Q2 2023 Voya Financial Inc Earnings Call
Good morning, and welcome to Voya financials second quarter 2023 earnings conference call all participants will be in a listen only mode.
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Please go ahead.
Thank you and good morning, welcome to Voya financials second quarter 2023 earnings Conference call. We appreciate all of you who have joined US. This morning as a reminder, materials for today's call are available on our website.
At investors, that's the way our dot com.
Turning to slide two some of the comments made during the call may contain forward looking statements.
We refer to certain non-GAAP financial measures within the meaning of federal Securities Law GAAP Reconciliations are available in our press release and financial supplement found on our website.
Now joining me on the call are have their own valley, our Chief Executive Officer.
Don Templin, our Chief Financial Officer after their prepared remarks, we will take your questions for the Q&A session. We have also invited the heads of our businesses, specifically Kristine hurt sellers investment management, and Rob group that workplace solutions with that let's turn to slide three.
Three as I would like to turn the call.
Over to Heather.
Good morning.
Boy a financial has delivered strong second quarter results as we continue to drive earnings and sales momentum across our businesses.
Prudently manage expenses and generate high free cash flow.
We are well on track to achieve our 12% to 17% EPS CAGR target over that three year Investor day period, ending in December 2024.
We're focused on executing our plan driving organic growth and integrating our new businesses, which are delivering valuable revenue diversification and attractive opportunities for future growth.
We head into the second half of 2023 focused on our customers and confident in our ability to generate profitable growth.
Our confidence is driven by the proven resilience of our businesses and a strong track record that we have built by consistently delivering results across a wide range of economic conditions.
Let's move to slide four with some key themes.
For the second quarter, we delivered adjusted operating EPS of $2.21, which is 30% higher year over year.
Our results reflect the strength and boy its diversified business model continued sales momentum and disciplined expense management.
For wealth solutions full service net flows were $400 million with growth in recurring deposits, helping to offset elevated participants surrenders.
Our recordkeeping delivered a strong quarter with net inflows exceeding three and a half a billion dollars.
Health solutions delivered another outstanding quarter, driven by strength in stop loss.
Annualized in force premiums and fees grew 22% year over year.
In investment management net outflows reflected the difficult market backdrop, especially among institutional clients. While continued strength in international retail helped to offset some of this effect.
We generated approximately $200 million of capital this quarter and our free cash flow conversion rate remained above 90%.
Because of our confidence in our continued ability to consistently generate strong free cash flows we are doubling our common stock dividend this quarter to 40 cents or approximately 2% yield.
We've also resumed share repurchases deploying $162 million this quarter as part of our consistent emphasis on returning capital to shareholders any disciplined manner.
Our board has provided a further $500 million repurchase authorization.
Facilitate our continued execution on this approach.
In a few moments and Don will share more on our results and performance.
Our strong results this quarter demonstrate the value of a diversified business model, we have built during the past several years.
Slide five shows how our revenues are balanced among underwriting spread and fee based sources.
With our fee revenues further diversified across markets.
This diversification coupled with our continued focus on expense management has allowed us to achieve consistently strong operating performance, even as business and macroeconomic conditions have changed quarter to quarter.
Turning to slide six.
For the past several quarters, we've been sharing progress on our strategic investments the results that they are already generating and the growth opportunities they present for the future.
We recently marked the first anniversary of our Allianz global investors acquisition.
There's been a tremendous success for Voya investment management.
The income and growth franchise continues to generate exceptionally strong net flows, especially in Asian markets.
Building on this success and.
Consistent with the plans we discussed last quarter, we have recently launched an investment grade credit fund and several equity funds in the international markets.
Capitalizing on the extensive distribution capabilities that we now have in Europe and Asia.
We see international markets is a powerful driver of future revenue and earnings growth.
Our.
<unk> benefit focus is on track.
The strategic vision it presents for the future of workplace benefits and savings is gaining traction in the marketplace.
The strong growth in bookings and a growing pipeline of opportunities contributing to sales momentum.
With benefit focus Voya is building a market leading workplace platform for our customers.
Connecting their benefits and savings programs to create a comprehensive workplace experience for their employees, while driving operational and cost efficiencies for their HR departments.
Finally, just yesterday, we took full ownership of our Indian technology and operations joint venture.
India has been a tremendous growth story for going out with close to 2000 employees just four years. After we founded it with our local joint venture partner.
And now as a wholly owned subsidiary of Alere. It will drive even further innovation across our entire company.
Turning to slide seven.
By living our purpose and vision every day, we're driving positive outcomes for our clients supporting our colleagues and serving the communities in which we live and work.
The growing adoption of boy as my voyage App across our client base provides a great example of our purpose and vision brought to life in a very tangible way.
This first of its kind platform users personalized guidance and comprehensive data to drive better decision, making when it comes to workplace benefits and savings improving financial outcomes for our customers.
Our purpose in action is also positively impacting our communities.
So our annual National days of service that we held in May boy employees volunteered over 13000 hours and helped over 2600 nonprofits across the U S.
Our purpose and the actions that we take to bring it to life continue to underpin our strong culture.
With that Dan will now provide more details on our performance and results Don.
Thank you Heather.
Now, let's turn to our results on slide nine.
We delivered $2 21 sentence of adjusted operating EPS in the second quarter, which was 30% higher year over year.
The health solutions business led to our exceptional growth with another strong quarter of favorable net underwriting.
While second quarter GAAP net income was $154 million, we generated approximately $200 million of excess capital in the quarter.
This was because a majority of the differences between after tax adjusted operating earnings and net income were noncash in nature.
Turning to wealth solutions.
We're focused on improving financial outcomes for our customers and clients consistent with our purpose vision and values.
This is supporting our ability to generate positive net cash flows and grow assets over the long term.
Specifically, we've generated over $9 billion of full service net inflows over the past five years.
Over 400 million in the second quarter.
Full service recurring deposits grew nine 5% on a trailing 12 month basis.
Supported by favorable chase retention.
We continue to expect deposit growth to exceed 10% for the full year.
And recordkeeping, we generated over $3 $5 billion of net inflows in the second quarter.
Which includes a large case funding.
Yeah.
Turning to slide 11.
Wealth solutions generated $174 million of adjusted operating earnings in the quarter.
Net revenues ex notables grew one 5% on a trailing 12 month basis due to higher spread based revenues.
Given the rapid rise in interest rates, we experienced elevated spread income last year and the first part of this year.
This quarter some of that benefit is normalizing due to policyholder behavior in response to the current yield environment.
Less variable to fixed transfers.
And higher crediting rates.
Higher credited rates represent our actions to pass on the benefits of higher rates to our policyholders.
Looking ahead, we expect overall net revenues to increase given the growth in fee based revenues heading into the second half of the year.
And we remain focused on the overall profitability of our book.
As planned administrative expenses were $23 million lower than first quarter.
And our adjusted operating margin remains in our target range.
Demonstrating our ability to manage spend while investing in our business.
Our wealth solutions business has a strong and diverse unfunded pipeline.
This diversification gives us confidence in continuing to grow the business, while delivering on our financial targets.
Turning to health solutions in the second quarter annualized in force premiums and fees were 16% higher year over year, excluding benefit focus well above our long term target of 7% to 10%.
We saw growth across all product lines supported by strong sales and favorable retention.
Our aggregate loss ratio was 64% on a trailing 12 month basis.
Driven by very favorable net underwriting experience in stop loss.
Within group life, we experienced loss ratios above our 77% to 80% targeted range due to greater severity. However claims frequency was in line with our expectations.
Looking ahead, we expect full year total aggregate loss ratios to be below 70% to 73% due.
Due to the favorability in stop loss during the first half of the year.
Turning to slide 13.
We had a record earnings quarter in health solutions with adjusted operating earnings excluding notables of $124 million.
Net revenue growth ex notables was 43% on a trailing 12 month basis, reflecting core business growth.
Adjusted operating margin ex notables was 35, 8% on a trailing 12 month basis.
Benefiting from the strong underwriting performance.
Looking ahead, we expect full year margins to be at the high end of our 27% to 33% target range.
Our leading brand and differentiated workplace value proposition continues to resonate and drive momentum with our distribution partners employer clients and customers.
Moving to slide 14.
Investment management has a multi decade track record of generating significant value for our clients across the different market cycles.
However, we're not immune to the headwinds that are facing the industry.
This impacted flows in the quarter.
Institutional net outflows of $3 $8 billion reflect softer client demand.
And strategic decisions by us to strengthen our active equity team earlier in the year.
That said, we have seen a pickup in institutional client demand in the third quarter and.
And we are well positioned to benefit from this demand given our long track record and top decile fixed income investment performance.
International retail net flows since we began our strategic partnership with Oems Gi are now over $5 billion and led to another quarter of positive retail net inflows.
We are building on this momentum with the recent launch of an investment grade credit use it.
With this product we look to drive additional flows into higher margin U S. Dollar denominated retail strategies that are in strong demand internationally.
We continue to grow our assets under management, which were $324 billion as of June 30.
The growth in assets under management was impacted by planned outflows related to our strategic partnership with Venerable, which reached its five year anniversary.
Approximately $2 billion of institutional assets now remain which we expect to wind down over time.
Turning to slide 15.
Investment management delivered adjusted operating earnings of $50 million in the second quarter.
Net of all Younce Gis Noncontrolling interest.
Net revenues grew 24% ex notables on a trailing 12 month basis.
Driven by the addition of <unk> assets.
On a trailing 12 month basis second quarter adjusted operating margin ex notables was 26, 4%.
We reduced expenses in the second quarter up by $23 million.
This was in line with our guidance.
And our full year expense outlook supports our target to improve 2023 margins by at least 100 basis points on a market neutral basis.
Looking ahead, our well diversified investment offering strong investment performance and attractive product pipeline in the private and alternative space position us well for greater scale are returned to positive net flows in 2024.
And further margin expansion.
Yeah.
Turning to slide 16.
Over the last 12 months, we generated excess capital in line with our free cash flow guidance and deployed over $1 billion of capital.
In the second quarter, we generated and deployed approximately $200 million of capital.
We opportunistically repurchased $162 million of shares in the quarter.
We have increased our share repurchase authorization and doubled our quarterly common stock dividend.
Reflecting confidence in our continued strong free cash flow generation.
Looking ahead, we expect to fund our August debt maturity of $140 million with excess capital.
As we continue to balance debt extinguishment and share repurchase activity to manage leverage to the mid point of our 25% to 30% target range.
Yesterday, we took ownership of the 51% partnership interest in Voya, India that we did not already owned.
We made a payment of approximately $50 million in connection with the closing.
As Heather indicated we expect immediate financial benefits from this action as well as significant strategic opportunities in the future.
Our balanced approach to capital allocation, which includes reinvestment in our business.
It is driving long term profitable growth and shareholder value.
Yes.
Turning to slide 17.
We remain on track to achieve our adjusted operating EPS growth target of 12% to 17%.
The three year period, ending in 2024.
We are focused on integrating our strategic assets and driving value from our partnerships.
Our diversity of revenue and track record of managing through challenging macroeconomic environments gives us confidence in achieving our growth objectives.
And we continue to generate and deploy capital to create ongoing value for our shareholders.
With that I will turn the call back to the operator, so that we can take your questions.
Thank you we will now begin the question and answer session.
To ask a question. Please press star one on your telephone keypad, if youre using a speakerphone. Please pick up the handset before pressing the keys to withdraw your question. Please press star two as a reminder, participants are limited to one question and one follow up.
Our first question comes from Wes Carmichael with Wells Fargo. Please proceed with your question.
Hey, Good morning first question is on health and the results were really strong in the quarter.
Stop loss loss ratio, that's always fun to say was that was really favorable. So just wondering if theres any way you can help us with kind of the run rate earnings power in that and maybe just how much that.
It might contribute to overall EPS growth I know you said you expected the consolidated loss ratio to be below your target, but any help there would be it would be great.
Yes, good morning, West, we'll let Rob start your question on stop loss, and then I'll ask Don to speak to the impact on EPS.
Great. Good morning, Wes I appreciate it. Thank you I'd like to thank stop loss loss ratio, it's always fun.
Look as we have talked about the last couple of quarters.
2022 experience is what's driving this so.
We think about one year product as a reminder, we're going to go through a normal cycle here in the fall for.
The whole book.
What has happened in this year is that 2022 experiences just has continued to mature and ultimately run better than we would've anticipated.
Time of pricing Youre seeing the.
The alignment of that actual experience and the reserving catch up to one another.
So as we think about the next couple of quarters.
Absent material change in the experience that we've seen we would continue to expect to be at.
Call it the lower end or under our 77% to 80% traditional guidance around stop loss.
And so then as.
As we we sort of toggle into next year after the renewal cycle.
We will start the process over of vaccine how experience plays itself out but again over time.
I think that 77% to 80% is how we want to think about the business as we move forward. This.
Our block of business that over the last handful of years, obviously, we've grown from a topline perspective, we've been doing that in a really disciplined way focused on not just growing as fast as we can but also balancing out the profitability growth. We've improved margins. So I would say top line has been growing fast we've been growing the bottom line margin.
Even faster.
It's a competitive space again, we'll go through renewal cycle and be able to talk more about that as we get into third and fourth quarter.
What that looks like but.
The fundamentals are really strong and as we play out I gave you a little bit of a guidance on how I would think about third and fourth quarter and I'll stop there.
Non China.
Yes, and west before I turn it to Don I'll, just reiterate the point that Bob made is the premium growth that that is something while we expect overtime to loss ratio to normalize you can expect that premium growth to persist, but Don maybe hit the second half of <unk> question, Yes, I think just from a from a sort of earnings power or.
EPS perspective, Youll recall at the end of the first quarter that we had guided to.
High single digit EPS growth for the year and recall that was off of 30% EPS growth in the prior year, we feel really confident about that being at the high end of that single digit earnings growth range and in fact, I would say the strong results in health.
Give us confidence that we're probably pushing up into the low double digits as opposed to the high single digit range. So we have a lot of confidence.
The business is executing really well and then as you think about sort of our three year guide for the EPS CAGR, we gave a range of 12% to 17% over a three year period ending in 2020 for the strong 2022, and the strong 2023 gives us a lot of confidence.
We will be also at the high end of that range.
Okay. That's all really helpful. Thank you.
And then just maybe pivoting to investment management, just wondering if you can provide maybe a little color on the flow pipeline for the balance of the year and maybe just your thoughts on how you're viewing your flow performance versus the industry. It looks like on the slide that maybe the gap versus an organic growth rate versus peers has narrowed a little bit. So just your thoughts there would be great. Thank you.
Yes, Thanks, Christine will give you some color on why were optimistic for a close out looking forward.
Certainly less so.
To kind of put into context certainly.
Challenging industry overall for institutional flows in and we're not immune to that when you think specifically about sort of near term and then longer run.
<unk>, we've made some very conscious strategic decisions and you've heard us on previous quarters talk a little bit off ramp versus on ramp and that sort of thing and so specifically what are those that we did combine the fundamental equity team.
All of our acquired Hei businesses with our fundamental equity team really to have best in class and focus.
Investors and strategy there. So that's just a natural outcome as far as some synergies that.
Can cause a little bit of client disruption. If you will very conscious formidable strong equity franchise going forward, but more importantly, we've also talked about the <unk> relationship. We did have some outflows related to that and we do see a little bit of headwind as a result of that.
See you next quarter.
So that's sort of a frame that again, what I want to remind you have enough throughout the stack just your observation and your question around the momentum in institutional flows.
Conscious decisions by assets really fortify and strengthen our business. So what do I mean like that that chart shows you. The institutional flows over a period, but if you'll recall, we delivered positive organic growth for seven straight years.
And if you look at that chart, what's changed what's changed is the international retail really helping to drive higher basis point higher margin business and so so I'm Super excited because the same company that delivered those institutional flows is only better today, because we have the global distribution partnership and.
Newly acquired capabilities. So private markets that you guys can you hear us talk about that insurance asset management and again, just really fortify retail.
Really have the opportunity to garner flows out of Asia, which is the fastest growing region globally for asset management overall, I Couldnt I couldnt be more excited 23. It is complex and a lot of that is just our conscious decision to strengthen and fortify our business. So what I see is I see going in.
24, though a lot of upside you know definitely 2% to 4% outpacing the organic growth of the industry and continuing to expand our operating margin.
Our next question is from Ryan Krueger with <unk>. Please proceed with your question.
Thanks. Good morning, first I just had a follow up can you give any more color on how much.
And then IP impacted institutional outflows in the current quarter and any more perspective on how to size how that could impact the third quarter.
Yes, Thanks, Ryan Ryan Christine will take that.
Sure. Thank you Brian and.
And when it was part of the <unk>.
Outflows in the second quarter and then.
You bet.
And we're looking at our competitors on the institutional side, there seems to be an industry trend, but as far as <unk>, specifically and it will continue to be a headwind.
Our flows into the third quarter, but again, you know what I am seeing in addition to really just the foundation I talked about is in our core businesses, our pipeline and opportunities are actually growing. So we are seeing a shift in momentum I mean Brandon.
Clients were terrified of real estate clients were sort of sitting in cash I'm really not sure what to do we are seeing a movement now into fixed income and credit we're starting to see.
More engagement and signs of life from our insurance.
Clients that we have in terms of the.
Commercial real estate, which quite frankly was a bad word for insurance companies that for a period of time, but I think that is.
Clients are getting more confident about the macro environment starting to deploy capital. So overall still have those in an ICU headwind.
Working really hard to overcome them just being the growing momentum in the pipeline and again I see this is just to think about this is 2023.
Just look at what this business has done in the past and it's going to do in 2024 and I'm just very confident that we're going to hit.
Organic growth targets over the long run.
Yeah, and maybe just to reiterate a point that Christine made on an IP number. One this was as expected you've heard us talk about the off ramp and then the significant ramp with Agi.
This has been built into the forecast and just a reminder, while the negative flows for from MNI Tito revenue protections I'm trying to say.
Thanks, and then on well is do you view the spread income that you generated in the second quarter is a reasonable run rate going forward or could there be some additional downside from here.
Sure Rob I'll take that.
Sure Yeah, Thanks, Ryan yes, so.
As we and Don really I think hit the main point when I had just to put context on the spread dynamics, what's going on.
It's easy to sort of think about the gross investment yield side of the story and think about okay. You can make crediting rate decisions and what we've seen emerge over the last couple of quarters.
To your question is this behavior piece of our policyholders and so what are they doing that's different than they did 12 months ago. There's just been some material changes there. So as we think about is that going to change. This quarter is that going to change next quarter as the market environment.
If it stays the way it is.
How long does that persist there is more questions than answers at this stage. So as we look at it doing the step back obviously spreads are an important part of how we make money in the business.
And how we set targets, but just sort of do the step back and say boy. We figured this out since we've been a public company on how to continue to hit operating margins.
Our expectations and your expectations so that.
36% to 40%, we feel good about staying in that range throughout the rest of the year and I think as we get past what in 'twenty. Two was a really quick and rapid run up in spread income.
That will sort of start to fall off and then our opportunity to kind of get back into net revenue growth of being in that 2% to 4%. We feel good about as we get through this period of time.
And so the new lines I think this quarter in the next couple of quarters is really around the client policyholder behavior piece, but I'll just come back to we still net net feel good about when you look at it in totality. The revenue piece of the story the spread piece is obviously a piece of that and then the fee income.
And then how are we going to manage expenses and so we feel good about them at the right overall margin level.
And so the pieces and parts here, we're just we're a little bit cautious on overly being precise around this client policyholder behavior piece of things.
And maybe one build on Rob's comment is you've heard us talk for a number of years about the revenue diversification within our wealth business and the fact that we've got the combination of spread equity market participant days surrenders and that's.
That diversification has allowed us to continue to navigate through different cycles as it will going forward.
Our next question is from Erik bass with Autonomous Research. Please proceed with your question.
Hi, Thank you can you talk about the decision to buy in the Indian JV and maybe provide a little bit more color on what this business does and what the transaction means for the company moving forward.
Yes, sure Eric I'm happy to take your questions. So if you do a step back in 2019, we established a joint venture with our India Technology company called Thats, Okay. It really focused on establishing a global operations and technology Center.
The strategic rationale for doing this was to build out capabilities to help us drive.
Efficiency scale, and innovation, and specifically thinking about building out capabilities and infrastructure support application development.
Data analytics security as well as <unk>.
Operational efficiency and so we.
We did that in 2019 and has been a really great.
A great strategic move for us.
And during that time really how you see it reflected as it is embedded in the operating margins of our businesses. So in our what Rob just mentioned our ability to maintain operating margins for a number of years. This is what was then one of the key capabilities.
And so for us to acquire the really other half that 61% of it. We just we just consider that a very logical next step to acquire full ownership of a great capability and it allows us to have these employees as voya employees very strategically aligned.
And then lastly, how to think about it on a go forward basis is that we see this as a capability, we can expand and it's going to help be a contributor to operating margin improvement within our asset management business and as we continue to drive innovation and to think about technology, and Vance advancements automation and AI that kind of capability.
We just we're really really pleased with India. So hopefully that gives you some context.
Yes. Thank you.
If I can switch to record keeping a very strong quarter for flows you had seen some public announcements recently on some nice wins. So I was hoping you could just talk about the outlook for this business and maybe one of those announced deals are kind of hitting the P&L and what are still to come.
Yes, no Rob can certainly take your question and I think this is a good place where diversification of markets plays out well so Rob.
Yes.
Yes.
Great point other yes. This is one where we're really excited about what we've got sort of in hand.
Unfunded in some ways in some places but.
What you saw in the quarter.
Was a particular case that came in it wasn't the only one but.
It was a rather large one and then as we think about ahead. There is more to come both in 'twenty, three as well as our pipeline and to 'twenty four 'twenty five.
So we feel good about the activity that we've seen in that space. This has been a story that's just continued.
Sort of build momentum in Voya has presence in this part of the market. We feel like we've certainly turned the corner on the ability and the right to win in this space and we will continue to leverage that ability and right to win as we think about the large middle and small end of the marketplace, we're going to see.
<unk> all of these.
Opportunities into new innovation, new ways to serve and think about driving the outcomes that we're all trying to strive for.
So we're excited about the activity that we've seen again a lot in hand, and Youre always working on the pipeline of opportunities, but we feel really good about the progress we're making in that space.
Yeah.
Our next question comes from the line of Tom Gallagher. Please proceed with your question.
And on the $7 billion of divestitures in investment management in the quarter.
Can you comment on.
Don I think you had referenced that.
And mention I believe it was.
Was it mainly vulnerable and I think you said there were $2 billion of assets.
Remaining that could outflow from that transaction in any way I guess, its a third quarter in a row, where you've seen some neck.
Negative impact from that line item.
Can you comment on.
What what drove that and is there any tail left on that that we're going to likely see in the coming quarters. Thanks.
Yeah. Thanks, Tom Christine we will take your question.
Sure Thomas.
Just very quickly.
Back around what is in that other category is that it would include fixed account flows for for Voya.
Does that still businesses, so kind of a traditional general account and part of those went to the interval.
Part of it obviously is incredibly strategic deal and beneficial for Voya in divesting of our variable annuity business as well as resolution so how to think about what what happens.
The venerable contract as expected when we did the deal they had a five year.
Contract with Voya investment management for us to manage their general account assets and.
Not unexpectedly and when you think about private equity owned companies strategic value for them and certainly they with Apollo and Athene. They have an in house capability to manage assets. So it wasn't unexpected for us and.
It certainly is captured in our operating margin targets, our revenue targets and forecasts and so how to think about the remaining relationship that Don referenced with with vertical on the general account side I mean, certainly.
Some of those assets are.
Are likely to remain I mean, this is we have been a strong performer in Hudson.
Pretty differentiated capabilities, but also some of them such as.
Commercial real estate potentially we are we are the service there as those assets.
And they are sticky and less liquid so I don't really want to speak specifically to our clients sort of forward looking view, but again.
<unk>.
Incredibly manageable when you think about everything we've done and then just quickly what I'd like to also just kind of hit the Q. It's just to remind everybody. This business five six years ago, we were managing over $90 billion of Voya General account assets.
Now, let's move 40 billion.
What have we done in the meantime, we've really focused on growing our external client business you hear US say, we have over 60 insurance clients today, but just from an outside in proof point for you. There was a recent industry reports that came out.
Those that we ranked number three in the United States as the asset manager for outsourced private fixed income capabilities.
Private debt commercial real estate number three will investment management. So again. This is a proof point our focus has pivoted forward continuing to focus on that insurance DNA that we have to continue to grow that client base in that business.
And maybe we have a built in.
Sorry, Tom I was just it was kind of due to the reminder of that.
The Venerable transaction was a really good deal for our shareholders. So just kind of doing that that look back but.
Turning to turn it back to you Tom for a follow on.
Thanks, Heather and thanks, Christine Yeah, just a follow up on that I hear you and I don't think anyone's going to.
Have issues with the merits of that transaction whatsoever.
Thank you.
Re rating overall capital freeing up perspective was it was quite attractive.
Just trying to get a sense for the remaining legacy for both that and also the deal with resolution. So is it is it like are we likely to see a continuation of outflows I assume this we're not going to see 7 billion again this seems fairly sizable.
But is it likely we're going to see a continuation of outflows coming through those divestitures.
Related to those would you say or do you think we've seen the vast majority of them already happened.
Yeah, Christine we will speak to it yeah, absolutely Tom.
Probably the best thing to do would be to look at the you know the announcements around the resolution deal, but so we we manage assets for resolution life.
And as part of that that deal.
We have a schedule of retaining general account assets, so think that that expires at the seven years to think that expires in 2027.
And it has been on a glide path down and so what started at $24 billion is now 15, so just to size that for you, but again just.
Expected built into our financial forecast again.
Nothing performance related.
Have a great relationship both with Venable and resolution.
Certainly it has been an area of focus to serve them well and will continue to be and again.
Super excited when you think about sort of the insurance trucks that we have that.
Well again complicated year, it's sort of again sort of as it does from two story right. So some legacy businesses and the pivot to is really.
Our insurance practice and then also we have a strategic relationship with Allianz life and their portfolio. So that that has been seen as the growing part of our business, which is exciting as well.
Our next question comes from Senate come off with Jefferies. Please proceed with your question.
Hi, Thanks, good morning.
Wanted to start out on the excess capital, which I think is 500 million sort of flat quarter over quarter should we view that as sort of fully deployable capital or should we think about second half capital deployment really being a function of the capital that you generate.
Thanks anytime we will take your question.
Sure so.
Maybe let me start with just reminding folks that we have a strong and long track record of returning capital to shareholders.
And we've been thoughtful balanced and disciplined around that.
Other thing that we've done consistently as we retire debt when we've been repurchasing shares so that we can prudently manage our balance sheet and our and our leverage ratio. So.
That's sort of the backdrop.
Obviously, there were some headwinds or some uncertainties around the economy macroeconomics heading into 2023 some of those still exist. So we've been thoughtful.
And maybe a little bit prudent around having a lot of excess capital here the $500 million, we think that's a really good position to be in.
Youll recall that.
We repurchase shares and we retired debt we had a debt.
Senior debt maturing in August and so for the second quarter, we were very focused on repurchasing shares. So that's the activity that consumed our capital in the second quarter.
In the third quarter, there is a natural point to retire some debt so to manage that so there'll be a $140 million of that five 500 million thats going to be used to retire that debt and then you should you should expect that given our capital light.
Our high free cash flow generation business that we are going to generate significant excess capital next quarter. I mean, this quarter next quarter and into the future and that excess capital we plan to return to our shareholders through share repurchases. So there will be periods, where there may be maybe.
Maybe a little heavier on share repurchase versus debt retirement, or a little heavier on debt retirement versus share repurchase, but we are we are steadfastly committed to returning capital to shareholders.
And.
In fact, we had the board authorized an increase in our share repurchase authorization by another $500 million, taking us to about $609 million of availability.
Got it that makes sense, maybe just a follow up there.
So should we assume that the majority of the capital that you generate going forward will be used for buybacks because I thought in the prepared remarks, there was a comment around being a little bit more balanced in terms of capital deployment. So I just wanted to flesh that out a little bit. Thanks.
Yes, I think that reference was really you know we have $140 million of senior debt. That's maturing in August . So this month. So we wanted to make sure that that people didn't.
It didn't overlook that but yes, we are big believers in returning capital to shareholders. We think that's a really really important part of an investment thesis in voya. So.
I think you should be thinking that we will be deploying that excess capital to share repurchase, but we are going to continue to manage our leverage metrics I mentioned that we're going to probably kind of work through the middle of about 25% to 30% range, but we don't have to do that immediately I mean, we're going to do that on a measured and paced way.
And I think you can you can also expect us to continue to be balanced in how we've invested in our business to drive growth just as we have done over the past number of years, so completely reiterating John Johns point around share repurchase is going to be an important lever to drive EPS growth going forward.
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Our next question comes from John Barnidge with Piper Sandler. Please proceed with your question.
Attunity. My question, you talked about a strong pipeline for wealth solutions ended 2004, and even 25.
Is that visit visibility come from because you talk about the right to win is it coming from.
Previous retirement providers that customers anticipate our exiting due to lack of scale or is it related to the liability consolidation we're seeing in the industry. Thank you.
Yes, Thanks, John well, let Ravi speak to your question, but again it goes back to we talk about is the.
The diverse markets, we're in from different tax codes and sizes, where we've had competitive positioning but rob left for you to elaborate.
Yes, no great question, John I mean look the visibility your opportunities there.
Especially in that record shipping market.
The plan levels.
The complexity.
As you sit back and think about like Oh, Okay, and large plans just a large plan, but likely its plans or plans or plans.
Got a lot going on within their benefit environment, you think about whether it's the state based plan and what they're trying to aggregate together bring together and you can start to get a feel for like okay. Yes, there's complexity here because it's not just all one sort of flavor of vanilla.
There's a little Baskin Robbins mixed in this where.
There's a lot of different flavors of plans and they are carrying a lot of history with them.
So that's that's a little bit of context on just like okay, well what brings these things the market is going to be like.
Fallen down on maintaining that and the continuity of the service the experience how do you integrate these things together depending on what.
Any particular plan provider does they may be doing things on their own from a digital perspective, and how do you integrate with those environments.
So I won't belabor that but you get the point that there's just a lot of complexity in them as they get bigger and it's not just a one size fits all and so you've got to have the capability to bring these things integrate these things and do it in a way that is consistent and fields cohesive to not only the employer, but ultimately their employees.
Who may have.
Assets and more than one place.
Their careers have evolved and so on so that's a little bit of what brings that to market.
And then there is an element of people need to make sure from a fiduciary duty perspective, they're doing their duty.
And theyre going to go to market test market and understand that they've got the pricing they think they should or not.
So those are a couple of the bigger dynamics, but again as you step back and we think about the look through and maybe talking about stuff. That's 2025 and Trust me. There is things that are probably 2026 in the house right now.
Thinking about those sorts of opportunities.
And then its execution and it takes a while with you that level of complexity I. Just described to bring these things on board make sure the integrations and things happen in the way that they need to and sort of there you see and feel the complexity and then sometimes the timing uncertainty.
That comes with whether things are coming are going when the book those are just dynamics that are evolving and how the teams are working to.
Bring something onboard <unk> exit something so those things that we think we do well.
Whether they are coming are going because we want to earn the right to get a new opportunity in the future.
So the teams strive incredibly hard to deliver on what we need to deliver on there and again I think we've built a lot of credibility over the last several years and how there was a big piece of that Heather you want to add anything else there.
Yeah, the only thing I would add on it is just the trends with secure act and the growth and the strength we have in the emerging markets and the team continues to drive success and then again, we talk about the diversification of markets.
Being number one in the government market and.
And we've seen a lot more consolidation in that space. It just goes to really the strength of rob's team across different tax codes different sized plans and so I think all of those factor into the confidence we have in the pipeline.
Maybe my follow up question would be sticking with Wolfe wealth, you talk about diversification across different tax codes, we have the potential for student loan payments resuming how do you think through that impacting demand at out of some of those tax codes and is it actually an opportunity to think through debt relief solutions.
That can be partnered into it.
Rob do you want to take that.
Yes, John it's a great question again doing the step back on it. There is there is so many things that get in the way of the consumer knowing where to allocate their paycheck.
And as you alluded to student debt.
A big part of the puzzles puzzled theyre trying to figure out.
Whether it's.
Excess medical things come up or family situations.
But mary across a wide variety of things.
That whole short term.
And or near term or long term in this case on the student debt piece of things, but there is a lot to think through I think this is actually one of the elements.
You sort of ask it in the context of wealth, but when we do the step back and think about our strategy to bring in the workplace benefits and savings together.
This is an area where I get excited I think the team collectively gets excited about well how does it benefit focus and their capabilities fit into this and how do we think about that.
That connected experience and whether it's something that voya is providing a particular solution to or we're partnering with someone to do it.
This is an area, where we think there is going to be ever more opportunity for us to get creative get more thoughtful and how we comment helping consumers employees ultimately.
These things out and evaluate their options.
There are plenty of solutions, how to evaluate them and think about them in the context of everything else and employees trying to balance out.
I think that's a big problem to solve which equates to a big opportunity for companies like us.
So I'm optimistic that there's going to be a lot of innovation on this front and I think we're going to get smarter faster given the assets that we have in place here at <unk>.
And maybe a final bill before we close as you think across the health and wealth.
We are seeing that in.
An integrated guidance drives better outcomes and connected experience for our employees drives better engagement and that's really what kind of why we exist as a company is to help to help our customers improve their outcomes.
This concludes our question and answer session I would now like to turn the conference call back over to Heather Laval Ali for any closing comments.
To summarize we will continue to be relentless in executing on our plan focused on revenue growth margin expansion and prudent capital management.
We remain confident in our growth objectives, including the three year EPS CAGR target of 12% to 17% that we have reaffirmed today.
Our confidence is driven by the proven benefits of our diversified business model and our track record of delivering results.
We remain focused on delivering outstanding service innovative solutions and a market leading experience for our customers with even more in store for the future.
We look forward to updating you on our progress. Thank you for joining us today.
This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.