Q2 2022 Equitable Holdings Inc Earnings Call
Good morning, My name is Rob and I will be your conference operator today.
At this time I would like to welcome everyone to the Equitable Holdings, Inc. Second quarter 2022 results conference 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. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again press Star one.
Michele <unk> head of Investor Relations you May begin your conference.
Okay.
Thank you good morning, and welcome to <unk> Holdings second quarter 2022 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.
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 holding Robin ratio, our Chief Financial Officer, Nick Lane, our President of our global financial and Kate Burke Alliance Bernstein, Chief operating Officer, and Chief Financial Officer.
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 may be 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.
Good morning, Thank you for joining with a sharp decline in asset prices. This year. We thought it is important today to highlight our economic framework protects our balance sheet and ensures consistent cash returns to shareholders.
Our operating subsidiaries equitable and AEP are not immune to these falling asset values, but all showing their resilience.
We see strong demand across all equitable lines and record sales in our individual retirement segment.
A b reported a 2% fee rate improvement with growth in municipals active equity and alternatives offsetting outflows from fixed income.
Turning to slide three.
In a quarter that is seen equity markets fall by a further 16%.
And inverted yield curve and persistent inflation.
Our attention naturally turns to protecting the balance sheet.
Economic management and hedging programs are working as intended and we closed the quarter with an RBC ratio above target at 440%.
Our investment portfolio is relatively conservative.
Is geared towards high quality investment grade issuers with an average credit rating of Ace III.
We ended the quarter with strong Holdco cash of $1 3 billion and returned $295 million of capital in the quarter.
Additionally, in July we upstream $930 million format of insurance subsidiary to the Holdco.
This will further support financial flexibility.
And provides confidence around our target, 50% to 60% payout ratio.
We continue to make progress towards mitigating the remaining $1 billion of redundant reserves associated.
She added with the regulation $2 13 and remain on track to complete by year end.
Furthermore.
As a result of our capital management program and continued strong business performance. We maintained our one 6 billion cash flow guidance for the year.
non-GAAP operating earnings for the quarter were $526 million.
Or $1 31 per share.
4% lower than first quarter 2022.
This primarily reflects a reduction in fees from lower account values and lower assets under management.
Additionally, our alternatives portfolio generated favorable returns in the quarter.
But lower than a year ago.
Assets under management at the end of the quarter with $754 billion.
Reflecting the market drawdowns and positive net flows for my retirement and wealth management businesses offsetting modest outflows from AEP.
Our top selling viola product, which provides downside protection for clients.
Continues to perform well in these markets and the quarter saw record sales and new business values.
We also completed the carve out acquisition.
And I'm pleased to note Cabell raised a further $2 billion of.
Assets under management since we announced the transaction.
While we are not immune to falling markets our business operations.
Operations are performing well and our capital management program continues to ensure we maintain healthy solvency ratios.
Okay.
On slide four.
Dig deeper into our capital management program and our solvency ratios.
We have broken the last three years down into half year segments.
Showing movements in the S&P 500 in Blue.
And movements in the 10 year treasury rate in Greece.
This is a period, which covers the COVID-19 pandemic.
Return of inflation and much more aggressive central bank tightening cycle.
The dramatic fall in both equity and bond values in the first half of 2022 is.
It's clearly showed with the S&P down more than 20%.
And the return on treasuries I've had the worst performance in over 40 years.
Recognizing that we have no innate ability to reliably predict markets.
Equitable's risk philosophy is designed to protect through volatile times.
This slide shows the results of how our product design.
Fair value hedging and economic reserving come together.
To ensure we deliver on our promises to both our clients.
And our shareholders.
Over this three year period.
Our reported RBC ratio has never fallen below 400%.
The surplus cash at Holdco today is $1 3 billion and we would be one of the very few companies that have consistently return capital irrespective of the market conditions.
Robin will go into some more detail here.
But I would like to leave you with two important differentiators for equitable.
Firstly.
Economic management is based on fair values that is interest rates as they are as per the forward curve not some all of which we estimate.
And policyholder reserves based on actual experience again, not some arbitrary estimate.
And secondly.
Hedging on our VA portfolio.
We hedge first dollar exposure to equity markets, and we immunize the balance sheet against interest rate movements.
This is unique to equitable. This is how we protect our balance sheet and this is how we protect cash generation for shareholders.
Of course in these times, we need both a robust balance sheet and a resilient business model.
Turning to slide five.
Our business is pay a well with each other and drive synergies that are hard to replicate.
With affiliated distribution.
Leading retirement and asset management subsidiaries, we participate in the whole value chain.
Benefiting both solutions, we offer to clients and returns we provide for shareholders.
We have meaningful synergy initiatives across our businesses.
At the half year.
We have deployed nearly 50% of the $10 billion General account capital commitment.
To generate additional yield.
And support growth in a higher multiple private markets business.
In our retirement business, we reported $5 billion in total premiums up 10% over the prior year.
Our individual group and protection segments.
All posted higher premiums above last year.
I, particularly want to highlight that this was a record sales quarter.
Our individual retirement business.
Further demonstrating the continued need clients have for our products.
Net inflows of $1 3 billion.
In our core retirement products are up 52% the highest since our IPO.
<unk> drive record value of new business.
We have realized $141 million of incremental investment income and we expect to complete our 2023 $180 million target ahead of time.
Net productivity saves amount to $39 million.
And again, we are on track for our 2023 target.
Turning to asset management.
Alliance Bernstein continues to perform well despite the current market conditions.
<unk> net outflows in the quarter were modest compared to many peers.
Supported by positive flows of $1 3 billion.
Within the institutional business, excluding low fee Axa redemptions.
While <unk> is not immune from industry wide outflows in taxable fixed income.
We see organic growth in active equities municipals alternatives and multi asset.
Notably AB continues to grow in actively managed strategies.
Quarter, two is the 11th consecutive quarter of organic growth within our active equity offerings.
Which along with growth in private alternatives has.
It has contributed to a 2% fee rate improvement over prior year.
We also benefit from strong long term performance, 82% of equity funds and 63% of fixed income funds have outperformed peers over the last five years.
This gives us confidence in our future outlook.
As previously mentioned.
<unk> completed the acquisition of call Val investors last month.
<unk> ability to raise an additional $2 billion of third party AUM between transaction announcement in March and closed in July .
Further supports the opportunity for growth.
<unk> now has $54 billion in the private markets platform.
An important differentiator for equitable is our affiliated distribution, we like this business we.
We continue to see strong flows within our broker dealer with $2 7 billion and total sales, 85% of which is in fee based advisory accounts.
On a year over year basis.
Average assets under advice is up 3% supporting earnings and cash flows.
Our advisors and a critical component to the success of our retirement business.
Representing approximately 50% of total premiums in the quarter.
<unk> productivity is up 9% over prior year.
I'll now pass over to Robin to go over our rich.
<unk> in more detail.
Thanks, Marc turning to slide six.
Ill highlight total company results for the quarter.
Reported results were $1 31 per share down 4% sequentially, primarily due to lower markets in the quarter.
Adjusting for $5 million of notable items in the quarter.
non-GAAP operating earnings were $531 million or $1 33 per share down 10% on a comparable year over year per share basis.
As expected the year over year decrease in earnings per share less notable was primarily driven by lower fee revenue in both our retirement and asset management businesses.
Additionally, prior year results included two months of earnings from the block that was reinsured debatable.
Overall results were within our expectations AG market movements in the quarter <unk>.
Impacted average AUM on a year over year basis.
Turning to GAAP results, we reported $1 7 billion in GAAP net income this quarter.
It was primarily driven by the non economic accounting treatment of our GAAP liability.
As a reminder to large gain reflects the variance between the movement in our GAAP liabilities very good movement in our economic hedging program.
This mismatch is unintuitive and will be reduce post <unk> implementation next year as GAAP accounting will move closer to fair value.
I can also confirm that our expected transition adjustment remained positive at current market conditions combined with our industry low three 5% GAAP interest rate assumption.
Continued to support a favorable impact to our book value now DTI.
Quarter end AUM was down 13%.
Market movements were partially offset by positive net flows in our retirement and asset management businesses over the last 12 months.
Looking ahead, we are mindful of potential headwinds that may impact fee based earnings.
We continue to focus on the execution of our general account rebalancing program, which has achieved a $141 million up to $180 million target.
And expense efficiencies of $39 million as we remain on track to achieve our $80 million net savings target.
This combined with our strong results in asset management, which outpaced peers and.
And record flows in our individual retirement business position equitable holdings, well his port client need and deliver shareholder value. During these times.
Turning to slide seven I would like to expand on Mark's earlier comments on our strong capital position and the effectiveness of our hedge program.
Both a testament to our economic management in the business, but also the actions we have taken over the last 10 years to ensure our product portfolio is hedged through a simple program that avoid surprises for investors.
Over the last decade, we fully move to an economic reserving approach, which incorporate realistic assumption.
This means that reserves are black both interest rate aligned with the <unk> forward curve and.
The behavior assumption, Derek Flatline, now 20 plus years of experience.
As a result, the interest rate and other assumptions assumed at the time of our original product pricing.
Do not impact our reserve our base case assumes that policyholders will always maximize the value of their contract.
Furthermore, disapproved applies to all of our businesses, both our legacy VA and the new business, we write today, leading to high confidence in the integrity of our birds aerie and certainty of future cash flows.
It not only ensures the new business generate strong risk adjusted return, but it allows us to avoid taking risks that cannot be hedged.
Economic regarding not only differentiates <unk> from our peers.
But it is especially important in periods of market dislocation.
Turning to our approach to hedging.
We believe we have one day simple and most predictable hedge programs in the market.
We seek to protect the economic liability and <unk> equity portfolio through a daily rebound dynamic program that fully hedges first dollar equity movements in interest rate exposures with simple plain vanilla instrument.
Both immunizing may impact the market on guarantees we provide the client.
This is supported by our data catching program.
Getting <unk> 98, protecting our statutory balance sheet and RBC ratio by hedging a portion of our bases on our insurance products.
Economic management and fair value hedging our key component to protecting our balance sheet product design minimizes the effect of other risk factors.
Over the last decade, we have made significant strides to transition our enforced.
<unk> shipped our new business towards products that support sound economic risk management, while meeting our client needs for accumulation income and protected equity solutions.
<unk> in 2009, we introduced passive investments and had to go and it can be paired with volatility management strategy.
Protect against extreme equity market volatility.
Today, approximately 75% of our in force is in passive hedgeable instruments with over 80% of equity exposure incorporating volatility management.
This significantly reduces basis rate by more than 90%, which in turn improves our hedge effectiveness manufacturing cost and capital stability.
We have also shifted new product design with 100% of new business post financial crisis, and fund option that invest in passive hedgeable indices and integrate tools that minimize the impact of elevated volatility.
<unk> better risk adjusted returns for clients and protecting shareholder interest.
In addition, our economic approach led the innovation of new products, creating the <unk> category in 2011, with our industry, leading SCS product, leading the fastest growing market within the VA space.
As a reminder, this product is perfectly al on that and investing credit, allowing us to compete against fixed index annuities at a lower cost of capital.
The combination of our economic management philosophy, rich experience data hygiene programs and product design.
John Kim with our deep talent bench, Dave equitable unique edge and creating capital phase in retirement solutions that deliver a narrow set of outcomes, we can fit in cash generation and capital return.
I will now turn to capital management program on slide eight and highlight how capital allocation is driving long term shareholder value.
Our retirement asset management and affiliated advice businesses continuing to generate positive return for shareholders as we execute against our strategic initiatives.
The close of <unk> transaction with carve out demonstrate our ability to execute against the strategy to drive a higher multiple growth without impacting capital return.
Using a b in it to fund the transaction and a deal that has no impact on capital return today and will be accretive to <unk> shareholders over time.
We also continue to maximize financial flexibility holding excess capital at holdings, which is even more important given market headwinds and challenging economic outlook are $930 million annual dividend from our retirement business and July was above our 750 million target.
It gives us confidence in our $1 6 billion of cash flow guidance to the market for the year with the retirement dividend offsetting some of the equity market impact on our other business lines.
As a result, we continue to deliver our consistent 50% to 60% payout target returning $295 million in the quarter, which included $220 million of share repurchases.
Our half year RBC ratio was at 440% highlighting our ability and maintain a strong capital position despite volatility in the market.
This reflects the strength of our fair value risk management and hedging program.
In addition, our capital position and financial flexibility was strengthened that holding with $1 3 billion of cash as of quarter end and that streaming $930 million from our retirement company.
We remain on track to mitigate the remaining redundant reserve associated with breakthrough 13. This year and we are fortunate to be able to point to both a strong capital position and a robust business performance across all business lines supporting consistent capital return for shareholders.
Looking ahead, we are mindful of the challenging market conditions, but we are well positioned to execute against our capital return objectives.
I will now turn the call back to Mark for closing remarks Mark.
Thanks, Robyn before we open up the line for questions I would like to summarize the highlights from the quarter.
First.
Economic reserving and fair value hedging program are unique to equitable and protect our balance sheet with.
We have shown a consistent and strong RBC ratio four.
440% as of quarter end.
Second.
We focus on maximizing economic value to generate distributable cash flows with a strong cash position at holdings, we reaffirm our one $6 billion of cash generation for the year.
Last.
Complimentary retirement asset management and advisory businesses continued to perform as expected through these turbulent markets, we see strong new business activity and value of new business across our subsidiaries.
With that I would like to open the line for questions.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Your first question comes from the line of Tom Gallagher from Evercore ISI. Your line is open.
Good morning.
Just wanted to start on the RBC ending at 440.
I would I would concur with your comments that that was a pretty good result, especially relative to some peers.
But it also implies that you didn't generate any capital during the first half of the year. So I just want to understand the components of this and how to think about it going forward.
Can you talk about you know.
What kind of normalized ongoing earnings power you believe is in the business as it is it still running at around 800 million annually.
And and if that's right that the $400 million get consumed by hedge breakage and door higher required capital.
Any help thinking through that would be appreciated.
Thanks, Tom Good morning, so our robust at 440% RBC ratio as of half year is a reflection of the effectiveness and strength of our economic hedging program as the hedge gains protected our strat statutory capital against the recent adverse market movements and a half.
Half year, where markets decreased by 20%, we were able to maintain our capital solvency and upstream additional capital to the holding company.
Like any period, there were several positive than negative one timers, which ultimately offset the primary driver was the impact in the protection of the hedge program and the cash flow that our business generates but it was offset slightly by adverse mortality in the first quarter and also market impact year to date, which impacted base fees that we generate looking.
Ahead, we remain within our target range.
Our consistent and we still see annual cash flows of $750 million is the guidance that we have within the insurance company.
Okay got you and then my follow up is.
I just wanted to understand the parameters around this 2 billion dollar higher reserve for Rec, two <unk> are there certain scenarios, where that will change over time.
Can you give some guardrails.
Under certain market scenarios, where you would see that changing either positive or negative markets.
Sure so.
With <unk> as you recall, we initially had $2 billion of redundant reserves as of last year, we resolved about half of that $3 billion to $1 billion Triple X reinsurance transaction with Swiss re in addition, we restructured the operating company to now have 50% of the cash flows unregulated and we remain on track as we mentioned in the call.
Fully mitigate the remaining.
Darius move with market so much directory 13 reserves, but the important factor for us is.
Reserves required about Cte 98, and that's what we would need to solve for in the $1 billion redundancy over time and Thats, what we plan to top or but you certainly have reserve movements between <unk> 21, and breakthrough 13 below it but it is offset by the hedging results.
And Rob just a quick follow up on that if I could just or are there scenarios, where we'll be talking about there's an extra $1 billion, let's say under certain market conditions that youll have to solve for again I think that's the concern in the market that you may fully solved for the $2 billion.
But under certain market conditions is it possible this reserve increases.
Yeah.
Now look we're fully focused on resolving this at the end of it and we're confident at the end of the year and will be resolve in this 1 billion redundant reserves and will no longer have to.
Concern ourselves with <unk>.
Okay. Thank you.
Your next question comes from the line of Ryan Krueger from K B W. Your line is open.
Hi, Thanks, Good morning, I had a question on the general account repositioning.
You achieved close to 80% of the originally guided NII upside, but have only redeployed about 50% of the asset. So could you comment I guess is that is that accurate and then if so.
So I.
Just can you comment on the potential upside to the original.
The original NII upside target that you gave.
Sure Ryan So the general account rebalancing program, we targeted $180 million by year end 2023 of which we've achieved $141 million.
So good results to this point, we do expect that we'd finished at $180 million earlier as a result of higher rates and spreads. So there may be upside on top of that as we head into 2023.
Part of your question is the $10 billion that we committed to ABB.
We are about 50% deployed but there are two separate targets, we want to commit 10 billion by 2023 and completed 180, but the two don't go together.
We will get benefits from the 10 billion fully deployed not only in the additional income, but a strong track record in raising $4 to five times of third party capital, which.
Effectuate the synergies between the insurance company and the asset management company and delivering value for shareholders over the long term.
Okay got it and then could you just comment on your U S. G exposure and any any color you can give on your own lapsed trends versus versus current assumption.
Sure. So as we mentioned in the presentation, our economic management means that we manage our assumptions to emerging experience in order to minimize large deviations in our reserving as such our policyholder behavior assumptions for all of our life business are based on the recent experience you know our objective is we never want to surprise in that.
There's adverse only.
Additionally, while some of our peers do have large exposure to U G. Our exposure is minimal.
We remain quite confident in our reserving integrity due to our economic focus onto reserves.
Great. Thank you.
Your next question comes from the line of Alex Scott from Goldman Sachs. Your line is open.
Hey.
First one I had for you is on the sort of the cash conversion of earnings.
The 1.6 billion.
You're retaining is the capital deployment this year.
It even relative to my estimates, which don't have alternatives being bad in the back half of the year yet.
You know, it's coming in above the 50% to 60%.
Range that you guys have talked about and when I consider all its are probably going to be about in the back half I mean, it's coming in materially better.
So I guess the question is what what is allowing that to happen.
Despite you've got Reg <unk> going on in markets down et cetera, what's allowing that to happen at the end of the day and.
Why or why shouldn't we believe that you could continue to be actually above that 50% to 60% range.
Look at the core at the end of the day is our hedging program and how we manage the business.
First dollar hedging helps protect them down equity markets and then supplement that with the statutory hedge has helped protect the balance sheet. That's why we were able to upstream the $930 million in July and felt comfortable to do so in a regulator felt comfortable to do so its because of the strength of our economic management, our guidance maintained because we upstream.
More than our 750 million got it in front of the retirement company, we still expect to have $1 6 billion and we'd expect that we continue to stay within our 50% to 60% pay.
Payout ratio our objective is always to maintain a consistency and returning cash to shareholders and you've seen that over time and that will continue.
Got it.
Second question I have is on just a holding company liquidity position you gave it at the end of the quarter. It obviously goes up because of the July dividend should we think about any of that being needed for a potential solution to Reg G. 13 like is it possible. Some of that gets used to be put into an internal captive or something like that to facilitate.
Solution or is that not in the picture.
I don't see that in the picture right now.
As I mentioned in the last call. Then we continue we have two options that we're working on to resolve <unk> external reinsurance and internal reinsurance we've made progress on both of them.
In the quarter. So we feel confident that we have the solutions to resolve <unk> and breakthrough 13 will be behind us as of yearend.
Thanks.
Your next question comes from the line of Elyse Greenspan from Wells Fargo. Your line is open.
Hi, Thanks.
Good morning. My first question now that you guys closed the carve out deal and I know in your prepared remarks right. You mentioned, how you were able to complete that deal right without using any of your excess capital can you just update us on just M&A thoughts from here in the pipeline and where you might focus on transactions and whatever.
<unk> would you like.
You know consider actually using your excess capital to finance.
Hi, Elyse, it's Marc I'll take that one yes, you're right to call Val deal was.
A really terrific deal for <unk> and for equitable on a b side really filled in some blank spaces on the private asset side.
We've seen the power of Caldwell and being able to raise 2 billion since the date of the acquisition and as you recall, we funded it from some of the units in.
Equitable holding off some of the units so it was.
Positive on the equitable side as well look we've always said that now with sort of a full five years in since the IPO, we will look at opportunities for inorganic growth, but we've always said that our strategy is not dependent on that so it's something that comes along that makes sense, we'll take a look at it as <unk>.
Belted, but it's not.
Needed for strategy the areas, where we would be interested would of course be on wealth management, that's an area which is.
<unk> capital.
Intense strategy and something where we've got a very solid unit to date.
The benefits would be something we'd be interested in and just growing out.
Ultimate platform at H B.
As we look but as I say, we would always do it in a way that is a key.
For shareholders.
That's one.
Okay. Thanks, and then my second question, you know mortality was favorable in the quarter.
Can you just give us an update on what you're seeing with Covid. Obviously, we've seen the number of deaths really slow and with the favorable mortality just driven off of.
Some releases of IBM <unk> for Covid as well.
Hey, Elyse I'll take that so the favorable mortality that we experienced was solely in conjunction with the sharp decline in U S Covid deaths.
We were obviously surprised with the U S. Covid deaths in the first quarter at 158000 and pleased to see that decrease to 30000, but we continue to monitor COVID-19 trends in the U S. As cases and hospitalizations are on the rise, but that's still not trending upward, but that said, we're maintaining our 30% to $60 million guide.
<unk> per 100000 U S deaths, and we'll continue to support our clients through these uncertain times.
But the favorability is linked to the lower U S deaths related to Covid.
Thanks for the color.
Your next question comes from the line of Jimmy <unk> from Jpmorgan. Your line is open.
Hey, good morning, So Robin you mentioned that despite the market being weak to see your cash flow guidance of $1 6 billion Hasnt changed.
Is it fair to assume that cash flow next year would still be impacted.
To the extent that.
In the unregulated subsidiaries with the markets being weak earnings are probably going to be pressured, but then in the regulated businesses.
The lack of increase in stat capital given the debt.
The stable RBC, despite no dividends being taken out debt and lower earning guns. Instead subs. This year than you might have expected at the beginning of the year still will have an impact on your cash flow next year.
Hum.
Or are there any other puts and takes that would be positive or negative.
Hey, Jimmy I'd say first this year to $1 six the reason we're able to.
Still keep the one six is because we're up streaming more than the $750 million guidance. We gave in the retirement company, but our businesses are not immune to to markets. We've transitioned to a capital light business, which means we are exposed to fee fee oriented impacts from equity market. So both the retirement and asset management.
We will certainly be impacted by markets, but we'll have a better feel for it as a as we get to the end of the year in terms of guidance for 2023.
Understood and to the extend you take out more than obviously less flexibility next year unless you wanted to place the capital base further.
Correct.
And then on buyback the amount in Tokyo dropped below what you had done in the <unk> and obviously <unk> was lower than what you've done in <unk> or in the second half of last year.
How should we think about the capital that you have at the holding company being used for buyback should be assume that buyback the pace of buybacks. This year is not going to be impacted given your.
Strong cash flow at the overall for the year or are you slowing down buybacks, a little bit given the uncertain macro environment.
Yeah. Thanks, Thanks, Jamie obviously, we're cognizant of the market environment around us.
But because we're able to protect our balance sheet through the hedging program that first dollar hedging and then additionally, the statutory hedging we are able to maintain buybacks at our pace and so our goal is to be consistent in the market and deliver returns to shareholders as we did demonstrate.
David over to pass on a year to date basis, we have returned a total of over $750 million to shareholders, including dividends. That's slightly ahead of the pace for the year relative to our guidance. This also translates to a 13% free cash flow yield, which we believe provides a significant value for shareholders and it's a level that is sustainable.
Due to the strength of our hedging program and economic management. So we remain fully committed to our 50% to 60% payout ratio and expect that to continue I wouldn't read too much into small timing difference between quarters, and we will continue to keep the pace and return capital to shareholders.
Okay. Thank you.
Your next question comes from the line of Andrew <unk> from Credit Suisse. Your line is open.
Hey, good morning.
<unk> been some time since you did the transaction with vulnerable on the variable annuity block.
Are you getting much interest in any of your other legacy blocks and and what's Equitable's interest in divesting in another of another block at this stage.
Andrew It's mark.
As Robin has indicated the priority for us has been.
Mitigating the rig to 13 redundant reserves Thats, where all of our focus has been and as Robin said, we remain pretty confident that we will have a solution for the remaining half of that by the end of this year, that's really where the team and myself have been lucky.
Okay. So not much focus there then.
Correct Mark.
Correct at the moment, it's been like two third thing that's been the dominant factor for us.
Got it and then just looking at.
Yes first year.
Premiums at $2 2 billion.
Pretty robust I think it's a record year.
Can you talk about market interest in the <unk>.
And the <unk> product in general and how equitable is doing in terms of its market share and competing.
Sure I'll take that one we see demand for protected equity solutions continuing to grow first given the structural shift.
Baby Boomers enter their next life stage, and then second further amplified by the current market dislocation and volatility it's really a solution thats right from this side is.
As Mark and Rob and highlighted we had record.
Second quarter sales over $3 billion and as a pioneer in developing this market over a decade ago with solutions anchored and economic realities. We think we've got a sustainable edge given our focus our continuous innovation and our differentiated distribution platform. This is both.
Over 4000 to equitable advisers as well as our long standing privilege third party distribution relationships.
Excellent. Thank you.
Your next question comes from the line of <unk> <unk> from Jefferies. Your line is open yes.
Yes. Thanks, good morning, just back on individual retirement, one issue we've seen with some companies that have sort of healthy blocks is this concept of sort of Florida out reserves, where you get this mismatch between hedges and reserve changes.
Wondering as your block evolves from post reinsurance is this something that could impact your.
Your capital position and your reserve position in that business.
Hey, if you needed. It is it's robin yeah to see us before.
Certainly at some point it could be in it and a period of highly rise in equity markets much farther away from we are today, but as your block becomes more healthier that is something that.
<unk> irregular I think could be exposed it doesn't impact equitable today, and we're far away from that point.
As we sit here today.
Okay got it and then I guess in wealth management.
One of the things that we've seen from other wealth management companies is sort of leverage to rising interest rates through either cash sweep programs or banks establish.
That was somewhat of a bank is that something that you guys do or could do in the future.
Just curious if that's an opportunity ahead.
Great I'll take that one this is Nick in the rising interest in <unk>.
It does help our earnings from sweeps.
Over the next several months, we expect to benefit from this Additionally, I would say our advisors continue to generate strong gross flows and net flows.
Adding to our overall earnings power of the business.
Can you quantify the benefit that you expect or is it is it not material.
We don't quantify it at this time.
Okay. Thanks.
Your next question comes from the line of Tracy Bengie from Barclays. Your line is open.
Thank you.
Nice achievement.
940 million Opco dividend, that's about EUR $750 million widened just a few questions there.
It was part of that special dividend since it was above your guide and it was above your 865 million in ordinary dividend capacity.
And I'm just wondering is that a higher dividend may change the mix. This year of cash flow sources would it be more skewed towards regulated.
First is not regulated I think your guide is 50 50 split.
<unk> reaffirmed the one 6 billion cash flowing toward all.
Sure Tracy said.
Our guidance from the retirement company, an annual earnings that we expected $750 million.
To get to a 1.6, you have to add back Alliance Bernstein.
And then are our investment management agreement that we have between the different life companies did.
$750 million, our ordinary dividend capacity for the year. The actual formula ended up being $930 million. So it's purely a function of our ordinary dividend formula.
And that's why we've upstream this year, yes, since we upstream more added a regulated company that percentage may be slightly higher this year, but over the long term. Our guide is 50 50, and a $1 6 billion of cash flows.
Got it.
And on Ta optimization any comment if you could see room for further enhancement.
Okay.
Yeah, as I mentioned earlier, where we achieved $141 million in the quarter were delighted at the progress we've made in partnership with a b and a life co.
We think we'll come ahead of the target of $180 million, which was year end 2023, as a function of rising rates and higher spread that we're investing in today versus gain forefront up so we're pleased with progress.
There is certainly probably upside, but we're cautious in the current credit environment to we want to be cognizant of the risks that may be out there is that we're focused on highly.
Hi, Lee highly rated names and ensuring that we're taking appropriate credit risk in this time.
Okay, and just one more I just wanted to make sure I understand a little conversation unfavorable mortality that was a function of lower COVID-19 losses, but there will be a point in time or COVID-19. It will be an endemic from Pam wallack like the flu. So then I can't imagine every quarter, we will see favorable mortality.
So I'm wondering if there are other offsets in there like non COVID-19 mortality that ran below trend.
Yeah, both of them ran below 10, non COVID-19 and <unk>.
And COVID-19 the Covid mortality for us that was very minimal in the quarter. So.
It is.
Mortality overall on non Covid related came in on there and we continue to see good results through this month. So we're pleased where we are and we maintain our 75 million guidance for the protection solutions segment, but acknowledge there is volatility around it where mortality.
Okay.
Your next question comes from the line of Mark Hughes from <unk> Securities. Your line is open.
Yeah. Thanks, good morning.
Your guidance around the $150 million impact from a 10% market move.
Pretty mechanical or given that we've had a lot of volatility.
Do you see the gap is still pretty much on the mark or is your experience, perhaps a little bit different.
Hey, Mark Yeah, No. We're still we still believe in the 10% $150 million guidance across aircraft, the retirement and asset management company.
And based on what we're seeing it aligns pretty well.
Okay and then.
Any change you've seen.
Maybe either in individual retirement group retirement Arun.
Customer behavior, perhaps withdrawals I think you talked about lower outflows from the legacy VA block.
Clearly seem to be getting more inflows, particularly with the SCS product. So can you sort of curious whether in these times of inflation consumer strength.
Sort of thinking whether you notice any behavioral changes in your customer base.
Yes, Mark this is Nick I think in these times consumers are looking for more resilient portfolios and I think it speaks to the power of insurance as an asset class. So we're seeing that in terms of demand for new products.
Not seen material changes in enforce favor at this time.
Thank you.
And there are no further questions at this time. This does conclude today's conference call. Thank you for your participation you may now disconnect.
Please wait the conference will begin shortly.
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