Q3 2021 Voya Financial Inc Earnings Call
[music].
That's executive Vice President Finance strategy and Investor Relations. Please go ahead.
Thank you and good morning, welcome to Boy, a financial third quarter 2021 earnings Conference call. We appreciate all of you have joined US for this call as.
As a reminder material for todays call are available on our website at investors Dot <unk> Dot com.
Or via the webcast.
Turning to slide too.
Some of the comments made during this conference call may contain forward looking statements within the meaning of federal Securities law.
I refer you to this slide for more information.
We will also be referring today to certain non-GAAP financial measures.
[noise] reconciliations are available on our press release and financial supplement found on our website investor's Dot <unk> dot com joining.
Joining me on the call or Rod Martin, our chairman and Chief Executive Officer, as well as like Smith, or Vice Chairman and Chief Financial Officer. After they're prepared remarks, we will take your questions.
Sure that Q&A session. We've also invited her vice chairman and Chief growth Officer, Charlie Nelson.
As well as the heads of our businesses.
Specifically, Heather low valley, well solutions, Christine hurt sellers investment management, Rob Group Health solutions.
With that let's turn to slide three as I would like to turn the call.
Over to Rod.
Good morning, let's begin on slide four with our T seems we delivered strong results during the third quarter with record adjusted operating EPS for a second consecutive quarter.
This was driven by strong alternative income and solid performance across our businesses.
We continue to see strong demand for our solutions. This is translated to top line growth in our businesses in the third quarter, which based on our expectations will extend into the fourth quarter as well.
And well solutions full service recurring deposits for the trailing 12 months group eight 7% compared with the prior year period and.
And we generated positive full service net inflows of $355 million.
This reflects continued sales growth and strong retention in several markets.
An investment management, we generated solid fixed income inflows in the third quarter.
Already in the fourth quarter over $7 billion of new mandates have funded.
And this demonstrates the continued appeal of our investment strategies as a result, we expect annual net flows to be at the high end of our 1% to 3% organic growth target for 2021.
And health solutions annualized enforce premiums grew approximately 11% compared with the prior year period.
This was driven by growth across all product lines and reflects the continued demand for our protection solutions, among both employers and employees.
We have executed a number of initiatives to effectively manage and deploy capital on share repurchases. We are currently executing additional buybacks and now expect to repurchase at least $1.1 billion of common stock for the full year 2021.
On a more long term forward looking note.
We also recently received an additional $500 million share repurchase authorization from the board.
In addition, last week, we announced a more than 20% increase in our dividend to 20 per share.
Given the strong performance avoid common stock this enables us to maintain a dividend yield of over 1%.
And as yet another demonstration of our confidence in our businesses.
Collectively we expect that our capital actions. This year will result in US having returned almost $8 billion of capital through both dividends and buybacks since our IPO.
Finally, as we announced last week, we will extinguish approximately $400 million of senior debt by the end of November.
Looking ahead, we remain well positioned to execute on our strategic priorities with approximately $1.5 billion of excess capital.
The results that are noted on this slide reflect our ability to continue to drive organic growth across our businesses. We are leveraging our scale are significant distribution relationships and our capabilities to deliver greater outcomes for clients.
We're also demonstrating the value of our high free cash flow businesses, which have enabled us to deliver greater shareholder value.
We have a clear focus on the workplace and institutions at a time of growing demand for our capabilities.
And we're further centering ourselves around the needs of our clients as a result, we're better position than ever to drive top and bottom line growth.
The combination of client demand.
Boy is leading market positions and our clear focus will enable us to deliver further profitable growth and shareholder value.
We look forward to sharing more details on our strategy and outlook at Investor Day.
On November 15th.
Turning to slide five during October which is national disability employment awareness month, we partnered with the CEO Commission for disability employment.
Disability in and the valuable 500 to highlight the need to increase and improve the employment of people with disabilities and special needs.
As a testament of our leadership and success in the industry. We were recently named retirement leader of the year at fund Intelligence Mutual fund industry and ETF Awards.
Our work to advance our culture was further validated by our recent recognition is a great place to work for the sixth consecutive year, which aligns with a positive feedback that we've heard from our people throughout the year.
And Savoy magazine recently recognized to avoid as board members events Butler and Alan Lewis on his 2021, most influential black corporate directors list and the publications fall issue.
With that let me ask Mike Smith to provide more details on our third quarter performance and results.
Thank you Rod.
Turning the third quarter financial results on slide seven.
We delivered another record quarter of earnings with $2.57 of after tax adjusted operating earnings per share.
This reflected strong underlying business results in $1.17, a prepayment an alternative income above our long term expectations there were.
A few notable items in third quarter EPS with all five of favorable deck boba and other intangibles unlocking primarily related to our annual assumption updates. This minimal impact was a result of our derisking actions over the last few years, we expect the annual assumption process will continue to be less.
S meaningful going forward.
Given the surge in U S COVID-19 related deaths in the third quarter, we experienced 14 cents of unfavorable Colbert related claims impacting health solutions and we also saw several other smaller items that total the net unfavourable 18 cents.
This included a legal accrual and wealth solutions, an incentive compensation related to the strong alternative performance for the year.
Third quarter GAAP net income of $142 million reflects strong underlying operating results and alternative income.
This was negatively affected by a 121 million after tax impact from the assumption update on our recently reinsured life business.
Importantly, this reduction in the reinsurance related gap intangible had no cash impact to boil.
Moving to slide eight.
We generated another quarter of record results in well solutions with adjusted operating earnings of $319 million in the third quarter.
This is meaningfully higher year over year due to favourable alternative and prepayment income.
And continued strength and underlying business results.
Spread revenues improve year over year due to higher surplus income as well as lower credited interest due to right actions taken earlier in the year.
This is partly offset by lower investment income driven by the ongoing great environment.
Fee based revenue meaningfully increase year over year, driven by full service client net flows over the period and by favorable equity markets.
In the quarter, we realized a full quarter impact a fee based revenue from our independent financial planning channel sale. The earnings impact of this was in line with our annual pretax guidance of $20 million to $30 million.
Stranded costs from this transaction are included in the well solutions resolved and will be eliminated by the end of 2022.
Administrative expenses, excluding notables were in line year over year.
Looking ahead, we expect fourthquarter expenses to be moderately higher than third quarter due to the timing of certain expenses such as advertising.
This quarter, we have begun to share the operating margins for our health and wealth businesses for wealth or margin was over 36% on a trailing 12 month basis, excluding notables.
Please refer to our investors supplement for more detail on how we calculate this metric.
Turning to deposits and flows full service recurring deposits due to 11.8 billion on a trailing 12 month basis as.
His employee and employer contributions continue to strengthen incorporate markets. We now expect full year 2021 recurring deposit growth to be at the high end of our 6% to 8% guidance.
We generated $355 million a positive full service net flows bringing our total full service net flows year to date to 1.5 billion.
Meanwhile, record keeping and stable value realized net outflows of $1.8 billion and 719 million respectively in the quarter.
Looking to fourth quarter, we anticipate them full service and record keeping net outflows, but expect to end the year with between $500 million to 1 billion and positive whole service net flows with good momentum going into 2022.
As we noted on last quarter's call higher equity markets have the effect of increasing the dollar amount of participants surrenders, even as the number of surrenders remains in line with our expectations.
While higher equity markets are a headwind for net flows market level supported record results for the corner and over $1 billion of earnings over the last 12 months.
Overall, we have a robust pipeline across all market segments are strong distribution team and a competitive sweet a workplace solutions, giving us confidence in our ability to achieve profitable growth going forward.
On slide nine investment management delivered $63 million adjusted operating earnings higher than the third quarter of 2020 $47 million a year over year improvement was driven by favourable investment capital and growth in fee income.
Revenues were higher year over year due to growth in both institutional and retail client assets.
Administrative expenses were modestly higher than the third quarter of 2020, largely due to variable compensation linked with fee income growth and strong investment capital results in the quarter.
Are trailing 12 months operating margin improved year over year to 33.1%, including investment capital and $26, 1% on an X notables basis.
Turning to flows.
Overall third quarter net outflows of 1.1 billion reflected in insurance client outflow that we signaled last quarter.
This mask the strength and institutional flows which included two cielo closings, including one European CLO as well as multiple private credit mandates.
Well, we had retail net outflows in the quarter, we've made several enhancements to our equity platform in an effort to improve our position heading into 2022.
Are fixed income performance also remains strong with over 90% of our fixed income funds outperforming their benchmarks on a three five and 10 year basis.
Looking ahead, we expect to reach the high end of our full year 2021, overall organic growth rate of 1% to 3%.
We have confidence in this outcome given the already 7 billion of funded mandates in October.
These are large scale mandates that we expect will be margin accretive.
Additionally, we do not expect to realize performance fees in the fourth quarter related to our mortgage derivative strategy.
That said this strategy has performed exceptionally well over the long term and expect a return performance fees in 2022.
Clients valued this strategy as it produces alpha uncorrelated to global credit risks and equity markets.
Going forward, we continue to see great demand for our solutions across a diverse set of strategies. This includes demand for higher margin products, including our growing private and alternatives franchise.
We are confident in our outlook given the excellent public and private asset performance are broad range of solutions and are strong distribution team.
Turning to slide 10.
Hello solutions delivered another record quarter of adjusted operating earnings at $71 million.
This result compares favorably to $56 million in the third quarter of 2020.
Similar to the other businesses health solutions also benefited from strong alternative and prepayment income.
Underlying business performance was strong despite the impact of excess replied claims related to Cobra.
Similar to well solutions and investment management, we are introducing operating margins metrics for health.
Our health solutions margin was over 33% on a trailing 12 month basis, excluding COVID-19 claims and other notables.
Given our recent favorable claims experience excluding notables, we would expect margins to normalize to closer to 30% once the pandemic subsides.
Annualized enforced premiums grew close to 11% year over year weeks.
We experienced growth across all product lines with continued strong growth and voluntary and stop loss.
The total every at loss ratio, including the impact of Covid was 71.6% on a trailing 12 month basis within our targeted range of 70% to 73%.
Excluding notables and the impact of Covid, we would be below that range.
Our total aggregate loss ratio included $85 million a covered related claims over the last 12 months, we incurred $22 million in the third quarter of 2021.
The impact in the quarter was on the high side of our guidance deaths were more common in younger working ages that had been seen in past quarters.
We expect this age shipped will persist going forward.
As a result, we expect to be at the higher end of our estimated $1 million to $2 million in claims for 10000 U S toga desk incoming quarters.
Looking ahead, you have a healthy pipeline powered by our expansive distribution and early indications are for continued strong top line growth as we approach the January 1st renewal and sales season.
Before we turn to slide 11.
Given the actions we have taken to simplify our company and in an effort to focus investors on our longer term goals.
Will no longer be providing our quarterly EPS walk slide.
That that will continue to periodically communicate guidance with respect to developments in our business and financial outlook as circumstances dictate.
Please see slide 15 of the appendix for more detailed commentary on the fourth quarter.
Now turning to slide 11 on shareholder return.
By year end, including dividends, we expect that our capital actions will result in US having returned almost $8 billion of capital to shareholders. Since we have been a public company.
Year to date, we have returned approximately $900 million to shareholders in the form of share repurchases. This includes the completion of our June ASR as well as October repurchase activity.
By year, and we expect to repurchase at least $1.1 billion of shares.
Additionally, in order to keep pace with our strong stock performance, we increase our dividend by over 20%, thereby maintaining our dividend yield of over 1%.
We also recently called for redemption, nearly $400 million of debt.
This will reduce both our leverage and future interest expense.
Our financial leverage ratio is now 27.5% below are 30% target.
Finally, given our strong excess capital at RBC ratio, we announced that our board has approved a new $500 million share repurchase authorization.
While our excess capital reflect in RBC target of 400%, we intend to lower our target to 375% effective with the end of 2021.
This change coincides with the effective date of new hire RBC, one factors and we will have minimal impact on excess capital.
In summary.
We are pleased with another quarter of record earnings and the strong underlying performance of our businesses.
We believe are highly regarded workplace and institutional franchises powered by our expansive distribution are poised for long term success, and we will continue to generate high free cash flow, adding to our significant excess capital position.
We look forward to sharing more on our long term strategy and financial outlook in a few days at our Investor Day on November 15th.
With that I will turn the call back to the operator, so we can take your questions.
Thank you we will now begin the question and answer session too.
To ask a question you May press star one on your Touchtone phone.
If you're using a speaker phone please pick up your handset before pressing the keys to.
To withdraw your question Please press star too.
As a reminder, participants are limited to one question and one follow up.
Our first question today is from Nigel Daily of Morgan Stanley. Please proceed with your question.
Great. Thanks, Good morning had a question on capital management, you're paying that they wanted a hot billionaire above intensive excess capital every quoted this year in the past I think you've been very good stewards of capital, but more recently it seems like you're holding back and we're training that Capitol Hill to say why that reluctance to know you're planning to wrap it up somebody in the fourth quarter, but still the same.
It could be a lot more aggressive to just trying to understand the rationale day.
Nigel Good morning, Mike.
[noise], Thank you Rod and [noise] excuse me. Thank you Nigel further question.
Maybe.
Let's start by trying to put the actions that we've taken in perspective and.
Think about what we've done and what will we will have done over the last six months of the year, you've got a 400 million.
Or that completed the in the middle of September.
Got $400 million of debt actions and you've got $100 million a share repurchases. So far this quarter within at least another 200 coming forward. So it's over the last six months or the elastic months of the year, we will put together.
Put to work excuse me.
1.1 billion at least of capital so I feel like that's we feel really good about the pacing.
On that we feel really good about our our leverage in overall capital position and the flexibility. It affords us. So I think we continue to think about what the right pacing is going forward continued to monitor conditions and.
Over that period, you can expect nothing to be different from the way. We've managed in the past I think everything we've done this year has been consistent with the philosophy, we've used over the last several years and I feel very comfortable with it.
That's great. Thank you.
The next question is from Tom Gallagher of Evercore ISI. Please proceed with your question.
Good morning, it might just just wanted to make sure.
And I realize you're not giving out the bridge anymore, but just wanted to make sure we're thinking about it correctly.
There, there's a bunch of items that seemed to be.
I guess, you could probably argue somewhat one timer and nature for Q4 can you give a level.
If he did still provide beverage that you'd expect to be at.
Uhm, let me, let me try to frame it up this way and thanks for the question. So the guidance we have given in the past was that we thought the fourth quarter would be in the high end of the dollars $62 70 range assuming normal alternatives.
Expect levels of alternative performance.
And excluding the impact of alternative performance. Thus far this year, an incentive cup right that was that was where we were that guidance really continues to hold with a couple of new things first is the performance fees that we talked about an investment management that are are not expected to occur this year, but.
I think that May have been what you were alluding to you know over time, you know those have been really strong but in this particular year you should think of those as being close to zero.
And then the other new thing will be Covid I think when we gave the guidance at the end of last quarter. You know I think our expectation was the COVID-19 and <unk> would be relatively small while we don't have a number and nor am I going to try and estimate what U S steps are.
You know we did give the guidance of one to 2 million and claims for every 10000, you you ask us and we expect probably be at the high end of that so you can you can plug in.
Your best guess as to what Coca deaths will be for the for the U S in the quarter and and translate that but that should be the <unk>. The main adjustments. So if you put those two things and on top of the incentive count that we've talked about before I think that should that should get you in the in the neighborhood.
Gotcha, and then might just a follow up on that I also solve.
The the elevated expenses in your wealth.
Segment is sequentially something like a 15 to 16 sent headwind and and is that is that something you know so if I just compare it to like what $1.67 of core that would also be a reduction sequentially and is that something we should be thinking about as normal spur.
Ending in the business or would you view that is unusual.
[noise] not likely replicated in <unk> of next year.
So, we'll we'll be able to talk maybe a little bit more about 22 guidance that investor day, but there. There are some timing things I think are putting that a little bit above sort of a normal trendable, but you know what we will get more into where we expect to be in 22 and beyond and a couple of weeks.
Okay. Thanks.
The next question is from Andrew <unk> of Credit Suisse. Please proceed with your question.
Hey, thank black morning.
Back on the capital management question.
Again, just respecting your programs have an excellent over the years.
It did seem odd that you only bite back 100 million in the third quarter.
Cause the number of people to question whether.
Your stance on M&A has changed you know I know you recently mentioned that there could be areas of interest, but it'd be good to kind of hear you.
Just either we stayed or update us on on your stance with regard to emanate.
Andrew Good morning, it's Rod, Mike and I will.
Will toggle back and forth.
Our position on M&A.
Is the following week.
We've stated as you just summarized.
We have been.
It might be very responsible with capital and will continue to be as we look at opportunities to further accelerate voyeurs growth and our outlook.
In my opinion, our track record is second to none in terms of the discipline, we've had and that applies coequal Lee to how we approach emanate that has not changed.
<unk> will continue to be a very important metric for us as we.
Look at and assess.
Inorganic opportunities and we're gonna we continue to believe that share repurchase.
R. A core part of our story and absent other actions to create shareholder value, you're going to see that that philosophy and approach.
You've already consistent Mike.
Mike.
Yeah, you're right and you're the only thing I'd add is just maybe to help people understand what what would actually occurred in the third quarter as it relates to repurchases. So the the ASR that we entered the 400 million ESR we entered in late.
Quarter was effectively.
All executed in the third quarter, so so that that we.
Essentially the $400 million a share worldwide during the third quarter, an average price of a little over 63 and a half so that had.
That activity was certainly going on and then with the the activity that we had planned for the fourth quarter I think that.
Basically winds up being $700 million more than half of the total share repurchases in the back half of the year you know I feel good about the pacing and and I think that's consistent with the way we've talked.
Got it. Thank you and then my follow up is around the record keeping business after I.
Dreamily strong 2020 this year, we've seen some net outflows I think what was that about $750 million in the second quarter.
1.7 billion this quarter and I'm wondering if you could give a little color around the.
Outlook for record keeping close and then just secondly, a backdrop just the dynamics of that business how competitive it is.
What you're seeing out there.
Sure Heather [noise].
Thank you Ron and thank you Andrea and if it's okay I'm Gonna Kinda Brodney question and talk a little bit about flows in general for both full service and record keeping to kind of get a little bit of dynamic on both and I think it's important to recognize that as you look at our commercial momentum in both whole service and record keeping it.
All been done organically.
So if I start with full service Yeah, we had 355 million in positive flows for the quarter a billion and a half year to date and that really reflects the strong sales and retention we've had across all markets I've been really led by our corporate market.
As we pivot and look into the fourth quarter.
As Mike mentioned in his comments, we have talked about negative flows in full service in the quarter driven by two factors first is driven by slightly higher plans surrenders as a result of M&A activity as well as higher participants surrenders due to higher account balances from the equity market growth.
And as Mike mentioned in his comments, we we have seen and we talked about this in second quarter, we have seen a higher equity markets, having creating a headwind for net flowers.
But if I kind of finish on the full service side, we're expecting a positive net flows for the full year between $500 million and one alien uhm and if we look over the past two years generating up to 3.3 billion in positive clothes for fall service.
Now Andrea to get back to your question around record keeping flows yes, we talked about and record keeping you tend to have much more lumpiness in terms of larger.
Plan sizes, so while we do anticipate negative flows and a quarter, it's really driven by one plan surrendered at.
And we also similar to full service and we did see higher participants surrenders due to the higher participant account balances from the equity market growth record keeping close can fluctuate in any given year really due to the timing of cases in N out and as your reference we had really strong record keeping sales and flows and the 2019.
And 2020, and so when I take a step back and I look at our record keeping our fundamentals are really strong.
Building on the $39 billion in positive flows we generated in the last two years, we've got a really robust pipeline. However, the the sales cycle is longer from RFP through implementation tore a pipeline has ground. We have several unfunded large plan wins over a variety of different industries that we expect to find in 2000.
22.
So the bottom line is we feel really really good about our sales team our pipeline across both full service and record keeping and the competitive suite of products and and I guess I'll close Andrew by answering the second half of your question, which is just what's going on in the market dynamics have record keeping.
It's a competitive sector, but we continue to be disciplined on where we can best target where are solutions that are going to resonate with clients and we've often talked about then when we're competing against very find companies. You went on inches and it's very often our culture that as a driver for us in that segment. So we feel really good about.
Where we're headed in 2022 and beyond.
Very helpful. Thank you.
The next question is from at least Greenspan of Wells Fargo. Please proceed with your question.
Hi. Thanks. My first question is also on the popular side, I guess, giving that poignantly in debt pay down and William average and I'm, assuming leverage action are behind US and then the second part of that question you guys put in place and you buyback authorization with earnings that one to the.
And then next year, so should we thank god that is putting in place.
You know you're buyback plan for the next you know can I ask why.
I'm here now.
Please at least good morning, Mike.
Thank you Rod at least good morning. Thanks for the question so first on that activity.
I think the the.
The the the call will get us as we've shown to a leverage ratio that we're comfortable with.
We'll continue to manage that going forward as events unfold, you know and as the book value of the company evolves, but.
I think to the extent you want to view it as is done for now I think the answer is you know nothing planned in the near term, but obviously, we will continue to manage that we do like having more leverage ratio in the range that it that.
Given given the potential for some movement in the denominator, where they go see I, so pretty comfortable there and then in terms of of the the authorization.
You should think of this as a a return to the practice of a couple of years ago from that we followed which was a series of of half a billion dollar authorizations and so while the authorization extends through the balance of 2022, you shouldn't view that as tab.
Paying or being our our expectation I think we will continue to monitor our capital position as it as it unfolds and continue to pursue the discipline and an approach that we've used for the the last many years now so.
If we exhaust that authorization before the end of 2022, then we'll discuss with our board whether another one makes sense and they've been Barry.
I'm willing to grant those that we have had 13 authorization since becoming a public company uhm and with this latest one over $8 billion worth of authorization. So I don't think there's any hesitation, there or or any limitation to be thinking about.
Okay. Thanks for the color.
The next question is from aircrafts Autonomous research. Please proceed with your question.
Hi, Thank you and can you talk more about the new adjusted margin metric that you are providing for the wealth solutions business and how we should think about the right target level for this going forward and is this going to be the key K P. I that you managed to and it's the goal to continue expanding margins are to sustain them at this level.
Heather and Mike you want him Jumpin.
Good morning.
Okay is your anointing. Thank you for the question. So I'll start you know, we're certainly going to provide more detail on our well solutions operating margin at our upcoming Investor day, but we are focused as a as a simpler business. We think operating margin is is a good metric of performance. We're pleased with the operating margin regenerated this quarter and going.
Forward your Gonna Harris talk about Ah focus on maintaining those strong margins going forward.
Eric maybe maybe just stepping back a little.
We think this is a really powerful way to think about the prospects of the company Alright, I I think the.
We are simpler we don't have nearly the complications that we we certainly used to have and.
And certainly simpler than than many that are in our traditional peer group and so we think that will be able to not only help people who follow as closely understand better the underlying trends, but also investors that are maybe new to the story and so and talk about our company in a way that they're used to seeing in in other.
Industries, and so if we're able to talk about revenue growth.
Net revenue growth and then ultimately the margin, we're gonna earn on that and set appropriate expectations around.
Around all of those we think that'll make the story much easier to follow and so so we're excited about being in this position and being able to talk about it this way.
[noise], Thanks, and they can certainly agree simpler is better and maybe on that note.
L D. Ti accounting is certainly another topic, that's coming up and I was just hoping maybe you could talk about which of your business lines will be affected by different elements of the accounting change.
And maybe the potential impacts to OCI and retained earnings and is it right to think of that since you've exited a lot of your insurance businesses that are less exposed than than most in the industry.
Yeah.
So we're still doing work and and a lot of work underway to fully understand the implications I think the your your read through though you know kind of based on what what one sees publicly about the kinds of products.
That are affected as you noted we don't have most of that anymore. So I think it's fair to say that the kinds of impacts will be you know.
Probably on the on the smaller N, but I I'm not in a position to give any kind of magnitude or or direction, but relative to others. In the industry. I think you should expect it to be fairly meat muted for us and.
In terms of the business line to I'm Gonna I'm, just gonna hold off on I'm trying to parse that out because it's it's fairly complicated and I think you'd probably need to see the whole story, including the impacts on on a O C I and some other related related areas there.
Got it I appreciate that thank you.
The next question is from John Barnard Piper Sandler. Please proceed with your question.
Yes. My question on stop loss sales, they've had quite a period of growth and then decline year over year.
Can you maybe talk about distribution, there and expectations ahead.
Sure. Thank you on good morning, rugs [laughter], yeah. Thanks, John maybe I'll just do the step back first on sales and the book of business in general and cause we shared obviously the overall book is.
Run at over close to 11% year over year. So the fundamentals within the book book not only sales, but also retention across the business has been good and we're really pleased with how that's performed on stop loss.
Look that that's a segment where.
Close to 80% of our business focused in on a one to one as we started this year. We certainly started the year well I think you could imagine within the underwriting shop that they get.
Appropriately stingy with with what we think we should be writing business. At when were were you started the year, where we did so I went over read into it. It's it's a business, it's always going to be competitive.
As we think about things moving forward, though we feel really good about where we set in the position we're in.
We've done a nice job doing both the top line growth as well as the margin improvement in that business over the last few years. So at this stage I wouldn't read into that again, it's competitive we're in the cycle now for one one business both renewal of new business.
We're sort of hot and heavy in.
But as we see that we feel like we continue to be well positioned as we move forward them.
Get excited about the growth that we've had in the margin improvement that's come with it.
[noise]. Thank you very much for that.
My second question.
Four Q21 mandates really strong can you talk about the level or asset focus maybe a bit more there and then what that gives you confidence in the pipeline quarter beyond that thank you.
[noise].
Mm good morning, John It's Christine listen as far as a little bit more color in terms of the strength of the <unk> pipeline as you can see very strong October and our outlook is over all organic growth for pushing up to the top and about 1% to 3% range for assets under management ground for sure.
It's a very strong quarter, you know how to think about it there were multiple strategies that funded but but there were.
More than one north of the millionaire show what what we've seen is a large smell T sector core fixed income mandate a couple of credit mandates and when you think about the first do tend to be lower more aggressive basis points because the public markets. So when you think about the quarter when you see that measure.
You will see it lower note that this quarter, though actually our basis points under management was was higher so again it all goes to a mix of business and.
It's kinda very quarter to quarter and also something to think about particularly with our insurance clients cause we typically bill Simon liquid markets and then over time. It moved the other thing too higher margin more differentiated products strategy. So overall, that's what I see fundamentals of the business very strong given our investment performance how's that.
Climb up today.
Still very strong you know again, driven by birth and that's it for five minutes and are differentiated product alignment. We have a number number of strategies represented as well as over 40 different clients that are in our current unfunded win. So we see good strong momentum as we move into the early part of next year.
Thank you.
Thank you John.
Again, if you have a question. Please press Star then one.
Our next question is from Humphrey Lee of dialing and partners. Please proceed with your question.
Good morning, and thank you for taking my questions. My first question is related to the stop loss and voluntary claims.
And a quarter, which continue to be favorable can you just talk about <unk> claims experienced throw the quarter and how the day trend and.
And then kind of given some of the the deferral care do you anticipate any kind of pricing impact as you're going going through.
Going through your renewal cycle.
Hopefully thank you Rob good morning lately.
Alright, good morning Humphrey.
Well this is an environment, where trying to talk a lot about trends month to month or within a quarter feels a little bit and dangerous.
But but let me take a shot at just again sort of a step back.
As I alluded to in the question prior stop loss of business, we've been doing a lot of work to just strike the right balance between growth and margin pricing discipline. That's certainly played out this year. There's there's some knock on impact from delayed care and those sorts of things like it's impossible to say there is none.
Is it dramatic the one thing I would say for us that keeps it away from being dramatic is just where we play.
So as a reminder, and the larger end of the market.
Think about deductibles at an individual level of and that 200000 to 300000 range.
Just put some numbers to that.
And so that tends to insulate us as we think about it and certainly we have had some impact from COVID-19 within the book.
But at this point is spent on the edges and driving the numbers materially.
So we'll see how that plays out into the future we feel good about.
Just understanding our book and where claims trends are going and how we're thinking about renewal strategy as we go into this cycle for one one.
I'm, sorry would just sort of a step back on stop loss again, where we play I think helps us in select stay insulated a bit from noise.
And we will continue to monitor it closely as we think about voluntary and obviously Mike.
Life story from a Covid perspective.
On the voluntary side. This one if you go back to the start of the pandemic, we've talked about in the accident product Heaven, just seeing a bit more dramatic depth and what was going on from a loss ratio perspective, there and strong results fashion moderated and sort of come back to more normal ish range.
When you think about critical on us in hospital indemnity. Obviously those are two areas that I just feel like through the pandemic of maybe bounced around a little bit more than we would have expected.
But net net the book of business is running well, we think about it in totality.
And so it's a little bit hard to draw a conclusion on okay. What had third quarter doing now what do we think about the future I think as we talk about things that Investor day, we still feel good and we'll talk more deeply about it but we still feel good about the underlying trends in the fundamentals within the business and what we're seeing from a claim trend perspective, but.
These again these days have had things move around a little bit differently than we would have otherwise anticipated, but net net strong top line growth in this business. The margin story loss ratios are running right in the middle of our guided range.
But it's been a little bit hard the first of all the future perfectly for all of us.
[noise] I appreciate a color. My second question is who are they to investment management I think in your prepared remarks, you talked about taking some actions on the retail side to improve the overall Ah flows picture.
<unk> provides some examples on some of the actions that you have taken and how should we think about that.
For some of the trend anything coming quarters.
Christine.
Certainly countries, so as far as retail flows.
Some of what are some of the actions that we've taken you know we've we've been focused on really strengthening our actors equity platform and so when you. When you think about some of the things that we've done we acquired in machine learning equity team. So thank AI driven investment result, and in fact, we have.
A sizeable unfunded when that we expect with that strategy to find it in the first quarter. So that's certainly getting momentum and we've recently announced some additions to our team.
As long as the coast C I O structures to think about.
Then he who is overseeing crying in the AI team combined with satellite pie Tashi run fundamental some important because this is going to continue to leverage multiple to use any fundamental.
Fundamental fax machine learning to really strengthen our performance on behalf of our clients. So that is definitely a T area of focus and then just let me get back to kind of what did we see about going forward and and what's driving clothes, we have very strong investment performance, notably in 16.
Calm so we're continuing to see strong client demand in our strategic income opportunities fine. So think about a fun that's going to appeal to people with inflationary concerns switches, becoming abroad, a part of the market conversation as well as something really excited in terms of retail slow is we have a.
A retail version of our secondaries Pomona business, it's called the Pomona investment fund and that is delivering extremely strong performance. It's existed for seven years. So it's got a long track record top performing fund in it.
Category.
And we're seeing real momentum that that fun cross is crossing the half a million Mark which you know is is pretty important in terms of getting bigger allocations into the sun and I would say a strategic focus that for us on retail continue to leveraged our traditional asset classes, but also more and more focused on delivery.
Private an alternative strategies to high net worth individuals to a retail distribution force.
Got it I appreciate that the color.
This concludes our question and answer session I would like to turn the conference back over to Rod Martin for any closing remarks.
Thank you.
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