8-K: Voya Financial Reports Mixed Q4 and Full-Year 2023 Results, Cites Strong Health Solutions Performance

Voya Financial announced its fourth-quarter and full-year 2023 financial results, highlighting record earnings in Health Solutions but a decrease in adjusted operating earnings compared to the previous year.

Summary

• Voya Financial reported a net income available to common shareholders of $118 million, or $1.10 per diluted share, for the fourth quarter of 2023.
• The after-tax adjusted operating earnings for the fourth quarter were $174 million, or $1.63 per diluted share.
• Full-year 2023 net income available to common shareholders was $589 million, or $5.42 per diluted share.
• The full-year after-tax adjusted operating earnings reached $763 million, or $7.02 per diluted share.
• The company generated approximately $0.8 billion of excess capital in 2023 and deployed approximately $1.3 billion, including share repurchases and dividends.
• Wealth Solutions saw a slight increase in pre-tax adjusted operating earnings to $147 million in Q4 2023.
• Health Solutions experienced a decrease in pre-tax adjusted operating earnings to $44 million in Q4 2023, but had record earnings for the full year.
• Investment Management's pre-tax adjusted operating earnings were $45 million in Q4 2023.
• Full-service recurring deposits in Wealth Solutions grew by 10.4% to $14.7 billion for the year.
• Health Solutions' annualized in-force premiums and fees grew by 19.8% to $3.3 billion in Q4 2023.
• Investment Management experienced $14 billion of net outflows for the year, excluding divested businesses.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While there are positives like record earnings in Health Solutions and strong capital generation, the overall results show a decline in net income and adjusted operating earnings compared to the previous year. The net outflows in Investment Management are also a concern.

Positives

• Health Solutions achieved record after-tax adjusted operating earnings for the full year 2023.
• Voya demonstrated strong capital generation, with $0.8 billion of excess capital in 2023.
• The company actively deployed capital, returning $200 million to shareholders in Q4 through share repurchases and dividends.
• Wealth Solutions experienced a 10.4% growth in full-service recurring deposits, reaching $14.7 billion for the year.
• Health Solutions saw a significant 19.8% increase in annualized in-force premiums and fees, reaching $3.3 billion in Q4 2023.
• Total client assets in Wealth Solutions grew by 14% year-over-year, reaching $544 billion.

Negatives

• Fourth-quarter 2023 net income available to common shareholders decreased to $118 million, compared to $190 million in Q4 2022.
• After-tax adjusted operating earnings for Q4 2023 were $174 million, down from $227 million in Q4 2022.
• Full-year 2023 after-tax adjusted operating earnings were $763 million, compared to $807 million in 2022.
• Health Solutions' Q4 2023 pre-tax adjusted operating earnings decreased to $44 million, down from $78 million in the prior-year period.
• Investment Management experienced $14 billion of net outflows for the year, excluding divested businesses.
• Wealth Solutions adjusted operating margin for the year ended Dec. 31, 2023, excluding notables, was 37.3%, compared with 39.3% in the prior-year period.

Risks

• The decrease in net income and adjusted operating earnings in Q4 2023 compared to Q4 2022 indicates potential challenges in maintaining profitability.
• The decline in Health Solutions' Q4 earnings suggests potential volatility in underwriting results.
• The significant net outflows in Investment Management could impact future revenue and profitability.
• The integration of Benefitfocus, while contributing to revenue growth, has resulted in a lower margin profile for Health Solutions.
• Macroeconomic headwinds are impacting the industry, particularly Institutional net flows, and the unwinding of the company's former international distribution partnership.

Future Outlook

Voya expects additional commercial momentum, healthy margins, strong cash generation, and further return of excess capital to shareholders in 2024, with a focus on share repurchases and dividends.

Management Comments

• Our fourth-quarter and full-year 2023 results demonstrate our commitment to execution; discipline in managing expenses while continuing to reinvest in our businesses; and the benefits of Voyas diversified, capital-light business mix, said Heather Lavallee, chief executive officer, Voya Financial.
• We are optimistic about our continued commercial momentum in 2024, including strong pipelines in Wealth Solutions and Investment Management, as well as a record-setting start of the year in Health Solutions.
• Looking ahead, our diversified revenue sources and prudent expense-management track record give us confidence in our ability to consistently generate strong free cash flows, and our capital deployment focus in 2024 will be on share repurchases and dividends, added Lavallee.

Industry Context

This announcement reflects the ongoing trends in the financial services industry, where companies are focusing on diversified revenue streams and capital management. The emphasis on health solutions aligns with the growing demand for workplace benefits and savings solutions. The challenges in Investment Management highlight the impact of macroeconomic factors on asset flows.

Comparison to Industry Standards

• Voya's Wealth Solutions segment's 10.4% growth in full-service recurring deposits is a positive sign, indicating strong client retention and acquisition, which is comparable to industry leaders like Fidelity and T. Rowe Price.
• The 19.8% growth in Health Solutions' annualized in-force premiums and fees is a strong performance, potentially outperforming peers like Aetna and Cigna in the benefits administration space.
• However, the $14 billion net outflows in Investment Management, excluding divested businesses, is a concern, as it lags behind competitors like BlackRock and Vanguard, which have generally seen positive net inflows.
• Voya's adjusted operating margin in Wealth Solutions at 37.3% is competitive but slightly lower than some of its peers, indicating room for improvement in operational efficiency.
• The company's capital deployment strategy, focusing on share repurchases and dividends, is consistent with industry trends, but the level of deployment needs to be compared to peers like Prudential and Lincoln Financial to assess its effectiveness.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net income and adjusted operating earnings, but may be pleased with the capital deployment through share repurchases and dividends.
• Employees may be encouraged by the record performance in Health Solutions and the company's commitment to reinvesting in its businesses.
• Customers may benefit from Voya's focus on workplace benefits, savings, and investment solutions.
• Suppliers and creditors may be reassured by the company's strong capital generation and prudent expense management.

Next Steps

• Voya will host a conference call on February 7, 2024, to discuss the results.
• The company will continue to focus on commercial momentum, expense management, and capital deployment in 2024.
• Voya will file its Annual Report on Form 10-K for the year ended December 31, 2023, on or before February 29, 2024.

Key Dates

Keywords

Voya Financial, Financial Results, Adjusted Operating Earnings, Health Solutions, Wealth Solutions, Investment Management, Share Repurchases, Dividends, Capital Generation, Net Income, Client Assets, Recurring Deposits, Premiums, Net Outflows