Active Stock Evaluation: Voya Financial (NYSE: VOYA)

On Tuesday, Shares of Voya Financial (NYSE: VOYA) rose 0.39% to $41.17. The stock traded total volume of 1,877,879 shares higher than the average volume of 1.79M shares.

Voya Financial, Inc. (VOYA) recently declared financial results for the third quarter of 2018.

Net income available to common shareholders for the third quarter of 2018 was $142.0M or $0.87 per diluted share, contrast with $149.0M, or $0.81 per diluted share in the third quarter of 2017. The improvement on a per-share basis reflects the company’s share repurchases. Total third-quarter 2018 net income available to common shareholders was lower because of higher income from continuing operations in the third quarter of 2018 being more than offset by the benefit of income from suspended operations in the third quarter of 2017.

Adjusted operating earnings for the third quarter of 2018 were $139.0M, or $0.84 per diluted share, after-tax, up from $29.0M, or $0.16 per diluted share, after-tax, in the third quarter of 2017. The increase was mostly because of third-quarter 2018 results having lowered negative DAC/VOBA and other intangibles unlocking, higher alternative investment income, lower expenses and higher fee-based margins.

THIRD-QUARTER 2018 HIGHLIGHTS:

  • Capital programs:
    • Repurchased $250.0M of Voya common stock during the third quarter — the company plans to purchase an additional $250.0M of common stock in the fourth quarter and deliver on its formerly declared plan in December 2017 to repurchase $1.50B in shares by the end of 2018.
    • Issued $325.0M of preferred shares in the third quarter, the proceeds of which will be utilized to reduce outstanding senior debt by $325.0M in the fourth quarter of 2018.
    • Pro-forma for the expected debt repurchase in the fourth quarter of 2018, excess capital was $813.0M as of Sept. 30, 2018.
  • Strong performance from Voya’s higher-growth, higher-return, capital-light businesses:
    • Retirement achieved record adjusted operating earnings (excluding DAC/VOBA and other intangibles unlocking) of $203.0M, mostly driven by strong prepayment fees and alternative investment income as well as higher fee-based margins. Retirement Full Service recurring deposits were $2.30B, and Full Service net flows were $99.0M in the third quarter.
    • Investment Management stated $48.0M of adjusted operating earnings and generated $1.40B of Institutional net flows, reflecting strong commercial growth in the business. Third-party sales were $5.50B during the quarter, and third-party AUM grew to $155.0B as of Sept. 30, 2018.
    • Employee Benefits generated adjusted operating earnings of $50.0M, counting underwriting results that reflect an improved loss ratio for Stop Loss. Annualized in-force premiums increased 2% contrast with the third quarter of 2017, reflecting both continued pricing discipline and a strong increase in the Voluntary business.
  • Total company assets under management and administration grew to $543.0B as of Sept. 30, 2018.

SEGMENT NEGOTIATIONS:

The following segment negotiations compare the third quarter of 2018 with the third quarter of 2017, unless otherwise noted. All figures are presented before income taxes.

Retirement

Retirement adjusted operating earnings were $253.0M, up from $107.0M. The increase was mostly because of:

  • $50.0M of positive DAC/VOBA and other intangibles unlocking in the third quarter of 2018 contrast with $44.0M of negative DAC/VOBA and other intangibles unlocking in the third quarter of 2017;
  • $35.0M of higher fee-based margin mainly because of higher average AUM (driven by both equity market and business growth) as well as the benefit of fees from the movement of certain investment-only products to Retirement from Corporate;
  • $33.0M of higher investment income, counting prepayment fee and alternative investment income that was, in aggregate, $27.0M above the company’s long-term expectations (before the effect of income taxes and DAC) in the third quarter of 2018; and
  • $20.0M of higher administrative expenses mostly because of the movement of certain investment-only products and planned investment spending to Retirement from Corporate.

Investment Management:

Investment Management adjusted operating earnings were $48.0M, contrast with $54.0M. The decline was mostly because of:

  • $6.0M of lower fee-based revenues as smaller general account average AUM resulting from the company’s June 1, 2018 sale of substantially all of its annuities businesses was partially offset by growth in third-party management fees (driven by positive net flows and higher third-party AUM);
  • $3.0M of higher investment capital revenues, which were also $3.0M above long-term expectations in the third quarter of 2018; and
  • $3.0M of higher expenses mainly because of higher volume expenses associated with higher revenue.

Total Investment Management AUM grew to $210.0B as of Sept. 30, 2018, up from $207.0B as of June 30, 2018. The decline from Sept. 30, 2017 reflects the sale of substantially all of the company’s individual annuities business on June 1, 2018. During the third quarter of 2018, Investment Management net inflows of $477.0M were driven by strong Institutional net flows of $1.40B, mainly from fixed income asset classes.

Employee Benefits:

Employee Benefits adjusted operating earnings were $50.0M, down from $58.0M. The decline was mostly because of:

  • $5.0M of lower underwriting results because of a non-recurring favorable reserve adjustment of $25.0M in the third quarter of 2017 — adjusting for the reserve change, underwriting results improved by $20.0M because of improvement in the loss ratio for Stop Loss and growth in the Voluntary block, which were partially offset by a higher Group Life loss ratio;
  • $4.0M of higher administrative expenses to support growth in the business; and
  • $2.0M of higher investment income, counting prepayment fee and alternative investment income that was, in aggregate, $2.0M above the company’s long-term expectations (before the effect of income taxes and DAC) in the third quarter of 2018.

Individual Life:

Individual Life adjusted operating earnings were $(134.0)M contrast with $(66.0)M. The higher loss was because of:

  • $57.0M of higher negative DAC/VOBA and other intangibles unlocking driven by assumption changes, mainly related to increased expected cost of reinsurance;
  • $11.0M of higher investment income, counting prepayment fee and alternative investment income that was, in aggregate, $10.0M above the company’s long-term expectations (before the effect of income taxes and DAC) in the third quarter of 2018; and
  • $4.0M of higher administrative expenses because of the reallocation of planned investment spending from Corporate into the business segments.

Total Individual Life sales, which mainly consist of indexed life insurance, were $20.0M, up from $18.0M.

Corporate:

Corporate adjusted operating losses were $(54.0)M, counting $5.0M of positive DAC/VOBA and other intangibles unlocking, contrast with losses of $(110.0)M. The improvement was mostly because of the reallocation of planned investment spending into the business segments, revenue from the company’s transition service agreements associated with the sale of substantially all of its individual annuities businesses on June 1, 2018, and higher earnings from the company’s legacy annuities business.

Share Repurchases:

In the third quarter of 2018, Voya repurchased 5.056M shares of its common stock at an average price per share of $49.44 for an aggregate purchase price of about $250.0M.

The company declared recently that its board of directors has increased the amount of the company’s common stock authorized for repurchase under the company’s share repurchase program by an additional $500.0M. This additional authorization increases the aggregate amount available under the company’s share repurchase authorization to about $761.0M as of Sept. 30, 2018. Under its share repurchase program, the company may, from time to time, purchase shares of its common stock through various means, counting open market transactions, privately negotiated transactions, forward, derivative, accelerated repurchase, or automatic repurchase transactions, or tender offers. The additional $500.0M share repurchase authorization expires on Dec. 31, 2019 (unless extended), and does not obligate the company to purchase any shares. The authorization for the share repurchase program may be terminated, increased or reduced by the board of directors at any time.

VOYA has the market capitalization of $6.57B and its EPS growth ratio for the past five years was -6.70%. The return on assets ratio of the Company was -1.30% while its return on investment ratio stands at 5.40%.

Grover Beam

Grover Beam has over 14 years experience in the financial services industry giving him a vast understanding of how news affects the financial markets. He is an active day trader spending the majority of her time analyzing earnings reports and watching commodities and derivatives. He has a Masters Degree in Economics from Westminster University with previous roles counting Investment Banking.

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