Equitable Holdings, Inc.

Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the Equitable Holdings Incorporated third quarter earnings 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 then the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. I would now like to turn the conference over to Ashil Madrasoglu, Head of Investor Relations. Please go ahead.

Thank you. Good morning and welcome to Equitable Holdings' third 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 Equinal Holdings, Robin Raju, our Chief Financial Officer, Nick Lane, 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 Rappin for their prepared remarks.

Good morning, and thank you for joining today's call. Conditions remain challenging with equities falling for a third consecutive quarter, and at the same time, bond markets providing their worst returns in 40 years. While our earnings are not immune to markets, our capital ratios are robust, and we remain focused on what we can control. Against this backdrop, our clients' need for advice, income, and protection has been heightened. Equitable is uniquely positioned to meet these demands with our integrated businesses and a conservative balance sheet. Turning to slide three, I will highlight the results from the quarter. with global equity and bond markets down 26% and 15% year-to-date, respectively. The value of equitable holdings assets under management declined by 21% this year. Non-GAAP operating earnings were $498 million this quarter, or $1.28 per share, down 2% from last quarter on a per-share basis. Third-quarter earnings benefited from a small positive impact from our annual assumption review, as our reserving is based on actual emerging policyholder and market experience. Adjusting for one-time items, our results were in line with expectations with higher interest rates, wider spreads, and lower pandemic-related claims, partially offsetting weaker fee and alternative income. We recognize that this market requires a different playbook. We continue to have deep conviction on our strategy and we are more aggressively managing our expenses. Offsetting the decline in fees on lower assets under management has been increased productivity saves and additional investment income growth through the optimization of our general account. Alliance Bernstein was also not immune to industry conditions as net outflows were $6.6 billion in the quarter excluding anticipated AXA redemptions. Growth in alternatives, multi-asset, and municipals were outweighed by redemptions in taxable fixed income and active equities. Pleasingly, overall fee rate improved by 7%, growing in each channel, driven by the addition of Carvel and favorable asset mix. AB's financial performance reflected lower asset prices, with Q3 adjusted operating earnings declining by 9% compared to Q2. Our capital management strategy continues to protect our balance sheet, enabling us to focus on organic growth and returning excess cash to shareholders through a combination of dividends and share repurchases. We returned $1 billion to date this year, including $275 million in the third quarter, in line with our payout guidance of 50 to 60% of non-GAAP operating earnings. As of the quarter end, we held $2 billion in cash at holdings, which is above our $500 million target. Supporting this financial flexibility and capital strength is our hedging philosophy. Our first dollar hedging program immunizes our VA guarantees from the impacts of the markets. This quarter, Our hedge effectiveness reduced volatility by more than 95% within our income-orientated offerings. Turning to our general account, new money yields are now 200 basis points above portfolio yields on our fixed income portfolio. With 15% of the portfolio turning over each year, this will benefit net investment income and earnings over time. Our investment portfolio is relatively conservative. 96% of our general account credit portfolio is in investment-grade securities, and we have limited exposure to subordinated CLOs and equity-like alternatives. We benefit from an integrated insurance, investment, and advisory business to meet our clients' holistic needs across all market environments. Equitable's third quarter retirement net inflows of $1.2 billion demonstrates our product innovation, strong distribution, and alignment with client needs. Our Ryla product, Structured Capital Strategies, provides downside protection and upside participation and continues to lead the market in meeting client preferences in these volatile times. We also have significant capital aggregation benefits between our businesses. This, in conjunction with our product design, results in greater capital efficiency across our retirement and life insurance segments. Importantly, we manage on an economic basis. Some use this term loosely. We mean the fair value of our liabilities based on actual emerging experience and take no bets on external market factors or heroic assumptions or policyholder behavior. This approach and our integrated businesses has resulted in total cash flows increasing by 30% since the IPO. Turning to slide four, we highlight key results from the quarter and a breakdown of our growth in cash flows since our IPO. which can be seen in the waterfall at the bottom of the slide. At the time of the IPO, our cash flows were approximately $1.2 billion. Our guidance for 2022 is that our cash flow will be $1.6 billion, supported by a $930 million dividend from our insurance company, which we completed in July. Back in October 2020, we reinsured one-third of our legacy VA portfolios and removed two-thirds of the tail risk by entering into a reinsurance transaction with Venable. This accelerated $100 million of cash flows and unlocked $1 billion of economic value. As a result, we returned an incremental $500 million in share repurchases in 2021. Since our IPO, organic growth and equity market performance have increased cash flows by $500 million, with the biggest contribution coming from equitables, individual and group retirement segments. Alliance Bernstein's stellar performance over this period has added an additional $200 million of cash flow and dividends from AB to EQH now total approximately $500 million in the year. We've also seen increased demand for advice with our wealth management business contributing an additional $50 million of cash flows. Since the IPO, we have returned $6 billion to shareholders and reduced outstanding shares from 561 million to 370 million. As a result in the growth in free cash flow and lower shares outstanding, Our free cash flow per share is up approximately 120% since the IPO, an attractive return for long-term shareholders. Our cash flows are, of course, sensitive to markets, which have been challenged over the last year. However, our hedging program and fair value management have enabled us to maintain our RBC ratios and cash returns to shareholders consistent with 50% to 60% of operating earnings. Turning to our retirement businesses, we are also diversifying our earnings through our SES product, which captures less equity-sensitive credit spreads. Retirement sales were $4.8 billion this quarter, up 6% compared to last year. With rising interest rates, this translated into another record quarter of new business values. Managing what is within our control is even more important in these markets. We have achieved $167 million of our $180 million incremental investment income target and remain on track to achieve our 2023 goal ahead of schedule. We also continue to thoughtfully manage expenses, realizing a net expense savings of $43 million as of quarter end. turning to asset management. As I mentioned earlier, AB was not immune to industry-wide outflows in the quarter, but remains in positive territory for the year to date and continues to outperform peers. Equitable continues to support the growth of AB's private markets platform, deploying nearly 60% of our $10 billion seed capital commitment, which has helped support a 7% year-over-year fee rate improvement. While near-term investment performance reflects a challenging environment, long-term performance remains strong in equities and above average in fixed income. AB's institutional pipeline remains strong, doubling in the quarter to $25 billion, with over 80% of the pipeline fee base attributable to private alternatives, highlighting the benefit again of our acquisition of Carvel. Within our wealth management business, we reported $2.4 billion in investment product sales, of which over 85% were in fee-based advisory accounts. While markets weighed on assets under advice, closing the quarter at $69 billion, down 3% compared to prior quarter, we have benefited from net inflows as demand for advice continues. Subject to markets, we are planning to break out our affiliated distribution channel as its own segment in the next year, providing further transparency into the sources of value generation. I will now turn the call over to Robin to discuss the results on the quarter in more detail. Robin?