Equitable Holdings Reports Second Quarter 2023 Results

Equitable Holdings, Inc. (“Equitable Holdings”, “Holdings”, or the “Company”) (NYSE: EQH) today announced financial results for the second quarter ended June 30, 2023.

“We reported non-GAAP operating earnings of $1.17 per share or $1.27 per share after adjusting for notable items, which is up 5% compared to first quarter 2023 and up 2% compared to the prior year quarter. Adjusted results, which account for lower alternatives performance and elevated mortality, were in line with expectations with positive equity returns and higher interest rates benefiting fee- and spread-based earnings.” said Mark Pearson, President and Chief Executive Officer.

Mr. Pearson continued, “At our inaugural investor day in May, we outlined key growth initiatives with meaningful updates to our financial guidance to 2027 including $2 billion of cash generation, 12-15% non-GAAP operating earnings per share growth and an upward revision to our payout ratio, now 60-70% of non-GAAP operating earnings. Results in the quarter further support our ability to deliver profitable growth for shareholders. In Retirement, we reported record net inflows of $1.4 billion as we continue to reach clients through our distribution platform and industry-leading buffered annuity. Asset Management net outflows were $4.0 billion in the quarter with positive flows in May and June following $6.2 billion of expected low-fee institutional redemptions in April. AB’s institutional pipeline remains strong with growth in Private Markets supporting a 2% fee-rate improvement year-over-year. In Wealth Management, demand for advice drove another quarter of organic growth with $1.3 billion of net inflows.”

Mr. Pearson concluded, “While our in-demand product offering and strong new business activity supports our growth targets, our conservative balance sheet, fair value approach to product design and capital management continues to differentiate Equitable while driving significant value for shareholders. We have generated $0.9 billion of cash to Holdings year-to-date, including a $0.6 billion dividend from Equitable Financial in July, which supports our ability to consistently deliver on our 60-70% payout target. In addition, our capital ratios remain resilient through market cycles with a combined RBC ratio of approximately 425-450% as of the half year, above our 375-400% target.”

As of June 30, 2023, total AUM/A was $887 billion, a year-over-year increase of 8%, driven by higher markets over the prior twelve months.

The Net income attributable to Holdings for the second quarter of 2023 was $759 million compared to $967 million in the second quarter of 2022.

Non-GAAP operating earnings in the second quarter of 2023 was $441 million compared to $493 million in the second quarter of 2022. Adjusting for notable items⁵ of $39 million, second quarter 2023 Non-GAAP operating earnings were $480 million or $1.27 per share.

As of June 30, 2023, book value per common share, including accumulated other comprehensive income (“AOCI”), was $5.69. Book value per common share, excluding AOCI, was $26.08.

Business Highlights

• Business segment highlights:
  • Individual Retirement (“IR”) reported record net inflows of $1.5 billion with first year premiums up 21% over prior year quarter supported by continued demand for industry-leading RILA products.
  • Group Retirement (“GR”) reported net outflows of $66 million in the quarter. The tax-exempt channel, which includes its industry leading 403(b) offering for K-12 educators, reported $769 million of total premiums in the quarter leading to net inflows in the channel.
  • Investment Management and Research (AllianceBernstein or “AB”)⁶ reported net outflows of $4.0 billion with pre-announced, low-fee institutional outflows of $6.2 billion in April partially offset by firmwide net inflows in May and June.
  • Protection Solutions (“PS”) reported $770 million in gross written premiums with Employee Benefits and accumulation-oriented VUL gross premiums up 15% and 4%, respectively, over prior year quarter.
  • Wealth Management (“WM”) reported net inflows of $1.3 billion, another quarter of organic growth, supported by advisor productivity up 2% compared to the first quarter of 2023.
  • Legacy (“L”) reported $569 million of net outflows and continues to run-off at $2 billion to $3 billion per annum.
• Capital management program:
  • The Company returned $304 million to shareholders in the quarter, including $78 million of quarterly cash dividends and $226 million of share repurchases, which is in line with the Company’s 60-70% payout target.
  • The Company reported cash and liquid assets of $1.6 billion at Holdings, which remains above the $500 million minimum target, with a continued focus on maximizing financial flexibility to support consistent capital return.
  • The Company maintained its strong financial condition with a combined insurance company RBC ratio of approximately 425-450% at quarter end, above the minimum combined RBC target of 375-400%.
• Delivering long-term shareholder value:
  • The Company is on track to achieve $30 million of its $150 million net expense savings target by year end and $45 million of its $110 million incremental income target in the Company’s general account by year end.
  • As of quarter end, the Company has deployed $7.5 billion of its initial $10 billion capital commitment to AB’s Private Markets platform with an additional $10 billion committed to AB bringing the cumulative commitment to $20 billion by 2027.
  • The Company continues to deliver strong cash generation with a $0.6 billion dividend from Equitable Financial to the Holding Company in July bringing year-to-date cash generation⁷ to $0.9 billion. The Company remains on track to achieve its $1.3 billion cash generation guidance for 2023.

Business Segment Results

Individual Retirement

• Account value increased by 17% primarily due to market performance and net inflows over the prior twelve months.
• Net inflows of $1.5 billion in the quarter were higher over the prior year quarter with record sales of $3.6 billion.
• Operating earnings increased from $186 million in the prior year quarter to $234 million, primarily driven by higher net investment income due to higher interest rates and higher SCS asset balances.
• Operating earnings adjusting for notable items⁸ increased from $204 million in the prior year quarter to $224 million. Notable items of $10 million in the current period reflect a one-time model update and favorable tax items in the quarter partially offset by lower net investment income from alternatives.

Group Retirement

• Account value decreased primarily due to the reinsurance transaction with Global Atlantic, which reduced account value by c.$9.4 billion, partially offset by market performance over the prior twelve months.

• Net outflows of $(66) million with inflows in the Company’s core tax-exempt market offset by outflows in older institutional products and corporate market.

• Operating earnings decreased from $111 million in the prior year quarter to $107 million primarily due to lower net investment income and lower fee-type revenue on lower average account balances.

• Operating earnings adjusting for notable items⁸ decreased from $117 million in the prior year quarter to $103 million. Notable items of $4 million reflect a one-time model update partially offset by lower net investment income from alternatives.

AllianceBernstein

• AUM increased by 7% due to market performance over the prior twelve months.

• Second quarter net outflows of $4.0 billion include $6.2 billion of pre-announced low-fee institutional redemptions in April with inflows in May and June. Investors continued to favor fixed income, which grew 9% annualized organically, mostly offsetting active equity outflows.

• Operating earnings decreased from $101 million in the prior year quarter to $99 million primarily due to higher compensation and benefits expenses.

• Operating earnings adjusting for notable items⁹ decreased from $101 million in the prior year quarter to $89 million. Notable items of $10 million reflect favorable tax items in the quarter.

Protection Solutions

• Gross written premiums increased 1% year-over-year with higher Employee Benefits and Variable Universal Life premiums compared to the prior year quarter.

• Operating earnings decreased from $110 million in the prior year quarter to $24 million, primarily due to higher than expected mortality and lower net investment income from lower alternatives.

• Operating earnings adjusting for notable items⁹ decreased from $92 million in the prior year quarter to $77 million. Notable items of $53 million reflect elevated mortality and lower net investment income from alternatives.

Wealth Management

• AUA increased by 14% due to market performance and net inflows over the last twelve months.

• Net inflows of $1.3 billion in the quarter with focus on driving higher-fee advisory AUA.

• Operating earnings increased from $24 million in prior year quarter to $42 million with distribution fees from higher retirement sales in addition to increased interest income from sweep accounts due to higher interest rates.

Legacy

• Account value decreased by 1% primarily due to expected outflows partially offset by market performance over the prior twelve months.

• Net outflows of $569 million in line with expectations as this business continues to run-off at $2 billion to $3 billion per annum.

• Operating earnings decreased from $57 million in the prior year quarter to $45 million, primarily due to lower fee-type revenue on lower average account values.

• Operating earnings adjusting for notable items¹⁰ decreased from $55 million in the prior year quarter to $48 million. Notable items of $3 million in the current period reflect lower net investment income from alternatives.

Corporate and Other (“C&O”)

Operating loss of $110 million in the second quarter increased from an operating loss of $96 million in the prior year quarter, primarily driven by higher interest credited partially offset by higher net investment income and lower expenses compared to the prior year quarter. Operating loss after adjusting for notable items10 increased from $96 million in the prior year quarter to $102 million.

Exhibit 1: Notable Items

Notable items represent the impact on results from our annual actuarial assumption review, approximate impacts attributable to significant variances from the Company’s expectations, and other items that the Company believes may not be indicative of future performance. The Company chooses to highlight the impact of these items and Non-GAAP measures, less notable items to provide a better understanding of our results of operations in a given period. Certain figures may not sum due to rounding.

Impact of notable items by segment and Corporate & Other:

Impact of notable items by item category:

Impact of Notable Items by segment and corporate & other: