Brighthouse Financial Inc

Results of Operations

Consolidated Results for the Three Months and Six Months Ended June 30, 2024 and 2023

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

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

Loss available to shareholders before provision for income tax was $11 million (income of $9 million, net of income tax), a lower loss of $251 million ($209 million, net of income tax) from loss available to shareholders before provision for income tax of $262 million ($200 million, net of income tax) in the prior period.

The lower loss before provision for income tax was driven by the following favorable items:

•lower losses from variable annuity guaranteed benefit riders, see “— Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Three Months and Six Months Ended June 30, 2024 and 2023”; and

•higher pre-tax adjusted earnings, as discussed in greater detail below.

The lower loss before provision for income taxes was partially offset by the following unfavorable items:

•net investment gains (losses) reflecting higher net losses on sales of fixed maturity securities and an increase in the allowance for credit losses, and higher net losses on mortgage loans due to an increase in the allowance for credit losses; and

•the impact of equity markets on equity options we use to hedge our non-variable annuity business, as equity markets increased less in the current period than the prior period.

The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in a lower effective tax rate in the current period compared to the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits.

Loss available to shareholders before provision for income tax was $653 million ($510 million, net of income tax), a lower loss of $290 million ($215 million, net of income tax) from loss available to shareholders before provision for income tax of $943 million ($725 million, net of income tax) in the prior period.

The lower loss before provision for income tax was driven by the following favorable items:

•lower losses from variable annuity guaranteed benefit riders, see “— Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Three Months and Six Months Ended June 30, 2024 and 2023”; and

•the impact of equity markets on equity options we use to hedge our non-variable annuity business, as equity markets increased more in the current period than the prior period.

The lower loss before provision for income tax was partially offset by the following unfavorable items:

•the impact of long-term interest rates on interest rate derivatives used to manage interest rate exposure in our ULSG business, as the long-term interest rate increased in the current period resulting in a loss of $309 million and decreased in the prior period resulting in a gain of $57 million; and

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

The provision for income tax, expressed as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of 24% in both the current period and the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction, tax credits and current period non-recurring items.

Reconciliation of Net Income (Loss) Available to Shareholders to Adjusted Earnings (Loss)

The reconciliation of net income (loss) available to shareholders to adjusted earnings (loss) was as follows:

Consolidated Results for the Three Months and Six Months Ended June 30, 2024 and 2023 — Adjusted Earnings

The components of adjusted earnings were as follows:

Adjusted earnings were $346 million in the current period, an increase of $75 million.

◦higher investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at higher yields than the portfolio average; and

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

◦higher interest credited to policyholders due to higher account balances;

•lower other expenses due to:

◦lower deferred compensation and operational expenses;

◦higher ceded cost of insurance expenses consistent with less favorable equity market returns in our Life segment, which is offset in fee income; and

◦lower transition services agreement expenses; and

•lower net costs associated with insurance-related activities due to an increase in income annuity underwriting margins.

Key net unfavorable impact was:

•lower net fee income due to:

◦higher ceded cost of insurance fees driven by the aging in-force business in our Run-off segment, as well as less favorable equity market returns in our Life segment, which is mostly offset in other expenses;

◦higher reinsurance fees commensurate with an increase in deposit balances resulting from increased sales in our Annuity segment.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 16% in the current period compared to 18% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits.

Adjusted earnings were $248 million in the current period, a decrease of $218 million.

Key net unfavorable impacts were:

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

◦an increase in liability balances in our Run-off segment resulting from a reinsurance premium rate increase associated with the conclusion of a reinsurance arbitration; and

◦a decrease in income annuity underwriting margins;

◦lower paid claims, net of reinsurance, in our Life and Run-off segments; and

•lower net fee income due to:

◦higher ceded cost of insurance fees related to the conclusion of the aforementioned reinsurance arbitration in our Life and Run-off segments, as well as the aging in-force business in our Run-off segment;

◦higher reinsurance fees commensurate with an increase in deposit balances resulting from increased sales in our Annuity segment.

Key net favorable impact was:

◦higher returns on other limited partnerships; and

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

◦higher interest credited to policyholders due to higher account balances.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 17% in the current period compared to 16% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction, tax credits and current period non-recurring items.

Segments and Corporate & Other Results for the Three Months and Six Months Ended June 30, 2024 and 2023 — Adjusted Earnings

Annuities

The components of adjusted earnings for our Annuities segment were as follows:

A significant portion of our adjusted earnings is driven by separate account balances related to our variable annuity business, as these balances determine asset-based fee income and commissions. The changes in our variable annuities separate account balances are presented in Note 5 of the Notes to the Interim Condensed Consolidated Financial Statements.

Adjusted earnings were $332 million in the current period, an increase of $41 million.

•higher fee income due to higher reinsurance fees commensurate with an increase in deposit balances resulting from increased sales;

•lower other expenses due to lower operational expenses;

•lower costs associated with insurance-related activities due an increase in income annuity underwriting margins; and

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

◦higher interest credited to policyholders due to higher account balances; and

◦lower returns on other limited partnerships.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 19% in the current period compared to 18% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction.

Adjusted earnings were $645 million in the current period, an increase of $40 million.

•higher fee income due to higher reinsurance fees commensurate with an increase in deposit balances resulting from increased sales;

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

◦higher interest credited to policyholders due to higher account balances; and

•lower other expenses due to:

◦lower operational expenses; and

◦lower transition services agreement expenses;

◦higher variable compensation.

Key unfavorable impact was higher costs associated with insurance-related activities due to a decrease in income annuity underwriting margins.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 19% in both the current period and the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.

Life

The components of adjusted earnings for our Life segment were as follows:

Adjusted earnings were $42 million in the current period, an increase of $27 million.

•lower net costs associated with insurance-related activities due to lower paid claims, net of reinsurance; and

•lower other expenses due to higher ceded cost of insurance expenses consistent with less favorable equity market returns, which is offset in fee income.

Key unfavorable impact was lower fee income due to higher ceded cost of insurance fees consistent with less favorable equity market returns, which is mostly offset in other expenses.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 19% in the current period compared to 17% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.

Adjusted earnings were $6 million in the current period, a decrease of $10 million.

Key unfavorable impact was lower fee income due to higher ceded cost of insurance fees related to the conclusion of the aforementioned reinsurance arbitration.

Key favorable impact was lower costs associated with insurance-related activities due to lower paid claims, net of reinsurance.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in a lower effective tax rate in the current period compared to the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.

Run-off

The components of adjusted earnings for our Run-off segment were as follows:

Adjusted loss was $30 million in the current period, a higher loss of $14 million.

Key unfavorable impacts were:

•higher costs associated with insurance-related activities due to higher paid claims, net of reinsurance; and

•lower fee income due to higher ceded cost of insurance fees driven by the aging in-force business.

•higher net investment spread due to lower interest credited to policyholders due to lower account balances; and

•lower other expenses due to lower operational expenses.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 19% in the current period compared to 24% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.

Adjusted loss was $371 million in the current period, a higher loss of $249 million.

Key net unfavorable impacts were:

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

◦an increase in liability balances resulting from a reinsurance premium rate increase associated with the conclusion of the aforementioned reinsurance arbitration;

◦lower paid claims, net of reinsurance; and

•lower fee income due to higher ceded cost of insurance fees related to the conclusion of the aforementioned reinsurance arbitration and the aging in-force business.

Key favorable impact was:

◦higher returns on other limited partnerships; and

◦lower interest credited to policyholders due to lower account balances.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 21% in both the current period and the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.

Corporate & Other

The components of adjusted earnings for Corporate & Other were as follows:

Adjusted earnings were $2 million in the current period, an increase of $21 million.

•higher net investment spread due to higher investment yields and average invested long-term assets from funding agreements issued in connection with our institutional spread margin business; and

•lower other expenses due to lower deferred compensation and operational expenses.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in a lower effective tax rate in the current period compared to the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits. We believe the effective tax rate for Corporate & Other is not generally meaningful, neither on a standalone basis nor for comparison to prior periods, since taxes for Corporate & Other are derived from the difference between the overall consolidated effective tax rate and total taxes for the combined operating segments.

Adjusted loss was $32 million in the current period, a lower loss of $1 million.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings (loss), resulted in a higher effective tax rate in the current period compared to the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction, tax credits and current period non-recurring items. We believe the effective tax rate for Corporate & Other is not generally meaningful, neither on a standalone basis nor for comparison to prior periods, since taxes for Corporate & Other are derived from the difference between the overall consolidated effective tax rate and total taxes for the combined operating segments.

Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Three Months and Six Months Ended June 30, 2024 and 2023

The overall impact on income (loss) available to shareholders before provision for income tax from the performance of annuity guaranteed benefits and Shield® Level Annuity (“Shield” and “Shield annuity”) liabilities, which includes (i) changes in the fair value of liabilities and reinsurance, (ii) fees net of claims and (iii) the mark-to-market of hedges, was as follows:

Three Months Ended June 30, 2024

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the three months ended June 30, 2024, primarily driven by:

•favorable decreases in annuity guaranteed benefits liabilities due to increasing interest rates;

•favorable changes in variable annuity hedges due to increasing equity markets, partially offset by increasing long-term interest rates; and

Three Months Ended June 30, 2023

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the three months ended June 30, 2023, primarily driven by:

•favorable decreases in annuity guaranteed benefits liabilities due to increasing interest rates and equity markets;

•unfavorable changes in variable annuity hedges due to increasing long-term interest rates, partially offset by increasing equity markets; and

Six Months Ended June 30, 2024

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the six months ended June 30, 2024, primarily driven by:

•favorable decreases in annuity guaranteed benefits liabilities due to increasing interest rates and equity markets;

•favorable changes in variable annuity hedges due to increasing equity markets, partially offset by increasing long-term interest rates; and

Six Months Ended June 30, 2023

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the six months ended June 30, 2023, primarily driven by:

•favorable decreases in annuity guaranteed benefits liabilities due to increasing equity markets;

•favorable changes in variable annuity hedges due to increasing equity markets; and