Conference Transcript - CRBG 2026-09-09

Ryan, Analyst — Cantor Fitzgerald (on for Ramsey El-Assal)

All right, we are going to get started with the next session. So it's great to have, I think we're referring to it as the new Equitable for now. We have Mark Costantini, the CEO of CoreBridge and soon to be the CEO of the new Equitable. And then we have Robin Raju, the current CFO of Equitable and will be the CFO of the combined company post-merger when it closes. So get started. Maybe just to start, just stepping back, why did Corbridge and Equitable ultimately decide to merge and what's your new vision for the new company going forward and the financial benefits that you expect to emerge from this merger?

Speaker 2

Yeah, Ryan, thank you. It's great to see you and thanks to everybody for attending. It's great for Robin and I to be with all of you. So, I mean, taking a step back, you know, there's a significant amount of tailwind in our business, right? You know, it's very cachet, but, you know, a number of people are retiring every year, reaching age 65, and, you know, and I think the worries of people have gone from, you know, worrying from dying too soon to living too long. And then when you look at the businesses that both Corbridge and Equible had, they're extremely complimentary and you know it's a bit obvious but when you look at doing transactions such as this one and the size of this one you know you really have to strive for one plus one equals three and when you look at the complementary nature of the businesses from the asset management business the you know the advisory business and the former equity advisors and you know the Corbridge advisors the group retirement business and the institutional markets business and what it could do for a balance sheet and last but not least the individual retirement business and the extremely complimentary nature of obviously equitable being the market leader in the Rila space and Corbridge obviously having a top five position and the fixed annuity and fixed index annuity and overarching all of that is world-class distribution right and and it's a vital in our business to have world-class distribution in the form of retail wholesaling and the form of you know direct to advisory and worksite you know. So it's, you know, it's very complimentary. And you bring these two platforms together and their scale advantages, which I'm sure we'll talk about it. But the scale manifests itself in many different ways. But, you know, it's going to be a company that will have a market cap of north of 30 billion and over 25 billion of statutory capital tied to it. And so it's great financials, which I'm sure Robin will add some comments here. But that's what that brought these two great companies together.

Robin Raju, CFO

Yeah, and before you get into financials, one good thing when these companies come together, and Mark talks about it a lot, is the impact we're gonna have on clients and the reach we're gonna have on clients. Together, we're gonna serve over 10 million-plus clients to combine companies, so that's compelling because more customers mean more opportunities to grow. Purely from a financial side, I couldn't think of a more compelling transaction when it comes down to it. We're going to be the number one U.S. insurer in terms of U.S.-based earnings and cash flow. I wouldn't want exposure to any other retirement market. And if that's the source of our earnings and cash flows, that's a great position to be with the tailwinds in the market that Mark spoke about. We're going to have $5 billion of operating earnings to combine business, $4 billion of cash flows, and we're going to deliver a 15% return on equity. So this is going to be a compelling transaction for shareholders. But we're really excited about what we're going to be doing for customers going forward.

Ryan, Analyst — Cantor Fitzgerald (on for Ramsey El-Assal)

I think it's been almost six months now since the merger was announced. Can you give a little color on what you've been able to accomplish so far as you prepare for the day one of the merger close? And also just what the reaction has been from employees and distributors and other business partners?

Speaker 2

So I would say when we announced the transaction in late March, we were quite prescriptive. you know Mark Pearson Robin and myself about you know what it would do to our balance sheets and all that but first and foremost we said as well we have to get the organization going right so we're sitting here today you know in early September and we've announced the three most senior layers of the organization that's 500 executives that have been appointed to the firm and and those executives basically are running their their day-to-day kind of responsibilities delivering on 26 until year-end when you know we are expecting to close but as well planning for the future so in line with that we've got this in through integration and transformation office we put in place it's been staffed and and it's well on its way of orchestrating all of the integration activities that need to take place to hit the ground running you know on Jan 1 when we we hope to close what it's done as well is we've secured obviously you know a number of our approvals so the you know the FINRA has approved a transaction our shareholders have approved the transaction the antitrust process has taken place obviously our shareholders approved the transaction last month or in July and so we're working through the regulatory process now and you know there's four or five key states that oversee and govern the activity of both Equitable and Corbridge that we're actively engaged in and there's a couple of international regulatory bodies tied to Alliance Bernstein that we're dealing with but you know we are sitting here you know confident that you know we're marching towards the close at the end of the year and then we'll hit the ground running very quickly you know in terms of bringing together a lot of the synergies that Robin speaks so well about but as well the growth this is a growth story right in our comments we just made a first question this is all about growth it's about serving more customers it's about getting ahead of the retirement curve and really delivering solutions to the end consumer, as Robin said. And, you know, in terms of distributors, you know, we have had a number of discussions across both firms with distributors, and we haven't heard of any revenue synergies, I guess, as people refer to them to. I think the large distributors are embracing this. The large distributors want to have longstanding, deep, you know, companies and manufacturers that know this business have been there through various cycles and deliver on their promises And, you know, obviously you're staring at a company that does all of that when we come together and have done so historically in each of our cases. So the employees, I mean, it's a merger, so it creates 100% anxiety across both platforms, right? And our responsibility as management is to engage with the employees, to be transparent, to be quick, as I mentioned, to make decisions and be and treat everybody the way, you know, you'd like to be treated. whether you've got a go-forward role or whether you've got a different role or whether you're leaving an organization, you know, how the organization treats you says a lot more about who we are. And, you know, we're working very hard to make sure that's the case. And there's a lot of transparency as we're marching towards, you know, the merger. So.

Ryan, Analyst — Cantor Fitzgerald (on for Ramsey El-Assal)

Great. I want to dig into some of the targets. So you got it to 10% plus accretion. A component of that, the biggest component of that was $500 million of expense synergies.

Robin Raju, CFO

Can you talk more about the the sequencing of and the key components to drive that and then um how i guess how big of a technology upgrade does does that expense save target contemplate as well sure so we announced of the 10 plus accretion we said about six to eight percent is going to come from the expense synergies that we have across both firms i'd break it into four buckets headcount obviously you have duplication enroll so they'll only be one person in one seat that's probably going to be where you get the front-loaded savings in any merger that we have. And as Mark said, we've already announced the first three layers of the organization. So we already know that we're very highly confident in that number coming through based on where we are today, which is a great sign of our success and our confidence in achieving the overall $500 million. The other areas are going to be vendor consolidation. If you think about where you get benefits from scale, you get really pricing power with your vendors. Now, we can't do that yet. some of that we have to wait obviously to january 1st um but let's uh but we know mark and i know that together both firms and we know by the inbounds that we get from a lot of our vendors that um we're going to have the ability to get at scale pricing which is going to drive bottom line savings the third category would be it consolidation that's going to be a big piece of work that we do from now to year end on picking what platforms that we're going to integrate that's That's why it was so important that we get the leaders that are going to be accountable for that decisions up front. So now the people that are accountable for the different businesses, for the different corporate functions, they will have to make the decisions on what are the best systems and IT integration that we'll do. And that'll come through probably more so in 2028 than 2027, because that's going to take time in planning and process. But our head of IT, he has this phrase, he wants to integrate, transform, and innovate. You can't do all at once, but we have to sequence it properly to make sure that we can run faster going forward post this. And then obviously with any merger, you're going to have some real estate consolidation as well. So that'll be something that we pick up naturally, whether it's in New York or other areas. But that's going to be another piece that'll come through later in 2028. But where we sit here today, Mark and I are highly confident in achieving that expense synergy number. And it's really down to the actions that we have already in place and putting us in a position where we can make decisions come 2027 and start running right away.

Ryan, Analyst — Cantor Fitzgerald (on for Ramsey El-Assal)

Great. So the other component of the EPS accretion was a 2% to 4% contribution from capital and tax synergies. What are those synergies more specifically resulting from? And then how quickly will they emerge? Is that going to be pretty quickly and free up capital that can be redeployed, or does it occur over time?

Robin Raju, CFO

Sure. Well, both will occur over the two years. So within the 2% to 4% accretion, that's part of the 10% plus accretion from the merger, there'll be a portion related to cash tax savings. And that's us leveraging the non-life DTAs on core bridges balance sheet to offset some of the non-life earnings that we have from Alliance Bernstein and the wealth management business. So that's going to be real cash savings that we achieve post-close. then we will have capital synergies. And we'll have some between the first two years, and I anticipate we'll have more later. Some capital synergies come from if we decide to consolidate legal entities, but we can get it even without consolidation through internal reinsurance in some areas. So that, again, will probably happen in 2028, where you get the cash tax savings immediately. And then post-2028, I mean, you've seen both companies, corporate and equitable. We've had a good track record of capital optimization and making sure we can and deliver value to shareholders and invest in growth. And so Anticipate, that's just going to be part of our DNA as a management team to unlock capital value and allocate it to the best sources.

Ryan, Analyst — Cantor Fitzgerald (on for Ramsey El-Assal)

Then on revenue synergies, you haven't officially given us a quantification of the revenue synergies and they weren't part of the accretion guidance, but you have talked about some of the areas that you think will provide synergies. I guess, can you review what those are and you know how meaningful you think they can be.

Speaker 2

Yeah and you know it's interesting because you know we had a lot of discussions leading up to the announcement in March as to you know where we'd focus kind of our guidance and we agreed on expense synergies and some of these capital and tax that Robin just walked through because they're tangible and a lot of people in this room and others you know could put tangible value on it and and very quickly when people, you know, grasp what Robin just said, we started getting peppered, Robin and I, with other questions about growth. And we did guide when we said, you know, we announced the merger that we were going to direct like 90 to 100 billion of assets that are on Corbidge's balance sheet, both the general account and separate accounts to Alliance Bernstein along the same timelines that Robin just mentioned. And, you know, that's net flows of 90 to 100 billion that Alliance Bernstein would otherwise have received, right? So that, But right there, that's a 10% to 12% increase into their asset base and their margins and revenue. That does not include as well bringing all these great origination teams together, the ones like Corbridge, Equible, and Alliance Bernstein under one plateau. One of the things I think we need to step back and reflect on is that when you look at the production that Equible has and you add it to the production that Corbridge has across our retail market and our institutional market, But you're looking at an engine here that's going to generate over $60 billion a year of institutional and retail spread business. And that creates a lot of origination capability. That creates a lot of access to investment that otherwise would not be available to each firm. So that's a smattering numbers. And then you look at what we're going to do on the group retirement side, plus the advisory business, plus just AB itself. You see a lot of revenue flow that way. And the synergies as well is through the distribution. Equitable Advisors, I think Robin has said many times, does like $2-ish billion or so of fixed annuities and fixed extension annuities that now will have, let's say, a proprietary offering to do so. Equitable has a VUL product that was on our design table. So we could quickly introduce that product into our distribution at Corbridge. And then you have the advisors and the penetration of the 4-3-B plans. If you listen to a lot of what we say, we need to cross-sell, up-sell those plans. And with the number of advisors a collective firm will have, we'll be able to accelerate the growth of the penetration of service that these clients deserve. And on the institutional market size, the sheer side of the balance sheet, that will be in the circa of $500 billion of on-balance sheet assets, will give an appetite for a lot bigger, I would say, PRT business and a lot bigger appetite for the GIG FABN products. So we see a lot of growth opportunities on the revenue side. And I would say the story that's not said enough, and you'll hear Robin and I say a lot more next year when we march towards Investor Day, is that this is all about growth. It's all about serving more customers. It's all about growth. And the expense synergies obviously fall into place for all the reasons that Robin said.

Ryan, Analyst — Cantor Fitzgerald (on for Ramsey El-Assal)

So Equitable recently announced the sale of its employee benefits business. Are there other divestitures that you would consider from here of the combined companies? I guess the one thing that comes to mind is kind of the remaining life exposure that the legacy Equitable had. Or do you feel pretty set on the business mix at this point going forward?

Robin Raju, CFO

Yeah, so look, this merger, it all comes back to scale. And scale matters in the businesses that we were in. Let me touch first the equitable employee benefits transaction. We actually like the employee benefits market. We think it's a good market. We just weren't at scale and we weren't profitable. So it's tough to compete when you have to allocate capital to these other businesses. Trying to grow a business as a greenfield at scale, it was going to take too much time. And so the Hartford, when they approached us, it was clear that they're a better owner of the business. They're in the small business market. They can leverage our platform to go in. And so I think it was a win-win, which is what you want in a transaction for both. But it doesn't mean that we didn't like the employee benefits market. It's just an at-scale point. If you look broader post-merger, like as Mark just mentioned, this is a growth story. We really want to allocate capital to fund growth to support Americans retire going forward. Sure, you may see some more cleanup reinsurance transactions. That's what I spoke about earlier. That's like capital optimization. But when Mark and I get together, believe me, we don't talk about, oh, should we do reinsurance here? Should we do reinsurance there? That's, I think both companies successfully use reinsurance to shift the balance sheet. And we're at a place where it's not needed at this time. And it's really, how do we fund the growth ambitions that we have for both companies by allocating capital appropriately?

Ryan, Analyst — Cantor Fitzgerald (on for Ramsey El-Assal)

All right. So we're shifting more to growth then. In the annuity business, so volumes have doubled basically in the retail annuity market, but it has also attracted a lot more competition at the same time. Can you talk about how you're viewing competitive conditions today in the retail annuity market and how the new combined company is positioned within that?

Speaker 2

We like our chances. I say that because we will have the broadest product portfolio. I would say look at the manufacturing capabilities of the new Equitable and compared to any other player in the industry and look at the history of proven success in manufacturing those products profitably while serving customers better and delivering value to their shareholders. I don't think anybody compares to this new co. Look at the distribution depth and breadth of the new firm. Pretty much every retail outlet that serves a retirement need and in retirement and consumer will be touched by our distribution. You know, people talk about scale and to me, scale is an ability to touch every customer you can manufacture a solution for profitably while delivering extreme value to that customer and serving the shareholder well. I don't think other companies compare to that. So is there increased competition in some of this space? Yes, there is. But I mean, I've been tied to this business for the better part of 36 years, there's always been robust competition, right? And it's a matter of what's the, I would say, capital and thoughtful capital that's coming to the market for serving clients' needs. And that capital needs to have an ability to originate assets to back those liabilities, but needs to understand the liabilities they're writing as well. And this firm has deep experience on both sides of that balance sheet. So we feel we're in it for the long run. And from the discussions we've had with distributors, I would say for many distributors, we're as important to them as they are important to us, which puts, you know, the relationship in a very good stead, right? And that scale that, you know, we talk about, you know, that matters, right? Because, you know, not having the new equitable on your shelf is not something that, you know, many distributors would find appealing, right? And that puts us in a very good spot. Now, I think you're implicitly referring to some of the newer entrants that are, you know, asset intensive or funded by alts and all that. And I think, you know, they pick their spots. They operate in distributions that maybe we have access to and they have access to, but they don't have the presence and the depth and the history, you know, behind their promises that we have. So, you know, we welcome rational competition. We welcome rational competition. Yes.

Robin Raju, CFO

It's going to be difficult to compete with us, though. If you think we're going to have one of the lowest unit costs in the industry, we're going to have great asset capabilities from Alliance Bernstein, Blackstone, BlackRock to get a good risk-adjusted yield, and we have world-class distribution. So it's going to be really hard to be competitive on a disciplined way versus us. So we expect we're going to grow but also deliver great returns given those attributes.

Ryan, Analyst — Cantor Fitzgerald (on for Ramsey El-Assal)

And I guess somewhat related, and maybe I don't know if this is a combined question or one for each of you at this point, since the merger hasn't closed. But can you talk about the spread dynamics in, I guess, each company's retirement business at this point in time and how to think about the near-term trajectory there?

Speaker 2

Yeah, I can give you maybe the corporate perspective to your point about that we're operating independently. So I think if you've been listening and following Corbridge, it's been a story of a transition and a pivot in our group retirement business, right? The group retirement business, you know, has circa $130 billion of assets tied to it. $80 billion is in the retirement space and $50 billion is in the out-of-plan business. We've been obviously cross-servicing and cross-penetrating our plans, basically, and growing our advisory business that is in excess of $20 billion now of that $50 billion. And we have 1.5 million participants in plan that we're trying to penetrate and serve and cross-serve. And that's created like 300,000 of these out-of-plan members that have the $50 billion of asset. And we are approaching it in terms of taking our business from a largely spread-based business to a fee-based business. And as you have seen in Q2, we basically clipped the 50-50 kind of approach there. So we are in a good position and we're growing and cross-pollinating. I think the merger will even bring more attention and ability to penetrate those plans. You know, as a standalone company, we felt there was a $30 billion opportunity there in terms of upside of cross-selling and upselling in our plans. With the merger, I think that accelerates. So to the spread comment, you know, we, leading up to year N and into Q1, we were defending that we had floating rate assets. You know, and we were saying, hey, if there's contraction, if rates are going down, it's about, you know, 20, 25 million for every 25 basis points. Well, the same thing happens when rates go up. So that's a tailwind to our spreads. I think we guided when we started the year to 2.55 billion of, you know, absolute spread income. we are sitting here confident that we will achieve that. So I think our spread business is doing well. I think the block of business is behaving overall as we intended, including our individual retirement business here as I talk about the spread business. So I think we're sitting here in a good position and we feel confident, obviously, bringing Equible with CoreBridge that will only accelerate some of the dynamics I just mentioned for our block.

Robin Raju, CFO

You know, one of the areas I'm excited about the merger, too, is innovation that's going to come out of both businesses. And when you innovate, you can get outsized margins early. And that's a little bit what happened with Equitable with our Ryla product. We were first to the market. You know, we were educating advisors on the needs to have equity exposure as you're nearing retirement. But we were the only ones there. And so we had outsized margins. We were writing new business at 20% plus IRRs for many years, and then everybody came to the market. Now, the pie's gotten bigger, and we've continued to grow and maintain our market share, but margins have normalized. And so now we're writing what I would call at-scale margins, 15% IRRs on that Ryla product. But from the pre-2020 business, we had big margins on it. That business rose off, and now margins have stabilized. And so that's the spread compression that you saw. And you also saw in the first two quarters now, as we guided, margins have stabilized, spreads have stabilized in that business overall. So going forward, we expect spreads to continue to be stable and NIM, net interest margin, to grow as book value grows, you know, X embedded derivatives. And that's how we are confident with that, as we've seen it the last few quarters. And the Ryla block, the pre-2020, is now less than 10% of the total block. So it's not really significant at this point.

Ryan, Analyst — Cantor Fitzgerald (on for Ramsey El-Assal)

Got it. than the variable component of spread. Any updated comments from either company on third quarter expectations for variable investment income at this point?

Robin Raju, CFO

Sure, I could start. ALTS continues to be a volatile category, for sure, as you've seen over the last few years with interest rates and change in dynamics where public equity markets are. We underperformed our long-term target the last few years. In the third quarter, we're expecting 4% to 5% growth, so a rebound from the lower second quarter that we have. So we should be at a 4% to 5% annualized growth rate for the third quarter. The drag in the portfolio is really coming from real estate equity at this time and some of the venture investments, where you're seeing some of the growth equity funds have more recovery with the delay in equity markets. And then we'd expect, if markets are normalized, that return should come back to longer-term targets over time.

Ryan, Analyst — Cantor Fitzgerald (on for Ramsey El-Assal)

You mean a 4% to 5% return? Is that correct? Correct.

Speaker 2

So for Corbridge, I think coming in and out of Q2, we guided to very soft, I would say, VII results for the balance of the year. I would say that for Q3, we will exceed the guidance we mentioned, and we'll be more in the zip code that Robin just mentioned, north of 5% for the quarter for VII. So I think that's a positive versus what we had guided. Now, what I would say as well, and I want to give perspective to the audience here. Both companies, you know, alts exposure is, you know, way less than the industry average. And our view, and it's very much aligned with Equitable, is that the alts play a role in people's portfolio. And when I say people, I mean companies' portfolio. because if you're issuing, let's say, a liability, a life liability or a pension risk transfer that has liabilities that exceed 25, 30 years, there's no good spread assets available, right? And economically, all are the right asset to defeats that liability until you can move those assets to some good spread assets, right? So, and it's each of us personally, if you have a 30-year outlook at the invest in fixed income or the invest in equities, right? So it's the same economic equation. It's just that the accountant makes it flow to operating income, which creates that volatility. But if you're buying whole and you get the capital appreciation and the actual return and investment income over the course of time, which is what we're both saying here, it's a great asset to defeats that long tail liability, which is why we buy it to start.

Ryan, Analyst — Cantor Fitzgerald (on for Ramsey El-Assal)

Shifting to the wealth business, so Equitable's wealth management business has had very good momentum across financial metrics. can you speak a bit about what's been driving that and the continued runway for revenue growth and margin expansion? And then I guess as a related follow-up, Mark touched on this a little bit, but just how can that all be accelerated with the wealth platform that will be then kind of connected with Corbridge?

Robin Raju, CFO

We're really excited about the wealth business at Equitable. It's doubled in earnings since our investor day and it hit our target two years below plan. Why is that? think it comes down to the people and the advice that we provide so one thing that's unique to equitable i think that many other wealth managers there is we recruit new people to the business and we hire experienced hires that's important because it ensures that we maintain discipline and what really separates us is the training so we have holistic life planning training programs and we help our advisors transition from they start into schools and they become wealth planners over time. And that's the best way we've seen to increase productivity. The proof is you've seen the double-digit productivity that we've had every year since we broke that business out as a segment. And the way we've done it is really unique because we do have these two levels of recruiting and the training that we provide overall. And I think that is really the secret sauce of Equitable. It's that strong performance culture and people helping each other out and trying to touch more customers overall. If you look from a net flow perspective, we've had double digit organic growth in that business. I would say it's like top quartile. I can't find anyone that has better organic growth in their wealth business than we do in equitable advisors. And that's a proof point of more customers touching us and the productivity that we have in that business overall. We also have another wealth management business too that we are excited about. It's the private wealth business at Alliance Bernstein. That's a real gem inside Alliance Bernstein that not a lot of people speak about that really provides a unique solution orientation towards ultra-high net worth as well. So both business together, we touch clients in the mass affluent and we touch clients in the high net worth area, and that excites us going forward. And Mark, you should touch about it. You've met now, I think, some of the equitable advisors and some of the people, your thoughts are on that.

Speaker 2

No, I would say that, But as a somewhat objective assessment, when we started having a dialogue with Equitable, I would say my view and my strong view was that Equitable Advisors was a gem and the private wealth business at Alliance Bernstein was a gem. And I would say the last six months have only proven to make my belief they're even stronger based on all the dynamics that Robin has said. And I have met 30-odd-plus people of the leadership there and some of the people on the ground in the branches. And it's amazing how they go after doing what's right for their customers first and packaging the right solutions for their financial needs and how the culture there is incredible. Now, I would say we have 1,000 or so advisors at Corbridge. And, you know, we invited some of the leadership of Equitable Advisors to one of our main national meetings a few months ago. And the similar culture, you know, kind of runs through the Corbridge Advisors to the point where, you know, a very senior leader at Equitable Advisors that was there said, hey, if I close my eyes, I think I was at an Equitable Advisors meeting, given the cultural assessment then as well. So the challenge for both organizations is you got to bring those two together and you're dealing with, you know, personalities that don't like to disrupt their book. Right. So we got to be thoughtful how we bring it together and make sure that one plus one equals three.

Ryan, Analyst — Cantor Fitzgerald (on for Ramsey El-Assal)

But, you know, obviously the platform and the success that Equal Advisors has had, you know, is an incredibly attractive for our future and speaks volume about why we're bullish on, you know, the value proposition we'll have going forward. then on on the institutional markets business so you know both companies have been generating double digit growth and in balances um you know equitable is more focused on spread lending i think you know there's more prt as part of the corbridge portfolio along with other along with other liabilities do you see the merger changing much on the growth rates of of those of those businesses can you do more as a combined company or should we just think about it as you can continue to grow you know in that double digit type range yeah i think we're going to increase

Robin Raju, CFO

the growth rate across all of our businesses with the revenue synergies that we have if you think mark mentioned it on the spread lending businesses now you have a bigger balance you can do more and you could be disciplined you know from an equitable perspective one thing that was interesting is we did want to broaden out our liabilities and an institutional business is a great way to allocate capital in a disciplined manner and you saw me outside in looking at Corbridge in the second quarter, how they were disciplined in allocating capital between institutional and retail, depending on where cost of funds is. Now we can do it at a much bigger and broader scale. So having an institutional business that's at scale, you know, outside in looking at Corbridge's PRT business, that's a good business that we would have loved to get into. But again, we can't do it at scale. Now we're at the merger, we can do it at scale. So having these different businesses plays an important part in terms of capital allocation. And it really drives discipline that Equitable couldn't do by itself today, or it would have taken years, 10 years, to develop our institutional business where CoreBridge is at today. So from my perspective, it really helps increase the growth rate, but also allows us to be very disciplined capital allocators as well.

Ryan, Analyst — Cantor Fitzgerald (on for Ramsey El-Assal)

Mark, on the individual life business, you've been pretty positive on that business and its potential since from the get-go, since you came into CoreBridge. I guess what's driving the optimism there? And then what have you been doing to position that business to have better growth?

Speaker 2

Yeah, so I am bullish on the live business and I'm bullish on the live business at CoreBridge and the new ECO role based on a couple of facts that I'm going to mention here. First of all, if you look at and I looked at it objectively when I joined the firm last December, if you look at the last, you know, 12, 16 quarters, the Corbridge's life business has printed mortality gains. Okay, so what does that mean? Okay, that means a few things. That means the business has been well underwritten and the business is performing and mortality is improving, right? Because that's, you know, versus expected, right? And then you look at what's the market segment we're serving versus, you know, uh other market segments and it's serving uh i would say the mid market and the emerging affluent market right uh so and that slice and you can we can talk about it i'm an actuary about uh you know what's driving that mortality and i'm happy to do so if we had more time but that bodes well for the life business then i look at i went to the new business area and i said hey how are we processing business how's our stp show me how the firms think of our operations and we had very low grades i'm going, okay, we're writing a decent amount of business, we're printing mortality margins, and we are less than appealing operationally. If we make ourselves appealing operationally, and we make ourselves the easiest to do business, and we create connectivity with the distribution and the end advisor, then we can easily accelerate the growth without putting any margin at risk. And the margin of the business are attractive, and they naturally diversify your balance sheet, because we're obviously writing a lot of longevity business on the annuity side. Now, the balance sheet of CoreBridge is still net long mortality, meaning we've got more mortality risk than longevity risk. I like that. I like that a lot because if I went to the casino and red was living longer and black was dying sooner, I'd put my money on red based on all the money that's going into biotech and developments. I think there will be a non-linear shift in the mortality curve, and I'm happy to talk about that in detail as well. So that's why I'm bullish on mortality. on bullish on mortality written thoughtfully and at good margins and i think that's what we have at coverage so is the main driver of better growth potential there the operational improvements the operational without changing the product margins without necessarily doing you know putting yourself in a position where you're writing a business that you'll find an appealing down the road so that doesn't mean we won't have you know assumption updates based on policy over here on older blocks or other blocks i'm just telling you that the business we're writing and the business that sprinting mortality margins is an attractive one.

Ryan, Analyst — Cantor Fitzgerald (on for Ramsey El-Assal)

At Alliance Bernstein, it's already achieved the private markets AUM target ahead of schedule. The margins are within the target range. What are the key milestones maybe from here now that you've achieved those two things?

Robin Raju, CFO

Yeah, so at Investor Day, we announced that we wanted to grow AB's private credit business to $90 to $100 billion. Ryan, as you mentioned, we achieved that well in advance of our target. AB's done a good job of building new capabilities and leveraging the equitable insurance capabilities to accelerate growth. So we hired a private ABS team that came over that was able to produce good risk-adjusted returns to us. They've now also built out their CML platform. That allowed us to move $12 billion in CML assets to them in July. That's a huge differentiator for AB that other traditional asset managers don't have. They have an insurer to help build new capabilities. And then AB has unique distribution, private wealth we talked about, but also in Asia where they're local in the markets and they have 25 plus years of history, a strong brand, where they can now distribute these products to third parties. That's going to be accretive to margins over time. Right now, new business at AB generates about 45 to 50 percent incremental margin that we put on. So that's a good tailwind for us as we want margins to grow over time as well. But AB, as we mentioned, has been a differentiator for equitable with this flywheel effect. It's just going to now run faster with the Corbridge merger now, a $90 to $100 billion of assets, general account and separate account moving over. As Mark mentioned earlier, that would take 10 years to do. So now we can make Alliance Bernstein a trillion-dollar asset manager after this merger. That's going to put them and separate them in terms of their growth profile and where they want to invest going forward as well.

Speaker 2

I mean, the only thing I would add to that great story is to make it even better is that when you look at the combined firm, there'll be like 80 to 90 billion of origination a year demand, right? There's the new business flow, plus there's a 500 billion asset that rolls over, right? And some of that, you know, will need to be redeployed. So you're looking at, in addition to all of what we're doing off balance sheet, just the on balance sheet origination need will be north of 80 billion. So that arms A, B, and everything Robin said with a lot of opportunity.

Ryan, Analyst — Cantor Fitzgerald (on for Ramsey El-Assal)

Just on the regulatory front, any particular key issues or debates you're focused on that could either impact the industry or equitable core bridge?

Robin Raju, CFO

Well, may I start a hot topic right now, I guess, always on the regulatory side of it. And, you know, one thing I know Mark agrees with me, like the one thing the combined companies want to do is advocate for a healthier industry. We need to do our part, write good business, print good margins, be disciplined, allocate as a capital, but we want to advocate for a good, healthy industry overall, and you've seen Equitable do that. We started with VM21 under reversion to mean that took a long time, as I tell Ryan, to become effective, but that's now in place. We did structure capital charges, so you see that impacting below BBB and below CLO businesses, and that has changed. You've seen some companies indicate that's going to change their risk profile for those securities overall. And then also reinsurance. You know, we're advocates of reinsurance. Both companies leverage Bermuda because we believe it's an economic regime and a disciplined regime. But our local regulators should have disclosures and understand what assets are moving offshore and why they're moving offshore and have good visibility with that as well. And I think where the NAIC and where the industry is moving to is transparency. And I think transparency is important to build trust and ultimately if the whole industry wants to re-rate and have a higher rating going forward as a PE multiple, we need to have more trust, more trust from clients and more trust from shareholders. And I think a healthier industry and continue to advocate for a healthy industry is important for all of us.

Ryan, Analyst — Cantor Fitzgerald (on for Ramsey El-Assal)

All right. We're going to wrap it up there. Thank you to the New Equitable team.