Equitable Holdings, Inc. Q3 FY2025 Earnings Call

Hello, and welcome to Equitable Holdings, Inc. Third Quarter Earnings Call. Please note that this call is being recorded. I would now like to hand the call over to Erik Bass, Head of Investor Relations. Please proceed.

Thank you. Good morning, and welcome to Equitable Holdings Third Quarter 2025 Earnings Call. Materials for today's call can be found on our website at ir.equitableholdings.com. Before we begin, I would like to note that some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. Our results may differ materially from those expressed in or indicated by such forward-looking statements. Please refer to the safe harbor language on Slide 2 of our presentation for additional information. Joining me on today's call are Mark Pearson, President and Chief Executive Officer of Equitable Holdings; Robin Raju, our Chief Financial Officer; Nick Lane, President of Equitable Financial; Seth Bernstein, AllianceBernstein's President and Chief Executive Officer; and Tom Simone, AllianceBernstein's Chief Financial Officer. During this call, we will be discussing certain financial measures that are not based on generally accepted accounting principles, also known as non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures and related definitions may be found in the Investor Relations portion of our website and in our earnings release, slide presentation and financial supplement. I will now turn the call over to Mark.

Good morning, and thank you for joining today's call. Equitable Holdings delivered solid third quarter results marked by continued organic growth momentum and increased earnings power across our businesses. We also allocated $1.5 billion of capital to drive shareholder value and future growth, successfully redeploying a large portion of the proceeds from our individual life reinsurance transaction with RGA. This includes approximately $200 million of investments to help accelerate growth in Asset and Wealth Management. Looking forward, our integrated business model positions us well to be a long-term winner in retirement, asset management and wealth management, and we remain confident in achieving each of our 2027 financial targets. On Slide 3, I'll provide a few highlights from the third quarter. Non-GAAP operating earnings were $455 million or $1.48 per share, down 6% year-over-year on a per share basis. Adjusting for notable items, non-GAAP operating EPS was $1.67, which is up 2% compared to the prior year. As expected, earnings rebounded from the first half of the year, helped by growth in each of our core businesses and the completion of the life reinsurance transaction. I'm also pleased that we saw only small impacts from our annual assumption review, validating our conservative approach to assumption setting. We ended the quarter with record assets under management of $1.1 trillion, up 4% sequentially, which bodes well for future growth in earnings. We will also see additional benefits from management actions to enhance yields in our investment portfolio and drive productivity savings. Organic growth momentum remains strong, supported by our flywheel business model. Our retirement businesses generated $1.1 billion of net flows during the quarter, driven by continued growth in RILA sales. As a reminder, flows tend to be lower in the third quarter due to seasonality in the K-12 teachers business, and we did not have any material institutional flows in the period. Wealth Management had another strong quarter with $2.2 billion of advisory net inflows, a 12% annualized growth rate. Adviser productivity increased 8% year-over-year. Turning to Asset Management. AB reported total net outflows of $2.3 billion, which includes $4 billion of low-fee assets transferred to RGA as part of the life reinsurance transaction. Excluding this, AB had net inflows of $1.7 billion, driven by the private wealth and institutional channels. Private markets assets increased 17% year-over-year to $80 billion and are on track to achieve AB's $90 billion to $100 billion target by 2027. Moving to capital deployment. We used $1.5 billion to drive shareholder value and make investments for future growth. During the quarter, we returned $757 million to shareholders, including $676 million of share repurchases. We completed most of our planned $500 million of incremental buybacks and expect our full year payout ratio to be at the upper end of our 60% to 70% target range. We also reduced outstanding debt by $500 million to manage our leverage ratio and give us more capital flexibility moving forward. Finally, we announced two strategic transactions that help scale our Wealth Management and AB Private Markets businesses. We are acquiring Stifel Independent Advisors, which has over 110 advisors and $9 billion of advisory assets. In addition, we are allocating $100 million to support AB's investment in FCA Re, an Asia-focused sidecar established by Fortitude Re and Carlyle. AB will become a key investment partner for Fortitude and initially manage $1.5 billion of private credit assets for FCA Re. I will discuss these transactions in more details in a minute, but they both offer attractive IRRs and are consistent with our strategy to scale adjacent businesses. Turning to Slide 4. We highlight our strategy to drive growth and create shareholder value. We are focused on three core growth businesses: Retirement, Asset Management and Wealth Management that have synergies and provide flywheel benefits. Participating in all three of these businesses allows us to capture the full retirement value chain. There are four key pillars to our strategy: number one, defend and grow our retirement and asset management businesses; secondly, scale our high-growth and high multiple wealth management and private markets businesses. Third, seed future growth by investing in high potential opportunities like annuities and 401(k) plans and emerging asset management markets. And finally, be a force for good and deliver on our mission to help our clients secure their financial well-being so they can live long and fulfilling lives. On the next two slides, I will provide a deeper dive into our strategy for scaling adjacent businesses. First, I will focus on our Wealth Management business, which is a key growth driver for the company. Having affiliated distribution also provides a significant competitive advantage for Equitable's retirement businesses. Wealth Management has strong growth momentum with $6.2 billion of year-to-date advisory net inflows. Adviser productivity is up 8% year-over-year and 24% since 2022. Earnings are on track to reach $200 million in 2025, two years ahead of plan. We are also allocating capital to enhance the strong organic growth momentum. We have increased our investment in experienced adviser recruiting, bringing in over $1.1 billion of recruited assets over the past 12 months. Earlier this year, we hired a new Head of Business Development to build out our platform, and we have a strong pipeline and expect to ramp up recruited AUA over time. As I mentioned earlier, we also recently announced the acquisition of Stifel Independent Advisors, which has over 110 advisors and $9 billion of AUM. Stifel's advisors have similar characteristics to Equitable's advisors, creating a nice cultural fit. There are also meaningful operational synergies. We expect the transaction to close in the first half of 2026 and forecast it to add about $10 million to Wealth Management earnings in 2027. This is a good example of the type of bolt-on acquisition we will look at to help scale our Wealth Management business at a reasonable cost. Looking forward, assuming normal markets, we forecast Wealth Management earnings to continue growing at a double-digit rate, driven by asset growth and further advisory productivity improvement. In addition, margins should expand over time as the business scales. I would also note that our business does not have significant exposure to lower short-term interest rates. Cash sweep income has accounted for only 15% of the segment's year-to-date earnings and 100 basis points of Fed rate cuts would reduce annual earnings by only about $15 million. Turning to Slide 6. I want to highlight some examples of how Equitable is deploying capital to support growth at AB. Having access to Equitable's balance sheet is a competitive advantage for AB relative to most traditional asset managers and the investments we make yield flywheel benefits across EQH. Our investments come in three primary forms: number one, allocations from Equitable's general account portfolio, which can be used to seed capital to launch new strategies or permanent capital to scale existing offerings. To date, we have deployed over $17 billion of our $20 billion commitment to AB's private markets platform. Number two, in addition, we support team lift-outs that bring new capabilities to AB. For example, in the past year, AB added private ABS and residential mortgage teams to expand its private markets offering, and Equitable was able to provide them with immediate capital to invest. Number three, finally, we help finance M&A or strategic investments, either by providing cash or issuing AB units. We did this with the acquisition of CarVal in 2022 and more recently with the investments in the Ruby Re and FCA Re sidecars. These sidecar investments highlight some of the unique synergies between AB and Equitable. AB leveraged Equitable's insurance expertise in the due diligence process, and both firms benefit from developing a strategic partnership with the sponsor. These investments also provide Equitable with exposure to new insurance markets such as pension risk transfer and Asia. AB has been able to leverage these investments to help deliver strong growth in private markets and third-party insurance, two key strategic focus areas for the company. Private markets AUM has grown at a 12% CAGR since 2022 and is on track to meet or exceed the $90 billion to $100 billion target by 2027. Third-party insurance general account AUM is up 36% since 2021, and AB has added six new mandates year-to-date. Stepping back, the recent actions we've taken to support the growth of AB and Wealth Management are good examples of us executing on our strategy and leveraging our unique flywheel benefits. I will now turn the call over to Robin to go through our financial results in more detail.

Thanks, Mark. Turning to Slide 7. I will provide some more detail on our third quarter results. On a consolidated basis, non-GAAP operating earnings were $455 million or $1.48 per share. We reported a GAAP net loss of $1.3 billion, primarily driven by a one-time impact from asset transfers at the closing of our individual life reinsurance transaction. There is an offsetting adjustment to AOCI. We had a few notable items in the quarter. First was a $36 million adjustment for July mortality experience, most of which was covered under our reinsurance agreement with RGA. The transaction had an effective date of April 1, so it covers claims in July. However, the reinsurance benefit is not reflected under U.S. GAAP as we did not close the transaction until July 31. Accordingly, there is a difference between our GAAP results and our cash results. Going forward, we expect to see significantly less volatility in our Life results, which are now reported in Corporate and Other. We also had $24 million of one-time expenses in Corporate and Other. Finally, we had a $4 million benefit in Wealth Management from a reserve release, which reflects better emerging experience on the loans we've made to recruit experienced advisors. Our annual assumption review had a $1 million positive net impact on operating earnings. As Mark mentioned earlier, this validates our conservative approach to assumption setting. Adjusting for these items, non-GAAP operating earnings per share was $1.67, up 2% year-over-year. Total assets under management and administration rose 7% year-over-year to $1.1 trillion, which bodes well for future earnings growth. In addition, we'll see further benefits from expense initiatives that will contribute to the bottom line over time. Adjusted book value per share ex AOCI and with AB at market value was $33.59. In our view, this is more meaningful than reported book value per share, which reflects our AB holding at book value. On this basis, our adjusted debt-to-capital ratio was 24.5%. On Slide 8, I'll provide some more details on our segment level earnings drivers. Starting with Retirement. Earnings declined from the third quarter 2024, but increased 9% sequentially after adjusting for notable items in both periods. Net interest margin, or NIM, was down year-over-year due to a lower level of market value adjustment gains and some spread compression as our pre-2020 RILA block runs off, but it did increase 4% sequentially. As discussed last quarter, we do not assume any benefit from MBAs going forward, and we expect spread pressure from the older RILA block to be minimal by mid-2026. NIM should continue to increase from the third quarter level, driven by growth in general account assets. We also saw fee-based revenues increase 4% from the second quarter due to strong equity markets. Separate account balances ended the quarter 4% higher, which bodes well for further growth in fee revenues in the fourth quarter. Growth in revenues was partially offset by higher DAC amortization, which reflects growth in the block and increased surrenders. This quarter is a good baseline for amortization moving forward, and we expect it to increase by approximately $4 million per quarter. Moving to Asset Management. AB delivered a strong quarter with earnings up 39% year-over-year. This includes the benefit of increasing our ownership from 62% to 69%. Fee revenue increased 6% sequentially, driven by favorable markets and a higher base fee rate. The adjusted margin improved 290 basis points year-over-year to 34.2% and is expected to come in above the 33% target for the full year. AUM ended the third quarter at a record $860 billion, which should support future growth in base fees, and we now project full year performance fees of $130 million to $155 million, up from our prior forecast of $110 million to $130 million. Turning to Wealth Management. We delivered strong earnings and net flows. Earnings increased 12% year-over-year, excluding the reserve release, and 12% annualized organic growth compares very favorably with peers. We expect segment earnings to continue growing at a double-digit rate moving forward. Finally, results in Corporate and Other were negatively affected by the notable items I mentioned earlier and adverse mortality throughout the quarter. We expect to see much more muted impact from mortality in future periods as we get the full benefit of the life reinsurance transaction. We will also see incremental benefits from our expense efficiency initiatives. Our alternatives portfolio generated an 8% annualized return in the quarter, consistent with our 8% to 12% long-term expectation. This exceeded our guidance of a 6% return due to a gain on a strategic investment. We expect returns at the low end of our 8% to 12% target range again in the fourth quarter. Lastly, the consolidated tax rate for the quarter was 17%, below our normal expectation of 20% due to some favorable items. We now expect the full year consolidated tax rate to be in the high teens. Looking to 2026, we still expect the full year overall company tax rate to go back to 20%. Putting it all together, we see good momentum heading into the fourth quarter and remain focused on controlling what we can control to drive higher earnings in the future.

Thanks, Robin. Equitable has healthy organic growth momentum and higher assets under management are driving increased earnings power across our retirement, Asset Management, and Wealth Management businesses. I'm also pleased with the progress we've made in redeploying the $2 billion of proceeds from the life reinsurance transaction to drive shareholder value and make strategic growth investments to scale our Wealth Management and AB private markets businesses. Looking forward, we expect EPS growth to accelerate and remain confident in achieving our 2027 financial targets. We will now open the line for your questions.

Your first question comes from the line of Suneet Kamath from Jefferies.

I wanted to start with private credit. And if we take a step back, we have some people outside the insurance industry pointing fingers at the insurance industry, some folks within the industry saying we're fine. So I wanted to get your perspectives on two things. One, what your view of the environment is? And I guess the bigger question is, as you start to add private credit assets, can you talk about the process that you go through with CarVal, just to understand what the requirements and criteria are, whether you want to talk about ratings or who rates the securities? Just want to get some color on the background there.

Sure, thanks for the question. Regarding the broader environment, I'll let Suneet touch on that. At Equitable Holdings, we believe that private credit and broader credit are good asset classes for our clients and investors, and we aim to be compensated for the risks we take. Specifically for Equitable's general account, we have stable liabilities where it's important to assume some liquidity risk, making private credit an appealing option. We invest in investment-grade assets and benefit from a liquidity premium. Regarding ratings, approximately 90% of our fixed maturity portfolio is rated by at least one of the major rating agencies, with 8% rated by DBRS or Kroll and 2% rated only by NAIC. We have $200 million rated by Egan-Jones, primarily in our middle-market lending portfolio, which represents less than 20 basis points of our total portfolio. It's important to note that ratings are merely an output; we focus on the underwriting capabilities of our general account team and AllianceBernstein. This direct access to underwriting is a significant advantage for us. We first ensure we are comfortable with the portfolio underwriting for the risks taken, followed by obtaining the rating. Overall, our general account consists of about 98% investment-grade assets with an A2 rating, which reflects the strong underwriting process carried out between Equitable and AllianceBernstein. We still see private credit as an attractive asset class even in the current environment. However, both private and public credit do involve risks, and we want to effectively manage those risks while ensuring appropriate compensation for our shareholders. We are confident in our current position at Equitable's general account. I’ll now pass it to Seth to discuss AllianceBernstein and broader credit, along with CarVal.

Okay. Thank you. And Suneet, let me just make the broader statement, which is as we look at our private credit businesses, of which CarVal is one of several, our overall investment performance, including recent results, has been as expected or better. We've seen pretty strong results across the board, certainly recovering, particularly in commercial real estate. But I would say generally that given the amount of money that's moved into private credit, we've certainly seen some reduction in strength of the covenant structures, and it's clear that people are reaching for risks in what has been a very strong demand market. That being said, we stay very close to home in the risks we underwrite, whether at CarVal or our middle-market lending business. And those processes are bottoms-up due diligence intensive and highly negotiated structures, which to date have protected us pretty well. We've been pretty prudent at stepping aside where we think the terms and the structure or the management team are not giving us the visibility that we would think is essential for us to take a favorable decision in that regard. So yes, there are signs of exuberance. And obviously, there have been indications of fraud, at least in two cases that are out there. But we think we're well protected, and we're comfortable with the positions we have, both in the general account of Equitable, but also more broadly for our third-party clients.

Okay. My second question is on the RILA market. And I know about half of your sales are somewhat protected given Equitable Advisors and some of the P&C companies that you sell through. But I wanted to focus on the other half and where I think there's probably more competition. And I just wanted you to talk to maybe two things. One, how are you differentiated in that other half? And then second, are you seeing anything in terms of terms and conditions that start to make you a little bit worried about aggressive features, things that we saw in the kind of the mid-2000s. Just want to make sure that doesn't kind of creep up on us.

Great. Thanks, Suneet. This is Nick. As you highlighted, first, we do see continued strong demand for RILAs across the space, driven by the demographics and this macro uncertainty, and that resonates across all channels. As Mark highlighted, overall RILA sales were up 7%, another record high for us in the quarter. We think our flywheel gives us a sustainable durable edge in three ways across the different markets. One, we generate attractive yields through AB. The second, as you highlighted, which is we have our privileged distribution through Equitable Advisors, but we have a track record as a pioneer, having been the first to launch this product over a decade ago and continue to deliver on the value proposition, consistent stories and the relationships with over 15,000 advisors in the third-party space. And then finally, we have the scale given our wholesaler footprint, our number one position. When we look at how we are continuing to evolve in the market, we have a successful track record of innovation that's really anchored both from the insights we get from Equitable Advisors that we translate on consumer need to other markets as well as anchoring our products in our economic model that ensures we deliver attractive returns. So our focus has been on prudent innovation relative to both within the segments in RILA's, we were the first to launch dual direction. These are new segments that tap into different needs as well as new versions that open up new markets. For example, in August, we launched our SCS Premier product, which allows consumers to pay a fee for a higher cap, which is fitting a new need that others aren't looking at. So I would say going forward, we believe we're in a privileged position to capture a disproportionate share of the value being created in this fast-growing market.

Your next question comes from the line of Tom Gallagher of Evercore ISI.

First question, Robin, aside from the $35 million one-time adjustment for mortality, you noted that the underlying mortality experience was also unfavorable. Can you provide details on how much the underlying mortality experience fell short of your expectations in the quarter and why you're confident that it should normalize moving forward? You mentioned expecting less volatility. Could you elaborate on what factors contributed to this quarter's results and why you're assured of a normalization?

Sure. Thanks, Tom. So we did call out about $36 million or $0.12 per share as a notable item for July mortality experience. And this is to reflect economic benefit from the reinsurance transaction that was not reflected in the GAAP results. Mortality was a bit elevated in August and September and broader across the whole quarter, we saw higher severity in the quarter as it relates to mortality. But our retained experience, which is net after the benefit of the RGA transaction was only about $10 million worse than expected for the months of August and September. So while it did weigh on earnings for Corporate and Other, the impact was relatively modest, underscoring the benefit of the reinsurance transaction. So we don't expect it to be highly volatile like it was previously going forward that we have RGA in place.

That seems fairly modest. Seth, my follow-up question is about capital. I heard your comment regarding a $500 million HoldCo target, but currently, you have $800 million. Historically, you maintained a significant buffer at the holding company of over $2 billion. However, things have changed now as you've made considerable improvements in cash flow outside of the insurance entities. Is $800 million a suitable level? I understand you have a $500 million target, but should we expect that you will maintain some buffer above that? Is $800 million reasonable to consider as a base case? Additionally, how much is remaining from the RGA deal? Is it around $300 million that you would have in addition to the normal cash flow?

Sure, Tom. Our cash flow position is very solid. When we went public, only 17% of our cash flows came from asset and wealth businesses, and now it's over 50%. This shift reflects our strategy to grow these areas as we capture a larger share of the overall operations at Equitable Holdings. For the HoldCo, we are targeting $500 million. While we may want slightly more to manage volatility in our results, I wouldn't suggest aiming for a target higher than $500 million. We will always keep some extra to address any cash flow needs, such as interest expenses or the timing of upstreams from the holding company. Regarding the RGA transaction, we’re pleased to have finalized it effective July 31, with a total value of $2 billion. We're using this value to transition our business away from long-term, highly volatile life insurance to faster-growing asset and wealth businesses. In this quarter, we invested about $800 million to increase our stake in AllianceBernstein from 62% to 69%. We also executed $500 million in incremental share buybacks on top of our existing 60% to 70%. This will support our future EPS growth. Additionally, we reduced our debt by $500 million and invested around $200 million to expand our wealth management business through the Stifel acquisition, which added 110 advisors and $9 billion in AUM and AUA. This is beneficial for our growth in wealth management moving forward, and we will continue to invest in sidecars to enhance AB's private credit business. This accounts for the $2 billion of proceeds, and we have roughly $300 million remaining that we plan to deploy in due time, either towards growth investments or further share buybacks depending on market conditions.

Your next question comes from the line of Ryan Krueger of KBW.

I think you mentioned a $10 million unfavorable mortality in August and September that affected the Corporate segment. Was there anything else you would consider unusual this quarter when you reported a $98 million loss? It seems there was a $10 million mortality impact. Is there anything else you would highlight that might have made this situation worse than usual?

Nothing else I would call out. But look, at Corporate and Other, there's always a little bit of a noise. And we will provide earnings guidance for Corporate and Other next quarter as we discuss our 2026 outlook. But you should expect the quarterly loss to be smaller than the $100 million per quarter that we had guided to prior to the resegmentation.

Okay. Got it. And then can you go into the sidecar strategy a little bit more in terms of investing in terms of AD investing in third-party sidecars? You've done a few things now. Do you see this as something you'll continue to do beyond what you've already done? Or is that most of what you think you'll do?

Well, let me begin. This is Seth Bernstein. We have announced two initiatives so far and are in discussions with others. However, we have a limit on what we would consider, depending on the opportunities that arise. We are very aware of the overall risk we are willing to take on the balance sheet regarding insurance risk. We work closely with Equitable, utilizing their extensive underwriting expertise, which we lack in-house, along with external consultants to assess these opportunities. I believe this will remain a key aspect of private credit markets, particularly due to life insurers' need for capital to grow their businesses in a cost-effective manner. It has been a beneficial way for us to allocate resources and strengthen client relationships. However, we do have a limit on the extent of our involvement. Robin, do you have any insights from the Equitable perspective?

Well, from an EQH perspective, sidecars fit quite well into the flywheel. We can underwrite insurance liabilities and AB can invest in private credit. Just to double-click a little bit, where we've invested so far, if you look at the RGA sidecar Ruby Re, we're getting into an asset-intensive sidecar, PRT liabilities. Those are liabilities that Equitable is not directly in, but can help underwrite the AB team and AB can invest and leverage their private credit capabilities. And then if you look at the FCA sidecar, well, that's now an international market, Asia-based liabilities. We can help underwrite and again, leveraging AB's private credit capabilities. So as we look at these opportunities, we want to make sure the equity stands by itself that it delivers good risk-adjusted IRRs. And then also it builds on the capabilities that we have at AllianceBernstein to grow our private markets business, which is now $80 billion and well on track to the $90 billion to $100 billion that we laid out at Investor Day. So we like the sidecar strategy. It leverages the flywheel, and we'll do more of them if we see that they fit the needs between Equitable and AB.

Your next question comes from the line of Joel Hurwitz of Dowling.

In retirement, the DAC amortization jumped $10 million quarter-over-quarter. Robin, you mentioned, I think, in your prepared remarks that surrenders was a driver. But I guess are surrenders getting worse than expectations? Because I thought that was the driver of the jump a year ago.

Yes, that's correct. Two factors are contributing to the higher DAC amortization that I mentioned: increased sales growth, which we need to capitalize and amortize, and a rise in surrenders that we are experiencing. I mentioned this during the call, and Nick can provide further details on it as well.

Yes. So just on overall flows, as a reminder, our Retirement segment now encompasses both our Individual Retirement as well as our Group Retirement business lines. So breaking that down, first, within Individual Retirement, we achieved $1.4 billion of net flows, driven by $3.9 billion of RILA sales. In the last nine out of the last ten quarters, we've had record sales, so we continue to see momentum. Next, as was sort of highlighted in the previous remarks, this was partially offset by our expected seasonal outflows in group retirement, which is comprised of our tax-exempt institutional and our corporate business. In tax exempt, this is our teachers business. We experienced modest outflows consistent with seasonal expectations given that teachers paused contributions during the summer months. As a reminder, this is where we have our 1,200 advisors that work with close to 900,000 educators and school districts on supplemental retirement plans. We would expect this line to continue to achieve single-digit growth with strong ROAs and be positive for the year. Institutional, we didn't have any material flows in the third quarter. However, we've gathered over $800 million in assets year-to-date. And then finally, in our corporate business, this is our legacy 401(k) lower margin that's sort of been in structural runoff. We would remind you that 20% of the outflows are for retirement distributions and the remainder, we're capturing 50% given our flywheel model through Equitable advisors. So looking forward in the retirement business, we expect to continue to generate strong flows supporting the future growth of our earnings and cash flow.

Although we did experience some surrenders, the actual surrender rate did not increase. The improvement was primarily due to higher market conditions, leading to overall higher account values. Therefore, the surrender rate itself remained stable.

Got it. That's helpful. And then, Nick, just following up on I guess, institutional, any expectations for Q4? And maybe can you comment on expectations for the sales of the fixed annuity product that you launched?

We remain optimistic about the long-term growth potential in the institutional market, which encompasses an $8 trillion defined contribution market. The addressable market for in-plan annuities is estimated to be between $400 billion and $600 billion in the long run. We're still in the initial stages of this opportunity. We have the necessary policy support thanks to regulatory changes from the SECURE Act, as well as the products and partnerships with target date funds and record keepers. We are actively engaging with plan sponsors and are encouraged by the momentum, having secured over $800 million since the launch of our BlackRock partnership last year. Looking ahead, we believe we are well-positioned with a first-mover advantage, complemented by our expertise in product design and our partnership with AB, which has substantial experience in this space. This collaboration is helping us establish a track record that we anticipate will attract other market participants as they begin to explore these solutions. For the upcoming quarter, we do not foresee significant sales, as our visibility on transfers typically comes about 30 to 60 days in advance. However, we do have a strong pipeline for 2026.

Your next question comes from the line of Alex Scott of Barclays.

I just wanted to make sure I had it clear on sort of the movement in HoldCo liquidity. It sounded like there's still some cash being taken up. So just wanted to see if you could walk us through like what does that look like on more of a pro forma basis for what you're expecting in 4Q? And if the higher sort of incremental share repurchases are more complete at this point? And how would you stack up like the set of priorities for potentially deploying more?

We finished the quarter with $800 million in the HoldCo. A chart on Slide 9 of the presentation shows the movement from last quarter to this one, detailing subsidiary dividends, capital return, debt tender, preferred shares, and some interest expenses. In the fourth quarter, we anticipate continued upstream contributions from both our Arizona insurance entity and our wealth management business, as well as from our asset management contracts, which should total around $700 million. Additionally, we expect capital return and interest expenses in the quarter, likely bringing our HoldCo cash above $1 billion by the end. Looking ahead to next year, we'll provide guidance on our cash flows, but we remain committed to a payout ratio of 60% to 70%. We also intend to pursue appealing bolt-on opportunities to support business growth, similar to what we achieved this quarter.

Sure. First, as we hire, we're excited by the Stifel transaction. These are high-quality advisors that are a strong cultural fit. And we see the opportunity for them to continue to accelerate the growth of their practices on our platform. As Mark highlighted, with 110 advisors, $9 billion of AUA, this is a good example of the bolt-on acquisitions where we're deploying capital to augment our strong organic growth as we continue to build scale. Looking forward, we see continued momentum in our underlying organic growth drivers. We're one of the few in the industry that continues to bring in new advisors or new talents into the industry, which allows us to be disciplined in our experienced hire efforts. So we think we're well positioned to meet this growing demand for advice and are very encouraged with the momentum that we have.

Your next question comes from the line of Jimmy Bhullar of JPMorgan.

First, I just had a quick follow-up question for Nick around your comments on competition in the RILA market. I'm not sure I missed what you said, but I realize you guys have a unique distribution and obviously scale in the product line as well. But the market is a lot more crowded than it was a few years ago, and some of your competitors have alluded to an increase in competition. So what is it that you're seeing competitors do in the market? And are you seeing any that are offering maybe overly generous terms and conditions? Or is it just that there are more companies and it gets harder to sell as a result?

Yes. So obviously, as you mentioned, the competitive landscape has changed since we pioneered the product a decade ago with the majority of carriers now having launched the product. We're very mindful of competitive trends on pricing. Usually, new entrants offer a teaser rate and they revert back because it's not sustainable. We remain focused on profitable growth. As the market leader with a durable edge, we're continuing to benefit from that growing pie as more advisors and consumers become familiar with the value of buffered annuities as an asset class in their portfolio. I'd highlight over the last three years, our RILA sales have almost doubled, and we've produced record sales in nine of the last ten quarters. So we continue to focus on, I would say, innovation anchored in our economic model, and you'll see us delivering, I would say, sustainable growth within that market.

And then just maybe on Individual Life. Obviously, your exposure going forward to the block is going to decline given the reinsurance contract. But if you think about the underlying policies, margins have deteriorated over time, and they've been especially weak the last few years. And do you view that as more of an aberration and just normal volatility in the business? Or is there something about the type of policies or terms in the block that are pressing results in recent years that might be more sustainable?

Sure. So when we think about the Individual Life business, let's just take a high level where we're focused is on Equitable Advisors. And the reason being is we don't find the third-party businesses being attractive. And a lot of the volatility we see from the results was a function of third-party sales pre-global financial crisis that had very high face amounts and had a low ROE on it. And that's why we did the RGA transaction. It took a 5% ROE business and reinvested it in higher growth businesses for Equitable to drive our strategy going forward. We are perfectly economically reserved. We manage the business on an economic basis. So the reserves are all good. It's there is some noise in the GAAP accounting with volatility. And part of the reason we did the RGA transaction was to reduce that volatility going forward. But we don't see anything else other than volatility at this time. They are older age policies, high face amounts. So if someone dies, if they don't die this year, it's likely they're going to die soon, and then you're going to see that volatility come in. So as a result, we feel good of where we set our reserves economically, and we feel very good about the RGA transaction because this helps accelerate our strategy into these faster-growing businesses.

Your next question comes from the line of Elyse Greenspan of Wells Fargo.

My first question is on the $300 million, I guess, the capital left from the RGA deal, right, that you just haven't fully earmarked. How do we think about you guys balancing using that right for M&A versus buyback? And will you just, I guess, make the decision if it goes to incremental buyback once you kind of get through what you've already outlined as the extra buyback?

Sure. So I just think of the $300 million, I mean, we're not going to be tracking it going forward. It's going to be returned in normal course of business as part of our 60% to 70% payout ratio. So if you see us at the high end of the payout ratio, it may be because of some of the $300 million, but I wouldn't anchor on the $300 million so much as we have excess capital in the system, so we can do both. We can return capital to shareholders and do bolt-on acquisitions, invest in sidecars to fuel growth for our business going forward. We want to drive earnings growth in the business, and we want to drive EPS accretion. So we have the ability to do both because of our unique business model.

And then you guys had last said you were in the middle of that 12% to 15% EPS CAGR. That's where you thought you would be, right, with the financial plan. Is that still where we sit today post Q3?

Yes, we still feel comfortable with the 12% to 15% in the middle of the range as part of our 2027 target. We feel comfortable with all of our 2027 targets, to be frank, the $2 billion of cash flows, we can see the visibility on that. We're in the $1.6 billion to $1.7 billion this year. That will go up next year, and we're on track for the $2 billion. You can see since our Investor Day, we're well on track to the high end of the payout ratio of 60% to 70%, where we were below on the EPS growth. If you normalize as of last quarter, we showed we're at 11%. We'll continue to hold ourselves accountable, and we see the benefit of record AUM at $1.1 trillion, organic growth coming in through all of our businesses, expense initiatives, investment initiatives, all will come through to support the 12% to 15% growth going forward in addition to the additional buybacks, which help reduce our share count. So we feel quite comfortable with the 12% to 15% target.

Your next question comes from the line of Jack Matten of BMO Capital Markets.

I have a question regarding the spread lending business. Could you elaborate on the growth opportunities in that area? How significant do you believe that business could become for Equitable? Additionally, what are your thoughts on the current market conditions?

Sure. So we launched this FABN business specifically in 2020. We issued about $4.5 billion so far year-to-date, and it's about $10 billion in total. We have a lot of capacity to continue to grow that business. This business directly benefits again from the flywheel as we can benefit the strength of Equitable and having a strong rating, borrow at a low cost of funds and take that and invest it at attractive risk-adjusted yields at AllianceBernstein. So it's really a function of the flywheel. And the FABN business is just a secondary benefit of the growth in our RILA business, as Nick spoke about earlier. As our general account continues to grow, our RILA sales continue to grow, attract more customers, it gives us more capacity to do FABN as long as the returns are there. So we'll continue to be a benchmark issuer in the market, but it's a function of our overall growth strategy that helps drive our ability to have FABN.

Got it. And then just a follow-up on your Bermuda entity. I know you executed a large transaction earlier this year, but just wondering if there's any thoughts or any update on your thoughts around further transactions, whether it's in-force flow reinsurance or down the line maybe third-party deals? And kind of over what time frame do you expect to do more with that entity?

Yes, we're very excited about establishing our Bermuda entity and grateful to our team there for their support. We have personnel on the island currently, and we plan to expand our presence over the next few years. This year, we completed our first in-force transaction on the group side, which serves as a tool for our capital management. We are considering flow reinsurance for 2026 and will explore further growth opportunities after 2027, possibly involving third-party involvement or broader markets. This framework aligns well with our economic strategy and the regulatory environment in Bermuda, which supports our internal cash flow management. We're pleased to have this capability and will utilize it as part of our strategy.

Your next question comes from the line of Tracy Benguigui of Wolfe Research.

Very basic question. So when AB partnered with RGA to create the Ruby Re, I was thinking that makes sense since RGA doesn't have real asset management capabilities. But turning to FCA Re, Fortitude Re has asset management capabilities with Carlyle. And on the Fortitude Re press release, they said the vehicle should add $10 billion of fee earnings AUM to Carlyle. So could you add some color on how AB won that mandate for private alternative management and where essentially that is outsourced? And what is the related AUM?

Let me try and answer that. This is Seth Bernstein. We want it because we have an existing relationship with Fortitude and know one another pretty well. And they approached us as they were looking for raising capital for this particular vehicle. And we were prepared to, just given the quality of the insurance risk they were taking, the market, particularly attractive market for us given our broader reach within Asia and our desire to grow our insurance activities in that region. And the result is that we believe for the amount of money we put in, we will raise, I think, about $1.5 billion of incremental private alternatives to manage for them in areas that are complementary, I believe, to what Carlyle already does for them.

Okay. Awesome. And then when you did the Ruby Re deal and the enhanced relationship with RGA, do you see this relationship with Fortitude Re maybe enhancing future risk transfer deal with that partner?

I'm sorry, can you ask the question again?

Okay. So when you created the Ruby Re deal with RGA, that enhanced your relationship with RGA. And I'm just curious, given this deal with Fortitude Re as you're looking to optimize your blocks, right now, you still have New York legacy VA. And I'm wondering if perhaps this could enhance your relationship with Fortitude Re.

Yes, we evaluate these individually. We have completed major block deals at Equitable, including the legacy VA transaction and the largest life reinsurance transaction in the industry. Currently, we are focused on expanding different business lines, and we view sidecars as a means to grow AB's private credit business while achieving solid returns on our equity investments. Therefore, I wouldn’t assume that our sidecar investments will lead to future reinsurance agreements with any partner. If we decide to pursue reinsurance, we will certainly consider all partners within the industry to secure the best returns for our shareholders.

Thank you. We have reached the end of our Q&A session and the end of our session for today. Thank you so much for attending today's call. You may now disconnect. Goodbye.