Equitable(US:EQH)2025-05-01 19:17PART I - FINANCIAL INFORMATION Consolidated Financial Statements Equitable Holdings' unaudited consolidated financial statements show total assets of $287.4 billion, net income attributable to Holdings of $63 million, and a significant positive swing in net derivative gains Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Investments | $118,908 | $116,441 | | Total Assets | $287,366 | $295,727 | | Total Liabilities | $282,872 | $292,179 | | Total Equity | $4,205 | $3,423 | Consolidated Income Statement Highlights (in millions) | Account | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total Revenues | $4,576 | $2,230 | | Net Derivative Gains (Losses) | $799 | $(1,376) | | Total Benefits and Other Deductions | $4,402 | $2,011 | | Net Income (Loss) Attributable to Holdings | $63 | $92 | | Diluted Earnings Per Share | $0.16 | $0.23 | Consolidated Cash Flow Highlights (in millions) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $158 | $31 | | Net cash provided by (used in) investing activities | $(1,199) | $(2,682) | | Net cash provided by (used in) financing activities | $2,228 | $4,945 | | Change in cash and cash equivalents | $1,200 | $2,284 | Note 1 - Organization Equitable Holdings operates through six segments, with a 62% economic interest in AllianceBernstein, and recently completed a reinsurance transaction and a legacy variable annuity novation resulting in a $236 million loss - The company operates through six segments: Individual Retirement, Group Retirement, Asset Management, Protection Solutions, Wealth Management, and Legacy3439 - On February 23, 2025, the company entered into a master transaction agreement with Reinsurance Group of America (RGA) to reinsure a block of business, with the deal expected to close in mid-202537 - Effective January 17, 2025, the company novated certain legacy variable annuity policies to Venerable, resulting in a pre-tax net income loss of $499 million and a total impact loss of $236 million3840 Note 2 - Significant Accounting Policies The company's U.S. GAAP financial statements consolidate VIEs, including $2.1 billion in CLOs, and were voluntarily revised to correct immaterial errors primarily related to reinsurance deposit accounting - The company consolidates various Variable Interest Entities (VIEs), including Collateralized Loan Obligations (CLOs), limited partnerships, and AB-sponsored investment funds485155 - As of March 31, 2025, consolidated CLOs had total assets and liabilities of $2.1 billion53 - The company voluntarily revised prior period financial statements to correct immaterial errors related to reinsurance deposit accounting and other items to improve consistency and comparability5960 Note 3 - Investments The company's $118.9 billion investment portfolio includes $78.0 billion in AFS fixed maturities with $7.7 billion in unrealized losses, and saw net investment income rise to $1.25 billion in Q1 2025 Fixed Maturities AFS by Classification (in millions) | Type | Fair Value (Mar 31, 2025) | Fair Value (Dec 31, 2024) | | :--- | :--- | :--- | | Corporate | $48,937 | $49,351 | | U.S. Treasury, govt & agency | $4,754 | $4,288 | | Asset-backed | $13,885 | $13,699 | | Commercial mortgage-backed | $4,156 | $3,921 | | Total | $77,997 | $76,641 | - As of March 31, 2025, AFS fixed maturities had gross unrealized losses of $7.7 billion, of which $7.6 billion were in a loss position for twelve months or longer, primarily due to increases in interest rates and credit spreads798082 Mortgage Loans on Real Estate (Net of Allowance) (in millions) | Date | Amount | | :--- | :--- | | March 31, 2025 | $20,566 | | December 31, 2024 | $20,072 | Net Investment Income (in millions) | Period | Amount | | :--- | :--- | | Q1 2025 | $1,248 | | Q1 2024 | $1,210 | Note 4 - Derivatives The company uses derivatives to hedge GMxB risks, with a total notional amount of $118.0 billion and net derivative gains of $799 million in Q1 2025, reversing a prior-year loss - Derivatives are primarily used to reduce economic exposures to equity market and interest rate risks from variable annuity guaranteed benefits (GMxB)117118 Derivative Instruments Fair Value (in millions) | Date | Notional Amount | Derivative Assets | Derivative Liabilities | Net Derivatives | | :--- | :--- | :--- | :--- | :--- | | Mar 31, 2025 | $118,016 | $18,790 | $32,352 | $(13,562) | | Dec 31, 2024 | $116,484 | $21,814 | $38,927 | $(17,113) | Net Derivative Gains (Losses) on Income Statement (in millions) | Period | Amount | | :--- | :--- | | Q1 2025 | $799 | | Q1 2024 | $(1,376) | Note 13 - Equity The company declared a $0.24 per share dividend, repurchased 5.0 million shares for approximately $253 million in Q1 2025, and has $1.7 billion remaining for future repurchases - On February 13, 2025, the Board approved an additional $1.5 billion for the share repurchase program. As of March 31, 2025, approximately $1.7 billion remained authorized280 Share Repurchase and Dividend Activity | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Shares Repurchased (millions) | 5.0 | 7.5 | | Average Price Paid | $50.55 | $33.86 | | Common Dividend per Share | $0.24 | $0.22 | - Total accumulated other comprehensive income (AOCI) attributable to Holdings was a loss of $7.6 billion as of March 31, 2025, an improvement from a loss of $8.7 billion at year-end 2024287 Note 16 - Commitments and Contingent Liabilities The company faces up to $100 million in reasonably possible litigation losses and utilizes FHLB and FABN funding agreements totaling $6.9 billion and $7.1 billion respectively for liquidity - The company estimates the aggregate range of reasonably possible losses from litigation and regulatory matters, in excess of amounts accrued, to be up to approximately $100 million as of March 31, 2025297 - The Hobish v. AXA Equitable Life Insurance Company matter was settled in March 2025299 Funding Agreement Balances (March 31, 2025, in millions) | Program | Outstanding Balance | | :--- | :--- | | FHLB Funding Agreements | $6,865 | | FABN Funding Agreements | $7,078 | | FABCP Funding Agreements | $850 | Note 17 - Business Segment Information Total operating earnings for Q1 2025 were $421 million, with Individual Retirement, Group Retirement, and Asset Management as key contributors, while Protection Solutions reported an operating loss Operating Earnings (Loss) by Segment (in millions) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Individual Retirement | $216 | $238 | | Group Retirement | $130 | $124 | | Asset Management | $126 | $106 | | Protection Solutions | $(17) | $44 | | Wealth Management | $46 | $43 | | Legacy | $24 | $33 | | Corporate and Other | $(104) | $(111) | | Total Operating Earnings | $421 | $477 | Total Assets by Segment (in millions) | Segment | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Individual Retirement | $118,123 | $110,358 | | Group Retirement | $50,353 | $51,269 | | Asset Management | $10,845 | $10,514 | | Protection Solutions | $41,725 | $41,583 | | Legacy | $34,955 | $42,373 | | Total Assets | $287,366 | $295,727 | Note 20 - Revision of Prior Period Financial Statements The company voluntarily revised prior period financial statements to correct immaterial errors, primarily related to reinsurance deposit accounting, impacting net income for 2023 and 2024 - The company identified and corrected an immaterial error related to the bookkeeping of ceded accrued fees in a reinsurance transaction, which impacted deposit accounting350 - Other corrected errors include a pension liability overstatement, incorrect FX on FABN, and various modeling input errors for MRB and deposit accounting350 - The impact on previously reported Net Income Attributable to Holdings for the full year 2023 was a decrease of $19 million, and for the full year 2024 was a decrease of $27 million355366 Note 21 - Subsequent Events Subsequent to quarter-end, Holdings increased its economic interest in AllianceBernstein to approximately 68.5% and redeemed $279 million of Series B Preferred Stock - On April 3, 2025, Holdings purchased 19.7 million AB Holding Units for $758 million, increasing its economic interest in AllianceBernstein L.P. to approximately 68.5%375 - On April 11, 2025, Holdings redeemed and retired $279 million of its Series B Preferred Stock376 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, noting strategic actions like the RGA reinsurance and AB tender offer, with Q1 2025 net income attributable to Holdings decreasing to $63 million and operating earnings to $421 million - Key strategic developments include the RGA Reinsurance Transaction expected to generate over $2 billion in value, the novation of legacy VA policies to Venerable, and a tender offer increasing ownership in AB to ~68.5%382383385 - The macroeconomic environment in Q1 2025 was characterized by U.S. equity market losses (S&P 500 returned -4.3%) and a lowered U.S. growth forecast by the Federal Reserve388 Key Performance Metrics (in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income Attributable to Holdings | $63 | $92 | | Non-GAAP Operating Earnings | $421 | $477 | Results of Operations by Segment Q1 2025 operating earnings were primarily from Individual Retirement, Group Retirement, and Asset Management, while Protection Solutions reported a $17 million loss due to unfavorable mortality Operating Earnings (Loss) by Segment (in millions) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Individual Retirement | $216 | $238 | | Group Retirement | $130 | $124 | | Asset Management | $126 | $106 | | Protection Solutions | $(17) | $44 | | Wealth Management | $46 | $43 | | Legacy | $24 | $33 | Liquidity and Capital Resources Holdings' highly liquid assets increased to $2.3 billion in Q1 2025, supported by subsidiary dividends and a $500 million junior subordinated debt issuance, maintaining strong liquidity Holding Company Highly Liquid Assets (in millions) | Period | Amount | | :--- | :--- | | End of Q1 2025 | $2,324 | | Beginning of Q1 2025 | $1,982 | - In Q1 2025, Holdings received $226 million in dividends from subsidiaries and used $336 million for share repurchases and common dividends518 - The company issued $500 million of 6.7% Junior Subordinated Debt Securities due 2055 in March 2025292518 Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in the quantitative and qualitative disclosures about market risk compared to the 2024 Annual Report on Form 10-K - There have been no material changes to the market risk disclosures from the 2024 Form 10-K584 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective585 - No material changes to internal control over financial reporting occurred during the first quarter of 2025586 PART II - OTHER INFORMATION Legal Proceedings The company faces various litigation and regulatory matters, with estimated reasonably possible losses up to approximately $100 million in excess of accruals, and settled the Hobish v. AXA Equitable case - The company estimates the aggregate range of reasonably possible losses from certain legal and regulatory matters to be up to approximately $100 million, in excess of any amounts already accrued297 - The Hobish v. AXA Equitable Life Insurance Company case was settled in March 2025299 Risk Factors This section refers readers to the comprehensive risk factors detailed in the 2024 Annual Report on Form 10-K and other risks within this report - The report directs readers to the "Risk Factors" section of the 2024 Form 10-K for a comprehensive discussion of risks589 Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2025, Equitable Holdings repurchased 5,012,985 common shares at an average price of $50.55, with $1.68 billion remaining authorized for future repurchases Share Repurchases in Q1 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2025 | 1,868,710 | $47.71 | | Feb 2025 | 620,370 | $53.27 | | Mar 2025 | 2,523,905 | $51.98 | | Total Q1 | 5,012,985 | $50.55 | - As of March 31, 2025, approximately $1.7 billion remained available for purchase under the company's share repurchase programs590