Equitable Holdings, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This annual filing reports full-year results, not a standalone fourth quarter. Equitable is a financial-services holding company operating retirement, asset management, insurance and wealth-management businesses; AllianceBernstein (AB) is consolidated, with Equitable holding an approximately 61% economic interest.
Financial performance and position
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | $10.528 billion | $12.644 billion |
| Income before tax | $738 million | $2.992 billion |
| Net income attributable to Holdings | $1.302 billion | $2.153 billion |
| Diluted GAAP EPS | $3.48 | $5.46 |
| Non-GAAP operating earnings | $1.694 billion | $1.726 billion |
| Non-GAAP operating diluted EPS | $4.59 | $4.33 |
| Cash from operating activities | $(208) million | $(250) million |
| Cash and cash equivalents, year-end | $8.239 billion | $4.281 billion |
| Total borrowings, year-end | $4.074 billion | $4.081 billion |
| Total assets / total equity, year-end | $276.814 billion / $4.388 billion | $252.702 billion / $3.141 billion |
Reported tax benefit was $905 million, including a $1.0 billion reduction in the deferred-tax-asset valuation allowance. This substantially supported reported net income; it should not be treated as a recurring operating source. Non-GAAP operating earnings exclude specified market-sensitive and other items and are not a substitute for GAAP results. The company also changed its calculation of operating earnings in 2023; the change added $61 million and $8 million to 2023 operating earnings for two separate adjustments.
Cash flow from investing activities was $(4.851) billion and financing activities provided $9.0 billion. Management said the company had sufficient operating cash flows to meet liquidity requirements in 2024. Holdings ended 2023 with $1.998 billion in highly liquid assets. Insurance-subsidiary dividends are regulated: Equitable Financial had no ordinary dividend capacity in 2024 under the applicable New York formula, while Equitable America had approximately $440 million of capacity.
The General Account investment portfolio earned $3.591 billion of net investment income in 2023, at a 3.80% yield, compared with $3.279 billion and 3.63% in 2022. Year-end AFS fixed maturities had $7.387 billion of gross unrealized losses, principally attributed to higher interest rates and credit spreads; management said it did not intend, and was not more likely than not required, to sell the securities before recovery. Commercial mortgage exposure merits attention: the average loan-to-value ratio was 64%, and the allowance for mortgage credit losses rose to $279 million from $129 million.
Business trends and changes versus 2022
- GAAP revenue fell about 17%, while net income attributable to Holdings fell $851 million. Net derivative results swung to a $2.397 billion loss from a $907 million gain, largely reflecting equity-market appreciation in 2023 versus depreciation in 2022. Higher investment income and a large tax benefit partly offset the decline.
- Non-GAAP operating earnings were broadly stable, down $32 million. Higher investment income helped offset higher policyholder interest credited and benefits.
- Individual Retirement operating earnings rose to $850 million from $762 million; segment account value increased to $91.7 billion, supported by $5.6 billion of net inflows and market appreciation.
- Group Retirement operating earnings declined to $399 million from $446 million. Net outflows were $256 million; results reflected lower assets following the Global Atlantic reinsurance transaction.
- AB operating earnings declined to $411 million from $424 million. AB AUM rose 12.2% to $725.2 billion, largely from $85.8 billion of market appreciation, despite $7.0 billion of net long-term outflows.
- Protection Solutions operating earnings fell to $51 million from $97 million, with higher mortality-related benefits and operating costs. Wealth Management earnings rose to $159 million from $101 million; assets under administration increased to $87.0 billion.
- Legacy operating earnings declined to $186 million from $235 million, including higher benefits from guaranteed-income annuitizations. Legacy account value increased to $22.2 billion despite $2.3 billion of net outflows.
Outlook, material items and risks
- Management cited volatile markets, higher interest rates and geopolitical uncertainty as factors affecting investment returns, hedging, reserves, sales and customer behavior. It noted that U.S. equity markets gained strongly late in 2023 and that market participants expected rate cuts in 2024; this is not company earnings guidance.
- The company began a productivity program targeting $150 million of run-rate expense savings by 2027; $38 million had been achieved by year-end 2023. AB expects about $75 million of annual savings beginning in 2025 from its headquarters transition.
- A 2023 internal reinsurance treaty transferred substantial liabilities from Equitable Financial to Equitable America. It does not affect consolidated financial statements; Holdings contributed $1.1 billion to support the transfer. Required contract novations remain subject to regulatory and policyholder approvals.
- AB’s Bernstein Research Services business was classified as held for sale amid planned joint ventures with Société Générale; closing was expected in the first half of 2024, subject to customary conditions and regulatory clearances.
- Key risks include equity- and interest-rate-driven guarantee liabilities, hedging and counterparty performance, reinsurer collectability, insurer statutory capital and dividend limits, credit and commercial real estate losses, market-driven asset-management outflows, litigation, cybersecurity and evolving regulation. Equitable Financial’s New York reserve rules are more conservative than the NAIC framework.
- The company estimated up to approximately $150 million of reasonably possible litigation losses above accrued amounts at year-end; some matters could not be reasonably estimated. The Brach cost-of-insurance class settlement and related individual settlements were fully accrued, with no expected impact on earnings or distributable cash projections.
- Combined statutory net income for specified insurance subsidiaries was a loss of $1.549 billion in 2023, versus income of $148 million in 2022; combined statutory surplus, capital stock and AVR was $6.776 billion at year-end. The filing states each insurance subsidiary exceeded applicable RBC action levels in its latest filed annual statutory statements.
Important facts for investors to verify
- How much of the $905 million tax benefit, particularly the $1.0 billion valuation-allowance release, is nonrecurring, and what earnings look like excluding it.
- Whether market-sensitive GAAP results and negative operating cash flow persist, and how hedging gains, collateral requirements and guarantee liabilities behave under market stress.
- The quality and liquidity of the investment portfolio, including commercial mortgage exposure, rising credit-loss allowances and unrealized fixed-maturity losses.
- Insurance-subsidiary statutory capital, dividend capacity and the outcomes of New York Regulation 213, the internal reinsurance treaty and planned novations.
- Progress and final terms of the Société Générale joint ventures, AB net flows, and delivery of the announced expense savings.
- The filing reports an unmodified audit opinion and effective internal control over financial reporting; the auditor identified valuation of market risk benefits as a critical audit matter.