LEASES

12 Months Ended

Dec. 31, 2020

On January 1, 2019, the Company adopted the new leases standard using the simplified modified retrospective transition method, as of the adoption date. The Company does not record leases with an initial term of 12 months or less in its consolidated balance sheets, but instead recognizes lease expense for these leases on a straight-line basis over the lease term. For leases with a term greater than one year, the Company records in its consolidated balance sheets at the time of lease commencement or modification a RoU operating lease asset and a lease liability, initially measured at the present value of the lease payments. Lease costs are recognized in the consolidated statements of income (loss) over the lease term on a straight-line basis. RoU operating lease assets represent the Company’s right to use an underlying asset for the lease term and RoU operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

The Company's operating leases primarily consist of real estate leases for office space. The Company also has operating leases for various types of office furniture and equipment. For certain equipment leases, the Company applies a portfolio approach to effectively account for the RoU operating lease assets and liabilities. For certain lease agreements entered into after the adoption of ASC 842 or for lease agreements for which the lease term or classification was reassessed after the occurrence of a change in the lease terms or a modification of the lease that did not result in a separate contract, the Company elected to combine the lease and related non-lease components for its operating leases; however, the non-lease components associated with the Company’s operating leases are primarily variable in nature and as such are not included in the determination of the RoU operating lease asset and lease liability, but are recognized in the period in which the obligation for those payments is incurred.

The Company’s operating leases may include options to extend or terminate the lease, which are not included in the determination of the RoU operating asset or lease liability unless they are reasonably certain to be exercised. The Company's operating leases have remaining lease terms of 1 year to 10 years, some of which include options to extend the leases. The Company typically does not include its renewal options in its lease terms for calculating its RoU operating lease asset and lease liability as the renewal options allow the Company to maintain operational flexibility and the Company is not reasonably certain it will exercise these renewal options until close to the initial end date of the lease. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As the Company's operating leases do not provide an implicit rate, the Company’s incremental borrowing rate, based on the information available at the lease commencement date, is used in determining the present value of lease payments.

The Company primarily subleases floor space within its New Jersey and New York lease properties to various third parties. The lease term for these subleases typically corresponds to the original lease term.

Balance Sheet Classification of Operating Lease Assets and Liabilities


		December 31,
	Balance Sheet Line Item	2020		2019
		(in millions)
Assets
Operating lease assets	Other assets	$	272	$	324
Liabilities
Operating lease liabilities	Other liabilities	$	350	$	415

The table below summarizes the components of lease costs for the years ended December 31, 2020 and 2019.

Lease Costs


	Year Ended December 31,
	2020		2019
	(in millions)
Operating lease cost	$	77	$	77
Variable operating lease cost	11		10
Sublease income	(18)		(16)
Short-term lease expense	—		2
Net lease cost	$	70	$	72

Maturities of lease liabilities as of December 31, 2020 are as follows:

Maturities of Lease Liabilities


	December 31, 2020
	(in millions)
Operating Leases:
2021	$	96
2022	95
2023	85
2024	26
2025	29
Thereafter	195
Total lease payments	526
Less: Interest	(176)
Present value of lease liabilities	$	350

During December 2020, Equitable Financial signed a lease which is expected to commence in 2023 once certain conditions of the lease are met, relating to approximately 130,000 square feet of space in New York City. Equitable Financial currently has an option to decrease the square footage by up to approximately 41,000 square feet, with such option expiring in October 2021, subject to acceleration to June 2021 pursuant to the terms of the lease.

The below table presents the Company’s weighted-average remaining operating lease term and weighted-average discount rate.

Weighted Averages - Remaining Operating Lease Term and Discount Rate


	December 31,
	2020		2019
Weighted-average remaining operating lease term	5 years		6 years
Weighted-average discount rate for operating leases	3.00	%	3.10	%

Supplemental cash flow information related to leases was as follows:

Lease Liabilities Information


	Year Ended December 31,
	2020		2019
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	94	$	87
Non-cash transactions:
Leased assets obtained in exchange for new operating lease liabilities	$	20	$	50