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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________

FORM 10-K

(Mark One)


☑			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2019~~2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ~~___to~~ ___ to ___

Commission ~~file~~File ~~number~~Number: 000-55705

Brighthouse Life Insurance Company of NY

(Exact name of registrant as specified in its charter)

New York

13-3690700

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

285 Madison Avenue, 14th Floor, New York, New York

10017

(Address of principal executive offices)

(Zip Code)

(980) 365-7100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None


Title of each class	Trading symbol(s)	Name of each exchange on which registered

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $10.00

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of March 54, ~~2020~~2021, 200,000 shares of the registrant’s common stock were outstanding, all of which were owned indirectly by Brighthouse Financial, Inc.

REDUCED DISCLOSURE FORMAT

The registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this Annual Report on Form 10-K with the reduced disclosure format.

DOCUMENTS INCORPORATED BY REFERENCE: NONE

Table of Contents

~~Page~~

Page

Part I

Item 1.

~~Business~~

Business

Item 1A.

~~Risk Factors~~

Risk Factors

Item 1B.

~~Unresolved Staff Comments~~

Unresolved Staff Comments

Item 3.

~~Legal Proceedings~~

Legal Proceedings

Item 4.

~~Mine Safety Disclosures~~

Mine Safety Disclosures

Part II

Item 5.

~~Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities~~

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 6.

~~Selected Financial Data~~

Selected Financial Data

Item 7.

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A.

~~Quantitative and Qualitative Disclosures About Market Risk~~

Quantitative and Qualitative Disclosures About Market Risk

Item 8.

~~Financial Statements and Supplementary Data~~

Financial Statements and Supplementary Data

Item 9.

~~Changes in and Disagreements with Accountants on Accounting and Financial Disclosure~~

~~107~~

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

114

Item 9A.

~~Controls and Procedures~~

~~107~~

Controls and Procedures

114

Item 9B.

~~Other Information~~

~~107~~

Other Information

114

Part III

Item 10.

~~Directors, Executive Officers and Corporate Governance~~

~~108~~

Directors, Executive Officers and Corporate Governance

115

Item 11.

~~Executive Compensation~~

~~108~~

Executive Compensation

115

Item 12.

~~Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters~~

~~108~~

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

115

Item 13.

~~Certain Relationships, Related Transactions and Director Independence~~

~~108~~

Certain Relationships, Related Person Transactions and Director Independence

115

Item 14.

~~Principal Accountant Fees and Services~~

~~108~~

Principal Accountant Fees and Services

115

Part IV

Item 15.

~~Exhibits and Financial Statement Schedules~~

~~110~~

Exhibits and Financial Statement Schedules

117

Exhibit Index

~~111~~

118

Signatures

~~112~~

119

Table of Contents

As used in this Annual Report on Form 10-K, unless otherwise mentioned or unless the context indicates otherwise, “BHNY,” the “Company,” “we,” “usour” and “~~our~~us” refer to Brighthouse Life Insurance Company of NY ~~(formerly~~, ~~First MetLife Investors Insurance Company,~~ a New York domiciled life insurance company. BHNY is ~~a wholly-owned subsidiary of Brighthouse Life Insurance Company (together with its subsidiaries and affiliates, “BLIC”), which is~~ an indirect wholly-owned subsidiary of Brighthouse Financial, Inc. (together with its subsidiaries and affiliates, “Brighthouse”). We use the term “BHF” to refer solely to Brighthouse Financial, Inc., and not to any of its subsidiaries. The term “Separation” refers to the separation of MetLife, Inc.’s (together with its subsidiaries and affiliates, “MetLife”) former Brighthouse Financial segment from MetLife’s other businesses and the creation of a separate, publicly-traded company, BHF, as well as the 2017 distribution onby ~~August 4~~MetLife, ~~2017~~Inc. of ~~96,776,670~~approximately ~~shares, or~~ 80.8%, of the ~~119,773,106~~then outstanding shares of BHF common stock ~~outstanding immediately prior~~ to ~~the distribution date by MetLife, Inc. to~~ holders of MetLife, Inc. common stock as of the record date for the distribution. In June 2018, MetLife divested all its remaining shares of BHF common stock.

Note Regarding Forward-Looking Statements and Summary of Risk Factors

This report and other oral or written statements that we make from time to time may contain information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve substantial risks and uncertainties. We have tried, wherever possible, to identify such statements using words such as “anticipate,” “estimate,” “expect,” “project,” “may,” “will,” “could,” “intend,” “goal,” “target,” “guidance,” “forecast,” “preliminary,” “objective,” “continue,” “aim,” “plan,” “believe” and other words and terms of similar meaning, or that are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include, without limitation, statements relating to future actions, prospective services or products, financial projections, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, as well as trends in operating and financial results. The list below is also a summary of the material risks and uncertainties that could adversely affect our business, financial condition and results of operations. You should read this summary together with the more detailed description of the risks and uncertainties in “Risk Factors.”

Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of BHNY. These statements are based on current expectations and the current economic environment and involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others:

• differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models;

•The ~~the~~ impact on earnings, capitalization and statutory capital and greater volatility of our results due to guarantees within certain of our products;

• the ~~potential~~impact ~~material adverse effect~~ of ~~changes~~the inongoing ~~accounting~~worldwide ~~standards,~~pandemic ~~practices~~sparked ~~and/or~~by ~~policies~~the ~~applicable~~novel tocoronavirus ~~us, including changes in~~ (the ~~accounting for long~~“COVID-~~duration~~19 ~~contracts~~pandemic”);

• the ~~impact~~potential ofmaterial adverse ~~capital~~effect ~~and~~of ~~credit~~changes ~~market~~in ~~conditions~~accounting standards, ~~including~~practices ~~with~~or ~~respect~~policies applicable to ~~our~~us, ~~ability~~including tochanges ~~meet~~in ~~liquidity~~the ~~needs~~accounting ~~and~~for ~~access~~long-duration ~~capital~~contracts;

•loss ~~the~~of ~~impact~~business ofand ~~changes~~other innegative ~~regulation~~impacts ~~and~~resulting infrom ~~supervisory~~a ~~and~~downgrade ~~enforcement~~or ~~policies~~a onpotential ~~our~~downgrade ~~insurance~~in ~~business~~our orfinancial ~~other~~strength ~~operations~~ratings;

• the availability of reinsurance and the ability of the counterparties to our reinsurance or indemnification arrangements to perform their obligations thereunder;

•heightened ~~the~~competition, ~~adverse~~including ~~impact~~with respect to ~~liabilities~~service, ~~for~~product ~~policyholder~~features, scale, price, actual or perceived financial strength, claims-paying asratings, afinancial ~~result~~strength ofratings, ~~extreme~~e-business ~~mortality~~capabilities ~~events~~and name recognition;

•our ~~heightened~~ability ~~competition, including with respect~~ to ~~service,~~market ~~product~~and ~~features,~~distribute ~~scale,~~our ~~price,~~products ~~actual~~through ordistribution ~~perceived financial strength, claims-paying ratings, financial strength ratings, e-business capabilities and name recognition~~channels;

•any failure of third parties to provide services we need, any failure of the practices and procedures of such third parties and any inability to obtain information or assistance we need from third parties;

•the adverse impact on liabilities for policyholder claims as a result of extreme mortality events;

•the impact of adverse capital and credit market conditions, including with respect to our ability to meet liquidity needs and access capital;

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•the ~~any~~impact ~~failure~~ of ~~third~~economic ~~parties~~conditions toin ~~provide~~the ~~services~~capital wemarkets ~~need~~and the U.S. and global economy, ~~any~~as ~~failure~~well ofas ~~the~~geo-political ~~practices~~or ~~and~~catastrophic ~~procedures~~events, ofon ~~such~~our ~~third~~investment ~~parties~~portfolio, ~~and~~including ~~any~~on ~~inability~~realized toand ~~obtain~~unrealized ~~information~~losses orand ~~assistance~~impairments, wenet ~~need~~investment ~~from~~spread ~~third~~and ~~parties~~net investment income;

• the ~~effectiveness~~impact of events that adversely affect issuers, guarantors or collateral relating to our ~~policies~~investments or our derivatives counterparties, on impairments, valuation allowances, reserves, net investment income and ~~procedures~~changes in ~~managing~~unrealized ~~risk~~gain or loss positions;

•the ~~our~~impact ~~ability~~of tochanges ~~market~~in regulation and ~~distribute~~in supervisory and enforcement policies on our ~~products~~insurance ~~through~~business ~~distribution~~or ~~channels~~other operations;

•the ~~whether~~potential ~~all~~material ornegative ~~any portion of the~~ tax ~~consequences~~impact of ~~the~~potential ~~Separation~~future ~~are~~tax ~~not~~legislation asthat ~~expected,~~could ~~leading~~make tosome ~~material~~of ~~additional~~our ~~taxes~~products orless ~~material~~attractive ~~adverse consequences~~ to ~~tax attributes that impact us~~consumers;

• the ~~uncertainty~~effectiveness of ~~the~~our ~~outcome~~policies ~~of any disputes with MetLife over tax-related or other matters~~ and ~~agreements~~procedures orin ~~disagreements~~managing ~~regarding MetLife’s or our obligations under our other agreements~~risk;

• the ~~potential~~loss ~~material~~or ~~negative~~disclosure ~~tax~~of ~~impact~~confidential information, damage to our reputation and impairment of ~~potential~~our ~~future~~ability ~~tax~~to ~~legislation~~conduct ~~that~~business ~~could~~effectively ~~make~~as ~~some~~a result of ~~our~~any ~~products~~failure ~~less~~in ~~attractive~~cyber- toor ~~consumers;~~other ~~and~~information security systems;

•whether ~~other~~all ~~factors~~or ~~described~~any inportion ~~this~~of ~~report~~the ~~and~~tax ~~from~~consequences ~~time~~of tothe ~~time~~Separation inare ~~documents~~not ~~that~~as weexpected, ~~file~~leading ~~with~~to ~~the~~material ~~U.S.~~additional ~~Securities~~taxes ~~and~~or ~~Exchange~~material ~~Commission~~adverse ~~(“SEC”).~~consequences to tax attributes that impact us;

•the uncertainty of the outcome of any disputes with MetLife over tax-related or other matters and agreements or disagreements regarding MetLife’s or our obligations under our other agreements; and

•other factors described in this report and from time to time in documents that we file with the U.S. Securities and Exchange Commission (“SEC”).

For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements included and the risks, uncertainties and other factors identified in this Annual Report on Form 10-K, particularly in the sections entitled “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk,” as well as in our other subsequent filings with the SEC. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

Note Regarding Reliance on Statements in Our Contracts

See “Exhibit Index — Note Regarding Reliance on Statements in Our Contracts” for information regarding agreements included as exhibits to this Annual Report on Form 10-K.

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PART I

Item 1. Business

Index to Business

	~~Page~~	Page
Overview	5	5
Segments and Corporate & Other	5	5
Reinsurance Activity	6	5
Sales Distribution	6	6
Regulation	7	7
Company Ratings	14	15
Competition		16

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Overview

BHNY ~~was~~is ~~incorporated on December 31, 1992 as~~ a New York stock life insurance company ~~and is~~ licensed to do business only in the state of New York.

The Company ~~offers~~markets or administers a range of ~~individual~~annuity ~~annuities~~ and ~~individual~~ life insurance products into ~~New York~~individuals. The Company is organized into two reporting segments: Annuities and Life. In addition, the Company reports certain of its results of operations in Corporate & Other. See “— Segments and Corporate & Other,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” and Note 2 of the Notes to the Financial Statements for further information on the Company’s segments and Corporate & Other.

In 2016, MetLife, Inc. (together with its subsidiaries and affiliates, “MetLife”) announced its plan to pursue the separation of a substantial portion of its former U.S. retail business (the “Separation”). In connection with the Separation, 80.8% of MetLife, Inc.’s interest in BHF was distributed to holders of MetLife, Inc.’s common stock. On June 14, 2018, MetLife, Inc. divested its remaining shares of BHF common stock (the “MetLife Divestiture”). As a result, MetLife, Inc. and its subsidiaries and affiliates are no longer considered related parties subsequent to the MetLife Divestiture.

Segments and Corporate & Other

The Company is organized into two segments: Annuities and Life. In addition, the Company reports certain of its results of operations in Corporate & Other.

Annuities

~~The~~Our Annuities segment consists of a variety of variable, fixed, index-linked and income annuities designed to address contract holders’ needs for protected wealth accumulation on a tax-deferred basis, wealth transfer and income security. The “variable” and “fixed” classifications describe generally whether we or the contract holder bears the investment risk of the assets supporting the contract and determine the manner in which we earn profits from these products, as asset-based fees charged for variable products or generally as investment spreads for fixed products. Index-linked annuities allow the contract holder to participate in returns from specified equity indices and, in the case of our Shield Annuities product suite (“Shield” and “Shield Annuities”), provide a specified level of market downside protection. The Shield reserve assets are held in a separate account, but the general account is obligated to pay distributions and benefits irrespective of the value of the separate account assets. Income annuities provide a guaranteed monthly income for a specified period of years or for the life of the annuitant.

Annuities are used by consumers for pre-retirement wealth accumulation and post-retirement income management. The “fixed” and “variable” classifications describe generally whether we or the contract holders bear the investment risk of the assets supporting the contract and determine the manner in which we earn profits from these products, as investment spreads for fixed products or as asset-based fees charged to variable products. Index-linked annuities allow the contract holder to participate in returns from equity indices and, in the case of Shield Level Annuities (“Shield” and “Shield Annuities”), a suite of single premium deferred annuity contracts that provides for accumulation of retirement savings or other long-term investment purposes, provide a specified level of market downside protection. Income annuities provide a guaranteed monthly income for a specified period of years and/or for the life of the annuitant.

Life

~~The~~Our Life segment consists of insurance products and services, ~~including~~primarily term, ~~whole and universal~~ life ~~products~~insurance, designed to address policyholders’ needs for financial security and protected wealth transfer, which may be provided on a tax-advantaged basis. In addition to contributing to our revenues and earnings, mortality protection-based products offered by our Life segment diversify the longevity and other risks in our Annuities segment.

Corporate & Other

Corporate & Other contains the excess capital not allocated to the segments and expenses associated with certain legal proceedings and income tax audit issues. Corporate & Other also includes term life insurance sold direct to consumers, which is no longer being offered for new sales.

Additional Segment Information

Revenues derived from any individual customer did not exceed 10% of premiums, universal life and investment-type product policy fees and other revenues for the years ended December 31, ~~2019~~2020, ~~2018~~2019 and ~~2017~~2018. Substantially all of our premiums, universal life and investment-type product policy fees and other revenues originated in New York. Financial information, including revenues, expenses, adjusted earnings and total assets by segment, as well as premiums, universal life and investment-type product policy fees and other revenues by major product groups, is provided in Note 2 of the Notes to the Financial Statements. Adjusted earnings is a performance measure that is not based on accounting principles generally accepted in the United States of America (“GAAP”). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Disclosures” for a definition of such measure.

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Reinsurance Activity

We enter into reinsurance agreements primarily as a purchaser of reinsurance for our various insurance products. We participate in reinsurance activities in order to limit losses, minimize exposure to significant risks and provide capacity for future growth. We enter into various agreements with reinsurers that cover individual risks, primarily on a coinsurance, yearly renewable term, or excess basis. These reinsurance agreements spread risk and minimize the effect of losses. The extent of each risk retained by us depends on our evaluation of the specific risk, subject, in certain circumstances, to maximum retention limits based on the characteristics of coverages. We also cede first dollar mortality risk under certain contracts. In addition to reinsuring mortality risk, we reinsure other risks, as well as specific coverages. We obtain reinsurance for capital requirement purposes and also when the economic impact of the reinsurance agreement makes it appropriate to do so.

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Under the terms of the reinsurance agreements, the reinsurer agrees to reimburse us for the ceded amount in the event that we pay a claim. Cessions under reinsurance agreements do not discharge our obligations as the primary insurer. In the event the reinsurers do not meet their obligations under the terms of the reinsurance agreements, reinsurance recoverable balances could become uncollectible.

WeOur ~~reinsure~~reinsurance ~~our~~is ~~business~~diversified ~~through~~with a ~~diversified~~ group of ~~well-capitalized~~primarily highly rated reinsurers. We analyze recent trends in arbitration and litigation outcomes in disputes, if any, with our reinsurers. Weand monitor ratings and ~~evaluate~~ the financial strength of our reinsurers ~~by analyzing their financial statements~~. In addition, the reinsurance recoverable balance due from each reinsurer and the recoverability of such balance is evaluated as part of ~~the~~this overall monitoring process. ~~Recoverability of reinsurance recoverable balances is evaluated based on these analyses.~~ We generally secure large reinsurance recoverable balances with various forms of collateral, including secured trusts, funds withheld accounts and irrevocable letters of credit.

Annuities

For annuities, we currently reinsure to our parent, Brighthouse Life Insurance Company ~~and formerly reinsured to Metropolitan Life Insurance Company (“MLIC”)~~, ~~a former affiliate,~~ 100% of certain variable annuity risks or 100% of the living and death benefit guarantees issued in connection with certain variable annuities. Under the benefit guarantee reinsurance agreements, we pay a reinsurance premium generally based on fees associated with the guarantees collected from policyholders, and receive reimbursement for benefits paid or accrued in excess of account values, subject to certain limitations. ~~In connection with the Separation, MLIC novated and assigned its rights and obligations under its agreement with Brighthouse Life Insurance Company, effective January 1, 2017.~~

Life

We have historically reinsured the mortality risk on our life insurance policies primarily on an excess of retention basis or on a quota share basis. When we cede risks to a reinsurer on an excess of retention basis we retain the liability up to a contractually specified amount and the reinsurer is responsible for indemnifying us for amounts in excess of the liability we retain, subject sometimes to a cap. When we cede risks on a quota share basis we share a portion of the risk within a contractually specified layer of reinsurance coverage. We reinsure on a facultative basis for risks with specified characteristics. On a case-by-case basis, we may retain up to $100,000 per life and reinsure 100% of amounts in excess of $100,000. We routinely evaluate our reinsurance program and may increase or decrease our retention at any time.

In connection with the Separation, in May 2017, we recaptured all of the reinsurance covering our term life insurance previously reinsured to MLIC. Concurrent with the recapture we executed a reinsurance agreement with Brighthouse Life Insurance Company, as reinsurer to cede on a yearly renewable term basis risks related to multiple life products. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

Catastrophe Coverage

We have exposure to catastrophes which could contribute to significant fluctuations in our results of operations. We use excess of retention and quota share reinsurance agreements to provide greater diversification of risk and minimize exposure to larger risks. See “Risk Factors — Risks Related to Our Business — Extreme mortality events may adversely impact liabilities for policyholder claims.”

Sales Distribution

We distribute our annuity and life insurance products in New York through multiple independent distribution channels and marketing arrangements with a diverse network of ~~independent~~ distribution partners. Our partners include broker-dealers, general agencies, and other marketing organizations. We market Brighthouse products to our distribution partners through our external wholesalers, who are registered with our affiliated broker-dealer for purposes of marketing our variable insurance products, for ultimate sale to retail customers of such distribution partners.

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Regulation

Index to Regulation

	~~Page~~	Page
Overview	8	8
Insurance Regulation	8	8
Cybersecurity Regulation	11	12
Securities and Investment Advisor Regulation	12
Securities, Broker-Dealer and Investment Advisor Regulation		12
Department of Labor and ERISA Considerations	12	13
Standard of Conduct Regulation	13	13
Regulation of Over-the-Counter Derivatives	14	15
Unclaimed Property	14	15

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Overview

We are domiciled in New York and regulated by the New York State Department of Financial Services (the “NYDFS”). We are regulated primarily at the state level, with some products and services also subject to federal regulation. Furthermore, some of our operations, products and services are subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), consumer protection laws, securities, broker-dealer and investment advisor regulations, and environmental and unclaimed property laws and regulations. See “Risk Factors — Regulatory and Legal Risks.”

Insurance Regulation

State insurance regulation generally aims at supervising and regulating insurers, with the goal of protecting policyholders and ensuring that insurance companies remain solvent. Insurance regulators have increasingly sought information about the potential impact of activities in holding company systems as a whole and have adopted laws and regulations enhancing “group-wide” supervision. See “— Holding Company Regulation” for information regarding an enterprise risk report.

We are licensed to issue insurance products only in New York and are regulated by the NYDFS. ~~We are licensed to issue insurance products only in~~ New York. ~~New York~~ law grants the NYDFS broad administrative powers with respect to, among other things:

• licensing companies and agents to transact business;

• calculating the value of assets to determine compliance with statutory requirements;

• mandating certain insurance benefits;

• regulating certain premium rates;

• reviewing and approving certain policy forms and rates;

• regulating unfair trade and claims practices, including through the imposition of restrictions on marketing and sales practices, distribution arrangements and payment of inducements, and identifying and paying to the state benefits and other property that are not claimed by the owners;

• regulating advertising and marketing of insurance products;

• protecting privacy;

• establishing statutory capital (including risk-based capital (“RBC”)) reserve requirements and solvency standards;

• specifying the conditions under which a ceding company can take credit for reinsurance in its statutory financial statements (i.e., reduce its reserves by the amount of reserves ceded to a reinsurer);

• fixing maximum interest rates on insurance policy loans and minimum rates for guaranteed crediting rates on life insurance policies and annuity contracts;

• adopting and enforcing suitability standards with respect to the sale of annuities and other insurance products;

• approving changes in control of New York-domiciled insurance companies;

• restricting the payment of dividends and other transactions between affiliates; and

• regulating the types, amounts and valuation of investments.

We are required to file reports, generally including detailed annual financial statements, with the NYDFS, and our operations and accounts are subject to periodic examination by the NYDFS. We must also file, and obtain regulatory approval for, rules, rates and forms relating to the insurance written in the jurisdictions in which we operate.

State and federal insurance and securities regulatory authorities and other state law enforcement agencies and attorneys general from time to time may make inquiries regarding our compliance with insurance, securities and other laws and regulations regarding the conduct of our insurance and securities businesses. We cooperate with such inquiries and take corrective action when warranted. See Note 1213 of the Notes to the Financial Statements.

State Insurance Regulatory Actions Related to the COVID-19 Pandemic

As U.S. states have declared states of emergency, many state insurance regulators have mandated or recommended that insurers implement policies to provide relief to consumers who have been adversely impacted by the COVID-19 pandemic. Accordingly, we have taken actions to provide relief to our life insurance policyholders, annuitants and other contract holders who have claimed hardship as a result of the COVID-19 pandemic. Such relief may include extending the grace

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period for payment of insurance premiums, offering additional time to exercise contractual rights or options or extending maturity dates on annuities.

Surplus and Capital; Risk-Based Capital

The National Association of Insurance Commissioners (“NAIC”) is an organization whose mission is to assist state insurance regulatory authorities in serving the public interest and achieving the insurance regulatory goals of its members, the state insurance regulatory officials. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews, and coordinate their regulatory oversight. The NAIC provides standardized insurance industry accounting and reporting guidance through its Accounting Practices and Procedures Manual (the “Manual”), which states have largely adopted by regulation. However, statutory accounting principles continue to be established by individual state laws, regulations and permitted practices, which may differ from the Manual. Changes to the Manual or modifications by the NYDFS may impact our statutory capital and surplus.

The NAIC has established regulations that provide minimum capitalization requirements based on RBC formulas for insurance companies. Insurers are required to maintain their capital and surplus at or above minimum levels. Regulators have discretionary authority, in connection with the continued licensing of an insurer, to limit or prohibit the insurer’s sales to policyholders if, in their judgment, the regulators determine that such insurer has not maintained the minimum surplus or capital or that the further transaction of business will be hazardous to policyholders. We are subject to RBC requirements ~~that~~and ~~were~~other ~~developed~~minimum bystatutory ~~the~~capital ~~NAIC~~ and ~~adopted~~surplus byrequirements imposed under the laws of New York. RBC is based on a formula calculated by applying factors to various asset, premium, claim, expense and statutory reserve items. The formula takes into account the risk characteristics of the insurer and is calculated on an annual basis. The major categories of risk involved are asset risk, insurance risk, interest rate risk, market risk and business risk. The RBC framework is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not as a means to rank insurers generally. New York insurance laws provide the NYDFS the authority to require various actions by, or take various actions against, insurers whose total adjusted capital (“TAC”) does not meet or exceed certain RBC levels. As of the date of the most recent annual statutory financial statements filed with the NYDFS, our TAC was in excess of RBC levels required by regulators. See “Risk Factors — Regulatory and Legal Risks — A decrease in our RBC ratio (as a result of a reduction in statutory surplus ~~and/~~or increase in RBC requirements) could result in increased scrutiny by insurance regulators and rating agencies and could have a material adverse effect on our ~~results~~financial ofcondition ~~operations~~ and ~~financial~~results ~~condition~~of operations” and Note 10 9 of the Notes to the Financial Statements.

In ~~August~~December ~~2018~~2020, the NAIC adopted a ~~new~~group ~~framework~~capital calculation tool that uses an RBC aggregation methodology for ~~variable~~all ~~annuity~~entities ~~reserve~~within an insurance holding company system. The NAIC has stated that the calculation will be a tool to assist regulators in assessing group risks and capital ~~reform~~adequacy ~~(“VA~~and ~~Reform”).~~does ~~While~~not ~~many~~constitute ~~other~~a ~~states~~minimum ~~have~~capital ~~adopted~~requirement VAor ~~Reform~~standard, ~~New~~however, ~~York~~there ~~has~~is ~~not~~no guarantee that will be the case in the future. WeIt ~~cannot~~is ~~predict~~unclear ~~whether~~how ~~New~~the ~~York~~group capital calculation will ~~adopt~~interact VAwith ~~Reform~~existing orcapital ~~similar~~requirements ~~regulation~~for ~~regarding~~insurance ~~variable~~companies ~~annuity~~in ~~reserves~~the ~~and~~United ~~capital~~States.

In August 2018, the NAIC adopted the framework for variable annuity reserve and capital reform (“VA Reform”). VA Reform is intended to (i) mitigate the asset-liability accounting mismatch between hedge instruments and statutory instruments and statutory liabilities, (ii) remove the non-economic volatility in statutory capital charges and the resulting solvency ratios and (iii) facilitate greater harmonization across insurers and their products for greater comparability. New York adopted a similar framework for variable annuity reserves (“NY VA Reform”), in addition to the NAIC changes to required capital. The changes were effective December 31, 2020 and replaced Actuarial Guideline 43 and the former Life Risk Based Capital C3 Phase II capital requirements.

The NYDFS issues an annual “Special Considerations” circular letter (“SCL”) to New York licensed insurers requiring tests to be performed as part of insurers’ year-end asset adequacy testing. An SCL could require us, among other things, to use certain asset adequacy testing assumptions resulting in increases or releases of certain asset adequacy reserves for a particular year, which could have a material impact on our statutory capital and surplus. There was no impact to our statutory capital and surplus resulting from SCLs for the years ended December 31, 2020 and 2019.

See “Risk Factors — Regulatory and Legal Risks — Our business is highly regulated, and changes in regulation and in supervisory and enforcement policies may materially impact our capitalization or cash flows, reduce our profitability and limit our growth.”

The NYDFS issues an annual “Special Considerations” circular letter (“SCL”) to New York licensed insurers requiring tests to be performed as part of insurers’ year-end asset adequacy testing. A SCL could require us, among other things, to use certain asset adequacy testing assumptions resulting in increases or releases of certain asset adequacy reserves for a particular year, which could have a material impact on our statutory capital and surplus. There was no impact to our statutory capital and surplus resulting from SCLs for the years ended December 31, 2019 and 2018.

Holding Company Regulation

Insurance holding company laws and regulations vary from jurisdiction to jurisdiction, but generally require a controlled insurance company (i.e., insurers that are subsidiaries of insurance holding companies) to register with state regulatory authorities and to file with those authorities certain reports, including information concerning its capital structure, ownership, financial condition, certain intercompany transactions and general business operations. In 2010 and 2014, the NAIC adopted revisions to the NAIC Insurance Holding Company System Model Act (“Model Holding Company Act”) and the Insurance Holding Company System Model Regulation (“Model Holding Company Regulation”). New York has adopted a modified version, although its supporting regulation is substantially similar to the model regulation.

New York insurance laws generally provide that no person, corporation or other entity may acquire control of a New York-domiciled insurance company, or a controlling interest in any parent company of any such insurance company, without the prior approval of the NYDFS. Under the laws of New York, any person acquiring, directly or indirectly, 10% or more of the voting securities of an insurance company (or any holding company of the insurance company) is presumed to have acquired “control” of the company. This statutory presumption of control may be rebutted by a showing that control does not exist in fact. The NYDFS, however, may find that “control” exists in circumstances in which a person owns or controls less than 10% of an insurance company’s voting securities.

The laws and regulations regarding acquisition of control transactions may discourage potential acquisition proposals and may delay, deter or prevent a change of control involving us, including through unsolicited transactions.

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Holding Company Regulation

Insurance holding company laws and regulations vary from jurisdiction to jurisdiction, but generally require a controlled insurance company (i.e., insurers that are subsidiaries of insurance holding companies) to register with state regulatory authorities and to file with those authorities certain reports, including information concerning its capital structure, ownership, financial condition, certain intercompany transactions and general business operations. In 2010 and 2014, the NAIC adopted revisions to the NAIC Insurance Holding Company System Model Act and the Insurance Holding Company System Model Regulation. New York has adopted a modified version, although its supporting regulation is substantially similar to the model regulation.

New York insurance laws generally provide that no person, corporation or other entity may acquire control of a New York-domiciled insurance company, or a controlling interest in any parent company of any such insurance company, without the prior approval of the NYDFS. Under the laws of New York, any person acquiring, directly or indirectly, 10% or more of the voting securities of an insurance company (or any holding company of the insurance company) is presumed to have acquired “control” of the company. This statutory presumption of control may be rebutted by a showing that control does not exist, in fact. The NYDFS, however, may find that “control” exists in circumstances in which a person owns or controls less than 10% of an insurance company’s voting securities.

The insurance holding company laws and regulations include a requirement that the ultimate controlling person of a U.S. insurer file an annual enterprise risk report with the lead state of the insurance holding company system identifying risks likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole. New York has enacted this enterprise risk reporting requirement.

Under New York insurance laws, BHNY is permitted, without prior insurance regulatory clearance, to pay stockholder dividends to its parent in any calendar year based on one of two standards. Under one standard, BHNY is permitted, without prior insurance regulatory clearance, to pay dividends out of earned surplus (defined as positive “unassigned funds (surplus)”), excluding 85% of the change in net unrealized capital gains or losses (less capital gains tax), for the immediately preceding calendar year), in an amount up to the greater of: (i) 10% of its surplus to policyholders as of the end of the immediately preceding calendar year, or (ii) its statutory net gain from operations for the immediately preceding calendar year (excluding realized capital gains), not to exceed 30% of surplus to policyholders as of the end of the immediately preceding calendar year. In addition, under this standard, BHNY may not, without prior insurance regulatory clearance, pay any dividends in any calendar year immediately following a calendar year for which its net gain from operations, excluding realized capital gains, was negative. Under the second standard, if dividends are paid out of other than earned surplus, BHNY may, without prior insurance regulatory clearance, pay an amount up to the lesser of: (i) 10% of its surplus to policyholders as of the end of the immediately preceding calendar year, or (ii) its statutory net gain from operations for the immediately preceding calendar year (excluding realized capital gains). In addition, BHNY will be permitted to pay a dividend to its parent in excess of the amounts allowed under both standards only if it files notice of its intention to declare such a dividend and the amount thereof with the New York Superintendent of Financial Services (the “NY Superintendent”), and the NY Superintendent either approves the distribution of the dividend or does not disapprove the dividend within 30 days of its filing. To the extent BHNY pays a stockholder dividend, such dividend will be paid to Brighthouse Life Insurance Company, its direct parent and sole stockholder. The ~~New~~NY ~~York~~ Superintendent has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its stockholders.

See “~~Market~~Dividend ~~for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.~~Restrictions” ~~See~~in ~~also~~ Note 910 of the Notes to the Financial Statements for further information regarding such limitations and dividends paid.

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Own Risk and Solvency Assessment Model Act

In ~~September~~ 2012, the NAIC adopted the Risk Management and Own Risk and Solvency Assessment Model Act (“ORSA”), which has been enacted by New York. ORSA requires that insurers maintain a risk management framework and conduct an internal own risk and solvency assessment of the insurer’s material risks in normal and stressed environments. The assessment must be documented in a confidential annual summary report, a copy of which must be made available to regulators as required or upon request.

Federal Initiatives

Although the insurance business in the United States is primarily regulated by the states, federal initiatives often have an impact on our business in a variety of ways. Federal regulation of financial services ~~regulation~~, securities ~~regulation~~, derivatives ~~regulation~~and pensions, ~~pension~~as ~~regulation,~~well as legislation affecting privacy, tort reform ~~legislation~~ and taxation, may significantly and adversely affect the insurance business. In addition, various forms of direct and indirect federal regulation of insurance have been proposed from time to time, including proposals for the establishment of an optional federal charter for insurance companies.

Guaranty Associations and Similar Arrangements

New York requires us to participate in The Life Insurance Guaranty Corporation, which is a guaranty association organized to pay certain contractual benefits owed pursuant to insurance policies issued by impaired, insolvent or failed insurers, or those that may become impaired, insolvent or fail, for example, following the occurrence of one or more catastrophic events. This association levies assessments, up to prescribed limits, on all member insurers in the state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent or failed insurer is engaged. New York permits member insurers to recover assessments paid through full or partial premium tax offsets.

InOver ~~December 2017,~~ the ~~NAIC~~past ~~approved~~several revisions to its Life and Health Insurance Guaranty Association Model Act governing assessments for long-term care insurance. The revisions broaden the assessment base for long-term care insurance insolvencies to include both life and health insurersyears, ~~provide for~~ the ~~inclusion~~aggregate ofassessments ~~HMOs~~levied inagainst ~~the~~us ~~assessment~~have ~~base,~~not ~~and~~been ~~include no change to the premium tax offset~~material. ~~Many~~We ~~states~~ have ~~adopted~~established ~~legislation~~liabilities tofor ~~codify~~guaranty ~~these~~fund ~~changes~~assessments ~~into~~that ~~law,~~we ~~and more states are expected to~~ consider ~~legislation in their 2020 legislative sessions~~adequate.

In the past five years, the aggregate assessments levied against us have not been material. We have established liabilities for guaranty fund assessments that we consider adequate. See Note 12 of the Notes to the Financial Statements for additional information on the guaranty association assessments.

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Insurance Regulatory Examinations and Other Activities

As part of its regulatory oversight process, the NYDFS conducts periodic detailed examinations of our books, records, accounts, and business practices., ~~The~~including ~~NYDFS~~periodic financial examinations and market conduct examinations, one of which is currently ~~conducting~~underway. aOver ~~routine~~the ~~examination~~past several years, there have been no material adverse findings in connection with any examinations of ~~BHNY~~us ~~for~~conducted by the ~~years~~NYDFS, ~~2014~~although tothere ~~2018~~can be no assurance that there will not be any material adverse findings in the future.

Regulatory authorities in a small number of states, the Financial Industry Regulatory Authority, Inc. (“FINRA”) and, occasionally, the SEC, have conducted investigations or inquiries relating to sales ~~and/~~or administration of individual life insurance policies, annuities or other products by us orand our affiliates. These investigations have focused on the conduct of particular financial services representatives, the sale of unregistered or unsuitable products, the misuse of client assets, and sales and replacements of annuities and certain riders on such annuities. Over the past several years, these and a number of investigations of us and our affiliates by other regulatory authorities were resolved for monetary payments and certain other relief, including restitution payments. We may continue to receive, and may resolve, further investigations and actions on these matters in a similar manner.

In addition, claims payment practices by insurance companies have received increased scrutiny from regulators.

Policy and Contract Reserve Adequacy Analysis

Annually, we are required to conduct an analysis of the adequacy of all statutory reserves. A qualified actuary must submit an opinion which states that the statutory reserves make adequate provision, according to accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses. The adequacy of the statutory reserves is considered in light of the assets held by us with respect to such reserves and related actuarial items including, but not limited to, the investment earnings on such assets, and the consideration anticipated to be received and retained under the related policies and contracts. We may increase reserves in order to submit an opinion without qualification. Since the inception of this requirement, we have provided the NYDFS such opinions without qualifications.

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Regulation of Investments

New York insurance laws require diversification of investment portfolios and limit the amount of investments that wean insurer may have in certain asset categories, such as below investment grade fixed income securities, real estate equity, other equity investments, and derivatives. Failure to comply with these laws and regulations would cause investments exceeding regulatory limitations to be treated as non-admitted assets for purposes of measuring surplus and, in some instances, would require divestiture of such non-qualifying investments. We believe that our investments complied, in all material respects, with such regulations at December 31, ~~2019~~2020.

NYDFS Insurance Regulation 210

OnIn March ~~19,~~ 2018, NYDFS Insurance Regulation 210: Life Insurance and Annuity Non-Guaranteed Elements took effect. The regulation establishes standards for the determination and readjustment of non-guaranteed elements (“NGEs”) that may vary at the insurer’s discretion for life insurance policies and annuity contracts delivered or issued for delivery in New York. In addition, the regulation establishes guidelines for related disclosure to NYDFS and policy owners prior to any adverse change in NGEs. The regulation applies to all individual life insurance policies, individual annuity contracts and certain group life insurance and group annuity certificates that contain NGEs. NGEs include premiums, expense charges, cost of insurance rates and interest credits.

Cybersecurity Regulation

In the course of our business, we and our distributors collect and maintain customer data, including personally identifiable ~~non-public~~nonpublic financial and health information. We also collect and handle the personal information of our employees and certain third parties who distribute our products. As a result, we and the third parties who distribute our products are subject to U.S. federal and state privacy laws and regulations, including the Health Insurance Portability and Accountability Act as well as additional regulation, including the state laws described below. These laws require that we institute and maintain certain policies and procedures to safeguard this information from improper use or disclosure and that we provide notice of our practices related to the collection and disclosure of such information. Other laws and regulations require us to notify affected individuals and regulators of security breaches.

For example, in 2017, the NYDFS adopted a broad cybersecurity regulation that requires financial services institutions to, among other things, implement and maintain a cybersecurity program and a cybersecurity policy that will be monitored and tested periodically, develop controls and technology standards for data protection, meet minimum standards in response to any cybersecurity breach and annually certify their compliance with the regulation. In addition, in 2017 the NAIC adopted the Insurance Data Security Model Law which established standards for data security and for the investigation and notification of insurance commissioners of cybersecurity events involving unauthorized access to, or the misuse of, certain nonpublic information. A number of states have enacted the Insurance Data Security Model Law or similar laws, and we expect more states to follow.

11The California Consumer Privacy Act of 2018 (the “CCPA”) went into effect on January 1, 2020, granting California residents new privacy rights and requiring disclosures regarding personal information, among other privacy protective measures. The California Privacy Rights Act (the “CPRA”) ballot measure passed in the November 2020 election. The CPRA becomes fully operative January 1, 2023 and amends the CCPA, expanding consumer privacy rights and establishing a new privacy enforcement agency. Additional states are considering enacting, or have enacted, consumer information privacy laws.

~~Table~~Securities, ofBroker-Dealer ~~Contents~~and Investment Advisor Regulation

Some of our activities in offering and selling variable insurance products, as well as certain fixed interest rate or index-linked contracts, are subject to extensive regulation under the federal securities laws administered by the SEC or state securities laws. Federal and state securities laws and regulations treat variable insurance products and certain fixed interest rate or index-linked contracts as securities that must be registered with the SEC under the Securities Act of 1933, as amended (the “Securities Act”), and ~~Investment~~distributed ~~Advisor~~through ~~Regulation~~broker-dealers registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These registered broker-dealers are also FINRA members; therefore, sales of these registered products also are subject to the requirements of FINRA rules.

Some of our activities in offering and selling variable insurance products, as well as certain fixed interest rate or index-linked contracts, are subject to extensive regulation under the federal securities laws administered by the SEC and/or state securities law. Federal and state securities laws and regulations treat variable insurance products and certain fixed interest rate or index-linked contracts as securities that must be registered with the SEC under the Securities Act of 1933, as amended (the “Securities Act”), and distributed through broker-dealers registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These registered broker-dealers are also FINRA members; therefore sales of these registered products also are subject to the requirements of FINRA rules.

We utilize Brighthouse Securities, LLC, an affiliate, to distribute our variable and registered fixed products. Brighthouse Securities, LLC is a FINRA member and a broker-dealer registered with the SEC and applicable state regulators.

We issue variable insurance products through separate accounts that are registered with the SEC as investment companies under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Each registered separate account is generally divided into sub-accounts, each of which invests in an underlying mutual fund which is itself a registered investment company under the Investment Company Act. Our affiliate, Brighthouse Investment Advisers, LLC is registered as an investment advisor with the SEC under the Investment Advisers Act of 1940, and its primary business is to serve as investment advisor to the registered mutual funds that underlie our variable annuity contracts and variable life insurance policies. Certain variable contract separate accounts sponsored by us and our affiliates are exempt from registration under the Securities Act and the Investment Company Act but may be subject to other provisions of the federal securities laws.12

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We issue variable insurance products through separate accounts that are registered with the SEC as investment companies under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Each registered separate account is generally divided into subaccounts, each of which invests in an underlying mutual fund which is itself a registered investment company under the Investment Company Act. Our affiliate, Brighthouse Investment Advisers, LLC is registered as an investment advisor with the SEC under the Investment Advisers Act of 1940, and its primary business is to serve as investment advisor to the registered mutual funds that underlie our variable annuity contracts and variable life insurance policies. Certain variable contract separate accounts sponsored by us and our affiliates are exempt from registration under the Securities Act and the Investment Company Act but may be subject to other provisions of the federal securities laws.

Federal, state and other securities regulatory authorities, including the SEC and FINRA, may from time to time make inquiries and conduct examinations regarding our compliance with securities and other laws and regulations. We will cooperate with such inquiries and examinations and take corrective action when warranted. See “— Insurance Regulation — Insurance Regulatory Examinations and Other Activities.”

Federal and state securities laws and regulations are primarily intended to ensure the integrity of the financial markets, to protect investors in the securities markets, and to protect investment advisory or brokerage clients, and generally grant regulatory agencies broad rulemaking and enforcement powers, including the power to limit or restrict the conduct of business for failure to comply with such laws and regulations.

Department of Labor and ERISA Considerations

We manufacture individual retirement annuities ~~(“IRAs”)~~ that are subject to the Internal Revenue Code of 1986, as amended (the “Tax Code”), for third parties to sell to individuals. Also, a portion of our in-force life insurance products and annuity products are held by tax-qualified pension and retirement plans that are subject to ERISA or the Tax Code. While we currently believe manufacturers do not have as much exposure to ERISA and the Tax Code as distributors, certain activities are subject to the restrictions imposed by ERISA and the Tax Code, including ~~the~~restrictions ~~requirement~~on ~~under~~the ~~ERISA~~provision ~~that fiduciaries~~ of ainvestment ~~plan~~advice ~~subject~~ to ~~Title I of~~ ERISA ~~(an~~qualified ~~“ERISA~~plans, ~~Plan”)~~plan ~~must~~participants ~~perform~~and ~~their~~individual ~~duties~~retirement ~~solely~~annuity inand ~~the~~individual ~~interests~~retirement ofaccount ~~the ERISA Plan participants and beneficiaries~~(collectively, ~~and~~“IRAs”) ~~those~~owners ~~fiduciaries~~if ~~may~~the ~~not~~investment ~~cause~~recommendation aresults ~~covered plan to engage~~ in ~~certain~~fees ~~prohibited~~paid ~~transactions.~~to ~~The~~an ~~applicable~~individual ~~provisions~~advisor, ofthe ~~ERISA~~firm ~~and~~that employs the ~~Tax~~advisor ~~Code~~or ~~are~~their ~~subject~~affiliates. toIn ~~enforcement~~June by2020, the Department of Labor (“DOL”), ~~the~~issued ~~Internal~~guidance ~~Revenue~~that ~~Service~~expands (the definition of “~~IRS~~investment advice.”) ~~and~~See ~~the~~“— ~~Pension~~Standard ~~Benefit~~of ~~Guaranty~~Conduct ~~Corporation~~Regulation ~~(“PBGC”)~~— Department of Labor Fiduciary Advice Rule.”

InThe ~~addition,~~DOL ~~the~~has ~~prohibited~~issued ~~transaction~~a ~~rules~~number of ~~ERISA~~regulations ~~and~~that ~~the~~increase ~~Tax Code generally restrict~~ the ~~provision~~level of ~~investment~~disclosure ~~advice~~that tomust ~~ERISA~~be ~~qualified~~provided ~~plans,~~to plan ~~participants~~sponsors and ~~IRA~~participants. ~~owners~~The ifparticipant ~~the~~disclosure ~~investment~~regulations ~~recommendation~~and ~~results in fees paid to an individual advisor,~~ the ~~firm~~regulations ~~that~~which ~~employs~~require ~~the~~service ~~advisor~~providers orto ~~their~~disclose ~~affiliates~~fee ~~that~~and ~~vary~~other ~~according~~information to ~~the~~plan ~~investment~~sponsors ~~recommendation~~took ~~chosen.~~effect ~~Similarly,~~in ~~without~~2012. anBHNY ~~exemption,~~has ~~fiduciary~~taken ~~advisors~~and ~~are~~continues ~~prohibited~~to ~~from~~take ~~receiving~~steps ~~compensation~~designed ~~from~~to ~~third~~ensure ~~parties~~compliance ~~in connection~~ with ~~their~~these ~~advice. DOL~~ regulations ~~expanding~~as ~~the~~they ~~definition~~apply ofto ~~“investment~~service ~~advice” were introduced in 2016 but were subsequently vacated in 2018~~providers. ~~See “— Standard of Conduct Regulation — Department of Labor Fiduciary Advice Rule” below.~~

~~The~~In ~~DOL~~John ~~has~~Hancock ~~issued~~Mutual Life Insurance Company v. Harris Trust and Savings Bank (1993), the U.S. Supreme Court held that certain assets in excess of amounts necessary to satisfy guaranteed obligations under a ~~number~~participating group annuity general account contract are “plan assets.” Therefore, these assets are subject to certain fiduciary obligations under ERISA, which requires fiduciaries to perform their duties solely in the interest of participants and beneficiaries of a plan subject to Title I of ERISA (an “ERISA Plan”). DOL regulations issued thereafter provide that, ~~increase~~if an insurer satisfies certain requirements, assets supporting a policy backed by the ~~level~~insurer’s ofgeneral ~~disclosure~~account ~~that~~and ~~must~~issued bebefore ~~provided~~1999 towill not constitute “plan ~~sponsors~~assets” We have taken and ~~participants.~~continue ~~The~~to ~~participant~~take ~~disclosure~~steps designed to ensure compliance with these regulations. An insurer issuing a new policy that is backed by its general account and ~~the~~is ~~regulations~~issued ~~which~~to ~~require~~or ~~service~~for ~~providers~~an employee benefit plan after December 31, 1998 is generally subject to ~~disclose~~fiduciary ~~fee~~obligations under ERISA, unless the policy is a guaranteed benefit policy. We have taken and ~~other~~continue ~~information~~to take steps designed to ~~plan~~ensure ~~sponsors~~that ~~took~~policies ~~effect~~issued into ~~2012~~ERISA plans after 1998 qualify as guaranteed benefit policies.

In John Hancock Mutual Life Insurance Company v. Harris Trust and Savings Bank (1993), the U.S. Supreme Court held that certain assets in excess of amounts necessary to satisfy guaranteed obligations under a participating group annuity general account contract are “plan assets.” Therefore, these assets are subject to certain fiduciary obligations under ERISA, which requires fiduciaries to perform their duties solely in the interest of ERISA plan participants and beneficiaries. DOL regulations issued thereafter provide that, if an insurer satisfies certain requirements, assets supporting a policy backed by the insurer’s general account and issued before 1999 will not constitute “plan assets.” We have taken and continue to take steps designed to ensure compliance with these regulations. An insurer issuing a new policy that is backed by its general account and is issued to or for an employee benefit plan after December 31, 1998 is generally subject to fiduciary obligations under ERISA, unless the policy is a guaranteed benefit policy.

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Standard of Conduct Regulation

As a result of overlapping efforts by the DOL, the NAIC, individual states and the SEC to impose fiduciary-like requirements in connection with the sale of annuities, life insurance policies and securities, which are each discussed in more detail below, there have been a number of proposed or adopted changes to the laws and regulations that govern the conduct of our business and the firms that distribute our products. As a manufacturer of annuity and life insurance products, we do not directly distribute our products to consumers. However, regulations establishing standards of conduct in connection with the distribution and sale of these products could affect our business by imposing greater compliance, oversight, disclosure and notification requirements on our distributors ~~and/~~or us, which may in either case increase our costs or limit distribution of our products. We cannot predict what other proposals may be made, what legislation or regulations may be introduced or enacted, or what impact any future legislation or regulations may have on our business, ~~results~~financial ofcondition ~~operations~~ and ~~financial~~results ~~condition~~of operations.

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Department of Labor Fiduciary Advice Rule

~~The~~A ~~DOL~~new ~~issued~~regulatory ~~regulations~~action inby ~~2016~~the DOL (the “Fiduciary Advice Rule”), ~~that~~which ~~were~~became ~~subsequently~~effective ~~vacated~~on byFebruary ~~the~~16, ~~Fifth~~2021, ~~Circuit~~reinstates ~~Court~~the text of ~~Appeals~~the inDOL’s ~~2018.~~1975 ~~While~~investment ~~the~~advice ~~Fiduciary~~regulation ~~Rule~~defining ~~was~~what inconstitutes ~~effect,~~fiduciary it“investment ~~substantially~~advice” ~~expanded~~to ~~the~~ERISA ~~definition~~Plans ofand ~~“investment~~IRAs ~~advice,”~~and ~~thereby~~provides ~~broadening~~guidance interpreting such regulation. The guidance provided by the DOL broadens the circumstances under which ~~distributors~~financial ~~and~~institutions, ~~manufacturers~~including of insurance ~~and~~companies, ~~annuity products~~ could be considered fiduciaries under ERISA or the Tax Code. In particular, ~~and~~the ~~subject~~DOL tostates anthat ~~impartial~~a ~~conduct~~recommendation orto “~~best~~roll ~~interests~~over” ~~standard~~assets infrom ~~providing~~a ~~such~~qualified ~~advice.~~retirement ~~Under the rule, certain communications with plans,~~ plan ~~participants~~to ~~and~~an IRA ~~owners,~~or ~~including~~from ~~the~~an ~~marketing~~IRA ofto ~~products,~~another ~~and marketing of investment management or advisory services~~IRA, ~~were~~can ~~deemed~~be considered fiduciary investment advice, ~~thus causing increased exposure to fiduciary liability~~ if ~~the~~provided ~~distributor~~by ~~did~~someone ~~not~~with ~~recommend~~an ~~what~~existing ~~was~~relationship inwith the ~~client’s~~ERISA ~~best~~Plan ~~interests.~~or Inan ~~2019,~~IRA ~~the~~owner ~~DOL~~(or ~~indicated~~in ~~that~~anticipation itof ~~intends~~establishing tosuch ~~issue~~ a ~~new proposed rule on fiduciary investment advice under ERISA~~relationship). AtThis ~~this~~guidance ~~time,~~reverses wean ~~cannot~~earlier ~~predict~~DOL ~~the~~interpretation ~~timing,~~suggesting ~~content~~that orroll ~~form~~over ofadvice ~~any~~does ~~such~~not ~~rule~~constitute orinvestment ~~its~~advice ~~impact~~giving onrise ~~our~~to ~~business,~~a ~~results~~fiduciary ~~of operations and financial condition~~relationship.

Under the Fiduciary Advice Rule, individuals or entities providing investment advice would be considered fiduciaries under ERISA or the Tax Code, as applicable, and would therefore be required to act solely in the interest of ERISA Plan participants or IRA beneficiaries, or risk exposure to fiduciary liability with respect to their advice. They would further be prohibited from receiving compensation for this advice, unless an exemption applied.

In connection with the Fiduciary Advice Rule, the DOL also issued an exemption, Prohibited Transaction Exemption 2020-02, that allows fiduciaries to receive compensation in connection with providing investment advice, including advice with respect to roll overs, that would otherwise be prohibited as a result of their fiduciary relationship to the ERISA Plan or IRA. In order to be eligible for the exemption, among other conditions, the investment advice fiduciary is required to acknowledge its fiduciary status, refrain from putting its own interests ahead of the plan beneficiaries’ interests or making material misleading statements, act in accordance with ERISA’s “prudent person” standard of care, and receive no more than reasonable compensation for the advice.

Because we do not engage in direct distribution of retail products, including IRA products and retail annuities sold to ERISA plan participants and to IRA owners, we believe that we will have limited exposure to the new Fiduciary Advice Rule. However, while we cannot predict the rule’s impact, the DOL’s interpretation of the ERISA fiduciary investment advice regulation could have an adverse effect on sales of annuity products through our independent distribution partners, as a significant portion of our annuity sales are as IRAs. The Fiduciary Advice Rule may also lead to changes to our compensation practices, product offerings and increased litigation risk, which could adversely affect our financial condition and results of operations. We may also need to take certain additional actions in order to comply with, or assist our distributors in their compliance with, the Fiduciary Advice Rule.

New York Regulation 187

OnIn July ~~18,~~ 2018, the NYDFS issued Regulation 187 (“Regulation 187”), which adopted a “best interest” standard for the sale of annuities and life insurance products in New York. The regulation generally requires a consumer’s best interest, and not the financial interests of a producer or insurer, in making a producer’s recommendation as to which life insurance or annuity product a consumer should purchase. In addition, Regulation 187 imposes a best interest standard on consumer in-force transactions. We have assessed the impact to our annuity and life insurance businesses and have adopted certain changes to promote compliance with the provisions by their respective effective dates.

SEC Rules Addressing Standards of Conduct for Broker-Dealers

On June 5, 2019, the SEC adopted a comprehensive set of rules and interpretations for broker-dealers and investment advisers, including new Regulation Best Interest. Among other things, this regulatory package (i) requires broker-dealers and their financial professionals to act in the best interest of retail customers when making recommendations to such customers without placing their own interests ahead of the customers’ interests, including by satisfying obligations relating to disclosure, care, mitigation of conflicts of interest, and compliance policies and procedures; (ii) clarifies the nature of the fiduciary obligations owed by registered investment advisers to their clients; (iii) imposes new requirements on broker-dealers and investment advisers to deliver Form CRS relationship summaries designed to assist customers in understanding key facts regarding their relationships with their investment professionals and differences between the broker-dealer and investment adviser business models; and (iv) restricts broker-dealers and their financial professionals from using certain compensation practices and the terms “adviser” or “advisor.” The intent of Regulation Best Interest is to impose an enhanced standard of care on broker-dealers and their financial professionals which is more similar to that of an investment adviser. Among other things, this would require broker-dealers to mitigate conflicts of interest arising from transaction-based financial arrangements for their employees.:

~~Regulation~~•requires ~~Best Interest may change the way~~ broker-dealers ~~sell~~and ~~securities~~their ~~such~~financial asprofessionals ~~variable annuities~~ to ~~their~~act ~~retail~~in ~~customers~~the asbest ~~well~~interest ~~as their associated costs. Moreover, it may impact broker-dealer sales~~ of ~~other~~retail ~~annuity~~customers ~~products~~when ~~that~~making ~~are~~recommendations ~~not~~to ~~securities~~such ~~because~~customers itwithout ~~could~~placing ~~be difficult for broker-dealers to differentiate~~ their ~~sales~~own ~~practices~~interests byahead ~~product.~~of ~~Per~~ the ~~timeline~~customers’ ~~established by the SEC~~interests, ~~broker-dealers~~including ~~will~~by besatisfying ~~required~~obligations relating to ~~comply~~disclosure, ~~with the requirements of Regulation Best Interest beginning June 30~~care, ~~2020.~~mitigation ~~Given the complexity~~ of ~~this~~conflicts ~~package~~ of ~~regulations and the fact that it was just recently adopted~~interest, ~~its likely impact on the distribution of our products is uncertain. In addition, individual states~~ and ~~their~~compliance ~~securities~~policies ~~regulators may adopt their own enhanced conduct standards for broker-dealers that may further impact their practices,~~ and ~~it is uncertain to what extent they would be preempted by Regulation Best Interest.~~procedures;

13•clarifies the nature of the fiduciary obligations owed by registered investment advisers to their clients;

•imposes new requirements on broker-dealers and investment advisers to deliver Form CRS relationship summaries designed to assist customers in understanding key facts regarding their relationships with their investment professionals and differences between the broker-dealer and investment adviser business models; and

•restricts broker-dealers and their financial professionals from using certain compensation practices and the terms “adviser” or “advisor.”

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The intent of Regulation Best Interest is to impose an enhanced standard of care on broker-dealers and their financial professionals which is more similar to that of an investment adviser. Among other things, this would require broker-dealers to mitigate conflicts of interest arising from transaction-based financial arrangements for their employees.

Regulation Best Interest may change the way broker-dealers sell securities such as variable annuities to their retail customers as well as their associated costs. Moreover, it may impact broker-dealer sales of other annuity products that are not securities because it could be difficult for broker-dealers to differentiate their sales practices by product. Broker-dealers were required to comply with the requirements of Regulation Best Interest beginning June 30, 2020. Given the novelty and complexity of this package of regulations, its likely impact on the distribution of our products is uncertain. In addition, individual states and their securities regulators may adopt their own enhanced conduct standards for broker-dealers that may further impact their practices, and it is uncertain to what extent they would be preempted by Regulation Best Interest.

Regulation of Over-the-Counter Derivatives

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) includes a framework of regulation of the over-the-counter (“OTC”) derivatives markets which requires clearing of certain types of derivatives and imposes additional costs, including new reporting and margin requirements. We use derivatives to mitigate a wide range of risks in connection with our businesses, including the impact of increased benefit exposures from certain of our annuity products that offer guaranteed benefits. Our costs of risk mitigation have increased under Dodd-Frank. For example, Dodd-Frank imposes requirements for (i) the mandatory clearing of certain OTC derivatives transactions ~~(derivatives~~ that must be cleared and settled through central clearing counterparties (“OTC-cleared”), and (ii) mandatory exchange of margin for “OTC~~-bilateral”~~ ~~transactions (OTC~~ derivatives transactions that are bilateral contracts between two counterparties (“OTC-bilateral”) entered into after the applicable phase-in period. The initial margin requirements for OTC-bilateral derivatives transactions will be applicable to us in September ~~2020~~2021. The increased margin requirements, combined with increased capital charges for our counterparties and central clearinghouses with respect to non-cash collateral, will likely require increased holdings of cash and highly liquid securities with lower yields causing a reduction in income and less favorable pricing for cleared and OTC-bilateral derivatives transactions. Centralized clearing of certain derivatives exposes us to the risk of a default by a clearing member or clearinghouse with respect to our cleared ~~derivative~~derivatives transactions. We could be subject to higher costs of entering into ~~derivative~~derivatives transactions (including customized derivatives) and the reduced availability of customized derivatives that might result from the implementation of Dodd-Frank and comparable international derivatives regulations.

Federal banking regulators adopted rules that apply to certain qualified financial contracts, including many derivatives contracts, securities lending agreements and repurchase agreements, with certain banking institutions and certain of their affiliates. These rules, which became effective on January 1, 2019, generally require the banking institutions and their applicable affiliates to include contractual provisions in their qualified financial contracts that limit or delay certain rights of their counterparties arising in connection with the banking institution or an applicable affiliate becoming subject to a bankruptcy, insolvency, resolution or similar proceeding. Certain of our derivatives, securities lending agreements and repurchase agreements are subject to these rules, and as a result, we are subject to greater risk and more limited recovery in the event of a default by such banking institutions or their applicable affiliates.

Unclaimed Property

We are subject to the laws and regulations of New York and other jurisdictions concerning identification, reporting and escheatment of unclaimed or abandoned funds, and are subject to audit and examination for compliance with these requirements, which may result in fines or penalties. Litigation may be brought by, or on behalf, of one or more entities, seeking to recover unclaimed or abandoned funds and interest. The claimant or claimants also may allege entitlement to other damages or penalties, including for alleged false claims.

Company Ratings

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. The level and composition of our regulatory capital are among the many factors considered in determining our financial strength ratings. Each agency has its own capital adequacy evaluation methodology, and assessments are generally based on a combination of factors. Rating agencies may increase the frequency and scope of their credit reviews, may request additional information from the companies that they rate and may adjust upward the capital and other requirements employed in the rating agency models for maintenance of certain ratings levels. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Rating Agencies” and “Risk Factors — Risks Related to Our Business — A downgrade or a potential downgrade in our financial strength ratings could result in a loss of business and materially adversely affect our financial condition and results of operations.”

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Competition

Both the annuities and the life insurance markets are very competitive, with many participants and no one company dominating the market for all products. According to the American Council of Life Insurers (Life Insurers Fact Book 2020), the U.S. life insurance industry is made up of approximately 760 companies with sales and operations across the country. We compete with major, well-established stock and mutual life insurance companies in all of our product offerings. Our Annuities segment also faces competition from other financial service providers that focus on retirement products and advice. Our competitive positioning overall is focused on access to distribution channels, product features and financial strength.

Principal competitive factors in the annuities business include product features, distribution channel relationships, ease of doing business, annual fees, investment performance, speed to market, brand recognition, technology and the financial strength ratings of the insurance company. In particular, the primary competitive feature for the variable annuity business is our living benefit rider product features, and for our Shield business it is the crediting methodology. Additionally, the quality of our relationship management and wholesaling support are key drivers in our competitive position. In the fixed annuity business, the crediting rates and guaranteed payout product features are the primary competitive factors. For income annuities, the competitiveness of the lifetime income payment amount is generally the principal factor.

Principal competitive factors in the life insurance business include customer service and distribution channel relationships, price, the financial strength ratings of the insurance company, technology and financial stability.

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Item 1A. Risk Factors

Index to Risk Factors

	~~Page~~	Page
Overview	15	18
Risks Related to Our Business	15	18
Economic Environment and Capital Markets-Related Risks	20	25
Investments-Related Risks	24	29
Regulatory and Legal Risks	26	31
Operational Risks	28	34
General Risks	30
Risks Related to Our Separation from, and Continuing Relationship with, MetLife		35
Risks Related to Our Separation from, and Continuing Relationship with, MetLife	31

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Overview

You should carefully consider the factors described below, in addition to the other information set forth in this Annual Report on Form 10-K. These risk factors are important to understanding the contents of this Annual Report on Form 10-K and our other filings with the SEC. If any of the following events occur, our business, financial condition and ~~operating~~ results ~~may~~of operations could be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. A summary of the factors described below can be found in “Note Regarding Forward-Looking Statements and Summary of Risk Factors.”

The materialization of any risks and uncertainties set forth below or identified in “Note Regarding Forward-Looking Statements and Summary of Risk Factors” contained in this Annual Report on Form 10-K and “Note Regarding Forward-Looking Statements” in our other filings with the SEC or those that are presently unforeseen or that we currently believe to be immaterial could result in significant adverse effects on our business, financial condition, results of operations and cash flows. See “Note Regarding Forward-Looking Statements and Summary of Risk Factors.”

Risks Related to Our Business

Differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models may adversely affect our financial results, capitalization and financial condition

Our earnings significantly depend upon the extent to which our actual claims experience and benefit payments on our products are consistent with the assumptions we use in setting prices for our products and establishing liabilities for future policy benefits and claims. Such amounts are established based on actuarial estimates of how much we will need to pay for future benefits and claims. To the extent that actual claims and benefits experience is less favorable than the underlying assumptions we used in establishing such liabilities, we could be required to increase our liabilities. We make assumptions regarding policyholder behavior at the time of pricing and in selecting and utilizing the guaranteed options inherent within our products based in part upon expected persistency of the products, which change the probability that a policy or contract will remain in-force from one period to the next. Persistency could be adversely affected by a number of factors, including adverse economic conditions, as well as by developments affecting policyholder perception of us, including perceptions arising from adverse publicity or any potential negative rating agency actions. The pricing of certain of our variable annuity products that contain certain living benefit guarantees is also based on assumptions about utilization rates, or the percentage of contracts that will utilize the benefit during the contract duration, including the timing of the first withdrawal. Results may vary based on differences between actual and expected benefit utilization. A material increase in the valuation of the liability could result to the extent that emerging and actual experience deviates from these policyholder option utilization assumptions, and in certain circumstances this deviation may impair our solvency. We conduct an annual actuarial ~~assumption~~ review (the “AAR”) of the key inputs into our actuarial models that rely on management judgment and update those where we have credible evidence from actual experience, industry data or other relevant sources to ensure our price-setting criteria and reserve valuation practices continue to be appropriate.

We use actuarial models to assist us in establishing reserves for liabilities arising from our insurance policies and annuity contracts. We periodically review the effectiveness of these models, their underlying logic and, from time to time, implement refinements to our models based on these reviews. We implement refinements after rigorous testing and validation and, even after such validation and testing, our models remain subject to inherent limitations. Accordingly, no assurances can be given as to whether or when we will implement refinements to our actuarial models, and, if implemented, the extent of such refinements. Furthermore, if implemented, any such refinements could cause us to increase the reserves we hold for our insurance policy and annuity contract liabilities. Such refinement would also cause us to accelerate the amortization of deferred policy acquisition costs (“DAC”) associated with the affected reserves.

15Due to the nature of the underlying risks and the uncertainty associated with the determination of liabilities for future policy benefits and claims, we cannot determine precisely the amounts which we will ultimately pay to settle these liabilities. Such amounts may vary materially from the estimated amounts, particularly when those payments may not occur until well into the future. We evaluate our liabilities periodically based on accounting requirements (which change from time to time), the assumptions and models used to establish the liabilities, as well as our actual experience. If the liabilities originally established for future benefit payments and claims prove inadequate, we will be required to increase them.

An increase in our reserves or any other adverse impacts, for any of the above reasons, individually or in the aggregate, could have a material adverse effect on our financial condition and results of operations and our profitability measures, as well as materially impact our capitalization, our dividend capacity and our liquidity. These impacts could then, in turn, impact our RBC ratios and our financial strength ratings, which are necessary to support our product sales, and, in certain circumstances, ultimately impact our solvency.

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~~Due~~See to“Management’s ~~the~~Discussion ~~nature~~and Analysis of ~~the~~Financial ~~underlying~~Condition ~~risks~~ and ~~the~~Results ~~uncertainty associated with the determination~~ of ~~liabilities~~Operations ~~for~~— ~~future~~Policyholder ~~policy~~Liabilities” ~~benefits~~ and ~~claims,~~“Management’s weDiscussion ~~cannot~~and ~~determine~~Analysis ~~precisely~~of ~~the~~Financial ~~amounts~~Condition which we will ultimately pay to settle our liabilities. Such amounts may vary materially from the estimated amounts, particularly when those payments may not occur until well into the future. We evaluate our liabilities periodically based on accounting requirements (which change from time to time) the assumptions and ~~models~~Results ~~used~~of toOperations ~~establish~~— ~~the~~Summary ~~liabilities,~~of asCritical ~~well~~Accounting asEstimates ~~our~~— ~~actual~~Deferred ~~experience.~~Policy IfAcquisition ~~the liabilities originally established for future benefit payments and claims prove inadequate, we will be required to increase them~~Costs. ”

An increase in our reserves or acceleration of DAC amortization for any of the above reasons, individually or in the aggregate, could have a material adverse effect on our financial condition and results of operations, profitability measures as well as materially impact our capitalization and our distributable earnings. These impacts could then in turn impact our RBC ratios and our financial strength ratings, which are necessary to support our product sales, and in certain circumstances ultimately impact our solvency.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Liability for Future Policy Benefits” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Deferred Policy Acquisition Costs.”

Guarantees within certain of our annuity products may decrease our earnings, decrease our capitalization, increase the volatility of our results and negatively affect our statutory capital

Our Shield Annuities are index-linked annuities with guarantees for a defined amount of equity loss protection and upside participation. ~~Our~~If the separate account assets consisting of fixed income securities are insufficient to support the increased liabilities resulting from a period of sustained growth in the equity index on which the product is based, we may be required to fund such separate accounts with additional assets from our general account where we risk manage the equity exposure. Our risk management program for Shield seeks to mitigate the potential adverse effects of changes in equity markets primarily by hedging using equity index options that attempt to approximately match the equity risk in the policyholder options.

In connection with our exposure risk management program we may determine to seek the approval of applicable regulatory authorities to permit us to increase our hedge limits consistent with those contemplated by the program. No assurance can be given that any of our requested approvals will be obtained and ~~whether,~~even if obtained, any such approvals ~~will~~may ~~not~~ be subject to qualifications, limitations or conditions.

In addition, hedging instruments we enter into may not effectively offset the equity participation risk in the policyholder options or may otherwise be insufficient in relation to our obligations. For example, in the event that derivative counterparties or central clearinghouses are unable or unwilling to pay, we remain liable for the policyholder liabilities. Furthermore, we are subject to the risk that changes in policyholder behavior, combined with adverse market events, could produce economic losses not addressed by the risk management techniques employed. Under our hedging strategy, period to period changes in the valuation of our hedges relative to the guarantee liabilities may result in significant volatility to certain of our profitability measures, which in certain circumstances could be more significant than has been the case historically.

Finally, the cost of our hedging program may be greater than anticipated because adverse market conditions can limit the availability and increase the costs of the derivatives we intend to employ, and such costs may not be recovered in the pricing of the underlying products we offer.

If our hedging strategy is ineffective for any of the above reasons, individually or in the aggregate, it could have a material adverse effect on our financial condition and results of operations, profitability measures as well as impact our capitalization, our ~~distributable~~dividend ~~earnings~~capacity and our ~~ability to pay statutory dividends~~liquidity. These impacts could in turn impact our RBC ratio and our financial strength ratings, which are necessary to support our product sales, and in certain circumstances ultimately impact our solvency. Additionally, to the extent policyholder persistency is different than we anticipate, it could have an impact on our liquidity.

Furthermore, we may be exposed to the risks related to guarantees included in certain of our variable annuity products. While we have ceded all of the economic risk associated with our guaranteed minimum benefits to Brighthouse Life Insurance Company, we retain exposure related to the guarantees in the event Brighthouse Life Insurance Company fails to perform. In that case, we would be exposed to the risks created by guaranteed benefits designed to protect contract holders against significant changes in equity markets and interest rates, including guaranteed minimum death benefits (“~~GMDBs~~GMDB”), guaranteed minimum withdrawal benefits ~~(“GMWBs”)~~ and guaranteed minimum accumulation benefits ~~(“GMABs”)~~. While we continue to have guaranteed minimum income benefits (“~~GMIBs~~GMIB”) in-force with respect to which we are obligated to perform, we no longer offer GMIBs. We hold liabilities based on the value of the benefits we expect to be payable under such guarantees in excess of the contract holders’ projected account balances. As a result, any periods of significant and sustained negative or low separate account returns, increased equity volatility, or reduced interest rates could result in an increase in the valuation of our liabilities associated with variable annuity guarantees.

Additionally, we make assumptions regarding policyholder behavior at the time of pricing and in selecting and utilizing the guaranteed options inherent within our products (e.g., utilization of option to annuitize within a GMIB product). An increase in the valuation of the liability could result to the extent emerging and actual experience deviates from these policyholder persistency and option utilization assumptions. We review key actuarial assumptions used to record our variable annuity liabilities on an annual basis, including the assumptions regarding policyholder behavior. Changes to assumptions based on our AAR in future years could result in an increase in the liabilities we record for these guarantees.

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~~and~~The ~~option~~ongoing ~~utilization~~COVID-19 ~~assumptions.~~pandemic Wecould ~~review~~materially ~~key~~adversely ~~actuarial~~affect ~~assumptions used to record~~ our ~~variable~~business, ~~annuity~~financial ~~liabilities~~condition onand anresults ~~annual~~of ~~basis~~operations, including ~~the~~our ~~assumptions~~capitalization ~~regarding~~and ~~policyholder behavior. Changes to assumptions based on AAR in future years could result in an increase in the liabilities we record for these guarantees.~~liquidity

We are closely monitoring developments related to the COVID-19 pandemic, which has already negatively impacted us in certain respects, including as discussed below and as further discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — COVID-19 Pandemic.” At this time, it is not possible to estimate the severity or duration of the pandemic, including the severity, duration and frequency of any additional “waves” of the pandemic or the timetable for the implementation, and the efficacy, of any therapeutic treatments and vaccines for COVID-19, including their efficacy with respect to variants or mutations of COVID-19 that have emerged or could emerge in the future. It is likewise not possible to predict or estimate the longer-term effects of the pandemic, or any actions taken to contain or address the pandemic, on the economy at large and on our business, financial condition, results of operations and prospects, including the impact on our investment portfolio and our ratings, or the need for us in the future to revisit or revise targets previously provided to the markets or aspects of our business model. See “— Extreme mortality events may adversely impact liabilities for policyholder claims.”

A key part of our operating strategy is leveraging third parties to deliver certain services important to our business. As a result, we rely upon the successful implementation and execution of the business continuity plans of such entities in the current environment. While our third-party provider contracts require business continuity and we closely monitor the performance of such third parties, including those that are operating in a remote work environment, successful implementation and execution of their business continuity strategies are largely outside of our control. If any of our third-party providers or partners (including third-party reinsurers) experience operational or financial failures related to the COVID-19 pandemic, or are unable to perform any of their contractual obligations due to a force majeure or otherwise, it could have a material adverse effect on our business, financial condition or results of operations. See “— The failure of third parties to provide various services, or any failure of the practices and procedures that these third parties use to provide services to us, could have a material adverse effect on our business.”

Certain sectors of our investment portfolio may be adversely affected as a result of the impact of the COVID-19 pandemic on capital markets and the global economy, as well as uncertainty regarding its duration and outcome. A sustained period of low interest rates, reduced liquidity and a continued slowdown in U.S. or global economic conditions may adversely affect, the values and cash flows of some of our investments. In addition, we have exposure to fixed maturity securities, mortgage loans and certain residential mortgage-backed securities, commercial mortgage-backed securities, and asset-backed securities that may be impacted by the COVID-19 pandemic. Our investment managers are actively working with borrowers who are experiencing short-term financial or operational problems as a result of the COVID-19 pandemic to provide temporary relief. To actively mitigate losses and enhance borrower support across the mortgage loan portfolio segments, we have expanded our loan modification and customer assistance programs. See “— Investments-Related Risks — Defaults on our mortgage loans and volatility in performance may adversely affect our profitability” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — COVID-19 Pandemic.”

Credit rating agencies may continue to review and adjust their ratings for the companies that they rate, including us. The credit rating agencies also evaluate the insurance industry as a whole and may change our financial strength rating based on their overall view of our industry. For example, in April 2020, Fitch revised the rating outlook of certain affiliates to negative from stable due to the disruption to economic activity and the financial markets from the COVID-19 pandemic. See “— A downgrade or a potential downgrade in our financial strength ratings could result in a loss of business and materially adversely affect our financial condition and results of operations” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Rating Agencies.”

Increased economic uncertainty and increased unemployment resulting from the economic impacts of the COVID-19 pandemic have also impacted sales of certain of our products and have prompted us to take actions to provide relief to customers adversely affected by the COVID-19 pandemic, as further described in “Business — Regulation — Insurance Regulation.” Circumstances resulting from the COVID-19 pandemic may affect the incidence of claims, utilization of benefits, lapses or surrenders of policies and payments on insurance premiums, any of which could impact the revenues and expenses associated with our products.

Any risk management or contingency plans or preventative measures we take may not adequately predict or address the impact of the COVID-19 pandemic on our business. Currently, our employees are working remotely. An extended period of remote work arrangements could increase operational risk, including, but not limited to, cybersecurity risks, and could impair our ability to manage our business.

The U.S. federal government and many state legislatures and insurance regulators have passed legislation and regulations in response to the COVID-19 pandemic that affect the conduct of our business. Changes in our circumstances due to the

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COVID-19 pandemic could subject us to additional legal and regulatory restrictions under existing laws and regulations, such as the Coronavirus Aid, Relief, and Economic Security Act. Future legal and regulatory responses could also materially affect the conduct of our business going forward, as well as our financial condition and results of operations.

Changes in accounting standards issued by the Financial Accounting Standards Board may adversely affect our financial statements

Our financial statements are subject to the application of GAAP, which is periodically revised by the Financial Accounting Standards Board (“FASB”). Accordingly, from time to time we are required to adopt new or revised accounting standards or interpretations issued by the FASB. The impact of accounting pronouncements that have been issued but not yet implemented is disclosed in our reports filed with the SEC. See Note 1 of the Notes to the Financial Statements.

The FASB issued an accounting standards update (“ASU”) onin August ~~15,~~ 2018 that will result in significant changes to the accounting for long-duration insurance contracts, including that all of our variable annuity guarantees, ~~including the related ceded reinsurance, will~~ be considered market risk benefits and measured at fair value, whereas today a significant amount of our variable annuity guarantees are ~~carried~~classified as insurance liabilities. The ASU will be effective as of January 1, ~~2022~~2023. The ~~Company~~impact isof ~~evaluating~~ the new guidance ~~and~~on our variable annuity guarantees is ~~currently~~highly ~~not~~dependent ~~able~~on market conditions, especially interest rates, as our stockholders’ equity would decrease as interest rates decrease and increase as interest rates rise. We are, therefore, unable to estimate the ultimate impact toof ~~its~~the ASU on our financial statements; however, at current market interest rate levels, the ASU would ultimately result in a material decrease in our stockholder’s equity, which could have a material adverse effect on our leverage ratios and other rating agency metrics and could consequently adversely impact our financial strength ratings and our ability to incur new indebtedness or refinance our existing indebtedness. ~~The~~In addition, the ASU could also result in ~~lower~~increased ~~and~~market ~~more~~sensitivity ~~volatile~~of our financial statements and results of operations. See “— A downgrade or a potential downgrade in our financial strength ratings could result in a loss of business and materially adversely affect our financial condition and results of operations.”

A downgrade or a potential downgrade in our financial strength ratings could result in a loss of business and materially adversely affect our financial condition and results of operations

Financial strength ratings are published by various nationally recognized statistical rating organizations (“NRSROs”) and similar entities not formally recognized as NRSROs. They indicate the NRSROs’ opinions regarding an insurance company’s ability to meet contract holder and policyholder obligations and are important to maintaining public confidence in our products and our competitive position. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Rating Agencies” for additional information regarding our financial strength ratings, including current rating agency ratings and outlooks.

Downgrades in our financial strength ratings or changes to our ratings outlooks could have a material adverse effect on our financial condition and results of operations in many ways, including:

• reducing new sales of insurance products and annuity products;

•limiting ~~adversely affecting~~ our ~~relationships~~access ~~with~~to ~~independent sales intermediaries~~distributors;

•adversely ~~increasing~~affecting ~~the~~our ~~number~~relationships orwith ~~amount~~independent ofsales ~~policy surrenders and withdrawals by contract holders and policyholders~~intermediaries;

•restricting ~~requiring~~our usability to ~~reduce~~generate ~~prices~~new ~~for~~sales, ~~many~~as of our products ~~and~~depend ~~services~~on strong financial strength ratings to ~~remain~~compete ~~competitive~~effectively;

•increasing ~~providing~~the ~~termination~~number ~~rights~~or ~~for~~amount ~~the~~of ~~benefit~~policy ofsurrenders ~~our~~and ~~derivative~~withdrawals ~~instrument~~by ~~counterparties~~contract holders and policyholders;

•requiring ~~adversely~~us ~~affecting~~to ~~our~~reduce ~~ability~~prices tofor ~~obtain~~many ~~reinsurance~~of atour ~~reasonable~~products ~~prices,~~and ifservices atto ~~all;~~remain ~~and~~competitive;

•providing ~~subjecting~~termination usrights tofor ~~potentially~~the ~~increased~~benefit ~~regulatory~~of ~~scrutiny.~~our derivative instrument counterparties;

~~Downgrades~~•adversely inaffecting our financial strength ratings or changes to our rating outlook could have a material adverse effect on our financial condition and results of operations in many ways, including limiting our access to distributors, restricting our ability to ~~generate~~obtain ~~new~~reinsurance ~~sales~~at ~~because~~reasonable ~~our products depend on strong financial strength ratings to compete effectively~~prices, ~~limiting~~if ~~our~~at ~~access to capital markets, and potentially increasing the cost of debt, which could adversely affect our liquidity.~~all;

An•subjecting ~~inability~~us to ~~access~~potentially ~~credit~~increased ~~facilities~~regulatory ~~could result in a reduction in our liquidity and lead to downgrades in Brighthouse’s credit ratings and our financial strength ratings~~scrutiny.

As•limiting ofour ~~December~~access 31, 2019, Brighthouse had approximately $4.4 billion of total long-term consolidated indebtedness outstanding. BHF also has a $1.0 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”). The right to ~~borrow~~capital ~~funds~~markets ~~under the Revolving Credit Facility is subject to the fulfillment of certain conditions, including compliance with all covenants. Failure to comply with the covenants in the Revolving Credit Facility~~ or ~~fulfill the conditions to borrowings, or the failure of lenders to fund their lending commitments (whether due to insolvency, illiquidity or~~ other ~~reasons)~~contingency infunding ~~the~~sources; ~~amounts provided for under the terms of the Revolving Credit Facility, would restrict the ability to access the Revolving Credit Facility when needed~~ and~~, consequently, could have a material adverse effect on our liquidity, results of operations and financial condition.~~

17•potentially increasing our cost of capital, which could adversely affect our liquidity.

Credit rating agencies may continue to review and adjust their ratings for the companies that they rate, including us. The credit rating agencies also evaluate the insurance industry as a whole and may change our financial strength rating based on their overall view of our industry. For example, in April 2020, Fitch revised the rating outlook of certain affiliates to negative from stable due to the disruption to economic activity and the financial markets from the COVID-19 pandemic. This action by Fitch followed its revision of the rating outlook on the U.S. life insurance industry to negative. There can be no assurance

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that the credit rating agencies will not take similar actions in the future. Each rating should be evaluated independently of any other rating. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Rating Agencies.”

An inability to access credit facilities could result in a reduction in our liquidity and lead to downgrades in Brighthouse’s credit ratings and our financial strength ratings

Brighthouse had approximately $3.4 billion of total long-term consolidated indebtedness outstanding at December 31, 2020, consisting of debt securities issued to its investors. BHF also has a $1.0 billion senior unsecured revolving credit facility maturing May 7, 2024 (the “Revolving Credit Facility”). The right to borrow funds under the Revolving Credit Facility is subject to the fulfillment of certain conditions, including compliance with all covenants. Failure to comply with the covenants in the Revolving Credit Facility or fulfill the conditions to borrowings, or the failure of lenders to fund their lending commitments (whether due to insolvency, illiquidity or other reasons) in the amounts provided for under the terms of the Revolving Credit Facility, would restrict BHF’s ability to access the Revolving Credit Facility when needed and, consequently, could have a material adverse effect on our financial condition, results of operations and liquidity.

Reinsurance may not be available, affordable or adequate to protect us against losses

As part of our overall risk management strategy, we may purchase reinsurance from third-party reinsurers for certain risks we underwrite. While reinsurance agreements generally bind the reinsurer for the life of the business reinsured at generally fixed pricing, market conditions beyond our control determine the availability and cost of the reinsurance protection for new business. The premium rates and other fees that we charge for our products are based, in part, on the assumption that reinsurance will be available at a certain cost. Some of our reinsurance contracts contain provisions that limit the reinsurer’s ability to increase rates on in-force business; however, some do not. We have faced a number of rate increase actions on in-force business in recent years and may face additional increases in the future. There can be no assurance that the outcome of any future rate increase actions would not have a material effect on our financial condition and results of operations. If a reinsurer raises the rates that it charges on a block of in-force business, in some instances, we will not be able to pass the increased costs onto our customers and our profitability will be negatively impacted. Additionally, such a rate increase could result in our recapturing of the business, which ~~may~~would result in a need to maintain additional reserves, reduce reinsurance receivables and expose us to greater risks. Accordingly, we may be forced to incur additional expenses for reinsurance or may not be able to obtain sufficient reinsurance on acceptable terms, which could adversely affect our ability to write future business or result in an increase in the ~~assumption~~amount of ~~more~~ risk that we retain with respect to those policies we issue. See “Business — Reinsurance Activity.”

If the counterparties to our reinsurance or indemnification arrangements or to the derivatives we use to hedge our business risks default or fail to perform, we may be exposed to risks we had sought to mitigate, which could materially adversely affect our financial condition and results of operations

We use reinsurance, indemnification and derivatives to mitigate our risks in various circumstances. In general, reinsurance, indemnification and derivatives do not relieve us of our direct liability to our policyholders, even when the reinsurer is liable to us. Accordingly, we bear credit risk with respect to our reinsurers, indemnitors, counterparties and central clearinghouses. A reinsurer’s, indemnitor’s, counterparty’s or central clearinghouse’s insolvency, inability or unwillingness to make payments under the terms of reinsurance agreements, indemnity agreements or derivatives agreements with us or inability or unwillingness to return collateral could have a material adverse effect on our financial condition and results of operations.

In addition, we use derivatives to hedge various business risks. We enter into a variety of OTC-bilateral derivatives, including equity index options, interest rate caps and currency swaps with a number of counterparties on a bilateral basis for uncleared OTC derivatives and with clearing brokers and central clearinghouses for OTC-cleared derivatives (OTC derivatives that are cleared and settled through central clearing counterparties). If our counterparties, ~~clearing brokers or central clearinghouses~~ fail or refuse to honor their obligations under these derivatives, our hedges of the related risk will be ineffective. Such failure could have a material adverse effect on our financial condition and results of operations.

Extreme mortality events may adversely impact liabilities for policyholder claims

Our life insurance operations are exposed to the risk of catastrophic mortality, such as a pandemic or other event that causes a large number of deaths. For example, significant influenza pandemics have occurred several times in the last century. The likelihood, timing, and severity of a future pandemic that may impact our policyholders cannot be predicted. A significant pandemic could have a major impact on the global economy or the economies of particular countries or regions, including travel, trade, tourism, the health system, food supply, consumption, overall economic output, as well as on the financial markets. In addition, a pandemic that affected our employees or the employees of our distributors or of other companies with which we do business could disrupt our business operations. The effectiveness of external parties, including governmental and non-governmental organizations, in combating the spread and severity of such a pandemic could have a material impact on the losses we experience. These events could cause a material adverse effect on our results of operations in any period and, depending on their severity, could also materially and adversely affect our financial condition.

Consistent with industry practice and accounting standards, we establish liabilities for claims arising from a catastrophe only after assessing the probable losses arising from the event. We cannot be certain that the liabilities we have established will be adequate to cover actual claim liabilities. A catastrophic event or multiple catastrophic events could have a material adverse effect on our results of operations and financial condition. Conversely, improvements in medical care and other developments which positively affect life expectancy can cause our assumptions with respect to longevity, which we use when we price our products, to become incorrect and, accordingly, can adversely affect our results of operations and financial condition.

Factors affecting our competitiveness may adversely affect our market share and profitability

We believe competition among insurance companies is based on a number of factors, including service, product features, scale, price, actual or perceived financial strength, claims-paying ratings, financial strength ratings, e-business capabilities and name recognition. We face intense competition from a large number of other insurance companies, as well as non-insurance financial services companies, such as banks, broker-dealers and asset managers. Some of these companies offer a broader array of products, have more competitive pricing or, with respect to other insurance companies, have higher claims-paying ability and financial strength ratings. Some may also have greater financial resources with which to compete. In some circumstances, national banks that sell annuity products of life insurers may also have a pre-existing customer base for financial services products. These competitive pressures may adversely affect the persistency of our products, as well as our

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national banks that sell annuity products of life insurers may also have a pre-existing customer base for financial services products. These competitive pressures may adversely affect the persistency of our products, as well as our ability to sell our products in the future. In addition, new and disruptive technologies may present competitive risks. If, as a result of competitive factors or otherwise, we are unable to generate a sufficient return on insurance policies and annuity products we sell in the future, we may stop selling such policies and products, which could have a material adverse effect on our financial condition and results of operations. See “Business — Competition.”

We have limited control over many of our costs. For example, we have limited control over the cost of ~~unaffiliated~~Unaffiliated ~~third~~Third-~~party~~Party ~~reinsurance~~Reinsurance, the cost of meeting changing regulatory requirements, and our cost to access capital or financing. There can be no assurance that we will be able to achieve or maintain a cost advantage over our competitors. If our cost structure increases and we are not able to achieve or maintain a cost advantage over our competitors, it could have a material adverse effect on our ability to execute our strategy, as well as on our ~~results~~financial ofcondition ~~operations~~ and ~~financial~~results ~~condition~~of operations. If we hold substantially more capital than is needed to support financial strength ratings that are commensurate with our business strategy, over time, our competitive position could be adversely affected.

In addition, since numerous aspects of our business are subject to regulation, legislative and other changes affecting the regulatory environment for our business may have, over time, the effect of supporting or burdening some aspects of the financial services industry. This can affect our competitive position within the annuities and life insurance industry, and within the broader financial services industry. See “— Regulatory and Legal Risks” and “Business — Regulation.”

Brighthouse may experience difficulty in marketing and distributing products through our distribution channels

We distribute our products exclusively through a variety of third-party distribution channels. Our agreements with our third-party distributors may be terminated by either party with or without cause. We may periodically renegotiate the terms of these agreements, and there can be no assurance that such terms will remain acceptable to us or such third parties. If we are unable to maintain our relationships, our sales of individual insurance, annuities and investment products could decline, and our financial condition and results of operations could be materially adversely affected. Our distributors may elect to suspend, alter, reduce or terminate their distribution relationships with us for various reasons, including changes in our distribution strategy, adverse developments in our business, adverse rating agency actions, or concerns about market-related risks. We are also at risk that key distribution partners may merge, consolidate, change their business models in ways that affect how our products are sold, or terminate their distribution contracts with us, or that new distribution channels could emerge and adversely impact the effectiveness of our distribution efforts. Also, if we are unsuccessful in attracting and retaining key internal associates who conduct our business, including wholesalers, our sales could decline.

An interruption or significant change in certain key relationships could materially affect our ability to market our products and could have a material adverse effect on our financial condition and results of operations. In addition, we rely on a core number of our distributors to produce the majority of our sales. If any one such distributor were to terminate its relationship with us or reduce the amount of sales which it produces for us, our results of operations could be adversely affected. An increase in bank and broker-dealer consolidation activity could increase competition for access to distributors, result in greater distribution expenses and impair our ability to market products through these channels. Consolidation of distributors or other industry changes may also increase the likelihood that distributors will try to renegotiate the terms of any existing selling agreements to terms less favorable to us.

Because our products are distributed through unaffiliated firms, we may not be able to monitor or control the manner of their distribution despite our training and compliance programs. If our products are distributed by such firms in an inappropriate manner, or to customers for whom they are unsuitable, we may suffer reputational and other harm to our business.

In addition, our distributors may also sell our competitors’ products. If our competitors offer products that are more attractive than ours or pay higher commission rates to the sales representatives than we do, these representatives may concentrate their efforts in selling our competitors’ products instead of ours.

The failure of third parties to provide various services, or any failure of the practices and procedures that these third parties use to provide services to us, could have a material adverse effect on our business

A key part of our operating strategy is to leverage third parties to deliver certain services important to our business., ~~For~~including ~~example~~administrative, ~~Brighthouse~~operational, ~~has~~technology, ~~arrangements~~financial, ~~with~~investment ~~DXC~~and ~~Technology~~actuarial ~~Company~~services. For example, ~~formerly~~we ~~Computer~~have ~~Sciences~~certain ~~Corporation~~arrangements ~~(“DXC”)~~with ~~for~~third-party service providers relating to the administration of both in-force policies and new life and annuities business, ~~and~~as ~~Brighthouse~~well ~~has~~as ~~also~~engagements ~~engaged~~with a select group of experienced external asset management firms to manage the investment of the assets comprising ~~Brighthouse’s~~our general account portfolio and certain other assets. ~~Brighthouse~~There ~~intends~~can tobe ~~focus~~no onassurance ~~further~~that ~~sourcing~~the ~~opportunities~~services ~~with~~provided to us by third~~-party~~ ~~vendors~~parties (or their suppliers, ~~including~~vendors ~~after~~or ~~Brighthouse~~subcontractors) ~~migrates~~will ~~off~~be ofsufficient ~~certain~~to ~~services,~~meet ~~such~~our asoperational ~~certain~~and ~~finance,~~business ~~treasury~~needs, ~~compliance,~~that ~~administrative,~~such ~~call~~third ~~center~~parties ~~and~~will ~~technology~~continue ~~support~~to ~~services~~be ~~MetLife~~able ~~currently~~to ~~provides~~perform ustheir ~~with~~functions ~~for~~in a ~~transition~~manner ~~period~~satisfactory ~~pursuant~~ to aus, ~~transition~~that ~~services~~the ~~agreement~~practices ~~Brighthouse~~and ~~entered~~procedures ~~into~~of insuch ~~connection~~third ~~with~~parties ~~the~~will ~~Separation~~continue ~~(the~~to ~~“Transition~~enable ~~Services~~them ~~Agreement”).~~to adequately manage

It may be difficult, disruptive and more expensive for Brighthouse to replace some of its third-party providers in a timely manner if in the future they were unwilling or unable to provide us with the services we require (as a result of their financial or business conditions or otherwise), and our business and operations could be materially adversely affected. There can also be no assurance that the services provided to us by third parties (or their suppliers, vendors or subcontractors) will be sufficient to meet our operational and business needs, that such third parties will continue to be able to perform their functions in a manner satisfactory to us, that the practices and procedures of such third parties will continue to enable them to adequately administer any policies they handle on our behalf, or that any remedies available under these third-party arrangements will be sufficient to us in the event of a dispute or nonperformance. In addition, if a third-party provider raises the rates that it charges Brighthouse for its services, in some instances, we will not be able to pass the increased costs onto our customers and our profitability will be negatively impacted.23

Furthermore, if a third-party provider (or such third-party’s supplier, vendor or subcontractor) fails to provide the administrative, operational, financial, actuarial or other services we require, fails to meet contractual requirements, such as compliance with applicable laws and regulations, suffers a cyberattack or other security breach or fails to provide material information on a timely basis, our business could suffer economic and reputational harm that could have a material adverse effect on our business and results of operations. See “— Operational Risks — Any failure in cyber- or other information security systems, as well as the occurrence of events unanticipated in Brighthouse’s or our third-party service providers’ disaster recovery systems and business continuity planning could result in a loss or disclosure of confidential information, damage to our reputation and impairment of our ability to conduct business effectively.”

Similarly, if any third-party provider, including MetLife, DXC or an investment manager (or such third party’s supplier, vendor or subcontractor) experiences any deficiency in internal controls, determines that its practices and procedures used in administering any of our policies or managing any of our investments require review or otherwise fails to administer any policies or manage any investments it handles for us in accordance with appropriate standards, we could incur expenses and experience other adverse effects as a result. In these situations, we may be unable to resolve any issues on our own without assistance from the third-party provider, and we may have limited ability to influence the speed and effectiveness of that resolution.

Some of our products, including certain group annuity contracts, are administered by MetLife under the Transition Services Agreement, and we depend on MetLife for performing and reviewing administrative practices and procedures and reserves. We also depend on MetLife to maintain systems on our behalf, and the information and data within those platforms. From time to time, MetLife has brought to our attention practices, procedures and reserves with respect to certain products that require further

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~~review.~~any ~~While~~processes wethey dohandle ~~not~~on ~~believe~~our behalf, ~~based~~or onthat ~~the~~any ~~information~~remedies ~~made~~ available under these third-party arrangements will be sufficient to us toin ~~date~~the byevent ~~MetLife,~~of ~~that~~a ~~any~~dispute ofor ~~the~~nonperformance. ~~matters~~In ~~MetLife~~addition, ~~has~~we ~~brought~~continue to ~~our~~focus ~~attention~~on ~~will~~further ~~require~~sourcing ~~material~~opportunities ~~modifications~~with third-party vendors; as we transition to ~~reserves~~new third-party service providers and convert certain administrative systems or ~~have~~platforms, acertain ~~material~~issues ~~effect~~may onarise. ~~our~~For ~~financial~~example, ~~condition~~during orthe ~~results~~third quarter of ~~operations~~2020, we ~~are~~completed ~~reliant~~the ~~upon~~conversion ~~MetLife~~of a significant portion of the administration of our in-force annuity business to ~~provide~~a ~~further~~single ~~information~~third-party service provider. Following the conversion, a number of our customers and ~~assistance~~distribution ~~with~~partners ~~respect~~experienced todelays ~~those~~and ~~products~~service interruptions. ~~There~~While ~~can~~these ~~also~~issues have been largely resolved, there can be no assurance that ~~such~~in ~~matters~~connection ~~will~~with ~~not~~this ~~require~~or ~~material~~future ~~modifications~~conversions, transitions to ~~reserves~~new third-party service providers, or ~~have~~in aconnection ~~material~~with ~~effect~~any onof ~~our~~the ~~financial~~services ~~condition~~provided orto ~~results~~us ofby ~~operations~~third inparties ~~the~~(or ~~future~~such third party’s supplier, vendor or ~~that~~subcontractor), ~~MetLife~~we will ~~provide~~not ~~further~~incur ~~information~~any unanticipated expenses or experience other economic or reputational harm, experience service delays or interruptions, or be subject to litigation or regulatory investigations and ~~assistance~~actions, any of which could have a material adverse effect on our business and financial reporting.

IfFurthermore, ~~material~~if ~~issues~~a ~~were~~third-party toprovider ~~arise~~(or ~~with~~such ~~respect~~third-party’s tosupplier, ~~any~~vendor ofor ~~our~~subcontractor) ~~products~~fails ~~administered~~to bymeet ~~third~~contractual ~~parties~~requirements, ~~whether~~such ~~involving~~as ~~MetLife~~compliance with applicable laws and regulations, ~~DXC~~suffers a cyberattack or ~~another~~other ~~third-party~~security ~~provider~~breach, (or ~~such~~fails ~~third~~to ~~party’s~~provide ~~supplier,~~material ~~vendor~~information oron ~~subcontractor)~~a timely basis, ~~any~~then, ~~resulting~~in ~~expenses~~each orcase, ~~other~~we could suffer economic orand reputational harm that could have a material adverse effect on our business and ~~results~~financial ofreporting. ~~operations~~In addition, ~~particularly~~such iffailures ~~they~~could ~~involved~~result ~~our~~in ~~core~~the ~~annuity~~loss ~~and~~of ~~life~~key ~~insurance~~distributors, ~~businesses.~~impact Inthe ~~addition,~~accuracy weof ~~could~~our befinancial reporting, or subject us to litigation or regulatory investigations and actions ~~resulting from any such issues~~, which could have a material adverse effect on our business, financial condition and results of operations. See “— Risks Related to Our Business — Brighthouse may experience difficulty in marketing and distributing products through our distribution channels” and “— Operational Risks — Any failure in cyber- or other information security systems, as well as the occurrence of events unanticipated in Brighthouse’s or our third-party service providers’ disaster recovery systems and business continuity planning could result in a loss or disclosure of confidential information, damage to our reputation and impairment of our ability to conduct business effectively.”

~~Changes~~Similarly, inif ~~our~~any ~~deferred~~third-party ~~income~~provider ~~tax~~(or ~~assets~~such third-party’s supplier, vendor or ~~liabilities~~subcontractor) experiences any deficiency in internal controls, ~~including~~determines ~~changes~~that its practices and procedures used in ~~our~~providing ~~ability~~services to ~~realize~~us (including administering any of our ~~deferred~~policies ~~income~~or ~~tax~~managing ~~assets~~any of our investments) require review or it otherwise fails to provide services to us in accordance with appropriate standards, we could ~~adversely~~incur ~~affect~~expenses and experience other adverse effects as a result. In such situations, we may be unable to resolve any issues on our ~~results~~own ofwithout ~~operations~~assistance orfrom ~~financial~~the ~~condition~~third-party provider, and we could have limited ability to influence the speed and effectiveness of that resolution.

~~Deferred~~In ~~income~~addition, ~~tax~~from ~~represents~~time ~~the~~to ~~tax~~time, ~~effect~~certain ofthird ~~the~~parties ~~differences~~have ~~between~~brought ~~the~~to ~~book~~our ~~and~~attention ~~tax~~practices, ~~bases~~procedures ~~of assets~~ and ~~liabilities.~~reserves ~~Deferred~~with ~~income~~respect ~~tax assets are assessed periodically by management~~ to ~~determine~~certain ~~whether~~products they ~~are~~administer ~~realizable.~~on ~~Factors~~our inbehalf ~~management’s~~that ~~determination~~require ~~include~~further ~~the~~review. ~~performance~~While ofwe ~~the~~do ~~business~~not ~~including the ability to generate future taxable income. If~~believe, based on ~~available~~the information, itmade isavailable ~~more~~to ~~likely~~us ~~than~~to ~~not~~date, that ~~the~~any ~~deferred~~of ~~income~~the ~~tax~~matters ~~asset~~brought ~~will~~to ~~not~~our beattention ~~realized,~~will ~~then~~require amaterial ~~valuation~~modifications ~~allowance~~to ~~must~~reserves beor ~~established~~have ~~with~~ a ~~corresponding~~material ~~charge~~effect toon our ~~profitability~~business ~~measures.~~and ~~Such~~financial ~~charges~~reporting, ~~could~~we ~~have~~are areliant ~~material~~on ~~adverse~~our ~~effect~~third-party onservice ~~our~~providers ~~results~~to ofprovide ~~operations~~further orinformation ~~financial~~and ~~position.~~assistance ~~Changes~~with inrespect ~~the~~to ~~statutory~~those ~~tax~~products. ~~rate~~There ~~could~~can also ~~affect~~be ~~the~~no ~~value~~assurance ofthat ~~our~~such ~~deferred~~matters ~~income~~will ~~tax~~not ~~assets~~require ~~and~~material ~~may~~modifications ~~require~~to areserves ~~write-off~~or ofhave ~~some~~a ofmaterial ~~those~~effect ~~assets.~~on ~~See~~our ~~“Management’s~~financial ~~Discussion~~condition ~~and~~or ~~Analysis~~results of ~~Financial~~operations ~~Condition~~in ~~and~~the ~~Results~~future, ofor ~~Operations~~that —our ~~Summary~~third-party ofservice ~~Critical~~providers ~~Accounting~~will ~~Estimates~~provide further information and assistance.”

It may be difficult, disruptive and more expensive for us to replace some of our third-party providers in a timely manner if in the future they were unwilling or unable to provide us with the services we require (as a result of their financial or business conditions or otherwise), and our business and financial condition and results of operations could be materially adversely affected. In addition, if a third-party provider raises the rates that it charges us for its services, in some instances, we will not be able to pass the increased costs onto our customers and our profitability may be negatively impacted.

Changes in our deferred income tax assets or liabilities, including changes in our ability to realize our deferred income tax assets, could adversely affect our financial condition or results of operations

Deferred income tax represents the tax effect of the differences between the book and tax bases of assets and liabilities. Deferred income tax assets are assessed periodically by management to determine whether they are realizable. Factors in management’s determination include the performance of the business, including the ability to generate future taxable income. If, based on available information, it is more likely than not that the deferred income tax asset will not be realized, then a valuation allowance must be established with a corresponding charge to our profitability measures. Such charges could have a material adverse effect on our financial condition and results of operations. Changes in the statutory tax rate could also affect the value of our deferred income tax assets and may require a write-off of some of those assets. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates.”

Extreme mortality events may adversely impact liabilities for policyholder claims

Our life insurance operations are exposed to the risk of catastrophic mortality, such as a pandemic or other event that causes a large number of deaths. For example, the COVID-19 pandemic is ongoing and several significant influenza

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pandemics have occurred in the last century. The likelihood, timing, and severity of a future pandemic that may impact our policyholders cannot be predicted. A significant pandemic could have a major impact on the global economy and the financial markets or the economies of particular countries or regions, including disruptions to commerce, the health system, and the food supply and reduced economic activity. In addition, a pandemic that affected our employees or the employees of our distributors or of other companies with which we do business, including providers of third-party services, could disrupt our business operations. Furthermore, the value of our investment portfolio could be negatively impacted, see “— Investments-Related Risks — The continued threat of terrorism, ongoing military actions as well as other catastrophic events may adversely affect the value of our investment portfolio and the level of claim losses we incur.” The effectiveness of external parties, including governmental and non-governmental organizations, in combating the spread and severity of such a pandemic could have a material impact on the losses we experience. These events could cause a material adverse effect on our results of operations in any period and, depending on their severity, could also materially and adversely affect our financial condition.

Consistent with industry practice and accounting standards, we establish liabilities for claims arising from a catastrophe only after assessing the probable losses arising from the event. We cannot be certain that the liabilities we have established will be adequate to cover actual claim liabilities. A catastrophic event or multiple catastrophic events could have a material adverse effect on our business, financial condition and results of operations. Conversely, improvements in medical care and other developments which positively affect life expectancy can cause our assumptions with respect to longevity, which we use when we price our products, to become incorrect and, accordingly, can adversely affect our financial condition and results of operations.

Economic Environment and Capital Markets-Related Risks

If difficult conditions in the capital markets and the U.S. economy generally persist or are perceived to persist, they may materially adversely affect our business and results of operations

Our business and results of operations are materially affected by conditions in the capital markets and the U.S. economy generally, as well as by the global economy to the extent it affects the U.S. economy. In addition, while our operations are entirely in the U.S., we have foreign investments in our general and separate accounts and, accordingly, conditions in the global capital markets can affect the value of our general account and separate account assets, as well as our financial results. Actual or perceived stressed conditions, volatility and disruptions in financial asset classes or various capital markets can have an adverse effect on us, both because we have a large investment portfolio and our benefit and claim liabilities are sensitive to changing market factors, including interest rates, credit spreads, equity and commodity prices, derivative prices and availability, real estate markets, foreign currency exchange rates and the returns and volatility and the returns of capital markets. In an economic downturn characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment and lower consumer spending, the demand for our products could be adversely affected as customers are unwilling or unable to purchase them. In addition, we may experience an elevated incidence of claims, adverse utilization of benefits relative to our best estimate expectations and lapses or surrenders of policies. Furthermore, our policyholders may choose to defer paying insurance premiums or stop paying insurance premiums altogether. Such adverse changes in the economy could negatively affect our earnings and capitalization and have a material adverse effect on our ~~results~~financial ofcondition ~~operations~~ and ~~financial~~results ~~condition~~of operations. Accordingly, both market and economic factors may affect our business results, as well as our ability to pay dividends or distributions to our parent company, and our liquidity.

Significant market volatility in reaction to geopolitical risks, changing monetary policy, trade disputes and uncertain fiscal policy may exacerbate some of the risks we face. Increased market volatility may affect the performance of the various asset classes in which we invest, as well as separate account values.

Extreme declines or shocks in equity markets, such as sustained stagnation in equity markets and low interest rates, could cause us to incur significant capital ~~and/~~or operating losses due to, among other reasons, the impact on us of guarantees related to our annuity products, including increases in liabilities, increased capital requirements, ~~and/~~or collateral requirements. Furthermore, periods of sustained stagnation in equity and bond markets, which are characterized by multiple years of low annualized total returns impacting the growth in separate accounts ~~and/~~or low level of U.S. interest rates, may materially increase our liabilities for claims and future benefits due to inherent market return guarantees in these liabilities. We ceded all of the risks associated with these guarantees to ~~BLIC~~Brighthouse Life Insurance Company. However, because the accounting for the ceded reinsurance is different from the accounting for the directly written guarantees, there can be a net impact to our financial statements even though all of the economic risks have been ceded. Similarly, sustained periods of low interest rates and risk asset returns could reduce income from our investment portfolio, increase our liabilities for claims and future benefits, and increase the cost of risk transfer measures such as hedging, causing our profit margins to erode as a result of reduced income from our investment portfolio and increase in insurance liabilities. See also “Risks Related to Our Business — Guarantees within certain of our annuity products may decrease our earnings, decrease our capitalization, increase the

2025

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involatility ~~insurance~~of ~~liabilities.~~our ~~See~~results ~~also~~and negatively affect our statutory capital” and “Risks Related to Our Business — ~~Guarantees~~The ~~within~~ongoing ~~certain~~COVID-19 ofpandemic ~~our~~could ~~annuity~~materially ~~products~~adversely ~~may~~affect ~~decrease~~ our ~~earnings~~business, ~~decrease~~financial ~~our~~condition ~~capitalization,~~and ~~increase~~results ~~the~~of ~~volatility~~operations, ofincluding our ~~results~~capitalization and ~~negatively affect our statutory capital~~liquidity.”

Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs and our access to capital

The capital and credit markets may be subject to periods of extreme volatility. Disruptions in capital markets could adversely affect our liquidity and credit capacity or limit our access to capital which may in the future be needed to operate our business and meet policyholder obligations.

We need liquidity to pay our operating expenses and replace certain maturing liabilities. Without sufficient liquidity, we could be forced to curtail our operations and limit the investments necessary to grow our business.

Our principal sources of liquidity are insurance premiums and fees paid in connection with annuity products, and cash flow from our investment portfolio to the extent consisting of cash and readily marketable securities.

In the event capital market or other conditions have an adverse impact on our capital and liquidity, or our stress-testing indicates that such conditions could have an adverse impact beyond expectations and our current resources do not satisfy our needs or regulatory requirements, we may have to seek additional financing to enhance our capital and liquidity position. The availability of additional financing will depend on a variety of factors such as the then current market conditions, regulatory capital requirements, availability of credit to us and the financial services industry generally, our financial strength ratings and financial leverage, and the perception of our customers and lenders regarding our long- or short-term financial prospects if we incur large operating or investment losses or if the level of our business activity decreases due to a market downturn. Similarly, our access to funds may be impaired if regulatory authorities or rating agencies take negative actions against us. Our internal sources of liquidity may prove to be insufficient and, in such case, we may not be able to successfully obtain additional financing on favorable terms, or at all.

In addition, our liquidity requirements may change if, among other things, we are required to return significant amounts of cash collateral on short notice under collateral requirements. See “— Investments-Related Risks — Should the need arise, we may have difficulty selling certain holdings in our investment portfolio in a timely manner and realizing full value given that not all assets are liquid,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Off-Balance Sheet Arrangements — Collateral for Derivatives.”

Our financial condition, results of operations, ~~financial condition,~~ cash flows and statutory capital position could be materially adversely affected by disruptions in the financial markets, as such disruptions may limit our ability to replace, in a timely manner, maturing liabilities, satisfy regulatory capital requirements, and access the capital that may be necessary to grow our business. See “— Regulatory and Legal Risks — Our business is highly regulated, and changes in regulation and in supervisory and enforcement policies may materially impact our capitalization or cash flows, reduce our profitability and limit our growth.”

We are exposed to significant financial and capital markets risks which may adversely affect our financial condition, results of operations, ~~financial condition~~ and liquidity, and may cause our net investment income and our profitability measures to vary from period to period

We are exposed to significant financial risks both in the U.S. and global capital and credit markets, including changes and volatility in interest rates, credit spreads, equity prices, real estate, foreign currency, commodity prices, performance of the obligors included in our investment portfolio (including governments), derivatives (including performance of our derivatives counterparties) and other factors outside our control. We may be exposed to substantial risk of loss due to market downturn or market volatility.

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Credit spread risk

Our exposure to credit spreads primarily relates to market price volatility and investment risk associated with the fluctuation in credit spreads. Widening credit spreads may cause unrealized losses in our investment portfolio. Increases in credit spreads of issuers due to credit deterioration may result in higher level of impairments. Additionally, an increase in credit spreads relative to U.S. Treasury benchmarks can also adversely affect the cost of our borrowing if we need to access credit markets. Tightening credit spreads may reduce our investment income and cause an increase in the reported value of certain liabilities that are valued using a discount rate that reflects our own credit spread. ~~An increase in credit spreads relative to U.S. Treasury benchmarks can also adversely affect the cost of our borrowing if we need to access credit markets.~~

Interest rate risk

Some of our current or anticipated future products, principally traditional life, universal life and fixed annuities, expose us to the risk that changes in interest rates will reduce our investment margin or “net investment spread,” or the difference between the amounts that we are required to pay under the contracts in our general account and the rate of return we earn on general account investments intended to support the obligations under such contracts. Our net investment spread is a key component of our profitability measures.

21In a low interest rate environment, we may be forced to reinvest proceeds from investments that have matured or have been prepaid or sold at lower yields, which will reduce our net investment spread. Moreover, borrowers may prepay or redeem the fixed income securities, commercial and agricultural mortgage loans in our investment portfolio with greater frequency in order to borrow at lower market rates, thereby exacerbating this risk. Although reducing interest crediting rates can help offset decreases in net investment spreads on some products, our ability to reduce these rates is limited to the portion of our in-force product portfolio that has adjustable interest crediting rates and could be limited by the actions of our competitors or contractually guaranteed minimum rates and may not match the timing or magnitude of changes in asset yields. As a result, our net investment spread would decrease or potentially become negative, which could have a material adverse effect on our financial condition and results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Policyholder Liabilities.”

Our estimation of future net investment spreads is an important component in the amortization of DAC. Significantly lower than anticipated net investment spreads can reduce our profitability measures and may cause us to accelerate amortization, which would result in a reduction of net income in the affected reporting period and potentially negatively affect our credit instrument covenants or the rating agencies’ assessment of our financial condition and results of operations.

During periods of declining interest rates, our return on investments that do not support particular policy obligations may decrease. During periods of sustained lower interest rates, our reserves for policy liabilities may not be sufficient to meet future policy obligations and may need to be strengthened. Accordingly, declining and sustained lower interest rates may materially adversely affect our financial condition and results of operations and significantly reduce our profitability.

Increases in interest rates could also negatively affect our profitability. In periods of rapidly increasing interest rates, we may not be able to replace, in a timely manner, the investments in our general account with higher-yielding investments needed to fund the higher crediting rates necessary to keep interest rate sensitive products competitive. Therefore, we may have to accept a lower credit spread and lower profitability or face a decline in sales and greater loss of existing contracts and related assets. In addition, as interest rates rise, policy loans, surrenders and withdrawals may increase as policyholders seek investments with higher perceived returns. This process may result in cash outflows requiring that we sell investments at a time when the prices of those investments are adversely affected by the increase in interest rates, which may result in realized investment losses. Unanticipated withdrawals, terminations and substantial policy amendments may cause us to accelerate the amortization of DAC; such events may reduce our profitability measures and potentially negatively affect our credit instrument covenants and the rating agencies’ assessments of our financial condition and results of operations. An increase in interest rates could also have a material adverse effect on the value of our investments, for example, by decreasing the estimated fair values of the fixed income securities and mortgage loans that comprise a significant portion of our investment portfolio. See “— Investments-Related Risks — Gross unrealized losses on fixed maturity securities and defaults, downgrades or other events may result in future impairments to the carrying value of such securities, resulting in a reduction in our profitability measures.” Finally, an increase in interest rates could result in decreased fee revenue associated with a decline in the value of variable annuity account balances invested in fixed income funds.

Furthermore, an increase in inflation could affect our business in several ways. During inflationary periods, the value of fixed income investments may fall, which could increase realized and unrealized losses. Inflation also increases expenses, potentially putting pressure on profitability in the event that such additional costs cannot be passed through. Prolonged and elevated inflation could adversely affect the financial markets and the economy generally, and dispelling it may require

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Ingovernments ~~a low interest rate environment, we may be forced~~ to ~~reinvest~~pursue ~~proceeds~~a ~~from~~restrictive ~~investments~~fiscal ~~that have matured or have been prepaid or sold at lower yields, which will reduce our net investment spread. Moreover, borrowers may prepay or redeem the fixed income securities, commercial~~ and ~~agricultural~~monetary ~~mortgage loans in our investment portfolio with greater frequency in order to borrow at lower market rates~~policy, thereby exacerbating this risk. Although reducing interest crediting rates can help offset decreases in net investment spreads on some products, our ability to reduce these rates is limited to the portion of our in-force product portfolio that has adjustable interest crediting rates and could be limited by the actions of our competitors or contractually guaranteed minimum rates and may not match the timing or magnitude of changes in asset yields. As a result, our net investment spread would decrease or potentially become negative, which could ~~have~~constrain aoverall ~~material~~economic ~~adverse~~activity ~~effect on our results of operations~~ and ~~financial~~inhibit ~~condition.~~revenue ~~See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Liability for Future Policy Benefits~~growth.”

During periods of declining interest rates, our return on investments that do not support particular policy obligations may decrease. During periods of sustained lower interest rates, our reserves for policy liabilities may not be sufficient to meet future policy obligations and may need to be strengthened. Accordingly, declining and sustained lower interest rates may materially adversely affect our results of operations and financial condition and significantly reduce our profitability.

Increases in interest rates could also negatively affect our profitability. In periods of rapidly increasing interest rates, we may not be able to replace, in a timely manner, the investments in our general account with higher-yielding investments needed to fund the higher crediting rates necessary to keep interest rate sensitive products competitive. Therefore, we may have to accept a lower credit spread and lower profitability or face a decline in sales and greater loss of existing contracts and related assets. In addition, as interest rates rise, policy loans, surrenders and withdrawals may increase as policyholders seek investments with higher perceived returns. This process may result in cash outflows requiring that we sell investments at a time when the prices of those investments are adversely affected by the increase in interest rates, which may result in realized investment losses. Unanticipated withdrawals, terminations and substantial policy amendments may cause us to accelerate the amortization of DAC; such events may reduce our profitability measures and potentially negatively affect our credit instrument covenants and the rating agencies’ assessments of our financial condition. An increase in interest rates could also have a material adverse effect on the value of our investments, for example, by decreasing the estimated fair values of the fixed income securities and mortgage loans that comprise a significant portion of our investment portfolio. See “— Investments-Related Risks — Gross unrealized losses on fixed maturity securities and defaults, downgrades or other events may result in future impairments to the carrying value of such securities, resulting in a reduction in our profitability measures.” Finally, an increase in interest rates could result in decreased fee revenue associated with a decline in the value of variable annuity account balances invested in fixed income funds.

Changes to LIBOR

There is currently uncertainty regarding the continued use and reliability of the London Inter-Bank Offered Rate (“LIBOR”), and any financial instruments or agreements currently using LIBOR as a benchmark interest rate may be adversely affected. As a result of concerns about the accuracy of the calculation of LIBOR, actions by regulators, law enforcement agencies or the ICE Benchmark Administration, the current administrator of LIBOR may ~~result~~enact in changes to the manner in which LIBOR is determined. ~~Additionally,~~In on July ~~27,~~ 2017, the UK Financial Conduct Authority announced that it will no longer persuade or compel banks to submit rates for the calculation of LIBOR rates after 2021, which iswas expected to result in these widely used reference rates no longer being available. ~~The~~As a result, the Federal Reserve began publishing a secured overnight funding rate ~~(“SOFR”)~~, which is intended to replace U.S. dollar LIBOR. Plans for alternative reference rates for other currencies have also been announced. On November 30, 2020, the administrator of LIBOR announced that only the one week and the two-month USD LIBOR settings would cease publication on December 31, 2020, while the remaining tenors will continue to be published through June 30, 2023. Regulators in the US and globally have continued to push for market participants to transition away from the use of LIBOR and have urged market participants to not enter into new contracts that reference USD LIBOR after December 31, 2021. At this time, it is not possible to predict how such changes or other reforms may adversely affect the trading market for LIBOR-based securities and derivatives, including those held in our investment portfolio. Such changes or reforms may result in adjustments or replacements to LIBOR, which could have an adverse impact on the market for LIBOR-based securities and the value of our investment portfolio. Furthermore, we previously entered into agreements that currently reference LIBOR and may be adversely affected by any changes or reforms to LIBOR or discontinuation of LIBOR, including if such agreements are not amended prior to any such changes, reform or discontinuation.

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Equity risk

Our primary exposure to equity relates to the potential for lower earnings associated with certain of our businesses where fee income is earned based upon the estimated market value of the separate account assets and other assets related to our variable annuity business. Because fees generated by such products are primarily related to the value of the separate account assets and other assets under management, a decline in the equity markets could reduce our revenues as a result of the reduction in the value of the investment assets supporting those products and services. See “— Risks Related to Our Business — Guarantees within certain of our annuity products may decrease our earnings, decrease our capitalization, increase the volatility of our results, and negatively affect our statutory capital.”

Real estate risk

A portion of our investment portfolio consists of mortgage loans on commercial and agricultural real estate. Our exposure to this risk stems from various factors, including the supply and demand of leasable commercial space, creditworthiness of tenants and partners, capital markets volatility, interest rate fluctuations, agricultural prices and farm incomes. Although we manage credit risk and market valuation risk for our commercial and agricultural real estate assets through geographic, property type and product type diversification, and asset allocation, general economic conditions in the commercial and agricultural real estate sectors will continue to influence the performance of these investments. These factors, which are beyond our control, could have a material adverse effect on our financial condition, results of operations, ~~financial condition,~~ liquidity or cash flows.

Obligor-related risk

Fixed income securities and mortgage loans represent a significant portion of our investment portfolio. We are subject to the risk that the issuers, or guarantors, of the fixed income securities and mortgage loans in our investment portfolio may default on principal and interest payments they owe us. We are also subject to the risk that the underlying collateral within asset-backed securities (“ABS”), including mortgage-backed securities, may default on principal and interest payments causing an adverse change in cash flows. The occurrence of a major economic downturn, acts of corporate malfeasance, widening mortgage or credit spreads, or other events that adversely affect the issuers, guarantors or underlying collateral of these securities and mortgage loans could cause the estimated fair value of our portfolio of fixed income securities and mortgage loans and our earnings to decline and the default rate of the fixed income securities and mortgage loans in our investment portfolio to increase.

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Derivatives risk

Our derivatives counterparties’ defaults could have a material adverse effect on our financial condition and results of operations. Substantially all of our derivatives (whether entered into bilaterally with specific counterparties or cleared through a clearinghouse) require us to pledge ~~and/~~or receive collateral or make payments related to any decline in the net estimated fair value of such derivatives. In addition, ratings downgrades or financial difficulties of derivative counterparties may require us to utilize additional capital with respect to the affected businesses. Furthermore, the valuation of our derivatives could change based on changes to our valuation methodology or the discovery of errors.

Summary

Economic or counterparty risks and other factors described above, and significant volatility in the markets, individually or collectively, could have a material adverse effect on our financial condition, results of operations, ~~financial condition,~~ liquidity or cash flows through realized investment losses, derivative losses, change in insurance liabilities, impairments, increased valuation allowances, increases in reserves for future policyholder benefits, reduced net investment income and changes in unrealized gain or loss positions.

Market price volatility can also make it difficult to value certain assets in our investment portfolio if trading in such assets becomes less frequent, for example, as was the case during the 2008 financial crisis. In such case, valuations may include assumptions or estimates that may have significant period- to- period changes, which could have a material adverse effect on our financial condition and results of operations ~~or financial condition~~ and ~~may~~could require additional reserves. Significant volatility in the markets could cause changes in the credit spreads and defaults and a lack of pricing transparency which, individually or ~~collectively~~in the aggregate, could have a material adverse effect on our financial condition, results of operations, ~~financial condition~~ or liquidity.

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Investments-Related Risks

Should the need arise, we may have difficulty selling certain holdings in our investment portfolio in a timely manner and realizing full value given that not all assets are liquid

There may be a limited market for certain investments we hold in our investment portfolio, making them relatively illiquid. These include privately-placed fixed maturity securities, derivative instruments such as options and mortgage loans. In the past, even some of our very high-quality investments experienced reduced liquidity during periods of market volatility or disruption. If we were forced to sell certain of our investments during periods of market volatility or disruption, market prices may be lower than our carrying value in such investments. This could result in realized losses which could have a material adverse effect on our ~~results~~financial ofcondition ~~operations~~ and ~~financial~~results ~~condition~~of operations, as well as our financial ratios, which could affect compliance with our rating agency capital adequacy measures.

If we need significant amounts of cash on short notice and we are forced to sell securities, we may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than we otherwise would have been able to realize ~~under~~in normal market conditions, or both. In the event of a forced sale, accounting guidance requires the recognition of a loss for securities in an unrealized loss position and may require the impairment of other securities based on our ability to hold those securities, which would negatively impact our financial condition and results of operations, as well as our financial ratios, which could affect compliance with our credit instruments and rating agency capital adequacy measures. In addition, under stressful capital market and economic conditions, liquidity broadly deteriorates, which ~~may~~could further restrict our ability to sell securities.

Our requirements to pledge collateral or make payments related to declines in estimated fair value of derivatives transactions or specified assets in connection with OTC-cleared and OTC-bilateral transactions may adversely affect our liquidity, expose us to central clearinghouse and counterparty credit risk, ~~and~~or increase our costs of hedging

Many of our derivatives transactions require us to pledge collateral related to any decline in the net estimated fair value of such derivatives transactions executed through a specific broker at a clearinghouse or entered into with a specific counterparty on a bilateral basis. The amount of collateral we may be required to pledge and the payments we may be required to make under our derivatives transactions may increase under certain circumstances as a result of the requirement to pledge initial margin for OTC-bilateral transactions entered into after the phase-in period, which we expect to be applicable to us in September ~~2020~~2021 as a result of the adoption by the Office of the Comptroller of the Currency, the Federal Reserve Board, Federal Deposit Insurance Corporation, Farm Credit Administration and Federal Housing Finance Agency and the U.S. Commodity Futures Trading Commission of final margin requirements for non-centrally cleared derivatives. Such requirements could adversely affect our liquidity, expose us to central clearinghouse and counterparty credit risk, or increase our costs of hedging. See “Business — Regulation — Regulation of Over-the-Counter Derivatives.”

Gross unrealized losses on fixed maturity securities and defaults, downgrades or other events may result in future impairments to the carrying value of such securities, resulting in a reduction in our profitability measures29

Fixed maturity securities classified as available-for-sale (“AFS”) securities are reported at their estimated fair value. Unrealized gains or losses on AFS securities are recognized as a component of other comprehensive income (loss) (“OCI”) and are, therefore, excluded from our profitability measures. In recent periods, as a result of low interest rates, the unrealized gains on our fixed maturity securities have exceeded the unrealized losses. However, if interest rates rise, our unrealized gains would decrease, and our unrealized losses would increase, perhaps substantially. The accumulated change in estimated fair value of these AFS securities is recognized in our profitability measures when the gain or loss is realized upon the sale of the security or in the event that the decline in estimated fair value is determined to be other-than-temporary and impairment charges to earnings are taken.

The occurrence of a major economic downturn, acts of corporate malfeasance, widening credit risk spreads, or other events that adversely affect the issuers or guarantors of securities or the underlying collateral of residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and ABS (collectively, “Structured Securities”) could cause the estimated fair value of our fixed maturity securities portfolio and corresponding earnings to decline and cause the default rate of the fixed maturity securities in our investment portfolio to increase. A ratings downgrade affecting issuers or guarantors of particular securities, or similar trends that could worsen the credit quality of issuers, such as the corporate issuers of securities in our investment portfolio, could also have a similar effect. Economic uncertainty can adversely affect credit quality of issuers or guarantors. Similarly, a ratings downgrade affecting a security we hold could indicate the credit quality of that security has deteriorated and could increase the capital we must hold to support that security to maintain our RBC levels. Levels of write-downs or impairments are impacted by intent to sell, or our assessment of the likelihood that we will be required to sell, fixed maturity securities, which have declined in value. Realized losses or impairments on these securities may have a material adverse effect on our results of operations and financial condition in, or at the end of, any quarterly or annual period.

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~~Our~~Gross ~~valuation~~unrealized oflosses ~~securities~~on ~~and~~fixed ~~investments~~maturity securities and ~~the~~defaults, ~~determination~~downgrades ofor ~~the~~other ~~amount~~events ofmay ~~allowances~~result ~~and~~in future impairments ~~taken~~to onthe ~~our~~carrying ~~investments~~value ~~are~~of ~~subjective~~such ~~and~~securities, ifresulting ~~changed,~~in ~~could~~a ~~materially~~reduction ~~adversely~~in ~~affect~~ our ~~results~~profitability ~~of operations or financial condition~~measures

Fixed maturity securities, asclassified ~~well~~ as ~~short~~available-~~term~~for-sale ~~investments~~(“AFS”) ~~that~~securities are reported at their estimated fair value~~, represent the majority of our total cash and investments~~. ~~See~~Unrealized ~~Note 1~~gains toor ~~the~~losses ~~Notes to the Financial Statements for more information~~ on ~~how~~AFS wesecurities ~~calculate~~are ~~fair~~recognized ~~value.~~as ~~During~~a ~~periods~~component of ~~market~~other ~~disruption,~~comprehensive ~~including~~income ~~periods~~(loss) of(“OCI”) ~~significantly~~and ~~rising or high interest rates~~are, ~~rapidly widening credit spreads or illiquidity~~therefore, itexcluded ~~may~~from ~~be difficult to value certain of~~ our ~~securities~~profitability ~~if trading becomes less frequent and/or market data becomes less observable~~measures. In ~~addition~~recent periods, inas ~~times~~a result of ~~financial~~low ~~market~~interest ~~disruption~~rates, ~~certain~~the ~~asset~~unrealized ~~classes~~gains ~~that~~on ~~were~~our infixed ~~active~~maturity ~~markets~~securities ~~with~~have ~~significant~~exceeded ~~observable~~the ~~data~~unrealized ~~may become illiquid~~losses. ~~In those cases~~However, ~~the~~if ~~valuation~~interest ~~process~~rates ~~includes~~rise, ~~inputs~~our ~~that~~unrealized ~~are~~gains ~~less~~would ~~observable~~decrease, and ~~require~~our ~~more~~unrealized ~~subjectivity~~losses ~~and~~would ~~management~~increase, ~~judgment~~perhaps substantially. ~~Valuations~~The ~~may~~accumulated ~~result~~change in estimated fair ~~values~~value ~~which~~of ~~vary~~these ~~significantly~~AFS ~~from~~securities ~~the~~is ~~amount~~recognized atin ~~which~~our ~~the~~profitability ~~investments~~measures ~~may~~when ~~ultimately~~the begain ~~sold.~~or ~~Further,~~loss ~~rapidly~~is ~~changing~~realized ~~and~~upon ~~unprecedented credit and equity market conditions could materially impact~~ the ~~valuation~~sale of ~~securities as reported within our financial statements and~~ the ~~period-to-period~~security ~~changes~~or in ~~estimated~~the ~~fair~~event ~~value~~that ~~could~~the ~~vary~~decline ~~significantly. Decreases~~ in ~~the~~ estimated fair value ofis ~~securities~~determined weto ~~hold~~be ~~may~~credit-related ~~have~~and aimpairment ~~material~~charges ~~adverse~~to ~~effect~~earnings onare ~~our financial condition~~taken.

The ~~determination~~occurrence of a major economic downturn, acts of corporate malfeasance, widening credit risk spreads, or other events that adversely affect the ~~amount~~issuers or guarantors of ~~allowances~~securities ~~and~~or ~~impairments~~the ~~varies~~underlying bycollateral ~~investment~~of residential mortgage-~~type~~backed securities, commercial mortgage-backed securities and isABS ~~based~~could ~~upon~~cause the estimated fair value of our ~~periodic~~fixed ~~evaluation~~maturity securities portfolio and ~~assessment~~corresponding ofearnings ~~known~~to decline and ~~inherent~~cause ~~risks~~the ~~associated~~default ~~with~~rate of the ~~respective~~fixed ~~asset~~maturity ~~class~~securities in our investment portfolio to increase. ~~However,~~A ~~historical~~ratings ~~trends~~downgrade ~~may~~affecting ~~not~~issuers beor ~~indicative~~guarantors of ~~future~~particular ~~impairments~~securities, or ~~allowances~~similar ~~and~~trends ~~any~~that could worsen the credit quality of issuers, such ~~future~~as ~~impairments~~the orcorporate ~~allowances~~issuers of securities in our investment portfolio, could also have a ~~materially~~similar ~~adverse~~ effect. onEconomic ~~our~~uncertainty ~~earnings~~can ~~and~~adversely ~~financial~~affect ~~position~~credit quality of issuers or guarantors. ~~See~~Similarly, ~~“Management’s~~a ~~Discussion~~ratings ~~and~~downgrade ~~Analysis~~affecting a security we hold could indicate the credit quality of ~~Financial~~that ~~Condition~~security has deteriorated and ~~Results~~could increase the capital we must hold to support that security to maintain our RBC levels. Our intent to sell or assessment of ~~Operations~~the —likelihood ~~Summary~~that we would be required to sell fixed maturity securities that have declined in value may affect the level of ~~Critical~~write-downs ~~Accounting~~or ~~Estimates~~impairments. —Realized ~~Investment~~losses ~~Impairments~~or impairments on these securities could have a material adverse effect on our financial condition and results of operations in, or at the end of, any quarterly or annual period.”

Our valuation of securities and investments and the determination of the amount of allowances and impairments taken on our investments are subjective and, if changed, could materially adversely affect our financial condition or results of operations

Fixed maturity securities, as well as short-term investments that are reported at estimated fair value, represent the majority of our total cash and investments. See Note 1 to the Notes to the Financial Statements for more information on how we calculate fair value. During periods of market disruption, including periods of significantly rising or high interest rates, rapidly widening credit spreads or illiquidity, it may be difficult to value certain of our securities if trading becomes less frequent or market data becomes less observable. In addition, in times of financial market disruption, certain asset classes that were in active markets with significant observable data may become illiquid. In those cases, the valuation process includes inputs that are less observable and require more subjectivity and management judgment. Valuations may result in estimated fair values which vary significantly from the amount at which the investments may ultimately be sold. Further, rapidly changing and unprecedented credit and equity market conditions could materially impact the valuation of securities as reported within our financial statements and the period to period changes in estimated fair value could vary significantly. Decreases in the estimated fair value of securities we hold could have a material adverse effect on our financial condition and results of operations.

The determination of the amount of allowances and impairments varies by investment type and is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. However, historical trends may not be indicative of future impairments or allowances and any such future impairments or allowances could have a materially adverse effect on our earnings and financial position.

Defaults on our mortgage loans and volatility in performance may adversely affect our profitability

Our mortgage loans face default risk and are principally collateralized by commercial and agricultural properties. An increase in the default rate of our mortgage loan investments or fluctuations in their performance, as a result of the COVID-19 pandemic or otherwise, could have a material adverse effect on our ~~results~~financial ofcondition ~~operations~~ and ~~financial~~results ~~condition~~of operations.

Further, any geographic or property type concentration of our mortgage loans may have adverse effects on our investment portfolio and consequently on our ~~results~~financial ofcondition ~~operations~~and orresults ~~financial~~of ~~condition~~operations. Events or developments that have a negative effect on any particular geographic region or sector may have a greater adverse effect on our investment portfolio to the extent that the portfolio is concentrated. See Notes 6 and 8 of the Notes to the Financial Statements.

~~The defaults or deteriorating credit of other financial institutions could adversely affect us~~30

We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, central clearinghouses, commercial banks, investment banks, and other financial institutions. Many of these transactions expose us to credit risk in the event of the default of our counterparty. In addition, with respect to secured transactions, our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due to us. We also have exposure to these financial institutions in the form of unsecured debt instruments and derivatives. Any losses or impairments to the carrying value of these investments or other changes may materially and adversely affect our results of operations and financial condition.

The continued threat of terrorism, ongoing military actions, as well as other catastrophic events may adversely affect the value of our investment portfolio and the level of claim losses we incur

The continued threat of terrorism, both within the United States and abroad, ongoing military and other actions and heightened security measures in response to these types of threats, as well as other natural or man-made catastrophic events may cause significant volatility in global financial markets and result in loss of life, property damage, additional disruptions to commerce and reduced economic activity. The value of assets in our investment portfolio may be adversely affected by declines in the credit and equity markets and reduced economic activity caused by the continued threat of catastrophic events. Companies in which we maintain investments may suffer losses as a result of financial, commercial or economic disruptions and such disruptions might affect the ability of those companies to pay interest or principal on their securities or mortgage loans. Catastrophic events could also disrupt our operations centers in the U.S. and result in higher than anticipated claims under insurance policies that we have issued. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Policyholder Liabilities.”

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The defaults or deteriorating credit of other financial institutions could adversely affect us

We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, central clearinghouses, commercial banks, investment banks, and other financial institutions. Many of these transactions expose us to credit risk in the event of the default of our counterparty. In addition, with respect to secured transactions, our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due to us. We also have exposure to these financial institutions in the form of unsecured debt instruments and derivatives. Any losses or impairments to the carrying value of these investments or other changes could materially and adversely affect our financial condition and results of operations.

The continued threat of terrorism, ongoing military actions as well as other catastrophic events may adversely affect the value of our investment portfolio and the level of claim losses we incur

The continued threat of terrorism, both within the United States and abroad, ongoing military and other actions and heightened security measures in response to these types of threats, as well as other natural or man-made catastrophic events, may cause significant decline and volatility in global financial markets and result in loss of life, property damage, additional disruptions to commerce, the health system, and the food supply and reduced economic activity. The value of assets in our investment portfolio may be adversely affected by declines in the credit and equity markets and reduced economic activity caused by the continued threat of catastrophic events. Companies in which we maintain investments may suffer losses as a result of financial, commercial or economic disruptions and such disruptions might affect the ability of those companies to pay interest or principal on their securities or mortgage loans. Catastrophic events could also disrupt our operations as well as the operations of our third-party service providers and also result in higher than anticipated claims under insurance policies that we have issued. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Policyholder Liabilities.”

Regulatory and Legal Risks

Our business is highly regulated, and changes in regulation and in supervisory and enforcement policies may materially impact our capitalization or cash flows, reduce our profitability and limit our growth

We are subject to a wide variety of insurance and other laws and regulations. We are domiciled in New York and regulated by the NYDFS. See “Business — Regulation,” as supplemented by discussions of regulatory developments in our subsequently filed Quarterly Reports on Form 10-Q under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations -— Regulatory Developments.”

We cannot predict what proposals may be made, what legislation or regulations may be introduced or enacted, or what impact any future legislation or regulations ~~may~~could have on our business, ~~results~~financial ofcondition ~~operations~~ and ~~financial~~results ~~condition~~of operations. Furthermore, regulatory uncertainty could create confusion among our distribution partners and customers, which could negatively impact product sales. See “Business — Regulation — Standard of Conduct Regulation” for a more detailed discussion of particular regulatory efforts by various regulators.

Changes to the laws and regulations that govern the standards of conduct that apply to the sale of our variable and registered fixed insurance products business and the firms that distribute these products could adversely affect our operations and profitability. Such changes could increase our regulatory and compliance burden, resulting in increased costs, or limit the type, amount or structure of compensation arrangements into which we may enter with certain of our associates, which could negatively impact our ability to compete with other companies in recruiting and retaining key personnel. Additionally, our ability to react to rapidly changing economic conditions and the dynamic, competitive market for variable and registered fixed products will depend on the continued efficacy of provisions we have incorporated into our product design allowing frequent and contemporaneous revisions of key pricing elements, as well as our ability to work collaboratively with securities regulators. Changes in regulatory approval processes, rules and other dynamics in the regulatory process could adversely impact our ability to react to such changing conditions.

Revisions to the NAIC’s RBC calculation, as well as further changes to the NY VA Reform framework, could result in a reduction in our RBC ratio below certain prescribed levels, and in case of such a reduction we may be required to hold additional capital. See also “— A decrease in our RBC ratio (as a result of a reduction in statutory surplus ~~and/~~or increase in RBC requirements) could result in increased scrutiny by insurance regulators and rating agencies and could have a material adverse effect on our financial condition and results of operations” and ~~financial~~“Business ~~condition~~— Regulation — Insurance Regulation — Surplus and Capital; Risk-Based Capital.”

We ~~also~~ cannot predict ~~with certainty~~ the impact ofthat ~~rules, should they take effect, substantially expanding the definition of~~ “~~investment advice” and imposing an impartial or “~~best ~~interests~~interest” ~~standard in providing such advice, thereby broadening the circumstances under which Brighthouse~~ or ~~its representatives could be deemed a~~ fiduciary under ERISA or the Tax Code, or amendments to certain prohibited transaction exemptions, will have on our products and services to certain employee benefit plans that are subject to ERISA or the Tax Code. Furthermore, we cannot predict the impact that “best interest” standards recently adopted or proposed by various regulators may have on our business, ~~results~~financial ofcondition ~~operations,~~ or ~~financial~~results ~~condition~~of operations. Compliance with new or changed rules or legislation in this area may increase our regulatory burden and that of our distribution partners, require changes to our compensation practices and product offerings, and increase litigation risk, which could adversely affect our results of operations and financial condition.

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legislation in this area may increase our regulatory burden and that of our distribution partners, require changes to our compensation practices and product offerings, and increase litigation risk, which could adversely affect our financial condition and results of operations. For example, we cannot predict the impact of the DOL’s Fiduciary Advice Rule that became effective on February 16, 2021, including the DOL’s guidance broadening the scope of what constitutes fiduciary “investment advice” under ERISA and the Tax Code. The DOL’s interpretation of the ERISA fiduciary investment advice regulation could have an adverse effect on sales of annuity products through our independent distribution partners, as a significant portion of our annuity sales are to IRAs. The Fiduciary Advice Rule may also lead to changes to our compensation practices, product offerings and increased litigation risk, which could adversely affect our financial condition and results of operations. We may also need to take certain additional actions in order to comply with, or assist our distributors in their compliance with, the Fiduciary Advice Rule.

Changes in laws and regulations that affect our customers and distribution partners or their operations also may affect our business relationships with them and their ability to purchase or distribute our products. Such actions may negatively affect our business and results of operations.

If our associates fail to adhere to regulatory requirements or our policies and procedures, we may be subject to penalties, restrictions or other sanctions by applicable regulators, and we may suffer reputational harm. See “Business - Regulation.”

A decrease in our RBC ratio (as a result of a reduction in statutory surplus ~~and/~~or increase in RBC requirements) could result in increased scrutiny by insurance regulators and rating agencies and could have a material adverse effect on our ~~results~~financial ofcondition ~~operations~~ and ~~financial~~results ~~condition~~of operations

The NAIC has established model regulations that provide minimum capitalization requirements based on RBC formulas for insurance companies. We are subject to RBC standards ~~and/~~or other minimum statutory capital and surplus requirements imposed under New York insurance laws. See “Business — Regulation — Insurance Regulation — Surplus and Capital; Risk-Based Capital.”

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In any particular year, statutory surplus amounts and RBC ratios may increase or decrease depending on a variety of factors, including the amount of statutory income or losses generated by us (which itself is sensitive to equity market and credit market conditions), the amount of additional capital we must hold to support business growth, changes in equity market levels, the value and credit ratings of certain fixed-income securities in our investment portfolio, the value of certain derivative instruments that do not receive hedge accounting and changes in interest rates, as well as changes to the RBC formulas and the interpretation of the NAIC’s instructions with respect to RBC calculation methodologies. Our financial strength ratings are significantly influenced by statutory surplus amounts and RBC ratios. In addition, rating agencies may implement changes to their own internal models, which differ from the RBC capital model, that have the effect of increasing or decreasing the amount of statutory capital we should hold relative to the rating agencies’ expectations. Under stressed or stagnant capital market conditions and with the aging of existing insurance liabilities, without offsets from new business, the amount of additional statutory reserves that we are required to hold may materially increase. This increase in reserves would decrease the statutory surplus available for use in calculating our RBC ratio. To the extent that our RBC ratio is deemed to be insufficient, we may seek to take actions either to increase our capitalization or to reduce the capitalization requirements. If we were unable to accomplish such actions, the rating agencies may view this as a reason for a ratings downgrade.

Our failure to meet our RBC requirements or minimum capital and surplus requirements could subject us to further examination or corrective action imposed by the NYDFS, including limitations on our ability to write additional business, supervision by regulators or seizure or liquidation. Any corrective action imposed could have a material adverse effect on our business, ~~results~~financial ofcondition ~~operations~~ and ~~financial~~results ~~condition~~of operations. A decline in RBC ratios, whether or not it results in a failure to meet applicable RBC requirements, could limit our ability to pay dividends or distributions to our parent company, could result in a loss of customers or new business, ~~and~~or could be a factor in causing ratings agencies to downgrade our financial strength ratings, ~~any~~each of which could have a material adverse effect on our business, ~~results~~financial ofcondition ~~operations~~ and ~~financial~~results ~~condition~~of operations.

We are subject to federal and state securities laws and regulations and rules of self-regulatory organizations which, among other things, require that we distribute certain of our products through a registered broker-dealer; failure to comply with these laws or changes to these laws ~~may~~could have a material adverse effect on our operations and our profitability

Federal and state securities laws and regulations apply to insurance products that are also “securities,” including variable annuity contracts and variable life insurance policies, to the separate accounts that issue them, and to certain fixed interest rate or index-linked contracts. Such laws and regulations require these products to be distributed through a broker-dealer that is registered with the SEC and certain state securities regulators and is also a member of FINRA. Accordingly, by offering and selling these registered products, we are subject to, and bear the costs of compliance with, extensive regulation under federal and state securities laws, as well as FINRA rules.

Federal and state securities laws and regulations are primarily intended to protect investors in the securities markets, protect investment advisory and brokerage clients, and ensure the integrity of the financial markets. These laws and regulations generally grant regulatory and self-regulatory agencies broad rulemaking and enforcement powers impacting new and existing products. These powers include the power to adopt new rules to regulate the issuance, sale and distribution of our products and powers to limit or restrict the conduct of business for failure to comply with securities laws and regulations. See “Business — Regulation — Securities and Investment Advisor Regulation.”32

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The global financial crisis of 2008 led to significant changes in economic and financial markets that have, in turn, led to a dynamic competitive landscape for issuers of variable and registered insurance products. Our ability to react to rapidly changing market and economic conditions will depend on the continued efficacy of provisions we have incorporated into our product design allowing frequent and contemporaneous revisions of key pricing elements and our ability to work collaboratively with federal securities regulators. Changes in regulatory approval processes, rules and other dynamics in the regulatory process could adversely impact our ability to react to such changing conditions.

Changes in tax laws or interpretations of such laws could reduce our earnings and materially impact our operations by increasing our corporate taxes and making some of our products less attractive to consumers

Changes in tax laws or interpretations of such laws could have a material adverse effect on our profitability and financial condition and could result in our incurring materially higher statutory taxes. Higher tax rates may adversely affect our business, financial condition, results of operations and liquidity. Conversely, ifdeclines in tax rates ~~decline it~~ could ~~adversely~~make ~~affect~~our ~~the~~products ~~desirability~~less ofattractive ~~our~~to ~~products~~consumers.

InWhen ~~2017,~~most ~~President~~of ~~Trump~~the ~~signed~~changes introduced by the Tax Cuts and Jobs Act went into ~~law~~effect on January 1, ~~resulting~~2018, it resulted in sweeping changes to the Tax Code. The Tax Cuts and Jobs Act reduced the corporate tax rate to 21%, limited deductibility of interest expense, increased capitalization amounts for DAC, eliminated the corporate alternative minimum tax, provided for determining reserve deductions as 92.81% of statutory reserves, and reduced the ~~dividend~~dividends received deduction. ~~Most of the changes in the Tax Act were effective as of January 1, 2018.~~

~~Our~~Litigation ~~actual~~and ~~results~~regulatory ~~may~~investigations ~~differ~~are ~~from~~common in our ~~current~~businesses ~~estimate~~and ~~due to, among other things, further guidance that~~ may beresult ~~issued~~in bysignificant ~~U.S.~~financial ~~tax~~losses ~~authorities~~ or ~~regulatory~~harm ~~bodies~~to ~~and/or~~our ~~changes in interpretations and assumptions we have preliminarily made.~~reputation

27We face a significant risk of litigation actions and regulatory investigations in the ordinary course of operating our businesses, including the risk of class action lawsuits. Our pending legal actions and regulatory investigations include proceedings specific to us, as well as other proceedings that raise issues that are generally applicable to business practices in the industries in which we operate. In addition, the Master Separation Agreement that sets forth our agreements with MetLife relating to the ownership of certain assets and the allocation of certain liabilities in connection with the Separation allocated responsibility among MetLife and Brighthouse with respect to certain claims (including litigation or regulatory actions or investigations where Brighthouse is not a party). As a result, we may face indemnification obligations or be required to share in certain of MetLife’s liabilities with respect to such claims.

In connection with our insurance operations, plaintiffs’ lawyers may bring or are bringing class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, claims payments and procedures, product design, disclosure, administration, investments, denial or delay of benefits, cost of insurance and breaches of fiduciary or other duties to customers. Plaintiffs in class action and other lawsuits against us may seek very large or indeterminate amounts, including punitive and treble damages. Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may be difficult to ascertain. Material pending litigation and regulatory matters affecting us and risks to our business presented by these proceedings, if any, are discussed in Note 13 of the Notes to the Financial Statements.

A substantial legal liability or a significant federal, state or other regulatory action against us, as well as regulatory inquiries or investigations, could harm our reputation, result in material fines or penalties, result in significant legal costs and otherwise have a material adverse effect on our business, financial condition and results of operations. Even if we ultimately prevail in the litigation, regulatory action or investigation, our ability to attract new customers and distributors, retain our current customers and distributors, and recruit and retain personnel could be materially and adversely impacted. Regulatory inquiries and litigation may also cause volatility in the price of BHF securities and the securities of companies in our industry.

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~~Litigation~~Current ~~and~~claims, ~~regulatory~~litigation, unasserted claims probable of assertion, investigations ~~are~~and ~~common~~other inproceedings against us could have a material adverse effect on our ~~businesses~~business, financial condition and results of operations. It is also possible that related or unrelated claims, litigation, unasserted claims probable of assertion, investigations and proceedings may be commenced in the future, and we could become subject to further investigations and have lawsuits filed or enforcement actions initiated against us. Increased regulatory scrutiny and any resulting investigations or proceedings in any of the jurisdictions where we operate could result in ~~significant~~new ~~financial~~legal ~~losses~~actions and/ precedents or ~~harm~~changes toin laws, rules or regulations that could adversely affect our ~~reputation~~business, financial condition and results of operations.

We face a significant risk of litigation actions and regulatory investigations in the ordinary course of operating our businesses, including the risk of class action lawsuits. Our pending legal actions and regulatory investigations include proceedings specific to us, as well as other proceedings that raise issues that are generally applicable to business practices in the industries in which we operate. In addition, the Master Separation Agreement that sets forth our agreements with MetLife relating to the ownership of certain assets and the allocation of certain liabilities in connection with the Separation (the “Master Separation Agreement”) allocated responsibility among MetLife and Brighthouse with respect to certain claims (including litigation or regulatory actions or investigations where Brighthouse is not a party). As a result, we may face indemnification obligations or be required to share in certain of MetLife’s liabilities with respect to such claims.

In connection with our insurance operations, plaintiffs’ lawyers may bring or are bringing class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, claims payments and procedures, product design, disclosure, administration, investments, denial or delay of benefits and breaches of fiduciary or other duties to customers. Plaintiffs in class action and other lawsuits against us may seek very large and/or indeterminate amounts, including punitive and treble damages. Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may be difficult to ascertain. Material pending litigation and regulatory matters affecting us and risks to our business presented by these proceedings, if any, are discussed in Note 12 of the Notes to the Financial Statements.

A substantial legal liability or a significant federal, state or other regulatory action against us, as well as regulatory inquiries or investigations, could harm our reputation, result in material fines or penalties, result in significant legal costs and otherwise have a material adverse effect on our business, financial condition and results of operations. Even if we ultimately prevail in the litigation, regulatory action or investigation, our ability to attract new customers and distributors, retain our current customers and distributors and recruit and retain personnel could be materially and adversely impacted. Regulatory inquiries and litigation may also cause volatility in the price of BHF securities and the securities of companies in our industry.

Current claims, litigation, unasserted claims probable of assertion, investigations and other proceedings against us could have a material adverse effect on our business, financial condition or results of operations. It is also possible that related or unrelated claims, litigation, unasserted claims probable of assertion, investigations and proceedings may be commenced in the future, and we could become subject to further investigations and have lawsuits filed or enforcement actions initiated against us. Increased regulatory scrutiny and any resulting investigations or proceedings in any of the jurisdictions where we operate could result in new legal actions and precedents or changes in laws, rules or regulations that could adversely affect our business, financial condition and results of operations.

Operational Risks

Any gaps in our policies and procedures may leave us exposed to unidentified or unanticipated risk, which could negatively affect our business

We have developed policies and procedures to reflect the ongoing review of our risks and expect to continue to do so in the future. Nonetheless, our policies and procedures may not be fully effective, leaving us exposed to unidentified or unanticipated risks. In addition, we rely on third-party providers to administer and service many of our products, and our policies and procedures may not enable us to identify and assess every risk with respect to those products, especially to the extent we rely on those providers for detailed information regarding the holders of our products and other relevant information.

Many of our methods for managing risk and exposures rely on assumptions that are based on observed historical financial and non-financial trends or projections of potential future exposure, and our assumptions and projections may be inaccurate. Business decisions based on incorrect or misused model output and reports could have a material adverse impact on our results of operations. If models are misused or fail to serve their intended purposes, they could produce incorrect or inappropriate results. Furthermore, models used by our business may not operate properly and could contain errors related to model inputs, data, assumptions, calculations, or output which could give rise to adjustments to models that may adversely impact our results of operations. As a result, these methods may not fully predict future exposures, which can be significantly greater than our historical measures indicate.

Other risk management methods depend upon the evaluation of information regarding markets, clients, catastrophe occurrence or other matters that are publicly available or otherwise accessible to us. This information may not always be accurate, complete, up-to-date or properly evaluated. Furthermore, there can be no assurance that we can effectively review and monitor all risks or that all of our employees will follow our policies and procedures, nor can there be any assurance that our policies and procedures, or the policies and procedures of third parties that administer or service our products, will enable us to accurately identify all risks and limit our exposures based on our assessments. In addition, we may have to implement more extensive and perhaps different policies and procedures under pending regulations.

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Any failure in cyber- or other information security systems, as well as the occurrence of events unanticipated in Brighthouse’s or our third-party service providers’ disaster recovery systems and business continuity planning could result in a loss or disclosure of confidential information, damage to our reputation and impairment of our ability to conduct business effectively

Our business is highly dependent upon the effective operation of computer systems. For some of these systems, we rely on third parties, such as our outside vendors and distributors~~, including MetLife~~. We rely on these systems throughout our business for a variety of functions, including processing new business, claims, and post-issue transactions, providing information to customers and distributors, performing actuarial analyses, managing our investments and maintaining financial records. Such computer systems have been, and will likely continue to be, subject to a variety of forms of cyberattacks with the objective of gaining unauthorized access to ~~Brighthouse~~our systems and data or disrupting ~~Brighthouse~~our operations. These include, but are not limited to, phishing attacks, account takeover attempts, malware, ransomware, denial of service attacks, and other computer-related penetrations. Administrative and technical controls and other preventive actions taken to reduce the risk of cyber-incidents and protect our information technology may be insufficient to prevent physical and electronic break-ins, cyberattacks or other security breaches to such computer systems. In some cases, such physical and electronic break-ins, cyberattacks or other security breaches may not be immediately detected. This may impede or interrupt our business operations and could adversely affect our business, financial condition and results of operations.

A disaster such as a natural catastrophe, epidemic, pandemic, industrial accident, blackout, computer virus, terrorist attack, cyberattack or war, unanticipated problems with our or our vendors’ disaster recovery systems (and the disaster recovery systems of such vendors’ suppliers, vendors or subcontractors), could cause our computer systems to be inaccessible to our employees, distributors, vendors or customers or may destroy valuable data. In addition, in the event that a significant number of our or our vendors’ managers were unavailable following a disaster, our ability to effectively conduct business could be severely compromised. These interruptions also may interfere with our suppliers’ ability to provide goods and ~~services and our employees’ ability to perform their job responsibilities.~~

A failure of our or relevant third-party (or such third-party’s supplier’s, vendor’s or subcontractor’s computer systems) computer systems could cause significant interruptions in our operations, result in a failure to maintain the security, confidentiality or privacy of sensitive data, harm our reputation, subject us to regulatory sanctions and legal claims, lead to a loss of customers and revenues, and otherwise adversely affect our business and financial results. Our cyber liability insurance may not be sufficient to protect us against all losses. See also “— General Risks — Any failure to protect the confidentiality of client and employee information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operations.”34

Brighthouse’s associates and those of our third-party service providers may take excessive risks which could negatively affect our financial condition and business

As an insurance enterprise, we are in the business of accepting certain risks. The associates who conduct our business include executive officers and other members of management, sales intermediaries, investment professionals, product managers, and other associates, as well as associates of our third-party service providers, including certain associates of MetLife who provide services to Brighthouse in connection with the Transition Services Agreement or other agreements, including agreements to provide certain third-party administration services. Each of these associates makes decisions and choices that may expose us to risk. These include decisions such as setting underwriting guidelines and standards, product design and pricing, determining what assets to purchase for investment and when to sell them, which business opportunities to pursue, and other decisions. Associates may take excessive risks regardless of the structure of our compensation programs and practices. Similarly, our controls and procedures designed to monitor associates’ business decisions and prevent them from taking excessive risks, and to prevent employee misconduct, may not be effective. If our associates and those of our third-party service providers take excessive risks, the impact of those risks could harm our reputation and have a material adverse effect on our financial condition and business operations.

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~~General~~services ~~Risks~~and our employees’ ability to perform their job responsibilities. In addition, an extended period of remote work arrangements resulting from such interruptions could increase our operational risk, including, but not limited to, cybersecurity risks, and could impair our ability to manage our business.

~~Brighthouse~~A ~~may~~failure ~~experience~~of ~~difficulty~~our or relevant third-party (or such third-party’s supplier’s, vendor’s or subcontractor’s computer systems) computer systems could cause significant interruptions in ~~marketing~~our operations, result in a failure to maintain the security, confidentiality or privacy of sensitive data, harm our reputation, subject us to regulatory sanctions and ~~distributing~~legal ~~products~~claims, ~~through~~lead to a loss of customers and revenues, and otherwise adversely affect our ~~distribution~~business ~~channels~~and financial results. Our cyber liability insurance may not be sufficient to protect us against all losses. See also “— Any failure to protect the confidentiality of client and employee information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operations.”

WeBrighthouse’s ~~distribute~~associates ~~our~~and ~~products~~those ~~exclusively through a variety~~ of ~~third-party~~our ~~distribution channels. Our agreements with the~~ third-party ~~distributors~~service ~~may~~providers ~~be terminated by either party with or without cause. We~~ may ~~periodically~~take ~~renegotiate~~excessive ~~the~~risks ~~terms~~which of these agreements, and there can be no assurance that such terms will remain acceptable to us or such third parties. If we are unable to maintain our relationships our sales of individual insurance, annuities and investment products could ~~decline,~~negatively ~~and~~affect our ~~results of operations and~~ financial condition could be materially adversely affected. Our distributors may elect to suspend, alter, reduce or terminate their distribution relationships with us for various reasons, including changes in our distribution strategy, adverse developments in our business, adverse rating agency actions, or concerns about market-related risks. We are also at risk that key distribution partners may merge, consolidate, change their business models in ways that affect how our products are sold, or terminate their distribution contracts with us, or that new distribution channels could emerge and ~~adversely impact the effectiveness of our distribution efforts. Also, if we are unsuccessful in attracting and retaining key internal associates who conduct our~~ business~~, including wholesalers, our sales could decline.~~

AnAs ~~interruption~~an orinsurance ~~significant~~enterprise, ~~change~~we are in ~~certain~~the ~~key~~business ~~relationships~~of ~~could~~accepting ~~materially~~certain ~~affect~~risks. ~~our~~The ~~ability~~associates towho ~~market~~conduct our ~~products~~business ~~and~~include ~~could~~executive ~~have~~officers aand ~~material~~other ~~adverse~~members ~~effect~~of onmanagement, ~~our~~sales ~~results~~intermediaries, ofinvestment ~~operations~~professionals, ~~and~~product ~~financial~~managers, ~~condition.~~and Inother ~~addition~~associates, weas ~~rely~~well onas aassociates ~~core number~~ of our ~~distributors~~various tothird-party ~~produce~~service ~~the~~providers. ~~majority~~Each of ~~our~~these ~~sales.~~associates Ifmakes ~~any~~decisions ~~one~~and ~~such~~choices ~~distributor~~that ~~were~~may expose us to ~~terminate~~risk. ~~its~~These ~~relationship~~include ~~with~~decisions ussuch oras ~~reduce~~setting ~~the~~underwriting ~~amount~~guidelines ofand ~~sales~~standards, ~~which~~product itdesign ~~produces~~and ~~for~~pricing, usdetermining ~~our~~what ~~results~~assets ofto ~~operations~~purchase ~~could~~for beinvestment ~~adversely~~and ~~affected.~~when Anto ~~increase~~sell inthem, ~~bank~~which business opportunities to pursue, and ~~broker-dealer~~other ~~consolidation~~decisions. ~~activity~~Associates ~~could~~may ~~increase~~take ~~competition~~excessive ~~for~~risks ~~access~~regardless toof ~~distributors,~~the ~~result~~structure inof ~~greater~~our ~~distribution~~compensation ~~expenses~~programs and ~~impair~~practices. Similarly, our ~~ability~~controls and procedures designed to ~~market~~monitor ~~products~~associates’ ~~through~~business ~~these~~decisions ~~channels.~~and ~~Consolidation~~prevent ofthem ~~distributors~~from taking excessive risks, and~~/or~~ ~~other~~to ~~industry~~prevent ~~changes~~employee misconduct, may ~~also~~not ~~increase~~be ~~the~~effective. ~~likelihood~~If ~~that~~our ~~distributors~~associates ~~will~~and ~~try~~those toof ~~renegotiate~~our third-party service providers take excessive risks, the ~~terms~~impact of ~~any~~those ~~existing~~risks ~~selling~~could ~~agreements~~harm toour ~~terms~~reputation ~~less~~and ~~favorable~~have toa usmaterial adverse effect on our financial condition and results of operations.

Any failure to protect the confidentiality of client and employee information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operations

Federal and state legislatures and various government agencies have established laws and regulations protecting the privacy and security of personal information. See “Business — Regulation — Cybersecurity Regulation.” Our third-party service-providers and our employees have access to, and routinely process, personal information through a variety of media, including information technology systems. It is possible that an employee or third-party service provider (or their suppliers, vendors or subcontractors) could, intentionally or unintentionally, disclose or misappropriate confidential personal information, and there can be no assurance that our information security policies and systems in place can prevent unauthorized use or disclosure of confidential information, including nonpublic personal information. Additionally, our data has been the subject of cyberattacks and could be subject to additional attacks. If we or any of our third-party service providers (or their suppliers, vendors or subcontractors) fail to maintain adequate internal controls or if our associates fail to comply with our policies and procedures, misappropriation or intentional or unintentional inappropriate disclosure or misuse of employee or client information could occur. Any data breach or unlawful disclosure of confidential personal information could materially damage our reputation or lead to civil or criminal penalties, which, in turn, could have a material adverse effect on our business, financial condition and results of operations. See “— ~~Operational Risks —~~ Any failure in cyber- or other information security systems, as well as the occurrence of events unanticipated in Brighthouse’s or our third-party service providers’ disaster recovery systems and business continuity planning could result in a loss or disclosure of confidential information, damage to our reputation and impairment of our ability to conduct business effectively.” In addition, compliance with complex variations in privacy and data security laws may require modifications to current business practices.

~~In addition~~Furthermore, there has been increased scrutiny as well as enacted and proposed additional regulation, including from state regulators, regarding the use of customer data. We may analyze customer data or input such data into third-party analytics in order to better manage our business. Any inquiry in connection with our analytics business practices, as well as any misuse or alleged misuse of those analytics insights, could cause reputational harm or result in regulatory enforcement actions or litigation, and any related limitations imposed on us could have a material impact on our business, financial condition and results of operations.

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Risks Related to Our Separation from, and Continuing Relationship with, MetLife

If the Separation were to fail to qualify for non-recognition treatment for federal income tax purposes, then we could be subject to significant tax liabilities

~~The~~In ~~Separation~~connection ~~was~~with ~~conditioned on~~ the ~~continued validity as of the~~ Separation, ~~date~~MetLife ofreceived ~~the~~a private letter ruling ~~that~~from ~~MetLife~~the ~~has~~Internal ~~received~~Revenue ~~from~~Service ~~the~~ (“IRS”) regarding certain significant issues under the Tax Code, ~~and~~as ~~the~~well ~~receipt and continued validity~~ as ~~of the Separation date of~~ an opinion from ~~MetLife’s~~its tax advisor that ~~the Separation qualifies for non-recognition of gain or loss to MetLife and MetLife’s shareholders pursuant to Sections 355 and 361 of the Tax Code~~, ~~except to the extent of cash received in lieu of fractional shares, each~~ subject to ~~the accuracy of and compliance with~~ certain ~~representations, assumptions and covenants therein.~~

Notwithstanding the receipt of the private letter ruling and the tax opinion, the IRS could determine that the Separation should be treated as a taxable transaction if it determines that any of the representations, assumptions or covenants on which the private letter ruling is based are untrue or have been violated. Furthermore, as part of the IRS’s policy, the IRS did not determine whether the Separation satisfies certain conditions that are necessary to qualify for non-recognition treatment. Rather, the private letter ruling is based on representations by MetLife and Brighthouse that these conditions have been satisfied. 35

The tax opinion is not binding on the IRS or the courts, and there can be no assurance that the IRS or a court will not take a contrary position. In addition, the tax opinion and the private letter ruling do not address all of the tax consequences of the Separation to us.

If the IRS ultimately determines that the Separation is taxable, we could incur significant federal income tax liabilities, and Brighthouse could have an indemnification obligation to MetLife. For a more detailed discussion, see “— Potential indemnification obligations if the Separation does not qualify for non-recognition treatment or if certain other steps that are part of the Separation do not qualify for their intended tax treatment could materially adversely affect our financial condition.”

The Separation was a complex transaction subject to numerous tax rules, including rules that could require us to reduce our tax attributes (such as the basis in our assets) in certain circumstances, and the application of these various rules to the Separation is not entirely clear. The ultimate tax consequences to us of the Separation may not be finally determined for many years and may differ from the tax consequences that we and MetLife expected at the time of the Separation. As a result, we could be required to pay material additional taxes and to materially reduce the tax assets (or materially increase the tax liabilities) on our balance sheet. These changes could impact our available capital, ratings or cost of capital. There can be no assurance that the tax separation agreement with MetLife, Inc. (the “Tax Separation Agreement”) will protect us from any such consequences, or that any issue that may arise will be subject to indemnification by MetLife under the Tax Separation Agreement. As a result, our financial condition and results of operations could be materially and adversely affected.

Potential indemnification obligations if the Separation does not qualify for non-recognition treatment or if certain other steps that are part of the Separation do not qualify for their intended tax treatment could materially adversely affect our financial condition

Generally, taxes resulting from the failure of the Separation to qualify for non-recognition treatment for federal income tax purposes would be imposed on MetLife or MetLife’s shareholders and, under the Tax Separation Agreement, MetLife is generally obligated to indemnify Brighthouse against such taxes if the failure to qualify for tax-free treatment results from any action or inaction that is within MetLife’s control or if the failure results from any direct or indirect transfer of MetLife’s stock. MetLife may have an adverse interpretation of or object to its indemnification obligations to Brighthouse under the Tax Separation Agreement, and there can be no assurance that MetLife will be able to satisfy its indemnification obligation to Brighthouse or that such indemnification will be sufficient to us in the event of a dispute or nonperformance by MetLife. The failure of MetLife to fully indemnify Brighthouse could have a material adverse effect on our financial condition and results of operations.

In addition, MetLife will generally bear tax-related losses due to the failure of certain steps that were part of the Separation to qualify for their intended tax treatment. However, the IRS could seek to hold Brighthouse responsible for such liabilities, and under the Tax Separation Agreement, Brighthouse could be required, under certain circumstances, to indemnify MetLife and its affiliates against certain tax-related liabilities caused by those failures, to the extent those liabilities result from an action Brighthouse or its affiliates, including us, take or from any breach of Brighthouse’s or its affiliates’, including us, representations, covenants or obligations under the Tax Separation Agreement. If the Separation does not qualify for non-recognition treatment or if certain other steps that are part of the Separation do not qualify for their intended tax treatment, we could be required to pay material additional taxes or an indemnification obligation to MetLife, which could materially and adversely affect our financial condition.

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limited exceptions, the Separation qualifies for non-recognition of gain or loss to MetLife and MetLife’s shareholders pursuant to Sections 355 and 361 of the Tax Code. Notwithstanding the receipt of the private letter ruling and the tax opinion, the tax opinion is not binding on the IRS or the courts, and the IRS could determine that the Separation should be treated as a taxable transaction and, as a result, we could incur significant federal income tax liabilities, and Brighthouse could have an indemnification obligation to MetLife.

Generally, taxes resulting from the failure of the Separation to qualify for non-recognition treatment for federal income tax purposes would be imposed on MetLife or MetLife’s shareholders. Under the tax separation agreement with MetLife, Inc. (the “Tax Separation Agreement”), MetLife is generally obligated to indemnify Brighthouse against such taxes if the failure to qualify for tax-free treatment results from, among other things, any action or inaction that is within MetLife’s control. MetLife may dispute an indemnification obligation to Brighthouse under the Tax Separation Agreement, and there can be no assurance that MetLife will be able to satisfy its indemnification obligation to Brighthouse or that such indemnification will be sufficient for us in the event of nonperformance by MetLife. The failure of MetLife to fully indemnify Brighthouse could have a material adverse effect on our financial condition and results of operations.

In addition, MetLife will generally bear tax-related losses due to the failure of certain steps that were part of the Separation to qualify for their intended tax treatment. However, the IRS could seek to hold Brighthouse responsible for such liabilities, and under the Tax Separation Agreement, Brighthouse could be required, under certain circumstances, to indemnify MetLife and its affiliates against certain tax-related liabilities caused by those failures. If the Separation does not qualify for non-recognition treatment or if certain other steps that are part of the Separation do not qualify for their intended tax treatment, Brighthouse could be required to pay material additional taxes or be obligated to indemnify MetLife, which could have a material adverse effect on our financial condition and results of operations.

The Separation was also subject to tax rules regarding the treatment of certain of our tax attributes (such as the basis in our assets). In certain circumstances such rules could require us to reduce those attributes, which could materially and adversely affect our financial condition. The ultimate tax consequences to us of the Separation may not be finally determined for many years and may differ from the tax consequences that we and MetLife expected at the time of the Separation. As a result, we could be required to pay material additional taxes and to materially reduce the tax assets (or materially increase the tax liabilities) on our balance sheet. These changes could impact our available capital, ratings or cost of capital. There can be no assurance that the Tax Separation Agreement will protect us from any such consequences, or that any issue that may arise will be subject to indemnification by MetLife under the Tax Separation Agreement. As a result, our financial condition and results of operations could be materially and adversely affected.

Disputes or disagreements with MetLife may affect our financial statements and business operations, and Brighthouse’s contractual remedies may not be sufficient

In connection with the Separation, Brighthouse entered into certain agreements that provide a framework for the ongoing relationship with MetLife, including ~~the~~a ~~Transition~~transition ~~Services~~services ~~Agreement~~agreement, the Tax Separation Agreement and a tax receivables agreement that provides MetLife with the right to receive future payments from us as partial consideration for its contribution of assets to us ~~(the “Tax Receivables Agreement”)~~. Brighthouse’s agreements with MetLife may not reflect terms that would have resulted from negotiation between unaffiliated parties. Such provisions may include, among other things, indemnification rights and obligations, the allocation of tax liabilities, and other payment obligations between Brighthouse and MetLife, including the payment by Brighthouse to MetLife pursuant to the Tax Receivables Agreement of a portion of cash savings, if any, in federal income tax that we actually realize as a result of certain transactions involved in the Separation. Disagreements regarding the obligations of MetLife or Brighthouse, including us, under these agreements ~~or any renegotiation of their terms~~ could create disputes that may be resolved in a manner unfavorable to us. In addition, there can be no assurance that any remedies available under these agreements will be sufficient to Brighthouse, including us, in the event of a dispute or nonperformance by MetLife ~~or that any such remedies will be sufficiently broad to cover any issues that arise under Brighthouse’s arrangements with MetLife~~. The failure of MetLife to perform its obligations under these agreements (or claims by MetLife that ~~Brighthouse~~we ~~has~~have failed to perform ~~its~~our obligations under the agreements) may have a material adverse effect on our financial ~~statements~~condition and ~~could~~results ~~consume~~of ~~substantial resources and attention thus creating a material adverse impact on our business performance~~operations.

Item 1B. Unresolved Staff Comments

None.

Item 3. Legal Proceedings

See Note 1213 of the Notes to the Financial Statements.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

No established public trading market exists for BHNY’s common equity; all of BHNY’s common stock is held by Brighthouse Life Insurance Company.

See Note 910 of the Notes to the Financial Statements for a discussion of dividends paid, as well as restrictions on BHNY’s ability to pay dividends.

Item 6. Selected Financial Data

Omitted pursuant to General Instruction I(2)(a) of Form 10-K.

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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~~	Page
Introduction	35	39
Overview	35	39
Summary of Critical Accounting Estimates	35	40
Non-GAAP Disclosures	38	43
Results of Operations	40	45
Effects of Inflation	43	47
Off-Balance Sheet Arrangements	43	48
Policyholder Liabilities	43	48
Liquidity and Capital Resources	44	49

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Introduction

For purposes of this discussion, unless otherwise mentioned or unless the context indicates otherwise, “BHNY,” the “Company,” “we,” “our” and “us” refer to Brighthouse Life Insurance Company of NY ~~(formerly~~, ~~First MetLife Investors Insurance Company),~~ a New York domiciled life insurance company. BHNY is an indirect wholly-owned subsidiary of Brighthouse Financial, Inc. (together with its subsidiaries and affiliates, “Brighthouse”). Management’s narrative analysis of the results of operations is presented pursuant to General Instruction I(2)(a) of Form 10-K. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with “Note Regarding Forward-Looking Statements and Summary of Risk Factors,” “Risk Factors,” “Quantitative and Qualitative Disclosures About Market Risk” and the Company’s financial statements included elsewhere herein.

~~The~~In ~~following~~2016, ~~discussion~~MetLife, ~~may~~Inc. ~~contain~~(together ~~forward-looking~~with ~~statements~~its ~~that~~subsidiaries ~~reflect~~and ~~our plans~~affiliates, ~~estimates~~“MetLife”) ~~and~~announced ~~beliefs~~its plan to pursue the separation of a substantial portion of its former U.S. ~~Our~~retail ~~actual~~business ~~results~~(the ~~could~~“Separation”). ~~differ~~In ~~materially~~connection ~~from~~with ~~those~~the ~~discussed~~Separation, 80.8% of MetLife, Inc.’s interest in ~~these~~BHF ~~forward-looking~~was ~~statements~~distributed to holders of MetLife, Inc.’s ~~Factors~~common ~~that~~stock. ~~could~~On ~~cause~~June or14, ~~contribute~~2018, toMetLife, ~~these~~Inc. ~~differences~~divested ~~include~~all ~~those~~its ~~factors~~remaining ~~discussed~~shares ~~below~~of ~~and~~BHF ~~elsewhere~~common instock ~~this~~(the ~~report~~“MetLife Divestiture”). As a result, ~~particularly~~MetLife, inInc. “and its subsidiaries and affiliates were no longer considered related parties subsequent to the MetLife Divestiture. See Note ~~Regarding~~1 ~~Forward-Looking~~of ~~Statements”~~the ~~and~~Notes ~~“Risk~~to ~~Factors~~the Financial Statements.”

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.”

Overview

We offer a range of individual annuities and individual life insurance products in New York. For operating purposes, we have established two segments: Annuities and Life. In addition, we report certain of our results of operations in Corporate & Other. See “Business — Segments and Corporate & Other” and Note 2 of the Notes to the Financial Statements for further information on our segments and Corporate & Other.

COVID-19 Pandemic

We continue to closely monitor developments related to the worldwide pandemic sparked by the novel coronavirus (“COVID-19 pandemic”), which has negatively impacted us in certain respects, as discussed below. At this time, it is not possible to estimate the severity or duration of the pandemic, including the severity, duration and frequency of any additional “waves” of the pandemic or the timetable for the implementation, and the efficacy, of any therapeutic treatments and vaccines for COVID-19, including their efficacy with respect to variants of COVID-19 that have emerged or could emerge in the future. It is likewise not possible to predict or estimate the longer-term effects of the pandemic, or any actions taken to contain or address the pandemic, on the economy at large and on our business, financial condition, results of operations and prospects, including the impact on our investment portfolio and our ratings, or the need for us in the future to revisit or revise targets previously provided to the markets or aspects of our business model. See “Risk Factors — Risks Related to Our Business — The ongoing COVID-19 pandemic could materially adversely affect our business, financial condition and results of operations, including our capitalization and liquidity.”

In March 2020, in response to the COVID-19 pandemic, management promptly implemented our business continuity plans, and quickly and successfully shifted all our employees to a work-from-home environment, where they currently remain. Our sales and support teams remain fully operational, and the COVID-19 pandemic has not interrupted our ability to service our distribution partners and customers. Additionally, we are closely monitoring all aspects of our business, including but not limited to, levels of sales and claims activity, policy lapses or surrenders, payments of premiums, sources and uses of liquidity, the valuation of our investments and the performance of our derivatives programs. We have observed varying degrees of impact in these areas, and we have taken prudent and proportionate measures to address such impacts; however, at this time it is impossible to predict if the COVID-19 pandemic will have a material adverse impact on our business, financial condition or results of operations. We continue to closely monitor this evolving situation as we remain focused on ensuring the health and safety of our employees, on supporting our partners and customers as usual and on mitigating potential adverse impacts to our business.

Increased economic uncertainty and increased unemployment resulting from the economic impacts of the COVID-19 pandemic have also impacted sales of certain of our products and have prompted us to take actions to provide relief to customers affected by adverse circumstances due to the COVID-19 pandemic. While the relief granted to customers to date has not had a material impact on our financial condition or results of operations, it is not possible to estimate the potential

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impact of any future relief. Circumstances resulting from the COVID-19 pandemic have also impacted the incidence of claims and may have impacted the utilization of benefits, lapses or surrenders of policies and payments on insurance premiums, though such impacts have not been material through year end 2020. Additionally, circumstances resulting from the COVID-19 pandemic have not materially impacted services we receive from third-party vendors, nor have such circumstances led to the identification of new loss contingencies or any increases in existing loss contingencies. However, there can be no assurance that any future impact from the COVID-19 pandemic, including, without limitation, with respect to revenues and expenses associated with our products, services we receive from third-party vendors, or loss contingencies, will not be material.

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 Financial Statements.

The most critical estimates include those used in determining:

~~(i)~~ •liabilities for future policy benefits;

~~(ii)~~ •amortization of DAC;

~~(iii)~~•estimated ~~investment~~fair ~~impairments~~values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation; and

~~(iv)~~•measurement ~~estimated fair values~~ of ~~freestanding~~income ~~derivatives~~taxes and the ~~recognition~~valuation ~~and estimated fair value~~ of ~~embedded~~deferred ~~derivatives~~tax ~~requiring bifurcation; and~~assets.

(v) measurement of income taxes and the valuation of deferred tax assets.

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 Financial Statements.

Liability for Future Policy Benefits

Future policy benefits for traditional long-duration insurance contracts (term, ~~whole~~ life insurance and income annuities) are payable over an extended period of time and the related liabilities are equal to the present value of future expected benefits to be paid, reduced by the present value of future expected net premiums. Assumptions used to measure the liability are based on the Company’s experience and include a margin for adverse deviation. The ~~principal~~most significant assumptions used in the establishment of liabilities for future policy benefits are mortality, ~~morbidity,~~ benefit ~~utilization~~election and utilization, withdrawals, policy lapse, ~~retirement,~~and ~~disability incidence, disability terminations,~~ investment returns ~~and expenses~~. These assumptions, intended to estimate the experience for the period the policy benefits are payable, are established at the time the policy is issued and are not updated unless a premium deficiency exists. Utilizing these assumptions, liabilities are established for each line of business. If experience is less favorable than assumed and a premium deficiency exists, DAC may be reduced, ~~and/~~or additional insurance liabilities established, resulting in a reduction in earnings.

Future policy benefit liabilities for GMDBs and certain GMIBs relating to variable annuity contracts are based on estimates of the expected value of benefits in excess of the projected account balance, recognizing the excess ratably over the accumulation period based on total expected assessments. ~~Liabilities~~The ~~for~~most ~~universal~~significant ~~and~~assumptions for variable ~~life~~annuity ~~insurance~~guarantees ~~secondary~~included ~~guarantees~~in future policyholder benefits are ~~determined~~projected bygeneral ~~estimating~~account ~~the~~and ~~expected~~separate ~~value~~account ofinvestment ~~death~~returns, ~~benefits~~as ~~payable~~well ~~when~~as ~~the~~policyholder ~~account~~behavior ~~balance~~including ismortality, ~~projected~~benefit toelection beand ~~zero~~utilization, ~~using~~and withdrawals.

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aWe ~~range~~regularly review our assumptions supporting our estimates of ~~scenarios~~all ~~and~~actuarial ~~recognizing~~liabilities ~~those~~for future policy benefits. ~~ratably~~For ~~over~~variable ~~the~~annuity ~~contract~~product ~~period~~guarantees, ~~based~~assumptions onare ~~total~~updated ~~expected~~periodically, ~~assessments.~~whereas ~~The~~for ~~Company~~traditional ~~also~~long-duration ~~maintains~~insurance contracts, assumptions are established at inception and not updated unless a ~~profit~~premium deficiency exists. We also review our liability projections to determine if profits are projected in earlier years followed by losses ~~reserve~~projected onin ~~universal~~later ~~life~~years, ~~insurance~~which ~~with~~could ~~secondary~~require ~~guarantees~~us to establish an additional liability. ~~The~~We ~~assumptions~~aggregate ofinsurance ~~investment~~contracts ~~performance~~by product and ~~volatility~~segment ~~for~~in ~~variable~~assessing ~~products~~whether ~~are~~a ~~consistent~~premium ~~with~~deficiency ~~historical~~or profits followed by losses exists. Differences between actual experience ofand the ~~underlying~~assumptions ~~separate~~used ~~account~~in ~~funds~~pricing our policies and guarantees, as well as adjustments to the related liabilities, result in changes to earnings.

WeSee ~~regularly~~Note 1 ~~review our assumptions supporting our estimates~~ of ~~actuarial~~the ~~liabilities~~Notes ~~for~~to ~~future~~the ~~policy~~Financial ~~benefits.~~Statements ~~For universal life and annuity product guarantees, assumptions are updated periodically, whereas~~ for ~~traditional~~additional ~~long-duration~~information ~~insurance~~on ~~contracts, assumptions are established at inception and not updated unless a premium deficiency exists. We also review~~ our ~~liability~~accounting ~~projections~~policy torelating ~~determine if profits are projected in earlier years followed by losses projected in later years, which could require us~~ to ~~establish~~variable anannuity ~~additional~~guarantees ~~liability. We aggregate insurance contracts by product~~ and ~~segment in assessing whether a premium deficiency or profits followed by losses exists. Differences between actual experience and~~ the ~~assumptions~~liability ~~used~~for infuture ~~pricing~~policy ~~our policies and guarantees, as well as adjustments to the related liabilities, result in changes to earnings~~benefits.

See Note 1 of the Notes to the Financial Statements for additional information on our accounting policy relating to variable annuity guarantees and liability for future policy benefits.

Deferred Policy Acquisition Costs

DAC represents deferred costs that relate directly to the successful acquisition or renewal of insurance contracts. The recovery of DAC is dependent upon the future profitability of the related business.

DAC related to deferred annuities, ~~universal and variable life insurance contracts~~ is amortized based on expected future gross profits, which is determined by using assumptions consistent with measuring the related liabilities. DAC balances and amortization for variable annuity contracts can be significantly impacted by changes in expected future gross profits related to projected separate account rates of return. Our practice of determining changes in projected separate account returns assumes that long-term appreciation in equity markets is not changed by short-term market fluctuations ~~but~~and is only changed when sustained interim deviations are expected. We monitor these events and only change the assumption when our long-term expectation changes. The effect of an increase (decrease) by 100 basis points in the assumed future rate of return is reasonably likely to result in a decrease (increase) in the DAC amortization with an offset to our unearned revenue liability which nets to approximately $15 million. We use a mean reversion approach to separate account returns where the mean reversion period is five years with a long-term separate account return after the five-year reversion period is over. The current long-term rate of return assumption for variable annuity ~~and variable universal life insurance~~ contracts is in the 6-7% range.

We also generally review other long-term assumptions underlying the projections of expected future gross profits on an annual basis. These assumptions primarily relate to general account investment returns, ~~interest crediting rates,~~ mortality, in-force or persistency, benefit elections and ~~withdrawals~~utilization, and ~~expenses to administer business~~withdrawals. Assumptions used in the calculation of expected future gross profits which have significantly changed are updated annually. If the update of assumptions causes expected future gross profits to increase, DAC amortization will generally decrease, resulting in a current period increase to earnings. The opposite result occurs when the assumption update causes expected future gross profits to decrease.

Our DAC balances are also impacted by replacing expected future gross profits with actual gross profits in each reporting period, including changes in annuity embedded derivatives and the related nonperformance risk. When the change in expected future gross profits principally relates to the difference between actual and estimates in the current period, an increase in profits will generally result in an increase in amortization and a decrease in profits will generally result in a decrease in amortization.

See Notes 1 and 4 of the Notes to the Financial Statements for additional information relating to DAC accounting policy and amortization.

Investment Impairments

One of the significant estimates related to AFS securities is our impairment evaluation. The assessment of whether an other-than-temporary impairment (“OTTI”) occurred is based on our case-by-case evaluation of the underlying reasons for the decline in estimated fair value on a security-by-security basis. Our review of each fixed maturity security for OTTI includes an analysis of gross unrealized losses by three categories of severity and/or age of gross unrealized loss. An extended and severe unrealized loss position may not have any impact on the ability of the issuer to service all scheduled interest and principal payments. Accordingly, such an unrealized loss position may not impact our evaluation of recoverability of all contractual cash flows or the ability to recover an amount at least equal to its amortized cost based on the present value of the expected future cash flows to be collected.

Additionally, we consider a wide range of factors about the security issuer and use our best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in our evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Factors we consider in the OTTI evaluation process are described in Note 6 of the Notes to the Financial Statements.

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The determination of the amount of allowances and impairments on the remaining invested asset classes is highly subjective and is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available.

See Notes 1 and 6 of the Notes to the Financial Statements for additional information relating to our determination of the amount of allowances and impairments.

Derivatives

We use freestanding derivative instruments to hedge various capital market risks in our products, including: (i) crediting rates associated with index-linked annuities which are reported as embedded derivatives; (ii) current or future changes in the fair value of our assets and liabilities; and (iii) 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) 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 7 of the Notes to the Financial Statements for additional information on significant inputs into the OTC derivative pricing models and credit risk adjustment.

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Embedded Derivatives in Variable Annuity Guarantees

We issue variable annuity products with guaranteed minimum benefits, some of which are embedded derivatives measured at estimated fair value separately from the host variable annuity product, with changes in estimated fair value reported in net derivative gains (losses). The estimated fair values of these embedded derivatives are determined based on the present value of projected future benefits minus the present value of projected future fees attributable to the guarantee. The projections of future benefits and future fees require capital markets and actuarial assumptions, including expectations concerning policyholder behavior. A risk neutral valuation methodology is used under which the cash flows from the guarantees are projected under multiple capital market scenarios using observable risk-free rates and implied equity volatilities.

We cede the risk associated with the variable annuities with guaranteed minimum benefits described in the preceding paragraphs to our parent, Brighthouse Life Insurance Company. Certain features of the ceded guarantees are accounted for as an embedded derivative with the value determined using a methodology consistent with that described previously for the guarantees directly written by us. However, because certain directly written GMIB riders are accounted for as insurance liabilities rather than fair value, significant fluctuations in net income may occur when the change in the fair value of the reinsurance recoverable is recorded in net income without a corresponding and offsetting change in fair value of the directly written guaranteed liability.

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 market inputs, as well as changes in our nonperformance risk may result in significant fluctuations in the estimated fair value of the guarantees that could have a material impact on net income. Changes to actuarial assumptions, principally related to contract holder behavior such as annuitization utilization and withdrawals associated with GMIB riders, can result in a change of expected future cash outflows of a guarantee between the accrual-based model for insurance liabilities and the fair value based model for embedded derivatives. See Note 1 of the Notes to the Financial Statements for additional information relating to the determination of the accounting model. Risk margins are established to capture the non-capital market 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 management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees.

Assumptions for embedded derivatives are reviewed at least annually, and if they change significantly, the estimated fair value is adjusted by a cumulative charge or credit to net income.

See Notes 7 and 8 of the Notes to the Financial Statements for additional information on our embedded derivatives and the determination of their fair values.

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Embedded Derivatives in Index-Linked Annuities

The Company issues index-linked annuities that contain equity crediting rates accounted for as an embedded derivative. The crediting rates are measured at estimated fair value which is determined using a combination of an option pricing methodology and an option-budget approach. The estimated fair value includes capital market and actuarial policyholder behavior and biometric assumptions, including expectations for renewals at the end of the term period. 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.

Nonperformance Risk Adjustment

The valuation of our embedded derivatives includes an adjustment for the risk that we fail to satisfy our obligations, which we refer to as our nonperformance risk. The nonperformance risk adjustment is captured as a spread over the risk-free rate in determining the discount rate to discount the cash flows of the liability.

The spread over the risk-free rate is based on BHF’s creditworthiness taking into consideration publicly available information relating to spreads in the secondary market for BHF’s debt. These observable spreads are then adjusted, as necessary, to reflect our financial strength ratings as compared to the credit rating of BHF.

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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 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 1112 of the Notes to the Financial Statements for additional information on our income taxes.

Non-GAAP Disclosures

Our definitions of the non-GAAP measures may differ from those used by other companies.

Non-GAAP Financial Disclosures

Adjusted Earnings

In this report, we present adjusted earnings as a measure of our performance that is not calculated in accordance with GAAP. We believe that this non-GAAP financial measure highlights our results of operations and the underlying profitability drivers of our business~~, as well as enhances the understanding of our performance by the investor community~~. However, adjusted earnings should not be viewed as a substitute for net income (loss), 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).

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Adjusted earnings, which may be positive or negative, is used by management to evaluate performance, allocate resources and facilitate comparisons to industry results. This financial measure focuses on our primary businesses principally by excluding the impact of market volatility, which could distort trends.

The following are significant items excluded from total revenues, net of income tax, in calculating adjusted earnings:

• Net investment gains (losses);

• Net derivative gains (losses) except earned income ~~on derivatives~~ and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment (“Investment Hedge Adjustments”); and

• Certain variable annuity GMIB fees (“GMIB Fees”) ~~and amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses)~~.

The following are significant items excluded from total expenses, net of income tax, in calculating adjusted earnings:

• Amounts associated with benefits related to GMIBs (“GMIB Costs”);

• Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”); and

~~• Amortization of DAC related to (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments.~~43

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•Amortization of DAC related to (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments.

The tax impact of the adjustments mentioned is calculated net of the statutory tax rate, which could differ from our effective tax rate.

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 statement of operations line items:

Component of Adjusted Earnings		~~How Derived from GAAP (1)~~		How Derived from GAAP (1)
(i)	~~Fee income~~	~~(i)~~	~~Universal~~Fee life and investment-type policy fees (excluding (a) unearned revenue adjustments related to net investment gains (losses) and net derivative gains (losses) and (b) GMIB Fees) plus Other revenues (excluding other revenues associated with related party reinsurance) and amortization of deferred gain on reinsurance.income	(i)	Universal life and investment-type policy fees (excluding (a) unearned revenue adjustments related to net investment gains (losses) and net derivative gains (losses) and (b) GMIB Fees) plus Other revenues (excluding other revenues associated with related party reinsurance) and amortization of deferred gain on reinsurance.
(ii)	~~Net investment spread~~	~~(ii)~~	Net investment income plus Investment Hedge Adjustments and interest received on ceded fixed annuity reinsurance deposit funds reduced by Interest credited to policyholder account balances and interest on future policy benefits.spread	(ii)	Net investment income plus Investment Hedge Adjustments and interest received on ceded fixed annuity reinsurance deposit funds reduced by Interest credited to policyholder account balances and interest on future policy benefits.
(iii)	~~Insurance-related activities~~	~~(iii)~~	Premiums less Policyholder benefits and claims (excluding (a) GMIB Costs, (b) Market Value Adjustments, (c) interest on future policy benefits and (d) amortization of deferred gain on reinsurance plus the passInsurance-~~through~~related ~~of performance of ceded separate account assets.~~activities	(iii)	Premiums less Policyholder benefits and claims (excluding (a) GMIB Costs, (b) Market Value Adjustments, (c) interest on future policy benefits and (d) amortization of deferred gain on reinsurance) plus the pass through of performance of ceded separate account assets.
(iv)	~~Amortization of DAC~~	~~(iv)~~	Amortization of DAC ~~(excluding amounts related to (a) net investment gains (losses), (b) net derivative gains (losses), (c) GMIB Fees and GMIB Costs and (d) Market Value Adjustments).~~	(iv)	Amortization of DAC (excluding amounts related to (a) net investment gains (losses), (b) net derivative gains (losses), (c) GMIB Fees and GMIB Costs and (d) Market Value Adjustments).
(v)	~~Other expenses, net of DAC capitalization~~	~~(v)~~	Other expenses, ~~reduced~~net ~~by capitalization~~ of DAC capitalization	(v)	Other expenses reduced by capitalization of DAC.
(vi)	~~Provision for income tax expense (benefit)~~	~~(vi)~~	~~Tax~~Provision ~~impact~~for ofincome ~~the~~tax ~~above~~expense ~~items.~~(benefit)	(vi)	Tax impact of the above items.

_______________

(1) Italicized items indicate GAAP statement 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 Financial Statements.

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Results of Operations

Results for the Years Ended December 31, ~~2019~~2020 and ~~2018~~2019

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,~~		Years Ended December 31,
	2019				2018
			2020					2019
	~~(In millions)~~		(In millions)
Revenues
Premiums	$	23	$	22	$	37		$	23
Universal life and investment-type product policy fees	97		93		~~102~~			97
Net investment income	~~122~~		134		~~100~~			122
Other revenues	~~(85~~		(83)		~~(59~~		)	(85)
Net investment gains (losses)	4		13		(7		)	4
Net derivative gains (losses)	42		129		~~(18~~		)	42
Total revenues	~~203~~		308		~~155~~			203
Expenses
Policyholder benefits and claims	33		23		7			33
Interest credited to policyholder account balances	36		38		38			36
Capitalization of DAC	~~(39~~		(42)		~~(30~~		)	(39)
Amortization of DAC	22		38		1			22
Other expenses	~~120~~		119		96			120
Total expenses	~~172~~		176		~~112~~			172
Income (loss) before provision for income tax	31		132		43			31
Provision for income tax expense (benefit)	3		25		5			3
Net income (loss)	$	28	$	107	$	38		$	28

The ~~following table presents the~~ components of net income (loss) were as follows:

	~~Years Ended December 31,~~		Years Ended December 31,
	2019				2018
			2020					2019
	~~(In millions)~~		(In millions)
GMLB Riders	$	77	$	102	$	1		$	77
Other derivative instruments	(8		)1		(1		)	(8)
Net investment gains (losses)	4		13		(7		)	4
Pre-tax adjusted earnings	~~(42~~		)16		50			(42)
Net income (loss) before provision for income tax	31				43
Income (loss) before provision for income tax			132					31
Provision for income tax expense (benefit)	3		25		5			3
Net income (loss)	$	28	$	107	$	38		$	28

GMLB Riders. We directly issue variable annuity products with guaranteed minimum living benefits (“GMLB”) riders (“GMLB Riders”) under which we have the obligation to protect policyholders against the possibility that a downturn in the markets will reduce the specified benefits. Any periods of significant ~~and/~~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), which could be significant. To mitigate this exposure, all of the economic risk associated with the GMLB Riders is currently ceded under reinsurance agreements with ~~BLIC~~Brighthouse Life Insurance Company. Certain features of the ceded GMLBs are accounted for as embedded derivatives, even when those same features are not accounted for as embedded derivatives on the directly written GMLBs. This difference in accounting may result in significant fluctuations in net income (loss) when a change in the fair value of the reinsurance receivable is recorded in net income (loss) with only a partial corresponding offset in the value of the directly written GMLBs. See “— Summary of Critical Accounting Estimates — Derivatives.”

40Shield Annuities, also included in GMLB Riders, provide the ability for the contract holder to participate in the appreciation of certain financial markets up to a stated level, while offering protection from a portion of declines in the

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Shield Annuities currently offered provide the ability for the contract holder 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. We ~~believe that Shield Annuities may provide us with risk offset to the direct liabilities related to the GMLB’s and therefore include them with the GMLB Riders. We~~ use derivative instruments, primarily equity options, to hedge against our exposure to changes in fair value of the Shield Annuities.

Other Derivative Instruments. In addition to derivatives included in GMLB Riders, we enter into other freestanding derivative instruments primarily to hedge foreign currency risks when we have foreign denominated fixed maturity securities backing our U.S dollar denominated liabilities. The changes in fair value of the hedges are accounted for in net income (loss), through net derivative gains (losses), while the offsetting economic impact on the items they are hedging are either not recognized or recognized in equity through other comprehensive income.

Pre-tax Adjusted Earnings. As more fully described in “— Non-GAAP Disclosures,” we use adjusted earnings, which does not equate to net income (loss), as determined in accordance with GAAP. We believe that the presentation of adjusted earnings, as we measure it for management purposes, enhances the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of the business. Adjusted earnings and other financial measures based on adjusted earnings allow analysis of our performance relative to our business plan and facilitate comparisons to industry results. Adjusted earnings should not be viewed as a substitute for net income (loss).

Year Ended December 31, ~~2019~~2020 Compared with the Year Ended December 31, ~~2018~~2019

~~Net~~Income ~~income~~ before provision for income tax was $31132 million ($28107 million, net of income tax), aan ~~decrease~~increase of $12101 million ($1079 million, net of income tax) from ~~net~~ income before provision for income tax of $4331 million ($3828 million, net of income tax) in the prior period.

The ~~decrease~~increase in income before provision for income tax was driven by the following key ~~unfavorable~~favorable items:

•higher ~~lower~~ pre-tax adjusted earnings, discussed in greater detail below; and

•a ~~current~~net ~~period~~favorable ~~losses~~change ~~from~~in ~~freestanding~~GMLB ~~derivatives~~and ~~due~~GMLB toRiders ~~the~~from ~~impact~~equity ofmarkets ~~long-term~~increasing ~~interest~~less ~~rates decreasing~~ in the current period ~~and~~than ~~unfavorable changes~~ in ~~foreign~~the ~~currency~~prior ~~swaps~~period ~~due~~and tolower ~~the~~interest ~~U.S.~~rates ~~dollar~~resulted ~~weakening.~~in:

~~The~~◦favorable ~~decrease~~changes in ~~income~~our ~~before~~ceded ~~provision~~reinsurance; ~~for income tax was partially offset by:~~ and

~~• net~~ ◦favorable changes in ~~GMLB~~freestanding ~~Riders~~equity ~~driven~~derivative ~~by:~~positions hedging Shield Annuities, which more than offset the unfavorable changes in Shield liabilities;

◦partially ~~favorable changes in freestanding equity derivative positions hedging our Shield Annuities, which more than~~ offset ~~the unfavorable changes in Shield liability reserves due, both resulting from higher relative equity markets;~~by

◦unfavorable ~~net favorable~~ changes in fair value of variable annuity liability reserves ~~as the impact from higher relative equity markets more than offset the impact of lower interest rates~~; ~~and~~

•◦an ~~favorable~~unfavorable ~~changes~~change in ~~net~~GMLB ~~investment~~DAC; ~~gains (losses) reflecting gains in the current period, compared to losses in the prior period, from the sale of fixed maturity securities.~~and

~~The~~◦unfavorable ~~provision~~changes ~~for income tax~~ in the current period ~~led~~due to anthe ~~effective~~annual ~~tax~~actuarial ~~rate~~review ofresulting ~~10%, compared to 12%~~ in ~~the~~higher ~~prior~~reserves ~~period.~~and ~~Our~~higher ~~effective~~DAC ~~tax~~amortization; ~~rate primarily differs from the statutory tax rate due to the impacts of the dividends received deductions and tax credits.~~

41•lower losses in the current period from freestanding derivatives due to the impact of long-term interest rates decreasing in the current period and favorable changes in foreign currency swaps due to the U.S. dollar weakening;

•favorable changes in net investment gains (losses) reflecting gains in the current period from the sale of fixed maturity securities.

The provision for income tax in the current period led to an effective tax rate of 19%, compared to 10% in 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.

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Reconciliation of Net Income (Loss) to Adjusted Earnings

The ~~following~~reconciliation ~~table~~of ~~reconciles~~ net income (loss) to adjusted earnings was as follows:

	~~Years Ended December 31,~~		Years Ended December 31,
	2019				2018
			2020					2019
	~~(In millions)~~		(In millions)
Net income (loss)	$	28	$	107	$	38		$	28
Add: Provision for income tax expense (benefit)	3		25		5			3
Net income (loss) before provision for income tax	31				43
Income (loss) before provision for income tax			132					31
Less: GMLB Riders	77		102		1			77
Less: Other derivative instruments	(8		)1		(1		)	(8)
Less: Net investment gains (losses)	4		13		(7		)	4
Pre-tax adjusted earnings	~~(42~~		)16		50			(42)
Less: Provision for income tax expense (benefit)	~~(12~~		)1		7			(12)
Adjusted earnings	$	~~(30~~	)$	15	$	43		$	(30)

Results for the Years Ended December 31, ~~2019~~2020 and ~~2018~~2019 - Adjusted Earnings

The ~~following table presents the~~ components of adjusted earnings were as follows:

	~~Years Ended December 31,~~		Years Ended December 31,
	2019				2018
			2020					2019
	~~(In millions)~~		(In millions)
Fee income	$	~~136~~	$	127	$	~~146~~		$	136
Net investment spread	68		77		45			68
Insurance-related activities	~~(125~~		(72)		~~(51~~		)	(125)
Amortization of DAC	~~(40~~		(39)		~~(24~~		)	(40)
Other expenses, net of DAC capitalization	~~(81~~		(77)		~~(66~~		)	(81)
Pre-tax adjusted earnings	~~(42~~		)16		50			(42)
Provision for income tax expense (benefit)	~~(12~~		)1		7			(12)
Adjusted earnings	$	~~(30~~	)$	15	$	43		$	(30)

Year Ended December 31, ~~2019~~2020 Compared with the Year Ended December 31, ~~2018~~2019

Adjusted earnings were ~~a loss of~~ $3015 million, aan ~~decrease~~increase of $7345 million.

Key ~~unfavorable~~favorable impacts were:

•lower ~~higher~~ costs associated with insurance-related activities ~~due~~driven ~~to:~~by lower paid claims, net of reinsurance; and

◦•higher ~~unfavorable~~net ~~change~~investment inspread ~~the~~reflecting ~~fair~~higher ~~value~~average ofinvested ~~the underlying ceded separate account~~ assets ~~under~~resulting afrom ~~related~~positive ~~party~~net ~~reinsurance~~flows ~~agreement~~in ~~for~~the ~~certain~~general ~~variable annuity contracts;~~account.

◦The ~~higher~~increase ~~severity~~in ofadjusted ~~paid~~earnings ~~claims~~was ~~net~~partially ofoffset ~~reinsurance;~~by ~~and~~lower fee income due to lower asset-based fees resulting from lower average separate account balances.

◦The ~~higher~~provision ~~reserves~~for income tax in the current period onled ~~yearly~~to ~~renewable~~an ~~term~~effective ~~business~~tax ~~reinsured~~rate of 6%, compared to an29% ~~affiliate;~~in 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.

• higher amortization of DAC in our annuity business primarily driven by changes in the long-term general account earned rate in connection with our annual actuarial assumption review;

• higher other expenses due to an increase in the allocation of corporate expenses; and

• lower fee income due to lower asset-based fees resulting from lower average separate account balances.

The decrease in adjusted earnings was partially offset by higher net investment spread, reflecting higher average invested assets resulting from positive net flows in the general account.

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The provision for income tax in the current period led to an effective tax rate of 29%, compared to 14% in the prior period. Our effective tax rate primarily differs from the statutory tax rate due to the impacts of the dividends received deductions and tax credits.

Effects of Inflation

Management believes that inflation has not had a material effect on the Company’s results of operations, except insofar as inflation may affect interest rates.

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An increase in inflation could affect our business in several ways. During inflationary periods, the value of fixed income investments falls which could increase realized and unrealized losses. Inflation also increases expenses for labor and other materials, potentially putting pressure on profitability if such costs cannot be passed through in our product prices. Prolonged and elevated inflation could adversely affect the financial markets and the economy generally and dispelling it may require governments to pursue a restrictive fiscal and monetary policy, which could constrain overall economic activity, inhibit revenue growth and reduce the number of attractive investment opportunities.

Off-Balance Sheet Arrangements

Collateral for Derivatives

We enter into derivatives to manage various risks relating to our ongoing business operations. We have non-cash collateral derivatives, which can be sold or re-pledged subject to certain constraints, and which has not been recorded on our balance sheets. The amount of this non-cash collateral was $435 million and $24 million at December 31, ~~2019~~2020 and ~~2018~~2019, respectively. See Note 7 of the Notes to the Financial Statements for information regarding the earned income on and the gross notional amount, estimated fair value of assets and liabilities, and primary underlying risk exposure of our derivatives.

Guarantees

See “Guarantees” in Note 1213 of the Notes to the Financial Statements.

Other

Additionally, we enter into mortgage loan commitments for the purpose of enhancing the total return on our investment portfolio. See Note 6 of the Notes to the Financial Statements for information on the investment income, investment expense, gains and losses from such investments, as well as for information on our investments in mortgage loans.

Other than the commitments disclosed in Note 1213 of the Notes to the Financial Statements, there are no other material obligations or liabilities arising from the commitments to fund mortgage loans.

Policyholder Liabilities

We establish, and carry as liabilities, actuarially determined amounts that are calculated to meet policy obligations or to provide for future annuity payments. Amounts for actuarial liabilities are computed and reported in the financial statements in conformity with GAAP. For more details on policyholder liabilities, see “— Summary of Critical Accounting Estimates.”

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, ~~results~~financial ofcondition ~~operations~~ and ~~financial~~results ~~condition~~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, ~~results~~financial ofcondition ~~operations,~~ and ~~financial~~results ~~condition~~of operations. Due to their nature, we cannot predict the incidence, timing, severity or amount of losses from catastrophes and acts of terrorism, but we make broad use of catastrophic and non-catastrophic reinsurance to manage risk from these perils.

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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. For further information regarding market factors that could affect our ability to meet liquidity and capital needs, including those related to the COVID-19 pandemic, see “Risk Factors — Risks Related to Our Business — The ongoing COVID-19 pandemic could materially adversely affect our business, financial condition and results of operations, including our capitalization and liquidity” and “— Overview — COVID-19 Pandemic.”

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 ~~under~~in current market conditions and certain stress scenarios. 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 $~~115~~203 million and $97115 million at December 31, ~~2019~~2020 and ~~2018~~2019, 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 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 $23.63 billion and $2.06 billion at December 31, ~~2019~~2020 and ~~2018~~2019, 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 derivatives and assets held on deposit or in trust.

Rating Agencies

The following financial strength ratings represent each rating agency’s current opinion of our ability to pay obligations under insurance policies and contracts in accordance with their terms and are not evaluations directed toward the protection of investors in our securities. 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 as of the date of this filing are indicated in the following table. All financial strength ratings have a stable outlook.

A.M. Best

Fitch

Moody’s

S&P

“A++ (superior)” to “S (suspended)”

“AAA (exceptionally strong)” to “C (distressed)”

“Aaa (highest quality)” to “C (lowest rated)”

“AAA (extremely strong)” to “SD (Selective Default)” or “D (Default)”

Brighthouse Life Insurance Company of NY

A+

3rd of 16

5th of 22

_______________

NR = Not rated

Additional information about financial strength ratings can be found on the respective websites of the rating agencies.

~~Rating~~Credit rating agencies may continue to review and adjust our ratings. For example, in April 2020, Fitch revised the rating outlook for certain affiliates to negative from stable due to the disruption to economic activity and the financial markets from the COVID-19 pandemic. This action by Fitch followed its revision of the rating outlook on the U.S. life insurance industry to negative. See “Risk Factors — Risks Related to Our Business — A downgrade or a potential downgrade in our financial strength ratings could result in a loss of business and materially adversely affect our financial condition and results of operations” for an in-depth description of the impact of a ratings downgrade.

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Sources and Uses of Liquidity and Capital

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.

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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 Asset Liability Management (“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 flows from our financing activities come from deposits and withdrawal of funds associated with policyholder account balances and changes in collateral related to derivative activities, as well as occasional capital contributions received from and cash dividends paid to our parent, Brighthouse Life Insurance Company. The primary liquidity concerns with respect to these cash flows are market disruption and the risk of early policyholder withdrawal.

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:

Intercompany Liquidity Facilities

See Note 9 of the Notes to the Financial Statements for information relating to our intercompany liquidity facilities including obligations outstanding, issuances and repayments.

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. Surrender or lapse behavior differs somewhat by product, but tends to occur in the ordinary course of business. During the years ended December 31, 2020, 2019 and 2018, general account surrenders and withdrawals totaled $48 million, $92 million and $108 million, respectively.

Pledged Collateral

We pledge collateral to, and have collateral pledged to us by, counterparties in connection with our derivatives. At both December 31, ~~2019~~2020 and ~~2018~~2019, we ~~had~~did ~~pledged~~not nopledge any cash collateral to counterparties. At December 31, ~~2019~~2020 and ~~2018~~2019, we were obligated to return cash collateral pledged to us by counterparties of $82137 million and $2482 million, respectively. See Note 7 of the Notes to the Financial Statements for additional information about pledged collateral.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Risk Management

We have an integrated process for managing risk exposures, which is coordinated among our Risk Management, Finance and Investment Departments. The process is designed to assess and manage exposures on a company-wide basis. Brighthouse Financial, Inc. has established a Balance Sheet Committee (“BSC”). The BSC is responsible for periodically reviewing all material financial risks to us and, in the event risks exceed desired tolerances, informs the Finance and Risk Committee of the Brighthouse Financial, Inc. Board of Directors, considers possible courses of action and determines how best to resolve or mitigate such risks. In taking such actions, the BSC considers industry best practices and the current economic environment. The BSC also reviews and approves target investment portfolios in order to align them with our liability profile and establishes guidelines and limits for various risk-taking departments, such as the Investment Department. Our Finance Department and our Investment Department, together with Risk Management are responsible for coordinating our ALM strategies throughout the enterprise. The membership of the BSC is comprised of the following members of Brighthouse’s senior management: Chief Executive Officer, Chief Risk Officer, Chief Financial Officer, Chief Operating Officer and Chief Investment Officer.

Our significant market risk management practices include, but are not limited to the following:

Managing Interest Rate Risk

We manage interest rate risk as part of our asset and liability management strategies, which include (i) maintaining an investment portfolio that has a weighted average duration approximately equal to the duration of our estimated liability cash flow profile, and (ii) maintaining hedging programs, including a macro interest rate hedging program. For certain of our liability portfolios, it is not possible to invest assets to the full liability duration, thereby creating some asset/liability mismatch. Where a liability cash flow may exceed the maturity of available assets, as is the case with certain retirement products, we may support such liabilities with equity investments, derivatives or other mismatch mitigation strategies. Although we take measures to manage the economic risks of investing in a changing interest rate environment, we may not be able to mitigate completely the interest rate or other mismatch risk of our fixed income investments relative to our interest rate sensitive liabilities. The level of interest rates also affects our liabilities for benefits under our annuity contracts. As interest rates decline, we may need to increase our reserves for future benefits under our annuity contracts, which would adversely affect our ~~results~~financial ofcondition ~~operations~~ and ~~financial~~results ~~condition~~of operations.

We also employ product design and pricing strategies to mitigate the potential effects of interest rate movements. These strategies include the use of surrender charges or restrictions on withdrawals in some products and the ability to reset crediting rates for certain products.

We analyze interest rate risk using various models, including multi-scenario cash flow projection models that forecast cash flows of the liabilities and their supporting investments, including derivatives. These projections involve evaluating the potential gain or loss on most of our in-force business under various increasing and decreasing interest rate environments. State insurance department regulations require that we perform some of these analyses annually as part of our review of the sufficiency of our regulatory reserves. We measure relative sensitivities of the value of our assets and liabilities to changes in key assumptions using internal models. These models reflect specific product characteristics and include assumptions based on current and anticipated experience regarding lapse, mortality and interest crediting rates. In addition, these models include asset cash flow projections reflecting interest payments, sinking fund payments, principal payments, bond calls, prepayments and defaults.

We also use common industry metrics, such as duration and convexity, to measure the relative sensitivity of asset and liability values to changes in interest rates. In computing the duration of liabilities, we consider all policyholder guarantees and how indeterminate policy elements such as interest credits or dividends are set. Each asset portfolio has a duration target based on the liability duration and the investment objectives of that portfolio.

Managing Equity Market and Foreign Currency Risks

We manage equity market risk in a coordinated process across our Risk Management, Investment and Finance Departments primarily through the use of derivatives ~~including equity options~~ to hedge losses, which may be temporary, from changes in equity markets without adversely affecting our financial strength ratings. We may also employ reinsurance strategies to manage these exposures. Key management objectives include limiting losses, minimizing exposures to significant risks and providing additional capital capacity for future growth. The Investment and Finance Departments are also responsible for managing the exposure to foreign currency denominated investments. We use foreign currency swaps and forwards to mitigate the exposure, risk of loss and financial statement volatility associated with foreign currency denominated fixed income investments.

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Market Risk - Fair Value Exposures

We regularly analyze our market risk exposure to interest rate, equity market price, credit spreads and foreign currency exchange rate risks. As a result of that analysis, we have determined that the estimated fair values of certain assets and liabilities are significantly exposed to changes in interest rates, and to a lesser extent, to changes in equity market prices and foreign currency exchange rates. We have exposure to market risk through our insurance and annuity operations and general account investment activities. For purposes of this discussion, “market risk” is defined as changes in estimated fair value resulting from changes in interest rates, equity market prices, credit spreads and foreign currency exchange rates. We may have additional financial impacts, other than changes in estimated fair value, which are beyond the scope of this discussion. See “Risk Factors” for additional disclosure regarding our market risk and related sensitivities.

Interest Rates

Our fair value exposure to changes in interest rates arises most significantly from our interest rate sensitive liabilities and our holdings of fixed maturity securities, mortgage loans and derivatives that are used to support our policyholder liabilities. Our interest rate sensitive liabilities include policyholder account balances related to certain investment-type contracts, and embedded derivatives in variable annuity contracts with guaranteed minimum benefits. Our fixed maturity securities including U.S. and foreign government bonds, securities issued by government agencies, corporate bonds, mortgage-backed and other ABS, and our commercial, agricultural and residential mortgage loans, are exposed to changes in interest rates. We also use derivatives including options to mitigate the exposure related to interest rate risks from our product liabilities.

Equity Market

We have fair value exposure to equity market risk through certain liabilities that allow the policyholder to participate in returns from equity indices and have a specified level of market downside protection, and other liabilities that involve long-term guarantees on equity performance such as embedded derivatives in variable annuity contracts with guaranteed minimum benefits.

Foreign Currency Exchange Rates

Our fair value exposure to fluctuations in foreign currency exchange rates against the U.S. dollar results from our holdings in non-U.S. dollar denominated fixed maturity securities and mortgage loans. The principal currencies that create foreign currency exchange rate risk in our investment portfolios and liabilities are the Euro and the British pound. We economically hedge substantially all of our foreign currency exposure.

Risk Measurement: Sensitivity Analysis

In the following discussion and analysis, we measure market risk related to our market sensitive assets and liabilities based on changes in interest rates, equity market prices and foreign currency exchange rates using a sensitivity analysis. This analysis estimates the potential changes in estimated fair value based on a hypothetical 100 basis point change (increase or decrease) in interest rates, or a 10% change in equity market prices or foreign currency exchange rates. We believe that these changes in market rates and prices are reasonably possible in the near -term. In performing the analysis summarized below, we used market rates as of December 31, ~~2019~~2020. We modeled the impact of changes in market rates and prices on the estimated fair values of our market sensitive assets and liabilities as follows:

• the estimated fair value of our interest rate sensitive exposures resulting from a 100 basis point change (increase or decrease) in interest rates;

• the estimated fair value of our equity positions due to a 10% change (increase or decrease) in equity market prices; and

• the U.S. dollar equivalent of estimated fair values of our foreign currency exposures due to a 10% change (increase in the value of the U.S. dollar compared to the foreign currencies or decrease in the value of the U.S. dollar compared to the foreign currencies) in foreign currency exchange rates.

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The sensitivity analysis is an estimate and should not be viewed as predictive of our future financial performance. Our actual losses in any particular period may vary from the amounts indicated in the table below. Limitations related to this sensitivity analysis include:

• interest sensitive liabilities do not include ~~752~~$837 million of insurance contracts at December 31, 2020, which are accounted for on a book value basis. Management believes that the changes in the economic value of those contracts under changing interest rates would offset a significant portion of the fair value changes of interest sensitive assets;

~~• the market risk information is limited by the assumptions and parameters established in creating the related sensitivity analysis, including the impact of prepayment rates on mortgage loans;~~52

•Table ~~foreign~~of ~~currency exchange rate risk is not isolated for certain embedded derivatives within host asset and liability contracts, as the risk on these instruments is reflected as equity;~~Contents

•the ~~for~~market ~~derivatives~~risk ~~that~~information ~~qualify~~is ~~for~~limited ~~hedge~~by ~~accounting,~~ the ~~impact~~assumptions onand ~~reported~~parameters ~~earnings~~established ~~may~~in becreating ~~materially~~the ~~different~~related ~~from~~sensitivity analysis, including the ~~change~~impact inof ~~market~~prepayment ~~values;~~rates ~~and~~on mortgage loans;

•foreign ~~the~~currency ~~model~~exchange ~~assumes~~rate ~~that~~risk ~~the~~is ~~composition~~not ofisolated ~~assets~~for ~~and~~certain ~~liabilities~~embedded ~~remains~~derivatives ~~unchanged~~within ~~throughout~~host asset and liability contracts, as the ~~period.~~risk on these instruments is reflected as equity;

•for derivatives that qualify for hedge accounting, the impact on reported earnings may be materially different from the change in market values; and

•the model assumes that the composition of assets and liabilities remains unchanged throughout the period.

Accordingly, we use such models as tools and not as substitutes for the experience and judgment of our management.

The ~~table below illustrates the~~ potential loss in the estimated fair value of our interest rate sensitive financial instruments due to a 100 basis point increase in the yield curve by type of asset and liability was as offollows at:

	December 31, 2019
			December 31, 2020
	~~NotionalAmount~~		NotionalAmount		~~EstimatedFairValue (1)~~		~~100~~EstimatedFairValue ~~Basis Point Increasein the YieldCurve~~(1)			100 Basis Point Increasein the YieldCurve
	~~(In millions)~~		(In millions)
Financial assets with interest rate risk
Fixed maturity securities					$	~~3,067~~	$	~~(231~~3,843	)	$	(286)
Mortgage loans					$	~~647~~	~~(38~~$	681	)	(37)
Premiums, reinsurance and other receivables					$	~~444~~	(5$	436	)	(4)
Embedded derivatives within asset host contracts (2)					$	~~338~~	~~(108~~$	477	)	(152)
Increase (decrease) in estimated fair value of assets							~~(382~~		)	(479)
Financial liabilities with interest rate risk (3)
Policyholder account balances					$	~~955~~	45$	979		61
Other liabilities					$	~~432~~	(4$	430	)	(4)
Embedded derivatives within liability host contracts (2)					$	~~152~~	36$	407		35
(Increase) decrease in estimated fair value of liabilities							77			92
Derivative instruments with interest rate risk
Interest rate contracts	$	~~800~~	$	800	$	2	2$	1		2
Equity contracts	$	~~4,699~~	$	6,157	$	57	24$	163		18
Foreign currency contracts	$	~~116~~	$	131	$	10	(1$	5	)	(1)
Increase (decrease) in estimated fair value of derivative instruments							25			19
Net change							$	~~(280~~	)	$	(368)

_______________

(1) Separate account assets and liabilities, which are interest rate sensitive, are not included herein as any interest rate risk is borne by the contract holder.

(2) Embedded derivatives are recognized inon the balance sheet in the same caption as the host contract.

(3) Excludes ~~752~~$837 million of liabilities, at carrying value, pursuant to insurance contracts reported within future policy benefits and other policy-related balances on the balance sheet at December 31, 2020. Management believes that the changes in the economic value of those contracts under changing interest rates would offset a significant portion of the fair value changes of interest rate sensitive assets.

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Sensitivity Summary

Sensitivity to rising interest rates increased by $5688 million, or 2531%, to $~~280~~368 million at December 31, ~~2019~~2020 from $~~224~~280 million at December 31, ~~2018~~2019, primarily as a result of an increase in our fixed maturity securities portfolio and the impact of lower interest rates ~~increasing~~on the estimated fair value of ~~and~~these ~~fixed maturity~~ securities, in line with management expectations.

Sensitivity to a 10% rise in equity prices ~~decreased~~increased by $12 16 million, or ~~400~~178%, to $925 million asat of December 31, ~~2019~~2020 from ~~a gain of~~ $3 9 million at December 31, ~~2018. Beginning in~~ 2019~~, we included our embedded derivatives in index-linked annuity liabilities in the sensitivity analysis, and revised the 2018 sensitivity to include such liabilities~~.

As previously mentioned, we economically hedge substantially all of our foreign currency exposure such that ~~the Company’s~~ sensitivity to changes in foreign currencies is minimal.

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Item 8. Financial Statements and Supplementary Data

Index to Financial Statements, Notes and Schedules

	~~Page~~	Page
Report of Independent Registered Public Accounting Firm	51	56
Financial Statements at December 31, 2019 and 2018 and for the Years Ended December 31, 2019, 2018 and 2017:
Financial Statements at December 31, 2020 and 2019 and for the Years Ended December 31, 2020, 2019 and 2018:
Balance Sheets	52	59
Statements of Operations	53	60
Statements of Comprehensive Income (Loss)	54	61
Statements of Stockholder’s Equity	55	62
Statements of Cash Flows	56	63
Notes to the Financial Statements
Note 1 — Business, Basis of Presentation and Summary of Significant Accounting Policies	57	64
Note 2 — Segment Information	64	72
Note 3 — Insurance	68	75
Note 4 — Deferred Policy Acquisition Costs and Other Intangibles	71
Note 4 — Deferred Policy Acquisition Costs and Deferred Sales Inducements		78
Note 5 — Reinsurance	72	78
Note 6 — Investments	75	82
Note 7 — Derivatives	82	89
Note 8 — Fair Value	86	93
Note 9 — Equity	95
Note 9 — Short-term Debt		102
Note 10 — Other Revenues and Other Expenses	97
Note 10 — Equity		102
Note 11 — Income Tax	98
Note 11 — Other Revenues and Other Expenses		105
Note 12 — Contingencies, Commitments and Guarantees	100
Note 12 — Income Tax		105
Note 13 — Related Party Transactions	102
Note 13 — Contingencies, Commitments and Guarantees		107
Financial Statement Schedules at December 31, 2019 and 2018 and for the Years Ended December 31, 2019, 2018 and 2017:
Note 14 — Related Party Transactions		109
Schedule I — Summary of Investments — Other Than Investments in Related Parties	103
Financial Statement Schedules at December 31, 2020 and 2019 and for the Years Ended December 31, 2020, 2019 and 2018:
Schedule III — Supplementary Insurance Information	104
Schedule I — Summary of Investments — Other Than Investments in Related Parties		110
Schedule IV — Reinsurance	106
Schedule III — Supplementary Insurance Information		111
Schedule IV — Reinsurance		113

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Brighthouse Life Insurance Company of NY

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Brighthouse Life Insurance Company of NY (the “Company”) as of December 31, ~~2019~~2020 and ~~2018~~2019, and the related statements of operations, comprehensive income (loss), stockholder’s equity, and cash flows for each of the three years in the period ended December 31, ~~2019~~2020, and the related notes and the schedules listed in the Index to Financial Statements, Notes and Schedules (collectively referred to as the "“financial statements"”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2019~~2020 and ~~2018~~2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2019~~2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Liability for Future Policy Benefits – Refer to Notes 1 and 3 to the financial statements

Critical Audit Matter Description

As of December 31, 2020, the liability for future policy benefits totaled $825 million, and included benefits related to variable annuity contracts with guaranteed benefit riders. Management regularly reviews its assumptions supporting the estimates of these actuarial liabilities and differences between actual experience and the assumptions used in pricing the policies and guarantees may require a change to the assumptions recorded at inception as well as an adjustment to the related liabilities. Updating such assumptions can result in variability of profits or the recognition of losses.

Given the future policy benefit obligation for these contracts is sensitive to changes in the assumptions related to general account and separate account investment returns, and policyholder behavior including mortality, benefit election and utilization, and withdrawals, auditing management’s selection of these assumptions involves an especially high degree of estimation.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the updating of assumptions by management included the following, among others:

•We tested the effectiveness of management’s controls over the assumption review process, including those over the selection of the significant assumptions used related to general account and separate account investment returns, and policyholder behavior including mortality, benefit election and utilization, and withdrawals.

•With the assistance of our actuarial specialists, we evaluated the appropriateness of the significant assumptions used, developed an independent estimate of the future policy benefit liability, and compared our estimates to management’s estimates.

•We tested the completeness and accuracy of the underlying data that served as the basis for the actuarial analysis, including experience studies, to test that the inputs to the actuarial estimate were reasonable.

•We evaluated the methods and significant assumptions used by management to identify potential bias.

•We evaluated whether the significant assumptions used were consistent with evidence obtained in other areas of the audit.

Deferred Acquisition Cost (DAC) – Refer to Notes 1 and 4 to the financial statements

Critical Audit Matter Description

The Company incurs and defers certain costs in connection with acquiring new and renewal insurance business. These deferred costs, amounting to $160 million as of December 31, 2020, are amortized over the expected life of the policy contract in proportion to actual and expected future gross profits, premiums or margins. For deferred annuity contracts, expected future gross profits utilized in the amortization calculation are derived using assumptions such as separate account and general account investment returns, mortality, in-force or persistency, benefit elections and utilization, and withdrawals. The assumptions used in the calculation of expected future gross profits are reviewed at least annually.

Given the significance of the estimates and uncertainty associated with the long-term assumptions utilized in the determination of expected future gross profits, auditing management’s determination of the appropriateness of the assumptions used in the calculation of DAC amortization involves an especially high degree of estimation.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s determination of DAC amortization included the following, among others:

•We tested the effectiveness of management’s controls related to the determination of expected future gross profits, including those over management’s review that the significant assumptions utilized related to separate account and general account investment returns, mortality, in-force or persistency, benefit elections and utilization, and withdrawals represented a reasonable estimate.

•With assistance from our actuarial specialists, we evaluated the data included in the estimate provided by the Company’s actuaries and the methodology utilized, and evaluated the process used by the Company to determine whether the significant assumptions used were reasonable estimates based on the Company’s own experience and industry studies.

•We inquired of the Company’s actuarial specialists whether there were any changes in the methodology utilized during the year in the determination of expected future gross profits.

•We inspected supporting documentation underlying the Company’s experience studies and, utilizing our actuarial specialists, independently recalculated the amortization for a sample of policies, and compared our estimates to management’s estimates.

•We evaluated whether the significant assumptions used by the Company were consistent with evidence obtained in other areas of the audit and to identify potential bias.

•We evaluated the sufficiency of the Company’s disclosures related to DAC amortization.

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Embedded Derivative Liabilities Related to Variable Annuity Guarantees – Refer to Notes 1, 7, and 8 to the financial statements.

Critical Audit Matter Description

The Company sells index-linked annuities and variable annuity products with guaranteed minimum benefits, some of which are embedded derivatives that are required to be bifurcated from the host contract, separately accounted for, and measured at fair value. As of December 31, 2020, the fair value of the embedded derivative liability associated with certain of the Company’s annuity contracts was $407 million. Management utilizes various assumptions in order to measure the embedded liability including expectations concerning policyholder behavior, mortality and risk margins, as well as changes in the Company’s own nonperformance risk. These assumptions are reviewed at least annually by management, and if they change significantly, the estimated fair value is adjusted by a cumulative charge or credit to net income.

Given the embedded derivative liability is sensitive to changes in these assumptions, auditing management’s selection of these assumptions involves an especially high degree of estimation.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the assumptions selected by management for the embedded derivative liability included the following, among others:

•We tested the effectiveness of management’s controls over the embedded derivative liability, including those over the selection of the significant assumptions related to policyholder behavior, mortality, risk margins and the Company’s nonperformance risk.

•With the assistance of our actuarial specialists, we evaluated the appropriateness of the significant assumptions, tested the completeness and accuracy of the underlying data and the mathematical accuracy of the Company’s valuation model.

•We evaluated the reasonableness of the Company’s assumptions by comparing those selected by management to those independently derived by our actuarial specialists, drawing upon standard actuarial and industry practice.

•We evaluated the methods and assumptions used by management to identify potential bias in the determination of the embedded liability.

•We evaluated whether the assumptions used were consistent with evidence obtained in other areas of the audit.

/s/ DELOITTE & TOUCHE LLP

Charlotte, North Carolina

March 54, ~~2020~~2021

We have served as the Company’s auditor since 2000.

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Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Balance Sheets

December 31, ~~2019~~2020 and ~~2018~~2019

(In millions, except share and per share data)

	2019		2018
			2020			2019
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $2,897 and $2,470, respectively)	$	3,067	$	2,434
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $3,460 and $2,897, respectively; allowance for credit losses of $0 and $0, respectively)			$	3,843		$	3,067
Mortgage loans (net of valuation allowances of $3 and $2, respectively)	625		448
Mortgage loans (net of allowance for credit losses of $2 and $3, respectively)			643			625
Short-term investments, principally at estimated fair value	52		—71			52
Other invested assets, principally at estimated fair value	~~108~~		36266			108
Total investments	~~3,852~~		24,~~918~~823			3,852
Cash and cash equivalents	~~148~~		~~120~~275			148
Accrued investment income	25		2129			25
Premiums, reinsurance and other receivables	~~1,048~~		~~580~~1,223			1,048
Deferred policy acquisition costs	~~175~~		~~186~~160			175
Other assets	33		3727			33
Separate account assets	~~4,676~~		4,~~268~~965			4,676
Total assets	$	~~9,957~~	$	811,~~130~~502		$	9,957
Liabilities and Stockholder's Equity
Liabilities and Stockholder’s Equity
Liabilities
Future policy benefits	$	~~743~~	$	~~719~~825		$	743
Policyholder account balances	~~2,339~~		13,~~692~~151			2,339
Other policy-related balances	9		912			9
Payables for collateral under derivative transactions	85		24137			85
Current income tax payable	30		2			30
Deferred income tax liability	~~114~~		~~108~~178			114
Other liabilities	~~912~~		~~471~~940			912
Separate account liabilities	~~4,676~~		4,~~268~~965			4,676
Total liabilities	~~8,908~~		710,~~293~~210			8,908
Contingencies, Commitments and Guarantees (Note 12)
Contingencies, Commitments and Guarantees (Note 13)
Stockholder's Equity
Stockholder’s Equity
Common stock, par value $10 per share; 200,000 shares authorized, issued and outstanding	2		2			2
Additional paid-in capital	~~491~~		~~416~~491			491
Retained earnings (deficit)	~~434~~		~~434~~541			434
Accumulated other comprehensive income (loss)	~~122~~		~~(15~~258		)	122
Total stockholder's equity	1,049		837
Total stockholder’s equity			1,292			1,049
Total liabilities and stockholder's equity	$	9,957	$	8,130
Total liabilities and stockholder’s equity			$	11,502		$	9,957

See accompanying notes to the financial statements.

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Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Statements of Operations

For the Years Ended December 31, ~~2019~~2020, ~~2018~~2019 and ~~2017~~2018

(In millions)

	2019				2018			2017
			2020					2019			2018
Revenues
Premiums	$	23	$	22	$	37		$	2623		$	37
Universal life and investment-type product policy fees	97		93		~~102~~			~~104~~97			102
Net investment income	~~122~~		134		~~100~~			86122			100
Other revenues	~~(85~~		(83)		~~(59~~		)	(4685)		)	(59)
Net investment gains (losses)	4		13		(7		)	(14		)	(7)
Net derivative gains (losses)	42		129		~~(18~~		)	~~(157~~42		)	(18)
Total revenues	~~203~~		308		~~155~~			12203			155
Expenses
Policyholder benefits and claims	33		23		7			(433		)	7
Interest credited to policyholder account balances	36		38		38			3936			38
Amortization of deferred policy acquisition costs	22		38		1			~~(40~~22		)	1
Other expenses	81		77		66			6681			66
Total expenses	~~172~~		176		~~112~~			61172			112
Income (loss) before provision for income tax	31		132		43			~~(49~~31		)	43
Provision for income tax expense (benefit)	3		25		5			~~(101~~3		)	5
Net income (loss)	$	28	$	107	$	38		$	5228		$	38

See accompanying notes to the financial statements

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Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Statements of Comprehensive Income (Loss)

For the Years Ended December 31, ~~2019~~2020, ~~2018~~2019 and ~~2017~~2018

(In millions)

	2019				2018			2017
			2020					2019			2018
Net income (loss)	$	28	$	107	$	38		$	5228		$	38
Other comprehensive income (loss):
Unrealized investment gains (losses), net of related offsets	~~173~~		177		~~(62~~		)	35173			(62)
Unrealized gains (losses) on derivatives	—		(5)		5			(4—		)	5
Other comprehensive income (loss), before income tax	~~173~~		172		~~(57~~		)	31173			(57)
Income tax (expense) benefit related to items of other comprehensive income (loss)	~~(36~~		(36)		12			(636)		)	12
Other comprehensive income (loss), net of income tax	~~137~~		136		~~(45~~		)	25137			(45)
Comprehensive income (loss)	$	~~165~~	$	243	$	(7	)	$	77165		$	(7)

See accompanying notes to the financial statements.

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Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Statements of Stockholder’s Equity

For the Years Ended December 31, ~~2019~~2020, ~~2018~~2019 and ~~2017~~2018

(In millions)

	~~CommonStock~~		~~AdditionalPaid-inCapital~~CommonStock		~~RetainedEarnings(Deficit)~~		AdditionalPaid-inCapital		~~AccumulatedOtherComprehensiveIncome (Loss)~~			~~TotalStockholder'sEquity~~RetainedEarnings(Deficit)			AccumulatedOtherComprehensiveIncome (Loss)		TotalStockholder'sEquity
Balance at December 31, 2016	$	2	$	341	$	349			$	5		$	697
Balance at December 31, 2017			$	2			$	416				$	396		$	30	$	844
Capital contribution			75									75
Net income (loss)												38					38
Net income (loss)					52							52
Other comprehensive income (loss), net of income tax															(45)		(45)
Effect of change in accounting principle					(5		)		5			—
Balance at December 31, 2018			2				416					434			(15)		837
Other comprehensive income (loss), net of income tax									20			20
Capital contribution							75										75
Balance at December 31, 2017	2		416		396				30			844
Dividends paid to Brighthouse Life Insurance Company												(28)					(28)
Net income (loss)					38							3828					28
Other comprehensive income (loss), net of income tax									~~(45~~		)	~~(45~~		)	137		137
Balance at December 31, 2018	2		416		434				(15		)	837
Balance at December 31, 2019			2				491					434			122		1,049
Capital contribution			75									75
Net income (loss)												107					107
Dividends paid to Brighthouse Life Insurance Company					(28		)					(28		)
Other comprehensive income (loss), net of income tax															136		136
Net income (loss)					28							28
Balance at December 31, 2020			$	2			$	491				$	541		$	258	$	1,292
Other comprehensive income (loss), net of income tax									137			137
Balance at December 31, 2019	$	2	$	491	$	434			$	122		$	1,049

See accompanying notes to the financial statements.

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Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Statements of Cash Flows

For the Years Ended December 31, ~~2019~~2020, ~~2018~~2019 and ~~2017~~2018

(In millions)

	2019			2018			2017
				2020					2019		2018
Cash flows from operating activities
Net income (loss)	$	28		$	38107		$	52	$	28	$	38
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Amortization of premiums and accretion of discounts associated with investments, net	3			21			4		3		2
(Gains) losses on investments, net	(4		)	7(13)			1		(4)		7
(Gains) losses on derivatives, net	~~(27~~		)	41(124)			57		(27)		41
Interest credited to policyholder account balances	36			38			39		36		38
Universal life and investment-type product policy fees	~~(97~~		)	(~~102~~93)		)	~~(104~~		(97)		(102)
Change in accrued investment income	(4		)	(23)		)	(2		(4)		(2)
Change in premiums, reinsurance and other receivables	—			(1535)		)	~~(291~~		)—		(15)
Change in deferred policy acquisition costs	~~(17~~		)	(294)		)	~~(57~~		(17)		(29)
Change in income tax	(2		)	7—			~~(58~~		(2)		7
Change in other assets	92			9790			~~105~~		92		97
Change in future policy benefits and other policy-related balances	21			4168			52		21		41
Change in other liabilities	~~(11~~		)	(1537)		)	~~355~~		(11)		(15)
Net cash provided by (used in) operating activities	18			~~108~~(5)			~~153~~		18		108
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities	~~626~~			~~408~~480			~~549~~		626		408
Mortgage loans	97			860			42		97		8
Purchases of:
Fixed maturity securities	~~(1,067~~		)	(~~702~~1,023)		)	~~(845~~		(1,067)		(702)
Mortgage loans	~~(275~~		)	(6380)		)	~~(31~~		(275)		(63)
Cash received in connection with freestanding derivatives	~~107~~			6313			1		107		6
Cash paid in connection with freestanding derivatives	~~(41~~		)	(59231)		)	—		(41)		(59)
Net change in short-term investments	~~(52~~		)	—(20)			—		(52)		—
Net change in other invested assets	6			~~(11~~1		)	—		6		(11)
Net cash provided by (used in) investing activities	~~(599~~		)	(~~413~~500)		)	~~(284~~		(599)		(413)
Cash flows from financing activities
Policyholder account balances:
Deposits	~~645~~			~~470~~672			~~254~~		645		470
Withdrawals	~~(144~~		)	(~~149~~100)		)	~~(127~~		(144)		(149)
Net change in payables for collateral under derivative transactions	61			1852			(4		)61		18
Dividends paid	(28		)	—			—
Short-term debt issued				100					—		—
Capital contribution	75			—			75
Short-term debt repaid				(100)					—		—
Net cash provided by (used in) financing activities	609			339			198
Dividends paid				—					(28)		—
Change in cash, cash equivalents and restricted cash	28			34			67
Capital contribution				—					75		—
Cash, cash equivalents and restricted cash, beginning of year	120			86			19
Financing element on certain derivative instruments and other derivative related transactions, net				8					—		—
Cash, cash equivalents and restricted cash, end of year	$	148		$	120		$	86
Net cash provided by (used in) financing activities				632					609		339
Supplemental disclosures of cash flow information
Change in cash, cash equivalents and restricted cash				127					28		34
Net cash paid (received) for:
Cash, cash equivalents and restricted cash, beginning of year				148					120		86
Income tax	$	5		$	(2	)	$	(42	)
Cash, cash equivalents and restricted cash, end of year				$	275				$	148	$	120
Supplemental disclosures of cash flow information
Net cash paid (received) for:
Interest				$	1				$	—	$	—
Income tax				$	25				$	5	$	(2)

See accompanying notes to the financial statements.

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Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements

1. Business, Basis of Presentation and Summary of Significant Accounting Policies

Business

“BHNY” and the “Company” refer to Brighthouse Life Insurance Company of NY, a New York domiciled life insurance company. Brighthouse Life Insurance Company of NY is a wholly-owned subsidiary of Brighthouse Life Insurance Company, which is an indirect wholly-owned subsidiary of Brighthouse Financial, Inc. (“BHF” together with its subsidiaries and affiliates, “Brighthouse Financial”). The Company is licensed to transact business in the state of New York.

~~BHNY~~The Company markets ~~and/~~or administers ~~traditional~~a ~~life,~~range ~~universal~~of ~~life, variable~~ annuity and ~~fixed~~life ~~annuity~~insurance products to individuals. The Company is organized into two segments: Annuities and Life. In addition, the Company reports certain of its results of operations in Corporate & Other.

Basis of Presentation

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the financial statements. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions 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 the Company’s business and operations. Actual results could differ from these estimates.

Reclassifications

Certain amounts in the prior years’ financial statements and related footnotes thereto have been reclassified to conform with the current year presentation as may be discussed when applicable in the Notes to the Financial Statements.

Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a ~~stand-alone~~standalone entity.

Summary of Significant Accounting Policies

Insurance

Future Policy Benefit Liabilities and Policyholder Account Balances

The Company establishes liabilities for future amounts payable under insurance policies. Insurance liabilities are generally equal to the present value of future expected benefits to be paid, reduced by the present value of future expected net premiums. Assumptions used to measure the liability are based on the Company’s experience, and include a margin for adverse deviation. The ~~principal~~most significant assumptions used in the establishment of liabilities for future policy benefits are mortality, ~~policy~~benefit ~~lapse,~~election ~~policy~~and ~~renewal~~utilization, ~~investment~~withdrawals, ~~returns~~policy lapse, and ~~expenses~~investment returns as appropriate to the respective product type.

For traditional long-duration insurance contracts (term, ~~whole~~ life insurance and income annuities), assumptions are determined at issuance of the policy and are not updated unless a premium deficiency exists. A premium deficiency exists when the liability for future policy benefits plus the present value of expected future gross premiums are less than expected future benefits and expenses (based on current assumptions). When a premium deficiency exists, the Company will reduce any deferred acquisition costs and may also establish an additional liability to eliminate the deficiency. To assess whether a premium deficiency exists, the Company groups insurance contracts based on the manner acquired, serviced and measured for profitability. In applying the profitability criteria, groupings are limited by segment.

InThe ~~certain~~Company ~~cases,~~is ~~the~~also ~~liability~~required ~~for~~to anreflect ~~insurance~~the ~~product~~effect ~~may~~of beinvestment ~~sufficient~~gains inand ~~the~~losses ~~aggregate,~~in ~~but~~its ~~the~~premium ~~pattern~~deficiency oftesting. ~~future~~When ~~earnings~~a ~~may~~premium ~~result~~deficiency inexists ~~profits~~related ~~followed~~to byunrealized ~~losses.~~gains Inand ~~these situations~~losses, ~~the~~any ~~Company~~reductions ~~may~~in ~~establish~~deferred anacquisition ~~additional~~costs ~~liability~~or toincreases ~~offset~~in ~~the~~insurance ~~losses~~liabilities ~~that~~ are ~~expected~~recorded to beother ~~recognized~~comprehensive inincome ~~later~~(loss) ~~years~~(“OCI”).

Policyholder account balances relate to customer deposits on universal life insurance and deferred annuity contracts and are equal to the sum of deposits, plus interest credited, less charges and withdrawals.64

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Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Policyholder account balances relate to customer deposits on deferred annuity contracts and are equal to the sum of deposits, plus interest credited, less charges and withdrawals. The Company may also hold additional liabilities for certain guaranteed benefits related to these contracts.

The Company issues directly, certain variable annuity products with guaranteed minimum benefits that provide the policyholder a minimum return based on their initial deposit (i.e., the benefit base) less withdrawals. These guarantees are accounted for as insurance liabilities or as embedded derivatives depending on how and when the benefit is paid. Specifically, a guarantee is accounted for as an embedded derivative if a guarantee is paid without requiring (i) the occurrence of specific insurable event, or (ii) the policyholder to annuitize. Alternatively, a guarantee is accounted for as an insurance liability if the guarantee is paid only upon either (i) the occurrence of a specific insurable event, or (ii) annuitization. In certain cases, a guarantee may have elements of both an insurance liability and an embedded derivative and in such cases the guarantee is split and accounted for under both models.

Guarantees accounted for as insurance liabilities in future policy benefits include guaranteed minimum death benefits (“~~GMDBs~~GMDB”), the portion of guaranteed minimum income benefits (“~~GMIBs~~GMIB”) that require annuitization, and the life-contingent portion of guaranteed minimum withdrawal benefits (“~~GMWBs~~GMWB”).

Guarantees accounted for as embedded derivatives in policyholder account balances include the non-life contingent portion of GMWBs, guaranteed minimum accumulation benefits (“~~GMABs~~GMAB”) and the portion of GMIBs that do not require annuitization. At inception, the Company attributes to the embedded derivative a portion of the projected future guarantee fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits. Any additional fees represent “excess” fees and are reported in universal life and investment-type product policy fees.

Recognition of Insurance Revenues and Deposits

Premiums related to traditional life insurance and annuity contracts ~~with life contingencies~~ are recognized as revenues when due from policyholders. ~~Policyholder benefits and expenses are provided to recognize profits over the estimated lives of the insurance policies.~~ When premiums for income annuities are due over a significantly shorter period than the period over which policyholder benefits are incurred, any excess profit is deferred and recognized into earnings in proportion to the amount of expected future benefit payments.

Deposits related to ~~universal~~deferred ~~life~~annuities ~~insurance and investment-type products~~ are credited to policyholder account balances. Revenues from such contracts consist of asset-based investment management fees, ~~cost of insurance charges,~~ risk charges, policy administration fees, and surrender charges. These fees, which are included in universal life and investment-type product policy fees, are recognized when assessed to the contract holder~~, except for non-level insurance charges which are deferred and amortized over the life of the contracts~~.

Premiums, policy fees, policyholder benefits and expenses are presented net of reinsurance.

Deferred Policy Acquisition Costs and ~~Other~~Deferred ~~Intangibles~~Sales Inducements

The Company incurs significant costs in connection with acquiring new and renewal insurance business. Costs that are related directly to the successful acquisition or renewal of insurance contracts are capitalized as deferred policy acquisition costs (“DAC”). These costs mainly consist of commissions and include the portion of employees’ compensation and benefits related to time spent selling, underwriting or processing the issuance of new insurance contracts. All other acquisition-related costs are expensed as incurred.

The Company amortizes DAC related to term life insurance, ~~non-participating whole life and immediate annuities~~ over the appropriate premium paying period in proportion to the actual and expected future gross premiums that were set at contract issue. The expected premiums are based upon the premium requirement of each policy and assumptions for mortality, persistency and investment returns at policy issuance, include provisions for adverse deviation, and are consistent with the assumptions used to calculate future policy benefit liabilities. These assumptions are not revised after policy issuance or acquisition unless the DAC balance is deemed to be unrecoverable from future expected profits.

The Company amortizes DAC on deferred annuities, ~~universal life and variable life insurance contracts~~ over the estimated lives of the contracts in proportion to actual and expected future gross profits. The amortization includes interest based on rates in effect at inception or acquisition of the contracts. The amount of future gross profits is dependent principally upon investment returns in excess of the amounts credited to policyholders, mortality, in-force or persistency, benefit elections and ~~withdrawals~~utilization, ~~interest crediting rates,~~ and ~~expenses to administer the business~~withdrawals. When significant negative gross profits are expected in future periods, the Company substitutes the amount of insurance in-force for expected future gross profits as the amortization basis for DAC.

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Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Assumptions for DAC are reviewed at least annually, and if they change significantly, the cumulative DAC amortization is re-estimated and adjusted by a cumulative charge or credit to net income. When expected future gross profits are below those previously estimated, the DAC amortization will increase, resulting in a current period charge to net income. The opposite result occurs when the expected future gross profits are above the previously estimated expected future gross profits.

The Company updates expected future gross profits to reflect the actual gross profits for each period, including changes to its nonperformance risk related to embedded derivatives and the actual amount of business remaining in-force. When actual gross profits exceed those previously estimated, the DAC amortization will increase, resulting in a current period charge to net income. The opposite result occurs when the actual gross profits are below the previously expected future gross profits.

DAC balances on deferred annuities, ~~universal and variable life insurance contracts~~ are also adjusted to reflect the effect of investment gains and losses and certain embedded derivatives (including changes in nonperformance risk). These adjustments can create fluctuations in net income from period to period. Changes in DAC balances related to unrealized gains and losses are recorded to ~~other comprehensive income (loss) (“~~OCI”).

DAC balances and amortization for variable ~~contracts~~annuities can be significantly impacted by changes in expected future gross profits related to projected separate account rates of return. The Company’s practice of determining changes in separate account returns assumes that long-term appreciation in equity markets is only changed when sustained interim deviations are expected. The Company monitors these events and only changes the assumption when its long-term expectation changes.

Periodically, the Company modifies product benefits, features, rights or coverages that occur by the exchange of an existing contract for a new contract, or by amendment, endorsement, or rider to a contract, or by election or coverage within a contract. If a modification is considered to have substantially changed the contract, the associated DAC is written off immediately as net income and any new acquisition costs associated with the replacement contract are deferred. If the modification does not substantially change the contract, the DAC amortization on the original contract will continue and any acquisition costs associated with the related modification are expensed.

The Company also has intangible assets representing deferred sales inducements (“DSI”) ~~and the value of distribution agreements (“VODA”)~~ which are included in other assets. The Company defers sales inducements and amortizes them over the life of the policy using the same methodology and assumptions used to amortize DAC. The amortization of DSI is included in policyholder benefits and claims. VODA represents the present value of expected future profits associated with the expected future business derived from the distribution agreements acquired as part of a business combination. The VODA associated with past business combinations is amortized over useful lives ranging from 10 to 40 years and such amortization is included in other expenses. Each year, or more frequently if circumstances indicate a possible impairment exists, the Company reviews DSI ~~and VODA~~ to determine whether the assets are impaired.

Reinsurance

The Company enters into reinsurance arrangements pursuant to which it cedes certain insurance risks to unaffiliated and related party reinsurers. Cessions under reinsurance agreements do not discharge the Company’s obligations as the primary insurer. The accounting for reinsurance arrangements depends on whether the arrangement provides indemnification against loss or liability relating to insurance risk in accordance with GAAP.

For ceded reinsurance of existing in-force blocks of insurance contracts that transfer significant insurance risk, premiums, benefits and the amortization of DAC are reported net of reinsurance ceded. Amounts recoverable from reinsurers related to incurred claims and ceded reserves are included in premiums, reinsurance and other receivables and amounts payable to reinsurers included in other liabilities.

If the Company determines that a reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the agreement using the deposit method of accounting. Deposits received are included in other liabilities and deposits made are included within premiums, reinsurance and other receivables. As amounts are paid or received, consistent with the underlying contracts, the deposit assets or liabilities are adjusted. Interest on such deposits is recorded as other revenues or other expenses, as appropriate.

5966

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

The funds withheld liability represents amounts withheld by the Company in accordance with the terms of the reinsurance agreements. Under certain reinsurance agreements, the Company withholds the funds rather than transferring the underlying investments and, as a result, records a funds withheld liability within other liabilities. The Company recognizes interest on funds withheld, included in other expenses, at rates defined by the terms of the agreement which may be contractually specified or directly related to the investment portfolio. Certain funds withheld arrangements may also contain embedded derivatives measured at fair value that are related to the investment return on the assets withheld.

The Company cedes the risk associated with the variable annuities with guaranteed minimum benefits to Brighthouse Life Insurance Company. Certain features of the ceded guarantees are accounted for as an embedded derivative and measured at fair value.

Index-linked Annuities

The Company issues index-linked annuities. The crediting rate associated with index-linked annuities is accounted for at fair value as an embedded derivative. The estimated fair value is determined using a combination of an option pricing model and an option-budget approach. Under this approach, the company estimates the cost of funding the crediting rate using option pricing and establishes that cost on the balance sheet as a reduction to the initial deposit amount. In subsequent periods, the embedded derivative is remeasured at fair value while the reduction in initial deposit is accreted back up to the initial deposit over the estimated life of the contract.

Investments

Net Investment Income and Net Investment Gains (Losses)

Income from investments is reported within net investment income, unless otherwise stated herein. Gains and losses on sales of investments, impairment losses and changes in valuation allowances are reported within net investment gains (losses), unless otherwise stated herein.

Fixed Maturity Securities Available-For-Sale

The Company’s fixed maturity securities are classified as available-for-sale ~~(“AFS”)~~ and are reported at their estimated fair value. Unrealized investment gains and losses on these securities are recorded as a separate component of OCI, net of policy-related amounts and deferred income taxes. Publicly-traded security transactions are recorded on a trade date basis, while privately-placed and bank loan security transactions are recorded on a settlement date basis. Investment gains and losses on sales are determined on a specific identification basis.

Interest income and prepayment fees are recognized when earned. Interest income is recognized using an effective yield method giving effect to amortization of premiums and accretion of discounts and is based on the estimated economic life of the securities, which for residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”) considers the estimated timing and amount of prepayments of the underlying loans. The amortization of premium and accretion of discount of fixed maturity securities also takes into consideration call and maturity dates.

Amortization of premium and accretion of discount on Structured Securities considers the estimated timing and amount of prepayments of the underlying loans. Actual prepayment experience is periodically reviewed, and effective yields are recalculated when differences arise between the originally anticipated and the actual prepayments received and currently anticipated. Prepayment assumptions for Structured Securities are estimated using inputs obtained from third-party specialists and based on management’s knowledge of the current market. For credit-sensitive Structured Securities and certain prepayment-sensitive securities, the effective yield is recalculated on a prospective basis. For all other Structured Securities, the effective yield is recalculated on a retrospective basis.

The Company ~~periodically~~regularly evaluates fixed maturity securities for ~~impairment.~~declines ~~The~~in ~~assessment~~fair ofvalue ~~whether~~to ~~impairments~~determine ~~have~~if ~~occurred~~a credit loss exists. This evaluation is based on management’s case- by- case evaluation of the underlying reasons for the decline in ~~estimated~~ fair value including, asbut ~~well~~not aslimited to an analysis of the gross unrealized losses by severity and~~/or~~ ~~age~~financial condition of the issuer.

60For fixed maturity securities in an unrealized loss position, when the Company has the intent to sell the security, or it is more likely than not that the Company will be required to sell the security before recovery, the amortized cost basis of the security is written down to fair value through net investment gains (losses).

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

For fixed maturity securities inthat ando ~~unrealized~~not ~~loss~~meet ~~position,~~the anaforementioned ~~other-than-temporary~~criteria, ~~impairment~~management ~~(“OTTI”)~~evaluates iswhether ~~recognized in earnings when it is anticipated that~~ the ~~amortized~~decline ~~cost~~in ~~will~~estimated ~~not~~fair bevalue ~~recovered. When either: (i) the Company~~ has ~~the~~resulted ~~intent~~from tocredit ~~sell~~losses ~~the security;~~ or ~~(ii) it~~other isfactors. ~~more~~If ~~likely than not that~~ the Company ~~will~~determines ~~be required to sell~~ the ~~security~~decline ~~before recovery, the OTTI recognized~~ in ~~earnings is the entire difference between the security’s amortized cost and~~ estimated fair value. Ifis ~~neither~~due ofto ~~these~~credit ~~conditions exists~~losses, the difference between the amortized cost of the security and the present value of projected future cash flows expected to be collected is recognized as an ~~OTTI~~allowance inthrough ~~earnings~~net ~~(“credit~~investment ~~loss”~~gains (losses). If the estimated fair value is less than the present value of projected future cash flows expected to be collected, this portion of ~~OTTI~~the allowance related to other-than-credit factors ~~(“noncredit loss”)~~ is recorded in OCI.

Once a security specific allowance for credit losses is established, the present value of cash flows expected to be collected from the security continues to be reassessed. Any changes in the security specific allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense in net investment gains (losses).

Fixed maturity securities are also evaluated to determine whether any amounts have become uncollectible. When all, or a portion, of a security is deemed uncollectible, the uncollectible portion is written-off with an adjustment to amortized cost and a corresponding reduction to the allowance for credit losses.

Mortgage Loans

Mortgage loans are stated at unpaid principal balance, adjusted for any unamortized premium or discount, and any deferred fees or expenses, and ~~are~~ net of ~~valuation~~an ~~allowances~~allowance for credit losses. Interest income and prepayment fees are recognized when earned. Interest income is recognized using an effective yield method giving effect to amortization of premiums and accretion of discounts. The allowance for credit losses for mortgage loans represents the Company’s best estimate of expected credit losses over the remaining life of the loans and is determined using relevant available information from internal and external sources, relating to past events, current conditions, and a reasonable and supportable forecast.

Short-term Investments

Short-term investments include securities and other investments with remaining maturities of one year or less, but greater than three months, at the time of purchase and are stated at estimated fair value or amortized cost, which approximates estimated fair value.

Other Invested Assets

Other invested assets consist principally of freestanding derivatives with positive estimated fair values which are described in “— Derivatives” below.

Derivatives

Freestanding Derivatives

Freestanding derivatives are carried on the Company’s balance sheet either as assets within other invested assets or as liabilities within other liabilities at estimated fair value. The Company does not offset the estimated fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement.

If a derivative is not designated or did not qualify as an accounting hedge, changes in the estimated fair value of the derivative are reported in net derivative gains (losses).

The Company generally reports cash received or paid for a derivative in the investing activity section of the statement of cash flows except for cash flows of certain derivative options with deferred premiums, which are reported in the financing activity section of the statement of cash flows.

Hedge Accounting

The Company primarily designates derivatives as a hedge of a forecasted transaction or a variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). When a derivative is designated as a cash flow hedge and is determined to be highly effective, changes in fair value are recorded in OCI and subsequently reclassified into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item.

To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge. In its hedge documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and at least quarterly throughout the life of the designated hedging relationship. 68

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item; (ii) the derivative or hedged item expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; or (iv) the derivative is de-designated as a hedging instrument.

When hedge accounting is discontinued the derivative is carried at its estimated fair value on the balance sheet, with changes in its estimated fair value recognized in the current period as net derivative gains (losses). The changes in estimated fair value of derivatives previously recorded in OCI related to discontinued cash flow hedges are released into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item. When the hedged item matures or is sold, or the forecasted transaction is not probable of occurring, the Company immediately reclassifies any remaining balances in OCI to net derivative gains (losses).

Embedded Derivatives

The Company has certain insurance and reinsurance contracts that contain embedded derivatives which are required to be separated from their host contracts and reported as derivatives. These host contracts include: variable annuities with guaranteed minimum benefits; index-linked annuities that are directly written; and ceded reinsurance of variable annuity with guaranteed minimum benefits. Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables on the balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances on the balance sheets. Changes in the estimated fair value of the embedded derivative are reported in net derivative gains (losses).

See “— Variable Annuity Guarantees,” “— Index-Linked Annuities” and “— Reinsurance” for additional information on the accounting policies for embedded derivatives bifurcated from variable annuity and reinsurance host contracts.

Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In most cases, the exit price and the transaction (or entry) price will be the same at initial recognition.

In determining the estimated fair value of the Company’s investments, fair values are based on unadjusted quoted prices for identical investments in active markets that are readily and regularly obtainable. When such quoted prices are not available, fair values are based on quoted prices in markets that are not active, quoted prices for similar but not identical investments, or other observable inputs. If these inputs are not available, or observable inputs are not determinable, unobservable inputs and/or adjustments to observable inputs requiring management judgment are used to determine the estimated fair value of investments.

Separate Accounts

Separate accounts underlying the Company’s variable life and annuity contracts are reported at fair value. Assets in separate accounts supporting the contract liabilities are legally insulated from the Company’s general account liabilities. Investments in these separate accounts are directed by the contract holder and all investment performance, net of contract fees and assessments, is passed through to the contract holder. Investment performance and the corresponding amounts credited to contract holders of such separate accounts are offset within the same line on the statements of operations.

Separate accounts that do not pass all investment performance to the contract holder, including those underlying certain index-linked annuities, are combined on a line-by-line basis with the Company’s general account assets, liabilities, revenues and expenses. The accounting for investments in these separate accounts is consistent with the methodologies described herein for similar financial instruments held within the general account.69

The Company receives asset-based distribution and service fees from mutual funds available to the variable life and annuity contract holders as investment options in its separate accounts. These fees are recognized in the period in which the related services are performed and are included in other revenues in the statement of operations.

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

The Company receives asset-based distribution and service fees from mutual funds available to the annuity contract holders as investment options in its separate accounts. These fees are recognized in the period in which the related services are performed and are included in other revenues in the statement of operations.

Income Tax

Income taxes as presented herein attribute current and deferred income taxes of MetLife, Inc., for periods up until the Separation, to Brighthouse Financial in a manner that is systematic, rational and consistent with the asset and liability method prescribed by the Financial Accounting Standards Board (“FASB”) guidance Accounting Standards Codification 740 -— Income Taxes (“ASC 740”). The Company’s income tax provision was prepared following the modified separate return method. The modified separate return method applies ASC 740 to the ~~stand-alone~~standalone financial statements of each member of the consolidated group as if the group member were a separate taxpayer and a ~~stand-alone~~standalone enterprise, after providing benefits for losses. The Company’s accounting for income taxes represents management’s best estimate of various events and transactions.

Deferred tax assets and liabilities resulting from temporary differences between the financial reporting and tax bases of assets and liabilities are measured at the balance sheet date using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse.

The realization of deferred tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction. Valuation allowances are established when management determines, based on available information, that it is more likely than not that deferred income tax assets will not be realized. Significant judgment is required in determining whether valuation allowances should be established, as well as the amount of such allowances. When making such determination, the Company considers many factors, including the jurisdiction in which the deferred tax asset was generated, the length of time that carryforward can be utilized in the various taxing jurisdictions, future taxable income exclusive of reversing temporary differences and carryforwards, future reversals of existing taxable temporary differences, taxable income in prior carryback years, tax planning strategies and the nature, frequency, and amount of cumulative financial reporting income and losses in recent years.

The Company may be required to change its provision for income taxes when estimates used in determining valuation allowances on deferred tax assets significantly change or when receipt of new information indicates the need for adjustment in valuation allowances. Additionally, the effect of changes in tax laws, tax regulations, or interpretations of such laws or regulations, is recognized in net income tax expense (benefit) in the period of change.

The Company determines whether it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded on the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. Unrecognized tax benefits due to tax uncertainties that do not meet the threshold are included within other liabilities and are charged to earnings in the period that such determination is made.

The Company classifies interest recognized as interest expense and penalties recognized as a component of income tax expense.

Litigation Contingencies

The Company is a party to a number of legal actions and may be involved in a number of regulatory investigations. Given the inherent unpredictability of these matters, it is difficult to estimate the impact on the Company’s financial position. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Legal costs are recognized as incurred. On a quarterly and annual basis, the Company reviews relevant information with respect to liabilities for litigation, regulatory investigations and litigation-related contingencies to be reflected on the Company’s financial statements.

~~Other Accounting Policies~~70

Cash and Cash Equivalents

The Company considers all highly liquid securities and other investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents are stated at estimated fair value or amortized cost, which approximates estimated fair value.

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Other Accounting Policies

Cash and Cash Equivalents

Employee Benefit Plans

Brighthouse Services, LLC (“Brighthouse Services”), an affiliate, sponsors qualified and non-qualified defined contribution plans, and New England Life Insurance Company, an affiliate, sponsors certain frozen defined benefit pension and postretirement plans. Within its statement of operations, the Company has included expenses associated with its participants in these plans.

Adoption of New Accounting Pronouncements

Changes to GAAP are established by the FASB in the form of accounting standards updates (“~~ASUs~~ASU”) to the FASB Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. ASUs not listed ~~below~~ were assessed and determined to be either not applicable or are not expected to have a material impact on the Company’s financial statements. ~~There were no ASUs adopted during 2019 that had a material impact on the Company’s financial statements.~~

~~ASUs~~Effective ~~issued~~January ~~but~~1, ~~not~~2020, ~~yet~~using the modified retrospective method, the Company adopted asASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of ~~December~~Credit Losses on Financial Instruments. The amendments to Topic 326 31replace the incurred loss impairment methodology for certain financial instruments with one that reflects expected credit losses based on historical loss information, ~~2019~~current ~~are~~conditions, ~~summarized~~and reasonable and supportable forecasts. The new guidance also requires that an other-than-temporary impairment on a debt security will be recognized as an allowance going forward, such that improvements in expected future cash flows after an impairment will no longer be reflected as a prospective yield adjustment through net investment income, but rather a reversal of the ~~table~~previous ~~below~~impairment and recognized through realized investment gains and losses. The Company recorded an after tax net increase to retained earnings of less than $1 million for the cumulative effect of adoption. The adjustment included establishing or updating the allowance for credit losses on fixed maturity securities, mortgage loans, and other invested assets.

Standard	Description	Effective Date	Impact on Financial Statements
ASU 2018-12, Financial Services -Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts	The amendments to Topic 944 will result in significant changes to the accounting for long-duration insurance contracts. These changes (1) require all guarantees that qualify as market risk benefits to be measured at fair value, (2) require more frequent updating of assumptions and modify existing discount rate requirements for certain insurance liabilities, (3) modify the methods of amortization for DAC, and (4) require new qualitative and quantitative disclosures around insurance contract asset and liability balances and the judgments, assumptions and methods used to measure those balances. The market risk benefit guidance is required to be applied on a retrospective basis, while the changes to guidance for insurance liabilities and DAC may be applied to existing carrying amounts on the effective date or on a retrospective basis.	January 1, 2022	The Company is in the early stages of evaluating the new guidance and therefore is unable to estimate the impact to its financial statements. The most significant impact is expected to be the measurement of liabilities for variable annuity guarantees.
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	The amendments to Topic 326 replace the incurred loss impairment methodology for certain financial instruments with one that reflects expected credit losses based on historical loss information, current conditions, and reasonable and supportable forecasts. The new guidance also requires that an OTTI on a debt security will be recognized as an allowance going forward, such that improvements in expected future cash flows after an impairment will no longer be reflected as a prospective yield adjustment through net investment income, but rather a reversal of the previous impairment and recognized through realized investment gains and losses.	January 1, 2020 using the modified retrospective method (with early adoption permitted beginning January 1, 2019)	The adoption of this new guidance will not have a material impact on the Company’s financial statements.

Future Adoption of New Accounting Pronouncements

In August 2018, the FASB issued new guidance on long-duration contracts (ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts). This new guidance is effective for fiscal years beginning after January 1, 2023. The amendments to Topic 944 will result in significant changes to the accounting for long-duration insurance contracts. These changes (i) require all guarantees that qualify as market risk benefits to be measured at fair value, (ii) require more frequent updating of assumptions and modify existing discount rate requirements for certain insurance liabilities, (iii) modify the methods of amortization for DAC, and (iv) require new qualitative and quantitative disclosures around insurance contract asset and liability balances and the judgments, assumptions and methods used to measure those balances. The market risk benefit guidance is required to be applied on a retrospective basis, while the changes to guidance for insurance liabilities and DAC may be applied to existing carrying amounts on the effective date or on a retrospective basis.

The Company continues to evaluate the new guidance and therefore is unable to estimate the impact on its financial statements. The most significant impact from the ASU is the requirement that all variable annuity guarantees will be considered market risk benefits and measured at fair value, whereas today a significant amount of variable annuity guarantees are classified as insurance liabilities.

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

2. Segment Information

The Company is organized into two segments: Annuities and Life. In addition, the Company reports certain of its results of operations in Corporate & Other.

Annuities

The Annuities segment consists of a variety of variable, fixed, index-linked and income annuities designed to address contract holders’ needs for protected wealth accumulation on a tax-deferred basis, wealth transfer and income security.

Life

The Life segment consists of insurance products and services, ~~including~~mainly term, ~~whole and universal~~ life ~~products~~insurance, designed to address policyholders’ needs for financial security and protected wealth transfer, which may be provided on a tax-advantaged basis.

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

2. Segment Information (continued)

Corporate & Other

Financial Measures and Segment Accounting Policies

Adjusted earnings is a financial measure used by management to evaluate performance, allocate resources and facilitate comparisons to industry results. Consistent with GAAP guidance for segment reporting, adjusted earnings is also used to measure segment performance. The Company believes the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of its performance by highlighting the results of operations and the underlying profitability drivers of the business. Adjusted earnings should not be viewed as a substitute for net income (loss).

Adjusted earnings, which may be positive or negative, focuses on the Company’s primary businesses principally by excluding the impact of market volatility, which could distort trends.

The following are significant items excluded from total revenues, net of income tax, in calculating adjusted earnings:

• Net investment gains (losses);

• Certain variable annuity GMIB fees (“GMIB Fees”) ~~and amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses)~~.

The following are significant items excluded from total expenses, net of income tax, in calculating adjusted earnings:

• Amounts associated with benefits related to GMIBs (“GMIB Costs”);

• Amortization of DAC related to: (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments.

The tax impact of the adjustments mentioned above is calculated net of the statutory tax rate, which could differ from the Company’s effective tax rate.

The segment accounting policies are the same as those used to prepare the Company’s financial statements, except for the adjustments to calculate adjusted earnings described above. In addition, segment accounting policies include the methods of capital allocation described below.

Segment investment and capitalization targets are based on statutory oriented risk principles and metrics. Segment invested assets backing liabilities are based on net statutory liabilities plus excess capital. For the variable annuity business, the excess capital held is based on the target statutory total asset requirement consistent with the Company’s variable annuity risk management strategy. For insurance businesses other than variable annuities, excess capital held is based on a percentage of required statutory risk-based capital (“RBC”). Assets in excess of those allocated to the segments, if any, are held in Corporate & Other. Segment net investment income reflects the performance of each segment’s respective invested assets.72

Set forth in the tables below are the operating results with respect to the Company’s segments, as well as Corporate & Other, for the years ended December 31, 2019, 2018 and 2017 and at December 31, 2019 and 2018.

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

2. Segment Information (continued)

	Operating Results
Year Ended December 31, 2019	Annuities			Life			Corporate& Other			Total
	(In millions)
Pre-tax adjusted earnings	$	(32	)	$	(10	)	$	—		$	(42	)
Provision for income tax expense (benefit)	(8		)	(2		)	(2		)	(12		)
Adjusted earnings	$	(24	)	$	(8	)	$	2		(30		)
Adjustments for:
Net investment gains (losses)										4
Net derivative gains (losses)										42
Other adjustments to net income (loss)										27
Provision for income tax (expense) benefit										(15		)
Net income (loss)										$	28
Interest revenue	$	83		$	37		$	2

Balance at December 31, 2019	Annuities		Life		Corporate & Other		Total
	(In millions)
Total assets	$	7,888	$	1,933	$	136	$	9,957
Separate account assets	$	4,676	$	—	$	—	$	4,676
Separate account liabilities	$	4,676	$	—	$	—	$	4,676

Operating results by segment, as well as Corporate & Other, were as follows:

	Operating Results
			Year Ended December 31, 2020
Year Ended December 31, 2018	Annuities		Life		Corporate& Other				Total
			Annuities				Life					Corporate& Other		Total
	~~(In millions)~~		(In millions)
Pre-tax adjusted earnings	$	27	$	25(11)	$	(2	)$	33	$	50		$	(6)	$	16
Provision for income tax expense (benefit)	4		5(4)		(2		)7		7			(2)		1
Adjusted earnings	$	23	$	20(7)	$	—	$	26	43			$	(4)	15
Adjustments for:
Net investment gains (losses)									(7		)			13
Net derivative gains (losses)									~~(18~~		)			129
Other adjustments to net income (loss)									18					(26)
Provision for income tax (expense) benefit									2					(24)
Net income (loss)									$	38				$	107
Interest revenue	$	64	$	3597	$	1	$	36				$	1

Balance at December 31, 2018	Annuities		Life		Corporate& Other				Total
			Year Ended December 31, 2019
	(In millions)
			Annuities				Life				Corporate& Other		Total
Total assets	$	7,034	$	1,084	$	12			$	8,130
			(In millions)
Separate account assets	$	4,268	$	—	$	—			$	4,268
Pre-tax adjusted earnings			$	(32)			$	(10)			$	—	$	(42)
Separate account liabilities	$	4,268	$	—	$	—			$	4,268
Provision for income tax expense (benefit)			(8)				(2)				(2)		(12)
Adjusted earnings			$	(24)			$	(8)			$	2	(30)
Adjustments for:
Net investment gains (losses)													4
Net derivative gains (losses)													42
Other adjustments to net income (loss)													27
Provision for income tax (expense) benefit													(15)
Net income (loss)													$	28
Interest revenue			$	83			$	37			$	2

6673

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

2. Segment Information (continued)

	Operating Results
			Year Ended December 31, 2018
Year Ended December 31, 2017	Annuities		Life		Corporate& Other				Total
			Annuities				Life					Corporate& Other		Total
	~~(In millions)~~		(In millions)
Pre-tax adjusted earnings	$	65	$	227	$	7	$	25	$	74		$	(2)	$	50
Provision for income tax expense (benefit)	16		14		~~(75~~		)5		~~(58~~		)	(2)		7
Adjusted earnings	$	49	$	123	$	82	$	20	~~132~~			$	—	43
Adjustments for:
Net investment gains (losses)									(1		)			(7)
Net derivative gains (losses)									~~(157~~		)			(18)
Other adjustments to net income (loss)									35					18
Provision for income tax (expense) benefit									43					2
Net income (loss)									$	52				$	38
Interest revenue	$	57	$	1964	$	10	$	35				$	1

~~The~~Total ~~following table presents total~~ revenues ~~with~~by ~~respect to the Company’s segments~~segment, as well as Corporate & Other, were as follows:

	~~Years Ended December 31,~~		Years Ended December 31,
	2019		2018			2017
			2020					2019		2018
	~~(In millions)~~		(In millions)
Annuities	$	90	$	~~103~~104		$	~~108~~	$	90	$	103
Life	51		6048			36		51		60
Corporate & Other	3		42			12		3		4
Adjustments	59		~~(12~~154		)	~~(144~~		)59		(12)
Total	$	~~203~~	$	~~155~~308		$	12	$	203	$	155

~~The~~Total ~~following~~assets ~~table~~by ~~presents~~segment, ~~total~~as ~~premiums,~~well ~~universal~~as ~~life~~Corporate ~~and~~& ~~investment-type~~Other, ~~product~~were ~~policy~~as ~~fees~~follows ~~and other revenues by major product group~~at:

	Years Ended December 31,
			December 31,
	2019				2018		2017
			2020				2019
	~~(In millions)~~		(In millions)
Annuity products	$	19			$	53	$	64
Annuities			$	9,467			$	7,888
Life insurance products	16				27		20
Life			1,859				1,933
Total	$	35			$	80	$	84
Corporate & Other			176				136
Total			$	11,502			$	9,957

Total premiums, universal life and investment-type product policy fees and other revenues by major product group were as follows:


	Years Ended December 31,
	2020		2019		2018
	(In millions)
Annuity products	$	20	$	19	$	53
Life insurance products	12		16		27
Total	$	32	$	35	$	80

All of the Company’s premiums, universal life and investment-type product policy fees and other revenues originated in the U.S.

6774

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

3. Insurance

Insurance Liabilities

Insurance liabilities, including affiliated insurance liabilities on reinsurance ceded, are comprised of future policy benefits, policyholder account balances and other policy-related balances. Information regarding insurance liabilities by segment, as well as Corporate & Other, was as follows at:

	~~December 31,~~		December 31,
	2019				2018
			2020				2019
	~~(In millions)~~		(In millions)
Annuities	$	~~2,714~~	$	3,612	$	~~2,051~~	$	2,714
Life	~~367~~		365		~~360~~		367
Corporate & Other	10		11		9		10
Total	$	~~3,091~~	$	3,988	$	~~2,420~~	$	3,091

See Note 5 for discussion of affiliated reinsurance liabilities included in the table above.

Assumptions for Future Policyholder Benefits and Policyholder Account Balances

For ~~non-participating~~ term ~~and whole~~ life insurance, assumptions for mortality and persistency are based upon the Company’s experience. Interest rate assumptions for the aggregate future policy benefit liabilities range from 3% to 5%. The liability for single premium immediate annuities is based on the present value of expected future payments using the Company’s experience for mortality assumptions, with interest rate assumptions used in establishing such liabilities ranging from 31% to 68%.

Policyholder account balances liabilities for deferred annuities ~~and universal life insurance~~ have interest credited rates ranging from 1% to 76%.

Guarantees

The Company issues variable annuity contracts with guaranteed minimum benefits. ~~GMABs~~GMDBs, the ~~non-~~life contingent portion of GMWBs and ~~the~~certain ~~portion~~portions of ~~certain~~ GMIBs ~~that~~are doaccounted ~~not~~for ~~require~~as ~~annuitization~~insurance liabilities in future policyholder benefits, while other guarantees are accounted for in whole or in part as embedded derivatives in policyholder account balances and are further discussed in Note 7. The most significant assumptions for variable annuity guarantees included in future policyholder benefits are projected general account and separate account investment returns, and policyholder behavior including mortality, benefit election and utilization, and withdrawals.

~~The~~See ~~assumptions~~Note 1 for ~~GMDBs~~more ~~and~~information ~~GMIBs~~on ~~included~~guarantees inaccounted future policyholder benefits include projected separate account rates of return, general account investment returns, interest crediting rates, mortality, in-force or persistency, benefit elections and withdrawals, and expenses to administer business. GMIBs also include an assumption for ~~the~~as ~~percentage~~insurance ~~of the potential annuitizations that may be elected by the contract holder, while GMWBs include assumptions for withdrawals~~liabilities.

~~See Note 1 for more information on GMDBs and GMIBs accounted for as insurance liabilities.~~75

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

3. Insurance (continued)

Information regarding the liabilities for guarantees (excluding policyholder account balances and embedded derivatives) relating to variable annuity contracts was as follows:

	~~Variable Annuity Contracts~~			Variable Annuity Contracts
	~~GMDBs~~			~~GMIBs~~GMDBs		~~Total~~		GMIBs		Total
	~~(In millions)~~			(In millions)
Direct
Balance at January 1, 2017	$	10		$	149	$	159
Balance at January 1, 2018				$	12			$	172	$	184
Incurred guaranteed benefits	2			231		25		26		27
Paid guaranteed benefits	—			—		—		—		—
Balance at December 31, 2017	12			172		184
Balance at December 31, 2018				13				198		211
Incurred guaranteed benefits	1			261		27		4		5
Paid guaranteed benefits	—			—		—		—		—
Balance at December 31, 2018	13			198		211
Balance at December 31, 2019				14				202		216
Incurred guaranteed benefits	1			4(1)		5		64		63
Paid guaranteed benefits	—			—(1)		—		—		(1)
Balance at December 31, 2019	$	14		$	202	$	216
Balance at December 31, 2020				$	12			$	266	$	278
Ceded
Balance at January 1, 2017	$	10		$	52	$	62
Balance at January 1, 2018				$	13			$	61	$	74
Incurred guaranteed benefits	3			9(1)		12		11		10
Paid guaranteed benefits	—			—		—		—		—
Balance at December 31, 2017	13			61		74
Balance at December 31, 2018				12				72		84
Incurred guaranteed benefits	(1		)	11—		10		2		2
Paid guaranteed benefits	—			—		—		—		—
Balance at December 31, 2018	12			72		84
Balance at December 31, 2019				12				74		86
Incurred guaranteed benefits	—			2—		2		34		34
Paid guaranteed benefits	—			—(1)		—		—		(1)
Balance at December 31, 2019	$	12		$	74	$	86
Balance at December 31, 2020				$	11			$	108	$	119
Net
Balance at January 1, 2017	$	—		$	97	$	97
Balance at January 1, 2018				$	(1)			$	111	$	110
Incurred guaranteed benefits	(1		)	142		13		15		17
Paid guaranteed benefits	—			—		—		—		—
Balance at December 31, 2017	(1		)	111		110
Balance at December 31, 2018				1				126		127
Incurred guaranteed benefits	2			151		17		2		3
Paid guaranteed benefits	—			—		—		—		—
Balance at December 31, 2018	1			126		127
Balance at December 31, 2019				2				128		130
Incurred guaranteed benefits	1			2(1)		3		30		29
Paid guaranteed benefits	—			—		—		—		—
Balance at December 31, 2019	$	2		$	128	$	130
Balance at December 31, 2020				$	1			$	158	$	159

6976

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

3. Insurance (continued)

Information regarding the Company’s guarantee exposure was as follows at:

	~~December 31,~~			December 31,
	2019						2018
				2020										2019
	~~In theEvent of Death~~			~~AtAnnuitization~~In theEvent of Death			~~In theEvent of Death~~		AtAnnuitization		~~AtAnnuitization~~			In theEvent of Death			AtAnnuitization
	~~(Dollars in millions)~~			(Dollars in millions)
Annuity Contracts (1), (2)
Variable Annuity Guarantees
Total account value (3)	$	~~4,683~~		$	34,~~742~~971		$	~~4,274~~	$	3,816	$	~~3,484~~		$	4,683		$	3,742
Separate account value	$	~~4,675~~		$	34,~~741~~962		$	~~4,267~~	$	3,816	$	~~3,483~~		$	4,675		$	3,741
Net amount at risk	$	4	~~(4)~~	$	~~310~~3	(54)	$	~~193~~	$	~~(4)~~429	$	~~275~~(5)	~~(5)~~	$	4	(4)	$	310	(5)
Average attained age of contract holders	~~68 years~~			6869 years			~~67 years~~		69 years		~~67 years~~			68 years			68 years

_______________

(1) The Company’s annuity contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive.

(2) Includes direct business, but excludes offsets from hedging or reinsurance, if any. Therefore, the net amount at risk presented reflects the economic exposures of living and death benefit guarantees associated with variable annuities, but not necessarily their impact on the Company. See Note 5 for a discussion of guaranteed minimum benefits which have been reinsured.

(3) Includes the contract holder’s investments in the general account and separate account, if applicable.

(4) Defined as the death benefit less the total account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death.

(5) Defined as the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents the Company’s potential economic exposure to such guarantees in the event all contract holders were to annuitize on the balance sheet date, even though the contracts contain terms that allow annuitization of the guaranteed amount only after the 10th anniversary of the contract, which not all contract holders have achieved.

Account balances of contracts with guarantees were invested in separate account asset classes as follows at:

	~~December 31,~~		December 31,
	2019				2018
			2020				2019
	~~(In millions)~~		(In millions)
Fund Groupings:
Balanced	$	~~3,001~~	$	3,069	$	~~2,769~~	$	3,001
Equity	~~1,180~~		1,350		~~1,014~~		1,180
Bond	~~495~~		546		~~486~~		495
Total	$	~~4,676~~	$	4,965	$	~~4,269~~	$	4,676

7077

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

4. Deferred Policy Acquisition Costs and ~~Other~~Deferred ~~Intangibles~~Sales Inducements

See Note 1 for a description of capitalized acquisition costs.

Information regarding DAC was as follows:

	~~Years Ended December 31,~~		Years Ended December 31,
	2019				2018			2017
			2020					2019			2018
	~~(In millions)~~		(In millions)
DAC:
Balance at January 1,	$	~~186~~	$	175	$	~~131~~		$	85186		$	131
Capitalizations	39		42		30			1739			30
Amortization related to net investment gains (losses) and net derivative gains (losses)	17		18		25			5017			25
All other amortization	~~(39~~		(56)		~~(26~~		)	(1039)		)	(26)
Total amortization	~~(22~~		(38)		(1		)	40(22)			(1)
Unrealized investment gains (losses)	~~(28~~		(19)		26			(1128)		)	26
Balance at December 31,	$	~~175~~	$	160	$	~~186~~		$	~~131~~175		$	186

Information regarding total DAC by segment, was as follows at:

	~~December 31,~~		December 31,
	2019				2018
			2020				2019
	~~(In millions)~~		(In millions)
Annuities	$	~~156~~	$	141	$	~~164~~	$	156
Life	19		19		22		19
Total	$	~~175~~	$	160	$	~~186~~	$	175

Information regarding ~~other~~DSI ~~intangibles~~ was as follows:

	~~Years Ended December 31,~~		Years Ended December 31,
	2019				2018			2017
			2020					2019			2018
	~~(In millions)~~		(In millions)
DSI:
Balance at January 1,	$	29	$	25	$	27		$	3029		$	27
Amortization	(2		(7)		(2		)	—(2)			(2)
Unrealized investment gains (losses)	(2		)—		4			(32)		)	4
Balance at December 31,	$	25	$	18	$	29		$	2725		$	29
VODA:
Balance at January 1,	$	8			$	9		$	10
Amortization	(1		)		(1		)	(1		)
Balance at December 31,	$	7			$	8		$	9
Accumulated amortization	$	13			$	12		$	11

The VODA estimated future amortization expense to be reported in other expenses is $1 million in each of 2020, 2021, 2022, 2023 and 2024.

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements

5. Reinsurance

The Company enters into reinsurance agreements primarily as a purchaser of reinsurance for its various insurance products. The Company participates in reinsurance activities in order to limit losses, minimize exposure to significant risks and provide additional capacity for future growth.

Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risks. The Company periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to establish assets and liabilities relating to ceded and assumed reinsurance and evaluates the financial strength of counterparties to its reinsurance agreements using criteria similar to that evaluated in the security impairment process discussed in Note 6.

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

5. Reinsurance (continued)

Annuities

For annuities, the Company currently reinsures to its parent, Brighthouse Life Insurance Company ~~and formerly reinsured to MLIC~~, 100% of certain variable annuity risks or 100% of the living and death benefit guarantees issued in connection with variable annuities. Under the benefit guarantee reinsurance agreements, the Company pays a reinsurance premium generally based on fees associated with the guarantees collected from policyholders, and receives reimbursement for benefits paid or accrued in excess of account values, subject to certain limitations.

Life

For its individual life insurance products, the Company has historically reinsured the mortality risk primarily on an excess of retention basis or on a quota share basis. The Company currently retains up to $100,000 per life and reinsures 100% of amounts in excess of the amount the Company retains. In addition to reinsuring mortality risk as described above, the Company reinsures other risks, as well as specific coverages. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks with specified characteristics. The Company evaluates its reinsurance programs routinely and may increase or decrease its retention at any time.

Catastrophe Coverage

The Company has exposure to catastrophes, which could contribute to significant fluctuations in the Company’s results of operations. The Company uses excess of retention and quota share reinsurance agreements to provide greater diversification of risk and minimize exposure to larger risks.

Reinsurance Recoverables

The Company reinsures its business through a diversified group of highly rated reinsurers. The Company analyzes recent trends in arbitration and litigation outcomes in disputes, if any, with its reinsurers. ~~The~~and ~~Company~~ monitors ratings and ~~evaluates~~ the financial strength of its reinsurers ~~by analyzing their financial statements~~. In addition, the reinsurance recoverable ~~balance~~balances due from each reinsurer isand ~~evaluated as part of~~ the ~~overall~~recoverability ~~monitoring process. Recoverability~~ of ~~reinsurance~~such ~~recoverable~~balance ~~balances~~ is evaluated ~~based~~as onpart ~~these analyses. The Company generally secures large reinsurance recoverable balances with various forms~~ of ~~collateral,~~this ~~including~~overall ~~secured~~monitoring ~~trusts, funds withheld accounts, and irrevocable letters of credit~~process. ~~These reinsurance recoverable balances are stated net of allowances for uncollectible reinsurance, which at both December 31, 2019 and 2018, were not significant.~~

The Company ~~has~~generally ~~secured~~secures ~~certain~~large reinsurance recoverable balances with various forms of collateral, including secured trusts, funds withheld accounts, and irrevocable letters of credit. These reinsurance recoverable balances are stated net of allowances for uncollectible reinsurance, which at both December 31, 2020 and ~~funds~~2019, ~~withheld~~were ~~accounts~~not significant. The Company had $2320 million and $2623 million of unsecured reinsurance recoverable balances with third-parties at December 31, ~~2019~~2020 and ~~2018~~2019, respectively.

At December 31, ~~2019~~2020, the Company had $~~454~~443 million of net ceded reinsurance recoverables with third-~~parties~~party reinsurers. Of this total, $~~451~~439 million, or 99%, were with the Company’s five largest ceded reinsurers, including $2017 million of net ceded reinsurance recoverables which were unsecured. At December 31, ~~2018~~2019, the Company had $27454 million of net ceded reinsurance recoverables with third-parties. Of this total, $24451 million, or 8999%, were with the Company’s five largest ceded reinsurers, ~~all~~including $20 million of net ceded reinsurance recoverables which were unsecured.

7279

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

5. Reinsurance (continued)

The amounts on the statements of operations include the impact of reinsurance. Information regarding the significant effects of reinsurance was as follows:

	~~Years Ended December 31,~~		Years Ended December 31,
	2019				2018			2017
			2020					2019			2018
	~~(In millions)~~		(In millions)
Premiums
Direct premiums	$	86	$	82	$	91		$	9386		$	91
Reinsurance ceded	~~(63~~		(60)		~~(54~~		)	(6763)		)	(54)
Net premiums	$	23	$	22	$	37		$	2623		$	37
Universal life and investment-type product policy fees
Direct universal life and investment-type product policy fees	$	~~101~~	$	97	$	~~106~~		$	~~108~~101		$	106
Reinsurance ceded	(4		(4)		(4		)	(4)		)	(4)
Net universal life and investment-type product policy fees	$	97	$	93	$	~~102~~		$	~~104~~97		$	102
Other revenues
Direct other revenues	$	13	$	13	$	13		$	13		$	13
Reinsurance ceded	~~(98~~		(96)		~~(72~~		)	(5998)		)	(72)
Net other revenues	$	~~(85~~	)$	(83)	$	~~(59~~	)	$	(4685)	)	$	(59)
Policyholder benefits and claims
Direct policyholder benefits and claims	$	92	$	149	$	98		$	~~106~~92		$	98
Reinsurance ceded	~~(59~~		(126)		~~(91~~		)	(~~110~~59)		)	(91)
Net policyholder benefits and claims	$	33	$	23	$	7		$	(433	)	$	7
Other expenses
Direct other expenses	$	87	$	80	$	74		$	6987		$	74
Reinsurance ceded	(6		(3)		(8		)	(36)		)	(8)
Net other expenses	$	81	$	77	$	66		$	6681		$	66

The amounts on the balance sheets include the impact of reinsurance. Information regarding the significant effects of reinsurance was as follows at:

	~~December 31,~~		December 31,
	2019								2018
			2020												2019
	~~Direct~~		Direct		~~Ceded~~		~~TotalBalanceSheet~~Ceded		~~Direct~~		TotalBalanceSheet		~~Ceded~~		~~TotalBalanceSheet~~Direct		Ceded		TotalBalanceSheet
	~~(In millions)~~		(In millions)
Assets
Premiums, reinsurance and other receivables	$	18	$	24	$	~~1,030~~	$	1,~~048~~199	$	17	$	1,223	$	~~563~~	$	~~580~~18	$	1,030	$	1,048
Liabilities
Other liabilities	$	86	$	148	$	~~826~~	$	~~912~~792	$	40	$	940	$	~~431~~	$	~~471~~86	$	826	$	912

Reinsurance agreements that do not expose the Company to a reasonable possibility of a significant loss from insurance risk are recorded using the deposit method of accounting. The deposit assets on reinsurance were $~~444~~435 million and $18444 million at December 31, ~~2019~~2020 and ~~2018~~2019, respectively. There were no deposit liabilities on reinsurance at both December 31, ~~2019~~2020 and ~~2018~~2019.

73Related Party Reinsurance Transactions

The Company has reinsurance agreements with its parent, Brighthouse Life Insurance Company, and Metropolitan Life Insurance Company, all of which were related parties until the completion of the MetLife Divestiture.

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

5. Reinsurance (continued)

Related Party Reinsurance Transactions

The Company has reinsurance agreements with its parent, Brighthouse Life Insurance Company, and certain MetLife, Inc. subsidiaries, including Metropolitan Life Insurance Company (“MLIC”) and MetLife Reinsurance Company of Vermont, all of which were related parties until the completion of the MetLife Divestiture.

Information regarding the significant effects of related party reinsurance included on the statements of operations was as follows:

	~~Years Ended December 31,~~		Years Ended December 31,
	2019				2018			2017
			2020					2019			2018
	~~(In millions)~~		(In millions)
Premiums
Reinsurance ceded	$	~~(45~~	)$	(43)	$	~~(37~~	)	$	(5245)	)	$	(37)
Universal life and investment-type product policy fees
Reinsurance ceded	$	(3	)$	(4)	$	(4	)	$	(43)	)	$	(4)
Other revenues
Reinsurance ceded	$	~~(98~~	)$	(96)	$	~~(72~~	)	$	(5998)	)	$	(72)
Policyholder benefits and claims
Reinsurance ceded	$	~~(51~~	)$	(120)	$	~~(89~~	)	$	(~~100~~51)	)	$	(89)
Other expenses
Reinsurance ceded	$	(7	)$	(7)	$	(8	)	$	(37)	)	$	(8)

Information regarding the significant effects of ceded related party reinsurance included on the balance sheets was as follows at:

	~~December 31,~~		December 31,
	2019				2018
			2020				2019
	~~(In millions)~~		(In millions)
Assets
Premiums, reinsurance and other receivables	$	~~567~~	$	749	$	~~534~~	$	567
Liabilities
Other liabilities	$	~~387~~	$	362	$	~~430~~	$	387

The Company cedes risks to Brighthouse Life Insurance Company related to guaranteed minimum benefit guarantees written directly by the Company. These ceded reinsurance agreements contain embedded derivatives and changes in their estimated fair value are included within net derivative gains (losses). The embedded derivatives associated with the cessions are included within premiums, reinsurance and other receivables and were $~~338~~477 million and $~~298~~338 million at December 31, ~~2019~~2020 and ~~2018~~2019, respectively. Net derivative gains (losses) associated with the embedded derivatives were $38138 million, ($~~12)~~38 million and ($7412) million for the years ended December 31, ~~2019~~2020, ~~2018~~2019 and ~~2017~~2018, respectively.

The Company ~~previously~~has ~~ceded~~secured ~~100% of~~ certain ~~variable annuities including guaranteed minimum benefit on a modified coinsurance basis to MLIC. In January 2017, the Company executed a novation and reassigned this~~ reinsurance ~~agreement~~recoverable ~~with~~balances ~~Brighthouse Life Insurance Company, as reinsurer. These transactions were treated as a termination of the existing reinsurance agreement~~ with ~~recognition~~various offorms ~~a loss and a new reinsurance agreement with no recognition~~ of acollateral, ~~gain~~including orsecured ~~loss~~trusts. ~~These transactions resulted in an increase in other liabilities of $130 million.~~ The Company ~~recognized~~had ano ~~loss~~unsecured ofrelated ~~$84~~party ~~million,~~reinsurance ~~net~~recoverable ofbalances ~~income~~at ~~tax,~~both as a result of these transactions. Certain contractual features of this agreement qualify as embedded derivatives and changes in their estimated fair value are included within net derivative gains (losses). Net derivative gains (losses) associated with the embedded derivatives were ($125) million for the year ended December 31, ~~2017~~2020 and 2019.

74Related party reinsurance agreements that do not expose the Company to a reasonable possibility of a significant loss from insurance risk are recorded using the deposit method of accounting. The deposit assets on related party reinsurance were $5 million and $4 million at December 31, 2020 and 2019, respectively. There were no deposit liabilities on related party reinsurance at both December 31, 2020 and 2019.

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

5. Reinsurance (continued)

In May 2017, the Company recaptured from MLIC risks related to multiple life products under yearly renewable term and coinsurance agreements. This recapture resulted in an increase in cash and cash equivalents of $26 million and a decrease in premiums, reinsurance and other receivables of $22 million. The Company recognized a gain of $2 million, net of income tax, as a result of this reinsurance termination. Concurrent with the recapture from MLIC, the Company executed a reinsurance agreement with Brighthouse Life Insurance Company, as reinsurer to cede on a yearly renewable term basis risks related to multiple life products. The transaction resulted in an increase in premiums, reinsurance and other receivables of $25 million, an increase in other liabilities of $23 million, a decrease in premiums of $23 million and a reduction in policyholder benefits and claims of $25 million. The Company recognized a gain of $1 million, net of income tax, as a result of this transaction.

The Company has secured certain reinsurance recoverable balances with various forms of collateral, including secured trusts. The Company had no unsecured related party reinsurance recoverable balances at both December 31, 2019 and 2018.

Related party reinsurance agreements that do not expose the Company to a reasonable possibility of a significant loss from insurance risk are recorded using the deposit method of accounting. The deposit assets on related party reinsurance were $4 million at both December 31, 2019 and 2018. There were no deposit liabilities on related party reinsurance at both December 31, 2019 and 2018.

6. Investments

See Note 8 for information about the fair value hierarchy for investments and the related valuation methodologies. In connection with the adoption of new guidance related to the credit losses (see Note 1), effective January 1, 2020, the Company updated its accounting policies on certain investments. Any accounting policy updates required by the new guidance are described in this footnote.

Fixed Maturity Securities ~~AFS~~Available-for-sale

Fixed Maturity Securities ~~AFS~~ by Sector

~~The~~Fixed ~~following table presents the fixed~~ maturity securities ~~AFS~~ by sector were as follows at:

	December 31, 2019														December 31, 2018
			December 31, 2020																				December 31, 2019
	~~AmortizedCost~~		AmortizedCost		~~Gross Unrealized~~		Allowance for Credit Losses				Gross Unrealized		~~EstimatedFairValue~~		~~AmortizedCost~~		~~Gross Unrealized~~		EstimatedFairValue				AmortizedCost		~~EstimatedFairValue~~		Allowance for Credit Losses (1)		Gross Unrealized				EstimatedFairValue
					~~Gains~~		~~TemporaryLosses~~		~~OTTI Losses~~		Gains				Losses		~~Gains~~				~~TemporaryLosses~~		~~OTTI Losses~~						Gains		Losses
	~~(In millions)~~		(In millions)
Fixed maturity securities: (1)
U.S. corporate			$	1,697			$	—			$	201			$	1			$	1,897			$	1,361			$	—	$	87	$	2	$	1,446
U.S. corporate	$	1,361			$	87	$	2	$	—			$	1,446	$	891	$	5			$	23	$	—	$	873
Foreign corporate			503				—				58				2				559				396				—		23		3		416
Foreign corporate	396				23		3		—				416		368		1				17		—		352
ABS			350				—				6				1				355				142				—		1		1		142
CMBS	~~319~~		299		16		1—		—		31		~~334~~		~~326~~1		1		329		4		—319		~~323~~		—		16		1		334
U.S. government and agency	~~290~~		254		27		—		—		58		~~317~~		~~511~~—		10		312		14		—290		~~507~~		—		27		—		317
RMBS	~~277~~		219		12		1—		—		17		~~288~~		~~201~~—		5		236		3		—277		~~203~~		—		12		1		288
ABS	142				1		1		—				142		80		—				1		—		79
State and political subdivision			122				—				15				—				137				92				—		10		—		102
State and political subdivision	92				10		—		—				102		66		5				1		—		70
Foreign government			16				—				2				—				18				20				—		2		—		22
Foreign government	20				2		—		—				22		27		1				1		—		27
Total fixed maturity securities			$	3,460			$	—			$	388			$	5			$	3,843			$	2,897			$	—	$	178	$	8	$	3,067
Total fixed maturity securities	$	2,897			$	178	$	8	$	—			$	3,067	$	2,470	$	28			$	64	$	—	$	2,434

The Company held no non-income producing fixed maturity securities atwith ~~either~~an estimated fair value of $2 million at December 31, ~~2019~~2020. orThe ~~2018.~~Company did not hold any non-income producing fixed maturity securities at December 31, 2019.

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

6. Investments (continued)

Maturities of Fixed Maturity Securities

The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at December 31, ~~2019~~2020:

	~~Due in One Year or Less~~		Due in One Year or Less		~~Due After One Year Through Five Years~~		Due After ~~Five~~One ~~Years~~Year Through ~~Ten~~Five Years		~~Due After Ten Years~~		Due After Five Years Through Ten Years		~~Structured Securities~~		~~Total~~Due ~~Fixed~~After ~~Maturity~~Ten ~~Securities~~Years		Structured Securities		Total Fixed Maturity Securities
	~~(In millions)~~		(In millions)
Amortized cost	$	38	$	27	$	~~475~~	$	~~868~~529	$	~~778~~	$	1,104	$	~~738~~	$	~~2,897~~932	$	868	$	3,460
Estimated fair value	$	39	$	28	$	~~490~~	$	~~918~~570	$	~~856~~	$	1,217	$	~~764~~	$	31,~~067~~108	$	920	$	3,843

Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity.

~~Continuous Gross Unrealized Losses for Fixed Maturity Securities AFS by Sector~~82

The following table presents the estimated fair value and gross unrealized losses of fixed maturity securities AFS in an unrealized loss position, aggregated by sector and by length of time that the securities have been in a continuous unrealized loss position at:

	December 31, 2019								December 31, 2018
	Less than 12 Months				Equal to or Greaterthan 12 Months				Less than 12 Months				Equal to or Greaterthan 12 Months
	EstimatedFairValue		GrossUnrealizedLosses		EstimatedFairValue		GrossUnrealizedLosses		EstimatedFairValue		GrossUnrealizedLosses		EstimatedFairValue		GrossUnrealizedLosses
	(Dollars in millions)
Fixed maturity securities
U.S. corporate	$	94	$	2	$	17	$	—	$	484	$	15	$	131	$	8
Foreign corporate	28		1		26		2		195		10		73		7
CMBS	38		1		3		—		119		2		45		2
U.S. government and agency	—		—		—		—		102		2		296		12
RMBS	8		—		6		1		58		2		29		1
ABS	57		—		22		1		51		1		12		—
State and political subdivision	19		—		—		—		18		1		14		—
Foreign government	2		—		—		—		7		1		7		—
Total fixed maturity securities	$	246	$	4	$	74	$	4	$	1,034	$	34	$	607	$	30
Total number of securities in an unrealized loss position	69				36				364				146

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

6. Investments (continued)

~~Evaluation~~Continuous ofGross ~~AFS~~Unrealized ~~Securities~~Losses for ~~OTTI~~Fixed ~~and~~Maturity ~~Evaluating~~Securities ~~Temporarily~~by ~~Impaired AFS Securities~~Sector

The estimated fair value and gross unrealized losses of fixed maturity securities in an unrealized loss position, by sector and by length of time that the securities have been in a continuous unrealized loss position, were as follows at:


	December 31, 2020								December 31, 2019
	Less than 12 Months				12 Months or Greater				Less than 12 Months				12 Months or Greater
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
	(Dollars in millions)
U.S. corporate	$	54	$	1	$	2	$	—	$	94	$	2	$	17	$	—
Foreign corporate	4		—		10		2		28		1		26		2
ABS	98		1		17		—		57		—		22		1
CMBS	19		1		—		—		38		1		3		—

RMBS	4		—		—		—		8		—		6		1
State and political subdivision	9		—		—		—		19		—		—		—
Foreign government	2		—		—		—		2		—		—		—
Total fixed maturity securities	$	190	$	3	$	29	$	2	$	246	$	4	$	74	$	4
Total number of securities in an unrealized loss position	82				15				69				36

Allowance for Credit Losses for Fixed Maturity Securities

Evaluation and Measurement Methodologies

~~Management~~For ~~considers~~fixed amaturity ~~wide~~securities ~~range~~in ofan ~~factors~~unrealized ~~about~~loss position, management first assesses whether the ~~security~~Company ~~issuer~~intends ~~and~~to ~~uses~~sell, ~~its~~or ~~best~~whether ~~judgment~~it inis ~~evaluating~~more likely than not it will be required to sell the ~~cause~~security before recovery of its amortized cost basis. If either of the ~~decline~~criteria inregarding intent or requirement to sell is met, the security’s amortized cost basis is written down to estimated fair value ofthrough net investment gains (losses). For fixed maturity securities that do not meet the ~~security~~aforementioned ~~and~~criteria, inmanagement ~~assessing~~evaluates whether the ~~prospects~~decline ~~for~~in ~~near-term~~estimated ~~recovery~~fair value has resulted from credit losses or other factors. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used in the ~~impairment~~allowance for credit loss evaluation process include, but are not limited to: (i) ~~the~~ ~~length of time and~~ the extent to which ~~the~~ estimated fair value ~~has~~is ~~been~~less ~~below~~than amortized cost; (ii) ~~the~~ ~~potential~~any ~~for~~changes ~~impairments~~to ~~when~~ the ~~issuer~~rating isof ~~experiencing~~the ~~significant~~security ~~financial~~by ~~difficulties~~a rating agency; (iii) ~~the~~ ~~potential~~adverse ~~for~~conditions ~~impairments~~specifically inrelated anto ~~entire~~the security, industry ~~sector~~ or ~~sub-sector~~geographic area; and (iv) ~~the~~ ~~potential~~payment ~~for~~structure ~~impairments~~of inthe ~~certain~~fixed ~~economically~~maturity ~~depressed~~security ~~geographic~~and ~~locations; (v)~~ the ~~potential~~likelihood ~~for~~of ~~impairments where~~ the issuer, ~~series~~being ofable ~~issuers~~to ormake ~~industry~~payments ~~has~~in ~~suffered~~the afuture ~~catastrophic~~or ~~loss~~the orissuer’s ~~has~~failure ~~exhausted~~to ~~natural~~make ~~resources;~~scheduled ~~(vi)~~interest ~~whether~~and ~~the~~principal ~~Company~~payments. ~~has~~If ~~the~~this ~~intent~~assessment toindicates ~~sell~~that ora ~~will~~credit ~~more~~loss ~~likely~~exists, ~~than~~the ~~not~~present bevalue ~~required~~of tocash ~~sell~~flows aexpected ~~particular~~to ~~security~~be ~~before~~collected from the ~~decline~~security inare ~~estimated~~compared ~~fair~~to ~~value~~the ~~below~~ amortized cost ~~recovers;~~basis ~~(vii) with~~of ~~respect~~the tosecurity. ~~Structured~~If ~~Securities,~~the ~~changes~~present invalue ~~forecasted~~of cash flows ~~after~~expected ~~considering~~to ~~the~~be ~~quality~~collected ofis ~~underlying~~less ~~collateral,~~than ~~expected~~the ~~prepayment~~amortized ~~speeds~~cost basis, ~~current~~a ~~and~~credit ~~forecasted~~ loss ~~severity,~~is ~~consideration~~deemed ofto ~~the~~exist ~~payment~~and ~~terms~~an ofallowance ~~the~~for ~~underlying~~credit ~~assets~~losses ~~backing~~is ~~a particular security~~recorded, ~~and~~limited by the ~~payment~~amount ~~priority~~that ~~within~~ the ~~tranche~~estimated ~~structure~~fair ofvalue ~~the~~is ~~security;~~less ~~(viii)~~ than the ~~potential~~amortized ~~for~~cost ~~impairments~~basis, ~~due~~with toa ~~weakening~~corresponding ofcharge ~~foreign~~to ~~currencies~~net oninvestment ~~non-functional~~gains ~~currency~~(losses). ~~denominated~~Any ~~fixed~~unrealized ~~maturity~~losses ~~securities~~ that ~~are~~have ~~near~~not ~~maturity;~~been ~~and~~recorded ~~(ix)~~through ~~other~~an ~~subjective~~allowance ~~factors,~~for ~~including~~credit ~~concentrations~~losses ~~and~~are ~~information~~recognized ~~obtained~~in ~~from regulators and rating agencies~~OCI.

~~For~~Once ~~securities~~a ~~in an unrealized loss position, an OTTI is recognized in earnings when it is anticipated that the amortized cost will not be recovered. When either: (i) the Company has the intent to sell the~~ security; orspecific ~~(ii) it~~allowance isfor ~~more~~credit ~~likely~~losses ~~than not that the Company will be required to sell the security before recovery, the OTTI recognized in earnings~~ is ~~the entire difference between the security’s amortized cost and estimated fair value. If neither of these conditions exists~~established, the ~~difference between the amortized cost of the security and the~~ present value of ~~projected future~~ cash flows expected to be collected isfrom ~~recognized~~the assecurity ancontinues ~~OTTI~~to inbe ~~earnings (“credit loss”)~~reassessed. IfAny ~~the~~changes ~~estimated~~in ~~fair~~the ~~value~~security isspecific ~~less~~allowance ~~than~~for ~~the~~credit ~~present~~losses ~~value~~are ofrecorded ~~projected~~as ~~future~~a ~~cash~~provision ~~flows~~for ~~expected~~(or toreversal beof) ~~collected,~~credit ~~this~~loss ~~portion~~expense ofin ~~OTTI~~net ~~related~~investment togains ~~other-than-credit factors~~ (~~“noncredit loss”~~losses) ~~is recorded in OCI~~.

~~Current~~Fixed ~~Period~~maturity ~~Evaluation~~securities are also evaluated to determine whether any amounts have become uncollectible. When all, or a portion, of a security is deemed uncollectible, the uncollectible portion is written-off with an adjustment to amortized cost and a corresponding reduction to the allowance for credit losses.

~~Based~~Accrued oninterest receivables are presented separate from the ~~Company’s~~amortized ~~current~~cost ~~evaluation~~basis of ~~its~~fixed ~~AFS~~maturity securities. inAn anallowance ~~unrealized~~for ~~loss~~credit ~~position~~losses inis ~~accordance~~not ~~with~~estimated ~~its~~on ~~impairment~~an ~~policy,~~accrued ~~and~~interest ~~the~~receivable, ~~Company’s~~rather ~~current~~receivable ~~intentions~~balances ~~and~~90-days ~~assessments~~past ~~(as~~due ~~applicable~~are todeemed ~~the~~uncollectible ~~type~~and ofare ~~security)~~written ~~about~~off ~~holding,~~with ~~selling~~a ~~and~~corresponding ~~any~~reduction ~~requirements~~ to ~~sell~~net ~~these~~investment ~~securities,~~income. ~~the~~The ~~Company~~accrued ~~concluded~~interest ~~that~~receivable ~~these~~on ~~securities~~fixed ~~were~~maturity ~~not~~securities ~~other-than-temporarily~~totaled ~~impaired~~$24 million at December 31, ~~2019.~~2020 and is included in accrued investment income.

Gross unrealized losses on fixed maturity securities decreased $56 million during the year ended December 31, 2019 to $8 million. The decrease in gross unrealized losses for the year ended December 31, 2019, was primarily attributable to decreasing longer-term interest rates and narrowing credit spreads.83

At December 31, 2019, $1 million of the total $8 million of gross unrealized losses were from one fixed maturity security with an unrealized loss position of 20% or more of amortized cost for six months or greater.

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

6. Investments (continued)

Fixed maturity securities are also evaluated to determine if they qualify as purchased financial assets with credit deterioration (“PCD”). To determine if the credit deterioration experienced since origination is more than insignificant, both (i) the extent of the credit deterioration and (ii) any rating agency downgrades are evaluated. For securities categorized as PCD assets, the present value of cash flows expected to be collected from the security are compared to the par value of the security. If the present value of cash flows expected to be collected is less than the par value, credit losses are embedded in the purchase price of the PCD asset. In this situation, both an allowance for credit losses and amortized cost gross-up is recorded, limited by the amount that the estimated fair value is less than the grossed-up amortized cost basis. Any difference between the purchase price and the present value of cash flows is amortized or accreted into net investment income over the life of the PCD asset. Any subsequent PCD asset allowance for credit losses is evaluated in a manner similar to the process described above for fixed maturity securities.

Current Period Evaluation

Based on the Company’s current evaluation of its fixed maturity securities in an unrealized loss position and the current intent or requirement to sell, the Company recorded no allowance for credit losses on fixed maturity securities at December 31, 2020. Management concluded that for all other fixed maturity securities in an unrealized loss position, the unrealized loss was not due to issuer specific credit-related factors and as a result was recognized in OCI. Where unrealized losses have not been recognized into income, it is primarily because the securities’ bond issuer(s) are of high credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in estimated fair value is largely due to changes in interest rates and non-issuer-specific credit spreads. These issuers continued to make timely principal and interest payments and the estimated fair value is expected to recover as the securities approach maturity.

Mortgage Loans

Mortgage Loans by Portfolio Segment

Mortgage loans are summarized as follows at:

	~~December 31,~~		December 31,
	2019						2018
			2020										2019
	~~CarryingValue~~		CarryingValue		~~% ofTotal~~		~~CarryingValue~~	% ofTotal			~~% ofTotal~~		CarryingValue		% ofTotal
	~~(Dollars in millions)~~		(Dollars in millions)
Mortgage loans:
Commercial			$	458				71.2		%			$	457	73.1	%
Commercial	$	457			73.1	%	$	311			69.3	%
Agricultural			187					29.1					171		27.3
Agricultural	171				27.3		139				31.1
Total mortgage loans			645					100.3					628		100.4
Subtotal	628				100.4		450				100.4
Allowance for credit losses			(2)					(0.3)					(3)		(0.4)
Valuation allowances (1)	(3		)		(0.4	)	(2		)		(0.4	)
Total mortgage loans, net			$	643				100.0		%			$	625	100.0	%
Total mortgage loans, net	$	625			100.0	%	$	448			100.0	%

~~_______________~~Allowance for Credit Losses for Mortgage Loans

~~(1)~~Evaluation ~~The~~and ~~valuation~~Measurement ~~allowances were primarily from collective evaluation (non-specific loan related).~~Methodologies

~~Information~~The onallowance ~~commercial~~for ~~and~~credit ~~agricultural~~losses is a valuation account that is deducted from the mortgage ~~loans~~loan’s amortized cost basis to present the net amount expected to be collected on the mortgage loan. The loan balance, or a portion of the loan balance, is ~~presented~~written-off inagainst the ~~tables~~allowance ~~below~~when management believes this amount is uncollectible.

~~Valuation~~Accrued ~~Allowance~~interest ~~Methodology~~receivables are presented separate from the amortized cost basis of mortgage loans. An allowance for credit losses is generally not estimated on an accrued interest receivable, rather when a loan is placed in nonaccrual status the associated accrued interest receivable balance is written off with a corresponding reduction to net investment income. For mortgage loans that are granted payment deferrals due to the worldwide pandemic sparked by the novel coronavirus (“COVID-19 pandemic”), interest continues to be accrued during the deferral period if the loan was less than 30 days past due at December 31, 2019 and performing at the onset of the pandemic. Accrued interest on COVID-19 pandemic impacted loans was not significant at December 31, 2020. The accrued interest receivable on mortgage loans is included in accrued investment income and totaled $4 million at December 31, 2020.

Mortgage loans are considered to be impaired when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the loan agreement. Specific valuation allowances are established using the same methodology for both portfolio segments as the excess carrying value of a loan over either (i) the present value of expected future cash flows discounted at the loan’s original effective interest rate, (ii) the estimated fair value of the loan’s underlying collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or (iii) the loan’s observable market price. A common evaluation framework is used for establishing non-specific valuation allowances for both loan portfolio segments; however, a separate non-specific valuation allowance is calculated and maintained for each loan portfolio segment that is based on inputs unique to each loan portfolio segment. Non-specific valuation allowances are established for pools of loans with similar risk characteristics where a property-specific or market-specific risk has not been identified, but for which the Company expects to incur a credit loss. These evaluations are based upon several loan portfolio segment-specific factors, including the Company’s experience for loan losses, defaults and loss severity, and loss expectations for loans with similar risk characteristics. These evaluations are revised as conditions change and new information becomes available.84

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

6. Investments (continued)

~~Credit~~The ~~Quality~~allowance for credit losses is estimated using relevant available information, from internal and external sources, relating to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience provides the basis for estimating expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics and environmental conditions. A reasonable and supportable forecast period of ~~Commercial~~two-years ~~Mortgage~~is ~~Loans~~used with an input reversion period of one-year.

Mortgage loans are evaluated in both portfolio segments to determine the allowance for credit losses. The loan-level loss rates are determined using individual loan terms and characteristics, risk pools/internal ratings, national economic forecasts, prepayment speeds, and estimated default and loss severity. The resulting loss rates are applied to the mortgage loan’s amortized cost to generate an allowance for credit ~~quality~~losses. In certain situations, the allowance for credit losses is measured as the difference between the loan’s amortized cost and liquidation value of ~~commercial~~the ~~mortgage~~collateral. These situations include collateral dependent loans, ~~was~~expected astroubled ~~follows~~debt ~~at:~~restructurings (“TDR”), foreclosure probable loans, and loans with dissimilar risk characteristics.

	Recorded Investment
	Debt-Service Coverage Ratios						Total		% ofTotal
	> 1.20x		1.00x - 1.20x		< 1.00x
	(Dollars in millions)
December 31, 2019
Loan-to-value ratios:
Less than 65%	$	397	$	6	$	—	$	403	88.2	%
65% to 75%	46		3		—		49		10.7
76% to 80%	5		—		—		5		1.1
Total	$	448	$	9	$	—	$	457	100.0	%
December 31, 2018
Loan-to-value ratios:
Less than 65%	$	274	$	5	$	14	$	293	94.2	%
65% to 75%	14		—		—		14		4.5
76% to 80%	4		—		—		4		1.3
Total	$	292	$	5	$	14	$	311	100.0	%

Rollforward of the Allowance for Credit Losses for Mortgage Loans by Portfolio Segment

~~Credit~~The ~~Quality~~changes ofin ~~Agricultural~~the ~~Mortgage~~allowance ~~Loans~~for credit losses by portfolio segment were as follows:

The credit quality of agricultural mortgage loans was as follows at:


	Commercial		Agricultural		Total
	(In millions)
Balance at December 31, 2019	$	2	$	1	$	3
Cumulative effect of change in accounting principle	(1)		—		(1)
Balance at January 1, 2020	1		1		2



Balance at December 31, 2020	$	1	$	1	$	2

	December 31,
	2019				2018
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(Dollars in millions)
Loan-to-value ratios:
Less than 65%	$	160	93.5	%	$	134	96.4	%
65% to 75%	11		6.5		5		3.6
Total	$	171	100.0	%	$	139	100.0	%

Credit Quality of Mortgage Loans by Portfolio Segment

~~Past~~The ~~Due,~~amortized ~~Nonaccrual~~cost of mortgage loans by year of origination and ~~Modified~~credit ~~Mortgage~~quality ~~Loans~~indicator was as follows at:

The Company has a high-quality, well performing mortgage loan portfolio, with all mortgage loans classified as performing at both December 31, 2019 and 2018. The Company defines delinquency consistent with industry practice, when mortgage loans are past due as follows: commercial mortgage loans – 60 days and agricultural mortgage loans – 90 days. The Company had no commercial or agricultural mortgage loans past due or in nonaccrual status at either December 31, 2019 or 2018. During the years ended December 31, 2019 and 2018, the Company had no mortgage loans modified in a troubled debt restructuring.


	2020		2019		2018		2017		2016		Prior		Total
	(In millions)
December 31, 2020
Commercial mortgage loans
Loan-to-value ratios
Less than 65%	$	32	$	102	$	23	$	13	$	16	$	187	$	373
65% to 75%	—		50		6		7		—		3		66
76% to 80%	—		—		—		—		1		3		4
Greater than 80%	—		—		5		—		—		10		15
Total commercial mortgage loans	32		152		34		20		17		203		458
Agricultural mortgage loans
Loan-to-value ratios
Less than 65%	46		43		21		6		15		52		183
65% to 75%	—		3		1		—		—		—		4

Total agricultural mortgage loans	46		46		22		6		15		52		187
Total	$	78	$	198	$	56	$	26	$	32	$	255	$	645

The loan-to-value ratio is a measure commonly used to assess the quality of commercial and agricultural mortgage loans. The loan-to-value ratio compares the amount of the loan to the estimated fair value of the underlying property collateralizing the loan and is commonly expressed as a percentage. A loan-to-value ratio less than 100% indicates an excess of collateral value over the loan amount. Loan-to-value ratios greater than 100% indicate that the loan amount exceeds the collateral value. Performing status is a measure commonly used to assess the quality of residential mortgage loans. A loan is considered performing when the borrower makes consistent and timely payments.

Table of Contents

Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

6. Investments (continued)

The amortized cost of commercial mortgage loans by debt-service coverage ratio was as follows at:


	December 31,
	2020				2019
	Amortized Cost		% of Total		Amortized Cost		% of Total
	(Dollars in millions)
Debt service coverage ratios:
Greater than 1.20x	$	450	98.3	%	$	448	98.0	%
1.00x - 1.20x	8		1.7		9		2.0

Total	$	458	100.0	%	$	457	100.0	%

The debt-service coverage ratio compares a property’s net operating income to its debt-service payments. Debt-service coverage ratios less than 1.00 times indicate that property operations do not generate enough income to cover the loan’s current debt payments. A debt-service coverage ratio greater than 1.00 times indicates an excess of net operating income over the debt-service payments.

Past Due Mortgage Loans by Portfolio Segment

The Company has a high-quality, well performing mortgage loan portfolio, with all mortgage loans classified as performing at both December 31, 2020 and 2019 . Delinquency is defined consistent with industry practice, when mortgage loans are past due as follows: commercial mortgage loans — 60 days and agricultural mortgage loans — 90 days. To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the past due status of the impacted loans during the forbearance period is locked-in as of March 1, 2020, which reflects the date on which the COVID-19 pandemic began to affect the borrower’s ability to make payments. At December 31, 2020, the Company did not have any COVID-19 pandemic modified loans in delinquent status.

The Company did not have any mortgage loans past due at December 31, 2020.

Mortgage Loans in Nonaccrual Status by Portfolio Segment

Mortgage loans are placed in a nonaccrual status if there are concerns regarding collectability of future payments or the loan is past due, unless the past due loan is well collateralized and in the process of foreclosure. To the extent a payment deferral is agreed to with a borrower, in response to the COVID-19 pandemic, the impacted loans generally will not be reported as in a nonaccrual status during the period of deferral. A COVID-19 pandemic modified loan is only reported as a nonaccrual asset in the event a borrower declares bankruptcy, the borrower experiences significant credit deterioration such that the Company does not expect to collect all principal and interest due, or the loan was 90 days past due at the onset of the pandemic. At December 31, 2020, the Company did not have any COVID-19 pandemic modified loans in nonaccrual status.

The Company did not have any mortgage loans in a nonaccrual status at either December 31, 2020 or 2019.

Modified Mortgage Loans by Portfolio Segment

Under certain circumstances, modifications are granted to nonperforming mortgage loans. Each modification is evaluated to determine if a TDR has occurred. A modification is a TDR when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the amount of debt owed, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company did not have any mortgage loans modified in a troubled debt restructuring during the year ended December 31, 2020.

Short-term modifications made on a good faith basis to borrowers who were not more than 30 days past due at December 31, 2019 and in response to the COVID-19 pandemic are not considered TDRs.

Net Unrealized Investment Gains (Losses)

Unrealized investment gains (losses) on fixed maturity securities and the effect on DAC, DSI and future policy benefits, that would result from the realization of the unrealized gains (losses), are included in net unrealized investment gains (losses) in accumulated other comprehensive income (loss) (“AOCI”).

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Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

6. Investments (continued)

The components of net unrealized investment gains (losses), included in AOCI, were as follows:

	~~Years Ended December 31,~~		Years Ended December 31,
	2019				2018			2017
			2020					2019			2018
	~~(In millions)~~		(In millions)
Fixed maturity securities	$	~~170~~	$	383	$	~~(36~~	)	$	56170		$	(36)
Derivatives	6		1		6			16			6
Subtotal	~~176~~		384		~~(30~~		)	57176			(30)
Amounts allocated from:
Future policy benefits	(3		(20)		—			—(3)			—
DAC and DSI	~~(19~~		(38)		11			(19)		)	11
Deferred income tax benefit (expense)	(32		)		4			(8		)
Subtotal			(58)					(22)			11
Net unrealized investment gains (losses)	$	122			$	(15	)	$	30
Deferred income tax benefit (expense)			(68)					(32)			4
Net unrealized investment gains (losses)			$	258				$	122		$	(15)

The changes in net unrealized investment gains (losses) were as follows:

	~~Years Ended December 31,~~		Years Ended December 31,
	2019				2018			2017
			2020					2019			2018
	~~(In millions)~~		(In millions)
Balance at January 1,	$	~~(15~~	)$	122	$	30		$	5(15)		$	30
Unrealized investment gains (losses) during the year	~~206~~		208		~~(87~~		)	45206			(87)
Unrealized investment gains (losses) relating to:
Future policy benefits	(3		(17)		—			—(3)			—
DAC and DSI	~~(30~~		(19)		30			(1430)		)	30
Deferred income tax benefit (expense)	~~(36~~		(36)		12			(636)		)	12
Balance at December 31,	$	~~122~~	$	258	$	~~(15~~	)	$	30122		$	(15)
Change in net unrealized investment gains (losses)	$	~~137~~	$	136	$	~~(45~~	)	$	25137		$	(45)

Concentrations of Credit Risk

There were no investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, at both December 31, ~~2019~~2020 and ~~2018~~2019.

Invested Assets on Deposit and Pledged as Collateral

Invested assets on deposit and pledged as collateral ~~are presented below~~ at estimated fair value were as follows at:

	~~December 31,~~		December 31,
	2019				2018
			2020				2019
	~~(In millions)~~		(In millions)
Invested assets on deposit (regulatory deposits)	$	2	$	2	$	2	$	2
Invested assets pledged as collateral (1)	19		5		—		19
Total invested assets on deposit and pledged as collateral (2)	$	21	$	7	$	2	$	21

_______________

(1) The Company has pledged invested assets in connection with derivative transactions (see Note 7).

(2) The Company ~~held~~did nonot hold any restricted cash and cash equivalents at either December 31, ~~2019~~2020 or ~~2018~~2019.

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Brighthouse Life Insurance Company of NY

(An Indirect Wholly-Owned Subsidiary of Brighthouse Financial, Inc.)

Notes to the Financial Statements (continued)

6. Investments (continued)

Variable Interest Entities

The Company has invested in legal entities that are variable interest entities (“~~VIEs~~VIE”). VIEs are consolidated when the investor is the primary beneficiary. A primary beneficiary is the variable interest holder in a VIE with both the power to (i) direct the activities of the VIE that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses, or the right to receive benefits that could potentially be significant to the VIE.

There were no material VIEs for which the Company has concluded that it is the primary beneficiary at either December 31, ~~2019~~2020 or ~~2018~~2019.

The carrying amount and maximum exposure to loss related to the VIEs for which the Company has concluded that it holds a variable interest, but is not the primary beneficiary, were as follows at:


	December 31,
	2020				2019
	Carrying Amount		Maximum Exposure to Loss		Carrying Amount		Maximum Exposure to Loss
	(In millions)
Fixed maturity securities	$	301	$	274	$	394	$	376

The Company’s investments in unconsolidated VIEs are described below.

Fixed Maturity Securities

The Company invests in U.S. corporate bonds, foreign corporate bonds, and Structured Securities, issued by VIEs. The Company is not obligated to provide any financial or other support to these VIEs, other than the original investment. The Company’s involvement with these entities is limited to that of a passive investor. The Company has no unilateral right to appoint or remove the servicer, speci

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