Voya Financial, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Strong third quarter results with adjusted operating EPS up nearly 30%, robust free cash flow, and resumed share repurchases.
• Retirement delivered strong earnings and revenue growth with $30 billion in year-to-date organic defined contribution net inflows.
• Investment Management showed strong commercial momentum with positive net flows and organic growth, on track to exceed 2% long-term organic growth target.
• Employee Benefits executed disciplined pricing in Stop Loss, launched integrated claims system for leave management, and focused on margin improvement.
• Wealth Management saw 20% year-over-year sales growth, has 500 advisers, plans to add over 100 by year-end, and invested in technology and digital self-service.

Segment Performance

• Retirement: Generated $261 million in adjusted operating earnings, a 24% year-over-year increase and 20% on a trailing 12-month basis. Year-to-date organic defined contribution net inflows are $30 billion, on track for strongest DC net flow year since 2020. Margins expected to return to midpoint of 35%-39% target range in 2026 as investments in Wealth Management are made.
• Investment Management: Generated $62 million in adjusted operating earnings, a 13% year-over-year increase and 15% on a trailing 12-month basis. Year-to-date net flows are over $13 billion, with organic growth over 4%. 74% of public assets outperform peers over 5 years and 84% over 10 years.
• Employee Benefits: Generated $47 million in adjusted operating earnings. Focus on margin improvement in Stop Loss, launched integrated claims system for leave management, and plan to deliver end-to-end lead management capability in January 2026.

Guidance

• Plan to invest up to $75 million in Wealth Management in 2026, with excess capital of $350 million at Q3 end. Guidance of $100 million to $150 million quarterly capital return (dividends and share repurchases) in 2026.
• Expect margins in Retirement to return to midpoint of 35%-39% target range in 2026 as strategic investments in Wealth Management are made.
• Investment Management on track to exceed organic long-term growth target of 2%, with positive net flows and strong investment performance.

Risks

• Stop Loss claims experience can be volatile due to factors like cancer frequency and cell/gene therapy drug costs; full year claims experience needed to inform ultimate loss ratios.
• Interest rate impact on floating rate exposure and general account management, though team is actively managing to stabilize effects.
• Regulatory and DOL rulemaking impact on partnerships and product rollouts, such as with Blue Owl.

Question and Answer

• Q: Color on size of wealth management investment in 2026 A: Up to $75 million of excess capital expected to be used, roughly 2/3 from GAAP perspective, back half weighted as it includes adviser hiring and technology investments.
• Q: Stop Loss 2026 outlook A: Claims experience in 2025 is modestly better than 2024 through October, but full fourth quarter and first quarter needed to inform ultimate loss ratios.
• Q: Wealth Management revenue contributions A: 2026 is a build year with hiring and technology investment, revenue expected to grow in 2027 and beyond.
• Q: Capital return guide for 2026 A: $100 million to $150 million quarterly guidance for 2026, considering excess capital, earnout on OneAmerica, and flexibility in capital deployment.
• Q: Impact of wealth management investments on operating margin A: Anticipated 200 basis point implication on margins in 2026, with more precision as budget season progresses.
• Q: Leave management rollout impact on Employee Benefits top line A: Strong commercial momentum with over 50% of RFPs requiring leave management bundled solution, leading to sales for 1/1/26 launch.
• Q: Investment Management flows outlook A: Year-to-date flows strong, with institutional flows driven by large insurance wins, and retail flows positive; fourth quarter expected to be more muted but long-term organic growth target of over 2% remains.
• Q: Floating rate exposure and Stop Loss reinsurance recoverables A: Less than $1.5 billion in floating rate exposure, actively managed; reinsurance recoverables in Stop Loss are idiosyncratic and not expected to be sustainable in forward-looking loss ratios.
• Q: General account private credit allocation A: 23% of general account in private credit, heavily biased towards investment grade (94% NAIC-1s and 2s), providing yield advantage and stronger covenants.
• Q: Edward Jones partnership and Blue Owl partnership A: Edward Jones partnership on track for early fiscal year 2026 rollout of retirement plan tools and services; Blue Owl partnership on plan for end-of-year rollout of private investments and innovative solutions in DC space.