Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations
Page
Introduction
Executive Summary
Risk Management Strategies
Industry Trends and Uncertainties
Summary of Critical Accounting Estimates
Non-GAAP Financial Disclosures
Results of Operations
Investments
Derivatives
Policyholder Liabilities
Liquidity and Capital Resources
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The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this report, particularly in “Note Regarding Forward-Looking Statements and Summary of Risk Factors” and “Risk Factors.” This Management’s Discussion and Analysis of Financial Condition and Results of Operations should also be read in conjunction with “Quantitative and Qualitative Disclosures About Market Risk” and our consolidated financial statements included elsewhere herein.
Introduction
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations, financial condition and cash flows of Brighthouse Financial for the periods indicated. In addition to Brighthouse Financial, Inc., the companies and businesses included in the results of operations, financial condition and cash flows are:
• Brighthouse Life Insurance Company (together with its subsidiaries and affiliates, “BLIC”), our largest insurance subsidiary, domiciled in Delaware and licensed to write business in all U.S. states (except New York), the District of Columbia, the Bahamas, Guam, Puerto Rico, the British Virgin Islands and the U.S. Virgin Islands;
• NELICO, domiciled in Massachusetts and licensed to write business in all U.S. states and the District of Columbia;
• BHNY, domiciled in New York and licensed to write business only in New York, which is a subsidiary of Brighthouse Life Insurance Company;
• BRCD, our reinsurance subsidiary domiciled and licensed in Delaware, which is a subsidiary of Brighthouse Life Insurance Company;
• Brighthouse Advisers, serving as investment advisor to certain proprietary funds that are underlying investments under our and MetLife’s variable insurance products;
• Brighthouse Services, LLC, an internal services and payroll company;
• Brighthouse Securities, registered as a broker-dealer with the SEC, approved as a member of FINRA, registered as a broker-dealer and licensed as an insurance agency in all required states; and
• Brighthouse Holdings, LLC (“BH Holdings”), a direct holding company subsidiary of Brighthouse Financial, Inc. domiciled in Delaware.
Prior to discussing our results of operations, we present information that we believe is useful to understanding the discussion of our financial results. This information precedes our results of operations discussion and is most beneficial when read in the sequence presented. A summary of key informational sections is as follows:
• “Executive Summary” provides summarized information regarding our business, segments and financial results.
• “Risk Management Strategies” describes the Company’s risk management strategies to protect against capital markets and other economic risks.
• “Industry Trends and Uncertainties” discusses updates and changes to a number of trends and uncertainties that we believe may materially affect our future financial condition, results of operations or cash flows.
• “Summary of Critical Accounting Estimates” explains what we believe to be the most critical estimates and judgments applied in determining our results in accordance with GAAP.
• “Non-GAAP Financial Disclosures” defines key financial measures presented in our results of operations discussion that are not calculated in accordance with GAAP but are used by management in evaluating company and segment performance. As described in this section, adjusted earnings is presented by key business activities which are derived, but different, from the line items presented in the GAAP statements of operations.
• “Results of Operations” begins with a discussion of our AAR, including a summary of the changes made to the key assumptions in 2025 and 2024, as well as the resulting impact on net income (loss) available to shareholders in each period.
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Our Results of Operations discussion and analysis presents a review for the years ended December 31, 2025 and 2024 and year-over-year comparisons between these years. Our Results of Operations discussion and analysis for the year ended December 31, 2024, including a review of the 2024 AAR and year-over-year comparisons between the years ended December 31, 2024 and 2023 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024 (our “2024 Annual Report”), which was filed with the SEC on February 28, 2025, and such discussions are incorporated herein by reference.
Executive Summary
We are one of the largest providers of annuity and life insurance products in the U.S. through multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners. We are organized into the following reportable segments: Annuities; Life; Run-off; and Corporate & Other. See “Business — Segment Information” and Note 2 of the Notes to the Consolidated Financial Statements for further information regarding our segments.
On November 6, 2025, BHF entered into the Merger Agreement, pursuant to which, at the closing of the transactions contemplated by the Merger Agreement, Merger Sub will merge with and into BHF, and the separate corporate existence of Merger Sub will cease, with BHF continuing as the surviving corporation and as a wholly-owned subsidiary of Aquarian Parent. The Merger Agreement was adopted by stockholders at the special meeting held on February 12, 2026, and the applicable waiting period under the Hart-Scott Rodino Antitrust Improvement Act of 1976, as amended, has expired. The Merger is expected to close in 2026. However, the completion of the Merger remains subject to the satisfaction or waiver of certain other customary conditions, including receipt of insurance regulatory approvals. See “Risks Related to the Merger – The completion of the Merger is subject to a number of conditions, many of which are largely outside the parties’ control, and, if these conditions are not satisfied or waived, the Merger may not be completed within the expected timeframe or at all.”
Net income (loss) available to shareholders and adjusted earnings (loss), a non-GAAP financial measure, were as follows:
Years Ended December 31,
(In millions)
Income (loss) available to shareholders before provision for income tax
Less: Provision for income tax expense (benefit)
Net income (loss) available to shareholders (1)
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends (1)
Less: Provision for income tax expense (benefit)
Adjusted earnings (loss) (1)
(1) We use the term “net income (loss) available to shareholders” to refer to “net income (loss) available to Brighthouse Financial, Inc.’s common shareholders” and “adjusted loss” to refer to negative adjusted earnings values throughout the results of operations discussions.
For the year ended December 31, 2025, we had net income available to shareholders of $331 million and adjusted earnings of $1.6 billion compared to net income available to shareholders of $286 million and adjusted earnings of $1.3 billion for the year ended December 31, 2024. Net income available to shareholders for the year ended December 31, 2025 primarily reflects favorable pre-tax adjusted earnings and a net investment gain on the sale of a subsidiary which owned certain mineral rights across the U.S. These favorable impacts were partially offset by unfavorable changes in our Shield embedded derivatives net of our variable annuity and Shield hedges due to market factors, an unfavorable change in the estimated fair value of freestanding interest rate derivatives we use to hedge our ULSG business, net investment losses on sales of fixed maturity securities, net investment losses on mortgage loans and the weakening of the U.S. dollar unfavorably impacting foreign currency forwards and swaps.
See “— Non-GAAP Financial Disclosures.” See “— Results of Operations” for a detailed discussion of our results.
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Risk Management Strategies
We employ risk management strategies to mitigate the effects of severe market disruptions and other economic events on our business. These strategies currently include hedging certain market risk exposures at the product level while taking into consideration market risk exposures at an aggregated level, as well as reinsurance. Our risk management strategies focus on protecting the capital and surplus of our insurance subsidiaries, through the use of metrics aligned with regulatory capital requirements. We continually review our risk management strategies in the context of our overall capitalization targets and monitor the capital markets for opportunities to adjust our derivative positions to manage our market risk exposure, as appropriate.
A metric we utilize to manage our risk is the combined RBC ratio (“Combined RBC Ratio”), which reflects the aggregate RBC ratio of our insurance subsidiaries, defined as aggregate TAC of our insurance subsidiaries divided by the total of their respective company action level RBCs. Combined RBC Ratio is an internal metric used by the Company to manage the risk associated with its insurance products through our risk management strategy; it is not a metric required or used by regulators. Brighthouse Financial targets a Combined RBC Ratio of 400% to 450% in normal market conditions.
We have historically managed the risks related to our variable annuity and first generation Shield Annuity contracts on a combined basis. However, in the third quarter of 2025, we completed an initiative that established a standalone hedging program for each product allowing us to more effectively manage the risks related to these two products. We launched updated versions of our Shield Annuity products in 2024, which we also manage and hedge on a standalone basis separately from our variable annuity and first generation Shield Annuity products.
We believe the level of our capital protection provides us financial flexibility and supports deploying capital for growing long-term, sustainable shareholder value. However, because our hedging strategies place a lower priority on offsetting changes to GAAP liabilities, changes to markets over time, including market volatility, could result in GAAP net income volatility, which could potentially impact stockholders’ equity. See “Risk Factors — Risks Related to Our Business — Our hedging strategy may not be effective, which may result in significant volatility in our profitability measures or may negatively affect our statutory capital” and “— Summary of Critical Accounting Estimates.”
Interest Rate Risk Management
We are exposed to interest rate risk in most of our products, with the more significant longer-dated exposure residing in our in-force variable annuity guarantees and ULSG business. Historically, we have managed interest rate exposure in aggregate across the Company, while also setting individual hedge targets for certain products such as ULSG, where the economics of the interest rate derivatives are ceded through reinsurance to BRCD. As discussed above, in the third quarter of 2025, we established a standalone hedging program for our variable annuity block. Our current variable annuity interest rate hedging program is intended to mitigate our exposure to changes in interest rates arising from the variable annuity contracts. Our interest rate hedge programs may also include hybrid options that have other risk exposure in addition to interest rate exposure. We continue to set individual hedge targets for certain products such as ULSG, where the economics of the interest rate derivatives are ceded through reinsurance to BRCD. While we now manage interest rate risk primarily on a product basis, we also manage interest rate exposure in aggregate across the Company.
The ULSG block, which is no longer actively sold, includes the business retained by our insurance subsidiaries and the portion of it that is ceded to BRCD for providing redundant, non-economic reinsurance financing support. The primary market risk associated with our ULSG block is the uncertainty around the future levels of U.S. interest rates and bond yields. To help ensure we have sufficient assets to meet future ULSG policyholder obligations, we have employed an actuarial approach based upon ULSG CFT to set our ULSG asset requirement target for BRCD, which reinsures the majority of the ULSG business written by our insurance subsidiaries. For the business retained by our insurance subsidiaries, we set our ULSG asset requirement target to equal the actuarially determined statutory reserves, which, taken together with our ULSG asset requirement target of BRCD, comprises our ULSG Target.
We seek to mitigate interest rate exposures associated with our ULSG business by holding ULSG Assets to closely match our ULSG Target under different interest rate environments. “ULSG Assets” are defined as (i) total general account assets supporting statutory reserves and capital in the ULSG portfolios of our insurance subsidiaries and BRCD and (ii) interest rate derivative instruments to mitigate ULSG interest rate exposures. The net statutory reserves for the ULSG business in our insurance subsidiaries and BRCD (which is in part supported by reinsurance financings) were $24.4 billion and $24.6 billion for the years ended December 31, 2025 and 2024, respectively.
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Our ULSG Target is sensitive to the actual and future expected level of long-term U.S. interest rates. If interest rates fall, our ULSG Target increases. Likewise, if interest rates rise, our ULSG Target declines. The interest rate derivatives included in ULSG Assets seek to offset movement in the ULSG Target. This could increase the period-to-period volatility of net income and equity due to differences in the sensitivity of the ULSG Target and GAAP liabilities to the changes in interest rates. We closely monitor the sensitivity of our ULSG Target to changes in interest rates. We seek to maintain ULSG Assets above the ULSG Target across a wide range of interest rate scenarios. At December 31, 2025, BRCD assets exceeded the ULSG CFT requirement.
Equity Risk Management
We are exposed to equity market risk from policyholder liabilities with long-term guarantees based on equity performance, with our most significant exposures found in crediting rates on Shield Annuities and variable annuity guarantees. While we manage equity risk primarily through the use of product-specific hedging strategies, we also manage equity risk in aggregate across the Company. As discussed above, we have historically managed equity risk of variable annuities and first generation Shield Annuity contracts together, but in the third quarter of 2025, we established standalone equity hedging programs for each product. We also manage the risks associated with our updated Shield Annuity product, launched in 2024, on a standalone basis.
We hedge the equity risk associated with Shield Annuity products by purchasing equity derivatives that are intended to offset the index credits due to contract holders. Since it is not practical to hedge each policy individually, we may group individual policies into cohorts or use other industry methods to reduce the number of hedge trades. We manage the equity risk associated with our variable annuity contracts through the use of derivatives intended to offset the exposure attributable to changes in equity markets.
Industry Trends and Uncertainties
Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we discuss a number of trends and uncertainties that we believe may materially affect our future financial condition, results of operations or cash flows. Where these trends or uncertainties are specific to a particular aspect of our business, we often include such a discussion under the relevant caption of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, as part of our broader analysis of that area of our business. In addition, the following factors represent some of the key general trends and uncertainties that have influenced the development of our business and our historical financial performance and that we believe will continue to influence our business and results of operations in the future.
Financial and Economic Environment
Our business and results of operations are materially affected by conditions in the capital markets and the economy generally. Stressed conditions, volatility and disruptions in the capital markets or financial asset classes can have an adverse effect on us. Equity market performance can affect our profitability for variable annuities, Shield Annuities and other separate account products as a result of the effects it has on product demand, revenues, expenses, reserves and our risk management effectiveness. The Federal Reserve Board (the “Federal Reserve”) decreased the target range for the federal funds rate in September, October and December 2025, as well as in September, November and December 2024, and any additional future decrease may negatively impact our business in certain respects, including our investment portfolio, by lowering the level of long-term interest rates and changing the shape of the yield curve. The level of long-term interest rates and the shape of the yield curve can have a negative effect on the profitability for variable annuities, as well as the demand for, and the profitability of, spread-based products such as fixed annuities, index-linked annuities and universal life insurance. Low interest rates and risk premium, including credit spread, affect new money rates on invested assets and the cost of product guarantees. Insurance premium growth and demand for our products is impacted by the general health of U.S. economic activity. A sustained or material increase in inflation could also affect our business in several ways. During inflationary periods, the value of fixed income investments falls which could increase realized and unrealized . Inflation also increases our expenses (including, among others, for labor and third-party services), potentially putting pressure on if such costs cannot be passed through to policyholders in our product prices. and elevated inflation could affect the financial markets and the economy generally and dispelling it may require governments to pursue restrictive fiscal and monetary policies, which could constrain overall economic activity and inhibit revenue growth. Events involving limited liquidity, , , or other developments that affect financial institutions or the financial services industry generally, or or rumors about events of these kinds or other similar risks, could affect market-wide liquidity, which could increase the risk of a or an equity market and impact various portions of our business, including our investment portfolio. See “Risk Factors — Economic Environment and Capital Markets-Related Risks — If conditions in the capital markets and the U.S. economy generally or are perceived to , they may materially affect our business and results of operations” and
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“Risk Factors — Risks Related to Our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations.”
The above factors affect our expectations regarding future margins. We review our long-term assumptions about capital markets returns and interest rates, along with other assumptions such as contract holder behavior, as part of our AAR. As additional company specific or industry information on contract holder behavior becomes available, related assumptions may change and may potentially have a material impact on liability valuations and net income.
We continue to closely monitor political and economic conditions that might contribute to market volatility and their impact on our business operations, investment portfolio and derivatives, such as global inflation, tariffs imposed or threatened by the U.S. or foreign governments, uncertainty and instability in certain asset classes (including commercial real estate), supply chain disruptions and recent geopolitical conflicts, including in Europe and the Middle East. See “— Investments — Current Environment” herein, as well as “Risk Factors — Economic Environment and Capital Markets-Related Risks,” “Risk Factors — Risks Related to Our Investment Portfolio” and “— Risk Management Strategies” for a detailed discussion of financial and economic impacts on our business, including the potential impacts of interest rate risk and inflation risk on our investments and overall business.
Demographics
We believe that demographic trends in the U.S. population, the increase in under-insured individuals, the potential risk to governmental social safety net programs and the shifting of responsibility for retirement planning and financial security from employers and other institutions to individuals, highlight the need of individuals to plan for their long-term financial security and will create opportunities to generate significant demand for our products.
By focusing our product development and marketing efforts to meeting the needs of certain targeted customer segments identified as part of our strategy, we will be able to focus on offering a smaller number of products that we believe are appropriately priced given current economic conditions. We believe this strategy will benefit our expense ratio thereby increasing our profitability.
Competitive Environment
The life insurance industry remains highly fragmented and competitive. See “Business — Competition.” In particular, we believe that financial strength and financial flexibility are highly relevant differentiators from the perspective of customers and distributors. We believe we are adequately positioned to compete in this environment.
Regulatory Developments
Our insurance subsidiaries and BRCD are primarily regulated at the state level, with some products and services also subject to federal regulation. In addition, BHF and its insurance subsidiaries are subject to regulation under the insurance holding company laws of various U.S. jurisdictions. Furthermore, some of our operations, products and services are subject to ERISA, consumer protection laws, securities, broker-dealer and investment advisor regulations, as well as environmental and unclaimed property laws and regulations. See “Business — Regulation,” as well as “Risk Factors — Regulatory and Legal Risks.”
Summary of Critical Accounting Estimates
The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the Consolidated Financial Statements.
The most critical estimates include those used in determining:
• liability for future policy benefits (“LFPB”);
• estimated fair values of MRBs;
• estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation; and
• measurement of income taxes and the valuation of deferred tax assets.
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In applying our accounting policies, we make subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our business and operations. Actual results could differ from these estimates.
The above critical accounting estimates are described below and in Note 1 of the Notes to the Consolidated Financial Statements.
Liability for Future Policy Benefits
The Company establishes an LFPB for income annuities, as well as non-participating term and whole life insurance. LFPBs are accrued over time as revenue is recognized based on a net premium ratio. The net premium ratio is the portion of gross premiums required to provide for all future benefits. LFPBs are established using the Company’s current assumptions of future cash flows, discounted at a rate that approximates a single A corporate bond curve. The Company generally aggregates insurance contracts into groupings by issue year, product and segment for determining the net premium ratio and related LFPBs.
The Company reviews cash flow assumptions regularly, and, if such assumptions change significantly, LFPBs are adjusted by determining a revised net premium ratio. The revised net premium ratio is calculated as of contract inception using both actual historical experience and updated future cash flow assumptions. The recalculated net premium ratio is applied to derive a remeasurement gain or loss recognized in current period net income. The net premium ratio is also updated for the difference between actual and expected experience.
The measurement of our LFPBs can be significantly impacted by changes in assumptions for mortality, policy lapses and market interest rates. See Note 3 of the Notes to the Consolidated Financial Statements for additional information on the effects of changes in assumptions on the measurement of our LFPBs.
The Company establishes liabilities in addition to the account balance for secondary guarantees on universal life insurance. These liabilities are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the contract period based on total expected assessments. The benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios. The Company also maintains a liability for profits followed by losses on ULSG, which is determined by projecting future earnings and establishing a liability to offset losses that are expected to occur in later years. The Company reviews cash flow assumptions regularly, and, if they change significantly, the liability for secondary guarantees is adjusted by a cumulative charge or credit to net income.
The measurement of our ULSG liabilities can be significantly impacted by changes in assumptions for the general account rate of return, which is driven by our assumption for long-term treasury yields, and changes in assumptions for mortality, premium persistency, lapses and withdrawals. The Company’s practice of projecting treasury yields uses a mean reversion approach that assumes that long-term interest rates are less influenced by short-term fluctuations and are only changed when sustained interim deviations are expected. As part of our 2025 AAR, we increased our projected long-term general account earned rate, as well as our mean reversion rate over a period of ten years, from 4.00% to 4.50%, which resulted in a decrease in our ULSG liabilities of $359 million. We also updated other assumptions related to ULSG, see “— Results of Operations — Annual Actuarial Review” for more information.
See Note 3 of the Notes to the Consolidated Financial Statements for additional information on the effects of inputs and assumptions on the measurement of ULSG liabilities.
Market Risk Benefits
MRBs principally include guaranteed minimum benefits on variable annuity contracts, including reinsured benefits related to these guarantees.
The estimated fair value of variable annuity guarantees accounted for as MRBs is determined based on the present value of projected future benefits, less the present value of projected future fees attributable to the guarantees. At policy inception, the Company determines an attributed fee ratio by solving for a percentage of projected future rider fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits. To the extent the rider fees are insufficient, the Company may also include fees related to mortality and expense charges in the attributed fee ratio, provided the total fees included in the calculation do not exceed total contract fees and assessments collected from the contract holder. The attributed fee ratio is not updated in subsequent periods.
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The Company updates the estimated fair value of variable annuity guarantees in subsequent periods by projecting future benefits using capital markets inputs and actuarial assumptions, including expectations of policyholder behavior. A risk neutral valuation methodology is used to project the cash flows from the guarantees under multiple capital markets scenarios. The reported estimated fair value is then determined by taking the present value of these cash flows using a discount rate that incorporates a spread over the risk-free rate to reflect the Company’s nonperformance risk and adding a risk margin (as discussed below). For more information on the determination of estimated fair value of MRBs, see Note 10 of the Notes to the Consolidated Financial Statements.
The valuation of MRBs includes an adjustment for the risk that the Company fails to satisfy its obligations, which is referred to as nonperformance risk. The nonperformance risk adjustment is captured as an additional spread applied to the risk-free rate in determining the rate to discount the cash flows of the liability. The spread over the risk-free rate is based on our creditworthiness taking into consideration publicly available information relating to spreads in the secondary market for Brighthouse Financial’s debt. These observable spreads are then adjusted, as necessary, to reflect the financial strength ratings of the issuing insurance subsidiaries as compared to the credit rating of Brighthouse Financial.
Risk margins are established to capture the non-capital markets risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties in certain actuarial assumptions. The establishment of risk margins requires the use of significant actuarial judgment, including assumptions of the amount needed to cover the guarantees.
Actuarial assumptions are reviewed at least annually, and if they change significantly, the estimated fair value is adjusted through net income. Capital market inputs used in the measurement of variable annuity guarantees are updated quarterly through net income, except for the change attributable to the Company’s nonperformance risk, which is reported in OCI.
Market conditions, including, but not limited to, changes in interest rates, equity indices, market volatility and variations in actuarial assumptions, including policyholder behavior, mortality and risk margins related to non-capital markets inputs, as well as changes in nonperformance risk, may result in significant fluctuations in the estimated fair value of the guarantees. In 2025, the Company updated assumptions regarding policyholder behavior, mortality and separate account fund allocations. See Note 4 of the Notes to the Consolidated Financial Statements for additional information on the effects of changes in inputs and assumptions on the measurement of our liabilities for variable annuity guarantees.
Derivatives
We use freestanding derivative instruments to hedge various capital markets risks in our products, including: (i) certain variable annuity guarantees, which are reported as MRBs; (ii) index-linked interest credited features, which are reported as embedded derivatives; (iii) current or future changes in the fair value of our assets and liabilities; and (iv) current or future changes in cash flows. All derivatives, whether freestanding or embedded, are required to be carried on the balance sheet at fair value with changes reflected in either net income (loss) available to shareholders or in OCI, depending on the type of hedge. Below is a summary of critical accounting estimates by type of derivative.
Freestanding Derivatives
The determination of the estimated fair value of freestanding derivatives, when quoted market values are not available, is based on market standard valuation methodologies and inputs that management believes are consistent with what other market participants would use when pricing such instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk, nonperformance risk, volatility, liquidity and changes in estimates and assumptions used in the pricing models. See Note 9 of the Notes to the Consolidated Financial Statements for additional information on significant inputs into the OTC derivative pricing models and credit risk adjustment.
Embedded Derivatives in Index-Linked Annuities
The Company issues, and assumes through reinsurance, index-linked annuities, including Shield, that contain crediting rates classified as embedded derivatives. The crediting rates are measured at estimated fair value separately from the fixed annuity host contracts, which is determined using a combination of an option pricing methodology and an option-budget approach. The estimated fair value includes capital market inputs and actuarial policyholder behavior assumptions, including expectations for renewals at the end of the term period. Actuarial assumptions are reviewed at least annually, and, if they change significantly, the estimated fair value is adjusted through net income. Capital market inputs used in the measurement of crediting rate embedded derivatives are updated quarterly through net income.
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Market conditions, including interest rates and implied volatilities, and variations in actuarial assumptions and risk margins, as well as changes in our nonperformance risk adjustment, may result in significant fluctuations in the estimated fair value that could have a material impact on net income. See Note 10 of the Notes to the Consolidated Financial Statements for more information on the determination of estimated fair value of crediting rate embedded derivatives.
Income Taxes
We provide for federal and state income taxes currently payable, as well as those deferred due to temporary differences between the financial reporting and tax bases of assets and liabilities. Our accounting for income taxes represents our best estimate of various events and transactions. Tax laws are often complex and may be subject to differing interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, we must make judgments and interpretations about the application of tax laws. We must also make estimates about when in the future certain items will affect taxable income in the various taxing jurisdictions.
In establishing a liability for unrecognized tax benefits, assumptions may be made in determining whether, and to what extent, a tax position may be sustained. Once established, unrecognized tax benefits are adjusted when there is more information available or when events occur requiring a change.
Valuation allowances are established against deferred tax assets, particularly those arising from carryforwards, when management determines, based on available information, that it is more likely than not that deferred income tax assets will not be realized. The realization of deferred tax assets related to carryforwards depends upon the existence of sufficient taxable income within the carryforward periods under the tax law in the applicable tax jurisdiction. Significant judgment is required in projecting future taxable income to determine whether valuation allowances should be established, as well as the amount of such allowances. See Note 1 of the Notes to the Consolidated Financial Statements for additional information relating to our determination of such valuation allowances.
We may be required to change our provision for income taxes when estimates used in determining valuation allowances on deferred tax assets significantly change, or when new information indicates the need for adjustment in valuation allowances. Additionally, future events, such as changes in tax laws, tax regulations, or interpretations of such laws or regulations, could have an impact on the provision for income tax and the effective tax rate. Any such changes could significantly affect the amounts reported in the financial statements in the year these changes occur.
See Notes 1 and 15 of the Notes to the Consolidated Financial Statements as well as “Business — Regulation — Federal Tax Reform” for additional information on our income taxes.
Non-GAAP Financial Disclosures
We present certain measures of our performance that are not calculated in accordance with GAAP. Our definitions of non-GAAP financial measures may differ from those used by other companies.
Adjusted Earnings
Adjusted earnings is a financial measure used by management to evaluate performance and facilitate comparisons to industry results. We believe the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of our performance by the investor community by highlighting the results of operations and the underlying profitability drivers of our business. Adjusted earnings should not be viewed as a substitute for net income (loss) available to Brighthouse Financial, Inc.’s common shareholders, which is the most directly comparable financial measure calculated in accordance with GAAP. See “— Results of Operations” for a reconciliation of adjusted earnings to net income (loss) available to Brighthouse Financial, Inc.’s common shareholders.
Adjusted earnings, which may be positive or negative, focuses on our primary businesses by excluding the impact of market volatility, which could distort trends. Adjusted earnings was updated during the first quarter of 2025 in connection with the establishment of a trading portfolio comprised of certain fixed income securities (classified as “trading securities” under GAAP). The Company did not have trading securities prior to the first quarter of 2025.
The following items are excluded from total revenues in calculating adjusted earnings:
• Net investment gains (losses);
• Investment gains (losses) on trading securities measured at estimated fair value through net investment income; and
• Net derivative gains (losses), excluding earned income 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”).
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The following items are excluded from total expenses in calculating adjusted earnings:
• Change in MRBs; and
• Change in fair value of the crediting rate on experience-rated contracts and market value adjustments on institutional group annuities that are economically offset by gains (losses) on the related trading securities (“Market Value Adjustments”).
The provision for income tax related to adjusted earnings is calculated using the statutory tax rate of 21%, net of impacts related to the dividends received deduction, tax credits and current period non-recurring items.
We present adjusted earnings in a manner consistent with management’s view of the primary business activities that drive the profitability of our core businesses. The following table illustrates how each component of adjusted earnings is calculated from the GAAP statements of operations line items:
Component of Adjusted Earnings
How Derived from GAAP (1)
Fee income
Universal life and investment-type product policy fees plus Other revenues .
Net investment spread
Net investment income (excluding investment gains (losses) on trading securities) plus Investment Hedge Adjustments reduced by Interest credited to policyholder account balances (excluding Market Value Adjustments) and interest on future policy benefits.
(iii)
Insurance-related activities
(iii)
Premiums less Policyholder benefits and claims , excluding interest on future policy benefits.
Amortization of DAC and VOBA
Amortization of deferred policy acquisition costs (“DAC”) and value of business acquired (“VOBA”) .
Other expenses
Other expenses.
Provision for income tax expense (benefit)
Tax impact of the above items, calculated using the statutory tax rate of 21%, net of impacts related to the dividends received deduction, tax credits and current period non-recurring items.
(1) Italicized items indicate GAAP statements of operations line items.
Consistent with GAAP guidance for segment reporting, adjusted earnings is also our GAAP measure of segment performance. Accordingly, we report adjusted earnings by segment in Note 2 of the Notes to the Consolidated Financial Statements.
Adjusted Net Investment Income
Adjusted net investment income is used by management to measure our performance, and we believe it enhances the understanding of our investment portfolio results. Adjusted net investment income represents GAAP net investment income plus Investment Hedge Adjustments less investment gains (losses) on trading securities. For a reconciliation of adjusted net investment income to net investment income, the most directly comparable GAAP measure, see table note (3) to the summary yield table located in “— Investments — Current Environment — Investment Portfolio Results.”
Adjusted Net Investment Income Yield
Similar to adjusted net investment income, adjusted net investment income yield is used by management as a performance measure that we believe enhances the understanding of our investment portfolio results. Adjusted net investment income yield represents adjusted net investment income as a percentage of average quarterly asset carrying values. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties. Investment fee and expense yields are calculated as a percentage of average quarterly asset estimated fair values. Asset estimated fair values exclude collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties. For a reconciliation of adjusted net investment income yield to net investment income, the most directly comparable GAAP measure, see the summary yield table located in “— Investments — Current Environment — Investment Portfolio Results.”
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Results of Operations
Index to Results of Operations
Page
Annual Actuarial Review
Consolidated Results for the Years Ended December 31, 2025 and 2024
Reconciliation of Net Income (Loss) Available to Shareholders to Adjusted Earnings (Loss)
Consolidated Results for the Years Ended December 31, 2025 and 2024 - Adjusted Earnings (Loss)
Segment Results for the Years Ended December 31, 2025 and 2024 - Adjusted Earnings (Loss)
Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Years Ended December 31, 2025 and 2024
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Annual Actuarial Review
We conducted our GAAP AAR in the third quarter of 2025. As part of the 2025 GAAP AAR, for our ULSG business, we updated assumptions regarding policyholder behavior, including mortality, premium persistency, lapses and withdrawals. In addition, we increased the long-term general account earned rate, driven by an increase in the mean reversion rate, from 4.00% to 4.50%. For our variable annuity business, we updated assumptions regarding annuitization, mortality, guaranteed principal option utilization, lapses and withdrawals, as well as separate account assumptions, including fund fees and allocations. For the payout annuity business, we updated assumptions regarding mortality. For term participating and non-participating whole life insurance, we updated assumptions regarding mortality and lapses.
As part of the 2024 GAAP AAR, for our ULSG business, we increased the long-term general account earned rate, driven by an increase in the mean reversion rate, from 3.75% to 4.00%. Also, with respect to our ULSG business, we updated assumptions regarding policyholder behavior, including mortality, premium persistency, lapses and withdrawals. For our variable annuity business, we updated assumptions regarding annuitization, mortality, lapses and withdrawals, as well as separate account assumptions, including fund fees and allocations. For term participating and non-participating whole life insurance, we updated assumptions regarding mortality and lapses.
We conducted our 2025 statutory AAR in the fourth quarter, the results of which will be included in our insurance subsidiaries’ 2025 annual statutory financial statements. The 2025 statutory AAR resulted in an increase to our statutory reserves; however, our 2025 preliminary Combined RBC Ratio was 456%, above our target range of 400% to 450% in normal market conditions, without contributing capital to our insurance subsidiaries. See “Risk Factors — Risks Related to Our Business — Differences between actual experience and actuarial assumptions may adversely affect our financial results, capitalization and financial condition.”
The impact on income (loss) available to shareholders before provision for income tax was as follows:
Years Ended December 31,
(In millions)
Market risk benefits
Embedded derivatives
Total market risk benefits and embedded derivatives
Included in pre-tax adjusted earnings (loss):
Other annuity business
Life business
Run-off
Total included in pre-tax adjusted earnings (loss)
Total impact on income (loss) available to shareholders before provision for income tax
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Consolidated Results for the Years Ended December 31, 2025 and 2024
Unless otherwise noted, all amounts in the following discussions of our results of operations are stated before income tax except for adjusted earnings, which are presented net of income tax.
Years Ended December 31,
(In millions)
Revenues
Premiums
Universal life and investment-type product policy fees
Net investment income
Other revenues
Net investment gains (losses)
Net derivative gains (losses)
Total revenues
Expenses
Policyholder benefits and claims (including liability remeasurement gains (losses) of ($273) and ($978), respectively)
Interest credited to policyholder account balances
Amortization of DAC and VOBA
Change in market risk benefits
Interest expense on debt
Other expenses
Total expenses
Income (loss) before provision for income tax
Provision for income tax expense (benefit)
Net income (loss)
Less: Net income (loss) attributable to noncontrolling interests
Net income (loss) attributable to Brighthouse Financial, Inc.
Less: Preferred stock dividends
Net income (loss) available to Brighthouse Financial, Inc.’s common shareholders
The components of net income (loss) available to shareholders were as follows:
Years Ended December 31,
(In millions)
Change in market risk benefits
Net investment gains (losses)
Investment gains (losses) on trading securities
Net derivative gains (losses), excluding investment hedge adjustments
Market value adjustments
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends
Income (loss) available to shareholders before provision for income tax
Provision for income tax expense (benefit)
Net income (loss) available to shareholders
Change in Market Risk Benefits. The change in MRBs reflects changes in the projected value of annuity guaranteed benefits discounted at current risk-free rates, plus a nonperformance risk spread that is locked-in at policy issuance.
Net Investment Gains (Losses). Includes gains and losses on sales of investments, impairments losses and changes in allowances for credit losses.
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Investment Gains (Losses) on Trading Securities. Includes gains and losses on trading securities measured at estimated fair value through net investment income.
Net Derivative Gains (Losses), Excluding Investment Hedge Adjustments. We use derivative instruments to minimize exposure to various market risks, including interest rates and equity markets. In addition, the crediting rates associated with index-linked annuities, including Shield Annuities, are classified as embedded derivatives. The change in fair value of derivative instruments that do not qualify for hedge accounting and embedded derivatives are recognized in net derivative gains (losses).
Market Value Adjustments. Includes the change in fair value of the crediting rate on experience-rated contracts and market value adjustments on institutional group annuities that are economically offset by gains (losses) on the related trading securities.
Pre-tax Adjusted Earnings. Adjusted earnings is a financial measure used by management to evaluate performance and facilitate comparisons to industry results.
See “— Non-GAAP Financial Disclosures — Adjusted Earnings” for more information on the items described above.
Year Ended December 31, 2025 Compared with the Year Ended December 31, 2024
Income available to shareholders before provision for income tax was $367 million ($331 million, net of income tax), an increase of $52 million ($45 million, net of income tax) from income available to shareholders before provision for income tax of $315 million ($286 million, net of income tax) in the prior period.
The increase in income before provision for income tax was driven by the following favorable items:
• higher pre-tax adjusted earnings, as discussed in greater detail below;
• lower losses from the impact of interest rates on derivatives used to manage interest rate exposure in our ULSG business, as long-term rates were relatively flat in the current period and increased in the prior period; and
• net investment gains (losses) reflecting lower net losses on sales of fixed maturity securities, a net decrease in impairments on fixed maturity securities, and a gain on the sale of a subsidiary which owned certain mineral rights across the U.S., partially offset by higher losses on mortgage loans due to an increase in the allowance for credit losses.
The increase in income before provision for income tax was partially offset by the following unfavorable items:
• higher losses from variable annuity guaranteed benefit riders, see “— Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Years Ended December 31, 2025 and 2024”; and
• the U.S. dollar weakening in the current period and strengthening in the prior period, unfavorably impacting foreign currency forwards and swaps.
The provision for income tax, calculated as a percentage of income (loss) before provision for income tax, resulted in an effective tax rate of 8% in the current period compared to 7% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction, tax credits and current period non-recurring items.
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Reconciliation of Net Income (Loss) Available to Shareholders to Adjusted Earnings (Loss)
The reconciliation of net income (loss) available to shareholders to adjusted earnings (loss) was as follows:
Year Ended December 31, 2025
Annuities
Life
Run-off
Corporate & Other
Total
(In millions)
Net income (loss) available to shareholders
Add: Provision for income tax expense (benefit)
Income (loss) available to shareholders before provision for income tax
Less: Net investment gains (losses)
Less: Investment gains (losses) on trading securities
Less: Net derivative gains (losses), excluding investment hedge adjustments of $0
Less: Change in market risk benefits
Less: Market value adjustments
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends
Less: Provision for income tax expense (benefit)
Adjusted earnings (loss)
Year Ended December 31, 2024
Annuities
Life
Run-off
Corporate & Other
Total
(In millions)
Net income (loss) available to shareholders
Add: Provision for income tax expense (benefit)
Income (loss) available to shareholders before provision for income tax
Less: Net investment gains (losses)
Less: Investment gains (losses) on trading securities
Less: Net derivative gains (losses), excluding investment hedge adjustments of $31
Less: Change in market risk benefits
Less: Market value adjustments
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends
Less: Provision for income tax expense (benefit)
Adjusted earnings (loss)
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Consolidated Results for the Years Ended December 31, 2025 and 2024 - Adjusted Earnings (Loss)
The components of adjusted earnings (loss) were as follows:
Years Ended December 31,
(In millions)
Fee income
Net investment spread
Insurance-related activities
Amortization of DAC and VOBA
Other expenses
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends
Provision for income tax expense (benefit)
Adjusted earnings (loss)
Year Ended December 31, 2025 Compared with the Year Ended December 31, 2024
Adjusted earnings were $1.6 billion in the current period, an increase of $298 million.
Key net favorable impacts were:
• lower net costs associated with insurance-related activities due to:
◦ a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR in our Run-off and Life segments and other refinements; and
◦ a decrease in liability balances in our Run-off segment resulting from a reinsurance premium rate increase associated with the conclusion of a reinsurance arbitration in the prior period;
partially offset by
◦ higher claims, net of reinsurance, in our Life and Run-off segments; and
◦ an increase in liability balances in our Run-off segment resulting from a premium rate increase on an existing reinsurance agreement; and
• higher net fee income due to:
◦ lower ceded COI fees in our Life and Run-off segments related to the conclusion of the aforementioned reinsurance arbitration in the prior period;
partially offset by
◦ lower asset-based fees resulting from lower average separate account balances, a portion of which is offset in other expenses; and
◦ a decline in the net COI fees driven by the aging in-force business in our Run-off segment.
Key net unfavorable impacts were:
• lower net investment spread due to:
◦ higher interest credited to policyholders due to higher account balances and prior period changes made in connection with the AAR, net of year-over-year actuarial modeling improvements in our Annuities segment;
◦ lower yields and average invested long-term assets on our institutional spread margin business;
◦ lower returns on other limited partnerships; and
◦ lower returns on short-term investments;
partially offset by
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◦ higher investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at higher yields than the portfolio average;
◦ higher returns on real estate limited partnerships and limited liability companies (“LLC”); and
◦ higher average invested long-term assets;
• higher other expenses due to:
◦ higher operational expenses;
partially offset by
◦ lower asset-based variable annuity expenses resulting from lower average separate account balances, a portion of which is offset in fee income;
◦ lower reinsurance expenses in our Life and Run-off segments associated with the conclusion of the aforementioned reinsurance arbitration in the prior period; and
◦ lower transition services agreement expenses; and
• higher amortization of DAC and VOBA resulting primarily from changes in policyholder behavior in our Annuities segment net of the aging in-force business in our Life segment.
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 18% in both the current period and the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction, tax credits and current period non-recurring items.
Segment Results for the Years Ended December 31, 2025 and 2024 — Adjusted Earnings (Loss)
Annuities
The components of adjusted earnings for our Annuities segment were as follows:
Years Ended December 31,
(In millions)
Fee income
Net investment spread
Insurance-related activities
Amortization of DAC and VOBA
Other expenses
Pre-tax adjusted earnings
Provision for income tax expense (benefit)
Adjusted earnings
A significant portion of our adjusted earnings is driven by separate account balances related to our variable annuity business, as these balances determine asset-based fee income and commissions. The changes in our variable annuities separate account balances are presented in Note 5 of the Notes to the Consolidated Financial Statements.
Year Ended December 31, 2025 Compared with the Year Ended December 31, 2024
Adjusted earnings were $1.3 billion in the current period, an increase of $3 million.
Key favorable impacts were:
• higher net investment spread due to:
◦ higher investment yields on our fixed income portfolio, as proceeds from maturing investments and the growth in the investment portfolio were invested at higher yields than the portfolio average;
◦ higher returns on real estate limited partnerships and LLCs; and
◦ higher average invested long-term assets;
partially offset by
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◦ higher interest credited to policyholders due to higher account balances and prior period changes made in connection with the AAR, net of year-over-year actuarial modeling improvements; and
• lower other expenses due to:
◦ lower asset-based variable annuity expenses resulting from lower average separate account balances, a portion of which is offset in fee income; and
◦ lower transition services agreement expenses;
partially offset by
◦ higher operational expenses.
Key net unfavorable impacts were:
• lower fee income due to lower asset-based fees resulting from lower average separate account balances, a portion of which is offset in other expenses; and
• higher amortization of DAC and VOBA resulting primarily from changes in policyholder behavior.
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings, resulted in an effective tax rate of 19% in both the current period and the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.
Life
The components of adjusted earnings (loss) for our Life segment were as follows:
Years Ended December 31,
(In millions)
Fee income
Net investment spread
Insurance-related activities
Amortization of DAC and VOBA
Other expenses
Pre-tax adjusted earnings (loss)
Provision for income tax expense (benefit)
Adjusted earnings (loss)
Year Ended December 31, 2025 Compared with the Year Ended December 31, 2024
Adjusted earnings were $41 million in the current period, an increase of $8 million.
Key favorable impacts were:
• higher fee income due to lower ceded COI fees related to the conclusion of the aforementioned reinsurance arbitration in the prior period; and
• lower amortization of DAC and VOBA driven by the aging in-force business.
Key net unfavorable impacts were:
• lower net investment spread due to:
◦ lower average invested long-term assets; and
◦ lower returns on other limited partnerships;
• higher net costs associated with insurance-related activities due to:
◦ higher claims, net of reinsurance;
partially offset by
◦ a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR and other refinements; and
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• higher other expenses due to:
◦ higher operational expenses;
partially offset by
◦ lower reinsurance expenses associated with the conclusion of the aforementioned reinsurance arbitration in the prior period.
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 9% in the current period compared to 13% in the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.
Run-off
The components of adjusted earnings (loss) for our Run-off segment were as follows:
Years Ended December 31,
(In millions)
Fee income
Net investment spread
Insurance-related activities
Amortization of DAC and VOBA
Other expenses
Pre-tax adjusted earnings (loss)
Provision for income tax expense (benefit)
Adjusted earnings (loss)
Year Ended December 31, 2025 Compared with the Year Ended December 31, 2024
Adjusted earnings were $436 million in the current period, an increase of $371 million.
Key net favorable impacts were:
• lower net costs associated with insurance-related activities due to:
◦ a decrease in liability balances resulting from a reinsurance premium rate increase associated with the conclusion of the aforementioned reinsurance arbitration in the prior period; and
◦ a net decrease in liability balances resulting from year-over-year changes made in connection with the AAR and other refinements;
partially offset by
◦ an increase in liability balances resulting from a premium rate increase on an existing reinsurance agreement; and
◦ higher claims, net of reinsurance;
• lower other expenses due to:
◦ lower reinsurance expenses associated with the conclusion of the aforementioned reinsurance arbitration in the prior period;
partially offset by
◦ higher operational expenses; and
• higher net fee income due to:
◦ lower ceded COI fees related to the conclusion of the aforementioned reinsurance arbitration in the prior period;
partially offset by
◦ a decline in the net COI fees driven by the aging in-force business.
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The key unfavorable impact was a lower net investment spread due to:
◦ lower average invested long-term assets; and
◦ lower returns on other limited partnerships.
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings (loss), resulted in an effective tax rate of 20% in both the current period and the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impact of the dividends received deduction.
Corporate & Other
The components of adjusted earnings (loss) for our Corporate & Other segment were as follows:
Years Ended December 31,
(In millions)
Fee income
Net investment spread
Insurance-related activities
Amortization of DAC and VOBA
Other expenses
Less: Net income (loss) attributable to noncontrolling interests and preferred stock dividends
Pre-tax adjusted earnings (loss), less net income (loss) attributable to noncontrolling interests and preferred stock dividends
Provision for income tax expense (benefit)
Adjusted earnings (loss)
Year Ended December 31, 2025 Compared with the Year Ended December 31, 2024
Adjusted loss was $114 million in the current period, a higher loss of $84 million.
Key unfavorable impacts were:
• lower net investment spread due to lower yields and lower average invested long-term assets on our institutional spread margin business; and
• higher other expenses due to higher operational expenses.
The provision for income tax, calculated as a percentage of pre-tax adjusted earnings (loss), resulted in a higher effective tax rate in the current period compared to the prior period. Our effective tax rate differs from the statutory tax rate primarily due to the impacts of the dividends received deduction and tax credits. We believe the effective tax rate for the Corporate & Other segment is not generally meaningful, neither on a standalone basis nor for comparison to prior periods, since taxes for the Corporate & Other segment are derived from the difference between the overall consolidated effective tax rate and total taxes for the other operating segments.
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Annuity Guaranteed Benefits and Shield Annuity Liabilities for the Years Ended December 31, 2025 and 2024
The overall impact on income (loss) available to shareholders before provision for income tax from the performance of annuity guaranteed benefits and Shield Annuity liabilities, which includes (i) changes in the fair value of liabilities and related reinsurance, (ii) fees net of claims and (iii) the mark-to-market of hedges, was as follows:
Years Ended December 31,
(In millions)
Market risk benefits mark-to-market
Annuity guaranteed benefit rider fees, net of claims
Ceded reinsurance
Total changes attributable to annuity guaranteed benefits
Variable annuity and Shield hedges
Shield embedded derivatives
Total
Market Risk Benefits Mark-to-Market. Annuity guaranteed rider benefits are accounted for as MRBs. MRBs related to guaranteed rider benefits represent the current estimated fair value of the obligation to protect policyholders against the possibility that a downturn in the markets will reduce the specified benefits that can be claimed under the base annuity contract. Any periods of significant or sustained downturns in equity markets, increased equity volatility, or reduced interest rates could result in an increase in the valuation of these liabilities. An increase in these liabilities would result in a decrease to our net income (loss) available to shareholders, which could be significant.
Annuity Guaranteed Benefit Rider Fees, Net of Claims. We earn fees from the guaranteed rider benefits, which are calculated using the policyholder’s Benefit Base. Fees calculated using the Benefit Base are more stable in market downturns, compared to fees based on the account value because the Benefit Base excludes the impact of a decline in the market value of the policyholder’s account value. We use the fees directly earned from the guarantee riders to fund the reserves, future claims and costs associated with the hedges of market risks inherent in these liabilities. The future fees are included in the estimated fair value of MRB liabilities, with changes recorded in MRBs.
Variable Annuity and Shield Hedges, including Reinsurance. We enter into freestanding derivatives to hedge certain aspects of the annuity guaranteed benefits accounted for as MRBs and index-linked crediting rates accounted for as embedded derivatives. Generally, the same market factors that impact the estimated fair value of the annuity guaranteed benefits impact the value of the hedges, though in the opposite direction. However, the changes in value of MRBs and related hedges may not be symmetrical and the divergence could be significant due to certain factors, including unhedged risks within MRBs. We may also use reinsurance to manage our exposure related to MRBs.
Shield Embedded Derivatives . Shield Annuities provide the contract holder the ability to participate in the appreciation of certain financial markets up to a stated level, while offering protection from a portion of declines in the applicable indices or benchmark. Shield embedded derivatives represent the estimated fair value of these features. We believe that Shield Annuities provide us with a risk offset to liabilities related to guaranteed rider benefits.
See “— Risk Management Strategies” for a discussion of our management of our hedging strategy.
Year Ended December 31, 2025
Annuity guaranteed benefits and Shield Annuity liabilities performance was unfavorable for the year ended December 31, 2025, primarily driven by:
• favorable decreases in annuity guaranteed benefits liabilities due to increasing equity markets, partially offset by changes made in connection with the AAR and decreasing interest rates;
• favorable changes in variable annuity and Shield hedges due to increasing equity markets; and
• unfavorable changes in Shield embedded derivatives due to increasing equity markets and changes made in connection with the AAR.
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Year Ended December 31, 2024
Annuity guaranteed benefits and Shield Annuity liabilities performance was unfavorable for the year ended December 31, 2024, primarily driven by:
• favorable decreases in annuity guaranteed benefits liabilities due to increasing long-term interest rates and equity markets, as well as changes made in connection with the AAR;
• favorable changes in variable annuity and Shield hedges due to increasing equity markets, partially offset by increasing long-term interest rates; and
• unfavorable changes in Shield embedded derivatives due to increasing equity markets, partially offset by increasing long-term interest rates and changes made in connection with the AAR.
Investments
Investment Risk Management Strategy
We manage the risks related to our investment portfolio through asset-type allocation as well as industry and issuer diversification. We also use risk limits to promote diversification by asset sector, avoid concentrations in any single issuer and limit overall aggregate credit and equity risk exposure. We manage real estate risk through geographic, property type and product type diversification and asset allocation. Interest rate risk is managed as part of our Asset Liability Management (“ALM”) strategies. We also utilize product design to manage interest rate risk (e.g., market value adjustment features and surrender charges). These ALM strategies include maintaining an investment portfolio that targets a weighted average duration that reflects the duration of our estimated liability cash flow profile. For certain of our liability portfolios, it is not possible to invest assets for the full liability duration, thereby creating some asset/liability mismatch. We also use certain derivatives in the management of credit, interest rate, equity market and foreign currency exchange rate risks.
Investment Management Agreements
Other than our derivatives trading, which we manage in-house, we have engaged a select group of experienced external asset management firms to manage the investment of the assets comprising our general account portfolio and certain separate account assets of our insurance subsidiaries, as well as assets of BHF and our reinsurance subsidiary, BRCD.
Current Environment
Our business and results of operations are materially affected by conditions in capital markets and the economy, generally. As a U.S. insurance company, we are affected by the monetary policy of the Federal Reserve in the U.S. We are also affected by the monetary policy of central banks around the world due to the diversification of our investment portfolio. See “— Industry Trends and Uncertainties — Financial and Economic Environment.”
In September, October and December 2025, the Federal Reserve decreased the target range for the federal funds rate from between 4.25% and 4.50% to between 3.50% to 3.75%. In 2024, the Federal Reserve decreased the target range for the federal funds rate three times — from between 5.25% and 5.50% to between 4.25% and 4.50%. The Federal Reserve may increase or decrease the federal funds rate in the future, which may have an impact on the pricing levels of risk-bearing investments and may adversely impact the level of product sales.
Prior period interest rate increases have contributed to the net unrealized loss position in our investment portfolio. As a result of increases in interest rates, the unrealized losses on our fixed maturity securities exceeded the unrealized gains as of December 31, 2025.
See “Risk Factors — Risks Related to Our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations.”
Selected Sector Investments
Market volatility has affected the performance of various asset classes. See “Risk Factors — Risks Related to Our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations,” and “Risk Factors — Risks Related to Our Investment Portfolio — Ongoing military actions, the continued threat of terrorism, climate change as well as other catastrophic events may adversely affect the value of our investment portfolio and the level of claim losses we incur.”
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There has been a continued market focus on commercial real estate, including office properties, as a result of hybrid work arrangements and the resulting impact on the demand for office space.
We have direct commercial real estate exposure through mortgage loans and certain structured securities, which include RMBS, CMBS and ABS. In addition, we have direct and indirect exposure through certain financial industry corporate fixed maturity securities. See “— Investments — Mortgage Loans” and Note 8 of the Notes to the Consolidated Financial Statements for information on mortgage loans, including credit quality by portfolio segment and commercial mortgage loans by property type. Additionally, see “— Investments — Fixed Maturity Securities Available-For-Sale — Structured Securities” for information on Structured Securities, including security type, risk profile and ratings profile as well as “— Investments — Fixed Maturity Securities Available-For-Sale — U.S. and Foreign Corporate Fixed Maturity Securities” for our exposure to the finance industry.
We monitor direct and indirect investment exposure across sectors and asset classes and adjust our level of investment exposure, as appropriate. At this time, we do not expect that our general account investments in these sectors and asset classes will have a material adverse effect on our results of operations or financial condition.
Investment Portfolio Results
The following summary yield table presents the yield and adjusted net investment income for our investment portfolio for the periods indicated. As described below, this table reflects certain differences from the presentation of net investment income presented in the GAAP statements of operations. This summary yield table presentation is consistent with how we measure our investment performance for management purposes, and we believe it enhances understanding of our investment portfolio results.
Years Ended December 31,
Yield %
Amount
Yield %
Amount
Yield %
Amount
(Dollars in millions)
Investment income (1)
Investment fees and expenses (2)
Adjusted net investment income (3)
(1) Investment income yields are calculated as investment income as a percentage of average quarterly asset carrying values. Investment income excludes recognized gains and losses and reflects the adjustments discussed in table note (3) below to arrive at adjusted net investment income. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.
(2) Investment fee and expense yields are calculated as a percentage of average quarterly asset estimated fair values. Asset estimated fair values exclude collateral received in connection with our securities lending program, freestanding derivative assets and collateral received from derivative counterparties.
(3) Adjusted net investment income presented in the yield table varies from the most directly comparable GAAP measure due to certain reclassifications, as presented below.
Years Ended December 31,
(In millions)
Net investment income
Add: Investment hedge adjustments
Less: Investment gains (losses) on trading securities
Adjusted net investment income — in the above yield table
See “— Results of Operations — Consolidated Results for the Years Ended December 31, 2025 and 2024” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Consolidated Results for the Years Ended December 31, 2024 and 2023” in our 2024 Annual Report for an analysis of the year-over-year changes in net investment income.
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Fixed Maturity Securities Available-For-Sale
Fixed maturity securities held by type (public or private) were as follows at:
December 31, 2025
December 31, 2024
Estimated Fair Value
Total
Estimated Fair Value
Total
(Dollars in millions)
Publicly-traded
Privately-placed
Total fixed maturity securities
Percentage of cash and invested assets
See Note 10 of the Notes to the Consolidated Financial Statements for further information on our valuation controls and procedures including our formal process to challenge any prices received from independent pricing services that are not considered representative of estimated fair value.
See Notes 1 and 8 of the Notes to the Consolidated Financial Statements for further information about fixed maturity securities by sector, contractual maturities, continuous gross unrealized losses and the allowance for credit losses.
Fixed Maturity Securities Credit Quality — Ratings
Rating agency ratings are based on availability of applicable ratings from rating agencies on the NAIC credit rating provider list, including Moody’s, S&P, Fitch, Dominion Bond Rating Service and Kroll Bond Rating Agency. If no rating is available from a rating agency, then an internally developed rating is used.
The NAIC has methodologies to assess credit quality for certain Structured Securities comprised of non-agency RMBS, CMBS and ABS. The NAIC’s objective with these methodologies is to increase the accuracy in assessing expected losses, and to use the improved assessment to determine a more appropriate capital requirement for such Structured Securities. The methodologies reduce regulatory reliance on rating agencies and allow for greater regulatory input into the assumptions used to estimate expected losses from Structured Securities. In 2021, these methodologies were updated to only apply to those Structured Securities issued prior to 2013. We apply the NAIC methodologies to Structured Securities held by our insurance subsidiaries and BRCD. The NAIC’s present methodology is to evaluate Structured Securities held by insurers on an annual basis. If our insurance subsidiaries and BRCD acquire Structured Securities that have not been previously evaluated by the NAIC but are expected to be evaluated by the NAIC in the upcoming annual review, an internally developed designation is used until a final designation becomes available.
The following table presents total fixed maturity securities by nationally statistical rating organizations (“NRSRO”) rating and the applicable NAIC designation from the NAIC published comparison of NRSRO ratings to NAIC designations, except for certain Structured Securities, which are presented using the NAIC methodologies, as well as the percentage, based on estimated fair value that each NAIC designation is comprised of at:
December 31, 2025
December 31, 2024
NAIC Designation
NRSRO Rating
Amortized Cost
Allowance for Credit Losses
Unrealized Gain (Loss)
Estimated Fair Value
% of Total
Amortized Cost
Allowance for Credit Losses
Unrealized Gain (Loss)
Estimated Fair Value
% of Total
(Dollars in millions)
Aaa/Aa/A
Baa
Subtotal investment grade
Caa and lower
In or near default
Subtotal below investment grade
Total fixed maturity securities
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The following tables present total fixed maturity securities, based on estimated fair value, by sector classification and by NRSRO rating and the applicable NAIC designations from the NAIC published comparison of NRSRO ratings to NAIC designations, except for certain Structured Securities, which are presented using the NAIC methodologies as described above:
Fixed Maturity Securities — by Sector & Credit Quality Rating
NAIC Designation
Total Estimated Fair Value
NRSRO Rating
Aaa/Aa/A
Baa
Caa and Lower
In or Near Default
(In millions)
December 31, 2025
U.S. corporate
Foreign corporate
RMBS
U.S. government and agency
ABS
CMBS
State and political subdivision
Foreign government
Total fixed maturity securities
December 31, 2024
U.S. corporate
Foreign corporate
RMBS
U.S. government and agency
ABS
CMBS
State and political subdivision
Foreign government
Total fixed maturity securities
U.S. and Foreign Corporate Fixed Maturity Securities
We maintain a diversified portfolio of corporate fixed maturity securities across industries and issuers. Our portfolio does not have any exposure to any single issuer in excess of 1% of total investments and the top ten holdings in aggregate comprise 1% of total investments at both December 31, 2025 and 2024. Our U.S. and foreign corporate fixed maturity securities holdings by industry were as follows at:
December 31, 2025
December 31, 2024
Estimated
Fair Value
Total
Estimated
Fair Value
Total
(Dollars in millions)
Industrial
Finance
Consumer
Utility
Communications
Total
Structured Securities
We held $20.5 billion and $20.0 billion of Structured Securities, at estimated fair value, at December 31, 2025 and 2024, respectively, as presented in the RMBS, CMBS and ABS sections below.
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RMBS
Our RMBS holdings are diversified by security type, risk profile and ratings profile, which were as follows at:
December 31, 2025
December 31, 2024
Estimated Fair Value
Total
Net Unrealized Gains (Losses)
Estimated Fair Value
Total
Net Unrealized Gains (Losses)
(Dollars in millions)
Security type:
Collateralized mortgage obligations
Pass-through securities
Total RMBS
Risk profile:
Agency
Prime
Alt-A
Sub-prime
Total RMBS
Ratings profile:
Rated Aaa
Designated NAIC 1
Historically, our exposure to sub-prime RMBS holdings has been managed by focusing primarily on senior tranche securities, stress-testing the portfolio with severe loss assumptions and closely monitoring the performance of the portfolio. Our sub-prime RMBS portfolio consists predominantly of securities that were purchased after 2012 at significant discounts to par value and discounts to the expected principal recovery value of these securities. The vast majority of these securities are investment grade under the NAIC designations (e.g., NAIC 1 and NAIC 2).
CMBS
Our CMBS holdings are diversified by vintage year, which were as follows at:
December 31, 2025
December 31, 2024
Amortized
Cost
Estimated Fair Value
Amortized
Cost
Estimated Fair Value
(In millions)
Total
The estimated fair value of CMBS rated Aaa using rating agency ratings was $3.9 billion, or 67.2% of total CMBS, and designated NAIC 1 was $5.6 billion, or 94.8% of total CMBS, at December 31, 2025. The estimated fair value of CMBS rated Aaa using rating agency ratings was $4.3 billion, or 67.7% of total CMBS, and designated NAIC 1 was $6.0 billion, or 94.2% of total CMBS, at December 31, 2024.
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ABS
Our ABS holdings are diversified by both collateral type and issuer. Our ABS holdings by collateral type and ratings profile were as follows at:
December 31, 2025
December 31, 2024
Estimated Fair Value
Total
Net Unrealized Gains (Losses)
Estimated Fair Value
Total
Net Unrealized Gains (Losses)
(Dollars in millions)
Collateral type:
Collateralized obligations
Automobile loans
Consumer loans
Student loans
Credit card loans
Other loans
Total
Ratings profile:
Rated Aaa
Designated NAIC 1
Allowance for Credit Losses for Fixed Maturity Securities
See Note 8 of the Notes to the Consolidated Financial Statements for information about the evaluation of fixed maturity securities for an allowance for credit losses or write-offs due to uncollectibility.
Securities Lending
We participate in a securities lending program whereby securities are loaned to third parties, primarily brokerage firms and commercial banks. We obtain collateral, usually cash, in an amount generally equal to 102% of the estimated fair value of the securities loaned, which is obtained at the inception of a loan and maintained at a level greater than or equal to 100% for the duration of the loan. The estimated fair value of the securities loaned is monitored on a daily basis with additional collateral obtained as necessary throughout the duration of the loan. Securities loaned under such transactions may be sold or re-pledged by the transferee. We are liable to return to our counterparties the cash collateral under our control. Security collateral received from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reflected in the financial statements. These transactions are treated as financing arrangements and the associated cash collateral liability is recorded at the amount of the cash received.
See “— Liquidity and Capital Resources — The Company — Primary Uses of Liquidity and Capital — Securities Lending” and Note 8 of the Notes to the Consolidated Financial Statements for information regarding our securities lending program.
Mortgage Loans
Our mortgage loans are principally collateralized by commercial, agricultural and residential properties. Information regarding mortgage loans by portfolio segment is summarized as follows at:
December 31, 2025
December 31, 2024
Amortized Cost
Total
Allowance for Credit Losses
% of Amortized Cost
Amortized Cost
Total
Allowance for Credit Losses
% of Amortized Cost
(Dollars in millions)
Commercial
Agricultural
Residential
Total
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Our mortgage loan portfolio is diversified by both geographic region and property type to reduce the risk of concentration. The percentage of our commercial and agricultural mortgage loan portfolios collateralized by properties located in the U.S. was 99% and 98% at December 31, 2025 and 2024, respectively. The remainder was collateralized by properties located outside of the U.S. At December 31, 2025, the carrying value as a percentage of total commercial and agricultural mortgage loans for the top three states in the U.S. was 17% for California, 11% for Texas and 7% for New York. Additionally, we manage risk when originating commercial and agricultural mortgage loans by generally lending up to 75% of the estimated fair value of the underlying real estate collateral.
Our residential mortgage loan portfolio is managed in a similar manner to reduce risk of concentration. All residential mortgage loans were collateralized by properties located in the U.S. at both December 31, 2025 and 2024. At December 31, 2025, the carrying value as a percentage of total residential mortgage loans for the top three states in the U.S. was 37% for California, 10% for Florida and 6% for Texas.
Commercial Mortgage Loans by Geographic Region and Property Type. Commercial mortgage loans are the largest component of the mortgage loan invested asset class. The diversification across geographic regions and property types of commercial mortgage loans was as follows at:
December 31, 2025
December 31, 2024
Amount
% of Total
Amount
% of Total
(Dollars in millions)
Geographic region:
South Atlantic
Pacific
Middle Atlantic
West South Central
Mountain
East North Central
New England
East South Central
West North Central
International
Multi-region and Other
Total recorded investment
Less: allowance for credit losses
Carrying value, net of allowance for credit losses
Property type:
Apartment
Office
Industrial
Retail
Hotel
Total recorded investment
Less: allowance for credit losses
Carrying value, net of allowance for credit losses
Mortgage Loan Credit Quality — Monitoring Process. Our mortgage loan investments are monitored on an ongoing basis, including a review of loans that are current, past due, restructured and under foreclosure. Quarterly, we conduct a formal review of the portfolio with our investment managers. See Note 8 of the Notes to the Consolidated Financial Statements for information on mortgage loans by credit quality indicator, past due status, nonaccrual status and modified mortgage loans.
Our commercial mortgage loans are reviewed on an ongoing basis. These reviews may include an analysis of the property financial statements and rent roll, lease rollover analysis, property inspections, market analysis, estimated valuations of the underlying collateral, loan-to-value ratios, debt-service coverage ratios and tenant creditworthiness. The monitoring process focuses on higher risk loans, which include those that are classified as restructured, delinquent or in foreclosure, as well as loans with higher loan-to-value ratios and lower debt-service coverage ratios. The monitoring process for agricultural mortgage loans is generally similar, with a focus on higher risk loans, such as loans with higher loan-to-value ratios,
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including reviews on a geographic and sector basis. Our residential mortgage loans are reviewed on an ongoing basis. See Note 8 of the Notes to the Consolidated Financial Statements for information on our evaluation of residential mortgage loans and related measurement of allowance for credit losses.
Loan-to-value ratios and debt-service coverage ratios are common measures in the assessment of the quality of commercial mortgage loans. Loan-to-value ratios are a common measure in the assessment of the quality of agricultural mortgage loans. Loan-to-value ratios compare the amount of the loan to the estimated fair value of the underlying collateral. A loan-to-value ratio greater than 100% indicates that the loan amount is greater than the collateral value. A loan-to-value ratio of less than 100% indicates an excess of collateral value over the loan amount. Generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss. The debt-service coverage ratio compares a property’s net operating income to amounts needed to service the principal and interest due under the loan. Generally, the lower the debt-service coverage ratio, the higher the risk of experiencing a credit loss. For our commercial mortgage loans, our average loan-to-value ratio was 67% and 69% at December 31, 2025 and 2024, respectively, and our average debt-service coverage ratio was 2.2x and 2.3x at December 31, 2025 and 2024, respectively. The debt-service coverage ratio, as well as the values utilized in calculating the ratio, is updated annually on a rolling basis, with a portion of the portfolio updated each quarter. In addition, the loan-to-value ratio is routinely updated for all but the lowest risk loans as part of our ongoing review of our commercial mortgage loan portfolio. For our agricultural mortgage loans, our average loan-to-value ratio was 46% and 48% at December 31, 2025 and 2024, respectively. The values utilized in calculating the agricultural mortgage loan loan-to-value ratio are developed in connection with the ongoing review of the agricultural loan portfolio and are routinely updated.
Mortgage Loan Allowance for Credit Losses. See Note 8 of the Notes to the Consolidated Financial Statements for information about how the allowance for credit losses is established and monitored, as well as activity in and balances of the allowance for credit losses for the years ended December 31, 2025 and 2024.
Limited Partnerships and Limited Liability Companies
The carrying values of our limited partnerships and LLCs were as follows at:
December 31, 2025
December 31, 2024
(In millions)
Other limited partnerships
Real estate limited partnerships and LLCs (1)
Total
(1) The estimated fair value of real estate limited partnerships and LLCs was $599 million and $836 million at December 31, 2025 and 2024, respectively.
Cash distributions on these investments are generated from investment gains, operating income from the underlying investments of the funds and liquidation of the underlying investments of the funds. We estimate that the underlying investment of the private equity funds will typically be liquidated over the next 10 to 20 years.
Other Invested Assets
The carrying value of our other invested assets by type was as follows at:
December 31, 2025
December 31, 2024
Carrying Value
Total
Carrying Value
Total
(Dollars in millions)
Freestanding derivatives with positive estimated fair values
Company-owned life insurance
Federal Home Loan Bank stock
Leveraged leases, net of non-recourse debt
Tax credit and renewable energy partnerships
Other
Total
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Derivatives
Derivative Risks
We are exposed to various risks relating to our ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market risks. We use a variety of strategies to manage these risks, including the use of derivatives. We have historically managed the risks related to our variable annuity and first generation Shield Annuity contracts on a combined basis. In the third quarter of 2025, we completed an initiative that established a standalone hedging program for each product allowing us to separately manage the risks related to these two products.
See Note 9 of the Notes to the Consolidated Financial Statements for:
• a comprehensive description of the nature of our derivatives, including the strategies for which derivatives are used in managing various risks;
• information about the gross notional amount, estimated fair value and primary underlying risk exposure of our derivatives by type of hedge designation, excluding embedded derivatives held at December 31, 2025 and 2024; and
• the effects of derivatives in cash flow, fair value or non-qualifying hedge relationships on the statements of operations for the years ended December 31, 2025, 2024 and 2023.
See “— Risk Management Strategies” for more information about our hedging strategies. In addition, see “— Results of Operations — Annual Actuarial Review” and “Risk Factors — Risks Related to Our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations.”
Fair Value Hierarchy
See Note 10 of the Notes to the Consolidated Financial Statements for derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy, as well as a rollforward of the fair value measurements for derivatives measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs as discussed below.
The valuation of Level 3 derivatives involves the use of significant unobservable inputs and generally requires a higher degree of management judgment or estimation than the valuations of Level 1 and Level 2 derivatives. Although Level 3 inputs are unobservable, management believes they are consistent with what other market participants would use when pricing such instruments and are considered appropriate given the circumstances. The use of different inputs or methodologies could have a material effect on the estimated fair value of Level 3 derivatives and could materially affect net income.
Derivatives categorized as Level 3 at December 31, 2025 include: credit default swaps priced using unobservable credit spreads, or that are priced through independent broker quotations; and foreign currency swaps with certain unobservable inputs.
Credit Risk
See Note 9 of the Notes to the Consolidated Financial Statements for information about how we manage credit risk related to derivatives and for the estimated fair value of our net derivative assets and net derivative liabilities after the application of master netting agreements and collateral. See “Risk Factors — Risks Related to Our Investment Portfolio — Our investment portfolio is subject to significant financial risks both in the U.S. and global financial markets, including credit risk, interest rate risk, inflation risk, market valuation risk, liquidity risk, real estate risk, derivatives risk, and other factors outside our control, the occurrence of any of which could have a material adverse effect on our financial condition and results of operations.”
Our policy is not to offset the fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement. This policy applies to the recognition of derivatives on the balance sheet and does not affect our legal right of offset.
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Credit Derivatives
The gross notional amount and estimated fair value of credit default swaps were as follows at:
December 31, 2025
December 31, 2024
Gross Notional Amount
Estimated Fair Value
Gross Notional Amount
Estimated Fair Value
(In millions)
Written
The maximum amount at risk related to our written credit default swaps is equal to the corresponding gross notional amount. In a replication transaction, we pair an asset on our balance sheet with a written credit default swap to synthetically replicate a corporate bond, a core asset holding of life insurance companies. Replications are entered into in accordance with the guidelines approved by state insurance regulators and the NAIC and are an important tool in managing the overall corporate credit risk within the Company. In order to match our long-dated insurance liabilities, we seek to buy long-dated corporate bonds. In some instances, these may not be readily available in the market, or they may be issued by corporations to which we already have significant corporate credit exposure. For example, by purchasing Treasury bonds (or other high-quality assets) and associating them with written credit default swaps on the desired corporate credit name, we can replicate the desired bond exposures and meet our ALM needs. This can expose the Company to changes in credit spreads as the written credit default swap tenor is shorter than the maturity of Treasury bonds.
Embedded Derivatives
See Note 10 of the Notes to the Consolidated Financial Statements for (i) information about embedded derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy and (ii) a rollforward of the fair value measurements for net embedded derivatives measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs.
See “— Summary of Critical Accounting Estimates — Derivatives” for additional information on the estimates and assumptions that affect embedded derivatives.
Policyholder Liabilities
We establish, and carry as liabilities, actuarially determined amounts that are calculated to meet policy obligations or to provide for future annuity and life insurance benefit payments. Amounts for actuarial liabilities are computed and reported in the financial statements in conformity with GAAP. See “— Summary of Critical Accounting Estimates” and Notes 1, 3 and 4 of the Notes to the Consolidated Financial Statements for more details on policyholder liabilities.
Due to the nature of the underlying risks and the uncertainty associated with the determination of actuarial liabilities, we cannot precisely determine the amounts that will ultimately be paid with respect to these actuarial liabilities, and the ultimate amounts may vary from the estimated amounts, particularly when payments may not occur until well into the future.
We periodically review the assumptions supporting our estimates of actuarial liabilities for future policy benefits. We revise estimates, to the extent permitted or required under GAAP, if we determine that future expected experience differs from assumptions used in the development of actuarial liabilities. We charge or credit changes in our liabilities to expenses in the period the liabilities are established or re-estimated. If the liabilities originally established for future benefit payments prove inadequate, we must increase them. Such an increase could adversely affect our earnings and have a material adverse effect on our business, financial condition and results of operations.
We have experienced, and will likely in the future experience, catastrophe losses and possibly acts of terrorism, as well as turbulent financial markets that may have an adverse impact on our business, financial condition and results of operations. Moreover, the impact of climate change could cause changes in the frequency or severity of outbreaks of certain diseases. Due to their nature, we cannot predict the incidence, timing, severity or amount of losses from catastrophes, acts of terrorism or climate change, but we make broad use of catastrophic and non-catastrophic reinsurance to manage risk from these perils.
Future Policy Benefits
We establish liabilities for future amounts payable under insurance policies. A discussion of future policy benefits by segment follows.
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Annuities
Future policy benefits for the annuities business are comprised mainly of liabilities for life contingent income annuities.
Life
Future policy benefits for the life business are comprised mainly of liabilities for term, whole, universal and variable life insurance contracts. In order to manage risk, we have often reinsured a portion of the mortality risk on life insurance policies. The reinsurance programs are routinely evaluated, and this may result in increases or decreases to existing coverage. We have entered into various derivative positions, primarily interest rate swaps, to mitigate the risk that investment of premiums received and reinvestment of maturing assets over the life of the policy will be at rates below those assumed in the original pricing of these contracts.
Run-off
Future policy benefits primarily include liabilities for structured settlements and pension risk transfer contracts. There is no interest rate crediting flexibility on the liabilities for immediate annuities. As a result, a sustained low interest rate environment could negatively impact earnings; however, we mitigate our risks by applying various ALM strategies, including the use of derivative positions, primarily interest rate swaps, to mitigate the risks associated with such a scenario.
Corporate & Other
Future policy benefits primarily include liabilities for long-term care business reinsured through 100% quota share reinsurance agreements.
Policyholder Account Balances
Policyholder account balance liabilities are established for products with an explicit account value and generally equal to the balance accrued to the contract holder, which includes accrued interest credited, but excludes the impact of any applicable charge that may be incurred upon surrender. See “Quantitative and Qualitative Disclosures About Market Risk — Market Risk - Fair Value Exposures — Interest Rates.”
Policyholder account balances also include embedded derivatives on index-linked annuities and amounts associated with funding agreements issued for additional liquidity or in connection with our institutional spread margin business. See “— Liquidity and Capital Resources — The Company — Primary Sources of Liquidity and Capital — Funding Sources — Funding Agreements.” A discussion of policyholder account balances by segment follows.
Annuities
Policyholder account balance liabilities are held for fixed deferred annuities, the fixed account portion of variable annuities and non-life contingent income annuities. Interest is credited to the policyholder’s account at interest rates we determine which are influenced by current market rates, subject to specified minimums. A sustained low interest rate environment could negatively impact earnings as a result of the minimum credited rate guarantees present in most of these policyholder account balances. We have various interest rate derivative positions, as part of the Company’s interest rate hedging program, to partially mitigate the risks associated with such a scenario. A breakdown of account value subject to minimum guaranteed crediting rates can be found in Note 3 of the Notes to the Consolidated Financial Statements.
As a result of acquisitions, we establish additional liabilities known as excess interest reserves for policies with credited rates in excess of market rates as of the applicable acquisition dates.
Life
Life policyholder account balance liabilities are held for retained asset accounts, universal life policies and the fixed account of universal variable life insurance policies. Interest is credited to the policyholder’s account at interest rates we determine which are influenced by current market rates, subject to specified minimums. A sustained low interest rate environment could negatively impact earnings as a result of the minimum credited rate guarantees present in most of these policyholder account balances. We have various derivative positions to partially mitigate the risks associated with such a scenario. A breakdown of account value subject to minimum guaranteed crediting rates can be found in Note 3 of the Notes to Consolidated Financial Statements.
As a result of acquisitions, we establish additional liabilities known as excess interest reserves for policies with credited rates in excess of market rates as of the applicable acquisition dates.
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Run-off
Policyholder account balance liabilities in Run-off are comprised of ULSG, certain company-owned life insurance policies and certain funding agreements. Interest crediting rates vary by type of contract and can be fixed or variable. We are exposed to interest rate risks, when guaranteeing payment of interest and return on principal at the contractual maturity date. We mitigate our risks by applying various ALM strategies. A breakdown of account value subject to minimum guaranteed crediting rates can be found in Note 3 of the Notes to the Consolidated Financial Statements.
As a result of acquisitions, we establish additional liabilities known as excess interest reserves for policies with credited rates in excess of market rates as of the applicable acquisition dates.
Corporate & Other
Policyholder account balance liabilities in Corporate & Other are primarily comprised of funding agreements related to our institutional spread margin business.
Market Risk Benefits
We issue certain variable annuity products with GMxBs that provide the policyholder a minimum return based on their initial deposit (i.e., the Benefit Base) less withdrawals. In some cases, the Benefit Base may be increased by additional deposits, bonus amounts, accruals or optional market value step-ups. Variable annuity guaranteed benefits are classified as MRBs and measured at fair value. Certain index-linked annuity products may also have GMxBs classified as MRBs. See Note 4 of the Notes to Consolidated Financial Statements and “Quantitative and Qualitative Disclosures About Market Risk — Market Risk - Fair Value Exposures — Interest Rates.”
Liquidity and Capital Resources
Our business and results of operations are materially affected by conditions in the global capital markets and the economy generally. Stressed conditions, volatility or disruptions in global capital markets, particular markets or financial asset classes can impact us adversely, in part because we have a large investment portfolio and our insurance liabilities and derivatives are sensitive to changing market factors. Changing conditions in the global capital markets and the economy may affect our financing costs and market interest rates for our debt or equity securities. For further information regarding market factors that could affect our ability to meet liquidity and capital needs, see “— Industry Trends and Uncertainties — Financial and Economic Environment,” as well as “Risk Factors — Economic Environment and Capital Markets-Related Risks” and “Risk Factors — Risks Related to Our Investment Portfolio.”
Liquidity and Capital Management
Based upon our capitalization, expectations regarding maintaining our business mix, ratings and funding sources available to us, we believe we have sufficient liquidity to meet business requirements in current market conditions and certain stress scenarios. BHF’s Board of Directors and senior management are directly involved in the governance of the capital management process, including proposed changes to the annual capital plan and capital targets. We continuously monitor and adjust our liquidity and capital plans in light of market conditions, as well as changing needs and opportunities.
We maintain a substantial short-term liquidity position, which was $4.3 billion and $5.2 billion at December 31, 2025 and 2024, respectively. Short-term liquidity is comprised of cash and cash equivalents and short-term investments, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include amounts received in connection with securities lending, derivatives and assets held on deposit or in trust.
An integral part of our liquidity management includes managing our level of liquid assets, which was $50.1 billion and $48.1 billion at December 31, 2025 and 2024, respectively. Liquid assets are comprised of 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 securities lending, funding agreements, derivatives and assets held on deposit or in trust.
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The Company
Liquidity
Liquidity refers to our ability to generate adequate cash flows from our normal operations to meet the cash requirements of our operating, investing and financing activities. We determine our liquidity needs based on a rolling 12-month forecast by portfolio of invested assets, which we monitor daily. We adjust the general account asset and derivatives mix and general account asset maturities based on this rolling 12-month forecast. To support this forecast, we conduct cash flow and stress testing, which reflects the impact of various scenarios, including (i) the potential increase in our requirement to pledge additional collateral or return collateral to our counterparties, (ii) a reduction in new business sales, and (iii) the risk of early contract holder and policyholder withdrawals, as well as lapses and surrenders of existing policies and contracts. We include provisions limiting withdrawal rights in many of our products, which deter the customer from making withdrawals prior to the maturity date of the product. If significant cash is required beyond our anticipated liquidity needs, we have various alternatives available depending on market conditions and the amount and timing of the liquidity need. These available alternative sources of liquidity include cash flows from operations, sales of liquid assets and funding sources, including secured funding agreements, unsecured credit facilities and secured committed facilities.
Under certain adverse market and economic conditions, our access to liquidity may deteriorate, or the cost to access liquidity may increase. See “Risk Factors — Economic Environment and Capital Markets-Related Risks — Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs and our access to capital.”
Capital
We manage our capital position to maintain our financial strength and credit ratings. We target a Combined RBC Ratio of 400% to 450% in normal market conditions. We believe a ratio at this level in normal markets provides us with sufficient capital to absorb risks associated with stressed market scenarios. In addition, our capital position is supported by our ability to generate cash flows within our insurance subsidiaries, our ability to effectively manage the risks of our businesses and our expected ability to borrow funds and raise additional capital to meet operating and growth needs under a variety of market and economic conditions.
We monitor our debt-to-capital ratio using an average of our key leverage ratios as calculated by A.M. Best, Fitch, Moody’s and S&P, and we aim to maintain a ratio commensurate with our financial strength and credit ratings. As such, we may opportunistically look to pursue additional financing over time, which may include borrowings under credit facilities, the issuance of debt, equity or hybrid securities, the incurrence of term loans, or the refinancing or extinguishment of existing indebtedness. There can be no assurance that we will be able to complete any such financing transactions on terms and conditions favorable to us or at all.
In November 2023, we authorized a $750 million share repurchase program under which repurchases may be made through open market purchases, including pursuant to Rule 10b5-1 plans or pursuant to accelerated stock repurchase plans, or through privately negotiated transactions, from time to time at management’s discretion in accordance with applicable legal requirements. Common stock repurchases are dependent upon several factors, including our capital position, liquidity, financial strength and credit ratings, general market conditions, the market price of our common stock compared to management’s assessment of the stock’s underlying value and applicable regulatory approvals, as well as other legal and accounting factors.
Pursuant to the Merger Agreement, we have agreed that during the period beginning the date of the Merger Agreement through the earlier of the closing of the Merger and the termination of the Merger Agreement, we will not, without the written consent of Aquarian Parent, pay any dividend or other distribution payable in cash, stock or property with respect to our common stock, or subject to certain exceptions, purchase directly or indirectly any of BHF’s or its subsidiaries’ capital stock or other equity or voting interests of BHF or any of its subsidiaries.
The Merger Agreement permits us to pay periodic cash dividends on our preferred stock not in excess of $412.50 per share on the 6.600% Non-Cumulative Preferred Stock, Series A (the “Series A Preferred Stock”), $421.875 per share on the 6.750% Non-Cumulative Preferred Stock, Series B (the “Series B Preferred Stock”), $335.9375 per share on the 5.375% Non-Cumulative Preferred Stock, Series C (the “Series C Preferred Stock”); and $289.0625 per share on the 4.625% Non-Cumulative Preferred Stock, Series D (the “Series D Preferred Stock” and; together with the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock, the “Preferred Stock”), in each case, per quarter during the period beginning the date of the Merger Agreement through the earlier of the closing of the Merger and the termination of the Merger Agreement, consistent with the per-quarter dividends due under each applicable Certificate of Designations.
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Rating Agencies
Financial strength ratings represent the opinion of rating agencies regarding the ability of an insurance company to pay obligations under insurance policies and contracts in accordance with their terms. Credit ratings indicate the rating agency’s opinion regarding a debt issuer’s ability to meet the terms of debt obligations in a timely manner. They are important factors in our overall funding profile and ability to access certain types of liquidity and capital. The level and composition of our regulatory capital at the subsidiary level, our Combined RBC Ratio and our equity capital are among the many factors considered in determining our financial strength ratings and credit ratings. Each agency has its own capital adequacy evaluation methodology, and assessments are generally based on a combination of factors. Financial strength ratings are not statements of fact nor are they recommendations to purchase, hold or sell any security, contract or policy. Each rating should be evaluated independently of any other rating.
Our financial strength ratings and long-term issuer credit ratings as of the date of this filing were as follows:
A.M. Best (1)
Fitch (2)
Moody’s (3)
Financial Strength Ratings:
Outlook
Watch
Stable
Watch
Watch
Brighthouse Life Insurance Company
New England Life Insurance Company
Brighthouse Life Insurance Company of NY
Long-term Issuer Credit Ratings:
Outlook
Watch
Stable
Watch
Watch
Brighthouse Financial, Inc.
bbb+
BBB
Baa3
BBB
Brighthouse Holdings, LLC
bbb+
BBB
Baa3
BBB
(1) “Watch” indicates that the rating is under review with negative implications. A.M. Best’s financial strength ratings for insurance companies range from “A++ (Superior)” to “S (Suspended).” A.M. Best’s long-term issuer credit ratings range from “aaa (exceptional)” to “s (suspended).”
(2) Fitch’s financial strength ratings for insurance companies range from “AAA (highest rating)” to “C (distressed).” Fitch’s long-term issuer credit ratings range from “AAA (highest rating)” to “D (default).”
(3) “Watch” indicates that the rating is on review for downgrade. Moody’s financial strength ratings for insurance companies and long-term issuer credit ratings range from “Aaa (highest quality)” to “C (lowest rated).”
(4) “Watch” indicates that the rating is on CreditWatch with negative implications. S&P’s financial strength ratings for insurance companies and long-term issuer credit ratings range from “AAA (extremely strong)” to “SD (selective default)” or “D (default).”
NR = Not rated
Rating agencies continue to review and adjust our ratings. In July 2025, S&P revised the long-term issuer credit ratings for BHF and BH Holdings to BBB from BBB+. In addition, S&P revised the financial strength ratings for certain of our insurance subsidiaries to A from A+, among other revisions. Following the announcement that BHF has entered into the Merger Agreement, S&P, Moody’s and AM Best revised their outlook on our financial strength ratings and credit ratings, and Fitch downgraded our financial strength ratings and credit ratings. On November 6, 2025, S&P placed BHF, BH Holdings and certain of our insurance subsidiaries on CreditWatch with negative implications. On November 7, 2025, Moody’s placed BHF, BH Holdings and certain of our insurance subsidiaries on review for a downgrade and changed the long-term issuer credit rating and financial strength rating outlooks for those entities to rating under review. On November 10, 2025, AM Best placed BHF, BH Holdings and certain of our insurance subsidiaries under review with implications. In addition, on November 10, 2025, Fitch the long-term issuer credit ratings for BHF and BH Holdings to BBB from BBB+ and the financial ratings for certain of our insurance subsidiaries to A- from A. See “Risk Factors — Risks Related to Our Business — A or a potential in our financial or credit ratings could result in a of business and materially affect our financial condition and results of operations” for a description of the potential impact of a ratings .
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Sources and Uses of Liquidity and Capital
Our primary sources and uses of liquidity and capital were as follows at:
Years Ended December 31,
(In millions)
Sources:
Operating activities, net
Investing activities, net
Changes in policyholder account balances, net
Changes in payables for collateral under securities loaned and other transactions, net
Financing element on certain derivative instruments and other derivative related transactions, net
Total sources
Uses:
Operating activities, net
Investing activities, net
Changes in policyholder account balances, net
Changes in payables for collateral under securities loaned and other transactions, net
Long-term debt repaid
Dividends on preferred stock
Treasury stock acquired in connection with share repurchases
Financing element on certain derivative instruments and other derivative related transactions, net
Other, net
Total uses
Net increase (decrease) in cash and cash equivalents
Cash Flows from Operating Activities
The principal cash inflows from our insurance activities come from insurance premiums, annuity considerations and net investment income. The principal cash outflows are the result of various annuity and life insurance products, operating expenses and income tax, as well as interest expense. The primary liquidity concern with respect to these cash flows is the risk of early contract holder and policyholder withdrawal.
Cash Flows from Investing Activities
The principal cash inflows from our investment activities come from repayments of principal, proceeds from maturities and sales of investments, as well as settlements of freestanding derivatives. The principal cash outflows relate to purchases of investments and settlements of freestanding derivatives. We typically can have a net cash outflow from investing activities because cash inflows from insurance operations are reinvested in accordance with our ALM discipline to fund insurance liabilities. We closely monitor and manage these risks through our comprehensive investment risk management process. The primary liquidity concerns with respect to these cash flows are the risk of default by debtors and market disruption.
Cash Flows from Financing Activities
The principal cash inflows from our financing activities come from issuances of debt and equity securities, deposits of funds associated with policyholder account balances and lending of securities. The principal cash outflows come from repayments of debt, common stock repurchases, preferred stock dividends, withdrawals associated with policyholder account balances and the return of securities on loan. The primary liquidity concerns with respect to these cash flows are market disruption and the risk of early policyholder withdrawal.
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Primary Sources of Liquidity and Capital
In addition to the summary description of liquidity and capital sources discussed in “— Sources and Uses of Liquidity and Capital,” the following additional information is provided regarding our primary sources of liquidity and capital:
Funding Sources
Liquidity is provided by a variety of funding sources, including secured and unsecured funding agreements, unsecured credit facilities and secured committed facilities. Capital is provided by a variety of funding sources, including issuances of debt and equity securities, as well as borrowings under our credit facilities. We maintain a shelf registration statement with the SEC that permits the issuance of public debt, equity and hybrid securities. As a “Well-Known Seasoned Issuer” under SEC rules, our shelf registration statement provides for automatic effectiveness upon filing and has no stated issuance capacity. The diversity of our funding sources enhances our funding flexibility, limits dependence on any one market or source of funds and generally lowers the cost of funds. Our primary funding sources include:
Preferred Stock
See Note 12 of the Notes to the Consolidated Financial Statements for information on preferred stock issuances.
Funding Agreements
Brighthouse Life Insurance Company issues funding agreements and uses the proceeds from such issuances for spread lending purposes in connection with our institutional spread margin business or to provide additional liquidity. The institutional spread margin business is comprised of funding agreements issued in connection with the programs described in more detail below. Activity related to these programs is reported in the Corporate & Other segment. See “Obligations Under Funding Agreements” in Note 3 of the Notes to the Consolidated Financial Statements for additional information on funding agreements.
Funding Agreement-Backed Repurchase Agreement Program
In January 2024, Brighthouse Life Insurance Company established a secured funding agreement-backed repurchase agreement program (the “FABR Program”), pursuant to which Brighthouse Life Insurance Company may enter into repurchase agreements with bank counterparties and the proceeds of the repurchase agreements are then used by a special purpose entity to purchase funding agreements from Brighthouse Life Insurance Company.
Funding Agreement-Backed Commercial Paper Program
In July 2021, Brighthouse Life Insurance Company established a funding agreement-backed commercial paper program (the “FABCP Program”) for spread lending purposes, pursuant to which a special purpose limited liability company (the “SPLLC”) may issue commercial paper and deposit the proceeds with Brighthouse Life Insurance Company under a funding agreement issued by Brighthouse Life Insurance Company to the SPLLC. The maximum aggregate principal amount permitted to be outstanding at any one time under the FABCP Program is $5.0 billion.
Funding Agreement-Backed Notes Program
In April 2021, Brighthouse Life Insurance Company established a funding agreement-backed notes program (the “FABN Program”), pursuant to which Brighthouse Life Insurance Company may issue funding agreements to a special purpose statutory trust for spread lending purposes. The maximum aggregate principal amount permitted to be outstanding at any one time under the FABN Program is $7.0 billion.
Federal Home Loan Bank Funding Agreements
Brighthouse Life Insurance Company is a member of the Federal Home Loan Bank (“FHLB”) of Atlanta, where it maintains a secured funding agreement program, under which funding agreements may be issued.
Farmer Mac Funding Agreements
Brighthouse Life Insurance Company has a secured funding agreement program with the Federal Agricultural Mortgage Corporation and its affiliate Farmer Mac Mortgage Securities Corporation (“Farmer Mac”) with a term ending on December 1, 2026, pursuant to which the parties may enter into funding agreements in an aggregate amount of up to $750 million.
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Information regarding funding agreements issued for spread lending purposes is as follows:
Aggregate Principal Amount Outstanding
Issuances
Repayments
December 31,
Years Ended December 31,
(In millions)
FABR Program
FABCP Program
FABN Program
FHLB Funding Agreements
Farmer Mac Funding Agreements
Total
Debt Issuances
See Note 11 of the Notes to the Consolidated Financial Statements for information on debt issuances.
Credit and Committed Facilities
See Note 11 of the Notes to the Consolidated Financial Statements for information regarding our credit and committed facilities.
We have no reason to believe that our lending counterparties would be unable to fulfill their respective contractual obligations under these facilities. As commitments under our credit and committed facilities may expire unused, these amounts do not necessarily reflect our actual future cash funding requirements.
Our Revolving Credit Facility contains financial covenants, including requirements to maintain a specified minimum adjusted consolidated net worth, to maintain a ratio of total indebtedness to total capitalization not in excess of a specified percentage and that place limitations on the dollar amount of indebtedness that may be incurred by our subsidiaries, which could restrict our operations and use of funds. At December 31, 2025, we were in compliance with these financial covenants.
Primary Uses of Liquidity and Capital
In addition to the summarized description of liquidity and capital uses discussed in “— Sources and Uses of Liquidity and Capital,” the following additional information is provided regarding our primary uses of liquidity and capital:
Common Stock Repurchases
See Note 12 of the Notes to the Consolidated Financial Statements for information relating to authorizations to repurchase BHF common stock, amounts of common stock repurchased pursuant to such authorizations and the amount remaining under such authorizations at December 31, 2025. See also “Risk Factors — Risks Related to Our Securities — We are not currently permitted to declare and pay dividends on our common stock, and legal restrictions could limit our ability to pay dividends on our capital stock and our ability to repurchase our common stock at the level we wish in the future.”
Preferred Stock Dividends
See Note 12 of the Notes to the Consolidated Financial Statements for information relating to dividends declared and paid on our preferred stock.
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“Dividend Stopper” Provisions in BHF’s Preferred Stock and Junior Subordinated Debentures
Terms applicable to our junior subordinated debentures may restrict our ability to pay interest on those debentures in certain circumstances. Suspension of payments of interest on our junior subordinated debentures, whether required under the relevant indenture or optional, could cause “dividend stopper” provisions applicable under those and other instruments to restrict our ability to pay dividends, if any, on our common stock and repurchase our common stock in various situations, including situations where we may be experiencing financial stress, and may restrict our ability to pay dividends or interest on our preferred stock and junior subordinated debentures as well. Similarly, the terms of our outstanding preferred stock contain restrictions on our ability to repurchase our common stock or pay dividends thereon if we have not fulfilled our dividend obligations under such preferred stock or other preferred securities. In addition, the terms of the agreements governing any preferred stock, debt or other financial instruments that we may issue in the future, may limit or prohibit the payment of dividends on our common stock or preferred stock, or the payment of interest on our junior subordinated debentures.
Debt Repayments, Repurchases, Redemptions and Exchanges
See Note 11 of the Notes to the Consolidated Financial Statements for information on debt repayments and repurchases, as well as debt maturities and the terms of our outstanding long-term debt.
We may from time to time seek to retire or purchase our outstanding indebtedness through cash purchases or exchanges for other securities, purchases in the open market, privately negotiated transactions or otherwise. Any such repurchases or exchanges will be dependent upon several factors, including our liquidity requirements, contractual restrictions, general market conditions, as well as applicable regulatory, legal and accounting factors. Whether or not we repurchase any debt and the size and timing of any such repurchases will be determined at our discretion.
Insurance Liabilities
Liabilities arising from our insurance activities primarily relate to benefit payments under various annuity and life insurance products, as well as payments for policy surrenders, withdrawals and loans.
At December 31, 2025, our insurance liabilities, excluding obligations under our institutional spread margin business, totaled $114.4 billion and the related future estimated cash payments totaled $204.9 billion, of which $13.7 billion is due in the next twelve months. These estimated cash payments are based on assumptions related to mortality, morbidity, policy lapses, withdrawals, surrender charges, annuitization, future interest credited and other assumptions comparable with our experience and expectations of future payment patterns, as well as other contingent events as appropriate for the respective product type. These amounts are undiscounted and, therefore, exceed the liabilities included on the consolidated balance sheet. Actual cash payments on insurance liabilities may differ significantly from future estimated cash payments due to differences between actual experience and the assumptions used in the establishment of the liabilities and the estimation of the future cash payments. All future estimated cash payments are presented gross of any reinsurance recoverable. At December 31, 2025, obligations under our institutional spread margin business totaled $9.5 billion and the related future estimated cash payments, including interest, totaled $10.1 billion, of which $4.7 billion is due in the next twelve months.
Pledged Collateral
We enter into derivatives to manage various risks relating to our ongoing business operations. We pledge collateral to, and have collateral pledged to us by, counterparties in connection with our derivatives. At December 31, 2025, we pledged $34 million of cash collateral to counterparties. At December 31, 2024, we did not pledge any cash collateral to counterparties. At December 31, 2025 and 2024, we were obligated to return cash collateral pledged to us by counterparties of $1.5 billion and $812 million, respectively. The timing of the return of the derivatives collateral is uncertain. We also pledge collateral from time to time in connection with certain funding agreements.
We receive non-cash collateral from counterparties for derivatives, which can be sold or re-pledged subject to certain constraints, and which is not recorded on our consolidated balance sheets. The amount of this non-cash collateral at estimated fair value was $3.2 billion and $2.3 billion at December 31, 2025 and 2024, respectively.
See Note 9 of the Notes to the Consolidated Financial Statements for additional information regarding pledged collateral.
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Securities Lending
We have a securities lending program that aims to enhance the total return on our investment portfolio, whereby securities are loaned to third parties, primarily brokerage firms and commercial banks. We obtain collateral, usually cash, from the borrower, which must be returned to the borrower when the loaned securities are returned to us. Generally, our securities lending contracts expire within twelve months of issuance. We were liable for cash collateral under our control of $3.2 billion at both December 31, 2025 and 2024.
We receive non-cash collateral for securities lending from counterparties, which cannot be sold or re-pledged, and which is not recorded on our consolidated balance sheets. There was no non-cash collateral at both December 31, 2025 and 2024.
See Note 8 of the Notes to the Consolidated Financial Statements for further discussion of our securities lending program.
Contingencies, Commitments and Guarantees
We establish liabilities for litigation, regulatory and other loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. See Note 17 of the Notes to the Consolidated Financial Statements for additional information regarding contingencies.
We enter into commitments for the purpose of enhancing the total return on our investment portfolio consisting of commitments to fund partnership investments, bank credit facilities and private corporate bond investments, as well as commitments to lend funds under mortgage loan commitments. We anticipate these commitments could be invested any time over the next five years. See Notes 8 and 17 of the Notes to the Consolidated Financial Statements for additional information regarding commitments.
In the normal course of our business, we have provided certain indemnities, guarantees and commitments to third parties such that we may be required to make payments now or in the future. See Note 17 of the Notes to the Consolidated Financial Statements for additional information regarding guarantees.
The Parent Company
Liquidity and Capital
In evaluating liquidity, it is important to distinguish the cash flow needs of the parent company from the cash flow needs of the combined group of companies. BHF is largely dependent on cash flows from its insurance subsidiaries to meet its obligations. Constraints on BHF’s liquidity may occur as a result of operational demands or as a result of compliance with regulatory requirements. See “Risk Factors — Risks Related to Our Business — As a holding company, BHF depends on the ability of its subsidiaries to pay dividends,” “Risk Factors — Economic Environment and Capital Markets-Related Risks — Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs and our access to capital” and “Risk Factors — Regulatory and Legal Risks — Our insurance business is highly regulated, and changes in regulation and in supervisory and enforcement policies or interpretations thereof may materially impact our capitalization or cash flows, reduce our profitability and limit our growth,” as well as Notes 12 and 15 of the Notes to the Consolidated Financial Statements.
Short-term Liquidity and Liquid Assets
At December 31, 2025 and 2024, BHF and certain of its non-insurance subsidiaries had short-term liquidity of $763 million and $912 million, respectively. Short-term liquidity is comprised of cash and cash equivalents and short-term investments, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include assets held in trust.
At December 31, 2025 and 2024, BHF and certain of its non-insurance subsidiaries had liquid assets of $911 million and $1.1 billion, respectively, of which $868 million and $1.1 billion, respectively, was held by BHF. Liquid assets are comprised of 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 assets held in trust. On February 11, 2025, Brighthouse Life Insurance Company received a $100 million capital contribution from BH Holdings.
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Statutory Capital and Dividends
The NAIC and state insurance departments have established regulations that provide minimum capitalization requirements based on RBC formulas for insurance companies. See “Business — Regulation — Insurance Regulation” and Note 12 of the Notes to the Consolidated Financial Statements for information regarding our statutory accounting and reserves, as well as the calculation of RBC and the regulatory RBC requirements. At December 31, 2025, our insurance subsidiaries had a preliminary combined statutory TAC of approximately $5.3 billion, resulting in a preliminary Combined RBC Ratio of 456%.
The amount of dividends that our insurance subsidiaries can ultimately pay to BHF through their various parent entities provides an additional margin for risk protection and investment in our businesses. Such dividends are constrained by the amount of surplus our insurance subsidiaries hold to maintain their ratings, which is generally higher than minimum RBC requirements. We proactively take actions to maintain capital consistent with these ratings objectives, which may include adjusting dividend amounts and deploying financial resources from internal or external sources of capital. Certain of these activities may require regulatory approval. Furthermore, the payment of dividends and other distributions by our insurance subsidiaries is governed by the insurance laws and regulations of the states where they are domiciled. Any payment of dividends by Brighthouse Life Insurance Company in 2026 would be subject to Delaware DOI approval. See also Note 12 of the Notes to the Consolidated Financial Statements for additional information regarding the applicable dividend restrictions and certain of our subsidiaries’ ordinary dividend capacity, as well as the circumstances under which regulatory approval would be required.
Normalized Statutory Earnings
Normalized statutory earnings (loss) is used by management to measure our insurance subsidiaries’ ability to pay future distributions and incorporates the effectiveness of our hedging program as well as other factors related to our business. Normalized statutory earnings (loss) is calculated as statutory pre-tax net gain (loss) from operations adjusted for the favorable or unfavorable impacts of (i) net realized capital gains (losses) before capital gains tax (excluding gains (losses) and taxes transferred to the interest maintenance reserve), (ii) the change in total asset requirement at CTE98, net of the change in our variable annuity reserves, which are calculated at CTE70, and (iii) pre-tax unrealized gains (losses) associated with our variable annuities and Shield hedges, net of reinsurance, and other equity risk management strategies. See “Glossary” for the definition of CTE. Normalized statutory earnings () may be further adjusted for certain items that impact our results in order to help management and investors understand, evaluate and forecast those results.
The following table presents the components of combined normalized statutory earnings for Brighthouse Life Insurance Company and NELICO:
Years Ended December 31,
(In billions)
Statutory net gain (loss) from operations, pre-tax
Add: net realized capital gains (losses)
Add: change in total asset requirement at CTE98, net of the change in variable annuity reserves
Add: unrealized gains (losses) on variable annuity & Shield hedges, net of reinsurance, and other equity risk management strategies
Add: impact of actuarial items and other adjustments
Normalized statutory earnings (loss)
Primary Sources and Uses of Liquidity and Capital
The principal sources of funds available to BHF include distributions from BH Holdings, dividends and returns of capital from its insurance subsidiaries and BRCD, capital markets issuances, as well as its own cash and cash equivalents and short-term investments. These sources of funds may also be supplemented by alternate sources of liquidity either directly or indirectly through our insurance subsidiaries. For example, we have established internal liquidity facilities to provide liquidity within and across our regulated and non-regulated entities to support our businesses.
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The primary uses of liquidity of BHF include debt-service obligations (including interest expense and debt repayments), preferred stock dividends, capital contributions to subsidiaries and payment of general operating expenses. Based on our analysis and comparison of our current and future cash inflows from the dividends we receive from subsidiaries that are permitted to be paid without prior insurance regulatory approval, our investment portfolio and other cash flows and anticipated access to the capital markets, we believe there will be sufficient liquidity and capital to enable BHF to make payments on debt, pay preferred stock dividends, contribute capital to its subsidiaries, pay all general operating expenses and meet its cash needs.
In connection with the Separation, the Company entered into a tax receivables agreement (the “Tax Receivables Agreement”) with MetLife. In connection with the Tax Receivables Agreement, the Company has a payable to MetLife of $328 million at both December 31, 2025 and 2024 reported in other liabilities, which would be accelerated upon closing of the Merger. See Note 15 of the Notes to the Consolidated Financial Statements.
In addition to the liquidity and capital sources discussed in “— The Company — Primary Sources of Liquidity and Capital” and “— The Company — Primary Uses of Liquidity and Capital,” the following additional information is provided regarding BHF’s primary sources and uses of liquidity and capital:
Distributions from and Capital Contributions to BH Holdings
See Note 2 of Schedule II — Condensed Financial Information (Parent Company Only) for information relating to distributions from and capital contributions to BH Holdings.
Short-term Intercompany Loans and Intercompany Liquidity Facilities
See Note 3 of Schedule II — Condensed Financial Information (Parent Company Only) for information relating to short-term intercompany loans and our intercompany liquidity facilities including obligations outstanding, issuances and repayments.
