BRIGHTHOUSE FINA(BHFAP) - 2025 Q2 - Quarterly Report

Company Information Filing Details This report is Brighthouse Financial, Inc.'s quarterly report for the period ended June 30, 2025, filed under Section 13 or 15(d) of the Securities Exchange Act of 1934, with the company having filed all required reports and complying with electronic data submission regulations - Brighthouse Financial, Inc. filed its quarterly report for the period ended June 30, 2025, complying with all reporting and electronic data submission requirements[2][3] Securities Information The company lists various securities on The Nasdaq Stock Market, including common stock, depositary shares representing interests in multiple series of non-cumulative preferred stock, and junior subordinated debentures due 2058 Registered Securities | Title of each class | Trading symbol(s) | Name of each exchange on which registered | | :------------------------------------------------------------------------------- | :---------------- | :---------------------------------------- | | Common Stock, par value $0.01 per share | BHF | The Nasdaq Stock Market LLC | | Depositary Shares, each representing a 1/1,000th interest in a share of 6.600% Non-Cumulative Preferred Stock, Series A | BHFAP | The Nasdaq Stock Market LLC | | Depositary Shares, each representing a 1/1,000th interest in a share of 6.750% Non-Cumulative Preferred Stock, Series B | BHFAO | The Nasdaq Stock Market LLC | | Depositary Shares, each representing a 1/1,000th interest in a share of 5.375% Non-Cumulative Preferred Stock, Series C | BHFAN | The Nasdaq Stock Market LLC | | Depositary Shares, each representing a 1/1,000th interest in a share of 4.625% Non-Cumulative Preferred Stock, Series D | BHFAM | The Nasdaq Stock Market LLC | | 6.250% Junior Subordinated Debentures due 2058 | BHFAL | The Nasdaq Stock Market LLC | Filer Status & Outstanding Shares The company is identified as a large accelerated filer, with 57,152,371 shares of common stock outstanding as of August 4, 2025 - The company is identified as a large accelerated filer[4] - As of August 4, 2025, the company had 57,152,371 shares of common stock outstanding[4] Part I — Financial Information Item 1. Consolidated Financial Statements This section presents Brighthouse Financial, Inc.'s unaudited condensed consolidated financial statements for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations and comprehensive income (loss), statements of equity, and cash flows, along with detailed notes Interim Condensed Consolidated Balance Sheets As of June 30, 2025, the company's total assets increased to $242,645 million from $238,537 million as of December 31, 2024, with total liabilities rising to $236,907 million and shareholders' equity increasing to $5,673 million Consolidated Balance Sheet Key Data (Million USD) | Metric | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :------------- | | Total Assets | 242,645 | 238,537 | | Total Liabilities | 236,907 | 233,513 | | Shareholders' Equity | 5,673 | 4,959 | - Total investments increased from $117,387 million as of December 31, 2024, to $120,747 million as of June 30, 2025[8] - Cash and cash equivalents increased from $5,045 million as of December 31, 2024, to $5,540 million as of June 30, 2025[8] Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) For the three months ended June 30, 2025, the company reported net income of $85 million, up from $34 million in the prior-year period, while for the six months ended June 30, 2025, net loss narrowed to $181 million from $457 million Consolidated Statements of Operations and Comprehensive Income (Loss) Key Data (Million USD) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Total Revenues | 871 | 1,427 | 3,261 | 1,501 | | Total Expenses | 778 | 1,413 | 3,522 | 2,101 | | Net Income (Loss) | 85 | 34 | (181) | (457) | | Net Income (Loss) Attributable to Brighthouse Financial, Inc. Common Shareholders | 60 | 9 | (234) | (510) | | Basic Earnings (Loss) Per Share | 1.03 | 0.12 | (4.06) | (8.17) | | Diluted Earnings (Loss) Per Share | 1.02 | 0.12 | (4.06) | (8.17) | - Net derivative gains (losses) for the three months ended June 30, 2025, were ($1,237 million), compared to ($662 million) in the prior-year period, indicating a larger loss[12] - Changes in market risk benefits for the six months ended June 30, 2025, were ($208 million), a significant reduction from the ($1,796 million) loss in the prior-year period[12] Interim Condensed Consolidated Statements of Equity As of June 30, 2025, Brighthouse Financial, Inc.'s shareholders' equity increased to $5,673 million from $4,959 million as of December 31, 2024, primarily due to an improvement in accumulated other comprehensive income (loss) Brighthouse Financial, Inc. Shareholders' Equity (Million USD) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------- | | Preferred Stock | — | — | | Common Stock | 1 | 1 | | Additional Paid-in Capital | 13,918 | 13,927 | | Retained Earnings (Deficit) | (1,302) | (1,119) | | Treasury Stock | (2,687) | (2,572) | | Accumulated Other Comprehensive Income (Loss) | (4,257) | (5,278) | | Brighthouse Financial, Inc. Shareholders' Equity | 5,673 | 4,959 | | Noncontrolling Interests | 65 | 65 | | Total Equity | 5,738 | 5,024 | - As of June 30, 2025, accumulated other comprehensive income (loss) improved to ($4,257 million) from ($5,278 million) as of December 31, 2024[8][15] Interim Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash from operating activities was $145 million, a significant improvement from ($196 million) in the prior-year period, while net cash from investing activities was $675 million and net cash used in financing activities was ($325 million) Consolidated Cash Flow Key Data (Million USD) | Cash Flow Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :-------------------- | :-------------------- | | Net Cash from Operating Activities | 145 | (196) | | Net Cash from Investing Activities | 675 | (1,707) | | Net Cash from Financing Activities | (325) | 2,493 | | Cash and Cash Equivalents, End of Period | 5,540 | 4,441 | - Policyholder account deposits significantly decreased to $9,834 million for the six months ended June 30, 2025, from $20,632 million in the prior-year period[18] - Net financing elements of derivative-related transactions improved to ($114 million) for the six months ended June 30, 2025, from ($175 million) in the prior-year period[18] Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) This section provides detailed notes on the company's business, accounting policies, segment information, insurance liabilities, market risk benefits, separate accounts, deferred policy acquisition costs, investments, derivatives, fair value, equity, other income and expenses, earnings per share, and contingencies, commitments, and guarantees Note 1 — Business, Basis of Presentation and Summary of Significant Accounting Policies Brighthouse Financial, Inc. is a leading U.S. provider of annuity and life insurance products, operating through multiple independent distribution channels, and updated its accounting policies in Q1 2025 to include a trading securities portfolio - Brighthouse Financial is one of the largest providers of annuity and life insurance products in the U.S., operating through multiple independent distribution channels and a network of distribution partners[21] - The company is organized into four reportable segments: Annuities, Life, Run-off, and Corporate & Other[21] - The company updated its accounting policies in the first quarter of 2025 to include a trading securities portfolio, with gains and losses recognized in net investment income[26][27][38] Note 2 — Segment Information The company offers products and services through its Annuities, Life, Run-off, and Corporate & Other segments, with the CEO using Adjusted Earnings, a non-GAAP measure excluding market volatility, to assess segment performance, updated in Q1 2025 to reflect trading securities - The company's Chief Operating Decision Maker (CEO) uses Adjusted Earnings, a non-GAAP measure, to evaluate segment performance, which excludes the impact of market volatility[37][38] Adjusted Earnings (Loss) by Segment for the Three Months Ended June 30, 2025 (Million USD) | Segment | Adjusted Earnings (Loss) | | :--------------- | :----------------- | | Annuities | 332 | | Life | (26) | | Run-off | (83) | | Corporate & Other | (25) | | Total | 198 | Adjusted Earnings (Loss) by Segment for the Six Months Ended June 30, 2025 (Million USD) | Segment | Adjusted Earnings (Loss) | | :--------------- | :----------------- | | Annuities | 646 | | Life | (17) | | Run-off | (147) | | Corporate & Other | (49) | | Total | 433 | Total Assets by Segment as of June 30, 2025, and December 31, 2024 (Million USD) | Segment | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :------------- | | Annuities | 168,101 | 163,830 | | Life | 26,810 | 26,261 | | Run-off | 24,873 | 24,873 | | Corporate & Other | 22,861 | 23,573 | | Total | 242,645 | 238,537 | Note 3 — Insurance Liabilities This note details future policy benefits liabilities and policyholder account balances, with total future policy benefits at $31,974 million and total policyholder account balances at $88,046 million as of June 30, 2025 Net Future Policy Benefits Liabilities (Million USD) | Metric | June 30, 2025 | June 30, 2024 | | :--------------------------------- | :------------ | :------------- | | Term and Universal Life Insurance | 2,539 | 2,389 | | Income Annuities | 3,866 | 3,698 | | Structured and Pension Risk Transfer Annuities | 6,053 | 6,225 | | Net Future Policy Benefits Liabilities, End of Period | 12,458 | 12,312 | Policyholder Account Balances (Million USD) | Product Type | Balance as of Six Months Ended June 30, 2025 | | :----------------- | :---------------------------- | | Universal Life | 2,605 | | Variable Annuities | 3,625 | | Indexed Annuities | 50,237 | | Fixed Annuities | 14,619 | | ULSG | 4,619 | | Company-Owned Life Insurance | 645 | | Total | 76,350 | - Net additional insurance liabilities for universal life-type contracts (net of reinsurance recoverables) were $7,769 million as of June 30, 2025, compared to $6,339 million in the prior-year period[64] Note 4 — Market Risk Benefits This note provides information on market risk benefits (MRB) assets and liabilities related to variable annuities, with net MRB (after reinsurance) decreasing to $6,945 million as of June 30, 2025, from $7,792 million in the prior-year period Net Market Risk Benefits (After Reinsurance) (Million USD) | Metric | June 30, 2025 | June 30, 2024 | | :--------------------------------- | :------------ | :------------- | | Beginning Balance | 7,233 | 9,701 | | Ending Balance, Net of Reinsurance | 6,945 | 7,792 | - As of June 30, 2025, the weighted average age of contract holders was 74.2 years, compared to 73.4 years in the prior-year period[76] Note 5 — Separate Accounts This note provides information on separate account liabilities and assets supporting separate accounts, with total separate account liabilities and total fair value of assets supporting separate accounts both at $86,085 million as of June 30, 2025 Separate Account Liabilities (Million USD) | Product Type | Balance as of Six Months Ended June 30, 2025 | | :----------------- | :---------------------------- | | Variable Annuities | 76,782 | | Universal Life | 6,632 | | Company-Owned Life Insurance | 2,399 | | Total | 85,813 | Total Fair Value of Assets Supporting Separate Accounts (Million USD) | Asset Class | June 30, 2025 | December 31, 2024 | | :----------------- | :------------ | :------------- | | Equity Securities | 85,868 | 85,423 | | Fixed Maturity Securities | 209 | 207 | | Cash and Cash Equivalents | 4 | 2 | | Other Assets | 4 | 4 | | Total | 86,085 | 85,636 | Net Amount at Risk and Cash Surrender Value of Insurance Products (Million USD) | Product Type | Net Amount at Risk as of June 30, 2025 | Cash Surrender Value as of June 30, 2025 | | :----------------- | :---------------------- | :------------------------ | | Universal Life | 32,356 | 8,642 | | Variable Annuities | 12,287 | 80,039 | | ULSG | 62,652 | 4,195 | | Company-Owned Life Insurance | 2,642 | 2,845 | Note 6 — Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles This note provides information on deferred policy acquisition costs (DAC) and value of business acquired (VOBA), with total DAC and VOBA decreasing slightly to $4,636 million as of June 30, 2025, from $4,710 million as of December 31, 2024 Total DAC and VOBA (Million USD) | Product Type | Ending Balance as of June 30, 2025 | | :----------------- | :-------------------- | | Variable Annuities | 2,295 | | Fixed Annuities | 171 | | Indexed Annuities | 1,522 | | Term and Universal Life Insurance | 290 | | Universal Life | 358 | | Total | 4,636 | Deferred Sales Inducements (Million USD) | Product Type | Ending Balance as of June 30, 2025 | | :----------------- | :-------------------- | | Variable Annuities | 6 | | Fixed Annuities | 187 | Unearned Revenue (Million USD) | Product Type | Ending Balance as of June 30, 2025 | | :----------------- | :-------------------- | | Universal Life | 357 | | ULSG | 758 | | Variable Annuities | 57 | Note 7 — Investments This note provides detailed information on the company's investment portfolio, including fixed maturity securities, mortgage loans, other investment assets, and net unrealized investment gains (losses), with total investments at $120,747 million as of June 30, 2025, of which fixed maturity securities account for $80,835 million Fixed Maturity Securities by Industry (Million USD) | Industry Category | Estimated Fair Value as of June 30, 2025 | | :----------------- | :------------------------ | | U.S. Corporate Bonds | 37,573 | | Foreign Corporate Bonds | 11,769 | | Residential Mortgage-Backed Securities | 7,835 | | U.S. Government and Agency Bonds | 6,636 | | Commercial Mortgage-Backed Securities | 6,374 | | Asset-Backed Securities | 6,186 | | State and Local Government Bonds | 3,521 | | Foreign Government Bonds | 941 | | Total | 80,835 | Mortgage Loans by Portfolio Segment (Million USD) | Portfolio Segment | Carrying Value as of June 30, 2025 | | :----------------- | :-------------------- | | Commercial | 12,916 | | Agricultural | 4,509 | | Residential | 5,777 | | Total | 23,202 | Components of Net Unrealized Investment Gains (Losses) (Million USD) | Component | June 30, 2025 | | :----------------- | :------------ | | Fixed Maturity Securities | (5,860) | | Derivatives | 189 | | Other | (7) | | Subtotal | (5,678) | - As of June 30, 2025, the estimated fair value of the company's non-income-producing fixed maturity securities was $20 million, down from $30 million as of December 31, 2024[88] - As of June 30, 2025, the allowance for credit losses on mortgage loans was $209 million, up from $178 million as of December 31, 2024[103] Note 8 — Derivatives This note details the company's derivative instruments and strategies used to manage interest rate, foreign currency, credit, and equity market risks, with total notional amount of $289,546 million and estimated fair value assets of $7,803 million and liabilities of $7,398 million as of June 30, 2025 Derivatives by Primary Risk Exposure, Notional Amount, and Estimated Fair Value (Million USD) | Primary Risk Exposure | Total Notional Amount as of June 30, 2025 | Estimated Fair Value Assets as of June 30, 2025 | Estimated Fair Value Liabilities as of June 30, 2025 | | :----------------- | :---------------------- | :---------------------------- | :---------------------------- | | Interest Rate | 91,031 | 266 | 2,014 | | Foreign Currency Exchange Rate | 4,358 | 326 | 114 | | Credit | 1,230 | 28 | — | | Equity Market | 191,994 | 7,183 | 5,247 | | Total | 289,546 | 7,803 | 7,398 | - The vast majority of the company's derivatives, by total notional amount, were not designated or did not qualify for hedge accounting relationships as of June 30, 2025[156] Estimated Fair Value and Maximum Future Payments for Credit Default Swaps (Million USD) | Credit Rating | Maximum Future Payments as of June 30, 2025 | Estimated Fair Value of Credit Default Swaps as of June 30, 2025 | | :----------------- | :---------------------------- | :------------------------------------ | | Aaa/Aa/A | 100 | 2 | | Baa | 1,102 | 24 | | Ba | 24 | 2 | | Caa and Below | 4 | 0.5 | | Total | 1,230 | 28 | Note 9 — Fair Value This note provides fair value measurement information for assets and liabilities by fair value hierarchy levels (Level 1, Level 2, Level 3), along with valuation controls and procedures, with total estimated fair value of assets at $177,651 million and liabilities at $27,095 million as of June 30, 2025 Assets Measured at Fair Value by Level (Million USD) | Asset Class | Level 1 | Level 2 | Level 3 | Total Estimated Fair Value | | :----------------- | :------ | :------ | :------ | :------------- | | Fixed Maturity Securities | 2,544 | 77,093 | 1,198 | 80,835 | | Trading Securities | 94 | 423 | 3 | 520 | | Equity Securities | 63 | 5 | 6 | 74 | | Short-Term Investments | 905 | 265 | — | 1,170 | | Derivative Assets | — | 7,795 | 8 | 7,803 | | Indexed Annuity Embedded Derivatives | — | — | 80 | 80 | | Market Risk Benefit Assets | — | — | 1,084 | 1,084 | | Separate Account Assets | 6 | 86,079 | — | 86,085 | | Total Assets | 3,612 | 171,660 | 2,379 | 177,651 | Liabilities Measured at Fair Value by Level (Million USD) | Liability Class | Level 1 | Level 2 | Level 3 | Total Estimated Fair Value | | :----------------- | :------ | :------ | :------ | :------------- | | Market Risk Benefit Liabilities | — | — | 8,051 | 8,051 | | Derivative Liabilities | 1 | 7,397 | — | 7,398 | | Indexed Annuity Embedded Derivatives | — | — | 11,646 | 11,646 | | Total Liabilities | 1 | 7,397 | 19,697 | 27,095 | - The company monitors and oversees valuation controls and policies for securities, mortgage loans, and derivatives performed by valuation service providers, reporting compliance to the Audit Committee regularly[183] Note 10 — Equity This note provides information on preferred stock, common stock repurchase programs, and accumulated other comprehensive income (loss) (AOCI), with the company having repurchased 1,844,396 shares of common stock for $102 million as of June 30, 2025, with $441 million remaining under the repurchase program Preferred Stock Issued, Outstanding, and Authorized Shares | Series | Authorized Shares | Shares Issued | Shares Outstanding | | :--------------------------------- | :----------- | :--------- | :------- | | 6.600% Non-Cumulative Preferred Stock, Series A | 17,000 | 17,000 | 17,000 | | 6.750% Non-Cumulative Preferred Stock, Series B | 16,100 | 16,100 | 16,100 | | 5.375% Non-Cumulative Preferred Stock, Series C | 23,000 | 23,000 | 23,000 | | 4.625% Non-Cumulative Preferred Stock, Series D | 14,000 | 14,000 | 14,000 | | Undesignated | 99,929,900 | — | — | | Total | 100,000,000 | 70,100 | 70,100 | Preferred Stock Dividends (Million USD) | Series | Total for Three Months Ended June 30, 2025 | Total for Three Months Ended June 30, 2024 | Total for Six Months Ended June 30, 2025 | Total for Six Months Ended June 30, 2024 | | :--- | :------------------------ | :------------------------ | :------------------------ | :------------------------ | | A | 7 | 7 | 14 | 14 | | B | 7 | 7 | 14 | 14 | | C | 7 | 7 | 15 | 15 | | D | 4 | 4 | 8 | 8 | | Total | 25 | 25 | 51 | 51 | - For the six months ended June 30, 2025, the company repurchased 1,844,396 shares of common stock for $102 million, compared to 2,634,041 shares for $126 million in the prior-year period[232] - As of June 30, 2025, $441 million remained under the company's common stock repurchase program[232] Note 11 — Other Revenues and Other Expenses This note provides detailed information on other revenues and expenses, with other revenues totaling $143 million for the three months ended June 30, 2025, including $64 million in 12b-1 fees, and total other expenses at $482 million - For the three months ended June 30, 2025, other revenues totaled $143 million, including $64 million in 12b-1 fees, primarily from the Annuities segment[242] Other Expenses (Million USD) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Compensation | 103 | 101 | 233 | 212 | | Contracted Services and Other Personnel Costs | 76 | 70 | 148 | 133 | | Transition Services Agreements | 4 | 5 | 7 | 12 | | Premium and Other Taxes, Licenses and Fees | 10 | 13 | 26 | 24 | | Separate Account Fees | 80 | 91 | 163 | 183 | | Sales-Related Costs | 153 | 138 | 285 | 285 | | Interest Expense on Debt | 38 | 38 | 76 | 76 | | Other | 18 | 12 | 37 | 50 | | Total Other Expenses | 482 | 468 | 975 | 975 | Note 12 — Earnings Per Common Share For the three months ended June 30, 2025, basic earnings per share were $1.03 and diluted earnings per share were $1.02, a significant increase from $0.12 in the prior-year period, while for the six months, basic and diluted loss per share both narrowed to $4.06 from $8.17 Earnings (Loss) Per Common Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net Income (Loss) Attributable to Brighthouse Financial, Inc. Common Shareholders | 60 | 9 | (234) | (510) | | Basic Earnings (Loss) Per Share | 1.03 | 0.12 | (4.06) | (8.17) | | Diluted Earnings (Loss) Per Share | 1.02 | 0.12 | (4.06) | (8.17) | - For the three months ended June 30, 2025, the weighted average common shares used to calculate diluted earnings per share included 322,881 dilutive stock options[246] Note 13 — Contingencies, Commitments and Guarantees This note discusses the company's litigation, regulatory investigations, commitments, and guarantees, with an estimated aggregate range of reasonably possible losses up to approximately $10 million and an additional range of $0 to $100 million for certain tax matters as of June 30, 2025 - As of June 30, 2025, the company estimated an aggregate range of reasonably possible losses up to approximately $10 million[253] - As of June 30, 2025, the company estimated a range of reasonably possible losses related to certain tax matters between $0 and $100 million[263] Commitment Amounts (Million USD) | Commitment Type | June 30, 2025 | December 31, 2024 | | :----------------- | :------------ | :------------- | | Mortgage Loan Commitments | 182 | 271 | | Commitments to Fund Partnership Investments, Bank Credit Facilities, and Private Corporate Bond Investments | 1,600 | 1,700 | - The company has provided certain indemnifications, guarantees, and commitments to third parties, some with potential maximum amounts contractually limited to an aggregate of up to $82 million[268] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a detailed discussion and analysis of the company's financial condition, results of operations, and cash flows, including an executive summary, industry trends, key accounting estimates, non-GAAP financial disclosures, segment performance, investments, derivatives, policyholder liabilities, and liquidity and capital resources Introduction This introduction aims to help readers understand Brighthouse Financial's results of operations, financial condition, and cash flows for the periods presented, recommending sequential reading of key information sections - This Management's Discussion and Analysis should be read in conjunction with the interim condensed consolidated financial statements and notes thereto, the 2024 Annual Report, the first quarter 10-Q report, and 8-K filings in 2025[272] Executive Summary Brighthouse Financial, a leading U.S. provider of annuity and life insurance products, reported net income of $60 million and adjusted earnings of $198 million for the three months ended June 30, 2025, and a net loss of $234 million with adjusted earnings of $433 million for the six months ended June 30, 2025 - For the three months ended June 30, 2025, the company reported net income of $60 million and adjusted earnings of $198 million[278] - For the six months ended June 30, 2025, the company reported a net loss of $234 million and adjusted earnings of $433 million[279] - The increase in net income for the second quarter of 2025 was primarily driven by favorable performance in pre-tax adjusted earnings and favorable market-driven changes in the estimated fair value of variable annuity guaranteed benefit riders[278] Industry Trends and Uncertainties The company's business and operating results are significantly influenced by capital markets and overall economic conditions, including interest rates, inflation, equity market performance, and geopolitical conflicts, which are continuously monitored for their impact on operations and the investment portfolio - Capital markets and economic conditions, particularly interest rate levels and the shape of the yield curve, significantly impact the company's profitability and product demand[283] - The Federal Reserve lowered the target range for the federal funds rate three times in 2024, and any further adjustments could affect pricing levels for risk investments and product sales[341] - The company continuously monitors factors such as global inflation, tariffs, uncertainties in certain asset classes (including commercial real estate), and geopolitical conflicts for their impact on business operations, investment portfolio, and derivatives[284] Summary of Critical Accounting Estimates The preparation of the company's financial statements involves management's adoption of accounting policies and use of estimates and assumptions, with critical estimates including future policy benefits liabilities, estimated fair value of market risk benefits, estimated fair value of derivatives and embedded derivatives, and the measurement of income taxes and valuation of deferred tax assets - Critical accounting estimates include future policy benefits liabilities, the estimated fair value of market risk benefits, the estimated fair value of freestanding and embedded derivatives, and the measurement of income taxes and valuation of deferred tax assets[293] Non-GAAP Financial Disclosures The company uses non-GAAP financial measures like Adjusted Earnings and Adjusted Net Investment Income to assess performance and facilitate comparisons with industry results, with Adjusted Earnings excluding market volatility and updated in Q1 2025 to reflect trading securities - Adjusted Earnings is a non-GAAP financial measure used by management to assess performance and facilitate comparisons with industry results, excluding the impact of market volatility[290][291] - Adjusted Earnings was updated in the first quarter of 2025 to incorporate the trading securities portfolio[291] - Adjusted Net Investment Income is a measure used by management to gauge investment portfolio performance, representing GAAP net investment income plus investment hedge adjustments less investment gains (losses) from trading securities[297] Results of Operations For the three months ended June 30, 2025, the company reported net income of $60 million and adjusted earnings of $198 million, a decrease from the prior-year period, while for the six months, net loss narrowed to $234 million and adjusted earnings increased to $433 million Net Income (Loss) Attributable to Shareholders and Adjusted Earnings (Loss) (Million USD) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net Income (Loss) Attributable to Shareholders | 60 | 9 | (234) | (510) | | Adjusted Earnings (Loss) | 198 | 346 | 433 | 248 | - For the three months ended June 30, 2025, Adjusted Earnings decreased by $148 million, primarily due to increased net costs of insurance-related activities, lower net investment spread, and decreased net fee income[309] - For the six months ended June 30, 2025, Adjusted Earnings increased by $185 million, favorably impacted by lower net costs of insurance-related activities, increased net fee income, and decreased other expenses[311] Investments The company manages investment portfolio risk through asset type allocation, industry and issuer diversification, and risk limits, with net unrealized loss positions in the investment portfolio increasing as of June 30, 2025, primarily due to rising interest rates - The company manages investment portfolio risk through asset type allocation, industry and issuer diversification, and risk limits, utilizing derivatives to manage credit, interest rate, equity market, and foreign currency risks[339] - Rising interest rates have resulted in unrealized losses exceeding unrealized gains on fixed maturity securities in the company's investment portfolio[341] Investment Portfolio Yield and Adjusted Net Investment Income (Million USD) | Metric | Yield for Three Months Ended June 30, 2025 | Amount for Three Months Ended June 30, 2025 | Yield for Six Months Ended June 30, 2025 | Amount for Six Months Ended June 30, 2025 | | :----------------------- | :-------------------------- | :------------------------ | :-------------------------- | :------------------------ | | Investment Income | 4.41% | 1,329 | 4.40% | 2,659 | | Investment Expenses and Other | (0.13)% | (37) | (0.13)% | (76) | | Adjusted Net Investment Income | 4.28% | 1,292 | 4.27% | 2,583 | Mortgage Loans by Portfolio Segment (Million USD) | Portfolio Segment | Amortized Cost as of June 30, 2025 | Allowance for Credit Losses as of June 30, 2025 | Allowance for Credit Losses as a Percentage of Amortized Cost as of June 30, 2025 | | :----------- | :-------------------- | :-------------------------- | :---------------------------------------- | | Commercial | 12,916 | 146 | 1.1% | | Agricultural | 4,509 | 22 | 0.5% | | Residential | 5,777 | 41 | 0.7% | | Total | 23,202 | 209 | 0.9% | Derivatives The company uses derivatives to manage interest rate, foreign currency, credit, and equity market risks, with a total notional amount of $289,546 million as of June 30, 2025, most of which are not designated as hedging instruments, and Level 3 derivatives valuation involves significant unobservable inputs - The company uses derivatives to manage interest rate, foreign currency exchange rate, credit, and equity market risks[377] - The vast majority of the company's derivatives, by total notional amount, were not designated or did not qualify for hedge accounting relationships as of June 30, 2025[156] - The valuation of Level 3 derivatives involves the use of significant unobservable inputs, requiring a higher degree of management judgment or estimation[379] Policyholder Liabilities The company establishes and holds actuarially determined liabilities to meet policy obligations or provide future annuity and life insurance benefit payments, with guaranteed minimum benefits (GMxB) on variable annuities classified as market risk benefits (MRB) and measured at fair value - The company establishes and holds actuarially determined liabilities to meet policy obligations or provide future annuity and life insurance benefit payments[387] - Guaranteed minimum benefits (GMxB) on variable annuities are classified as market risk benefits (MRB) and measured at fair value[390] Variable Annuity Account Value and Net Amount at Risk (NAR) by GMxB Type (Million USD) | GMxB Type | Account Value as of June 30, 2025 | Death Benefit NAR as of June 30, 2025 | Living Benefit NAR as of June 30, 2025 | | :----------------- | :-------------------- | :----------------------- | :----------------------- | | GMIB | 29,952 | 3,352 | 3,644 | | GMIB Max with EDB | 6,871 | 6,485 | 857 | | GMIB Max without EDB | 3,878 | 81 | 236 | | GMWB | 19,242 | 163 | 197 | | GMAB | 219 | — | — | | GMDB only | 17,113 | 939 | — | | EDB only | 3,132 | 1,267 | — | | Total | 80,407 | 12,287 | 4,934 | Liquidity and Capital Resources The company maintains ample liquidity to meet business needs and a strong capital position to support its financial strength and credit ratings, with short-term liquidity of $4.6 billion and liquid assets of $48.9 billion as of June 30, 2025 - As of June 30, 2025, the company had short-term liquidity of $4.6 billion and liquid assets of $48.9 billion[401][402] - The company targets a consolidated Risk-Based Capital (RBC) ratio of 400% to 450% under normal market conditions[407] - The company authorized a $750 million share repurchase program in November 2023, with $441 million remaining as of June 30, 2025[408][99] Sources and Uses of Liquidity and Capital (Million USD) | Category | Sources for Six Months Ended June 30, 2025 | Uses for Six Months Ended June 30, 2025 | | :--------------- | :------------------------ | :------------------------ | | Net from Operating Activities | 145 | — | | Net from Investing Activities | 675 | — | | Net Change in Policyholder Account Balances | — | 146 | | Net Change in Securities Lending and Other Trading Collateral Payables | 103 | — | | Long-Term Debt Repayments | — | 1 | | Preferred Stock Dividends | — | 51 | | Treasury Stock Repurchases | — | 102 | | Net Financing Elements of Certain Derivative Instruments and Other Derivative-Related Transactions | — | 114 | | Other, Net | — | 14 | | Total | 923 | 428 | Note Regarding Forward-Looking Statements This report contains forward-looking statements involving significant risks and uncertainties, based on current expectations and economic conditions, where actual results may differ materially due to known or unknown risks, uncertainties, and other factors - Forward-looking statements involve significant risks and uncertainties, and actual results may differ materially from expectations[450][451] - Investors are cautioned not to place undue reliance on any forward-looking statements and should read them in conjunction with the 'Risk Factors' and 'Quantitative and Qualitative Disclosures About Market Risk' sections in the 2024 Annual Report[452] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risk through its insurance operations and general account investment activities, primarily from changes in interest rates, equity market prices, credit spreads, and foreign currency exchange rates, with no material changes in market risk exposure since the 2024 Annual Report - The company faces market risk through its insurance operations and general account investment activities, primarily from changes in interest rates, equity market prices, credit spreads, and foreign currency exchange rates[454] - There have been no material changes in the company's market risk exposure since the disclosures in the 2024 Annual Report[455] Item 4. Controls and Procedures As of June 30, 2025, management assessed and determined the company's disclosure controls and procedures to be effective, with ongoing changes to business processes, system implementations, and new third-party arrangements considered material changes to internal control over financial reporting - As of June 30, 2025, the company's disclosure controls and procedures were determined to be effective[457] - The company is changing business processes, implementing systems, and establishing new third-party arrangements, which are considered material changes to internal control over financial reporting[458] Part II — Other Information Item 1. Legal Proceedings This section refers to the detailed disclosures regarding legal proceedings in Note 13 to the financial statements - Detailed information on legal proceedings can be found in Note 13 to the interim condensed consolidated financial statements[460] Item 1A. Risk Factors Various risk factors that could materially affect the company's business are discussed in this report, with no material changes to risk factors since the 2024 Annual Report disclosures - Various risk factors that could materially affect the company's business are discussed in this report[461] - There have been no material changes to risk factors since the disclosures in the 2024 Annual Report[461] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds For the three months ended June 30, 2025, the company repurchased 781,800 shares of common stock at average prices ranging from $51.65 to $59.34 per share, with $441 million remaining under the repurchase program Issuer Purchases of Equity Securities (Million USD) | Period | Total Number of Shares Repurchased | Average Price Paid Per Share | Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Program | | :------------------- | :----------- | :--------------- | :----------------------------- | :----------------------------------- | | April 1, 2025—April 30, 2025 | 410,200 | 51.65 | 410,200 | 463 | | May 1, 2025—May 31, 2025 | 356,400 | 59.14 | 356,400 | 442 | | June 1, 2025—June 30, 2025 | 15,200 | 59.34 | 15,200 | 441 | | Total | 781,800 | | 781,800 | | - The company authorized a repurchase program for up to $750 million of its common stock on November 16, 2023, with no expiration date[462] Item 5. Other Information For the three months ended June 30, 2025, no directors or officers adopted or terminated Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements - For the three months ended June 30, 2025, no directors or officers adopted or terminated Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements[463] Item 6. Exhibits This section lists the exhibits filed with the report, including management certifications and XBRL data files - Exhibits include certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[465] - Exhibits also include XBRL Instance Document, Taxonomy Extension Schema Document, Calculation Linkbase Document, Label Linkbase Document, Presentation Linkbase Document, and Definition Linkbase Document[465] Signature Signature Details This report was formally signed by Edward A. Spehar, Executive Vice President and Chief Financial Officer of Brighthouse Financial, Inc., on August 8, 2025 - This report was signed on behalf of Brighthouse Financial, Inc. by Edward A. Spehar, Executive Vice President and Chief Financial Officer, on August 8, 2025[470][471]