Voya Financial, Inc. · NYSE:VOYA
Voya Financial — Q1 2023 Earnings Presentation
34 slides from Voya Financial's earnings presentation, May 3, 2023
Slide 1: Voya Financial First Quarter 2023 Investor Presentation
Voya Financial First Quarter 2023 Investor Presentation May 3, 2023 All financial information reflects accounting implementation for LDTI
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. The company does not assume any obligation to revise or update these statements to reflect new information, subsequent events or changes in strategy. Forward-looking stat
Slide 3: Key Themes & Executing on our Strategy
Key Themes & Executing on our Strategy ■ Heather Lavallee, Chief Executive Officer Business Segment Performance and Financial Highlights ■ Don Templin, Chief Financial Officer
Slide 4: Key Themes
Key Themes ■ 1Q’23 adjusted operating earnings per share of $1.44, compared to $1.55 in 1Q’22 Achieve and ■ 1Q’23 includes $(0.25) of variance from our long-term expectation of alternative income ■ 1Q’22 includes an aggregate impact of $0.13, $0.40 from alternative income above long-term expectation
Slide 5: Acquisitions driving immediate financial results and future growth
Acquisitions driving immediate financial results and future growth AllianzGI acquisition has delivered immediate upside while opening new high-growth markets Powerful source of net flows Adds significant scale Diversifies across markets • Positive net flows each quarter • 95% asset retention at clos
Slide 6: Acquisitions driving immediate financial results and future growth
Acquisitions driving immediate financial results and future growth Benefitfocus provides an essential element of Voya’s Workplace Benefits and Savings strategy Voya’s differentiated offerings Unmet and growing need for Wealth integrated guidance across savings Health and benefits Market-leading Reti
Slide 7: Voya Culture – Living our Purpose and Vision
Voya Culture – Living our Purpose and Vision ▪ Clients: Helped one of our clients – City of Milwaukee – External Recognition of Voya’s Culture increase retirement plan participation rates for Black and Hispanic employees by 40% and 25%, respectively. ▪ Colleagues: Led 3,000+ employees through worksh
Slide 8: Business Segment Performance and Financial Highlights
Key Themes & Executing on our Strategy ■ Heather Lavallee, Chief Executive Officer Business Segment Performance and Financial Highlights ■ Don Templin, Chief Financial Officer
Slide 9: First Quarter 2023 Financial Results
First Quarter 2023 Financial Results1 1Q’221 1Q’23 Earnings Drivers Adjusted ▪ Adjusted operating EPS of $1.44 is down $0.11 compared to prior Operating $1.55 $1.44 year quarter, primarily driven by unfavorable alternative income relative to expectations EPS Per Diluted Per Diluted Share Share ▪ 1Q’
Slide 10: Wealth Solutions
Wealth Solutions Continued momentum to drive business growth and scale (Billions) Full Service – Client Assets Full Service – Recurring Deposits Target 10 – 12% Growth Spread-Based Fee-Based 9.4% CAGR $188 2018 to 1Q23 TTM $165 $171 $163 $144 $13.3 $13.6 $12.1 $119 $11.1 $10.3 $155 $9.3 $133 $129 $1
Slide 11: Wealth Solutions
Wealth Solutions Diverse revenue streams driving results (Millions) Adjusted Operating Earnings Summary ▪ 1Q’23 pre-tax adjusted operating earnings of $132M Earnings ex Notables Notables impacted by alternative income below long-term $1,077 expectations and higher administrative expenses. $602 ▪ 2Q’
Slide 12: Health Solutions
Health Solutions Premium growth while maintaining pricing discipline (Millions) Annualized In-Force Premium & Fees Aggregate Loss Ratio1 Target 7-10% Growth Target 70 – 73% 80% 13% 75% 73% 73% CAGR $912 70% 70% 70% $833 67% $752 66% $714 65% $710 $659 $1,457 $1,258 60% $1,181 $1,096 $1,038 $969 55%
Slide 13: Health Solutions
Health Solutions Revenue growth reflecting strong sales and retention, with disciplined underwriting (Millions) Adjusted Operating Earnings Summary Earnings ex Notables Notables ▪ 1Q’23 adjusted operating earnings of $94M are higher than 1Q'22 due to in-force premium growth, favorable underwriting a
Slide 14: Investment Management
Investment Management Long track record of positive organic growth & strong net flows (Billions) Assets Under Management Organic Growth Rate1 ’21 to ’24 Target of 2 – 4% $321 $328 5.0% $264 4.2% $246 $223 $204 1.8% 0.6% 1.1% 0.5% -0.4% -1.2% Net Flows2 2018 2018 2019 2019 2020 2020 2021 2021 2022 20
Slide 15: Investment Management
Investment Management Revenue growth driven by AllianzGI, Private and Alternative Assets (Millions) Adjusted Operating Earnings Summary Excludes AllianzGI NCI ▪ 1Q’23 adjusted operating earnings of $33M, excluding AllianzGI noncontrolling interest (“NCI”) of $9M, impacted Earnings ex Notables Notabl
Slide 16: Strong Balance Sheet
Strong Balance Sheet Supports our capital-light, high-free cash flow business model (As of 3/31/2023) $0.5B of Excess Capital Robust excess capital position, supported by capital-light, high- free cash flow business model that replenishes capital 90%+ FCF Generation 25 – 30% Leverage Ratio Strong li
Slide 17: General Account
General Account Built to deliver through-the-business cycle returns $40Bn 96%+ 3,000+ General Account Investment Grade1 Issuers diversified across a range of Industries THROUGH THE CYCLE, RISK- HIGH-QUALITY AND CREDIT ADJUSTED RETURNS DIVERSIFIED RISK-MANAGEMENT ✓ Trailing 20-yr loss rate on CML por
Slide 18: Capital Rollforward
Capital Rollforward Balanced capital return and strong cash flow generation (Billions) 12-month Excess Capital Rollforward Considerations 90%+ ▪ Capital generation is over 90%, on a TTM basis FCF Conversion ▪ On track to extinguish $393 million of hybrid debt in May, funded by P-Caps senior debt wit
Slide 19: Strong Cash Flow Generation Over Time
Strong Cash Flow Generation Over Time $5.7B of capital generated from 2018 – 2022 (Billions) Consistent Cash Flow Generation Summary 18% ▪ Diversity of revenue sources and capital light FCF2 102% nature of our businesses have led to consistent $1.4 FCF $1.490%+ cash generation 102% FCF 92% $1.2 $0.3
Slide 20: Focused on strategy execution and building on our track record of success
Focused on strategy execution and building on our track record of success Achieve and ■ 2023 revenue growth, margin, and capital management guidance remain unchanged Execute Financial ■ On target for 12% to 17% EPS CAGR over the three-year period ending in 2024 Targets ■ LDTI and outstanding warrant
Slide 21: Appendix
Appendix
Slide 22: Adjusted Operating to Net Income Walk
Adjusted Operating to Net Income Walk (Millions) Primarily Primarily Primarily Cash Non-Cash Cash 2 1 1. Losses from Businesses exited include amortization of intangibles. 2. Primarily closing costs associated with Benefitfocus acquisition and ongoing integration costs related to AllianzGI. 22
Slide 23: EPS Guidance intact, remain on track for 12 – 17% EPS CAGR
EPS Guidance intact, remain on track for 12 – 17% EPS CAGR over the 3-year period ending in 2024 2023 EPS Growth Recast for LDTI 2023 High Single Digit EPS Growth Given LDTI Recast and Elevated Warrant Dilution LDTI Recast 2022 EPS Growth of 30% vs. Prior 24% $7.481 12 – 17% Annual Adjusted EPS1 Gro
Slide 24: Guidance and Assumptions
Guidance and Assumptions Note: Teal font denotes change from 4Q’22 Prepayment & ■ Long-term prepayment and other investment fee income, quarterly ■ Approximately 9% annual long-term expected returns (pre-tax) for alternative Alt. Income expectation in 2023 (pre-tax): $9 million for Wealth Solutions
Slide 25: Seasonality
Seasonality Note: Teal font denotes change from 4Q’22 Wealth Health IM Corporate All Segments ▪ Group Life ▪ Admin expenses tend to be the ▪ Corporate tends to have the highest loss ratio highest recurring deposits tends to be ▪ Payroll taxes and long- highest ▪ Seasonally higher 1Q ▪ Withdrawals te
Slide 26: 1Q’23 Notable Items Impacts
1Q’23 Notable Items Impacts Adjusted Operating Alternative Income Adjusted Operating Earnings Other Notables3 1Q’23 (Millions) Earnings1 Above/(Below) Expectations2 (ex. notables) Wealth Solutions $132 $(33) – $166 Health Solutions 94 (2) – 97 Investment Management 42 2 – 41 Corporate (69) – – (69)
Slide 27: Historical LDTI Impacts by Business Segment
Historical LDTI Impacts by Business Segment (Millions) Wealth Solutions 4Q'21 1Q'22 2Q'22 3Q'22 4Q'22 FY'21 FY'22 Adjusted Operating Earnings as reported1 241 205 186 168 148 1,110 707 DAC Unlocking eliminated with LDTI (1) 16 4 (50) (14) (29) (44) Decrease in DAC Amortization 6 7 8 9 10 26 33 Recas
Slide 28: Reliable Long-Term Investment Performance Critical to Future Success
Reliable Long-Term Investment Performance Critical to Future Success 1Q 2023 % AUM Above Benchmark or Peer Median1 100 87 80 79 70 71 62 61 64 55 43 22 Equity Multi-Asset Fixed Voya IM Income Total 3 Year 5 Year 10 Year 1. Voya Investment Management calculations as of March 31, 2023. Metrics present
Slide 29: Well-Diversified Investment Portfolio Built for Through the Cycle Risk Adjusted Returns
Well-Diversified Investment Portfolio Built for Through the Cycle Risk Adjusted Returns $40 Billion General Account Investment Portfolio1 96%+ Investment Grade2 Munis 2% LP/Equity 6% Short 4% Term/Treasury 2% 45% Public Corporate CML 13% 30% Private Securitized 52% Credit 26% 20% 1 Ratings2 Fixed Ma
Slide 30: Private Credit Provides Income, Diversification and Downside Protection
Private Credit Provides Income, Diversification and Downside Protection ▪ 20% allocation in the investment portfolio, of which 92% is Investment Grade ▪ Covenant structures in Private Credit provide more protections than Public Investment Grade Bonds ▪ Voya Investment Management is a Tier One invest
Slide 31: Well Diversified and High-Quality CML Portfolio
Well Diversified and High-Quality CML Portfolio CML Portfolio: Exposure by Property Type1 2% 1% Debt Service Coverage Ratio (DSCR) 2% 3% Multifamily >1.25- >1.00 – Retail >1.50X <1.00X Total Loan To Value (LTV2) 1.50X 1.25X 9% Industrial/Warehouse 30% <50% 44.4% 8.8% 7.3% 6.6% 67.0% Office 15% 50% -
Slide 32: Office Loan Exposure
Office Loan Exposure Direct Exposure Represents 2% of Total General Account % of Office Loan Portfolio Maturing by Year1 $159M maturing over the next 5-years 6.5% 6.3% Debt Service Coverage Ratio (DSCR) >1.25- >1.00 – >1.50X <1.00X Total Loan To Value (LTV) 1.50X 1.25X 3.0% <50% 56.1% 7.2% 11.2% 1.4
Slide 33: CMBS is Tilted Toward Agency and Loss Remote Credit
CMBS is Tilted Toward Agency and Loss Remote Credit (As of 3/31/2023) ▪ 11% allocation in the investment portfolio, of which 97% is NAIC 1 or 2; 64% is NAIC 1A (AAA equivalent) ▪ 32% of exposure is Agency with no credit risk ▪ 33% is to directly underwritten Single Asset Single Borrower (SASB) ▪ 32%
Slide 34: CLO Portfolio is Modestly Sized and Highly Rated
CLO Portfolio is Modestly Sized and Highly Rated (As of 3/31/2023) ▪ 4% allocation1 in the investment portfolio, of which 93% is rated NAIC 1 ▪ Below Investment Grade and Equity exposure exclusively in Voya issued transactions ▪ Significant Credit Enhancement (CE)2 mitigates the risk of loss Voya Po