Equitable Holdings, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Equitable Holdings second quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, please press star 1 on your touchstone phones. Ms. Baer, please go ahead.

Thank you. Good morning and welcome to Equitable Holdings' second quarter 2020 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 materially differ from those expressed in or indicated by such forward-looking statements. So I'd like to refer you to the Safe Harbor language on slide two of our presentation for additional information. Joining me on today's call is Mark Pearson, President and Chief Executive Officer of Equitable Holdings, and Anders Malmstrom, our Chief Financial Officer. Also on the line is Nick Lane, President of Equitable Financial, and John Wisenseel, Alliance Bernstein's Chief Financial Officer. 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 in our earnings release, slide presentation, and financial supplement. I would now like to turn the call over to Mark and Anders for their prepared remarks.

Good morning, and thank you all for joining us today. I recognize that this is still a very difficult time for many, so I'd just like to start by saying that on behalf of all of us at Equitable, I hope you and your loved ones are safe and well. I'm extremely proud of how our employees and advisors have responded to these most challenging times. It is pleasing to report today's earnings and growth in assets under management, a testament to the commitment and agility of our people and robustness of our business model. Our resilient balance sheet means we are well prepared for any future turbulence and Equitable remains well-positioned to help our clients protect their families and secure their financial well-being. Turning to page three, we came into this crisis from a position of strength, with strong capital ratios and a set of management values that underpin how we manage this institution. We have a strong emphasis on prudent financial risk management, and we always put the well-being and safety of our people at the forefront of everything we do. I'm also extremely proud of how my colleagues have responded to the calls for a more just society. Equitable will continue to be a force for good in developing programs and solutions that make a difference and create opportunities for those who have been disadvantaged for far too long. Overall, I'm very pleased with the Q2 results. Non-GAAP operating earnings amounted to $459 million, or $1 per share. I believe this to be a very credible performance considering the headwinds facing the business and compares well to the $1.14 of earnings per share we saw in Q2 of 2019. Assets under management are up 10% since the first quarter to $711 billion, supported by the strong persistency of our in-force and good net flows in both retirement and at Alliance Bernstein. As a result of strong expense focus and less travel, operating expenses are down 9% year over year, and we remain well on track for our $75 million net savings target. The impacts to date of the COVID health crisis are manageable and below previous guidance provided. Excess claims during the COVID period, net of reinsurance and reserves amounted to $60 million post-tax impact to operating earnings in the quarter. New business activity remains around 70% of normal levels, and we are very pleased with the significant step change in our digital capabilities and adoption. Over the past 10 years, we've developed a risk management framework which fully hedges to our economic liabilities and protects the balance sheet from record low interest rates. Equitable is not reliant on interest rates rising. We are executing our hedging program with over 95% effectiveness. Our statutory ratios remain strong with a combined RBC ratio of approximately 415% after a $1.2 billion distribution from Equivalent Financial in May. Later on in the presentation, Anders will explain how we are responding to market volatility with speed and discipline to improve our risk-adjusted outcomes on our general account. Please turn to slide four. I'd like to provide some detail to support why we are confident in our ability to adapt to an uncertain environment. You may recall from our Q1 release, Nick Lane presented the three pillars that differentiate Equitable. Firstly, the ability to design and market economically sound products. The affiliated distribution strength we have. and the scale benefits of being a trusted leader in resilient sectors such as the teachers market. These trends are evidenced by strong net flows in the second quarter, with combined retirement net flows of $163 million, and AB delivering a particularly strong quarter with net flows of $4.6 billion, excluding low-fee AXA redemptions. The demand for advice remains high, Experienced, equitable advisors who comprise 65% of our sales force and 91% of production have successfully maintained their 2019 productivity levels, reflecting the deep client relationships they have built over many years. We also remotely onboarded over 100 new advisors in the quarter. We are magnifying our outreach to help clients navigate through these uncertain times. Advisors have increased virtual client meetings by seven times to prior periods, and client engagement activities are up 9% year over year. In response to the current environment, we are obviously changing processes to meet client needs. We have modified our underwriting policies to offer fluidless, touchless process to help more clients access the protection they need. With schools closed, we've worked fast to develop digital and remote engagement with our teacher clients, And as a result, we've seen contribution increases reach record highs, up over 25% year over year. Our ability to innovate, that is, develop economically sound products that are in demand, is best represented by our flagship product, Structured Capital Strategies. This is a protected equity strategy that effectively balances client value with responsible pricing and continues to be one of the top selling products in the variable annuity market. Client demand remains strong with SES sales up 7% in the retail channel year over year. We continue to introduce new features such as dual direction while developing new solutions to meet the evolving needs of our clients. While the outlook remains so uncertain, we must manage the variables within our control, especially expenses. Productivity initiatives are ahead of plan. We are on track to achieve our 75 million net savings and expect additional uplift from COVID related savings, such as reduced travel. Further, we're using the separation from Axa Group as an opportunity to seek to reduce our run rate expenses and upgrade our technology capabilities. For example, we are migrating 80% of applications to the cloud. which provides us with new tools, improved security, and lower expenses. Additionally, we now have an enterprise data lake, robust reporting tools, and enhanced modeling capabilities, which will further drive insights for business growth and productivity gains. Once all the lining of the COVID-19 pandemic has been the acceleration of digital adoption programs. We are seeing projects that would take many years to deliver achieved in a matter of weeks. Today, over 90% of retail applications are submitted electronically, including 100% in individual retirement, leading to improved outcomes and generating productivity gains for clients, advisors, and the company. Throughout these past months, we really see the reinforcement of our mission and where we help clients protect their families and secure their financial well-being. I'll now pass it to Anders to give some more detail, including our risk policy, segment results, and capital management program. Anders?