Voya Financial, Inc. · NYSE:VOYA
Voya Financial — Q2 2016 Earnings Presentation
34 slides from Voya Financial's earnings presentation, Aug 3, 2016
Slide 1: Voya Financial Second Quarter 2016 Investor Presentation
Voya Financial Second Quarter 2016 Investor Presentation August 3, 2016
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 Themes and 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 and Chief Executive Officer of Retirement and Investment Solutions 3. Business Operatin
Slide 4: Key Themes
Key Themes ROE increased slightly Progress Executing on sales, deposits, and in-force premium growth initiatives across our Ongoing Towards ROE Target Businesses Refinancing of redundant reserves to reduce expenses Excess capital of $775 million even after $267 million of share repurchases d
Slide 5: Second Quarter 2016 Financial Highlights
Second Quarter 2016 Financial Highlights Second Quarter 2016 $160 million or $0.79 per diluted share • Includes: After-tax Operating • +$0.07 of deferred acquisition costs and value of business acquired (“DAC/VOBA”) and Earnings1 other intangibles unlocking • +$0.06 of prepayment fees above long-ter
Slide 6: Agenda
Agenda 1. Key Themes and 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 and Chief Executive Officer of Retirement and Investment Solutions 3. Business Operatin
Slide 7: Ongoing Business Adjusted Operating Return on Equity and Return on Capital Tracking to Target
Ongoing Business Adjusted Operating Return on Equity and Return on Capital Tracking to Target Ongoing Business1 Adjusted Operating ROE2 Ongoing Business1 Adjusted Operating ROC3 13.5-14.5% 12.1% 12.1% 11.5% 11.5-12.5% 10.3% 10.0% 9.6% 9.9% 8.6% FY'13 FY'14 FY'15 2Q'16 2018 FY'13 FY'14 FY'15 2Q'16 20
Slide 8: Progress on Growth Initiatives Execution Partially Affected by Funding Timing and Market Volatility
Progress on Growth Initiatives Execution Partially Affected by Funding Timing and Market Volatility 2016 Growth Metrics1 1Q’16 Scorecard 2Q’16 Scorecard Commentary Small/Mid Corporate – grow full • 1Q’16 deposits within range provided year deposits by 5%-10% in February • 2Q’16 deposits up 10%
Slide 9: Retirement – Leading Franchise Driving Long-Term Growth and Returns
Retirement – Leading Franchise Driving Long-Term Growth and Returns Adjusted Operating ROC1 Growth Initiatives 11-12% Expand advisor distribution and market reach to generate higher sales Increase sales force productivity to win more mandates 9.2% 8.9% 8.7% Retain profitable clients 8.3% Margi
Slide 10: Annuities – Expanding Product Range and Distribution Reach
Annuities – Expanding Product Range and Distribution Reach Adjusted Operating ROC1 Growth Initiatives 9.5-10.5% Expand product line 9.3% 9.0% 8.9% Grow less capital-intensive investment only products Expand FIA distribution to growing institutional 7.3% markets Margin Initiatives Continue ma
Slide 11: Investment Management – Continued Strong Performance Across Broad Capabilities
Investment Management – Continued Strong Performance Across Broad Capabilities Operating Margin1 Growth Initiatives New distribution and markets 33-35% New products and solutions 32.1% 29.2% 28.7% Productivity enhancements 27.7%2 30.0% 29.1% 24.8% 24.7% Examples of Execution Continued long-t
Slide 12: Employee Benefits – High Return and Capital Generation
Employee Benefits – High Return and Capital Generation Business Adjusted Operating ROC1 Growth Initiatives 28.9% Expand into mid-market 26.5% Grow private exchange participation and voluntary 23-25% sales 22.3% 18.8% In-force premium growth Examples of Execution 1H’16 mid-market policies inc
Slide 13: Individual Life – Repositioning Through In-Force Actions and Aligned Distribution Model
Individual Life – Repositioning Through In-Force Actions and Aligned Distribution Model Adjusted Operating ROC1 Margin Initiatives 7.5%-8.5% Restore profit margins within the in-force block 7.0% 6.2% Reduce redundant reserve financing cost 5.3% 4.9% Capital Initiatives Reduce capital usage Exa
Slide 14: Agenda
Agenda 1. Key Themes and 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 and Chief Executive Officer of Retirement and Investment Solutions 3. Business Operatin
Slide 15: 2Q’16 Business Segment Drivers
2Q’16 Business Segment Drivers 2Q’16 Commentary Fee income benefitted from higher average assets relative to 1Q’16, partially offset by a shift of participant assets from variable to fixed accounts Retirement Sequential decline in administrative expenses from seasonally high 1Q’16 and lower IT s
Slide 16: Non-Rate Sensitive Fee Income and Underwriting Contribute Majority of Sources of Ongoing Business Operating Earnings
Non-Rate Sensitive Fee Income and Underwriting Contribute Majority of Sources of Ongoing Business Operating Earnings LTM Ongoing Business Sources of Operating Earnings1 ($ millions) Fee-Based Primarily consists of 60% of sources of operating earnings not Margin fees on AUM and AUA interest rate sens
Slide 17: Manageable Impact of Low Interest Rates on Operating Earnings and Excess Capital Generation
Manageable Impact of Low Interest Rates on Operating Earnings and Excess Capital Generation Tools and Levers for Actively Impact of Constant 10-Year Treasury at 1.0% Managing Prolonged Low Interest Through 20191 Rates Hedging programs 2016 - 2019 • Financial instruments, including swaps, swap deriva
Slide 18: Retirement Net Flows Remained Positive Overall in 2Q’16
Retirement Net Flows Remained Positive Overall in 2Q’16 Retirement Net Flows1 ($ million) $1,000 $585 $732 $205 $500 $159 $64 $82 $40 $38 $10 $371 $418 $360 $406 $340 $- $(500) $(2,132) $(2,132) $(1,000) 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 Corporate Markets Tax-Exempt Markets Stable Value, Retail Wealth M
Slide 19: Annuities Flows Supported by Fixed Indexed Annuities and Investment-Only Products
Annuities Flows Supported by Fixed Indexed Annuities and Investment- Only Products, While Continuing to Run Off Less Profitable Business Annuities Net Flows1 ($ million) $85 $198 $172 $74 $159 $173 $104 $89 $66 $(37) $(33) $(52) $(35) $(43) $(59) $(153) $(165) $(191) $(198) $(168) 2Q'15 3Q'15 4Q'15
Slide 20: Investment Management Net Inflows in 2Q’16 Driven by Institutional Sales
Investment Management Net Inflows in 2Q’16 Driven by Institutional Sales Investment Management Third-Party Net Flows1 ($ billion) 2Q’15 3Q’15 4Q’15 1Q’16 2Q’16 $0.5 $0.5 $0.5 $(0.3) $(0.7) $(1.1) $(0.2) $(1.4) Sub-Advisor $0.0 $1.4 $0.0 $0.0 $0.0 Replacements Investment Management $(1.0) $(0.8) $(0.
Slide 21: Individual Life 2Q’16 Favorable Mortality
Individual Life 2Q’16 Favorable Mortality Actual-to-Expected Frequency Actual-to-Expected Mortality 140% 120% 100% 115% 80% 110.6% 110% 60% 40% 105% 115% 84% 81% 76% 89% 77% 20% Between One and Two Standard Deviations 98.5% 100% 0% 96.4% 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 93.7% 95.6% 95% 90% 92.4%
Slide 22: Employee Benefits Loss Ratios Better Than Annual Targets
Employee Benefits Loss Ratios Better Than Annual Targets Sales1 ($ million) Loss Ratios (%) 95% 95% $245 90% 90% 84.5% 85% 85% 78.7% 80% 80% 78.7% 75.6% 76.1% 75.6% 74.0% 75% 75% 70% 72.9% 70% 65% 65% 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 FY'13 FY'14 FY'15 95% 95% 90% 90% 85% 85% 80% 80% 75.9% 76.8% $39 $40
Slide 23: Focus on Protecting Regulatory and Rating Agency Capital
Focus on Protecting Regulatory and Rating Agency Capital Variable Annuity Risk Hedge Program Designed to Protect Capital Against Market Shocks Management Approach CBVA has been in run-off for Equity Risk Dynamically protect regulatory and rating agency capital the past 6.5 years levels against e
Slide 24: Active Hedge Program in Closed Block Variable Annuity
Active Hedge Program in Closed Block Variable Annuity Change in Statutory Reserves Relative to Hedge Resources 2Q’16 Results ($ billion) Equity impacts (increase) decrease in stat reserve liability Estimated available Equity impacts increase (decrease) in hedge resources resources of $6.8 $1.1 $0.
Slide 25: Present Value of Rates Staying Flat at 1% for 50 Years is Approximately $(0.8) Billion
Present Value of Rates Staying Flat at 1% for 50 Years is Approximately $(0.8) Billion PV of Cash Flows as Scenario Assumptions of Year End 2015 The scenarios provide an ($ billions) illustrative presentation of Equity returns down 25% in first year, then 0% how the CBVA segment is Scenario 1 ther
Slide 26: Estimated Combined RBC Ratio and Leverage Ratio Better Than Target
Estimated Combined RBC Ratio1 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 • After dividends of $701 million • Pre-dividend RBC= 511% Target 25% • Pre-dividend Debt-to-
Slide 27: Significant Excess Capital Available
Significant Excess Capital Available Holding Company Liquidity1 Excess Capital Share Repurchases ($ million) ($ million) ($ million) $775 $722 $267 $2334 $220 $503 Estimated Statutory Surplus in $1503 Excess of $450 Liquidity 425% RBC Target Level Holding Co. Working Capital Above Target2 $272 $117
Slide 28: Progress Towards ROE Target; Capital Position is Strong; CBVA Capital Protected
Helping Americans Get Ready to Retire Better 1 Progress Towards ROE Target 2 Capital Position is Strong 3 CBVA Capital Protected and De-Risking Actions Taken 28
Slide 29: Appendix
Appendix a eeeeeslllclrlrllrrTC“‘(‘(’UNCOC;(él;.MSG VOYA. FINANCIAL PLAN | INVEST | PROTECT 29
Slide 30: Reconciliation of 2Q’16 Ongoing Business Adjusted Operating Earnings to Net Income
Reconciliation of 2Q’16 Ongoing Business Adjusted Operating Earnings to Net Income ($ million; all figures are after-tax) $37 $162 1 2 1. Other, after-tax consists of net guaranteed benefit hedging gains (losses) and related charges and adjustments; income (loss) from business exited; and restructur
Slide 31: Ongoing Business Key Sources of Value
Key Sources of Value Tax Benefits Ongoing Business Excess Capital Potential CBVA Value 31
Slide 32: Seasonality of Financial Items
Seasonality of Financial Items 1Q 2Q 3Q 4Q Corporate Markets tends to Education Tax-Exempt Markets Corporate Markets typically see have the highest recurring typically see lowest recurring highest transfer / single Retirement deposits deposits deposits Withdrawals also tend to Withdrawals
Slide 33: Analyst Modeling Considerations
Analyst Modeling Considerations Prepayment Income Prepayment income of $12 million per quarter for Ongoing Business in 2016 (pre-tax, pre- and Alternative DAC): $6 million for Retirement; $4 million for Annuities; $2 million for Individual Life Income Approximately 9% annual long-term expected r
Slide 34: FINANCIAL
® FINANCIAL FINANCIAL PLAN | INVEST | PROTECT 34