Q3 2023 Equitable Holdings Inc Earnings Call

Good morning, My name is Krista and I'll be your conference operator today at this time I would like to welcome everyone to the act equitable holding the third quarter earnings call 2023.

To prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time simply pressed star followed by the number one on your telephone keypad and if you would like to withdraw your question. Please press star one again. Thank you I will now turn the conference over to Eric Dot.

Had of Investor Relations, you may be getting a conference.

Thank you good morning, and welcome to equitable holding his third quarter of 2023 earnings call material for today's call can be found on our website at I R. Dot equitable holdings dotcom.

Before we begin I would like to note that some of the information. We present today is forward looking and subject to certain F. C C rules and regulations regarding disclosure Ah.

Our results may materially differ from those expressed in or indicated by such forward looking statements.

Please refer 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 of Equitable Holdings Robin Roger You are Chief Financial Officer, Nick Lane, President of Equitable financial they'll Seamers Alliance Bernstein's interim Chief Financial Officer, and owner, Arizona head of the Alliance Bernstein's Global client group in private.

Wealth business.

During this call 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 may be found on the Investor relations portion of our website and our earnings.

Release, slide presentation and financial supplements I.

I would now like to turn the call over to Mark and Robyn for their prepared remarks, good morning, and thank you for joining today's cool.

This is a promising time for equitable in the life insurance industry is the combination of higher interest rates and favourable demographic trends provides the best backdrop for growth we've seen in well over a decade.

Equitable is particularly well positioned to capitalize on these tailwinds given a unique business model, which allows us to monetize all three components of the insurance value chain called.

Product manufacturing asset management and distribution.

On slide three we present, an overview of the third quarter.

Third quota non-GAAP operating earnings with $413 million or $1.15 per share up 16% year over year, but down 2% compared to the second quarter modestly below our expectations.

Adjusting for notable items in the period, which included lower Alternatively tunes elevated mortality and a higher tax rate.

<unk> gap operating earnings per share, what's $1.30, which is up 15% compared to the third quarter of last year and up 2% sequentially.

Robin will touch on this in more detail in a few minutes.

We continue to benefit from momentum and both have retirement and wealth management businesses with a combined $3 billion of net inflows in the quarter.

Supported by record demand for industry, leading Buffett annuity and 4100 proprietary advises which enable us to capture distribution margin.

Retirement offerings and investment products.

An asset management will not immune to industrywide pushes with 1.9 billion in outflows and quota three but active flows with nearly flatten the quarter a better result, dental most peers.

Turning to capital businesses continue to deliver diverse sources of earnings, which ultimately leads to a more predictable cash flow.

Yeah to date, we have generated approximately $1 billion of cash to holdings and remain on track for a $1.3 billion guidance for the year.

Importantly, more than half of our cashflow now comes from nonregulated entities, which makes it more predictable.

All cash generation and wholesale cash position of $2 billion.

Continue to support meaningful capital return to shareholders.

We returned $350 million in the quarter and over $900 million a year to date.

Putting us on track to come in at all above the high end of a 60% to 70% payout ratio target.

Third quarter results also reflect a annual assumption with you the first under the L. D T I accounting framework.

The minimal impact to operating results reflects the benefits of a conservative approach to setting assumptions.

And designing products with a narrow range of outcomes.

We continue to focus on driving profitable organic growth to cross that businesses.

Executing against the strategic priorities outlined that are invest today, including a yield enhancement and productivity initiatives.

We are also benefiting from higher interest rates, which are at levels, we haven't experienced in over 15 years and.

And favourable demographics with 11000 Americans turning 65 each day.

And now general account hire new money yields and the continued demand for a while a product furthers the shift and I have a time in business towards spread based earnings.

Higher interest rates have also been a tailwind for our wealth management segment with revenue on cash balances supporting operating earnings growth of over 80% over prior year quota.

Current interest rate levels put us ahead of plan relative to a 2027 target to double earnings to $200 million per annum.

On slide for all.

I'll touch on the favorable impact of higher interest rates and a bit more detail.

We have often talked about a market neutral balance sheet, which means that we H first dollar interest rate exposures and equity market exposures on the guarantees we've made to our clients.

This means that we are not making a bet on the direction of markets when we price products.

As a result.

B C ratio has remained in a narrow and comfortable range, despite significant volatility and interest rates and markets over the past few years.

This ultimately enables us to drive consistent test generation and capital return to shareholders.

While our balance sheet is neutralized from the impact of the interest rate movements high rates to provide a meaningful tailwind tour earnings and growth outlook.

Ah retirement product offering is more attractive to clients.

Evidenced by a second consecutive quarter of record sales and Netflix.

Importantly, higher rates also named better economics for our shareholders and we're generating ionopause about 15% and a record value of new business.

As a reminder, strong with time in sales also benefit a b and wealth management business.

And a general account, we're investing your money at levels at 160 basis points above portfolio yield, which is driving hi, Annette investment income and widespread.

Finally, we will also realizing a benefit in wealth management with increased revenue on cash sweeps supporting strong.

Over your earnings growth.

Turning to slide five.

We highlight the strong results, we are seeing across our businesses as we continue to execute against growth strategy.

And retirement, we reported a record quota with $1.5 billion of net inflows, a 5% annualized organic growth rate with strong results in individual retirement of setting typical third quarter seasonality and a group retirement segment.

Total premiums were $5.4 billion in the quarter up 17% year over year led.

Led by our industry, leading violet product with $3.1 billion in premiums up 37%.

Yeah.

An asset management, we continue to drive growth and apply that markets platform with $8 billion of our initial $10 billion capital commitment from Equitable's General account deployed to date.

And an additional $10 billion committed at our Investor day in May, bringing a cumulative commitment to $20 billion.

The acquisition of Carvel also significantly enhanced abies offering.

And private Marcus a U M as growing 11% year over year to $61 billion as of quarter and.

The total net outflows with a b of $1.9 billion in the quarter were modest relative to the industry.

With active flows nearly flat and outpacing peers.

Organic growth in the retail channel was attributable to taxable fixed income and municipals and U S. Retail flows have been positive for 12 of the last 13 quarters.

Fixed income performance remains strong with nearly 75% of assets outperforming over the one and three year periods.

And the institutional channel fixed income and passive outflows offset organic growth in active equities.

The pipeline remains strong.

With $12.5 billion of unfunded mandates and private alternatives <unk> more than 80% of the fee base.

Wealth management segment, which is the fastest growing portion of our business reported 8% annualized organic growth and the quota with $1.6 billion of net inflows.

Net inflows and market Tailwinds over the last 12 months drove 16% year over year growth in assets under administration now $79 billion.

While operating earnings are benefiting from higher interest rates.

We're also seeing improved adviser productivity, which shows up 2% compared to the second quarter of this year.

Increasing advisor productivity is a key lever to drive higher wealth management margins and we are encouraged by the momentum in this business.

I will now turn over to Robin to provide additional updates on the quota.

Robin Thanks.

Thanks, Mark turn into slide six I'll touch on the results for the third quarter.

On a consolidated basis equitable holdings recorded non-GAAP operating earnings of $430 million in the quarter or $1.15 per share.

Up 16% year over year.

After jumping for $67 million of unfavorable aftertax notable items and a favorable assumption update a $12 million non-GAAP operating earnings were $468 million or $1.30 per share up 15% on a comparable year over year per share basis.

We also generate a net income of $1.1 billion or $3.02 per share.

Under L. D T. I every corner that we have reported as a result in positive net income.

Sure we remain eligible for inclusion in <unk>.

While please with the underlying growth momentum across our business third quarter EPS came in below consensus expectations and our view of the run rate earnings power for the business.

This wasn't noisy quarter and I'm paid seven I'll walk you through major moving pieces and how we're thinking about the outlook going forward.

Turning to page seven.

There are three items that affected results across the enterprise.

<unk> alternatives and prepayment income or $20 million below are known my expectation.

Our alternative portfolio had an annualized return of six per cent in the quarter as solid private equity results were offset by the continued weakness in a real estate equity investments.

Which represent 20% of the alternatives portfolio.

As a reminder, we normalize the low end of our eighth at 12% normal life return expectations.

Looking forward, we expect similar returns in the fourth quarter.

Project further recovery and performance in 2024.

Second we completed our 2023 assumption update and made some model changes in the third corner.

Which resulted in 16 million favorable adjustment.

The modest changes reflect our fair value management philosophy, which incorporates emerging experience into our assumptions.

When it surprises like large unlocked for investors.

Lastly, the consolidated tax rate in the quarter was 22 per cent above or 19% expectations.

This quarter, we had an unfavorable David and received the <unk>, which drove the higher rate.

While taxes can bounce around each quarter. We continued to estimate of 19 per cent consolidated tax rate and is 17% tax rate for the insurance business.

We also had a few items that affected specific business segment that I wanted to highlight.

Protection solutions earnings were $34 million hired in the second quarter.

Low or guidance at 50 to 75 million per quarter near term.

Overall growth mortality claims, we're close to our updated assumptions.

My neck claims came in higher than expected you to last reinsurance coverage.

In a typical quarter about 15% of our gross claims are covered by reinsurance.

But this quarter, we only had coverage on 10%.

It was about a 23 million after tax variants.

Justin for weight segment, earning would've been at the lower end of our expected range.

We still viewed 50 to 75 million at our best estimate of near term quarterly earnings power of the data.

We expect us to move higher over time.

As a reminder, why we expect some continue drag from a pull forward and mortality in the next few quarters.

The minimal impact on cash generation.

Since we have already adjusted the statutory assumptions to account for the increased COVID-19 endemic related mortality.

I would also note that we had a modest positive adjustment from our actuarial assumption update.

Underscoring the conservative assumptions for our block.

Moving forward, we look for ways to reduce the earnings volatility in the protection solutions segment.

Such as by adding more reinsurance or reducing retention limits.

An individual retirement, we delivered a second straight quarter, a record sales and airflows highlighting the growing consumer demand for protected equity in securing come solutions total sales were $3.8 billion <unk> 1.7 billion.

Which continues to be driven by our spread base <unk> product S. T S.

This momentum bodes well for the future growth and individual retirement earnings and cash generation.

However wanted the dynamics, we've seen is that as the terms, we can offer to policyholders improves with higher interest rates.

Some increase laps activity and are in fourth block <unk>.

Which we have factored into our near term assumptions.

Under GAAP accounting requires us to amortize more gas and we expect quarterly amortization expense to be roughly 5 million higher gone forward.

This is a modest near term headwind burning I would emphasize too thin.

One as we mentioned earlier receding record <unk> and a growth in this block will have a much bigger impact on earnings over time.

Secondly, Jack amortization into non-cash expense.

No change in projected cash flow for the business.

Overall, we continue to be very bullish on the outlook for individual retirement.

In wealth management, we collected 5 million of lower Commission related earnings this quarter due to a lower level of four three detail.

This corresponds with the seasonality in our group retirement business related to teachers being off during the summer months.

Forward, you should assume some seasonal pressure on the wealth management results in the third quarter, but.

But we <unk> $45 million of earnings at a better run right you'd think about for the fourth quarter.

Finally, I'm corporate another regenerated normalized loss of $109 million, which is worse and are expected quarterly run rate of roughly $100 million.

This is due to timing on some expenses.

Nothing back, though we remain confident in our ability to grow EPS at 12% to 15% annual rate through 2027 across.

All of our businesses, we continue to control. The controllable. We are ahead of our plan for achieving the hundred and $10 million general can yield enhancement target helped by the higher rate environment.

Additionally, we're ahead of schedule on 150 million expense savings target and expect a capped at 30 million run rate of savings get here.

Finally, I'd Mark Pecina earlier, the higher rate environment provides a strong talent for new goodness across all three retirement businesses. We are running well ahead of our projection for D M B and 2020th way, which will contribute to future earnings and cash flow.

Turning to slide eight <unk>, earning that lead to our consistent cash generation.

Or a deliberate actions over the last five years to shrink our legacy block <unk> wealth management, and private markets business and expand our core retirement and asset management market have led us to meaningfully grow earnings and cash flows while also shifting to a higher quality ma'am.

At the same time, we consistently convert earning cash flows in our retirement business for two reasons.

The business is strongly capitalized and tightly heads ensuring our balance sheet market neutral.

Enabled our earnings and cash to remain stable through volatile market.

Second $200 million of the cash flows from these businesses are unregulated and go directly to the holding company, Brian bathroom management contract.

As a result, Ah retirement cash when I was a much more consistent and higher quality than other retirement players in the industry.

At the same time, we have too high quality unregulated businesses and acid in wealth management that comprise the remaining 40 per cent of our anticipated 1.3 billion of cash will get here.

This business converts nearly 100 per cent guarantee to cashbox.

The quality and durability of cash flows enabled us to increase our payout target earlier this year to 60% to 70% of operating area.

Data 20 percentage point increase since our I P S.

Stating a significant shift in our business over time.

This leads me to our next slide raw dive deeper into our capital management program.

Turning to fly nine.

Strong cash generation continues to drive shareholder value.

<unk>, we return $315 million, which includes $238 million a share repurchases, resulting in an 8 million share count reduction.

Over the last 12 months, we have returned 1.1 billing to shareholders, reducing our shares outstanding by 8%.

At the same time are holding company cash increased to $2 billion after taking a David and from the insurance subsidiary.

Our cash position gives us confidence to continue paying at 60% to 70% of non-GAAP operating earnings even involved to market.

It also enables us to play offense and be opportunistic rather than being on the defense.

Year to date, we about screened 1 billion of dividends to the holding company and remain confident that we will hit our 1.3 billion target for the year.

In the fourth quarter, we will receive unregulated dividend from alliance Bernstein, our wealth management business and our investment management contract with a retirement company.

From an investor perspective, we believe that equitable holdings prevent an excellent value proposition.

After paying interest expense, we expect to generate 1.1 billion of distributed free cash flow, which represent the 12 per cent free cash flow yield.

Our businesses have strong organic growth potential and we expect cash generation to increase by 50% <unk>.

2 billion by 2027.

With that I will now turn to call back and Mark for closing remarks, Mark. Thanks.

Thanks, Robyn in closing, we continue to benefit from momentum and both of assignment and wealth management businesses with a combined $3 billion of net inflows in the quarter.

Balance sheets and capital position remain robust with conservative assumptions, resulting in no material assumption with you impact.

Ah cash generation and Holdco cash position of $2 billion continues to support consistent capital return to shareholders checking at all above the high end of 60 to 70 per cent target payout ratio.

We remain on track for the financial guidance, we outlined at our invest today as we continue to focus on driving growth crush up businesses, while capitalizing on the tailwind provided a higher interest rates.

That will now open the line for questions.

Thank you as a reminder, if you would like to ask a question. Please press star followed by the number one on your telephone keypad and we ask that you limit yourself to one question and one follow up.

Your first question comes from the line of Elise Greenspan from Wells Fargo. Please go ahead.

Hi, Thanks <unk>. Good morning, My first question, it's not protection solution. So.

You know in the fourth quarter, if mortality is expected to stormy unallocated and you know in the slide you guys 0.82 alternative results being similar to the Q3 sequentially. So what does that imply that in the fourth quarter, you would still fall below that 50 to 75 million target or is there something I'm missing an arrow.

Is there you know normalizing on the reinsurance side I'm, just trying to piece that altogether.

Thanks, Elise so for protection and the fourth corner Fourthquarter, we continue to expect to see somebody to pull forward come through that would put us in the range of 50 to 75 million guidance. We continue to expect that range over to near term in in protection solutions, and then obviously somebody off would come.

I'm against that as well and so from a normalized basis, we should be at the lower end of the range when considering <unk> as long as we remain at that midpoint in the third quarter to give you comfort in D. C. On a normalized basis. We are at the lower end of the range of 49 at 49 million or 50 million, we continued to see.

Good momentum and improvement in actually gross claims, but as you noted we did see some to reinsurance coming lowered unexpected we're at 10% into quarter versus 15% historically and we'd expect that to normalize gone forward as well <unk> reminder, again to pull forward and what we've seen the range had no impact on the cash flows into cash.

<unk> continue to grow strongly overall across our businesses.

Thanks, and then there was like around 1.5 billion dollar impact to net income for the V. A product feature line. This quarter I had thought that that would be smoother under L. T. T. I can you just give some color on what went on there in the corner.

Sure. So we you know as I mentioned him to call. This is the seventh straight corded at we seen positive net income post L. D. T I and so we're we're comforted and continue to see positive results. There on our hedging program, we do <unk> with the general account and some on the interest rate sides that agenda.

Your account flows through a OCI vs. The liability flowing through the V. A product features.

And then we do that perfectly to avoid statutory volatility and so we can have consistent capital returns. So it should be in line with the sensitivity that we've given for interest rates in as it relates to L. B T I.

Okay. Thank you.

Your next question comes from the line of Tom Gallagher from E. V. R. Please go ahead.

Thanks, <unk> Robin just following up on your comment on considering reinsurance Adair.

Additional reinsurance purchases on your protection block to lower volatility.

Can you talk a little bit about what you're considering there would pricings like.

Is that is that likely to lower the earnings in the segment.

Would you not seeing.

<unk> would you not expected to have much of an impact.

Sure Tom look at for protection, we're not we're obviously not happy with the results for the business and so therefore, we are exploring options to mitigate volatility of the results and we'd hope to mitigated by hopefully at some point in the first half of next year certainly in D. If.

Lope relative it appears we've historically bad higher retention limits on that business, that's a function of us being a subsidiary part of a big company at previously before I P O and so we have to explore retention limits, obviously, if we give up and we reduce the volatility you're giving up some long term economic or.

Return so that's the trade off that will continue to assess but we're in discussions or reinsurers and assess windows tradeoffs.

Okay. Thanks, and any I know, it's early just came out yesterday, but any initial thoughts on this new department of labor proposal on retirement.

And how that might impact on the industry you're equitable.

Sure. Tom This is Nick we are still digesting the almost 500 pages with that said initial reading.

<unk> for us from the D. O L is that all rollovers from ERISA 401k plans will be considered fiduciary activities and while in spirit This'll lines with the 2016 rule what is different in this iteration. It. It does not include any private rights of actions and sense too.

Krista: Good morning, my name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Equitable Holdings 3rd quarter earnings called 2023. All lines have been placed on you to prevent any background noise.

16, a majority of firms have revamped are complying processes to align with the existing S. E C and state best interest and fiduciary rules. What does this mean for the industry. The biggest impact appears to be that nonsecurity licensed insurance agents that sell <unk>.

Krista: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, follow by the number one on your telephone keypad. And if you would like to withdraw your question, please press star one again. Thank you.

Erik Bass: I will now turn the conference over to Erik Bass, Head of Investor Relations. You may begin your conference. Thank you.

Registered products like fixed index annuities will now be covered there's also some interesting language Pauline robo advisers and scope for equitable we see no material impact given the investments we've made it.

Erik Bass: Good morning and welcome to Equitable Holdings 3rd quarter 2023 earnings call. Material for today's call can be found on our website at ir.equitableholdings.com. Before we begin, I would like to note that some of the information we present today is forward looking. I can 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. Please refer to the safe harbor language on slide two of our presentation for additional information.

And the changing landscape as a reminder, equitable advisers operates today under the higher S. C. C rugby I fiduciary standards 403, b plans or not in scope and our individual annuity products are registered products registered products securities sold through registered broker dealer.

<unk> channels going forward will continue review the details and I do expect there to be significant industry comments over the next 60 day period.

Erik Bass: Joining me on today's call is Mark Pearson, President and Chief Executive Officer of Equitable Holdings, Robin Raju, our Chief Financial Officer, Nick Lane, President of Equitable Financial, Bill Seamers, Alliance Bernstein's Interim Chief Financial Officer, and owner, Arizona, head of Alliance Bernstein's Global Client Group and Private Wealth Business. During this call, we will be discussing certain financial measures that are not based on generally accepted accounting principles, also known as non-gap measures. Reconciliation of these non-gap measures to the most directly comparable gap measures and related definitions may be found on the investor relations portion of our website in our earnings release slide presentation and financial supplement.

Specific provisions that will provide more clarity.

Alright, Thanks, Nick help that was helpful.

Your next question comes from the line of <unk> from J P. Morgan. Please go ahead.

Good morning, So first just a question or maybe should we assume that flows in the business and obviously other asset managers have been affected by this but should we assume that flows are gonna be challenging until there's a little bit more stability in interest rates in the equity market or are there other things that suggest that things might improve in your business in the near term.

Thanks to me this is <unk> and I'm from a b.

Mark Pearson: I would now like to turn the call over to Mark and Robin for their prepared remarks.

As you pointed out it has been a tough environment that said if you look at our active clothes in the third quarter, we were roughly flat, which was better than other peers that reported so far.

Mark Pearson: Good morning and thank you for joining today's call. This is a promising time for Equitable and the life insurance industry as the combination of higher interest rates and favorable demographic trends provides the best backdrop for growth we've seen in well over a decade. Equitable is particularly well positioned to capitalize on these tailwinds given our unique business model, which allows us to monetize all three components of the insurance value chain product manufacturing, asset management and distribution.

So.

Good Nevada relative performance on the business.

And let me look at the growth engines, we feel pretty good about the momentum we works top 5% in equities in Munising. The U S retail top three per cent in cross border taxable fixed income so I'll definitely feeling good about those you want an institutional which led to the outflows overall.

Mark Pearson: On slide three, we present an overview of the third quarter. Third quarter non-gap operating earnings were $413 million or $1.15 per share up 16% year over year but down 2% compared to the second quarter modestly below our expectations. Adjusting for notable items in the period, which included lower alternative returns, elevated mortality and a higher tax rate, non-gap operating earnings per share was $1.30 which is up 15% compared to third quarter of last year and up 2% sequentially.

Including passive actually institutional equities hidden annualize organic growth rate of 7%. So if you feel confident about the diversity of our growth engines, it's an and finally, our institutional pipeline remains very strong at 12 billion and the effect of <unk> on that is three times the effective.

<unk>, we have today and institutional business. So I'll definitely revenue creative so we have a lot of strength to feel good about that said, we cannot predict the rates.

And the <unk> definitely keeps the investors on the sidelines and skews the flows towards money market funds, then low risk low fee products. So cannot time, it's perfectly feel confidence in terms of our ability to perform well, but definitely there could be some sluggish.

Mark Pearson: Robin will touch on this in more detail in a few minutes. We continue to benefit from momentum in both our retirement and wealth management businesses, with a combined $3 billion of net inflows in the quarter, supported by record demand for industry-leading buffered annuity and 4,100 proprietary advisors, which enable us to capture distribution margin for our retirement offerings and investment products. In asset management, we were not immune to industry-wide pressures, with 1.9 billion in outflows in quarter three, but active flows were nearly flat in the quarter, a better result than for most peers.

Uhm, depending on the rates environment.

Okay.

And then Robin on on the protection I think <unk> than your estimates or your guidance for six of the best seven quarters and there's always some reason obviously for that and it's very doable time, but still.

Still gives you the confidence that 50 to 75 is the right range should or.

Or have you thought about lowering the range given results in the last several quarters.

Sure Jimmy you're right, it's come in below our expectations uhm over the last few periods, but on a normalized basis for those for to reinsurance did I mention it in case it did come in at the lower end or arrange even <unk>, even taking into account the alternative portfolio, so seeing that come through.

Mark Pearson: Turning to capital, our businesses continue to deliver diverse sources of earnings, which ultimately leads to a more predictable cash flow. Year to date, we have generated approximately $1 billion of cash to holdings, and remain on track for our $1.3 billion guidance for the year. Importantly more than half of our cash flow now comes from non-regulated entities, which makes it more predictable. Our cash generation and whole co-cash position of $2 billion continued to support meaningful capital return to shareholders.

Really knowing if we went back to our 15% reinsurance coverage that we've had we would have been at the lower end of the range and also seeing gross claims improved quarter over quarter. That's what gives us confidence in the range, but you know we're not yet relying on confidence we're gonna obviously explore actions to reduce the volatility of the business because honestly, it's a <unk>.

Mall part of equitable holdings, we generate 1.3 billion of cash flows it's grown into billing of cash flows and you know we're answering questions about volatility in a small segment here. So we'll look to reduce that uhm going forward and get the focus back on our ground caseloads by 50 per cent to 2027.

Mark Pearson: We returned $315 million in the quarter and over $900 million a year to date, putting us on track to come in at or above the high end of our 60 to 70% payout ratio target. Our third quarter results also reflect our annual assumption review, the first under the LDPI accounting framework. The minimal impact operating results reflect the benefits of our conservative approach to setting assumptions and designing products with a narrow range of outcomes.

Okay. Thank you.

Your next question comes from the line is Alex Scott from Goldman Sachs. Please go ahead.

Hey, Good morning first one is just a quick follow up on the comments on the fiduciary rule I think you mentioned there was no private right of action I I notice in the <unk> I thought there was an enforcement section that mentioned the private right of action I think there may be a new one sir with like tired of one verse titled two or something but.

Mark Pearson: We continue to focus on driving profitable, organic growth across our businesses, executing against the strategic priorities outlined at our investor day, including our yield enhancement and productivity initiatives. We are also benefiting from higher interest rates, which are at levels we haven't experienced in over 15 years, and favorable demographics with 11,000 Americans turning 65 each day. In our general account, higher new money yields and the continued demand for our Ryla product further the shift in our retirement business towards spread-based earnings.

Just interested in that that piece of your common and where you're rid of of that language on enforcement with.

Yeah at this time it we would do it as of nuance, but will be coming back with more details on that.

Okay understood.

Second question I had was just on the environment for <unk> production and competition are you seeing.

Any more competition coming in from the private equity players are they are they starting to get any more traction and some of the distribution channels, where I think you you all haven't had the computers directly with them are you are you still able to avoid some of the pressure is there a sort of lagging more into private debt allocations and they're able to provide pretty pretty.

Mark Pearson: Higher interest rates have also been a tailwind for our wealth management segment, with revenue on cash balances supporting operating earnings growth of over 80% over prior year quarter. Current interest rate levels put us ahead of plan relative to our 2027 target to double earnings to $200 million per annum. On slide four, I'll touch on the favorable impact of higher interest rates in a bit more detail. We have often talked about our market neutral balance sheet, which means that we hedge first dollar interest rate exposures and equity market exposures on the guarantees we've made to our clients.

[noise] strong pricing.

Yeah at this time.

Her comments Robyn made you know we had a record quarter in terms of flows in sales competitive dynamics continue to be positive visa V. Other markets given our edge in terms of being a pioneer in the mortgage given our distribution footprint both equitable advice.

Or some privilege third party and given our innovation space. We think we're uniquely captured to capture to capture a disproportionate share the value there.

Mark Pearson: This means that we are not making a bet on the direction of markets when we price products. As a result, our RBC ratio has remained in a narrow and comfortable range despite significant volatility in interest rates and markets over the past few years. This ultimately enables us to drive consistent cash generation and capital return to shareholders. While our balance sheet is neutralised from the impact of interest rate movements, higher rates provide a meaningful tailwind to our earnings and growth outlook.

They could still the case that it's sort of eight players in the market. They are against nearly 50 players in the <unk> fixed annuity market. So we were away uhm, Alex what the you know the.

Possible new insurance, but at the moment, we don't see it in passing remains very very soon.

Thank you.

Your next question comes from the line of <unk> connect from Jeffries. Please go ahead.

Mark Pearson: Our retirement product offering is more attractive to clients, evidenced by a second consecutive quarter of record sales and net flows. Importantly, higher rates also mean better economics for our shareholders, and we're generating a stronger retirement sales, also benefit AB and our wealth management business. In our general account, we're investing new money at levels that are 160 basis points above our portfolio yield, which is driving higher net investment income and wider spread. Finally, we're also realising a benefit in wealth management, with increased revenue on cash sweeps, supporting strong year-over-year earnings growth.

Thanks, Good morning, So Mark I think in your closing comments, he talked about being opportunistic with capital and clearly you have a lot of capital at the holding company.

Is is is one way we might see that is you traveling above the 60% to 70% payout target for some period of time as we move into 2024.

We're not changing the guidance, but if you look in this lost a quota we actually did travel up slightly higher than than that particular ratios. I think is both open and I have said with.

A healthy balance sheet as as we have now and the the excess cash that as a naval us to look at opportunities I mean, the most recent one we did of course 15 months or so ago was this call Bell that really was a way to accelerate our strategy in the build.

Mark Pearson: Turning to slide 5, we highlight the strong results we are seeing across our businesses as we continue to execute against our growth strategy. In retirement, we reported a record quarter with $1.5 billion of net inflows, a 5% annualised organic growth rate, with strong results in individual retirement of setting typical third-quarter seasonality in our group retirement segment. Total premiums were $5.4 billion in the quarter, up 17% year-over-year, led by our industry-leading Ryla product, with $3.1 billion in premiums, up 37% year-over-year.

Out of all that remains an area wait wait we're very interested in and we remain though you're interested in wealth management and and growing distribution in that size. So all auto let's say so in it for the right deal at the right price and where we can see accretion for our shareholders we will be.

I would be interested in looking at the but it's it's not a strategy I'll suggest you would manage to build out those those businesses, if we see a way to accelerated.

Located.

Got it makes sense and then I guess as we think about the build out of the private asset portfolio within the general account I think you're marching towards that sort of 25 billion. How should we think about the capital requirements associated with that growth in in private.

Mark Pearson: In asset management, we continue to drive growth in our private markets platform, with $8 billion of our initial $10 billion capital commitment from equitable general account deployed to date, and an additional $10 billion committed at our investor day in May, bringing our cumulative commitment to $20 billion. The acquisition of Carvelle also significantly enhanced AB's offering, and private markets AUM has grown 11% year-over-year to $61 billion as of quarter-end. The total net outflows at AB of $1.9 billion in the quarter were modest relative to the industry, with active flows nearly flat and outpacing peers.

Sure. It's it we're we're about 80% of the year through and getting through our $10 billion for the year and so we have confidence in that and then we have another 10 billion dollar commitment to a <unk> business and as you know the big the Big Prize. There is a V growing that too you know almost 90 billion by 22.

G seven and it being 20 per cent of revenues at Alliance Bernstein. So that's the Big Prize for EQ H, obviously as our business grows we have to hold capital for the for the ripped out we take them, but this is coming with the growth in our overall business and we're not fundamentally shifting to mix that we see so we don't see significant.

Capital constrained as a result in the movement of the general account until forever. Historically, if you look back.

Mark Pearson: Organic growth in the retail channel was attributable to taxable fixed income and municipal, and US retail flows had been positive for 12 of the last 13 quarters. Fixed income performance remained strong, with nearly 75% of assets outperforming over the one and three-year period. In the institutional channel, fixed income, and passive outflows offset organic growth in active equities. The pipeline remains strong, with $12.5 billion of unfunded mandates and private alternatives comprise more than 80% of the fee base.

Every dollar that we put in into alliance Bernstein, they've grown $4 worth of third party money. So we think it's a great value proposition for shareholders without constraint and capital.

Sorry that sort of capital requirements on the privates are not materially different than what you guys were.

Holding before.

Now if you look at our business mix today in terms of what we have in private credit and what we have an alternative that next in the general account isn't shifting significantly from now to 2027. So it's coming a lot of it is coming from growth in our underlying business.

Okay got it thanks.

Your next question comes from the line of Tracy and then Kiki from Barclays. Please go ahead.

Mark Pearson: Our wealth management segment, which is the fastest growing portion of our business, reported 8% annualized organic growth in the quarter, with $1.6 billion of net inflows. Net inflows and market tailwinds over the last 12 months drove 16% year over year growth in assets under administration, now $79 billion. While operating earnings are benefiting from higher interest rates, we are also seeing improved advisor productivity, which was up 2% compared to the second quarter of this year. Increasing advisor productivity is a key lever to drive higher wealth management margins, and we are encouraged by the momentum in this business.

Good morning going back to protection in your comment that gross claims are 10 per cent reinsurance nurses or 15% average the lower reinsurance recovery have anything to do with the risk recap, Sir <unk> T T E.

No. It's just a function of lower hi base amount claims in the quarter.

Okay.

Got it and and you just wondering on the comment about normalizing color going forward do you think that the.

The face amount might be lower or your normalize recovery dependent upon the comment that you need to add my insurance so received <unk>.

No. It has nothing to do the actions that we take if you look in the appendix, we put a slide in for the protection solutions business and it shows historical reinsurance coverage that we had been on average we'd been about 15% and in the quarter you can see it sticks out to you at 10% into quarters, So we'd assumed that we'd get back.

Robin Raju: I will now turn over to Robin to provide additional updates on the quarter. Robin? Thanks, Mark. I will touch on the results for the third quarter. On a consolidated basis, Equitable Holdings reported non-gap operating earnings of $413 million in the quarter, or $1.16 per share, up 16% year over year. After adjusting for $67 million of unfavorable after tax notable items, and a favorable assumption update of $12 million, non-gap operating earnings were $468 million, or $1.30 per share, up 15% on a comparable year over year per share basis. We also generated net income of $1.1 billion, or $3.02 per share. Under LDPI, every quarter that we have reported has a result in positive net income. This ensures we remain eligible for inclusion into S&P indices.

Back to that historical average is based on the mixer business that we have and that should put us within that 50 to 75 million guidance that we've given.

Alright did see that so your comment was just based on your track record.

Correct Yeah.

Yeah, Okay. So just to be sure you're cappa returned this quarter exceed your 60 to 70 per cent payout because I've, just and you wanted to check out the county like higher attack it doesn't <unk> translate to statutory cash flow generation.

That's right in the in the quarter on a reported basis, we paid more than the 60 to 70 per.

Percent payout ratio.

Normalized basis, we paid at the higher end of that range, you know and continue to see returning caches shareholders is a great ready to drive value given weird Doctor Ace today, and so we will continue to <unk> will continue to return capital to shareholders as we see fit.

Robin Raju: While pleased with the underlying growth momentum across our business, third quarter EPS came in below consensus expectations, and our review of the run rate earnings power for the business. This was a noisy quarter, and on page 7, I'll walk you through the major moving pieces, and how we're thinking about the outlook going forward. Turning to page 7, there are three items that affected results across the enterprise. First, alternatives and prepayment income were $20 million below our normal expectation.

Thank you.

Your next question comes from the lines <unk> from Raymond James. Please go ahead.

Hey, good morning, the assumption review could you just go into a little bit more detail. The assumption review is interesting to see a favorable assumption review, especially it seemed like it was related to lapse and utilization.

Robin Raju: Our alternative portfolio had an annualized return of 6% into quarter, as solid private equity results were offset by the continued weakness in our real estate equity investments, which represent 20% of the alternative portfolio. As a reminder, we normalize to the low end of our 8% to 12% normalized return expectation. Looking forward, we expect similar returns in the fourth quarter, but our project further recovery and performance in 2024. Second, we completed our 2023 Assumption Update, and made some model changes in the third quarter, which resulted in 16 million favorable just.

Sure I would take the assumptions review in aggregate the way I look at it in an aggregate the net income impact that the assumption review across all of our business was $4 million at the end of next week you should expect because that's how we manage our assumptions we manage on a conservative basis, we moved.

Emerging experience and we do not want to surprise investors with negative unlock that a large they're distracting and they're not represented in our core business. So if you look across every single.

Uhm business line that we have we update assumptions on an annual basis and move towards emerging experience or you're gonna see <unk> within every single assumption, but at the end of the day around to a very small number.

Robin Raju: The modest changes reflect our fair value management philosophy, which incorporates emerging experience into our assumptions. This limits surprises like large unlocks for investors. Lastly, the consolidated tax rate in the quarter was 22% above our 19% expectation. This quarter, we had an unfavorable dividend received deduction true up, which drove the higher rate. While taxes can bounce around each quarter, we continue to ask estimate a 19% consolidated tax rate and a 17% tax rate for an insurance business.

Okay. Thank you and then what else could you talk about the opportunities to acquire wealth management teams versus the ability to grow organically.

Sure.

Our model is distinct because we both bring in new people into the industry and grow them into wealth managers, we've amplified that through our experienced advisor initiatives, which would be looking for supported independent model the opportunity for a differentiate advice model.

Robin Raju: We also had a few items that affected specific business segments that I wanted to highlight. Protection solution earnings were 34 million, hired in the second quarter, but below our guidance of 50 to 75 million per quarter near term. Overall, gross mortality claims were close to our updated assumptions, but net claims came in higher than expected due to less re-insurance coverage. In a typical quarter, about 15% of our gross claims are covered by re-insurance, but this quarter, we only had coverage on 10%.

The platform that gives an open architecture to a full suite of fee based reoccurring investment.

Products, plus our strength of our retirement platform year to date, we've recruited.

Roughly 80 advisers on the experienced side, so we could see traction on that side.

Thank you.

Your next question comes in line and Maxwell right, Sir <unk> Securities. Please go ahead.

Robin Raju: This was about a 23 million after tax variant adjusted for which segment earnings would have been at the lower end of our expected range. We still viewed 50 to 75 million as our best estimate of near term quarterly earnings power of the business, and we expect this to move higher over time. As a reminder, while we expect some continued drag from a pull forward and mortality into next-week quarters, this has a minimal impact on cash generation since we have already adjusted the statutory assumptions to account for the increased COVID endemic related mortality.

Hi, good morning, pulling in for more too I joined a little later I apologize to be covered this but and wealth management, you've had positive year over year seals broken advisory after contractions in the first two quarters of the year.

And strong growth in brokerage indirect is there anything in particular, you're seeing there that you can share I know you just mentioned recruiting but.

Anything else.

Yeah structurally in the industry, you've seen with interest rate job people move cash into fixed maturity options, which are more on the which are fee based investment. So that that's shifted some of it from the fee based investment to the.

Robin Raju: I would also note that we had a modest positive adjustment from our actuarial assumption update, underscoring the conservative assumptions for our block. Moving forward, we will explore ways to reduce the earnings volatility in the protection solution segment, such as by adding more re-insurance or reducing retention limits. In individual retirement, we delivered a second straight quarter of record sales and net flows, highlighting the growing consumer demand for protected equity and securing come solutions.

The structure mature it is.

As Robin highlighted we continued to see growth that Ah reoccurring fee based investment accounts uhm.

In terms of positive net flows and then it continues to be a growing percentage of or a U a.

Thank you.

You know our next question comes from the line of Mike Ward from City. Please go ahead.

Robin Raju: Total sales were 3.8 billion, and net flows were 1.7 billion, which continues to be driven by our spread-based RILA product, SCF. This momentum bodes well for the future growth in individual retirement earnings and cash generation. However, one of the dynamics we've seen is that as the terms we can offer to policyholders improves with higher interest rates, there is some increased lapse activity in our enforced block, which we have factored into our near term assumptions.

Hey, Thanks, guys. Good morning, maybe back to the regulatory landscape.

Focus has been on the D O L. I think I saw the S E C priorities for 24 months.

Include <unk> variable noticed too just wondering if you had any.

No inklings or communications on what they're interested there.

You know at this time the S. C. C has been focused on implementation of right D. I am interpretations of.

Robin Raju: Under gap accounting, this requires us to amortize more DACs, and we expect quarterly amortization expense to be roughly 5 million higher gone forward. While this is in modest near term headwind earnings, I would emphasize two things. One, as we mentioned earlier, we're seeing record net flows, and the growth in this block will have a much bigger impact on earnings over time. Secondly, back-emortization is a non-cash expense that had no change in projected cash flow for the business.

Of that regulation, that's been a major.

Major Polish.

We'll have to come back to you on.

And any specific variable annuity.

Okay in order to send out right and then just a second on on some of the good guys and then that flow metrics.

I think some areas like private credit I've been pretty strong and and helping you guys strategically you dug into those at the Investor Day, what I'm wondering is kind of you know how the outlook for these asset classes might change you know if and when we get to a point of declining interest rates.

Robin Raju: Overall, we continue to be very bullish on the outlook for individual retirement. In wealth management, we collected 5 million of lower commission-related earnings this quarter due to a lower level of 4 or 3 B sales. This corresponds with the seasonality in our group retirement business related to teachers being off during the summer months. Going forward, you should assume some seasonal pressure on the wealth management results in the third quarter. But we viewed 45 million of earnings as a better run rate to think about for the fourth quarter.

And how do you guys sort of think through that.

Hi, Mike I, Uhm again or from a b.

Yes, we feel pretty good about the I'll I'll look for our private alternatives platform, we have roughly $14 billion in dry powder. There. So we can definitely deploy capital across all of our strategies ranging from.

<unk> two corporate lending in <unk> in terms of the declining rates first of all it's hard to predict when that's gonna happen I think the base case seems to suggest is more high for longer but even in a relatively lower rates scenario the attractiveness of private credit.

Robin Raju: Finally, I'm corporate another. We generated a normalized loss of 109 million, which is worse than our expected quarterly run rate of roughly 100 million. This is due to timing of some expenses.

Robin Raju: That's in back though, we remain confident in our ability to grow EPS at 12 to 15% annual rate through 2027. Across all our businesses, we continue to control the controllables. We are ahead of our plan for achieving the 110 million general count yield enhancement target, helped by the higher rate environment. Additionally, we're ahead of schedule on our 150 million expense savings target and expect to capture our 30 million run rate of savings this year.

Remains strong because we have a lot of clothing <unk>, but also you'll be able to to to go with a fixed and we have seen this through the market cycle. Because if you think about history have you had these strategies depending on the strategy except to carve out going back to 2012, 2014, and we have generated caste system net flix.

<unk>, regardless of the interest rate environment. So it's pretty right agnostic. So we we believed the momentum will continue.

Robin Raju: Finally, as Mark touched on earlier, the higher rate environment provides a strong talent for new business. Across all three retirement businesses, we are running well ahead of our projection for the MD in 2023, which will contribute to future earnings and cash flow.

Thanks, guys.

This concludes today's conference call. Thank you for your participation and you may now disconnect.

Please wait the conference will begin shortly.

Robin Raju: Turning to slide 8, let's dive deeper into the diverse sorts of earnings that lead to our consistent cash generation. Our deliberate actions over the last five years to shrink our legacy block, grow our wealth management and private markets business, and expand our core retirement and asset management markets, have led us to meaningfully grow earnings and cash flows while also shifting to a higher quality mix. At the same time, we consistently convert earnings to cash flows in our retirement business for two reasons.

[music].

Robin Raju: First, the business is strongly capitalized and tightly hedge, ensuring our balance sheet is market neutral. This enables our earnings and cash to remain stable through volatile markets. Second, 200 million of the cash flows from these businesses are unregulated and go directly to the whole of the company through our investment management contract. As a result, our retirement cash flows are much more consistent and higher quality than other retirement players in the industry.

Robin Raju: At the same time, we have two high quality unregulated businesses and asset and wealth management that comprise the remaining 40% of our anticipated 1.3 billion of cash flows this year. This business converts nearly 100% of their earnings to cash flow. The quality and durability of cash flows enabled us to increase our payout target earlier this year to 60 to 70% of operating. This is a 20 percentage point increase in our IPF, demonstrating a significant shift in our business over time.

Robin Raju: This leads me to our next slide, where I'll dive deeper into our capital management program. Turning to slide 9, our strong cash generation continues to drive shareholder value. In the quarter, we return $315 million, which includes $238 million of share repurchases, resulting in an $8 million share count reduction. Over the last 12 months, we have returned 1.1 billion to shareholders, reducing our shares upstanding by 8%. At the same time, our holding company cash increased to $2 billion after taking a dividend from the insurance subsidy area.

Robin Raju: Our cash position gives us confidence to continue paying out 60 to 70% of non-gap operating earnings, even in volatile markets. It also enables us to play offense and be opportunistic rather than being on the defense. Year-to-date, we have upstreamed 1 billion of dividends to the holding company, and remain confident that we will hit our 1.3 billion target for the year. In the fourth quarter, we will receive unregulated dividends from Alliance Bernstein, our wealth management business, and our investment management contract with the retirement company.

Robin Raju: From an investor perspective, we believe that equitable holdings present an excellent value proposition. After paying interest expense, we expect to generate 1.1 billion of distributed free cash flow, which represents a 12% free cash flow yield. Our businesses have strong organic growth potential, and we expect cash generation to increase by 50% to 2 billion by 2027.

Mark Pearson: With that, I will now turn the call back to Mark for closing remarks. Mark? Thanks, Robin.

Mark Pearson: In closing, we continue to benefit from momentum in both our retirement and wealth management businesses, with a combined $3 billion of net inflows in the quarter. Our balance sheet and capital position remain robust, with conservative assumptions resulting in no material assumption review impact. Our cash generation and whole co-cash position of $2 billion continues to support consistent capital return to shareholders, tracking at or above the high end of our 60-70% target payout ratio. We remain on track for the financial guidance we outlined at our investor day, as we continue to focus on driving growth across our businesses, while capitalizing on the tailwind provided for higher interest rates.

Mark Pearson: With that, we'll now open the line for questions. Thank you.

Krista: As a reminder, if you would like to ask a question, please press star followed by the number one on your telephone keypad, and we ask that you limit yourself to one question and one follow-up.

Elyse Greenspan: Your first question comes from the line of Elise Greenstein from Wells Fargo. Please go ahead. Hi, thanks. Good morning. My first question is on protection solutions. So if, you know, in the fourth quarter, if mortality is expected to still remain elevated, and I know in the slides, you guys pointed to alternative results being similar to the Q3 sequentially. So wouldn't that imply that in the fourth quarter, you would still fall below that 50 to 75 million target, or is there something I'm missing in there, or is there, you know, normalizing on the reinsurance side?

Elyse Greenspan: I'm just trying to piece that. Thanks, Elyse. So for protection in the fourth corner, fourth quarter, we continue to expect to see some of the pull forward come through. That would put us in the range of the 50 to 75 million guidance. We continue to expect that range over the near term in protection solutions. And then obviously some of the all would come against that as well. And so from a normalized basis, we should be at the lower end of the range when considering all as long as we remain at that.

Elyse Greenspan: In the third quarter to give you comfort as you see on a normalized basis, we are at the lower end of the range of 49 at 49 million or 50 million. We continue to see good momentum and improvement and actually gross claims. But as you noted, we did see some of the reinsurance coming lower than expected. We're at 10% into quarter versus 15% historically. And we'd expect that to normalize gone forward as well. But reminder again, the pull forward and what we see in the range. Has no impact on the cash flows and the cash flows continue to grow strongly overall across our businesses.

Robin Raju: Thanks. And then there was like around a $1.5 billion impact to net income from the VA product feature line this quarter. I had thought that that would be smoother under LDTI. You just give some color on what went on there in the quarter. Sure. So we, you know, as I mentioned on the call, this is the seventh straight quarter that we've seen positive net income post LDTI. And so we're, we're comforted and continue to see positive results there on our hedging program.

Robin Raju: We do hedge with the general count. And then we do that purposely to avoid statutory volatility. And so we can have consistent capital returns. So it should be in line with the sensitivity that we've given for interest rates as relates to LDTI. Okay.

Unknown Executive: Thank you.

Thomas Gallagher: Your next question comes from the line of Galagher from EVR. Please go ahead. Thanks. Robin, just following up on your comment on considering reinsurance additional reinsurance purchases on your protection block to lower volatility. Can you talk a little bit about what you're considering there what pricing is like? Is that is that likely to lower the earnings in the segment or would you not see? Would you not expect it to have much of an impact?

Thomas Gallagher: Sure, Tom. Look, for protection, we're not, we're obviously not happy with the results for the business. And so therefore we are exploring options to mitigate volatility of the results. And we'd hope to mitigate it by hopefully some point in the first step next year. Certainly indeed, if you look relative to peers, we've historically had higher retention limits on that business. That's a function of us being a subsidiary part of a big company at previously before our IPO.

Thomas Gallagher: And so we have to explore those retention limits. Obviously if we give up and we reduce the volatility, you're giving up some long-term economic returns. So that's the trade-off that will continue to assess. But we're in discussions with reinsurers and assessing those trade-offs. Okay, thanks.

Nicholas Lane: And any, I know it's early, it just came out yesterday, but any initial thoughts on this new departmental labor proposal on retirement, and how that might impact out of the industry are equitable. Sure, Tom, this is Nick. We are still digesting the almost 500 pages with that said initial reading. The main thrust from the DOL is that all rollovers from Arissa 401k plans will be considered fiduciary activities. And while in spirit, this aligns with the 2016 rule, what is different in this iteration?

Nicholas Lane: It does not include any private rights of actions. And since 2016, the majority of firms have revamped their complying processes to align with the existing SEC and state best interest in fiduciary rules.

Nicholas Lane: What does this mean for the industry? The biggest impact appears to be that non-security license insurance agents that sell non-registered products like fixed index annuities will now be covered. There's also some interesting language pulling robo advisors and scope.

Nicholas Lane: For equitable, we see no material impact given the investments we've made and the changing landscape. As a reminder, equitable advisors operates today under the higher SEC, REG BI fiduciary standards. For three B plans are not in scope. And our individual annuity products or registered product, registered product securities sold through registered broker dealer channels.

Nicholas Lane: Going forward, we'll continue review the details. And I do expect there to be significant industry comments over the next 60 day period. And specific provisions that will provide more clarity. Great. Thanks, Nick. That was helpful.

Jamie Bueller: Your next question comes from the line of Jamie Bueller from JP Morgan. Please go ahead.

Onur Erzan: Good morning. So first is to question on AB. Should we assume that flows in the business and obviously other asset managers have been affected by this, but should we assume the flows are going to be challenging until there's a little bit more stability in interest rates and the equity market, or are there other things that suggest that things might improve in your business in the near curve? Thanks, Jimmy. This is owners down from AB.

Onur Erzan: As you pointed out, it has been a tough environment that said, if you look at our active flows in the third quarter, we were roughly flat, which was better than other peers that reported so far. So good about our relative performance on the business. And when we look at the growth engines, we feel pretty good about the momentum. We were top 5% in equities and munis in the US retail top 3% in cross border taxable fixed income.

Onur Erzan: So definitely feeling good about those. Even an institutional which led to the outflows overall, including passive, actually institutional equities had an annualized organic growth rate of 7%. So we feel confident about the diversity of our growth engines. And finally, our institutional pipeline remains very strong at 12 billion and the effective fee rate on that is 3 times the effective fee rate. We have today in the institutional business, so definitely revenue equity.

Onur Erzan: So we have a lot of strength to feel good about that said, we cannot predict the rates. And the rate uncertainty definitely keeps the investors on the sidelines and skews the flows towards money market funds and low risk low fee products. So cannot time it perfectly feel confidence in terms of our ability to perform well, but definitely there could be some sluggish growth, depending on the rate environment.

Robin Raju: And then Robin, on protection, I think earnings have been weaker than your estimates or your guidance for six of the past seven quarters and there's always some reason obviously for that and it's very over time. But what still gives you the confidence that 50 to 75 is the right range should or have you thought about lowering the range given results in the last several quarters. Sure Jimmy, you write it's come in below our expectations over the last few periods, but on a normalize basis for those for the reinsurance that I mentioned it it did come in at the lower end of a range even given it even taken into account the alternative portfolio.

Robin Raju: So seeing that come through and knowing if we went back to our 15% reinsurance coverage that we've had we would have been at the lower end of the range and also seeing gross claims improved. Quarter over quarter that's what gives us confidence in the range but you know we're not just relying on confidence we're going to obviously explore actions to reduce the volatility of the business because honestly it's a small part of equitable holdings we generate 1.3 billion of cash loads it's grown to 2 billion of cash loads and you know we're answering questions about volatility in a small segment here so we'll look to reduce that going forward and get the focus back on how we're grown cash loads by 50% to 2020.

Unknown Executive: Thank you.

Alex Scott: Your next question comes from the line of Alex Scott from Goldman Sachs please go ahead. Hey good morning. First one I had just a quick follow up on the comments on the fiduciary rule I think you mentioned there was no private ride of action. I noticed in the rule I thought there was an enforcement section that mentioned the private ride of action. I think there may be a nuance there with like title one versus title two or something but just interested in that piece of your comment and what you read of that language on enforcement list. Yeah at this time we would view it as a nuance but we'll be coming back with more details on that.

Alex Scott: Okay understood.

Nicholas Lane: The second question I had was just on the environment for RILA products and competition. Are you seeing any more competition coming in from the private equity players or are they starting to get any more traction in some of the distribution channels where I think you all haven't had to compete directly with them. Are you still able to avoid some of that pressure is there sort of lagging more into private debt allocations and you know able to provide pretty pretty strong pricing.

Nicholas Lane: Yeah at this time you know in per the comments Robin made you know we had a record quarter in terms of flows and sales. Competitive dynamics continue to be positive these are the other markets given our edge in terms of being a pioneer in the market. Given our distribution footprint both equitable advisors and privileged third party and given our innovation the space we think we're uniquely captured to capture capture a disproportionate share of the value there.

Nicholas Lane: Nick it's still the case that it's sort of eight players in the market there against nearly 50 players in the fixed and new fixed and newly market so. We were aware Alex of the you know the possible new entrance but at the moment we don't see it in pricing remains very strong.

Unknown Executive: Thank you.

Suneet Kamath: Your next question comes from the line of Suneet Kamath from Jeffries. Please go ahead. Thanks, good morning. Mark, I think in your closing comments you talked about being opportunistic with capital and clearly you have a lot of capital at the holding company. Is one way we might see that is you traveling above the 60 to 70% target for some period of time as we move into 2024? We're not changing any guidance, but if you look in this last quarter we actually did travel up slightly higher than that particular ratio.

Suneet Kamath: I think it's both Robin and I have said with a healthy balance sheet as we have now and the excess cash that doesn't enable us to look at opportunities. I mean the most recent one we did of course 15 months or so ago was Carvelle that really was a way to accelerate our strategy in the build out of all that remains an area where we were very interested in and we remain very interested in in wealth management and growing distribution in that size.

Suneet Kamath: So all I would say Suneet for the right deal at the right price and where we can see a creation for our shareholders we would be very interested in looking at them. But it's not our strategy after it remains to build out those businesses and if we see a way to accelerate it we will certainly look at it.

Mark Pearson: Got it makes sense and then I guess as we think about the build out of the private asset portfolio within the general account I think you're marching towards that sort of 25 billion. How should we think about the capital requirements associated with that growth in private? Sure so we're we're about 80% of the year through and getting to our 10 billion for the year. So we have confidence in that and then we have another 10 billion dollar commitment to AB business and as you know the big the big prize there is AB growing that to you know almost 90 billion by 2027 and it being 20% of the revenues at Alliance Bernstein so that's the big prize for EQH.

Mark Pearson: Obviously as our business grows we have to hold capital for the for the risk that we take but this is coming with the growth in our overall business and we're not fundamentally shifting the mix that we see that we don't see a significant capital constraint as a result in the movement of the general account. And so for historically if you look back for every dollar that we put in into Alliance Bernstein they've grown $4 worth of third party money so we think it's a great value proposition for shareholders without constraining capital.

Mark Pearson: Sorry that so the capital requirements on the privates are not materially different than what you guys were holding before. Now if you look at our business mix today in terms of what we have in private credit and what we have in alternatives that mix in the general account isn't shifting significantly from now to 2027 so it's it's coming a lot of it's coming from growth in our underlying business. Okay, thanks.

Tracey Abengigee: Your next question comes from the line of Tracey Abengigee from Barclays. Please go ahead.

Unknown Executive: Good morning. Go back to protection in your comment that gross claims were 10% reinsured versus your 15% average. Did the lower reinsurance recovery have anything to do with risk recapture maybe under a YRT treaty? No, it's just the function of lower high-based amount claims in the quarter.

Unknown Executive: Okay, got it. And you're just wondering on the comment about normalizing going forward. Do you think that the face amounts might be lower or is your normalized recovery dependent upon the comment that you need to add more reinsurance or reduce retention limits? No, it has nothing to do with actions that we take. If you look in the appendix, we put a slide in for the protection solutions business. And it shows the historical reinsurance coverage that we have done on average.

Unknown Executive: We've been about 15%. And in the quarter, you can see it sticks out to you at 10% in the quarter. So we'd assume that we get back to that historical average just based on the mix of business that we have. And that should put us within that 50 to 75 million guidance that we've given.

Robin Raju: Okay, did see that. So your comment was just based on your track record. Correct. Yeah, okay. But also just to be sure, didn't your couple returns this quarter exceed your 60 to 70% payout because of just nuances that gap accounting like higher DAC. It doesn't translate to statutory cash flow generation. That's right. In the quarter on a reported basis, we paid more than the 60 to 70% payout ratio. So on a normalized basis, we paid at the higher end of that range. You know, and continue to see returning cash to shareholders as a great, ready to drive value, given where the stock trades today.

Robin Raju: And so we'll continue to, we'll continue to return capital to shareholders as we see fit.

Unknown Executive: Thank you.

Wilmer: Your next question comes from the line that Wilmer is from Raymond James. Please go ahead. Hey, good morning.

Robin Raju: The assumption review, could you just go into a little bit more detail in the assumption review? Is interesting to see a favorable assumption review, especially it seemed like it was related to lapse in utilization? Sure, I would take the assumptions review and aggregate the way I look at it and aggregate the net income impact of the assumption review across all of our business was $4 million. At the end, and that's what you should expect, because that's how we manage our assumptions.

Robin Raju: We manage on a conservative basis. We move to emerging experience, and we do not want to surprise investors with negative unlocks that are large, they're distracting, and they're not represented in our core business. So if you look across every single business line that we have, we update assumptions on an annual basis and move towards emerging experience. So you're going to see in and out within every single assumption, but at the end of the day, around a very small number.

Robin Raju: Thank you.

Mark Pearson: And then as well, could you talk about the opportunities to acquire wealth management teams versus the ability to grow organically? Sure. Our model is distinct because we both bring in new people into the industry and grow them into wealth managers. We've amplified that through our experienced advisor initiatives, which would be looking for a supported independence model, the opportunity for a differentiated advice model, the platform that gives them open architecture to a full suite of fee-based recurring investment, products, plus our strength of our retirement platform. Year-to-date, we've recruited, you know, roughly 80 advisors on the experience side, so we see traction on that side.

Unknown Executive: Thank you.

Maxwell Fritzer: Your next question comes from the line of Maxwell Fritzer from Truist Securities. Please go ahead. Hi, good morning.

Mark Pearson: I'm calling in from Mark Hughes. I joined a little late-sized apologize to be covered this, but in wealth management, you've had positive year over year sales growth and advisory after contractions in the first two quarters of the year, and strong growth and brokerage and direct. Is there anything in particular you're seeing there that you could share? I know you had just mentioned recruiting, but did anything else? Yeah, structurally in the industry you've seen with interest rates up, people move cash into fixed maturity options, which aren't fee-based investments.

Mark Pearson: So that shifted some of it from the fee-based investment to the structure majorities. As Robin highlighted, we continue to seek growth in our reoccurring fee-based investment accounts in terms of positive net flows, and that continues to be a growing percentage of our AUA.

Michael Ward: Thank you. Your next question comes from the line of Mike Ward from City. Please go ahead. Hey, thanks, guys. Good morning. Maybe back to regulatory landscape. I know the focus has been on the DLL. I think it's on the SEC priorities for 24 might include variable notice too, just wondering if you had any, you know, inklings or communications on what they're interested there. You know, at this time, the SEC has been focused on implementation of REG BI and interpretations of that regulation. That's been the major push.

Onur Erzan: We'll have to come back to you on any specific variable annuity. Okay, no worries, I know it's early. And then just a second on some of the good guys in the net flow metrics. I think some areas like private credit have been pretty strong and helping you guys strategically. You dug into this at the investor day. What I'm wondering is kind of, you know, how the outlook for these asset classes might change. You know, if and when we get to a point of declining interest rates, and how do you guys sort of think through that?

Onur Erzan: Hi, my guys. Again, Honour from AB. Yes, we feel pretty good about the outlook for our private alternatives platform. We have roughly $14 billion in dry powder there, so we can definitely deploy capital across all of our strategies, ranging from real estate debt to corporate lending and Carval. In terms of the declining rates, for example, it's hard to predict when that's going to happen. I think the base case seems to suggest it's more high for longer, but even in a relatively lower rate scenario, the attractiveness of private credit remains strong because we have a lot of floating rate exposures, but also you have the ability to go with fixed and we have seen this through the market cycle, because if you think about history, we had these strategies, depending on the strategy, except Carval, going back to 2012, 2014, and we have generated consistent net flows regardless of the interest rate environment. So it's pretty rate agnostic, so we believe the momentum will continue.

Unknown Executive: Thanks, guys.

Krista: This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Unknown Executive: Please wait, the conference will begin shortly.

Unknown Executive: Thank you very much.