UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 1, 2017
Brighthouse Financial, Inc.
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
Delaware | 001-37905 | 81-3846992 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
11225 North Community House Road Charlotte, North Carolina | 28277 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
(980) 365-7100
Not Applicable
(Former name or former address, if changed since last report)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 under the Securities Act (17 CFR 230.405) or Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02. Results of Operations and Financial Condition.
On November 1, 2017, Brighthouse Financial, Inc. issued (i) a news release announcing its results for the quarter ended September 30, 2017, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference, and (ii) a Financial Supplement for the quarter ended September 30, 2017, a copy of which is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
BRIGHTHOUSE FINANCIAL, INC. | ||
By: | /s/ Lynn A. Dumais | |
Name: | Lynn A. Dumais | |
Title: | Chief Accounting Officer | |
Date: November 1, 2017
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EXHIBIT INDEX
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PUBLIC RELATIONS Brighthouse Financial, Inc. 11225 N Community House Rd. Charlotte, NC 28277 |  |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Brighthouse Financial Announces Third Quarter 2017 Results
CHARLOTTE, NC, November 1, 2017 — Brighthouse Financial, Inc. ("Brighthouse Financial") (Nasdaq: BHF) announced today its financial results for the third quarter ended September 30, 2017. The results are the first quarterly earnings reported by Brighthouse Financial following its separation from MetLife, Inc. (NYSE: MET), which was completed on August 4, 2017. Shares of Brighthouse Financial began trading on the Nasdaq Stock Market under the symbol “BHF” on August 7, 2017.
Third Quarter Results
The company reported a third quarter 2017 net loss of $943 million, or $7.87 on a per share basis, compared to a net loss of $158 million in the third quarter of 2016. The net loss in the quarter includes a $1,073 million non-cash tax expense triggered prior to separation, recognized by the company's former parent with no impact to the stockholders' equity ("book value") of Brighthouse Financial. The company ended the third quarter 2017 with a book value of $13.8 billion, or $114.93 on a per share basis, and a book value, excluding accumulated other comprehensive income ("AOCI")*, of $12.5 billion, or $104.01 on a per share basis.
For the third quarter of 2017, the company reported an operating loss* of $676 million, or $5.64 on a per share basis. Excluding the above mentioned non-cash tax expense, operating earnings* for the quarter would have been $397 million, or $3.31 on a per share basis. The quarterly operating results also reflected $103 million of net favorable other notable items, or $0.86 per share, including:
• | $134 million net favorable impact primarily from the annual actuarial review completed in the third quarter. As a result of the review, the company took several actions, including: |
◦ | Reduced variable annuity ("VA") lapse floor assumptions for all living benefit guarantee products; |
◦ | Updated VA withdrawal assumptions for guaranteed minimum withdrawal benefits for life; and |
◦ | Aligned certain GAAP and statutory modeling assumptions. |
• | $31 million in establishment costs, primarily related to technology and branding expenses associated with the separation. |
Annuity sales increased 8 percent on a quarter-over-quarter and sequential basis, primarily driven by sales of Shield annuities, which increased 67 percent quarter-over-quarter and 15 percent sequentially.
Assets above CTE95 were $2.3 billion, unchanged from the second quarter of 2017.
“We are pleased with the performance of our hedging program and our sales momentum during our first reporting period as a standalone company,” commented Eric Steigerwalt, president and chief executive officer, Brighthouse Financial. “As we execute on our strategy, we believe that our focused product offerings, strong balance sheet, and growing brand awareness position us favorably to capitalize on growth opportunities in the market.”
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PUBLIC RELATIONS Brighthouse Financial, Inc. 11225 N Community House Rd. Charlotte, NC 28277 | |
Key Information (Unaudited, dollars in millions except share and per share amounts)
For the Three Months Ended and As of September 30, | ||||||||
2017 | 2016 | |||||||
Total | Per share | Total | Per share | |||||
Net income (loss) | $(943) | $(7.87) | $(158) | N/A | ||||
Operating earnings (loss) | $(676) | $(5.64) | $329 | N/A | ||||
Book value | $13,766 | $114.93 | $18,170 | N/A | ||||
Book value, excluding AOCI | $12,458 | $104.01 | $15,731 | N/A | ||||
Common shares outstanding | 119,773,106 | — | N/A | N/A | ||||
Weighted average common shares outstanding - basic | 119,773,106 | — | N/A | N/A | ||||
Weighted average common shares outstanding - diluted | 119,773,106 | — | N/A | N/A | ||||
* Information regarding the non-GAAP and other financial measures included in this news release and a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is provided in the Non-GAAP and Other Financial Disclosures discussion below as well as in the tables that accompany this news release and/or the Third Quarter 2017 Brighthouse Financial, Inc. Financial Supplement (which is available on the Brighthouse Financial Investor Relations web page at http://investor.brighthousefinancial.com).
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PUBLIC RELATIONS Brighthouse Financial, Inc. 11225 N Community House Rd. Charlotte, NC 28277 | |
Results by Business Segment and Corporate & Other (Unaudited, in millions)
For the Three Months Ended | ||||||
Operating earnings (loss) | September 30, 2017 | June 30, 2017 | September 30, 2016 | |||
Annuities | $355 | $226 | $247 | |||
Life | $6 | $12 | $25 | |||
Run-off | $83 | $52 | $27 | |||
Corporate & Other | $(1,120) | $34 | $30 | |||
Sales (Unaudited, in millions)
For the Three Months Ended | ||||||
September 30, 2017 | June 30, 2017 | September 30, 2016 | ||||
Annuities (1) | $1,074 | $995 | $995 | |||
Life | $5 | $11 | $28 | |||
(1) Annuities sales in the third quarter of 2017 include $69 million in sales of a fixed index annuity distributed exclusively by MassMutual, representing 90 percent of gross sales assumed via reinsurance agreement. | ||||||
Annuities
Operating earnings in the Annuities segment were $355 million in the current quarter, compared to $247 million in the third quarter of 2016 and $226 million in the second quarter of 2017.
The current quarter includes $142 million of favorable notable items (described above), while the second quarter of 2017 included $25 million of favorable notable items related to reinsurance recaptures. On a quarter-over-quarter basis, operating earnings reflect lower derivative net investment income and higher expenses, partially offset by favorable taxes. On a sequential basis, operating earnings reflect lower amortization of deferred acquisition costs ("DAC") and favorable taxes.
As mentioned above, overall annuity sales increased 8 percent on a quarter-over-quarter and sequential basis, primarily driven by strong sales of Shield annuities, which increased 67 percent quarter-over-quarter and 15 percent sequentially.
Life
Operating earnings in the Life segment were $6 million in the current quarter, compared to operating earnings of $25 million in the third quarter of 2016 and $12 million in the second quarter of 2017.
The current quarter includes $17 million of unfavorable notable items (described above), compared to $12 million in favorable notable items in the second quarter of 2017. On a sequential basis, operating earnings reflect favorable underwriting and favorable taxes.
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PUBLIC RELATIONS Brighthouse Financial, Inc. 11225 N Community House Rd. Charlotte, NC 28277 | |
Life insurance sales were down, consistent with the company's strategy of migrating to simpler life insurance solutions and away from products such as participating whole life. As previously disclosed, Brighthouse Financial is in the process of revamping this business.
Run-off
Operating earnings in the Run-off segment were $83 million in the current quarter, compared to operating earnings of $27 million in the third quarter of 2016 and operating earnings of $52 million in the second quarter of 2017.
The current quarter contains $9 million of favorable notable items (described above), compared to $21 million in unfavorable notable items in the third quarter of 2016 and $5 million in favorable notable items in the second quarter of 2017. Operating earnings in the current quarter reflect favorable underwriting and taxes on a quarter-over-quarter and sequential basis.
Corporate & Other
Corporate & Other had an operating loss of $1,120 million in the current quarter, compared to operating earnings of $30 million in the third quarter of 2016 and operating earnings of $34 million in the second quarter of 2017. Results in the quarter included $1,104 million in unfavorable notable items (described above) and reflect lower net investment income on a quarter-over-quarter and sequential basis. Results in the second quarter of 2017 included favorable taxes.
Net investment income
Net investment income decreased 12 percent quarter-over-quarter to $761 million, primarily from lower alternative investment income and lower prepayments as well as a smaller securities lending portfolio. Net investment income decreased by less than one percent sequentially.
The net investment income yield was approximately 4.3 percent during the quarter.
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PUBLIC RELATIONS Brighthouse Financial, Inc. 11225 N Community House Rd. Charlotte, NC 28277 | |
Statutory Capital and Liquidity (Unaudited, in billions)
As of | ||||||
September 30, 2017 | June 30, 2017 | September 30, 2016 | ||||
Variable annuity assets above CTE95 (1) | $2.3 | $ 2.3 (2) | N/A | |||
Statutory combined total adjusted capital (3) (4) | $6.6 | $6.4 | $9.1 | |||
(1) CTE95 is defined as the amount of assets required to satisfy contract holder obligations across market environments in the average of the worst 5% of 1,000 capital market scenarios over the life of the contracts. | ||||||
(2) Pro forma for transactions associated with the separation from MetLife, Inc. | ||||||
(3) Represents combined results for Brighthouse Life Insurance Company, Brighthouse Life Insurance Company of NY and New England Life Insurance Company. | ||||||
(4) Reflects preliminary statutory results for the three months ended September 30, 2017. | ||||||
Holding company liquid assets were approximately $775 million at September 30, 2017. Subsequent to September 30, 2017, the company contributed $200 million of cash to Brighthouse Life Insurance Company, resulting in a corresponding decrease to liquid assets at the holding company, to approximately $575 million.
Statutory total adjusted capital on a preliminary basis improved to $6.6 billion, reflecting the capital contribution made subsequent to September 30, 2017.
Assets above CTE95 were $2.3 billion, unchanged from the second quarter of 2017.
Earnings Conference Call
Brighthouse Financial plans to hold a conference call and audio webcast to discuss its financial results for the third quarter of 2017 at 12:00 p.m. Eastern Time on Thursday, November 2, 2017.
To listen to the audio webcast via the internet, please visit the Brighthouse Financial Investor Relations webpage at http://investor.brighthousefinancial.com. To join the conference call via telephone, please dial (844) 358-9117 from within the U.S. or +1 (209) 905-5952 from outside the U.S.
A replay of the conference call will be made available until Friday, November 10, 2017 on the Brighthouse Financial Investor Relations webpage at http://investor.brighthousefinancial.com.
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PUBLIC RELATIONS Brighthouse Financial, Inc. 11225 N Community House Rd. Charlotte, NC 28277 | |
Non-GAAP and Other Financial Disclosures
In this news release, we present certain measures of our performance that are not calculated in accordance with generally accepted accounting principles in the United States of America ("GAAP"). We believe that these non-GAAP financial measures enhance the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of our business.
The following non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP:
Non-GAAP financial measures: | Comparable GAAP financial measures: |
book value, excluding AOCI / stockholders' equity, excluding AOCI | book value / stockholders' equity |
operating earnings (loss) | net income (loss) |
operating revenues | revenues |
operating expenses | expenses |
operating return on equity | return on equity |
operating earnings (loss) per share | earnings per share |
Reconciliations of these measures to the most directly comparable historical GAAP measures are included below in this news release.
Our definitions of the non-GAAP and other financial measures discussed in this news release may differ from those used by other companies. For example, as indicated below, we exclude guaranteed minimum income benefit ("GMIB") revenues and related embedded derivatives gains (losses) as well as GMIB benefits and associated deferred acquisition costs ("DAC") and value of business acquired ("VOBA") offsets from operating earnings (loss), thereby excluding substantially all guaranteed minimum living benefit ("GMLB") activity from operating earnings (loss).
Operating Earnings (Loss), Operating Revenues and Operating Expenses
Operating earnings (loss) is used by management to evaluate performance, allocate resources and facilitate comparisons to industry results. This financial measure focuses on our primary businesses principally by excluding the impact of market volatility, which could distort trends, and revenues and costs related to non-core products and businesses. Non-core businesses include discontinued operations and other businesses that have been or will be sold or exited by us, referred to as divested businesses, and certain entities required to be consolidated under GAAP.
Provided below are the adjustments to GAAP revenues and GAAP expenses used to calculate operating revenues and operating expenses, respectively. Operating earnings (loss), as presented in this news release, reflects operating revenues less operating expenses, both net of income tax.
The following are excluded from total revenues in calculating the operating revenues component of operating earnings (loss):
• | Net investment gains (losses); |
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PUBLIC RELATIONS Brighthouse Financial, Inc. 11225 N Community House Rd. Charlotte, NC 28277 | |
• | Net derivative gains (losses) except: (i) earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment ("Investment Hedge Adjustments"), and (ii) earned income on derivatives that are hedges of policyholder account balances, but do not qualify for hedge accounting treatment ("PAB Adjustments"); |
• | Amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses) and certain variable annuity GMIB fees (“GMIB Fees”); |
• | Certain amounts related to securitization entities that are VIEs consolidated under GAAP; and |
• | Revenues from divested businesses. |
The following are excluded from total expenses in calculating the operating expenses component of operating earnings (loss):
• | Amounts associated with benefits and hedging costs related to GMIBs (“GMIB Costs”); |
• | Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”); |
• | Amortization of DAC and VOBA related to (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments; |
• | Recognition of certain contingent assets and liabilities that could not be recognized at acquisition or adjusted for during the measurement period under GAAP business combination accounting guidance; |
• | Expenses of divested businesses; |
• | Amounts related to securitization entities that are VIEs consolidated under GAAP; |
• | Goodwill impairment; and |
• | Costs related to: (i) implementation of new insurance regulatory requirements and (ii) acquisition and integration costs. |
The tax impact of the adjustments mentioned is calculated net of the U.S. statutory tax rate, which could differ from our effective tax rate.
Consistent with GAAP guidance for segment reporting, operating earnings (loss) is also our GAAP measure of segment performance.
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PUBLIC RELATIONS Brighthouse Financial, Inc. 11225 N Community House Rd. Charlotte, NC 28277 | |
Operating Return On Equity and Operating Earnings (Loss) Per Share
Operating return on equity and operating earnings (loss) per share are measures used by management to evaluate the execution of our business strategy and align such strategy with our shareholders’ interests.
Operating return on equity is defined as total annual operating earnings (loss) on a four quarter trailing basis divided by the simple average of the most recent five quarters of total stockholders’ equity, excluding AOCI.
Operating earnings (loss) per share is defined as total annual operating earnings (loss) on a four quarter trailing basis divided by the weighted average number of fully diluted shares of common stock outstanding for the period.
Book Value per Common Share
We use the term "book value" to refer to "stockholders' equity." Book value per common share is defined as ending stockholders' equity, including AOCI, divided by weighted average common shares outstanding - diluted. Book value per common share, excluding AOCI, is defined as ending stockholders' equity, excluding AOCI, divided by weighted average common shares outstanding - diluted.
We provide these measures to enable investors to analyze the amount of the company's net worth that is primarily attributable to the company's business operations. We believe they are useful to investors because they eliminate the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates.
Sales
Statistical sales information for Life sales are calculated using the LIMRA definition of sales for core direct sales, excluding company-sponsored internal exchanges, corporate-owned life insurance, bank-owned life insurance, and private placement variable universal life insurance. Annuity sales consist of 100 percent of direct statutory premiums, excluding company-sponsored internal exchanges and the fixed index annuity distributed by MassMutual (discussed above). These sales statistics do not correspond to revenues under GAAP, but are used as relevant measures of business activity.
Other Financial Disclosures
• | Net income (loss)/operating earnings (loss) per common share is defined as net income (loss) or operating earnings (loss), divided by weighted average common shares outstanding - diluted. |
• | Holding company liquid assets include liquid assets in Brighthouse Financial, Inc., Brighthouse Holdings, LLC, and Brighthouse Services, LLC. Liquid assets include cash and cash equivalents, short-term investments and publicly-traded securities excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include amounts received in connection with derivatives and collateral financing arrangements. |
• | Notable items reflect the impact of events that affected our results but that were unknown. Notable items also include certain items anticipated to help investors have a better understanding of our results and to evaluate and forecast those results, such as establishment costs. |
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PUBLIC RELATIONS Brighthouse Financial, Inc. 11225 N Community House Rd. Charlotte, NC 28277 | |
Forward-Looking Statements
This news release may contain information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “will,” “intend,” “plan,” “believe” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, statements regarding the separation from MetLife, including the expected benefits thereof, the recapitalization actions, including expected benefits thereof, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results.
Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of Brighthouse, its subsidiaries and affiliates. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others: the impact of the separation on our business and profitability due to MetLife’s strong brand and reputation, the increased costs related to replacing arrangements with MetLife with those of third parties and incremental costs as a public company; whether the operational, strategic and other benefits of the separation can be achieved, and our ability to implement our business strategy; our degree of leverage following the separation due to indebtedness incurred in connection with the separation; differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models; higher risk management costs and exposure to increased counterparty risk due to guarantees within certain of our products; the effectiveness of our proposed exposure management strategy, and the timing of its implementation and the impact of such strategy on net income volatility and negative effects on our statutory capital; the additional reserves we will be required to hold against our variable annuities as a result of actuarial guidelines; a sustained period of low equity market prices and interest rates that are lower than those we assumed when we issued our variable annuity products; the effect adverse capital and credit market conditions may have on our ability to meet liquidity needs and our access to capital; the impact of regulatory, legislative or tax changes on our insurance business or other operations; the effectiveness of our risk management policies and procedures; the availability of reinsurance and the ability of our counterparties to our reinsurance or indemnification arrangements to perform their obligations thereunder; heightened competition, including with respect to service, product features, scale, price, actual or perceived financial strength, claims-paying ratings, credit ratings, e-business capabilities and name recognition; changes in accounting standards, practices and/or policies applicable to us; the ability of our insurance subsidiaries to pay dividends to us, and our ability to pay dividends to our shareholders; our ability to market and distribute our products through distribution channels; tax consequences of the distribution, including whether the distribution will qualify for non-recognition treatment for U.S. federal income tax purposes and potential indemnification to MetLife if the distribution does not so qualify; our ability to attract and retain key personnel; and other factors described from time to time in documents that we file with the U.S. Securities and Exchange Commission (the “SEC”).
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PUBLIC RELATIONS Brighthouse Financial, Inc. 11225 N Community House Rd. Charlotte, NC 28277 | |
For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements included and the risks, uncertainties and other factors identified in the Preliminary Information Statement of Brighthouse Financial, Inc., subject to completion, dated June 30, 2017 included as Exhibit 99.1 to Amendment No. 5 to Brighthouse Financial, Inc.’s Registration Statement on Form 10, filed with the SEC on June 30, 2017 and in Brighthouse Financial, Inc.’s subsequent reports on Form 10-K and Form 10-Q, including in the sections thereof captioned “Risk Factors” and “Note Regarding Forward-Looking Statements”, and in Brighthouse Financial, Inc.’s subsequent reports on Form 8-K. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law. Please consult any further disclosures Brighthouse Financial, Inc. makes on related subjects in reports to the SEC.
About Brighthouse Financial, Inc.
Brighthouse Financial, Inc. (Nasdaq: BHF) is a major provider of annuities and life insurance in the U.S. Established by MetLife, our mission is to help people achieve financial security by offering essential annuity and life insurance solutions designed to protect what they have earned and help ensure it lasts. Learn more at www.brighthousefinancial.com.
CONTACT
FOR INVESTORS David Rosenbaum (980) 949-3326 david.rosenbaum@brighthousefinancial.com | FOR MEDIA Tim Miller (980) 949-3121 tim.w.miller@brighthousefinancial.com |
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PUBLIC RELATIONS Brighthouse Financial, Inc. 11225 N Community House Rd. Charlotte, NC 28277 | |
Interim Condensed Statements of Operations (Unaudited, in millions)
For the Three Months Ended | ||||||
Revenues | September 30, 2017 | June 30, 2017 | September 30, 2016 | |||
Premiums | $236 | $218 | $347 | |||
Universal life and investment-type product policy fees | 1,025 | 957 | 976 | |||
Net investment income | 761 | 766 | 869 | |||
Other revenues | 93 | 162 | 49 | |||
Revenues before NIGL and NDGL | 2,115 | 2,103 | 2,241 | |||
Net investment gains (losses) | 21 | — | 26 | |||
Net derivative gains (losses) | (164) | (78) | (501) | |||
Total revenues | $1,972 | $2,025 | $1,766 | |||
Expenses | ||||||
Interest credited | $279 | $284 | $290 | |||
Policyholder benefits and claims | 1,083 | 785 | 1,058 | |||
Amortization of DAC and VOBA | 123 | 21 | (10) | |||
Interest expense | 34 | 37 | 45 | |||
Other expenses (1) | 577 | 577 | 635 | |||
Total expenses | $2,096 | $1,704 | $2,018 | |||
Income (loss) before provision for income tax | (124) | 321 | (252) | |||
Provision for income tax expense (benefit) | 819 | 75 | (94) | |||
Net income (loss) | $(943) | $246 | $(158) | |||
(1) The period ended September 30, 2016 includes a non-cash charge for the goodwill write down of $161 million in our Run-off segment. | ||||||
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PUBLIC RELATIONS Brighthouse Financial, Inc. 11225 N Community House Rd. Charlotte, NC 28277 | |
Interim Condensed Balance Sheets (Unaudited, in millions)
As of | ||||||
ASSETS | September 30, 2017 | June 30, 2017 | September 30, 2016 | |||
Investments: | ||||||
Fixed maturity securities available-for-sale | $63,565 | $63,507 | $75,842 | |||
Equity securities available-for-sale | 265 | 278 | 365 | |||
Mortgage loans, net | 10,431 | 10,263 | 8,567 | |||
Policy loans | 1,522 | 1,513 | 1,518 | |||
Real estate and real estate joint ventures | 407 | 302 | 210 | |||
Other limited partnership interests | 1,654 | 1,623 | 1,704 | |||
Short-term investments | 1,149 | 1,286 | 3,670 | |||
Other invested assets | 2,666 | 3,037 | 7,686 | |||
Total investments | 81,659 | 81,809 | 99,562 | |||
Cash and cash equivalents | 1,698 | 4,443 | 2,825 | |||
Accrued investment income | 641 | 608 | 692 | |||
Reinsurance recoverables | 12,727 | 12,732 | 14,469 | |||
Premiums and other receivables | 864 | 683 | 599 | |||
DAC and VOBA | 6,414 | 6,464 | 6,589 | |||
Current income tax recoverable | 1,772 | 1,423 | 329 | |||
Other assets | 647 | 600 | 646 | |||
Separate account assets | 116,857 | 115,566 | 115,218 | |||
Total assets | $223,279 | $224,328 | $240,929 | |||
LIABILITIES, STOCKHOLDERS' EQUITY AND NONCONTROLLING INTERESTS | ||||||
Liabilities | ||||||
Future policy benefits | $36,035 | $34,352 | $35,863 | |||
Policyholder account balances | 37,298 | 37,296 | 40,304 | |||
Other policy-related balances | 2,964 | 2,985 | 3,092 | |||
Payables for collateral under securities loaned and other transactions | 4,569 | 7,121 | 13,696 | |||
Long-term financing obligations: | ||||||
Debt | 3,615 | 3,016 | 814 | |||
Reserve financing | — | — | 3,897 | |||
Deferred income tax liability | 2,116 | 2,337 | 3,394 | |||
Other liabilities | 5,994 | 5,190 | 6,481 | |||
Separate account liabilities | 116,857 | 115,566 | 115,218 | |||
Total liabilities | $209,448 | $207,863 | $222,759 | |||
Stockholders' Equity and Noncontrolling Interests | ||||||
Common stock | 1 | — | — | |||
Additional paid-in capital | 12,418 | — | — | |||
Retained earnings | 39 | — | — | |||
Shareholder's net investment | — | 14,521 | 15,731 | |||
Accumulated other comprehensive income (loss) | 1,308 | 1,894 | 2,439 | |||
Total stockholders' equity | $13,766 | $16,415 | $18,170 | |||
Noncontrolling interests | 65 | 50 | — | |||
Total stockholders' equity and noncontrolling interests | $13,831 | $16,465 | $18,170 | |||
Total liabilities, stockholders' equity and noncontrolling interests | $223,279 | $224,328 | $240,929 | |||
For periods ending prior to the separation, stockholders' equity was previously reported as shareholder's net investment. | ||||||
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PUBLIC RELATIONS Brighthouse Financial, Inc. 11225 N Community House Rd. Charlotte, NC 28277 | |
Reconciliation of Net Income to Operating Earnings (Unaudited, dollars in millions except per share data)
For the Three Months Ended | ||||||
September 30, 2017 | June 30, 2017 | September 30, 2016 | ||||
Net income (loss) | $(943) | $246 | $(158) | |||
Adjustments from net income (loss) to operating earnings (loss): | ||||||
Less: Net investment gains (losses) | 21 | — | 26 | |||
Less: Net derivative gains (losses) | (164) | (78) | (501) | |||
Less: Other adjustments to net income (1) | ||||||
GMIB Fees | 70 | 70 | 73 | |||
Investment hedge adjustments | (19) | (27) | (74) | |||
Amortization of DAC and VOBA related to net investment gains (losses) and net derivative gains (losses) | (78) | 124 | 128 | |||
GMIB costs and amortization of DAC and VOBA related to GMIB fees and GMIB costs | (486) | (158) | (209) | |||
Divested business | 26 | (26) | (24) | |||
Other | 2 | (10) | (166) | |||
Less: Provision for income tax (expense) benefit on reconciling adjustments | 361 | 27 | 260 | |||
Add: Net income (loss) attributable to noncontrolling interests | — | — | — | |||
Operating earnings (loss) | $(676) | $324 | $329 | |||
Net income (loss) per common share - diluted | (7.87) | N/A | N/A | |||
Adjustments from net income (loss) to operating earnings (loss): | ||||||
Less: Net investment gains (losses) | 0.18 | N/A | N/A | |||
Less: Net derivative gains (losses) | (1.37) | N/A | N/A | |||
Less: Other adjustments to net income (1) | ||||||
GMIB Fees | 0.58 | N/A | N/A | |||
Investment hedge adjustments | (0.16) | N/A | N/A | |||
Amortization of DAC and VOBA related to net investment gains (losses) and net derivative gains (losses) | (0.65) | N/A | N/A | |||
GMIB costs and amortization of DAC and VOBA related to GMIB fees and GMIB costs | (4.06) | N/A | N/A | |||
Divested business | 0.22 | N/A | N/A | |||
Other | 0.02 | N/A | N/A | |||
Less: Provision for income tax (expense) benefit on reconciling adjustments | 3.01 | N/A | N/A | |||
Add: Net income (loss) attributable to noncontrolling interests | — | N/A | N/A | |||
Operating earnings (loss) per common share - diluted | (5.64) | N/A | N/A | |||
(1) For further explanations of these adjustments see pages A-1 through A-9 of our Third Quarter 2017 Brighthouse Financial, Inc. Financial Supplement (which is available on the Brighthouse Financial Investor Relations web page at http://investor.brighthousefinancial.com). | ||||||
13
Exhibit 99.2
Brighthouse Financial, Inc.
Financial Supplement
Third Quarter 2017
Table of Contents | ||
Financial Results | ||
Key Metrics | ||
Condensed Statements of Operations | ||
Balance Sheets | ||
Earnings and Select Metrics from Business Segments and Corporate & Other | ||
Statements of Operating Earnings (Loss) by Segment and Corporate & Other | ||
Annuities - Statements of Operating Earnings (Loss) | ||
Annuities - Select Operating Metrics | ||
Life - Statements of Operating Earnings (Loss) | ||
Life - Select Operating Metrics | ||
Run-off - Statements of Operating Earnings (Loss) | ||
Run-off - Select Operating Metrics | ||
Corporate & Other - Statements of Operating Earnings (Loss) | ||
Other Information | ||
DAC and VOBA Rollforward | ||
Net Derivative Gains (Losses) | ||
Notable Items Impacting Operating Earnings (Loss) | ||
Variable Annuity Separate Account Returns | ||
Summary of Investments | ||
Select Actual and Preliminary Statutory Financial Results | ||
Appendix | ||
Non-GAAP and Other Financial Disclosures | ||
Acronyms | ||
Reconciliation of Net Income to Operating Earnings (Loss) | ||
Reconciliation of Return On Equity to Operating Return On Equity | ||
Reconciliation of Total Revenues to Operating Revenues and Reconciliation of Total Expenses to Operating Expenses | ||
Investment Reconciliation Details | ||
Note: See Appendix for Non-GAAP financial information, definitions and reconciliations. Financial information, unless otherwise noted, is rounded to millions. Some financial information, therefore, may not sum to the corresponding total.
The information presented in this financial supplement has been derived from the consolidated financial statements of Brighthouse Financial, Inc. for periods subsequent to the separation from MetLife, Inc. that occurred on August 4, 2017, and is derived from the combined financial information of the MetLife U.S. Retail Separation Business for periods prior to the separation. The combined financial information was prepared in connection with the separation of a substantial portion of MetLife, Inc.’s former Retail segment as well as certain portions of its former Corporate Benefit Funding segment, and presents the combined results of operations and financial condition of certain former direct and indirect subsidiaries and businesses of MetLife, Inc., including Brighthouse Life Insurance Company (formerly MetLife Insurance Company USA) and its subsidiaries, New England Life Insurance Company, Brighthouse Life Insurance Company of NY (formerly First MetLife Investors Insurance Company), MetLife Reinsurance Company of Delaware, MetLife Reinsurance Company of South Carolina, Brighthouse Investment Advisers, LLC (formerly MetLife Advisers, LLC), and a designated protected cell of MetLife Reinsurance Company of Vermont. As used in this financial supplement, “Brighthouse Financial,” the “Company,” “we,” “our” and “us” refer to Brighthouse Financial, Inc., the entity that subsequent to the separation holds, through its subsidiaries, the assets (including the equity interests of certain former MetLife, Inc. subsidiaries) and liabilities associated with MetLife, Inc.’s former Brighthouse Financial segment.
Financial Results
Financial Supplement | 1 | |||
Key Metrics (Unaudited, dollars in millions except share and per share amounts)
For the Three Months Ended | ||||||||||
Financial Results and Metrics | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||
Net income (loss) (1) | $(943) | $246 | $(349) | $(1,765) | $(158) | |||||
Operating earnings (loss) (1) | $(676) | $324 | $280 | $(62) | $329 | |||||
Total corporate expenses (2) | $241 | $226 | $215 | $198 | $199 | |||||
Stockholders' Equity (3) | ||||||||||
Ending stockholders' equity | $13,766 | $16,415 | $15,116 | $14,862 | $18,170 | |||||
Ending AOCI | 1,308 | 1,894 | 1,506 | 1,265 | 2,439 | |||||
Ending stockholders' equity, excluding AOCI | $12,458 | $14,521 | $13,610 | $13,597 | $15,731 | |||||
Proforma ending stockholders' equity, excluding AOCI (4) | N/A | $12,170 | N/A | N/A | N/A | |||||
Return On Equity | ||||||||||
Return on equity | (17.9)% | (12.2)% | (21.4)% | (16.7)% | (5.8)% | |||||
Return on equity, excluding AOCI (5) | (20.1)% | (13.8)% | (24.3)% | (18.9)% | (6.6)% | |||||
Operating return on equity, excluding AOCI (6) | (1.0)% | 5.9% | 4.1% | 4.4% | 6.9% | |||||
Per Common Share | ||||||||||
Net income (loss) (7) | $(7.87) | N/A | N/A | N/A | N/A | |||||
Operating earnings (loss) (8) | $(5.64) | N/A | N/A | N/A | N/A | |||||
Book value per common share (9) | $114.93 | N/A | N/A | N/A | N/A | |||||
Book value per common share, excluding AOCI (10) | $104.01 | N/A | N/A | N/A | N/A | |||||
Common Shares | ||||||||||
Common shares outstanding | 119,773,106 | N/A | N/A | N/A | N/A | |||||
Weighted average common shares outstanding - basic | 119,773,106 | N/A | N/A | N/A | N/A | |||||
Weighted average common shares outstanding - diluted | 119,773,106 | N/A | N/A | N/A | N/A | |||||
(1) The Company recorded a noncash tax expense of $1.1 billion in the third quarter of 2017 related to a tax obligation triggered prior to the separation, recognized by the Company's former parent. This tax expense had no impact on the book value of Brighthouse Financial. | ||||||||||
(2) Includes functional department expenses, public company expenses, certain investment expenses, retirement funding and incentive compensation; but excludes one time establishment costs. | ||||||||||
(3) For periods ending prior to the separation, stockholders' equity was previously reported as shareholder's net investment. | ||||||||||
(4) June 30, 2017 amounts have been adjusted for subsequent separation transactions, including the distribution to MetLife, Inc. of $1.8 billion and a tax separation liability of $600 million. | ||||||||||
(5) Return on equity is defined as total annual net income (loss) on a four quarter trailing basis, divided by the simple average of the most recent five quarters of total stockholders' equity, excluding AOCI. | ||||||||||
(6) Operating return on equity is defined as total annual operating earnings (loss) on a four quarter trailing basis, divided by the simple average of the most recent five quarters of total stockholders' equity, excluding AOCI. | ||||||||||
(7) Net income (loss) per common share is defined as net income (loss), divided by weighted average common shares outstanding - diluted. | ||||||||||
(8) Operating earnings (loss) per common share is defined as operating earnings (loss), divided by weighted average common shares outstanding - diluted. | ||||||||||
(9) Book value per common share is defined as ending stockholders' equity, including AOCI, divided by weighted average common shares outstanding - diluted. | ||||||||||
(10) Book value per common share, excluding AOCI, is defined as ending stockholders' equity, excluding AOCI, divided by weighted average common shares outstanding - diluted. | ||||||||||
Financial Supplement | 2 | |||
Condensed Statements of Operations (Unaudited, in millions)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||
Revenues | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||
Premiums | $236 | $218 | $176 | $201 | $347 | $630 | $1,021 | |||||||
Universal life and investment-type product policy fees | 1,025 | 957 | 953 | 939 | 976 | 2,935 | 2,843 | |||||||
Net investment income | 761 | 766 | 782 | 785 | 869 | 2,309 | 2,422 | |||||||
Other revenues | 93 | 162 | 74 | 255 | 49 | 329 | 481 | |||||||
Revenues before NIGL and NDGL | 2,115 | 2,103 | 1,985 | 2,180 | 2,241 | 6,203 | 6,767 | |||||||
Net investment gains (losses) | 21 | — | (55) | (63) | 26 | (34) | (15) | |||||||
Net derivative gains (losses) | (164) | (78) | (965) | (2,670) | (501) | (1,207) | (3,181) | |||||||
Total revenues | $1,972 | $2,025 | $965 | $(553) | $1,766 | $4,962 | $3,571 | |||||||
Expenses | ||||||||||||||
Interest credited | $279 | $284 | $275 | $294 | $290 | $838 | $871 | |||||||
Policyholder benefits and claims | 1,083 | 785 | 864 | 955 | 1,058 | 2,732 | 2,948 | |||||||
Amortization of DAC and VOBA | 123 | 21 | (148) | 416 | (10) | (4) | (45) | |||||||
Interest expense | 34 | 37 | 45 | 42 | 45 | 116 | 133 | |||||||
Other expenses (1) | 577 | 577 | 519 | 517 | 635 | 1,673 | 1,592 | |||||||
Total expenses | $2,096 | $1,704 | $1,555 | $2,224 | $2,018 | $5,355 | $5,499 | |||||||
Income (loss) before provision for income tax | (124) | 321 | (590) | (2,777) | (252) | (393) | (1,928) | |||||||
Provision for income tax expense (benefit) | 819 | 75 | (241) | (1,012) | (94) | 653 | (754) | |||||||
Net income (loss) | $(943) | $246 | $(349) | $(1,765) | $(158) | $(1,046) | $(1,174) | |||||||
(1) The period ended September 30, 2016 includes a non-cash charge for the goodwill write down of $161 million in our Run-off segment. | ||||||||||||||
Financial Supplement | 3 | |||
Balance Sheets (Unaudited, in millions)
As of | ||||||||||
ASSETS | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||
Investments: | ||||||||||
Fixed maturity securities available-for-sale | $63,565 | $63,507 | $60,870 | $61,388 | $75,842 | |||||
Equity securities available-for-sale | 265 | 278 | 290 | 300 | 365 | |||||
Mortgage loans, net | 10,431 | 10,263 | 9,908 | 9,378 | 8,567 | |||||
Policy loans | 1,522 | 1,513 | 1,512 | 1,517 | 1,518 | |||||
Real estate and real estate joint ventures | 407 | 302 | 242 | 215 | 210 | |||||
Other limited partnership interests | 1,654 | 1,623 | 1,596 | 1,642 | 1,704 | |||||
Short-term investments | 1,149 | 1,286 | 1,058 | 1,288 | 3,670 | |||||
Other invested assets | 2,666 | 3,037 | 3,817 | 4,904 | 7,686 | |||||
Total investments | 81,659 | 81,809 | 79,293 | 80,632 | 99,562 | |||||
Cash and cash equivalents | 1,698 | 4,443 | 5,812 | 5,228 | 2,825 | |||||
Accrued investment income | 641 | 608 | 641 | 693 | 692 | |||||
Reinsurance recoverables | 12,727 | 12,732 | 12,869 | 13,455 | 14,469 | |||||
Premiums and other receivables | 864 | 683 | 817 | 1,192 | 599 | |||||
DAC and VOBA | 6,414 | 6,464 | 6,500 | 6,293 | 6,589 | |||||
Current income tax recoverable | 1,772 | 1,423 | 1,247 | 778 | 329 | |||||
Other assets | 647 | 600 | 644 | 616 | 646 | |||||
Separate account assets | 116,857 | 115,566 | 115,365 | 113,043 | 115,218 | |||||
Total assets | $223,279 | $224,328 | $223,188 | $221,930 | $240,929 | |||||
LIABILITIES, STOCKHOLDERS' EQUITY AND NONCONTROLLING INTERESTS | ||||||||||
Liabilities | ||||||||||
Future policy benefits | $36,035 | $34,352 | $33,622 | $33,372 | $35,863 | |||||
Policyholder account balances | 37,298 | 37,296 | 36,986 | 37,526 | 40,304 | |||||
Other policy-related balances | 2,964 | 2,985 | 3,009 | 3,045 | 3,092 | |||||
Payables for collateral under securities loaned and other transactions | 4,569 | 7,121 | 7,177 | 7,390 | 13,696 | |||||
Long-term financing obligations: | ||||||||||
Debt | 3,615 | 3,016 | 807 | 810 | 814 | |||||
Reserve financing | — | — | 3,897 | 3,897 | 3,897 | |||||
Deferred income tax liability | 2,116 | 2,337 | 2,445 | 2,056 | 3,394 | |||||
Other liabilities | 5,994 | 5,190 | 4,764 | 5,929 | 6,481 | |||||
Separate account liabilities | 116,857 | 115,566 | 115,365 | 113,043 | 115,218 | |||||
Total liabilities | 209,448 | 207,863 | 208,072 | 207,068 | 222,759 | |||||
Stockholders' Equity and Noncontrolling Interests | ||||||||||
Common stock | 1 | — | — | — | — | |||||
Additional paid-in capital | 12,418 | — | — | — | — | |||||
Retained earnings | 39 | — | — | — | — | |||||
Shareholder's net investment | — | 14,521 | 13,610 | 13,597 | 15,731 | |||||
Accumulated other comprehensive income (loss) | 1,308 | 1,894 | 1,506 | 1,265 | 2,439 | |||||
Total stockholders' equity | 13,766 | 16,415 | 15,116 | 14,862 | 18,170 | |||||
Noncontrolling interests | 65 | 50 | — | — | — | |||||
Total stockholders' equity and noncontrolling interests | 13,831 | 16,465 | 15,116 | 14,862 | 18,170 | |||||
Total liabilities, stockholders' equity and noncontrolling interests | $223,279 | $224,328 | $223,188 | $221,930 | $240,929 | |||||
Earnings and Select
Metrics from
Business Segments and Corporate & Other
Financial Supplement | 5 | |||
Statements of Operating Earnings (Loss) By Segment and Corporate & Other (Unaudited, in millions)
For the Three Months Ended September 30, 2017 | ||||||||||
Operating revenues | Annuities | Life | Run-off | Corporate & Other | Total | |||||
Premiums | $44 | $164 | $— | $28 | $236 | |||||
Universal life and investment-type product policy fees | 629 | 134 | 196 | (4) | 955 | |||||
Net investment income | 310 | 87 | 348 | 35 | 780 | |||||
Other revenues | 87 | 2 | 3 | — | 92 | |||||
Total operating revenues | $1,070 | $387 | $547 | $59 | $2,063 | |||||
Operating expenses | ||||||||||
Interest credited | $153 | $40 | $86 | $— | $279 | |||||
Policyholder benefits and claims | 258 | 161 | 287 | 21 | 727 | |||||
Amortization of DAC and VOBA | (228) | 138 | — | 4 | (86) | |||||
Interest expense | — | — | — | 36 | 36 | |||||
Other operating expenses | 399 | 56 | 55 | 93 | 603 | |||||
Total operating expenses | $582 | $395 | $428 | $154 | $1,559 | |||||
Operating earnings (loss) before provision for income tax | 488 | (8) | 119 | (95) | 504 | |||||
Provision for income tax expense (benefit) | 133 | (14) | 36 | 1,025 | 1,180 | |||||
Operating earnings (loss) | $355 | $6 | $83 | $(1,120) | $(676) | |||||
For the Three Months Ended September 30, 2016 | ||||||||||
Operating revenues | Annuities | Life | Run-off | Corporate & Other | Total | |||||
Premiums | $76 | $125 | $132 | $13 | $346 | |||||
Universal life and investment-type product policy fees | 647 | 82 | 177 | (3) | 903 | |||||
Net investment income | 370 | 110 | 359 | 107 | 946 | |||||
Other revenues | 40 | 2 | 6 | — | 48 | |||||
Total operating revenues | $1,133 | $319 | $674 | $117 | $2,243 | |||||
Operating expenses | ||||||||||
Interest credited | $160 | $28 | $101 | $— | $289 | |||||
Policyholder benefits and claims | 189 | 142 | 476 | 6 | 813 | |||||
Amortization of DAC and VOBA | 89 | 40 | 15 | 8 | 152 | |||||
Interest expense | — | — | 15 | 28 | 43 | |||||
Other operating expenses | 308 | 69 | 37 | 37 | 451 | |||||
Total operating expenses | $746 | $279 | $644 | $79 | $1,748 | |||||
Operating earnings (loss) before provision for income tax | 387 | 40 | 30 | 38 | 495 | |||||
Provision for income tax expense (benefit) | 140 | 15 | 3 | 8 | 166 | |||||
Operating earnings (loss) | $247 | $25 | $27 | $30 | $329 | |||||
Financial Supplement | 6 | |||
Statements of Operating Earnings (Loss) By Segment and Corporate & Other (Cont.) (Unaudited, in millions)
For the Nine Months Ended September 30, 2017 | ||||||||||
Operating revenues | Annuities | Life | Run-off | Corporate & Other | Total | |||||
Premiums | $142 | $406 | $1 | $81 | $630 | |||||
Universal life and investment-type product policy fees | 1,900 | 292 | 544 | (10) | 2,726 | |||||
Net investment income | 948 | 263 | 1,060 | 159 | 2,430 | |||||
Other revenues | 280 | 21 | 26 | — | 327 | |||||
Total operating revenues | $3,270 | $982 | $1,631 | $230 | $6,113 | |||||
Operating expenses | ||||||||||
Interest credited | $457 | $108 | $271 | $— | $836 | |||||
Policyholder benefits and claims | 581 | 477 | 874 | 48 | 1,980 | |||||
Amortization of DAC and VOBA | (22) | 190 | 6 | 15 | 189 | |||||
Interest expense | — | — | 23 | 94 | 117 | |||||
Other operating expenses | 1,143 | 207 | 185 | 134 | 1,669 | |||||
Total operating expenses | $2,159 | $982 | $1,359 | $291 | $4,791 | |||||
Operating earnings (loss) before provision for income tax | 1,111 | — | 272 | (61) | 1,322 | |||||
Provision for income tax expense (benefit) | 302 | (11) | 88 | 1,015 | 1,394 | |||||
Operating earnings (loss) | $809 | $11 | $184 | $(1,076) | $(72) | |||||
For the Nine Months Ended September 30, 2016 | ||||||||||
Operating revenues | Annuities | Life | Run-off | Corporate & Other | Total | |||||
Premiums | $386 | $378 | $146 | $110 | $1,020 | |||||
Universal life and investment-type product policy fees | 1,894 | 236 | 501 | (8) | 2,623 | |||||
Net investment income | 1,075 | 306 | 1,057 | 189 | 2,627 | |||||
Other revenues | 454 | 8 | 17 | — | 479 | |||||
Total operating revenues | $3,809 | $928 | $1,721 | $291 | $6,749 | |||||
Operating expenses | ||||||||||
Interest credited | $476 | $83 | $311 | $— | $870 | |||||
Policyholder benefits and claims | 897 | 429 | 1,130 | 69 | 2,525 | |||||
Amortization of DAC and VOBA | 276 | 120 | 406 | 20 | 822 | |||||
Interest expense | — | — | 45 | 82 | 127 | |||||
Other operating expenses | 932 | 228 | 127 | 94 | 1,381 | |||||
Total operating expenses | $2,581 | $860 | $2,019 | $265 | $5,725 | |||||
Operating earnings (loss) before provision for income tax | 1,228 | 68 | (298) | 26 | 1,024 | |||||
Provision for income tax expense (benefit) | 368 | 16 | (107) | (1) | 276 | |||||
Operating earnings (loss) | $860 | $52 | $(191) | $27 | $748 | |||||
Financial Supplement | 7 | |||
Annuities — Statements of Operating Earnings (Loss) (Unaudited, in millions)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||
Operating revenues | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||
Premiums | $44 | $48 | $50 | $58 | $76 | $142 | $386 | |||||||
Universal life and investment-type product policy fees | 629 | 639 | 632 | 629 | 647 | 1,900 | 1,894 | |||||||
Net investment income | 310 | 311 | 327 | 376 | 370 | 948 | 1,075 | |||||||
Other revenues | 87 | 128 | 65 | 86 | 40 | 280 | 454 | |||||||
Total operating revenues | $1,070 | $1,126 | $1,074 | $1,149 | $1,133 | $3,270 | $3,809 | |||||||
Operating expenses | ||||||||||||||
Interest credited | $153 | $152 | $152 | $153 | $160 | $457 | $476 | |||||||
Policyholder benefits and claims | 258 | 163 | 160 | 182 | 189 | 581 | 897 | |||||||
Amortization of DAC and VOBA | (228) | 112 | 94 | 92 | 89 | (22) | 276 | |||||||
Interest expense | — | — | — | — | — | — | — | |||||||
Other operating expenses | 399 | 386 | 358 | 314 | 308 | 1,143 | 932 | |||||||
Total operating expenses | $582 | $813 | $764 | $741 | $746 | $2,159 | $2,581 | |||||||
Operating earnings (loss) before provision for income tax | 488 | 313 | 310 | 408 | 387 | 1,111 | 1,228 | |||||||
Provision for income tax expense (benefit) | 133 | 87 | 82 | 116 | 140 | 302 | 368 | |||||||
Operating earnings (loss) | $355 | $226 | $228 | $292 | $247 | $809 | $860 | |||||||
Financial Supplement | 8 | |||
Annuities — Select Operating Metrics (Unaudited, in millions)
For the Three Months Ended | ||||||||||
FIXED ANNUITIES ACCOUNT VALUE | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||
Account value, beginning of period | $13,230 | $13,369 | $13,523 | $13,715 | $13,809 | |||||
Premiums and deposits | 113 | 47 | 48 | 56 | 65 | |||||
Surrenders and contract benefits | (331) | (298) | (313) | (358) | (276) | |||||
Net flows | (218) | (251) | (265) | (302) | (211) | |||||
Interest credited | 111 | 112 | 111 | 110 | 117 | |||||
Policy charges and other | — | — | — | — | — | |||||
Account value, end of period | $13,123 | $13,230 | $13,369 | $13,523 | $13,715 | |||||
VARIABLE & INDEX ANNUITIES ACCOUNT VALUE (1) | ||||||||||
Account value, beginning of period | $116,830 | $115,920 | $113,271 | $115,099 | $113,121 | |||||
Premiums and deposits | 981 | 965 | 930 | 1,015 | 911 | |||||
Surrenders and contract benefits | (2,402) | (2,689) | (2,585) | (2,413) | (2,302) | |||||
Net flows | (1,421) | (1,724) | (1,655) | (1,398) | (1,391) | |||||
Investment performance (2) | 3,873 | 3,330 | 4,949 | 224 | 4,064 | |||||
Policy charges and other | (708) | (696) | (645) | (654) | (695) | |||||
Account value, end of period | $118,574 | $116,830 | $115,920 | $113,271 | $115,099 | |||||
INCOME ANNUITIES (1) | ||||||||||
Income annuity insurance liabilities | $4,544 | $4,531 | $4,518 | $4,521 | $4,507 | |||||
(1) Includes general account and separate account. | ||||||||||
(2) Includes imputed interest on index annuities and the interest credited on the general account investment option of variable products. | ||||||||||
Financial Supplement | 9 | |||
Annuities — Select Operating Metrics (Cont.) (Unaudited, in millions)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||
VARIABLE & INDEX ANNUITY SALES | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||
Shield LevelTM Annuities | $653 | $570 | $458 | $456 | $390 | $1,681 | $1,199 | |||||||
Fixed index annuity (1) | 69 | — | — | — | — | 69 | — | |||||||
GMWB/GMAB | 190 | 215 | 234 | 326 | 314 | 639 | 1,045 | |||||||
GMDB only | 92 | 107 | 115 | 142 | 129 | 314 | 432 | |||||||
GMIB (2) | 25 | 43 | 51 | 56 | 50 | 119 | 300 | |||||||
Total variable & index annuity sales | $1,029 | $935 | $858 | $980 | $883 | $2,822 | $2,976 | |||||||
FIXED ANNUITY SALES | ||||||||||||||
Fixed deferred annuities | $37 | $47 | $49 | $56 | $66 | $133 | $219 | |||||||
Single premium immediate annuities | 7 | 8 | 12 | 17 | 34 | 27 | 175 | |||||||
Other fixed annuities | 1 | 5 | 12 | 14 | 12 | 18 | 126 | |||||||
Total fixed annuity sales | $45 | $60 | $73 | $87 | $112 | $178 | $520 | |||||||
(1) Represents 90% of gross sales assumed via reinsurance agreement. | ||||||||||||||
(2) Ceased issuing GMIBs for new purchase in February 2016. | ||||||||||||||
Financial Supplement | 10 | |||
Life — Statements of Operating Earnings (Loss) (Unaudited, in millions)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||
Operating revenues | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||
Premiums | $164 | $142 | $100 | $114 | $125 | $406 | $378 | |||||||
Universal life and investment-type product policy fees | 134 | 75 | 83 | 12 | 82 | 292 | 236 | |||||||
Net investment income | 87 | 69 | 107 | 66 | 110 | 263 | 306 | |||||||
Other revenues | 2 | 19 | — | 128 | 2 | 21 | 8 | |||||||
Total operating revenues | $387 | $305 | $290 | $320 | $319 | $982 | $928 | |||||||
Operating expenses | ||||||||||||||
Interest credited | $40 | $40 | $28 | $31 | $28 | $108 | $83 | |||||||
Policyholder benefits and claims | 161 | 169 | 147 | 138 | 142 | 477 | 429 | |||||||
Amortization of DAC and VOBA | 138 | 7 | 45 | 162 | 40 | 190 | 120 | |||||||
Interest expense | — | — | — | — | — | — | — | |||||||
Other operating expenses | 56 | 66 | 85 | 31 | 69 | 207 | 228 | |||||||
Total operating expenses | $395 | $282 | $305 | $362 | $279 | $982 | $860 | |||||||
Operating earnings (loss) before provision for income tax | (8) | 23 | (15) | (42) | 40 | — | 68 | |||||||
Provision for income tax expense (benefit) | (14) | 11 | (8) | (18) | 15 | (11) | 16 | |||||||
Operating earnings (loss) | $6 | $12 | $(7) | $(24) | $25 | $11 | $52 | |||||||
Financial Supplement | 11 | |||
Life — Select Operating Metrics (Unaudited, in millions)
For the Three Months Ended | ||||||||||
LIFE ACCOUNT VALUE: GENERAL ACCOUNT | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||
Variable universal and universal life account value, beginning of period | $2,818 | $2,823 | $2,914 | $2,891 | $2,875 | |||||
Premiums and deposits (1) | 64 | 76 | 77 | 94 | 61 | |||||
Surrender and contract benefits | (49) | (36) | (124) | (41) | (32) | |||||
Net flows | 15 | 40 | (47) | 53 | 29 | |||||
Net transfers from (to) separate account | 14 | 17 | 17 | 17 | 13 | |||||
Interest credited | 29 | 19 | 22 | 34 | 26 | |||||
Policy charges and other | (76) | (81) | (83) | (81) | (52) | |||||
Variable universal and universal life account value, end of period | $2,800 | $2,818 | $2,823 | $2,914 | $2,891 | |||||
LIFE ACCOUNT VALUE: SEPARATE ACCOUNT | ||||||||||
Variable universal life account value, beginning of period | $4,977 | $4,886 | $4,704 | $4,730 | $4,583 | |||||
Premiums and deposits | 65 | 70 | 70 | 69 | 72 | |||||
Surrender and contract benefits | (58) | (71) | (67) | (68) | (57) | |||||
Net flows | 7 | (1) | 3 | 1 | 15 | |||||
Investment performance | 196 | 171 | 250 | 55 | 204 | |||||
Net transfers from (to) general account | (14) | (17) | (17) | (17) | (13) | |||||
Policy charges and other | (59) | (62) | (54) | (65) | (59) | |||||
Variable universal life account value, end of period | $5,107 | $4,977 | $4,886 | $4,704 | $4,730 | |||||
(1) Includes premiums and sales directed to the general account investment option of variable products. | ||||||||||
Financial Supplement | 12 | |||
Life — Select Operating Metrics (Cont.) (Unaudited, in millions)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||
LIFE SALES | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||
Whole life | $1 | $5 | $9 | $11 | $14 | $15 | $64 | |||||||
Term life | 2 | 3 | 6 | 10 | 10 | 11 | 44 | |||||||
Variable universal life | — | 2 | 1 | 2 | 1 | 3 | 9 | |||||||
Universal life without secondary guarantees | 2 | 1 | 1 | 10 | 3 | 4 | 8 | |||||||
Total life sales | $5 | $11 | $17 | $33 | $28 | $33 | $125 | |||||||
As of | ||||||||||
LIFE INSURANCE IN-FORCE | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||
Whole Life | ||||||||||
Life Insurance in-force, before reinsurance | $23,532 | $23,881 | $24,090 | $24,280 | $24,248 | |||||
Life Insurance in-force, net of reinsurance | $3,747 | $3,827 | $3,089 | $3,165 | $4,642 | |||||
Term Life | ||||||||||
Life Insurance in-force, before reinsurance | $459,001 | $464,872 | $470,405 | $471,857 | $471,182 | |||||
Life Insurance in-force, net of reinsurance | $329,833 | $333,685 | $120,791 | $120,090 | $113,899 | |||||
Universal and Variable Universal Life | ||||||||||
Life Insurance in-force, before reinsurance | $61,408 | $62,142 | $62,760 | $63,709 | $64,437 | |||||
Life Insurance in-force, net of reinsurance | $40,183 | $39,909 | $32,602 | $32,930 | $33,285 | |||||
Financial Supplement | 13 | |||
Run-off — Statements of Operating Earnings (Loss) (Unaudited, in millions)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||
Operating revenues | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||
Premiums | $— | $1 | $— | $1 | $132 | $1 | $146 | |||||||
Universal life and investment-type product policy fees | 196 | 175 | 173 | 232 | 177 | 544 | 501 | |||||||
Net investment income | 348 | 354 | 358 | 384 | 359 | 1,060 | 1,057 | |||||||
Other revenues | 3 | 15 | 8 | 6 | 6 | 26 | 17 | |||||||
Total operating revenues | $547 | $545 | $539 | $623 | $674 | $1,631 | $1,721 | |||||||
Operating expenses | ||||||||||||||
Interest credited | $86 | $91 | $94 | $110 | $101 | $271 | $311 | |||||||
Policyholder benefits and claims | 287 | 288 | 299 | 390 | 476 | 874 | 1,130 | |||||||
Amortization of DAC and VOBA | — | — | 6 | 556 | 15 | 6 | 406 | |||||||
Interest expense | — | 8 | 15 | 15 | 15 | 23 | 45 | |||||||
Other operating expenses | 55 | 79 | 51 | 88 | 37 | 185 | 127 | |||||||
Total operating expenses | $428 | $466 | $465 | $1,159 | $644 | $1,359 | $2,019 | |||||||
Operating earnings (loss) before provision for income tax | 119 | 79 | 74 | (536) | 30 | 272 | (298) | |||||||
Provision for income tax expense (benefit) | 36 | 27 | 25 | (187) | 3 | 88 | (107) | |||||||
Operating earnings (loss) | $83 | $52 | $49 | $(349) | $27 | $184 | $(191) | |||||||
Financial Supplement | 14 | |||
Run-off — Select Operating Metrics (Unaudited, in millions)
For the Three Months Ended | ||||||||||
UNIVERSAL LIFE WITH SECONDARY GUARANTEES ACCOUNT VALUE | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||
Account value, beginning of period | $6,282 | $6,258 | $6,252 | $6,227 | $6,210 | |||||
Premiums and deposits (1) | 200 | 215 | 208 | 211 | 235 | |||||
Surrenders and contract benefits | (17) | (30) | (42) | (22) | (31) | |||||
Net flows | 183 | 185 | 166 | 189 | 204 | |||||
Interest credited | 61 | 76 | 65 | 67 | 66 | |||||
Policy charges and other | (234) | (237) | (225) | (231) | (253) | |||||
Account value, end of period | $6,292 | $6,282 | $6,258 | $6,252 | $6,227 | |||||
As of | ||||||||||
LIFE INSURANCE IN-FORCE | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||
Universal Life with Secondary Guarantees | ||||||||||
Life Insurance in-force, before reinsurance | $83,325 | $83,645 | $83,587 | $83,566 | $83,749 | |||||
Life Insurance in-force, net of reinsurance | $35,243 | $35,356 | $24,556 | $24,287 | $24,105 | |||||
(1) Includes premiums and sales directed to the general account investment option of variable products. | ||||||||||
Financial Supplement | 15 | |||
Corporate & Other — Statements of Operating Earnings (Loss) (Unaudited, in millions)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||
Operating revenues | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||
Premiums | $28 | $27 | $26 | $29 | $13 | $81 | $110 | |||||||
Universal life and investment-type product policy fees | (4) | (3) | (3) | (3) | (3) | (10) | (8) | |||||||
Net investment income | 35 | 58 | 66 | 52 | 107 | 159 | 189 | |||||||
Other revenues | — | — | — | 32 | — | — | — | |||||||
Total operating revenues | $59 | $82 | $89 | $110 | $117 | $230 | $291 | |||||||
Operating expenses | ||||||||||||||
Interest credited | $— | $— | $— | $— | $— | $— | $— | |||||||
Policyholder benefits and claims | 21 | 17 | 10 | 17 | 6 | 48 | 69 | |||||||
Amortization of DAC and VOBA | 4 | 6 | 5 | 3 | 8 | 15 | 20 | |||||||
Interest expense | 36 | 28 | 30 | 29 | 28 | 94 | 82 | |||||||
Other operating expenses | 93 | 20 | 21 | 48 | 37 | 134 | 94 | |||||||
Total operating expenses | $154 | $71 | $66 | $97 | $79 | $291 | $265 | |||||||
Operating earnings (loss) before provision for income tax | (95) | 11 | 23 | 13 | 38 | (61) | 26 | |||||||
Provision for income tax expense (benefit) | 1,025 | (23) | 13 | (7) | 8 | 1,015 | (1) | |||||||
Operating earnings (loss) | $(1,120) | $34 | $10 | $20 | $30 | $(1,076) | $27 | |||||||
Other
Information
Financial Supplement | 17 | |||
Other Information (Unaudited, in millions)
For the Three Months Ended | ||||||||||
DAC AND VOBA ROLL FORWARD | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||
Balance, beginning of period | $6,464 | $6,500 | $6,293 | $6,589 | $6,572 | |||||
Capitalizations | 72 | 47 | 68 | 79 | 71 | |||||
Amortization: | ||||||||||
Related to net investment gains (losses) and net derivative gains (losses) (1) | (209) | 105 | 297 | 397 | 162 | |||||
Related to actuarial notable items, included in operating expenses | 229 | — | — | (539) | — | |||||
Other amortization, included in operating expenses | (143) | (125) | (149) | (274) | (152) | |||||
Total amortization | (123) | (20) | 148 | (416) | 10 | |||||
Unrealized investment gains (losses) | 1 | (63) | (9) | 90 | (64) | |||||
Other | — | — | — | (49) | — | |||||
Balance, end of period | $6,414 | $6,464 | $6,500 | $6,293 | $6,589 | |||||
As of | ||||||||||
DAC AND VOBA BY SEGMENT AND CORPORATE & OTHER | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||
Annuities | $5,142 | $5,076 | $5,106 | $4,878 | $4,380 | |||||
Life | 1,134 | 1,248 | 1,253 | 1,261 | 1,423 | |||||
Run-off | 6 | 2 | 5 | 6 | 639 | |||||
Corporate & Other | 132 | 138 | 136 | 148 | 147 | |||||
Total DAC and VOBA | $6,414 | $6,464 | $6,500 | $6,293 | $6,589 | |||||
For the Three Months Ended | ||||||||||
NET DERIVATIVE GAINS (LOSSES) | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||
Net derivative gains (losses): | ||||||||||
Variable annuity embedded derivatives | $721 | $212 | $291 | $1,753 | $606 | |||||
Variable annuity hedge program (2) | (872) | (471) | (1,070) | (2,538) | (1,027) | |||||
ULSG hedge program | (9) | 267 | (44) | (1,388) | 32 | |||||
Other hedges and embedded derivatives | (22) | (113) | (218) | (590) | (187) | |||||
Sub-total | (182) | (105) | (1,041) | (2,763) | (576) | |||||
Investment hedge adjustments and PAB adjustments | 18 | 27 | 76 | 93 | 75 | |||||
Total net derivative (losses) | $(164) | $(78) | $(965) | $(2,670) | $(501) | |||||
(1) Includes amounts related to GMIB fees and GMIB costs that are also included as an adjustment from net income (loss) to operating earnings (loss). | ||||||||||
(2) Beginning with the period ended September 30, 2017, in connection with the transition to our new variable annuity hedge program, the change in value of embedded derivative liabilities associated with Shield LevelTM Annuities is included in and presented with the variable annuity hedges. | ||||||||||
Financial Supplement | 18 | |||
Other Information (Cont.) (Unaudited, in millions)
For the Three Months Ended | ||||||||||
NOTABLE ITEMS IMPACTING OPERATING EARNINGS | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||
Actuarial assumption review and other insurance adjustments | $(134) | $— | $— | $399 | $21 | |||||
Establishment costs | 31 | — | — | — | — | |||||
Separation related transactions | 1,073 | (42) | — | (23) | — | |||||
Other | — | — | — | (23) | — | |||||
Total notable items (1) | $970 | $(42) | $— | $353 | $21 | |||||
NOTABLE ITEMS BY SEGMENT AND CORPORATE & OTHER | ||||||||||
Life | $17 | $(12) | $— | $— | $— | |||||
Annuities | (142) | (25) | — | (46) | — | |||||
Run-off | (9) | (5) | — | 399 | 21 | |||||
Corporate & Other | 1,104 | — | — | — | — | |||||
Total notable items (1) | $970 | $(42) | $— | $353 | $21 | |||||
(1) Notable items represent a negative (positive) impact to operating earnings (loss). | ||||||||||
Notable items reflect the impact of events that affected the Company’s results but that were unknown. Notable items also include certain items anticipated to help investors have a better understanding of the Company’s results and to evaluate and forecast those results, such as establishment costs. | ||||||||||
Financial Supplement | 19 | |||
Variable Annuity Separate Account Returns (Unaudited)
For the Three Months Ended | ||||||||||
VARIABLE ANNUITY SEPARATE ACCOUNT RETURNS | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||
Total Quarterly VA separate account gross returns: | 3.61% | 3.11% | 4.72% | 0.20% | 3.84% | |||||
TOTAL VARIABLE ANNUITY SEPARATE ACCOUNT ALLOCATION | ||||||||||
Percent allocated to equity funds | 27.87% | 27.77% | 27.70% | 27.41% | 26.97% | |||||
Percent allocated to bond funds/other funds | 8.82% | 8.94% | 9.01% | 9.23% | 9.43% | |||||
Percent allocated to target volatility funds | 14.82% | 14.78% | 14.69% | 14.76% | 14.88% | |||||
Percent allocated to balanced funds | 48.49% | 48.52% | 48.60% | 48.60% | 48.72% | |||||
Financial Supplement | 20 | |||
Summary of Investments (Unaudited, dollars in millions)
September 30, 2017 | December 31, 2016 | |||||||
Amount | % of Total | Amount | % of Total | |||||
Fixed maturity securities: | ||||||||
U.S. corporate securities | $22,446 | 26.93% | $22,311 | 25.99% | ||||
U.S. government and agency securities | 15,843 | 19.01% | 13,090 | 15.25% | ||||
Residential mortgage-backed securities | 8,012 | 9.61% | 8,023 | 9.34% | ||||
Foreign corporate securities | 6,764 | 8.11% | 6,393 | 7.45% | ||||
State and political subdivision securities | 4,118 | 4.94% | 3,945 | 4.59% | ||||
Commercial mortgage-backed securities | 3,377 | 4.05% | 3,812 | 4.44% | ||||
Asset-backed securities | 1,750 | 2.10% | 2,652 | 3.09% | ||||
Foreign government securities | 1,255 | 1.51% | 1,162 | 1.35% | ||||
Total fixed maturity securities | 63,565 | 76.26% | 61,388 | 71.50% | ||||
Equity securities | 265 | 0.32% | 300 | 0.35% | ||||
Mortgage loans: | ||||||||
Commercial mortgage loans | 7,039 | 8.44% | 6,523 | 7.60% | ||||
Agricultural mortgage loans | 2,220 | 2.66% | 1,892 | 2.20% | ||||
Residential mortgage loans | 1,098 | 1.32% | 867 | 1.01% | ||||
Valuation allowances | (45) | (0.05)% | (40) | (0.05)% | ||||
Commercial mortgage loans held by CSEs securitization entities | 119 | 0.14% | 136 | 0.16% | ||||
Total mortgage loans | 10,431 | 12.51% | 9,378 | 10.92% | ||||
Policy loans | 1,522 | 1.83% | 1,517 | 1.77% | ||||
Real estate and real estate joint ventures | 407 | 0.49% | 215 | 0.25% | ||||
Other limited partnership interests | 1,654 | 1.98% | 1,642 | 1.91% | ||||
Cash, cash equivalents and short-term investments | 2,847 | 3.42% | 6,516 | 7.59% | ||||
Other invested assets: | ||||||||
Derivatives: | ||||||||
Interest rate | 1,236 | 1.48% | 2,152 | 2.51% | ||||
Equity markets | 1,003 | 1.20% | 1,076 | 1.25% | ||||
Foreign currency exchange rate | 201 | 0.24% | 366 | 0.43% | ||||
Credit | 37 | 0.04% | 28 | 0.03% | ||||
Total derivatives | 2,477 | 2.97% | 3,622 | 4.22% | ||||
Loans to affiliates | — | 0.00% | 1,090 | 1.27% | ||||
Other | 189 | 0.22% | 192 | 0.22% | ||||
Total other invested assets | 2,666 | 3.19% | 4,904 | 5.71% | ||||
Total invested assets and cash and cash equivalents | $83,357 | 100.00% | $85,860 | 100.00% | ||||
For the Three Months Ended | ||||||||||
September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | ||||||
Net investment income yield (1) | 4.32% | 4.40% | 4.74% | 4.69% | 4.95% | |||||
(1) Yields are calculated as investment income as a percent of average quarterly asset carrying values. Investment income includes investment hedge adjustments, excludes recognized gains and losses and reflects the GAAP adjustments described beginning on page A-1 of the Appendix hereto. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets, collateral received from derivative counterparties and the effects of consolidating under GAAP certain VIEs that are treated as CSEs. . | ||||||||||
Financial Supplement | 21 | |||
Select Actual and Preliminary Statutory Financial Results (1) (Unaudited, in millions)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||
INCOME | September 30, 2017 (2) | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | September 30, 2017 (2) | September 30, 2016 | |||||||
Total revenues (Line 9) | $2,600 | $3,194 | $8,889 | $3,022 | $2,872 | $14,700 | $13,129 | |||||||
Total benefits and expenses before dividends to policyholders (Line 28) | $1,800 | $2,501 | $9,246 | $1,387 | $1,508 | $13,500 | $11,218 | |||||||
Gain (loss) from operations (Line 33) | $700 | $114 | $(279) | $1,620 | $866 | $500 | $1,065 | |||||||
Net realized capital gains (losses), net of federal income tax and transfers to interest maintenance reserve (Line 34) | (400) | (234) | (463) | (569) | (474) | (1,100) | (909) | |||||||
Net income (loss) (Line 35) | $300 | $(120) | $(742) | $1,051 | $392 | $(600) | $156 | |||||||
As of | ||||||||||||||
COMBINED TOTAL ADJUSTED CAPITAL | September 30, 2017 (2) | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||||||
Combined total adjusted capital | $6,600 | $6,377 | $4,217 | $5,377 | $9,073 | |||||||||
(1) Combined statutory results for Brighthouse Life Insurance Company, Brighthouse Life Insurance Company of NY and New England Life Insurance Company. | ||||||||||||||
(2) Reflects preliminary statutory results for the three months and the year to date period ended September 30, 2017. | ||||||||||||||
Appendix
Financial Supplement | A-1 | |||
This financial supplement may contain information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “will,” “intend,” “plan,” “believe” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, statements regarding the separation from MetLife, including the expected benefits thereof, the recapitalization actions, including expected benefits thereof, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results.
Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of Brighthouse, its subsidiaries and affiliates. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others: the impact of the separation on our business and profitability due to MetLife’s strong brand and reputation, the increased costs related to replacing arrangements with MetLife with those of third parties and incremental costs as a public company; whether the operational, strategic and other benefits of the separation can be achieved, and our ability to implement our business strategy; our degree of leverage following the separation due to indebtedness incurred in connection with the separation; differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models; higher risk management costs and exposure to increased counterparty risk due to guarantees within certain of our products; the effectiveness of our proposed exposure management strategy, and the timing of its implementation and the impact of such strategy on net income volatility and negative effects on our statutory capital; the additional reserves we will be required to hold against our variable annuities as a result of actuarial guidelines; a sustained period of low equity market prices and interest rates that are lower than those we assumed when we issued our variable annuity products; the effect adverse capital and credit market conditions may have on our ability to meet liquidity needs and our access to capital; the impact of regulatory, legislative or tax changes on our insurance business or other operations; the effectiveness of our risk management policies and procedures; the availability of reinsurance and the ability of our counterparties to our reinsurance or indemnification arrangements to perform their obligations thereunder; heightened competition, including with respect to service, product features, scale, price, actual or perceived financial strength, claims-paying ratings, credit ratings, e-business capabilities and name recognition; changes in accounting standards, practices and/or policies applicable to us; the ability of our insurance subsidiaries to pay dividends to us, and our ability to pay dividends to our shareholders; our ability to market and distribute our products through distribution channels; tax consequences of the distribution, including whether the distribution will qualify for non-recognition treatment for U.S. federal income tax purposes and potential indemnification to MetLife if the distribution does not so qualify; our ability to attract and retain key personnel; and other factors described from time to time in documents that we file with the U.S. Securities and Exchange Commission (the “SEC”).
For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements included and the risks, uncertainties and other factors identified in the Preliminary Information Statement of Brighthouse Financial, Inc., subject to completion, dated June 30, 2017 included as Exhibit 99.1 to Amendment No. 5 to Brighthouse Financial, Inc.’s Registration Statement on Form 10, filed with the SEC on June 30, 2017 and in Brighthouse Financial, Inc.’s subsequent reports on Form 10-K and Form 10-Q, including in the sections thereof captioned “Risk Factors” and “Note Regarding Forward-Looking Statements”, and in Brighthouse Financial Inc.’s subsequent reports on Form 8-K. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law. Please consult any further disclosures Brighthouse Financial, Inc. makes on related subjects in reports to the SEC.
Financial Supplement | A-2 | |||
Non-GAAP and Other Financial Disclosures
In this financial supplement, we present certain measures of our performance that are not calculated in accordance with GAAP. We believe that these non-GAAP financial measures enhance the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of our business.
The following non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP:
Non-GAAP financial measures: | Comparable GAAP financial measures: | |||
(i) | book value, excluding AOCI / stockholders' equity, excluding AOCI | (i) | book value / stockholders' equity | |
(ii) | operating earnings (loss) | (ii) | net income (loss) | |
(iii) | operating revenues | (iii) | revenues | |
(iv) | operating expenses | (iv) | expenses | |
(v) | operating return on equity | (v) | return on equity | |
(vi) | operating earnings per share | (vi) | earnings per share | |
Reconciliations of these measures to the most directly comparable historical GAAP measures are included in this financial supplement.
Our definitions of the non-GAAP and other financial measures discussed in this financial supplement may differ from those used by other companies. For example, as indicated below, we exclude GMIB revenues and related embedded derivatives gains (losses) as well as GMIB benefits and associated DAC and VOBA offsets from operating earnings (loss), thereby excluding substantially all GMLB activity from operating earnings.
Operating Earnings (Loss), Operating Revenues and Operating Expenses
Operating earnings (loss)is used by management to evaluate performance, allocate resources and facilitate comparisons to industry results. This financial measure focuses on our primary businesses principally by excluding the impact of market volatility, which could distort trends, and revenues and costs related to non-core products and businesses. Non-core businesses include discontinued operations and other businesses that have been or will be sold or exited by us, referred to as divested businesses, and certain entities required to be consolidated under GAAP.
Provided below are the adjustments to GAAP revenues and GAAP expenses used to calculate operating revenues and operating expenses, respectively. Operating earnings (loss), as presented in this financial supplement, reflects operating revenues less operating expenses, both net of income tax.
Financial Supplement | A-3 | |||
Non-GAAP and Other Financial Disclosures (Cont.)
The following are excluded from total revenues in calculating the operating revenues component of operating earnings (loss):
• | Net investment gains (losses); |
• | Net derivative gains (losses) except: (i) earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment ("Investment Hedge Adjustments"), and (ii) earned income on derivatives that are hedges of policyholder account balances but do not qualify for hedge accounting treatment ("PAB Adjustments"); |
• | Amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses) and certain variable annuity GMIB fees (“GMIB Fees”); |
• | Certain amounts related to securitization entities that are VIEs consolidated under GAAP; and |
• | Revenues from divested businesses. |
The following are excluded from total expenses in calculating the operating expenses component of operating earnings (loss):
• | Amounts associated with benefits and hedging costs related to GMIBs (“GMIB Costs”); |
• | Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”); |
• | Amortization of DAC and VOBA related to (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments; |
• | Recognition of certain contingent assets and liabilities that could not be recognized at acquisition or adjusted for during the measurement period under GAAP business combination accounting guidance; |
• | Expenses of divested businesses; |
• | Amounts related to securitization entities that are VIEs consolidated under GAAP; |
• | Goodwill impairment; and |
• | Costs related to: (i) implementation of new insurance regulatory requirements and (ii) acquisition and integration costs. |
The tax impact of the adjustments mentioned is calculated net of the U.S. statutory tax rate, which could differ from our effective tax rate.
Consistent with GAAP guidance for segment reporting, operating earnings (loss) is also our GAAP measure of segment performance.
Financial Supplement | A-4 | |||
Non-GAAP and Other Financial Disclosures (Cont.)
Operating Return On Equity and Operating Earnings (Loss) Per Share
Operating return on equity and operating earnings per share are measures used by management to evaluate the execution of our business strategy and align such strategy with our shareholders’ interests.
Operating return on equity is defined as total annual operating earnings (loss) on a four quarter trailing basis divided by the simple average of the most recent five quarters of total stockholders’ equity, excluding AOCI.
Operating earnings (loss) per share is defined as total annual operating earnings on a four quarter trailing basis divided by the weighted average number of fully diluted shares of common stock outstanding for the period.
Book Value per Common Share
Brighthouse Financial uses the term "book value" to refer to "stockholders' equity." Book value per common share is defined as ending stockholders' equity, including AOCI, divided by weighted average common shares outstanding - diluted. Book value per common share, excluding AOCI, is defined as ending stockholders' equity, excluding AOCI, divided by weighted average common shares outstanding - diluted.
Brighthouse Financial provides these measures to enable investors to analyze the amount of the company's net worth that is primarily attributable to the company's business operations. Brighthouse Financial believes they are useful to investors because they eliminate the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates.
Sales
Statistical sales information for Life sales are calculated using the LIMRA definition of sales for core direct sales, excluding company-sponsored internal exchanges, corporate-owned life insurance, bank-owned life insurance, and private placement variable universal life insurance. Annuity sales consist of 100 percent of direct statutory premiums, excluding company sponsored internal exchanges and the fixed index annuity distributed by MassMutual. These sales statistics do not correspond to revenues under GAAP, but are used as relevant measures of business activity.
Financial Supplement | A-5 | |||
Acronyms
AOCI | Accumulated other comprehensive income (loss) |
CSE | Consolidated securitization entity |
DAC | Deferred policy acquisition costs |
GAAP | Accounting principles generally accepted in the United States of America |
GMAB | Guaranteed minimum accumulation benefits |
GMDB | Guaranteed minimum death benefits |
GMIB | Guaranteed minimum income benefits |
GMLB | Guaranteed minimum living benefits |
GMWB | Guaranteed minimum withdrawal benefits |
LIMRA | Life Insurance Marketing and Research Association |
NDGL | Net derivative gains (losses) |
NIGL | Net investment gains (losses) |
PAB | Policyholder account balances |
ULSG | Universal life insurance with secondary guarantees |
VA | Variable annuity |
VIE | Variable interest entities |
VOBA | Value of business acquired |
VUL | Variable universal life insurance |
Financial Supplement | A-6 | |||
Reconciliation of Net Income (Loss) to Operating Earnings (Loss) (Unaudited, in millions except per share data)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||
September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||
Net income (loss) | $(943) | $246 | $(349) | $(1,765) | $(158) | $(1,046) | $(1,174) | |||||||
Adjustments from net income (loss) to operating earnings (loss): | ||||||||||||||
Less: Net investment gains (losses) | 21 | — | (55) | (63) | 26 | (34) | (15) | |||||||
Less: Net derivative gains (losses) | (164) | (78) | (965) | (2,670) | (501) | (1,207) | (3,181) | |||||||
Less: Other adjustments to net income (loss) (1) | ||||||||||||||
GMIB Fees | 70 | 70 | 69 | 73 | 73 | 209 | 221 | |||||||
Investment hedge adjustments | (19) | (27) | (76) | (92) | (74) | (122) | (206) | |||||||
Amortization of DAC and VOBA related to net investment gains (losses) and net derivative gains (losses) | (78) | 124 | 240 | 325 | 128 | 286 | 1,077 | |||||||
GMIB costs and amortization of DAC and VOBA related to GMIB fees and GMIB costs | (486) | (158) | (185) | (190) | (209) | (829) | (587) | |||||||
Divested business | 26 | (26) | (4) | (36) | (24) | (4) | (51) | |||||||
Other | 2 | (10) | (6) | 33 | (166) | (14) | (210) | |||||||
Less: Provision for income tax (expense) benefit on reconciling adjustments | 361 | 27 | 353 | 917 | 260 | 741 | 1,030 | |||||||
Add: Net income (loss) attributable to noncontrolling interests | — | — | — | — | — | — | — | |||||||
Operating earnings (loss) | $(676) | $324 | $280 | $(62) | $329 | $(72) | $748 | |||||||
Net income (loss) per common share - diluted | $(7.87) | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Adjustments from net income (loss) to operating earnings (loss): | ||||||||||||||
Less: Net investment gains (losses) | 0.18 | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Less: Net derivative gains (losses) | (1.37) | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Less: Other adjustments to net income (1) | ||||||||||||||
GMIB Fees | 0.58 | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Investment hedge adjustments | (0.16) | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Amortization of DAC and VOBA related to net investment gains (losses) and net derivative gains (losses) | (0.65) | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
GMIB costs and amortization of DAC and VOBA related to GMIB fees and GMIB costs | (4.06) | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Divested business | 0.22 | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Other | 0.02 | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Less: Provision for income tax (expense) benefit on reconciling adjustments | 3.01 | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Add: Net income (loss) attributable to noncontrolling interests | — | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Operating earnings (loss) per common share - diluted | $(5.64) | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
(1) For further explanations of these adjustments see pages A-1 through A-9 of the Appendix. | ||||||||||||||
Financial Supplement | A-7 | |||
Reconciliation of Return On Equity to Operating Return On Equity (Unaudited, dollars in millions)
Four Quarters Cumulative Trailing Basis | ||||||||||
OPERATING EARNINGS (LOSS) | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||
Net income (loss) | $(2,811) | $(2,026) | $(3,695) | $(2,939) | $(1,083) | |||||
Add: Investment portfolio gains (losses) | 97 | 92 | 72 | 78 | 5 | |||||
Add: Net derivative gains (losses) | 3,877 | 4,214 | 7,109 | 5,851 | 3,438 | |||||
Add: Other adjustments to net income | 361 | 148 | (523) | (357) | (29) | |||||
Add: Provision for income tax expense (benefit) | (1,658) | (1,557) | (2,337) | (1,947) | (1,192) | |||||
Operating earnings (loss) | $(134) | $871 | $626 | $686 | $1,139 | |||||
Five Quarters Average Stockholders' Equity Basis | ||||||||||
STOCKHOLDERS' EQUITY, EXCLUDING AOCI | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||
Stockholders' equity | $15,666 | $16,605 | $17,258 | $17,603 | $18,614 | |||||
Accumulated other comprehensive income (loss) (AOCI) | 1,682 | 1,947 | 2,060 | 2,063 | $2,209 | |||||
Stockholders' equity, excluding AOCI | $13,983 | $14,658 | $15,198 | $15,540 | $16,405 | |||||
Five Quarters Average Stockholders' Equity Basis | ||||||||||
RETURN ON EQUITY AND RETURN ON EQUITY, EXCLUDING AOCI | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||
Return on equity | (17.9)% | (12.2)% | (21.4)% | (16.7)% | (5.8)% | |||||
Add: Return on investment portfolio gains (losses) | 0.6% | 0.6% | 0.4% | 0.4% | —% | |||||
Add: Return on net derivative gains (losses) | 24.7% | 25.4% | 41.2% | 33.2% | 18.5% | |||||
Add: Return on other adjustments to net income | 2.3% | 0.9% | (3.0)% | (2.0)% | (0.2)% | |||||
Add: Return on provision for income tax expense (benefit) | (10.6)% | (9.4)% | (13.5)% | (11.1)% | (6.4)% | |||||
Operating return on equity | (0.9)% | 5.2% | 3.6% | 3.9% | 6.1% | |||||
Return on equity, excluding AOCI | (20.1)% | (13.8)% | (24.3)% | (18.9)% | (6.6)% | |||||
Operating return on equity, excluding AOCI | (1.0)% | 5.9% | 4.1% | 4.4% | 6.9% | |||||
Financial Supplement | A-8 | |||
Reconciliation of Total Revenues to Operating Revenues and Reconciliation of Total Expenses to Operating Expenses (Unaudited, in millions)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||
September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||
Total revenues | $1,972 | $2,025 | $965 | $(553) | $1,766 | $4,962 | $3,571 | |||||||
Less: Net investment gains (losses) | 21 | — | (55) | (63) | 26 | (34) | (15) | |||||||
Less: Net derivative gains (losses) | (164) | (78) | (965) | (2,670) | (501) | (1,207) | (3,181) | |||||||
Less: Other adjustments to revenues: | ||||||||||||||
GMIB fees | 70 | 70 | 69 | 73 | 73 | 209 | 221 | |||||||
Investment hedge adjustments | (19) | (27) | (76) | (92) | (74) | (122) | (206) | |||||||
Other | 1 | 2 | — | (3) | (1) | 3 | 3 | |||||||
Total operating revenues | $2,063 | $2,058 | $1,992 | $2,202 | $2,243 | $6,113 | $6,749 | |||||||
Total expenses | $2,096 | $1,704 | $1,555 | $2,224 | $2,018 | $5,355 | $5,499 | |||||||
Less: Amortization of DAC and VOBA related to net investment gains (losses) and net derivative gains (losses) | 78 | (124) | (240) | (325) | (128) | (286) | (1,077) | |||||||
Less: Goodwill impairment | — | — | — | — | 161 | — | 161 | |||||||
Less: Other adjustments to expenses: | ||||||||||||||
GMIB costs and amortization of DAC and VOBA related to GMIB fees and GMIB costs | 486 | 158 | 185 | 190 | 209 | 829 | 587 | |||||||
Other | (1) | 12 | 6 | (36) | 4 | 17 | 52 | |||||||
Less: Divested business | (26) | 26 | 4 | 36 | 24 | 4 | 51 | |||||||
Total operating expenses | $1,559 | $1,632 | $1,600 | $2,359 | $1,748 | $4,791 | $5,725 | |||||||
Financial Supplement | A-9 | |||
Investment Reconciliation Details (Unaudited, dollars in millions)
For the Three Months Ended | For the Nine Months Ended | |||||||||||||
INVESTMENT PORTFOLIO GAINS (LOSSES) | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||
Gross investment gains (losses) | $23 | $4 | $(51) | $(67) | $66 | $(24) | $51 | |||||||
Writedowns | (1) | (3) | (4) | 2 | (38) | (8) | (65) | |||||||
Investment portfolio gains (losses) | 22 | 1 | (55) | (65) | 28 | (32) | (14) | |||||||
Net investment gains (losses) related to CSEs | (1) | (1) | — | 1 | (2) | (2) | (2) | |||||||
Other gains (losses) reported in net investment gains (losses) on GAAP basis | — | — | — | 1 | — | — | 1 | |||||||
Net Investment Gains (Losses) - GAAP Basis | $21 | $— | $(55) | $(63) | $26 | $(34) | $(15) | |||||||
For the Three Months Ended | ||||||||||
NET INVESTMENT YIELD | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | |||||
Total Investments | ||||||||||
Investment income yield (1) | 4.47% | 4.55% | 4.89% | 4.84% | 5.09% | |||||
Investment fees and expenses | (0.15)% | (0.15)% | (0.15)% | (0.15)% | (0.14)% | |||||
Net investment income yield (1) | 4.32% | 4.40% | 4.74% | 4.69% | 4.95% | |||||
(1) Yields are calculated as investment income as a percent of average quarterly asset carrying values. Investment income excludes recognized gains and losses and reflects the GAAP adjustments described beginning on page A-1. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets, collateral received from derivative counterparties and the effects of consolidating under GAAP certain VIEs that are treated as CSEs. | ||||||||||
