AXA Equitable Holdings Reports First Quarter 2019 Results

Net loss of $775 million; Net loss per diluted share of $1.50

Non-GAAP Operating Earnings¹ of
$509 million

Non-GAAP Operating Earnings per diluted share of $0.98

Returned $818 million to shareholders during the first quarter of
2019

Newly independent company following successful March secondary
offering

NEW YORK–(BUSINESS WIRE)–AXA Equitable Holdings, Inc. (“AXA Equitable Holdings”, or the
“Company”) (NYSE: EQH) today announced financial results for the first
quarter ended March 31, 2019.

“AXA Equitable Holdings delivered strong first quarter 2019 results,
with 14% growth in Non-GAAP Operating Earnings per share, reflecting
solid operating performance and effective execution against our
strategic priorities,” said Mark Pearson, President and Chief Executive
Officer. “The positive momentum we are generating in each of our
segments, our rigorous financial discipline and the strength of our
balance sheet are enabling us to deliver significant levels of capital
return for shareholders, reflected in dividends and share repurchases
totaling $818 million during the first quarter.”

Mr. Pearson continued, “We continue to demonstrate our ability to
deliver on the shareholder commitments we articulated at the time of our
initial public offering one year ago, with growth in earnings,
substantial progress against our 2020 strategic goals and meaningful
capital return. Today, as a newly independent company following the
conclusion of AXA S.A.’s majority ownership, we are inspired by our
160-year heritage and guided by our purpose to help our clients retire
with dignity, protect their families and prepare for their financial
future with confidence.”

Total AUM was $664 billion, flat compared to March 31, 2018.

Net loss attributable to Holdings for the first quarter of 2019 was $775
million, a decrease of $1.0 billion compared to the first quarter of
2018. This result was primarily driven by noneconomic market impacts
under GAAP accounting driven by hedging and nonperformance risk.

Non-GAAP Operating Earnings in the first quarter of 2019 increased to
$509 million from $483 million in the first quarter of 2018.

As of March 31, 2019, Book value per share, including accumulated other
comprehensive income (“AOCI”), was $26.77. Book value per share,
excluding AOCI, was $27.81 per share.

First Quarter 2019 Business Highlights

• Business segment highlights:
  • Individual Retirement first year premiums increased 16% to $1.9
    billion.
  • Group Retirement operating earnings increased 7% to $81 million.
  • Investment Management and Research (AllianceBernstein) net inflows
    of $1.1 billion, positive for the third straight quarter.
  • Protection Solutions operating earnings increased 40% to $49
    million.
• Capital management program:
  • Returned $818 million of capital to shareholders, including $68
    million of quarterly cash dividends, a $600 million share
    repurchase from AXA S.A. and $150 million repurchased as part of
    an Accelerated Share Repurchase agreement.
  • Intend to increase quarterly cash dividend 15% to $0.15 per share
    in the second quarter.²
• Established majority independent governance:
  • Following completion of the March secondary public offering and
    the share repurchase from AXA S.A., AXA Equitable Holdings is no
    longer a controlled company.
  • Ramon de Oliveira named independent Chairman of the AXA Equitable
    Holdings and AllianceBernstein (or “AB”)³ Boards of
    Directors.
  • Kristi Matus and Bertram Scott appointed to the AXA Equitable
    Holdings Board of Directors.
  • With these appointments, the AXA Equitable Holdings board is now
    comprised of a majority of independent directors.

• Continued to successfully execute on strategic priorities:
  • Achieved net savings run-rate of $21 million, and we remain on
    track to deliver $75 million pre-tax productivity gains by 2020.
  • Completed execution of over two-thirds of the Company’s general
    account optimization initiative and achieved $108 million towards
    the $160 million growth in pre-tax net investment income goal by
    2020.

• Capital position in-line with target CTE98 for variable annuities and
  risk-based capital (“RBC”) ratio of 350-400% for non-variable annuity
  insurance liabilities.

Business Segment Results

• Account value increased 1% due to equity market performance over the
  last twelve months.
• Net outflows of $88 million improved compared to the first quarter of
  2018 as outflows from the fixed rate living benefits block were
  partially offset by $841 million of net inflows on newer, less
  capital-intensive products which increased from $579 million in the
  prior year quarter.
• Operating earnings increased slightly from $368 million to $370
  million year-over-year, primarily due to an increase in net investment
  income from higher asset balances and yields from our general account
  investment portfolio optimization and an improvement in GMxB results.

• Account value increased by 3% due to positive equity market
  performance and net inflows over the last twelve months.
• Net inflows of $107 million increased from net inflows of $101 million
  in the prior year quarter driven by strong inflows in the tax-exempt
  market.
• Operating earnings increased to $81 million primarily due to higher
  fee-type revenue on higher average separate account assets and an
  increase in net investment income due to our general account
  investment portfolio optimization.

• AUM increased to $554.7 billion over the last twelve months due to
  market performance.
• First quarter net inflows of $1.1 billion were driven by active net
  inflows of $2.2 billion.
• Operating earnings decreased to $77 million primarily reflecting a
  decrease in fee-type revenue due to lower performance-based fees and
  lower Bernstein Research Services revenues. This decrease was
  partially offset by our increased ownership in AB.

• Gross written premiums increased 4% year-over-year driven by both
  higher first year and renewal premiums.
• Annualized premiums increased 14% year-over-year driven by continued
  growth in VUL and Employee Benefits product sales.
• Operating earnings increased from $35 million to $49 million
  year-over-year, driven by an increase in net investment income due to
  the positive impact of our general account investment portfolio
  optimization and a decrease in DAC amortization as the segment is no
  longer in loss recognition.

Corporate and Other

Operating loss of $68 million, an improvement of $9 million
year-over-year, driven primarily by higher net investment income and
lower expenses.

Capital Management

During the first quarter, AXA Equitable Holdings returned $818 million
to shareholders, including

• $68 million of quarterly cash dividends, reflecting $0.13 per share.
• Completion of $150 million of share repurchases as part of an
  accelerated share repurchase agreement entered into in January.
• $600 million share repurchase from AXA S.A., leaving $200 million
  remaining on the Company’s current repurchase authorization.

On February 28, 2019, the Company announced its intention to increase
its dividend by 15% to $0.15 per share payable in the second quarter of
2019.

Also during the quarter, the Company raised a total of $1 billion of
contingent capital that gives it the right at any time over a ten-year
or thirty-year period to issue senior notes, totaling $600 million and
$400 million respectively. This facility is intended to provide an
additional source of committed, long-term liquidity and enhance the
Company’s financial flexibility.

Earnings Conference Call

AXA Equitable Holdings will host a conference call on Friday, May 10,
2019 at 8:00 a.m. ET, to discuss its first quarter 2019 results. The
conference call webcast, along with additional earnings materials will
be accessible on the AXA Equitable Holdings Investor Relations website
at ir.axaequitableholdings.com.
Please log on to the webcast at least 15 minutes prior to the call to
download and install any necessary software. To join the conference call
via telephone, please use one of the following dial-in numbers:

• Domestic: +1 844-897-7515
• International: +1 647-689-5390
• Access code: 3495776

A webcast replay will be made available on the AXA Equitable Holdings
Investor Relations website at ir.axaequitableholdings.com.

About AXA Equitable Holdings

AXA Equitable Holdings, Inc. (NYSE: EQH) is one of the leading financial
services companies in the U.S. and is comprised of two complementary and
well-established principal franchises, AXA Equitable Life Insurance
Company and AllianceBernstein. We have been helping clients prepare for
their financial future since 1859 and have a combined total of
approximately 12,500 employees and financial professionals, 5.3 million
customer relationships and $664 billion of assets under management (as
of 3/31/2019).

Forward-looking and cautionary statements

This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Words
such as “expects,” “believes,” “anticipates,” “intends,” “seeks,”
“aims,” “plans,” “assumes,” “estimates,” “projects,” “should,” “would,”
“could,” “may,” “will,” “shall” or variations of such words are
generally part of forward-looking statements. Forward-looking statements
are made based on management’s current expectations and beliefs
concerning future developments and their potential effects upon AXA
Equitable Holdings, Inc. (“Holdings”) and its consolidated subsidiaries.
“We,” “us” and “our” refer to Holdings and its consolidated
subsidiaries, unless the context refers only to Holdings as a corporate
entity. There can be no assurance that future developments affecting
Holdings will be those anticipated by management. Forward-looking
statements include, without limitation, all matters that are not
historical facts.

These forward-looking statements are not a guarantee of future
performance and involve risks and uncertainties, and there are certain
important factors that could cause actual results to differ, possibly
materially, from expectations or estimates reflected in such
forward-looking statements, including, among others: (i) conditions in
the financial markets and economy, including equity market declines and
volatility, interest rate fluctuations, impacts on our goodwill and
changes in liquidity and access to and cost of capital; (ii) operational
factors, including reliance on the payment of dividends to Holdings by
its subsidiaries, remediation of our material weaknesses, fulfilling our
obligations related to being a public company, indebtedness, elements of
our business strategy not being effective in accomplishing our
objectives, protection of confidential customer information or
proprietary business information, information systems failing or being
compromised and strong industry competition; (iii) credit,
counterparties and investments, including counterparty default on
derivative contracts, failure of financial institutions, defaults,
errors or omissions by third parties and affiliates and gross unrealized
losses on fixed maturity and equity securities; (iv) our reinsurance and
hedging programs; (v) our products, structure and product distribution,
including variable annuity guaranteed benefits features within certain
of our products, complex regulation and administration of our products,
variations in statutory capital requirements, financial strength and
claims-paying ratings and key product distribution relationships; (vi)
estimates, assumptions and valuations, including risk management
policies and procedures, potential inadequacy of reserves, actual
mortality, longevity and morbidity experience differing from pricing
expectations or reserves, amortization of deferred acquisition costs and
financial models; (vii) our Investment Management and Research segment,
including fluctuations in assets under management, the industry-wide
shift from actively-managed investment services to passive services and
potential termination of investment advisory agreements; (viii) legal
and regulatory risks, including federal and state legislation affecting
financial institutions, insurance regulation and tax reform; (ix) risks
related to our controlling stockholder, including conflicts of interest,
waiver of corporate opportunities and costs associated with separation
and rebranding; and (x) risks related to our common stock and future
offerings, including the market price for our common stock being
volatile and potential stock price declines due to future sales of
shares by existing stockholders.

Forward-looking statements should be read in conjunction with the other
cautionary statements, risks, uncertainties and other risk factors
identified in Holdings’ Annual Report on Form 10-K for the year ended
December 31, 2018 as filed with the Securities and Exchange Commission
on March 8, 2019 and elsewhere in Holdings’ Quarterly Report on Form
10-Q for the quarter ended March 31, 2019. Further, any forward-looking
statement speaks only as of the date on which it is made, and we
undertake no obligation to update or revise any forward-looking
statement to reflect events or circumstances after the date on which the
statement is made or to reflect the occurrence of unanticipated events,
except as otherwise may be required by law.

Use of Non-GAAP financial measures

In addition to our results presented in accordance with U.S. GAAP, we
report Non-GAAP Operating Earnings, Non-GAAP Operating EPS and Book
value per share, excluding AOCI, each of which is a measure that is not
determined in accordance with U.S. GAAP. Management believes that the
use of these non-GAAP financial measures, together with relevant U.S.
GAAP measures, provides 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 (other than with
respect to equity method investments) 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.

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 are more sensitive to changes
in market conditions than the variable annuity product liabilities as
valued under U.S. GAAP. This is a large source of volatility in net
income.

In the first quarter of 2019, we modified our Non-GAAP Operating
Earnings measure’s treatment of the impact of timing differences on the
amortization of DAC resulting from market value adjustments for our SCS
variable annuity product. As a result of this modification, the
amortization of DAC for our SCS product included in Non-GAAP Operating
Earnings was changed to be determined based on our SCS product’s gross
profits included in Non-GAAP Operating Earnings, consistent with both
our exclusion from Non-GAAP Operating Earnings of other items that are
distortive to the underlying drivers of our financial performance on a
consolidated basis and with industry practice. Our presentation of
Non-GAAP Operating Earnings in prior periods was not revised to reflect
this modification, however, had we modified the treatment of the
amortization of DAC for SCS starting in the first quarter of 2018,
SCS-related DAC amortization excluded from Non-GAAP Operating Earnings
would have been $52 million, $17 million and $4 million lower during the
first, second and third quarter of 2018, respectively, and $17 million
higher during the fourth quarter of 2018.

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
  certain changes in the fair value of the derivatives and other
  securities we use to hedge these features, the effect of benefit ratio
  unlock adjustments and changes in the fair value of the embedded
  derivatives reflected within variable annuity products’ net derivative
  results and the impact of these items on DAC amortization;
• Investment (gains) losses, which includes other-than-temporary
  impairments of securities, 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 includes restructuring costs related to
  severance, lease write-offs related to non-recurring restructuring
  activities, and separation costs; 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 the impact of the Tax Reform
  Act.

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

We use our prevailing corporate federal income tax rate of 21% in 2019
and 2018, 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.

The table below presents a reconciliation of Net income (loss)
attributable to Holdings to Non-GAAP Operating Earnings for the Three
Months Ended March 31, 2019 and 2018:

Non-GAAP Operating EPS

Non-GAAP Operating EPS is calculated by dividing Non-GAAP Operating
Earnings by weighted average diluted common shares outstanding. The
table below presents a reconciliation of GAAP EPS to Non-GAAP Operating
EPS for the Three Months Ended March 31, 2019 and 2018:

Book Value Per Share, excluding AOCI

We use the term “book value” to refer to Total equity attributable to
Holdings. Book Value Per Share, excluding AOCI, is our Total equity
attributable to Holdings, excluding AOCI, divided by ending common
shares outstanding – diluted.

Other Operating Measures

We also use certain operating measures which management believes provide
useful information about our businesses and the operational factors
underlying our financial performance.

Account Value

Account value generally equals the aggregate policy account value of our
retirement products.

Assets Under Management (“AUM”)

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 assets portfolio and (iii) the separate account
assets of our Individual Retirement, Group Retirement and Protection
Solutions businesses. Total AUM reflects exclusions between segments to
avoid double counting.

Conditional Tail Expectation (“CTE”) 98

CTE98 is defined as the amount of assets required to satisfy contract
holder obligations across market environments in the average of the
worst two percent of scenarios over the life of the contracts.

Contacts

Investor Relations
Kevin Molloy
+1 212-314-2476

Media
Relations
Matt Asensio
+1 212-314-2010

Read full story here