Voya Financial, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited U.S. GAAP results. Voya provides retirement and wealth services, employee benefits and insurance, and investment management through Wealth Solutions, Health Solutions, and Investment Management.
Key financial results
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Total revenue | $2.051 billion | $1.835 billion; up $216 million |
| Net income | $288 million | $129 million |
| Net income available to common shareholders | $234 million; diluted EPS $2.24 | $69 million; diluted EPS $0.63 |
| Income before income taxes | $287 million | $141 million |
| Net investment income | $529 million | $545 million |
| Operating cash flow | $231 million | $156 million |
Revenue growth reflected higher fee income (+$49 million), premiums (+$115 million) and net gains, partly offset by lower net investment income. Net gains improved to $43 million from a $16 million loss, mainly due to favorable derivative valuation changes from interest-rate movements; fair-value-option securities partly offset the benefit. The 2024 tax benefit was $1 million, including a $38 million benefit from the Security Life of Denver capital loss carryback, versus $12 million of tax expense in Q1 2023.
Segments and operating trends
- Wealth Solutions: Adjusted operating earnings before tax increased to $186 million from $132 million. Adjusted operating margin rose to 36.9% from 28.6%, supported by higher fee income, market appreciation, business growth, and lower expenses. Total client assets were $573.9 billion, up from $497.9 billion a year earlier. Net flows were mixed: full-service net flows were $22 million, recordkeeping flows were negative $311 million, and investment-only stable-value flows were negative $919 million.
- Health Solutions: Adjusted operating earnings declined to $59 million from $94 million; margin fell to 20.3% from 30.7%. Premiums and sales grew, but higher benefits, growth-related expenses, and a higher stop-loss loss ratio weighed on results. The stop-loss loss ratio was 84.2%, versus 70.1%; the total aggregate loss ratio was 73.8%, versus 65.5%.
- Investment Management: Adjusted operating earnings, including Allianz noncontrolling interest, increased to $53 million from $42 million; margin rose to 22.7% from 18.5%. Retail net inflows partly offset institutional and divested-business outflows. Segment AUM and AUA were $384.3 billion, broadly stable year over year.
- Corporate: Adjusted operating loss including Allianz noncontrolling interest narrowed to $64 million from $69 million, primarily on lower expenses and interest costs.
Financial position, liquidity, and capital
- Total assets were $161.6 billion at March 31, 2024, versus $157.1 billion at year-end; separate-account assets and matching liabilities were $98.6 billion.
- Cash and cash equivalents were $995 million, excluding $181 million held in consolidated investment entities. Consolidated cash, including those entities, was $1.176 billion. Cash increased $58 million during the quarter; investing activities provided $1.082 billion and financing activities used $1.255 billion.
- Debt carrying value was $2.100 billion, including $393 million classified as short-term/current debt. Voya reported compliance with debt covenants and had an undrawn $500 million revolving credit facility. Its 3.976% senior notes due 2025 are a near-term maturity to monitor.
- Management estimated excess capital at approximately $0.4 billion and the adjusted combined RBC ratio at 412%. These are management estimates; subsidiary dividend capacity is subject to insurance regulation.
- Total shareholders’ equity was $5.697 billion, down from $5.878 billion at year-end. AOCI was a loss of $2.469 billion. The debt-to-capital ratio was 33.6%, and financial leverage excluding AOCI was 28.1%, up from 27.8%.
Material changes, outlook, and risks
- Management described a strategic focus on higher-return, capital-light workplace benefits, retirement, and investment-management businesses, and cited a path to adjusted operating EPS growth through revenue growth, margin expansion, and disciplined capital management. The filing provides no specific earnings or revenue guidance.
- Health Solutions’ higher stop-loss claims and loss ratio are a notable adverse trend despite premium and sales growth. Management attributed the increase in benefits partly to in-force growth and the higher stop-loss loss ratio.
- Capital returns increased: Voya repurchased 2.4 million shares for $172 million and paid $41 million in common dividends during the quarter. The board authorized an additional $500 million of repurchases on April 23, 2024; the authorization is discretionary. Subsequent to quarter-end, the company repurchased 802,725 shares for $56 million.
- Investment risks include interest-rate and credit-spread movements, equity markets, and alternative-investment volatility. Fixed maturities had $2.807 billion of gross unrealized losses at quarter-end, which the company attributed to interest rates; it reported no intent impairments and said it did not expect to be required to sell the affected securities before recovery.
- Commercial mortgage loans totaled $5.118 billion. Loans with debt-service coverage below 1.0x totaled $741 million; $35 million were in non-accrual status, compared with $16 million at year-end. Reinsurance recoverables were $11.812 billion, making reinsurer creditworthiness and collectability relevant risks.
- Litigation and regulatory matters include an ERISA class action and an arbitration demand over Czech Asset Management earn-outs. Management said pending matters are not likely to materially affect financial position based on current information, but estimated reasonably possible losses in excess of accruals of up to approximately $100 million. Approximately $91 million of previously accrued carried interest could be reversed if fund performance hurdles are not maintained.
- New DOL retirement-advice fiduciary rules are expected to take effect around September 23, 2024; Voya was assessing their effect and currently anticipated no significant impact. The filing also identifies market, liquidity, ratings, investment, operational, cybersecurity, tax, regulatory, and legal risks.
Important facts for investors to verify
- Whether the elevated Health Solutions stop-loss loss ratio persists and how it affects segment earnings and margins.
- Drivers of Wealth Solutions flows, particularly stable-value outflows and the timing of recordkeeping deposits deferred to Q2.
- Interest-rate and market sensitivity of investment marks, derivatives, policy reserves, and reported GAAP earnings.
- Credit quality, delinquencies, and loss experience in mortgage loans and fixed-maturity holdings, along with collectability of reinsurance recoverables.
- Capital availability after repurchases and dividends, the 2025 debt maturity, and regulatory limits on subsidiary distributions.
- Developments in the disclosed litigation, arbitration, carried-interest reversal exposure, and implementation of the DOL rules.