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BUSINESS SEGMENT INFORMATION | 3 Months Ended
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Mar. 31, 2024
Segment Reporting [Abstract] |
BUSINESS SEGMENT INFORMATION | BUSINESS SEGMENT INFORMATION As previously announced, effective January 1, 2023, our financial reporting presentation was revised to reflect the reorganization of the Company’s reportable segments to reflect how the Company’s chief operating decision maker now makes operating decisions and assesses performance. We now have six reportable segments. Prior period results have been revised in connection with updates to our reportable segments. The six reportable segments are: Individual Retirement, Group Retirement, Investment Management and Research, Protection Solutions, Wealth Management and Legacy. These segments reflect the manner by which the Company’s chief operating decision maker views and manages the business. A brief description of these segments follows: •The Individual Retirement segment offers a diverse suite of variable annuity products which are primarily sold to affluent and high net worth individuals saving for retirement or seeking retirement income. •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 Investment Management and Research segment provides diversified investment management, research, and related solutions globally to a broad range of clients through three main client channels - Institutional, Retail and Private Wealth - and distributes its institutional research products and solutions through Bernstein Research Services. •The Protection Solutions segment includes our life insurance and group employee benefits businesses. Our life insurance business offers a variety of VUL, UL and term life products to help affluent and high net worth individuals, as well as small and medium-sized business owners, with their wealth protection, wealth transfer and corporate needs. Our group employee benefits business offers a suite of life, and short- and long-term disability, dental and vision insurance products to small and medium-size businesses across the United States. •The Wealth Management segment offers discretionary and non-discretionary investment advisory accounts, financial planning and advice, life insurance, and annuity products through Equitable Advisors. •The Legacy segment primarily consists of the capital intensive fixed-rate GMxB business written in the Individual Retirement market prior to 2011. This business offered GMDB features in isolation or together with GMLB features. This business also historically offered variable annuities with four types of guaranteed living benefit riders: GMIB, GWBL/GMWB, and GMAB. Measurement Operating earnings (loss) is the financial measure which primarily focuses on the Company’s segments’ results of operations as well as the underlying profitability of the Company’s core business. By excluding items that can be distortive and unpredictable such as investment gains (losses) and investment income (loss) from derivative instruments, the Company believes operating earnings (loss) by segment enhances the understanding of the Company’s underlying drivers of profitability and trends in the Company’s segments. Operating earnings is calculated by adjusting each segment’s net income (loss) attributable to Holdings for the following items: •Items related to variable annuity product features, which include: (i) changes in the fair value of market risk benefits and purchased market risk benefits, including the related attributed fees and claims, offset by derivatives and other securities used to hedge the market risk benefits 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; •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; 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. The General Account investment portfolio is used to support the insurance and annuity liabilities of our Individual Retirement, Group Retirement, Protection Solutions and Legacy business segments. 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 three months ended March 31, 2023. In the first quarter of 2024, the Company began allocating to its 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, the Company 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. The impact to operating earnings for each segment during the quarters of 2023 was not material. Total Company operating earnings were not impacted. Revenues derived from any customer did not exceed 10% of revenues for the three months ended March 31, 2024 and 2023. The Company accounts for inter-segment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices. The table below presents operating earnings (loss) by segment and Corporate and Other and a reconciliation to net income (loss) attributable to Holdings:
|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023 |  |
|  |  |  |  | (in millions)
Net income (loss) attributable to Holdings |  |  |  |  | $ | 114 |  |  | $ | 177 |  |  |
Adjustments related to: |  |  |  |  |  |  |  |  |
Variable annuity product features |  |  |  |  | 319 |  |  | 861 |  |  |
Investment (gains) losses |  |  |  |  | 39 |  |  | 87 |  |  |
Net actuarial (gains) losses related to pension and other postretirement benefit obligations |  |  |  |  | 17 |  |  | 9 |  |  |
Other adjustments (1) |  |  |  |  | 91 |  |  | 45 |  |  |
Income tax expense (benefit) related to above adjustments |  |  |  |  | (98) |  |  | (210) |  |  |
Non-recurring tax items (2) |  |  |  |  | 8 |  |  | (605) |  |  |
Non-GAAP Operating Earnings |  |  |  |  | $ | 490 |  |  | $ | 364 |  |  |
|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023 |  |
|  |  |  |  | (in millions)
Operating earnings (loss) by segment: |  |  |  |  |  |  |  |  |
Individual Retirement |  |  |  |  | $ | 228 |  |  | $ | 200 |  |  |
Group Retirement |  |  |  |  | $ | 126 |  |  | $ | 89 |  |  |
Investment Management and Research |  |  |  |  | $ | 106 |  |  | $ | 99 |  |  |
Protection Solutions |  |  |  |  | $ | 41 |  |  | $ | (35) |  |  |
Wealth Management |  |  |  |  | $ | 43 |  |  | $ | 32 |  |  |
Legacy |  |  |  |  | $ | 51 |  |  | $ | 60 |  |  |
Corporate and Other (3) |  |  |  |  | $ | (105) |  |  | $ | (81) |  |  |
______________ (1)Includes certain gross legal expenses related to the cost of insurance litigation of $106 million for the three months ended March 31, 2024. (2)For the three months ended March, 31 2024, non-recurring tax items reflects the effect of uncertain tax positions for a given audit period and for the three months ended March 31, 2023 primarily includes a decrease of the deferred tax valuation allowance of $614 million. (3)Includes interest expense and financing fees of $56 million and $67 million for the three months ended March 31, 2024 and 2023, respectively. Segment revenues is a measure of the Company’s revenue by segment as adjusted to exclude certain items. The following table reconciles segment revenues to total revenues by excluding 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 and changes in the fair value of the embedded derivatives reflected within the net derivative results of variable annuity product features; •Investment (gains) losses, which includes credit loss impairments of securities/investments, sales or disposals of securities/investments, realized capital gains/losses and valuation allowances; •Other adjustments, which primarily includes net derivative gains (losses) on certain Non-GMxB derivatives and net investment income from certain items including consolidated VIE investments, seed capital mark-to-market adjustments and unrealized gain/losses associated with equity securities. The table below presents revenues by segment and Corporate and Other:
|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023 |  |
|  |  |  |  | (in millions)
Segment revenues: |  |  |  |  |  |  |  |  |
Individual Retirement (1) |  |  |  |  | $ | 766 |  |  | $ | 588 |  |  |
Group Retirement (1) |  |  |  |  | 292 |  |  | 237 |  |  |
Investment Management and Research (2) |  |  |  |  | 1,093 |  |  | 1,009 |  |  |
Protection Solutions (1) |  |  |  |  | 825 |  |  | 767 |  |  |
Wealth Management (3) |  |  |  |  | 423 |  |  | 362 |  |  |
Legacy (1) |  |  |  |  | 210 |  |  | 206 |  |  |
Corporate and Other (1) |  |  |  |  | 246 |  |  | 281 |  |  |
Eliminations |  |  |  |  | (216) |  |  | (180) |  |  |
Adjustments related to: |  |  |  |  |  |  |  |  |
Variable annuity product features |  |  |  |  | (319) |  |  | (861) |  |  |
Investment gains (losses), net |  |  |  |  | (39) |  |  | (87) |  |  |
Other adjustments to segment revenues |  |  |  |  | (1,051) |  |  | 35 |  |  |
Total revenues |  |  |  |  | $ | 2,230 |  |  | $ | 2,357 |  |  |
______________ (1)Includes investment expenses charged by AB of $36 million and $38 million for the three months ended March 31, 2024 and 2023, respectively, for services provided to the Company. (2)Inter-segment investment management and other fees of $42 million and $43 million for the three months ended March 31, 2024 and 2023, respectively, are included in segment revenues of the Investment Management and Research segment. (3)Inter-segment distribution fees of $200 million and $175 million for the three months ended March 31, 2024 and 2023, respectively, are included in segment revenues of the Wealth Management segment. Total assets by segment were as follows:
| March 31, 2024 |  | December 31, 2023
| (in millions)
Total assets by segment: |  |  |
Individual Retirement | $ | 94,514 |  |  | $ | 90,805 |
Group Retirement | 49,351 |  |  | 47,260 |
Investment Management and Research | 11,276 |  |  | 11,088 |
Protection Solutions | 40,102 |  |  | 38,933 |
Wealth Management | 199 |  |  | 144 |
Legacy | 49,711 |  |  | 49,487 |
Corporate and Other | 40,424 |  |  | 39,097 |
Total assets | $ | 285,577 |  |  | $ | 276,814 |

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