Voya Financial, Inc. · NYSE:VOYA
Voya Financial — Q4 2016 Earnings Presentation
33 slides from Voya Financial's earnings presentation, Feb 8, 2017
Slide 1: Voya Financial Fourth Quarter 2016 Investor Presentation
Voya Financial Fourth Quarter 2016 Investor Presentation February 8, 2017
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 Mike Smith, Chief Financial Officer 3
Slide 4: Key Themes
Key Themes Ongoing Business ROE continued to improve Continued Progress Business growth from strong net flows, distribution expansion, and increased productivity Towards 2018 ROE Target Capital initiatives ahead of plan Executing $100 million cost savings program Excess capital of $941 mil
Slide 5: Fourth Quarter and Full Year 2016 Financial Highlights
Fourth Quarter and Full Year 2016 Financial Highlights Fourth Quarter 2016 Full Year 2016 $529 million or $2.61 per diluted share $180 million or $0.91 per diluted share • Includes: • Includes: • $(0.41) of deferred acquisition • $0.11 of prepayment fees and costs and value of business alternative i
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 Mike Smith, Chief Financial Officer 6
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% 11.5-12.5% 12.1% 12.1% 12.3% 10.0% 10.2% 10.3% 9.9% 8.6% FY'13 FY'14 FY'15 FY'16 2018 FY'13 FY'14 FY'15 FY'16 2
Slide 8: Cost Savings, Capital, and Other Initiatives Driving ROC to Target
Cost Savings, Capital, and Other Initiatives Driving ROC to Target Ongoing Business Category Initiatives Adjusted Operating ROC1 2014 Year End ROC 9.9% Streamline Operations Consolidate IT Platforms Through Process Digitization Cost Savings 90-100 bps Simplify Organization Migrate to Cloud Environme
Slide 9: Significant Progress on Strategic Investment Initiatives
Significant Progress on Strategic Investment Initiatives 2015 2016 2017 2018 Consolidate IT 5%3 50%3 90% 100% Platforms1 Foundational work Migrate to Cloud built on-premise 35% 70% 100% Environment1 cloud environment 15% Digitize Foundational Work, 30% 60% 100% Processes1 Methodology Simplify N/A Fo
Slide 10: Progress on 2016 Growth Initiatives Partially Affected by Market Conditions
Progress on 2016 Growth Initiatives Execution Partially Affected by Market Conditions and Pricing Discipline 2016 Growth Metrics1 2016 Results 2017 Growth Metrics • FY’16: +5% y-o-y Small/Mid Corporate: Deposits +5% to +10% Small/Mid Corporate: Deposits +5% to +10% • 4Q’16: +5% y-o-y Retirement
Slide 11: Retirement – Leading Franchise Driving Long-Term Growth and Returns
Retirement – Leading Franchise Driving Long-Term Growth and Returns Adjusted Operating ROC1 Initiatives Focus on customer retirement outcomes by encouraging greater employee participation, raising 9.5-10.5% participant savings rates, and optimizing asset 9.2% 8.9% 8.7% 8.8% allocation Enhance cl
Slide 12: Investment Management – Continued Strong Performance Across Broad Capabilities
Investment Management – Continued Strong Performance Across Broad Capabilities Operating Margin1 Initiatives Expand client solutions with new products 33-35% Improve distributor productivity by leveraging enhanced digital 32.1% capabilities and tools 29.2% 28.2% Broaden client choices by incre
Slide 13: Annuities – Expanding Product Range and Distribution Reach
Annuities – Expanding Product Range and Distribution Reach Adjusted Operating ROC1 Initiatives 9.8% 9.5-10.5% Improve customer and distributor experience and 9.3% lower unit costs by simplifying operations through 9.0% Annuities and Individual Life combination Address evolving and diverse client
Slide 14: Individual Life – Repositioning Through In-Force Actions
Individual Life – Repositioning Through In-Force Actions and Aligned Distribution Model Adjusted Operating ROC1 Initiatives 7.5%-8.5% Improve customer and distributor experience and lower costs by simplifying operations through 6.6% Individual Life and Annuities combination 6.2% Improve profit m
Slide 15: Employee Benefits – High Return and Capital Generation Business
Employee Benefits – High Return and Capital Generation Business Adjusted Operating ROC1 Initiatives 28.9% Improve customer and distributor experience and lower 26.5% unit costs by simplifying operations 23-25% 23.3% Solve diverse and expanding client needs with voluntary products 18.8% Strengt
Slide 16: 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 Mike Smith, Chief Financial Officer 1
Slide 17: 4Q’16 Business Segment Drivers
4Q’16 Business Segment Drivers 4Q’16 Commentary Continued shift of participant assets from variable to fixed accounts Retirement Fee-based margin benefitted from higher market levels and positive net flows Prepayments and alternative income: $11 million above long-term expectations (pre-tax, p
Slide 18: Retirement Continued to Attract Strong Net Flows in 4Q’16
Retirement Continued to Attract Strong Net Flows in 4Q’16 Retirement Net Flows1 ($ million) $1,500 $280 $1,000 $732 $653 $291 $205 $500 $159 $71 $82 $38 $10 $406 $423 $441 $360 $340 $- $(2,132) $(500) $(2,132) $(1,000) 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 Corporate Markets Tax-Exempt Markets Stable Value,
Slide 19: Investment Management Net Inflows in 4Q’16 Driven by Institutional Sales
Investment Management Net Inflows in 4Q’16 Driven by Institutional Sales Investment Management Third-Party Net Flows1 ($ billion) 4Q’15 1Q’16 2Q’16 3Q’16 4Q’16 $1.6 $0.5 $0.5 $0.1 $0.2 ($0.1) ($0.7) ($0.2) Sub-Advisor $0.0 $0.0 $0.0 $0.2 $0.0 Replacements Investment Management $(0.7) $(0.7) $(0.7) $
Slide 20: Positive Investment-Only Flows and Fixed Indexed Annuities Flows Offset Run Off
Positive Investment-Only Flows and Fixed Indexed Annuities Flows Offset by Continued Run Off of Less Profitable Business Annuities Net Flows1 ($ million) $198 $172 $116 $74 $104 $89 $81 $90 $66 $(35) $(9) $(52) $(43) $(56) $(57) $(153) $(165) $(125) $(198) $(151) 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 Annual
Slide 21: Individual Life 4Q’16 Unfavorable Mortality
Individual Life 4Q’16 Unfavorable Mortality Actual-to-Expected Mortality Actual-to-Expected Frequency 140% 115% 120% 110.6% 100% 110% 80% 105% 60% Between One and Two Standard Deviations 99.1% 40% 100% 98.5% 76% 89% 77% 73% 76% 96.4% 20% 95.6% 95% 93.7% 0% 94.2% 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 90% 92.
Slide 22: Employee Benefits Annual Loss Ratios In-line With Target Range
Employee Benefits Annual Loss Ratios In-line With Target Range Sales1 ($ million) Loss Ratios (%) 95% 95% 90% 90% $245 84.5% 85% 85% 78.7% 77.2% 80% 77.9% 80% 76.1% 75.6% 78.7% 75% 75% 70% 72.9% 73.4% 70% 65% 65% 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 FY'13 FY'14 FY'15 FY'16 95% 95% 90% 90% 85% 85% 80% 82.1%
Slide 23: Active Hedge Program in Closed Block Variable Annuity
Active Hedge Program in Closed Block Variable Annuity Change in Statutory Reserves Relative to Hedge Resources 4Q’16 Results ($ billion) Equity impacts (increase) decrease in stat reserve liability Estimated available Equity impacts increase (decrease) in hedge resources resources of $5.0 $1.1 bil
Slide 24: Significant NPV of Projected Tax Savings
Significant NPV of Projected Tax Savings Income Statement and Balance Sheet Metrics TVA of $745 million related to Federal NOLs as of 12/31/16 2017 operating tax rate of 32% NPV Analysis ($ million) Value of Tax Assets1,2,3 Value of DRD6 Nominal DTA Value NPV5 Years NPV7 as of 12/31/16 Federal O
Slide 25: 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 Target 25% $6.9 $7.0 Debt-to-Capital $6.5 $6.8 24.4% Ratio $6.4 23.0% 23.3% 22.4% 22.4% 485%
Slide 26: Significant Excess Capital Available
Significant Excess Capital Available Holding Company Liquidity1 Excess Capital Share Repurchases ($ million) ($ million) ($ million) $941 $687 $633 $463 $450 Liquidity Target Estimated $928 Statutory Surplus in Excess of Share 425% RBC Repurchases Level Remaining Holding Co. Repurchase Working Autho
Slide 27: Continued Progress, Strong Capital Position, CBVA Protected
Helping Americans Get Ready to Retire Better 1 Continued Progress Towards 2018 ROE Target 2 Capital Position is Strong 3 CBVA Capital Protected and Additional De-Risking Actions Taken 27
Slide 28: Appendix
Appendix ee VOYA. PLAN | INVEST | PROTECT 28 FINANCIAL
Slide 29: Reconciliation of 4Q’16 Operating Earnings to Net Income
Reconciliation of 4Q’16 Operating Earnings to Net Income ($ million; all figures are after-tax) $180 $(474) $6 $(155) $(90) $(533) 1 2 Operating Earnings Closed Block Variable Net Realized Gains Other Other Tax-Related Net Income (Loss) Available Annuity (Losses) to Common Shareholders 1. Other, aft
Slide 30: Key Sources of Value
Key Sources of Value Tax Benefits Ongoing Business Excess Capital Potential CBVA Value 30
Slide 31: Seasonality of Financial Items
Seasonality of Financial Items 9. 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 Withdrawa
Slide 32: Analyst Modeling Considerations
Analyst Modeling Considerations Long-term prepayment income expectation of $15 million per quarter for Ongoing Business Prepayment Income in 2017 (pre-tax, pre-DAC): $7 million for Retirement; $5 million for Annuities; $3 million for and Alternative Individual Life Income Approximately 9% annual
Slide 33: FINANCIAL
® FINANCIAL FINANCIAL PLAN | INVEST | PROTECT 33