Voya Financial, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed February 24, 2023. This is an annual report, not a standalone fourth-quarter report. Voya provides workplace retirement and benefits solutions and investment management services through Wealth Solutions, Health Solutions and Investment Management. The Individual Life business sale closed in January 2021, making some year-over-year comparisons unusually affected by discontinued operations and reinsurance accounting.
Financial performance and position
Amounts below are in millions of dollars unless otherwise noted. GAAP results and management’s non-GAAP adjusted operating measures are distinct.
| Metric | FY2022 / year-end 2022 | FY2021 / year-end 2021 |
|---|---|---|
| Total revenue | $5,922 | $4,230 |
| Continuing-operations pretax income | $428 | $2,777 |
| Continuing-operations net income | $433 | $2,875 |
| Net income available to common shareholders | $474; diluted continuing-operations EPS $4.30 | $2,090; diluted continuing-operations EPS $16.52 |
| Adjusted operating earnings before tax | $944 | $1,292 |
| Cash from operating activities | $1,352 | $22 |
| Total assets / shareholders’ equity | $147,652 / $5,951 | $171,262 / $9,821 |
| Total AUM and AUA | $741.2 billion | $739.0 billion |
| Debt: short-term and long-term carrying value | $141 / $2,094 | $1 / $2,595 |
| Parent-company cash and cash equivalents | $209 | $202 |
Segments and operating trends
- Wealth Solutions: Adjusted operating earnings before tax were $707, down from $1,110. Lower alternative investment returns, lower average equity markets and a lower earned rate weighed on results. Full-service net flows improved to $2,953 from $576; recordkeeping flows were $766 versus outflows of $6,731 in 2021. Total client assets fell to $474.3 billion from $536.2 billion.
- Health Solutions: Adjusted operating earnings before tax rose to $291 from $204, primarily on premium growth across product lines. Annualized in-force premiums increased to $2.78 billion from $2.51 billion. The total loss ratio improved to 69.4% from 72.5%; the 2022 figure includes a favorable $59 reserve impact from annual assumption updates.
- Investment Management: Adjusted operating earnings before tax, after Allianz’s noncontrolling interest, were $158 versus $239. Added AllianzGI business increased fee income, but investment capital returns were lower and expenses rose. Segment AUM and AUA reached $377.0 billion from $323.7 billion, reflecting acquisition effects; net flows were outflows of $1.1 billion versus inflows of $4.8 billion.
- Corporate: Adjusted operating loss before tax improved to $213 from $261, helped by lower stranded costs and interest expense, partly offset by lower transition-services revenue.
Material changes and unusual items
- GAAP revenue increased by $1.7 billion, but this is not a straightforward indicator of underlying growth: 2021 included large reinsurance-related premium and benefit offsets from the Individual Life transaction. Adjusted operating revenue declined to $6.176 billion from $6.516 billion.
- GAAP pretax income and common earnings fell substantially. The comparison reflects, among other items, prior-year gains connected with the Individual Life transaction and sale of VFA’s independent financial planning channel, as well as 2022 market-value losses. Net gains moved from a $1.423 billion gain to a $685 million loss.
- FY2022 included $67 million of AllianzGI transaction and integration expenses and a $32 million office-building impairment. Management reported $114 million of favorable impact from annual assumption updates to adjusted operating earnings, partly offset by $17 million unfavorable unlocking in exited businesses excluded from that measure.
- Interest rates drove $3.894 billion of after-tax other comprehensive loss in 2022. AOCI shifted from positive $2.100 billion to negative $1.794 billion, largely due to unrealized losses on available-for-sale investments. This materially reduced reported shareholders’ equity; management notes that the securities losses were primarily interest-rate-related and reported no need for an allowance on the cited unrealized-loss securities.
Liquidity, capital and debt
- Consolidated cash and cash equivalents, including cash in consolidated investment entities, ended 2022 at $1.007 billion, down from $1.573 billion. Investing activities used $1.946 billion; financing activities provided $28 million. Cash flow is affected by insurance and investment-contract activity and should not be read like cash flow at a nonfinancial company.
- Voya estimated excess capital of approximately $937 million, defined as insurance-subsidiary capital above a 375% RBC target plus holding-company liquidity above a $200 million target. Combined principal-insurance-subsidiary TAC-to-CAL RBC was estimated at 490%, compared with 550% in 2021; each subsidiary exceeded statutory minimums.
- Financial leverage excluding AOCI was 29.9%, down from 33.0%. Voya repurchased $750 million of common shares and paid $80 million of common dividends in 2022. The April 2022 repurchase authorization left $271 million available at year-end and was set to expire June 30, 2023, unless extended.
- Voya repaid or repurchased $366 million of debt during 2022. The company reported covenant compliance and had $537 million of unused commitments across its listed credit facilities at year-end. Insurance-subsidiary dividends are subject to regulatory restrictions; a $402 million extraordinary distribution from ReliaStar Life was received on February 7, 2023.
Outlook, risks and contingencies
- Management describes a strategy focused on adjusted operating earnings per-share growth through revenue growth, margin expansion and disciplined capital management, but the filing provides no specific quantified earnings or revenue guidance.
- Management expected near-term reinvestment yields on fixed-income purchases to exceed the prevailing portfolio yield, while cautioning that market volatility makes the outlook uncertain. It cited a 5.1% annualized general-account earned yield in fourth-quarter 2022 and expects 9.0% long-term returns on specified alternative investments; actual alternative returns can be volatile.
- On January 24, 2023, Voya acquired Benefitfocus for approximately $570 million in cash consideration, including its outstanding debt and preferred shares. The acquisition was not included in FY2022 financial results. Voya also completed the AllianzGI combination in July 2022, with Voya holding a 76% economic interest and Allianz a 24% interest, and acquired Czech Asset Management in November 2022.
- Key disclosed risks include interest-rate and credit-market volatility, falling asset values or outflows affecting fee revenue, liquidity and collateral demands, investment and counterparty credit risk, policyholder behavior and insurance assumptions, reinsurance collectability, acquisition integration, cybersecurity and privacy, and regulatory change. Voya depends on subsidiary distributions to meet holding-company obligations.
- The company estimated up to approximately $25 million of reasonably possible litigation losses in excess of amounts accrued as of year-end; other matters could not be estimated. Disclosed cases include a stop-loss policy dispute alleging more than $47 million in claims and a certified putative class action concerning universal-life cost-of-insurance charges. Voya denies the allegations. A separate 401(k) fiduciary-duty class action is also disclosed.
- Voya adopted targeted long-duration insurance accounting guidance effective January 1, 2023. Its estimated transition impact had changed with market movements; the filing estimated a $1.1–$1.3 billion reduction in shareholders’ equity as of September 30, 2022. The ultimate effect depends on assumptions and market conditions.
Important facts for investors to verify
- Reconcile the large GAAP year-over-year earnings and revenue changes with the Individual Life reinsurance transaction, discontinued operations and prior-year transaction gains; compare these with adjusted operating results.
- Track the effect of interest rates, credit spreads and equity markets on AOCI, statutory capital, investment margins, collateral needs and Health Solutions claims experience.
- Assess the sustainability of segment earnings—especially Wealth Solutions’ lower adjusted earnings and Health Solutions’ favorable assumption-related reserve impact—and monitor flows and asset levels.
- Review acquisition integration, Benefitfocus’s post-close results and costs, AllianzGI’s contribution to fees and earnings, and the effect of Allianz’s 24% economic interest.
- Monitor subsidiary dividend capacity, the 490% RBC ratio versus management’s 375% target, parent liquidity, debt maturities and the legal and regulatory matters disclosed in the filing.