November 2, 2023

Retirement, wealth businesses help offset Equitable’s Q3 challenges

Success in Equitable Holdings Inc.’s retirement and wealth management businesses in the third quarter helped offset ongoing challenges in asset management.

Equitable’s retirement business brought in net flows of $1.5 billion during Q3, a record for the firm and a 5% increase over the same period in 2022. Wealth management added another $1.6 billion, representing 8% annualized organic growth. However, AllianceBernstein, Equitable’s investment management and research business, saw net outflows of $1.9 billion while active net flows remained flat.

Overall, Equitable reported quarterly net income of $1.1 billion, or $3.02 per share, a 75% increase over the year-ago period. Non-GAAP operating earnings were $413 million, a 7% increase year-over-year but down 6% from the previous quarter. Mark Pearson, Equitable’s president and CEO, attributed the dip from Q2 to lower alternative returns, elevated mortality and a higher tax rate.

Institutional pipeline ‘remains robust’

“While we were not immune to industry-wide outflows in the quarter, our retail channel delivered net inflows of $1.6 billion, and our institutional pipeline remains robust at $12.5 billion,” said Pearson, during a conference call to discuss the quarterly earnings results.

It was the second consecutive quarter that Equitable’s individual retirement division generated record net inflows, which Pearson attributed to demand for its spread-based registered index-linked annuity. Premiums of its flagship RILA reached $3.1 billion, up 37% YOY, while total premiums hit $5.4 billion, a 17% YOY increase.

The wealth management business grew thanks to a 2% increase in productivity from Equitable’s 4,100 financial advisors. Total assets under advisement grew 16% YOY to $79.4 billion.

The firm has reaped benefits from the highest interest rate environment in more than 15 years. Interest rates are not only helping drive demand for products in individual retirement, but they are creating better product margins, higher new money yields and increased cash sweep fees, Pearson said.

The company is also benefiting from an aging population, with an estimated 11,000 Americans turning 65 each day.

“The combination of higher interest rates and favorable demographic trends provides the best backdrop for growth we’ve seen in well over a decade,” Pearson said.

Equitable’s stock price was down more than 5% to $25.21 when markets closed Wednesday following the earnings call.

Ryan W. Neal has more than 14 years of experience as a reporter, including nine years covering the financial services industry. He formerly served as technology editor at Investment News.

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