Equitable Holdings Aktie

Hello, everyone. Thank you for joining us, and welcome to the Equitable Holdings Q1 2026 Earnings and Conferencing Call. [Operator Instructions] I will now hand the conference over to Eric Bass Chief Strategy Officer and Head of Investor Relations. Eric, please go ahead.

Thank you. Good morning, and welcome to Equitable Holdings First Quarter 2026 Earnings Call. Materials for today's call can be found on our website at ir.equitableholdings.com. Before we begin, I would like to note that some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. Our results may differ materially from those expressed in or indicated by such forward-looking statements. Please refer to the safe harbor language on Slide 2 of our presentation for additional information. .

Joining me on today's call are Mark Pearson, President and Chief Executive Officer of Equitable Holdings; Robin Raju, our Chief Financial Officer; Nick Lane, President of Equitable Financial; Onur Erzan, President of AllianceBernstein; and Tom Simioni, Chief Financial Officer of AllianceBernstein. During this call, we will be discussing certain financial measures that are not based on generally accepted accounting principles, also known as non-GAAP measures.

Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures and related definitions may be found on the Investor Relations portion of our website in our earnings release, slide presentation and financial supplement. We will also refer to the pending transaction with Core Bridge. Any statements about the transaction made during this call are not an offer of securities. Registration statement containing a prospectus will be filed with the SEC in connection with the transaction. I will now turn the call over to Mark.

Good morning, and thank you for joining today's call. The first quarter marked an extraordinary moment in Equitable's 166-year history, with the announcement of our planned merger with Corebridge, which will create a world-class platform to help our customers plan, save for and achieve secure financial futures. This morning, I will spend some time discussing why we believe that by leveraging the complementary strengths of Equitable and core bridge, the combined company will deliver tremendous value for both our customers and shareholders.

On Slide 4, I will start by providing a few highlights from our first quarter results. We reported non-GAAP operating earnings of $1.62 per share or $1.68 per share after adjusting for notable items. This increased 25% versus the first quarter of 2025, driven by healthy organic growth momentum, improved mortality experience and a lower share count. We continue to expect earnings per share growth to exceed the high end of our 12% to 15% target range in 2026.

Assets under management ended the quarter at $1.1 trillion, up 9% year-over-year. While equity markets declined modestly in the first quarter, they have since recovered, and higher average AUM versus 2025 levels should continue to provide a near-term tailwind for earnings. Our balance sheet remains a core strength with a combined NAIC RBC ratio of approximately 475% and $1.2 billion of holding company liquidity. Our credit portfolio continues to perform well. And as Robert will walk through, we are positioned to handle even a severe stress scenario.

We remain committed to being a consistent return of capital and executing the share buybacks assumed in our 2026 financial plan. Turning to organic growth. We see good momentum in retirement sales and flows even as the level of competition has increased. Total sales increased 10% year-over-year, driven by strength in Riles and we have $1.3 billion of net inflows. Wealth Management delivered another strong growth quarter with $2 billion of advisory net inflows.

Over the last 12 months, the business produced a 13% organic growth rate. During the quarter, we also closed on the acquisition of Stifel Independent Advisors, which is a good example of how we can use bolt-on M&A to help scale our wealth management business. Asset management earnings grew 11% year-over-year, driven by higher AUM and increased ownership. AB had net outflows of $7.1 billion in the first quarter, driven primarily by active equities and taxable fixed income. Private wealth and private markets remain bright spots as both had positive flows in the period.

Total private markets AUM increased 13% year-over-year to $85 billion. and AB remains on track to meet or exceed its target of $90 billion to $100 billion in AUM by the end of 2027. While near-term flows may remain volatile, AB has a record institutional pipeline of nearly $28 billion, which includes several large insurance mandates that will fund over the next few quarters. AB will also be a meaningful beneficiary of the Core bridge merger as we expect it to receive at least $100 billion of incremental assets over the next few years.

As I will walk through over the next few slides, the motivating factor behind the Corebridge merger is our belief that it will accelerate our growth strategy and position us to be a long-term winner across all the markets we compete in. The companies have complementary strengths with limited overlap across products. We have already begun the integration planning process and have high confidence in achieving at least $500 million of expense synergies and -- as a result, the merger will be immediately accretive to earnings per share, and we expect to deliver 10% plus accretion on a run rate basis by the end of 2028. And with potential upside from revenue synergies.

Moving to Slide 5. Before talking about the merger, I want to highlight 5 attributes we believe are critical for long-term success and which we use when evaluating any strategic option, including this merger. Underlying everything, of course, is providing an exceptional customer experience. Customers that are easy to do business with and offer the products and advice needed to transform complex financial risks into simple, reliable outcomes will attract clients and distributors. Developing deep brand loyalty will help create predictable and growing value for shareholders.

Second, in intermediated markets like financial services, having strong distribution is critical as clients want local access to expert, personalized advice. Privileged shelf space, particularly in channels with high barriers to entry, provides a meaningful competitive advantage in acquiring new customers while also managing the cost of funds. Third is the imperative of competitive scale, size matters. Being able to invest in technology and automation will improve efficiency and result in lower unit costs and a lower expense ratio. This provides capacity to reinvest in growth while simultaneously delivering higher profit margins.

Fourth, we know that shareholders value consistent growth in earnings and cash flow across different market cycles and having diversified sources of earnings and capital enhances the ability to deliver this. Disciplined risk management is also critical to give clients and investors confidence in the resilience of the balance sheet, especially during periods of macro uncertainty and market stress.

Finally, we see significant value in owning insurance, asset management and wealth management businesses to participate in the full value chain and benefit from the significant demographic tailwinds driving growth across each of these markets. It also means that shareholders capture the high multiple fee earnings generated by distributing and managing the assets associated with insurance and retirement solutions that are manufactured. By attracting the very best talent and aligning to these 5 convictions, we ensure that when our clients win, our shareholders win.

Turning to Slide 6. I will highlight why the merger with Corebridge aligns to these convictions and will drive growth and shareholder value. The merger brings together 3 outstanding franchises to create a diversified financial services company with over 12 million customers, $1.5 trillion in AUM and leading positions across retirement, life insurance, asset management and wealth management. Equitable and Corebridge complement each other well with different strengths and limited overlap. We intend to capitalize on our scale advantages to reduce unit costs and achieve a lower cost of capital.

We expect to have a top quartile expense ratio, and we'll be able to combine our resources when making growth investments. This will make us more profitable, drive more cash generation and increase our return on capital. We will have formidable distribution capabilities and leading positions across the retail, institutional and worksite channels. The depth and breadth of our distribution should enable us to expand our offerings while achieving a lower average cost of funds, resulting in more profitable new business.

We will also have flexibility to allocate capital where we see the best risk-adjusted returns and customer demand. In addition, our integrated business model allows us to capture the full value chain by acting as a product manufacturer, distributor and asset manager. This differentiates us from our competitors, most of whom only participate in 1 or 2 of these verticals. While the merger will shift our mix more towards retirement, it also helps scale AB and wealth management, enhancing the value of these high-multiple businesses. We remain focused on maximizing the flywheel benefits inherent in our model.

Finally, the new Equitable will have a robust balance sheet and is expected to generate over $4 billion of cash flow annually. We are aligned and having strong financial principles that govern how we operate starting with economic management of the balance sheet and a focus on cash generation. Ultimately, we want to produce consistent results and cash flow across market cycles, so that we can provide attractive returns to shareholders while also investing for growth.

I will conclude on Slide 7 by providing some clear examples of how the merger will help accelerate growth across all our businesses. Starting with Retirement and Institutional, the combined firm will have approximately $540 billion of AUM and unmatched breadth across products and distribution. We knew that Equitable would need to become more diversified over time in order to fully participate in the growing U.S. retirement market and combining with Corebridge makes us a top 3 provider of fixed and indexed annuities and expands our institutional capabilities, notably in pension risk transfer.

It also adds a strong life business that provides earnings and capital diversification and should benefit from selling through equitable advisers. In addition, the merger doubles our third-party distribution network to approximately 900 firms expanding our ability to reach new customers. The combined firm will originate $70 billion to $80 billion of liabilities annually, highlighting the size and scale of our platform. We will have a more balanced business mix that provides liquidity benefits and positions us well to generate consistent growth across market cycles while deploying capital where we can earn the most attractive returns.

Moving to Asset Management. AB will also benefit from the merger in multiple ways. We expect AB to add at least $100 billion of Corebridge general and separate account assets over the next couple of years, resulting in total AUM of nearly $1 trillion. AB will also benefit from the combined firms increased liability generation, which should drive higher ongoing net inflows. We also see an opportunity to commercialize some of Corebridge's internal asset origination capabilities, particularly for real estate and commercial mortgage loans by leveraging AB's global distribution.

Over time, we expect to find additional sources of incremental revenues and net flows, including the potential to develop new commercial partnerships. Lastly, the addition of Corebridge Advisors accelerates the path to scaling our wealth management business and adds approximately $20 billion of AUA. The merger will expand our proprietary product offering to include fixed and indexed annuities and indexed universal life, which will be a win for advisers, particularly our emerging sales force. We will have a more attractive platform and more financial resources, which should enhance our ability to recruit and develop new and experienced financial advisers.

Overall, the key message I want to leave you with is that having increased scale would provide competitive advantages that translate into stronger and more consistent growth and enhances our profitability. I will now turn the call over to Robin to highlight the financial benefits from the merger and discuss our first quarter results in more detail.

Thanks, Mark. I want to echo my excitement about the merger and the ways in which it will accelerate our growth strategy and deliver attractive financial outcomes for our shareholders. On Slide 8, we highlight some of the key financial benefits. First, the combined company will have a robust balance sheet with significant capital. As of year-end 2025, pro forma GAAP book value exceeded $30 billion and the company has had over $25 billion of statutory capital. The pro forma leverage ratio is approximately 26%, which provides financial flexibility. .

Second, we will have a more diversified business mix with equal contribution from fee and spread-based earnings. This should help us generate more consistent earnings in different market environments. Third, we project at least 10% accretion to EPS and cash generation on a run rate basis by year-end 2028, driven by expense, capital and tax synergies. We also expect to have a 15% plus return on equity. These projections do not include any benefit from the anticipated revenue synergies.

Finally, we forecast over $5 billion of annual earnings power and over $4 billion of cash flows to the holding company, which will make us the most profitable company in the sector based on U.S. earnings. Turning to Slide 9. I will provide some more detail on first quarter results. On a consolidated basis, non-GAAP operating earnings were $472 million, or $1.62 per share, and we reported net income of $621 million or $2.14 per share. Notable items in the quarter included $32 million of below plan alternatives and a $13 million benefit from the purchase of tax credits.

Adjusting for these items, non-GAAP operating earnings per share was $1.68, up 25% year-over-year. This is consistent with our earnings per share growth guidance of above 12% to 15% for 2026. The 25% increase in earnings per share was driven by a 9% year-over-year increase in total AUM AUA, lower mortality claims, the benefit of our increased ownership stake in AllianceBernstein, and a lower share count, which reflects the incremental buyback executed following the RGA transaction.

In the first quarter of 2026, our alt portfolio, which is 2% of our general account produced an annualized return of 3.5%, with results pressured by lower CLO equity returns. Given weaker market conditions in the first quarter, we currently project our portfolio to have a return of 2% to 3% in the second quarter. While it's premature to predict what will happen in the second half of 2026, based on the lower returns for the first half of the year, we now expect the full year return to be below our prior 8% to 9% guidance.

Adjusted book value per share ex AOCI with ABM market value was $34.70, we view this as a more meaningful number than reported book value per share, which significantly understates the fair value of our AB stake. On this basis, our adjusted debt-to-capital ratio was 24.5%, down 40 basis points sequentially. On Slide 10, I'll provide some more details on segment level earnings drivers. In Retirement, first quarter earnings, excluding notable items, were $394 million. Net interest margin or NIM, increased 3% sequentially as lower alternative investment income was offset by growth in general account assets.

Excluding alternatives, our NIM spread improved by 5 basis points sequentially, helped by a 4 basis point benefit from a modest recovery in MDA. This reverses the downward trend in spreads we experienced over the past year and supports our view that spreads are beginning to stabilize. On a sequential basis, the growth in NIM was partially offset by lower fee-based revenues as market declines pressured average separate account AUM.

Turning to Asset Management. AB reported earnings of $140 million, up 11% year-over-year as a result of higher base fees and our increased ownership percentage. While base fees benefited from a 7% year-over-year increase in AUM, this was partially offset by lower fee rate due to a shift in asset mix. As expected, performance fees were relatively modest in this quarter, but we raised our full year forecast from $80 million to $100 million to $95 million to $115 million.

Moving to Wealth Management. We experienced strong year-over-year growth in advisory fees and transaction revenues, driving a 22% increase in earnings. As a reminder, fourth quarter 2025 results benefited from favorable onetime items. And this quarter, we had seasonally higher expenses and a couple of million of costs related with the Stifel acquisition. We still expect double-digit earnings growth in 2026. Finally, Corporate & Other reported a loss of $98 million in the quarter after adjusting for notable items, which is consistent with our 2026 guidance. Mortality was slightly favorable in the quarter and improved versus previous periods.

On Slide 11, I'll highlight Equitable's strong balance sheet and cash flows, which enable us to be a consistent returner of capital to shareholders. We know there has been a lot of focus on credit risk. So we've updated our investment portfolio stress test to reflect our holdings as of year-end 2025. This assumes a hypothetical severe credit stress scenario, at least as bad as the global financial crisis and a decline of 40% in equity markets. We estimate slightly less than a 50-point decline in RBC ratio, which from a starting point of 475% still leaves us comfortably above our 400% target. As a result, we are well positioned to handle a potential downturn in credit markets.

That being said, today, we do not see any signs of weakness in our portfolio. In the appendix, we provided updated disclosures on our private credit portfolio, which represents 18% of our general account and is 95% investment-grade assets that match well against our liabilities. Let me now turn to cash. We ended the first quarter with $1.2 billion of cash at the holding company above our $500 million target, and we remain on track to achieve our target of 2026 cash generation of $1.8 billion.

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.

On Slide 12, we show a time line with key dates related to the merger and a specific time period of when we will be able to repurchase stock. Both Equitable and Corebridge trade at a significant discount relative to where we believe they should be valued making buybacks meaningfully accretive to shareholders. As a result, you can expect that we will be active in the market during the windows that are available to us. 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. As a reminder, the exchange ratio for the merger is fixed and will not be affected by any share repurchases executed by either company. I will now turn the call back over to Mark for some closing comments. Mark?

Thanks, Robert. Equitable delivered solid first quarter results, and we remain confident in achieving our EPS growth and cash generation guidance for 2026, even with the volatile market backdrop. Looking forward, I am incredibly excited about the powerhouse franchise we are creating through the merger with Corebridge. As we have talked about this morning, the combined company will have the scale, distribution strength and product with to deliver differentiated growth and returns. I am confident that this merger positions us to win with customers and deliver superior value to shareholders over time. We will now open the line to take your questions. .

[Operator Instructions] Your first question comes from the line of Wes Carmichael with Wells Fargo.

Good morning. Thank you. My first question was on the Retirement segment. And you had a pretty good earnings result in the quarter. And previously, I think you talked about spread compression abating in the second half of 2026, at least on a percentage basis. So do you still think that's the case, given the mix of the book here? And maybe you could just talk a little bit about what you're seeing on the cost of fund side from a competitive dynamic.

Thank you for your question. We were happy to see spread stabilized here in the first quarter. If you look quarter-over-quarter, spread income, NIM was up $11 million quarter-over-quarter. If you exclude all to is up even more and excluding some of the MBA benefit, it was up about 1 basis point net. So -- if you look at it, it's about 1.69 or 169 basis points. And I think that's the level you can probably expect at this point, and you can expect spread income to grow as the general account, excluding embedded derivatives growth. .

I mean 2 primary factors that you see, yes, with the abatement of some of the higher-margin imports that's run off. That's a smaller part of the business mix, but also the discipline in the new business underwriting that we're seeing despite what you hear on the competition, Rail sales were up 14% year-over-year and the pricing discipline has been maintained and the margins have been good. So the combination of that with the runoff of the in-force should lead to stabilization of spreads going forward.

Got it. And then maybe just a more broad question. But on the Equitable Corebridge merger, I know you reiterated the EPS guidance with materials. Just wondering if you've done a bit more work, I guess, in earnest on progress towards the merger. Have any of your expectations change in terms of the financial impact? And maybe anywhere you seeing more or less opportunity relative to, I guess, a little bit more than a month ago when the deal was announced.

Thanks, Wes, it's Mark Pearson. Yes, I think the things we'd say is the integration planning process is well under way now with the top or so leaders from each of the organizations. We really are confirming through that the complementarity of the 2 businesses. We are stronger together in terms of our product breadth, in terms of our distribution in terms of the scale. So that is confirming everything we've told you in terms of the synergy opportunities and look forward.

We are also pretty excited on the revenue synergy side, but we're going to save telling you that until first half of 2027 when we've done the work and we can start to quantify it for you. But confirming the expense synergies now and then also starting to work on the revenue side as well.

Your next question comes from the line of Suneet Kamath with Jefferies.

I just wanted to start on the buybacks with the window opening, I guess, later tonight. How should we think about the pace of buybacks here over the next month? And is there any sort of restrictions or coordination that's required with Corebridge? Or are you guys just kind of operating at your own sort of speed?

Sure. Thanks, Suneet. Yes, look, as we laid out in the presentation, we're excited to say we're going to be back in the market with share buybacks -- we expect to file the proxy this evening, and that enables us to open up the window again until the final mailing that will happen in June. Within that time period, expect us to be active in the market. The returns on a share buyback are very attractive at this point in time. So that's 1 of the reasons why we wanted to be back in and both us and Corebridge will coordinate together to make sure that share buybacks maintain accretion for shareholders throughout the period. .

And then as I laid out in the presentation, after the shareholder vote that will open up the next window for share buybacks. And then anything that's not completed by the closing will be completed as an ASR if needed. But shareholders should expect the same level of capital return from both companies that they would have otherwise received and we're happy to say we're going to be back in the market because buybacks are accretive given that both stocks will cheap right now.

Okay. That's helpful. And then, I guess, on the $70 billion to $80 billion of originated liabilities that you guys are sort of talking about, is there a practical limit in terms of how much assets AB can originate in order to back those liabilities?

No, we're fortunate. With $70 billion to $80 billion of liabilities, we're going to have 4 asset managers that we're going to leverage. So obviously, Alliance Bernstein, our in-house. Also, we get to benefit from some of the capabilities that Corebridge brings to the merger, so Blackstone BlackRock and their internal capabilities as well. $70 million to $80 billion provides lots of assets to put to work and allows us to be disciplined on the general account and getting the best risk-adjusted returns on those assets across the board.

So I would expect everybody to benefit. Obviously, AB will benefit from the broader revenue synergies as well. That doesn't take into account the future growth. That's the $100 billion in separate account and general account assets that will move over to AB as a starting point. And then there'll be upside from there with the future growth of the $70 billion to $80 billion, benefiting AB and our other asset managers as well.

Your next question comes from the line of Ryan Krueger with KBW.

In the merger call, you talked about 2% to 4% synergies from capital and taxes that were part of the 10% plus overall synergies. I wanted to, I guess, ask if -- is that a true best estimate? Or did you embed some conservatism there? And you could possibly, as you do more work, see some upside to the capital benefits of the merger.

Thanks, Ryan. So some of the benefits that we spoke about the merger, I think it's just important to repeat. So it's going to be day 1 accretive and 10% plus going forward after everything at a run rate basis. In addition to diversification of both businesses together means we'll have more stability in earnings and cash flows, which I think will lead to a lower cost of capital and a better profile for us going forward. .

To your question on the 10% plus synergies, we referenced 6% to 8% coming from expense synergies there, we said we at least expect to at least get $500 million. There should be upside to that and then the remainder will be from tax and capital, which I would say is our best estimate at this point in time. We'll always do more work going forward. You can see both companies Equitable and Corebridge, very active in terms of capital management since the IPO. So you could expect that to continue going forward.

Most importantly though, as Mark mentioned earlier, these numbers do not include the benefit of revenue synergies. I think that's what's going to differentiate this transaction on a go-forward basis, is the more assets and revenues going to AllianceBernstein, leveraging Corebridges, index IUL and fixed annuity products with Equitable advisers and leveraging our VUL product with their third-party distribution if we can be successful in capturing more revenue with the 2 companies together, this will be a stronger franchise that deserves a higher multiple going forward.

And then just 1 question on the PGAAP impacts. I mean I understand that it's -- it's contingent on where interest rates are, and there's probably a lot of work to be done on this. But maybe just directionally, can you give any sense of like if the merger closed now would this be more -- would this be more likely to be a positive or negative potential impact to your GAAP earnings?

I think it's too early to say at this point in time. As we put together the PGAAP, we'll finalize that prior to close, and we'll certainly give you that guidance. I think there will be moving parts into PGAAP1 on the balance sheet basis. Obviously, the book value of the combined companies will be the figure, and that will just be reflective of wherever the market cap of Equitable is at that standpoint. On the income side, there will be moving parts between VOBA DAC and then fair value of some of the assets. And we'll do that work. And as we do that work, we'll disclose it as we get closer to the close of the transaction. .

Your next question comes from the line of Tom Gallagher with Evercore ISI.

One question about the quarter and then 1 about the merger. On the quarter, the MVA gains that you had in retirement, Robin, can you comment on absolute dollars of earnings that, that represented this quarter? And would you expect there to be any sustainability there? Was there something unusual about why they were higher? .

Sure. Thanks. Yes, we were -- again, a key point for me is that spreads stabilized ex all to next the MVA, so about a 1 basis point improvement the MVA was about approximately $10 million in the quarter. We don't expect benefits on a go-forward basis. That's something we don't include in our forecast or budgeting. As you've seen, that's been positive or negative through different periods over time. But excluding the MVA and excluding the impact of alts, spreads improved by 1 basis point quarter-over-quarter.

Got you. So $10 million was the earnings contribution?

Yes, approximately. .

Got you. And the -- my question on the merger, I listened closely to what you've been saying about the revenue synergies. I haven't heard much of an emphasis on your institutional spread business, which I know is small for you, it's bigger for Corebridge. But is that an opportunity? Because when I look at you and Corebridge on a stand-alone basis, you're probably half of the size or maybe 30% or 40% of the size of that business compared to like the Mets and the cruise of the world. So I'm just wondering, is that a business that we should expect you to really scale up.

Sure. I think for corporate and Equitable, the FAB end market has been attractive, it's generated good returns for us. It's obviously spread dependent. So depending on where our spreads trade at different time periods that allows us to go in and out. And then obviously, with the balance sheet being much bigger, it gives us more capacity to lean in, in that market given that spreads are there and pricing is there. So it's certainly an opportunity for us with the larger balance sheet going forward. .

Your next question comes from the line of Joel Hurwitz with Dowling & Partners.

Robin, first, can you just unpack what you guys saw from a mortality perspective in the quarter. It looked pretty good with the reported benefit ratio at 83.1%.

Yes, it was nice to have a nice quarter on mortality this quarter. Our benefit ratio is 83%. That's the lowest it's been in any quarter over the last year, which is good. Overall, we saw our lower claims and less high-face amount claims as well, specifically which benefited us this quarter. And so going forward, we think with the guidance that we've given to the market captures appropriately what we'd expect to see in mortality and we look forward to speaking more about good mortality and focusing on the growth in the other businesses as well going forward. .

Got it. And then in retirement, it looks like you're starting to utilize flow reinsurance for some of your spread business. Can you just talk about what products that's on, how much I guess, you plan to do and the economics for Equitable?

Sure. Yes. We did -- in the fourth quarter, we started a bit to do some flow reinsurance on our Rila product. Flow reinsurance is a tool that we think is helpful for us when making products accretive going forward. So it's an important tool in the toolkit. We could look at for reinsurance and other products as well and even post merger, corporate does some flow reinsurance as well.

So as long as it's accretive for us versus not doing it, it's something that we'll look at selectively in different products. As you know, it's important to have a good counterparty, which we have and also we try to make sure AV continues to manage a portion of the assets for us going forward. We also have Bermuda as a tool in our toolkit as well. We'll look at that for flow reinsurance for selected products, for our internal products and also potentially for third-party opportunities going forward as well. So Flow reinsurance is something that we'll always look at across our businesses.

Your next question comes from the line of Alex Scott with Barclays.

First 1 I have is on cash flow. I wanted to see if you could talk a bit about just the cash generation of the business and how that will trend through the integration process with just some higher expenses related to the integration itself and probably some sort of hockey stick dynamic. Could you help us think through the way that, that will progress over the next few years?

Yes. It's probably a little bit too early to give you too many specifics. I'd say both companies obviously have strong cash flow generation across on the equitable side, we continue to feel comfortable with our $1.8 billion guidance that we provided this year and to $2 billion for 2027, expect that to be in addition to the investments that we have in growth to help grow our new business franchises across the board.

As part of the integration, we will target $500 million plus in expense synergies and expect that will be a 1.5x investment with a very good payback associated with it. That investment is put between cash and noncash and the timing of that, we'll provide further updates as we get closer to the close of the transaction and the integration planning is more complete.

Got it. That's helpful. And then I guess, a related topic is just the excess capital levels that you have right now, particularly at the OpCo level, pretty significant in Corebridge, has a pretty significant menaces Capital as well. How will this transaction change the way you approach it all to the amount of excess capital you hold over time. I mean, I think it's been a while now that you've sort of sat on a pretty high level. And you mentioned the stress test doesn't even take you down that close to your -- your buffer at this point, and that was a pretty extreme stress test. So are you thinking about that differently with the transaction coming on?

Yes. I think again, going forward, we will have an Investor Day in 2027, where we'll give further guidance on all those metrics. But look, if you take a step back, as we mentioned, the 2 companies are stronger together, the balance sheet are more resilient, they're more diversified across each other. There will be a lower cost of equity across the company, and we'll be well positioned to maintain different cycles in the market, whether that be credit or equity because of the diversification of the businesses.

So what does that do? That allows us to leverage excess capital for best use for shareholders. Obviously, share buybacks are very attractive use at this time given the valuations of both companies, but it also allows us to invest in growth. We see very good returns across in the Ryland market and the other markets across both companies. So the more we can invest in growth and grow earnings going forward, which will translate into growth in cash, that will benefit shareholders over the long term. So we'll evaluate all those investment in growth, investment in share buybacks. And for uses of excess capital as the 2 companies come together.

Your next question comes from the line of Yaron Kinar with Mizuho.

Just a couple of on capital deployment. So if the windows end up being a bit narrower than expected or in light and ultimately, you have to complete the the buyback through an ASR at the end of the year. Is that 15-plus percent EPS growth target still achievable?

Yes. I think we're pretty comfortable. If you look where we -- the quarter, we standed at plus 25% on an EPS basis overall. That was with a lower share buyback in the first quarter. If you look at the windows that we have available to us, we can -- we believe we can deploy a lot of capital in the markets to buy back stock at these levels and keeping within our 60% to 70% payout ratio by year-end. So the windows that we have are pretty broad, and we think, give us the availability and the timing needed to deploy our capital plan.

And anything that is left will complete it in an ASR and -- so we feel comfortable with the guidance. Remember, the guidance for this year is that we'd be above our 12% to 15%, and we still expect to be above our 12% to 15% as we progress during the year.

Great. And then the second 1 also on capital deployment. So with the Stifel deal done, I think you've expressed interest in continuing to grow that the Wealth business, both organically and inorganically I'm assuming, though, that given where the share price is today, buybacks would be a far more attractive capital deployment than you then -- or avenue than doing a deal in wealth?

Well, look, I don't know if I'd say it all is deal-specific. Ultimately, we're in a fortunate position where the company can execute on its capital return program for shareholders and investor growth. That's a position of strength that we're in right now. So obviously, we want the Stifel transaction to complete disclosure, the advisers will transition to our platform later this year. We can also look for opportunities in at AllianceBernstein to grow on the asset management side as well.

Obviously, where the share price is now, it needs to be accretive for shareholders as you see this deal was as well with the merger that we announced. But ultimately, we're well positioned because we can buy back stock at this price and deploy excess capital to fuel future growth and make us a stronger company going forward.

Your next question comes from the line of Will Maertas with Raymond James.

Given the one-off buybacks will be Mac sometime in June. Maybe if you could just drill down a little bit, is there any limit to the amount equitable could buy given limitations on the percentage of daily trading volume -- and if you could just help us a little bit with the math there. I was just giving it a shot myself but didn't quite get there.

Yes, look, we obviously have some limitations on average daily trading volume that we have to we have to keep. But we feel as though, and I think corporate would say the same, the windows that we have available to us provide us the flexibility that we need to be in the market to buy back stock. We'll have this, again, we'll have this time period between when we file the proxy tonight versus the final proxy in June to complete a decent amount of share buybacks, and then we'll also have the ability, again, post the shareholder vote.

And so we think we can -- we feel pretty comfortable to execute within a reasonable average daily trading volume, our capital plans this year. And so we'd expect to end with the ASR at our 60% to 70% payout ratio and no change in the amount of capital returned to shareholders for this year.

Okay. If there's any way you can give a little bit more detail just on the restrictions there? Just as a quick follow-up there. And then second question, I think the commentary that you guys have implied on the capital and tax benefits, I calculated it to around $500 million to $1.5 billion of capital that would be freed up by the deal any way to tell us that estimate is somewhere in the ballpark.

I don't know if there's any other color I gave on the share buybacks at this time. On the capital and tax benefits of the deal, as we mentioned, the EPS accretion will be 6% to 8% from the expenses, hopefully, more than that. We'd expect it to be more given the size of synergy potential that we have between both organizations and then we'll have capital and tax benefits as well that we're not going to give nominal amounts at this time. But again, going forward, as we get into the Investor Day next year, I think you could expect more information on those numbers and also the revenue synergies.

Don't forget that's the big part that we get excited about internally of what this brings to AllianceBernstein, what just brings to our wealth management business and what this does for a broader product distribution across both companies that will lead to a higher multiple over time.

Your next question comes from the line of Pablo Sanson with JPMorgan.

Just a follow-up on mortality. So 1Q and 40 tends to be the highest mortality quarter for you. So given do you expect corporate loss to be there sequentially? Or was 1Q just too favorable.

Look, in 1 quarter, we did have some favorability in mortality, as we mentioned, the benefits ratio with 83%. That's lower than it was last quarter, as you could see in the supplement and also lower than it was over the last year. The corporate and other guidance that we gave for the full year was the $350 million to $400 million. We expect to be within that guidance, if you look on a normalized basis this quarter.

And also keep in mind, going forward, the benefit of the RGA transaction really limits the volatility related to mortality for us going forward. So I think you're starting to see those benefits come through, and we do expect that to continue.

And then second question is to the implementation of V-22, -- do you see that having any material impact whether from a price or capital standpoint on the fixed annuity block you're getting from Corebridge?

Yes. I'd ike to let Cobridge add to that on the VM20 side. Look, we've done -- obviously, you can look across both sides have done diligence on each other and whether that be on the asset side or the liability and potential regulation, and we feel comfortable where both companies combined are positioned ahead of any regulation or asset changes. .

Your next question comes from the line of Tracy Benguigui with Wolfe Research.

Going back to the PGAAP changes you mentioned, some of the moving parts, but I want to touch on AB. It seems like a big thing that folks misunderstand about Equitable is your asset leverage. They're not looking at the right denominator, my personal view of statutory capital matters more. Now with this merger coming up, I understand that your PGAAP,you could mark up AB. So my question is, how should we expect a large goodwill asset and I'm also curious if doing the deal the only way to mechanically recognize AB's equity value? .

Sure. Thanks, Tracy. I think you're right. I think the way to look at it is not GAAP leverage, but obviously, stat is a bigger piece of and something that a lot of people don't look at. Now on the GAAP side, you're right, it doesn't capture the full market value of AlinsBernstein outside of a transaction like and with PGAAP, I don't think you can. Since we own the linesBernstein, we can't write up the asset as it exists today. So that is 1 of the benefits of the transaction. it will lead to some addition of goodwill, but there are a lot of moving parts related to the PGAAP.

So it's too early to give you precise numbers on how to peak up works. But ultimately, both companies, if you look, as I mentioned, the statutory capital is going to be $25 billion of the pro forma company. The GAAP equity is going to be above $30 billion. So we feel very well positioned in terms of the size of both balance sheets and especially well positioned having AB, a wealth management franchise and a broader retirement platform to grow sales.

Staying with EB, I'm curious if the combined company's plans, are to change the 68% stake.

No. Currently, right now, we're quite happy with our ownership of AllianceBernstein at 68%, 69%. AB is a key part of the flywheel and expect it to grow. Again, the synergy potential of AB is pretty sign. Maybe I'll ask Onur to talk about the revenue that potential if they align Bernstein, but I think that's a big part of this deal is the benefits of the line Bernstein and getting the $100 billion of seratonin general account assets. .

Yes. Thanks, Bob, and I'll also let to catch your breath a bit after multiple questions. Definitely, we are very excited about the $100 billion plus that Mark and Robin mentioned. Obviously, it's going to come from both the general count and the separate account businesses as well as funds and retirement plans. So we have multiple opportunities to do work over the next 7, 8 months before the merger closes. So have a very actionable bankable bottom-up plan and that comes on top of a record pipeline we had before the Corebridge Equitable merger. So it's built on a very sizable pipeline that already exists. So very excited about that and also like the fact that it's a diverse set of asset classes ranging from public to private fixed income, multi-asset equities. So it will allow us to scale multiple platforms or at the same time.

So would you -- would you want to take that stake up, if you like, the business?

No change right now in our stake of AllianceBersten. I think we've been clear that after we purchased the increase last year, we went from 62% to approximately 68%, 69%. So -- we have no other plans at this time. We're really focused to combined firms are really focused on execution of this merger. We're pretty excited. We -- as Mark mentioned on the call, we established the integration office. We got our teams together and everybody is focused on planning to execute the expense and revenue synergies and making sure we have the right people in the right seats. So that's our focus at this time. .

Your next question comes from the line of Mark Hughes with Truist.

Yes. In the Rail business, sales were pretty strong. I wonder if you could discuss the competitive environment and then maybe touch on the biggest impact, biggest benefit from the merger on distribution?

Great. This is Nick. As you mentioned, overall, we had a strong quarter in sales and volume with Ryals up 14% and $1.3 billion of net flows translating to a 6% trailing 12-month organic growth rate. Look, we're very mindful of competitive trends. As we mentioned last quarter, we saw new entrants in 2025 for back to more rational pricing in the fourth quarter, and we don't see any material change in competitive activity this quarter. .

Looking forward, we continue to see strong demand for rails driven by favorable demographics and the macro uncertainty. I'd highlight consumer sentiment is at an all-time low, so people are looking for protected equity stories. And we believe we've got a durable edge to capture it. This is both generating attractive yields through AB, our differentiated distribution with Equitable advisers and our third-party networks. As Robin and Mark alluded to, the merger will even expand our reach in that area. And finally, we have deep relationships and scale.

As the pie has grown, we've nearly doubled our sales over the last 3 years, and this was another first quarter in record sales and volume, so just impacting the benefits on distribution, better reach deeper relationships. And as Mark mentioned, we see scale becoming equally increasingly important to generate profitable growth and protect margins. Corebridge will give us both of this immediately. So as such, we think we're in a privileged position to capture the disproportional share of value in the growing retirement market.

Understood. Then the $70 billion to $80 billion in liability origination capacity, how much of that is third party versus owned distribution?

Yes. So, the way to look about it is the $70 million to $80 million is the combined companies post merger today and for Equitable, about 35% of our sales in the retirement business come through Equitable advisers. So -- that's the way to look at it. .

We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us and welcome to the Equitable Holdings Full Year and Fourth Quarter Earnings Call. [Operator Instructions]

I will now hand the call over to Erik Bass Head of Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to Equitable Holdings Full Year and Fourth Quarter 2025 Earnings Call. Materials for today's call can be found on our website at ir.equitableholdings.com.

Before we begin, I would like to note that some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. Our results may differ materially from those expressed in or indicated by such forward-looking statements. Please refer to the safe harbor language on Slide 2 of our presentation for additional information.

Joining me on today's call are Mark Pearson, President and Chief Executive Officer of Equitable Holdings; Robin Raju, our Chief Financial Officer; Nick Lane, President of Equitable Financial; Onur Erzan, President of AllianceBernstein; and [ Tom Simeone ], Chief Financial Officer for AllianceBernstein.

During this call, we will be discussing certain financial measures that are not based on Generally Accepted Accounting Principles, also known as non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures and related definitions may be found on the Investor Relations portion of our website and in our earnings release slide presentation and financial supplement. I will now turn the call over to Mark.

Good morning, and thank you for joining today's call. Before diving into our 2025 results and 2026 outlook, I want to take a step back to reflect on the journey Equitable Holdings has been on since our IPO.

We have been intentional about refining our business mix to focus on three core growth engines: U.S. retirement, asset management and wealth management. These are very attractive and growing markets, and they are integral to our mission of helping our clients secure their financial well-being and the long and fulfilling lives.

Our integrated model positions us well to be one of the long-term winners in each of them. At the same time, we have been reshaping our balance sheet to become more capital light reduce exposure to legacy insurance risks and increase the quality of cash flows.

You saw further evidence of this in 2025 with the execution of our life reinsurance transaction with RGA and we believe these actions will create a more valuable company. Our business has solid momentum entering 2026, and we remain focused on achieving all of our 2027 financial targets.

Turning to Slide 3. I will provide some brief highlights from our 2025 results. Full year non-GAAP operating earnings were $5.64 per share or $6.21 per share after adjusting for notable items. This was up 1% over 2024 as growth was held back by elevated mortality claims. The past 2 quarters have shown increased earnings power, and we expect EPS growth to accelerate in 2026.

We produced full year organic cash generation of $1.6 billion consistent with our $1.6 billion to $1.7 billion guidance range. In 2026, we expect this to increase to approximately $1.8 billion and we remain on track to reach $2 billion in 2027.

Assets under management and administration ended 2025 at a record $1.1 trillion, up 10% year-over-year, which will support growth in fee and spread-based earnings.

Finally, we returned $1.8 billion to shareholders in 2025. And which includes $500 million of additional share repurchases executed following the life reinsurance transaction. Excluding these incremental buybacks, our payout ratio was 68% and at the high end of our 60% to 70% target range.

Moving to organic growth. We continue to see healthy trends despite competitive market conditions. In retirement, we produced $5.9 billion of net flows in 2025, a 4% organic growth rate, helped by another year of record wireless sales.

We also leaned into the funding agreement-backed note market to take advantage of attractive spreads and had $5 billion of new issuance. This is not reflected in our retirement net flows but will help support growth in spread-based earnings.

Wealth Management also continues to see strong momentum with full year net inflows of $8.4 billion, a 13% organic growth rate. The number of wealth planners who are our most productive advisers focused on holistic wealth planning increased by 12%.

AllianceBernstein experienced mixed dynamics in 2025. It had overall net outflows of $11.3 billion, which includes $4 billion of low fee outflows related to the RGA transaction.

On the other hand, AB continues to see strong momentum in its private markets business, which increased AUM by 18% to $82 billion and is well positioned to achieve its target of $90 billion to $100 billion in AUM by the end of 2027.

AB ended 2025 with an institutional pipeline of $20 billion, and it has over $3 billion of additional insurance wins that are also expected to fund in 2026.

One incremental growth opportunity is commercial real estate lending. AB is making investments to enhance its platform and will onboard more than $10 billion of Equitable's commercial mortgage loan portfolio in the second half of the year.

This is a win for both companies and is another good example of the flywheel benefits between Equitable and AB.

Finally, we continue to make strong progress on our strategic initiatives. I already mentioned the life reinsurance transaction with RGA, which create $2 billion of capital and reduced our mortality exposure by 75%. We used a portion of the proceeds to help drive growth in assets and wealth management by increasing our ownership stake in AB and funding and investment in the FCA Re Sidecar and the acquisition of Stifel Independent Advisers.

We are also on track to realize our targeted $150 million of expense savings by 2027 with $120 million currently in our run rate results. We have already achieved our $110 million target for incremental investment income from shifting to private markets and see opportunity for further upside.

Moving to Slide 4. We highlight some of the key performance indicators for our growth strategy and the progress since our 2023 Investor Day. I've already mentioned several of these, so I'll just focus on a couple of areas.

In Retirement, net flows and AUM growth are running ahead of Investor Day forecasts. We also are making progress in growing our institutional business which had over $600 million of net inflows in 2025, across implant annuities and HSA. We expect a similar level of inflows in 2026 and forecast this to ramp further over time.

In Wealth Management, we achieved our target of $200 million in annual earnings 2 years ahead of plan, and the business has excellent momentum given top quartile organic growth and rising adviser productivity. We expect Wealth Management to sustain double-digit annual earnings growth, assuming normal market conditions.

Finally, AB has done a good job in executing on its margin initiatives. And it reported a 33.7% adjusted operating margin in 2025 at the upper end of its targeted range. At the same time, it is seeing benefits from growth investments in areas such as private markets, insurance asset management and active ETFs.

Overall, we see good commercial growth momentum, which will support further growth in earnings and cash flows.

Slide 5 provides an update on progress against our 2027 financial targets. Starting with cash generation. We remain on track to reach $2 billion in 2027. As I mentioned earlier, we forecast $1.8 billion of cash generation in 2026, which represents greater than 10% year-over-year growth.

Over 50% of cash flow is coming from assets and wealth management, and we now have a track record of paying dividends from our Arizona insurance entity, giving us good visibility into future cash flows.

Through 12 quarters, our payout ratio was 67% at the high end of our targeted 60% to 70% range. Note that this does not include the $500 million of incremental share repurchases funded by the RGA transaction. The one area where we are currently below our target is earnings per share growth, which has been 8% through the first 3 years of our plan.

We attribute this primarily to the elevated mortality claims experienced in 2025. Our exposure to mortality is significantly reduced following the life reinsurance transaction, and we expect EPS growth to improve in 2026, getting us back on track.

Turning to Slide 6. I want to highlight some of the reasons we feel confident in projecting strong growth in 2026. First, we ended 2025 with a record level of assets under management across each of our business segments, which bodes well for growth in fee and spread-based earnings. Given the healthy organic growth momentum we have discussed, particularly in retirement and wealth management, we expect continued growth in assets under management and advice moving forward.

Importantly, we also have significantly less exposure to future fluctuations in mortality claims. The RGA transaction reduced our net mortality exposure by 75%. So even if 2025's experience were to recur, the bottom line impact would be materially reduced.

Finally, we will get the full benefit from the additional share repurchases executed in the second half of 2025. We reduced our share count by 9% over the past year, which provides a nice tailwind in for EPS growth in 2026. Equitable is well positioned in attractive growing markets, and I'm confident in our ability to execute on the opportunity in front of us. I will now turn the call over to Robin to discuss our fourth quarter results and outlook in more detail.

Thank you, Mark. Turning to Slide 7. I'll provide some more detail on our fourth quarter results. On a consolidated basis, non-GAAP operating earnings were $513 million or $1.73 per share, and we reported net income of $215 million. The only notable item we had in the quarter was $10 million of noncash expense in Corporate and Other related to the write-off of a legacy software investment. Excluding this, non-GAAP operating earnings per share would have been $1.76 a up 8% year-over-year.

Our consolidated tax rate was approximately 18% this quarter, consistent with the guidance we provided.

Total assets under management and administration increased 10% year-over-year to a record $1.1 trillion, which provides a tailwind for earnings as we enter 2026. Adjusted book value per share ex AOCI and with AB at market value was $33.84. In our view, this is a more meaningful number than reported book value per share which significantly understates the fair value of our AB stake.

On this basis, our adjusted debt-to-capital ratio ended the year at 25%.

On Slide 8, I'll provide some further details on our segment level earnings drivers. In Retirement, fourth quarter earnings increased 4% year-over-year and 2% sequentially, and after adjusting for notable items. Given differences in tax rates across different periods, I'll focus on pretax results.

Net interest margin or NIM increased 2% sequentially and driven by the growth in general account assets. As expected, our NIM spread compressed modestly versus the third quarter, reflecting the runoff of our very profitable older RILA block and some timing noise in investment income. We expect some additional spread compression in the first half of 2026, but anticipate spreads will stabilize after that.

Over time, we expect quarterly NIM growth to roughly track the growth in general account assets, excluding embedded derivatives.

Fee-based revenues increased 8% sequentially and driven by higher average separate account AUM as well as a favorable catch-up adjustment.

Offsetting the growth in revenues was higher commission expense. While we expect commissions to trend higher over time with increased sales, the sequential growth was inflated by an allocation true-up with wealth management. This shifted some earnings between segments but had a neutral impact at a total company level.

Putting it all together, we view this quarter's level of pretax retirement earnings at a reasonable starting point from which to project future growth.

Turning to Asset Management. AB reported strong fourth quarter results with earnings up 4% sequentially. Base fees continue to benefit from growth in average AUM and performance fees of $82 million came in above our guidance. AB delivered a full year margin of 33.7% and at the upper end of our 30% to 35% guidance range provided at Investor Day.

As a reminder, AB as seasonality and results given the timing of performance fees, but the business is entering 2026 with solid earnings momentum.

Moving to Wealth Management. Fourth quarter earnings increased 40% year-over-year and the business exceeded our target of $200 million in annual earnings, 2 years ahead of schedule. Results in this quarter benefited from a favorable commission adjustment from retirement and elevated transaction fees and we view $60 million of quarterly earnings as a better run rate.

We continue to forecast double-digit earnings growth moving forward, supported by steady increases in AUA and adviser productivity. Wealth Management attracted $2.1 billion of advisory net flows in the quarter and $8.4 billion for the full year, a 13% organic growth rate. This compares favorably versus industry peers, and we are excited about the outlook for 2026.

Finally, Corporate & Other reported a loss of $123 million in the quarter. This was higher than our expectations due to $10 million of onetime expenses, approximately $25 million of elevated mortality and a lower tax rate. The adverse mortality experience was concentrated in December and resulted from a high number of small claims with less reinsurance coverage.

While we still retain some exposure to fluctuations in mortality, the RGA transaction has significantly narrowed the range of potential outcomes going forward.

Turning to Slide 9. I'll highlight Equitable's capital management program and cash flow outlook. In the fourth quarter, we returned $354 million to shareholders, including $277 million of share repurchases, for the full year, we reduced shares outstanding by 9%, which included [ 500 million ] of incremental share repurchases funded by proceeds from our individual life reinsurance transaction.

Our full year payout ratio was 95% or 68% excluding the additional $500 million of buybacks. We ended the year with $1.1 billion of cash at the holding company, up from $800 million at the end of the third quarter and comfortably above our $500 million minimum target.

During the fourth quarter, we received approximately $600 million of subsidiary dividends, including the annual distribution from our Wealth Management business. As a reminder, our holding company cash position tends to be elevated at year-end due to timing of subsidiary distribution, and we expect it to trend lower in the first half of 2026.

For the full year, we had total cash generation of $2.6 billion, which includes $1 billion of proceeds from the RGA transaction. Organic cash generation was modestly above $1.6 billion and in line with our guidance range.

As Mark mentioned, we expect approximately $1.8 billion of cash generation in 2026. The and we remain on track to achieve $2 billion of annual cash generation in 2027. Finally, we expect our year-end 2025 combined NAIC RBC ratio to be approximately 475%, above our target of 400% plus. This year-over-year increase reflects the benefit of the RGA transaction and provides us with ample capital flexibility moving forward.

On Slide 10, we highlight the value of new business, or VNB, which is generated mainly in our retirement business. VNB represents the present value of expected future cash flows from new sales, which is above and beyond the capital deployed to fund growth. It is intended to provide investors with some visibility into the drivers of future growth and cash flow from our insurance subsidiaries.

In 2025, we had record retirement sales. which helped drive an increase in VNB to $600 million. We deployed about $580 million of capital to support these sales.

While our VNB margin declined modestly due to a shift in sales mix, and a low spread environment, we continue to generate a 15%-plus IRR on new business. We are able to achieve above-industry returns as a result of our unique distribution model, which leverages Equitable advisers and results in a lower average cost of funds and a top quartile expense ratio in our retirement business.

I would also note VNB did not include the impact of distribution fees earned in our wealth management business or investment management fees earned by AB. These are additional benefits of our integrated business model that show up as noninsurance earnings and cash flows.

Turning to Slide 11. I want to conclude by providing some additional guidance to help you forecast our results to 2026 and beyond. This assumes an 8% total return for equity markets and interest rates following the forward curve. We also forecast an 8% to 9% return for our alternative portfolio.

Starting with retirement. We expect mid- to high single-digit growth in pretax earnings, with spreads stabilizing in the second half of the year. Asset Management results will be highly sensitive to market. but we have provided some baseline guidance for the compensation ratio and noncomp expenses.

In addition, AB has good visibility into achieving performance fees of at least $80 million to $100 million in 2026.

In Wealth Management, we forecast double-digit growth in earnings from the full year 2025 level.

Turning to Corporate and Other. We project a full year loss in the $350 million to $400 million range. There will be some quarterly volatility in results based on the seasonal pattern of mortality. With higher expected claims in the first and fourth quarters of the year. We have also increased our baseline GAAP assumption for mortality to incorporate recent experience.

Finally, we expect a total company tax rate of approximately 20% and segment tax rate up 16% for retirement, 26% for Wealth Management and 28% for asset management. We may have opportunity to execute on additional opportunistic tax planning initiatives in the first half of 2026, which could reduce our consolidated tax rate below the 20% level.

Putting it all together, we expect growth in 2026 earnings per share, excluding notable items, to exceed our 12% to 15% target. I will now turn the call back over to Mark. Mark?

Thanks, Robin. As I mentioned at the beginning of the call, Equitable has been on a journey since our IPO to build a more profitable and faster-growing company, and we enter 2026 with solid momentum. We have a strong balance sheet and continue to increase our organic cash generation. This has enabled us to consistently return capital to shareholders while also investing for growth.

You can see this in the strong net flows we are generating across retirement, wealth management and AB private markets, and each of our business segments ended the year with record AUM.

As Robin and I have both discussed, we have tailwinds that should drive stronger earnings per share growth in 2026, and we remain focused on achieving our 2027 financial targets. We will now open the line to take your questions.

[Operator Instructions] Your first question comes from the line of Suneet Kamath from Jefferies.

I just wanted to start with private credit again. It seems like your stock trades like a private equity company except on the days when those stocks go up. And I know you have some slides in the back talking about private credit, but can you just talk a little bit about how you're feeling about the quality of what you have in the portfolio. I don't know if you have a watch list, if you can talk about some of the sectors that you're particularly focused on. It just seems like this is an ongoing kind of overhang on the stock.

Sure net, we look forward to the multiple of those private credit companies for Equitable over time. But we added on Slide 16 in the earnings presentation gives them a little bit more disclosure on our private credit portfolio.

So private credit, if you take a step back, it's about 16% of our total GA. Within that, almost 50% of that is within corporate private placements, which is nothing new for insurance companies over time. There has been some recent noise about software. That's typically found in the direct lending portion of the portfolio. That's about 4% and of the private credit portfolio or 1% direct lending is 1% of the total GA software specifically within the direct lending is a small portion of that. It's 15 basis points of the total general account. So it's really immaterial for us, and we're underweight the industry benchmarks on our software exposure within that for Equitable on the general account.

Maybe I'll pass to Onur to speak about private credit at AllianceBernstein within the broader client portfolios as well. Onur?

Yes. Thanks, Robin. Just to start with the broader context, if you think about our AUM, which is approaching $900 billion, private credit brought the defined makes up roughly $82 billion, both in terms of fee paying and fee eligible assets. Within that, the corporate direct lending that Robin mentioned, makes up roughly 25% of that $82 million. So within the grand scheme of things, it's also relatively small exposure to AB overall as a category.

And within that, we have some exposure to software in line with other corporate direct lending franchises. But our experience so far has been spectacular over the last decade plus.

We have deployed $15 billion with software companies. We had 0 net losses in that. When we look at our current portfolio, our elevated risk rating is only 3% of those companies that is in our portfolio. So as a result, A, it's not a big exposure for us either. Second, we feel confident about our history of underwriting discipline. And then third, we are remaining very confident about the health of our current portfolio. So overall, it's not a big event for us so far. So we remain relatively constructive.

And I need just to wrap it up with private credit, it's an important asset class for us. The liabilities within the insurance company fit well. with private credit with AB, as Onur mentioned, we get a good direct look at the underwriting that makes us comfortable risk in there and it delivers good risk-adjusted returns for us. So it's an asset class that we think it's important for insurance companies to invest in. They're important for the economy and they're point for our clients at AB. And so we'll maintain our discipline and ensure we deliver good risk-adjusted returns for our clients.

Okay. Appreciate that. And then just shifting gears to Wealth Management. One of the things we're hearing is competition for advisers has been increasing and then there's pretty sizable packages being offered. When I look at your 12% growth in wealth planning, just curious how much of that is coming from external hires versus internal promotions? And what is your sort of target market in terms of the practices that you go after?

Yes. Thanks. This is Nick. Look, we're very encouraged by our organic growth rate that we see coming from our existing advisers. That was $8.4 billion of net flows for the year. We bring a distinct model out to the space, given our people, our planning and our platform. We're one of the few platforms that continue to bring new advisers into the industry, and that gives us a pipeline to grow wealth planners, as Mark highlighted, which were up 12% year-over-year and have more than doubled since we IPO-ed back in 2018.

We're very pleased with the progress of our [ EXP ] hiring efforts. We recruited $1.4 billion in assets for the year in 2025. As context, it's a large addressable market. There are about 150,000 Series 7 producers, about 12,000 a year looking for new homes. We hired a 20-year veteran to run our [ EXP ] hires, knows the market well and has built a disciplined approach here at Equitable, we are very intentional about the type of advisers we target believe we have a distinct model for [ EXP ] hires who are looking to grow our businesses or transition their practices to other advisers.

So we've got an edge. We'll remain disciplined. We're very bullish about our organic growth drivers and productivity and wealth planners, and we see as a force multiple on top of that.

Your next question comes from the line of Tom Gallagher from Evercore ISI.

Good morning. First question is, when I look at the value of your AB stake now and I compare it to the value of the equitable stock, everyone looks at that tracks it from time to time. That valuation spread is probably as big as it's been in a very long time because AB has done well, equitable, not so much. Is there anything structurally you can do to close that valuation gap when you think about potential corporate strategies? Or is that more of a theoretical gap that you're just going to have to live with and hope it closes over time?

Tom, it's Mark. Thank you very much for the question. Yes, we see the gap as well, and it is perplexing from time to time. But having said that, AB has done incredibly well in the last year or so or the last years or so. And part of the benefit in AB is this integrated model that we talk about, this flywheel, this ability for Equitable to help seed strategies in AB and they've executed extremely well over there.

Looking at our valuation, I think there's two or three things which would point to investors. One, attractive and growing markets, being in U.S. retirement, asset management and wealth management, having record AUM there, it's a good place to be. We're very pleased with the way the integrated model is working now. This flywheel we can point to really, really strong benefits on that. And we have a good track record of execution.

So I mean putting it all together, we can see upside here, and we can see upside in the valuation for EQH, it certainly is not an expensive stock now at 6x future earnings. And what we have to do is the management team is really, really focused on the things that we can control and that's growing the business, making sure that a flywheel works being disciplined on the expenses and increasing that cash generation. And I'm sure that will close the gap.

My follow-up is just on mortality exposure, I guess, Rob and one, but Two-part question. One, can you just give us an idea of the embedded earnings in the corporate loss that's related to life insurance now?

And secondly, is there any opportunity to further reduce your exposure to mortality? Like could you potentially get RGA to buy out the remaining 25%? Or is that -- is the expectation you're just going to keep that exposure going forward?

Thanks, Tom. So let me just touch on mortality, a bit taking a step back. So in the quarter, we did see a mix of some large claims also smaller claims that we didn't have reinsurance coverage on before the RGA transaction benefits kick in. So this led to about $25 million adverse mortality in the quarter that we mentioned. And for '26, we felt that it was prudent to include in our corporate and other guide of $350 million to $400 million and increased GAAP guidance of about $50 million in terms of mortality.

Now that may be conservative because it's slightly worse than our 3-year average, but it's closer to recent experience. So we felt it was prudent to include that in the guidance that we've given. We're not going to disclose like subsegments within corporate and other because noise within there. But I think that's the best you can look at is the $350 million to $400 million. That includes some prudence in it. And I think over time, in 2027, we expect that to improve as -- we expect the life earnings to improve and some of the other pieces in corporate and other to improve as well.

If you think about our remaining 25% of the exposure, it's much smaller now than it was previously. We feel as though the volatility that we have is manageable. It's small even in an adverse quarter like this. where it was $25 million. That being said, we always look at different solutions if we think it's permanent, and we want to continue to drive execution and shareholder value. So we'll always look to see where we can do that.

Your next question comes from the line of Wes Carmichael from Wells Fargo.

Maybe a bit more of a specific question for Robin. But in the Retirement segment, realizing you had pretty strong sales this quarter, but the commission and distribution expense line picked up, I think, sequentially about $25 million. I'm just curious if you think there's a higher ratio of commission and distribution expense relative to sales going forward?

Sure. So as Mark mentioned on the call, on Nick can go deep on, but we've seen great growth in the retirement business. 4% organic growth in it. We've seen good top line growth in SCS as well. As you recall, the mix of where that sales come from, whether it's Equitable advisers or third-party changes the commissions that come up upfront as we can back less in Equitable advisers. So that's a big portion of the drive. That being said, going forward, with less upfront DAC, that means less DAC amortization. So we expect over time earnings from the Retirement business to exceed well and beyond the commission expense that we have along with the NIM growth that we'll see going forward.

And Wes, remember, we also had a onetime true-up as well that I mentioned between retirement and wealth management on the call.

My follow-up was on the FABN program. I know you've been more active there recently, additional spread source. Could you talk about maybe how meaningful you think you can grow that program from here and what the issuance environment looks like in 2026. I know in 2025 was kind of a record year for the industry.

Sure. We've been able to lean in on the FABN program in 2025. And almost $5 billion in issuances. It comes with very attractive IRRs and good spread earnings, also benefiting the flywheel at AB manages those assets so we get good risk-adjusted returns from that program.

Overall, as a reminder, the FABN flows aren't included in the retirement 4% organic growth rate that we gave if it was, it would be about 7% organic growth rate. So it's incremental to retirement earnings and helps us grow going forward.

As long as FABN, it's a very disciplined liability that we have. If the pricing is there, we'll go and execute an issue if we can get the IRRs that we want. If it's not there, we won't. So we'll be disciplined in that market, and it really depends on where equitable spreads trade relative to broader industry spreads. And so that's what we're looking. But from where we sit here today, we still see opportunities to grow that FABN business going forward.

Your next question comes from the line of Alex Scott from Barclays.

I have one on cash flow and just the conversion of earnings. I guess just inherent in you guys confirming the cash flow targets that you've laid out but not necessarily the absolute earnings level. It sort of suggests that cash conversion is improving.

So I just wanted to make sure I understand that correctly. And can you talk about some of the underlying drivers, the types of businesses you make shifting towards Will you actually changed sort of the guidance talked about in terms of conversion over time? And what kind of upside is there as you continue to mix shift?

Sure, Alex. I think I got it. You came in a little broken up, but it was about the cash generation, the mix and the conversion. So just taking a step back, we were able to upstream and $2.6 billion of cash this past year in 2025, the $1 billion of that related to the benefit from the RGA transaction to $1.6 billion of organic cash generation, 50% of that is coming from asset and wealth businesses. So that's close to 90% conversion of rates on those businesses that you'll see.

Going forward, we expect to grow cash flow of 10% next year to $1.8 billion. This growth is driven by higher asset and wealth earnings and larger expected retirement dividends as well, reflecting the profitable growth in the business. that we see.

Now keep in mind, the one factor that we have is the capital release from the runoff legacy block, that has a very high conversion rate. So that's why uniquely in our IR Day plan, you saw cash growing faster than earnings because we're getting the benefit of the capital release on the legacy block that we see. So we still feel very confident on the $2 billion target. You can see that naturally come through, and we're excited about the future.

Got it. if we can go back to retirement and the spread, what are some of the dynamics that will cause that to stabilize in the mid part of the year? I mean, does that have the new with the market value adjustments? Or is that more related to the [ 2020 ] runoff and what you see there? I just wanted to better understand.

Yes. So the question was on spread in retirement and whether it's -- when the market value adjustments to MBAs runoff. So it's a little bit of both that you saw in 2025. We saw a year-over-year decrease in MBAs. We don't assume any benefits from MBAs going forward. And then we see the runoff of that very profitable RILA block.

As you recall, we were the only ones in the market, so we had very strong margins and now margins have normalized to 15% plus IRRs on that business. That business is less than 15% of our total RILA block, so that continues to run off. And we expect some less spread compression going forward. If you look at this quarter versus last quarter, it was about 3 basis points of spread compression. I think that's anywhere from 2 to 4 in the first half of next -- of 2026. I think it's fair.

And then going forward, you're going to see spreads move in line and grow NIM grow with the general account balance in the retirement business. So -- and then keep in mind as well, take stuff, even if you saw spread compression quarter-over-quarter, NIM is grown. So we're actually growing nominal value in terms of earnings in that retirement business, and that will continue going forward with a strong organic growth.

So all in all, retirement business, we feel comfortable with. We expect that, as you saw in our guidance to grow on a pretax basis between mid-single to high single digits. And so we're excited about the future growth coming through.

Your next question comes from Jimmy Bhullar from JPMorgan.

I had a question on individual life. But before that, I think, obviously, you guys have done a good job of derisking the business, including the RGA deal, but some of the disclosure changes you've made recently they make it harder to analyze your results and not a anybody who would want individual life bumped into like corporate, where you can see what the helps going on with that business, I doubt you're in within the company analyzing it that way. But from the outside, that's how people have to do it.

But the question is on like maybe if you could go into a little bit more detail on what you've seen in the business that's caused the results to get worse, maybe either by policy type or issue? And is it more of an aberration? Or is there something with pricing or anything or the macro environment that's made the business perform worse and what caused you to maybe increase your -- or reduce your earnings or increase your loss assumption for that block?

Sure. Thanks, Jimmy. So just taking a step back, I think it's most important for us and we tell you and investors focus on cash. I mean that's the most important metric that we can give you out in the Street. Cash flow has grown from $1.6 billion to $1.8 billion next year and to $2 billion by 2027. So that's the most important metric I can give you because that's what's really coming through in the businesses for some of the noise that you'll see in the GAAP reporting overall.

The life business specifically, as we've talked about historically, mortality, we have volatility because we have large base amounts, and we have older issue ages within that block. So as a result, there's some volatility within windows policies die. The underlying economics, the economics of it are good. The cash is okay because the assumptions are more conservative on cash than they are in GAAP.

From that volatility perspective, we did the RGA transaction to reduce 75% of that volatility going forward. We think the guide that we're giving is prudent it's conservative versus the 3-year average. But from what we've seen recently, we thought it was prudent to give you a guide that gave us an opportunity to ensure that we hit the numbers, even if we have some volatility also provides upside for 2027 compared if that improves.

So all in all, we feel good about the business where it is with the reinsurance transactions that we've done also the lower retention rate on new business that we have minimizes that volatility going forward. So we feel okay over there.

And then maybe just following up with Nick on the RILA market. seems like more and more companies have entered the market in recent years, including some of the guys backed by PE insurers. Are you seeing competition disciplined? Or are you -- are some of the carriers being more aggressive we aren't just offering maybe introductory specials and whatever else? Like how do you feel about the competitive environment in the RILA market?

Yes. Thanks for the question. Look, first, we continue to see growing demand for [indiscernible], given the demographics and heightened by the current period of macro uncertainty. It's a product that's right for the times. As Mark highlighted, fourth quarter RILA sales were robust across all channels, up 12% year-over-year, another record high with $1.4 billion of net flows.

Look, as the market leader with the durable edge, we have a track record of benefiting from the growing demand. You've seen us more than double our RILA sales in the last 3 years. we delivered record sales in 9 out of the last 10 quarters.

To your point on competitive intensity, we saw players enter at the tail end of 2024, so we've been operating what I would say in this new normal for over a year. We're always vigilant on competitive trends, especially on pricing. Traditionally, we see new entrants offer teaser rates and then revert to more sustainable levels. And we saw this dynamic in the fourth quarter for those who entered in the beginning of the year.

We have conviction that given our equitable flywheel, this gives us an edge. We have the differentiated distribution with Equitable advisers and privileged third-party networks, which attract lower cost of liabilities. We generate attractive yields and a line of sight for how we do that through AB. We have scale as the #1 player and decades-long relationships. And I think we have a track record of innovation to continue to meet emerging needs that we see in the marketplace. So we believe that's hard to replicate.

So looking forward, we'll continue to be vigilant on competition. We're confident in our momentum and we have conviction that we're in a privileged position to capture a disproportionate share of the value being created in that space.

Your next question comes from the line of Joel Hurwitz from Dowling & Partners.

Robin, I wanted to get an update on the '27 targets. Last quarter, I think you said the midpoint of that 12% to 15% EPS CAGR was achievable. I guess, do you still think that's the case, especially with the mortality outlook?

Sure, Joel. We're very focused on delivering all of our 2027 targets. As Mark mentioned, we remain on track for the $2 billion of cash, the 60% to 70% payout ratio and where we're lagging, to your point, is on the earnings per share growth. I think the guidance that we've given you in this quarter should allow you to get to that range on the 12% to 15%. I think the guidance would give you probably gets us to the lower end of the range, which would be fair.

Keep in mind, though, depending on how we track during the year, we still have levers in place such as expenses to get in that range. So that's where we're focused on delivering is the 12% to 15%, but also ensuring that the business continues to grow going forward even post 2027, so we continue to drive cash flows and earnings growth for shareholders.

Got you. That's helpful. And then just on the payout ratio, with cash generation moving to $1.8 billion, I think what you're implying on earnings why shouldn't the payout ratio be moving up? I know we have to take out interest expense, but I feel like if I do that, cash generation ex interest expense is more towards like the mid-70% of your operating earnings?

Yes. So if you look on the payout ratio since our IPO has been on the higher end of the range, that we deliver on. And I think from -- if you look at where the stock is trading and relative to expectations, you can expect us to be probably in the higher end of the range.

But keep in mind though, the opportunities to invest in growth are the best that we've seen in some time when interest rates were there are the consumer needs for us to grow in the retirement business and asset management and wealth businesses. There are a lot of good investment opportunities that deliver very strong returns for shareholders as well.

So we'll continue to buy back a good amount of stock at these levels. But more importantly, we're investing for future growth to ensure that we continue to capture the retirement opportunity in the U.S. and continue to grow in asset and wealth.

Your next question comes from the line of Yaron Kinar from Mizuho.

You mentioned the durable edge you have in the RILA market. That being said, market share for equitable in on new sales is shrinking, albeit from an enviable market-leading position. due to the increased competition. So I'm assuming you're not willing to compromise on IRRs here. And would that potentially mean that one of the company's growth engines moderate in coming years even as the RILA market continues to grow?

This is Nick. Look, obviously, the competitive landscape has changed from a decade ago since we were a pioneer in launching the RILA market and net 100% share in that market. As we highlighted, look, we see the pie continuing to grow, given the demographics and the nature of the product in these times. We would expect to continue to maintain our leadership position in this space.

We are very intentional, and I think this speaks to the power of our distribution being able to pivot our sales based on we see -- where we see consumer value and shareholder value. So as you mentioned, we are extremely disciplined on IRRs. We're delivering our targeted IRRs today, and we continue to see strong momentum, as Mark highlighted, in our sales and flows.

I think -- it's Mark here. I'll just add a couple of things, which is unique to the while market. Firstly, there's about $600 billion of assets coming out of 401(k)s a year, going precisely into this type of market. So it's not necessarily coming out of disposable income for consumers that's coming out of their savings vehicles. So that protects it from some of the economic issues we see consumers have.

And then secondly, to Nick's point, we've had this product a long time. We don't look at market share. We look at sales growth and sales growth at a record level. So we're happy with that one. But one of the things that gives us comfort on RILA is that we know it works in low and high interest rates. There were some annuity products that work incredibly well in high interest rates and not in low interest rates. But we've seen RILA through the cycle, Nick. And we know it is a very strong customer proposition when rates are low as well as when rates are high. So it's a good part of the retirement market to be in.

Makes sense. And then my follow-up, just going back to Slide 10, the VNBs. Has the VNB payback period changed over time? Can you give us any quantification of that?

Sure. We haven't disclosed a beer, but our VNB over time as -- and payback period, it has come down over time and IRRs have gone up. If you look RILA product is specifically what we just spoke about is a shorter duration product compared to most of the longer duration products that we've been selling. We're also -- we exited the individual third-party life market last year. That's longer duration. So much shorter duration, faster payback periods, faster cash conversion on the product portfolio that we sell today versus what we sold years ago.

Okay. But you can't quantify it at this point?

We haven't disclosed it, but it's materially lower than what [indiscernible].

Your next question comes from the line of Mike Ward from UBS.

I was just wondering, you mentioned the roll-off of the profitable RILA, I think, being 15% of the total, just -- how long do you expect that to take to roll out?

Mike, it's the roll off of the very profitable all because that was the force of whom we are only the only ones in the market across it. We'd expect that to still drive a little bit of spread compression. You start 3 basis points this quarter. And overall, through the first half of this year, probably in similar magnitude anywhere from 2 to 4 basis points a quarter.

But come the second half of the year, we expect those spreads to stabilize and NIM will grow with the general account book value in embedded derivatives going forward. So I think at 0.5 point this year, we'd expect that to be immaterial and not drive spread compression in the business anymore.

Okay. And then just switching to the sort of defined contribution world. It seems like there's been kind of more of a push to open up to different asset classes and help employers the plan sponsors get more comfortable with some of this stuff. You guys have obviously been involved in that for some time. Just curious how the uptake in some of those products and in-plan annuities life path paycheck kind of stuff is trending more recently.

Great. I'll start with that one. Look, we continue to remain bullish on the untapped potential in the long-term growth for secure income or implant annuities. It's an $8 trillion DC market. We see the potential addressable market being about $400 million to $600 million for implant solutions. We're still in the early innings, but I would say there is momentum. We have the policy or the regulatory tailwinds, this is Secure 1.0. This is Secure 2.0, where people want more durable retirement solutions. I think that's going to amplify as we approach Social Security going into 2030. We have products and partnerships with the target date funds and record keeper platform exists to provide those products. So we're really in this for step now of engaging plan sponsors.

This is a subject of all discussions. I think we see their first movers and then fast followers and then laggards, but we're encouraged by the momentum. We had roughly $920 million in sales in our broader institutional business for the year and have about $1.8 billion in AUM since we launched an institutional.

Looking forward, our belief we're in a very strong position as market continues to emerge, given our partnership ment network that you referenced, that's AB, BlackRock and JPMorgan that are building a track record as the market expands. So going forward, we get confirmation about 60 to 90 days prior to transfer. This is going to still be lumpy, while we don't expect material inflows in the first quarter, we've got a strong pipeline for 2026.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, and welcome to Equitable Holdings Inc. Third Quarter Earnings Call. Please note that this call is being recorded. After the speaker's prepared remarks, there will be a question-and-answer session. [Operator Instructions]

I'd now like to hand the call over to Erik Bass, Head of Investor Relations. You may now go ahead, please.

Thank you. Good morning, and welcome to Equitable Holdings Third Quarter 2025 Earnings Call. Materials for today's call can be found on our website at ir.equitableholdings.com. Before we begin, I would like to note that some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. Our results may differ materially from those expressed in or indicated by such forward-looking statements. Please refer to the safe harbor language on Slide 2 of our presentation for additional information.

Joining me on today's call are Mark Pearson, President and Chief Executive Officer of Equitable Holdings; Robin Raju, our Chief Financial Officer; Nick Lane, President of Equitable Financial; Seth Bernstein, AllianceBernstein's President and Chief Executive Officer; and Tom Simeone, AllianceBernstein's Chief Financial Officer.

During this call, we will be discussing certain financial measures that are not based on generally accepted accounting principles, also known as non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures and related definitions may be found on the Investor Relations portion of our website and in our earnings release, slide presentation and financial supplement.

I will now turn the call over to Mark.

Good morning, and thank you for joining today's call. Equitable Holdings delivered solid third quarter results marked by continued organic growth momentum and increased earnings power across our business. We also allocated $1.5 billion of capital to drive shareholder value and future growth, successfully redeploying a large portion of the proceeds from our individual life reinsurance transaction with RGA. This includes approximately $200 million of investments to help accelerate growth in asset and wealth management. .

Looking forward, our integrated business model positions us well to be a long-term winner in retirement, asset management and wealth management, and we remain confident in achieving each of our 2027 financial targets.

On Slide 3, I'll provide a few highlights from the third quarter. Non-GAAP operating earnings were $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, which is up 2% compared to the prior year. As expected, earnings rebounded from the first half of the year, helped by growth in each of our core businesses and the completion of the life reinsurance transaction. I'm also pleased that we saw only small impacts from our annual assumption review, validating our conservative approach to assumption setting. We ended the quarter with record assets under management of $1.1 trillion, up 4% sequentially, which bodes well for future growth in earnings.

We will also see additional benefits from management actions to enhance yields in our investment portfolio and drive productivity savings. Organic growth momentum remains strong, supported by our flywheel business model. Our retirement businesses generated $1.1 billion of net flows during the quarter, driven by continued growth in wireless sales. As a reminder, flows tend to be lower in the third quarter due to seasonality in the K-12 teachers business, and we did not have any material institutional flows in the period. Wealth Management had another strong quarter with $2.2 billion of advisory net inflows, a 12% annualized growth rate. Adviser productivity increased 8% year-over-year.

Turning to 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, driven by the private wealth and institutional channels. Private markets assets increased 17% year-over-year to $80 billion and are on track to achieve AB's $90 billion to $100 billion target by 2027.

Moving to capital deployment. We used $1.5 billion to drive shareholder value and make investments for future growth. During the quarter, we returned $757 million to shareholders, including $676 million of share repurchases. We completed most of our planned $500 million of incremental buybacks and expect our full year payout ratio to be at the upper end of our 60% to 70% target range. We also reduced outstanding debt by $500 million to manage our leverage ratio and give us more capital flexibility moving forward. Finally, we announced 2 strategic transactions that help scale our Wealth Management and AB Private Markets businesses.

We are acquiring Stifel independent advisers, which has over 110 advisers and $9 billion of advisory assets. In addition, we are allocating $100 million to support AB's investment in FCA Re, an Asia-focused sidecar established by Fortitude Re and Carlyle. AB will become a key investment partner for Fortitude and initially manage $1.5 billion of private credit assets for FCA. I will discuss these transactions in more details in a minute but they both offer attractive IRRs and are consistent with our strategy to scale adjacent businesses.

Turning to Slide 4. We highlight our strategy to drive growth and create shareholder value. We are focused on 3 core growth businesses: Retirement, asset management and wealth management that have synergies and provide flywheel benefits. Participating in all 3 of these businesses allows us to capture the full retirement value chain. There were 4 key pillars to our strategy. Number one, defend and grow our retirement and asset management businesses. Secondly, scale, our high growth and high multiple wealth management and private markets businesses. Third, seed future growth by investing in high potential opportunities by annuities and 401(k) plans and emerging asset management markets. And finally, be a force for good and deliver on our mission to help our clients secure their financial well-being so they can live long and fulfilling lives.

On the next 2 slides, I will provide a deeper dive into our strategy for scaling adjacent businesses. First, I will focus on our Wealth Management business, which is a key growth driver for the company. Having affiliated distribution also provides a significant competitive advantage for Equitable's retirement businesses. Wealth Management has strong growth momentum with $6.2 billion of year-to-date advisory net inputs. Adviser productivity is up 8% year-over-year and 24% since 2022. Earnings are on track to reach $200 million in 2025, 2 years ahead of plan. We are also allocating capital to enhance the strong organic growth momentum. We have increased our investment in experienced adviser recruiting, bringing in over $1.1 billion of recruited assets over the past 12 months.

Earlier this year, we hired a new Head of Business Development to build out our platform, and we have a strong pipeline and expect to ramp up recruited AUA over time. As I mentioned earlier, we also recently announced the acquisition of Stifel independent advisers, which has over 110 advisers and $9 billion of AUM. Stifel's advisers have similar characteristics to Equitable's advisers, creating a nice cultural fit. There are also meaningful operational synergies. We expect the transaction to close in the first half of 2026 and forecast it to add about $10 million to Wealth Management earnings in 2027. This is a good example of the type of bolt-on acquisitions we will look at to help scale our Wealth Management business at a reasonable cost. Looking forward, assuming normal markets, we forecast Wealth Management earnings to continue growing at a double-digit rate, driven by asset growth and further advisory productivity improvement.

In addition, margins should expand over time as the business scales. I would also note that our business does not have significant exposure to lower short-term interest rates. Cash sweep income has accounted for only 15% of the segment's year-to-date earnings and 100 basis points of Fed rate cuts would reduce annual earnings by only about circa $15 million.

Turning to Slide 6. I want to highlight some examples of our equitability of deploying capital to support growth at AB. Having access to Equitable's balance sheet is a competitive advantage for AB relative to most traditional asset managers and the investments we make yield flywheel benefits across EQH. Our investments come in 3 primary forms: number one, allocations from Equitable's general account portfolio which can be used to seed capital to launch new strategies or permanent capital to scale existing offerings. To date, we have deployed over $17 billion of our $20 billion commitment to AB's private markets platform. Number two, in addition, we support team lift-outs that bring new capabilities to AB. For example, in the past year, AB added private ABS and residential mortgage teams to expand its private market offering, and Equitable was able to provide them with immediate capital to invest.

Number three, finally, we helped finance M&A or strategic investments, either by providing cash or issuing AB units. We did this with the acquisition of CarVal in 2022 and more recently with the investments in the Ruby Re and FCA reside cost. These sidecar investments highlight some of the unique synergies between AB and Equitable. AB leveraged Equitable's insurance expertise and the due diligence process and both firms benefit from developing a strategic partnership with the sponsor. These investments also provide Equitable with exposure to new insurance markets, such as pension restate and Asia. AB has been able to leverage these investments to help deliver strong growth in private markets and third-party insurance, 2 key strategic focus areas for the company: private markets AUM and has grown at a 12% CAGR since 2022 and is on track to meet to exceed the $90 billion to $100 billion target by 2027.

Third-party insurance general account AUM is up 36% since 2021, and AB has added 6 new mandates year-to-date. Stepping back, the recent actions we've taken to support the growth of AB and Wealth Management are good examples of us executing on our strategy and leveraging our unique flywheel benefits.

I will now turn the call over to Robin to go through our financial results in more detail.

Thanks, Mark. Turning to Slide 7. I will provide some more detail on our third quarter results. On a consolidated basis, non-GAAP operating earnings were $455 million or $1.48 per share. We reported a GAAP net loss of $1.3 billion, primarily driven by a onetime impact from asset transfers at the closing of our individual life reinsurance transaction. There is an offsetting adjustment to AOCI. We had a few notable items in the quarter. First was a $36 million adjustment for July mortality experience, most of which was covered under our reinsurance agreement with RGA. The transaction had an effective date of April 1, so it covers claims in July. However, the reinsurance benefit is not reflected under U.S. GAAP as we did not close the transaction until July 31. .

Accordingly, there is a difference between our GAAP results and our cash results. Going forward, we expect to see significantly less volatility in our life results, which are now reported in Corporate and Other. We also had $24 million of onetime expenses in corporate and other. Finally, we had a $4 million benefit in Wealth Management from our reserve release which reflects better emerging experience on the loans we've made to recruit experienced advisers. Our annual assumption review had a $1 million positive net impact on operating earnings.

As Mark mentioned earlier, this validates our conservative approach to assumption setting. Adjusting for these items, non-GAAP operating earnings per share was $1.67, up 2% year-over-year. Total assets under management and administration rose 7% year-over-year to $1.1 trillion, which bodes well for future earnings growth. In addition, we'll see further benefits from expense initiatives that will contribute to the bottom line over time. Adjusted book value per share ex AOCI and with ABF market value was $33.59. In our view, this is more meaningful than reported book value per share, which reflects our AB holding at book value. On this basis, our adjusted debt-to-capital ratio was 24.5%.

On Slide 8, I'll provide some more details on our segment level earnings drivers. Starting with retirement Earnings declined from the third quarter 2024, but increased 9% sequentially after adjusting for notable items in both periods. Net interest margin, or NIM, was down year-over-year due to a lower level of market value adjustment gains and some spread compression as our pre-2020 RILA block runs off, but it did increase 4% sequentially. As discussed last quarter, we do not assume any benefit from MVAs going forward, and we expect spread pressure from the old RILA block to be de minimis by mid-2026. NIM should continue to increase from the third quarter level driven by growth in general account assets.

We also saw fee-based revenues increased 4% from the second quarter due to strong equity markets. Separate account balances ended the quarter 4% higher, which bodes well for further growth in fee revenues in the fourth quarter. Growth in revenues was partially offset by higher DAC amortization which reflects growth in the block and increased surrenders. This quarter is a good baseline for amortization moving forward, and we expect it to increase by approximately $4 million per quarter.

Moving to Asset Management. AB delivered a strong quarter with earnings up 39% year-over-year. This includes the benefit of increasing our ownership from 62% to 69%. We Fee revenue increased 6% sequentially, driven by favorable markets and a higher base fee rate. The adjusted margin improved 290 basis points year-over-year to 34.2% and is expected to come in above the 33% target for the full year. AUM ended the third quarter at a record $860 billion, which should support future growth in base fees and we now project full year performance fees of $130 million to $155 million, up from our prior forecast of $110 million to $130 million.

Turning to Wealth Management. We delivered strong earnings and net flows. Earnings increased 12% year-over-year, excluding the reserve release and 12% annualized organic growth compares very favorably with peers. We expect segment earnings to continue growing at a double-digit rate moving forward. Finally, results in Corporate and Other were negatively affected by the notable items I mentioned earlier and adverse mortality throughout the quarter. We expect to see much more muted impact from mortality in future periods as we get the full benefit of the life reinsurance transaction. We will also see incremental benefits from our expense efficiency initiatives. Our alternatives portfolio generated an 8% annualized return in the quarter consistent with our 8% to 12% long-term expectation. This exceeded our guidance of a 6% return due to a gain on a strategic investment. We expect returns at the low end of our 8% to 12% target range again in the fourth quarter.

Lastly, the consolidated tax rate for the quarter was 17%, below our normal expectation of 20% and due to some favorable items. We now expect a full year consolidated tax rate to be in the high teens. Looking to 2026, we still expect the full year overall company tax rate to go back to 20%. Putting it all together, we see good momentum heading into the fourth quarter and remain focused on controlling what we can control to drive higher earnings in the future.

Turning to Slide 9. I'll highlight Equitable's capital management program. During the quarter, we returned $757 million to shareholders. including $676 million of share repurchases. We completed most of the planned $500 million of incremental buybacks in the third quarter. For the full year, we expect our payout ratio, excluding the onetime buyback to be at the higher end of our 60% to 70% guidance range. Over the past 4 quarters, we have reduced our share count by approximately 8%, helping to drive growth in earnings per share. We ended the quarter with $800 million of cash at the holding company, above our $500 million minimum target. During the quarter, Holdings received $1.6 billion in subsidiary dividends, including $1.3 billion from our Arizona insurance entity. We used this to fund the capital return to shareholders, tender for $500 million of debt. and redeemed the remaining $165 million of our Series B preferred.

In the fourth quarter, we expect to take an additional dividend from our Arizona subsidiary and we'll also receive distributions from our asset and wealth management businesses. For the full year, we expect total cash upstream to the holding company to be $2.6 billion to $2.7 billion. This includes $1.6 billion to $1.7 billion of organic cash generation in 2025, in line with our guidance. In addition, we will upstream $1 billion of proceeds from the life reinsurance transaction. Importantly, over 50% of our organic cash generation is coming from asset and wealth management businesses, highlighting our diversified business model. We will provide additional guidance on our 2026 cash flow outlook early next year and remain on track to achieve the $2 billion of annual cash generation by 2027.

I will now turn the call back over to Mark.

Thanks, Robin. Equitable as healthy organic growth momentum and higher assets under management are driving increased earnings power across our retirement, asset management and wealth management businesses. I'm also pleased with the progress we've made in redeploying the $2 billion of proceeds from the life reinsurance transaction to drive shareholder value and make strategic growth investments to scale our wealth management and AB Private Markets businesses. Looking forward, we expect EPS growth to accelerate and remain confident in achieving our 2027 financial targets. We will now open the line for your questions. .

[Operator Instructions] Your first question comes from the line of Suneet Kamath of Jefferies.

I wanted to start with private credit. And if we take a step back, we have some people outside the insurance industry pointing fingers at the insurance industry, some folks within the industry saying refined. So I wanted to get your perspectives on 2 things. One, what your view of the environment is? And I guess the bigger question is, as you start to add private credit assets, can you talk about the process that you go through with CarVal just to understand what the requirements and criteria are, whether you want to talk about ratings or who rates the securities? Just want to get some color on the background there.

Sure, thanks for the question. I think on the broader environment and carve-out sets on the line, so I'll let them touch that, but let me talk quickly about how we think about it at equitable holdings. We do think private credit and broader credit is a good asset class for clients and investors at Equitable and AllianceBernstein, and we want to make sure we're compensated for the risk we take.

For Equitable's general accounts, specifically, this is a business in insurance that we have sticky liabilities and where you want to take some liquidity risk and as a result, private credit is an attractive asset class that matches well with our liabilities. We invest in investment-grade assets, and we pick up in a liquidity premium as a result. Specifically on the ratings, as I know this has come up in some of the calls, about 90% of our fixed maturity portfolio is rated by at least 1 of the big 3 rating agencies. We have 8% at DBRS and our Kroll and 2% is NAIC only.

We only have $200 million that's rated by Egon Jones, and that's really within our middle market lending portfolio. So that's about less than 20 basis points of our total portfolio. Just importantly, ratings is an output, but we don't rely on ratings. Where we rely on at Equitable Holdings is the underwriting capability within our general account team and at AllianceBernstein. And that's really the benefit of our flywheel here as we have direct access of underwriting. And so we need to get comfortable first with the underwriting of the portfolio that we're being compensated for any risk that there is, and then you would get the rating.

So the overall portfolio, the general account, it's about 98% investment-grade and A2 rating, but it's the output of the good underwriting that takes place between Equitable and AllianceBernstein. And we continue to view even in this environment, private credit as an attractive asset class, but both private and public credit for the general account does come with risk. That's our role. We want to take good risk and make sure that our shareholders are being compensated for it, and we feel comfortable where we are today for the general account at Equitable. Maybe I'll pass to Seth, so we could talk about AB, broader credit and CarVal as well.

Okay. And Suneet, let me just make the broader statement, which is as we look at our private credit businesses, which CarVal is one of several. Our overall investment performance, including recent results, has been as expected or better. We've seen pretty strong results across the board, certainly recovering, particularly in commercial real estate. But I would say, generally, that given the amount of money that's moved into private about it, we've certainly seen some reduction in the strength of the covenant structures and it's clear that people are reaching for risks in what has been in a very strong demand market. .

That being said, we stay very close to home in the risks we underwrite, whether at CarVal or our middle market lending business. And those processes are bottoms up due diligence intensive and highly negotiated structures, which to date have protected us pretty well. We've been pretty prudent at stepping aside where we think the terms and the structure or the management team are not giving us like the visibility that we would think is essential for us to take a favorable decision in that regard.

So yes, there are signs of exuberance. And obviously, there have been indications of fraud at least in 2 cases. that are out there, but we think we're well protected and we're comfortable with the positions we have, both in the general account of Equitable, but also more broadly for our third-party clients.

Okay. My second question is on the RILA market. And I know about half of your sales are somewhat protected given Equitable advisers and some of the P&C companies that you sell through but I wanted to focus on the other half and where I think there's probably more competition. I just wanted you to talk to maybe 2 things. One, how are you differentiated in that other half? And then second, are you seeing anything in terms of terms and conditions that start to make you a little bit worried about aggressive features, things that we saw in the kind of the mid-2000s. Just want to make sure that doesn't kind of creep up on us.

Great. Thanks, Suneet as you highlighted, first, we do see continued strong demand for RILAs across the space, driven by the demographics and this macro uncertainty, and that resonates across all channels. As Mark highlighted, overall RILA sales were up 7%, another record high for us in the quarter. We think our flywheel gives us a sustainable durable edge in 3 ways across the different markets. One, we generate attractive yields through AB.

The second, as you highlighted, which is we have our privileged distribution through Equitable advisers but we have a track record as a pioneer, having been the first to launch this product over a decade ago and continue to deliver on the value proposition, consistent stories and the relationships with over 15,000 advisers in the third-party space. And then finally, we have the scale, given our wholesaler footprint our #1 position. When we look at how we are continuing to evolve in the market, we have a successful track record of innovation that's really anchored both from the insights we get from Equitable advisers that we translate on consumer need to other markets as well as anchoring our products in our economic that ensures we deliver attractive returns.

So our focus has been on prudent innovation relative to both within the segments in RILAs. We were the first to launch stool direction. These are new segments that into different needs as well as new versions that open up new markets. For example, August, we launched our SES Premier product, which allows consumers to pay a fee for a higher cap which is fitting a new need that others are looking at. So I would say, going forward, we believe we're in a privileged position to capture a disproportionate share of the value being created in this fast-growing market.

Your next question comes from the line of Tom Gallagher of Evercore ISI.

First question, Robin, beyond the $35 million onetime adjustment for mortality, you mentioned underlying mortality experience was also unfavorable. Can you comment on how much below your expectation kind of underlying mortality experience was in the quarter and why you're confident that should normalize going forward? I think you said you expect less volatility. Was it maybe a little more color on what drove it this quarter and why you're comfortable that should normalize?

Sure. Thanks, Tom. So we did call out about $36 million or $0.12 per share as a notable item for July mortality experience. And this is to reflect economic benefit from the reinsurance transaction that was not reflected in the GAAP results. Mortality was a bit elevated in August and September. And broader across the whole quarter, we saw higher severity in the quarter as it relates to mortality but our retained experience, which is net after the benefit of the RGA transaction was only about $10 million worse than expected for the months of August and September.

So did weigh on earnings for Corporate and Other, the impact was relatively modest, underscoring the benefit of the reinsurance transaction. So we don't expect it to be highly volatile like it was previously going forward that we have RGA in place.

Okay. That seems fairly modest. The follow-up question is just about capital. And I heard your comment about you have a $500 million holdco target. You have $800 million currently. I guess, historically, you ran with this like giant buffer at the holding company, $2 billion plus. And -- but now things have changed. I think you've significantly improved cash flow outside of the insurance entities, is $800 million a good kind of level? I know you have a $500 million target, but should we be thinking about in normal course, you're going to run with some buffer on top of that is $800 million reasonable to think about it as a base case? And then also, how much is left from the RGA deal? Is it around $300 million that you would have in addition to normal cash flow?

Sure, Tom. So on cash flows, look, our cash flow position is very robust. If you recall back going back when we IPO-ed, only 17% of the cash flows were coming from asset and wealth businesses, and now it's over 50%. And that's reflective of our distinct strategy and growing our asset and wealth businesses as we capture a bigger share in the overall flywheel that we have at Equitable Holdings. For the holdco, we want to target $500 million.

Yes, at time to always have a little bit more but not substantially, just to manage volatility within results. So I wouldn't think that we -- I wouldn't take away that we have a higher target than the $500 million. But yes, sure, we're always going to have a little bit more as you want to manage any cash flows better needs, whether it's for interest expense or timing of upstreams from the holding company as well. As it relates from -- for the RGA transaction, we're happy that we completed and closed the transaction effective July 31. And reminder, $2 billion in total value. We used that value and that shift to really move our business away from long-dated, highly volatile business to faster-growing businesses in asset and wealth.

You saw that in this quarter as well. So we invested about $800 million to increase our stake in Alliance Bernstein from 62% to 69%. We had $500 million of incremental share buybacks on top of our 60% to 70%. That's going to be helpful for go-forward EPS growth. We also reduced our debt position by $500 million. And in this quarter, we invested approximately $200 million to scale our wealth management business a bit more with the Stifel acquisition. That's about 110 advisers, $9 billion of AUM, AUA, so that's good for our growth in our Wealth Management business going forward and continue to invest in [ Sicar ] to grow AB's private credit business. So that's the $2 billion of proceeds right there. There's about $300 million of left that we said we will deploy, and that will be deployed in due time either in growth investments or additional share buybacks depending on where we are in the market.

Your next question comes from the line of Ryan Krueger of KBW.

I think you called out $10 million of unfavorable mortality in August and September that impacted the corporate segment. Was there anything else that would you consider somewhat unusual this quarter when you -- I think you called -- you showed kind of a $98 million loss. It sounds like there was a $10 million mortality impact. Anything else you would you point out that maybe caused that to be worse than you normally expect?

Nothing else I would call out. But look, at corporate and other, there's always a little bit of a noise, and we will provide earnings guidance for Corporate and Other next quarter as we discuss our 2026 outlook. But you should expect the quarterly loss to be smaller than the $100 million per quarter that we had guided to prior to the resegmentation.

Okay. Got it. And then can you go into the sidecar strategy a little bit more in terms of investing in terms of AB investing in third-party sidecars. You've done a few things now is something you'll continue to do beyond what you've already done? Or is that most of what you think you'll do?

Well, why don't I start? This is Seth Bernstein. We have done to that we've announced. We are talking with others, and there's ultimately a limit on what we would be willing to do here depending on the opportunities but we're quite mindful of the overall risk we're prepared to take on the balance sheet with respect to insurance risk. And again, we do this in partnership with equitable utilizing their extensive underwriting capabilities, which we don't have here in-house as well as outside consultants that we use to evaluate the opportunities.

So this is going to be, I think, a continuing attribute of private credit markets. given insurers, particularly life insurers' desire to access capital to continue to expand their businesses and do so in the most cost-effective way. It has proven to be a pretty attractive way for us to deploy and deploy new assets and develop new client relationships. But ultimately, there is a limit on the amount we're prepared to do. And perhaps, Robin, I don't know if you have a perspective from the equitable level.

Yes. Look, from an EQH perspective, side cards fit quite well into the flywheel. We can underwrite insurance liabilities and AB can invest in private credit. Just to double-click a little bit where we've invested so far, if you look at the RGA Sicar were, we're getting into an asset-intensive sidecar, PRT liabilities. Those are liabilities that Equitable is not directly in, but can help underwrite the AB team and AB can invest and leverage their private credit capabilities. And then if you look at the FCA side car. Well, that's now an international market, Asia as liabilities, we can help underwrite and again, leveraging AB's private credit capabilities.

So as we look at these opportunities, we want to make sure the equity stands by itself that it delivers good risk-adjusted IRRs. And then also it builds on the capabilities that we have at AllianceBernstein to grow our private markets business, which is now $80 billion and well on track to the $90 billion to $100 billion we laid out at Investor Day. So we like the sidecar strategy. It leverages the flywheel, and we'll do more of them if we see that they fit the needs between equitable and AV.

Your next question comes from the line of Joel Hurwitz of Dowling.

In retirement, the DAC amortization jumped $10 million quarter-over-quarter. Robin, you mentioned, I think, in your prepared remarks that surrenders was a driver. But I guess are surrenders getting worse than expectations? I thought that was the driver of the jump a year ago.

Yes, that's right. Some -- well, 2 things driving higher DAC amortization, I mentioned higher growth in sales which obviously, we capitalize and have to amortize and then some higher surrenders as well. Nick, you could provide some color on it as well.

Yes. So just on overall flows. As a reminder, our Retirement segment now encompasses both our individual retirement as well as our group retirement business lines. So breaking that down, first, with an individual retirement, we achieved $1.4 billion of net flows, driven by $3.9 billion of RILA sales. In the last 9 out of the last 10 quarters, we've had record sales. So we continue to see momentum. Next, as was sort of highlighted in the previous remarks. This was partially offset by our expected seasonal outflows in Group Retirement which is comprised of our tax exempt institutional and our corporate business.

In exempt, this is our teachers business. We experienced modest outflows consistent with seasonal expectations, given that teachers pause contributions during the summer months. As a reminder, this is where we have our 1,200 advisers that work with close to 900,000 educators in school districts on supplemental retirement lands. We would expect this line to continue to achieve single-digit growth with strong ROAs and be positive for the year. Institutional, we didn't have any material flows in the third quarter.

However, we've gathered over $800 million in assets year-to-date. And then finally, in our corporate business, this is our legacy 401(k) lower margin. It's sort of been in structural runoff. We would remind you that 20% of the outflows are for retirement distributions and the remainder were capturing 50% given our flywheel model through Equitable advisers. So looking forward in the retirement business, we expect to continue to generate strong flows supporting the future growth of our earnings and cash flow.

And where we did just where we did see the renders the actual rate -- surrender rate didn't increase, so it's more the benefit of higher markets, so higher account values overall. So the surrender rate itself was okay. .

Got it. That's helpful. And then, Nick, just following up on, I guess, institutional, any expectations for Q4? And maybe can you comment on expectations for the sales of the fixed annuity product that you launched? .

Sure. We continue to be bullish on the untapped potential for long-term growth in the institutional market. Just to frame, it's an $8 trillion defined contribution market with a potential addressable market for implant annuities probably between $400 billion and $600 billion longer term. Still in the early innings. We have the policy support, that's the regulatory tailwinds through the SecureX. We have the products. We have the partnerships now with the target date funds and the record keepers.

So we're really now on that fourth step engaging plan sponsors. We're encouraged by the momentum having gathered over $800 million since we launched the BlackRock partnership last year and believe that going forward, we're in a strong position with the first-mover advantage. This is both our expertise in the product design as well as our partnership network with AB. AB has been in this space for over a decade and BlackRock. This is allowing us to build a track record that we think the fast followers are going to look at when they start to adopt these solutions. Specifically for the next quarter, we don't expect material sales. We get visibility about 30 to 60 days prior to transfer, but there is a strong pipeline for 2026.

Your next question comes from the line of Alex Scott of Barclays.

I just wanted to make sure I had it clear on sort of the movement in holdco liquidity. It sounded like there's still some cash being taken up. So just wanted to see if you could walk us through like what does that look like on more of a pro forma basis for what you're expecting in 4Q? And the higher sort of incremental share repurchases are more complete at this point? Then how would you stack up like set of priorities for potentially deploying more?

Sure. So we ended the quarter at $800 million at the holdco. We put a chart on Slide 9 of the deck that highlights the walk from last quarter to this quarter, it included the subsidiary dividends to capital return to debt tender the preferreds and some interest expense. In the fourth quarter, you should expect that we'll continue to get upstreams from both the Arizona insurance entity and also AB, our wealth management business and the asset management contracts that we have that should total around $700 million, and then we'll have capital return as well in the quarter and interest expense on top of that as well.

So we should end the quarter probably above $1 billion in holdco cash as well. And then going forward, as we think of next year, we'll give guidance on our cash lost next year. But obviously, we're committed to the 60% to 70% payout ratio and we want to continue to find attractive bolt-on opportunities to fuel growth in the business as well, similar to what you saw this quarter.

Got it. That's helpful. And in Wealth Management, as I think about some of the other peer companies out there that have built up their wealth management groups, I think team lift has been a big part of it. Can you talk about that as part of your strategy? Is that something that you're deploying capital towards and using it to build it up over time? I guess it would be a little more organically?

Sure. First is we're excited by the Stifel transaction. These are high-quality advisers that are a strong cultural fit. We see the opportunity for them to continue to accelerate the growth of their practices on our platform. As Mark highlighted with 110 advisers, $9 billion of AUA, this is a good example of the bolt-on acquisitions where we're deploying capital to augment our strong organic growth as we continue to build scale.

Looking forward, we see continued momentum in our underlying organic growth drivers. We're one of the few in the industry that continues to bring in new advisers or new talents into the industry, which allows us to be disciplined in our experienced hire efforts we think we're well positioned to meet this growing demand for advice and are very encouraged with the momentum that we have.

Your next question comes from the line of Jimmy Bhullar of JPMorgan.

First, I just had a quick follow-up question for Nick around your comments on competition in the rail market. I'm not sure I missed what you said. But I realize you guys have a unique distribution and obviously, scale in the product line as well. But the market is a lot more crowded than it was a few years ago, and some of your competitors have alluded to an increase in competition. So what is it that you're seeing competitors do in the market? And are you seeing any that are offering maybe overly generous terms and conditions? Or is it just that there are more companies and it gets harder to sell as a result?

Yes. So obviously, as you mentioned, the competitive landscape has changed since we pioneered the product a decade ago. with the majority of carriers now having launched a product. We're very mindful of competitive trends on pricing, usually new entrants offer a teaser rate and they revert back because it's not sustainable. But we remain focused on profitable growth as the market leader with the durable edge, we're continuing to benefit from that growing pie as more advisers and consumers become familiar with the value of buffered annuities as an asset class in their portfolio. .

I'd highlight over the last 3 years, our RILA sales have almost doubled, and we've produced record sales in 9 of the last 10 quarters. So we continue to focus on, I would say, innovation anchored in our economic model, and you'll see us delivering, I would say, sustainable growth within that market.

And then just maybe on individual life. Obviously, your exposure going forward to the block is going to decline given the reinsurance contracts but if you think about the underlying policies, margins have deteriorated over time. And they've been especially weak in the last few years. And do you view that as more of an aberration and just normal volatility in the business? Or is there something about the type of policies or terms in the block that are -- that have been pressuring results in recent years that might be more sustainable?

Sure. So when we think about the Individual Life business, let's just take a high level, where our focus is on Equitable advisers. And the reason being is we don't find the third-party business as being attractive. And a lot of the volatility we see from the results was a function of third-party sales, pre-global financial crisis that had very high face amounts and had a low ROE on it. And that's why we did the RGA transaction.

It takes 5% ROE business and reinvested in higher growth businesses for Equitable to drive our strategy going forward. We are perfectly economically reserved. We manage the business on an economic basis. So the reserves are all good. there is some noise in the GAAP accounting with volatility. And part of the reason we did the RGA transaction was to reduce that volatility going forward. But we don't see anything else other than volatility at this time. Their older age policies, high face amount. So if someone dies -- if they don't die this year, it's likely they're going to die soon and then you're going to see that volatility come in. So as a result, we feel good of where we set our reserves economically, and we feel very good about the RGA transaction because this helps accelerate our strategy into these faster-growing businesses.

Your next question comes from the line of Elyse Greenspan of Wells Fargo.

My first question is on the $300 million, I guess, the capital left from the RGA deal, right, that you just haven't fully earmarked. How do we think about you guys balancing using that right for M&A versus buyback? And will you just, I guess, make the decision if it goes to incremental buyback once you kind of get through what you've already outlined as the extra buyback?

Sure. I just think of the $300 million, I mean, we're not going to be tracking it going forward. It's going to be returned a normal course of business as part of our 60% to 70% payout ratio. So if you see it at the high end of the payout ratio, it may be because of some of the $300 million, but I wouldn't anchor on the $300 million so much as we have excess capital in the system, so we can do both. We can return capital to shareholders and do bolt-on acquisitions, invest in side cards to fuel growth for our business going forward. We want to drive earnings growth in the business and we want to drive EPS accretion. So we have the ability to do both because of our unique business model.

And then you guys had last said you were in the middle of that 12% to 15% EPS CAGR. That's where you thought you would be right with the financial plan. Is that still where we sit today post Q3?

Yes, we still feel comfortable with the 12% to 15% in the middle of the range as part of our 2027 target. We feel comfortable with all of our 2027 targets to be frank, to the $2 billion of cash flows. We can see the visibility on that. We're in the $1.6 billion to $1.7 billion this year. That will go up next year, and we're on track for the $2 billion. You can see since our Investor Day, we're well on track to the high end of the payout ratio of 60% to 70%. And where we were below on the EPS growth.

If you normalize as of last quarter, we showed we're at 11%. We'll continue to hold ourselves accountable, and we see the benefit of record AUM at $1.1 trillion, organic growth coming in through all of our businesses, expense initiatives, investment initiatives, all will come through to support the 12% to 15% growth going forward in addition to the additional buybacks, which helped reduce our share count. So we feel quite comfortable with the 12% to 15% target.

Your next question comes from the line of Jack Matten of BMO Capital Markets.

Just one on your -- the spread lending business. Just wondering if you can talk a little bit more about the growth opportunities there? And how big do you think that business can be for equitable and any thoughts on current market conditions?

Sure. So we launched a FAB business, specifically in 2020. We issued about $4.5 billion so far year-to-date, and it's about $10 billion in total. We have a lot of capacity to continue to grow that business. this business directly benefits again from the flywheel as we can benefit the strength of Equitable and having a strong rating, borrow at a low cost of funds and take that and invest it at attractive risk-adjusted yields at AllianceBernstein.

So it's really a function of the flywheel. And the FABN business is just a secondary benefit of the growth in our RILA business, as Nick spoke about earlier, as our general account continues to grow. Our RILA sales continue to grow, attract more customers, it gives us more capacity to do FABN as long as the returns are there. So we'll continue to be a benchmark issuer in the market but it's a function of our overall growth strategy that helps drive our ability to have FABN.

Got it. And then just a follow-up on your Bermuda entity. I know you excluded a large transaction earlier this year, but just wondering if there's an thoughts or any update on your thoughts around further transactions, whether it's in-force flow reinsurance sort of down the line, maybe third-party deals and kind of over what time frame do you expect to do more with that intended?

Yes. We're really excited to have our Bermuda entity set up and also very thankful for the people in our Bermuda company that are help operating that as we have people on Island at this time as well. And we'll continue to grow our presence there over the next few years. The Bermuda business, we did our [indiscernible] transaction this year on our group side. We -- it's a lever in our toolkit for capital management. We can use it for flow reinsurance, which is something we'll look at for 2026. And then post 2027, we'll look at to see if we can leverage it for further growth, whether it be third-party or broader markets to help our growth profile overall.

So I think it's a good framework. It's an economic framework. We like the regulatory regime in Bermuda, it's very close to our economic framework that we manage internally. So it's going to help us sustain cash flows on a go-forward basis as well. So we're happy to have Bermuda, and we're going to leverage it as part of our toolkit.

Your next question comes from the line of Tracy Benguigui of Wolfe Research.

Very basic question. So when AB partnered with RGA to create the Ruby Re, I was thinking that makes sense since RGA doesn't have real asset management capabilities. But turning to FCA REIT, [indiscernible] has asset management capabilities with Carlyle. And on the 4 press release, they said the vehicle should add $10 billion of fee earning AUM to Carlyle. So could you add some color on how AB won that mandate for private alternative management and where essentially that is outsourced? And what is the related AUM? .

Let me try and answer that. This is Seth Bernstein. We want it because we have an existing relationship with Fortitude and no one another pretty well. And they approached us as they were looking for raising capital for this particular vehicle. And we were prepared to just given the quality of the insurance risk they were taking in the market particularly attractive market for us given our broader reach within Asia and our desire to grow our insurance activities in that region. And the result is that we believe for the amount of money we put in, we will raise, I think, about $1.5 billion of incremental private alternatives to manage for them in areas that are complementary, I believe, to what Carlyle already does for them.

Okay. Awesome. And then when you did the Ruby Re deal and that enhanced relationship with RGA, do you see this relationship with Fortitude may be enhancing future risk transfer deal with that partner?

I'm sorry, can you ask the question again? .

Okay. So when you created the Ruby REI deal with RGA, that enhanced your relationship with RGA. And I'm just curious, given this deal with Fortitude as you're looking to optimize your blocks. Right now, you still have New York legacy and I'm wondering if perhaps this could enhance your relationship with [indiscernible]?

Right. Now I'll hand it over to Robin to answer that.

Yes. Sure, Tracy. We look at these on a stand-alone basis. We don't have any other -- we've done the big block deals at Equitable. We did the legacy VA transaction. We did the largest life reinsurance transaction in the industry. At this point in time, we're looking to grow the different business lines. And we look at [indiscernible] as a way to grow AB's private credit business while getting good returns on the equity that we invest. So I wouldn't read into our sidecar investments leading to future reinsurance deals with any partner. If we're going to do reinsurance, we'd obviously look at all the partners in the different industry and get the best returns for shareholders.

Thank you. We have reached the end of our Q&A session and the end of our session for today. Thank you so much for attending today's call. You may now disconnect. Goodbye.

All right. We are going to get started, everyone. If you could please take your seats. I'm Ryan Krueger, Life Insurance Analyst at KBW. It's great to have Equitable back with us. On stage up with me is Robin Raju, the CFO. I also want to recognize Erik Bass, Head of Strategy and Investor Relations and other members of the team I see in the back somewhere.

Robin, to start it off, in 2023, Equitable established 5-year financial targets through 2027. Can you update on the progress that you've made towards those targets so far? And any key considerations to think about going forward that may have differed at all from the original expectation?

Yes. First, thanks for having us again here, Ryan. It's great to be back. So in 2023 at our Investor Day, we really laid out a growth strategy for Equitable. And what underpinned it was the markets that we operate in and growing retirement, asset management and while and specifically the U.S. retirement market, which really benefits from tailwinds related to demographics and legislation.

You have 4 million Americans that retire every year. You have $600 billion of assets in motion. And we think Equitable is differentiated operating an integrated model to having asset wealth and retirement together really enables us and puts us in a position to differentiate and win in that market and capture an outside portion of that growth. In addition, I think Equitable has done a good job in terms of execution. We've hit every number that we've laid out to the Street since our IPO, and we'll continue to do that.

There's a strong culture of execution focus internally in the company. And so in 2023, the output of that growth strategy because that's what we really laid out, was 3 main financial targets. We're going to grow cash flows to $2 billion. We're going to have a payout ratio of 60% to 70%, and we're going to grow earnings per share by 12% to 15%.

So if I take each 1 of those on cash flows, this year, we're guiding to $1.6 billion to $1.7 billion of cash flows. We're on track to achieve that. That's about a 10% growth from prior year. And so that gives us clear line of sight to $2 billion by 2027. The $2 billion is going to come from organic growth coming from our retirement businesses and then also release of legacy capital as well.

A reminder, 1 thing, again, that differentiates Equitable, 50% of those cash flows come from asset and wealth businesses. That should get a higher multiple for overall and improved valuation over time. So having 50% of the cash flow come from asset and wealth that allows and gives us consistency in our payout ratio across the Board. So we have a 60% to 70% target. If you look through the first 10 quarters since our 2023 Investor Day, we're at 68% at the higher end of that range. And in addition, keep in mind, we have a $500 million additional share repurchase that we're going to do related to the RGA transaction on top of that base in the second half of the year.

And then the third target was the 12% to 15% earnings per share growth. So through the year-end 2024, we achieved a 12% growth from our IPO in the first half of the year. This year, earnings were lower than we expected, primarily due to 2 things. One is the mortality volatility that we had in the business. Now we resolved that with the RGA transaction. But that mortality volatility was about $95 million below our expectations in the first half of the year at $0.23 per share. If you take into account the RGA transaction was in place in January, our year-to-date earnings per share growth, cumulative since the Investor Day would be around 11%.

So still a little bit lower than the 12% to 15%. Now going forward, we do feel as though we have good levers for the growth to hit the 12% to 15%, both in later after this year and then go forward. That's going to come from markets, which are higher and led to record AUM levels, which mean higher fee-based and spread-based income. We have continuous efforts in expense efficiency within the business. The Life transaction means that we won't have exposure to that mortality at least for 75% of that exposure.

And then in addition to 500 million incremental share buyback should provide earnings per share growth. So, we think from here, we have good line of sight to that 12% to 15% CAGR, and we feel comfortable across the Board around all of our targets, supporting the growth strategy for Equitable Holdings.

I had a follow-up on the 12% to 15%. When you had announced the RGA Life transaction, I think you had said you think -- that you thought that may push you up towards the higher end. Is that still your view? Or I mean, there's been a number of moving parts or should we just think about the 12% to 15% kind of overall target?

Yes. I think now, I'd say, it would be in the mid-range of that 12% to 15%. So there are a few key components that change from the announcement of that transaction. We assume that we'd get a $1.8 billion full tender of AllianceBernstein stock. We had $760 million. So that means, we have lower exposure to AllianceBernstein than originally planned; second, the life mortality that I mentioned. And then also our Individual Retirement business had lower market value adjustments. Dow is about over $20 million lower year-over-year. And that had a $10 million -- we assumed -- we used to assume that there was a $10 million incremental every quarter that we're no longer assuming. So as a result, we think we'll be in the midpoint of the range. But, now keep in mind, we're going to be on an outsized -- we're going to have outside growth in 2026 compared to the low end of 2025 because of the first half of the year, but we expect over the period, we should be in the midpoint of the range.

Got it. One more on the Life transaction. So it freed up $2.3 billion. You mentioned the $800 million to tender for a higher ownership of AB. You've committed $500 million to incremental buybacks, and you've recently announced a $500 million tender for debt. So that still leaves about $500 million unaccounted for how are you thinking about both the timing of deploying that $500 million in the potential uses?

Sure. So the Life transaction, the exact number is $2 billion that are freed up in capital and the $2.3 billion that we deploy assumes that we're going to draw down from some excess capital as well within that. So from the $2.3 billion overall that we intend to deploy, as you laid out, we did approximately $800 million in increasing our share of AllianceBernstein. That's strategic for us because that allows us to capture the full benefits of our flywheel model and enhancing the synergy value of AllianceBernstein, where we did -- we announced the $500 million incremental share buyback that we'll have in the second half of the year and the $500 million tender that we most recently announced last week to help reduce our leverage ratios. .

So that leaves us roughly to $500 million remaining. We're going to look at growth investments and share repurchases depending on what provides most value for shareholders. For growth investments, we think about bolt-on acquisitions within the wealth management space or investments into Sidecars that advance AllianceBernstein's business. And then share repurchases would always be something that we'll look at as well.

So expect us to fully deploy the proceeds probably in the first half of 2026. But we think across, if you think about the life transaction overall, it's going to be -- our target is for to be accretive for shareholders relative to previous expectations.

On bolt-on wealth M&A, are you interested in adding particular capabilities? Or would it be more opportunistic potentially looking to just add scale to the business that you have?

Yes. So the -- well, let's talk about the wealth business, Equitable Advisors specifically first. It's -- we're very happy and thrilled with the growth that we saw in that business. So at IPO, that business was $40 million in 2018 in AUA. It's now $110 billion. We've grown at a 12% organic growth rate the last 12 months. That organic growth rate is better than most peers that we see in the market. So I consider that best-in-class in growth rate in the market.

And now we also announced at our Investor Day in 2023 that we doubled earnings in that business from $100 million to $200 million by 2027. We're already on target to achieve that $200 million. That's 2 years ahead of schedule. So we're very excited about the growth in that business. The growth so far has really come from organic investments that we've made, specifically in training and upskilling our adviser force, really moving them more towards wealth planners, which are 2 to 3x more productive than our existing advisers.

We also made an investment early in this year in hiring the head of new business development at Ameriprise to expand our experience higher recruiting that's worked out well year-to-date. We've added over $700 million in experienced higher recruiting AUM. Now, when looking at bolt-on acquisitions, I think it would be advisers that compare wealth-management-oriented businesses with retirement products.

The reason being is that helps grow the wealth business, but also to expand our distribution of retirement and asset management products as well. So advisers that fit both retirement and wealth space are sweet spots for us in Equitable Advisors. Now, a lot of these valuations are expensive. So you'd have to be very disciplined. That's why smaller bolt-on valuations seem somewhat more reasonable at times, but we'll be very disciplined in ensuring that we add value for shareholders or cost of whenever we use shareholder capital.

And then you had mentioned potential Sidecar investments with AB. Would that be more to help AB fund investments in other insurance company Sidecars? Or would this be more of an Equitable-type sponsored Sidecar?

Mainly growing AB's insurance business. So similar to Ruby Re, AllianceBernstein made $100 million investment through Equitable. Equitable supplying the capital through ownership in AllianceBernstein. So they did a $100 million investment. They gained $1 billion in assets in private credit assets with Ruby Re. Those were assets coincidentally, that Equitable already funded for the seed capital program. So proof point of the synergy value between Equitable and AB. Those are the type of Sidecar investments that we think are attractive. Those investments typically have low mid-teens IRRs. But if you add the fees from the investment management agreements as well, you get to mid-teen IRR. So those are attractive investments for AllianceBernstein and growing in the insurance business.

The interesting part of those is usually once you're with the partner and you have multiple strategies in place, you've now operationalized your investment capability into their system. So a lot of times, it leads to more upside going forward as well. So those are the reasons why we like Sidecar investments to help grow AB's insurance platform.

And then financially for Equitable, are those held as like an alternative investment in the general account? Or is it more like a holding company investment?

Right now, we've done it actually through AB's balance sheet. So we funded it through equity and then AB would put it on their balance sheet and hold it in.

Got it. So I think you're going to make some financial disclosure changes following the Life transaction. Can you give us any kind of preview of the types of things that you -- and how you're going to go about changing the disclosures.

So the RJ transaction gave us an opportunity to relook of how we're disclosing our financials to the Street, and we really want to simplify our disclosures focused on asset retirement and wealth. So if you look currently in our businesses, we have 6 segments that we report, 4 of which are insurance. And we're really focused on 1 broad retirement market.

So some of the changes that we're going to make. If you look post the transaction, both the protection and legacy business have less than 5% of earnings contribution for Equitable. So that's going to move into corporate and other. So that's 1 component that will move in. That helps simplify those. There's a small runoffs, and those aren't going to be material for us going forward. .

The other change we're going to make, we're going to combine our group retirement and individual retirement into 1 broad retirement segment. The reason we're doing that is we really operate across the full retirement spectrum. Also within the businesses, they're blurring lines between group and individual retirement. Take our K-12 leadership position in the 403(b) market. That's reported in the Group Retirement business, but it's actually an individual sale. And the margins are more similar to that of the individual market, very different from the corporate 401(k) market.

Now in combining those, we're going to still provide everybody separate account, general count, net flows, product sales. So we'll provide all the underlying detail. We'll also include more information on spread assets and payout reserves. So people can appropriately model net investment income as well.

The other change we're going to make is to our allocation process. So how we allocate net investment income, specifically our spread business. So our FABN FHLB business, which is currently allocated across all the segments, that's now going to be fully allocated to the retirement segment. The reason being is the capacity to grow those businesses is dependent on your general account assets. And our general account assets are primarily coming from the retirement business. So we think it's better alignment within that.

Now, we will provide information to the Street to appropriately model that for both sell side and buy side. So we'll put out an 8-K about 2 weeks before earnings that will recast financials for 6 quarters that enable you to model it, so you all have time before we come out with earnings going forward. But we think this simplifies the story focuses us on the growth drivers for Equitable asset retirement and wealth and aligns better with the strategy for us going forward.

I want to shift to the individual annuity business and RILA, in particular, it is still much more concentrated market than the fixed and fixed indexed annuity markets, but we have seen the amount of competitors gradually increase over time. How would you characterize the competitive environment right now in RILA as well as your ability to continue to earn targeted returns?

Well, it's definitely more competitive since we were the only ones in the market back in 2010. So we created that market in 2010, really through our Equitable Advisors distribution. That's the benefit again of owning a wealth management business is you can test new products with that distribution before we expand into third-party distribution overall. The RILA market, though, is a growing part of the market. I mean it's up 40% year-over-year in 2024. It's up 20% this year, so it was up $65 billion. It's a huge piece of our business.

We had $7 billion of sales year-to-date in the RILA business. So we continue to see growth in that aspect. But we do operate in broad retirement. So we have RILA product, we also have income products. We also have investment-only VA products. And we also launched a fixed index annuity -- fixed annuity product exclusive to our Equitable Advisors distribution as well as to take advantage of that low cost of funds distribution outlet overall. So we like the RILA market. The reason why we like it, it's a simple solution for clients. Clients like the product. It's your nearing retirement. It offers you downside protection with upside potential. Clients need to stay invested in equities. So this client, this product really serves a client need as they near retirement, and we're the innovator in that market. We created it and we're going to continue to expand with the pie in that market.

Now, as competition comes in, you're always going to see new competitors come in with teaser rates. But it's hard to displace people that have innovated and that have been in that market for a while. So we own the shelf space and Equitable Advisors, obviously. We also have 10% to 15% of our sales come from privileged third-party distribution where they may only have 2 to 3 players. So that's 50% of that our sales are coming from what I'd say, low cost of funds channels for us.

So if you look at Equitable overall, we have the lowest cost of funds for RILA products. We operate on a top-quartile expense ratio for our individual retirement business and we benefited from the investment capabilities of AllianceBernstein having that flywheel effect. So we think that gives us a competitive advantage to win in the RILA market. As competitors have come in, you've seen the pie increase, which is good.

Equitable's maintained #1 position, and we've continued to benefit from that pie, and we continue to price products at a 15% IRR. Now, the return -- the margins of the product are very different from when we were the only ones in there, even much higher at that time, but we think the margins are still attractive at a 15% IRR even at this time.

The RILA market and obviously, Equitable as the creator of the market was originally really focused on accumulation, but there have been more guaranteed income options that have been added to the RILA product over time. I guess some -- I've gotten some questions about that just given what happened with the variable annuity industry. So what gives you comfort that the guaranteed income options that are being added now are appropriately structured and priced?

Sure. So I can speak from Equitable's perspective, accumulation-oriented RILA products are still the dominance out there. We launched an SCS income product, that's about 10% of our RILA sales, that's really offering a withdrawal benefit feature for clients with the downside protection of the RILA. So it gives someone the RILA feature that they like, but also an income option as well. I think the income market is quite interesting at this time because most competitors have left the market.

So that means the margins are much better with income-oriented products right now. Now Equitable has a unique advantage. We have tons of history in that space. We price the products conservatively. So we assume any utilization benefits are in the customers' interest. We're not assuming customers don't maximize their benefit where ALM matched overall and the products designed around a narrow range of outcome.

So for us, we think that market is quite attractive. There are not a lot of players in it at this time. But I think it's important you keep your discipline and you don't get over your skis on that market as well. And if we see the market getting too hot, we'd pull back from it. We're not here to chase guarantees. We're here to provide customers value propositions, and that's our goal, and that's our mission.

On the -- is the product that you are rolling out to your advisers, that's a MYGA product.

Yes.

Is that -- they never sold that, I think before, or at least not an Equitable MYGA. Is that something that you think will be material or be more of a gradual build over time?

Well, we just started. I think the opportunity is there. We offer third-party MYGA is in Equitable Advisors now because we haven't historically been there. So having an Equitable MYGA product resonates a lot with our field. So we think that's in addition to the tool kit for an adviser providing planning for their clients as well. So we hope there's a big opportunity. We just started just like when we started with RILA was very small to begin with, and it took years to get big. So we hope, over time, it will get bigger.

In the individual annuity business, your earnings growth has been lagging the account value growth over the last 1 to 2 years. Can you, I guess, review the reasons that, that has been happening and also going forward, how should we think about the earnings growth or the ROA trends or how to just -- you've given some kind of guidance on your earnings expectations for the third quarter. I'm thinking more about the jump-off point and how to think about the growth of that business going forward?

Yes. So Individual Retirement is our largest segment. That's our biggest business growth engine across the Board. It had 8% organic growth, $7 billion of net flows over the trailing 12-month period as well. So that's a business that's going to drive much of Equitable going forward. We've disclosed to the market that in the third quarter, we expect about $220 million to $225 million, that's higher than we had previously. We were lower, as Ryan indicated earlier this year and probably for a few reasons. One, markets were lower. That impacts our fee-based business. Our fee-based business does have a higher ROA. So the markets lower in the first half impacted the fees on that relative to last year.

Second, in net investment income, we have 2 things happening there. One, we are seeing some spread compression. As the old RILA business when there are a few competitors, and we had big margins on the business rolls off, that's competing against a new business that we write on, which is still good margin, 15% IRR. But lower than the previous margins when we own the market to ourselves. That's about 15% of our total RILA account value. And so we expect that to continue to drag down NIM relative to assets in the short term, and that should turn probably early to mid next year in terms of when you'd expect NIM to continue to grow back at the same rate as general account book value.

The second component we had is market value adjustments. We were over -- like $20 million and plus lower year-over-year in market value adjustments. Going forward, we assume 0 benefit from market value adjustments as well. But that we expect will rebound across the board NIM with the growth in the general account overall.

So we think if you take those components, those are transitory, I would say, in some sense. And we think that going forward, we'll continue to see growth in that business benefiting again from the low cost of funds to privileged distribution that we have and the capabilities in asset management at AllianceBernstein. So we'd expect growth with the $220 million to $225 million in the third quarter, continue to grow earnings from there. But the ROAs, as we shift from fee-based to spread base will move a little bit lower, but they'll also be less sensitive to markets as well.

Got it. And then just that legacy RILA higher profitability piece, the 15%, that should be most -- you said that in the next few quarters, that should be mostly runoff.

Exactly.

Okay. Moving more to the Group Retirement business, you've been working on some emerging growth opportunities there, in-plan annuities, HSA, what time frame do you think those products will become a more meaningful contributor to Equitable? And also just what -- can you maybe just talk a little bit about the outlook for both of those?

Yes. So let me start with in-plan annuities because we're really optimistic about this growth going forward. So we have partnerships with AllianceBernstein. They were first in the market actually and innovated more than before regulation was there more than 10 years ago, and then we had the partnership with BlackRock, LifePath Paycheck, we've achieved over $1 billion in flows in those products already. We think it's a huge market opportunity.

If you think of the overall retirement market, there's no decumulation solution in the market today. It's a huge need in society. And we've partnered with asset managers to address this need through in-plan annuities. If you look at the 401(k) market, it's an $8 trillion market. Target date funds are about 50% of that market, so about $4 trillion. When target date funds were first launched, they weren't 50% of the market. It took time to leg in. So we think this will take time as well to legend, but we think both from a plan standpoint, being comfortable with the performance, the track record of these in-plan annuities; and second, the operational integration with the planned administrators or the record keepers as well as those all come together, we think there's a lot more upside.

And we think in-plan annuities will be a core part of target day fund offerings in the future. I think every target date fund out there will need to have an in-plan annuity in the future. Now it's not going to be in the near term, but it will be later on to address the decumulation need for clients.

We're also working on new solutions with in-plan annuities. We've recently announced a partnership with JPMorgan. That's more of a stable value orientation solution, and we continue to talk to other asset managers as well.

This year, we also announced flows related to a partnership with an HSA partner. That's more of a spread-based products, a different type institutional product, more spread-oriented ROA versus the in-plan annuities probably have higher margins to them over time. That will have stable flows. That's not as much of a growth potential as the in-plan annuities, but still will be sticky and good, stable flows for us. Probably the biggest piece that we don't talk about, and you'll see it more is our spread-based lightening business, FABN and FHLB. We had about $9 billion outstanding in the year. That's a bigger driver of overall earnings, which I think of is historical institutional businesses for us, and that will continue to be a growth level going forward.

That's now remember, going to be allocated, as I mentioned earlier, to the Retirement segment. And we'll continue to disclose that balance. And so you can forecast the spreads and model that as well. So those are the 3 components that we see.

Now having in-plan annuity capabilities allow us to leverage that for other markets as well. If we think about our capabilities with AllianceBernstein, our underwriting capabilities, that gives us potential to expand in other parts of the retirement market that are bigger and institutional as well over time, but we'll be opportunistic about that as they come.

Actually, I guess just 1 follow-up. Like are there -- are there other areas you're considering that you can share now or that you could enter into the into the spread lending or other institutional space? Or is it more things that are in the future?

Well, we're big in this spread lending now. The FAB, we have $9 billion of exposure there. We'll continue to grow in spread lending. That's a very attractive business for us as we can really benefit from the flywheel and AllianceBernstein's capability and the low-cost liability of the insurance companies. We'll look at the bigger institutional markets as well. We have the capabilities with our underwriting and asset management skills, but we don't have any like plans right now to enter into those markets.

Similar -- we looked at the MYGA market for some time, and we started that with Equitable Advisors. We'll certainly look at other parts in the institutional market. And if we see attractive entry points, we have the capabilities to go into past. It's not going to be a huge investment for us considering we have the capability set up.

Got it. Moving to AllianceBernstein. Can you discuss their private markets business and you have some goals there for 2027, the progress you're making towards them?

Yes. So we're really excited about the private markets business at AllianceBernstein. It's now $77 billion. That's up 20% year-over-year. Our target for 2027 is to reach $90 billion to $100 billion. That means it's about 20% of AB's revenues by 2027. So that's a good mark for us. That's being funded in part by Equitable's commitment in seed capital to grow their private credit business. Equitable has committed $20 billion, of which we deployed $15 billion to date, and we expect to fully deploy the $20 billion by 2027.

Of interest, some of the strategies that we have seeded and recruit teams, that's been value for us. We seeded $1.4 billion in -- or allocated $1.4 billion to AB carve-outs resi mortgage capabilities. We've also allocated over $2 billion to private structured assets like NAV loans, ABS, specialty finance. So we continue to see that opportunity to grow both for AllianceBernstein, but the yield also comes back into the retirement business and to grow the retirement business. That's the flywheel effect.

Now the real value is AB is able to grow for every dollar Equitable has put in, AB has been able to grow $3 to $4 of third-party capital. And that's really valuable for EQH shareholders because they're getting the full benefit of the value chain between owning retirement and asset management together.

AB acquired CarVal a few years ago to enhance the private market capabilities. Are there other M&A opportunities similar to that or that, that could be of interest to AB going forward?

Yes. I think I think of 3 areas within AB that we think about. One is private credit. Obviously, that's probably our primary focus because there are a lot of synergies. Second is their private wealth business and third being Sidecars, which we spoke about. So within private credit, AB has had a tremendous history of team lift outs, that's differentiated because they can attract teams, they know Equitable is going to provide them fun.

So we have teams with a track record funds they want and they can go out and raise their party money. That's a $3 to $4 that I mentioned earlier in terms of leverage we get from the capital we put in. Part of the CarVal acquisition, CarVal is attracted to come to be paired with an insurance business as well. So we think we're differentiated in acquiring private credit, but we have much of the capabilities we need in private credit and maybe there are things like infrastructure debt that we don't have that we look at over time.

AB's private wealth business is probably something that's not spoken about as much as it should be. The private wealth business is at scale. It's focused on the ultra-high net worth. So really $5 million to $10 million plus individuals. Our plans there, we think we can grow our adviser base by 2 to 3x from here, specifically taking advantage of opportunities we see in some geographies and some segments in the private wealth space. We'd also look at small bolt-on type RAs within that business that fit that can sell private credit orientation. So that continues to be a place that we think we can grow in AB's private wealth channel.

And then third, Sidecar investments. We did the Ruby Re one. I think that was a win-win for Ruby Re for AB, benefiting from AB's capabilities. We'll continue to look to expand AB's insurance capabilities for future Sidecar type investments more so as we talked about from AB side of it so that they can participate in the insurance value chain. And those are probably the 3 areas that we'd focus on, but primarily private credit would be our #1 focus.

Is there a, I think you've been asked this before, but just -- do you think there could eventually be some synergies between Equitable's advisory -- Equitable's Wealth Management business and the private wealth business at AB or the segments you're targeting just 2 different?

Yes, exactly. The segments that we're targeting are very different. Equitable Advisors is more mass affluent, $3 million below. AB is more private wealth. They're not material synergies between the 2.

Got it. You talked more earlier about the growth and success you're having in the wealth business. Just 1 follow-up on that from a margin standpoint. Do you have any like, I think you're around a 15% margin right now. Do you feel like that's a good level for the business? Or is your -- in your focus on just growing earnings and revenue? Or could you see margins expand over time?

Yes. I think in the short term, we're really focused on making the investments to grow earnings and revenue in that business. That includes experience hiring, like I spoke about earlier, with the new hire that we brought in from Ameriprise. Experience hires is a great way to grow that business because it has a good IRR, short payback period. As I mentioned earlier, we had $700 million recruited year-to-date already.

So we're seeing wins on that. But those are investments that we're making in the business right now. The business is -- it's at $110 billion, which is great from the $40 billion it was, but it's still relatively small to other wealth managers out there. We do think there are opportunities to expand margins to the high mid-teens or low 20s, but that will over time, and that's a lot of scale that's needed in that. So in the short term, we're really focused on investing in the business, growing the platform, increasing the number of advisers that we have and then smaller bolt-ons as we see fit and value accretive for shareholders.

On the second quarter call, you gave a preliminary expectation for alternative investment returns in the third quarter, I guess, as we've gone forward a little bit, do you have an updated view there?

Yes. I think all returns for the first half of the year, we're about 6% for Equitable. I think in the third quarter, it should be similar, maybe a small upside potential on it, but it should be similar to how I sit here today and see it. I think by year-end, we should be able to get to the low end of our 8% to 12% range. It's really dependent on activity in the marketplace. So we are seeing better performance in private equity. Real estate has been somewhat muted. Now, we have seen more real estate transactions.

So I think the market somewhat bottoms out based on the transactions that we're seeing. So we're hoping to see improvement in that space. The IPO market has opened as many of you have seen. There are a lot more IPOs occurring, and we see that as a good tailwind as well for the private equity portfolio overall. But if you take a step back, our returns since our IPO are about 10%, so in the midrange of our 8% to 12% range we hope to get back into that range for the full year in 2026, but that depends on the transaction activity that we spoke about earlier.

But going forward, our liability profile of much shorter duration with RILA. So alternatives don't really have the same positioning as it did in our liability profile when it had a longer duration.

So as a result, for every unit, every marginal dollar is going to be going more into private credit then would be alternative versus historical because of that liability profile. So alts are about less than 3% of our general account today and I expect it to decrease over time. But still, reaching back to that 8% to 12% over the long term.

And then it's a much smaller business for you now, so you may not have anything, but I figured I'd check at least on the life side of the business, if you had anything to say on mortality or anything like that for the third quarter?

Thankfully, no because hopefully, no longer, we will provide updates on it.

Okay. Great. And then you established an affiliated Bermuda reinsurer. You had -- last quarter, you seeded $30 billion of liabilities there of annuity liabilities. I think you had said there's no real upfront change to your view of capital. But can you maybe just provide a little bit more insight into if there is no upfront benefit from that, what was the reason and rationale for doing it?

Sure. So we launched a Bermuda company earlier this year. We completed our first in-force transaction to it as Ryan mentioned, it was about $30 billion of liabilities. And the real focus for us is we like the Bermuda framework because it actually aligns pretty well with how we manage economically. It's the only framework we see outside of Solvency II in Europe that really looks at fair value reserving, and that aligns better with our hedge program. So the real benefit that we have because there's no economic change in capital for us.

The real benefit is really allowing matching with our hedging program. And that's what the Bermuda framework allowed you to do because you have fair value reserving. So you don't have volatility related to your hedging program on the statutory results.

Bermuda for us, though, going forward, I think it provides us a lot of optionality in our toolkit. Flow reinsurance would be something we look at for some of our internal products. We can look to other in-force transactions if we thought it helped the consistency of cash flows. And then over the long term, we think there's potential to do third-party reinsurance as well in our Bermuda company.

So that's probably more of a post-2027 thing, but we think there are opportunities there. If you take a step back there, our capital management strategy since IPO has really been focused on economic management. We want to manage to book economically. Like if you think at IPO, we started with just a New York company then we move business from New York to Arizona and now we move to Bermuda.

The key focus for us is always economic management. We want to protect policyholders and we want to make sure we're providing good returns for shareholders across the board. And now even post RGA transaction, you can look across our businesses. We have a Bermuda entity that's set up. We have the consolidated RBC ratio is above 500%. All of our insurance subsidiaries post RGA transaction are above their target levels. But this is a deliberate strategy to manage the business economically, not towards U.S. GAAP, not even towards U.S. GAAP. We want to manage economically to protect policyholders and drive good cash flows for shareholders as well.

We have just a small amount of time left. I just want to check if there's any questions in the audience.

Is Bermuda for the annuities?

It is for group annuities. $30 billion of group annuities.

Maybe I'll just actually -- just circle back to 1 thing you said. So I guess I don't know if you have the number off the top of your head. But I guess with that RGA transaction. I assume the size of your alt portfolio will likely be smaller going forward because some of that was included in the transaction. Is that correct?

It -- there are -- Alt's portfolio was not transferred in the transaction. So that will stay on Equitable balance sheet, but as a result, that will decrease over time because obviously, the liability profile is much shorter.

Okay. Got it. Understood. All right. Well, we are running out of time. So we're going to wrap it up there. Thank you very much to Robin and the Equitable team.

Thank you, Ryan.

Thank you for standing by, and welcome to the Equitable Holdings, Inc. Second Quarter Earnings Call.

[Operator Instructions]

I would now like to turn the call over to Erik Bass, Head of Investor Relations. Please go ahead, Erik.

Thank you. Good morning, and welcome to Equitable Holdings Second Quarter 2025 Earnings Call. Materials for today's call can be found on our website at ir.equitableholdings.com. Before we begin, I would like to note that some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. Our results may differ materially from those expressed in or indicated by such forward-looking statements. Please refer to the safe harbor language on Slide 2 of our presentation for additional information.

Joining me on today's call are Mark Pearson, President and Chief Executive Officer of Equitable Holdings; Robin Raju, our Chief Financial Officer; Nick Lane, President of Equitable Financial; Tom Simioni, AllianceBernstein's Chief Financial Officer; and Owner Arzon, Head of AllianceBernstein's Global Client Group and Private Wealth business. During this call, we will be discussing certain financial measures that are not based on generally accepted accounting principles, also known as non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures and related definitions may be found on the Investor Relations portion of our website and in our earnings release, slide presentation and financial supplement. I will now turn the call over to Mark.

Good morning, and thank you for joining today's call. This quarter marks the halfway point of our 5-year planning period. and we're pleased with the organic growth momentum across our businesses and the progress we've made on our strategic initiatives. In July, we closed our landmark Individual Life reinsurance transaction with RGA which freed over $2 billion of capital and will significantly reduce future earnings volatility. Looking forward, we are excited about the growth prospects across our retirement asset management and wealth management businesses. And the flywheel benefits from our integrated business model position us well to be a long-term winner in each of these markets.

Turning to Slide 3. Let me briefly cover our second quarter results. Non-GAAP operating earnings were $352 million or $1.10 per share down 23% year-over-year on a per share basis. Adjusting for notable items, non-GAAP operating EPS was $1.41 and which is down 8% compared to the prior year. But the primary driver of the decline was elevated individual life mortality claims. In addition, fee-based earnings were pressured by lower average equity market levels during the second quarter. While results this quarter came in below expectations, we see several positive leading indicators that suggest growth will accelerate in the second half of the year.

Our mortality exposure has been reduced by 75% and markets have had a strong recovery. Assets in totaled a record $1.1 trillion which is up 5% year-to-date and bodes well for future growth in spread and fee-based earnings. We also see healthy organic growth momentum, supported by our flywheel business model. Our retirement businesses produced $1.9 billion of net inflows in the second quarter driven by strong wireless sales and $250 million of BlackRock LifePath Paycheck net inflows. Wealth Management also had another very strong quarter with $2 billion of advisory net inflows and the trailing 12-month organic growth rate is 12%. We continue to see positive adviser recruiting trends and productivity increased 8% year-over-year.

Turning to Asset Management. AB was not immune to the challenging market conditions in the second quarter and reported net outflows of $6.7 billion, which includes active net outflows of $4.8 billion. The outflows were concentrated in April and the business returned to a net inflow in June. AB also continues to grow its private markets business. with AUM up 20% year-over-year to $77 billion, and the total institutional pipeline increased to $22 billion, the highest level since 2022. Moving to capital. We returned $318 million to shareholders in the second quarter, which represents a 74% payout ratio above our 60% to 70% target. We are on track for $1.6 billion to $1.7 billion of organic cash generation in 2025 and with over 50% coming from our asset and wealth management businesses.

In addition, we expect to bring approximately $1 billion of additional insurance dividends to the holding company in the second half of 2025, following the close of the Individual Life reinsurance transaction. As Robyn will discuss, we plan to execute at least $500 million of incremental share repurchases and repay some debt before year-end. We have already received regulatory approval for these dividends. Over the past few months, we have made significant progress executing against our strategic initiatives to reduce earnings volatility and improve our churn on capital and drive future growth. I've already highlighted the like insurance transaction with RGA, which closed on July 31.

In addition, in June, we completed the first internal reinsurance transaction to our Bermuda entity as well as the majority of our policy innovation initiative. These actions enhance our financial flexibility and visibility into future cash flows from our insurance entities. Finally, you're seeing evidence of the flywheel synergies between Equitable and AB. A good example is the Ruby Recyco investment which yielded a $1 billion private credit investment management agreement with RGA, including mandates for newer strategies that have recently been ceded by Equitable. This has helped to accelerate momentum in AB's insurance business, which has added 4 new insurance general account relationships year-to-date.

Turning to Slide 4. I'll provide an update and performance against our 3 primary financial targets, which are to grow annual cash generation to $2 billion by 2027. And deliver a 60% to 70% payout ratio and grow non-GAAP operating earnings per share 12% to 15% annually. As I mentioned, we are on track for $1.6 billion to $1.7 billion of organic cash generation in 2025, and we have a good line of sight into achieving our $2 billion target for 2027, even after reinsuring 75% of our in-force individual life block. Our cumulative payout ratio over the past 10 quarters is 68% at the upper end of our 60% to 70% target range. As a reminder, the $500 million of additional share repurchases following the Individual Life transaction is on top of this target.

The one metric where we are slightly below plan is EPS growth as we have a 10-quarter average growth rate of 11% and versus our 12% to 15% target. Year-to-date, non-GAAP operating EPS, excluding notable items, is down 5% due to elevated mortality claims. If the reinsurance transaction had been in effect starting January 1 and our mortality claims were reduced by 75%, non-GAAP operating EPS growth would have been 3% in the first half of the year. Looking forward, we expect EPS growth to accelerate given the recovering markets and benefit from incremental share repurchases.

Turning to Slide 5. We highlight some of the key performance indicators for our business segments and the progress we have made against our Investor Day targets. I won't cover everything on this page, but I want to call out a few items. Starting with retirement. We have delivered 5% organic growth year-to-date and 6% over the past 10 quarters. This has helped drive 13% annual growth in AUM, significantly ahead of plan. Not included in retirement net flows is our spread lending program. We have issued $3.4 billion of FABNs year-to-date and have approximately $9 billion outstanding.

We expect to be a consistent issuer going forward, which will contribute to growth in future spread income. Turning to AB. While active net flows are modestly negative year-to-date, the base fee rate has remained relatively stable, and the business is on track for a 33% margin in 2025. This is up 410 basis points since 2022 and reflects the benefits from AB's office relocation strategy and the Bernstein Research JV. We have made significant progress in scaling our Wealth Management and AB Private Markets businesses. Wealth Management has delivered a 12% organic growth rate over the trailing 12 months, has grown AUA to $110 billion and is on track to exceed $200 million of annual earnings ahead of schedule.

Private markets AUM has grown to $77 billion, up 20% over the past year, and we expect it to reach $90 billion to $100 billion by 2027. Finally, we are seeding future growth by developing new markets for both AB and Equitable. We continue to see in-plan annuities as a growth market, and we have a first-mover advantage through our relationships with AB, BlackRock and JPMorgan. Since launching the BlackRock LifePath Paycheck product in the second quarter of 2024, we have received over $800 million of inflows. We also expanded our institutional offering through a partnership with a leading HSA provider, which has yielded approximately $350 million of net inflows year-to-date.

AB is making good progress in target growth areas like active ETFs and insurance mandates, which now have AUM of $8 billion and $48 billion, respectively. Moving to Slide 6. I want to reinforce the value created by our individual life reinsurance transaction and the benefits it will have for Equitable moving forward. By reinsuring 75% of our in-force individual life block on a pro rata basis, we have significantly reduced our exposure to future mortality claims and the associated volatility. This should enable us to deliver more predictable earnings. We are also generating over $2 billion of value through a positive ceding commission and the release of capital supporting the block. This represents a multiple of approximately 20x our lost earnings, a very attractive valuation. This freed capital will be redeployed into higher return businesses and drive accretion for shareholders.

We have already used $760 million to increase our ownership stake in AB from 62% to 69%, and we plan to execute $500 million of incremental share repurchases in the second half of 2025. We also expect to repay some debt. This leaves us with some remaining capacity for opportunistic growth investments or additional buybacks. I'm very excited about the road ahead for Equitable, and I'll now turn the call over to Robin to go through our financial results in more detail.

Thanks, Mark. Turning to Slide 7. I will provide some more detail on our second quarter results. On a consolidated basis, non-GAAP operating earnings were $352 million or $1.10 per share, and we reported a GAAP net loss of $349 million. We had a few notable items in the quarter. Our alternative investment portfolio returned 6.3% in the quarter, modestly below our 8% to 12% long-term expectation, but in line with our guidance for the second quarter. In Protection Solutions, we had $74 million after tax of negative onetime items. driven primarily by the discovery of a third-party administrator issue that resulted in the late reporting of some COLI claims.

We are confident that all outstanding claims have now been identified and that there won't be any impact in future quarters. We also identified a few other small items that were cleaned up ahead of the closing of the RGA transaction. Finally, in Corporate and Other, we had $16 million of notable items, primarily from one-off expenses related to a true-up of PCAP issuance costs and an adjustment to the FABN currency hedges. After adjusting for these items, non-GAAP operating earnings per share would have been $447 million or $1.41 per share. Total assets under management and administration rose 8% year-over-year to $1.1 trillion. This bodes well for future earnings growth. Adjusted book value per share ex AOCI and with our AD ownership stake at market value was $40.89 up 11% year-over-year. In our view, this is a more meaningful number than reported book value per share ex AOCI, which reflects our AB holding at book value. Our adjusted debt-to-capital ratio with AB's ownership stake at market value was 23% in the quarter.

On Slide 8, I'll provide some further details on our segment level earnings drivers. Starting with mortality, we again experienced a higher-than-expected level of larger claims in our individual life insurance block primarily concentrated in older-aged policyholders. Excluding the late reported COLI claims that I mentioned previously, mortality came in about $35 million after tax worse than our normal expectations. Moving to Individual Retirement. Earnings declined on a year-over-year basis, driven by a couple of factors that I'd like to dive deeper into. Fee-based revenues declined by 3% and reflecting lower average separate account balances due to outflows in our older GMxB block and the equity market decline through April. Fee-based products account for about half of our segment earnings and have a higher return on assets than spread products.

Net interest margin, or NIM, was flat year-over-year as strong growth in net investment income was offset by higher interest credited. We attribute this to 3 dynamics. First, we are starting to see more of our very profitable older Rail segments mature. These policies were written at a time when competition was limited, and we could achieve margins well above our normal hurdle rates. While we continue to earn attractive 15% IRRs on new business, this is below the return turn when we had the market largely to ourselves. Second, a component of interest credited is market value adjustments or NDAs, which are collected if a contract is early surrendered or the policyholders chain segments within their Rila contract. MBAs had been quite stable from the second half of 2022 through the first half of 2024 but they have declined in recent periods and were essentially 0 this quarter.

This reduced year-over-year NIM growth by about 10%. We do not assume any benefit from NDAs in pricing and expected limited GAAP earnings contribution moving forward. Third, we have multiple product lines that drive individual retirement NIM, including Riles and payout annuities as well as income from surplus. So this can create noise on a quarterly basis. When we update our financial reporting next quarter, we plan to provide additional disclosure to help you model NIM across our retirement businesses. The final drag on earnings has been higher commission expense which reflects strong sales volumes, particularly at Equitable advisers, where not all payouts can be capitalized in DAC.

This is ultimately a positive as we'll see higher earnings over time. but new business does not immediately start to contribute to GAAP profits. Looking forward, we view $220 million to $225 million as a good baseline for third quarter earnings for Individual Retirement, assuming normal markets and our current segment reporting methodology. Keep in mind that not all the benefit from the strong organic growth in Individual Retirement shows up with robust sales volumes benefit transactional revenues in Wealth Management and drive asset flows to AB. In addition, growth in our general account assets allows us to expand our spread lending program, which generates earnings that currently get allocated across all of our insurance segments.

Turning to Group Retirement. Earnings declined sequentially due to lower average separate account balances in the second quarter, but the market rebound should lift third quarter results. AB reported a solid quarter from an earnings perspective and remains on track to achieve its full year margin target of 33%. AUM ended the second quarter at record levels, which should support growth in base fees and AB now expects full year performance fees of $110 million to $130 million, up from our prior forecast of $90 million to $105 million. Finally, wealth management had a very strong quarter with earnings up 16% year-over-year. We expect this momentum to continue given robust net new asset growth and supportive equity markets. Across our businesses, we expect earnings to improve in the second half of the year given record AUM levels, higher investment portfolio yields, benefits from expense actions and reduced mortality exposure.

Turning to Slide 9. We executed on several important capital management initiatives during the quarter, which will support growth and enhanced visibility into future cash flows. As Mark previously discussed, we are thrilled to have closed the life reinsurance transaction with RGA, which we expect will reduce earnings volatility will enhance returns on capital and be accretive to earnings and cash flow per share. In June, we also completed the first transaction with our [indiscernible] entity reinsuring approximately $30 billion of group annuity contracts. While this transaction does not impact our view of excess capital, it enhances our visibility into future cash generation. and our ability to upstream excess surplus on a consistent basis. This is because of a better alignment between the Bermuda framework and how we economically hedge our annuity book.

Looking ahead, having a Bermuda entity provides another tool in our capital management toolkit, and we'll be opportunistic in utilizing it. This could include seeding additional blocks of in-force business seeding new business on a flow basis or even reinsuring third-party business. Finally, we've completed the first wave of policy innovations. Moving a portion of our reinsured legacy VA policies to Beneva and a portion of internally reinsured policies from New York to Arizona. By [indiscernible] these policies, we reduced counterparty risk. Simplify our statutory accounting and increase future financial flexibility. These strategic initiatives support Equitable's consistent capital management program, which is highlighted on Slide 10.

During the quarter, we returned $38 million to shareholders including $236 million of share repurchases. The payout ratio was 74% of earnings, excluding notable items in the quarter, above our 60% to 70% guidance range. Over the past year, we have reduced our share count by approximately 6%, helping us drive growth in earnings per share. We currently have about $800 million of cash at the holding company. above our $500 million minimum target. During the quarter, we spent approximately $760 million to purchase additional AB units and $283 million to retire our standing Series B preferred stock. During the second half of the year, we expect to upstream $1.7 billion of excess surplus from our insurance subsidiaries to the holding company. which include both organic cash generation and a portion of proceeds from the life reinsurance transaction.

We have received regulatory approval for any required extraordinary dividends. Following the life reinsurance transaction and these planned dividends, we will have a pro forma combined NAIC RBC ratio of over 500% and above our 400% minimum target. This puts the enterprise in a strong capital position and provides capacity to fund growth and meet our payout ratio targets. Even during periods of market volatility. We plan to execute at least $500 million of incremental share repurchases in the second half of 2025. We and we will also look to pay down some outstanding debt to manage our leverage ratio and maintain flexibility. We will be opportunistic in redeploying the remaining transaction proceeds in a timely manner, to support growth and drive shareholder value. Now let me turn the call back over to Mark. Mark?

Thanks, Robin. Looking forward, Equitable is well positioned to capitalize on the growth opportunities across retirement, asset management and wealth management, helped by the flywheel benefits of our integrated business model. We have strong organic growth momentum and the individual life reinsurance transaction will reduce the earnings volatility that has weighed on our year-to-date results. We also have a robust balance sheet and significant freed capital to redeploy, which will be accretive to earnings per share. As a result, we expect EPS growth to accelerate in the second half of 2025 and we remain confident about achieving our 2027 financial targets. We will now open the line for your questions.

[Operator Instructions]

And your first question comes from the line of Brian Kruger with KBW. Ryan

Robin, thank you for the more color on the earnings in Individual Retirement. I guess the question is you gave us the baseline earnings for the third quarter. But how should we think about the growth in earnings beyond that?

I guess you do you have good growth momentum in the business, but it does seem like the earnings, I assume will continue to grow less than an account value just given the dynamics you mentioned on runoff of fire margin legacy Ria business as well as some of the mix shift between variable annuities and Rayle. So I don't know if you can give us any more context, but just trying to think about the growth off of that third quarter starting point.

Okay, Ryan. Yes, let me just break it down in a few components, what happened now in this current quarter and then how should we think about it going forward. So we view approximately 220 to 225 as a reasonable baseline for the third quarter. As you noted and I noted on the call, results came in lower from the few components: one, fee-based products, in our historical closing rate VA, which is more linked to the separate account. Markets were lower in April, which was below our expectations, which is about 2% for a quarter but that should help us going forward.

So that's going to support the $220 million to $225 million guidance that I gave given the equity market rebound reported NIM was flat year-over-year as strong growth in net investment income was offset by interest credited. As we talked about previously, a big piece of that is market value adjustments. These bounce around quarter-to-quarter. It's been about $10 million pretax recently, but was 0 this quarter. So that obviously has an impact. We don't predict much of that going forward, but that could sway results on the positive side. if that bounces back as well. I would view NIM spreads have somewhat stabilized and will continue to stabilize this year as we see the runoff from our very profitable book when we own the market to ourselves where margins have more stabilized at a 15% IRR.

So you can assume that to flatten out this year and probably for the next 9 to 12 months, we're going to see that shift. So the NIM rate should be consistent going forward. But the business momentum remains strong, as we mentioned in the call, going forward, we do expect the general account to grow, which benefits the other parts of our flywheel, including AB AUM, wealth management fees and then also our spread lending capability, which will all benefit us going forward.

Just one related follow-up. I don't know if you have something approximate not looking for anything exact, but -- how much of your in-force RILA would you say is more of the older business when you had excess returns compared to that's probably more in line with your pricing targets now?

Yes. It's about the in force, and I would put that like pre-2020, it's about 15% of the total account value and that's very good, very high margins because we're the only ones in the market at that time. So as more people have come in, those margins have stabilized. But -- so it's not a huge shift. That's why we think the next few quarters, that should stabilize as that will come off.

And your next question comes from the line of Suneet Kamath with Capri.

Robin, I want to come back to the spreads in IR. It sounds like you're saying that, that should sort of stabilize or flatten out here. Is there any sensitivity to that outlook if the Fed starts -- or if and when the Fed starts cutting rates?

No, because it's not for RILA products specifically one, it's not only the short-term rates. It's really looking at, I would say, closer to something to the 10-year treasury and then also we're looking at volatility and we're looking at corporate spreads. So those are the 3 drivers of our RILA profitability, which we used to price products. So we're matching our pricing depending on the movements to that 15% IRR. So we're less sensitive to those movements and more focused on making sure our pricing meets that hurdle rate.

That makes sense. And then I guess, sticking with IR and RILA, how do the economics of the products that you sell through the Wealth Management business compared to the products that you sell through third parties. I'm assuming it's sort of a level commission. So that's not the difference, but there's probably other factors that we should think about in terms of the profitability. Can you just kind of talk about that?

I'll ask Nick to jump in and talk about the growth that we're seeing within that segment. But within our Wealth Management franchise, those are where we're closer to the client, and we see better persistency, and we do see higher margins as a result of that when we sell any of our products through our Wealth Management business. That's why owning and having affiliated distribution is a differentiator for Equitable and a key part of our flywheel going forward. And Nick, do you want to add on some of the growth we're seeing on the wealth management side?

Sure. As Mark and Robin highlighted, Equitable -- while sales were up 9% year-over-year. This was another record high with a total of $1.7 billion of net flows. We continue to believe that to be a sustainable success story, you need to generate attractive yields, have distribution which generates lower cost liabilities. This is both Equitable advisers and third-party partners that have a more curated share of products on the shelf and scale. And we think Equitable has that flywheel benefit. So we're a sustainable success story in the business.

And your next question comes from the line of Tom Gallagher with Evercore ISI.

Question on capital management and what you're thinking there. I guess after your extraordinary dividends, you're still going to have a 500% pro forma RBC would the baseline plan be to take out another extraordinary dividend next year on -- so you would end up doing more buybacks in 2026 than you would normally generate. It sounds like you're going to do some debt paydown as well. But how are you thinking about kind of the cadence of getting some of this excess capital out from the RGA deal. And of that $1 billion that I guess, wasn't deployed into an increased AB stake ballpark would the vast majority of that likely go into buyback today? Or are you still deciding between debt paydown and share repurchase?

Thanks, Tom. I think you had a few questions there, so I'll take all good questions. So we're thrilled, as I said on the call, to close this RGA transaction. More importantly, the strategic value of this transaction as really cements us into the flywheel of asset retirement and wealth management and also recognizing we're not a differentiator in owning mortality, mortality risk. So for us, this is a very strategic transaction. We're benefiting from unlocking $2 billion of value and reduced mortality exposure going forward.

As you mentioned, we've invested $750 million in AllianceBernstein. That increased our stake to 69%. And we're also committed to doing $500 million of share buybacks in the second half of the year. That's going to be one of the pieces that helps EPS growth on the second half as well. That's going to be above the 60% to 70% payout. And with the $1 billion remaining, I would split it in one piece for [indiscernible] as the transaction becomes effect in the third quarter, we'll have a loss on the GAAP side related to the assets that move but also with the purchase of AllianceBernstein, that's how that book values. So combined puts an impact on the equity in the company. So as a result, we do want to reduce debt to make sure our leverage ratios are in line with our rating agencies would expect.

I would think about that anywhere up to $500 million because it will be a tender offer that we would likely do in the second half of the year depending on markets. And then with the remaining $500 million were, as always, we look for bolt-on opportunities within the wealth side, across equitable and AV. We always look at sidecars and then we'll certainly look at it additional share buybacks as we need to drive accretion because of where we trade today as well. As the -- I think the first part of your question on future capital deployment, you have to post the transaction post the extraordinary dividend and the ordinary dividend of $1.7 billion out of the insurance company. The RBC ratio of the combined entities is above 500%. So the capital ratios at the subs are very robust at this time.

We don't have any plans to take out any other dividends from the insurance companies this year. And then next year, we'll look at where the ratios are and the organic cash generation and we'll look to upstream next year and then the following year in order to meet our $2 billion cash flow guidance, which come both from the insurance company and 50% from asset and wealth.

Your next question comes from the line of Elyse Greenspan with Wells Fargo.

Putting together, I guess, Robin, a lot of the comments that you gave, right? You guys said EPS growth should pick up in the back half. And then obviously, it takes time, right, for the full credit right for repurchase to work in as well as business growth, et cetera. So with how you see things, I guess, would you expect, I guess, the second half to be better than the first half but I guess, below the 12% to 15% target for EPS and then we get back there in 2026. Is that kind of the right way to think about it when you think about the moving pieces?

Yes, I think that's right. I think, look, we -- with the tailwinds behind our business, the growth momentum higher equity markets, reduced mortality exposure and additional share buybacks. EPS growth will certainly improve in the second half, and we'd expect to be back on track for 12% to 15% in 2026 and then obviously, towards 2027 to achieve our commitments.

We also have levers in place if the market doesn't continue to participate well. So we have expense actions that we can take. We also have investment actions that we continue to execute on we're about $15 billion through our $20 billion commitment in the private credit build at AB. That's helped AB grow that business at $77 billion, and we're getting good investment income off of that as well. So I think where we're positioned today, we see good growth coming in the second half and then going forward, but we'll also have levers in place in case things don't materialize as we expect.

And then I was hoping just to get some incremental color just on wireless sales in the quarter as well as just what you're seeing from a competitive and just market standpoint?

Yes, thanks. Obviously, the competitive dynamics have changed since we pioneered the product over a decade ago. With that said, year-to-date, we haven't seen any material change in the relative competitive intensity. We continue to see strong demand and growth driven by the demographics. The baby boomers moving to their next chapter of their lives heightened by this current state of, I would say, macro uncertainty. I alluded to our strong sales already in the quarter, up 9%. We're very mindful of competitive trends on pricing.

As we've mentioned, when we see new entrants enter. They tend to have a period of aggressive pricing. We've seen this before, and it tends to be temporary. We focus on value versus pure volume. And as the market leader, we've continued to benefit from the growing pie. I would highlight over the last 3 years, our sales have more than doubled over that period. So we believe looking forward, we're in a privileged position to capture a disproportionate share of the value given our asset origination capability, our distribution network and our scale.

And your next question comes from the line of Jimmy Bhullar with JPMorgan.

So first, just a question for Robin on the buyback. The -- I think the $500 million extra that you've communicated, are you going to be opportunistic in terms of timing of that, depending on how the stock price behaves -- or should we assume that that's going to be more flat lined?

Thanks, Jimmy. Yes, we're going to start the $500 million on top of our committed 60% to 70% in the third quarter. We'll run that through based on the trading volume that is. And obviously, that gives us a lot of good dry powder to be opportunistic depending on the share price as well. So you should expect us to be active in the market.

And then on the -- you certainly have the ability to do more. Obviously, you have to reduce debt as well given the lower earnings base with the reinsurance transaction. But the -- what is it that you -- or you mentioned maybe potential tuck-in deals or other uses of capital besides debt reduction like have you already earmarked something for potential acquisitions? Or is it more that if you don't find anything, then maybe the $500 million more likely than not will be increased over time?

Jim, first, we have to get through the $500 million because that's on top of the 60% to 70% Yes. shares that we have available to us to buy back. So that's going to take time. So expect us to deploy the remaining proceeds by 2026, and it will be in a combination of share buybacks and if something becomes available to us, that's accretive for the wealth management businesses and equitable RED or [indiscernible] that aligned to our strategy to grow insurance third-party insurance mandates. Those are the things that we look at as well. But we have to get through the first portion first, and then that gives us options going forward. But anything that we do will have to drive shareholder value.

Jimmy, it's Mark. If I could just add to that. I think and I hope, as you've seen over the years, we will be incredibly disciplined. The fact that we've got the money does not burn a hole in our pockets. We will be very disciplined in anything we look at. And to Robin's point, we know we have to beat the baseline of the value that would be accretive to shareholders through a share buyback. So that provides a healthy discipline for us.

And your next question comes from the line of Jack Matten with BMO Capital Markets.

Just a follow-up on the individual retirement business. How much longer do you expect to [indiscernible] roll off dynamics to continue. Is it fair sense mostly behind us now? Or is there just a little bit more to come over the next few quarters? And then on the earnings baseline for next quarter, just confirming that assumes no market value adjustments and that would guess be less favorable compared to your kind of historical average experience?

Sure. I expect is the older business to run off definitely over the next few quarters still. And then I also -- we also do not assume any MBA in the $20 million to $25 million I provided during the call. But we should still see this dynamic. As I mentioned, it's about 15% in that's still there. So that dynamic is going to run off over the next few quarters. So that will still occur. But we still have underlying good growth momentum, as Nick highlighted, and that should come through in earnings.

Got it. Maybe just one on Bermuda entity, I guess, are the benefits from entity material enough that there could eventually be a step change higher in the cash conversion or payout ratio that you would expect longer term then any thoughts on the timing for additional transactions, particularly around potential third-party transactions for that entity?

First off, we really like the Bermuda system because it really allows us to manage economically. As you know, we're unique here, and we have an economic approach on how we manage liabilities and how we hedge. The Bermuda framework allows us to fully manage on an economic basis. It means we won't have volatility in any results related to our hedging program, and that gives us consistency of cash flow going forward, which is good for shareholders.

So it's really about more consistency in cash flow and managing economically as the framework allows us to again, we just closed the first transaction on June and June. So there's still a lot more to be done. As I mentioned on the call, we'll look at flow reinsurance on new business. We'll look at other internal measures in '26 and '27, we'll execute again dose. And then it gives us optionality post 2027 and later on if we wanted to look at third party as well.

And your next question comes from the line of Michael Ward with UBS. Let's go proceed to the next question.

Our next question comes from the line of Kat Muntasir with Deutsche Bank.

I apologize. I think I missed Jack's question. Hopefully, it's not the same question I have to ask. But on this $30 billion of annuities reinsured to Bermuda. Were you able to give us a bit of an estimate of the capital benefits from that transaction, maybe not an exact number, but some kind of a range would be helpful.

Sure, Tate. As I mentioned, we don't view it as like an excess capital materialization because nothing changed in our economic capital for moving to Bermuda. It's more about having consistency of cash flows going forward. The capital benefits that we're going to get throughout the year is going to be coming from the RGA transaction, which, as we mentioned, unlocks $2 billion of value for us. And post dividends allowed us to run the company at a 500% RBC post all the dividends.

So that's what puts us in a good capital position. And now the Bermuda transaction gives us the consistency of the cash flow on an economic framework going forward.

Okay. So there's no actual benefit from that transaction specifically then like internal lower capital requirement in Bermuda for that type of product?

Yes, the benefit is the consistency of cash flow aligning to our economic hedging program.

Okay. And now second question is on technology. Which part of your business I guess, could benefit most of the implementation of GenAI? And do you think it's more about improving efficiencies? Or can it also help you drive growth.

Great. Thanks for the question. Obviously, AI is rapidly evolving and being adopted in the space out there. We built the foundation, given that we're in a regulated space that allows us to seek seed and scale the benefits, primarily in the last phase, we've seen it on the operational side. relative to doing mundane TAS, and we continue to explore the potential to use it for value-added services such as how we produce alpha or our advice model. our conviction is that AI is not going to replace advisers out there. but people that use AI are going to replace people that don't. So we see the potential to continue to explore and accelerate in this space.

And your next question comes from the line of Mark Hughes with Truist Securities.

Not a big impact, but the surrenders in group retirement were a little lower than we've been seeing over the last several quarters. Anything in particular you'd call out there?

Sure. Mark, we've seen lower surrenders in the quarter. I think some of that has to do with the equity market decline in April, people are a bit more steady with their money. But we also have actions in place across our businesses to retain more clients as we continue to provide holistic advice for them. But nothing really to call out that's material there.

Yes. Understood. And then on the RIA side of the business, I saw Libra for what it's worth, was saying they expect continued expansion of more broker dealers are offering these products. When you think about your distribution through those third parties, you've had a lot of success with BlackRock and elsewhere. But just as a kind of a general matter of the adoption of Riles across the financial services space. Anything you've seen different lately?

Yes, I'd comment on that. Look, net, I think as the demand has continued to grow given the value proposition of the protected equity story, we are seeing greater adviser awareness and consumer interest for the product, which is increasing the overall pie itself. Having been the pioneer in this market 10 years ago, we were able to secure what I would say, privileged distribution where the product aligns with the investment philosophy of the third-party firms for how they need a consumer's best interest.

And your next question comes from the line of Wilma Berdis with Raymond James.

The stock is off a little bit this morning. But when I look at the core '25 segment results, they're really on top of my underlying EPS model estimates. Most of the noise really seems to be related to the deal. Do you agree -- should we start to see more consistent results in the post I know you touched on that, but -- and is there any additional noise to come through in 3Q?

Yes, no, I expect the results to be stable going forward. Obviously, we essentially decreased by 75%, the most volatile part that we've seen in our results. previously. So going forward, we expect strong results, again, coming from better equity markets, lower mortality exposure and then the incremental share buybacks, about $500 million above the 60% to 70% payout ratio.

And could you give a little bit more color on the FABN program? Some competitors have highlighted drag from high volumes of ABN as they've been waiting to deploy the assets at higher spreads. Is this something that's impacting equitable -- or has the company already been able to invest the proceeds and if it is an impact, is there something we should think of on spread uplift?

Sure. We've been accessing the FABN market as an issuer since 2020. I think it's one, again, the benefits of having an in-house asset manager in AllianceBernstein that has that origination capability that we can continue to issue FABN and achieve attractive IRRs similar to our retail business above 15%. We've achieved $3.4 billion year-to-date. We have $9 billion outstanding, and the AV team does a great job of putting that money to work to ensure that we get the yields that we price for.

And your next question comes from the line of Michael Ward with UBS.

Can you hear me now?

Yes, we can.

Okay. Sorry about. I don't know what that was. So just another one on Rails. So I'm curious, how do you see this level of sales? Are you comfortable with this level of sales growth given the market is more mature? Do you think it might be a little bit more lumpy? Or is this -- is this -- because you don't sound too concerned about it, right? And just curious also how you innovate on the product side.

Sure. We believe the pie is going to continue to grow given the structural forces that we highlighted as referenced, annuities are still only 10% over the broader retirement market. So we see upside associated with that. Your second question on innovation. We think about innovation both to extend the edge of our core businesses as well as open up new markets. We are pioneer in the launch of the Ryland market or going back longer in variable annuities.

Recently, our partnership with BlackRock and implant annuities or our pooled employer program. So I think Equitable -- one of Equitable's Edge is our customer-led innovation, and that's where Equitable advisers gives us a slight edge because we get real-time feedback of emerging client and adviser needs, allowing us to create new value propositions and offers.

Michael, it's Mark. If I can just sort of take the strategic view. I mean it is a very attractive market. That's why a lot of competitors are going in. If you look at the basic demographics in there, 4 million Americans turn 65 million this year, and we'll do next year as well. It something like $600 billion of flows coming out of 401(k) market. So the core drivers behind the retirement and rail market are very, very positive. And then just echoing what Dick said, our position being in both advice and product manufacturing and in asset management is really, really an equitable strength. So good market business model. We remain very positive about it.

Okay. And then just I had one on wealth. Strong result there again. Just curious how you see the growth pipeline there and if there's any uptick in the competition on the inorganic side?

Yes. Thank you. We see a strong demand for advice. I'm sure you saw the recent Mackenzie study that stayed at 80% of affluent households would pay a premium for a human advice. And as Mark alluded to, as baby boomers move to the next phase, there's $600 billion coming out of 401(k)s annually. Equitable advisers, we're very pleased that our value proposition is resonating with clients and advisers. As demonstrated by our strong advisory flows, $2 billion net flows in the quarter and a 12% organic growth rate on a trailing 12-month basis.

I think about looking forward, we're very encouraged by the underlying growth drivers, the 8% improvement in productivity as well as improvement of headcount. And I think underlying that is our people are planning and our platform. On the people standpoint, to your question, we've got a distinct model where we bring in new talent into the industry and then use EXP's as a force multiplier. -- average age is 48, in an industry that's grain out of 10 years younger, which gives us a pipeline and allows us to be disciplined in the EXP hiring space. So given the foundational organic drivers, we're very confident in the future growth of that segment.

There is no further question at this time. And that concludes today's call. Thank you all for joining. You may now disconnect.

All right. Good morning, everybody. Before we get started, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/research disclosure. Taking of photographs and use of recording devices is also not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative.

So with that out of the way, so we're privileged to have Robin Raju, the CFO of Equitable, here with us today. So maybe let's just dive right in.

So first of all, thank you for being here with us. On your Investor Day several years ago, right? You outlined a broader strategy with the goal for the next 5 years. And you made quite a bit of progress along the way already despite the fact that market isn't smooth at all. So can you maybe talk about how you're positioned going forward based on the Investor Day goals you've laid out, and if there's any additional we can achieve?

No. Thanks, Bob. Thanks for having me. I look forward to the discussion today. So in May in 2023, we had our first Investor Day as a public company, and we really laid out a growth strategy to the market. It was about defending and growing our core businesses, which was retirement and asset management. It was seeding future businesses like in-plan guarantees and emerging markets. That was the third horizon.

And then it was really scaling our wealth management and private credit capabilities. Those were the 3 pieces of our Investor Day strategy that we wanted to go out to the market, but it was really a growth strategy. That's what pinned it number one.

The output of that strategy that we've communicated to the market was 3 main financial metrics. One was to grow cash flows from $1.3 billion to $2 billion by 2027. Second was to grow our -- increase our payout ratio to 60% to 70%. That was 40% to 60% when we IPO-ed the company in 2018. And the third was to grow earnings per share to 12% to 15%. Those we thought were compelling financial targets to go out to the market with.

So how are we progressing versus those targets? Obviously, markets never go in the direction that you expect when you set these things. So you have to be nimble and agile. From a cash flow perspective, that's the most important metric that we're focused on internally, the $2 billion by 2027. The first year out, when we started at $1.3 billion, we said we're going to grow to $1.4 billion to $1.5 billion. We hit the higher end of that range.

This year, we said we're going to signal $1.6 billion to $1.7 billion. And we believe we have the levers in place too and we have visibility in the $2 billion of cash flows for 2027, really coming from the work that we're doing, the growth, expense efficiency, picking up net investment income yield and also decreasing the capital allocated to our legacy businesses overall.

The second metric was the 60% to 70% payout ratio. I think that's pretty clear through 9 quarters, we've achieved 68% of that.

And the third metric was 12% to 15% EPS. Through the first 2 years of the plan, we achieved 12% earnings per share growth in the first quarter and year-to-date, we did see some adverse mortality, which took away a little bit from that. But if you exclude the mortality given we have the RGA transaction that would reduce that by 75% going forward, we'd still be at that 12% number.

So in total, we're executing and we're focused on executing against that plan, and we feel confident in achieving those growth ambitions that we laid out at Investor Day.

That actually is a nice segue into the RGA and Life transaction, right? That should free about $2 billion of capital and really enhance rest of your segments. As we continue to think about growth and earnings mix going forward, your aspiration at some point is 50-50 balance between the annuities and the -- sorry, the retirement, investment management and wealth management. But curious as your thoughts on the path going forward? And then how -- what will be the levers that you need to pull to eventually achieve that?

Sure. So first on the RGA transaction, that was both strategically and financially important for us. Strategically, because it signaled us moving away from traditional life insurance, which was a low-return business for us and volatile as many of our investors have seen over the years.

And then also redeploying and going into higher-growth businesses like Asset and Wealth was a big piece of it. So within the RGA transaction, we unlocked $2 billion of capital, and we gave up $100 million of life earnings. With that, we've invested in increasing our ownership stake at AllianceBernstein from 62% to 69% or about $800 million of those proceeds we used to do that. And we're also committed to use the remaining proceeds in a way that's accretive for shareholders going forward.

The Asset and Wealth businesses for us are the fastest-growing parts of our segment. By 2027, about 1/3 of our earnings are going to come from Asset and Wealth Management and the remainder from our retirement businesses. Part of that is due to the capital allocation and the increased stake in AllianceBernstein.

Also in 2027, we're going to go to about 50% to 60% of our cash flows coming from Asset and Wealth businesses. So if you look from IPO, that was about 17%. So we made a significant shift in increasing the Asset and Wealth Management contribution in both earnings and cash flows, and we'd expect that to continue going forward.

We don't have like precise targets on the Board to say we want to be X percent this, X percent that. In reality, we really like all 3 of the businesses that we're in, Retirement, Asset and Wealth Management, and we want to grow all 3. But naturally, Asset and Wealth are faster growing. So over time, those should be a higher contributor to our overall mix.

Right. And that business mix shift so far, actually, you didn't sacrifice anything for it either. In fact, there's a lot of incremental.

Yes. Look, I think that business mix has put us into faster-growing markets, higher multiple markets and better returns for shareholders.

Yes, which is actually quite interesting, right, because you have this integrated flywheel that essentially you have set up. It's the ability to really leverage your dominant position in annuities and really expand into the more durable asset retirement and wealth management businesses overall. And then from that perspective, are there anything within that, that you think is incrementally interesting that is -- could have much higher like a potential or something that you are very excited about going forward?

Well, we're super excited about this flywheel effect that we now have coming in our business. It's really amplifying the returns overall. And as you said, we have an integrated business model, and we're one of the few with that unique business model, pairing asset, wealth and retirement businesses together.

So for example, the retirement market, as you know, at the highest level is the most important part of our investment thesis. You have to believe in the retirement market and the prospects of that in the U.S. There are 4 million Americans turning 65 this year. There's also $600 billion of assets in motions coming out of 401(k) plans into retirement retirees.

Our Individual Retirement business over the last 12 months has $7 billion in net flows. That's an 8% organic growth rate. So we're capturing that opportunity. But also that kind of opportunity also from -- within the retirement business links to asset and wealth.

In Individual Retirement, about 35% of our distribution sales come from Equitable advisers and in Group Retirement, it's about 90%. So we're capturing a distribution margin there. We take those assets and they're primarily invested into AllianceBernstein. So that's leading to positive net flows in AllianceBernstein. So we're getting sales in through our retirement opportunity, and that's benefiting all aspects of that business.

Now to the flywheel effect that you spoke about, that flywheel effect also means that when we invest in AllianceBernstein, they're generating an attractive investment yield for our products. That means we can offer more attractive solutions for clients and then get more flows. And so it kind of replicates across the board. So the flywheel effect is working very well right now. We feel quite good about it.

Maybe a few examples on that. The first one I'll give you with the benefits of having this integrated asset and retirement business is AllianceBernstein's ability to attract teams. So late last year, we hired a private ABS team that came to Equitable -- or came to AllianceBernstein. And part of the reason they came is because they're getting assets day 1.

Normally, when you do a team lift out, you come into a company, then you spend the first year fundraising. We're able to put money to work with that team on day 1 across. And that's able to attract and build new private credit capabilities. That private ABS gives us an attractive yield. And they're already starting to attract third-party mandates with that private ABS team. So the assets that Equitable contributes is very important to the strategy at AllianceBernstein.

The second example I would give you is the Ruby Re Sidecar investment that we made last year. That was a strategic investment that Equitable and AllianceBernstein made. It gives AB about $1 billion in private credit mandates. AB cannot do that without Equitable's balance sheet and insurance expertise to help underwrite that deal. So the flywheel effect keeps coming.

Emerging in the future, we could see the potential of offering private credit into retirement accounts and also into our Equitable advisers wealth management platform. So it will continue to evolve going forward. And we feel as though this gives us a competitive edge having asset management and retirement together in the marketplace.

So there's really a compounding effect. And then you'll have that new business coming up as well.

Absolutely.

So that's quite a bit of stuff. No, that's pretty impressive. So maybe if we focus on the retirement a little bit here, right? Like current market environment is quite interesting. We had a volatile March and volatile April. But you've always maintained that buffered annuity products are really designed for volatilities like this. So -- is this something that currently customers are gravitating towards? Can you maybe talk about where we're going with the buffered annuity side of things and also what the competitive positioning and the overall market environment looks like so far?

Sure. So again, just taking a step back, the retirement market, there's -- we have $600 billion of assets in motion, right? So that's a big piece. Retirees need to have equity exposure. So they want protected equity solutions in their business or in their portfolio overall. If you get out of equities, you're not going to have enough in retirement. And RILAs provide that offering for retirees. So that is a compelling proposition.

In periods of volatility like you saw in April, that actually even resonates even better. If you look in the depths of April, the market was down 15%. If they bought one of our buffered annuities, a client would be down 0 because they would have been protected on the first 20% and with the upside participation.

So times like April and volatility actually amplified the RILA story for clients and for advisers. So we saw momentum continue to progress well in the month of April, and so we feel good about that. From a competition standpoint, competition is good in my mind. We own -- we used to have 100% share of the RILA market, but it's very small. Now we have 20% market share. We're still #1, but the market was up $65 billion last year. That was a 40% increase year-over-year. So it's a pretty significant market. It's fast growing, and that's benefiting from competition because competition is coming in, they're seeing it's a simple client story and they can make an investment spread.

Now with these spread products, when you get into the market, there are 3 ways you need to -- there are 3 capabilities you need to have to win. One, you need a low cost of funds. Second, you need to generate an attractive investment yield. And third, you need a good expense discipline and a good expense base.

If you look at Equitable, we have one of the lowest cost of funds in the industry in the RILA market. Why? It's because our distribution edge in Equitable advisers. That means we can have a higher margin when products are sold through Equitable advisers, which is the low cost of funds. So that's an edge we have.

On the investment yield side, we're able to get competitive yields through AllianceBernstein. That keeps us in the market through the build-out of their private credit capabilities on it. And from an expense side, as benchmarked by McKinsey, we're in the first quartile of expense.

So generally, you need 1 or 2 of those capabilities to have a long-term sustainable edge. I think Equitable, we can say, at least has 2 of those, and we're very competitive on the investment yield side as well. So we believe that sets us up for the long-term run in the RILA market.

And look, the RILA market is still in the early innings. This tailwind in demographics in the retirement market is just continuing. I mentioned that 4 million Americans turning 65 million this year. There's also 4 million turning 35, right? So this isn't something that's going to stop here in the near term. This will continue, and we feel we have an edge in the RILA market given our capabilities and the flywheel that we have going.

Right. So -- and essentially, those 3 points all should support very long-term durable earnings growth as well for sure. So one thing you've mentioned in the past was about the future growth around the 401(k) business and as well as the emerging asset market, right? So can you maybe talk about the opportunities in the 401(k) business here as well?

Sure. So as part of the strategy that we laid out at Investor Day, the third leg was seeding for future growth, and that goes to in-plan guarantees. This is very exciting for us. One, it's aligned to our mission in providing income solutions for retirees, but it's a brand-new market in many ways for us.

The 401(k) market in the U.S. is an $8 trillion market and annuities today have less than 1% of share in that market. So it's a huge opportunity for us overall.

With in-plan guarantees, we have 3 partnerships in there. AllianceBernstein was actually first to market over 10 years ago. We have partnerships with BlackRock and JPMorgan. There's huge demand for these products over time. And the Congress through the SECURE Act, we've had bipartisan passing up secure access has actually progressed workplace retirement planning solutions for retirees. So the tailwind in multiple aspects continues to add in-plan guarantees in.

We received $600 million of inflows from Alliance -- from BlackRock last year. We're going to get $250 million in the second quarter. So that's going to be lumpy in size, but this is very early innings. And in the future, it's just a brand-new market for us. For example, today, when we sell individual annuities, you have to go through an adviser because really, it's for mass affluent clients that leverage advisers.

Going forward, if in-plan guarantees can be a bigger part of 401(k) solutions, it opens us up to the middle market client potentially. And that's a brand-new market on top of the individual market that we have today. So we're super excited about this market, but it aligns well with the mission of providing income solutions and retirees. And we believe with the partnerships we have now and which we will continue to expand, we're in a position to win.

And would you say that this particular business would be a bigger piece of your overall business mix in your view?

Yes. Over time, I mean, right, it's not -- we don't need any of this business for our 2027 financial targets, to be clear, it's not embedded in that. But post 2027 as part of our strategy, it's certainly something that we want to accelerate and have a bigger size, be a bigger part of.

Sure. No, that's certainly helpful. So maybe pivot a little bit to the wealth management side. You're seeing some very strong net inflows kind of like you said before. And adviser productivity is also increasing by about high single digit. So in -- as far as you're attracting advisers, as we're looking at the next step, in scaling the business. What are the key aspects that allows you to really win in an increasingly competitive environment here because it feels like everyone is really focused on this segment as well.

Yes. So taking a step back, though, we're a top 10 independent broker-dealer in the United States. We have 4,500 Equitable advisers, and we've focused on increasing productivity of that group over time. So we feel as though we're at size there.

You've seen that come through in terms of results. When we IPO-ed in 2018, we had $40 billion in assets under administration, thanks to organic growth, but also equity markets, we're over $100 billion today. That wealth management business had a 12% organic growth rate over the last 12 months. That's best-in-class by some measures in terms of organic growth. Why? Because we're offering both retirement solutions and wealth management solutions, and they're benefiting from the tailwind in both of those markets as well.

As far as growth going forward in that market, we're really excited. Early this year, we had the Head of Ameriprise's experienced hire program come to Equitable, and he's now going to build an experienced hire program for us that's more competitive in the marketplace. We view experienced hires as something in between of organic and inorganic growth. It's a little bit of a sweet spot for us. And having that capability coming from someone that's done it for 10 years plus at a company like Ameriprise, we think is really going to accelerate our growth pattern in terms of the number of experienced hires we have.

This program has a short payback period and very good IRR. We'll also look at over time if bolt-on small acquisitions make sense. Those are very expensive in the wealth space, as many of you know. But if we can make them make sense and be accretive, that's something we'll look at as well. So we think the combination of our organic growth strategy, which as you see is executing well, now supplementing with experienced hires, we'll continue to accelerate our growth strategy there. And we always have the potential for bolt-on acquisitions if it makes sense.

Got it. No, that's very helpful. It's interesting, right, because I think last year, about half of your cash flow came from Investment Management and Wealth Management. And as we look at the additional initiatives and growth trajectories you have, I feel it should be confident that you can do more than half going forward. Is that right? I don't want to put words in your mouth.

Well, I think I said, as I said earlier, in 2027, just naturally with the increased investment moving from life to asset management with the increased investment in AllianceBernstein, that number is going to be 55% to 60% by 2027. And then as those businesses continue to grow, as AB continues to grow with its private credit capabilities, wealth management continues to accelerate growth, it should be a bigger portion over time.

Right. For sure. So maybe moving to the asset management side, right? Like you're currently 69% ownership of AllianceBernstein. On the earnings call, you talked about there's really no near-term plans to increase the stake. But are there any other M&A opportunities outside of AllianceBernstein that can expand your asset management footprint? Is that something you ever considered?

Sure. So at AllianceBernstein, we've increased our stake from 62% to 69%. So we bought 20 million units at $38.50. At this point in time, I don't see our stake changing materially at AllianceBernstein there. We do like having a public float at AllianceBernstein. The employees enjoy having it. That's how they're compensated. We can use that public float for acquisitions like we've previously done. And then we also benefit from allowing in buy side and sell side to do sum of the parts valuation there as well. So we like the stake where it is now, and I don't see that changing meaningfully here in the short term.

From an acquisition side at AllianceBernstein, we've built out a lot of the private capabilities that we need at AllianceBernstein to date on it. If you look, we have middle market lending, we have private placement, we have residential loans. We have commercial mortgages. We have NAB loans, and we have a private ABS team that we just joined. So we have a lot of the capabilities that we need today to support the liabilities that we have.

What we don't have, we don't have private equity, we don't have real estate equity and we don't have infrastructure. But those don't specifically meet the liability needs that we have anyway. So it's not really a core capability that we look to acquire. And anything that we did do at AllianceBernstein or even on the wealth management side, we look to be accretive on an earnings per share basis. So if we can grow either in private credit, increase our scale there or on wealth management, whether it be Equitable advisers or the private wealth business at Bernstein, we'd look for it to be accretive over time. But that's the areas of acquisitions for us that we look at.

Got it. No, that's certainly very helpful. So you mentioned private markets, right? This is something you've been putting a lot more emphasis on. Maybe like can you give us a little bit more details on the environment here and how you think Equitable's positioning will evolve over time just from that marketplace?

Sure. So the private market has expanded significantly by 2030, expected to be about almost $40 trillion. That ranges from asset classes like music royalties, aviation financing, but those are all things that fit the need for insurance companies. So a sticky liability -- those are sticky asset classes that we benefit from having the liquidity premium because we have sticky liabilities to go with it. So we think the combination of private credit and insurance is here to stay and the liabilities support them, at least from what Equitable underwrites as well.

But the flywheel model gives us an edge in acquiring those capabilities. If you look over time, we've expanded our capabilities in private credit through M&A. We've done that through the CarVal acquisition. We've done team lift-outs, the private ABS transaction that I talked about earlier. And then we've also moved into adjacent markets. So our middle market lending team created an NAB loan capability, and that's attracted third-party capital as well.

All this is a function of Equitable and the retirement business being able to see those capabilities at AllianceBernstein. So the CarVal team comes, they know they're getting $750 million of assets when they came over. We've deployed over $1 billion to them to date.

The private ABS team comes, they know they have assets day 1. the NAV loans are created, they know they have assets to support from Equitable. In addition now, AB is now really getting that third-party value in place that they're winning third-party mandates on some of those propositions as well from both insurance companies and other institutions as well. So it's a huge market. It's a growing market, and we think we have the capabilities and that flywheel really cements our positioning there.

For sure. So with the opportunities in the private market, obviously, some investors have voiced concerned for maybe the entire industry is growing too fast. Are there any areas within private markets that you feel you might have to either keep an eye out for or maybe to avoid completely? Just curious as your view on the risk aspect. office market?

Look, I think we're fortunate through our ownership of AllianceBernstein, we're able to partner very closely when we go into new asset classes like private credit. So we get first-hand view of the underwriting that occurs. That's very different than when if we just hired AllianceBernstein for a third-party mandate where you may have an IMA guidelines, but you're not getting a sense of who the teams are and the underwriting that occurs. So I think that gives us an edge in assessing risk within that.

That being said, I mean, Equitable still has a conservative posture towards this general account. We always stay on the higher-grade elements of private credit as well. We stay away from below investment grade. And below investment grade is an area that hasn't been tested very well, and that's an area that I would be cautious of.

Now private credit has a short history, and there's not a lot of losses in that short history. But over time, when credit events come, losses could emerge. And so I would stay away from the below investment-grade area, and that's not a place where Equitable really has an edge in.

Okay. No, that's very helpful there. So maybe if we think about the guidance, right, on free cash flow, first quarter earnings call, you indicated that given market volatility previously, your free cash flow might come in at the lower end of the 2025 guidance. But the market has kind of moved since and the rest of your business is obviously holding up very well. You talked about the path to $2 billion free cash flow generation. Curious as to what like your view on that $1.6 billion to $1.7 billion for 2025, specifically just for this year for now.

Sure. No, so we feel comfortable with the $1.6 billion to $1.7 billion guide. Markets have rebounded. The underlying assumption in the $1.6 billion to $1.7 billion guide that we gave this year is a 2% equity market assumption every quarter. So it looks like equities are coming back. So that brings us to even be more comfortable to $1.6 billion to $1.7 billion guide that we have there.

I think going forward, if equity markets deviated on the negative side, we also have levers in place. We have a big expense efficiency program as well. It's targeting $150 million by 2027. We've achieved about $100 million of that to date. So we have $50 million remaining that we have line of sight in, but we can easily accelerate that if needed to achieve our targets that we have.

We've also progressed quite well in deploying our private credit commitment to AllianceBernstein. We deployed about $14 billion of the $20 billion commitment. That picks up yield as well. So I think we have levers to manage in different environments. And as you've seen since our IPO, we're laser-focused on executing and hitting the financial targets that we put out to the market. And so we feel quite comfortable with that.

And with that, how about the expectation for alternative investment return? Obviously, second quarter will have some volatility due to what happened in the marketplace. But just curious about looking beyond second quarter, should we see a much smoother trend into the rest of the year for alternative investments?

Yes. So the past 2 quarters, we had about a 5% to 6% annualized return on VII. I'd expect that to be the same in the second quarter. Going forward, what's really going to drive it is transaction activity. We're starting to hear from some. You told me a little bit earlier, but really, it's -- whether it's the more IPOs, M&A and real estate transaction activity, will really get us back to that longer-term target of 8% to 12% going forward.

I think as the first half with uncertainty in the macro environment, we haven't seen much so far in the first half. But hopefully, as there's more certainty in the macro environment, that will be more certain going forward.

Got it. No, that's helpful. One other item would be the way we think about mortality, right? So you obviously have the RGA transaction coming up. But assuming that closes soon actually, what -- how should we think about just mortality in general? We've had some large mortality impacts previously. But as that transaction becomes history, should we just really think about a much smoother earnings from that perspective?

Sure. So we continue to see mortality being adverse in a few ways in our business. One, we have concentrated policies and larger face amounts and older ages. And so in the first quarter, we have seen -- we saw in the first quarter higher claims, and we saw that continue in the second quarter to date as well. So we're seeing some adverse mortality relative to our budget here in the second quarter.

Now we see also from the CDC data that the flu has lingered longer and came into April as well. So that may be a contributing factor to the higher mortality that we're seeing in the month so far in the quarter-to-date.

The second area that we're seeing is a little bit more unique. We did have a vendor issue that we looked at in our COLI business, that's small businesses, and that had claims of approximately $50 million for claims that happened out of period. So those are claims from prior periods that we went out and we found due to a vendor issue that we had.

And so now, we've identified and we'll have that as well. So in total, if you put that together, our latest forecast for Protection Solutions would be a loss of about $40 million for the second quarter.

Now the good news is we have the RGA transaction, and that's scheduled to close in the second quarter. So that will reduce 75% of the mortality volatility going forward. And we still feel good about the $1.6 billion to $1.7 billion cash generation that we laid out for the year.

No, that's good color. So maybe a last point on capital, right? So thinking beyond the reinsurance transaction, thinking beyond what just has happened in the market, you mentioned the potential for additional share repurchase above the $500 million. So curious about the progress on this. It feels like the balance sheet is incredibly strong in this environment, which leaves you more option for capital deployment it feels like. So maybe just curious your thoughts on that.

Sure. So with the RGA transaction, as I mentioned earlier, $2 billion of value that we created through that transaction. We deployed $800 million in the investment in AllianceBernstein, and we are committed to an additional $500 million of share buybacks on top of the 60% to 70% payout ratio. So that leaves about $1 billion remaining.

Now it's not a bad situation to have $1 billion of extra capital, especially in these volatile market environments. But as long as markets stabilize, our intent is to fully deploy the full $2 billion of proceeds. You'd expect us to look at some debt repayment. We'd also look at share buybacks on top of what we've already promised and investing into future growth is compelling for us, especially with the growth we see in the different markets we're in.

But more importantly, this allows us to be offense. If markets turned on us, we have a lot of capital, and we're sitting pretty good and to be offensive as well with that capital. But I'd expect a combination of debt repayment, share buybacks and investment for future growth as part of the remaining use of the proceeds.

So a pretty enviable position to be in?

Yes. Quite happy to be in this position rather than other positions you could be.

For sure. We have a couple more minutes left, so I'll leave questions on the floor, if there are any. I don't know -- if not, then, well, Robin, really appreciate your time here. It's certainly enlightening. So thank you very much.

Thanks very much for having me. Thank you, Bob.