Equitable Q2 earnings fall on mortality spike, but sees reinsurance relief

Equitable Holdings closed a reinsurance deal last week, which executives say will benefit the company in multiple ways.

For starters, the deal with Reinsurance Group of America will reduce Equitable’s exposure to unpredictable mortality swings, CEO Mark Pearson said. Equitable blames higher-than-expected mortality for some disappointing second-quarter results.

Non-GAAP earnings per share were down 23% year over year to $1.10. The Equitable executive team met with Wall Street analysts Wednesday morning.

“The primary driver of the decline was elevated individualized mortality claims,” Pearson said. “In addition, fee-based earnings were pressured by lower average equity market levels during the second quarter. While results this quarter came in below expectations, we see several positive leading indicators that suggest growth will accelerate in the second half of the year.”

The RGA deal is one move that will stabilize future volatility. RGA will reinsure a diversified portfolio of life insurance products in the $32 billion transaction. In addition, the deal expands RGA’s partnership with Equitable across underwriting, product development, distribution, and investment management.

“By reinsuring 75% of our enforced individual life block on a pro rata basis, we have significantly reduced our exposure to future mortality claims and the associated volatility,” Pearson explained. “This should enable us to deliver more predictable earnings. We're also generating over $2 billion of value to a positive ceding commission and the release of capital supporting the block.”

Equitable added a second reinsurance deal for about $30 billion of group annuity liabilities with its own Bermuda reinsurer. That deal will “improve the visibility into and consistency of future cash generation,” the insurer said in a news release.

“Looking ahead, having a Bermuda entity provides another tool in our capital management toolkit, and we’ll be opportunistic in utilizing it,” said Robin Raju, chief financial officer. “This could include ceding additional blocks of in-force business, ceding new business on a flow basis, or even reinsuring third-party business.”

In Other News:

RILA news. Equitable is credited with creating the RILA concept – in which losses are capped in exchange for a chance to earn a greater market return – in 2010. Today, about 25 annuity sellers have a RILA product. Equitable is feeling that market saturation, Raju said.

“We are starting to see more of our very profitable older RILA segments mature,” Raju said. “These policies were written at a time when competition was limited and we could achieve margins well above our normal … rate. While we continue to earn attractive 15% [rate of return] on new business. This is below the returns earned when we had the market largely to ourselves.”

Despite the crowded market and new entrants who frequently debut with “aggressive pricing,” Equitable’s RILA sales were up 9% in the quarter, said Nick Lane, head of retirement, wealth management & protection solutions.

Equitable executives frequently talk about the insurer's ability to serve a lucrative retirement market.

“We continue to see strong demand and growth driven by the demographics, the baby boomers moving to their next chapter of their lives, heightened by this current state of, I would say, macro uncertainty,” Lane said.

Elevated mortality. Equitable booked about $ 35 million after tax in excess mortality, Raju said, “primarily concentrated in older age policy holders.”

Had the RGA reinsurance deal been in place since Jan. 1, Equitable would have delivered 3% earnings per share for the first half of 2025, Pearson noted.

Quarterly Snapshot:

• Combined RBC ratio over 500% following the reinsurance transaction and $1.7 billion of planned insurance subsidiary dividends to Holdings in the second half of 2025.
• Protection Solutions reported $776 million of written gross premiums, with accumulation-oriented VUL first-year premiums up 14% and Employee Benefits first-year premiums up 7% over the prior year.
• Wealth Management reported advisory net inflows of $2 billion, with total assets under administration reaching $110 billion.
• Legacy had $580 million of net outflows and is running off at $2-$3 billion annually.

Management Perspective:

“The fact that we've got the money does not burn a hole in our pockets. We will be very disciplined in anything we look at.”

CEO Mark Pearson on the potential to use reinsurance proceeds for M&A

By The Numbers:

• Total Revenue: $2.36 billion ($3.5 billion in Q2 2024)
• Net Income: -$349 million ($428 million in Q2 2024)
• Earnings Per Share: Non-GAAP earnings per share of $1.10 ($1.43 in Q2 2024)
• Share Repurchases: $236 million in Q2 2025
• Dividend Declared: $82 million in Q2 2025
• Stock Price Movement: Shares dipped slightly as of Wednesday afternoon to $50.67.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.