Equitable Holdings, Inc. · NYSE:EQH
Equitable — AXA Equitable Holdings — Investor Presentation (March 2019)
38 slides from Equitable's investor presentation, Mar 11, 2019
Slide 1: AXA Equitable Holdings Investor Presentation
AXA Equitable Holdings Investor Presentation March 11, 2019
Slide 2: Note Regarding Forward-Looking and Non-GAAP Financial Measures
Note Regarding Forward-Looking and Non-GAAP Financial Measures This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “believes,” “anticipates,” “intends,” “seeks,” “aims,” “plans,” “assumes,” “estima
Slide 3: Delivering on commitments
AXA Equitable Holdings Delivering on commitments On track to deliver 5-7% Non-GAAP Operating Earnings1 growth annually ✓ (after tax-reform) Returned over $1 billion to shareholders since IPO; announced 2019 ✓ share repurchase authorization of $800m and intent to increase dividend2 Revised target pay
Slide 4: Established in 1859, now one of America's leading financial services companies
AXA Equitable Holdings Established in 1859, now one of America’s leading financial services companies Our mission Since 1859, we have been providing advice and solutions that help our clients retire with dignity, protect their families and prepare for their financial future with confidence. Our heri
Slide 5: Operating through two well-established and iconic brands
AXA Equitable Holdings Operating through two well-established and iconic brands NYSE: EQH Mkt cap.: $10.4bn¹ 100% 65% owned owned NYSE: AB Mkt cap.: $7.8bn2 Employees & c. 8,9003 c. 3,6003 Advisors # Clients 2.8m4 2.5m5 AUM6 $196bn7 $516bn 72% of General Account with AB Connected and 29% of Separate
Slide 6: One of America's leading financial services companies
AXA Equitable Holdings One of America’s leading financial services companies $14.6 $619 $2.2 14.9% billion billion billion Avg. Shareholders’ Total AUM, as of 2018 Non-GAAP Pro Forma Non- Equity (excl. AOCI)1 year-end 2018 Operating Earnings2 GAAP Operating Return on Equity3 1 Pro forma average tota
Slide 7: Strategic priorities
Strategic priorities We aim to be the most trusted partner to our clients by providing advice and solutions that help them retire with dignity, protect their families and prepare for their financial future with confidence Growth Productivity Capital optimization ▪ Focus on less capital- ▪ Use techno
Slide 8: Differentiated industry leader
Differentiated industry leader Recognized for the breadth of our business and strength of our balance sheet 1 Leading positions in select markets with premier multi-channel distribution 2 Repositioned business towards less capital-intensive segments 3 Robust cash flow generation drives capital retur
Slide 9: Leading positions in select markets with premier multi-channel distribution
1 Leading positions in select markets with premier multi-channel distribution Focus where we have scale, strong value propositions and competitive advantages Clients1 Value proposition Market position ▪ Innovative product manufacturing Individual 759k ▪ Certainty of retirement income #3 Retirement C
Slide 10: Diversified business mix across four core segments
1 Leading positions in select markets with premier multi-channel distribution Diversified business mix across four core segments 2018 Non-GAAP Individual Retirement Group Retirement Operating Earnings1 ▪ Account value: $95bn (at ▪ Account value: $32bn (at 12/31/18) 12/31/18) ▪ Return on Assets2: 1.8
Slide 11: Distribution platform provides access to over 150,000 advisors
1 Leading positions in select markets with premier multi-channel distribution Distribution platform provides access to over 150,000 advisors Affiliated Third-party partners 1,000 agreements with banks, 4,500+ AXA Advisors financial broker-dealers, insurance carriers, professionals and 200 AB advisor
Slide 12: Repositioned business towards less capital-intensive segments
2 Repositioned business towards less capital-intensive segments Significant change to Individual Retirement in-force and new business mix 2008 2018 Non-GMxB 63% Fixed rate Non-GMxB GMxB 1% New 90% ROP Death Fixed rate business $11bn Benefit Only GMxB $7bn 9% (FYP) 1% Floating Rate GMxB ROP Death 29%
Slide 13: AB provides a good source of non-regulated cash flows
2 Repositioned business towards less capital-intensive segments AB provides a good source of non-regulated cash flows (c. 35% of annual cash flows) Adjusted Operating Margin (%)1 27.7 29.1 24.1 24.2 24.5 25.3 18.8 17.0 2011 2012 2013 2014 2015 2016 2017 2018 Adjusted Operating Income ($m)1 414 424 5
Slide 14: Robust cash flow generation drives capital return
3 Robust cash flow generation drives capital return Distributable earnings positive in the near-term across market environments1 2018-2020 VA distributable earnings ($bn) PV of VA free cash flows and assets ($bn)2 17.5 12.9 9.2 8.6 6.3 4.1 4.3 3.1 2.9 1.6 Base Case Upside Downside Extreme Lapse Shoc
Slide 15: Mature VA book drives release of CTE98
3 Robust cash flow generation drives capital return Mature VA book drives release of CTE98 leading to capital return VA portfolio is mature, concentrated pre-20091 VA funding lifecycle: Expect to release capital Premium ($bn) Majority Peak Fixed GMxB “Up the funding Floating GMxB curve” CTE 98 “Down
Slide 16: Strong balance sheet and sophisticated risk management practices
4 Strong balance sheet and sophisticated risk management practices Hedging approach protects capital while maintaining upside on rates Illustrative funding level Hedging strategy Rates ▪ Hedge seeks to immunize rider while Favorable Moderate stress Severe allowing business to continue to profit from
Slide 17: Multiple organic levers to drive earnings growth
5 Multiple organic levers to drive earnings growth Non-GAAP Operating Earnings growth is expected to result in Non-GAAP Operating ROE in the mid-teens by 2020 5-7% Target Non-GAAP Operating Earnings CAGR Tax reform GA Optimization Productivity Growth Strategic Targets GA Optimization Productivity Gr
Slide 18: Fourth Quarter 2018
Fourth Quarter 2018 Earnings Presentation
Slide 19: Highlights
Highlights ▪ VA capitalization at CTE98 Financial strength ▪ Combined RBC of c. 670% despite volatile markets ▪ Hedge program funded c. $3bn change in CTE98 liability ▪ Strong operating earnings Delivering on 2020 ▪ Delivering on key financial targets strategic priorities ▪ Returned over $1bn to sha
Slide 20: Full Year 2018 Financial Summary
Full Year 2018 Financial Summary Full year Non-GAAP Operating Earnings1 increased 28% to $2 billion2 ▪ Fourth quarter 2018 Non-GAAP Operating EPS3 of $0.93 Positive momentum across all business segments in 2018 ▪ Individual Retirement operating earnings increased 24% ▪ Group Retirement net flows of
Slide 21: Strategic Priorities
Strategic Priorities Non-GAAP Operating Earnings growth is expected to result in Non-GAAP Operating ROE in the mid-teens by 2020 5-7% Target Non-GAAP Operating Earnings CAGR $2.2-$2.3bn Tax reform GA Optimization Productivity Growth Strategic priorities GA Optimization Productivity Growth $160m $75m
Slide 22: Full Year 2018 Consolidated Results Summary
Full Year 2018 Consolidated Results Summary Assumption update impact1 Non-GAAP Operating Earnings Non-GAAP Operating EPS2 Financial Highlights $m $ Non-GAAP Operating Earnings 2,166 3.89 increased to $3.59 per share 2,035 3.63 169 0.30 excluding assumption updates 473 0.84 driven by: ▪ Increase in f
Slide 23: Fourth Quarter 2018 Consolidated Results Summary
Fourth Quarter 2018 Consolidated Results Summary Assumption update impact1 Non-GAAP Operating Earnings Non-GAAP Operating EPS2 Financial Highlights $m $ Non-GAAP Operating Earnings 921 1.64 decreased to $504 million excluding assumption updates driven by: 405 0.72 0.93 504 ▪ Lower account values due
Slide 24: Net Income to Non-GAAP Operating Earnings, 4Q18
Net Income to Non-GAAP Operating Earnings, 4Q18 Hedging program performed as expected in down market $m 1,938 (1,898) 504 350 114 Net Income (loss) VA Product Features All other adjustments1 Income tax expense Non-GAAP Operating Earnings All figures $m Description 4Q18 GMxB accounting asymmetry: • G
Slide 25: Hedging program effectively protected capital position
Hedging program effectively protected capital position Two-pronged program delivered despite volatile Q4 markets Target Q4 Performance Current State Dynamic ▪ Hedges economic liability ▪ Hedges funded c. $3bn ▪ Proven program performing as hedge (futures and swaps) increase to CTE98 liability expect
Slide 26: Individual Retirement
Individual Retirement Operating Earnings Highlights $m ▪ Operating earnings decline driven by: (15)% o Higher DAC amortization due to lower interest rates 408 o Fall in equity markets 348 ▪ FYP increased 15% YOY driven primarily by SCS sales ▪ Net inflows on our Current Product Offering were offset
Slide 27: Group Retirement
Group Retirement Operating Earnings Highlights $m ▪ Strong operating earnings growth primarily due +13% higher net investment income from GA optimization 102 ▪ Achieved sixth consecutive full year of positive net 90 flows despite fourth quarter outflows ▪ Gross premiums increased 7% YOY, including 1
Slide 28: Investment Management and Research (AB)
Investment Management and Research (AB) Operating Earnings Highlights $m ▪ Increase in operating earnings mainly driven by +45% o Increase in the company’s ownership of AB to 65.2% 107 and lower operating expenses o Partially offset by a decrease in revenue due to lower performance-based fees and lo
Slide 29: Protection Solutions
Protection Solutions Operating Earnings Highlights $m Assumption update impact1 ▪ Operating earnings decline primarily attributable to non-recurring items incurred ahead of the IPO ▪ Anticipate lower earnings volatility post loss- 448 recognition exit in 3Q18 405 ▪ Higher annualized premiums driven
Slide 30: Capital Position
Capital Position Capital position robust following 4Q18 equity market and interest rate decline ▪ 24.5% debt-to-capital ratio Strong and protected ▪ Maintained target of CTE98 for VA business, balance sheet 350-400% RBC for non-VA ▪ c. 670% Combined RBC as of year-end ▪ Completed transfer of AB inte
Slide 31: Capital Management
Capital Management Since IPO, returned over $1 billion to shareholders1 Capital Return $m 661 ▪ Completed accelerated share repurchase of $150m in 1Q19 69 as part of 2018 capital management program 2181 68 ▪ Announced new $800m share 130 repurchase authorization for 592 2019 73 150 ▪ Declared $0.13
Slide 32: Appendix
Appendix Is Equitable 2.98 Holdings
Slide 33: Key Financial Targets
Key Financial Targets Maintain strong balance sheet while delivering disciplined financial growth AXA Equitable Holdings Non-GAAP Op. Earnings growth Payout ratio1 Pro Forma Non-GAAP Operating ROE 5-7% 50-60% Mid-teens CAGR through 2020 by 2020 (after tax reform) AXA Equitable Life AllianceBernstein
Slide 34: General Account investment portfolio
General Account investment portfolio High quality, diversified portfolio Overall portfolio composition Fixed maturity portfolio Mortgage U.S. Treasury, < Baa Loans Gov’t and Agency 2% 15% 18% Aaa Policy Alts. & 27% Loans Baa 5% 2% Other 32% $78bn 2 $61bn Short Duration 19% Fixed Maturities1 9% Aa 38
Slide 35: Reconciliation of Non-GAAP and Other Financial Disclosures
Appendix Reconciliation of Non-GAAP and Other Financial Disclosures EQH Pro Forma Non-GAAP Operating Return on Equity (ROE) Three months Ended or As of Twelve Months Ended or As of (in millions USD, unless otherwise indicated) 12/31/2016 12/31/2017 03/31/2018 06/30/2018 09/30/2018 12/31/2018 12/31/2
Slide 36: Reconciliation of Non-GAAP and Other Financial Disclosures
Appendix Reconciliation of Non-GAAP and Other Financial Disclosures EQH Non-GAAP Operating Earnings Fourth Quarter Full Year 2018 2017 2018 2017 (in millions) (in millions) Net income (loss) attributable to Holdings $ 1,938 $ 483 $ 1,820 $ 834 Adjustments related to: Variable annuity product feature
Slide 37: Impact of Actuarial Assumption Updates on Non-GAAP Operating Earnings
Appendix Impact of Actuarial Assumption Updates on Non-GAAP Operating Earnings Quarter Ended December 31, 2018 Year Ended December 31, 2018 Individual Group Protection Corporate Individual Group Protection Corporate Non-GAAP Operating Earnings Line Retirement Retirement Solutions and Other Total Ret
Slide 38: Non-GAAP Operating ROC by segment
Appendix Non-GAAP Operating ROC by segment, Twelve Months Ended or As Of 12/31/2018 Individual Group Protection ($ million) Retirement Retirement Solutions Operating Earnings $1,555 $389 $197 Average Capital $6,921 $1,227 $2,659 Non-GAAP Operating ROC 22.5% 31.7% 7.4% Non-GAAP Operating ROC is calcu
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