Equitable Holdings, Inc. 2024 Q2 10-Q Summary
Business Context and Reporting Period
This summary covers the quarterly period ended June 30, 2024, for Equitable Holdings, Inc. (EQH), a diversified financial services organization. The company operates through six reportable segments: Individual Retirement, Group Retirement, Asset Management, Protection Solutions, Wealth Management, and Legacy. Effective April 1, 2024, the company renamed its Investment Management and Research segment to Asset Management following the completion of a joint venture with Societe Generale to create Bernstein, resulting in the deconsolidation of the Bernstein Research Services business.
Key Financial Metrics (Six Months Ended June 30, 2024)
| Metric | 2024 (YTD) | 2023 (YTD) |
|---|---|---|
| Total Revenues | $5,740 million | $4,734 million |
| Net Income (Loss) | $782 million | $1,097 million |
| Net Income Attributable to Holdings | $542 million | $936 million |
| Net Income Available to Common Shareholders | $502 million | $896 million |
| Diluted EPS (Common) | $1.52 | $2.49 |
| Non-GAAP Operating Earnings | $984 million | $805 million |
| Net Investment Income | $2,385 million | $2,026 million |
| Net Derivative Gains (Losses) | ($1,584 million) | ($1,758 million) |
| Total Assets | $287,769 million | $276,814 million |
| Cash and Cash Equivalents | $9,684 million | $8,239 million |
| Long-Term Debt | $3,830 million | $3,820 million |
Material Changes vs. Prior Period
- Net Income Decline: Net income attributable to Holdings decreased by $394 million (42%) year-over-year. This was primarily driven by a $1.2 billion increase in income tax expense due to a $990 million release of the deferred tax valuation allowance in the prior year (2023) which did not recur in 2024.
- Revenue Growth: Total revenues increased by $1,006 million (21%), driven by a $385 million increase in fee-type revenue (including an $82 million gain on the sale of Bernstein Research Services) and a $359 million increase in net investment income.
- Derivative Volatility: Net derivative losses improved (decreased) by $174 million compared to the prior year, attributed to lower equity market appreciation in the first half of 2024 compared to 2023.
- Operating Earnings Growth: Non-GAAP Operating Earnings increased by $179 million (22%) to $984 million, reflecting underlying business growth in fee-type revenue and investment income, excluding market volatility and tax adjustments.
- Segment Performance:
- Individual Retirement: Operating earnings increased $28 million to $462 million, driven by higher net investment income and fee-type revenue.
- Protection Solutions: Operating earnings improved significantly from a loss of $11 million to a profit of $108 million, primarily due to lower net mortality and higher fee-type revenue.
- Asset Management: Operating earnings increased $9 million to $207 million, supported by higher average Assets Under Management (AUM).
Guidance, Outlook, and Risks
- Market Sensitivity: The company's results remain highly sensitive to equity market performance and interest rate movements due to its variable annuity products with guaranteed minimum benefits (GMxB). Hedging programs are in place to mitigate these risks but contribute to net income volatility.
- Regulatory Environment: The company is monitoring new SEC climate-related disclosure rules (currently stayed pending litigation) and Department of Labor fiduciary rule changes (also stayed pending litigation). Regulatory capital requirements for CLOs and asset-backed securities are also under review by the NAIC.
- Liquidity and Capital: The company maintains sufficient liquidity to meet obligations. Holdings has approximately $958 million remaining in its share repurchase program. The company continues to manage its capital position to support financial strength ratings (A/A+ from AM Best/S&P).
- Unusual Items: The $82 million gain on the sale of Bernstein Research Services is a non-recurring item included in operating earnings for the period. The company also recorded a $106 million legal expense related to cost of insurance litigation in the first half of 2024.
Key Facts for Investor Verification
- Tax Valuation Allowance: Verify the impact of the $990 million deferred tax valuation allowance release in 2023 on the year-over-year comparison of net income, as this is a non-recurring item that significantly inflated 2023 earnings.
- Non-GAAP Reconciliation: Review the reconciliation of Net Income to Non-GAAP Operating Earnings to understand the magnitude of adjustments related to variable annuity product features and investment gains/losses.
- Derivative Exposure: Assess the net derivative losses of $1.584 billion and the associated fair value changes in Market Risk Benefits (MRBs) to gauge exposure to market volatility.
- Share Repurchases: Confirm the remaining capacity of the share repurchase program ($958 million) and the volume of shares repurchased in Q2 (6.3 million shares).
- Segment Flows: Monitor net flows in the Individual Retirement and Asset Management segments, as these are key drivers of future fee income.