AllianceBernstein Holding L.P. (AB) Earnings

Management highlights

### Firm-wide Milestones * Record total firm-wide AUM of over $905 billion at quarter-end, driven by both market appreciation and years of strategic investment. The quarter marked the strongest gross sales in five years and a return to positive organic firm-wide net flows of nearly $800 million, ending four consecutive quarters of outflows. * Achieved the 2027 investor day target of $90-$100 billion in private markets AUM more than a year ahead of schedule. ### Strategic Growth Initiatives * The proposed combination of Equitable and CoreBridge will add at least $100 billion of incremental assets to AB, accelerating the firm's flywheel strategy of using long-duration insurance capital to seed and scale capabilities for distribution across a broader client base, creating a path to $1 trillion in total firm AUM. * Global expansion of the active ETF franchise: After launching initial strategies in Taiwan, five new strategies were added in Europe using a pioneering dual share class structure alongside mutual funds. The platform now has 31 strategies and over $20 billion AUM, with 73% organic growth year-over-year. * The customized retirement platform is expanding access to private markets for defined contribution participants, highlighted by the new ABC1 multi-alternative solution launched in partnership with Brookfield and Carlyle that combines private credit, private equity, and private real assets to complement existing target date funds. * Bernstein Private Wealth, a core strategic growth vector, continues to gain share with ultra-high net worth clients by delivering customized after-tax outcomes across public and private markets, with product innovation including new high-yield municipal strategies for sophisticated tax management. ### Investment Performance * Fixed income: 68% of fixed income AUM outperformed its benchmark over the one-year period, improving sequentially; 81% outperformed over three years, and 61% outperformed over five years. * Equities: Relative performance lagged in the quarter due to the narrow AI-driven market rally that favored a small group of large-cap growth stocks, which conflicted with AB's valuation-disciplined, diversified approach. Only 23%, 28%, and 31% of equity AUM outperformed over one, three, and five-year periods respectively, though more than 25 individual equity strategies with over $45 billion total AUM continue to outperform over three and five-year horizons. ### Financial Performance * Adjusted earnings per unit were 82 cents, an 8% year-over-year increase; 100% of adjusted earnings are distributed to unit holders. * Base fees grew 7% year-over-year, driven by higher average AUM, partially offset by product mix shifts. Performance fees totaled $24 million, down from $30 million in the prior year. * Total operating expenses grew 4% year-over-year, with a stable compensation ratio of 48.5% of adjusted net revenue. Adjusted operating margin expanded 70 basis points to 33% year-over-year, already above the midpoint of the 30-35% target originally planned for 2027.

Guidance

* Full-year 2026 total performance fees are now guided to $115 million to $135 million, upwardly revised from the prior range of $95 million to $115 million. This increase is driven by higher-than-expected public market performance fees, now guided to $60 million to $70 million (up from $25 million to $35 million), offset by a downward revision to private market performance fees to $55 million to $65 million (down from $70 million to $80 million). * Full-year 2026 non-compensation expenses are revised downward to $620 million to $640 million from the prior outlook, driven by cost savings across promotional, servicing, and general and administrative expenses. * The full-year 2026 effective tax rate for ABLP is lowered to 5% to 6%, from the prior range of 6% to 7%. * The firm maintains a long-term operating margin target of 30% to 35% and expects incremental CoreBridge assets to have high incremental margins despite lower average fee rates, being accretive to overall earnings. Around 20-30% of the expected $100 billion in CoreBridge assets are expected to be onboarded in 2027, with onboarding accelerating in 2028.

Segment performance

Total adjusted net revenues for Q2 2026 were $888 million, a 5% year-over-year increase. Breakdown by business segment: 1. Insurance: Total insurance AUM is nearly $218 billion, including $128 billion in general account assets and $61 billion in third-party insurance assets. Third-party insurance general account assets grew more than 30% year-over-year, with 6% annualized organic growth in H1 2026, contributing scaled long-duration capital to the firm's platform. 2. Bernstein Private Wealth: Ended Q2 with $167 billion in AUM, contributing ~40% of total firm-wide revenue. Net flows were negative $700 million in Q2 due to seasonal tax-related selling, but net new assets grew 6% annualized over the prior 12 months, with strong client demand for alternatives and tax-efficient solutions. 3. Active ETFs: Platform reached 31 strategies and over $20 billion in AUM, with 73% organic AUM growth over the past year. It generates an annualized run rate of ~$100 million in management fees, with a 50 basis point average effective fee rate. 4. SMAs: Ended Q2 with $69 billion in AUM, delivering 17% annualized organic growth over the past year, with expanding momentum in taxable fixed income beyond the core municipal bond foundation. 5. Customized Retirement: Grew to $117 billion in AUM, with new innovative solutions (such as the ABC1 multi-alternative partnership with Brookfield and Carlyle) targeting private market access for defined contribution plan participants. 6. Private Markets: Reached $91 billion in AUM in Q2, exceeding the low end of the firm's $90-$100 billion target over a year ahead of schedule. Including the $12 billion in commercial mortgage loans onboarded in July 2026 after quarter-end, private markets AUM now exceeds the upper end of the original target range. It has seen six consecutive quarters of positive organic growth, with over $4 billion in net inflows in Q2 growing at an 11% annualized rate.

Risks & headwinds

* Narrow market leadership concentrated in AI-linked equities has negatively impacted AB's equity performance and driven outflows from the firm's valuation-disciplined, diversified large-cap growth strategies. * Cyclical rotation into strong-performing local equity markets in Asia Pacific has driven elevated outflows from U.S. dollar fixed income and active equity strategies in the region, and retail demand for private credit in Asia has been muted in the short term. * Private market performance fees are lower than previously guided due to quarterly third-party unrealized marks on portfolio exposures and investor-level tax events, even without underlying credit issues in the portfolio. * Newer strategic growth initiatives require upfront investment and take time to scale, meaning full earnings contribution may be delayed even as assets grow. * Proposed U.S. Treasury Department regulatory focus on certain tax-advantaged investment products creates potential headwinds, though AB notes its exposure to the highest-risk product categories targeted by regulators is very small as a percentage of total AUM. * The Equitable-CoreBridge merger has not yet closed (expected by end of 2026), so final details of asset allocation and AUM upside remain uncertain.

Analyst Q&A

• Q: What is the upside for AB to grow its share of CoreBridge's general account assets beyond the committed $100 billion, and can AB eventually manage the full $200+ billion combined portfolio? /

  A: The combined Equitable-CoreBridge entity has ~$350 billion in general account assets and $200 billion in separate account assets, with $70-80 billion in annual new liability origination that creates continuous capital in motion. While the merger has not closed yet, AB expects significant upside to grow its asset share beyond the minimum $100 billion commitment, with opportunities across higher-fee private alternatives and equities as well as lower-fee core fixed income that is highly scalable and high-margin.

• Q: How has demand for U.S. assets from Asian clients trended amid geopolitical tensions and strong local market performance? /

  A: Retail clients have rotated out of U.S. taxable fixed income strategies (such as AB's American Income and Global High Yield) into strong-performing local equities, but this is a cyclical phenomenon rather than a structural shift. Institutional demand for U.S. fixed income across fundamental and systematic strategies remains robust, while retail investors have increased allocation to multi-asset and regional/global equity strategies, and hedge fund demand has ticked up recently.

• Q: How competitive is the private wealth market for advisors, and what is the current and target allocation to alternatives in private client portfolios? /

  A: AB's private wealth business has not been broadly impacted by elevated competitive pressure, with advisor headcount up 4% year-over-year from end-2025, rising advisor productivity, and on-track recruiting. Alternatives currently make up ~10% of private client AUM, and AB expects this ratio to grow to the mid-teens over time as the firm expands its alternative platform and clients seek diversified sources of return.

• Q: What is the relationship between lower blended fee rates from incremental insurance assets and long-term profitability? /

  A: Fee rate and margin are not directly linked: lower-fee assets like core fixed income from general accounts are highly scalable, require very little incremental cost to onboard onto AB's existing infrastructure, and deliver high incremental margins that are accretive to overall profitability. AB expects incremental CoreBridge assets to have incremental margins of 45-50%, with upside to overall firm profitability over time as assets are onboarded.

• Q: How long will it take for new growth strategies to reach scale and deliver full profitability? /

  A: Scale is product-specific, and historically, material AUM growth has translated into higher incremental margins relative to the firm's average margin. AB maintains its overall 30-35% long-term margin target, and will continue proactive investment in new growth areas like private markets that may have lower near-term margins while capturing high incremental margins from scalable existing categories.