Equitable Holdings, Inc. (EQH) FY 2024 MD&A

Executive Summary

Overview

We are one of America’s leading financial services companies, providing: (i) advice and solutions for helping Americans set and meet their retirement goals and protect and transfer their wealth across generations; and (ii) a wide range of investment management insights, expertise and innovations to drive better investment decisions and outcomes for clients worldwide.

We manage our business through six segments: Individual Retirement, Group Retirement, Asset Management, Protection Solutions, Wealth Management and Legacy. We report certain activities and items that are not included in these segments in Corporate and Other. See Note 21 of the Notes to the Consolidated Financial Statements for further information on our segments.

We benefit from our complementary mix of businesses. This business mix provides diversity in our earnings sources, which helps offset fluctuations in market conditions and variability in business results, while offering growth opportunities.

Overview of Recent Developments

RGA Reinsurance Transaction

On February 23, 2025, Equitable Financial, as well as Equitable America and Equitable Financial L&A, entered into a Master Transaction Agreement with RGA pursuant to which, at closing and subject to the terms and conditions set forth in such agreement, RGA would enter into reinsurance agreements, as reinsurer, with each such subsidiary, as ceding company, to effect the RGA Reinsurance Transaction. The transaction is expected to reinsure 75% of such ceding companies’ in-force individual life insurance block, and upon closing, generate total value for Holdings of over $2 billion, which includes a positive ceding commission and capital release, and is expected to close in mid-2025.

Tender Offer

On February 24, 2025, Holdings commenced a cash tender offer (the “Offer”) to purchase up to 46 million AB Holding Units at a price of $38.50 per unit, less any applicable tax withholding, for an aggregate purchase price of $1.8 billion. The Offer will expire on March 24, 2025 unless extended or earlier terminated. The Offer is not conditioned upon the receipt of financing or any minimum number of units being tendered but is subject to certain other conditions set forth in the Offer to Purchase, dated February 24, 2025. If Holdings purchases the maximum of 46 million units in the Offer, Holdings will own approximately 41.7% of the issued and outstanding AB Holding Units and will have an approximate 77.5% economic interest in AB. Holdings expects to fund the Offer from available cash and cash equivalents and the Term Loan described in the following paragraphs. Additional information about the Offer is set forth in the tender offer statement on Schedule TO filed with the SEC, including the Offer to Purchase.

Term Loan Agreement

In connection with the commencement of the Offer described in the precedent paragraph, Holdings entered into the 364-Day Term Loan Credit Agreement (the “Term Loan Agreement”) with respect to a $500 million senior unsecured delayed-draw term loan (the “Term Loan”). The Term Loan will be used, along with available cash and cash equivalents, to fund the Offer and related fees and expenses. The Term Loan may be drawn at any time until April 24, 2025 and will mature 364 days from the date of funding, provided that Holdings may elect not to incur all or a portion of such Term Loan to the extent it is unnecessary to fund the Offer.

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Although the Term Loan is required to be repaid with the cash proceeds from the RGA Reinsurance Transaction, it may be prepaid at any time without a fee (other than customary breakage costs relating to the prepayment of any drawn loans). Borrowings under the Term Loan Agreement will bear interest at a rate per annum, which will be, at Holdings’ option, a rate equal to an applicable margin, which is subject to adjustment based on the credit ratings of Holdings, plus an Alternate Base Rate or Adjusted Term SOFR (each as defined in the Term Loan Agreement). The funding of the Term Loan is subject to the satisfaction of customary conditions for facilities of such type that are set forth therein.

Share Repurchase Authority

On February 13, 2025, Holdings’s Board approved an additional $1.5 billion of share repurchases under Holdings’s share repurchase program. As of December 31, 2024, Holdings had $445 million of authorized capacity remaining under its prior authorization. The repurchase program does not obligate Holdings to purchase any particular number of shares. See Note 22 for additional details on the repurchase program.

Macroeconomic and Industry Trends

Our business and consolidated results of operations are significantly affected by economic conditions and consumer confidence, conditions in the global capital markets and the interest rate environment.

Financial and Economic Environment

A wide variety of factors continue to impact global financial and economic conditions. These factors include, among others, uncertainty regarding the federal debt limit, volatility in the capital markets, equity market declines, plateauing or decreasing economic growth, high fuel and energy costs, changes in fiscal or monetary policy and geopolitical tensions. The Russian invasion of the Ukraine, the Israel-Hamas war and broader Middle Eastern hostilities, and the ensuing conflicts and the sanctions and other measures imposed in response to these conflicts, as well as the U.S. presidential administration’s threats of tariffs, and retaliatory tariffs in response, significantly increased the level of volatility in the financial markets and have increased the level of economic and political uncertainty.

Stressed conditions, volatility and disruptions in the capital markets, particular markets, or financial asset classes can have an adverse effect on us, in part because we have a large investment portfolio. In addition, our insurance liabilities and derivatives are sensitive to changing market factors, including equity market performance and interest rates, which fell twice in November and December 2024. However, in December 2024, the Federal Reserve scaled back expectations for rate cuts in 2025 due to persistent inflation and a robust labor market. An increase in market volatility could continue to affect our business, including through effects on the yields we earn on invested assets, changes in required reserves and capital and fluctuations in the value of our AUM, AV or AUA from which we derive our fee income. These effects could be exacerbated by uncertainty about future fiscal policy, changes in tax policy, the scope of potential deregulation and levels of global trade.

The potential for increased volatility could pressure sales and reduce demand for our products as consumers consider purchasing alternative products to meet their objectives. In addition, this environment could make it difficult to consistently develop products that are attractive to customers. Financial performance can be adversely affected by market volatility and equity market declines as fees driven by AV and AUM fluctuate, hedging costs increase and revenues decline due to reduced sales and increased outflows.

We will continue to monitor the behavior of our customers and other factors, including mortality rates, morbidity rates, annuitization rates and lapse and surrender rates, which change in response to changes in capital market conditions, to ensure that our products and solutions remain attractive and profitable. For additional information on our sensitivity to interest rates and capital market prices, see “Risk Factors—Risks Relating to Conditions in the Financial Markets and Economy” and “Quantitative and Qualitative Disclosures About Market Risk.”

Regulatory Developments

Our life insurance subsidiaries are regulated primarily at the state level, with some policies and products also subject to federal regulation. In addition, Holdings and its insurance subsidiaries are subject to regulation under the insurance holding company laws of various U.S. jurisdictions. Furthermore, on an ongoing basis, regulators refine capital requirements and introduce new reserving standards. Regulations recently adopted or currently under review can potentially impact our statutory reserve, capital requirements and profitability of the industry and result in increased regulation and oversight for the industry. For additional information on regulatory developments and the risks we face, see “Business—Regulation” and “Risk Factors—Legal and Regulatory Risks.”

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Revenues

Our revenues come from three principal sources:

•fee income derived from our retirement and protection products and our asset management services;

•premiums from our traditional life insurance and annuity products; and

•investment income from our General Account investment portfolio.

Our fee income varies directly in relation to the amount of the underlying AV or benefit base of our retirement and protection products, the amount of AUM and AUA in our Wealth management business, and the amount of AUM of our Asset Management business. AV and AUM, each as defined in “Key Operating Measures,” are influenced by changes in economic conditions, primarily equity market returns, as well as net flows. Our premium income is driven by the growth in new policies written and the persistency of our in-force policies, both of which are influenced by a combination of factors, including our efforts to attract and retain customers and market conditions that influence demand for our products. Our investment income is driven by the yield on our General Account investment portfolio and is impacted by the prevailing level of interest rates as we reinvest cash associated with maturing investments and net flows to the portfolio.

Benefits and Other Deductions

Our primary expenses are:

•policyholders’ benefits and interest credited to policyholders’ account balances;

•sales commissions and compensation paid to intermediaries and advisors that distribute our products and services; and

•compensation and benefits provided to our employees and other operating expenses.

Policyholders’ benefits are driven primarily by mortality, customer withdrawals, and benefits which change in response to changes in capital market conditions. In addition, some of our policyholders’ benefits are directly tied to the AV and benefit base of our variable annuity products. Interest credited to policyholders varies in relation to the amount of the underlying AV or benefit base. Sales commissions and compensation paid to intermediaries and advisors vary in relation to premium and fee income generated from these sources, whereas compensation and benefits to our employees are more constant and impacted by market wages and decline with increases in efficiency. Our ability to manage these expenses across various economic cycles and products is critical to the profitability of our company.

Net Income Volatility

We have offered and continue to offer variable annuity products with GMxB features. The future claims exposure on these features is sensitive to movements in the equity markets and interest rates. Accordingly, we have implemented hedging and reinsurance programs designed to mitigate the economic exposure to us from these features due to equity market and interest rate movements. We are using a combination of General Account assets and derivatives to manage duration gap on an economic basis. The changes in the values of the derivatives associated with these programs due to equity and interest rate movements, together with the GMxB MRBs assets and liabilities, are recognized in net income in the periods in which they occur, while the General Account asset gains and losses are recorded in OCI resulting in an offset between OCI and net income. In addition, we conduct macro hedging to protect our statutory capital which could also cause net income volatility as further described below. Net income is also impacted by changes in our reinsurers credit spread, while changes in the Company’s credit spread is recorded in OCI. See “—Significant Factors Impacting Our Results—Impact of Hedging and GMIB Reinsurance on Results.”

In addition to our dynamic hedging strategy, we have static hedge positions designed to mitigate the adverse impact of changing market conditions on our statutory capital. We believe this program will continue to preserve the economic value of our variable annuity contracts and better protect our target variable annuity asset level. However, these static hedge positions increase the size of our derivative positions and may result in additional net income volatility on a period-over-period basis.

Due to the impacts on our net income of equity market and interest rate movements and other items that are not part of the underlying profitability drivers of our business, we evaluate and manage our business performance using Non-GAAP Operating Earnings, a Non-GAAP financial measure that is intended to remove these impacts from our results. See “—Key Operating Measures—Non-GAAP Operating Earnings.”

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Significant Factors Impacting Our Results

The following significant factors have impacted, and may in the future impact, our financial condition, results of operations or cash flows.

Impact of Hedging and GMxB Reinsurance on Results

We have offered and continue to offer variable annuity products with GMxB features. The future claims exposure on these features is sensitive to movements in the equity markets and interest rates. Accordingly, we have implemented hedging and reinsurance programs designed to mitigate the economic exposure to us from these features due to equity market and interest rate movements. These programs include:

•Variable annuity hedging programs. We use a dynamic hedging program (within this program, generally, we reevaluate our economic exposure at least daily and rebalance our hedge positions accordingly) to mitigate certain risks associated with the GMxB features that are embedded in our liabilities for our variable annuity products. This program utilizes various derivative instruments that are managed in an effort to reduce the economic impact of unfavorable changes in GMxB features’ exposures attributable to movements in the equity markets and interest rates. Although this program is designed to provide a measure of economic protection against the impact of adverse market conditions, it does not qualify for hedge accounting treatment. Accordingly, changes in value of the derivatives will be recognized in the period in which they occur with offsetting changes in reserves recognized in the current period. In addition, we utilize AFS fixed maturity securities in our General Account to mitigate the economic impact of unfavorable changes in GMxB features’ exposures attributable to movements in interest rates. However, the economic effect of interest rate changes on such securities is reflected in OCI, which results in net income volatility as the economic effect of interest rates on our GMxB MRB liabilities is reflected in net income.

•In addition to our dynamic hedging program, we have a hedging program using static hedge positions (derivative positions intended to be HTM with less frequent re-balancing) to protect our statutory capital against stress scenarios. This program, in addition to our dynamic hedge program, has increased the size of our derivative positions, resulting in additional net income volatility. The impacts are most pronounced for variable annuity products.

•GMxB reinsurance contracts. Historically, GMxB reinsurance contracts were used to cede to non-affiliated reinsurers a portion of our exposure to variable annuity products that offer GMxB features. We account for the reinsurance contracts as MRBs and report them at fair value. In addition, on June 1, 2021, we ceded legacy variable annuity policies sold by Equitable Financial between 2006-2008 (the “Block”), comprised of non-New York “Accumulator” policies containing fixed rate GMIB and/or GMDB guarantees.

Effect of Assumption Updates on Operating Results

During the third quarter of each year, we conduct our annual review of the assumptions underlying the valuation of DAC, deferred sales inducement assets, unearned revenue liabilities, liabilities for future policyholder benefits and MRBs for our Individual Retirement, Group Retirement, Protection Solutions, and Legacy segments (assumption reviews are not relevant for the Asset Management and Wealth Management segments). Assumptions are based on a combination of Company experience, industry experience, management actions and expert judgement and reflect our best estimate as of the date of the applicable financial statements.

Most of the variable annuity products, variable universal life insurance and universal life insurance products we offer maintain policyholder deposits that are reported as liabilities and classified within either Separate Accounts liabilities or policyholder account balances. Our products and riders also impact liabilities for future policyholder benefits, MRBs and unearned revenues and assets for DAC and DSI. The valuation of these assets and liabilities (other than deposits) is based on differing accounting methods depending on the product, each of which requires numerous assumptions and considerable judgment. The accounting guidance applied in the valuation of these assets and liabilities includes, but is not limited to, the following: (i) traditional life insurance products for which assumptions are updated annually to estimate the value of future death, morbidity or income benefits; (ii) universal life insurance and variable life insurance secondary guarantees for which benefit liabilities are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the accumulation period based on total expected assessments; and (iii) certain product guarantees reported as MRBs at fair value.

For further details of our accounting policies and related judgments pertaining to assumption updates, see Note 2 of the Notes to the Consolidated Financial Statements.

Assumption Updates and Model Changes

We conduct our annual review of our assumptions and models during the third quarter of each year. We also update our assumptions as needed in the event we become aware of economic conditions or events that could require a change in our assumptions that we believe may have a significant impact to the carrying value of product liabilities and assets and consequently materially impact our earnings in the period of the change.

Impact of Assumption Updates and Model Changes on Income from Continuing Operations before income taxes and Net income (loss)

The table below presents the impact of our actuarial assumption update to our income (loss) from continuing operations, before income taxes and net income (loss).

2024 Assumption Updates

The impact of the economic assumption update during 2024 was an increase of $20 million to income (loss) from continuing operations, before income taxes and an increase to net income (loss) of $16 million.

The net impact of this assumption update on income (loss) from continuing operations, before income taxes of $20 million consisted of an increase in other income of $21 million, an increase in remeasurement of liability for future policy benefits of $18 million, a decrease in policyholders’ benefits of $8 million and a decrease in change in MRBs and purchased MRBs of $9 million.

2023 Assumption Updates

The impact of the economic assumption update during 2023 was a decrease of $5 million to income (loss) from continuing operations, before income taxes and a decrease to net income (loss) of $4 million.

The net impact of this assumption update on income (loss) from continuing operations, before income taxes of $5 million consisted of a decrease in other income of $9 million, an increase in remeasurement of liability for future policy benefits of $51 million, a decrease in policyholders’ benefits of $2 million and a decrease in change in MRBs and purchased MRBs of $53 million.

2022 Assumption Updates

The impact of the economic assumption update during 2022 was a decrease of $206 million to income (loss) from continuing operations, before income taxes and a decrease to net income (loss) of $163 million.

The net impact of this assumption update on income (loss) from continuing operations, before income taxes of $206 million consisted of an increase in remeasurement of liability for future policy benefits of $14 million, a decrease in policyholders’ benefits of $13 million, an increase in change in market risk benefits and purchased market risk benefits of $204 million and an increase in interest credited to policyholder’s account balances of $1 million.

Model Changes

There were no material model changes during 2024, 2023 and 2022.

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Impact of Assumption Updates and Model Changes on Pre-tax Non-GAAP Operating Earnings Adjustments

The table below presents the impact on pre-tax Non-GAAP Operating Earnings of our actuarial assumption updates by segment and Corporate and Other.

2024 Assumption Updates

The impact of our 2024 annual review on Non-GAAP Operating Earnings was favorable by $4 million before taking into consideration the tax impacts, or $3 million after tax.

The net impact of assumption changes on Non-GAAP Operating Earnings increased other income by $13 million, increased remeasurement of liability for future policy benefits by $18 million, and decreased policyholders’ benefits by $9 million. Non-GAAP Operating Earnings excludes items related to variable annuity product features, such as changes in the MRBs and purchased MRBs.

2023 Assumption Updates

The impact of our 2023 annual review on Non-GAAP Operating Earnings was favorable by $15 million before taking into consideration the tax impacts, or $12 million after tax.

The net impact of assumption changes on Non-GAAP Operating Earnings increased other income by $4 million, decreased remeasurement of liability for future policy benefits by $10 million and decreased policyholders’ benefits by $1 million. Non-GAAP Operating Earnings excludes items related to variable annuity product features, such as changes in the MRBs and purchased MRBs.

2022 Assumption Updates

The impact of our 2022 annual review on Non-GAAP Operating Earnings was unfavorable by $2 million before taking into consideration the tax impacts or $1 million after tax.

The net impact of assumption changes on Non-GAAP Operating Earnings increased remeasurement of liability for future policy benefits by $14 million, decreased policyholders’ benefits by $13 million and increased interest credited by to policyholder’s account balances by $1 million. Non-GAAP Operating Earnings excludes items related to variable annuity product features, such as changes in the MRBs and purchased MRBs.

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Productivity

As part of our continuing efforts to drive productivity improvements, in May 2023, we began a new program expected to achieve $150 million of run-rate expense savings by 2027, of which $100 million has been achieved as of December 31, 2024. We expect to achieve these savings by optimizing our real estate footprint at both Equitable and AB in addition to other initiatives to improve operational efficiency.

As previously announced, we entered into a 15-year lease agreement in New York, NY at 1345 Avenue of the Americas which commenced in 2023 and will reduce rental expense beginning in 2024. We also realized expense efficiencies in office space leases as follows: in Syracuse, NY, we occupy space under a lease that was scheduled to expire in 2024, but which was amended to extend a portion of the space through 2028 at a lower total cost; and in Jersey City, NJ, we occupied space under a lease that expired in 2023 and was not extended or replaced.

As previously announced in 2018, AB established its corporate headquarters in Nashville, TN at 501 Commerce Street and began the process of transitioning Finance, IT, Operations, Legal, Compliance, Internal Audit, Human Capital, and Sales and Marketing functions. As of December 31, 2024, 1,063 employees were located in Nashville and AB has successfully completed the relocation of their corporate headquarters to Nashville, TN. AB will continue to operate a principal location in New York City, which houses Portfolio Management, Trading, and New York-based Wealth Management Private Wealth businesses. Beginning in 2025, as the transition period has now been completed, AB expects to realize an estimated $75 million of annual savings from a combination of lower occupancy and compensation-related expenses.

Key Operating Measures

In addition to our results presented in accordance with U.S. GAAP, we report Non-GAAP Operating Earnings, Non-GAAP Operating ROE, and Non-GAAP operating common EPS, each of which is a measure that is not determined in accordance with U.S. GAAP. Management principally uses these Non-GAAP financial measures in evaluating performance because they present a clearer picture of our operating performance and they allow management to allocate resources. Similarly, management believes that the use of these Non-GAAP financial measures, together with relevant U.S. GAAP measures, provide investors with a better understanding of our results of operations and the underlying profitability drivers and trends of our business. These Non-GAAP financial measures are intended to remove from our results of operations the impact of market changes (where there is a mismatch in the valuation of assets and liabilities) as well as certain other expenses which are not part of our underlying profitability drivers or likely to re-occur in the foreseeable future, as such items fluctuate from period-to-period in a manner inconsistent with these drivers. These measures should be considered supplementary to our results that are presented in accordance with U.S. GAAP and should not be viewed as a substitute for the U.S. GAAP measures. Other companies may use similarly titled Non-GAAP financial measures that are calculated differently from the way we calculate such measures. Consequently, our Non-GAAP financial measures may not be comparable to similar measures used by other companies.

We also discuss certain operating measures, including AUM, AUA, AV, Protection Solutions reserves and certain other operating measures, which management believes provide useful information about our businesses and the operational factors underlying our financial performance.

Non-GAAP Operating Earnings

Non-GAAP Operating Earnings is an after-tax Non-GAAP financial measure used to evaluate our financial performance on a consolidated basis that is determined by making certain adjustments to our consolidated after-tax net income attributable to Holdings. The most significant of such adjustments relates to our derivative positions, which protect economic value and statutory capital, and the variable annuity product MRBs. This is a large source of volatility in net income.

Non-GAAP Operating Earnings equals our consolidated after-tax net income attributable to Holdings adjusted to eliminate the impact of the following items:

•Items related to variable annuity product features, which include: (i) changes in the fair value of MRB and purchased MRB, including the related attributed fees and claims, offset by derivatives and other securities used to hedge the MRB which result in residual net income volatility as the change in fair value of certain securities is reflected in OCI and due to our statutory capital hedge program; and (ii) market adjustments to deposit asset or liability accounts arising from reinsurance agreements which do not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk;

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•Investment (gains) losses, which includes credit loss impairments of securities/investments, sales or disposals of securities/investments, realized capital gains/losses and valuation allowances;

•Net actuarial (gains) losses, which includes actuarial gains and losses as a result of differences between actual and expected experience on pension plan assets or projected benefit obligation during a given period related to pension, other postretirement benefit obligations, and the one-time impact of the settlement of the defined benefit obligation;

•Other adjustments, which primarily include restructuring costs related to severance and separation, lease write-offs related to non-recurring restructuring activities, COVID-19 related impacts, net derivative gains (losses) on certain Non-GMxB derivatives, net investment income from certain items including consolidated VIE investments, seed capital mark-to-market adjustments, unrealized gain/losses and realized capital gains/losses from sales or disposals of select securities, certain legal accruals; a bespoke deal to repurchase UL policies from one entity that had invested in numerous policies purchased in the life settlement market, which disposed of the risk of additional COI litigation by that entity related to those UL policies, impact of the annual actuarial assumption updates attributable to LFPB when the majority of the impact relates to the non-core business; and

•Income tax expense (benefit) related to the above items and non-recurring tax items, which includes the effect of uncertain tax positions for a given audit period and changes to the deferred tax valuation allowance.

In the fourth quarter of 2023, the Company updated its operating earnings measure to exclude the impact of realized amounts related to equity classified instruments. The recognition of the realized capital gains and losses from investments in current net investment income is generally considered distortive and not reflective of the ongoing core business activities of the segments. The presentation of operating earnings in prior periods was not revised to reflect this modification. The impact to operating earnings was immaterial for the year ended December 31, 2023.

In the first quarter of 2024, the we began allocating to our business segments collateral expense resulting from a designated rate to be paid on the collateral held back to counterparties. The new segment allocation methodology for collateral expense is based on the income earned on cash equivalents held in the surplus segments and income earned in portfolios backing collateral expenses, such that the collateral expense would be allocated to the segments up to that amount. Any remaining amount is included within Corporate and Other. This expense was previously recorded in Corporate and Other with no allocation to our business segments in prior reporting periods.

The presentation of operating earnings in prior periods was not revised to reflect this modification, however, we estimated that allocating collateral expense to the segments for the twelve months ended December 31, 2023 and 2022, respectively, would have resulted in a decrease to operating earnings of $4.0 million and $0.8 million for Individual Retirement, $7.7 million and $1.4 million for Group Retirement, $21.9 million and $2.5 million for Protection Solutions, $4.2 million and $1.0 million for Legacy, and an increase of $37.8 million and $5.7 million for Corporate and Other. Our total operating earnings were not impacted.

During the third quarter 2024, we moved revenues and expenses related to payout annuitizations from the Legacy segment to the Individual Retirement segment. Now all payout annuities will be reported within the Individual Retirement segment as the block is managed on an aggregate basis. Prior periods have been recast to reflect this change.

Because Non-GAAP Operating Earnings excludes the foregoing items that can be distortive or unpredictable, management believes that this measure enhances the understanding of our underlying drivers of profitability and trends in our business, thereby allowing management to make decisions that will positively impact our business.

We use the prevailing corporate federal income tax rate of 21% while taking into account any non-recurring differences for events recognized differently in our financial statements and federal income tax returns as well as partnership income taxed at lower rates when reconciling Net income (loss) attributable to Holdings to Non-GAAP Operating Earnings.

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The table below presents a reconciliation of net income (loss) attributable to Holdings to Non-GAAP Operating Earnings:

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(1)Includes the impact of favorable assumption updates of $16 million and $40 million for the year ended December 31, 2024 and 2023, respectively. Includes the impact of unfavorable assumption updates of $204 million for the year ended December 31, 2022.

(2)Includes certain gross legal expenses related to the COI litigation of $106 million, $144 million and $218 million for the year ended December 31, 2024, 2023 and 2022, respectively. Includes the impact of annual actuarial assumptions updates related to LFPB of $61 million for the year ended December 31, 2023. Prior period impact was immaterial and was not revised.

(3)For the year ended December 31, 2024, includes $82 million of the gain on sale on AB's Bernstein Research Service attributable to Holdings.

(4)For the year ended December 31, 2024, includes $78 million contingent payment gain recognized in connection with a fair value remeasurement of the contingent payment liability associated with AB's acquisition of CarVal in 2022.

(5)For the and 2023, respectively, non-recurring tax items reflect primarily the effect of uncertain tax positions for a given audit period. Include a decrease of the deferred tax valuation allowance of $1.0 billion during year ended December 31, 2023.

(6) Includes Non-GMxB related derivative hedge losses (gains) of $6 million, $26 million and ($34) million for the years ended December 31, 2024, 2023 and 2022, respectively.

Non-GAAP Operating ROE

We calculate Non-GAAP Operating ROE by dividing Non-GAAP Operating Earnings for the previous twelve calendar months by consolidated average equity attributable to Holdings’ common shareholders, excluding AOCI. AOCI fluctuates period-to-period in a manner inconsistent with our underlying profitability drivers as the majority of such fluctuation is related to the market volatility of the unrealized gains and losses associated with our AFS securities. Therefore, we believe excluding AOCI is more effective for analyzing the trends of our operations.

The following table presents return on average equity attributable to Holdings’ common shareholders, excluding AOCI and Non-GAAP Operating ROE for the year ended December 31, 2024.

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Non-GAAP Operating Common EPS

Non-GAAP operating common EPS is calculated by dividing Non-GAAP Operating Earnings by diluted common shares outstanding. The following table sets forth Non-GAAP operating common EPS:

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(1)Includes the impact of favorable assumption updates of $0.05 and $0.11 for the year ended December 31, 2024 and 2023, respectively. Includes the impact of unfavorable assumption updates of $0.54 for the year ended December 31, 2022.

(2)Includes certain gross legal expenses related to the COI litigation of $0.33, $0.41 and $0.57 for the year ended December 31, 2024, 2023 and 2022, respectively. Includes the impact of unfavorable annual actuarial assumptions updates related to LFPB of $0.17 for the year ended December 31, 2023. Includes policyholder benefit costs of $0.20 for the year ended December 31, 2022 stemming from a deal to repurchase UL policies from one entity that had invested in numerous policies purchased in the life settlement market.

(3)For the year ended December 31, 2024, includes $0.25 of the gain on sale on AB's Bernstein Research Service attributable to Holdings.

(4)For the year ended December 31, 2024 includes $0.24 contingent payment gain recognized in connection with a fair value remeasurement of the contingent payment liability associated with AB's acquisition of CarVal in 2022.

(5)For the 2023, respectively, non-recurring tax items reflect primarily the effect of uncertain tax positions for a given audit period. Include a decrease of the deferred tax valuation allowance of $2.84 per common share during year ended December 31, 2023.

(6)Includes Non-GMxB related derivative hedge losses (gains) of $0.02, $0.07 and $(0.09) for the years ended December 31, 2024, 2023 and 2022, respectively.

Assets Under Management

AUM means investment assets that are managed by one of our subsidiaries and includes: (i) assets managed by AB; (ii) the assets in our General Account investment portfolio; and (iii) the Separate Accounts assets of our Individual Retirement, Group Retirement and Protection Solutions businesses. Total AUM reflects exclusions between segments to avoid double counting.

Assets Under Administration

AUA includes non-insurance client assets that are invested in our savings and investment products or serviced by our Equitable Advisors platform. We provide administrative services for these assets and generally record the revenues received as distribution fees.

Account Value

AV generally equals the aggregate policy account value of our retirement products. General Account AV refers to account balances in investment options that are backed by the General Account while Separate Accounts AV refers to Separate Accounts investment assets.

Protection Solutions Reserves

Protection Solutions reserves equals the aggregate value of policyholders’ account balances and future policy benefits for policies in our Protection Solutions segment.

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Consolidated Results of Operations

Our consolidated results of operations are significantly affected by conditions in the capital markets and the economy because we offer market sensitive products. These products have been a significant driver of our results of operations. Because the future claims exposure on these products is sensitive to movements in the equity markets and interest rates, we have in place various hedging and reinsurance programs that are designed to mitigate the economic risk of movements in the equity markets and interest rates. The volatility in net income attributable to Holdings for the periods presented below results from the mismatch between: (i) the change in carrying value of the reserves for GMDB and certain GMIB features that do not fully and immediately reflect the impact of equity and interest market fluctuations; (ii) the change in fair value of products with the GMIB feature that have a no-lapse guarantee; and (iii) our hedging and reinsurance programs.

Ownership and Consolidation of AllianceBernstein

Our indirect, wholly-owned subsidiary, AllianceBernstein Corporation, is the General Partner of AB. Accordingly, AB’s results are fully reflected in our consolidated financial statements.

Our average economic interest in AB was approximately 61%, 61% and 64% for the year ended December 31, 2024, 2023 and 2022, respectively. The slight decrease was due to the issuance of AB Units relating to AB’s 100% acquisition of CarVal Investments L.P. (“CarVal”). On July 1, 2022, AB issued 3.2 million AB Units (with a fair value of $133 million) with the remaining 12.1 million AB units (with a fair value of $456 million) issued on November 1, 2022. AB also recorded a contingent consideration payable of $229 million (to be paid predominantly in AB Units) based on CarVal achieving certain performance objectives over a six-year period ending December 31, 2027. During 2024, AB remeasured the contingent liability and recorded a gain reflected within contingent payment arrangements of $129 million. In December 2024, AB agreed to finalize its contingent consideration liability with CarVal for a value of $134 million. This liability will be paid predominantly in AB units issued within 10 days of December 31, 2027.

Consolidated Results of Operations

The following table summarizes our consolidated statements of income (loss):

Consolidated Statements of Income (Loss)

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The following table summarizes our Non-GAAP Operating Earnings per common share:

Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Net Income (Loss) Attributable to Holdings

Net income attributable to Holdings was relatively flat at $1.3 billion for the years ended December 31, 2024 and 2023. The following were notable changes in net income (loss):

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Favorable items included:

•Fee-type revenue increased by $907 million mainly driven by higher investment base advisory fees and distribution revenue from higher average AUM and the gain on sale of AB’s Bernstein Research Service in our Asset Management segment, higher advisory fee type revenue attributed to higher average asset balances in our Wealth Management segment, higher average Separate Account values from market appreciation in our Group Retirement segment, partially offset by lower revenue from Bernstein Research Services due to the sale of this business completed during April 2024.

•Investment losses decreased by $580 million mainly due to our rebalancing program to reduce duration during 2023.

•Net investment income increased by $576 million mainly due to higher average asset balances, higher investment yields, higher alternative investments, and higher income on seed capital investments.

•Change in market risk benefits and purchased market risk benefits decreased by $164 million mainly due to more favorable interest rate movements in 2024 compared to 2023. This was partially offset by less favorable equity market and volatility movements in 2024 compared to 2023.

•Remeasurement of liability for future policy benefits decreased by $69 million mainly due to less unfavorable assumption updates in 2024 compared to 2023.

•Policyholders’ benefits decreased by $58 million mainly due to lower net mortality and more favorable Traditional Life and SOP reserve reactivity, partially offset by growth in Employee Benefits in our Protection Solutions segment.

These were partially offset by the following unfavorable items:

•Interest credited to policyholders’ account balances increased by $416 million mainly due to growth of SCS account values in our Individual Retirement segment, partially offset by lower interest expense on funding agreements in Corporate and Other.

•Commissions and distribution-related payments increased by $306 million mainly due to higher payments to financial intermediaries for the distribution of AB mutual funds resulting from higher AUM in our Asset Management segment and higher asset-based commissions and sales volumes in our Individual Retirement segment.

•Net derivative losses increased by $154 million mainly due to higher equity market appreciation during 2024 compared to 2023.

•Amortization of DAC increased by $70 million mainly due to growth in our Individual Retirement segment from sales momentum.

•Net income attributable to noncontrolling interest increased by $175 million mainly due to higher pre-tax earnings in our Asset Management segment.

•Income tax expense increased by $1.2 billion primarily due to a partial release of the valuation allowance of $1.0 billion on the deferred tax asset in the year ended December 31, 2023 compared to no valuation allowance release in the year ended December 31, 2024.

See “—Significant Factors Impacting Our Results—Effect of Assumption Updates on Operating Results” for more information regarding assumption updates.

Non-GAAP Operating Earnings

Non-GAAP Operating Earnings increased by $313 million to $2.0 billion for the year ended December 31, 2024 from $1.7 billion in the year ended December 31, 2023. The following were notable changes in Non-GAAP Operating Earnings:

Favorable items included:

•Fee-type revenue increased by $742 million mainly driven by higher investment base advisory fees and distribution revenue from higher average AUM in our Asset Management segment, higher advisory fee type revenue attributed to higher average asset balances in our Wealth Management segment, higher average Separate Account values from market appreciation in our Group Retirement segment, partially offset by lower revenue from Bernstein Research Services due to the sale of this business completed during April 2024.

•Net investment income increased by $600 million mainly due to higher average asset balances, higher investment yields, higher alternative investments, and higher income on seed capital investments.

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•Policyholders’ benefits decreased by $64 million mainly due to lower net mortality and more favorable Traditional Life and SOP reserve reactivity, partially offset by growth in Employee Benefits in our Protection Solutions segment.

•Net derivative losses decreased by $27 million mainly due to inflation swaps in our Protection Solutions segment and lower losses from hedging seed capital investments in our Asset Management segment.

These were partially offset by the following unfavorable items:

•Interest credited to policyholders’ account balances increased by $428 million mainly due to growth of SCS account values in our Individual Retirement segment, partially offset by lower interest expense on funding agreements in Corporate and Other.

•Commissions and distribution-related payments increased by $306 million mainly due to higher payments to financial intermediaries for the distribution of AB mutual funds resulting from higher average AUM in our Asset Management segment and higher asset-based commissions and sales volumes in our Individual Retirement segment.

•Compensation, benefits, interest expense and other operating costs increased by $168 million mainly due to higher variable compensation from higher sales in our Wealth Management and Asset Management segments, and higher incentive compensation and sub-advisory fees.

•Amortization of DAC increased by $70 million mainly due to growth in our Individual Retirement segment from sales momentum.

•Net income attributable to the noncontrolling interest increased by $98 million mainly due to higher pre-tax earnings.

•Income tax expense increased by $54 million mainly driven by higher pre-tax earnings in 2024.

Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

Net Income Attributable to Holdings

For a discussion that compares results for the year ended December 31, 2023 to the year ended December 31, 2022 refer to the MD&A section in our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”).

Non-GAAP Operating Earnings

For a discussion that compares results for the year ended December 31, 2023 to the year ended December 31, 2022 refer to the MD&A section in our 2023 Form 10-K.

Results of Operations by Segment

We manage our business through the following six segments: Individual Retirement, Group Retirement, Asset Management, Protection Solutions, Wealth Management and Legacy. We report certain activities and items that are not included in our six segments in Corporate and Other. The following section presents our discussion of operating earnings (loss) by segment and AUM, AV and Protection Solutions Reserves by segment, as applicable. Consistent with U.S. GAAP guidance for segment reporting, operating earnings (loss) is our U.S. GAAP measure of segment performance. See Note 21 of the Notes to the Consolidated Financial Statements for further information on our segments.

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The following table summarizes operating earnings (loss) on our segments and Corporate and Other:

Effective Tax Rates by Segment

The following table summarizes income tax expense which was allocated to the Company’s business segments:

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(1)Includes: Individual Retirement, Group Retirement, Protection Solutions and Legacy.

Individual Retirement

The Individual Retirement segment includes our variable annuity products which primarily meet the needs of individuals saving for retirement or seeking retirement income.

The following table summarizes operating earnings (loss) of our Individual Retirement segment:

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Key components of operating earnings (loss) were:

The following table summarizes AV for our Individual Retirement segment:

_____________

(1)AV presented are net of reinsurance.

The following table summarizes a roll-forward of AV for our Individual Retirement segment:

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(1)For the year ended December 31, 2023, amounts reflect a total special payment applied to the accounts of active clients as part of a previously disclosed settlement agreement between Equitable Financial and the SEC.

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Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 for the Individual Retirement Segment

Operating earnings

Operating earnings increased $69 million to $953 million during the year ended December 31, 2024 from $884 million in the year ended December 31, 2023. The following were notable changes in operating earnings (losses):

Favorable items included:

•Net investment income increased by $667 million mainly due to higher income from higher average asset balances, higher investment yields, and higher alternative investment income.

•Fee-type revenue increased by $77 million mainly due to higher average Separate Account values.

•Income tax expense decreased by $23 million mainly driven by a lower ETR in 2024.

These were partially offset by the following unfavorable items:

•Interest credited to policyholders’ account balances increased by $500 million mainly due to growth of SCS account values.

•Commissions and distribution-related payments increased by $94 million mainly due to higher asset-based commissions and sales volumes.

•Amortization of DAC increased by $72 million mainly due to growth in the business from sales momentum.

•Policyholders’ benefits increased by $25 million mainly due to growth in the payout business.

Net Flows and AV

•The increase in AV of $18.5 billion in the year ended December 31, 2024 was driven by an increase in investment performance as a result of market appreciation and change in fair value of embedded derivative instruments of $11.3 billion in the year ended December 31, 2024 and net inflows of $7.2 billion.

•Net inflows of $7.2 billion were $1.6 billion higher than in the year ended December 31, 2023, mainly driven by higher sales in the year ended December 31, 2024.

Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 for the Individual Retirement Segment

Operating earnings

For a discussion that compares results for the year ended December 31, 2023 to the year ended December 31, 2022 refer to the MD&A section in our 2023 Form 10-K.

Net Flows and AV

For a discussion on net flows and AV comparative results for the year ended December 31, 2023 to the year ended December 31, 2022 refer to the MD&A section in our 2023 Form 10-K.

Group Retirement

The Group Retirement segment offers tax-deferred investment and retirement services or products to plans sponsored by educational entities, municipalities and not-for-profit entities, as well as small and medium-sized businesses.

The following table summarizes operating earnings (loss) of our Group Retirement segment:

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Key components of operating earnings (loss) are:

The following table summarizes AV and AUA for our Group Retirement segment:

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(1)    AV presented are net of reinsurance.

The following table summarizes a roll-forward of AV and AUA for our Group Retirement segment:

____________

(1)For the year ended December 31, 2023, amounts reflect a total special payment applied to the accounts of active clients as part of a previously disclosed settlement agreement between Equitable Financial and the SEC.

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Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 for the Group Retirement Segment

Operating earnings

Operating earnings increased by $123 million to $522 million during the year ended December 31, 2024 from $399 million during the year ended December 31, 2023. The following were notable changes in operating earnings (losses):

Favorable items included:

•Fee-type revenue increased by $110 million primarily due to higher average Separate Account values from market appreciation.

•Net investment income increased by $63 million due to higher alternative investment income, higher average asset, and higher investment yields.

These were partially offset by the following unfavorable items:

•Compensation, benefits and other operating costs and expenses increased by $24 million mainly due to the expansion of our Institutional business and higher vendor and legal expenses.

•Commissions and distribution-related payments increased by $15 million mainly due to higher premium-based and asset-based commission payments.

•Interest credited to policyholders’ account balances increased by $12 million mainly due to higher average account balances in institutional markets (offset in Net investment income).

Net Flows and AV

•The increase in AV of $4.2 billion in the year ended December 31, 2024 was primarily driven by equity market appreciation, partially offset by net outflows of $104 million.

•Net outflows of $104 million for the year ended December 31, 2024 improved by $152 million compared to the year ended December 31, 2023, mainly driven by large institutional lump sum premiums partially offset by higher tax-exempt and corporate surrenders.

Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 for the Group Retirement Segment

Operating earnings

For a discussion that compares results for the year ended December 31, 2023 to the year ended December 31, 2022 refer to the MD&A section in our 2023 Form 10-K.

Net Flows and AV

For a discussion on net flows and AV comparative results for the year ended December 31, 2023 to the year ended December 31, 2022 refer to the MD&A section in our 2023 Form 10-K.

Asset Management

The Asset Management segment provides diversified investment management and related services to a broad range of clients around the world. Operating earnings (loss), net of tax, presented here represents our average economic interest in AB of approximately 61%, 61% and 64% during the years ended December 31, 2024, 2023 and 2022.

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Key components of operating earnings (loss) were:

Changes in AUM in the Asset Management segment were as follows:

__________

(1)Net flows include $4.5 billion of AXA redemptions for 2022.

(2)Approximately $0.7 billion adjustment is due to a change in fee policy related to certain fixed income assets effective October 1, 2024. Approximately $0.4 billion of Institutional AUM was removed from AB total assets under management during the second quarter 2022 due to a change in the fee structure.

(3)The CarVal acquisition added approximately $12.2 billion of Institutional AUM in the third quarter 2022.

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Average AUM in the Asset Management segment for the periods presented by distribution channel and investment services were as follows:

____________

(1)Includes index and enhanced index services.

(2)Includes certain multi-asset solutions and services not included in equity of fixed income services.

(3)Approximately $12.1 billion of private placements was transferred from Taxable Fixed Income into Alternatives/Multi-Asset during the three months ended September 30, 2024 to better align with standard industry practice for asset class reporting purposes.

Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 for the Asset Management Segment

Operating earnings

Operating earnings increased $68 million to $479 million during the year ended December 31, 2024 from $411 million in the year ended December 31, 2023. The following were notable changes in operating earnings (losses):

Favorable items included:

•Fee-type revenue increased by $344 million primarily due to higher investment base advisory fees and higher distribution revenue from higher average AUM, higher performance based fees, partially offset by lower revenue from Bernstein Research Services due to the sale of this business completed during April 2024.

•Net investment income increased by $9 million mainly due to higher gains from seed capital investments.

•Net derivative losses decreased by $9 million mainly due to lower losses from hedging seed capital investments.

These were offset by the following unfavorable items:

•Commissions and distribution-related payments increased by $132 million mainly due to higher payments to financial intermediaries for the distribution of AB mutual funds resulting from higher average AUM.

•Compensation, benefits, interest expense and other operating costs increased by $32 million mainly due to higher incentive compensation expense and other expenses including office related expenses, partially offset by lower base compensation and other expenses driven by the sale of Bernstein Research Services and the recognition of a $21 million incentive grant gain in connection with the AB headquarters relocation to Nashville.

•Net income attributable to noncontrolling interest increased by $78 million due to higher pre-tax earnings.

•Income tax expense increased by $52 million primarily due to higher pre-tax earnings and a higher ETR for the year ended December 31, 2024 compared to the year ended December 31, 2023.

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Long-Term Net Flows and AUM

•Total AUM as of December 31, 2024 was $792.2 billion, up $67.0 billion, or 9.2%, compared to December 31, 2023. The increase is primarily the result of market appreciation of $68.5 billion, partially offset by net outflows of ($2.2) billion. Market appreciation of $68.5 billion attributed to Retail of $34.2 billion, Institutions of $20.7 billion and Private Wealth of $13.6 billion. Net outflows were driven by Institutions net outflows of $16.5 billion, which were partially offset by Retail and Private Wealth net inflows of $13.4 billion and $0.9 billion respectively.

Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 for the Asset Management Segment

Operating earnings

For a discussion that compares results for the year ended December 31, 2023 to the year ended December 31, 2022 refer to the MD&A section in our 2023 Form 10-K.

Net Flows and AUM

For a discussion that compares results for the year ended December 31, 2023 to the year ended December 31, 2022 refer to the MD&A section in our 2023 Form 10-K.

Protection Solutions

The Protection Solutions segment includes our life insurance and EB businesses. We provide a targeted range of products aimed at serving the financial needs of our clients throughout their lives, including VUL, IUL and term life products. In 2015, we entered the EB market and currently offer a suite of dental, vision, life, as well as short- and long-term disability insurance products to small and medium-size businesses.

The following table summarizes operating earnings (loss) of our Protection Solutions segment:

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Key components of operating earnings (loss) were:

The following table summarizes Protection Solutions Reserves for our Protection Solutions segment:

_______________

(1)Does not include Protection Solutions Reserves for our EB business as it is a scaling business and therefore has immaterial in-force policies.

The following table presents our in-force face amounts for our individual life insurance products:

_______________

(1)Includes individual life insurance and does not include EB as it is a scaling business and therefore has immaterial in-force policies.

(2)UL includes GUL.

(3)VUL includes VL and COLI.

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Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 for the Protection Solutions Segment

Operating earnings (loss)

Operating earnings increased $135 million to $186 million during the year ended December 31, 2024 from $51 million in the year ended December 31, 2023. The following were notable changes in operating earnings (losses):

Favorable items included:

•Policyholders’ benefits decreased by $74 million mainly due to lower net mortality and more favorable Traditional Life and SOP reserve reactivity, partially offset by growth in Employee Benefits.

•Net investment income increased by $74 million mainly due to higher alternative investment income and higher investment yields.

•Fee-type revenue increased by $59 million mainly driven by higher premiums due to growth in Employee Benefits.

•Net derivative losses decreased by $16 million mainly due to inflation swaps.

These were partially offset by the following unfavorable items:

•Compensation, benefits, interest expense and other operating costs increased by $44 million mainly due to higher incentive compensation, higher premium taxes, and higher sub advisory fees.

•Commissions and distribution-related payments increased by $14 million mainly due to growth in Employee Benefits.

•Interest credited to policyholders’ account balances increased by $14 million mainly due to higher crediting rates.

•Income tax expense increased by $20 million primarily due to higher pre-tax earnings, partially offset by a lower ETR.

Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 for the Protection Solutions Segment

For a discussion that compares results for the year ended December 31, 2023 to the year ended December 31, 2022 refer to the MD&A section in our 2023 Form 10-K.

Wealth Management

The Wealth Management segment is an emerging leader in the wealth management space with a differentiated advice value proposition that offers discretionary and non-discretionary investment advisory accounts, financial planning and advice, life insurance, and annuity products. In 2023, we began reporting this business separately from our other segments and Corporate and Other.

The following table summarizes operating earnings (loss) of our Wealth Management segment:

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Key components of operating earnings (loss) were:

The following table summarizes revenue by activity type for our Wealth Management segment:

The following table summarizes a roll-forward of AUA for our Wealth Management segment:

Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 for the Wealth Management Segment

Operating earnings

Operating earnings increased $25 million to $184 million during the year ended December 31, 2024 compared to $159 million in the year ended December 31, 2023. The following were notable changes in operating earnings (losses):

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Favorable items included:

•Investment management, service fees and other income increased by $241 million mainly due to higher advisory fee type revenue attributed to higher average asset balances combined with increased distribution fees from higher retirement sales.

These were partially offset by the following unfavorable items:

•Commissions and distribution-related payments increased by $165 million mainly due to higher distribution and advisory fee-type revenue from higher retirement sales and average asset balances.

•Compensation, benefits and other operating costs and expenses increased by $46 million mainly due to higher variable compensation from higher sales.

•Income tax expense increased by $9 million primarily due to higher pre-tax earnings.

Net Flows and AUA

•The increase in AUA of $13.6 billion in the year ended December 31, 2024 was mainly driven by market appreciation and advisory net flows of $4.0 billion.

•Advisory net inflows of $4.0 billion were $1.0 billion higher than in the year ended December 31, 2023 mainly driven by sales.

Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 for the Wealth Management Segment

Operating earnings

For a discussion that compares results for the year ended December 31, 2023 to the year ended December 31, 2022 refer to the MD&A section in our 2023 Form 10-K.

Net Flows and AUA

For a discussion on net flows and AUA comparative results for the year ended December 31, 2023 to the year ended December 31, 2022 refer to the MD&A section in our 2023 Form 10-K.

Legacy

The Legacy segment consists of our capital intensive fixed-rate GMxB business written prior to 2011.

The following table summarizes operating earnings (loss) of our Legacy segment:

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Key components of operating earnings (loss) were:

The following table summarizes AV for our Legacy segment:

_______________

(1)AV presented are net of reinsurance.

The following table summarizes a roll-forward of AV for our Legacy segment net of the Venerable transaction:

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Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 for the Legacy Segment

Operating earnings

Operating earnings decreased $20 million to $131 million during the year ended December 31, 2024 from $151 million in the year ended December 31, 2023. The following were notable changes in operating earnings (losses):

Unfavorable items included:

•Net investment income decreased by $41 million mainly due to lower average asset balances.

These were partially offset by the following favorable items:

•Commissions and distribution-related payments decreased by $11 million mainly due to business runoff.

•Income tax expense decreased by $9 million primarily due to lower pre-tax earnings and a lower ETR for the year ended December 31, 2024.

Net Flows and AV

•The decrease in AV of $482 million in the year ended December 31, 2024 was primarily driven by net outflows of $2.8 billion, partially offset by $2.3 billion of market appreciation.

•Net outflows of $2.8 billion were $526 million higher than in the year ended December 31, 2023, mainly driven by continuing runoff of the business.

Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 for the Legacy Segment

Operating earnings

For a discussion that compares results for the year ended December 31, 2023 to the year ended December 31, 2022 refer to the MD&A section in our 2023 Form 10-K.

Net Flows and AV

For a discussion on net flows and AV comparative results for the year ended December 31, 2023 to the year ended December 31, 2022 refer to the MD&A section in our 2023 Form 10-K.

Corporate and Other

Corporate and Other includes some of our financing and investment expenses. It also includes: the Closed Block, run-off variable annuity reinsurance business, run-off group pension business, run-off health business, benefit plans for our employees, certain strategic investments and certain unallocated items, including capital and related investments, interest expense and financing fees and corporate expense. AB’s results of operations are reflected in the Asset Management segment. Accordingly, Corporate and Other does not include any items applicable to AB.

The following table summarizes operating earnings (loss) of Corporate and Other:

General Account Investment Portfolio

Our investment philosophy is driven by our long-term commitments to clients, robust risk management and strategic asset allocation. Our General Account investment portfolio investment strategy seeks to achieve sustainable risk-adjusted returns by focusing on principal preservation and investment return, subject to duration and liquidity requirements by product as well as diversification of investment risks. Investment activities are undertaken based on established investment guidelines and are required to comply with applicable laws and insurance regulations.

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Risk tolerances are established for credit risk, market risk, liquidity risk and concentration risk across issuers and asset classes, each of which seek to mitigate the impact of cash flow variability arising from these risks. Significant interest rate increases and market volatility since 2022 have reduced the fair value of fixed maturities from a net unrealized gain position to a net unrealized loss. As a part of asset and liability management, we maintain a weighted average duration for our General Account investment portfolio that is within an acceptable range of the estimated duration of our liabilities given our risk appetite and hedging programs.

The General Account investment portfolio consists largely of investment grade fixed maturities, short-term investments, commercial, agricultural and residential mortgage loans, alternative investments and other financial instruments. Fixed maturities include publicly issued corporate bonds, government bonds, privately placed notes and bonds, bonds issued by states and municipalities, agency and non-agency mortgage-backed securities and asset-backed securities. In addition, from time to time we use derivatives to hedge our exposure to equity markets, interest rates, foreign currency and credit spreads.

We incorporate ESG factors into the investment processes for a significant portion of our General Account portfolio. As investors with a long-term horizon, we believe that companies with sustainable practices are better positioned to deliver value to stakeholders over an extended period. These companies are more likely to increase sales through sustainable products, reduce energy costs and attract and retain talent. This belief underpins our approach to sustainable investing, where we seek to enhance the sustainability and quality of our investment portfolio.

Investments in our surplus portfolio are generally comprised of a mix of fixed maturity investment grade and below investment grade securities as well as various alternative investments, primarily private equity and real estate equity. Although alternative investments are subject to period over period earnings fluctuations, they have historically achieved returns in excess of the fixed maturity portfolio.

The General Account investment portfolio reflects certain differences from the presentation of the U.S. GAAP Consolidated Financial Statements. This presentation is consistent with how we manage the General Account investment portfolio. For further investment information, see Note 3 and Note 4 of the Notes to the Consolidated Financial Statements.

Investment Results of the General Account Investment Portfolio

The following table summarizes the General Account investment portfolio results with Non-GAAP Operating Earnings adjustments by asset category for the periods indicated. This presentation is consistent with how we measure investment performance for management purposes.

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_____________

(1)Includes, as of December 31, 2024, December 31, 2023 and December 31, 2023 respectively, $431 million, $361 million and $400 million of other invested assets. Amounts for certain consolidated VIE investments are shown net of associated non-controlling interest.

(2)Amount for fixed maturities and mortgages represents original cost, reduced by repayments, write-downs, adjusted amortization of premiums, accretion of discount and allowances. Cost for equity securities represents original cost reduced by write-downs; cost for other limited partnership interests represents original cost adjusted for equity in earnings and reduced by distributions.

(3)Cash and Short-term net of collateral expense.

(4)Fixed maturities yield excludes out of period income adjustment during year ended December 31, 2023.

AFS Fixed Maturities

The fixed maturity portfolio consists largely of investment grade corporate debt securities and includes significant amounts of U.S. government and agency obligations. The below investment grade securities in the General Account investment portfolio consist of loans to middle market companies, public high yield securities, bank loans, as well as “fallen angels,” originally purchased as investment grade investments.

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AFS Fixed Maturities by Industry

The following table sets forth these fixed maturities by industry category along with their associated gross unrealized gains and losses:

AFS Fixed Maturities by Industry (1)

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______________

(1)Investment data has been classified based on standard industry categorizations for domestic public holdings and similar classifications by industry for all other holdings.

(2)Includes publicly traded agency pass-through securities and collateralized obligations.

(3)Includes credit-tranched securities collateralized by sub-prime mortgages, credit risk transfer securities and other asset types.

Fixed Maturities Credit Quality

The SVO of the NAIC evaluates the investments of insurers for regulatory reporting purposes and assigns fixed maturities to one of six categories (“NAIC Designations”). NAIC Designations of “1” or “2” include fixed maturities considered investment grade, which include securities rated Baa3 or higher by Moody’s or BBB- or higher by Standard & Poor’s. NAIC Designations of “3” through “6” are referred to as below investment grade, which include securities rated Ba1 or lower by Moody’s and BB+ or lower by Standard & Poor’s. As a result of time lags between the funding of investments and the completion of the SVO filing process, the fixed maturity portfolio typically includes securities that have not yet been rated by the SVO as of each balance sheet date. Pending receipt of SVO ratings, the categorization of these securities by NAIC Designation is based on the expected ratings indicated by internal analysis.

The following table sets forth the General Account’s fixed maturities portfolio by NAIC rating:

AFS Fixed Maturities