Voya Financial
Second Quarter 2020 Investor Presentation
August 6, 2020
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 statements include statements relating to future developments in our business or expectations for our future financial performance and any statement not involving a historical fact. Forward-looking statements use words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. Actual results, performance or events may differ materially from those projected in any forward-looking statement due to, among other things, (i) general economic conditions, particularly economic conditions in our core markets, (ii) performance of financial markets, (iii) the frequency and severity of insured loss events, (iv) the effects of natural or man-made disasters, including pandemic events and specifically the current COVID-19 pandemic event, (v) mortality and morbidity levels, (vi) persistency and lapse levels, (vii) interest rates, (viii) currency exchange rates, (ix) general competitive factors, (x) changes in laws and regulations, such as those relating to Federal taxation, state insurance regulations and NAIC regulations and guidelines, (xi) changes in the policies of governments and/or regulatory authorities, and (xii) our ability to successfully manage the separation of our individual life and legacy variable annuities
businesses on the expected timeline and economic terms. Factors that may cause actual results to differ from those in any forward- looking statement also include those described under "Risk Factors" and "Management's Discussion and Analysis of Results of Operations and Financial Condition ("MD&A") - Trends and Uncertainties" in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission ("SEC") on February 21, 2020, and in our Quarterly Report on Form 10-Q for the three months ended June 30, 2020, to be filed with the SEC on or before August 10, 2020.
This presentation and the remarks made orally contain certain non-GAAP financial measures. Non-GAAP measures include Adjusted Operating Earnings, Adjusted Operating Return on Capital, Adjusted Operating Margin, and Adjusted debt-to-capital ratio. Information regarding these and other non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures, is provided in our quarterly earnings press releases and in our quarterly investor supplements, all of which are available at the Investor Relations section of Voya Financial's website at investors.voya.com.
2
Agenda
- Key Themes and Strategic Priorities
- Rod Martin, Chairman and Chief Executive Officer
- Business Segment Performance and Financial Highlights
- Mike Smith, Chief Financial Officer
3
Voya Continues to Address the Challenges of COVID-19
Employees
- Over 95% of Voya employees continuing to work remotely and leveraging Voya's prior investments in technology to reach colleagues, clients and customers
- Working group established to implement new office safety protocols for the eventual return to Voya office space, understand employee needs and preferences, and examine options for potentially greater numbers of virtual work options post-pandemic
- Continued access for all employees to the Voya Community Fund, which provides tax-freegrants to aid employees experiencing economic hardship
Customers
- Supporting plan sponsors and participants with coronavirus-related distributions, including continued fee credits for hardship withdrawals and loans under CARES Act provisions
- Providing extended grace periods and flexible premium options for Life, Disability and Supplemental Health Benefits for in-forcecovered employees furloughed, temporarily laid off, placed on a leave of absence, or facing a reduction in pay or hours due to COVID-19
- Implemented COVID-19 Relief Planning Assistant in partnership with SAVVI Financial to provide educational resources that assist in creating a personalized, short-termfinancial plan for participants financially impacted by COVID-19
Communities
- Maintaining Voya employee benefit that provides 40 hours of paid time off for volunteer work to allow employees to help their communities virtually
-
Planning Voya's National Week of
Service, which will be celebrated virtually in September as part of our month of giving. Employees provided ~200 nonprofits with 12,000 volunteer hours during last year's day of service - Continuing to provide free online resources and phone access to financial advisors to all Americans
- Providing $55,000 in grants for entrepreneurs through Voya Cares and National Down Syndrome Society partnership
4
Our Commitment to Addressing Racial Injustice
Activating
- Voya will continue building upon actions - such as serving people with special needs and advancing gender equality - to continue to recruit, develop and retain diverse talent, particularly people of color and women at senior levels of the company
- Created a new Diversity Celebration Day as an additional day of paid time off for employees to celebrate days of personal cultural significance
- Each member of Voya's executive committee is implementing his or her own action plan to ensure we remain accountable, and we will leverage dashboards, top and emerging talent lists, and talent acquisition metrics to measure our progress
-
A toolkit created by Voya's African-
American Employee Resource Group (ERG) has been distributed to all employees to use when having difficult conversations related to race and social injustice.
Communicating
- Increased and active engagement with our employees and the public, including communications from the Chairman and CEO and hosting an Employee Open Forum led by our African-AmericanERG and Diversity & Inclusion team
- Newly created internal video featuring Voya leaders sharing their thoughts and personal experiences with racial injustice has become the most watched video of 2020 internally and was shared externally on social media, becoming Voya's most-watchedorganic video on LinkedIn and receiving positive feedback from employees and the public
- Continuing dialogue on racial injustice by holding employee open forums featuring Voya leadership to provide an open space for employees to discuss their observations, experiences, feelings, and ask questions
Partnering
-
Across all existing 2019 Voya Foundation programs, which benefitted 28,000 STEM and financial literacy students, 35% of beneficiaries were
African American, 21% Hispanic, and 54% female - As the title sponsor of the National Personal Finance Challenge, Voya
Foundation creates opportunity grants to increase Title I school participation in the competition -
As part of the Voya Teacher Voices program, Voya Foundation has worked with Medgar Evers College
(NY's only predominantly Black institution) and the Thurgood Marshall College Fund to provide mentorship and guidance to Black college students with the goal of recruiting more Black teachers -
Working with organizations such as
CEO Action for Diversity and Inclusion and the Ethisphere Institute to help drive change on a societal level
5
Key Themes
EPS Growth
Despite Pandemic
Headwinds
Continued
Momentum Across
All Businesses
On Track to Close
Individual Life Transaction by 3Q'20
Prudent Capital
Management
- Normalized 2Q'20 adjusted operating earnings of $1.09 per share1, excluding:
- $(0.79) of prepayment and alternative income below our long-term expectations
- $0.05 of DAC/VOBA and other intangibles unlocking
- $(0.20) of stranded costs2 from the sale of Individual Life
- Normalized 2Q'20 adjusted operating earnings per share1 grew 3% year-over-year despite challenging environment presented by COVID-19 and unfavorable Retirement items not expected to recur in 3Q'20
- Retirement and Investment Management received a combined $26.8 billion of total deposits and inflows in 2Q'20
- Retirement Full Service recurring deposits TTM grew 10.4% in 2Q'20
- Investment Management garnered record $6.8 billion of net flows in 2Q'203, representing 6.8% organic growth TTM
- Employee Benefits annualized in-force premium increased 5.4% YoY
- Discussions with regulators and operational separation progressing as planned
- Continue to expect approximately $1.5 billion of deployable capital
- Free cash flow conversion at high end of 85 - 95%
- Achieved $250 million of run-rate cost savings in 2Q'20
- Additional saves provide us with momentum as we begin to address stranded costs associated with the Life sale
- Excess capital of $668 million, RBC ratio of 468% as of 6/30/204
- Share repurchases paused in March; closely monitoring developments related to the pandemic and broader economy in the third quarter
- Maintained dividend at $0.15 per share and yield above 1%
- Normalized Adjusted Operating Earnings as presented is a non-GAAP measure. Information regarding this non-GAAP financial measure, and a reconciliation to most comparable U.S. GAAP measure, is provided in the
"Reconciliations" section of the Quarterly Investor Supplement. - Estimated expenses that are reported in adjusted operating earnings in Corporate related to activities for which we have agreed to provide transitional services and for which we will be reimbursed under a transition services agreement upon closing of the transaction and indirect costs, such as those related to corporate and shared service functions that were previously allocated to the businesses sold.
- Excludes net flows associated with the variable annuities business that Voya sold to VA Capital LLC on June 1, 2018 and sub-advisor replacement flows.
- Estimated combined adjusted RBC ratio primarily for our principal U.S. insurance subsidiaries and is adjusted for an intercompany loan of $254 million as of June 30, 2020.
6
Emphasis on ESG and Leading ESG Practices
GovernanceSocial
Environmental
Executive Committee
Led Firmwide
ESG Council
Robust, independent
oversight aligning
business with
shareholder interests
-
Board Gender parity and 67% of Board Committees chaired
by women - 38% of Executive Committee is female
- ESG Board Committee
- Robust ownership and incentives alignment for management
Aligned social purpose
and empowering
individuals
- Socially responsible investment solutions,
ESG integration, ESG proxy voting and ESG Leadership
- Investing in
communities and diversity inclusion
initiatives with Voya Cares
-
Driving superior retirement outcomes
through holistic financial wellness
Encouraging
sustainable practices
at home and the
workplace
- Green supply chain procurement initiative
- Voya IM voted in favor of 74% of
environmental proxy proposals in 2019
- Developed an ESG Risk Policy approved by Board of Directors to align investment and business partnerships to Corporate Values
7
Recent Enterprise Accomplishments
Named to FTSE4Good Index for | Recognized as a Best Place to Work for |
meeting globally-recognized | Disability Inclusion on the 2020 |
ESG practices | Disability Equality Index |
Earned the 2020 Marketplace Innovator of
The Year Award
8
Agenda
- Key Themes and Strategic Priorities
- Rod Martin, Chairman and Chief Executive Officer
- Business Segment Performance and Financial Highlights
- Mike Smith, Chief Financial Officer
9
Second Quarter 2020 Results - Financial Highlights
After-tax Adjusted Operating
Earnings Per Share¹ (Normalized)
2Q'20
$1.09
per diluted share
Excludes | 2Q'20 |
■ Prepayment fees and alternative income below | (0.79) |
long-term expectations | |
- Deferred acquisition costs and value of business
acquired ("DAC/VOBA") and other intangibles | 0.05 | |
unlocking | ||
■ | Stranded costs from Individual Life transaction | (0.20) |
■ | After-tax Adjusted Operating Earnings¹ (Reported) | $0.15 |
Net Income (Loss) Available to
Common Shareholders
2Q'20
$(71)
million
Includes | 2Q'20 | |
■ | Adjusted operating earnings | $20 M |
■ Net guaranteed benefit hedging gains (losses) | 30 | |
■ | Discontinued operations2 | (93) |
■ | Other3 | (27) |
- Adjusted Operating Earnings as presented is a non-GAAP measure. Information regarding this non-GAAP financial measure, and a reconciliation to most comparable U.S. GAAP measure, is provided in the "Reconciliations" section of the Quarterly Investor Supplement. For 2020, the adjusted operating effective tax rate ("ETR") is based on the actual income tax expense for the current period related to income (loss) from continuing operations, adjusted for estimated taxes on non-operating items and non-operating tax impacts, such as those related to restructuring, changes in a tax valuation allowance and changes to tax law. Voya assumes a 21% tax rate on all components of Adjusted operating earnings described as "after-tax." The ETR for adjusted operating earnings for 2Q'20 was (17.6)%. The ETR for normalized adjusted operating earnings for 2Q'20 was 17.2%.
- Includes amounts related to the Individual Life Transaction entered onto on December 18, 2019. Refer to our Quarterly Report on Form 10-Q for further detail.
- Includes factors such as investment gains (losses), income (loss) related to businesses exited or to be exited though reinsurance, and restructuring charges. Refer to Adjusted Operating Earnings reconciliation in Appendix for full breakdown.
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Retirement - Industry Leading Provider of Retirement Solutions across all Plan Sizes and Markets
Adjusted Operating Earnings1 ($ millions)
Current Quarter | TTM | ||||
$686 | |||||
$486 | |||||
Includes Prepayments and | $175 | $28 | |||
Alternative Income | |||||
Above/(Below) Expectations2: | 2Q'19 | 2Q'20 | |||
Current Quarter | $22 | $(92) | |||
TTM | 44 | (59) | |||
Adjusted Return on Capital | |||||
Adjusted Operating ROC, TTM3 | 13.9% | 10.9% |
Full Service Client Assets ($ billions)
Spread-based | Fee-based | |||||
$134 | $142 | |||||
$125 | ||||||
$103 | $93 | $110 | ||||
$31 | $32 | $32 | ||||
Full Service ($ m) | 2Q'19 | 1Q'20 | 2Q'20 | |||
Recurring Deposits, TTM | $9,761 | $10,639 | $10,772 | |||
Net Flows4 | (19) | 329 | 73 | |||
Client Assets ($ b) | ||||||
Total Client Assets | 402 | 386 | 437 |
Recordkeeping Net Flows in | |||
Full Service Net Flows | 2Q'20; on track to reach higher | Growth in Full Service | |
$73M in 2Q'20, contributing to $1.9 | $4.5B than market-adjusted $20 billion | 10.4% | |
Recurring Deposits, TTM YoY | |||
billion TTM | target and more than 10% | ||
participant increase in 2020
- Excludes DAC unlocking. Adjusted Operating Earnings as presented is a non-GAAP measure. Information regarding this non-GAAP financial measure, and a reconciliation to most comparable U.S. GAAP measure, is provided in the "Reconciliations" section of the Quarterly Investor Supplement.
- Prepayment and alternative income above/(below) expectations are pre-tax and pre-DAC.
- Return on Capital presented on an unlevered basis.
- Excludes Retail Wealth Management and Other Assets.
11
Investment Management - Delivering Strong Investment Performance and Net Flows
Adjusted Operating Earnings1 ($ millions)
Current Quarter TTM
$167$164
Includes Prepayments and | $41 | $20 |
Alternative Income | ||
Above/(Below) Expectations2: | 2Q'19 | 2Q'20 |
Current Quarter | $2 | $(27) |
TTM | (2) | (31) |
Adjusted Operating Margin | ||
Including Investment Capital, TTM | 26.2% | 24.9% |
Assets Under Management ($ billions)
General Account | External Clients | ||||||
$214 | $211 | $230 | |||||
$158 | $154 | $173 | |||||
$56 | $57 | $57 | |||||
Net Flows3 ($ b) | 2Q'19 | 1Q'20 | 2Q'20 | ||||
Institutional | $0.8 | $3.1 | $7.1 | ||||
Retail | (0.6) | (0.9) | (0.3) | ||||
Sub-advisor Replacement | 0.9 | 0.0 | 0.0 | ||||
Total Net Flows | $1.1 | $2.2 | $6.8 | ||||
Organic Growth, TTM3 | |||||||
Institutional | 4.7% | 5.3% | 12.1% | ||||
Retail | (3.8)% | (0.8)% | (0.4)% | ||||
Total | 0.9% | 2.7% | 6.8% |
12.1% | Organic growth in 2Q'20 | Institutional Net Flows in |
$7.1B 2Q'20, driven by large | ||
Institutional Net Flows, TTM | ||
insurance mandate win | ||
Fixed income strategies
85%+ outperforming benchmark on a 3-, 5- and 10-year basis
- Excludes DAC unlocking. Adjusted Operating Earnings as presented is a non-GAAP measure. Information regarding this non-GAAP financial measure, and a reconciliation to most comparable U.S. GAAP measure, is provided in the "Reconciliations" section of the Quarterly Investor Supplement.
- Prepayment and alternative income above/(below) expectations are pre-tax and pre-DAC.
- Excludes net flows associated with the variable annuities business that Voya sold to VA Capital LLC on June 1, 2018. Organic growth rates exclude sub-advisor replacement flows.
12
Employee Benefits - Growing while Maintaining Underwriting and Expense Discipline
Adjusted Operating Earnings1 ($ millions)
Current Quarter TTM
$180$210
Includes Prepayments and | $49 | $36 |
Alternative Income | ||
Above/(Below) Expectations2: | 2Q'19 | 2Q'20 |
Current Quarter | $2 | $(10) |
TTM | 3 | (6) |
Adjusted Return on Capital | ||
Adjusted Operating ROC, TTM3 | 29.4% | 31.7% |
Annualized In-Force Premiums ($ millions)
Group Life & Disability | Stop Loss | Voluntary | ||||
$2,152 | $2,271 | $2,268 | ||||
$392 | $483 | $477 | ||||
$1,045 | $1,084 | $1,075 | ||||
$715 | $704 | $716 | ||||
Loss Ratios | 2Q'19 | 1Q'20 | 2Q'20 | |||
Total Aggregate, TTM4 | 71.6% | 69.1% | 69.3% |
31.7% Adjusted Operating ROC TTM | 5% | Growth in annualized in-force | COVID-19 claims year-to- |
230bps$8M date, lower than original | |||
premiums, YoY | |||
expected impact | |||
- Excludes DAC unlocking. Adjusted Operating Earnings as presented is a non-GAAP measure. Information regarding this non-GAAP financial measure, and a reconciliation to most comparable U.S. GAAP measure, is provided in the "Reconciliations" section of the Quarterly Investor Supplement.
- Prepayment and alternative income above/(below) expectations are pre-tax and pre-DAC.
- Return on Capital presented on an unlevered basis.
- Includes Stop Loss, Group Life & Disability, and Voluntary.
13
Adjusted Operating EPS Considerations
2Q'20 Financial Results
Reported 2Q'20 Adjusted Operating EPS1 | $0.15 | |
Includes: | ||
■ Prepayment fees and alternative income below long-term expectations | (0.79) | |
■ DAC/VOBA and other intangibles unlocking | 0.05 | |
■ Stranded costs from Individual Life transaction | (0.20) | |
Normalized 2Q'20 Adjusted Operating EPS1 | $1.09 | |
3Q'20 Considerations2 | ||
Potential Beneficial Items: | ||
■ 2Q Retirement legal and contra-revenue accrual not expected to recur in 3Q | 0.14 | |
■ Equity market impact on fee revenues (based on July 31 market levels)3 | 0.07 | |
■ Improved Employee Benefits net underwriting | 0.02 | |
Potential Offsetting Items: | ||
■ Lower spread revenues, including impact of large case Tax-Exempt departure | (0.06) | |
■ Preferred stock dividends seasonally higher in 1Q and 3Q | (0.06) | |
Potential EPS, excluding benefits from share repurchases | $1.20 | |
- Adjusted Operating Earnings as presented is a non-GAAP measure. Information regarding this non-GAAP financial measure, and a reconciliation to most comparable U.S. GAAP measure, is provided in the
"Reconciliations" section of the Quarterly Investor Supplement. For 2020, the adjusted operating effective tax rate ("ETR") is based on the actual income tax expense for the current period related to income (loss) from continuing operations, adjusted for estimated taxes on non-operating items and non-operating tax impacts, such as those related to restructuring, changes in a tax valuation allowance and changes to tax law. Voya assumes a 21% tax rate on all components of Adjusted operating earnings described as "after-tax." The ETR for adjusted operating earnings for 2Q'20 was (17.6)%. The ETR for normalized adjusted operating earnings for 2Q'20 was 17.2%. - List of considerations not intended to be exhaustive. Other factors could include share repurchases change in average shares, business growth, and potential further COVID-19 impacts.
- Assume average third quarter levels based on the actual market performance in July and no market appreciation from the end of July
14
Alternatives Portfolio Has Delivered Favorable Investment Performance Over Time
Calendar Year Net Returns1,2 (%)
Long-term Return Target: 9.0%
16.6% | 15.7% | |
14.7% | ||
12.0% | 12.1% | 11.1% |
Average:
9.8%
2.2% 3.3%
-9.6%
Details of $1.3 Billion
Alternatives Portfolio Profile2 (as of 06/30/20)
- Diversified across traditional Private Equity, Infrastructure, Real Estate, Credit and Hedge Funds
- 72% of Alternatives Portfolio is in Private Equity
- Invested in a diversified mix of managers, strategies, and vintages
- Made up of commitments to over 150 funds managed by 85 distinct general partners
- Private Equity and all alternative asset classes except for Hedge Funds tend to be reported 1 quarter in arrears; Hedge Funds returns are reported 1 month in arrears
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 1H20 |
- Net of fees; alternative investment income excludes the net investment income from Lehman Recovery / LIHTC, primarily in 2013, and net loss on the sale of certain alternative investments during 2012.
- Includes general account and Investment Management investment capital pro forma U.S. GAAP value weight for the post Life/Annuity sale view for Voya's ongoing operating insurance companies.
15
Investment Portfolio COVID-19 Exposure and Stress Tests
COVID-19 Sector Exposure1
Remaining
GA
89%
COVID-19
Impacted
Sectors
11%
COVID-19 Exposure Composition
Asset Class | Industry | ||||||
10% | 3% | 4% | 2% | 2% | Energy | ||
8% | |||||||
Retailers | |||||||
9% | Metals | ||||||
53% | Automotive | ||||||
51% | |||||||
34% | 11% | Airlines/Aircraft | |||||
Leasing | |||||||
Airports | |||||||
13% | Lodging | ||||||
Corporate - Public Corporate - Private | Restaurants | ||||||
Securitized | Lodging (CML) |
1. Based on post Life/Annuity sale pro forma U.S. GAAP Voya General Account portfolio
Investment Portfolio Stress Test1
Impact to Excess Capital
from Rating Migration and Impairments
Stress Case One | Stress Case Two |
~$300 million | ~$600 million |
- Scenarios project potential impact to excess capital from rating migration and impairments through 2Q'21
- Stress case 1 and stress case 2 assume 6% and 11% of portfolio migrates or is impaired, respectively
- Rating migration accounts for more than 75% of the stressed capital in each scenario
- Gross impact of $58 million from migrations and impairments YTD; net impact of $13 million
- ~$3.6 billion unrealized gains in investment portfolio
- Current excess capital exceeds the increase in required capital of both of these scenarios
16
Strong Capital Position
Estimated Combined | Excess Capital | Debt-to-Capital Ratio3 | ||
Adjusted RBC Ratio¹ | ($ millions)2 | |||
468% | $668 | 32.4% |
Target: | Target: | |
400% | 30% |
Deployable capital | ||||
$0.15 Per share dividend maintained | 1%+ | Dividend yield maintained | $1.5B | expected in 3Q'20 at |
close of Individual Life | ||||
transaction
- Estimated combined adjusted RBC ratio primarily for our principal U.S. insurance subsidiaries and is adjusted for an intercompany loan of $254 million as of June 30, 2020.
- Estimated statutory surplus in excess of 400% RBC level, net of any outstanding loans ($254 million as of June 30, 2020); and Holding Co. Working Capital Above $200 million Target. Holding company liquidity includes cash, cash equivalents, and short-term investments; holding company is defined as Voya Financial Inc. and Voya Holdings Inc. 2Q'20 holding company liquidity includes $90 million of loans to non-insurance subsidiaries considered short term investments and $(136) million of pro forma adjustments related to the Individual Life Transaction
- Ratio is based on U.S. GAAP capital (adjusted to exclude non-controlling interest and AOCI) and includes 25% equity treatment afforded to subordinated debt and 100% equity treatment afforded to preferred stock.
17
Helping Americans Get Ready to Retire Better
1
2
3
4
EPS Growth Despite Pandemic Headwinds
Continued Momentum Across All Businesses
On Track to Close Individual Life Transaction by 3Q'20
Prudent Capital Management
18
Appendix
19
Reconciliation of 2Q'20 Adjusted Operating Earnings to Net Income
($ million; all figures are after-tax)
2Q'20
$34
$20
$(93) | $30 | |||||||||||||||
$(43) | ||||||||||||||||
$(18) | $(71) | |||||||||||||||
Adjusted Operating | Net Investment | Income (Loss) from | Net Guaranteed | Income (Loss) | Other | Net Income (Loss) | ||||||||||
Earnings 1 | Gains (Losses) | Discontinued | Benefit Hedging | Related to Business | Available to | |||||||||||
Operations | Gains (Losses) | Exited or to Be | Common | |||||||||||||
Exited through | Shareholders 2 | |||||||||||||||
Reinsurance |
- The normalized adjusted operating tax expense is based on the actual income tax expense for the current period related to Income (loss) from continuing operations, adjusted for estimated taxes on non-operating items and non-operating tax impacts, such as those related to restructuring, changes in a tax valuation allowance and changes to tax law. For non-operating items, we apply a 21% tax rate.
- Other, after-tax primarily consists of restructuring expenses (severance, lease write-offs, etc.).
20
Valuation Metrics Underline High Free Cash Flow Conversion and Value of DTA
Peer | P/E 2 | P/FCF 3, 4 | FCF Yield 3, 4, 5 |
Company A | 4.0x | 7.3x | 13.8% |
Company B | 6.3x | 12.7x | 7.9% |
Company C | 5.5x | 8.5x | 11.8% |
Company D | 3.8x | 7.3x | 13.7% |
Traditional Peer Average6 | 4.9x | 8.9x | 11.2% |
Company E | 7.1x | 9.4x | 10.6% |
Company F | 8.5x | 9.4x | 10.6% |
Capital Light Peer Average6 | 7.8x | 9.4x | 10.6% |
VOYA | 8.5x | 9.2x | 10.9% |
VOYA (ex-DTA)1,2 | 6.9x |
- $9.00 per share value of DTA based on present value of deferred tax assets and AMT receivables as disclosed in 4Q'19 Voya Financial Investor Presentation; ending shares outstanding per 2Q'20 Investor Supplement.
- 2021 consensus per FactSet, as of 7/31/20. Stock price as of 7/31/20.
- Current prices and 2021 consensus EPS per Factset as of 7/31/20.
- Peers price/free cash flow derived by applying company guidance on the FCF/Operating earnings ratio to consensus 2021 estimates.
- FCF yield is calculated as the inverse of price/free cash flow
- Traditional Peer Group includes EQH, LNC, MET, PRU; Capital Light Peer Group includes AMP and PFG
21
Well-Diversified Investment Portfolio Built for Through-The- Cycle Risk Adjusted Returns
$59 Billion | $38 Billion (Post Life Estimate) | ||||||||||||||||||||||
General Account Investment Portfolio1 | General Account Investment Portfolio2 | ||||||||||||||||||||||
Munis | LP/Equity | Short | |||||||||||||||||||||
2% | |||||||||||||||||||||||
Term/Treas | |||||||||||||||||||||||
3% | Munis LP/Equity | ||||||||||||||||||||||
ury | |||||||||||||||||||||||
2% | 3% Short Term/Treasury | ||||||||||||||||||||||
3% | |||||||||||||||||||||||
2% | |||||||||||||||||||||||
CML | 5% | CML | 5% | ||||||||||||||||||||
Public | 14% | 42% | 41% | ||||||||||||||||||||
Corporate | Public Corporate | 15% | |||||||||||||||||||||
36% | |||||||||||||||||||||||
29% | |||||||||||||||||||||||
Securitized- | |||||||||||||||||||||||
Securitized- | NonAgency | ||||||||||||||||||||||
NonAgency | 53% | 14% | 53% | ||||||||||||||||||||
12% | Private Credit | ||||||||||||||||||||||
Securitized- | |||||||||||||||||||||||
22% | |||||||||||||||||||||||
Agency | |||||||||||||||||||||||
Securitized- | Fixed Maturity Ratings3 | 12% | |||||||||||||||||||||
Private | 3 | ||||||||||||||||||||||
Credit | Agency | Fixed Maturity Ratings | |||||||||||||||||||||
10% | |||||||||||||||||||||||
19% | |||||||||||||||||||||||
NAIC 1 | NAIC 2 | BIG | |||||||||||||||||||||
NAIC 1 | NAIC 2 | BIG | |||||||||||||||||||||
Improved Investment Allocation
- Portfolio re-alignment resulting from Life sale accelerates preference to reduce Public Corporate in favor of specialty sector allocations
- Private Credit and CML allocations benefit from structural features that provide downside protection
- GA Portfolio represents statutory carrying value weights for Voya's operating insurance companies (MULIC, RLI, RNY, SLD and VRIAC).
- GA Portfolio represents pro forma statutory carrying value weights for the post Life/Annuity sale view for Voya's ongoing operating insurance companies (RLI, RNY, and VRIAC).
- Fixed maturity includes Public Corporate, EMD, Private Credit, Munis, Securitized Non-Agency, and Securitized Agency.
22
Spotlight: Commercial Mortgage Loans
Key Message: ~$5.6 billion allocation1 with weighted average debt service coverage ratio (DSCR) of 2.3x and weighted average loan-to-value (LTV) ratio of 46%2. Retail focus on need driven properties, such as grocery anchored. No material exposure to real estate equity outside of home office.
$6,000M | ||||||||
$5,000M | ||||||||
$4,000M | ||||||||
$3,000M | ||||||||
$2,000M | ~61% of this exposure (~$3bn) | |||||||
has LTV 0% - 50% and DSCR >1.5X | ||||||||
$1,000M | ||||||||
$0M | ||||||||
LTV 0% - | LTV >60% | |||||||
60% | ||||||||
95% | 93% | |||||||
DSCR < 1.25X | $578 | 72% | $26 | |||||
DSCR > 1.25X | $4,809 | $239 55% | 59% | |||||
Diversified Portfolio Exposure
Hotel, 2% | |
Manufactured | Other, 1% |
Housing | Mixed Use, 1% |
Community, 3% |
Self
Storage,
7%
Multifamily, 26%
Office, 15%
Industrial /
Warehouse,Retail, 25%
19%
CML Portfolio | |||
86% | 14% | 1% | |
CM 1 CM 2 CM 3
- Represents pro forma U.S. GAAP value weight for the post Life/Annuity sale view for Voya's ongoing operating insurance companies.
- LTV based on current loan balance and MAI appraised value at funding.
23
Spotlight: Collateralized Loan Obligations
Key Message: ~$1.2 billion allocation1,2 with significant Credit Enhancement (CE)3 to mitigate the risk of par losses. 97% rated NAIC 1 / 2 with all NAIC 2 and below holdings in Voya-issued transactions.
Generic CLO Structure4
NAIC 1
AAA rated tranche 63%
- Collateral losses are allocated in reverse order of capital structure seniority
- AAA rated tranches would not be allocated losses until collateral pool losses reached 37% 3
- Structural protections include collateral tests which can trigger the redirection of cash flow from subordinated
Total | ||||
NAIC | NRSRO | USG BV (mln) | CE | BV% |
AAA | $230 | 35 | 19% | |
1 | AA | $303 | 25 | 24% |
A | $660 | 18 | 53% | |
2 | BBB | $16 | 11 | 1% |
3 | BB | $13 | 7 | 1% |
4 | B | $2 | 4 | 0% |
5 | Equity | $18 | 0 | 1% |
22 |
95% | AA 12% | |
93% | ||
A 6% | ||
BBB 6% | ||
NAIC 2 | ||
BB 5% | ||
NAIC 3, | ||
Equity 8% | ||
NR |
tranches to the
72% senior-most class
outstanding55%59%
- Underlying CLO collateral portfolios are actively managed
$1,241 | 100% |
- Represents pro forma U.S. GAAP value weight for the post Life/Annuity sale view for Voya's ongoing operating insurance companies.
- As of 6/30/20 there are $151M USG BV of additional CLO investments in Voya managed deals held outside of the GA by Voya Investment Management
- CE = Credit Enhancement or the amount of loss that can absorbed by the structure before impacting the owned tranche (see AAA rated tranches bullet in Generic CLO structure for example of CE of 37%)
- Generic CLO structure is a representative structure that is not indicative of all CLO structures and does not reflect Voya CLO portfolio composition.
24
Spotlight: Energy Exposure
Key Message: ~$2.0 billion portfolio1 is 84% rated NAIC 1 / 2. Exposure has been steadily declining as a percentage of fixed maturity assets, estimated post Life to be 6.4%. 65%/35% split between Public and Private Credit.
Energy Exposure | |||||||||
Concentrated in Midstream | |||||||||
9.0% | 11.6% | ||||||||
7% | |||||||||
6.4% | |||||||||
10% | |||||||||
8.5% | 15.5% | ||||||||
17% | |||||||||
8.0% | 24.3% | ||||||||
23% | |||||||||
7.5% | |||||||||
7.0% | 42.1% | ||||||||
43% | |||||||||
6.5% | |||||||||
95% | 93% | 72% | |||||||
6.0% | |||||||||
55% | 59% | ||||||||
1Q-18 | 2Q-18 | 3Q-18 | 4Q-18 | 1Q-19 | 2Q-19 | 4Q-19 | U.S. GAAP BV at June 30, 2020 | ||
3Q-19 | 1Q-20*2Q-20* |
Energy % of Fixed Maturity Assets | Midstream | ||
*Estimated | Independent Energy | ||
Integrated Energy | |||
Oil Field Services | |||
Refining | |||
1. Represents pro forma U.S. GAAP value weight for the post Life/Annuity sale view for Voya's ongoing operating insurance companies.
25
Spotlight: BBB Exposure
Key Message: ~$13 billion NAIC 2 portfolio1,2 is approximately 56%/44% split between Public and Private. Private exposure provides combination of structural protections and attractive value. Minimal BIG allocation is opportunistic.
% of Fixed Maturity Assets4
11.6%
6.4%
15.5%
24.3%
42.1%
95% 93%
55%
3
- Represents pro forma statutory carrying value weights for the post Life/Annuity sale view for Voya's ongoing operating insurance companies.
- Based on NAIC and NRSRO composite using the middle of three or lower of two ratings.
- Refers to securitized assets in the broad NAIC 2 category, 1% of which are BBB- on an NRSRO basis.
- Fixed maturity includes Public Corporate, EMD, Private Credit, Munis, Securitized Non-Agency, and Securitized Agency.
26
Seasonality of Financial Items
1Q | 2Q | 3Q | 4Q | |
■ Corporate Markets tends to have | ■ 91 fee and crediting interest | ■ Education Tax-Exempt | ■ Corporate Markets typically see | |
Retirement | the highest recurring deposits | days in quarter | Markets typically see lowest | highest transfer / single deposits |
■ Withdrawals also tend to | recurring deposits | ■ Withdrawals also tend to increase | ||
increase | ■ 92 fee and crediting interest | ■ Recurring deposits in Corporate | ||
days in quarter | ||||
■ 90 fee and crediting interest days | Markets tend to be lower | |||
in quarter (91 in leap year) | ■ 92 fee and crediting interest days | |||
in quarter | ||||
Investment Management | ■ Performance fees tend to be | |||
highest | ||||
Employee Benefits | ■ Group Life loss ratio tends to be | ■ Sales tend to be second | ||
highest | highest | |||
■ Sales tend to be the highest | ||||
Corporate | ■ Seasonally higher preferred | ■ Seasonally lower preferred | ■ Seasonally higher preferred | ■ Seasonally lower preferred |
dividend | dividend | dividend | dividend | |
Segments | ■ Payroll taxes and long-term | |||
incentive awards tend to be | ||||
highest and steadily decline over | ||||
remaining quarters | ||||
All | ■ Other annual expenses are | |||
concentrated in 1Q | ||||
Note: Teal font denotes change from 1Q'20.
27
Analyst Modeling Considerations
Prepayment Income | ■ Long-term prepayment income quarterly expectation in 2020 (pre-tax,pre-DAC): $8 million for Retirement | |
and Alternative | ■ Approximately 9% annual long-term expected returns (pre-tax,pre-DAC) for alternative income; 3Q'20 performance expected | |
Income | to be above our long-term expected return given one quarter reporting lag | |
■ FY'20 administrative expenses expected to be $840 - 850 million including $16 million of unfavorable not expected to recur | ||
Retirement | items | |
■ Recurring deposit TTM growth expected to be flat in 2H'20 year-over-year and 2 - 5% FY'20 growth | ||
Investment | ■ Annual organic growth in the range of or above 2 - 4% in 20201 | |
■ Pre-tax operating margin target of 30 - 32% (includes investment capital) | ||
Management | ■ Reduction in pre-tax annualized earnings on assets transferred of approximately $10 - 15 million upon closing of sale of | |
Individual Life | ||
Employee Benefits | ■ Total aggregate loss ratio on a trailing twelve month basis underwritten to an annual range of 70 - 73%2 | |
■ $1 - 2 million of COVID-19 claims per incremental 10,000 U.S. mortalities | ||
Corporate & | ■ Estimated $(50) - (60) million operating loss in 3Q'20. Excludes $30 - 35 million of Individual Life stranded costs | |
Discontinued | ■ Preferred stock dividends to be paid: $14 million 1Q and 3Q, $4 million in 2Q and 4Q | |
Business | ■ Expected $1 - 3 million of COVID-19 mortality impact to Individual Life per incremental 10,000 U.S. mortalities | |
Tax Rate | ||
■ 15 - 18% effective tax rate on adjusted operating earnings for 2020, normalizing for stranded costs | ||
■ Warrants representing 26 million of underlying Voya shares are outstanding, which can be exercised at $48.22 strike price3 | ||
and will expire 5/7/2023. | ||
Warrants Sensitivity | ||
Warrants | Average Share Price | Additional Shares Factoring into EPS (in Millions)4 |
$50.00 | 0.9 | |
55.00 | 3.2 | |
60.00 | 5.2 | |
65.00 | 6.8 |
Note: Teal font denotes change from 1Q'20.
- As measured by net flows / beginning of period commercial AUM, excluding general account, market appreciation, VA net flows, and sub-advisor replacements.
- Inclusive of COVID-19 claims impact as shared. Any adverse deviations from our assumptions could lead to total aggregate loss ratios being outside of this range.
- Exercise price of the warrants is subject to adjustment, including for stock dividends, and cash dividends in excess of $.01 per share a quarter.
- Exercise price of the warrants was adjusted on June 26, 2020, based on 2Q'20 cash dividend of $0.15 per share. Dilution effects include impact of adjusted strike price. Refer to the Quarterly Report on Form 10-Q for more information.
28
Reliable Long-Term Investment Performance Critical to Future Success
% AUM Above Benchmark or Peer Median1
98 | 98 | ||
85 | |||
71 | 72 | 72 | 72 |
62 | 60 |
41 37
26
Equity | Multi-Asset | Fixed | Voya IM | ||||
Income | Total | ||||||
3 Year | 5 Year | 10 Year | |||||
1. Voya Investment Management calculations as of June 30, 2020. Metrics presented are based on a prescribed criteria to measure each asset class based on its respective success in either, A) ranking above the median of its peer category; or B) outperforming its benchmark on a gross-of-fee basis. Metrics are calculated on an annualized basis and inclusive of fully-actively managed mutual funds, collective investment trusts, and separately- managed institutional mandates included in traditional (long-only)third-party accounts remaining open as of June 30, 2020. Above median metrics represent a mix of net-of-fee rankings from Morningstar and gross-of-fee rankings from eVestment. Past performance is not a guarantee or reliable indicator of future results. All investments involve risk including the possible loss of capital.
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Voya Financial Inc. published this content on 05 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 August 2020 20:41:09 UTC