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Item 7. Management’s Discussion and Analysis

2024-02-09 compared with 2023-02-10 · 220 added, 234 removed, 681 unchanged (40% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Impact of COVID-19

AB continues to actively monitor COVID-19 developments and their impact on our employees, business and operations.

The aggregate extent to which COVID-19, including its impact on the global economy, affects AB’s business, liquidity, results of operations and financial condition, will depend on future COVID-19 developments that are highly uncertain, including the scope and duration of COVID-19 and any recovery period, the emergence, spread and seriousness of COVID-19 variants, the continuing prevalence of severe, unconstrained and/or escalating rates of infection and hospitalization in various countries and regions, the availability, adoption and efficacy of treatments and vaccines, and future actions taken by governmental authorities, central banks and other parties in response to COVID-19.

Further, we have benefited from certain of our adjusted operating expenses declining significantly due to COVID-19, generally owing to depressed levels of travel and entertainment and in-person client meetings, during both 2020 and 2021.

While these costs started to return in 2022, results in 2022 did not reach historical levels;

the prior-year savings are not indicative of our future performance.

Additionally, as most of our workforce continues working in a hybrid model, which includes the option of two remote days each week, we are mindful of increased risk related to cybersecurity, which could significantly disrupt our business functions.

Executive Overview (1)

Our total assets under management (" AUM ") as of December 31, 2022 were $646.4 billion, down $132.2 billion, or 17.0%, during 2022.

The decrease was driven primarily by market depreciation of $140.4 billion and net outflows of $3.6 billion (reflecting Retail net outflows of $11.6 billion, offset by Institutional net inflows of $6.3 billion and Private Wealth Management net inflows of $1.7 billion), offset by the addition of $12.2 billion due to the acquisition of CarVal Investors L.P.

(" CarVal ") in the third quarter.

AXA S.A.(" AXA ") redeemed approximately $4.5 billion of low-fee fixed income and equity mandates in 2022.

Going forward, any AXA-related redemptions or new sales (reflecting, for example, recent commitments by AXA to certain of our private alternative strategies) will be considered as part of our normal course of business.

Institutional AUM decreased $39.8 billion, or 11.8%, to $297.3 billion during 2022, primarily due to market depreciation of $57.8 billion, partially offset by the addition of $12.2 billion due to the acquisition of CarVal and net inflows of $6.3 billion.

Our total Assets Under Management (" AUM ") as of December 31, 2023 were $725.2 billion, up $78.8 billion, or 12.2%, during 2023.

The increase was driven by market appreciation of $85.8 billion, offset by net outflows of $7.0 billion (reflecting Institutional net outflows of $11.8 billion, offset by Retail net inflows of $3.7 billion and Private Wealth Management net inflows of $1.1 billion).

Institutional AUM increased $19.8 billion, or 6.7%, to $317.1 billion during 2023, primarily due to market appreciation of $31.5 billion, partially offset by net outflows of $11.8 billion.

Gross sales decreased $20.4 billion, from $32.2 billion in 2022 to $11.8 billion in 2023.

Redemptions and terminations decreased $0.7 billion, from $13.3 billion in 2022 to $12.6 billion in 2023.

Retail AUM increased $43.9 billion, or 18.1%, to $286.8 billion during 2023, primarily due to market appreciation of $40.3 billion and net inflows of $3.7 billion.

Gross sales increased $5.2 billion, from $65.9 billion in 2022 to $71.1 billion in 2023.

Redemptions and terminations decreased $8.2 billion, from $66.3 billion in 2022 to $58.1 billion in 2023.

Institutional net inflows included $2.3 billion of AXA redemptions.

Retail AUM decreased $77.0 billion, or 24.1%, to $242.9 billion during 2022, primarily due to market depreciation of $65.5 billion and net outflows of $11.6 billion.

Net outflows included $2.2 billion of AXA redemptions.

Gross sales decreased $34.1 billion, from $100.0 billion in 2021 to $65.9 billion in 2022.

Redemptions and terminations increased $1.2 billion, from $65.1 billion in 2021 to $66.3 billion in 2022.

Private Wealth Management AUM decreased $15.4 billion, or 12.6%, to $106.2 billion during 2022, due to market depreciation of $17.1 billion, offset by net inflows of $1.7 billion.

Gross sales decreased $0.8 billion, from $18.3 billion in 2021 to $17.5 billion in 2022.

Private Wealth Management AUM increased $15.1 billion, or 14.1%, to $121.3 billion during 2023, due to market appreciation of $14.0 billion and net inflows of $1.1 billion.

Gross sales increased $1.1 billion, from $17.5 billion in 2022 to $18.6 billion in 2023.

Redemptions and terminations increased $1.7 billion, from $15.8 billion in 2022 to $17.5 billion in 2023.

Bernstein Research Services (" BRS ") revenue decreased $30.1 million, or 7.2%, in 2023.

The decrease was driven by significantly lower customer trading activity in Europe and Asia due to local market conditions.

The decrease was primarily driven by significantly lower global customer trading activity due to the prevailing macro-economic environment.

In the fourth quarter of 2022, AB and Société Générale (EURONEXT:

SCGLY, “ SocGen ”), a leading European bank, announced plans to form a joint venture combining their respective cash equities and research businesses.

GLE, “ SocGen ”), a leading European bank, announced plans to form a joint venture combining their respective cash equities and research businesses.

As a result, the BRS business has been classified as held for sale.

For further discussion, see Note 24 Acquisitions and Divestitures to our consolidated financial statements in Item 8 .

Our 2022 net revenues of $4.1 billion decreased $387.3 million, or 8.7%, compared to net revenues of $4.4 billion in the prior year.

The decrease was primarily driven by lower base advisory fees of $123.6 million, higher investment losses of $101.8 million, lower performance-based fees of $99.9 million, lower distribution revenues of $45.0 million, lower Bernstein Research Services revenue of $35.7 million and lower shareholder servicing fees of $3.6 million, partially offset by higher net dividend and interest income of $21.6 million.

Our 2023 net revenues of $4.2 billion increased $101.0 million, or 2.5%, compared to net revenues of $4.1 billion in the prior year.

The increase was primarily driven by investment gains in the current year compared to investment losses in the prior year (impact of $116.6 million), higher net dividend and interest income of $35.2 million and higher base advisory fees of $4.8 million, partially offset by lower Bernstein Research Services revenue of $30.1 million and lower distribution revenues of $20.9 million.

Our operating expenses of $3.3 billion increased $98.5 million, or 3.0%, compared to the prior year.

The increase was primarily due to higher general and administrative expenses of $86.0 million, higher amortization of intangible assets of $20.9 million, higher interest on borrowings of $12.8 million and higher contingent payment arrangements of $3.9 million, offset by lower promotion and servicing expenses of $60.1 million and lower employee compensation and benefits expenses of $49.4 million.

Our operating income decreased $401.4 million, or 33.0%, to $0.8 billion from $1.2 billion in 2021 and our operating margin decreased to 21.5% in 2022 from 27.3% in 2021.

1 Percentage change figures are calculated using assets under management rounded to the nearest million, while financial statement amounts are rounded to the nearest hundred thousand.

2022 Annual Report 33

The increase was primarily driven by higher employee compensation and benefits expenses of $102.5 million, higher interest on borrowings of $36.5 million, higher amortization of intangibles of $20.3 million and higher contingent payment arrangements of $16.3 million, partially offset by lower general and administrative expenses of $60.1 million and lower promotion and servicing expenses of $17.1 million.

Our operating income increased $2.6 million, or 0.3%, to $817.7 million from $815.1 million in 2022 and our operating margin decreased to 19.1% in 2023 from 21.5% in 2022.

Market Environment

While equity markets were positive in the fourth quarter of 2022, with the S&P 500 Index (" S&P ") and Dow Jones Industrial Average both registering gains, both indexes declined for the full year ended December 31, 2022.

The S&P declined 18.1% for the full year, while the Nasdaq declined by 33.1% and was down 8.7% in December.

Inflation remains the dominant issue for U.S.

markets, fueling consumer concerns of a potential recession.

While the U.S.

consumer has been largely resilient so far, higher interest rates have weighed on home building, trade and business investments.

Despite signs that the labor market and inflation are easing, the Federal Reserve has maintained its aggressive stance on monetary policy.

At its December meeting, the Federal Reserve increased interest rates and indicated that, while future rate increases are likely to be less severe, they continue to be needed.

In the U.K., the new prime minister reversed the tax cuts introduced by his predecessor and added some tax increases.

These actions calmed the market and reduced the pressure on mortgage rates.

However, monetary tightening, steep energy prices and supply-side constraints from Brexit create a challenging outlook for consumers.

In China, key watch-points include the property market and overall growth in the economy.

The Chinese government has announced new support measures, but it is unclear whether these measures will be sufficient to re-create historical growth patterns.

Equity markets registered strong gains in the final quarter of 2023, buoyed by slowing inflation data and expectations that the U.S.

Federal Reserve (the "Fed") has finished its rate hiking cycle and will move towards cuts in 2024.

Market breadth improved in the fourth quarter, with share price appreciation moving beyond mega-cap technology stocks.

Both the cap-weighted S&P 500 and the equal-weighted S&P 500 returned positive 12% in the fourth quarter (including dividends).

Previously lagging segments of the market rebounded, with Small-Caps (market capitalization ranges between $250 million to $2 billion) and Mid-Caps (market capitalization ranges between $2 billion to $10 billion) outperforming Large-Caps (market capitalization above $10 billion) with the Russell 2000 index posting a positive 14% return in the fourth quarter and Value stocks outperforming Growth stocks in the fourth quarter.

1 Percentage change figures are calculated using assets under management rounded to the nearest million, while financial statement amounts are rounded to the nearest hundred thousand.

AllianceBernstein

Despite the broadening rally in late 2023, annual index returns were largely concentrated within the "Magnificent-7" companies:

a term coined for Apple, Amazon, Alphabet, Meta Platforms, Microsoft, NVIDIA and Tesla which were perceived as the main beneficiaries of the Artificial Intelligence revolution.

These seven companies boast the largest market capitalization values in the S&P 500 and account for more than a quarter of the index, disproportionally driving the capitalization-weighted S&P 500's 2023 total return of positive 26% versus positive 14% for the equal-weighted version.

Global and Non-U.S.

Moderating inflation data and peaking interest rates drove nearly unilateral gains beyond U.S.

equity markets (MSCI World Index was positive 11.4% in the fourth quarter).

Within the Eurozone, annual inflation fell to 2.4% (as of November 2023) from 10.1% a year ago, sending the MSCI European Economic and Monetary Union index 7.8% higher in the fourth quarter.

In the U.K., gains were led by Small-Cap and Mid-Cap indices while Large-Cap lagged on account of a strengthening GBP (sterling).

Japan's TOPIX trading index posted a positive 2.0% total return despite a volatile quarter and overall Emerging Market equities were strong in the fourth quarter, albeit lagging Developed Markets.

All markets in the MSCI Asia (ex Japan) index ended the quarter positively, apart from China, where lackluster growth continues to be a drag on asset prices.

Fixed income markets experienced their strongest quarterly performance in over 20 years, as indicated by the Bloomberg Global Aggregate indices.

This was primarily driven by a perceived shift in monetary policy direction, with expectations of rate cuts replacing the previous "higher-for-longer" narrative.

As a result, government bond yields fell significantly, and credit markets outperformed government bonds.

The Fed maintained its rates throughout the quarter, but a more dovish tone in December accelerated the market rally.

The revised dot plot, which plots the Federal Open Market Committee's (" FOMC ") projections for the federal funds rate, now anticipates three rate cuts in 2024, up from the previous expectation of two.

The FOMC appears more comfortable with the progress made in bringing inflation back towards the target, as indicated by positive news on the Personal Consumption Expenditures Price Index, which is the Fed's most closely watched measure.

Relationship with EQH and its Subsidiaries

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EQH is collaborating with AB in order to improve the risk-adjusted yield for the General Accounts of EQH's insurance subsidiaries by investing additional assets at AB, including the utilization of AB's higher-fee, longer-duration alternative offerings.

Equitable Financial Life Insurance Company, a subsidiary of EQH (" Equitable Financial "), has agreed to provide $10 billion in permanent capital 2 to build out AB's private illiquid offerings, including private alternatives and private placements.

Deployment of this capital commitment is more than 50% completed and is expected to continue over approximately the next two years.

In mid-2021, Equitable Financial Life Insurance Company, a subsidiary of EQH (" Equitable Financial "), agreed to provide an initial $10 billion in permanent capital to build out AB's private illiquid offerings, including private alternatives and private placements.

Deployment of this capital commitment is approximately 90% completed and is expected to continue over the next year.

In addition, during the second quarter of 2023, EQH committed to provide an additional $10 billion in permanent capital, which will begin following the completion of the initial $10 billion commitment.

We expect this anticipated capital from Equitable Financial will continue to accelerate both organic and inorganic growth in our private alternatives business, allowing us to continue to deliver for our clients, employees, unitholders and other stakeholders.

For example, included in this $10 billion commitment by EQH is $750 million in capital to be deployed through AB CarVal.

For example, included in the initial $10 billion commitment by EQH is $750 million in capital to be deployed through AB CarVal.

Permanent capital means investment capital of indefinite duration, for which commitments may be withdrawn under certain conditions.

Such conditions primarily include potential regulatory restrictions, lacking sufficient liquidity to fund the capital commitments to AB and AB's inability to identify attractive investment opportunities which align with the investment strategy.

Although EQH’s insurance subsidiaries have indicated their intention over time to provide this investment capital to AB, they have no binding commitment to do so.

While the withdrawal of their commitment could potentially slow down our introduction of certain products, the impact to our overall operations would not be material.

Relocation Strategy

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Our Nashville headquarters houses Finance, IT, Operations, Legal, Compliance, Internal Audit, Human Capital, and Sales and Marketing, and at year-end 2023 we had 1,048 employees in Nashville.

We expect to reach a total of 1,250 employees in Nashville by the end of 2024.

We will continue to maintain a principal location in New York City, which houses our Portfolio Management, Sell-Side Research and Trading, and New York-based Private Wealth Management businesses.

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Over this same period, we expect to realize total expense savings of between $205 million to $215 million.

However, we did incur some transition costs before we began to realize expense savings.

However, we did incur some transition costs before we began to realize

2023 Annual Report 33

expense savings.

For the period beginning in 2018 and ending in the fourth quarter of 2023, we incurred $140 million of cumulative transition costs compared to $175 million of cumulative savings.

In addition, we incurred $24 million of transition costs for the twelve months ended December 31, 2022, compared to $43 million of expense savings, resulting in an overall net savings of $19 million for the period.

We incurred $20 million of transition costs for the twelve months ended December 31, 2023, compared to $43 million of expense savings, resulting in an overall net savings of $23 million for the period.

In 2023, our net income per unit (" EPU ") increased $0.08 as a result of our relocation strategy, which compares to the $0.07 EPU increase that occurred in 2022.

We also expect to achieve EPU accretion in each future year.

Beginning in 2025, once the transition period has been completed, we estimate ongoing annual expense savings of approximately $75 million to $80 million, which will result from a combination of occupancy and compensation-related savings.

Beginning in 2025, once the transition period has been completed, we estimate ongoing annual expense savings of approximately $75 million, which will result from a combination of occupancy and compensation-related savings.

Our estimates for both the transition costs and the corresponding expense savings are based on our current assumptions of employee relocation costs, severance, and overlapping compensation and occupancy costs.

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The actual total charges we eventually record, the related expense savings we realize, and the timing of EPU impact may differ from our current estimates as we implement each phase of our headquarters relocation.

2 Permanent capital means investment capital of indefinite duration, which may be withdrawn under certain conditions.

Although Equitable Financial has indicated its intention over time to provide this investment capital to AB, which is mutually beneficial to both firms, it has no binding commitment to do so.

AllianceBernstein

During October 2018, we signed a lease, which commenced in the fourth quarter of 2020, relating to 218,976 square feet of space at our new Nashville headquarters.

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AB Holding had net income of $264.2 million in 2023 compared to $274.2 million in 2022, reflecting lower net income attributable to AB Unitholders, partially offset by higher weighted average equity ownership interest.

AB Holding had net income of $385.8 million in 2021 compared to $279.4 million in 2020, reflecting higher net income attributable to AB Unitholders and higher weighted average equity ownership interest.

AB Holding had net income of $274.2 million in 2022 compared to $385.8 million in 2021, reflecting lower net income attributable to AB Unitholders, partially offset by higher weighted average equity ownership interest.

AB Holding's partnership gross income is derived from its interest in AB.

AB Holding’s income taxes, which reflect a 3.5% federal tax on its partnership gross income from the active conduct of a trade or business, are computed by multiplying certain AB qualifying revenues (primarily U.S.

investment advisory fees, brokerage commissions and direct payments for research services) by AB Holding’s ownership interest in AB, multiplied by the 3.5% tax rate.

Certain AB qualifying revenues are primarily U.S.

investment advisory fees, research payments and brokerage commissions.

AB Holding’s effective tax rate was 11.9% in 2023, 10.3% in 2022 and 7.3% in 2021.

The increase in AB Holdings effective tax rate is primarily due to the

AllianceBernstein

increase in the weighted average equity ownership interest.

See Note 6 to AB Holding’s financial statements in Item 8 for a further description.

As supplemental information, AB provides the performance measures “adjusted net revenues,” “adjusted operating income” and “adjusted operating margin,” which are the principal metrics management uses in evaluating and comparing the period-to-period operating performance of AB.

Management principally uses these metrics in evaluating performance because they present a clearer picture of AB's operating performance and allow management to see long-term trends without the distortion primarily caused by long-term incentive compensation-related mark-to-market adjustments, real estate charges ( discussed below in Adjusted Operating Income) and other adjustment items.

Management principally uses these metrics in evaluating performance because they present a clearer picture of AB's operating performance and allow management to see long-term trends without the distortion primarily caused by long-term incentive compensation-related mark-to-market adjustments, acquisition-related expenses, interest expense and other adjustment items.

Similarly, management believes that these management operating metrics help investors better understand the underlying trends in AB's results and, accordingly, provide a valuable perspective for investors.

Such measures are not based on generally accepted accounting principles (“ non-GAAP measures ”).

We provide the non-GAAP measures "adjusted net income" and "adjusted diluted net income per unit" because our quarterly distribution per unit is typically our adjusted diluted net income per unit (which is derived from adjusted net income).

These non-GAAP measures are provided in addition to, and not as substitutes for, net revenues, operating income and operating margin, and they may not be comparable to non-GAAP measures presented by other companies.

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See “Management Operating Metrics” in this Item 7 .

2022 Annual Report 35

The impact of these adjustments on AB Holding’s net income and diluted net income per AB Holding Unit are as follows:

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(in thousands, except per unit amounts)

AB non-GAAP adjustments, before taxes $ 75,745 $ 2,959 $ 6,393

AB non-GAAP adjustments 2 $ 103,164 $ 75,745 $ 2,959

AB Income tax (expense) benefit on non-GAAP adjustments (2,786) (6,395) 71

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During the year ended December 31, 2023, net cash provided by operating activities was $294.0 million, compared to $362.6 million during the corresponding 2022 period.

The increase primarily resulted from higher cash distributions received from AB of $9.3 million.

The decrease primarily resulted from lower cash distributions received from AB of $64.6 million.

During the year ended December 31, 2022, net cash provided by operating activities was $362.6 million, compared to $355.1 million during the corresponding 2021 period.

The increase primarily resulted from higher cash distributions received from AB of $9.3 million.

During the years ended December 31, 2022, 2021 and 2020, net cash used in investing activities was $1.8 million, $3.4 million and $0.1 million, respectively, reflecting investments in AB with proceeds from exercises of compensatory options to buy AB Holding Units and capital contributions to AB.

During the years ended December 31, 2023, 2022 and 2021, net cash used in investing activities was zero, $1.8 million and $3.4 million, respectively, reflecting investments in AB with proceeds from exercises of compensatory options to buy AB Holding Units and capital contributions to AB.

2 Includes all AB non-GAAP adjustments to pre-tax income.

2023 Annual Report 35

During the year ended December 31, 2023, net cash used in financing activities was $294.0 million, compared to $360.8 million during the corresponding 2022 period.

The increase was due to cash distributions to Unitholders of $3.5 million and proceeds from exercise of compensatory options to buy AB Holding Units of $3.2 million, offset by lower capital contributions from AB of $2.3 million.

The decrease was primarily due to lower cash distributions to Unitholders of $64.9 million and higher capital contributions from AB of $2.2 million.

During the year ended December 31, 2022, net cash used in financing activities was $360.8 million, compared to $351.7 million during the corresponding 2021 period.

The increase primarily was due to higher cash distributions to Unitholders of $86.6 million, offset by higher proceeds from exercise of compensatory options to buy AB Holding Units of $3.3 million.

Management believes that AB Holding will have the resources it needs to meet its financial obligations as a result of the cash flow AB Holding realizes from its investment in AB.

AB Holding’s cash inflow is comprised entirely of distributions from AB.

These distributions are subsequently distributed (net of taxes paid) in their entirety to AB Holding’s Unitholders.

As a result, AB Holding has no liquidity risk as it only pays distributions to AB Holding’s Unitholders to the extent of distributions received from AB (net of taxes paid).

Cash Distributions

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See Note 2 to AB Holding’s financial statements in Item 8 for a description of Available Cash Flow.

AllianceBernstein

Commitments and Contingencies

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Total $ 725.2 $ 646.4 $ 778.6 12.2 % (17.0) %

AllianceBernstein

Assets under management by investment service are as follows:

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Cash flow/unreinvested dividends (11.0) (9.3) — (20.3)

Net long-term inflows (outflows) (1)

6.3 (11.6) 1.7 (3.6)

Adjustments (2)

(0.4) — — (0.4)

Acquisition (3)

12.2 — — 12.2

Net long-term (outflows) inflows (11.8) 3.7 1.1 (7.0)

Transfers 0.1 (0.1) — —

Market depreciation (57.8) (65.5) (17.1) (140.4)

Market appreciation 31.5 40.3 14.0 85.8

Net change 19.8 43.9 15.1 78.8

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Cash flow/unreinvested dividends (12.6) (11.2) — (23.8)

Net long-term inflows (1)

Net long-term inflows (outflows) (1)

6.3 (11.6) 1.7 (3.6)

Adjustments (2)

(0.4) — — (0.4)

Acquisitions (3)

12.2 — — 12.2

Transfers (0.1) 0.1 — —

Market appreciation 19.4 33.6 13.6 66.6

Market (depreciation) (57.8) (65.5) (17.1) (140.4)

Net change (39.8) (77.0) (15.4) (132.2)

Balance as of December 31, 2022 $ 297.3 $ 242.9 $ 106.2 $ 646.4

(1) Net flows include $4.5 billion and $1.3 billion of AXA redemptions for 2022 and 2021, respectively.

(1) Net flows include $4.5 billion of AXA redemptions for 2022.

(2) Approximately $0.4 billion of Institutional AUM was removed from our total assets under management during the second quarter of 2022 due to a change in the fee structure.

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Net long-term (outflows) inflows (15.5) (4.0) 6.6 5.7 1.5 (1.3) (7.0)

(2.7) (5.3) (17.9) 0.6 (1.3) 23.0 (3.6)

Adjustments (4)

— — — — — (0.4) (0.4)

Acquisition (5)

— — — — — 12.2 12.2

Market (depreciation) (67.0) (12.5) (38.1) (5.2) (2.5) (15.1) (140.4)

Market appreciation 45.1 12.3 11.7 2.9 0.5 13.3 85.8

Net change 29.6 8.3 18.3 8.6 2.0 12.0 78.8

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Cash flow/unreinvested dividends (9.7) (4.0) (10.8) (0.4) 0.3 0.8 (23.8)

Net long-term inflows (outflows) (3)

Net long-term (outflows) inflows (3)

(2.7) (5.3) (17.9) 0.6 (1.3) 23.0 (3.6)

Market appreciation (depreciation) 47.9 14.6 (7.0) 0.8 (0.3) 10.6 66.6

Adjustments (4)

— — — — — (0.4) (0.4)

Acquisitions (5)

— — — — — 12.2 12.2

Market (depreciation) (67.0) (12.5) (38.1) (5.2) (2.5) (15.1) (140.4)

Net change (69.7) (17.8) (56.0) (4.6) (3.8) 19.7 (132.2)

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(2) Includes certain multi-asset solutions and services not included in equity or fixed income services.

(3) Net flows include $4.5 billion and $1.3 billion of AXA redemptions for 2022 and 2021, respectively.

(3) Net flows include $4.5 billion of AXA redemptions for 2022.

(4) Approximately $0.4 billion of Institutional AUM was removed from our total assets under management during the second quarter of 2022 due to a change in the fee structure.

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Total (1.8) (4.5)

Total net long-term (outflows) inflows $ (3.6) $ 26.1

Total net long-term (outflows) $ (7.0) $ (3.6)

Average assets under management by distribution channel and investment service are as follows:

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AllianceBernstein

During 2023, our Institutional channel average AUM of $304.6 billion decreased $3.8 billion, or 1.2%, compared to 2022, while ending AUM increased $19.8 billion, or 6.7%, to $317.1 billion from December 31, 2022.

The $19.8 billion increase in AUM resulted primarily from market appreciation of $31.5 billion (with $22.7 billion of market appreciation occurring in the fourth quarter of 2023), partially offset by net outflows of $11.8 billion.

During 2022, our Institutional channel average AUM of $308.4 billion decreased $17.3 billion, or 5.3%, compared to 2021, primarily due to this AUM decreasing $39.8 billion, or 11.8%, to $297.3 billion from December 31, 2021.

The $39.8 billion decrease in AUM resulted primarily from market depreciation of $57.8 billion, partially offset by an addition of $12.2 billion due to the acquisition of CarVal and net inflows of $6.3 billion.

During 2021, our Institutional channel average AUM of $325.7 billion increased $39.8 billion, or 13.9%, compared to 2020, primarily due to this AUM increasing $21.5 billion, or 6.8%, to $337.1 billion during 2021.

The $21.5 billion increase in AUM resulted primarily from market appreciation of $19.4 billion and net inflows of $2.3 billion.

During 2023, our Retail channel average AUM of $262.0 billion decreased $5.8 billion, or 2.1%, compared to 2022, while ending AUM increased $43.9 billion, or 18.1%, to $286.8 billion from December 31, 2022.

The $43.9 billion increase in AUM resulted primarily from market appreciation of $40.3 billion (with $26.3 billion of market appreciation occurring in the fourth quarter of 2023) and net inflows of $3.7 billion.

During 2022, our Retail channel average AUM of $267.8 billion decreased $23.2 billion, or 8.0%, compared to 2021, primarily due to this AUM decreasing $77.0 billion, or 24.1%, to $242.9 billion from December 31, 2021.

The $77.0 billion decrease in AUM resulted primarily from market depreciation of $65.5 billion and net outflows of $11.6 billion.

During 2021, our Retail channel average AUM of $291.0 billion increased $54.5 billion, or 23.0%, compared to 2020, primarily due to this AUM increasing $54.6 billion, or 20.6%, to $319.9 billion during 2021.

The $54.6 billion increase in AUM resulted primarily from market appreciation of $33.6 billion and net inflows of $20.8 billion.

During 2023, our Private Wealth Management channel average AUM of $113.7 billion increased $3.4 billion, or 3.0%, compared to 2022, primarily due to this AUM increasing $15.1 billion, or 14.1%, to $121.3 billion from December 31, 2022.

The $15.1 billion increase in AUM resulted from market appreciation of $14.0 billion (with $9.0 billion of market appreciation occurring in the fourth quarter of 2023) and net inflows of $1.1 billion.

During 2022, our Private Wealth Management channel average AUM of $110.3 billion decreased $3.8 billion, or 3.3%, compared to 2021, primarily due to this AUM decreasing $15.4 billion, or 12.6%, to $106.2 billion from December 31, 2021.

The $15.4 billion decrease in AUM resulted from market depreciation of $17.1 billion, offset by net inflows of $1.7 billion.

During 2021, our Private Wealth Management channel average AUM of $114.1 billion increased $17.0 billion, or 17.5%, compared to 2020, primarily due to this AUM increasing $16.6 billion, or 15.8%, to $121.6 billion during 2021.

The $16.6 billion increase in AUM resulted primarily from market appreciation of $13.6 billion and net inflows of $3.0 billion.

Absolute investment composite returns, gross of fees, and relative performance as of December 31, 2023 compared to benchmarks for certain representative Institutional equity and fixed income services are as follows:

1-Year 3-Year (1)

Global High Income - Hedged (fixed income)

Income - Hedged (fixed income)

Absolute return 9.7% (0.8%) 3.3%

1 unchanged sentence

Bloomberg Barclays Global High Yield Index - Hedged) 4.2 2.5 2.0

High Income (fixed income)

Absolute return 15.1 2.3 5.1

Relative return (vs.

Bloomberg Barclays U.S.

Aggregate Index) 1.4 1.1 0.6

Global Plus - Hedged (fixed income)

16 unchanged sentences

JPM EMBI Global/JPM EMBI) 2.2 (0.3) 0.3

2023 Annual Report 41

1-Year 3-Year (1)

Sustainable Global Thematic

2 unchanged sentences

MSCI ACWI Index) (5.2) (3.6) 2.7

2022 Annual Report 41

1-Year 3-Year (1)

International Strategic Core Equity

60 unchanged sentences

Net income 788,619 775,457 1,153,734 1.7 (32.8)

Net (loss) income of consolidated entities attributable to non-controlling interests (56,356) 5,111 (4,169) n/m n/m

Net income (loss) of consolidated entities attributable to non-controlling interests 24,009 (56,356) 5,111 n/m n/m

Net income attributable to AB Unitholders $ 764,610 $ 831,813 $ 1,148,623 (8.1) (27.6)

3 unchanged sentences

19.1 % 21.5 % 27.3 %

(1) Operating income excluding net (loss) income attributable to non-controlling interests as a percentage of net revenues.

(1) Operating income excluding net income (loss) attributable to non-controlling interests as a percentage of net revenues.

Net income attributable to AB Unitholders for the year ended December 31, 2023 decreased $67.2 million from the year ended December 31, 2022.

The decrease primarily is due to (in millions):

Higher employee compensation and benefits $ (102.5)

Higher net gains of consolidated entities attributable to non-controlling interest (80.4)

Higher interest on borrowings (36.5)

Lower Bernstein Research Services revenue (30.1)

Lower distribution revenues (20.9)

Higher amortization of intangible assets (20.3)

Higher contingent payment arrangements (16.3)

Higher investment gains 116.6

Lower general and administrative expenses 60.1

Higher net dividend and interest income 35.2

Lower promotion and servicing expenses 17.1

Lower income taxes 10.6

2023 Annual Report 43

Net income attributable to AB Unitholders for the year ended December 31, 2022 decreased $316.8 million from the year ended December 31, 2021.

The decrease primarily was due to (in millions):

Lower base advisory fees $ (123.6)

7 unchanged sentences

Lower employee compensation and benefits 49.4

Net income attributable to AB Unitholders for the year ended December 31, 2021 increased $282.7 million from the year ended December 31, 2020.

The increase primarily was due to (in millions):

Higher base advisory fees $ 486.6

Higher distribution revenues 122.5

Higher performance-based fees 112.5

Higher employee compensation and benefits (221.8)

Higher promotion and servicing expenses (153.5)

Higher general and administrative expenses (64.5)

2022 Annual Report 43

Units Outstanding

12 unchanged sentences

We are providing the non-GAAP measures “adjusted net revenues,” “adjusted operating income” and “adjusted operating margin” because they are the principal operating metrics management uses in evaluating and comparing period-to-period operating performance.

Management principally uses these metrics in evaluating performance because they present a clearer picture of our operating performance and allow management to see long-term trends without the distortion primarily caused by long-term incentive compensation-related mark-to-market adjustments, real estate charges and other adjustment items.

Similarly, we believe that these management operating metrics help investors better understand the underlying trends in our results and, accordingly, provide a valuable perspective for investors.

23 unchanged sentences

Acquisition-related expenses 98,070 72,503 2,614

Sub-total of non-GAAP adjustments 75,745 2,959 6,393

Net (loss) income of consolidated entities attributable to non-controlling interests (56,356) 5,111 (4,169)

Sub-total of non-GAAP adjustments before interest on borrowings 103,164 75,745 2,959

Interest on borrowings 1

54,394 17,906 5,145

Subtotal of non-GAAP adjustments 157,558 93,651 8,104

Net income (loss) of consolidated entities attributable to non-controlling interests 24,009 (56,356) 5,111

Adjusted operating income 1

951,219 965,103 1,219,455

Interest on borrowings 54,394 17,906 5,145

Adjusted pre-tax income 896,825 947,197 1,214,310

Adjusted income taxes 31,837 46,034 62,658

6 unchanged sentences

Adjusted operating margin 28.2% 28.9% 33.8%

Adjusted operating income for the year ended December 31, 2022 decreased $267.1 million, or 22.0%, from the year ended December 31, 2021, primarily due to lower performance-based fees of $130.9 million, lower investment advisory base fees of $99.1 million, lower Bernstein Research Services revenue of $35.7 million and higher general and administrative expenses of $32.3 million, partially offset by lower employee compensation and benefits expense of $58.4 million.

Adjusted operating income for the year ended December 31, 2021 increased $296.3 million, or 32.3%, from the year ended December 31, 2020, primarily due to higher investment advisory base fees of $460.9 million and higher performance-based fees of $91.7 million, partially offset by higher employee compensation and benefits expenses of $221.4 million and higher general and administrative expenses of $49.2 million.

During the second quarter of 2023, we revised adjusted operating income to exclude interest on borrowings in order to align with our industry peer group.

We have recast prior periods presentation to align with the current period presentation.

Adjusted operating income for the year ended December 31, 2023 decreased $13.9 million, or 1.4%, from the year ended December 31, 2022, primarily due to higher employee compensation and benefits expense of $39.3 million, lower Bernstein Research Services revenue of $30.1 million, lower investment advisory base fees of $25.1 million and higher general and administrative expenses of $6.2 million, partially offset by higher net dividend and interest income of $51.6 million and higher performance-based fees of $35.5 million.

Adjusted operating income for the year ended December 31, 2022 decreased $254.4 million, or 20.9%, from the year ended December 31, 2021, primarily due to lower performance-based fees of $130.9 million, lower investment advisory base fees of

2023 Annual Report 45

$99.1 million, lower Bernstein Research Services revenue of $35.7 million and higher general and administrative expenses of $32.3 million, partially offset by lower employee compensation and benefits expense of $58.4 million.

Adjusted Net Revenues

13 unchanged sentences

this write-down brought the investment balance to zero.

Additionally, during the first quarter of 2020, we wrote-down an investment that had been received in exchange for the sale of software technology;

the write-down brought the investment balance to zero.

Previously, we had been excluding the investment from adjusted net revenues.

Adjusted Operating Income

Adjusted operating income represents operating income on a US GAAP basis excluding (1) real estate charges (credits), (2) the impact on net revenues and compensation expense of the investment gains and losses (as well as the dividends and interest) associated with employee long-term incentive compensation-related investments, (3) the equity compensation paid by EQH to certain AB executives, as discussed below , (4) the write-down of investments ( discussed immediately above ), (5) acquisition-related expenses and (6) the impact of consolidated company-sponsored investment funds.

Adjusted operating income represents operating income on a US GAAP basis excluding (1) real estate charges (credits), (2) the impact on net revenues and compensation expense of the investment gains and losses (as well as the dividends and interest) associated with employee long-term incentive compensation-related investments, (3) the equity compensation paid by EQH to certain AB executives, as discussed below , (4) the write-down of investments ( discussed immediately above ), (5) acquisition-related expenses, (6) interest on borrowings and (7) the impact of consolidated company-sponsored investment funds.

Real estate charges (credits) incurred during the fourth quarter of 2019 through the fourth quarter of 2020, while excluded in the period in which the charges (credits) were recorded, are included ratably over the remaining applicable lease term.

11 unchanged sentences

The compensation expense associated with these awards has been excluded from our non-GAAP measures because they are non-cash and are based upon EQH's, and not AB's, financial performance.

The write-down of investments discussed above in Adjusted Net Revenues have been excluded due to their non-recurring nature and because they are not part of our core operating results.

AllianceBernstein

The write-down of investments discussed above in Adjusted Net Revenues have been excluded due to their non-recurring nature and because they are not part of our core operating results.

Acquisition-related expenses have been excluded because they are not considered part of our core operating results when comparing financial results from period to period and to industry peers.

1 unchanged sentence

Beginning in the first quarter of 2022, acquisition-related expenses also include certain compensation-related expenses, amortization of intangible assets for contracts acquired and accretion expense with respect to contingent payment arrangements.

During 2022 and 2021, these expenses included an intangible asset impairment charge of $5.6 million and $1.0 million, respectively, related to various historical acquisitions.

During 2023, 2022 and 2021, acquisition related expenses included an intangible asset impairment charge of zero, $5.6 million and $1.0 million, respectively, related to various historical acquisitions.

The recording of changes in estimates of contingent consideration payable with respect to contingent payment arrangements associated with our acquisitions are not considered part of our core operating results and, accordingly, have been excluded.

During 2023, we recorded an expense of $28.4 million due to a change in estimate related to the contingent consideration associated with the acquisition of Autonomous LLC in 2019.

The change in estimate was based upon better than expected revenues during the 2023 performance evaluation period.

We recorded $14.1 million as contingent payment arrangement expense and $14.3 million as compensation and benefits expense in the condensed consolidated statement of income.

The charges to compensation and benefits expense are due to certain service conditions and special awards included in the acquisition agreement.

We adjust operating income to exclude interest on borrowings in order to align with our industry peer group.

We adjusted for the operating income impact of consolidating certain company-sponsored investment funds by eliminating the consolidated company-sponsored funds' revenues and expenses and including AB's revenues and expenses that were eliminated in consolidation.

29 unchanged sentences

Dividend and interest income 199,443 123,091 38,734 62.0 n/m

Investment (losses) gains (102,413) (636) (16,401) n/m (96.1)

Investment gains (losses) 14,206 (102,413) (636) n/m n/m

Other revenues 101,342 105,544 108,409 (4.0) (2.6)

Total revenues 4,262,864 4,120,728 4,445,288 3.4 (7.3)

Interest expense 66,438 3,686 15,650 n/m (76.4)

broker-dealer related interest expense 107,541 66,438 3,686 61.9 n/m

Net revenues $ 4,155,323 $ 4,054,290 $ 4,441,602 2.5 % (8.7) %

15 unchanged sentences

Fair valuation methods include:

discounted cash flow models or any other methodology that is validated and approved by our Valuation Committee ( see paragraph immediately below for more information regarding our Valuation Committee).

discounted cash flow models or any other methodology that is validated and approved by our Valuation Committee and sub-committee (the " Valuation Committee" ) ( see paragraph immediately below for more information regarding our Valuation Committee).

Fair valuation methods are used only where AUM cannot be valued using market-based valuation methods, such as in the case of private equity or illiquid securities.

The Valuation Committee, which consists of senior officers and employees, is responsible for overseeing the pricing and valuation of all investments held in client and AB portfolios.

The Valuation Committee, consists of senior officers and employees, which oversees a consistent framework of pricing and valuation of all investments held in client and AB portfolios.

The Valuation Committee has adopted a Statement of Pricing Policies describing principles and policies that apply to pricing and valuing investments held in these portfolios.

5 unchanged sentences

We are eligible to earn performance-based fees on 9.3%, 8.3% and 0.4% of the assets we manage for institutional clients, private wealth clients and retail clients, respectively (in total, 5.6% of our AUM).

Our investment advisory and services fees increased by $4.4 million, or 0.1%, in 2023, due to a $4.8 million, or 0.2%, increase in base fees, offset by a $0.3 million decrease in performance-based fees.

The increase in base fees is primarily due to slight shift in product mix to alternatives, which generally earn higher fees, partially offset by a 0.9% decrease in average AUM.

Our investment advisory and services fees decreased by $223.5 million, or 7.0%, in 2022, due to a $123.6 million, or 4.2%, decrease in base fees and a $99.9 million decrease in performance-based fees.

The decrease in base fees is primarily due to a 6.1% decrease in average AUM, partially offset by a slight increase in our portfolio fee rate.

Our investment advisory and services fees increased by $599.1 million, or 23.1%, in 2021, due to a $486.6 million, or 19.8%, increase in base fees and a $112.5 million increase in performance-based fees.

The increase in base fees was primarily due to a 18.0% increase in average AUM, as well as a slight increase in our portfolio fee rate.

The decrease in base fees was primarily due to a 6.1% decrease in average AUM, partially offset by a slight increase in our portfolio fee rate.

Performance-based fees decreased $0.3 million, or 0.2%, in 2023, primarily due to lower performance-based fees earned on U.S.

Real Estate fund and Emerging Markets Opportunistic Credit fund, partially offset by higher performance-based fees earned on Private Credit fund, Global Opportunistic Credit fund, Global Multi-Strategy fund and Securitized Assets fund.

Performance-based fees decreased $99.9 million, or 40.7%, in 2022, primarily due to lower performance-based fees earned on Financial Services Opportunities fund, U.S.

Select Equity fund, Arya Partners fund and Private Credit Services fund, partially offset by higher U.S.

Real Estate Funds fees.

Performance-based fees increased $112.5 million, or 84.8%, in 2021, primarily due to higher performance-based fees earned on Private Credit Services, U.S.

Real Estate Funds, Financial Services Opportunities and U.S.

Select Equity, partially offset by lower Arya Partners fees.

Institutional investment advisory and services fees increased $73.2 million, or 12.5%, in 2022, due to an increase in base fees of $41.5 million, or 7.7%, and an increase in performance-based fees of $31.7 million.

The increase in base fees is primarily due to a higher portfolio fee rate, partially offset by a 5.3% decrease in average AUM.

Institutional investment advisory and services fees increased $74.3 million, or 14.5%, in 2021, due to an increase in base fees of $82.0 million, or 17.9%, partially offset by a decrease in in performance-based fees of $7.8 million.

The increase in base fees was primarily due to a 13.9% increase in average AUM, an increase in portfolio fee rate and a shift in product mix from fixed income to active equities and alternatives, which generally earn higher fees.

Retail investment advisory and services fees decreased $169.6 million, or 11.4%, in 2022, due to a decrease in base fees of $120.5 million, or 8.4%, and a $49.1 million decrease in performance-based fees.

The decrease in base fees is primarily due to a 8.0% decrease in average AUM.

Retail investment advisory and services fees increased $281.9 million, or 23.3%, in 2021, due to an increase in base fees of $255.6 million, or 21.5%, and a $26.3 million increase in performance-based fees.

The increase in base fees is primarily due to a 23.0% increase in average AUM.

Private Wealth Management investment advisory and services fees decreased by $127.1 million, or 11.4%, in 2022, due to a decrease in base fees of $44.6 million, or 4.6%, and an $82.5 million decrease in performance-based fees.

The decrease in base fees is primarily due to a 3.3% decrease in average AUM.

Private Wealth Management investment advisory and services fees increased $243.0 million, or 27.8%, in 2021, due to an increase in base fees of $148.9 million, or 18.2%, and a $94.0 million increase in performance-based fees.

The increase in base fees is primarily due to a 17.5% increase in average AUM.

Real Estate fund fees.

Institutional base fees increased $30.4 million, or 5.2%, in 2023, primarily due to a higher portfolio fee rate, partially offset by a 1.2% decrease in average AUM.

Retail base fees decreased $45.7 million, or 3.5%, in 2023, primarily due to a 2.1% decrease in average AUM.

Private Wealth base fees increased $20.1 million, or 2.2%, in 2023, primarily due to a 3.0% increase in average AUM.

Institutional base fees increased $41.5 million, or 7.7%, in 2022, primarily due to a higher portfolio fee rate, partially offset by a 5.3% decrease in average AUM.

Retail base fees decreased $120.5 million, or 8.4%, in 2022, primarily due to an 8.0% decrease in average AUM.

Private Wealth base fees decreased $44.6 million, or 4.6%, in 2022, primarily due to a 3.3% decrease in average AUM.

Bernstein Research Services

4 unchanged sentences

For further discussion, see Note 24 Acquisitions and Divestitures to our consolidated financial statements in Item 8 .

2022 Annual Report 49

Revenues from Bernstein Research Services decreased $30.1 million, or 7.2%, in 2023.

The decrease was driven by significantly lower customer trading activity in Europe and Asia due to local market conditions.

The decrease was primarily driven by significantly lower global customer trading activity due to the prevailing macro-economic environment.

Revenues from Bernstein Research Services decreased $35.7 million, or 7.9%, in 2022.

The decrease was due to lower trading activity driven by lower global market volatility as compared to the COVID-related volatility in 2020.

This was partially offset by higher research payments across Bernstein and Autonomous Research products.

The decrease was driven by significantly lower customer trading activity in Europe and Asia due to local market conditions.

Distribution Revenues

1 unchanged sentence

Period-over-period fluctuations of distribution revenues typically are in line with fluctuations of the corresponding average AUM of these mutual funds.

2023 Annual Report 49

Distribution revenues decreased $20.9 million, or 3.4%, in 2023, primarily due to a shift in product mix from mutual funds with higher distribution rates to mutual funds with lower distribution rates, as well as a 1.4% decrease in the corresponding average AUM of these mutual funds.

Distribution revenues decreased $45.0 million, or 6.9%, in 2022, primarily due to the corresponding average AUM of these mutual funds decreasing 12.4%, partially offset by a shift in product mix from mutual funds with lower distribution rates to mutual funds with higher distribution rates.

Distribution revenues increased $122.5 million, or 23.1%, in 2021, primarily due to the corresponding average AUM of these mutual funds increasing 17.2%.

Dividend and Interest Income and Interest Expense

2 unchanged sentences

Interest expense principally reflects interest accrued on cash balances in customers’ brokerage accounts.

Dividend and interest income increased $76.4 million, or 62.0%, in 2023, primarily due to higher interest earned on customer margin balances and higher interest earned on U.S.

Treasury Bills.

Interest expense increased $41.1 million in 2023, due to higher interest paid on cash balances in customers' brokerage accounts.

Dividend and interest income increased $84.4 million in 2022, primarily due to higher interest earned on customer margin balances, higher interest earned on U.S.

1 unchanged sentence

Interest expense increased $62.8 million, in 2022, due to higher interest paid on cash balances in customers' brokerage accounts.

Dividend and interest income decreased $12.2 million, or 23.9%, in 2021, primarily due to lower interest earned on U.S.

Treasury Bills as well as lower dividend and interest income in our consolidated company-sponsored investment funds.

Interest expense decreased $12.0 million, or 76.4%, in 2021, due to lower interest paid on cash balances in customers' brokerage accounts.

AllianceBernstein

12 unchanged sentences

Investments held by consolidated company-sponsored investment funds:

Realized (losses) gains (46,293) (2,341) 3,357

Unrealized (losses) (73,194) (1,882) (854)

Realized (losses) (32,125) (46,293) (2,341)

Unrealized gains (losses) 48,350 (73,194) (1,882)

Seed capital investments:

Realized gains (losses)

Realized (losses) gains

Seed capital and other (34) 17,272 20,263

Derivatives (7,588) 41,236 (22,313)

Unrealized (losses) gains

Unrealized gains (losses)

Seed capital and other 10,099 (31,261) (6,907)

2 unchanged sentences

Realized (losses) (203) (1,384) (829)

Unrealized gains (losses) 669 (278) (337)

Unrealized (losses) gains (442) 669 (278)

$ 14,206 $ (102,413) $ (636)

1 unchanged sentence

Other revenues consist of fees earned for transfer agency services provided to company-sponsored mutual funds, fees earned for administration and recordkeeping services provided to company-sponsored mutual funds and the General Accounts of EQH and its subsidiaries, and other miscellaneous revenues.

Other revenues decreased $4.2 million, or 4.0%, in 2023, primarily due to lower shareholder servicing fees and lower brokerage income, partially offset by higher mutual fund reimbursements.

Other revenues decreased $2.9 million, or 2.6%, in 2022, primarily due to lower shareholder servicing fees.

Other revenues increased $3.7 million, or 3.5%, in 2021, primarily due to higher shareholder servicing fees, partially offset by lower brokerage income.

2023 Annual Report 51

10 unchanged sentences

General and administrative 581,571 641,635 555,608 (9.4) 15.5

Contingent payment arrangements 6,563 2,710 1,855 142.2 46.1

Interest on borrowings 17,906 5,145 6,180 n/a (16.7)

Amortization of intangible assets 26,564 5,697 21,372 n/a (73.3)

Contingent payment arrangements 22,853 6,563 2,710 n/m 142.2

Interest on borrowings 54,394 17,906 5,145 n/m n/m

Amortization of intangible assets 46,854 26,564 5,697 76.4 n/m

Total $ 3,337,653 $ 3,239,194 $ 3,225,140 3.0 % 0.4 %

9 unchanged sentences

Our ratios of adjusted compensation expense as a percentage of adjusted net revenues were 49.0%, 48.4% and 46.5%, respectively, for the years ended December 31, 2023, 2022 and 2021.

In 2023, employee compensation and benefits expense increased $102.5 million, or 6.2%, primarily due to higher base compensation of $72.2 million, higher incentive compensation of $51.7 million and higher fringes of $7.8 million, partially offset by lower commissions of $29.0 million.

In 2022, employee compensation and benefits expense decreased $49.4 million, or 2.9%, primarily due to lower incentive compensation of $107.7 million, partially offset by higher base compensation of $39.8 million, higher commissions of $12.7 million and higher other employment costs of $5.3 million.

In 2021, employee compensation and benefits expense increased $221.8 million, or 14.8%, primarily due to higher incentive compensation of $124.6 million, higher base compensation of $48.9 million, higher commissions of $25.0 million, higher fringes of $20.1 million and higher other employment costs of $3.3 million.

Promotion and Servicing

3 unchanged sentences

Promotion and servicing expenses decreased $17.1 million, or 1.9%, in 2023.

The decrease was due to lower distribution-related payments of $19.2 million, lower trade execution and clearance expenses of $9.0 million and lower transfer fees of $3.0 million, offset by higher travel and entertainment expenses of $8.5 million, higher marketing and communication expenses of $3.5 million and higher amortization of deferred sales commissions of $2.1 million.

Promotion and servicing expenses decreased $60.1 million, or 6.4%, in 2022.

The decrease was primarily due to lower distribution-related payments of $78.5 million, lower transfer fees of $4.9 million and lower trade execution and clearance expenses of $3.1 million, partially offset by higher travel and entertainment expenses of $15.4 million and higher firm meeting expenses of $8.8 million.

Promotion and servicing expenses increased $153.5 million, or 19.5%, in 2021.

The increase primarily was due to higher distribution-related payments of $138.8 million, higher transfer fees of $10.1 million, higher amortization of deferred sales commissions of $7.0 million and higher marketing expenses of $4.9 million, partially offset by lower trade execution and clearance expenses of $7.4 million.

General and Administrative

1 unchanged sentence

General and administrative expenses as a percentage of net revenues were 14.0%, 15.8% and 12.5% for the years ended December 31, 2023, 2022 and 2021, respectively.

General and administrative expenses decreased $60.1 million, or 9.4%, in 2023.

The decrease was primarily due to lower portfolio services fees of $43.7 million, lower professional fees of $18.0 million, lower valuation adjustments related to the classification of Bernstein Research Services as held for sale of $6.0 million and a favorable foreign exchange translation impact of $5.7 million, partially offset by higher office-related expenses of $7.4 million.

General and administrative expenses increased $86.0 million, or 15.5%, in 2022.

The increase was primarily due to higher professional fees of $27.3 million, higher portfolio services fees of $21.3 million, higher technology fees of $19.1 million, a valuation adjustment of $7.4 million associated with the classification of BRS as held for sale, higher office-related expenses of $6.9 million and a $5.6 million impairment of certain acquisition related intangible assets.

General and administrative expenses increased $64.5 million, or 13.1%, in 2021.

The increase was primarily due to higher portfolio services of $34.0 million, higher technology fees of $14.3 million, higher office-related expenses of $7.6 million, higher professional fees of $6.6 million and an unfavorable foreign exchange translation impact of $5.2 million, partially offset by lower charitable contributions of $4.9 million.

Contingent Payment Arrangements

Contingent payment arrangements reflect changes in estimates of contingent payment liabilities associated with acquisitions in current and previous periods, as well as accretion expense of these liabilities.

In 2022, we recognized $6.6 million in accretion expense related to our contingent considerations payable.

The expense of $2.7 million for 2021 reflects accretion expense of $3.3 million, offset by the change in estimate of the contingent consideration payable relating to our 2016 acquisition of $0.6 million.

For the years ended December 31, 2023, 2022 and 2021, we recognized $8.8 million, $6.6 million and $3.3 million, respectively, in accretion expense related to our contingent considerations payable.

During 2023, we recorded a change in estimate related to the contingent consideration liability associated with the acquisition of Autonomous LLC in 2019 of $14.1 million.

The change in estimate was based upon better than expected revenues during the 2023 performance evaluation period.

There were no changes in our estimates during the year ended December 31, 2022.

During 2021, we recorded a change in estimate related to the contingent consideration liability associated with the acquisition of Ramius Alternative Solutions LLC of $0.6 million.

Due to the loss of acquired investment management contracts, the carrying value of the finite-lived intangible assets exceeded the fair value of the contracts.

These expenses resulting from changes to expected payments and the accretion of these obligations to their expected payment amounts are reflected within contingent payment arrangements in our consolidated statements of income.

Interest on Borrowings

1 unchanged sentence

Average daily borrowings for the EQH facilities and commercial paper were $1,014 million at a weighted average interest rate of 5.1% during 2023 compared to $845.5 million and 1.7% during 2022.

Interest expense decreased $1.0 million, or 16.7%, in 2021, reflecting lower interest rates partially offset by higher weighted average borrowings.

Average daily borrowings for both the EQH facility and commercial paper were $561.6 million at a weighted average interest rate of 0.2% during 2021 compared to $554.0 million and 0.5% during 2020.

Interest expense increased $12.8 million in 2022, reflecting higher interest rates on borrowings and higher weighted average borrowings.

Average daily borrowings for the EQH facilities and commercial paper were $845.5 million at a weighted average interest rate of 1.7% during 2022 compared to $561.6 million and 0.2% during 2021.

Amortization of Intangible Assets

1 unchanged sentence

These assets are recognized at fair value and generally are amortized on a straight-line basis over their estimated useful life.

On July 1, 2022, AB acquired CarVal, which resulted in recording of $303.0 million of finite-lived intangible assets primarily relating to investment management contracts and investor relationships with useful lives ranging from 5 to 10 years ( see Note 24 Acquisitions and Divestitures to our consolidated financial statements in Item 8 ).

On July 1, 2022, AB acquired CarVal Investors L.P.

("CarVal"), which resulted in recording of $303.0 million of finite-lived intangible assets primarily relating to investment management contracts and investor relationships with useful lives ranging from 5 to 10 years ( see Note 24 Acquisitions and Divestitures to our consolidated financial statements in Item 8 ).

Amortization of intangible assets increased $20.3 million in 2023.

The increase was primarily due to the acquired intangible assets associated with the CarVal acquisition.

Amortization of intangible assets decreased $15.7 million, or 73.3%, in 2021.

The decrease in the prior year was primarily due to the full amortization of intangible assets related to the Bernstein acquisition.

Amortization of intangible assets increased $20.9 million in 2022.

The increase was primarily due to the acquired intangible assets associated with the CarVal acquisition.

AB, a private limited partnership, is not subject to federal or state corporate income taxes.

1 unchanged sentence

Our domestic corporate subsidiaries are subject to federal, state and local income taxes, and generally are included in the filing of a consolidated federal income tax return.

Separate state and local income tax returns also are filed.

Separate state and local

2023 Annual Report 53

income tax returns also are filed.

Foreign corporate subsidiaries generally are subject to taxes in the jurisdictions where they are located.

Income tax expense decreased $10.6 million, or 26.7%, in 2023 compared to 2022.

This decrease is due to lower pre-tax book income and one-time discrete items which resulted in a lower effective tax rate in 2022 of 4.9% compared to 5.2% in 2021.

This decrease is primarily driven by a one time tax benefit of $22.4 million resulting from the release of a valuation allowance on a capital loss tax asset due to a tax planning action identified in the fourth quarter of 2023, due to a future restructuring of certain foreign subsidiaries that would not have a material impact on AB operations.

This resulted in a lower effective tax rate in 2023 of 3.6% compared to 4.9% in 2022.

Income tax expense decreased $23.1 million, or 36.8%, in 2022 compared to 2021.

This increase is due to higher pre-tax book income which resulted in a higher effective tax rate in 2021 of 5.2% compared to 5.0% in 2020.

2022 Annual Report 53

Net (Loss) Income of Consolidated Entities Attributable to Non-Controlling Interests

Net (loss) income of consolidated entities attributable to non-controlling interests primarily consists of limited partner interests owned by other investors in our consolidated company-sponsored investment funds.

This decrease is due to lower pre-tax book income and one-time discrete items which resulted in a lower effective tax rate in 2022 of 4.9% compared to 5.2% in 2021.

Net Income (Loss) of Consolidated Entities Attributable to Non-Controlling Interests

Net income (loss) of consolidated entities attributable to non-controlling interests primarily consists of limited partner interests owned by other investors in our consolidated company-sponsored investment funds.

In 2023, we had $24.0 million of net income of consolidated entities attributable to non-controlling interests, primarily due to gains on investments held by our consolidated company-sponsored investment funds.

In 2022, we had $56.4 million of net loss of consolidated entities attributable to non-controlling interests, primarily due to losses on investments held by our consolidated company-sponsored investment funds.

In 2021 we had $5.1 million of net income of consolidated entities attributable to non-controlling interests, primarily due to gains on investments held by our consolidated company-sponsored investment funds.

In 2020 we had $4.2 million of net losses of consolidated entities attributable to non-controlling interests, primarily due to losses on investments held by our consolidated company-sponsored investment funds.

Capital Resources and Liquidity

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During 2023, net cash provided by operating activities was $0.9 billion, compared to $1.1 billion during 2022.

The change primarily was due to an increase in fees receivable of $161.1 million, lower earnings of $159.9 million (after non-cash reconciling items), a decrease in broker-dealer related payables (net of receivable and segregated U.S.

Treasury Bills activity) of $133.3 million and an increase in deferred sales commissions of $59.8 million, partially offset by net activity of our consolidated company-sponsored investment funds of $166.0 million and an increase in accrued compensation of $127.4 million.

During 2022, net cash provided by operating activities was $1.1 billion, compared to $1.3 billion during 2021.

The change primarily was due to lower earnings of $265.1 million (after non-cash reconciling items), a decrease in accrued compensation of $200.8 million and a decrease in broker-dealer related payables (net of receivable and segregated U.S.

Treasury Bills activity) of $169.2 million, partially offset by net activity of our consolidated company-sponsored investment funds of $252.0 million and an increase in fees receivable of $193.3 million.

During 2021, net cash provided by operating activities was $1.3 billion, compared to $1.5 billion during 2020.

The change primarily was due to net activity of our consolidated company-sponsored investment funds of $560.6 million, an increase in other assets of $75.7 million and higher net purchases of broker-dealer investments of $33.3 million, partially offset by higher earnings of $346.2 million, an increase in broker-dealer related payables (net of receivable and segregated U.S.

Treasury Bills activity) of $72.9 million and an increase in accounts payable and accrued expenses of $25.2 million.

During 2023, net cash used in investing activities was $33.6 million, compared to $22.0 million during 2022.

The change is primarily due the acquisition of CarVal, net cash acquired of $40.3 million in 2022.

The change is due to the acquisition of CarVal, net cash acquired of $40.3 million in 2022, partially offset by lower purchases of furniture, equipment and leasehold improvements of $28.7 million.

During 2022, net cash used in investing activities was $22.0 million, compared to $65.7 million during 2021.

The change is primarily due to higher purchases of furniture, equipment and leasehold improvements of $20.4 million, partially offset by lower cash paid for acquisitions, net of cash acquired, of $9.8 million and lower purchases of equity method investments of $4.1 million.

The change is primarily due to the acquisition of CarVal, net cash acquired of $40.3 million in 2022.

During 2023, net cash used in financing activities was $1.0 billion, compared to $1.1 billion during 2022.

The change reflects lower net purchases of non-controlling interests of consolidated company-sponsored investment funds in 2022 of $309.9 million, repayment of CarVal debt subsequent to acquisition of $42.7 million and an decrease in overdrafts payable of $41.6 million, partially offset by higher net borrowings of debt of $155.0 million and a decrease in the net purchases of AB Holding Units to fund long-term incentive compensation plans of $51.3 million.

The change reflects lower cash distributions to Unitholders of $230.6 million, a decrease in the net purchases of AB Holding Units to fund long-term incentive compensation plans of $66.5 million and the repayment of CarVal debt of $42.7 million, partially offset by higher net purchases of non-controlling interests of consolidated company-sponsored investment funds of $187.1 million and lower net borrowings of debt of $70.7 million.

During 2022, net cash used in financing activities was $1.1 billion, compared to $0.9 billion during 2021.

The change reflects the net purchases of non-controlling interests of consolidated company-sponsored investment funds in 2021 as compared to net redemptions in 2020 (impact of $532.7 million), partially offset by higher distributions to the General Partner and Unitholders of $223.0 million as a result of higher earnings (distributions on earnings are paid one quarter in arrears) and an increase in the net purchases of AB Holding Units to fund long-term incentive compensation plans of $113.2 million.

The change reflects lower net purchases of non-controlling interests of consolidated company-sponsored investment funds in 2022 of $309.9 million, repayment of CarVal debt of $42.7 million and a decrease in overdrafts payable of $41.6 million, partially offset by higher net borrowings of debt of $155.0 million and a decrease in the net purchases of AB Holding Units to fund long-term incentive compensation plans of $51.3 million.

As of December 31, 2023, AB had $1.0 billion of cash and cash equivalents (excluding cash and cash equivalents of consolidated company-sponsored investment funds and cash held-for-sale), all of which is available for liquidity but consist primarily of cash on deposit for our broker-dealers related to various customer clearing activities and cash held by foreign subsidiaries of $585.8 million.

AllianceBernstein

Debt and Credit Facilities

See Note 12 to our consolidated financial statements in Item 8 for disclosures relating to our debt and credit facilities.

We use our debt and credit facilities to seed certain new investment products which may expose us to market risk, credit risk and material gains and losses.

To reduce our exposure, we enter into various futures, forwards, options and swaps primarily to economically hedge certain of our seed money investments.

While in most cases broad market risks are hedged and are effective in reducing our exposure, our hedgers are imperfect and we may remain exposed to some market risk and credit-related losses in the event of non-performance by counterparties on these derivative instruments.

Our financial condition and access to public and private debt markets should provide adequate liquidity for our general business needs.

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Aggregate Contractual Obligations

During 2010, as general partner of AllianceBernstein U.S.

Real Estate L.P.

(“ Real Estate Fund ”), we committed to invest $25.0 million in the Real Estate Fund.

As of December 31, 2022, we had funded $22.4 million of this commitment.

During 2014, as general partner of AllianceBernstein U.S.

Real Estate II L.P.

(“ Real Estate Fund II ”), we committed to invest $27.3 million, as amended in 2020, in the Real Estate Fund II.

As of December 31, 2022, we had funded $21.6 million of this commitment.

We have various compensation and benefit obligations, including accrued salaries and fringes, commissions, payroll taxes, incentive payments and deferred compensation arrangements.

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The excess of the purchase price over the fair value of identifiable assets acquired, net of liabilities assumed, results in the recognition of goodwill.

On July 1, 2022, AB Holding acquired a 100% ownership interest in CarVal Investors L.P.

(“ CarVal ”).

Immediately following its acquisition of CarVal (the " CarVal acquisition "), AB Holding contributed 100% of its equity interests in CarVal to AB in exchange for AB Units (s ee Note 24 Acquisitions and Divestitures to our consolidated financial statements in Item 8) .

On November 22, 2022, AB and SocGen, a leading Eu ropean bank, announced plans to form a joint venture combining their respective cash equities and research businesses.

As such, the BRS business has been classified as held for sale and $159.8 million of goodwill recorded on the consolidated statement of financial condition has been allocated to the held for sale disposal group.

As AB is a single reporting unit, we have allocated goodwill to the disposal group based on the relative fair values of (1) the disposal group and (2) the portion of the reporting unit that will be retained.

For further discussion, see Note 24 Acquisitions and Divestitures to our consolidated financial statements in Item 8 .

As of December 31, 2022, we had goodwill of $3.6 billion on the consolidated statement of financial condition, which included $666.1 million as a result of the CarVal acquisition in the third quarter of 2022, $2.8 billion as a result of the Sanford C.

As of December 31, 2023, we had goodwill of $3.6 billion on the consolidated statement of financial condition, which included $666.1 million as a result of the CarVal Investors L.P.

(" CarVal ") acquisition in the third quarter of 2022, $2.8 billion as a result of the Sanford C.

Bernstein Inc.

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Approximately $159.8 million of goodwill has been classified as assets held for sale on the consolidated statement of financial condition.

For further discussion, see Note 24 Acquisitions and Divestitures in Item 8 to these consolidated financial statements .

We have determined that AB has only one reporting segment and reporting unit.

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For our annual impairment test, we utilize the market approach where the fair value of the reporting unit is based on its unadjusted market valuation (AB Units outstanding multiplied by AB Holding's Unit price) and earnings multiples.

A goodwill impairment would be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

The goodwill impairment test does not include a determination by management of whether a decline in fair value is temporary and it is important that management's determination of fair value reflect the impact of changing market conditions, including the severity and anticipated duration of any such changes.

The price of a publicly traded AB Holding Unit serves as a reasonable starting point for valuing an AB Unit because each represents the same fractional interest in our underlying business.

Our market approach analysis also includes comparable industry earnings multiples applied to our earnings forecast and assumes a control premium (when applicable).

The announcement of the joint venture between AB and SocGen and classification of the BRS business as held for sale during the fourth quarter of 2022 was a triggering event requiring an interim impairment test;

as such, we tested our goodwill as of December 31, 2022.

The impairment test indicated that goodwill was not impaired.

Under ASU 2017-04, Simplifying the Test for Goodwill Impairment, a goodwill impairment will be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

Under this guidance, the goodwill impairment test no longer includes a determination by management of whether a decline in fair value is temporary.

However, it is important that management's determination of fair value reflect the impact of changing market conditions, including the severity and anticipated duration of any such changes.

AllianceBernstein

Business Combinations

We account for business combinations using the acquisition method of accounting whereby the identifiable assets and liabilities of the acquired business, as well as any noncontrolling interest in the acquired business, are recorded at their estimated fair values as of the date that we obtain control of the acquired business.

Any purchase consideration in excess of the estimated fair values of the net assets acquired is recorded as goodwill.

Acquisition-related expenses are expensed as incurred.

Often, as part of the business combination, intangible assets are recorded based on their estimated fair value at the time of acquisition and primarily relate to acquired investment management contracts.

We periodically review indefinite-lived intangible assets for impairment as events or changes in circumstances indicate that the carrying value may not be recoverable.

If the carrying value exceeds fair value, we perform additional impairment tests to measure the amount of the impairment loss, if any.

Contingent Payment Arrangements

We periodically enter into contingent payment arrangements in connection with our business combinations.

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Both gains and losses resulting from changes to expected payments and the accretion of these obligations to their expected payment amounts are reflected within contingent payment arrangements in our consolidated statements of income.

Several valuation methods may be used to determine the fair value of assets acquired and liabilities assumed.

For intangible assets and contingent liabilities, we typically use a method that is a form of the income approach, whereby a forecast of future cash flows attributable to the asset are discounted to present value using a risk-adjusted discount rate.

Similarly for contingent liabilities, we develop a forecast of future cash flows attributable to the performance objectives that are then discounted to present value using a risk-adjusted discount rate.

For contingent liabilities, we typically use a valuation method that is a form of the income approach, whereby a forecast of future cash flows attributable to the asset are discounted to present value using a risk-adjusted discount rate.

We develop a forecast of future cash flows attributable to the performance objectives that are then discounted to present value using a risk-adjusted discount rate.

Some of the more significant estimates and assumptions inherent in the income approach include the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in the future cash flows.

See Note 24 Acquisitions and Divestitures to our consolidated financial statements in Item 8 .

Assets and Liabilities Held for Sale

The Company classifies assets and liabilities to be sold (disposal group) as held for sale in the period when all of the applicable criteria are met, including:

(i) management commits to a plan to sell, (ii) the disposal group is available to sell in its present condition, (iii) there is an active program to locate a buyer, (iv) the disposal group is being actively marketed at a reasonable price in relation to its fair value, (v) significant changes to the plan to sell are unlikely, and (vi) the sale of the disposal group is generally probable of being completed within one year.

Management performs an assessment of held for sale at least quarterly or when events or changes in business circumstances indicate that a change in classification may be necessary.

Assets and liabilities held for sale are presented separately within the consolidated statements of financial condition with any adjustments necessary to measure the disposal group at the lower of its carrying value or fair value less costs to sell.

Depreciation of property, plant and equipment and amortization of intangible and right-of-use assets are not recorded while these assets are classified as held for sale.

For each reporting period the disposal group remains classified as held for sale, the carrying value of the disposal group is adjusted for subsequent changes in fair value less costs to sell.

A loss is recognized for any subsequent decrease in fair value less costs to sell, while a gain is recognized in any subsequent period for any subsequent increase in fair value less cost to sell, but not in excess of the cumulative loss previously recognized.

If, in any period, the carrying value of the disposal group exceeds the estimated fair value less costs to sell, a loss is recognized on sale rather than an impairment loss.

AllianceBernstein

Loss Contingencies

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See Note 14 to our consolidated financial statements in Item 8 .

2022 Annual Report 57

Accounting Pronouncements

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Fluctuations in our revenues and/or changes in competitive compensation levels could result in adjusted employee compensation expense exceeding 50% of our adjusted net revenues.

• The adverse impact of COVID-19:

The aggregate extent to which COVID-19, including its impact on the global economy, affects AB’s business, liquidity, results of operations and financial condition, will depend on future COVID-19 developments that are highly uncertain, including the scope and duration of the disease and any recovery period, the emergence, spread and seriousness of COVID-19 variants, the continuing prevalence of severe, unconstrained and/or escalating rates of infection and hospitalization in various countries and regions, the availability, adoption and efficacy of treatments and vaccines, and future actions taken by governmental authorities, central banks and other parties in response to COVID-19.

• The impact of our acquisition of CarVal:

The impact of our acquisition of CarVal:

These statements concern expected growth, client and stockholder benefits, key assumptions, revenue realization, financial benefits or returns, accretion and integration costs.

Actual results may differ materially from future results expressed or implied by our forward-looking statements as a result of similar risks to those that impact our other similar business lines, as well as the risk that we are not able to realize the anticipated benefits of the transaction, including the realization of revenue, accretion, and financial benefits or returns, in full or that we may take longer to realize benefits than expected, due, among other reasons, to the

AllianceBernstein

challenges of integrating a new business and personnel.

The anticipated benefits may also be adversely impacted by the risk that AB Holding units to be issued after the closing are issued at a price below anticipated levels.

We caution readers to carefully consider such factors.

• Our Relocation Strategy:

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These assumptions include:

2023 Annual Report 57

• the amount and timing of employee relocation costs, severance, and overlapping compensation and occupancy costs we experience;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis