Good morning, everyone. I'm Ryan Krueger from KBW. Pleased to be joined by Robin Raju, who is the CFO of Equitable. Thanks for joining me, Robin. Thank you, Ryan. Thanks for having me. I wanted to kick it off with discussing New York's Regulation 213, since that's been such a hot topic lately for you. As a starting point, can you just discuss how Regulation 213 differs from the NAIC variable annuity rules and give some perspective on why it's causing non-economic reserves for Equitable? Sure. Thanks. First, I'd say, as a reminder, Equitable manages its business on an economic basis, which really just means we manage on fair value. What it could trade for in the market, that's what we hold liabilities for, that's what we hedge. We think that's an appropriate way to manage an insurance company. I think it was back in 2015, the NAIC started work on a new variable annuity reform to bring more transparency to investors on what the appropriate reserving framework should be for variable annuities. They hired Oliver Wyman as a consultant, ran many studies for many years. We supported it. We were early adopters because it brought a level of transparency and reserving as much as it could. Wasn't perfect. They have this arbitrary 3.5% reversion to the mean on interest rates, but they at least charged companies who took outsized risk on a statutory basis. New York, when they saw VM-21 going to be adopted, they wanted to take their own approach. They didn't like some of the items in VM-21. Again, as I said, it's not perfect. We just think it's better than what was there before. In the rush to create a framework that would apply to New York companies, there were some unintended consequences. For us specifically, and everybody's book is different, but for our business, we have a fixed-rate GMXB business. That's business sold before 2007, higher guarantees related to it. Then we have a post-financial crisis business, which has more appropriately priced guarantees, I would say, at that time. The way the regulation works, it's actually less punitive on reserves for pre-2007 fixed-rate GMXB business and more punitive on post-crisis business or even regular premium business that doesn't have guarantees associated with it. For us, when we put it together, it has an unintended consequence, which over redundant reserves over time that we wouldn't be required to hold in any other country for that matter because it's uneconomic in the way it's designed. We're fortunate though where we are. We have a strong cash position at the holding company with $2.5 billion and a strong RBC ratio. The measures and the actions that we highlighted give us confidence that we can still manage the business on an economic framework, and we'll take actions necessary to address the redundant reserves. Thanks. I have a couple more on this. Last month on your earnings call, you announced that you have a five-year phase-in agreement with New York on this issue. I guess first, just if nothing else happened, would you expect the $2 billion of redundant reserves to be incurred relatively evenly over that five-year period, or is there anything nuanced about the timing of it? Yeah. No, I would say expect it to come through pretty evenly over the five-year period. There is some market impacts related to it, I guess as market moves dramatically one way or another, that could impact the timing of it across the board. I'd expect it to come through pretty evenly over time. We worked with the department, we're fortunate on two aspects. One, they approved our landmark variable annuity deal, which de-risked the company earlier this year. In almost less than 20 days, they gave us this permitted practice, which enables us to address the redundant reserves over this five-year period of time and gives us confidence in our ability to continue to return capital to shareholders. They gave you the permitted practice that phases it in, do you still have optimism that the New York DFS would actually consider revising this regulation in the future? Yeah. Our preference is always to find a good economic solution. We'll continue to advocate for economic reserving and requirements. An amendment to the regulation is not needed given we have the permitted practice and we have actions that we can take to address it across the board. New York's indicated their preference was to give us the permitted practice, and that's what they did. Given that, we have an avenue to take actions to address the unintended consequences of Regulation 213. Got it. Can you discuss a little bit more about the initial actions that you've taken to mitigate the impacts? Let's start there first, and then follow up. Sure. I think before on actions, what gives us comfort, as I mentioned earlier, is the $2.5 billion of cash at the holdco and then the 450% RBC ratio. That gives us capital in order to continue to pay out to shareholders here over the short term. We're very fortunate to have that capital buffer and the strength of our balance sheet overall. From an action standpoint, there are a few things we want to do. One, we want to increase the unregulated cash flows that we have coming up to the holding company. Currently, it's about 35% of the $1.5 billion that comes up every year that is unregulated. The actions that we're taking are going to increase that to 50%. We started doing some of those actions. We're about halfway there. By year-end, we expect to be at 50%. The second thing that we're going to evaluate is reinsurance transactions. That's internal and external reinsurance transactions. We have a menu of options that we can select, but we're in no rush to do anything, and anything we're going to do has to result on good economic value for our shareholders, as we're not going to destroy economic value to solve an accounting issue overall. Third, additionally, going forward, we're going to sell most of our new business outside of N.Y. By the end of 2022, about 90% of our new business will be sold outside N.Y. Those combined actions give us comfort to continue to return capital to shareholders and continue to grow our business as we see good value coming through across all of our business lines. I know you have the cushion at the holding company and the RBC cushion, but I guess beyond that, do you feel like you can take actions to fully offset the $2 billion redundant reserves over the five-year period? Absolutely. I think the menu we have, as I mentioned, we have a wide menu of actions we could take, so it's about which choice we want to select that drives the most economic value, and that enables us to offset the redundant reserves. One last one on this from the audience is just on potential reinsurance transactions. Are there any specific business lines that would be focused on? No, we look at it across all of our business lines to see where we can drive the most economic value for shareholders at the end of the day. It's not particularly focused on one or the other. It's where can we drive the most value for shareholders. Got it. Okay. I think that I've exhausted my questions on Regulation 213. I'll move on. In terms of capital returns, you have the 50%-60% capital return target. You also have the $2 billion of excess holding company cash. Can you help us think about what are potential uses of the current excess capital that's above and beyond your normal free cash flow generation? Sure. Number one, the current excess capital is there to support our long-term payout ratio. The way we have dividends come out, sometimes we're able to take two dividends in any given year because of the formula, like in 2020. In 2021, we didn't take out dividends because of the formula. We always operate with a capital buffer at the holdco, and by design, we want all capital to be at the holdco, in order to provide us buffer as it relates to the dividend formulas in underlying insurance company. Now, fortunately, we have unregulated cash flow s for AB. That provides us ongoing confidence. Having a buffer enables us to maintain the payout ratio without having to get down to our minimum $500 million. Outside of capital return to 50%-60%, we look at M&A as a lever to return capital to shareholders. It has to make sense. We have some good small businesses that we see opportunities in to get to scale. The price is expensive right now in the market, and it would have to be measured against additional share buybacks for shareholders. Right now, we're looking at the market from an M&A standpoint, and if we see something that makes sense for shareholders, we'll do that as a way to return capital as well. Can you expand on that a little? I think, at least in the past when you've talked about potential M&A, wealth management and employee benefits have been the main things that you've cited. Can you, I guess maybe give us a little bit of perspective on how those businesses are performing organically at this point, and then why you're interested in M&A there specifically? I would say there are 3 areas that we think of M&A. One is alternatives. We look at AllianceBernstein, and we look at their portfolio, and we think alternatives is a way that we can expand the portfolio. The alternative business at AB has done very well. We originally seeded it with about $4 billion of seed capital a few years ago, and they've grown that with third-party money to be over $20 billion of AUM right now in alternatives. Us working together with AB has created a higher multiple business, and that goes along with the additional $10 billion of committed capital that we have assigned to AllianceBernstein. The second area is wealth management. It's a smaller business compared to our other segments. It's in corporate and other today, but there's $75 billion of AUA. AUA is up 41% year-over-year, obviously driven by equity markets, but also positive net flows. If we can get that business to $100 billion or $150 billion of AUA, we'd probably break that out to the market, so it'd be another source of value for investors. If we can bolt something onto that to make it bigger and increase the capitalized cash flows for our investors, we would certainly do so. The 3rd area is employee benefits. You've heard us speak about a lot. We continue to see record strong growth from that business. Our enrollees for that are about 500,000 now. You want to be close to 900,000 to 1 million enrollees to be at scale. We've grown that well, but it takes a long time to get to scale in that business. Again, a bolt-on to that would accelerate our growth trajectory in that line as well. I look at all 3 of those, and those are 3 areas that we'd want to look at from an M&A standpoint to supplement the good organic growth that we're getting. There always tends to be a fair amount of these small wealth management deals in the market. There have been a few smaller employee benefits deals too. Has the main impediment so far just been price, or as you were working through Venerable transaction, were you not as focused on it before? Yeah. We look at everything in the market, there's no deal that gets announced that we haven't looked at in these areas. I think the main impediment is price. Everything we see is going 20 to 30 times, and it really doesn't make sense for our shareholders when you look at that versus share buybacks, to pay 20 to 30 times for something. We're going to continue to focus on it, but it has to make sense for our shareholders for us to do something. Got it. There's a couple audience related follow-ups here. One was just on how you think about your wealth management business and AllianceBernstein's private client business, and if it could ever make sense to combine them into a single business. Sure. I think the two businesses serve different clients, and I think that's the main thing to recognize. AllianceBernstein is on the high net worth end, where our wealth management business is focused on the mass affluent side. The needs, the technology would be somewhat different across the board. We like both businesses. They both provide good value for the firm. Just like anything with asset management and wealth management or insurance, putting it together, we'd have to be convinced it drives better value for shareholders at the end. We just don't want to put it together to put it together unless there's synergies. Right now, given the two different client needs that they address, we don't necessarily see the synergies enough to put the two together. Got it. The recent decision to commit $10 billion of general account assets to the illiquid platform at AB. Can you talk a little bit about what led to that decision? You've also talked about investment income uplift from doing this as well. I guess what led to the decision, and also how are you thinking about the potential trade-off of more investment income, but potentially higher credit risk? Sure. Our first leg of when we came out in IPO, we announced we were going to rebalance our general account, that was moving from treasuries to public corporates. The program was designed to deliver $160 million of earnings. We ended up delivering $240 million in annual lift. That was just the first leg of the program. It was really just to better align with U.S. peers coming out of Solvency II. We've now entered this second phase, we're really looking to capture the illiquidity premium that alternatives private credit capabilities give us. As I mentioned earlier, we seeded AllianceBernstein's alternative business a few years back, they've successfully grown that. They've been able to recruit teams with the seed capital that we provide. There's a good synergy between the two. With this additional $10 billion that we see as the next phase of our general account in illiquidity premium, if AllianceBernstein can raise 4 to 5x of third-party money on that's significant value that we can deliver to our shareholders. It's one of the best synergies that we have between the firms is us seeding AllianceBernstein money, them recruiting teams and expertise, and raising third-party money. It's good value for our shareholders over the long term. We're really focused, though, on higher asset quality when we think about structured and private credit. Expect about half of that to be done on the private credit side, half get to structural alternatives, but mostly on the higher asset quality side, where we like the risk reward. Got it. I think you had mentioned this area also as an area of bolt-on M&A potential. Did I interpret that correctly? Is that separate from the initiative to just allocate more money to the platform? It's separate, but it goes together. If we can find a platform that provides other alternative capabilities that AllianceBernstein doesn't have, we can allocate more general account assets to it to help them as well. When we think about alternatives, again, we're trying to build a higher multiple business for AllianceBernstein, and if we can do that and support it with our general account, it's a great synergy for shareholders. Got it. Just, I guess, a related question on AllianceBernstein that you get a lot. You own about 65% of it, but that was also just kind of a legacy ownership structure that you inherited from your predecessor company. Are you pretty content with that level of ownership at this point in time, or would you consider changes in the future? Sure. As you said, the 65% is a function of history. No one mathematically designed that to be the best ownership that we have. We're really happy with the stake that we have in AllianceBernstein, as it is a significant investment, but they're also a great partner together with the insurance company. From a holding company perspective, to have an insurance company and an asset manager, we can really optimize the value end to end of the services we provide overall. We've historically always looked at do you hold 51%, 100%? I'm saying now we're more focused on how do we drive synergies, how do we increase the value and take the best of both of these operating companies and deliver value for shareholders. That's our focus now is how do we continue to drive long-term value between the insurance company and AllianceBernstein so that the sum of the parts is greater for shareholders. Got it. You had announced a new expense initiative quarters call. Can you walk through a little bit in terms of the magnitude and also what type of actions you're planning to take to achieve it? Sure. Similar to our general account, at IPO, when we announced the $80 million of fixed expenses, we were really focused on headcount efficiencies, optimization. This next $80 million builds on the COVID pandemic, on the learnings that we had. The first leg of it is optimizing some of the travel saves, some of the work from home saves that we've received from the pandemic. Making some of that permanent. The second leg of it is benefiting from the technology that we built as part of the separation from AXA. We've put all of our information in the cloud. We've digitalized a lot of the operations. The second point of that is benefiting from the technology investments that we've made over the past. The third leg, which will come out in the later part, is our leases. We're going to significantly reduce some of our leases, especially in the New York area, and that will provide a better footprint and a better optimization of expenses by paying less to landlords and allowing people to have more flexible working arrangements. The three together give us confidence in our ability to continue to add incremental value for shareholders. Got it. Shifting a little bit to new business. We've continued to just see more and more companies enter the RILA or the buffered annuity space. Can you talk about how do you differentiate yourself from competitors at this point in that market? Also, have you seen any pressure on new business returns from all these new competitors, or have you been able to maintain pretty similar returns? Sure. First, we're proud to have innovated that market. We were the first to come to market with a buffered annuity. That gives us a history in how to distribute that across different distribution areas. Us being able to market protected equity strategies for clients really resonates today in a world where people have seen equity markets continue to rise. They seem like they're always going up. If you're someone that's close to retirement, you may want some protection while keeping equity exposure, and that's really serve a need for consumers. That's number one, and that's most important. Everybody's in the space now across the board, and it's certainly increased competition, but it's increased the size of the pie in many ways. As you've seen, we've continued to grow sales. We've hit another record quarter in the second quarter with $1.9 billion in Structured Capital Strategies sale, our flagship product in the RILA space. We continue to innovate with features on there, so giving different payoffs for advisors and clients in order to stay ahead of the market. In reality, Ryan, our differentiator is our distribution. It's where we play, and that's always been a differentiator for Equitable. It really enables us to enhance value for shareholders. It comes in several areas. One is our affiliated distribution with Equitable Advisors. We have 4,300 affiliated advisors who only sell Structured Capital Strategies. That's an advantage for us that enables us to control margin and value. No one else is in that space. Second is other insurance carriers. There are other insurance carriers or P&C firms that we distribute in with a small set of competitors. Again, we're able to take the learnings we have from our Equitable Advisors, go in and train their investment professionals on how to sell buffered annuities, and it really helps us gain market share, and that's been a big piece of our growth. Where we don't play, we don't play in the wirehouses. We're number 12 in the wirehouses, but we're number two in overall variable annuity sales led by our buffered annuity product. The difference and why we've been able to stay ahead is solely due to our distribution. There was a follow-up from the audience, which was that can you talk a little bit about just how much less risky the SCS product is than a traditional variable annuity product with income guarantees? Sure. Very different. It is always tough to get across that all VAs are not the same. We have said that for a long time. SCS leverages our Structured Capital Strategies product, leverages the variable annuity chassis, which enables you to have the tax advantage that a variable annuity provides. It does not have any riders associated with it. No living benefit riders that traditional GMXB oriented variable annuities have. There is no complexity about riders. The product is perfectly matched and priced in the market, and we get to reset pricing every two weeks based on current market rates. It is perfectly matched to use in options at point of sale. The only risk in the product is traditional credit risk, because it ends up actually looking like a spread product that is perfectly AUM matched at the end of the day. It does not have, as I mentioned, any of the complex ALM options that a traditional variable annuity has. It is simple from a balance sheet perspective, but more importantly, it is simple to clients and it resonates well with them. You recently have become more active in funding agreements. Can you give any sense of how meaningful that business could be for the company over time? Sure. With spreads where they are for us and I think you see a lot of peers in this too, funding agreements are probably the cheapest. We are really attracted by the FABN market. We have launched it. We are now up to over $5 billion in the program. We have approval to go up to $10 billion. It really just ends up being a spread-oriented where we can borrow at a lower rate and invest at a higher rate to generate a spread for shareholders. It is a good market right now, it is a cheap liability. It is going to enable us to enhance return for shareholders. That is part of what drives the additional $180 million of incremental income that we have done. Further to that, we just did our first ESG related FABN note with a $500 million sustainable finance issuance. It helps support our ESG efforts as well. It's a core element of our business going forward and expect us to be active in the market. Thanks. In your group retirement business, I guess a nuance is when people think about retirement businesses, there's always been lots of 401 fee pressure. You're primarily in the 403 business, which seems like it's just had a lot less fee pressure. Can you, I guess, talk a little bit about that dynamic and why you think that is? Sure. I think it's easy to think that the two markets are the same, but they're very different. I think everybody is probably familiar with the 401 market, institutional sale. You deal with a plan provider, and obviously they're bidding you out against three other advisors basically, and you have to prove your value to win in that market. 403 is more of an individual sale. We have 8,700 slots with school districts, but that doesn't give us the business. We have 1,000 dedicated advisors that go into those slots, and they have to sit down, work with teachers, explain to them the current pension plans and the benefits that they have in their local municipality, and why supplemental retirement income is important. The value added there is really on advice, and that's the core differentiation between 403 and 401, where we play in the K to 12 market. We're proud to be in that space servicing and helping teachers. I know I have young kids and what teachers had to deal with over the last year, I'm really proud that we're a leader in that market in helping teachers, help them save for retirement. In terms of GAAP LDTI, the changes that are coming in 2023, can you talk a little bit about how you view that and when you might be in position to disclose the impacts to the market? Yeah, Ryan, I'm very excited. You won't hear too much excitement from people when talking about a big accounting change, but I'm really excited about LDTI and what it's going to do because it's going to address the uneconomic accounting mismatch of assets and liabilities and help GAAP be more transparent for investors. Right now, GAAP is not fair value based, and as a result, it's difficult for investors to compare companies on their liabilities as they're not mark-to-market. Are they hedging it appropriately? It's difficult for investors. With our economic hedging, fair value accounting and GAAP, it's going to work very well. It's going to reduce volatility between our operating earnings and net income. As our hedges, you'll see our hedges match the liabilities because they're fair valued. We're excited about it. Our teams are currently doing the work to assess the impacts, we plan to disclose everything at our investor day next quarter. I think this is going to be a game changer for the industry, and it's really going to help investors understand the different risks that companies are taking on a GAAP standpoint going forward. I think the one, I guess maybe perceived negative that it could have on you would just be that your likely pro forma leverage ratio will go up on a GAAP basis. Where are you? Have you had discussions with rating agencies about this, how are you thinking about how that could impact you? Sure. I am not too concerned on the leverage ratio, to be honest. The reasons why is, one, discussions in the past on leverage ratio, rating agencies have always suggested that an increase of a fair value liability wouldn't drive their change in assessment in terms of leverage ratio and that impact on your rating. Second, historically, accounting changes haven't driven rating agencies to change assessments on leverage ratios overall. It is a little bit early in terms of, I guess we would have to see where the industry lands out and what happens to everybody across the industry and if they decide there are changes that need to be made. It is not really a concern of mine today. Got it. I wanted to dig in a little bit more on variable annuity hedging because Equitable has been strongly emphasizing your fair value, risk-neutral approach to hedging. That is definitely not the approach every company in the variable annuity space is taking. Maybe you could elaborate on why you believe that is the best way to manage the liabilities. Sure. As a reminder for everyone, we hedge fully the economic liabilities of the guarantees that we provide, which means we immunize our balance sheet to changes in interest rates or equities. I think that is a key distinction of us compared to the industry, and it has been proven to be effective. Honestly, that is what helped us with our landmark VA transaction with Venerable. What does that mean more specifically is we manage to the forward curve. Even if the NAIC allows people to assume some arbitrary 3.5% interest rate, we look at where rates are today, and we hedge to where they are today. Well, what I would say is we believe if an investor wants to take a bet on interest rates, we think there are better places to do it than an insurance company. Our perspective is investors want us to protect against movements in interest rates or equities which have balance sheet risk associated with them. That is why we hedge fully to rates where we assume is, and we test rates going negative, rates staying low for long, and that means that we are managing economically because what we assume in the liabilities is what we can hedge. It is fully market consistent across the board, and we think that is the appropriate way to manage complex liabilities to ensure that you can deliver sustainable returns for investors. I think the other side of that argument I've heard from some is that equity markets typically perform above risk-free rates over time, should that really be hedged based on risk-free rates? What would be your perspective on that? My perspective would be if equity markets go down and you need a capital call, that's not good risk management at the end of the day. Our view is where we offer guarantees which have equity exposures, we have to hedge those guarantees. Where we have equity exposure where there are not guarantees associated with them, we won't hedge those. Where there are guarantees that we put the balance sheet at risk, we believe it's appropriate to hedge those as I don't think investors would be happy with call if equities weren't hedged appropriately. Again, I think taking equity risk at an insurance company is a terrible bet. It's probably one of the worst places you can take an equity bet. You're better off buying call options on the street or on the exchange. It's just where the take an insurance company is not equities or interest rate, it's credit. Insurance companies can hold it at book value, and that's good value to hold it at book value. You can't do that anywhere else. That's where we strongly believe that's the risk that investors would like to see in insurance companies, not equity and interest rates. Got it. This is I guess somewhat related, the NAIC, you've mentioned the interest rate assumptions in statutory accounting and this economic scenario generator is being reviewed by the NAIC to be revised. It seems like it will likely incorporate lower interest rates. What are your thoughts on that process? How could that might that affect Equitable once it's done? We're a lead advocator of that. We've actively engaged the NAIC and Conning because we believe a more realistic distribution of interest rates is appropriate on the statutory lens. What they're assuming now and what they're working towards is lower rates for longer, different scenarios which test the balance sheet. I think it's more appropriate. Just set an arbitrary number to assume that the 10-year is always at 3.5% just doesn't make sense at the end of the day when we know where interest rates are now. That's a huge risk in terms of balance sheet exposure that someone's taking. The current framework allows people or entices people not to hedge when rates are below 3.5%. There's a huge risk laying on insurance company balance sheets right now if they're not hedging interest rates. We think that this is a more sustainable framework with the new scenario generator coming out. Again, it'll provide transparency to investors and rating agencies on what are appropriate risk and potential capital implications on different balance sheets across the industry. In terms of Equitable, I think one question I've gotten from people is if the current economic scenario generator is effectively mandated by the NAIC and it assumes mean reversion, and then the mean reversion rate is lowered, why wouldn't that impact Equitable as well? It's because in our hedging liability, we assume the forward curve. Essentially when we model out the liability, we assume the forward curve and don't put in the NAIC assumption in our hedging formula the way we model it and what we hedge. As a result, today our curves are held appropriately for interest rates at today's environment. Changed it from 3.5% to 1.3%, well, it would have no impact because that's what Equitable assumes already and we hedge it. If it goes down from there or up from there, essentially no impact or very limited with any change that the NAIC's contemplating. Just one follow-up on that. Correct me if I'm wrong, but I believe there's a voluntary option from companies in the variable annuity space to do what you're doing, and use a fair value approach in statutory reserves. You cannot do that and assume the mean reversion. Is that correct? That's right. What we do is we take that voluntary approach and we assume the forward curve for interest rates because we believe it's more economic and that's how we think an insurance company should be managed, and that's how we think investors would like them to be managed. As a result, that's why there's limited impact for Equitable. There was a question in the audience on funding agreements and given the competitive nature of that business, there's been a lot of issuance. What type of return target do you have there and are you able to achieve it at this point? Yeah. Like compare it to new business, essentially, we try to for getting a double-digit IRR on funding agreements. There's really good demand amongst investors for funding agreements, we haven't even seen any slow up in demand despite a lot of activity out there and the returns are comparable to new business with double-digit IRRs. Just one probably, I have just time maybe for this one last question from the audience, which is on your life insurance business. Probably hasn't been talked about as much. How do you view that business at this point in time? Sure. It's our smallest segment of Protection Solutions, but we see value in the products that we offer. We're number four in the VUL market. It really aligns with savings for consumers as they look to have tax advantage savings products and VUL does that plus the protection of a death benefit. We like where we play in the market. We're selective on where we play because we play where we see value for us and the consumer. We still like the market. We've grown and you've seen that shift in our business. Our volume has grown pretty well year-over-year in the VUL space as a result of that shift. We like where we play, but we're focused on really growing the employee benefits business, which I mentioned earlier. We have 500,000 enrollees now. That's really exciting to have a greenfield that's producing good returns and growing rapidly for investors. Excellent. Well, we're pretty much out of time I think we're going to end it there. Thanks a lot, Robin, for participating and much appreciated. Thank you, Ryan.