Good afternoon, everyone. My name is Işıl Müderrisoğlu, and I'm the Head of Investor Relations for Equitable Holdings. It's a pleasure to welcome you all here today, both those who are able to attend in person and the many more that are with us virtually. While today marks the five-year anniversary of our IPO in this very location, no less, it also marks the next chapter for Equitable Holdings, which we are very excited to share with you. We have a great agenda prepared for you today. Mark Pearson, our President and CEO of Equitable Holdings, will address our company overview and strategy. We'll go deep into our largest businesses with retirement and asset management led by Nick and Seth. Nick will take us through our emerging wealth management business.
Finally, Robin Raju, our CFO, will provide details on financial projections and new guidance. These sessions will be followed by a Q&A session. For those of you who are joining remotely, please submit your questions to ir@equitable.com. We will direct the questions to management. Lastly, a few housekeeping items. 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. I'd like to refer you to the safe harbor language at the beginning of our presentation for additional information.
During the presentation, we will begin discussing certain financial measures that are not based on generally accepted accounting principles, also known as non-GAAP measures. Reconciliation 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.
Now, before I turn it over to Mark, we'd like to share a brief video.
We are Equitable. Five years ago was a turning point when we became a publicly listed company on the New York Stock Exchange with the strength of two iconic franchises. At the time, we defined who we are and what we stand for while delivering on our mission to help our clients secure their financial well-being, so they can pursue long and fulfilling lives. We shaped our brand, deepened our connection with clients, and transformed our businesses while delivering on our commitments to stakeholders. Over this period, we have faced an unprecedented environment and demonstrated our ability to turn challenges into opportunities. Now we enter this next chapter with conviction that we will continue to deliver on our promises for generations to come.
Now I'd like to welcome our CEO, Mark Pearson, to the stage.
Thank you. Thank you. Good afternoon and welcome to our Investor Day. We're delighted you could be with us today. As Işıl said, it was exactly five years ago today in 2018 that we rang the bell here to list Equitable Holdings on the New York Stock Exchange. Certainly, the proudest day in my career. Right from day one of this journey, we felt blessed to be here, to take this storied institution, Equitable, and bring it back to the market, back to prominence in the U.S. As we say internally, to build the house that we want to live in. It's a house that was set on good foundations, I want to thank AXA for this. Our listing was not a spin. We were set up and established with reserves at a very high threshold of CTE98.
If there's one thing that the last five years has taught us is the importance of having a strong and robust balance sheet. Today, you'll hear presentations from the senior leaders across Equitable and AB, and our go-forward strategy. I wanna start by thanking my colleagues for these first five years. They have delivered on every one of the commitments we gave in May of 2018, despite having to overcome some very significant unforeseen events. We are gonna present strategy, and of course, strategy is important, but our ability to execute is critical. We believe that management should think like owners, and to deliver, we must set clear objectives, clear milestones, and fully align all resources. How we do this at Equitable is our enterprise-wide program we call New Ways of Working.
Supported by over 45,000 hours of training, which brings agile working, design thinking, and adaptive leadership into the firm. Today, nearly 80% of the organization has been stood up with a very positive uplift in both engagement and in productivity. There's a lovely quote from Winston Churchill on this. I think he captures it well: "Without execution, thinking is mere idleness." Of course, execution requires huge amounts of energy. Energy, we know is maximized when people have a passion for what they are doing. Today, our mission has never been more important: to help Americans secure their financial well-being so they can live long and fulfilling lives. The reason why our mission has never been so important is that it reflects what's happening in society at large.
11,000 Americans turn 65 today, 11,000 more will turn 65 tomorrow and the day after that. In just three short years, more Americans will reach the traditional age of retirement than ever before. This is something that affects each and every one of us in this room. We know that 50% of American households are at risk of not having enough to maintain their standard of living in retirement. We see this as a tremendous opportunity to serve and for us to grow our business as we meet this fundamental need to retire with dignity. I think it's this belief in our mission that drives us to be advocates for fair value management, proper reserving, and transparent accounting, as this is the only way we can build trust with our clients and provide attractive returns to our shareholders.
These last five years have been an amazing time for us. It's been very, very energizing. Of course, much has changed in the world. In looking forward, we are realistic enough to know that the uncertainty is most likely to continue. While there are some risks, it is also a time of tremendous opportunity. For this overview, I'm gonna cover our unique business model before looking at opportunities in the market. I hope to demonstrate our track record of execution and how we've simplified the business since the IPO. I hope to be clear on our competitive strengths, which underpin the strategy, and why we have confidence that we will continue to grow cash flows and earnings for our shareholders. Firstly, our business model. EQH subsidiaries provide advice, underwrite retirement and protection products, and manage money.
Some of the companies we are compared to, frankly, do not do this. Michael Porter famously said that strategy is about making choices, trade-offs. It is about deliberately choosing to be different. Equitable has chosen to invest in advice through our affiliated distribution and to seek synergies between our retirement and asset management businesses. We made these choices for two reasons. Firstly, we believe that this enables us to create better outcomes for clients. A great example of this was the cooperation between our affiliated distribution in designing and learning how to market our buffered annuity product. Our model enabled us to be faster and more innovative. Secondly, the choices we made create better outcomes for shareholders in that we participate in the full value chain. Our balance sheet business, Equitable, writes life insurance, retirement, and income contracts.
It manages over $200 billion of assets under management, and has a brand awareness amongst 76% of financial professionals in the U.S., up 62% since our brand relaunch three years ago. We have two capital-light businesses. We own 61% of AllianceBernstein, a leading active manager with a global distribution footprint in 21 countries. AB currently manages $676 billion of assets under management, and has recently been recognized as the sixth most trusted financial company by Investor's Business Daily in the U.S. In wealth management, our newest reporting segment, we have approximately 4,100 advisors through which we distribute retirement and protection products. 85% of all annuities and nearly 100% of life business is placed with Equitable, and we also benefit from $76 billion of assets under administration.
Through seed investments totaling $12 billion up to date, Equitable has used its general account to help the build-out of faster growing, higher multiple alternative strategies in AllianceBernstein. In return, AB has been a pioneer with its Lifetime Income Strategies, sourcing new annuity flows for Equitable. The point I want to leave you with is these are unique and integrated advice, retirement, and asset management businesses. Five years ago, at our IPO roadshow, we defined success as growing operating earnings per share, returning capital to shareholders, and maintaining a strong balance sheet. At the end of 2022, we have delivered on all of these objectives. non-GAAP operating earnings per share grew at a CAGR of 11%, helped by more than $500 million of annual earnings uplift from general account investment optimization and productivity saves.
Despite a period of quite extreme volatility, our operating businesses have performed exceptionally well, demonstrating the strength of our client offer and the power of our distribution. In retirement, gross premiums have totaled $80 billion over that period, and today, we are the number one provider in the VA, RILA, and K - 12 educators supplementary retirement markets. At AB, active net inflows over the past five years have been $67 billion. The strong demand has led to AB posting a 2.5% average annual organic growth against active manager peers of negative 2.5%. Net flows in our new wealth management segment amounted to $22 billion, representing an 8% annual organic growth rate. All this has culminated in us being able to return $6.5 billion in capital since the IPO.
Our risk management discipline has ensured that we remained above 400% RBC through multiple and very different market environments. Included in this structural management actions, such as the Venerable reinsurance transaction, led us to returning an additional $500 million of capital above our stated payout target ratio. The past five years have seen us move decidedly away from capital intensive products. In addition to a 30% organic growth in cash flows to the end of 2022, we have improved the quality of our earnings. A combination of economically sound products with a narrow range of outcomes, fair value reserving, first dollar hedging, and reinsurance transactions have contributed to CTE98. That is, the assets required to meet the average of the worst 2% of economic scenarios, reducing by over 70% from $14 billion at the IPO to $4 billion today.
I don't like using the word, there really has been a transformation inside Equitable in how we work and certainly in our risk profile. The capital-intensive legacy VA portfolio has now been significantly reduced. Total legacy account value is only $22 billion today and is naturally running off at $2 billion-$3 billion per annum. This represents only 16% of total account values. Legacy VA is fully hedged, fully reserved, and is not significant. It should not be the basis for valuing EQH. We now show the segment separately from our individual retirement business to help investors distinguish these two very different blocks. In addition, we've restructured our business such that the percentage of cash flows coming from non-insurance regulated entities has risen from 17% at IPO to now over 50% of total cash flows.
Talking of cash flows, it's clear that investors in EQH value cash generation and capital returns. As I mentioned earlier, the cumulative capital return through dividends and share repurchases is $6.5 billion in the first five years since the IPO, which is over 55% of the market cap at the time of the IPO. This means the cash returns to the end of 2022 are 13% higher than peers. Over this time, free cash flow per share has grown 120% since the IPO, reflecting the benefit of organic growth and the reduction in our share register from buybacks. This has translated into strong TSR performance with EQH up 59% to the end of 2022, against life peers of 38% and a 41% increase in the S&P 500.
Of course, since the regional banking crisis broke on March 8th, it's been a difficult time for our sector, and there appears to be little buy interest for any company that is perceived to be balance sheet intensive like banks and insurance companies. For year to date, we've seen the insurance index and KBW banking index fall by 13% and 26%, respectively. EQH's share prices declined 17% over this period. As we showed at Q1, this performance doesn't reflect the fundamentals inside our business. At our quarterly earnings last week, we presented our conservative positioning on credit quality, COE exposure, liability, and capital resilience. Our RBC ratio is healthy, and above this, we have $1.8 billion of surplus cash at the hold co.
We continue to see strong net flows in retirement and asset management this year, and our surrenders remain within historic levels. In such uncertain times, balance sheet resilience and consistency are critical to future confidence. For example, over these first five years, and who would have believed this, we've seen the U.S. 10-Year Treasury range from 50 basis points to 420 basis points. We particularly as having so much of our capital in an insurance company, we have to prepare for unpredictable outcomes. We have to do this as we promise to serve clients through thick and thin, through good times and bad. We support the stability of our RBC ratio and cash generation capability through our fair value risk policy, which guides our ALM strategy, our hedging program, conservative credit portfolio, and realistic assumption setting.
This philosophy of ensuring that the balance sheet can withstand turbulence and being consistent in our return of capital to shareholders will continue. Balance sheet resilience is behind our liquidity position and conservative investment portfolio, and in light of the current market environment, our conservative positioning is even more important, with 96% of our fixed maturities investment grade. We have a mortgage loan portfolio which has remained resilient through the 2008 global financial crisis and the COVID pandemic, with very limited exposure towards highly volatile or equity-like alternative asset classes. At Equitable, we know our primary responsibility is to be good stewards of the capital given to us by our shareholders. We put this capital to work, and we believe that the best returns come from our people being engaged, bringing their best selves to work, and where society is healthy and thriving.
ESG, if you like, is a natural orientation for us as we write liabilities and put money to work for decades. We are also very proud that we've been recognized as a great place to work for seven years in a row now, awarded a 100% rating by the Human Rights Campaign Foundation Corporate Equality Index, and we are a founding signatory of the CEO Action for Diversity & Inclusion. Before looking forward, let me recap. We believe that the most important thing with strategy is the ability to execute. We've shown we can do this in volatile times. We have a unique business model that has translated into shareholder value, and this gives us confidence as we look ahead to the next chapter. Obviously, equally important to the ability to execute is being in attractive markets.
Strong societal tailwinds driven by demographics and evolving regulation are combining to provide opportunities for growth. Americans are not only living longer, but have greater aspirations for retirement, and also face a meaningful shortfall in their retirement funds. We expect this to be a $32 trillion addressable market by the end of the decade, with the number of Americans 65 or older growing by over 60% to 89 million in the next 30 years. On the global asset management side, global active investable assets are expected to grow by nearly 1/3 over the next five years to a $117 trillion. Within that, the two fastest-growing products are forecast to be alternatives and active specialties, These are parts of the market that AB plays in and plays in well. We also face some monumental regulatory changes.
Firstly, this year marks the most significant change in the accounting standards for insurance companies in over 40 years. Insurance regulators have reformed their interest rate stress scenario tests and are actively looking at capital charges on structured assets. At the same time, we see perhaps uniquely strong bipartisan support for the SECURE Act, encouraging the introduction of annuities into 401(k) target funds. Strategically, we see these moves as net positives as the industry moves closer to fair value principles. With more appropriate capital and reserving, this will improve trust in our industry and more closely aligned to how we manage our business. Now turning to strategy. It's most important that strategy is clear, so we've challenged ourselves to articulate it on one page. In order to deliver on our mission, our strategy is geared towards driving long-term value and utilizes our competitive edges.
Our premier investment capabilities in both AB and Equitable allow us to meet client needs, attract new monies, and capture greater margins. Our risk management philosophy protects policyholders and ensures consistent cash flow generation for shareholders. We have broad and diverse distribution with our 4,100 Equitable Advisors, over 200 AB private wealth advisors, as well as partnerships with third-party institutions. As we have demonstrated, we have a track record of execution through an agile and research-based workforce. Our first strategic priority is to defend and grow our core retirement and asset management businesses. These today drive over 90% of free cash flow generated. We will do this by continuing to innovate capital-light products and expanding our distribution reach. Equitable today invests approximately $500 million per annum to support new business growth in our core retirement businesses.
In asset management, despite challenging markets in 2022, the active ETF industry continues to see AUM growth while mutual funds are seeing net outflows. AB launched its first two active ETFs in 2022. We see this as a sizable opportunity. Investment performance is obviously important for our business. We are very proud of our strong long-term track record. 75% of our fixed income portfolios and 73% of our equity portfolios have outperformed over the last five years. Later today, we will share initiatives to enhance productivity and further optimize our general account to improve investment returns. As we've demonstrated with the acquisition of CarVal and Penn Investment Advisors, we will continue to look for, but be very disciplined in organic, inorganic opportunities that can accelerate our strategy. We also plan to scale adjacent businesses.
These are smaller businesses where we have the opportunity to grow at a faster rate than our core. AB's private markets platform accelerated last year and is now $58 billion assets. We believe that AB's broad solution set in this high growth market, combined with a strong performance track record, can attract and scale with institutions, retail, and private wealth. We are announcing today a further strengthening of the synergies between Equitable and AB with an additional $10 billion capital commitment from the general account to help grow AB's private markets platform. In wealth management, we expect this business to grow at a faster rate by utilizing our affiliated distribution, holistic life planning platform, and open architecture solutions. Within Equitable Advisors today, we have 700 wealth planners.
We also have good operating leverage inside this business as we utilize and share the cost of the technology platform with LPL. In order to ensure long-term success, it's important that we continue to invest through the cycle and seed businesses that we believe will provide significant opportunities in the future. There are three areas where our competitive edges play well. Firstly, AB is investing in markets that will sustain above market organic growth like China and EMEA. Secondly, the global insurance market is substantial, nearly $30 trillion in assets. With over 40 years of experience in insurance management, AB is positioned well to grow this business. Thirdly, we are excited about the long-term prospects of the in-plan guarantee market. There is significant competition in the retirement accumulation space, but no ownership yet of the post-retirement income market.
Of course, this line of business has been boosted by the SECURE Act, which now provides a safe haven opportunity for asset managers and insurers to provide annuities within the $7 trillion, 401(k) market. AB has been a true pioneer for the last decade, preceding the SECURE Act through its Lifetime Income Strategy. Additionally, Equitable has a partnership with BlackRock, giving us an excellent opportunity to be a leader in this exciting new market. Recognizing the meaningful role we play in society, we believe our business is best served by building trust with our people, communities, and all stakeholders. We have two key principles. Our Force for Good strategy has to drive business value, and we leverage our big systems to drive positive outcomes. We believe that strong rigor and good governance controls throughout the business build trust among all stakeholders.
That's a double-click on our strategy and key initiatives. Now, we're a mature industry, and we've been providing protection to the American public since before the Civil War. Mature, yes, but as we've just seen from the changing demographics, never more relevant than today. We help people retire with dignity. We help them plan for living their best lives. Yes, at Equitable, we may have been around over 160 years, but we're also a young, vibrant company just five years out from the IPO. We've shown great innovation in building new solutions, and we've been marketing guaranteed income and retirement products for 10 years before the SECURE Act. We've shown we can manage risk. We've shown an ability to consistently return cash to shareholders.
We've shown that we can protect the balance sheet and maintain an RBC ratio above 400% through thick and thin. We have great investment capabilities, both inside Equitable and through our leading subsidiary, AllianceBernstein. We're significant today in private as well as public markets. Having affiliated distribution is a tremendous asset. It keeps us close to the customer and keeps our revenue steady. We have two great brands, Equitable and AB, trusted by clients and intermediaries alike. In looking forward, these capabilities provide us with opportunities to grow existing businesses and move into adjacent and emerging markets. I think these competencies, these edges, combined with our performance culture, where we really do focus on execution, enable me and the whole team to look forward with excitement and confidence.
We wanna translate our confidence in the business and provide new guidance for the next five years. With the fall in equity and bond values in 2022, average assets under management reduced and our free cash flow forecast for 2023 remains at $1.3 billion. Based on the forward curve and an assumption that equity markets will average return 6% growth + 2% dividend, we expect cash generation growth of 50% to $2 billion by 2027. In line with this, we are increasing our target payout ratio to 60%-70% and revising our EPS target upwards to 12%-15%.
Underpinning these financial goals is delivery of incremental general account income of $110 million by 2027, a further $150 million in productivity saves, and as I mentioned earlier, an additional $10 billion capital commitment to seed AB's build-out of its private markets business. As we'll hear from Seth in a short while, operating leverage within AB should see an improvement of 350 to 500 basis points in margin. Later on today, Robin will provide further details on these financial goals later on. I'm confident with our diverse and experienced leadership team that we can deliver on this guidance. This, in combination with the investment we are making in our people, is really the key to our current and future success.
Looking at the leadership team, we have a very nice balance of people who have grown up inside our organization, like our CFO, Robin Raju, and President Nick Lane. People like Jeff Hurd, who joined to help us prepare for our listing. People like Aaron Sarfatti, Stephanie Withers, and José González joined because they were attracted to the Equitable story, and they, of course, bring valuable outside perspectives. AB's business has flourished under Seth Bernstein's leadership since he joined in 2017. Seth also has a powerful combination of leaders from diverse backgrounds, including with us today, Kate Burke, who started at AB 19 years ago, and Onur Erzan, who brings over 19 years of consulting experience with McKinsey. This is an outstanding team, and I'm very proud to be part of it.
Please take the opportunity today to talk to as many of them as you can. We at EQH also benefit enormously from the diverse backgrounds, high-level oversight, and clear governance from our board. With that, thank you for listening to me this afternoon. This concludes the company overview. We are absolutely delighted and thrilled to be here.
Now it's my pleasure to invite our President, Nick Lane, to dive deeper into our retirement business. Nick.
Well, thank you, Mark Pearson, and good afternoon. My name's Nick Lane, President of Equitable, and it is great to be back here at the New York Stock Exchange on the fifth anniversary of our IPO. For me personally, where I started my career as a floor clerk almost 30 years ago. Today I'm excited to talk to you about how we intend to elevate how we serve the American public and continue to profitably grow our business. As a reminder, our retirement pillar covers three business lines: individual retirement, group retirement, and protection solutions. Collectively, they target the broader retirement opportunity and are entrusted with $150 billion in assets while serving approximately 3 million Americans, helping them to secure long and fulfilling lives.
In this section, I'll cover the following key messages: our view of the retirement market, where we see a tremendous opportunity, the distinct edge we have in driving profitable growth given our track record of success, innovation, and our differentiated distribution network, the attractive business mix this generates, which translates to strong and predictable earnings and cash flow, and lastly, our go-forward guidance. Let's drill in. While the broader $30 trillion retirement market is viewed as mature, we have conviction that money is in motion and the market is ripe for dislocation given three primary forces. First, structural demographics. People are living longer, and they have different expectations. Drilling deeper on Mark's point, a majority of the 75 million baby boomers will have hit the peak retirement age of 65 in the next three to five years.
Today alone, 11,000 people are retiring daily, 4 million a year, and they're expecting to live 20 years longer. A whole new chapter. It's no surprise that 90% of advisors say their clients are looking for better financial plans beyond the generic 60/40 allocations as they enter this next chapter. Leading academics like Joseph Coughlin, the Director of the MIT AgeLab, have shown that this generation who grew up with the mantra forever young, is gonna live their next chapter, another 20 years, much differently than their parents. This means an increased need for more resilient portfolios that provide equity and income solutions. Next, public policy evolution. Given the growing retirement gap, policymakers across party lines realize that the retirement safety net programs created in the last century are no longer viable and need to be transformed for this century.
Facts such as the expected insolvency of Social Security in 2034 are creating a sense of urgency. We see this coming through in new legislation like the SECURE Act, 1.0 and 2.0, which increased the incentives for Americans to save and encourage the use of insurance products to ensure more stable retirement outcomes. Finally, consumer sentiment. In this period of enhanced macro and socioeconomic volatility, clients are seeking resilient portfolios that give them peace of mind. Almost 80% of Americans feel unprepared for retirement, and an equal percentage are concerned about market volatility and macro forces impacting their savings. Americans are looking for advice to help guide them and products that give them clarity of outcomes. We're uniquely positioned to meet this increased demand.
We see this demand from consumers and advisors manifesting itself in three ways: tax-efficient accumulation, protected equity and income solutions, and wealth transfer strategies. Before talking about product economics, I think it's important to spend a moment talking about how our core value propositions translate into our specific business lines and products. Let me illustrate a couple examples on this page. People are searching for tax-efficient location strategies, and we all know annuities and life insurance have unique tax benefits that permit valuable deferral of taxes. Investment Edge, our investment-only variable annuity, targets this need specifically with a robust suite of investment options and all the tax advantages of an IRA without the dollar limits. People are searching for protected equity and income allocation strategies.
Our RILA Buffered Annuity SCS provides a great solution for clients who want the upside opportunity of investing in the market without all the risk of the downside. Retirement Cornerstone, our floating rate variable annuity, allows the clients the opportunity for increasing income as interest rates rise, protecting their purchasing power. People are looking for allocation and location strategies to transfer their wealth and leave a legacy, and our variable universal life solution allows clients to save with purpose. Keeping more of the money they earn with tax-deferred growth for retirement or tax-efficient inheritance for their loved ones. As you can see, our product suite is well-positioned to capture this opportunity. Going forward, as Mark highlighted, our organic growth strategy is focused on two drivers, defending and growing our core and building new adjacent businesses for the future.
The dark blue, the Equitable blue, represents our core markets, individual retirement, group retirement life, with a total addressable market of $130 billion in annual sales. The lighter blue represents adjacent and new markets, where we've built the foundation for future growth like workplace solutions and in plan guarantees, which I'll dive deeper into later. In total, we see an addressable market in the next five to seven years of over $250 billion with significant room for us to continue to grow profitably. Going forward, let me tell you why we're well-positioned to capture a disproportionate share of the value in these markets, given our distinct edge in three areas. First, our experienced team of business leaders who have built leading positions with strategic moats driving outperformance versus peers.
This results in lower cost liabilities and an ability to generate sustainable consumer and shareholder value. In individual retirement, we're number one in the RILA space, and these are registered SEC products, which means only firms that report GAAP financials can issue them, and they can only be sold through security license advisors. Over time, we've built scale with deep relationships and distinct distribution capabilities. The barriers to entry are high, and there are only five main RILA competitors trying to copy us. As a result, we've significantly outpaced the industry, growing 12x faster than peers with record sales and value of new business in 2022. In group retirement, we're number one in the public kindergarten through 12th grade market for supplemental retirement plans.
There are 14,000 public school districts in the U.S., of which I'm a proud graduate. We have 9,000 payroll slots. These payroll slots give us the ability to speak directly with educators. There are only three primary national players in this space. We have scale with our 1,100 dedicated advisors that work with educators, sitting down face-to-face with teachers in the lunchroom or in their classroom on those little chairs. The facts show that these educators have almost 2x higher annual contribution than those who don't work with an advisor. We've grown twice as fast as the industry, gaining market share with positive net flows. Lastly, in protection, where we're a top five player in the accumulation-focused VUL space, which we've made our main focus.
Now different from term products, VULs are used as a part of comprehensive financial planning, and we have 30+ years of expertise in incorporating insurance into estate planning and scale through our Equitable Advisors. As a result, we've outpaced the industry in this market as well, growing at 21% versus the industry at 19%. We're continuing to extend the edge in these core markets and beyond, leveraging our client-centric innovation process. Now while many people think of insurance as a product, we view insurance as an asset class, which delivers better Pareto efficient returns when integrated into a client's financial plan. This philosophy drives our innovation process and has kept us at the leading edge of commercial success over the last decade.
This page shows how we view the consumer life stages, the alignment of our businesses against those stages, and our history of delivering our capabilities to meet them in creative ways. For example, as Mark touched on, we introduced the RILA, a new category in the space, targeting 55-year-olds at the pre-retirement life stage where we saw a wide space for protected equity solutions. We drive these synergies across other areas by using the same strategy as an investment option in our group retirement and life products. Our consumer-led process of innovation is extending our edge in our core markets while creating new ones. Speaking of new markets, I wanted to spend a few minutes on our institutional in-plan guarantee business, where we've laid the foundation for future growth. Today, there's $7 trillion of assets in 401(k)s, with $3 trillion in target date default options.
While historically annuities were not incorporated, there is an emerging opportunity for in plan guarantees to become a major asset class within target date funds. Seeking better outcomes, employers see the benefits of providing their employees with individual like DB plans with steady streams of income. Following the passage of the SECURE Act, which provides a safe harbor for annuities, target date funds are moving with urgency to create income solutions. Now we recognize this need early on, and we're a first mover in the space, leveraging our expertise in asset management with AB, group retirement ERISA planning expertise, and our individual retirement income expertise. You saw last year we secured a $500 million asset allocation for Equitable as part of AB's overall $9 billion mandate.
Given our expertise, we were selected by BlackRock, a top five target date fund provider, to help design their LifePath Paycheck target date fund. They've commented that they have over 10 clients in the queue already. While many companies may innovate, distribution is critical in driving commercial success. That leads me to our third edge, our privileged and distinct distribution network, which brings access, margin, and scale to our business. We're one of the few that can say they have a distinct network of both affiliated and third-party distribution. On the left-hand side, our affiliated distribution network, Equitable Advisors, with over 4,100 advisors, gives us an advantage, providing stable and stickier flows and insights into consumer behaviors and advisors' utilization of features, which allows us to shape the market. We scale our distribution through our third-party networks.
We have products on the shelf at more than 500 firms with 14,000 active third-party producers, and the opportunity to access well over 150,000 advisors. As you can see on the bottom of this page, we're selective in our distribution based on the nature of the products and where we have an edge. For example, in individual retirement, where we have the biggest third-party position, we've built sustainable scale with a meaningful footprint in firms with curated product shelves, firms that focus on long-term sustainable solutions rather than one-off fire sales. Today, we're number one in the banks where there are fewer competitors, less than five other VA providers on the shelf. We're number three in independents, including affiliated P&C, where we also see less competition.
We leverage the size and scale of our over 200 wholesalers across the nation to meet them where they are. We continue to be strategic in where we focus, looking for deep partnerships and sustainable shelf space. I talked about our edges to meet the growing demand with strategic moats, which produce higher value sales. I wanna cover how that translates to sustainable value for our shareholders. Like most insurance companies, we make money in the following three ways: spread-based, where we make money by investing client funds in the general account, fee-based, like an asset manager or service contract, where we make money from the fees generated on the underlying separate account assets, and underwriting-based from premiums paid by clients less client claims paid out.
What differentiates us is how the design of our products drives robust margins and results in a narrower range of outcomes. For example, spread-based, our industry-leading SCS product, which represents over 2/3 of our individual retirement first-year premium, is well-matched and repriced every two weeks. Fee-based, today 70% of fee-based products do not have guarantees, and for those that do, we hedge the first dollar for equity and interest rate movements. In underwriting-based, we focus on the VUL accumulation space, which is capital efficient and where there is less exposure to enhanced persistency risk. Overall, our retirement businesses generate attractive margins with a narrow range of outcomes. I shared early in the presentation how our products deliver consumer value. This page translates product value to earnings.
As you can see, based on the account value concentration by product, our retirement business earnings are primarily generated through spread and fee-based drivers. In individual retirement, our largest RILA product is almost $40 billion in assets and primarily spread-based. This is complemented by our floating rate VA with $30 billion. In group retirement, our 403(b) product is almost $30 billion in assets and is 75% fee-based. In protection solutions, we're focused on accumulation, and we make money across all three levers. Collectively, these complementary earnings streams create consistent cash flow and sustainable earnings. Linking it back to our go-forward guidance.
Going forward, we expect our retirement pillar to generate resilient and growing cash flows driven by in-force as the quality of earnings from the block I covered materialize and AUM grows between 5% to 7% driven by positive net flows and market appreciation under normal conditions. Next, the value of the new business which we continue to put on the books, which we expect to continue to grow between 5% to 7% as well, driven by our strong sales and robust product design. Robin will go into more detail, but simply put, value of new business is the present value of future cash flows above and beyond the economic cost of capital.
Given the quality of earnings from our in-force and the growth in the value of new business, you can expect an incremental cash flow lift of $200 million in the next five years. In closing, our retirement business helps Americans and finances America, and we see a large and growing demand. We have a track record of success and a distinct edge to drive profitable growth going forward.
Thank you. Now I'll hand it over to Seth.
Good afternoon, everybody. Thank you, Nick. It's a pleasure to be with you all today. I want to begin with a brief overview. AB is a leading active manager with a premier investment franchise across the globe. We provide globally diversified active investment management services across $676 billion in assets under management. Our distribution is split relatively evenly between institutional and retail, with local presence in all major asset management geographies across APAC, EMEA, and Latin America, in addition to the U.S. We have regional expertise and local coverage, key elements, in my view, that enable us to deliver complete solutions to clients. Importantly, we have a proprietary integrated private wealth channel with 230 advisors across 20 U.S. offices, managing about $113 billion of assets under management.
Over the past decade, with the support of Equitable, we've successfully diversified our product suite to include a broader set of private market solutions in addition to our comprehensive and competitive public equity, fixed income, and multi-asset offerings. AB also provides independent research, trading, and brokerage-related services to institutional clients through Bernstein Research Services, which we plan to place into a joint venture with Société Générale , subject to regulatory consultation and approvals. Our key messages to you today are as follows. The global active management industry presents, in my opinion, a strong growth opportunity. Despite the growth in passive investing, global active investable assets are expected to grow by nearly 30% over the next five years. AllianceBernstein has a globally diversified business model positioned in the right growth markets and segments. We have outperformed, delivering organic growth above the peer group average and expanding margins over the cycle.
Our growth strategy leverages our strengths while growing into areas of higher client demand. We expect double-digit growth in private markets AUM coupled with meaningful margin expansion. The global active management industry is positioned for healthy growth over the next five years as the need for active investing, driven by our unique ability to deliver an enduring idiosyncratic return stream will continue to be in demand across asset classes. Key drivers of expected growth are private alternatives, regional growth in APAC, and strong client growth in retail and private wealth segments here in the United States. As we'll show, all three of these are critical areas to our business. We're focused on extending an already very competitive position.
Let's touch on how our platform generates its competitive advantage. As shown on the top left, our global diversification across asset classes and channels has resulted in strong active organic growth, which has outpaced our public peers on average over the past five years. Active equity and alternatives in multi-asset have been key drivers of that growth. Those we showed in the first quarter, our fixed income business is taking the baton as investors are keen to realize the benefits of a higher interest rate environment. Our strong long-term investment track record shown on the top right are generated by an outstanding group of experienced and generally very long-tenured investors. Long-term performance is sound with greater than 70% of both our equity and fixed income assets outperforming over five years.
Moving to the bottom left, we're well-positioned to participate in the growth in private wealth channel through our integrated private wealth business, which manages $113 billion of assets, generating fully 1/3 of our base fees. These are sticky assets with client tenure averaging 12 years with attractive fees ranging in the mid-80 basis points. We've competitively advantaged position in the fast-growing APAC market, having built local businesses with strong market positions over the past several decades. We have the very strong brand which punches well above its weight in Asia. These attributes have led to strong organic growth and improving financial performance over the past five years. We've outperformed our publicly traded fee peers by 500 basis points of organic growth annualized.
Our mix has shifted toward higher value assets with both active equities and private alternatives driving this growth, and our margins have improved significantly over the course of the cycle as measured on a rolling three-year basis. Now I'd like to focus on our growth strategy. AllianceBernstein's long-term strategic goals are to establish overall market leadership by outgrowing the traditional active management industry organically and delivering accretive incremental margins through market cycles. We're investing in higher growth market opportunities across products, vehicles, and geography that will sustain our above-market organic growth. In private credit, we believe the secular trend of borrowers seeking alternatives to traditional bank and bond markets has a long way to run, and our risk-return mix is very appealing for our clients.
Through last year's acquisition of CarVal, supported by Equitable, we significantly diversified our offering to include opportunistic and distressed debt, renewable energy infrastructure, specialty finance, and transportation investing. We're encouraged by the growing client interest in AB's CarVal's offerings and are actively planning to expand these across new vehicles and channels. Let's double-click into the insurance opportunity. The global insurance market is substantial at nearly $30 trillion in general account or GA assets. Of this, approximately $4 trillion of GA assets are outsourced to third-party non-affiliated managers growing at healthy rates. Over 40 years of experience in insurance management with significant client assets of both Equitable Holdings as well as our experience managing AXA assets positions us, I think, to grow well in this sector. We have over 60 dedicated insurance experts globally who contribute to significant assets we manage in this space.
Capabilities span across public and private markets and include a dedicated insurance portfolio management team. We offer a service-oriented engagement with solutions and analytics, client servicing and operations and reporting. Our five-year aspiration is to become a top 10 provider of asset management and insurance. We'll continue to evaluate inorganic opportunities in the insurance space to drive additional growth. In active ETFs, we're introducing an innovative and differentiated global ETF offering, as we've done successfully in different parts of the market, like retail, separately managed accounts, income and sustainable investing. Depending on the strategy, the active ETF structure may offer our shareholders additional trading flexibility, increased transparency, and enhanced tax efficiency. While it's early days, we're very pleased by the strong start we've enjoyed.
Following the launch of our two active fixed income ETFs last year, in March, we launched three active equity ETFs, US Low Volatility Equity, U.S. High Dividend, and Disruptors. These provide clients with diversity, innovation and efficiency amidst continued market volatility. In U.S. Retail, we see the opportunity to extend an advantage position in SMAs across both municipals and equities. Municipals are a key area of growth for our U.S. Retail channel, where we've delivered outsized growth and taken share. Notably, we grew the business last year, 2022, a down market year with difficult performance and flows across the industry. We've seen strong performance and good results from the unique flexibility and technology that we've created through investing in the build-out of our SMA platform.
We're confident we can continue to grow market share, particularly with SMAs, where we're currently the sixth-ranked provider with a market share of 5.1% and with a plan to get to top three. Our focus is on evolving from a product to a solutions platform where we're seeing strong traction with retail wirehouses. Switching to geographic opportunities, as China continues to open their asset management market, it presents a unique opportunity for a small number of foreign firms to participate in a large and growing market. Industry analysts project annualized growth of 10%-15% over the next few years for this market. AB began the process to build a full-fledged asset management company in China in 2019. We knew this would be a long-term investment.
We recently received approval of our fund management company application and are taking the necessary steps in order to be awarded a license to launch our first onshore fund by year-end. We're executing our plan to meaningfully grow our higher multiple private markets business over the next five years. Our investment in private markets accelerated last year with the mid-year acquisition of CarVal, resulting in a $56 billion diversified platform. AB's broad solution set in this high-growth market, combined with strong performance track records, can attract and scale with institutions, retail, and private wealth. With Equitable's partnership, we're planning to achieve double-digit compound annual growth, leading to a near doubling of assets under management over the next five years, and a private markets business of $90 billion-$100 billion in assets under management. This would double our mix to 20% or more of revenues from private alternatives.
This represents a meaningful mix shift toward a higher value and higher multiple fee base, which will support our margin growth over the long term. Importantly, Equitable and its predecessor, AXA, have been a key strategic enabler to our private markets growth. With an initial $5 billion commitment that we were able to grow with third parties by a factor of four. Equitable's mid-2021 $10 billion capital commitment has been more than 70% deployed across a range of private strategies, and that was ahead of schedule. We're delighted with today's announcement that Equitable commit an additional $10 billion of permanent capital across our private alternatives and private placement offerings. We're excited to grow our partnership with Equitable, contributing to strong policyholder investment returns over time. I'd like to share our operating guidance over the five-year horizon to give you better context for your expectations.
In my view, we're uniquely positioned among our peers of multiple drivers of operating leverage over the next few years at current market levels. Specifically, the deconsolidation of Bernstein Research should lead to at least 200 basis points of operating margin expansion, again, subject to regulatory approvals. Our national relocation, which was accretive by $19 million in 2022, is expected to generate an additional 100-150 basis points of operating margin expansion in 2025, when the full savings of $75 million-$80 million will be realized. This follows lease expiry at our New York offices at 1345 Avenue of the Americas in late 2024. Our private alternatives and other investments are expected to improve operating margins over time, while at the same time becoming larger levers of growth.
In sum, we have visibility on 350 to 500 basis points of margin expansion by 2027, all things being equal. I wanna leave you with key messages as shown. We're excited and confident to build upon our past success by delivering focused growth and margin improvement over the next five years. With our strong Equitable partnership, I believe we'll be well-positioned to do just that.
Let me turn it back to Nick. Nick?
Thank you, Seth. I'm going to close out this section by breaking down our third pillar, wealth management. You've heard how Equitable Advisors is a critical differentiator for us in our retirement business, we also view it as a new driver of revenue going forward based on our fee-based investment assets. As a reminder, our new wealth management segment is the comprehensive distribution P&L for Equitable Advisors. There are a couple of key messages I'll highlight as we introduce this new segment. Our market positioning, our differentiated approach and operating model, our track record of success, the P&L growth drivers, and lastly, our go-forward guidance. First, the demand for humanistic advice is increasing. Today, Americans are faced with a daunting set of complex financial and personal choices as they plan for the next phase of their life journeys.
In the last two years, we have faced a health pandemic, economic uncertainty, important discussions on racial reckoning, not to mention a land war in Europe and rising interest rates. The research shows that 65% of Americans wanna work with an advisor to help them navigate these challenges. It's clear that there's an increasing demand for advice, but the nature of advice demanded is also changing. Clients are more focused on a sense of purpose and aligning their lifestyles and financial assets to secure long and fulfilling lives. While the demand is growing, the overall supply of financial advisors has remained the same over the last decade. Equitable Advisors has a differentiated edge to capitalize on this opportunity. Within the broader wealth management space, Equitable Advisors targets the $12 trillion mass affluent market.
12 million households representing nearly 40% of the total wealth in the country. We believe we have a distinct value proposition to compete with peers like Ameriprise and Raymond James. We've built a top 10 independent broker-dealer in this space. Today, we have 4,100 advisors managing over $180 billion in total client assets, roughly $112 billion in retirement and $76 billion in investment advisory and brokerage assets. We bring the following key differentiators to the space. A proven track record of recruiting and developing advisors. While peers have advisors aging out, we have the most robust advisor demographics in wealth management, with an average age eight years younger than peers. This ensures a strong pipeline for growth and continuity of client relationships.
A distinct advice model with the planning process that meets clients where they are in their life journeys, with investment strategies that leverage both insurance and investment solutions, driving client acquisition, better retention, and advisor productivity. A track record of building comprehensive wealth planners who've integrated reoccurring fee-based investment accounts into their practice models. Finally, an industry-leading operating platform, with scale both from our retirement platforms and LPL's investment broker-dealer, allowing us to profitably grow. Over the last five years, we have a track record of meaningful growth, both top line net flows and mix improvement, with room to continue to grow. First, with sales. Total sales for retirement and investment offers have grown to over $20 billion in 2022, a 7% CAGR since 2017. Of the $10 billion+ in investment sales, roughly 70% are going into fee-based accounts.
Next, positive consistent growth in net investment flows, growing by 9% in the same period, given our focus on fee-based investment accounts, and hitting $4.5 billion in 2022. This has resulted in total AUA growing by 10% over the past five years versus peers at 6%. Powering these organic results is our distinctive model to attract advisors and clients. Our edge is built on three core pillars, our people, our planning process, and our platform. People. Today, we have over 4,100 advisors nationwide in 250 offices across three segments. 1,100 kindergarten to 12th grade retirement specialists who start their careers working with educators, teachers, and then serve their families and broader communities. 2,300 generalists who mainly focus today on retirement products but are looking to expand and grow their practice models.
700 comprehensive wealth planners who leverage insurance and fee-based investment solutions. Our experienced leaders like Dave Karr, who's in the room, have a proven program and track record to help advisors develop and grow from generalists into wealth planners. We're also attracting experienced advisors where we see additional upside. Advice planning process, a holistic life planning advice model which amplifies both IQ and EQ, going deeper into defining a client's purpose and aspirational lifestyle to guide their financial choices to serve more of their needs. Our Columbia Financial Coaching program was recognized as the best training program in 2022 in the nation, beating out the likes of Google and Oracle, a testament to our commitment to providing best-in-class training and developing opportunities for our advisors. We see upside here as it's driving enhanced results, particularly amongst women, advisors and clients.
Going forward, we all know that women will earn more and inherit a larger share of wealth. Platform. Our platform benefits from a best-of-breed design with the scale of Equitable's retirement platforms coupled with LPL's leading broker-dealer advisory platform. This drives advisor productivity, and we participate in the broader economics and leverage their over $200 million in annual investment in technology. These pillars are giving us an edge in the market and are driving our strong organic growth. Next, I want to pivot to how that translates to revenue. Once again, comparable to peers, our wealth management segment is a comprehensive distribution P&L. We make money in three ways. Annual distribution fees, where we generate revenue from insurance and investment sales.
As you can see on the page, retirement covers the distribution costs, and investment product distribution fees have a gross margin of roughly 10%. Reoccurring advisory fees, where we generate revenue off of the reoccurring fees captured from advisory assets. As I mentioned, we did over $10 billion, and this reoccurring revenue continues to be a greater percentage of our total investment AUA. Cash sweeps, where we generate revenue from our cash balances with our investment platform, where we participate in economics through our unique operating model. Now going forward, we see organic growth being driven by three factors. Advisor productivity. We've increased productivity at 10% CAGR since our IPO, but see further uplift given our planning process and platform to move into the top quartile. Wealth planner advisors.
As I mentioned, we have 700 holistic wealth planners, up from 450 in 2018. This is a strategic segment that drives high productivity with a clear path to future growth. Wealth planners are the highest performing advisory segment, 3x more productive than non-wealth planners. This group accounts for about 2/3 of our investment broker-dealer flows. We have a strong pipeline of roughly 2,300 producing generalist advisors, which gives us a runway for growth. Last, advisory mix shift. Currently, 70% of net flows are in reoccurring fee-based advisory accounts, and we are growing the percentage of total in-force advisory assets. These three drivers combine to create significant opportunity to build on our momentum. Our guidance and expectations.
We aim to double organic earnings by 2027 to over $200 million post-tax, with 90%-100% cash repatriation. There are two primary drivers of earnings growth. Productivity, which we see increasing by 4%-5%, and margin expansion, which we expect to increase by 8%-12%. In closing, we see a growing demand and need for humanistic advice. Our wealth management business has a distinctive edge in our target market with a track record of success. We see this as a growing part of our overall business model. We remain steadfast in helping our advisors guide their clients through these dynamic times so they can live long and fulfilling lives.
Thank you, and I'll turn it back over to Işıl.
Thanks, Nick. We'll now pause here for a 15-minute break.
Thank you, and welcome back, everyone. Now I'd like to introduce Robin Raju, our CFO. Thank you.
Hi, everyone. Thank you all for coming today. Before I jump into my section, I really just wanted to share a few brief words. You know, five years ago today, I was so excited to help reintroduce this company. It's a 160-year-old company, and we had a chance to make it public or build our own house, as Mark says. It gave us the opportunity to tell our story, which represents the hard work of 12,000 employees across Equitable and AllianceBernstein. I'm so passionate about what we do here at Equitable Holdings. We have the opportunity to create value and drive long-term returns for shareholders, and at the same time, we make the difference to families across America every day. We've done both and will continue to do both.
You've heard this morning from our leadership team on our strategy and business initiatives. I'll focus my time in this section to explain to you how this comes through in value for our shareholders. I'll explain it across five key points. First is our economic balance sheet and how it's been protected through market cycles. Underpinning this is our fair value risk management approach. You should know this is ingrained in our DNA here at Equitable. Second, I'll share our team's strong track record of execution. At IPO, we went out with financial targets around investment income, expense efficiency, and AB's operating margin, all of which led to earnings growth. These targets were important. We had to build credibility to the public markets. Now, five years later, we've demonstrated the performance culture of this team.
We have exceeded every target that we've gone out to market with, while at the same time simplifying our business. Third, I'll focus on capital optimization. Our teams have demonstrated their agility and have completed numerous actions to stabilize our balance sheet and improve our business profile and grow our resilient long-term cash flows. Fourth, I'll share how our simplified and faster-growing business model suggests a higher relative value for our shareholders. Finally, this leads us to our 2027 guidance under normal market conditions. We will grow our cash flows by 50% to $2 billion per year, while also increasing our non-GAAP operating EPS growth to 12%-15% by 2027, and our payout ratio increasing to 60%-70%. As a leadership team across Equitable and AB, we're laser-focused on controlling the controllables.
You can and will continue to see that come through our results. We're operating from a position of strength, and this next chapter of Equitable Holdings will continue to drive shareholder value. Let me start with our economic balance sheet. This is what differentiates Equitable compared to our U.S. peers. As I mentioned earlier, this is in our DNA. It's how we operate and think on a day-to-day basis. This page illustrates how it comes through our results for our shareholders. As Mark showed earlier in the pre-presentation, we have a proven track record of managing our capital position through different market cycles. Over the last five years, we've seen volatile equity markets, historically low interest rates, and recently, rapid rate hikes due to inflation, all while navigating a global health pandemic.
During this time, our RBC ratio or regulatory capital position has never fallen below 400%. We have seen this decrease since our IPO by over $10 billion or 70%. Our economic approach has protected our balance sheet, reduced the risk in the company, and enabled consistent capital return. You've probably heard the term economic management used a lot in the industry, but for us it has a distinct meaning. Our economic model is built around key principles, and it's shown on the left-hand side of this slide. First is our ALM strategy, where we ensure asset and liability duration is tightly matched within one year at the enterprise level. Second is our market assumptions that value our liabilities.
They incorporate what is actually observed in the market, meaning we use a forward curve instead of an arbitrary number. Additionally, we base our actuarial assumptions off of emerging policyholder experience. This ensures that there are no major surprises in our reserving. Lastly, we hedge the guarantees that we provide for our clients on a first dollar basis for both interest rates and equities. We believe that this economic approach is how an insurance company should be managed. Now you see this coming through as the accounting and regulations are moving closer to this approach. LDTI accounting, the NAIC scenario generator for interest rates, and structured asset reforms will require the industry to adopt frameworks which are closer to fair value. These reforms will ensure economic pricing for our products and improve transparency and trust across the industry.
The effectiveness of our economic management is also visible through our financial ratings. We have an RBC ratio of 425% through year-end, which is above our 375%-400% target. A leverage ratio of 27% in the midpoint of our 25%-30% target. Our strength is recognized by rating agencies, where we've received strong ratings from each. Additionally, we were upgraded by Moody's last year to A1. We also maintain ample sources of liquidity, which I know you know is especially important in markets like these. We have a $1.8 billion cash position at the holding company on top of over $4 billion of available credit resources. Lastly, almost 50% of our cash flows come from non-regulated entities. This is up from 17% at IPO, which helps support the consistency in our cash generation.
Diving deeper on the asset side of Equitable's economic balance sheet, we aim to deliver strong risk-adjusted returns in our general account, supported by AllianceBernstein. We have a conservative and resilient investment portfolio with an A2 rating and 96% of fixed maturities are investment grade. You can see the portfolio has no exposure to any of the names in the recent banking crisis. Our resilient CML portfolio, which has not had any delinquencies in its existence. AB manages 70% of the general account. This allows Equitable to benefit from AB's underwriting expertise. At the same time, AB has developed a strong capability in insurance asset management that they can now market to third parties. Let me move to our track record of execution.
I truly believe this differentiates this management team sitting before you today and how we will continue to deliver value for shareholders. Over the last five years, our investment teams repositioned the general account to capture higher risk-adjusted yields. At IPO, we had a large allocation to treasuries under the Solvency II regime. We had the opportunity to rebalance towards corporate bonds. This was the first phase of our general account optimization program, which resulted in a $240 million annual uplift, which was above the $160 million target we put out at IPO. In 2020, we saw another opportunity to capture illiquidity premiums through private credit and alternatives. In phase two, we set out to capture another $180 million in annual uplift over three years. We completed this program one year in advance of our target.
Moving forward, our portfolio will support strong value of new business growth in our spread-based products like SCS and our FABN issuances. Additionally, as our general account portfolio grows with our new spread products, we will continue to allocate more general account assets towards AB's private market strategies. This will enable us to capture an additional $110 million in annual yield in phase three of our general account program. We will do this while maintaining a high-quality portfolio, which will be resilient to different market cycles. The additional yield captured through our new $10 billion commitment to AllianceBernstein will ensure that AB continues to build out its faster-growing, higher multiple private markets business, a core part of AB strategy that Seth laid out earlier. To date, there are $15 billion committed to seed AB strategies, and $12 billion of it is funded, the remainder being funded this year.
This has benefited both Equitable and AB. These committed assets have delivered incremental income of $42 million per year to Equitable's general account. The same time, it has enabled AB to scale its private markets platform to the tune of $56 billion. To reiterate the strategy that Seth laid out earlier, AB has a proven track record of using Equitable seed money to grow. AB's raised 4x the third-party assets that was initially committed to a strategy. This is a differentiator for AllianceBernstein, as they can recruit teams knowing they will have permanent capital supported by Equitable. Moving forward, we will commit the additional $10 billion to these strategies, while Equitable will capture an additional $110 million of yield that I just mentioned.
The multiplier effect will enable AB to grow its platform to $90 billion-$100 billion of assets over the next five years, repositioning AB as a major player in the private alternative space. This again highlights the synergies between the retirement and asset management business, which translates directly into value for EQH shareholders. Let me speak about productivity. Equitable has a long history of executing against our productivity targets. This is evidenced by the $350 million of saves we achieved even before we had our IPO. Before I dive into this slide, I should spend a moment on our philosophy around productivity. When we create expense goals, they are net of reinvestment, and there's a reason for that. We need to change the way we work, adapt the latest technologies, while at the same time investing through cycles to create revenues for shareholders.
As a management team, we want to reduce bad expenses that lead to bureaucracy and inefficiency. At the same time, we want to invest in new things like wholesalers, advisors, investment teams at AB, and front-facing client technology. This enables the company to remain agile and also continue to grow our revenue. Let's dive into how we've executed against this philosophy. At IPO, we announced phase one of our net productivity goals, which resulted in $75 million of savings by 2020 from enhancing customer experience and driving technology improvements like moving to the cloud. Since then, we executed on phase two, where we achieved $69 million of annual savings from moving to an agile workforce through New Ways of Working. Including in this is $19 million of savings from AB's relocation to Nashville.
Our new target, phase three, will include an additional $150 million of net savings by 2027. This will include over $55 million of AB's real estate saves by 2025 to hit our $75 million-$80 million Nashville relocation target. Equitable will receive its share of these saves. In addition, our retirement company will realize $30 million of real estate savings by the end of 2023, and an additional $65 million of savings to continue to deliver top quartile expense efficiency within our peer group. This will bring total net savings by 2027 to $150 million and cumulative savings since IPO to nearly $300 million. Additionally, if you include the savings executed prior to the IPO by this management team, we will have delivered $650 million annually in savings.
As I started, we achieved this save while investing and building new businesses like wealth management and private markets at AllianceBernstein. I hope you've seen that in this section that our history of strong execution will continue to deliver value for shareholders. Today, with the additional commitments to AB's alternative business, investment income into general account, and productivity, you will see strong execution continue to drive shareholder value. Let's focus on capital optimization, as this is one of the hallmarks of EQH as we continue to optimize our capital to drive future growth while improving cash flows. We have proven our ability to efficiently use our capital for growth. Last year, we completed the acquisition of CarVal Investors, a leading private credit manager that complemented AB's existing capabilities into space. To fund this transaction, we used AB stock as a currency.
As a result, there is limited impact to cash up front for EQH shareholders and long-term upside. We have also been investing $500 million annually in our Equitable Retirement new business at a 15%+ IRR. This has led to record levels of inflows and will result in long-term cash flows for shareholders, which I will highlight in a few slides. We also have a proven track record of access into private markets to secure cash flows. Recently, we executed on two transactions to offset the redundant reserves required in New York. This is another example of the agility of our teams, with both transactions occurring within one year of the new rules. As a result, we secured long-term cash flows at minimal economic cost to shareholders. Previously, in 2020, we announced our de-risking transaction through our landmark legacy variable annuity risk transfer with Venerable.
This validated the economic management in our reserving, with Venerable delivering to us a positive seed for this block. This transaction enabled us to unlock $1 billion of value, and it reduced the capital needed to back our retirement business by 2/3. Additionally, we found a partner in Venerable who has expertise to manage these liabilities. This will ensure that our policies are protected through market cycles as we continue to shrink our legacy block. Now let's talk about what remains in our legacy business. Mark outlined our progress since IPO, but I will dive deeper and provide an outlook. Last week, in our first quarter earnings, we reported results for the first time in our legacy business. As you saw, the legacy business is now only 16% of Equitable's total retirement business.
Given its size, this block should in no way drive the valuation of Equitable Holdings. The segment's operating earnings have fallen from roughly $600 million to $200 million today. We expect this to continue to shrink to about $100 million organically over the next five years. This means that it'll be less than 5% of Equitable's total non-GAAP operating earnings by 2027. Additionally, we used to hold $14 billion of capital to back the legacy business at IPO. Today it's only $4 billion, and in five years it will be $1 billion. Organically, this block will run off at $2 billion-$3 billion of outflows per year. With our ongoing work to split New York and non-New York policies, we will have further optionality down the road to accelerate the runoff.
With legacy now insignificant, it allows us to focus on growing our core retirement business, which leads me to the next page. You heard about our actions to cut bad expenses earlier. I'll discuss one of our best expenses that drive cash flows for shareholders, that's our investment in new business. Our annual $500 million of new business investments provide strong returns for shareholders. For each year we invest in new business, we generate roughly $500 million of economic value of new business, with record levels last year due to the rising interest rate environment. As Nick touched on earlier, VNB represents the present value of future cash flows generated by new business sales. This value is above and beyond the economic cost of capital and translates to a 15% IRR on our investments.
These strong returns are enabled by three competitive edges that you've heard throughout the day. First is our capital diversification between our complementary retirement business, which drives lower capital requirements. Second, we design products to have a narrow range of outcomes with our economic pricing framework. Third, you heard it from today from Nick, is our affiliated distribution, Equitable Advisors. Equitable Advisors enables us to better control mix and reduces the cost of funds for our products. These three differentiators and the continued value of new business that we generate allows us to grow our cash flows, which I will highlight next. Our actions to date have and strength of the franchises have positioned us well to grow our cash flows from $1.3 billion in 2023 to $2 billion by 2027, or a 50% increase.
These cash flows really highlight the quality of the businesses we have, especially in retirement. Our retirement business will benefit from the general account income and expense initiatives I mentioned earlier. We recognize the profit margin from new business, while at the same time releasing the capital in our fully reserved legacy business through this period. These drivers will improve the free cash flow generation of the retirement businesses by 2027. At AllianceBernstein, we will continue to benefit from organic growth. The shift towards higher fee private markets, improving the long-term cash flows. Within our wealth management business, which is our fastest growing business, we expect cash flows to double by 2027, benefiting from the holistic advice our advisors give to clients. Additionally, our actions to date have significantly narrowed the range of the outcomes of our cash flows.
Our base case of growing from $1.3 billion to $2 billion assumes the forward curve for interest rates, 6% equity markets, and a 2% dividend yield. In a severe downturn, with equity markets down 25% and interest rates down to 100 basis points, our cash flows will drop on average to $1.7 billion by 2027. Additionally, under a deep recession, with a 40% equity shop and a 200 basis point decline in interest rates, our cash flows will remain resilient and on average, drop to $1.4 billion, which is above today's levels. The resiliency of these cash flows is a function of our economic management, strong execution, and capital optimization. This positions the holding company more like an asset manager than an insurance company and ensures consistency of cash flows for shareholders.
Again, at Equitable, you should expect the track record of our free cash flow growth and resiliency to continue, which should help you better model our relative valuation. Let's talk about valuation. Normally, I don't speak about it, as that's your role, not mine. I will take a shot at it once every five years if you give me a second. Today, our relative valuation presents an excellent opportunity for both new and existing shareholders. Equitable Holdings has changed its mix into a diversified financial services holding company that generates cash flows across several capital-light businesses. If you look on a price-to-earnings basis, we are valued at 4x despite having nearly a quarter of our earnings coming from asset and wealth management business, while another 20% comes from group retirement.
Additionally, our core retirement business generates spread and fee-based earnings, which should be valued as a capital-light business. When you look on a price-to-free cash flow basis, we are valued at 8x despite having over half of the cash flows come from asset and wealth management businesses. If you compare these multiples to how the market values insurance peers, on average, they have a 6x multiple on earnings and 10x multiple on cash. As we tried to demonstrate with you today, we shouldn't be compared to insurance peers because we have an asset management business, a wealth management business, and a capital-light retirement business. If you do a sum of the parts valuation incorporating the market values for our asset and wealth, it would suggest a multiple of 8x earnings and 12x cash. Look, Equitable Holdings is a good business.
We're not going to tell you how to value it. In looking at peers, we know there's an opportunity for shareholders to benefit over time. Now I'm going to get back to my day job, and that's enough for valuation for five years. I'll let you take care of that going forward. I'm going to focus on what we do well, and that's thriving and controlling the controllables. We're going to focus back on executing against our strategy. As an output of what we covered today, we will continue to grow our non-GAAP operating earnings to $2.5 billion by 2027, which is over a 25% increase in the next five years. This is benefiting from the initiatives I laid out earlier, along with organic growth coming through our business lines.
Additionally, our cash flows will grow to $2 billion over the next five years or 50%. As a result of our organic growth and our more capital-efficient businesses, we are updating our payout ratio to 60%-70% of non-GAAP operating earnings. This is a significant growth from where we were just five years ago when we had a payout ratio of 40%-60%. This is the result of us improving our business mix. As Mark mentioned earlier, we don't like to use the word transformation here at Equitable, we truly believe the way we reduced our risk exposures while growing and continuing to deliver cash flows is a good example of it. To pull our guidance all together, we're also updating our earnings per share growth to 12%-15% by 2027.
This is delivered through a combination of organic business growth in non-GAAP operating earnings to $2.5 billion, supported by the general account investment income, expense efficiency, and growth in our underlying businesses. This will account to about 4%-5% of EPS growth. Along with executing against our increased payout ratio, it'll account for an additional 8%-10% EPS growth. Together, this will enable us to deliver on a 12%-15% non-GAAP operating earnings EPS growth by 2027. These are compelling targets which we can achieve under normal market conditions. As we look in the future, our priorities remain unchanged. We will continue to rely on our fair value management to protect our economic balance sheet and ensure we have the financial flexibility to navigate through different market cycles. We will remain disciplined in our pricing decisions to ensure we're delivering profitable growth.
We will not sacrifice value for market share, and we'll ensure our products meet a 15% IRR hurdle rate. We are committed to our capital return program, and given our current valuation, we will continue to have a bias towards buybacks to drive shareholder accretion. Lastly, we'll continue to look for opportunities to optimize our capital structure. M&A will need to require significant expense or capital synergies to ensure accretion for shareholders. In summary, we're excited about the growth prospects and this next chapter at Equitable Holdings. Our new financial guidance will deliver $2 billion of annual cash generation, leading us to increase our payout ratio to 60%-70% and deliver 12%-15% of non-GAAP operating EPS growth by 2027. Our new guidance is driven by a relentless focus on controlling the controllables.
We announced today an additional $110 million of investment income initiatives, $150 million of productivity, $10 billion of committed capital to AB, along with a 350-500 basis points margin improvement at AllianceBernstein. Thank you for joining us today so that we can share with you this next chapter of our story here at Equitable Holdings.
With that, I'll ask my colleagues to join me for our Q&A session.
Thank you. A couple of housekeeping items before we start. If you have a question, please raise your hand, and we'll provide you with a microphone. When you start your question, please start with your name and the company you're with, and limit yourself to one question and one follow-up. With that, we'll begin. Jimmy?
Hi, thanks. Jimmy Bhullar from J.P. Morgan. First, I just had a question on your EPS guidance and on the 12%-15%. What are you assuming in terms of drawdown of the RBC, potentially and/or the liquidity levels at the holding company?
Robin, why don't you take that?
Sure, thanks for the question. Our EPS growth that we're excited to announce today, 12%-15% by 2027. There are two things that will not change with that. We'll always continue to maintain our strong RBC ratio at the holding company. We'll never go below our 375%-400% RBC ratio within the retirement business. We also do. That does not assume that we have to draw down on our existing cash to achieve that. That EPS growth is driven by purely the $2 billion of cash flow growth that we have by 2027, which then translates into the EPS growth after taking into account our earnings growth to $2.5 billion.
Suneet?
Thanks. Suneet Kamath from Jefferies. Just, Robin, on the $1.3 billion of cash flow going to $2 billion, just to be clear, you've talked about it, I think, in a couple different ways, but is that before or after, interest expense and preferred dividends?
The question from Suneet was the $1.3 billion of cash flow up to the holdco company. That's before interest expenses at the holdco company.
Okay, got it. just one other one on the wealth management earnings. I think you talked about a 15% CAGR in terms of earnings over the next few years. What are you assuming for that cash sweep piece? Because I'm assuming if the Fed cuts, that'll be negatively impacted. Are you assuming that any of that goes away, or it stays with you?
Yeah. We take the projections on the Fed funds rate associated with that. Your point, as we saw in first quarter, higher Fed funds rates, we earn more, lower, the cash sweep we would earn less.
Alex?
Hi, it's Alex Scott, Goldman Sachs. Question I had was on the run off of capital versus new business investment. You know, if I'm understanding it right, there's about $3 billion running off of the legacy business, you know, over five years, about $0.6 billion a year. If the new business investment is about $0.5 billion a year, wouldn't the two things roughly offset? You know, if that's the case, you know, what holds you back from reaching higher, you know, free cash flow generation levels? Just thinking through, you know, run off capital sort of funding new business growth.
Sure. I would separate the two in thinking about that. We have our new business investment of $500 million. That's incorporated into the net growth in retirement cash flows at $200 million that Nick mentioned earlier. The run off of the capital, that's reserves and capital that's behind the CTE.
Some of that needs to be done to pay claims that we'd have over the next five years, and the remaining is the capital that we've released for shareholders over the next five years.
Got it. Okay. That's more clear. Yeah, the other thing I wanted to ask about was just the opportunity you guys outlined with the SECURE Act and the in-plan guaranteed product. You sort of showed, you know, what you think it could be in the future. You know, how long do you think that'll take? What kind of tailwind is that over the projectable period that you guys have talked to?
Maybe if I set the scene on that, Alex, then I'll pass to Nick in terms of the opportunity. The big numbers we're showing today is the $2 billion cash and the growth in the earnings. There's a very, very insignificant amount of that coming from in-plan guarantees because it is, behind your question, difficult to project where it comes. This really is a horizon three opportunity for us today, but the numbers you're seeing here are not dependent on it. Maybe Nick, if you give some color on where we are both with AB and with BlackRock and some of the noise we're hearing from the market.
Yeah. I do think we're hitting a tipping point. It started with, obviously, the need was there, and then the regulators with the safe harbor. You had the target date fund managers, and all target date fund managers are saying, "We want income." The, the third leg of that stool is then the platform operators like the Fidelity's saying that they'll be able to implement that, and you've seen announcements saying they're gonna start to incorporate it. As we saw through, you know, the win last year, you're starting to see plan sponsors saying, "This is what I want." There's demand and there's supply. It's gonna be lumpy. It's a 12-month sales cycle. When you do a 401(k) conversion, that takes a little bit of time.
It is, I would say a, in motion, and we're at the leading edge of, I would say, being part of those solutions.
Alex, if I could just follow up on that. We think this is very important for America. If you, as you know, I've worked in many markets around the world. If you look at one market like Australia, they had a very well mandatory retirement saving on the accumulation side. They didn't do anything in the decumulation side. Everybody who had built up these funds started buying boats and racehorses and second houses and then falling back onto the state. This is a very important part for society that we not only help people accumulate, but then we turn it into some secure income in retirement. Particularly with the death of defined benefit schemes, it's really important that we find a solution for this.
Tom?
Thanks. Tom Gallagher, Evercore ISI. Robin, you opened the door on the valuation discussion, so I'm just gonna go through it.
It is your job, as I said.
It is. I agree. I'm gonna reverse engineer the way you put it, though. If we look at the value of AB, thank you, Seth, for that, and then we look at the implied valuation of the insurance business, it's probably a 1 or 2 PE today, which is, you know, incredibly low. You can view it as an opportunity or an overhang, whatever. Other companies that I've experienced with similar challenges, some just assume it'll take care of itself over time, and the market will become more efficient. Others have taken matters into their own hands and done something about it to try and unlock value. Curious where you stand and if there's anything you have from a strategy standpoint, whether that's restructuring, divestitures, anything that you're considering to do to unlock value.
Okay. Maybe if I kick off on that one, Tom. Thanks for the question. It's a key question. We know we appreciate it. Let me tell you how we're thinking about it. Certainly, if you look at the sector now, I think we'd all agree in the room that it's sort of been tracking macro events for some time now. You know, interest rates, equity markets, what happened in the regional banking crisis there. Even within that, if you look at Equitable, our relative margin is on the lower side. You know, the positive, the glass half full on that is there is upside potential in there.
We certainly hope you've seen from today as to why, you know, you should take a look, investors should take a look at Equitable. More than half of our cash flows are coming from asset management and wealth management. The legacy VA now is insignificant, and it's not a way to look at to value the company by any measure. You know, that's an important thing we've done in bringing that business out. In terms of any sort of breakup strategy, of course, we look at these things. I mean, it's important for us. Total shareholder return is a critical measure for us, and we look at it. We're very--
If you look at our results so far, particularly on the TSR to the end of 2022, we are beating our peers. We know that, and we can see that. A key part of that is this business model and the integration between them. Let me give you some examples on that. AB today has as a permanent capital, low cost capital, about $110 billion from Equitable. We've used the general account very, very smartly in seeding the build-out of high alternatives. Seth and the team have done an incredible job. When we put four--
$1 of seed capital in, they can attract a further $4 on that side. I know it was quite critical to CarVal to come to us because of the fit with AB, but also because there's a life company they're able to cede into the CarVal acquisition side there as well. This is what's been driving the performance, the outperformance on TSR in year-to-date. When we do our work on this one, these are the reasons why we think breakup is not in shareholders' interest. One, you lose that integration. We see elsewhere in the market, life companies and asset managers rushing to get together. We already have it, and it's been working really, really well.
On the other business lines, to help with maybe a follow-up question, there's a lot of capital synergies across individual retirement and across group retirement. To ask what we're doing, we're carrying on really focusing on cash flow generation. If you look at those slides we've shown today, our cash flow is growing faster than our earnings. That's very unusual. One of the reasons for it is we're able to have a much higher percentage of our earnings convert to cash, plus this legacy portfolio that we have spent a long time managing with reinsurance, making sure the first dollar hedging in there and reserving now, it's starting to throw off cash as this book comes down.
We think we're in a good position, and it's important, through meetings like today that we really get over looking at Equitable as a legacy VA company is just wrong. There may have been some argument for it five years ago, but the work we've done between now and then has really changed the landscape.
Robin, would you add anything to that, or have I missed anything?
No, I think you, I think you hit the pretty key points. I think the only thing I would add, that's the importance with the new accounting regime. As we continue to generate positive net income, I think it'll be cleaner in the financial statements for Equitable as well. It leads to something we don't control, frankly, and that is, you know, potentially index inclusion at some point. We need to generate positive net income consistency in order to be sitting at the table for that to be eligible. That's the other thing I would add.
Thanks. Just my follow-up is, how much does the legacy VA book produce in terms of annual free cash flow today? I guess I'm also a little surprised that it runs off so quickly. I had always thought of that as a very long duration book that would take 10, 15 years to shrink as much as you're showing. Why is that shrinking so quickly?
Sure. You know, we're really fortunate with that Venerable deal that we did because that took up a big chunk of the variable annuity, legacy variable annuity business from 2006 and 2008 that was written. The remaining part of the legacy business is mostly pre-2006 that's sitting there. As a function, it gets to this point that we call peak TAR, which means you don't need to build assets back in reserves anymore. You're collecting fees, and you can release reserves over time. That's where we are with that legacy business, and that's why it's releasing capital in the plan period. Today there is minimal cash flow coming in, coming off that block.
Through the next five years, we see that increasing, and actually the cash flow conversion will be greater than the operating earnings that that business generates through the next five years. That's really, I mean, it goes, Mark, we're really passionate about this because this is 15 years of hard work by a lot of people in this room to ensure that the stability of those cash flows, the economic management, and the policies are fully reserved. There's not gonna be any surprises for investors through that period as well. That's why we can share with you today that we're gonna be releasing capital and end up having a higher free cash flow conversion than our actual earnings are.
Tom, you know, just to take you back five years as to why we were able to do this, and we have our banking partners in the room at the time. We set the company up at CTE98. This was really, really important for us to actually have those reserves. You've heard me say before, what did this mean? This meant that AXA had to inject $3 billion. If at that time AXA had just spun off, we would not have been at CTE98. We could not have hedged to it, and we would not be in the position we are today.
It really goes back to those five years. All credit to the team in managing that opportunity so we were fully reserved. We hedged the first dollar. We did the reinsurance. We're in this position now to start to throw off cash.
Ryan?
Thanks. Ryan Krueger, KBW. I had a follow-up on Tom's question. I guess, given the confidence in the outlook that you expressed and where your stock is currently trading and the fact that you do have a lot of excess capital right now, I mean, I do understand the, you know, that we're in an uncertain environment and you may wanna hold some extra buffer. I guess why not deploy some of your excess capital into additional buybacks to take advantage of the opportunity you could have right now?
You wanna take that one, Robin?
Sure. Look, I really feel comfortable today sitting up here having $1.8 billion of cash at the HoldCo and sitting on a strong RBC ratio. You know, all of you see what's happening with other companies around us, but also what's happening in the market. It's an uncertain time period. As a result, we think it is prudent at this time to keep that levels. Those cash flows, though, as there are as a result of our businesses, it's free cash flow that was generated up to the holding company. 50% of it now is more than is unregulated. That's up from 17% of IPO. The hedging program has led to that consistency where we can have that capital.
If we ever went through a severe shock of credit and equities and et cetera, Equitable can, under most scenarios, maintain the consistency in our capital return. That's been a hallmark from us since IPO. We're one of the few companies since IPO that has never stopped their share buyback program. Some may say it's conservative, Ryan, because we're holding on cash, but I'd rather be conservative in a period like this when there's uncertainty and deliver consistency in cash flow growth for shareholders.
Got it. Thanks. Separate question. On the $10 billion of additional committed capital with AB, I guess, how are you thinking about the time frame? Is that something that will be gradually done in terms of being deployed into those assets, or is it something you'd look to do faster?
Sure. First, we're gonna finish the $3 billion that we have remaining. That's our plan this year, as Seth continues to build out strategies, and we can deploy those assets. The remainder $10 billion will be done over the next five years. You know, I would spread it out over that time. I wouldn't put specific dates on them.
Seth, anything you wanna add on the build?
No, I think that's accurate.
Wes?
Thanks. Wes Carmichael, Wells Fargo. Question on the cash generation of $2 billion. Is there any way to help quantify, at least directionally, how much is coming from the protection segment? 'Cause, you know, operating earnings have been a little bit volatile, but maybe the cash flows are more stable.
Sure. I, you know, I think the best way to think about it is probably the operating earnings and the percentage of operating earnings conversion that we have from the retirement business for protection. You know, we'll remain our $300 million guidance in an annual basis or $75 million quarterly for protection. There will be volatility. You know, coming out of COVID, going from a pandemic to an endemic, there's certainly some uncertainty with mortality. Now, the last nine quarters, our reserving's been in line, we do expect volatility, that's why we gave that guidance. From the cash conversion standpoint, I would think about it as the percentage of our overall cash conversion and apply it to that segment's earnings.
Thanks. On expense saves of the $65 million related to Equitable that are kinda in excess of real estate, is there any upfront investment required related to that? Like, might we see that in 2023 or 2024?
Sure. See, remember what I mentioned is all of our expense savings are net of reinvestment. So it's after investing, whether it's adding new advisors, wholesalers, investment teams, or investing to get efficiency, which is always part of our program every year. Every year, we put money in place to deliver efficiency goals. That's all included already in the earnings growth that we've provided in the $2.5 billion. We don't see anything in this time that would have a EPS dilution over the next few years in order to get that, if that's your question, across the board.
We have a responsibility to continue to drive productivity while investing at the same time and continue to see us leverage the same playbook as we always have, but try to expand in places like automation, vendor management, and continue to look at our real estate footprint.
Go ahead.
Thanks, guys. Mike Ward with Citi. I guess I just wanted to clarify, I think it was slide 75. There's the targeted operating income of $2.5 billion, and then free cash generation of $2 billion. That is 80%, I just wanted, you know, of operating income, whereas the target 60%-70%. I just wanted to clarify, is the delta interest expense or what am I missing?
That's right. I'd say the difference is we have about $250 million annually in interest expense at the whole co that you have to take out, what Suneet was alluding to earlier in his question. You have to take that out, and that would get you to the higher end of the range in 2027.
Okay. Also expanding on Tom's question. If we think about some of the stories across the life space that have seen material multiple expansion, to me, it feels like it's, you know, been those who have completely eliminated individual life and individual annuities or variable annuities specifically. You know, and so I'm just wondering, like, how realistic might that be for you? Or is the cost or complexity too great really for you to, you know, consider that today?
Mike, maybe if I handle that. If you look at the retirement market in the U.S., it is a fantastic opportunity. You look at the numbers that Nick put up of 60% growth in Americans hitting age 65. Granted, there was five-seven years where the industry really messed it up in terms of product design. Granted. That shouldn't take us out of a market where we have natural strengths and the ability to convert those strengths into earnings and cash flows for shareholders. I think we've seen that this is the key for the industry, if I may.
There was quite a lot of bad press around variable annuities. We saw that you can have those same types of problems if you misprice on SGUL as well, which is not a variable annuity. The key I think for in-investors is understanding how companies are pricing. As Robin showed and as Nick showed, we are pricing for a narrow range of outcomes. The range of outcomes for the old variable annuities prior to the global financial crisis was great if interest rates were stayed at 6.5% and lapses were 5% a year, but absolutely terrible if interest rates fell and lapse rates fell as well.
It's a good market for us, and we have to show and keep showing to our shareholders that we can really meet a social need and at the same time create enormous value. That's what we really believe.
Tracy?
Hi, Tracy Benguigui, Barclays. Okay, you've previously spoken about your plans to reinsure policies from New York to Arizona and ultimately novate those policies. I'm just wondering, in your $1.3 billion-$2 billion cash flow update, is that contingent on completing those plans, or could that be a added upside?
Yeah, thanks for the question, Tracy. As it relates to the internal reinsurance that we've been working on, that does assume that that does get completed within our plans. I think I can tell you now we have line of sight into that, and we should complete that shortly. That should take into place. Now, once we complete that'll lead us. We'll have to do some work on novation, but that allows us and gives us future optionality to accelerate the run off over time.
Okay, great. I found one of your slides really interesting about the life cycle and the entry point by product. It looked like under life legacies, your protection, the average age was over 80. I'm just wondering how you manage adverse selection, if that's the average age.
Yeah, I'll take that one. I think the chart you're referring to, our life products actually cover a broad age. You know, one of our distinct advantages of going through client journeys, when you're in that sandwich generation, let's call it 40-45, you're thinking about your kids, you're thinking about your parents. Emerging wealth can afford a VUL policy, let's call a $1 million face, right, for $5,000 a year, right? That allows us, our advisors to engage at that cycle, and then it allows that person to grow as the individual grows. Our target age is sort of in that sandwich generation accumulation, but we can use it at different life stages there. It may have just been where the dot was pointed in that particular area.
Yeah, Tracy, we're not issuing policies to--
We're not, yeah.
To 80-year-olds. We're not that good at underwriting. At that level, but it's, but it's probably the average age of the client portfolio.
Yeah. Mark?
Yeah. Hi, it's Mark Hughes with Truist. The free cash flow conversion, the 60%-70% payout, as your business evolves over time, is there a endpoint where we or that we should think about some higher number? You've been migrating it up all this time pretty consistently. Where is it going?
Mark, I thought everybody would be happy with going at 60%-70%. Oh, you want more. That is part of being a public company, I suppose. We're really excited where we are today as a company. You know, five years ago, coming out to 40%-60% and needing to de-risk the company and while growing cash flows at 30% at the same time, it's really a function of our economic management and our ability to simplify the business model. Over time, if we continue to simplify and drive that capital efficiency in our capital-light businesses, that could potentially increase over time.
Now we set that part, this new guidance today, and we're gonna focus on executing against that guidance and deliver that consistency of cash flows and that 60%-70% payout ratio.
Very good. The walk from $1.3 billion-$2 billion includes the capital release. It's an important component of it. Once you get to 2027 and that book is largely run off, is that $2 billion still a good sustainable run rate?
By 2027, the businesses that we talked about today, those emerging businesses like wealth management and the alternatives business at AllianceBernstein, they're gonna be bigger, and they're gonna be still growing pretty fast. Over time, if you look on the things that we didn't mention today, whether it's in-plan guarantees, which isn't included in those numbers at a significant amount, there's more growth for us after this. Again, we come back to we gotta execute against this. This is what we put forward today. As we execute and we deliver, hopefully we'll sit here again in 2027, we can talk about something new, right now we'll focus on executing.
Go. Wes.
It's Wes Carmichael, Wells Fargo. Maybe just a question for Seth.
Oh, thank God.
On the $10 billion in capital commitments, I know that's not a new thing, but can you maybe just give a little bit more detail on what the underlying investments are there, as well as, like, how much spread you get relative to another comparable security, a corporate bond or something like that?
I think that's really to you as opposed to me. Is that--
Well, you have to take at least one question.
No, Don't worry.
All right.
There's some buried for me.
Steve Joenk. Steve Joenk is our Chief Investment Officer, Wes. Steve, Wes' question is what additional yield pickup you'd expect? Oh, okay. Okay. Steve, what are the underlying investments of the $10 billion, Steve, and the yield pickup?
You know, excuse me, as Robin indicated, you know, we still have money to put to work from the original $10 billion and then into the next $10 billion. There's a mixture of private investment grade, just straight up private placements. And then we're working with CarVal, especially to develop new areas, new asset classes for our general account. First one will be residential mortgages, and we'll continue to evolve with CarVal, with the private markets that AB is building to basically match up with whatever our liability profile looks like.
It's been beyond CarVal too, right? It's been our middle-market lending business, where, as well as our CLO business as well as.
European credit, also, you know.
European real estate. Correct.
Construction to perm loans, et cetera.
All right.
Okay. Jimmy?
Hi. Just to follow up on the capital that you're gonna generate. How do you think about deploying that? Should we assume that most of it's gonna go into buybacks? Obviously dividends, the amounts are fairly small, or are you targeting acquisitions as well? If you are, what are some of the markets you're interested in? Maybe, Seth, what are you interested in in terms of acquisitions?
Maybe if I tee that up and then pass to Seth. As Robin said in his slide, obviously there's a bias towards the share buybacks. We can see very clearly what the shareholder returns on there. I think the best way to answer that is to look at the transactions we've had to date. CarVal was a $750 million earn-out, with an earn-out on there. They bought $16 billion of private assets. Of course, that was a good acquisition for us. We used AB units there to make sure that it was accretive at the AB level and accretive at the Equitable level. That's something we wouldn't rule out, and that's something we would look at.
The other bolt-on we had was Penn Investments, and Nick, that brought $600 million of assets under advice into us, well. They would be areas that we would look at, but we will always remain very, very disciplined and look to make sure that it's accretive on an AB acquisition at the AB level and the EQH level. Maybe I'll ask you to add some color there.
Sure. I think from our perspective, several areas remain very interesting to us. With respect to traditional equities and fixed income, those tend to be team lift outs for the most part, so they're not all that expensive to actually put forth and execute. It's finding the right teams with an enduring edge that we can onboard and get to scale faster, and they can do it for themselves. We look at a number of those all the time, that wouldn't be a meaningful part of this.
Where I think it could be meaningful for us is filling out our private alts platform, whether it's in infrastructure, whether it was in another particular area in private debt space that we think would be appealing, particularly to insurers as a potential opportunity to, on a risk-adjusted basis, raise the yields in an attractive way for them on their general accounts. I think finally, accelerating growth in our, in our private wealth business, whether that is as multiples begin to come back down to earth, whether there's something attractive in the RIA space that could be appealing and complementary to what we're doing or elsewhere. Those are the kinds of areas, Jimmy, we would be thinking about investing.
Tom?
Tom Gallagher, Evercore ISI. question for Nick on wealth management. Today, as you think about that business, is it really more of an insurance agency, commission-oriented, model that you're trying to pivot to a fee-based wealth management platform? Because I looked at, like, the margin differentials, and you're at, what, 11%? It looks like the commission-oriented margins are 10% and the wealth management are in the 30s. Can you talk about where you are? Is the vast majority of this just commissions? 'Cause I don't think that's broken out in the supplement. What is the plan? Like, how do you see this evolving? Is there an aggressive growth plan to build out your true wealth management business?
I think we're positioned in the market both with our consumers and advisors as a wealth management business. The vast majority of the overall earnings are coming from that fee-based advisory, as we talked about, not the commission component to it. I would say we're probably have started that journey. On the margin basis, it would be sort of comparable when peers like Ameriprise had come out, but we see that rapidly ticking up. As we highlighted, we've doubled our number of wealth planners from 450 or almost doubled to 700. I think what's driving that is two things. One is actually our advisors are growing their practice models, and they view the opportunity to essentially grow their relationship, position themselves as the primary advisor with insurance and wealth management matches their clients' journeys.
They may have talked to them about insurance when they were 35, and now they're approaching retirement, and they're thinking about different opportunities. I would say, you know, we are, as we highlighted, you know, one of the top 10 investment broker-dealers on most metrics that you will look at today, with room to continue to grow.
So vast majority of revenues are fee, not commission?
I'm sorry. Revenues would be-- Well, it's 50%, I think we highlighted, of our $20 billion associated with annual top-line sales. Half are coming from insurance, and half are coming from investment. Between that's 50/50. On the earnings, obviously the recurring fees on the fee-based advisory are recurring annual fees.
Gotcha. Follow-up for Seth.
Tom, sorry. The vast majority of the earnings are coming from that wealth orientation that Nick had mentioned. That's what you have coming today.
From an earnings.
Yeah. With the margin expansion that Nick highlighted in the presentation along with productivity, you know, that should be by 2027 in line with what you see in the industry.
Gotcha. Seth, just one on private credit. It seems like every insurer is shifting heavily into private credit as is Equitable now. Just curious what you think of that asset class. Whenever you see a lot of movement in one direction, you worry about a bubble forming in terms of terms and conditions and underwriting and that sort of thing. Just curious what you think. Are you seeing slippage, or do you still feel pretty good about, we'll call it the risk in that asset class?
We've been in a credit bull market for looking around this room for some of your lives, with a few exceptions. When I was making loans a long time ago at J.P. Morgan, we had very different standards than what is applicable now in the marketplace. That being said, several observations. One, a lot of this is refinancing out of the bank market and to some degree out of the public bond market. It may not be net new in that particular case, or at least a portion of it may not be net new. Secondly, this last year has been traumatic enough that in fact, I think there's been a meaningful shift in leverage from the borrower to the lender in terms of covenant structure, terms, and pricing.
Less evident in the public high yield market still, but much more evident in the private market. Tom, I think your concern is well taken, and I think we have to be mindful of it. I think there's still a lot of opportunity to run there, in particular relative to the value impacts of the reps, the covenant structures, which afford lenders or investors in our case, considerably more latitude in workouts than you would otherwise see in a traditional public structure.
Alex?
Hi, it's Alex Scott, Goldman Sachs. Excuse me. One of the questions I've gotten frequently from investors is just around, you know, lapse risk on the annuities. I wanted to ask you specifically about RILAs. You know, how do you view the surrender protection, some of the market value adjustments, et cetera, on that in the range of outcomes around interest rates?
Just, let me just highlight a little bit what we talked about on our earnings slide last week. Look, the businesses that we have is very different than a banking business or even some of the fixed businesses too that are out there because of the uniqueness of our distribution that Nick highlighted today. Over time, we price for and we include market value adjustments. We have surrender charges. Those are on all of our products that we sell. In addition, there's protection. We sell qualified retirement products. There's tax friction from moving from qualified to non-qualified. In addition, over 98% of our sales are coming through the retail channel. As with retail, you have to go through an advisor. We feel quite comfortable.
We haven't seen any upticks, even in the call centers or across the board in our businesses. That's again, it goes back to that economic pricing that we have. We price these products around a narrow range of outcomes, and we assume, and we don't wanna surprise investors by a negative outcome from a policyholder behavior utilization. That consistency continues, but it's a function of our differentiated distribution.
Can I just chip in on RILAs? You know, this is the markets where RILAs are really performing well. That's what the consumer bought, which is upside potential and a downside buffer. When you think about it's a protected equity story versus a protected principal story on the fix. Clients that are in these products are saying, "Look, I'm outperforming the market. I've got exposure to equities going forward," and our advisors and clients are here. I think you've got to go back to the value propositions of those two markets 'cause they're fundamentally different.
We are almost at time. Last couple questions. Wilma?
What do you see as the key risks to achieving 12%-15% EPS growth through 2027? That figure seems like it includes quite a few initiatives, some cost saves, general account optimization, and interest rates are a bit higher. Just wondering if there's any risk you see there.
Maybe if I handle it. I think, and I believe this quite passionately, the track record on execution of this management team is really excellent. The initiatives we're after on productivity, on general account optimization are, you know, things that we are in our hands and we believe we can achieve them. Wilma, if you look at the journey of the organization, five years ago when we stood here today, it was an organization that was quite dependent on high interest rates, meeting high guarantees on the legacy VA. That's gone away now and is not significant. We're well reserved, and we're hedged on that side. The main sensitivity in the company continues to be equity markets and credit premium. That's the risk side.
As we've shifted from, 83% of the cash flows coming from the insurance entity and the guarantees in there to 50/50 now, that has meant the risk profile shifts to be more market-based.
Thank you.
Okay.
Okay. That brings us to the end of our Q&A. Thank you very much for joining us. For those of you who are here, we welcome you for a networking session in the back.
Thank you very much for coming this afternoon.