2Q 2026 Voya Financial Earnings Transcript

Date: 2026-08-05

Company: Voya Financial, Inc. Ticker: VOYA-US

Unverified Participant

00:00:09 Good morning. Welcome to Voya Financial's Second Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Participants are limited to one question and one follow up. Please note this event is being recorded. I would now like to turn the call over to Mei Ni Chu, head of Investor Relations. Please go ahead.

00:00:43 Good morning. And thank you for joining our second quarter earnings conference call. We will begin with prepared remarks by Heather Lavallee, our Chief Executive Officer; and Mike Katz, our Chief Financial Officer. Following their prepared remarks, we will take your questions. Also joining the call are Jay Kaduson, CEO of workplace solutions; and Matt Toms, our CEO of investment management. As a reminder, materials for today's call are available on our website at investors.voya.com.

00:01:10 As noted on slide 2 of our analyst presentation, some of the comments during today's discussion may contain forward-looking statements and refer to certain non-GAAP financial measures within the meaning of federal securities law. GAAP reconciliations are available in our press release and financial supplement found on our Investor Relations website. And now I will turn the call over to Heather.

00:01:42 Thank you, Mei Ni. Good morning and thank you for joining us today. Let's turn to Slide 4. Our businesses performed well in the second quarter. Strong underlying results were affected by lower alternative investment performance and by severance costs we incurred to reduce our expense base. For the quarter, we delivered adjusted operating earnings of $1.51 per share, generated approximately

$150 million of excess capital, and returned approximately $200 million to shareholders through repurchases and dividends. As Mike will cover in more detail, fundamental performance trends and the immediate payback from these expense actions gives us a clear line of sight to increased earnings and cash generation in the second half.

00:02:28 Our performance this quarter highlighted continued execution of our strategic priorities. We delivered strong commercial results in retirement and investment management. We're stabilizing and growing margins in employee benefits. And we are expanding wealth management capabilities to drive future revenue growth.

00:02:48 Turning to our business results. In retirement, we generated over $8 billion dollars of defined contribution net inflows in the quarter, supported by continued high client retention and large plan implementations in government and corporate markets. In government markets where Voya leads the industry, we've added

more than $30 billion in assets and approximately 1 million participants in the past 18 months through organic growth. We're also driving strong full service growth in key segments, with emerging market sales up over 30% year-over-year. We completed the final phase of our OneAmerica integration during the quarter, marking the conclusion of a highly successful acquisition and integration effort that has significantly exceeded the financial goals we set.

00:03:37 We continue to build momentum in wealth management with year-over-year revenue growth of approximately 12%. Our retirement franchise now exceeds 10 million participant accounts, and wealth management allows us to deepen those participant relationships and serve customers in a more comprehensive way. Our results this quarter demonstrate Voya's leadership position in the retirement market. Our business is delivering consistent flows, high client retention and significant growth in participant accounts. Our presence across markets and expansive distribution footprint provides a durable foundation for sustainable growth. As we further develop our wealth management capabilities, we are building a platform that can serve an expanding customer base with the solutions they need for a confident financial future.

00:04:28 In investment management, we generated positive net flows for both the quarter and the year supported by client demand across a broad range of investment strategies and distribution channels. We expanded our product offerings during the quarter, including the launch of two Multi-manager collective investment trusts that enhance the private and alternative asset solutions we bring to retirement plan clients. Our investment performance remains a clear strength, with 83% of assets outperforming peers or benchmarks over three years and 85% outperforming over 10 years. The strong outcomes we deliver for clients are driving continued commercial success and strengthen the role investment management plays in Voya's broader workplace and wealth management strategy.

00:05:18 In employee benefits, we continue to improve and strengthen the business. In stop loss, we have stabilized loss ratios and margins across the entire book while maintaining the strength of our reserves. Early 2026 experience reinforces our confidence that the actions we've taken will continue to drive higher margins and restore the business to its historical earnings power. Across the portfolio, disciplined pricing, underwriting and risk selection are improving margins and allowing us to focus on business that meets our return expectations.

00:05:55 I'll now turn it over to Mike to walk through the financials in more detail. Mike.

00:06:01 Thank you, Heather. Turning to slide 6. In the quarter, adjusted operating earnings were $140 million or a

$1.51 per diluted share. That result includes an approximate $0.90 per share impact from alternative investment performance below expectations, as well as severance actions. The alternative investment impact was driven primarily by macro market conditions affecting our private equity portfolio, which are reported on a one quarter lag. Year-to-date returns remain positive and we expect results to improve in the third quarter. On severance, we expect the resulting expense savings to fully offset the upfront costs by year-end. These actions improve efficiency, reduce ongoing expenses and allow us to invest in longterm growth. While these items affected second quarter EPS, the underlying business trends remain strong. Continued commercial momentum in retirement and investment management, along with improving margins in employee benefits, support our confidence in meaningfully higher earnings in the second half.

00:07:09 With that, let me turn to the segment results. Starting with retirement on Slide 7. Adjusted operating earnings were $190 million in the quarter. Results were impacted by lower spread income, reflecting alternative investment performance below expectations. Excluding the alternative investment impact, core spread income remained resilient, supported by reinvestment at higher rates. On a trailing 12 month basis, adjusted operating earnings increased 6%. Fee-based revenue increased 10% year-over-year.

Now representing over 60% of revenue. And margins remained healthy at 38%. Defined contribution net flows were $8.1 billion in the quarter, supported by continued high client retention and large plan implementations in both government and corporate markets. The platform now serves more than 10 million participant accounts, providing meaningful scale to drive future fee-based revenue growth.

Stepping back, robust flows, high client retention and growth in participant accounts reinforce the strength of our retirement franchise.

00:08:23 Turning to Investment Management on Slide 8. Adjusted operating earnings increased 12% year-over-year to $57 million, driven by higher advisory fees across institutional and retail channels. On a trailing 12 month basis, adjusted operating earnings increased 11%, reflecting both those higher advisory fees, as well as disciplined expense management. Net inflows were $1.2 billion in the quarter and now $6.3 billion over the last 12 months. Looking ahead, we continue to see healthy client demand for our differentiated investment capabilities and robust investment performance. At the same time, the second half will include the wind down of a legacy relationship, which will modestly offset momentum in actively distributed products. Importantly, the revenue impacts from this are expected to be immaterial in 2026. Overall, investment management delivered solid earnings growth supported by positive flows, healthy client demand and strong investment performance.

00:09:32 Turning to employee benefits on Slide 9. Adjusted operating earnings were $22 million in the quarter and

$122 million over the last 12 months. In the quarter, we released $8 million of reserves and stop loss while continuing to hold reserves at the high end of our best estimate range. Early Claims Experience on 2026 business is encouraging and is emerging favorably relative to both 2024 and 2025 business. We also continue to see favorable underwriting conditions as we complete the non-January 2026 selling season and begin pricing for January 2027. In group life, results continue to benefit from favorable mortality consistent with broader industry trends. This helped to offset higher voluntary loss ratios in the quarter, which were elevated in part due to non-recurring items. For voluntary, while one time items contributed to higher loss ratios in the quarter, the broader trend remains consistent with our expectations as expense actions are supporting our plan to maintain net margins. Stepping back, the underlying fundamentals across the portfolio remain strong, highlighted by the 5 point improvement in aggregate loss ratios over the last 12 months. Our disciplined approach to risk selection, pricing and expense management reinforces our ability to deliver further margin expansion and earnings growth in employee benefits.

00:11:06 Turning to Slide 10. We generated approximately $150 million of excess capital in the second quarter and $350 million year-to-date with cash conversion above 100% in the quarter. We remain on track for 2026 cash generation to exceed 2025 levels supported by strong cash conversion, the second half earnings outlook and the expense actions we've discussed. On capital deployment, we repurchased 150 million of shares in the second quarter and 300 million year-to-date. We ended the quarter with approximately $200 million of excess capital, preserving flexibility while continuing to return capital to shareholders.

00:11:51 For the third quarter, we expected deploy at least $100 million towards share repurchases and the second half cash generation outlook gives us flexibility to deploy additional capital in the fourth. Return on equity was impacted by alternative investment and severance items, which is why we are explicitly calling them out rather than leaving investors to reconcile the effect on their own. Stepping back, the second half outlook is supported by business momentum, expense discipline and improving fundamentals. Most importantly, cash generation remains strong and we remain on track for 2026 to exceed 2025 levels.

00:12:34 With that, I'll turn it back to Heather.

00:12:37 Let me close on Slide 11, which brings together the key points from today's discussion. We're carrying strong commercial momentum into the second half, particularly in retirement and investment management. We continue to improve margins in employee benefits supported by the pricing and underwriting actions we've taken across the portfolio. The expense actions we took in the second quarter alongside a more constructive macro environment, provide a tailwind for increased earnings in the second half. Our cash generation remains strong, with 2026 on track to exceed 2025 levels and conversion rates above our 90% target.

00:13:17 We continue to be disciplined in deploying capital. We returned more than $380 million to shareholders in the first half of 2026. We are maintaining our commitment to return capital to shareholders in the second half with our repurchase program active in the market and at least $100 million of buybacks planned for the third quarter. Together, these actions reinforce our confidence in our strategy and position Voya to deliver continued earnings growth, strong cash generation and shareholder value.

00:13:48 Before we go to questions, I want to thank our employees across Voya. Every day they help our customers navigate some of life's most important financial decisions with greater confidence. Their focus and commitment continue to drive our success. With that, I'll turn it over to the operator so we can take your questions.

00:14:25 Thank you. We will now begin the question-and-answer session. Our first question is from Ken Lee with RBC Capital. Please proceed.

Unidentified speaker

00:14:38 Question - Unidentified speaker: Hey, good morning and thanks for taking my question. Just one on the investment management side. The institutional net inflows in the quarter. I wonder if you could talk a little bit more about some of the drivers there and perhaps also the - any kind of color or composition of the pipeline> Thanks.

00:14:57 Answer - Unidentified speaker: Yeah. Good morning, Ken. Matt will take your question.

00:14:59 Answer - Unidentified speaker: Yes. Happy to unpack that for you, Ken. So first quarter, sorry, second quarter strong, that $1.2 billion we're happy with that's an annualized growth rate of about 1.6%.

Importantly within that, the revenue yield was up as well. I think that's a counter industry trend and that's supporting the broader fee revenue growth and it shows the quality of those flows. You referenced

institutional specifically, that's $1.6 billion. So providing the flows for the quarter. We'd continue to call out the insurance strength we have that's backed by both our fixed income and our private, private credit capabilities that continue to resonate in the marketplace. That's both backward-looking and forward-looking. To your question about the forward look. Overall, our demand for institutional retail products remains intact. And look, we like the competitive position in those fixed income international markets, which we believe are poised for continued growth. And that's what drives that long-term expectation of 2-plus percent.

Unidentified speaker

00:16:00 Question - Unidentified speaker: Great. Very helpful there. And one follow up, if I may. Any color around what you're seeing in terms of planned RFP activity within the retirement business there?

Thanks.

00:16:17 Answer - Unidentified speaker: Yeah, Ken. Jay will take your question. Thanks.

00:16:21 Answer - Unidentified speaker: Hi, Ken. Yeah, if you think about RFP volumes themselves, they do differ across markets. If you think about our emerging market, you should think in terms of that mid-single digits that 6% or 7% growth, double digit growth in mid-market where we're seeing a lot of activity and finding a lot of success. In that large mega it's been very consistent in prior years low-single digit very healthy. And you know, overall, I'm really, really pleased with the RFP volumes that are, you know, really helping us do our commercial momentum.

00:16:51 Answer - Unidentified speaker: And I think the broader set back, Ken, is that we continue to be very pleased with the commercial momentum in retirement and the overall performance that are in our largest and highest margin business.

Unidentified speaker

00:17:03 Question - Unidentified speaker: Great. Very helpful there. Thanks again. 00:17:06 Answer - Unidentified speaker: Thanks, Ken.

00:17:08 Our next question is from Tom Gallagher with Evercore ISI. Please proceed.

Unidentified speaker

00:17:15 Question - Unidentified speaker: Hey. Good morning. A few on stop loss. Heather, I know you mentioned the early 2026 experience gives you confidence that margins will improve in stop loss. Any sort of quantification that you can share on how we should think about that the - and is 3Q at all a possibility to change your 87 loss pick for 2026 or is it more likely need to be more seasoned that we would have to expect that to come through and have enough evidence to wait until Q4?

00:17:54 Answer - Unidentified speaker: Yeah. Good morning, Tom. I'll let Mike start on the question.

00:17:57 Answer - Unidentified speaker: Hey, Tom. Yeah, look, I think it's remotely possible in the third quarter, but I would circle the fourth quarter as really the more likely opportunity for that. Why is that? You know, we're a third complete coming out of the third quarter. We're two thirds complete coming out of the fourth. And we just really have zero interest in trying to accelerate outcomes. That said, when we look at what we're seeing in the 2026 business so far, it's running meaningfully better than what we saw in both 2024 and 2025 coming out of August. Now, to get to completion here, we're about 15% to 20% complete coming out of the second quarter. But we're still going to think about this at the high end of best estimate reserve ranges. I think we've been very consistent about that. But what's important here is the work we did last year. When you look at the underwriting team that we put in place, the leadership we put in place, which is really been all about how we quote, how we review and select risk.

00:18:55 You know, the other thing is just our ability to get rate. We got 21% rate increase coming into 2025. We got 24% rate increase coming into 2026. And frankly, we're getting even more rate. And what we're pricing in 2026. So I think the step back here is we feel really good, but we don't want to accelerate any outcomes here, Tom.