8-K: Equitable Holdings Reports Strong First Quarter 2024 Results, Operating Earnings Surge 49%

Equitable Holdings announced a robust first quarter for 2024, with operating earnings per share increasing by 49% compared to the same period last year, driven by strong performance across its core businesses.

Summary

• Equitable Holdings reported a net income of $114 million, or $0.30 per share, for the first quarter of 2024.
• Non-GAAP operating earnings reached $490 million, or $1.43 per share, a 49% increase compared to the first quarter of 2023.
• Adjusting for notable items, non-GAAP operating earnings were $491 million, or $1.43 per share, representing an 18% increase year-over-year.
• The company's total assets under management and administration (AUM/A) grew to $974 billion, a 13% increase year-over-year.
• Retirement premiums and deposits increased by 42% compared to the first quarter of 2023, resulting in net inflows of $1.5 billion.
• Asset Management saw active net inflows of $3.7 billion, driven by strong retail demand.
• Wealth Management operating earnings increased by 34% year-over-year.
• Equitable returned $326 million to shareholders through dividends and share repurchases, aligning with its 60-70% payout ratio target.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, particularly in operating earnings and AUM growth. While there are some negative aspects, such as net outflows in certain segments, the overall tone is optimistic and suggests a company on a positive trajectory.

Positives

• The company experienced strong growth in operating earnings, driven by increased sales and net flows across its businesses.
• Equitable is well-positioned to capitalize on the current favorable environment for growth, particularly in the U.S. market with an aging population and a growing retirement savings gap.
• The company is on track to achieve its 2027 financial targets, including $2 billion of holding company cash flow and 12-15% annual growth in non-GAAP EPS.
• The company intends to increase its quarterly cash dividend from $0.22 to $0.24 per share in the second quarter.
• The company's year end combined RBC ratio was 411%, above the company's target of 375-400%.

Negatives

• Net income attributable to Holdings decreased to $114 million from $177 million in the first quarter of 2023.
• Group Retirement reported net outflows of $132 million in the first quarter.
• Wealth Management reported advisory net outflows of $175 million, primarily due to an advisor group departure.
• Legacy business continues to run-off at $2-$3 billion annually with net outflows of $659 million in the quarter.
• The operating loss in Corporate and Other increased to $105 million from $81 million in the prior year quarter.

Risks

• The company faces risks related to financial market conditions, including interest rate fluctuations and equity market volatility.
• Operational risks include reliance on dividend payments from subsidiaries and potential failures by service providers.
• Credit and investment risks include counterparty defaults and economic downturns affecting investments.
• Legal and regulatory risks include changes in legislation affecting financial institutions and insurance regulations.
• The company is exposed to risks related to its common stock and general risks such as strong industry competition and information system failures.

Future Outlook

The company remains focused on delivering against its 2027 financial targets of $2 billion of holding company cash flow, 12-15% annual growth in non-GAAP EPS, and a 60-70% payout ratio of non-GAAP operating earnings.

Management Comments

• Strong sales and net flows across our businesses are driving increases in both spreadand fee-based earnings, and Equitable is well-positioned to capitalize on the current favorable environment for growth, said Mark Pearson, President and Chief Executive Officer.
• The U.S. market presents a tremendous opportunity with an aging population and a growing retirement savings gap. Equitable and AllianceBernstein are uniquely suited to address this need given our leading positions across the retirement, wealth management, and asset management businesses, Mr. Pearson continued.
• We are pleased with the acceleration in earnings growth this quarter and remain focused on delivering against our 2027 financial targets, Mr. Pearson concluded.

Industry Context

The announcement highlights Equitable's strong position in the retirement, wealth management, and asset management sectors, aligning with the broader trend of an aging population and increasing demand for retirement savings solutions. The company's focus on spreadand fee-based earnings also reflects industry trends towards diversified revenue streams.

Comparison to Industry Standards

• Equitable's 49% year-over-year increase in non-GAAP operating earnings per share is a strong result compared to many of its peers in the financial services industry, such as Prudential Financial and Lincoln National, which have seen more modest growth or even declines in recent quarters.
• The $3.7 billion in active net inflows for AllianceBernstein is a positive sign, especially when compared to other asset managers who are facing headwinds from the shift to passive investing, such as BlackRock and State Street.
• The 13% year-over-year growth in AUM/A to $974 billion is also a solid performance, placing Equitable among the larger players in the industry, such as TIAA and Fidelity.
• However, the net outflows in Group Retirement and Wealth Management are areas of concern, as other companies like Empower Retirement and Schwab have been experiencing strong inflows in these segments.

Stakeholder Impact

• Shareholders will benefit from increased dividends and share repurchases.
• Employees may see positive impacts from the company's growth and financial stability.
• Customers will have access to a wider range of financial products and services.
• Suppliers and creditors will benefit from the company's strong financial position.

Next Steps

• The company intends to increase its quarterly cash dividend from $0.22 to $0.24 per share in the second quarter.
• Equitable Holdings will host a conference call on May 1, 2024, to discuss its first quarter 2024 results.

Key Dates

Keywords

Equitable Holdings, Operating Earnings, Asset Management, Retirement, Wealth Management, Net Inflows, AUM, Financial Results, Insurance, Annuities