Equitable Holdings, Inc. · NYSE:EQH
Equitable — AXA Equitable Holdings — Q3 2019 Earnings Presentation
24 slides from Equitable's earnings presentation, Nov 7, 2019
Slide 1: AXA Equitable Holdings Third Quarter 2019 Earnings Results
AXA Equitable Holdings Third Quarter 2019 Earnings Results November 7, 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: Third Quarter 2019 Overview
Third Quarter 2019 Overview Strong Non-GAAP Operating Earnings • GA rebalance benefits delivered one year early • SCS sales at record levels Strengthening of US GAAP reserves • Changes in policyholder utilization magnified by low interest rates Protecting Economic value • Economic hedges offsetting
Slide 4: Third Quarter 2019 Financial Summary
Third Quarter 2019 Financial Summary US GAAP Net Loss of $384 million • Reflects assumption updates, partially offset by Economic interest rate hedge gains Non-GAAP Operating Earnings1 of $677 million, or $1.38 per share2 • On track to deliver 5-7% Non-GAAP Operating Earnings CAGR target • Total AUM
Slide 5: Economic model is more realistic as based on current market rates
Economic model is more realistic as based on current market rates US GAAP Statutory EQH Economic Interest rates ▪ Current ▪ Current: RTM ▪ Mark-to-market - Fair value: MTM (industry: practices vary, with 10 Yr T at Q3: 1.7%; 20 Yr RTM up to 5.5%+)1 20 Yr T at Q3: 1.9% - SOP: Reversion to mean (risk
Slide 6: Third Quarter 2019 Consolidated Results Summary
Third Quarter 2019 Consolidated Results Summary Assumption update impact1 Non-GAAP Operating Earnings Non-GAAP Operating EPS2 Financial Highlights $m $ Non-GAAP Operating Earnings of $677 million, including $60 million -2% +12% favorable impact from actuarial 693 677 1.38 assumption updates 60 1.23
Slide 7: 2019 Actuarial Assumption Review and Notable Items
2019 Actuarial Assumption Review and Notable Items US GAAP Net Income Impact1 Post-tax ($bn) YTD Economic interest rate hedge gains +0.7 Assumption review: Annual Short-term SOP interest rate assumption (0.3) (reflected in Q3) GMxB withdrawal experience2 (0.5) GMxB impact of low rates and SOP to FV
Slide 8: Key takeaways from assumption review
Key takeaways from assumption review Economic interest rate hedge gains more than offsetting interest rate- 1 related assumption updates Adoption of new NAIC standards will fully reflect Economic hedging in 2 Statutory reserves, more than offsetting impact of assumption updates Managing to Economic
Slide 9: Individual Retirement
Individual Retirement Operating Earnings Key Drivers $m Assumption update impact1 ▪ Operating earnings excluding assumption updates decreased due to lower fee-type revenue on lower SA +5% balances, partly offset by higher net investment income on higher GA balances and improved GMxB results 434 457
Slide 10: Group Retirement
Group Retirement Operating Earnings Key Drivers $m Assumption update impact1 ▪ Operating earnings excluding assumption updates increased due to higher net investment income from -22% higher asset balances and our GA rebalancing as well as ongoing efficiency gains 134 104 ▪ Net outflows driven by sea
Slide 11: Investment Management and Research (AB)
Investment Management and Research (AB) Operating Earnings Key Drivers $m ▪ Operating earnings decrease primarily driven by lower performance fees and higher comp. and G&A expenses -3% ▪ Net inflows of $8.1 billion were positive for a fifth straight quarter, driven by $9.3 billion of active net infl
Slide 12: Protection Solutions
Protection Solutions Operating Earnings Key Drivers $m Assumption update impact1 ▪ Operating earnings excluding assumption updates increased significantly driven by higher fee-type -18% revenue, higher net investment income from the GA 137 rebalance, and lower expenses 113 ▪ Growth in annualized pre
Slide 13: Capital Position and Management
Capital Position and Management Capital return (TTM), $m Highlights Dividends Capital return to shareholders Repurchase from AXA 818 Repurchases from market ▪ $1.8bn returned to shareholders since IPO, including $111m in the third quarter 68 ▪ As of 9/30, $163m remaining on 2019 $800m share repurcha
Slide 14: Third Quarter Key Messages
Third Quarter Key Messages Strong results reflecting solid operating momentum Capital position and balance sheet well-protected Anticipating and advocating for new FASB and NAIC standards Buyback acceleration demonstrating commitment to capital return 14 | AXA Equitable Holdings 3Q19 Earnings Presen
Slide 15: Appendix
AXA Equitable Holdings Third Quarter 2019 Earnings Results Appendix November 7, 2019
Slide 16: 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 Non-GAAP Operating ROE 5-7% 50-60% Mid-teens CAGR through 2020 by 2020 (after tax reform) AXA Equitable Life AllianceBernstein Target ca
Slide 17: 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 18: Net Income to Non-GAAP Operating Earnings, 3Q19
Net Income to Non-GAAP Operating Earnings, 3Q19 $m (251) 2 (282) 128 3 1,185 (60) 677 617 1 (384) 282 Net Income Interest Rate Other VA hedging, All other Income tax Non-GAAP Assumption Non-GAAP (loss) Assumption Assumption NPR, and adjustments1 expense Operating Updates Operating Update Updates MTM
Slide 19: 2019 Actuarial Assumption Review and Notable Items (1/2)
2019 Actuarial Assumption Review and Notable Items (1/2) Notable Items included in US GAAP Net Income (from page 7) In millions USD, unless otherwise indicated 1Q19 2Q19 3Q19 YTD 2019 Net income (loss) attributable to Holdings $(775) $363 $(384) $(796) Items included in Net income (loss) attributabl
Slide 20: 2019 Actuarial Assumption Review and Notable Items (2/2)
2019 Actuarial Assumption Review and Notable Items (2/2) Line item impact of assumption updates on Operating Earnings1 Individual Group Protection Three months ended 9/30/2019 ($m) Consolidated2,3 Retirement Retirement Solutions Total revenues 3 3 Policy charges, fee income and premiums 3 3 Total be
Slide 21: FASB changing GAAP standards to move closer to economic framework
FASB changing GAAP standards to move closer to economic framework GAAP (Current) GAAP (Post-FASB TI) EQH Economic Interest rates SOP: Reversion to mean Fair value: MTM Mark-to-market Fair value: MTM 10 Yr T at Q3: 1.7%; 20 Yr T at Q3: 1.9% Equity Long term historic Fair value: MTM Mark-to-market (ri
Slide 22: Avg. 20-year UST rate
Post NAIC VA reform Statutory Interest Rate Scenario Generator1 # of scenarios (of 10,000) 0 100 200 300 400 500 600 700 800 Over 5.0% 4.9% 4.7% Avg. rates higher (~99.8% of NAIC scenarios) 4.5% 4.3% Avg. 20-year UST rate 4.1% 3.9% 3.7% 3.5% 3.3% 3.1% 2.9% 2.7% 2.5% 2.3% 2.1% 20-year UST 9/30: 1.94%
Slide 23: Reconciliation of Non-GAAP and Other Financial Disclosures
Reconciliation of Non-GAAP and Other Financial Disclosures EQH Non-GAAP Operating Earnings Three Months Ended September 30, 2019 2018 (in millions) Net income (loss) attributable to Holdings $ (384) $ (496) Adjustments related to: Variable annuity product features 1,444 1,403 Investment (gains) loss
Slide 24: Reconciliation of Non-GAAP and Other Financial Disclosures
Reconciliation of Non-GAAP and Other Financial Disclosures EQH Non-GAAP Pro Forma Non-GAAP Operating Return Operating on Equity Return(ROE) on Equity (ROE) Pro forma (1) Balances as of Balances as of (in millions USD, unless otherwise indicated) 12/31/2017 3/31/2018 06/30/2018 09/30/2018 12/31/2018
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