBA”); |
(iv) | estimated fair values of investments in the absence of quoted market values; |
(v) | investment impairments; |
(vi) | estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation; |
(vii) | measurement of income taxes and the valuation of deferred tax assets; and |
(viii) | liabilities for litigation and regulatory matters. |
• | Net investment gains (losses); |
• | Net derivative gains (losses) except earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment (“Investment Hedge Adjustments”); and |
• | Certain variable annuity guaranteed minimum income benefits (“GMIBs”) fees (“GMIB Fees”) and amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses). |
• | Amounts associated with benefits and hedging costs related to GMIBs (“GMIB Costs”); |
• | Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”); and |
• | Amortization of DAC and VOBA related to (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments. |
Component of Adjusted Earnings | How Derived from GAAP (1) | ||
(i) | Fee income | (i) | Universal life and investment-type policy fees (excluding (a) unearned revenue adjustments related to net investment gains (losses) and net derivative gains (losses) and (b) GMIB Fees) plus Other revenues (excluding other revenues associated with related party reinsurance) and amortization of deferred gain on reinsurance. |
(ii) | Net investment spread | (ii) | Net investment income plus Investment Hedge Adjustments and interest received on ceded fixed annuity reinsurance deposit funds reduced by Interest credited to policyholder account balances and interest on future policy benefits. |
(iii) | Insurance-related activities | (iii) | Premiums less Policyholder benefits and claims (excluding (a) GMIB Costs, (b) Market Value Adjustments, (c) interest on future policy benefits and (d) amortization of deferred gain on reinsurance) plus the pass through of performance of ceded separate account assets. |
(iv) | Amortization of DAC and VOBA | (iv) | Amortization of DAC and VOBA (excluding amounts related to (a) net investment gains (losses), (b) net derivative gains (losses), (c) GMIB Fees and GMIB Costs and (d) Market Value Adjustments). |
(v) | Other expenses, net of DAC capitalization | (v) | Other expenses reduced by capitalization of DAC. |
(vi) | Provision for income tax expense (benefit) | (vi) | Tax impact of the above items. |
(1) | Italicized items indicate GAAP statement of operations line items. |
• | We sometimes refer to sales activity for various products. Statistical sales information for life sales are calculated using the LIMRA (Life Insurance Marketing and Research Association) definition of sales for core direct sales, excluding company-sponsored internal exchanges, corporate-owned life insurance, bank-owned life insurance, and private placement variable universal life insurance. Annuity sales consist of 10% of direct statutory premiums, excluding company-sponsored internal exchanges. These sales statistics do not correspond to revenues under GAAP, but are used as relevant measures of business activity. |
• | Similar to adjusted net investment income, we present net investment income yields as a performance measure we believe enhances the understanding of our investment portfolio results. Net investment income yields are calculated on adjusted net investment income as a percent 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. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In millions) | ||||||||||||||||
Revenues | ||||||||||||||||
Premiums | $ | 232 | $ | 223 | $ | 459 | $ | 452 | ||||||||
Universal life and investment-type product policy fees | 888 | 962 | 1,763 | 1,964 | ||||||||||||
Net investment income | 942 | 806 | 1,753 | 1,623 | ||||||||||||
Other revenues | 96 | 98 | 188 | 203 | ||||||||||||
Net investment gains (losses) | 63 | (75 | ) | 52 | (79 | ) | ||||||||||
Net derivative gains (losses) | 149 | (312 | ) | (1,154 | ) | (646 | ) | |||||||||
Total revenues | 2,370 | 1,702 | 3,061 | 3,517 | ||||||||||||
Expenses | ||||||||||||||||
Policyholder benefits and claims | 845 | 813 | 1,617 | 1,551 | ||||||||||||
Interest credited to policyholder account balances | 265 | 269 | 523 | 536 | ||||||||||||
Capitalization of DAC | (95 | ) | (76 | ) | (181 | ) | (152 | ) | ||||||||
Amortization of DAC and VOBA | 170 | 246 | 192 | 551 | ||||||||||||
Interest expense on debt | 48 | 33 | 95 | 70 | ||||||||||||
Other expenses | 668 | 734 | 1,299 | 1,391 | ||||||||||||
Total expenses | 1,901 | 2,019 | 3,545 | 3,947 | ||||||||||||
Income (loss) before provision for income tax | 469 | (317 | ) | (484 | ) | (430 | ) | |||||||||
Provision for income tax expense (benefit) | 85 | (79 | ) | (133 | ) | (127 | ) | |||||||||
Net income (loss) | 384 | (238 | ) | (351 | ) | (303 | ) | |||||||||
Less: Net income (loss) attributable to noncontrolling interests | — | 1 | 2 | 3 | ||||||||||||
Net income (loss) attributable to Brighthouse Financial, Inc. | 384 | (239 | ) | (353 | ) | (306 | ) | |||||||||
Less: Preferred stock dividends | 7 | — | 7 | — | ||||||||||||
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders | $ | 377 | $ | (239 | ) | $ | (360 | ) | $ | (306 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In millions) | ||||||||||||||||
GMLB Riders | $ | (233 | ) | $ | (429 | ) | (1,563 | ) | $ | (423 | ) | |||||
Other derivative instruments | 344 | (2 | ) | 480 | (479 | ) | ||||||||||
Net investment gains (losses) | 63 | (75 | ) | 52 | (79 | ) | ||||||||||
Other adjustments | (17 | ) | 9 | (39 | ) | 41 | ||||||||||
Pre-tax adjusted earnings, less net income attributable to noncontrolling interests and preferred stock dividends | 305 | 179 | 577 | 507 | ||||||||||||
Net income (loss) available to shareholders before provision for income tax | 462 | (318 | ) | (493 | ) | (433 | ) | |||||||||
Provision for income tax expense (benefit) | 85 | (79 | ) | (133 | ) | (127 | ) | |||||||||
Net income (loss) available to shareholders | $ | 377 | $ | (239 | ) | $ | (360 | ) | $ | (306 | ) |
• | current period gains on interest rate swaps and swaptions in our ULSG hedge program from declining long-term interest rates; |
• | lower losses from GMLB Riders, discussed in greater detail in “— GMLB Riders for the Three Months and Six Months Ended June 30, 2019 and 2018;” |
• | higher net investment gains reflecting current period net gains on sales of fixed maturity securities compared to prior period losses; and |
• | higher adjusted earnings, discussed in greater detail below. |
• | higher losses from GMLB Riders, discussed in greater detail in “— GMLB Riders for the Three Months and Six Months Ended June 30, 2019 and 2018;” and |
• | higher policyholder benefits and claims, included in other adjustments, resulting from the adjustment for market performance related to participating products in the Run-off segment. |
• | current period gains on interest rate swaps and swaptions in our ULSG hedge program from declining long-term interest rates; |
• | higher net investment gains reflecting: |
◦ | current period net gains on sales of fixed maturity securities compared to prior period losses; and |
◦ | current period net mark-to-market gains on equity securities compared to prior period net losses, |
◦ | prior period net gains on real estate limited partnerships; and |
• | higher adjusted earnings, discussed in greater detail below. |
Annuities | Life | Run-off | Corporate & Other | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Net income (loss) available to shareholders | $ | 41 | $ | 78 | $ | 432 | $ | (174 | ) | $ | 377 | |||||||||
Add: Provision for income tax expense (benefit) | 58 | 14 | (41 | ) | 54 | 85 | ||||||||||||||
Net income (loss) available to shareholders before provision for income tax | 99 | 92 | 391 | (120 | ) | 462 | ||||||||||||||
Less: GMLB Riders | (233 | ) | — | — | — | (233 | ) | |||||||||||||
Less: Other derivative instruments | (3 | ) | 11 | 337 | (1 | ) | 344 | |||||||||||||
Less: Net investment gains (losses) | 13 | 9 | 68 | (27 | ) | 63 | ||||||||||||||
Less: Other adjustments | (1 | ) | — | (16 | ) | — | (17 | ) | ||||||||||||
Pre-tax adjusted earnings, less net income attributable to noncontrolling interests and preferred stock dividends | 323 | 72 | 2 | (92 | ) | 305 | ||||||||||||||
Less: Provision for income tax expense (benefit) | 58 | 14 | — | (21 | ) | 51 | ||||||||||||||
Adjusted earnings | $ | 265 | $ | 58 | $ | 2 | $ | (71 | ) | $ | 254 |
Annuities | Life | Run-off | Corporate & Other | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Net income (loss) available to shareholders | $ | (292 | ) | $ | (4 | ) | $ | 4 | $ | 53 | $ | (239 | ) | |||||||
Add: Provision for income tax expense (benefit) | 33 | 12 | (19 | ) | (105 | ) | (79 | ) | ||||||||||||
Net income (loss) available to shareholders before provision for income tax | (259 | ) | 8 | (15 | ) | (52 | ) | (318 | ) | |||||||||||
Less: GMLB Riders | (429 | ) | — | — | — | (429 | ) | |||||||||||||
Less: Other derivative instruments | 36 | 1 | (59 | ) | 20 | (2 | ) | |||||||||||||
Less: Net investment gains (losses) | (132 | ) | (39 | ) | 44 | 52 | (75 | ) | ||||||||||||
Less: Other adjustments | — | — | 8 | 1 | 9 | |||||||||||||||
Pre-tax adjusted earnings, less net income attributable to noncontrolling interests and preferred stock dividends | 266 | 46 | (8 | ) | (125 | ) | 179 | |||||||||||||
Less: Provision for income tax expense (benefit) | 45 | 9 | (2 | ) | (26 | ) | 26 | |||||||||||||
Adjusted earnings | $ | 221 | $ | 37 | $ | (6 | ) | $ | (99 | ) | $ | 153 |
Annuities | Life | Run-off | Corporate & Other | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Net income (loss) available to shareholders | $ | (1,010 | ) | $ | 94 | $ | 690 | $ | (134 | ) | $ | (360 | ) | |||||||
Add: Provision for income tax expense (benefit) | 113 | 20 | (189 | ) | (77 | ) | (133 | ) | ||||||||||||
Net income (loss) available to shareholders before provision for income tax | (897 | ) | 114 | 501 | (211 | ) | (493 | ) | ||||||||||||
Less: GMLB Riders | (1,563 | ) | — | — | — | (1,563 | ) | |||||||||||||
Less: Other derivative instruments | (35 | ) | 21 | 495 | (1 | ) | 480 | |||||||||||||
Less: Net investment gains (losses) | 17 | (10 | ) | 89 | (44 | ) | 52 | |||||||||||||
Less: Other adjustments | — | — | (39 | ) | — | (39 | ) | |||||||||||||
Pre-tax adjusted earnings, less net income attributable to noncontrolling interests and preferred stock dividends | 684 | 103 | (44 | ) | (166 | ) | 577 | |||||||||||||
Less: Provision for income tax expense (benefit) | 124 | 20 | (10 | ) | (43 | ) | 91 | |||||||||||||
Adjusted earnings | $ | 560 | $ | 83 | $ | (34 | ) | $ | (123 | ) | $ | 486 |
Annuities | Life | Run-off | Corporate & Other | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Net income (loss) available to shareholders | $ | (49 | ) | $ | 86 | $ | (258 | ) | $ | (85 | ) | $ | (306 | ) | ||||||
Add: Provision for income tax expense (benefit) | 84 | 35 | (116 | ) | (130 | ) | (127 | ) | ||||||||||||
Net income (loss) available to shareholders before provision for income tax | 35 | 121 | (374 | ) | (215 | ) | (433 | ) | ||||||||||||
Less: GMLB Riders | (423 | ) | — | — | — | (423 | ) | |||||||||||||
Less: Other derivative instruments | 14 | (13 | ) | (479 | ) | (1 | ) | (479 | ) | |||||||||||
Less: Net investment gains (losses) | (96 | ) | 7 | 12 | (2 | ) | (79 | ) | ||||||||||||
Less: Other adjustments | 2 | — | 38 | 1 | 41 | |||||||||||||||
Pre-tax adjusted earnings, less net income attributable to noncontrolling interests and preferred stock dividends | 538 | 127 | 55 | (213 | ) | 507 | ||||||||||||||
Less: Provision for income tax expense (benefit) | 91 | 24 | 11 | (55 | ) | 71 | ||||||||||||||
Adjusted earnings | $ | 447 | $ | 103 | $ | 44 | $ | (158 | ) | $ | 436 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In millions) | ||||||||||||||||
Fee income | $ | 919 | $ | 990 | $ | 1,820 | $ | 2,026 | ||||||||
Net investment spread | 459 | 330 | 794 | 674 | ||||||||||||
Insurance-related activities | (292 | ) | (295 | ) | (565 | ) | (550 | ) | ||||||||
Amortization of DAC and VOBA | (153 | ) | (150 | ) | (250 | ) | (327 | ) | ||||||||
Other expenses, net of DAC capitalization | (621 | ) | (695 | ) | (1,213 | ) | (1,313 | ) | ||||||||
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends | 7 | 1 | 9 | 3 | ||||||||||||
Pre-tax adjusted earnings, less net income attributable to noncontrolling interests and preferred stock dividends | 305 | 179 | 577 | 507 | ||||||||||||
Provision for income tax expense (benefit) | 51 | 26 | 91 | 71 | ||||||||||||
Adjusted earnings | $ | 254 | $ | 153 | $ | 486 | $ | 436 |
• | higher net investment spread reflecting: |
◦ | higher alternative investment income in the current period; and |
◦ | higher average invested assets resulting from positive net flows in the general account; |
• | lower other expenses due to: |
◦ | lower establishment costs in the current period related to planned technology expense; |
◦ | the exit of various transition service agreements with MetLife; and |
◦ | lower asset-based variable annuity expenses resulting from lower average separate account balances, which are passed through to third-parties and largely offset in fee income. |
• | higher net investment spread reflecting: |
◦ | higher average invested assets resulting from positive net flows in the general account; |
◦ | lower alternative investment income in the current period. |
• | lower other expenses due to: |
◦ | lower establishment costs in the current period related to planned technology expenses; |
◦ | the exit of various transition service agreements with MetLife; and |
◦ | lower asset-based variable annuity expenses resulting from lower average separate account balances, which are passed through to third-parties and largely offset in fee income; |
• | lower amortization of DAC and VOBA due to positive equity market performance in the current period. |
• | lower fee income due to: |
◦ | lower asset-based fees resulting from lower average separate account balances, a portion of which are offset in other expenses; and |
◦ | the reimbursement of fees for recaptured universal life business in the prior period; and |
• | higher costs associated with insurance-related activities due to: |
◦ | unfavorable mortality in our life business; |
◦ | a decrease in guaranteed minimum death benefits (“GMDB”) liability balances resulting from positive equity market performance. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In millions) | ||||||||||||||||
Fee income | $ | 664 | $ | 720 | $ | 1,302 | $ | 1,451 | ||||||||
Net investment spread | 280 | 186 | 521 | 361 | ||||||||||||
Insurance-related activities | (77 | ) | (89 | ) | (119 | ) | (174 | ) | ||||||||
Amortization of DAC and VOBA | (128 | ) | (124 | ) | (210 | ) | (267 | ) | ||||||||
Other expenses, net of DAC capitalization | (416 | ) | (427 | ) | (810 | ) | (833 | ) | ||||||||
Pre-tax adjusted earnings | 323 | 266 | 684 | 538 | ||||||||||||
Provision for income tax expense (benefit) | 58 | 45 | 124 | 91 | ||||||||||||
Adjusted earnings | $ | 265 | $ | 221 | $ | 560 | $ | 447 |
Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||||
(In millions) | ||||||||
Balance, beginning of period | $ | 98,244 | $ | 91,923 | ||||
Deposits | 338 | 637 | ||||||
Withdrawals, surrenders and contract benefits | (2,499 | ) | (4,782 | ) | ||||
Net flows | (2,161 | ) | (4,145 | ) | ||||
Investment performance | 3,630 | 12,556 | ||||||
Policy charges | (627 | ) | (1,197 | ) | ||||
Net transfers from (to) general account | (73 | ) | (124 | ) | ||||
Balance, end of period | $ | 99,013 | $ | 99,013 | ||||
Average balance | $ | 98,142 | $ | 97,320 |
• | higher net investment spread driven by: |
◦ | higher average invested assets resulting from positive net flows in the general account; |
◦ | higher alternative investment income in the current period; and |
◦ | repositioning of the investment portfolio into higher yielding assets; |
• | lower costs associated with insurance-related activities due to: |
◦ | a decrease in GMDB liability balances resulting from positive equity market performance, |
◦ | higher paid claims net of reinsurance; and |
• | lower other expenses due to: |
◦ | lower asset-based variable annuity expenses resulting from lower average separate account balances, which are passed through to third-parties and largely offset in fee income; and |
◦ | the exit of various transition services agreements with MetLife in the current period, |
◦ | an increase in the allocation of corporate expenses. |
• | higher net investment spread driven by: |
◦ | higher average invested assets resulting from positive net flows in the general account; and |
◦ | repositioning of the investment portfolio into higher yielding assets; and |
◦ | higher alternative investment income in the current period. |
• | lower amortization of DAC and VOBA driven by: |
◦ | positive equity market performance in the current period; and |
◦ | the net impacts of actuarial model refinements in both the current and prior periods; |
• | lower costs associated with insurance-related activities due to: |
◦ | a decrease in GMDB liability balances resulting from positive equity market performance, |
◦ | higher paid claims net of reinsurance; and |
• | lower other expenses due to: |
◦ | lower asset-based variable annuity expenses resulting from lower average separate account balances, which are passed through to third-parties and largely offset in fee income; and |
◦ | the exit of various transition services agreements with MetLife in the current period, |
◦ | an increase in the allocation of corporate expenses. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In millions) | ||||||||||||||||
Fee income | $ | 64 | $ | 77 | $ | 125 | $ | 180 | ||||||||
Net investment spread | 61 | 52 | 103 | 98 | ||||||||||||
Insurance-related activities | 12 | 14 | 6 | 38 | ||||||||||||
Amortization of DAC and VOBA | (21 | ) | (23 | ) | (32 | ) | (52 | ) | ||||||||
Other expenses, net of DAC capitalization | (44 | ) | (74 | ) | (99 | ) | (137 | ) | ||||||||
Pre-tax adjusted earnings | 72 | 46 | 103 | 127 | ||||||||||||
Provision for income tax expense (benefit) | 14 | 9 | 20 | 24 | ||||||||||||
Adjusted earnings | $ | 58 | $ | 37 | $ | 83 | $ | 103 |
• | lower other expenses due to a decrease in the allocation of corporate expenses in the current period; and |
• | higher net investment spread reflecting repositioning of the investment portfolio into higher yielding assets. |
• | lower fee income due to: |
◦ | the reimbursement of fees for recaptured universal life business in the prior period; |
◦ | lower amortization of unearned revenue in the current period from positive separate account fund performance; |
◦ | lower net cost of insurance fees driven by the decline in our aging in-force business; and |
• | higher costs associated with insurance-related activities due to higher paid claims, net of reinsurance. |
• | lower other expenses due to a decrease in the allocation of corporate expenses in the current period; and |
• | lower amortization of DAC and VOBA primarily due to positive equity market performance in the current period. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In millions) | ||||||||||||||||
Fee income | $ | 188 | $ | 197 | $ | 387 | $ | 402 | ||||||||
Net investment spread | 101 | 81 | 136 | 193 | ||||||||||||
Insurance-related activities | (236 | ) | (225 | ) | (470 | ) | (431 | ) | ||||||||
Amortization of DAC and VOBA | — | — | — | — | ||||||||||||
Other expenses, net of DAC capitalization | (51 | ) | (61 | ) | (97 | ) | (109 | ) | ||||||||
Pre-tax adjusted earnings | 2 | (8 | ) | (44 | ) | 55 | ||||||||||
Provision for income tax expense (benefit) | — | (2 | ) | (10 | ) | 11 | ||||||||||
Adjusted earnings | $ | 2 | $ | (6 | ) | $ | (34 | ) | $ | 44 |
• | higher net investment spread reflecting higher alternative investment income in the current period; and |
• | lower other expenses due to a decrease in allocated expenses resulting from business run-off. |
• | unfavorable underwriting in our ULSG business resulting from higher claim severity and |
• | an increase in reserves in the current period from higher reinsurance rates on certain assumed ULSG business; |
• | lower benefit costs driven by the aging of our structured settlement business. |
• | lower net investment spread reflecting lower alternative investment income in the current period; |
• | higher costs associated with insurance-related activities due to: |
◦ | unfavorable mortality in our ULSG business resulting from higher claim severity and lower reinsurance recoveries in the current period and |
◦ | an increase in reserves in the current period from higher reinsurance rates on certain assumed ULSG business; |
• | lower fee income due to: |
◦ | the reimbursement of fees for recaptured ULSG business in the prior period; |
◦ | the ongoing impacts of various reinsurance recaptures, which occurred in the prior period. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In millions) | ||||||||||||||||
Fee income | $ | 3 | $ | (4 | ) | $ | 6 | $ | (7 | ) | ||||||
Net investment spread | 17 | 11 | 34 | 22 | ||||||||||||
Insurance-related activities | 9 | 5 | 18 | 17 | ||||||||||||
Amortization of DAC and VOBA | (4 | ) | (3 | ) | (8 | ) | (8 | ) | ||||||||
Other expenses, net of DAC capitalization | (110 | ) | (133 | ) | (207 | ) | (234 | ) | ||||||||
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends | 7 | 1 | 9 | 3 | ||||||||||||
Pre-tax adjusted earnings, less net income attributable to noncontrolling interests and preferred stock dividends | (92 | ) | (125 | ) | (166 | ) | (213 | ) | ||||||||
Provision for income tax expense (benefit) | (21 | ) | (26 | ) | (43 | ) | (55 | ) | ||||||||
Adjusted earnings | $ | (71 | ) | $ | (99 | ) | $ | (123 | ) | $ | (158 | ) |
• | lower other expenses due to |
◦ | lower establishment costs in the current period related to planned technology expenses; and |
◦ | lower branding expenses associated with the Separation; |
• | higher fee income due to reimbursement of pension liabilities from MetLife, which was reported in other expenses in the prior period; and |
• | higher net investment spread reflecting positive returns on short-term investments. |
• | lower other expenses due to: |
◦ | lower establishment costs in the current period related to planned technology expenses; and |
◦ | lower branding expenses associated with the Separation; |
◦ | higher interest on debt which was issued in the first quarter of 2019 and the third quarter of 2018; |
• | higher fee income due to reimbursement of pension liabilities from MetLife, which was reported in other expenses in the prior period; and |
• | higher net investment spread reflecting positive returns on short-term investments. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In millions) | ||||||||||||||||
Liabilities (1) | $ | (702 | ) | $ | (21 | ) | $ | (1,051 | ) | $ | 312 | |||||
Hedging program | 245 | (510 | ) | (999 | ) | (881 | ) | |||||||||
Ceded reinsurance | 34 | (16 | ) | 24 | (44 | ) | ||||||||||
Fees (2) | 207 | 214 | 406 | 419 | ||||||||||||
GMLB DAC | (17 | ) | (96 | ) | 57 | (229 | ) | |||||||||
Total GMLB Riders | $ | (233 | ) | $ | (429 | ) | $ | (1,563 | ) | $ | (423 | ) |
(1) | Includes changes in fair value of the Shield Annuities embedded derivatives of ($204) million and ($903) million for the three months and six months ended June 30, 2019, respectively, and ($127) million and ($69) million for the three months and six months ended June 30, 2018, respectively. |
(2) | Excludes living benefit fees, included as a component of adjusted earnings of $16 million and $32 million for the three months and six months ended June 30, 2019, respectively, and $18 million and $36 million for the three months and six months ended June 30, 2018, respectively. |
• | a net favorable change in GMLB DAC related to capital market factors; |
• | net favorable changes in the GMLB Hedging Program in excess of increases to the liability reserves; and |
• | favorable changes in ceded reinsurance. |
• | favorable change to the fair value of the freestanding derivatives in our GMLB Hedging Program and |
• | favorable changes in reinsurance |
• | unfavorable changes to the fair value of the variable annuity liability reserves. |
• | unfavorable changes to the fair value of the freestanding derivatives in our GMLB Hedging Program and |
• | unfavorable changes to the fair value of the Shield liability reserves; |
• | favorable changes to the fair value of the variable annuity liability reserves. |
• | the unfavorable change in the fair value of the embedded derivative liability reserves and |
• | higher losses in the GMLB Hedging Program |
• | a net favorable change in GMLB DAC related to capital market factors and |
• | favorable changes in the ceded reinsurance. |
• | credit risk, relating to the uncertainty associated with the continued ability of a given obligor to make timely payments of principal and interest; |
• | interest rate risk, relating to the market price and cash flow variability associated with changes in market interest rates. Changes in market interest rates will impact the net unrealized gain or loss position of our fixed income investment portfolio and the rates of return we receive on both new funds invested and reinvestment of existing funds; |
• | market valuation risk, relating to the variability in the estimated fair value of investments associated with changes in market factors such as credit spreads and equity market levels. A widening of credit spreads will adversely impact the net unrealized gain (loss) position of the fixed income investment portfolio, will increase losses associated with credit-based non-qualifying derivatives where we assume credit exposure, and, if credit spreads widen significantly or for an extended period of time, will likely result in higher other-than-temporary impairment (“OTTI”). Credit spread tightening will reduce net investment income associated with new purchases of fixed maturity securities and will favorably impact the net unrealized gain (loss) position of the fixed income investment portfolio; |
• | liquidity risk, relating to the diminished ability to sell certain investments, in times of strained market conditions; |
• | real estate risk, relating to commercial, agricultural and residential real estate, and stemming from factors, which include, but are not limited to, market conditions, including the demand and supply of leasable commercial space, creditworthiness of borrowers and their tenants and joint venture partners, capital markets volatility and inherent interest rate movements; |
• | currency risk, relating to the variability in currency exchange rates for foreign denominated investments; and |
• | financial and operational integration risks while we transition to a multiple manager investment platform, and following such transition, we will continue to be subject to the risks related to using external investment managers. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||
Yield% (1) | Amount | Yield% (1) | Amount | Yield% (1) | Amount | Yield% (1) | Amount | |||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||
Investment income | 4.79 | % | $ | 967 | 4.53 | % | $ | 841 | 4.52 | % | $ | 1,806 | 4.59 | % | $ | 1,693 | ||||||||||||
Investment fees and expenses | (0.12 | ) | (25 | ) | (0.16 | ) | (29 | ) | (0.13 | ) | (53 | ) | (0.15 | ) | (56 | ) | ||||||||||||
Adjusted net investment income (2), (3) | 4.67 | % | $ | 942 | 4.37 | % | $ | 812 | 4.39 | % | $ | 1,753 | 4.44 | % | $ | 1,637 |
(1) | Yields are calculated as investment income as a percent of average quarterly asset carrying values. Investment income excludes recognized gains and losses and reflects the adjustments presented in footnote 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) | Adjusted net investment income included in yield calculations includes Investment Hedge Adjustments. |
(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 June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In millions) | ||||||||||||||||
Net investment income | $ | 942 | $ | 806 | $ | 1,753 | $ | 1,623 | ||||||||
Less: Investment hedge adjustments | — | (3 | ) | — | (11 | ) | ||||||||||
Less: Other incremental net investment income | — | (3 | ) | — | (3 | ) | ||||||||||
Adjusted net investment income — in the above yield table | $ | 942 | $ | 812 | $ | 1,753 | $ | 1,637 |
June 30, 2019 | December 31, 2018 | |||||||||||||
Estimated Fair Value | % of Total | Estimated Fair Value | % of Total | |||||||||||
(Dollars in millions) | ||||||||||||||
Fixed maturity securities | ||||||||||||||
Publicly-traded | $ | 55,132 | 82.0 | % | $ | 51,939 | 83.0 | % | ||||||
Privately-placed | 12,079 | 18.0 | 10,669 | 17.0 | ||||||||||
Total fixed maturity securities | $ | 67,211 | 100.0 | % | $ | 62,608 | 100.0 | % | ||||||
Percentage of cash and invested assets | 71.6 | % | 71.7 | % |
June 30, 2019 | December 31, 2018 | |||||||||||||||||||||||||||||||
NAIC Designation | NRSRO Rating | Amortized Cost | Unrealized Gain (Loss) | Estimated Fair Value | % of Total | Amortized Cost | Unrealized Gain (Loss) | Estimated Fair Value | % of Total | |||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||
1 | Aaa/Aa/A | $ | 39,729 | $ | 4,648 | $ | 44,377 | 66.0 | % | $ | 40,218 | $ | 1,954 | $ | 42,172 | 67.4 | % | |||||||||||||||
2 | Baa | 18,625 | 1,164 | 19,789 | 29.5 | 17,656 | (122 | ) | 17,534 | 28.0 | ||||||||||||||||||||||
Subtotal investment grade | 58,354 | 5,812 | 64,166 | 95.5 | 57,874 | 1,832 | 59,706 | 95.4 | ||||||||||||||||||||||||
3 | Ba | 2,044 | 36 | 2,080 | 3.1 | 2,160 | (87 | ) | 2,073 | 3.3 | ||||||||||||||||||||||
4 | B | 855 | 4 | 859 | 1.3 | 787 | (48 | ) | 739 | 1.2 | ||||||||||||||||||||||
5 | Caa and lower | 75 | (1 | ) | 74 | 0.1 | 99 | (9 | ) | 90 | 0.1 | |||||||||||||||||||||
6 | In or near default | 34 | (2 | ) | 32 | — | — | — | — | — | ||||||||||||||||||||||
Subtotal below investment grade | 3,008 | 37 | 3,045 | 4.5 | 3,046 | (144 | ) | 2,902 | 4.6 | |||||||||||||||||||||||
Total fixed maturity securities | $ | 61,362 | $ | 5,849 | $ | 67,211 | 100.0 | % | $ | 60,920 | $ | 1,688 | $ | 62,608 | 100.0 | % |
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 | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||
June 30, 2019 | ||||||||||||||||||||||||||||
U.S. corporate | $ | 13,788 | $ | 12,297 | $ | 1,437 | $ | 695 | $ | 33 | $ | 32 | $ | 28,282 | ||||||||||||||
U.S. government and agency | 7,198 | 71 | — | — | — | — | 7,269 | |||||||||||||||||||||
RMBS | 9,323 | 29 | 35 | 3 | 21 | — | 9,411 | |||||||||||||||||||||
Foreign corporate | 2,912 | 6,081 | 479 | 102 | 11 | — | 9,585 | |||||||||||||||||||||
CMBS | 5,203 | 109 | — | — | — | — | 5,312 | |||||||||||||||||||||
State and political subdivision | 3,672 | 161 | — | 4 | 9 | — | 3,846 | |||||||||||||||||||||
ABS | 1,570 | 253 | 24 | — | — | — | 1,847 | |||||||||||||||||||||
Foreign government | 711 | 788 | 105 | 55 | — | — | 1,659 | |||||||||||||||||||||
Total fixed maturity securities | $ | 44,377 | $ | 19,789 | $ | 2,080 | $ | 859 | $ | 74 | $ | 32 | $ | 67,211 | ||||||||||||||
Percentage of total | 66.0 | % | 29.5 | % | 3.1 | % | 1.3 | % | 0.1 | % | — | % | 100.0 | % | ||||||||||||||
December 31, 2018 | ||||||||||||||||||||||||||||
U.S. corporate | $ | 11,277 | $ | 11,118 | $ | 1,417 | $ | 635 | $ | 26 | $ | — | $ | 24,473 | ||||||||||||||
U.S. government and agency | 8,921 | 174 | — | — | — | — | 9,095 | |||||||||||||||||||||
RMBS | 8,395 | 40 | 58 | 6 | 48 | — | 8,547 | |||||||||||||||||||||
Foreign corporate | 2,427 | 5,089 | 427 | 70 | 13 | — | 8,026 | |||||||||||||||||||||
CMBS | 5,183 | 57 | 6 | 2 | — | — | 5,248 | |||||||||||||||||||||
State and political subdivision | 3,437 | 156 | 1 | — | 3 | — | 3,597 | |||||||||||||||||||||
ABS | 1,851 | 244 | 30 | 1 | — | — | 2,126 | |||||||||||||||||||||
Foreign government | 681 | 656 | 134 | 25 | — | — | 1,496 | |||||||||||||||||||||
Total fixed maturity securities | $ | 42,172 | $ | 17,534 | $ | 2,073 | $ | 739 | $ | 90 | $ | — | $ | 62,608 | ||||||||||||||
Percentage of total | 67.4 | % | 28.0 | % | 3.3 | % | 1.2 | % | 0.1 | % | — | % | 100.0 | % |
June 30, 2019 | December 31, 2018 | |||||||||||||
Estimated Fair Value | % of Total | Estimated Fair Value | % of Total | |||||||||||
(Dollars in millions) | ||||||||||||||
Industrial | $ | 11,603 | 30.6 | % | $ | 9,896 | 30.4 | % | ||||||
Consumer | 9,450 | 25.0 | 8,290 | 25.5 | ||||||||||
Finance | 8,499 | 22.5 | 7,209 | 22.2 | ||||||||||
Utility | 5,580 | 14.7 | 4,770 | 14.7 | ||||||||||
Communications | 2,735 | 7.2 | 2,334 | 7.2 | ||||||||||
Total | $ | 37,867 | 100.0 | % | $ | 32,499 | 100.0 | % |
June 30, 2019 | December 31, 2018 | |||||||||||||||||||||
Estimated Fair Value | % of Total | Net Unrealized Gains (Losses) | Estimated Fair Value | % of Total | Net Unrealized Gains (Losses) | |||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||
By security type: | ||||||||||||||||||||||
Collateralized mortgage obligations | $ | 4,951 | 52.6 | % | $ | 365 | $ | 4,885 | 57.2 | % | $ | 174 | ||||||||||
Pass-through securities | 4,460 | 47.4 | 43 | 3,662 | 42.8 | (55 | ) | |||||||||||||||
Total RMBS | $ | 9,411 | 100.0 | % | $ | 408 | $ | 8,547 | 100.0 | % | $ | 119 | ||||||||||
By risk profile: | ||||||||||||||||||||||
Agency | $ | 7,398 | 78.6 | % | $ | 228 | $ | 6,396 | 74.8 | % | $ | (23 | ) | |||||||||
Prime | 213 | 2.3 | 12 | 296 | 3.5 | 10 | ||||||||||||||||
Alt-A | 884 | 9.4 | 101 | 938 | 11.0 | 79 | ||||||||||||||||
Sub-prime | 916 | 9.7 | 67 | 917 | 10.7 | 53 | ||||||||||||||||
Total RMBS | $ | 9,411 | 100.0 | % | $ | 408 | $ | 8,547 | 100.0 | % | $ | 119 | ||||||||||
Ratings profile: | ||||||||||||||||||||||
Rated Aaa | $ | 7,468 | 79.4 | % | $ | 6,529 | 76.4 | % | ||||||||||||||
Designated NAIC 1 | $ | 9,323 | 99.1 | % | $ | 8,395 | 98.2 | % |
June 30, 2019 | December 31, 2018 | |||||||||||||||
Amortized Cost | Estimated Fair Value | Amortized Cost | Estimated Fair Value | |||||||||||||
(Dollars in millions) | ||||||||||||||||
2003 - 2010 | $ | 131 | $ | 145 | $ | 177 | $ | 177 | ||||||||
2011 | 237 | 236 | 297 | 293 | ||||||||||||
2012 | 150 | 154 | 263 | 262 | ||||||||||||
2013 | 255 | 264 | 290 | 290 | ||||||||||||
2014 | 348 | 360 | 526 | 519 | ||||||||||||
2015 | 953 | 990 | 1,076 | 1,059 | ||||||||||||
2016 | 495 | 511 | 582 | 568 | ||||||||||||
2017 | 639 | 673 | 696 | 686 | ||||||||||||
2018 | 1,570 | 1,685 | 1,385 | 1,394 | ||||||||||||
2019 | 284 | 294 | — | — | ||||||||||||
Total | $ | 5,062 | $ | 5,312 | $ | 5,292 | $ | 5,248 |
June 30, 2019 | December 31, 2018 | ||||||||||||||||||||
Estimated Fair Value | % of Total | Net Unrealized Gains (Losses) | Estimated Fair Value | % of Total | Net Unrealized Gains (Losses) | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||
By collateral type: | |||||||||||||||||||||
Collateralized obligations | $ | 1,018 | 55.1 | % | $ | (7 | ) | $ | 1,010 | 47.5 | % | $ | (18 | ) | |||||||
Automobile loans | 145 | 7.9 | 3 | 199 | 9.4 | — | |||||||||||||||
Consumer loans | 161 | 8.7 | 3 | 193 | 9.1 | 1 | |||||||||||||||
Student loans | 197 | 10.7 | 5 | 186 | 8.7 | 3 | |||||||||||||||
Credit card loans | 36 | 1.9 | 3 | 136 | 6.4 | 2 | |||||||||||||||
Other loans | 290 | 15.7 | 8 | 402 | 18.9 | 3 | |||||||||||||||
Total | $ | 1,847 | 100.0 | % | $ | 15 | $ | 2,126 | 100.0 | % | $ | (9 | ) | ||||||||
Ratings profile: | |||||||||||||||||||||
Rated Aaa | $ | 729 | 39.5 | % | $ | 956 | 45.0 | % | |||||||||||||
Designated NAIC 1 | $ | 1,570 | 85.0 | % | $ | 1,851 | 87.1 | % |
June 30, 2019 | December 31, 2018 | ||||||||||||||||||||||||||
Recorded Investment | % of Total | Valuation Allowance | % of Recorded Investment | Recorded Investment | % of Total | Valuation Allowance | % of Recorded Investment | ||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||
Commercial | $ | 9,267 | 61.2 | % | $ | 46 | 0.5 | % | $ | 8,529 | 62.0 | % | $ | 42 | 0.5 | % | |||||||||||
Agricultural | 3,248 | 21.5 | % | 10 | 0.3 | % | 2,946 | 21.4 | % | 9 | 0.3 | % | |||||||||||||||
Residential | 2,627 | 17.3 | % | 8 | 0.3 | % | 2,276 | 16.6 | % | 6 | 0.3 | % | |||||||||||||||
Total | $ | 15,142 | 100.0 | % | $ | 64 | 0.4 | % | $ | 13,751 | 100.0 | % | $ | 57 | 0.4 | % |
June 30, 2019 | December 31, 2018 | |||||
State | ||||||
California | 24 | % | 26 | % | ||
New York | 13 | % | 14 | % | ||
Texas | 7 | % | 8 | % |
June 30, 2019 | December 31, 2018 | |||||
State | ||||||
California | 37 | % | 36 | % | ||
Florida | 10 | % | 9 | % | ||
New York | 7 | % | 6 | % |
June 30, 2019 | December 31, 2018 | |||||||||||||
Amount | % of Total | Amount | % of Total | |||||||||||
(Dollars in millions) | ||||||||||||||
Region | ||||||||||||||
Pacific | $ | 2,613 | 28.2 | % | $ | 2,550 | 29.9 | % | ||||||
Middle Atlantic | 1,860 | 20.1 | 1,867 | 21.9 | ||||||||||
South Atlantic | 1,545 | 16.7 | 1,316 | 15.5 | ||||||||||
West South Central | 783 | 8.5 | 801 | 9.4 | ||||||||||
Mountain | 696 | 7.5 | 404 | 4.7 | ||||||||||
East North Central | 521 | 5.6 | 473 | 5.5 | ||||||||||
International | 463 | 5.0 | 389 | 4.5 | ||||||||||
New England | 455 | 4.9 | 397 | 4.7 | ||||||||||
West North Central | 126 | 1.3 | 127 | 1.5 | ||||||||||
East South Central | 59 | 0.6 | 59 | 0.7 | ||||||||||
Multi-Region and Other | 146 | 1.6 | 146 | 1.7 | ||||||||||
Total recorded investment | 9,267 | 100.0 | % | 8,529 | 100.0 | % | ||||||||
Less: valuation allowances | 46 | 42 | ||||||||||||
Carrying value, net of valuation allowances | $ | 9,221 | $ | 8,487 | ||||||||||
Property Type | ||||||||||||||
Office | $ | 3,911 | 42.2 | % | $ | 3,810 | 44.6 | % | ||||||
Retail | 2,173 | 23.4 | 2,064 | 24.2 | ||||||||||
Apartment | 1,904 | 20.5 | 1,480 | 17.4 | ||||||||||
Hotel | 825 | 9.0 | 744 | 8.7 | ||||||||||
Industrial | 423 | 4.6 | 400 | 4.7 | ||||||||||
Other | 31 | 0.3 | 31 | 0.4 | ||||||||||
Total recorded investment | 9,267 | 100.0 | % | 8,529 | 100.0 | % | ||||||||
Less: valuation allowances | 46 | 42 | ||||||||||||
Carrying value, net of valuation allowances | $ | 9,221 | $ | 8,487 |
June 30, 2019 | December 31, 2018 | ||||||||||||||
Carrying Value | % of Total | Carrying Value | % of Total | ||||||||||||
(Dollars in millions) | |||||||||||||||
Freestanding derivatives with positive estimated fair values | $ | 2,856 | 93.3 | % | $ | 2,778 | 91.8 | % | |||||||
Tax credit and renewable energy partnerships | 93 | 3.0 | 95 | 3.1 | |||||||||||
Leveraged leases, net of non-recourse debt | 64 | 2.1 | 65 | 2.1 | |||||||||||
FHLB Stock | 50 | 1.6 | 64 | 2.1 | |||||||||||
Other | 1 | — | 25 | 0.9 | |||||||||||
Total | $ | 3,064 | 100.0 | % | $ | 3,027 | 100.0 | % |
• | Types of derivatives, including the strategies for which derivatives are used in managing various risks. |
• | Information about the gross notional amount, estimated fair value, and primary underlying risk exposure of our derivatives by type of hedge designation held at June 30, 2019 and December 31, 2018. |
• | The statement of operations effects of derivatives in cash flow or nonqualifying hedge relationships for the three months and six months ended June 30, 2019 and 2018. |
June 30, 2019 | December 31, 2018 | |||||||||||||||
Credit Default Swaps | Gross Notional Amount | Estimated Fair Value | Gross Notional Amount | Estimated Fair Value | ||||||||||||
(In millions) | ||||||||||||||||
Written | $ | 1,905 | $ | 33 | $ | 1,820 | $ | 11 | ||||||||
Purchased | 12 | — | 98 | 3 | ||||||||||||
Total | $ | 1,917 | $ | 33 | $ | 1,918 | $ | 14 |
June 30, 2019 (1) | December 31, 2018 (1) | ||||||||||||||||||||||||||||
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 | $ | 41,258 | $ | 2,475 | $ | 3,575 | 33.5 | % | $ | 38,682 | $ | 4,064 | $ | 4,115 | 42.6 | % | |||||||||||||
GMIB Max w/ Enhanced DB | 11,861 | 2,779 | 8 | 0.8 | % | 10,961 | 3,775 | 11 | 1.3 | % | |||||||||||||||||||
GMIB Max w/o Enhanced DB | 6,805 | 3 | 1 | 0.3 | % | 6,324 | 87 | 2 | 0.42 | % | |||||||||||||||||||
GMWB4L (FlexChoiceSM) | 3,520 | 5 | 3 | 3.1 | % | 2,819 | 100 | 15 | 12.5 | % | |||||||||||||||||||
GMAB | 652 | 2 | 2 | 2.8 | % | 600 | 17 | 16 | 27.3 | % | |||||||||||||||||||
GMWB | 2,819 | 45 | 13 | 6 | % | 2,672 | 143 | 85 | 31.3 | % | |||||||||||||||||||
GMWB4L | 15,249 | 79 | 308 | 15.7 | % | 14,596 | 558 | 505 | 27.8 | % | |||||||||||||||||||
EDB Only | 3,697 | 665 | — | N/A | 3,434 | 955 | — | N/A | |||||||||||||||||||||
GMDB Only (Other than EDB) | 18,005 | 991 | — | N/A | 16,777 | 1,374 | — | N/A | |||||||||||||||||||||
Total | $ | 103,866 | $ | 7,044 | $ | 3,910 | $ | 96,865 | $ | 11,073 | $ | 4,749 |
(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. |
Reserves | |||||||||||||||||||||||
June 30, 2019 | December 31, 2018 | ||||||||||||||||||||||
Future Policy Benefits | Policyholder Account Balances | Total Reserves | Future Policy Benefits | Policyholder Account Balances | Total Reserves | ||||||||||||||||||
(In millions) | |||||||||||||||||||||||
GMDB | $ | 1,324 | $ | — | $ | 1,324 | $ | 1,305 | $ | — | $ | 1,305 | |||||||||||
GMIB | 2,631 | 1,793 | 4,424 | 2,565 | 1,603 | 4,168 | |||||||||||||||||
GMIB Max | 531 | (88 | ) | 443 | 507 | 14 | 521 | ||||||||||||||||
GMAB | — | (15 | ) | (15 | ) | — | (8 | ) | (8 | ) | |||||||||||||
GMWB | — | 11 | 11 | — | 16 | 16 | |||||||||||||||||
GMWB4L | 272 | (32 | ) | 240 | 261 | 17 | 278 | ||||||||||||||||
GMWB4L (FlexChoiceSM) | — | — | — | — | — | — | |||||||||||||||||
Total | $ | 4,758 | $ | 1,669 | $ | 6,427 | $ | 4,638 | $ | 1,642 | $ | 6,280 |
June 30, 2019 | December 31, 2018 | |||||||||||||||||||||||||
Primary Underlying Risk Exposure | Instrument Type | Gross Notional Amount | Estimated Fair Value | Gross Notional Amount | Estimated Fair Value | |||||||||||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
Interest Rate | Interest rate swaps | $ | 7,741 | $ | 805 | $ | 30 | $ | 7,928 | $ | 470 | $ | 29 | |||||||||||||
Interest rate futures | — | — | — | 54 | — | — | ||||||||||||||||||||
Interest rate options | 21,000 | 551 | 81 | 10,500 | 94 | — | ||||||||||||||||||||
Equity Market | Equity futures | — | — | — | 170 | — | — | |||||||||||||||||||
Equity index options | 41,550 | 700 | 1,623 | 43,985 | 1,365 | 1,202 | ||||||||||||||||||||
Equity variance swaps | 5,574 | 95 | 247 | 5,574 | 80 | 232 | ||||||||||||||||||||
Equity total return swaps | 5,061 | 4 | 92 | 3,920 | 280 | 3 | ||||||||||||||||||||
Total | $ | 80,926 | $ | 2,155 | $ | 2,073 | $ | 72,131 | $ | 2,289 | $ | 1,466 |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
(In millions) | |||||||
Sources: | |||||||
Operating activities, net | $ | 809 | $ | 1,017 | |||
Changes in policyholder account balances, net | 2,290 | 1,451 | |||||
Changes in payables for collateral under securities loaned and other transactions, net | — | 96 | |||||
Long-term debt issued | 1,000 | — | |||||
Preferred stock issued, net of issuance costs | 412 | — | |||||
Financing element on certain derivative instruments and other derivative related transactions, net | 44 | — | |||||
Total sources | 4,555 | 2,564 | |||||
Uses: | |||||||
Investing activities, net | 2,932 | 2,023 | |||||
Changes in payables for collateral under securities loaned and other transactions, net | 963 | — | |||||
Long-term debt repaid | 601 | 6 | |||||
Dividends on preferred stock | 7 | — | |||||
Treasury stock acquired in connection with share repurchases | 188 | — | |||||
Financing element on certain derivative instruments and other derivative related transactions, net | — | 226 | |||||
Other, net | 28 | 31 | |||||
Total uses | 4,719 | 2,286 | |||||
Net increase (decrease) in cash and cash equivalents | $ | (164 | ) | $ | 278 |
June 30, 2019 | December 31, 2018 | |||||||
(In millions) | ||||||||
Senior notes (1) | $ | 2,969 | $ | 2,968 | ||||
Term loan | 1,000 | 600 | ||||||
Junior subordinated debentures (1) | 362 | 361 | ||||||
Other long-term debt (2) | 34 | 34 | ||||||
Total long-term debt | $ | 4,365 | $ | 3,963 |
(1) | Includes unamortized debt issuance costs and debt discount totaling $44 million and $46 million at June 30, 2019 and December 31, 2018, respectively, for senior notes and junior subordinated debentures on a combined basis. |
(2) | Represents non-recourse debt for which creditors have no access, subject to customary exceptions, to the general assets of the Company other than recourse to certain investment companies. |
Paid | Permitted without Approval (1) | |||||||
(In millions) | ||||||||
Brighthouse Life Insurance Company | $ | — | $ | 798 | ||||
New England Life Insurance Company | $ | — | $ | 131 | ||||
Brighthouse Life Insurance Company of NY (2) | $ | — | $ | 27 |
(1) | Reflects dividend amounts that may be paid during 2019 without prior regulatory approval. However, because dividend tests may be based on dividends previously paid over rolling 12-month periods, if paid before a specified date during 2019, some or all of such dividends may require regulatory approval. |
(2) | Dividends are not anticipated to be paid by BHNY in 2019. |
• | higher risk management costs and exposure to increased market and counterparty risk due to guarantees within certain of our products; |
• | the effectiveness of our variable annuity exposure management strategy and the impact of such strategy on net income volatility and negative effects on our statutory capital; |
• | the reserves we are required to hold against our variable annuities as a result of actuarial guidelines; |
• | a sustained period of low equity market prices and interest rates that are lower than those we assumed when we issued our variable annuity products; |
• | the potential material adverse effect of changes in accounting standards, practices and/or policies applicable to us, including changes in the accounting for long duration contracts; |
• | our degree of leverage due to indebtedness; |
• | the effect adverse capital and credit market conditions may have on our ability to meet liquidity needs and our access to capital; |
• | the impact of changes in regulation and in supervisory and enforcement policies on our insurance business or other operations; |
• | the effectiveness of our risk management policies and procedures; |
• | the availability of reinsurance and the ability of our counterparties to our reinsurance or indemnification arrangements to perform their obligations thereunder; |
• | heightened competition, including with respect to service, product features, scale, price, actual or perceived financial strength, claims-paying ratings, credit ratings, e-business capabilities and name recognition; |
• | the ability of our insurance subsidiaries to pay dividends to us, and our ability to pay dividends to our shareholders; |
• | our ability to market and distribute our products through distribution channels; |
• | any failure of third parties to provide services we need, any failure of the practices and procedures of these third parties and any inability to obtain information or assistance we need from third parties, including MetLife; |
• | whether all or any portion of the tax consequences of the Separation are not as expected, leading to material additional taxes or material adverse consequences to tax attributes that impact us; |
• | the uncertainty of the outcome of any disputes with MetLife over tax-related or other matters and agreements, including the potential of outcomes adverse to us that could cause us to owe MetLife material tax reimbursements or payments, or disagreements regarding MetLife’s or our obligations under our other agreements; |
• | the impact on our business structure, profitability, cost of capital and flexibility due to restrictions we have agreed to that preserve the tax-free treatment of certain parts of the Separation; |
• | the potential material negative tax impact of potential future tax legislation that could decrease the value of our tax attributes and cause other cash expenses, such as reserves, to increase materially and make some of our products less attractive to consumers; |
• | whether the Separation will qualify for non-recognition treatment for federal income tax purposes and potential indemnification to MetLife if the Separation does not so qualify; |
• | the impact of the Separation on our business and profitability due to MetLife’s strong brand and reputation, the increased costs related to replacing arrangements with MetLife with those of third parties and incremental costs as a public company; |
• | whether the operational, strategic and other benefits of the Separation can be achieved, and our ability to implement our business strategy; |
• | our ability to attract and retain key personnel; and |
• | other factors described in our 2018 Annual Report, our subsequent Quarterly Reports on Form 10-Q, and from time to time in documents that we file with the SEC. |
Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||
(In millions) | ||||||||||||||
April 1 — April 30, 2019 | 354,806 | $ | 38.88 | 352,259 | $ | 29 | ||||||||
May 1 — May 31, 2019 | 1,435,198 | $ | 38.26 | 1,435,198 | $ | 374 | ||||||||
June 1 — June 30, 2019 | 1,788,630 | $ | 37.50 | 1,788,385 | $ | 307 | ||||||||
Total | 3,578,634 | 3,575,842 |
(1) | Where applicable, total number of shares purchased includes shares of common stock withheld with respect to option exercise costs and tax withholding obligations associated with the exercise or vesting of share-based compensation awards under our publicly announced benefit plans or programs. |
(2) | In August 2018, we authorized the repurchase of up to $200 million of our common stock and, on May 3, 2019, we authorized the repurchase of up to an additional $400 million of our common stock. For more information on common stock repurchases, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Primary Uses of Liquidity and Capital — Common Stock Repurchases” and Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements. |
Exhibit No. | Description | |
10.1 | ||
10.2* | ||
10.3*# | ||
10.4* | ||
10.5# | ||
31.1* | ||
31.2* | ||
32.1** | ||
32.2** | ||
101.INS* | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
104* | The cover page of Brighthouse Financial, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in Inline XBRL (included within the Exhibit 101 attachments). |
BRIGHTHOUSE FINANCIAL, INC. | |||
By: | /s/ Conor E. Murphy | ||
Name: | Conor E. Murphy | ||
Title: | Executive Vice President, Chief Operating Officer and Interim Chief Financial Officer | ||
(Authorized Signatory and Principal Financial Officer) |
◦ | You are a full-time, salaried Brighthouse Services, LLC employee or a new hire scheduled to be a full-time, salaried Brighthouse Services, LLC employee, at Grade 14 or above. |
◦ | You have received a letter from Brighthouse Services, LLC requesting that you relocate and stating that you are entitled to the benefits provided under this Policy. Employee-initiated relocations are NOT eligible for relocation benefits. |
◦ | The distance between your former residence and your new job site must be at least 50 miles greater than the distance between your former residence and your former job site. |
a. | Benefits Must be Used Within 1 Year of Relocation |
b. | Repayment Agreement |
0 – 180 days | 100% |
181 – 365 days | 75% |
366 – 545 days | 50% |
546 – 730 days | 25% |
c. | Cooperation with SIRVA |
◦ | Refrain from contacting a real estate broker or listing your home with an agent. SIRVA will recommend pre-qualified brokers who are trained and experienced in corporate relocation transactions. They will recommend brokers for both selling your current home and purchasing a home in the destination location. |
◦ | Accurately complete all required disclosure materials. Real estate transactions are governed by laws and regulations designed to protect the interests of both sellers and buyers. Every home seller has certain duties and obligations to a buyer, including full disclosure of all pertinent information about the condition of the home and its surroundings. |
◦ | DO NOT sign anything or accept any monies as this may affect the taxability of Home Sale Assistance described in the Home Sale Assistance section, should you receive an offer on the sale of your home. Simply contact your SIRVA Relocation Consultant and he or she will instruct you on how to proceed. SIRVA ensures that you will have after-hours access to your SIRVA Relocation Consultant or a designated representative at all times. |
◦ | Retain receipts and other documentation to verify relocation expenses and to support payments made to you by Brighthouse Services, LLC. You must submit expense reports and required receipts (scanned receipts are acceptable) within 60 days of the incurred expense. |
a. | Home Marketing Assistance |
◦ | Brokerage must have a relocation department or proven relocation-related experience. |
◦ | Real estate firm must have no interest (actual or contemplated) in Brighthouse Services, LLC, departure property, or home to be purchased, including any business or family relationship with the owners of the properties. |
◦ | Broker must have a proven track record in the selling community. SIRVA tracks list price to sales price ratio, number of current listings, and number of recent sales. |
i. | Broker Market Analysis |
◦ | Use an agent or broker who has been qualified by SIRVA. If you have a preferred agent, please submit the name of that agent for qualification and consideration, realizing that you cannot list the house with a relative or friend as this may cause a conflict of interest. |
◦ | Agree to list the home for sale at a price that does not exceed 105% of the average of the two most likely sales prices from the Broker Market Analyses (BMAs) requested by SIRVA. |
◦ | Allow reasonable showings and open houses as suggested and maintain the home in marketing condition. |
◦ | Present all offers to your SIRVA Relocation Consultant for review. |
◦ | Continuously market the home until it is sold. |
b. | Home Sale Assistance |
◦ | Enter into an Option to Purchase with SIRVA instead of listing your home under your name. This agreement enables SIRVA to list the property in SIRVA’s name, facilitate the move and defray many relocation costs. The option will last for six months and is renewable at the end of that period of time with your consent. During this option period SIRVA will expose the home to the marketplace. Most typically, the home will be listed with a real estate agent by SIRVA who will, through exposure to the public, determine what a buyer will pay at arm’s length for the home. The Option to Purchase must be executed and returned to SIRVA prior to proceeding with the program. |
◦ | Comply with all federal, state and local disclosure requirements associated with the sale of your home. This includes the completion of all real estate disclosure forms that may be required, as well as a SIRVA Seller’s Disclosure Statement for execution. This document must be executed prior to proceeding with the program. |
◦ | Properly clearing title before selling the home to SIRVA, in the event the title report ordered by SIRVA indicates a cloud on title. SIRVA may be able to assist you in clearing clouds on title. A cloud on title is defined as any outstanding claim, lien, encumbrance, document or condition usually revealed by a title search which impairs the title and the marketability of a property. |
i. | Homes Eligible for Home Sale Assistance |
◦ | Located in the U.S. |
◦ | A completed primary, single-family residence, townhouse, two-family duplex, or condominium unit (provided said unit meets FNMA/FHLMC approval), in each case owned and occupied by the Employee (or in the case of a two-family |
◦ | Not rendered ineligible by the provisions listed below. |
ii. | Homes Not Eligible for Home Sale Assistance |
◦ | Any income producing properties or properties with inherent in coproducing characteristics (including but not limited to properties with mineral rights, properties with commercial businesses and rental properties but not including two family duplexes owned by the Employee, one unit of which is occupied by the Employee). |
◦ | Resort properties. |
◦ | Mobile homes/manufactured homes. |
◦ | Cooperative units (see Item vi Cooperative Apartment). |
◦ | Farms. |
◦ | Properties with acreage in excess of five acres. |
◦ | Properties with acreage that does not conform to the immediate area. |
◦ | Properties on which clear title cannot be delivered. |
◦ | Properties which do not qualify for conventional mortgage financing. |
◦ | Properties containing or located by hazardous, toxic or potentially hazardous or toxic containers, materials, chemicals or gases (including but not limited to, radon, underground storage tanks, mold, Urea Formaldehyde Foam Insulation (UFFI), carcinogens, irritants, corrosives, environment hazardous and the like). |
◦ | Vacant land. |
◦ | Residences that are not Fannie Mae approved or income properties other than two-family dwellings. |
◦ | Properties that have Exterior Insulation Finishing System (EIFS)/synthetic stucco exterior finishing. |
◦ | Properties in which investigations disclose conditions which render the property unmarketable and/or which the Employee does not resolve to the satisfaction of SIRVA. |
◦ | Properties not zoned for 1-4 family residential. |
◦ | Properties not insurable under SIRVA’s property and general insurance liability coverage for relocation homes. |
◦ | Partially completed dwelling. |
◦ | Converted properties (not originally residential). |
◦ | Properties where the Employee currently has or has previously had their home on the market. |
◦ | Properties with building materials commonly known as “Chinese Drywall” or other drywall material with similar characteristics. |
◦ | Properties with a most probable sales price of at least one million dollars as determined by the average of the BMAs. |
iii. | Inspections and Repairs |
iv. | Acquisition of the Home |
◦ | Brokerage or agent commission up to a maximum of six percent of the sale price |
◦ | Normal and customary home sale closing costs, including: |
• | Attorney/escrow fees |
• | Customary federal, state, and local transfer taxes |
• | Filing and notary fees |
• | Legal fees |
v. | Equity Advance |
vi. | Cooperative Apartment |
vii. | Loss on Sale |
a. | Home Finding Assistance |
◦ | Conducting a telephone interview with you to discuss your housing needs and wants at the destination location. After this discussion, the SIRVA Relocation Consultant will use the information acquired to recommend a real estate agent, who is a relocation specialist in the destination area and who is knowledgeable regarding homes within the price range you have requested. |
◦ | Explaining “agency” and clarifying who the real estate agent is representing and why. |
◦ | Discussing real estate agent expectations so you fully understand what the real estate agent is expected to do for you and in what time frame. |
◦ | Reviewing purchase guidelines to help you make a good decision on the home you decide to purchase, including: disclosure hazards such as synthetic stucco, lead paint and other toxic hazards. |
◦ | Explaining comparable market analysis and encouraging you to have the real estate agent assist you in putting one together on the home you are purchasing. This will help you determine the best price for the property and eliminate purchasing an over-priced home. |
◦ | Assisting with negotiations, which can be very helpful to have the opinion of an uninvolved specialist when you are negotiating the purchase price of a new home. |
◦ | Reviewing the purchase agreement, or contract. The SIRVA Relocation Consultant will be available to look over the purchase agreement to help determine if it is written in your best interest. |
◦ | Encouraging you to be prequalified with a lender. In many markets, sellers are requiring buyers to be prequalified at the time the offer to purchase is made. The Company has made lender arrangements through SIRVA Mortgage. |
b. | House-Hunting Trip |
c. | Temporary Housing Assistance |
◦ | You must not have established a permanent residence in the new area. |
◦ | Your position and work have transferred permanently to the new office. |
◦ | A new lease has not been executed or a new home closing has not occurred and you still have a residence in the former location. |
◦ | You are not submitting travel/hotel/meal expenses through Brighthouse Services, LLC’s Business Expense Reimbursement system. |
d. | Miscellaneous Allowance |
e. | Home Purchase Assistance |
◦ | Counseling on various types of loan programs available and the impact of those programs based upon your specific financial situation and relocation mortgage benefits. |
◦ | Pre-approval assessment for mortgage financing, including credit review, so you are more aware of the value of a home you can acquire in the destination location. You are encouraged to be pre- approved before embarking on a home finding trip. This benefit is without cost or obligation. |
◦ | You must sell your home through SIRVA’s Home Sale Assistance program. |
◦ | The residence purchased must be your permanent residence. |
◦ | The home purchased cannot be a mobile home or boat. |
◦ | Additional temporary housing expenses due to construction delays. |
◦ | Reimbursement of purchase closing costs related to the builder or construction loan. |
◦ | Household goods storage costs. |
f. | Rental Assistance |
◦ | Rental applications |
◦ | Rental deposits |
◦ | Security considerations |
◦ | Lease considerations |
◦ | Renters insurance |
i. | Rental Home Finding Trip |
ii. | Lease Cancellation Payment |
g. | Transportation and/or Storage of Your Household Goods |
i. | Authorized Charges |
◦ | Provide all required packing materials. |
◦ | Crate and uncrate necessary household items as recommended by the movers. |
◦ | Perform normal appliance servicing at origin and destination locations. |
◦ | Perform all packing, loading, transporting, and unloading. |
◦ | Provide partial unpacking services. |
◦ | Remove debris upon completion of the move (includes one pickup by the carrier of all cartons unpacked by you within 30 days of delivery); make sure during any unpacking that you inspect every carton and all packaging material so that no item is accidentally discarded. |
◦ | Unload the moving van and place furniture and boxes in specific rooms in the home per the transferee’s instructions. |
◦ | Unpack mattresses and assemble beds. |
◦ | Unpack dresser mirrors and similar items and reassemble. |
◦ | Reassemble any item disassembled by the mover to facilitate transportation. Exceptions include any item needing professional expertise to reassemble, such as a slate pool table, major appliances, etc. |
ii. | Brighthouse Services, LLC will not pay for the following: |
◦ | Exclusive use of the moving service van or truck, expedited service or extra drop off/pick up stops. |
◦ | Housecleaning, maid, or debris removal service at either the old or new home. |
◦ | Removal or installation of wall-to-wall carpeting, draperies and/or rods, electrical fixtures, water softeners, or similar items. |
◦ | Packing or transportation of boats, trailers, airplanes, household pets, plants, building materials, wood, or any perishable item. |
◦ | Transportation of flammable items such as paints, household cleaners, etc. |
◦ | Swing sets, portable swimming pools, waterbeds, hot tubs, utility sheds, fencing, or items of similar nature. |
◦ | Firearms and/or ammunition. |
◦ | Valuable items, such as jewelry, precious stones, art, or collectibles (coins, sports memorabilia, etc.). |
iii. | Replacement Value Protection of Household Goods |
h. | Automobile Shipping |
i. | Moving Day and Final Trip |
◦ | Airfare |
• | Transportation to and from the terminal |
• | Airline luggage charges (one bag per person) |
◦ | Lodging |
• | Up to three days/two nights |
◦ | Meals |
• | $40 per diem per family member age 13 and older |
• | $20 per diem per family member age 12 and younger |
• | Receipts will not be required |
◦ | Mileage |
• | Reimbursed at the current IRS business rate for up to two automobiles |
• | Brighthouse Services, LLC covers up to a total of two automobiles, whether by shipping, mileage reimbursement or a combination of both. |
◦ | Parking and tolls |
j. | Career Assistance Services |
k. | Community Assistance Services |
◦ | Your tax filing status. |
◦ | Your tax rates based on your compensation from Brighthouse Services, LLC. Compensation from Brighthouse Services, LLC is defined to only include your annualized base salary and relocation expenses. Any bonus and stock options, etc. are excluded. Brighthouse Services, LLC will not include any spousal income, even if you are filing jointly. |
◦ | The higher of the standard deduction or estimated itemized deduction of the respective taxing authorities. |
◦ | Your destination state. |
Relocation Expense | Taxable Taxable | Gross-Up Calculation | Payment Deadline |
Rental/House Hunting Trip | Yes | At individual’s tax rate | Deadline for reimbursement2 |
Miscellaneous Allowance Lump Sum (including any additional Miscellaneous Allowance Lump Sum) | Yes | At individual’s tax rate | Deadline for allowances1 |
Temporary Housing Assistance | Yes | At individual’s tax rate | Deadline for reimbursement2 |
Final Move meals, mileage, airfare, lodging, tolls, parking | Yes | At individual’s tax rate | Deadline for reimbursement2 |
Transportation of Household Goods | Yes | At individual’s tax rate | Employer will generally be billed directly by moving company. If employee pays moving company’s bill, deadline for reimbursement2 |
Storage of Household Goods | Yes | At individual’s tax rate | Employer will generally be billed directly by moving company. If employee pays storage company’s bill, deadline for reimbursement2 |
New Home Closing Costs (No Closing Cost Loan program) | No | No closing cost, as such, nothing to include in employee’s income | N/A |
New Home Closing Costs (reimbursement if home not eligible for Home Purchase Assistance) | Yes | At individual’s tax rate | Deadline for reimbursement2 |
New Home Closing Costs (if rented or did not own a home in the originating location) | Yes | At individual’s tax rate | Deadline for reimbursement2 |
Relocation Expense | Taxable Taxable | Gross-Up Calculation | Payment Deadline |
New Home Closing Costs (when employee chooses a lender other than SIRVA Mortgage) | Yes | No | Deadline for reimbursement2 |
Finder or Broker’s Fee for New Rental Home | Yes | At individual’s tax rate | Deadline for reimburseent2 |
Home Sale through SIRVA | No | No – not included in employee income | N/A |
Home Sale – Direct Reimbursement for Excluded Primary Homes and Coops | Yes | At individual’s tax rate | Deadline for reimbursement2 |
Loss on Sale | Yes | At individual’s tax rate | Generally, on the first or second pay day following the date that all necessary documents are submitted to SIRVA, but not later than March 1 following the calendar year in which the closing of the sale of your house occurs. |
Lease Cancellation | Yes | At individual’s tax rate | Deadline for reimbursement2 |
Career/Community Assistance | Yes | At individual’s tax rate | N/A – employer will pay provider directly |
Automobile Shipping | Yes | At individual’s tax rate | Employer will generally be billed directly by moving company. If employee pays moving company’s bill, deadline for reimbursement2 |
Home Inspection Costs | Yes | At individual’s tax rate | Deadline for reimbursement2 |
(i) | Managing the run off of capital markets activities/transactions that were in existence as of the Effective Date; |
(ii) | Securities lending and repurchase transactions, including without limitation, acting as lending agent, selecting lending agents, and managing and reinvesting cash collateral received in respect of such transactions in accordance with the terms of the relevant agreements (collectively, “Securities Lending Activities”); and |
(iii) | Completing the re-registration of physical notes and other securities and revision of applicable administrative details forms and purchaser schedules to reflect the name change of certain Companies in connection with their disaffiliation from MetLife. |
(i) | deviate from or breach the Investment Guidelines. Notwithstanding the foregoing, in the event of an inadvertent deviation from or breach of the Investment Guidelines, Services may, in its sole discretion, consent in writing to such breach or deviation. |
(ii) | invest the Assets (x) in any security identified as a restricted security or restricted issuer in the Investment Guidelines, or (y) in any other security, if Services has previously notified the Investment Adviser in writing that a Company is prohibited from investing in such security. In |
(iii) | except as specifically permitted by the Investment Guidelines, borrow money on behalf of or in respect of an Account; or |
(iv) | invest any Account or any portion thereof in any collective investment vehicle for which the Investment Adviser or any of its affiliates serves as investment manager or investment adviser if such investment would require such Account to pay a separate management fee, incentive fee or any similar fee to the Investment Adviser or any such affiliates, unless the Investment Adviser reduces its fees payable by Services in the amount of, or otherwise completely offsets, such separate management fee, incentive fee or similar fee. |
(i) | avoid purchasing or otherwise acquiring for the benefit of any Company an investment that creates a permanent establishment for tax purposes in any jurisdiction outside of the U.S., and |
(ii) | not engage, on behalf of any Company, in any activity that would cause any Company to be required to file a net income based tax return in any non-US jurisdiction without the prior consent of Services, other than with respect to those non-US jurisdictions previously approved by Services and listed on Exhibit B. |
(i) | all applicable laws, rules and regulations, including all applicable laws, rules and regulations related to investments, directly or through either a domestic or foreign subsidiary, in countries outside of the United States of America, related to laws and regulations which seek to prohibit or limit business activities which pose the potential for supporting or advancing terrorist related activities, particularly business activities in sanctioned or sensitive foreign countries (as identified by the U.S. federal government, the Department of Treasury, the Department of State or the SEC); and |
(ii) | the regulations, orders or directives of the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury (including any country sanctions programs or Specially Designated and Blocked Persons List administered and enforced by OFAC), and any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action relating thereto. |
(i) | Written information security policies and procedures; |
(ii) | Industry standard access controls to limit access to the information and systems containing the information only to those who need such access to perform the services hereunder, including requiring the use of multi-factor authentication for any remote access to the information or systems with access to the information; |
(iii) | User identification and password standards, including length and configuration attributes (character composition, expiration term, no sharing of accounts, separate privileged user accounts from non-privileged user accounts, etc.); |
(iv) | Industry accepted methods of secure encryption of the information in transit over public networks and, where applicable to Investment Adviser’s services, of data storage and backups of information at rest; |
(v) | Where applicable to Investment Adviser’s services, maintaining regular data backup and recovery systems of the information and any other data or systems used to perform the services; |
(vi) | Secure logging of all access and changes to the information; |
(vii) | Regular vulnerability scans and a managed patch management process to redress any identified vulnerabilities; and |
(viii) | Maintaining and updating all systems, hardware and software for which Investment Adviser is responsible in the performance of any services such that they remain under support by the applicable manufacturer or provider. |
1) | shall comply and cause each of its officers, partners, members, managers, directors, employees, and affiliates engaged by the Investment Adviser for the provision of services under this Agreement to comply, with all governmental, regulatory and exchange licenses, registrations, and approvals required by law as may be necessary to perform its obligations under this Agreement and to perform such acts throughout the term of this Agreement; |
2) | shall comply with all Laws applicable to it in its capacity as an investment adviser and in its performance of this Agreement; |
3) | shall ensure that it will be in compliance with all applicable United States federal anti-terrorism and anti-terrorist financing laws and regulations related to investments, including, if applicable, the Uniting and Strengthening of America by Providing the Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended; |
4) | shall, and shall cause each of its officers, partners, members, managers, directors, employees, or affiliates engaged by the Investment Adviser for the provision of services under this Agreement to (i) use funds for lawful purposes, (ii) not violate applicable anticorruption laws, including without limitation the FCPA and the OECD Convention, (iii) not, directly or indirectly, give or offer anything of value, including, but not limited to, cash, contributions, gifts, or entertainment, to foreign or domestic government officials or to any private commercial person or entity for the purpose of gaining an improper business advantage in violation of any such applicable anticorruption laws and (iv) establish sufficient internal controls and procedures to ensure compliance with applicable anticorruption laws, including, but not limited to, the FCPA, the UK Bribery Act, and the OECD Convention; |
5) | shall comply with all applicable federal laws and regulations related to investments, directly or through either a domestic or foreign subsidiary, in countries outside of the United States of America, related to laws and regulations which seek to prohibit or limit business activities which pose the potential for supporting or advancing terrorist related activities, particularly business activities in sanctioned or sensitive foreign countries (as identified by the U.S. federal government, the Department of Treasury, or the SEC); |
6) | shall, to the extent permitted by applicable law, promptly notify Services in writing (a) if the representation in Section 7(h) herein ceases to be true or (b) if there occurs or has arisen any material adverse change in the financial condition or in the business of the Investment Adviser or any event, condition, or state of facts which materially adversely affects, or to its knowledge threatens to affect, the Investment Adviser’s ability to manage the Accounts. |
(i) | Investment Adviser shall purchase a number of replacement securities equal to the number of unreturned Loaned Securities (the “Replacement Securities”), to the extent that such Replacement Securities are available on the open market. Such Replacement Securities shall be purchased by applying the proceeds of the collateral with respect to such securities lending transaction to the purchase of such Replacement Securities. If and to the extent that such proceeds are insufficient or the collateral is unavailable, the purchase of such Replacement Securities shall be made at Investment Adviser’s expense. |
(ii) | If Investment Adviser is unable to purchase Replacement Securities pursuant to Section 10(m)(i) hereof, Investment Adviser shall credit to the relevant Account an amount equal to the market value of the unreturned Loaned Securities for which |
(iii) | In addition to making the purchases or credits required by Sections 10(m)(i) and 10(m)(ii) hereof, Investment Adviser shall credit to such relevant Account the value of all distributions on the Loaned Securities (not otherwise credited to such Account with the Investment Adviser), for record dates which occur before the date that Investment Adviser purchases Replacement Securities pursuant to Section 10(j)(i) or credits such Account pursuant to Section 10(m)(ii). |
(iv) | Any credits required under Sections 10(m)(ii) and 10(m)(iii) hereof shall be made by application of the proceeds of the collateral, if any, that remains after the purchase of Replacement Securities pursuant to Section 10(m)(i). If and to the extent that the collateral is unavailable or the value of the proceeds of the remaining collateral is less than the value of the sum of credits required to be made under Sections 10(m)(ii) and 10(m)(iii), such credits shall be made at Investment Adviser’s expense. |
(v) | If, after application of Sections 10(m)(i) through 10(m)(iv) hereof, additional collateral remains or any previously unavailable collateral becomes available or any additional amounts owed by the Borrower with respect to such securities lending transaction(s) are received from the Borrower, Investment Adviser shall apply the proceeds of such collateral or such additional amounts first to credit to such relevant Account all other amounts owed by the Borrower to such Account with respect to such securities lending transaction(s), and then to reimburse itself for any amounts expended by Investment Adviser pursuant to Sections 10(m)(i) through 10(m)(iv) above. |
(vi) | In the event that Investment Adviser incurs any loss or expense under this Section 10(m), Investment Adviser shall to the extent of such payment, loss or expense, be subrogated to, and succeed to, all the rights of Services or the relevant Company against the Borrower with respect to the applicable securities lending transaction(s). |
(vii) | The provisions of this Section 10(m) shall not apply to losses attributable to war, riot, revolution, acts of government or other causes beyond the reasonable control or apprehension of Investment Adviser. For the avoidance of doubt, the provisions of this Section 10(m) shall apply to, inter alia, losses attributable to Borrower defaults. |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Eric T. Steigerwalt |
Eric T. Steigerwalt |
President and Chief Executive Officer |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Conor E. Murphy |
Conor E. Murphy |
Executive Vice President, Chief Operating Officer and Interim Chief Financial Officer |
/s/ Eric T. Steigerwalt |
Eric T. Steigerwalt |
President and Chief Executive Officer |
/s/ Conor E. Murphy |
Conor E. Murphy |
Executive Vice President, Chief Operating Officer and Interim Chief Financial Officer |
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Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
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Assets | ||
Amortized cost of fixed maturity securities available-for-sale | $ 61,362 | $ 60,920 |
Mortgage loans valuation allowances | $ 64 | $ 57 |
Preferred Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Preferred Stock, Liquidation Preference, Value | $ 425 | $ 0 |
Brighthouse Financial, Inc.’s stockholders’ equity: | ||
Treasury stock, shares | 7,948,461 | 2,915,682 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued | 120,593,413 | 120,448,018 |
Common stock, shares outstanding | 112,644,952 | 117,532,336 |
Business, Basis of Presentation and Summary of Significant Accounting Policies |
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Jun. 30, 2019 | |||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||
Business, Basis of Presentation and Summary of Significant Accounting Policies | 1. Business, Basis of Presentation and Summary of Significant Accounting Policies Business “Brighthouse Financial” and the “Company” refer to Brighthouse Financial, Inc. and its subsidiaries (formerly, MetLife U.S. Retail Separation Business). Brighthouse Financial, Inc. (“BHF”) is a holding company formed to own the legal entities that historically operated a substantial portion of MetLife, Inc.’s (together with its subsidiaries and affiliates, “MetLife”) former Retail segment. BHF was incorporated in Delaware on August 1, 2016 in preparation for MetLife, Inc.’s separation of a substantial portion of its former Retail segment, as well as certain portions of its former Corporate Benefit Funding segment (the “Separation”), which was completed on August 4, 2017. In connection with the Separation, 80.8% of MetLife, Inc.’s interest in BHF was distributed to holders of MetLife, Inc.’s common stock and MetLife, Inc. retained the remaining 19.2%. On June 14, 2018, MetLife, Inc. divested its remaining shares of BHF common stock (the “MetLife Divestiture”). As a result, MetLife, Inc. and its subsidiaries and affiliates are no longer considered related parties subsequent to the MetLife Divestiture. Brighthouse Financial is one of the largest providers of annuity and life insurance products in the United States 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 (“LLCs”) in which the Company has control. Intercompany accounts and transactions have been eliminated. The Company uses the equity method of accounting for investments in limited partnerships and LLCs when it has more than a minor ownership interest or more than a minor influence over the investee’s operations. The Company generally recognizes its share of the investee’s earnings on a three-month lag in instances where the investee’s financial information is not sufficiently timely or when the investee’s reporting period differs from the Company’s reporting period. When the Company has virtually no influence over the investee’s operations, the investment is carried at fair value. Reclassifications Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform with the 2019 presentation as may be discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements. 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, 2018 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, 2018 (the “2018 Annual Report”), which include all disclosures required by GAAP. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated and combined financial statements of the Company included in the 2018 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 (“ASUs”) to the FASB Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the Company’s financial statements. There were no ASUs adopted during 2019 which had a material impact on the Company’s financial statements. ASUs issued but not yet adopted as of June 30, 2019 are summarized in the table below.
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Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | 2. Segment Information The Company is organized into three segments: Annuities; Life; and Run-off. In addition, the Company reports certain of its results of operations in Corporate & Other. Annuities The Annuities segment consists of a variety of variable, fixed, index-linked and income annuities designed to address contract holders’ needs for protected wealth accumulation on a tax-deferred basis, wealth transfer and income security. Life The Life segment consists of insurance products and services, including term, universal, whole and variable life products designed to address policyholders’ needs for financial security and protected wealth transfer, which may be provided on a tax-advantaged basis. Run-off The Run-off segment consists of products no longer actively sold and which are separately managed, including structured settlements, pension risk transfer contracts, certain company-owned life insurance policies, funding agreements and universal life with secondary guarantees. Corporate & Other Corporate & Other contains the excess capital not allocated to the segments and interest expense related to the majority of the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. Corporate & Other also includes the elimination of intersegment amounts, long-term care and workers compensation business reinsured through 100% quota share reinsurance agreements, and term life insurance sold direct to consumers, which is no longer being offered for new sales. Financial Measures and Segment Accounting Policies Adjusted earnings is a financial measure used by management to evaluate performance, allocate resources and facilitate comparisons to industry results. Consistent with GAAP guidance for segment reporting, adjusted earnings is also used to measure segment performance. The Company believes the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of its performance by the investor community. Adjusted earnings should not be viewed as a substitute for net income (loss) available to BHF’s common shareholders and excludes net income (loss) attributable to noncontrolling interests and preferred stock dividends. Adjusted earnings, which may be positive or negative, focuses on the Company’s primary businesses principally by excluding the impact of market volatility, which could distort trends. The following are significant items excluded from total revenues, net of income tax, in calculating adjusted earnings:
The following are significant items excluded from total expenses, net of income tax, in calculating adjusted earnings:
The tax impact of the adjustments mentioned above is calculated net of the statutory tax rate, which could differ from the Company’s effective tax rate. Set forth in the tables below is certain financial information with respect to the Company’s segments, as well as Corporate & Other, for the three months and six months ended June 30, 2019 and 2018 and at June 30, 2019 and December 31, 2018. The segment accounting policies are the same as those used to prepare the Company’s 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.
The following table presents total revenues with respect to the Company’s segments, as well as Corporate & Other:
The following table presents total assets with respect to the Company’s segments, as well as Corporate & Other, at:
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Insurance |
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Insurance | 3. Insurance Guarantees As discussed in Notes 1 and 3 of the Notes to the Consolidated and Combined Financial Statements included in the 2018 Annual Report, the Company issues variable annuity contracts with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMABs”), the non-life contingent portion of guaranteed minimum withdrawal benefits (“GMWBs”) and certain portions of GMIBs that do not require the policyholder to annuitize are accounted for as embedded derivatives in policyholder account balances and are further discussed in Note 5. The Company also has universal and variable life insurance contracts with secondary guarantees. Information regarding the Company’s guarantee exposure was as follows at:
__________________
(6) Defined as the guarantee amount less the account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date.
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Investments |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | 4. Investments See Note 1 of the Notes to the Consolidated and Combined Financial Statements included in the 2018 Annual Report for a description of the Company’s accounting policies for investments and Note 6 for information about the fair value hierarchy for investments and the related valuation methodologies. Fixed Maturity Securities Available-for-sale (“AFS”) Fixed Maturity Securities AFS by Sector The following table presents the fixed maturity securities AFS by sector at:
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The Company held non-income producing fixed maturity securities with an estimated fair value of $32 million and less than $1 million with unrealized gains (losses) of ($2) million and less than $1 million at June 30, 2019 and December 31, 2018, respectively. Maturities of Fixed Maturity Securities The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at June 30, 2019:
Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity. Continuous Gross Unrealized Losses for Fixed Maturity Securities AFS by Sector The following table presents the estimated fair value and gross unrealized losses of fixed maturity securities AFS in an unrealized loss position, aggregated by sector and by length of time that the securities have been in a continuous unrealized loss position at:
Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS Securities Evaluation and Measurement Methodologies Management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used in the impairment evaluation process include, but are not limited to: (i) the length of time and the extent to which the estimated fair value has been below amortized cost; (ii) the potential for impairments when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments where the issuer, series of issuers or industry has suffered a catastrophic loss or has exhausted natural resources; (vi) whether the Company has the intent to sell or will more likely than not be required to sell a particular security before the decline in estimated fair value below amortized cost recovers; (vii) with respect to Structured Securities, changes in forecasted cash flows after considering the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying assets backing a particular security, and the payment priority within the tranche structure of the security; (viii) the potential for impairments due to weakening of foreign currencies on non-functional currency denominated fixed maturity securities that are near maturity; and (ix) other subjective factors, including concentrations and information obtained from regulators and rating agencies. For securities in an unrealized loss position, an OTTI is recognized in earnings when it is anticipated that the amortized cost will not be recovered. When either: (i) the Company has the intent to sell the security; or (ii) it is more likely than not that the Company will be required to sell the security before recovery, the OTTI recognized in earnings is the entire difference between the security’s amortized cost and estimated fair value. If neither of these conditions exists, the difference between the amortized cost of the security and the present value of projected future cash flows expected to be collected is recognized as an OTTI in earnings (“credit loss”). If the estimated fair value is less than the present value of projected future cash flows expected to be collected, this portion of OTTI related to other-than-credit factors (“noncredit loss”) is recorded in other comprehensive income (“OCI”). Current Period Evaluation Based on the Company’s current evaluation of its AFS securities in an unrealized loss position in accordance with its impairment policy, and the Company’s current intentions and assessments (as applicable to the type of security) about holding, selling and any requirements to sell these securities, the Company concluded that these securities were not other-than-temporarily impaired at June 30, 2019. Gross unrealized losses on fixed maturity securities decreased $1.2 billion during the six months ended June 30, 2019 to $226 million. The decrease in gross unrealized losses for the six months ended June 30, 2019 was primarily attributable to decreasing longer-term interest rates and narrowing credit spreads. At June 30, 2019, $8 million of the total $226 million of gross unrealized losses were from seven fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for six months or greater. Mortgage Loans Mortgage Loans by Portfolio Segment Mortgage loans are summarized as follows at:
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Information on commercial, agricultural and residential mortgage loans is presented in the tables below. Valuation Allowance Methodology Mortgage loans are considered to be impaired when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the loan agreement. Specific valuation allowances are established using the same methodology for all three portfolio segments as the excess carrying value of a loan over either (i) the present value of expected future cash flows discounted at the loan’s original effective interest rate, (ii) the estimated fair value of the loan’s underlying collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or (iii) the loan’s observable market price. A common evaluation framework is used for establishing non-specific valuation allowances for all loan portfolio segments; however, a separate non-specific valuation allowance is calculated and maintained for each loan portfolio segment that is based on inputs unique to each loan portfolio segment. Non-specific valuation allowances are established for pools of loans with similar risk characteristics where a property-specific or market-specific risk has not been identified, but for which the Company expects to incur a credit loss. These evaluations are based upon several loan portfolio segment-specific factors, including the Company’s experience for loan losses, defaults and loss severity, and loss expectations for loans with similar risk characteristics. These evaluations are revised as conditions change and new information becomes available. Credit Quality of Commercial Mortgage Loans The credit quality of commercial mortgage loans was as follows at:
Credit Quality of Agricultural Mortgage Loans The credit quality of agricultural mortgage loans was as follows at:
The estimated fair value of agricultural mortgage loans was $3.3 billion and $2.9 billion at June 30, 2019 and December 31, 2018, respectively. Credit Quality of Residential Mortgage Loans The credit quality of residential mortgage loans was as follows at:
The estimated fair value of residential mortgage loans was $2.7 billion and $2.3 billion at June 30, 2019 and December 31, 2018, respectively. Past Due, Nonaccrual and Modified Mortgage Loans The Company has a high quality, well performing mortgage loan portfolio, with over 99% of all mortgage loans classified as performing at both June 30, 2019 and December 31, 2018. The Company defines delinquency consistent with industry practice, when mortgage loans are past due as follows: commercial and residential mortgage loans — 60 days and agricultural mortgage loans — 90 days. The Company had no commercial mortgage loans past due or in nonaccrual status at either June 30, 2019 or December 31, 2018. Agricultural mortgage loans past due totaled $6 million and less than $1 million at June 30, 2019 and December 31, 2018, respectively. The Company had no agricultural mortgage loans in nonaccrual status at either June 30, 2019 or December 31, 2018. Residential mortgage loans past due and in nonaccrual status totaled $37 million and $36 million at June 30, 2019 and December 31, 2018, respectively. During the three months and six months ended June 30, 2019 and 2018, the Company did not have a significant number of mortgage loans modified in a troubled debt restructuring. Other Invested Assets Freestanding derivatives with positive estimated fair values comprise over 90% of other invested assets. See Note 5 for information about freestanding derivatives with positive estimated fair values. Other invested assets also includes tax credit and renewable energy partnerships, leveraged leases and Federal Home Loan Bank stock. Cash Equivalents The carrying value of cash equivalents, which includes securities and other investments with an original or remaining maturity of three months or less at the time of purchase, was $1.0 billion and $3.1 billion at June 30, 2019 and December 31, 2018, respectively. Net Unrealized Investment Gains (Losses) Unrealized investment gains (losses) on fixed maturity securities and the effect on DAC, VOBA, deferred sales inducements (“DSI”) and future policy benefits, that would result from the realization of the unrealized gains (losses), are included in net unrealized investment gains (losses) in AOCI. The components of net unrealized investment gains (losses), included in AOCI, were as follows:
The changes in net unrealized investment gains (losses) were as follows:
Concentrations of Credit Risk There were no investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, at both June 30, 2019 and December 31, 2018. Securities Lending Elements of the securities lending program are presented below at:
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The cash collateral liability by loaned security type and remaining tenor of the agreements were as follows at:
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If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell securities to meet the return obligation, it may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than what otherwise would have been realized under normal market conditions, or both. The estimated fair value of the securities on loan related to the cash collateral on open at June 30, 2019 was $1.4 billion, all of which were U.S. government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement. The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including agency RMBS, U.S. and foreign corporate securities, ABS, non-agency RMBS and U.S. government and agency securities) with 55% invested in agency RMBS, cash and cash equivalents and U.S. government and agency securities at June 30, 2019. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company.Invested Assets on Deposit, Held in Trust and Pledged as Collateral Invested assets on deposit, held in trust and pledged as collateral are presented below at estimated fair value at:
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See “— Securities Lending” for information regarding securities on loan. Variable Interest Entities The Company has invested in legal entities that are variable interest entities (“VIEs”). VIEs are consolidated when the investor is the primary beneficiary. A primary beneficiary is the variable interest holder in a VIE with both the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and the obligation to absorb losses, or the right to receive benefits that could potentially be significant to the VIE. There were no material VIEs for which the Company has concluded that it is the primary beneficiary at June 30, 2019 or December 31, 2018. The Company’s investments in unconsolidated VIEs are described below. Fixed Maturity Securities The Company invests in U.S. corporate bonds, foreign corporate bonds, and Structured Securities issued by VIEs. The Company is not obligated to provide any financial or other support to these VIEs, other than the original investment. The Company’s involvement with these entities is limited to that of a passive investor. The Company has no unilateral right to appoint or remove the servicer, special servicer, or investment manager, which are generally viewed as having the power to direct the activities that most significantly impact the economic performance of the VIE, nor does the Company function in any of these roles. The Company does not have the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the entity; as a result, the Company has determined it is not the primary beneficiary, or consolidator, of the VIE. The Company’s maximum exposure to loss on these fixed maturity securities is limited to the amortized cost of these investments. See “— Fixed Maturity Securities AFS” for information on these securities. Limited Partnerships and LLCs The Company holds investments in certain limited partnerships and LLCs which are VIEs. These ventures include real estate limited partnerships/LLCs, private equity funds, hedge funds, and to a lesser extent tax credit and renewable energy partnerships. The Company is not considered the primary beneficiary, or consolidator, when its involvement takes the form of a limited partner interest and is restricted to a role of a passive investor, as a limited partner’s interest does not provide the Company with any substantive kick-out or participating rights, nor does it provide the Company with the power to direct the activities of the fund. The Company’s maximum exposure to loss on these investments is limited to: (i) the amount invested in debt or equity of the VIE and (ii) commitments to the VIE, as described in Note 11. The carrying amount and maximum exposure to loss related to the VIEs in which the Company concluded that it holds a variable interest, but is not the primary beneficiary, were as follows at:
Net Investment Income The components of net investment income were as follows:
Net Investment Gains (Losses) Components of Net Investment Gains (Losses) The components of net investment gains (losses) were as follows:
Sales or Disposals of Fixed Maturity Securities Investment gains and losses on sales of securities are determined on a specific identification basis. Proceeds from sales or disposals of fixed maturity securities and the components of fixed maturity securities net investment gains (losses) were as shown in the table below.
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | 5. Derivatives Accounting for Derivatives Freestanding Derivatives Freestanding derivatives are carried on the Company’s balance sheet either as assets within other invested assets or as liabilities within other liabilities at estimated fair value. The Company does not offset the estimated fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement. If a derivative is not designated or did not qualify as an accounting hedge, changes in the estimated fair value of the derivative are reported in net derivative gains (losses) except for economic hedges of limited partnerships and LLCs which are presented in net investment income. The Company generally reports cash received or paid for a derivative in the investing activity section of the statement of cash flows except for cash flows of certain derivative options with deferred premiums, which are reported in the financing activity section of the statement of cash flows. Hedge Accounting The Company primarily designates derivatives as a hedge of a forecasted transaction or a variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). When a derivative is designated as a cash flow hedge and is determined to be highly effective, changes in fair value are recorded in OCI and subsequently reclassified into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item. To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge. In its hedge documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and at least quarterly throughout the life of the designated hedging relationship. The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item; (ii) the derivative or hedged item expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; or (iv) the derivative is de-designated as a hedging instrument. When hedge accounting is discontinued the derivative is carried at its estimated fair value on the balance sheet, with changes in its estimated fair value recognized in the current period as net derivative gains (losses). The changes in estimated fair value of derivatives previously recorded in OCI related to discontinued cash flow hedges are released into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item. When the hedged item matures or is sold, or the forecasted transaction is not probable of occurring, the Company immediately reclassifies any remaining balances in OCI to net derivative gains (losses). Embedded Derivatives The Company has certain insurance and reinsurance contracts that contain embedded derivatives which are required to be separated from their host contracts and reported as derivatives. These host contracts include: variable annuities with guaranteed minimum benefits, including GMWBs, GMABs and certain GMIBs; index-linked annuities that are directly written or assumed through reinsurance; and ceded reinsurance of variable annuity GMIBs. Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables on the consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances on the consolidated balance sheets. Changes in the estimated fair value of the embedded derivative are reported in net derivative gains (losses).Derivative Strategies The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to minimize its exposure to various market risks, including interest rate, foreign currency exchange rate, credit and equity market. Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are bilateral contracts between two counterparties (“OTC-bilateral”). Interest Rate Derivatives Interest rate swaps: The Company primarily uses interest rate swaps to hedge interest rate exposure in variable annuity products and minimum guarantees embedded in universal life products. Interest rate swaps are used in nonqualifying hedging relationships. Interest rate caps: The Company uses interest rate caps to protect its floating rate liabilities against rises in interest rates above a specified level, and against interest rate exposure arising from mismatches between assets and liabilities. Interest rate caps are used in nonqualifying hedging relationships. Interest rate futures: The Company uses exchange-traded interest rate futures contracts to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. Exchange-traded interest rate futures are used in nonqualifying hedging relationships. Swaptions: The Company uses swaptions to hedge interest rate risk associated with the Company’s variable annuity and universal life products. Swaptions are used in nonqualifying hedging relationships. Swaptions are included in interest rate options. Interest rate forwards: The Company uses interest rate forwards to hedge minimum guarantees embedded in universal life products. Interest rate forwards are used in nonqualifying hedging relationships. Foreign Currency Exchange Rate Derivatives Foreign currency swaps: The Company uses foreign currency swaps to convert foreign currency denominated cash flows to U.S. dollars to reduce cash flow fluctuations due to changes in currency exchange rates. Foreign currency swaps are used in cash flow and nonqualifying hedging relationships. Foreign currency forwards: The Company uses foreign currency forwards to hedge currency exposure on its invested assets. Foreign currency forwards are used in nonqualifying hedging relationships. Credit Derivatives Credit default swaps: The Company uses credit default swaps to create synthetic credit investments to replicate credit exposure that is more economically attractive than what is available in the market or otherwise unavailable (written credit protection), or to reduce credit loss exposure on certain assets that the Company owns (purchased credit protection). Credit default swaps are used in nonqualifying hedging relationships. Equity Derivatives Equity futures: The Company uses exchange-traded equity futures to hedge minimum guarantees embedded in certain variable annuity products against adverse changes in equity markets. Exchange-traded equity futures are used in nonqualifying hedging relationships. Equity index options: The Company uses equity index options primarily to hedge minimum guarantees embedded in certain variable annuity products against adverse changes in equity markets. Additionally, the Company uses equity index options to hedge index-linked annuity products against adverse changes in equity markets. Equity index options are used in nonqualifying hedging relationships. Equity total return swaps: The Company uses equity total return swaps to hedge minimum guarantees embedded in certain variable annuity products against adverse changes equity markets. Equity total return swaps are used in nonqualifying hedging relationships. Equity variance swaps: The Company uses equity variance swaps to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. Equity variance swaps are used in nonqualifying hedging relationships. Primary Risks Managed by Derivatives The following table presents the primary underlying risk exposure, gross notional amount, and estimated fair value of the Company’s derivatives, held at:
At June 30, 2019 and December 31, 2018, the balance in AOCI associated with cash flow hedges was $257 million and $264 million, respectively. Credit Derivatives In connection with synthetically created credit investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at:
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(2) The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts. Counterparty Credit Risk The Company may be exposed to credit-related losses in the event of counterparty nonperformance on derivative instruments. Generally, the credit exposure is the fair value at the reporting date less any collateral received from the counterparty. The Company manages its credit risk by: (i) entering into derivative transactions with creditworthy counterparties governed by master netting agreements; (ii) trading through regulated exchanges and central clearing counterparties; (iii) obtaining collateral, such as cash and securities, when appropriate; and (iv) setting limits on single party credit exposures which are subject to periodic management review. See Note 6 for a description of the impact of credit risk on the valuation of derivatives. The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
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The Company’s collateral arrangements generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the amount owed by that counterparty reaches a minimum transfer amount. Certain of these arrangements also include credit contingent provisions which permit the party with positive fair value to terminate the derivative at the current fair value or demand immediate full collateralization from the party in a net liability position, in the event that the financial strength or credit rating of the party in a net liability position falls below a certain level. The following table presents the aggregate estimated fair value of derivatives in a net liability position containing such credit contingent provisions and the aggregate estimated fair value of assets posted as collateral for such instruments.
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(2) Substantially all of the Company’s collateral arrangements provide for daily posting of collateral for the full value of the derivative contract. As a result, if the credit contingent provisions of derivative contracts in a net liability position were triggered minimal additional assets would be required to be posted as collateral or needed to settle the instruments immediately.
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | 6. Fair Value Considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. Recurring Fair Value Measurements The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy, are presented below. Investments that do not have a readily determinable fair value and are measured at net asset value (or equivalent) as a practical expedient to estimated fair value are excluded from the fair value hierarchy.
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(2) Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables and other invested assets on the consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances on the consolidated balance sheets.Valuation Controls and Procedures The Company monitors and provides oversight of valuation controls and policies for securities, mortgage loans and derivatives, which are primarily executed by its valuation service providers. The valuation methodologies used to determine fair values prioritize the use of observable market prices and market-based parameters and determines that judgmental valuation adjustments, when applied, are based upon established policies and are applied consistently over time. The valuation methodologies for securities, mortgage loans and derivatives are reviewed on an ongoing basis and revised when necessary. In addition, the Chief Accounting Officer periodically reports to the Audit Committee of Brighthouse Financial’s Board of Directors regarding compliance with fair value accounting standards. The fair value of financial assets and financial liabilities is based on quoted market prices, where available. The Company assesses whether prices received represent a reasonable estimate of fair value through controls designed to ensure valuations represent an exit price. Valuation service providers perform several controls, including certain monthly controls, which include, but are not limited to, analysis of portfolio returns to corresponding benchmark returns, comparing a sample of executed prices of securities sold to the fair value estimates, reviewing the bid/ask spreads to assess activity, comparing prices from multiple independent pricing services and ongoing due diligence to confirm that independent pricing services use market-based parameters. The process includes a determination of the observability of inputs used in estimated fair values received from independent pricing services or brokers by assessing whether these inputs can be corroborated by observable market data. Independent non-binding broker quotes, also referred to herein as “consensus pricing,” are used for non-significant portion of the portfolio. Prices received from independent brokers are assessed to determine if they represent a reasonable estimate of fair value by considering such pricing relative to the current market dynamics and current pricing for similar financial instruments. Valuation service providers also apply a formal process to challenge any prices received from independent pricing services that are not considered representative of estimated fair value. If prices received from independent pricing services are not considered reflective of market activity or representative of estimated fair value, independent non-binding broker quotations are obtained. If obtaining an independent non-binding broker quotation is unsuccessful, valuation service providers will use the last available price. The Company reviews outputs of the valuation service providers’ controls and performs additional controls, including certain monthly controls, which include but are not limited to, performing balance sheet analytics to assess reasonableness of period to period pricing changes, including any price adjustments. Price adjustments are applied if prices or quotes received from independent pricing services or brokers are not considered reflective of market activity or representative of estimated fair value. The Company did not have significant price adjustments during the six months ended June 30, 2019. Determination of Fair Value Fixed Maturity Securities The fair values for actively traded marketable bonds, primarily U.S. government and agency securities, are determined using the quoted market prices and are classified as Level 1 assets. For fixed maturity securities classified as Level 2 assets, fair values are determined using either a market or income approach and are valued based on a variety of observable inputs as described below. U.S. corporate and foreign corporate securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, benchmark yields, spreads off benchmark yields, new issuances, issuer rating, trades of identical or comparable securities, or duration. Privately-placed securities are valued using the additional key inputs: market yield curve, call provisions, observable prices and spreads for similar public or private securities that incorporate the credit quality and industry sector of the issuer, and delta spread adjustments to reflect specific credit-related issues. U.S. government and agency, state and political subdivision and foreign government securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, benchmark U.S. Treasury yield or other yields, spread off the U.S. Treasury yield curve for the identical security, issuer ratings and issuer spreads, broker dealer quotes, and comparable securities that are actively traded. Structured Securities: Fair value is determined using third-party commercial pricing services, with the primary inputs being quoted prices in markets that are not active, spreads for actively traded securities, spreads off benchmark yields, expected prepayment speeds and volumes, current and forecasted loss severity, ratings, geographic region, weighted average coupon and weighted average maturity, average delinquency rates and debt service coverage ratios. Other issuance-specific information is also used, including, but not limited to; collateral type, structure of the security, vintage of the loans, payment terms of the underlying asset, payment priority within tranche, and deal performance. Equity Securities and Short-term Investments The fair value for actively traded equity securities and short-term investments are determined using quoted market prices and are classified as Level 1 assets. For financial instruments classified as Level 2 assets or liabilities, fair values are determined using a market approach and are valued based on a variety of observable inputs as described below. Equity securities and short-term investments: Fair value is determined using third-party commercial pricing services, with the primary input being quoted prices in markets that are not active. Derivatives The fair values for exchange-traded derivatives are determined using the quoted market prices and are classified as Level 1 assets. For OTC-bilateral derivatives and OTC-cleared derivatives classified as Level 2 assets or liabilities, fair values are determined using the income approach. Valuations of non-option-based derivatives utilize present value techniques, whereas valuations of option-based derivatives utilize option pricing models which are based on market standard valuation methodologies and a variety of observable inputs. The significant inputs to the pricing models for most OTC-bilateral and OTC-cleared derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. Certain OTC-bilateral and OTC-cleared derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and management believes they are consistent with what other market participants would use when pricing such instruments. Most inputs for OTC-bilateral and OTC-cleared derivatives are mid-market inputs but, in certain cases, liquidity adjustments are made when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income. The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all OTC-bilateral and OTC-cleared derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its OTC-bilateral and OTC-cleared derivatives using standard swap curves which may include a spread to the risk-free rate, depending upon specific collateral arrangements. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with similar collateral arrangements. As the Company and its significant derivative counterparties generally execute trades at such pricing levels and hold sufficient collateral, additional credit risk adjustments are not currently required in the valuation process. The Company’s ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. An evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period. Embedded Derivatives Embedded derivatives principally include certain direct and ceded variable annuity guarantees and equity crediting rates within index-linked annuity contracts. Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income. The Company issues certain variable annuity products with guaranteed minimum benefits. GMWBs, GMABs and certain GMIBs contain embedded derivatives, which are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets. The Company determines the fair value of these embedded derivatives by estimating the present value of projected future benefits minus the present value of projected future fees using actuarial and capital market assumptions including expectations of policyholder behavior. The calculation is based on in-force business and is performed using standard actuarial valuation software which projects future cash flows from the embedded derivative over multiple risk neutral stochastic scenarios using observable risk-free rates. The percentage of fees included in the initial fair value measurement is not updated in subsequent periods. Capital market assumptions, such as risk-free rates and implied volatilities, are based on market prices for publicly traded instruments to the extent that prices for such instruments are observable. Implied volatilities beyond the observable period are extrapolated based on observable implied volatilities and historical volatilities. Actuarial assumptions, including mortality, lapse, withdrawal and utilization, are unobservable and are reviewed at least annually based on actuarial studies of historical experience. The valuation of these guarantee liabilities includes nonperformance risk adjustments and adjustments for a risk margin related to non-capital market inputs. The nonperformance adjustment is determined by taking into consideration publicly available information relating to spreads in the secondary market for BHF’s debt. These observable spreads are then adjusted to reflect the priority of these liabilities and claims paying ability of the issuing insurance subsidiaries as compared to BHF’s overall financial strength. Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees. The Company issues and assumes through reinsurance index-linked annuities which allow the policyholder to participate in returns from equity indices. The crediting rates associated with these features are embedded derivatives which are measured at estimated fair value separately from the host fixed annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets. The estimated fair value of crediting rates associated with index-linked annuities is determined using a combination of an option pricing model and an option-budget approach. The valuation of these embedded derivatives also includes the establishment of a risk margin, as well as changes in nonperformance risk. Transfers Into or Out of Level 3: Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable. Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3) The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at:
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The Company does not develop unobservable inputs used in measuring fair value for all other assets and liabilities classified within Level 3; therefore, these are not included in the table above. The other Level 3 assets and liabilities primarily included fixed maturity securities and derivatives. For fixed maturity securities valued based on non-binding broker quotes, an increase (decrease) in credit spreads would result in a higher (lower) fair value. For derivatives valued based on third-party pricing models, an increase (decrease) in credit spreads would generally result in a higher (lower) fair value. The following tables summarize the change of all assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3):
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(9) Changes in unrealized gains (losses) included in net income (loss) relate to assets and liabilities still held at the end of the respective periods. Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses). Fair Value of Financial Instruments Carried at Other Than Fair Value The following tables provide fair value information for financial instruments that are carried on the balance sheet at amounts other than fair value. These tables exclude the following financial instruments: cash and cash equivalents, accrued investment income, payables for collateral under securities loaned and other transactions and those short-term investments that are not securities and therefore are not included in the three level hierarchy table disclosed in the “— Recurring Fair Value Measurements” section. The estimated fair value of the excluded financial instruments, which are primarily classified in Level 2, approximates carrying value as they are short-term in nature such that the Company believes there is minimal risk of material changes in interest rates or credit quality. All remaining balance sheet amounts excluded from the tables below are not considered financial instruments subject to this disclosure. The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:
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Long-term Debt |
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Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Long-term Debt | 7. Long-term Debt Revolving Credit Facility On May 7, 2019, BHF entered into an amended and restated revolving credit agreement with respect to a $1.0 billion senior unsecured revolving credit facility (the “2019 Revolving Credit Facility”) scheduled to mature in May 2024, all of which may be used for revolving loans and/or letters of credit. The 2019 Revolving Credit Facility replaced BHF’s former $2.0 billion senior unsecured revolving credit facility, which was scheduled to mature in December 2021. Debt issuance costs incurred related to the 2019 Revolving Credit Facility were not significant. Term Loan Facility On February 1, 2019, BHF entered into a term loan agreement with respect to a $1.0 billion unsecured term loan facility (as amended, the “2019 Term Loan Facility”) scheduled to mature in February 2024. On February 1, 2019, BHF borrowed $1.0 billion under the 2019 Term Loan Facility, terminated its former term loan facility due December 2, 2019 (the “2017 Term Loan Facility”) without penalty and repaid $600 million of borrowings outstanding under the 2017 Term Loan Facility, with the remainder of the proceeds to be used for general corporate purposes. Debt issuance costs incurred related to the 2019 Term Loan Facility were not significant.
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Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity | 8. Equity Preferred Stock On March 25, 2019, BHF issued depositary shares, each representing a 1/1,000th ownership interest in a share of BHF’s perpetual 6.600% Series A non-cumulative preferred stock (the “Series A Preferred Stock”) and in the aggregate representing 17,000 shares of Series A Preferred Stock, with a stated amount of $25,000 per share, for aggregate net cash proceeds of $412 million. Dividends, if declared, will accrue and be payable quarterly, in arrears, at an annual rate of 6.600% on the stated amount per share. In connection with the issuance of the depositary shares and the underlying Series A Preferred Stock, BHF incurred $13 million of issuance costs, which have been recorded as a reduction of additional paid-in capital. On May 15, 2019, BHF declared a dividend of $412.50 per share, for a total of $7 million, on the Series A Preferred Stock. The dividend was paid on June 25, 2019 to stockholders of record as of June 10, 2019. Common Stock Repurchase Program On May 3, 2019, BHF authorized the repurchase of up to an additional $400 million of its common stock. Repurchases made under such authorization may be made through open market purchases, including pursuant to 10b5-1 plans or pursuant to accelerated stock repurchase plans, from time to time at management’s discretion in accordance with applicable federal securities laws. During the three months and six months ended June 30, 2019, BHF repurchased 3,575,842 shares and 4,993,424 shares, respectively, of its common stock through open market purchases, pursuant to 10b5-1 plans, for $136 million and $188 million, respectively. At June 30, 2019, BHF had $307 million remaining under its common stock repurchase program. Accumulated Other Comprehensive Income (Loss) Information regarding changes in the balances of each component of AOCI was as follows:
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Information regarding amounts reclassified out of each component of AOCI was as follows:
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Other Revenues and Other Expenses |
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Revenue and Other Expenses | 9. Other Revenues and Other Expenses Other Revenues The Company has entered into contracts with mutual funds, fund managers, and their affiliates (collectively, the “Funds”) whereby the Company is paid monthly or quarterly fees (“12b-1 fees”) for providing certain services to customers and distributors of the Funds. The 12b-1 fees are generally equal to a fixed percentage of the average daily balance of the customer’s investment in a fund. The percentage is specified in the contract between the Company and the Funds. Payments are generally collected when due and are neither refundable nor able to offset future fees. To earn these fees, the Company performs services such as responding to phone inquiries, maintaining records, providing information to distributors and shareholders about fund performance and providing training to account managers and sales agents. The passage of time reflects the satisfaction of the Company’s performance obligations to the Funds and is used to recognize revenue associated with 12b-1 fees. Other revenues consisted primarily of 12b-1 fees of $85 million and $167 million for the three months and six months ended June 30, 2019, respectively, and $91 million and $184 million for the three months and six months ended June 30, 2018, respectively, of which substantially all were reported in the Annuities segment. Other Expenses Information on other expenses was as follows:
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Earnings Per Common Share |
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Earnings Per Common Share | 10. Earnings Per Common Share The following table sets forth the calculation of earnings per common share:
Basic loss per common share equaled diluted loss per common share for the six months ended June 30, 2019 and the three months and six months ended June 30, 2018. The diluted shares were not utilized in the per share calculation for these periods, as the inclusion of such shares would have an antidilutive effect. For the three months ended June 30, 2019, weighted average shares used for calculating earnings per diluted common share excludes 196,492 out-of-the-money stock options, as the inclusion of such shares would be antidilutive to the earnings per common share calculation due to the average share price for the three months ended June 30, 2019.
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Contingencies, Commitments and Guarantees |
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Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies, Commitments and Guarantees | 11. Contingencies, Commitments and Guarantees Contingencies Litigation The Company is a defendant in a number of litigation matters. In some of the matters, large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value. Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law. The Company establishes liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. It is possible that some matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated at June 30, 2019. Matters as to Which an Estimate Can Be Made For some loss contingency matters, the Company is able to estimate a reasonably possible range of loss. For such matters where a loss is believed to be reasonably possible, but not probable, no accrual has been made. As of June 30, 2019, the Company estimates the aggregate range of reasonably possible losses in excess of amounts accrued for these matters to be $0 to $10 million. Matters as to Which an Estimate Cannot Be Made For other matters, the Company is not currently able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts, and the progress of settlement negotiations. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation contingencies and updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews. Sales Practices Claims Over the past several years, the Company has faced claims and regulatory inquiries and investigations, alleging improper marketing or sales of individual life insurance policies, annuities or other products. The Company continues to defend vigorously against the claims in these matters. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices matters. Summary Various litigation, claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, investor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations. It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to previously, large and/or indeterminate amounts, including punitive and treble damages, are sought. Although, in light of these considerations, it is possible that an adverse outcome in certain cases could have a material effect upon the Company’s financial position, based on information currently known by the Company’s management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods. Commitments Mortgage Loan Commitments The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $297 million and $492 million at June 30, 2019 and December 31, 2018, respectively. Commitments to Fund Partnership Investments, Bank Credit Facilities, Bridge Loans and Private Corporate Bond Investments The Company commits to fund partnership investments and to lend funds under bank credit facilities and private corporate bond investments. The amounts of these unfunded commitments were $1.9 billion at both June 30, 2019 and December 31, 2018. Guarantees In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties such that it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third-party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from less than $1 million to $124 million, with a cumulative maximum of $130 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments. In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company’s interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future. The Company’s recorded liabilities were $1 million and $2 million at June 30, 2019 and December 31, 2018, respectively, for indemnities, guarantees and commitments.
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Related Party Transactions |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions | 12. Related Party Transactions The following table summarizes income and expense from affiliated transactions with MetLife prior to the MetLife Divestiture (see Note 1) for the periods indicated:
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(2) Primarily includes costs incurred with MetLife related to shared services, offset by reinsurance ceded to MetLife.
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Business, Basis of Presentation and Summary of Significant Accounting Policies (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||
Use of Estimates, Policy [Policy Text Block] | 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.
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Consolidation of Subsidiaries, Policy [Policy Text Block] | Consolidation The accompanying interim condensed consolidated financial statements include the accounts of Brighthouse Financial, as well as partnerships and limited liability companies (“LLCs”) in which the Company has control. Intercompany accounts and transactions have been eliminated. The Company uses the equity method of accounting for investments in limited partnerships and LLCs when it has more than a minor ownership interest or more than a minor influence over the investee’s operations. The Company generally recognizes its share of the investee’s earnings on a three-month lag in instances where the investee’s financial information is not sufficiently timely or when the investee’s reporting period differs from the Company’s reporting period. When the Company has virtually no influence over the investee’s operations, the investment is carried at fair value. Reclassifications Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform with the 2019 presentation as may be discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements. 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, 2018 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, 2018 (the “2018 Annual Report”), which include all disclosures required by GAAP. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated and combined financial statements of the Company included in the 2018 Annual Report.
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New Accounting Pronouncements, Policy [Policy Text Block] | Adoption of New Accounting Pronouncements Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the Company’s financial statements. There were no ASUs adopted during 2019 which had a material impact on the Company’s financial statements. ASUs issued but not yet adopted as of June 30, 2019 are summarized in the table below.
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Investments, Policy [Policy Text Block] | Maturities of Fixed Maturity Securities Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity. Past Due, Nonaccrual and Modified Mortgage Loans The Company defines delinquency consistent with industry practice, when mortgage loans are past due as follows: commercial and residential mortgage loans — 60 days and agricultural mortgage loans — 90 days.Valuation Allowance Methodology Mortgage loans are considered to be impaired when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the loan agreement. Specific valuation allowances are established using the same methodology for all three portfolio segments as the excess carrying value of a loan over either (i) the present value of expected future cash flows discounted at the loan’s original effective interest rate, (ii) the estimated fair value of the loan’s underlying collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or (iii) the loan’s observable market price. A common evaluation framework is used for establishing non-specific valuation allowances for all loan portfolio segments; however, a separate non-specific valuation allowance is calculated and maintained for each loan portfolio segment that is based on inputs unique to each loan portfolio segment. Non-specific valuation allowances are established for pools of loans with similar risk characteristics where a property-specific or market-specific risk has not been identified, but for which the Company expects to incur a credit loss. These evaluations are based upon several loan portfolio segment-specific factors, including the Company’s experience for loan losses, defaults and loss severity, and loss expectations for loans with similar risk characteristics. These evaluations are revised as conditions change and new information becomes available. Variable Interest Entities The Company has invested in legal entities that are variable interest entities (“VIEs”). VIEs are consolidated when the investor is the primary beneficiary. A primary beneficiary is the variable interest holder in a VIE with both the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and the obligation to absorb losses, or the right to receive benefits that could potentially be significant to the VIE.
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Derivatives, Policy [Policy Text Block] | Accounting for Derivatives Freestanding Derivatives Freestanding derivatives are carried on the Company’s balance sheet either as assets within other invested assets or as liabilities within other liabilities at estimated fair value. The Company does not offset the estimated fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement. If a derivative is not designated or did not qualify as an accounting hedge, changes in the estimated fair value of the derivative are reported in net derivative gains (losses) except for economic hedges of limited partnerships and LLCs which are presented in net investment income. The Company generally reports cash received or paid for a derivative in the investing activity section of the statement of cash flows except for cash flows of certain derivative options with deferred premiums, which are reported in the financing activity section of the statement of cash flows. Hedge Accounting The Company primarily designates derivatives as a hedge of a forecasted transaction or a variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). When a derivative is designated as a cash flow hedge and is determined to be highly effective, changes in fair value are recorded in OCI and subsequently reclassified into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item. To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge. In its hedge documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and at least quarterly throughout the life of the designated hedging relationship. The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item; (ii) the derivative or hedged item expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; or (iv) the derivative is de-designated as a hedging instrument. When hedge accounting is discontinued the derivative is carried at its estimated fair value on the balance sheet, with changes in its estimated fair value recognized in the current period as net derivative gains (losses). The changes in estimated fair value of derivatives previously recorded in OCI related to discontinued cash flow hedges are released into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item. When the hedged item matures or is sold, or the forecasted transaction is not probable of occurring, the Company immediately reclassifies any remaining balances in OCI to net derivative gains (losses). Embedded Derivatives The Company has certain insurance and reinsurance contracts that contain embedded derivatives which are required to be separated from their host contracts and reported as derivatives. These host contracts include: variable annuities with guaranteed minimum benefits, including GMWBs, GMABs and certain GMIBs; index-linked annuities that are directly written or assumed through reinsurance; and ceded reinsurance of variable annuity GMIBs. Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables on the consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances on the consolidated balance sheets. Changes in the estimated fair value of the embedded derivative are reported in net derivative gains (losses).Counterparty Credit Risk The Company may be exposed to credit-related losses in the event of counterparty nonperformance on derivative instruments. Generally, the credit exposure is the fair value at the reporting date less any collateral received from the counterparty. The Company manages its credit risk by: (i) entering into derivative transactions with creditworthy counterparties governed by master netting agreements; (ii) trading through regulated exchanges and central clearing counterparties; (iii) obtaining collateral, such as cash and securities, when appropriate; and (iv) setting limits on single party credit exposures which are subject to periodic management review.
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Segment Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Information, by Segment |
The following table presents total assets with respect to the Company’s segments, as well as Corporate & Other, at:
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Reconciliation of Revenue from Segments to Consolidated | The following table presents total revenues with respect to the Company’s segments, as well as Corporate & Other:
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Insurance (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Insurance [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantees related to Annuity, Universal and Variable Life Contracts | Information regarding the Company’s guarantee exposure was as follows at:
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(6) Defined as the guarantee amount less the account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date.
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Investments (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed Maturity Securities AFS by Sector | The following table presents the fixed maturity securities AFS by sector at:
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(2) Redeemable preferred stock is reported within U.S. corporate and foreign corporate fixed maturity securities. Included within fixed maturity securities are structured securities including residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”).
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Maturities of Fixed Maturity Securities | The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at June 30, 2019:
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Continuous Gross Unrealized Losses for Fixed Maturity Securities AFS by Sector | The following table presents the estimated fair value and gross unrealized losses of fixed maturity securities AFS in an unrealized loss position, aggregated by sector and by length of time that the securities have been in a continuous unrealized loss position at:
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Mortgage Loans by Portfolio Segment | Mortgage loans are summarized as follows at:
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(2) The valuation allowances were primarily from collective evaluation (non-specific loan related).
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Credit Quality of Mortgage Loans by Portfolio Segment | The credit quality of residential mortgage loans was as follows at:
The credit quality of agricultural mortgage loans was as follows at:
The credit quality of commercial mortgage loans was as follows at:
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Net Unrealized Investment Gains (Losses) | The components of net unrealized investment gains (losses), included in AOCI, were as follows:
The changes in net unrealized investment gains (losses) were as follows:
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Securities Lending | Elements of the securities lending program are presented below at:
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The cash collateral liability by loaned security type and remaining tenor of the agreements were as follows at:
__________________ (1) The related loaned security could be returned to the Company on the next business day which would require the Company to immediately return the cash collateral.
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Invested Assets on Deposit, Held in Trust and Pledged as Collateral | Invested assets on deposit, held in trust and pledged as collateral are presented below at estimated fair value at:
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(3) The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 3 of the Notes to the Consolidated and Combined Financial Statements included in the 2018 Annual Report) and derivative transactions (see Note 5).
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Variable Interest Entities | The carrying amount and maximum exposure to loss related to the VIEs in which the Company concluded that it holds a variable interest, but is not the primary beneficiary, were as follows at:
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Components of Net Investment Income | The components of net investment income were as follows:
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Components of Net Investment Gains (Losses) | The components of net investment gains (losses) were as follows:
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Sales or Disposals of Fixed Maturity Securities | Proceeds from sales or disposals of fixed maturity securities and the components of fixed maturity securities net investment gains (losses) were as shown in the table below.
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Derivatives (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location | The following table presents the primary underlying risk exposure, gross notional amount, and estimated fair value of the Company’s derivatives, held at:
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Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) | The following tables present the amount and location of gains (losses), including earned income, recognized for derivatives and gains (losses) pertaining to hedged items presented in net derivative gains (losses):
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Components of Net Derivatives Gains (Losses) | The following tables present the amount and location of gains (losses), including earned income, recognized for derivatives and gains (losses) pertaining to hedged items presented in net derivative gains (losses):
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Schedule of estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps | The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at:
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(2) The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.
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Estimated Fair Value of Derivative Assets and Liabilities after Master Netting Agreements and Cash Collateral | The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
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Estimated Fair Value of Derivative Assets and Liabilities after Master Netting Agreements and Cash Collateral | The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
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Schedule of Derivative Instruments | Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are bilateral contracts between two counterparties (“OTC-bilateral”). The following table presents the aggregate estimated fair value of derivatives in a net liability position containing such credit contingent provisions and the aggregate estimated fair value of assets posted as collateral for such instruments.
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(2) Substantially all of the Company’s collateral arrangements provide for daily posting of collateral for the full value of the derivative contract. As a result, if the credit contingent provisions of derivative contracts in a net liability position were triggered minimal additional assets would be required to be posted as collateral or needed to settle the instruments immediately.
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Fair Value (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recurring Fair Value Measurements |
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(2) Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables and other invested assets on the consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances on the consolidated balance sheets.
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Fair Value Inputs, Quantitative Information | The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at:
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(6) Nonperformance risk spread varies by duration. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative.
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Fair Value, Measured on Recurring Basis, Unobservable Input Reconciliation | The following tables summarize the change of all assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3):
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(9) Changes in unrealized gains (losses) included in net income (loss) relate to assets and liabilities still held at the end of the respective periods. Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).
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Fair Value of Financial Instruments Carried at Other Than Fair Value | The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:
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Equity (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Accumulated Other Comprehensive Income (Loss) | Information regarding changes in the balances of each component of AOCI was as follows:
__________________ (1) See Note 4 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI.
|
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Reclassification out of Accumulated Other Comprehensive Income (Loss) | Information regarding amounts reclassified out of each component of AOCI was as follows:
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Other Revenues and Other Expenses Other Revenues and Expenses (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Operating Cost and Expense, by Component [Table Text Block] | Information on other expenses was as follows:
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Earnings Per Common Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Common Share | The following table sets forth the calculation of earnings per common share:
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Related Party Transactions (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Related Party Transactions [Table Text Block] | The following table summarizes income and expense from affiliated transactions with MetLife prior to the MetLife Divestiture (see Note 1) for the periods indicated:
__________________
(2) Primarily includes costs incurred with MetLife related to shared services, offset by reinsurance ceded to MetLife.
|
Business, Basis of Presentation and Summary of Significant Accounting Policies (Narrative) (Details) - Segment |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Aug. 04, 2017 |
|
Restructuring Cost and Reserve [Line Items] | ||
Number of Reportable Segments | 3 | |
Spinoff [Member] | ||
Restructuring Cost and Reserve [Line Items] | ||
Common Stock Distribution by Parent | 80.80% | |
Common Stock Retained by Parent | 19.20% |
Segment Information (Reconciliation of Operating Revenues to Total Revenues) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Revenues | $ 2,370 | $ 1,702 | $ 3,061 | $ 3,517 |
Annuities | ||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Revenues | 1,194 | 1,146 | 2,311 | 2,293 |
Life | ||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Revenues | 330 | 339 | 633 | 708 |
Run-off | ||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Revenues | 527 | 510 | 1,003 | 1,058 |
Corporate & Other | ||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Revenues | 42 | 31 | 85 | 65 |
Segment Reconciling Items | ||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Revenues | $ 277 | $ (324) | $ (971) | $ (607) |
Segment Information (Total Assets) (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Segment Reporting Information [Line Items] | ||
Total assets | $ 221,212 | $ 206,294 |
Annuities | ||
Segment Reporting Information [Line Items] | ||
Total assets | 152,948 | 141,489 |
Life | ||
Segment Reporting Information [Line Items] | ||
Total assets | 20,854 | 20,449 |
Run-off | ||
Segment Reporting Information [Line Items] | ||
Total assets | 34,245 | 32,393 |
Corporate & Other | ||
Segment Reporting Information [Line Items] | ||
Total assets | $ 13,165 | $ 11,963 |
Segment Information (Narrative) (Details) |
6 Months Ended |
---|---|
Jun. 30, 2019
Segment
| |
Segment Reporting [Abstract] | |
Number of segments | 3 |
Insurance (Guarantees Related to Annuity Contracts) (Details) - Variable Annuity Guarantees - USD ($) $ in Millions |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Guaranteed Death Benefits | ||
Net Amount at Risk by Product and Guarantee [Line Items] | ||
Total account value (3) | $ 103,866 | $ 96,865 |
Separate account value | 98,907 | 91,837 |
Net amount at risk | $ 7,044 | $ 11,073 |
Average attained age of contract holders | 68 years | 68 years |
Guaranteed Annuitization Benefits | ||
Net Amount at Risk by Product and Guarantee [Line Items] | ||
Total account value (3) | $ 59,924 | $ 55,967 |
Separate account value | 58,727 | 54,731 |
Net amount at risk | $ 3,584 | $ 4,128 |
Average attained age of contract holders | 68 years | 68 years |
Insurance (Guarantees Related to Universal and Variable Life Contracts) (Details) - Secondary Guarantees - USD ($) $ in Millions |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Universal Life Contracts | ||
Net Amount at Risk by Product and Guarantee [Line Items] | ||
Total account value (3) | $ 6,028 | $ 6,099 |
Net amount at risk | $ 72,121 | $ 73,131 |
Average attained age of policyholders | 66 years | 65 years |
Variable Life Contracts | ||
Net Amount at Risk by Product and Guarantee [Line Items] | ||
Total account value (3) | $ 3,325 | $ 3,230 |
Net amount at risk | $ 22,139 | $ 23,004 |
Average attained age of policyholders | 50 years | 50 years |
Investments (Maturities of Fixed Maturity Securities) (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Amortized Cost, Due in one year or less | $ 1,670 | |
Amortized Cost, Due after one year through five years | 7,069 | |
Amortized Cost, Due after five years through ten years | 12,313 | |
Amortized Cost, Due after ten years | 24,413 | |
Amortized Cost, Structured Securities | 15,897 | |
Amortized Cost | 61,362 | $ 60,920 |
Estimated Fair Value, Due in one year or less | 1,681 | |
Estimated Fair Value, Due after one year through five years | 7,264 | |
Estimated Fair Value, Due after five years through ten years | 12,967 | |
Estimated Fair Value, Due after ten years | 28,729 | |
Estimated Fair Value, Structured Securities | 16,570 | |
Debt Securities, Available-for-sale | $ 67,211 | $ 62,608 |
Investments (Net Unrealized Investment Gains (Losses)) (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Components of net unrealized investment gains (losses) included in accumulated other comprehensive loss | ||
Fixed maturity securities | $ 5,849 | $ 1,691 |
Derivatives | 257 | 264 |
Other | (13) | (13) |
Subtotal | 6,093 | 1,942 |
Future policy benefits | (2,318) | (886) |
DAC, VOBA and DSI | (300) | (90) |
Subtotal | (2,618) | (976) |
Deferred income tax benefit (expense) | (730) | (203) |
Net unrealized investment gains (losses) | $ 2,745 | $ 763 |
Investments (Changes in Net Unrealized Investment Gains (Losses)) (Details) $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2019
USD ($)
| |
Investments, Debt and Equity Securities [Abstract] | |
Balance, December 31, 2018 | $ 763 |
Unrealized investment gains (losses) during the period | 4,151 |
Unrealized investment gains (losses) relating to: | |
Future policy benefits | (1,432) |
DAC, VOBA and DSI | (210) |
Deferred income tax benefit (expense) | (527) |
Balance, June 30, 2019 | 2,745 |
Change in net unrealized investment gains (losses) | $ 1,982 |
Investments (Securities Lending) (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Securities Financing Transaction [Line Items] | ||
Cash collateral received from counterparties | $ 3,023 | $ 3,646 |
Security collateral received from counterparties | 18 | 55 |
Reinvestment portfolio — estimated fair value | 3,072 | 3,658 |
Amortized cost | ||
Securities Financing Transaction [Line Items] | ||
Securities on loan | 2,038 | 3,056 |
Estimated fair value | ||
Securities Financing Transaction [Line Items] | ||
Securities on loan | $ 2,973 | $ 3,628 |
Investments (Securities Lending Remaining Tenor) (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Securities Financing Transaction [Line Items] | ||
Cash collateral received from counterparties | $ 3,023 | $ 3,646 |
U.S. government and agency | ||
Securities Financing Transaction [Line Items] | ||
Cash collateral received from counterparties | 3,023 | 3,646 |
U.S. government and agency | Remaining Tenor of Securities Lending Agreements: Open | ||
Securities Financing Transaction [Line Items] | ||
Cash collateral received from counterparties | 1,446 | 1,474 |
U.S. government and agency | Remaining Tenor of Securities Lending Agreements: 1 Month or Less | ||
Securities Financing Transaction [Line Items] | ||
Cash collateral received from counterparties | 686 | 1,823 |
U.S. government and agency | Remaining Tenor of Securities Lending Agreements: 1 to 6 Months | ||
Securities Financing Transaction [Line Items] | ||
Cash collateral received from counterparties | $ 891 | $ 349 |
Investments (Invested Assets on Deposit, Held In Trust and Pledged as Collateral) (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Invested assets on deposit (regulatory deposits) | $ 8,991 | $ 8,176 |
Invested assets held in trust (reinsurance agreements) | 4,087 | 3,455 |
Invested assets pledged as collateral | 3,336 | 3,341 |
Total invested assets on deposit, held in trust and pledged as collateral | $ 16,414 | $ 14,972 |
Investments (Variable Interest Entities) (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Variable Interest Entity [Line Items] | ||
Carrying Amount | $ 15,251 | $ 14,855 |
Maximum Exposure to Loss | 15,868 | 16,244 |
Fixed maturity securities | ||
Variable Interest Entity [Line Items] | ||
Carrying Amount | 13,477 | 13,099 |
Maximum Exposure to Loss | 12,865 | 13,099 |
Limited partnerships and LLCs | ||
Variable Interest Entity [Line Items] | ||
Carrying Amount | 1,774 | 1,756 |
Maximum Exposure to Loss | $ 3,003 | $ 3,145 |
Investments (Components of Net Investment Gains (Losses)) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Investments, Debt and Equity Securities [Abstract] | ||||
Net investment gains (losses), fixed maturity securities | $ 68 | $ (65) | $ 53 | $ (104) |
Net investment gains (losses), equity securities | 1 | (3) | 11 | (4) |
Net investment gains (losses), mortgage loans | (3) | (3) | (7) | (7) |
Net investment gains (losses), real estate limited partnerships and limited liability companies | 1 | 0 | 0 | 42 |
Net investment gains (losses), other limited partnership interests | (3) | 0 | (5) | 0 |
Net investment gains (losses), other | (1) | (4) | 0 | (6) |
Total net investment gains (losses) | $ 63 | $ (75) | $ 52 | $ (79) |
Investments (Sales or Disposals of Fixed Maturity Securities) (Details) - Fixed maturity securities - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Debt Securities, Available-for-sale [Line Items] | ||||
Proceeds | $ 3,679 | $ 2,476 | $ 6,958 | $ 5,337 |
Gross investment gains | 106 | 9 | 173 | 12 |
Gross investment losses | (38) | (74) | (120) | (116) |
Net investment gains (losses) | $ 68 | $ (65) | $ 53 | $ (104) |
Investments (Fixed Maturity Securities AFS - Narrative) (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Debt Securities, Available-for-sale | $ 67,211 | $ 62,608 |
Non-Income Producing Debt Securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Debt Securities, Available-for-sale | 32 | |
Unrealized Gain (Loss) | $ (2) | |
Non-Income Producing Debt Securities | Maximum | ||
Debt Securities, Available-for-sale [Line Items] | ||
Debt Securities, Available-for-sale | 1 | |
Unrealized Gain (Loss) | $ 1 |
Investments (Continuous Gross Unrealized Losses for Fixed Maturity Securities AFS by Sector - Narrative) (Details) $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2019
USD ($)
Contracts
| |
Debt Securities, Available-for-sale [Line Items] | |
Fixed maturity securities available-for-sale with gross unrealized loss of equal to or greater than stated percentage | 20.00% |
Fixed maturity securities | |
Debt Securities, Available-for-sale [Line Items] | |
Change in gross unrealized losses of securities in an unrealized loss position | $ (1,200) |
Gross unrealized losses of securities in an unrealized loss position | 226 |
20% or more | Six months or greater | Fixed maturity securities | |
Debt Securities, Available-for-sale [Line Items] | |
Gross unrealized losses of securities in an unrealized loss position | $ 8 |
Number of Securities | Contracts | 7 |
Investments (Other Invested Assets - Narrative) (Details) |
Jun. 30, 2019 |
---|---|
Other invested assets | |
Fair Value, Option, Quantitative Disclosures [Line Items] | |
Percentage Estimated Fair Value | 90.00% |
Investments (Cash Equivalents - Narrative) (Details) - USD ($) $ in Billions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Cash equivalents | $ 1.0 | $ 3.1 |
Investments (Securities Lending - Narrative) (Details) $ in Billions |
Jun. 30, 2019
USD ($)
|
---|---|
Securities Investment | |
Securities Financing Transaction [Line Items] | |
Percentage of Reinvestment Portfolio in Fixed Maturity Securities | 55.00% |
Estimated fair value | |
Securities Financing Transaction [Line Items] | |
Cash collateral on deposit from counterparties | $ 1.4 |
Estimated fair value | U.S. government and agency | |
Securities Financing Transaction [Line Items] | |
Percentage of Securities at Estimated Fair Value of Securities on Loan Relating to Cash Collateral on Open | 100.00% |
Investments (Invested Assets On Deposit, Held in Trust and Pledged as Collateral - Narrative) (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Invested assets on deposit (regulatory deposits) | $ 8,991 | $ 8,176 |
Invested assets held in trust (reinsurance agreements) | 4,087 | 3,455 |
Fixed maturity securities | Policyholder account balances | ||
Invested assets on deposit (regulatory deposits) | 171 | 55 |
Fixed maturity securities | Reinsurance | ||
Invested assets held in trust (reinsurance agreements) | $ 52 | $ 87 |
Investments (Variable Interest Entities - Narrative) (Details) |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Material VIEs | 0 | 0 |
Derivatives (Credit Derivatives) (Details) - USD ($) $ in Millions |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Credit Derivatives [Line Items] | ||
Estimated Fair Value of Credit Default Swaps | $ 33 | $ 11 |
Maximum Amount of Future Payments under Credit Default Swaps | $ 1,905 | $ 1,820 |
Weighted Average Years to Maturity (2) | 3 years 8 months 12 days | 3 years 10 months 24 days |
Credit default swaps | Aaa/Aa/A | ||
Credit Derivatives [Line Items] | ||
Estimated Fair Value of Credit Default Swaps | $ 11 | $ 8 |
Maximum Amount of Future Payments under Credit Default Swaps | $ 828 | $ 689 |
Weighted Average Years to Maturity (2) | 2 years | 2 years |
Credit default swaps | Baa | ||
Credit Derivatives [Line Items] | ||
Estimated Fair Value of Credit Default Swaps | $ 22 | $ 3 |
Maximum Amount of Future Payments under Credit Default Swaps | $ 1,077 | $ 1,131 |
Weighted Average Years to Maturity (2) | 4 years 10 months 24 days | 5 years |
Derivatives Derivatives (Estimated Fair Value of OTC-Bilateral Derivatives) (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Derivative [Line Items] | ||
Estimated Fair Value of Derivatives in Net Liability Position | $ 841 | $ 433 |
Fixed Maturity Securities | ||
Derivative [Line Items] | ||
Estimated Fair Value of Collateral Provided | $ 1,126 | $ 797 |
Derivatives (Derivatives Pertaining to Hedged Items - Narrative) (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Accumulated Other Comprehensive Income (Loss), Cumulative Changes in Net Gain (Loss) from Cash Flow Hedges, Effect Net of Tax | $ 257 | $ 264 |
Long-term Debt - Narrative (Details) - USD ($) $ in Millions |
6 Months Ended | |||
---|---|---|---|---|
Feb. 01, 2019 |
Jun. 30, 2019 |
Jun. 30, 2018 |
May 07, 2019 |
|
Debt Instrument [Line Items] | ||||
Proceeds from issuance of long-term debt | $ 1,000 | $ 0 | ||
Repayments of long-term debt | $ 601 | $ 6 | ||
Revolving Credit Facility Maturing 2024 | ||||
Debt Instrument [Line Items] | ||||
Credit facilities, maximum borrowing capacity | $ 1,000 | |||
Revolving Credit Facility Maturing 2019 | ||||
Debt Instrument [Line Items] | ||||
Credit facilities, maximum borrowing capacity | $ 2,000 | |||
Term Loan Due 2024 | ||||
Debt Instrument [Line Items] | ||||
Credit facilities, maximum borrowing capacity | $ 1,000 | |||
Proceeds from issuance of long-term debt | 1,000 | |||
Term Loan Due 2019 | ||||
Debt Instrument [Line Items] | ||||
Repayments of long-term debt | $ 600 |
Equity (Preferred Stock & Common Stock Repurchase Program - Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
May 15, 2019 |
Mar. 25, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Jun. 30, 2019 |
Jun. 30, 2018 |
May 03, 2019 |
|
Equity [Abstract] | |||||||
Preferred stock, dividend rate | 6.60% | ||||||
Preferred stock, shares issued | 17,000 | ||||||
Preferred stock, liquidation preference per share | $ 25,000 | ||||||
Proceeds from issuance of preferred stock, net of issuance costs | $ 412 | $ 412 | $ 0 | ||||
Preferred stock issuance costs | $ 13 | ||||||
Preferred stock dividend declared per share | $ 412.50 | ||||||
Preferred stock dividend declared | $ 7 | $ 7 | |||||
Class of Stock [Line Items] | |||||||
Treasury stock, value acquired | $ 136 | $ 52 | |||||
Authorization Under 10b5-1 Plan | |||||||
Class of Stock [Line Items] | |||||||
Stock repurchase program, authorized amount | $ 400 | ||||||
Treasury stock, shares acquired | 3,575,842 | 4,993,424 | |||||
Treasury stock, value acquired | $ 136 | $ 188 | |||||
Stock repurchase program, remaining authorized repurchase amount | $ 307 | $ 307 |
Other Revenues and Other Expenses (Other Expenses) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Other Income and Expenses [Abstract] | ||||
Compensation | $ 80 | $ 83 | $ 162 | $ 153 |
Contracted services and other labor costs | 65 | 77 | 112 | 126 |
Transition services agreements | 65 | 71 | 132 | 145 |
Establishment costs | 38 | 56 | 72 | 103 |
Premium and other taxes, licenses and fees | 13 | 26 | 20 | 43 |
Separate account fees | 122 | 132 | 242 | 268 |
Volume related costs, excluding compensation, net of DAC capitalization | 153 | 166 | 317 | 325 |
Interest expense on debt | 48 | 37 | 95 | 74 |
Other | 37 | 43 | 61 | 72 |
Total other expenses | $ 621 | $ 691 | $ 1,213 | $ 1,309 |
Other Revenues and Other Expenses Other Revenues and Other Expenses (Other Revenues - Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Distribution service | ||||
Revenue from Contract with Customer, Including Assessed Tax | $ 85 | $ 91 | $ 167 | $ 184 |
Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Earnings Per Share [Abstract] | ||||
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders | $ 377 | $ (239) | $ (360) | $ (306) |
Weighted average common shares outstanding - Basic | 114,931,224 | 119,773,106 | 115,863,127 | 119,773,106 |
Dilutive effect of share-based awards | 605,430 | 0 | 0 | 0 |
Weighted average common shares outstanding - Diluted | 115,536,654 | 119,773,106 | 115,863,127 | 119,773,106 |
Earnings per common share - Basic | $ 3.28 | $ (2.01) | $ (3.10) | $ (2.56) |
Earnings per common share - Diluted | $ 3.27 | $ (2.01) | $ (3.10) | $ (2.56) |
Antidilutive stock options excluded from the computation of earnings per common share | 196,492 |
Related Party Transactions Related Party Transactions (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Related Party Transactions [Abstract] | ||||
Income (1) | $ 0 | $ (101) | $ 0 | $ (182) |
Expense (2) | $ 0 | $ 55 | $ 0 | $ 133 |
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