Equitable(US:EQH)2024-11-04 21:13Consolidated Financials and Key Metrics Key Metrics Summary In Q3 2024, Equitable Holdings reported a net loss attributable to Holdings of $134 million, a stark contrast to the $1,064 million net income in the prior year, despite robust growth in Non-GAAP Operating Earnings to $501 million Q3 2024 Key Financial Metrics | Metric | Q3 2023 | Q3 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net income (loss) attributable to Holdings | $1,064M | $(134)M | (112.6)% | | Non-GAAP Operating Earnings | $413M | $501M | 21.3% | | Diluted earnings per common share | $3.02 | $(0.47) | (115.4)% | | Non-GAAP Operating Earnings per share | $1.15 | $1.53 | 33.5% | | Book value per common share (ex. AOCI) | $28.90 | $26.16 | (9.5)% | | Total capital returned to common shareholders | $315M | $330M | 4.8% | Consolidated Statements of Income (Loss) For Q3 2024, total revenues decreased to $3.1 billion primarily due to a significant net derivative loss of $714 million, leading to a net loss attributable to Holdings of $134 million despite growth in key revenue streams Q3 2024 vs. Q3 2023 Income Statement Highlights (in millions) | Item | Q3 2023 | Q3 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total revenues | $3,624 | $3,076 | (15.1)% | | Net derivative gains (losses) | $615 | $(714) | (216.1)% | | Net investment income | $1,071 | $1,309 | 22.2% | | Total benefits and other deductions | $2,149 | $3,090 | 43.8% | | Net income (loss) attributable to Holdings | $1,064 | $(134) | (112.6)% | | Non-GAAP Operating earnings | $413 | $501 | 21.3% | Consolidated Balance Sheets As of September 30, 2024, Equitable Holdings' total assets grew to $299.0 billion and total liabilities rose to $292.8 billion, with total equity attributable to Holdings significantly increasing to $3.2 billion due to a favorable change in AOCI Balance Sheet Summary (in millions) | Account | 9/30/2023 | 9/30/2024 | | :--- | :--- | :--- | | Total investments | $97,209 | $114,246 | | Total assets | $260,252 | $298,989 | | Total liabilities | $256,335 | $292,791 | | Total equity attributable to Holdings | $1,642 | $3,220 | Consolidated Capital Structure The company's capital structure remained stable with total long-term debt at $3.83 billion as of September 30, 2024, while the debt-to-capital ratio (ex. AOCI) increased to 28.1% and common shares outstanding decreased to 315.5 million Capital Structure Metrics | Metric | 9/30/2023 | 9/30/2024 | | :--- | :--- | :--- | | Total long-term debt | $3,820M | $3,831M | | Total equity attributable to Holdings (ex. AOCI) | $11,444M | $9,815M | | Debt to capital (ex. AOCI) | 25.0% | 28.1% | - Ending basic common shares outstanding decreased to 315.5 million from 342.0 million year-over-year, reflecting the impact of the company's share repurchase program5 Operating Earnings (Loss) by Segment and Corporate and Other In Q3 2024, total operating earnings reached $501 million, a significant increase from $413 million in Q3 2023, primarily driven by strong contributions from Individual Retirement, Group Retirement, and Asset Management segments Operating Earnings by Segment (in millions) | Segment | Q3 2023 | Q3 2024 | | :--- | :--- | :--- | | Individual Retirement | $220 | $225 | | Group Retirement | $105 | $141 | | Asset Management | $99 | $111 | | Protection Solutions | $34 | $46 | | Wealth Management | $40 | $50 | | Legacy | $31 | $27 | | Corporate and Other | $(116) | $(99) | | Consolidated | $413 | $501 | Assets Under Management and Administration As of September 30, 2024, Total Assets Under Management (AUM) grew to $933.8 billion and Total Assets Under Administration (AUA) reached $100.4 billion, reflecting substantial growth supported by third-party AUM and company accounts AUM and AUA Growth (in billions) | Metric | 9/30/2023 | 9/30/2024 | | :--- | :--- | :--- | | Total AUM | $780.8 | $933.8 | | Total AUA | $79.4 | $100.4 | - The total number of Equitable Advisors increased to 4,396 from 4,141 in the prior year10 Sales Metrics by Segment The company reported strong sales growth across its key segments in Q3 2024, with Individual Retirement's gross premiums rising 26.2% to $4.9 billion and Asset Management's firmwide gross sales surging 40.9% to $35.5 billion Q3 2024 Sales Performance vs. Q3 2023 | Segment | Metric | Q3 2023 | Q3 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Individual Retirement | Total Gross Premiums | $3,893M | $4,912M | 26.2% | | Group Retirement | Total Gross Premiums | $807M | $955M | 18.4% | | Protection Solutions | Total Gross Premiums | $756M | $793M | 4.9% | | Asset Management | Firmwide Gross Sales | $25.2B | $35.5B | 40.9% | | Wealth Management | Total Sales | $6,606M | $8,710M | 31.9% | Select Metrics from Business Segments Individual Retirement The Individual Retirement segment generated $225 million in operating earnings in Q3 2024, a 2.3% increase year-over-year, driven by a 33.7% rise in net investment income and strong growth in first-year premiums and deposits to $4.9 billion Statements of Operating Earnings (Loss) and Summary Metrics | Metric | Q3 2023 | Q3 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Operating earnings | $220 | $225 | 2.3% | | Segment revenues | $762 | $944 | 23.9% | | Net flows | $1,670 | $1,910 | 14.4% | | First year premiums and deposits | $3,833 | $4,854 | 26.6% | Select Operating Metrics - Sales were led by the SCS product line, which accounted for $3.1 billion in first-year premiums in Q3 202413 Account Value Roll-forward (in millions) | Account Type | 9/30/2023 Balance | 9/30/2024 Balance | | :--- | :--- | :--- | | General Account | $46,650 | $66,473 | | Separate Accounts | $36,820 | $42,393 | | Total | $83,470 | $108,866 | Group Retirement Group Retirement delivered strong results with operating earnings of $141 million in Q3 2024, a 34.3% increase from the prior year, fueled by a 17.6% rise in segment revenues and 18.4% growth in gross premiums and deposits Statements of Operating Earnings (Loss) and Summary Metrics | Metric | Q3 2023 | Q3 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Operating earnings | $105 | $141 | 34.3% | | Segment revenues | $267 | $314 | 17.6% | | Net flows | $(130) | $(246) | (89.2)% | | Gross premiums and deposits | $807 | $955 | 18.4% | Select Operating Metrics - In Q3 2024, first-year premiums were $454 million, while renewal premiums were $501 million, totaling $955 million in gross premiums15 Account Value by Type (in millions) | Account Type | 9/30/2023 Balance | 9/30/2024 Balance | | :--- | :--- | :--- | | General Account | $9,002 | $9,369 | | Separate Accounts & Mutual Funds | $24,848 | $31,493 | | Total | $33,850 | $40,862 | Asset Management The Asset Management segment (AllianceBernstein) reported Q3 2024 operating earnings of $111 million, a 12.1% year-over-year increase, with Total Assets Under Management (AUM) growing to $805.9 billion due to $1.1 billion in net inflows and market appreciation Asset Management Q3 Performance | Metric | Q3 2023 | Q3 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Operating earnings | $99M | $111M | 12.1% | | Adjusted operating margin | 28.0% | 31.3% | +3.3 p.p. | | Net flows | $(1.9)B | $1.1B | N/M | | Total AUM | $669.0B | $805.9B | 20.5% | Select Operating Metrics Q3 2024 AUM Roll-forward (in billions) | Item | Amount | | :--- | :--- | | Beginning balance (6/30/2024) | $769.5 | | Sales/new accounts | $35.5 | | Redemptions/terminations | $(26.4) | | Net long-term inflows | $1.1 | | Market appreciation | $35.3 | | Ending balance (9/30/2024) | $805.9 | Net Flows - In Q3 2024, net inflows of $1.1 billion were driven by strong performance in the Retail channel (+$5.4B), which offset outflows in the Institutional channel (-$4.4B)18 - By investment service, Fixed Income products attracted significant net inflows (Taxable: +$2.7B, Tax-Exempt: +$3.3B), while Equity Active products saw net outflows of $4.5 billion18 Protection Solutions The Protection Solutions segment posted operating earnings of $46 million in Q3 2024, a 35.3% increase from the prior year, supported by 4.9% growth in gross written premiums to $793 million and a significant improvement in the benefit ratio to 71.0% Statements of Operating Earnings (Loss) and Summary Metrics | Metric | Q3 2023 | Q3 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Operating earnings | $34M | $46M | 35.3% | | Gross written premiums | $756M | $793M | 4.9% | | Benefit ratio | 79.0% | 71.0% | -8.0 p.p. | | Total in-force face amount | $413.2B | $410.3B | (0.7)% | Select Operating Metrics - First-year premiums in Q3 2024 were primarily driven by Variable Universal Life ($90 million) and Employee Benefits ($32 million)20 - Total reserves for the segment increased to $37.0 billion as of September 30, 2024, up from $32.7 billion a year prior20 Wealth Management Wealth Management operating earnings grew 25.0% year-over-year to $50 million in Q3 2024, driven by a 26.6% increase in Total Assets Under Administration (AUA) to $100.4 billion and strong advisory net flows of $1.9 billion Statements of Operating Earnings (Loss) and Summary Metrics | Metric | Q3 2023 | Q3 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Operating earnings | $40M | $50M | 25.0% | | Pre-tax operating margin | 13.6% | 14.7% | +1.1 p.p. | | Advisory net flows | $909M | $1,860M | 104.6% | | Total AUA | $79.4B | $100.4B | 26.6% | Select Operating Metrics - Total sales in Q3 2024 reached $8.7 billion, up from $6.6 billion in Q3 2023, with growth across Advisory, Brokerage, and Retirement product types22 - The number of advisors increased to 4,396, and the trailing twelve months revenue per advisor rose to $394,000 from $359,000 in the prior year22 Legacy The Legacy segment, which is in run-off, reported operating earnings of $27 million for Q3 2024, a 12.9% decrease from the prior year, and continued to experience expected net outflows amounting to $712 million Statements of Operating Earnings (Loss) and Summary Metrics | Metric | Q3 2023 | Q3 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Operating earnings | $31 | $27 | (12.9)% | | Net flows | $(560) | $(712) | (27.1)% | Select Operating Metrics Net Amount at Risk (NAR) (in millions) | Metric | 9/30/2023 | 9/30/2024 | | :--- | :--- | :--- | | Total GMIB NAR | $2,767 | $2,692 | | Total GMDB NAR | $10,690 | $8,472 | Investments Consolidated Investment Portfolio Composition As of September 30, 2024, the total investment portfolio stood at $114.2 billion, primarily composed of fixed maturities ($76.2 billion) and mortgage loans ($19.2 billion), with 97.9% of the General Account's AFS fixed maturities rated investment grade Investment Portfolio Composition (as of 9/30/2024) | Asset Class | Amount (in millions) | % of Total | | :--- | :--- | :--- | | Fixed maturities, AFS | $76,245 | 61.6% | | Mortgage loans | $19,237 | 15.5% | | Other invested assets | $6,825 | 5.5% | | Total Investments | $114,246 | 92.3% | - The credit quality of the General Account AFS fixed maturity portfolio remains strong, with 66.3% rated Aaa, Aa, or A, and an additional 31.5% rated Baa, totaling 97.9% investment grade26 Consolidated Results of General Account Investment Portfolio For the nine months ended September 30, 2024, the General Account investment portfolio generated net investment income of $3.1 billion, with an annualized yield of 4.05%, up from 3.74% in the prior year, driven by higher returns across fixed maturities and mortgages Net Investment Income & Yield (Nine Months Ended) | Period | Net Investment Income | Yield | | :--- | :--- | :--- | | September 30, 2023 | $2,585M | 3.74% | | September 30, 2024 | $3,109M | 4.05% | Additional Information Deferred Policy Acquisition Costs Rollforward The total balance of Deferred Policy Acquisition Costs (DAC) increased to $7.03 billion as of September 30, 2024, from $6.60 billion a year prior, with $291 million capitalized and $184 million amortized during Q3 Total DAC Rollforward (in millions) | Period | Beginning Balance | Capitalization | Amortization | Ending Balance | | :--- | :--- | :--- | :--- | :--- | | Q3 2023 | $6,512 | $252 | $(165) | $6,599 | | Q3 2024 | $6,924 | $291 | $(184) | $7,031 | Use of Non-GAAP Financial Measures This section explains the company's use of non-GAAP measures such as Non-GAAP Operating Earnings, ROE, and EPS to evaluate performance by removing the distorting effects of market volatility and non-recurring items, providing a clearer view of underlying profitability - Non-GAAP Operating Earnings are calculated by adjusting net income to exclude the impact of variable annuity product features, investment gains/losses, net actuarial gains/losses, and other non-recurring items to present a clearer picture of operating performance29 - Non-GAAP Operating ROE is calculated using Non-GAAP Operating Earnings and excludes Accumulated Other Comprehensive Income (AOCI) from average equity to remove volatility from unrealized gains and losses on securities30 Reconciliation of Non-GAAP Measures This section provides detailed reconciliations of GAAP to non-GAAP financial measures, showing how a GAAP net loss of $134 million was reconciled to Non-GAAP Operating Earnings of $501 million in Q3 2024 through adjustments for variable annuity product features and investment gains Q3 2024 Reconciliation of Net Income to Non-GAAP Operating Earnings (in millions) | Item | Amount | | :--- | :--- | | Net income (loss) attributable to Holdings | $(134) | | Adjustment for Variable annuity product features | $738 | | Adjustment for Investment gains (losses), net | $46 | | Other adjustments (net of tax) | $(149) | | Non-GAAP Operating Earnings | $501 | Glossary of Selected Financial and Product Terms This section provides definitions for key financial and product-specific terms used throughout the supplement, clarifying concepts such as Account Value (AV), Assets Under Management (AUM), Assets Under Administration (AUA), Deferred Policy Acquisition Costs (DAC), and various types of variable annuity guaranteed benefits (GMxB) Analyst Coverage, Ratings & Contact Information The company is covered by a wide range of investment banks, including Barclays, Goldman Sachs, and J.P. Morgan, and holds strong financial strength ratings from major agencies, reflecting its solid financial position Financial Strength Ratings | Agency | Rating (Equitable Financial Life Insurance Company) | | :--- | :--- | | A.M. Best | A | | S&P | A+ | | Moody's | A1 |