Thank you for standing by, and welcome to the Equitable Holdings First Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I'd now like to welcome Isil Muderrisoglu, Head of Investor Relations, to begin the conference. Isil, over to you.

Good morning, and welcome to Equitable Holdings first quarter 2023 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 Kate Burke, Chief Operating Officer and Chief Financial Officer. 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 supplement. I would now like to turn the call over to Mark and Robin for their prepared remarks.

Good morning, and thank you for joining today's call. This is the first time we are presenting our results under the new LDTI accounting standard. And also this quarter, we provide additional disclosures to our new Wealth Management segment and separating our legacy VA portfolio from our core retirement business. Let's get straight into it. On slide three, we present highlights from this past quarter. Non-GAAP operating earnings were $364 million or $0.96 per share. Adjusting for notable items in the period, which included elevated mortality claims and lower alternative returns, earnings per share were $1.21, up 9% on quarter four, 2022 and down 18% compared to the prior-year quarter, reflecting movements in equity markets and alternatives. Assets under management and administration ended the period at $864 billion, down 8% year-over-year but up 5% year-to-date. Our businesses delivered strong results this quarter, with $3.2 billion inflows in our core businesses, positive across retirement, asset, and Wealth Management. With the collapse of SVB, Credit Suisse, and Signature Bank, there has understandably been a lot of attention on the finance sector. Today, Robin and I will spend most of our time on our liquidity position and strength of our balance sheet. We are conservatively positioned with an A2-rated investment portfolio and a high-quality diversified mortgage portfolio. Lapse rates remain within expectations as well as historical averages, a testament to products that are ALM matched and hedged to protect both policyholders and shareholders. We will touch on this later in more detail. Turning to capital, we have $1.8 billion of cash at holdings, supporting financial flexibility and giving confidence that we can consistently deliver on our payout guidance across market cycles. In the quarter, we returned $286 million to shareholders, including $214 million in share repurchases. As such, we delivered a 63% payout in the quarter, which is at the upper end of our stated guidance. Our RBC ratios remain above target levels. This quarter sees the introduction of the new LDTI accounting standards, the most meaningful change in over 40 years. Equitable welcomes the greater transparency and the closer alignment between accounting and fair-value management. We are also taking this opportunity to show our businesses and what we think will be a better way for investors. Firstly, we are splitting out our capital-intensive legacy VA business from our core retirement business. This reflects the fact that five years since the IPO, we have been very successful in reducing the risks on the legacy portfolio, and it is now no longer significant. The book is only $22 billion in account value, 16% of the total. Through reinsurance, hedging, and buyback programs, we have reduced CTE98, that is assets needed to withstand the average of the worst 2% of scenarios, by over 70% since our IPO. The data before this was the capital-intensive legacy was lumped with an upscale in the value in a more capital-light and spread-based individual retirement products. Products like our market-leading SCS are perfectly ALM matched and have no living benefits. As such, there is a very narrow range of financial outcomes, very different profile to the legacy VA. Our revised disclosures provide greater visibility into the drivers of value within our business. As a reminder, over 50% of our annual cash flows come from unregulated sources, primarily wealth and asset management. Our new Wealth Management segment highlights one of the faster-growing and higher-multiple portions of our business and demonstrates the synergies and strong client persistency we realize from one of our biggest assets, that is our 4,100 affiliated advisors. We are excited about the growth prospects here and believe that our holistic life planning advice model and investment capabilities should translate into attractive growth in the future. Turning to slide four, you will see an overview of what has changed in our new disclosures. In our largest segment, Individual Retirement, investors now have greater visibility into the size, earnings power, and momentum of our core retirement offerings. This segment has $79 billion of AUM in a mix of fee-based and spread-based earnings and totals approximately 38% of operating earnings in the quarter. We expect to see continued growth in this segment from our privileged distribution, meeting the demand for tax-deferred accumulation and income. In Wealth Management, we capture investment advisory fees, income on cash sweeps, and distribution margin on insurance sales. We have grown from approximately $40 billion of assets under administration at IPO to $76 billion today. This segment contributed $32 million of operating earnings in Q1 and net flows have been growing at an 8% CAGR over the last five years. Last is our Legacy segment. This includes capital-intensive fixed-rate variable annuities issued prior to 2011, which were previously included in Individual Retirement. Legacy represents approximately 12% of operating earnings, adjusting for notable items. This segment continues to generate earnings and cash flow, and we are comfortable with the reserving and hedging of these liabilities. In 2021, we completed the Venerable transaction, which significantly reduced our risk profile. This is our smallest segment, with $22 billion of account value and running off at $2 billion to $3 billion per year. We look forward to providing more detail on these segments and the broader opportunity ahead at our Investor Day next week. Please turn to slide five. To understand EQH, it is important to understand the benefit from synergies we get between our businesses. We are uniquely positioned in advice, retirement, and asset management. 85% of Equitable advisor annuity sales go to Equitable and nearly 100% of life insurance sales. Equitable has also received new business from approximately 14,000 third-party advisors in the last year. Equitable uses its general account to help build out AB's private markets in return for higher-risk weighted returns. AB has been very successful in attracting $4 of third-party funds for every $1 of seed money and has now built a broad alternatives platform including the CarVal acquisition, which now stands at $58 billion. We have deployed over 70% of our $10 billion capital commitment to AB, which provides higher general account yields and attractive high multiple fee revenue at AB. Beyond our capital commitment from the general account, continued growth in structured capital strategies product range is benefiting AB, as they manage over 90% of our SCS account values. Turning to our businesses, in Retirement, we delivered $4.7 billion in premiums, led by our suite of RILA products, up 12% year-over-year, as we continue to innovate and capitalize on the demand for protected equity. Approximately 50% of our sales come from all affiliated distribution. We had another strong quarter with $1 billion of net inflows, benefiting from strong demand and client persistency. We also continue to progress on our expense initiatives, achieving $60 million run rate savings through quarter-end. We remain on track to achieve this target by year-end.

Thank you, Mark. Turning to slide seven, I will now spend a few minutes discussing the three areas Mark just highlighted. First on credit, we are well positioned to withstand a credit event and recover quickly from it. Generally, the insurance industry is well-capitalized. However, as you can see on the left-hand side of this page, Equitable can better withstand significant stress in our investment portfolio. At the top is an independent stress test by Autonomous, which shows that in a credit event similar to the global financial crisis of 2008, our RBC ratio holds up better than peers, with a drop of only 40 points versus peers at 48 points. In this event, we will stay within our target range of 375% to 400% RBC. We are also constantly performing internal stresses on our portfolio, which are more severe than this example. On the bottom, you can see one of our internal stresses, which tells a similar story to Autonomous. Equitable's portfolio and capital remain resilient through a scenario that is more severe than a global financial crisis. We define this stress as using the global financial crisis for investment grade. The dotcom crisis for below investment grade, which was more severe than the global financial crisis, while also using a 40% valuation shock to the office TML portfolio and a meaningful shock to other TML types. And even in our internal stress scenario, our RBC ratio is only impacted by 52 points. There are a few observations that we would make from these results. First, our high-quality investment portfolio is resilient. 96% of our fixed maturities are rated investment grade and the portfolio has a total credit rating of A3, which excludes treasuries. Second, we have a track record of maintaining a strong RBC ratio. Through every period since our IPO, we have delivered an RBC ratio above 400%, a testament to our economic management of the balance sheet. And last, our statutory capital generation remains strong. In 2023, we will generate roughly 10 RBC points per quarter in the retirement company. This means that should a material credit event arise, we will likely be able to fully rebuild our regulatory capital to the current excess levels within one year's time. So in summary, our portfolio is high quality and able to withstand stresses in the credit cycle. The next topic I will address is our real-estate exposure through our mortgage loan portfolio, which represents approximately 17% of our highly-diversified general account. Within our $17 billion portfolio, we hold agricultural loans and a diversified portfolio of commercial mortgage loans, which have allocations to resilient sectors by multifamily housing and industrial. These CMLs provide an attractive risk-adjusted investment for Equitable. The portfolio is resilient, which is reflected in the underlying fundamentals with an average loan-to-value ratio of 62%, a debt service coverage ratio of 2.1 times, and 97% of the loans rated investment grade. It is important to note that we update our loan-to-value every year, which not everyone does. This means that our loan-to-values reflect the impact of recent market developments like COVID and rising rates, and we feel it is appropriate way to measure the portfolio, giving our shareholders the highest level of transparency. From a relative value perspective, CMLs typically earn over 50 basis points more in comparable quality fixed maturity, making them an attractive use of capital. They also have excellent historical performance across multiple down-cycles. Additionally, the asset class provides more flexibility than many others. CMLs have manageable maturity, resulting in tighter asset liability matching. Diving deeper into the office portion of our portfolio, our investments in the new office space are high quality with strong credit metrics. Our office portfolio has an average loan-to-value of 65%, a debt service coverage of 2.3 times, while 99% of our loans are investment grade. Additionally, like any type of underwriting, we focus on the high-quality properties and tenants, with nearly all of our loans being tied to Class-A buildings with an average occupancy rate of around 90%. Looking to the future, 2023 office maturities represent only 2% of our overall CML portfolio upcoming due this year. In summary, Equitable has a long history in this space and we have the expertise to manage through turbulent markets. Our track record of having no losses or delinquencies through the global financial crisis or COVID-19 pandemic is proof of this. The last area I would like to highlight is policyholder lapses, given what has happened in the banking sector. Insurers have more structural protection from severe lapses than bank deposits do. And the markets that we operate in have generated consistently stable lapse rates historically. In a rapidly changing market like we just experienced, our products have features called market value adjustments, which means that clients can only withdraw the current value of their policy rather than the full benefit. This reduces the incentives for clients to move their money. Next, we provide millions of Americans with individual retirement accounts. As a result, more than 98% of our client balances are in retail. This means that we aren't susceptible to a couple of large institutions on their money, as seen with dominant banks affected by the crisis. These retirement accounts are sold primarily through financial advisors and are tax-advantaged accounts. This creates operational friction for clients to move money and tax consequences if they would like to liquidate their funds into cash. Lastly, our policies are protected by surrender charges for early lapses that last for more than six years on average. In all, 90% of the account value in our retirement products have lapse protection. This has resulted in consistent lapse rates hovering around 8% since the early 2000s. During this time, we've experienced the global financial crisis, a decade-long bull market, a global pandemic, and rapid rate hikes. These features enable us to entirely match our assets and liabilities. Our current duration gap is less than half a year. This means our investment portfolio can hold high-quality assets to maturity and is not required to necessarily sell assets to meet obligations. In summary, the structure of our products protects us from lapses, and this has proven to be true over the long term through different market cycles. Turning to slide 10, I will highlight total company results for the quarter. This is our first quarter in the new accounting regime, the biggest accounting change for the industry in over 40 years, which we believe will increase transparency to the market for the entire industry. We're excited this is finally here. And as you know, for Equitable, this change has no impact on our hedging program or cash flows because it moves closer to fair value. We reported non-GAAP operating earnings of $364 million or $0.96 per share, up 10% compared to the fourth quarter. On a year-over-year basis, we saw volatility, mortality, and lower alternative returns offsetting our higher RILA spread income in the quarter. As I discussed previously, you can expect volatility and mortality as our protection business focuses on VUL policies with higher face amounts. These are accumulation-oriented policies which are reserved at cash surrender values, leading to volatility in results under LDTI. We had positive mortality experience in Q2 and Q3 in 2022, which helped offset the last two quarters of adverse experience. Over the last nine quarters, mortality continues to be in line with expectation on a cumulative basis, taking into account our COVID sensitivities. Additionally, alternatives were lower year-over-year, as you would expect. Our portfolio experienced gains in our traditional, private, and growth equity strategies, which were offset by declines in our real estate equity investments, which had strong performance in 2022. Adjusting for $92 million of notable items in the quarter, non-GAAP operating earnings were $456 million or $1.21 per share, down 18% on a comparable year-over-year per share basis but up 9% over the fourth quarter. This was largely driven by the impact of lower market and alternative returns, offset by share buyback, which reduced our share count by 7% year-over-year. In our results, you can also see the benefit of our growing spread business in SCS and productivity, of which we captured an additional $10 million of savings in the quarter, as we continue to execute against our strategy. Turning to GAAP results, we reported a $177 million positive net income in the quarter. This reflects LDTI's reduced sensitivity to equity movements by 80%, and our general account interest-rate hedges, which are captured in OCI. Quarter-end assets under management and under administration were in line with market movement, as year-over-year market declines drove assets lower. However, elevated markets and net inflows in each of our businesses in the first quarter drove assets under management and administration up 5% versus the last quarter. Turning to slide 11, our prudent capital management has enabled us to consistently return capital despite the ongoing market volatility. In the quarter, we returned $286 million, which includes $214 million of repurchases, resulting in a 6 million share count reduction in the quarter. As I highlighted earlier, over the last 12 months we have reduced our shares by 7%, demonstrating our ability to create shareholder value through challenging markets. We have $1.8 billion of cash at the holding company. This is a net cash number following the repayment of our latest debt maturity in April. As a reminder, we have no more debt maturities until 2028. This provides us financial flexibility to navigate through various market cycles going forward. Additionally, we are on track for our guidance of $1.3 billion of cash generation to the holding company this year. This is enabled by our diverse cash generation sources, with nearly 50% coming from unregulated entities of AB, Wealth Management, and the investment contract for our Retirement business. Later this month, we intend to increase our dividend to $0.22 per share, up from $0.20. This will bring our dividend yield up to nearly 3.5%, which is above the 2% yield for the average S&P 500 company. I will now turn the call back to Mark for closing remarks.

Thanks, Rob. In closing, our Retirement, Asset, and Wealth Management businesses continued to deliver strong operating results while our fair-value balance sheet, conservative investment portfolio, and HoldCo cash position give us confidence in our ability to navigate periods of market stress. We continue to execute on our stated targets, including productivity savings and consistently returning 55% to 65% of earnings to shareholders. Through enhanced disclosures, we are providing investors with additional information to value our growing Retirement, Asset, and Wealth Management franchises. We're also looking forward to meeting again next week, as we host our Investor Day on our 5-year anniversary as a public company. I'm incredibly proud of what we have delivered to our clients and shareholders since our IPO, and our management team looks forward to highlighting the opportunity ahead for Equitable Holdings. Thank you, and we'll now open the line for your questions.

Thank you. We will begin our first question from Elyse Greenspan from Wells Fargo. Your line is open.

Hi, thanks, good morning. My first question, you have $1.8 billion at parent, right, net of the reset debt maturity. And so, that's obviously a good amount above your target. A couple of times in the prepared remarks, you had mentioned uncertain and volatile times. So, how should we think about where you would want to be in reference to your $500 million target, just as we deal with a lot of uncertainties out there right now?

Sure, good morning, Elyse. We're pleased to have $1.8 billion in cash at the holding company in this market environment. This reflects our strong economic risk management in our hedging program and the diverse sources of cash flow from AllianceBernstein and our Wealth Management business, along with ongoing dividends from the retirement business. Given the current market, we prefer to maintain a buffer at the holding company until this uncertainty resolves. We are on track to generate $1.3 billion in free cash flow this year, allowing us to meet our 55% to 65% payout ratio. In the long run, we will continue to evaluate the cash position at the holding company in relation to the surrounding market environment.

Could you also provide us an update, just on your progress on moving your business out of New York to Arizona?

Sure. So, there are multiple steps there. The first one was moving our Individual Retirement business, our new business, to be written out of Arizona. We completed that last year. So, all of our business from our Individual Retirement line, which is our largest line, $2.8 billion of sales this year came from the non-New York policies from the Arizona company. Second is our Group Retirement business, that will be on track to be completed this year. And then there on our in-force, we're in the process of restructuring the Company and working on our internal reinsurance. We continue to work on that and look forward to providing an update once completed.

Thank you.

Your next question comes from the line of Jimmy Bhullar from JP Morgan. Your line is open.

Hi, good morning. So first, just a question on your commercial mortgage loan book. Are you able to provide any metrics on problem loans or those that are on your watchlist and how that's trended in recent months for the book overall, and specifically on the office portion of the portfolio?

Sure, thanks, Jimmy. I want to reiterate a few comments on the CML portfolio. We do see risks in this sector, particularly in the office segment. However, similar to any credit, the key factors are underwriting capabilities and the quality of the assets and tenants. In our office sector, which makes up about 5% of our total general account, we are predominantly in Class-A buildings, boasting a 90% occupancy rate and a solid debt-to-service coverage ratio. This positions us well to limit troubled loans since we have a strong coverage ratio. Less than 2% of our maturities are due in 2023, which gives us confidence in this portfolio. Additionally, if you take a look at the quality across different segments, most of it falls into CM1 and CM2, while our CM3 portion has actually decreased from 8% in 2022 to 3% in the latest quarter, indicating improvements. Moreover, as you know, we conduct annual appraisals, which is not a common practice among all firms, and we believe it’s crucial.

And then on the Protection business, how much of the loss was because of normal seasonal volatility versus poor mortality beyond seasonality? And what's your expectation for the earnings power of the Protection business on an annual or longer-term basis?

Most of our Protection business operates under DUL policies, which typically have higher face amounts and are more volatile. Currently, there are several factors affecting mortality rates. The shift of COVID from a pandemic to an endemic state might lead to increased mortality beyond the usual first-quarter seasonal trends. Additionally, we experienced a notably severe flu season in 2022 and 2023, particularly affecting those with higher face amounts. However, if we review the last nine quarters, our mortality rates have aligned with our GAAP reserves and projections. Despite experiencing two positive quarters in 2022 followed by two negative ones, the cumulative results are what truly matter, reflecting that our pricing and profitability for the business are on track. As we move forward, we anticipate mortality rates to return to the expected levels we established for the protection sector. So far in April, mortality has met our expectations.

Okay. And just on the mortgage loans, do you have any loans that are on the watchlist or are not performing currently?

We have about four of our nearly 188 loans on the watchlist and we continue to monitor them, but overall, the quality of the portfolio is high.

Okay, and that four has been fairly consistent or has it just come up in the last few months?

It's been consistent.

Your next question is from the line of Tom Gallagher from EVR. Your line is open.

Good morning. Robin, just wanted to follow up on that last answer you gave on ratings migration of the commercial mortgage loan book. Did I hear you correctly, you went from 8% at year-end 2022 in CM3 rated loans down to 3% in Q1?

That's right. Our ratings actually improved over the last year there. Our ratings were 8% in 2022 and it moved down to 3% in CM3, our overall quality of the book actually improved, even despite this environment. So again, that goes back to the testament, it's all about the underwriting, who your tenants are, and the quality of the office space that you are in.

I want to clarify the timing. Was the 3% figure at year-end 2022 reflected in your RBC at that time, or did this change occur at the end of the last quarter, which would then influence the RBC going forward?

No, it's down; it moved from 8% to 3% over the last year, so some of that is reflected at year-end. And in the first quarter as we stand here today, it's at 3%.

Got it. So, that wasn't a big drop just in one quarter, that was over the course of the year?

Correct.

Okay. My other question is about the $1.3 billion in cash generation that you're reaffirming for 2023. I believe that suggests a dividend of $600 million to $700 million from the life company. If I remember correctly, the dividend capacity for this year is $1.7 billion. So, I'm curious about how you're planning for the mid-year decision regarding how much of a dividend to take from the life company. Is there a possibility of exceeding the $1.3 billion depending on your capital generation?

The company's capital position is robust. We plan to achieve our guidance of $1.3 billion in free cash flow, which includes a $600 million dividend from the Retirement business. While we can access regular dividend capacity, if we successfully transfer policies from our New York business to our non-New York business, we will need to fund the capital for those associated liabilities and utilize the New York capital. Therefore, we aim to allocate some of that extraordinary dividend capacity to support the capital for the liabilities we transfer to the non-New York entity. The key figure to focus on for free cash flow is $600 million, leading to the $1.3 billion guidance.

Okay, thanks.

Your next question comes from the line of Andrew Kligerman from Credit Suisse. Your line is open.

Hey, thanks a lot and good morning. Just following up on the commercial mortgage loans, Robin, you mentioned that every year you re-evaluate these loans. So, how should we be thinking about the 62% LTVs? Is that a year-end number? Could it have potentially changed a lot in the first quarter?

I believe the 62% figure refers to the first quarter, but as you know, we update this on an annual basis to account for various market conditions and the strength of our tenants generating strong income in these buildings. Additionally, all of our appraisals are more conservative than the third-party appraisals we have received. This means we are taking a cautious approach in our appraisal methodology concerning those loan-to-value ratios as well.

I'm sorry, Robin. So in other words, during the course of the year, you're getting updates on each property and each happens once a year, so there could be some that are several months old, they're not completed in the course of Q1 2023. Some of it could have been in Q3 2022, for example, but they're all done within a year. Is that the right way to think about it?

Yes, that's the right way to think about it.

Okay, got it. Thank you. And then, with regard to the Individual Retirement segment, it looks really solid in terms of first-year premiums, $2.84 billion, up a little bit from last year. Could you talk a little bit about what's driving the strong RILA sales? Were there any major product feature changes, and any color on the wholesaling?

Sure, this is Nick. As you mentioned, we're building off of a record 2022 in volume and value, as you alluded to, evidenced by the 12% increase in RILA sales. Look, I think we're well-positioned to capture a disproportionate share of value, given our track record of innovation. We did come out with some new segments in the first quarter, but also our distinct distribution network of both affiliated distribution and Equitable advisors and our privileged space in third-party where we have a long track record of communicating protected equities stories. So given the macro trends and given our distinct position, we think we have a sustainable edge to continue to go forward.

And any particular feature you would call out that was different from the year ago?

I would attribute it to our structural modes of consistent performance. So, I think we've got a sustainable edge going forward. We obviously continue to innovate and I look forward to going into more detail at Investor Day next week.

Your next question comes from the line of Suneet Kamath from Jefferies. Your line is open.

Thanks, good morning. So, on slide four of your deck, you spent a lot of time talking about capital light, which makes sense. But if I think about your payout ratio, that 55% to 65%, which got a lift from LDTI, it seems like that's maybe broadly in line with the life sector. So I guess, given the changes in your business mix, should we expect some upside eventually to that 55% to 65%, driven more by sort of the numerator as opposed to the denominator?

Sure. Thanks, Suneet. At our IPO, our payout ratio was between 40% and 60%, reflecting the wider range of outcomes from our business mix at that time. With improvements in our business mix and as LDTI and earnings align more closely with cash, that payout ratio has now shifted to 55% to 65%. In the future, as we enhance our business mix further, it could potentially increase. However, for a business focused on profit-level retail-oriented sales, as mentioned by Nick, it won't reach 90% to 100% overall because we need to fund new business in that year, which isn't recognized under GAAP but is accounted for in cash. Overall, I believe there is potential for movement as we continue to adjust our business mix over time.

Okay, that makes sense. And then I guess on the Wealth Management business, I was looking at your supplement that you put out when you gave the LDTI disclosures. And it just looks like the earnings in that business went from like $58 million in 2021 to $101 million in 2022. Revenues were flat, so the big driver there seemed to be expenses, and that growth came despite the market challenges. So, I just wanted to maybe unpack that a little bit, just so we get a sense of like, that's such a big move, like what's the trajectory of this business kind of going forward and maybe what happened in 2022 on the expense side that caused that big earnings lift? Thanks.

Sure, this is Nick. As a reminder, our new Wealth Management segmentation is the comprehensive P&L of our entire assets through Equitable Advisors. It continues to be a fast-growing business, evidenced as you saw by the increase in net flows. The three main drivers there that we'll unpack in Investor Day are the distribution fees, the advisory fees, and the cash sweep accounts. So, we're excited about the growth of that business and believe we have a distinctive edge to continue to move forward.

It's a solid model, Suneet. When looking at it year-over-year, even with a decrease in assets under administration, earnings remain stable, benefiting significantly from the interest rate that Nick mentioned, resulting in an $11 million year-over-year gain from interest-rate sweeps. Therefore, it's a robust model that, in this market environment, will keep growing, and it currently stands as our fastest-growing business line.

That makes sense. If I could just sneak one more in, and maybe you'll talk about this next week, but so many other companies that we cover that have wealth management businesses have kind of focused on growing banks sort of internally as just another sort of arrow in the quiver in terms of driving growth. Is that something that you guys are thinking about?

I couldn't imagine addressing questions about a bank along with all the other inquiries we receive, but we do have something to share, and Nick will elaborate on it more during Investor Day. We have a solid model that takes advantage of our relationship with LPL, which provides us with good internal leverage and allows us to benefit from the sweep accounts at the current interest rate levels. Therefore, we feel quite confident in the model we have in place.

Your next question comes from the line of Alex Scott, Goldman Sachs. Your line is open.

Hi, good morning. First one I had is on the Legacy business. I just wanted to see if you could frame the amount of capital that's back in that business, whether GAAP allocations or stat allocation, just to help us think through the value of that. And as you kind of do some of this restructuring, what kind of amount of capital is back in it? Is that something you all could provide?

Sure. And I think we highlighted a bit on this call. Look, the Legacy business today is quite small at 16% of our total AUM. The capital behind it, as we measure by CTE98, has declined almost by 70% since IPO from $14 billion to about $4 billion as of year-end, and it continues to run off about $2 billion to $3 billion organically over the years. So, we're quite pleased with the work done on that business. It's fully reserved. That would validate it through to Venerable transaction. Over time, it'll run off, and we'll continue to grow that core business and generate good cash flow for shareholders.

Got it. The second question I had, I mean, is really a more theoretical question. Your stock obviously is traded to the cash flow multiple that's a bit of a head scratcher at times. I mean, what's your perspective on how to fix it? I mean it seems like with the re-segmentation, you can show in a much better way you're shifting towards these higher multiple businesses, they're growing, et cetera. I think some of the things you mentioned in response to Elyse's question suggested there is a variety of things being considered in terms of restructuring different parts of the business geographically and maybe some other things. I mean, I guess the question is, can you speed that up in terms of the mix shift? Are there ways to do that using your excess capital on some of these restructuring transactions or is it going to just take some time before you're able to more fully make a shift towards more Wealth Management and Asset Management?

Alex, hi. It's Mark Pearson. Thanks for the question. This will be a big part of our Investor Day discussion next week, but just at a very high level. I think we'd agree with you on the relative valuation metrics. And taking into account the strength of our flows suggest upside potential for shareholders. And that's certainly something we'll be talking about next week. I think if you look over the last five years, you've seen the cash flows grow. But we've also seen the percentage of cash flows from non-insurance regulated entities move from 17% to 50%. So, we have to move very, very fast in this transformation over those five years. And I think with the additional disclosures we've given now, firstly on the more faster-moving Wealth Management, AB has been performing extremely strongly. We'll start to see that ratio even improve further as we move out. And I think as Robin has just alluded to on the Legacy side, we pull Legacy out now, 16% of the account value, so it's running off at $2 million to $3 million. It is not significant, it's fully reserved, and anybody using that to value EQH is just misaligned. You'll get some more detail next week. It will be a big part of our Investor Day.

Your next question comes from the line of Tracy Benguigui from Barclays. Your line is open.

Good morning. On the topic of ALM, I would like to touch upon your funding agreements. I realize that FABN are not surrenderable. So, really there is no run-on deposits type of concept. But the key is the duration match, that operating debt with backed assets. And I noticed that your 2022 and 2023 FABNs due is $2.5 billion. So my question is, did you build in any refinancing assumptions in order to maintain a balance or do you approach the market more opportunistically and have assets backing those issues with the same duration so you could actually see that balance go down?

Hey, Tracy, thanks for the question. Our FABN book is perfectly matched. We have an opportunistic trade that we have in the marketplace and we ensure that it's perfectly duration matched. And as you know, rating agencies require that as well.

Okay, awesome. Just a quick clarification on your comment about a higher flu season. I was actually just looking this morning at CDC data and it looks like it's towing to 19,000 deaths, which does feel low versus prior seasons pre-pandemic. So, you're just comparing what you're seeing to last year's season?

We are looking at what we've experienced over the past five to seven years, factoring in the shift from COVID being a pandemic to an endemic, along with a notably severe flu season in 2022 and 2023. This has contributed to some volatility in mortality rates for our clients with higher face amounts, which we observed during the quarter.

Okay. And just really, really quickly, can you just add more color what's driving 10 points of RBC generation a quarter within Individual Retirement? Is that just your typical statutory earnings generation and does not contemplate an operating dividend?

That's right, that's across all the Retirement and Protection businesses. We expect to generate that 10 points of RBC that's purely from organic capital generation.

Your next question comes from the line of Ryan Krueger from KBW. Your line is open.

Thanks, good morning. I just had a quick one, and I'm not sure if I missed this, but do you still view $75 million of quarterly protection or means it's a good run rate with more quarterly volatility under LDTI or I guess, has the $75 million changed at all?

That's right. We still expect that $75 million to be a run rate, that's the guidance we gave. But as you mentioned, we expect higher volatility, given our higher face amounts and the way it's accounted for in LDTI. And over the last nine quarters, I think if you look back, that's what we delivered on the mortality front.

Your next question comes from the line of Michael Ward from Citi. Your line is open.

Hey guys, thanks, good morning. I was just wondering if you could isolate the office mortgage loan component in the RBC points during the stress test.

We did not isolate the office component and call-out the office component. But if you look at the comparison of the independent stress test and the real estate stress test, we specifically ran that 40% valuation shock on the office portfolio, which comes through in some of the credit stress line and also the ratings migration line. But we didn't call out all the different pieces of it. We put it all together as one combined shock, assuming dotcom for below-investment grade, which is almost two times the data of the global financial crisis at 40% CML office portfolio and then 10% shock on the others. So, it's all combined at 52 points.

Thank you. The average office loan-to-value ratio is 65%, and you applied a 40% valuation shock. I was curious about how you expect this to affect things. Does this take into account defaults on loans reaching 100% loan-to-value, and does it imply that you will acquire equity afterward?

It doesn't assume we take on equity after. It assumes that above a 100, you take a hit on the loan and then it assumes some migration as well that we have in our stress test, and that's what you see on the ratings migration line.

Okay, thanks, guys.

As there are no further questions, I would like to thank our speakers for today's presentation. And thank you all for joining us. This now concludes today's conference. Enjoy the rest of your day, and you may now disconnect.