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Employees say:"When I first came to this company, it felt very welcoming and I had a lot of people who helped me grow as a person and as a developer here at Equitable. Ever since then, I have made so many new connections with different people and all of them are all super nice, genuine people. What makes this place unique and a great place to work is the great management, the people, as well as the work-life balance—its insane, the amount of PTO you get. "

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Employees say:"Individuals respect and care for one another which highly contributes to productivity and success. Everyone takes their work very seriously (with a sense of humor as well) and are dedicated to providing a quality end result/product. To be honest—I feel that the culture is very unique for insurance, in a positive way, and is a testament to those that have shaped the organization."

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F500-2021-244-Equitable Holdings

Headquartered in New York City, the company provides financial services in the form of retirement planning, insurance, and investment management.

This year's Fortune 500 marks the 66th running of the list.

Founded in 1859, Equitable is a New York City financial services holding company that provides variable annuity, life insurance, and employee benefit products to both individuals and businesses.

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Equitable Holdings is a financial services company with six distinct offerings: individual retirement, group retirement, asset management, protection solutions, wealth management, and legacy. Through these segments, both individuals and organizations can access retirement plans and asset management services. Other offerings across the segments include life insurance policies and employee benefit packages. The company started in 1859 and now has approximately 12,000 employees and financial professionals.

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Equitable Holdings (EQH): Company Profile, Stock Price, News, Rankings

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Equitable Holdings

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Hello, and welcome to the Equitable Holdings First Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I would now like to turn the conference over to Eric Bass, Head of Investor Relations. You may begin.

Thank you. Good morning, and welcome to Equitable Holdings first quarter twenty twenty five earnings call. Materials for today's call can be found on our website at ir.equitableholdings.com. Before we begin, I would like to note that some of the information we present today is forward looking and subject to certain SEC rules and regulations regarding disclosure. Our results may differ materially from those expressed in or indicated by such forward looking statements.

Please refer to the Safe Harbor language on Slide two of our presentation for additional information. Joining me on today's call are Mark Pearson, President and Chief Executive Officer of Equitable Holdings Robin Raju, our Chief Financial Officer Nick Lane, President of Equitable Financial Tom Simeone, AllianceBernstein's Chief Financial Officer and Ono Arzan, Head of AllianceBernstein's Global Client Group and Private Wealth business. During this call, we will be discussing certain financial measures that are not based on Generally Accepted Accounting Principles, also known as non GAAP measures. Reconciliations of these non GAAP measures to the most directly comparable GAAP measures and related definitions may be found on the Investor Relations portion of our website and in our earnings release, slide presentation and financial supplement. I will now turn the call over to Mark.

Good morning and thank you for joining today's call. Given recent volatile markets, we recognize the first quarter may seem like a distant memory. Therefore, in addition to reviewing our results, we will also take a step back to focus on the powerful underlying growth drivers for our business and why investors should be confident in Equitable's ability to navigate periods of volatility and create long term shareholder value. Since our IPO in 2018, we have executed through periods of economic and market disruption, maintaining positive net flows and consistent capital return to shareholders, even during the depths of the pandemic and the market sell off in 2022. Equitable is operating from a position of strength given our robust balance sheet, integrated business model and differentiated distribution.

Periods of uncertainty only heighten the need for retirement and investment advice, and I'm confident that if we stay connected to our clients and focus on controlling what we can control, we will deliver value for all our stakeholders. Turning to Slide three. Let me briefly cover our first quarter results. Non GAAP operating earnings were $421,000,000 or 1.3 per share, down 7% year over year on a per share basis. Adjusting for notable items, non GAAP operating EPS was $1.35 which is down 3% compared to the prior year.

As Robin will discuss in more detail later, we experienced a very high level of large individual life mortality claims this quarter, and our Protection Solutions segment reported a loss of $17,000,000 While disappointed with the result, this quarter underscores why we made the decision to reinsure 75% of our individual life block to RGA. This transaction is on track to close midyear and will significantly reduce our exposure to mortality volatility moving forward. Results for our Retirement and Wealth Management businesses reflect some seasonality in revenues and expenses, but had solid underlying growth momentum. AB operating earnings rose 19% year over year, driven by higher average AUM and improved margins. Our Retirement businesses produced $1,600,000,000 of net inflows in the first quarter, driven by momentum in our RILEH franchise and expansion of our institutional offering.

We also had $2,000,000,000 of advisory net inflows in our wealth management business. Advisor productivity is up 8%, and the business has a 12% organic growth rate on a trailing twelve month basis. Finally, AV delivered positive net flows across each of its three distribution channels and had total active net inflows of 2,700,000,000 We are particularly excited about the momentum in its private markets business, where AUM is up 20% year over year to $75,000,000,000 and the pipeline remains strong. While the market volatility and tax payments have pressured April flows, AB is well positioned given its global investment platform, diversified asset mix and unique distribution platforms. Moving to capital, we returned $335,000,000 to shareholders in the first quarter, which represents an 80% payout ratio.

In April, we also purchased $760,000,000 of AB Holding units through a tender offer, increasing our ownership in AllianceBernstein to 69%. There are significant flywheel benefits between Equitable and AB, and we are excited to be able to capture more of these economics for our shareholders. We expect to close the RGA reinsurance transaction in the middle of the year, which will free over $2,000,000,000 of capital and enhance our focus on retirement, asset management and wealth management. We also plan to execute $500,000,000 of incremental share repurchases post close. Robin will discuss potential uses of the remaining capital later, and we'll be in the fortunate position of having significant excess capital.

Clearly, the market environment has changed meaningfully over the past month, but Equitable is well positioned to navigate a period of macro volatility. It starts with having a strong balance sheet. Our year end combined NAIC RBC ratio was approximately four twenty five percent, and we have $1,100,000,000 of holding company liquidity after purchasing the AB units and tendering for some of our outstanding Series B preferred securities in April. This is before factoring in the $2,000,000,000 benefit from the reinsurance transaction. We fully hedge the equity market and interest rate exposure underlying the product guarantees we offer, protecting our capital position.

Therefore, market declines only impact our income statement and not our balance sheet. We also benefit from getting over 50% of our cash flow from non insurance businesses, which enables us to consistently return capital to shareholders even during periods of stress like we're experiencing now. I'm confident that Equitable has the right strategy and approach to emerge from this period even stronger than it is today. One of the reasons I'm confident is because of the durable growth drivers underlying the markets where we have chosen to play, which we highlight on Slide four. If anything, periods of market volatility increase the need for and highlight the value of the advice we provide and the retirement and investment solutions we offer.

There are 4,000,000 Americans turning 65 each year and over $600,000,000,000 of assets coming out of four zero one plans annually. These retirees need help figuring out how to ensure they will have enough assets and income to support them for the rest of their lives. The life insurance industry is uniquely suited to provide protected equity solutions like Reilers or guaranteed income. The last month provides a reminder that markets can go down, underscoring the value that our offering provides to policyholders. We have generated positive net flows in our retirement businesses every year that we've been a public company, highlighting the strong secular demand drivers and appeal of our All Weather product portfolio.

Another key reason that we have been successful in growing our retirement franchise is the unique distribution we have through Equitable Advisors. Sixty five percent of Americans are looking for investment advice, and advisor mediated assets have grown twice as fast as overall U. S. Financial assets. These trends are driving growth in our Wealth Management business, which has a 12% organic growth rate for advisory assets over the past year.

We're also attracting new advisers and helping them grow their practices with productivity up 8% year over year. The final component of our flywheel is asset management, which is critical to enabling us to deliver value to our clients. Because is able to produce strong investment returns, we can offer attractive annuity and protection solutions, driving sales and positive net flows. These flows then enable AB to invest in new capabilities such as expanding its private markets offering, creating value for itself and equitable. AB has been able to consistently generate positive active net flows and is well positioned to be a winner in two of the fastest growing segments in the market, private credit and insurance asset management.

We firmly believe that combining insurance and asset management provides competitive advantages for both firms, and we were excited to recently increase our ownership in AB to 69%. Turning to Slide five. I want to spend a minute reviewing Equitable's strong track record of managing through volatile markets since our IPO. It all starts with having a robust balance sheet. As a reminder, Equitable takes a market neutral approach to hedging, which means that we fully hedge the equity market and interest rate exposure underlying our product guarantees.

Therefore, our capital position is relatively insensitive to market movements, which you have seen in our stable RBC ratio over time. We also set prudent assumptions for policyholder behavior and insurance risk factors, which had been validated by the positive ceding commissions we have received when executing third party reinsurance transactions. Equitable entered this period of volatility from a position of strength with a 425% combined NAIC RBC ratio and $1,100,000,000 of holding company liquidity after the AB and preferred tenders. We are on track to close the life reinsurance transaction in the middle of the year, which will free over $2,000,000,000 of capital and provide significant resources that can be used to take advantages of opportunities in the market, including additional share buybacks. We plan to bring a sizable dividend to the holding company post close and still expect our RBC ratio to increase by 75 to 100 points.

Equitable also benefits from generating predictable cash flow with about 50% of cash coming from our asset and wealth management businesses. This has enabled us to consistently return capital to shareholders, maintaining our buybacks even during the peak of the pandemic. Leaning into share repurchases during periods of market declines helps offset the impact of lower fee income on EPS and creates value for our shareholders. Putting it all together, I feel confident that Equitable is well positioned to manage this period of volatility and uncertainty, and we'll also be ready to play offense if opportunities emerge. I'll now turn it over to Robin to discuss our financial results in more detail.

Thanks Mark. Turning to Slide six, I will highlight our first quarter results. On a consolidated basis, non GAAP operating earnings were $421,000,000 or $1.3 per share. The only notable item in the quarter was below plan alternative investment income, which reduced earnings by $13,000,000 after tax. Adjusting for this, non GAAP earnings per share was $1.35 per share.

As Mark mentioned, our results this quarter were impacted by elevated mortality claims in our individual life insurance block, which reduced earnings per share by about $0.20 relative to our normal expectations. If mortality had been in line with budget, earnings per share excluding notable items would have increased 12% year over year. GAAP net income was $63,000,000 in the quarter. This is lower than our non GAAP operating earnings due to non economic hedging impacts, which are offset management and administration rose 3% year over year to $1,000,000,000,000 but they declined on a sequential basis as a result of weaker equity markets in the first quarter. Our reported book value per share ex AOCI was $27.62 in the quarter.

As a reminder, GAAP accounting requires us to carry AB at book value, which we believe materially understates shareholders' equity at the EQH level and inflates our leverage ratio. We added new disclosure this quarter to highlight book value per share including our ownership in AB at market value. The adjusted book value per share was $39.96 as of March 31 and our leverage ratio would have been nearly seven points lower. This difference will become more notable moving forward given our increased ownership in a bit. I'll provide some further details on our segment level earnings drivers on Slide seven.

Mortality claims in our individual life insurance block came in approximately 80,000,000 above our expectations on a pretax basis. Our block is concentrated in higher face value policies and has limited reinsurance coverage. And this quarter, we experienced an abnormally high number of large claims. While hard to be definitive, we believe a harsh flu season was a contributing factor. The CDC has classified this as the first high severity flu season since 2017, '20 '18, and the cumulative hospitalization rate is the highest observed since 2011.

The poor experience this quarter and recent volatility in our individual life earnings underscores why we made a strategic decision to reinsure seventy five percent of our life block to RGA. This transaction, is on track to close mid year, will significantly reduce our mortality exposure and enhance our focus on our core growth engines. I also want to spend a minute discussing our individual retirement earnings, which declined year over year despite strong net flows. Results were pressured by a few items. The first is expenses, which reflect higher seasonal compensation costs for benefits, payroll taxes and long term incentive payouts due to twenty twenty four bonus payments.

In addition, the growth in commission payouts reflects strong sales volume, particularly in Equitable Advisors, where not all payouts can be capitalized in DAC. We expect compensation expense to normalize in the second quarter, but commissions will depend on sales levels and the mix by channel. Turning to revenues, we continue to see steady growth in spread earnings or NIM driven by positive RILENA net flows. However, fee income was negatively affected by a decline in average separate account assets and fewer fee days in the first quarter. Given the equity market decline we've seen so far in April, this will likely remain a near term headwind offsetting growth in NIM.

Keep in mind that our traditional VA block has a higher return on assets than our RILA block, So reduced fee income will also pressure the segment's return on assets. Overall, our individual retirement business produces a high return on capital and consistent cash flows. While the benefit of our strong organic growth takes some time to emerge in results, we expect steady growth in earnings over time. First quarter results for Group Retirement and Wealth Management businesses were in line with our expectations, which included some anticipated revenue and expense seasonality. Both businesses had positive organic growth with $192,000,000 of group inflows and 2,000,000,000 of wealth management advisory net flows.

Advisory productivity improved 8%, which is a good leading indicator of future growth. AB had a strong quarter with positive net flows across each of its distribution channels, a relatively stable base fee rate and good expense control. The business had an adjusted margin of 33.7% for the quarter, up three forty basis points from the first quarter twenty twenty four. While the market decline in April could pressure near term flows and margins, AB has a diversified asset mix and a differentiated distribution, including its private wealth business, leadership position in Asia and its partnership with Equitable, all position it well for long term success. Finally, our alternative investments portfolio had a 6% annualized return in the first quarter consistent with our guidance.

Current market volatility makes projecting future returns difficult, but we expect them to remain below our 8% to 12% long term target in the second quarter. We will provide a more specific update later in the quarter when we have better visibility. Turning to Slide eight, we will highlight Equitable's capital management program. During the quarter, we returned three thirty five million dollars to shareholders, including $261,000,000 of share repurchases, which translates to an 80% payout ratio. This is above our 60% to 70% guidance range, primarily due to lower earnings as a result of unfavorable mortality.

Over the past year, we have reduced our share count by approximately 7% helping to drive growth in earnings per share. We also plan to increase our quarterly cash dividend on common shares by 13% to $0.27 in May pending Board approval. We ended the quarter with $2,200,000,000 of cash and liquid assets at holdings, up from $1,800,000,000 at the end of the fourth quarter. During the first quarter, we received about $200,000,000 of cash flows from subsidiaries and issued $500,000,000 of new hybrid securities in March. In April, we invested $760,000,000 to increase our ownership in AB and used $283,000,000 of the hybrid proceeds to tender for some of our existing Series B preferred equity.

As a result, we currently have $1,100,000,000 of cash at the holding company comfortably above our $500,000,000 target. On Slide nine, we highlight our macro sensitivities both from an earnings and balance sheet standpoint. The earnings sensitivities are consistent with what we've highlighted previously even as we've grown our business. Every 10% change in equity markets has about $150,000,000 of annual impact on after tax earnings. Turning to interest rates, a 50 basis point change in long term rates has about a 40,000,000 to $45,000,000 impact on our annual earnings.

We have a relatively limited sensitivity to changes in short term rates as we have a similar exposure to floating rate assets and liabilities. The primary impact is on our cash sweep revenue in our wealth management business where a 100 basis points change in the Fed funds rate equates to about a 70 basis points change in our sweep yield. Cash sweeps only drive about 20% of wealth management earnings and less than 2% of total company earnings, so this is very manageable. Keep in mind that these sensitivities are prior to any management actions such as expense controls. We still have about $50,000,000 of our targeted $150,000,000 in annual expense saves that will earn in by 2027, and Equitable has demonstrated a strong expense discipline in prior periods of market volatility.

Turning to the balance sheet. As Mark discussed, we fully hedge the equity market and interest rate exposure associated with our product guarantees. Therefore, our capital position has little sensitivity to markets. The primary risk that we take is credit exposure through our general account investment portfolio. We have updated our credit stress test for the portfolio as of year end 2024 and the result is illustrated on the right hand side of the slide.

For fixed maturity securities, the stress is calibrated to the global financial crisis like scenarios. We also assume a minus 40% equity market decline, which negatively affects the value of our private equity and other alternative investments. The impact of such a severe stress would be a 50 reduction in our RBC ratio. Currently, this would take us from about 425% down to 375%. We expect the Life Reinsurance transaction to increase our RBC ratio by 75 to 100 points after paying an extraordinary dividend to the holding company, which will provide significant additional capital cushion if needed.

Our insurance subsidiaries only produce about 50% of our holding company cash flows, so we would still generate meaningful cash even if we needed to reduce our insurance dividends for a period. Therefore, we feel confident that we are well positioned to withstand even a severe credit downturn. Putting it all together, we feel we're well positioned to navigate a period of macro volatility and have expense levers in place if markets remain challenging. Finally, on Slide 10, we lay out the timeline and key milestones for our Life Reinsurance transaction. To reiterate, the transaction is on track to close in mid-twenty twenty five and will free up over $2,000,000,000 of capital.

We plan to deploy these proceeds in a prudent and timely manner. And as I mentioned earlier, we used approximately $760,000,000 of Holdco liquidity to acquire $19,700,000 of AB Holding units, increasing our ownership in AllianceBernstein from 62% to 69%. Post close, we expect to bring an extraordinary dividend to the holding company and we remain committed to executing 500,000,000 of incremental EQH share repurchases on top of our 60% to 70% payout ratio. This leaves nearly 1,000,000,000 of remaining resources. Given the pullback in our share price, additional share buybacks beyond the $500,000,000 are certainly something we'll look at.

And this would likely need to be accompanied by some debt repayment to manage our leverage ratios. We will also be watching the broader market environment. This transaction provides a lot of financial flexibility, which is a significant positive in periods of uncertainty. Therefore, it makes sense to exercise some patience, but we remain committed to making the reinsurance transaction accretive to both earnings and cash flow per share. Now let me turn the call back over to Mark.

Thanks, Robin. While we're living in a period of heightened macro uncertainty, I remain very optimistic about the long term growth prospects for Equitable, given favorable demographic trends and a durable need for the advice, retirement and investment solutions we offer our clients. Equitable has a robust balance sheet, predictable cash flows and an all weather product portfolio. As a result, the company has a strong track record of executing through volatile markets and creating value for our shareholders. Our financial position will only be enhanced by our individual life reinsurance transaction, which gives us the ability to play offense if opportunities arise.

We'll now open the call to take your questions.

Thank you. Your first question comes from Suneet Kamath with Jefferies. Your line is open.

Great. Thanks. First for Robin on the $2,000,000,000 of proceeds. Can you size the extraordinary dividend that you plan to take up to the holding company?

Good morning, Anthony. So as we as you mentioned, we expect a $2,000,000,000 benefit or capital release from the life insurance company post the transaction with RGA and that hasn't changed. To date, as you know, we redeployed about $760,000,000 with investment in AD that brings our ownership to 69%. That leaves us about $1,500,000,000 left from the transaction. We remain committed to deploying the $500,000,000 on top of the $760,000,000 that we invested already and that leaves us about $1,000,000,000 of proceeds, which we'd expect to take at an extraordinary dividend later in this year.

So assuming that we achieve our 1,600,000,000.0 to 1,700,000,000.0 guidance that's what we're still working towards. And then we have $1,000,000,000 of extraordinary dividend that we're looking to take as well on top of that. Now given the pullback, we've been getting a lot of questions on the use of it. Now given the pullback of our share price since in the month of April that certainly buybacks will be certainly something that we look like that we'll look at but we need to accompany that with debt repayment given the leverage ratio. But we're also going to be watchful with the broader market environment as I mentioned on the call.

The transaction gives us tons of financial flexibility and resources deploy. Given the volatility, we're not in a bad it's not a bad position to sit on a bunch of cash right now as we wait the transaction to close as well.

Okay. And then I guess for Mark or maybe Nick, you made the point in your prepared remarks about this is a perfect environment to highlight the benefit of Ryla's and some of the other products that you offer. I guess the question is, are you seeing that in April? In other words, a lot of times people make that comment, but market volatility sometimes often, freezes market. But are you seeing incremental demand for your product given what's going on in the market?

Yes. This is Nick. We're seeing robust sales in April. To reiterate Mark's comments, look, we see continued demand driven both by the demographic trends and this heightened period of volatility. Research shows that 70% of people out there are concerned about the impact of volatility on their retirement assets.

And given our distribution and product portfolio, we're well positioned to meet that need.

And Suneet, the product range we have is something that really is an advantage to us. We talk about the old weather portfolio. If somebody is wanting to secure income for the long term, we have solutions for that. And the Ryler product, of course, is a way somebody can protect capital on the downside but participate in any market recovery. So the product range itself helps.

But yes, to your question, April was a good month for us, as Nick said.

The next question comes from Ryan Krueger with KBW. Your line is open.

Thanks. Good morning. First question was just on the seasonally elevated expenses as well as the lower fee days in the first quarter. Are you able to give us a rough sizing of the consolidated impact that had on earnings or EPS

Sure. We did have overall some seasonality in expenses as I mentioned on the call that's related to timing of when we've paid the benefits and taxes on the bonus payments and then also the long term incentive comp. I think maybe a lot of the focus has been in individual retirement where we have seen growth in revenue, but some of the expense pickup has shown earnings decline year over year. That's about $10,000,000 that should come back next quarter in terms of pretax impact for Individual Retirement on earnings on that. And in addition for Individual Retirement, we expect steady growth in our net investment margin, aligning with the growth in the general accounts as we still continue to see robust sales in the all weather product that Nick and Mark just mentioned as well.

But keep in mind for individual retirement, about half of our earnings are fee related and that will be sensitive to equity markets across the board. So we do expect some expenses to come back, but we are exposed to equity market volatility in these times.

Got it. Thanks. And then on the leverage ratio, do you feel that you need to bring the leverage ratio down from here? Or is your comment on the incremental buybacks just that you would need to do some debt repayment to keep the leverage ratio at the same level it's already at?

Yes. I think with the when we think about leverage ratio, I'm mainly looking at rating agency leverage ratios. The GAAP leverage ratios we feel fine with. Also remember what I mentioned on the call, the GAAP leverage ratios don't reflect the ABM market value, which would bring that down by about seven points across the board. But if we did incrementally more than the 500,000,000 that we're going to add on top of the 60% to 70% as part of the transaction, we'd likely accompany that with some debt repayment to make sure our leverage ratios are in line with what the rating agencies want to see.

The next question comes from Michael Ward of UBS. Your line is open.

Hey, good morning. Thanks very much. So net flows were very strong across pretty much every segment. Just curious how you think about this momentum heading into the volatility that we've seen in April? And I guess specifically around IR and AD.

Great. Thanks. This is Nick. I'll kick it off. As we've highlighted a couple of times, we see strong structural drivers and the current heightened period of volatility enhancing interest in our products.

To start an individual retirement, first quarter, we had $1,400,000,000 in net flows, an 8% organic growth rate over the last twelve months. As Mark highlighted, our buffered annuity is right for these times. It provides downside protection with upside potential. So people that can secure their assets, but gives them the opportunity to participate if the market bounces back. If I hit on Group Retirement Group Retirement, we had positive net flows, primarily our core K-twelve teacher business.

I'd remind you it's a payroll contribution business focused on longer term retirement savings. We have 1,000 advisors working with over 800,000 teachers and 5,000 local school environments. Employment tends to be more consistent through macro cycles, so we would expect that to consistently grow in the single digits. So we do see upside potential in institution. The institutional market is this environment is highlighting the need for secure income within defined contribution group plans.

So we're focused in this time. We remain steadfast in guiding our clients. We see a demand for advice, and we see a demand for more durable retirement solutions, and we're well positioned to capture a disproportionate share of the value that we see emerging. I'd hand it over to Onar to hit on AV.

Thanks, Nick. Yes. As was mentioned on the question, we came off of a very strong Q1 in terms of flows at AB. All of our three channels were net positive. April is always a tricky month for us given it's the tax season.

I'll come back to the market volatility, but given our focus we are skewed towards high net worth and also high net worth, particularly in our private wealth business, in our U. S. Retail business, we tend to get some outflow pressure in April even when the markets are relatively well functioning. That combined with the heightened market volatility and the uncertainty around the rate cuts and inflation puts some challenges around the flows, particularly around the retail channels. As you know, we have a very strong Asia retail franchise.

Whenever there's a rate uncertainty, we tend to see a slowdown in flows in that region. That being said, all of the signs are quite positive. If I go beyond April, several strengths emerge. One, if you look at our institutional pipeline, our institutional pipeline increased materially several billion dollars in the first quarter. So that gives us confidence in terms of flows into our institutional channel going forward.

As you know, equitable commitment to private alts continues and our private assets continue to grow rapidly. And we still have another $6,500,000,000 from the equitable commitment. So that's a positive. And then on the retail side, as I think about fixed income first, typically steepening yield curve and widening credit spreads means long term better returns for fixed income strategies. And we benefited from fixed income rebalancing in 2023 and 2024.

We had $35,000,000,000 of net flows when that rebalancing happened in the past. So once this rate kite cycle starts, we're going to see the money flowing back to taxable fixed income and we're going to benefit most likely disproportionately from that. And on the equity side, the good news is some of our flagship products and geographies are performing well. For instance, our Japan franchise remained strong despite all of the equity market and currency volatility and we are benefiting from some of the structural trends there like the new retirement accounts called NISAS. So all in all, April definitely a tough month for almost every asset manager.

We are not an exception. But when I look at where the pocket is headed, I think we are very well positioned in terms of benefiting from the markets as well as our distribution channels.

Thank you, guys. And then on on capital deployment, I'm just kinda curious, recognizing there's uncertainty out there, but what is there anything that you would say, or, I guess kind of like a timeline of calm markets that could get you, off the sidelines to be more aggressive on the buyback? And should we think about your capital usage as kind of buybacks, debt reduction or maybe holding excess capital? Or is there other options that you haven't spoken about?

Sure. So Mike, just in our normal share buyback program, if we see dislocation in the market, we'll certainly dip in and buy back more stock just at a normal course. If the stock is cheap, that's just timing that we'll do. On top of that with the transaction, we're going to wait till the transaction closes. Once the transaction closes that allows us one to see where the markets are and the evolution with the volatility that we're currently seeing, but also allows us to take out the extraordinary dividend from the insurance company as well.

And at that point in time, we have tremendous financial flexibility at the holding company with the cash that we will have just in normal course of normal dividends in addition with the benefit of the transaction. So we will evaluate share buybacks with some debt repayment. We can it's very volatile at that time. The stock is likely to be cheap. So share buybacks even look more interesting in that type of period.

And then we'll also be on the offensive for anything else that remains available for us at that time. But again tons of financial flexibility and that's a good thing to have in these volatile times.

The next question comes from Tom Gallagher with Evercore ISI. Your line is open.

Good morning. Had a few questions on Ryla. Nick, maybe to start with you. I was sort of peaked by my interest was peaked by your comment that April sales were robust. Are we talking about a modest increase like 10%, something much larger?

Want to get a sense for what you're seeing right now because and I'll get to my follow-up after that if we just start with that. Thanks.

Yes. We don't disclose that level of information, but I would say they're robust compared to first quarter.

Got it. And I guess my follow-up is really this. It's probably for Robin. The it's an interesting dynamic when you have a countercyclical product now that is benefiting from the markets being weaker and where clients are demanding probably the product in greater way because of the underlying equity protection. But I don't think the earnings in that product are really equity sensitive.

Robin, would you mind kind of just reminding us the underlying profit margin of that product and whether there is equity sensitivity, the earnings get better or worse if the markets weaken? Thanks.

Sure. Just as Nick and Mark mentioned earlier, this volatility in equity market drives the need for the RILE product and the product is structured around buffers that provide downside protection and upside participation. But I want to reiterate that's not the only product that we have within the offering. It's an all weather product portfolio that provides buffer protection, income protection and investment only tax advantage vehicles as well that the team fully capitalized to drive growth in the retirement market. With the RILEs specifically, you're right, the underlying mechanics it's really a spread based earnings products and you saw our spread on NIM and individual retirement increased 9% year over year and that will continue to grow with the growth in the RILEs sales going forward.

It does take their time in terms of GAAP profit emergence. So some of the profit emergence ends up being slower because we have acquisition costs upfront, but that's time. But the ultimate sensitivity to the RILA is spread based earnings. The overall segment though is still 50% fee based. And so the overall segment has sensitivity to equity markets from the other products that we sell that are more investment only oriented.

Tom, it's Mark. If I could just add something to the demand, which I think is worth saying. These clients would be late 50s, early 60s on the retirement side. That would be typical for us. They have savings.

They have four zero one ks, so it's not coming out of disposable income necessary. So as we mentioned on the call, something like $600,000,000,000 a year is coming out of four zero one ks into better vehicles, of which Rylo is one. So that helps keep the demand up.

The next question comes from Jimmy Bhullar with JPMorgan. Your line is open.

Yes, good morning. So first, just had a question on the annuity business, but on a different topic. Just can you comment on what you're seeing in terms of competition and just competitor behavior, especially in the buffer market, but just overall given that a number of companies seem to be very active and many more companies are selling similar products than was the case a few years ago. And and then relatedly, if I look at your sales and flows, they were still very strong, but I think flows were weaker than they had been the last several quarters and sales growth slowed as well versus what it had been obviously off of fairly high levels.

Sure. This is Nick. For our overall Retirement segment, were up 6% year over year. And as we've mentioned, we have an all weather portfolio of protected equity, buffered annuities, income and ILVAs. RILAs were up 3% year over year and this was another record first quarter.

We're very intentional about focusing on segments where we can generate attractive returns and sustainable shareholder value. So we've been mindful of competitive trends on pricing. As we've mentioned historically, as we see new entrants enter, there tends to be a period of aggressive pricing. We've seen this before, and it tends to be temporary and not sustainable. To date, increased competition in RILA has, net net, continued to grow the size of the pie as it raises adviser awareness in the broader $30,000,000,000,000 retirement market, and we think annuities and buffered annuities are still underpenetrated given the need out there.

As the market leader, we continue to benefit from that growing pie. Over the last three years, we have more than doubled our sales. And finally, I'd just say we're in a different macro environment today than January. Looking forward, we continue to be very excited about the opportunity and believe that given our history of innovation and our privileged distribution, we are well positioned to capture a disproportionate share of the value being created.

And then just on LifePath, think there weren't any new cases this quarter, but do you have any line of sight on what the rest of the year is looking like?

Sure. So we remain bullish on the long term growth of this market. And the current market environment is amplifying the need for Secure Income Solutions within defined contribution plans. As context, last year we had $600,000,000 in flows from our institutional segment coming from the launch of our LifePath paycheck. In the first quarter, we've continued to deepen and broaden our institutional offers.

We had over $400,000,000 in flows coming from our partnership with a leading HSA provider. We did not have any plans funded in the first quarter. We expect about $250,000,000 of inflows from Lifepath in the second quarter. As we've stated, they're going to continue to be lumpy. We get visibility sixty to ninety days looking out.

So going forward, we've been a leader in this market. And we think given our relationships with both BlackRock, AV, JPMorgan and others, we're well positioned as this market continues to grow.

The next question comes from Joel Hurwitz with Dowling. Your line is open.

Hey, good morning. So spreads in individual retirement look to have compressed a bit in the quarter. Anything unusual you would call out? And what are you expecting from a spread yield standpoint moving forward?

Joe. It's Robin. I'll take that. So in the quarter, you're going to always have some noise quarterly on a quarterly basis when looking at spread income. That's why I would look at the year over year as a function of longer term growth.

But in the quarter with short term rates decreasing, we did see some decline in some of the floating rate exposure. But as a reminder, the floating rate assets are managed and matched with the floating rate liability. So as the one year segments reset, we expect to get some of that back going forward. But you'll see some of that quarterly noise. But over the long term, we still continue to expect strong growth in terms of spread income along with the general account book value in the segment and consistent cash flows coming out of this as well.

Okay. Makes sense. And then just wanted to see if you have any update on your Bermuda entity. Any plans to move any business there in the near term?

Yes. Bermuda is set up and operational for us. It continues to be provide us with good optionality to manage cash flows going forward. No further update to give at this time though, but we remain focused on capital optimization and this is just another piece of the toolkit that gives us optionality.

The next question comes from Jack Madden with BMO Capital Markets. Your line is open.

Hey, good morning. Just on full year cash flow run rate guidance of the $1,600,000,000 to $1,700,000,000 Are you seeing any risk to that outlook given the lower equity markets year to date? I know you generate a lot of cash flow from unregulated sources, but just wondering if there's still a material equity market sensitivity that we should be thinking about regarding free cash flow?

Sure, Sid. The 1,600,000,000 to 1,700,000,000.0 guidance that we gave for the full year does assume an 8% normal equity market return. But keep in mind 50% of those cash flows are coming from the insurance businesses, is based on last year's results. And so we will have some equity sensitivity on the other 50% on the asset and wealth pieces. I think if I take a look from where we are now, we're probably on the lower end of the guidance of the 1.6% to 1.7%, but still feel comfortable with that guidance.

Got it. Thanks. And then the AllianceBernstein any changes to your thoughts on the ultimate ownership of that business now that you're at around 69%? Are you looking to increase that this year?

It's Mark. I'll take that. Yes, very pleased that we've increased ownership to 69%. I mean, the real issue as we said on the call is there are very big synergies between the Equitable businesses and AB and we're starting to harvest those synergies. And as we've said before, we like the fact that we have a currency in AB there.

It helps us with acquisitions as we did with Carvell. It helps us with remuneration and it helps us put a value on a big part of our business. So no plans to increase this at the moment.

The next question comes from Nick Anido with Wells Fargo. Your line is open.

Equitable Holdings (EQH) Q1 2025 Earnings Call Transcript

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