Brighthouse Financial Inc

Results of Operations

Consolidated Results for the Three Months Ended March 31, 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 $642 million ($519 million, net of income tax), a lower loss of $39 million ($6 million, net of income tax) from loss available to shareholders before provision for income tax of $681 million ($525 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 Ended March 31, 2024 and 2023”;

•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; and

•net investment gains (losses) reflecting lower net losses on sales of fixed maturity securities and lower net losses on mortgage loans due to a smaller increase in the allowance for credit losses.

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 $212 million and decreased in the prior period resulting in a gain of $141 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 20% in the current period compared to 24% in the prior period. The decrease in the effective tax rate was driven by a lower loss before provision for income tax as discussed above. 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

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

Consolidated Results for the Three Months Ended March 31, 2024 and 2023 — Adjusted Earnings

The components of adjusted earnings were as follows:

Adjusted loss was $98 million in the current period, a decrease of $293 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;

•lower net fee income due to:

◦higher ceded cost of insurance fees in our Life and Run-off segments related to the conclusion of the aforementioned reinsurance arbitration;

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

•higher other expenses due to:

◦the conclusion of the aforementioned reinsurance arbitration; and

◦higher deferred compensation and operational expenses;

◦lower transition services agreement expenses.

Key net favorable impact was:

•higher net investment spread due to:

◦higher returns on other limited partnerships;

◦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.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 15% in the current period compared to 14% 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 Ended March 31, 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 $313 million in the current period, a decrease of $1 million.

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

Key net favorable impacts were:

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

•higher net investment spread due to:

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

◦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;

◦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 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 loss was $36 million in the current period, a decrease of $37 million.

Key unfavorable impacts were lower fee income due to higher ceded cost of insurance fees and higher other expenses, both related to the conclusion of a 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, 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 impact of the dividends received deduction.

Run-off

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

Adjusted loss was $341 million in the current period, a higher loss of $235 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 a reinsurance arbitration;

◦lower paid claims, net of reinsurance;

•lower fee income due to higher ceded cost of insurance fees and higher other expenses, both related to the conclusion of the aforementioned reinsurance arbitration.

Key favorable impact was a higher net investment spread due to higher returns on other limited partnerships.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, 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 loss was $34 million in the current period, a higher loss of $20 million.

The provision for income tax, expressed as a percentage of pre-tax adjusted earnings, 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 Ended March 31, 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:

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the three months ended March 31, 2024, primarily driven by:

•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

•unfavorable changes in Shield embedded derivatives due to increasing equity markets.

Annuity guaranteed benefits and Shield annuity liabilities performance was unfavorable for the three months ended March 31, 2023, primarily driven by:

•increases in annuity guaranteed benefits liabilities due to decreasing interest rates, partially offset by increasing equity markets;

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

•unfavorable changes in Shield embedded derivatives due to increasing equity markets.