Equitable Holdings, Inc.
For the period ended Dec 31, 2025. Filed Feb 25, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Feb 25, 2026
EQH$52.66-0.5%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-02-24.
0001333986-25-000011
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-25.
0001333986-26-000012
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 152 previous paragraphs and 142 current paragraphs.
115 unchanged; 23 reworded; 4 added; 14 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
Our reinsurance arrangement with affiliated entities.
Current report
The reinsurance arrangement with Equitable America and Equitable Bermuda (the “Offshore Affiliate”) provides important capital management benefits to Equitable America. Under applicable statutory accounting rules, Equitable America is currently, and will in the future be, entitled to a credit in their calculations of reserves for amounts reinsured to the Offshore Affiliate. However, if the Offshore Affiliate loses its reciprocal jurisdiction reinsurer status in Arizona, the Offshore Affiliate will have to maintain collateral equal to the U.S. statutory accounting reserve for Equitable America to retain this credit. We cannot be certain that the Offshore Affiliate will be able to maintain this collateral.
Removed paragraphs (14)
Previous report
In the U.S., the continued disagreement over the federal debt limit and other budget questions threatens the economy. Failure to resolve these issues in a timely manner could result in a government shutdown, erratic shutdown in government spending or a default on government debt, which could result in increased market volatility and reduced economic activity.
Previous report
Losses due to defaults by third parties and affiliates, including outsourcing relationships.
Previous report
We depend on third parties and affiliates that owe us money, securities or other assets to pay or perform under their obligations. Defaults by one or more of these parties could have a material adverse effect on our business, results of operations or financial condition. Moreover, as a result of contractual provisions certain swap dealers require us to add to derivatives documentation and to agreements, we may not be able to exercise default rights or enforce transfer restrictions against certain counterparties which may limit our ability to recover amounts due to us upon a counterparty’s default. We rely on various counterparties and other vendors to augment our existing investment, operational, financial and technological capabilities, but the use of a vendor does not diminish our responsibility to ensure that client and regulatory obligations are met. Disruptions in the financial markets and other economic challenges may cause our counterparties and other vendors to experience significant cash flow problems or even render them insolvent, which may expose us to significant costs and impair our ability to conduct business. We are also subject to the risk that our rights against third parties may not be enforceable in all circumstances. The deterioration or perceived deterioration in the credit quality of third parties whose securities or obligations we hold could result in losses or adversely affect our ability to use those securities or obligations for liquidity purposes.
Previous report
Our reinsurance arrangement with an affiliated captive.
Previous report
The completion of the reinsurance transaction with Reinsurance Group of America is subject to several conditions, including the receipt of consents and approvals from government entities, which may impose conditions that could have an adverse effect on the expected economic and non-economic benefits to the Company or could cause the proposed transaction to be abandoned.
Previous report
Subsequent to December 31, 2024, our subsidiaries, Equitable Financial, as well as our subsidiaries Equitable America and Equitable L&A, entered into a master transaction agreement with Reinsurance Group of America (“RGA”) on February 23, 2025 pursuant to which at closing and subject to the terms and conditions set forth in such agreement, RGA would enter into reinsurance agreements, as reinsurer, with each such subsidiary, as ceding company, to reinsure 75% of such ceding companies’ in-force individual life insurance block on a pro-rata basis (the “RGA Reinsurance Transaction”).
Previous report
The completion of the RGA Reinsurance Transaction, and entry into the reinsurance agreements contemplated thereby, is subject to several conditions, including, among others, the receipt of approvals from certain U.S. insurance regulators, including the New York Department of Financial Services, the Arizona Department of Insurance and Financial Institutions and the Missouri Department of Commerce & Insurance, as well as the Bermuda Monetary Authority. The Company cannot provide any assurance that either it or RGA will obtain the necessary approvals.
Previous report
In addition, regulatory entities may impose certain requirements or obligations as conditions for their approval or in connection with their review. The master transaction agreement may require the Company (including its applicable subsidiaries) or RGA to accept certain conditions or limitations or modification to the transaction document from these regulators that could adversely effect the expected economic and non-economic benefits of the RGA Reinsurance Transaction to the Company or could cause the proposed transaction to be abandoned. The parties are not required to accept conditions that would or would reasonably be likely to have a Burdensome Condition (as defined in the master transaction agreement), which assessment will be made at or prior to closing, and the Company cannot provide any assurance that any required conditions, limitations or modification will not, individually or in the aggregate, have such an effect. Furthermore, it could take longer to receive the requisite governmental consents and approvals than currently anticipated, and any such delay could cause the Company to fail to realize the benefits it currently expects to receive from the RGA Reinsurance Transaction or result in the abandonment of the transaction.
Previous report
On February 24, 2025, Holdings commenced a cash tender offer (the “Offer”) to purchase up to 46 million AB Holding Units at a price of $38.50 per unit, less any applicable tax withholding, for an aggregate purchase price of $1.8 billion. The Offer will expire on March 24, 2025 unless extended or earlier terminated. Holdings expects to fund the Offer from available cash and cash equivalents and the Term Loan described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Holdings Credit Facilities.” In the event the RGA Reinsurance Transaction is significantly delayed or fails to close, and the Company does not receive the expected economic benefits, the use of cash and cash equivalents, along with a draw under the Term Loan, could have a material adverse effect on our business, results of operations, liquidity or financial condition, including the ability to meet our 2027 financial targets.
Previous report
State insurance laws limit the ability of our insurance subsidiaries to pay dividends and other distributions to Holdings.
Previous report
The payment of dividends and other distributions to Holdings by its insurance subsidiaries, including its captive reinsurer, is regulated by state insurance laws and regulations. These restrictions may limit or prevent our insurance subsidiaries from making dividend or other payments to Holdings. These restrictions are based, in part, on earned surplus and the prior year’s statutory income and policyholder surplus. In general, dividends may be paid only from earned surplus (typically defined as available or unassigned surplus, subject to possible adjustments) which is derived from realized net profits on the company’s business. Dividends up to specified levels are considered ordinary and generally may be made without prior regulatory approval. Meanwhile, dividends paid from sources other than earned surplus or in larger amounts, often called “extraordinary dividends,” are generally subject to approval by the insurance commissioner of the relevant state of domicile. In addition, certain states may prohibit the payment of dividends from other than the insurance company’s earned surplus. If any of our insurance subsidiaries subject to the positive earned surplus requirement do not succeed in building up sufficient positive earned surplus to have ordinary dividend capacity in future years, such subsidiary would be unable to pay dividends or distributions to our holding company, in certain cases, absent prior approval of its domiciliary insurance regulator. For further information on state insurance laws related to payments of dividends, see “Business—Regulation—Insurance Regulation—Holding Company and Shareholder Dividend Regulation.”
Previous report
From time to time, the NAIC and various state insurance regulators have considered, and may in the future consider, proposals to further limit dividend payments that an insurance company may make without regulatory approval. For example, the NYDFS enacted Regulation 213. Due to a permitted statutory accounting practice agreed to with the NYDFS, Equitable Financial needs the prior approval of the NYDFS to pay the portion, if any, of any ordinary dividend that exceeds the ordinary dividend that Equitable Financial would be permitted to pay under New York’s insurance laws absent the application of such permitted practice. If more stringent restrictions on dividend payments are adopted by jurisdictions in which our insurance subsidiaries are domiciled, such restrictions could have the effect of significantly reducing dividends or other amounts payable to Holdings by its insurance subsidiaries without prior approval by regulatory authorities. The ability of our insurance subsidiaries to pay dividends or make other distributions is also limited by our need to maintain the financial strength ratings assigned to such subsidiaries by the rating agencies. These ratings depend to a large extent on the capitalization levels of our insurance subsidiaries.
Previous report
Uncertainty surrounding potential legal, regulatory and policy changes, as well as the potential for general market volatility, because of the change in the presidential administration in the United States.
Previous report
We face regulatory and tax uncertainties because of possible changes arising from the new presidential administration. The nature, timing and economic effects of any potential change to the current legal and regulatory framework affecting our insurance subsidiaries or the products they offer remains highly uncertain. Uncertainty surrounding future changes may adversely affect our operating environment and have an adverse impact on our business, financial condition, results of operations and growth prospects.
Reworded paragraphs (23)
Previous wording
Our business, results of operations or financial condition are materially affected by conditions in the global capital markets and the economy. A wide variety of factors continue to impact economic conditions and consumer confidence. These factors include, among others, uncertainty regarding the federal debt limit, volatility in the capital markets, equity market declines, inflationary pressures, plateauing or decreasing economic growth, high fuel and energy costs and changes in fiscal or monetary policy. The Russian invasion of the Ukraine, the Israel-Hamas war and broader Middle Eastern hostilities, and the ensuing conflicts and the sanctions and other measures imposed in response to these conflicts, as well as the U.S. presidential administration’s threats of tariffs, and retaliatory tariffs in response, have significantly increased the level of volatility in the financial markets and have increased the level of economic and political uncertainty. Given our interest rate and equity market exposure in our investment and derivatives portfolios and many of our products, these factors could have a material adverse effect on us. The value of our investments and derivatives portfolios may also be adversely affected by reductions in price transparency, changes in the assumptions or methodology we use to estimate fair value and changes in investor confidence or preferences, which could potentially result in higher realized or unrealized losses. Market volatility may also make it difficult to transact in or to value certain of our securities if trading becomes less frequent.
Current wording
Our business, results of operations or financial condition are materially affected by conditions in the global capital markets and the economy. A wide variety of factors continue to impact economic conditions and consumer confidence. These factors include, among others, uncertainty regarding the federal debt limit, volatility in the capital markets, equity market declines, inflationary pressures, plateauing or decreasing economic growth, high fuel and energy costs and changes in fiscal or monetary policy. The Russian invasion of Ukraine, hostilities in the Middle East, and the ensuing conflicts and the sanctions and other measures imposed in response to these conflicts, as well as tariff and trade disputes, have significantly increased the level of volatility in the financial markets and have increased the level of economic and political uncertainty. Given our interest rate and equity market exposure in our investment and derivatives portfolios and many of our products, these factors could have a material adverse effect on us. The value of our investments and derivatives portfolios may also be adversely affected by reductions in price transparency, changes in the assumptions or methodology we use to estimate fair value and changes in investor confidence or preferences, which could potentially result in higher realized or unrealized losses. Market volatility may also make it difficult to transact in or to value certain of our securities if trading becomes less frequent.
Previous wording
Some of our retirement and protection products and certain of our investment products, and our investment returns, are sensitive to interest rate fluctuations, and changes in interest rates and interest rate benchmarks may adversely affect our investment returns and results of operations, including in the following respects:
Current wording
Some of our retirement products and certain of our investment products, and our investment returns, are sensitive to interest rate fluctuations, and changes in interest rates and interest rate benchmarks may adversely affect our investment returns and results of operations, including in the following respects:
Previous wording
We and certain of our vendors retain confidential information (including customer transactional data and personal information about our customers, the employees and customers of our customers, and our own employees). The privacy or security of this information may be compromised, including as a result of an information security breach. We have implemented a formal, risk-based data security program, including physical, technical, and administrative safeguards; however, failure to implement and maintain effective data protection and cybersecurity programs that comply with applicable law, or any compromise of the security, confidentiality, integrity, or availability of our information systems, or those of our vendors, the cloud-based systems we use, or the sensitive information stored on such systems, through cyber-attacks or for any other reason that results in unauthorized access, use, modification, disclosure or destruction of personally identifiable information, customer information, or other confidential or proprietary information, or the disruption of critical operations and services, could damage our reputation, deter people from purchasing our products, subject us to significant civil and criminal liability and require us to incur significant technical, legal and other expenses any of which could have a material adverse effect on our business, results of operations or financial condition. For further information on the cybersecurity and data privacy laws applicable to our insurance subsidiaries, see “Cybersecurity—Overview of Equitable Cybersecurity Risk Management” and “Cybersecurity—Governance of Cybersecurity Risk Management.”
Current wording
We and certain of our vendors retain confidential information (including customer transactional data and personal information about our customers, the employees and customers of our customers, and our own employees). The privacy or security of this information may be compromised, including as a result of an information security breach. We have implemented a formal, risk-based data security program, including physical, technical, and administrative safeguards; however, failure to implement and maintain effective data protection and cybersecurity programs that comply with applicable law, or any compromise of the security, confidentiality, integrity, or availability of our information systems, or those of our vendors, the cloud-based systems we use, or the sensitive information stored on such systems, through cyber-attacks, employee error or malfeasance, system degradation, or for any other reason that results in unauthorized access, use, modification, disclosure or destruction of personally identifiable information, customer information, or other confidential or proprietary information, or the disruption of critical operations and services, could damage our reputation, deter people from purchasing our products, subject us to significant civil and criminal liability and require us to incur significant technical, legal and other expenses any of which could have a material adverse effect on our business, results of operations or financial condition. Moreover, while we maintain cyber incident liability insurance, it may be insufficient to cover all costs and liabilities associated with a cyber incident, or we may be unable to retain or obtain such insurance in the future on commercially practicable terms. For further information on the cybersecurity and data privacy laws applicable to our insurance subsidiaries, see “Cybersecurity—Overview of Equitable Cybersecurity Risk Management” and “Cybersecurity—Governance of Cybersecurity Risk Management.”
Previous wording
Any catastrophic event, terrorist attacks, accidents, floods, severe storms or hurricanes, pandemics and other public health issues, or cyber-terrorism, could have a material and adverse effect on our business. We could experience long-term interruptions in our service and the services provided by our significant vendors. Some of our operational systems are not fully redundant, and our disaster recovery and business continuity planning cannot account for all eventualities. Additionally, unanticipated problems with our disaster recovery systems could further impede our ability to conduct business, particularly if those problems affect our computer-based data processing, transmission, storage and retrieval systems and destroy valuable data. We could experience a material adverse effect on our liquidity, financial condition and the operating results of our insurance business due to increased mortality and, in certain cases, morbidity rates and/or its impact on the economy and financial markets. We may also experience lower sales or other negative impacts to the use of services we provide if economic conditions worsen due to a catastrophe or pandemic or other public health emergency, as the financial condition of current or potential customers, policyholders, and clients may be adversely affected. See “—Conditions in the global capital markets and economy.” A catastrophe may affect our computer-based data processing, transmission, storage and retrieval systems and destroy valuable data. Climate change may increase the frequency and severity of weather-related disasters and pandemics. These events could result in an adverse impact on our ability to conduct our business, including our ability to sell our products and services and our ability to adjudicate and pay claims in a timely manner.
Current wording
Any catastrophic event, terrorist attacks, accidents, floods, severe storms or hurricanes, pandemics and other public health issues, cyber-terrorism, or the failure of telecommunications or other critical infrastructure could have a material and adverse effect on our business. We could experience long-term interruptions in our service and the services provided by our significant vendors. Some of our operational systems are not fully redundant, and our disaster recovery and business continuity planning cannot account for all eventualities. Additionally, unanticipated problems with our disaster recovery systems could further impede our ability to conduct business, particularly if those problems affect our computer-based data processing, transmission, storage and retrieval systems and destroy valuable data. We could experience a material adverse effect on our liquidity, financial condition and the operating results of our insurance business due to increased mortality and, in certain cases, morbidity rates and/or its impact on the economy and financial markets. We may also experience lower sales or other negative impacts to the use of services we provide if economic conditions worsen due to a catastrophe or pandemic or other public health emergency, as the financial condition of current or potential customers, policyholders, and clients may be adversely affected. See “—Conditions in the global capital markets and economy.” A catastrophe may affect our computer-based data processing, transmission, storage and retrieval systems and destroy valuable data. Climate change may increase the frequency and severity of weather-related disasters and pandemics. These events could result in an adverse impact on our ability to conduct our business, including our ability to sell our products and services and our ability to adjudicate and pay claims in a timely manner.
Previous wording
If economic conditions worsen as a result of a catastrophe, pandemic or other public health issue, companies may be unable inability to make interest and principal payments on their debt securities or mortgage loans that we hold for investment purposes. Accordingly, we may still incur significant losses that can result in a decline in net investment income and/or material increases in credit losses on our investment portfolios. With respect to commercial real estate, there could be potential impacts to estimates of expected losses resulting from lower underlying values, reflecting current market conditions at that time.
Current wording
If economic conditions worsen as a result of a catastrophe, pandemic or other public health issue, companies may be unable to make interest and principal payments on their debt securities or mortgage loans that we hold for investment purposes. Accordingly, we may still incur significant losses that can result in a decline in net investment income (“NII”) and/or material increases in credit losses on our investment portfolios. With respect to commercial real estate, there could be potential impacts to estimates of expected losses resulting from lower underlying values, reflecting current market conditions at that time.
Previous wording
Misconduct by our employees, financial professionals, agents, intermediaries, representatives of our broker-dealer subsidiaries - or employees of our vendors could result in obligations to report such misconduct publicly, regulatory enforcement proceedings and, even findings that violations of law were committed by us or our subsidiaries, regulatory sanctions or serious reputational or financial harm. Certain types of violations may result in our inability to act as an investment adviser or broker-dealer or to represent issuers in Regulation D offerings by acting as placement agent, general partner or other roles. We employ controls and procedures designed to monitor employees’ and financial professionals’ business decisions and to prevent them from taking excessive or inappropriate risks, including with respect to information security, but employees may take such risks regardless of such controls and procedures. If our employees or financial professionals take excessive or inappropriate risks, those risks could harm our reputation, subject us to significant civil or criminal liability and require us to incur significant technical, legal and other expenses.
Current wording
Misconduct and excessive or inappropriate risk taking by our employees, financial professionals, agents, intermediaries, representatives of our broker-dealer subsidiaries, or employees of our vendors could result in public reporting, regulatory enforcement proceedings, regulatory sanctions or serious reputational or financial harm, as well as significant technical, legal and other expenses. Certain types of violations may result in our inability to act as an investment adviser or broker-dealer or to represent issuers in Regulation D offerings by acting as placement agent, general partner or another role. We employ controls and procedures designed to monitor employees’ and financial professionals’ business decisions and to prevent them from taking excessive or inappropriate risks, including with respect to information security, but employees may take such risks regardless of such controls and procedures.
Previous wording
We may consider potential strategic transactions, including acquisitions, dispositions, mergers, reinsurance, joint ventures and similar transactions. These transactions may not be effective and could result in decreased earnings and harm to our competitive position. In addition, these transactions, if undertaken, may involve a number of risks and present financial, managerial and operational challenges. Furthermore, strategic transactions may require us to increase our leverage or, if we issue shares to fund an acquisition, would dilute the holdings of the existing stockholders. Any of the above could cause us to fail to realize the benefits anticipated from any such transaction.
Current wording
We may consider potential strategic transactions, including acquisitions, dispositions, mergers, reinsurance, joint ventures and similar transactions. These transactions may not be effective and could result in decreased earnings and harm to our competitive position. In addition, these transactions, if undertaken, may involve a number of risks; present financial, managerial and operational challenges; require us to increase our leverage; or, if we issue shares to fund an acquisition, dilute the holdings of the existing stockholders. Any of the above could cause us to fail to realize the benefits anticipated from any such transaction.
Previous wording
We hold certain investments that may lack liquidity, such as privately placed fixed maturity securities, mortgage loans, commercial mortgage backed securities and alternative investments. In the past, even some of our very high quality investments experienced reduced liquidity during periods of market volatility or disruption. If we were required to liquidate these investments on short notice or were required to post or return collateral, we may have difficulty doing so and be forced to sell them for less than we otherwise would have been able to realize. The reported values of our relatively illiquid types of investments do not necessarily reflect the current market price for the asset. If we were forced to sell certain of our assets in the current market, there can be no assurance that we would be able to sell them for the prices at which we have recorded them and we might be forced to sell them at significantly lower prices, which could have a material adverse effect on our business, results of operations, liquidity or financial condition.
Current wording
We hold certain investments that may lack liquidity, such as privately placed fixed maturity securities, mortgage loans, commercial mortgage backed securities and private alternative investments. In the past, even some of our very high quality investments experienced reduced liquidity during periods of market volatility or disruption. If we were required to liquidate these investments on short notice or were required to post or return collateral, we may have difficulty doing so and be forced to sell them for less than we otherwise would have been able to realize. The reported values of our relatively illiquid types of investments do not necessarily reflect the current market price for the asset. If we were forced to sell certain of our assets in the current market, there can be no assurance that we would be able to sell them for the prices at which we have recorded them and we might be forced to sell them at significantly lower prices, which could have a material adverse effect on our business, results of operations, liquidity or financial condition.
Previous wording
The reinsurance arrangement with EQ AZ Life Re Company (the “Affiliated Captive”) provides important capital management benefits to Equitable Financial and Equitable America (collectively, the “Affiliated Cedants”). Under applicable statutory accounting rules, the Affiliated Cedants are currently, and will in the future be, entitled to a credit in their calculations of reserves for amounts reinsured to the Affiliated Captive, to the extent the Affiliated Captive holds assets in trust or provides letters of credit or other financing acceptable to the respective domestic regulators of the Affiliated Cedants. The level of assets required to be maintained in the trust fluctuates based on market and interest rate movements, age of the policies, mortality experience and policyholder behavior. Increasing reserve requirements may necessitate that additional assets be placed in trust or securing additional letters of credit, which could impact the liquidity of the Affiliated Captive.
Current wording
The reinsurance arrangement with EQ AZ Life Re (the “Affiliated Captive”) provides important capital management benefits to Equitable Financial. Under applicable statutory accounting rules, Equitable Financial is currently, and will in the future be, entitled to a credit in its calculations of reserves for amounts reinsured to the Affiliated Captive, to the extent the Affiliated Captive holds assets in trust or provides letters of credit or other financing acceptable to the domestic regulator of Equitable Financial. The level of assets required to be maintained in the trust fluctuates based on market and interest rate movements, age of the policies, mortality experience and policyholder behavior. Increasing reserve requirements may necessitate that additional assets be placed in trust or additional letters of credit secured, which could impact the liquidity of the Affiliated Captive.
Previous wording
In any particular year, statutory surplus amounts and RBC ratios may increase or decrease depending on a variety of factors. For further information on the NAIC review of the RBC treatment of certain complex assets in which insurers have invested during recent years, see “Business—Regulation—Insurance Regulation—Surplus and Capital; Risk Based Capital.” Additionally, state insurance regulators have significant leeway in how to interpret existing regulations, which could further impact the amount of statutory capital or reserves that we must maintain. Equitable Financial is primarily regulated by the NYDFS, which from time to time has taken more stringent positions than other state insurance regulators on matters affecting, among other things, statutory capital or reserves. In certain circumstances, particularly those involving significant market declines, the effect of these more stringent positions may be that our financial condition appears to be worse than competitors who are not subject to the same stringent standards, which could have a material adverse impact on our business, results of operations or financial condition. Moreover, rating agencies may implement changes to their internal models that have the effect of increasing or decreasing the amount of capital our insurance subsidiaries must hold in order to maintain their current ratings. To the extent that our statutory capital resources are deemed to be insufficient to maintain a particular rating by one or more rating agencies, our insurance subsidiaries’ financial strength and credit ratings might be downgraded by one or more rating agencies. There can be no assurance that any of our insurance subsidiaries will be able to maintain its current RBC ratio in the future or that its RBC ratio will not fall to a level that could have a material adverse effect on our business, results of operations or financial condition.
Current wording
In any particular year, statutory surplus amounts and RBC ratios may increase or decrease depending on a variety of factors. For further information on the NAIC review of the RBC treatment of certain complex assets in which insurers have invested during recent years, see “Business—Regulation—Insurance Regulation—Risk Based Capital.” Additionally, state insurance regulators have significant leeway in how to interpret existing regulations, which could further impact the amount of statutory capital or reserves that we must maintain. Equitable Financial is primarily regulated by the NYDFS, which from time to time has taken more stringent positions than other state insurance regulators on matters affecting, among other things, statutory capital or reserves. In certain circumstances, particularly those involving significant market declines, the effect of these more stringent positions may be that our financial condition appears to be worse than competitors who are not subject to the same stringent standards, which could have a material adverse impact on our business, results of operations or financial condition. Moreover, rating agencies may implement changes to their internal models that have the effect of increasing or decreasing the amount of capital our insurance subsidiaries must hold in order to maintain their current ratings. To the extent that our statutory capital resources are deemed to be insufficient to maintain a particular rating by one or more rating agencies, our insurance subsidiaries’ financial strength and credit ratings might be downgraded by one or more rating agencies. There can be no assurance that any of our insurance subsidiaries will be able to maintain its current RBC ratio in the future or that its RBC ratio will not fall to a level that could have a material adverse effect on our business, results of operations or financial condition.
Previous wording
AB derives most of its revenues from investment advisory and services fees, typically calculated as a percentage of the value of AUM on a specified date, or as an average over a billing period. These fees vary based on the type of service, account size, and total assets managed for a client. Several factors can adversely affect AB’s AUM and composition, including market factors, client preferences, AB’s investment performance, investing trends, service changes and interest rate changes. A decrease in the value or amount of AB’s AUM, an adverse mix shift in its AUM, or a reduction in AB’s fee levels would negatively impact AB’s investment advisory fees and revenues. Reduced revenues, without a corresponding decrease in expenses, would adversely affect AB’s and our operating results.
Current wording
AB derives most of its revenues from investment advisory and services fees that vary based on the type of service, account size, and total assets managed for a client, and that are typically calculated as a percentage of the value of AUM on a specified date, or as an average over a billing period. Several factors can adversely affect the market value and composition of AB’s AUM, including market factors, client preferences, AB’s investment performance, investing trends, service changes and interest rate changes. A decrease in the market value or amount of AB’s AUM, an adverse shift in the composition of AUM, or a reduction in AB’s fee levels would negatively impact AB’s revenues and, without a corresponding decrease in expenses, would adversely affect AB’s and our operating results.
Previous wording
AB sometimes charges performance-based fees, which include a base advisory fee plus an additional fee based on investment results, either in absolute terms or relative to a benchmark Some of these fees have a high-watermark provision, meaning if a client account underperforms, it must recover losses before AB can earn future performance-based fees. Failure to meet performance targets means no performance-based fee for that period, and high-watermark provisions can impare future fee earnings.
Current wording
AB sometimes charges performance-based fees, which include a base advisory fee plus an additional fee based on investment results. Failure to meet performance targets means no performance-based fee for that period. Performance-based fee arrangements can also have a high-watermark provision, meaning that an underperforming client account must recover losses before AB can earn future performance-based fees, which can impair future fee earnings.
Previous wording
AB’s financial performance relies on its ability to quickly adapt to changes in the asset management industry, meet evolving client needs, and develop, market, and manage new investment products and services. Creating new products, including those focused on specific in industries, sectors, or criteria like ESG, requires continuous innovation,, significant time, resources, and ongoing support. Introducing new products and services involves substantial risks and uncertainties, such establishing appropriate operational controls, adapting to shifting client and market preferences, facing competition, and complying with regulatory requirements.
Current wording
AB’s financial performance relies on its ability to quickly adapt to changes in the asset management industry, meet evolving client needs, and develop, market, and manage new investment products and services. Creating new products and services, including those focused on specific industries, sectors, or criteria, requires continuous innovation and significant time, resources, and ongoing support. Introducing new products and services involves substantial risks and uncertainties, such establishing appropriate operational controls, adapting to shifting client and market preferences, facing competition, and complying with regulatory requirements.
Previous wording
AB has a seed investment program to build track records and support marketing for its new products. These investments are subject to market risk. AB’s risk management team oversees a seed hedging program to minimize this risk, considering practical and cost factors. However, not all seed investments hedged, exposing AB to market risk. Additionally, AB may face basis risk as it cannot always precisely hedge its market exposure, leading to potential relative spreads between market sectors. Consequently, capital market volatility can significantly impact its financial and operating results.
Current wording
AB has a seed investment program to build track records and support marketing for its new products, but that is subject to market risk. AB’s risk management team oversees a seed hedging program to minimize this risk. Not all seed investments are hedged, and AB’s hedges are imperfect, leaving some market risk. AB may also face basis risk as it cannot always precisely hedge its market exposure, leading to potential relative spreads between market sectors. Consequently, capital market volatility can significantly impact its financial and operating results.
Previous wording
AB uses various derivative instruments, such as futures, forwards, swaps, and options in its seed hedging program. While it hedges broad market risks, AB’s hedges are imperfect, leaving some market risk. Furthermore, using derivatives introduces counterparty risk (the risk of credit-related losses if counterparties fail to perform, regulatory risk (e.g., short selling restrictions) and cash/synthetic basis risk (the risk that underlying positions do not move identically to related derivatives).
Current wording
Furthermore, using derivatives, such as futures, forwards, swaps, and options introduces counterparty risk (the risk of credit-related losses if counterparties fail to perform, regulatory risk (e.g., short selling restrictions) and cash/synthetic basis risk (the risk that underlying positions do not move identically to related derivatives).
Previous wording
In accordance with applicable regulatory requirements, contractual obligations or client direction, AB has procedures for pricing and valuing securities and other positions in client accounts or for company investments. AB’s Valuation Committee and sub-committees, comprising senior officers and employees, oversee a consistent framework of pricing controls and valuation processes for the firm and its advisory affiliates. If market quotations for a security are unavailable, the Valuation Committee determines its fair value.
Current wording
AB has procedures for pricing and valuing securities and other positions in client accounts and for company investments. AB’s Valuation Committee oversees a consistent framework of pricing controls and valuation processes for the firm and its advisory affiliates. If market quotations for a security are unavailable, the Valuation Committee determines its fair value.
Previous wording
Extraordinary market volatility, liquidity constraints or failure to consider all factors when determining fair value could lead to improper valuation of securities. This could result in inaccurate AUM figures, incorrect net asset values for company-sponsored funds, and inaccurate financial reporting. Although the percentage of AB’s AUM that based on limited market observability is not significant, valuations can harm AB’s clients, create regulatory issues and damage its reputation.
Current wording
Improper valuation of securities, which can result from factors such as extraordinary market volatility, liquidity constraints and failure to consider all factors when determining fair value can result in inaccurate AUM figures, incorrect NAVs for company-sponsored funds, and inaccurate financial reporting. Incorrect valuations can harm AB’s clients, create regulatory issues and damage AB’s reputation.
Previous wording
AB uses quantitative and systematic models in many of its investment services, often alongside fundamental research. These models are developed by senior quantitative professionals and typically are implemented by IT professionals. AB’s Model Risk Oversight Committee, supported by the Model Risk Team, oversees the model governance framework and review activities. However, due to the complexity and data dependency of these models, errors may occur, and AB’s controls might fail to detect them. Undetected errors could lead to client losses and reputational damage.
Current wording
AB uses quantitative and systematic models in many of its investment services, often alongside fundamental research. Due to the complexity and data dependency of these models, errors may occur, resulting in client losses and reputational damage, and AB’s controls might fail to detect the errors.
Previous wording
AB must increasingly manage actual and potential conflicts of interest, including situations where its services to one client may conflict with another’s interests. Failure to address these conflicts could harm AB’s reputation, operations and business prospects. If AB fails, or appears to fail, in handling conflicts appropriately, its reputation could suffer, and clients may be less willing to engage with AB. Additionally, potential or perceived conflicts could lead to litigation or regulatory enforcement actions.
Current wording
AB must increasingly manage actual and potential conflicts of interest. Failure to manage conflicts appropriately could harm AB’s reputation, operations and business prospects, cause clients to be less willing to engage with AB, and lead to litigation or regulatory enforcement actions.
Previous wording
We are heavily regulated, and regulators continue to increase their oversight over financial services companies. The adoption of new laws, regulations or standards and changes in the interpretation or enforcement of existing laws, regulations or standards have directly affected, and will continue to affect, our business, including making our efforts to comply more expensive and time-consuming. In recent years, insurance regulators and the NAIC have been focused on enhancing regulatory oversight of insurers’ investments in complex assets, the use of AI technologies and “big data,” and the management of climate risk. For additional information on regulatory developments and the risks we face, see “Business—Regulation”.
Current wording
We are heavily regulated, and regulators continue to increase their oversight over financial services companies. The adoption of new laws, regulations or standards and changes in the interpretation or enforcement of existing laws, regulations or standards have directly affected, and will continue to affect, our business, including making our efforts to comply more expensive and time-consuming. In recent years, insurance regulators and the NAIC have been focused on enhancing regulatory oversight of insurers’ investments in complex assets, such as leveraged loans and CLOs, the use of AI technologies and “big data,” and the management of climate risk. For additional information on regulatory developments and the risks we face, see “Business—Regulation”.
Previous wording
Our retirement and protection business is subject to a complex and extensive array of state and federal tax, securities, insurance and employee benefit plan laws and regulations, which are administered and enforced by a number of different governmental and self-regulatory authorities, including, among others, state insurance regulators, state securities administrators, state banking authorities, the SEC, FINRA, the DOL and the IRS. Failure to administer our retirement and protections products in accordance with contract provisions or applicable law, or to meet any of these complex tax, securities or insurance requirements could subject us to administrative penalties imposed by a governmental or self-regulatory authority, unanticipated costs associated with remedying such failure or other claims, litigation, harm to our reputation or interruption of our operations.
Current wording
Our retirement and protection business is subject to a complex and extensive array of state and federal tax, securities, insurance and employee benefit plan laws and regulations, which are administered and enforced by a number of different governmental and self-regulatory authorities, including, among others, state insurance regulators, state securities administrators, state banking authorities, the SEC, FINRA, the DOL and the IRS. Failure to administer our retirement and protection products in accordance with contract provisions or applicable law, or to meet any of these complex tax, securities or insurance requirements could subject us to administrative penalties imposed by a governmental or self-regulatory authority, unanticipated costs associated with remedying such failure or other claims, litigation, harm to our reputation, or interruption of our operations.
Previous wording
Our second amended and restated certificate of incorporation and our sixth amended and restated by-laws include a number of provisions that may discourage, delay or prevent a change in our management or prevent a takeover attempt that stockholders may consider favorable. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered in a takeover context or may even adversely affect the price of our common stock if the provisions discourage takeover attempts. Our second amended and restated certificate of incorporation and amended and sixth restated by-laws may also make it difficult for stockholders to replace or remove our management.
Current wording
Our third amended and restated certificate of incorporation and our seventh amended and restated by-laws include a number of provisions that may discourage, delay or prevent a change in our management or prevent a takeover attempt that stockholders may consider favorable. These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered in a takeover context or may even adversely affect the price of our common stock if the provisions discourage takeover attempts. Our third amended and restated certificate of incorporation and amended and seventh restated by-laws may also make it difficult for stockholders to replace or remove our management.
Previous wording
Our second amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is, to the fullest extent permitted by law, be the sole and exclusive forum for a number of actions. Notwithstanding the foregoing, the exclusive provision shall not preclude or contract the scope of exclusive federal or concurrent jurisdiction for actions brought under the Exchange Act or the Securities Act or the respective rules and regulations promulgated thereunder.
Current wording
Our third amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is, to the fullest extent permitted by law, be the sole and exclusive forum for a number of actions. Notwithstanding the foregoing, the exclusive provision shall not preclude or contract the scope of exclusive federal or concurrent jurisdiction for actions brought under the Exchange Act or the Securities Act or the respective rules and regulations promulgated thereunder.