Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Voya Financial Inc (VOYA, Financial) delivered strong business results in Wealth Solutions and Investment Management, with Wealth Solutions revenue growth and adjusted operating margin exceeding 2024 targets.
- The company is on track to close its acquisition of One America's full-service Retirement business on January 1, which is expected to add at least $75 million of pretax operating earnings in the first year.
- Voya Financial Inc (VOYA) continues to deliver strong free cash flows and is on track to return $800 million in excess capital to shareholders in 2024.
- Investment Management achieved a third consecutive quarter of positive net flows, exceeding the organic growth target for the year, driven by institutional fixed income and third-party insurance channels.
- The company has maintained high plan retention rates in Wealth Solutions, with a 98% retention rate, and expects participant growth to exceed 15% in 2025, excluding the impact of the One America acquisition.
Negative Points
- Adverse Stop Loss results led to disappointing outcomes in Health Solutions, with elevated loss ratios due to underpricing of the 2024 book.
- The unfavorable Stop Loss results have impacted adjusted operating margins, taking the company off course from achieving its full-year EPS target.
- Voya Financial Inc (VOYA) experienced net outflows in Wealth Solutions, driven by higher average account values resulting from recent equity market increases.
- The company expects lower sales and in-force premium year-over-year for the January 2025 Stop Loss book due to prioritizing higher margins over premium growth.
- Third quarter GAAP net income was below adjusted operating earnings due primarily to non-cash items, affecting overall financial performance.
Q & A Highlights
Q: Can you provide more color on the underlying claim trends in Stop Loss and the type of loss inflation built into the 80% loss pick for 2024?
A: Heather Lavallee, CEO: We are disappointed with our Stop Loss results, which have overshadowed strong performances in Wealth and Investment Management. Claims are about one-third complete, showing elevated levels across all categories. We are actively repricing, targeting higher rate increases for 2025, with medical trends factored into our pricing.
Q: Do you think the loss ratio will still be above your 77% to 80% target in 2025, or could you get back to the target with pricing actions?
A: Mike Katz, EVP Finance: We are targeting the 77% to 80% range for 2025. We achieved significantly higher rates for non-January 2024 business, and we expect similar success for January 2025 renewals. We anticipate a modest decline in premium but are confident in improving cash generation.
Q: Regarding the OneAmerica acquisition, are there any changes in your thinking about retention or shock lapse on that business?
A: Mike Katz, EVP Finance: Our $75 million earnings target remains unchanged, factoring in lower persistency around 90%. The technology alignment with OneAmerica should aid in transition and retention, and the earn-out structure provides additional protection.
Q: Can you provide updates on the distribution expansion from the Allianz partnership and the organic growth split across US and international markets?
A: Matthew Toms, CEO of Voya Investment Management: We are pleased with the $3.8 billion net inflows, exceeding our 2% organic growth target. The international retail channel and fixed income demand are strong, with significant contributions from US intermediary and insurance channels.
Q: How should we think about the EPS guidance and growth rate going forward?
A: Mike Katz, EVP Finance: While it's early for 2025 guidance, key drivers include the $75 million earnings from OneAmerica, organic growth in Investment Management and Wealth Solutions, and improved margins in Health Solutions. More specifics will be shared in the Q4 call.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
