Executive Summary / Key Takeaways

• The RGA (RGA) reinsurance transaction fundamentally de-risked Equitable Holdings, freeing over $2 billion of capital while eliminating 75% of mortality volatility, transforming the company from a capital-intensive life insurer into a diversified financial services platform focused on higher-return retirement, asset management, and wealth management businesses.

• Equitable's integrated "flywheel" model creates a durable competitive moat that competitors cannot replicate: the company generates attractive yields through AllianceBernstein (AB)'s origination capabilities, distributes products through privileged channels including 15,000 third-party advisors and its own Equitable Advisors network, and leverages scale to deliver superior economics across its $1.1 trillion asset platform.

• All three growth engines are firing simultaneously: Retirement segment RILA sales hit record highs with 7% growth in Q3 2025, Asset Management (AB) delivered 39% earnings growth with 34.2% margins, and Wealth Management achieved 12% organic growth while reaching $200 million in earnings two years ahead of plan.

• Disciplined capital allocation is driving shareholder value: The company deployed $1.5 billion in Q3 2025 through strategic share repurchases ($676 million), debt reduction ($500 million), and growth investments, while increasing its AB ownership to 69% to capture more economic benefits from the integrated model.

• The market underappreciates the quality of transformed earnings: Trading at 11.7x free cash flow with a 2.3% dividend yield and 76.7% payout ratio, EQH offers an attractive risk/reward profile as management executes on its 2027 targets of $2 billion annual cash generation and 12-15% EPS growth.

Setting the Scene: From Life Insurer to Financial Services Platform

Equitable Holdings, founded in 1859 and headquartered in New York, has spent the past decade executing one of the most significant strategic transformations in the insurance industry. For most of its 166-year history, the company operated as a traditional life insurer, accumulating capital-intensive policies that exposed shareholders to mortality volatility and required massive balance sheet commitments. This legacy business model, while stable, generated low returns on equity and trapped capital that could not be deployed to higher-growth opportunities.

The company's demutualization in 1992 and subsequent IPO in 2018 marked important milestones, but the real inflection point came in 2025 with the completion of the RGA reinsurance transaction. This single deal ceded 75% of the in-force individual life insurance block and Closed Block to RGA, effective April 1 and completed July 31, 2025. Why does this matter? It fundamentally altered Equitable's risk profile and capital intensity. The transaction freed over $2 billion of capital while reducing exposure to mortality volatility—the primary source of earnings unpredictability that had plagued the company for decades. More importantly, it signaled management's decisive pivot away from capital-heavy protection businesses toward capital-light, fee-based growth engines.

Today, Equitable operates as a diversified financial services company with three reportable segments: Retirement ($171 billion account values), Asset Management ($860 billion AUM through AllianceBernstein), and Wealth Management ($118 billion assets under administration). This structure reflects how management actually runs the business, not historical legacy divisions. The company sits at the intersection of powerful demographic and structural trends: 4 million Americans turning 65 each year, $600 billion annually rolling out of 401(k)s into better vehicles, and an $8 trillion defined contribution market with a potential $400-600 billion addressable market for in-plan annuities. Equitable's position in this value chain is unique—it can capture the full retirement lifecycle from accumulation through decumulation while generating fees at multiple points along the way.

Business Model Evolution: The Strategic Masterstroke of 2025

The RGA transaction represents more than a risk management exercise—it is the strategic masterstroke that unlocks Equitable's true value proposition. Prior to this deal, the Corporate and Other segment, which housed the life insurance business, generated operating losses of $59 million in Q3 2024 and $172 million for the first nine months of 2024. These losses masked the strong performance of the growth businesses and created earnings volatility that repelled valuation-sensitive investors.

What does the transaction imply for future earnings quality? Management now expects the quarterly loss in Corporate and Other to be "smaller than the $100 million per quarter that we had guided to prior to the resegmentation." More importantly, the retained mortality experience net of the RGA benefit was only about $10 million worse than expected in August and September 2025—demonstrating that the reinsurance effectively neutralized the primary source of earnings volatility. This matters because it allows investors to value Equitable on the predictable, fee-based earnings from its three growth segments rather than discounting for potential mortality shocks.

The capital freed by the transaction enabled a series of value-accretive moves: $800 million to increase AB ownership from 62% to 69%, $500 million for incremental share buybacks, $500 million for debt reduction, and $200 million for growth investments including the Stifel Independent Advisors acquisition and FCA Re sidecar. Approximately $300 million remains for additional deployment. This allocation demonstrates management's discipline—every dollar is deployed against strategic priorities that either increase earnings power (higher AB ownership), reduce risk (debt paydown), or accelerate growth (acquisitions). The Bermuda reinsurance subsidiary established January 1, 2025 provides additional capital management flexibility, offering optionality for in-force or new business flow reinsurance and potentially third-party business post-2027.

Technology, Products, and Strategic Differentiation: The Flywheel Effect

Equitable's competitive moat centers on what management calls its "flywheel"—a self-reinforcing system where each business segment strengthens the others in ways competitors cannot replicate. This is not marketing rhetoric; it manifests in tangible economic advantages across three dimensions.

First, asset origination capability: AllianceBernstein's investment management platform generates attractive risk-adjusted yields that flow directly into Equitable's general account. The company has deployed over $17 billion of its $20 billion commitment to AB's private markets platform, which has grown AUM at a 12% CAGR since 2022 and is on track to reach $90-100 billion by 2027. This capability provides Equitable privileged access to investment opportunities that third-party insurers cannot match, enabling the company to earn superior spreads on its retirement products while maintaining investment-grade quality (98% of the general account portfolio is investment-grade with an A2 rating). As management stated, "We have direct access of underwriting. We need to get comfortable first with the underwriting of the portfolio that we're being compensated for any risk."

Second, privileged distribution: Equitable's multi-channel approach combines proprietary distribution through Equitable Advisors with third-party relationships spanning over 15,000 advisors. This approach creates lower-cost liabilities and more curated product placement than pure third-party players. In the RILA market, where Equitable pioneered the product over a decade ago, this distribution advantage translates to record sales in 9 of the last 10 quarters and sales that have more than doubled over three years. The August 2025 launch of SCS Premier, which allows consumers to pay a fee for a higher cap, demonstrates how Equitable uses distribution insights to innovate in ways that align with advisor needs and consumer best interests.

Third, scale and market leadership: As the #1 RILA provider with a wholesaler footprint covering the market, Equitable achieves economies of scale in product development, risk management, and technology investment. This scale supports the 15% IRR targets on new RILA business even as margins have compressed from pioneer levels. Management remains "very mindful of competitive trends on pricing," noting that new entrants typically offer "teaser rates" that prove unsustainable. Equitable's scale allows it to focus on "profitable growth" rather than market share at any cost.

The sidecar strategy exemplifies the flywheel's power. AB leveraged Equitable's insurance expertise for due diligence on the FCA Re sidecar, which provides exposure to new insurance markets (pension risk transfer, Asia) while growing AB's private credit assets under management. AB expects to manage $1.5 billion of incremental private credit assets for FCA Re, generating fee revenue while Equitable gains access to new risk pools. This synergy is unavailable to standalone asset managers or insurers.

Financial Performance & Segment Dynamics: Evidence of Strategy Working

The Q3 2025 results provide compelling evidence that the transformation is delivering tangible results. Total Assets Under Management and Administration reached a record $1.1 trillion, up 4% sequentially and 7% year-over-year. This scale drives fee revenue growth across all three segments while creating operational leverage.

Retirement Segment: Account values grew $19.8 billion over nine months to $171 billion, driven by $1.1 billion in net flows in Q3 and 5% organic growth year-to-date. Operating earnings of $401 million declined $15 million year-over-year. This decline was influenced by a $165 million increase in interest credited to policyholders, which was partially mitigated by a $153 million increase in net investment income. The key insight is that net interest margin increased 4% sequentially and is expected to continue rising from Q3 levels as general account assets grow. Management expects spread pressure from the pre-2020 RILA block to be "de minimis by mid-2026," removing a key headwind. The segment's 50% fee-based revenue mix provides stability while maintaining equity market upside participation.

Asset Management (AB): This segment delivered standout performance with Q3 operating earnings up 39% year-over-year to $154 million, driven by Equitable's increased ownership and strong underlying results. The 34.2% adjusted operating margin exceeded the 33% target and improved 290 basis points year-over-year. AUM reached $860 billion, with private markets AUM up 17% year-over-year to $80 billion. The significance is that AB's margin expansion demonstrates operational leverage as AUM grows, while the private markets focus (targeting $90-100 billion by 2027) positions the firm in higher-fee alternative assets. The $2.3 billion in total net outflows included $4 billion of low-fee assets transferred to RGA, meaning organic flows were actually positive $1.7 billion—a crucial distinction that shows underlying business health.

Wealth Management: This emerging leader generated $59 million in operating earnings, up 12% year-over-year, with a 12% annualized organic growth rate that compares favorably to peers. Advisory net inflows of $2.2 billion in Q3 demonstrate strong momentum, while advisor productivity increased 8% year-over-year. The segment is on track to exceed $200 million in annual earnings ahead of schedule, with management expecting "double-digit rate" growth moving forward. The Stifel Independent Advisors (SF) acquisition, expected to close in H1 2026, will add $9 billion in AUA and approximately $10 million to earnings in 2027, demonstrating the scalability of the wealth platform.

Corporate and Other: The segment reported a $159 million operating loss in Q3, which included notable items. However, only $10 million of this was retained mortality experience net of RGA benefits. This validates the reinsurance transaction's effectiveness—what would have been a significant volatility source is now a manageable, predictable expense. Management now expects future quarterly losses to be smaller than the previous $100 million guidance, with full-year 2025 losses projected around $400 million.

Outlook, Management Guidance, and Execution Risk

Management's 2027 financial targets—$2 billion annual cash generation, 12-15% EPS growth CAGR, and 60-70% payout ratio—provide a clear roadmap for value creation. The company is well on track, with 2025 cash generation expected at $1.6-1.7 billion and the RGA transaction contributing an additional $1 billion. Over 50% of organic cash generation comes from Asset and Wealth Management businesses, highlighting the success of the diversification strategy.

The path to $2 billion by 2027 assumes an 8% normal equity market return and continued execution across all segments. Alternative investment returns, which generated 8% annualized in Q3 (above the 6% guidance due to a strategic investment gain), are expected to be at the low end of the 8-12% target range in Q4 before grading up as M&A and IPO activity accelerates. Alternative investment returns directly impact both Retirement segment spreads and Corporate earnings, making them a key variable for hitting cash generation targets.

Management's guidance on key metrics provides insight into execution priorities: DAC amortization is expected to increase approximately $4 million per quarter from Q3 baseline, NIM should continue increasing from Q3 levels, and Wealth Management margins should expand over time as the business scales. The consolidated tax rate is expected to normalize to 20% in 2026 after a 17% rate in Q3 2025 due to favorable items.

The primary execution risk lies in scaling Wealth Management through acquisitions while maintaining the 12% organic growth rate. The Stifel integration will test management's ability to onboard 110+ advisors and $9 billion in AUA without disrupting the existing culture and productivity metrics. Success here would validate the bolt-on acquisition strategy and support the double-digit earnings growth target.

Risks and Asymmetries: What Could Break the Thesis

While the transformation has materially improved Equitable's risk profile, three key risks could challenge the investment thesis.

RILA Market Competition: The competitive landscape has intensified significantly since Equitable pioneered the RILA market a decade ago. Management acknowledges that "the majority of carriers now having launched the product" and that new entrants often offer "teaser rates" to gain market share. While Equitable maintains pricing discipline targeting 15% IRRs, sustained aggressive pricing could pressure new business margins and slow net flow growth. The risk is mitigated by Equitable's scale, distribution relationships, and innovation track record—having launched dual-direction products and the new SCS Premier fee-based product—but investors should monitor whether RILA sales growth decelerates from the current double-digit pace.

Interest Rate Sensitivity: While management emphasizes that RILA profitability depends on 10-year Treasury rates, volatility, and corporate spreads rather than short-term Fed policy, the broader business has some rate exposure. Cash sweep income accounts for 15% of Wealth Management earnings, and a 100 basis point Fed rate cut would reduce annual earnings by approximately $15 million. More importantly, sustained low rates could compress net interest margins in the Retirement segment and reduce demand for fixed annuity products, though the current macro uncertainty actually benefits RILA demand as clients seek buffered equity exposure.

Wealth Management Integration Risk: The Stifel acquisition represents a new phase of inorganic growth for a segment that has primarily grown organically. Integrating 110 advisors, aligning technology platforms, and maintaining the 12% organic growth rate while absorbing $9 billion in AUA presents execution challenges. Failure to realize projected synergies could delay margin expansion and reduce the segment's contribution to the 2027 cash generation target.

Regulatory and Market Risk: The NAIC's focus on CLO capital requirements and potential revisions to DOL fiduciary rules could increase compliance costs or restrict distribution channels. Additionally, equity market volatility impacts both fee-based revenue (50% of Retirement segment) and alternative investment returns, creating some earnings variability despite the company's market-neutral hedging approach.

Competitive Context: Where Equitable Stands

Against direct annuity competitors, Equitable occupies a unique position. Jackson Financial (JXN) leads in overall annuity sales volume and RILA market share, consistently ranking #1 in LIMRA data. Jackson Financial's Q3 2025 results showed strong beats with 20.78% EPS surprise and robust retail annuity sales growth. However, Jackson Financial's pure-play annuity focus creates higher sensitivity to equity markets and sales cyclicality compared to Equitable's diversified model. Equitable's $1.1 trillion AUM/A platform and positive net flows across all segments provide more stable, recurring revenue than Jackson Financial's transaction-based model.

Lincoln National (LNC) competes directly in variable annuities and group protection, with strong distribution and product breadth. Lincoln National's Q3 2025 earnings grew 13% year-over-year with improving margins. Yet Lincoln National's broader retail approach lacks Equitable's affluent/HNW focus and AB integration, resulting in less customized solutions and lower capital efficiency. Equitable's operational efficiency is evident in its record inflows and AUM growth, while Lincoln National's growth remains more sales-dependent.

Brighthouse Financial (BHF) specializes in annuities with record Shield Level Annuity sales of $2.7 billion in Q3, but its narrower focus and higher volatility contrast with Equitable's diversified earnings streams. Equitable's technology-enabled distribution and integrated model provide greater stability than Brighthouse Financial's sales-spike driven results.

Voya Financial (VOYA) excels in workplace retirement plans with $785 billion in client assets and strong commercial momentum from acquisitions like OneAmerica. Voya Financial's 29% earnings growth and 39.8% margins demonstrate effective execution. However, Voya Financial's corporate plan focus differs from Equitable's nonprofit/education niche and individual annuity strength. Equitable's holistic affluent client solutions and protection integration provide differentiation, though Voya Financial's acquisition-driven growth has outpaced Equitable's organic pace.

The key insight is that Equitable's diversification is its primary competitive advantage. While pure-play competitors may lead in specific product categories, Equitable's ability to capture value across the entire retirement lifecycle—through asset management fees, advisory fees, and insurance solutions—creates a more resilient and capital-efficient model. The integrated flywheel generates superior economics that standalone players cannot replicate.

Valuation Context: Quality at a Reasonable Price

At $46.69 per share, Equitable trades at a market capitalization of $14.0 billion and an enterprise value of $5.15 billion, reflecting its strong balance sheet with net cash position. The valuation metrics reveal a disconnect between business quality and market pricing that supports the investment thesis.

Cash Flow Metrics: The company trades at 11.7x price-to-free-cash-flow and 11.0x price-to-operating-cash-flow based on TTM results. These multiples are attractive for a business generating $1.49 billion in annual free cash flow with a clear path to $2 billion by 2027. The 8.5% free cash flow yield provides substantial capital return capacity through the 2.31% dividend yield (76.7% payout ratio) and ongoing share repurchases ($676 million in Q3 2025 alone).

Earnings-Based Metrics: The forward P/E of 6.46x appears exceptionally low, though TTM metrics are distorted by the one-time RGA transaction impacts. The company's non-GAAP operating earnings of $1.48 per share in Q3 2025, up 2% year-over-year after adjusting for notable items, provides a better baseline. The 12-15% EPS growth target through 2027, supported by share repurchases and margin expansion, makes the current valuation compelling.

Peer Comparison: Competitors trade at mixed valuations reflecting their business models. Jackson Financial trades at 4.73x forward earnings but with higher beta (1.46) and less diversification. Lincoln National trades at 5.33x forward earnings with stronger ROE (21.7%) but more volatile earnings. Brighthouse Financial trades at just 3.29x forward earnings, reflecting its narrower focus and higher risk profile. Voya Financial trades at 7.12x forward earnings with higher margins but slower organic growth. Equitable's valuation sits in the middle of this range while offering superior diversification and capital management.

Balance Sheet Strength: The adjusted debt-to-capital ratio of 24.5% (including AB at market value) is conservative, and the combined NAIC RBC ratio above 500% post-transaction indicates strong capital adequacy. S&P's upgrade to 'A-' issuer rating reflects the improved earnings quality and capital flexibility. This financial strength provides optionality for additional strategic investments or accelerated capital return.

The valuation disconnect stems from the market's slow recognition of Equitable's transformation. Investors still price the stock like a traditional life insurer with mortality risk, rather than a diversified financial services platform with predictable fee-based earnings. As the new segment structure reports clean results and management delivers on its 2027 targets, this discount should narrow.

Conclusion: A Transformed Company at an Inflection Point

Equitable Holdings has completed a strategic transformation that fundamentally improves its risk/reward profile for investors. The RGA reinsurance transaction eliminated the primary source of earnings volatility while freeing $2 billion of capital for value-accretive deployment. The resulting company is a capital-light financial services platform with three complementary growth engines generating predictable fee-based revenue from a record $1.1 trillion asset base.

The integrated flywheel model—combining AB's asset origination, Equitable's distribution scale, and the wealth management platform's organic growth—creates a durable competitive moat that standalone competitors cannot replicate. This is evident in the simultaneous strength across all segments: record RILA sales, 34% AB margins, and 12% wealth management organic growth. Management's disciplined capital allocation, increasing AB ownership to 69% while returning cash through dividends and buybacks, demonstrates alignment with shareholder interests.

The investment thesis hinges on two critical variables: sustained RILA market leadership amid increasing competition, and successful integration of wealth management acquisitions while maintaining organic growth. The company's strong capital position, proven hedging capabilities, and conservative assumption setting provide downside protection, while the demographic tailwinds of aging baby boomers and $600 billion in annual 401(k) rollovers support long-term growth.

Trading at 11.7x free cash flow with a clear path to $2 billion in annual cash generation by 2027, Equitable offers an attractive entry point for investors seeking exposure to the retirement megatrend through a diversified, capital-efficient platform. The market has yet to fully price the quality and predictability of the transformed earnings stream, creating potential for multiple expansion as management delivers consistent results. For long-term investors, Equitable Holdings represents a rare combination of strategic transformation, operational excellence, and disciplined capital allocation at a reasonable valuation.