Equitable Holdings, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 Results: Full year non-GAAP operating earnings were $2 billion or $5.93 per share, up 29% year-over-year. Assets under management and administration increased 10% to over $1 trillion. Cash flow to holding company was $1.5 billion, high end of guidance range, with over 50% from asset and wealth management businesses.
• Strategic Initiatives: Achieved $100 million run rate expense saves, on track for $150 million by 2027. Repositioned investment portfolio generated $80 million incremental net investment income, ahead of plan to $110 million by 2027. AB completed separation of Bernstein Research Services business and NYC office relocation.
• Business Segments: Strong organic growth in retirement (net inflows $7.1B) and wealth management ($4B). AB had $4.3B net inflows, second highest sales year. Equitable was a leader in the in plan guarantee market with over $600M net inflows from BlackRock's LifePath Paycheck and new partnership with JPMorgan.

Segment Performance

• Retirement: Full year net inflows of $7.1 billion. In individual retirement, extended edge through client-centric innovation in the RILA market and enhanced core products. Group Retirement is broadening institutional offering, became a provider of income solutions for a leading HSA administrator and looking to expand in small case 401(k) and 457 markets.
• Wealth Management: Full year net inflows of $4 billion. Had record AUA and net flows, strong organic growth, advisor productivity up 10%, wealth planner count up, and hired a new Head of Business Development.
• Asset Management (AllianceBernstein - AB): Full year active net inflows of $4.3 billion, second highest year ever for firmwide sales. Private markets AUM increased 14% to $70 billion. AB expects a 33% plus adjusted operating margin in 2025, over 400 basis points improvement from 2022. Fourth quarter earnings helped by performance fees from public alternative strategies and lower comp to revenue ratio.

Guidance

• 2025 Forecast: Cash generation expected $1.6 billion to $1.7 billion, continuing ramp to $2 billion by 2027. Non-GAAP operating EPS growth expected consistent with 12%-15% annualized target. Protection Solutions earnings ex notable items forecast at lower end of $200M-$300M range. Corporate and other expected to generate full-year loss ~$400M. Alternative returns in investment portfolio expected at lower end of 8%-12% range, starting 5%-6% in Q1 then grading up. Tax rate expected 20% overall, 17% for insurance, 26% for wealth management, 30% for AB.

Risks

• Protection Solutions: Volatility in mortality claims due to concentration of life block in older age policies with high face values and low retention levels. Below plan alternative investment income in Q4 reduced earnings by $27M after tax.
• Market Volatility: Impact of equity market fluctuations on earnings, especially for asset management segment. Competitive pressures in RILA market, potential for aggressive pricing by new entrants.

Question and Answer

• Q: On Bermuda reinsurance subsidiary A: Establishes optionality to reinsure in-force liabilities and new business, supports consistent cash flows to holdings.
• Q: On AB C-corp conversion A: AB's analysis shows current structure best for unitholders; conversion to C-corp would lead to higher tax rates and earnings dilution.
• Q: On protection earnings guidance A: Protection earnings ex notable items forecast at lower end of range due to volatility in mortality claims and alternative investment income; working on expense management, Bermuda entity, and third-party reinsurance to improve returns.
• Q: On annuity business growth A: Growth from both new policy counts (up 15%) and higher account balances (annual policy size up ~13%). Structurally favorable market with demographics, legislation, and money in motion.
• Q: On capital flexibility A: Holdco cash will fluctuate; aim to reduce excess cash toward target levels in a disciplined way, focusing on growth and shareholder returns.
• Q: On RILA market competition A: Bullish on RILA market; competitive activity has grown the pie, temporary aggressive pricing by new entrants, focus on value and disciplined pricing to maintain 15% IRRs.
• Q: On group retirement business A: Tax exempt and institutional segments strong, corporate segment had outflows from legacy lower margin segments; new efforts in plan and PEPs expected to drive growth.
• Q: On asset management net flows A: Positive start to 2025, strong platform with diverse distribution, success in tax-exempt fixed income, Japan strength, and progress in insurance-related areas.
• Q: On alt returns and M&A in Wealth Management A: Alt returns expected to grade up as M&A and IPO activity accelerates; M&A focus on Retirement, Asset, and Wealth Management, with interest in private credit markets.