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8-K - 8-K - Brighthouse Financial, Inc. | bhfqfs8-kq217finsupp.htm |
Brighthouse Financial, Inc.
Financial Supplement
Second Quarter 2017
Table of Contents | ||
Combined Financial Results | ||
Key Metrics | ||
Condensed Combined Statements of Operations | ||
Combined Balance Sheets | ||
Earnings and Select Metrics from Business Segments | ||
Statements of Operating Earnings by Segment | ||
Annuities - Statements of Operating Earnings | ||
Annuities - Select Operating Metrics | ||
Life - Statements of Operating Earnings | ||
Life - Select Operating Metrics | ||
Run-off - Statements of Operating Earnings | ||
Run-off - Select Operating Metrics | ||
Corporate & Other - Statements of Operating Earnings | ||
Other Information | ||
DAC and VOBA Rollforward | ||
Net Derivative Gains (Losses) | ||
Notable Items Impacting Operating Earnings | ||
Variable Annuity Separate Account Returns | ||
Summary of Investments | ||
Select Statutory Financial Results | ||
Appendix | ||
Non-GAAP and Other Financial Disclosures | ||
Acronyms | ||
Reconciliation of Net Income to Operating Earnings | ||
Reconciliation of Return On Equity to Operating Return On Equity | ||
Reconciliation of Total Revenues to Operating Revenues and Reconciliation of Total Expenses to Operating Expenses |
Note: See Appendix for Non-GAAP financial information, definitions and reconciliations. Financial information, unless otherwise noted, is rounded to millions. Some financial information, therefore, may not sum to the corresponding total.
The information presented in this financial supplement has been derived from the combined financial information of the MetLife U.S. Retail Separation Business. The combined financial information was prepared in connection with the proposed separation of a substantial portion of MetLife, Inc.’s former Retail segment as well as certain portions of its former Corporate Benefit Funding segment, and presents the combined results of operations and financial condition of certain direct and indirect subsidiaries and businesses of MetLife, Inc., including Brighthouse Life Insurance Company (formerly MetLife Insurance Company USA) and its subsidiaries, New England Life Insurance Company, Brighthouse Life Insurance Company of NY (formerly First MetLife Investors Insurance Company), MetLife Reinsurance Company of Delaware, MetLife Reinsurance Company of South Carolina, Brighthouse Investment Advisers, LLC, (formerly MetLife Advisers LLC), and a designated protected cell of MetLife Reinsurance Company of Vermont. As used in this financial supplement, “Brighthouse Financial,” the “Company,” “we,” “our” and “us” refer to Brighthouse Financial, Inc., the entity that at the time of the separation will hold, through its subsidiaries, the assets (including the equity interests of certain MetLife, Inc. subsidiaries) and liabilities associated with MetLife, Inc.’s Brighthouse Financial segment.
Combined
Financial
Results
Financial Supplement | 1 |
Key Metrics (Unaudited, dollars in millions except per share amounts)
For the Three Months Ended | ||||||||||
Combined Financial Results and Metrics | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||
Net income (loss) | $246 | $(349) | $(1,765) | $(158) | $(1,423) | |||||
Operating earnings | $324 | $280 | $(62) | $329 | $79 | |||||
Total corporate expenses (1) | $226 | $215 | $198 | $199 | $212 | |||||
Shareholder's Net Investment | ||||||||||
Ending shareholder's net investment, including AOCI | $16,415 | $15,116 | $14,862 | $18,170 | $18,464 | |||||
Ending AOCI | 1,894 | 1,506 | 1,265 | 2,439 | 2,632 | |||||
Ending shareholder's net investment, excluding AOCI | $14,521 | $13,610 | $13,597 | $15,731 | $15,832 | |||||
Proforma ending shareholder's net investment, excluding AOCI (2) | $12,170 | N/A | N/A | N/A | N/A | |||||
Return On Equity, excluding AOCI | ||||||||||
Return on equity (3) | (13.8)% | (24.3)% | (18.9)% | (6.6)% | (3.6)% | |||||
Operating return on equity (4) | 5.9% | 4.1% | 4.4% | 6.9% | 7.0% | |||||
Per Share | ||||||||||
Net income (loss) | N/A | N/A | N/A | N/A | N/A | |||||
Operating earnings | N/A | N/A | N/A | N/A | N/A | |||||
Book value per common share (5) | N/A | N/A | N/A | N/A | N/A | |||||
Book value per common share, excluding AOCI (6) | N/A | N/A | N/A | N/A | N/A | |||||
Shares (7) | ||||||||||
Common shares outstanding | 119,773,106 | N/A | N/A | N/A | N/A | |||||
Weighted average common shares outstanding - basic | 119,773,106 | N/A | N/A | N/A | N/A | |||||
Weighted average common shares outstanding - diluted | 119,773,106 | N/A | N/A | N/A | N/A | |||||
(1) Includes functional department expenses, public company expenses, certain investment expenses, retirement funding and incentive compensation; but excludes one time establishment costs. | ||||||||||
(2) June 30, 2017 amounts have been adjusted for subsequent separation transactions, including the distribution to MetLife, Inc. of $1.8 billion and a tax separation liability of $600 million. | ||||||||||
(3) Return on equity is defined as total annual net income (loss) on a four quarter trailing basis divided by the simple average of the most recent five quarters of total shareholder's net investment, excluding AOCI. | ||||||||||
(4) Operating return on equity is defined as total annual operating earnings on a four quarter trailing basis divided by the simple average of the most recent five quarters of total shareholder's net investment, excluding AOCI. | ||||||||||
(5) Book value per common share is defined as ending shareholder's net investment, including AOCI, divided by weighted average common shares outstanding - diluted. | ||||||||||
(6) Book value per common share excluding AOCI, is defined as ending shareholder's net investment, excluding AOCI, divided by weighted average common shares outstanding - diluted. | ||||||||||
(7) Represents the Company’s basic shares outstanding on August 4, 2017, the date of the completion of the separation from MetLife, Inc., which was effected through a distribution to MetLife, Inc. shareholders of one share of Brighthouse Financial, Inc. common stock for every 11 shares of MetLife, Inc. common stock held on July 19, 2017. |
Financial Supplement | 2 |
Condensed Combined Statements of Operations (Unaudited, in millions)
For the Three Months Ended | For the Year to Date Period Ended | |||||||||||||
Revenues | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||
Premiums | $218 | $176 | $201 | $347 | $281 | $394 | $674 | |||||||
Universal life and investment-type product policy fees | 957 | 953 | 939 | 976 | 936 | 1,910 | 1,867 | |||||||
Net investment income | 766 | 782 | 785 | 869 | 805 | 1,548 | 1,553 | |||||||
Other revenues | 162 | 74 | 255 | 49 | 347 | 236 | 432 | |||||||
Revenues before NIGL and NDGL | 2,103 | 1,985 | 2,180 | 2,241 | 2,369 | 4,088 | 4,526 | |||||||
Net investment gains (losses) | — | (55) | (63) | 26 | 20 | (55) | (41) | |||||||
Net derivative gains (losses) | (78) | (965) | (2,670) | (501) | (2,973) | (1,043) | (2,680) | |||||||
Total Revenues | $2,025 | $965 | $(553) | $1,766 | $(584) | $2,990 | $1,805 | |||||||
Expenses | ||||||||||||||
Interest credited | $284 | $275 | $294 | $290 | $291 | $559 | $581 | |||||||
Policyholder benefits and claims | 785 | 864 | 955 | 1,058 | 1,153 | 1,649 | 1,890 | |||||||
Amortization of DAC and VOBA | 21 | (148) | 416 | (10) | (281) | (127) | (35) | |||||||
Interest expense | 37 | 45 | 42 | 45 | 45 | 82 | 88 | |||||||
Other expenses (1) | 577 | 519 | 517 | 635 | 448 | 1,096 | 957 | |||||||
Total Expenses | $1,704 | $1,555 | $2,224 | $2,018 | $1,656 | $3,259 | $3,481 | |||||||
Income (loss) before provision for income tax | 321 | (590) | (2,777) | (252) | (2,240) | (269) | (1,676) | |||||||
Provision for income tax expense (benefit) | 75 | (241) | (1,012) | (94) | (817) | (166) | (660) | |||||||
Net income (loss) | $246 | $(349) | $(1,765) | $(158) | $(1,423) | $(103) | $(1,016) | |||||||
(1) The period ended September 30, 2016 includes a non-cash charge for the goodwill write down of $161 million in our Run-off segment. |
Financial Supplement | 3 |
Combined Balance Sheets (Unaudited, in millions)
As of | ||||||||||
ASSETS | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||
Investments: | ||||||||||
Fixed maturity securities available-for-sale | $63,507 | $60,870 | $61,388 | $75,842 | $76,611 | |||||
Equity securities available-for-sale | 278 | 290 | 300 | 365 | 438 | |||||
Mortgage loans, net | 10,263 | 9,908 | 9,378 | 8,567 | 8,429 | |||||
Policy loans | 1,513 | 1,512 | 1,517 | 1,518 | 1,610 | |||||
Real estate and real estate joint ventures | 302 | 242 | 215 | 210 | 502 | |||||
Other limited partnership interests | 1,623 | 1,596 | 1,642 | 1,704 | 1,761 | |||||
Short-term investments | 1,286 | 1,058 | 1,288 | 3,670 | 2,735 | |||||
Other invested assets | 3,037 | 3,817 | 4,904 | 7,686 | 8,262 | |||||
Total investments | 81,809 | 79,293 | 80,632 | 99,562 | 100,348 | |||||
Cash and cash equivalents | 4,443 | 5,812 | 5,228 | 2,825 | 2,521 | |||||
Accrued investment income | 608 | 641 | 693 | 692 | 640 | |||||
Reinsurance recoverables | 12,732 | 12,869 | 13,455 | 14,469 | 14,353 | |||||
Premiums and other receivables | 683 | 817 | 1,192 | 599 | 777 | |||||
DAC and VOBA | 6,464 | 6,500 | 6,293 | 6,589 | 6,572 | |||||
Current income tax recoverable | 1,423 | 1,247 | 778 | 329 | 522 | |||||
Other assets | 600 | 644 | 616 | 646 | 818 | |||||
Separate account assets | 115,566 | 115,365 | 113,043 | 115,218 | 113,465 | |||||
Total assets | $224,328 | $223,188 | $221,930 | $240,929 | $240,016 | |||||
LIABILITIES, SHAREHOLDER'S NET INVESTMENT AND NONCONTROLLING INTERESTS | ||||||||||
Liabilities | ||||||||||
Future policy benefits | $34,352 | $33,622 | $33,372 | $35,863 | $35,123 | |||||
Policyholder account balances | 37,296 | 36,986 | 37,526 | 40,304 | 40,528 | |||||
Other policy-related balances | 2,985 | 3,009 | 3,045 | 3,092 | 3,168 | |||||
Payables for collateral under securities loaned and other transactions | 7,121 | 7,177 | 7,390 | 13,696 | 13,694 | |||||
Long-term financing obligations: | ||||||||||
Debt | 3,016 | 807 | 810 | 814 | 823 | |||||
Reserve financing | — | 3,897 | 3,897 | 3,897 | 3,897 | |||||
Deferred income tax liability | 2,337 | 2,445 | 2,056 | 3,394 | 3,783 | |||||
Other liabilities | 5,190 | 4,764 | 5,929 | 6,481 | 7,071 | |||||
Separate account liabilities | 115,566 | 115,365 | 113,043 | 115,218 | 113,465 | |||||
Total liabilities | 207,863 | 208,072 | 207,068 | 222,759 | 221,552 | |||||
Shareholder's Net Investment and Noncontrolling Interests | ||||||||||
Shareholder's net investment | 14,521 | 13,610 | 13,597 | 15,731 | 15,832 | |||||
Accumulated other comprehensive income (loss) | 1,894 | 1,506 | 1,265 | 2,439 | 2,632 | |||||
Total shareholder's net investment | 16,415 | 15,116 | 14,862 | 18,170 | 18,464 | |||||
Noncontrolling interests | 50 | — | — | — | — | |||||
Total shareholder's net investment and noncontrolling interests | 16,465 | 15,116 | 14,862 | 18,170 | 18,464 | |||||
Total liabilities, shareholder's net investment and noncontrolling interests | $224,328 | $223,188 | $221,930 | $240,929 | $240,016 |
Earnings and Select
Metrics from
Business Segments
Financial Supplement | 5 |
Statements of Operating Earnings By Segment (Unaudited, in millions)
For the Three Months Ended June 30, 2017 | ||||||||||
Operating revenues | Annuities | Life | Run-off | Corporate & Other | Total | |||||
Premiums | $48 | $142 | $1 | $27 | $218 | |||||
Universal life and investment-type product policy fees | 639 | 75 | 175 | (3) | 886 | |||||
Net investment income | 311 | 69 | 354 | 58 | 792 | |||||
Other revenues | 128 | 19 | 15 | — | 162 | |||||
Total operating revenues | $1,126 | $305 | $545 | $82 | $2,058 | |||||
Operating expenses | ||||||||||
Interest credited | $152 | $40 | $91 | $— | $283 | |||||
Policyholder benefits and claims | 163 | 169 | 288 | 17 | 637 | |||||
Amortization of DAC and VOBA | 112 | 7 | — | 6 | 125 | |||||
Interest expense | — | — | 8 | 28 | 36 | |||||
Other operating expenses | 386 | 66 | 79 | 20 | 551 | |||||
Total operating expenses | $813 | $282 | $466 | $71 | $1,632 | |||||
Operating earnings before provision for income tax | 313 | 23 | 79 | 11 | 426 | |||||
Provision for income tax expense (benefit) | 87 | 11 | 27 | (23) | 102 | |||||
Operating earnings | $226 | $12 | $52 | $34 | $324 | |||||
For the Three Months Ended June 30, 2016 | ||||||||||
Operating revenues | Annuities | Life | Run-off | Corporate & Other | Total | |||||
Premiums | $121 | $124 | $2 | $34 | $281 | |||||
Universal life and investment-type product policy fees | 632 | 80 | 152 | (3) | 861 | |||||
Net investment income | 367 | 103 | 353 | 45 | 868 | |||||
Other revenues | 337 | 4 | 6 | — | 347 | |||||
Total operating revenues | $1,457 | $311 | $513 | $76 | $2,357 | |||||
Operating expenses | ||||||||||
Interest credited | $159 | $26 | $106 | $— | $291 | |||||
Policyholder benefits and claims | 403 | 137 | 453 | 16 | 1,009 | |||||
Amortization of DAC and VOBA | 85 | 42 | 377 | 5 | 509 | |||||
Interest expense | — | — | 15 | 27 | 42 | |||||
Other operating expenses | 309 | 65 | 40 | 23 | 437 | |||||
Total operating expenses | $956 | $270 | $991 | $71 | $2,288 | |||||
Operating earnings before provision for income tax | 501 | 42 | (478) | 5 | 70 | |||||
Provision for income tax expense (benefit) | 143 | 4 | (159) | 2 | (10) | |||||
Operating earnings | $358 | $38 | $(319) | $3 | $80 |
Financial Supplement | 6 |
Statements of Operating Earnings By Segment (Cont.) (Unaudited, in millions)
For the Six Months Ended June 30, 2017 | ||||||||||
Operating revenues | Annuities | Life | Run-off | Corporate & Other | Total | |||||
Premiums | $98 | $242 | $1 | $53 | $394 | |||||
Universal life and investment-type product policy fees | 1,270 | 158 | 348 | (6) | 1,770 | |||||
Net investment income | 638 | 176 | 712 | 124 | 1,650 | |||||
Other revenues | 194 | 19 | 23 | — | 236 | |||||
Total operating revenues | $2,200 | $595 | $1,084 | $171 | $4,050 | |||||
Operating expenses | ||||||||||
Interest credited | $304 | $68 | $185 | $— | $557 | |||||
Policyholder benefits and claims | 323 | 316 | 587 | 27 | 1,253 | |||||
Amortization of DAC and VOBA | 206 | 52 | 6 | 11 | 275 | |||||
Interest expense | — | — | 23 | 58 | 81 | |||||
Other operating expenses | 744 | 151 | 130 | 41 | 1,066 | |||||
Total operating expenses | $1,577 | $587 | $931 | $137 | $3,232 | |||||
Operating earnings before provision for income tax | 623 | 8 | 153 | 34 | 818 | |||||
Provision for income tax expense (benefit) | 169 | 3 | 52 | (10) | 214 | |||||
Operating earnings | $454 | $5 | $101 | $44 | $604 | |||||
For the Six Months Ended June 30, 2016 | ||||||||||
Operating revenues | Annuities | Life | Run-off | Corporate & Other | Total | |||||
Premiums | $310 | $253 | $14 | $97 | $674 | |||||
Universal life and investment-type product policy fees | 1,247 | 154 | 324 | (5) | 1,720 | |||||
Net investment income | 705 | 196 | 698 | 82 | 1,681 | |||||
Other revenues | 414 | 6 | 11 | — | 431 | |||||
Total operating revenues | $2,676 | $609 | $1,047 | $174 | $4,506 | |||||
Operating expenses | ||||||||||
Interest credited | $316 | $55 | $210 | $— | $581 | |||||
Policyholder benefits and claims | 708 | 287 | 654 | 63 | 1,712 | |||||
Amortization of DAC and VOBA | 187 | 80 | 391 | 12 | 670 | |||||
Interest expense | — | — | 30 | 54 | 84 | |||||
Other operating expenses | 624 | 159 | 90 | 57 | 930 | |||||
Total operating expenses | $1,835 | $581 | $1,375 | $186 | $3,977 | |||||
Operating earnings before provision for income tax | 841 | 28 | (328) | (12) | 529 | |||||
Provision for income tax expense (benefit) | 228 | 1 | (110) | (9) | 110 | |||||
Operating earnings | $613 | $27 | $(218) | $(3) | $419 |
Financial Supplement | 7 |
Annuities — Statements of Operating Earnings (Unaudited, in millions)
For the Three Months Ended | For the Year to Date Period Ended | |||||||||||||
Operating revenues | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||
Premiums | $48 | $50 | $58 | $76 | $121 | $98 | $310 | |||||||
Universal life and investment-type product policy fees | 639 | 632 | 629 | 647 | 632 | 1,270 | 1,247 | |||||||
Net investment income | 311 | 327 | 376 | 370 | 367 | 638 | 705 | |||||||
Other revenues | 128 | 65 | 86 | 40 | 337 | 194 | 414 | |||||||
Total operating revenues | $1,126 | $1,074 | $1,149 | $1,133 | $1,457 | $2,200 | $2,676 | |||||||
Operating expenses | ||||||||||||||
Interest credited | $152 | $152 | $153 | $160 | $159 | $304 | $316 | |||||||
Policyholder benefits and claims | 163 | 160 | 182 | 189 | 403 | 323 | 708 | |||||||
Amortization of DAC and VOBA | 112 | 94 | 92 | 89 | 85 | 206 | 187 | |||||||
Interest expense | — | — | — | — | — | — | — | |||||||
Other operating expenses | 386 | 358 | 314 | 308 | 309 | 744 | 624 | |||||||
Total operating expenses | $813 | $764 | $741 | $746 | $956 | $1,577 | $1,835 | |||||||
Operating earnings before provision for income tax | 313 | 310 | 408 | 387 | 501 | 623 | 841 | |||||||
Provision for income tax expense (benefit) | 87 | 82 | 116 | 140 | 143 | 169 | 228 | |||||||
Operating earnings | $226 | $228 | $292 | $247 | $358 | $454 | $613 |
Financial Supplement | 8 |
Annuities — Select Operating Metrics (Unaudited, in millions)
For the Three Months Ended | ||||||||||
FIXED ANNUITIES ACCOUNT VALUE | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||
Account value, beginning of period | $13,369 | $13,523 | $13,715 | $13,809 | $13,913 | |||||
Premiums and deposits | 47 | 48 | 56 | 65 | 77 | |||||
Surrenders and contract benefits | (298) | (313) | (358) | (276) | (297) | |||||
Net flows | (251) | (265) | (302) | (211) | (220) | |||||
Interest credited | 112 | 111 | 110 | 117 | 116 | |||||
Policy charges and other | — | — | — | — | — | |||||
Account value, end of period | $13,230 | $13,369 | $13,523 | $13,715 | $13,809 | |||||
VARIABLE & INDEX ANNUITIES ACCOUNT VALUE (1) | ||||||||||
Account value, beginning of period | $115,920 | $113,271 | $115,099 | $113,121 | $112,589 | |||||
Premiums and deposits | 965 | 930 | 1,015 | 911 | 929 | |||||
Surrenders and contract benefits | (2,689) | (2,585) | (2,413) | (2,302) | (2,136) | |||||
Net flows | (1,724) | (1,655) | (1,398) | (1,391) | (1,207) | |||||
Investment performance (2) | 3,330 | 4,949 | 224 | 4,064 | 2,338 | |||||
Policy charges and other | (696) | (645) | (654) | (695) | (599) | |||||
Account value, end of period | $116,830 | $115,920 | $113,271 | $115,099 | $113,121 | |||||
INCOME ANNUITIES (1) | ||||||||||
Income annuity insurance liabilities | $4,531 | $4,518 | $4,521 | $4,507 | $4,413 | |||||
(1) Includes general account and separate account. | ||||||||||
(2) Includes imputed interest on index annuities and the interest credited on the general account investment option of variable products. |
Financial Supplement | 9 |
Annuities — Select Operating Metrics (Cont.) (Unaudited, in millions)
For the Three Months Ended | For the Year to Date Period Ended | |||||||||||||
VARIABLE & INDEX ANNUITY DEPOSITS | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||
Shield Level SelectorSM | $570 | $458 | $456 | $390 | $444 | $1,028 | $809 | |||||||
GMWB/GMAB | 215 | 234 | 326 | 314 | 247 | 449 | 731 | |||||||
GMDB only | 107 | 115 | 142 | 129 | 149 | 222 | 303 | |||||||
GMIB (1) | 43 | 51 | 56 | 50 | 68 | 94 | 250 | |||||||
Total variable & index annuity deposits | $935 | $858 | $980 | $883 | $908 | $1,793 | $2,093 | |||||||
FIXED ANNUITY SALES | ||||||||||||||
Fixed deferred annuities | $47 | $49 | $56 | $66 | $78 | $96 | $153 | |||||||
Single premium immediate annuities | 8 | 12 | 17 | 34 | 54 | 20 | 141 | |||||||
Other fixed annuities | 5 | 12 | 14 | 12 | 36 | 17 | 114 | |||||||
Total fixed annuity sales | $60 | $73 | $87 | $112 | $168 | $133 | $408 | |||||||
(1) Ceased issuing GMIBs for new purchase in February 2016. |
Financial Supplement | 10 |
Life — Statements of Operating Earnings (Unaudited, in millions)
For the Three Months Ended | For the Year to Date Period Ended | |||||||||||||
Operating revenues | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||
Premiums | $142 | $100 | $114 | $125 | $124 | $242 | $253 | |||||||
Universal life and investment-type product policy fees | 75 | 83 | 12 | 82 | 80 | 158 | 154 | |||||||
Net investment income | 69 | 107 | 66 | 110 | 103 | 176 | 196 | |||||||
Other revenues | 19 | — | 128 | 2 | 4 | 19 | 6 | |||||||
Total operating revenues | $305 | $290 | $320 | $319 | $311 | $595 | $609 | |||||||
Operating expenses | ||||||||||||||
Interest credited | $40 | $28 | $31 | $28 | $26 | $68 | $55 | |||||||
Policyholder benefits and claims | 169 | 147 | 138 | 142 | 137 | 316 | 287 | |||||||
Amortization of DAC and VOBA | 7 | 45 | 162 | 40 | 42 | 52 | 80 | |||||||
Interest expense | — | — | — | — | — | — | — | |||||||
Other operating expenses | 66 | 85 | 31 | 69 | 65 | 151 | 159 | |||||||
Total operating expenses | $282 | $305 | $362 | $279 | $270 | $587 | $581 | |||||||
Operating earnings before provision for income tax | 23 | (15) | (42) | 40 | 41 | 8 | 28 | |||||||
Provision for income tax expense (benefit) | 11 | (8) | (18) | 15 | 4 | 3 | 1 | |||||||
Operating earnings | $12 | $(7) | $(24) | $25 | $37 | $5 | $27 |
Financial Supplement | 11 |
Life — Select Operating Metrics (Unaudited, in millions)
For the Three Months Ended | ||||||||||
LIFE ACCOUNT VALUE: GENERAL ACCOUNT | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||
Variable universal and universal life account value, beginning of period | $2,823 | $2,914 | $2,891 | $2,875 | $2,851 | |||||
Premiums and deposits (1) | 76 | 77 | 94 | 61 | 67 | |||||
Surrender and contract benefits | (36) | (124) | (41) | (32) | (24) | |||||
Net flows | 40 | (47) | 53 | 29 | 43 | |||||
Net transfers from (to) separate account | 17 | 17 | 17 | 13 | 17 | |||||
Interest credited | 19 | 22 | 34 | 26 | 25 | |||||
Policy charges and other | (81) | (83) | (81) | (52) | (61) | |||||
Variable universal and universal life account value, end of period | $2,818 | $2,823 | $2,914 | $2,891 | $2,875 | |||||
LIFE ACCOUNT VALUE: SEPARATE ACCOUNT | ||||||||||
Variable universal life account value, beginning of period | $4,886 | $4,704 | $4,730 | $4,583 | $4,552 | |||||
Premiums and deposits | 70 | 70 | 69 | 72 | 75 | |||||
Surrender and contract benefits | (71) | (67) | (68) | (57) | (69) | |||||
Net flows | (1) | 3 | 1 | 15 | 6 | |||||
Investment performance | 171 | 250 | 55 | 204 | 100 | |||||
Net transfers from (to) general account | (17) | (17) | (17) | (13) | (17) | |||||
Policy charges and other | (62) | (54) | (65) | (59) | (58) | |||||
Variable universal life account value, end of period | $4,977 | $4,886 | $4,704 | $4,730 | $4,583 | |||||
(1) Includes premiums and deposits directed to the general account investment option of variable products. |
Financial Supplement | 12 |
Life — Select Operating Metrics (Cont.) (Unaudited, in millions)
For the Three Months Ended | For the Year to Date Period Ended | |||||||||||||
LIFE SALES | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||
Whole life | $5 | $9 | $11 | $14 | $26 | $14 | $50 | |||||||
Term life | 3 | 6 | 10 | 10 | 16 | 9 | 34 | |||||||
Variable universal life | 2 | 1 | 2 | 1 | 4 | 3 | 8 | |||||||
Universal life without secondary guarantees | 1 | 1 | 10 | 3 | 3 | 2 | 5 | |||||||
Total life sales | $11 | $17 | $33 | $28 | $49 | $28 | $97 |
As of | ||||||||||
LIFE INSURANCE IN-FORCE | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||
Whole Life | ||||||||||
Life Insurance in-force, before reinsurance | $23,881 | $24,090 | $24,280 | $24,248 | $24,061 | |||||
Life Insurance in-force, net of reinsurance | $3,827 | $3,089 | $3,165 | $4,642 | $4,649 | |||||
Term Life | ||||||||||
Life Insurance in-force, before reinsurance | $464,872 | $470,405 | $471,857 | $471,182 | $468,965 | |||||
Life Insurance in-force, net of reinsurance | $333,685 | $120,791 | $120,090 | $113,899 | $110,642 | |||||
Universal and Variable Universal Life | ||||||||||
Life Insurance in-force, before reinsurance | $62,142 | $62,760 | $63,709 | $64,437 | $65,088 | |||||
Life Insurance in-force, net of reinsurance | $39,909 | $32,602 | $32,930 | $33,285 | $33,555 |
Financial Supplement | 13 |
Run-off — Statements of Operating Earnings (Unaudited, in millions)
For the Three Months Ended | For the Year to Date Period Ended | |||||||||||||
Operating revenues | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||
Premiums | $1 | $— | $1 | $132 | $2 | $1 | $14 | |||||||
Universal life and investment-type product policy fees | 175 | 173 | 232 | 177 | 152 | 348 | 324 | |||||||
Net investment income | 354 | 358 | 384 | 359 | 353 | 712 | 698 | |||||||
Other revenues | 15 | 8 | 6 | 6 | 6 | 23 | 11 | |||||||
Total operating revenues | $545 | $539 | $623 | $674 | $513 | $1,084 | $1,047 | |||||||
Operating expenses | ||||||||||||||
Interest credited | $91 | $94 | $110 | $101 | $106 | $185 | $210 | |||||||
Policyholder benefits and claims | 288 | 299 | 390 | 476 | 453 | 587 | 654 | |||||||
Amortization of DAC and VOBA | — | 6 | 556 | 15 | 377 | 6 | 391 | |||||||
Interest expense | 8 | 15 | 15 | 15 | 15 | 23 | 30 | |||||||
Other operating expenses | 79 | 51 | 88 | 37 | 40 | 130 | 90 | |||||||
Total operating expenses | $466 | $465 | $1,159 | $644 | $991 | $931 | $1,375 | |||||||
Operating earnings before provision for income tax | 79 | 74 | (536) | 30 | (478) | 153 | (328) | |||||||
Provision for income tax expense (benefit) | 27 | 25 | (187) | 3 | (159) | 52 | (110) | |||||||
Operating earnings | $52 | $49 | $(349) | $27 | $(319) | $101 | $(218) |
Financial Supplement | 14 |
Run-off — Select Operating Metrics (Unaudited, in millions)
For the Three Months Ended | ||||||||||
UNIVERSAL LIFE WITH SECONDARY GUARANTEES ACCOUNT VALUE | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||
Account value, beginning of period | $6,258 | $6,252 | $6,227 | $6,210 | $6,175 | |||||
Premiums and deposits (1) | 215 | 208 | 211 | 235 | 239 | |||||
Surrenders and contract benefits | (30) | (42) | (22) | (31) | (25) | |||||
Net flows | 185 | 166 | 189 | 204 | 214 | |||||
Interest credited | 76 | 65 | 67 | 66 | 67 | |||||
Policy charges and other | (237) | (225) | (231) | (253) | (246) | |||||
Account value, end of period | $6,282 | $6,258 | $6,252 | $6,227 | $6,210 |
As of | ||||||||||
LIFE INSURANCE IN-FORCE | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||
Universal Life with Secondary Guarantees | ||||||||||
Life Insurance in-force, before reinsurance | $83,645 | $83,587 | $83,566 | $83,749 | $84,018 | |||||
Life Insurance in-force, net of reinsurance | $35,356 | $24,556 | $24,287 | $24,105 | $23,931 | |||||
(1) Includes premiums and deposits directed to the general account investment option of variable products. |
Financial Supplement | 15 |
Corporate & Other — Statements of Operating Earnings (Unaudited, in millions)
For the Three Months Ended | For the Year to Date Period Ended | |||||||||||||
Operating revenues | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||
Premiums | $27 | $26 | $29 | $13 | $34 | $53 | $97 | |||||||
Universal life and investment-type product policy fees | (3) | (3) | (3) | (3) | (3) | (6) | (5) | |||||||
Net investment income | 58 | 66 | 52 | 107 | 45 | 124 | 82 | |||||||
Other revenues | — | — | 32 | — | — | — | — | |||||||
Total operating revenues | $82 | $89 | $110 | $117 | $76 | $171 | $174 | |||||||
Operating expenses | ||||||||||||||
Interest credited | $— | $— | $— | $— | $— | $— | $— | |||||||
Policyholder benefits and claims | 17 | 10 | 17 | 6 | 16 | 27 | 63 | |||||||
Amortization of DAC and VOBA | 6 | 5 | 3 | 8 | 5 | 11 | 12 | |||||||
Interest expense | 28 | 30 | 29 | 28 | 27 | 58 | 54 | |||||||
Other operating expenses | 20 | 21 | 48 | 37 | 23 | 41 | 57 | |||||||
Total operating expenses | $71 | $66 | $97 | $79 | $71 | $137 | $186 | |||||||
Operating earnings before provision for income tax | 11 | 23 | 13 | 38 | 5 | 34 | (12) | |||||||
Provision for income tax expense (benefit) | (23) | 13 | (7) | 8 | 2 | (10) | (9) | |||||||
Operating earnings | $34 | $10 | $20 | $30 | $3 | $44 | $(3) |
Other
Information
Financial Supplement | 17 |
Other Information (Unaudited, in millions)
For the Three Months Ended | ||||||||||
DAC AND VOBA ROLL-FORWARD | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||
Balance, beginning of period | $6,500 | $6,293 | $6,589 | $6,572 | $6,204 | |||||
Capitalizations | 47 | 68 | 79 | 71 | 82 | |||||
Amortization: | ||||||||||
Related to net investment gains (losses) and net derivative gains (losses) (1) | 105 | 297 | 397 | 162 | 791 | |||||
Operating amortization - actuarial notable items | — | — | (539) | — | (342) | |||||
Operating amortization - other | (125) | (149) | (274) | (152) | (168) | |||||
Total amortization | (20) | 148 | (416) | 10 | 281 | |||||
Unrealized investment gains (losses) | (63) | (9) | 90 | (64) | 5 | |||||
Other | — | — | (49) | — | — | |||||
Balance, end of period | $6,464 | $6,500 | $6,293 | $6,589 | $6,572 | |||||
DAC AND VOBA BY SEGMENT | ||||||||||
Annuities | $5,076 | $5,106 | $4,878 | $4,380 | $4,267 | |||||
Life | 1,248 | 1,253 | 1,261 | 1,423 | 1,530 | |||||
Run-off | 2 | 5 | 6 | 639 | 645 | |||||
Corporate & Other | 138 | 136 | 148 | 147 | 130 | |||||
Total DAC and VOBA | $6,464 | $6,500 | $6,293 | $6,589 | $6,572 |
For the Three Months Ended | ||||||||||
NET DERIVATIVE GAINS (LOSSES) | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||
Net derivative gains (losses): | ||||||||||
Variable annuity embedded derivatives | $212 | $291 | $1,753 | $606 | $(3,477) | |||||
Variable annuity hedges | (471) | (1,070) | (2,538) | (1,027) | 355 | |||||
ULSG hedge program | 267 | (44) | (1,388) | 32 | — | |||||
Other hedges and embedded derivatives | (113) | (218) | (590) | (187) | 82 | |||||
Sub-total | (105) | (1,041) | (2,763) | (576) | (3,040) | |||||
Investment hedge adjustments and PAB adjustments | 27 | 76 | 93 | 75 | 67 | |||||
Total net derivative (losses) | $(78) | $(965) | $(2,670) | $(501) | $(2,973) | |||||
(1) Includes amounts related to GMIB fees and GMIB costs that are also included as an adjustment from net income (loss) to operating earnings. |
Financial Supplement | 18 |
Other Information (Cont.) (Unaudited, in millions)
For the Three Months Ended | ||||||||||
NOTABLE ITEMS IMPACTING OPERATING EARNINGS | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||
Actuarial assumption review and other insurance adjustments | $(42) | $— | $399 | $21 | $540 | |||||
One time establishment costs | — | — | — | — | — | |||||
Separation related transactions | — | — | (23) | — | (246) | |||||
Other | — | — | (23) | — | — | |||||
Total notable items (1) | $(42) | $— | $353 | $21 | $294 | |||||
(1) Notable items represent a positive (negative) impact to operating earnings and operating earnings per common share - diluted. | ||||||||||
Notable items reflect the impact of events that affected the Company’s results but that were unknown. Notable items also include certain items anticipated, such as one time establishment costs, to help investors have a better understanding of the Company’s results and to evaluate and forecast those results. |
Financial Supplement | 19 |
Variable Annuity Separate Account Returns (Unaudited)
For the Three Months Ended | ||||||||||
VARIABLE ANNUITY SEPARATE ACCOUNT RETURNS | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||
Total Quarterly VA separate account gross returns: | 3.11% | 4.72% | 0.20% | 3.84% | 2.15% | |||||
Percent allocated to equity funds | 27.77% | 27.70% | 27.41% | 26.97% | 26.70% | |||||
Percent allocated to bond funds/other funds | 8.94% | 9.01% | 9.23% | 9.43% | 9.66% | |||||
Percent allocated to target volatility funds | 14.78% | 14.69% | 14.76% | 14.88% | 14.81% | |||||
Percent allocated to balanced funds | 48.52% | 48.60% | 48.60% | 48.72% | 48.83% |
Financial Supplement | 20 |
Summary of Investments (Unaudited, dollars in millions)
June 30, 2017 | December 31, 2016 | |||||||
Amount | % of Total | Amount | % of Total | |||||
Fixed Maturity Securities: | ||||||||
U.S. corporate securities | $22,412 | 25.98% | $22,311 | 25.99% | ||||
U.S. government and agency securities | 15,511 | 17.98% | 13,090 | 15.25% | ||||
Residential mortgage-backed securities | 8,168 | 9.47% | 8,023 | 9.34% | ||||
Foreign corporate securities | 6,627 | 7.68% | 6,393 | 7.45% | ||||
State and political subdivision securities | 4,043 | 4.69% | 3,945 | 4.59% | ||||
Commercial mortgage-backed securities | 3,299 | 3.83% | 3,812 | 4.44% | ||||
Asset-backed securities | 2,238 | 2.60% | 2,652 | 3.09% | ||||
Foreign government securities | 1,209 | 1.40% | 1,162 | 1.35% | ||||
Total fixed maturity securities | 63,507 | 73.63% | 61,388 | 71.50% | ||||
Equity securities | 278 | 0.32% | 300 | 0.35% | ||||
Mortgage loans: | ||||||||
Commercial mortgage loans | 6,959 | 8.07% | 6,523 | 7.60% | ||||
Agricultural mortgage loans | 2,116 | 2.45% | 1,892 | 2.20% | ||||
Residential mortgage loans | 1,109 | 1.29% | 867 | 1.01% | ||||
Valuation allowances | (44) | (0.05)% | (40) | (0.05)% | ||||
Commercial mortgage loans held by CSEs securitization entities | 123 | 0.14% | 136 | 0.16% | ||||
Total mortgage loans | 10,263 | 11.90% | 9,378 | 10.92% | ||||
Policy loans | 1,513 | 1.75% | 1,517 | 1.77% | ||||
Real estate and real estate joint ventures | 302 | 0.35% | 215 | 0.25% | ||||
Other limited partnership interests | 1,623 | 1.88% | 1,642 | 1.91% | ||||
Cash, cash equivalents and short-term investments | 5,729 | 6.64% | 6,516 | 7.59% | ||||
Other invested assets: | ||||||||
Derivatives: | ||||||||
Interest rate | 1,204 | 1.40% | 2,152 | 2.51% | ||||
Equity markets | 1,367 | 1.59% | 1,076 | 1.25% | ||||
Foreign currency exchange rate | 242 | 0.28% | 366 | 0.43% | ||||
Credit | 34 | 0.04% | 28 | 0.03% | ||||
Total derivatives | 2,847 | 3.31% | 3,622 | 4.22% | ||||
Loans to affiliates | — | 0.00% | 1,090 | 1.27% | ||||
Other | 190 | 0.22% | 192 | 0.22% | ||||
Total other invested assets | 3,037 | 3.53% | 4,904 | 5.71% | ||||
Total invested assets and cash | $86,252 | 100.00% | $85,860 | 100.00% |
For the Three Months Ended | ||||||||||
June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | ||||||
Net investment income yield (1) | 4.40% | 4.74% | 4.69% | 4.95% | 4.77% | |||||
(1) Yields are calculated as investment income as a percent of average quarterly asset carrying values. Investment income includes investment hedge adjustments, excludes recognized gains and losses and reflects the GAAP adjustments described beginning on Page A-1 of the Appendix hereto. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets, collateral received from derivative counterparties and the effects of consolidating under GAAP certain VIEs that are treated as CSEs. . |
Financial Supplement | 21 |
Select Statutory Financial Results (1) (Unaudited, in millions)
For the Three Months Ended | For the Year to Date Period Ended | |||||||||||||
INCOME | June 30, 2017 (2) | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | June 30, 2017 (2) | June 30, 2016 | |||||||
Total revenues (Line 9) | $8,889 | $3,022 | $2,872 | $7,124 | $10,257 | |||||||||
Total benefits and expenses before dividends to policyholders (Line 28) | 9,246 | 1,387 | 1,508 | 6,899 | 9,710 | |||||||||
Gain (loss) from operations (Line 33) | (279) | 1,620 | 866 | 32 | 199 | |||||||||
Net realized capital gains (losses), net of federal income tax and transfers to interest maintenance reserve (Line 34) | (463) | (569) | (474) | (424) | (435) | |||||||||
Net income (loss) (Line 35) | $(742) | $1,051 | $392 | $(392) | $(236) | |||||||||
As of | ||||||||||||||
COMBINED TOTAL ADJUSTED CAPITAL | June 30, 2017 (2) | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||||||
Combined total adjusted capital | $4,217 | $5,377 | $9,073 | $9,255 | ||||||||||
(1) Combined results for Brighthouse Life Insurance Company, Brighthouse Life Insurance Company of NY and New England Life Insurance Company. | ||||||||||||||
(2) Statutory results for the 3 months and the year to date period ended June 30, 2017 are not available at the time of the issuance of this financial supplement. |
Appendix
Financial Supplement | A-1 |
Non-GAAP and Other Financial Disclosures
In this financial supplement, we present certain measures of our performance that are not calculated in accordance with GAAP. We believe that these non-GAAP financial measures enhance the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of our business.
The following non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP:
Non-GAAP financial measures: | Comparable GAAP financial measures: | ||
(i) | operating earnings | (i) | net income (loss) |
(ii) | operating revenues | (ii) | revenues |
(iii) | operating expenses | (iii) | expenses |
(iv) | operating return on equity | (iv) | return on equity |
(v) | operating earnings per share | (v) | earnings per share |
Reconciliations of these measures to the most directly comparable historical GAAP measures are included in this financial supplement.
Our definitions of the non-GAAP and other financial measures discussed in this financial supplement may differ from those used by other companies. For example, as indicated below, we exclude GMIB revenues and related embedded derivatives gains (losses) as well as GMIB benefits and associated DAC and VOBA offsets from operating earnings, thereby excluding substantially all GMLB activity from operating earnings.
Operating Earnings, Operating Revenues and Operating Expenses
Operating earnings is used by management to evaluate performance, allocate resources and facilitate comparisons to industry results. This financial measure focuses on our primary businesses principally by excluding the impact of market volatility, which could distort trends, and revenues and costs related to non-core products and businesses. Non-core businesses include discontinued operations and other businesses that have been or will be sold or exited by us, referred to as divested businesses, and certain entities required to be consolidated under GAAP.
Provided below are the adjustments to GAAP revenues and GAAP expenses used to calculate operating revenues and operating expenses, respectively. Operating earnings, as presented in this financial supplement, reflects operating revenues less operating expenses, both net of income tax.
Financial Supplement | A-2 |
Non-GAAP and Other Financial Disclosures (Cont.)
The following are excluded from total revenues in calculating the operating revenues component of operating earnings:
• | Net investment gains (losses); |
• | Net derivative gains (losses) except: (i) earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment ("Investment Hedge Adjustments"), and (ii) earned income on derivatives that are hedges of policyholder account balances but do not qualify for hedge accounting treatment ("PAB Adjustments"); |
• | Amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses) and certain variable annuity GMIB fees (“GMIB Fees”); |
• | Certain amounts related to securitization entities that are VIEs consolidated under GAAP; and |
• | Revenues from divested businesses. |
The following are excluded from total expenses in calculating the operating expenses component of operating earnings:
• | Amounts associated with benefits and hedging costs related to GMIBs (“GMIB Costs”); |
• | Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”); |
• | Amortization of DAC and VOBA related to (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments; |
• | Recognition of certain contingent assets and liabilities that could not be recognized at acquisition or adjusted for during the measurement period under GAAP business combination accounting guidance; |
• | Expenses of divested businesses; |
• | Amounts related to securitization entities that are VIEs consolidated under GAAP; |
• | Goodwill impairment; and |
• | Costs related to: (i) implementation of new insurance regulatory requirements and (ii) acquisition and integration costs. |
The tax impact of the adjustments mentioned is calculated net of the U.S. statutory tax rate, which could differ from our effective tax rate.
Consistent with GAAP guidance for segment reporting, operating earnings is also our GAAP measure of segment performance.
Financial Supplement | A-3 |
Non-GAAP and Other Financial Disclosures (Cont.)
Operating Return On Equity and Operating Earnings Per Share
Operating return on equity and operating earnings per share are measures used by management to evaluate the execution of our business strategy and align such strategy with our shareholders’ interests.
Operating return on equity is defined as total annual operating earnings on a four quarter trailing basis divided by the simple average of the most recent five quarters of total stockholders’ equity, excluding AOCI.
Operating earnings per share is defined as total annual operating earnings on a four quarter trailing basis divided by the weighted average number of fully diluted shares of common stock outstanding for the period.
Sales
Statistical sales information for Life sales are calculated using the LIMRA definition of sales for core direct sales, excluding company-sponsored internal exchanges, corporate-owned life insurance, bank-owned life insurance, and private placement variable universal life insurance. Annuity sales consist of 10% of direct statutory premiums, excluding company sponsored internal exchanges. These sales statistics do not correspond to revenues under GAAP, but are used as relevant measures of business activity.
Financial Supplement | A-4 |
Acronyms
AOCI | Accumulated other comprehensive income (loss) |
CSE | Consolidated securitization entity |
DAC | Deferred policy acquisition costs |
GAAP | Accounting principles generally accepted in the United States of America |
GMAB | Guaranteed minimum accumulation benefits |
GMDB | Guaranteed minimum death benefits |
GMIB | Guaranteed minimum income benefits |
GMLB | Guaranteed minimum living benefits |
GMWB | Guaranteed minimum withdrawal benefits |
NDGL | Net derivative gains (losses) |
NIGL | Net investment gains (losses) |
PAB | Policyholder account balances |
ULSG | Universal life insurance with secondary guarantees |
VA | Variable annuity |
VIE | Variable interest entities |
VOBA | Value of business acquired |
VUL | Variable universal life insurance |
Financial Supplement | A-5 |
Reconciliation of Net Income to Operating Earnings (Unaudited, in millions except per share data)
For the Three Months Ended | For the Year to Date Period Ended | |||||||||||||
June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | June 30, 2017 | June 30, 2016 | ||||||||
Net income (loss) | $246 | $(349) | $(1,765) | $(158) | $(1,423) | $(103) | $(1,016) | |||||||
Adjustments from net income (loss) to operating earnings: | ||||||||||||||
Less: Net investment gains (losses) | — | (55) | (63) | 26 | 20 | (55) | (41) | |||||||
Less: Net derivative gains (losses) | (78) | (965) | (2,670) | (501) | (2,973) | (1,043) | (2,680) | |||||||
Less: Other adjustments to net income (1) | ||||||||||||||
GMIB Fees | 70 | 69 | 73 | 73 | 75 | 139 | 148 | |||||||
Investment hedge adjustments | (27) | (76) | (92) | (74) | (66) | (103) | (131) | |||||||
Amortization of DAC and VOBA related to net investment gains (losses) and net derivative gains (losses) | 124 | 240 | 325 | 128 | 982 | 364 | 948 | |||||||
GMIB costs and amortization of DAC and VOBA related to GMIB fees and GMIB costs | (158) | (185) | (190) | (209) | (314) | (343) | (378) | |||||||
Divested business | (26) | (4) | (36) | (24) | (11) | (30) | (26) | |||||||
Other | (10) | (6) | 33 | (166) | (22) | (16) | (44) | |||||||
Less: Provision for income tax (expense) benefit on reconciling adjustments | 27 | 353 | 917 | 260 | 807 | 380 | 769 | |||||||
Add: Net income (loss) attributable to noncontrolling interests | — | — | — | — | — | — | — | |||||||
Operating earnings | $324 | $280 | $(62) | $329 | $79 | $604 | $419 | |||||||
Net income (loss) per common share - diluted | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Adjustments from net income (loss) to operating earnings: | ||||||||||||||
Less: Net investment gains (losses) | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Less: Net derivative gains (losses) | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Less: Other adjustments to net income (1) | ||||||||||||||
GMIB Fees | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Investment hedge adjustments | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Amortization of DAC and VOBA related to net investment gains (losses) and net derivative gains (losses) | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
GMIB costs and amortization of DAC and VOBA related to GMIB fees and GMIB costs | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Divested business | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Other | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Less: Provision for income tax (expense) benefit on reconciling adjustments | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Add: Net income (loss) attributable to noncontrolling interests | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
Operating earnings per common share - diluted | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||
(1) Further explanations of these adjustments begin on page A-1 of the Appendix. |
Financial Supplement | A-6 |
Reconciliation of Return On Equity to Operating Return On Equity (Unaudited, dollars in millions)
Four Quarters Cumulative Trailing Basis | ||||||||||
OPERATING EARNINGS | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||
Net income (loss) | $(2,026) | $(3,695) | $(2,939) | $(1,083) | $(602) | |||||
Add: Investment portfolio gains (losses) | 92 | 72 | 78 | 5 | 67 | |||||
Add: Net derivative gains (losses) | 4,214 | 7,109 | 5,851 | 3,438 | 2,979 | |||||
Add: Other adjustments to net income | 148 | (523) | (357) | (29) | (310) | |||||
Add: Provision for income tax expense (benefit) | (1,557) | (2,337) | (1,947) | (1,192) | (957) | |||||
Operating earnings | $871 | $626 | $686 | $1,139 | $1,177 | |||||
Five Quarters Average Shareholder's Net Investment Basis | ||||||||||
SHAREHOLDER'S NET INVESTMENT, EXCLUDING AOCI | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||
Shareholder's net investment | $16,605 | $17,258 | $17,603 | $18,614 | $18,855 | |||||
Accumulated other comprehensive income (loss) (AOCI) | 1,947 | 2,060 | 2,063 | 2,209 | $2,058 | |||||
Shareholder's net investment, excluding AOCI | $14,658 | $15,198 | $15,540 | $16,405 | $16,797 | |||||
Five Quarters Average Shareholder's Net Investment Basis | ||||||||||
RETURN ON EQUITY, EXCLUDING AOCI | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||
Return on equity | (13.8)% | (24.3)% | (18.9)% | (6.6)% | (3.6)% | |||||
Operating return on equity | 5.9% | 4.1% | 4.4% | 6.9% | 7.0% |
Financial Supplement | A-7 |
Reconciliation of Total Revenues to Operating Revenues and Reconciliation of Total Expenses to Operating Expenses (Unaudited, in millions)
For the Three Months Ended | For the Year to Date Period Ended | |||||||||||||
June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | June 30, 2017 | June 30, 2016 | ||||||||
Total revenues | $2,025 | $965 | $(553) | $1,766 | $(584) | $2,990 | $1,805 | |||||||
Less: Net investment gains (losses) | — | (55) | (63) | 26 | 20 | (55) | (41) | |||||||
Less: Net derivative gains (losses) | (78) | (965) | (2,670) | (501) | (2,973) | (1,043) | (2,680) | |||||||
Less: Other adjustments to revenues: | ||||||||||||||
GMIB fees | 70 | 69 | 73 | 73 | 75 | 139 | 148 | |||||||
Investment hedge adjustments | (27) | (76) | (92) | (74) | (66) | (103) | (131) | |||||||
Other | 2 | — | (3) | (1) | 3 | 2 | 3 | |||||||
Total operating revenues | $2,058 | $1,992 | $2,202 | $2,243 | $2,357 | $4,050 | $4,506 | |||||||
Total expenses | $1,704 | $1,555 | $2,224 | $2,018 | $1,656 | $3,259 | $3,481 | |||||||
Less: Amortization of DAC and VOBA related to net investment gains (losses) and net derivative gains (losses) | (124) | (240) | (325) | (128) | (982) | (364) | (948) | |||||||
Less: Goodwill impairment | — | — | — | 161 | — | — | — | |||||||
Less: Other adjustments to expenses: | ||||||||||||||
GMIB costs and amortization of DAC and VOBA related to GMIB fees and GMIB costs | 158 | 185 | 190 | 209 | 314 | 343 | 378 | |||||||
Other | 12 | 6 | (36) | 6 | 25 | 18 | 47 | |||||||
Less: Divested businesses | 26 | 4 | 36 | 24 | 11 | 30 | 26 | |||||||
Total operating expenses | $1,632 | $1,600 | $2,359 | $1,746 | $2,288 | $3,232 | $3,978 |
Financial Supplement | A-8 |
Reconciliations Details (Unaudited, dollars in millions)
For the Three Months Ended | For the Year to Date Period Ended | |||||||||||||
INVESTMENT PORTFOLIO GAINS (LOSSES) | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||
Gross investment gains (losses) | $4 | $(51) | $(67) | $66 | $28 | $(47) | $(15) | |||||||
Writedowns | (3) | (4) | 2 | (38) | (7) | (7) | (27) | |||||||
Investment portfolio gains (losses) | 1 | (55) | (65) | 28 | 21 | (54) | (42) | |||||||
Net investment gains (losses) related to CSEs | (1) | — | 1 | (2) | (1) | (1) | — | |||||||
Other gains (losses) reported in net investment gains (losses) on GAAP basis | — | — | 1 | — | — | — | 1 | |||||||
Net Investment Gains (Losses) - GAAP Basis | $— | $(55) | $(63) | $26 | $20 | $(55) | $(41) |
For the Three Months Ended | ||||||||||
NET INVESTMENT YIELD | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||
Total Investments | ||||||||||
Investment income yield (1) | 4.55% | 4.89% | 4.84% | 5.09% | 4.91% | |||||
Investment fees and expenses | (0.15)% | (0.15)% | (0.15)% | (0.14)% | (0.14)% | |||||
Net investment income yield (1) | 4.40% | 4.74% | 4.69% | 4.95% | 4.77% | |||||
(1) Yields are calculated as investment income as a percent of average quarterly asset carrying values. Investment income excludes recognized gains and losses and reflects the GAAP adjustments described beginning on Page A-1. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets, collateral received from derivative counterparties and the effects of consolidating under GAAP certain VIEs that are treated as CSEs. |