Voya Financial, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• New Hires: Welcomed Jay Kaduson as CEO of Workplace Solutions and Mike Katz as CFO; recognized Don Templin's contributions.
• Stop Loss Focus: Prioritize margin improvement through rate increases and better risk selection for the January 2025 block, with actions applied to upcoming renewals.
• OneAmerica Integration: Making good progress, expecting $200 million revenue and $75 million incremental operating earnings from OneAmerica in 2025; focus on smooth transition and customer retention.
• Capital Allocation: Returned $800 million of excess capital to shareholders in 2024; expect significant increase in excess capital generation in 2025 and 2026.
• Investments: Focus on Health Solutions to enhance leave management and disability administration capabilities; strategic investment in Sconset Re for annuities market growth.

Segment Performance

• Health Solutions: Adjusted operating earnings were $40 million for the year. Stop Loss results in 2024 were unfavorable but expect improvement in 2025 with a 21% net effective rate increase for the January 2025 cohort and strengthened underwriting risk selection. Voluntary loss ratios are expected to increase in 2025.
• Wealth Solutions: Generated nearly $2 billion of total defined contribution net flows in 2024. Adjusted operating earnings were $820 million for the full year, up 30% year-over-year. Expect solid commercial performance in 2025 with over $20 billion in pipeline wins.
• Investment Management: Total net inflows for 2024 were $12.5 billion. Adjusted operating earnings grew 20% in 2024. Expect adjusted operating margins in 2025 to be consistent with 2024, driven by strong performance fees and expense discipline.

Guidance

• 2025 Expectations: Aim to improve Stop Loss margins, successfully integrate OneAmerica, and drive commercial momentum across core businesses. Expect $200 million revenue and $75 million incremental operating earnings from OneAmerica in 2025.
• Capital Generation: Plan to significantly increase excess capital generation in 2025 and 2026 through strategic investments and improved business performance.
• Wealth Solutions: Expect solid commercial performance in 2025 with over $20 billion in pipeline wins, despite potential net flow volatility from OneAmerica integration.

Risks

• Stop Loss Unfavorable Experience: Unfavorable claims experience in 2024, but actions taken to improve margins in 2025 carry uncertainty.
• OneAmerica Integration: Potential volatility in net flows during integration, though tracking as expected.
• Market Volatility: Impact on Wealth Solutions net flows due to equity market movements, with higher equity markets affecting surrenders.

Question and Answer

Q: On ROE guide change A: Mike Katz discussed factors like Stop Loss results, leave management investment, and prepayment income affecting ROE, expecting to return to target range of 14% to 16% in 2026.

Q: Stop Loss risk selection A: Mike Katz explained rate increases and improved risk selection actions taken, confident in underwriting improvements based on January 2025 block data.

Q: Wealth flows volatility from OneAmerica A: Heather Lavallee noted strong fundamentals in Wealth Solutions but expected some volatility in net flows during OneAmerica integration, with fundamentals remaining strong.

Q: Voluntary business loss experience A: Heather Lavallee explained higher utilization driving loss experience, focusing on increasing participation rates through administrative capabilities to enhance client value.

Q: OneAmerica integration surprises A: Heather Lavallee mentioned positive feedback from clients and advisers, retention tracking as expected, with smooth implementation on track.

Q: Asset management divested flows A: Matthew Toms discussed divested flows as known and manageable, with growth outpacing outflows due to strong performance in core businesses.

Q: Stop Loss risk selection actions A: Michael Katz and Heather Lavallee explained actions like renewing healthy accounts and factoring in higher claim frequencies into pricing to improve Stop Loss margins.

Q: Wealth Solutions in-plan annuities A: Heather Lavallee mentioned strategy to explore product enhancements and partnerships for in-plan annuities, with Jay Kaduson expected to focus on partnerships for growth.

Q: Sconset Re and insurance clients A: Matthew Toms discussed Sconset Re as a strategic investment, with leading position in insurance asset management, leveraging capabilities to guide clients on sidecar solutions.

Q: Annual marks on funds A: Matthew Toms discussed visibility on annual marks, expecting to be back on long-term return contract with current market conditions, including lower interest rates and broader equity markets.