Equitable Holdings Inc (EQH) is a leading diversified financial services organization that has demonstrated strong growth momentum across its core business segments - Individual Retirement, Group Retirement, Asset Management, Protection Solutions, Wealth Management, and Legacy. The company's integrated business model, innovative product offerings, and strategic initiatives have positioned it as a formidable player in the U.S. retirement, asset management, and wealth management markets.
Business Overview: Equitable Holdings traces its roots back to 1859 when it was founded as The Equitable Life Assurance Society of the United States, one of the earliest life insurance companies in the country. Over the decades, the company has evolved and diversified its operations, becoming a leading provider of retirement solutions, asset management services, and wealth management offerings. A significant milestone in the company's history was the introduction of variable annuities in the 1970s, which expanded its product portfolio and market reach.
In 2018, Equitable Holdings underwent a major transformation when it demutualized and became a publicly traded company, listing on the New York Stock Exchange under the ticker symbol EQH. This transition allowed the company to access public capital markets and provided more flexibility to pursue strategic initiatives. Shortly after going public, Equitable Holdings acquired AllianceBernstein, a leading global asset management firm, solidifying its position as a diversified financial services company.
The company's resilience was tested during the 2008 financial crisis, which exposed some vulnerabilities in its variable annuity business. In response, Equitable Holdings implemented hedging programs and reinsurance agreements to better manage the risks associated with these products. More recently, the company faced challenges related to the COVID-19 pandemic, which impacted its mortality experience and investment performance. Equitable Holdings responded by taking proactive measures to manage these risks, including expense reduction initiatives and portfolio optimization.
Core Business Segments: Today, Equitable Holdings operates through six primary business segments: Individual Retirement, Group Retirement, Asset Management, Protection Solutions, Wealth Management, and Legacy. The Individual Retirement segment offers a diverse suite of variable annuity products, primarily catering to affluent and high-net-worth individuals saving for retirement or seeking retirement income. As of September 30, 2024, the total account value (AV) for this segment was $108.87 billion, comprising $66.47 billion in General Account AV and $42.39 billion in Separate Accounts AV. The segment experienced net inflows of $5.40 billion in the first nine months of 2024, driven by higher sales.
The Group Retirement segment provides tax-deferred investment and retirement services or products to plans sponsored by educational entities, municipalities, not-for-profit entities, and small-to-medium-sized businesses. As of September 30, 2024, the total AV and assets under administration (AUA) for this segment was $40.86 billion, with net inflows of $30 million for the first nine months of 2024.
The Asset Management segment, through the company's subsidiary AllianceBernstein (AB), provides diversified investment management and related services globally to a broad range of clients through three main channels: Institutional, Retail, and Private Wealth. As of September 30, 2024, the total assets under management (AUM) for this segment was $805.90 billion, an increase of 11.10% compared to December 31, 2023.
The Protection Solutions segment includes the company's life insurance and group employee benefits businesses, offering a variety of variable universal life, indexed universal life, and term life products. As of September 30, 2024, the total Protection Solutions Reserves were $37.00 billion, with the in-force face amount of individual life insurance products at $410.30 billion.
The Wealth Management segment provides discretionary and non-discretionary investment advisory accounts, financial planning and advice, life insurance, and annuity products through Equitable Advisors. As of September 30, 2024, the total assets under administration (AUA) for this segment was $100.43 billion, an increase of 15.40% compared to December 31, 2023.
The Legacy segment consists of the company's capital-intensive fixed-rate guaranteed minimum benefit business written prior to 2011. As of September 30, 2024, the total AV for this segment was $22.25 billion.
Financial Highlights: For the full year 2024, Equitable Holdings reported revenue of $8.82 billion and net income of $808 million. The company's operating cash flow (OCF) was $1.61 billion, with free cash flow (FCF) of $1.32 billion. In the most recent quarter (Q4 2024), Equitable Holdings reported revenue of $3.95 billion, representing a year-over-year growth of 11.3%. Net income for the quarter was $899 million, with OCF of $400 million and FCF of $374 million.
Equitable Holdings reported non-GAAP operating earnings of $2 billion, or $5.93 per share, representing a 29% year-over-year increase on a per-share basis. Adjusting for notable items, non-GAAP operating earnings per share was $6.18, up 20% compared to the prior year and above the company's 12-15% annualized growth target.
The company's assets under management and administration (AUM/AUA) increased 10% year-over-year to exceed $1 trillion, boding well for growth in fee and spread-based earnings going forward. Equitable Holdings generated $1.5 billion in cash flow to the holding company in 2024, at the high end of its guidance range, with over 50% of the cash flow coming from its asset and wealth management businesses.
Financials: The company continued to make progress on its strategic initiatives, achieving $100 million in run-rate expense savings and generating $80 million in incremental net investment income through portfolio repositioning, putting it on track to meet or exceed its $150 million expense savings and $110 million investment income targets by 2027.
Across Equitable's business segments, the company delivered strong organic growth, with full-year net inflows of $7.1 billion in Retirement, $4 billion in Wealth Management, and active net inflows of $4.3 billion in Asset Management. AllianceBernstein, the company's asset management arm, also had its second-highest year ever for firmwide sales.
The Individual Retirement segment saw operating earnings increase by $42 million to $713 million during the nine months ended September 30, 2024. The Group Retirement segment's operating earnings increased by $89 million to $390 million, while the Asset Management segment's operating earnings rose by $21 million to $318 million. The Protection Solutions segment experienced a significant turnaround, with operating earnings increasing by $131 million to $154 million. The Wealth Management segment's operating earnings grew by $23 million to $137 million, while the Legacy segment's operating earnings decreased by $26 million to $93 million.
Liquidity: Equitable has also established itself as a leader in the emerging in-plan guaranteed solutions market, highlighted by over $600 million in net inflows in 2024 from BlackRock's LifePath Paycheck offering and a new partnership with JPMorgan Asset Management to launch an in-plan solution.
The company's financial position remains strong, with a debt-to-equity ratio of 2.42x. At the end of 2024, Equitable had $1.8 billion in cash and liquid assets at the holding company level. Additionally, the company has a $1.6 billion revolving credit facility, which was undrawn at the end of the year. The current ratio and quick ratio both stand at 29.99, indicating a robust liquidity position.
Risks and Outlook: While Equitable Holdings has demonstrated impressive growth and execution, the company is not without its risks. The company's Protection Solutions segment, which includes its life insurance and group employee benefits businesses, has experienced some volatility in mortality experience, leading to earnings volatility. Equitable is actively working to manage this risk through a combination of expense management, in-force actions, and potential reinsurance solutions.
Additionally, the company's asset management and wealth management businesses are subject to market fluctuations, which can impact fee-based revenues and asset levels. However, Equitable's diversified business model and the growing contribution from its higher-margin asset and wealth management segments help to mitigate these risks.
Looking ahead, Equitable Holdings remains confident in its ability to deliver on its 2027 financial targets, which include growing annual cash generation to $2 billion, maintaining a 60-70% payout ratio, and achieving 12-15% annualized non-GAAP operating earnings per share growth. For 2025, the company forecasts cash generation of $1.6 billion to $1.7 billion, continuing the ramp to $2 billion by 2027. EPS growth is expected to be consistent with their 12% to 15% target.
In the Protection Solutions segment, Equitable forecasts 2025 earnings ex notable items to come in at the lower end of their $200 million to $300 million range, similar to 2024. The company expects alternative returns in their investment portfolio to come in at the lower end of their 8% to 12% target range, an improvement from the 5% return reported in 2024. The overall company tax rate is expected to be 20% for 2025.
Conclusion: Equitable Holdings has transformed itself into a diversified financial services powerhouse, leveraging its integrated business model to drive growth across its Retirement, Asset Management, and Wealth Management segments. The company's focus on innovation, strategic partnerships, and disciplined execution has enabled it to consistently deliver strong financial results and position itself for continued success in the years ahead. With a clear strategy in place and a track record of meeting or exceeding its financial targets, Equitable Holdings is well-positioned to capitalize on the attractive growth opportunities in the U.S. retirement, asset management, and wealth management markets.