Voya Financial, Inc. — 2020 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2020; filed March 1, 2021. Amounts are U.S. dollars. The filing reports full-year results and includes fourth-quarter data.
Business context
Voya provides retirement, investment management and employee benefits products and services, primarily in the United States. At year-end, it reported 14.8 million customers and $700.2 billion of consolidated assets under management and administration (AUM/AUA). Its strategic focus is on higher-growth, higher-return, capital-light workplace and institutional businesses.
On January 4, 2021, after the reporting period, Voya completed the sale of substantially all of its Individual Life and legacy non-retirement annuity businesses to Resolution Life. The 10-K presents those businesses as discontinued operations or held for sale, as applicable.
Financial and operating highlights
| Metric | 2020 | 2019 |
|---|---|---|
| Continuing-operations revenue | $7.649 billion | $7.478 billion |
| Continuing-operations income before tax | $352 million | $574 million |
| Continuing-operations net income | $370 million | $791 million |
| Adjusted operating earnings before tax (non-GAAP) | $495 million | $591 million |
| Net income (loss) available to common shareholders | $(242) million | $(388) million |
| Net cash provided by operating activities | $1.209 billion | $1.310 billion |
- Continuing-operations revenue rose 2.3%. Higher investment income, management fees and premiums were partly offset by greater net realized capital losses and lower other revenue.
- Adjusted operating earnings before tax fell about 16%, chiefly reflecting lower Retirement earnings and higher assumption-related costs; Investment Management and Employee Benefits earnings increased modestly.
- Segment adjusted operating earnings before tax: Retirement $443 million (down from $588 million); Investment Management $197 million (up from $180 million); Employee Benefits $204 million (up from $199 million); Corporate loss $349 million (improved from a $376 million loss). Adjusted operating earnings are non-GAAP and are not a substitute for GAAP results.
- Retirement AUM/AUA increased to $520.3 billion from $440.0 billion; Investment Management AUM/AUA rose to $301.7 billion from $272.7 billion. Total consolidated AUM/AUA increased to $700.2 billion from $602.8 billion.
- Employee Benefits annualized in-force premiums grew to $2.282 billion from $2.138 billion. Group life’s interest-adjusted loss ratio increased to 81.8% from 75.6%; total loss ratio was 70.4% versus 70.2%.
- The filing does not provide a consolidated operating margin as a headline measure. Fourth-quarter continuing-operations pretax income was $495 million; common-shareholder net income was $257 million.
Balance sheet, capital and liquidity
- At December 31, 2020, total assets were $180.5 billion, including $20.7 billion of assets held for sale. Total shareholders’ equity was $11.2 billion; Voya Financial, Inc. shareholders’ equity excluding AOCI was $5.2 billion.
- Long-term debt was $3.044 billion and short-term debt was $1 million. The company reported compliance with debt covenants. Cash and cash equivalents from continuing operations were $1.502 billion; parent-company cash was $229 million.
- Pro forma for the January 2021 Individual Life transaction, estimated excess capital at year-end was approximately $1.8 billion, using management’s definition of capital above a 400% RBC target and holding-company liquidity above a $200 million target. The pro forma combined RBC ratio was estimated at 498%.
- Voya repurchased approximately $526 million of common shares and paid $76 million of common dividends in 2020. The board increased the share-repurchase authorization by $1 billion in January 2021, and the company announced a 10% common-dividend increase.
- As a holding company, Voya depends on subsidiary distributions to meet parent obligations; insurance-regulatory restrictions can limit those distributions. The Connecticut principal insurer had $372 million of ordinary dividend capacity for 2021; Minnesota and Colorado insurers had no ordinary dividend capacity at the time described.
Outlook, risks and unusual items
- Management said COVID-19 had affected results through market volatility, lower interest rates, fee pressure and increased group-life mortality claims. It expected elevated group-life claims into 2021; estimated that each 10,000 incremental U.S. COVID-19 deaths could reduce Employee Benefits operating earnings by approximately $1 million to $2 million. The filing gives no clear consolidated earnings guidance.
- Management said capital levels remained strong and, absent another significant and prolonged market shock, it did not anticipate a material effect on balance sheet, statutory capital or liquidity. Persistently low interest rates, market declines, unemployment, claims, credit deterioration and reduced AUM remain material risks.
- The 2020 annual assumption review produced a net unfavorable $175 million impact to adjusted operating earnings before tax. Lower long-term interest and equity-return assumptions contributed to DAC/VOBA unlocking and loss recognition.
- The Individual Life sale generated a cumulative estimated loss on sale of $1.466 billion, net of tax, recorded in discontinued operations through year-end. The purchase-price true-up remained outstanding and was expected by the second half of 2021. The transaction was expected to reduce shareholders’ equity by $600 million to $800 million excluding AOCI, or $2.5 billion to $2.7 billion including AOCI.
- Voya anticipated an additional $75 million to $125 million of restructuring expense related to the Individual Life disposition, beyond $78 million incurred in 2020. Annual amortization of transaction-related deferred intangibles and a deposit asset was estimated at $125 million to $175 million, net of tax.
- The company settled an SEC share-class disclosure matter for $22.9 million in December 2020. It estimated reasonably possible litigation and regulatory losses in excess of accrued amounts at up to approximately $25 million. It also disclosed $89 million of previously accrued private-equity carried interest potentially subject to reversal if fund hurdles are not maintained.
- The 10-K disclosed immaterial revisions to previously issued financial statements. Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting.
Most important facts for investors to verify
- Final proceeds and any purchase-price adjustment from the Individual Life sale, including effects on capital, equity and transaction-related amortization.
- Whether adjusted operating earnings stabilize after the 2020 assumption changes, and how persistent low rates affect spreads, fees and product economics.
- COVID-19-related claims experience in Employee Benefits, particularly group life, and subsequent loss-ratio trends.
- Insurance-subsidiary RBC ratios, dividend capacity and holding-company liquidity after the divestiture and capital returns.
- Credit quality and allowance trends in commercial mortgages and other investments, including hotel exposure, and the collectability of reinsurance recoverables.
- Progress and cost of stranded-cost reductions, restructuring, and the pending sale of VFA’s independent financial-planning channel to Cetera.