Equitable Records $12 Billion in Hedging Gains

Equitable Holdings Inc. announced Monday that a $12 billion gain the value of its hedging arrangements will help it report $5.2 billion to $5.4 billion in net income for the first quarter.

Operating earnings will probably be about $500 million to $515 million, the New York-based life insurer said in an earnings preview.

Equitable is preparing to put out its full financial results for the first quarter May 5..

Resources

A copy of the Equitable earnings preview announcement is available here.
An article about Equitable’s earnings for the previous quarter is available here.

Equitable marks the value of its investments, and of the derivatives used to support its annuities, to market every quarter. It includes the change in its assets value in its net quarterly earnings.

Equitable’s mark-to-market approach, which is in line with what many accounting experts have been promoting for years, leads to big swings in earnings every quarter, even when operating performance is about the same as in previous quarters.

The company reported a net loss of $709 million on $1.7 billion revenue for the first quarter of 2019.

Equitable noted that, in the latest quarter, it has faced serious challenges.

The company slashed its long-term GAAP interest rate assumption to 2.25%, from 3.45%.

“We continue to monitor the impacts from COVID-19 and will further address its impacts in our first quarter earnings materials,” Equitable said in the main part of the announcement.

In a warning about forward-looking and cautionary statements at the bottom, Equitable notes that the equity and financial markets have experienced significant volatility since the end of the first quarter, and that interest rates have continued to decline.

“The company is currently unable to determine the extent of the impact of the pandemic to its operations and financial condition,” Equitable said.

Equitable will put accounting and disclosure requirements related to the events that have taken place after March 31 in its upcoming financial statements, the company said.

The company said it ended the first quarter with $1 billion in cash and liquid assets at the holding company, which is $500 million over the comppany’s target, and $7 billion in cash and liquid assets at the main life insurance company, which is $1 billion over the company’s target.

Correction: An earlier version of this article gave Equitable’s projected earnings range incorectly. The top of the range is $5.4 billion.

— Read Brighthouse Shows That Net Income Is Having Problems: Earnings, on ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on Facebook, LinkedIn and Twitter.