Q4 2021 Equitable Holdings Inc Earnings Call

Please wait the conference will begin shortly.

[music].

Good morning.

Thank you for standing by 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 full year and fourth quarter earnings call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

If you would like to ask a question at that time simply press star followed by the number one on your telephone keypad. If he would like to withdraw your question again Press Star. One. It is now my pleasure to turn today's call over to Phil moved rest solely. Please go ahead.

Thank you good morning, and welcome to equitable holdings full year and fourth quarter 2021 earnings call materials for today's call can be found on our website at IR dot equitable holding 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 adult made 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 join.

Joining me on today's call is Mark Pearson, President and Chief Executive Officer of equitable holding Robin Rajiv <unk>, Our Chief Financial Officer, Nick Wayne President of Ecuador, Financial and Elite 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.

Reconciliation 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 would now like to turn the call over to Mark and Robin for their prepared remarks. Thank you issue.

Morning, everyone and thank you for joining our call today.

We are a business that exist to meet the need for retirement planning income protection and asset management.

Over the past two years of the pandemic these needs have been amplified.

The ability of equitable holdings to meet these needs is unique.

We provide advice to our affiliated distribution.

We have leading retirement franchises and we have a premier asset management subsidiary Alliance Bernstein.

Our strategy of managing to economic realities, and shifting to low capital intensive businesses.

Has proven to be well suited to low interest rates and rising equity markets.

We are meeting both the amplified needs of our clients and building sustainable shareholder values.

2021 was a record year.

As you can see on slide three.

non-GAAP operating earnings were $2 8 billion or $6.58 per share up 32% year over year.

For quarter, four non-GAAP operating earnings were $649 million or $1.54 per share.

A b had a particularly strong year contributing $564 million of operating earnings to holdings up 31% over prior year.

Strong organic growth in our core retirement and asset management businesses.

Resulted in net inflows of $25 billion in 2021 and.

And this combined.

Combined with the benefit of market tailwind.

Is altered in assets under management growing 12% to 908 billion, which is also an all time record.

The balance sheet remains robust.

We have an RBC ratio of approximately 440% and one $6 billion of cash at the holding company.

We successfully executed on our capital return program in 2021 return.

Returning $1 9 billion to shareholders.

<unk>, an incremental $500 million.

Share repurchases associated with our legacy VA reinsurance transaction.

And $112 million of 2022 repurchases accelerated into the fourth quarter.

Earlier this week.

Our board authorized a $1 $2 billion share repurchase program for 2022.

As we continue to deliver consistent capital return with an expected $1 5 billion in the coming year of course subject to no significant deterioration in the market.

Looking ahead we.

We welcome the implementation of <unk> accounting changes in 2023.

Because it will bring further transparency.

Compatibility across the industry and as close to our economic model.

The term economic is often referenced in different context across our industry.

For us and I think what is important economic means two things.

Firstly setting reserves using actual interest rates that is the forward curve. Because this is what you can hedge and.

Secondly, economic means fair value liability reserving assumptions based on actual experience.

We know that investors have been eager to understand more about the impacts of LD Ti.

Economic approach to interest rates, where we make no beds and our strong reserves not only aligned to the upcoming accounting changes that position us well for the transition.

As of year end.

We anticipate the transition impact to be within a OCI.

If al DTI will implement today, it would mean less than $2 billion of adjustments to the GAAP book value, which today stands at 11 5 billion.

We will provide.

<unk> further details for investors in the coming months as we get closer to implementation.

Lastly, I am incredibly proud that equitable achieved another milestone as a public company.

By releasing our inaugural sustainability report in the fourth quarter.

Conducting ourselves as a force for good is always been a part of our culture and the way, we do business for more than a 162 years.

But of course, the need to show we meet the needs of all stakeholders and help address some of society's inequalities has been significantly amplified in the past few years.

As of year end <unk>.

$60 billion of Equitable's General account and.

524 billion of ABS assets.

That is 64% and 67% of their respective totals.

Now integrate ESG factors into the investment process.

In July .

<unk> pledge to adopt the UN principles for responsible investment.

We also take seriously as an industry leader in risk management.

This extends beyond the company to supporting advocacy efforts for more economic and robust practices.

To protect policyholders and investors.

Turning to slide four an important slide.

This shows our unique business model and the results of our shift to capital light businesses.

As a result of the transformation in our retirement business.

Our legacy VA amounts to only 18% of retirement assets today.

We have also improved the certainty of our cash flows through internal restructuring today.

<unk>, 50% of our annual one 5 billion cash flows is generated from non insurance regulated entities.

We continue to leverage synergies between our two operating companies.

The $10 billion investment commitment to AEP.

Not only improves the risk adjusted return for our general account, but strengthens ab's efforts to build out higher multiple businesses.

In the alternative space.

Within the Ecuador financial operating subsidiary.

We've made tremendous progress to become a more diversified retirement company.

We shifted retirement, new business away from interest rate dependency and high living benefit guarantees.

Through the launch of our innovative structured capital strategies protected equity product.

Q4 saw another record quarter of Acs sales and as a result, we remain the number one player in this fast growing while our market.

Overall gross sales for my retirement businesses amounted to $18 billion up 30% from last year.

In addition to shifting the sales mix and enforce actions, we continue to execute on our productivity.

<unk> investment income priorities to further drive earnings growth.

Our asset management subsidiary Alliance Bernstein.

Strong net inflows of $26 billion in the year.

Cross all three of its distribution channels retail institutional and private wealth.

This has resulted in a 5% organic revenue growth and a 1% fee rate expansion.

Importantly, and looking to the future.

<unk> has strong underlying investment performance with 89% of fixed income and 73% of equity assets outperforming this past year.

<unk> was an early mover now has a strong brand recognition in the Asian markets.

We see this as a particular area of differentiation and future growth.

Hey.

Our Asia businesses represented 18% of AUM and 25% of annualized fees.

ABB has a proven track record of attracting and building out investment capabilities.

Growing an initial seed investment within alternatives for times to $23 billion today.

We will be looking to a multiplier effect with the $10 billion investment commitment we announced format critical.

Equitable advisers is a cornerstone of our strategy.

Firstly.

The major source of revenue growth with an equitable financial.

Affiliated sales force contribute 70% of combined gross premiums and broker dealer inflows.

Secondly, they are key to our efforts to transform towards capital light businesses.

With an equitable advisers, a broker dealer continues to be a growth area.

With an increase in assets under advice of 34% to $83 billion. This past year.

Benefiting from strong flows as well as favorable markets.

We now have over 500 wealth managers, delivering valuable advice and solutions to our clients.

With full year sales of $13 billion.

A 54% improvement over the prior year.

On slide five I would like to briefly highlight the journey we've been on since the IPO on May 10th 2019.

And shifting our business mix towards advice, driven retirement and asset management.

In retirement, we have done two important things.

<unk> grown our business and substantially change the mix.

Our core retirement business the capital light business has grown by 47% to 130 billion.

At the same time.

Legacy VA business has decreased by 40% to.

Now less than $30 billion.

We are now no longer dependent or significantly exposed to high guarantee living benefit of annuities.

At Alliance Bernstein total AUM has grown 40% since our IPO.

The 39% increase in fee based revenues.

AB managed equitable AUM has grown to nearly $130 billion and is 17% of total assets under management.

Finally, equitable advisers are meeting clients' growing needs for wealth accumulation and retirement.

Through a differentiated holistic financial plan.

As a result, we have seen strong organic growth in assets under advice up 88% since IPO with strong net inflows and favorable equity markets.

Turning to slide six.

We were pleased to recently release Equitable's inaugural sustainability report.

There was a lot in the report which can be accessed through our website underpinning everything out in the report is our belief that we can bridge profits with purpose.

I've already mentioned inclusion of ESG factors into our investment decisions.

Clients are supporting this momentum and now have $31 5 billion in AB portfolios with purpose up 91% in the year.

At this time of remote working we have invested in our people with over 30000 training hours to adopt an agile design thinking framework to raise the metabolism inside the organization and we are also using this framework.

Improve our diversity equity and inclusion representation.

Key to our ESG approach is upholding stakeholder trust, including advocating for more robust industry practices.

And we see the upcoming implementation of LTI as a critical building block, which Robin will address on the following page.

Yeah.

Thank you Mark.

We're very supportive of the upcoming LPTA accounting reform, which will bring gap closer to fair value economics.

And will improve transparency and comparability for our industry.

On slide seven I would like to provide additional insight into how we beat a chain.

And how we are well positioned for adoption.

Before I do that Eric three key points to highlight.

First.

We expect that the impact to shareholder equity will be lower than our current <unk> balance.

Which with $2 billion as of year end.

We also expect the impact will flow primarily through a OTI taking into account year end market conditions.

Second <unk> aligned well through our economic approach to managing the business.

Due to our conservative interest rate assumption and fair value approach setting actuarial assumptions.

And third the enhanced al DTI disclosure, which we intend to provide into early summer will support <unk> strong economic standing and competitive position in the market.

I will now go through some of the drivers to provide additional detail.

Our year end estimate are primarily attributable to an uneconomic backer nonperformance risk our MPR.

Under GAAP accounting today, a company's own credit spread impact their liabilities.

For example, as a company's own credit spread decreases the company is required to hold more reserves.

And bank of America.

Is counter intuitive.

We have seen credit spreads narrow over time and the impact of MTR is currently reflected in net income.

While <unk> improved that by shifting the non economic movement to OTI.

There is some potential sensitivity between now and the transition date in 2023.

If credit spreads increase before the transition date, the MPR gained would shift from net income.

OTI.

Turning to retained earnings.

Anticipated our limited transition impact based on our year end market conditions.

While S&P reserves currently account for two thirds of our GMI B and <unk>.

The impact of fair value reserve is largely mitigated.

Offsetting items.

The first is a favorable offset from increasing our near industry low 2.25% GAAP interest rate assumption to the forward curve.

Which was two 5% as of year end.

This demonstrates how conservative interest rate assumption that equitable has positioned us well for the upcoming accounting change compared to our peers.

The second is a minimal impact from aligning to the proposed <unk> discount rate.

Our current <unk> reserve discount rate is similar to the future <unk> discount rate.

Our discount rate takes into account the forward curve and credit spreads.

As I mentioned the movement in NPR may change, where the impact is reflected in the future.

Between retained earnings and iOS.

We expect our total impact to be lap and our OCI down regardless.

Finally, we expect no impact to cash flow.

Given our hedging strategy is aligned fair value economics.

Under current GAAP rules hygiene to our economic liabilities.

Create the majority of the accounting mismatch between net income and non-GAAP operating earnings.

Under <unk>, we expect that the asymmetry between our economic hedging in gap to be significantly reduced.

And items, such as book value, excluding <unk> will be more meaningful for equitable and our peers.

I'm really excited about this transition to a more economic approach to GAAP accounting and the validation of equitable economic approach to managing the business.

We look forward to sharing further detail at an LTI and back to the Carl early in the summer, including how disclosures will illustrate the strength of our economic assumptions backing our liabilities.

We are confident that this additional transparency will be good pretty industry and will help investors better understand the risk they are taking when investing in different companies.

Now, let me turn to full year results on slide eight.

We had a record year with our retirement and asset management business is performing exceptionally well.

As Mark mentioned, we reported non-GAAP operating earnings of $2 $8 billion. This year.

Adjusting for nonrecurring items in the year, our full year earnings were approximately $2 5 billion.

These strong results reflect <unk> growth to a record 908 billion.

Supported by net inflows of $25 billion and favorable equity markets in.

In addition to the continued mix shift to our capital light businesses.

Turning to our segments.

Individual retirement reporting operating earnings less notable items of $1 4 billion this year <unk>.

Excluding the impact of the legacy VA transaction earnings have increased year over year.

As you recall, we monetize one 2 billion per shareholders with the close of the legacy VA transaction and significantly Derisked our in force.

Further supporting the successful Mei.

Is the continued strong performance.

Of our capital light offerings.

As we drive record sales and sustain our leadership position in the <unk> market.

For the full year.

First year premiums were $11 billion up 53% over prior year.

Which is a level we haven't seen since 2008.

The team finished the year strong setting another record with $2 billion of SCS sales in the fourth quarter.

We continue to innovate in demand and economically down solutions.

Ensure our client.

Their retirement dreams.

In group retirement operating earnings less notable items were $596 million up 26% year over year.

As we continue to benefit from strong equity markets. We reported gross premiums up three 6 billion. This year with year over year growth supported by both first year premiums and renewal premiums up 11% and 7% respectively.

We continue to see the benefit of our advisers leveraging technology to enhance client engagements.

That said, our differentiator continues to be our Worksite advice model with access to over 8700 school districts and over 800000 educators.

And we began to see the benefit of this hybrid approach in the second half of 2021 at schools reopen in the fall.

In asset management.

<unk> has continued to be a driver of capital light growth for equitable holdings.

With operating earnings of $564 million.

Up 38% year over year.

Accordingly.

We need to drive organic revenue growth supported by active net inflows of $27 6 billion.

Positive across retail institutional and private wealth channels.

<unk> leadership position in Asia continues to support strong results with approximately one third of <unk> total net inflows into year attributable to that market.

The continued positive momentum is a testament to the performance.

Is delivering to our clients.

With over 89% of fixed income and 73% of equity asset outperforming their benchmarks over the past year.

In addition, strong longer term performance with fixed income and equity outperforming their benchmark by 70% and 75% respectively over the past five years.

And finally in protection solutions operating earnings less notable items were 277 million up 39% over the prior year.

Our strategic pivot to more capital light accumulation.

Drove year over year first year premium growth up 99% in that product.

And now represents approximately two thirds of segment first year premiums this year compared to only 40% in 2020.

Turning to the right hand side of page eight we have highlighted our success shifting the profile of our business towards more capital light businesses. Since the IPO, we had improved earnings by 32%. While also improving the mix with continued growth in asset management and over 80% of retirement.

AUM and capital light product today.

Let me now turn to the fourth quarter consolidated results on slide nine.

Adjusting for notable items in both periods.

non-GAAP operating earnings were up from $638 million in the fourth quarter of 2000 $20 million to $691 million this quarter or $1 64 per share a 70% increase.

On a per share basis.

We benefited from higher net investment income performance fees and base fee revenue on higher AUM this quarter.

Which partially offset a one time litigation apparel and adverse mortality in the quarter.

Which remain in line with our core <unk> guidance.

In the quarter, we reported GAAP net income of $254 million as we continue to see the impact of non economic accounting treatment for our GAAP liabilities compared to a fair value hedging program.

Which performed as expected with a hedge effectiveness of 95% in the quarter.

As I discussed a few minutes ago, we look forward to the implementation of <unk> in 2023, which will eliminate much of this accounting asymmetry.

<unk> was a record at 908 billion supported by strong equity markets and positive fourth quarter net flows of $7 billion led by our asset management business. We have made good progress against our strategic priorities.

Levering $31 million in productivity savings.

$90 million and general account yield enhancement this year.

And we continue to deploy our $10 billion of committed investment capital from the insurance subsidiary to support growth in <unk> alternatives business.

Dis synergy enables us to build a high multiple business that.

While generating favorable risk adjusted yield for equitable policyholders.

We are excited about the potential for AEP the alternatives business in the future.

Turning to slide 10.

Our strong capital and liquidity position enabled us to successfully deliver on our 2021 capital management program.

Throughout the year, we returned $1 9 billion to shareholders.

With $540 million occurring in the fourth quarter.

This return was supported by the closing of our legacy VA reinsurance transaction in June of last year, which returned an incremental $500 million and $112 million at 2022 repurchases that we accelerated into the fourth quarter.

We closed the year with $1 $6 billion of cash at the holding company and a strong RBC ratio of 440% each well above their respective targets.

Our successful shift towards capital light business model and our internal restructuring had increased unregulated cash flow.

Giving us confidence in our dividends to the holding company with approximately 50% coming from nonregulated advocates.

In 2022, we expect to lead to one $5 billion in subsidiary dividends to support our capital return strategy.

Further our strong financial position allows us to announce a $1 $2 billion repurchase authorization from our board as we continue to execute on our stated capital management targets delivering consistent capital return at 50% to 60% non-GAAP operating earnings.

Normal market conditions.

I'll now pass it back to Mark.

Thank you Robyn before we turn to your questions I would like to reiterate some highlights from our full year and fourth quarter results.

First we delivered another year of record results supported by the societal need for our products and services and strong equity markets.

And how.

Our unique business model pairing retirement asset management and advice drives our strong capital position.

And enables us to consistently return capital to shareholders.

As a result.

Pleased to announce a new authorization to deploy $1 $2 billion for repurchases in 2022.

And target the total capital return of $1 5 billion this year.

Third.

Fair value economic framework positions us well for <unk> implementation.

Aided by our economic approach, we expect to <unk> transition impact to be within a OCI, which is $2 billion as of year end.

And lastly.

<unk> is committed to being a force for good and we will continue to be a strong advocate for robust industry practices aligned to economic realities.

With that I'd like.

To open the line for your questions.

At this time I would like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad.

Your first question comes from the line of Elyse Greenspan with Wells Fargo. Your line is open.

Thanks. Good morning. My first question was on capital returns you gave us the one 2 billion authorization for the year, how should we think about the cadence between the quarters and would you just be more active.

Upon.

Share price.

Good morning, Elyse. Thank you for the question.

As you recall, we returned $1 9 billion in 2000 in 2021 that included a $100 million of accelerated share repurchase that we're counting towards 2022, and a $1 2 billion future authorization that the board approved this year allows us to continue to execute against our 50% to 60%.

Capital return under normal market conditions, I expect us to be in the market consistently throughout the year and the authorization that the board gives us allows us to adjust flexibility to program, if we see any share price deviations as well.

And then when thinking about 'twenty, two relative to that 50% to 60% you would look at the one five.

But the ones that you look solid.

Forward is putting you within that 50% to 60% target correct.

That's right.

Okay, and then in terms of the protection solutions.

You guys had been running with earnings of around $75 million on an adjusted basis.

Last quarter, you had said you could see there.

With more elevated mortality.

Below this quarter. So just how should we think about the earnings trajectory for protection solutions, just given that we're in and probably at least for a little bit longer and elevated mortality period.

Sure. So we increased the guidance to $75 million last quarter. That's the result of continued productivity in the business and and benefiting from the GA rebalancing that we have done throughout the years with that $75 million, we said expect volatility around at $75 million.

Up or down as add mortality evolves in the quarter. If you look on a normalized basis.

Excluding the elevated mortality related to Covid and the alternative benefit we ran about a 92 million normalized earnings for the quarter.

The Covid guidance, we're saddened by the continued debts related to Covid in the U S. But we do remain.

Within the guidance that we've given to the market of that 30% to $60 million per 100000 U S deaths.

Okay. Thanks for the color.

Your next question is from the line of Ryan Krueger with VW. Your line is open.

Hi, good morning, Thanks for the LPTA.

Impacts I guess.

I'll be greedy and ask for one more thing.

You.

Touch on was how it may impact GAAP operating earnings can you give any comment.

On the potential impact there.

Sure Ryan let me first start by emphasizing what I mentioned earlier, our economic approach to managing the business and fair value approach to setting assumptions allows us to have a limited impact on the transition balanced for Lv Ti.

It aligns well to our fair value approach and our economic model.

The ongoing operating earnings in some of the other details with the LPTA you will have to wait until our Investor day as we go through the technicals of <unk> going forward, but again, we expect the economic earnings of this business to continue to grow based on the strong fundamentals, we see across all of our business lines.

Andre <unk>.

Got it thanks, and then could you.

Given an update on your efforts to mitigate the remaining red <unk> <unk> impact and if you think.

You can get that offset in by.

By the end of 2022.

Sure. So as as you recall, we took significant action during the year. It started by receiving the permitted practice from the regulator restructuring the insurance company cash flows where 50% of the cash flows going forward of that $1 5 billion will be unregulated and we just completed and closed in <unk>.

Sember, the Triple X reinsurance transaction, which allowed us to unlock $1 billion of value decreasing the redundant reserves the right to 13 to about 1 billion going forward that remaining 1 billion will be phased in over the next several years. So it gives us time and flexibility to continue to explore internal and external reinsurance opera.

<unk>, if they are accretive on an economic basis and drive value to shareholders. We are targeting and we continue to be adamant about pursuing all options on the table and expect that to continue to address it as the year goes by.

Thank you.

Yes.

Yes.

Your next question is from Tom Gallagher with Evercore. Your line is open.

Good morning.

First question.

Robin if I go back to the second quarter. Your estimated RBC was 450 I believe now it's $4 40 at year end.

You haven't taken any dividends out, but I know theres been a lot of movement things like <unk>, one and.

Other things going on but curious if you can comment on what happened to organic capital generation and.

Both for I guess, non insurance and insurance over that period of time.

Sure So organic capital generation and again business fundamentals are very strong during the year. There are a few things that changed from a statutory basis as you recall as I just mentioned, we restructured our cash flows and the insurance entities. We're now more cash flow of about 250 million going forward are coming through.

Right to the holding company that added no longer an insurance company as a result.

From an RBC perspective during the year as we continue to shift the general account and good risk adjusted yield we did see an increase in the <unk> or foreign capital charges that had about an 18 point impact on RBC.

As of year end, but if you exclude that and exclude the mortality, we still see strong cash flow generation and the insurance company. It should translate to about $750 million in an annual basis, and then alliance Bernstein and unregulated cash flows to the holding company, making up the rest of it at $7 50 to bring the total to $1 $5 billion.

The holding company.

Got it that's that's.

Helpful. What is your dividend capacity out of the insurance company in 2022 by the way.

As I mentioned in the call, it's going to be $1 5 billion across all of our subsidiaries and we expect the insurance company to be greater than the $750 million guidance that we provided to the market.

Got it so based on how yearend.

That is expected to play out do you think the allowable normal dividends will be over $750 million or is that still not clear.

Hey.

What I expect it'll be officially when we filed the K in a few weeks as we will have that number in there, but we do expect it to be about $750 million, bringing the total to $1 5 billion got.

Got you and just one last one if I could.

The.

The <unk> book value impact that you mentioned the lesson 2 billion you mentioned that was year end 'twenty one.

When rates were lower.

Would it make much of a difference if you were to mark that to market today.

I assume it would go down but.

If so if you could sensitize it at all would it be meaningful and then.

When you when you implement.

The initial 2023 will you be using rate levels from year end 2021, or what what period do you use the initial.

Implementation interest rate.

From.

Sure Tom.

The good thing about <unk> again, it's fair value. So at point of transition it moved to the rates at that specific period.

Overall, that's the benefit of fair value and that's where we hedge our balance sheet.

The impact as of yearend, we said, it's left and 2 billion <unk> balance.

And it's across the industry it will be sensitive to equities interest rates and credit spreads those are probably the three biggest sensitivities.

Where we sit today it is lower than what we what we the number we had as of year end, but it is sensitive to those three elements. So we'll continue to give updates as the year progresses.

Keep in mind those liability numbers may move there are always going to be within the <unk> balance, we believe and we have derivative gains that offset that potential liability movements. So economically there is no impact for us because it was close to how we manage the business.

Okay, great. Thanks.

Yes.

Your next question is from Andrew <unk> with Credit Suisse. Your line is open.

Hey, good morning.

So in individual retirement.

Other outstanding quarter in terms of volumes I think.

Buffered SCS product was up 36% year over year.

I'm wondering if you could.

Just given the incredible competition, that's coming into into that product since you pioneered it.

It's great to see this growth, but so I'm wondering what what's allowing you to keep this going is there a particular product feature that the most current SCS stands out for or is there. Some new distribution. That's driving this growth maybe you could give a little color behind this robust sales growth.

Thanks, Andrew for the question, we have Nick Lane here today, who heads up all of our commercial lines will give robin a little bit of a list.

That's great.

Alright, Thanks, Mark first as you mentioned core results were strong.

Positive $2 5 billion for the year 500 million for the quarter.

Sales up 55% and another record Rcs.

What is sustaining and elevating that.

First is our differentiated distribution position, both equitable advisers as well as our third party partnerships.

We've been there from the beginning with consistent strong relationships as we've highlighted in the past.

We believe the pie is going to continue to grow and we continue to innovate in that space relative to.

New functionalities, such as sole direction. So we're confident that we will continue to.

To maintain our position going forward and help consumers navigate these volatile markets.

You mentioned, new functionalities, such as dual direction could you give a little more color on that.

Short dual direction is.

Enhancement to the segments that clients can invest relative to.

Their perception of.

The market. So as you know we provide.

Yes.

Upside protection upside.

Potential with downside protection, but all of these new segments are perfectly matched and we've been a leader in and getting feedback from our clients and advisors on on what they are looking to invest.

Yes.

As you.

Look for Reg.

Teams solutions and <unk>.

Understand that 18%.

In the individual retirement block is only legacy VA.

What areas of the business.

Are you talking to potential.

Looking at for potential solutions is it is it possible to move the legacy the remaining legacy VA given that it's housed in New York.

Are there.

Very different product areas.

As you did with Reg Triple X what areas are you looking at to solve for this 2013 and maybe what's the interest level and working with you on it.

Sure Andrew.

I think the way to think about it is we're looking at across the in force all products and where we can drive economic accretion in gains relative to an external or internal transaction.

That's why we started with a triple X reinsurance transaction and we don't always have to just address the VA book, if there are opportunities to reduce that 18% legacy AAM further debt economically accretive we will certainly execute that but if there are opportunities across other lines as well we will have a look.

But everything's on the table as we continue to address the redundant reserves, but it needs to be economically accretive for shareholders.

Yeah like accretive thanks.

[laughter].

Your next question comes from the line of Tracy Ben <unk> with Barclays. Your line is open.

Thank you.

Inc.

Sorry.

Long.

Hi, Thanks.

Okay.

Hold on bear with me.

Youre coming through clear Tracy, Okay, yes, well one of your competitors.

Talked about policyholder appetite correctly, a buyout program and I'm curious if you could share your thoughts on the economics of offering these.

Lump sum payments to annuity holders that'd be a riskier blocks.

To accelerate our efforts to producing the proportion of capital intensive business or if that could help in any way.

Q3 <unk>.

But I've heard others in the policy that's expensive.

Sure Tracy.

Buyouts of legacy annuity policies were wanted to burst derisk.

Derisking actions, we deployed back in 2011.

We've executed that along with moving the majority of that legacy AUM to passive index funds.

Key derisking levers that we utilized over 10 years ago and that led us to the successful derisking through the Venerable transaction. So.

Does that playbook had been utilized.

Here are ready and now we're focused really on external and internal reinsurance as potential opportunity that that can really drive accretion for shareholders.

I think we've had three programs of buyback over the last 10 years.

So it's something we're aware of we've acted on it's been successful for us.

But we've moved on a bit now, we're looking at reinsurance and otherwise to deal with.

Great. Thank you.

I know, it's been asked already but just wanted to touch upon.

Your COVID-19 losses.

And particularly what we've seen it.

And each cohort now theres, a little bit more of a bias on the older population in <unk> versus <unk> I'm wondering if that had anything to do with you're running your losses are a little bit higher end of the range I think in the past on the bottom end of the range and if you could also share. If you received any benefit from a longevity longevity offset this.

Or maybe in individual retirement.

Sure again, I just want to emphasize as I mentioned earlier, we are saddened by the fact that depend amex deal impacts many of the people that we interact with and so many of our clients.

That we have but it also shows the benefits of the products that equitable holdings have to offer and providing protection needs for American consumers in.

In the quarter as you saw fourth quarter mortality in the U S was elevated versus third quarter, and we did see some big come into older age, that's which we do have exposure to older age policies, but if you exclude that for the full year. We are in the middle of our Covid guidance that we provided to the market in that.

What are we would expect to be going forward.

Okay, and then maybe on the longevity offset.

Are you seeing any of that we.

We did not in the quarter.

Thank him.

Your next question comes from the line of Alex Scott with Goldman Sachs. Your line is open.

Hey, good morning.

First question I had is on the flow reinsurance market I think you made some comments already about potential.

Block deals I'd just be interested in your view on the flow reinsurance market and it seems like there is some new.

Third parties popping up there and how do you view using that as a potential lever to increase cash conversion.

Sure.

And Nick mentioned it earlier the products that we write today are all capitalized very efficient and generate good economic value for shareholders. So when we think about leverage flow reinsurance isn't one of them that we consider as an opportunity to benefit our shareholders. Because we would essentially be passing some of the value that we have for <unk>.

Shareholder to someone else.

The products that we write today are economically sound.

Sanctions are based on current experience in their own matched so as a result, we don't need to pass on to value to others and so we fully we fully believe in the products that we write today and the value that they generate and we want to retain those for our shareholders.

Got it thanks and.

A follow up I guess just on <unk>.

Inflation I know from a capital standpoint, and if rates were to move higher.

An obvious benefit I think for variable annuity companies generally, but just thinking more specifically about expenses can you help us think through wage inflation and some of the pressure there and if we should expect to see anything in 2022.

Thanks, Alex its mark yes.

Obviously, two things firstly.

Focus will be on expenses and making sure that we can.

Identified productivity improvements to offset.

Any inflation hasn't really hit us up to the end of 2021, but we'll alert and watching it.

Closely I think the other thing to say, though Alex is the is the types of products that we offer you know we'd like to.

Talk about it internally of all weather products. So if you look at some of the things that <unk> offers in ultimates in real assets. This can be attractive to consumers.

And as Nick has just explained.

Some of the products we've got.

Like SCS and dual direction that can that can help consumers. So we look at it three ways as you say balance sheet first making sure.

Immunize. The then secondly productivity to offset pressure on inflation. If it comes and then thirdly, what other products. So we can help our clients with that.

Helping them an economically sound for us as well so that's how we think of inflation.

Thanks.

Okay.

Your next question is from the line of Jimmy Buhler with Jpmorgan. Your line is open.

Good morning, I had a couple of questions first on the group retirement business.

I guess with the SEC.

Settlement Youre going to pay a fine and then increased disclosure, but do you see any sort of.

Ongoing impacts of this either on your business or on competitors that greater disclosure leads to maybe fee pressure or something else, but any comments on <unk>.

Whether you expect any ongoing impact from this.

Thanks, Jimmy its mark Yes, we have been cooperating with ACC on that industry wide investigation as you know thats been on for a little while here I think you also whales settlements Institute in Dubai.

Some of our peer companies as well on this one.

We have as you say, which reached a settlement in principle on it.

As we go in and it is around our quarterly account.

Disclosure statements.

Obviously, we disclose our fees and charges in our prospectus.

The FCC would like us to be.

Clearer if you like on the statements and we fully agree we should be as clear and as transparent as we.

As we possibly can look we're very proud of the service we offer to.

Teachers.

If you look at the fee income what does it cover it really covers.

The advice, we give of course, we know that.

Teachers, who receive advice and up with 49% more in their retirement accounts and those teaches us don't get advice. So there is really really a benefit to two teachers.

In addition of course.

We help them with.

Getting teachers.

Right investment solutions, we help them with loan forgiveness. They do have access inside the funds to safe Harbor funds guarantee funds, if if the market gets to two walkie. So.

The way we look at this.

Jimmy.

Do we justify our fees and we are very confident that we do we can seem to benefit both teachers.

Okay.

Then on the FCC.

Then just the buffer annuity market in general there's a lot of other companies that have come out with similar products and.

Are you seeing so obviously the markets a lot more crowded than it was but are you seeing the other companies be rational in terms of terms conditions and the benefits that they're offering or some of them being aggressive on features as well.

Great. This is Nick currently we're seeing rational pricing out there.

Continued to see growth in this space, both driven by the demographics in volatile markets.

As we've said, we think competitors entering helps validate the solutions for advisors and consumers out there.

And Jimmy remember anybody can copy our product, but they can't copy our distribution through equitable advisers and a third party affiliated agreements that we have so that's our differentiator and that's what makes us win in the market.

Thank you.

Your final question comes from the line of Smedes.

<unk> with Jefferies. Your line is open.

Great. Thanks.

I wanted to start on slide eight that lower Pie chart. There just to make sure I'm reading. This right are you basically saying that the legacy <unk>.

<unk> block is about 15% of total company earnings maybe a third of individual retirement earnings does that kind of in the ballpark.

Yeah, what we said in the slide and what you see is the legacy VA is about 18% of our retirement AUM.

And that's a function of the historic de risking but also the good core flows that we received $2 5 billion in the year up 20% year over year from an earnings perspective, we haven't disclosed earnings by specific product and we won't enhanced disclosures until post Lv Ti and we will look to provide greater clarity but.

If you wanted to take a look at something right now the best we can give you is AUM as a ballpark.

Really the right way to look at it right now.

Okay got it and I guess, Robyn I Havent heard anyone else used the words excited and <unk> in the same sentence in it it sounds like you're going to provide a lot more disclosure I guess in the early summer is that.

Is your view that this is just going to shed a new light on how people think about.

For individual retirement business, because when I think about like the valuation of the company to me that's always been the biggest source of upside if people just get a better handle on the risk profile of this.

This block is that kind of what you're leading us towards.

Yes, I think Thats right I think.

Two issues.

Excitement and accounting changes not normally towards you put into one sentence, but look what why we say that is number one go back to Jamie's question.

Earlier.

Is the irrational pricing, we would argue very strongly that the current accounting basis, particularly where you can use.

A reversion to mean on interest rates.

Hi, the rational pricing, we think that's wrong, we think people are pricing irrationally.

It should be disclosed as such.

It's up to every insurance company, where they want to cost, but it shouldnt be hidden by the accounting system and secondly.

Companies that have.

Have hedged book to the real economic liabilities.

We would all of you should have less capital needs and those who don't.

Of course management teams have to decide the risk they want to take but it should be disclosed Luckily we're not saying this is the only way or the best way, but we are saying you should disclose appropriately so that investors can make an informed choice. That's why we are excited about it the disclosure leads to better compatibility.

Recognition of economically what's happening.

Okay got it and then maybe just sneak one more in real quick.

Just on the wealth management segment, we can see the account value growth or the AUR growth, but we can't really see the organic growth.

So can you maybe just give us a sense of what the organic growth looks like in that business and maybe how it's tracked over the past few years.

Great.

Thanks for the question.

Very pleased with the progress we've seen in the wealth management segment.

You highlighted thrown at 34%, we're now at 83 billion.

In 2021, we had $3 billion of gross sales.

We've originally expressed that would enhance our disclosures.

When the AA range has got to about 125 billion with via.

Be a meaningful segment.

These these targets and aspiration sold through.

Yes.

Alright, I'll follow up thanks.

Okay.

So there are no further questions at this time, ladies and gentlemen, Thank you for your participation. This concludes today's conference call you may now disconnect.

Please wait the conference will begin shortly.

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