Equitable Holdings Inc

NYSE:EQH

Q1-2025 Earnings Call

[Operator]

Hello, and welcome to the Equitable Holdings First Quarter Earnings Call. [Operator Instructions] I would now like to turn the conference over to Eric Bass, Head of Investor Relations. You may begin.

[Erik Bass, executive]

Thank you. Good morning, and welcome to Equitable Holdings First 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; Tom Simioni, AllianceBernstein's Chief Financial Officer; and Onur Erzan, Head of AllianceBernstein's Global Client Group and Private Wealth business.

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 on 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.

[Mark Pearson, executive]

Good morning, and thank you for joining today's call. Given recent volatile markets, we recognize the first quarter may seem like a distant memory. Therefore, in addition to reviewing our results, we will also take a step back to focus on the powerful underlying growth drivers for our business and why investors should be confident in Equitable's ability to navigate periods of volatility and create long-term shareholder value.

Since our IPO in 2018, we have executed through periods of economic and market disruption, maintaining positive net flows and consistent capital return to shareholders even during the depths of the pandemic and the market sell-off in 2022. Equitable is operating from a position of strength given our robust balance sheet, integrated business model and differentiated distribution. Periods of uncertainty only heightened the need for retirement and investment advice. And I'm confident that if we stay connected to our clients and focus on controlling what we can control, we will deliver value for all our stakeholders.

Turning to Slide 3. Let me briefly cover our first quarter results. Non-GAAP operating earnings were $421 million, or $1.30 per share, down 7% year-over-year on a per share basis. Adjusting for notable items, non-GAAP operating EPS was $1.35, which is down 3% compared to the prior year. As Robin will discuss in more detail later, we experienced a very high level of large individual life mortality claims this quarter. and our Protection Solutions segment reported a loss of $17 million.

While disappointed with the result this quarter underscores why we made the decision to reinsure 75% of our individual life block to RGA. This transaction is on track to close midyear and will significantly reduce our exposure to mortality volatility moving forward. Results for our retirement and wealth management businesses reflect some seasonality in revenues and expenses but had solid underlying growth momentum. AB operating earnings rose 19% year-over-year, driven by higher average AUM and improved margins.

Our retirement businesses produced $1.6 billion of net inflows in the first quarter, driven by momentum in our [indiscernible] franchise and expansion of our institutional offering. We also had $2 billion of advisory net inflows in our Wealth Management business. Adviser productivity is up 8%, and the business has a 12% organic growth rate on a trailing 12-month basis.

Finally, AB delivered positive net flows across each of its 3 distribution channels and had total active net inflows of $2.7 billion. We are particularly excited about the momentum in its private markets business, where AUM is up 20% year-over-year to $75 billion, and the pipeline remains strong. While the market volatility and tax payments have pressured April flows, AB is well positioned given its global investment platform, diversified asset mix and unique distribution platforms.

Moving to capital. We returned $335 million to shareholders in the first quarter, which represents an 80% payout ratio. In April, we also purchased $760 million of AB Holding units through a tender offer, increasing our ownership in AllianceBernstien team to 69%. There are significant flywheel benefits between Equitable and AB, and we are excited to be able to capture more of these economics for our shareholders. We expect to close the RGA reinsurance transaction in the middle of the year, which will free over $2 billion of capital and enhance our focus on retirement, asset management and wealth management.

We also plan to execute $500 million of incremental share repurchases post close. Robin will discuss potential uses of the remaining capital later and we'll be in the fortunate position of having significant excess capital. Clearly, the market environment has changed meaningfully over the past month, but Equitable is well positioned to navigate a period of macro volatility. It starts with having a strong balance sheet. Our year-end combined NAIC RBC ratio was approximately 425%. And and we have $1.1 billion of holding company liquidity after purchasing the AB units and tendering for some of our outstanding Series B preferred securities in April. This is before factoring in the $2 billion benefit from the reinsurance transaction.

We fully hedged the equity market and interest rate exposure underlying the product guarantees we offer protecting our capital position. Therefore, market declines only impact our income statement and not our balance sheet. We also benefit from getting over 50% of our cash flow from noninsurance businesses, which enables us to consistently return capital to shareholders, even during periods of stress like we're experiencing now. I'm confident that Equitable has the right strategy and approach to emerge from this period even stronger than it is today.

One of the reasons I'm confident is because of the durable growth drivers underlying the markets where we have chosen to play, which we highlight on Slide 4. If anything, periods of market volatility, increase the need for and highlight the value of the advice we provide and the retirement and investment solutions we offer. There were 4 million Americans turning 65 each year, and over $600 billion of assets coming out of 401(k) plans annually. These retirees need help figuring out how to ensure they will have enough assets and income to support them for the rest of their lives.

The life insurance industry is uniquely suited to provide protected equity solutions like wireless or guaranteed income. The last month provides a reminder that markets can go down. underscoring the value that our offering provides to policyholders. We have generated positive net flows in our retirement businesses every year that we've been a public company. highlighting the strong secular demand drivers and appeal of our all-weather product portfolio.

Another key reason that we have been successful in growing our retirement franchise is the unique distribution we have through Equitable advisers. 65% of Americans are looking for investment advice and adviser-mediated assets have grown twice as fast as overall U.S. financial assets. These trends are driving growth in our Wealth Management business, which has a 12% organic growth rate for advisory assets over the past year. We're also attracting new advisers and helping them grow their practices with productivity up 8% year-over-year.

The final component of our flywheel is asset management, which is critical to enabling us to deliver value to our clients. Because AB is able to produce strong investment returns, we can offer attractive annuity and protection solutions, driving sales and positive net flows. These flows that enable AB to invest in new capabilities such as expanding its private markets offering, creating value for itself and equitable. AB has been able to consistently generate positive active net flows and is well positioned to be a winner in 2 of the fastest-growing segments in the market, private credit and insurance asset management. We firmly believe that combining insurance and asset management provides competitive advantages for both firms, and we were excited to recently increase our ownership in AB to 69%.

Turning to Slide 5. I want to spend a math reviewing Equitable's strong track record of managing through volatile markets since our IPO. It all starts with having a robust balance sheet. As a reminder, Equitable takes a market-neutral approach to hedging, which means that we fully hedge the equity market and interest rate exposure underlying our product guarantees. Therefore, our capital position is relatively insensitive to market movements, which you have seen in our stable RBC ratio over time. We also set prudent assumptions for policyholder behavior and insurance risk factors. which have been validated by the positive ceding commissions we have received when executing third-party reinsurance transactions.

Equitable entered this period of volatility from a position of strength with a 425% combined NAIC RBC ratio and $1.1 billion of holding company liquidity after the AB and preferred tenders. We are on track to close the life reinsurance transaction in the middle of the year, which will free over $2 billion of capital and provide significant resources that can be used to take advantages of opportunities in the market, including additional share buybacks. We plan to bring a sizable dividend to the holding company post close and still expect our RBC ratio to increase by 75 to 100 points.

Equitable also benefits from generating predictable cash flow with about 50% of cash coming from our asset and wealth management businesses. This has enabled us to consistently return capital to shareholders, maintaining our buybacks even during the peak of the pandemic. Leaning into share repurchases during periods of market declines helps offset the impact of lower fee income on EPS and creates value for our shareholders. Putting it all together, I feel confident that Equitable is well positioned to manage this period of volatility and uncertainty, and we'll also be ready to play offense if opportunities emerge.

I'll now turn it over to Robin to discuss our financial results in more detail.

[Robin Raju, executive]

Thanks, Mark. Turning to Slide 6. I will highlight our first quarter results. On a consolidated basis, non-GAAP operating earnings were $421 million or $1.30 per share. The only notable item in the quarter was below plan alternative investment income. which reduced earnings by $13 million after tax. Adjusting for this, non-GAAP earnings per share was $1.35 per share. As Mark mentioned, our results this quarter were impacted by elevated mortality claims in our individual life insurance block, which reduced earnings per share by about $0.20 relative to our normal expectations. If mortality had been in line with budget, earnings per share, excluding notable items, would have increased 12% year-over-year.

GAAP net income was $63 million in the quarter. This is lower than our non-GAAP operating earnings due to noneconomic hedging impacts, which are offset in OCI. Total assets under management and administration rose 3% year-over-year to $1 trillion. but they declined on a sequential basis as a result of weaker equity markets in the first quarter.

Our reported book value per share ex AOCI was $27.62 in the quarter. As a reminder, GAAP accounting requires us to carry AB at book value, which we believe materially understates shareholders' equity at the EQH level and inflates our leverage ratio. We added new disclosure this quarter to highlight book value per share, including our ownership in AB market value. The adjusted book value per share was $39.96 and as of March 31, and our leverage ratio would have been nearly 7 points lower. This difference will become more notable moving forward, given our increased ownership in AB.

I'll provide some further details on our segment level earnings drivers on Slide 7. Mortality claims in our individual life insurance block came in approximately $80 million above our expectations on a pretax basis. Our block is concentrated in higher face value policies and has limited reinsurance coverage. And this quarter, we experienced an abnormally high number of large claims. While hard to be definitive, we believe a harsh flu season was a contributing factor. The CDC has classified this as the first high severity flu season since 2017, 2018, and cumulative hospitalization rate is the highest observed since 2011.

The poor experience this quarter and recent volatility in our Individual Life earnings underscores why we made this strategic decision to reinsure 75% of our life block to RGA. This transaction, which is on track to close midyear, will significantly reduce our mortality exposure and enhance our focus on our core growth engines. I also want to spend a minute discussing our individual retirement earnings, which declined year-over-year despite strong net flows.

Results were pressured by a few items. The first is expenses, which reflect higher seasonal compensation costs for benefits, payroll taxes and long-term incentive payouts due to 2024 bonus payments. In addition, the growth in commission payouts reflects strong sales volume, particularly in Equitable advisers, where not all payouts can be capitalized in DAC. We expect compensation expense to normalize in the second quarter, but commissions will depend on sales levels and the mix by channel.

Turning to revenues. We continue to see steady growth in spread earnings or NIM driven by positive Rila net flows. However, fee income was negatively affected by a decline in average separate account assets and fewer fee days in the first quarter. Given the equity market decline we've seen so far in April, this will likely remain a near-term headwind, offsetting growth in NIM. Keep in mind that our traditional VA block has a higher return on assets than our Rila block to a reduced fee income will also pressure the segment's return on assets.

Overall, our Individual Retirement business produces a high return on capital and consistent cash flows. While the benefit of our strong organic growth takes some time to emerge in results, we expect steady growth in earnings over time. First quarter results for group retirement and wealth management businesses were in line with our expectations, which included some anticipated revenue and expense seasonality. Both businesses had positive organic growth with $192 million of group inflows and $2 billion of wealth management advisory net flows. Adviser productivity improved 8%, which is a good leading indicator of future growth.

AB had a strong quarter with positive net flows across each of its distribution channels, a relatively stable base fee rate and good expense control. The business had an adjusted margin of 33.7% for the quarter, up 340 basis points from the first quarter '24. While the market decline in April could pressure near-term flows and margins, AB has a diversified asset mix and a differentiated distribution, including its private wealth business, leadership position in Asia and its partnership with Equitable, all position it well for long-term success.

Finally, our alternative investments portfolio had a 6% annualized return in the first quarter, consistent with our guidance. Current market volatility makes projecting future returns difficult. but we expect them to remain below our 8% to 12% long-term target in the second quarter. We will provide a more specific update later in the quarter when we had better visibility.

Turning to Slide 8. We we will highlight Equitable's capital management program. During the quarter, we returned $335 million to shareholders, including $261 million of share repurchases, which translates to an 80% payout ratio. This is above our 60% to 70% guidance range, primarily due to lower earnings as a result of unfavorable mortality. Over the past year, we have reduced our share count by approximately 7%, helping to drive growth in earnings per share. We also plan to increase our quarterly cash dividend on common shares by 13% to $0.27 in May, pending Board approval. We ended the quarter with $2.2 billion of cash and liquid assets at Holdings, up from $1.8 billion at the end of the fourth quarter.

During the first quarter, we received about $200 million of cash flows from subsidiaries and issued $500 million of new hybrid securities in March. In April, we invested $760 million to increase our ownership in AB and used $283 million of the hybrid proceeds to tender for some of our existing Series B preferred equity. As a result, we currently have $1.1 billion of cash at the holding company. comfortably above our $500 million target.

On Slide 9, we highlight our macro sensitivities, both from an earnings and balance sheet standpoint. The earnings sensitivities are consistent with what we've highlighted previously, even as we've grown our business. Every 10% change in equity markets has about $150 million of annual impact on after-tax earnings.

Turning to interest rates. A 50 basis point change in long-term rates has about a $40 million to $45 million impact on our annual earnings. We have a relatively limited sensitivity to changes in short-term rates as we have a similar exposure to floating rate assets and liabilities. The primary impact is on our cash sweep revenue in our wealth management business. where 100 basis points change in the Fed funds rate equates to about a 70 basis points change in our sweep yield. Cash sweeps only drive about 20% of Wealth Management earnings and less than 2% of total company earnings, so this is very manageable.

Keep in mind that these sensitivities are prior to any management actions such as expense controls. We still have about $50 million of our targeted $150 million in annual expense saves that will earn in by 2027, and Equitable has demonstrated a strong expense discipline in prior periods of market volatility.

Turning to the balance sheet. As Mark discussed, we fully hedge the equity market and interest rate exposure associated with our product guarantees Therefore, our capital position has little sensitivity to markets. The primary risk that we take is credit exposure through our general account investment portfolio. We have updated our credit stress test for the portfolio as of year-end 2024, and the result is illustrated on the right-hand side of the slide.

For fixed maturity securities, distress is calibrated to the global financial crisis-like scenarios. We also assume a minus 40% equity market decline, which negatively affects the value of our private equity and other alternative investments. The impact of such a severe stress would be a 50-point reduction in our RBC ratio. Currently, this would take us from about 425% down to 375%. We expect the life reinsurance transaction to increase our RBC ratio by 75 to 100 points after paying an extraordinary dividend to the holding company, which will provide significant additional capital cushion if needed.

Our insurance subsidiaries only produce about 50% of our holding company cash flows, so we would still generate meaningful cash even if we needed to reduce our insurance dividend for a period. Therefore, we feel confident that we are well positioned to withstand even a severe credit downturn. Putting it all together, we feel we are well positioned to navigate a period of macro volatility and have expense levers in place if markets remain challenging.

Finally, on Slide 10, we lay out the time line and key milestones for our life reinsurance transaction. To reiterate, the transaction is on track to close in mid-2025 and will free up over $2 billion of capital. We plan to deploy these proceeds in a prudent and timely manner. And as I mentioned earlier, we used approximately $760 million of HoldCo liquidity to acquire $19.7 million of AB Holding units increasing our ownership in AllianceBernstien from 62% to 69%.

Post close, we expect to bring an extraordinary dividend to the holding company and we remain committed to executing $500 million of incremental EQH share repurchases on top of our 60% to 70% payout ratio. This leaves nearly $1 billion of remaining resources. Given the pullback in our share price, additional share buybacks beyond the $500 million are certainly something we'll look at. and this would likely need to be accompanied by some debt repayment to manage our leverage ratios.

We will also be watching the broader market environment. This transaction provides a lot of financial flexibility, which is a significant positive in periods of uncertainty. Therefore, it makes sense to exercise some patience but we remain committed to making the reinsurance transaction accretive to both earnings and cash flow per share.

Now let me turn the call back over to Mark. Mark?

[Mark Pearson, executive]

Thanks, Robin. While we're living in the period of heightened macro uncertainty, I remain very optimistic about the long-term growth prospects for Equitable, given favorable demographic trends and the durable need for the advice retirement and investment solutions we offer our clients. Equitable has a robust balance sheet, predictable cash flows and an all-weather product portfolio. As a result, the company has a strong track record of executing through volatile markets and creating value for our shareholders. Our financial position will only be enhanced by our individual life reinsurance transaction. which gives us the ability to play offense if opportunities arise.

We'll now open the call to take your questions.

[Operator]

[Operator Instructions] Your first question comes from Suneet Kamath with Jefferies.

[Suneet Kamath, analyst]

First for Robin, on the $2 billion of proceeds, can you size the extraordinary dividend that you plan to take up to the holding company?

[Robin Raju, executive]

So as we -- as you mentioned, we expect a $2 billion benefit or capital release from the life insurance company post the transaction with RGA and that hasn't changed. To date, as you know, we redeployed about $750 million with investment in AB. That brings our ownership to 69%. That leaves us about $1.5 billion left from the transaction. We remain committed to deploying the $500 million on top of the $750 million that we invested already, and that leaves us about $1 billion of proceeds, which we'd expect to take at an extraordinary dividend later in this year. So assuming that we achieve our 1.6 to 1.7 guidance, that's what we're still working towards. And then we have $1 billion of extraordinary dividend that we're looking to take as well on top of that.

Now given the pullback, we've been getting a lot of questions on the use of it. Now given the pullback of our share price since in the month of April. That certainly buybacks would be certainly something that we'll look at, but we need to accompany that with debt repayment given the leverage ratio. But we're also going to be watched but the broader market environment, as I mentioned on the call. The transaction gives us tons of financial flexibility resources deploy. And given the volatility, we're not in a -- it's not a bad position to sit on a bunch of cash right now as we wait the transaction to close as well.

[Suneet Kamath, analyst]

Okay. And then I guess for Mark or maybe Nick, you made the point in your prepared remarks about this is a perfect environment to highlight the benefit of Rilas and some of the other products that you offer. I guess the question is, are you seeing that in April? In other words, a lot of times, people make that comment, but market volatility sometimes often freezes the market. But are you seeing incremental demand for your product given what's going on in the market?

[Nicholas Lane, executive]

Yes. This is Nick. We're seeing robust sales in April. To reiterate Mark's comments, look, we see continued demand driven both by the demographic trends and this heightened period of volatility. Research shows that 70% of people out there are concerned about the impact of volatility on their retirement assets. And given our distribution and product portfolio, we're well positioned to meet that need.

[Mark Pearson, executive]

Suneet, the product range we have is something that really is an advantage to us. We talk about the all-weather portfolio. If somebody is wanting to secure income for the long term, we have solutions for that. And the Rila product, of course, is the way somebody can protect capital on the downside, but participate in any market recovery. So the product range itself helps. But yes, to your question, April was a good month for us, as Nick said. .

[Operator]

The next question comes from Ryan Krueger with KBW.

[Ryan Krueger, analyst]

First question was just on the seasonally elevated expenses as well as the lower fee days in the first quarter. Are you able to give us a rough sizing of the consolidated impact that had on earnings or EPS for the company?

[Robin Raju, executive]

Sure. We did have overall some seasonality in expenses, as I mentioned on the call, that's related to timing of one we stated benefits and taxes on the bonus payments and then also the long-term incentive comp. I think maybe a lot of the focus has been in individual retirement where we have seen growth in revenue, but some of the expense pickup has shown earnings decline year-over-year. That's about $10 million that should come back next quarter in terms of pretax impact for individual retirement on earnings on that.

And in addition, for individual retirement, we expect steady growth in our net investment margin aligning with the growth in the general account as we still continue to see robust sales in that weather product that Nick and Mark just mentioned as well. But keep in mind, for individual retirement, about half of our earnings are fee related and that will be sensitive to equity markets. across the board. So we do expect some expenses to come back, but we are exposed to equity market volatility in these times.

[Ryan Krueger, analyst]

Got it. And then on the leverage ratio, do you feel that you need to bring the leverage ratio down from here? Or is there a comment on the incremental buybacks just that you would need to do some debt repayment to keep the leverage ratio at the same level it's already at?

[Robin Raju, executive]

Yes. I think with the -- when we think about leverage ratio, mainly looking at rating agency leverage ratio, the GAAP leverage ratio is we feel fine with also remember what I mentioned on the call, the GAAP leverage ratios don't reflect AB market value, which would bring that down by about 7 points across the board. But if we did incrementally more than the $500 million that we're going to add on top of the 60% to 70% as part of the transaction, we'd likely accompany that with some debt repayment to make sure our leverage ratios are in line with what the rating agencies want to see.

[Operator]

The next question comes from Michael Ward of UBS.

[Michael Ward, analyst]

So net flows were very strong across pretty much every segment. Just curious how you think about this momentum heading into the volatility that we've seen in April? And I guess, specifically, around IR and AB.

[Nicholas Lane, executive]

Great. Thanks. This is Nick. I'll kick it off. As we've highlighted a couple of times, we see strong structural drivers and the current heightened period of volatility, enhancing interest in our products to start an individual retirement. First quarter, we had $1.4 billion in net flows. an 8% organic growth rate over the last 12 months. as Mark highlighted, our buffered annuity is right for these times. It provides downside protection with upside potential. So people that can secure their assets but gives them the opportunity to participate if the market bounces back.

If I hit on group retirement, group retirement, we had positive net flows, primarily our core K-12 teacher business. I'd remind you, it's a payroll contribution business. focused on longer-term retirement savings. We have 1,000 advisers working with over 800,000 teachers in 5,000 local school environments. Employment tends to be more consistent through macro cycles. So we would expect that to consistently grow in the single digits.

So we do see upside potential in institution -- the institutional market as this environment is highlighting the need for secure income within defined contribution group plans. So we're focused in this time. We remain steadfast in guiding our clients. We see a demand for advice, and we see demand for more durable retirement solutions, and we're well positioned to capture a disproportionate share of the value that we see emerging.

I'd hand it over to Onur to hit on AB.

[Onur Erzan, executive]

Thanks, Nick. Yes, as was mentioned on the question, we came off a very strong Q1 in terms of flows that the AB all of our 3 channels were net positive. April is always a tricky month for us given it's the tax season. I'll come back to the market volatility. But given our books, we are skewed towards high net worth and also in net worth, particularly in our private wealth business, in our U.S. retail business. We tend to get some outflow pressure in April even when the markets are relatively well functioning. That, combined with the heightened market volatility and the uncertainty around the rate cuts and inflation put some challenges around the flows, particularly around the retail channels. As you know, we have a very strong Asia retail franchise. Whenever there's a rate of uncertainty, we tend to see a slowdown in flows in that region.

That being said, all of the signs are quite positive. If I go beyond April, several strengths emerge. One, if you look at our institutional pipeline, our institutional pipeline increased materially several billion dollars in the first quarter. So that gives us confidence in terms of flows into our institutional channel going forward. As you know, Equitable commitment to private out continues and our private assets continue to grow rapidly. And we still have another $6.5 billion from the Equitable commitment. So that's a positive.

And then on the retail side, as I think about fixed income, first, typically steepening yield curve and widening credit spreads means long-term better returns for fixed income strategies, and we benefited from fixed income rebalancing in '23 and '24, we had $35 billion of net flows when that balancing happened in the past. So once this rate cut cycle starts, we're going to see the margin flowing back to taxable fixed income, and we're going to benefit most likely disproportionately from that.

And on the equity side, the good news is some of our flagship products and geographies are performing well. For instance, our Japan franchise remained strong despite all of the equity market and currency volatility. And we are benefiting from some of the structural trends there like the new retirements accounts called NISA. So all in all, April, definitely tough months for almost every asset manager. We are not an exception. But when I look at where the puck is headed, I think we are very well positioned in terms of benefiting from the markets as well as our distribution channels.

[Michael Ward, analyst]

And then on capital deployment, I'm just kind of curious, recognizing there's uncertainty out there, but -- what -- is there anything that you would say or I guess, kind of like a time line of call markets that could get you off the sidelines to be more aggressive on the buyback? And do we think about your capital usage as kind of buybacks, debt reduction or maybe holding excess capital? Or is there other options that you haven't spoken about?

[Mark Pearson, executive]

Sure, Mike, just in our normal share buyback program, if we see dislocation in the market, we'll certainly dip in and buy back more stock just at a normal course. If the stock is cheap, that's just timing that we'll do. On top of that with the transaction, we're going to wait until the transaction closes. Once the transaction closes, that allows us one to see where the markets are and the evolution with the volatility that we're currently seeing, but also allows us to take out the extraordinary dividend from the insurance company as well.

And at that point in time, we have tremendous financial flexibility at the holding company with the cash that we will have just a normal course of normal dividends in addition with the benefit of the transaction. So we will evaluate share buybacks with some debt repayment. We can -- it's very volatile at that time. The stock is likely to be cheap. So share buybacks even look more interesting in that topic period. And then we'll also be on the fence for anything else that remains available for us at that time. But again, tons of financial flexibility, and that's a good thing to have in these volatality times.

[Operator]

The next question comes from Tom Gallagher with Evercore ISI.

[Thomas Gallagher, analyst]

I had a few questions on RILA. Nick, maybe to start with you. I was sort of peaked by -- my interest has peaked by your comment that April sales were robust. Are we talking about a modest increase, like 10%, something much larger, I want to get a sense for what you're seeing right now because -- and I'll get to my follow-up after that, if we just start with that. .

[Nicholas Lane, executive]

We don't disclose that level of -- as I mentioned, but I would say they're robust compared to first quarter.

[Michael Ward, analyst]

Got it. And I guess my follow-up is really this, it's probably for Robin. The -- it's an interesting dynamic when you have a countercyclical product now that is benefiting from the markets being weaker and where clients are demanding probably the product in a greater way because of the underlying equity protection. But I don't think the earnings in that product are really equity sensitive. Robin, would you mind kind of just reminding us the underlying profit margin of that product and whether there is equity sensitivity, the earnings get better or worse if the markets weaken?

[Robin Raju, executive]

Sure. Just as Nick and Mark mentioned earlier, this volatility in equity market drives the need for the RILA product and the product is structured around buffers that provide downside protection and upside participation. But I want to reiterate, that's not the only product that we have within the offering. It's an all-weather product portfolio that provides buffer protection, income protection and investment-only tax advantage. vehicles as well that the team fully capitalized to drive growth in the retirement market.

With the RILA specifically, you're right, the underlying mechanics, it's really a spread-based earnings products. And you saw a spread on NIM and individual retirement increased 9% year-over-year, and that will continue to grow with the growth in RILA sales. going forward. It does take their time in terms of GAAP profit emergence. So some of the profit emergence ends up being slower because we have acquisition cost upfront, but that's time. But the ultimate sensitivity to the RILA is spread-based earnings. The overall segment, though, it's still 50% fee-based. And so the overall segment has sensitivity to equity markets from the other products that we sell that are more investment-only or indeed.

[Mark Pearson, executive]

Tom, it's Mark. If I could just add something to the demand, which I think is worth saying. These clients would be late 50s, early 60s on the retirement side that would be typical for us. They have savings, they have 401(k), so it's not coming out of disposable income necessary. So as we mentioned on the call, something like $600 billion a year is coming out of 401(k)s into better vehicles, of which RILA is one. So that helps keep the demand up. .

[Operator]

The next question comes from Jimmy Bhullar with JPMorgan.

[Jamminder Bhullar, analyst]

So first, just had a question on the annuity business, but on a different topic. Just can you comment on what you're seeing in terms of competition and just competitor behavior, especially in the buffer market, but just overall, given that a number of companies seem to be very active and many more companies are selling similar products than was the case a few years ago. And then relatedly, if I look at your sales and flows, they were still very strong, but I think flows were weaker than they had been in the last several quarters and sales growth slowed as well versus what it had been, obviously, off of fairly high levels.

[Nicholas Lane, executive]

Sure. This is Nick. For our overall Retirement segment, we were up 6% year-over-year. And as we've mentioned, we have an all-weather portfolio of protected equity offered annuities income and IVAs. RILA were up 3% year-over-year, and this was another record first quarter. We're very intentional about focusing on segments where we can generate attractive returns and sustainable shareholder value. So we've been mindful of competitive trends on pricing.

As we've mentioned historically, as we see new entrants enter, there tends to be a period of aggressive pricing, we've seen this before, and it tends to be temporary and not sustainable. To date, increased competition in RILA has net-net continued to grow the size of the pie as it raises adviser awareness in the broader $30 trillion retirement market, and we think annuities and buffered annuities are still underpenetrated. given the need out there.

As the market leader, we continue to benefit from that growing pie. Over the last 3 years, we have more than doubled our sales. And finally, I'd just say we're in a different macro environment today than January. Looking forward, we continue to be very excited about the opportunity and believe that given our history of innovation and our privilege distribution, we are well positioned to capture a disproportionate share of the value being created.

[Jamminder Bhullar, analyst]

And then just on LifePath, I think there weren't any new cases this quarter, but do you have any line of sight on what the rest of the year is looking like?

[Nicholas Lane, executive]

Sure. So we remain bullish on the long-term growth of this market and the current market environment is amplifying the need for secure income solutions within defined contribution plans. As contacts, last year, we had $600 million of flows from our institutional segment. coming from the launch of our LifePath Paycheck. In the first quarter, we've continued to deepen and broaden our institutional offers. We had over $400 million in flows coming from our partnership with the leading HSA provider. We did not have any plans funded in the first quarter. We expect about $250 million of inflows from LifePath in the second quarter.

As we've stated, they're going to continue to be lumpy. we get visibility 60 to 90 days looking out. So going forward, we've been a leader in this market. And we think given our relationships with both BlackRock, AB, JPMorgan and others, we're well positioned as this market continues to grow.

[Operator]

The next question comes from Joel Hurwitz with Dowling.

[Joel Hurwitz, analyst]

So spreads in Individual Retirement look to have compressed a bit in the quarter. Anything unusual you would call out? And what are you just expecting from a spread yield standpoint moving forward?

[Robin Raju, executive]

Joel, it's Robin. I'll take that. So in the quarter, you're going to always have some noise quarterly -- on a quarterly basis when looking at spread income. That's why I would look at the year-over-year as a function of longer-term growth. But in the quarter with short-term rates decreasing, we did see some decline in some of the floating rate exposure. But as a reminder, the floating rate assets are managed and matched with the floating rate liabilities. So as the 1-year segment's reset, we expect to get some of that back going forward. But you'll see some of that quarterly noise. But over the long term, we still continue to expect strong growth in terms of spread income along with the general account book value in the segment and consistent cash flows coming out of this as well.

[Joel Hurwitz, analyst]

Okay. Makes sense. And then just wanted to see if you have any update on your Bermuda entity. Any plans to move any business there in the near term?

[Robin Raju, executive]

Yes. Bermuda is set up and operational for us. It continues to be -- provide us with good optionality to manage cash flows going forward. No further update to give at this time, though. But we remain focused on capital optimization, and this is just another piece of the toolkit that gives us optionality.

[Operator]

The next question comes from Jack Matten with BMO Capital Markets.

[Francis Matten, analyst]

Just on the full year cash flow run rate guidance of the $1.6 million to $1.7 million. Are you seeing any risk to that outlook given the lower equity markets year-to-date? I know you generate a lot of cash from unregulated sources. But -- just wondering if there's still a material equity market sensitivity that we should be thinking about regarding free cash flow?

[Robin Raju, executive]

Sure, The $1.6 billion to $1.7 billion guidance that we gave for the full year does assume an 8% normal equity market return but keep in mind, 50% of those cash flows are coming from the insurance businesses, which is based on last year's results. And so we will have some equity sensitivity on the other 50% on the asset and wealth pieces. I think if I take a look from where we are now, we're probably on the lower end of the guidance of the $1.6 billion to $1.7 billion, but still feel comfortable with that guidance.

[Francis Matten, analyst]

Got it. And then on the AllianceBernstein, any changes to your thoughts around the ultimate ownership of that business now that you're at around 69%. Are you looking to increase that this year?

[Mark Pearson, executive]

It's Mark. I'll take that. Yes, very pleased that we've increased ownership to 69%. I mean the real issue, as we said on the call is there are very big synergies between the Equitable businesses and AB and we're starting to harvest those synergies. And as we've said, before, we like the fact that we have a currency in AB that helps us with acquisitions as we did with [indiscernible] it helps us with remuneration and it helps us put a value on a big part of our business. So no plans to increase the set amount.

[Operator]

The next question comes from Nick Annitto with Wells Fargo.

[Nicholas Annitto, analyst]

Just a follow-up to the cash generation question as well. What gives you confidence in the $2 billion in 2027, especially given that you guys are at the lower end of the $1.6 billion to $1.7 billion now. And when that was given at the Investor Day, did that contemplate the increase in AB ownership?

[Robin Raju, executive]

Sure. We're fully confident in that $2 billion number that we're going at at Investor Day. As you've seen historically, we pretty much come in line with the numbers that we give to the market because we're focused on execution. internally. As a reminder that when we gave that at Investor Day, it assumed an 8% annual return, we saw our equity markets up 20% plus the previous 2 years. And now this year, we see a decline. So we don't think that changes the long-term cash flow outlook that we provided at Investor Day.

At Investor Day, we did not contemplate increasing our ownership in AB nor did we contemplate the life transaction at that time. That being said, remember, we're just swapping, the transaction essentially swaps life insurance earnings for AllianceBernstein earnings, which we believe that's higher multiple and provides a better return profile for our investors so that we can avoid unnecessary volatility in the business. So full confidence in the $2 billion for 2027.

[Operator]

The next question comes from Maxwell Fritscher with Truist Securities.

[Maxwell Fritscher, analyst]

I am on for Mark Hughes. Just for the -- in Protection Solutions, are you seeing any of the elevated mortality from flu season carryover into 2Q thus far?

[Robin Raju, executive]

Can't give an update yet for April, April isn't over. Yes, we still have another day here to go forward. But Ken, we don't have insight yet into the month of April is mortality now. But keep in mind, this is exactly why we focus and we're focused on closing the Life transaction either in Q2 or Q3. So we're not dealing with mortality volatility anymore, and we can focus on our core growth engines that we've been discussing on the call. .

[Maxwell Fritscher, analyst]

Understood. And then at AB, there are outflows in outside the U.S. Any color there and maybe any visibility going forward?

[Mark Pearson, executive]

Sure. owner here, I can take that. As I mentioned a little bit in the previous flow question, when we have uncertainty around the rate outlook and what will be the pace and degree of rate cuts, that's when we get some pressure on our taxable fixed income business in Asia. As you know, we are a high-performing manager in the Asian market and taxable fixed income is definitely a strong flagship for us. And that has been the main driver of the outflows overseas.

That being said, over the years, we have been very successful in diversifying our position, leveraging our brand strength in Asia. Like, for instance, if you look at the first quarter, we had very significant net flows into our multi-asset solutions. because we created a multi-asset income solution, particularly targeting the Taiwan market to diversify our exposure to our global high-yield product, and that has been working very well. And then separately, as I mentioned in the previous question, as a recap, our Japanese business tends to skew heavily towards equities -- U.S. equities, and given our strong distribution network there, we continue to maintain strength from Q1 into April. So all in all, I don't have any major concerns in terms of the long-term outlook. I think we will continue to well -- continue to do well in Asia in another overseas markets. but there might be some short-term flow pressure, particularly in taxable fixed income, particularly in Asia.

[Operator]

The next question comes from Wilma Burdis with Raymond James.

[Wilma Jackson Burdis, analyst]

This is something you highlighted in the new slide me in the presentation, but could you give us a little bit of color on how the Protection Services deal reduces credit risk?

[Robin Raju, executive]

Yes. Wilma, I think you broke up a little bit. I think you're referring to the stress test that we provided at year-end.

[Wilma Jackson Burdis, analyst]

Yes, Slide 9, you added something where you talked about how the protection services deal reduces the credit risk.

[Robin Raju, executive]

I think you -- I guess you're referring to at that some of the RGA transaction on GA assets associated with it that would reduce some of the credit risk associated. If you take a look on the page, we're speaking about the the overall credit risk in the GA portfolio as of year-end. which our RBC was 4.25%. And you can see the credit losses, credit migration and the impact from alternatives to about 50 points to that. And then the protection deal, what it is, it helps because we have that $2 billion benefit. And after we take out debt in our dividend, the RBC will improve by 75 to 100 points that brings us to $450 million to $475 million. So that's where you get the benefit from the protection deal as it relates to our RBC posted credit stress test.

[Wilma Jackson Burdis, analyst]

Got it. And then given the projection services -- protection deals changing the footprint of the investment portfolio, does this give equitable opportunity to consider reinvesting at a quicker pace, some of the assets? I know, especially there was quite a bit of the portfolio that was purchased around the time of the 2018 IPO, which was in a low rate environment. So -- just wondering if that deal gives you an opportunity to accelerate some of that repositioning.

[Robin Raju, executive]

Yes. No, the structural repositions that we've spoken about since IPO have been completed on that, that delivered significant income for the insurance company. I think where we're focused now is relative value with the growth in the RILA product where the general account is growing, and we continue to get private credit capabilities with AllianceBernstein. As Onur mentioned, we're about $14 billion of the $20 billion of of commitment that we have with AllianceBernstein is another $6 billion to go, and that should provide incremental income for us going forward. And then I'm sure once we get there, there will be more to come as well.

[Operator]

That is all the time we have for questions. This concludes today's conference call. Thank you for joining. You may now disconnect.