- Momentum in Retirement1 and Wealth Management leading to
combined net inflows of $3.0 billion; modest Asset Management net
outflows of $1.9 billion, with active net flows nearly flat in the
quarter
- Net income of $1.1 billion, or $3.02 per share
- Non-GAAP operating earnings2 of $413 million, or
$1.15 per share; adjusting for notable items3, Non-GAAP operating
earnings of $468 million, or $1.30 per share
- Cash generation4 of $1.0 billion year-to-date, on track for
$1.3 billion 2023 guidance; cash at the Holding Company increased
to $2.0 billion
- Returned $315 million to shareholders during the quarter,
bringing year-to-date capital return to $905 million; consistently
delivering on the 60-70% payout ratio target
- No material impact from the annual assumption review,
underscoring the company’s conservative approach to setting initial
assumptions
Equitable Holdings, Inc. (“Equitable Holdings”, “Holdings”, or
the “Company”) (NYSE: EQH) today announced financial results for
the third quarter ended September 30, 2023.
“We reported third quarter non-GAAP operating earnings of $1.15
per share, or $1.30 per share after adjusting for notable items.
Adjusted results in the period were up 15% over the prior year
quarter with organic growth in our businesses supported by
favorable demographic trends and the highest interest rate levels
we have seen in over 15 years. In Retirement, we reported another
record quarter with $1.5 billion of net inflows driven by our
industry-leading spread-based RILA product. In Wealth Management,
our fastest growing business, we continue to see strong, organic
growth with $1.6 billion of net inflows, or an 8% annualized
organic growth rate. In Asset Management, while we were not immune
to industry-wide outflows in the quarter, our retail channel
delivered net inflows of $1.6 billion, and our institutional
pipeline remains robust at $12.5 billion.” said Mark Pearson,
President and Chief Executive Officer.
Mr. Pearson concluded, “Our businesses continue to provide an
attractive value proposition for investors with diverse sources of
earnings driving predictable cash generation of $1.0 billion
year-to-date as we remain on track for our $1.3 billion 2023
guidance. This supports our capital management program as we
continue to consistently deliver on our payout ratio target of
60-70% of Non-GAAP operating earnings.”
Consolidated Results
Third Quarter
(in millions, except per share amounts or
unless otherwise noted)
2023
2022
Total Assets Under
Management/Administration (“AUM/A”, in billions)
$
860
$
784
Net income attributable to Holdings
1,064
594
Net income attributable to Holdings per
common share
3.02
1.54
Non-GAAP operating earnings
413
386
Non-GAAP operating earnings per common
share (“EPS”)
1.15
0.99
As of September 30, 2023, total AUM/A was $860 billion, a
year-over-year increase of 10%, driven by higher markets over the
prior twelve months.
Net income attributable to Holdings for the third quarter of
2023 was $1.1 billion compared to $594 million in the third quarter
of 2022.
Non-GAAP operating earnings in the third quarter of 2023 was
$413 million compared to $386 million in the third quarter of 2022.
Adjusting for notable items5 of $55 million, third quarter 2023
Non-GAAP operating earnings were $468 million or $1.30 per
share.
As of September 30, 2023, book value per common share, including
accumulated other comprehensive income (“AOCI”), was $0.23. Book
value per common share, excluding AOCI, was $28.90.
Business
Highlights
- Business segment highlights:
- Individual Retirement (“IR”) reported another record quarter
with net inflows of $1.7 billion and first year premiums up 28%
over prior year quarter attributable to record demand for
spread-based RILA product.
- Group Retirement (“GR”) reported net outflows of $175 million,
primarily due to seasonality in the Company’s industry leading K-12
educators offering, while generating $817 million of gross premiums
in the quarter.
- Investment Management and Research (AllianceBernstein or “AB”)6
reported net outflows of $1.9 billion with active net flows nearly
flat and $1.6 billion of net inflows in the Retail channel.
- Protection Solutions (“PS”) reported $756 million in gross
written premiums with accumulation-oriented VUL first year premiums
and Employee Benefits first year premiums up 1% and 5%,
respectively, over the prior year quarter.
- Wealth Management (“WM”) reported net inflows of $1.6 billion,
another quarter of organic growth, supported by a 2% increase in
advisor productivity compared to the second quarter of 2023.
- Legacy (“L”) reported $554 million of net outflows and
continues to run-off at $2 to $3 billion per annum.
- Delivering shareholder value:
- The Company’s Retirement business continues to benefit from
higher interest rates with new money yields in its general account
of 6.0% compared to an average portfolio yield of 4.3%.
- The Company has deployed 80% of its initial $10 billion capital
commitment to AB’s Private Markets platform. In May the Company
made an additional $10 billion commitment and will invest $20
billion cumulatively by 2027, supporting growth in AB’s Private
Markets business, which currently has $61 billion in assets under
management.
- The Company is ahead of plan on its productivity and yield
enhancement programs and by year end expects to achieve more than
$30 million of its $150 million net expense savings target and over
$45 million of its $110 million incremental income target for the
Company’s general account.
- Capital management program:
- The Company returned $315 million to shareholders in the
quarter, including $238 million of share repurchases, which is
above the Company’s payout ratio target of 60-70% of Non-GAAP
operating earnings and in line after adjusting Non-GAAP operating
earnings for notable items7 in the quarter.
- The Company continues to benefit from diverse sources of
earnings to drive predictable cash generation with $1.0 billion of
net dividends and distributions from its subsidiaries year to date.
The Company remains on track to achieve its $1.3 billion cash
generation guidance for 2023.
- The Company reported cash and liquid assets of $2.0 billion at
Holdings, which remains above the $500 million minimum target, with
a continued focus on maximizing financial flexibility to support
consistent capital return.
- Completed annual actuarial assumption review:
- The Company completed its annual actuarial assumption update
resulting in minimal impacts with a $4 million loss to net income
and $12 million benefit to non-GAAP operating earnings on a
post-tax basis.
Business Segment
Results
Individual Retirement
(in millions, unless otherwise noted)
Q3 2023
Q3 2022
Account value (in billions)
$
83.2
$
69.7
Segment net flows (in billions)
1.7
1.3
Operating earnings (loss)
210
183
- Account value increased by 19% primarily due to market
performance and net inflows over the prior twelve months.
- Net inflows of $1.7 billion in the quarter were higher over the
prior year quarter with record sales of $3.8 billion.
- Operating earnings increased from $183 million in the prior
year quarter to $210 million, primarily driven by higher net
investment income due to higher interest rates and higher SCS asset
balances.
- Operating earnings adjusting for notable items8 increased from
$193 million in the prior year quarter to $221 million. Notable
items of $11 million in the current period reflect the higher tax
rate in the quarter and lower net investment income from
alternatives and prepayments, partially offset by a favorable
assumption update.
Group Retirement
(in millions, unless otherwise noted)
Q3 2023
Q3 2022
Account value (in billions) (1)
$
33.8
$
39.7
Segment net flows (2)
(175
)
(57
)
Operating earnings (loss)
105
99
(1) Effective October 3, 2022, AV excludes
activity related to ceded AV to Global Atlantic. In addition,
roll-forward reflects the AV ceded to Global Atlantic as of the
transaction date.
(2) For the three months ended September
30, 2023, net out flows of $172 million are excluded as these
amounts are related to ceded AV to Global Atlantic.
- Account value decreased primarily due to the reinsurance
transaction with Global Atlantic, which reduced account value by
c.$9.4 billion, partially offset by market performance over the
prior twelve months.
- Net outflows of $175 million primarily driven by seasonality in
the tax-exempt channel with lower premiums from K-12 educators
during the summer months.
- Operating earnings increased from $99 million in the prior year
quarter to $105 million, primarily due to lower interest credited
associated with policies ceded to Global Atlantic partially offset
by lower net investment income due to lower assets following the
transaction.
- Operating earnings adjusting for notable items8 increased from
$107 million in the prior year quarter to $113 million. Notable
items of $8 million reflect a higher tax rate in the quarter and
lower net investment income from alternatives and prepayments,
partially offset by a favorable assumption update.
AllianceBernstein
(in millions, unless otherwise noted)
Q3 2023
Q3 2022
Total AUM (in billions)
$
669.0
$
612.7
Segment net flows (in billions)
(1.9
)
(10.5
)
Operating earnings (loss)
99
94
- AUM increased by 9% due to market performance over the prior
twelve months.
- Third quarter net outflows of $1.9 billion with total active
net outflows of $0.1 billion. Retail net inflows were $1.6 billion,
led by taxable fixed income and municipals, partially offsetting
institutional net outflows as growth in active equities was offset
by outflows in fixed income and passive mandates.
- Operating earnings increased from $94 million in the prior year
quarter to $99 million, primarily due to higher base fees on higher
average AUM and higher performance fees.
Protection Solutions
(in millions)
Q3 2023
Q3 2022
Gross written premiums
$
756
$
769
Annualized premiums
79
74
Operating earnings (loss)
34
30
- Annualized premiums increased 7% year-over-year driven by an 8%
increase in Life and a 5% increase in Employee Benefits.
- Operating earnings increased from $30 million in the prior year
quarter to $34 million, primarily due to higher net investment
income, partially offset by higher-than-expected mortality.
- Operating earnings adjusting for notable items9 increased from
$53 million in the prior year quarter to $62 million. Notable items
of $28 million reflect elevated mortality and lower net investment
income from alternatives and prepayments, partially offset by a
favorable assumption update.
Wealth Management
(in millions, unless otherwise noted)
Q3 2023
Q3 2022
Total AUA (in billions)
$
79.4
$
68.4
Net Flows (in billions)
1.6
1.1
Operating earnings (loss)
40
22
- AUA increased by 16% due to market performance and net inflows
over the last twelve months.
- Net inflows of $1.6 billion in the quarter with focus on
driving higher-fee advisory AUA.
- Operating earnings increased from $22 million in the prior year
quarter to $40 million, primarily due to higher advisory fees on
higher average asset balances and increased interest income from
sweep accounts.
Legacy
(in millions)
Q3 2023
Q3 2022
Account value (in billions)
$
20.9
$
20.9
Net Flows (1)
(554
)
(499
)
Operating earnings (loss)
41
50
(1) Net flows excluded as it relates to AV
ceded to Venerable for the discrete periods of September 30, 2023
and September 30, 2022 were $(263) million and $(312) million,
respectively.
- Account value was flat year-over-year with expected net
outflows offset by positive market performance over the prior
twelve months.
- Net outflows of $554 million were in line with expectations as
this business continues to run-off at $2 billion to $3 billion per
annum.
- Operating earnings decreased from $50 million in the prior year
quarter to $41 million, primarily due lower net investment income
as the business continues to run off.
- Operating earnings adjusting for notable items10 decreased from
$53 million in the prior year quarter to $41 million. Notable items
of $0 million in the current period reflect lower net investment
income from alternatives and prepayments and a higher tax rate in
the quarter, offset by a favorable assumption update.
Corporate and Other (“C&O”)
Operating loss of $116 million in the third quarter increased
from an operating loss of $92 million in the prior year quarter,
primarily driven by higher interest credited partially offset by
higher net investment income, lower policyholder benefits and lower
expenses compared to the prior year quarter. Operating loss after
adjusting for notable items10 increased from $84 million in the
prior year quarter to $109 million.
Exhibit 1: Notable
Items
Notable items represent the impact on results from our annual
actuarial assumption review, approximate impacts attributable to
significant variances from the Company’s expectations, and other
items that the Company believes may not be indicative of future
performance. The Company chooses to highlight the impact of these
items and Non-GAAP measures, less notable items to provide a better
understanding of our results of operations in a given period.
Certain figures may not sum due to rounding.
Impact of notable items by segment and Corporate &
Other:
Three Months Ended September
30,
(in millions)
2023
2022
Non-GAAP Operating Earnings
413
$
386
Post-tax Adjustments related to notable
items:
Individual Retirement
12
9
Group Retirement
9
9
Investment Management and Research
—
—
Protection Solutions
36
19
Corporate & Other
8
12
Wealth Management
—
—
Legacy
3
3
Notable items subtotal
67
51
Less: impact of actuarial assumption
update
(12
)
1
Non-GAAP Operating Earnings, less Notable
Items
$
468
$
438
Impact of notable items by item category:
Three Months Ended September
30,
(in millions)
2023
2022
Non-GAAP Operating Earnings
413
$
386
Pre-tax adjustments related to Notable
Items:
Actuarial Updates/Reserve
(4
)
—
Mortality
43
12
Expenses
—
30
Net Investment Income
24
11
Subtotal
63
53
Post-tax impact of Notable Items
67
51
Less: impact of actuarial assumption
update
(12
)
1
Non-GAAP Operating Earnings, less Notable
Items
$
468
$
438
Impact of Notable Items by segment and corporate &
other:
Three Months Ended 9/30/2023
IR
GR
AB
PS
WM
L
C&O
Consolidated
Non-GAAP Operating Earnings
210
105
99
34
40
41
(116
)
413
Pre-tax adjustments related to Notable
Items:
Actuarial Updates/Reserve
—
—
—
(9
)
—
—
5
(4
)
Mortality
—
—
—
43
—
—
—
43
Expenses
—
—
—
—
—
—
—
—
Net Investment Income
2
5
—
10
—
2
5
24
Pre-tax Subtotal
2
5
—
44
—
2
9
63
Tax adjustment
9
4
—
(7
)
—
—
(2
)
4
Post-tax impact of Notable
Items
12
9
—
36
—
3
8
67
Impact of Actuarial Assumption Update
(1
)
—
—
(9
)
—
(3
)
—
(12
)
Non-GAAP Operating Earnings, less
Notable Items
221
113
99
62
40
41
(109
)
468
0
Three Months Ended 9/30/2022
IR
GR
AB
PS
WM
L
C&O
Consolidated
Non-GAAP Operating Earnings
183
99
94
30
22
50
(92
)
386
Pre-tax adjustments related to Notable
Items:
Actuarial Updates/Reserve
—
—
—
—
—
—
—
—
Mortality
—
—
—
12
—
—
—
12
Expenses
2
6
—
5
—
—
17
30
Net Investment Income
1
3
—
4
—
1
2
11
Pre-tax Subtotal
3
9
—
21
—
1
19
53
Tax adjustment
6
-0
—
(2
)
—
1
(7
)
(2
)
Post-tax impact of Notable
Items
9
9
—
19
—
3
12
51
Impact of Actuarial Assumption Update
1
—
—
3
—
—
(3
)
1
Non-GAAP Operating Earnings, less
Notable Items
193
107
94
53
22
53
(84
)
438
Earnings Conference Call
Equitable Holdings will host a conference call at 9 a.m. ET on
November 1, 2023 to discuss its third quarter 2023 results. The
conference call webcast, along with additional earnings materials,
will be accessible on the company’s investor relations website at
ir.equitableholdings.com. Please log on to the webcast at least 15
minutes prior to the call to download and install any necessary
software.
To register for the conference call, please use the following
link: EQH Third Quarter 2023 Earnings Call
After registering, you will receive an email confirmation
including dial in details and a unique conference call code for
entry. Registration is open through the live call. To ensure you
are connected for the full call we suggest registering a day in
advance or at minimum 10 minutes before the start of the call.
A webcast replay will be made available on the Equitable
Holdings Investor Relations website at
ir.equitableholdings.com.
About Equitable Holdings
Equitable Holdings, Inc. (NYSE: EQH) is a financial services
holding company comprised of two complementary and well-established
principal franchises, Equitable and AllianceBernstein. Founded in
1859, Equitable provides advice, protection and retirement
strategies to individuals, families and small businesses.
AllianceBernstein is a global investment management firm that
offers high-quality research and diversified investment services to
institutional investors, individuals and private wealth clients in
major world markets. Equitable Holdings has approximately 12,300
employees and financial professionals, $860 billion in assets under
management and administration (as of 9/30/2023) and more than 5
million client relationships globally.
Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Words such as “expects,” “believes,” “anticipates,”
“intends,” “seeks,” “aims,” “plans,” “assumes,” “estimates,”
“projects,” “should,” “would,” “could,” “may,” “will,” “shall” or
variations of such words are generally part of forward-looking
statements. Forward-looking statements are made based on
management’s current expectations and beliefs concerning future
developments and their potential effects upon Equitable Holdings,
Inc. (“Holdings”) and its consolidated subsidiaries. “We,” “us” and
“our” refer to Holdings and its consolidated subsidiaries, unless
the context refers only to Holdings as a corporate entity. There
can be no assurance that future developments affecting Holdings
will be those anticipated by management. Forward-looking statements
include, without limitation, all matters that are not historical
facts.
These forward-looking statements are not a guarantee of future
performance and involve risks and uncertainties, and there are
certain important factors that could cause actual results to
differ, possibly materially, from expectations or estimates
reflected in such forward-looking statements, including, among
others: (i) conditions in the financial markets and economy,
including the impact of plateauing or decreasing economic growth
and geopolitical conflicts and related economic conditions, equity
market declines and volatility, interest rate fluctuations, impacts
on our goodwill and changes in liquidity and access to and cost of
capital; (ii) operational factors, including reliance on the
payment of dividends to Holdings by its subsidiaries, protection of
confidential customer information or proprietary business
information, operational failures by us or our service providers,
potential strategic transactions, changes in accounting standards,
and catastrophic events, such as the outbreak of pandemic diseases
including COVID-19; (iii) credit, counterparties and investments,
including counterparty default on derivative contracts, failure of
financial institutions, defaults by third parties and affiliates
and economic downturns, defaults and other events adversely
affecting our investments; (iv) our reinsurance and hedging
programs; (v) our products, structure and product distribution,
including variable annuity guaranteed benefits features within
certain of our products, variations in statutory capital
requirements, financial strength and claims-paying ratings, state
insurance laws limiting the ability of our insurance subsidiaries
to pay dividends and key product distribution relationships; (vi)
estimates, assumptions and valuations, including risk management
policies and procedures, potential inadequacy of reserves and
experience differing from pricing expectations, amortization of
deferred acquisition costs and financial models; (vii) our
Investment Management and Research segment, including fluctuations
in assets under management and the industry-wide shift from
actively-managed investment services to passive services; (viii)
recruitment and retention of key employees and experienced and
productive financial professionals; (ix) subjectivity of the
determination of the amount of allowances and impairments taken on
our investments; (x) legal and regulatory risks, including federal
and state legislation affecting financial institutions, insurance
regulation and tax reform; (xi) risks related to our common stock
and (xii) general risks, including strong industry competition,
information systems failing or being compromised and protecting our
intellectual property.
Forward-looking statements should be read in conjunction with
the other cautionary statements, risks, uncertainties and other
factors identified in Holdings’ filings with the Securities and
Exchange Commission. 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.
Forward-looking Non-GAAP Metrics
The Company has presented forward-looking statements regarding
Non-GAAP operating earnings, Non-GAAP operating earnings per share
and Adjusted Operating Margin at AB. These non-GAAP financial
measures are derived by excluding certain amounts, expenses or
income, from the corresponding financial measures determined in
accordance with GAAP. The determination of the amounts that are
excluded from these non-GAAP financial measures is a matter of
management judgment and depends upon, among other factors, the
nature of the underlying expense or income amounts recognized in a
given period. We are unable to present a quantitative
reconciliation of forward-looking adjusted operating earnings per
share and payout ratio targeted to non-GAAP operating earnings to
their most directly comparable forward-looking GAAP financial
measures because such information is not available, and management
cannot reliably predict all of the necessary components of such
GAAP measures without unreasonable effort or expense. In addition,
we believe such reconciliations would imply a degree of precision
that would be confusing or misleading to investors. The unavailable
information could have a significant impact on the Company’s future
financial results. These non-GAAP financial measures are
preliminary estimates and are subject to risks and uncertainties,
including, among others changes in connection with quarter-end and
year-end adjustments. Any variations between the Company’s actual
results and preliminary financial data set forth above may be
material.
Use of Non-GAAP Financial Measures
In addition to our results presented in accordance with U.S.
GAAP, we report Non-GAAP Operating Earnings, Non-GAAP Operating
EPS, and Book Value per common share, excluding AOCI, each of which
is a measure that is not determined in accordance with U.S. GAAP.
Management principally uses these non-GAAP financial measures in
evaluating performance because they present a clearer picture of
our operating performance and they allow management to allocate
resources. Similarly, management believes that the use of these
Non-GAAP financial measures, together with relevant U.S. GAAP
measures, provide investors with a better understanding of our
results of operations and the underlying profitability drivers and
trends of our business. These non-GAAP financial measures are
intended to remove from our results of operations the impact of
market changes (where there is mismatch in the valuation of assets
and liabilities) as well as certain other expenses which are not
part of our underlying profitability drivers or likely to re-occur
in the foreseeable future, as such items fluctuate from
period-to-period in a manner inconsistent with these drivers. These
measures should be considered supplementary to our results that are
presented in accordance with U.S. GAAP and should not be viewed as
a substitute for the U.S. GAAP measures. Other companies may use
similarly titled non-GAAP financial measures that are calculated
differently from the way we calculate such measures. Consequently,
our non-GAAP financial measures may not be comparable to similar
measures used by other companies.
We also discuss certain operating measures, including AUM, AV,
and certain other operating measures, which management believes
provide useful information about our businesses and the operational
factors underlying our financial performance.
Non-GAAP Operating Earnings
Non-GAAP Operating Earnings is an after-tax non-GAAP financial
measure used to evaluate our financial performance on a
consolidated basis that is determined by making certain adjustments
to our consolidated after-tax net income attributable to Holdings.
The most significant of such adjustments relates to our derivative
positions, which protect economic value and statutory capital, and
the variable annuity product MRBs. This is a large source of
volatility in net income.
Non-GAAP Operating Earnings equals our consolidated after-tax
net income attributable to Holdings adjusted to eliminate the
impact of the following items:
- Items related to variable annuity product features, which
include: (i) changes in the fair value of market risk benefits and
purchased market risk benefits, including the related attributed
fees and claims, offset by derivatives and other securities used to
hedge the market risk benefits which result in residual net income
volatility as the change in fair value of certain securities is
reflected in OCI and due to our statutory capital hedge program;
and (ii) market adjustments to deposit asset or liability accounts
arising from reinsurance agreements which do not expose the
reinsurer to a reasonable possibility of a significant loss from
insurance risk;
- Investment (gains) losses, which includes credit loss
impairments of securities/investments, sales or disposals of
securities/investments, realized capital gains/losses and valuation
allowances;
- Net actuarial (gains) losses, which includes actuarial gains
and losses as a result of differences between actual and expected
experience on pension plan assets or projected benefit obligation
during a given period related to pension, other postretirement
benefit obligations, and the one-time impact of the settlement of
the defined benefit obligation;
- Other adjustments, which primarily include restructuring costs
related to severance and separation, lease write-offs related to
non-recurring restructuring activities, COVID-19 related impacts,
net derivative gains (losses) on certain Non-GMxB derivatives, net
investment income from certain items including consolidated VIE
investments, seed capital mark-to-market adjustments, unrealized
gain/losses and realized capital gains/losses from sales or
disposals of select securities, certain legal accruals; and a
bespoke deal to repurchase UL policies from one entity that had
invested in numerous policies purchased in the life settlement
market, which disposed of the risk of additional COI litigation by
that entity related to those UL policies, impact of the annual
actuarial assumption updates attributable to LFPB; and
- Income tax expense (benefit) related to the above items and
non-recurring tax items, which includes the effect of uncertain tax
positions for a given audit period and a decrease of deferred tax
valuation allowance.
In the third quarter 2023, the Company updated its operating
earnings measure to exclude the impact of the annual actuarial
assumption update attributable to LFPB as the majority of the
earnings volatility attributable to these assumption updates relate
to the Company’s Legacy and non-business segment products and as
such do not represent the Company’s ongoing revenue generating
activities or future business strategy, and impedes comparability
of operating results period over period. Operating earnings were
favorably impacted by this change in the amount of $61 million for
the three and nine months ended September 30, 2023, respectively.
The presentation of operating earnings in prior periods was not
revised to reflect this modification because the impact to those
periods was immaterial.
Because Non-GAAP Operating Earnings excludes the foregoing items
that can be distortive or unpredictable, management believes that
this measure enhances the understanding of the Company’s underlying
drivers of profitability and trends in our business, thereby
allowing management to make decisions that will positively impact
our business.
We use the prevailing corporate federal income tax rate of 21%
while taking into account any non-recurring differences for events
recognized differently in our financial statements and federal
income tax returns as well as partnership income taxed at lower
rates when reconciling Net income (loss) attributable to Holdings
to Non-GAAP Operating Earnings.
The table below presents a reconciliation of Net income (loss)
attributable to Holdings to Non-GAAP Operating Earnings for the
three months and nine months ended September 30, 2023 and 2022:
Three Months Ended September
30,
Nine Months Ended September
30,
(in millions)
2023
2022
2023
2022
Net income (loss) attributable to
Holdings
$
1,064
$
594
$
2,000
$
2,091
Adjustments related to:
Variable annuity product features (4)
(1,380
)
(675
)
(584
)
(2,322
)
Investment (gains) losses
411
333
554
890
Net actuarial (gains) losses related to
pension and other postretirement benefit obligations
8
19
26
57
Other adjustments (1) (2)
91
50
198
455
Income tax expense (benefit) related to
above adjustments
183
58
(40
)
194
Non-recurring tax items (3)
36
7
(936
)
13
Non-GAAP Operating Earnings
$
413
$
386
$
1,218
$
1,378
____________________
(1)
Includes certain gross legal expenses
related to the cost of insurance litigation and claims related to a
commercial relationship of $0 million and $35 million for the three
and nine months ended September 30, 2023, respectively and $2
million and $168 million for the three and nine months ended
September 30, 2022, respectively. Includes policyholder benefit
costs of $75 million for the nine months ended September 30, 2022
stemming from a deal to repurchase UL policies from one entity that
had invested in numerous policies purchased in the life settlement
market. Includes the impact of unfavorable annual actuarial
assumptions updates related to LFPB of $61 million for the three
and nine months ended September 30, 2023. Prior period impact was
immaterial and was not revised.
(2)
Includes Non-GMxB related derivative hedge
losses of ($16) million and ($7) million for the three and nine
months ended September 30, 2023, respectively and ($28) million and
($68) million for the three and nine months ended September 30,
2022, respectively.
(3)
For the three and nine months ended
September 30, 2023, non-recurring tax items reflect primarily the
effect of uncertain tax positions for a given audit period and an
increase to the tax valuation allowance of $20 million and a
decrease of $970 million, respectively.
(4)
Includes the impact of favorable
assumption updates of $40 million for the three and nine months
ended September 30, 2023. Includes the impact of unfavorable
assumption updates of $204 million for the three and nine months
ended September 30, 2022.
Non-GAAP Operating EPS
Non-GAAP Operating Earnings per common share is calculated by
dividing Non-GAAP Operating Earnings less preferred stock dividends
by diluted common shares outstanding. The table below presents a
reconciliation of GAAP EPS to Non-GAAP Operating EPS for the three
months and nine months ended September 30, 2023 and 2022.
Three Months Ended September
30,
Nine Months Ended September
30,
(per share amounts)
2023
2022
2023
2022
Net income (loss) attributable to Holdings
(1)
$
3.06
$
1.58
$
5.62
$
5.45
Less: Preferred stock dividend
0.04
0.04
0.15
0.14
Net Income (loss) available to common
shareholders
3.02
1.54
5.47
5.31
Adjustments related to:
Variable annuity product features (5)
(3.97
)
(1.79
)
(1.64
)
(6.06
)
Investment (gains) losses
1.18
0.88
1.56
2.32
Net actuarial (gains) losses related to
pension and other postretirement benefit obligations
0.02
0.05
0.07
0.15
Other adjustments (2) (3)
0.27
0.14
0.55
1.20
Income tax expense (benefit) related to
above adjustments
0.53
0.15
(0.11
)
0.51
Non-recurring tax items (4)
0.10
0.02
(2.63
)
0.03
Non-GAAP Operating Earnings
$
1.15
$
0.99
$
3.27
$
3.46
____________________
(1)
For periods presented with a net loss,
basic shares are used for EPS.
(2)
The legal accruals impact per common share
is $0.00 and $0.10 for the three and nine months ended September
30, 2023, respectively and $0.01 and $0.44 for the three and nine
months ended September 30, 2022, respectively. Includes
policyholder benefit costs of $0.20 for the nine months ended
September 30, 2022 stemming from a deal to repurchase UL policies
from one entity that had invested in numerous policies purchased in
the life settlement market. Includes the impact of unfavorable
annual actuarial assumptions updates related to LFPB of $0.18 and
$0.17 for the three and nine months ended September 30, 2023. Prior
period impact was immaterial and was not revised.
(3)
Includes Non-GMxB related derivative hedge
losses of ($0.05) and ($0.02) for the three and nine months ended
September 30, 2023, respectively and $(0.07) and $(0.18) for the
three and nine months ended September 30, 2022, respectively.
(4)
For the three and nine months ended
September 30, 2023, non-recurring tax items per common share
reflect primarily the effect of uncertain tax positions for a given
audit period and a decrease of the deferred tax valuation allowance
of $0.06 and $2.73, respectively.
(5)
Includes the impact of favorable
assumption updates of $0.11 and $0.67 for the three and nine months
ended September 30, 2023. Includes the impact of unfavorable
assumption updates of $0.54 and $0.53 million for the three and
nine months ended September 30, 2022.
Book Value per common share, excluding AOCI
We use the term “book value” to refer to total equity
attributable to Holdings’ common shareholders. Book Value per
common share, excluding AOCI, is our total equity attributable to
Holdings, excluding AOCI and preferred stock, divided by ending
common shares outstanding.
September 30,
2023
December 31, 2022
Book value per common share
$
0.23
$
(0.44
)
Per share impact of AOCI
28.67
24.63
Book Value per common share, excluding
AOCI
$
28.90
$
24.19
Other Operating Measures
We also use certain operating measures which management believes
provide useful information about our businesses and the operational
factors underlying our financial performance.
Account Value (“AV”)
Account value generally equals the aggregate policy account
value of our retirement products.
Assets Under Management (“AUM”)
AUM means investment assets that are managed by one of our
subsidiaries and includes: (i) assets managed by AB, (ii) the
assets in our general account investment portfolio and (iii) the
separate account assets of our Individual Retirement, Group
Retirement and Protection Solutions businesses. Total AUM reflects
exclusions between segments to avoid double counting.
Assets Under Management (“AUA”)
AUA means advisory and brokerage investment assets included in
the Company’s Wealth Management segment.
Segment net flows
Net change in segment customer account balances in a period
including, but not limited to, gross premiums, surrenders,
withdrawals and benefits. It excludes investment performance,
interest credited to customer accounts and policy charges.
Consolidated
Statements of Income (Loss) (Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in millions)
REVENUES
Policy charges and fee income
$
599
$
603
$
1,781
$
1,873
Premiums
267
259
823
744
Net derivative gains (losses)
615
199
(1,143
)
2,216
Net investment income (loss)
1,071
842
3,097
2,357
Investment gains (losses), net:
Credit losses on available-for-sale debt
securities and loans
(65
)
(267
)
(145
)
(266
)
Other investment gains (losses), net
(346
)
(65
)
(409
)
(624
)
Total investment gains (losses), net
(411
)
(332
)
(554
)
(890
)
Investment management and service fees
1,217
1,179
3,579
3,731
Other income
266
242
775
797
Total revenues
3,624
2,992
8,358
10,828
BENEFITS AND OTHER DEDUCTIONS
Policyholders’ benefits
693
629
2,107
2,020
Remeasurement of liability for future
policy benefits
49
20
46
54
Change in market risk benefits and
purchased market risk benefits
(817
)
(491
)
(1,772
)
(144
)
Interest credited to policyholders’
account balances
556
378
1,520
1,001
Compensation and benefits
593
568
1,742
1,682
Commissions and distribution-related
payments
405
368
1,178
1,184
Interest expense
55
51
171
148
Amortization of deferred policy
acquisition costs
165
148
472
436
Other operating costs and expenses
450
496
1,339
1,613
Total benefits and other deductions
2,149
2,167
6,803
7,994
Income (loss) from continuing operations,
before income taxes
1,475
825
1,555
2,834
Income tax (expense) benefit
(340
)
(177
)
677
(578
)
Net income (loss)
1,135
648
2,232
2,256
Less: Net income (loss) attributable to
the noncontrolling interest
71
54
232
165
Net income (loss) attributable to
Holdings
1,064
594
2,000
2,091
Less: Preferred stock dividends
14
14
54
54
Net income (loss) available to Holdings’
common shareholders
$
1,050
$
580
$
1,946
$
2,037
Earnings Per Common
Share
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in millions)
Earnings per common share
Basic
$
3.03
$
1.55
$
5.49
$
5.35
Diluted
$
3.02
$
1.54
$
5.47
$
5.32
Weighted average shares
Weighted average common stock outstanding
for basic earnings per common share
346.4
374.5
354.4
380.6
Weighted average common stock outstanding
for diluted earnings per common share (1)
348.0
376.8
355.9
382.9
(1)
Due to net loss for the nine months ended
September 30, 2022 approximately 2.3 million share awards were
excluded from the diluted EPS calculation.
Results of Operations
by Segment
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(in millions)
Operating earnings (loss) by
segment:
Individual Retirement
$
210
$
183
$
644
$
572
Group Retirement
105
99
301
354
Investment Management and Research
99
94
297
331
Protection Solutions
34
30
23
137
Wealth Management
40
22
114
78
Legacy
41
50
146
170
Corporate and Other (1)
(116
)
(92
)
(307
)
(264
)
Non-GAAP Operating Earnings
$
413
$
386
$
1,218
$
1,378
(1)
Includes interest expense and financing
fees of $54 million and $51 million for the three and nine months
ended September 30, 2023, and 2022 respectively.
Select Balance Sheet
Statistics
September 30,
2023
December 31, 2022
(in millions)
ASSETS
Total investments and cash and cash
equivalents
$
103,305
$
97,378
Separate Accounts assets
117,577
114,853
Total assets
260,252
252,702
LIABILITIES
Long-term debt
$
3,820
$
3,322
Future policy benefits and other
policyholders' liabilities
16,647
16,603
Policyholders’ account balances
91,912
83,866
Total liabilities
256,335
249,106
EQUITY
Preferred stock
1,562
1,562
Accumulated other comprehensive income
(loss)
(9,802
)
(8,992
)
Total equity attributable to Holdings
$
1,642
$
1,401
Total equity attributable to Holdings'
common shareholders (ex. AOCI)
9,882
8,831
Assets Under
Management (Unaudited)
September 30,
2023
December 31, 2022
(in billions)
Assets Under Management
AB AUM
$
669.0
$
646.4
Exclusion for General Account and other
Affiliated Accounts
(69.8
)
(66.8
)
Exclusion for Separate Accounts
(39.3
)
(38.2
)
AB third party
$
559.9
$
541.4
Total company AUM
AB third party
$
559.9
$
541.4
General Account and other Affiliated
Accounts (1) (3) (4)
103.3
97.4
Separate Accounts (2) (3) (4)
117.6
114.9
Total AUM
$
780.8
$
753.6
____________________
(1)
“General Account and Other Affiliated
Accounts” refers to assets held in the general accounts of our
insurance companies and other assets on which we bear the
investment risk.
(2)
“Separate Accounts” refers to the separate
account investment assets of our insurance subsidiaries excluding
any assets on which we bear the investment risk.
(3)
As of September 30, 2023 and March 31,
2023, Separate Account and General Account AUM is inclusive of
$11.7 billion and $51 million as well as $12.3 billion and $54
million, respectively. Account Value ceded to Venerable. For
additional information on the Venerable transaction see Note 1 of
the Notes to Consolidated Financial Statements within the 10-K.
(4)
As of September 30, 2023 and December 31,
2022, Separate Account is exclusive of $5.9 billion and $5.6
billion & General Account AUM is exclusive of $3.7 billion and
$3.9 billion, respectively, Account Value ceded to Global Atlantic.
For additional information on the Global Atlantic transaction see
MD&A - Executive Summary “Global Atlantic Reinsurance
Transaction" within the 10-K.
_________________________ 1 Includes Individual Retirement and
Group Retirement segments. 2 This press release includes certain
Non-GAAP financial measures. More information on these measures and
reconciliations to the most comparable U.S. GAAP measures can be
found in the “Use of Non-GAAP Financial Measures” section of this
release. 3 Please refer to Exhibit 1 for a detailed reconciliation
and definitions related to notable items. 4 Cash generation is net
dividends and distributions to Equitable Holdings from its
subsidiaries. 5 Please refer to Exhibit 1 for detailed
reconciliation and definitions related to notable items. 6 Refers
to AllianceBernstein L.P. and AllianceBernstein Holding L.P.,
collectively. 7 Please refer to Exhibit 1 for a detailed
reconciliation and definitions related to notable items. 8 Please
refer to Exhibit 1 for a detailed reconciliation and definitions
related to notable items. 9 Please refer to Exhibit 1 for a
detailed reconciliation and definitions related to notable items.
10 Please refer to Exhibit 1 for a detailed reconciliation and
definitions related to notable items.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231031231046/en/
Investor Relations Erik Bass (212) 314-2476
IR@equitable.com
Media Relations Sophia Kim (212) 314-2010
mediarelations@equitable.com
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