The AB Investment Opportunity Presentation for the Investment - - PowerPoint PPT Presentation

The AB Investment Opportunity

August, 2020

Presentation for the Investment Community

| Second Quarter 2020 Review 1

The AB Investment Opportunity

Sustained Growth Expanding Alternatives Committed Capital (EQH)

Differentiated investment performance and distribution capabilities driving sustained best-in-class

• rganic growth and accelerating inorganic growth opportunities

Demonstrated expansion in higher-fee, persistent-AUM alternatives platforms Strategic partner, Equitable (EQH), seeding new strategies and supporting M&A

Strong Incremental Margins Tax Advantaged Structure High Distribution Yield

45-50% incremental margin targets from scalable platform, headquarters relocation, and consistent cost-savings ~9% distribution yield in a low rate environment Low ~10% effective tax rate, given partnership structure, an attractive attribute should tax rates rise in the future

Brand Strength

AB, Bernstein brands renowned among institutional investors Private Wealth differentiated among peers; stable client assets, advisory fees adding significant long- term value

2 | The AB Investment Opportunity

Note: Percentage of active fixed income and equity assets in institutional services that outperformed their benchmark gross of fees, and percentage active fixed income and equity assets in retail Advisor and I share class funds ranked in the top half of their Morningstar category. Where no Advisor class exists, A share class used.

Fixed Income

91 88 90 89 92 64 2015 2016 2017 2018 20192Q20

Equities

53 64 91 83 84 70 2015 2016 2017 2018 2019 2Q20

Percentage of Assets Outperforming at Quarter- End Trailing 5-Year Period

Sustained Growth

SUSTAINED AND DIFFERENTIATED INVESTMENT PERFORMANCE…

3 | The AB Investment Opportunity

…HAS DRIVEN SCALE AND NET FLOWS ACROSS OUR PLATFORM…

AUM Growth of Key Products

$ Billions

Select Growth Equities Products1

$ Billions

Sustained Growth

1 Includes: Concentrated Equities, Global Core Equities, Global Strategic

Core, U.S. Large Cap Growth

$16 $65 10 20 30 40 50 60 70 2015 2016 2017 2018 2019 2Q20 Cumulative Net Flows Since 2015 Select Growth Equities Products AUM $32 $59 $0 $10 $20 $30 $40 $50 $60 $70 2015 2016 2017 2018 2019 2Q20 Cumulative Net Flows Since 2015 AB High Income Products AUM

High Yield

4 | The AB Investment Opportunity

1.5% 1.5% 1.2%

• 3.4%

0.4%

• 4.8%
• 6%
• 5%
• 4%
• 3%
• 2%
• 1%

0% 1% 2% 3% 4% Total Active AUM Active Fixed Income Active Equities AB Peer Average

AND SUSTAINED ORGANIC GROWTH…

Active Net Inflows Average Annualized Growth, 2015-1H2020

1H20 organic growth excludes AXA redemptions of $8.9B. Including these redemptions, AB’s total active AUM average organic growth rate was 1.1% and active fixed income average organic growth rate was 0.5%. Peer Average includes: Affiliated Managers Group, Franklin Resources, Blackrock, Invesco, Janus Henderson, Legg Mason, T. Rowe Price, Waddell and Reed

Sustained Growth

5 | The AB Investment Opportunity

RESULTING IN SOLID AUM GROWTH

2015 2016 2017 2018 2019 Jun-20 Equities Fixed Income Other $468 $516 $554 $480 $622

5.7% Compound Annual Growth 2015 - Present

$ Billions $600 Sustained Growth

6 | The AB Investment Opportunity

Y/Y AUM Growth Rate Annlz’d Fee Base ($ Millions) *

11% Compound Annual Growth Rate 2015 - 2019

Alternatives includes: Real Estate Lending, Private Credit, Arya Partners, Select Equity Long/Short, US Real Estate, Option Advantage, Custom Alternatives, Securitized Assets, Financial Services Opportunities, Global Energy Exploration, Drawdown Managed, All Market Total Return, Asturias, and other alternative strategies. Annualized Fee Base represents the estimated 12-month management fee run- rate, excluding performance fees, based on assets at a specific point in time.

Expanding Alternatives

WE HAVE A GROWING ALTERNATIVES PLATFORM…

$‐ $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

2016 2017 2018 2019 % AUM Growth Annualized Fee Base

7 | The AB Investment Opportunity

 Founded in 1859, Equitable (Rated A+/A2 by S&P/Moody’s) provides advice, protection and retirement strategies with more than 5,000 client relationships globally  Has owned AB for over 25 years, including prior AXA ownership  65% economic interest in AB

Committed Capital (EQH)

…ACCELERATED BY A STRATEGIC PARTNER IN EQUITABLE HOLDINGS (EQH)

EQH’s low cost of capital and high cash generation benefits AB

 Represents AB’s largest client totaling ~20% of AUM  Lead investor in seeding new liquid and illiquid alternative strategies, having committed >$1B to past funds  Significant client for Fixed Income  Provides low-cost $900M Line of Credit to AB

Matching long-term liabilities with long-term invested assets

 Over time, low global interest rate environment may drive asset rotation into higher return, diversifying products  Example: investment grade corporate and sovereign debt into yield enhancing and diversifying private credit and alternatives

AB a key contributor to EQH portfolio

 Hedging trading expertise; investment portfolio insights driving better risk-adjusted outcomes; delivers stable and unregulated cash distributions; diversifying, low-capital business

8 | The AB Investment Opportunity

% of Annualized Fee Base, Active Equities and Alternatives

Strong Incremental Margins

A CONTINUED MIX SHIFT TO HIGHER FEE ACTIVE EQUITIES AND ALTERNATIVES…

20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% 55.0% 60.0% 2017 2018 2019 June 2020 Active Equities Alternatives

50.0% 53.6% 54.8% 55.1% 15.0% 17.0% 19.0% 21.0% 23.0% 25.0% 27.0% 29.0% 31.0% 33.0%

2017 2018 2019 June 2020

Active Equities Alternatives

% of Assets under Management Active Equities and Alternatives

+ 170 bps + 200 bps + 20 bps

9 | The AB Investment Opportunity

• $40
• $20

$0 $20 $40 $60 $80 2019 2020E 2021E 2025E

Nashville Relocation Annual Cost Savings

($ Millions)

$75-$80M Strong Incremental Margins

…COMBINED WITH FOCUSED EXECUTION ON COST REDUCTION…

50.4% 48.0% 45.0% 46.0% 47.0% 48.0% 49.0% 50.0% 51.0% Average 2011‐2014 2015 2016 2017 2018 2019 1H 2020 2H 20 Guidance

Adjusted Comp Expense as % of Revenues

10 | The AB Investment Opportunity

Strong Incremental Margins

…SUPPORTS STRONG INCREMENTAL MARGINS

Peer Average includes: Affiliated Managers Group, Franklin Resources, Blackrock, Invesco, Janus Henderson, Legg Mason, T. Rowe Price, Waddell and Reed

24.4% 27.6% 22.0% 23.0% 24.0% 25.0% 26.0% 27.0% 28.0% 29.0% 30.0% 2015 2016 2017 2018 2019 1H 2020

AB Adjusted Operating Margin %

31% 54% 0% 10% 20% 30% 40% 50% 60% Peer Group Average (ex AB) AB

Average Incremental Margin % 5 Years, 2015 ‐ 2019

11 | The AB Investment Opportunity

10.5% 21.0% 0% 10% 20% 30% 40% 2015 2016 2017 2018 2019 2020 2021 and Beyond AB Holding Effective Tax Rate U.S. Federal Corporate Tax Rate

1) 2020 & 2021 AB ETR represents 2020 YTD AB ETR Note: AB Holding is a grandfathered publicly-traded partnership “PTP” for federal tax purposes and, accordingly, is not subject to federal or state corporate income taxes. However, AB Holdings is subject to a 3.5% federal tax and a 1.0% California state tax on partnership gross income from active conduct of a trade or business, derived from its interest in AB,

1 1

?? Tax Advantaged Structure

PARTNERSHIP STRUCTURE HEDGES US AGAINST RISK OF A HIGHER TAX WORLD

12 | The AB Investment Opportunity

HIGH DISTRIBUTION YIELD IN A LOW-RATE ENVIRONMENT AB Pays out 100% of Adjusted Earnings

$1.86 $1.92 $2.30 $2.68 $2.53 2% 4% 6% 8% 10% 12% $1.00 $1.25 $1.50 $1.75 $2.00 $2.25 $2.50 $2.75 $3.00 2015 2016 2017 2018 2019 Annual Distribution per Unit Annual Distribution Yield 8.8% 4.1% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% Current Distribution Yield AB Peer Average *

Peer Average includes: Affiliated Managers Group, Franklin Resources, Blackrock, Invesco, Janus Henderson, Legg Mason, T. Rowe Price, Waddell and Reed. Source: Bloomberg

Distribution and Yield 2015-2019

High Distribution Yield

Current Yield vs. Peer Group

13 | The AB Investment Opportunity

TOTAL SHAREHOLDER RETURN  AB TSR has exceeded both S&P 500 and Peers  Distributions represent >90% of TSR since 2015

Assumes distributions are reinvested Peer Average includes: Affiliated Managers Group, Franklin Resources, Blackrock, Invesco, Janus Henderson, Legg Mason, T. Rowe Price, Waddell and Reed. Source: Bloomberg

High Distribution Yield

• 40%
• 20%

0% 20% 40% 60% 80%

AB Peer S&P Dividend Return Price Return

Total Shareholder Return CAGR, 2015 – June 30, 2020

70% (23%) 68%

14 | The AB Investment Opportunity

Brand Strength

OUR BRAND IS A COMPETITIVE ADVANTAGE

1) Normalized composite of all research qualitative evaluations in survey. Score increased 15 points y/y and was 84 points above the mean 2) Source: The Nelson Company Brand Tracking Study

Bernstein Research

QUALITY STANDARD OF THE INDUSTRY

AllianceBernstein

AB Awarded Greenwich Associates’ Quality Leader in Asian Region for 3 Consecutive Years #1 Brand Awareness in Taiwan2 #1 Brand Awareness in Hong Kong2 “An expert in fixed income funds”, “Reliable” and “Excellent performance” are brand images highly associated with ABHK, while ABTW rank 1st place on images of “Fixed income funds”, “Well-known and respected firms”, “Trustworthy” and “Retirement expert” compared to key competitors. AB Awarded Greenwich Associates’ Quality Leader American Income – Best Fund over 3, 5, 10 years (Lipper); Best in Class (Benchmark Fund) AB International Health Care – Best Fund over 5 Years of Equity Sector Health Care (Lipper)

US Equity Research team overall on Greenwich Quality Index1 Most Intense Sales Coverage Overall Satisfaction with Client Service Electronic Trading Quality and Service

#1 #1 #1 #1

15 | The AB Investment Opportunity

…who are a significant contributor to AB’s business model…

 $94B AUM represents 16% of AB’s AUM and 36% of Annual Adjusted Base Fees  45% of clients are invested in AB’s alternative offerings  $11.7B in Alts/Focused Equities committed and deployed capital  Helps seed new investment strategies (Alternatives, liquid Alts)  $3.2B in AUM invested in ESG strategies

…and a high multiple, recurring fee business

 Stable client assets, advisory fees valued at mid-teens earnings multiple in public markets

We aim to provide the best service to our loyal and high value, high net worth customers…

 Average client relationship tenure of 12 years  Low team turnover  Mix shift to ultra high-net worth customers  Integrated architecture driven by wealth advice minimizes unintended bets, prevents double layer of fees and optimizes tax loss harvesting

DIFFERENTIATED PRIVATE WEALTH MANAGEMENT

Additional AUA (Assets under Administration) of $1B reflect cash for which AB derives a distribution fee.

Brand Strength