Equitable Holdings, Inc. (EQH) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A highlight strong financial performance, strategic growth plans, and positive sentiment from management. Key factors include EPS growth exceeding targets, record AUM, favorable mortality trends, and active share repurchases. While some uncertainties exist, such as the merger's financial impact and revenue synergies, the overall outlook remains optimistic. The company's robust cash flow generation and strategic investments further support a positive sentiment, likely leading to a stock price increase within the 2% to 8% range over the next two weeks.
Key Financial Performance
Non-GAAP Operating Earnings Per Share $1.62 per share or $1.68 per share after adjusting for notable items, increased 25% year-over-year. This growth was driven by healthy organic growth momentum, improved mortality experience, and a lower share count.
Assets Under Management (AUM) $1.1 trillion, up 9% year-over-year. The increase was supported by higher average AUM levels despite modest equity market declines in the first quarter.
Total Sales Increased 10% year-over-year, driven by strength in RILAs (Registered Index-Linked Annuities) and $1.3 billion of net inflows.
Wealth Management Advisory Net Inflows $2 billion in the quarter, contributing to a 13% organic growth rate over the last 12 months. Growth was supported by the acquisition of Stifel Independent Advisors.
Asset Management Earnings Grew 11% year-over-year, driven by higher AUM and increased ownership. However, AB (AllianceBernstein) experienced net outflows of $7.1 billion, primarily in active equities and taxable fixed income.
Private Markets AUM Increased 13% year-over-year to $85 billion, with private wealth and private markets showing positive flows.
Adjusted Book Value Per Share (ex AOCI with ABM market value) $34.70, reflecting a more meaningful valuation compared to reported book value per share.
Net Interest Margin (NIM) Increased 3% sequentially, with a 5 basis point improvement in NIM spread excluding alternatives, reversing the downward trend in spreads experienced over the past year.
Adjusted Debt-to-Capital Ratio 24.5%, down 40 basis points sequentially, indicating improved financial leverage.
Cash at Holding Company $1.2 billion, above the $500 million target, with a target of $1.8 billion cash generation for 2026.
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Operating Highlights
Merger with Corebridge: Equitable announced a planned merger with Corebridge to create a diversified financial services company with over 12 million customers and $1.5 trillion in AUM. The merger is expected to achieve $500 million in expense synergies and deliver 10%+ accretion to EPS by 2028.
Stifel Independent Advisors Acquisition: Equitable closed the acquisition of Stifel Independent Advisors to scale its wealth management business.
Retirement Sales Growth: Retirement sales increased 10% year-over-year, driven by strength in RILAs, with $1.3 billion in net inflows.
Wealth Management Growth: Wealth Management achieved $2 billion in advisory net inflows and a 13% organic growth rate over the last 12 months.
Asset Management Expansion: AB's private markets AUM increased 13% year-over-year to $85 billion, with a target of $90-$100 billion by 2027. AB also has a record institutional pipeline of $28 billion.
Earnings Growth: Non-GAAP operating earnings increased 25% year-over-year to $1.62 per share, driven by organic growth, improved mortality experience, and a lower share count.
Assets Under Management (AUM): AUM ended the quarter at $1.1 trillion, up 9% year-over-year, providing a tailwind for earnings.
Balance Sheet Strength: The company has a combined NAIC RBC ratio of 475% and $1.2 billion in holding company liquidity, with a robust credit portfolio.
Corebridge Merger Strategy: The merger aims to leverage complementary strengths, achieve competitive scale, and diversify earnings sources. It will also enhance distribution capabilities and expand product offerings.
Focus on Scale and Efficiency: The merger will capitalize on scale advantages to reduce unit costs, achieve a lower cost of capital, and enhance profitability.
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Risk or Challenges
Market Volatility: The company acknowledges that near-term flows may remain volatile, particularly in asset management, which could impact earnings stability.
Increased Competition: The level of competition in retirement sales and flows has increased, which could pressure growth and profitability.
Net Outflows in Asset Management: AllianceBernstein experienced $7.1 billion in net outflows in the first quarter, driven by active equities and taxable fixed income, which could affect revenue and growth.
Credit Market Stress: The company has conducted stress tests to prepare for potential downturns in credit markets, but a severe credit stress scenario could still impact the RBC ratio and financial stability.
Lower Alternative Investment Returns: The alternative investment portfolio produced lower-than-expected returns, and the full-year return is now projected to be below prior guidance, which could impact overall earnings.
Integration Risks from Corebridge Merger: The planned merger with Corebridge involves integration planning and achieving $500 million in expense synergies, but there are risks associated with realizing these synergies and aligning operations.
Dependency on Market Conditions: The company's earnings and cash flow projections are sensitive to market cycles, including equity market performance and interest rate environments, which could affect financial outcomes.
Shift in Asset Mix: A shift in asset mix at AllianceBernstein has led to lower fee rates, which could impact profitability in asset management.
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Guidance & Outlook
Earnings Per Share (EPS) Growth: The company expects earnings per share growth to exceed the high end of its 12% to 15% target range in 2026.
Assets Under Management (AUM): AllianceBernstein (AB) aims to meet or exceed its target of $90 billion to $100 billion in AUM by the end of 2027. The merger with Corebridge is expected to add at least $100 billion of incremental assets to AB over the next few years, resulting in total AUM of nearly $1 trillion.
Merger with Corebridge: The merger is expected to achieve at least $500 million of expense synergies and deliver 10%+ accretion to EPS on a run-rate basis by the end of 2028. The combined company is projected to generate over $4 billion of cash flow annually and achieve a 15%+ return on equity.
Retirement and Institutional Business: The combined firm will have approximately $540 billion of AUM and aims to originate $70 billion to $80 billion of liabilities annually. The merger positions the company as a top 3 provider of fixed and indexed annuities and expands institutional capabilities, notably in pension risk transfer.
Wealth Management: The merger adds approximately $20 billion of assets under advisement (AUA) and expands proprietary product offerings to include fixed and indexed annuities and indexed universal life. This is expected to enhance the ability to recruit and develop financial advisers.
Asset Management: AB is expected to benefit from increased liability generation and commercial partnerships, including leveraging Corebridge's internal asset origination capabilities. Performance fees for AB are forecasted to be between $95 million and $115 million for the full year.
Capital and Financial Flexibility: The combined company will have a robust balance sheet with over $25 billion of statutory capital and a pro forma leverage ratio of approximately 26%. The company forecasts over $5 billion of annual earnings power and over $4 billion of cash flows to the holding company.
Share Buybacks: The company plans to execute share buybacks during open windows and remains committed to delivering a 60% to 70% payout ratio target for 2026.
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Shareholder Return Plan
Dividend payout ratio: We remain committed to delivering our 60% to 70% payout ratio target for 2026.
Share buybacks: During the first quarter, we returned $223 million to shareholders including $147 million of share repurchases. We were blacked out from buying back shares for the second half of the quarter due to the merger with Corebridge, which depressed our payout ratio for the period. We remain committed to delivering our 60% to 70% payout ratio target for 2026 and recognize that share buybacks look extremely compelling at the current valuation. We plan to be in the market purchasing shares during the open windows between now and the closing of the transaction.
Future share repurchase plans: We expect to file the initial merger proxy statement today after market close, and we can repurchase shares from that point until we mail the final proxy. There is not a set date for that mailing, but we do not expect it to occur until at least early June. We would then be able to repurchase shares again after the shareholder vote. If any repurchases from our 2026 capital plan are not completed prior to the merger close, we plan to execute them as part of an ASR shortly after the closing.
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Key Q&A
Q:What is the outlook for spread compression in the Retirement segment and the cost of funds?
A:Management expects spread income to grow as the general account grows, excluding embedded derivatives. They noted stabilization in spreads, with a 1 basis point improvement quarter-over-quarter. RILA sales were up 14% year-over-year, and pricing discipline has been maintained.
Q:What is the progress on the Equitable-Corebridge merger and its financial impact?
A:Integration planning is underway with leaders from both organizations. Management confirmed synergy opportunities and expects expense synergies to be quantified by the first half of 2027. Revenue synergies will also be explored but will be detailed later.
Q:What is the plan for share buybacks and coordination with Corebridge?
A:Management plans to be active in the market for share buybacks, coordinating with Corebridge to ensure accretion for shareholders. Any remaining buybacks will be completed as an ASR if needed.
Q:Is there a practical limit to the amount of assets AllianceBernstein (AB) can originate to back liabilities?
A:No, there is no practical limit. The company will leverage four asset managers, including AB, Blackstone, and BlackRock, to manage $70 billion to $80 billion in liabilities.
Q:Are the 2%-4% synergies from capital and taxes in the merger a conservative estimate?
A:Management considers this their best estimate but acknowledges potential upside as more work is done. They emphasized that these estimates do not include revenue synergies, which could further enhance the transaction's value.
Q:What is the potential impact of PGAAP on GAAP earnings if the merger closed now?
A:Management stated it is too early to determine the impact. They will finalize PGAAP prior to the merger's close and provide guidance at that time.
Q:What was the contribution of MVA gains to earnings in the Retirement segment this quarter?
A:MVA gains contributed approximately $10 million to earnings this quarter. Management does not expect these gains to be sustainable or included in future forecasts.
Q:Is there an opportunity to scale up the institutional spread business post-merger?
A:Yes, the larger balance sheet post-merger provides more capacity to lean into the institutional spread business, depending on market conditions and pricing.
Q:What were the mortality trends this quarter?
A:Mortality trends were favorable, with a benefit ratio of 83%, the lowest in the past year. Lower claims and fewer high-face amount claims contributed to this improvement.
Q:What is the company's approach to flow reinsurance in the Retirement segment?
A:The company has started using flow reinsurance for its RILA product and may expand it to other products. They view it as a tool to make products accretive and maintain asset management relationships.
Q:How will cash flow generation trend through the integration process?
A:Management expects strong cash flow generation, maintaining $1.8 billion guidance for this year and $2 billion for 2027. They plan to invest in growth and achieve $500 million+ in expense synergies with a 1.5x investment.
Q:Will the merger change the approach to excess capital levels?
A:Management believes the combined companies' diversified and resilient balance sheets will allow for better use of excess capital, including share buybacks and growth investments.
Q:Is the 15%+ EPS growth target achievable if buybacks are completed through an ASR?
A:Yes, management is confident in achieving the EPS growth target, even if buybacks are completed through an ASR, due to broad windows for capital deployment.
Q:What are the capital and tax benefits of the merger?
A:Management did not provide specific figures but emphasized that the merger will lead to significant expense, capital, and tax synergies, along with revenue synergies.
Q:What is the impact of VM-22 on the fixed annuity block from Corebridge?
A:Management stated it is too early to assess the impact but expressed confidence in the combined companies' positioning ahead of regulatory changes.
Q:What is the competitive environment in the RILA business and the merger's impact on distribution?
A:The RILA market remains competitive but rational. The merger will expand distribution reach and relationships, providing scale and better margins.
Q:What is the breakdown of the $70 billion to $80 billion in liability origination capacity?
A:Approximately 35% of Equitable's retirement sales come through Equitable advisers, with the rest through third-party distribution.
Q:Review of Unclear Management Responses
A:Management avoided providing specific figures or clear guidance on the following: 1) Revenue synergies from the merger, which will only be detailed in 2027. 2) The exact impact of PGAAP on GAAP earnings, stating it is too early to determine. 3) Specific capital and tax benefits of the merger, deferring details to a future Investor Day. 4) The potential impact of VM-22 on Corebridge's fixed annuity block, stating it is too early to assess.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AB
AUM
account
asset
balance sheet
basis
benefit
buyback
capital
cash flow
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client
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credit
decline
distribution
end
equity
expense
fee
firm
increase
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market cycle
merger Corebridge
mix
period
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retirement
return
risk
scale
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strength
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synergy
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value
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EQH Transcript
Equitable Holdings, Inc. (EQH) Q1 2026 Earnings Call Transcript
Positive5-5
The earnings call summary and Q&A highlight strong financial performance, strategic growth plans, and positive sentiment from management. Key factors include EPS growth exceeding targets, record AUM, favorable mortality trends, and active share repurchases. While some uncertainties exist, such as the merger's financial impact and revenue synergies, the overall outlook remains optimistic. The company's robust cash flow generation and strategic investments further support a positive sentiment, likely leading to a stock price increase within the 2% to 8% range over the next two weeks.
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.
Equitable Holdings, Inc. (EQH) Q3 2025 Earnings Call Transcript
Positive11-5
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.
Equitable Holdings, Inc. (EQH) Presents At KBW Insurance Conference 2025 Transcript
Neutral9-4
EQH Report
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