Equitable Holdings, Inc.

Good morning, and thank you for standing by. Welcome to the Equitable Holdings Second Quarter Earnings Conference Call. At this time, all participant lines are in listen-only mode. After the speaker's presentation, we will have a question-and-answer session. To ask a question during the session, you will need to press star then 1 on your telephone keypad. Please be advised that today's conference is being recorded. If you require operator assistance, please press star 0. Now, I would like to hand today's conference over to Head of Investor Relations, Isil Mugerasolu. Please go ahead.

Thank you. Good morning and welcome to Equitable Holdings' second quarter 2021 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, Robin Raju, our Chief Financial Officer, Nick Lane, President of Equitable Financial, and Ali Dibaj, Alliance Bernstein's Chief Financial Officer and Head of Strategy. 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. Reconciliation 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 Robin for their prepared remarks.

Thank you, Michelle. Good morning, and thank you for joining our second quarter earnings call. While there have been some signs of returning to normalcy, of course this pandemic is not over. And we all know we need to be vigilant and especially watch the Delta variant. That said, the consistently strong results we have delivered over the last 18 months, including those of the second quarter we will present today, were made possible by the extraordinary efforts of our equitable team and our continued economic management of the business. Turning to slide three, there are four points which highlight our results for the quarter. Firstly, strong results reported by robust net flows. Our second quarter non-GAAP operating earnings of $758 million, or $1.71 per share, were up 74% on a year-over-year share basis, driven by strong performance from both Equitable and Alliance Bernstein. Assets under management increased 22% year-over-year, $869 billion, driven by strong net flows of $6.1 billion, attributable to robust first-year premiums, and another quarter of strong inflows at Alliance Bernstein, as well as positive equity markets. These comparisons to a year ago are flattering because we were in the middle of the COVID lockdown this time last year. Perhaps it is more meaningful to look at the momentum from Q1 this year. Operating earnings are up 26% quarter over quarter, and assets under management are up 6% this quarter. Second highlight, we continue to optimize shareholder returns. We were very pleased to announce the close of our landlocked variable annuity reinsurance transaction with Venerable in June. As a reminder, this transaction significantly de-risked our balance sheet, reducing CTE 98 capital by more than 64%, and unlocking $1 billion of economic value. Our relationship with Alliance Bernstein also provides us with an opportunity to optimize risk-adjusted returns. We have committed a further $10 billion of our general account to AB's Liquid platform to help them build out private placement bonds and private alternative investments. This provides a number of benefits. First, additional yield for the general account, which will boost EQH earnings. And second, AB will receive incremental uplift in fee revenue and will use this capital to attract other third-party investors and build higher multiple businesses for shareholders. Thirdly, Regulation 213. Understandably, we have received questions on the impact of this regulation. At Equitable, our economic risk management framework remains the cornerstone of how we manage the business. Reg 213 does not impact the economic solvency of the business at all. However, RBC solvency ratio and the amount of dividend we can return to shareholders is driven by statutory reserving. And as we are domiciled in New York, Reg 213 applies to these measures and could have the unintended consequence of requiring us to hold redundant reserves that would not be required if we were domiciled outside of New York State. We've been working closely with the New York DFS. They've been very responsive to address this issue, and I'm pleased to tell you we have received a permitted practice. The permitted practice defers the impact over five years. Our RBC at the end of the second quarter, allowing for this permitted practice and net of management actions like corporate restructuring stands at approximately 450%. And combined with further management actions we can take in the future and our strong capital position of $2.5 billion in holdings, we can maintain cash flows and continue to deliver on our 50 to 60% payout ratio during this five-year permitted practice period. This period enables us to continue to work with the DFS and take other management actions such as reinsurance to permanently reduce redundant reserves. I want to emphasize any actions we pursue on Reg 213 will not impair our economic balance sheet to solve this uneconomic statutory accounting issue. And we will continue to manage the business on an economic fair value basis. Robin will provide more details shortly. And the final highlight is our announcement of new targets to drive long-term value. With our agile workforce, and technology-enabled capabilities, we feel comfortable to deliver an incremental $80 million of expense savings by 2023. With the move to more illiquid asset classes in AB, we target an additional $180 million of incremental investment income by 2023. These new targets, combined with our shift towards a more capital-resilient business mix and leveraging synergies with AB, give us confidence in our ability to achieve 8% to 10% EPS growth while delivering on our mission to help clients secure their financial well-being so they can pursue long and fulfilling lives. Turning to slide four, I would like to highlight our main strategic initiatives and differentiators that give us confidence that we can continue to drive long-term shareholder value. The strength of our distribution model more than 4,000 equitable advisors and over 1,000 third-party relationships, continues to distinguish us as a leader in target markets where we have competitive advantages. As the number two variable annuity provider, we continue to focus on bridging the retirement gap and are the number one RILA provider, posting record SES first-year premiums of $1.9 billion in the second quarter. as clients continue to look to the Buffett annuity market for accumulation solutions. In our group retirement business, we are the number one provider of supplemental retirement solution in the educators K through 12 market. And our business now has $45.9 billion of assets. Gross premiums were $928 million in line with pre-pandemic levels. as our advisors continue to leverage digital capabilities to engage with teachers and other clients in this remote environment. In addition to its contributions as a strategic partner, AB continues to produce solid results with another strong quarter of positive flows, including its 17th consecutive quarter of positive active equity net flows in their retail channel. Second quarter net flows were $6.2 billion, positive in each channel, driven primarily by retail of $5.2 billion, institutional of $0.9 billion, and private wealth of $0.1 billion. Net flows were primarily driven by active equities, multi-assets, and municipals. Importantly, 70% of AB's U.S.-rated assets and 54% of Luxembourg-rated assets were four- or five-star rated by Morningstar. We also continue to focus on growing our nascent businesses, and I would like to highlight the continued momentum in our wealth management business this quarter. Assets Under Advice is up 41%, supported by positive net flows and equity markets, and we continue to see strong engagement between our advisors and their clients as they seek financial planning and advice. As I referenced last quarter, we believe a critical component of delivering shareholder value is bridging profits with purpose. In July, we announced the close of our inaugural sustainable financing transaction. This offering allows us to strengthen the impact of our investment portfolio on society delivering additional yield for our investment portfolio and contributes to the work our teams are doing to ensure that equitable remains a force for good. Turning to slide five, I would like to take a few moments to talk about our synergies with Alliance Bernstein. Managing $121 billion of the separate account and general account assets, equitable and AB create opportunity for each other, ultimately driving enhanced value for shareholders. At the time of our IPO, we announced a target of $160 million of incremental income as we shifted our portfolio from U.S. treasuries to public corporates to better align with our U.S. peers. We achieved this target ahead of schedule in 2019 with an additional $80 million achieved in 2020. as we opportunistically manage the portfolio during the market dislocation we saw last year. We continue to utilize our economic risk management framework to further optimize our investment portfolio. Leveraging AB's investment capabilities, we look to capture a liquidity premium by shifting from public corporates to private credit, structured assets, and alternatives without sacrificing the quality of our book. As a result of these efforts, we are targeting $180 million of incremental income by 2023 to further general account optimization and FABN issuances. In addition, we are committing $10 billion of general account assets to help build out AB's higher multiple businesses and attract additional third-party capital, in turn driving greater earnings potential for AB and EQH. As evidenced by an initial commitment of $5 billion, which has since grown four times to over $21 billion today, AB has a proven track record of growing its private alternatives platform. Looking ahead, we will continue to leverage the unique synergies of our AB relationship to drive value for shareholders. I'll now pass it to Robin to walk through our second quarter results. Robin?