Equitable's Q3 2025: Contradictions Emerge on Mortality, Capital Management, RILA Sales, and Bermuda Strategy

Business Commentary:

* Strong Financial Performance: - Equitable Holdings' consolidated non-GAAP operating earnings were $455 million or $1.48 per share, down 6% year-over-year. - Adjusting for notable items, non-GAAP operating EPS was $1.67, up 2% year-over-year. - This rebound was driven by growth in each core business and the completion of a life reinsurance transaction, validating a conservative approach to assumption setting.

• Asset and Wealth Management Growth:
• Equitable's Asset and Wealth Management reported advisory net inflows of $2.2 billion, with a 12% annualized growth rate.
• Adviser productivity increased by 8% year-over-year.

• Growth in this segment was supported by strategic acquisitions like Stifel Independent Advisors and increased investment in experienced adviser recruiting.

  

• Private Markets Expansion:

• AB reported total net outflows of $2.3 billion, including $4 billion of low-fee assets transferred to RGA as part of a reinsurance transaction.
• Excluding this transaction, AB had net inflows of $1.7 billion, driven by private markets assets increasing 17% year-over-year to $80 billion.

• Growth in private markets is on track to achieve $90 billion to $100 billion by 2027, supported by capital investments from Equitable Holdings.

• Capital Deployment and Shareholder Returns:

• Equitable returned $757 million to shareholders in Q3, including $676 million of share repurchases, completing most of the planned $500 million incremental buybacks.
• The company reduced outstanding debt by $500 million and announced strategic transactions to scale Wealth Management and AB's private markets businesses.
• This capital deployment is aimed at driving shareholder value and future growth, with a focus on attractive IRR investments and strategic acquisitions.

Contradiction Point 1

Mortality Experience and Impact

It involves the company's assessment of mortality experience and its impact on financial results, which is crucial for understanding risk management and financial stability.

To what extent did underlying mortality fall below expectations this quarter, and why are you confident it will normalize? - Thomas Gallagher(UBS)

2025Q3: Mortality was elevated, but the retained experience was only $10 million worse than expected. - Robin Raju(CFO)

How should we assess Individual Retirement earnings growth beyond Q3, considering RILA runoff and mix shifts? - Ryan Joel Krueger(KBW)

2025Q2: The mortality experience for the second quarter was favorable, resulting in a mortality gain of $37 million net of reinsurance, which was slightly better than our expectations. - Robin Raju(CFO)

Contradiction Point 2

Capital Management and Share Buybacks

It involves the company's capital management strategy and share buyback plans, which are critical for investors in assessing shareholder value and financial health.

Can you outline 4Q liquidity trends and capital allocation priorities? - Taylor Scott(Barclays)

2025Q3: We expect to end Q4 with more than $1 billion in cash at the HoldCo, with ongoing growth in cash flow from Asset and Wealth Management businesses. We will continue to prioritize shareholder returns and growth investments. - Robin Raju(CFO)

What is the capital management plan after the extraordinary dividends, and how will excess capital be deployed? - Elyse Beth Greenspan(Wells Fargo Securities)

2025Q2: The RGA deal unlocks $2 billion; $750 million was used to increase AB stake, and $500 million in share buybacks is planned. Remaining capital could be used for debt reduction, bolt-on acquisitions, or additional share buybacks. No plans for further extraordinary dividends from insurance this year, but organic cash generation will support future capital needs. - Robin Raju(CFO)

Contradiction Point 3

RILA Sales Growth and Market Conditions

It highlights differing perspectives on the drivers and market conditions affecting RILA sales growth, which is crucial for understanding the company's strategic focus and performance.

How are you differentiated in the RILA market, and are there aggressive competitive conditions? - Suneet Kamath (Jefferies LLC)

2025Q3: We are seeing a significant pickup in demand for RILAs as financial advisors continue to access our sales tools and product features, supporting record RILA sales in Q3. - Nicholas Lane(President of Equitable, Senior EVP & Head of Retirement, Wealth Management & Protection Solutions)

What is the size of the extraordinary dividend you plan to take up to the holding company? Are you seeing increased demand for your products due to market volatility? - Suneet Kamath (Jefferies)

2025Q1: We are seeing robust sales in April, driven by demographic trends and market volatility. Research shows that 70% of people are concerned about volatility impacting their retirement assets. We are well-positioned with our product portfolio to meet this need. - Nick Lane (President, Equitable Financial)

Contradiction Point 4

Bermuda Entity Strategy

It involves the strategic use of the Bermuda entity, which is crucial for capital management and growth plans.

Are there plans for additional Bermuda transactions and what is the timeline? - Francis Matten (BMO Capital Markets Equity Research)

2025Q3: Bermuda is a strategic lever for capital management, with plans for flow reinsurance in 2026 and broader growth post-2027. - Robin Raju(CFO)

Does the Bermuda entity serve as a tool to maintain the 60%-70% payout ratio target amid growth in the retirement sector, or could it generate upside or free up capital? - Ryan Krueger (KBW)

2024Q4: The Bermuda entity is aligned with our strategy, allowing us to consistently generate capital to the holding company and support growth momentum. It provides optionality to reinsure in-force business or support new business flow reinsurance, sustaining free cash flow growth to $2 billion by 2027. - Robin Raju(CFO)