Equitable Holdings (EQH): Strategic Pivot and Financial Transformation

Equitable Holdings (EQH has unveiled a significant strategic shift, transforming its business model to emphasize capital-light, recurring revenue streams, a move that saw its gross profit margin surge to 80.37% in 2024 from 27.2% in 2023 [Monexa AI]. This strategic reorientation aims to significantly boost cash generation to an anticipated $2 billion by 2027, up from a projected $1.6-1.7 billion in 2025 [Vertex AI Search - Equitable Holdings Research Findings].

This reorientation, driven by a deeper integration of its asset and wealth management operations, particularly through AllianceBernstein (AB, signals a deliberate effort to enhance earnings quality and cash flow predictability. The company is actively moving away from traditional, capital-heavy insurance underwriting, as evidenced by its recent financial maneuvers and projected growth trajectory, positioning itself for more stable and higher-margin returns in the evolving financial services landscape.

The Strategic Pivot: Embracing Capital-Light, Recurring Revenue Models#

What is the nature of Equitable Holdings' strategic shift towards capital-light, recurring revenue models?#

Equitable Holdings is fundamentally reorienting its business towards less capital-intensive, fee-based income sources. This transformation involves expanding its asset management and wealth management operations, notably through its increased stake in AllianceBernstein (AB, and engaging in strategic reinsurance deals. These initiatives are designed to generate stable, predictable cash flows while reducing reliance on traditional, capital-heavy insurance underwriting. This shift is clearly reflected in the company's financial statements, where the gross profit ratio soared to 80.37% in 2024, a substantial increase from 27.2% in 2023 and 42.53% in 2022 [Monexa AI].

Research findings indicate that this shift has been tangible over the past 1-2 years, with a marked increase in fee-based income contributing to the company's earnings. For instance, AllianceBernstein reported $2.7 billion in active net inflows in Q1 2025, which has driven a +19% year-over-year increase in segment operating earnings to $126 million [Vertex AI Search - Equitable Holdings Research Findings]. Similarly, the Wealth Management division experienced strong advisory net inflows of $2.0 billion in the same period, with earnings rising by +7% to $46 million [Vertex AI Search - Equitable Holdings Research Findings]. These figures underscore a clear move towards recurring revenue streams that are less sensitive to market volatility and contribute to a healthier operating income ratio, which improved to 18.79% in 2024 from 7.01% in 2023 [Monexa AI].

Management commentary corroborates this strategic direction, emphasizing the intent to reduce earnings volatility and focus on higher-margin, less capital-intensive businesses. The planned reinsurance transaction with RGA, set to close in mid-2025, is a critical component of this broader transformation, aiming to free over $2 billion in capital and mitigate exposure to mortality volatility [Vertex AI Search - Equitable Holdings Research Findings]. This move aligns with a broader industry trend of insurers seeking to optimize their capital structures and de-risk their balance sheets.

Driving Growth Through Asset and Wealth Management#

The company's growth strategy heavily relies on expanding its asset management and wealth management operations. The integration of AllianceBernstein (AB plays a pivotal role in this regard. Equitable Holdings (EQH deployed approximately $760 million in April 2025 to purchase additional AB Holding units, increasing its ownership to roughly 69% [Vertex AI Search - Equitable Holdings Research Findings]. This move signifies a strong commitment to bolstering its asset management capabilities and aligning its strategic interests, directly contributing to its reported revenue growth of +18.13% in 2024 [Monexa AI].

Furthermore, the company’s focus on advising-driven solutions and the US retirement market positions it well for sustained growth. CEO Mark Pearson highlighted that the company's integrated business model is well-suited to capitalize on these opportunities, with a focus on higher-margin, fee-based products. The strategic Octane forward-flow deal, while details are limited, typically involves selling future receivables or assets to generate immediate liquidity, a practice consistent with a capital-light strategy aimed at optimizing capital allocation and supporting organic growth.

Enhancing Earnings Quality and Cash Flow Predictability#

In what ways is Equitable Holdings enhancing earnings quality and cash flow predictability?#

The company's shift towards recurring revenue streams has significantly improved its earnings quality and cash flow stability. By increasing reliance on fee-based income from asset and wealth management, the company reduces earnings volatility associated with underwriting and mortality risks. This is reflected in the substantial +1064.42% increase in operating cash flow and a +670.15% rise in free cash flow in 2024 [Monexa AI], signaling a strong improvement in its ability to generate cash from operations.

Data from recent quarters show that AllianceBernstein's active net inflows and rising operating earnings contribute to a more predictable earnings profile. For example, in Q1 2025, AllianceBernstein's operating earnings increased by +19%, driven by asset inflows [Vertex AI Search - Equitable Holdings Research Findings]. Similarly, Wealth Management’s net inflows and earnings growth bolster the diversification of cash flows. Management forecasts cash generation to rise to $1.6-1.7 billion in 2025, with a trajectory to reach $2 billion by 2027. Over 50% of this cash flow is now generated from asset and wealth management, underscoring the enhanced predictability [Vertex AI Search - Equitable Holdings Research Findings]. This strategic focus aligns with the company's goal to reduce earnings volatility and improve overall financial performance, making it more attractive to investors seeking stable returns.

Financial Performance Overview: A Deeper Dive into the Income Statement#

Equitable Holdings' financial results for 2024 demonstrate a mixed but strategically aligned performance. Revenue increased to $12.44 billion in 2024, up from $10.53 billion in 2023, representing a +18.13% growth [Monexa AI]. However, net income remained relatively flat, showing a marginal +0.38% increase to $1.31 billion in 2024 from $1.30 billion in 2023 [Monexa AI]. This suggests that while top-line growth is strong, the benefits of the strategic pivot are perhaps more evident in margin expansion and cash flow generation rather than immediate net income acceleration.

Income Statement Highlights (in Billions USD) [Monexa AI]#

Metric	2021	2022	2023	2024
Revenue	11.04	12.64	10.53	12.44
Gross Profit	6.57	5.38	2.86	10.00
Operating Income	2.85	2.99	0.74	2.34
Net Income	1.75	2.15	1.30	1.31
Gross Profit Ratio	59.51%	42.53%	27.20%	80.37%
Operating Income Ratio	25.85%	23.66%	7.01%	18.79%
Net Income Ratio	15.90%	17.03%	12.37%	10.51%

The significant jump in gross profit and operating income ratios in 2024 highlights the success of the capital-light model in improving operational efficiency, even if the net income ratio saw a slight decline from 2023. This can often be attributed to non-operating factors or taxes, which are less indicative of core business performance.

Balance Sheet Strength and Capital Allocation Strategy#

Equitable Holdings' balance sheet reflects a strategic rebalancing. Total assets increased to $295.87 billion in 2024 from $276.81 billion in 2023 [Monexa AI]. While total liabilities also grew to $292.30 billion from $271.66 billion [Monexa AI], the company’s total stockholders' equity saw a notable decline to $1.58 billion in 2024 from $2.65 billion in 2023 [Monexa AI]. This shift in equity, coupled with an increase in total debt to $5.95 billion from $5.63 billion [Monexa AI], results in a debt-to-equity ratio of 2.68x (or 268.22%) [Monexa AI]. While this ratio appears high, it is common in the financial sector due to the nature of their balance sheets, which are often heavily weighted by policyholder liabilities and investment portfolios.

Balance Sheet Snapshot (in Billions USD) [Monexa AI]#

Metric	2021	2022	2023	2024
Cash & Cash Equivalents	5.19	4.28	8.24	6.96
Total Assets	292.26	252.70	276.81	295.87
Total Liabilities	278.70	249.11	271.66	292.30
Total Stockholders Equity	11.52	1.40	2.65	1.58
Total Debt	5.12	5.23	5.63	5.95

From a capital allocation perspective, Equitable Holdings paid $382 million in dividends in 2024, a slight increase from $381 million in 2023 [Monexa AI]. The company also engaged in significant share repurchases, totaling $1.01 billion in 2024, following $919 million in 2023 and $849 million in 2022 [Monexa AI]. These consistent buybacks, alongside a dividend yield of 1.79% and a payout ratio of 30.49% [Monexa AI], indicate management's commitment to returning capital to shareholders, even as it invests in strategic growth areas like AllianceBernstein.

Profitability and Valuation: Assessing EQH's Efficiency and Market Perception#

The profitability metrics underscore the impact of EQH's strategic pivot. The return on equity (ROE) stands at a robust 56.77% and return on capital (ROIC) at 13.34% [Monexa AI]. These figures, particularly the high ROE, suggest that the company is effectively leveraging its equity base to generate profits, even with a lower total stockholders' equity. The operating margin saw a significant recovery to 18.79% in 2024, up from a trough of 7.01% in 2023, though still below the 25.85% recorded in 2021 [Monexa AI].

In terms of valuation, Equitable Holdings trades at a price-to-sales (P/S) ratio of 1.14x and a price-to-book (P/B) ratio of 7.1x [Monexa AI]. Its trailing twelve months (TTM) P/E ratio is 13.57x, while its enterprise value over EBITDA (EV/EBITDA) is 5.24x [Monexa AI]. Looking ahead, analyst estimates for forward P/E ratios show a compelling decline, from 14.05x in 2024 to 7.97x in 2025 and further to 4.8x by 2028 [Monexa AI]. Similarly, forward EV/EBITDA is projected to decrease from 4.8x in 2024 to 3.75x by 2028 [Monexa AI]. This suggests that analysts anticipate strong earnings and EBITDA growth, making the company appear increasingly undervalued on a forward basis.

Market Reaction and Analyst Outlook#

As of recent trading, EQH shares were priced at $55.37, experiencing a slight dip of -$0.65, or -1.16%, from its previous close of $56.02 [Monexa AI]. The company's market capitalization stands at approximately $16.83 billion [Monexa AI]. While the segment-level performance in Q1 2025 showed strength in asset and wealth management, the overall reported earnings surprise for EQH on April 29, 2025, indicated an actual earning result of $1.35 against an estimated $1.49 [Monexa AI]. This earnings miss, despite positive underlying strategic segment performance, highlights the complexities of financial reporting for diversified companies and suggests that broader factors or other segments may have weighed on the overall result.

Analyst estimates project robust future growth for Equitable Holdings. Revenue is expected to grow at a compound annual growth rate (CAGR) of +6.4%, while EPS is anticipated to grow at a significant +15.8% CAGR [Monexa AI]. For the full year 2025, estimated revenue is $14.93 billion with an estimated EPS of $6.50 [Monexa AI]. These projections underscore the market's confidence in the long-term efficacy of EQH's strategic pivot to higher-margin, fee-based businesses.

Strategic Effectiveness and Management Execution#

Equitable Holdings' management, under CEO Mark Pearson, appears to be executing its strategic pivot with considerable discipline. The consistency between stated priorities—moving towards capital-light models and enhancing recurring revenue—and actual capital allocation is evident. The substantial investments in AllianceBernstein, coupled with consistent share buybacks and dividends, demonstrate a balanced approach to growth and shareholder returns. The significant increase in operating and free cash flow in 2024, following negative cash flows in previous years, is a strong indicator of management's success in translating strategic initiatives into tangible financial outcomes [Monexa AI].

Historically, the company's revenue has shown a 3-year CAGR of +4.06%, while net income has seen a 3-year CAGR of -9.36% [Monexa AI]. The recent surge in gross and operating profit margins, despite the flat net income growth in 2024, suggests a turning point where the benefits of the strategic shift are beginning to materialize in operational efficiency. This indicates management's ability to adapt and steer the company through challenging market conditions, focusing on long-term value creation over short-term net income fluctuations.

Historical Context and Future Implications#

Equitable Holdings' current strategic shift is not an isolated event but rather a response to evolving dynamics within the financial services and insurance sectors. The move towards asset and wealth management mirrors broader industry trends where companies seek to diversify revenue streams and reduce exposure to volatile underwriting cycles. While the company's revenue growth has historically been modest (3-year CAGR of +4.06%), the aggressive push into fee-based services and strategic reinsurance aims to accelerate future revenue streams. Analysts project a +6.4% revenue CAGR and a substantial +15.8% EPS CAGR for the future, indicating strong confidence in this strategic direction [Monexa AI].

The company's financial foundation, particularly its improved cash flow generation and strategic capital deployment, strengthens its competitive positioning. The ability to generate significant free cash flow (rising to $1.85 billion in 2024 from negative figures in prior years [Monexa AI]) provides flexibility for future investments, potential acquisitions, or increased shareholder returns. This strategic pivot, if executed consistently, could lead to a more resilient business model, less susceptible to interest rate fluctuations and market volatility that traditionally impact insurance operations. The focus on the US retirement market also positions EQH to capitalize on demographic trends and increasing demand for advisory services.

Key Takeaways for Investors#

• Strategic Transformation: Equitable Holdings (EQH is undergoing a significant and effective pivot towards capital-light, fee-based revenue streams, primarily through its asset and wealth management segments, including AllianceBernstein (AB.
• Improved Profitability & Cash Flow: This strategy has led to a dramatic increase in gross profit margin (to 80.37% in 2024) and a substantial surge in operating cash flow (+1064.42% in 2024), indicating enhanced operational efficiency and cash generation capability [Monexa AI].
• Mixed Earnings Performance: While segment-level performance in Q1 2025 was strong, the overall EPS for EQH in April 2025 missed estimates, suggesting that benefits from the strategic shift are still integrating across the entire enterprise [Monexa AI].
• Attractive Forward Valuation: Analyst projections for future EPS growth (+15.8% CAGR) and declining forward P/E and EV/EBITDA ratios suggest that the market anticipates significant earnings expansion, potentially making EQH an attractive long-term proposition [Monexa AI].
• Balanced Capital Allocation: Management is actively returning capital to shareholders through consistent share buybacks ($1.01 billion in 2024) and dividends, while simultaneously investing strategically in growth areas [Monexa AI].

All financial data is sourced from Monexa AI.

Sources#

• Vertex AI Search - Equitable Holdings Research Findings
• Vertex AI Search - Balance Sheet Risks and Credit Outlook
• Vertex AI Search - Rating Agency and Analyst Perspectives