Red Flags

EQH — Equitable Holdings, Inc.

Equitable Holdings, Inc., together with its consolidated subsidiaries, operates as a diversified financial services company worldwide. The company operates through six segments: Individual Retirement, Group Retirement, Asset Management, Protection Solutions, Wealth Management, and Legacy. The Individual Retirement variable annuity products, including structured capital strategies, retirement cornerstone, and investment edge primarily to affluent and high net worth individuals. The Group Retirement provides tax-deferred investment and retirement services or products to plans sponsored by educational entities, municipalities, and not-for-profit entities, as well as small and medium-sized businesses. It offers guaranteed and structured investment option, and personal income benefit variable a

**THE CORE CONCERN**

The most direct quantitative signal is the Beneish M-Score of −1.04, which sits closer to zero than the −1.78 manipulation threshold. The same model flagged Enron in fiscal 1997–1998. The score is driven primarily by a DSRI of 2.67, indicating accounts receivable expanded 167 percent faster than revenue. Revenue itself contracted from $12.6 billion to $11.7 billion over the most recent three-year window, producing a −2.7 percent CAGR. An accruals ratio of 0.000 and zero instances of positive net income paired with negative operating cash flow provide no offsetting cash-flow support. The Altman Z-Score of 1.04 places the firm inside the distress zone, though this metric was calibrated on manufacturing companies and requires caution for asset managers.

**HISTORICAL PRECEDENT**

The combination of an M-Score breach driven by DSRI and flat-to-declining top-line revenue mirrors the pattern observed at certain specialty finance and insurance vehicles that later required material restatements. In those cases, receivables growth detached from reported premiums or fee income often preceded either accelerated recognition of investment-management or annuity fees or understated allowance for credit losses on affiliated products. The absence of cumulative NI–OCF divergence narrows the possible mechanisms to timing differences within revenue rather than outright expense capitalization.

**WHAT TO VERIFY**

Three items warrant direct examination in the 10-K or through management inquiry. First, the composition and aging of the $2.3 billion reinsurance recoverable and affiliated investment-management receivables, specifically any change in collection terms or off-balance-sheet guarantees. Second, the percentage of variable-annuity and asset-management revenue recognized on an accelerated basis versus cash collected, including the impact of any new or amended distribution agreements. Third, the reconciliation between statutory and GAAP reserves for the legacy life block, with emphasis on assumption updates that could affect both earnings and required capital.

**COUNTERARGUMENTS**

The Z-Score’s distress classification is known to overstate risk for regulated financial-services entities that carry large statutory reserves and investment portfolios. Low insider ownership of 0.65 percent is common among former mutual-insurance subsidiaries that converted via sponsored IPOs, where sponsor stakes remain outside the reported insider category. The M-Score itself can be elevated by legitimate changes in product mix—such as a shift toward fee-based advisory assets that generate longer collection cycles—without implying manipulation. Finally, the Red Flags Score of 57 incorporates several inputs that are structural to the life-and-annuity sector rather than discretionary. These factors do not eliminate the DSRI anomaly but indicate that sector-specific accounting conventions must be isolated before the M-Score can be read as conclusive evidence of earnings distortion.

ONB — Old National Bancorp

Old National Bancorp operates as the bank holding company for Old National Bank that provides consumer and commercial banking services in the United States. It accepts deposit accounts, such as noninterest-bearing demand, interest-bearing checking and negotiable order of withdrawal, savings and money market, and time deposits. The company also offers loans, including home equity lines of credit, residential real estate loans, and consumer loans, as well as loans to commercial clients comprising commercial loans, commercial real estate loans, agricultural loans, letters of credit, and lease financing. In addition, it offers debit and automated teller machine cards, telephone access and online banking, and other electronic and mobile banking services. Further, the company offers private bank

**THE CORE CONCERN**

Old National Bancorp’s Beneish M-Score of −1.36 breaches the −1.78 manipulation threshold on a scale where values closer to zero are more indicative of earnings management. The score is driven primarily by a DSRI of 2.21, meaning accounts receivable expanded 121 percent faster than revenue. Revenue itself rose from $0.8 billion to $1.9 billion over the measured period, producing a 32.5 percent compound annual growth rate. While the accruals ratio sits at 0.000 and cumulative net income has not diverged from operating cash flow, the combination of an elevated M-Score and low insider ownership of 0.65 percent still warrants examination of revenue recognition practices. The Altman Z-Score of 1.07 places the firm in the distress zone, though this metric was calibrated on manufacturing companies and is less reliable for regional banks.

**HISTORICAL PRECEDENT**

The M-Score pattern aligns with the profile that flagged Enron in fiscal 1997–1998, three years before its collapse. In that case, the model captured accelerating accruals and receivables growth that later proved unsustainable. Regional banks have exhibited analogous signals during periods of rapid balance-sheet expansion through acquisitions, where acquired loan portfolios and deferred fee recognition can temporarily inflate both revenue and asset growth metrics without immediate cash confirmation.

**WHAT TO VERIFY**

Investigators should examine three items in the 10-K and 10-Q. First, the allowance for credit losses relative to non-performing loans and the methodology for purchase-accounting adjustments on acquired portfolios. Second, the aging schedule and concentration of commercial real-estate and C&I loans added through recent mergers, including any changes in non-accrual policies. Third, the reconciliation between reported net interest income and cash interest received, particularly the treatment of loan origination fees and fair-value marks.

**COUNTERARGUMENTS**

The 32.5 percent revenue CAGR indicates that many forensic ratios are likely reflecting legitimate growth dynamics rather than manipulation. Regional banks frequently expand through acquisitions, which can produce step-function increases in loans and deposits that mechanically elevate DSRI and SGI variables in the Beneish model. Purchase-accounting accretion and the timing of credit-loss provisioning can also distort accrual ratios without implying fraudulent intent. The absence of any year in which net income was positive while operating cash flow was negative, together with zero cumulative NI–OCF divergence, provides a factual offset to the M-Score breach. Short interest of 5.1 percent remains moderate and does not itself confirm market skepticism. These factors collectively suggest the signals merit routine scrutiny of acquisition accounting and credit metrics rather than an assumption of earnings manipulation.