EQUITABLE FINANCIAL LIFE INSURANCE CO – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's discussion and analysis of financial condition and results of
operations is presented pursuant to General Instruction (H)(2)(a) of Form 10-Q.
The management's narrative that follows should be read in conjunction with the
consolidated financial statements and the related Notes to Consolidated
Financial Statements included elsewhere herein, with the information provided
under "Note Regarding Forward-looking Statements and Information" included
elsewhere herein and Management's Discussion and Analysis of Financial Condition
and Results of Operations ("MD&A") in Part II, Item 7 and "Risk Factors" in Part
I, Item 1A included in Equitable Financial's Annual Report on Form 10-K for
the year ended December 31, 2021 ("2021 Form 10-K"). The management's narrative
that follows represents a discussion and analysis of Equitable Financial's
financial condition and results of operations and not the financial condition
and results of operations of Equitable Holdings, Inc. ("Holdings").

Executive Summary

Overview

We are one of America's leading financial services companies, providing advice
and solutions for helping Americans set and meet their retirement goals and
protect and transfer their wealth across generations. We operate as a single
segment entity based on the manner in which we use financial information to
evaluate business performance and to determine the allocation of resources. We
benefit from our complementary mix of product offerings. This mix in product
offerings provides diversity in our earnings sources, which helps offset
fluctuations in market conditions and variability in business results, while
offering growth opportunities.

COVID-19 Impact

We continue to closely monitor COVID-19 developments and the impact on our
business, operations and investment portfolio. The pandemic's impact on us
depends on future developments that are highly uncertain, including the scope
and duration of the pandemic and any recovery period, the emergence and spread
of COVID-19 variants, the availability, adoption and efficacy of COVID-19
treatments and vaccines, and future actions taken by governmental authorities,
central banks and other parties in response to COVID-19. It is not possible to
predict or estimate the longer-term effects of the COVID-19 pandemic, on the
economy and on our business, results of operations, and financial condition,
including the impact on our investment portfolio or the need for us to revisit
or revise targets previously provided to the markets and/or aspects of our
business model. For additional information regarding the actual and potential
impacts of the COVID-19 pandemic and action we have taken to mitigate certain
impacts, see "Risk Factors-Risks Relating to Conditions in the Financial Markets
and Economy-The coronavirus (COVID-19) pandemic", "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Executive
Summary-COVID-19 Impact" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations-General Account Investment Portfolio" in the
2021 Form 10-K.

Revenues

Our revenues come from three principal sources:

•fee income derived from our products;

•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 life insurance and annuity products which 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;

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•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 GMxB 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.

An additional source of net income (loss) volatility is the impact of the
Company's annual actuarial assumption review. See "-Significant Factors
Impacting Our Results-Effect of Assumption Updates on Operating Results", for
further detail of the impact of assumption updates on net income (loss) in first
quarter 2022.

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 GMxB Reinsurance on Results

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. These
programs include:

•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 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.

•GMxB reinsurance contracts. Historically, GMIB reinsurance contracts were used
to cede to affiliated and 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.

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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. In addition, on June 1, 2021, we ceded the Block,
comprised of non-New York "Accumulator" policies containing fixed rate GMIB
and/or GMDB guarantees. As this contract provides full risk transfer and thus
has the same risk attributes as the underlying direct contracts, the benefits of
this treaty are accounted for in the same manner as the underlying gross
reserves.

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 of the Notes to the Consolidated Financial
Statements and "Summary of Critical Accounting Estimates-Liability for Future
Policy Benefits included in the 2021 Form 10-K".

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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

A wide variety of factors continue to impact financial and economic conditions.
These factors include, among others, volatility in financial markets, economic
growth, inflationary pressures, fuel and energy costs, supply chain disruptions,
low interest rates, changes in fiscal or monetary policy and geopolitical
tensions.

The invasion of Ukraine by Russia and the sanctions and other measures being
imposed in response to this conflict significantly increased the level of
volatility in the financial markets and have increased the level of economic and
political uncertainty.

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, including
interest rates, which are anticipated to continue to rise in 2022 based on
statements of members of the Board of Governors of the Federal Reserve System.
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 and AV,
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
remaining below historical averages despite inflationary pressures, 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.

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.

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Regulatory Developments

We are regulated primarily by the NYDFS, with some policies and products also
subject to federal regulation. On an ongoing basis, regulators refine capital
requirements and introduce new reserving standards. 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. For additional information on the
regulatory developments and risk we face, see "Business-Regulation" and "Risk
Factors-Legal and Regulatory Risks" in the 2021 Form 10-K.

Climate Risks. In March 2022, the SEC released proposed rule changes on
climate-related disclosure. The proposed rule changes would require companies to
include certain climate-related disclosures including information about
climate-related risks that have had or reasonably likely to have a material
impact on their business, results of operations, or financial condition, and
certain climate-related financial statement metrics in a note to the audited
financial statements. Among other things, the required information about
climate-related risks also would include disclosure of a company's greenhouse
gas emissions, information about climate-related targets and goals, and if a
transition plan, has been adopted as part of climate-related risk management
strategy, and requires extensive attestation requirements. If adopted as
proposed, the rule changes are expected to result in additional compliance and
reporting costs.

Privacy and Security of Customer Information and Cybersecurity Regulation. In
March 2022, the SEC released proposed rules enhancing cybersecurity risk and
management disclosure requirements for companies. If enacted, the proposed rules
would, among other things, require disclosure of any material cybersecurity
incident on its Form 8-K within four business days of determining that the
incident it has experienced is material. They would also require periodic
disclosures of, among other things, (i) details on the company's cybersecurity
policies and procedures, (ii) cybersecurity governance, oversight policies and
risk management policies, including the board of directors' oversight of
cybersecurity risks, (iii) the relevant expertise of members of the board of
directors with respect to cybersecurity issues and (iv) details of any
cybersecurity incident that was previously disclosed on Form 8-K, as well as any
undisclosed incidents that were non-material, but have become material in the
aggregate.

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 risk
of movements in the equity markets and interest rates. The volatility in net
income attributable to Equitable Financial 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; (ii) the change
in fair value of products with the GMIB feature that have a no-lapse guarantee;
and (iii) our hedging and reinsurance programs.

The following table summarizes our consolidated statements of income (loss) for
the three months ended March 31, 2022 and 2021:

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