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 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. To withdraw your question, press star one again. We do ask that you please limit yourself to one question and one follow-up. 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' third 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 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, 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 third quarter results demonstrate continued strong growth momentum both in terms of new business activity and earnings per share. We once again had positive net flows across our retirement, asset management, and wealth management businesses. And firm-wide, assets under management surpassed the $1 trillion mark. Equitable's integrated business model positions us well to capitalize on the tremendous opportunity in the U.S. retirement market and deliver value to all our stakeholders. On slide three, I'll provide a few highlights from the third quarter. Non-GAAP operating earnings were $501 million, or $1.53 per share, which is up 34% year over year on a per share basis. Adjusting for notable items, non-GAAP operating EPS was $1.59, which is up 22% compared to the prior year and above our 12 to 15% annualized growth guidance. Athletes under management and administration increased 20% year over year and now exceed $1 trillion. We returned $330 million to shareholders during the quarter, which equates to a 65% payout ratio within our targeted range of 60 to 70%. Holding company cash increased to $2 billion from the second quarter, reflecting a $440 million ordinary dividend from our Arizona entity paid in July. For the full year, we now expect cash generation to come in at the high end of our $1.4 to $1.5 billion guidance range. During the third quarter, we completed our annual assumption update, which resulted in no major changes and had only modest impact on our gap earnings. This validates our conservative approach to assumption setting, particularly for policyholder behavior. Turning to our reporting segments, we continue to execute well on our growth strategy. In retirement, sustained demand for our individual retirement offerings drove net inflows of $1.7 billion in the quarter. Across individual and group retirement, sales were up 25% year-over-year. As expected, we did not have any new BlackRock Lifepath paycheck plans fund during the quarter, but we remained bullish on the in-plan annuity opportunity. In August, JPMorgan Asset Management announced plans to collaborate with Equitable on its new smart retirement lifetime income offering. In asset management, AB reported its third consecutive quarter of organic growth with total net inflows of $1.1 billion and active net inflows of $2.2 billion. AB also completed its real estate relocation during the third quarter. which will contribute 100 to 150 basis points of margin expansion on a go-forward basis. AB now expects a baseline adjusted operating margin of 33% in 2025, assuming neutral markets, which is up more than 400 basis points compared to the full year 2022. Moving to wealth management, Our business reported record advisory net inflows of $1.9 billion, and assets under administration now exceeds $100 billion. We're seeing strong momentum in both advisor recruiting and productivity improvement, which are good leading indicators of future growth in earnings and margins. Turning to slide four. I want to spend a couple of minutes discussing our competitive position in the U.S. retirement market. This is a fantastic market with a growing need for the solutions we provide and emerging opportunities to reach customers in new ways. Not surprisingly, others have identified this as well, and we expect competition. That said, we fully believe we have the right business model to be a long-term winner. It starts with our ability to capture the full retirement value chain. We are a leading product manufacturer in the individual and group retirement space, and we also capture economics as a distributor through equitable advisors and on the assets managed by Alliance Bernstein. This provides significant advantage versus companies that are pure manufacturers, which shows up in multiple ways. There are four key drivers of economics in the retirement business. The investment yield you can generate, the fees you collect, the cost of funds on your liabilities, and your G&A expense ratio. To be successful over time, a company needs to have advantages in at least one, and ideally more than one, of these areas. Equitable partners closely with AB to source the assets needed to generate competitive risk-adjusted yields. And it's a symbiotic relationship as the capabilities built for our general account can also be monetized through third-party net flows. While there's been a lot of focus on the growth in our spread-based earnings given the success of our Ryla product, we also generate a significant amount of high return fee-based earnings from separate account products and through AB and equitable advisors. The value of equitable advisors also shows up in our low cost of funds. Having proprietary distribution provides better persistency and enables us to retain more of the economics. In addition, we can launch new products through equitable advisors, which allows us to innovate and create new markets like we did with the Ryla. Finally, equitable has a top quartile expense ratio in individual retirement compared to our peers. Putting it all together, our company is well positioned to adapt and thrive as the competitive landscape evolves. Another area of focus for investors has been the sustainability of the recent strength in industry sales across individual retirement products. Turning to slide five, I want to highlight why we continue to be very bullish about the retirement growth story. As we've highlighted before, demographic trends create increased need for retirement savings and income solutions, regardless of the macro environment. There are 4.1 million Americans turning 65 each year, and the large and growing retirement gap underscores the need for the advice and products we provide. This need has been recognized by the government with bipartisan support for the two secure acts, which expanded access to workplace retirement savings plans and provide plan sponsors with a safe harbor to include annuities within 401K plans. We see this as creating a significant new market by enabling insurers to access the $7 trillion of assets currently sitting in 401K plans. We're encouraged by the initial interest shown in guaranteed lifetime income options by both plan sponsors and asset managers with sizable target date fund complexes. During the third quarter, we announced plans to develop a secure income solution with JPMorgan Asset Management, which will complement our existing offerings with AB and BlackRock. Equitable has had positive net flows in our retirement business every year since IPO, during a period which covers a wide range of macro backdrops. Over the last 12 months, net inflows of $6.8 billion are more than double what we reported in 2018. A key reason we've been able to do this is the all-weather portfolio of insurance and assets and wealth management solutions that we offer to our clients. Most of these fill a specific need such as for protected equity exposure or guaranteed lifetime income that is present regardless of the level of interest rates or equity markets. Looking ahead, I'm excited about the growth momentum in our business and continue to believe this is a fantastic time to be in the U.S. retirement market. I'll now turn it over to Robin to discuss our financial results in more detail.