Equitable Holdings, Inc. (EQH) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A indicate positive sentiment. Wealth management and private markets show strong growth, with strategic investments and partnerships in place. Despite some concerns about mortality exposure and increased expenses, management demonstrates confidence in achieving financial targets. Analysts' questions reveal a positive outlook on cash flow conversion and market leadership in RILA. The overall tone suggests a positive stock price movement, supported by optimistic guidance and strong financial performance.
Key Financial Performance
Full year non-GAAP operating earnings $5.64 per share or $6.21 per share after adjusting for notable items, up 1% over 2024. Growth was held back by elevated mortality claims.
Full year organic cash generation $1.6 billion, consistent with the $1.6 billion to $1.7 billion guidance range.
Assets under management and administration Ended 2025 at a record $1.1 trillion, up 10% year-over-year, supporting growth in fee and spread-based earnings.
Shareholder returns $1.8 billion returned in 2025, including $500 million of additional share repurchases after the life reinsurance transaction. Excluding these buybacks, the payout ratio was 68%.
Retirement net flows $5.9 billion in 2025, a 4% organic growth rate, helped by record RILA sales.
Wealth Management net inflows $8.4 billion in 2025, a 13% organic growth rate. The number of wealth planners increased by 12%.
AllianceBernstein net outflows $11.3 billion in 2025, including $4 billion of low fee outflows related to the RGA transaction. However, private markets business AUM increased by 18% to $82 billion.
Life reinsurance transaction with RGA Freed $2 billion of capital and reduced mortality exposure by 75%.
Fourth quarter non-GAAP operating earnings $513 million or $1.73 per share, up 8% year-over-year when adjusted for notable items.
Adjusted book value per share $33.84, excluding AOCI and with AB at market value.
Retirement fourth quarter earnings Increased 4% year-over-year and 2% sequentially after adjusting for notable items.
Asset Management (AB) fourth quarter earnings Increased 4% sequentially, with performance fees of $82 million.
Wealth Management fourth quarter earnings Increased 40% year-over-year, benefiting from favorable commission adjustments and elevated transaction fees.
Corporate and Other fourth quarter loss $123 million, higher than expected due to $10 million of one-time expenses and $25 million of elevated mortality.
Full year cash generation $2.6 billion, including $1 billion from the RGA transaction. Organic cash generation was modestly above $1.6 billion.
Value of new business (VNB) in retirement $600 million in 2025, with $580 million of capital deployed to support sales. VNB margin declined modestly due to sales mix and low spread environment.
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Operating Highlights
Record Retirement Sales: Achieved record retirement sales in 2025, driving an increase in Value of New Business (VNB) to $600 million.
Wealth Management Growth: Exceeded $200 million in annual earnings target two years ahead of schedule, with a 13% organic growth rate in net inflows.
Private Markets Expansion: AllianceBernstein's private markets business increased AUM by 18% to $82 billion, targeting $90-$100 billion by 2027.
Commercial Real Estate Lending: AllianceBernstein is enhancing its platform and will onboard over $10 billion of Equitable's commercial mortgage loan portfolio in 2026.
Funding Agreement-Backed Notes: Issued $5 billion in funding agreement-backed notes to capitalize on attractive spreads.
Life Reinsurance Transaction: Freed $2 billion of capital and reduced mortality exposure by 75% through a transaction with RGA.
Expense Savings: Achieved $120 million in expense savings, on track for $150 million by 2027.
Cash Generation: Generated $1.6 billion in organic cash in 2025, expected to grow to $1.8 billion in 2026 and $2 billion by 2027.
Shift to Capital-Light Model: Focused on reducing legacy insurance risks and increasing cash flow quality.
Increased Ownership in AllianceBernstein: Used proceeds from the RGA transaction to increase stake in AllianceBernstein and fund strategic acquisitions.
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Risk or Challenges
Elevated Mortality Claims: The company experienced elevated mortality claims in 2025, which negatively impacted earnings. Although exposure to mortality has been reduced by 75% following a reinsurance transaction, some residual exposure remains.
Competitive Market Conditions: The company faces competitive pressures in the retirement and wealth management sectors, which could impact growth and profitability.
Net Outflows in Asset Management: AllianceBernstein experienced net outflows of $11.3 billion in 2025, including $4 billion of low-fee outflows related to a reinsurance transaction. This could hinder growth in asset management.
Spread Compression in Retirement Business: The retirement segment is experiencing spread compression, which is expected to continue into the first half of 2026, potentially impacting profitability.
Adverse Mortality Experience in Corporate Segment: The corporate segment reported $25 million of elevated mortality claims in Q4 2025, concentrated in December, which negatively impacted results.
Seasonal Volatility in Mortality Claims: The company expects seasonal volatility in mortality claims, with higher expected claims in the first and fourth quarters of the year, which could impact financial performance.
Tax Rate Volatility: The company anticipates some volatility in its tax rate, which could affect net earnings.
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Guidance & Outlook
EPS Growth: Expected to accelerate in 2026, with growth exceeding the 12% to 15% target.
Cash Generation: Forecasted to increase to approximately $1.8 billion in 2026 and on track to reach $2 billion in 2027.
Assets Under Management (AUM): Ended 2025 at a record $1.1 trillion, supporting growth in fee and spread-based earnings. Continued growth in AUM is expected in 2026.
Retirement Business: Net flows and AUM growth are running ahead of forecasts. Institutional business inflows expected to remain at $600 million in 2026, with further ramp-up over time.
Wealth Management: Double-digit annual earnings growth expected, assuming normal market conditions. Strong momentum with a 13% organic growth rate in 2025.
AllianceBernstein (AB): Private markets business AUM expected to reach $90 billion to $100 billion by 2027. Institutional pipeline of $20 billion and $3 billion of insurance wins expected to fund in 2026. Investments in commercial real estate lending to onboard $10 billion of Equitable's commercial mortgage loan portfolio in the second half of 2026.
Mortality Exposure: Net mortality exposure reduced by 75% following the RGA transaction, significantly narrowing the range of potential outcomes.
Share Repurchases: Share count reduced by 9% in 2025, providing a tailwind for EPS growth in 2026.
Tax Rate: Total company tax rate expected to be approximately 20% in 2026, with potential reductions from tax planning initiatives.
Segment-Level Guidance: Mid- to high single-digit growth in pretax earnings for Retirement. Double-digit growth in Wealth Management earnings. AB performance fees expected to be at least $80 million to $100 million in 2026.
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Shareholder Return Plan
Dividend payout ratio: The payout ratio was 68% at the high end of the 60% to 70% target range, excluding additional share repurchases.
Dividend from Arizona insurance entity: The company has a track record of paying dividends from its Arizona insurance entity, providing visibility into future cash flows.
Share repurchases in 2025: $1.8 billion returned to shareholders, including $500 million of additional share repurchases following the life reinsurance transaction.
Reduction in share count: The company reduced its share count by 9% over the past year, providing a tailwind for EPS growth in 2026.
Fourth quarter share repurchases: $277 million of share repurchases executed in the fourth quarter of 2025.
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Key Q&A
Q:Can you talk about the quality of your private credit portfolio and any specific sectors of focus?
A:The private credit portfolio is about 16% of the total GA, with nearly 50% in corporate private placements. Direct lending, including software exposure, is a small portion (1% of total GA). Software exposure is immaterial (15 basis points of total GA) and underweight compared to industry benchmarks. AllianceBernstein's private credit exposure is $82 billion, with corporate direct lending at 25%. Elevated risk ratings are only 3%, and there have been zero net losses in software companies over the last decade. Overall, the portfolio is healthy and delivers good risk-adjusted returns.
Q:How is competition for wealth management advisers affecting your growth?
A:The company is encouraged by organic growth, with $8.4 billion in net flows for the year. Wealth planners grew 12% year-over-year, doubling since 2018. External hires contributed $1.4 billion in assets. The company targets advisers looking to grow or transition their practices and remains disciplined in hiring efforts.
Q:What can be done to close the valuation gap between AB and Equitable stock?
A:Management acknowledges the valuation gap and attributes AB's success to its integrated model. They focus on growing in attractive markets like U.S. retirement, asset management, and wealth management. The management team is focused on growing the business, maintaining expense discipline, and increasing cash generation to close the gap.
Q:What is the outlook for mortality exposure and potential reduction opportunities?
A:The company experienced $25 million in adverse mortality in the quarter due to large claims and smaller claims without reinsurance coverage. Guidance includes $50 million for mortality in 2026, which is conservative compared to the three-year average. The remaining 25% exposure is considered manageable, and the company will explore solutions to drive shareholder value.
Q:Why did commission and distribution expenses increase in the retirement segment?
A:The increase is due to strong sales growth and changes in the mix of sales between Equitable advisers and third-party channels. Less upfront DAC in Equitable advisers results in lower DAC amortization. Over time, earnings from the retirement business are expected to exceed commission expenses.
Q:What is the outlook for the FABN program and its growth potential?
A:The FABN program issued almost $5 billion in 2025, providing attractive IRRs and spread earnings. The program is disciplined, issuing only when pricing is favorable. Opportunities for growth in the FABN business are expected to continue.
Q:How is cash flow conversion improving, and what are the drivers?
A:Cash flow conversion is improving due to higher asset and wealth earnings and larger expected retirement dividends. The company upstreamed $2.6 billion in cash in 2025, with $1.6 billion from organic cash generation. The mix shift towards shorter-duration products with faster payback periods also contributes to improved cash conversion.
Q:What are the dynamics affecting retirement spreads and their stabilization?
A:Retirement spreads are affected by market value adjustments (MVAs) and the runoff of a profitable RILA block. Spread compression is expected to stabilize in the second half of 2026, with NIM growing alongside the general account balance.
Q:What is the outlook for the RILA market and competition?
A:The RILA market continues to grow due to demographics and macro uncertainty. Equitable remains the market leader with record sales and flows. While competition has increased, the company maintains discipline on IRRs and leverages its distribution, scale, and innovation to capture value.
Q:What is the impact of disclosure changes on analyzing individual life results?
A:Management emphasizes focusing on cash flow as the most important metric. The individual life business has volatility due to large face amounts and older issue ages. The RGA transaction reduced 75% of volatility, and guidance is conservative to account for recent experience.
Q:What is the company's position on in-plan annuities and secure income solutions?
A:The company sees long-term growth potential in the $8 trillion DC market, with an addressable market of $400-$600 billion for in-plan solutions. Regulatory tailwinds and partnerships with target date funds and record-keeping platforms support growth. The company has $920 million in sales and $1.8 billion in AUM in its institutional business.
Q:Review of Unclear Management Responses
A:Management avoided providing specific quantifications for the VNB payback period, stating only that it has materially decreased over time. Additionally, they did not disclose subsegments within Corporate and Other, citing noise within the data, which limits transparency.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AB
AUM
Asset
RGA transaction
Retirement
Slide
VNB
adviser
asset
benefit
capital
cash flow
cash generation
commission
end
exposure
fee
generation track
investment
level
life reinsurance
margin
market
momentum
mortality claim
progress
record
reinsurance transaction
retirement
sale
share repurchase
spread
tax rate
value
EQH Transcript
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Equitable Holdings, Inc. (EQH) Q4 2025 Earnings Call Transcript
Positive2-5
The earnings call summary and Q&A indicate positive sentiment. Wealth management and private markets show strong growth, with strategic investments and partnerships in place. Despite some concerns about mortality exposure and increased expenses, management demonstrates confidence in achieving financial targets. Analysts' questions reveal a positive outlook on cash flow conversion and market leadership in RILA. The overall tone suggests a positive stock price movement, supported by optimistic guidance and strong financial performance.
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