Equitable Holdings: Improved Business Mix Should Reduce Market Sensitivity

Core Viewpoint - Equitable Holdings (EQH) has experienced a solid performance with a 31% gain over the past year, but a recent market sell-off has created an opportunity for investors as shares are now about 5% lower than the buy recommendation made in May [1] Financial Performance - In Q2, EQH reported earnings of $1.43, beating consensus by $0.03, with revenue of $3.5 billion, and a 20% increase in earnings year-over-year when excluding one-time items [1] - The company generated $2.3 billion in retirement net inflows during Q2, with spread products now accounting for approximately 50% of its assets under management (AUM) [1] Product Strategy - EQH is shifting towards less risky insurance products, reducing overall business risk and enabling more stable earnings [1][2] - The company is focused on earning a spread on investments versus payouts on annuities, benefiting from a favorable rate environment that has boosted sales [2] Segment Results - Individual retirement segment earned $236 million in Q2, a 23% increase in sales year-over-year, with account values rising 22% to $102 billion [3] - Group retirement saw a net inflow due to a $500 million partnership with BlackRock, with assets increasing by 12% to $39.3 billion [6] Alternative Investments - EQH's alternative investment portfolio has faced challenges, with a 2.6% loss in real estate equity, leading to a marked down portfolio [9] - Despite this, the company maintains a strong capital position with risk-based capital between 425-450%, and has paid a $400 million dividend to the holding company [10] Shareholder Returns - EQH is on track to return at least $1.4 billion to shareholders over the next year, with a projected capital return yield of 11.7-12% [10] - The company has reduced its share count by 8% over the past year, and raised its dividend to $0.24 from $0.22, maintaining a flat actual dividend cost compared to the previous year [10]