Morning. My name is Matthew, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the AXA Equitable Holdings, Inc. second quarter earnings call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question at this time, simply press star, then the number 1 on your telephone keypad. If you'd like to withdraw your question, press the pound key. Thank you. Kevin Molloy, Head of Investor Relations, you may begin your conference.
Thank you. Good morning and welcome to AXA Equitable Holdings second quarter 2018 earnings call. Materials for today's call can be found on our website at ir.axaequitableholdings.com. Before we begin, I would like to note that some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. Our results may materially differ from those expressed in or indicated by such forward-looking statements. I'd like to point out the safe harbor language on slide two of our presentation. You can also find our safe harbor language in our second quarter 10-Q. Joining me on today's call is Mark Pearson, President and Chief Executive Officer of AXA Equitable Holdings, and Anders Malmström, our Chief Financial Officer. Also on the line is John Weisenfluh, AllianceBernstein's Chief Financial Officer.
During this call, we will be discussing certain financial measures that are not based on Generally Accepted Accounting Principles, also known as non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures and related definitions may be found on the investor relations portion of our website, in our earnings release, slide presentation, and the financial supplement. I'd like to now turn the call over to Mark and Anders for their prepared remarks.
Thank you, Kevin, and good morning, everyone. As we discussed on our last earnings call, the second quarter of 2018 was a landmark quarter for the company, during which we completed our initial public offering and began trading on the New York Stock Exchange. In addition, let me remind you of some of the other key milestones we have achieved. In April, we raised $3.8 billion in long-term debt with a weighted average duration of 16.9 years at a 4.52% average coupon in order to repay internal loans to AXA SA and purchase AXA's remaining interest in AllianceBernstein, bringing our ownership of AB to approximately 65%. We also merged our primary captive variable annuity reinsurer into AXA Equitable Life, which positions us well for the upcoming anticipated NAIC variable annuity reform.
Today, I'm also pleased to announce the commencement of our capital management program, which we believe reflects the strength of our balance sheet and the confidence we have in this company to produce sustainable cash flows. The first part of our capital management program is our common stock dividend. We have declared a first quarterly cash dividend of $0.13 per share, payable on August 30th, which gives an annualized yield of approximately 2.4%. Secondly, our board of directors has approved a $500 million share repurchase program, which we will start to execute in the open market during this, the third quarter of 2018. In order to limit the impact of the program on the liquidity of our public flow, we expect that share repurchases will primarily occur from AXA. As a reminder, AXA's post-IPO lockup period ends in early November.
The commencement of this capital management program allows us to optimize the capital we hold in our company and delivers on our long-term commitment to return 40%-60% of non-GAAP operating earnings. As you can see on slide four, AXA Equitable Holdings delivered strong operating results in the second quarter. Against the backdrop of constructive markets, our four business segments continued to demonstrate their ability to grow earnings. From a regulatory standpoint, the industry continues to work through important reforms, including the NAIC variable annuity reform and proposed fiduciary standards. Overall, we believe the NAIC reform is moving VA capital standards towards an economic framework, which we support and is consistent with how we manage our business. Regarding fiduciary standards, more clarity has emerged over recent months, and we are beginning to see the impact of this through improving sales trends.
As always, AXA Equitable Holdings will maintain our focus on providing our clients with the advice and products to protect their financial future. Turning now to the main results from our second quarter. Total AUM increased 4% to $656 billion, supported by equity market performance and net inflows across a number of our target markets in the retirement and investment management businesses. Overall, our non-GAAP operating earnings increased to $506 million, up 27% from the second quarter of 2017. This performance reflects our AUM growth, good execution against the company's productivity and general account optimization initiatives, and lower tax rates. All segments have seen earnings growth in the second quarter. Firstly, in individual retirement, operating earnings increased 30% from the second quarter of 2017 to $399 million, driven by higher account values, improved VA margins, and continued expense discipline.
Sales momentum also picked up in the second quarter, stemming from new distribution partnerships. Overall sales mix remained good with over 60% of first year premiums coming from products sold without GMXB features. We also saw positive net flows up from quarter one 2018 from our newer, less capital intensive products, partially offsetting the continued runoff of our mature fixed rate GMXB block. In group retirement, we continue to add new clients, and recently we achieved the milestone of our 1 millionth group retirement client. Our successful advice driven model has translated to another quarter of positive net flows, with second quarter net inflows of $150 million, primarily driven by strong recurring contributions.
For investment management and research for AllianceBernstein, operating earnings increased to $97 million, up 59% from the second quarter of 2017, reflecting our increased ownership of AB, now approximately 65%, and an improvement in the business's operating margin year-over-year. Overall, AB's adjusted operating margin improved 240 basis points year-over-year to 27.3%. In the quarter, AB's fee realization rate actually expanded as higher revenues from inflows into equity and alternative investment services more than offset the impact of outflows from lower fee strategies. Lastly, annualized premiums in our Protection Solutions business rose 22% from the second quarter of 2017, primarily due to increased sales of variable life products and the continued ramp-up of our small market employee benefits business. As previously mentioned, today we launch our capital management program funded by dividends received from the insurance subsidiaries and AB.
We also maintain a strong balance sheet with capitalization in excess of CTE 98 for variable annuities and 350%-400% RBC for our non-variable annuity businesses. As at June 30th, we have an RBC ratio in excess of 700%. These results combined delivered a 14.6% operating ROE, an increase of 100 basis points compared to the first quarter of 2018 and in line with our long-term mid-teens target. Today, I'm also announcing new members to my leadership team. Nick Lane, current CEO of AXA Japan, will be joining the team in the first quarter of 2019 as President of AXA Equitable Life, leading the individual retirement, group retirement and Protection Solutions segments, as well as heading up our affiliated and third-party distribution. He will also join the EQH Management Committee. Nick joins us following over two years leading AXA's business in Japan.
He previously had roles at AXA Equitable Life, including leading our commercial business lines and our affiliated advisor sales force, and as a member of our corporate strategy team. Nick will bring valuable expertise to AXA Equitable Holdings, and we will be able to draw upon his energy and passion for the U.S. business. Brian Winikoff, our current head of the life retirement and wealth management organization, will be departing the company. Brian will stay through the end of the year to ensure smooth transition of his responsibilities. I would like to thank Brian for his many contributions to the business over the past several years. To further strengthen our finance organization as a public company, I'm very pleased to announce that we are bringing in new talent with listed company experience. William Eckert will become AXA Equitable Holdings Chief Accounting Officer.
Prior to joining us, he was corporate controller and principal accounting officer at Athene Holding. Paul Hance will join as AXA Equitable Life Chief Actuary in September. Most recently, Paul served as actuary head of valuation Center of Excellence at Prudential Financial. In summary, we are further strengthening our leadership team by bringing in seasoned leaders with listed company experience, which I believe positions us well to deliver our commitments to shareholders and customers. Turning to slide five. I would like to dive into progress on our strategic priorities, which are focused around growing the business, enhancing productivity, and optimizing capital. We believe that by emphasizing these key areas, we are well positioned with multiple levers to drive overall non-GAAP operating earnings growth of 5%-7% compounded by 2020. Clearly, our share repurchase program will further accelerate that growth on a per share basis.
As a reminder, for general account optimization, we anticipate generating an additional $160 million pre-tax benefit by 2020. As of the end of the second quarter, we completed 50% of the transition and have achieved $48 million uplift. Our productivity initiatives are focused on further rationalizing our cost base, we expect to generate a $75 million pre-tax benefit net of any reinvestment by 2020. Through the first half of 2018, we have reduced net costs in our insurance business by a total of $11 million year-to-date. Although it is early days, we remain on track to meet our goals by 2020. Lastly, we are targeting 3%-4% non-GAAP operating earnings growth by 2020 from various initiatives across each of our business segments.
We believe the strength of our capital-l ight product strategy, combined with the depth and breadth of our distribution footprint, will support this underlying business growth over time. In individual retirement, for example, we are already seeing positive sales momentum from recent product updates and several significant new distribution agreements, which we launched during the second quarter. Given our history of product innovation and our targeted distribution approach, we remain confident in our ability to capitalize on the growing demand for our lifetime income and protected growth solutions. In group retirement, our leading position in the 403(b) K-12 market provides a foundation for consistent flows and creates longer-term opportunities for deeper relationships through our over 1,000-strong dedicated advisors. Building on recent successes, we will continue to prioritize growth through both new and recurring businesses, while maintaining expense discipline and further optimizing our advice-driven client engagement model.
In investment management and research, AB continues to demonstrate its ability to generate differentiated returns across a broad array of active investment services. This success has produced net inflows across active equities and alternatives, driving higher fee rates and revenues. This, combined with AB's track record on cost management, has resulted in continued expansion of its operating margin. In addition, AB announced this quarter its intention to relocate its corporate headquarters from its New York Metro offices to Nashville over the next several years. The transition is already underway and will favorably impact the long-term cost structure of the company. Finally, in Protection Solutions, our targeted focus on less capital-intensive accumulation segments and on select distribution partners has yielded positive results, including year-over-year growth in annualized premiums. Augmenting this growth, we are scaling our employee benefits business and expect this to contribute differentiated returns over time.
Overall, our strategy has and should continue to generate attractive earnings, robust cash flows, and capital return to shareholders consistent with our 40%-60% of non-GAAP operating earnings payout target ratio. In addition, we are on track to produce a sustainable mid-teens ROE in the near term and strong EPS growth, driven by a combination of 5%-7% non-GAAP operating earnings growth and the execution of our capital management program. I will now turn the call over to Anders to go through our quarterly results in more detail. Anders?
Thank you, Mark, and good morning, everyone. On slide six, I will review our overall results for the second quarter before providing more detail by segment. non-GAAP operating earnings in the second quarter of 2018 increased 27% year-over-year to $506 million, driven by higher revenues from increased policy charges and fees, combined with improved GMxB margins and net investment income. As Mark mentioned, we had two important changes reflected in our capital structure during the second quarter. First, we increased our ownership of AB to approximately 65%. Second, we issued new public debt to complete our initial capital structure. On a per share basis, non-GAAP operating earnings per share was $0.90, also up 27% year-over-year, given our steady share count at 561 million shares outstanding during the quarter.
Net income for the quarter was $158 million, down from $608 million in the prior year period, primarily due to favorable one-time items that occurred in the second quarter of 2017. On a year-to-date basis, net income increased 3% to $326 million compared to the first half of 2017. As a reminder, we conduct our annual actuarial assumption review in the third quarter. The difference between operating earnings and net income in the quarter can be explained primarily by the recurring accounting mismatch of our variable annuity product features of $280 million. For your information, included within this amount is a $24 million cost for our static hedge options. The remaining $256 million are due to the mark-to-market valuation. We recorded $33 million of separation costs in the period.
Total AUM, an important driver of our fee-based business, grew 4% year-over-year to approximately $656 billion, driven predominantly by market appreciation. Sequentially, our operating ROE increased 100 basis points to 14.6%, primarily driven by higher operating earnings in the current quarter. Level of ROE is in line with our mid-teens ROE objective. Turning to our segments, I will begin with individual retirement on slide seven. Operating earnings increased 30% to $399 million, primarily driven by higher net investment income, an improvement in GMxB results, and a reduction in expenses. Net investment income increased $37 million year-over-year, primarily due to higher asset balances in our popular Structured Capital Strategies product and the GA optimization initiative. Operating expenses were down year-over-year due to our continued focus on creating operating efficiencies. Account value increased $4.5 billion year-over-year, largely driven by market appreciation.
While net flows decreased compared to the second quarter of 2017, we continue to experience strong net inflows with our current product set, $867 million during the quarter, and ongoing net outflows from our mature fixed GMxB block. This dynamic continues to de-risk our portfolio towards our new, less capital-intensive product. As Mark mentioned, we saw improving trends in sales, with deposits and first-year premiums improving sequentially. Declining year-over-year, following strong sales in the first half of 2017 in anticipation of the United States Department of Labor's fiduciary rule implementation. We continue to take a value over volume approach in this market. Turning to our group retirement segment on Slide 8. Operating earnings grew 63% to $78 million due to higher fee income from equity market performance and higher net investment income, combined with lower expenses.
Account value increased $2.6 billion year-over-year due to market appreciation and continued positive net flows. The segment continued to experience strong net flows in the second quarter, increasing to $150 million, driven by higher premiums. Gross premiums increased to $880 million, driven by growth in renewal contributions, as well as strong client retention and new sales momentum. The strength in new business and renewals are supported by the efforts we have made to engage existing clients while increasing our advisor base to attract new clients. Turning to investment management and research, which is AllianceBernstein on Slide nine. As a reminder, in April, Holdings' ownership in AB increased to approximately 65%, and on a weighted average basis, was approximately 62% for the quarter, given the timing of the transaction.
Operating earnings grew 59% in the quarter to $97 million due to the increased ownership in AB, higher average AUM across all channels, and higher fee rate realization, reflecting a mix shift from lower to higher fee products. Driven by strong revenue growth and disciplined expense management, AB's operating margin improved to 27.3%, a 240 basis point increase compared to the second quarter of 2017. Net outflows of $7.7 billion during the quarter were primarily driven by a low-fee institutional redemption, partially offset by net inflows to higher fee strategies, including $3.4 billion into a broad array of active equities. Ending AUM increased to $539.8 billion, primarily due to market appreciation of $24.6 billion over the last 12 months. Finally, we'll turn to Protection Solutions on Slide 10. Operating earnings grew 50% to $24 million, driven by higher policy revenues and net investment income, combined with expense discipline.
As we have discussed previously, loss recognition testing will continue to impact our Protection Solutions business and resulted in higher DAC amortization costs during the period. We expect earnings volatility in this segment to persist for the foreseeable future as our loss recognition testing continues. Annualized premiums increased 22% to $66 million, primarily due to higher individual and small business variable life sales, combined with our continuing ramp-up of our employee benefits business. Moving to Slide 11. As Mark discussed earlier, we have launched our capital management program and expect to return capital to shareholders in line with our goal of 40%-60% of non-GAAP operating earnings on an annualized basis. Our capital return approach includes an inaugural quarterly cash dividend of $0.13 per share based on second quarter earnings, plus authorization of a $500 million share purchase program.
Share purchases will begin in the third quarter of 2018, subject to market conditions. We will look to primarily buy shares from AXA as it executes on its stated intention to sell down, as well as in the open market. This approach will allow us to further optimize our capital structure and maintain shareholder liquidity. In total, we have set forward a path of common dividends and a share purchase authorization to deliver on our target payout ratio of 40%-60% of 2018 non-GAAP operating earnings. In July, we upstreamed a $1.1 billion dividend from our primary life subsidiary, and with additional non-regulated cash flows from AB, we have ample capital flexibility to begin executing on the program. At the same time, we are focused on maintaining our strong balance sheet and capitalization levels. As of June 30th, our estimated combined RBC ratio was in excess of 700%.
We anticipate the tax reform changes to the RBC formula will have an impact of approximately 13%-14% of RBC, or lower RBC by roughly 100 points. At the end of the second quarter, our debt to capital ratio was 25%, in line with our expectations, and holding company cash remained strong at $400 million as of June 30. As a reminder, this was before the cash upstream from our life subsidiary. With that, I will turn the call back to Mark for some concluding remarks. Mark?
Thanks, Anders. Before breaking for questions, I'd like to reiterate this quarter's performance in the context of our long-term financial targets. On slide 12, we show a familiar snapshot of our key financial targets. Having completed our IPO during the second quarter, I am pleased with our strong results. Our leading positions within select markets, premier multi-channel distribution platform, and investment expertise position us well to continue to generate earnings growth, maintain financial stability through market cycles, and generate attractive returns and strong cash flows for shareholders. We've positioned the company to maintain a strong balance sheet while delivering disciplined financial growth. We're holding ourselves accountable to deliver 5%-7% compound annual growth in non-GAAP operating earnings through 2020, supported in part by the 30% adjusted operating margin target that AB has publicly reported.
With a target payout ratio of 40%-60%, this should result in an operating ROE in the mid-teens by 2020. We expect to maintain strong capitalization of CTE 98 for the variable annuity business and 350%-400% RBC for the other insurance businesses. With that, we'll open the call to Q&A.
Thank you. At this time, I'd like to remind everyone that in order to ask a question, press star, then the number one on your telephone keypad. Our first question comes from the line of Ryan Krueger with KBW. Your line is open.
Hi. Thanks. Good morning. You saw an uptick in the ROA and earnings power in individual retirement in the quarter. Can you just talk about if you view the second quarter as a good run rate for that business going forward?
Yeah. This is Anders speaking. Look, I think overall, absolutely, I think it was a good quarter for the individual retirement business. I think we had good flows, even though not as last year, overall, I think it was a very good quarter there. Yes.
Okay. Thanks.
Hi, it's Mark. I think as well we saw an uptick in the sales activity quarter two relative to quarter one. That's something we've been looking for after all the DOL noise has died down. That was a good trend.
Thanks. It sounds like you're comfortable with the NAIC VA reform, any updates on potential impacts from that? I guess also, do you expect a shift from reserves to statutory capital when this comes through, and will that impact your dividend capacity going forward?
Yeah. Look, this is again, Anders Malmström speaking. Look, I think overall, as we said, I think we are supportive of the VA reform. I think it goes in the right direction. It's more economic than it is today. That's I think that's important. The reform has been approved or adopted. Now it's important that the committees go through the details. They're going to do that over the next couple of months. I think from our perspective, we're comfortable with the outcome of the reform. We don't think that it has a material impact on our dividend capacity going forward. As I said, I think we have to go through the details now once the committees finalize the details.
Okay. Thank you.
Our next question comes from the line of Erik Bass with Autonomous Research. Your line is open.
Hi. Thank you. I first just had a clarification question on the buyback. While the authorization goes through March, should we really view this as 2018 capital return, so the 40%-60% of expected capital return for 2019 would be on top of this, even if the buyback does stretch into the first quarter?
Yes, Erik, that's correct. That would be a good summary of the position.
Okay. Thank you. On Protection Solutions, do you have any sense of how long you expect it to take to rebuild positive margin and exit loss recognition? Until that happens, I realize there's going to be some volatility, but do you have a sense of what a normal level of quarterly or annual earnings that we should expect?
Look, I think it's going to take us another couple of quarters to get out of loss recognition testing. There's basically two things that really help on that front. One is obviously strong new sales that have a good margin that will help us to get out of loss recognition testing. The other thing is if interest rates increase, let's say, more than what you expect in your assumptions. From that perspective, as we told you, we're going to expect that we're going to stay in couple of quarters in loss recognition testing. To your second question about the underlying trend, if you take out the DAC amortization that you see in this business, if you actually take that out, overall, you see a positive trend in the business, and it's really encouraging that we're going to see strong earnings in the out years.
Thank you. Just one last one on protection. I was a little bit surprised to see the drop in net investment income quarter-over-quarter, because I think that was a business that you had highlighted as one of the bigger beneficiaries from the general account restructuring. Is there just noise in it this quarter, or I guess, how should we think about the investment in income allocation to the businesses?
I think good question. When you look at how we manage the investment portfolio overall, we have a central investment portfolio, this really helps us on the ALM. That's how we manage ALM, we allocate the investment income to the segments. You see some small noise. If you actually look at the half year results, you don't see that. It's really a kind of noise, as you say. Overall, I think we had a strong improvement in the investment income overall from this program. I think, as Mark mentioned before, it's about $48 million already realized in our results. The segments get the benefit, you see some small noise there.
Okay. Thank you.
Our next question comes from the line of Andrew Kligerman with Credit Suisse. Your line is open.
Good morning. Quick technical question. On the variable annuity product features, which get marked below the line. I believe the guidance on overall variable annuity hedging was about $700 million a year, but now you're also including some effects from the SCS product. Could you break out maybe your targeted or guided effects from the SCS product into hedging going forward below the operating line?
I think, Andrew, good morning. I think you're absolutely correct. I think if you look at the overall impact coming from, let's say, the market, the majority is really due to mark-to-market. I think I gave you the breakdown overall, the impact operating to net income is $280 million. Out of $256 is really mark-to-market. The rest is coming from the static hedge cost. We don't break it out, what is coming from GMxB and what is coming from SCS. Majority is GMxB, obviously. I think to give you the guidance, we gave you a guidance on a normal year. I think, as you know, it's very sensitive to equity market, so it can be higher, it can be lower. On average, when you follow the plan, which I think assumes a 6% equity growth, that guidance is still valid.
The $700 is still valid going forward?
Absolutely, Yep.
Okay, great. Shifting over to group retirement. It looked really solid in terms of sales and flows and renewals. It seemed modestly down or flattish in each of these categories. What are your strategies going forward, and expectations in terms of growth in this sector?
Hi, it's Mark. Maybe I'll take that, Andrew. Firstly, as you know, we've got a pretty good position there, particularly in the 403 business. The growth strategies are really penetrating further those 8,700 school districts we have, getting productivity in the ones where we are active. We've seen a nice uptick in our RBG advisors. These are the dedicated advisors, just over 1,000. Growing the advisor force is key to that growth strategy, as well as improving the existing productivity. We've started to do some work, both direct and with third-party distributors as well. They're the main drivers behind the growth strategies in the group retirement business.
You think you could get those numbers moving up year-over-year going forward?
Yeah, look, that is part of the plan. As I say, we're in a very solid position there. It's an advice-based model, work site delivered, if you like. It's really key to that organic strategy we put to the market of looking for the 3%-4% growth on earnings. Yeah, we're upbeat about the business.
Just lastly, any quick color on Brian Winikoff's departure?
Brian's been commuting from Boston and his home here to New York and spoke to me about wanting to get closer to the family. That's really a decision Brian came to. As I said earlier, we really want to thank him for what he's done. He's added a great deal to the business. As I said in my earlier comments, really delighted to be welcoming Nick into the team. Nick, as some of you may know, has spent 12, 13 years in the business. He's going to bring a lot of energy. Brian will be staying with us through the end of the year, and it'll be a nice, smooth transition for when Nick arrives in quarter one of 2019.
Great. Thanks, Mark.
Thanks.
Our next question comes from the line of Suneet Kamath with Citibank. Your line is open.
Thanks. Just on the GMxB portion of the $280 million number. I had thought that maybe FASB was considering some accounting changes that might make the GMIB be a little bit more apples to apples with some of the other VA riders out there, which would potentially eliminate this asymmetry. Is that something that you're hearing as well, and any thoughts on that?
Yeah. This is Anders. Yeah, absolutely. The FASB is moving towards more fair value. I think if I'm right, it will be in 2022 or 2021, it's coming pretty soon. From my personal point of view, I think that goes in the right direction. I think it's the right way to look at it will be much more fair value, and you're going to see this gap going to be much closer, if not going to go away between operating and net from that particular item.
Right, which is the majority of, I think, what you said the 280-
Absolutely. Absolutely. No, I think it goes in the right direction, absolutely. We encourage to do fair value. I think it's economic and it's how we look at the business.
Got it. Then sort of related to VA also, I wanted to try to go back to the present value cash flow analysis that you guys provided at the time of the IPO. Our understanding is that includes all the VA that's in individual and most of the VA that's in group, which I think is a little bit different than how other companies show that. Is it possible to get a sense of what that would look like if you took out the group retirement VAs?
Look, I think you're absolutely correct. I think when we talk about VAs, we take all the VAs, the ones in individual retirement and the ones in group retirement. We don't separate them, but if you want to, from a cash flow, you can go to account values and make your own assessment where the cash flows are coming from. Obviously, the capital requirement is more on the individual retirement side than on the group retirement side.
Right. In other words, is the risk profile is more skewed to the individual retirement.
Absolutely.
Then maybe just one last one, if I could. On group retirement, sort of similar to Ryan's question, it seemed like the ROC there, I think 25.4% was generally higher than what we're seeing from other companies, and I know everyone has a different business mix, but any thoughts to the sustainability of that ROC?
Look, I think you're going to see some swings quarter-over-quarter, as you saw in our case. I would say we will be steadily above the 20% range, from an ROC, which is our target. We don't expect to go to 30%, obviously, but I think you're going to see a solid ROC coming from Retirement Benefits Group.
Got it. Thanks.
Once again, if you'd like to ask a question, that's star, then the number 1 on your telephone keypad. Our next question comes from the line of Alex Scott with Goldman Sachs. Your line is open.
Hi. I guess the first question was a follow-up on the NAIC VA capital reform. I guess one of your peers mentioned that they would adopt it early. What's your view on that and potentially adopting it early? I know you give the sensitivity of 100-point impact from tax reform on the RBC, but do you have any sense of how this new capital framework would impact the RBC?
To your question about the early adoption, I think it's too early to make a final determination if we want to early adopt or not. As we said before, the framework is now approved. The committees go through the details, and we now have to implement these details once they are final. Then we're going to make a decision if we want to early adopt or not. I think an important point on our side is that we're not constrained right now through the standard model to be able to pay dividends. We can pay dividends, and we just did out of the operating entity. I don't think that early adoption would actually change the way we think about cash upstream on a going-forward basis.
I think I want to go through the details, and once we have the details, we decide if early adoption makes sense or not. To your second question, yes, tax reform is going to impact about 13% of our RBC, which translates into 100 points. We're not yet there to give a number on the NAIC, but we expect that it has an impact on RBC. There will be a reset, I think, in the whole industry after the NAIC reform gets implemented.
Okay. Then maybe my follow-up question, just on the corporate segment. I know there's sort of a lot going on here between wealth management, I think some of the variable annuity reinsurance piece that's in there, and there are moving pieces in the quarter with interest expense and so forth. Could you help us think about, on a go-forward basis, what's a reasonable expectation for the corporate loss? How much volatility around that should we expect?
Look, I think after all the restructuring has been done now, the biggest change on corporate and other was really the debt, and I think we have now issued the debt. We have the interest costs. We know them. As you mentioned, there are other businesses in there that have some volatility. I think we are pretty much on run rate. From a going forward basis, I can expect maybe $10 million ± of volatility there. That should give you some guidance.
Okay. Thank you.
There are no further questions at this time. I'll turn the call back over to Kevin Molloy, Head of Investor Relations.
Hey, Matthew. Thank you. Thanks, everyone, for joining us this morning. As always, if you have any follow-up questions, please don't hesitate to give us a call or email. You can reach us at 212-314-2476 or through email at ir@axaequitable.com. Thanks, and have a great day.
This concludes today's conference call. You may now disconnect.