Voya Financial Announces Fourth-Quarter and Full-Year 2018 Results

  • Fourth-quarter 2018 net income available to common shareholders of
    $0.76 per diluted share
  • Fourth-quarter 2018 adjusted operating earnings1of $1.32 per diluted share, after-tax; Normalized for the following
    items, fourth-quarter 2018 adjusted operating earnings were $1.40 per
    diluted share, after-tax:

    • $(0.18) per diluted share, after-tax, of unfavorable deferred
      acquisition costs and value of business acquired (“DAC/VOBA”) and
      other intangibles unlocking; and
    • $0.10 per diluted share, after-tax and DAC/VOBA, of prepayment
      fees and alternative investment income above the company’s
      long-term expectations.
  • Full-year 2018 net income available to common shareholders of $5.20
    per diluted share
  • Full-year 2018 adjusted operating earnings of $4.04 per
    diluted share, after-tax; Normalized for the following items,
    full-year 2018 adjusted operating earnings were $4.88 per diluted
    share, after-tax:

    • $(1.30) per diluted share, after-tax, of unfavorable deferred
      acquisition costs and value of business acquired (“DAC/VOBA”) and
      other intangibles unlocking;
    • $0.39 per diluted share, after-tax and DAC/VOBA, of prepayment
      fees and alternative investment income above the company’s
      long-term expectations; and
    • $0.07 per diluted share, after-tax, of Investment Management
      adjusted operating earnings associated with the fixed and variable
      annuities business that was sold on June 1, 2018.
  • Repurchased $275 million of Voya common stock in the fourth-quarter
    and delivered on the previously announced plan to repurchase $1.5
    billion in shares by the end of 2018
  • $871 million of excess capital as of Dec. 31, 2018, which reflects
    the company’s new risk-based capital (RBC) ratio target of 400%
    following the year-end implementation by the NAIC of reduced tax rates
    in the calculation of RBC

NEW YORK–(BUSINESS WIRE)–lt;a href=”https://twitter.com/search?q=%24VOYA&src=ctag” target=”_blank”gt;$VOYAlt;/agt;–Voya Financial, Inc. (NYSE: VOYA) today announced financial results for
the fourth quarter of 2018 and the full-year 2018.

“We concluded 2018 with strong results that demonstrate our continued
commitment to driving profitable organic growth and creating greater
value for our shareholders,” said Rodney O. Martin, Jr., chairman and
CEO, Voya Financial, Inc. “We demonstrated continued momentum across our
businesses with Retirement Full Service recurring deposits for 2018
increasing 10% compared with 2017; $694 million of positive
Institutional net flows in Investment Management in the fourth quarter
of 2018; and a 5% increase in Employee Benefits annualized in-force
premiums compared with the fourth quarter of 2017.

“Excluding the negative impact of DAC/VOBA and other intangibles
unlocking and the benefit of prepayment fees and alternative investment
income above our long-term expectations, normalized fourth-quarter 2018
adjusted operating earnings were $1.40 per diluted share, after-tax,
which is at the high-end of our previously shared target range of $1.30
to $1.40 earnings per share that we had aimed to achieve by the end of
the second quarter of 2019.

“Normalized full-year 2018 adjusted operating earnings — which exclude
DAC/VOBA and other intangibles unlocking, the benefit of prepayment fees
and alternative investment income above our long-term expectations, and
Investment Management adjusted operating earnings associated with the
fixed and variable annuities business that was sold on June 1, 2018 —
were $4.88 per diluted share, after-tax.

“We also further executed on our capital deployment plans and
repurchased $275 million of Voya common shares in the fourth quarter of
2018. Including the accelerated share repurchase agreement that we
executed at the end of 2017, we delivered on our previously-announced
plan to repurchase at least $1.5 billion of Voya common shares in 2018.

“We also concluded 2018 with $871 million in excess capital and, in the
first quarter of 2019, we entered into a new accelerated share
repurchase agreement to buy back an additional $250 million of our
common shares. We remain committed to our capital deployment plans,
which continue to emphasize share repurchases, so that — along with our
organic growth and cost savings initiatives — we can achieve our target
of at least 10% annual adjusted operating earnings per share growth over
the next three years, on a normalized basis.

“As a simpler, more focused company, Voya remains well positioned to
achieve its plans to drive greater shareholder returns by ensuring we
continue to both anticipate and meet our customers’ needs, which will
also enable us to achieve our vision to be America’s Retirement
Company,” added Martin.

FOURTH-QUARTER 2018 SUMMARY

   

Three Months Ended

December 31, 2018

   

December 31, 2017

($ in millions)     (per share)     ($ in millions)     (per share)
Net income available to common shareholders $121 $0.76 $(3,165) $(17.64)
Adjusted operating earnings, after-tax $209 $1.32 $158 $0.87
Common book value $52.28 $58.19
Common book value, excluding AOCI $48.26 $42.31
Weighted avg common shares outstanding (in millions):
Basic 154 179
Diluted     158           183      
 

1 This press release includes certain non-GAAP financial
measures, including adjusted operating earnings and book value,
excluding accumulated other comprehensive income. More information on
non-GAAP measures and reconciliations to the most comparable U.S. GAAP
measures can be found in the “Use of Non-GAAP Financial Measures”
section of this release and in the company’s Quarterly Investor
Supplement.

Net income available to common shareholders in the fourth quarter
of 2018 was $121 million, or $0.76 per diluted share, compared with
$(3,165) million, or $(17.64) per diluted share in the fourth quarter of
2017. Net income available to common shareholders in the fourth quarter
of 2017 included a $2.6 billion loss from discontinued operations
related to the company’s sale of the majority of its individual
annuities businesses and a $679 million one-time loss related to the
reduction in the carrying value of deferred tax assets due to the lower
corporate tax rate established by the Tax Cuts and Jobs Act.

Adjusted operating earnings in the fourth quarter of 2018 were
$209 million, or $1.32 per diluted share, after-tax, up from $158
million, or $0.87 per diluted share, after-tax, in the fourth quarter of
2017. The increase was driven by improved underwriting results in
Employee Benefits, higher investment income, and lower expenses in
Corporate, which were partially offset by higher negative DAC/VOBA and
other intangibles unlocking as well as lower fee-based margins due to
the company’s June 1, 2018 sale of substantially all of its annuities
businesses and the fourth quarter of 2017 benefiting from higher
performance-based fees in Investment Management.

In addition, fourth-quarter 2018 adjusted operating earnings benefited
from a change in the effective tax rate from 32.0% in the fourth quarter
of 2017 to 12.2% in the fourth quarter of 2018. The fourth-quarter 2018
tax rate reflected a benefit of $11 million, or $0.07 per diluted share,
due to a greater dividends received deduction than previously estimated.

FULL-YEAR 2018 SUMMARY

   

Twelve Months Ended

December 31, 2018

   

December 31, 2017

($ in millions)     (per share) ($ in millions)     (per share)
Net income available to common shareholders $875 $5.20 $(2,992) $(16.25)
Adjusted operating earnings, after-tax $680 $4.04 $359 $1.92
Common book value $52.28 $58.19
Common book value, excluding AOCI $48.26 $42.31
Weighted avg common shares outstanding (in millions):
Basic 163 184
Diluted     168           187      

Net income available to common shareholders in the full-year 2018
was $875 million, or $5.20 per diluted share, compared with $(2,992)
million, or $(16.25) per diluted share in the full-year 2017. Net income
available to common shareholders in the full-year 2017 includes the
previously mentioned fourth-quarter 2017 loss from discontinued
operations related to the company’s sale of the majority of its
individual annuities businesses and the one-time loss related to the
reduction in the carrying value of deferred tax assets.

Adjusted operating earnings in the full-year 2018 were $680
million, or $4.04 per diluted share, after-tax, up from $359 million, or
$1.92 per diluted share, after-tax, in the full-year 2017. The increase
was driven by lower negative DAC/VOBA and other intangibles unlocking,
higher investment income, improved underwriting results in Employee
Benefits, higher fee-based margins, and lower expenses in Corporate.

FOURTH-QUARTER AND FULL-YEAR 2018 HIGHLIGHTS

  • Continued execution of the company’s long-term plan to drive organic
    growth, cost savings and capital deployment.
  • Capital deployment:

    • Repurchased $275 million of Voya common stock in the
      fourth-quarter of 2018 and delivered on the previously announced
      plan to repurchase $1.5 billion in shares by the end of 2018.
    • Reduced outstanding senior debt by $325 million.
    • Excess capital of $871 million as of Dec. 31, 2018, which is the
      amount above the company’s holding company liquidity target of
      $200 million and estimated statutory surplus in excess of a 400%
      combined RBC ratio. As of Dec. 31, 2018, Voya’s estimated RBC
      ratio was 479% and includes the impact of the industry-wide
      changes to the factors affecting the RBC formula that were driven
      by a change in the corporate tax rate. During the fourth quarter
      of 2018, Voya also established a new RBC ratio target of 400%,
      which the company believes is appropriate given its simpler
      portfolio of higher-growth, higher-return, capital-light
      businesses and actions taken during 2018 to lower balance sheet
      risk, including divestment of its variable and fixed annuities
      businesses.
  • Organic growth:

    • Retirement reported fourth-quarter 2018 adjusted operating
      earnings (excluding DAC/VOBA and other intangibles unlocking) of
      $183 million, up 14% compared with the fourth quarter of 2017,
      largely driven by higher investment income and fee-based margins.
      For the full-year 2018, Retirement achieved record adjusted
      operating earnings (excluding DAC/VOBA and other intangibles
      unlocking) of $702 million, up 18% compared with full-year 2017.
      For 2018, Full Service recurring deposits grew 10% compared with
      the prior year period to reach $9.3 billion.
    • Investment Management reported fourth-quarter 2018 adjusted
      operating earnings of $44 million and generated $694 million of
      Institutional net flows, reflecting strong commercial growth in
      the business and the 12th consecutive quarter of positive
      Institutional net flows. External client sales were $7.3 billion
      in the fourth quarter of 2018. Investment Management full-year
      2018 adjusted operating earnings were $205 million and reflect a
      6% increase in external client fee revenues compared with
      full-year 2017.
    • Employee Benefits increased fourth-quarter 2018 adjusted
      operating earnings to $43 million, up 39% compared with the fourth
      quarter of 2017 and driven by an improved loss ratio for Stop
      Loss. For the full-year 2018, Employee Benefits achieved record
      adjusted operating earnings (excluding DAC/VOBA and other
      intangibles unlocking) of $161 million, up 26% compared with
      full-year 2017. The Employee Benefits total aggregate loss ratio
      improved to 72.5% for 2018, compared with 74.0% for 2017. In the
      fourth quarter of 2018, annualized in-force premiums increased 5%
      compared with the fourth quarter of 2017, reflecting both
      continued pricing discipline and a strong increase in the
      Voluntary business.
  • Total company assets under management and administration of $467
    billion as of Dec. 31, 2018.

SEGMENT DISCUSSIONS

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

Retirement

Retirement adjusted operating earnings were $170 million, up from $168
million. The increase primarily reflects:

  • $13 million of negative DAC/VOBA and other intangibles unlocking in
    the fourth quarter of 2018 compared with $7 million of positive
    DAC/VOBA and other intangibles unlocking in the fourth quarter of 2017;
  • $19 million of higher fee-based margin primarily due to the benefit of
    fees from the movement of certain investment-only products to
    Retirement from Corporate;
  • $17 million of higher investment income, including prepayment fee and
    alternative investment income that was, in aggregate, $11 million
    above the company’s long-term expectations (before the effect of
    income taxes and DAC) in the fourth quarter of 2018; and
  • $23 million of higher administrative expenses largely due to the
    movement of certain investment-only products and strategic investment
    spending to Retirement from Corporate.
           
($ in millions)

Trailing twelve
months ended
Dec. 31,
2018

Trailing twelve
months ended
Sept. 30,
2018

Trailing twelve
months ended
Dec. 31,
2017

Retirement — Full Service
Full Service recurring deposits $ 9,343 $ 9,164 $ 8,478
 
($ in millions)

Three months
ended Dec. 31,
2018

Three months
ended Sept. 30,
2018

Three months
ended Dec. 31,
2017

Retirement
Total client assets $ 361,575 $ 434,862 $ 432,341
 
Retirement — Full Service
Full Service recurring deposits $ 2,173 $ 2,267 $ 1,994
Full Service net flows $ 1,315 $ 99 $ (27 )
Full Service client assets $ 119,219 $ 128,641 $ 122,565
 

The decline in Retirement total client assets for the three months ended
Dec. 31, 2018 compared with the prior periods reflects a previously
announced termination of a large recordkeeping plan of approximately $40
billion of plan assets in the fourth quarter of 2018.

Investment Management

Investment Management adjusted operating earnings were $44 million,
compared with $60 million. The decline primarily reflects:

  • $23 million of lower fee-based revenues driven by lower general
    account average AUM (resulting from the company’s June 1, 2018 sale of
    substantially all of its annuities businesses) and the fourth quarter
    of 2017 benefiting from higher performance-based fees;
  • $3 million of lower investment capital revenues, however
    fourth-quarter 2018 investment capital results were in-line with
    long-term expectations; and
  • $10 million of lower expenses primarily due to lower volume expenses
    associated with lower revenue during the quarter.
           
($ in millions) 4Q 2018 3Q 2018 4Q 2017
Investment Management AUM
External clients $ 147,176 $ 154,553 $ 142,280
General account     56,288       55,862       82,006  
Total     $ 203,464       $ 210,415       $ 224,286  
 
Investment Management Net Flows
Institutional $ 694 $ 1,392 $ 528
Retail (including sub-advisor replacements)     (1,120 )     (315 )     (223 )
Total (excluding divested annuities)     $ (426 )     $ 1,077       $ 305  
Divested annuities outflows     (578 )     (600 )     (1,443 )
Total     $ (1,004 )     $ 477       $ (1,137 )
 

During the fourth quarter of 2018, Investment Management (IM) net
outflows (excluding divested annuities) were $426 million. This included:

  • $694 million in Institutional net inflows, primarily from fixed
    income asset classes and senior loans, and reflecting $1.6 billion of
    net inflows from IM-sourced channels, partially offset by $884 million
    of net outflows from Affiliate-sourced channels.
  • $1.1 billion in Retail net outflows, reflecting outflows in
    both IM-sourced (primarily senior loan and real estate strategies) and
    Affiliate-sourced channels.

Total Investment Management AUM was $203 billion as of Dec. 31, 2018.
The decline from Sept. 30, 2018 primarily reflects lower equity markets
and total net flows, while the decline from Dec. 31, 2017 primarily
reflects the reduction in the company’s general account that resulted
from the sale of substantially all of the company’s individual annuities
businesses on June 1, 2018.

Employee Benefits

Employee Benefits adjusted operating earnings were $43 million, up from
$31 million. The increase primarily reflects:

  • $18 million of higher underwriting results driven by an 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;
  • $3 million of higher administrative expenses to support growth in the
    business; and
  • $1 million of higher investment income, including prepayment fee and
    alternative investment income that was, in aggregate, $1 million above
    the company’s long-term expectations (before the effect of income
    taxes and DAC) in the fourth quarter of 2018.
           
($ in millions) 4Q 2018 3Q 2018 4Q 2017
Employee Benefits Annualized In-Force Premiums
Group Life, Disability and Other $ 659 $ 654 $ 623
Stop Loss 969 953 969
Voluntary     311       309       257  
Total     $ 1,939       $ 1,916       $ 1,849  
 
Employee Benefits Loss Ratios
Group Life 78.7 % 78.6 % 76.1 %
Stop Loss 77.5 % 77.0 % 83.9 %
 

Trailing twelve
months ended
Dec. 31,
2018

Trailing twelve
months ended
Sept. 30,
2018

Trailing twelve
months ended
Dec. 31,
2017

Total Aggregate Loss Ratio 72.5 % 73.1 % 74.0 %
 

Compared with the fourth quarter of 2017, total Employee Benefits
in-force premiums increased 5%, reflecting strong growth in Voluntary
premiums and continued pricing discipline in Stop Loss. The Total
Aggregate Loss Ratio improved to 72.5% for 2018, within the company’s
target range of 71% to 74% and driven largely by significant improvement
in the loss ratio for Stop Loss.

Individual Life

Individual Life adjusted operating earnings were $43 million compared
with $64 million. The decline primarily reflects:

  • $13 million of higher negative DAC/VOBA and other intangibles
    unlocking due to unfavorable unlocking related to assumption updates
    on cost of reinsurance, somewhat offset by favorable unlocking due to
    timing of reinsurance premiums in the period.
  • $8 million of higher investment income, including prepayment fee and
    alternative investment income that was, in aggregate, $6 million above
    the company’s long-term expectations (before the effect of income
    taxes and DAC) in the fourth quarter of 2018; and
  • $4 million of higher administrative expenses due to the reallocation
    of strategic investment spending from Corporate into the business
    segments.

Total Individual Life sales, which primarily consist of indexed life
insurance, were $26 million. Voya ceased new sales of individual life
insurance on Dec. 31, 2018.

Corporate

Corporate adjusted operating losses were $62 million, including $1
million of negative DAC/VOBA and other intangibles unlocking, compared
with losses of $90 million. The improvement was largely due to a decline
in the stranded costs that resulted from the company’s sale of
substantially all of its individual annuities businesses on June 1, 2018
and the reallocation of strategic investment spending into the business
segments. Earnings from the company’s legacy annuities business were
largely unchanged.

Share Repurchases

In the fourth quarter of 2018, Voya repurchased 6,169,463 shares of its
common stock at an average price per share of $44.51 for an aggregate
purchase price of approximately $275 million.

In the first quarter of 2019, Voya entered into an accelerated share
repurchase (“ASR”) agreement with a third-party to repurchase an
aggregate of $250 million of Voya’s common stock. Under the terms of the
ASR agreement, approximately 5 million shares were received by Voya in
January 2019. The final number of shares to be repurchased will be based
on the volume-weighted average stock price of Voya’s common stock less a
discount and subject to potential adjustments pursuant to the terms of
the ASR agreement. Final settlement of the transaction under the ASR
agreement is expected to occur no later than the beginning of the second
quarter of 2019.

Giving effect to the completion of the ASR agreement, the aggregate
amount remaining under the company’s share repurchase authorization
would be approximately $236 million.

Supplementary Financial Information

More detailed financial information can be found in the company’s
Quarterly Investor Supplement, which is available on Voya’s investor
relations website, investors.voya.com.

Earnings Call and Slide Presentation

Voya will host a conference call on Wed., Feb. 6, 2019, at 10 a.m. ET,
to discuss the company’s fourth-quarter and full-year 2018 results. The
call and slide presentation can be accessed via the company’s investor
relations website at investors.voya.com.
A replay of the call will be available on the company’s investor
relations website at investors.voya.com
starting at 1 p.m. ET on Feb. 6, 2019.

About Voya Financial

Voya Financial, Inc. (NYSE: VOYA), helps Americans plan, invest and
protect their savings — to get ready to retire better. Serving the
financial needs of approximately 13.8 million individual and
institutional customers in the United States, Voya is a Fortune 500
company that had $8.6 billion in revenue in 2018. The company had $467
billion in total assets under management and administration as of Dec.
31, 2018. With a clear mission to make a secure financial future
possible — one person, one family, one institution at a time — Voya’s
vision is to be America’s Retirement Company®. Certified as a
“Great Place to Work” by the Great Place to Work® Institute,
Voya is equally committed to conducting business in a way that is
socially, environmentally, economically and ethically responsible. Voya
has been recognized as one of the 2018 World’s Most Ethical Companies®
by the Ethisphere Institute, one of the 2018 World’s Most Admired
Companies by Fortune magazine and one of the Top Green Companies
in the U.S. by Newsweek magazine. For more information, visit voya.com.
Follow Voya Financial on Facebook,
LinkedIn
and Twitter @Voya.

Use of Non-GAAP Financial Measures

We believe that Adjusted operating earnings before income taxes provides
a meaningful measure of its business and segment performance and
enhances the understanding of our financial results by focusing on the
operating performance and trends of the underlying business segments and
excluding items that tend to be highly variable from period to period
based on capital market conditions or other factors. We use the same
accounting policies and procedures to measure segment Adjusted operating
earnings before income taxes as we do for the directly comparable U.S.
GAAP measure, which is Income (loss) from continuing operations before
income taxes.

Adjusted operating earnings before income taxes does not replace Income
(loss) from continuing operations before income taxes as a measure of
our consolidated results of operations. Therefore, we believe that it is
useful to evaluate both Income (loss) from continuing operations before
income taxes and Adjusted operating earnings before income taxes when
reviewing our financial and operating performance. Each segment’s
Adjusted operating earnings before income taxes is calculated by
adjusting Income (loss) from continuing operations before income taxes
for the following items:

  • Net investment gains (losses), net of related amortization of DAC,
    VOBA, sales inducements and unearned revenue, which are significantly
    influenced by economic and market conditions, including interest rates
    and credit spreads, and are not indicative of normal operations. Net
    investment gains (losses) include gains (losses) on the sale of
    securities, impairments, changes in the fair value of investments
    using the FVO unrelated to the implied loan-backed security income
    recognition for certain mortgage-backed obligations and changes in the
    fair value of derivative instruments, excluding realized gains
    (losses) associated with swap settlements and accrued interest;
  • Net guaranteed benefit hedging gains (losses), which are significantly
    influenced by economic and market conditions and are not indicative of
    normal operations, include changes in the fair value of derivatives
    related to guaranteed benefits, net of related reserve increases
    (decreases) and net of related amortization of DAC, VOBA and sales
    inducements, less the estimated cost of these benefits.

Contacts

Media Contacts:
Christopher Breslin
212-309-8941
[email protected]

Bill
Sutton
860-580-2626
[email protected]

Investor
Contacts:

Michael Katz
212-309-8999
[email protected]

Mei
Ni Chu
212-309-8929
[email protected]

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