8-K: Equitable Holdings Reports Strong Second Quarter Earnings Driven by Growth in AUM and Fee-Based Revenues

Equitable Holdings announced strong second-quarter 2024 results, highlighted by a 23% increase in non-GAAP operating earnings per share and record net inflows across its Retirement, Wealth Management, and Asset Management segments.

Summary

• Equitable Holdings reported a net income of $428 million, or $1.23 per share, for the second quarter of 2024.
• Non-GAAP operating earnings were $494 million, or $1.43 per share, a 23% increase from the prior year quarter.
• Adjusting for notable items, non-GAAP operating earnings reached $525 million, or $1.52 per share, a 20% increase from the prior year quarter.
• The company experienced record net inflows of $2.3 billion in Retirement, $1.5 billion in Wealth Management, and $0.9 billion in Asset Management.
• Assets under management and administration reached a record $986 billion, an 11% increase year-over-year.
• Equitable Holdings returned $325 million to shareholders through dividends and share repurchases, meeting its 60-70% payout ratio target.
• The company's combined NAIC RBC ratio is approximately 425-450%, exceeding the target of 375-400%.
• Equitable Holdings is on track to generate $1.4 billion to $1.5 billion of cash in 2024, with a target of $2.0 billion annually by 2027.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to strong financial results, record net inflows, and positive future outlook. The company's performance is better than expected, and management's comments are optimistic.

Positives

• The company experienced strong organic growth across all business segments.
• Favorable market conditions contributed to increased assets under management and administration.
• The company is on track to achieve its 2027 strategic targets of $150 million in net expense savings and $110 million in incremental general account investment income.
• The company has deployed $10 billion of its $20 billion capital commitment to AB, supporting growth in AB's Private Markets business.
• Individual Retirement first year premiums were up 23% over the prior year quarter.
• Protection Solutions saw a 16% increase in annualized premiums year-over-year.

Negatives

• Net income attributable to Holdings decreased to $428 million from $759 million in the same quarter last year.
• The Legacy segment continues to experience net outflows of $672 million, in line with expectations of a $2-3 billion annual run-off.
• Book value per common share, including accumulated other comprehensive income (AOCI), was $0.25.

Risks

• The company's performance is subject to conditions in the financial markets and economy, including equity market declines and interest rate fluctuations.
• Operational factors, such as reliance on dividends from subsidiaries and potential strategic transactions, pose risks.
• Credit, counterparty, and investment risks, including defaults by third parties and economic downturns, could impact the company.
• Legal and regulatory risks, including changes in legislation and insurance regulation, could affect the company.
• The company faces strong industry competition and risks related to information systems and intellectual property.

Future Outlook

Equitable Holdings remains on track to deliver $1.4 billion to $1.5 billion of cash generation in 2024 and increase this to $2.0 billion annually by 2027. The company also aims to achieve $150 million of net expense savings and $110 million of incremental general account investment income by 2027.

Management Comments

• Mark Pearson, President and Chief Executive Officer, stated that the second quarter results highlight the building growth momentum across the company.
• Mr. Pearson noted the robust organic growth momentum across the businesses, highlighted by record Retirement net inflows.
• Mr. Pearson also mentioned that the combination of organic growth and favorable market conditions drove assets under management and administration to a record $986 billion.

Industry Context

This announcement reflects a trend of growth in the financial services sector, particularly in asset and wealth management, driven by favorable market conditions and increased investor activity. The company's focus on fee-based revenues and organic growth aligns with industry trends.

Comparison to Industry Standards

• Equitable's 23% increase in non-GAAP operating earnings per share is a strong result compared to peers in the insurance and asset management industries.
• The record net inflows in Retirement, Wealth Management, and Asset Management indicate a competitive advantage in attracting and retaining client assets.
• The combined NAIC RBC ratio of 425-450% demonstrates a strong financial position compared to the industry target of 375-400%.
• Companies like Prudential Financial and Lincoln National, which also operate in the insurance and retirement space, have reported varying results, making Equitable's performance stand out.
• Asset managers like BlackRock and AllianceBernstein, which Equitable has a relationship with, are also seeing growth in AUM, but Equitable's diversified approach across multiple segments provides a unique advantage.

Stakeholder Impact

• Shareholders will benefit from the increased earnings and shareholder returns.
• Employees may experience positive impacts due to the company's growth and financial stability.
• Customers will benefit from the company's strong financial position and continued investment in its products and services.
• Suppliers and creditors will have confidence in the company's ability to meet its obligations.

Next Steps

• The company will host a conference call on July 31, 2024, to discuss the second quarter results.
• Equitable Holdings will continue to focus on achieving its 2027 strategic targets.
• The company will continue to deploy capital to support growth in AB's Private Markets business.

Key Dates

Keywords

Equitable Holdings, Financial Results, Earnings, AUM, Asset Management, Wealth Management, Retirement, Net Inflows, Operating Earnings, Shareholder Returns, RBC Ratio