Good morning. My name is Melissa and I will be your conference operator today. At this time, I would like to welcome everyone to the AXA Equitable Holdings Third Quarter 2018 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. [Operator Instructions] Thank you. Mr. Kevin Molloy, Head of Investor Relations, you may begin your conference.

Thank you. Good morning and welcome to AXA Equitable Holdings’ third quarter 2018 earnings call. Materials for today's call can be found on our website at ir.axaequitableholdings.com. Before we begin, I would like to note that some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. Our results may materially differ from those expressed in or indicated by such forward-looking statements. So I’d like to point out the Safe Harbor language on Slide 2 of our presentation. You can also find our Safe Harbor language in our third quarter 10-Q. Joining me on today's call is Mark Pearson, President and Chief Executive Officer of AXA Equitable Holdings; and Anders Malmstrom, our Chief Financial Officer. Also on the line is John Weisenseel, AllianceBernstein’s Chief Financial Officer. During this call we will be discussing certain financial measures that are not based on generally accepted accounting principles, also known as non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures and related definitions may be found on the Investor Relations portion of our website, in our earnings release, slide presentation, and financial supplement. I would like to now turn the call over to Mark and Anders for their prepared remarks. Mark

Thank you, Kevin, and good morning, everyone. This morning we will discuss our third quarter financial performance, provide an update on our strategic priorities and share progress against our key financial targets. Before jumping into the results, I'd like to spend a moment highlighting some of the key factors influencing our performance for the third quarter. Firstly, capital markets were favorable. The S&P was 7% in the quarter and the 10-year treasurer increased 20 bps, both helping operating earnings and our cash generation capability. Our hedging program is working as intended and the balance sheet remained strong. In the third quarter we started to execute our capital management program. We have returned $130 million to shareholders, $73 million in dividends and $57 million in open market share buybacks. This means we have $443 million remaining from our initial repurchase authorization we announced in August. In addition, I am pleased to announce today that our Board has authorized increasing our share purchase program by an additional $300 million. Our capital management program allows us to continue to optimize the capital we hold in our company and the new $300 million authorization increase is another example of the confidence that we have in the earnings power and financial strength of this company. And finally, in line with most of our peers we have completed our first actuarial assumption update as a public company. Anders will review this in detail shortly. Turning to Slide 4 and our third quarter financial highlights. Total assets under management grew 3% to $668 billion over the past year supported by equity markets. Non-GAAP Operating Earnings grew to $693 million for the quarter including a one-time favorable impact of $169 million relating to the outcome of the annual assumption update. Excluding this one-time update, operating earnings increased 38%…

Thank you, Mark and good morning everyone. On Slide 6, I will review our consolidated results for the third quarter before providing more detail on the outcome of the actuarial assumption updates, second results and capital position. As Mark noted, excluding impact from the assumption updates non-GAAP operating earnings increased 38% year-over-year to $524 million. This growth was driven by higher AUM across all business segments, stable operating expenses in our insurance segments and lower taxes. On a per-share basis non-GAAP operating earnings excluding the impact of the assumption update was $0.93 also up 38% year-over-year. The GAAP net loss for the quarter was $496 million. Driving the variance between operating earnings and net income was a combination of primarily noneconomic factors including our hedging program and nonperformance risk adjustment, as well as the outcome of our annual actuarial assumption updates which I will review in detail on the following two pages. Total AUM, an important driver of our fee-based business grew 3% year-over-year to approximately $668 billion driven predominantly by market appreciation and sequentially our pro forma non-GAAP operating ROE increased 200 basis points to 15.6% driven by higher non-GAAP operating earnings in the current quarter. This level of ROE includes a benefit from our assumption update, but remains in line with our mid-teens ROE objective. Turning to Slide 7, I'd like to provide additional detail on the outcome of our annual actuarial assumptions update. For background, we moved to an annual assumption and model update process in the third quarter during which we completed our first comprehensive update as a U.S. listed company. We reviewed all material assumptions making updates where warranted. First, non-GAAP operating earnings of $693 million for the quarter includes a favorable impact of $169 million related to assumption updates. Included in this table are…

Thanks Anders. Before breaking for questions, I’d like to reiterate this quarter’s performance in the context of our long-term financial targets. On Slide 14, we show a familiar snapshot of our key financial targets. Three quarters of the way through the year I’m very pleased with our results. We are well-positioned to continue to grow earnings while maintaining financial stability through market cycles and generating attractive returns and strong cash flows for our shareholders. And to reiterate our commitments, we hold ourselves accountable to deliver 5% to 7% compound annual growth in non-GAAP operating earnings through 2020 supported in part by this 30% adjusted operating margin target that AB has publicly reported. For the target payout ratio of 40% to 60%, this should result in an operating ROE in the mid-teens by 2020. And finally, we expect to maintain strong capitalization of CTE98 for the variable annuity business and 350% to 400% RBC for the other insurance businesses. With that, we will open the call now to Q&A.

Thank you. [Operator Instructions] Your first question comes from the line of Erik Bass from Autonomous Research. Your line is open.

Hi, thank you. Now that you’ve exited loss recognition in the protection business, how should we think about the run rate earnings power for that segment?

Yes, good morning, Erik. This is Anders speaking. Look I think as we now exited loss recognition testing as I said the earnings volatility should come down and you can expect a run rate at about $50 million per quarter.

Thank you. And I’m assuming with some seasonality in terms of and mortality experience?

Yes, absolutely correct. I mean there is seasonality to mortality, but because we exited loss recognition testing all the other volatility should really be muted now.

Thank you. And then given the rise in interest rates since you initially gave your target of $160 million of higher net investment income from the general account optimization, do you see any potential for upside if rates remain at or above current levels?

Yes, look I think that there are multiple factors that play into the GRE balancing. I would say from an interest rate perspective because they are higher, there is offset there, but at the same time keep in mind that the graph is much flatter than in the past. And then I think because of that we are a little bit more cautious on duration when it comes to corporate in order to make sure that we don’t lose an opportunity and go too long and then the curve flattens. So I would at this point of time stick to the $160 million that is obviously if rates rise further, that would add. And in particularly if it would steepen that would help as well.

Got it, thank you.

Your next question comes from the line of Andrew Kligerman from Credit Suisse. Your line is open. Andrew Kligerman, your line is open.

Hi, can you hear me?

Yes, now can hear you.

Okay, great. Okay in line with your comment that you would like to be in line with CTE98 or you are in line with CTE98, I listed one of your competitors, Brighthouse Financial and they complied with it and found that after factoring in tax reform and AIC reform that they were short about $1 billion and they input certain capital got above it. So my question to you is with an AIC reform or with tax reform would you be in line with CTE98 and if not how much capital might you need to put in?

Yes, so I mean that’s a really good question. When we think about the NAC [ph] reform, it has multiple components and as you mentioned, I mean I think tax is an important one. Now we still go through the details that’s what I can tell you today is that we don’t think that we have any shortfall from a capital perspective and we actually believe right now that it will have no impact on our dividend capacity of going forward, which means we’re going to stick to the same target to be at CTE98 in almost all scenarios going forward. But as I said, I mean for the couple of open points there and the committees haven’t finalized everything, but we feel very confident.

So from where you sit Anders, no need to dividend down capital to the life operations from the parent?

Absolutely, absolutely. I think our dividend plan still sticks.

Perfect. And then with regard to the robust sales that you saw in the variable annuity area, what’s interesting is, both Equitable and your competitors seem to have done extremely well this quarter and I kind of benchmarked it against numerous thinking that, annuity sales this year would be up maybe high single digit low double digit depending on the product. And I'm wondering is it the DoL going –regulation going away, was it a robust equity market in the third quarter, and looking forward over the next 12 months, do you think you could sustain this type of growth?

Hi Andrew its Mark Pearson. Thanks for the question. Yes, very pleased to see our top line growth on the individual retirement business. It was a very good quarter for us. We are seeing good momentum since the quarter as well. I think in addition to the point you made about the DoL it was definitely an impact on the pattern of sales in 2017 in anticipation of a rule that didn't come in that distorted the pattern. So be careful looking at it quarter-on-quarter. But the growth has come back for us. I think a couple of things there for us. Firstly the product innovation side, we were the pioneers and leader on the SCS product and that's helped us very much. And the other thing I think to take into account is our distributions strength. The partnerships we've got through AXA Advisors, third parties and into some insurance carriers is really helping the sales for us.

So Mark, the growth potential still exists to continue?

Yes, we like the market and we like our position in there.

Okay, thank you.

Your next question comes from the line of Jimmy Bhullar from J.P. Morgan. Your line is open.

Hi. Good morning. Could you talk about as you mentioned annuity sales just following up on that, have you seen an increase in competition or any changes in demand for the SCS buffer annuity as other companies have come out with some similar products?

Yes, Jimmy. You're right, there is increased competition particularly on that SCS number of competitors have followed us into that market. We still categorize the competition as we know it as it is there's no return to the pre 2007 pricing problems. So it's rational competition in there. I think there's two things. It's where we compete and how we distribute as well as the products we have. So you will remember me telling you that we were currently for example number three in the market, a number 12 in the White Houses. So we get a lot of our business where it's less proceeding, less margin pressure. So we think we're in a good position notwithstanding the increased competition.

Okay. And then also could you remind us what your expectations are for free cash flow over the next couple of years either dollar amount or as a percentage of earnings?

Yes, so I think and this is Andres speaking. I think what I can confirm is that we stick to the 40% to 60% pay out of our operating earnings. I think as you saw before I think for 2018 we already showed that we were well within this range and you can expect that to continue over the next couple of years.

And then just lastly on share buybacks, I think you mentioned this briefly in your comments, but I missed your point. Do you intend to just do open market purchases or could you do sort of an accelerated buyback in terms of participating in any offering if AXA were to sell stock?

Yes, so I think what I said and I can repeat this, I would say if and when AXA has - we use the majority with AXA, but we will also be in the open market.

Okay, alright. Thank you.

Your next question comes from the line of Tom Gallagher from Evercore. Your line is open.

Good morning. Andres, I know you mentioned you think the FASB change will better align economics in variable annuities for you. So you think it will be positive from that perspective, can you provide any other perspective on initial estimates, even broader impressions you have on what the standard might mean for your company in terms of book value impact or any other impacts we should be thinking about?

Yes so and good morning Tom. So I think look I think overall as I said, I think the FASB reform really goes into the right direction. And as you know, we manage our business to economics and right now the biggest disconnect is that the accounting is not economics, so the faster reform will really make it more economic. And with that in the future once this is implemented you can actually look at book value and book value really gives you a good indication on how the businesses performing going forward. And I think to give a quantitative impact it's way too early. We need to do a little bit more work, but generally it goes exactly in the right direction. It is how we want to manage the business on an economic basis and which will help all of [indiscernible] to actually look at all the indicators in the right way because today this is not possible.

Got it. And just the on the accounting asymmetry on the GMxB of $700 million a year, should I take that to mean when we look at your actuarial review, the $496 million negative net income loss or net loss for the quarter, if the economics today were better or if the accounting was better aligned with the economics there would have been a $700 million reserve release related to VA which would have more than offset the net loss, is that kind of the high level point you're trying to make there?

Yes, I think there is a couple of points there. I mean, in my slide we basically show the three components that we look at when we go from operating earnings to net income it's the assumption update and then it is the hedging fees which is basically the $700 million guidance we gave you based on the management case and then it's the NPR. The assumption update actually was amplified by the accounting mismatch because we updated annuitization, so in it and there is, I mean it was impacted by the asymmetry. So it would be smaller and under the new FASB rules the hedging fees should principally go away in a perfect world and then the NPR goes through OCI in the future. So you see all these three items would be would be much easier for all of us to actually talk about.

Okay. And then final question, the fact that you’re not out of loss recognition testing for protection, what does that effectively mean? Do you now have a thin margin or is there a big enough buffer within that business where you wouldn’t expect it to become – to be an issue from a volatility standpoint for several years, can you provide a little more perspective there?

Yes, look I think, I think the good thing is we’re out of the loss recognition and as we’ve said it’s multiple reasons. One that we have high interest rates right now which are reflected there. I would say if everything stays equal we are in a good position, if interest rates would go back to where they were couple of years ago, we would probably be thin again or negative. So with that I mean we have margins, but we don’t have margin to withstand 100 bps reduction in interest rates.

Got you, thank you.

[Operator Instructions] Your next question comes from the line of Alex Scott from Goldman Sachs. Your line is open.

Hey, first question I had was just a followup on one of Tom’s questions. When I think about the economic liability, I think you mentioned in your prepared remarks the economic liability is more consistent with where liability would be once some of the accounting is updated and I appreciate its early days to kind of give an impact from the accounting, but could you give us a way to think about what level of the economic liability is that now for the GMIB relative to I think the reserve that you guys disclosed currently?

I mean, I would say maybe as a best proxy take the CTE framework because the CTE is an economic framework, because I think it’s as it’s really way too early to give you a quantitative impact on the accounting based on many factors that is going to impact that number. Why don’t you just take the CTE as a first good proxy for the economic liability?

Got it, okay. And then the other question I had is on the AB stake, as you guys are kind of getting closer to year-end, give any update on just sort of discussions with the regulators and potential strategies to bring the AB stake just say in the life insurance subsidiary up to the holding company?

Yes, I mean as I told you look I think it’s in our interest to change the ownership structure, I think it’s still too early to give you kind of a date and where we are but we’re making good progress there.

Got it. Okay, thanks.

There are no further questions at this time. Ladies and gentlemen, thank you for joining. This concludes today’s conference call. You may now disconnect.