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01/10 19:55
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A revealed strong financial performance, strategic product development, and a positive market strategy with promising growth in private credit and RILA markets. Despite some concerns about mortality experience, management's guidance and strategic investments suggest a positive outlook. Shareholder returns through buybacks and the RGA transaction proceeds further support a positive sentiment.
Non-GAAP operating earnings $455 million or $1.48 per share, down 6% year-over-year on a per share basis. Adjusting for notable items, non-GAAP operating EPS was $1.67, up 2% compared to the prior year. The decline was attributed to notable items and adjustments, while the increase after adjustments was due to growth in core businesses and completion of the life reinsurance transaction.
Assets under management (AUM) $1.1 trillion, up 4% sequentially and 7% year-over-year. The increase was driven by strong equity markets and growth in private markets.
Retirement businesses net flows $1.1 billion during the quarter, driven by continued growth in RILA sales. Seasonal factors in the K-12 teachers business and lack of material institutional flows were noted.
Wealth Management advisory net inflows $2.2 billion, representing a 12% annualized growth rate. Adviser productivity increased 8% year-over-year.
Asset Management net outflows $2.3 billion, which includes $4 billion of low-fee assets transferred to RGA as part of the life reinsurance transaction. Excluding this, AB had net inflows of $1.7 billion, driven by private wealth and institutional channels.
Private markets assets $80 billion, up 17% year-over-year, on track to achieve AB's $90 billion to $100 billion target by 2027.
Capital deployment $1.5 billion used to drive shareholder value and future growth. This included $757 million returned to shareholders, $676 million of share repurchases, and $500 million debt reduction.
Adjusted book value per share $33.59, reflecting adjusted debt-to-capital ratio of 24.5%.
Net interest margin (NIM) Down year-over-year due to lower market value adjustment gains and spread compression, but increased 4% sequentially. Expected to improve as older RILA block runs off and general account assets grow.
AB earnings Up 39% year-over-year, driven by increased ownership from 62% to 69%, favorable markets, and higher base fee rates. Adjusted margin improved 290 basis points year-over-year to 34.2%.
Wealth Management earnings Increased 12% year-over-year, excluding reserve release. Segment earnings are expected to continue growing at a double-digit rate.
Corporate and Other results Negatively affected by notable items and adverse mortality. Future periods expected to see muted impact from mortality due to life reinsurance transaction.
Alternatives portfolio return 8% annualized return in the quarter, exceeding guidance of 6% due to a gain on a strategic investment.
Consolidated tax rate 17% for the quarter, below the normal expectation of 20% due to favorable items. Full-year consolidated tax rate expected to be in the high teens.
RILA Sales: Retirement businesses generated $1.1 billion of net flows during the quarter, driven by continued growth in RILA sales.
Wealth Management Advisory Net Inflows: Wealth Management had $2.2 billion of advisory net inflows, a 12% annualized growth rate.
Private Markets Assets: Private markets assets increased 17% year-over-year to $80 billion, on track to achieve $90 billion to $100 billion target by 2027.
Stifel Independent Advisors Acquisition: Acquiring Stifel Independent Advisors with over 110 advisors and $9 billion of advisory assets, expected to close in the first half of 2026.
FCA Re Investment: Allocated $100 million to support AB's investment in FCA Re, managing $1.5 billion of private credit assets for FCA Re.
Capital Deployment: Allocated $1.5 billion to drive shareholder value, including $757 million returned to shareholders and $500 million debt reduction.
Expense Efficiency Initiatives: Incremental benefits expected from expense efficiency initiatives to contribute to the bottom line over time.
Wealth Management Growth Strategy: Focus on scaling Wealth Management business through acquisitions like Stifel Independent Advisors and enhancing adviser productivity.
Private Markets Expansion: Investments in private markets and strategic partnerships to grow AUM and expand into new insurance markets like pension risk transfer and Asia.
Net Outflows in Asset Management: AB reported total net outflows of $2.3 billion, which includes $4 billion of low-fee assets transferred to RGA as part of the life reinsurance transaction. Excluding this, AB had net inflows of $1.7 billion. This indicates potential challenges in maintaining consistent inflows and managing asset retention.
Decline in Non-GAAP Operating Earnings: Non-GAAP operating earnings were $455 million or $1.48 per share, down 6% year-over-year on a per share basis. This decline could impact financial performance and investor confidence.
Adverse Mortality Experience: There was a $36 million adjustment for July mortality experience, most of which was covered under the reinsurance agreement with RGA. However, this indicates potential volatility in life insurance-related results.
Spread Compression in Retirement Business: Net interest margin (NIM) was down year-over-year due to a lower level of market value adjustment gains and some spread compression as the pre-2020 RILA block runs off. This could impact profitability in the retirement segment.
Exposure to Interest Rate Cuts in Wealth Management: Cash sweep income accounted for 15% of the segment's year-to-date earnings, and a 100 basis points Fed rate cut would reduce annual earnings by approximately $15 million. This indicates sensitivity to interest rate changes.
One-Time Expenses in Corporate and Other: There were $24 million of one-time expenses in Corporate and Other, which could affect short-term financial results.
GAAP Net Loss: A GAAP net loss of $1.3 billion was reported, primarily driven by a one-time impact from asset transfers at the closing of the individual life reinsurance transaction. This could raise concerns about the financial impact of strategic transactions.
Higher DAC Amortization in Retirement Business: Growth in revenues was partially offset by higher DAC amortization, reflecting growth in the block and increased surrenders. This could pressure margins in the retirement segment.
Future Financial Targets: Equitable Holdings remains confident in achieving its 2027 financial targets, including $2 billion of annual cash generation by 2027.
Wealth Management Growth: Wealth Management earnings are forecasted to continue growing at a double-digit rate, driven by asset growth and further advisory productivity improvement. Margins are expected to expand over time as the business scales.
Private Markets Growth: Private markets assets are on track to achieve AB's $90 billion to $100 billion target by 2027, with a 12% CAGR since 2022.
Capital Deployment: Equitable Holdings plans to continue strategic investments, including the acquisition of Stifel Independent Advisors, expected to close in the first half of 2026 and add $10 million to Wealth Management earnings in 2027.
Tax Rate Outlook: The full-year consolidated tax rate for 2025 is expected to be in the high teens, with a return to 20% in 2026.
Net Interest Margin (NIM): NIM is expected to increase from the third quarter level, driven by growth in general account assets, with spread pressure from older RILA blocks becoming minimal by mid-2026.
Performance Fees: Full-year performance fees for AB are projected to be $130 million to $155 million, up from the prior forecast of $110 million to $130 million.
Cash Generation: Organic cash generation for 2025 is expected to be $1.6 billion to $1.7 billion, with over 50% coming from Asset and Wealth Management businesses.
Expense Efficiency Initiatives: Incremental benefits from expense efficiency initiatives are expected to contribute to future earnings growth.
Dividend Payout Ratio: For the full year, the payout ratio is expected to be at the higher end of the 60% to 70% guidance range.
Cash Upstream: Over the past 4 quarters, $1.6 billion in subsidiary dividends were received, including $1.3 billion from the Arizona insurance entity.
Share Repurchases: $676 million of share repurchases were completed during the quarter, with most of the planned $500 million of incremental buybacks executed.
Share Count Reduction: Over the past 4 quarters, the share count was reduced by approximately 8%, contributing to growth in earnings per share.
The earnings call summary and Q&A revealed strong financial performance, strategic product development, and a positive market strategy with promising growth in private credit and RILA markets. Despite some concerns about mortality experience, management's guidance and strategic investments suggest a positive outlook. Shareholder returns through buybacks and the RGA transaction proceeds further support a positive sentiment.
The earnings call summary reveals a mixed performance: slight declines in non-GAAP operating earnings and protection solutions segment loss, but strong net inflows in retirement and wealth management, increased advisor productivity, and a 19% rise in AB operating earnings. The Q&A section highlights robust sales driven by market volatility and demographic trends, and a positive outlook on cash flow and leverage ratios. The planned $500 million share repurchase and potential for additional buybacks further boost sentiment. Despite some uncertainties, the overall outlook is positive, likely leading to a stock price increase of 2% to 8%.
The earnings call summary indicates strong financial performance with a 10% revenue increase and a 15% net income rise year-over-year. Additionally, margins have improved, and the company projects a positive outlook. While the Q&A section highlighted some uncertainties, such as supply chain challenges and undisclosed revenue targets, the overall sentiment remains positive due to stable margins, strategic growth initiatives, and increased profitability. The lack of specific revenue guidance is a slight concern, but the overall outlook is optimistic, suggesting a positive stock price movement.
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