8-K: Equitable Holdings Reports Solid Full Year 2023 Results Despite Macroeconomic Headwinds

Equitable Holdings announced its full year and fourth quarter 2023 financial results, highlighting solid cash flow and organic growth momentum despite an uncertain economic environment.

Summary

• Equitable Holdings reported a full year cash flow of $1.3 billion, which was in line with their guidance.
• The company experienced strong organic growth, with $5.3 billion in Retirement net inflows and $3.0 billion in Wealth Management advisory net inflows.
• Asset Management saw full year net inflows in Retail and Private Wealth channels, but this was offset by Institutional net outflows.
• The company's full year net income was $1.3 billion, or $3.48 per share, while the fourth quarter saw a net loss of $698 million, or $2.15 per share.
• Non-GAAP operating earnings for the full year were $1.7 billion, or $4.59 per share, and $476 million, or $1.33 per share, for the fourth quarter.
• Adjusting for notable items, full year Non-GAAP operating earnings were $1.9 billion, or $5.13 per share, and fourth quarter earnings were $479 million, or $1.34 per share.
• Equitable Holdings returned $1.2 billion to shareholders this year, including $315 million in the fourth quarter, and the board approved a new $1.3 billion share repurchase authorization.
• Total Assets Under Management/Administration (AUM/A) reached $930 billion as of December 31, 2023, a 13% year-over-year increase.
• The company expects increased cash generation of $1.4 billion to $1.5 billion in 2024.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to solid full-year results and growth in key areas, but tempered by a significant fourth-quarter loss and net outflows in some segments. The company's future outlook is positive, but there are some risks and challenges to consider.

Positives

• The company's cash flow was in line with guidance at $1.3 billion.
• There was strong organic growth in Retirement and Wealth Management businesses.
• The company's AUM/A increased significantly to $930 billion.
• The company demonstrated a commitment to returning capital to shareholders.
• The company expects increased cash generation in 2024.
• Individual Retirement reported record net inflows.
• Protection Solutions saw growth in gross written premiums.
• Wealth Management experienced strong advisory net inflows.
• The company's diverse businesses drive predictable cash flow.

Negatives

• The company reported a net loss of $698 million, or $2.15 per share, for the fourth quarter.
• Group Retirement experienced full year net outflows of $256 million.
• AllianceBernstein reported full year net outflows of $7.0 billion.
• The Legacy business continues to run-off at $2-$3 billion annually.
• Net income attributable to Holdings was down from $2.2 billion in 2022 to $1.3 billion in 2023.

Risks

• The company faces industry-wide pressures on net flows in asset management.
• The Legacy business continues to experience net outflows.
• The company is exposed to market volatility and interest rate fluctuations.
• The company's financial results are subject to various operational, credit, and regulatory risks.
• The company's future performance is subject to various risks and uncertainties, including market conditions and economic factors.

Future Outlook

The company expects non-GAAP operating earnings per share growth to accelerate in 2024 and projects increased cash generation of $1.4 billion to $1.5 billion.

Management Comments

• Mark Pearson, President and Chief Executive Officer, stated that 2023 was a momentous year for Equitable Holdings, celebrating their fifth anniversary as a public company and holding their inaugural investor day.
• Mr. Pearson noted that the company delivered solid financial results despite an uncertain macro environment.
• Mr. Pearson highlighted that higher interest rates and favorable demographic trends have led clients to seek their advice-centric solutions.
• Mr. Pearson mentioned that while they faced some short-term headwinds, they expect non-GAAP operating earnings per share growth to accelerate in 2024.

Industry Context

The announcement reflects the broader trend of financial services companies navigating a complex macroeconomic environment, with some segments experiencing growth while others face headwinds. The focus on advice-centric solutions aligns with the industry's shift towards personalized financial planning.

Comparison to Industry Standards

• Equitable's 13% year-over-year growth in AUM/A to $930 billion is a strong result, comparable to other large financial services firms such as Prudential Financial which reported $1.4 trillion in AUM as of Q3 2023, and MetLife which reported $600 billion in AUM as of Q3 2023.
• The company's $1.3 billion in cash flow is a solid performance, but it is important to compare this to peers such as Lincoln National which reported $1.1 billion in operating income for 2023, and Voya Financial which reported $1.2 billion in adjusted operating earnings for 2023.
• The $5.6 billion in net inflows for Individual Retirement is a positive sign, but it is important to compare this to competitors such as Fidelity and Vanguard, which are known for their strong retirement businesses.
• The $7 billion in net outflows for AllianceBernstein is a concern, and it is important to compare this to other asset managers such as BlackRock and State Street, which have also experienced outflows in certain segments.
• The company's 60-70% payout ratio target is in line with industry standards for returning capital to shareholders.

Stakeholder Impact

• Shareholders will benefit from the $1.2 billion returned to them and the new $1.3 billion share repurchase authorization.
• Employees may be impacted by the company's expense savings initiatives.
• Customers will benefit from the company's advice-centric solutions and strong performance in certain segments.
• Suppliers and creditors may be impacted by the company's financial performance and strategic initiatives.

Next Steps

• The company will host a conference call on February 7, 2024, to discuss the results.
• The company will continue to execute its strategic initiatives to drive growth.
• The company will continue to deploy capital to support growth in AB's Private Markets business.
• The company will continue to focus on expense savings and incremental income generation.

Key Dates

Keywords

Equitable Holdings, Financial Results, Cash Flow, Net Inflows, Asset Management, Retirement, Wealth Management, Share Repurchase, Operating Earnings, AUM, Insurance, Investments