First Quarter 2024 Earnings Call Transcript
REFINITIV STREETEVENTS
EDITED TRANSCRIPT
Q1 2024 Voya Financial Inc Earnings Call
EVENT DATE/TIME:
REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us
1
©2024 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
CORPORATE PARTICIPANTS
CONFERENCE CALL PARTICIPANTS
PRESENTATION
Operator
Good morning. Welcome to
I would now like to tuthe call over to
Thank you, and good morning. Welcome to
Turning to Slide 2. Some of the comments made during the call may contain forward-looking statements or refer to certain non-GAAP financial measures within the meaning of federal securities law. GAAP Reconciliations are available in our press release and financial supplement found on our website.
Now joining me on the call are
With that, let's tuto Slide 3 as I would like to tuthe call over to Heather.
Good morning, and thank you for joining us today. As you can see from our first quarter highlights on Slide 4, we delivered on our financial targets. Adjusted operating EPS was
We generated excess capital of approximately
Strong sales momentum and positive flows this quarter have us well on track to achieve our commercial and revenue targets for 2024. We are maintaining strong discipline on spend to enhance margins, while preserving the investments that will sustain our long-term growth. And we continue to deliver an attractive retuon equity, reflecting the achievement of our earnings targets and the capital efficiency of our businesses.
REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us
2
©2024 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Turning to Slide 5. We are executing our strategy with competitive advantages that establish our clear right to win. As one of the few players in the market with leading positions in both Retirement and group benefits, we have a distinct ability to succeed with our workplace benefits and savings strategy. We have scale and credibility across markets, tax codes and employer sizes.
We've distribution through virtually every intermediary channel, providing a diversified platform to grow revenues and add participants, and we have a leading brand in the marketplace with a reputation for putting the customer first and for a culture of service. I will mention just a few examples of how our workplace strategy is landing new clients, expanding our revenue base and deepening our relationships with customers.
In Retirement, we've evolved the way we approach the mid-market for customers who had different needs and expectations from those in smaller and larger market segments. Our efforts are yielding results with mid-market sales up almost 300% over the same time last year. In stop-loss, we've added new quoting capabilities and expanded our distribution reach to smaller employers, who are increasingly self-funding their medical plans.
This has contributed to the 17% growth of in-force premiums and fees we've achieved in
Moving to Slide 6. In
In private and alts, we're executing our expansion strategy with three private fund launches planned this year. We've also strengthened our distribution team with further private markets expertise to help us meet new client demand. And our growth in international markets continues with international retail flows of
Turning to Slide 7. Voya's purpose and vision continue to drive positive outcomes for our clients, our colleagues and the communities in which we live and work. For our customers, we continue to roll out our MyVoyage guidance tool to help employees choose the right benefits and savings options to meet their personal circumstances and improve their financial outcomes. Customers who use MyVoyage are 50% more likely to choose a less expensive health plan option and 50% more likely to elect to save funds in a health savings account, while increasing their Retirement savings rates.
For our communities, we are working to advance financial literacy among young people. Through a partnership with a
With respect to our colleagues, I'd like to highlight a recent achievement that involved almost 2,000 Voya employees, those who work at Voya India. In April, we completed the final step in our operational separation from our joint venture partner, creating powerful new opportunities for greater innovation and collaboration among our teams.
With that, Don will now provide more details on our performance and results. Don?
REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us
3
©2024 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Thank you, Heather. Now let's tuto our results on Slide 9. We delivered
First quarter GAAP net income was
Turning to Wealth Solutions on Slide 10. We continue to improve outcomes and deliver value for our customers, consistent with our vision and values. This is supporting our ability to consistently grow assets and our participant base. Full service net inflows were
In recordkeeping, net outflows were
Moving to Slide 11. Wealth Solutions generated
Looking ahead, we expect full year net revenues in 2024 ex notables to be 1% to 2% higher than 2023. While we took actions in the first quarter to enhance portfolio yields, and improved interest income on cash balances. Second quarter spread income is expected to be between
Turning to Slide 12 on
Premium growth was largely driven by stop loss, where we improved capabilities to quote new plans as well as enhanced our distribution down market. In the first quarter, our total aggregate loss ratio was 74%. In stop loss, results reflect updated experience for our 2023 block, which is nearing completion, and is expected to finish at the high end of our 77% to 80% target loss ratio range.
Looking forward, updated results from our 2023 block and pricing metrics related to the strong in-force premium growth suggested it's prudent to expect we will finish the year on the high end of our 69% to 72% aggregate loss ratio range.
Moving to Slide 13.
This reflects both our full year underwriting expectations as well as continued discipline managing expenses, while investing in growth. Growth examples include investing in lead management. This capability is of increasing importance to employers and often influences decisions to bundle supplemental, life and disability products. Additionally, we are continuing to enhance key capabilities within benefits
REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us
4
©2024 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
administration to support growth in 2025 and beyond.
Moving to Investment Management on Slide 14. With the international transition now behind us, we are seeing the results of Investment Management's reach as a diversified global investment manager with an enhanced platform of investment solutions emerging. The diversity of our business across client type, client region and asset class provides multiple paths to scale and grow.
Our leading positions in institutional fixed income and third-party insurance asset management serve as competitive advantages, which will support continued client and asset growth. We generated positive net inflows of
In Institutional, the industry headwinds in CLOs and softer demand for fundamental and thematic equities were partly offset by strong demand for core fixed income in the insurance channel. Overall, we expect our positive net flows momentum to build throughout the year driven by strengthening investment performance, improving client sentiment across domestic insurance and retail channels and increasing demand in the
Turning to Slide 15. Investment Management delivered adjusted operating earnings of
Turning to Slide 16. Our strong capital generation differentiates us from peers. We continue to build on our track record of generating excess capital above 90% of earnings, while still investing for growth. In the first quarter, we generated approximately
Turning to Slide 17. We are focused on executing our strategy and meeting our financial targets for 2024. We continue to generate excess capital in line with our 90% plus free cash conversion, supported by our diverse and capital-light businesses. We expect to retuover
With that, I will tuthe call back to the operator so that we can take your questions.
QUESTIONS AND ANSWERS
Operator
(Operator Instructions) Our first question is from
I was just wondering, if you could maybe comment on the really strong sales growth that we saw in Health? It just seemed like a very -- I think it was up 50% excluding
Yes, sure, Mike. So we clearly had a really strong year to start. And then as you do the comparable to last year, I'd say we felt like we were a little bit light. So the year-over-year percentage impressive, nonetheless. But look, I think it's really a testament to the work the team does from an execution standpoint across all of our products. I think the distribution depth and breadth has just continued to build.
REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us
5
©2024 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
I would also say as we think about bringing
We're as in as good position as anybody to take advantage of what we think is a really unique opportunity to solve problems in a different way. But look we, obviously, you do the step back and you want to make sure it was a disciplined growth I'm sure we'll talk more about that as we go, but we feel good about how we started the year, and we'll continue to be disciplined as we think about moving forward.
And Mike, this is Heather, if I can just build a finer point on the Stop Loss sales, and very strong growth. Two key points there is that we had expanded down market. And so we saw that contributing to the very favorable Stop Loss sales. And we've also done some things to leverage AI and machine learning to be able to expand our quoting capabilities.
Historically, we typically would have to decline about 50% of the 1/1 business that came in and through this new capability. It's allowed us to be able to bid on a larger percentage of opportunities, which has contributed to the favorable sales.
And then maybe on the outlook for flows and I guess more towards Investment Management, but retail, fairly solid. Curious if maybe in 2Q to date, you're seeing any indication that some of the institutional players might be looking to, I don't know, put some excess cash to work that could be maybe bolstering the outlook for inflows?
Mike, thanks for the question. Certainly, encouraged by the tuinflows in the first quarter. We talked about an inflection point at the end of last year, and we've seen that inflection point inflows. And as you referenced, strong internationally and in the retail markets domestically, we are seeing with the market environment, let me just categorize the market environment a bit. The lower rate volatility, even a higher rate, that lower volatility and the narrative around how persistent is growth as opposed to has the Fed already killed growth. That's an environment where institutions are more likely to act.
So when we look at our investment performance, which continues to be strong and we look at say, pipeline, which we referenced last quarter, again, still in place that
Maybe two builds for me for Matt's comment is to emphasize the point that the transition year is behind us. We recognize we still have work to do, but we do feel very good about the full year outlook. And secondly is that if you look at the strong results we delivered in the quarter and the visibility we have into 2Q, we did that during a very successful leadership transition within asset management with both Matt and Eric and that speaks to really strong client confidence in Matt and the team.
Operator
Our next question is from
I had a follow-up on Stop Loss. I guess, first, can you provide some additional detail on what you think is driving the higher Stop Loss claims? And then just as a follow-up to the very strong sales, to what extent are you concerned that you may have underestimated the medical trend in your 2024 Stop Loss pricing?
Yes, I'll start with the first one. From a 1Q perspective, what we saw driving the loss ratio there was really the more complete nature of the '23 cohort of business. As you'll recall, last year, we started the year focused in and talking about during the year about the 2022 block of
REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us
6
©2024 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
business. And that cohort ran incredibly well. Sort of start of the year was showing good results and then it continued on in the second quarter and impacted what we were showing then.
The '22 block, easy for me to say here is running and ran at low 70%. So as we look at the '23 block and how that is finishing and how that impacted the quarter, we're ending up at the higher end of the range. And so to connect to the second part of your question, we -- and Don said this in his comments, feel it's prudent to be at the higher end of the range. We'll see how that obviously plays out quarter-to-quarter and continue to guide and give you the best view in the underwriting margin, which we put in the modeling considerations to help bridge that gap.
But as you think about where we're at today versus where we were a year ago, you got two cohorts of business that are much tighter aligned from a loss ratio expectation perspective. Now again, '24, we're just getting started as we get into third and fourth quarter, obviously, you've got much more experience to look at versus reserving. And so that dynamic of how the credibility builds versus reserving that plays out at the back half of the year.
But as we do the step back, things like lapse rates on the renewal activity we drove, the guidance that we set around renewal targets. And then the new business pricing was at win rates that were consistent to the prior few years, a little bit better than last year, but consistent with the years before that. So with that, I'll pause and see.
Yes. I think just the one thing I would build to emphasize the examples that Rob was highlighting there is we have a disciplined approach to how we price this business over the long term. And as you saw in the materials, we also have a very strong track record of growing this business, while effectively managing the loss ratios over a long period of time, and we plan to continue to do that in the '24 book and going forward.
Shifting to Wealth. Are you still seeing the same type of trends on somewhat elevated participant withdrawals. And then if it is so, are there any actions you're trying to take to retain more of those assets within Voya?
Yes, sure. So from a participant behavior piece of it, I think, consistent to how we guided at the end of last year, how we have seen things play out at the start of this year, our views really most come to light when you think about both net flow perspective and the guidance that we're giving you there, that's incorporated. And then also from a general account perspective and guiding you on the spread income, that's the most meaningful area to look for outcomes or the impact of that.
As we think about what we're trying to do, again, last quarter, we talked about new product introductions. So both general account and stable value product introductions are going to be happening or are happening. Those will build and help over time as we think about the decision and the actions that a consumer is taking, obviously, it's a complex point in time when they're making those choices and decisions.
We want to be there to provide thoughtful education guidance and potentially advice depending on who they're working with, within the Voya team. And again, I'll tuit over to Heather here to talk a little bit about retail and what we're doing and how we're thinking about that moving forward.
Yes. Let me just add on that is that the real point is we've got a strong retail wealth management business inside Wealth. And today, we've got a combination of ways that we're going to deliver education and advice for our participants. We do take a holistic view of participant needs, and we've got a breadth of solutions to serve them both in plan and out of plan.
We are -- this is one of the areas when you hear Don talk about our investments in growth. We are continuing to invest in our capabilities to serve customers' needs out of plan, and it really links back to our purpose to help our clients to and through Retirement. So I would
REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us
7
©2024 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
say on this one is stay tuned. We'll continue to provide updates on how we are continuing to expand our out-of-plan capabilities in support as well of our strong in-plan capabilities within Wealth.
Operator
Our next question is from
I had another one just on Stop Loss. I think you mentioned being able to go down market and price some smaller employers. I'm just curious if you think that, that business is kind of accretive to margin on a relative basis, do you kind of price those to a lower loss ratio? Or is it kind of similar to the in-force book?
No, I think about them being similar. At the end of the day, as we think about this is just an important opportunity to continue to expand from a capability standpoint, we've got the foundation. We did do some deliberate things from just an underwriting talent experience perspective in that space. You get into lower deductible levels. And so you get into a different set of drivers of claims and claim severity. But we wanted to make sure we had the right people in play.
And so this is really a build of the capability over really 3 to 4 years, and we're starting to see the benefits of that come in and start to be a more material piece of the overall sales story, which I would think of as roughly 10% of the sales for Stop Loss coming from that expansion. We think that will continue to build over time. But I would not think about it as something that's going to drive our margin in a material way to be anything different than what we've historically experienced.
And then on Investment Management, I think you pointed last quarter to the
Yes. Thanks, Wes. On the institutional side, again, we're seeing more of a build. The relative stability or the lowering of volatility is the important thing. And if the Fed is staying still for an extended period, while it may disappoint the market over a short-term horizon. That stability builds confidence and movement within the institutional asset base. We've already seen that on the retail base, both domestically and internationally.
And we've seen that on the insurance side, the insurance side, which is a preeminent business of ours really paused through last year that created a headwind has accelerated this year, and we're seeing that expand into the pension space, where there's a lot of industry articles around increased allocations to fixed income. We are seeing client engagement increase there. Again, we've got strong products, a strong performance. That's really the next inflection point for us to see in our business.
And again, the second quarter outlook for that is strong. But again, as we step back, it's really the breadth of products and distribution channels. They're all starting to improve. As we look to the second half, hard to know from a forecast, there's an election, the Fed has activity to undertake. We have announcements today. But just I would want to really highlight the point, stability at a high level of rates is not harmful to client activity. It's volatility, and that's been declining.
Operator
Our next question is from
REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us
8
©2024 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
First question, just a follow-up on medical Stop Loss. Rob, what did you do with pricing in that business for this past year renewal heading into '24. Did you get rate over and above what you normally get? Or was it just in line? And what are your plans? I assume we're entering into, getting close to where you're thinking about pricing and renewal season for this year. Just given your current experience, would you expect to push through more rate than usual?
Yes. So the more than usual is the key part of that question. Look, we're -- I think as we completed the renewal cycle, it was very much in line with the target we set to bring clarity to that piece of it. And the other thing I'd add is also our retention was in line with expectations. And just in a normal year, that's losing 20% of the book roughly. That's sort of the right benchmark. You vacillate a little bit around it.
But -- so there's always tension to the renewal process, as you would expect. So I would say those two factors played in and played out relatively close to what we would have expected.
Now as we think about the future, I will tell you, every year, I'm thinking about getting more rate. It's a business with inflationary trend perspective in it. The risk that we take is leverage trends, so you should think about it even being higher than sort of traditional medical trend. And so that's always the element that we bring into it, as Heather and I have alluded to from a process standpoint, we'll go through the same rigor that we go through every year, we'll be sort of quarter turn, half tuthe screw on the disciplined alignment with the team and making sure there's clarity on execution for sure.
You can expect that. But I wouldn't also think about it as dramatic shifts. This is a market that continues to grow. We've done it over a long period of time and have a lot of confidence in the team and the process.
And maybe, Tom just one clarification, build from me on Rob's comment is, first, when we're setting the pricing, we look back over a 3-year period. We're not just looking at the prior year claims experience, which we know can be a little bit volatile, but go back. And I know, Tom, you know this is why do we like this product so much is that there's built-in protections in this product.
The fact that we have the ability to annually reprice it, the fact that we use reinsurance to protect against large claims. Stop Loss creates really nice growth opportunities and diversification. And I think over the long term, has demonstrated really strong contribution to shareholder value, and we expect that to continue going forward.
My follow-up is just on the pipeline in Wealth and how we should think about that translating into your flow guidance. I think the
Yes. No, great question, Tom. I'll try to maybe just reiterate some things but also hopefully make sure it's crystal clear. From a flow perspective, we've again talked about the
As we think about activity moving forward, we've tried to provide the guidance around general account, which is obviously a piece of the full service story more in particular, and so I feel like we've given the pieces and parts. You've got also the spread guide on what we think next quarter will look like. So I think we've tried to make as much visible as we possibly can. But the high level of fundamentals on new business activity, I feel good about that.
As we foreshadowed in Don's comments, the second half of the year is where you'll really see the net flow emerge and as you know, in the larger end of the market, you get things swinging from quarter-to-quarter a little bit, but we feel really good about, again, that guide for the full year.
REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us
9
©2024 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
And I would keep in mind, when you think about Wealth beyond the flow story is really the strong organic growth story. You saw in this quarter, we gave you the participant growth. So we've continued to drive participants. We've driven plan counts, we've driven asset growth. We've all done it organically, and it really also goes back to the revenue diversification of this business. We've been able to navigate very different macro environments over a long period of time.
And finally, as the free cash flow contribution from this business is significant towards that
Operator
Our next question is from
Most of my questions have been answered, but just one quick one. Could you please discuss the upcoming
Sure, Wilma. As you have rightly noted, we have approximately
Our balance sheet is well positioned. Our leverage ratio is 28%. And as you know, our target is 25% to 30%. So we're comfortably in that range. And as you also noted, we are consistently generating capital and have
Just a quick follow-up, if I can. Would pausing share repurchases be on the table or no?
We've committed this year to returning
Operator
Our next question is from
I think on the fourth quarter call, you had talked about some additional expenses in Wealth Solutions. And it looked like the expense discipline this quarter kind of was pretty visible. So were you able to make those investments and just offset it with cost savings elsewhere? Or are those investments sort of still in front of us?
Yes, Suneet, thanks for the question. It's Heather, I'll take that. So a couple of things. As you know, we've got a long track record of being disciplined about expenses and we took meaningful expense actions in the quarter across our businesses, while still being able to invest in the business.
The way that I would think about those is Rob was able to do some things in terms of combining the teams across workplace. That is allowing us to achieve some expense saves. We continue to take advantage of
REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us
10
©2024 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.
Attachments
Disclaimer
Bill sponsored by Rick Scott would give homeowners tax break for flood insurance premiums
Backstory Insurance Introduces a New Era of Expertise and Innovation in Risk Management for the Medical Industry
Advisor News
- A rising retirement challenge: The license to spend
- Financial stress leaves less room for retirement saving
- Giving while you’re living: 3 frequently asked questions about gifting
- Helping clients prepare for one of their biggest retirement expenses
- Important year-end financial conversations every advisor must have
More Advisor NewsAnnuity News
- A rising retirement challenge: The license to spend
- What lower interest rates mean to annuity payouts
- AM Best downgrades A-Cap insurers amid financial and regulatory troubles
- Lawsuit claims Delaware Life hid billions in insurer-linked investments
- AM Best to Deliver Presentation at 2026 ACLI Annual Conference
More Annuity NewsHealth/Employee Benefits News
Life Insurance News