~~0001333986us-gaap:GuaranteedMinimumDeathBenefitMemberaxaeq:~~0001333986eqh:RollUpMemberus-gaap:ImmediateVariableAnnuityMembersrt:~~MaximumMember2020-01-012020-06-30~~MinimumMemberus-gaap:GuaranteedMinimumIncomeBenefitMember2020-01-012020-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————————————

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-38469

————————————————

Equitable Holdings, Inc.

(Exact name of registrant as specified in its charter)


Delaware						90-0226248
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1290 Avenue of the Americas, New York, New York 10104

(Address of principal executive offices) (Zip Code)

(212) 554-1234

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock

EQH

New York Stock Exchange

Depositary Shares, each representing a 1/1,000th interest in a share of Fixed Rate Noncumulative Perpetual Preferred Stock, Series A

EQH PR A

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an “emerging growth company”. See definition of “accelerated filer,” “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~August~~November 3, 2020, ~~449,411,503~~444,684,279 shares of the registrant’s Common Stock, $0.01 par value, were outstanding.

TABLE OF CONTENTS


		Page
PART I - FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets, ~~June~~September 30, 2020 (Unaudited)and December 31, 2019	34
	Consolidated Statements of Income (Loss), Three and ~~Six~~N ine Months Ended ~~June 30, 2020 and 2019 (Unaudited)~~	4September
	~~Consolidated Statements of Comprehensive Income (Loss), Three and Six Months Ended June~~ 30, 2020 and 2019 (Unaudited)	5
	Consolidated Statements of ~~Equity,~~Comprehensive Income (Loss), Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019 (Unaudited)	6
	Consolidated Statements of Equity, Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)	7
	Consolidated Statements of Cash Flows, ~~Six~~N ine Months Ended ~~June~~September 30, 2020 and 2019 (Unaudited)	89
	Notes to Consolidated Financial Statements (Unaudited):
	Note 1 - Organization	1011
	Note 2 - Significant Accounting Policies	1011
	Note 3 - Investments	1820
	Note 4 - Derivatives	2930
	Note 5 - Goodwill	34
	Note 6 - Closed Block	3435
	Note 7 - Insurance Liabilities	3536
	Note 8 - Fair Value Disclosures	3940
	Note 9 - Employee Benefit Plans	5354
	Note 10 - Income Taxes	5355

	Note 11 - ~~Related Party Transactions~~	54
	~~Note 12 -~~ Equity	54
	~~Note 13 - Redeemable Noncontrolling Interest~~	55
	Note 1412 - Redeemable Noncontrolling Interest	57
	Note 1 3 - Commitments and Contingent Liabilities	5658
	Note 14 - Business Segment Information	62
	Note 15 - ~~Business Segment Information~~Earnings per Common Share	5964
	Note 16 - ~~Earnings Per Common Share~~Revision of Prior Period Financial Statements	6166
	Note 17 - Subsequent Events	6280
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6381
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	~~106~~128
Item 4.	Controls and Procedures	~~106~~128

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	~~108~~131
Item 1A.	Risk Factors	~~108~~131
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~109~~131
Item 3.	Defaults Upon Senior Securities	~~109~~131
Item 4.	Mine Safety Disclosures	~~109~~131
Item 5.	Other Information	~~109~~131
Item 6.	Exhibits	~~110~~132

Signatures			~~110~~132

NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION

Certain of the statements included or incorporated by reference in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “believes,” “anticipates,” “intends,” “seeks,” “aims,” “plans,” “assumes,” “estimates,” “projects,” “should,” “would,” “could,” “may,” “will,” “shall” or variations of such words are generally part of forward-looking statements. Forward-looking statements are made based on management’s current expectations and beliefs concerning future developments and their potential effects upon Equitable Holdings, Inc. (“Holdings”) and its consolidated subsidiaries. “We,” “us” and “our” refer to Holdings and its consolidated subsidiaries, unless the context refers only to Holdings as a corporate entity. There can be no assurance that future developments affecting Holdings will be those anticipated by management. Forward-looking statements include, without limitation, all matters that are not historical facts.

These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including, among others: (i) conditions in the financial markets and economy, including equity market declines and volatility, interest rate fluctuations, impacts on our goodwill and changes in liquidity, access to and cost of capital and the impact of COVID-19 and related economic conditions; (ii) operational factors, including reliance on the payment of dividends to Holdings by its subsidiaries, remediation of our material weakness, indebtedness, protection of confidential customer information or proprietary business information, information systems failing or being compromised, strong industry competition and catastrophic events, such as the outbreak of pandemic diseases including COVID-19; (iii) credit, counterparties and investments, including counterparty default on derivative contracts, failure of financial institutions, defaults, errors or omissions by third parties and affiliates and gross unrealized losses on fixed maturity and equity securities; (iv) our reinsurance and hedging programs; (v) our products, structure and product distribution, including variable annuity guaranteed benefits features within certain of our products, complex regulation and administration of our products, variations in statutory capital requirements, financial strength and claims-paying ratings and key product distribution relationships; (vi) estimates, assumptions and valuations, including risk management policies and procedures, potential inadequacy of reserves, actual mortality, longevity, morbidity and lapse experience differing from pricing expectations or reserves, amortization of deferred acquisition costs and financial models; (vii) our Investment Management and Research segment, including fluctuations in assets under management, the industry-wide shift from actively-managed investment services to passive services and potential termination of investment advisory agreements; (viii) legal and regulatory risks, including federal and state legislation affecting financial institutions, insurance regulation and tax reform; (ix) risks related to separation from, and continuing relationship with, AXA, including costs associated with separation and rebranding; and (x) risks related to our common stock and future offerings, including the market price for our common stock being volatile and potential stock price declines due to future sales of shares by existing stockholders.

Forward-looking statements should be read in conjunction with the other cautionary statements, risks, uncertainties and other factors identified in Holdings’ Annual Report on Form 10-K for the year ended December 31, 2019, as amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q, including in the section entitled “Risk Factors,” and elsewhere in this Quarterly Report on Form 10-Q. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

Part I FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

EQUITABLE HOLDINGS, INC.
Consolidated Balance Sheets
June 30, 2020 (Unaudited) and December 31, 2019
June 30, 2020 December 31, 2019

(in millions, except share data)
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value (amortized cost of $67,515 and $62,937) (allowance for credit losses of $13 at June 30, 2020) $ 76,243 $ 66,343
Mortgage loans on real estate (net of allowance for credit losses of $66 at June 30, 2020) 12,523 12,107
Policy loans 3,689 3,735
Other equity investments (1) 1,342 1,344
Trading securities, at fair value 6,616 7,031
Other invested assets (1) 2,280 2,780
Total investments 102,693 93,340
Cash and cash equivalents (1) 8,364 4,405
Cash and securities segregated, at fair value 1,882 1,095
Broker-dealer related receivables 1,998 1,987
Deferred policy acquisition costs 4,182 5,890
Goodwill and other intangible assets, net 4,756 4,751
Amounts due from reinsurers (allowance for credit losses of $6 at June 30, 2020) 4,665 4,592
GMIB reinsurance contract asset, at fair value 2,931 2,139
Other assets (1) 3,724 3,799
Assets held-for-sale — 962
Separate Accounts assets 118,915 126,910
Total Assets $ 254,110 $ 249,870
LIABILITIES
Policyholders’ account balances $ 59,272 $ 58,879
Future policy benefits and other policyholders' liabilities 41,476 34,587
Broker-dealer related payables 1,001 722
Customer related payables 3,199 2,523
Amounts due to reinsurers 1,399 1,404
Short-term and long-term debt 4,113 4,111
Current and deferred income taxes 1,848 549
Other liabilities (1) 3,666 3,970
Liabilities held-for-sale — 724
Separate Accounts liabilities 118,915 126,910
Total Liabilities $ 234,889 $ 234,379
Redeemable noncontrolling interest (1) (2) $ 87 $ 365
Commitments and contingent liabilities (Note 14)
EQUITY
Equity attributable to Holdings:
Preferred stock and additional paid-in capital, $1 par value, 32 million shares authorized, issued and outstanding; $25,000 liquidation preference $ 775 $ 775
Common stock, $0.01 par value, 2,000,000,000 shares authorized; 552,896,328 and 552,896,328 shares issued, respectively; 449,436,843 and 463,711,392 shares outstanding, respectively 5 5
Additional paid-in capital 1,938 1,920
Treasury stock, at cost, 103,459,485 and 89,184,936 shares, respectively (2,047) (1,832)
Retained earnings 12,995 11,827
Accumulated other comprehensive income (loss) 3,928 840
Total equity attributable to Holdings 17,594 13,535
Noncontrolling interest 1,540 1,591
Total Equity 19,134 15,126
Total Liabilities, Redeemable Noncontrolling Interest and Equity $ 254,110 $ 249,870


EQUITABLE HOLDINGS, INC.
Consolidated Balance Sheets
September 30, 2020 (Unaudited) and December 31, 2019

	September 30, 2020		December 31, 2019
	(in millions, except share data)
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value (amortized cost of $70,307 and $62,937) (allowance for credit losses of $13 at September 30, 2020)	$	79,379	$	66,343
Mortgage loans on real estate (net of allowance for credit losses of $70 at September 30, 2020)	12,802		12,107

Policy loans	4,123		3,735
Other equity investments (1)	1,428		1,344
Trading securities, at fair value	6,244		7,031
Other invested assets (1)	1,802		2,780
Total investments	105,778		93,340
Cash and cash equivalents (1)	8,684		4,405
Cash and securities segregated, at fair value	1,869		1,095
Broker-dealer related receivables	1,929		1,987
Deferred policy acquisition costs	4,171		5,837
Goodwill and other intangible assets, net	4,745		4,751
Amounts due from reinsurers (allowance for credit losses of $0 at September 30, 2020)	4,580		4,592

GMIB reinsurance contract asset, at fair value	2,818		2,139

Other assets (1)	4,476		3,800
Assets held-for-sale	0		962
Separate Accounts assets	123,446		126,910
Total Assets	$	262,496	$	249,818
LIABILITIES
Policyholders’ account balances	$	62,726	$	58,879
Future policy benefits and other policyholders' liabilities	41,139		34,635
Broker-dealer related payables	760		722

Customer related payables	3,461		2,523
Amounts due to reinsurers	1,391		1,404
Short-term and long-term debt	4,114		4,111

Current and deferred income taxes	1,648		528
Other liabilities (1)	4,864		3,970
Liabilities held-for-sale	0		724
Separate Accounts liabilities	123,446		126,910
Total Liabilities	$	243,549	$	234,406
Redeemable noncontrolling interest (1) (2)	$	95	$	365
Commitments and contingent liabilities (Note 13)
EQUITY
Equity attributable to Holdings:
Preferred stock and additional paid-in capital, $1 par value and $25,000 liquidation preference	$	1,269	$	775
Common stock, $0.01 par value, 2,000,000,000 shares authorized; 552,896,328 and 552,896,328 shares issued, respectively; 444,708,017 and 463,711,392 shares outstanding, respectively	5		5
Additional paid-in capital	1,953		1,920
Treasury stock, at cost, 108,188,311 and 89,184,936 shares, respectively	(2,147)		(1,832)
Retained earnings	12,032		11,744
Accumulated other comprehensive income (loss)	4,188		844
Total equity attributable to Holdings	17,300		13,456
Noncontrolling interest	1,552		1,591
Total Equity	18,852		15,047
Total Liabilities, Redeemable Noncontrolling Interest and Equity	$	262,496	$	249,818

____________

(1) See Note 2 for details of balances with variable interest entities.

(2) See Note 1312 for details of Redeemable noncontrolling interest.

See Notes to Consolidated Financial Statements (Unaudited).

EQUITABLE HOLDINGS, INC.

Consolidated Statements of Income (Loss)

For the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019 (Unaudited)


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020		2019
		(in millions, except per share data)															(in millions, except per share data)
REVENUES	REVENUES									REVENUES
Policy charges and fee income	Policy charges and fee income	$	879	$	941	$	1,870	$	1,872	Policy charges and fee income	$	914	$	980	$	2,787	$	2,847
Premiums	Premiums	244		280		533		563		Premiums	221		284		754		847
Net derivative gains (losses)	Net derivative gains (losses)	(6,033)		(236)		3,368		(1,866)		Net derivative gains (losses)	(1,472)		(453)		1,890		(2,323)
Net investment income (loss)	Net investment income (loss)	1,035		976		1,651		1,991		Net investment income (loss)	879		824		2,530		2,815
Investment gains (losses), net:	Investment gains (losses), net:									Investment gains (losses), net:
Credit losses on AFS debt securities and loans	Credit losses on AFS debt securities and loans	(31)		—		(43)		—		Credit losses on AFS debt securities and loans	(4)		0		(47)		0
Other investment gains (losses), net	Other investment gains (losses), net	200		(12)		216		(23)		Other investment gains (losses), net	21		199		237		176
Total investment gains (losses), net	Total investment gains (losses), net	169		(12)		173		(23)		Total investment gains (losses), net	17		199		190		176
Investment management and service fees	Investment management and service fees	1,052		1,072		2,188		2,071		Investment management and service fees	1,126		1,101		3,314		3,172
Other income	Other income	124		139		280		266		Other income	155		143		434		409
Total revenues	Total revenues	(2,530)		3,160		10,063		4,874		Total revenues	1,840		3,078		11,899		7,943

BENEFITS AND OTHER DEDUCTIONS	BENEFITS AND OTHER DEDUCTIONS									BENEFITS AND OTHER DEDUCTIONS
Policyholders’ benefits	Policyholders’ benefits	746		896		3,534		1,776		Policyholders’ benefits	1,034		1,735		4,546		3,551
Interest credited to policyholders’ account balances	Interest credited to policyholders’ account balances	307		314		624		618		Interest credited to policyholders’ account balances	306		320		930		944
Compensation and benefits	Compensation and benefits	469		512		995		1,021		Compensation and benefits	503		502		1,498		1,523
Commissions and distribution-related payments	Commissions and distribution-related payments	302		307		640		588		Commissions and distribution-related payments	342		317		982		905
Interest expense	Interest expense	48		57		100		113		Interest expense	52		54		152		167
Amortization of deferred policy acquisition costs	Amortization of deferred policy acquisition costs	183		177		1,431		375		Amortization of deferred policy acquisition costs	90		128		1,555		489
Other operating costs and expenses	Other operating costs and expenses	434		456		871		866		Other operating costs and expenses	436		449		1,308		1,315
Total benefits and other deductions	Total benefits and other deductions	2,489		2,719		8,195		5,357		Total benefits and other deductions	2,763		3,505		10,971		8,894
Income (loss) from continuing operations, before income taxes	Income (loss) from continuing operations, before income taxes	(5,019)		441		1,868		(483)		Income (loss) from continuing operations, before income taxes	(923)		(427)		928		(951)
Income tax (expense) benefit	Income tax (expense) benefit	1,077		(11)		(363)		204		Income tax (expense) benefit	218		121		(141)		334
Net income (loss)	Net income (loss)	(3,942)		430		1,505		(279)		Net income (loss)	(705)		(306)		787		(617)
Less: Net income (loss) attributable to the noncontrolling interest	Less: Net income (loss) attributable to the noncontrolling interest	86		67		123		133		Less: Net income (loss) attributable to the noncontrolling interest	74		68		197		201
Net income (loss) attributable to Holdings	Net income (loss) attributable to Holdings	(4,028)		363		1,382		(412)		Net income (loss) attributable to Holdings	(779)		(374)		590		(818)
Less: Preferred stock dividends	Less: Preferred stock dividends	10		—		23		—		Less: Preferred stock dividends	11		0		34		0
Net income (loss) available to Holdings’ common shareholders	Net income (loss) available to Holdings’ common shareholders	$	(4,038)	$	363	$	1,359	$	(412)	Net income (loss) available to Holdings’ common shareholders	$	(790)	$	(374)	$	556	$	(818)

EARNINGS PER COMMON SHARE	EARNINGS PER COMMON SHARE									EARNINGS PER COMMON SHARE
Net income (loss) applicable to Holdings’ common shareholders per common share:	Net income (loss) applicable to Holdings’ common shareholders per common share:									Net income (loss) applicable to Holdings’ common shareholders per common share:
Basic	Basic	$	(8.96)	$	0.74	$	2.98	$	(0.82)	Basic	$	(1.77)	$	(0.76)	$	1.23	$	(1.64)
Diluted	Diluted	$	(8.96)	$	0.74	$	2.97	$	(0.82)	Diluted	$	(1.77)	$	(0.76)	$	1.22	$	(1.64)
Weighted average common shares outstanding (in millions):	Weighted average common shares outstanding (in millions):									Weighted average common shares outstanding (in millions):
Basic	Basic	450.4		491.1		455.8		504.5		Basic	447.5		490.4		453.0		499.8
Diluted	Diluted	450.4		491.9		457.1		504.5		Diluted	447.5		490.4		454.1		499.8

~~See Notes to Consolidated Financial Statements (Unaudited).~~

~~EQUITABLE HOLDINGS, INC.~~

~~Consolidated Statements of Comprehensive Income (Loss)~~

~~For the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)~~

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(in millions)
COMPREHENSIVE INCOME (LOSS)
Net income (loss) $ (3,942) $ 430 $ 1,505 $ (279)
Other comprehensive income (loss) net of income taxes:
Change in unrealized gains (losses), net of reclassification adjustment 1,614 1,369 3,048 2,203
Changes in defined benefit plan related items not yet recognized in periodic benefit cost, net of reclassification adjustment 22 18 50 67
Foreign currency translation adjustment 6 1 (15) —
Total other comprehensive income (loss), net of income taxes 1,642 1,388 3,083 2,270
Comprehensive income (loss) (2,300) 1,818 4,588 1,991
Less: Comprehensive income (loss) attributable to the noncontrolling interest 89 66 118 131
Comprehensive income (loss) attributable to Holdings $ (2,389) $ 1,752 $ 4,470 $ 1,860

See Notes to Consolidated Financial Statements (Unaudited).

EQUITABLE HOLDINGS, INC.

Consolidated Statements of ~~Equity~~Comprehensive Income (Loss)

For the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019 (Unaudited)

Three Months Ended June 30,
Equity Attributable to Holdings
Preferred Stock and Additional Paid-In Capital Common Stock Additional Paid-in Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Holdings Equity Non-controlling Interest Total Equity
(in millions)
April 1, 2020 $ 775 $ 5 $ 1,930 $ (2,025) $ 17,112 $ 2,289 $ 20,086 $ 1,554 $ 21,640
Stock compensation — — 15 2 — — 17 2 19
Purchase of treasury stock — — — (24) — — (24) — (24)
Reissuance of treasury stock — — — (2) (2) (2)
Repurchase of AB Holding units — — (37) — — — (37) (11) (48)
Dividends paid to noncontrolling interest — — — — — — — (69) (69)
Stockholder dividends (cash dividends declared per common share of $0.17) — — — — (77) — (77) — (77)
Dividends on preferred stock (10) (10) (10)
Net income (loss) — — — — (4,028) — (4,028) 61 (3,967)
Other comprehensive income (loss) — — — — — 1,639 1,639 3 1,642
Other — — 30 — — — 30 — 30
June 30, 2020 $ 775 $ 5 $ 1,938 $ (2,047) $ 12,995 $ 3,928 $ 17,594 $ 1,540 $ 19,134

April 1, 2019 $ — $ 5 $ 1,881 $ (1,234) $ 13,004 $ (513) $ 13,143 $ 1,539 $ 14,682
Stock compensation — — 28 2 — — 30 3 33
Retirement of common stock — — — (1) — (1) — (1)
Dividends paid to noncontrolling interest — — — — — — — (56) (56)
Stockholder dividends (cash dividends declared per common share of $0.15) — — — — (73) — (73) — (73)
Net income (loss) — — — — 363 — 363 60 423
Other comprehensive income (loss) — — — — — 1,389 1,389 (1) 1,388
Other — — (8) — — — (8) — (8)
June 30, 2019 $ — $ 5 $ 1,901 $ (1,232) $ 13,293 $ 876 $ 14,843 $ 1,545 $ 16,388


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$	(705)	$	(306)	$	787	$	(617)
Other comprehensive income (loss) net of income taxes:
Change in unrealized gains (losses), net of reclassification adjustment	229		746		3,273		2,874
Changes in defined benefit plan related items not yet recognized in periodic benefit cost, net of reclassification adjustment	21		18		71		85
Foreign currency translation adjustment	16		(12)		1		(12)
Total other comprehensive income (loss), net of income taxes	266		752		3,345		2,947
Comprehensive income (loss)	(439)		446		4,132		2,330
Less: Comprehensive income (loss) attributable to the noncontrolling interest	80		63		198		194
Comprehensive income (loss) attributable to Holdings	$	(519)	$	383	$	3,934	$	2,136

See Notes to Consolidated Financial Statements (Unaudited).

EQUITABLE HOLDINGS, INC.

Consolidated Statements of Equity

For the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019 (Unaudited)

Six Months Ended June 30,
Equity Attributable to Holdings
Preferred Stock and Additional Paid-In Capital Common Stock Additional Paid-in Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Holdings Equity Non-controlling Interest Total Equity
(in millions)
January 1, 2020 $ 775 $ 5 $ 1,920 $ (1,832) $ 11,827 $ 840 $ 13,535 $ 1,591 $ 15,126
Cumulative effect of adoption of ASU 2016-03, CECL — — — — (30) — (30) — (30)
Stock compensation — — 29 15 — — 44 5 49
Purchase of treasury stock — — — (230) — — (230) — (230)
Reissuance of treasury stock — — — (15) — (15) — (15)
Repurchase of AB Holding units — — (31) — — — (31) (17) (48)
Dividends paid to noncontrolling interest — — — — — — — (162) (162)
Dividends on common stock (cash dividends declared per common share of $0.32) — — — — (146) — (146) — (146)
Dividends on preferred stock — — — — (23) — (23) — (23)
Net income (loss) — — — — 1,382 — 1,382 128 1,510
Other comprehensive income (loss) — — — — — 3,088 3,088 (5) 3,083
Other — — 20 — — — 20 — 20
June 30, 2020 $ 775 $ 5 $ 1,938 $ (2,047) $ 12,995 $ 3,928 $ 17,594 $ 1,540 $ 19,134


January 1, 2019		$	—	$	5	$	1,908	$	(640)	$	13,989	$	(1,396)	$	13,866	$	1,566	$	15,432
																					Three Months Ended September 30,
																					Equity Attributable to Holdings
																					Preferred Stock and Additional Paid-In Capital		Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Holdings Equity		Non-controlling Interest		Total Equity
																							(in millions)
July 1, 2020																				July 1, 2020	$	775	$	5	$	1,938	$	(2,047)	$	12,899	$	3,928	$	17,498	$	1,540	$	19,038
Stock compensation	Stock compensation	—		—		9		2		—		—		11		12		23		Stock compensation	—		—		15		—		—		—		15		3		18
Purchase of treasury stock	Purchase of treasury stock	—		—		—		(594)		—		—		(594)		—		(594)		Purchase of treasury stock	—		—		—		(100)		—		—		(100)		—		(100)
Retirement of common stock		—		—		—		—		(143)		—		(143)		—		(143)
Reissuance of treasury stock																				Reissuance of treasury stock			—		—		—		(1)				(1)				(1)

Repurchase of AB Holding units	Repurchase of AB Holding units	—		—		—		—		—		—		—		(21)		(21)		Repurchase of AB Holding units	—		—		—		—		—		—		—		(2)		(2)
Dividends paid to noncontrolling interest	Dividends paid to noncontrolling interest	—		—		—		—		—		—		—		(124)		(124)		Dividends paid to noncontrolling interest	—		—		—		—		—		—		—		(68)		(68)
Dividends on common stock (cash dividends declared per common share of $0.28)		—		—		—		—		(141)		—		(141)		—		(141)

Stockholder dividends (cash dividends declared per common share of $0.17)																				Stockholder dividends (cash dividends declared per common share of $0.17)	—		—		—		—		(76)		—		(76)		—		(76)
Dividends on preferred stock																				Dividends on preferred stock									(11)				(11)				(11)
Net income (loss)	Net income (loss)	—		—		—		—		(412)		—		(412)		114		(298)		Net income (loss)	—		—		—		—		(779)		—		(779)		73		(706)
Issuance of preferred stock																				Issuance of preferred stock	494		—		—		—		—		—		494		—		494
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		—		—		2,272		2,272		(2)		2,270		Other comprehensive income (loss)	—		—		—		—		—		260		260		6		266
Other	Other	—		—		(16)		—		—		—		(16)		—		(16)		Other	—		—		0		—		—		—		0		—		0
June 30, 2019		$	—	$	5	$	1,901	$	(1,232)	$	13,293	$	876	$	14,843	$	1,545	$	16,388
September 30, 2020																				September 30, 2020	$	1,269	$	5	$	1,953	$	(2,147)	$	12,032	$	4,188	$	17,300	$	1,552	$	18,852


July 1, 2019	$	0	$	5	$	1,901	$	(1,232)	$	13,209	$	789	$	14,672	$	1,545	$	16,217
Stock compensation	—		—		(20)		6		—		—		(14)		4		(10)
Purchase of treasury stock	—		—		—		(43)		—		—		(43)		—		(43)
Reissuance of treasury stock	—		—		—		—		(1)		—		(1)		—		(1)
Retirement of common stock			—		—		—		1		—		1		—		1
Repurchase of AB Holding units	—		—		—		—		—		—		—		(9)		(9)
Dividends paid to noncontrolling interest	—		—		—		—		—		—		—		(62)		(62)
Stockholder dividends (cash dividends declared per common share of $0.15)	—		—		—		—		(74)		—		(74)		—		(74)


Net income (loss)	—		—		—		—		(374)		—		(374)		61		(313)
Other comprehensive income (loss)	—		—		—		—		—		757		757		(5)		752
Other	—		—		16		—		—		—		16		8		24
September 30, 2019	$	0	$	5	$	1,897	$	(1,269)	$	12,761	$	1,546	$	14,940	$	1,542	$	16,482

See Notes to Consolidated Financial Statements (Unaudited).

EQUITABLE HOLDINGS, INC.

Consolidated Statements of ~~Cash Flows~~Equity

For the ~~Six~~Three and Nine Months Ended ~~June~~September 30, 2020 and 2019 (Unaudited)

Six Months Ended June 30,
2020 2019
(in millions)
Cash flows from operating activities:
Net income (loss) $ 1,505 $ (279)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Interest credited to policyholders’ account balances 624 618
Policy charges and fee income (1,870) (1,872)
Net derivative (gains) losses (3,368) 1,866
Credit losses on AFS debt securities and loans 43 —
Investment (gains) losses, net (266) 23
Loss on businesses held-for-sale 50 —
Realized and unrealized (gains) losses on trading securities (130) (456)
Non-cash long term incentive compensation expense 33 68
Amortization and depreciation 1,506 433
Equity (income) loss from limited partnerships 60 (41)
Changes in:
Net broker-dealer and customer related receivables/payables 704 (384)
Reinsurance recoverable
(292) (65)
Segregated cash and securities, net (787) 60
Capitalization of deferred policy acquisition costs (341) (362)
Future policy benefits 1,828 1
Current and deferred income taxes 482 23
Other, net (329) (58)
Net cash provided by (used in) operating activities $ (548) $ (425)
Cash flows from investing activities:
Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale $ 7,595 $ 5,201
Mortgage loans on real estate 383 288
Trading account securities 899 7,662
Real estate joint ventures — 2
Short term investments 938 1,613
Other 189 115
Payment for the purchase/origination of:
Fixed maturities, available-for-sale (11,832) (12,916)
Mortgage loans on real estate (860) (757)
Trading account securities (354) (715)
Short term investments (651) (1,598)
Other (266) (113)
Proceeds from the sale of business 164 —
Cash settlements related to derivative instruments 5,004 (1,112)
Repayments of loans to affiliates — —
Investment in capitalized software, leasehold improvements and EDP equipment (28) (39)
Other, net 381 (73)
Net cash provided by (used in) investing activities $ 1,562 $ (2,442)
Cash flows from financing activities:
Policyholders’ account balances:
Deposits $ 4,599 $ 4,920
Withdrawals (2,029) (2,382)
Transfers (to) from Separate Accounts 873 831


			Nine Months Ended September 30,
	Equity Attributable to Holdings
	Preferred Stock and Additional Paid-In Capital		Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Holdings Equity		Non-controlling Interest		Total Equity
	(in millions)
January 1, 2020	$	775	$	5	$	1,920	$	(1,832)	$	11,744	$	844	$	13,456	$	1,591	$	15,047
Cumulative effect of adoption of ASU 2016-03, CECL	—		—		—		—		(30)		—		(30)		—		(30)
Stock compensation	—		—		44		15		—		—		59		8		67
Purchase of treasury stock	—		—		—		(330)		—		—		(330)		—		(330)
Reissuance of treasury stock			—		—		—		(16)		—		(16)		—		(16)

Repurchase of AB Holding units	—		—		(31)		—		—		—		(31)		(19)		(50)
Dividends paid to noncontrolling interest	—		—		—		—		—		—		—		(230)		(230)
Dividends on common stock (cash dividends declared per common share of $0.49)	—		—		—		—		(222)		—		(222)		—		(222)
Dividends on preferred stock	—		—		—		—		(34)		—		(34)		—		(34)
Issuance of preferred stock	494		—		—		—		—		—		494		—		494
Net income (loss)	—		—		—		—		590		—		590		201		791
Other comprehensive income (loss)	—		—		—		—		—		3,344		3,344		1		3,345
Other	—		—		20		—		—		—		20		—		20
September 30, 2020	$	1,269	$	5	$	1,953	$	(2,147)	$	12,032	$	4,188	$	17,300	$	1,552	$	18,852


January 1, 2019	$	0	$	5	$	1,908	$	(640)	$	13,937	$	(1,408)	$	13,802	$	1,566	$	15,368
Stock compensation	—		—		(11)		8		—		—		(3)		16		13
Purchase of treasury stock	—		—		—		(637)		—		—		(637)		—		(637)
Reissuance of treasury stock	—		—		—		—		(1)		—		(1)		—		(1)
Retirement of common stock	—		—		—		—		(142)		—		(142)		—		(142)
Repurchase of AB Holding units	—		—		—		—		—		—		—		(30)		(30)
Dividends paid to noncontrolling interest	—		—		—		—		—		—		—		(186)		(186)
Dividends on common stock (cash dividends declared per common share of $0.43)	—		—		—		—		(215)		—		(215)		—		(215)

Net income (loss)	—		—		—		—		(818)		—		(818)		175		(643)
Other comprehensive income (loss)	—		—		—		—		—		2,954		2,954		(7)		2,947
Other	—		—		—		—		—		—		—		8		8
September 30, 2019	$	0	$	5	$	1,897	$	(1,269)	$	12,761	$	1,546	$	14,940	$	1,542	$	16,482

See Notes to Consolidated Financial Statements (Unaudited).

EQUITABLE HOLDINGS, INC.

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2020 and 2019 (Unaudited)


	Nine Months Ended September 30,
	2020		2019
	(in millions)
Cash flows from operating activities:
Net income (loss)	$	787	$	(617)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Interest credited to policyholders’ account balances	930		944
Policy charges and fee income	(2,787)		(2,847)
Net derivative (gains) losses	(1,890)		2,323
Credit losses on AFS debt securities and loans	47		0
Investment (gains) losses, net	(287)		(176)
Loss on businesses held-for-sale	50		0
Realized and unrealized (gains) losses on trading securities	(133)		(485)
Non-cash long term incentive compensation expense	55		90
Non-cash pension plan restructuring	0		0
Amortization and depreciation	1,668		564
Equity (income) loss from limited partnerships	14		(67)
Changes in:
Net broker-dealer and customer related receivables/payables	980		(504)
Reinsurance recoverable	(316)		(70)
Segregated cash and securities, net	(774)		211
Capitalization of deferred policy acquisition costs	(489)		(544)
Future policy benefits	1,867		943
Current and deferred income taxes	237		30
Other, net	46		(87)
Net cash provided by (used in) operating activities	$	5	$	(292)

Cash flows from investing activities:
Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale	$	10,422	$	9,850
Mortgage loans on real estate	454		708
Trading account securities	1,529		8,762
Real estate joint ventures	0		3
Short term investments	1,434		2,011
Other	570		162
Payment for the purchase/origination of:
Fixed maturities, available-for-sale	(17,393)		(24,448)
Mortgage loans on real estate	(1,208)		(912)
Trading account securities	(550)		(1,072)
Short term investments	(1,100)		(2,148)
Other	(702)		(302)
Proceeds from the sale of business	164		0
Cash settlements related to derivative instruments	2,503		179
Repayments of loans to affiliates	0		0
Investment in capitalized software, leasehold improvements and EDP equipment	(44)		(72)
Other, net	(47)		(132)
Net cash provided by (used in) investing activities	$	(3,968)	$	(7,411)

Cash flows from financing activities:
Policyholders’ account balances:
Deposits	$	7,928	$	9,944
Withdrawals	(3,116)		(3,551)
Transfers (to) from Separate Accounts	1,919		1,358

See Notes to Consolidated Financial Statements (Unaudited).

EQUITABLE HOLDINGS, INC.

Consolidated Statements of Cash Flows

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019 (Unaudited)


		Six Months Ended June 30,							Nine Months Ended September 30,
		2020		2019			2020		2019
		(in millions)							(in millions)
Change in short-term financings	Change in short-term financings	—		(104)		Change in short-term financings	0		(163)
Change in collateralized pledged assets	Change in collateralized pledged assets	60		(9)		Change in collateralized pledged assets	60		3
Change in collateralized pledged liabilities	Change in collateralized pledged liabilities	239		1,483		Change in collateralized pledged liabilities	1,973		1,900
(Decrease) increase in overdrafts payable	(Decrease) increase in overdrafts payable	17		(19)		(Decrease) increase in overdrafts payable	3		(73)
Dividends paid on common stock	Dividends paid on common stock	(146)		(141)		Dividends paid on common stock	(222)		(215)
Dividends paid on preferred stock	Dividends paid on preferred stock	(23)		—		Dividends paid on preferred stock	(34)		0
Issuance of preferred stock						Issuance of preferred stock	494		0
Purchases of AB Holding Units to fund long-term incentive compensation plan awards	Purchases of AB Holding Units to fund long-term incentive compensation plan awards	(48)		(59)		Purchases of AB Holding Units to fund long-term incentive compensation plan awards	(54)		(82)
Purchase of treasury shares	Purchase of treasury shares	(230)		(750)		Purchase of treasury shares	(330)		(787)
Purchases (redemptions) of noncontrolling interests of consolidated company-sponsored investment funds	Purchases (redemptions) of noncontrolling interests of consolidated company-sponsored investment funds	(269)		59		Purchases (redemptions) of noncontrolling interests of consolidated company-sponsored investment funds	(260)		138
Distribution to noncontrolling interest of consolidated subsidiaries	Distribution to noncontrolling interest of consolidated subsidiaries	(162)		(124)		Distribution to noncontrolling interest of consolidated subsidiaries	(230)		(186)
Increase (decrease) in securities sold under agreement to repurchase	Increase (decrease) in securities sold under agreement to repurchase	—		(573)		Increase (decrease) in securities sold under agreement to repurchase	0		(573)
Other, net	Other, net	9		—		Other, net	45		0
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	$	2,891	$	3,132	Net cash provided by (used in) financing activities	$	8,176	$	7,713

Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	$	(11)	$	—	Effect of exchange rate changes on cash and cash equivalents	$	1	$	(8)
Change in cash and cash equivalents	Change in cash and cash equivalents	3,894		265		Change in cash and cash equivalents	4,214		2
Cash and cash equivalents, beginning of year	Cash and cash equivalents, beginning of year	4,405		4,469		Cash and cash equivalents, beginning of year	4,405		4,469
Change in cash of businesses held-for-sale	Change in cash of businesses held-for-sale	65		—		Change in cash of businesses held-for-sale	65		0
Cash and cash equivalents, end of year	Cash and cash equivalents, end of year	$	8,364	$	4,734	Cash and cash equivalents, end of year	$	8,684	$	4,471

Non-cash transactions:	Non-cash transactions:					Non-cash transactions:
Right-of-use assets obtained in exchange for lease obligations	Right-of-use assets obtained in exchange for lease obligations	$	16	$	11	Right-of-use assets obtained in exchange for lease obligations	$	24	$	41

See Notes to Consolidated Financial Statements (Unaudited).

910

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited)

1) ORGANIZATION

Equitable Holdings, Inc. (which removed “AXA” from its name on January 13, 2020, “Holdings” and, with its consolidated subsidiaries, the “Company”) is the holding company for a diversified financial services organization. The Company conducts operations in 4 segments: Individual Retirement, Group Retirement, Investment Management and Research, and Protection Solutions. The Company’s management evaluates the performance of each of these segments independently.

•The Individual Retirement segment offers a diverse suite of variable annuity products which are primarily sold to affluent and high net worth individuals saving for retirement or seeking retirement income.

•The Group Retirement segment offers tax-deferred investment and retirement services or products to plans sponsored by educational entities, municipalities and not-for-profit entities, as well as small and medium-sized businesses.

•The Investment Management and Research segment provides diversified investment management, research and related solutions globally to a broad range of clients through three main client channels - Institutional, Retail and Private Wealth Management - and distributes its institutional research products and solutions through Bernstein Research Services. The Investment Management and Research segment reflects the business of AllianceBernstein Holding L.P. (“AB Holding”), AllianceBernstein L.P. (“ABLP”) and their subsidiaries (collectively, “AB”).

•The Protection Solutions segment includes the Company’s life insurance and group employee benefits businesses. The life insurance business offers a variety of variable universal life, indexed universal life and term life products to help affluent and high net worth individuals, as well as small and medium-sized business owners, with their wealth protection, wealth transfer and corporate needs. Our group employee benefits business offers a suite of life, short- and long-term disability, dental and vision insurance products to small and medium-size businesses across the United States.

The Company reports certain activities and items that are not included in our segments in Corporate and Other. Corporate and Other includes certain of our financing and investment expenses. It also includes: Equitable Advisors, LLC (“Equitable Advisors”) broker-dealer business, closed block of life insurance (the “Closed Block”), run-off variable annuity reinsurance business, run-off group pension business, run-off health business, benefit plans for our employees, certain strategic investments and certain unallocated items, including capital and related investments, interest expense and corporate expense. AB’s results of operations are reflected in the Investment Management and Research segment. Accordingly, Corporate and Other does not include any items applicable to AB.

At ~~June~~both September 30, 2020 and December 31, 2019, the Company’s economic interest in AB was approximately 65% ~~and 65%, respectively.~~. The general partner of AB, AllianceBernstein Corporation (the “General Partner”), is a wholly-owned subsidiary of the Company. Because the General Partner has the authority to manage and control the business of AB, AB is consolidated in the Company’s financial statements for all periods.

Sale of U.S. Financial Life Insurance Company and MONY Life Insurance Company of the Americas, Ltd

On December 10, 2019, Holdings entered into a definitive agreement to sell U.S. Financial Life Insurance Company (“USFL”) and MONY Life Insurance Company of the Americas, Ltd (“MLICA”), indirect wholly-owned subsidiaries of Holdings. The transaction closed on April 1, 2020. Accordingly, the Company recognized an impairment loss in Investment gains (losses), net, in the consolidated statements of income (loss) of $39 million and $105 million, net of income tax, during the ~~six~~nine months ended ~~June~~September 30, 2020 and year ended December 31, 2019, respectively. In addition, the assets and liabilities of USFL and MLICA were reported as “held-for-sale” in the Company’s consolidated balance sheets from December 31, 2019 through the date the transaction closed. The assets held-for-sale were reported in the Protection Solutions segment as of December 31, 2019.

2) SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The unaudited interim consolidated financial statements (the “consolidated financial statements”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP” or

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

~~“GAAP”~~ “GAAP”) on a basis consistent with reporting interim financial information in accordance with instructions to the Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”).

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

In the opinion of management, all adjustments necessary for a fair ~~presentation~~statement of the financial position and results of operations have been made. All such adjustments are of a normal, recurring nature, with the exception of the Company’s update of its interest rate assumption and adoption of new economic scenario generator as further described below in Assumption Updates and Model Changes. Interim results are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The accompanying unaudited consolidated financial statements present the consolidated results of operations, financial condition, and cash flows of the Company and its subsidiaries and those investment companies, partnerships and joint ventures in which the Company has control and a majority economic interest as well as those variable interest entities (“VIEs”) that meet the requirements for consolidation.

All significant intercompany transactions and balances have been eliminated in consolidation. The terms ~~“second~~“third quarter 2020” and ~~“second~~“third quarter 2019” refer to the three months ended ~~June~~September 30, 2020 and 2019, respectively. The terms “first ~~six~~nine months of 2020” and “first ~~six~~nine months of 2019” refer to the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

Certain prior year amounts have been reclassified to conform to the current year’s presentation.

Adoption of New Accounting Pronouncements


Description			Effect on the Financial Statement or Other Significant Matters
ASU 2016-13: Financial Instruments—Credit Losses (Topic 326), as clarified and amended by ASU 2018-19: Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU 2019-04: Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments and ASU 2019-05: Financial Instruments—Credit Losses (Topic 326) Targeted Transition Relief, ASU 2019-11: Codification Improvements to Topic 326, Financial Instruments—Credit Losses
ASU 2016-13 contains new guidance which introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU 2019-05 provides entities that have instruments within the scope of Subtopic 326-20 an option to irrevocably elect the fair value option on an ~~instrument-by instrument~~instrument-by-instrument basis upon adoption of Topic 326. ASU 2018-19, ASU 2019-04 and ASU 2019-11 clarified the codification guidance and did not materially change the standard.			On January 1, 2020, the Company adopted the new standard and completed implementation of its updated current expected credit losses (“CECL”) models, processes and controls related to the identified financial assets that fall within the scope of the new standard. Upon adoption, the Company recorded a cumulative effect adjustment to reduce the opening retained earnings balance by approximately $40 million, on a pre-tax and pre-DAC basis. The adjustment is primarily attributable to an increase in the allowance for credit losses associated with the Company’s commercial and agricultural mortgage loan portfolios and reinsurance. Results for reporting periods beginning after January 1, 2020 are presented under ASU 2016-13 while prior period amounts continue to be reported in accordance with previously applicable GAAP.
ASU 2018-13: Fair Value Measurement (Topic 820)
This ASU improves the effectiveness of fair value disclosures in the notes to financial statements. Amendments in this ASU impact the disclosure requirements in Topic 820, including the removal, modification and addition to existing disclosure requirements.			The Company elected to early adopt during 2019 the removal of disclosures relating to transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and valuation processes for Level 3 fair value measurements. The Company adopted the additional disclosures related to Level 3 fair value information on January 1, 2020.
ASU 2018-17: Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities
This ASU provides guidance requiring that indirect interests held through related parties in common control arrangements be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests.			The Company adopted this new standard effective for January 1, 2020. Adoption of this standard did not materially impact the Company’s financial position or results of operations.

Future Adoption of New Accounting Pronouncements

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

~~Future Adoption of New Accounting Pronouncements~~

Description

Effective Date and Method of Adoption

Effect on the Financial Statement or Other Significant Matters

ASU 2018-12: Financial Services - Insurance (Topic 944); ASU 2019-09: Financial Services - Insurance (Topic 944): Effective Date

This ASU provides targeted improvements to existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by an insurance entity. The ASU primarily impacts four key areas, including:

In November 2019, ASU 2019-09 was issued which modified ASU 2018-12 to be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption is permitted. On ~~July 9,~~September 30, 2020, the FASB ~~issued an exposure draft which proposed a one-year deferral of~~tentatively affirmed its decision to defer the effective date of the amendments in ASU 2018-12, for all insurance ~~entities.~~entities by one year. Early adoption would still be allowed.

The Company is currently evaluating the impact that adoption of this guidance will have on the Company’s consolidated financial statements, however the adoption of the ASU is expected to have a significant impact on the Company’s consolidated financial condition, results of operations, cash flows and required disclosures, as well as processes and controls.

1. Measurement of the liability for future policy benefits for traditional and limited payment contracts. The ASU requires companies to review, and if necessary, update cash flow assumptions at least annually for non-participating traditional and limited-payment insurance contracts. Interest rates used to discount the liability will need to be updated quarterly using an upper medium grade (low credit risk) fixed-income instrument yield.

2. Measurement of market risk benefits (“MRBs”). MRBs, as defined under the ASU, will encompass certain GMxB features associated with variable annuity products and other general account annuities with other than nominal market risk. The ASU requires MRBs to be measured at fair value with changes in value attributable to changes in instrument-specific credit risk recognized in OCI.

3. Amortization of deferred acquisition costs. The ASU simplifies the amortization of deferred acquisition costs and other balances amortized in proportion to premiums, gross profits, or gross margins, requiring such balances to be amortized on a constant level basis over the expected term of the contracts. Deferred costs will be required to be written off for unexpected contract terminations but will not be subject to impairment testing.

4. Expanded footnote disclosures. The ASU requires additional disclosures including disaggregated roll-forwards of beginning to ending balances of the liability for future policy benefits, policyholder account balances, MRBs, separate account liabilities and deferred acquisition costs. Companies will also be required to disclose information about significant inputs, judgements, assumptions and methods used in measurement.

For the liability for future policyholder benefits for traditional and limited payment contracts, companies can elect one of two adoption methods. Companies can either elect a modified retrospective transition method applied to contracts in force as of the beginning of the earliest period presented on the basis of their existing carrying amounts, adjusted for the removal of any related amounts in Accumulated other comprehensive income (“AOCI”) or a full retrospective transition method using actual historical experience information as of contract inception. The same adoption method must be used for deferred policy acquisition costs.

For MRBs, the ASU should be applied retrospectively as of the beginning of the earliest period presented.

For deferred policy acquisition costs, companies can elect one of two adoption methods. Companies can either elect a modified retrospective transition method applied to contracts in force as of the beginning of the earliest period presented on the basis of their existing carrying amounts, adjusted for the removal of any related amounts in AOCI or a full retrospective transition method using actual historical experience information as of contract inception. The same adoption method must be used for the liability for future policyholder benefits for traditional and limited payment contracts.

1213

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Description

Effective Date and Method of Adoption

Effect on the Financial Statement or Other Significant Matters

ASU 2019-12: Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes

This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, as well as clarifying and amending existing guidance.

Effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted.

The Company is currently evaluating the impact adopting the guidance will have on the Company’s consolidated financial statements, however the adoption is not expected to materially impact the Company’s financial position, results of operation, or cash flows.

ASU2020-04: Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

The amendments in this ASU provide optional expedients and exceptions to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

This ASU is effective as of March 12, 2020 through December 31, 2022.

The Company will determine the applicability of the optional expedients and exceptions provided under the ASU as reference rate reform continues to develop.

Goodwill

Starting as of June 30, 2020, the Company changed its measurement of the fair value of the Company’s Investment Management and Research reporting unit from a discounted cash flow valuation technique to a market valuation approach. Under the market valuation approach, the fair value of the reporting unit is based on its adjusted market valuation assuming a control premium. The Company has determined that this valuation technique provides a more exact determination of fair value for the reporting unit. This approach will be applied when the Company performs its annual testing for goodwill recoverability at December ~~31.~~31, 2020. The Company also determined that if the market valuation approach had been applied in the first quarter 2020, it would not have resulted in an impairment of the reporting unit.

Investments

The carrying values of fixed maturities classified as available-for-sale (“AFS”) are reported at fair value. Changes in fair value are reported in OCI, net of allowance for credit losses, policy related amounts and deferred income taxes. With the adoption of the new Financial Instruments-Credit Losses standard, changes in credit losses are recognized in Investment gains (losses), net. The redeemable preferred stock investments that are reported in fixed maturities include real estate investment trusts (“REIT”), perpetual preferred stock and redeemable preferred stock. These securities may not have a stated maturity, may not be cumulative, and do not provide for mandatory redemption by the issuer.

The Company determines the fair values of fixed maturities and equity securities based upon quoted prices in active markets, when available, or through the use of alternative approaches when market quotes are not readily accessible or available. These alternative approaches include matrix or model pricing and use of independent pricing services, each supported by reference to principal market trades or other observable market assumptions for similar securities. More specifically, the matrix pricing approach to fair value is a discounted cash flow methodology that incorporates market interest rates commensurate with the credit quality and duration of the investment. The Company’s management, with the assistance of its investment advisors, evaluates AFS debt securities that experienced a decline in fair value below amortized cost for credit losses which are evaluated in accordance with the new financial instruments credit losses guidance effective January 1, 2020. Integral to this review is an assessment made each quarter, on a security-by-security basis, by the Company’s Investments Under Surveillance (“IUS”) Committee, of various indicators of credit deterioration to determine whether the investment security has experienced a credit loss. This assessment includes, but is not limited to, consideration of the severity of the unrealized loss, failure, if any, of the issuer of the security to make scheduled payments, actions taken by rating agencies, adverse conditions specifically related to the security or sector, and the financial strength, liquidity and continued viability of the issuer.

The Company recognizes an allowance for credit losses on AFS debt securities with a corresponding adjustment to earnings rather than a direct write down that reduces the cost basis of the investment, and credit losses are limited to the amount by which the security’s amortized cost basis exceeds its fair value. Any improvements in estimated credit

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

losses on AFS debt securities are recognized immediately in earnings. Management does not use the length of time a

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

security has been in an unrealized loss position as a factor, either by itself or in combination with other factors, to conclude that a credit loss does not exist, as they were permitted to do prior to January 1, 2020.

When the Company determines that there is more than 50% likelihood that it is not going to recover the principal and interest cash flows related to an AFS debt security, the security is placed on nonaccrual status and the Company reverses accrued interest receivable against interest income. Since the nonaccrual policy results in a timely reversal of accrued interest receivable, the Company does not record an allowance for credit losses on accrued interest receivable.

If there is no intent to sell or likely requirement to dispose of the fixed maturity security before its recovery, only the credit loss component of any resulting allowance is recognized in income (loss) and the remainder of the fair value loss is recognized in OCI. The amount of credit loss is the shortfall of the present value of the cash flows expected to be collected as compared to the amortized cost basis of the security. The present value is calculated by discounting management’s best estimate of projected future cash flows at the effective interest rate implicit in the debt security at the date of acquisition. Projections of future cash flows are based on assumptions regarding probability of default and estimates regarding the amount and timing of recoveries. These assumptions and estimates require use of management judgment and consider internal credit analyses as well as market observable data relevant to the collectability of the security.

Write-offs of AFS debt securities are recorded when all or a portion of a financial asset is deemed uncollectible. Full or partial write-offs are recorded as reductions to the amortized cost basis of the AFS debt security and deducted from the allowance in the period in which the financial assets are deemed uncollectible. The Company elected to reverse accrued interest deemed uncollectible as a reversal of interest income. In instances where the Company collects cash that it has previously written off, the recovery will be recognized through earnings or as a reduction of the amortized cost basis for interest and principal, respectively.

Real estate held for the production of income is stated at depreciated cost less allowance for credit losses. Depreciation of real estate held for production of income is computed using the straight-line method over the estimated useful lives of the properties, which generally range from 40 to 50 years.

Policy loans represent funds loaned to policyholders up to the cash surrender value of the associated insurance policies and are carried at the unpaid principal balances due to the Company from the policyholders. Interest income on policy loans is recognized in net investment income at the contract interest rate when earned. Policy loans are fully collateralized by the cash surrender value of the associated insurance policies.

Partnerships, investment companies, and joint venture interests that the Company has control of and has an economic interest in or those that meet the requirements for consolidation under accounting guidance for consolidation of VIEs are consolidated. Those that the Company does not have control of and does not have a majority economic interest in and those that do not meet the VIE requirements for consolidation are reported on the equity method of accounting and are reported in other equity investments. The Company records its interests in certain of these partnerships on a month or one quarter lag.

Trading securities, which include equity securities and fixed maturities, are carried at fair value based on quoted market prices, with realized and unrealized gains (losses) reported in net investment income (loss) in the consolidated statements of income (loss).

Corporate owned life insurance (“COLI”) has been purchased by the Company and certain subsidiaries on the lives of certain key employees and the Company and these subsidiaries are named as beneficiaries under these policies. COLI is carried at the cash surrender value of the policies. At ~~June~~September 30, 2020 and December 31, 2019, the carrying value of COLI was ~~$980~~$958 million and $944 million, respectively, and is reported in Other invested assets in the consolidated balance sheets.

Cash and cash equivalents includes cash on hand, demand deposits, money market accounts, overnight commercial paper and highly liquid debt instruments purchased with an original maturity of three months or less. Due to the short-term nature of these investments, the recorded value is deemed to approximate fair value. Cash and securities segregated primarily includes U.S. Treasury Bills segregated by AB in a special reserve bank custody account for the exclusive benefit of its brokerage customers under Rule 15c3-3 of the Exchange Act.

All securities owned, including U.S. government and agency securities, mortgage-backed securities, futures and forwards transactions, are reported in the consolidated financial statements on a trade date basis.

~~Commercial and Agricultural~~

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Mortgage Loans on Real Estate

Mortgage loans are stated at unpaid principal balances, net of unamortized discounts and the allowance for credit losses. The Company calculates the allowance for credit losses in accordance with the CECL model in order to provide for the risk of credit losses in the lending process.

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

Expected credit losses for loans with similar risk characteristics are estimated on a collective (i.e., pool) basis in order to meet CECL’s risk of loss concept which requires the Company to consider possibilities of loss, even if remote.

For collectively evaluated mortgages, the Company estimates the allowance for credit losses based on the amortized cost basis of its mortgages over their expected life using a probability of default (“PD”) / loss given default (“LGD”) model. The PD/LGD model incorporates the Company’s reasonable and supportable forecast of macroeconomic information over a specified period. The length of the reasonable and supportable forecast period is reassessed on a quarterly basis and may be adjusted as appropriate over time to be consistent with macroeconomic conditions and the environment as of the reporting date. For periods beyond the reasonable and supportable forecast period, the model reverts to historical loss information. The PD and LGD are estimated at the loan-level based on loans’ current and forecasted risk characteristics as well as macroeconomic forecasts. The PD is estimated using both macroeconomic conditions as well as individual loan risk characteristics including LTV ratios, DSC ratios, seasoning, collateral type, geography, and underlying credit. The LGD is driven primarily by the type and value of collateral, and secondarily by expected liquidation costs and time to recovery.

The CECL model is configured to the Company’s specifications and takes into consideration the detailed risk attributes of each discrete loan in the mortgage portfolio which include, but are not limited to the following:

•Loan-to-value (“LTV”) ratio - Derived from current loan balance divided by the fair market value of the property. An LTV ratio in excess of 100% indicates an underwater mortgage.

•Debt service coverage (“DSC”) ratio - Derived from actual operating earnings divided by annual debt service. If the ratio is below 1.0x, then the income from the property does not support the debt.

•Occupancy - Criteria varies by property type but low or below market occupancy is an indicator of sub-par property performance.

•Lease expirations - The percentage of leases expiring in the upcoming 12 to 36 months are monitored as a decline in rent and/or occupancy may negatively impact the debt service coverage ratio. In the case of single-tenant properties or properties with large tenant exposure, the lease expiration is a material risk factor.

•Other - Any other factors such as maturity, borrower/tenant related issues, payment status, property condition, or current economic conditions may call into question the performance of the loan.

Mortgage loans that do not share similar risk characteristics with other loans in the portfolio are individually evaluated quarterly by the Company’s IUS Committee. The allowance for credit losses on these individually evaluated mortgages is a loan-specific reserve as a result of the loan review process that is recorded based on the present value of expected future cash flows discounted at the loan’s effective interest rate or based on the fair value of the collateral. The individually assessed allowance for mortgage loans can increase or decrease from period to period based on such factors.

Individually assessed loans may include, but are not limited to, mortgages that have deteriorated in credit quality such as troubled debt restructurings (“TDR”) and reasonably expected TDRs, mortgages for which foreclosure is probable, and mortgages which have been classified as “potential problem” or “problem” loans within the Company’s IUS Committee processes as described below.

Within the IUS process, Commercial mortgages 60 days or more past due and agricultural mortgages 90 days or more past due, as well as all mortgages in the process of foreclosure, are identified as problem ~~mortgages.~~loans. Based on its monthly monitoring of mortgages, a class of potential problem ~~mortgages~~loans are also identified, consisting of mortgage loans not currently classified as problem ~~mortgages~~loans but for which management has doubts as to the ability of the borrower to comply with the present loan payment terms and which may result in the loan becoming a problem or being modified. The decision whether to classify a performing mortgage loan as a potential problem involves judgments by management as to likely future industry conditions and developments with respect to the borrower or the individual mortgaged property.

Individually assessed mortgage loans without provision for losses are mortgage loans where the fair value of the collateral or the net present value of the expected future cash flows related to the loan equals or exceeds the recorded

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

investment. Interest income earned on mortgage loans where the collateral value is used to measure impairment is recorded on a cash basis. Interest income on mortgage loans where the present value method is used to measure impairment is accrued on the net carrying value amount of the loan at the interest rate used to discount the cash flows.

Mortgage loans are placed on nonaccrual status once management believes the collection of accrued interest is not probable. Once mortgage loans are classified as nonaccrual mortgage loans, interest income is recognized under the cash basis of accounting and the resumption of the interest accrual would commence only after all past due interest has been collected or the mortgage loan has been restructured to where the collection of interest is considered likely. The Company charges off loan balances and accrued interest that are deemed uncollectible.

~~EQUITABLE HOLDINGS, INC.~~The components of amortized cost for mortgage loans on the consolidated balance sheets excludes accrued interest amounts because the Company presents accrued interest receivables within Other assets. Once mortgage loans are placed on nonaccrual status, the Company reverses accrued interest receivable against interest income. Since the nonaccrual policy results in the timely reversal of accrued interest receivable, the Company does not record an allowance for credit losses on accrued interest receivable.

~~Notes~~Troubled Debt Restructuring

The Company invests in commercial and agricultural mortgage loans included in the balance sheet as Mortgage loans on real estate and privately negotiated fixed maturities included in the balance sheet as Fixed maturities AFS. Under certain circumstances, modifications are granted to ~~Consolidated Financial Statements (Unaudited), Continued~~

these contracts. Each modification is evaluated as to whether a troubled debt restructuring has occurred. A modification is a troubled debt restructuring when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the face amount or maturity amount of the debt as originally stated, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company considers the amount, timing and extent of the concession granted in determining any impairment or changes in the specific credit allowance recorded in connection with the troubled debt restructuring. A credit allowance may have been recorded prior to the quarter when the loan is modified in a troubled debt restructuring. Accordingly, the carrying value (net of the allowance) before and after modification through a troubled debt restructuring may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment.

Net Investment Income (Loss), Investment Gains (Losses), Net, and Unrealized Investment Gains (Losses)

Realized investment gains (losses) are determined by identification with the specific asset and are presented as a component of revenue. Changes in the allowance for credit losses are included in Investment gains (losses), net.

Realized and unrealized holding gains (losses) on trading and equity securities are reflected in Net investment income (loss).

Unrealized investment gains (losses) on fixed maturities designated as AFS held by the Company are accounted for as a separate component of AOCI, net of related deferred income taxes, as are amounts attributable to certain pension operations, Closed Block’s policyholders’ dividend obligation, insurance liability loss recognition, DAC related to UL policies, investment-type products and participating traditional life policies.

Changes in unrealized gains (losses) reflect changes in fair value of only those fixed maturities classified as AFS and do not reflect any change in fair value of policyholders’ account balances and future policy benefits.

Accounting and Consolidation of VIEs

For all new investment products and entities developed by the Company (other than Collateralized Debt Obligations (“CDOs”)), the Company first determines whether the entity is a VIE, which involves determining an entity’s variability and variable interests, identifying the holders of the equity investment at risk and assessing the five characteristics of a VIE. Once an entity has been determined to be a VIE, the Company then identifies the primary beneficiary of the VIE. If the Company is deemed to be the primary beneficiary of the VIE, then the Company consolidates the entity.

Management of the Company reviews quarterly its investment management agreements and its investments in, and other financial arrangements with, certain entities that hold client assets under management (“AUM”) to determine the entities that the Company is required to consolidate under this guidance. These entities include certain mutual fund products, hedge funds, structured products, group trusts, collective investment trusts and limited partnerships.

The analysis performed to identify variable interests held, determine whether entities are VIEs or voting interest entities (“VOEs”), and evaluate whether the Company has a controlling financial interest in such entities requires the

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

exercise of judgment and is updated on a continuous basis as circumstances change or new entities are developed. The primary beneficiary evaluation generally is performed qualitatively based on all facts and circumstances, including consideration of economic interests in the VIE held directly and indirectly through related parties and entities under common control, as well as quantitatively, as appropriate.

Consolidated VIEs

At ~~June~~September 30, 2020 and December 31, 2019, the Company consolidated 1 real estate joint venture for which it was identified as the primary beneficiary under the VIE model. The consolidated entity is jointly owned by Equitable Financial Life Insurance Company (“Equitable Financial”) and AXA France and holds an investment in a real estate venture. Included in Other invested assets in the Company’s consolidated balance sheets at ~~June~~September 30, 2020 and December 31, 2019 are total assets of ~~$30~~$31 million and $32 million, respectively, related to this VIE, primarily resulting from the consolidated presentation of this real estate joint venture as real estate ~~held-for-sale.~~held for sale.

As of September 30, 2020, Equitable Financial holds $18 million of equity interests in a newly formed Special Purpose Entity, (“SPE”) established to purchase loans from the market in anticipation of a Collateralized Loan Obligation (“CLO”) transaction. The Company has determined it will consolidate the SPE as of September 30, 2020 as it is the primary beneficiary due to the combination of both its equity interest held by Equitable Financial and the majority ownership of AB, which functions as the SPE loan manager.

Consolidated AB-Sponsored Investment Funds

Included in the Company’s consolidated balance sheet at ~~June~~September 30, 2020 and December 31, 2019 are assets of ~~$161~~$169 million and $424 million, liabilities of $6$7 million and $12 million, and redeemable noncontrolling interests of ~~$35~~$39 million and $273 million, respectively, associated with the consolidation of AB-sponsored investment funds under the VIE model. Also included in the Company’s consolidated balance sheets at ~~June~~September 30, 2020 and December 31, 2019 are assets of ~~$114~~$102 million and $188 million, liabilities of ~~$20~~$23 million and $19 million, and redeemable noncontrolling interests of ~~$16~~$18 million and $52 million, respectively, from consolidation of AB-sponsored investment funds under the VOE model. The assets of these consolidated funds are presented within Other invested assets and Cash and cash equivalents, and liabilities of these consolidated funds are presented with Other liabilities in the Company’s consolidated balance sheets; ownership interests not held by the Company relating to consolidated VIEs and VOEs are presented either as redeemable or non-redeemable noncontrolling interests, as appropriate. Redeemable noncontrolling interests are presented in mezzanine equity and non-redeemable noncontrolling interests are presented within permanent equity. The Company is not required to provide financial support to these Company-sponsored investment funds, and only the assets of such funds are available to settle each fund’s own liabilities.

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

Non-Consolidated VIEs

At ~~June~~September 30, 2020 and December 31, 2019, respectively, the Company held approximately ~~$1.2~~$1.3 billion and $1.2 billion of investment assets in the form of equity interests issued by non-corporate legal entities determined under the guidance to be VIEs, such as limited partnerships and limited liability companies, including hedge funds, private equity funds and real estate-related funds. As an equity investor, the Company is considered to have a variable interest in each of these VIEs as a result of its participation in the risks and/or rewards these funds were designed to create by their defined portfolio objectives and strategies. Primarily through qualitative assessment, including consideration of related party interests or other financial arrangements, if any, the Company was not identified as primary beneficiary of any of these VIEs, largely due to its inability to direct the activities that most significantly impact their economic performance. Consequently, the Company continues to reflect these equity interests in the consolidated balance sheets as Other equity investments and applies the equity method of accounting for these positions. The net assets of these non-consolidated VIEs are approximately ~~$146.6~~$156.7 billion and $160.2 billion at ~~June~~September 30, 2020 and December 31, 2019, respectively. The Company’s maximum exposure to loss from its direct involvement with these VIEs is the carrying value of its investment of ~~$1.2~~$1.3 billion and $1.2 billion and approximately $1.2 billion and $1.1 billion of unfunded commitments at ~~June~~September 30, 2020 and December 31, 2019, respectively. The Company has no further economic interest in these VIEs in the form of guarantees, derivatives, credit enhancements or similar instruments and obligations.

In addition, at ~~June~~September 30, 2020 and December 31, 2019, Other invested assets includes real estate ~~held-for-sale~~held for production of ~~$(5)~~income of $(4) million and $(5) million, respectively, as related to 1 non-consolidated real estate joint venture.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Non-Consolidated AB-Sponsored Investment Products

As of ~~June~~September 30, 2020 and December 31, 2019, the net assets of investment products sponsored by AB that are non-consolidated VIEs are approximately ~~$63.5~~$68.9 billion and $79.3 billion, respectively. The Company’s maximum exposure to loss from its direct involvement with these VIEs is its investment of ~~$13~~$7 million and $8 million at ~~June~~September 30, 2020 and December 31, 2019, respectively. The Company has no further commitments to or economic interest in these VIEs.

Assumption Updates and Model Changes

The Company conducts its annual review of its assumptions and models during the third quarter of each year. The annual review encompasses assumptions underlying the valuation of unearned revenue liabilities, embedded derivatives for our insurance business, liabilities for future policyholder benefits, DAC and deferred sales inducement (“DSI”) assets.

However, the Company updates its assumptions as needed in the event it becomes aware of economic conditions or events that could require a change in assumptions that it believes may have a significant impact to the carrying value of product liabilities and assets and consequently materially impact its earnings in the period of the change.

Annual Update

The net impact of assumption changes in the third quarter of 2020 decreased Policy charges and fee income by $23 million, increased Policyholders’ benefits by $193 million, increased Interest credited to policyholders’ account balances by $5 million, decreased Net derivative losses by $112 million and decreased Amortization of DAC by $35 million. This resulted in a decrease in Income (loss) from operations, before income taxes of $74 million and decreased Net income (loss) by $58 million. Third quarter 2020 assumption updates include a pre-tax gain of $445 million attributable to the removal of the credit risk adjustment from our fair value scenario calibration to better align with US valuation practices, offset by updates to our mortality and policyholder behavior assumptions to reflect emerging experience.

The net impact of assumption changes in the third quarter of 2019 increased Policy charges and fee income by $3 million, increased Policyholders’ benefits by $875 million, decreased Interest credited to policyholders’ account balances by $13 million, increased Net derivative losses by $578 million and decreased Amortization of DAC by $46 million. This resulted in a decrease in Income (loss) from operations, before income taxes of $1.4 billion and decreased Net income (loss) by $1.1 billion.

First Quarter Update

In the first quarter of 2020, due to the extraordinary economic conditions driven by the COVID-19 pandemic, the Company updated its interest rate assumption to grade from the current interest rate environment to an ultimate five-year historical average over a 10-year period. As such, the 10-year U.S. Treasury yield grades from the current level to an ultimate 5-year average of 2.25%. The Company determined that no assumption updates were necessary in the second quarter of 2020.

The low interest rate environment and update to the interest rate assumption caused a loss recognition event for the Company’s life interest-sensitive products, as well as to certain run-off business. This loss recognition event caused an acceleration of DAC amortization on the life interest-sensitive products and an increase in the premium deficiency reserve on the run-off business in the first quarter of 2020.

The net impact of the economic assumption update in the first ~~six months~~quarter of 2020 ~~increased Policyholders’ benefits by $1.4 billion, increased Amortization of DAC by $1.1 billion,~~ increased Policy charges and fee income by $46 million, ~~and~~increased Policyholders’ benefits by $1.4 billion, decreased Interest credited to policyholders’ account balances by $6 ~~million.~~million and increased Amortization of DAC by $1.1 billion. This resulted in a decrease in Income (loss) from continuing operations, before income taxes of $2.5 billion and decreased Net income (loss) of ~~$1.9~~$2.0 billion.

~~Also in~~Model Changes

In the first quarter of 2020, the Company adopted a new economic scenario generator to calculate the fair value of the GMIB reinsurance contract asset and GMxB derivative features liability, eliminating reliance on AXA Group for scenario production. The new economic scenario generator allows for a tighter calibration of U.S. indices, better reflecting the Company’s actual portfolio. The net impact of the new economic scenario generator resulted in an increase in Income (loss) from continuing operations, before income taxes of $201 million, and an increase to Net Income (loss) of $159 million during the first ~~six~~nine months of 2020.

1719

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Revision of Prior Period Financial Statements

The Company identified certain errors in its previously issued financial statements primarily related to the calculation of actuarially determined insurance contract assets and liabilities. The impact of these errors to the current and the prior periods consolidated financial statements were not considered to be material. In order to improve the consistency and comparability of the financial statements, management revised the consolidated financial statements to include the revisions discussed herein. See Note 16 to the Notes to Consolidated Financial Statements for details of the revisions.

3) INVESTMENTS

Fixed Maturities Available-for-Sale

Accounting for credit impairments of fixed maturities classified as AFS has changed from a direct write-down, or other-than-temporary impairment (“OTTI”) approach, to an allowance for credit loss model starting in 2020 upon adoption of CECL (see Note 2, Significant Accounting Policies — Investments).

The components of fair value and amortized cost for fixed maturities classified as AFS on the consolidated balance sheets excludes accrued interest receivable because the Company elected to present accrued interest receivable within Other assets. Accrued interest receivable on AFS fixed maturities at ~~June~~September 30, 2020 was ~~$514~~$547 million.

There was 0 accrued interest written off for AFS fixed maturities for the three and ~~six~~nine months ended ~~June~~September 30, 2020.

Comparative tables as of December 31, 2019 include OTTI, reported net of tax in OCI and in AOCI until realized.

The following tables provide information relating to the Company’s fixed maturities classified as AFS.

AFS Fixed Maturities by Classification


		Amortized Cost		Allowance for Credit Losses (4)		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		Allowance for Credit Losses (4)		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
		(in millions)																			(in millions)
June 30, 2020
September 30, 2020												September 30, 2020
Fixed Maturities:	Fixed Maturities:											Fixed Maturities:
Corporate (1)	Corporate (1)	$	49,494	$	13	$	4,452	$	156	$	53,777	Corporate (1)	$	51,340	$	13	$	4,661	$	176	$	55,812
U.S. Treasury, government and agency	U.S. Treasury, government and agency	13,135		—		4,242		—		17,377		U.S. Treasury, government and agency	13,160		0		4,308		0		17,468
States and political subdivisions	States and political subdivisions	663		—		112		—		775		States and political subdivisions	762		0		116		0		878
Foreign governments	Foreign governments	771		—		69		5		835		Foreign governments	829		0		82		6		905
Residential mortgage-backed (2)	Residential mortgage-backed (2)	160		—		15		—		175		Residential mortgage-backed (2)	146		0		14		0		160
Asset-backed (3)	Asset-backed (3)	2,062		—		24		41		2,045		Asset-backed (3)	2,588		0		26		18		2,596
Commercial mortgage-backed	Commercial mortgage-backed	854		—		25		—		879		Commercial mortgage-backed	1,067		0		50		0		1,117
Redeemable preferred stock	Redeemable preferred stock	376		—		15		11		380		Redeemable preferred stock	415		0		31		3		443
Total at June 30, 2020		$	67,515	$	13	$	8,954	$	213	$	76,243
Total at September 30, 2020												Total at September 30, 2020	$	70,307	$	13	$	9,288	$	203	$	79,379

December 31, 2019 (5)	December 31, 2019 (5)											December 31, 2019 (5)
Fixed Maturities:	Fixed Maturities:											Fixed Maturities:
Corporate (1)	Corporate (1)	$	45,900	$	—	$	2,361	$	62	$	48,199	Corporate (1)	$	45,900	$	0	$	2,361	$	62	$	48,199
U.S. Treasury, government and agency	U.S. Treasury, government and agency	14,410		—		1,289		305		15,394		U.S. Treasury, government and agency	14,410		0		1,289		305		15,394
States and political subdivisions	States and political subdivisions	638		—		70		3		705		States and political subdivisions	638		0		70		3		705
Foreign governments	Foreign governments	462		—		35		5		492		Foreign governments	462		0		35		5		492
Residential mortgage-backed (2)	Residential mortgage-backed (2)	178		—		13		—		191		Residential mortgage-backed (2)	178		0		13		0		191
Asset-backed (3)	Asset-backed (3)	848		—		4		3		849		Asset-backed (3)	848		0		4		3		849
Redeemable preferred stock	Redeemable preferred stock	501		—		17		5		513		Redeemable preferred stock	501		0		17		5		513
Total at December 31, 2019	Total at December 31, 2019	$	62,937	$	—	$	3,789	$	383	$	66,343	Total at December 31, 2019	$	62,937	$	0	$	3,789	$	383	$	66,343

______________

(1)Corporate fixed maturities include both public and private issues.

(2)Includes publicly traded agency pass-through securities and collateralized obligations.

(3)Includes credit-tranched securities collateralized by sub-prime mortgages and other asset types and credit tenant loans.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

(4)Amounts represent the allowance for credit losses for 2020 (see Note 2 Significant Accounting Policies – Investments).

(5)Excludes amounts reclassified as ~~Held-for-Sale.~~HFS.

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

The contractual maturities of AFS fixed maturities at ~~June~~September 30, 2020 are shown in the table below. Bonds not due at a single maturity date have been included in the table in the final year of maturity. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Contractual Maturities of AFS Fixed Maturities

Amortized Cost (Less Allowance for Credit Losses) Fair Value
(in millions)
June 30, 2020 (1)
Contractual maturities:
Due in one year or less $ 4,645 $ 4,688
Due in years two through five 15,141 15,985
Due in years six through ten 18,394 20,398
Due after ten years 25,870 31,693
Subtotal 64,050 72,764
Residential mortgage-backed 160 175
Asset-backed 2,062 2,045
Commercial mortgage-backed 854 879
Redeemable preferred stock 376 380
Total at June 30, 2020 $ 67,502 $ 76,243

~~______________~~

~~(1)Net amortized cost is equal to amortized cost, less any allowance for credit losses to the extent applicable.~~


	Amortized Cost (Less Allowance for Credit Losses)		Fair Value
	(in millions)
September 30, 2020
Contractual maturities:
Due in one year or less	$	4,326	$	4,362
Due in years two through five	15,844		16,772
Due in years six through ten	18,836		20,887
Due after ten years	27,072		33,042
Subtotal	66,078		75,063
Residential mortgage-backed	146		160
Asset-backed	2,588		2,596
Commercial mortgage-backed	1,067		1,117
Redeemable preferred stock	415		443
Total at September 30, 2020	$	70,294	$	79,379

The following table shows proceeds from sales, gross gains (losses) from sales and credit losses for AFS fixed maturities for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019:

Proceeds from Sales, Gross Gains (Losses) from Sales and Credit Losses for AFS Fixed Maturities


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020		2019
		(in millions)															(in millions)
Proceeds from sales	Proceeds from sales	$	2,947	$	1,614	$	4,767	$	3,064	Proceeds from sales	$	1,433	$	3,849	$	6,200	$	6,913
Gross gains on sales	Gross gains on sales	$	207	$	10	$	277	$	18	Gross gains on sales	$	26	$	205	$	303	$	223
Gross losses on sales	Gross losses on sales	$	(28)	$	(7)	$	(34)	$	(25)	Gross losses on sales	$	(5)	$	(4)	$	(39)	$	(29)

Credit losses (1)	Credit losses (1)	$	(11)	$	—	$	(13)	$	—	Credit losses (1)	$	0	$	0	$	(13)	$	0

______________

(1) Commencing with the Company’s adoption of ASU 2016-13 on January 1, 2020, credit losses on AFS debt securities were recognized as an allowance for credit losses. ~~In 2019 and prior,~~Prior to this, credit losses on AFS fixed maturities were recognized as OTTI.

The following table sets forth the amount of credit loss impairments on AFS fixed maturities held by the Company at the dates indicated and the corresponding changes in such amounts.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

AFS Fixed Maturities - Credit Loss Impairments


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020		2019
		(in millions)															(in millions)
Balance, beginning of period	Balance, beginning of period	$	(23)	$	(26)	$	(21)	$	(58)	Balance, beginning of period	$	32	$	25	$	21	$	58
Previously recognized impairments on securities that matured, paid, prepaid or sold	Previously recognized impairments on securities that matured, paid, prepaid or sold	2		1		2		33		Previously recognized impairments on securities that matured, paid, prepaid or sold	0		(4)		(2)		(37)
Recognized impairments on securities impaired to fair value this period (1)	Recognized impairments on securities impaired to fair value this period (1)	—		—		—		—		Recognized impairments on securities impaired to fair value this period (1)	0		0		0		0
Credit losses recognized this period on securities for which credit losses were not previously recognized	Credit losses recognized this period on securities for which credit losses were not previously recognized	(8)		—		(10)		—		Credit losses recognized this period on securities for which credit losses were not previously recognized	(3)		0		7		0
Additional credit losses this period on securities previously impaired	Additional credit losses this period on securities previously impaired	(3)		—		(3)		—		Additional credit losses this period on securities previously impaired	3		0		6		0
Increases due to passage of time on previously recorded credit losses	Increases due to passage of time on previously recorded credit losses	—		—		—		—		Increases due to passage of time on previously recorded credit losses	0		0		0		0
Accretion of previously recognized impairments due to increases in expected cash flows (for OTTI securities 2019 and prior)	Accretion of previously recognized impairments due to increases in expected cash flows (for OTTI securities 2019 and prior)	—		—		—		—		Accretion of previously recognized impairments due to increases in expected cash flows (for OTTI securities 2019 and prior)	0		0		0		0
Balance at June 30,		$	(32)	$	(25)	$	(32)	$	(25)
Balance at September 30,										Balance at September 30,	$	32	$	21	$	32	$	21

______________

(1)Represents circumstances where the Company determined in the current period that it intends to sell the security, or it is more likely than not that it will be required to sell the security before recovery of the security’s amortized cost.

~~Net unrealized investment gains (losses) on AFS fixed maturities are included in the consolidated balance sheets as a component of AOCI.~~

Changes in net unrealized investment gains (losses) recognized in AOCI include reclassification adjustments to reflect amounts realized in Net income (loss) for the current period that had been part of OCI in earlier periods. The tables that follow below present a roll-forward of net unrealized investment gains (losses) recognized in AOCI, split between amounts related to fixed maturities on which a credit loss has been recognized, and all other.

Net Unrealized Gains (Losses) on AFS Fixed Maturities


		Net Unrealized Gains (Losses) on Investments		DAC		Policyholders’ Liabilities		Deferred Income Tax Asset (Liability)		AOCI Gain (Loss) Related to Net Unrealized Investment Gains (Losses)			Net Unrealized Gains (Losses) on Investments		DAC		Policyholders’ Liabilities		Deferred Income Tax Asset (Liability)		AOCI Gain (Loss) Related to Net Unrealized Investment Gains (Losses)
		(in millions)																			(in millions)
Balance, April 1, 2020		$	5,306	$	(921)	$	(354)	$	(847)	$	3,184
Balance, July 1, 2020												Balance, July 1, 2020	$	8,728	$	(1,521)	$	(1,034)	$	(1,297)	$	4,876
Net investment gains (losses) arising during the period	Net investment gains (losses) arising during the period	3,614		—		—		—		3,614		Net investment gains (losses) arising during the period	362		—		—		—		362
Reclassification adjustment:	Reclassification adjustment:											Reclassification adjustment:
Included in Net income (loss)	Included in Net income (loss)	(190)		—		—		—		(190)		Included in Net income (loss)	(21)		—		—		—		(21)
Excluded from Net income (loss)	Excluded from Net income (loss)	—		—		—		—		—		Excluded from Net income (loss)	0		—		—		—		0
Impact of net unrealized investment gains (losses) on:
DAC		—		(600)		—		—		(600)
Deferred income taxes		—		—		—		(450)		(450)
Policyholders’ liabilities		—		—		(681)		—		(681)
Impact of net unrealized investment gains (losses)												Impact of net unrealized investment gains (losses)	0		23		(13)		(74)		(64)
Net unrealized investment gains (losses) excluding credit losses	Net unrealized investment gains (losses) excluding credit losses	8,730		(1,521)		(1,035)		(1,297)		4,877		Net unrealized investment gains (losses) excluding credit losses	9,069		(1,498)		(1,047)		(1,371)		5,153
Net unrealized investment gains (losses) with credit losses	Net unrealized investment gains (losses) with credit losses	(2)		—		1		—		(1)		Net unrealized investment gains (losses) with credit losses	3		(1)		0		0		2
Balance, June 30, 2020		$	8,728	$	(1,521)	$	(1,034)	$	(1,297)	$	4,876
Balance, September 30, 2020												Balance, September 30, 2020	$	9,072	$	(1,499)	$	(1,047)	$	(1,371)	$	5,155

Balance, July 1, 2019												Balance, July 1, 2019	$	2,929	$	(649)	$	(101)	$	(481)	$	1,698
Net investment gains (losses) arising during the period												Net investment gains (losses) arising during the period	1,619		—		—		—		1,619
Reclassification adjustment:												Reclassification adjustment:
Included in Net income (loss)												Included in Net income (loss)	(199)		—		—		—		(199)
Excluded from Net income (loss)												Excluded from Net income (loss)	0		—		—		—		0
Impact of net unrealized investment gains (losses)												Impact of net unrealized investment gains (losses)	0		(374)		(121)		(150)		(645)

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Net Unrealized Gains (Losses) on Investments DAC Policyholders’ Liabilities Deferred Income Tax Asset (Liability) AOCI Gain (Loss) Related to Net Unrealized Investment Gains (Losses)
(in millions)
Balance, April 1, 2019 $ 1,187 $ (601) $ 12 $ (126) $ 472
Net investment gains (losses) arising during the period 1,746 — — — 1,746
Reclassification adjustment:
Included in Net income (loss) (4) — — — (4)
Excluded from Net income (loss) — — — — —
Impact of net unrealized investment gains (losses) on:
DAC — 49 — — 49
Deferred income taxes — — — (355) (355)
Policyholders’ liabilities — — (100) — (100)
Net unrealized investment gains (losses) excluding credit losses 2,929 (552) (88) (481) 1,808
Net unrealized investment gains (losses) with credit losses (1) 2 — — — 2
Balance, June 30, 2019 $ 2,931 $ (552) $ (88) $ (481) $ 1,810


	Net Unrealized Gains (Losses) on Investments		DAC		Policyholders’ Liabilities		Deferred Income Tax Asset (Liability)		AOCI Gain (Loss) Related to Net Unrealized Investment Gains (Losses)
	(in millions)
Net unrealized investment gains (losses) excluding credit losses	4,349		(1,023)		(222)		(631)		2,473
Net unrealized investment gains (losses) with credit losses (1)	0		0		0		0		0
Balance, September 30, 2019	$	4,349	$	(1,023)	$	(222)	$	(631)	$	2,473

Net Unrealized Gains (Losses) on Investments DAC Policyholders’ Liabilities Deferred Income Tax Asset (Liability) AOCI Gain (Loss) Related to Net Unrealized Investment Gains (Losses)
(in millions)
Balance, January 1, 2020 $ 3,453 $ (899) $ (189) $ (497) $ 1,868
Net investment gains (losses) arising during the period 5,536 — — — 5,536
Reclassification adjustment:
Included in Net income (loss) (252) — — — (252)
Excluded from Net income (loss) — — — — —
Impact of net unrealized investment gains (losses) on:
DAC — (624) — — (624)
Deferred income taxes — — — (801) (801)
Policyholders’ liabilities — — (846) — (846)
Net unrealized investment gains (losses) excluding credit losses 8,737 (1,523) (1,035) (1,298) 4,881
Net unrealized investment gains (losses) with credit losses (9) 2 1 1 (5)
Balance, June 30, 2020 $ 8,728 $ (1,521) $ (1,034) $ (1,297) $ 4,876

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~


													Net Unrealized Gains (Losses) on Investments		DAC		Policyholders’ Liabilities		Deferred Income Tax Asset (Liability)		AOCI Gain (Loss) Related to Net Unrealized Investment Gains (Losses)
													(in millions)
Balance, January 1, 2020												Balance, January 1, 2020	$	3,453	$	(894)	$	(189)	$	(497)	$	1,873
Net investment gains (losses) arising during the period												Net investment gains (losses) arising during the period	5,898		—		—		—		5,898
Reclassification adjustment:												Reclassification adjustment:
Included in Net income (loss)												Included in Net income (loss)	(273)		—		—		—		(273)
Excluded from Net income (loss)												Excluded from Net income (loss)	0		—		—		—		0
Impact of net unrealized investment gains (losses)												Impact of net unrealized investment gains (losses)	0		(606)		(859)		(875)		(2,340)
Net unrealized investment gains (losses) excluding credit losses												Net unrealized investment gains (losses) excluding credit losses	9,078		(1,500)		(1,048)		(1,372)		5,158
Net unrealized investment gains (losses) with credit losses												Net unrealized investment gains (losses) with credit losses	(6)		1		1		1		(3)
Balance, September 30, 2020												Balance, September 30, 2020	$	9,072	$	(1,499)	$	(1,047)	$	(1,371)	$	5,155
		Net Unrealized Gains (Losses) on Investments		DAC		Policyholders’ Liabilities		Deferred Income Tax Asset (Liability)		AOCI Gain (Loss) Related to Net Unrealized Investment Gains (Losses)
Balance, January 1, 2019	Balance, January 1, 2019	$	(522)	$	100	$	(73)	$	104	$	(391)	Balance, January 1, 2019	$	(522)	$	100	$	(88)	$	104	$	(406)
Net investment gains (losses) arising during the period	Net investment gains (losses) arising during the period	3,456		—		—		—		3,456		Net investment gains (losses) arising during the period	5,075		—		—		—		5,075
Reclassification adjustment:	Reclassification adjustment:											Reclassification adjustment:
Included in Net income (loss)	Included in Net income (loss)	(5)		—		—		—		(5)		Included in Net income (loss)	(204)		—		—		—		(204)
Excluded from Net income (loss)	Excluded from Net income (loss)	—		—		—		—		—		Excluded from Net income (loss)	0		—		—		—		0
Impact of net unrealized investment gains (losses) on:
DAC		—		(652)		—		—		(652)
Deferred income taxes		—		—		—		(585)		(585)
Policyholders’ liabilities		—		—		(15)		—		(15)
Impact of net unrealized investment gains (losses)												Impact of net unrealized investment gains (losses)	0		(1,123)		(134)		(735)		(1,992)
Net unrealized investment gains (losses) excluding credit losses	Net unrealized investment gains (losses) excluding credit losses	2,929		(552)		(88)		(481)		1,808		Net unrealized investment gains (losses) excluding credit losses	4,349		(1,023)		(222)		(631)		2,473
Net unrealized investment gains (losses) with credit losses (1)	Net unrealized investment gains (losses) with credit losses (1)	2		—		—		—		2		Net unrealized investment gains (losses) with credit losses (1)	0		0		0		0		0
Balance, June 30, 2019		$	2,931	$	(552)	$	(88)	$	(481)	$	1,810
Balance, September 30, 2019												Balance, September 30, 2019	$	4,349	$	(1,023)	$	(222)	$	(631)	$	2,473

_____________

(1)Credit losses for 2019 were OTTI losses.

The following tables disclose the fair values and gross unrealized losses of the ~~652~~729 issues at ~~June~~September 30, 2020 and the 413 issues at December 31, 2019 that are not deemed to have credit losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position for the specified periods at the dates indicated.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

AFS Fixed Maturities in an Unrealized Loss Position for Which No Allowance Is Recorded


		Less Than 12 Months						12 Months or Longer								Total					Less Than 12 Months				12 Months or Longer		Total
		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
		(in millions)																							(in millions)
June 30, 2020:
September 30, 2020:														September 30, 2020:
Fixed Maturities:	Fixed Maturities:													Fixed Maturities:
Corporate	Corporate	$	2,574	$	96	$	277	$	53	$	2,851	$	149	Corporate	$	4,247	$	121	$	369	$	50	$	4,616	$	171

Foreign governments	Foreign governments	47		6		—		—		47		6		Foreign governments	88		1		31		5		119		6

Asset-backed	Asset-backed	1,349		37		73		4		1,422		41		Asset-backed	1,324		16		74		2		1,398		18

Redeemable preferred stock	Redeemable preferred stock	123		9		11		2		134		11		Redeemable preferred stock	59		1		11		2		70		3
Total at June 30, 2020		$	4,093	$	148	$	361	$	59	$	4,454	$	207
Total at September 30, 2020														Total at September 30, 2020	$	5,718	$	139	$	485	$	59	$	6,203	$	198

December 31, 2019: (1) (2)	December 31, 2019: (1) (2)													December 31, 2019: (1) (2)
Fixed Maturities:	Fixed Maturities:													Fixed Maturities:
Corporate	Corporate	$	2,773	$	42	$	373	$	20	$	3,146	$	62	Corporate	$	2,773	$	42	$	373	$	20	$	3,146	$	62
U.S. Treasury, government and agency	U.S. Treasury, government and agency	4,309		305		2		—		4,311		305		U.S. Treasury, government and agency	4,309		305		2		0		4,311		305
States and political subdivisions	States and political subdivisions	112		3		—		—		112		3		States and political subdivisions	112		3		0		0		112		3
Foreign governments	Foreign governments	11		—		47		5		58		5		Foreign governments	11		0		47		5		58		5

Asset-backed	Asset-backed	319		1		201		2		520		3		Asset-backed	319		1		201		2		520		3

Redeemable preferred stock	Redeemable preferred stock	29		—		49		5		78		5		Redeemable preferred stock	29		0		49		5		78		5
Total at December 31, 2019	Total at December 31, 2019	$	7,553	$	351	$	672	$	32	$	8,225	$	383	Total at December 31, 2019	$	7,553	$	351	$	672	$	32	$	8,225	$	383

______________

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

(1)Amounts represents fixed maturities in an unrealized loss position that are not deemed to be ~~other-than-temporarily impaired~~OTTI for 2019.

(2)Excludes amounts reclassified as ~~Held-for-Sale.~~HFS.

The Company’s investments in fixed maturities do not include concentrations of credit risk of any single issuer greater than 10% of the consolidated equity of the Company, other than securities of the U.S. government, U.S. government agencies, and certain securities guaranteed by the U.S. government. The Company maintains a diversified portfolio of corporate securities across industries and issuers and does not have exposure to any single issuer in excess of 0.7% of total corporate securities. The largest exposures to a single issuer of corporate securities held at ~~June~~September 30, 2020 and December 31, 2019 were ~~$367~~$373 million and $309 million, respectively, representing ~~1.9%~~2.0% and ~~2.0%~~2.1% of the consolidated equity of the Company.

Corporate high yield securities, consisting primarily of public high yield bonds, are classified as other than investment grade by the various rating agencies, i.e., a rating below Baa3/BBB- or the National Association of Insurance Commissioners (“NAIC”) designation of 3 (medium investment grade), 4 or 5 (below investment grade) or 6 (in or near default). At ~~June~~September 30, 2020 and December 31, 2019, respectively, approximately ~~$1.9~~$2.0 billion and $1.4 billion, or 2.9% and 2.3%, of the ~~$67.5~~$70.3 billion and $62.9 billion aggregate amortized cost of fixed maturities held by the Company were considered to be other than investment grade. These securities had gross unrealized losses of ~~$113~~$83 million and $21 million at ~~June~~September 30, 2020 and December 31, 2019, respectively.

At ~~June~~September 30, 2020 and December 31, 2019, respectively, the $59 million and $32 million of gross unrealized losses of twelve months or more were primarily concentrated in corporate securities, as applicable. In accordance with the policy described in Note 2, the Company concluded that an adjustment to income for OTTI (prior to January 1, 2020) nor an allowance for credit losses (after January 1, 2020) for these securities was not warranted at either ~~June~~September 30, 2020 or December 31, 2019. At ~~June~~September 30, 2020 and December 31, 2019, the Company did not intend to sell the securities nor will it likely be required to dispose of the securities before the anticipated recovery of their remaining amortized cost basis.

Based on the Company’s evaluation both qualitatively and quantitatively of the drivers of the decline in fair value of fixed maturity securities as of ~~June~~September 30, 2020, the Company determined that the unrealized loss was primarily due

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

to increases in credit spreads and changes in credit ratings due to the impact of the COVID-19 pandemic on financial markets and assessments of fundamental risks.

Mortgage Loans on Real Estate

The Company utilizes a PD/LGD model, configured in accordance with the Company’s policies that meet the concepts in the CECL framework, to estimate expected credit losses for mortgage loans as a product of PD, LGD and the exposure at default across various economic scenarios. The PD and LGD are estimated at the loan-level based on loans’ current and forecasted risk characteristics as well as macroeconomic forecasts. The PD is estimated using both macroeconomic conditions as well as individual loan risk characteristics including LTV ratios, DSC ratios, seasoning, collateral type, geography, and underlying credit. The LGD is driven primarily by the type and value of collateral, and secondarily by expected liquidation costs and time to recovery.

The model also incorporates the Company’s reasonable and supportable forecasts of the macroeconomic variables deemed to be correlated to the credit risk of its loans. The length of the reasonable and supportable forecast period is reassessed on a quarterly basis and may be adjusted as appropriate over time to be consistent with macroeconomic conditions and the environment as of the reporting date. Reversion to historical loss information is performed for periods beyond the reasonable and supportable forecast period.

~~The components of amortized cost for mortgage loans on the consolidated balance sheets excludes accrued interest amounts because the Company presents accrued interest receivables within Other assets.~~ Accrued interest receivable on commercial and agricultural mortgage loans at ~~June~~September 30, 2020 was ~~$28~~$29 million and ~~$29~~$32 million, respectively. ~~Accrued interest of $1 million was written off for the three and six months ended June 30, 2020 for commercial mortgage loans.~~ There was 0 accrued interest written off for commercial and agricultural mortgage loans for the three and ~~six~~nine months ended ~~June~~September 30, 2020.

Once mortgage loans are placed on nonaccrual status, the Company reverses accrued interest receivable against interest income. Since the nonaccrual policy results in the timely reversal of accrued interest receivable, the Company does not record an allowance for credit losses on accrued interest receivable.

At ~~June~~September 30, 2020, the Company had 0 loans for which foreclosure was probable included within the individually assessed mortgage loans, and accordingly had 0 associated allowance for credit losses.

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

Allowance for Credit Losses on Mortgage Loans

The change in the allowance for credit losses for commercial mortgage loans and agricultural mortgage loans during the three and ~~six~~nine months ended ~~June~~September 30, 2020 was as follows:


		Three Months Ended June 30, 2020		Six Months Ended June 30, 2020			Three Months Ended September 30, 2020			Nine Months Ended September 30, 2020
		(in millions)								(in millions)
Allowance for credit losses on mortgage loans (1):	Allowance for credit losses on mortgage loans (1):								Allowance for credit losses on mortgage loans (1):
Commercial mortgages:	Commercial mortgages:					Commercial mortgages:
Balance, beginning of period	Balance, beginning of period	$	(43)	$	(33)	Balance, beginning of period	$	62		$	33
Current-period provision for expected credit losses	Current-period provision for expected credit losses	(19)		(29)		Current-period provision for expected credit losses	4			33
Write-offs charged against the allowance	Write-offs charged against the allowance	—		—		Write-offs charged against the allowance	0			0
Recoveries of amounts previously written off	Recoveries of amounts previously written off	—		—		Recoveries of amounts previously written off	0			0
Net change in allowance	Net change in allowance	$	(19)	$	(29)	Net change in allowance	$	4		$	33
Ending Balance, June 30,		$	(62)	$	(62)
Ending Balance, September 30,						Ending Balance, September 30,	$	66		$	66

Agricultural mortgages:	Agricultural mortgages:					Agricultural mortgages:
Balance, beginning of period	Balance, beginning of period	$	(3)	$	(3)	Balance, beginning of period	$	4		$	3
Current-period provision for expected credit losses	Current-period provision for expected credit losses	(1)		(1)		Current-period provision for expected credit losses	0			1
Write-offs charged against the allowance	Write-offs charged against the allowance	—		—		Write-offs charged against the allowance	0			0
Recoveries of amounts previously written off	Recoveries of amounts previously written off	—		—		Recoveries of amounts previously written off	—			0
Net change in allowance	Net change in allowance	$	(1)	$	(1)	Net change in allowance	$	0		$	1
Ending Balance, June 30,		$	(4)	$	(4)
Ending Balance, September 30,						Ending Balance, September 30,	$	4		$	4

Total allowance for credit losses	Total allowance for credit losses	$	(66)	$	(66)	Total allowance for credit losses	$	70		$	70

_______________

(1)See Note 2 for discussion of the allowance of credit losses transition ~~balance.~~balance, which is included in the Balance, beginning of period.

The change in the allowance for credit losses is attributable to:

•increases/decreases in the loan balance due to new originations, maturing mortgages, and loan amortization;

•changes in credit quality; and

•changes in market assumptions primarily related to COVID-19 driven economic changes.

Credit Quality Information

The following tables summarize the Company’s mortgage loans segregated by risk rating exposure at ~~June~~September 30, 2020.

~~LTV Ratios (1)(3)~~

At June 30, 2020
Amortized Cost Basis by Origination Year
2020 2019 2018 2017 2016 Prior Total
(in millions)
Mortgage loans:
Commercial:
0% - 50% $ — $ — $ 29 $ 324 $ 213 $ 748 $ 1,314
50% - 70% 656 613 915 759 2,501 1,714 7,158
70% - 90% 90 184 304 113 58 464 1,213
90% plus — — — 5 — 156 161
Total commercial $ 746 $ 797 $ 1,248 $ 1,201 $ 2,772 $ 3,082 $ 9,846
Agricultural:
0% - 50% $ 106 $ 139 $ 159 $ 167 $ 254 $ 733 $ 1,558

2425

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

At June 30, 2020
Amortized Cost Basis by Origination Year
2020 2019 2018 2017 2016 Prior Total
(in millions)
50% - 70% 204 139 186 112 129 394 1,164
70% - 90% — — 3 — — 18 21
90% plus — — — — — — —
Total agricultural $ 310 $ 278 $ 348 $ 279 $ 383 $ 1,145 $ 2,743
Total mortgage loans:
0% - 50% $ 106 $ 139 $ 188 $ 491 $ 467 $ 1,481 $ 2,872
50% - 70% 860 752 1,101 871 2,630 2,108 8,322
70% - 90% 90 184 307 113 58 482 1,234
90% plus — — — 5 — 156 161
Total mortgage loans $ 1,056 $ 1,075 $ 1,596 $ 1,480 $ 3,155 $ 4,227 $ 12,589
LTV Ratios (1)


	At September 30, 2020
	Amortized Cost Basis by Origination Year
	2020		2019		2018		2017		2016		Prior		Total
	(in millions)
Mortgage loans:
Commercial:
0% - 50%	$	0	$	0	$	0	$	324	$	187	$	650	$	1,161
50% - 70%	935		411		885		760		2,432		1,608		7,031
70% - 90%	90		394		368		115		153		574		1,694
90% plus	0		0		12		5		0		216		233
Total commercial	$	1,025	$	805	$	1,265	$	1,204	$	2,772	$	3,048	$	10,119

Agricultural:
0% - 50%	$	181	$	137	$	168	$	161	$	232	$	679	$	1,558
50% - 70%	253		131		172		110		136		372		1,174
70% - 90%	0		0		3		0		0		18		21
90% plus	0		0		0		0		0		0		0
Total agricultural	$	434	$	268	$	343	$	271	$	368	$	1,069	$	2,753

Total mortgage loans:
0% - 50%	$	181	$	137	$	168	$	485	$	419	$	1,329	$	2,719
50% - 70%	1,188		542		1,057		870		2,568		1,980		8,205
70% - 90%	90		394		371		115		153		592		1,715
90% plus	0		0		12		5		0		216		233
Total mortgage loans	$	1,459	$	1,073	$	1,608	$	1,475	$	3,140	$	4,117	$	12,872

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Debt Service Coverage Ratios (2)~~(3)~~


		At June 30, 2020																											At September 30, 2020
		Amortized Cost Basis by Origination Year																											Amortized Cost Basis by Origination Year
		2020		2019		2018		2017		2016		Prior		Total			2020		2019		2018		2017		2016		Prior		Total
		(in millions)																											(in millions)
Mortgage loans:	Mortgage loans:															Mortgage loans:
Commercial:	Commercial:															Commercial:
Greater than 2.0x	Greater than 2.0x	$	621	$	373	$	801	$	377	$	2,151	$	1,315	$	5,638	Greater than 2.0x	$	749	$	492	$	772	$	268	$	2,053	$	1,268	$	5,602
1.8x to 2.0x	1.8x to 2.0x	90		187		123		409		70		484		1,363		1.8x to 2.0x	227		77		118		378		184		524		1,508
1.5x to 1.8x	1.5x to 1.8x	35		183		230		302		551		610		1,911		1.5x to 1.8x	49		138		186		480		437		569		1,859
1.2x to 1.5x	1.2x to 1.5x	—		12		11		76		—		673		772		1.2x to 1.5x	0		56		154		78		97		533		918
1.0x to 1.2x	1.0x to 1.2x	—		42		83		37		—		—		162		1.0x to 1.2x	0		42		35		0		1		82		160
Less than 1.0x	Less than 1.0x	—		—		—		—		—		—		—		Less than 1.0x	0		0		0		0		0		72		72
Total commercial	Total commercial	$	746	$	797	$	1,248	$	1,201	$	2,772	$	3,082	$	9,846	Total commercial	$	1,025	$	805	$	1,265	$	1,204	$	2,772	$	3,048	$	10,119

Agricultural	Agricultural															Agricultural
Greater than 2.0x	Greater than 2.0x	$	43	$	28	$	39	$	37	$	76	$	162	$	385	Greater than 2.0x	$	52	$	27	$	39	$	38	$	73	$	158	$	387
1.8x to 2.0x	1.8x to 2.0x	11		36		15		17		21		91		191		1.8x to 2.0x	33		36		14		15		21		90		209
1.5x to 1.8x	1.5x to 1.8x	75		39		46		43		52		232		487		1.5x to 1.8x	103		38		45		41		52		212		491
1.2x to 1.5x	1.2x to 1.5x	110		126		148		110		158		349		1,001		1.2x to 1.5x	165		118		146		105		147		327		1,008
1.0x to 1.2x	1.0x to 1.2x	67		39		92		71		58		275		602		1.0x to 1.2x	77		39		91		71		57		265		600
Less than 1.0x	Less than 1.0x	4		10		8		1		18		36		77		Less than 1.0x	4		10		8		1		18		17		58
Total agricultural	Total agricultural	$	310	$	278	$	348	$	279	$	383	$	1,145	$	2,743	Total agricultural	$	434	$	268	$	343	$	271	$	368	$	1,069	$	2,753

Total mortgage loans	Total mortgage loans															Total mortgage loans
Greater than 2.0x	Greater than 2.0x	$	664	$	401	$	840	$	414	$	2,227	$	1,477	$	6,023	Greater than 2.0x	$	801	$	519	$	811	$	306	$	2,126	$	1,426	$	5,989
1.8x to 2.0x	1.8x to 2.0x	101		223		138		426		91		575		1,554		1.8x to 2.0x	260		113		132		393		205		614		1,717
1.5x to 1.8x	1.5x to 1.8x	110		222		276		345		603		842		2,398		1.5x to 1.8x	152		176		231		521		489		781		2,350
1.2x to 1.5x	1.2x to 1.5x	110		138		159		186		158		1,022		1,773		1.2x to 1.5x	165		174		300		183		244		860		1,926
1.0x to 1.2x	1.0x to 1.2x	67		81		175		108		58		275		764		1.0x to 1.2x	77		81		126		71		58		347		760
Less than 1.0x	Less than 1.0x	4		10		8		1		18		36		77		Less than 1.0x	4		10		8		1		18		89		130
Total mortgage loans	Total mortgage loans	$	1,056	$	1,075	$	1,596	$	1,480	$	3,155	$	4,227	$	12,589	Total mortgage loans	$	1,459	$	1,073	$	1,608	$	1,475	$	3,140	$	4,117	$	12,872

______________

(1)The LTV ratio is derived from current loan balance divided by the fair value of the property. The fair value of the underlying commercial properties is updated annually for each mortgage loan.

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

(2)The DSC ratio is calculated using the most recently reported operating income results from property operations divided by annual debt service.

~~(3)Amounts presented at amortized cost basis.~~

The following tables provide information relating to the LTV and DSC ratios for commercial and agricultural mortgage loans at ~~June~~September 30, 2020 and December 31, 2019. The values used in these ratio calculations were developed as part of the periodic review of the commercial and agricultural mortgage loan portfolio, which includes an evaluation of the underlying collateral value.

Mortgage Loans by LTV and DSC Ratios

DSC Ratio (2) (3)
LTV Ratio (1) (3): Greater than 2.0x 1.8x to
2.0x 1.5x to
1.8x 1.2x to
1.5x 1.0x to
1.2x Less than
1.0x Total
(in millions)
June 30, 2020:
Mortgage loans:
Commercial:
0% - 50% $ 1,033 $ 20 $ 237 $ 24 $ — $ — $ 1,314
50% - 70% 4,208 1,080 1,353 485 32 — 7,158
70% - 90% 312 263 321 187 130 — 1,213
90% plus 85 — — 76 — — 161
Total commercial $ 5,638 $ 1,363 $ 1,911 $ 772 $ 162 $ — $ 9,846
Agricultural:
0% - 50% $ 292 $ 106 $ 255 $ 520 $ 333 $ 52 $ 1,558
50% - 70% 93 83 232 462 269 25 1,164
70% - 90% — 2 — 19 — — 21
90% plus — — — — — — —
Total agricultural $ 385 $ 191 $ 487 $ 1,001 $ 602 $ 77 $ 2,743
Total mortgage loans:
0% - 50% $ 1,325 $ 126 $ 492 $ 544 $ 333 $ 52 $ 2,872
50% - 70% 4,301 1,163 1,585 947 301 25 8,322
70% - 90% 312 265 321 206 130 — 1,234
90% plus 85 — — 76 — — 161
Total mortgage loans $ 6,023 $ 1,554 $ 2,398 $ 1,773 $ 764 $ 77 $ 12,589


	DSC Ratio (2) (3)
LTV Ratio (1) (3):	Greater than 2.0x		1.8x to 2.0x		1.5x to 1.8x		1.2x to 1.5x		1.0x to 1.2x		Less than 1.0x		Total
	(in millions)
September 30, 2020:
Mortgage loans:
Commercial:
0% - 50%	$	952	$	0	$	185	$	24	$	0	$	0	$	1,161
50% - 70%	3,992		1,160		1,342		511		26		0		7,031

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued


		DSC Ratio (2) (3)																									DSC Ratio (2) (3)
LTV Ratio (1) (3):	LTV Ratio (1) (3):	Greater than 2.0x		1.8x to 2.0x		1.5x to 1.8x		1.2x to 1.5x		1.0x to 1.2x		Less than 1.0x		Total		LTV Ratio (1) (3):	Greater than 2.0x		1.8x to 2.0x		1.5x to 1.8x		1.2x to 1.5x		1.0x to 1.2x		Less than 1.0x		Total
																	(in millions)
70% - 90%																70% - 90%	574		348		332		306		134		0		1,694
90% plus																90% plus	84		0		0		77		0		72		233
Total commercial																Total commercial	$	5,602	$	1,508	$	1,859	$	918	$	160	$	72	$	10,119

Agricultural:																Agricultural:
0% - 50%																0% - 50%	$	283	$	107	$	271	$	529	$	335	$	33	$	1,558
50% - 70%																50% - 70%	104		100		220		460		265		25		1,174
70% - 90%																70% - 90%	0		2		0		19		0		0		21
90% plus																90% plus	0		0		0		0		0		0		0
Total agricultural																Total agricultural	$	387	$	209	$	491	$	1,008	$	600	$	58	$	2,753

Total mortgage loans:																Total mortgage loans:
0% - 50%																0% - 50%	$	1,235	$	107	$	456	$	553	$	335	$	33	$	2,719
50% - 70%																50% - 70%	4,096		1,260		1,562		971		291		25		8,205
70% - 90%																70% - 90%	574		350		332		325		134		0		1,715
90% plus																90% plus	84		0		0		77		0		72		233
Total mortgage loans																Total mortgage loans	$	5,989	$	1,717	$	2,350	$	1,926	$	760	$	130	$	12,872
		(in millions)
December 31, 2019:	December 31, 2019:															December 31, 2019:
Mortgage loans:	Mortgage loans:															Mortgage loans:
Commercial:	Commercial:															Commercial:
0% - 50%	0% - 50%	$	903	$	38	$	214	$	25	$	—	$	—	$	1,180	0% - 50%	$	903	$	38	$	214	$	25	$	0	$	0	$	1,180
50% - 70%	50% - 70%	4,097		1,195		1,118		795		242		—		7,447		50% - 70%	4,097		1,195		1,118		795		242		0		7,447
70% - 90%	70% - 90%	251		98		214		154		46		—		763		70% - 90%	251		98		214		154		46		0		763
90% plus	90% plus	—		—		—		—		—		—		—		90% plus	0		0		0		0		0		0		0
Total commercial	Total commercial	$	5,251	$	1,331	$	1,546	$	974	$	288	$	—	$	9,390	Total commercial	$	5,251	$	1,331	$	1,546	$	974	$	288	$	0	$	9,390

Agricultural:	Agricultural:															Agricultural:
0% - 50%	0% - 50%	$	322	$	104	$	241	$	545	$	321	$	50	$	1,583	0% - 50%	$	322	$	104	$	241	$	545	$	321	$	50	$	1,583
50% - 70%	50% - 70%	82		87		236		426		251		33		1,115		50% - 70%	82		87		236		426		251		33		1,115
70% - 90%	70% - 90%	—		—		—		19		—		—		19		70% - 90%	0		0		0		19		0		0		19
90% plus	90% plus	—		—		—		—		—		—		—		90% plus	0		0		0		0		0		0		0
Total agricultural	Total agricultural	$	404	$	191	$	477	$	990	$	572	$	83	$	2,717	Total agricultural	$	404	$	191	$	477	$	990	$	572	$	83	$	2,717

Total mortgage loans:	Total mortgage loans:															Total mortgage loans:
0% - 50%	0% - 50%	$	1,225	$	142	$	455	$	570	$	321	$	50	$	2,763	0% - 50%	$	1,225	$	142	$	455	$	570	$	321	$	50	$	2,763
50% - 70%	50% - 70%	4,179		1,282		1,354		1,221		493		33		8,562		50% - 70%	4,179		1,282		1,354		1,221		493		33		8,562
70% - 90%	70% - 90%	251		98		214		173		46		—		782		70% - 90%	251		98		214		173		46		0		782
90% plus	90% plus	—		—		—		—		—		—		—		90% plus	0		0		0		0		0		0		0
Total mortgage loans	Total mortgage loans	$	5,655	$	1,522	$	2,023	$	1,964	$	860	$	83	$	12,107	Total mortgage loans	$	5,655	$	1,522	$	2,023	$	1,964	$	860	$	83	$	12,107

______________

(1)The LTV ratio is derived from current loan balance divided by the fair value of the property. The fair value of the underlying commercial properties is updated annually for each mortgage loan.

(2)The DSC ratio is calculated using the most recently reported operating income results from property operations divided by annual debt service.

(3)Amounts presented at amortized cost basis.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Past-Due and Nonaccrual Mortgage Loan Status

The following table provides information relating to the aging analysis of past-due mortgage loans at ~~June~~September 30, 2020 and December 31, 2019, respectively.

Age Analysis of Past Due Mortgage Loans (1)

Accruing Loans Non-accruing Loans Total Loans Non-accruing Loans with No Allowance Interest Income on Non-accruing Loans (2)
Past Due Current Total
30-59 Days 60-89 Days 90 Days or More Total
(in millions)
June 30, 2020:
Mortgage loans:
Commercial $ — $ — $ — $ — $ 9,771 $ 9,771 $ 75 $ 9,846 $ 75 $ 1
Agricultural 67 9 49 125 2,618 2,743 — 2,743 — —
Total $ 67 $ 9 $ 49 $ 125 $ 12,389 $ 12,514 $ 75 $ 12,589 $ 75 $ 1

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~


																							Accruing Loans												Non-accruing Loans		Total Loans		Non-accruing Loans with No Allowance		Interest Income on Non-accruing Loans (2)
																							Past Due								Current		Total
																							30-59 Days		60-89 Days		90 Days or More		Total
																							(in millions)
September 30, 2020:																						September 30, 2020:
Mortgage loans:																						Mortgage loans:
Commercial																						Commercial	$	0	$	0	$	0	$	0	$	10,119	$	10,119	$	0	$	10,119	$	0	$	0
Agricultural																						Agricultural	24		6		135		165		2,588		2,753		0		2,753		0		0
Total																						Total	$	24	$	6	$	135	$	165	$	12,707	$	12,872	$	0	$	12,872	$	0	$	0

December 31, 2019:	December 31, 2019:																					December 31, 2019:
Mortgage loans:	Mortgage loans:																					Mortgage loans:
Commercial	Commercial	$	—	$	—	$	—	$	—	$	9,390	$	9,390	$	—	$	9,390	$	—	$	—	Commercial	$	0	$	0	$	0	$	0	$	9,390	$	9,390	$	0	$	9,390	$	0	$	0
Agricultural	Agricultural	57		1		66		124		2,593		2,717		—		2,717		—		—		Agricultural	57		1		66		124		2,593		2,717		0		2,717		0		0
Total	Total	$	57	$	1	$	66	$	124	$	11,983	$	12,107	$	—	$	12,107	$	—	$	—	Total	$	57	$	1	$	66	$	124	$	11,983	$	12,107	$	0	$	12,107	$	0	$	0

_______________

(1) Amounts presented at amortized cost basis.

(2) Amounts for 2020 represent results for both the three and ~~six~~nine months ended ~~June~~September 30, 2020.

At ~~June~~September 30, 2020 and December 31, 2019, the carrying values of problem mortgage loans that had been classified as non-accrual loans were ~~$75~~$0 million and $0 million, respectively.

Troubled Debt Restructuring

~~The~~For the nine months ended September 30, 2020 , the Company ~~invests in~~had 1 commercial ~~and agricultural~~ mortgage ~~loans included in the balance sheet as Mortgage loans~~loan on real estate and privately negotiated fixed maturities included in the balance sheet as Fixed maturities AFS. Under certain circumstances, modifications are granted to these contracts. Each modification is evaluated as to whether a troubled debt restructuring has occurred. A modification is a troubled debt restructuring when the borrower is in financial difficulty and the creditor makes concessions. Generally, the types of concessions may include reducing the face amount or maturity amount of the debt as originally stated, reducing the contractual interest rate, extending the maturity date at an interest rate lower than current market interest rates and/or reducing accrued interest. The Company considers the amount, timing and extent of the concession granted in determining any impairment or changes in the specific credit allowance recorded in connection with the troubled debt restructuring. A credit allowance may have been recorded prior to the quarter when the loan is modified in a troubled debt restructuring. Accordingly, the carrying value (net of the allowance) before and after modification through a troubled debt restructuring may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment. At June 30, 2020, the Company did not have any commercial or agricultural mortgage loans accounted for as ~~troubled debt restructurings. At June 30, 2020, the Company had 4 new privately negotiated fixed maturity troubled debt restructurings~~a TDR with a pre-modification cost basis of ~~$42~~$75 million and post-modification carrying value of ~~$37~~$75 million. The 1 commercial mortgage loan TDR is 0.07% of the Company’s total invested assets. For the nine months ended September 30, 2020, the Company had 6 new privately negotiated fixed maturity TDRs with a pre-modification cost basis of $50 million ~~these troubled debt restructurings~~and post-modification carrying value of $44 million. These TDRs did not have subsequent payment defaults nor additional commitments to lend. The 46 privately negotiated fixed maturity ~~troubled debt restructurings~~TDRs are 0.04% of the Company’s total invested assets. There were no mortgage loan on real estate or fixed maturities accounted for as a TDR during 2019.

Trading Securities

At ~~June~~September 30, 2020 and December 31, 2019, respectively, the fair value of the Company’s trading securities was ~~$6.6~~$6.2 billion and $7.0 billion. At ~~June~~September 30, 2020 and December 31, 2019, respectively, trading securities included the General Account’s investment in Separate Accounts which had carrying values of $38 million and $58 million.

~~Net unrealized and realized gains (losses) on trading securities are included in Net investment income (loss) in the Consolidated Statements of Income (Loss).~~ The table below shows a breakdown of Net investment income (loss) from trading securities during the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019.

~~Net Investment Income (Loss) from Trading Securities~~

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(in millions)
Net investment gains (losses) recognized during the period on securities held at the end of the period $ 287 $ 159 $ 101 $ 477
Net investment gains (losses) recognized on securities sold during the period 25 3 29 (21)
Unrealized and realized gains (losses) on trading securities 312 162 130 456
Interest and dividend income from trading securities 48 73 99 165
Net investment income (loss) from trading securities $ 360 $ 235 $ 229 $ 621

2829

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Net Investment Income (Loss) from Trading Securities


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
Net investment gains (losses) recognized during the period on securities held at the end of the period	$	(13)	$	15	$	88	$	492
Net investment gains (losses) recognized on securities sold during the period	16		14		45		(7)
Unrealized and realized gains (losses) on trading securities	3		29		133		485
Interest and dividend income from trading securities	60		62		159		227
Net investment income (loss) from trading securities	$	63	$	91	$	292	$	712

4) DERIVATIVES

The Company uses derivatives as part of its overall asset/liability risk management primarily to reduce exposures to equity market and interest rate risks. Derivative hedging strategies are designed to reduce these risks from an economic perspective and are all executed within the framework of a “Derivative Use Plan” approved by applicable states’ insurance law. Derivatives are generally not accounted for using hedge accounting, with the exception of Treasury Inflation-Protected Securities (“TIPS”), which is discussed further below. Operation of these hedging programs is based on models involving numerous estimates and assumptions, including, among others, mortality, lapse, surrender and withdrawal rates, election rates, fund performance, market volatility and interest rates. A wide range of derivative contracts are used in these hedging programs, including exchange traded equity, currency and interest rate futures contracts, total return and/or other equity swaps, interest rate swap and floor contracts, bond and bond-index total return swaps, swaptions, variance swaps and equity options, credit and foreign exchange derivatives, as well as bond and repo transactions to support the hedging. The derivative contracts are collectively managed in an effort to reduce the economic impact of unfavorable changes in guaranteed benefits’ exposures attributable to movements in capital markets. In addition, as part of its hedging strategy, the Company targets an asset level for all variable annuity products at or above a CTE98 level under most economic scenarios (Conditional Tail Expectation, or “CTE”, is a statistical measure of tail risk which quantifies the total asset requirement to sustain a loss if an event outside a given probability level has occurred. CTE98 denotes the financial resources a company would need to cover the average of the worst 2% of scenarios.)

Derivatives Utilized to Hedge Exposure to Variable Annuities with Guarantee Features

The Company has issued and continues to offer variable annuity products with GMxB features. The risk associated with the GMDB feature is that under-performance of the financial markets could result in GMDB benefits, in the event of death, being higher than what accumulated policyholders’ account balances would support. The risk associated with the GMIB feature is that under-performance of the financial markets could result in the present value of GMIB, in the event of annuitization, being higher than what accumulated policyholders’ account balances would support, taking into account the relationship between current annuity purchase rates and the GMIB guaranteed annuity purchase rates. The risk associated with products that have a GMxB derivative features liability is that under-performance of the financial markets could result in the GMxB derivative features’ benefits being higher than what accumulated policyholders’ account balances would support.

For GMxB features, the Company retains certain risks including basis, credit spread and some volatility risk and risk associated with actual versus expected actuarial assumptions for mortality, lapse and surrender, withdrawal and policyholder election rates, among other things. The derivative contracts are managed to correlate with changes in the value of the GMxB features that result from financial markets movements. A portion of exposure to realized equity volatility is hedged using equity options and variance swaps and a portion of exposure to credit risk is hedged using total return swaps on fixed income indices. Additionally, the Company is party to total return swaps for which the reference U.S. Treasury securities are contemporaneously purchased from the market and sold to the swap counterparty. As these transactions result in a transfer of control of the U.S. Treasury securities to the swap counterparty, the Company derecognizes these securities with consequent gain or loss from the sale. The Company has also purchased reinsurance contracts to mitigate the risks associated with GMDB features and the impact of potential

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

market fluctuations on future policyholder elections of GMIB features contained in certain annuity contracts issued by the Company. The reinsurance of the GMIB features is accounted for as a derivative.

The Company has in place an economic hedge program using interest rate swaps and U.S. Treasury futures to partially protect the overall profitability of future variable annuity sales against declining interest rates.

Derivatives Utilized to Hedge Crediting Rate Exposure on SCS, SIO, MSO and IUL Products/Investment Options

The Company hedges crediting rates in the Structured Capital Strategies (“SCS”) variable annuity, Structured Investment Option in the EQUI-VEST variable annuity series (“SIO”), Market Stabilizer Option (“MSO”) in the variable life insurance products and Indexed Universal Life (“IUL”) insurance products. These products permit the contract owner to participate in the performance of an index, Exchange Traded ~~Fund~~Funds (“ETF”) or commodity price movement up to a cap for a set period of time. They also contain a protection feature, in which the Company will absorb, up to a certain percentage, the loss of value in an index, ETF or commodity price, which varies by product segment.

In order to support the returns associated with these features, the Company enters into derivative contracts whose payouts, in combination with fixed income investments, emulate those of the index, ETF or commodity price, subject to caps and buffers, thereby substantially reducing any exposure to market-related earnings volatility.

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

Derivatives Used to Hedge Equity Market Risks Associated with the General Account’s Seed Money Investments in Retail Mutual Funds

The Company’s General Account seed money investments in retail mutual funds expose us to market risk, including equity market risk which is partially hedged through equity-index futures contracts to minimize such risk.

Derivatives Used to Hedge Universal Life Products with Secondary Guarantee (“ULSG”) Policy

The Company implemented a hedge program using fixed income total return swaps to mitigate the interest rate exposure in the ULSG policy statutory liability.

Derivatives Used for General Account Investment Portfolio

The Company maintains a strategy in its General Account investment portfolio to replicate the credit exposure of fixed maturity securities otherwise permissible for investment under its investment guidelines through the sale of credit default swaps (“CDS”). Under the terms of these swaps, the Company receives quarterly fixed premiums that, together with any initial amount paid or received at trade inception, replicate the credit spread otherwise currently obtainable by purchasing the referenced entity’s bonds of similar maturity. These credit derivatives generally have remaining terms of five years or less and are recorded at fair value with changes in fair value, including the yield component that emerges from initial amounts paid or received, reported in Net derivative gains (losses).

The Company manages its credit exposure taking into consideration both cash and derivatives based positions and selects the reference entities in its replicated credit exposures in a manner consistent with its selection of fixed maturities. In addition, the Company generally transacts the sale of CDS in single name reference entities of investment grade credit quality and with counterparties subject to collateral posting requirements. If there is an event of default by the reference entity or other such credit event as defined under the terms of the swap contract, the Company is obligated to perform under the credit derivative and, at the counterparty’s option, either pay the referenced amount of the contract less an auction-determined recovery amount or pay the referenced amount of the contract and receive in return the defaulted or similar security of the reference entity for recovery by sale at the contract settlement auction. The Company purchased CDS to mitigate its exposure to a reference entity through cash positions. These positions do not replicate credit spreads.

To date, there have been no events of default or circumstances indicative of a deterioration in the credit quality of the named referenced entities to require or suggest that the Company will have to perform under these CDS. The maximum potential amount of future payments the Company could be required to make under these credit derivatives is limited to the par value of the referenced securities which is the dollar or euro-equivalent of the derivative’s notional amount. The Standard North American CDS Contract (“SNAC”) or Standard European Corporate Contract (“STEC”) under which the Company executes these CDS sales transactions does not contain recourse provisions for recovery of amounts paid under the credit derivative.

The Company purchased 30-year TIPS and other sovereign bonds, both inflation linked and non-inflation linked, as General Account investments and enters into asset or cross-currency basis swaps, to result in payment of the given

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

bond’s coupons and principal at maturity in the bond’s specified currency to the swap counterparty in return for fixed dollar amounts. These swaps, when considered in combination with the bonds, together result in a net position that is intended to replicate a dollar-denominated fixed-coupon cash bond with a yield higher than a term-equivalent U.S. Treasury bond.

The tables below present quantitative disclosures about the Company’s derivative instruments, including those embedded in other contracts required to be accounted for as derivative instruments.

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

~~Derivative Instruments by Category~~

At June 30, 2020 Six Months Ended June 30, 2020
Fair Value
Notional Amount Derivative Assets Derivative Liabilities Net Derivative Gains (Losses) (2)
(in millions)
Derivative instruments:
Freestanding derivatives (1):
Equity contracts:
Futures $ 4,680 $ — $ 1 $ (193)
Swaps 17,846 77 81 959
Options 36,548 4,346 2,448 (1,390)
Interest rate contracts:
Swaps 24,850 2,091 435 3,658
Futures 23,993 — — 2,067
Swaptions — — — 9
Credit contracts:
Credit default swaps 1,469 22 15 1
Other freestanding contracts:
Foreign currency contracts 434 9 8 (2)
Margin — 84 77 —
Collateral — 14 3,295 —
Embedded derivatives:
GMIB reinsurance contracts (3) — 2,931 — 839
GMxB derivative features liability (4) — — 12,613 (3,994)
SCS, SIO, MSO and IUL indexed features (5) — — 1,773 1,414
Total derivative instruments $ 109,820 $ 9,574 $ 20,746
Net derivative gains (losses) $ 3,368

~~______________~~

~~(1)Reported in Other invested assets in the consolidated balance sheets.~~

~~(2)Reported in Net derivative gains (losses) in the consolidated statements of income (loss).~~

~~(3)Reported in GMIB reinsurance contract asset in the consolidated balance sheets.~~

~~(4)Reported in Future policy benefits and other policyholders’ liabilities in the consolidated balance sheets.~~

~~(5)Reported in Policyholders’ account balances in the consolidated balance sheets.~~

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

Derivative Instruments by Category


		At December 31, 2019													Six Months Ended June 30, 2019	At September 30, 2020						Nine Months Ended September 30, 2020
				Fair Value									Six Months Ended June 30, 2019					Fair Value			Nine Months Ended September 30, 2020
		Notional Amount		Derivative Assets		Derivative Liabilities		Net Derivative Gains (Losses) (2)			Notional Amount				Derivative Assets	Derivative Liabilities			Net Derivative Gains (Losses) (2)
		(in millions)																	(in millions)
Derivative instruments:	Derivative instruments:									Derivative instruments:
Freestanding derivatives (1):	Freestanding derivatives (1):									Freestanding derivatives (1):
Equity contracts:	Equity contracts:									Equity contracts:
Futures	Futures	$	4,257	$	1	$	1	$	(954)	Futures	$	4,480		$	0	$	0		$	(401)
Swaps	Swaps	17,156		9		281		(1,276)		Swaps	20,718			28		18			(604)
Options	Options	47,861		5,098		1,752		1,289		Options	31,750			5,557		2,800			(481)
Interest rate contracts:	Interest rate contracts:									Interest rate contracts:
Swaps	Swaps	23,793		468		526		1,596		Swaps	24,024			1,699		341			3,587
Futures	Futures	20,901		—		—		27		Futures	19,922			0		0			2,051
Swaptions	Swaptions	3,201		16		—		7		Swaptions	0			0		0			9
Credit contracts:	Credit contracts:									Credit contracts:
Credit default swaps	Credit default swaps	1,400		21		6		9		Credit default swaps	1,534			24		18			2
Other freestanding contracts:	Other freestanding contracts:									Other freestanding contracts:
Foreign currency contracts	Foreign currency contracts	559		12		9		(27)		Foreign currency contracts	416			8		8			(3)
Margin	Margin	—		155		—		—		Margin	0			69		125			0
Collateral	Collateral	—		74		3,016		—		Collateral	0			14		4,965			0

Embedded derivatives:	Embedded derivatives:									Embedded derivatives:
GMIB reinsurance contracts (3)	GMIB reinsurance contracts (3)	—		2,139		—		177		GMIB reinsurance contracts (3)	0			2,818		0			737
GMxB derivative features liability (4)	GMxB derivative features liability (4)	—		—		8,432		(1,126)		GMxB derivative features liability (4)	0			0		12,204			(3,421)
SCS, SIO, MSO and IUL indexed features (5)	SCS, SIO, MSO and IUL indexed features (5)	—		—		3,268		(1,588)		SCS, SIO, MSO and IUL indexed features (5)	0			0		2,606			414
Total derivative instruments	Total derivative instruments	$	119,128	$	7,993	$	17,291			Total derivative instruments	$	102,844		$	10,217	$	23,085

Net derivative gains (losses)	Net derivative gains (losses)							$	(1,866)	Net derivative gains (losses)									$	1,890

______________

(1)Reported in Other invested assets in the consolidated balance sheets.

(2)Reported in Net derivative gains (losses) in the consolidated statements of income (loss).

(3)Reported in GMIB reinsurance contract asset in the consolidated balance sheets.

(4)Reported in Future policy benefits and other policyholders’ liabilities in the consolidated balance sheets.

(5)Reported in Policyholders’ account balances in the consolidated balance sheets.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Derivative Instruments by Category


	At December 31, 2019						Nine Months Ended September 30, 2019
			Fair Value
	Notional Amount		Derivative Assets		Derivative Liabilities		Net Derivative Gains (Losses) (2)
	(in millions)
Derivative instruments:
Freestanding derivatives (1):
Equity contracts:
Futures	$	4,257	$	1	$	1	$	(990)
Swaps	17,156		9		281		(1,279)
Options	47,861		5,098		1,752		1,255
Interest rate contracts:
Swaps	23,793		468		526		2,843
Futures	20,901		0		0		188
Swaptions	3,201		16		0		146
Credit contracts:
Credit default swaps	1,400		21		6		9
Other freestanding contracts:
Foreign currency contracts	559		12		9		(11)
Margin	0		155		0		0
Collateral	0		74		3,016		0

Embedded derivatives:
GMIB reinsurance contracts (3)	0		2,139		0		740
GMxB derivative features liability (4)	0		0		8,502		(3,677)
SCS, SIO, MSO and IUL indexed features (5)	0		0		3,268		(1,547)
Total derivative instruments	$	119,128	$	7,993	$	17,361

Net derivative gains (losses)							$	(2,323)

______________

(1)Reported in Other invested assets in the consolidated balance sheets.

(2)Reported in Net derivative gains (losses) in the consolidated statements of income (loss).

(3)Reported in GMIB reinsurance contract asset in the consolidated balance sheets.

(4)Reported in Future policy benefits and other policyholders’ liabilities in the consolidated balance sheets.

(5)Reported in Policyholders’ account balances in the consolidated balance sheets.

Equity-Based and Treasury Futures Contracts Margin

All outstanding equity-based and treasury futures contracts at ~~June~~September 30, 2020 and December 31, 2019 are exchange-traded and net settled daily in cash. At ~~June~~September 30, 2020 and December 31, 2019, respectively, the Company had open exchange-traded futures positions on: (i) the S&P 500, Russell 2000 and Emerging Market indices, having initial margin requirements of ~~$490~~$381 million and $252 million, (ii) the 2-year, 5-year and 10-year U.S. Treasury Notes on U.S. Treasury bonds and ultra-long bonds, having initial margin requirements of ~~$405~~$315 million and $166 million, and (iii) the Euro Stoxx, FTSE 100, Topix, ASX 200 and European, Australasia, and Far East (“EAFE”) indices as well as corresponding currency futures on the Euro/U.S. dollar, Pound/U.S. dollar, Australian dollar/U.S. dollar, and Yen/U.S. dollar, having initial margin requirements of ~~$43~~$40 million and $60 million.

Collateral Arrangements

The Company generally has executed a Credit Support Annex (“CSA”) under the International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”) it maintains with each of its over-the-counter (“OTC”) derivative counterparties that requires both posting and accepting collateral either in the form of cash or high-quality securities, such as U.S. Treasury securities, U.S. government and government agency securities and investment grade corporate bonds. The Company nets the fair value of all derivative financial instruments with counterparties for which

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

an ISDA Master Agreement and related CSA have been executed. At ~~June~~September 30, 2020 and December 31, 2019, respectively, the Company held ~~$3.3~~$5.0 billion and $3.0 billion in cash and securities collateral delivered by trade counterparties, representing the fair value of the related derivative agreements. The unrestricted cash collateral is reported in Other invested assets. The Company posted collateral of $14 million and $74 million at ~~June~~September 30, 2020 and December 31, 2019, respectively, in the normal operation of its collateral arrangements.

The following table presents information about the Company’s offsetting of financial assets and liabilities and derivative instruments at ~~June~~September 30, 2020:

Offsetting of Financial Assets and Liabilities and Derivative Instruments

At ~~June~~September 30, 2020


		Gross Amount Recognized		Gross Amount Offset in the Balance Sheets		Net Amount Presented in the Balance Sheets		Gross Amount not Offset in the Balance Sheets (3)		Net Amount			Gross Amount Recognized		Gross Amount Offset in the Balance Sheets		Net Amount Presented in the Balance Sheets		Gross Amount not Offset in the Balance Sheets (3)		Net Amount
		(in millions)																			(in millions)
Assets:	Assets:											Assets:
Derivative assets (1)	Derivative assets (1)	$	6,643	$	6,173	$	470	$	(118)	$	351	Derivative assets (1)	$	7,398	$	7,282	$	116	$	(54)	$	62
Other financial assets	Other financial assets	1,810		—		1,810		—		1,811		Other financial assets	1,686		0		1,686		0		1,686
Other invested assets	Other invested assets	$	8,453	$	6,173	$	2,280	$	(118)	$	2,162	Other invested assets	$	9,084	$	7,282	$	1,802	$	(54)	$	1,748

Liabilities:	Liabilities:											Liabilities:
Derivative liabilities (2)	Derivative liabilities (2)	$	6,242	$	6,173	$	69	$	—	$	69	Derivative liabilities (2)	$	8,222	$	7,282	$	940	$	0	$	940
Other financial liabilities	Other financial liabilities	3,597		—		3,597		—		3,597		Other financial liabilities	3,924		0		3,924		0		3,924
Other liabilities	Other liabilities	$	9,839	$	6,173	$	3,666	$	—	$	3,666	Other liabilities	$	12,146	$	7,282	$	4,864	$	0	$	4,864

______________

(1)Excludes Investment Management and Research segment’s derivative assets of consolidated VIEs/VOEs.

(2)Excludes Investment Management and Research segment’s derivative liabilities of consolidated VIEs/VOEs.

(3)Financial instruments sent (held).

The following table presents information about the Company’s offsetting of financial assets and liabilities and derivative instruments at December 31, 2019:

Offsetting of Financial Assets and Liabilities and Derivative Instruments

At December 31, 2019


		Gross Amount Recognized		Gross Amount Offset in the Balance Sheets		Net Amount Presented in the Balance Sheets		Gross Amount not Offset in the Balance Sheets (3)		Net Amount			Gross Amount Recognized		Gross Amount Offset in the Balance Sheets		Net Amount Presented in the Balance Sheets		Gross Amount not Offset in the Balance Sheets (3)		Net Amount
		(in millions)																			(in millions)
Assets:	Assets:											Assets:
Derivative assets (1)	Derivative assets (1)	$	5,852	$	5,466	$	386	$	(77)	$	309	Derivative assets (1)	$	5,852	$	5,466	$	386	$	(77)	$	309
Other financial instruments	Other financial instruments	2,394		—		2,394		—		2,394		Other financial instruments	2,394		0		2,394		0		2,394
Other invested assets	Other invested assets	$	8,246	$	5,466	$	2,780	$	(77)	$	2,703	Other invested assets	$	8,246	$	5,466	$	2,780	$	(77)	$	2,703

Liabilities:	Liabilities:											Liabilities:
Derivative liabilities (2)	Derivative liabilities (2)	$	5,512	$	5,466	$	46	$	—	$	46	Derivative liabilities (2)	$	5,512	$	5,466	$	46	$	0	$	46
Other financial liabilities	Other financial liabilities	3,924		—		3,924		—		3,924		Other financial liabilities	3,924		0		3,924		0		3,924
Other liabilities	Other liabilities	$	9,436	$	5,466	$	3,970	$	—	$	3,970	Other liabilities	$	9,436	$	5,466	$	3,970	$	0	$	3,970

______________

(1)Excludes Investment Management and Research segment’s derivative assets of consolidated VIEs/VOEs.

(2)Excludes Investment Management and Research segment’s derivative liabilities of consolidated VIEs/VOEs.

(3)Financial instruments sent (held).

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

5) GOODWILL

Goodwill represents the excess of purchase price over the estimated fair value of identifiable net assets acquired in a business combination. The Company tests goodwill for recoverability each annual reporting period at December 31

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

and at interim periods if facts or circumstances are indicative of potential impairment. See Note 2 for information on the Company’s change in fair value measurement methodology for testing goodwill impairment.

The carrying value of goodwill from the Company’s Investment Management and Research reporting unit totaled $4.6 billion at both ~~June~~September 30, 2020 and December 31, 2019, resulting primarily from its investment in AB as well as direct strategic acquisitions of AB, including its purchase of Sanford C. Bernstein, Inc.

For purpose of testing this goodwill for impairment, the Company has historically applied a discounted cash flow valuation technique to measure the fair value of the reporting unit, sourcing the underlying cash flows and assumptions from AB’s current business plan projections and adjusting the result to reflect the noncontrolling interest in AB as well as incremental taxes at the Company level as related to the form and structure of its investment in AB. During the first quarter of 2020, the unit price of AB declined significantly in response to the precipitous decline in the financial markets. As such, the Company performed an interim impairment evaluation of goodwill utilizing the discounted cash flow valuation technique and considered the results along with a number of other factors (including current market conditions) and determined that the fair value of the reporting unit exceeded its carrying value at March 31, 2020. As such, no goodwill impairment existed. The Company will continue to monitor and evaluate any events that may indicate an impairment of goodwill.

6) CLOSED BLOCK

As a result of demutualization, the Company’s Closed Block was established in 1992 for the benefit of certain individual participating policies that were in force on that date. Assets, liabilities and earnings of the Closed Block are specifically identified to support its participating policyholders.

Assets allocated to the Closed Block inure solely to the benefit of the Closed Block policyholders and will not revert to the benefit of the Company. No reallocation, transfer, borrowing or lending of assets can be made between the Closed Block and other portions of the Company’s General Account, any of its Separate Accounts or any affiliate of the Company without the approval of the New York State Department of Financial Services (the “NYDFS”). Closed Block assets and liabilities are carried on the same basis as similar assets and liabilities held in the General Account. For more information on the Closed Block, see Note 6 to the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2019.

Summarized financial information for the Company’s Closed Block is as follows:


		June 30, 2020		December 31, 2019			September 30, 2020		December 31, 2019
		(in millions)							(in millions)
Closed Block Liabilities:	Closed Block Liabilities:					Closed Block Liabilities:
Future policy benefits, policyholders’ account balances and other	Future policy benefits, policyholders’ account balances and other	$	6,327	$	6,478	Future policy benefits, policyholders’ account balances and other	$	6,260	$	6,478
Policyholder dividend obligation	Policyholder dividend obligation	150		2		Policyholder dividend obligation	149		2
Other liabilities	Other liabilities	100		38		Other liabilities	58		38
Total Closed Block liabilities	Total Closed Block liabilities	6,577		6,518		Total Closed Block liabilities	6,467		6,518

Assets Designated to the Closed Block:	Assets Designated to the Closed Block:					Assets Designated to the Closed Block:
Fixed maturities available-for-sale, at fair value (amortized cost of $3,490 and $3,558) (allowance for credit losses of $0 at June 30, 2020)		3,838		3,754
Mortgage loans on real estate (net of allowance for credit losses of $7 at June 30, 2020)		1,774		1,759
Fixed maturities available-for-sale, at fair value (amortized cost of $3,440 and $3,558) (allowance for credit losses of $0 at September 30, 2020)						Fixed maturities available-for-sale, at fair value (amortized cost of $3,440 and $3,558) (allowance for credit losses of $0 at September 30, 2020)	3,788		3,754
Mortgage loans on real estate (net of allowance for credit losses of $6 at September 30, 2020)						Mortgage loans on real estate (net of allowance for credit losses of $6 at September 30, 2020)	1,782		1,759
Policy loans	Policy loans	668		706		Policy loans	656		706
Cash and other invested assets	Cash and other invested assets	44		82		Cash and other invested assets	3		82
Other assets	Other assets	183		145		Other assets	172		145
Total assets designated to the Closed Block	Total assets designated to the Closed Block	6,507		6,446		Total assets designated to the Closed Block	6,401		6,446

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued


		June 30, 2020		December 31, 2019			September 30, 2020		December 31, 2019
		(in millions)							(in millions)
Excess of Closed Block liabilities over assets designated to the Closed Block	Excess of Closed Block liabilities over assets designated to the Closed Block	70		72		Excess of Closed Block liabilities over assets designated to the Closed Block	66		72
Amounts included in accumulated other comprehensive income (loss):	Amounts included in accumulated other comprehensive income (loss):					Amounts included in accumulated other comprehensive income (loss):
Net unrealized investment gains (losses), net of policyholders’ dividend obligation: $150 and $2; and net of income tax: $42 and $41		167		164
Net unrealized investment gains (losses), net of policyholders’ dividend obligation: $149 and $2; and net of income tax: $42 and $41						Net unrealized investment gains (losses), net of policyholders’ dividend obligation: $149 and $2; and net of income tax: $42 and $41	168		164
Maximum future earnings to be recognized from Closed Block assets and liabilities	Maximum future earnings to be recognized from Closed Block assets and liabilities	$	237	$	236	Maximum future earnings to be recognized from Closed Block assets and liabilities	$	234	$	236

The Company’s Closed Block revenues and expenses were as follows:


		Three Months Ended June 30,						Six Months Ended June 30,									Three Months Ended September 30,			Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020			2019
		(in millions)																(in millions)
Revenues:	Revenues:									Revenues:
Premiums and other income	Premiums and other income	$	40	$	46	$	82	$	94	Premiums and other income	$	36	$	42	$	118		$	136
Net investment income (loss)	Net investment income (loss)	63		72		129		139		Net investment income (loss)	61		69		190			208
Investment gains (losses), net	Investment gains (losses), net	(2)		—		(2)		(1)		Investment gains (losses), net	1		0		(1)			(1)
Total revenues	Total revenues	101		118		209		232		Total revenues	98		111		307			343

Benefits and Other Deductions:	Benefits and Other Deductions:									Benefits and Other Deductions:
Policyholders’ benefits and dividends	Policyholders’ benefits and dividends	103		114		206		235		Policyholders’ benefits and dividends	96		108		302			343
Other operating costs and expenses	Other operating costs and expenses	1		—		1		1		Other operating costs and expenses	0		0		1			1
Total benefits and other deductions	Total benefits and other deductions	104		114		207		236		Total benefits and other deductions	96		108		303			344
Net income (loss), before income taxes	Net income (loss), before income taxes	(3)		4		2		(4)		Net income (loss), before income taxes	2		3		4			(1)
Income tax (expense) benefit	Income tax (expense) benefit	(1)		(1)		(1)		(2)		Income tax (expense) benefit	(1)		0		(2)			(2)
Net income (loss)	Net income (loss)	$	(4)	$	3	$	1	$	(6)	Net income (loss)	$	1	$	3	$	2		$	(3)

7) INSURANCE LIABILITIES

Variable Annuity Contracts – GMDB, GMIB, GIB and GWBL and Other Features

The Company has certain variable annuity contracts with GMDB, GMIB, GIB and GWBL and other features in-force that guarantee one of the following:

•Return of Premium: the benefit is the greater of current account value or premiums paid (adjusted for withdrawals);

•Ratchet: the benefit is the greatest of current account value, premiums paid (adjusted for withdrawals), or the highest account value on any anniversary up to contractually specified ages (adjusted for withdrawals);

•Roll-Up: the benefit is the greater of current account value or premiums paid (adjusted for withdrawals) accumulated at contractually specified interest rates up to specified ages;

•Combo: the benefit is the greater of the ratchet benefit or the roll-up benefit, which may include either a five year or an annual reset; or

•Withdrawal: the withdrawal is guaranteed up to a maximum amount per year for life.

Liabilities for Variable Annuity Contracts with GMDB and GMIB Features without No-Lapse Guarantee Rider (“NLG”) Feature

The change in the liabilities for variable annuity contracts with GMDB and GMIB features and without a NLG feature are summarized in the tables below. The amounts for the direct contracts (before reinsurance ceded) and assumed contracts are reflected in the consolidated balance sheets in Future policy benefits and other policyholders’ liabilities. The amounts for the ceded contracts are reflected in the consolidated balance sheets in Amounts due from reinsurers. The amounts for the ceded IB are reflected in the consolidated balance sheets in GMIB reinsurance contract asset, at fair value.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Change in Liability for Variable Annuity Contracts with GMDB and GMIB Features and No NLG Feature

For the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019


		GMDB										GMIB											GMDB				GMIB
		Direct		Assumed		Ceded		Direct		Assumed		Ceded			Direct		Assumed		Ceded		Direct		Assumed		Ceded
		(in millions)																							(in millions)
Balance at April 1, 2020		$	5,052	$	72	$	(111)	$	6,299	$	219	$	(2,823)
Balance at July 1, 2020														Balance at July 1, 2020	$	5,004	$	70	$	(105)	$	6,122	$	232	$	(2,931)
Paid guarantee benefits	Paid guarantee benefits	(140)		(4)		4		(103)		49		17		Paid guarantee benefits	(121)		(6)		3		(110)		(9)		21
Other changes in reserve	Other changes in reserve	103		2		2		(43)		(36)		(125)		Other changes in reserve	233		4		10		113		(3)		92
Balance at June 30, 2020		$	5,015	$	70	$	(105)	$	6,153	$	232	$	(2,931)
Balance at September 30, 2020														Balance at September 30, 2020	$	5,116	$	68	$	(92)	$	6,125	$	220	$	(2,818)

Balance at April 1, 2019		$	4,670	$	77	$	(109)	$	3,742	$	182	$	(1,740)
Balance at July 1, 2019														Balance at July 1, 2019	$	4,714	$	76	$	(106)	$	3,759	$	192	$	(1,897)
Paid guarantee benefits	Paid guarantee benefits	(108)		(5)		4		(56)		11		14		Paid guarantee benefits	(102)		(6)		3		(71)		15		20
Other changes in reserve	Other changes in reserve	152		4		(1)		75		(1)		(170)		Other changes in reserve	155		4		(4)		979		(2)		(576)
Balance at June 30, 2019		$	4,714	$	76	$	(106)	$	3,761	$	192	$	(1,896)
Balance at September 30, 2019														Balance at September 30, 2019	$	4,767	$	74	$	(107)	$	4,667	$	205	$	(2,453)


		GMDB										GMIB											GMDB				GMIB
		Direct		Assumed		Ceded		Direct		Assumed		Ceded			Direct		Assumed		Ceded		Direct		Assumed		Ceded
		(in millions)																							(in millions)
Balance at January 1, 2020	Balance at January 1, 2020	$	4,784	$	76	$	(105)	$	4,691	$	187	$	(2,139)	Balance at January 1, 2020	$	4,780	$	76	$	(104)	$	4,673	$	187	$	(2,139)
Paid guarantee benefits	Paid guarantee benefits	(251)		(10)		9		(177)		48		37		Paid guarantee benefits	(372)		(16)		11		(287)		39		58
Other changes in reserve	Other changes in reserve	482		4		(9)		1,639		(3)		(829)		Other changes in reserve	708		8		1		1,739		(6)		(737)
Balance at June 30, 2020		$	5,015	$	70	$	(105)	$	6,153	$	232	$	(2,931)
Balance at September 30, 2020														Balance at September 30, 2020	$	5,116	$	68	$	(92)	$	6,125	$	220	$	(2,818)

Balance at January 1, 2019	Balance at January 1, 2019	$	4,659	$	82	$	(113)	$	3,743	$	184	$	(1,732)	Balance at January 1, 2019	$	4,662	$	82	$	(113)	$	3,746	$	184	$	(1,733)
Paid guarantee benefits	Paid guarantee benefits	(226)		(11)		8		(112)		10		35		Paid guarantee benefits	(328)		(17)		11		(183)		25		55
Other changes in reserve	Other changes in reserve	281		5		(1)		130		(2)		(199)		Other changes in reserve	433		9		(5)		1,104		(4)		(775)
Balance at June 30, 2019		$	4,714	$	76	$	(106)	$	3,761	$	192	$	(1,896)
Balance at September 30, 2019														Balance at September 30, 2019	$	4,767	$	74	$	(107)	$	4,667	$	205	$	(2,453)

Liabilities for Embedded and Freestanding Insurance Related Derivatives

The liability for the GMxB derivative features, the liability for SCS, SIO, MSO and IUL indexed features and the asset and liability for the GMIB reinsurance contracts are considered embedded or freestanding insurance derivatives and are reported at fair value. For the fair value of the assets and liabilities associated with these embedded or freestanding insurance derivatives, see Note 8.8 Fair Value Disclosures.

Account Values and Net Amount at Risk

Account Values and Net Amount at Risk (“NAR”) for direct and assumed variable annuity contracts in force with GMDB and GMIB features as of ~~June~~September 30, 2020 are presented in the following tables by guarantee type. For contracts with the GMDB feature, the NAR in the event of death is the amount by which the GMDB feature exceeds the related Account Values. For contracts with the GMIB feature, the NAR in the event of annuitization is the amount by which the present value of the GMIB benefits exceed the related Account Values, taking into account the relationship between current annuity purchase rates and the GMIB guaranteed annuity purchase rates. Since variable annuity contracts with GMDB features may also offer GMIB guarantees in the same contract, the GMDB and GMIB amounts listed are not mutually exclusive.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Direct Variable Annuity Contracts with GMDB and GMIB Features

at ~~June~~September 30, 2020


		Guarantee Type																												Guarantee Type
		Return of Premium			Ratchet			Roll-Up			Combo			Total				Return of Premium			Ratchet			Roll-Up			Combo			Total
		(in millions, except age and interest rate)																												(in millions, except age and interest rate)
Variable annuity contracts with GMDB features	Variable annuity contracts with GMDB features																Variable annuity contracts with GMDB features
Account Values invested in:	Account Values invested in:																Account Values invested in:
General Account	General Account	$	14,904		$	90		$	57		$	174		$	15,225		General Account	$	15,155		$	89		$	57		$	171		$	15,472
Separate Accounts	Separate Accounts	46,313			8,576			2,914			30,252			88,055			Separate Accounts	48,407			8,812			3,021			31,083			91,323
Total Account Values	Total Account Values	$	61,217		$	8,666		$	2,971		$	30,426		$	103,280		Total Account Values	$	63,562		$	8,901		$	3,078		$	31,254		$	106,795

Net Amount at Risk, gross	Net Amount at Risk, gross	$	167		$	207		$	1,990		$	20,398		$	22,762		Net Amount at Risk, gross	$	125		$	94		$	1,864		$	19,561		$	21,644
Net Amount at Risk, net of amounts reinsured	Net Amount at Risk, net of amounts reinsured	$	167		$	201		$	1,414		$	20,398		$	22,180		Net Amount at Risk, net of amounts reinsured	$	125		$	91		$	1,319		$	19,561		$	21,096

Average attained age of policyholders (in years)	Average attained age of policyholders (in years)	51.2			68.0			74.6			69.8			55.1			Average attained age of policyholders (in years)	51.3			68.1			74.7			70.0			55.3
Percentage of policyholders over age 70	Percentage of policyholders over age 70	10.9		%	47.1		%	69.3		%	52.4		%	19.8		%	Percentage of policyholders over age 70	11.0		%	47.7		%	69.8		%	53.3		%	20.0		%
Range of contractually specified interest rates	Range of contractually specified interest rates	N/A			N/A			3% - 6%			3% - 6.5%			3% - 6.5%			Range of contractually specified interest rates	N/A			N/A			3% - 6%			3% - 6.5%			3% - 6.5%

Variable annuity contracts with GMIB features	Variable annuity contracts with GMIB features																Variable annuity contracts with GMIB features
Account Values invested in:	Account Values invested in:																Account Values invested in:
General Account	General Account	$	—		$	—		$	18		$	223		$	241		General Account	$	0		$	0		$	17		$	220		$	237
Separate Accounts	Separate Accounts	—			—			22,463			32,329			54,792			Separate Accounts	0			0			23,124			33,217			56,341
Total Account Values	Total Account Values	$	—		$	—		$	22,481		$	32,552		$	55,033		Total Account Values	$	0		$	0		$	23,141		$	33,437		$	56,578

Net Amount at Risk, gross	Net Amount at Risk, gross	$	—		$	—		$	1,189		$	15,384		$	16,573		Net Amount at Risk, gross	$	0		$	0		$	1,100		$	14,461		$	15,561
Net Amount at Risk, net of amounts reinsured	Net Amount at Risk, net of amounts reinsured	$	—		$	—		$	376		$	13,872		$	14,248		Net Amount at Risk, net of amounts reinsured	$	0		$	0		$	349		$	13,066		$	13,415

Average attained age of policyholders (in years)	Average attained age of policyholders (in years)	N/A			N/A			63.8			69.8			67.6			Average attained age of policyholders (in years)	N/A			N/A			64.0			70.0			67.8
Weighted average years remaining until annuitization	Weighted average years remaining until annuitization	N/A			N/A			5.9			0.7			2.6			Weighted average years remaining until annuitization	N/A			N/A			5.7			0.7			2.5
Range of contractually specified interest rates	Range of contractually specified interest rates	N/A			N/A			3% - 6%			3% - 6.5%			3% - 6.5%			Range of contractually specified interest rates	N/A			N/A			3% - 6%			3% - 6.5%			3% - 6.5%

Assumed Variable Annuity Contracts with GMDB and GMIB Features

at ~~June~~September 30, 2020


		Guarantee Type																												Guarantee Type
		Return of Premium			Ratchet			Roll-Up			Combo			Total				Return of Premium			Ratchet			Roll-Up			Combo			Total
		(in millions, except age and interest rates)																												(in millions, except age and interest rates)
Variable annuity contracts with GMDB features	Variable annuity contracts with GMDB features																Variable annuity contracts with GMDB features
Reinsured Account Values	Reinsured Account Values	$	856		$	4,761		$	244		$	1,041		$	6,902		Reinsured Account Values	$	888		$	4,915		$	247		$	1,079		$	7,129
Net Amount at Risk assumed	Net Amount at Risk assumed	$	6		$	281		$	16		$	169		$	472		Net Amount at Risk assumed	$	5		$	241		$	14		$	142		$	402

Average attained age of policyholders (in years)	Average attained age of policyholders (in years)	68			73			78			76			73			Average attained age of policyholders (in years)	68			73			78			76			73
Percentage of policyholders over age 70	Percentage of policyholders over age 70	46.0		%	65.0		%	80.0		%	76.0		%	65.0		%	Percentage of policyholders over age 70	45.9		%	65.6		%	79.9		%	76.1		%	65.2		%
Range of contractually specified interest rates (1)	Range of contractually specified interest rates (1)	N/A			N/A			3%-10%			5%-10%			3%-10%			Range of contractually specified interest rates (1)	N/A			N/A			3%-10%			5%-10%			3%-10%

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued


		Guarantee Type																												Guarantee Type
		Return of Premium			Ratchet			Roll-Up			Combo			Total				Return of Premium			Ratchet			Roll-Up			Combo			Total
		(in millions, except age and interest rates)																												(in millions, except age and interest rates)

Variable annuity contracts with GMIB features	Variable annuity contracts with GMIB features																Variable annuity contracts with GMIB features
Reinsured Account Values	Reinsured Account Values	$	830		$	40		$	211		$	1,054		$	2,135		Reinsured Account Values	$	878		$	42		$	217		$	1,090		$	2,227
Net Amount at Risk assumed	Net Amount at Risk assumed	$	1		$	—		$	32		$	336		$	369		Net Amount at Risk assumed	$	1		$	0		$	27		$	296		$	324

Average attained age of policyholders (in years)	Average attained age of policyholders (in years)	72			74			72			70			71			Average attained age of policyholders (in years)	72			74			72			70			71
Percentage of policyholders over age 70	Percentage of policyholders over age 70	65.0		%	62.0		%	63.0		%	54.0		%	59.0		%	Percentage of policyholders over age 70	65.0		%	62.2		%	61.9		%	54.5		%	59.5		%
Range of contractually specified interest rates	Range of contractually specified interest rates	N/A			N/A			3.3%-6.5%			6%-6%			3.3%-6.5%			Range of contractually specified interest rates	N/A			N/A			3.3%-6.5%			6%-6%			3.3%-6.5%

______________

(1)In general, for policies with the highest contractual interest rate shown (10%), the rate applied only for the first 10 years after issue, which has now elapsed.

For more information about the reinsurance programs of the Company’s GMDB and GMIB exposure, see “Reinsurance” in Note 11 to the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2019.

Separate Accounts Investments by Investment Category Underlying Variable Annuity Contracts with GMDB and GMIB Features

The total Account Values of variable annuity contracts with GMDB and GMIB features include amounts allocated to the guaranteed interest option, which is part of the General Account and variable investment options that invest through Separate Accounts in variable insurance trusts. The following table presents the aggregate fair value of assets, by major investment category, held by Separate Accounts that support variable annuity contracts with GMDB and GMIB features. The investment performance of the assets impacts the related Account Values and, consequently, the NAR associated with the GMDB and GMIB benefits and guarantees. Because the Company’s variable annuity contracts offer both GMDB and GMIB features, GMDB and GMIB amounts are not mutually exclusive.

Investment in Variable Insurance Trust Mutual Funds


		June 30, 2020						December 31, 2019							September 30, 2020				December 31, 2019
Mutual Fund Type	Mutual Fund Type	GMDB		GMIB		GMDB		GMIB		Mutual Fund Type	GMDB		GMIB		GMDB		GMIB
		(in millions)															(in millions)
Equity	Equity	$	39,126	$	16,011	$	42,489	$	17,941	Equity	$	41,259	$	16,739	$	42,489	$	17,941
Fixed income	Fixed income	5,297		2,682		5,263		2,699		Fixed income	5,371		2,679		5,263		2,699
Balanced	Balanced	42,696		35,835		45,871		38,445		Balanced	43,684		36,656		45,872		38,445
Other	Other	936		264		865		263		Other	1,009		267		865		263
Total	Total	$	88,055	$	54,792	$	94,488	$	59,348	Total	$	91,323	$	56,341	$	94,489	$	59,348

Hedging Programs for GMDB, GMIB, GIB and Other Features

The Company has a program intended to hedge certain risks associated first with the GMDB feature and with the GMIB feature of the Accumulator series of variable annuity products. The program has also been extended to cover other guaranteed benefits as they have been made available. This program utilizes derivative contracts, such as exchange-traded equity, currency and interest rate futures contracts, total return and/or equity swaps, interest rate swap and floor contracts, swaptions, variance swaps as well as equity options, that collectively are managed in an effort to reduce the economic impact of unfavorable changes in guaranteed benefits’ exposures attributable to movements in the capital markets. At the present time, this program hedges certain economic risks on products sold from 2001 forward, to the extent such risks are not externally reinsured.

These programs do not qualify for hedge accounting treatment. Therefore, gains (losses) on the derivatives contracts used in these programs, including current period changes in fair value, are recognized in Net derivative gains (losses) in the period in which they occur, and may contribute to income (loss) volatility.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Variable and Interest-Sensitive Life Insurance Policies – NLG

The NLG feature contained in variable and interest-sensitive life insurance policies keeps them in force in situations where the policy value is not sufficient to cover monthly charges then due. The NLG remains in effect so long as the policy meets a contractually specified premium funding test and certain other requirements.

The change in the NLG liabilities, reflected in Future policy benefits and other policyholders’ liabilities in the consolidated balance sheets, is summarized in the table below.


		Direct Liability (1)															Direct Liability (1)
		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020		2019
		(in millions)															(in millions)
Beginning balance (2)	Beginning balance (2)	$	925	$	825	$	897	$	812	Beginning balance (2)	$	948	$	845	$	898	$	813
Paid guarantee benefits	Paid guarantee benefits	(13)		(3)		(26)		(10)		Paid guarantee benefits	(6)		(7)		(32)		(16)
Other changes in reserves	Other changes in reserves	35		21		76		41		Other changes in reserves	60		54		136		95
Ending balance	Ending balance	$	947	$	843	$	947	$	843	Ending balance	$	1,002	$	892	$	1,002	$	892

______________

(1)There were no amounts of reinsurance ceded in any period presented.

(2)The beginning balance for ~~six~~the nine months ended ~~June~~September 30, 2020 was reduced by $22 million to reflect the balance transferred to Assets ~~held-for-sale~~HFS at December 31, 2019.

8) FAIR VALUE DISCLOSURES

U.S. GAAP establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value, and identifies three levels of inputs that may be used to measure fair value:

Level 1 Unadjusted quoted prices for identical instruments in active markets. Level 1 fair values generally are supported by market transactions that occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar instruments, quoted prices in markets that are not active, and inputs to model-derived valuations that are directly observable or can be corroborated by observable market data.

Level 3 Unobservable inputs supported by little or no market activity and often requiring significant management judgment or estimation, such as an entity’s own assumptions about the cash flows or other significant components of value that market participants would use in pricing the asset or liability.

The Company uses unadjusted quoted market prices to measure fair value for those instruments that are actively traded in financial markets. In cases where quoted market prices are not available, fair values are measured using present value or other valuation techniques. The fair value determinations are made at a specific point in time, based on available market information and judgments about the financial instrument, including estimates of the timing and amount of expected future cash flows and the credit standing of counterparties. Such adjustments do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value cannot be substantiated by direct comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instrument.

Management is responsible for the determination of the value of investments carried at fair value and the supporting methodologies and assumptions. Under the terms of various service agreements, the Company often utilizes independent valuation service providers to gather, analyze, and interpret market information and derive fair values based upon relevant methodologies and assumptions for individual securities. These independent valuation service providers typically obtain data about market transactions and other key valuation model inputs from multiple sources and, through the use of widely accepted valuation models, provide a single fair value measurement for individual securities for which a fair value has been requested. As further described below with respect to specific asset classes, these inputs include, but are not limited to, market prices for recent trades and transactions in comparable securities, benchmark yields, interest rate yield curves, credit spreads, quoted prices for similar securities, and other market-observable information, as applicable. Specific attributes of the security being valued also are considered, including its term, interest rate, credit rating, industry sector, and when applicable, collateral quality and other security- or issuer-

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

specific information. When insufficient market observable information is available upon which to measure fair value, the Company either will request brokers knowledgeable about these securities to provide a non-binding quote or will employ internal valuation models. Fair values received from independent valuation service providers and brokers and those internally modeled or otherwise estimated are assessed for reasonableness.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below. At ~~June~~September 30, 2020 and December 31, 2019, no assets were required to be measured at fair value on a non-recurring basis. Fair value measurements are required on a non-recurring basis for certain assets, including goodwill and mortgage loans on real estate, only when an impairment or other event occurs. When such fair value measurements are recorded, they must be classified and disclosed within the fair value hierarchy.

Fair Value Measurements at ~~June~~September 30, 2020


		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(in millions)															(in millions)
Assets	Assets									Assets
Investments	Investments									Investments
Fixed maturities, AFS:	Fixed maturities, AFS:									Fixed maturities, AFS:
Corporate (1)	Corporate (1)	$	—	$	52,092	$	1,685	$	53,777	Corporate (1)	$	0	$	54,318	$	1,494	$	55,812
U.S. Treasury, government and agency	U.S. Treasury, government and agency	—		17,377		—		17,377		U.S. Treasury, government and agency	0		17,468		0		17,468
States and political subdivisions	States and political subdivisions	—		735		40		775		States and political subdivisions	0		839		39		878
Foreign governments	Foreign governments	—		835		—		835		Foreign governments	0		905		0		905
Residential mortgage-backed (2)	Residential mortgage-backed (2)	—		175		—		175		Residential mortgage-backed (2)	0		160		0		160
Asset-backed (3)	Asset-backed (3)	—		2,045		—		2,045		Asset-backed (3)	0		2,583		13		2,596
Commercial mortgage-backed	Commercial mortgage-backed	—		879		—		879		Commercial mortgage-backed	0		1,117		0		1,117
Redeemable preferred stock	Redeemable preferred stock	317		63		—		380		Redeemable preferred stock	369		74		0		443
Total fixed maturities, AFS	Total fixed maturities, AFS	317		74,201		1,725		76,243		Total fixed maturities, AFS	369		77,464		1,546		79,379
Other equity investments	Other equity investments	12		—		81		93		Other equity investments	20		0		73		93
Trading securities	Trading securities	486		6,093		37		6,616		Trading securities	414		5,778		52		6,244
Other invested assets:	Other invested assets:									Other invested assets:
Short-term investments	Short-term investments	—		244		—		244		Short-term investments	0		126		0		126
Assets of consolidated VIEs/VOEs	Assets of consolidated VIEs/VOEs	20		215		15		250		Assets of consolidated VIEs/VOEs	19		213		13		245
Swaps	Swaps	—		1,653		—		1,653		Swaps	0		1,368		0		1,368
Credit default swaps	Credit default swaps	—		7		—		7		Credit default swaps	0		6		0		6
Futures	Futures	(1)		—		—		(1)		Futures	0		0		0		0
Options	Options	—		1,898		—		1,898		Options	0		2,757		0		2,757
Swaptions	Swaptions	—		—		—		—		Swaptions	0		—		0		0
Total other invested assets	Total other invested assets	19		4,017		15		4,051		Total other invested assets	19		4,470		13		4,502
Cash equivalents	Cash equivalents	7,127		—		—		7,127		Cash equivalents	6,331		1,041		0		7,372
Segregated securities	Segregated securities	—		1,882		—		1,882		Segregated securities	0		1,869		0		1,869
GMIB reinsurance contracts asset	GMIB reinsurance contracts asset	—		—		2,931		2,931		GMIB reinsurance contracts asset	0		0		2,818		2,818
Separate Accounts assets (4)	Separate Accounts assets (4)	115,552		2,806		—		118,358		Separate Accounts assets (4)	120,418		2,438		0		122,856
Total Assets	Total Assets	$	123,513	$	88,999	$	4,789	$	217,301	Total Assets	$	127,571	$	93,060	$	4,502	$	225,133

Liabilities	Liabilities									Liabilities
GMxB derivative features’ liability	GMxB derivative features’ liability	$	—	$	—	$	12,613	$	12,613	GMxB derivative features’ liability	$	0	$	0	$	12,204	$	12,204
SCS, SIO, MSO and IUL indexed features’ liability	SCS, SIO, MSO and IUL indexed features’ liability	—		1,773		—		1,773		SCS, SIO, MSO and IUL indexed features’ liability	0		2,606		0		2,606
Liabilities of consolidated VIEs and VOEs	Liabilities of consolidated VIEs and VOEs	—		6		—		6		Liabilities of consolidated VIEs and VOEs	0		5		0		5
Contingent payment arrangements	Contingent payment arrangements	—		—		29		29		Contingent payment arrangements	0		0		30		30
Total Liabilities	Total Liabilities	$	—	$	1,779	$	12,642	$	14,421	Total Liabilities	$	0	$	2,611	$	12,234	$	14,845

______________

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

(1)Corporate fixed maturities includes both public and private issues.

(2)Includes publicly traded agency pass-through securities and collateralized obligations.

(3)Includes credit-tranched securities collateralized by sub-prime mortgages and other asset types and credit tenant loans.

(4)Separate Accounts assets included in the fair value hierarchy exclude investments in entities that calculate NAV per share (or its equivalent) as a practical expedient. Such investments excluded from the fair value hierarchy include investments in real estate and commercial mortgages. At ~~June~~September 30, 2020, the fair value of such investments was ~~$363~~$356 million.

Fair Value Measurements at December 31, 2019 (1)


		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(in millions)															(in millions)
Assets	Assets									Assets
Investments	Investments									Investments
Fixed maturities, AFS:	Fixed maturities, AFS:									Fixed maturities, AFS:
Corporate (2)	Corporate (2)	$	—	$	46,942	$	1,257	$	48,199	Corporate (2)	$	0	$	46,942	$	1,257	$	48,199
U.S. Treasury, government and agency	U.S. Treasury, government and agency	—		15,394		—		15,394		U.S. Treasury, government and agency	0		15,394		0		15,394
States and political subdivisions	States and political subdivisions	—		666		39		705		States and political subdivisions	0		666		39		705
Foreign governments	Foreign governments	—		492		—		492		Foreign governments	0		492		0		492
Residential mortgage-backed (3)	Residential mortgage-backed (3)	—		191		—		191		Residential mortgage-backed (3)	0		191		0		191
Asset-backed (4)	Asset-backed (4)	—		749		100		849		Asset-backed (4)	0		749		100		849

Redeemable preferred stock	Redeemable preferred stock	239		274		—		513		Redeemable preferred stock	239		274		0		513
Total fixed maturities, AFS	Total fixed maturities, AFS	239		64,708		1,396		66,343		Total fixed maturities, AFS	239		64,708		1,396		66,343
Other equity investments	Other equity investments	13		—		97		110		Other equity investments	13		0		97		110
Trading securities	Trading securities	500		6,495		36		7,031		Trading securities	500		6,495		36		7,031
Other invested assets:	Other invested assets:									Other invested assets:
Short-term investments	Short-term investments	—		490		—		490		Short-term investments	0		490		0		490
Assets of consolidated VIEs/VOEs	Assets of consolidated VIEs/VOEs	132		457		17		606		Assets of consolidated VIEs/VOEs	132		457		17		606
Swaps	Swaps	—		(327)		—		(327)		Swaps	0		(327)		0		(327)
Credit default swaps	Credit default swaps	—		15		—		15		Credit default swaps	0		15		0		15
Options	Options	—		3,346		—		3,346		Options	0		3,346		0		3,346
Swaptions	Swaptions	—		16		—		16		Swaptions	0		16		0		16
Total other invested assets	Total other invested assets	132		3,997		17		4,146		Total other invested assets	132		3,997		17		4,146
Cash equivalents	Cash equivalents	3,497		—		—		3,497		Cash equivalents	3,497		0		0		3,497
Segregated securities	Segregated securities	—		1,095		—		1,095		Segregated securities	0		1,095		0		1,095
GMIB reinsurance contracts asset	GMIB reinsurance contracts asset	—		—		2,139		2,139		GMIB reinsurance contracts asset	0		0		2,139		2,139
Separate Accounts assets (5)	Separate Accounts assets (5)	123,432		2,892		—		126,324		Separate Accounts assets (5)	123,432		2,892		0		126,324
Total Assets	Total Assets	$	127,813	$	79,187	$	3,685	$	210,685	Total Assets	$	127,813	$	79,187	$	3,685	$	210,685

Liabilities	Liabilities									Liabilities
GMxB derivative features’ liability	GMxB derivative features’ liability	$	—	$	—	$	8,432	$	8,432	GMxB derivative features’ liability	$	0	$	0	$	8,502	$	8,502
SCS, SIO, MSO and IUL indexed features’ liability	SCS, SIO, MSO and IUL indexed features’ liability	—		3,268		—		3,268		SCS, SIO, MSO and IUL indexed features’ liability	0		3,268		0		3,268
Liabilities of consolidated VIEs and VOEs	Liabilities of consolidated VIEs and VOEs	1		9		—		10		Liabilities of consolidated VIEs and VOEs	1		9		0		10
Contingent payment arrangements	Contingent payment arrangements	—		—		23		23		Contingent payment arrangements	0		0		23		23
Total Liabilities	Total Liabilities	$	1	$	3,277	$	8,455	$	11,733	Total Liabilities	$	1	$	3,277	$	8,525	$	11,803

______________

(1)Excludes amounts reclassified as ~~Held-for-Sale.~~HFS.

(2)Corporate fixed maturities includes both public and private issues.

(3)Includes publicly traded agency pass-through securities and collateralized obligations.

(4)Includes credit-tranched securities collateralized by sub-prime mortgages and other asset types and credit tenant loans.

(5)Separate Accounts assets included in the fair value hierarchy exclude investments in entities that calculate NAV per share (or its equivalent) as a practical expedient. Such investments excluded from the fair value hierarchy include investments in real estate and commercial mortgages. At December 31, 2019, the fair value of such investments was $356 million.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Public Fixed Maturities

The fair values of the Company’s public fixed maturities are generally based on prices obtained from independent valuation service providers and for which the Company maintains a vendor hierarchy by asset type based on historical pricing experience and vendor expertise. Although each security generally is priced by multiple independent valuation service providers, the Company ultimately uses the price received from the independent valuation service provider highest in the vendor hierarchy based on the respective asset type, with limited exception. To validate reasonableness, prices also are internally reviewed by those with relevant expertise through comparison with directly observed recent market trades. Consistent with the fair value hierarchy, public fixed maturities validated in this manner generally are reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable inputs.

Private Fixed Maturities

The fair values of the Company’s private fixed maturities are determined from prices obtained from independent valuation service providers. Prices not obtained from an independent valuation service provider are determined by using a discounted cash flow model or a market comparable company valuation technique. In certain cases, these models use observable inputs with a discount rate based upon the average of spread surveys collected from private market intermediaries who are active in both primary and secondary transactions, taking into account, among other factors, the credit quality and industry sector of the issuer and the reduced liquidity associated with private placements. Generally, these securities have been reflected within Level 2. For certain private fixed maturities, the discounted cash flow model or a market comparable company valuation technique may also incorporate unobservable inputs, which reflect the Company’s own assumptions about the inputs market participants would use in pricing the asset. To the extent management determines that such unobservable inputs are significant to the fair value measurement of a security, a Level 3 classification generally is made.

Freestanding Derivative Positions

The net fair value of the Company’s freestanding derivative positions as disclosed in Note 4 are generally based on prices obtained either from independent valuation service providers or derived by applying market inputs from recognized vendors into industry standard pricing models. The majority of these derivative contracts are traded in the OTC derivative market and are classified in Level 2. The fair values of derivative assets and liabilities traded in the OTC market are determined using quantitative models that require use of the contractual terms of the derivative instruments and multiple market inputs, including interest rates, prices, and indices to generate continuous yield or pricing curves, including overnight index swap (“OIS”) curves, and volatility factors, which then are applied to value the positions. The predominance of market inputs is actively quoted and can be validated through external sources or reliably interpolated if less observable.

Level Classifications of the Company’s Financial Instruments

Financial Instruments Classified as Level 1

Investments classified as Level 1 primarily include redeemable preferred stock, trading securities, cash equivalents and Separate Accounts assets. Fair value measurements classified as Level 1 include exchange-traded prices of fixed maturities, equity securities and derivative contracts, and net asset values for transacting subscriptions and redemptions of mutual fund shares held by Separate Accounts. Cash equivalents classified as Level 1 include money market accounts, overnight commercial paper and highly liquid debt instruments purchased with an original maturity of three months or less and are carried at cost as a proxy for fair value measurement due to their short-term nature.

Financial Instruments Classified as Level 2

Investments classified as Level 2 are measured at fair value on a recurring basis and primarily include U.S. government and agency securities and certain corporate debt securities, such as public and private fixed maturities. As market quotes generally are not readily available or accessible for these securities, their fair value measures are determined utilizing relevant information generated by market transactions involving comparable securities and often are based on model pricing techniques that effectively discount prospective cash flows to present value using appropriate sector-adjusted credit spreads commensurate with the security’s duration, also taking into consideration issuer-specific credit quality and liquidity. Segregated securities classified as Level 2 are U.S. Treasury bills segregated by AB in a special reserve bank custody account for the exclusive benefit of brokerage customers, as required by Rule 15c3-3 of the Exchange Act and for which fair values are based on quoted yields in secondary markets.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Observable inputs generally used to measure the fair value of securities classified as Level 2 include benchmark yields, reported secondary trades, issuer spreads, benchmark securities and other reference data. Additional observable inputs are used when available, and as may be appropriate, for certain security types, such as prepayment, default, and collateral information for the purpose of measuring the fair value of mortgage- and asset-backed securities. The Company’s AAA-rated mortgage- and asset-backed securities are classified as Level 2 for which the observability of market inputs to their pricing models is supported by sufficient, albeit more recently contracted, market activity in these sectors.

Certain Company products, such as the SCS and EQUI-VEST variable annuity products, IUL and the MSO fund available in some life contracts, offer investment options which permit the contract owner to participate in the performance of an index, ETF or commodity price. These investment options, which depending on the product and on the index selected, can currently have one, three, five or six year terms, provide for participation in the performance of specified indices, ETF or commodity price movement up to a segment-specific declared maximum rate. Under certain conditions that vary by product, e.g., holding these segments for the full term, these segments also shield policyholders from some or all negative investment performance associated with these indices, ETF or commodity prices. These investment options have defined formulaic liability amounts, and the current values of the option component of these segment reserves are accounted for as Level 2 embedded derivatives. The fair values of these embedded derivatives are based on data obtained from independent valuation service providers.

Financial Instruments Classified as Level 3

The Company’s investments classified as Level 3 primarily include corporate debt securities, such as private fixed maturities and asset-backed securities. Determinations to classify fair value measures within Level 3 of the valuation hierarchy generally are based upon the significance of the unobservable factors to the overall fair value measurement. Included in the Level 3 classification are fixed maturities with indicative pricing obtained from brokers that otherwise could not be corroborated to market observable data.

The Company also issues certain benefits on its variable annuity products that are accounted for as derivatives and are also considered Level 3. The GMIBNLG feature allows the policyholder to receive guaranteed minimum lifetime annuity payments based on predetermined annuity purchase rates applied to the contract’s benefit base if and when the contract account value is depleted and the NLG feature is activated. The GMWB feature allows the policyholder to withdraw at minimum, over the life of the contract, an amount based on the contract’s benefit base. The GWBL feature allows the policyholder to withdraw, each year for the life of the contract, a specified annual percentage of an amount based on the contract’s benefit base. The GMAB feature increases the contract account value at the end of a specified period to a GMAB base. The GIB feature provides a lifetime annuity based on predetermined annuity purchase rates if and when the contract account value is depleted. This lifetime annuity is based on predetermined annuity purchase rates applied to a GIB base.

Level 3 also includes the GMIB reinsurance contract assets, which are accounted for as derivative contracts. The GMIB reinsurance contract asset and liabilities’ fair value reflects the present value of reinsurance premiums and recoveries and risk margins over a range of market consistent economic scenarios while GMxB derivative features liability reflects the present value of expected future payments (benefits) less fees, adjusted for risk margins and nonperformance risk, attributable to GMxB derivative features’ liability over a range of market-consistent economic scenarios.

The valuations of the GMIB reinsurance contract asset and GMxB derivative features liability incorporate significant non-observable assumptions related to policyholder behavior, risk margins and projections of equity Separate Accounts funds. The credit risks of the counterparty and of the Company are considered in determining the fair values of its GMIB reinsurance contract asset and GMxB derivative features liability positions, respectively, after taking into account the effects of collateral arrangements. Incremental adjustment to the swap curve for non-performance risk is made to the fair values of the GMIB reinsurance contract asset and liabilities and GMIBNLG feature to reflect the claims-paying ratings of counterparties and the Company. Equity and fixed income volatilities were modeled to reflect current market volatilities. Due to the unique, long duration of the GMIBNLG feature, adjustments were made to the equity volatilities to remove the illiquidity bias associated with the longer tenors and risk margins were applied to the non-capital markets inputs to the GMIBNLG valuations.

After giving consideration to collateral arrangements, the Company reduced the fair value of its GMIB reinsurance contract asset by ~~$166~~$161 million and $110 million at ~~June~~September 30, 2020 and December 31, 2019, respectively, to recognize incremental counterparty non-performance risk and reduced the fair value of its GMIB reinsurance contract liabilities by ~~$36~~$29 million and $25 million at ~~June~~September 30, 2020 and December 31, 2019, respectively, to recognize its own incremental non-performance risk.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Lapse rates are adjusted at the contract level based on a comparison of the actuarial calculated guaranteed values and the current policyholder account value, which include other factors such as considering surrender charges. Generally, lapse rates are assumed to be lower in periods when a surrender charge applies. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as ~~in the money~~in-the-money contracts are less likely to lapse. For valuing the embedded derivative, lapse rates vary throughout the period over which cash flows are projected.

The Company’s Level 3 liabilities include contingent payment arrangements associated with acquisitions in 2016 and 2019 by AB. At each reporting date, AB estimates the fair values of the contingent consideration expected to be paid based upon revenue and discount rate projections, using unobservable market data inputs, which are included in Level 3 of the valuation hierarchy. The Company’s consolidated VIEs/VOEs hold investments that are classified as Level 3, primarily corporate bonds that are vendor priced with no ratings available, bank loans, non-agency collateralized mortgage obligations and asset-backed securities.

Transfers of Financial Instruments Between Levels 2 and 3

During the ~~six~~nine months ended ~~June~~September 30, 2020, AFS fixed maturities with fair values of $103 million were transferred out of Level 3 and into Level 2 principally due to the availability of trading activity and/or market observable inputs to measure and validate their fair values. In addition, AFS fixed maturities with fair value of ~~$224~~$195 million were transferred from Level 2 into the Level 3 classification. These transfers in the aggregate represent approximately ~~1.7%~~1.6% of total equity at ~~June~~September 30, 2020.

During the ~~six~~nine months ended ~~June~~September 30, 2019, AFS fixed maturities with fair values of ~~$73~~$104 million were transferred out of Level 3 and into Level 2 principally due to the availability of trading activity and/or market observable inputs to measure and validate their fair values. In addition, AFS fixed maturities with fair value of $14 million were transferred from Level 2 into the Level 3 classification. These transfers in the aggregate represent approximately ~~0.5%~~0.7% of total equity at ~~June~~September 30, 2019.

The tables below present reconciliations for all Level 3 assets and liabilities for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

Level 3 Instruments - Fair Value Measurements


		Corporate		State and Political Subdivisions		Asset- backed			Corporate		State and Political Subdivisions			Asset- backed
		(in millions)											(in millions)
Balance, April 1, 2020		$	1,185	$	36	$	40
Balance, July 1, 2020								Balance, July 1, 2020	$	1,685	$	40		$	0
Total gains and (losses), realized and unrealized, included in:	Total gains and (losses), realized and unrealized, included in:							Total gains and (losses), realized and unrealized, included in:
Net income (loss) as:	Net income (loss) as:							Net income (loss) as:
Net investment income (loss)	Net investment income (loss)	1		—		—		Net investment income (loss)	0		0			0
Investment gains (losses), net	Investment gains (losses), net	(11)		—		—		Investment gains (losses), net	(1)		0			0
Subtotal	Subtotal	(10)		—		—		Subtotal	(1)		0			0
Other comprehensive income (loss)	Other comprehensive income (loss)	7		5		8		Other comprehensive income (loss)	18		(1)			0
Purchases	Purchases	301		—		(48)		Purchases	(155)		0			13
Sales	Sales	(45)		(1)		—		Sales	(24)		0			0
Transfers into Level 3 (1)	Transfers into Level 3 (1)	224		—		—		Transfers into Level 3 (1)	(29)		0			0
Transfers out of Level 3 (1)	Transfers out of Level 3 (1)	23		—		—		Transfers out of Level 3 (1)	0		0			0
Balance, June 30, 2020		$	1,685	$	40	$	—
Balance, September 30, 2020								Balance, September 30, 2020	$	1,494	$	39		$	13

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

Corporate State and Political Subdivisions Asset- backed
(in millions)
Balance, April 1, 2019 $ 1,180 $ 40 $ 534
Total gains and (losses), realized and unrealized, included in:
Net income (loss) as:
Net investment income (loss) 2 — —
Subtotal 2 — —
Other comprehensive income (loss) 1 1 1
Purchases 152 — (1)
Sales (26) (1) —
Transfers into Level 3 (1) (3) — —
Transfers out of Level 3 (1) (4) — —
Balance, June 30, 2019 $ 1,302 $ 40 $ 534

~~_____________~~

~~(1)Transfers into/out of the Level 3 classification are reflected at beginning of period fair values.~~

Corporate State and
Political
Subdivisions Asset-backed
(in millions)
Balance, January 1, 2020 $ 1,257 $ 39 $ 100
Total gains and (losses), realized and unrealized, included in:
Net income (loss) as:
Net investment income (loss) 2 — —
Investment gains (losses), net (13) — —
Subtotal (11) — —
Other comprehensive income (loss) (54) 2 —
Purchases 362 — —
Sales (90) (1) —
Transfers into Level 3 (1) 224 — —
Transfers out of Level 3 (1) (3) — (100)
Balance, June 30, 2020 $ 1,685 $ 40 $ —
Balance, January 1, 2019 $ 1,186 $ 39 $ 519
Total gains and (losses), realized and unrealized, included in:
Net income (loss) as:
Net investment income (loss) 3 — —
Investment gains (losses), net — — —
Subtotal 3 — —
Other comprehensive income (loss) 10 2 5
Purchases 222 — 10
Sales (60) (1) —
Transfers into Level 3 (1) 14 — —
Transfers out of Level 3 (1) (73) — —
Balance, June 30, 2019 $ 1,302 $ 40 $ 534

~~_____________~~

~~(1)Transfers into/out of the Level 3 classification are reflected at beginning of period fair values.~~

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Other Equity Investments GMIB Reinsurance Contract Asset Separate Accounts Assets GMxB Derivative Features Liability Contingent Payment Arrangement
(in millions)
Balance, April 1, 2020 $ 140 $ 2,823 $ — $ (9,727) $ (24)
Realized and unrealized gains (losses), included in Net income (loss) as:
Investment gains (losses), net — — — — —
Net derivative gains (losses), excluding non-performance risk — (90) — (346) —
Non-performance risk (1) — 203 — (2,450) —
Total realized and unrealized gains (losses) — 113 — (2,796) —
Other comprehensive income (loss) (10) — — — —
Purchases (2) 2 12 — (109) (4)
Sales (3) (1) (17) — 19 —
Settlements (4) — — — — —
Change in estimate (5) — — — — —
Activity related to consolidated VIEs/VOEs — — — — (1)
Transfers into Level 3 (6) 1 — — — —
Transfers out of Level 3 (6) — — — — —
Balance, June 30, 2020 $ 132 $ 2,931 $ — $ (12,613) $ (29)
Balance, April 1, 2019 $ 137 $ 1,740 $ 23 $ (6,126) $ (7)
Realized and unrealized gains (losses), included in Net income (loss) as:
Investment gains (losses), net — — — — —
Net derivative gains (losses), excluding non-performance risk — 147 — (719) —
Non-performance risk (1) — 12 — — —
Total realized and unrealized gains (losses) — 159 — (719) —
Other comprehensive income (loss) — — — — —
Purchases (2) 6 11 4 (104) (17)
Sales (3) (7) (14) — 8 —
Settlements (4) — — (2) — —
Activity related to consolidated VIEs/VOEs — — — — —
Transfers into Level 3 (6) (2) — — — (1)
Transfers out of Level 3 (6) — — — — —
Balance, June 30, 2019 $ 134 $ 1,896 $ 25 $ (6,941) $ (25)


	Corporate		State and Political Subdivisions		Asset- backed
	(in millions)
Balance, July 1, 2019	$	1,302	$	40	$	534
Total gains and (losses), realized and unrealized, included in:
Net income (loss) as:
Net investment income (loss)	0		0		0
Investment gains (losses), net	0		1		0
Subtotal	0		1		0
Other comprehensive income (loss)	(6)		0		0
Purchases	(3)		0		71
Sales	(42)		(2)		(73)
Transfers into Level 3 (1)	0		0		0
Transfers out of Level 3 (1)	(31)		0		0
Balance, September 30, 2019	$	1,220	$	39	$	532

_____________

(1)Transfers into/out of the Level 3 classification are reflected at beginning-of-period fair values.


	Corporate		State and Political Subdivisions		Asset-backed
	(in millions)
Balance, January 1, 2020	$	1,257	$	39	$	100
Total gains and (losses), realized and unrealized, included in:
Net income (loss) as:
Net investment income (loss)	2		0		0
Investment gains (losses), net	(14)		0		0
Subtotal	(12)		0		0
Other comprehensive income (loss)	(36)		1		0
Purchases	207		0		13
Sales	(114)		(1)		0
Transfers into Level 3 (1)	195		0		0
Transfers out of Level 3 (1)	(3)		0		(100)
Balance, September 30, 2020	$	1,494	$	39	$	13

Balance, January 1, 2019	$	1,186	$	39	$	519
Total gains and (losses), realized and unrealized, included in:
Net income (loss) as:
Net investment income (loss)	3		0		0
Investment gains (losses), net	0		1		0
Subtotal	3		1		0
Other comprehensive income (loss)	4		2		5
Purchases	219		0		81
Sales	(102)		(3)		(73)
Transfers into Level 3 (1)	14		0		0
Transfers out of Level 3 (1)	(104)		0		0
Balance, September 30, 2019	$	1,220	$	39	$	532

_____________

(1)Transfers into/out of the Level 3 classification are reflected at beginning-of-period fair values.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued


	Other Equity Investments		GMIB Reinsurance Contract Asset		Separate Accounts Assets		GMxB Derivative Features Liability		Contingent Payment Arrangement
	(in millions)
Balance, July 1, 2020	$	132	$	2,931	$	0	$	(12,689)	$	(28)
Realized and unrealized gains (losses), included in Net income (loss) as:
Investment gains (losses), net	7		0		0		0		0
Net derivative gains (losses) (1)	0		(103)		0		579		0
Total realized and unrealized gains (losses)	7		(103)		0		579		0
Other comprehensive income (loss)	(4)		0		0		0		0
Purchases (2)	21		11		0		(115)		0
Sales (3)	(14)		(21)		0		21		0
Settlements (4)	0		0		0		0		0
Activity related to consolidated VIEs/VOEs	(3)		0		0		0		(1)
Transfers into Level 3 (5)	0		0		0		0		0
Transfers out of Level 3 (5)	0		0		0		0		0
Balance, September 30, 2020	$	139	$	2,818	$	0	$	(12,204)	$	(29)

Balance, July 1, 2019	$	134	$	1,898	$	25	$	(7,004)	$	(25)
Realized and unrealized gains (losses), included in Net income (loss) as:
Investment gains (losses), net	0		0		0		0		0
Net derivative gains (losses)	0		563		0		(2,548)		0
Total realized and unrealized gains (losses)	0		563		0		(2,548)		0
Other comprehensive income (loss)	0		0		0		0		0
Purchases (2)	2		11		(5)		(102)		0
Sales (3)	(4)		(20)		(1)		13		0
Settlements (4)	0		0		(1)		0		0
Activity related to consolidated VIEs/VOEs	0		0		0		0		(1)
Transfers into Level 3 (5)	0		0		0		0		0
Transfers out of Level 3 (5)	(4)		0		(11)		0		0
Balance, September 30, 2019	$	128	$	2,452	$	7	$	(9,641)	$	(26)

_____________

(1)The Company’s ~~non-performance~~nonperformance risk impact of ($464) million for the GMxB derivative features liability and ($8) million for the GMIB reinsurance contract asset the three months ended September 2020, respectively, is recorded through Net derivative gains (losses).

(2)For the GMIB reinsurance contract asset, and GMxB derivative features liability, represents attributed fee.

(3)For the GMIB reinsurance contract asset, represents recoveries from reinsurers and for GMxB derivative features liability represents benefits paid.

(4)For contingent payment arrangements, it represents payments settled under the arrangement related to AB acquisitions.

(5)~~For the GMIB reinsurance contract asset, represents a transfer from amounts due from reinsurers.~~

~~(6)~~Transfers into/out of the Level 3 classification are reflected at beginning-of-period fair values.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued


		Other Equity Investments		GMIB Reinsurance Contract Asset		Separate Accounts Assets		GMxB Derivative Features Liability		Contingent Payment Arrangement			Other Equity Investments		GMIB Reinsurance Contract Asset		Separate Accounts Assets		GMxB Derivative Features Liability		Contingent Payment Arrangement
		(in millions)																			(in millions)
Balance, January 1, 2020	Balance, January 1, 2020	$	150	$	2,139	$	—	$	(8,432)	$	(23)	Balance, January 1, 2020	$	150	$	2,139	$	0	$	(8,502)	$	(23)
Realized and unrealized gains (losses), included in Net income (loss) as:	Realized and unrealized gains (losses), included in Net income (loss) as:											Realized and unrealized gains (losses), included in Net income (loss) as:
Investment gains (losses), net	Investment gains (losses), net	7		—		—		—		—		Investment gains (losses), net	14		0		0		0		0
Net derivative gains (losses), excluding non-performance risk		—		865		—		(4,499)		—
Non-performance risk (1)		—		(26)		—		505		—
Net derivative gains (losses) (1)												Net derivative gains (losses) (1)	0		736		0		(3,421)		0
Total realized and unrealized gains (losses)	Total realized and unrealized gains (losses)	7		839		—		(3,994)		—		Total realized and unrealized gains (losses)	14		736		0		(3,421)		0
Other comprehensive income (loss)	Other comprehensive income (loss)	(17)		—		—		—		—		Other comprehensive income (loss)	(21)		0		0		0		0
Purchases (2)	Purchases (2)	4		22		—		(220)		(4)		Purchases (2)	25		33		0		(335)		(4)
Sales (3)	Sales (3)	(12)		(37)		—		33		—		Sales (3)	(26)		(58)		0		54		0
Settlements (4)	Settlements (4)	—		—		—		—		—		Settlements (4)	0		0		0		0		0
Change in estimate (5)	Change in estimate (5)	—		(32)		—		—		—		Change in estimate (5)	0		(32)		0		0		0
Activity related to consolidated VIEs/VOEs	Activity related to consolidated VIEs/VOEs	(1)		—		—		—		(2)		Activity related to consolidated VIEs/VOEs	(4)		0		0		0		(2)
Transfers into Level 3 (6)	Transfers into Level 3 (6)	1		—		—		—		—		Transfers into Level 3 (6)	1		0		0		0		0
Transfers out of Level 3 (6)	Transfers out of Level 3 (6)	—		—		—		—		—		Transfers out of Level 3 (6)	0		0		0		0		0
Balance, June 30, 2020		$	132	$	2,931	$	—	$	(12,613)	$	(29)
Balance, September 30, 2020												Balance, September 30, 2020	$	139	$	2,818	$	0	$	(12,204)	$	(29)

Balance, January 1, 2019	Balance, January 1, 2019	$	165	$	1,732	$	21	$	(5,614)	$	(7)	Balance, January 1, 2019	$	165	$	1,734	$	21	$	(5,674)	$	(7)
Realized and unrealized gains (losses), included in Net income (loss) as:	Realized and unrealized gains (losses), included in Net income (loss) as:											Realized and unrealized gains (losses), included in Net income (loss) as:
Investment gains (losses), net	Investment gains (losses), net	—		—		—		—		—		Investment gains (losses), net	0		0		0		0		0
Net derivative gains (losses), excluding non-performance risk		—		136		—		(656)		—
Non-performance risk (1)		—		41		—		(470)		—
Net derivative gains (losses)												Net derivative gains (losses)	0		740		0		(3,677)		0
Total realized and unrealized gains (losses)	Total realized and unrealized gains (losses)	—		177		—		(1,126)		—		Total realized and unrealized gains (losses)	0		740		0		(3,677)		0
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		—		—		Other comprehensive income (loss)	0		0		0		0		0
Purchases (2)	Purchases (2)	8		22		8		(215)		(17)		Purchases (2)	10		33		3		(317)		(17)
Sales (3)	Sales (3)	(7)		(35)		—		14		—		Sales (3)	(11)		(55)		(1)		27		0
Settlements (4)	Settlements (4)	—		—		(3)		—		—		Settlements (4)	0		0		(4)		0		0
Change in estimate	Change in estimate	—		—		—		—		—		Change in estimate	0		0		0		0		0
Activity related to consolidated VIEs/VOEs	Activity related to consolidated VIEs/VOEs	(3)		—		—		—		(1)		Activity related to consolidated VIEs/VOEs	(3)		0		0		0		(2)
Transfers into Level 3 (6)	Transfers into Level 3 (6)	—		—		—		—		—		Transfers into Level 3 (6)	0		0		0		0		0
Transfers out of Level 3 (6)	Transfers out of Level 3 (6)	(29)		—		(1)		—		—		Transfers out of Level 3 (6)	(33)		0		(12)		0		0
Balance, June 30, 2019		$	134	$	1,896	$	25	$	(6,941)	$	(25)
Balance, September 30, 2019												Balance, September 30, 2019	$	128	$	2,452	$	7	$	(9,641)	$	(26)

______________

(1)The Company’s ~~non-performance~~nonperformance risk impact of $42 million for the GMxB derivative features liability and ($33) million for the GMIB reinsurance contract asset the nine months ended September 2020, respectively, is recorded through Net derivative gains (losses).

(2)For the GMIB reinsurance contract asset, and GMxB derivative features liability, represents attributed fee.

(3)For the GMIB reinsurance contract asset, represents recoveries from reinsurers and for GMxB derivative features liability represents benefits paid.

(4)For contingent payment arrangements, it represents payments under the arrangement.

(5)For the GMIB reinsurance contract asset, represents a transfer from amounts due from reinsurers.

(6)Transfers into/out of the Level 3 classification are reflected at beginning-of-period fair values.

The table below details changes in unrealized gains (losses) for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 by category for Level 3 assets and liabilities still held at ~~June~~September 30, 2020 and 2019, respectively.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Change in Unrealized Gains (Losses) for Level 3 Instruments


		Net Income (Loss)								Net Income (Loss)
			Net Derivative Gains (Losses)		OCI			Investment Gains (Losses), Net			Net Derivative Gains (Losses)		OCI
			(in millions)								(in millions)
Held at June 30, 2020:
Held at September 30, 2020:							Held at September 30, 2020:
Change in unrealized gains (losses):	Change in unrealized gains (losses):						Change in unrealized gains (losses):
Fixed maturities, AFS	Fixed maturities, AFS						Fixed maturities, AFS
Corporate	Corporate		$	—	$	(54)	Corporate	$	0		$	0	$	(37)
State and political subdivisions	State and political subdivisions		—		2		State and political subdivisions	0			0		2
Asset-backed	Asset-backed		—		—		Asset-backed	0			0		0
Total fixed maturities, AFS	Total fixed maturities, AFS		—		(52)		Total fixed maturities, AFS	0			0		(35)
GMIB reinsurance contracts	GMIB reinsurance contracts		839		—		GMIB reinsurance contracts	0			2,818		0

Separate Account assets							Separate Account assets	0
GMxB derivative features liability	GMxB derivative features liability		(3,994)		—		GMxB derivative features liability	0			(12,204)		0
Total	Total		$	(3,155)	$	(52)	Total	$	0		$	(9,386)	$	(35)

Held at June 30, 2019:
Held at September 30, 2019:							Held at September 30, 2019:
Change in unrealized gains (losses):	Change in unrealized gains (losses):						Change in unrealized gains (losses):
Fixed maturities, AFS	Fixed maturities, AFS						Fixed maturities, AFS
Corporate	Corporate		$	—	$	10	Corporate	$	0		$	0	$	3
State and political subdivisions	State and political subdivisions		—		3		State and political subdivisions	0			0		3

Asset-backed	Asset-backed		—		5		Asset-backed	0			0		4
Total fixed maturities, AFS	Total fixed maturities, AFS		—		18		Total fixed maturities, AFS	0			0		10
GMIB reinsurance contracts	GMIB reinsurance contracts		177		—		GMIB reinsurance contracts	0			740		0

Separate Account assets							Separate Account assets	(1)			0		0
GMxB derivative features liability	GMxB derivative features liability		(1,126)		—		GMxB derivative features liability	0			(3,677)		0
Total	Total		$	(949)	$	18	Total	$	(1)		$	(2,937)	$	10

Quantitative and Qualitative Information about Level 3 Fair Value Measurements

The following tables disclose quantitative information about Level 3 fair value measurements by category for assets and liabilities at ~~June~~September 30, 2020 and December 31, 2019, respectively.

Quantitative Information about Level 3 Fair Value Measurements at ~~June~~September 30, 2020

Fair

Value

Valuation

Technique

Significant

Unobservable Input

Range

Weighted Average (2)

(in millions)

Assets:

Investments:

Fixed maturities, AFS:

Corporate

~~260~~31

Matrix pricing model

Spread over Benchmark

0220 - ~~580~~610 bps

36278 bps

~~1,062~~1,105

Market comparable
companies

EBITDA multiples
Discount rate
Cash flow multiples

~~3.7x~~3.5x-31.8x
5.1% - 33.6x
6.2% - 23.4%25.4%
0.9x ~~- 25.0x~~-25.0x

~~14.0x~~14.4x
~~10.2%~~10.0%
~~11.1x~~10.7x

Other equity investments

37 4

Market comparable companies

Revenue multiple

3.5x - 27.9x

9.5x

Discounted ~~cash flow~~Cash Flow

Earnings multiple
Discount factor
Discount years

8.0x
10.0%
11

~~GMIB reinsurance contract asset~~

~~2,931~~

~~Discounted cash flow~~

Non-performance risk
Lapse rates
Withdrawal rates
Utilization rates
Volatility rates - Equity
Mortality rates (1):
Ages 0 - 40
Ages 41 - 60
Ages 61 - 115

55 - 144 bps
0.8%-10%
0%-8%
0%-49%
14%-34%

0.01%-0.18%
0.07%-0.54%
0.42%-42.20%

73 bps
1.55%
1.11%
6.20%
24%

All ages 2.76%

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Fair

Value

Valuation

Technique

Significant

Unobservable Input

Range

Weighted Average (2)

GMIB reinsurance contract asset

2,818

Discounted cash flow

Non-performance risk
Lapse rates
Withdrawal rates
Utilization rates
Volatility rates - Equity
Mortality rates (1):
Ages 0 - 40
Ages 41 - 60
Ages 61 - 115

60 - 125 bps
0.6%-16%
0%-2%
0%-61%
16%-34%

0.01%-0.18%
0.07%-0.54%
0.42%-42.20%

72 bps
1.56%
0.96%
6.37%
25%

2.72%
(same for all ages)
(same for all ages)

Liabilities:

GMIBNLG

~~12,081~~11,682

Discounted cash flow

Non-performance risk
Lapse rates
Withdrawal rates
Annuitization rates
Mortality rates (1):
Ages 0 - 40
Ages 41 - 60
Ages 61 - 115

~~166.0~~141.0 bps
~~0.8%-19.9%~~1.1%-25.7%
~~0.3%-11%~~0.4%-2%
0%-100%

0.01%-0.19%
0.06%-0.53%
0.41%-41.39%

~~2.59%~~3.06%
~~1.17%~~0.96%
~~6.19%~~5.92%

1.48%
~~All ages 1.38%~~(same for all ages)
(same for all ages)

Assumed GMIB Reinsurance Contracts

~~231~~219

Discounted cash flow

Non-performance risk
Lapse rates
Withdrawal rates (Age ~~0 - 85)~~0-85)
Withdrawal rates (Age 86+)
Utilization rates
Volatility rates - Equity

~~109~~92 - ~~232~~195 bps
1.1% - 11.1%
0.6% - 22.2%
1.1% - 100%
0% - 30%
~~14% - 34%~~16%-34%

~~178~~147 bps
~~1.55%~~1.56%
~~All ages 1.11%~~0.96%
(same for all ages)
~~6.20%~~6.37%
~~24%~~25%

GWBL/GMWB

~~167~~220

Discounted cash flow

Non-performance risk
Lapse rates
Withdrawal rates
Utilization rates

Volatility rates - Equity

~~166.0~~141.0 bps
0.8%~~-10%~~-16%
0%~~-7%~~-8%
100% once starting
~~14%~~16%-34%

~~1.55%~~1.56%
~~1.11%~~0.96%

~~24.08%~~24.57%

GIB

~~124~~77

Discounted cash flow

Non-performance risk
Lapse rates
Withdrawal rates
Utilization rates
Volatility rates - Equity

~~166.0~~141.0 bps
~~1.2%-19.9%~~0.8%-15.6%
0%~~-8%~~-2%
0%-100%
~~14%~~16%-34%

~~1.55%~~1.56%
~~1.11%~~0.96%
~~6.20%~~6.37%
~~24%~~25%

GMAB

106

Discounted cash flow

Non-performance risk
Lapse rates
Volatility rates - Equity

~~166.0~~

141.0 bps
~~1%-10%~~0.8%-16%
~~14%~~16%-34%

~~1.55%~~
~~24%~~
1.56%
25%

______________

(1)Mortality rates vary by age and demographic characteristic such as gender. Mortality rate assumptions are based on a combination of company and industry experience. A mortality improvement assumption is also applied. For any given contract, mortality rates vary throughout the period over which cash flows are projected for purposes of valuating the embedded derivatives.

(2)For Lapses, Withdrawals, and Utilizations the rates were weighted by ~~counts,~~counts; for Mortality weighted average rates are shown for all ages ~~combined~~combined; and for Withdrawals the weighted averages were based on an estimated split of partial withdrawal and dollar-for-dollar withdrawals.

Quantitative Information about Level 3 Fair Value Measurements at December 31, 2019

Fair
Value

Valuation
Technique

Significant
Unobservable Input

Range

Weighted Average

(in millions)

Assets:

Investments:

Fixed maturities, AFS:

Corporate

Matrix pricing model

Spread over benchmark

65 - 580 bps

184 bps

1,025

Market comparable companies

EBITDA multiples
Discount rate
Cash flow multiples

3.3x - 56.7x
3.9% - 16.5%
0.8x - 48.1x

14.3x
10.0%
10.7x

Other equity investments

Discounted cash flow

Earnings multiple
Discounts factor
Discount years

8.0x
10.0%
11

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Fair
Value

Valuation
Technique

Significant
Unobservable Input

Range

Weighted Average

GMIB reinsurance contract asset

2,139

Discounted cash flow

Non-performance risk
Lapse rates
Withdrawal rates
Utilization rates
Volatility rates - Equity
Mortality rates (1):
Ages 0 - 40
Ages 41 - 60
Ages 60 - 115

55 - 109 bps
0.8% - 10%
0.0% - 8.0%
0.0% - 49.0%
9.0% - 30.0%

0.01% - 0.18%
0.07% - 0.54%
0.42% - 42.20%

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

~~Fair Value~~

~~Valuation Technique~~

~~Significant Unobservable Input~~

~~Range~~

~~Weighted Average~~

Liabilities:

GMIBNLG

~~8,128~~8,135

Discounted cash flow

Non-performance risk
Lapse rates
Withdrawal rates
Annuitization rates
Mortality rates (1):
Ages 0 - 40
Ages 41 - 60
Ages 60 - 115

124 bps
0.8% - 19.9%
0.3% - 11.0%
0.0% - 100.0%

0.01% - 0.19%
0.06% - 0.53%
0.41% - 41.39%

Assumed GMIB Reinsurance Contracts

186

Discounted cash flow

Non-performance risk
Lapse rates
Withdrawal rates (Age 0 - 85)
Withdrawal rates (Age 86+)
Utilization rates
Volatility rates - Equity

61 - 141 bps
1.1% - 11.1%
0.6% - 22.2%
1.1% - 100.0%
0.0% - 30.0%
9.0% - 30.0%

GWBL/GMWB

~~109~~172

Discounted cash flow

Non-performance risk
Lapse rates
Withdrawal rates
Utilization rates

Volatility rates - Equity

124 bps
0.8% - 10.0%
0.0% - 7.0%
100% after starting
9.0% - 30.0%

GIB

Discounted cash flow

Non-performance risk
Lapse rates
Withdrawal rates
Utilization rates
Volatility rates - Equity

124 bps
1.2% - 19.9%
0.0% - 8.0%
0.0% - 100.0%
9.0% - 30.0%

GMAB

Discounted cash flow

Lapse rates
Volatility rates - Equity

1.0% - 10.0%
9.0% - 30.0%

______________

Level 3 Financial Instruments for which Quantitative Inputs are Not Available

Certain Privately Placed Debt Securities with Limited Trading Activity

Excluded from the tables above at ~~June~~September 30, 2020 and December 31, 2019, respectively, are approximately ~~$499~~$507 million and $428 million of Level 3 fair value measurements of investments for which the underlying quantitative inputs are not developed by the Company and are not readily available. These investments primarily consist of certain privately placed debt securities with limited trading activity, including residential mortgage- and asset-backed instruments, and their fair values generally reflect unadjusted prices obtained from independent valuation service providers and indicative, non-binding quotes obtained from third-party broker-dealers recognized as market participants. Significant increases or decreases in the fair value amounts received from these pricing sources may result in the Company’s reporting significantly higher or lower fair value measurements for these Level 3 investments.

•The fair value of private placement securities is determined by application of a matrix pricing model or a market comparable company value technique. The significant unobservable input to the matrix pricing model valuation technique is the spread over the industry-specific benchmark yield curve. Generally, an increase or decrease in spreads would lead to directionally inverse movement in the fair value measurements of these securities. The significant unobservable input to the market comparable company valuation technique is the discount rate. Generally, a significant increase (decrease) in the discount rate would result in significantly lower (higher) fair value measurements of these securities.

•Residential mortgage-backed securities classified as Level 3 primarily consist of non-agency paper with low trading activity. Included in the tables above at ~~June~~September 30, 2020 and December 31, 2019, there were no

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Level 3 securities that were determined by application of a matrix pricing model and for which the spread over the U.S. Treasury curve is the most significant unobservable input to the pricing result. Generally, a change in spreads would lead to directionally inverse movement in the fair value measurements of these securities.

•Asset-backed securities classified as Level 3 primarily consist of non-agency mortgage loan trust certificates, including subprime and Alt-A paper, credit tenant loans, and equipment financings. Included in the tables above at ~~June~~September 30, 2020 and December 31, 2019, there were no securities that were determined by the

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

application of matrix-pricing for which the spread over the U.S. Treasury curve is the most significant unobservable input to the pricing result. Significant increases (decreases) in spreads would have resulted in significantly lower (higher) fair value measurements.

Other Equity Investments

Included in other equity investments classified as Level 3 are ~~reporting entities’~~ venture capital securities in the Technology, Media and Telecommunications industries. The fair value measurements of these securities include significant unobservable inputs including an enterprise value to revenue multiples and a discount rate to account for liquidity and various risk factors. Significant increases (decreases) in the enterprise value to revenue multiple inputs in isolation would have resulted in a significantly higher (lower) fair value measurement. Significant increases (decreases) in the discount rate would have resulted in a significantly lower (higher) fair value measurement.

GMIB Reinsurance Contract Asset and GMxB Derivative Features Liability

Significant unobservable inputs with respect to the fair value measurement of the Level 3 GMIB reinsurance contract asset and the Level 3 liabilities identified in the table above are developed using ~~the~~ Company data.

The significant unobservable inputs used in the fair value measurement of the Company’s GMIB reinsurance contract asset are lapse rates, withdrawal rates, and GMIB utilization rates. Significant increases in GMIB utilization rates or decreases in lapse or withdrawal rates in isolation would tend to increase the GMIB reinsurance contract asset.

Fair value measurement of the GMIB reinsurance contract asset and liabilities includes dynamic lapse and GMIB utilization assumptions whereby projected contractual lapses and GMIB utilization reflect the projected net amount of risks of the contract. As the net amount of risk of a contract increases, the assumed lapse rate decreases and the GMIB utilization increases. Increases in volatility would increase the asset and liabilities.

The significant unobservable inputs used in the fair value measurement of the Company’s GMIBNLG liability are lapse rates, withdrawal rates, GMIB utilization rates, adjustment for Non-performance risk and NLG forfeiture rates. NLG forfeiture rates are caused by excess withdrawals above the annual GMIB accrual rate that cause the NLG to expire. Significant decreases in lapse rates, NLG forfeiture rates, adjustment for non-performance risk and GMIB utilization rates would tend to increase the GMIBNLG liability, while decreases in withdrawal rates and volatility rates would tend to decrease the GMIBNLG liability.

The significant unobservable inputs used in the fair value measurement of the Company’s GMWB and GWBL liability are lapse rates and withdrawal rates. Significant increases in withdrawal rates or decreases in lapse rates in isolation would tend to increase these liabilities. Increases in volatility would increase these liabilities.

AB Contingent Consideration Payable

As of ~~June~~September 30, 2020 and December 31, 2019, AB has acquisition-related contingent liabilities remaining with a fair value of ~~$29~~$30 million and $23 million, respectively.

The liabilities were valued using expected revenue growth rates and discount rates. The expected revenue growth rates range from 0.7% to 50.0%, with a weighted average of 4.9%, calculated using cumulative revenues and range of revenue growth rates (excluding revenue growth from additional AUM contributed from existing clients). The discount rates ranged from 1.9% to 10.4% with a weighted average of 8.0%, calculated using total contingent liabilities and range of discount rates.

Carrying Value of Financial Instruments Not Otherwise Disclosed in Note 3 and Note 4

The carrying values and fair values at ~~June~~September 30, 2020 and December 31, 2019 for financial instruments not otherwise disclosed in Note 3 and Note 4 are presented in the table below.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Carrying Values and Fair Values for Financial Instruments Not Otherwise Disclosed

~~Carrying Value~~

~~Fair Value~~

~~Level 1~~

~~Level 2~~

~~Level 3~~

~~Total~~

~~(in millions)~~

~~June 30, 2020:~~

~~Mortgage loans on real estate~~

~~12,523~~

—

~~12,589~~

~~Policy loans~~

~~3,689~~

—

~~4,890~~

~~Policyholders’ liabilities: Investment contracts~~

~~2,177~~

—

~~2,439~~

~~FHLBNY funding agreements (1)~~

~~6,700~~

—

~~6,793~~

—

~~6,793~~

~~Short-term and long-term debt~~

~~4,113~~

—

~~4,656~~

—

~~4,656~~

~~Separate Accounts liabilities~~

~~8,445~~

—

~~8,445~~

~~December 31, 2019:~~

~~Mortgage loans on real estate~~

~~12,107~~

—

~~12,334~~

~~Policy loans (2)~~

~~3,735~~

—

~~4,707~~

~~Policyholders’ liabilities: Investment contracts (2)~~

~~2,056~~

—

~~2,167~~

~~FHLBNY funding agreements~~

~~6,909~~

—

~~6,957~~

—

~~6,957~~

~~Short-term and long-term debt~~

~~4,111~~

—

~~4,476~~

—

~~4,476~~

~~Separate Accounts liabilities~~

~~9,041~~

—

~~9,041~~


	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(in millions)
September 30, 2020:
Mortgage loans on real estate	$	12,802	$	0	$	0	$	13,049	$	13,049
Policy loans	$	4,123	$	0	$	0	$	5,232	$	5,232
Policyholders’ liabilities: Investment contracts	$	2,195	$	0	$	0	$	2,425	$	2,425
FHLB funding agreements (1)	$	6,848	$	0	$	6,940	$	0	$	6,940
FABN funding agreements (2)	$	1,143	$	0	$	1,168	$	0	$	1,168
Short-term and long-term debt	$	4,114	$	0	$	4,750	$	0	$	4,750
Separate Accounts liabilities	$	9,000	$	0	$	0	$	9,000	$	9,000

December 31, 2019:
Mortgage loans on real estate	$	12,107	$	0	$	0	$	12,334	$	12,334
Policy loans (3)	$	3,735	$	0	$	0	$	4,707	$	4,707
Policyholders’ liabilities: Investment contracts (3)	$	2,056	$	0	$	0	$	2,167	$	2,167
FHLB funding agreements (1)	$	6,909	$	0	$	6,957	$	0	$	6,957
Short-term and long-term debt	$	4,111	$	0	$	4,476	$	0	$	4,476
Separate Accounts liabilities	$	9,041	$	0	$	0	$	9,041	$	9,041

~~______________~~_____________

(1)Federal Home Loan Bank of New York (“~~FHLBNY”~~FHLB”)

(2)Funding Agreement Backed Notes Program (“FABN”)

(3)Excludes amounts reclassified as Held-for-Sale.

Mortgage Loans on Real Estate

Fair values for commercial and agricultural mortgage loans on real estate are measured by discounting future contractual cash flows to be received on the mortgage loan using interest rates at which loans with similar characteristics and credit quality would be made. The discount rate is derived based on the appropriate U.S. Treasury rate with a like term to the remaining term of the loan to which a spread reflective of the risk premium associated with the specific loan is added. Fair values for mortgage loans anticipated to be foreclosed and problem mortgage loans are limited to the fair value of the underlying collateral, if lower.

Policy Loans

The fair value of policy loans is calculated by discounting expected cash flows based upon the U.S. Treasury yield curve and historical loan repayment patterns.

Short-term and Long-term Debt

The Company’s short-term debt primarily includes commercial paper with short-term maturities and carrying value approximates fair value. The fair values for the Company’s long-term debt are determined by Bloomberg’s evaluated pricing service, which uses direct observations or observed comparables.

FHLB Funding Agreements

The fair values of the Company’s FHLB funding agreements are determined by discounted cash flow analysis based on the indicative funding agreement rates published by the FHLB.

FABN Funding Agreements

The fair values of Equitable Financial’s FABN funding agreements are determined by Bloomberg’s evaluated pricing service, which uses direct observations or observed comparables.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Policyholder Liabilities - Investment Contracts and Separate Accounts Liabilities

The fair values for deferred annuities and certain other annuities, which are included in Policyholders’ account balances, and liabilities for investment contracts with fund investments in Separate Accounts, are estimated using projected cash flows discounted at rates reflecting current market rates. Significant unobservable inputs reflected in the cash flows include lapse rates and withdrawal rates. Incremental adjustments may be made to the fair value to reflect non-performance risk. Certain other products such as the Company’s association plans contracts, supplementary contracts

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

not involving life contingencies (“SCNILC”), Access Accounts and Escrow Shield Plus product reserves are held at book value.

Financial Instruments Exempt from Fair Value Disclosure or Otherwise Not Required to be Disclosed

Exempt from Fair Value Disclosure Requirements

Certain financial instruments are exempt from the requirements for fair value disclosure, such as insurance liabilities other than financial guarantees and investment contracts, limited partnerships accounted for under the equity method and pension and other postretirement obligations.

Otherwise Not Required to be Included in the Table Above

The Company’s investment in ~~Corporate Owned Life Insurance (“COLI”)~~COLI policies are recorded at their cash surrender value and are therefore not required to be included in the table above. See Note 2 to the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2019 for further description of the Company’s accounting policy related to its investment in COLI policies.

9) EMPLOYEE BENEFIT PLANS

Pension Plans

Holdings and Equitable Financial Retirement Plans

Holdings sponsors the MONY Life Retirement Income Security Plan for Employees and Equitable Life sponsors the Equitable Retirement Plan (the “Equitable Financial QP”), both of which are frozen qualified defined benefit plans covering eligible employees and financial professionals. These pension plans are non-contributory, and their benefits are generally based on a cash balance formula and/or, for certain participants, years of service and average earnings over a specified period. Holdings and Equitable Financial also sponsor certain nonqualified defined benefit plans, including the Equitable Excess Retirement Plan, that provide retirement benefits in excess of the amount permitted under the tax law for the qualified plans. Holdings has assumed primary liability for both the Equitable Financial QP and the Equitable Financial nonqualified defined benefit plans. Equitable Financial remains secondarily liable for its obligations under the Equitable Financial QP and its nonqualified defined benefits plans and would recognize such liability in the event Holdings does not perform.

AB Retirement Plans

AB maintains a qualified, non-contributory, defined benefit retirement plan covering current and former employees who were employed by AB in the United States prior to October 2, 2000 (the “AB Plan”). Benefits under the AB Plan are based on years of credited service, average final base salary, and primary Social Security benefits.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Net Periodic Pension Expense

Components of net periodic pension expense for the Company’s plans were as follows:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020		2019
		(in millions)															(in millions)
Service cost	Service cost	$	2	$	3	$	4	$	6	Service cost	$	3	$	2	$	7	$	8
Interest cost	Interest cost	22		31		45		61		Interest cost	23		30		68		91
Expected return on assets	Expected return on assets	(35)		(38)		(74)		(77)		Expected return on assets	(36)		(37)		(110)		(114)
Actuarial (gain) loss	Actuarial (gain) loss	—		—		1		1		Actuarial (gain) loss	0		0		1		1
Net amortization	Net amortization	27		24		55		48		Net amortization	27		26		82		74
Impact of Settlement										Impact of Settlement	4		0		4		0
Net periodic pension expense	Net periodic pension expense	$	16	$	20	$	31	$	39	Net periodic pension expense	$	21	$	21	$	52	$	60

10) INCOME TAXES

Income tax expense for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 was computed using an estimated annual effective tax rate (“ETR”), with discrete items recognized in the period in which they occur. The estimated ETR is revised, as necessary, at the end of successive interim reporting periods.

11) EQUITY

Preferred Stock

Preferred stock authorized, issued and outstanding was as follows:


	September 30, 2020			December 31, 2019
Series	Shares Authorized	Shares Issued	Shares Outstanding	Shares Authorized	Shares Issued	Shares Outstanding
Series A (1)	32,000	32,000	32,000	32,000	32,000	32,000
Series B (2)	20,000	20,000	20,000	0	0	0
Total	52,000	52,000	52,000	32,000	32,000	32,000

Series B Fixed Rate Reset Noncumulative Perpetual Preferred Stock

On August 11, 2020, Holdings issued 500,000 depositary shares, each representing a 1/25th interest in a share of the Company’s Series B Fixed Rate Reset Noncumulative Perpetual Preferred Stock (“Series B Preferred Stock”), $1.00 par value per share and liquidation preference of $25,000 per share, for aggregate net cash proceeds of $494 million ($500 million gross). The Series B Preferred Stock ranks senior to Holdings’ common stock and on parity with Holdings’ Series A Preferred Stock with respect to the payment of dividends and liquidation. Holdings will pay dividends on the Series B Preferred Stock on a noncumulative basis only when, as and if declared by the Company’s Board of Directors (or a duly authorized committee of the Board) and will be payable semi-annually in arrears, at an annual rate equal to the fixed rate of 4.950%, which is reset every 5 years starting on December 15, 2025 (“Reset Date”), at a rate per annum equal to the five-year U.S. Treasury Rate plus 4.736%.

In connection with the issuance of the depositary shares and the underlying Series B Preferred Stock, Holdings incurred $6 million of issuance costs, which have been recorded as a reduction of additional paid-in capital. The Series B Preferred Stock is redeemable at Holdings’ option in whole or in part, from time to time, during the three-month period prior to, and including, each Reset Date, at a redemption price equal to $25,000 per share of preferred stock, plus any declared and unpaid dividends. Furthermore, the preferred stock is redeemable at Holdings’ option, in whole but not in part at any time, within 90 days after the occurrence of certain rating agency events at a redemption price equal to $25,500 per share, plus any declared and unpaid dividends or after the occurrence of certain regulatory capital events at a redemption price equal to $25,000 per share, plus any declared and unpaid dividends.

Preferred Stock

Dividends to Shareholders

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Dividends declared per share were as follows for the periods indicated:


	Three Months Ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Series A dividends declared	$	328.13	$	0	$	1,049.99	$	0
Series B dividends declared	$	0	$	0	$	0	$	0

~~11) RELATED PARTY TRANSACTIONS~~

~~The Company did not enter into any new significant transactions with related parties during the six months ended June 30, 2020.~~

~~12) EQUITY~~Common Stock

Dividends to Shareholders

Dividends declared per share of ~~each class of~~common stock were as follows for the periods indicated:

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Dividends declared per share of common stock $ 0.17 $ 0.15 $ 0.32 $ 0.28
Dividends declared per depositary share (1) $ 0.33 $ — $ 0.72 $ —

~~_______________~~


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Dividends declared	$	0.17	$	0.15	$	0.49	$	0.43

~~(1)Represents a 1/1,000th interest in a share of preferred stock.~~

Share Repurchase

On November 6, 2019, Holdings’ Board of Directors authorized a $400 million share repurchase program with an expiration date of December 31, 2020. On February 26, 2020, Holdings’ Board of Directors authorized an increase of $600 million to the capacity of this program as well as the extension of the term of the program until March 31, 2021. Under this program, Holdings may, from time to time through March 31, 2021, purchase up to $1.0 billion of its common stock but it is not obligated to purchase any particular number of shares. Repurchases may be effected in the open market, through derivative, accelerated repurchase and other negotiated transactions and through prearranged trading plans complying with Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

During the three and ~~six~~nine months ended ~~June~~September 30, 2020, Holdings repurchased ~~1.3~~4.7 million and ~~14.9~~19.7 million shares of its common stock in the open market. As of ~~June~~September 30, 2020, Holdings had capacity of approximately ~~$370~~$270 million remaining in its stock repurchase program.

Accumulated Other Comprehensive Income (Loss)

AOCI represents cumulative gains (losses) on items that are not reflected in Net income (loss). The balances as of ~~June~~September 30, 2020 and 2019 follow:


		June 30,							September 30,
		2020		2019			2020		2019
		(in millions)							(in millions)
Unrealized gains (losses) on investments	Unrealized gains (losses) on investments	$	4,886	$	1,799	Unrealized gains (losses) on investments	$	5,115	$	2,459
Defined benefit pension plans	Defined benefit pension plans	(933)		(901)		Defined benefit pension plans	(912)		(883)
Foreign currency translation adjustments	Foreign currency translation adjustments	(72)		(62)		Foreign currency translation adjustments	(56)		(74)
Total accumulated other comprehensive income (loss)	Total accumulated other comprehensive income (loss)	3,881		836		Total accumulated other comprehensive income (loss)	4,148		1,502
Less: Accumulated other comprehensive income (loss) attributable to noncontrolling interest	Less: Accumulated other comprehensive income (loss) attributable to noncontrolling interest	(47)		(40)		Less: Accumulated other comprehensive income (loss) attributable to noncontrolling interest	(40)		(44)
Accumulated other comprehensive income (loss) attributable to Holdings	Accumulated other comprehensive income (loss) attributable to Holdings	$	3,928	$	876	Accumulated other comprehensive income (loss) attributable to Holdings	$	4,188	$	1,546

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

The components of OCI, net of taxes for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 follow:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020		2019
		(in millions)															(in millions)
Change in net unrealized gains (losses) on investments:	Change in net unrealized gains (losses) on investments:									Change in net unrealized gains (losses) on investments:
Net unrealized gains (losses) arising during the period	Net unrealized gains (losses) arising during the period	$	2,853	$	1,381	$	4,366	$	2,723	Net unrealized gains (losses) arising during the period	$	309	$	1,279	$	4,675	$	4,002
(Gains) losses reclassified into net income (loss) during the period (1)	(Gains) losses reclassified into net income (loss) during the period (1)	(152)		(4)		(199)		5		(Gains) losses reclassified into net income (loss) during the period (1)	(26)		(158)		(225)		(153)
Net unrealized gains (losses) on investments	Net unrealized gains (losses) on investments	2,701		1,377		4,167		2,728		Net unrealized gains (losses) on investments	283		1,121		4,450		3,849
Adjustments for policyholders’ liabilities, DAC, insurance liability loss recognition and other	Adjustments for policyholders’ liabilities, DAC, insurance liability loss recognition and other	(1,087)		(8)		(1,119)		(525)		Adjustments for policyholders’ liabilities, DAC, insurance liability loss recognition and other	(54)		(375)		(1,177)		(975)
Change in unrealized gains (losses), net of adjustments (net of deferred income tax expense (benefit) of $428, $362, $810 and $580)		1,614		1,369		3,048		2,203
Change in unrealized gains (losses), net of adjustments (net of deferred income tax expense (benefit) of $61, $198, $870 and $759)										Change in unrealized gains (losses), net of adjustments (net of deferred income tax expense (benefit) of $61, $198, $870 and $759)	229		746		3,273		2,874
Change in defined benefit plans:	Change in defined benefit plans:									Change in defined benefit plans:
Reclassification to Net income (loss) of amortization of net prior service credit included in net periodic cost	Reclassification to Net income (loss) of amortization of net prior service credit included in net periodic cost	22		18		50		67		Reclassification to Net income (loss) of amortization of net prior service credit included in net periodic cost	21		18		71		85
Change in defined benefit plans (net of deferred income tax expense (benefit) of $6, $(5), $13 and $17)		22		18		50		67
Change in defined benefit plans (net of deferred income tax expense (benefit) of $6, $7, $19 and $25)										Change in defined benefit plans (net of deferred income tax expense (benefit) of $6, $7, $19 and $25)	21		18		71		85
Foreign currency translation adjustments:	Foreign currency translation adjustments:									Foreign currency translation adjustments:
Foreign currency translation gains (losses) arising during the period	Foreign currency translation gains (losses) arising during the period	6		1		(15)		—		Foreign currency translation gains (losses) arising during the period	16		(12)		1		(12)

Foreign currency translation adjustment	Foreign currency translation adjustment	6		1		(15)		—		Foreign currency translation adjustment	16		(12)		1		(12)
Total other comprehensive income (loss), net of income taxes	Total other comprehensive income (loss), net of income taxes	1,642		1,388		3,083		2,270		Total other comprehensive income (loss), net of income taxes	266		752		3,345		2,947
Less: Other comprehensive income (loss) attributable to noncontrolling interest	Less: Other comprehensive income (loss) attributable to noncontrolling interest	3		(1)		(5)		(2)		Less: Other comprehensive income (loss) attributable to noncontrolling interest	6		(5)		1		(7)
Other comprehensive income (loss) attributable to Holdings	Other comprehensive income (loss) attributable to Holdings	$	1,639	$	1,389	$	3,088	$	2,272	Other comprehensive income (loss) attributable to Holdings	$	260	$	757	$	3,344	$	2,954

_______________

(1)See “Reclassification adjustments” in Note 3. Reclassification amounts presented net of income tax expense (benefit) of ~~$(41)~~$(7) million, ~~$(1)~~$(42) million, ~~$(53)~~$(60) million, and $1$(41) million for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively

Investment gains and losses reclassified from AOCI to Net income (loss) primarily consist of realized gains (losses) on sales and credit losses of AFS securities and are included in Total investment gains (losses), net on the consolidated statements of income (loss). Amounts reclassified from AOCI to Net income (loss) as related to defined benefit plans primarily consist of amortization of net (gains) losses and net prior service cost (credit) recognized as a component of net periodic cost and reported in Compensation and benefits in the consolidated statements of income (loss). Amounts presented in the table above are net of tax.

~~13)~~12) REDEEMABLE NONCONTROLLING INTEREST

The changes in the components of redeemable noncontrolling interests are presented in the table that follows:


		Three Months Ended June 30,								Six Months Ended June 30,								Three Months Ended September 30,			Nine Months Ended September 30,
		2020		2019		2020		2019				2020		2019		2020			2019
		(in millions)																	(in millions)
Balance, beginning of period	Balance, beginning of period	$	257	$	207	$	365	$	187		Balance, beginning of period	$	87	$	257	$	365		$	187
Net earnings (loss) attributable to redeemable noncontrolling interests	Net earnings (loss) attributable to redeemable noncontrolling interests	25		7		(5)		19			Net earnings (loss) attributable to redeemable noncontrolling interests	1		7		(4)			26
Purchase/change of redeemable noncontrolling interests	Purchase/change of redeemable noncontrolling interests	(195)		43		(273)		51			Purchase/change of redeemable noncontrolling interests	7		74		(266)			125
Balance, end of period	Balance, end of period	$	87	$	257	$	87	$	257		Balance, end of period	$	95	$	338	$	95		$	338

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

~~14)~~13) COMMITMENTS AND CONTINGENT LIABILITIES

Litigation

Litigation, regulatory and other loss contingencies arise in the ordinary course of the Company’s activities as a diversified financial services firm. The Company is a defendant in a number of litigation matters arising from the conduct of its business. In some of these matters, claimants seek to recover very large or indeterminate amounts, including compensatory, punitive, treble and exemplary damages. Modern pleading practice permits considerable variation in the assertion of monetary damages and other relief. Claimants are not always required to specify the monetary damages they seek, or they may be required only to state an amount sufficient to meet a court’s jurisdictional requirements. Moreover, some jurisdictions allow claimants to allege monetary damages that far exceed any reasonably possible verdict. The variability in pleading requirements and past experience demonstrates that the monetary and other relief that may be requested in a lawsuit or claim often bears little relevance to the merits or potential value of a claim. Litigation against the Company includes a variety of claims including, among other things, insurers’ sales practices, alleged agent misconduct, alleged failure to properly supervise agents, contract administration, product design, features and accompanying disclosure, cost of insurance increases, payments of death benefits and the reporting and escheatment of unclaimed property, alleged breach of fiduciary duties, alleged mismanagement of client funds and other matters.

As with other financial services companies, the Company periodically receives informal and formal requests for information from various state and federal governmental agencies and self-regulatory organizations in connection with inquiries and investigations of the products and practices of the Company or the financial services industry. It is the practice of the Company to cooperate fully in these matters.

The outcome of a litigation or regulatory matter is difficult to predict, and the amount or range of potential losses associated with these or other loss contingencies requires significant management judgment. It is not possible to predict the ultimate outcome or to provide reasonably possible losses or ranges of losses for all pending regulatory matters, litigation and other loss contingencies. While it is possible that an adverse outcome in certain cases could have a material adverse effect upon the Company’s financial position, based on information currently known, management believes that neither the outcome of pending litigation and regulatory matters, nor potential liabilities associated with other loss contingencies, are likely to have such an effect. However, given the large and indeterminate amounts sought in certain litigation and the inherent unpredictability of all such matters, it is possible that an adverse outcome in certain of the Company’s litigation or regulatory matters, or liabilities arising from other loss contingencies, could, from time to time, have a material adverse effect upon the Company’s results of operations or cash flows in a particular quarterly or annual period.

For some matters, the Company is able to estimate a possible range of loss. For such matters in which a loss is probable, an accrual has been made. For matters where the Company believes a loss is reasonably possible, but not probable, no accrual is required. For matters for which an accrual has been made, but there remains a reasonably possible range of loss in excess of the amounts accrued or for matters where no accrual is required, the Company develops an estimate of the unaccrued amounts of the reasonably possible range of losses. As of ~~June~~September 30, 2020, the Company estimates the aggregate range of reasonably possible losses, in excess of any amounts accrued for these matters as of such date, to be up to approximately $100 million.

For other matters, the Company is currently not able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from plaintiffs and other parties, investigation of factual allegations, rulings by a court on motions or appeals, analysis by experts and the progress of settlement discussions. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation and regulatory contingencies and updates the Company’s accruals, disclosures and reasonably possible losses or ranges of loss based on such reviews.

In August 2015, a lawsuit was filed in Connecticut Superior Court, Judicial Division of New Haven entitled Richard T. O’Donnell, on behalf of himself and all others similarly situated v. AXA Equitable Life Insurance Company. This lawsuit is a putative class action on behalf of all persons who purchased variable annuities from Equitable Financial, which were subsequently subjected to the volatility management strategy and who suffered injury as a result thereof. Plaintiff asserts a claim for breach of contract alleging that Equitable Financial implemented the volatility management strategy in violation of applicable law. Plaintiff seeks an award of damages individually and on a classwide basis, and costs and disbursements, including attorneys’ fees, expert witness fees and other costs. In November 2015, the Connecticut Federal District Court transferred this action to the United States District Court for the Southern District

5658

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

of New York. In March 2017, the Southern District of New York granted Equitable Financial’s motion to dismiss the complaint. In April 2017, the plaintiff filed a notice of appeal. In April 2018, the United States Court of Appeals for the Second Circuit reversed the trial court’s decision with instructions to remand the case to Connecticut state court. In September 2018, the Second Circuit issued its mandate, following Equitable Financial’s notification to the court that it would not file a petition for writ of certiorari. The case was transferred in December 2018 to the Connecticut Superior Court, Judicial District of Stamford. In December 2018, Equitable Financial sought dismissal of the complaint by filing a motion to strike, which the court granted in August 2019. Plaintiff filed an Amended Class Action Complaint in September 2019. Equitable Financial filed a motion for entry of judgment in October 2019. On August 3, 2020, the court granted Equitable Financial’s motion for entry of ~~judgment.We~~judgment. In August 2020, Plaintiff filed a notice of appeal. We are vigorously defending this matter.

In February 2016, a lawsuit was filed in the United States District Court for the Southern District of New York entitled Brach Family Foundation, Inc. v. AXA Equitable Life Insurance Company. This lawsuit is a putative class action brought on behalf of all owners of universal life (“UL”) policies subject to Equitable Financial’s COI rate increase. In early 2016, Equitable Financial raised COI rates for certain UL policies issued between 2004 and 2007, which had both issue ages 70 and above and a current face value amount of $1 million and above. A second putative class action was filed in Arizona in 2017 and consolidated with the Brach matter. The current consolidated amended class action complaint alleges the following claims: breach of contract; misrepresentations by Equitable Financial in violation of Section 4226 of the New York Insurance Law; violations of New York General Business Law Section 349; and violations of the California Unfair Competition Law, and the California Elder Abuse Statute. Plaintiffs seek: (a) compensatory damages, costs, and, pre- and post-judgment interest; (b) with respect to their claim concerning Section 4226, a penalty in the amount of premiums paid by the plaintiffs and the putative class; and (c) injunctive relief and attorneys’ fees in connection with their statutory claims. ~~Five~~In August 2020, the federal district court issued a decision granting in part Brach Plaintiffs’ motion for class certification. The court certified nationwide breach of contract and Section 4226 classes, and a New York State Section 349 class, and class notice has gone out. Equitable Financial filed a petition seeking permission to appeal the decision to certify the Section 4226 class and New York State Section 349 class. NaN other federal actions challenging the COI rate increase are also pending against Equitable Financial and have been coordinated with the Brach action for the purposes of pre-trial activities. They contain allegations similar to those in the Brach action as well as additional allegations for violations of various states’ consumer protection statutes and common law fraud. ~~Three~~NaN actions are also pending against Equitable Financial in New York state court. Equitable Financial is vigorously defending each of these matters.

Pre-Capitalized Trust Securities (“P-Caps”)

In April 2019, pursuant to separate Purchase Agreements among Holdings, Credit Suisse Securities (USA) LLC, as representative of the several initial purchasers, and the Trusts (as defined below), Pine Street Trust I, a Delaware statutory trust (the “2029 Trust”), completed the issuance and sale of 600,000 of its Pre-Capitalized Trust Securities redeemable February 15, 2029 (the “2029 P-Caps”) for an aggregate purchase price of $600 million and Pine Street Trust II, a Delaware statutory trust (the “2049 Trust” and, together with the 2029 Trust, the “Trusts”), completed the issuance and sale of 400,000 of its Pre-Capitalized Trust Securities redeemable February 15, 2049 (the “2049 P-Caps” and, together with the 2029 P-Caps, the “P-Caps”) for an aggregate purchase price of $400 million in each case to qualified institutional buyers in reliance on Rule 144A that are also “qualified purchasers” for purposes of Section 3(c)(7) of the Investment Company Act of 1940, as amended.

The P-Caps are an off-balance sheet contingent funding arrangement that, upon Holdings’ election, gives Holdings the right over a ~~ten-year~~ten-year period (in the case of the 2029 Trust) or over a ~~thirty-year~~thirty-year period (in the case of the 2049 Trust) to issue senior notes to the Trusts. The Trusts each invested the proceeds from the sale of their P-Caps in separate portfolios of principal and/or interest strips of U.S. Treasury securities. In return, Holdings will pay a semi-annual facility fee to the 2029 Trust and 2049 Trust calculated at a rate of 2.125% and 2.715% per annum, respectively, which will be applied to the unexercised portion of the contingent funding arrangement and Holdings will reimburse the Trusts for certain expenses. The facility fees are recorded in Other operating costs and expenses in the Consolidated Statements of Income (Loss).

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Obligations under Funding Agreements

Federal Home Loan Bank of New York

As a member of the ~~FHLBNY,~~FHLB, Equitable Financial has access to collateralized borrowings. It also may issue funding agreements to the ~~FHLBNY.~~FHLB. Both the collateralized borrowings and funding agreements would require Equitable Financial to pledge qualified mortgage-backed assets and/or government securities as collateral. Equitable Financial issues short-term funding agreements to the ~~FHLBNY~~FHLB and uses the funds for asset, liability, and cash management purposes. Equitable Financial issues long-term funding agreements to the ~~FHLBNY~~FHLB and uses the funds for spread lending purposes.

~~EQUITABLE HOLDINGS, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited), Continued~~

Entering into ~~FHLBNY~~FHLB membership, borrowings and funding agreements requires the ownership of ~~FHLBNY~~FHLB stock and the pledge of assets as collateral. Equitable Financial has purchased ~~FHLBNY~~FHLB stock of ~~$313~~$320 million and pledged collateral with a carrying value of ~~$8.6~~$8.7 billion, as of ~~June~~September 30, 2020.

Funding agreements are reported in Policyholders’ account balances in the consolidated balance sheets. For other instruments used for asset/liability and cash management purposes, see “Derivative and offsetting assets and liabilities” included in Note 4. The table below summarizes the Company’s activity of funding agreements with the ~~FHLBNY.~~FHLB.

Change in ~~FHLBNY~~FHLB Funding Agreements during the ~~Six~~Nine Months Ended ~~June~~September 30, 2020


		Outstanding Balance at December 31, 2019		Issued During the Period		Repaid During the Period		Long-term Agreements Maturing Within One Year		Long-term Agreements Maturing Within Five Year		Outstanding Balance at June 30, 2020			Outstanding Balance at December 31, 2019		Issued During the Period		Repaid During the Period		Long-term Agreements Maturing Within One Year		Long-term Agreements Maturing Within Five Years		Outstanding Balance at September 30, 2020
		(in millions)																							(in millions)
Short-term funding agreements:	Short-term funding agreements:													Short-term funding agreements:
Due in one year or less	Due in one year or less	$	4,608	$	22,950	$	23,158	$	490	$	—	$	4,890	Due in one year or less	$	4,608	$	34,298	$	34,358	$	490	$	0	$	5,038
Long-term funding agreements:	Long-term funding agreements:													Long-term funding agreements:
Due in years two through five	Due in years two through five	1,646		—		—		(490)		112		1,268		Due in years two through five	1,646		0		0		(490)		112		1,268
Due in more than five years	Due in more than five years	646		—		—		—		(112)		534		Due in more than five years	646		0		0		0		(112)		534
Total long-term funding agreements	Total long-term funding agreements	2,292		—		—		(490)		—		1,802		Total long-term funding agreements	2,292		0		0		(490)		0		1,802
Total funding agreements (1)	Total funding agreements (1)	$	6,900	$	22,950	$	23,158	$	—	$	—	$	6,692	Total funding agreements (1)	$	6,900	$	34,298	$	34,358	$	0	$	0	$	6,840

_____________

(1)The $8 million and $9 million difference between the funding agreements carrying value shown in fair value table for ~~June~~September 30, 2020 and December 31, 2019, respectively, reflects the remaining amortization of a hedge implemented and closed, which locked in the funding agreements borrowing rates.

Funding Agreement-Backed Notes Program

Under the FABN, Equitable Financial may issue funding agreements to a Delaware special purpose statutory trust (the “Trust”) in exchange for the proceeds from issuances of fixed and floating rate medium-term marketable notes issued by the Trust from time to time (the “Trust notes”). The funding agreements have matching interest and maturity payment terms to the applicable Trust notes. The maximum aggregate principal amount of Trust notes permitted to be outstanding at any one time is $5 billion. Funding agreements issued to the Trust are reported in policyholders’ account balances in the consolidated balance sheets. The table below summarizes the Equitable Financial’s activity of funding agreements under the FABN.

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

Change in FABN Funding Agreements during the Nine Months Ended September 30, 2020


	Outstanding Balance at December 31, 2019		Issued During the Period		Repaid During the Period		Long-term agreements maturing within one year		Long-term Agreements Maturing Within Five Years		Outstanding Balance at September 30, 2020
	(in millions)
Short-term funding agreements:
Due in one year or less	0		$	0	$	0	$	0	$	0	$	0
Long-term funding agreements:
Due in years two through five	0		650		0		0		0		650
Due in more than five years	0		500		0		0		0		500
Total long-term funding agreements	0		1,150		0		0		0		1,150
Total funding agreements (1)	$	0	$	1,150	$	0	$	0	$	0	$	1,150

_____________

(1)The$7 million difference between the funding agreements notional value shown and carrying value table at September 30, 2020, reflects the remaining amortization of the issuance cost of the funding agreements.

Credit Facilities

The Company has a $2.5 billion five-year senior unsecured revolving credit facility with a syndicate of banks. The revolving credit facility has a sub-limit of $1.5 billion for letters of credit issued to support the Company’s life insurance business reinsured by EQ AZ Life Re Company “EQ AZ Life Re” and to support the third-party GMxB variable annuity business retroceded to CS Life RE Company “CS Life RE”. As of ~~June~~September 30, 2020, $150 million and ~~$620~~$425 million of undrawn letters of credit have been issued out of the $1.5 billion sub-limit for ACS Life and Equitable Financial, respectively, as beneficiaries. In addition to the letters of credit issued under the $2.5 billion revolving credit facility, as of ~~June~~September 30, 2020, $1.9 billion of undrawn letters of credit have been issued related to reinsurance assumed by EQ AZ Life Re from Equitable Financial and Equitable Financial Life Insurance Company of America “EFLOA”.

Guarantees and Other Commitments

The Company provides certain guarantees or commitments to affiliates and others. At ~~June~~September 30, 2020, these arrangements include commitments by the Company to provide equity financing of $1.3 billion (including ~~$226~~$217 million with affiliates) to certain limited partnerships and real estate joint ventures under certain conditions. Management believes the Company will not incur material losses as a result of these commitments.

The Company is the obligor under certain structured settlement agreements it had entered into with unaffiliated insurance companies and beneficiaries. To satisfy its obligations under these agreements, the Company owns single premium annuities issued by previously wholly-owned life insurance subsidiaries. The Company has directed payment under these annuities to be made directly to the beneficiaries under the structured settlement agreements. A contingent liability exists with respect to these agreements should the previously wholly-owned subsidiaries be unable to meet their obligations. Management believes the need for the Company to satisfy those obligations is remote.

The Company had $17 million of undrawn letters of credit related to reinsurance at ~~June~~September 30, 2020. The Company had ~~$481~~$469 million of commitments under existing mortgage loan agreements at ~~June~~September 30, 2020.

5861

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

~~15)~~14) BUSINESS SEGMENT INFORMATION

The Company has 4 reportable segments: Individual Retirement, Group Retirement, Investment Management and Research and Protection Solutions.

These segments reflect the manner by which the Company’s chief operating decision maker views and manages the business. A brief description of these segments follows:

•The Protection Solutions segment includes our life insurance and group employee benefits businesses. Our life insurance business offers a variety of variable universal life, universal life and term life products to help affluent and high net worth individuals, as well as small and medium-sized business owners, with their wealth protection, wealth transfer and corporate needs. Our group employee benefits business offers a suite of dental, vision, life, and short- and long-term disability and other insurance products to small and medium-size businesses across the United States.

Measurement

Operating earnings (loss) is the financial measure which primarily focuses on the Company’s segments’ results of operations as well as the underlying profitability of the Company’s core business. By excluding items that can be distortive and unpredictable such as investment gains (losses) and investment income (loss) from derivative instruments, the Company believes Operating earnings (loss) by segment enhances the understanding of the Company’s underlying drivers of profitability and trends in the Company’s segments.

Operating earnings is calculated by adjusting each segment’s Net income (loss) attributable to Holdings for the following items:

•Items related to variable annuity product features, which include: (i) certain changes in the fair value of the derivatives and other securities we use to hedge these features; (ii) the effect of benefit ratio unlock adjustments related to extraordinary economic conditions or events such as COVID-19; and (iii) changes in the fair value of the embedded derivatives reflected within variable annuity products’ net derivative results and the impact of these items on DAC amortization on our SCS product.

•Investment (gains) losses, which includes credit loss impairments of securities/investments, sales or disposals of securities/investments, realized capital gains/losses and valuation allowances;

•Net actuarial (gains) losses, which includes actuarial gains and losses as a result of differences between actual and expected experience on pension plan assets or projected benefit obligation during a given period related to pension, other postretirement benefit obligations, and the one-time impact of the settlement of the defined benefit obligation;

•Other adjustments, which includes restructuring costs related to severance, lease write-offs related to non-recurring restructuring activities, separation costs and impacts related to COVID-19; and

•Income tax expense (benefit) related to the above items and non-recurring tax items, which includes the effect of uncertain tax positions for a given audit period.

Revenues derived from any customer did not exceed 10% of revenues for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019.

The table below presents Operating earnings (loss) by segment and Corporate and Other and a reconciliation to Net income (loss) attributable to Holdings for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively:

5962

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020		2019
		(in millions)															(in millions)
Net income (loss) attributable to Holdings	Net income (loss) attributable to Holdings	$	(4,028)	$	363	$	1,382	$	(412)	Net income (loss) attributable to Holdings	$	(779)	$	(374)	$	590	$	(818)
Adjustments related to:	Adjustments related to:									Adjustments related to:
Variable annuity product features (1)	Variable annuity product features (1)	5,727		200		(1,134)		1,740		Variable annuity product features (1)	1,620		1,431		473		3,167
Investment (gains) losses	Investment (gains) losses	(169)		12		(173)		23		Investment (gains) losses	(17)		(199)		(190)		(176)
Net actuarial (gains) losses related to pension and other postretirement benefit obligations	Net actuarial (gains) losses related to pension and other postretirement benefit obligations	28		24		55		48		Net actuarial (gains) losses related to pension and other postretirement benefit obligations	31		24		86		72
Other adjustments (2) (3)	Other adjustments (2) (3)	91		89		725		129		Other adjustments (2) (3)	66		73		836		200
Income tax expense (benefit) related to above adjustments (4)	Income tax expense (benefit) related to above adjustments (4)	(1,192)		(71)		111		(408)		Income tax expense (benefit) related to above adjustments (4)	(357)		(278)		(253)		(685)
Non-recurring tax items	Non-recurring tax items	2		(58)		8		(52)		Non-recurring tax items	4		(4)		12		(56)
Non-GAAP Operating Earnings	Non-GAAP Operating Earnings	$	459	$	559	$	974	$	1,068	Non-GAAP Operating Earnings	$	568	$	673	$	1,554	$	1,704

Operating earnings (loss) by segment:	Operating earnings (loss) by segment:									Operating earnings (loss) by segment:
Individual Retirement	Individual Retirement	$	350	$	359	$	722	$	729	Individual Retirement	$	371	$	465	$	1,094	$	1,206
Group Retirement	Group Retirement	$	90	$	95	$	196	$	176	Group Retirement	$	129	$	105	$	325	$	281
Investment Management and Research	Investment Management and Research	$	92	$	80	$	187	$	157	Investment Management and Research	$	104	$	93	$	291	$	250
Protection Solutions	Protection Solutions	$	(12)	$	106	$	26	$	155	Protection Solutions	$	51	$	100	$	88	$	207
Corporate and Other (5)	Corporate and Other (5)	$	(61)	$	(81)	$	(157)	$	(149)	Corporate and Other (5)	$	(87)	$	(90)	$	(244)	$	(240)

______________

(1)Includes COVID-19 impact on Variable annuity product features due to a first quarter 2020 assumption update of $1.5 billion and other COVID-19 related impacts of $35 million for the ~~six~~nine months ended ~~June~~September 30, 2020.

(2)Includes COVID-19 impact on Other adjustments due to a first quarter 2020 assumption update of ~~$988~~$1,049 million ~~for the six months ended June 30, 2020~~ and other COVID-19 related impacts of ~~$52 million and $103~~$86 million for the ~~three and six~~nine months ended ~~June~~September 30, 2020.

(3)Include separation costs of $37 million, $39 million, ~~$58 million,~~$71108 million and ~~$82~~$121 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

(4)Includes income taxes of ~~$11 million and $545~~$554 million for the above COVID-19 items for the ~~three and six~~nine months ended ~~June~~September 30, 2020.

(5)Includes interest expense and financing fees of ~~$52~~$56 million, $59 million, ~~$108~~$164 million and ~~$111~~$170 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

Segment revenues is a measure of the Company’s revenue by segment as adjusted to exclude certain items. The following table reconciles segment revenues to ~~Total~~total revenues by excluding the following items:

•Items related to variable annuity product features, which include certain changes in the fair value of the derivatives and other securities we use to hedge these features and changes in the fair value of the embedded derivatives reflected within the net derivative results of variable annuity product features;

•Investment (gains) losses, which includes credit loss impairments of securities/investments, sales or disposals of securities/investments, realized capital gains/losses and valuation allowances;

•Other adjustments, which includes investment income (loss) from certain derivative instruments, excluding derivative instruments used to hedge risks associated with interest margins on interest sensitive life and annuity contracts and freestanding and embedded derivatives associated with products with GMxB features.

6063

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued

The table below presents segment revenues for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019.


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020		2019
		(in millions)															(in millions)
Segment revenues:	Segment revenues:									Segment revenues:
Individual Retirement (1)	Individual Retirement (1)	$	809	$	1,073	$	2,290	$	2,080	Individual Retirement (1)	$	1,079	$	1,181	$	3,352	$	3,253
Group Retirement (1)	Group Retirement (1)	246		267		528		518		Group Retirement (1)	301		273		829		791
Investment Management and Research (2)	Investment Management and Research (2)	844		848		1,751		1,628		Investment Management and Research (2)	899		872		2,650		2,500
Protection Solutions (1)	Protection Solutions (1)	730		843		1,589		1,674		Protection Solutions (1)	751		855		2,344		2,524
Corporate and Other (1)	Corporate and Other (1)	283		300		582		612		Corporate and Other (1)	300		302		881		914
Adjustments related to:	Adjustments related to:									Adjustments related to:
Variable annuity product features	Variable annuity product features	(5,678)		(161)		2,661		(1,639)		Variable annuity product features	(1,512)		(608)		1,160		(2,244)
Investment gains (losses), net	Investment gains (losses), net	169		(12)		173		(23)		Investment gains (losses), net	17		199		190		176
Other adjustments to segment revenues (3)	Other adjustments to segment revenues (3)	67		2		489		24		Other adjustments to segment revenues (3)	5		4		493		29
Total revenues	Total revenues	$	(2,530)	$	3,160	$	10,063	$	4,874	Total revenues	$	1,840	$	3,078	$	11,899	$	7,943

______________

(1)Includes investment expenses charged by AB of $17 million, ~~$21~~$18 million, ~~$35~~$51 million and ~~$39~~$57 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively, for services provided to the Company.

(2)Inter-segment investment management and other fees of ~~$27~~$28 million, $26 million, ~~$54~~$82 million and ~~$51~~$77 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively, are included in segment revenues of the Investment Management and Research segment.

(3)Includes COVID-19 impact on other adjustments due to an assumption update of $46 million ~~for the six months ended June 30, 2020~~ and other COVID-19 related impacts of ~~$21 million and~~ $(30) million for the ~~three and six~~nine months ended ~~June~~September 30, 2020.

The table below presents ~~Total~~total assets by segment as of ~~June~~September 30, 2020 and December 31, 2019:


		June 30, 2020		December 31, 2019			September 30, 2020		December 31, 2019
		(in millions)							(in millions)
Total assets by segment:	Total assets by segment:					Total assets by segment:
Individual Retirement	Individual Retirement	$	125,169	$	123,626	Individual Retirement	$	129,265	$	123,627
Group Retirement	Group Retirement	44,895		43,588		Group Retirement	47,745		43,590
Investment Management and Research	Investment Management and Research	10,812		10,170		Investment Management and Research	10,736		10,170
Protection Solutions	Protection Solutions	45,762		46,886		Protection Solutions	47,166		46,832
Corporate and Other	Corporate and Other	27,472		25,600		Corporate and Other	27,584		25,599
Total assets	Total assets	$	254,110	$	249,870	Total assets	$	262,496	$	249,818

~~16)~~15) EARNINGS PER COMMON SHARE

The following table presents a reconciliation of Net income (loss) and Weighted-average common shares used in calculating basic and diluted Earnings per common share — basic is calculated by dividing Net income (loss) attributable to Holdings’ common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is calculated by dividing the Net income (loss) available to Holdings’ common shareholders by the weighted-average number of common shares outstanding for the ~~period plus the shares representing the dilutive effect of share-based awards. The following table presents the weighted-average shares outstanding and Earnings per common share — basic and diluted:~~periods indicated:

6164

EQUITABLE HOLDINGS, INC.

Notes to Consolidated Financial Statements (Unaudited), Continued


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020		2019
		(in millions)															(in millions)
Weighted-average common shares outstanding:	Weighted-average common shares outstanding:									Weighted-average common shares outstanding:
Weighted-average common shares outstanding — basic	Weighted-average common shares outstanding — basic	450.4		491.1		455.8		504.5		Weighted-average common shares outstanding — basic	447.5		490.4		453.0		499.8
Effect of dilutive potential common shares:	Effect of dilutive potential common shares:									Effect of dilutive potential common shares:
Employee share awards (1)	Employee share awards (1)	—		0.8		1.4		—		Employee share awards (1)	0		0		1.1		0
Weighted-average common shares outstanding — diluted (2) (3)	Weighted-average common shares outstanding — diluted (2) (3)	450.4		491.9		457.1		504.5		Weighted-average common shares outstanding — diluted (2) (3)	447.5		490.4		454.1		499.8

Net income (loss):	Net income (loss):									Net income (loss):
Net income (loss)	Net income (loss)	(3,942)		430		1,505		$	(279)	Net income (loss)	(705)		$	(306)	$	787	$	(617)
Less: Net income (loss) attributable to the noncontrolling interest	Less: Net income (loss) attributable to the noncontrolling interest	86		67		123		133		Less: Net income (loss) attributable to the noncontrolling interest	74		68		197		201
Net income (loss) attributable to Holdings	Net income (loss) attributable to Holdings	(4,028)		363		1,382		(412)		Net income (loss) attributable to Holdings	(779)		(374)		590		(818)
Less: Preferred stock dividends	Less: Preferred stock dividends	10		—		23		—		Less: Preferred stock dividends	11		0		34		0
Net income (loss) available to Holdings’ common shareholders	Net income (loss) available to Holdings’ common shareholders	(4,038)		363		1,359		(412)		Net income (loss) available to Holdings’ common shareholders	$	(790)	$	(374)	$	556	$	(818)

Earnings per common share:	Earnings per common share:									Earnings per common share:
Basic	Basic	$	(8.96)	$	0.74	$	2.98	$	(0.82)	Basic	$	(1.77)	$	(0.76)	$	1.23	$	(1.64)
Diluted	Diluted	$	(8.96)	$	0.74	$	2.97	$	(0.82)	Diluted	$	(1.77)	$	(0.76)	$	1.22	$	(1.64)

_____________

(1)Calculated using the treasury stock method.

(2)Due to net loss for the three months ended ~~June~~September 30, 2020 and ~~six~~three and nine months ended ~~June~~September 30, 2019 , approximately 1.5 million, 1.0 million and ~~0.6~~0.8 million more shares, respectively, were excluded from the diluted earnings per common share calculation than would have been excluded as being anti-dilutive under the treasury stock method.

(3)Weighted-average common shares outstanding - diluted may not foot precisely due to rounding.

For the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, ~~8.3~~8.2 million, ~~8.0~~8.4 million, ~~4.2~~4.6 million and ~~6.1~~6.2 million of outstanding stock awards, respectively, were not included in the computation of diluted earnings per share because their effect was anti-dilutive.

EQUITABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16) REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

The Company identified certain errors primarily related to the calculation of actuarially determined insurance contract assets and liabilities that impacted previously issued consolidated financial statements. Management evaluated these adjustments and concluded they were not material to any previously reported quarterly or annual financial statements. In order to improve the consistency and comparability of the financial statements, management revised the financial statements and related disclosures to correct these errors as shown below.

Management assessed the materiality of this change within prior period financial statements based upon SEC Staff Accounting Bulletin Number 99, Materiality, which is since codified in Accounting Standards Codification ("ASC") 250, Accounting Changes and Error Corrections. The prior period comparative financial statements that are presented herein have been revised.

The following tables present line items for prior period financial statements that have been affected by the revision. For these line items, the tables detail the amounts as previously reported, the impact upon those line items due to the revision, and the amounts as currently revised within the financial statements.


	June 30, 2020		March 31, 2020
	As Previously Reported		Impact of Revisions		As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Balance Sheet:
ASSETS







Other invested assets	2,280		0		2,280		2,112		12		2,124





Deferred policy acquisition costs	4,182		(92)		4,090		4,809		(112)		4,697








Total Assets	$	254,110	$	(92)	$	254,018	$	240,781	$	(100)	$	240,681
LIABILITIES

Future policy benefits and other policyholders’ liabilities	41,476		30		41,506		37,968		33		38,001






Current and deferred income taxes	1,848		(26)		1,822		2,355		(28)		2,327



Total Liabilities	$	234,889	$	4	$	234,893	$	218,884	$	5	$	218,889


EQUITY




Retained earnings	12,995		(96)		12,899		17,112		(105)		17,007

Total equity attributable to Holdings	17,594		(96)		17,498		20,086		(105)		19,981

Total Equity	19,134		(96)		19,038		21,640		(105)		21,535

Total Liabilities, Redeemable Noncontrolling Interest and Equity	$	254,110	$	(92)	$	254,018	$	240,781	$	(100)	$	240,681

EQUITABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	December 31, 2019		December 31, 2018
	As Previously Reported		Impact of Revisions		As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Balance Sheet:
ASSETS













Deferred policy acquisition costs	5,890		(53)		5,837		6,745		(40)		6,705



GMIB reinsurance contract asset, at fair value	2,139		0		2,139		1,732		2		1,734

Other assets	3,799		1		3,800		3,127		20		3,147


Total Assets	$	249,870	$	(52)	$	249,818	$	220,797	$	(18)	$	220,779
LIABILITIES

Future policy benefits and other policyholders’ liabilities	34,587		48		34,635		30,998		79		31,077






Current and deferred income taxes	549		(21)		528		68��		(33)		35



Total Liabilities	$	234,379	$	27	$	234,406	$	205,178	$	46	$	205,224


EQUITY




Retained earnings	11,827		(83)		11,744		13,989		(52)		13,937
Accumulated other comprehensive income (loss)	840		4		844		(1,396)		(12)		(1,408)
Total equity attributable to Holdings	13,535		(79)		13,456		13,866		(64)		13,802

Total Equity	15,126		(79)		15,047		15,432		(64)		15,368

Total Liabilities, Redeemable Noncontrolling Interest and Equity	$	249,870	$	(52)	$	249,818	$	220,797	$	(18)	$	220,779

EQUITABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
	As Previously Reported			Impact of Revisions		As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statements of Income (Loss)
REVENUES
Policy charges and fee income	$	879		$	(2)	$	877	$	1,870	$	3	$	1,873

Net derivative gains (losses)	(6,033)			(5)		(6,038)		3,368		(6)		3,362
Net investment income (loss)	1,035			(13)		1,022		1,651		0		1,651





Other Income	124			0		124		280		(1)		279
Total revenues	(2,530)			(20)		(2,550)		10,063		(4)		10,059

BENEFITS AND OTHER DEDUCTIONS
Policyholders' benefits	746			(10)		736		3,534		(22)		3,512




Amortization of deferred policy acquisition costs	183			(21)		162		1,431		34		1,465
Other operating costs and expenses	434			0		434		871		1		872
Total benefits and other deductions	2,489			(31)		2,458		8,195		13		8,208
Income (loss) from continuing operations, before income taxes	(5,019)			11		(5,008)		1,868		(17)		1,851
Income tax (expense) benefit	1,077			(2)		1,075		(363)		4		(359)
Net income (loss)	(3,942)			9		(3,933)		1,505		(13)		1,492

Net income (loss) attributable to Holdings	$	(4,028)		$	9	$	(4,019)	$	1,382	$	(13)	$	1,369

EARNINGS PER COMMON SHARE
Basic	$	(8.96)		$	0.02	$	(8.94)	$	2.98	$	(0.03)	$	2.95
Diluted	$	(8.96)		$	0.02	$	(8.94)	$	2.97	$	(0.03)	$	2.94

EQUITABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Three Months Ended March 31, 2020
	As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statements of Income (Loss)
REVENUES
Policy charges and fee income	$	991	$	5	$	996

Net derivative gains (losses)	9,401		(1)		9,400
Net investment income (loss)	616		13		629





Other Income	156		(1)		155
Total revenues	12,593		16		12,609

BENEFITS AND OTHER DEDUCTIONS
Policyholders' benefits	2,788		(12)		2,776




Amortization of deferred policy acquisition costs	1,248		55		1,303
Other operating costs and expenses	437		1		438
Total benefits and other deductions	5,706		44		5,750
Income (loss) from continuing operations, before income taxes	6,887		(28)		6,859
Income tax (expense) benefit	(1,440)		6		(1,434)
Net income (loss)	5,447		(22)		5,425

Net income (loss) attributable to Holdings	$	5,410	$	(22)	$	5,388

EARNINGS PER COMMON SHARE
Basic	$	11.71	$	(0.05)	$	11.66
Diluted	$	11.65	$	(0.05)	$	11.60


	Year Ended December 31, 2019		Year Ended December 31, 2018
	As Previously Reported		Impact of Revisions		As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statements of Income (Loss)
REVENUES
Policy charges and fee income	$	3,738	$	40	$	3,778	$	3,824	$	10	$	3,834

Net derivative gains (losses)	(4,000)		(12)		(4,012)		(231)		(19)		(250)







Total revenues	9,591		28		9,619		12,078		(9)		12,069

BENEFITS AND OTHER DEDUCTIONS
Policyholders' benefits	4,370		15		4,385		2,915		(59)		2,856
Interest credited to policyholders' account balances	1,241		22		1,263		1,090		(23)		1,067

Commissions and distribution related payments	1,242		0		1,242		1,160		5		1,165

Amortization of deferred policy acquisition costs	579		18		597		333		38		371
Other operating costs and expenses	1,892		(2)		1,890		1,809		1		1,810
Total benefits and other deductions	11,626		53		11,679		9,617		(38)		9,579
Income (loss) from continuing operations, before income taxes	(2,035)		(25)		(2,060)		2,461		29		2,490
Income tax (expense) benefit	599		(6)		593		(307)		6		(301)
Net income (loss)	(1,436)		(31)		(1,467)		2,154		35		2,189

Net income (loss) attributable to Holdings	$	(1,733)	$	(31)	$	(1,764)	$	1,820	$	35	$	1,855

EARNINGS PER COMMON SHARE
Basic	$	(3.51)	$	(0.06)	$	(3.57)	$	3.27	$	0.06	$	3.33
Diluted	$	(3.51)	$	(0.06)	$	(3.57)	$	3.27	$	0.06	$	3.33

EQUITABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Three Months Ended September 30, 2019				Nine Months Ended September 30, 2019
	As Previously Reported		Impact of Revisions		As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statements of Income (Loss)
REVENUES
Policy charges and fee income	$	929	$	51	$	980	$	2,801	$	46	$	2,847

Net derivative gains (losses)	(451)		(2)		(453)		(2,317)		(6)		(2,323)






Other Income	142		1		143		408		1		409
Total revenues	3,028		50		3,078		7,902		41		7,943

BENEFITS AND OTHER DEDUCTIONS
Policyholders' benefits	1,757		(22)		1,735		3,533		18		3,551
Interest credited to policyholders' account balances	304		16		320		922		22		944



Amortization of deferred policy acquisition costs	85		43		128		460		29		489

Total benefits and other deductions	3,468		37		3,505		8,825		69		8,894
Income (loss) from continuing operations, before income taxes	(440)		13		(427)		(923)		(28)		(951)
Income tax (expense) benefit	124		(3)		121		328		6		334
Net income (loss)	(316)		10		(306)		(595)		(22)		(617)

Net income (loss) attributable to Holdings	$	(384)	$	10	$	(374)	$	(796)	$	(22)	$	(818)

EARNINGS PER COMMON SHARE
Basic	$	(0.78)	$	0.02	$	(0.76)	$	(1.59)	$	(0.05)	$	(1.64)
Diluted	$	(0.78)	$	0.02	$	(0.76)	$	(1.59)	$	(0.05)	$	(1.64)


	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
	As Previously Reported		Impact of Revisions		As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statements of Income (Loss)
REVENUES
Policy charges and fee income	$	941	$	(3)	$	938	$	1,872	$	(5)	$	1,867

Net derivative gains (losses)	(236)		(1)		(237)		(1,866)		(4)		(1,870)







Total revenues	3,160		(4)		3,156		4,874		(9)		4,865

BENEFITS AND OTHER DEDUCTIONS
Policyholders' benefits	896		(1)		895		1,776		40		1,816
Interest credited to policyholders' account balances	314		3		317		618		6		624



Amortization of deferred policy acquisition costs	177		(2)		175		375		(14)		361
Other operating costs and expenses	456		(1)		455		866		0		866
Total benefits and other deductions	2,719		(1)		2,718		5,357		32		5,389
Income (loss) from continuing operations, before income taxes	441		(3)		438		(483)		(41)		(524)
Income tax (expense) benefit	(11)		1		(10)		204		9		213
Net income (loss)	430		(2)		428		(279)		(32)		(311)

Net income (loss) attributable to Holdings	$	363	$	(2)	$	361	$	(412)	$	(32)	$	(444)

EARNINGS PER COMMON SHARE
Basic	$	0.74	$	0	$	0.74	$	(0.82)	$	(0.06)	$	(0.88)
Diluted	$	0.74	$	(0.01)	$	0.73	$	(0.82)	$	(0.06)	$	(0.88)

EQUITABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Three Months Ended March 31, 2019
	As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statements of Income (Loss)
REVENUES
Policy charges and fee income	$	931	$	(2)	$	929

Net derivative gains (losses)	(1,630)		(3)		(1,633)







Total revenues	1,714		(5)		1,709

BENEFITS AND OTHER DEDUCTIONS
Policyholders' benefits	880		41		921
Interest credited to policyholders' account balances	304		3		307



Amortization of deferred policy acquisition costs	198		(12)		186
Other operating costs and expenses	410		1		411
Total benefits and other deductions	2,638		33		2,671
Income (loss) from continuing operations, before income taxes	(924)		(38)		(962)
Income tax (expense) benefit	215		8		223
Net income (loss)	(709)		(30)		(739)

Net income (loss) attributable to Holdings	$	(775)	$	(30)	$	(805)



EARNINGS PER COMMON SHARE
Basic	$	(1.50)	$	(0.05)	$	(1.55)
Diluted	$	(1.50)	$	(0.05)	$	(1.55)


	Year Ended December 31, 2017
	As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statement of Income (Loss):
REVENUES
Policy charges and fee income	$	3,693	$	(7)	$	3,686

Net derivative gains (losses)	214		(23)		191







Total revenues	$	12,460	$	(30)	$	12,430

BENEFITS AND OTHER DEDUCTIONS
Policyholders' benefits	4,366		14		4,380


Commissions and distribution related payments	1,081		7		1,088

Amortization of deferred policy acquisition costs	503		12		515

Total benefits and other deductions	11,154		33		11,187
Income (loss) from continuing operations, before income taxes	1,306		(63)		1,243
Income tax (expense) benefit	(49)		7		(42)
Net income (loss)	1,257		(56)		1,201

Net income (loss) attributable to Holdings	834		(56)		778

Net income (loss) available to Holdings’ common shareholders	$	834	$	(56)	$	778

EARNINGS PER COMMON SHARE
Basic	$	1.49	$	(0.10)	$	1.39
Diluted	$	1.48	$	(0.09)	$	1.39

EQUITABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
	As Previously Reported		Impact of Revisions		As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)	$	(3,942)	$	9	$	(3,933)	$	1,505	$	(13)	$	1,492



Other comprehensive income	1,642		0		1,642		3,083		(4)		3,079
Comprehensive income (loss)	(2,300)		9		(2,291)		4,588		(17)		4,571

Comprehensive income (loss) attributable to Holdings	$	(2,389)	$	9	$	(2,380)	$	4,470	$	(17)	$	4,453

EQUITABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Three Months Ended March 31, 2020
	As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)	$	5,447	$	(22)	$	5,425

Change in unrealized gains (losses), net of reclassification adjustment	1,434		(4)		1,430

Other comprehensive income	1,441		(4)		1,437
Comprehensive income (loss)	6,888		(26)		6,862

Comprehensive income (loss) attributable to Holdings	$	6,859	$	(26)	$	6,833


	Year Ended December 31, 2019				Year Ended December 31, 2018
	As Previously Reported		Impact of Revisions			As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)	$	(1,436)	$	(31)		$	(1,467)	$	2,154	$	35	$	2,189
Foreign currency translation adjustment	5		0			5		(37)		5		(32)
Change in unrealized gains (losses), net of reclassification adjustment	2,242		16			2,258		(1,329)		3		(1,326)

Other comprehensive income	2,232		16			2,248		(1,177)		8		(1,169)
Comprehensive income (loss)	796		(15)			781		977		43		1,020

Comprehensive income (loss) attributable to Holdings	$	503	$	(15)		$	488	$	628	$	43	$	671


	Three Months Ended September 30, 2019				Nine Months Ended September 30, 2019
	As Previously Reported		Impact of Revisions			As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)	$	(316)	$	10		$	(306)	$	(595)	$	(22)	$	(617)

Change in unrealized gains (losses), net of reclassification adjustment	581		165			746		2,784		90		2,874

Other comprehensive income	587		165			752		2,857		90		2,947
Comprehensive income (loss)	271		175			446		2,262		68		2,330

Comprehensive income (loss) attributable to Holdings	$	208	$	175		$	383	$	2,068	$	68	$	2,136


	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
	As Previously Reported		Impact of Revisions		As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)	$	430	$	(2)	$	428	$	(279)	$	(32)	$	(311)

Change in unrealized gains (losses), net of reclassification adjustment	1,369		(77)		1,292		2,203		(75)		2,128

Other comprehensive income	1,388		(77)		1,311		2,270		(75)		2,195
Comprehensive income (loss)	1,818		(79)		1,739		1,991		(107)		1,884

Comprehensive income (loss) attributable to Holdings	$	1,752	$	(79)	$	1,673	$	1,860	$	(107)	$	1,753

EQUITABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Three Months Ended March 31, 2019
	As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)	$	(709)	$	(30)	$	(739)

Change in unrealized gains (losses), net of reclassification adjustment	834		2		836

Other comprehensive income	882		2		884
Comprehensive income (loss)	173		(28)		145

Comprehensive income (loss) attributable to Holdings	$	108	$	(28)	$	80


	Year Ended December 31, 2017
	As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statements of Comprehensive Income:
Net income (loss)	$	1,257	$	(56)	$	1,201
Foreign currency translation adjustment	$	42	$	(3)	$	39
Change in unrealized gains (losses), net of reclassification adjustment	690		(18)		672

Other comprehensive income	832		(21)		811
Comprehensive income (loss)	2,089		(77)		2,012

Comprehensive income (loss) attributable to Holdings	1,647		(77)		1,570

EQUITABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
	As Previously Reported		Impact of Revisions		As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statement of Equity:

















Retained earnings, beginning of year	$	17,112	$	(105)	$	17,007	$	11,827	$	(83)	$	11,744







Net income (loss) attributable to Holdings	(4,028)		9		(4,019)		1,382		(13)		1,369


Retained earnings, end of period	$	12,995	$	(96)	$	12,899	$	12,995	$	(96)	$	12,899






Total Holdings’ equity, end of period	$	17,594	$	(96)	$	17,498	$	17,594	$	(96)	$	17,498










Total equity, end of period	$	19,134	$	(96)	$	19,038	$	19,134	$	(96)	$	19,038

EQUITABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Three Months Ended March 31, 2020
	As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statement of Equity:












Retained earnings, beginning of year	$	11,827	$	(83)	$	11,744





Net income (loss) attributable to Holdings	5,410		(22)		5,388

Retained earnings, end of period	$	17,112	$	(105)	$	17,007






Total Holdings’ equity, end of period	$	20,086	$	(105)	$	19,981










Total equity, end of period	$	21,640	$	(105)	$	21,535


	Year Ended December 31, 2019		Year Ended December 31, 2018
	As Previously Reported		Impact of Revisions		As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statement of Equity:

















Retained earnings, beginning of year	$	13,989	$	(52)	$	13,937	$	12,225	$	(87)	$	12,138







Net income (loss) attributable to Holdings	(1,733)		(31)		(1,764)		1,820		35		1,855


Retained earnings, end of year	$	11,827	$	(83)	$	11,744	$	13,989	$	(52)	$	13,937
Accumulated other comprehensive income (loss), beginning of year	$	(1,396)	$	(12)	$	(1,408)	$	(108)	$	(20)	$	(128)



Other comprehensive income (loss)	2,236		16		2,252		(1,192)		8		(1,184)
Accumulated other comprehensive income (loss), end of year	$	840	$	4	$	844	$	(1,396)	$	(12)	$	(1,408)
Total Holdings’ equity, end of year	$	13,535	$	(79)	$	13,456	$	13,866	$	(64)	$	13,802










Total equity, end of year	$	15,126	$	(79)	$	15,047	$	15,432	$	(64)	$	15,368


	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
	As Previously Reported		Impact of Revisions		As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statement of Equity:

















Retained earnings, beginning of year	$	13,293	$	(84)	$	13,209	$	13,989	$	(52)	$	13,937







Net income (loss) attributable to Holdings	(384)		10		(374)		(796)		(22)		(818)


Retained earnings, end of period	$	12,835	$	(74)	$	12,761	$	12,835	$	(74)	$	12,761
Accumulated other comprehensive income (loss), beginning of year	$	876	$	(87)	$	789	$	(1,396)	$	(12)	$	(1,408)



Other comprehensive income (loss)	592		165		757		2,864		90		2,954
Accumulated other comprehensive income (loss), end of period	$	1,468	$	78	$	1,546	$	1,468	$	78	$	1,546
Total Holdings’ equity, end of period	$	14,936	$	4	$	14,940	$	14,936	$	4	$	14,940










Total equity, end of period	$	16,478	$	4	$	16,482	$	16,478	$	4	$	16,482

EQUITABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Three Months Ended June 30, 2019				Six Months Ended June 30, 2019
	As Previously Reported		Impact of Revisions			As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statement of Equity:










Additional paid-in capital, beginning of year	1,881		1			1,882		1,908		0		1,908




Other	(8)		(1)			(9)		(16)		0		(16)
Additional paid-in capital, end of period	$	1,901	$	0		$	1,901	$	1,901	$	0	$	1,901
Retained earnings, beginning of year	$	13,004	$	(82)		$	12,922	$	13,989	$	(52)	$	13,937







Net income (loss) attributable to Holdings	363		(2)			361		(412)		(32)		(444)


Retained earnings, end of period	$	13,293	$	(84)		$	13,209	$	13,293	$	(84)	$	13,209
Accumulated other comprehensive income (loss), beginning of year	$	(513)	$	(10)		$	(523)	$	(1,396)	$	(12)	$	(1,408)



Other comprehensive income (loss)	1,389		(77)			1,312		2,272		(75)		2,197
Accumulated other comprehensive income (loss), end of period	$	876	$	(87)		$	789	$	876	$	(87)	$	789
Total Holdings’ equity, end of period	$	14,843	$	(171)		$	14,672	$	14,843	$	(171)	$	14,672










Total equity, end of period	$	16,388	$	(171)		$	16,217	$	16,388	$	(171)	$	16,217


	Three Months Ended March 31, 2019
	As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statement of Equity:










Other	(8)		1		(7)
Additional paid-in capital, end of period	$	1,881	$	1	$	1,882
Retained earnings, beginning of year	$	13,989	$	(52)	$	13,937





Net income (loss) attributable to Holdings	(775)		(30)		(805)

Retained earnings, end of period	$	13,004	$	(82)	$	12,922
Accumulated other comprehensive income (loss), beginning of year	$	(1,396)	$	(12)	$	(1,408)



Other comprehensive income (loss)	883		2		885
Accumulated other comprehensive income (loss), end of period	$	(513)	$	(10)	$	(523)
Total Holdings’ equity, end of period	$	13,143	$	(91)	$	13,052










Total equity, end of period	$	14,682	$	(91)	$	14,591


	Year Ended December 31, 2017
	As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statements of Equity:

















Retained earnings, beginning of year	$	11,391	$	(31)	$	11,360







Net income (loss) attributable to Holdings	834		(56)		778


Retained earnings, end of period	$	12,225	$	(87)	$	12,138
Accumulated other comprehensive income (loss), beginning of year	$	(921)	$	1	$	(920)



Other comprehensive income (loss)	813		(21)		792
Accumulated other comprehensive income (loss), end of period	$	(108)	$	(20)	$	(128)
Total Holdings’ equity, end of period	$	13,421	$	(107)	$	13,314










Total equity, end of period	$	16,518	$	(107)	$	16,411

EQUITABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Six Months Ended June 30, 2020		Three Months Ended March 31, 2020
	As Previously Reported		Impact of Revisions		As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statement of Cash Flows:
Cash flows from operating activities:
Net income (loss)	$	1,505	$	(13)	$	1,492	$	5,447	$	(22)	$	5,425
Adjustments to reconcile Net income (loss) to Net cash provided by (used in) operating activities:
Policy charges and fee income	(1,870)		(3)		(1,873)		(991)		(5)		(996)


Net derivative (gains) losses	(3,368)		6		(3,362)		(9,401)		1		(9,400)







Amortization and depreciation	1,506		34		1,540		1,275		55		1,330









Future policy benefits	1,828		(21)		1,807		1,936		(11)		1,925
Current and deferred income taxes	482		(4)		478		1,425		(5)		1,420
Other, net	(329)		1		(328)		(448)		(1)		(449)
Net cash provided by (used in) operating activities	$	(548)	$	0	$	(548)	$	(582)	$	12	$	(570)

























Cash flows from financing activities:
Policyholders’ account balances:







Change in collateralized pledged assets	60		0		60		44		(1)		43
Change in collateralized pledged liabilities	239		0		239		657		(11)		646

















Net cash provided by (used in) financing activities	$	2,891	$	0	$	2,891	$	(13)	$	(12)	$	(13)




Cash and cash equivalents, end of period	$	8,364	$	0	$	8,364	$	10,315	$	0	$	10,315


	Year Ended December 31, 2019				Year Ended December 31, 2018
	As Previously Reported		Impact of Revisions			As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statement of Cash Flows:
Cash flows from operating activities:
Net income (loss)	$	(1,436)	$	(31)		$	(1,467)	$	2,154	$	35	$	2,189
Adjustments to reconcile Net income (loss) to Net cash provided by (used in) operating activities:
Policy charges and fee income	(3,738)		(40)			(3,778)		(3,824)		(10)		(3,834)
Interest credited to policyholders' account balances	1,241		22			1,263		1,090		(23)		1,067

Net derivative (gains) losses	4,000��		12			4,012		231		19		250







Amortization and depreciation	657		18			675		257		39		296








Capitalization of DAC	(754)		0			(754)		(702)		5		(697)
Future policy benefits	947		15			962		(399)		(59)		(458)
Current and deferred income taxes	(108)		6			(102)		633		(6)		627
Other, net	(162)		(2)			(164)		(222)		0		(222)
Net cash provided by (used in) operating activities	$	(216)	$	0		$	(216)	$	61	$	0	$	61


























































Cash and cash equivalents, end of year	$	4,405	$	0		$	4,405	$	4,469	$	0	$	4,469

EQUITABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Nine Months Ended September 30, 2019		Six Months Ended June 30, 2019
	As Previously Reported		Impact of Revisions		As Revised		As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statement of Cash Flows:
Cash flows from operating activities:
Net income (loss)	$	(595)	$	(22)	$	(617)	$	(279)	$	(32)	$	(311)
Adjustments to reconcile Net income (loss) to Net cash provided by (used in) operating activities:
Policy charges and fee income	(2,801)		(46)		(2,847)		(1,872)		5		(1,867)
Interest credited to policyholders' account balances	922		22		944		618		6		624

Net derivative (gains) losses	2,317		6		2,323		1,866		4		1,870







Amortization and depreciation	535		29		564		433		(13)		420




Changes in:




Future policy benefits	925		18		943		1		40		41
Current and deferred income taxes	36		(6)		30		23		(9)		14
Other, net	(86)		(1)		(87)		(58)		(1)		(59)
Net cash provided by (used in) operating activities	$	(292)	$	0	$	(292)	$	(425)	$	0	$	(425)


























































Cash and cash equivalents, end of period	$	4,471	$	0	$	4,471	$	4,734	$	0	$	4,734


	Three Months Ended March 31, 2019
	As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statement of Cash Flows:
Cash flows from operating activities:
Net income (loss)	$	(709)	$	(30)	$	(739)
Adjustments to reconcile Net income (loss) to Net cash provided by (used in) operating activities:
Policy charges and fee income	(931)		2		(929)
Interest credited to policyholders' account balances	304		3		307

Net derivative (gains) losses	1,630		3		1,633







Amortization and depreciation	239		(12)		227









Future policy benefits	22		42		64
Current and deferred income taxes	183		(8)		175

Net cash provided by (used in) operating activities	$	(109)	$	0	$	(109)

























































Cash and cash equivalents, end of period	$	5,129	$	0	$	5,129


	Year Ended December 31, 2017
	As Previously Reported		Impact of Revisions		As Revised
	(in millions)
Consolidated Statement of Cash Flows:
Cash flows from operating activities:
Net income (loss)	$	1,257	$	(56)	$	1,201
Adjustments to reconcile Net income (loss) to Net cash provided by (used in) operating activities:
Policy charges and fee income	(3,693)		7		(3,686)


Net derivative (gains) losses	(214)		23		(191)







Amortization and depreciation	399		(13)		386








Capitalization of DAC	(687)		24		(663)
Future policy benefits	1,097		14		1,111
Current and deferred income taxes	(10)		1		(9)

Net cash provided by (used in) operating activities	$	(243)	$	0	$	(243)


























































Cash and cash equivalents, end of year	$	4,814	$	0	$	4,814

EQUITABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17) SUBSEQUENT EVENTS

~~Funding Agreement-Backed Notes~~ ~~Program~~

~~Pursuant to~~On October 27, 2020, Holdings entered into a ~~funding agreement-backed notes program,~~Master Transaction Agreement with Venerable Insurance and Annuity Company (“VIAC”), and Venerable Holdings, Inc., a Delaware corporation. VIAC will acquire all of the shares of the capital stock of Corporate Solutions Life Reinsurance Company (“CSLRC”), and, immediately following such sale, Equitable Financial ~~may issue funding agreements~~will enter into a coinsurance and modified coinsurance agreement, pursuant to which Equitable Financial will cede to CSLRC, on a ~~Delaware special purpose statutory trust~~combined coinsurance and modified coinsurance basis, legacy variable annuity policies sold by Equitable Financial between 2006-2008 supported by general account assets of approximately $12 billion (the ~~“Trust”~~“Block”) ~~in exchange for~~, comprised of non-New York “Accumulator” policies containing fixed rate Guaranteed Minimum Income Benefit and/or Guaranteed Minimum Death Benefit guarantees. Equitable Financial will reinsure the proceeds from issuances of fixed and floating rate medium-term marketable notes issued by the Trust from time to time (the “Trust notes”). The funding agreements have matching interest and maturity payment termsseparate accounts relating to the ~~applicable Trust notes. The maximum~~Block on a modified coinsurance basis. Equitable Financial will also acquire a surplus note in aggregate principal amount of ~~Trust notes permitted to be outstanding at any one time is $5 billion.~~

~~Effective July 7, 2020, Equitable Financial~~$50 million issued a $650 million funding agreement to the Trust. The funding agreement has a fixed interest rate of 1.4% per annum and will mature on July 7, 2025. Funding agreements issued to the Trust will be reported in Policyholders’ account balancesby VIAC in the ~~consolidated balance sheets in subsequent periods.~~transaction.

~~Dividends Declared~~

On July 31, 2020, the Company declared a quarterly cash dividend of $0.17 per share of common stock. The dividend on the common stock will be payable August 18, 2020 to shareholders of record at the close of business on August 11, 2020.

On July 31, 2020, the Company declared a cash dividend of $328.125 per share on the Company’s Series A 5.25% Non-Cumulative Perpetual Preferred Stock, with a liquidation preference of $25,000 per share, which are represented by depositary shares, each representing a 1/1,000th interest in a share of preferred stock, holders of which will receive $0.328125 per depositary share. The dividend will be payable on September 15, 2020 to holders of record as of September 4, 2020.

6280

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in its entirety and in conjunction with the consolidated financial statements and related notes contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section contained in our Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”).

In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Actual results may differ materially from those discussed in the forward-looking statements as a result of various factors. See the Note Regarding Forward-Looking Statements and Information. Investors are directed to consider the risks and uncertainties discussed in Part II, Item 1A of this Quarterly Report on Form 10-Q, as well as in other documents we have filed with the ~~Securities and Exchange Commission (“SEC”).~~SEC.

Executive Summary

Overview

We are one of America’s leading financial services companies, providing: (i) advice and solutions for helping Americans set and meet their retirement goals and protect and transfer their wealth across generations; and (ii) a wide range of investment management insights, expertise and innovations to drive better investment decisions and outcomes for clients worldwide.

We manage our business through four segments: Individual Retirement, Group Retirement, Investment Management and Research, and Protection Solutions. We report certain activities and items that are not included in these segments in Corporate and Other. See Note 1514 of the Notes to the Consolidated Financial Statements for further information on our segments.

We benefit from our complementary mix of businesses. This business mix provides diversity in our earnings sources, which helps offset fluctuations in market conditions and variability in business results, while offering growth opportunities.

Reinsurance of Legacy Variable Annuity Block and Sale of Runoff Variable Annuity Reinsurance Entity

~~COVID-19 Impact~~On October 27, 2020, Holdings entered into a Master Transaction Agreement (the “MTA”) with Venerable Insurance and Annuity Company, an insurance company domiciled in Iowa (“VIAC”), and Venerable Holdings, Inc., a Delaware corporation (“Venerable”), pursuant to which, among other things, VIAC will acquire all of the shares of the capital stock of Corporate Solutions Life Reinsurance Company, an insurance company domiciled in Delaware and wholly owned subsidiary of the Company (“CSLRC”). Prior to the closing, CSLRC will affect the recapture of all of the business that is currently ceded to CS Life Re Company, an insurance company domiciled in Arizona and wholly owned subsidiary of CSLRC (“Reinsurance Subsidiary”), and the dissolution or sale, transfer or distribution of 100% of the equity of the Reinsurance Subsidiary.

~~During~~Immediately following the ~~first half~~sale of CSLRC, CSLRC and Equitable Financial will enter into a coinsurance and modified coinsurance agreement (the “Reinsurance Agreement”), pursuant to which Equitable Financial will cede to CSLRC, on a combined coinsurance and modified coinsurance basis, legacy variable annuity policies sold by Equitable Financial between 2006-2008 supported by general account assets of approximately $12 billion (the “Block”), comprised of non-New York “Accumulator” policies containing fixed rate Guaranteed Minimum Income Benefit and/or Guaranteed Minimum Death Benefit guarantees. CSLRC will deposit assets supporting the general account liabilities relating to the Block into a trust account for the benefit of Equitable Financial, which assets will secure its obligations to Equitable Financial under the Reinsurance Agreement. Equitable Financial will reinsure the separate accounts relating to the Block on a modified coinsurance basis. At closing, VIAC will contribute additional assets to the trust such that trust assets will exceed the liabilities they secure. Venerable will provide a holding company guarantee of CSLRC’s obligation to Equitable Financial under the Reinsurance Agreement. In addition, the investment of assets in the trust account will be subject to investment guidelines and certain capital adequacy related triggers will strengthen the requirements of the trust. The Reinsurance Agreement also contains additional counterparty risk management and mitigation provisions.

As part of the transaction, the Company is in discussions to acquire a 9.9% equity interest in Venerable’s parent holding company, VA Capital Company LLC, which may include a board seat, subject to reaching an agreement on the terms of the investment.

Based on estimates as of June 30, 2020, the Company expects to realize approximately $1.2 billion in value from the transaction, which includes an anticipated capital release of approximately $800 million, a positive ceding commission in respect of the Block reinsurance transaction and consideration payable by VIAC for the acquisition of CSLRC totaling

approximately $300 million, subject to adjustment, and approximately $100 million in ~~particular,~~tax benefits. Equitable Financial will also acquire a surplus note in aggregate principal amount of $50 million issued by VIAC.

Under the terms of the MTA, at closing of the transactions, ABLP will enter into an investment advisory agreement with CSLRC pursuant to which ABLP will serve as the preferred investment manager for approximately 80%, relative to assets currently managed by ABLP, of the general account assets transferred to the trust account for, subject to certain provisions, a minimum of five years. Equitable Financial will continue to administer the Block.

The transaction is expected to close in the second quarter of ~~2020,~~2021. The consummation of the closing under the MTA is subject to the satisfaction or waiver of customary closing conditions specified in the MTA, including, among other things, (i) the receipt of required regulatory approvals, without imposing a burdensome condition, (ii) the expiration or termination of the applicable waiting period (or extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and (iii) absence of a material adverse effect on Venerable (in the case of the Company) or CSLRC (in the case of Venerable and VIAC), in each case subject to certain exceptions and qualifications.

COVID-19 Impact

The COVID-19 pandemic has negatively impacted the U.S. and global economies. ~~Capital~~In the third quarter, financial markets continued to experience significant volatility and unemployment levels ~~rose dramatically. In addition, many businesses~~remained high. The pandemic continues to evolve in the U.S., and ~~schools remained closed or were ordered to close and many states and local communities instituted or maintained social distancing and sheltering in place requirements. It remains unclear whether~~while certain states and municipalities across the U.S. will be able to safely re-open schools in several weeks given the spread of the virus. The COVID-19 pandemic is rapidly evolving in the U.S. and while certain cities and/or states are beginning the process of re-opening,have re-opened, others are pausing re-opening plans or reinstating lockdowns due to ~~dramatic~~ surges in COVID-19 cases. ~~It is expected that~~States and municipalities have instituted varying plans for in-person instruction at schools, but surging national infection rates and the possibility of a localized outbreak create uncertainty and threaten continued in-person instruction. The effects from the pandemic are likely to persist for months to come. Governments around the world continued to implement economic stimulus measures that are intended to steady businesses and consumers until economic activity and financial markets meaningfully recover. The timing and magnitude of any such recovery, however, remains uncertain.

As a financial services company, factors such as the volatility and strength of equity markets, interest rates, consumer spending, and government debt and spending all affect the business and economic environment and, ultimately, the amount and profitability of our business. During the current economic downturn, the demand for our products and services and our investment returns could be materially and adversely affected. In addition, the growing number of COVID-19 related deaths could have an adverse effect on our insurance business due to increased mortality and, in certain cases, morbidity rates.

To date, COVID-related impacts, including adverse mortality experience, have been manageable and below initial expectations. In response to the current environment, we are adapting our processes to meet client needs. For example, we have modified our underwriting policies to offer a fluid-less, touchless process to help more clients access the protection they need. In addition, we have accelerated our digital adoption programs, leading to improved outcomes for clients, advisors, and the company. With schools closed and an uncertain outlook on reopening, we have developed digital tools and enhanced our remote engagement with our educator clients, which is resulting in improved retention and increases in retirement plan contributions.

Action taken by state insurance departments, including the NYDFS, to require insurers to offer flexible premium payment plans, relax payment dates, waive late fees and penalties in order to avoid canceling or non-renewing polices may negatively affect our results of operations. Additionally, the profitability of many of our retirement, protection and investment products depends in part on the value of the AUM supporting them, which has declined and may continue to decline substantially

depending on any of the foregoing conditions. The ongoing economic impact and the potential for continued volatility and declines in the capital markets could have a significant adverse effect on our business, results of operations and financial condition, particularly if economic activity and financial markets do not recover or recover slowly.

While the COVID-19 pandemic significantly affected the capital markets and economy, we believe the actions we have previously taken help assure that our economic balance sheet is protected from interest rate and equity declines. These actions include redesigning our product portfolio to concentrate on offering less capital intensive products and implementing a hedging strategy that manages and protects against the economic risks associated with our in-force GMxB products. In addition to our hedging strategy, we employ various other methods to manage the risks of our in-force variable annuity products, including asset-liability matching, volatility management tools within the Separate Accounts and an active in-force management program, including buyout offers for certain products. Our General Account was impacted both from declining interest rates, which had a positive effect on fair value, and sharply increased credit spreads, which had a negative impact on fair value. Due to the General Account’s exposure to U.S. government bonds and credit quality of the portfolio, we feel that our balance sheet is well positioned to withstand the extreme volatility in the capital markets.

In light of the unprecedented decline in long-term interest rates in the first quarter of 2020, we updated our long-term GAAP interest rate assumption to grade from current rates over 10-years to the 5-year historical average (currently 2.25%). For additional information, see “—Significant Factors Impacting Our Results—Assumption Updates and Model Changes.”

Operationally, we acted quickly and implemented our risk management and contingency plans as the COVID-19 pandemic evolved. For example, among other things, we implemented travel restrictions, imposed self-quarantine requirements for employees and advisors who were exposed to someone who tested positive or had traveled to certain countries with active COVID-19 outbreaks and, finally, we temporarily closed our corporate locations and advisor branch offices. As a result, most of our ~~employee~~employees and advisors are currently working remotely. The remote working arrangement has detracted from the ability of our advisors to sell our products in the normal course and, as a result, the demand for our products and services has been adversely impacted and ~~going forward~~ could decline further as the pandemic persists. We are also mindful that an extended period of remote work arrangements could strain our business continuity plans, introduce additional operational risk, including cybersecurity and privacy risks, and impair our ability to effectively manage our business.

While the COVID-19 pandemic has negatively impacted our business and financial results, the extent and nature of its full financial impact cannot reasonably be estimated at this time due to the uncertainty as to the severity and duration of the pandemic. For additional information regarding the potential impacts of the COVID-19 pandemic, see “Risk Factors—The novel coronavirus (COVID-19) pandemic has adversely impacted our business and could materially adversely affect our business, results of operation or financial condition in the future.” in our Forms 10-Q for the quarters ended March 31, 2020 and June 30, 2020.

Revenues

Our revenues come from three principal sources:

•fee income derived from our retirement and protection products and our investment management and research services;

•premiums from our traditional life insurance and annuity products; and

•investment income from our General Account investment portfolio.

Our fee income varies directly in relation to the amount of the underlying AV or benefit base of our retirement and protection products and the amount of AUM of our Investment Management and Research business. AV and AUM, each as defined in ~~“—Key~~“Key Operating Measures,” are influenced by changes in economic conditions, primarily equity market returns, as well as net flows. Our premium income is driven by the growth in new policies written and the persistency of our in-force policies, both of which are influenced by a combination of factors, including our efforts to attract and retain customers and market conditions that influence demand for our products. Our investment income is driven by the yield on our General Account investment portfolio and is impacted by the prevailing level of interest rates as we reinvest cash associated with maturing investments and net flows to the portfolio.

Benefits and Other Deductions

Our primary expenses are:

•policyholders’ benefits and interest credited to policyholders’ account balances;

•sales commissions and compensation paid to intermediaries and advisors that distribute our products and services; and

•compensation and benefits provided to our employees and other operating expenses.

Policyholders’ benefits are driven primarily by mortality, customer withdrawals, and benefits which change in response to changes in capital market conditions. In addition, some of our policyholders’ benefits are directly tied to the AV and benefit base of our variable annuity products. Interest credited to policyholders varies in relation to the amount of the underlying AV or benefit base. Sales commissions and compensation paid to intermediaries and advisors vary in relation to premium and fee income generated from these sources, whereas compensation and benefits to our employees are more constant and impacted by market wages and decline with increases in efficiency. Our ability to manage these expenses across various economic cycles and products is critical to the profitability of our company.

Net Income Volatility

We have offered and continue to offer variable annuity products with GMxB features. The future claims exposure on these features is sensitive to movements in the equity markets and interest rates. Accordingly, we have implemented hedging and reinsurance programs designed to mitigate the economic exposure to us from these features due to equity market and interest rate movements. Changes in the values of the derivatives associated with these programs due to equity market and interest rate movements are recognized in the periods in which they occur while corresponding changes in offsetting liabilities not measured at fair value are recognized over time. This results in net income volatility as further described below. See “—Significant Factors Impacting Our Results—Impact of Hedging and GMIB Reinsurance on Results.”

In addition to our dynamic hedging strategy, we have static hedge positions designed to mitigate the adverse impact of changing market conditions on our statutory capital. We believe this program will continue to preserve the economic value of our variable annuity contracts and better protect our target variable annuity asset level. However, these static hedge positions increase the size of our derivative positions and may result in higher net income volatility on a period-over-period basis.

Due to the impacts on our net income of equity market and interest rate movements and other items that are not part of the underlying profitability drivers of our business, we evaluate and manage our business performance using Non-GAAP Operating Earnings, a non-GAAP financial measure that is intended to remove these impacts from our results. See “—Key Operating Measures—Non-GAAP Operating Earnings.”

Significant Factors Impacting Our Results

The following significant factors have impacted, and may in the future impact, our financial condition, results of operations or cash flows.

Impact of Hedging and GMIB Reinsurance on Results

•Variable annuity hedging programs. We use a dynamic hedging program (within this program, generally, we reevaluate our economic exposure at least daily and rebalance our hedge positions accordingly) to mitigate certain risks associated with the GMxB features that are embedded in our liabilities for our variable annuity products. This program utilizes various derivative instruments that are managed in an effort to reduce the economic impact of unfavorable changes in GMxB features’ exposures attributable to movements in the equity markets and interest rates. Although this program is designed to provide a measure of economic protection against the impact of adverse market conditions, it does not qualify for hedge accounting treatment. Accordingly, changes in value of the derivatives will be recognized in the period in which they occur with offsetting changes in reserves partially recognized in the current period, resulting in net income volatility. In addition to our dynamic hedging program, we have a hedging program using static hedge positions (derivative positions intended to be ~~held to maturity~~held-to-maturity with less frequent re-balancing) to protect our statutory capital against stress scenarios. This program in addition to our dynamic hedge program has increased the size of our derivative positions, resulting in an increase in net income volatility. The impacts are most pronounced for variable annuity products in our Individual Retirement segment.

•GMIB reinsurance contracts. Historically, GMIB reinsurance contracts were used to cede to non-affiliated reinsurers a portion of our exposure to variable annuity products that offer a GMIB feature. We account for the GMIB reinsurance

contracts as derivatives and report them at fair value. Gross GMIB reserves are calculated on the basis of assumptions related to projected benefits and related contract charges over the lives of the contracts. Accordingly, our gross reserves will not immediately reflect the offsetting impact on future claims exposure resulting from the same capital market or interest rate fluctuations that cause gains or losses on the fair value of the GMIB reinsurance contracts. Because changes in the fair value of the GMIB reinsurance contracts are recorded in the period in which they occur and a majority of the changes in gross reserves for GMIB are recognized over time, net income will be more volatile.

Effect of Assumption Updates on Operating Results

Our actuaries oversee the valuation of the product liabilities and assets and review the underlying inputs and assumptions. We comprehensively review the actuarial assumptions underlying these valuations and update assumptions during the third quarter of each year. Assumptions are based on a combination of Company experience, industry experience, management actions and expert judgment and reflect our best estimate as of the date of the applicable financial statements. Changes in assumptions can result in a significant change to the carrying value of product liabilities and assets and, consequently, the impact could be material to earnings in the period of the change.

Most of the variable annuity products, variable universal life insurance and universal life insurance products we offer maintain policyholder deposits that are reported as liabilities and classified within either Separate Accounts liabilities or policyholder account balances. Our products and riders also impact liabilities for future policyholder benefits and unearned revenues and assets for DAC and DSI. The valuation of these assets and liabilities (other than deposits) are based on differing accounting methods depending on the product, each of which requires numerous assumptions and considerable judgment. The accounting guidance applied in the valuation of these assets and liabilities includes, but is not limited to, the following: (i) traditional life insurance products for which assumptions are locked in at inception; (ii) universal life insurance and variable life insurance secondary guarantees for which benefit liabilities are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the accumulation period based on total expected assessments; (iii) certain product guarantees for which benefit liabilities are accrued over the life of the contract in proportion to actual and future expected policy assessments; and (iv) certain product guarantees reported as embedded derivatives at fair value.

For further details of our accounting policies and related judgments pertaining to assumption updates, see Note 2 to the Notes to the Company’s consolidated financial statements and ~~“-Summary~~“—Summary of Critical Accounting ~~Estimates -Liability~~Estimates—Liability for Future Policy Benefits” included in the 2019 Form 10-K.

Assumption Updates and Model Changes

We conduct our annual review of our assumptions and models during the third quarter of each year. However, we update our assumptions as needed in the event we become aware of economic conditions or events that could require a change in our assumptions that we believe may have a significant impact to the carrying value of product liabilities and assets and consequently materially impact our earnings in the period of the change.

Impact of Assumption Updates and Model Changes on Income from Continuing Operations before income taxes and Net income (loss)

The table below presents the impact of our actuarial assumption update during the three and nine months ended September 30, 2020 and 2019 to our Income (loss) from continuing operations, before income taxes and Net income (loss).


	Three Months Ended September 30,				Nine Months Ended September 30, (1)
	2020		2019		2020		2019
	(in millions)
Impact of assumption update on Net income (loss):
Variable annuity product features related assumption update	$	(63)	$	(1,467)	$	(1,531)	$	(1,467)
Assumption updates for other business	(11)		76		(1,060)		76
Impact of assumption updates on Income (loss) from continuing operations, before income tax	(74)		(1,391)		(2,591)		(1,391)
Income tax (expense) benefit on assumption update	16		292		544		292
Net income (loss) impact of assumption update	$	(58)	$	(1,099)	$	(2,047)	$	(1,099)

(1) During the first quarter of 2020, we updated interest rate assumption and the impact was a decrease to Net income (loss) of $2.0 billion. See Note 2 for further details on the assumption update.

2020 Assumption Updates

Annual Update

The impact of the economic assumption update in the third quarter of 2020 was a decrease of $74 million to Income (loss) from continuing operations, before income taxes and a decrease to Net income (loss) of $58 million.

The net impact of this assumption update on Income (loss) from continuing operations, before income taxes of $74 million consisted of a decrease in Policy charges and fee income of $23 million, an increase in Policyholders’ benefits of $193 million, an increase in Interest credited to policyholders’ account balances of $5 million, a decrease in net derivative losses of $112 million and a decrease in the Amortization of DAC of $35 million. Third quarter 2020 assumption updates include a pre-tax gain of $445 million attributable to the removal of the credit risk adjustment from our fair value scenario calibration to better align with U.S. valuation practices, offset by updates to our mortality and policyholder behavior assumptions to reflect emerging experience.

First Quarter Update

In the first quarter of 2020, due to the extraordinary economic conditions driven by the COVID-19 pandemic, we updated our interest rate assumption to grade from the current interest rate environment to an ultimate five-year historical average over a 10-year period. As such, the 10-year U.S. Treasury yield grades from the current level to an ultimate 5-year average of 2.25%. We determined that no assumption updates were necessary in the second quarter of 2020.

The low interest rate environment and update to the interest rate assumption caused a loss recognition event for our life interest-sensitive products, as well as to certain run-off business included in Corporate and Other. This loss recognition event caused an acceleration of DAC amortization on our life interest-sensitive products and an increase in the premium deficiency reserve on the run-off business in the first quarter of 2020.

~~Impact of Assumption Updates and Model Changes on Income from Continuing Operations before income taxes and Net income (loss)~~

The table below presents the impact of our actuarial assumption update during the three and six months ended June 30, 2020 to our Income (loss) from continuing operations, before income taxes and Net income (loss):

~~Three Months Ended June 30, 2020~~

~~Six Months Ended June 30, 2020~~

~~(in millions)~~

~~Impact of assumption update on Net income (loss):~~

~~Variable annuity product features related assumption update~~

—

~~(1,468)~~

~~Assumption updates for other business~~

—

~~(988)~~

~~Impact of assumption updates on Income (loss) from continuing operations, before income tax~~

—

~~(2,456)~~

~~Income tax (expense) benefit on assumption update~~

—

~~516~~

~~Net income (loss) impact of assumption update~~

—

~~(1,940)~~

~~2020 Assumption Update~~

The impact of the economic assumption update in the first ~~six months~~quarter of 2020 was a decrease of $2.5 billion to Income (loss) from continuing operations, before income taxes and a decrease to Net income (loss) of ~~$1.9~~$2.0 billion.

The net impact of this assumption update on Income (loss) from continuing operations, before income taxes of $2.5 billion consisted of an increase in ~~Policyholders’ benefits of $1.4 billion, an increase in the Amortization of DAC of $1.1 billion, an increase in~~ Policy charges and fee income of $46 million, ~~and~~an increase in Policyholders’ benefits of $1.4 billion, a decrease in Interest credited to policyholders’ account balances of $6 million and an increase in the Amortization of DAC of $1.1 billion.

2019 Assumption Updates

The impact of assumption updates in the third quarter of 2019 was a decrease of $1.4 billion to Income (loss) from continuing operations, before income taxes and a decrease to Net income (loss) of $1.1 billion. This includes a $1.5 billion unfavorable impact on the reserves for our Variable annuity product features as a result of unfavorable updates to our: (i) interest rate assumptions; and (ii) policyholder behavior, primarily lapse and withdrawal assumptions, further magnified by low interest rates.

The net impact of these assumption updates on Income (loss) from continuing operations, before income taxes of $1.4 billion consisted of an increase in Policy charges and fee income of $3 million, an increase in Policyholders’ benefits of $875 million, a decrease in Interest credited to policyholders’ account balances of $13 million, an increase in Net derivative losses of $578 million and a decrease in the Amortization of DAC of $46 million.

2020 Model Changes

In the first quarter of 2020, we adopted a new economic scenario generator to calculate the fair value of the GMIB reinsurance contract asset and GMxB derivative features liability, eliminating reliance on AXA Group for scenario production. The new economic scenario generator allows for a tighter calibration of U.S. indices, better reflecting our actual portfolio. The net impact of the new economic scenario generator resulted in an increase in Income (loss) from continuing operations, before income taxes of $201 million, and an increase to Net Income (loss) of $159 million for the nine months ended September 30, 2020.

2019 Model Changes

There was no material impact from model changes during the first nine months of 2019 to our Income (loss) from continuing operations, before income taxes or Net income (loss).

Impact of Assumption Updates and Model Changes on Pre-tax Non-GAAP Operating Earnings Adjustments

The table below presents the impact of our actuarial assumption updates during the first nine months of 2020 and 2019 on segment revenues, benefits and other deductions, and Corporate and Other. There was no material impact from model changes during the third quarter of 2020 or 2019 on segment revenues, benefits and other deductions, and Corporate and Other.


	Nine Months Ended September 30, (1)
	2020		2019
	(in million)
Impact of assumption updates by segment:
Individual Retirement	(28)		$	104
Group Retirement	(3)		3
Protection Solutions	4		(4)
Impact of assumption updates on Corporate and Other	(12)		(27)
Total impact on pre-tax Non-GAAP Operating Earnings	$	(39)	$	76

(1) The amounts for the three months and the nine months ended September 30 of each year represented the same amounts. The first quarter 2020 assumption update did not impact Non-GAAP Operating Earnings and we only had our third quarter annual updates for 2019.

2020 Assumption Updates

The impact of our 2020 annual review on Non-GAAP Operating Earnings was unfavorable by $39 million before taking into consideration the tax impacts or $31 million after tax.For the Individual Retirement segment, the impacts primarily reflect higher surrenders at the end of the surrender charge period on Retirement Cornerstone policies. The impact of our 2020 annual review was not material for our Group Retirement and Protection Solutions segments.

The net impact of assumption changes on Non-GAAP Operating Earnings in the third quarter of 2020 decreased Policy charges and fee income by $23 million, increased Policyholder’ benefits by $46 million, increased Interest credited to policyholders’ account balances by $5 million and decreased Amortization of DAC by $35 million. Non-GAAP Operating Earnings excludes items related to Variable annuity product features and impact of COVID 19, such as changes in the fair value of the embedded derivatives associated with the GMIBNLG liability and the effect of benefit ratio unlock adjustments.

2019 Assumption Updates

The impact of our 2019 annual review on Non-GAAP Operating Earnings was favorable by $60 million, or $76 million before taking into consideration the tax impacts.

•For the Individual Retirement segment, the impacts primarily reflect favorable updates to Amortization of DAC from lower lapse assumptions.

•For the Group Retirement segment, the impacts primarily reflect a favorable update to maintenance expenses.

•For the Protection Solutions segment, the results primarily reflect unfavorable updates to mortality and economic assumptions, partially offset by a favorable update to maintenance expenses.

Non-GAAP Operating Earnings excludes items related to Variable annuity product features, such as changes in the fair value of the embedded derivatives associated with the GMIBNLG liability and the effect of benefit ratio unlock adjustments. The net impact of assumption changes on Non-GAAP Operating Earnings in the third quarter of 2019 increased Policy charges and fee income by $3 million, decreased Policyholder’ benefits by $15 million, decreased Interest credited to policyholders’ account balances by $13 million and decreased Amortization of DAC by $46 million.

Impact of the First Quarter 2020 Assumption Update, and COVID-19 Impacts on Pre-tax Non-GAAP Operating Earnings Adjustments

The unprecedented and rapid spread of COVID-19 and the related restrictions and social distancing measures implemented throughout the world have caused severe, lasting turmoil in the financial markets during the first six months of 2020.

The Company’s accounting policy governing its Non-GAAP Operating Earnings measure permits adjustments to Non-GAAP Operating Earnings if certain criteria are met, which include if the proposed adjustment relates to a non-recurring event or transaction. Management concluded that all impacts on the Company from the COVID-19 pandemic and its effects on the economy meet the indicators of a non-recurring event. Therefore, management has determined that the items set forth in the table below should be included as adjustments to the Non-GAAP Operating Earnings measure so that investors can more clearly see the delineation between the operating results of the Company’s core operations and the impact of the items specific to the current COVID-19 pandemic crisis. ~~Management expects to continue to treat these items as adjustments to Non-GAAP Operating Earnings in the future.~~

The table below presents the impact of COVID-19 related impacts on Income (loss) from continuing operations, before income taxes which all occurred during the ~~three and~~first six months ~~ended June 30,~~of 2020 by segment and Corporate and Other, and the COVID-19-related adjustments included in the reconciliation of Net Income (loss) attributable to Holdings to Non-GAAP Operating Earnings:

Three Months Ended June 30, 2020
COVID-19 Impacts
Interest Rate Assumption Update Impacts other than Interest Rate Assumption
Update (1) Total
(in millions)
Net income (loss) from continuing operations, before income taxes by Segment and Corporate and Other:
Individual Retirement $ — $ 1 $ 1
Group Retirement — (3) (3)
Protection Solutions — (60) (60)
Corporate and Other — 10 10
Net income (loss) from continuing operations, before income taxes $ — $ (52) $ (52)


		Three Months Ended June 30, 2020
		COVID-19 Impacts											Nine Months Ended September 30, 2020
		Interest Rate Assumption Update		Impacts other than Interest Rate Assumption Update (1)		Total			COVID-19 Impacts
		(in millions)											Interest Rate Assumption Update		Impacts other than Interest Rate Assumption Update (1)	Total
									(in millions)
Net income (loss) from continuing operations, before income taxes by Segment and Corporate and Other:								Net income (loss) from continuing operations, before income taxes by Segment and Corporate and Other:
Individual Retirement								Individual Retirement	(1,417)		$	(43)	$	(1,460)
Group Retirement								Group Retirement	(51)		—		(51)
Protection Solutions								Protection Solutions	(1,016)		(75)		(1,091)
Corporate and Other								Corporate and Other	(33)		(3)		(36)
Net income (loss) from continuing operations, before income taxes								Net income (loss) from continuing operations, before income taxes	$	(2,517)	$	(121)	$	(2,638)

COVID-19-related adjustments included in Reconciliation of Net income (loss) attributable to Holdings to Non-GAAP Operating Earnings:	COVID-19-related adjustments included in Reconciliation of Net income (loss) attributable to Holdings to Non-GAAP Operating Earnings:							COVID-19-related adjustments included in Reconciliation of Net income (loss) attributable to Holdings to Non-GAAP Operating Earnings:
Variable annuities product features	Variable annuities product features	—		—		—		Variable annuities product features	(1,468)		(35)		(1,503)
Other adjustments	Other adjustments	—		(52)		(52)		Other adjustments	(1,049)		(86)		(1,135)
Net income (loss) from continuing operations, before income taxes	Net income (loss) from continuing operations, before income taxes	$	—	$	(52)	$	(52)	Net income (loss) from continuing operations, before income taxes	$	(2,517)	$	(121)	$	(2,638)

_______________

(1) Includes adjustments to Non-GAAP Operating Earnings primarily due to non-variable annuity hedging impacts resulting from unprecedented volatility in equity markets and accelerated amortization of DAC due to ~~continued~~ loss recognition in the first half of 2020 resulting from ~~first quarter 2020 interest rate assumption update.~~

Six Months Ended June 30, 2020
COVID-19 Impacts
Interest Rate Assumption Update Impacts other than Interest Rate Assumption
Update (1) Total
(in millions)
Net income (loss) from continuing operations, before income taxes by Segment and Corporate and Other:
Individual Retirement (1,417) $ (43) $ (1,460)
Group Retirement (51) — (51)
Protection Solutions (955) (92) (1,047)
Corporate and Other (33) (3) (36)
Net income (loss) from continuing operations, before income taxes $ (2,456) $ (138) $ (2,594)

COVID-19-related adjustments included in Reconciliation of Net income (loss) attributable to Holdings to Non-GAAP Operating Earnings:
Variable annuities product features (1,468) (35) (1,503)
Other adjustments (988) (103) (1,091)
Net income (loss) from continuing operations, before income taxes $ (2,456) $ (138) $ (2,594)

~~_______________~~

(1) Includes adjustments to Non-GAAP Operating Earnings primarily due to non-variable annuity hedging impacts resulting from unprecedented volatility in equity markets and accelerated amortization of DAC due to continued loss recognition resulting fromthe first quarter 2020 interest rate assumption update.

Adjustments related to the Individual Retirement and Group Retirement segments are primarily included in the “Variable annuities product features” in the reconciliation of Net income (loss) attributable to Holdings to Non-GAAP Operating Earnings. All other adjustments are included in “Other”. This impact has been more than offset by hedging gains.

~~2020 Model Changes~~

Macroeconomic and Industry Trends

Our business and consolidated results of operations are significantly affected by economic conditions and consumer confidence, conditions in the global capital markets and the interest rate environment.

Financial and Economic Environment

~~During~~In the ~~second quarter,~~face of the ~~COVID-19~~ongoing pandemic, financial markets continued to ~~adversely affect capital markets. As the pandemic evolved~~experience significant volatility and unemployment levels remained high during the third quarter. Although the financial market recovered most of the first quarter ~~equity markets experienced significant~~losses in the months since, the prospect of continued volatility ~~interest rates~~remains, especially given the uncertainty surrounding continued ~~to drop to historical lows,~~civil unrest across the U.S. centered around racial inequality, the presidential and ~~many state~~congressional election and ~~local governments maintained or instituted orders for non-essential businesses to close and residents to shelter in place. This resulted in an unprecedented slow-down in~~the continued economic ~~activity, a related dramatic increase in unemployment and fears~~effects of ~~a global recession.~~the virus. Stressed conditions, volatility and disruptions in the capital markets, particular markets, or financial asset classes can have an adverse effect on us, in part because we have a large investment portfolio and our insurance liabilities and derivatives are sensitive to changing market factors. An increase in market volatility could continue to affect our business, including through effects on the yields we earn on invested assets, changes in required reserves and capital and fluctuations in the value of our AUM, AV or AUA from which we derive our fee income. These effects could be exacerbated by uncertainty about future fiscal policy, changes in tax policy, the scope of potential deregulation and levels of global trade.

The potential for increased volatility, coupled with prevailing interest rates continuing to fall and/or remaining below historical averages, could pressure sales and reduce demand for our products as consumers consider purchasing alternative products to meet their objectives. In addition, this environment could make it difficult to consistently develop products that are attractive to customers. Financial performance can be adversely affected by market volatility and equity market declines as fees driven by AV and AUM fluctuate, hedging costs increase and revenues decline due to reduced sales and increased outflows.

We monitor the behavior of our customers and other factors, including mortality rates, morbidity rates, annuitization rates and lapse and surrender rates, which change in response to changes in capital market conditions, to ensure that our products and solutions remain attractive and profitable. For additional information on our sensitivity to interest rates and capital market prices, see “Quantitative and Qualitative Disclosures About Market Risk.”

Interest Rate Environment

We believe the interest rate environment will continue to impact our business and financial performance in the future for several reasons, including the following:

•Certain of our variable annuity and life insurance products pay guaranteed minimum interest crediting rates. We are required to pay these guaranteed minimum rates even if earnings on our investment portfolio decline, with the resulting investment margin compression negatively impacting earnings. In addition, we expect more policyholders to hold policies with comparatively high guaranteed rates longer (lower lapse rates) in a low interest rate environment. Conversely, a rise in average yield on our investment portfolio should positively impact earnings. Similarly, we expect policyholders would be less likely to hold policies with existing guaranteed rates (higher lapse rates) as interest rates rise.

•A prolonged low interest rate environment also may subject us to increased hedging costs or an increase in the amount of statutory reserves that our insurance subsidiaries are required to hold for GMxB features, lowering their statutory surplus, which would adversely affect their ability to pay dividends to us. In addition, it may also increase the perceived value of GMxB features to our policyholders, which in turn may lead to a higher rate of annuitization and higher persistency of those products over time. Finally, low interest rates may continue to cause an acceleration of DAC amortization or reserve increase due to loss recognition for interest sensitive products, primarily for our Protection Solutions segment.

For a discussion on derivatives we used to hedge interest rates, see Note 4 of the Notes to the Consolidated Financial Statements in this Form 10-Q.

Regulatory Developments

Our life insurance subsidiaries are regulated primarily at the state level, with some policies and products also subject to federal regulation. In addition, Holdings and its insurance subsidiaries are subject to regulation under the insurance holding company laws of various U.S. jurisdictions. Furthermore, on an ongoing basis, regulators refine capital requirements and introduce new reserving standards. See “Business—Regulation” and “Risk Factors—Legal and Regulatory Risks” in the 2019

Form 10-K. Regulations recently adopted or currently under review can potentially impact our statutory reserve, capital requirements and profitability of the industry and result in increased regulation and oversight for the industry.

•COVID-19 Impact. In March 2020, in connection with the COVID-19 pandemic, many U.S. state insurance regulators began issuing bulletins, directives and guidance encouraging, requesting or directing licensed life insurance companies to implement life insurance policy measures such as: providing grace periods to policyholders for the payment of insurance premiums and forbearing on the cancellation or non-renewal of life insurance policies due to non-payment of premium. In addition, some states’ governors have issued emergency orders and state insurance commissioners have promulgated emergency regulations requiring such actions. For example, the NYDFS, which is the domiciliary regulator of our principal insurance subsidiary, Equitable Financial, promulgated emergency regulations requiring insurance company actions with respect to many lines of insurance. Among other requirements, these emergency measures temporarily required New York licensed life insurers to extend the grace period for the payment of premiums and fees to 90 days for any life policyholder or group certificate holder facing financial hardship as a result of the COVID-19 pandemic. In addition, licensed life insurers were required to provide 90 days to exercise rights or benefits for a policyholder who was unable timely to exercise such rights as a result of the COVID-19 pandemic. New York licensed insurers were prohibited from imposing any late fees or reporting such policyholder to a credit reporting agency or debt collection agency in the event of a policyholder’s failure to timely pay premium and were required to permit policyholders who did not make a premium payment due to financial hardship as a result of the COVID-19 pandemic to pay the premium over a 12-month period. These measures expired on July 6, 2020, however we cannot predict what future orders or regulations, if any, will be implemented as a result of the ongoing COVID-19 pandemic.

•Variable Annuity Capital Standards. In 2015, the NAIC Financial Condition (E) Committee established a working group to study and address, as appropriate, regulatory issues resulting from variable annuity captive reinsurance transactions, including reforms that would improve the current statutory reserve and RBC framework for insurance companies that sell variable annuity products. In August 2018, the NAIC adopted the new framework developed and proposed by this working group. Following its referral to various NAIC committees to develop the full implementation details, the new framework became

operational in January 2020. Among other changes, the new framework includes new prescriptions for reflecting hedge effectiveness, investment returns, interest rates, mortality and policyholder behavior in calculating statutory reserves and RBC. ~~Once effective, it is expected to~~The new framework will materially change the level of variable annuity reserves and RBC requirements as well as their sensitivity to capital markets including interest rate, equity markets, volatility and credit spreads. Overall, we believe the NAIC reform has moved variable annuity capital standards towards an economic framework and is consistent with how we manage our business. The Company adopted the NAIC reserve and capital framework for the year ended December 31, 2019.

•On February 26, 2020, the NYDFS adopted amendments to Regulation 213 that differ from the NAIC variable annuity reserve and capital framework. These amendments will not materially affect the Company’s GAAP financial condition, results of operations or stockholders’ equity. However, Regulation 213, as amended, absent management action, will require our principal insurance subsidiary, Equitable Financial, to carry statutory basis reserves for its variable annuity contract obligations equal to the greater of those required under (i) the NAIC standard or (ii) a revised version of the NYDFS requirement in effect prior to the adoption of the amendment for contracts issued prior to January 1, 2020, and for policies issued after that date, a new standard that we believe is more conservative than the NAIC standard. Absent management action, we believe that ~~the adoption of~~ the amendments will materially increase the statutory basis reserves that Equitable Financial will be required to carry and, will materially and adversely affect the capacity of Equitable Financial to distribute dividends to the Company beyond 2020. As a holding company, we rely on dividends and other payments from our subsidiaries and, accordingly, any material limitation on Equitable Financial’s dividend capacity could materially affect our ability to return capital to stockholders through dividends and stock repurchases. The Company is considering management actions to mitigate the impact of Regulation 213. These actions could include seeking further amendment of Regulation 213 or exemptive relief therefrom to make the regulation’s application to Equitable Financial more consistent with the NAIC reserve and capital framework, as well as changing our underwriting practices to emphasize issuing variable annuity products out of subsidiaries which are not domiciled in New York, increasing the use of reinsurance and other corporate transactions intended to reduce the impact of the regulation. There can be no assurance that any management action individually or collectively will fully mitigate the impact of Regulation 213. Other state insurance regulators may also propose and adopt standards different from the NAIC framework.

•DOL Fiduciary Rule and “Best Interest” PTEs. In the wake of the March 2018 Fifth Circuit federal appeals court decision to vacate the DOL Fiduciary Rule, the DOL announced that it planned to issue revised fiduciary investment advice regulations. In June 2020, the DOL proposed a “best interest” prohibited transaction exemption (“PTE”) for investment advice fiduciaries under ERISA. The proposal restores the five-part test for determining fiduciary status that was in effect

prior to the DOL Fiduciary Rule, although the scope of the PTE now extends to rollover transactions if they constitute “investment advice” under the five-part test. If fiduciary status is triggered, the PTE prescribes a set of impartial conduct standards and disclosure obligations that are intended to be consistent with the SEC’s Regulation Best Interest. We are currently assessing the proposed PTE to determine the impact it may have on our business.

•Other “Best Interest” Standards of Conduct. Following the decision to vacate the DOL Fiduciary Rule in 2018, the NAIC adopted, and state regulators either have adopted or are currently considering whether to apply, an impartial conduct or fiduciary standard to recommendations made in connection with certain annuities and, in one case, to life insurance policies. For example, the NAIC has amended its Suitability in Annuity Transactions Model Regulation to apply a best interest of the consumer standard to insurance producers’ annuity recommendations and require that insurers supervise such recommendations. To date, the amended regulation has been adopted in Iowa and Arizona. In July 2018, the NYDFS issued a final version of Regulation 187 that adopts a “best interest” standard for recommendations regarding the sale of life insurance and annuity products in New York. Regulation 187 took effect on August 1, 2019 with respect to annuity sales and took effect on February 1, 2020 for life insurance ~~sales and is applicable to sales of life insurance and annuity products in New York.~~sales. We have developed our compliance framework for Regulation 187 with respect to annuity sales as well as our life insurance business. In addition, state regulators and legislatures in Nevada, New Jersey and Maryland have proposed measures that would make broker-dealers, sales agents, and investment advisers and their representatives subject to a fiduciary duty when providing products and services to customers, including pension plans and IRAs. Massachusetts has adopted such a regulation applying a fiduciary duty standard to broker-dealers and their agents, but it does not apply to insurance product sales, including variable annuities. Beyond the New York regulation, the likelihood of enactment of any such state-based regulation is uncertain at this time, but if implemented, these regulations could have adverse effects on our business and consolidated results of operations.

•Regulation Best Interest. In June 2019, the SEC released a set of rules that, among other things, enhance the existing standard of conduct for broker-dealers to require them to act in the best interest of their retail customers (“Regulation Best Interest”); clarify the nature of the fiduciary obligations owed by registered investment advisers to their clients; impose new disclosure requirements aimed at ensuring investors understand the nature of their relationship with their investment professionals; and restrict certain broker-dealers and their financial professionals from using the terms “adviser” or “advisor”~~. The~~ unless they act in an investment advisory capacity. These rules became effective ~~date for compliance with these rules was~~on June 30, 2020. Investment advisers to retail clients as well as broker-dealers serving retail customers are now required to deliver to retail clients and customers and file with

the SEC the new Form CRS, which provides disclosures about its standard of conduct and conflicts of interest. Broker-dealers must also provide more detailed disclosures to retail clients in connection with securities transactions. The intent of these rules is to impose on broker-dealers an enhanced duty of care to their natural person customers similar to that which applies to investment advisers under existing law and to require both broker-dealers and investment advisers to provide enhanced disclosure regarding the nature of their services to retail clients and customers and associated conflicts of interest. We have developed systems and processes and put in place policies and procedures to ensure that we are in compliance with Regulation Best Interest. Meanwhile, ~~two lawsuits, one by seven states~~the SEC’s examination staff and the District of Columbia and the other by private firms, which were filed in September 2019 and sought to vacate Regulation Best Interest, were dismissed by the U.S. Second Circuit Court of Appeals in June 2020, and the plaintiffs have not yet announced whether they intend appeal to the U.S. Supreme Court. In addition, FINRA ~~is also currently~~are focusing on examining compliance efforts by broker-dealers with Regulation Best Interest.

•Derivatives Regulation. The amount of collateral we are required to pledge and the expenses we incur under our derivatives transactions are expected to increase as a result of the requirement to pledge initial margin for non-centrally cleared derivative transactions (“OTC” derivatives) entered into after the phase-in period, which ~~will~~is expected to become applicable to us in September 2021 as a result of adoption by the Office of the Comptroller of the Currency, the Federal Reserve Board, the FDIC, the Farm Credit Administration, and the Federal Housing Finance Agency and the Commodity Futures Trading Commission of final margin requirements for OTC ~~derivatives.~~derivatives, absent further delays. Also, the SEC has finalized and adopted the final set of rules related to security-based swaps, which triggers the compliance date for security-based swap entities registration and compliance with previously adopted rules regarding margin, capital, segregation, recordkeeping and reporting and business conduct for security-based swaps. The rules became effective on April 6, 2020. The compliance date for registration of (i) security-based swap dealers that incur a registration obligation as a result of meeting certain thresholds to be set by the SEC on August 6, 2021 will be November 1, 2021 and (ii) major security-based swap participants that incur a registration obligation as a result of security-based swap activities in their quarter ending September 30, 2021 will be December 1, 2021. We continue to monitor developments and are evaluating the potential effect these rules might have on our business.

Impact of the SECURE Act

On December 20, 2019, President Trump signed into law the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”). The SECURE Act contains a number of provisions that affect the administration and operation of defined contribution plans such as 401(k) and 403(b) plans and IRAs, including provisions that encourage additional retirement savings and lifetime income options, promote the adoption of retirement plans by small employers, provide lifetime income portability, and accelerate the distribution of retirement benefits of deceased retirees. Many provisions of the SECURE Act become effective for plan years beginning after December 31, 2019. At this time, we ~~cannot predict the impact~~do not expect material impacts to our business from the SECURE ~~Act will have on our business, financial condition or results of operations.~~Act.

Impact of the CARES Act

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. Several tax provisions were included as part of a broad economic relief package. These include the temporary allowance of Net Operating Loss carrybacks and the acceleration of Alternative Minimum Tax (“AMT”) credit refunds. The Company is assessing the economic and financial statement impact of these provisions.

Impact of the Tax Cut and Jobs Act

In December 2017, Tax Cut and Jobs Act (“TCJA”) was signed into law. The TCJA reduced the federal corporate income tax rate to 21% and repealed the corporate AMT while keeping existing AMT credits. It also contained measures affecting our insurance companies, including changes to the DRD, insurance reserves and tax DAC, and measures affecting our international operations. As a result of the TCJA, our Net Income and Non-GAAP Operating Earnings has improved and the tax liability on the earnings of our foreign subsidiaries has decreased.

In August 2018, the NAIC adopted changes to the RBC calculation, including the C-3 Phase II Total Asset Requirement for variable annuities, to reflect the 21% corporate income tax rate in RBC, which resulted in a reduction to our Combined RBC Ratio.

Overall, the TCJA had a net positive economic impact on us, and we continue to monitor regulations related to this reform.

Separation Costs

In connection with our separation from AXA, we have incurred and expect to continue to incur one-time and recurring expenses. These expenses primarily relate to information technology, compliance, internal audit, finance, risk management, procurement, client service, human resources, rebranding and other support services. The process of replicating and replacing functions, systems and infrastructure provided by AXA or certain of its affiliates in order to operate on a stand-alone basis is currently underway. These expenses, any recurring expenses, including under the Transitional Services Agreement, and any additional one-time expenses we may incur may be material. See “Risk Factors” in the 2019 Form 10-K for additional information.

We estimate that the aggregate amount of the one-time expenses described above will be approximately $700 million. Through ~~June~~September 30, 2020, a total of ~~$603~~$640 million has been incurred, of which $37 million, $39 million, ~~$58 million, $71~~$108 million and ~~$82~~$121 million was incurred in the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

Productivity Strategies

Retirement and Protection Businesses

We continue to build upon our productivity improvements through which we delivered more than $350 million in efficiency improvements from 2012 through 2017. Our productivity strategy includes several initiatives, including relocating some of our real estate footprint away from the New York metropolitan area, replacing or updating less efficient legacy technology infrastructure and expanding existing outsourcing arrangements, which we believe will reduce costs and improve productivity.

We anticipate that the savings from these initiatives will offset any incremental ongoing expenses that we incur as a standalone company, and we expect these initiatives to improve our operating ~~leverage, increasing~~leverage. In the third quarter of 2020 we achieved our ~~Non-GAAP Operating Earnings by approximately~~run rate productivity expense target of $75 million pre-tax per annum bynet of reinvestment in the ~~end of 2020 since~~business announced at the ~~date~~time of our IPO.

Investment Management and Research Business

AB has announced that it will establish its corporate headquarters in and relocate approximately 1,250 jobs located in the New York metro area to Nashville, Tennessee. Beginning in 2025, AB estimates ongoing annual expense savings of approximately $75 million to $80 million which will result from a combination of occupancy and compensation-related savings.

Key Operating Measures

In addition to our results presented in accordance with U.S. GAAP, we report Non-GAAP Operating Earnings, Non-GAAP Operating ROE, Non-GAAP Operating ROC by segment for our Individual Retirement, Group Retirement and Protection Solutions segments, and Non-GAAP Operating Earnings per share, each of which is a measure that is not determined in accordance with U.S. GAAP. Management principally uses these non-GAAP financial measures in evaluating performance because they present a clearer picture of our operating performance and they allow management to allocate resources. Similarly, management believes that the use of these Non-GAAP financial measures, together with relevant U.S. GAAP measures, provide investors with a better understanding of our results of operations and the underlying profitability drivers and trends of our business. These non-GAAP financial measures are intended to remove from our results of operations the impact of market changes (where there is mismatch in the valuation of assets and liabilities) as well as certain other expenses which are not part of our underlying profitability drivers or likely to re-occur in the foreseeable future, as such items fluctuate from period-to-period in a manner inconsistent with these drivers. These measures should be considered supplementary to our results that are presented in accordance with U.S. GAAP and should not be viewed as a substitute for the U.S. GAAP measures. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate such measures. Consequently, our non-GAAP financial measures may not be comparable to similar measures used by other companies.

We also discuss certain operating measures, including AUM, AUA, AV, Protection Solutions Reserves and certain other operating measures, which management believes provide useful information about our businesses and the operational factors underlying our financial performance.

Non-GAAP Operating Earnings

Non-GAAP Operating Earnings is an after-tax non-GAAP financial measure used to evaluate our financial performance on a consolidated basis that is determined by making certain adjustments to our consolidated after-tax net income attributable to Holdings. The most significant of such adjustments relates to our derivative positions, which protect economic value and statutory capital, and are more sensitive to changes in market conditions than the variable annuity product liabilities as valued under U.S. GAAP. This is a large source of volatility in net income.

Non-GAAP Operating Earnings equals our consolidated after-tax net income attributable to Holdings adjusted to eliminate the impact of the following items:

•Investment (gains) losses, which includes credit loss impairments of securities/investments, sales or disposals of securities/investments, realized capital gains/losses and valuation allowances;

•Income tax expense (benefit) related to the above items and non-recurring tax items, which includes the effect of uncertain tax positions for a given audit period.

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

We use the prevailing corporate federal income tax rate of 21% while taking into account any non-recurring differences for events recognized differently in our financial statements and federal income tax returns as well as partnership income taxed at lower rates when reconciling Net income (loss) attributable to Holdings to Non-GAAP Operating Earnings.

The table below presents a reconciliation of Net income (loss) attributable to Holdings to Non-GAAP Operating Earnings for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020		2019
		(in millions)															(in millions)
Net income (loss) attributable to Holdings	Net income (loss) attributable to Holdings	$	(4,028)	$	363	$	1,382	$	(412)	Net income (loss) attributable to Holdings	$	(779)	$	(374)	$	590	$	(818)
Adjustments related to:	Adjustments related to:									Adjustments related to:
Variable annuity product features (1)	Variable annuity product features (1)	5,727		200		(1,134)		1,740		Variable annuity product features (1)	1,620		1,431		473		3,167
Investment (gains) losses	Investment (gains) losses	(169)		12		(173)		23		Investment (gains) losses	(17)		(199)		(190)		(176)
Net actuarial (gains) losses related to pension and other postretirement benefit obligations	Net actuarial (gains) losses related to pension and other postretirement benefit obligations	28		24		55		48		Net actuarial (gains) losses related to pension and other postretirement benefit obligations	31		24		86		72
Other adjustments (2) (3)	Other adjustments (2) (3)	91		89		725		129		Other adjustments (2) (3)	66		73		836		200
Income tax expense (benefit) related to above adjustments (4)	Income tax expense (benefit) related to above adjustments (4)	(1,192)		(71)		111		(408)		Income tax expense (benefit) related to above adjustments (4)	(357)		(278)		(253)		(685)
Non-recurring tax items	Non-recurring tax items	2		(58)		8		(52)		Non-recurring tax items	4		(4)		12		(56)
Non-GAAP Operating Earnings	Non-GAAP Operating Earnings	$	459	$	559	$	974	$	1,068	Non-GAAP Operating Earnings	$	568	$	673	$	1,554	$	1,704

______________

(2)Includes COVID-19 impact on Other adjustments due to a first quarter 2020 assumption update of $1.0 billion ~~for the six months ended June 30, 2020~~ and other COVID-19 related impacts of ~~$52 million and $103~~$86 million for the ~~three and six~~nine months ended ~~June~~September 30, 2020.

(3)Includes separation costs of $37 million, $39 million, ~~$58 million, $71~~$108 million and ~~$82~~$121 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

(4)Includes income taxes of ~~$(11) million and $(545)~~$(554) million for the above related COVID-19 items for the ~~three and six~~nine months ended ~~June~~September 30, 2020.

Non-GAAP Operating ROE and Non-GAAP Operating ROC by Segment

We report Non-GAAP Operating ROE and Non-GAAP Operating ROC by segment for our Individual Retirement, Group Retirement and Protection Solutions segments, each of which is a Non-GAAP financial measure used to evaluate our profitability on a consolidated basis and by segment, respectively.

We calculate Non-GAAP Operating ROE by dividing Non-GAAP Operating Earnings for the previous twelve calendar months by consolidated average equity attributable to Holdings’ common shareholders, excluding Accumulated Other Comprehensive Income (“AOCI”). We calculate Non-GAAP Operating ROC by segment by dividing Operating earnings (loss) on a segment basis for the previous twelve calendar months by average capital on a segment basis, excluding AOCI, as described below. AOCI fluctuates period-to-period in a manner inconsistent with our underlying profitability drivers as the majority of such fluctuation is related to the market volatility of the unrealized gains and losses associated with our available-for-sale (“AFS”) securities.

Therefore, we believe excluding AOCI is more effective for analyzing the trends of our operations. We do not calculate Non-GAAP Operating ROC by segment for our Investment Management and Research segment because we do not manage that segment from a return of capital perspective. Instead, we use metrics more directly applicable to an asset management business, such as AUM, to evaluate and manage that segment.

For Non-GAAP Operating ROC by segment, capital components pertaining directly to specific segments such as DAC along with targeted capital are directly attributed to these segments. Targeted capital for each segment is established using assumptions supporting statutory capital adequacy levels, reflecting the newly adopted NAIC RBC framework the company as of year end 2019. To enhance the ability to analyze these measures across periods, interim periods are annualized. Non-GAAP Operating ROE and Non-GAAP Operating ROC by segment should not be used as substitutes for ROE.

The following table presents Return on Average equity attributable to Holdings’ common shareholders, excluding AOCI and Non-GAAP Operating ROE for the trailing twelve months ended ~~June~~September 30, 2020.


	Trailing Twelve Months Ended ~~June~~September 30, 2020
	(in millions)
Net income (loss) available to Holdings’ common shareholders	$	38 (390)
Average equity attributable to Holdings’ common shareholders, excluding AOCI	$	~~13,825~~13,348
Return on average equity attributable to Holdings’ common shareholders, excluding AOCI	~~0.3~~ (2.9)		%

Non-GAAP Operating Earnings available to Holdings’ common shareholders	$	~~2,280~~2,173
Average equity attributable to Holdings’ common shareholders, excluding AOCI	$	~~13,825~~13,348
Non-GAAP Operating ROE	~~16.5~~16.3		%

The following table presents Non-GAAP Operating ROC by segment for our Individual Retirement, Group Retirement and Protection Solutions segments for the trailing twelve months ended ~~June~~September 30, 2020.


		Trailing Twelve Months Ended June 30, 2020																Trailing Twelve Months Ended September 30, 2020
		Individual Retirement			Group Retirement			Protection Solutions				Individual Retirement			Group Retirement			Protection Solutions
		(in millions)																(in millions)
Operating earnings	Operating earnings	$	1,570		$	410		$	267		Operating earnings	$	1,486		$	434		$	217
Average capital (1)	Average capital (1)	$	7,008		$	1,204		$	2,654		Average capital (1)	$	6,682		$	1,136		$	2,922
Non-GAAP Operating ROC	Non-GAAP Operating ROC	22.4		%	34.1		%	10.0		%	Non-GAAP Operating ROC	22.2		%	38.3		%	7.4		%

______________

(1)For average capital amounts by segment, capital components pertaining directly to specific segments such as DAC along with targeted capital are directly attributed to these segments. Targeted capital for each segment is established using assumptions supporting statutory capital adequacy levels, reflecting the newly adopted NAIC RBC framework the company as of year end 2019.

Non-GAAP Operating Earnings Per Common Share

Non-GAAP Operating Earnings per common share (“Non-GAAP Operating EPS”) is calculated by dividing Non-GAAP Operating Earnings by diluted common shares outstanding. The following table sets forth Non-GAAP Operating EPS for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019.

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(per share amounts)
Net income (loss) attributable to Holdings (1) $ (8.94) $ 0.74 $ 3.02 $ (0.82)
Less: Preferred stock dividends 0.02 — 0.05 —
Net income (loss) available to Holdings’ common shareholders (8.96) 0.74 2.97 (0.82)
Adjustments related to:
Variable annuity product features (2) 12.71 0.41 (2.48) 3.44
Investment (gains) losses (0.38) 0.02 (0.38) 0.05
Net actuarial (gains) losses related to pension and other postretirement benefit obligations 0.06 0.05 0.12 0.10
Other adjustments (3) (4) 0.22 0.18 1.59 0.25
Income tax expense (benefit) related to above adjustments (5) (2.65) (0.14) 0.24 (0.81)
Non-recurring tax items — (0.12) 0.02 (0.10)
Non-GAAP Operating Earnings per common share $ 1.00 $ 1.14 $ 2.08 $ 2.11


	Three Months Ended September 30,			Nine Months Ended September 30,
		2020		2019		2020		2019
		(per share amounts)
Net income (loss) attributable to Holdings (1)		$	(1.74)	$	(0.76)	$	1.30	$	(1.64)
Less: Preferred stock dividends		0.03		—		0.08		—
Net income (loss) available to Holdings’ common shareholders		(1.77)		(0.76)		1.22		(1.64)
Adjustments related to:
Variable annuity product features (2)		3.62		2.92		1.04		6.34
Investment (gains) losses		(0.04)		(0.41)		(0.42)		(0.35)
Net actuarial (gains) losses related to pension and other postretirement benefit obligations		0.07		0.05		0.19		0.14
Other adjustments (3) (4)		0.15		0.15		1.85		0.40
Income tax expense (benefit) related to above adjustments (5)		(0.80)		(0.57)		(0.56)		(1.37)
Non-recurring tax items		0.01		(0.01)		0.03		(0.11)
Non-GAAP Operating Earnings per common share		$	1.24	$	1.37	$	3.35	$	3.41

______________

(1)Due to reporting a net loss for the three months ended ~~June~~September 30, 2020 and ~~six~~three and nine months ended ~~June~~September 30, 2019, basic shares was used in the diluted earnings per common share calculation as the use of diluted shares would have resulted in a lower loss per share.

(2)Includes COVID-19 impact on Variable annuity product features due to a first quarter 2020 assumption update of ~~$3.21~~$3.23 and other COVID-19 related impacts of $0.08 for the ~~six~~nine months ended ~~June~~September 30, 2020.

(3)Includes COVID-19 impact on Other adjustments due to a first quarter 2020 assumption update of ~~$2.16 for the six months ended June 30, 2020~~$2.31 and other COVID-19 related impacts of ~~$0.12 and $0.23~~$0.19 for the ~~three and six~~nine months ended ~~June~~September 30, 2020.

(4)Includes separation costs of ~~$0.09, $0.12, $0.16~~$0.08, $0.08, $0.24 and ~~$0.16~~$0.24 for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

(5)Includes income taxes of ~~$(0.02) and $(1.19)~~$(1.22) for the above related COVID-19 items for the ~~three and six~~nine months ended ~~June~~September 30, 2020.

Assets Under Management

AUM means investment assets that are managed by one of our subsidiaries and includes: (i) assets managed by AB; (ii) the assets in our General Account investment portfolio; and (iii) the Separate Accounts assets of our Individual Retirement, Group Retirement and Protection Solutions businesses. Total AUM reflects exclusions between segments to avoid double counting.

Assets Under Administration

AUA includes non-insurance client assets that are invested in our savings and investment products or serviced by our Equitable Advisors platform. We provide administrative services for these assets and generally record the revenues received as distribution fees.

Account Value

AV generally equals the aggregate policy account value of our retirement products. General Account AV refers to account balances in investment options that are backed by the General Account while Separate Accounts AV refers to Separate Accounts investment assets.

Protection Solutions Reserves

Protection Solutions Reserves equals the aggregate value of Policyholders’ account balances and Future policy benefits for policies in our Protection Solutions segment.

Consolidated Results of Operations

Our consolidated results of operations are significantly affected by conditions in the capital markets and the economy because we offer market sensitive products. These products have been a significant driver of our results of operations. Because the future claims exposure on these products is sensitive to movements in the equity markets and interest rates, we have in place various hedging and reinsurance programs that are designed to mitigate the economic risks of movements in the equity markets and interest rates. The volatility in Net income attributable to Holdings for the periods presented below results from the mismatch between: (i) the change in carrying value of the reserves for GMDB and certain GMIB features that do not fully and immediately reflect the impact of equity and interest market fluctuations; and (ii) the change in fair value of products with the GMIB feature that has a no-lapse guarantee, and our hedging and reinsurance programs.

Ownership and Consolidation of AllianceBernstein

Our indirect, wholly-owned subsidiary, AllianceBernstein Corporation, is the General Partner of AB. Accordingly, AB’s results are fully reflected in our consolidated financial statements.

Our blended economic interest in AB was approximately 65% ~~and 65%~~ for both the three and nine months ended ~~June~~September 30, 2020 and 2019, respectively.

Effective Tax Rates

For interim reporting periods, we calculate income tax expense using an estimated annual effective tax rate (“ETR”), with discrete items recognized in the period in which they occur.

7696

Consolidated Results of Operations

The following table summarizes our consolidated statements of income (loss) for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019:

Consolidated Statement of Income (Loss)


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020		2019
		(in millions, except per share data)															(in millions, except per share data)
REVENUES	REVENUES									REVENUES
Policy charges and fee income	Policy charges and fee income	$	879	$	941	$	1,870	$	1,872	Policy charges and fee income	$	914	$	980	$	2,787	$	2,847
Premiums	Premiums	244		280		533		563		Premiums	221		284		754		847
Net derivative gains (losses)	Net derivative gains (losses)	(6,033)		(236)		3,368		(1,866)		Net derivative gains (losses)	(1,472)		(453)		1,890		(2,323)
Net investment income (loss)	Net investment income (loss)	1,035		976		1,651		1,991		Net investment income (loss)	879		824		2,530		2,815
Investment gains (losses), net:	Investment gains (losses), net:									Investment gains (losses), net:
Credit losses on AFS debt securities and loans	Credit losses on AFS debt securities and loans	(31)		—		(43)		—		Credit losses on AFS debt securities and loans	(4)		—		(47)		—
Other investment gains (losses), net	Other investment gains (losses), net	200		(12)		216		(23)		Other investment gains (losses), net	21		199		237		176
Total investment gains (losses), net	Total investment gains (losses), net	169		(12)		173		(23)		Total investment gains (losses), net	17		199		190		176
Investment management and service fees	Investment management and service fees	1,052		1,072		2,188		2,071		Investment management and service fees	1,126		1,101		3,314		3,172
Other income	Other income	124		139		280		266		Other income	155		143		434		409
Total revenues	Total revenues	(2,530)		3,160		10,063		4,874		Total revenues	1,840		3,078		11,899		7,943

BENEFITS AND OTHER DEDUCTIONS	BENEFITS AND OTHER DEDUCTIONS									BENEFITS AND OTHER DEDUCTIONS
Policyholders’ benefits	Policyholders’ benefits	746		896		3,534		1,776		Policyholders’ benefits	1,034		1,735		4,546		3,551
Interest credited to policyholders’ account balances	Interest credited to policyholders’ account balances	307		314		624		618		Interest credited to policyholders’ account balances	306		320		930		944
Compensation and benefits	Compensation and benefits	469		512		995		1,021		Compensation and benefits	503		502		1,498		1,523
Commissions and distribution-related payments	Commissions and distribution-related payments	302		307		640		588		Commissions and distribution-related payments	342		317		982		905
Interest expense	Interest expense	48		57		100		113		Interest expense	52		54		152		167
Amortization of deferred policy acquisition costs	Amortization of deferred policy acquisition costs	183		177		1,431		375		Amortization of deferred policy acquisition costs	90		128		1,555		489
Other operating costs and expenses	Other operating costs and expenses	434		456		871		866		Other operating costs and expenses	436		449		1,308		1,315
Total benefits and other deductions	Total benefits and other deductions	2,489		2,719		8,195		5,357		Total benefits and other deductions	2,763		3,505		10,971		8,894
Income (loss) from continuing operations, before income taxes	Income (loss) from continuing operations, before income taxes	(5,019)		441		1,868		(483)		Income (loss) from continuing operations, before income taxes	(923)		(427)		928		(951)
Income tax (expense) benefit	Income tax (expense) benefit	1,077		(11)		(363)		204		Income tax (expense) benefit	218		121		(141)		334
Net income (loss)	Net income (loss)	(3,942)		430		1,505		(279)		Net income (loss)	(705)		(306)		787		(617)
Less: Net income (loss) attributable to the noncontrolling interest	Less: Net income (loss) attributable to the noncontrolling interest	86		67		123		133		Less: Net income (loss) attributable to the noncontrolling interest	74		68		197		201
Net income (loss) attributable to Holdings	Net income (loss) attributable to Holdings	(4,028)		363		1,382		(412)		Net income (loss) attributable to Holdings	(779)		(374)		590		(818)
Less: Preferred stock dividends	Less: Preferred stock dividends	10		—		23		—		Less: Preferred stock dividends	11		—		34		—
Net income (loss) available to Holdings’ common shareholders	Net income (loss) available to Holdings’ common shareholders	$	(4,038)	$	363	$	1,359	$	(412)	Net income (loss) available to Holdings’ common shareholders	$	(790)	$	(374)	$	556	$	(818)

EARNINGS PER COMMON SHARE	EARNINGS PER COMMON SHARE									EARNINGS PER COMMON SHARE
Net income (loss) applicable to Holdings’ common shareholders per common share:	Net income (loss) applicable to Holdings’ common shareholders per common share:									Net income (loss) applicable to Holdings’ common shareholders per common share:
Basic	Basic	$	(8.96)	$	0.74	$	2.98	$	(0.82)	Basic	$	(1.77)	$	(0.76)	$	1.23	$	(1.64)
Diluted	Diluted	$	(8.96)	$	0.74	$	2.97	$	(0.82)	Diluted	$	(1.77)	$	(0.76)	$	1.22	$	(1.64)
Weighted average common shares outstanding (in millions):	Weighted average common shares outstanding (in millions):									Weighted average common shares outstanding (in millions):
Basic	Basic	450.4		491.1		455.8		504.5		Basic	447.5		490.4		453.0		499.8
Diluted	Diluted	450.4		491.9		457.1		504.5		Diluted	447.5		490.4		454.1		499.8

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(in millions)
Non-GAAP Operating Earnings $ 459 $ 559 $ 974 $ 1,068


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
Non-GAAP Operating Earnings	$	568	$	673	$	1,554	$	1,704

7797

The following table summarizes our Non-GAAP Operating Earnings per common share for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019:


		Three Months Ended June 30,						Six Months Ended June 30,									Three Months Ended September 30,			Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020			2019
		(in millions)																(in millions)
Non-GAAP Operating Earnings per common share:	Non-GAAP Operating Earnings per common share:									Non-GAAP Operating Earnings per common share:
Basic	Basic	$	1.00	$	1.14	$	2.09	$	2.12	Basic	$	1.24	$	1.37	$	3.36		$	3.41
Diluted	Diluted	$	1.00	$	1.14	$	2.08	$	2.11	Diluted	$	1.24	$	1.37	$	3.35		$	3.41

The following discussion compares the results for the three and ~~six~~nine months ended ~~June~~September 30, 2020 to the three and ~~six~~nine months ended ~~June~~September 30, 2019.

Three Months Ended ~~June~~September 30, 2020 Compared to the Three Months Ended ~~June~~September 30, 2019

Net Income Attributable to Holdings

Net ~~income~~loss attributable to Holdings ~~decreased~~increased by ~~$4.4 billion,~~$405 million, to a net loss of ~~$4.0 billion~~$779 million for the three months ended ~~June~~September 30, 2020 from a net ~~income~~loss of ~~$363~~$374 million in the three months ended ~~June~~September 30, 2019 primarily driven by the following notable items:

•~~Decrease~~Increase in Net derivative ~~gains~~losses of ~~$5.8~~$1.0 billion driven by ~~losses from freestanding derivatives resulting from~~improvements in equity markets during the ~~equity market recovery in the second~~third quarter of 2020 ~~as well as~~compared to relatively flat equity markets and declining interest rates in the third quarter of 2019. Also, contributing were negative impacts from non-performance risk and credit spreads due to spread ~~tightening.~~tightening partially offset by the favorable impact of assumption updates on our GMIBNLG liability.

•Decrease in Net investment gains of $182 million primarily due to the rebalancing of our U.S. Treasury portfolio in 2019.

•Decrease in Fee-type revenue of ~~$133~~$92 million mainly driven by ~~lower fees from lower average Separate Account AV reflecting the March equity markets decline, and~~ a decrease in our Protection Solutions ~~segment primarily due to the premium impact of the USFL~~ and MLICA sale, lower premiums on traditional products (offset in Policyholders’ benefits), as well as higher ceded premiums and the unfavorable impact on amortization of the initial fee liability from reactivity to adverse mortality experience.

•~~Increase in Net income attributable to noncontrolling interest of $19 million mainly due to higher consolidated VIE income and higher AB pre-tax income.~~

•~~Increase in Amortization of DAC of $6 million mainly driven by our Protection Solutions segment, partly~~Individual Retirement segments partially offset by ~~a decrease~~an increase in our ~~Individual Retirement~~Investment Management and Research segment. The ~~increase~~decrease in our Protection Solutions segment was ~~driven by~~primarily due to the unfavorable impact of assumption updates in 2020 compared to the favorable impact of assumption updates in 2019, lower premiums reflecting the impact of the ~~assumption update in the first quarter~~sale of ~~2020 related to COVID-19 (as a result of the~~USFL and MLICA, lower interest rate assumption, Protection Solutions entered into loss recognition resulting in an acceleration of DAC amortization), partly offset by the favorable impact of reactivity to adverse mortality experience.premiums on traditional products, and higher ceded premiums. The decrease in our Individual Retirement segment ~~reflected the favorable impact~~was primarily due to lower fee income reflecting lower average AV mainly due to outflows on our older fixed-rate GMxB block. The increase in our Investment Management and Research segment was due to higher distribution revenues and base fees driven by higher average AUM.

•Increase in Commissions and distribution-related payments of ~~the equity markets recovery on SCS assets.~~$25 million mainly driven by higher payments to financial intermediaries for distribution of AB mutual funds in our Investment Management and Research segment.

Partially offsetting this decrease were the following notable items:

•~~Increase in Net investment gains of $181 million primarily due to the rebalancing of our U.S. Treasury portfolio.~~

•Decrease in Policyholders’ benefits of ~~$150~~$701 million mainly due to our Individual Retirement segment ~~benefiting~~reflecting lower unfavorable impacts from assumption updates and the favorable impact of the ~~recovery of the~~improvements in equity markets in the ~~second~~third quarter of 2020, offset by ~~lower~~higher Net Derivatives ~~gains.~~losses. The decrease was partially offset in our Protection Solutions segment mainly driven by the unfavorable impact of assumption updates in 2020 compared to the favorable impact of assumption updates in 2019, the re-establishment of the profits followed by loss (“PFBL”) reserve upon exiting loss recognition and an increase in term and employee benefits product reserves partially offset by favorable net mortality and lower policyholders’ benefits reflecting the impact of the sale of USFL and MLICA.

•Increase in Net investment income of $55 million mainly due to higher asset balances, the General Account investment portfolio optimization and higher income from alternative investments partially offset by lower income from changes in the market value of trading securities supporting our variable annuity products.

•Decrease in Amortization of DAC of $38 million mainly driven by our Protection Solutions segment, partially offset by an increase in our Individual Retirement segment. The decrease in our Protection Solutions segment was mainly due to the favorable impact of assumption updates in 2020 compared to the unfavorable impact of assumption updates in 2019 and the unfavorable impact of the update to reinsurance projections in 2019 and lower ongoing baseline amortization. The increase in our Individual Retirement segment was mainly due to the unfavorable impact of assumption updates in 2020 compared to the favorable impact of assumption updates in 2019 partially offset by the favorable impact of reactivity to market movements in our SCS products.

•Decrease in Interest credited to policyholders’ account balances of $14 million mainly driven by lower FHLB funding agreements costs due to lower interest rates.

•Decrease in Compensation, benefits and other operating expenses of ~~$65~~$12 million mainly driven by productivity initiatives and COVID-19 related expense saves.

•Increase in Net investment income of $59 million mainly due to change in the market value of trading securities supporting our variable annuity products due to credit spreads tightening in 2020 compared to 2019 and gains on seed capital investments, partially offset by losses on our alternative investment portfolio.

•~~Increase in~~ Income tax benefit of ~~$1.1 billion~~$97 million primarily driven by a higher pre-tax ~~loss in 2020 compared to pre-tax income in 2019, partially offset by the effect of uncertain tax positions for a given audit period in the three months ended June 30, 2019.~~loss.

See “—Significant Factors Impacting Our Results—Assumption Updates and Model Changes” for more information regarding ~~the COVID-19-related~~ assumption ~~update and other COVID-19 related impacts.~~

updates.

Non-GAAP Operating Earnings

Non-GAAP Operating Earnings decreased by ~~$100~~$105 million to ~~$459~~$568 million for the three months ended ~~June~~September 30, 2020 from ~~$559~~$673 million in the three months ended ~~June~~September 30, 2019. The following notable items were the primary drivers for the decrease in Non-GAAP Operating Earnings.

•Decrease in Net derivative gains of ~~$207~~$127 million mainly due to losses on derivatives used to hedge our ~~Individual Retirement segment largely offset in Policyholders’ benefits.~~GMxB liabilities not carried at fair value.

•Decrease in Fee-type revenue of ~~$130~~$96 million mainly driven by ~~lower fees from lower average Separate Accounts AV reflecting the March equity markets decline, and~~ a decrease in our Protection Solutions and Individual Retirement segments partially offset by an increase in our Investment Management and Research segment. The decrease in our Protection Solutions segment was primarily due to the ~~premium~~unfavorable impact of assumption updates in 2020 compared to the favorable impact of assumption updates in 2019, lower premiums reflecting the impact of the sale of USFL and MLICA, ~~sale,~~ lower premiums on traditional products, ~~(offset in Policyholders’ benefits), as well as~~and higher ceded ~~premiums~~premiums. The decrease in our Individual Retirement segment was primarily due to lower fee income reflecting lower average AV mainly due to outflows on our older fixed-rate GMxB block. The increase in our Investment Management and ~~the unfavorable impact on amortization of the initial fee liability from reactivity~~Research segment was due to ~~adverse mortality experience.~~higher distribution revenues and base fees driven by higher average AUM.

•~~Decrease~~Increase in ~~Net investment income~~Commissions and distribution-related payments of ~~$82~~$25 million mainly driven by ~~losses on~~higher payments to financial intermediaries for distribution of AB mutual funds in our ~~alternative investment portfolio, partially offset by the positive impacts of higher asset balances~~Investment Management and ~~the General Account investment portfolio optimization.~~Research segment.

Partially offsetting this decrease were the following notable items:

•~~Decrease~~Increase in ~~Policyholders’ benefits~~Net investment income of ~~$188~~$70 million mainly due to our Individual Retirement segment (offset by an increase in Net derivatives gains), partly offset by an increase in our Protection Solutions segment. The increase in our Protection Solutions segment was mainly driven by adverse mortality experience related to COVID-19, partly offset by lower claims due tohigher asset balances, the ~~USFL~~General Account investment portfolio optimization and ~~MLICA sale and lower reserve accruals on our traditional products (offset in Fee-type revenue).~~

•~~Decrease in Compensation, benefits and other operating costs and expenses of $52 million mainly driven by productivity initiatives and COVID-19 related expense saves.~~higher income from alternative investments.

•Decrease in Amortization of DAC of ~~$34~~$24 million mainly driven by our Protection Solutions segment, partially offset by an increase in our Individual Retirement segment. The decrease in our Protection Solutions segment was mainly due to the favorable impact of ~~reactivity~~assumption updates in 2020 compared to ~~adverse mortality experience~~the unfavorable impact of assumption updates in 2019 and the unfavorable impact of the update to reinsurance projections in 2019 and lower ongoing baseline amortization. The increase in our ~~Protection Solutions~~Individual Retirement segment ~~and~~was mainly due to the ~~positive~~unfavorable impact of ~~lower crediting rates~~assumption updates in ~~our Group Retirement segment.~~2020 compared to the favorable impact of assumption updates in 2019.

•Decrease in Interest credited to policyholders’ account balances of $8$14 million mainly driven by lower FHLB funding agreements costs due to lower interest rates.

•~~Decrease in Commissions and distribution-related payments of $5 million mainly driven by our Individual Retirement segment due to lower asset balances resulting from the March equity markets decline.~~

•Decrease in Income tax expense of $27 million mainly driven by lower pre-tax earnings.

See “—Significant Factors Impacting Our Results—Assumption Updates and Model Changes” for more information regarding assumption updates.

~~Six~~

Nine Months Ended ~~June~~September 30, 2020 Compared to the ~~Six~~Nine Months Ended ~~June~~September 30, 2019

Net Income Attributable to Holdings

Net income (loss) attributable to Holdings increased by ~~$1.8~~$1.4 billion, to a net income of ~~$1.4 billion~~$590 million for the ~~six~~nine months ended ~~June~~September 30, 2020 from a net loss of ~~$412~~$818 million in the ~~six~~nine months ended ~~June~~September 30, 2019 primarily driven by the following notable items:

•Increase in Net derivative gains of ~~$5.2~~$4.2 billion ~~driven by~~mainly reflecting the gains from ~~freestanding derivatives mainly reflecting~~ the first quarter 2020 decrease in interest rates and a lower improvement in ~~the first half of~~equity markets in 2020 when compared to ~~increases~~2019.

•Decrease in ~~both equity markets~~Compensation, benefits and other operating expenses of $32 million, mainly driven by productivity initiatives and COVID-19 related expense saves.

•Decrease in Interest expense of $15 million mainly driven by the repayment of a $300 million term loan in December 2019 and lower interest ~~rates~~expense in ~~the first half of 2019, as well as the positive impacts from non-performance risk~~our Investment Management and ~~credit spreads reflecting spread widening.~~Research segment.

•Increase in Fee-type revenue of ~~$99~~$14 million mainly driven by ~~an increase~~higher base fees and distribution revenues resulting from higher average AUM and higher Bernstein Research Services revenues in our Investment Management and Research ~~segment, partly~~segment. This increase was partially offset by lower ~~fees from~~fee income due to lower average Separate Account AV reflecting the March equity markets decline and ~~a decrease in~~outflows on our Protection Solutions segment. The increase in our Investment Management and Research segment was mainly attributable to higher base fees resulting from higher average AUM and higher Bernstein Research Services revenues.older fixed-rate GMxB block. The decrease in our Protection Solutions segment was ~~mainly due to~~driven by lower premiums reflecting the ~~premium~~ impact of the sale of USFL and MLICA, ~~sale,~~ lower premiums on traditional products (offset in Policyholders’ benefits)~~, as well as~~ and higher ceded ~~premiums and the unfavorable impact on amortization~~premiums.

•Decrease in Interest credited to policyholders’ account balances of ~~the initial fee liability from reactivity~~$14 million mainly driven by lower FHLB funding agreements costs due to ~~adverse mortality experience.~~lower interest rates partially offset by higher interest credited in our Individual Retirement segment due to higher SCS AV due to new business growth.

•Increase in Net investment gains of ~~$196~~$14 million primarily due to the rebalancing of our U.S. Treasury portfolio, partially offset by a $50 million impairment on assets related to the USFL and MLICA sale.

•~~Decrease in Net income attributable to noncontrolling interest of $10 million mainly due to lower consolidated VIE income, partly offset by higher AB pre-tax income.~~

Partially offsetting this increase were the following notable items:

•Increase in Policyholders’ benefits of ~~$1.8~~$1.0 billion mainly due to ~~our Individual Retirement segment driven by~~ the higher unfavorable impact of ~~the~~ assumption ~~update~~updates in 2020 including the first quarter ~~of 2020 related~~assumption update due to COVID-19, ~~and~~ the unfavorable impact of equity markets in our GMxB liabilities, the re-establishment of PFBL reserve upon exiting loss recognition and an increase in term and employee benefits product reserves, partially offset by ~~higher Net derivatives gains.~~favorable net mortality and lower policyholders’ benefits reflecting the impact of the sale of USFL and MLICA.

•Increase in Amortization of DAC of $1.1 billion mainly ~~in our Protection Solutions segment driven by~~due to the impact of the assumption ~~update in~~updates including the first quarter of 2020 assumption update related to COVID-19. ~~As a result of the lower interest rate assumption, Protection Solutions entered into loss recognition resulting in an acceleration of DAC amortization.~~

•Decrease in Net investment income of ~~$340~~$285 million mainly driven by ~~a change~~changes in the market value of trading securities supporting our variable annuity products and lower income from alternative investments partially offset by higher investment income from fixed maturities available-for-sale due to ~~credit spreads widening in 2020 compared to credit spreads tightening in 2019~~higher asset balances and ~~losses on our alternative~~the General Account investment ~~portfolio.~~

•~~Decrease in Compensation, benefits and other operating expenses of $21 million, mainly driven by productivity initiatives and COVID-19 related expense saves.~~portfolio optimization.

•Increase in Commissions and distribution-related payments of ~~$52~~$77 million mainly driven by higher payments to financial intermediaries for distribution of AB mutual funds in our Investment Management and Research segment, as well as the growth in broker ~~dealers~~dealer sales.

•Increase in Income tax expense of ~~$567~~$475 million primarily driven by pre-tax income in the ~~six~~nine months ended ~~June~~September 30, 2020 compared to a pre-tax loss in the ~~six~~nine months ended ~~June~~September 30, 2019, and a change in the ~~effect of~~reserve accrual for uncertain tax positions ~~for a given audit period~~ in the ~~six~~nine months ended ~~June 30,~~September 20, 2019.

Non-GAAP Operating Earnings

Non-GAAP Operating Earnings decreased by ~~$94~~$150 million to ~~$1.0~~$1.6 billion for the ~~six~~nine months ended ~~June~~September 30, 2020 from ~~$1.1~~$1.7 billion in the ~~six~~nine months ended ~~June~~September 30, 2019. The following notable items were the primary drivers for the decrease in Non-GAAP Operating Earnings.

•Increase in Policyholders’ benefits of ~~$292~~$229 million mainly in our Individual Retirement segment (offset by an increase in Net derivatives gains) reflecting the impact of the March equity markets, ~~decline.~~

•~~Decrease~~and our Protection Solutions segment. The increase in ~~Net investment income of $79 million~~our Protection Solutions segment was mainly driven by ~~losses on our alternative investment portfolio,~~the unfavorable impact of assumption updates in 2020 compared to the favorable impact of assumption updates in 2019, the re-establishment of PFBL reserve upon exiting loss recognition and an increase in term and employee benefits product reserves partially offset by ~~the positive impacts of higher asset balances~~favorable net mortality and the ~~General Account investment portfolio optimization.~~lower policyholders’ benefits reflecting the impact of the sale of USFL and MLICA.

100

•~~Increase~~Decrease in ~~Interest credited to policyholders’ account balances~~Fee-type revenue of ~~$12~~$31 million ~~mainly~~ driven by higher ~~SCS AV due to new business growth,~~base fees and distribution revenues resulting from higher average AUM and higher Bernstein Research Services revenues in our Investment Management and Research segment. This increase was partially offset by lower ~~funding agreements costs~~fee income due to lower ~~interest rates.~~average Separate Account AV reflecting outflows on our older fixed-rate GMxB block. The decrease in our Protection Solutions segment was due to lower premiums reflecting the impact of the sale of USFL and MLICA, lower premiums on traditional products (offset in Policyholders’ benefits), higher ceded premiums and the unfavorable impact of assumption updates in 2020 compared to the favorable impact of assumption updates in 2019.

•Increase in Earnings attributable to the noncontrolling interest of ~~$13~~$20 million mainly in our Investment Management and Research segment due to higher AB Operating earnings.

Partially offsetting this decrease were the following notable items:

•Increase in Net derivative gains of ~~$251~~$114 million mainly due to gains on derivatives used to hedge our ~~Individual Retirement segment largely offset in Policyholders’ benefits.~~GMxB liabilities not carried at fair value.

•~~Increase~~Decrease in ~~Fee-type revenue~~Amortization of ~~$56~~DAC of $36 million mainly ~~driven~~in our Protection Solutions segment partially offset by an increase in our ~~Investment Management and Research segment, partly offset by lower fees from lower average Separate Account AV reflecting the March equity markets decline, and a decrease in our Protection Solutions~~Individual Retirement segment. ~~The increase in our Investment Management and Research segment was mainly attributable to higher base fees resulting from higher average AUM and higher Bernstein Research Services revenues.~~ The decrease in our Protection Solutions segment was mainly due to the

~~premium~~ favorable impact of assumption updates in 2020 compared to the ~~USFL and MLICA sale, lower premiums on traditional products (offset~~unfavorable impact of assumption updates in ~~Policyholders’ benefits), as well as higher ceded premiums~~2019 and the unfavorable impact ~~on amortization~~ of the ~~initial fee liability from reactivity~~update to ~~adverse mortality experience.~~reinsurance projections in 2019 and lower ongoing baselines amortization. The increase in our Individual Retirement segment was mainly due to the unfavorable impact of assumption updates in 2020 compared to the favorable impact of assumption updates in 2019.

•Decrease in Compensation, benefits and other operating costs and expenses of ~~$15~~$22 million mainly driven by productivity initiatives and COVID-19 related expense saves, partially offset by an increase in our Investment Management and Research segment due to higher employee compensation attributed to higher revenues.

•Decrease in Amortization of DAC of $14 million mainly due to the favorable impact of reactivity to adverse mortality experience in our Protection Solutions segment, and the positive impact of lower crediting rates in our Group Retirement segment.

•~~Decrease in~~ Income tax expense of ~~$12~~$26 million mainly driven by lower pre-tax ~~earnings, partially offset by a lower effective tax rate in the six months ended June 30, 2019.~~earnings.

See “—Significant Factors Impacting Our Results—Assumption Updates and Model Changes” for more information regarding assumption updates.

Results of Operations by Segment

We manage our business through the following four segments: Individual Retirement, Group Retirement, Investment Management and Research, and Protection Solutions. We report certain activities and items that are not included in our four segments in Corporate and Other. The following section presents our discussion of Operating earnings (loss) by segment and AUM, AV and Protection Solutions Reserves by segment, as applicable. Consistent with U.S. GAAP guidance for segment reporting, Operating earnings (loss) is our U.S. GAAP measure of segment performance. See Note 1514 of the Notes to the Consolidated Financial Statements for further information on our segments.

The following table summarizes Operating earnings (loss) on our segments and Corporate and Other for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2020		2019		2020		2019
		(in millions)															(in millions)
Operating earnings (loss) by segment:	Operating earnings (loss) by segment:									Operating earnings (loss) by segment:
Individual Retirement	Individual Retirement	$	350	$	359	$	722	$	729	Individual Retirement	$	371	$	465	$	1,094	$	1,206
Group Retirement	Group Retirement	90		95		196		176		Group Retirement	129		105		325		281
Investment Management and Research	Investment Management and Research	92		80		187		157		Investment Management and Research	104		93		291		250
Protection Solutions	Protection Solutions	(12)		106		26		155		Protection Solutions	51		100		88		207
Corporate and Other	Corporate and Other	(61)		(81)		(157)		(149)		Corporate and Other	(87)		(90)		(244)		(240)
Non-GAAP Operating Earnings	Non-GAAP Operating Earnings	$	459	$	559	$	974	$	1,068	Non-GAAP Operating Earnings	$	568	$	673	$	1,554	$	1,704

Effective Tax Rates by Segment

For interim reporting periods, we calculate income tax expense using an estimated annual effective tax rate (“ETR”), with discrete items recognized in the period in which they occur. Income tax expense is calculated using the ETR and then allocated to our business segments using an ~~18%~~17% ETR for our retirement and protection business (Individual Retirement, Group Retirement, and Protection Solutions) and a 27% ETR for Investment Management and Research.

101

Individual Retirement

The Individual Retirement segment includes our variable annuity products which primarily meet the needs of individuals saving for retirement or seeking retirement income.

The following table summarizes Operating earnings of our Individual Retirement segment for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(in millions)
Operating earnings $ 350 $ 359 $ 722 $ 729


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
Operating earnings	$	371	$	465	$	1,094	$	1,206

Key components of Operating earnings are:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020		2019
		(in millions)															(in millions)
REVENUES	REVENUES									REVENUES
Policy charges, fee income and premiums	Policy charges, fee income and premiums	$	493	$	524	$	994	$	1,022	Policy charges, fee income and premiums	$	519	$	538	$	1,513	$	1,560
Net investment income	Net investment income	266		280		582		548		Net investment income	324		287		906		835
Net derivative gains (losses)	Net derivative gains (losses)	(114)		87		373		150		Net derivative gains (losses)	58		170		414		312
Investment management, service fees and other income	Investment management, service fees and other income	164		182		341		360		Investment management, service fees and other income	178		186		519		546
Segment revenues	Segment revenues	$	809	$	1,073	$	2,290	$	2,080	Segment revenues	$	1,079	$	1,181	$	3,352	$	3,253

BENEFITS AND OTHER DEDUCTIONS	BENEFITS AND OTHER DEDUCTIONS									BENEFITS AND OTHER DEDUCTIONS
Policyholders’ benefits	Policyholders’ benefits	$	86	$	291	$	765	$	535	Policyholders’ benefits	$	298	$	376	$	1,046	$	904
Interest credited to policyholders’ account balances	Interest credited to policyholders’ account balances	81		84		163		146		Interest credited to policyholders’ account balances	78		77		241		229
Commissions and distribution-related payments	Commissions and distribution-related payments	60		71		132		137		Commissions and distribution-related payments	71		72		203		209
Amortization of deferred policy acquisition costs	Amortization of deferred policy acquisition costs	72		75		160		158		Amortization of deferred policy acquisition costs	94		(8)		253		129
Compensation, benefits and other operating costs and expenses	Compensation, benefits and other operating costs and expenses	86		114		193		225		Compensation, benefits and other operating costs and expenses	93		100		286		325
Interest expense	Interest expense	—		—		—		—		Interest expense	—		—		—		—
Segment benefits and other deductions	Segment benefits and other deductions	$	385	$	635	$	1,413	$	1,201	Segment benefits and other deductions	$	634	$	617	$	2,029	$	1,796

The following table summarizes AV for our Individual Retirement segment as of the dates indicated:


		As of							As of
		June 30, 2020		December 31, 2019			September 30, 2020		December 31, 2019
		(in millions)							(in millions)
AV	AV					AV
General Account	General Account	$	27,075	$	26,108	General Account	$	28,376	$	26,108
Separate Accounts	Separate Accounts	76,765		82,814		Separate Accounts	79,455		82,814
Total AV	Total AV	$	103,840	$	108,922	Total AV	$	107,831	$	108,922

The following table summarizes a roll-forward of AV for our Individual Retirement segment for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(in millions)
Balance as of beginning of period $ 93,589 $ 102,498 $ 108,922 $ 94,589
  Gross premiums 1,719 2,173 3,709 4,211
  Surrenders, withdrawals and benefits (1,772) (2,265) (4,082) (4,391)
    Net flows (53) (92) (373) (180)
  Investment performance, interest credited and policy charges 10,304 2,359 (4,700) 10,356
Transfer to Corporate and Other (1) — (458) — (458)
Reclassified to Liabilities held for sale — — (3) —
Other (2) — — (6) —
Balance as of end of period $ 103,840 $ 104,307 $ 103,840 $ 104,307

102


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
Balance as of beginning of period	$	103,840	$	104,307	$	108,922	$	94,589
Gross premiums	1,735		2,135		5,444		6,346
Surrenders, withdrawals and benefits	(2,162)		(2,258)		(6,244)		(6,649)
Net flows	(427)		(123)		(800)		(303)
Investment performance, interest credited and policy charges	4,418		(205)		(282)		10,151
Transfer to Corporate and Other (1)	—		—		—		(458)
Reclassified to Liabilities held for sale	—		—		(3)		—
Other (2)	—		—		(6)		—
Balance as of end of period	$	107,831	$	103,979	$	107,831	$	103,979

______________

(1) Transfer to Corporate and Other represents the placement of an Individual Retirement product in run-off effective for the second quarter of 2019.

(2) Represents amounts related to our fixed income annuity (“FIA”) contracts which were previously reported as Policyholders’ account balances in the consolidated balance sheets and therefore included in our definition of “Account Value”. Effective January 1, 2020, FIAs are reported as Future policy benefits and other policyholders’ liabilities in the consolidated balance sheets and accordingly were excluded from Account Value.

Three Months Ended ~~June~~September 30, 2020 Compared to the Three Months Ended ~~June~~September 30, 2019 for the Individual Retirement Segment

Operating earnings

Operating earnings decreased $9$94 million to ~~$350~~$371 million during the three months ended ~~June~~September 30, 2020 from ~~$359~~$465 million in the three months ended ~~June~~September 30, 2019. The following notable items were the primary drivers for the decrease in Operating earnings.

•Amortization of DAC increased $102 million mainly due to the $20 million unfavorable impact of assumption updates in 2020 compared to the $92 million favorable impact of assumption updates in 2019.

•Fee-type revenue decreased ~~$48~~$15 million due to lower average ~~asset balances from the March equity markets decline.~~

•~~Net investment income decreased $14 million~~Separate Accounts AV mainly ~~due to losses~~driven by outflows on our ~~alternative investment portfolio, partially offset by higher income from higher SCS asset balances.~~older fixed-rate GMxB block.

•Net GMxB results decreased $5$43 million primarily due to ~~a growth in no lapse guarantee benefits.~~higher interest and funding requirements from assumption updates.

The decrease was partially offset by:

•Net investment income increased $37 million due to higher asset balances, the General Account investment portfolio optimization and higher income from alternative investments.

•Compensation benefits and other operating expenses decreased ~~$28~~$7 million due to productivity initiatives and COVID-19 related expense saves.

•~~Commissions and distribution related payments decreased $11 million due to lower average asset balances.~~

•~~Non-GMxB Policyholders’ benefits decreased $6 million primarily due to favorable mortality on payout annuities.~~

•Income tax expense decreased $5$25 million due to lower pre-tax earnings.

See “—Significant Factors Impacting Our Results—Assumption Updates and Model Changes” for more information regarding assumption updates.

Net Flows and AV

•The increase in AV of ~~$10.3~~$4.0 billion in the three months ended ~~June~~September 30, 2020 was primarily due to a ~~$10.3~~$4.4 billion increase in equity markets, partially offset by ~~$53~~$427 million in net outflows.

•Net outflows of ~~$53~~$427 million were ~~$39~~$304 million higher than in the three months ended ~~June~~September 30, 2019, mainly driven by ~~$709~~$778 million of outflows on our older fixed-rate GMxB block, partially offset by ~~$656~~$351 million of inflows on our newer, less capital-intensive products.

103

~~Six~~

Nine Months Ended ~~June~~September 30, 2020 Compared to the ~~Six~~Nine Months Ended ~~June~~September 30, 2019 for the Individual Retirement Segment

Operating earnings

Operating earnings decreased $7$112 million to ~~$722 million~~$1.1 billion during the ~~six~~nine months ended ~~June~~September 30, 2020 from ~~$729 million~~$1.2 billion in the ~~six~~nine months ended ~~June~~September 30, 2019. The following notable items were the primary drivers for the decrease in Operating earnings.

•Amortization of DAC increased $124 million mainly due to the $20 million unfavorable impact of assumption updates in 2020 compared to the $92 million favorable impact of assumption updates in 2019.

•Fee-type revenue decreased ~~$47~~$61 million due to lower average ~~asset balances~~Separate Accounts AV primarily from ~~the March equity markets decline.~~outflows on our older fixed-rate GMxB block.

•Interest credited to policyholders’ account balances increased ~~$17~~$12 million primarily driven by higher SCS AV due to new business growth.

•Net GMxB results decreased $5$49 million primarily due to higher interest and funding requirements from assumption updates and a growth in no lapse guarantee benefits, partially offset by higher rider fees.

•~~Income tax expense increased $5 million mainly driven by a lower effective tax rate in the six months ended June 30, 2019.~~

The decrease was partially offset by:

•Net investment income increased ~~$34~~$71 million mainly due to higher ~~SCS~~ asset balances and the General Account investment portfolio optimization, partially offset by ~~losses on our~~lower income from alternative ~~investment portfolio.~~investments.

•Compensation benefits and other operating expenses decreased ~~$32~~$39 million due to productivity initiatives and COVID-19 related expense saves.

•~~Commissions~~Income tax expense decreased $22 million mainly driven by lower pre-tax earnings and ~~distribution-related payments decreased $5 million due to~~a lower ~~average asset balances.~~effective tax rate in the nine months ended September 30, 2019.

See “—Significant Factors Impacting Our Results—Assumption Updates and Model Changes” for more information regarding assumption updates.

Net Flows and AV

•The decline in AV of ~~$5.1~~$1.1 billion in the ~~six~~nine months ended ~~June~~September 30, 2020 was primarily due ~~primarily~~ to net outflows of $800 million and declines in equity markets ~~$4.7 billion and net outflows~~ of ~~$373 million.~~$282 million .

•Net outflows of ~~$373~~$800 million were ~~$193~~$497 million higher than in the ~~six~~nine months ended ~~June~~September 30, 2020, mainly driven by ~~$1.6~~$2.4 billion of outflows on our older fixed-rate GMxB block, partially offset by ~~$1.3~~$1.6 billion of inflows on our newer, less capital-intensive products.

Group Retirement

The Group Retirement segment offers tax-deferred investment and retirement services or products to plans sponsored by educational entities, municipalities and not-for-profit entities, as well as small and medium-sized businesses.

The following table summarizes Operating earnings of our Group Retirement segment for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(in millions)
Operating earnings $ 90 $ 95 $ 196 $ 176


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
Operating earnings	$	129	$	105	$	325	$	281

Key components of Operating earnings are:

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(in millions)
REVENUES
Policy charges, fee income and premiums $ 68 $ 69 $ 139 $ 134
Net investment income 127 150 286 284
Net derivative gains (losses) 4 (2) 4 2
Investment management, service fees and other income 47 50 99 98
Segment revenues $ 246 $ 267 $ 528 $ 518
BENEFITS AND OTHER DEDUCTIONS
Policyholders’ benefits $ 1 $ 1 $ 1 $ 1
Interest credited to policyholders’ account balances 74 75 150 148
Commissions and distribution-related payments 13 11 24 21
Amortization of deferred policy acquisition costs 2 10 14 22
Compensation, benefits and other operating costs and expenses 47 54 101 114
Interest expense — — — —
Segment benefits and other deductions $ 137 $ 151 $ 290 $ 306


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
REVENUES
Policy charges, fee income and premiums	$	75	$	72	$	214	$	206
Net investment income	174		148		460		432

104


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
Net derivative gains (losses)	(3)		1		1		3
Investment management, service fees and other income	55		52		154		150
Segment revenues	$	301	$	273	$	829	$	791

BENEFITS AND OTHER DEDUCTIONS
Policyholders’ benefits	$	1	$	—	$	2	$	1
Interest credited to policyholders’ account balances	76		78		226		226
Commissions and distribution-related payments	9		9		33		30
Amortization of deferred policy acquisition costs	14		5		28		27
Compensation, benefits and other operating costs and expenses	46		54		147		168
Interest expense	—		—		—		—
Segment benefits and other deductions	$	146	$	146	$	436	$	452

The following table summarizes AV for our Group Retirement segment as of the dates indicated:

As of
June 30, 2020 December 31, 2019
(in millions)
AV
General Account $ 12,420 $ 12,071
Separate Accounts 24,670 25,809
Total AV $ 37,090 $ 37,880


	As of
	September 30, 2020		December 31, 2019
	(in millions)
AV
General Account	$	12,627	$	12,071
Separate Accounts	26,088		25,809
Total AV	$	38,715	$	37,880

The following table summarizes a roll-forward of AV for our Group Retirement segment for the periods indicated:


		Three Months Ended June 30,						Six Months Ended June 30,									Three Months Ended September 30,			Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020			2019
		(in millions)																(in millions)
Balance as of beginning of period	Balance as of beginning of period	$	33,148	$	35,077	$	37,880	$	32,401	Balance as of beginning of period	$	37,090	$	36,057	$	37,880		$	32,401
Gross premiums	Gross premiums	796		910		1,721		1,750		Gross premiums	706		770		2,427			2,520
Surrenders, withdrawals and benefits	Surrenders, withdrawals and benefits	(580)		(746)		(1,377)		(1,479)		Surrenders, withdrawals and benefits	(799)		(793)		(2,176)			(2,272)
Net flows	Net flows	216		164		344		271		Net flows	(93)		(23)		251			248
Investment performance, interest credited and policy charges	Investment performance, interest credited and policy charges	3,726		816		(1,134)		3,385		Investment performance, interest credited and policy charges	1,718		27		584			3,412
Balance as of end of period	Balance as of end of period	$	37,090	$	36,057	$	37,090	$	36,057	Balance as of end of period	$	38,715	$	36,061	$	38,715		$	36,061

Three Months Ended ~~June~~September 30, 2020 Compared to the Three Months Ended ~~June~~September 30, 2019 for the Group Retirement Segment

Operating earnings

Operating earnings ~~decreased $5~~increased $24 million to ~~$90~~$129 million during the three months ended ~~June~~September 30, 2020 from ~~$95~~$105 million in the three months ended ~~June~~September 30, 2019. The ~~decrease~~increase is primarily attributable to the following:

•Net investment income ~~decreased $23~~increased $26 million due to ~~losses on our alternative investment portfolio, partially offset by~~higher asset balances, the General Account investment portfolio ~~optimization.~~optimization and higher income from alternative investments.

•Fee-type revenues ~~decreased $4~~increased $6 million due to ~~lower~~higher average Separate Accounts AV, ~~reflecting the March~~driven by equity ~~markets decline.~~market performance.

•Compensation and other operating expenses decreased $8 million due to productivity initiatives and COVID-19 related expense saves.

105

The ~~decrease~~increase was partially offset by the following:

•Amortization of DAC ~~decreased $8~~increased $9 million mainly due to the $3 million unfavorable impact of assumption updates in 2020 compared to the $3 million favorable in 2019).

•Income tax expense increased $4 million due to higher pre-tax earnings.

See “—Significant Factors Impacting Our Results—Assumption Updates and Model Changes” for more information regarding assumption updates.

Net Flows and AV

•The increase in AV of $1.6 billion in the three months ended September 30, 2020 was driven by strong equity markets, partially offset by net outflows of $93 million.

•Net outflows of $93 million increased $71 million, due to lower ~~crediting rates.~~first year premiums due to the impact of COVID-19, partially offset by higher renewals.

Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019 for the Group Retirement Segment

Operating earnings

Operating earnings increased $44 million to $325 million during the nine months ended September 30, 2020 from $281 million in the nine months ended September 30, 2019. The increase is primarily attributable to the following:

•Net investment income increased $28 million due to higher asset balances and our General Account investment portfolio optimization, partially offset by lower income from alternative investments.

•Compensation benefits and other operating expenses decreased $7$21 million due to productivity initiatives and COVID-19 related expense saves.

•~~Net derivative gains increased $6 million due to inflation related hedging gains.~~

~~Net Flows and AV~~

•~~The increase in AV of $3.9 billion in the three months ended June 30, 2020 was driven by recovering equity markets $3.7 billion, and by net inflows of $216 million.~~

•~~Net inflows of $216 million increased $52 million, driven by lower surrenders and strong renewals, reflecting continuous client engagement.~~

~~Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019 for the Group Retirement Segment~~

~~Operating earnings~~

Operating earnings increased $20 million to $196 million during the six months ended June 30, 2020 from $176 million in the six months ended June 30, 2019. The increase is primarily attributable to the following:

•~~Compensation benefits and other operating expenses decreased $13 million due to productivity initiatives and COVID-19 related expense saves.~~

•~~Amortization of DAC decreased $8 million due to lower crediting rates.~~

•Fee-type revenues increased $6$12 million due to higher average Separate Account ~~AV.~~

•~~Net investment income increased $2 million due to~~AV driven by higher ~~asset balances and our General Account investment portfolio optimization.~~equity market performance.

The increase was partially offset by the following:

•Commissions and distribution related payments increased $3 million due to higher asset base.

•~~Interest credited to policyholders’ account balances increased $2 million due to AV growth, partially offset by lower crediting rates.~~

•Income tax expense increased ~~by $6~~$10 million ~~primarily~~ due to higher pre-tax earnings.

See “—Significant Factors Impacting Our Results—Assumption Updates and Model Changes” for more information regarding assumption updates.

Net Flows and AV

•The ~~decrease~~increase in AV of ~~$790~~$835 million in the ~~six~~nine months ended ~~June~~September 30, 2020 was primarily due to equity market ~~volatility~~performance of ~~$1.1 billion, partially offset by~~$584 million and net inflows of ~~$344~~$251 million.

•Net inflows of ~~$344~~$251 million increased ~~$73~~$3 million, ~~driven by~~as lower surrenders and ~~strong~~higher renewals ~~reflecting~~reflect continuous client ~~engagement.~~engagement were offset by lower first year premiums due to the impact of COVID-19.

Investment Management and Research

The Investment Management and Research segment provides diversified investment management, research and related services to a broad range of clients around the world. Operating earnings (loss), net of tax, presented here represents our economic interest in AB of approximately 65% ~~and 65%~~ during three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 respectively.

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(in millions)
Operating earnings $ 92 $ 80 $ 187 $ 157


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
Operating earnings	$	104	$	93	$	291	$	250

Key components of Operating earnings are:

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(in millions)
REVENUES
Net investment income $ 32 $ 15 $ (1) $ 39
Net derivative gains (losses) (31) (9) (1) (29)
Investment management, service fees and other income 843 842 1,753 1,618
Segment revenues $ 844 $ 848 $ 1,751 $ 1,628
BENEFITS AND OTHER DEDUCTIONS
Commissions and distribution related payments $ 126 $ 116 $ 266 $ 222
Compensation, benefits and other operating costs and expenses 523 547 1,081 1,056
Interest expense 2 3 4 7
Segment benefits and other deductions $ 651 $ 666 $ 1,351 $ 1,285

106


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
REVENUES

Net investment income	$	13	$	5	$	12	$	44
Net derivative gains (losses)	(14)		—		(15)		(29)
Investment management, service fees and other income	900		867		2,653		2,485
Segment revenues	$	899	$	872	$	2,650	$	2,500

BENEFITS AND OTHER DEDUCTIONS


Commissions and distribution related payments	$	148	$	128	$	414	$	350

Compensation, benefits and other operating costs and expenses	531		542		1,612		1,598
Interest expense	1		2		5		9
Segment benefits and other deductions	$	680	$	672	$	2,031	$	1,957

Changes in AUM in the Investment Management and Research segment for the periods presented were as follows:

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(in billions)
Balance as of beginning of period $ 541.8 $ 554.7 $ 622.9 $ 516.4
Long-term flows
Sales/new accounts 31.8 27.3 63.5 50.3
Redemptions/terminations (31.4) (16.1) (64.1) (34.2)
Cash flow/unreinvested dividends $ (3.7) $ (1.7) $ (8.3) $ (5.5)
Net long-term (outflows) inflows (3.3) 9.5 (8.9) 10.6
Acquisition — 0.2 —
AUM adjustment (1) — (0.9) — (0.9)
Market appreciation (depreciation) 61.5 17.5 (14.2) 54.7
Net change 58.2 26.1 (22.9) 64.4

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(in billions)
Balance as of end of period $ 600.0 $ 580.8 $ 600.0 $ 580.8


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in billions)
Balance as of beginning of period	$	600.0	$	580.8	$	622.9	$	516.4
Long-term flows
Sales/new accounts	29.3		26.3		92.8		76.7
Redemptions/terminations	(23.2)		(18.6)		(87.3)		(52.8)
Cash flow/unreinvested dividends	$	(3.0)	$	0.4	$	(11.3)	$	(5.2)
Net long-term (outflows) inflows	3.1		8.1		(5.8)		18.7
Acquisition	—				0.2		—
AUM adjustment (1)	—		—		—		(0.9)
Market appreciation (depreciation)	27.7		3.5		13.5		58.2
Net change	30.8		11.6		7.9		76.0
Balance as of end of period	$	630.8	$	592.4	$	630.8	$	592.4

______________

(1) Approximately $900 million of non-investment management fee earning taxable and tax-exempt money market assets were removed from assets under management during the second quarter of 2019.

107

Average AUM in the Investment Management and Research segment for the periods presented by distribution channel and investment services were as follows:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020		2019
		(in billions)															(in billions)
Distribution Channel:	Distribution Channel:									Distribution Channel:
Institutions	Institutions	$	271.5	$	262.1	$	276.6	$	257.2	Institutions	$	287.4	$	270.7	$	280.9	$	261.4
Retail	Retail	215.8		207.3		225.8		200.1		Retail	239.8		218.5		231.1		206.1
Private Wealth Management	Private Wealth Management	91.2		96.5		94.8		94.9		Private Wealth Management	97.1		97.1		95.8		95.5
Total	Total	$	578.5	$	565.9	$	597.2	$	552.2	Total	$	624.3	$	586.3	$	607.8	$	563.0

Investment Service:	Investment Service:									Investment Service:
Equity Actively Managed	Equity Actively Managed	$	160.5	$	157.4	$	165.7	$	152.6	Equity Actively Managed	$	184.4	$	160.3	$	172.4	$	154.8
Equity Passively Managed (1)	Equity Passively Managed (1)	51.7		56.1		54.5		54.9		Equity Passively Managed (1)	58.0		57.1		55.9		55.6
Fixed Income Actively Managed – Taxable	Fixed Income Actively Managed – Taxable	244.9		233.5		252.9		228.6		Fixed Income Actively Managed – Taxable	253.0		246.9		253.5		234.7
Fixed Income Actively Managed – Tax-exempt	Fixed Income Actively Managed – Tax-exempt	46.1		44.1		47.1		43.3		Fixed Income Actively Managed – Tax-exempt	48.1		45.3		47.5		44.0
Fixed Income Passively Managed (1)	Fixed Income Passively Managed (1)	10.2		9.4		9.8		9.4		Fixed Income Passively Managed (1)	9.3		9.5		9.6		9.4
Other (2)	Other (2)	65.1		65.4		67.2		63.4		Other (2)	71.5		67.2		68.9		64.5
Total	Total	$	578.5	$	565.9	$	597.2	$	552.2	Total	$	624.3	$	586.3	$	607.8	$	563.0

___ ____________

(1)Includes index and enhanced index services.

(2)Includes multi-asset solutions and services, and certain alternative investments.

Three Months Ended ~~June~~September 30, 2020 Compared to the Three Months Ended ~~June~~September 30, 2019 for the Investment Management and Research Segment

Operating earnings

Operating earnings increased ~~$12~~$11 million to ~~$92~~$104 million during the three months ended ~~June~~September 30, 2020 from ~~$80~~$93 million in three months ended ~~June~~September 30, 2019 primarily attributable to the following:

•Increase in fee-type revenues of $33 million primarily due to higher distribution revenues and base fees driven by higher average AUM.

•Compensation, benefits and other operating costs and expenses decreased ~~$24~~$11 million primarily due to lower compensation and COVID-19 related expense saves.

•Net investment income increased ~~$17~~$8 million mainly due to gains on seed capital investments, offset by Net derivative losses.

The increase was partially offset by the following:

•Net derivative gains (losses) decreased ~~$22~~$14 million offsetting the increase in Net investment income.

•Commissions and distribution-related payments increased ~~$10~~$20 million due to higher payments to financial intermediaries for the distribution of AB mutual funds.

Long-Term Net Flows and AUM

•Total AUM as of ~~June~~September 30, 2020 was ~~$600.0~~$630.8 billion, up ~~$58.2~~$30.8 billion, or ~~10.7%~~5.1%, compared to ~~March 31,~~June 30, 2020. During the ~~second~~third quarter of 2020, AUM increased as a result of market appreciation of ~~$61.5~~$27.7 billion ~~offset by net outflows of $3.3 billion (primarily due to $7.9 billion outflows from AXA Group, partially offset by Retail~~and net inflows of ~~$3.8 billion).~~$3.1 billion, primarily due to Institutional net inflows of $2.1 billion. Excluding AXA redemptions of $2.2 billion, net inflows were $5.3 billion in the third quarter.

~~Six~~Nine Months Ended ~~June~~September 30, 2020 Compared to the ~~Six~~Nine Months Ended ~~June~~September 30, 2019 for the Investment Management and Research Segment

Operating earnings

108

Operating earnings increased ~~$30~~$41 million to ~~$187~~$291 million during the ~~six~~nine months ended ~~June~~September 30, 2020 from ~~$157~~$250 million in ~~six~~nine months ended ~~June~~September 30, 2019 primarily attributable to the following:

•Increase in fee-type revenues of ~~$135~~$168 million primarily due to higher base fees and distribution revenues driven by higher average AUM, and higher Bernstein Research Services revenues.

•Net derivative ~~gains (losses) increased $28~~losses decreased $14 million partially offsetting the decrease in Net investment income.

The increase was partially offset by the following:

•Decrease in Net investment income of ~~$40~~$32 million mainly due to the seed capital investment subject to market risk, partially offset inby lower Net derivative ~~gains.~~losses.

•Commissions and distribution-related payments increased ~~$44~~$64 million due to higher payments to financial intermediaries for the distribution of AB mutual funds.

•Compensation, benefits and other operating costs and expenses increased ~~$25~~$14 million primarily due to higher employee compensation attributed to higher revenues.

•Earnings attributable to the noncontrolling interest increased by ~~$20~~$26 million due to higher pre-tax earnings.

•Income tax expense increased $7$9 million due to higher pre-tax ~~earnings.~~earnings, partially offset by a lower effective tax rate in the nine months ended September 20,2020.

Long-Term Net Flows and AUM

•Total AUM as of ~~June~~September 30, 2020 was ~~$600.0~~$630.8 billion, up ~~$19.2~~$38.4 billion, or ~~3.3%~~6.5%, compared to ~~June~~September 30, 2019. During the ~~six~~twelve months ended ~~June~~September 30, 2020, AUM increased as a result of market appreciation of ~~$13.2~~$37.4 billion and net inflows of ~~$5.8~~$0.8 billion (Retail net inflows of ~~$11.0~~$4.3 billion were partially offset by Institutional net outflows of ~~$3.1~~$2.5 billion ~~primarily due to $8.9 billion outflows from AXA Group~~ and Private Wealth Management net outflows of ~~$2.1~~$1.0 billion). Excluding AXA’s redemption of $11.1 billion in the first nine months of 2020, net inflows were $11.9 billion during the twelve months ended September 30, 2020.

Protection Solutions

The Protection Solutions segment includes our life insurance and employee benefits businesses. We provide a targeted range of products aimed at serving the financial needs of our clients throughout their lives, including VUL, IUL and term life products. In 2015, we entered the employee benefits market and currently offer a suite of dental, vision, life, as well as short- and long-term disability insurance products to small and medium-size businesses.

In recent years, we have refocused our product offering and distribution towards less capital intensive, higher return accumulation and protection products. We plan to improve our Operating earnings over time through earnings generated from sales of our repositioned product portfolio and by proactively managing and optimizing our in-force book.

The following table summarizes Operating earnings (loss) of our Protection Solutions segment for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(in millions)
Operating earnings (loss) $ (12) $ 106 $ 26 $ 155


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
Operating earnings (loss)	$	51	$	100	$	88	$	207

88109

Key components of Operating earnings (loss) are:


		Three Months Ended June 30,						Six Months Ended June 30,									Three Months Ended September 30,			Nine Months Ended September 30,
		2020		2019		2020		2019			2020		2019		2020			2019
		(in millions)																(in millions)
REVENUES	REVENUES									REVENUES
Policy charges, fee income and premiums	Policy charges, fee income and premiums	$	469	$	530	$	1,026	$	1,072	Policy charges, fee income and premiums	$	450	$	555	$	1,480		$	1,622
Net investment income	Net investment income	204		248		448		472		Net investment income	240		242		688			714
Net derivative gains (losses)	Net derivative gains (losses)	5		1		7		11		Net derivative gains (losses)	3		(1)		10			10
Investment management, service fees and other income	Investment management, service fees and other income	52		64		108		119		Investment management, service fees and other income	58		59		166			178
Segment revenues	Segment revenues	$	730	$	843	$	1,589	$	1,674	Segment revenues	$	751	$	855	$	2,344		$	2,524

BENEFITS AND OTHER DEDUCTIONS	BENEFITS AND OTHER DEDUCTIONS									BENEFITS AND OTHER DEDUCTIONS
Policyholders’ benefits	Policyholders’ benefits	$	460	$	419	$	962	$	871	Policyholders’ benefits	$	455	$	359	$	1,415		$	1,277
Interest credited to policyholders’ account balances	Interest credited to policyholders’ account balances	137		127		264		265		Interest credited to policyholders’ account balances	130		131		394			396
Commissions and distribution related payments	Commissions and distribution related payments	35		43		75		81		Commissions and distribution related payments	40		41		115			122
Amortization of deferred policy acquisition costs	Amortization of deferred policy acquisition costs	31		50		87		100		Amortization of deferred policy acquisition costs	(16)		120		63			229
Compensation, benefits and other operating costs and expenses	Compensation, benefits and other operating costs and expenses	81		75		169		170		Compensation, benefits and other operating costs and expenses	82		84		251			254
Interest expense	Interest expense	—		—		—		—		Interest expense	—		—		—			—
Segment benefits and other deductions	Segment benefits and other deductions	$	744	$	714	$	1,557	$	1,487	Segment benefits and other deductions	$	691	$	735	$	2,238		$	2,278

The following table summarizes Protection Solutions Reserves for our Protection Solutions segment as of the dates presented:


		As of							As of
		June 30, 2020		December 31, 2019			September 30, 2020		December 31, 2019
		(in millions)							(in millions)
Protection Solutions Reserves (1)	Protection Solutions Reserves (1)					Protection Solutions Reserves (1)
General Account	General Account	$	17,930	$	17,298	General Account	$	18,691	$	17,300
Separate Accounts	Separate Accounts	12,928		13,616		Separate Accounts	13,190		13,616
Total Protection Solutions Reserves	Total Protection Solutions Reserves	$	30,858	$	30,914	Total Protection Solutions Reserves	$	31,881	$	30,916

_______________

(1)Does not include Protection Solutions Reserves for our employee benefits business as it is a start-up business and therefore has immaterial in-force policies.

The following table presents our in-force face amounts for the periods indicated, respectively, for our individual life insurance products:


		As of							As of
		June 30, 2020		December 31, 2019			September 30, 2020		December 31, 2019
		(in billions)							(in billions)
In-force face amount by product: (1)	In-force face amount by product: (1)					In-force face amount by product: (1)
Universal Life (2)	Universal Life (2)	$	49.9	$	53.3	Universal Life (2)	$	49.5	$	53.3
Indexed Universal Life	Indexed Universal Life	27.0		25.8		Indexed Universal Life	27.5		25.8
Variable Universal Life (3)	Variable Universal Life (3)	126.4		127.5		Variable Universal Life (3)	126.7		127.5
Term	Term	206.3		233.5		Term	203.3		233.5
Whole Life	Whole Life	1.4		1.4		Whole Life	1.3		1.4
Total in-force face amount	Total in-force face amount	$	411.0	$	441.5	Total in-force face amount	$	408.3	$	441.5

_______________

(1)Includes individual life insurance and does not include employee benefits as it is a start-up business and therefore has immaterial in-force policies.

(2)Universal Life includes Guaranteed Universal Life.

(3)Variable Universal Life includes VL and COLI.

89110

Three Months Ended ~~June~~September 30, 2020 Compared to the Three Months Ended ~~June~~September 30, 2019 for the Protection Solutions Segment

Operating earnings (loss)

Operating earnings ~~(loss)~~ decreased ~~$118~~$49 million to ~~a loss of $12~~$51 million during the three months ended ~~June~~September 30, 2020 from ~~earnings of $106~~$100 million in the three months ended ~~June~~September 30, 2019 primarily attributable to the following:

•Fee-type revenue decreased ~~$73~~$106 million mainly driven by the $24 million unfavorable impact of assumption updates in 2020 compared to $3 million favorable impact of assumption updates in 2019, lower premiums reflecting the impact of the sale of USFL and MLICA, lower premiums on traditional products, as well as higher ceded premiums.

•Policyholders’ benefits increased $96 million mainly driven by the $31 million unfavorable impact of assumption updates in 2020 compared to the $42 million favorable impact of assumption updates in 2019 and the favorable 2019 reserve adjustment on our disability deduction waiver rider reserves, the re-establishment of PFBL reserve upon exiting loss recognition and an increase in term and employee benefits product reserves. The increase in Policyholders’ benefits was partially offset by favorable net mortality and lower policyholders’ benefits reflecting the impact of the sale of USFL and MLICA.

This decrease was partially offset by the following:

•Amortization of DAC decreased $136 million mainly due to the $58 million favorable impact of assumption updates in 2020 compared to the $49 million unfavorable impact of assumption updates in 2019 and the unfavorable impact of the update to reinsurance projections in 2019. Baseline amortization in 2020 is lower than 2019, post the 2020 assumption updates.

•Income tax expense decreased $11 million due to lower pre-tax earnings.

See “—Significant Factors Impacting Our Results—Assumption Updates and Model Changes” for more information regarding assumption updates.

Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019 for the Protection Solutions Segment

Operating earnings

Operating earnings decreased $119 million to $88 million during the nine months ended September 30, 2020 from $207 million in the nine months ended September 30, 2019 primarily attributable to the following:

•Fee-type revenue decreased $154 million mainly driven by the premium impact of the USFL and MLICA sale, lower premiums on traditional products (offset in Policyholders’ benefits) as well as higher ceded premiums and the $24 million unfavorable impact of assumption updates in 2020 compared to the $3 million favorable impact of assumption updates in 2019.

•Policyholders’ benefits increased $138 million mainly driven by the $31 million unfavorable impact of assumption updates in 2020 compared to the $42 million favorable impact of assumption updates in 2019 and the favorable 2019 reserve adjustment on ~~amortization~~our disability deduction waiver rider reserves, the re-establishment of PFBL reserve upon exiting loss recognition and an increase in term and employee benefits product reserves. The increase in Policyholders’ benefits was partially offset by favorable net mortality and lower policyholders’ benefits reflecting the impact of the ~~initial fee liability from reactivity to adverse mortality experience.~~sale of USFL and MLICA.

•Net investment income decreased ~~$44~~$26 million primarily due to ~~losses on our~~lower income from alternative ~~investment portfolio,~~investments and the impact of lower assets as a result of the USFL and MLICA sale, partly offset by the General Account investment portfolio ~~optimization.~~

•Policyholders’ benefits increased $41 million mainly due to adverse mortality experience largely due to the impacts of COVID-19 related claims, partly offset by lower reserve accrual on our traditional products (partly offset in fee-type revenue).

•~~Interest credited to policyholder’s account balances increased $10 million, mainly due to~~optimization and higher ~~crediting on IUL products.~~

•Compensation, benefits and other operating costs and expenses increased $6 million mainly due to the positive impact in 2019 of a legal reserve release, partly offset by productivity gains and COVID-19 related expense saves.assets.

This decrease was partially offset by the following:

•Amortization of DAC decreased ~~$19~~$166 million mainly due to the $58 million favorable impact of ~~reactivity~~assumption updates in 2020 compared to ~~adverse mortality experience.~~

•~~Commissions decreased $8~~the $49 million ~~mainly~~unfavorable impact of assumption updates in 2019 and the unfavorable impact of the update to reinsurance projections in 2019. Baseline amortization in 2020 is lower ~~life sales.~~than 2019, post the 2020 assumption updates.

•Income tax expense decreased ~~$25 million due to a pre-tax loss in the three months ended June 30, 2020 compared to pre-tax earnings in the three months ended June 30, 2019.~~

~~Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019 for the Protection Solutions Segment~~

~~Operating earnings~~

~~Operating earnings decreased $129 million to $26 million during the six months ended June 30, 2020 from $155 million in the six months ended June 30, 2019 primarily attributable to the following:~~

•~~Policyholders’ benefits increased $91 million mainly due to adverse mortality experience including COVID-19 related claims and an increase in term product reserves.~~

•Fee-type revenue decreased $57 million mainly driven by the premium impact of the USFL and MLICA sale, lower premiums on traditional products (offset in Policyholders’ benefits) as well as higher ceded premiums, and the unfavorable impact on amortization of the initial fee liability from reactivity to adverse mortality experience.

•Net investment income decreased $24 million primarily due to losses on our alternative investment portfolio and the impact of lower assets as a result of the USFL and MLICA sale, partly offset by the General Account investment portfolio optimization.

~~This decrease was partially offset by the following:~~

•~~Amortization of DAC decreased $13 million mainly due to the favorable impact of reactivity to adverse mortality experience, and lower baseline amortization.~~

•~~Income tax expense decreased $26~~$21 million due to lower pre-tax earnings.

90111

See “—Significant Factors Impacting Our Results—Assumption Updates and Model Changes” for more information regarding assumption updates.

Corporate and Other

Corporate and Other includes some of our financing and investment expenses. It also includes: Equitable Advisors broker-dealer business, the Closed Block, run-off variable annuity reinsurance business, run-off group pension business, run-off health business, benefit plans for our employees, certain strategic investments and certain unallocated items, including capital and related investments, interest expense and financing fees and corporate expense. AB’s results of operations are reflected in the Investment Management and Research segment. Accordingly, Corporate and Other does not include any items applicable to AB.

The following table summarizes Operating earnings (loss) of Corporate and Other for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(in millions)
Operating earnings (loss) $ (61) $ (81) $ (157) $ (149)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
Operating earnings (loss)	$	(87)	$	(90)	$	(244)	$	(240)

General Account Investment Portfolio

The General Account investment portfolio supports the insurance and annuity liabilities of our Individual Retirement, Group Retirement and Protection Solutions businesses. Our General Account investment portfolio investment strategy seeks to achieve sustainable risk-adjusted returns by focusing on principal preservation, investment return, duration and liquidity requirements by product class and the diversification of risks. Investment activities are undertaken according to investment policy statements that contain internally established guidelines and are required to comply with applicable laws and insurance regulations. Risk tolerances are established for credit risk, market risk, liquidity risk and concentration risk across types of issuers and asset classes that seek to mitigate the impact of cash flow variability arising from these risks. The impact of COVID-19 continues to be assessed for potential negative impacts to the performance of mortgage loans and fixed maturities.

The General Account investment portfolio consists largely of investment grade fixed maturities, short-term investments, commercial and agricultural mortgage loans, alternative investments and other financial instruments. Fixed maturities include publicly issued corporate bonds, government bonds, privately placed notes and bonds, bonds issued by states and municipalities, mortgage-backed securities and asset-backed securities. The General Account investment portfolio also includes credit derivatives to replicate exposure to individual securities or pools of securities as a means of achieving credit exposure similar to bonds of the underlying issuer(s) more efficiently. In addition, from time to time we use derivatives for hedging purposes to reduce our exposure to equity markets, interest rates and credit spreads.

As part of our asset and liability management strategies, we maintain a weighted average duration for our General Account investment portfolio that is within an acceptable range of the estimated duration of our liabilities given our risk appetite and hedging programs. Our asset and liability management strategies are applied to portfolio duration groups within the General Account investment portfolio. For example, we maintain a “short duration” group comprised primarily of investment grade fixed maturity securities that are aligned with the duration of product liabilities with an average duration of less than six years (e.g., our SCS product). As of ~~June~~September 30, 2020 and December 31, 2019, 60% and 62% of the fixed maturities in the short duration group were rated NAIC 1, and ~~40%~~39% and 38% were rated NAIC 2, respectively. During the ~~second~~third quarter of 2020, new purchases from both new money flows and portfolio rebalancing activity were designated as AFS included in fixed maturities. The remaining trading securities in the short duration VA portfolio will be opportunistically rebalanced to AFS and shown with fixed maturities, which is consistent with other portfolios in our General Account. New AFS assets included in fixed maturities had an amortized cost of ~~$14.5~~$15.6 billion as of ~~June~~September 30, 2020.

The General Account invests in commercial and agricultural mortgage loans, included in the balance sheet as Mortgage loans on real estate, and privately negotiated fixed maturities, included in the balance sheet as fixed maturities AFS. Under certain circumstances, modifications are granted to these contracts. These modifications were determined not to be Troubled Debt Restructurings. At ~~June~~September 30, 2020, the General Account had twenty commercial mortgage loans with a carrying value of ~~$830~~$835 million in which short term modifications were granted. Forbearance agreements reduced mortgage payments for a set time period. The commercial mortgage modifications were a result of the COVID-19 pandemic’s impact on the underlying real estate operations. The General Account did not have any agricultural mortgage loans for which modifications were granted at ~~June~~September 30, 2020. At ~~June~~September 30, 2020, the General Account had ~~two~~seven privately negotiated fixed maturity modifications

112

with a carrying value of $8$67 million. The modifications to privately negotiated fixed maturities were to allow for the postponement or reduction in interest or principal payments for a defined period. The modifications were agreed upon to support several investments that had operations decline primarily due to the COVID-19 pandemic. The commercial mortgage loans and privately negotiated fixed maturities modifications are 1% of the General Account’s total invested assets.

Investment portfolios are primarily managed by legal entity with dedicated portfolios for certain blocks of business. For portfolios that back multiple product groups, investment results are allocated to business segments.

The General Account investment portfolio reflects certain differences from the presentation of the U.S. GAAP Consolidated Financial Statements. This presentation is consistent with how we manage the General Account investment portfolio. For further investment information, please refer to Note 3 and Note 4 of the Notes to the Consolidated Financial Statements.

The General Account adopted CECL effective January 1, 2020. For further information regarding the adoption of CECL, please refer to Note 2 in the Notes to the Consolidated Financial Statements.

Investment Results of the General Account Investment Portfolio

The following table summarizes the General Account investment portfolio results with Non-GAAP Operating Earnings adjustments by asset category for the periods indicated. This presentation is consistent with how we measure investment performance for management purposes.

Three Months Ended June 30,
2020 (3) 2019
Yield Amount (2) Yield Amount (2)
(Dollars in millions)
Fixed Maturities:
Income (loss) 3.48 % $ 565 4.00 % $ 516
Ending assets 67,302 54,315
Mortgages:
Income (loss) 4.07 % 125 4.26 % 130
Ending assets 12,523 12,288
Other Equity Investments (1):
Income (loss) (18.84) % (72) 8.90 % 31
Ending assets 1,497 1,382
Policy Loans:
Income (loss) 5.46 % 51 5.44 % 51
Ending assets 3,689 3,740
Cash and Short-term Investments:
Income (loss) 1.45 % 17 0.98 % 8
Ending assets 4,567 3,296
Repurchase and funding agreements:
Interest expense and other (18) (24)
Ending assets (liabilities) (6,700) (4,001)
Total Invested Assets:
Income (loss) 3.33 % 668 4.18 % 712
Ending Assets 82,878 71,020
Short Duration Fixed Maturities:
Income (loss) 3.09 % 44 3.04 % 79
Ending assets 5,755 8,797
Total:
Investment income (loss) 3.31 % 712 4.03 % 791
Less: investment fees (0.11) % (24) (0.08) % (16)
Investment Income, Net 3.20 % $ 688 3.95 % $ 775
Ending Net Assets $ 88,633 $ 79,817

92113


		Six Months Ended June 30,																Year Ended December 31		Three Months Ended September 30,
		2020						2019								2019	2020					2019
		Yield		Amount (2)		Yield		Amount (2)		Amount (2)			Yield		Amount (2)		Yield			Amount (2)
		(Dollars in millions)																				(Dollars in millions)
Fixed Maturities:	Fixed Maturities:											Fixed Maturities:
Income (loss)	Income (loss)	3.54	%	$	1,138	3.82	%	$	951	$	2,019	Income (loss)	3.41	%	$	586	3.69		%	$	535
Ending assets	Ending assets			67,302				54,315		62,687		Ending assets			70,135					61,684
Mortgages:	Mortgages:											Mortgages:
Income (loss)	Income (loss)	4.14	%	252		4.34	%	262		541		Income (loss)	4.17	%	132		4.44		%	135
Ending assets	Ending assets			12,523				12,288		12,107		Ending assets			12,802					12,022
Other Equity Investments (1):	Other Equity Investments (1):											Other Equity Investments (1):
Income (loss)	Income (loss)	(5.66)	%	(43)		6.58	%	46		86		Income (loss)	11.82	%	46		7.52		%	27
Ending assets	Ending assets			1,497				1,382		1,507		Ending assets			1,588					1,488
Policy Loans:	Policy Loans:											Policy Loans:
Income (loss)	Income (loss)	5.51	%	103		5.53	%	104		210		Income (loss)	5.14	%	50		5.66		%	53
Ending assets	Ending assets			3,689				3,740		3,735		Ending assets			4,123					3,750
Cash and Short-term Investments:	Cash and Short-term Investments:											Cash and Short-term Investments:
Income (loss)	Income (loss)	0.04	%	1		0.49	%	8		(4)		Income (loss)	0.07	%	1		(1.04)		%	(7)
Ending assets	Ending assets			4,567				3,296		1,856		Ending assets			3,931					2,071
Repurchase and funding agreements:	Repurchase and funding agreements:											Repurchase and funding agreements:
Interest expense and other	Interest expense and other			(46)				(49)		(110)		Interest expense and other			(15)					(27)
Ending assets (liabilities)	Ending assets (liabilities)			(6,700)				(4,001)		(6,909)		Ending assets (liabilities)			(6,848)					(6,510)
Total Invested Assets:	Total Invested Assets:											Total Invested Assets:
Income (loss)	Income (loss)	3.53	%	1,405		3.99	%	1,322		2,742		Income (loss)	3.80	%	800		3.94		%	716
Ending Assets	Ending Assets			82,878				71,020		74,983		Ending Assets			85,731					74,505
Short Duration Fixed Maturities:	Short Duration Fixed Maturities:											Short Duration Fixed Maturities:
Income (loss)	Income (loss)	3.35	%	96		3.02	%	181		312		Income (loss)	3.29	%	44		3.33		%	70
Ending assets	Ending assets			5,755				8,797		6,173		Ending assets			5,448					8,030
Total:	Total:											Total:
Investment income (loss)	Investment income (loss)	3.51	%	1,501		3.85	%	1,503		3,054		Investment income (loss)	3.77	%	844		3.87		%	786
Less: investment fees	Less: investment fees	(0.12)	%	(49)		(0.08)	%	(32)		(66)		Less: investment fees	(0.12)	%	(26)		(0.08)		%	(16)
Investment Income, Net	Investment Income, Net	3.40	%	$	1,452	3.77	%	$	1,471	$	2,988	Investment Income, Net	3.65	%	$	818	3.79		%	$	770
Ending Net Assets	Ending Net Assets			$	88,633			$	79,817	$	81,156	Ending Net Assets			$	91,179				$	82,535

114


	Nine Months Ended September 30,								Year Ended December 31
	2020				2019				2019
	Yield		Amount (2)		Yield		Amount (2)		Amount (2)
	(Dollars in millions)
Fixed Maturities:
Income (loss)	3.49	%	$	1,725	3.78	%	$	1,486	$	2,019
Ending assets			70,135				61,684		62,687
Mortgages:
Income (loss)	4.15	%	384		4.37	%	397		541
Ending assets			12,802				12,022		12,107
Other Equity Investments (1):
Income (loss)	0.21	%	2		6.90	%	73		86
Ending assets			1,588				1,488		1,507
Policy Loans:
Income (loss)	5.38	%	153		5.57	%	157		210
Ending assets			4,123				3,750		3,735
Cash and Short-term Investments:
Income (loss)	0.05	%	2		0.04	%	1		(4)
Ending assets			3,931				2,071		1,856
Repurchase and funding agreements:
Interest expense and other			(61)				(76)		(110)
Ending assets (liabilities)			(6,848)				(6,510)		(6,909)
Total Invested Assets:
Income (loss)	3.62	%	2,205		3.98	%	2,038		2,742
Ending Assets			85,731				74,505		74,983
Short Duration Fixed Maturities:
Income (loss)	3.33	%	140		3.09	%	251		312
Ending assets			5,448				8,030		6,173
Total:
Investment income (loss)	3.60	%	2,345		3.86	%	2,289		3,054
Less: investment fees	(0.12)	%	(75)		(0.08)	%	(48)		(66)
Investment Income, Net	3.49	%	$	2,270	3.78	%	$	2,241	$	2,988
Ending Net Assets			$	91,179			$	82,535	$	81,156

______________

(1)Includes, as of ~~June~~September 30, 2020, ~~June~~September 30, 2019 and December 31, 2019 respectively, ~~$353~~$359 million, ~~$209~~$347 million and $365 million of other invested assets.

(2)Amount for fixed maturities and mortgages represents original cost, reduced by repayments, write-downs, adjusted amortization of premiums, accretion of discount and allowances. Cost for equity securities represents original cost reduced by write-downs; cost for other limited partnership interests represents original cost adjusted for equity in earnings and reduced by distributions.

Fixed Maturities

The fixed maturity portfolio consists largely of investment grade corporate debt securities and includes significant amounts of U.S. government and agency obligations. The limited below investment grade securities in the General Account investment portfolio consist of “fallen angels,” originally purchased as investment grade, as well as short duration public high yield securities and loans to middle market companies.

Fixed Maturities by Industry

The following table sets forth these fixed maturities by industry category as of the dates indicated along with their associated gross unrealized gains and losses.

93115

Fixed Maturities by Industry (1)


		Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Percentage of Total (%)			Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Percentage of Total (%)
		(in millions)																					(in millions)
As of June 30, 2020
As of September 30, 2020														As of September 30, 2020
Corporate Securities:	Corporate Securities:													Corporate Securities:
Finance	Finance	$	14,014	$	—	$	947	$	21	$	14,940	20	%	Finance	$	14,221	$	—	$	953	$	17	$	15,157	19	%
Manufacturing	Manufacturing	13,253		1		1,382		19		14,615		19	%	Manufacturing	13,629		2		1,497		16		15,108		19	%
Utilities	Utilities	5,450		—		595		3		6,042		8	%	Utilities	6,075		—		628		14		6,689		9	%
Services	Services	6,856		10		624		35		7,435		10	%	Services	7,398		11		638		49		7,976		10	%
Energy	Energy	3,841		2		269		69		4,039		5	%	Energy	4,098		—		274		67		4,305		5	%
Retail and wholesale	Retail and wholesale	3,641		—		400		5		4,036		6	%	Retail and wholesale	3,377		—		398		4		3,771		5	%
Transportation	Transportation	2,082		—		224		2		2,304		3	%	Transportation	2,272		—		266		8		2,530		3	%
Other	Other	172		—		7		2		177		—	%	Other	126		—		6		1		131		—	%
Total corporate securities	Total corporate securities	49,309		13		4,448		156		53,588		71	%	Total corporate securities	51,196		13		4,660		176		55,667		70	%
U.S. government	U.S. government	13,120		—		4,241		—		17,361		23	%	U.S. government	13,145		—		4,308		—		17,453		22	%
Residential mortgage-backed (2)	Residential mortgage-backed (2)	160		—		15		—		175		—	%	Residential mortgage-backed (2)	146		—		14		—		160		—	%
Preferred stock	Preferred stock	376		—		15		11		380		—	%	Preferred stock	415		—		31		3		443		1	%
State & political	State & political	663		—		112		—		775		1	%	State & political	762		—		116		—		878		1	%
Foreign governments	Foreign governments	771		—		70		5		836		1	%	Foreign governments	829		—		82		6		905		1	%
Commercial mortgage-backed	Commercial mortgage-backed	854		—		25		—		879		1	%	Commercial mortgage-backed	1,067		—		50		—		1,117		2	%
Asset-backed securities	Asset-backed securities	2,062		—		24		41		2,045		3	%	Asset-backed securities	2,588		—		26		18		2,596		3	%
Total	Total	$	67,315	$	13	$	8,950	$	213	$	76,039	100	%	Total	$	70,148	$	13	$	9,287	$	203	$	79,219	100	%

As of December 31, 2019 (3)	As of December 31, 2019 (3)													As of December 31, 2019 (3)
Corporate Securities:	Corporate Securities:													Corporate Securities:
Finance	Finance	$	12,015	$	—	$	469	$	4	$	12,480	19	%	Finance	$	12,015	$	—	$	469	$	4	$	12,480	19	%
Manufacturing	Manufacturing	12,643		—		706		9		13,340		20	%	Manufacturing	12,643		—		706		9		13,340		20	%
Utilities	Utilities	4,999		—		302		8		5,293		8	%	Utilities	4,999		—		302		8		5,293		8	%
Services	Services	6,730		—		386		17		7,099		11	%	Services	6,730		—		386		17		7,099		11	%
Energy	Energy	3,772		—		189		14		3,947		6	%	Energy	3,772		—		189		14		3,947		6	%
Retail and wholesale	Retail and wholesale	3,515		—		183		7		3,691		6	%	Retail and wholesale	3,515		—		183		7		3,691		6	%
Transportation	Transportation	1,793		—		115		3		1,905		3	%	Transportation	1,793		—		115		3		1,905		3	%
Other	Other	198		—		8		—		206		—	%	Other	198		—		8		—		206		—	%
Total corporate securities	Total corporate securities	45,665		—		2,358		62		47,961		73	%	Total corporate securities	45,665		—		2,358		62		47,961		73	%
U.S. government and agency	U.S. government and agency	14,395		—		1,289		305		15,379		23	%	U.S. government and agency	14,395		—		1,289		305		15,379		23	%
Residential mortgage-backed (2)	Residential mortgage-backed (2)	178		—		13		—		191		—	%	Residential mortgage-backed (2)	178		—		13		—		191		—	%
Preferred stock	Preferred stock	501		—		17		5		513		1	%	Preferred stock	501		—		17		5		513		1	%
State & political	State & political	638		—		70		3		705		1	%	State & political	638		—		70		3		705		1	%
Foreign governments	Foreign governments	462		—		35		5		492		1	%	Foreign governments	462		—		35		5		492		1	%
Commercial mortgage-backed	Commercial mortgage-backed	—		—		—		—		—		—	%	Commercial mortgage-backed	—		—		—		—		—		—	%
Asset-backed securities	Asset-backed securities	848		—		4		3		849		1	%	Asset-backed securities	848		—		4		3		849		1	%
Total	Total	$	62,687	$	—	$	3,786	$	383	$	66,090	100	%	Total	$	62,687	$	—	$	3,786	$	383	$	66,090	100	%

______________

(1)Investment data has been classified based on standard industry categorizations for domestic public holdings and similar classifications by industry for all other holdings.

(2)Includes publicly traded agency pass-through securities and collateralized obligations.

(3)Excludes amounts reclassified as Held-for-Sale.

94116

Fixed Maturities Credit Quality

The Securities Valuation Office (“SVO”) of the National Association of Insurance Commissioners (“NAIC”), evaluates the investments of insurers for regulatory reporting purposes and assigns fixed maturities to one of six categories (“NAIC Designations”). NAIC Designations of “1” or “2” include fixed maturities considered investment grade, which include securities rated Baa3 or higher by Moody’s or BBB- or higher by Standard & Poor’s. NAIC Designations of “3” through “6” are referred to as below investment grade, which include securities rated Ba1 or lower by Moody’s and BB+ or lower by Standard & Poor’s. As a result of time lags between the funding of investments and the completion of the SVO filing process, the fixed maturity portfolio typically includes securities that have not yet been rated by the SVO as of each balance sheet date. Pending receipt of SVO ratings, the categorization of these securities by NAIC designation is based on the expected ratings indicated by internal analysis.

The following table sets forth the General Account’s fixed maturities portfolio by NAIC rating at the dates indicated.

Fixed Maturities


NAIC Designation	NAIC Designation	Rating Agency Equivalent	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		NAIC Designation			Rating Agency Equivalent		Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
			(in millions)																							(in millions)
As of June 30, 2020
As of September 30, 2020													As of September 30, 2020
1................................	1................................	Aaa, Aa, A	$	44,300	$	—	$	6,910	$	56	$	51,154	1................................			Aaa, Aa, A		$	45,448	$	—	$	7,054	$	52	$	52,450
2................................	2................................	Baa	21,216		—		2,030		43		23,203		2................................			Baa		22,752		—		2,212		63		24,901
		Investment grade	65,516		—		8,940		99		74,357					Investment grade		68,200		—		9,266		115		77,351
3................................	3................................	Ba	1,034		1		7		53		987		3................................			Ba		1,129		—		16		43		1,102
4................................	4................................	B	667		9		2		49		611		4................................			B		696		11		3		28		660
5................................	5................................	Caa	86		2		1		11		74		5................................			Caa		107		—		2		15		94
6................................	6................................	Ca, C	12		1		—		1		10		6................................			Ca, C		16		2		—		2		12
		Below investment grade	1,799		13		10		114		1,682					Below investment grade		1,948		13		21		88		1,868
Total Fixed Maturities	Total Fixed Maturities				$	67,315	$	13	$	8,950	$	213		$	76,039		Total Fixed Maturities			$	70,148	$	13	$	9,287	$	203	$	79,219

As of December 31, 2019 (1)	As of December 31, 2019 (1)												As of December 31, 2019 (1)
1................................	1................................	Aaa, Aa, A	$	42,770	$	—	$	2,666	$	342	$	45,094	1................................			Aaa, Aa, A		$	42,770	$	—	$	2,666	$	342	$	45,094
2................................	2................................	Baa	18,605		—		1,105		18		19,692		2................................			Baa		18,605		—		1,105		18		19,692
		Investment grade	61,375		—		3,771		360		64,786					Investment grade		61,375		—		3,771		360		64,786
3................................	3................................	Ba	663		—		9		7		665		3................................			Ba		663		—		9		7		665
4................................	4................................	B	567		—		4		10		561		4................................			B		567		—		4		10		561
5................................	5................................	Caa	80		—		2		6		76		5................................			Caa		80		—		2		6		76
6................................	6................................	Ca, C	2		—		—		—		2		6................................			Ca, C		2		—		—		—		2
		Below investment grade	1,312		—		15		23		1,304					Below investment grade		1,312		—		15		23		1,304
Total Fixed Maturities	Total Fixed Maturities				$	62,687	$	—	$	3,786	$	383		$	66,090		Total Fixed Maturities			$	62,687	$	—	$	3,786	$	383	$	66,090

______________

(1)Excludes amounts reclassified as Held-for-Sale.

95117

Mortgage Loans

The mortgage portfolio primarily consists of commercial and agricultural mortgage loans. The investment strategy for the mortgage loan portfolio emphasizes diversification by property type and geographic location with a primary focus on asset quality. The tables below show the breakdown of the amortized cost of the General Account’s investments in mortgage loans by geographic region and property type as of the dates indicated.

Mortgage Loans by Region and Property Type


		June 30, 2020						December 31, 2019							September 30, 2020				December 31, 2019
		Amortized Cost		% of Total		Amortized Cost		% of Total			Amortized Cost		% of Total		Amortized Cost		% of Total
		(in millions)															(in millions)
By Region:	By Region:									By Region:
U.S. Regions:	U.S. Regions:									U.S. Regions:
Pacific	Pacific	$	3,676	29	%	$	3,468	29	%	Pacific	$	3,839	30	%	$	3,468	29	%
Middle Atlantic	Middle Atlantic	3,516		28		3,220		27		Middle Atlantic	3,665		28		3,220		27
South Atlantic	South Atlantic	1,286		10		1,269		10		South Atlantic	1,287		10		1,269		10
East North Central	East North Central	917		8		906		8		East North Central	922		7		906		8
Mountain	Mountain	1,033		8		1,012		8		Mountain	1,029		8		1,012		8
West North Central	West North Central	885		7		896		7		West North Central	883		7		896		7
West South Central	West South Central	618		5		631		5		West South Central	584		5		631		5
New England	New England	512		4		566		5		New England	512		4		566		5
East South Central	East South Central	146		1		139		1		East South Central	151		1		139		1
Total Mortgage Loans	Total Mortgage Loans	$	12,589	100	%	$	12,107	100	%	Total Mortgage Loans	$	12,872	100	%	$	12,107	100	%

By Property Type:	By Property Type:									By Property Type:
Office	Office	$	4,171	33	%	$	3,794	31	%	Office	$	4,199	33	%	$	3,794	31	%
Multifamily	Multifamily	3,815		30		3,768		31		Multifamily	3,976		31		3,768		31
Agricultural loans	Agricultural loans	2,743		22		2,717		23		Agricultural loans	2,753		21		2,717		23
Retail	Retail	695		6		665		5		Retail	694		5		665		5
Industrial	Industrial	349		3		344		3		Industrial	430		3		344		3
Hospitality	Hospitality	475		4		477		4		Hospitality	477		4		477		4
Other	Other	341		2		342		3		Other	343		3		342		3
Total Mortgage Loans	Total Mortgage Loans	$	12,589	100	%	$	12,107	100	%	Total Mortgage Loans	$	12,872	100	%	$	12,107	100	%

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Liquidity and Capital Resources

Liquidity refers to our ability to generate adequate amounts of cash from our operating, investment and financing activities to meet our cash requirements with a prudent margin of safety. Capital refers to our long-term financial resources available to support business operations and future growth. Our ability to generate and maintain sufficient liquidity and capital is dependent on the profitability of our businesses, timing of cash flows related to our investments and products, our ability to access the capital markets, general economic conditions and the alternative sources of liquidity and capital described herein. When considering our liquidity and cash flows, it is important to distinguish between the needs of Holdings and the needs of our insurance and non-insurance subsidiaries. We also distinguish and separately manage the liquidity and capital resources of our retirement and protection businesses, including our Individual Retirement, Group Retirement and Protection Solutions segments, and our Investment Management and Research segment.

Sources and Uses of Liquidity

The Company had sufficient cash flows from operations to satisfy liquidity requirements.

Cash Flows of Holdings

As a holding company with no business operations of its own, Holdings primarily derives cash flows from dividends from its subsidiaries and distributions related to its economic interest in AB, nearly all of which is currently held outside our insurance company subsidiaries. These principal sources of liquidity are augmented by cash and short-term investments held by Holdings and access to bank lines of credit and the capital markets. The main uses of liquidity for Holdings are interest payments and debt repayment, payment of dividends and other distributions to stockholders, which may include stock repurchases, loans and capital contributions, if needed, to our insurance subsidiaries. Our principal sources of liquidity and our capital position are described in the following paragraphs.

Sources and Uses of Holding Company Highly Liquid Assets

The following table sets forth Holding’s principal sources and uses of highly liquid assets, excluding net borrowings from our intercompany liquidity account, for the periods indicated.


		Six Months Ended June 30,							Nine Months Ended September 30,
		2020		2019			2020		2019
		(in millions)							(in millions)
Highly Liquid Assets, beginning of period	Highly Liquid Assets, beginning of period	$	1,589	$	743	Highly Liquid Assets, beginning of period	$	1,589	743
Dividends from subsidiaries	Dividends from subsidiaries	1,750		197		Dividends from subsidiaries	1,838		1,303
Repayment of surplus note including interest	Repayment of surplus note including interest	—		576		Repayment of surplus note including interest			576

Capital contributions to subsidiaries	Capital contributions to subsidiaries	(335)		(76)		Capital contributions to subsidiaries	(335)		(76)

Income taxes payable	Income taxes payable	142		68		Income taxes payable
Total Business Capital Activity	Total Business Capital Activity	1,557		765		Total Business Capital Activity	1,503		1,803

Purchase of treasury shares	Purchase of treasury shares	(230)		(600)		Purchase of treasury shares	(330)		(637)
Retirement of treasury shares	Retirement of treasury shares	—		(150)		Retirement of treasury shares	—		(150)
Shareholder dividends paid	Shareholder dividends paid	(146)		(141)		Shareholder dividends paid	(222)		(215)
Total Share Repurchases, Dividends and Acquisition Activity	Total Share Repurchases, Dividends and Acquisition Activity	(376)		(891)		Total Share Repurchases, Dividends and Acquisition Activity	(552)		(1,002)

Issuance of preferred stock						Issuance of preferred stock	494		—
Preferred stock dividend	Preferred stock dividend	(23)		—		Preferred stock dividend	(34)		—
Total Preferred Stock Activity	Total Preferred Stock Activity	(23)		—		Total Preferred Stock Activity	460		—

Net decrease (increase) in loans to affiliates	Net decrease (increase) in loans to affiliates	(125)		—		Net decrease (increase) in loans to affiliates	260		—
Total Affiliated Debt Activity	Total Affiliated Debt Activity	(125)		—		Total Affiliated Debt Activity	260		—

97119


							Nine Months Ended September 30,
		Six Months Ended June 30,							2020		2019
		2020		2019			(in millions)
		(in millions)
Interest paid on external debt and P-Caps	Interest paid on external debt and P-Caps	(110)		(104)		Interest paid on external debt and P-Caps	(122)		(115)
Others, net	Others, net	(70)		(22)		Others, net	(193)		214
Total Other Activity	Total Other Activity	(180)		(126)		Total Other Activity	(315)		99

Net increase (decrease) in highly liquid assets	Net increase (decrease) in highly liquid assets	853		(251)		Net increase (decrease) in highly liquid assets	1,357		901
Highly Liquid Assets, end of period	Highly Liquid Assets, end of period	$	2,442	$	492	Highly Liquid Assets, end of period	$	2,946	$	1,644

In the ~~six~~nine months ended ~~June~~September 30, 2020, Holdings’ liquid assets increased ~~$0.9~~$1.4 billion. Excluding the amount set aside for the EQH Facility (as described under “—Capital Position of Holdings—Credit Facility with AB”), liquid assets increased ~~$1.0~~$1.1 billion. The resources increased by $1.8 billion due to dividends from our subsidiaries and $494 million in Preferred Stock issuance , and the primary uses are $335 million in capital contributions to subsidiaries, ~~$376~~$552 million in shareholders return including dividends and share repurchases.

Cash Distributions from Our Subsidiaries

In 2019, Holdings and certain of its subsidiaries received cash distributions from AB of $452 million and $1 billion in dividends from Equitable Financial. Also, Holdings received $576 million from Equitable Financial as repayment of principal of $572 million and interest of $4 million related to a $572 million surplus note.

Through ~~June~~September 30, 2020, Holdings and certain of its subsidiaries received cash distributions from AB of ~~$285~~$404 million and $1.2 billion in dividends from Equitable Financial. Also, Holdings received $60 million in distributions from Equitable Advisors. Holdings also received $164 million in distributions from Equitable Financial related to the USFL and MLICA sale proceeds.

Distributions from Insurance Subsidiaries

Our insurance companies are subject to limitations on the payment of dividends and other transfers of funds to Holdings and other affiliates under applicable insurance law and regulation. Also, more generally, the ability of our insurance subsidiaries to pay dividends can be affected by market conditions and other factors beyond our control.

Under New York insurance law applicable to Equitable Financial, a domestic stock life insurer may not, without prior approval of the NYDFS, pay a dividend to its stockholders exceeding an amount calculated based on a statutory formula. This formula would permit Equitable Financial to pay shareholder dividends up to approximately $2.1 billion during 2020. Dividends in excess of this amount require the insurer to file a notice of its intent to declare the dividends with the NYDFS and prior approval or non-disapproval from the NYDFS.

Distributions from AllianceBernstein

ABLP is required to distribute all of its Available Cash Flow, as defined in the Amended and Restated Partnership Agreement of ABLP, to the holders of AB Units and to the General Partner. Available Cash Flow is defined as the cash flow received by ABLP from operations minus such amounts as the General Partner determines, in its sole discretion, should be retained by ABLP for use in its business, or plus such amounts as the General Partner determines, in its sole discretion, should be released from previously retained cash flow. Distributions by ABLP are made 1% to the General Partner and 99% among the limited partners.

Typically, Available Cash Flow has been the adjusted diluted net income per unit for the quarter multiplied by the number of general and limited partnership interests at the end of the quarter. In future periods, management of AB anticipates that Available Cash Flow will be based on adjusted diluted net income per unit, unless management of AB determines, with the concurrence of the Board of Directors of AB, that one or more adjustments that are made for adjusted net income should not be made with respect to the Available Cash Flow calculation.

AB Holding is required to distribute all of its Available Cash Flow, as defined in the Amended and Restated Agreement of Limited Partnership of AB Holding, to holders of AB Holding Units pro rata in accordance with their percentage interest in AB Holding. Available Cash Flow is defined as the cash distributions AB Holding receives from ABLP minus such amounts as the General Partner determines, in its sole discretion, should be retained by AB Holding for use in its business (such as the payment of taxes) or plus such amounts as the General Partner determines, in its sole discretion, should be released from previously

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retained cash flow. AB Holding is dependent on the quarterly cash distributions it receives from ABLP, which is subject to the

performance of capital markets and other factors beyond our control. Distributions from AB Holding are made pro rata based on the holder’s percentage ownership interest in AB Holding.

As of ~~June~~September 30, 2020, Holdings and its non-insurance company subsidiaries hold approximately 167.5 million AB Units, 4.1 million AB Holding Units and the 1% General Partnership interest in ABLP, while 2.6 million AB Units continue to be held by Equitable America. Because Equitable America is subject to regulatory restrictions on the amount of dividends it may pay, distributions it receives from AB may not be distributable to Holdings.

As of ~~June~~September 30, 2020, the ownership structure of ABLP, including AB Units outstanding as well as the general partner’s 1% interest, was as follows:


Owner	Percentage Ownership
EQH and its subsidiaries	~~63.7~~63.8	%
AB Holding	35.5	%
Unaffiliated holders	~~0.8~~0.7	%
Total	100.0	%

Including both the general partnership and limited partnership interests in AB Holding and ABLP, Holdings and its subsidiaries had an approximate 65% economic interest in AB as of ~~June~~September 30, 2020.

Holdings Credit Facilities

We have a $2.5 billion five-year senior unsecured revolving credit facility (the “Credit Facility”), which may provide significant support to our liquidity position when alternative sources of credit are limited. In addition to the Credit Facility, we have letter of credit facilities with an aggregate principal amount of approximately $1.9 billion (the “LOC Facilities”), primarily to be used to support our life insurance business reinsured to EQ AZ Life Re in April 2018.

The Credit Facilities and LOC Facilities contain certain administrative, reporting, legal and financial covenants, including requirements to maintain a specified minimum consolidated net worth and to maintain a ratio of indebtedness to total capitalization not in excess of a specified percentage, and limitations on the dollar amount of indebtedness that may be incurred by our subsidiaries and the dollar amount of secured indebtedness that may be incurred by us, which could restrict our operations and use of funds. The right to borrow funds under the Credit Facility and LOC Facilities is subject to the fulfillment of certain conditions, including compliance with all covenants, and the ability to borrow thereunder is also subject to the continued ability of the lenders that are or will be parties to the facilities to provide funds. As of ~~June~~September 30, 2020, we were in compliance with these covenants. For additional information regarding the covenants in the facilities and the conditions to borrowing thereunder, see “Part I Item 1A-Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2019.

Contingent Funding Arrangements

In April 2019, pursuant to separate Purchase Agreements among Holdings, Credit Suisse Securities (USA) LLC, as representative of the several initial purchasers, and the Trusts (as defined below), Pine Street Trust I, a Delaware statutory trust (the “2029 Trust”), completed the issuance and sale of 600,000 of its Pre-Capitalized Trust Securities redeemable February 15, 2029 (the “2029 P-Caps”) for an aggregate purchase price of $600 million and Pine Street Trust II, a Delaware statutory trust (the “2049 Trust” and, together with the 2029 Trust, the “Trusts”), completed the issuance and sale of 400,000 of its Pre-Capitalized Trust Securities redeemable February 15, 2049 (the “2049 P-Caps” and, together with the 2029 P-Caps, the “P-Caps”) for an aggregate purchase price of $400 million, in each case to qualified institutional buyers in reliance on Rule 144A that are also “qualified purchasers” for purposes of Section 3(c)(7) of the Investment Company Act of 1940, as amended. The P-Caps are a contingent funding arrangement that, upon Holdings’ election, gives Holdings the right over a ten-year period (in the case of the 2029 Trust) or over a thirty-year period (in the case of the 2049 Trust) to issue senior notes to the Trusts. The Trusts each invested the proceeds from the sale of their P-Caps in separate portfolios of principal and/or interest strips of U.S. Treasury securities.

Series A Fixed Rate Noncumulative Perpetual Preferred Stock

In November and December 2019, Holdings issued a total of 32 million depositary shares, each representing a 1/1,000th interest in share of Holdings’ Series A Fixed Rate Noncumulative Perpetual Preferred Stock (“Series A Preferred Stock”), ~~$1.00~~

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$1.00 par value per share, with a liquidation preference of $25,000 per share of Series A Preferred Stock, for aggregate net cash

proceeds of $775 million ($800 million gross). The Series A Preferred Stock ranks senior to Holdings common stock with respect to the payment of dividends and liquidation. Holdings will pay dividends on the Series A Preferred Stock on a noncumulative basis only when, as and if declared by Holdings’ Board of Directors (or a duly authorized committee of the board) and will be payable quarterly in arrears, at an annual rate of 5.25% on the stated amount per share. The Series A Preferred Stock is redeemable at Holdings’ option in whole or in part, on or after December 15, 2024, at a redemption price of $25,000 per share of Series A Preferred Stock, plus declared and unpaid dividends. Prior to December 25, 2024, the Series A Preferred Stock is redeemable at Holdings’ option, in whole but not in part, within 90 days of the occurrence of certain rating agency events at a redemption price equal to $25,500 per share, plus declared and unpaid dividends or certain regulatory capital events at a redemption price equal to $25,000 per share, plus any declared and unpaid dividends.

Series B Fixed Rate Noncumulative Perpetual Preferred Stock

Capital Position of Holdings

We manage our capital position to maintain financial strength and credit ratings that facilitate the distribution of our products and provide our desired level of access to the bank and capital markets. Our capital position is supported by the ability of our subsidiaries to generate cash flows and distribute cash to us and our ability to effectively manage the risk of our businesses and to borrow funds and raise capital to meet our operating and growth needs.

Capital Management

Our Board and senior management are directly involved in the development of our capital management policies. Accordingly, capital actions, including proposed changes to the annual capital plan, capital targets and capital policies, are approved by the Board.

Dividends Declared and Paid

The declaration and payment of future dividends is subject to the discretion of our Board of Directors and depends on our financial condition, results of operations, cash requirements, future prospects, regulatory restrictions on the payment of dividends by Holdings’ insurance subsidiaries and other factors deemed relevant by the Board.

The payment of dividends will be substantially restricted in the event that we do not declare and pay (or set aside) dividends on the Series A and Series B Preferred Stock for the last proceeding dividend period. For additional information on the Series A Preferred Stock, see “Series A Fixed Rate Noncumulative Perpetual Preferred Stock.”

In 2019, Holdings paid a total of $285 million in cash dividends to stockholders.

On February 26, 2020, Holdings’ Board of Directors declared a cash dividend on Holdings’ common stock of $0.15 per share, payable on March 16, 2020 to shareholders of record as of March 9, 2020.

On May 20, 2020, Holdings’ Board of Directors declared a cash dividend on Holdings’ common stock of $0.17 per share, payable on June ~~15,~~9, 2020 to shareholders of record as of June ~~5, 200.~~1, 2020.

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On July 31, 2020, Holdings’ Board of Directors declared a cash dividend on Holdings’ common stock of $0.17 per share, payable on August 18, 2020 to shareholders of record as of August 11, 2020.

On February 26, 2020, Holdings’ Board of Directors declared a cash dividend of $393.741 per share on the Company’s Series A Preferred Stock, with a liquidation preference of $25,000 per share, which are represented by depositary shares, each representing a 1/1,000th interest in a share of Series A Preferred Stock, holders of which will receive approximately $0.39 per depositary share. The dividend was paid on March 16, 2020 to holders of record as of March 5, 2020.

On May 20, 2020, Holdings’ Board of Directors declared a cash dividend of $328.125 per share on the Company’s Series A Preferred Stock, with a liquidation preference of $25,000 per share, which are represented by depositary shares, each representing a 1/1,000th interest in a share of Series A Preferred Stock, holders of which will receive approximately $0.33 per depositary share. The dividend was paid on June 15, 2020 to holders of record as of June 5, ~~200.~~2020.

On July 31, 2020, Holdings’ Board of Directors declared a cash dividend of $328.125 per share on the Company’s Series A Preferred Stock, with a liquidation preference of $25,000 per share, which are represented by depositary shares, each representing a 1/1,000th interest in a share of Series A Preferred Stock, holders of which will receive approximately $0.33 per depositary share. The dividend was paid on September 15, 2020 to holders of record as of September 4, 2020.

Share Repurchase Programs

In 2019, Holdings repurchased approximately 65.6 million shares of its common stock.

On February 26, 2020, Holdings’ Board of Directors authorized an increase of $600 million to the capacity of its existing $400 million share repurchase program (the “2020 Program”). Under this program, Holdings may, from time to time through March 31, 2021, purchase its common stock through various means.

During the three and ~~six~~nine months ended ~~June~~September 30, 2020 , Holdings repurchased ~~1.3~~5 million and ~~14.9~~19.7 million shares, respectively, of its common stock.

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As of ~~June~~September 30, 2020, Holdings had a remaining capacity of approximately ~~$370~~$270 million remaining in the 2020 Program.

Credit Facility with AB

On November 4, 2019, Holdings made available to AB a $900 million committed, unsecured senior credit facility (the “EQH Facility”). The EQH Facility matures on November 4, 2024 and is available for AB’s general business purposes. Borrowings by AB under the EQH Facility generally bear interest at a rate per annum based on prevailing overnight commercial paper rates. For additional information regarding the EQH Facility, see “Sources and Uses of Liquidity of our Investment Management and Research Segment.”

In addition to the EQH Facility, on September 1, 2020, AB established a new $300 million uncommitted, unsecured senior credit facility (the “EQH Uncommitted Facility”) with EQH. For additional information regarding the EQH Uncommitted Facility, see “Source and Uses of Liquidity of our Investment Management and Research Segment.”

Sources and Uses of Liquidity of Our Insurance Subsidiaries

The principal sources of liquidity for our insurance subsidiaries are premiums, investment and fee income, deposits associated with our insurance and annuity operations, cash and invested assets, as well as internal borrowings. The principal uses of that liquidity include benefits, claims and dividends paid to policyholders and payments to policyholders in connection with surrenders and withdrawals. Other uses of liquidity include commissions, general and administrative expenses, purchases of investments, the payment of dividends to Holdings and hedging activity. Certain of our insurance subsidiaries’ principal sources and uses of liquidity are described in the paragraphs that follow.

We manage the liquidity of our insurance subsidiaries with the objective of ensuring that they can meet payment obligations linked to our Individual Retirement, Group Retirement and Protection Solutions businesses and to their outstanding debt and derivative positions, including in our hedging programs, without support from Holdings. We employ an asset/liability management approach specific to the requirements of each of our insurance businesses. We measure liquidity against internally-developed benchmarks that consider the characteristics of our asset portfolio and the liabilities that it supports. We consider attributes of the various categories of our liquid assets (for example, type of asset and credit quality) in calculating internal liquidity indicators for our insurance and reinsurance operations. Our liquidity benchmarks are established for various stress scenarios and durations, including company-specific and market-wide events. The scenarios we use to evaluate the liquidity of our subsidiaries are defined to allow operating entities to operate without support from Holdings.

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Liquid Assets

The investment portfolios of our insurance subsidiaries are a significant component of our overall liquidity. Liquid assets include cash and cash equivalents, short-term investments, U.S. Treasury fixed maturities, fixed maturities that are not designated as held-to-maturity and public equity securities. We believe that our business operations and the liquidity profile of our assets provide sufficient liquidity under reasonably foreseeable stress scenarios for each of our insurance subsidiaries.

See “—General Account Investment Portfolio” and Note 3 and Note 4 for a description of our retirement and protection businesses’ portfolio of liquid assets.

Hedging Activities

Because the future claims exposure on our insurance products, and in particular our variable annuity products with GMxB features, is sensitive to movements in the equity markets and interest rates, we have in place various hedging and reinsurance programs that are designed to mitigate the economic risks of movements in the equity markets and interest rates. We use derivatives as part of our overall asset/liability risk management program primarily to reduce exposures to equity market and interest rate risks. In addition, we use credit derivatives to replicate exposure to individual securities or pools of securities as a means of achieving credit exposure similar to bonds of the underlying issuer(s) more efficiently. The derivative contracts are an integral part of our risk management program, especially for the management of our variable annuities program, and are collectively managed to reduce the economic impact of unfavorable movements in capital markets. These derivative transactions require liquidity to meet payment obligations such as payments for periodic settlements, purchases, maturities and terminations as well as liquid assets pledged as collateral related to any decline in the net estimated fair value. Collateral calls represent one of our biggest drivers for liquidity needs for our insurance subsidiaries. Our derivatives contracts reside primarily within Equitable Financial, which has a significantly large investment portfolio.

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FHLB Membership

Equitable Financial is a member of the Federal Home Loan Bank of New York, ~~(“FHLBNY”),~~ which provides Equitable Financial with access to collateralized borrowings and other ~~FHLBNY~~FHLB products. At ~~June~~September 30, 2020, we had ~~$4.9~~$5.0 billion of short-term outstanding funding agreements and $1.8 billion of long-term outstanding funding agreements issued to the ~~FHLBNY~~FHLB and had posted ~~$8.6~~$8.7 billion securities as collateral for funding agreements. In addition, Equitable Financial implemented a hedge to lock in the funding agreements borrowing rate, and $8 million of hedge impact was reported as funding agreement carrying value.

Equitable America is a member of the Federal Home Loan Bank of San Francisco.

Sources and Uses of Liquidity of our Investment Management and Research Segment

The principal sources of liquidity for our Investment Management and Research business include investment management fees and borrowings under its credit facilities and commercial paper program. The principal uses of liquidity include general and administrative expenses, business financing and distributions to holders of AB Units and AB Holding Units plus interest and debt service. The primary liquidity risk for our fee-based Investment Management and Research business is its profitability, which is impacted by market conditions and our investment management performance.

AB Credit Facility

AB has a $800 million committed, unsecured senior revolving credit facility (the “AB Credit Facility”) that matures on September 27, 2023. The credit facility provides for possible increases in the principal amount by up to an aggregate incremental amount of $200 million. Any such increase is subject to the consent of the affected lenders. The AB Credit Facility is available for AB’s business purposes, including the support of AB’s commercial paper program. AB can draw directly under the AB Credit Facility and AB management may draw on the AB Credit Facility from time to time.

The AB Credit Facility contains affirmative, negative and financial covenants, which are customary for facilities of this type, including restrictions on dispositions of assets, restrictions on liens, a minimum interest coverage ratio and a maximum leverage ratio. As of ~~June~~September 30, 2020, AB was in compliance with these covenants. The AB Credit Facility also includes customary events of default (with customary grace periods, as applicable), including provisions under which, upon the occurrence of an event of default, all outstanding loans may be accelerated and/or lender’s commitments may be terminated. Also, under such provisions, upon the occurrence of certain insolvency- or bankruptcy-related events of default, all amounts payable under the AB Credit Facility would automatically become immediately due and payable, and the lender’s commitments automatically would terminate.

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Amounts under the AB Credit Facility may be borrowed, repaid and re-borrowed by us from time to time until the maturity of the facility. Voluntary prepayments and commitment reductions requested by us are permitted at any time without a fee (other than customary breakage costs relating to the prepayment of any drawn loans) upon proper notice and subject to a minimum dollar requirement. Borrowings under the AB Credit Facility bear interest at a rate per annum, which will be, at AB’s option, a rate equal to an applicable margin, which is subject to adjustment based on the credit ratings of AB, plus one of the following indices: London Interbank Offered Rate; a floating base rate; or the Federal Funds rate.

As of ~~June~~September 30, 2020, and December 31, 2019, AB had no amounts outstanding under the AB Credit Facility. During the ~~six~~nine months ended ~~June~~September 30, 2020 and the full year 2019, AB did not draw upon the AB Credit Facility.

EQH Facility

In addition to the AB Credit Facility, AB has the EQH Facility with Holdings. The EQH Facility matures on November 4, 2024 and is available for AB’s general business purposes. Borrowings under the EQH Facility generally bear interest at a rate per annum based on prevailing overnight commercial paper rates.

The EQH Facility contains affirmative, negative and financial covenants which are substantially similar to those in AB’s committed bank facilities. The EQH Facility also includes customary events of default substantially similar to those in AB’s committed bank facilities, including provisions under which, upon the occurrence of an event of default, all outstanding loans may be accelerated and/or the lender’s commitment may be terminated.

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Amounts under the EQH Facility may be borrowed, repaid and re-borrowed by AB from time to time until the maturity of the facility. AB or Holdings may reduce or terminate the commitment at any time without penalty upon proper notice. Holdings also may terminate the facility immediately upon a change of control of AB’s general partner.

As of ~~June~~September 30, 2020 and December 31, 2019, AB had ~~$685~~$300 million and $560 million, respectively, outstanding under the EQH Facility with interest rates of approximately 0.2% and 1.6%, respectively. Average daily borrowing of the EQH Facility for the ~~six~~nine months ended ~~June~~September 30, 2020 and for the 57 days it was available in 2019 were ~~$591~~$503 million and $359 million, respectively, with a weighted average interest rate of approximately ~~0.7%~~0.6% and 1.6% respectively.

~~Commercial Paper~~EQH Uncommitted Facility

AB also has the EQH Uncommitted Facility with Holdings. The EQH Uncommitted Facility matures on September 1, 2024 and is available for AB’s general purposes. Borrowings under the EQH Uncommitted Facility bear interest at a rate per annum based on prevailing overnight commercial paper rates. The EQH Uncommitted Facility contains affirmative, negative and financial covenants, customary events of defaults and other terms and conditions which are substantially similar to those in the EQH Facility.

As of ~~June~~September 30, 2020, AB had no outstanding balance on the EQH Uncommitted Facility and has not drawn on it since its inception.

As of September 30, 2020 and December 31, 2019 AB had no commercial paper outstanding. The commercial paper is short term in nature, and as such, recorded value is estimated to approximate fair value (and considered a Level 2 security in the fair value hierarchy). Average daily borrowings of commercial paper during the ~~six~~nine months ended ~~June~~September 30, 2020 and during the 317 days commercial paper was outstanding in 2019 were ~~$91~~$85 million and $439 million, respectively, with weighted average interest rates of approximately ~~0.7%~~0.5% and 2.6%, respectively.

AB Revolver

AB has a $200 million committed, unsecured senior revolving credit facility (the “AB Revolver”) with a leading international bank, maturing on November 16, 2021. The AB Revolver is available for AB’s business purposes, including the provision of additional liquidity to meet funding requirements. AB can draw directly under the AB Revolver and management expects to draw on the AB Revolver from time to time. The AB Revolver contains affirmative, negative and financial covenants that are identical to those of the AB Credit Facility. As of both ~~June~~September 30, 2020 and December 31, 2019, AB had no amount outstanding under the AB Revolver. Average daily borrowings of the AB Revolver during the first ~~six~~nine months ended ~~June~~September 30, 2020 and full year 2019 were ~~$19~~$14 million and $24 million, respectively, with weighted average interest rates of approximately ~~1.7%~~1.5% and 3.2%, respectively.

In addition, AB currently has three uncommitted lines of credit with three financial institutions. Two of these lines of credit permit AB to borrow up to an aggregate of $175 million, while the other line has no stated limit. As of ~~June~~September 30,

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2020 and December 31, 2019, AB had no outstanding balance on these lines of credit. Average daily borrowings on the lines of credit during the ~~six~~nine months ended ~~June~~September 30, 2020 and full year 2019 were $2$1.2 million and $2 million, respectively, with weighted average interest rates of approximately ~~1.5%~~1.3% and 1.9%, respectively.

Statutory Capital of Our Insurance Subsidiaries

Our capital management framework is primarily based on statutory RBC standards and the CTE asset standard for our variable annuity business.

RBC requirements are used as minimum capital requirements by the NAIC and the state insurance departments to evaluate the capital condition of regulated insurance companies. RBC is based on a formula calculated by applying factors to various asset, premium, claim, expense and statutory reserve items. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk, market risk and business risk and is calculated on a quarterly basis and made public on an annual basis. The formula is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not as a means to rank insurers generally. These rules apply to our insurance company subsidiaries and not to Holdings. State insurance laws provide insurance regulators the authority to require various actions by, or take various actions against, insurers whose total adjusted capital does not meet or exceed certain RBC levels. At the date of the most recent annual statutory financial statements filed with insurance regulators, the total adjusted capital of each of these insurance company subsidiaries subject to these requirements was in excess of each of those RBC levels.

CTE is a statistical measure of tail risk which quantifies the total asset requirement to sustain a loss if an event outside a given probability level has occurred. In the case of our analysis of variable annuity guarantees, CTE98 denotes the financial resources a company would need to cover the average of the worst 2% of scenarios.

Following our early adoption of the NAIC’s variable annuity framework for the year ended December 31, 2019, we manage our capital on a consolidated basis. Post-NAIC reform, CTE98 translates to 400% RBC. This combined with our target RBC ratio of 350%-400% for non-VAs, translates to a new target minimum consolidated RBC ratio of 375% - 400%.

~~103~~

Captive Reinsurance Companies

We use captive reinsurance companies to more effectively manage our reserves and capital on an economic basis and to enable the aggregation and transfer of risks. Our captive reinsurance companies assume business from affiliates only and are closed to new business. All of our captive reinsurance companies are wholly-owned subsidiaries and are located in the United States. In addition to state insurance regulation, our captives are subject to internal policies governing their activities. We continue to analyze the use of our existing captive reinsurance structures, as well as additional third-party reinsurance arrangements.

Description of Certain Indebtedness

The following table sets forth our total consolidated borrowings as of the dates indicated. Our financial strategy going forward will remain subject to market conditions and other factors. For example, we may from time to time enter into additional bank or other financing arrangements, including public or private debt, structured facilities and contingent capital arrangements, under which we could incur additional indebtedness.


		As of June 30, 2020											As of September 30, 2020
		Holdings		AB		Consolidated			Holdings		AB		Consolidated
		(in millions)											(in millions)
Short-term debt:	Short-term debt:							Short-term debt:

Total short-term debt	Total short-term debt	$	—	$	—	$	—	Total short-term debt	$	—	$	—	$	—
Long-term debt:	Long-term debt:							Long-term debt:
Senior Notes (5.00%, due 2048)	Senior Notes (5.00%, due 2048)	1,480		—		1,480		Senior Notes (5.00%, due 2048)	1,481		—		1,481
Senior Notes (4.35%, due 2028)	Senior Notes (4.35%, due 2028)	1,488		—		1,488		Senior Notes (4.35%, due 2028)	1,488		—		1,488
Senior Notes (3.90%, due 2023)	Senior Notes (3.90%, due 2023)	796		—		796		Senior Notes (3.90%, due 2023)	796		—		796
Senior Debentures, 7.0%, due 2028	Senior Debentures, 7.0%, due 2028	349		—		349		Senior Debentures, 7.0%, due 2028	349		—		349
Total long-term debt	Total long-term debt	4,113		—		4,113		Total long-term debt	4,114		—		4,114
Total borrowings	Total borrowings	$	4,113	$	—	$	4,113	Total borrowings	$	4,114	$	—	$	4,114

126


	As of December 31, 2019
	Holdings		AB		Consolidated
	(in millions)
Short-term debt:
Total short-term debt	$	—	$	—	$	—
Long-term debt:
Senior Notes (5.00%, due 2048)	1,480		—		1,480
Senior Notes (4.35%, due 2028)	1,487		—		1,487
Senior Notes (3.90%, due 2023)	795		—		795
Senior Debentures, 7.0%, due 2028	349		—		349
Total long-term debt	4,111		—		4,111
Total borrowings	$	4,111	$	—	$	4,111

Notes and Debentures

In April 2018, we issued $3.8 billion in aggregate principal amount of notes (consisting of $800 million aggregate principal amount of 3.9% Senior Notes due 2023, $1.5 billion aggregate principal amount of 4.35% Senior Notes due 2028 and $1.5 billion aggregate principal amount of 5.0% Senior Notes due 2048) to third party investors. As of ~~June~~September 30, 2020, we had outstanding $349 million aggregate principal amount of Senior Debentures due 2028 (the “Senior Debentures”).

The Senior Notes and Senior Debentures contain customary affirmative and negative covenants, including a limitation on certain liens and a limit on the Company’s ability to consolidate, merge or sell or otherwise dispose of all or substantially all of its assets. The Senior Notes and Senior Debentures also include customary events of default (with customary grace periods, as applicable), including provisions under which, upon the occurrence of an event of default, all outstanding Senior Notes and Senior Debentures may be accelerated. As of ~~June~~September 30, 2020, we were in compliance with all covenants.

~~104~~

Term Loan

In May 2018, we borrowed $300 million under a $500 million three-year senior unsecured delayed draw term loan agreement and terminated the remaining $200 million capacity. In December 2019, we made full prepayment of the outstanding $300 million term loan and as of December 31, 2019, there were no amounts outstanding under the term loan.

Ratings

Financial strength ratings (which are sometimes referred to as “claims-paying” ratings) and credit ratings are important factors affecting public confidence in an insurer and its competitive position in marketing products. Our credit ratings are also important for our ability to raise capital through the issuance of debt and for the cost of such financing.

Financial strength ratings represent the opinions of rating agencies regarding the financial ability of an insurance company to meet its obligations under an insurance policy. Credit ratings represent the opinions of rating agencies regarding an entity’s ability to repay its indebtedness. The following table summarizes the ratings for Holdings and certain of its subsidiaries. ~~Moody~~AM Best and ~~AM Best~~S&P have a stable outlook while ~~S&P~~Moody has a ~~negative~~positive outlook.

AM Best

S&P

Moody’s

Last review date

~~Dec '19~~Oct'20

~~Jun '20~~Oct'20

~~May '20~~Oct'20

Financial Strength Ratings:

Equitable Financial Life Insurance Company

A+

Equitable Financial Life Insurance Company of America

A+

~~Credit Ratings:~~

Equitable Holdings, Inc.

~~bbb+~~

BBB+

Baa2

Last review date

~~Jun~~Sep '20

~~Jun~~June '20

AllianceBernstein Holding L.P.

—

SUPPLEMENTARY INFORMATION

We are involved in a number of ventures and transactions with AXA and certain of its affiliates. See Note ~~11 of the Notes to the Consolidated Financial Statements included herein and Note~~ 12 in the Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2019.

127

Contractual Obligations

Our consolidated contractual agreements include policyholder obligations, long-term debt, commercial paper, employee benefits, operating leases and various funding commitments. See “Supplementary Information – Contractual Obligations” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2019 for additional information.

Off-Balance Sheet Arrangements

At ~~June~~September 30, 2020, we were not a party to any off-balance sheet transactions other than those Guarantees and Commitments described in Note 1413 of the Notes to the Consolidated Financial Statements.

Summary of Critical Accounting Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in our consolidated financial statements included elsewhere herein. For a discussion of our significant accounting policies, see Note 2 to the Company’s consolidated financial statements included in our 2019 Form 10-K. The most critical estimates include those used in determining:

•liabilities for future policy benefits;

•accounting for reinsurance;

•capitalization and amortization of DAC and policyholder bonus interest credits;

•estimated fair values of investments in the absence of quoted market values and investment impairments;

~~105~~

•estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation;

•goodwill and related impairment;

•measurement of income taxes and the valuation of deferred tax assets; and

•liabilities for litigation and regulatory matters.

In applying our accounting policies, we make subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries while others are specific to our business and operations. Actual results could differ from these estimates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the quantitative and qualitative disclosures about market risk described in the Annual Report on Form 10-K for the year ended December 31, 2019 in “Quantitative and Qualitative Disclosures About Market Risk”, with the exception of sensitivity of certain of our derivative financial instruments to changes in equity prices. The change in fair value of these derivatives following a ten percent decline in equity prices as of December 31, 2019 changed as follows: (a) the fair value of futures increased by $462 million, from a decline of $231 million, to an increase of $231 million; (b) the fair value of swaps increased by $3.5 billion, from a decrease of $2.0 billion to an increase of $1.5 billion; and (c) the fair value of options decreased by $1.7 billion, from an increase of $4.1 billion to an increase of $2.4 billion.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The management of the Company, with the participation of the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of ~~June~~September 30, 2020. This evaluation is performed to determine if our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities and Exchange Act of 1934, as amended, is accumulated and communicated to management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms.

128

Due to the material weakness described below, the Company’s CEO and CFO, concluded that the Company’s disclosure controls and procedures were not effective as of ~~June~~September 30, 2020.

As previously reported, the Company identified a material weakness in the design and operation of the Company’s internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. The Company’s management, including the Company’s CEO and CFO, have concluded that we do not maintain effective controls to timely validate that actuarial models are properly configured to capture all relevant product features and provide reasonable assurance timely reviews of assumptions and data have occurred, and, as a result, errors were identified in future policyholders’ benefits and deferred policy acquisition costs balances.

This material weakness resulted in misstatements in the Company’s previously issued annual and interim financial statements and resulted in:

(i) the revision of the interim financial statements for the nine, six, and three months ended September 30, June 30, and March 31, 2018 and 2017, respectively, and the annual financial statements for the year ended December 31, 2017;

(ii) the amended restatement of the interim financial statements for the nine months ended September 30, 2017 and the six months ended June 30, 2017, and the year ended December 31, 2016 and revisions for the six and three months ended June 30, 2018 and March 31, 2018, respectively, and the three months ended March 31, 2017 and the years ended December 31, 2017, 2015, 2014, and 2013, respectively;

~~106~~

(iii) the revision of the annual financial statements for the year ended December 31, 2017 and amended the restated annual financial statements for the year ended December 31, 2016, and amended the restated interim financial statements for the nine and six months ended September 30, 2017, and June 30, 2017, respectively;

(iv) the restatements of the interim financial statements for the nine and six months ended September 30, 2017 and June 30, 2017, respectively, the restatement of the annual financial statements for the year ended December 31, 2016, the revision of the interim financial statements for the nine and six months ended September 30, 2016 and June 30, 2016, respectively, and the revision of the annual financial statements for the year ended December 31, 2015; and

(v) the restatement of the interim financial statements for the six months ended June 30, 2017 and the revision of the annual financial statements for the years ended December 31, 2016, 2015 and 2014, respectively, and the interim financial statements for the six months ended June 30, 2016.

These revisions and restatements were directly related to the material weakness described above and not indicative of any new material weaknesses. Until remediated, there is a reasonable possibility that this material weakness could result in a material misstatement of the Company’s consolidated financial statements or disclosures that would not be prevented or detected.

Remediation Status of Material Weakness

For the material weakness related to Actuarial Models, Assumptions and Data, management has implemented and tested new or enhanced controls as described below but determined that further sustained operation is necessary.

Remediation Activities: Material Weakness Related to Actuarial Models, Assumptions and Data

•We have designed, implemented and tested an enhanced model validation control framework, including a rotational schedule to periodically re-validate all U.S. GAAP models.

•We have designed, implemented and tested enhanced controls and governance processes for new model implementations.

•We have designed, implemented and tested enhanced controls for model changes.

•We have designed, implemented and tested enhanced controls over the annual assumption setting process, including a comprehensive master assumption inventory and risk framework.

•We have designed, implemented and tested new controls and are redesigning certain of these controls to validate the reliability of significant data flows feeding actuarial models and assumptions

~~Second~~Third quarter 2020 controls have operated as designed. However, given that certain controls noted above have only operated effectively in one financial closing cycle during the year, and controls are still being redesigned, we have

129

determined that further work and sustained operation is appropriate before concluding the controls are operationally effective.

Changes in Internal Control Over Financial Reporting

As described above, the Company continues to design certain controls in connection with its remediation plan. These remediation efforts related to the material weakness described above represent changes in our internal control over financial reporting for the quarter ended ~~June~~September 30, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~107~~130

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding certain legal proceedings pending against us, see Note 1413 of the Notes to the Consolidated Financial Statements (unaudited) in this Form 10-Q. See “Risk Factors—Legal and Regulatory Risks—Legal and regulatory actions could have a material adverse effect on our reputation, business, results of operations or financial condition” in our Form 10-K for the year ended December 31, 2019.

Item 1A. Risk Factors

You should carefully consider the risks described in the “Risk Factors” section included in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2019 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020. Risks to which we are subject include, but are not limited to, the factors mentioned under “Note Regarding Forward-Looking Statements and Information” above and the risks of our businesses described elsewhere in this Quarterly Report on Form 10-Q.

~~The novel coronavirus (COVID-19) pandemic has adversely impacted our business and could materially adversely affect our business, results of operations or financial condition in the future.~~

The COVID-19 pandemic has negatively impacted the U.S. and global economies, created significant volatility in the capital markets and dramatically increased unemployment levels. In addition, the pandemic has resulted in temporary closures of many businesses and schools and the institution of social distancing and sheltering in place requirements in many states and local communities. It remains unclear whether states and municipalities across the U.S. will be able to safely re-open schools in several weeks given the spread of the virus. Businesses or schools that reopen may also restrict or limit access for the foreseeable future or on a permanent basis. As a result, our ability to sell products through our regular channels and the demand for our products and services has been significantly impacted. The extent to which the COVID-19 pandemic impacts our business, results of operations or financial condition will depend on future developments that are highly uncertain, including the severity and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic, and could cause us to revise financial targets or other guidance we have previously provided.

While we have implemented risk management and contingency plans and taken other precautions with respect to the COVID-19 pandemic, such measures may not adequately protect our business from the full impacts of the pandemic. Currently, most of our employees and advisors are working remotely. An extended period of remote work arrangements could strain our business continuity plans, introduce additional operational risk, including but not limited to cybersecurity risks, and impair our ability to effectively manage our business. We also outsource a variety of functions to third parties, including certain of our administrative operations which are in India. As a result, we rely upon the successful implementation and execution of the business continuity planning of such entities in the current environment. While we closely monitor the business continuity activities of these third parties, successful implementation and execution of their business continuity strategies are largely outside our control. If one or more of the third parties to whom we outsource certain critical business activities experience operational failures as a result of the impacts from the spread of COVID-19, or claim that they cannot perform due to a force majeure, it could adversely impact our business, results of operations or financial condition.

Economic uncertainty and unemployment resulting from the impacts of the spread of COVID-19 may have an adverse effect on product sales and also result in existing policyholders seeking sources of liquidity and withdrawing at rates greater than we previously expected. COVID-19 could have an adverse effect on our insurance business due to increased mortality and, in certain cases, morbidity rates. In addition, many state insurance departments, including the NYDFS, are requiring insurers to offer flexible premium payment plans, relax payment dates, waive late fees and penalties in order to avoid canceling or non-renewing polices. If policyholder lapse and surrender rates or premium waivers significantly exceed our expectations, we may need to change our assumptions, models or reserves. The cost of reinsurance to us for these policies could increase, and we may encounter decreased availability of such reinsurance. Each of these could have a material adverse effect on our business, financial condition, results of operations, liquidity and cash flows.

Our investment portfolio (specifically, the increased risk of defaults, downgrades and volatility in the valuations of certain investment assets we hold) has been, and may continue to be, adversely affected as a result the COVID-19 pandemic and uncertainty regarding its outcome. Moreover, declines in equity markets and interest rates, reduced liquidity or a continued slowdown in the U.S. or in global economic conditions may also adversely affect the values and cash flows of these assets. Our investments in mortgages and commercial mortgage-backed securities have been, and could continue to be, negatively affected by delays or failures of borrowers to make payments of principal and interest when due. In some jurisdictions, local governments have imposed delays or moratoriums on many forms of enforcement actions. More broadly, increased unemployment, slowing economic conditions, and uncertainty about occupant requirements evolving out of the COVID-19

~~108~~

crisis could negatively impact underlying real estate values over the longer term. The recent market volatility has also caused significant increases in credit spreads, which may increase our borrowing costs and decrease product fee income. Further, severe market volatility may leave us unable to react to market events in a prudent manner consistent with our historical investment practices. Market dislocations, decreases in observable market activity or unavailability of information, in each case, arising from the spread of COVID-19, may restrict our access to key inputs used to derive certain estimates and assumptions made in connection with financial reporting or otherwise. Restricted access to such inputs may make our financial statement balances and estimates and assumptions used to run our business subject to greater variability and subjectivity.

Additionally, COVID-19 could negatively affect our internal controls over financial reporting as the vast majority of our employees are required to work from home and most onsite locations remain closed, and therefore new processes, procedures, and controls could be required to respond to changes in our business environment. Further, should any key employees become ill from COVID-19 and unable to work, our ability to operate our internal controls may be adversely impacted.

Any of these events could cause or contribute to the risks and uncertainties enumerated in our Annual Report on Form 10-K and Quarterly Report on Form 10-Q and could materially adversely affect our business, results of operations or financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about purchases by Holdings during the three months ended ~~June~~September 30, 2020, of its common stock:

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
4/1/20 through 4/30/20 — $ — — $ 395,415,361
5/1/20 through 5/31/20 — $ — — $ 395,415,361
6/1/20 through 6/30/20 1,260,910 $ 19.81 1,260,910 $ 370,431,157
Total 1,260,910 $ 19.81 1,260,910 $ 370,431,157


Period	Total Number of Shares Purchased		Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
7/1/20 through 7/31/20	$	—	—	$	—	$	370,431,157
8/1/20 through 8/31/20	$	3,259,806	21.28	$	3,259,806	$	301,069,442
9/1/20 through 9/30/20	$	1,473,143	20.80	$	1,473,143	$	270,431,173
Total	$	4,732,949	21.13	$	4,732,949	$	270,431,173

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

~~109~~131

Item 6. Exhibits


Number		Description and Method of Filing
3.1		Certificate of Designations with respect to the Series B Preferred Stock of the Company, filed August 7, 2020 (incorporated by reference to Exhibit 3.1 to our Form 8-K filed on August 11, 2020).
3.2		Third Amended and Restated By-laws of Equitable Holdings, Inc. (incorporated by reference to Exhibit 3.1 to our Form 8-K filed on September 23, 2020).
31.1	#	Certification of the Registrant’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	#	Certification of the Registrant’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	#	Certification of the Registrant’s Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32 .232.2	#	Certification of the Registrant’s Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
104		Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibits 101).

______________

# Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Equitable Holdings, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~August~~November 5, 2020

EQUITABLE HOLDINGS, INC.

By:

/s/ Anders Malmström

Name:

Anders Malmström

Title:

Senior Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

Date: ~~August~~November 5, 2020

/s/ William Eckert

Name:

William Eckert

Title:

Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)

~~110~~132


EQUITABLE HOLDINGS, INC.
Consolidated Balance Sheets
June 30, 2020 (Unaudited) and December 31, 2019

	June 30, 2020		December 31, 2019
	(in millions, except share data)
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value (amortized cost of $67,515 and $62,937) (allowance for credit losses of $13 at June 30, 2020)	$	76,243	$	66,343
Mortgage loans on real estate (net of allowance for credit losses of $66 at June 30, 2020)	12,523		12,107

Policy loans	3,689		3,735
Other equity investments (1)	1,342		1,344
Trading securities, at fair value	6,616		7,031
Other invested assets (1)	2,280		2,780
Total investments	102,693		93,340
Cash and cash equivalents (1)	8,364		4,405
Cash and securities segregated, at fair value	1,882		1,095
Broker-dealer related receivables	1,998		1,987
Deferred policy acquisition costs	4,182		5,890
Goodwill and other intangible assets, net	4,756		4,751
Amounts due from reinsurers (allowance for credit losses of $6 at June 30, 2020)	4,665		4,592

GMIB reinsurance contract asset, at fair value	2,931		2,139

Other assets (1)	3,724		3,799
Assets held-for-sale	—		962
Separate Accounts assets	118,915		126,910
Total Assets	$	254,110	$	249,870
LIABILITIES
Policyholders’ account balances	$	59,272	$	58,879
Future policy benefits and other policyholders' liabilities	41,476		34,587
Broker-dealer related payables	1,001		722

Customer related payables	3,199		2,523
Amounts due to reinsurers	1,399		1,404
Short-term and long-term debt	4,113		4,111

Current and deferred income taxes	1,848		549
Other liabilities (1)	3,666		3,970
Liabilities held-for-sale	—		724
Separate Accounts liabilities	118,915		126,910
Total Liabilities	$	234,889	$	234,379
Redeemable noncontrolling interest (1) (2)	$	87	$	365
Commitments and contingent liabilities (Note 14)
EQUITY
Equity attributable to Holdings:
Preferred stock and additional paid-in capital, $1 par value, 32 million shares authorized, issued and outstanding; $25,000 liquidation preference	$	775	$	775
Common stock, $0.01 par value, 2,000,000,000 shares authorized; 552,896,328 and 552,896,328 shares issued, respectively; 449,436,843 and 463,711,392 shares outstanding, respectively	5		5
Additional paid-in capital	1,938		1,920
Treasury stock, at cost, 103,459,485 and 89,184,936 shares, respectively	(2,047)		(1,832)
Retained earnings	12,995		11,827
Accumulated other comprehensive income (loss)	3,928		840
Total equity attributable to Holdings	17,594		13,535
Noncontrolling interest	1,540		1,591
Total Equity	19,134		15,126
Total Liabilities, Redeemable Noncontrolling Interest and Equity	$	254,110	$	249,870


April 1, 2019	$	—	$	5	$	1,881	$	(1,234)	$	13,004	$	(513)	$	13,143	$	1,539	$	14,682
Stock compensation	—		—		28		2		—		—		30		3		33


Retirement of common stock			—		—		—		(1)		—		(1)		—		(1)

Dividends paid to noncontrolling interest	—		—		—		—		—		—		—		(56)		(56)
Stockholder dividends (cash dividends declared per common share of $0.15)	—		—		—		—		(73)		—		(73)		—		(73)


Net income (loss)	—		—		—		—		363		—		363		60		423
Other comprehensive income (loss)	—		—		—		—		—		1,389		1,389		(1)		1,388
Other	—		—		(8)		—		—		—		(8)		—		(8)
June 30, 2019	$	—	$	5	$	1,901	$	(1,232)	$	13,293	$	876	$	14,843	$	1,545	$	16,388


	Three Months Ended June 30,
	2020 (3)						2019
	Yield		Amount (2)		Yield		Amount (2)
	(Dollars in millions)
Fixed Maturities:
Income (loss)	3.48	%	$	565	4.00	%	$	516
Ending assets			67,302				54,315
Mortgages:
Income (loss)	4.07	%	125		4.26	%	130
Ending assets			12,523				12,288
Other Equity Investments (1):
Income (loss)	(18.84)	%	(72)		8.90	%	31
Ending assets			1,497				1,382
Policy Loans:
Income (loss)	5.46	%	51		5.44	%	51
Ending assets			3,689				3,740
Cash and Short-term Investments:
Income (loss)	1.45	%	17		0.98	%	8
Ending assets			4,567				3,296
Repurchase and funding agreements:
Interest expense and other			(18)				(24)
Ending assets (liabilities)			(6,700)				(4,001)
Total Invested Assets:
Income (loss)	3.33	%	668		4.18	%	712
Ending Assets			82,878				71,020
Short Duration Fixed Maturities:
Income (loss)	3.09	%	44		3.04	%	79
Ending assets			5,755				8,797
Total:
Investment income (loss)	3.31	%	712		4.03	%	791
Less: investment fees	(0.11)	%	(24)		(0.08)	%	(16)
Investment Income, Net	3.20	%	$	688	3.95	%	$	775
Ending Net Assets			$	88,633			$	79,817