Brighthouse Financial Inc

Consolidated Results for the Years Ended December 31, 2023 and 2022 - Adjusted Earnings

The components of adjusted earnings were as follows:

Adjusted earnings were $969 million in the current period, a decrease of $215 million.

◦an increase in liability balances resulting from actuarial model refinements in the prior period; and

◦lower liabilities from the impact of new reinsurance agreements entered into in the prior period; and

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

•lower net fee income due to:

◦lower asset-based fees resulting from lower average separate account balances, a portion of which is offset in other expenses; and

◦a decline in the net cost of insurance fees driven by the aging in-force business in our Run-off segment;

◦lower ceded cost of insurance fees consistent with favorable equity market returns in our Life segment, which is mostly offset in other expenses.

Key net favorable impacts were:

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

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

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

◦higher interest credited to policyholders due to higher account balances, net of changes made in the prior period in connection with the AAR, and current period actuarial modeling improvements;

◦lower returns on investments in real estate limited partnerships and limited liability companies (“LLC”); and

◦lower income from our securities lending program; and

◦the settlement of a reinsurance-related matter in the prior period;

◦higher systems conversion costs in the prior period;

◦lower asset-based variable annuity expenses resulting from lower average separate account balances, a portion of which is offset in fee income; and

◦lower transition services agreement expenses;

◦higher deferred compensation and operational expenses;

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

◦lower interest expenses in the prior period related to prior year tax matters; and

◦higher legal reserves.

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 11% 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.