Tom Gallagher

Tom Gallagher followed up on mortality exposure, asking for details on embedded earnings in the corporate loss related to life insurance and the potential for further reducing mortality exposure, such as RGA buying out the remaining 25%.

Answer

Robin Raju, CFO of Equitable Holdings, explained that Q4 saw $25 million in adverse mortality due to a mix of large and smaller claims with less reinsurance coverage before the RGA transaction benefits. For 2026, an increased GAAP guidance of $50 million for mortality is included in the corporate and other loss projection of $350 million-$400 million, which is conservative but closer to recent experience. He noted that the remaining 25% exposure is much smaller and manageable, but the company will always explore solutions to drive shareholder value.

Tom Gallagher asked about the significant valuation gap between Equitable Holdings' stake in AllianceBernstein and its own stock, inquiring if there are structural corporate strategies to close this gap or if it's a theoretical gap to be managed over time. He also followed up on mortality exposure, asking for details on embedded earnings in the corporate loss related to life insurance and the possibility of further reducing mortality exposure, such as RGA acquiring the remaining 25%.

Answer

Mark Pearson, CEO and President of Equitable Holdings, acknowledged the perplexing valuation gap, attributing AB's strong performance partly to the integrated 'flywheel' model. He highlighted Equitable Holdings' position in attractive, growing markets (U.S. retirement, asset management, wealth management), record AUM, strong execution, and its current valuation at 6x future earnings, stating management is focused on growing the business, optimizing the flywheel, expense discipline, and increasing cash generation to close the gap. Robin Raju, CFO of Equitable Holdings, detailed $25 million in adverse mortality in Q4, leading to an increased GAAP guidance of $50 million for 2026 in corporate and other, which he described as prudent. He stated that the remaining 25% mortality exposure is smaller and manageable, but they would always consider solutions to drive shareholder value.

Tom Gallagher inquired about the baseline for Voya Financial's Stop Loss margin expansion in 2026 (84% full year vs. 91% January 2025 cohort) and asked for clarification on the implied loss-cost trend and the company's confidence in managing the situation without adverse selection.

Answer

Mike Katz (CFO, Voya Financial) stated that margin improvement is expected from both the 84% full-year reported loss ratio and the 91% January 2025 cohort, emphasizing the prudence of reserving at the higher end of the best estimate range due to wider outcome ranges. Heather Lavallee (CEO, Voya Financial) highlighted the improvement from a 95% loss ratio a year ago to the current 90-91% range for the 2025 book. Mike Katz confirmed confidence in managing the situation, noting improvements in risk selection and a trend in the high teens to 20% range.

Tom Gallagher asked about the outlook for Advice & Wealth Management (AWM) margins in 2026, specifically if Ameriprise expects to maintain the 29%-30% range. Tom Gallagher also inquired about Ameriprise's retention of existing advisors, given the strong pipeline for recruiting new financial advisors in 2026. Tom Gallagher asked for clarification on the elevated mortality in Retirement & Protection Solutions (RPS) during the quarter, specifically whether it was due to large claim volatility or a higher frequency of claims.

Answer

Chairman and CEO Jim Cracchiolo expressed confidence in maintaining strong, consistent core margins. He noted that Ameriprise has minimized interest rate impact through investment strategies, expecting margins to remain in the current range unless external, unmanageable factors like government changes or interest rate shifts occur. Cracchiolo stated that overall advisor retention is very good, acknowledging that some losses may occur due to competitive offers. He emphasized Ameriprise's focus on helping advisors generate long-term value through its excellent platform, capabilities, and leadership, attracting quality recruits who prioritize growth over immediate incentives. Cracchiolo clarified that the elevated mortality was due to both higher claims and frequency, but nothing exceptional or outside the expected range. He stated it was a balanced situation with no issues impacting the longer-term outlook.

Tom Gallagher asked about the outlook for Advice & Wealth Management (AWM) margins in 2026, specifically whether Ameriprise expects to maintain the 29%-30% range. He also inquired about the company's confidence in retaining existing advisors and sought clarification on whether the elevated mortality in Retirement & Protection Solutions (RPS) during the quarter was due to large claim volatility or a higher frequency of claims.

Answer

CFO Walter Berman expressed confidence in maintaining AWM margins within the 29%-30% range, citing strong core margins and minimized interest rate impact due to investment strategy, barring unforeseen external factors. Chairman and CEO Jim Cracchiolo stated overall confidence in advisor retention, acknowledging competitive pressures but emphasizing Ameriprise's value proposition and support for advisor growth. Regarding RPS mortality, Jim Cracchiolo and Walter Berman clarified it was a balance of both higher frequency and large claims, but nothing exceptional or outside the expected range, not impacting longer-term trends.

Tom Gallagher followed up on the two large advisor teams that left, asking if there would be a continued tail of outflows in subsequent quarters or if wrap flows are expected to rebound closer to $8 billion in Q4. He also asked if Ameriprise has re-examined its payout grid for existing advisors to ensure retention in a competitive market.

Answer

EVP and CFO Walter Berman stated there would be some carryover into Q4 from the two advisor departures, but current attrition patterns are stable. Chairman and CEO Jim Cracchiolo explained that Ameriprise evaluates payout in a balanced equation with advisor support and investments, making periodic adjustments, but is currently in a good position without broad-based changes being discussed.

Tom Gallagher from Evercore asked for details on the improvement in MetLife's non-medical health ratio, specifically the split between dental and disability performance in Q3 2025, and confidence for Q4.

Answer

Ramy Tadros, President of U.S. Business at MetLife, reported a 230 basis point sequential improvement in the non-medical health ratio. He attributed this to favorable seasonal utilization patterns in dental and the ongoing impact of pricing actions. Disability performance was in line with expectations, showing strong recoveries due to prior investments. Tadros expressed confidence in further Q4 improvement due to continued dental seasonality.

Tom Gallagher inquired about the nature of the $12 billion in Q4 PRT wins (large vs. small deals), the competitive dynamics in the market, and the underlying factors contributing to the improvement in non-medical health, specifically the split between dental and disability, and confidence for Q4.

Answer

Ramy Tadros, President of U.S. Business at MetLife, confirmed the $12 billion in Q4 PRT wins were a few large deals, emphasizing MetLife's competitive advantages in the jumbo market (balance sheet, investment capabilities, track record) and a disciplined M&A approach. For non-medical health, he attributed sequential improvement to favorable seasonal dental utilization and pricing actions, with disability performing well and in line with expectations, expressing confidence in further Q4 improvement due to continued dental seasonality.

Tom Gallagher inquired if the $500 million in actuarially justified rate increases were directly linked to the removal of morbidity and mortality improvement assumptions and changes in group life contracts. He also asked what was driving these long-term assumption changes, whether it was experience, future uncertainty, prudence, or alignment with peers, and if regulators would approve such changes if perceived as solely prudence-driven.

Answer

Chief Financial Officer Steve Zabel confirmed that all assumption changes flow through to the justification for rate increases, noting the magnitude of the adjustments. He explained that initial adjustments to cash flow assumptions for morbidity and mortality were based on several years of experience, including higher incidence post-COVID and higher mortality in parts of the block. The full removal of the morbidity improvement assumption was due to heightened modeling uncertainty post-pandemic, as the trend hadn't fully re-emerged. Mr. Zabel expressed confidence that all assumption changes are based on supportable experience and would be approved by regulators.

Tom Gallagher from Evercore ISI asked if the $500 million in actuarially justified rate increases were primarily driven by the removal of morbidity and mortality improvement assumptions and changes in group life contracts. He also probed the rationale behind the long-term assumption changes, questioning if they were based on observed experience, future uncertainty, prudence, or alignment with industry peers, and how regulators might perceive these changes.

Answer

CFO Steve Zabel confirmed that all assumption changes, particularly the magnitude of adjustments, influence the rate increase program. He clarified that basic morbidity and mortality assumption updates reflect several years of observed experience, including higher incidence post-COVID and increased mortality in parts of the block. The decision to remove the morbidity improvement assumption was driven by its failure to re-emerge post-pandemic and increased modeling uncertainty, which Zabel believes is supportable to regulators.

Questioned the risk of long-term care (LTC) incidence trends being permanently revised higher in the next actuarial review and challenged the sustainability of the low 62% disability loss ratio, which is significantly better than pre-pandemic levels and peers.

Answer

Management declined to preview the LTC review results but emphasized the large statutory reserve buffer. For disability, they expressed confidence in the sustainability of the low loss ratio, attributing it to their best-in-class claims management operations and a sales approach focused on integrated solutions rather than just price, which supports fair returns.

Tom Gallagher asked about the performance of Principal Financial Group's commercial real estate (CRE) returns, asset management flows, and commercial mortgage loan exposure, seeking insight into a potential market inflection point. He also questioned the company's M&A philosophy, particularly regarding large defined contribution assets.

Answer

CEO Deanna Strable and President Kamal Bhatia noted CRE is in its strongest position in three years, with stability in occupancy and pricing, improving capital flows, and increased transaction volume, positioning Principal's institutional book for outperformance. CEO Deanna Strable reiterated a disciplined M&A philosophy focused on strategic alignment, capabilities, financial targets, and cultural fit, emphasizing organic growth but maintaining capital flexibility for opportunistic, high-bar inorganic growth after recent integrations and divestitures.

Tom Gallagher asked about Principal Financial Group's M&A philosophy, noting a shift from M&A-focused capital deployment to primarily common dividends and buybacks, and whether the company would consider lumpy defined contribution assets coming to market.

Answer

CEO Deanna Strable stated that Principal's disciplined M&A philosophy remains unchanged, prioritizing strategic alignment, increased growth potential, meeting financial targets, and cultural fit. She emphasized the ability to meet financial targets organically but confirmed the company remains inquisitive and has capital flexibility for inorganic opportunities, especially where scale is critical. She noted that after integrating Wells Fargo and divesting other businesses, Principal is now on the 'front foot' for growth opportunities.