10-Q: Equitable Holdings Reports Q3 Loss Amid Major Reinsurance Deals

Equitable Holdings, Inc. reported a significant net loss for Q3 and the first nine months of 2025, primarily driven by a large reinsurance transaction with RGA and the novation of legacy variable annuity policies, despite stable operating earnings.

Summary

• Equitable Holdings reported a net loss attributable to Holdings of $1.3 billion for the three months ended September 30, 2025, a decrease of $1.2 billion from a $132 million net loss in the prior year period.
• For the nine months ended September 30, 2025, the net loss attributable to Holdings was $1.6 billion, a $2.0 billion decrease from $388 million net income in the prior year period.
• The RGA Reinsurance Transaction, completed on July 31, 2025, involved ceding a 75% quota share of in-force individual life insurance and Closed Block to RGA, resulting in a $1.1 billion loss on asset transfer.
• The novation of certain legacy variable annuity policies on January 17, 2025, resulted in a pre-tax net income loss of $499 million and a pre-tax AOCI increase of $263 million.
• Non-GAAP Operating Earnings decreased by $62 million to $455 million for Q3 2025 and by $261 million to $1.2 billion for the nine months ended September 30, 2025.
• Holdings purchased 19.7 million AB Holding Units for $758 million as part of a tender offer, increasing its economic interest in AllianceBernstein to approximately 69%.

Sentiment

Score: 3

Explanation: The sentiment is negative due to substantial net losses driven by significant one-time charges from reinsurance and novation transactions. While operating earnings show some stability, the GAAP results reflect considerable adverse impacts. Regulatory changes and market volatility also present ongoing challenges.

Positives

• Net derivative losses decreased by $606 million for the nine months ended September 30, 2025, primarily due to lower equity market appreciation compared to the prior year.
• Net investment income increased by $261 million for the nine months ended September 30, 2025, driven by higher average asset balances and alternative investment income.
• The change in market risk benefits and purchased market risk benefits decreased by $450 million in Q3 2025, mainly due to more favorable interest rate movements.
• The company's Board approved an additional $1.5 billion, and later another $500 million, for its share repurchase program, with approximately $1.3 billion remaining capacity as of September 30, 2025.
• A new $1.0 billion five-year senior unsecured revolving credit facility was entered into, enhancing liquidity.

Negatives

• Investment losses increased by $1.1 billion in Q3 2025 and $1.2 billion for the nine months ended September 30, 2025, largely due to the RGA reinsurance transaction and other investment activities.
• Net derivative losses increased by $403 million in Q3 2025 due to higher equity market appreciation.
• The change in market risk benefits and purchased market risk benefits increased by $836 million for the nine months ended September 30, 2025, attributed to a decrease in interest rates and less favorable equity market movements.
• Compensation, benefits, interest, and other operating expenses increased by $537 million for the nine months ended September 30, 2025, partly due to the Venerable novation loss and contingent payment liability adjustments.
• Interest credited to policyholders account balances increased by $97 million in Q3 2025 and $393 million for the nine months ended September 30, 2025, due to account value growth and higher funding agreement interest expense.
• Fee-type revenue decreased by $131 million in Q3 2025 and $135 million for the nine months ended September 30, 2025, primarily due to the RGA reinsurance transaction.
• Amortization of deferred policy acquisition costs increased by $59 million for the nine months ended September 30, 2025, due to growth in the Retirement segment.

Risks

• Conditions in the financial markets and economy, including geopolitical conflicts, tariffs, interest rate fluctuations, and equity market volatility, could adversely affect financial results.
• Operational failures by the company or its service providers, or catastrophic events like pandemics, pose risks.
• Counterparty default on derivative contracts, failure of financial institutions, and economic downturns could adversely affect investments.
• Changes in statutory capital requirements, financial strength ratings, and state insurance laws limiting dividend payments by insurance subsidiaries are ongoing regulatory risks.
• The NAIC's interim rules raising capital requirements for CLO and other asset-backed security residual interests, effective January 1, 2024, could impact capital.
• Actuarial Guideline (AG 55) adopted by NAIC subjects certain post-January 1, 2016 offshore reinsurance transactions to enhanced asset adequacy testing, requiring compliance by December 31, 2025.
• SEC rules requiring clearing agencies to submit eligible secondary market transactions in U.S. Treasury securities for clearing, starting December 31, 2026, could affect Treasury markets.
• The U.S. Department of Labor's (DOL) revised definition of fiduciary and amendments to prohibited transaction exemptions (PTEs) could impact investment advice to retirement investors, though the DOL intends to review and re-issue the rule.
• The company's hedging programs, while designed to mitigate economic exposure, do not qualify for hedge accounting, leading to net income volatility.
• Static hedge positions, used to protect statutory capital, increase derivative positions and may result in additional net income volatility.

Future Outlook

The company's business and consolidated results are significantly affected by economic conditions, consumer confidence, global capital markets, and interest rates. Management anticipates that market volatility could continue to impact yields on invested assets, required reserves and capital, and fluctuations in AUM, AV, or AUA, potentially pressuring sales and reducing demand for products. Regulatory changes, including new NAIC rules on CLOs and offshore reinsurance, and SEC rules on Treasury securities clearing, are expected to impact statutory reserve and capital requirements. The DOL's fiduciary rule is under review and may be re-issued in revised form, potentially affecting investment advice to retirement investors. The company will continue to monitor customer behavior and market factors to ensure product attractiveness and profitability.

Management Comments

• Management evaluates the performance of each segment independently, focusing on operating earnings to understand underlying profitability drivers and trends.
• The company's hedging programs are designed to mitigate economic exposure to equity market and interest rate risks, though they may cause net income volatility.
• The company conducts an annual review of assumptions and models, updating them as needed for significant economic conditions or events impacting product liabilities and assets.

Industry Context

The financial services industry is currently navigating a volatile macroeconomic environment characterized by strong U.S. equity market returns in Q3 2025, resilient consumer spending, and benign inflation, yet still facing uncertainties from geopolitical conflicts, interest rate fluctuations, and potential economic recession. Regulatory bodies like the NAIC and SEC are actively refining capital requirements and introducing new standards for structured securities, reinsurance, and derivatives clearing, which will increase compliance burdens and potentially impact profitability across the sector. The DOL's ongoing review of fiduciary rules also signals potential shifts in how investment advice is provided to retirement investors, affecting distribution models and client engagement strategies.

Comparison to Industry Standards

• The company's RBC requirements are based on NAIC standards, which are minimum capital requirements used by state insurance departments to evaluate capital condition. The company's TAC was in excess of these RBC levels at the most recent annual filing.
• The company's hedging program aims for an asset level at or above a CTE98 level for variable annuity products, a statistical measure of tail risk common in the insurance industry.
• The company's investment strategy incorporates ESG factors, aligning with a growing industry trend towards sustainable investing practices.

Corporate Governance

Legal Proceedings

• The company is a defendant in various litigation and regulatory matters, including claims related to sales practices, agent misconduct, contract administration, product design, death benefits, unclaimed property, breach of fiduciary duties, and mismanagement of client funds.
• The estimated aggregate range of reasonably possible losses, in excess of any accrued amounts, is up to approximately $100 million as of September 30, 2025.
• The company periodically receives informal and formal requests for information from state and federal governmental agencies and self-regulatory organizations regarding inquiries and investigations.

Related Party Transactions

• The RGA Reinsurance Transaction involved Equitable Financial, Equitable America, and Equitable Financial L&A (subsidiaries of Equitable Holdings) ceding business to RGA Reinsurance Company. AllianceBernstein L.P. (an indirect, wholly-owned subsidiary of Equitable Holdings) entered into an investment advisory agreement with RGA to manage certain assets.
• Holdings purchased 19.7 million AB Holding Units from AllianceBernstein (a consolidated subsidiary) for $758 million, increasing its economic interest.
• Holdings received cash distributions of $427 million from AllianceBernstein and $133 million from investment management contracts with EFIM and EIM during the nine months ended September 30, 2025.
• Equitable Financial and Equitable America (insurance subsidiaries) are members of the Federal Home Loan Bank (FHLB) and have access to collateralized borrowings and funding agreements, requiring ownership of FHLB stock and pledging assets as collateral.
• AB (AllianceBernstein) has a $900 million committed, unsecured senior credit facility (EQH Facility) and a $300 million uncommitted, unsecured senior credit facility (EQH Uncommitted Facility) with EQH (Equitable Holdings).

Stakeholder Impact

• Shareholders: Experienced a significant net loss, impacting earnings per share, but the company continues share repurchase programs and pays preferred stock dividends.
• Policyholders: The reinsurance and novation transactions are intended to manage long-term liabilities, potentially affecting the administration of their contracts, though the ceding company continues to administer them.
• Employees: The reorganization of segments and strategic transactions may lead to operational adjustments, but no specific employee impact details were provided beyond general compensation and benefits.
• Creditors: The company maintains compliance with debt covenants and has secured new credit facilities, indicating continued access to capital markets, but the net losses could be a concern.
• Regulatory Bodies: The company is actively engaging with and complying with evolving regulatory standards, including those from NAIC, SEC, and DOL, which impacts its operational and financial reporting.

Next Steps

• The company is preparing to comply with the new NAIC actuarial guideline (AG 55) for offshore reinsurance transactions, with reporting required by December 31, 2025.
• The NAIC is considering delaying the requirement for insurers to report financially modeled NAIC Designations for CLOs to year-end 2026.
• The NAIC's Purposes and Procedures Manual amendment regarding unreasonable assessment of investment risk is scheduled to become effective on January 1, 2026.
• The SEC rules requiring clearing agencies to submit eligible cash transactions in U.S. Treasury securities for clearing will begin on December 31, 2026, and eligible repurchase and reverse repurchase transactions on June 30, 2027.
• The DOL intends to review and re-issue its fiduciary rule, which may lead to revised regulations impacting investment advice.

Key Dates

Recommendation

The company reported substantial net losses for the quarter and year-to-date, primarily due to significant one-time charges from the RGA reinsurance transaction and the novation of legacy variable annuity policies. While these events are largely non-recurring and operating earnings show a more stable, albeit slightly declining, trend, the magnitude of the GAAP losses and the ongoing market volatility create uncertainty. Strategic actions like share repurchases and debt management are positive, but the overall financial picture is mixed. A 'hold' recommendation is appropriate as investors should monitor the integration of the reinsurance deals and the company's ability to return to GAAP profitability, while acknowledging the underlying stability in operating performance.

Keywords

Equitable Holdings, SEC Filing, 10-Q, Financial Results, Reinsurance, RGA Reinsurance Company, Novation, Variable Annuity, Life Insurance, Asset Management, Wealth Management, Capital Markets, Net Loss, Operating Earnings, Share Repurchase, Debt, Regulatory Compliance, Risk Management, Equity Holdings, AllianceBernstein