Equitable Faces Wall Street Annuity Love Gap

What You Need to Know

The holdings firm reported a $589 million net loss for the fourth quarter on $2.2 billion in revenue.
Eleven company clients are on track to flow in from a BlackRock 401(k) plan annuitization platform.
Hedging arrangements absorb most of the market risk related to registered index-linked annuities.

Equitable created the hottest segment of the U.S. individual annuity market. It is outselling competitors, benefiting from a strong selling environment and hedging away most of the investment risk — but it’s having a hard time impressing Wall Street.

Suneet Kamath, a securities analyst at Jefferies, asked about Wall Street investors’ annuity enthusiasm gap Wednesday during a conference call that Equitable held with the analysts.

“I would argue it’s getting a pretty low valuation in the market,” Kamath said.

Equitable shares are selling for about $34 each, or 6.4 times net income per share. That compares with a 29.5 price-to-earnings ratio for Apple and a 21.4 price-to-earnings ratio for UnitedHealth.

Robin Raju, Equitable’s chief officer, emphasized that Equitable has done more to manage market risk than the annuity issuers of the past, and Nick Lane, Equitable’s president, pointed to the baby boomers’ rush to use assets to generate retirement income.

“This is a great time to be in the market,” Lane said.

What it means: If Wall Street investors liked annuity issuers more, the issuers might be able to offer clients cheaper, more varied products with better crediting rates.

Equitable: Equitable Holdings is the New York-based parent of the AllianceBernstein asset management business and the Equitable insurance business.

It held Wednesday’s call to go over its earnings for the fourth quarter of 2023. The company reported a $589 million net loss for the quarter on $2.2 billion in revenue, compared with $138 million in net income on $1.8 billion in revenue for the fourth quarter of 2022.

Operating earnings, which exclude fluctuations in the estimated value of assets and benefits obligations, increased to $476 million, from $348 million.

Individual annuities: First-year premiums and deposits for individual annuities increased to $3.8 billion, up 48% from the total for the year-earlier quarter.

Equitable created the market for a different type of variable annuity, the registered index-linked annuity, about 15 years ago, and most of its annuity sales are now RILA sales.