Equitable Holdings, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Landmark Transactions: Closed Individual Life reinsurance transaction with RGA, freeing over $2 billion of capital and reducing earnings volatility. Completed internal reinsurance transaction to Bermuda entity and majority of policy innovation initiative.
• Financial Performance: Non-GAAP operating earnings were $352 million or $1.10 per share, down 23% year-over-year. Adjusting for notable items, non-GAAP operating EPS was $1.41, down 8% year-over-year.
• Strategic Initiatives: Progressed on reducing earnings volatility, improving capital churn, and driving growth. Flywheel synergies between Equitable and AB, e.g., Ruby Re Sidecar investment leading to a $1 billion private credit agreement.
• Segment Updates: Retirement businesses delivered 5% organic growth year-to-date; Wealth Management had 12% organic growth over trailing 12 months; AB Private Markets AUM grew to $77 billion, up 20% year-over-year.

Segment Performance

• Retirement: Second quarter net inflows of $1.9 billion driven by strong wireless sales and $250 million of BlackRock, LifePath, Paycheck net inflows. Year-to-date assets under management and administration totaled a record $1.1 trillion, up 5% year-to-date.
• Wealth Management: $2 billion of advisory net inflows in the second quarter, with a trailing 12-month organic growth rate of 12%.
• Asset Management (AB): Reported net outflows of $6.7 billion in the second quarter, but private markets AUM up 20% year-over-year to $77 billion, and total institutional pipeline increased to $22 billion.

Guidance

• Cash Generation: On track for $1.6 billion to $1.7 billion of organic cash generation in 2025, aiming for $2 billion by 2027.
• Share Repurchases: Plan to execute at least $500 million of incremental share repurchases and repay some debt before year-end.
• EPS Growth: Expect EPS growth to accelerate in the second half of 2025, with a target of 12% to 15% annual growth in non-GAAP operating earnings per share.

Risks

• Mortality Claims: Elevated individual life mortality claims impacted second quarter results.
• Market Volatility: Lower average equity market levels in the second quarter pressured fee-based earnings.
• Regulatory/Competitive: Potential impact from regulatory changes and competitive dynamics in the financial services industry.

Question and Answer

Q: Ryan Krueger asks about growth in earnings beyond the third quarter baseline in Individual Retirement.

A: Robin Raju responds about components affecting earnings, including fee-based products, net interest margin (NIM), and general account growth.

Q: Suneet Kamath asks about sensitivity of RILA IRR to Fed rate cuts.

A: Robin Raju explains that RILA profitability is linked to 10-year treasury, volatility, and corporate spreads, and pricing is matched to a 15% IRR hurdle rate.

Q: Tom Gallagher asks about capital management and deployment of excess capital from RGA deal.

A: Robin Raju discusses plans for share buybacks, debt paydown, and strategic uses of excess capital.

Q: Elyse Greenspan asks about EPS growth expectations for the second half and beyond.

A: Robin Raju expects EPS growth to improve in the second half, with levers in place for expense and investment actions.

Q: Jimmy Bhullar asks about timing of $500 million share buybacks.

A: Robin Raju states they will be opportunistic in timing based on share price behavior.

Q: Cave Montazeri asks about capital benefits from Bermuda reinsurance transaction.

A: Robin Raju explains the transaction provides consistency of cash flows rather than immediate capital benefits.

Q: Mark Hughes asks about surrenders in Group Retirement.

A: Robin Raju mentions lower surrenders due to equity market stability and client retention efforts.

Q: Wilma Burdis asks about consistency of results post-deal close.

A: Robin Raju expects stable results going forward with reduced mortality exposure and share buybacks.

Q: Michael Ward asks about RILA sales growth and innovation.

A: Nicholas Lane discusses growth potential in the retirement market and Equitable's customer-led innovation approach.

Q: Wilma Burdis asks about FABN program impact.

A: Robin Raju explains Equitable's FABN program is effectively managed with attractive IRRs.

Q: Michael Ward asks about wealth management growth pipeline and competition.

A: Nicholas Lane discusses strong demand for advice, organic growth drivers, and talent management in Wealth Management