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BUSINESS SEGMENT INFORMATION
 9 Months Ended
Sep. 30, 2024
Segment Reporting [Abstract]  
BUSINESS SEGMENT INFORMATION BUSINESS SEGMENT INFORMATION
We have six reportable segments: Individual Retirement, Group Retirement, Asset Management, 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 Asset Management segment provides diversified investment management and related solutions globally to a broad range of clients through three main client channels - Institutional, Retail and Private Wealth.
•The Protection Solutions segment includes our life insurance and group EB 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 EB 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 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;
•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.
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 and nine months ended September 30, 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 $5.7 million for Corporate and Other. The impact to operating earnings for each segment during the quarters of 2023 was not material. Total Company operating earnings were not impacted.
During the third quarter 2024, the Company moved revenues and expenses related to payout annuitizations from the Legacy segment to the Individual Retirement segment. Now all payout annuities will be reported within the Individual Retirement segment as the block is managed on an aggregate basis. Prior periods have been recast to reflect this change.
Revenues derived from any customer did not exceed 10% of revenues for the three and nine months ended September 30, 2024 and 2023.
The Company accounts for inter-segment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices.
The table below presents operating earnings (loss) by segment and Corporate and Other and a reconciliation to net income (loss) attributable to Holdings:
 Three Months Ended September 30,Nine Months Ended September 30,
 2024202320242023
(in millions)
Net income (loss) attributable to Holdings$(134)$1,064 $408 $2,000 
Adjustments related to:
Variable annuity product (1)
738 (1,380)1,136 (584)
Investment (gains) losses46 411 101 554 
Net actuarial (gains) losses related to pension and other postretirement benefit obligations13 8 44 26 
Other adjustments (2) (3) (4)
— 91 59 198 
Income tax expense (benefit) related to above adjustments (167)183 (281)(40)
Non-recurring tax items (5)
5 36 18 (936)
Non-GAAP Operating Earnings$501 $413 $1,485 $1,218 
Operating earnings (loss) by segment:
Individual Retirement$225 $220 $713 $671 
Group Retirement$141 $105 $390 $301 
Asset Management$111 $99 $318 $297 
Protection Solutions$46 $34 $154 $23 
Wealth Management$50 $40 $137 $114 
Legacy$27 $31 $93 $119 
Corporate and Other (6)
$(99)$(116)$(320)$(307)
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(1)Includes the impact of favorable assumption updates of $16 million for the three and nine months ended September 30, 2024, respectively, and $40 million for the three and nine months ended September 30, 2023, respectively.
(2)Includes certain gross legal expenses related to the COI litigation of $0 million and $106 million for the three and nine months ended September 30, 2024, respectively, and $0 million and $35 million for the three and nine months ended September 30, 2023, respectively. Includes the impact of unfavorable annual actuarial assumptions updates related to LFPB of $61 million for the three and nine months ended September 30, 2023.
(3)For the nine months ended September 30, 2024, includes $82 million of the gain on sale on AB's Bernstein Research Service attributable to Holdings.
(4)For the three and nine months ended September 30, 2024, includes $78 million contingent payment gain recognized in connection with the fair value remeasurement of the contingent payment liability associated with AB’s acquisition of CarVal in 2022.
(5)For the three and nine months ended September 30, 2024, includes non-recurring tax items reflects the effect of uncertain tax positions for a given audit period and for the three and nine months ended September 30, 2023, non-recurring tax items reflect primarily the effect of uncertain tax positions for a given audit period and an increase of the deferred tax valuation allowance of $20 million and a decrease of $970 million, respectively.
(6)Includes interest expense and financing fees of $57 million and $171 million for the three and nine months ended September 30, 2024, respectively, and $54 million and $173 million for the three and nine months ended September 30, 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 September 30,Nine Months Ended September 30,
 
2024202320242023
(in millions)
Segment revenues:
Individual Retirement (1)$944 $762 $2,678 $2,130 
Group Retirement (1)314 267 889 771 
Asset Management (2)1,086 1,034 3,230 3,043 
Protection Solutions (1)839 822 2,498 2,373 
Wealth Management (3)450 390 1,315 1,143 
Legacy (1)117 129 369 405 
Corporate and Other (1) (4)
246 257 720 800 
Eliminations(220)(199)(663)(597)
Adjustments related to:
Variable annuity product features(738)1,380 (1,136)584 
Investment gains (losses), net(46)(411)(101)(554)
Other adjustments to segment revenues84 (807)(983)(1,740)
Total revenues$3,076 $3,624 $8,816 $8,358 
______________
(1)Includes investment expenses charged by AB of $37 million and $110 million for the three and nine months ended September 30, 2024, respectively, and $35 million and $104 million for the three and nine months ended September 30, 2023, respectively, for services provided to the Company.
(2)Inter-segment investment management and other fees of $(41) million and $(125) million for the three and nine months ended September 30, 2024, respectively, and $40 million and $120 million for the three and nine months ended September 30, 2023, respectively, are included in segment revenues of the Asset Management segment.
(3)Inter-segment distribution fees of $212 million and $626 million for the three and nine months ended September 30, 2024, respectively, and $185 million and $553 million for the three and nine months ended September 30, 2023, respectively, are included in segment revenues of the Wealth Management segment.
(4)Includes interest expense charged to AB of $5 million and $22 million for the three and nine months ended September 30, 2024, respectively, and $10 million and $29 million for the three and nine months ended September 30, 2023, respectively.
Total assets by segment were as follows:
 
September 30, 2024December 31, 2023
(in millions)
Total assets by segment:
Individual Retirement$107,610 $93,500 
Group Retirement51,790 47,260 
Asset Management10,405 11,088 
Protection Solutions42,012 38,933 
Wealth Management291 144 
Legacy45,851 46,792 
Corporate and Other41,030 39,097 
Total assets$298,989 $276,814