Equitable Holdings, Inc.

Thank you for standing by and welcome to the Equitable Holdings Inc. Second Quarter 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, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, press star one again. And please limit yourself to one question and one follow-up. I would now like to turn the call over to Eric Bass, Head of Investor Relations. Please go ahead, Eric.

Thank you. Good morning and welcome to Equitable Holdings' second quarter 2025 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, Tom Simeone, 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. This quarter marks the halfway point of our five-year planning period, and we're pleased with the organic growth momentum across our businesses and the progress we've made on our strategic initiatives. In July, we closed our landmark individual life reinsurance transaction with RGA, which freed over $2 billion of capital and will significantly reduce future earnings volatility. Looking forward, We are excited about the growth prospects across our retirement, asset management, and wealth management businesses. And the flywheel benefits from our integrated business model position us well to be a long-term winner in each of these markets. Turning to slide three, let me briefly cover our second quarter results. Non-GAAP operating earnings were $352 million, or $1.10 per share, down 23% year over year on a per share basis. Adjusting for notable items, non-GAAP operating EPS was $1.41, which is down 8% compared to the prior year. The primary driver of the decline was elevated individual life mortality claims. In addition, fee-based earnings were pressured by lower average equity market levels during the second quarter. While results this quarter came in below expectations, we see several positive leading indicators that suggest growth will accelerate in the second half of the year. Our mortality exposure has been reduced by 75% and markets have had a strong recovery. Assets under management and administration at quarter end totaled a record $1.1 trillion, which is up 5% year-to-date and bodes well for future growth in spread and fee-based earnings. We also see healthy organic growth momentum supported by our flywheel business model. Our retirement businesses produced $1.9 billion of net inflows in the second quarter, driven by strong Ryla sales and $250 million of BlackRock LifePath paycheck net inflows. Wealth Management also had another very strong quarter with $2 billion of advisory net inflows and the trailing 12-month organic growth rate is 12%. We continue to see positive advisor recruiting trends and productivity increased 8% year over year. Turning to asset management, AB was not immune to the challenging market conditions in the second quarter and reported net outflows of $6.7 billion, which includes active net outflows of $4.8 billion. The outflows were concentrated in April, and the business returned to net inflow in June. AB also continues to grow its private markets business with AUM up 20% year over year to $77 billion. And the total institutional pipeline increased to $22 billion, the highest level since 2022. Moving to capital, we returned $318 million to shareholders in the second quarter. which represents a 74% payout ratio above our 60 to 70% target. We are on track for $1.6 to $1.7 billion of organic cash generation in 2025, with over 50% coming from our asset and wealth management businesses. In addition, we expect to bring approximately $1 billion of additional insurance dividends to the holding company in the second half of 2025, following the close of the individual life reinsurance transaction. As Robin will discuss, we plan to execute at least $500 million of incremental share repurchases and repay some debt before year-end. we have already received regulatory approval for these dividends. Over the past few months, we have made significant progress executing against our strategic initiatives to reduce earnings volatility, improve our return on capital, and drive future growth. I've already highlighted the LIFE reinsurance transaction with RGA, which closed on July 31st. In addition, In June, we completed the first internal reinsurance transaction to our Bermuda entity, as well as the majority of our policy innovation initiative. These actions enhance our financial flexibility and visibility into future cash flows from our insurance entities. Finally, you're seeing evidence of the flywheel synergies between Equitable and AB. A good example is the Ruby Re side car investment which yielded a $1 billion private credit investment management agreement with RGA, including mandates for newer strategies that have recently been seeded by Equitable. This has helped to accelerate momentum in AB's insurance business, which has added four new insurance general account relationships year to date. Turning to slide four. I'll provide an update on performance against our three primary financial targets, which are to grow annual cash generation to $2 billion by 2027, deliver a 60 to 70% payout ratio, and grow non-GAAP operating earnings per share 12 to 15% annually. As I mentioned, We are on track for $1.6 to $1.7 billion of organic cash generation in 2025, and we have a good line of sight into achieving our $2 billion target for 2027, even after reinsuring 75% of our in-force individual life block. Our cumulative payout ratio over the past 10 quarters is 68%. at the upper end of our 60 to 70% target range. As a reminder, the $500 million of additional share repurchases following the individual life transaction is on top of this target. The one metric where we are slightly below plan is EPS growth, as we have a 10 quarter average growth rate of 11% versus our 12 to 15% target. Year to date, non-GAAP operating EPS excluding notable items is down 5% due to elevated mortality claims. If the reinsurance transaction had been in effect starting January 1st and our mortality claims were reduced by 75%, non-GAAP operating EPS growth would have been 3% in the first half of the year. Looking forward, we expect EPS growth to accelerate given the recovering markets and benefit from incremental share repurchases. Turning to slide five, we highlight some of the key performance indicators for our business segments and the progress we've made against our Invest Today targets. I won't cover everything on this page, but want to call out a few items. Starting with retirement, we have delivered 5% organic growth year-to-date and 6% over the past 10 quarters. This has helped drive 13% annual growth in AUM significantly ahead of plan. Not included in retirement net flows is our spread lending program. We have issued $3.4 billion of FABNs year-to-date and have approximately $9 billion outstanding. We expect to be a consistent issuer going forward, which will contribute to growth in future spread income. Turning to AB, while active net flows are modestly negative year-to-date, the base V rate has remained relatively stable, and the business is on track for a 33% margin in 2025. This is up 410 basis points since 2022 and reflects the benefits from AB's office relocation strategy and the Bernstein Research JV. We've made significant progress in scaling our wealth management and AB private markets businesses. Wealth management has delivered a 12% organic growth rate over the trailing 12 months, has grown AUA to $110 billion, and is on track to exceed $200 million of annual earnings ahead of schedule. Private markets AUM has grown to $77 billion, up 20% over the past year, and we expect it to reach $90 to $100 billion by 2027. Finally, we are seeding future growth by developing new markets for both AEP and equitable. We continue to see in-plan annuities as a growth market, And we have a first mover advantage through our relationships with AB, BlackRock, and JP Morgan. Since launching the BlackRock LifePath Paycheck product in the second quarter of 2024, we have received over $800 million of inflows. We also expanded our institutional offering through a partnership with a leading HSA provider, which has yielded approximately $350 million of net inflows year to date. AV is making good progress in target growth areas like active ETFs and insurance mandates, which now have AUM of $8 billion and $48 billion, respectively. Moving to slide six, I want to reinforce the value created by our individual life reinsurance transaction and the benefits it will have for equitable moving forward. By reinsuring 75% of our in-force individual life block on a pro-rata basis, we have significantly reduced our exposure to future mortality claims and the associated volatility. This should enable us to deliver more predictable earnings. We are also generating over $2 billion of value through a positive seeding commission and the release of capital supporting the block. This represents a multiple of approximately 20 times our lost earnings, a very attractive valuation. This free capital will be redeployed into higher return businesses and drive accretion for shareholders. We have already used $760 million to increase our ownership stake in AB from 62% to 69%, and we plan to execute $500 million of incremental share repurchases in the second half of 2025. We also expect to repay some debt. This leaves us with some remaining capacity for opportunistic growth investments or additional buybacks. I'm very excited about the road ahead for Equitable, and I'll now turn the call over to Robin to go through our financial results in more detail.