Equitable(US:EQH)2025-11-07 21:30Financial Performance - The company reported a pre-tax net income loss of $499 million due to the novation of certain legacy variable annuity policies, resulting in a total impact loss of $236 million[444]. - The company recorded a net income loss impact of $63 million due to economic assumption updates in Q3 2025, compared to a net income increase of $16 million in Q3 2024[478][480]. - The impact of assumption updates on income from continuing operations before income taxes was a decrease of $80 million in 2025, while it was an increase of $20 million in 2024[477][480]. - Non-GAAP Operating Earnings for 2025 showed a favorable impact of $1 million before tax adjustments, while in 2024, it was favorable by $4 million[485][487]. - Non-GAAP Operating Earnings decreased by $62 million to $455 million for the three months ended September 30, 2025, from $517 million in the same period of 2024[517]. - Non-GAAP Operating Earnings decreased by $261 million to $1.2 billion for the nine months ended September 30, 2025, from $1.5 billion in the same period of 2024[523]. - Net income attributable to Holdings decreased by $1.2 billion to a net loss of $1.3 billion for the three months ended September 30, 2025, compared to a net loss of $132 million for the same period in 2024[516]. - Net income attributable to Holdings decreased by $2.0 billion to a net loss of $1.6 billion during the nine months ended September 30, 2025, from net income of $388 million in the same period of 2024[519]. Investment and Asset Management - The company’s revenues are derived from fee income, premiums from life insurance and annuity products, and investment income from the General Account investment portfolio[464][467]. - The company’s investment income is affected by the yield on its General Account investment portfolio and prevailing interest rates[464]. - Investment gains for Q3 2025 were $1,170 million, significantly higher than $46 million in Q3 2024, and totaled $1,255 million for the nine months ended September 30, 2025, compared to $101 million in 2024[496]. - The company’s total Assets Under Management (AUM) includes investment assets managed by subsidiaries, reflecting the overall performance of the investment portfolio[505]. - Total AUM as of September 30, 2025, was $860.1 billion, up $31.0 billion or 3.7% compared to June 30, 2025, driven by market appreciation of $33.3 billion[542]. - The balance of the General Account asset value at the end of the period was $171.7 billion, up from $151.8 billion in the previous year[532]. - The total investment income for the three months ended September 30, 2025, was $1,399 million, with a yield of 4.51%[569]. - The total investment income for the nine months ended September 30, 2025, was $4,137 million, with a yield of 4.54%[571]. Market Conditions and Risks - The company faces potential market volatility due to various macroeconomic factors, which could pressure sales and reduce demand for its products[450]. - The company continues to monitor customer behavior, including mortality and morbidity rates, to ensure product attractiveness and profitability[451]. - The NAIC adopted an amendment to enhance capital requirements for CLO investments, effective January 1, 2024, impacting the company's investment strategy[453]. - The company is preparing to comply with the new actuarial guideline AG 55, which requires enhanced asset adequacy testing for certain reinsurance transactions, with reporting required by December 31, 2025[458]. - The company utilizes dynamic and static hedging strategies to mitigate risks associated with variable annuity products, which may lead to net income volatility[469][472]. - Hedging activities are in place to mitigate risks from equity market and interest rate movements, utilizing derivatives as part of the risk management program[630]. Reinsurance and Liability Management - The company ceded a 75% quota share of its in-force individual life insurance block to RGA as part of the RGA Reinsurance Transaction, effective April 1, 2025[441]. - The investment advisory agreement with RGA involves managing approximately 70% of assets supporting reserves associated with the ceded policies[442]. - The company recorded a reduction of the purchased MRB asset of $2.0 billion and a reduction of liability for MRBs of $1.6 billion due to the novation[444]. - The company reinsured net retained general account liabilities to Equitable Bermuda, securing obligations through asset retention[593]. - Fee-type revenue decreased by $211 million primarily due to a reinsurance transaction with RGA[560]. - Net investment income decreased by $61 million, also primarily due to the reinsurance transaction with RGA[560]. - Policyholders' benefits decreased by $142 million, mainly due to the reinsurance transaction with RGA, partially offset by higher net mortality in the Life business[560]. Shareholder and Capital Management - The AB Tender Offer commenced to purchase up to 46 million AB Holding Units at a price of $38.50 per unit, with an aggregate purchase price of $1.8 billion, and 19.7 million units were purchased for $758 million, representing approximately 17.9% of outstanding units[445]. - The company had authorized capacity of approximately $1.3 billion remaining in its share repurchase program as of September 30, 2025, with an additional $1.5 billion approved for repurchases[596]. - The total business capital activity for the nine months ended September 30, 2025, was $1.127 billion, with significant cash outflows for share repurchases and dividends[599]. - Future dividends are subject to the discretion of the Board and depend on financial condition, results of operations, and regulatory restrictions[621]. - The principal sources of liquidity for the insurance subsidiaries include premiums, investment income, and cash from operations, while uses include claims, dividends, and administrative expenses[625]. - The company manages its capital position to maintain financial strength and credit ratings, supported by cash flows from subsidiaries and effective risk management[619]. Segment Performance - Operating earnings for the Retirement segment decreased by $15 million to $401 million for the three months ended September 30, 2025, compared to $416 million for the same period in 2024[533]. - Total segment revenues for the Retirement segment increased to $4.53 billion for the nine months ended September 30, 2025, compared to $4.06 billion for the same period in 2024[530]. - Operating earnings for the Asset Management segment increased by $43 million to $154 million during the three months ended September 30, 2025, compared to $111 million in the same period of 2024[541]. - Wealth Management segment operating earnings increased by $10 million to $59 million during the three months ended September 30, 2025, compared to $49 million in the same period of 2024[552]. - Total Wealth Management Assets at the end of September 2025 were $118.2 billion, up from $101.5 billion in September 2024[551]. - Advisory net inflows of $2.2 billion in the three months ended September 30, 2025, were $146 million higher than in the same period of 2024, driven by increased sales[553].