Equitable Holdings, Inc. · NYSE:EQH
Equitable — AXA Equitable Holdings — Debt Investor Presentation (December 2018)
39 slides from Equitable's debt investor presentation, Dec 17, 2018
Slide 1: AXA Equitable Holdings Debt Investor Presentation
AXA Equitable Holdings Debt Investor Presentation December 17, 2018
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: Agenda
AXA Equitable Holdings Agenda AXA Equitable Holdings Overview Cash Flow & Balance Sheet Third Quarter Earnings Update Appendix 3 | EQH Investor Presentation
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.: $9.8bn¹ 100% 65% owned owned NYSE: AB Mkt cap.: $7.4bn2 Employees & c. 8,6003 c. 3,6003 Advisors # Clients 2.8m4 2.5m5 AUM6 $210bn7 $550bn 70% of General Account with AB Connected and 27% of Separate
Slide 6: 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 7: Differentiated industry leader
Differentiated industry leader Recognized for the breadth of our business and strength of our balance sheet Leading positions in select markets with premier multi-channel distribution Repositioned business towards less capital-intensive segments Robust cash flow generation drives capital return Stro
Slide 8: Leading positions in select markets with premier multi-channel distribution
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 760k ▪ Certainty of retirement income #3 Retirement Cli
Slide 9: Diversified business mix across four core segments
Leading positions in select markets with premier multi-channel distribution Diversified business mix across four core segments 2018 YTD Individual Retirement Non-GAAP Group Retirement Operating Earnings1 ▪ Account value: $106bn (at ▪ Account value: $36bn (at 9/30/18) 9/30/18) ▪ Return on Assets2: 1.
Slide 10: Distribution platform provides access to over 150,000 advisors
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 advisors
Slide 11: Significant change to Individual Retirement in-force and new business mix
Repositioned business towards less capital-intensive segments Significant change to Individual Retirement in-force and new business mix 2008 September 30, 2018 Non-GMxB 63% Fixed rate Non-GMxB GMxB 1% New 90% ROP Death Fixed rate business $11bn Benefit Only GMxB $5bn 9% (FYP) 1% Floating Rate GMxB R
Slide 12: AB provides a good source of non-regulated cash flows
Repositioned business towards less capital-intensive segments AB provides a good source of non-regulated cash flows (10-15% of annual cash flows) Adjusted Operating Margin (%)1 27.7 29.1 24.1 24.2 24.5 25.3 18.8 17.0 2011 2012 2013 2014 2015 2016 2017 YTD '18 Adjusted Operating Income ($m)1 414 424
Slide 13: Multiple organic levers to drive earnings growth
Multiple organic levers to drive earnings growth On track to achieve 2020 growth targets 5-7% Target Non-GAAP Operating Earnings CAGR $2.2 - $2.3bn Tax reform GA Optimization Productivity Growth Strategic Targets GA Optimization Productivity Growth $160m $75m 3-4% Pre-tax by 2020 Pre-tax by 2020 Non
Slide 14: 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% 40-60% Mid-teens CAGR through 2020 by 2020 (after tax reform) AXA Equitable Life AllianceBernstein
Slide 15: Delivering on 2020 commitments
Delivering on 2020 commitments On track to deliver 5-7% Non-GAAP Operating Earnings CAGR 2018-2020 ✓ (after tax-reform) Generated 15.6% Pro Forma Non-GAAP Operating ROE1 in third quarter ✓ of 2018, in line with mid-teens target ✓ On track to achieve 30% Adj. Operating Margin2 at AB: 29.1% YTD 2018 C
Slide 16: Cash Flow & Balance Sheet
Cash Flow & Balance Sheet Is Equitable 2.98 Holdings
Slide 17: Strong track record of cash upstream from operating subsidiaries
Strong track record of cash upstream from operating subsidiaries Sustainable sources of cash flow funding growth and enabling capital return $bn Non-Regulated1 Operating Entities 1.3 1.4 1.2 1.2 $2.3 billion injected as part of IPO & therefore no dividend 0.2 2013 2014 2015 2016 20172 2018 +32% +14%
Slide 18: Cash flow generation enabling capital return
Cash flow generation enabling capital return Target payout ratio of 40%–60% of Non-GAAP Operating Earnings 2018E Capital return Share repurchase authorization Dividends Dividend Yield 3.0% $500m 11% 2.5% 2.0% Annualized cash return yield1 $1.1bn 2 Peer Median S&P 500 $300m $300m* • $300m* authorizat
Slide 19: Distributable earnings positive in the near-term across market environments
Distributable earnings positive in the near-term across market environments1 2018-2020 VA distributable earnings ($bn) PV of VA free cash flows and assets ($bn)2 17.5 12.9 9.2 8.6 6.3 4.1 4.3 3.1 2.9 1.6 Base Case Upside Downside Extreme Lapse Shock (25%) shock to (40%) shock to (25%) shock to Equit
Slide 20: Mature VA book drives release of CTE98
Mature VA book drives release of CTE98 VA portfolio is mature, concentrated pre-20091 VA funding lifecycle: Expect to release capital Premium ($bn) Majority Peak Fixed GMxB “Up the funding Floating GMxB curve” CTE 98 “Down the 14 9+ years old curve” EQH 12 Portfolio age 10 13 CTE 98 ($bn) 8 12 6 11
Slide 21: Well-capitalized and strong liquidity profile
Well-capitalized and strong liquidity profile Our Holding Company has diverse ...that establish conservative holding sources of liquidity… company financial targets Regulated dividends from our main insurance operating companies ✓ $500m cash buffer at holding company Unregulated dividends from our s
Slide 22: Hedging approach protects capital while maintaining upside on rates
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 b
Slide 23: Highest capital standard across industry
Highest capital standard across industry Provides confidence for clients and investors and a strong foundation to grow Lower capital standard Higher capital standard Range of peers (A-D) CTE95 CTE97 CTE98 A B C D (>600% RBC) ▪ Capital management approach ‒ CTE98 for VAs and a 350-400% RBC for non-VA
Slide 24: Credit ratings demonstrate strength of balance sheet
Credit ratings demonstrate strength of balance sheet Rated entities AXA AXA Equitable Equitable Life MLOA Holdings (financial (financial AB (debt rating)1 strength rating) strength rating) (credit rating) Outlook S&P BBB+ A+ A+ A Stable Moody’s Baa2 A2 A2 A2 Stable A.M. Best — A A — Stable1 1 Curren
Slide 25: Third Quarter Earnings Update
Third Quarter Earnings Update
Slide 26: Third quarter 2018 overview
Third quarter 2018 overview ▪ S&P 500 up 7% in the quarter Favorable capital ▪ 10-year Treasury rates increased 20 bps markets ▪ October more challenging – hedging program in place ▪ $130 million returned to shareholders during Q3 $ Increase in share ▪ $443 million remaining of initial repurchase au
Slide 27: Third quarter 2018 financial highlights
Third quarter 2018 financial highlights Total AUM grew 3% from September 30, 2017 to $668bn Non-GAAP Operating Earnings1 increased to $693 million, or $1.23 per share ▪ Excluding actuarial assumptions update, Non-GAAP Operating Earnings increased 38% to $524 million, or $0.93 per share Strong perfor
Slide 28: Third quarter 2018 consolidated results summary
Third quarter 2018 consolidated results summary Assumption update impact1 Non-GAAP Operating Earnings Non-GAAP Operating Earnings Financial Highlights Per Diluted Share2 $m $ Non-GAAP Operating Earnings of +73% +73% $693 million, including $169 million favorable impact from actuarial 693 1.23 assump
Slide 29: Appendix
Appendix Is Equitable 2.88 Holdings
Slide 30: Third quarter 2018 actuarial assumption updates
Third quarter 2018 actuarial assumption updates Impact on Operating earnings by segment and consolidated Net income Operating Earnings Impact Actuarial assumption updates $m except $ per share Pre-tax Post-tax1 Per share Operating Earnings: Individual ▪ Individual Retirement: favorable Retirement 59
Slide 31: Net Income to Non-GAAP Operating earnings
Net Income to Non-GAAP Operating earnings Third quarter 2018 impacts ($m) 195 (409) 693 (169) 524 968 435 (496) 1 2 Net Income Assumption GMxB hedging All other Income tax Non-GAAP Assumption Non-GAAP (loss) updates1 adjustments2 expense Operating updates Operating Earnings (operating) Earnings (exc
Slide 32: Diversified, conservative General Account portfolio
Diversified, conservative General Account portfolio Portfolio overview Overall portfolio composition • The majority of General Account assets are managed by AB, GAAP Basis Total: $75bn2 3Q’2018 Alternatives with a focus on maintaining a diverse, high quality portfolio and Other3 Policy Loans 5% 2% •
Slide 33: 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) 09/30/2017 12/31/2017 03/31/2018 06/30/2018 09/30/2018 06/30/2018 09/30/2
Slide 34: EQH Non-GAAP Operating Earnings
Appendix Reconciliation of Non-GAAP and Other Financial Disclosures EQH Non-GAAP Operating Earnings Three Months Ended September 30, 2018 2017 (in millions) Net income (loss) attributable to Holdings $ (496) $ 10 Adjustments related to: Variable annuity product features1 1,403 507 Investment (gains)
Slide 35: Reconciliation of Net Income to Non-GAAP Operating Earnings
Appendix Reconciliation of Net Income to Non-GAAP Operating Earnings ($ million) Historical Pro Forma 2015 2016 2017 3Q’18 YTD 2017 3Q’18 YTD Net income (loss) attributable to Holdings $325 $1,254 $834 $(118) $824 $(109) Adjustments: Variable annuity product features1 $1,778 $2,143 $1,107 $1,829 $1,
Slide 36: Non-GAAP Operating Earnings adjustments for non-recurring items
Appendix Non-GAAP Operating Earnings adjustments for non-recurring items ($ million) 2017 Pro Forma Pro Forma Non-GAAP Operating Earnings $2,022 Pre-tax adjustments in policyholders’ benefits Actuarial assumptions updates and model changes ($677) Change in mortality table 70 Pre-tax adjustments in D
Slide 37: Protection Solutions Segment Operating Earnings adjustments for non-recurring items
Appendix Protection Solutions Segment Operating Earnings adjustments for non-recurring items ($ million) 2017 3Q’18 TTM Operating Earnings $502 $608 Pre-tax adjustments in policyholders’ benefits Actuarial assumptions updates and model changes ($677) ($677) Change in mortality table 70 70 Pre-tax ad
Slide 38: Line item impact of assumptions update
Appendix Line item impact of assumptions update1 Individual Group Protection Three months ended 9/30/2018 ($m) Total2 Retirement Retirement Solutions Total revenues (24) (24) Policy charges, fee income and premiums (24) (24) Total benefits and other deductions 59 43 131 2303 Policyholders' benefits
Slide 39: Non-GAAP Operating ROC by segment
Appendix Non-GAAP Operating ROC by segment Individual Group Protection ($ million) Retirement Retirement Solutions Operating Earnings $1,615 $377 $608 Normalized Operating Earnings 1,615 377 2491 Average Capital $7,043 $1,210 $2,607 Non-GAAP Operating ROC 22.9% 31.2% 9.6% 1 Excludes impact of certai
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