Voya Financial, Inc. 10-K Analysis & Summary – 2/21/2025

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Voya Financial, Inc.

10-K

Annual report

Filing date:

02/21/2025

TLDR:

Voya Financial’s 2024 10-K reveals a diversified financial profile with growth potential. The company faces risks related to market volatility, actuarial assumptions, and regulatory changes.

ELI5:

Voya is like a company that helps people save and invest for the future. They made more money this year, but they also face some challenges like market ups and downs and changing rules.

Accession #:

0001535929-25-000017

Published on

March 16, 2025

Analyst Summary

Total revenues increased by $702 million, driven by growth in premiums and fee income.
Income before income taxes increased by $121 million.
Total AUM and AUA increased to $893.5 billion.
Wealth Solutions saw a significant increase in adjusted operating earnings.
Health Solutions experienced a decrease in adjusted operating earnings.
Investment Management showed improved earnings.

Opportunities and Risks

Market Volatility: Fluctuations in capital markets and interest rates pose a significant risk to Voya’s investment portfolio and profitability.
Actuarial Assumptions: Inaccurate actuarial assumptions regarding mortality, morbidity, and persistency could lead to reserve deficiencies.
Competition: Intense competition in all segments could limit Voya’s ability to maintain market share and pricing power.
Integration Risks: Challenges in integrating recent acquisitions could hinder the realization of expected benefits.
Cybersecurity: The company faces ongoing cybersecurity threats that could disrupt operations and compromise sensitive data.
Regulatory Changes: Evolving regulations in the insurance and financial services industries could increase compliance costs and limit product offerings.
Workplace Solutions Growth: Increasing demand for comprehensive benefits and savings solutions presents a growth opportunity for Voya’s Workplace Solutions business.
Investment Management Expansion: The acquisition of AllianzGI assets and the expansion of international retail markets offer opportunities for growth in the Investment Management segment.
Financial Wellness Solutions: Voya’s integrated financial wellness solutions, such as MyVoyage, provide a competitive advantage and drive customer engagement.

Potential Implications

Company Performance

Successful integration of recent acquisitions will be critical for future performance.
Maintaining competitive pricing will be critical for future performance.
Managing actuarial assumptions is important for future performance.

SEC Filing Report: Voya Financial, Inc. 10-K for 2024

Executive Summary

This report analyzes Voya Financial, Inc.’s 2024 10-K filing. Voya presents a diversified financial profile across Wealth Solutions, Health Solutions, and Investment Management. Key areas of focus include the impact of market volatility, interest rate fluctuations, and the integration of recent acquisitions. While the company demonstrates consistent organic growth and prudent capital management, challenges remain in managing actuarial assumptions, maintaining competitive pricing, and navigating the evolving regulatory landscape. A hold rating is suggested, pending further observation of the successful integration of acquisitions and sustained performance across all segments.

Company Overview

Voya Financial, Inc. is a leading provider of workplace benefits and savings solutions, as well as a global asset manager. The company operates through three segments: Wealth Solutions, Health Solutions, and Investment Management. Voya serves approximately 15.7 million customers and is committed to responsible business practices.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management highlights the company’s transformation into a diversified, capital-light, growth-oriented business. The MD&A emphasizes consistent organic growth, prudent capital management, and a commitment to customers. Forward-looking statements are included, outlining potential risks and uncertainties. The tone is generally optimistic, but acknowledges the challenges of a dynamic economic environment.

Financial Statement Analysis

Key Ratios and Trends

Revenue: Total revenues increased by $702 million, driven by growth in premiums and fee income.
Profitability: Income before income taxes increased by $121 million.
AUM/AUA: Total AUM and AUA increased to $893.5 billion.
Segment Performance: Wealth Solutions saw a significant increase in adjusted operating earnings, while Health Solutions experienced a decrease. Investment Management also showed improved earnings.

Segment Analysis

Wealth Solutions

AUM and AUA increased, driven by market performance and net deposits.
Adjusted operating earnings increased significantly.
Key products include Full Service plans, Recordkeeping, and Stable Value.

Health Solutions

In-force premiums and fees increased.
Adjusted operating earnings decreased due to higher benefits expenses.
Key products include Stop Loss, Group Life, and Voluntary Benefits.

Investment Management

AUM increased, driven by both retail and institutional clients.
Adjusted operating earnings increased.
Key investment platforms include Fixed Income, Equities, Alternatives, and MASS.

Uncommon Metrics

Policyholder Account Balance at Guaranteed Minimum Crediting Rate: The filing provides detailed breakdowns of policyholder account balances across different guaranteed minimum crediting rate ranges. This is a key metric for understanding the risk associated with interest rate guarantees.
Commercial Real Estate Portfolio Loan Metrics: The filing includes loan-to-value (LTV) and debt service coverage ratio (DSCR) ranges for the commercial real estate portfolio, providing insights into the credit quality of this asset class.

Risk and Opportunity Assessment

Risks

Market Volatility: Fluctuations in capital markets and interest rates pose a significant risk to Voya’s investment portfolio and profitability.
Actuarial Assumptions: Inaccurate actuarial assumptions regarding mortality, morbidity, and persistency could lead to reserve deficiencies.
Competition: Intense competition in all segments could limit Voya’s ability to maintain market share and pricing power.
Integration Risks: Challenges in integrating recent acquisitions could hinder the realization of expected benefits.
Cybersecurity: The company faces ongoing cybersecurity threats that could disrupt operations and compromise sensitive data.
Regulatory Changes: Evolving regulations in the insurance and financial services industries could increase compliance costs and limit product offerings.

Opportunities

Workplace Solutions Growth: Increasing demand for comprehensive benefits and savings solutions presents a growth opportunity for Voya’s Workplace Solutions business.
Investment Management Expansion: The acquisition of AllianzGI assets and the expansion of international retail markets offer opportunities for growth in the Investment Management segment.
Financial Wellness Solutions: Voya’s integrated financial wellness solutions, such as MyVoyage, provide a competitive advantage and drive customer engagement.

Conclusion and Actionable Insights

Voya Financial’s 2024 10-K reveals a company with a diversified business model and a focus on growth. However, the company faces significant risks related to market volatility, actuarial assumptions, and regulatory changes. The successful integration of recent acquisitions and the ability to maintain competitive pricing will be critical for future performance.

Overall Assessment: Hold. While Voya demonstrates a solid financial foundation and growth potential, the identified risks warrant a cautious approach. Monitor the company’s progress in integrating acquisitions, managing actuarial assumptions, and navigating the evolving regulatory landscape.

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Financial Ratio and Metric Analysis

Profitability

Gross Profit Margin

Ratio/Metric: Not applicable. Voya is not primarily a product-selling company where cost of goods sold is a major factor.

Operating Profit Margin

Ratio/Metric: Income Before Income Taxes / Total Revenues = $799 / $8,050 = 9.93%
Industry: The average operating margin for insurance companies typically ranges from 5% to 15%.

Net Profit Margin

Ratio/Metric: Net Income / Total Revenues = $742 / $8,050 = 9.22%
Industry: The average net profit margin for insurance companies typically ranges from 3% to 10%.

Return on Assets (ROA)

Ratio/Metric: Net Income / Total Assets = $742 / $163,889 = 0.45%
Industry: The average ROA for insurance companies typically ranges from 0.5% to 1.5%.

Return on Equity (ROE)

Ratio/Metric: Net Income Available to Common Shareholders / Total Shareholders’ Equity = $626 / $5,788 = 10.81%
Industry: The average ROE for insurance companies typically ranges from 8% to 12%.

Earnings Per Share (EPS) – Basic and Diluted

Ratio/Metric:
- Basic EPS: $6.31
- Diluted EPS: $6.17
Industry: P/E ratio is used to compare with industry.

Liquidity

Current Ratio

Ratio/Metric: Current Assets / Current Liabilities. Need to calculate current assets and liabilities from balance sheet.

Current Assets: Cash and cash equivalents ($1,399) + Short-term investments under securities loan agreements ($1,042) = $2,441 million

Current Liabilities: Short-term debt ($399) = $399 million

Current Ratio = $2,441 / $399 = 6.12
Industry: A typical current ratio for insurance companies is between 0.2 and 0.5.

Quick Ratio (Acid-Test Ratio)

Ratio/Metric: (Current Assets – Inventory) / Current Liabilities. Since inventory is not applicable, it is the same as the current ratio. 6.12
Industry: A typical quick ratio for insurance companies is between 0.2 and 0.5.

Cash Ratio

Ratio/Metric: Cash and Cash Equivalents / Current Liabilities = $1,399 / $399 = 3.51
Industry: A typical cash ratio for insurance companies is between 0.1 and 0.2.

Solvency/Leverage

Debt-to-Equity Ratio

Ratio/Metric: Total Debt / Total Shareholders’ Equity = $2,502 / $5,788 = 0.43
Industry: A typical debt-to-equity ratio for insurance companies is between 0.2 and 0.5.

Debt-to-Assets Ratio

Ratio/Metric: Total Debt / Total Assets = $2,502 / $163,889 = 0.015 (1.5%)
Industry: A typical debt-to-assets ratio for insurance companies is between 0.01 and 0.05.

Interest Coverage Ratio (Times Interest Earned)

Ratio/Metric: Operating Income / Interest Expense = $799 + $124 + $175 / $124 + $175 = $1,098 / $299 = 3.67
Industry: A typical interest coverage ratio for insurance companies is between 3 and 7.

Activity/Efficiency

Inventory Turnover

Ratio/Metric: Not applicable. Voya is not primarily a product-selling company where inventory turnover is relevant.

Days Sales Outstanding (DSO)

Ratio/Metric: (Accounts Receivable / Total Revenue) x 365 = ($11,284 / $8,050) * 365 = 511 days
Industry: The average DSO for financial services companies is between 30 and 50 days.

Days Payable Outstanding (DPO)

Ratio/Metric: Not enough information to calculate.

Asset Turnover

Ratio/Metric: Total Revenue / Total Assets = $8,050 / $163,889 = 0.049 (4.9%)
Industry: The average asset turnover for insurance companies is between 0.05 and 0.1.

Valuation

Price-to-Earnings Ratio (P/E)

Ratio/Metric: Stock Price / EPS = $71.95 / $6.31 = 11.40
Industry: The average P/E ratio for insurance companies is between 10 and 20.

Price-to-Book Ratio (P/B)

Ratio/Metric: Market Cap / Book Value of Equity = (95.5 * $71.95) / $4,005 = $6,871.73 / $4,005 = 1.72
Industry: The average P/B ratio for insurance companies is between 0.8 and 1.5.

Price-to-Sales Ratio (P/S)

Ratio/Metric: Market Cap / Total Revenue = $6,871.73 / $8,050 = 0.85
Industry: The average P/S ratio for insurance companies is between 0.5 and 1.5.

Enterprise Value to EBITDA (EV/EBITDA)

Ratio/Metric: EV = Market Cap + Total Debt – Cash and Cash Equivalents = $6,871.73 + $2,502 – $1,399 = $7,974.73

EBITDA = Net Income + Interest + Taxes + Depreciation and Amortization = $742 + $299 + $223 + $3,082 = $4,346

EV/EBITDA = $7,974.73 / $4,346 = 1.83
Industry: The average EV/EBITDA ratio for insurance companies is between 6 and 12.

Growth Rates

Revenue Growth

Ratio/Metric: ($8,050 – $7,348) / $7,348 = 9.56%

Net Income Growth

Ratio/Metric: ($742 – $729) / $729 = 1.78%

EPS Growth

Ratio/Metric: ($6.31 – $5.74) / $5.74 = 9.93%

Other Relevant Metrics

Adjusted Operating Earnings

Description: Adjusted operating earnings is a non-GAAP measure used by Voya to provide a more consistent comparison of its underlying operating performance. It excludes certain items that can be volatile or distort the view of ongoing operations.
Calculation: Income (loss) before income taxes less adjustments for net investment gains/losses, income related to exited businesses, income attributable to noncontrolling interests, dividend payments to preferred shareholders, and other adjustments.
Significance: It provides investors with a clearer picture of Voya’s core profitability.

Commentary

Voya Financial demonstrates a solid financial performance with strong profitability ratios, particularly ROE, indicating efficient use of equity. Revenue growth is healthy, and EPS growth aligns positively. However, the company’s valuation metrics, such as P/E and EV/EBITDA, are lower than industry averages, suggesting potential undervaluation or market concerns. The high DSO indicates challenges in collecting revenue efficiently, and the low asset turnover suggests potential inefficiencies in asset utilization. Overall, Voya exhibits a stable financial position with room for improvement in operational efficiency and market perception.