Equitable Holdings, Inc.

Holdings full year and fourth quarter 2023 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 differ materially from those expressed in or indicated by such forward-looking statements. Please refer 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, Bill Siemers, Alliance Bernstein's Interim Chief Financial Officer, and Onar Erzan, Head of Alliance Bernstein's Global Client Group and Private Wealth Business. During this call, we will be discussing certain financial measures that are not based on generally accepted accounting principles, 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 will now turn the call over to Mark.

Good morning, and thank you for joining today's call. 2023 marked a momentous year for Equitable as we celebrated our fifth anniversary as a public company and hosted an inaugural investor day to tell our story and provide updated financial targets. We're very excited about the road ahead for Equitable Holdings. In our retirement business, higher interest rates and favorable demographic trends are providing the best environment for growth in well over a decade. In asset management, AB continues to see strong client demand for private markets investments, and we're optimistic that stabilization of interest rates will lead to a resurgence in fixed income flows. Finally, our wealth management business is attracting strong client inflows and should continue to benefit from Americans' need and desire for financial advice. This morning, I'm going to provide an update on the progress we're making against the strategic initiatives provided at our investor day, and then turn it over to Nick and Onar to talk about the strong commercial momentum we're seeing at both Equitable and Alliance Bernstein. Then Robin will focus on our financial results and outlook for 2024. Turning to slide three, full-year non-GAAP operating earnings were $1.7 billion, or $4.59 per share, which is up 6% year over year on a per share basis. 2023's reported results were below our expectations, primarily due to lower returns on alternative investments and elevated mortality claims during the first three quarters of the year. After adjusting for notable items, non-GAAP operating EPS was $5.13, which is up 3% compared to prior year. While short-term headwinds put pressure on earnings this past year, we expect non-GAAP operating EPS growth to accelerate in 2024. Strong equity markets and stabilization in interest rates bode well for improved alternative returns, and we're encouraged that mortality returned to more normal levels in the fourth quarter. Robin will touch on our outlook in more detail in a few minutes. We continue to manage the business to drive long-term results and consistent cash generation. In 2023, we delivered $1.3 billion of cash flow in line with guidance, which is testament to the underlying strength of Equitable's retirement business and diversified mix of fee and spread-based earnings. Importantly, over 50% of cash flows to the holding company now come from non-insurance subsidiaries, which is up from 17% at the IPO. The combination of predictable cash generation and a strong capital position enable us to consistently return capital to shareholders. At Invest Today, we raised our payout ratio target to 60% to 70% of non-GAAP operating earnings. and we returned $1.2 billion to shareholders this past year, which equates to 72% of non-GAAP operating earnings, or 65% after adjusting for notable items. Looking ahead to 2024, our board has approved a new $1.3 billion buyback authorization, and we expect to continue returning capital to shareholders in line with our payout ratio guidance. At Equitable, we also pride ourselves on controlling the controllables, which is particularly important during periods of macro volatility and uncertainty. I have already mentioned the shift towards capital light businesses and increase in non-insurance cash flows. Some other examples include the actions taken to optimize the real estate footprint for both Equitable and AB and to manage expenses across the organization. We also continue to drive incremental yield from our general account by repositioning the portfolio to take advantage of AB's strong capabilities in private markets. Also outlined at our investor day were compelling and achievable financial targets, which are supported by growth in our commercial businesses. We are very pleased with the strong organic growth momentum in retirement and wealth management. as well as the ongoing progress in building out AV's higher fee private markets platform. We will further highlight progress against our targets and the strong growth momentum heading into 2024 in a minute. But first, I want to provide a brief reminder on our strategy, competitive edges, and financial principles, which are highlighted on slide four. Our strategy is centered around defending and growing our core retirement and asset management businesses while scaling higher growth businesses such as wealth management and AB's private markets platform. Equitable is unique in its ability to capture the entire value chain across product manufacturing, asset management, and distribution, which provides us with competitive advantages. You are seeing this show up in our strong sales and net flows. Importantly, we also manage the business with clear financial principles. We have often talked about our market neutral balance sheet, which means that we hedge first dollar interest rate exposures and equity market exposures on the guarantees we've made to our clients. This means that we are not making a bet on the direction of markets when we price products. In addition, We prioritize value over volume and target 15% plus IRRs on new business with a narrow range of outcomes. This all leads to consistent cash generation, which we view as the key driver of value creation for our shareholders over time. At Invest Today, we laid out a plan to increase annual cash generation by 50% to $2 billion by 2027. And we remain well on track to achieve this. This strong cash flow supports our target payout ratio of 60 to 70% of non-GAAP operating earnings. And ongoing capital deployment for share repurchases helps drive conviction in our ability to grow non-GAAP operating earnings per share 12 to 15% annually through 2027. Turning to slide five. I want to highlight the progress we're making against our Investor Day commitments. In retirement, equity market tailwinds, higher interest rates, and record net inflows drove core AUM to $154 billion, up 11% compared to year-end 2022. We maintain leading positions in the RILA and K-12 educators market. The growth we are seeing is driving strong value of new business, which represents the present value of future cash flows generated from business we write today. In 2023, we realized $460 million of VNB in our retirement business, which is ahead of the $400 million projected at Invest Today. In asset management, AV closed the year with $725 billion in AUM, up 12% year over year, driven by market tail widths. AB also had net inflows in retail and private wealth, although these were more than offset by net outflows in institutional. While margins declined modestly versus 2022, we still expect material improvement over the next few years, helped by the close of the Bernstein Research Joint Venture in the first half of 24. We also continue to make progress on our strategic initiatives. Starting with expenses, we have achieved $38 million of our $150 million savings target. And AB is on track to realize total savings of $75 million from its Nashville relocation in 2025. In our general account, we added $52 million of incremental net investment income through the fourth quarter of 23. The combination of strong growth in our spread-based businesses, favorable new money yields, which were 215 basis points above our portfolio yield in the fourth quarter, and increased allocations to investment-grade illiquid investments puts us well on track to meet or exceed our $110 million target by 2027. In everything we do, we also want to make sure we're being a force for good, delivering value for all of our stakeholders, including policyholders, investors, and employees. We continue to invest in our people, with the opening of our new headquarters this year being a great example. Our new space is designed with a focus on collaboration and employee wellness, creating a more productive and enjoyable work environment. I'm pleased to see our progress and successes being recognized externally. This month, S&P rated its rating for equitable holdings to A-, acknowledging equitable strong balance sheet and growth of non-insurance cash flows. To sum up, I feel confident in the strategy and targets we laid out at the Investor Day, and I will now turn over to Nick and Onar to provide additional updates on progress against our growth strategy.

Thanks, Mark. As Mark mentioned, we're seeing good growth momentum in our core retirement business with record sales and flows in individual retirement and strong value of new business. Given the demographic changes with the majority of baby boomers now hitting peak retirement age 65, this is a very good time to be in the retirement business. And Equitable is well positioned to take advantage, given our leadership position in the RILA market and strong distribution platform. We're also making meaningful progress in scaling our wealth management business, with both earnings and organic growth running ahead of the plan provided at Investor Day. Wealth management is our fastest growing segment, and Equitable Advisors is a critical differentiator for our retirement business. We're a top 10 independent broker dealer with 4,400 advisors and 87 billion of assets under administration. We see continued demand for personal financial advice with 65% of American investors seeking advisors to help them with their financial needs. In 2023, we had 3 billion of advisory net inflows, a 7% annual organic growth rate, which in combination with market tailwinds resulted in AUA growing 20% year over year to $87 billion. A key leading indicator of our ability to grow advisory assets is growth in the number of wealth planners on our platform. These are advisors who focus on reoccurring fee-based investment accounts, and they are three times more productive than non-wealth planners. In 2023, we increased the wealth planner count by 7% to 750. Wealth management earnings increased 57% year over year to nearly 160 million, putting the business well ahead of plan to reach 200 million of earnings by 2027. Higher short-term interest rates have provided a nice tailwind, driving an increase in revenue from cash sweeps. While we could see some earnings pressure if the Fed cuts rates this year, the strong growth in AUA bodes well for growth in fee income. Now, I want to turn to the third pillar of our strategy, which is to seed future growth. We continue to lay the foundation for our institutional in-plan guarantee business, which is reported in group retirement. Today, there are $7 trillion of assets in 401Ks. with approximately 3 trillion invested in target date default options. The passage of the Secure Act 1.0 and 2.0 served as catalysts, providing safe harbor to include annuities within 401K target date funds, opening up a substantial new market opportunity for insurers. We're well positioned to capitalize on this through our existing partnership with Alliance Bernstein, a first mover in the in-plan annuity market over a decade ago, and a new offering we developed in partnership with BlackRock. We expect to see initial inflows from BlackRock in 2024 as they work to onboard 11 committed clients. While it will take time, we see potential for significant growth in the market over the next few years. I'll now pass it over to Onar for an update on Alliance Bernstein. Onar.