Equitable Holdings, Inc. (EQH) Earnings Call Transcript & Summary

Good afternoon, everyone. My name is Isil Muderrisoglu and I'm the Head of Investor Relations for Equitable Holdings. It's a pleasure to welcome you all here today, both those who are able to attend in person and the many more that are with us virtually. While today marks the 5-year anniversary of our IPO in this very location, no less, it also marks the next chapter for Equitable Holdings, which we are very excited to share with you. We have a great agenda prepared for you today. Mark Pearson, our President and CEO of Equitable Holdings, will address our company overview and strategy. Then we'll go deep into our largest businesses with Retirement and Asset Management, led by Nick and Seth. And then Nick will take us through our emerging wealth management business. And finally, Robin Raju, our CFO, will provide details on financial projections and new guidance. These sessions will be followed by a Q&A session. For those of you who are joining remotely, please submit your questions to ir@equitable.com and we will direct the questions to management. And lastly, a few housekeeping items. I would like to note that some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. Our results may materially differ from those expressed in or indicated by such forward-looking statements. So I'd like to refer you to the safe harbor language at the beginning of our presentation for additional information. During the presentation, we will begin discussing certain financial measures that are not based on generally accepted accounting principles, also known as non-GAAP measures. Reconciliation of these non-GAAP measures to the most directly comparable GAAP measures and related definitions may be found on the Investor Relations portion of our website. And now before I turn it over to Mark, we'd like to share a brief video. [Presentation]

And now I'd like to welcome our CEO, Mark Pearson, to the stage.

Thank you, thank you. Good afternoon and welcome to our Investor Day. We're delighted you could be with us today. As Isil said, it was exactly 5 years ago today in 2018 that we rang the bell here to list Equitable Holdings on the New York Stock Exchange. Certainly, the proudest day in my career. Right from day one of this journey, we felt blessed to be here to take the storied institution, Equitable and bring it back to the market, back to prominence in the U.S. And as we say internally, to build the house that we want to live in. It's a house that was set on good foundations and I want to thank AXA for this. Our listing was not a spin. We were set up and established with reserves at a very high threshold of CTE98. And if there's one thing that the last 5 years has taught us is the importance of having a strong and robust balance sheet. Today, you'll hear presentations from the senior leaders across Equitable and AB and our go-forward strategy. But I want to start by thanking my colleagues for these first 5 years. They have delivered on every one of the commitments we gave in May of 2018 despite having to overcome some very significant unforeseen events. Now we are going to present strategy and of course, strategy is important but our ability to execute is critical. We believe that management should think like owners and to deliver, we must set clear objectives, clear milestones and fully align our resources. And how we do this at Equitable is our enterprise-wide program we call New Ways of Working, supported by over 45,000 hours of training, which brings agile working, design thinking and adaptive leadership into the firm. Now today, nearly 80% of the organization has been stood up with a very, very positive uplift in both engagement and in productivity. And there's a lovely quote from Winston Churchill on this, I think it captures it well: Without execution, thinking is mere idleness. Now of course, execution requires huge amounts of energy. And energy, we know, is maximized when people have a passion for what they are doing. And today, our mission has never been more important: To help Americans secure their financial well-being so they can live long and fulfilling lives. The reason why our mission has never been so important is that it reflects what's happening in society at large. 11,000 Americans turn 65 today and 11,000 more will turn 65 tomorrow and the day after that. In just 3 short years, more Americans will reach the traditional age of retirement than ever before. And this is something that affects each and every one of us in this room. And we know that 50% of American households are at risk of not having enough to maintain their standard of living in retirement. And we see this as a tremendous opportunity to serve and for us to grow our business as we meet this fundamental need to retire with dignity. I think it's this belief in our mission that drives us to be advocates of fair value management, proper reserving and transparent accounting, as this is the only way we can build trust with our clients and provide attractive returns to our shareholders. These last 5 years have been an amazing time for us. It's been very, very energizing. And of course, much has changed in the world. And in looking forward, we are realistic enough to know that the uncertainty is most likely to continue. And while there are some risks, it is also a time of tremendous opportunity. So for this overview, I'm going to cover our unique business model before looking at opportunities in the market. I hope to demonstrate our track record of execution and how we've simplified the business since the IPO. I hope to be clear on our competitive strengths, which underpin the strategy and why we have confidence that we will continue to grow cash flows and earnings for our shareholders. Firstly, our business model. EQH subsidiaries provide advice, underwrite retirement and protection products and manage money. Some of the companies we are compared to, frankly, do not do this. Michael Porter famously said that strategy is about making choices, trade-offs. It is about deliberately choosing to be different. Equitable has chosen to invest in advice through our affiliated distribution and to seek synergies between our retirement and asset management businesses. We made these choices for 2 reasons. Firstly, we believe that this enables us to create better outcomes for clients. A great example of this was the affiliation -- the cooperation between our affiliated distribution in designing and learning how to market our buffered annuity product. Our model enabled us to be faster and more innovative. And secondly, the choices we made create better outcomes for shareholders, in that we participate in the full value chain. Our balance sheet business Equitable writes life insurance, retirement and income contracts. It manages over $200 billion of assets under management and has a brand awareness among 76% of financial professionals in the U.S., up 62% since our brand relaunched 3 years ago. We have 2 capital-light businesses. We own 61% of AllianceBernstein, a leading active manager with a global distribution footprint in 21 countries. AB currently manages $676 billion of assets under management and has recently been recognized as the sixth most trusted financial company by Investor's Business Daily in the U.S. In Wealth Management, our newest reporting segment, we have approximately 4,100 advisers through which we distribute retirement and protection products. 85% of all annuities and nearly 100% of life business is placed with Equitable. And we also benefit from $76 billion of assets under administration. Through seed investments totaling $12 billion up to date, Equitable has used its general account to help the build-out of faster growing, higher multiple alternative strategies in AllianceBernstein. And in return, AB has been a pioneer with its lifetime income strategies, sourcing new annuity flows for Equitable. The point I want to leave you with is, these are unique and integrated advice, retirement and asset management businesses. Five years ago at our IPO roadshow, we defined success as growing operating earnings per share, returning capital to shareholders and maintaining a strong balance sheet. At the end of 2022, we have delivered on all of these objectives. Non-GAAP operating earnings per share grew at a CAGR of 11%, helped by more than $500 million of annual earnings uplift from general account investment optimization and productivity saves. Despite a period of quite extreme volatility, our operating businesses have performed exceptionally well, demonstrating the strength of our client offer and the power of our distribution. In Retirement, gross premiums have totaled $80 billion over that period. And we -- today, we are the #1 provider in the VA, RILA and K-12 educator supplementary retirement markets. At AB, active net inflows over the past 5 years have been $67 billion. The strong demand has led to AB posting a 2.5% average annual organic growth against active manager peers of negative 2.5%. Net flows in our new Wealth Management segment amounted to $22 billion, representing an 8% annual organic growth rate. All this has culminated in us being able to return $6.5 billion in capital since the IPO. And our risk management discipline has ensured that we remained above 400% RBC through multiple and very different market environments. Included in this, structural management actions such as the Venerable reinsurance transaction, led us to returning an additional $500 million of capital above our stated payout target ratio. The past 5 years have seen us move decidedly away from capital-intensive products. In addition to a 30% organic growth in cash flows to the end of 2022, we have improved the quality of our earnings. A combination of economically sound products with a narrow range of outcomes, fair value reserving, first dollar hedging and reinsurance transactions have contributed to CTE98, that is the assets required to meet the average of the worst 2% of economic scenarios, reducing by over 70% from $14 billion at the IPO to $4 billion today. I don't like using the word but there really has been a transformation inside Equitable, in how we work and certainly in our risk profile. The capital-intensive legacy VA portfolio has now been significantly reduced. Total legacy account value is only $22 billion today and is naturally running off at $2 billion to $3 billion per annum and this represents only 16% of total account values. Legacy VA is fully hedged, fully reserved and is not significant. It should not be the basis for valuing EQH. We now show the segment separately from our individual retirement business to help investors distinguish these 2 very different blocks. In addition, we have restructured our business such that the percentage of cash flows coming from noninsurance regulated entities has risen from 17% at IPO to now over 50% of total cash flows. Talking of cash flows, it's clear that investors in EQH value cash generation and capital returns. As I mentioned earlier, the cumulative capital return through dividends and share repurchases is $6.5 billion in the first 5 years since the IPO, which is over 55% of the market cap at the time of the IPO. And this means the cash returns to the end of 2022 are 13% higher than peers. Over this time, free cash flow per share has grown 120% since the IPO, reflecting the benefit of organic growth and the reduction in our share register from buybacks. This has translated into strong TSR performance, with EQH up 59% to the end of 2022 against life peers of 38% and a 41% increase in the S&P 500. Of course, since the regional banking crisis broke on March 8, it's been a difficult time for our sector and there appears to be a little buy interest for any company that is perceived to be balance sheet intensive like banks and insurance companies. For year-to-date, we've seen the insurance index and KBW Banking Index fall by 13% and 26%, respectively. And EQH's share prices declined 17% over this period. But as we showed at quarter 1, this performance doesn't reflect the fundamentals inside our business. At our quarterly earnings last week, we presented our conservative positioning on credit quality, CRE exposure, liability and capital resilience. Our RBC ratio is healthy. And above this, we have $1.8 billion of surplus cash at the holdco. We continue to see strong net flows in Retirement and Asset Management this year and our surrenders remain within historic levels. In such uncertain times, balance sheet resilience and consistency are critical to future confidence. For example, over these first 5 years -- and who would have believed this, we've seen the U.S. 10-year treasury range from 50 basis points to 420 basis points. We particularly, as having so much of our capital in an insurance company, we have to prepare for unpredictable outcomes. We have to do this as we promise to serve clients through thick and thin, through good times and bad. We support the stability of our RBC ratio and cash generation capability through our fair value risk policy, which guides our ALM strategy, our hedging program, conservative credit portfolio and realistic assumption setting. This philosophy of ensuring that the balance sheet can withstand turbulence and being consistent in our return of capital to shareholders will continue. Balance sheet resilience is behind our liquidity position and conservative investment portfolio. And in light of the current market environment, our conservative positioning is even more important with 96% of our fixed maturities investment grade. We have a mortgage loan portfolio, which has remained resilient through the 2008 global financial crisis and the COVID pandemic, with very limited exposure towards highly volatile or equity-like alternative asset classes. Now at Equitable, we know our primary responsibility is to be good stewards of the capital given to us by our shareholders. We put this capital to work and we believe that the best returns come from our people being engaged, bringing their best selves to work and where society is healthy and thriving. ESG, if you like, is a natural orientation for us as we write liabilities and put money to work for decades. So, we are also very proud that we've been recognized as a Great Place to Work for 7 years in a row now, awarded 100% rating by the Human Rights Campaign Corporate Equality Index and we are a founding signatory of the CEO Action for Diversity & Inclusion. So before looking forward, let me recap. We believe that the most important thing with strategy is the ability to execute. We've shown we can do this in volatile times. We have a unique business model that has translated into shareholder value and this gives us confidence as we look ahead to the next chapter. Obviously, equally important to the ability to execute is being in attractive markets. Strong societal tailwinds driven by demographics and evolving regulation are combining to provide opportunities for growth. Americans are not only living longer but have greater aspirations for retirement and also face a meaningful shortfall in their retirement funds. We expect this to be a $32 trillion addressable market by the end of the decade, with a number of Americans 65 or older growing by over 60% to 89 million in the next 30 years. On the global asset management side, global active investable assets are expected to grow by nearly 1/3 over the next 5 years to $117 trillion. And within that, the 2 fastest-growing products are forecast to be alternatives and active specialties and these are parts of the market that AB plays in and plays in well. We also faced some monumental regulatory changes. Firstly, this year marks the most significant change in the accounting standards for insurance companies in over 40 years. Insurance regulators have reformed their interest rate, stress scenario tests and are actively looking at capital charges on structured assets. And at the same time, we see perhaps, uniquely, strong bipartisan support for the SECURE Act, encouraging the introduction of annuities into 401(k) target funds. Strategically, we see these moves as net positives as the industry moves closer to fair value principles. And with more appropriate capital and reserving, this will improve trust in our industry and more closely aligned to how we manage our business. Now turning to strategy. It's most important that strategy is clear, so we have challenged ourselves to articulate it on one page. In order to deliver on our mission, our strategy is geared towards driving long-term value and utilizes our competitive edges. Our premier investment capabilities in both AB and Equitable allow us to meet client needs, attract new monies and capture greater margins. Our risk management philosophy protects policyholders and ensures consistent cash flow generation for shareholders. We have broad and diverse distribution with our 4,100 Equitable advisers, over 200 AB private wealth advisers, as well as partnerships with third-party institutions. And as we have demonstrated, we have a track record of execution through an agile and research-based workforce. Our first strategic priority is to defend and grow our core retirement and asset management businesses. These today drive over 90% of free cash flow generated. We will do this by continuing to innovate capital-light products and expanding our distribution reach. Equitable today invests approximately $500 million per annum to support new business growth in our core retirement businesses. In Asset Management, despite challenging markets in 2022, the active ETF industry continues to see AUM growth, while mutual funds are seeing net outflows. AB launched its first 2 active ETFs in 2022 and we see this as a sizable opportunity. Investment performance is obviously important for our business and we are very proud of our strong long-term track record. 75% of our fixed income portfolios and 73% of our equity portfolios have outperformed over the last 5 years. Later today, we will share initiatives to enhance productivity and further optimize our general account to improve investment returns. And as we've demonstrated with the acquisition of CarVal and Penn Investment Advisors, we will continue to look for but be very disciplined in inorganic opportunities that can accelerate our strategy. We also plan to scale adjacent businesses. These are smaller businesses where we have the opportunity to grow at a faster rate than our core. AB's private markets platform accelerated last year and is now $58 billion assets. We believe that AB's board solution set in this high-growth market, combined with a strong performance track record, can attract and scale with institutions, retail and private wealth. We are announcing today a further strengthening of the synergies between Equitable and AB, with an additional $10 billion capital commitment from the general account to help grow AB's private markets platform. In Wealth Management, we expect this business to grow at a faster rate by utilizing our affiliated distribution, holistic life planning platform and open architecture solutions. Within Equitable advisers today, we have 700 wealth planners. And we also have good operating leverage inside this business as we utilize and share the cost of the technology platform with LPL. In order to ensure long-term success, it's important that we continue to invest through the cycle and see businesses that we believe will provide significant opportunities in the future. There were 3 areas where our competitive edges play well: Firstly, AB is investing in markets that will sustain above market organic growth like China and EMEA; secondly, the global insurance market is substantial, with nearly $30 trillion in assets; and with over 40 years of experience in insurance management, AB is positioned well to grow this business; and thirdly, we are excited about the long-term prospects of the in-plan guarantee market. There is significant competition in the retirement accumulation space but no ownership yet of the post retirement income market. And of course, this line of business has been boosted by the SECURE Act, which now provides a safe haven opportunity for asset managers and insurers to provide annuities within the $7 trillion 401(k) market. AB has been a true pioneer for the last decade, preceding the SECURE Act through its lifetime income strategy. And additionally, Equitable has a partnership with BlackRock, giving us an excellent opportunity to be a leader in this exciting new market. Recognizing the meaningful role we play in society, we believe our business is best served by building trust with our people, communities and all stakeholders. And we have 2 key principles: Our force for good strategy has to drive business value and we leverage our big systems to drive positive outcomes; and we believe that strong rigor and good governance controls throughout the business build trust among all stakeholders. So that's a double click on our strategy and key initiatives. Now we're a mature industry and we've been providing protection to the American public since before the civil war. Mature, yes. But as we've just seen from the changing demographics, never more relevant than today. We help people retire with dignity. We help them plan for living their best lives. And yes, at Equitable, we may have been around over 160 years but we're also a young vibrant company, just 5 years out from the IPO. We've shown great innovation in building new solutions and we've been marketing guaranteed income and retirement products for 10 years before the SECURE Act. We've shown we can manage risk. We've shown an ability to consistently return cash to shareholders. And we've shown that we can protect the balance sheet and maintain an RBC ratio above 400% through thick and thin. We have great investment capabilities both inside Equitable and through our leading subsidiary, AllianceBernstein. We're significant today in private as well as public markets. And having affiliated distribution is a tremendous asset. It keeps us close to the customer and keeps our revenue steady. We have 2 great brands, Equitable and AB, trusted by clients and intermediaries alike. And in looking forward, these capabilities provide us with opportunities to grow existing businesses and move into adjacent and emerging markets. And I think these competencies, these hedges combined with our performance culture, where we really do focus on execution, enable me and the whole team to look forward with excitement and confidence. We want to translate our confidence in the business and provide new guidance for the next 5 years. With the fall in equity and bond values in 2022, average assets under management reduced and our free cash flow forecast for 2023 remains at $1.3 billion. Based on the forward curve and an assumption that equity markets will average return 6% growth plus 2% dividend, we expect cash generation growth of 50% to $2 billion by 2027. In line with this, we are increasing our target payout ratio to 60% to 70% and revising our EPS target upwards to 12% to 15%. Underpinning these financial goals is delivery of incremental general account income of $110 million by 2027, a further $150 million in productivity saves. And as I mentioned earlier, an additional $10 billion capital commitment to seed AB's build-out of its private markets business. Now as we'll hear from Seth in a short while, operating leverage within AB should see an improvement of 350 to 500 bps in margin. Later on today, Robin will provide further details on these financial goals later on. I'm confident with our diverse and experienced leadership team that we can deliver on this guidance. This, in combination with the investment we are making in our people is really the key to our current and future success. Looking at the leadership team, we have a very nice balance of people who have grown up inside our organization like our CFO, Robin Raju and President, Nick Lane. People like Jeff Hurd who joined to help us prepare for our listing. And people like Aaron Sarfatti, Stephanie Withers and José González joined because they were attracted to the Equitable story. And they, of course, bring valuable outside perspectives. AB's business has flourished under Seth Bernstein's leadership since he joined in 2017. Seth also has a powerful combination of leaders from diverse backgrounds, including with us today, Kate Burke, who started at AB 19 years ago and [indiscernible], who brings over 19 years of consulting experience with McKinsey. This is an outstanding team and I'm very proud to be part of it. And please take the opportunity today to talk to as many of them as you can. We, at EQH also benefit enormously from the diverse backgrounds, high-level oversight and clear governance from our Board. With that, thank you for listening to me this afternoon. This concludes the company overview. We are absolutely delighted and thrilled to be here. And now it's my pleasure to invite our President, Nick Lane, to dive deeper into our retirement business. Nick?

Well, thank you, Mark and good afternoon. My name is Nick Lane, President of Equitable. And it is great to be back here at the New York Stock Exchange on the fifth anniversary of our IPO. And for me, personally, where I started my career as a floor clerk almost 30 years ago. Now today, I'm excited to talk to you about how we intend to elevate how we serve the American public and continue to profitably grow our business. Now as a reminder, our retirement pillar covers 3 business lines: Individual Retirement, Group Retirement and Protection Solutions. And collectively, they target the broader retirement opportunity and are entrusted with $150 billion in assets while serving approximately 3 million Americans, helping them to secure long and fulfilling lives. And in this section, I'll cover the following key messages: our view of the retirement market, where we see a tremendous opportunity; the distinct edge we have in driving profitable growth, given our track record of success, innovation and our differentiated distribution network; the attractive business mix this generates, which translates to strong and predictable earnings and cash flow; and lastly, our go-forward guidance. So let's drill in. While the broader $30 trillion retirement market is viewed as mature, we have conviction that money is in motion and the market is ripe for dislocation, given the 3 primary forces. First, structural demographics. People are living longer and they have different expectations. And drilling deeper on Mark's point, a majority of the 75 million baby boomers will have hit the peak retirement age of 65 in the next 3 to 5 years. Today alone, 11,000 people are retiring daily, 4 million a year. And they're expecting to live 20 years longer, a whole new chapter. And it's no surprise that 90% of advisers say their clients are looking for better financial plans beyond the generic 60-40 allocations as they enter this next chapter. And leading academics like [ Tom Coughlin ], the Director of the MIT AgeLab, have shown that this generation, who grew up with the mantra Forever Young is going to live their next chapter another 20 years much differently than their parents. This means an increased need for more resilient portfolios that provide equity and income solutions. Next, public policy evolution. Given the growing retirement gap, policymakers across party lines realize that the retirement safety net programs created in the last century are no longer viable and need to be transformed for this century. And facts such as the expected insolvency of social security in 2034 are creating a sense of urgency. And we see this coming through in new legislation like the SECURE Act 1.0 and 2.0, which increased the incentives for Americans to save and encourage the use of insurance products to ensure more stable retirement outcomes. And finally, consumer sentiment. In this period of enhanced macro and socioeconomic volatility, clients are seeking resilient portfolios that give them peace of mind. Almost 80% of Americans feel unprepared for retirement and an equal percentage are concerned about market volatility and macro forces impacting their savings. Americans are looking for advice to help guide them and products that give them clarity of outcomes. And we're uniquely positioned to meet this increased demand. We see this demand from consumers and advisers manifesting itself in 3 ways: tax-efficient accumulation, protected equity and income solutions and wealth transfer strategies. And before talking about product economics, I think it's important to spend a moment talking about how our core value propositions translate into our specific business lines and products. And let me illustrate a couple of examples on this page. People are searching for tax-efficient location strategies. And we all know annuities and life insurance have unique tax benefits that permit valuable deferral of taxes. Investment Edge, our investment-only variable annuity, targets this needs specifically with a robust suite of investment options and all the tax advantages of an IRA without the dollar limits. People are searching for protected equity and income allocation strategies. Our RILA buffered annuity SCS provides a great solution for clients who want the upside opportunity of investing in the market without all the risk of the downside. And Retirement Cornerstone, our floating rate variable annuity, allows the clients the opportunity for increasing income as interest rates rise, protecting their purchasing power. People are looking for allocation and location strategies to transfer their wealth and leave a legacy. And our variable Universal Life solution allows clients to save with purpose, keeping more of the money they earn with tax deferred growth for retirement or tax-efficient inheritance for their loved ones. As you can see, our product suite is well positioned to capture this opportunity. Now going forward, as Mark highlighted, our organic growth strategy is focused on 2 drivers: defending and growing our core; and building new adjacent businesses for the future. Now the dark blue, the Equitable blue, represents our core markets, Individual Retirement, Group Retirement, Life, with a total addressable market of $130 billion in annual sales. And the lighter blue represents adjacent and new markets, where we've built the foundation for future growth like workplace solutions and in-plan guarantees, which I'll dive deeper into later. In total, we see an addressable market in the next 5 to 7 years of over $250 billion, with significant room for us to continue to grow profitably. Now going forward, let me tell you why we're well positioned to capture a disproportionate share of the value in these markets, given our distinct edge in 3 areas. First, our experienced team of business leaders who have built leading positions with strategic moats, driving outperformance versus peers. And this results in lower cost liabilities and an ability to generate sustainable consumer and shareholder value. In Individual Retirement, we're #1 in the RILA space. And these are registered SEC products, which means only firms that report GAAP financials can issue them and they can only be sold through security licensed advisers. Over time, we've built scale with deep relationships and distinct distribution capabilities. The barriers to entry are high, and there are only 5 main RILA competitors trying to copy us. And as a result, we significantly outpaced the industry, growing 12x faster than peers with record sales and value of new business in 2022. In Group Retirement, we're #1 in the public K-12 grade market for supplemental retirement plans. There are 14,000 public school districts in the U.S., of which I'm a proud graduate. Now we have 9,000 payroll slots. These payroll slots give us the ability to speak directly with educators and there are only 3 primary national players in this space. We have scale with our 1,100 dedicated advisers that work with educators sitting down face-to-face with teachers in the lunchroom or in their classroom, on those little chairs. And the facts show that these educators have almost 2x higher annual contribution than those who don't work with an adviser. We've grown twice as fast as the industry, gaining market share with positive net flows. And lastly, in Protection, where we're a top 5 player in the accumulation focused VUL space, which we have made our main focus. Now different from term products, VULs are used as a part of comprehensive financial planning. And we have 30-plus years of expertise in incorporating insurance into estate planning and scale through our Equitable advisers. As a result, we've outpaced the industry in this market as well, growing at 21% versus the industry at 19%. We're continuing to extend the edge in these core markets and beyond, leveraging our client-centric innovation process. Now while many people think of insurance as a product, we view insurance as an asset class, which delivers better Pareto efficient returns when integrated into a client's financial plan. And this philosophy drives our innovation process and has kept us at the leading edge of commercial success over the last decade. This page shows how we view the consumer life stages, the alignment of our businesses against those stages and our history of delivering our capabilities to meet them in creative ways. For example, as Mark touched on, we introduced the RILA, a new category in this space, targeting 55-year-olds at the preretirement life stage where we saw a white space for protected equity solutions. And we drive these synergies across other areas by using the same strategy as an investment option in our group retirement and life products. Our consumer-led process of innovation is extending our edge in our core markets, while creating new ones. Now speaking of new markets, I wanted to spend a few minutes on our institutional in-plan guarantee business, where we've laid the foundation for future growth. Today, there's $7 trillion of assets in 401(k)s, with $3 trillion in target date default options. While historically annuities were not incorporated, there is an emerging opportunity for in-plan guarantees to become a major asset class within target date funds. Seeking better outcomes, employers see the benefits of providing their employees with individual, like DB plans with steady streams of income. And following the passage of the SECURE Act, which provides a safe harbor for annuities, target date funds are moving with urgency to create income solutions. Now we recognize this need early on, and we're a first mover in the space, leveraging our expertise in asset management with AB, group retirement, ERISA planning expertise and our individual retirement income expertise. And you saw last year, we secured a $500 million asset allocation for Equitable as part of AB's overall $9 billion mandate. Now given our expertise, we were selected by BlackRock, a top 5 target date fund provider, to help design their LifePath Paycheck target date fund. And they've commented that they have over 10 clients in the queue already. Now while many companies may innovate, distribution is critical in driving commercial success. And that leads me to our third edge, our privileged and distinct distribution network, which brings access, margin and scale to our business. We're one of the few that can say they have a distinct network of both affiliated and third-party distribution. On the left-hand side, our affiliated distribution network, Equitable advisers, with over 4,100 advisers, gives us an advantage, providing stable and stickier flows and insights into consumer behaviors and advisers' utilization of features, which allows us to shape the market. Now we scale our distribution through our third-party networks. We have products on the shelf at more than 500 firms, with 14,000 active third-party producers and the opportunity to access well over 150,000 advisers. As you can see on the bottom of this page, we're selective in our distribution based on the nature of the products and where we have an edge. For example, in individual retirement where we have the biggest third-party position, we've built sustainable scale with a meaningful footprint in firms with curated product shelves, firms that focus on long-term sustainable solutions rather than one-off fire sales. Today, we're #1 in the banks where there are fewer competitors, less than 5 other VA providers on the shelf. And we're #3 in independents, including affiliated P&C, where we also see less competition. We leverage the size and scale of our over 200 wholesalers across the nation to meet them where they are. And we continue to be strategic in where we focus, looking for deep partnerships and sustainable shelf space. Now I talked about our edges to meet the growing demand with strategic moats, which produce higher-value sales. Now I want to cover how that translates to sustainable value for our shareholders. Now like most insurance companies, we make money in the following 3 ways: spread-based, where we make money by investing client funds in the general account; fee-based, like an asset manager or service contract where we make money from the fees generated on the underlying separate account assets; and underwriting based from premiums paid by clients less claims paid out. But what differentiates us is how the design of our products drives robust margins and results in a narrower range of outcomes. For example, spread-based. Our industry-leading SCS product, which represents over 2/3 of our individual retirement first year premium, is well matched and repriced every 2 weeks. Fee-based. Today, 70% of fee-based products do not have guarantees. And for those that do, we hedged the first dollar for equity and interest rate movements. And underwriting base, we focus on the VUL accumulation space, which is capital efficient and where there is less exposure to enhanced persistency risk. Overall, our retirement businesses generate attractive margins with a narrow range of outcomes. Now I shared early in the presentation how our products deliver consumer value. This page translates product value to earnings. And as you can see, based on the account value concentration by product, our retirement business earnings are primarily generated through spread and fee-based drivers. In individual retirement, our largest RILA product is almost $40 billion in assets and primarily spread based. And this is complemented by our floating rate VA with $30 billion. In Group Retirement, our 403(b) product is almost $30 billion in assets and is 75% fee based. And in Protection Solutions, we're focused on accumulation and we make money across all 3 levers. Collectively, these complementary earnings streams create consistent cash flow and sustainable earnings. Now linking it back to our go-forward guidance. Going forward, we expect our retirement pillar to generate resilient and growing cash flows, driven by in-force, as the quality of earnings from the block I covered materialize and AUM grows between 5% to 7%, driven by positive net flows and market appreciation under normal conditions. And next, the value of the new business, which we continue to put on the books, which we expect to continue to grow between 5% to 7% as well, driven by our strong sales and robust product design. Now Robin will go into more detail but simply put, value of new business is the present value of future cash flows above and beyond the economic cost of capital. And given the quality of earnings from our in-force and the growth in the value of new business, you can expect an incremental cash flow lift of $200 million in the next 5 years. So in closing, our retirement business helps Americans and finances America. And we see a large and growing demand. We have a track record of success and a distinct edge to drive profitable growth going forward. Thank you. And now I'll hand it over to Seth.

Good afternoon, everybody and thank you, Nick. It's a pleasure to be with you all today. I want to begin with a brief overview. AB is a leading active manager of a premier investment franchise across the globe. We provide globally diversified active investment management services across $676 billion in assets under management. Our distribution is split relatively evenly between institutional and retail, with local presence in all major asset management geographies across APAC, EMEA and Latin America in addition to the U.S. We have regional expertise and local coverage, key elements, in my view, that enable us to deliver complete solutions to clients. Importantly, we have a proprietary integrated private wealth channel with 230 advisers across 20 U.S. offices, managing about $113 billion of assets under management. Over the past decade, with the support of Equitable, we've successfully diversified our product suite to include a broader set of private market solutions in addition to our comprehensive and competitive public equity, fixed income and multi-asset offerings. AB also provides independent research, trading and brokerage-related services to institutional clients through Bernstein Research Services, which we plan to place into a joint venture with Societe Generale subject to regulatory consultation and approvals. Our key messages to you today are as follows: The global active management industry presents, in my opinion, a strong growth opportunity. Despite the growth in passive investing, global active investable assets are expected to grow by nearly 30% over the next 5 years. AllianceBernstein has a globally diversified business model positioned in the right growth markets and segments. We have outperformed, delivering organic growth above the peer group average and expanding margins over the cycle. Our growth strategy leverages our strengths while growing into areas of higher client demand and we expect double-digit growth in private markets AUM coupled with meaningful margin expansion. The global active management industry is positioned for healthy growth over the next 5 years, as the need for active investing, driven by unique -- our unique ability to deliver an enduring idiosyncratic return stream will be -- continue to be in demand across asset classes. Key drivers of expected growth are private alternatives, regional growth in APAC and strong client growth in retail and private wealth segments here in the United States. As we'll show, all 3 of these are critical areas to our business and we're focused on extending an already very competitive position. Let's touch on how our platform generates its competitive advantage. As shown on the top left, our global diversification across asset classes and channels has resulted in strong active organic growth, which has outpaced our public peers on average over the past 3 years -- 5 years. Active equity and alternatives and multi-asset have been key drivers of that growth, those we showed in the first quarter, our fixed income business is taking the baton as investors are keen to realize the benefits of a higher interest rate environment. Our strong long-term investment track record, shown on the top right, are generated by an outstanding group of experienced and generally very long-tenured investors. Long-term performance is sound, with greater than 70% of both our equity and fixed income assets outperforming over 5 years. Moving to the bottom left, we're well positioned to participate in the growth in private wealth channel through our integrated private wealth business, which manages $113 billion of assets, generating fully 1/3 of our base fees. These are sticky assets of client tenure averaging 12 years, with attractive fees ranging in the mid-80s basis points. And we've competitively [indiscernible] position in the fast-growing APAC market, having built local businesses with strong market positions over the past several decades. We have the very strong brand, which punches well above its weight in Asia. These attributes have led to strong organic growth and improving financial performance over the past 5 years. We've outperformed our publicly traded peers by 500 basis points of organic growth annualized. Our mix has shifted toward higher-value assets with both active equities and private alternatives driving this growth. And our margins have improved significantly over the course of the cycle as measured on a rolling 3-year basis. Now I'd like to focus on our growth strategy. AllianceBernstein's long-term strategic goals are to establish overall market leadership by outgrowing the traditional active management industry organically and delivering accretive incremental margins through market cycles. We're investing in higher-growth market opportunities across products, vehicles and geography that will sustain our above-market organic growth. In Private Credit, we believe the secular trend of borrowers seeking alternatives to traditional bank and bond markets has a long way to run and our risk return mix is very appealing for our clients. Through last year's acquisition of CarVal, supported by Equitable, we significantly diversified our offering to include opportunistic and distressed debt, renewable energy infrastructure, specialty finance and transportation investing. We're encouraged by the growing client interest in AB's CarVal offerings and are actively planning to expand these across new vehicles and channels. Now let's double-click into the insurance opportunity. The global insurance market is substantial at nearly $30 trillion in general account or GA assets. Of this, approximately $4 trillion of GA assets are outsourced to third-party, nonaffiliated managers growing at healthy rates. Over 40 years of experience in insurance management with significant client assets of both Equitable Holdings, as well as our experience managing AXA assets, positions us, I think, to grow well in this sector. We have over 60 dedicated insurance experts globally who contribute to significant assets we manage in this space. Capabilities span across public and private markets and include a dedicated insurance portfolio management team. We offer a service-oriented engagement with solutions and analytics, client servicing and operations and reporting. Our 5-year aspiration is to become a top 10 provider of asset management and insurance. We'll continue to evaluate inorganic opportunities in the insurance space to drive additional growth. In active ETFs, we're introducing an innovative and differentiated global ETF offering as we've done successfully in different parts of the market, like retail separately managed accounts, income and sustainable investing. Depending on the strategy, the active ETF structure may offer our shareholders additional trading flexibility, increased transparency and enhanced tax efficiency. While it's early days, we're very pleased by the strong start we've enjoyed. Following the launch of our first 2 active fixed income ETFs last year, in March we launched 3 active equity ETFs: U.S. low volatility equity, U.S. high dividend and disruptors. These provide clients with diversity, innovation and efficiency amidst continued market volatility. In U.S. retail, we see the opportunity to extend in the advantaged position in SMAs across both municipals and equities. In municipals, we aspire to become a top 5 provider. And municipals are a key area of growth for our U.S. retail channel, where we've delivered outsized growth and taken share. Notably, we grew the business last year, 2022, a down market year with difficult performance and flows across the industry. We've seen strong performance and good results from the unique flexibility and technology that we've created through investing in the build-out of our SMA platform. We're confident we can continue to grow market share, particularly with SMAs where we're currently the sixth ranked provider with a market share of 5.1% and with a plan to get to top 3. Our focus is on evolving from a product to a solutions platform where we're seeing strong traction with retail wirehouses. Switching to geographic opportunities. As China continues to open their asset management market, it presents a unique opportunity for a small number of foreign firms to participate in a large and growing market. Industry analysts project annualized growth of 10% to 15% over the next few years for this market. AB began the process to build a full-fledged asset management company in China in 2019. We knew this would be a long-term investment. We recently received approval of our fund management company application and are taking the necessary steps in order to be awarded a license to launch our first onshore fund by year-end. We're executing our plan to meaningfully grow our higher multiple private markets business over the next 5 years. Our investment in private markets accelerated last year with the midyear acquisition of CarVal, resulting in a $56 billion diversified platform. AB's broad solution set in this high-growth market, combined with strong performance track records, can attract and scale with institutions, retail and private wealth. With Equitable's partnership, we're planning to achieve double-digit compound annual growth, leading to a near doubling of assets under management over the next 5 years and a private markets business of $90 billion to $100 billion in assets under management. This would double our mix to 20% or more of revenues from private alternatives. This represents a meaningful mix shift toward a higher value and higher multiple fee base, which will support our margin growth over the long term. Importantly, Equitable and its predecessor, AXA, have been a key strategic enabler to our private markets growth with an initial $5 billion commitment that we were able to grow with third parties by a factor of 4. Equitable's mid-2021 $10 billion capital commitment has been more than 70% deployed across a range of private strategies, and that was ahead of schedule. We're delighted with today's announcement that Equitable commit an additional $10 billion of permanent capital across our private alternatives and private placement offerings. We're excited to grow our partnership with Equitable, contributing to strong policyholder investment returns over time. Now I'd like to share our operating guidance over the 5-year horizon to give you better context for your expectations. In my view, we're uniquely positioned among our peers of multiple drivers of operating leverage over the next few years at current market levels, specifically the de-consolidation of Bernstein Research should lead to at least 200 basis points of operating margin expansion, again, subject to regulatory approvals. Secondly, our Nashville relocation, which was accretive by $19 million in 2022, is expected to generate an additional 100 to 150 basis points of operating margin expansion in 2025, when the full savings of the $75 million to $80 million will be realized. This follows the lease expiry at our New York offices at 1345 Avenue of the Americas in late 2024. As well, our private alternatives and other investments are expected to improve operating margins over time, while at the same time, becoming larger levers of growth. In sum, we have visibility on 350 to 500 basis points of margin expansion by 2027, all things being equal. So now I want to leave you with key messages as shown. We're excited and confident to build upon our past success by delivering focused growth and margin improvement over the next 5 years. With our strong equitable partnership, I believe we'll be well positioned to do just that. Now let me turn it back to Nick. Nick?

Thank you, Seth. I'm going to close out this section by breaking down our third pillar, Wealth Management. Now you've heard how Equitable Advisor is a critical differentiator for us in our retirement business, but we also view it as a new driver of revenue going forward based on our fee-based investment assets. And as a reminder, our new Wealth Management segment is the comprehensive distribution P&L for Equitable Advisors. And there are a couple of key messages I'll highlight as we introduce this new segment: Our market positioning, our differentiated approach and operating model; our track record of success; the P&L growth drivers; and lastly, our go-forward guidance. Now first, the demand for humanistic advice is increasing. Today, Americans are faced with a daunting set of complex financial and personal choices as they plan for the next phase of their life journeys. In the last 2 years, we have faced a health pandemic, economic uncertainty, important discussions on racial reckoning, not to mention a land war in Europe and rising interest rates. And the research shows that 65% of Americans want to work with an adviser to help them navigate these challenges. It's clear that there's an increasing demand for advice, but the nature of advice demanded is also changing. Clients are more focused on a sense of purpose, and aligning their lifestyles and financial assets to secure long and fulfilling lives. Now while the demand is growing, the overall supply of financial advisers has remained the same over the last decade, and Equitable Advisors has a differentiated edge to capitalize on this opportunity. Now within the broader wealth management space, Equitable Advisors targets the $12 trillion mass-affluent market, 12 million households, representing nearly 40% of the total wealth in the country. And we believe we have a distinct value proposition to compete with peers like Ameriprise and Raymond James. We've built a top 10 independent broker-dealer in this space. Today, we have 4,100 advisers managing over $180 billion in total client assets, roughly $112 billion in retirement and $76 billion in investment advisory and brokerage assets. And we bring the following key differentiators to the space. A proven track record of recruiting and developing advisers. While peers have advisers aging out, we have the most robust adviser demographics in wealth management, with an average age 8 years younger than peers. And this ensures a strong pipeline for growth and continuity of client relationships, a distinct advice model with the planning process that meets clients where they are in their life journeys, with investment strategies that leverage both insurance and investment solutions, driving client acquisition, better retention and adviser productivity. A track record of building comprehensive wealth planners who've integrated reoccurring fee-based investment accounts into their practice models. And finally, an industry-leading operating platform with scale, both from our retirement platforms and LPL's investment broker dealer, allowing us to profitably grow. Now over the last 5 years, we have a track record of meaningful growth, both top line, net flows and mix improvement, with room to continue to grow. First, with sales. Total sales for retirement and investment offers have grown to over $20 billion in 2022, a 7% CAGR since 2017. And of the $10 billion-plus in investment sales, roughly 70% are going into fee-based accounts. Next, positive consistent growth in net investment flows, growing by 9% in the same period, given our focus on fee-based investment accounts and hitting $4.5 billion in 2022. And this has resulted in total AUA growing by 10% over the past 5 years versus peers at 6%. Now powering these organic results is our distinctive model to attract advisers and clients. Our edge is built on 3 core pillars: our people, our planning process and our platform. People. Today, we have over 4,100 advisers nationwide in 250 offices across 3 segments, 1,100 kindergarten to 12th grade retirement specialists who start their careers working with educators, teachers and then serve their families and broader communities, 2,300 generalists who mainly focus today on retirement products but are looking to expand and grow their practice models and 700 comprehensive wealth planners who leverage insurance and fee-based investment solutions. And our experienced leaders like Dave Carr, who's in the room, have a proven program and track record to help advisers develop and grow from generalists into wealth planners. And we're also attracting experienced advisers where we see additional upside. Advice planning process, a holistic life planning advice model, which amplifies both IQ and EQ, going deeper into defining a client's purpose and aspirational lifestyle to guide their financial choices to serve more of their needs. Our Columbia financial coaching program was recognized as the best training program in 2022 in the nation, beating out the likes of Google and Oracle, a testament to our commitment to providing best-in-class training and developing opportunities for our advisers. And we see upside here as it's driving enhanced results, particularly amongst women, advisers and clients. And going forward, we all know that women will earn more and inherit a larger share of wealth. Platform. Our platform benefits from a best-of-breed design with the scale of Equitable's retirement platforms, coupled with LPL's leading broker-dealer advisory platform. And this drives adviser productivity, and we participate in the broader economics and leverage their over $200 million in annual investment in technology. These pillars are giving us an edge in the market and are driving our strong organic growth. Now next, I want to pivot to how that translates to revenue. Once again, comparable to peers, our Wealth Management segment is a comprehensive distribution P&L, and we make money in 3 ways: annual distribution fees, where we generate revenue from insurance and investment sales. And as you can see on the page, retirement covers the distribution costs and investment product distribution fees have a gross margin of roughly 10%. Recurring advisory fees where we generate revenue off of the recurring fees captured from advisory assets. And as I mentioned, we did over $10 billion, and this recurring revenue continues to be a greater percentage of our total investment AUA. And cash sweeps, where we generate revenue from our cash balances with our investment platform, where we participate in economics through our unique operating model. Now going forward, we see organic growth being driven by 3 factors: adviser productivity, we've increased productivity at 10% CAGR since our IPO, but see further uplift given our planning process and platform to move into the top quartile; wealth planner advisers, as I mentioned, we have 700 holistic wealth planners, up from 450 in 2018, and this is a strategic segment that drives high productivity with a clear path to future growth. Wealth planners are the highest performing adviser segment, 3x more productive than non-wealth planners. And this group accounts for about 2/3 of our investment broker-dealer flows. We have a strong pipeline of roughly 2,300 producing generalist advisers, which gives us a runway for growth. And last, advisory mix shift. Currently, 70% of net flows are in recurring fee-based advisory accounts. And we are growing the percentage of total in-force advisory assets. Now these 3 drivers combined to create significant opportunity to build on our momentum. Now our guidance and expectations. We aim to double organic earnings by 2027 to over $200 million post stacks, with 90% to 100% cash repatriation. And there are 2 primary drivers of earnings growth: Productivity, which we see increasing by 4% to 5%; and margin expansion, which we expect to increase by 8% to 12%. So in closing, we see a growing demand and need for humanistic advice. Our wealth management business has a distinctive edge in our target market with a track record of success. And we see this as a growing part of our overall business model. We remain steadfast in helping our advisers guide their clients through these dynamic times, so they can live long and fulfilling lives. Thank you, and I'll turn it back over to Isil.

Thanks, Nick. We'll now pause here for a 15-minute break. [Break]

Thank you, and welcome back, everyone. Now I'd like to introduce Robin Raju, our CFO. Thank you.

Hi, everyone, and thank you all for coming today. Before I jump into my section, I really just wanted to share a few brief words. Five years ago today, I was so excited to help reintroduce this company. It's a 160-year-old company, and we had a chance to make it public, or build our own house, as Mark says. It gave us the opportunity to tell our story, which represents the hard work of 12,000 employees across Equitable and AllianceBernstein. I'm so passionate about what we do here about at Equitable Holdings. We have the opportunity to create value and drive long-term returns for shareholders. And at the same time, we make the difference to families across America every day. We've done both, and we'll continue to do both. You've heard this morning from our leadership team on our strategy and business initiatives. I'll focus my time in this section to explain to you how this comes through in value for our shareholders. I'll explain it across 5 key points. First is our economic balance sheet and how it's been protected through market cycles. Underpinning this is our fair value risk management approach. You should know this is ingrained in our DNA here at Equitable. Second, I'll share our team's strong track record of execution. At IPO, we went out with financial targets around investment income, expense efficiency and AB's operating margin, all of which led to earnings growth. These targets were important. We had to build credibility to the public markets. And now 5 years later, we've demonstrated the performance culture of this team. We have exceeded every target that we've gone out to market with, while at the same time, simplifying our business. Third, I'll focus on capital optimization. Our teams have demonstrated their agility and have completed numerous actions to stabilize our balance sheet and improve our business profile and grow our resilient long-term cash flows. Fourth, I'll share how our simplified and faster-growing business model suggest a higher relative value for our shareholders. And finally, this leads us to our 2027 guidance under normal market conditions. We will grow our cash flows by 50% to $2 billion per year, while also increasing our non-GAAP operating EPS growth to 12% to 15% by 2027, and our payout ratio increasing to 60% to 70%. As a leadership team across Equitable and AB, we're laser-focused on controlling the controllables. You can, and we'll continue to see that come through our results. We're operating from a position of strength, and this next chapter of Equitable Holdings will continue to drive shareholder value. So let me start with our economic balance sheet. This is what differentiates Equitable compared to our U.S. peers. As I mentioned earlier, this is in our DNA. It's how we operate and think on a day-to-day basis, and this page illustrates how it comes through our results for our shareholders. As Mark showed earlier in the presentation, we have a proven track record of managing our capital position through different market cycles. Over the last 5 years, we've seen volatile equity markets, historically low interest rates and recently rapid rate hikes due to inflation, all while navigating a global health pandemic. During this time our RBC ratio, or regulatory capital position, has never fallen below 400%. We have prudently managed our risk exposures to reduce the capital we hold as defined by CTE98. We have seen this decrease since our IPO by over $10 billion or 70%. Our economic approach has protected our balance sheet, reduced the risk in the company and enabled consistent capital return. You've probably heard the term economic management used a lot in the industry. But for us, it has a distinct meaning. Our economic model is built around key principles, and it's shown on the left-hand side of this slide. First is our ALM strategy, where we ensure asset and liability duration is tightly matched within a year at the enterprise level. Second is our market assumptions that value our liabilities. They incorporate what is actually observed in the market, meaning we used the forward curve instead of an arbitrary number. Additionally, we base our actuarial assumptions off of emerging policyholder experience. This ensures that there are no major surprises in our reserving. And lastly, we hedge the guarantees that we provide for our clients on a first dollar basis for both interest rates and equities. We believe that this economic approach is how an insurance company should be managed. And now you see this coming through as the accounting and regulations are moving closer to this approach. LDTI accounting, the NAIC scenario generator for interest rates and structured asset reforms will require the industry to adopt frameworks, which are closer to fair value. These reforms will ensure economic pricing for our products and improve transparency and trust across the industry. The effectiveness of our economic management is also visible to our financial ratings. We have an RBC ratio of 425% through year-end, which is above our 375% to 400% target, a leverage ratio of 27% in the midpoint of our 25% to 30% target. Our strength is recognized by rating agencies, where we've received strong ratings from each. Additionally, we were upgraded by Moody's last year to A1. We also maintain ample sources of liquidity, which I know you know is especially important in markets like these. We have a $1.8 billion cash position at the holding company, on top of over $4 billion of available credit resources. Lastly, almost 50% of our cash flows come from nonregulated entities. This is up from 17% at IPO, which helps support the consistency in our cash generation. Diving deeper on the asset side of Equitable's economic balance sheet, we aim to deliver strong risk-adjusted returns in our general account, supported by AllianceBernstein. We have a conservative and resilient investment portfolio with an A2 rating and 96% of fixed maturities are investment grade. You can see the portfolio has no exposure to any of the names in the recent banking crisis, and our resilient CML portfolio, which has not had any delinquencies in its existence. AB manages 70% of the general account, and this allows Equitable to benefit from AB's underwriting expertise. At the same time, AB has developed a strong capability in insurance asset management that they can now market to third parties. Now let me move our track record of execution. I truly believe this differentiates this management team sitting before you today, and how we will continue to deliver value for shareholders. Over the last 5 years, our investment teams repositioned the general account to capture higher risk-adjusted yields. At IPO, we had a large allocation of treasuries under the Solvency II regime. We had the opportunity to rebalance towards corporate bonds. This was the first phase of our general account optimization program, which resulted in a $240 million annual uplift, which was above the $160 million target we put out at IPO. In 2020, we saw another opportunity to capture illiquidity premiums through private credit and alternatives. In Phase 2, we set out to capture another $180 million in annual uplift over 3 years. We completed this program 1 year in advance of our target. Moving forward, our portfolio will support strong value of new business growth in our spread-based products like SCS and our FABN issuances. Additionally, as our general account portfolio grows with our new spread products, we will continue to allocate more general account assets towards AB's private market strategies. This will enable us to capture an additional $110 million in annual yield in Phase 3 of our general account program. We will do this while maintaining a high-quality portfolio, which will be resilient to different market cycles. The additional yield captured through our new $10 billion commitment to AllianceBernstein will ensure that AB continues to build out its faster-growing, higher multiple private markets business, a core part of AB's strategy that Seth laid out earlier. To date, there are $15 billion committed to seed AB strategies and $12 billion of it is funded, the remainder being funded this year. This has benefited both Equitable and AB. These committed assets have delivered incremental income of $42 million per year to Equitable's general account. At the same time, it has enabled AB to scale its private markets platform to the tune of $56 billion. To reiterate the strategy that Seth laid out earlier, AB has a proven track record of using Equitable's seed money to grow. AB has raised 4x the third-party assets that was initially committed to its strategy. This is a differentiator for AllianceBernstein, as they can recruit teams knowing they will have permanent capital supported by Equitable. Moving forward, we will commit the additional $10 billion to these strategies, while Equitable would capture an additional $110 million of yield that I just mentioned. The multiplier effect will enable AB to grow its platform to $90 billion to $100 billion of assets over the next 5 years, repositioning AB as a major player in the private alternative space. This again highlights the synergies between the retirement and asset management business, which translates directly into value for EQH shareholders. Now let me speak about productivity. Equitable has a long history of executing against our productivity targets. This is evidenced by the $350 million of saves we achieved even before we had our IPO. But before I dive into this slide, I should spend a moment on our philosophy around productivity. When we create expense goals, they are net of reinvestment, and there's a reason for that. We need to change the way we work, adapt the latest technologies, while at the same time, investing through cycles to create revenues for shareholders. As a management team, we want to reduce bad expenses that lead to bureaucracy and inefficiency. At the same time, we want to invest in new things like wholesalers, advisers, investment teams at AB and front-facing client technology. This enables the company to remain agile and also continue to grow our revenue. So let's dive into how we've executed against this philosophy. At IPO, we announced Phase 1 of our net productivity goals, which resulted in $75 million of savings by 2020 from enhancing customer experience and driving technology improvements like moving to the cloud. Since then, we executed on Phase 2, where we achieved $69 million of annual savings from moving to an agile workforce through new ways of working. Including in this is $90 million of savings from AB's relocation to Nashville. Our new target, Phase 3, will include an additional $150 million of net savings by 2027. This will include over $55 million of AB's real estate saves by 2025 to hit our $75 million to $80 million Nashville relocation target. Equitable will receive its share of these saves. In addition, our retirement company will realize $30 million of real estate savings by the end of 2023, and an additional $65 million of savings to continue to deliver top quartile expense efficiency within our peer group. This will bring total net savings by 2027 to $150 million and cumulative savings since IPO to nearly $300 million. Additionally, if you include the savings executed prior to the IPO by this management team, we will have delivered $650 million annually in savings. As I started, we achieved this save while investing and building new businesses like wealth management and private markets at AllianceBernstein. I hope you've seen that in this section, that our history of strong execution will continue to deliver value for shareholders. Today, with the additional commitments to AB's alternative business, investment income in the general account and productivity, you will see strong execution continue to drive shareholder value. Now let's focus on capital optimization, as this is one of the hallmarks of EQH as we continue to optimize our capital to drive future growth while improving cash flows. We have proven our ability to efficiently use our capital for growth. Last year, we completed the acquisition of CarVal Investors, a leading private credit manager that complemented AB's existing capabilities in the space. To fund this transaction, we used AB's stock as a currency. As a result, there is limited impact to cash upfront for EQH shareholders and long-term upside. We have also been embedding $500 million annually in our Equitable retirement new business at a 15% plus IRR. This has led to record levels of inflows and will result in long-term cash flows for shareholders, which I will highlight in a few slides. We also have a proven track record of access in the private markets to secure cash flows. Recently, we executed on 2 transactions to offset the redundant reserves required in New York. This is another example of the agility of our teams, with both transactions occurring within 1 year of the new rules. As a result, we secured long-term cash flows at minimal economic cost to shareholders. And previously, in 2020, we announced our de-risking transaction through our landmark legacy variable annuity risk transfer with Venerable. This validated the economic management in our reserving, with Venerable delivering to us a positive seed for this block. This transaction enabled us to unlock $1 billion of value, and have reduced the capital needed to back our retirement business by 2/3. Additionally, we found a partner in Venerable, who has expertise to manage these liabilities. This will ensure that our policies are protected through market cycles as we continue to shrink our legacy block. So now let's talk about what remains in our legacy business. Mark outlined our progress since IPO, but I will dive deeper and provide an outlook. Last week, in our first quarter earnings, we reported results for the first time in our legacy business. And as you saw, the legacy business is now only 16% of Equitable's total retirement business. Given its size, this block should in no way drive the valuation of Equitable Holdings. This segment's operating earnings have fallen from roughly $600 million to $200 million today, and we expect this to continue to shrink to about $100 million organically over the next 5 years. This means that it will be less than 5% of Equitable's total non-GAAP operating earnings by 2027. Additionally, we used to hold $14 billion of capital to back the legacy business at IPO. Today, it's only $4 billion, and in 5 years it will be $1 billion. Organically, this block will run off at $2 billion to $3 billion of outflows per year. And with our ongoing work to split New York and non-New York policies, we will have further optionality down the road to accelerate the runoff. With legacy now insignificant, it allows us to focus on growing our core retirement business, which leads me to the next page. You heard about our actions to cut bad expenses earlier. Now I'll discuss one of our best expenses that drive cash flows for shareholders, and that's our investment in new business. Our annual $500 million of new business investments provide strong returns for shareholders. For each year we invest in new business, we generate roughly $500 million of economic value of new business, with record levels last year due to the rising interest rate environment. As Nick touched on earlier, VNB represents the present value of future cash flows generated by new business sales. This value is above and beyond the economic cost of capital and translates to a 15% IRR on our investments. These strong returns are enabled by 3 competitive edges that you've heard throughout the day. First is our capital diversification between our complementary retirement business, which drives lower capital requirements. Second, we designed products to have a narrow range of outcomes with our economic pricing framework. And third, you heard it from today from Nick, is our affiliated distribution Equitable Advisors. Equitable Advisors enables us to better control mix and reduces the cost of funds for our products. These 3 differentiators and the continued value of new business that we generate allows us to grow our cash flows, which I will highlight next. Our actions to date have -- and strength of the franchises, have positioned us well to grow our cash flows from $1.3 billion in 2023 to $2 billion by 2027, or a 50% increase. These cash flows really highlight the quality of the businesses we have, especially in retirement. Our Retirement business will benefit from the general account income and expense initiatives I mentioned earlier. In addition, we recognized a profit margin from new business, while at the same time releasing the capital in our fully reserved legacy business through this period. These drivers will improve the free cash flow generation of the retirement businesses by 2027. At AllianceBernstein, we will continue to benefit from organic growth and a shift towards higher fee private markets, improving the long-term cash flows. And within our wealth management business, which is our fastest-growing business, we expect cash flows to double by 2027, benefiting from the holistic advice our advisers give to clients. Additionally, our actions to date have significantly narrowed the range of the outcomes of our cash flows. Our base case of growing from $1.3 billion to $2 billion assumes the forward curve for interest rates, 6% equity markets and a 2% dividend yield. In a severe downturn, with equity markets down 25% and interest rates down to 100 basis points, our cash flows will drop on average to $1.7 billion by 2027. Additionally, under a deep recession with a 40% equity shock and a 200 basis point decline in interest rates, our cash flows will remain resilient and an average drop to $1.4 billion, which is above today's levels. The resiliency of these cash flows is a function of our economic management, strong execution and capital optimization. This positions the holding company more like an asset manager than an insurance company, and ensures consistency of cash flows for shareholders. So again, at Equitable, you should expect the track record of our free cash flow growth and resiliency to continue, which should help you better model our relative valuation. So let's talk about valuation. Normally, I don't speak about it, as that's your role, not mine. But I will take a shot at it once every 5 years if you give me a second. Today, our relative valuation presents an excellent opportunity for both new and existing shareholders. Equitable Holdings has changed its mix into a diversified financial services holding company that generates cash flows across several capital-light businesses. If you look on a price-to-earnings basis, we are valued at 4 times despite having nearly 1/4 of our earnings coming from asset and wealth management business, while another 20% comes from group retirement. Additionally, our core retirement business generates spread and fee-based earnings, which should be valued as a capital-light business. When you look on a price to free cash flow basis, we are valued at 8x, despite having over half of the cash flows come from asset and wealth management businesses. If you compare these multiples to the market values insurance peers, on average they have a 6x multiple on earnings and 10x multiple on cash. But as we tried to demonstrate with you today, we shouldn't be compared to insurance peers, because we have an asset management business, a wealth management business and a capital-light retirement business. So if you do a sum of the parts valuation, incorporating the market values for asset and wealth, it would suggest a multiple of 8x earnings and 12x cash. Look, Equitable Holdings is a good business. We're not going to tell you how to value it. But in looking at peers, we know there's an opportunity for shareholders to benefit over time. So now I'm going to get back to my day job, and that's enough for valuation for 5 years. I'll let you take care of that going forward. I'm going to focus on what we do well, and that's driving and controlling the controllables. So we're going to focus back on executing against our strategy. As an output of what we cover today, we will continue to grow our non-GAAP operating earnings to $2.5 billion by 2027, which is over a 25% increase in the next 5 years. This is benefiting from the initiatives I laid out earlier, along with organic growth coming through our business lines. Additionally, our cash flows will grow to $2 billion over the next 5 years, or 50%. As a result of our organic growth in our more capital-efficient businesses, we are updating our payout ratio to 60% to 70% of non-GAAP operating earnings. This is a significant growth from where we were just 5 years ago when we had a payout ratio of 40% to 60%, and this is the result of us improving our business mix. As Mark mentioned earlier, we don't like to use the word transformation here at Equitable, but we truly believe the way we reduced our risk exposures while growing and continuing to deliver cash flows is a good example of it. To pull our guidance altogether, we're also updating our earnings per share growth to 12% to 15% by 2027. This is delivered through a combination of organic business growth and non-GAAP operating earnings to $2.5 billion, supported by the general account investment income, expense efficiency and growth in our underlying businesses. This will account to about 4% to 5% of EPS growth. Along with executing against our increased payout ratio, it will account for an additional 8% to 10% EPS growth. Together, this will enable us to deliver on a 12% to 15% non-GAAP operating earnings EPS growth by 2027. These are compelling targets, which we can achieve under normal market conditions. As we look in the future, our priorities remain unchanged. We will continue to rely on our fair value management to protect our economic balance sheet, and ensure we have the financial flexibility to navigate through different market cycles. We will remain disciplined in our pricing decisions to ensure we're delivering profitable growth. We will not sacrifice value for market share, and we'll ensure our products meet a 15% IRR hurdle rate. We are committed to our capital return program. And given our current valuation, we will continue to have a bias towards buybacks to drive shareholder accretion. And lastly, we'll continue to look for opportunities to optimize our capital structure. M&A will need to require significant expense or capital synergies to ensure accretion for shareholders. So in summary, we're excited about the growth prospects and this next chapter at Equitable Holdings. Our new financial guidance will deliver $2 billion of annual cash generation leading us to increase our payout ratio to 60% to 70% and deliver 12% to 15% of non-GAAP operating EPS growth by 2027. Our new guidance is driven by our relentless focus on controlling the controllables. We announced today an additional $110 million of investment income initiatives, $150 million of productivity, $10 billion of committed capital to AB along with a 350 to 500 basis points margin improvement at AllianceBernstein. So thank you for joining us today so that we can share with you this next chapter of our story here at Equitable Holdings. With that, I'll ask my colleagues to join me for our Q&A session.

Thank you. A couple of housekeeping items before we start. If you have a question, please raise your hand, and we'll provide you with a microphone. Limit -- and once you start your question, please start with your name and the company you're with and limit yourself to 1 question and 1 follow-up. And with that, we'll begin. Jimmy?

Jimmy Bhullar from JPMorgan. So first, I just had a question on your EPS guidance on the 12% to 15%. What are you assuming in terms of drawdown of the RBC potentially and/or the liquidity levels at the holding company?

Robin, why don't you take that?

Sure. Thanks for the question. So our EPS growth that we're excited to announce today, 12% to 15% by 2027. And there are 2 things that will not change with that. We'll always continue to maintain our strong RBC ratio at the holding company. So we'll never go below our 375% to 400% RBC ratio within the retirement business. We also do -- that does not assume that we have to draw down on our existing cash to achieve that. That EPS growth is driven by purely the $2 billion of cash flow growth that we have by 2027, which then translates into the EPS growth after taking into account our earnings growth to $2.5 billion.

Suneet?

Suneet Kamath from Jefferies. Just Robin, on the $1.3 billion of cash flow going to $2 billion. Just to be clear, you've talked about it, I think, in a couple of different ways. But is that before or after interest expense and preferred dividends.

That's -- the question from Suneet was the $1.3 billion of cash flow up to the HoldCo company. That's before interest expenses at the HoldCo company.

Okay. Got it. And then just one other one on the Wealth Management earnings. I think you talked about a 15% CAGR in terms of earnings over the next few years. What are you assuming for that cash sweep piece? Because I'm assuming if the Fed cuts that will be negatively impacted. So are you assuming that any of that goes away or it stays with you?

Yes, we take the projections on the Fed funds rate, it's associated with that. So to your point, as we saw in first quarter, higher Fed funds rates, we earn more lower the cash sweep [indiscernible].

Alex?

It's Alex Scott, Goldman Sachs. Question I had was on the runoff of capital versus new business investment. If I'm understanding it right, there's about $3 billion running off of the legacy business over 5 years, about $0.6 billion a year if the new business investment is about $0.5 billion a year, wouldn't the 2 things roughly offset? And if that's the case, what holds you back from reaching higher free cash flow generation levels, just thinking through runoff capital sort of funding new business growth?

Sure. I would separate the 2 in thinking about that. We have our new business investment of $500 million that's incorporated into the net growth in retirement cash flow at $200 million that Nick mentioned in earlier. And then the runoff of the capital, that reserves and capital that's behind the CTE. So some of that needs to be done due to pay claims that we'd have over the next 5 years. And the remaining is the capital that we'd release for shareholders over the next 5 years.

Got it. Okay. That's more clear. Again, the other thing I wanted to ask about was just the opportunity you guys outlined with the Secure Act and the in-plan guarantee product you sort of showed what you think it could be in the future. How long do you think that will take? What kind of tailwind is that over the projectable period that you guys had talked to.

Maybe if I set the scene on that, Alex, then I'll pass to Nick in terms of the opportunity. The big numbers we're showing today is the $2 billion cash and the growth in the earnings there's a very, very insignificant amount of that coming from in-plan guarantees because it is -- behind your question, difficult to project where it comes. So this really is a horizon 3 opportunity for us today. But the numbers you're seeing here are not dependent on it. And maybe, Nick, if you can give some color on where we are both with AB and with BlackRock and some of the noise we're hearing from the market.

Yes. I do -- I think we're hitting the tipping point. So it started with -- obviously, the need was there and then the regulators of the safe harbor. Then you had the target date fund managers and all target fund managers are saying, we want income. The third leg of that stool is then the platform operators like the Fidelity saying that they'll be able to implement that. And you've seen announcements saying they're going to start to incorporate it. So as we saw through the win last year, you're starting to see [ plan partners are ] saying, this is what I want. So there's demand and there's supply. But it's going to be lumpy. It's a 12-month sales cycle when you do a 401(k) conversion that takes a little bit of time. So it is, I would say, in motion, and we're at the leading edge of I would say, being part of those solutions.

Alex, if I could just follow up on that. We think this is very, very important for America. If you -- As you know, I've worked in many markets around the world. And if you look at 1 market like Australia, they had a well mandatory retirement saving on the accumulation side, then they didn't do anything in the decumulation side, then everybody who had built up these funds started buying boats and resources and second houses and then falling back on to the state. So this is a very important part for society that we not only help people accumulate but then we turn it into some secure income in retirement, particularly with the death of defined benefit schemes. It's really, really important that we find a solution to it.

Tom?

Tom Gallagher, Evercore ISI. Robin, you opened the door on the valuation discussion. So I'm just going to go through it. So...

It is your job, as I said, it is.

So I agree. I'm going to reverse engineer the way you put it, though. So if we look at the value of AB, thank you, Seth, for that. And then we look at the implied valuation of the insurance business, it's probably a 1 or 2 PE today, which is incredibly low, you can view it as an opportunity or an overhang whatever. Other companies that I've experienced with similar challenges, some just assume it will take care of itself over time and the market will become more efficient. Others have taken matters into their own hands and done something about it to try and unlock value. Curious where you stand and if there's anything you have from a strategy standpoint, whether that's restructuring, divestitures, anything that you're considering to do to unlock value?

Okay. Maybe if I kick off on that one, Tom, and thanks for the question. It's a key question. We appreciate it. Let me tell you how we're thinking about it. So if you look at the sector now, I think we'd all agree in the room that it's sort of been tracking macro events for some time now, interest rates, equity markets, what happened in the regional banking crisis. But then even within that, if you look at Equitable, our relative margins are on the lower side. Now the positive -- the glass half full on that is there is upside potential in there. And we certainly hope you've seen from today as to why you should take a look -- investors should take a look at Equitable, more than half of our cash flows are coming from asset management and wealth management, and the legacy VA now is insignificant and it's not a way to look at -- to evaluate value the company by any measure. So that's an important thing we've done in bringing that business out. In terms of any sort of breakup strategy, of course, we look at these things. I mean, it's important for us. Total shareholder return is a critical measure for us, and we look at it. And we're very -- if you look at our results so far, particularly on the TSR to the end of 2022, we are beating our peers. We know that and we can see that. And a key part of that is this business model and the integration between them. So let me give you some examples on that. So AB today has as a permanent capital, low-cost capital, about $110 billion from Equitable. We've used the general account very, very smartly in seeding the build-out of high alternatives. And Seth and the team have done an incredible job. When we put for $1 of seed capital in, they can attract a further $4 on that side. And I know it was quite critical to CarVal to come to us because of the fit with AB, but also because there's a life company there able to seed into the CarVal acquisition side there as well. So this is what's been driving the performance, the outperformance on TSR in year-to-date. So when we do our work on this one, these are the reasons why we think breakup is not in shareholders' interest. One, you lose that integration. And we see elsewhere in the market, life companies and asset managers rushing to get together. We already have it, and it's been working really, really well. And on the other business lines to help with maybe a follow-up question, there's a lot of capital synergies across individual retirement and across group retirement. So to ask what we're doing, we're carrying on really focusing on cash flow generation. And if you look at those slides we've shown today, our cash flow is growing faster than our earnings. That's very unusual. And one of the reasons for it is we were able to have a much higher percentage of our earnings convert to cash plus this legacy portfolio that we have spent a long time managing with reinsurance, making sure that the first-dollar hedging is there [ and ] reserving now, it's starting to throw off cash as this book comes down. So we think we're in a good position, and it's important through meetings like today that we really get over looking at Equitable as a legacy VA company is just wrong. There may have been some argument for it 5 years ago, but the work we've done between now and then has really, really changed the landscape. Robin, would you add anything to that? Have I missed anything?

No, I think you hit the both key points. I think the only thing I would add, and that's the importance with the new accounting regime, as we continue to generate positive net income, I think it will be cleaner into financial statements for Equitable as well. And it leads to something we don't control, frankly, and that is potentially index inclusion at some point. But we need to generate positive net income consistency in order to be sitting at the table for that to be eligible, but that's the other thing I would add.

And just my follow-up is how much does the legacy VA book produce in terms of annual free cash flow today? And I guess I'm also a little surprised that it runs off so quickly. I had always thought of that as a very long duration book that would take 10, 15 years to shrink as much as you're showing. Why is that shrinking so quickly?

Sure. We're really fortunate with that Venerable deal that we did because that took up a big chunk of the variable annuity -- legacy variable annuity business from 2006 and 2008 that was written. The remaining part of the legacy business is mostly pre-2006 that's sitting there. So as a function, it gets to this point that we call peak TaR, which means you don't need to build assets back in reserves anymore. You're collecting fees and you can release reserves over time. And that's where we are with that legacy business. And that's why it's releasing capital in the plan period. Today, there is minimal cash flow coming in, coming off that block. But through the next 5 years, we see that increasing. And actually, the cash flow conversion will be greater than the operating earnings that, that business generates through the next 5 years. And that's really -- I mean, it goes -- [ Mark ], we're really passionate about this because this is 15 years of hard work by a lot of people in this room to ensure that the stability of those cash flows, the economic management and the policies are fully reserved. So there's not going to be any surprises for investors through that period as well. And so that's why we can share with you today that we're going to be releasing capital and end up having a higher free cash flow conversion than our actual earnings are.

And Tom, just to take you back 5 years as to why we were able to do this. And we have our banking partners in the room at the time. We set the company up at CTE98. This was really, really important for us to actually have those reserves. And you've heard me say before, what does this mean? This meant That AXA had to inject $3 billion. If at that time, AXA had just spun off, we would not have been at CTE98. We could not have hedged to it, and we would not be in the position we are today. Really goes back to those 5 years and all credit to the team in managing that opportunity. So we were fully reserved and we hedged to first-dollar and then we did the reinsurance. That's why we're in this position now. It starts to throw off cash.

Ryan?

Ryan Krueger, KBW. I had a follow-up on Tom's question. I guess, given the confidence in the outlook that you expressed and where your stock is currently trading, and the fact that you do have a lot of excess capital right now. I mean, I do understand that we're in an uncertain environment, you may want to hold some extra buffer. But I guess, why not deploy some of your excess capital into additional buybacks to take advantage of the opportunity you could have right now?

Do you want to take that one, Robin?

Sure. Look, I'm really -- I really feel comfortable today sitting up here having $1.8 billion of cash at the HoldCo and sitting on a strong RBC ratio. All do you see what's happening with other companies around us, but also what's happening in the market. It's an uncertain time period, and as a result, we think it is prudent at this time to keep that levels. Those cash flows, though, as are as a result of our businesses, it's free cash flow that was generated up to the holding company. 50% of it now is more than -- is unregulated. That's up from 17% of IPO. And the hedging program has led to that consistency where we can have that capital. So if we ever went through a severe shock of credit and equities and et cetera, Equitable can, under most scenarios, maintain the consistency in our capital return, and that's been a hallmark from us since IPO. We're one of the few companies since IPO that has never stopped their share buyback program. And some may say it's conservative, Ryan, because we're holding on cash, but I'd rather be conservative in a period like this when there's uncertainty and deliver consistency and cash flow growth for shareholders.

Got it. And then separate question. On the $10 billion of additional committed capital with AB, I guess, what's -- how are you thinking about the time frame? Is that something that will be gradually done in terms of being deployed into those assets? Or is it something you'd look to do faster?

Sure. First, we're going to finish the $3 billion that we have remaining. That's our plan this year, as Seth continues to build out strategies and we can deploy those assets. And then the remainder, $10 billion will be done over the next 5 years. I would spread it out over that time. I wouldn't put specific dates on them. Seth, anything you want to add on the build.

No. I think that's accurate.

Wes?

Wes Carmichael, Wells Fargo. A question on the cash generation of $2 billion. Is there any way to help quantify at least directionally, how much is coming from the protection segment because operating earnings have been a little bit volatile, but maybe the cash flows are more stable.

Sure. I think the best way to think about it is probably the operating earnings and the percentage of operating earnings conversion that we have from the retirement business for protection. We'll remain our $300 million guidance on an annual basis or $75 million quarterly for protection, but there will be volatility coming out of COVID going from a pandemic to an endemic. There's certainly some uncertainty with mortality. Now the last 9 quarters, our reserving has been in line, but we do expect volatility then that's why we gave that guidance. But from the cash conversion standpoint, I would think about it as the percentage of our overall cash conversion and apply to that segment's earnings.

And on expense saves of the $65 million related to Equitable, they're kind of in excess of real estate. Is there any upfront investment required related to that? And like will you see that in 2023 or 2024?

Sure. So remember what I mentioned is all of our expense savings are net of reinvestment. So it's after investing, whether it's adding new advisers, wholesales, investment teams or investing to get efficiency, which is always part of our program every year. Every year, we put money in place to deliver efficiency goals. That's all included already in the earnings growth that we provided in the $2.5 billion. So we don't see anything at this time that would have EPS dilution over the next few years in order to get that, if that's your question across the board. But it's -- we have a responsibility to continue to drive productivity while investing at the same time and continue to see us leverage the same playbook as we always have, but try to expand in places like automation, vendor management and continue to look at our real estate footprint.

Go ahead.

Mike Ward with Citi. I guess I just wanted to clarify, I think it was Slide 75. So there's the targeted operating income of $2.5 billion and then free cash generation of $2 billion that is 80%. So I just wanted -- of operating income, whereas the target 60% to 70%. I just wanted to clarify, is the delta interest expense? Or what am I missing?

That's right. So the difference is we have about $250 million annually in interest expense at the HoldCo that you have to take out what Suneet was alluding to earlier in his question. So you have to take that out and that would get you to the higher end of the range in 2027.