Equitable Holdings, Inc. Q3 FY2025 earnings call

• Equitable Holdings delivered solid third quarter results with organic growth momentum and increased earnings power. Allocated $1.5 billion of capital to drive shareholder value and future growth, redeploying proceeds from the individual life reinsurance transaction. - Strategy focused on 3 core growth businesses: Retirement, Asset Management, and Wealth Management with synergies. 4 key pillars: defend and grow retirement and asset management, scale high-growth wealth management and private markets, seed future growth, and be a force for good. - Acquired Stifel Independent Advisors (over 110 advisors and $9 billion of advisory assets) and allocated $100 million to support AB's investment in FCA Re. - Total assets under management and administration rose 7% Y/Y to $1.1 trillion. Non-GAAP operating earnings were $455 million or $1.48 per share, with adjusting for notable items, non-GAAP operating EPS was $1.67, up 2% Y/Y.

Retirement: Earnings declined year-over-year but increased 9% sequentially after adjusting for notable items. Net interest margin (NIM) down Y/Y due to lower market value adjustment gains and spread compression, but up 4% sequentially. Fee-based revenues increased 4% Q/Q. DAC amortization higher due to growth in the block and increased surrenders. Asset Management (AB): Earnings up 39% Y/Y. Fee revenue increased 6% Q/Q, adjusted margin improved 290 basis points Y/Y to 34.2%, expected to be above 33% target for full year. AUM ended at a record $860 billion. Wealth Management: Earnings increased 12% Y/Y. $2.2 billion of advisory net inflows, 12% annualized growth. Adviser productivity up 8% Y/Y.

• Remain confident in achieving 2027 financial targets. - Expect EPS growth to accelerate. - Full year payout ratio expected to be at the upper end of 60% to 70% target range. - Total cash upstream to the holding company expected to be $2.6 billion to $2.7 billion in 2025, with organic cash generation in line with guidance. - Projected Wealth Management earnings to continue growing at double-digit rate, driven by asset growth and advisory productivity improvement. - AB's private markets AUM on track to meet or exceed $90 billion to $100 billion target by 2027.

• Mortality experience had an impact on earnings in Corporate and Other, but expected to be less volatile going forward with the life reinsurance transaction. - Competitive risks in the RILA market with more companies entering, but Equitable sees itself as the market leader with a durable edge. - Private credit environment risks including potential reduction in covenant structures and signs of exuberance, but Equitable's underwriting processes protect against these risks.

Q: Thoughts on the private credit environment and CarVal's requirements?

A: Robin Raju and Seth Bernstein discussed private credit as an attractive asset class, with Equitable's general account investing in investment-grade assets. CarVal's underwriting is bottoms-up and intensive, protecting against risks.

Q: Differentiation in RILA market and concerns about aggressive features?

A: Nick Lane stated Equitable's flywheel gives a sustainable edge through attractive yields, privileged distribution, and scale. Focus on prudent innovation and no signs of aggressive features creeping up.

Q: Mortality experience impact and normalization?

A: Robin Raju said mortality was slightly elevated, but retained experience was only $10 million worse than expected, and expected to be less volatile with RGA in place.

Q: Sidecar strategy and future plans?

A: Seth Bernstein and Robin Raju mentioned sidecars fit the flywheel, leveraging Equitable's underwriting and AB's private credit capabilities, with plans to do more if opportunities fit.

Q: DAC amortization in Retirement and surrenders?

A: Robin Raju and Nicholas Lane explained higher DAC amortization due to growth in sales and higher surrenders, but flows remain strong in Retirement segment.

Q: HoldCo liquidity and deployment of remaining RGA proceeds?

A: Robin Raju said HoldCo cash is robust, with plans to return capital and pursue bolt-on acquisitions, with remaining RGA proceeds to be deployed in normal course.

Q: Spread lending business growth and Bermuda entity?

A: Robin Raju discussed spread lending growth tied to the flywheel, and Bermuda entity as a toolkit for capital management and growth.

Q: AB's partnership with Fortitude Re and future risk transfer deals?

A: Seth Bernstein and Robin Raju explained the partnership with Fortitude Re for FCA Re, with no direct link to future reinsurance deals but as a standalone investment.