Equitable targets $2B cash generation by 2027 through reinsurance deal

Key Highlights from Equitable Holdings’ Q2 2025 Earnings Call

Equitable Holdings (EQH) provided an in-depth look at its performance and future outlook during the second quarter of 2025. The company’s leadership emphasized strong momentum across key business segments, strategic initiatives, and a robust financial position.

Management Perspective

Mark Pearson, President and CEO, highlighted that the current quarter marks the halfway point of the company’s five-year planning period. He expressed satisfaction with the organic growth across various business lines and progress on strategic goals. A significant milestone was the completion of the Individual Life reinsurance transaction with RGA in July, which freed up over $2 billion in capital and reduced future earnings volatility.

Pearson pointed to growth opportunities in retirement, asset management, and wealth management, noting that the company ended the quarter with a record $1.1 trillion in assets under management and administration. He also mentioned that the company is on track for organic cash generation of $1.6 billion to $1.7 billion in 2025.

The CFO, Robin Matthew Raju, provided details on the financial results, stating that non-GAAP operating earnings were $352 million or $1.10 per share. Adjusted for notable items, the non-GAAP operating EPS would have been $1.41 per share. Raju also noted that the adjusted book value per share, excluding AOCI and with AB ownership stake at market value, was $40.89, representing an 11% year-over-year increase.

Segment Performance

Pearson outlined progress in different segments:

• Retirement businesses generated $1.9 billion in net inflows.
• Wealth Management reported $2 billion in advisory net inflows with a 12% trailing 12-month organic growth rate.
• AB experienced $6.7 billion in net outflows but returned to a net inflow in June.

The company plans to execute at least $500 million in incremental share repurchases and repay some debt before the end of the year.

Outlook and Guidance

Management reaffirmed its guidance for $1.6 billion to $1.7 billion in organic cash generation for 2025 and maintained the target to grow annual cash generation to $2 billion by 2027. Pearson emphasized that even after reinsuring 75% of its in-force individual life block, the company has a clear path to achieving the $2 billion target.

Raju stated that the company expects EPS growth to accelerate in the second half of 2025, supported by additional share repurchases and reduced mortality exposure.

Financial Results

Non-GAAP operating earnings stood at $352 million or $1.10 per share, with adjusted non-GAAP operating EPS at $1.41. Total assets under management and administration increased by 8% year-over-year to $1.1 trillion. The payout ratio was 74% of earnings, exceeding the 60% to 70% guidance range.

Retirement businesses delivered $1.9 billion in net inflows, while Wealth Management earnings rose 16% year-over-year, driven by strong advisory net inflows and a 12% trailing organic growth rate. AB's base fee rate remained stable, with the business expected to achieve a 33% margin in 2025. Private markets AUM grew to $77 billion, up 20% over the past year.

Raju provided a third-quarter baseline for Individual Retirement earnings of $220 million to $225 million, assuming normal markets and current segment reporting methodology.

Q&A Highlights

Analysts raised several questions during the call, including inquiries about earnings growth beyond the third quarter, spread sensitivity to Fed rate cuts, capital management post-extraordinary dividends, and confirmation on EPS growth trajectory.

Raju responded that the company views the third-quarter baseline as reasonable and expects continued momentum. He also noted that the general account is expected to grow, benefiting other parts of the business. Regarding spread sensitivity, he explained that RILA products are closely tied to the 10-year Treasury and corporate spreads.

On capital management, Raju confirmed that the company plans to execute $500 million in share buybacks in the second half of the year and will seek bolt-on opportunities that drive shareholder value. He also confirmed that EPS growth will improve in the second half of the year, with expectations of 12% to 15% growth in 2026 and further improvement in 2027.

Sentiment and Comparison

Analysts focused on the sustainability of earnings growth, capital deployment, and the impact of strategic transactions. Their tone was probing but balanced, seeking clarity on forward guidance and capital usage.

Management maintained a confident and forward-looking tone, emphasizing momentum, strong capital position, and accretive capital deployment. Pearson cited confidence in achieving 2027 financial targets.

Compared to the previous quarter, management’s tone was more upbeat regarding strategic execution and future growth, while analysts remained consistent in focusing on growth drivers and capital strategy.

Quarter-over-Quarter Changes

Guidance language shifted from caution around equity market volatility in Q1 to increased confidence in achieving targets, supported by the completion of the RGA reinsurance transaction in Q2. Analysts continued to probe on earnings growth sustainability, capital deployment, and segment performance, but the Q2 focus included more questions about the impact and deployment of freed capital from the RGA deal.

Management’s confidence increased, citing reduced mortality exposure and capital redeployment plans, while reiterating long-term targets. Key metric changes included a drop in non-GAAP operating earnings per share from $1.30 in Q1 to $1.10 in Q2, but with an adjusted EPS view reflecting one-time items. Assets under management and administration rose from $1 trillion to $1.1 trillion. Wealth Management organic growth and net inflows remained strong quarter-over-quarter.

Risks and Concerns

Elevated mortality claims and associated volatility were a key challenge, but management stated that mortality exposure has been reduced by 75% and markets have had a strong recovery. Fee-based earnings were pressured by lower average equity market levels during the second quarter. Notable one-time items included a third-party administrator issue causing late reporting of COLI claims, but Raju assured that all outstanding claims have now been identified.

Analysts raised concerns about the sustainability of spread and fee margins, competitive dynamics in the RILA market, and timing of capital deployment.

Final Takeaway

Equitable Holdings signaled increased confidence in its long-term growth prospects following the close of its Individual Life reinsurance transaction, which unlocked over $2 billion of capital and reduced earnings volatility. Management emphasized strong organic growth across retirement, wealth, and asset management segments, robust adviser productivity, and a return to net inflows in June at AB. The company remains on track for $1.6 billion to $1.7 billion in organic cash generation for 2025 and maintains its target of $2 billion by 2027, with additional share repurchases and debt reduction planned for the second half of the year. Management expects EPS growth to accelerate as freed capital is redeployed, mortality exposure is reduced, and equity market conditions improve, supporting confidence in achieving 2027 financial targets.