Equitable Holdings, Inc.

Good morning. Thank you for standing by. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the Equitable Holdings full year and fourth quarter earnings call. All lines have been placed on mute 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 at that time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. It is now my pleasure to turn today's call over to Ishil Mudrasolu. Please go ahead.

Thank you. Good morning and welcome to Equitable Holdings' full year and fourth quarter 2021 earnings call. Materials 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 and subject to certain SEC rules and regulations regarding disclosure. Our results may materially differ from those expressed in or indicated by such forward-looking statements. so I'd like to refer you to the Safe Harbor language on slide two of our presentation for additional information. Joining me on today's call is Mark Pearson, President and Chief Executive Officer of Equitable Holdings, Robin Raju, our Chief Financial Officer, Nick Lane, President of Equitable Financial, and Ali Dibaj, Alliance Bernstein's Chief Financial Officer and Head of Strategy. During this call, we will be discussing certain financial measures that are not based on generally accepted accounting principles, also known as non-GAAP measures. Reconciliation of these non-GAAP measures to the most directly comparable GAAP measures and related definitions may be found on the Investor Relations portion of our website in our earnings release, slide presentation, and financial supplements. I would now like to turn the call over to Mark and Robin for their prepared remarks.

Thank you, Ishul. Good morning, everyone, and thank you for joining our call today. We are a business that exists to meet the need for retirement planning, income protection, and asset management. Over the past two years of the pandemic, these needs have been amplified. The ability of Equitable Holdings to meet these needs is unique. We provide advice through our affiliated distribution. We have leading retirement franchises, and we have our premier asset management subsidiary, Alliance Bernstein. Our strategy of managing to economic realities and shifting to low capital intensive businesses has proven to be well suited to low interest rates and rising equity markets. We are meeting both the amplified needs of our clients and building sustainable shareholder values. 2021 was a record year. As you can see on slide three, non-GAAP operating earnings were $2.8 billion, or $6.58 per share, up 32% year over year. For quarter four, non-GAAP operating earnings were $649 million, or $1.54 per share. AB had a particularly strong year, contributing $564 million of operating earnings to holdings, up 31% over prior year. Strong organic growth in our core retirement and asset management businesses resulted in net inflows of $25 billion in 2021. And this, combined with the benefit of market tailwinds, resulted in assets under management growing 12%, to $908 billion, which is also an all-time record. The balance sheet remains robust. We have an RBC ratio of approximately 440% and $1.6 billion of cash at the holding company. We successfully executed on our capital return program in 2021, returning $1.9 billion to shareholders, including an incremental $500 million of share repurchases associated with our legacy VA reinsurance transaction and $112 million of 2022 repurchases accelerated into the fourth quarter. Earlier this week, our board authorized a $1.2 billion share repurchase program for 2022. As we continue to deliver consistent capital return, with an expected $1.5 billion in the coming year, of course subject to no significant deterioration in the market. Looking ahead, we welcome the implementation of LDTI accounting changes in 2023 because it will bring further transparency, comparability across the industry, and it's close to our economic model. The term economic is often referenced in different contexts across our industry. For us, and I think what is important, economic means two things. Firstly, setting reserves using actual interest rates. That is the forward curve because this is what you can hedge. And secondly, economic means fair value liability reserving assumptions based on actual experience. We know that investors have been eager to understand more about the impacts of LDTI. Our economic approach to interest rates, where we make no bets, and our strong reserves not only align to the upcoming accounting changes, but position us well for the transition. As of year-end, we anticipate the transition impact to be within AOCI. If LDTI were implemented today, it would mean a less than $2 billion adjustment to the GAAP book value, which today stands at $11.5 billion. We will provide further details for investors in the coming months as we get closer to implementation. Lastly, I am incredibly proud that Equitable achieved another milestone as a public company by releasing our inaugural sustainability report in the fourth quarter. Conducting ourselves as a force for good has always been a part of our culture and the way we do business for more than 162 years. But of course, the need to show we meet the needs of all stakeholders and help address some of society's inequalities has been significantly amplified in the past few years. As of year end, $60 billion of Equitable's general account and $524 billion of AB's assets that is 64% and 67% of their respective totals, now integrate ESG factors into the investment process. In July, EQH pledged to adopt the UN Principles for Responsible Investment. We also take our role seriously as an industry leader in risk management. This extends beyond our company to supporting advocacy efforts for more economic and robust practices that better protect policyholders and investors. Turning to slide four, an important slide. This shows our unique business model and the results of our shift to capital light businesses. As a result of the transformation in our retirement business, our legacy VA amounts to only 18% of retirement assets today. We have also improved the certainty of our cash flows through internal restructuring Today, approximately 50% of our annual $1.5 billion cash flows is generated from non-insurance regulated entities. We continue to leverage synergies between our two operating companies. The $10 billion investment commitment to AB not only improves the risk-adjusted return for our general account, but strengthens AB's efforts to build out higher multiple businesses in the alternative space Within the Equitable Financial Operating subsidiary, we have made tremendous progress to become a more diversified retirement company. We shifted retirement new business away from interest rate dependency and high living benefit guarantees through the launch of our innovative structured capital strategies protected equity product. Q4 saw another record quarter of SES sales. And as a result, we remain the number one player in this fast-growing RILA market. Overall, gross sales from our retirement businesses amounted to $18 billion, up 30% from last year. In addition to shifting the sales mix and enforce action, we continue to execute on our productivity and investment income priorities to further drive earnings growth. Our asset management subsidiary, Alliance Bernstein, generated strong net inflows of $26 billion in the year across all three of its distribution channels, retail, institutional, and private wealth. This has resulted in a 5% organic revenue growth and a 1% fee rate expansion. Importantly, and looking to the future, AB has strong underlying investment performance with 89% of fixed income and 73% of equity assets outperforming this past year. AB was an early mover and now has a strong brand recognition in the Asian markets. We see this as a particular area of differentiation and future growth. Today, our Asia businesses represent 18% of AUM and 25% of annualized fees. AB has a proven track record of attracting and building out investment capabilities, growing an initial seed investment within alternatives four times to $23 billion today. We'll be looking to a multiplier effect with the $10 billion investment commitment we announced from Equitable. Equitable Advisors is a cornerstone of our strategy. Firstly, they are the major source of revenue growth within Equitable Financials. Our affiliated Salesforce contributes 70% of combined gross premiums and broker-dealer inflows. Secondly, they are key to our efforts to transform towards capital-like businesses. Within Equitable Advisors, our broker-dealer continues to be a growth area, with an increase in assets under advice of 34% to $83 billion this past year, benefiting from strong flows as well as favorable markets. We now have over 500 wealth managers delivering valuable advice and solutions to our clients, with full-year sales of $13 billion, a 54% improvement over the prior year. On slide five, I would like to briefly highlight the journey we've been on since the IPO on May 10, 2018, in shifting our business mix towards advice-driven retirement and asset management. In retirement, we've done two important things. We've grown our business and substantially changed the mix. Our core retirement business, the capital light business, has grown by 47% to $130 billion. At the same time, our legacy VA business has decreased by 40% to now less than $30 billion. we are now no longer dependent or significantly exposed to high guarantee living benefit annuities. At Alliance Bernstein, total AUM has grown 40% since the IPO with a 39% increase in fee-based revenue. AB managed equitable AUM has grown to nearly $130 billion and is 17% of total AB assets under management. Finally, Equitable advisors are meeting clients' growing needs for wealth accumulation and retirement through a differentiated holistic financial plan. As a result, we have seen strong organic growth in assets under advice, up 88% since IPO, with strong net inflows and favorable equity markets. Turning to slide six, we were pleased to recently release Equitable's inaugural sustainability report, There is a lot in the report which can be accessed through our website. Underpinning everything, though, in the report is our belief that we can bridge profits with purpose. I've already mentioned inclusion of ESG factors in our investment decisions. Our clients are supporting this momentum and now have $31.5 billion in ABE portfolios with purpose, up 91% in the year. At this time of remote working, we have invested in our people with over 30,000 training hours to adopt an agile design thinking framework to raise the metabolism inside the organization. And we are also using this framework to improve our diversity, equity, and inclusion representation. Key to our ESG approach is upholding stakeholder trust, including advocating for more robust industry practices. And we see the upcoming implementation of LDTI as a critical building block, which Robin will address on the following page. Robin?