Voya Financial, Inc. · NYSE:VOYA
Voya Financial — Q3 2016 Earnings Presentation
32 slides from Voya Financial's earnings presentation, Nov 2, 2016
Slide 1: Voya Financial Third Quarter 2016 Investor Presentation
Voya Financial Third Quarter 2016 Investor Presentation November 2, 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 3. Business Operating and Balance Sheet Metrics Ewout Steenbergen, Chief Financial Of
Slide 4: Key Themes
Key Themes Ongoing Business ROE continued to improve New projected annual run rate cost savings of at least $100 million in 2018 and growing in Management Continuing to Take subsequent years1 Proactive ROE Measures Simplifying organization to create a more agile and efficient company that can
Slide 5: Third Quarter 2016 Financial Highlights
Third Quarter 2016 Financial Highlights Third Quarter 2016 $74 million or $0.37 per diluted share • Includes: After-tax Operating • $(0.47) of deferred acquisition costs and value of business acquired (“DAC/VOBA”) unlocking Earnings1 • $(0.49) related to the assumption update • $0.02 due to favorabl
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 3. Business Operating and Balance Sheet Metrics Ewout Steenbergen, Chief Financial Of
Slide 7: Ongoing Business Adjusted Operating ROE and ROC 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% 12.1% 11.5-12.5% 10.3% 10.0% 10.0% 9.9% 8.6% FY'13 FY'14 FY'15 3Q'16 2018 FY'13 FY'14 FY'15 3Q'16 2
Slide 8: Simplifying the Organization to Reduce Costs and Improve Customer Experience
Simplifying the Organization to Reduce Costs and Improve Customer Experience Annual run rate cost savings of at least $100 million in 2018, including $30-40 million Additional Cost already announced as part of the Strategic Investment Program1 Savings Cost savings to grow beyond 2018 Offset so
Slide 9: Progress on Growth Initiatives Execution Partially Affected by Funding Timing and Market Conditions
Progress on Growth Initiatives Execution Partially Affected by Funding Timing and Market Conditions 1Q’16 2Q’16 3Q’16 2016 Growth Metrics1 Commentary Scorecard Scorecard Scorecard Small/Mid Corporate – 2 • 3Q’16 deposits up 11% y-o-y grow full year deposits by 5%-10% • YTD’16 deposits up 5%
Slide 10: Retirement – Leading Franchise Driving Long-Term Growth and Returns
Retirement – Leading Franchise Driving Long-Term Growth and Returns Adjusted Operating ROC1 Growth Initiatives Expand advisor distribution and market reach to generate higher sales Revised 9.5-10.5% Increase sales force productivity to win more mandates 9.2% 8.9% 8.7% Retain profitable clients
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% Productivity enhancements 27.7%2 30.0% 29.1% 28.4% Examples of Execution 24.7% 25.0%2 Identified oppo
Slide 12: 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 9.0% 9.3% Grow less capital-intensive investment only products 8.9% Expand FIA distribution to growing institutional markets 7.3% Margin Initiatives Continue ma
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 8.1% 7.5%-8.5% Restore profit margins within the in-force block Reduce redundant reserve financing cost 6.2% 5.3% 4.9% Capital Initiatives Reduce capital usage Exa
Slide 14: 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 21.5% 18.8% In-force premium growth Examples of Execution Identified opportunities to l
Slide 15: 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 3. Business Operating and Balance Sheet Metrics Ewout Steenbergen, Chief Financial Of
Slide 16: 3Q’16 Business Segment Drivers
3Q’16 Business Segment Drivers 3Q’16 Commentary Fee-based margin benefitted from higher market levels Continued shift of participant assets from variable to fixed accounts Retirement Administrative expenses declined due in part to lower IT spend Prepayments and alternative income: $6 million
Slide 17: Annual Assumptions Review Had Modest Balance Sheet Impact
Annual Assumptions Review Had Modest Balance Sheet Impact Main drivers of assumption updates: Updated prospective impact of current yield environment on portfolio earned rates Lowered GAAP long-term rate assumption to 4.25% from 4.75% Lowered CBVA long-term rate assumption to 3.75% from 4.75
Slide 18: Retirement Continued to Attract Strong Net Flows in 3Q’16
Retirement Continued to Attract Strong Net Flows in 3Q’16 Retirement Net Flows1 ($ million) $1,500 $280 $1,000 $585 $732 $82 $653 $205 $500 $159 $82 $38 $10 $418 $406 $423 $360 $340 $- $(2,132) $(500) $(2,132) $(1,000) 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 Corporate Markets Tax-Exempt Markets Stable Value,
Slide 19: Investment Management Net Inflows in 3Q’16 Driven by Institutional Sales
Investment Management Net Inflows in 3Q’16 Driven by Institutional Sales Investment Management Third-Party Net Flows1 ($ billion) 3Q’15 4Q’15 1Q’16 2Q’16 3Q’16 $0.5 $0.5 $0.1 $0.2 ($0.7) ($1.1) ($0.2) ($1.4) Sub-Advisor $1.4 $0.0 $0.0 $0.0 $0.2 Replacements Investment Management $(0.8) $(0.7) $(0.7)
Slide 20: Positive Investment-Only Flows, Offset by Negative Fixed Indexed Annuities Flows
Positive Investment-Only Flows, Offset by Negative Fixed Indexed Annuities Flows and Continued Run Off of Less Profitable Business Annuities Net Flows1 ($ million) $85 $198 $172 $74 $173 $104 $89 $81 $66 $(9) $(33) $(52) $(35) $(43) $(56) $(153) $(165) $(191) $(151) $(198) 3Q'15 4Q'15 1Q'16 2Q'16 3Q
Slide 21: Individual Life 3Q’16 Unfavorable Mortality
Individual Life 3Q’16 Unfavorable Mortality Actual-to-Expected Mortality Actual-to-Expected Frequency 140% 115% 120% 110.6% 100% 110% 80% 105% 98.5% 60% Between One and Two Standard Deviations 40% 100% 77% 81% 76% 89% 73% 96.4% 20% 93.7% 95.6% 94.2% 95% 0% 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 90% 92.4% 89.
Slide 22: Employee Benefits Loss Ratios In-Line With Annual Targets
Employee Benefits Loss Ratios In-Line With Annual Targets Sales1 ($ million) Loss Ratios (%) 95% 95% 90% 90% $245 84.5% 85% 85% 78.7% 77.9% 78.5% 80% 80% 78.7% 76.1% 75.6% 75% 75% 75.6% 70% 72.9% 70% 65% 65% 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 FY'13 FY'14 FY'15 YTD'16 95% 95% 90% 90% 85% 85% 79.5% $50 80%
Slide 23: Active Hedge Program in Closed Block Variable Annuity
Active Hedge Program in Closed Block Variable Annuity Change in Statutory Reserves Relative to Hedge Resources 3Q’16 Results ($ billion) Equity impacts (increase) decrease in stat reserve liability Estimated available Equity impacts increase (decrease) in hedge resources resources of $6.3 $1.1 $0.
Slide 24: Estimated Combined RBC Ratio and Leverage Ratio Better Than Target
Estimated Combined RBC Ratio1 and Leverage Ratio Better Than Target Statutory Total Adjusted Capital ($ billion) and Estimated Debt to Total Capital Ratio ex. Minority Interest and AOCI2 Combined RBC Ratio1 After After an Target 25% dividends extraordinary Debt-to-Capital of $701 distribution 22.4%
Slide 25: Significant Excess Capital Available
Significant Excess Capital Available Holding Company Liquidity1 Excess Capital Share Repurchases ($ million) ($ million) ($ million) $978 $828 $833 4Q’16 Planned $600 $200 Discounted Share Estimated Statutory $600 Repurchase $450 Liquidity Surplus in Target Excess of New repurchase 425% RBC authoriz
Slide 26: Management Continuing to Take Proactive ROE Measures; Capital Position is Strong
Helping Americans Get Ready to Retire Better 1 Management Continuing to Take Proactive ROE Measures 2 Capital Position is Strong 3 CBVA Capital Protected with Additional De-Risking Actions Taken 26
Slide 27: Appendix
Appendix a eeeeeslllclrlrllrrTC“‘(‘(’UNCOC;(él;.MSG VOYA. FINANCIAL PLAN | INVEST | PROTECT 27
Slide 28: Reconciliation of 3Q’16 Ongoing Business Adjusted Operating Earnings to Net Income
Reconciliation of 3Q’16 Ongoing Business Adjusted Operating Earnings to Net Income ($ million; all figures are after-tax) $225 $(96) $2 $131 $(52) $(5) $74 $(213) $(43) $(53) $(248) $(13) Ongoing Net Gain (Loss) Net Gain (Loss) Ongoing Corporate Closed Block Operating Closed Block Net Realized Other
Slide 29: Key Sources of Value
Key Sources of Value Tax Benefits Ongoing Business Excess Capital Potential CBVA Value 29
Slide 30: 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 31: 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 32: FINANCIAL
® FINANCIAL FINANCIAL PLAN | INVEST | PROTECT 32