BRIGHTHOUSE LIFE INSURANCE CO OF NY – 10-Q – Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Index to Management's Discussion and Analysis of Financial Condition and Results
                                 of Operations

                                                                Page
                Overview                                         36
                Regulatory Developments                          37
                Summary of Critical Accounting Estimates         38
                Non-GAAP Financial Disclosures                   38
                Results of Operations                            40
                Note Regarding Forward-Looking Statements        42



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  Table of Contents
For purposes of this discussion, "BHNY," the "Company," "we," "our" and "us"
refer to Brighthouse Life Insurance Company of NY. BHNY is an indirect
wholly-owned subsidiary of Brighthouse Financial, Inc. ("BHF" and together with
its subsidiaries, "Brighthouse Financial"). This Management's Discussion and
Analysis of Financial Condition and Results of Operations should be read in
conjunction with (i) the Interim Condensed Financial Statements and related
notes included elsewhere herein; (ii) our Annual Report on Form 10-K for the
year ended December 31, 2021, filed with the U.S. Securities and Exchange
Commission ("SEC") on March 3, 2022 (the "2021 Annual Report"); and (iii) our
current reports on Form 8-K filed in 2022.

Insight

BHNY is a New York stock life insurance company licensed to do business only in
the state of New York. We market or administer a range of annuity and life
insurance products to individuals and deliver our products through multiple
independent distribution channels and marketing arrangements with a diverse
network of distribution partners. We are organized into two segments: Annuities
and Life. In addition, we report certain of our results of operations in
Corporate & Other. See "Business - Segments and Corporate & Other" included in
our 2021 Annual Report, as well as Note 2 of the Notes to the Interim Condensed
Financial Statements for further information regarding our segments and
Corporate & Other.

Covid-19 pandemic

We continue to closely monitor developments related to the COVID-19 pandemic,
which has negatively impacted us in certain respects. At this time, it continues
to not be possible to estimate (i) the severity or duration of the pandemic,
including the severity, duration and frequency of any additional "waves" or
emerging variants of COVID-19 or (ii) the efficacy or utilization of any
therapeutic treatments and vaccines for COVID-19 or variants thereof. It
likewise remains 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 any targets we may provide
to the markets or any aspects of our business model. See "Business -
Regulation," "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 "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Overview - COVID-19 Pandemic" included in our 2021 Annual Report,
as well as Note 4 of the Notes to the Interim Condensed Financial Statements.

Regulatory developments

We are domiciled in New York and regulated by the New York State Department of
Financial Services. We are regulated primarily at the state level, with some
products and services also subject to federal regulation. In addition, BHNY is
subject to regulation under the insurance holding company laws of various U.S.
jurisdictions. Furthermore, some of our operations, products and services are
subject to the Employee Retirement Income Security Act of 1974, consumer
protection laws, securities, broker-dealer and investment advisor regulations,
as well as environmental and unclaimed property laws and regulations. See
"Business - Regulation," as well as "Risk Factors - Regulatory and Legal Risks"
included in our 2021 Annual Report, as amended or supplemented by our subsequent
Quarterly Reports under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Regulatory Developments."

Transition from LIBOR

On March 15, 2022, the Adjustable Interest Rate (LIBOR) Act (the "LIBOR Act")
was signed into law, which provided a replacement framework for outstanding
financial contracts tied to LIBOR once LIBOR ceases to be published. The LIBOR
Act is substantially similar to the law passed in New York in April 2021 that
aimed at ensuring legal clarity for legacy contracts governed by New York law.
The LIBOR Act provides a statutory mechanism and safe harbor that applies on a
nationwide basis to replace LIBOR with a benchmark rate, selected by the Federal
Reserve Board based on a secured overnight funding rate, for certain contracts
that reference LIBOR and contain no or insufficient fallback provisions. The
LIBOR Act preempts and supersedes any state or local law, statute, rule,
regulation or standard relating to the selection or use of a benchmark
replacement or related changes and allows parties that already have effective
fallback provisions to opt out of the legislation. See "Business - Regulation -
Transition from LIBOR" and "Risk Factors - Economic Environment and Capital
Markets-Related Risks - We are exposed to significant financial and capital
markets risks which may adversely affect our financial condition, results of
operations and liquidity, and may cause our net investment income and our
profitability measures to vary from period to period - Changes to LIBOR"
included in our 2021 Annual Report, as amended or supplemented herein.
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Summary of Critical Accounting Estimates

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 Interim Condensed Financial Statements.

The most critical estimates include those used to determine:

•liabilities for future policy benefits;

•the amortization of deferred acquisition costs (“DAC”);

• the estimated fair values ​​of stand-alone derivatives and the recognition and
the estimated fair value of embedded derivatives requiring bifurcation; and

•assessment of income taxes and assessment 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 in the
Discussion and analysis of financial position and results of operations –
Summary of Critical Accounting Estimates” and Note 1 of the Notes to
Financial statements included in our 2021 annual report.

Non-GAAP financial information

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

Adjusted Earnings

In this report, we present adjusted earnings as a measure of our performance
that is not calculated in accordance with GAAP. Adjusted earnings is used by
management to evaluate performance and facilitate comparisons to industry
results. We believe the presentation of adjusted earnings, as the Company
measures it for management purposes, enhances the understanding of our
performance by contract holders by highlighting the results of operations and
the underlying profitability drivers of our business. Adjusted earnings should
not be viewed as a substitute for net income (loss), 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).

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

The following are significant items excluded from total revenue in the calculation
adjusted revenues:

•Net investment gains (losses);

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

• Certain Variable Annuity Guaranteed Minimum Income (“GMIB”) benefit charges
(“GMIB Fees”).

The following are significant items excluded from the total expenses in the calculation
adjusted revenues:

• Amounts Associated with GMIB Benefits (“GMIB Costs”);

• Amounts associated with periodic credit rate adjustments based on total
return of a contractually referenced pool of assets (“Market Value
Adjustments” ); and

• Amortization of DAC related to (i) net investment gains (losses), (ii)
derivative gains (losses) and (iii) GMIB fees and GMIB costs.

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

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We present adjusted earnings in a manner consistent with management’s view of
the main business activities that drive the profitability of our core business
companies. The following table illustrates how each component of
the profit is calculated from the line items of the GAAP income statement:

Component of Adjusted Earnings                                 How Derived from GAAP (1)
(i)               Fee 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 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 benefits of the contract.
(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 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) and (c) GMIB Fees and GMIB Costs).
(v)               Other expenses, net of DAC capitalization    (v)          

Other expenses reduced by the capitalization of DAC.
(v)

              Provision for income tax expense (benefit)   (vi)         

Tax impact of the above items.

_______________

(1) Items in italics indicate income statement items under GAAP.

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 Interim Condensed Financial
Statements.
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Operating results

Results for the three months ended March 31, 2022 and 2021

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.

                                                                  Three Months Ended
                                                                       March 31,
                                                                    2022             2021
                                                                     (In millions)
Revenues
Premiums                                                    $        3              $   5
Universal life and investment-type product policy fees              25                 25
Net investment income                                               43                 37
Other revenues                                                     (23)               (23)
Net investment gains (losses)                                       (7)                 1
Net derivative gains (losses)                                      (40)               (85)
Total revenues                                                       1                (40)
Expenses
Policyholder benefits and claims                                     7                 (6)
Interest credited to policyholder account balances                  12                 13
Capitalization of DAC                                              (13)               (14)
Amortization of DAC                                                  1                 (3)
Other expenses                                                      32                 33
Total expenses                                                      39                 23
Income (loss) before provision for income tax                      (38)     

(63)

Provision for income tax expense (benefit)                          (9)               (14)
Net income (loss)                                           $      (29)             $ (49)

The components of net income (loss) were as follows:

                                                         Three Months Ended
                                                              March 31,
                                                           2022             2021
                                                            (In millions)
GMLB Riders                                        $      (34)             $ (64)
Other derivative instruments                                2               

3

Net investment gains (losses)                              (7)              

1

Pre-tax adjusted earnings                                   1               

(3)

Income (loss) before provision for income tax             (38)              

(63)

Provision for income tax expense (benefit)                 (9)               (14)
Net income (loss)                                  $      (29)             $ (49)

Three months completed March 31, 2022 Compared to the three months ended March, 31st,
2021

Loss before provision for income tax was $38 million ($29 million, net of income
tax), a lower loss of $25 million ($20 million, net of income tax) from a loss
before provision for income tax of $63 million ($49 million, net of income tax)
in the prior period.

The increase in profit before provision for income tax is explained by the
following net favorable items:

•a net favorable change in guaranteed minimum living benefits ("GMLB") riders
("GMLB Riders") from lower relative equity markets and higher interest rates
resulting in:

• favorable change in the estimated fair value of the embedded derivative
liabilities associated with Shield Level Annuities (“Shield”); and

•a favorable trend in ceded reinsurance;

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partially offset by

•the unfavorable change in the estimated fair value of our GMLB hedges;

• an unfavorable change in the estimated fair value of the variable annuity liability
reservations; and

•an unfavorable change in GMLB DAC; and

• higher adjusted pre-tax profits, as discussed in more detail below.

The increase in income before provision for income tax was partially offset by
net investment losses reflecting current period net losses on sales of fixed
maturity securities compared to prior period net gains.

The provision for income tax resulted in an effective tax rate of 24% in the
current period compared to 22% in the prior period. The increase in the
effective tax rate was driven by higher pre-tax adjusted earnings, as discussed
in greater detail below. Our effective tax rate differs from the statutory tax
rate primarily due to the impacts of the dividends received deduction and tax
credits.

Reconciliation of Net Earnings (Loss) to Adjusted Earnings

The reconciliation of net income (loss) to adjusted earnings was as follows:

                                                            Three Months Ended
                                                                 March 31,
                                                              2022             2021
                                                               (In millions)
Net income (loss)                                     $      (29)             $ (49)
Add: Provision for income tax expense (benefit)               (9)           

(14)

Income (loss) before provision for income tax                (38)           

(63)

Less: GMLB Riders                                            (34)           

(64)

Less: Other derivative instruments                             2            

3

Less: Net investment gains (losses)                           (7)           

1

Pre-tax adjusted earnings                                      1            

(3)

Less: Provision for income tax expense (benefit)               -                 (1)
Adjusted earnings                                     $        1              $  (2)

Results for the three months ended March 31, 2022 and 2021 – Adjusted result

The components of adjusted earnings were as follows:

                                                       Three Months Ended
                                                           March 31,
                                                         2022              2021
                                                         (In millions)
Fee income                                      $       32                $ 34
Net investment spread                                   26                  19
Insurance-related activities                           (29)                (24)
Amortization of DAC                                     (9)                (13)
Other expenses, net of DAC capitalization              (19)                

(19)

Pre-tax adjusted earnings                                1                  

(3)

Provision for income tax expense (benefit)               -                  (1)
Adjusted earnings                               $        1                $ (2)

Three months completed March 31, 2022 Compared to the three months ended March, 31st,
2021

Adjusted profit was $1 million in the current period, an increase of $3
million
.

The main positive impacts were:

• higher net investment gap due to higher average invested assets resulting
positive net flows from the general account; and

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• lower DAC amortization due to lower equity market performance
resulting in favorable changes to our Shield business.

The main adverse impacts were:

• higher costs associated with insurance-related activities driven by higher salaries
claims, net of reinsurance; and

• lower asset-based fees resulting from lower average separate account balances,
part of which is offset in other expenses.

Higher adjusted pre-tax profit resulted in lower effective tax rate
in the current period compared to the previous period. Our effective tax rate
differs from the statutory tax rate primarily due to the impacts of
dividends benefited from a deduction and tax credits.

Note Regarding Forward-Looking Statements

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.

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
effectiveness of our actuarial models;

•the impact on earnings, capitalization and share capital and greater
the volatility of our results due to warranties on some of our products;

•the impact of the ongoing COVID-19 pandemic;

•the potential material adverse effect of changes in accounting standards,
practices or policies applicable to us, including changes in the accounting for
long-duration contracts;

• the loss of business and other negative impacts resulting from a decommissioning or
the potential downgrade of our financial strength ratings;

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

•heightened competition, including with respect to service, product features,
scale, price, actual or perceived financial strength, claims-paying ratings,
financial strength ratings, e-business capabilities and name recognition;

• our ability to market and distribute our products through the distribution
canals ;

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

•risks related to climate change;

•the negative impact on policyholder claims liabilities due to
extreme mortality events;

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

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•the impact of economic conditions on capital markets and the WE and
the world economy, as well as geopolitical events, military actions or
catastrophic events, on our investment portfolio, including on the achievements and
unrealized losses and impairments, net investment gap and net investment
Income;

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

• the impact of regulatory changes and supervisory and enforcement policies
about our insurance business or other operations;

• the potential negative tax impact of possible future tax legislation
this could make some of our products less attractive to consumers;

•the effectiveness of our risk management policies and procedures;

•the loss or disclosure of confidential information, damage to our reputation
and impairment of our ability to conduct business effectively as a result of any
failure in cyber- or other information security systems;

•whether all or any portion of the tax consequences of our separation from
MetLife, Inc. (together with its subsidiaries and affiliates, "MetLife") are not
as expected, leading to material additional taxes or material adverse
consequences to tax attributes that impact us;

•uncertainty as to the outcome of any litigation with MetLife regarding tax matters or
other matters and agreements or disagreements regarding MetLife 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 SECOND.

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 our 2021 Annual Report, 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.
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