Brighthouse Financial Inc

Consolidated Results for the Years Ended December 31, 2024 and 2023 - Adjusted Earnings (Loss)

The components of adjusted earnings were as follows:

Adjusted earnings were $1.3 billion in the current period, an increase of $350 million.

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

◦a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR in our Run-off and Annuities segments and other refinements;

◦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;

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

◦higher returns on other limited partnerships; 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 and current and prior period actuarial modeling improvements, net of changes made in the current period in connection with the AAR in our Annuities segment; and

◦lower operational expenses;

◦lower legal reserves; and

◦lower transition services agreement expenses;

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

◦higher variable compensation expenses.

Key net unfavorable impact was:

•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, as well as the aging in-force business in our Run-off segment;

◦higher reinsurance fees on our fixed annuity business resulting from higher account balances; and

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

The provision for income tax, calculated as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 18% 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 impacts of the dividends received deduction, tax credits and current period non-recurring items.