Equitable(US:EQH)2023-05-06 14:23Financial Data and Key Metrics Changes - Non-GAAP operating earnings were $364 million or $0.96 per share, up 10% compared to the fourth quarter of 2022, but down 18% year-over-year due to market volatility and mortality claims [46][54] - Assets under management and administration ended at $864 billion, down 8% year-over-year but up 5% year-to-date [10][49] - The company returned $286 million to shareholders, including $214 million in share repurchases, resulting in a 63% payout ratio for the quarter [13][56] Business Line Data and Key Metrics Changes - Individual Retirement segment had $79 billion in assets under management, contributing approximately 38% of operating earnings for the quarter [19] - Wealth Management segment grew from approximately $40 billion of assets under administration at IPO to $76 billion today, contributing $32 million of operating earnings in Q1 [20] - Legacy segment, which includes capital-intensive fixed-rate variable annuities, represents about 12% of operating earnings, with a total account value of $22 billion [21][22] Market Data and Key Metrics Changes - The banking crisis that began on March 8th has impacted the financial sector, but the company maintains a strong liquidity position and a high-quality investment portfolio [30][32] - The company’s RBC ratio remains above target levels, indicating strong capital management [33][36] Company Strategy and Development Direction - The company is focusing on separating its capital-intensive legacy VA business from its core retirement business to enhance transparency and reduce risk [15][52] - The new Wealth Management segment is expected to drive growth, leveraging synergies from affiliated advisors and a holistic life planning advice model [18][23] - The company aims to continue improving its business mix towards higher-margin segments, with a target payout ratio of 55% to 65% [98][99] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating market volatility due to a strong balance sheet and diversified cash flow sources [58][60] - The company anticipates a normalization of mortality rates and expects to maintain its cash generation guidance of $1.3 billion for the year [65][74] Other Important Information - The introduction of the new LDTI accounting standards is expected to enhance transparency and align accounting with fair value management [14][52] - The company plans to increase its dividend to $0.22 per share, reflecting a commitment to returning capital to shareholders [51] Q&A Session Summary Question: Cash Position and Market Uncertainty - Management indicated that the $1.8 billion cash at the holding company provides a buffer during uncertain times and supports ongoing cash flow generation [63][65] Question: Business Relocation Progress - The Individual Retirement business has successfully transitioned to Arizona, with the Group Retirement business on track for completion this year [66][68] Question: Commercial Mortgage Loan Metrics - The company reported that less than 2% of its commercial mortgage loans are maturing in 2023, indicating a strong position in the portfolio [71] Question: Protection Business Mortality Losses - Management noted that mortality volatility is influenced by seasonal factors and COVID transitioning to an endemic state, but overall mortality has been in line with expectations [73][74] Question: Legacy Business Capital Allocation - The Legacy business has seen a significant reduction in capital requirements, running off at $2 billion to $3 billion per year, and is fully reserved [107] Question: RBC Generation and Dividend Capacity - The company expects to generate approximately 10 RBC points per quarter, with a focus on maintaining a strong capital position while managing dividend capacity [118]