Equitable Holdings, Inc.

Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Equitable Holdings first quarter 2024 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 during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the conference over to Eric Bass, Head of Investor Relations. Please go ahead.

Thank you. Good morning and welcome to Equitable Holdings' first quarter 2024 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 are Mark Pearson, President and Chief Executive Officer of Equitable Holdings, Robin Raju, our Chief Financial Officer, Nick Lane, President of Equitable Financial, Jackie Marks, Alliance Bernstein's Chief Financial Officer, and Onur Ercan, 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, 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 and 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. Equitable Holdings delivered strong first quarter results, and I'm pleased that the organic growth momentum in our businesses is beginning to translate into higher earnings. Across Equitable and Alliance Bernstein, we continue to see strong demand for our retirement, asset management, and wealth management solutions, helped by favorable demographic trends and a supportive macro environment. This is enabling Equitable to generate strong value of new business, which will drive future growth in earnings and cash flows, while also delivering on our mission to help our clients live fulfilling lives and retire with dignity. Turning to slide three. First quarter non-GAAP operating earnings were $490 million, or $1.43 per share, which is up 49% year-over-year on a per-share basis. There were offsetting notable items in the quarter, and non-GAAP operating EPS after adjusting for notables was also $1.43, which is up 18% compared to the prior year. As discussed last quarter, we expect non-GAAP EPS growth to accelerate in 2024, driven by strong organic growth, ongoing benefits from productivity saves and general account optimization, and easing headwinds from the adverse mortality and lower alternative investment returns experienced in 2023. You saw that this quarter, and we continue to forecast 12 to 15% annual EPS growth through 2027. Looking forward, Equitable and AB should both benefit from growth in assets under management and administration, which increased 13% year-over-year to $974 billion, In addition, the favorable interest rate environment remains a tailwind for retirement sales and investment income. Equitable also continues to consistently return capital. And in the first quarter, we bought back $253 million of stock and paid $73 million of common dividends. This equates to a total payout ratio of 68%. at the upper end of our 60 to 70% guidance. We ended the quarter with $1.9 billion of cash and liquid assets at the holding company, providing ample flexibility to both continue returning capital and take advantage of the attractive growth environment. Ecuador remains on track to generate $1.4 to $1.5 billion of cash in 2024, with roughly half of this coming from asset and wealth management. Turning to our growth strategy, we continue to see good momentum in our core businesses while scaling emerging higher growth businesses. In retirement, our largest business, we had another strong quarter with net inflows of $1.5 billion, which translates into a 5% annualized organic growth rate. Sales and deposits were up 42% year-over-year and continue to be driven by our spread-based Ryla product, although we're seeing growth across all products. Robin will expand on this later in our presentation. In asset management, AV's overall net flows were slightly positive, with very strong active net inflows of $3.7 billion, being partially offset by the loss of a large, low-fee passive mandate. Retail flows continue to be very strong, and private wealth also had a solid quarter. The institutional pipeline currently sits at $11.5 billion, with the majority in private market strategies. AB also closed the Bernstein Research Joint Venture on April 1st, which will result in margin expansion of 200 to 250 basis points on an annualized basis. Wealth management earnings continue to track well ahead of our 2027 target, helped by favorable markets and strong organic growth in fee-based investment accounts. Over the past year, the advisory business has grown 4% organically. This is slightly lower than the recent trend due to an advisory group departure this quarter, but the growth outlook remains strong with earnings up 34% compared to the prior year quarter and AUA up 22% to $92 billion. We've also made good progress on our strategy to seek future growth. AB received its China license earlier this year and launched its first mutual fund in March. Additionally, we received initial flows from BlackRock's Life Path Paycheck offering in April and continue to be excited about the in-plan guaranteed growth opportunity. Before turning the call over to Robin, I'd like to spend a couple of minutes discussing the US retirement market and the growth opportunities I see for equitable and AB. Please turn to slide four. I've had the privilege of working in retirement businesses across the globe, and the US is by far the most attractive market I've seen for a few reasons. First, it's a huge market with over $35 trillion of assets, nearly 10 times the size of the next largest market. Secondly, there's a clear need for private market solutions. The US has an aging population that is living longer, which necessitates a higher level of retirement savings. Social Security will not meet this need, and the shift from defined benefit to defined contribution plans has transferred that savings burden to individuals. The lack of traditional pensions means that Americans also need to figure out how to convert their savings into lifetime income, which is something most people are not equipped to do on their own. Solving this need presents a critical challenge for the country and is central to Equitable's mission. We are reaching the peak period for baby boomer retirements, with 4.1 million Americans turning 65 every year through 2027. By 2050, the U.S. is projected to have a retirement gap of $137 trillion, by far the largest amongst developed countries. Turning to slide five, I'd like to focus on how equitable and AB are positioned to capture this retirement opportunity through our unique integrated business model that combines wealth management, product manufacturing, and proprietary asset management. It all starts with our advice-driven model and ability to engage directly with our clients on their retirement savings, income, and intergenerational wealth transfer needs. Equitable has 4,300 affiliated advisors and access to over 14,000 actively producing third-party agents through targeted distribution relationships. This enables us to reach a wide range of clients to provide tailored solutions, whether they are just starting their careers or in the midst of retirement. In our individual and group retirement businesses, we have chosen to focus on three segments of the retirement market that leverage our distribution strengths, have compelling growth potential, and offer attractive returns on capital. In individual retirement, we are the leading provider of registered index-linked annuities, or RILAs. We believe RILAs offer a compelling consumer value proposition by providing an opportunity to grow retirement income while also having partial downside protection against a market decline. From Equitable's perspective, RILAs are a spread-based, capital-like product, allowing us to generate 15% plus IRRs, with a narrow range of outcomes. Over the last 12 months, our individual retirement segment has delivered 8% organic growth while generating higher spread income and strong value of new business. LIMRA projects riders to be the fastest growing segment of the annuity market over the next few years. We're also the market leader in providing supplemental retirement savings for K through 12 educators. We operate through a worksite advice model with 1,100 dedicated advisors that understand educators' specific needs. And today we work with over 900,000 teachers across 9,000 school districts. This is a steady growth market where Equitables distribution provides a real competitive advantage. Finally, we are very excited about the emerging in-plan guarantee market. Passage of the SECURE Act makes it easier for plan sponsors to add a decumulation option to define contribution plans by placing annuities inside 401 plans. Over $7 trillion of assets sits in 401 plans today, so this represents a tremendous opportunity for us and our industry. Equitable currently has offerings with BlackRock and AB, both leading asset managers in the 401 market. BlackRock has 14 plans with $27 billion of target date fund AUM signed up for its life path paycheck solution. And we received initial inflows in April. Beyond the business opportunity, we are very proud that across Ecuador and AB, we are innovating to address a real social need that all working people can understand. we can protect them from the risk of outliving their savings. Underpinning everything we do in retirement is one of Equitable's greatest assets, Alliance Bernstein. AB currently manages $123 billion of AUM for Equitable. And as we continue to grow in spread-based products like RILAs and in-plan annuities, AB will capture most of those general account inflows. AB also directly benefits from the growth in retirement savings market as it manages over $200 billion of third-party retirement assets. Despite the challenges facing the active asset management industry, AB has delivered 2% average annual organic growth over the past five years, much better than most peers. Putting it all together, I truly believe Equitable is in a privileged position. The US retirement market presents a huge growth opportunity, and equitable is unique in being able to participate across distribution, product manufacturing, and asset management. I'll now turn it over to Robin to go through our results in more detail.