Voya Financial, Inc. (NYSE: VOYA) today announced financial results for
the second quarter of 2018.
“Our second-quarter results demonstrate our commitment to growth,
operational excellence and continued good stewardship of shareholder
capital,” said Rodney O. Martin, Jr., chairman and CEO, Voya Financial,
Inc. “A top priority for us this year was closing the transaction to
sell the majority of our annuities businesses. Through this transaction,
which we completed on June 1, we have significantly reduced market and
insurance risk — transforming Voya into a simpler, more focused company
with higher-growth, higher-return, capital-light businesses. At the same
time, we continue to execute on our other 2018 priorities, which include
several cost-saving, capital and growth initiatives. Our commitment to
achieving these priorities is demonstrated in our financial results this
quarter.
“Excluding DAC/VOBA and other intangibles unlocking, our adjusted
operating earnings grew 20% compared with the second quarter of 2017. We
are executing on our plans to achieve $1.30 to $1.40 per share of
adjusted operating earnings and our targeted cost savings of $110 to
$130 million by the end of the second quarter of 2019.
“During the second quarter, we delivered on our plan to repurchase $1
billion of Voya shares by June 30, 2018. We intend to buy back an
additional $500 million of our common stock by the end of 2018 as we
continue to generate greater value for Voya’s shareholders. As a more
focused, simpler company, we are now better positioned to drive greater
customer and shareholder value and achieve our vision to be America’s
Retirement Company,” added Martin.
SECOND-QUARTER 2018 SUMMARY
Book value, excluding AOCI3
1 This press release includes certain non-GAAP financial
measures. More information on these measures and reconciliations to the
most comparable U.S. GAAP measures can be found in the “Use of Non-GAAP
Financial Measures” section of this release and in the company’s
Quarterly Investor Supplement.
2 Excess capital as of June 30, 2018 of $699 million is that
which is above the company’s holding company liquidity target of $200
million and estimated statutory surplus in excess of a 425% combined
risk-based capital (RBC) ratio.
3 This press release includes certain non-GAAP financial
measures. More information on these measures and reconciliations to the
most comparable U.S. GAAP measures can be found in the “Use of Non-GAAP
Financial Measures” section of this release and in the company’s
Quarterly Investor Supplement.
Second-quarter 2018 net income available to common shareholders was $166
million, or $0.96 per diluted share, compared with $167 million, or
$0.89 per diluted share in the second quarter of 2017. The increase is
largely due to higher income from continuing operations.
Second-quarter 2018 adjusted operating earnings were $195 million, or
$1.13 per diluted share, after-tax, up from $73 million, or $0.39 per
diluted share, after-tax, in the second quarter of 2017. The increase
was largely due to second-quarter 2017 results having higher negative
DAC/VOBA and other intangibles unlocking, driven by changes in
guaranteed minimum interest rate (“GMIR”) provisions for certain
retirement plan contracts. In addition, fee income increased, and
expenses declined year over year.
BUSINESS HIGHLIGHTS
SEGMENT DISCUSSIONS
The following segment discussions compare the second quarter of 2018
with the second quarter of 2017, unless otherwise noted. All figures are
presented before income taxes.
Retirement
Retirement adjusted operating earnings were $169 million, up from $33
million. Second-quarter 2018 results reflect $3 million of positive
DAC/VOBA and other intangibles unlocking. Conversely, the second quarter
of 2017 had $114 million of negative DAC/VOBA and other intangibles
unlocking primarily due to changes in GMIR provisions for certain
retirement plan contracts.
Key earnings drivers included:
During the second quarter of 2018, full service net inflows were more
than offset by stable value net outflows.
Retirement AUM was $146 billion, up from $144 billion as of March 31,
2018. Retirement AUM increased from $130 billion as of June 30, 2017,
primarily due to equity market and business growth as well as the
transfer of certain investment-only products from Corporate to
Retirement in the first quarter of 2018.
Investment Management
Investment Management adjusted operating earnings were $52 million
compared with $85 million. Key earnings drivers included:
During the second quarter of 2018, Investment Management sourced net
inflows were driven by institutional net flows primarily reflecting the
issuance of three collateralized loan obligations during the quarter.
Third-party sales (which exclude general account assets of Voya
Financial’s insurance company subsidiaries) were $5.7 billion, compared
with $4.7 billion in the first quarter of 2018 and $6.4 billion in the
second quarter of 2017. Third-party AUM totaled $152 billion as of June
30, 2018, up from $141 billion as of March 31, 2018, and up from $135
billion as of June 30, 2017. The increase was largely due to positive
net flows and the addition of $9.7 billion of AUM retained from Voya’s
general account assets in connection with Voya’s sale of the majority of
its annuities businesses.
Employee Benefits
Employee Benefits adjusted operating earnings were $35 million, up from
$27 million. Key earnings drivers included:
The loss ratio for Group Life was 81.5%, compared with 70.5% in the
second quarter of 2017. The loss ratio for Stop Loss was 81.7%, compared
with 85.6% during the same period last year. The annual loss ratios for
Stop Loss and Group Life are expected to be between the company’s
targeted annual range of 77-80%.
Compared with the second quarter of 2017, total Employee Benefits sales
increased 3%, and in-force premiums increased 2%, reflecting strong
growth in Voluntary premiums and continued pricing discipline in Stop
Loss.
Individual Life
Individual Life adjusted operating earnings were $41 million compared
with $62 million. Second-quarter 2018 results were lower due to $30
million of higher negative DAC/VOBA and other intangibles unlocking
driven by changes in reinsurance and unfavorable mortality experience on
interest-sensitive products.
Key earnings drivers included:
Total Individual Life sales, which primarily consist of indexed life
insurance, were $18 million compared with $19 million.
Corporate
Corporate adjusted operating losses were $59 million, compared with
losses of $100 million. The improvement was largely due to the
reallocation of strategic investment spending into the business segments
and a $10 million one-time favorable reserve refinement associated with
the legacy annuities.
Loss on Sale
For the three months ended June 30, 2018, the company recorded a
favorable adjustment of $56 million, after-tax, to the previously
estimated loss on the sale of the majority of its variable and fixed
annuities business.
Share Repurchases
In the second quarter of 2018, Voya repurchased 9,617,162 shares of its
common stock at an average price per share of $51.99 for an aggregate
purchase price of approximately $500 million. Voya had approximately
$511 million remaining under its share repurchase authorization as of
June 30, 2018.
Supplementary Financial Information
More detailed financial information can be found in the company’s
Quarterly Investor Supplement, which is available on Voya’s investor
relations website, investors.voya.com.
Earnings Call and Slide Presentation
Voya will host a conference call on Thursday, Aug. 2, 2018, at 8 a.m.
ET, to discuss the company’s second-quarter 2018 results. The call and
slide presentation can be accessed via the company’s investor relations
website at investors.voya.com.
A replay of the call will be available on the company’s investor
relations website at investors.voya.com
starting at 1 p.m. ET on Aug. 2, 2018.
About Voya Financial
Voya Financial, Inc. (NYSE: VOYA), helps Americans plan, invest and
protect their savings — to get ready to retire better. Serving the
financial needs of approximately 14.3 million individual and
institutional customers in the United States, Voya is a Fortune 500
company that had $8.6 billion in revenue in 2017. The company had $528
billion in total assets under management and administration as of June
30, 2018. With a clear mission to make a secure financial future
possible — one person, one family, one institution at a time — Voya’s
vision is to be America’s Retirement Company®. Certified as a
“Great Place to Work” by the Great Place to Work® Institute,
Voya is equally committed to conducting business in a way that is
socially, environmentally, economically and ethically responsible. Voya
has been recognized as one of the 2018 World’s Most Ethical Companies®
by the Ethisphere Institute, one of the 2018 World’s Most Admired
Companies by Fortune magazine and one of the Top Green Companies
in the U.S. by Newsweek magazine. For more information, visit voya.com.
Follow Voya Financial on Facebook,
LinkedIn
and Twitter @Voya.
Use of Non-GAAP Financial Measures
Adjusted operating earnings before income taxes is a measure used to
evaluate segment performance. We believe that adjusted operating
earnings before income taxes provides a meaningful measure of Voya’s
business and segment performances and enhances the understanding of our
financial results by focusing on the operating performance and trends of
the underlying business segments and excluding items that tend to be
highly variable from period to period based on capital market conditions
and/or other factors. We use the same accounting policies and procedures
to measure segment adjusted operating earnings before income taxes as we
do for the directly comparable U.S. GAAP measure Income (loss) from
continuing operations before income taxes.
Adjusted operating earnings before income taxes does not replace Income
(loss) from continuing operations before income taxes as the comparable
U.S. GAAP measure of our consolidated results of operations. Therefore,
we believe that it is useful to evaluate both Income (loss) from
continuing operations before income taxes and Adjusted operating
earnings before income taxes when reviewing our financial and operating
performance. Each segment’s adjusted operating earnings before income
taxes is calculated by adjusting Income (loss) from continuing
operations before income taxes for the following items:
Adjusted operating earnings before income taxes for Corporate in the
prior period includes Net investment gains (losses) and Net guaranteed
benefit hedging gains (losses) associated with the retained CBVA and
annuities businesses that are not components of discontinued operations.
These retained amounts are insignificant and do not distort the ability
to make a meaningful evaluation of the trends of Corporate activities.
Income (loss) related to businesses exited through reinsurance or
divestment (including net investment gains (losses) on securities sold
and expenses directly related to these transactions) is excluded from
the results of operations from adjusted operating earnings before income
taxes. When we present the adjustments to income (loss) from continuing
operations before income taxes on a consolidated basis, each adjustment
excludes the relative portions attributable to businesses exited through
reinsurance or divestment.
The most directly comparable U.S. GAAP measure to adjusted operating
earnings before income taxes is income (loss) from continuing operations
before income taxes. For a reconciliation of income (loss) from
continuing operations before income taxes to adjusted operating earnings
before income taxes, see the tables that accompany this release, as well
as our Quarterly Investor Supplement.
Adjusted operating earnings – excluding unlocking is also a non-GAAP
financial measure. This measure excludes from adjusted operating
earnings before income taxes the following items:
In addition to net income (loss) per share, we report adjusted operating
earnings per share (diluted) because we believe that adjusted operating
earnings before income taxes provides a meaningful measure of its
business and segment performances and enhances the understanding of our
financial results by focusing on the operating performance and trends of
the underlying business segments and excluding items that tend to be
highly variable from period to period based on capital market conditions
and/or other factors.
In addition to book value per share including accumulated other
comprehensive income (AOCI), we also report book value per share
excluding AOCI and shareholders’ equity excluding AOCI. Included in AOCI
are investment portfolio unrealized gains or losses. In the ordinary
course of business we do not plan to sell most investments for the sole
purpose of realizing gains or losses, and book value per share excluding
AOCI and shareholders’ equity excluding AOCI provide a measure
consistent with that view. The adjusted debt to capital calculation
excludes AOCI and includes a 25% equity treatment afforded to
subordinated debt.
In our Investment Management business, adjusted operating margin
excluding Investment Capital results is reported because results from
Investment Capital can be volatile and excluding the effect of this item
can improve period-to-period comparability.
For a reconciliation of these non-GAAP measures to the most directly
comparable U.S. GAAP measures, refer to the tables that accompany this
release, as well as our Quarterly Investor Supplement.
We also analyze our segment performance based on the sources of
earnings. We believe this supplemental information is useful in order to
gain a better understanding of our adjusted operating earnings before
income taxes for the following reasons: (1) we analyze our business
using this information and (2) this presentation can be helpful for
investors to understand the main drivers of adjusted operating earnings
(loss) before income taxes. The sources of earnings are defined as such:
More details on these sources of earnings can be found in Voya
Financial’s Quarterly Investor Supplement, which is available on Voya
Financial’s investor relations website, investors.voya.com.
Forward-Looking and Other Cautionary Statements
This press release contains forward-looking statements. Forward-looking
statements include statements relating to future developments in our
business or expectations for our future financial performance and any
statement not involving a historical fact. Forward-looking statements
use words such as “anticipate,” “believe,” “estimate,” “expect,”
“intend,” “plan,” and other words and terms of similar meaning in
connection with a discussion of future operating or financial
performance. Actual results, performance or events may differ materially
from those projected in any forward-looking statement due to, among
other things, (i) general economic conditions, particularly economic
conditions in our core markets, (ii) performance of financial markets,
including emerging markets, (iii) the frequency and severity of insured
loss events, (iv) mortality and morbidity levels, (v) persistency and
lapse levels, (vi) interest rates, (vii) currency exchange rates, (viii)
general competitive factors, (ix) changes in laws and regulations, such
as those relating to Federal taxation, state insurance regulations and
NAIC regulations and guidelines, including those affecting reserve
requirements for variable annuity policies and the use of and possible
application of NAIC accreditation standards to captive reinsurance
entities, those made pursuant to the Dodd-Frank Wall Street Reform and
Consumer Protection Act, and the U.S. Department of Labor’s final rules
and exemptions pertaining to the fiduciary status of providers of
investment advice, or any amendments thereto, (x) changes in the
policies of governments and/or regulatory authorities, and (xi) our
ability to successfully manage the separation of Venerable, including
the transition services, on the expected timeline and economic terms.
Factors that may cause actual results to differ from those in any
forward-looking statement also include those described under “Risk
Factors” and “Management’s Discussion and Analysis of Results of
Operations and Financial Condition – Trends and Uncertainties” in our
Annual Report on Form 10-K for the year ended Dec. 31, 2017, which the
company filed with the Securities and Exchange Commission on Feb. 23,
2018 and in our Quarterly Report on Form 10-Q for the three-month period
ended June 30, 2018, which the company expects to file with the
Securities and Exchange Commission on or before Aug. 8, 2018.
VOYA-IR
(1) Voya Financial assumes a 32% tax rate on
adjusted operating earnings and all components of adjusted operating
earnings described as “after tax” for 2017. For 2018, the adjusted
operating effective tax rate is based on the actual income tax expense
for the current period related to Income (loss) from continuing
operations, less estimated taxes on non-operating items assuming a 21%
corporate tax rate and other non-operating impacts such as those related
to restructuring and the Tax Cuts and Jobs Act. A 35% tax rate is
applied to all non-operating items in 2017 and 21% in 2018. The 32% tax
rate for 2017 adjusted operating earnings and components reflects the
estimated benefit of the dividend received deduction related to the
company’s Retirement, Investment Management, Employee Benefits and
Individual Life segments.
(2) “Other adjustments” consists of net guaranteed benefit
hedging gains (losses) and related charges and adjustments; income
(loss) from business exited; immediate recognition of net actuarial
gains (losses) related to pension and other post-retirement benefit
obligations and gains (losses) from plan amendments and curtailments;
expenses associated with the rebranding of Voya Financial from ING U.S.;
and restructuring expenses (severance, lease write-offs, etc.).
Adjusted operating expenses
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