Voya Financial, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Voya's capital-light businesses generate diverse revenue streams and consistent free cash flow. Strong capital and liquidity support a healthy balance sheet.
• In Wealth Solutions, strong commercial results with defined contributions organic net flows and assets from OneAmerica acquisition. Full-service known sales showed momentum.
• Investment Management generated strong net inflows across various strategies. Pipeline remains strong for long-term organic growth.
• Health Solutions improved margins, with progress in Stop Loss experience and addressing Group Life and Voluntary challenges.
• Balance sheet remains strong with excess capital, RBC ratio of 385%, and debt repaid, returning capital to shareholders.

Segment Performance

• Wealth Solutions: Generated $207 million of adjusted operating earnings in the quarter, a 11% year-over-year growth. Achieved defined contributions organic net flows of approximately $30 billion. Added $60 billion of assets from the OneAmerica acquisition. Full-service known sales increased 7% in the first quarter compared to the prior year.
• Investment Management: Adjusted operating earnings were $41 million in the first quarter. Generated $7.7 billion of net inflows, representing 2.5% organic growth. Net inflows were across a breadth of strategies, including institutional and retail markets.
• Health Solutions: Adjusted operating earnings for Health Solutions were $46 million in the quarter. Stop Loss had an estimated loss ratio of 87% for the January 2025 cohort. Group Life claims were elevated in January but normalized in February and March. Voluntary increased reserves due to uncertain environment and potential utilization impact.

Guidance

• Expect second quarter alternative returns to be below long-term expectations due to current macro environment.
• Plan to further strengthen excess capital in the second quarter.
• Believes companies with healthy balance sheets and high free cash flow businesses are well-positioned to navigate volatile environments and drive value for shareholders.

Risks

• Economic signals mixed and market volatility elevated.
• Uncertainty in Voluntary business leading to reserve increases for potential higher utilization.
• Potential impact of macro environment on claims experience and utilization in Health Solutions.

Q: On Wealth earnings, how does the first quarter relate to the 35%-39% margin guidance?

A: The only piece in the quarter was spread-based assets being a little higher than expected. Second quarter expected to have some offset from expense changes with targeted investments but not as dramatic as last year.

Q: On Voluntary, why were reserves increased?

A: Increased reserves due to economic uncertainty and potential higher utilization later in the year to smooth out results.

Q: On Stop Loss, how was the 87% estimate for 2025 cohort arrived at?

A: Based on performance relative to 2024 cohort, with early views from 50% notice reports and first dollar trend, and continued focus on reserving and pricing.

Q: On Voluntary top line slowing, what's the reason?

A: Lower jumbo cases in Q1 versus same period last year, but pipeline is strong and commercial momentum is there.

Q: On retail wealth capabilities, update?

A: Making modest investments in hiring advisers, technology, and leveraging Jay Kaduson's retail wealth management background to build capabilities.

Q: On OneAmerica mix shift, any change?

A: Just reporting change during TSA period, no real change to earnings and revenue perspective.

Q: On Investment Management net inflows, any outsized mandates?

A: Broad drivers across private assets, fixed income, CLOs, and income/growth strategies, not lumpy.

Q: On Voluntary reserves strengthening, macro reason?

A: Economic uncertainty potentially leading to higher benefit utilization, with IBNR held for potential later impact.

Q: On leave management spend, run rate and revenue?

A: ~$50 million expected spend, with bundling benefits and early favorable client feedback, implementation on track for 2026.

Q: On Wealth Solutions net flows and OneAmerica shock lapse?

A: OneAmerica retention in line with expectations, commercial momentum weighted to first half with episodic large plans.

Q: On $6 million severance in quarter, location?

A: Not specifically affecting one business, focus on expense management with no big expected in future quarters.

Q: On Investment Management flow performance and Sconset Re?

A: Sconset is a component on private asset side, building over time, flows driven by breadth of client types and products.