Voya Financial, Inc. — 2019 Form 10-K Summary
Business context and reporting period
For the fiscal year ended December 31, 2019. Voya is a U.S. retirement, investment management and employee benefits company serving approximately 13.8 million customers, workplace participants and institutions. Its continuing reportable segments are Retirement, Investment Management and Employee Benefits; results from the planned Individual Life and legacy annuities divestiture are reported as discontinued operations.
Financial and operating performance
Amounts are U.S. dollars; financial figures are in millions unless stated otherwise.
| Metric | 2019 | 2018 |
|---|---|---|
| Total revenue | $7,476 | $7,163 |
| Income from continuing operations before tax | $560 | $528 |
| Income from continuing operations, net | $765 | $491 |
| Adjusted operating earnings before tax (non-GAAP) | $591 | $651 |
| Discontinued operations, net of tax | $(1,066) | $529 |
| Net income (loss) available to common shareholders | $(379) | $875 |
| Basic EPS: continuing operations / total | $4.88 / $(2.69) | $2.12 / $5.36 |
| Operating cash flow | $1,310 | $1,868 |
| Long-term debt at year-end | $3,042 | $3,136 |
- Revenue rose about 4%; continuing pre-tax income increased about 6%, while adjusted operating earnings fell about 9%. Reported common-shareholder net loss chiefly reflects a $1.108 billion after-tax estimated loss on the planned Individual Life transaction.
- Year-end total AUM and AUA were $602.8 billion, up from $511.3 billion; shareholders’ equity excluding AOCI was $6.1 billion, down from $7.6 billion. Cash and cash equivalents were $1.181 billion for continuing operations. The filing does not provide a single consolidated current-liquidity ratio.
- Segment adjusted operating earnings before tax: Retirement $588 million (down from $701 million); Investment Management $180 million (down from $205 million); Employee Benefits $199 million (up from $160 million); Corporate loss $376 million, improved from $415 million.
- Employee Benefits annualized in-force premiums increased to $2.138 billion from $1.939 billion; total loss ratio improved to 70.2% from 72.5%. Investment Management reported net flows of $2.780 billion, compared with outflows of $1.576 billion in 2018.
- Continuing operations generated $1.310 billion of operating cash flow, versus $1.868 billion. Voya repurchased $1.136 billion of common stock and paid $44 million in common dividends; it also issued $293 million net of Series B preferred stock.
Material changes, outlook and risks
- On December 18, 2019, Voya agreed to sell SLD, SLDI and related entities and reinsure substantially all remaining individual life and legacy non-retirement annuity business to SLD. The approximately $1.25 billion purchase price includes about $902 million cash, a $225 million interest in Resolution Life Group Holdings and $123 million of SLD surplus notes retained by Voya. Closing was expected by September 30, 2020, subject to regulatory and other conditions.
- Voya estimated a further $250 million to $750 million reduction in shareholders’ equity excluding AOCI at transaction close, partly offset by an anticipated book-value gain on transferred assets. The sale estimate and the $1.108 billion loss are subject to quarterly remeasurement and may change before closing.
- Management emphasized a strategic shift toward higher-growth, higher-return, capital-light workplace and institutional businesses. It cited continued pressure from low interest rates: 2020 reinvestment yields were expected to be below the existing portfolio yield. No consolidated earnings guidance was provided in the supplied filing text.
- Management targeted an additional $100 million of cost savings by the end of 2020 and expected aggregate restructuring expenses of $250 million to $300 million, including $201 million incurred in 2019. Additional Individual Life transaction-related restructuring costs were not yet estimable and could be material.
- Insurance subsidiaries’ combined estimated RBC ratio was approximately 490%, above the company’s 400% target. However, dividend capacity is constrained: Minnesota and Colorado principal insurers lacked ordinary dividend capacity, and Voya depends on subsidiary distributions to meet holding-company obligations.
- Key risks include market, interest-rate, credit and liquidity volatility; reinsurance and counterparty exposure; regulatory approval and execution of the divestiture; reserve and actuarial-estimate uncertainty; and competition. The filing estimates reasonably possible litigation losses above accrued amounts of up to approximately $50 million, while noting that some matters cannot be reasonably estimated. Voya also disclosed a prior SEC settlement involving customer-information controls and ongoing cybersecurity and privacy risks.
Important facts for investors to verify
- Progress, regulatory approvals, final consideration and closing adjustments for the Resolution Life transaction, including the final loss on sale and equity impact.
- Whether Retirement earnings stabilize after the 2019 decline, and whether Employee Benefits growth and loss-ratio improvements persist.
- Cash generation, parent-company liquidity and the capacity of regulated subsidiaries to distribute funds, alongside debt and collateral needs.
- Actual delivery of targeted cost savings and the total restructuring costs, including costs associated with the pending divestiture.
- Changes in RBC ratios, reserve assumptions, investment impairments, reinsurance recoverables and litigation exposures.
The independent auditor issued an unqualified opinion on the consolidated financial statements and on internal control over financial reporting as of December 31, 2019.