Equitable Holdings, Inc.

Good morning. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Equitable Holdings, Inc. second quarter 2022 results conference 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 during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again press star 1. Thank you. Michelle Mudirisulu, Head of Investor Relations, you may begin your conference.

Thank you. Good morning and welcome to Equitable Holdings' second quarter 2022 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, our President of Equitable Financial, and Kate Burke, Alliance Bernstein's Chief Operating Officer and 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. 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.

Good morning. Thank you for joining. With a sharp decline in asset prices this year, we thought it is important today to highlight how our economic framework protects our balance sheet and ensures consistent cash returns to shareholders. Our operating subsidiaries, Equitable and AB, are not immune to these falling asset values but are showing their resilience. We see strong demand across all Equitable lines and record sales in our individual retirement segment. AB reported a 2% fee rate improvement with growth in municipals, active equity, and alternatives, offsetting outflows from fixed income. Turning to slide three, in a quarter that has seen equity markets fall by a further 16%, an inverted yield curve, and persistent inflation, our attention naturally turns to protecting the balance sheet. Our economic management and hedging programs are working as intended, and we close the quarter with an RBC ratio above target at 440%. Our investment portfolio is relatively conservative and is geared towards high-quality investment-grade issuers with an average credit rating of A3. We ended the quarter with strong hold-go cash of $1.3 billion and returned $295 million of capital in the quarter. Additionally, in July, we upstreamed $930 million from our insurance subsidiary to the whole co. This will further support financial flexibility and provides confidence around our target 50 to 60% payout ratio. We continue to make progress towards mitigating the remaining $1 billion of redundant reserves associated with the Regulation 213 and remain on track to complete by year end. Furthermore, As a result of our capital management program and continued strong business performance, we maintain our $1.6 billion cash flow guidance for the year. Non-GAAP operating earnings for the quarter were $526 million, or $1.31 per share, 4% lower than first quarter 2022. This primarily reflects a reduction in fees from lower account values and lower assets under management. Additionally, our alternatives portfolio generated favorable returns in the quarter, but lower than a year ago. Assets under management at the end of the quarter was $754 billion, reflecting the market drawdowns and positive net flows from our retirement and wealth management businesses offsetting modest outflows from AB. Our top-selling Ryla product, which provides downside protection for clients, continues to perform well in these markets, and the quarter saw record sales and new business values. We also completed the Carvel acquisition, and are pleased to note Carvel raised a further $2 billion of assets under management, since we announced the transaction. While we are not immune to falling markets, our business operations are performing well and our capital management program continues to ensure we maintain healthy solvency ratios. On slide four, we dig deeper into our capital management program and our solvency ratios. We have broken the last three years down into half-year segments, showing movements in the S&P 500 in blue and movements in the 10-year Treasury rate in green. This is a period which covers the COVID pandemic, the return of inflation, and much more aggressive central bank tightening cycle. The dramatic fall in both equity and bond values in the first half of 2022 is clearly shown with the S&P down more than 20%, and the return on treasuries have had their worst performance in over 40 years. Recognizing that we have no innate ability to reliably predict markets, Equitable's risk philosophy is designed to protect through volatile times. This slide shows the results of how our product design, fair value hedging, and economic reserving come together to ensure we deliver on our promises to both our clients and our shareholders. Over this three-year period, our reported RBC ratio has never fallen below 400%. The surplus cash at Holco today is $1.3 billion, and we have been one of the very few companies that have consistently returned capital irrespective of the market conditions. Robin will go into some more detail here, but I would like to leave you with two important differentiators for equitable. Firstly, our economic management is based on fair values, that is, interest rates as they are as per the forward curve, not some arbitrary estimate. And policyholder reserves based on actual experience, again, not some arbitrary estimate. And secondly, hedging on our VA portfolio. We hedge first dollar exposure to equity markets, and we immunize the balance sheet against interest rate movements. This is unique to Equitable. This is how we protect our balance sheet, and this is how we protect cash generation for shareholders. Of course, in these times, we need both a robust balance sheet and a resilient business model. Turning to slide five, our businesses pair well with each other and drive synergies that are hard to replicate. With affiliated distribution, leading retirement and asset management subsidiaries, we participate in the whole value chain, benefiting both solutions we offer to clients and returns we provide for shareholders. We have meaningful synergy initiatives across our businesses. At the half year, we have deployed nearly 50% of the $10 billion general account capital commitment to generate additional yield and support growth in AB's higher multiple private markets business. In our retirements business, we reported $5 billion in total premiums, up 10% over the prior year. Our individual, group, and protection segments all posted higher premiums above last year. I particularly want to highlight that this was a record sales quarter for our individual retirement business, further demonstrating the continued need clients have for our products. Net inflows of $1.3 billion in our core retirement products are up 52%, the highest since our IPO, helping drive record value of new business. We have realized $141 million of incremental investment income, and we expect to complete our 2023 $180 million target ahead of time. Net productivity saves amount to $39 million. And again, we are on track for our 2023 target. Turning to asset management. Alliance Bernstein continues to perform well despite the current market conditions. AB's net outflows in the quarter were modest compared to many peers, supported by positive flows of $1.3 billion within the institutional business, excluding low fee acts and redemptions. While AB is not immune from industry-wide outflows in taxable fixed income, we see organic growth in active equities, municipals, alternatives, and multi-asset. Notably, AB continues to grow in actively managed strategies. Quarter two is the 11th consecutive quarter of organic growth within our active equity offerings, which along with growth in private alternatives has contributed to a 2% fee rate improvement over prior year. We also benefit from strong long-term performance, 82% of equity funds and 63% of fixed income funds have outperformed peers over the last five years. This gives us confidence in our future outlook. As previously mentioned, AB completed the acquisition of Carvel Investors last month. Carvel's ability to raise an additional $2 billion of third-party AUM between transaction announcement in March and close in July further supports the opportunity for growth. AB now has $54 billion in their private markets platforms. An important differentiator for Equitable is our affiliated distribution. We like this business. We continue to see strong flows within our broker-dealer with $2.7 billion in total sales, 85% of which is in fee-based advice accounts. On a year-over-year basis, average assets under advice is up 3%, supporting earnings and cash flows. Our advisors, a critical component to the success of our retirement business, representing approximately 50% of total premiums in the quarter. Overall productivity is up 9% over prior year. I'll now pass over to Robin to go over our results in more detail.