Voya Financial, Inc. · NYSE:VOYA
Voya Financial — Q4 2014 Earnings Presentation
34 slides from Voya Financial's earnings presentation, Feb 11, 2015
Slide 1: Voya Financial Fourth Quarter 2014 Investor Presentation
Voya Financial Fourth Quarter 2014 Investor Presentation February 11, 2015
Slide 2: Forward-Looking and Other Cautionary Statements
Forward-Looking and Other Cautionary Statements This presentation and the remarks made orally contain 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 i
Slide 3: Agenda
Agenda 1. Key Highlights Rod Martin, Chairman and Chief Executive Officer 2. Executing Our Return on Equity (ROE) / Return on Capital (ROC) Improvement Plan Alain Karaoglan, Chief Operating Officer 3. Business Operating and Balance Sheet Metrics Ewout Steenbergen, Chief Financial Officer 3
Slide 4: Key Developments
Key Developments Achievement of 2014 Full Year Ongoing Business Adjusted Operating ROE of 12.1% marks the 2016 ROE Target early achievement of our original 2016 goal of 12-13% New ROE Target 13-14% Ongoing Business Adjusted Operating run-rate1 ROE for full year 2018 Invest for ROE, Invest an increme
Slide 5: Fourth Quarter and Full Year 2014 Financial Highlights
Fourth Quarter and Full Year 2014 Financial Highlights Fourth Quarter 2014 Full Year 2014 $245 million or $0.99 per diluted share $800 million or $3.14 per diluted share After-tax Operating Earnings1 $239 million or $0.97 per diluted share excl. DAC $814 million or $3.19 per diluted share excl. DAC
Slide 6: Premier Franchise with Diverse Earnings
Premier Franchise with Diverse Earnings FY’14 Ongoing Business Adjusted Operating Earnings Before Income Taxes1: $1,378 million 72% from Retirement Solutions and Investment Management Prominent multi-asset, multi-channel Investment Management Inv. Mgmt. active asset manager for institutions 15% and
Slide 7: Key Sources of Value
Key Sources of Value Potential Ongoing Tax Excess CBVA Business Benefits Capital Value 7
Slide 8: Agenda
Agenda 1. Key Highlights Rod Martin, Chairman and Chief Executive Officer 2. Executing Our Return on Equity (ROE) / Return on Capital (ROC) Improvement Plan Alain Karaoglan, Chief Operating Officer 3. Business Operating and Balance Sheet Metrics Ewout Steenbergen, Chief Financial Officer 8
Slide 9: Achieved 2016 Ongoing Business Adjusted Operating Return on Equity Target
Achieved 2016 Ongoing Business Adjusted Operating Return on Equity Target Ongoing Business1 Adjusted Operating ROE2 Ongoing Business1 Adjusted Operating ROC3 13.0-14.0% 11.0-12.0% 12.0 – 10.0 – 12.1% 13.0% 11.0% 9.9% 11.7% 10.3% 9.6% 8.6% 9.8% 8.2% 8.3% 7.2% 7.6% 6.6% FY'11 FY'12 FY'13 FY'14 Origina
Slide 10: ROC Improvement Driven by Margin, Growth, and Capital Initiatives
ROC Improvement Driven by Margin, Growth, and Capital Initiatives Ongoing Business Adjusted Operating ROC1 55 bps Capital 109 bps Interest Rates 9.9% Growth 182 bps 69 bps Margin 7.2% 30 bps of improvement includes items that we do not expect to recur at the same levels FY’12 FY’14 1. Ongoing Busine
Slide 11: Setting a Plan to Deliver on a 2018 Target of 13-14% ROE
Setting a Plan to Deliver on a 2018 Target of 13-14% ROE Ongoing Investment $300-$350 million Incremental Investment Ongoing Business Digital & IT Cross- Initiatives Analytics Simplification Enterprise Run-rate ROE target of 13-14% by 2018 11
Slide 12: Retirement – Leading Franchise Driving Long-Term Growth and Returns
Retirement – Leading Franchise Driving Long-Term Growth and Returns Adjusted Operating ROC 2015 Priorities Expand distribution footprint 10.5% Develop key product and technology capabilities 10.0-11.0% Increase participant engagement through further rollout 9.2% of Retirement Readiness offerin
Slide 13: Annuities – Selective Growth While Running Off Less Profitable Business
Annuities – Selective Growth While Running Off Less Profitable Business Adjusted Operating ROC 2015 Priorities Introduce new products to meet evolving client retirement 9.0% needs and risk profiles 8.0% Expand wholesale strategy that broadens distribution into 8.6% 7.0-9.0% new institutions, suc
Slide 14: Investment Management – Scalable Platform Leveraging Strong Investment Performance
Investment Management – Scalable Platform Leveraging Strong Investment Performance Operating Margin 2015 Priorities Continued strong investment performance 32.1% 32.0% 30.0-34.0% Continued expansion of third-party business and 1 improved institutional and retail distribution 27.7% 30.0% Growth
Slide 15: Individual Life – Repositioning Toward Aligned Distribution Model
Individual Life – Repositioning Toward Aligned Distribution Model Adjusted Operating ROC 2015 Priorities Launch of Aligned Distribution strategy Grow sales of indexed life products Continue to seek in-force solutions 7.9% Manage non-guaranteed elements of in-force contracts 7.0% 6.0-8.0% 5.3
Slide 16: Employee Benefits – High Return on Profitable Growth
Employee Benefits – High Return on Profitable Growth Adjusted Operating ROC 2015 Priorities Expand target market focus to include mid-sized 28.9% employers 28.8% Leverage breadth of product portfolio to drive package solutions 22.0% 18.0-22.0% Sales training and elimination of manual pricing a
Slide 17: Agenda
Agenda 1. Key Highlights Rod Martin, Chairman and Chief Executive Officer 2. Executing Our Return on Equity (ROE) / Return on Capital (ROC) Improvement Plan Alain Karaoglan, Chief Operating Officer 3. Business Operating and Balance Sheet Metrics Ewout Steenbergen, Chief Financial Officer 17
Slide 18: 4Q'14 Business Segment Drivers
4Q’14 Business Segment Drivers 4Q’14 relative to 3Q’14 Retirement Higher prepayment income partially offset by lower alternative income; higher fee income Annuities Higher prepayment income and favorable mortality Investment Higher performance fees offset by higher operating expenses; lower investme
Slide 19: Retirement Net Flows Better Than Expected in 4Q'14
Retirement Net Flows Better Than Expected in 4Q’14 Retirement Net Flows1 ($ million) $363 $44 $148 $46 $48 $475 $28 $257 $340 $245 $188 $(90) $(94) $(1) $0 $(282) $(287) $(145) $(22) $(566) $(60) $(24) $(66) $(111) $(202) 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 Stable Value Tax-Exempt Markets Individual Marke
Slide 20: Annuities Focused on Growing Fixed Indexed and Mutual Fund Custodial
Annuities Focused on Growing Fixed Indexed and Mutual Fund Custodial, and Running Off Less Profitable Business Annuities Net Flows1 ($ million) $55 $23 $31 $120 $82 $153 $146 $126 $122 $121 $11 $(26) $(41) $(40) $(63) $(1) $(233) $(259) $(481) $(330) $(704) $(92) $(172) $(411) $(623) 4Q'13 1Q'14 2Q'
Slide 21: Investment Management Aided by Positive Sourced Flows and Sub-Advisor Replacements
Investment Management Aided by Positive Investment Management Sourced Flows and Sub-Advisor Replacements in 4Q’14 Investment Management Third-Party Net Flows1 ($ billion) 4Q’13 1Q’14 2Q’14 3Q’14 4Q’14 $1.3 $1.3 $0.8 $(0.3) $(0.4) $(0.5) ($0.6) $(0.5) $(0.4) Sub-Advisor $0.0 $4.7 $0.0 $2.1 $0.8 Repla
Slide 22: Individual Life Results Positively Impacted by Favorable Net Mortality
Individual Life Results Positively Impacted by Favorable Net Mortality Individual Life Sales¹ Actual-to-Expected Mortality ($ million) 2013 Sales 115% 110% 28% Above One Standard Deviation 105% 50% 100% 96.9% 13% 95.7% 96.4% 95% 93.7% 9% 90% 89.8% 2014 Sales 85% 84.8% 80% 80.8% 30% 75% 52% Below One
Slide 23: Employee Benefits Loss Ratios for Group Life and Stop Loss Remained Favorable
Employee Benefits Loss Ratios for Group Life and Stop Loss Remained Favorable Sales1 Loss Ratios ($ million) (%) $242 82.0% 78.7% 77.5% 76.1% 74.7% 75.4% 72.0% 72.2% 76.9% 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 FY'11 FY'12 FY'13 FY'14 78.4% 82.9% 72.4% 72.2% 72.1% 75.3% 61.9% $29 $34 $26 $18 72.9% 69.6% 4Q'1
Slide 24: Active Hedge Program in Closed Block Variable Annuity
Active Hedge Program in Closed Block Variable Annuity Change in Statutory Reserves Relative to Hedge 4Q’14 Results ($ billion) Equity impacts (increase) decrease in stat reserve liability Estimated available Equity impacts increase (decrease) in hedge assets resources of $5.0 billion $1.2 $1.0 $1.
Slide 25: CBVA Policy Count Decline Reflects Continued Run-off
CBVA Policy Count Decline Reflects Continued Run-off 4801 460 440 420 400 Total account Total account value2 as of value2 as of Dec-12: $43 Dec-14: $41 billion billion Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Death Benefits Living Benefits Only Policy Count Policy Count 1. All policy count figures in thou
Slide 26: Sizeable TVA Release and Significant NPV of Projected Tax Savings
Sizeable TVA Release and Significant NPV of Projected Tax Savings Income Statement and Balance Sheet Metrics TVA release of $1.85 billion for FY’14 TVA of $783 million related to Federal NOLs as of 12/31/14 2015 Ongoing Business operating tax rate of 32% NPV Analysis ($ million) Value of Tax A
Slide 27: Estimated Combined RBC Ratio Strengthened and Leverage Ratio Better Than Target
Estimated Combined RBC Ratio1 Strengthened and Leverage Ratio Better Than Target Statutory Total Adjusted Capital ($ billion) and Estimated Debt to Total Capital Ratio ex. Minority Interest and AOCI2 Combined RBC Ratio1 Target 25% $7.6 Debt-to- $7.4 23.5% 23.5% 23.2% $7.3 23.0% Capital Ratio $7.1 $7
Slide 28: Robust Capital Position
Robust Capital Position Corporate & Closed Blocks GAAP Holding Company Liquidity1 Share Buybacks ($ million) Capital ex. DTA ($ million) ($ million) $2,937 $1,548 $11 $789 Estimated $750 Statutory $11 Surplus in $789 Excess of 425% RBC $6143 $750 $682 Level Holding Co Working Capital Other2 $450 Liq
Slide 29: Premier Franchise, Experienced Management, Potential for Further ROE Improvement
America’s Retirement Company™ 1 Premier Franchise with Leading Positions in Attractive Markets 2 Experienced Management Team With a Track Record of Execution 3 Potential for Further Significant ROE Improvement, Free Cash Flow Generation, and Earnings Growth 29
Slide 30: Appendix
Appendix a eeeeeslllclrlrllrrTC“‘(‘(’UNCOC;(él;.MSG RETIREMENT |! INVESTMENTS | INSURANCE 30 VOYA FINANCIAL™
Slide 31: Reconciliation of 4Q'14 Ongoing Business Adjusted Operating Earnings to Net Income
Reconciliation of 4Q’14 Ongoing Business Adjusted Operating Earnings to Net Income ($ million; all figures are after-tax) $1,675 $1,395 Closed Block Variable $6 $13 $274 $245 $255 $2 Annuity $(31) $27 Other1 Ongoing Net Gain Gain on a Ongoing Corporate Closed Block Operating $(209) Net Realized Net
Slide 32: Diversified Drivers of Operating Revenues
Diversified Drivers of Operating Revenues Ongoing Business Sources of Revenues Net Primarily consists of ($ millions) Underwriting difference between premiums Gain (Loss) and or fees charged for insurance 2 Other Revenue risks and incurred benefits $966 $1,021 1 $947 $917 $967 $231 $181 $219 $182 In
Slide 33: Seasonality of Financial Items
Seasonality of Financial Items 1Q 2Q 3Q 4Q Corporate Markets tends to Education Tax-Exempt Markets Corporate Markets typically have the highest recurring typically sees lowest recurring sees highest transfer / single Retirement deposits deposits deposits Withdrawals also tend to Withdrawal
Slide 34: Voya Financial
FINANCIAL RETIREMENT |! INVESTMENTS | INSURANCE 34 FINANCIAL™