Q3 2021 Equitable Holdings Inc Earnings Call
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Good morning, My name is Brent and I will be your conference operator today at this time I would like to welcome everyone to the equitable holdings third quarter earnings call.
All lines have been placed on mute to prevent any background noise.
The speaker's remarks, there will be a question and answer session.
If you would like to ask a question simply press Star and then number one on your telephone keypad. If you would like to withdraw your question again press Star one. Thank you I would now like to turn the call over to Israel Maduro skull Lu head of Investor Relations. Please go ahead.
Thank you good morning, and welcome to Equitable Holdings third quarter 2021 earnings call materials for today's call can be found on our website at IR Dot equitable holdings Dot com.
Before we begin I would like to note that some of the information. We present today is forward looking and subject to certain SEC rules and regulations regarding disclosure.
Our results may materially differ from those expressed in or indicated by such forward looking statements. So I'd like to refer you to the safe Harbor language on slide two of our presentation for additional information.
Joining me on today's call is Mark Pearson, President and Chief Executive Officer of Equitable Holdings, Robyn <unk>, Our Chief Financial Officer, Nick Lane, President of Ecuador, Financial and Ali Dupage Alliance Bernstein, Chief Financial Officer, and head of strategy.
During this call we will be discussing certain financial measures that are not based on generally accepted accounting principles also known as non-GAAP measures reconciliations of these non-GAAP measures to the most directly comparable GAAP measures and related definitions maybe found on the Investor relations portion of our website.
In our earnings release slide presentation and financial supplement.
I'd now like to turn the call over to Mark and Robin for their prepared remarks.
Thank you <unk> good morning, everyone and thank you for joining our call today I.
I am pleased to present, our results for the third quarter of 2021.
And I would like to begin by providing some key highlights on slide three.
Product innovation across both our insurance and asset management subsidiaries.
<unk> to resonate well with clients and our distribution strength and economic management of the business continues to generate value for shareholders.
This is reflected in our record operating earnings in the third quarter with strong results in our retirement and asset management businesses supported by favorable equity markets.
Our third quarter, non-GAAP operating earnings of $818 million or $1 94 per share.
56% up year over year, and 13% up sequentially on a per share basis.
Assets under management increased 17% year over year to 871 billion.
Driven by strong net flows of $7 1 billion in the quarter equity markets and continued momentum in our capital light businesses.
Secondly.
I am very pleased to highlight our progress on the mitigation of regulation to 13 redundant reserves.
As a reminder, these are on economic reserves that would not be required. If we were domiciled outside of New York State.
We announced at the half year that we received a permitted practice with the New York DFS, which provides us with a five year phase in of this new regulation.
Since the half year.
We have delivered on our commitment to execute management actions to secure our future cash flows in support of these efforts yesterday, we announced a triple X financing transaction via reinsurance with Swiss re which unlocks $1 billion of statutory value and offset approximately half of the regulation.
2013 redundant reserves.
We have also completed our previously announced internal restructuring and now expect 50% of annual cash flows for non insurance regulated subsidiaries of our holdings company.
That is of the one 5 billion cash we generate each year approximately $750 million now comes from our insurance entity and the balance from AEP and non insurance subsidiaries.
Robin will provide more detail on these actions later in our call.
Our fair value economic framework continues to be the campus by which we steer the business.
This ensures sound economic pricing about products, a robust capital position and that we are closely aligned.
And look forward to the forthcoming adoption of <unk> accounting changes in 2023, we are very much for fair value and transparent reporting.
The results of our annual assumption update this quarter has had a minimal impact and is testament to the effectiveness of our fair value management.
The capital position remains strong with $2 billion in cash and liquid assets at equitable holdings.
We continue to consistently deliver on our 50% to 60% payout ratio target.
An incremental $500 million from.
From the Venerable transaction.
In this last quarter $534 million was returned to shareholders in the form of dividends and buybacks and $4 5 billion has been returned since our IPO.
And the final point I would like to highlight is our business model.
Which differentiates equitable and positions us to deliver superior client outcomes and capture the full value chain for our shareholders. When we think of equitable naturally we think of insurance and retirement segments.
But the reality is we have three businesses.
<unk> asset management and our affiliated distribution.
Collectively these three businesses deliver a unique value proposition to capture the growing retirement opportunity, while differentiating equitable from our peers, which I'll highlight in further detail on the following page.
So turning to slide four first half insurance business <unk>.
The equitable has been providing life and retirement solutions to help clients secure the financial well being for more than a 160 years now.
We have a history of innovation pioneer.
Pioneering the first variable life product in the 19 seventies.
Variable annuity with living benefit in the 19 nineties and creating the buffered annuity market in 2010.
Demonstrating our ability to not just exceed but also shape the markets we play in.
Today equitable holds the number one position in the <unk> market number two position in the variable annuity market and the number one position in the K through 12, four three b educators market.
Underlying all of these businesses is a fair value economic framework.
Over the last decade, we have shifted to businesses that are more capital efficient and less interest sensitive.
As a result.
We will live subsidiaries have historically generated stable cash flows of around $1 billion per year, Despite historically low interest rates and volatile equity markets.
What is unique is that our insurance operations are enhanced by our 65% ownership of alliance Bernstein, a globally renowned asset management.
There were three strategic advantages to this.
First we are able to develop more attractive solutions for our clients capabilities.
Capabilities, such as our volatility management tools.
It'll wealth portfolios and buffered annuities are complex to design and need both insurance and investment expertise.
We have that expertise.
Secondly.
Alliance Bernstein provides diversified and attractive returns from our capital light business.
The returns from AB has been very impressive.
Since our IPO <unk> has delivered a total shareholder return of over 180%.
Assets under management have grown from $540 billion to $742 billion over that period. This directly benefits EQ eight shareholders.
This performance is reflected in enhanced cash flows which have grown from approximately $300 million.
<unk> received by the holding company at the time of our IPO too.
To approximately $500 million per year now.
Cash flows that are outside of the insurance regulated entities.
Finally, there are attractive synergies between the two businesses the virtuous cycle. We've described in the past.
Equitable serves as a source of permanent capital for AEP.
Now a $121 billion of Equitable's AUM.
And recall, our announcement last quarter to use $10 billion of general account capital to further seed and grow avs private alternatives business.
We utilized the general account to seed and build higher multiple alternative businesses in AP.
In turn equitable policyholders benefiting from enhanced risk adjusted returns and equitable shareholders benefiting from the 65% stake in IEP.
The final pillar to our unique business model is of course, our affiliated distribution.
Equitable advisers represents approximately 70% of sales year to date and provide certainty of revenues and the ability to better manage mix.
Both of which enabled us to improve capital efficiency and deliver better risk weighted returns for our shareholders.
For example, our.
Our leadership position in the K through 12 educators market is a direct result of our 1100 dedicated retirement benefit group financial professionals.
And growth in our broker dealer.
<unk> remained strong up 37% year over year to $77 4 billion.
<unk> assets under administration, primarily driven by a 500 wealth management advisors and.
Insurance asset management and affiliated distribution is what sets <unk> apart.
And looking forward, we will continue to leverage these differentiate us and drive long term shareholder value.
I will now turn to Robert to cover the third quarter results Robyn.
Thank you Mark turning to slide five.
Ill review, our consolidated results for the third quarter.
For providing more detail on the outcome of our actuarial assumption update segment results and capital management program.
Non-GAAP operating earnings were $818 million for the third quarter up 44%.
$568 million in the prior year quarter.
On a per share basis earnings were $1 94 up 56% from $1 24 in the prior year quarter.
The record performance in this quarter was aided by higher net investment income, reflecting our continued general account optimization as well as onetime impact from favorable alternative performance and prepayments.
They seem to increased fee revenue on higher account values.
As Mark mentioned, our fair value approach to your assumption setting, which I'll highlight in a moment on the following page.
The resulted in a minimal non-GAAP earnings impact of $6 million or <unk> 10 per share.
Other notable items in the quarter were primarily driven by higher alternative performance and prepayments with the net impact on earnings of $153 million or <unk> 37 per share.
Adjusting for notable items, the non-GAAP earnings were $668 million or $1 56 per share up 23% year over year on a comparable basis.
Moving to GAAP results net income was $672 million gain in the quarter, which was primarily driven by strong non-GAAP operating earnings and flat equity market.
The resulting in a limited impact in the asymmetry in the accounting between our economic hedging and our GAAP liability.
Our hedging program performed as expected with a hedge effectiveness of 95%.
AUM increased to $871 billion.
By strong equity markets and positive third quarter net flows of $7 1 billion, reflecting the strength of our retirement and asset management businesses.
Turning to slide six.
I'd like to briefly review the outcome of our annual assumption update in the context of our economic reserving framework.
As we previously highlighted our fair value model incorporates realistic reserves, both in terms of policyholder behavior and interest rates.
This approach is not only prudent but also positioned us well for the industry upcoming al DTI accounting changes in 2023.
As evident from our results the impact from this year's assumption updates were nominal only at $6 million impact to non-GAAP operating earnings and an $85 million impact to net income largely attributable to behavioral adjustment made and further align our assumption K emerging experience.
As consumer behavior and capital markets continually evolves, we believe it is appropriate to reflect emerging experience in our assumptions.
It not only protects the integrity of our reserves.
But also to ensure we remain appropriately capitalized and immunizes our balance sheet in all environments.
Further demonstrating our fair value approach in our gms be reserving at something as.
As we've illustrated in the past interest rate assumptions under GAAP and statutory accounting are disconnected from economic reality.
For example, we hedged to our economic model, which uses the forward curve.
Currently at approximately two 5% compared to three in a quarter under the NTIC framework.
As a result, our statutory balance sheet reflects the reserves that are more aligned with today's reality and not dependent on bad debt interest rate will rise.
It also positions us well for any changes DNA, Steve will make to its scenario generator.
Further our lapse assumptions.
Which represents 8% of policyholders, we expect that to render when guarantees are deeply in the money is among the lowest in the industry at approximately 55 basis points.
<unk> to date, NTIC assumption, which is over two times higher at 120 basis points.
The net result is we hold appropriate reserving levels that are approximately $2 3 billion higher than under the NASD framework.
Accurately, reflecting the true economics of the business and current realities, which are not captured under the antiquated industry framework.
Overall equitable position on interest rates and policyholder behavior assumption.
And stronger there and aligns us well could upcoming accounting changes.
Moving to the business segment.
I'll begin with individual retirement on slide seven.
As a reminder, the venerable transaction closed in June our marketing and $1 2 billion in value reducing over two thirds of our legacy risk.
And resulting in $180 million of annual impact already.
On a reported basis operating earnings were $316 million, excluding the Venerable transaction earnings would have been higher year over year, primarily driven by higher net investment income and strong equity market.
Results also included $22 million of notable items in the quarter, including $15 million of favorable net investment income from alternatives and prepayment offset by negative $37 million of assumption update.
Turning to new business activity.
Continue to benefit from strong consumer demand for our all weather retirement product portfolio.
This includes our number one position in the protected equity <unk> market, where we saw another record quarter of doubt in our structured capital strategies product of <unk>.
One 9 billion and total sales in the segment of $2 8 billion.
Our leadership position and strong new business activity reflects the strength and breadth of our distribution.
As a result, we reported net inflows of $702 million in the quarter and our more capital resilient product.
The first quarter of positive net flows that are in debate on your retirement and <unk>.
Yes.
Turning to group retirement on slide eight.
We reported operating earnings of $192 million.
Up 49% versus the prior year quarter.
Driven by an increase in net investment income from alternatives and fee revenue on higher account values.
The result also include $43 million of notable items, including $16 million of higher net investment income from alternatives and prepayment and $27 million of assumption update.
Gross premiums remained strong with $831 million in the quarter driven by first year premiums of $352 million up 39% year over year and continued purchasing fee with renewal premiums up 6% year over year.
As with prior years net outflows for the third quarter were primarily driven by seasonality in the <unk> market with schools closed into summer.
Despite higher account values, leading to slightly elevated withdrawals during the quarter for hidden fee rate and the business remained high at over 90% in line with historical experience.
The business has remained resilient.
Thanks to our 1100 dedicated equitable advisers, helping educators across America.
For retirement.
Now turning to alliance Bernstein on slide nine.
Third quarter operating earnings were $134 million up 29% year over year, primarily driven by an increase in base fees on higher average AUM.
Adding increased operating expenses.
<unk> had gross sales of $32 3 billion up 10% year over year.
Led by another record quarter sales and recap channel up $25 6 billion up 7% sequentially.
Additionally, <unk> generated net inflows of $7 2 billion.
With $6 7 billion of active net inflows attributable to positive flows across all three distribution channels in the retail channel a net net flows.
$6 6 billion supported by strong net flows in the U S and Asia.
This is the 18th consecutive quarter of positive active equity net flows in the retail channel.
<unk> continues to deliver strong investment performance for its clients.
Over 70% or more of fixed income and equity assets are outperforming on a one three and five year basis.
Total assets under management at the end of the third quarter were 742 billion up 18% from the prior year quarter are attributable to strong market performance and over $21 billion in net inflows over the trailing 12 months' period.
Net inflows and operating leverage contributed to strong adjusted operating margin of 31, 8% in the quarter.
Moving to protection solutions on slide 10.
We reported operating earnings of $160 million up from $51 million in the prior year quarter.
Primarily driven by higher net investment income.
And higher fee revenue on higher account values.
<unk> include $59 million in notable items in the quarter.
With 43 million attributable to higher net investment income from alternative prepayments and lower reserve accruals and $16 million from assumption updates.
We continue to see strong premiums in our variable universal life and quality product with gross premiums up 13% year over year, highlighting our shift to less interest sensitive products.
Annualized premiums were $67 million in the quarter up 37% year over year.
Driven by continued momentum in our employee benefits business, which generated 50% year over year sales growth and now covers approximately 570000 employee.
Going forward the expected impact of assumption update continued benefit of our general account rebalancing program and improved value of our new business sales.
<unk> increased our earnings guidance to $75 million per quarter.
Turning to slide 11, our strong capital and liquidity position continues to support our ability to deliver on our commitments.
We continue to execute on our capital management program, returning $534 million to shareholders this quarter.
<unk> $460 million of buyback executed through accelerated share repurchases.
In the context of our 2021 capital management program. We've returned $1 4 billion to shareholders to date and we remain on track to deliver on our 50% to 60% payout ratio plus an incremental $500 million stemming from the close of the VA reinsurance transaction.
We closed the quarter with $2 billion of cash and liquid assets at the holding company well above our $500 million minimum target and maintained our leverage ratio in line with our long term target.
Our strong position at earlier enabled us.
Quickly and effectively execute our balance sheet initiatives that debt restructuring and repair financing, which I will review on the following page.
Turning to slide 12, we have made good progress on delivering on our action plan to mitigate the on economic redundant reserves from <unk>.
King a permitted practice with the New York regulator restructuring to increase our unregulated cash flows and now a 1 billion reserve financing transaction with Swiss re.
As a reminder, <unk> became effective for New York Domiciled companies at the end of 2020.
<unk> 13 became binding for equitable filing to close at the Venerable transaction in January effectively introducing redundant reserves that would not be required. If we were domiciled in any of the other 49 states.
Since we reached the permitted practice with the New York regulator at the end of June we began internal restructuring and evaluating reinsurance transaction to mitigate such unintended consequences.
Thereby securing future cash flows.
We are pleased to report we completed our internal restructuring action, which insures approximately 50% of our cash flows come from non regulated entity.
In August we announced moving our separate account administration out of the life company to holding.
In addition, we have now moved our general account investment advisory service to holding.
Together these actions along with alliance Bernstein cash flow result in approximately 50% of our cash flows coming from nonregulated entities.
Further yesterday, we announced a triple X reserve financing transaction with choice right.
Which unlocked $1 billion of statutory value.
Our dressing approximately 50% of the remaining redundant reserves related to <unk>.
Importantly, this transaction aligns with our fair value model and we will have nominal impact on non-GAAP operating earnings.
In the four months since the rate became effective.
We have been diligent in managing the uneconomic redundant reserves.
Our actions to date bird to illustrate our commitment to managing the business on an economic basis and generating long term value for our shareholders.
Overall, our balance sheet remains strong with $2 billion of cash at the holding company and act can secure our future cash flows from our subsidiary.
I will now turn it back to Mark for closing comments Mark.
Thank you Robert before opening up the line for your questions I would like to reiterate some highlights from our third quarter results.
First supported by strong equity markets and the need for our products and services, we have delivered a record quarter driven by strong results across our retirement and asset management businesses.
Second.
Julie announced $1 billion of.
Financing transaction and completed internal restructuring actions.
Further secure cash flows and mitigate impacts from regulation in 2013.
Third we continue to employ our fair value economic framework.
Which reinforces our robust capital position and enables us to consistently deliver on our commitments to the market.
The interest rate assumption, our policyholders very assumptions, we believe it positions us well for the accounting change and we're excited for it forward.
We will come out with with a full investor day.
In mid 2022 will provide more detailed elements of the account and Kate change for investors.
Okay. Thanks, and then my second question you guys took a lot of action related.
213 this quarter.
Following swiftly deal would you guys look into additional reinsurance transaction to address the remaining redundant reserves or how should we think about that going forward.
Sure. So we are quite pleased with the actions that we've taken to date, we received a permitted practice with the New York Department, we restructured our subsidiaries to ensure that 50% of our unregulated cash flows remain unregulated of that $1.5 billion and now this 1 billion reinsurance.
Transaction, which we are three positions as well going forward, we continue to talk to the DFS and they've been helpful for us and these actions that we've taken to date going forward. We still have a menu of options that will look to deploy but most importantly, we will continue to assess it on an economic basis to ensure deliver long term value for.
Our shareholders.
Okay. Thanks for the color.
Your next question comes from the line of Andrew Triggerman with Credit Suisse. Your line is open.
Mr. Klinger menu your line is open.
Well good morning, sorry, Thank you for taking my questions and.
Guess the.
The billion dollar question is is timing around the next billing in and maybe with that.
Why why a triple X transaction.
As opposed to a very.
Variable annuity transaction.
Morning, Andrew So let me address the first one on on timing the benefited the permitted practice, we received from the New York regulator meant that we have a five year phase in four to 2 billion redundant reserves. So it gives us time to assess options and insure that any action. We take is aligned to our economic.
<unk>.
Which we manage the business.
As a result of having redundant reserves are additional redundant reserves, which are economic.
It allows us to evaluate options with existing redundant reserves that we had on the balance sheet. So having more redundant reserves allowed us to assess in total what redundant reserves, who wanted to take action on and a triple X financing transaction, which which three.
Was the one that we can do quickly and had a good economic cost for shareholders over the long term.
So at the end of the day, we are quite pleased with 1 billion dollar transaction and we will assess as I mentioned the menu of options that we have to address that on.
The redundant reserves that we have on the balance sheet.
And Robin where would you like to deploy that capital any thoughts on that and timing, it's not likely to just sit on the balance sheet for a long time would you agree with that.
Correct No you should assume that.
In the fourth quarter will accelerate some of the redundant reserves of direct <unk> to offset the $1 billion unlock that we have from this transaction.
Directly addresses 50% of the redundant reserves that are going to come through right 213.
I'm sorry, what I meant was deploying the capital meaning would you buy back shares we do.
Would you do an acquisition what what are you thinking about with capital now I assume you Wanna wanted deploy that and would do so quickly or take your time.
No I'd say you should think about two things. One is we are committed to delivering on our 50% to 60% payout ratio as you see from this year, we returned 1.4 billion to shareholders year to date.
And we haven't probably an additional $400 million to go into the fourth quarter.
On that.
As we continue to deliver will continue to assess the market.
For options to accelerate inorganic options, if they drive economic value for shareholders over the long term, but our first commitment is to continue to deliver on to 50% to 60% payout.
Okay, and just lastly, amazing sales.
On the buffered annuity.
8 billion versus 165.
Competition is jumping into this market. So could you give a little backdrop on what you're seeing out there and why you have been so successful.
Nick could you take that one.
Sure.
First I would say we continue to see the overall pie growing I think it is driven by two factors first it's a product it's right for the times, providing upside potential downside protection given this period of of market in.
Instability second is the fundamental demographics of more pre retirees looking for protected equity stories as they approach that next phase our differentiator continues to be our.
Affiliated distribution and strong third party networks, where we have.
<unk> relationships.
We're proud to be the innovator of the Rye love market.
<unk> in 2011 and continue to deliver the value proposition to our consumers. So as you mentioned, we saw record third quarter sales and we've got confidence that will continue.
Awesome. Thank you.
Your next question comes from the line of Tom Gallagher was Evercore. Your line is open.
Good morning, just first just a follow up.
Robbins to understanding the mechanics of this deal first question has just been approved by the NY DFS.
Hey, Thanks, Tom Yes. It has been approved by the New York Department, We expect to close the deal in December.
Okay, and Robin if I understood you correctly, so the billion who's going to go to offset.
Half of the re 213.
2 billion and so should we then think about the annual amortization dropping from $400 million to $200 million is that effectively how this is going to work.
That's right and that's what we will do in the fourth quarter through to acceleration.
With this 1 billion unlock that we have from the reinsurance deal.
Okay, and then in terms of.
Range or menu of options beyond. This are you are you just trying to solve for a transaction.
That would fill in the remaining billion or are you thinking if the economics of right you might do something bigger and more strategic.
That could address bowls, the remaining 213 Dragon and also.
Will say do something more shareholder friendly.
If the terms of right.
Thinking like whether it's.
Essentially a part of your buffer annuity block if if the economics were right or can you talk a little bit more about what.
Is it what you're thinking is it just trying to solve for the remaining billion or are you thinking potentially doing something bigger than that.
Sure. It's a Tom as you know we manage the business on an economic basis.
And any action that we take will will ensure to drive future economics for shareholders over the long term we.
We have several options that we can execute against but the option that will pick from similar today's triple X reserve financing transaction.
We will have to meet our economic hurdle rate.
Going forward, we would love to do if the options were available to do more but it has to drive economics.
To shareholders over the long term for us to pull any lever.
That that makes perfect sense, and if I could slip and just one last one the.
Just to confirm the.
The life raise and guidance to 75 million if COVID-19 mortality remains elevated would you expect that to be lower than that over the near term or does that already contemplate some COVID-19 impacts.
Sure. So let me address the 75 million first we've made good progress in <unk> on the life business.
The reactions that drive that that higher guidance to the mark of 75 million.
One is to re risking took any general account allows us to assume higher future earnings on yields from four to life business too is the pivot the team made to shifting away from interest sensitive products to be well, we're a leader into <unk> market supported by equitable advisors and that assumes that allows us to assume higher margins.
And three assumption update that we made had a positive impact on run rate earnings because its entire persistency on our business that allowed us the actions we've taken since IPO and to work with the teams had allowed us to come out and have confidence in the future 75 million earnings guidance that we provided on the Covid.
Front.
As you have seen in the past we've been on the low rated the guidance we've given.
We continue to stick to that guidance, though and we feel as though to $75 million is appropriate taking everything into account.
Okay. Thank you.
Your next question comes from the line of Tracy Bengie with Barclays. Your line is open.
Thank you good morning.
Six demonstrates the strength of your fair value framework and would probably be helpful to see another column on ranked 213.
<unk> 21 matters last for Ya, giving you are in New York Domicile.
So under right to 13, it's my understanding that Youre Cte scenarios work better for older wreck that links and venerable rather than newer wreck, which is counterintuitive and robbed and you said earlier when you're looking at your menu of options.
You will only look at those that you view as economic but I'm wondering how you may lay in any type of Red 13, arbitrage that potentially newer blocks of business, even though that makes no sense onto your economic framework, where intuitively the older blocks more economic capital.
Sure. Thank you Tracy.
You know as a company we're not here to arbitrage the different an economic frameworks of us GAAP statutory a right to 13, our first priority is to manage for the economic value to business and returned 50% to 60% for shareholders cities. You can assume that that's going to be the driver of our motivation of acts.
<unk> driving economic value not trying to address right 213 itself or any other on economic.
Antiquated industry framework that are existing today, it really drive long term economic value for our shareholders.
Got it.
I'm thinking about the billion dollars internal loan you took from the op Kosta Holdco am I thinking about this the right way since you had 10 years to pay it back it's really non issue ear ability to deploy holding company liquidity. That's now 2 billion in terms of your 50% to 60% payout.
That's correct. The 2 billion that we have today at the Holdco.
Which would which is there as a result of the annual $1.5 billion of cash flows that we received from our subsidiaries.
Is there to support our payout ratio of 50% to 60% for shareholders.
Right and then internal alone doesn't impede their ability given a term structure of it being tenure.
Correct.
Okay. Thank you for clarifying.
Your next question comes from the line of Brian Kruger Whiskey VW. Your line is open.
Hi, good morning.
First follow up on protection is is this part of the business that's still in Las recognition or did this update caused you to exit loss recognition.
Thanks, Ryan we are no longer in Los recognition, but we still had that <unk> reserve that we accrued on a quarterly basis.
So these assumption updates that we've made in addition to the V. U L sales that we have today within the business end of general count rebalancing allow us to accrue less Ah lower <unk> reserve going forward.
So it generates higher run right earnings of 75 million as a result.
Got it and then on your wealth management business, that's reported within the corporate segment can you give any update on.
The rough amount of earning being generated by that business at this point and some some of the actions you're you're taken to grow that business.
Sure.
We're really proud of our position there that's built with the equitable advisers distribution force, Denmark mentioned earlier and supports our business model.
We have $77 billion of <unk> way and if you look that's grown pretty significant on throughout the year generated by positive net flows into that business and we haven't disclosed operating earnings.
Business, but we look to do so in the future, but we want to try to get that business to be more material. We're really targeting 100 150 billion of a way for that business. So we can break out the operating earnings for investors.
Got it thank you.
Again, if you would like to ask a question press star followed by the number one on your telephone keypad. Your next question comes from Mark Hughes with Truest. Your line is open.
Thank you and good morning.
Pointed out an individual retirement I think tck first quarter a positive net plays.
Yeah, I definitely hope failure.
Growing new sales can you expect expect total.
Continue you think.
Physician at this point to maintain a positive that flows through for Ya.
Balanced new business versus a runoff.
I turned the corner or is this.
Just.
This particular quarter.
Great just a snake I'll take that question.
As you mentioned or we continue to be encouraged by the.
New sales momentum and our core differentiators in in our distribution footprint. We are continuing to see strong growth in our core flows and expect that to continue as as we.
Continue to innovate our product line and.
Address the growing retirement need that's out there so.
We are confident that we will continue to grow that core business going forward.
So in the positiveness flow territory more consistently way to think about.
I think positive more consistently obviously, we continue to focus on.
Value.
And run the business on an economic basis, and we think differently about our core in our legacy blocks.
And then the.
Update on the expense reduction initiative milestones.
Milestones you could pay for.
Sure, It's Robyn air I'll take that.
In early in the year, we announced three.
Three initiatives to support our long term, 8% to 10% EPS growth.
It was expensive 80 million general can optimization, the second stage of our rebalancing of $180 million and then we have growth coming into our business and you see that with a $7.1 billion flowed that we had in the quarter overall andi expenses expect that to come through evenly over the next three years, we remain on track.
Jack.
And you see that across our expense line in good operating leverage coming in with lower fixed expenses and then more variable expenses aligned to revenue overall, so we remain on track for all three initiatives.
Thank you.
Ladies and gentlemen. This concludes today's conference call you may now disconnect.
Please wait the conference will begin shortly.
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