Voya Financial(US:VOYA)2022-05-05 20:34markdown [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides a comprehensive overview of the company's financial performance, condition, and related disclosures [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section details the company's financial position, including assets, liabilities, and equity, at specific reporting dates Condensed Consolidated Balance Sheet Highlights (Unaudited) | (In millions) | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$161,806** | **$171,262** | | Total Investments | $42,950 | $45,581 | | Assets held in separate accounts | $93,108 | $100,433 | | **Total Liabilities** | **$154,102** | **$161,441** | | Contract owner account balances | $42,838 | $42,806 | | Liabilities related to separate accounts | $93,108 | $100,433 | | **Total Shareholders' Equity** | **$7,704** | **$9,821** | - **Total assets** decreased from **$171.3 billion** at year-end 2021 to **$161.8 billion** as of March 31, 2022, primarily driven by a decrease in the fair value of fixed maturities and assets held in separate accounts[15](index=15&type=chunk) - **Total shareholders' equity** declined from **$9.8 billion** to **$7.7 billion** during the first quarter of 2022, largely due to a decrease in Accumulated Other Comprehensive Income (AOCI) from **$2.1 billion** to **$527 million**[18](index=18&type=chunk) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the company's revenues, expenses, and net income (loss) over specific periods Condensed Consolidated Statements of Operations (Unaudited) | (In millions, except per share data) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Total Revenues | $1,514 | $(1,957) | | Total Benefits and Expenses | $1,423 | $(2,995) | | Income (loss) from continuing operations | $84 | $1,086 | | Net Income (loss) | $84 | $1,100 | | Net income (loss) available to common shareholders | $27 | $1,086 | | Diluted EPS available to common shareholders | $0.24 | $8.29 | - **Net income available to common shareholders** was **$27 million** for Q1 2022, a significant decrease from **$1,086 million** in Q1 2021. The prior year period included large net gains and favorable impacts from the Individual Life Transaction[21](index=21&type=chunk) - **Total revenues** were **$1.5 billion** in Q1 2022 compared to a loss of **$(2.0) billion** in Q1 2021. The prior year's revenue was negatively impacted by a large reinsurance-related adjustment to premiums of **$(5.8) billion**, which was largely offset in policyholder benefits[21](index=21&type=chunk)[134](index=134&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section reports the company's comprehensive income (loss), including net income and other comprehensive income - **The company reported a comprehensive loss** of **$(1,489) million** in Q1 2022, compared to a comprehensive loss of **$(1,888) million** in Q1 2021[23](index=23&type=chunk) - The comprehensive loss in Q1 2022 was primarily driven by a **$(1,573) million** after-tax loss in Other Comprehensive Income (OCI), resulting from unrealized losses on securities[23](index=23&type=chunk) [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) This section outlines the changes in the company's shareholders' equity over specific periods - **Total Voya Financial, Inc. shareholders' equity** decreased from **$8,253 million** at the start of 2022 to **$6,198 million** at the end of Q1 2022[25](index=25&type=chunk) - Key activities impacting equity in Q1 2022 included a comprehensive loss of **$(1,532) million** attributable to Voya, common stock repurchases of **$500 million**, and common and preferred stock dividends totaling **$35 million**[25](index=25&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Unaudited) | (In millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $419 | $(936) | | Net cash (used in) provided by investing activities | $(403) | $452 | | Net cash (used in) financing activities | $(407) | $(268) | | **Net decrease in cash and cash equivalents** | **$(391)** | **$(752)** | - **Cash used in financing activities** was **$407 million** in Q1 2022, primarily driven by **$500 million** in share repurchases and **$194 million** in long-term debt repayment[31](index=31&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements - **On January 4, 2021, the Company completed the sale** of substantially all of its individual life insurance and legacy non-Wealth Solutions annuity businesses to Resolution Life US (the "Individual Life Transaction")[33](index=33&type=chunk)[34](index=34&type=chunk) - **On June 9, 2021, the Company completed the sale** of the independent financial planning channel of Voya Financial Advisors ("VFA") to Cetera Financial Group, Inc[35](index=35&type=chunk) - **The Company expects the adoption of ASU 2018-12** (Long-Duration Contracts) on January 1, 2023, to have a modestly positive impact on Total Shareholders' Equity at transition, primarily driven by a positive impact to AOCI[42](index=42&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=62&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for Q1 2022 [Overview and Trends](index=62&type=section&id=Overview%20and%20Trends) This section provides an overview of the company's business segments and key trends impacting its operations - **The company operates through three segments**: Wealth Solutions, Investment Management, and Health Solutions. Corporate includes non-segment activities and run-off businesses[235](index=235&type=chunk) - **The January 2021 Individual Life Transaction resulted** in the classification of divested businesses as discontinued operations and created "Stranded Costs" in continuing operations, which the company is addressing through a cost reduction strategy[237](index=237&type=chunk)[248](index=248&type=chunk) - **Key trends affecting the business include** the lingering economic effects of COVID-19, which drive market volatility and impact fee-based income, and the interest rate environment, which influences investment income and product profitability[238](index=238&type=chunk)[242](index=242&type=chunk)[247](index=247&type=chunk) - **The company has a multi-faceted ESG strategy** focusing on environmental impact reduction, workplace diversity, and corporate governance, including a board with gender parity[251](index=251&type=chunk)[252](index=252&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk) [Results of Operations - Consolidated](index=67&type=section&id=Results%20of%20Operations%20-%20Consolidated) This section analyzes the company's consolidated financial performance, including revenues and expenses Consolidated Results Summary (Q1 2022 vs Q1 2021) | ($ in millions) | Q1 2022 | Q1 2021 | Change | | :--- | :--- | :--- | :--- | | Total revenues | $1,514 | $(1,957) | $3,471 | | Total benefits and expenses | $1,423 | $(2,995) | $(4,418) | | Income from continuing operations | $84 | $1,086 | $(1,002) | | Net income available to common shareholders | $27 | $1,086 | $(1,059) | - **The significant year-over-year changes in revenues and expenses were primarily due to the accounting impacts** of the Individual Life Transaction in Q1 2021, which included large reinsurance-related adjustments and realized gains that did not recur in Q1 2022[263](index=263&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk) - **Net investment income** decreased by **$84 million** YoY, driven by lower alternative investment income and lower yields on new fixed-income investments[262](index=262&type=chunk) - **Net gains (losses)** swung from a **$1.7 billion** gain in Q1 2021 to a **$285 million** loss in Q1 2022, largely because the prior year included significant realized gains from asset transfers related to the Individual Life Transaction[263](index=263&type=chunk) [Results of Operations - Segments](index=71&type=section&id=Results%20of%20Operations%20-%20Segments) This section details the financial performance of the company's individual business segments Adjusted Operating Earnings Before Income Taxes by Segment | ($ in millions) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Wealth Solutions | $205 | $255 | | Investment Management | $39 | $52 | | Health Solutions | $22 | $37 | | Corporate | $(58) | $(71) | | **Total** | **$209** | **$273** | - **Wealth Solutions:** Adjusted operating earnings decreased by **$50 million** YoY, primarily due to lower alternative asset income and unfavorable DAC unlocking from equity market performance[275](index=275&type=chunk) - **Investment Management:** Adjusted operating earnings decreased by **$13 million** YoY, driven by lower investment capital returns and higher operating expenses, partially offset by higher fee revenue[278](index=278&type=chunk)[281](index=281&type=chunk) - **Health Solutions:** Adjusted operating earnings decreased by **$15 million** YoY, mainly due to higher benefits incurred from business growth and non-COVID Group Life claims[283](index=283&type=chunk) - **Corporate:** The operating loss improved by **$13 million** YoY, driven by lower stranded costs from cost-saving initiatives and lower incentive compensation[284](index=284&type=chunk)[287](index=287&type=chunk) [Liquidity and Capital Resources](index=77&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's financial flexibility, capital management, and funding sources - **As of March 31, 2022, the company estimated its excess capital** at approximately **$0.9 billion** and its estimated combined RBC ratio was **453%**, well above the **375%** target[240](index=240&type=chunk)[296](index=296&type=chunk) - **In Q1 2022, the company returned** **$466 million** to shareholders, consisting of **$445 million** in share repurchases and **$21 million** in common stock dividends[301](index=301&type=chunk) Financial Leverage Ratio | Ratio | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Financial Leverage Ratio | 31.9% | 27.6% | - **The Financial Leverage Ratio** increased by **430 basis points** to **31.9%** in Q1 2022, primarily due to a decrease in Adjusted Capitalization resulting from lower AOCI, share repurchases, and a decrease in noncontrolling interest[307](index=307&type=chunk) - **As of March 31, 2022, the company had** **$700 million** in total credit facilities, with **$537 million** of unused capacity[310](index=310&type=chunk) [Investments](index=85&type=section&id=Investments) This section provides details on the composition and performance of the company's investment portfolio Investment Portfolio Composition | ($ in millions) | March 31, 2022 | % of Total | December 31, 2021 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Fixed maturities, available-for-sale | $31,127 | 72.6% | $33,699 | 73.9% | | Mortgage loans on real estate | $5,524 | 12.9% | $5,612 | 12.3% | | Limited partnerships/corporations | $1,852 | 4.3% | $1,739 | 3.8% | | **Total investments** | **$42,950** | **100.0%** | **$45,581** | **100.0%** | - **Gross unrealized capital losses** on fixed maturities increased significantly from **$149 million** at year-end 2021 to **$891 million** as of March 31, 2022, driven by materially higher interest rates[344](index=344&type=chunk) - As of March 31, 2022, the company's exposure to sectors potentially affected by COVID-19 (e.g., Energy, Airlines, Retailers) was **$4.5 billion**, or **12.8%** of the fixed maturity portfolio[343](index=343&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=97&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to key market risks, including interest rate, equity market, and credit risk - **The company's main market risks** are interest rate risk, equity market price risk, and credit risk[380](index=380&type=chunk) Hypothetical Change in Fair Value from 100 bps Interest Rate Shift (As of March 31, 2022) | ($ in millions) | +100 bps Yield Curve Shift | -100 bps Yield Curve Shift | | :--- | :--- | :--- | | Financial assets with interest rate risk | $(2,563) | $2,863 | | Financial liabilities with interest rate risk | $(3,272) | $3,956 | | Derivatives & Other | $53 | $(128) | Hypothetical Change in Fair Value from 10% Equity Shock (As of March 31, 2022) | ($ in millions) | +10% Equity Shock | -10% Equity Shock | | :--- | :--- | :--- | | Financial assets with equity market risk | $136 | $(136) | | Derivatives | $14 | $(14) | - **Following the Individual Life Transaction, SLD became the company's largest reinsurer**, creating a significant credit risk concentration. This risk is mitigated by collateral held in a trust[387](index=387&type=chunk) [Item 4. Controls and Procedures](index=99&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the company's disclosure controls and procedures, concluding they were effective with no material changes - **The CEO and CFO concluded** that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[389](index=389&type=chunk) - **No changes occurred during the quarter** ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[390](index=390&type=chunk) [PART II. OTHER INFORMATION](index=99&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides a comprehensive overview of the company's financial performance, condition, and related disclosures [Item 1. Legal Proceedings](index=99&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various litigation and regulatory matters, with estimated possible losses up to $50 million - **As of March 31, 2022, the company estimates the aggregate range of reasonably possible losses** from litigation, in excess of any accrued amounts, to be up to approximately **$50 million**[171](index=171&type=chunk) - **Notable ongoing litigation includes** Henkel v. ReliaStar (breach of stop-loss policy), Ravarino v. Voya (breach of fiduciary duties for 401(k) plan), and Advance Trust v. ReliaStar (cost of insurance litigation)[173](index=173&type=chunk)[174](index=174&type=chunk)[177](index=177&type=chunk) [Item 1A. Risk Factors](index=100&type=page&id=Item%201A.%20Risk%20Factors) This section refers to the comprehensive risk factors detailed in the company's Annual Report on Form 10-K - **The report directs readers** to the Risk Factors section in the 2021 Annual Report on Form 10-K and the MD&A section of this 10-Q for a comprehensive discussion of potential risks[392](index=392&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=100&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Voya repurchased 7.2 million shares of common stock in Q1 2022 and authorized an additional $500 million for repurchases Issuer Purchases of Equity Securities (Q1 2022) | Period | Total Shares Purchased | Average Price Paid Per Share | Approx. Value Remaining for Purchase (in millions) | | :--- | :--- | :--- | :--- | | Jan 2022 | 1,215,784 | $70.73 | $435 | | Feb 2022 | 1,311,036 | $69.52 | $357 | | Mar 2022 | 4,660,652 | $66.10 | $21 | | **Total** | **7,187,472** | **$67.51** | **N/A** | - **During the first quarter of 2022, Voya repurchased** **7.2 million shares** of its common stock at an average price of **$67.51 per share**[393](index=393&type=chunk) - **On March 17, 2022, the company entered into a share repurchase agreement** to buy back **$275 million** of its common stock, receiving an initial delivery of **3.3 million shares**[393](index=393&type=chunk) - **On April 28, 2022, the Board of Directors increased the share repurchase authorization** by an additional **$500 million**, with the program set to expire on June 30, 2023[393](index=393&type=chunk) [Item 6. Exhibits](index=100&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data - **The exhibits filed include** Rule 13a-14(a)/15d-14(a) and Section 1350 certifications from the CEO and CFO, along with XBRL data files[397](index=397&type=chunk)