8-K: Voya Financial Reports Mixed Q3 2024 Results; Announces $500 Million Share Repurchase

Voya Financial announced its third-quarter 2024 results, showing strong performance in Wealth Solutions and Investment Management, which was partially offset by higher loss ratios in Health Solutions, and authorized an additional $500 million share repurchase program.

Summary

• Voya Financial reported a net income available to common shareholders of $98 million, or $0.98 per diluted share, for the third quarter of 2024.
• After-tax adjusted operating earnings were $190 million, or $1.90 per diluted share, compared to $189 million, or $1.74 per diluted share, in the same period last year.
• Wealth Solutions saw pre-tax adjusted operating earnings increase to $211 million, up from $179 million year-over-year, driven by growth in fee-based revenues.
• Health Solutions experienced a decline in pre-tax adjusted operating earnings to $23 million, down from $53 million, primarily due to higher loss ratios in Stop Loss.
• Investment Management's pre-tax adjusted operating earnings, excluding Allianz's noncontrolling interest, rose to $55 million, up from $49 million, due to higher fee-based revenues.
• The company generated approximately $0.2 billion of excess capital in the third quarter and returned approximately $0.2 billion to shareholders through share repurchases and dividends.
• Voya's board of directors authorized an additional $500 million for common stock repurchases.
• The acquisition of OneAmerica Financial's full-service retirement plan business is expected to close on January 1, 2025.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to strong performance in Wealth Solutions and Investment Management, coupled with a significant share repurchase authorization. However, the negative impact of higher loss ratios in Health Solutions and the decrease in net income temper the overall positive outlook.

Positives

• Wealth Solutions experienced strong growth in fee-based revenues, leading to increased pre-tax adjusted operating earnings.
• Investment Management saw higher fee-based revenues and positive capital markets, contributing to increased pre-tax adjusted operating earnings.
• The company generated a significant amount of excess capital and returned a portion to shareholders through share repurchases and dividends.
• The board authorized an additional $500 million for share repurchases, indicating confidence in the company's financial position.
• The acquisition of OneAmerica's retirement plan business is expected to strengthen Voya's market position and accelerate profitable growth.
• Voya's balance sheet is prudently positioned with strong excess capital generation.
• Fitch upgraded Voya Financial, Inc.'s life insurance subsidiaries' Insurer Financial Strength to 'A+' from 'A'.

Negatives

• Health Solutions experienced a significant decline in pre-tax adjusted operating earnings due to higher loss ratios in Stop Loss.
• Net income available to common shareholders decreased compared to the same quarter last year, driven by non-recurring events in the prior period.
• Health Solutions net revenues for the trailing twelve months declined 1.2% compared to the prior-year period.
• Health Solutions adjusted operating margin for the trailing twelve months declined to 16.6% compared to 30.6% in the prior-year period.

Risks

• Higher loss ratios in the Health Solutions Stop Loss business are negatively impacting profitability.
• The company is exposed to global market risks, including general economic conditions and interest rate fluctuations.
• There are liquidity and credit risks, including potential financial strength or credit rating downgrades.
• Strategic and business risks include the ability to maintain market share and achieve desired results from acquisitions.
• Operational risks include cybersecurity and privacy failures and dependence on third parties.
• Tax, regulatory, and legal risks include limits on the ability to use deferred tax assets and changes in laws or regulations.

Future Outlook

Voya expects to significantly increase excess capital generation in 2025, driven by growth in core businesses, repricing actions in Stop Loss, and additional earnings from the OneAmerica acquisition. They also expect to return $800 million of capital for the full-year 2024.

Management Comments

• We delivered robust results in Wealth Solutions and Investment Management in the third-quarter of 2024. This helped offset higher loss ratios in Health Solutions, resulting in an adjusted operating EPS of $1.90 per diluted share, said Heather Lavallee, chief executive officer, Voya Financial.
• We are building on our commercial momentum to accelerate profitable growth.
• We are also fully focused on executing substantial rate increases in our Stop Loss business during the fourthquarter, which we expect will improve profitability in Health Solutions in 2025.
• Capital return in the third-quarter reflects our continued commitment to creating value for shareholders.
• We remain on track to return $800 million for the full-year.
• Looking forward, we expect to significantly increase excess capital generation in 2025 driven by continued growth in our core businesses, repricing actions in Stop Loss, and additional earnings from the OneAmerica acquisition.
• The strategic acquisition of OneAmerica's full-service retirement plan business will further strengthen our market position and accelerate profitable growth.
• We remain focused on addressing the evolving needs of our customers, who rely on us for comprehensive workplace benefits, savings, and investment solutions. This commitment continues to distinguish Voya as a leader in the marketplace.

Industry Context

This announcement reflects the ongoing trends in the financial services industry, where companies are focusing on growing fee-based revenues and managing risk in their insurance businesses. The acquisition of OneAmerica's retirement plan business is a strategic move to expand Voya's market presence in the retirement sector. The challenges in the Health Solutions segment highlight the volatility and risk associated with insurance underwriting.

Comparison to Industry Standards

• Voya's Wealth Solutions segment's 19% growth in client assets is strong compared to industry averages, which typically see single-digit growth.
• The adjusted operating margin of 37.9% for Wealth Solutions is competitive with other large financial services firms, such as Fidelity and T. Rowe Price, which also focus on fee-based revenue.
• The decline in Health Solutions' operating earnings due to higher loss ratios is a common challenge in the insurance industry, particularly in stop-loss products, and is similar to issues faced by competitors like Cigna and UnitedHealth.
• Voya's Investment Management segment's 1.3% organic growth is in line with industry averages for asset managers, but lags behind some high-growth firms like BlackRock and Vanguard.
• The $500 million share repurchase program is a common capital management strategy among large financial institutions, similar to actions taken by companies like Prudential and MetLife.

Stakeholder Impact

• Shareholders will benefit from the share repurchase program and continued dividends.
• Employees may see opportunities for growth and development due to the company's strategic initiatives.
• Customers will benefit from the company's focus on comprehensive workplace benefits, savings, and investment solutions.
• Suppliers and creditors will continue to engage with a financially stable company.

Next Steps

• Voya will host a conference call on November 5, 2024, to discuss the third-quarter 2024 results.
• The company will focus on executing substantial rate increases in its Stop Loss business during the fourth quarter.
• The acquisition of OneAmerica Financial's full-service retirement plan business is expected to close on January 1, 2025.
• Voya will continue to return capital to shareholders through share repurchases and dividends.

Key Dates

Keywords

Voya Financial, Financial Results, Share Repurchase, Wealth Solutions, Health Solutions, Investment Management, Operating Earnings, Capital Return, OneAmerica Acquisition, Loss Ratios