Voya Financial(VOYA) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Voya Financial reported total assets of $172.4 billion and Q2 2025 net income of $162 million, influenced by asset growth and the OneAmerica acquisition 1. Business, Basis of Presentation and Significant Accounting Policies Voya Financial operates through three segments: Retirement, Investment Management, and Employee Benefits, with the OneAmerica Financial retirement plan business acquired on January 2, 2025, and segment names reverted on August 5, 2025, without affecting reported financials - On January 2, 2025, the Company acquired the full-service retirement plan business of OneAmerica Financial for approximately $50 million in cash and up to $160 million in contingent consideration payable in 2026[40] - Effective August 5, 2025, the Company reverted to its prior segment names—Retirement and Employee Benefits—replacing Wealth Solutions and Health Solutions, respectively. This change did not affect the reported financial amounts by segment[39] 2. Investments (excluding Consolidated Investment Entities) Total investments increased to $37.6 billion, primarily in fixed maturities ($29.1 billion), with commercial mortgage loans growing to $5.5 billion, reflecting the OneAmerica acquisition and stable credit quality Fixed Maturities Portfolio Summary | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Amortized Cost | $31,158 | $30,050 | | Gross Unrealized Gains | $395 | $292 | | Gross Unrealized Losses | $(2,415) | $(2,846) | | Allowance for credit losses | $(52) | $(38) | | Fair Value | $29,089 | $27,454 | Commercial Mortgage Loans Summary | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Carrying Value | $5,531 | $4,699 | | Allowance for credit losses | $19 | $24 | | Loans > 90 days past due | $0 | $26 | Net Investment Income Breakdown | Source | Three Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2025 (in millions) | | :--- | :--- | :--- | | Fixed maturities | $462 | $927 | | Mortgage loans on real estate | $69 | $136 | | Limited partnerships and other | $55 | $87 | | Total Net Investment Income | $584 | $1,144 | 3. Derivative Financial Instruments The company uses derivatives to hedge various market risks, with non-qualifying interest rate contracts totaling $14.7 billion notional, and fair values of derivative assets at $199 million and liabilities at $309 million Derivative Notional Amounts and Fair Values (June 30, 2025) | Derivative Type | Notional Amount (in millions) | Asset Fair Value (in millions) | Liability Fair Value (in millions) | | :--- | :--- | :--- | :--- | | Non-qualifying for hedge accounting | | | | | Interest rate contracts | $14,717 | $177 | $271 | | Foreign exchange contracts | $228 | $4 | $5 | | Equity contracts | $284 | $7 | $1 | | Credit contracts | $137 | $0 | $3 | - The majority of derivatives are used for product hedges against exposures from insurance liabilities and guarantees, as well as to hedge risks in the investment portfolio. A substantial portion of derivative positions did not qualify for hedge accounting[84] 4. Fair Value Measurements (excluding Consolidated Investment Entities) As of June 30, 2025, the company held $139.2 billion in fair value assets, predominantly Level 1 ($104.2 billion) in separate accounts, with Level 2 at $31.9 billion and Level 3 at $3.1 billion Fair Value Hierarchy of Assets (June 30, 2025) | Asset Category | Level 1 (in millions) | Level 2 (in millions) | Level 3 (in millions) | Total (in millions) | | :--- | :--- | :--- | :--- | :--- | | Fixed maturities, including securities pledged | $442 | $26,034 | $2,613 | $29,089 | | Equity securities | $115 | $0 | $95 | $210 | | Derivatives | $10 | $251 | $0 | $261 | | Assets held in separate accounts | $101,330 | $5,601 | $347 | $107,278 | | Total Assets | $104,199 | $31,931 | $3,080 | $139,210 | - The fair value of Level 3 assets increased from $2.1 billion at year-end 2024 to $2.6 billion as of June 30, 2025, primarily due to purchases of U.S. and foreign corporate private securities[115][117] 5. Deferred Policy Acquisition Costs and Value of Business Acquired Total DAC and VOBA increased to $2.47 billion, primarily due to a $390 million VOBA addition from the OneAmerica acquisition DAC and VOBA Rollforward | (in millions) | Dec 31, 2024 | Additions (Acquisition) | Deferrals | Amortization | June 30, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | | DAC | $1,772 | $0 | $52 | $(74) | $1,750 | | VOBA | $376 | $390 | $2 | $(30) | $738 | | Total | $2,148 | $390 | $54 | $(104) | $2,472 | - The acquisition of OneAmerica Financial's business is expected to increase VOBA amortization by $21 million to $29 million annually from 2025 through 2029[128] 6. Reserves for Future Policy Benefits and Contract Owner Account Balances Future policy benefits remained stable at $9.2 billion, while contract owner account balances increased to $40.5 billion, largely due to the OneAmerica acquisition and market performance Liability Balances | Liability | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Future policy benefits | $9,215 | $9,332 | | Contract owner account balances | $40,450 | $37,104 | - The increase in Contract owner account balances was primarily driven by a $3.46 billion addition from the OneAmerica business acquisition, along with deposits and interest credited[133] 7. Reinsurance The company uses reinsurance for risk management, notably assuming $3.8 billion in contract owner balances and $20.6 billion in separate account liabilities from the OneAmerica acquisition - In connection with the OneAmerica acquisition, Voya assumed contract owner account balances of $3.8 billion and separate account liabilities of $20.6 billion through an indemnity reinsurance agreement[138] Reinsurance Impact on Premiums (Six Months Ended June 30) | (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Direct premiums | $1,914 | $2,054 | | Reinsurance assumed | $11 | $11 | | Reinsurance ceded | $(470) | $(475) | | Net premiums | $1,455 | $1,590 | 8. Separate Accounts Separate account liabilities grew to $107.3 billion, driven by $6.8 billion in investment performance and $6.1 billion in net deposits, with equity securities comprising 93% of assets Separate Account Liabilities Rollforward (Six Months Ended June 30, 2025) | (in millions) | Amount | | :--- | :--- | | Balance at January 1 | $97,657 | | Premiums and deposits | $6,120 | | Surrenders, withdrawals and benefits | $(6,566) | | Investment performance | $6,802 | | Balance at June 30 | $102,808 (Retirement portion) | - As of June 30, 2025, equity securities (including mutual funds) represented $99.7 billion, or approximately 93%, of the total assets supporting separate accounts[141] 9. Segments Q2 2025 adjusted operating earnings before taxes increased to $289 million, driven by growth in Retirement ($235 million) and Employee Benefits ($69 million), while Investment Management remained stable Adjusted Operating Earnings Before Income Taxes by Segment (Three Months Ended June 30) | Segment | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Retirement | $235 | $214 | | Investment Management | $51 | $50 | | Employee Benefits | $69 | $60 | | Corporate | $(67) | $(53) | | Total | $289 | $271 | - The company renamed its Wealth Solutions and Health Solutions segments back to Retirement and Employee Benefits, respectively, on August 5, 2025, to better align with its services. This change did not impact reported segment financials[142] 10. Goodwill and Other Intangible Assets Goodwill increased by $56 million to $804 million due to the OneAmerica acquisition, which also added $21 million to other intangible assets, totaling $839 million - Goodwill increased by $56 million during the first half of 2025, entirely attributable to the acquisition of OneAmerica Financial's full-service retirement plan business[157] - The OneAmerica acquisition also resulted in the recognition of $21 million in finite-life intangible assets, primarily customer relationship lists, which will be amortized over a weighted average useful life of 13 years[158] 11. Share-based Incentive Compensation Plans Share-based compensation expense decreased to $45 million, with 6.2 million shares available under the 2024 Omnibus Incentive Plan approved by shareholders Share-Based Compensation Expense | (in millions) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | RSU awards | $13 | $32 | | PSU awards | $5 | $13 | | Total | $18 | $45 | 12. Shareholders' Equity As of June 30, 2025, 96.3 million common shares were outstanding, with $0.45 Q2 dividends declared and $761 million remaining in share repurchase authorization - As of June 30, 2025, the remaining amount under the company's share repurchase authorization was $761 million, which expires on December 31, 2025[165] Common Stock Repurchases | Period | Shares Repurchased | Payment (in millions) | | :--- | :--- | :--- | | Six Months Ended June 30, 2025 | 0 | $0 | | Six Months Ended June 30, 2024 | 4,854,544 | $346 | 13. Earnings per Common Share Q2 2025 basic EPS was $1.69 and diluted EPS was $1.66, down from $2.00 and $1.96 respectively in Q2 2024, with six-month diluted EPS at $3.09 Earnings Per Common Share | Period | Basic EPS | Diluted EPS | | :--- | :--- | :--- | | Three Months Ended June 30, 2025 | $1.69 | $1.66 | | Three Months Ended June 30, 2024 | $2.00 | $1.96 | | Six Months Ended June 30, 2025 | $3.14 | $3.09 | | Six Months Ended June 30, 2024 | $4.29 | $4.20 | 14. Accumulated Other Comprehensive Income (Loss) AOCI improved to a loss of $(2.07) billion, primarily due to decreased unrealized losses on fixed maturities, with a positive $395 million change after tax for the six months Components of AOCI | (in millions) | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Fixed maturities, net of impairment | $(2,018) | $(2,676) | | Derivatives | $3 | $66 | | Change in current discount rate | $(759) | $(818) | | Deferred income tax asset (liability) | $706 | $843 | | Total AOCI | $(2,067) | $(2,583) | 15. Revenue from Contracts with Customers Total revenue from contracts with customers increased to $1.08 billion, driven by growth in Retirement segment advisory, recordkeeping, and administration fees Revenue from Contracts with Customers (Six Months Ended June 30) | Segment/Service | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Retirement - Advisory and recordkeeping | $353 | $300 | | Investment Management - Advisory, asset management | $475 | $484 | | Employee Benefits - Software subscriptions | $101 | $104 | | Total financial services and software revenue | $1,080 | $1,047 | 16. Income Taxes The effective tax rate for the six months ended June 30, 2025, was 13.6%, a significant change from 7.1% in 2024, primarily due to DRD and tax credits - The effective tax rate for the first six months of 2025 was 13.6%, compared to 7.1% for the same period in 2024. The 2024 rate was significantly lower due to the Security Life of Denver Company capital loss carryback[175][176] - The company is participating in the IRS Compliance Assurance Process (CAP) for tax years 2023-2025 and does not expect to be subject to the Corporate Alternative Minimum Tax (CAMT) for 2025[179][180] 17. Financing Agreements Total long-term debt decreased to $1.66 billion due to a $400 million senior note repayment, offset by a new 10-year $600 million P-Caps facility for future liquidity - The company repaid $400 million of 3.976% Senior Notes at maturity on February 14, 2025, using proceeds from a September 2024 debt issuance[184] - On May 21, 2025, the company entered into a new 10-year facility agreement providing the right to issue up to $600 million of its 6.012% Senior Notes in exchange for Treasury securities held by a trust[190][191] 18. Commitments and Contingencies Off-balance sheet commitments include $177 million in mortgage loans and $2.3 billion in limited partnerships, with estimated litigation losses up to $25 million beyond accruals - The company estimates the aggregate range of reasonably possible losses from litigation and other contingencies, in excess of amounts already accrued, to be up to approximately $25 million as of June 30, 2025[200] - A putative class action lawsuit, Ravarino, et al. v. Voya Financial, Inc., et al., alleges breaches of fiduciary duties in the administration of the Voya 401(k) Savings Plan. The company denies the allegations and intends to defend the case vigorously[201] 19. Consolidated and Nonconsolidated Investment Entities The company consolidates 6 CLOs and 11 LPs where it is the primary beneficiary, with maximum exposure to loss from unconsolidated entities at $494 million for CLOs and $1.97 billion for LPs - As of June 30, 2025, the company was the primary beneficiary of and consolidated 6 Collateralized Loan Obligation (CLO) entities and 11 Limited Partnerships (LPs)[207][209] Maximum Exposure to Loss from Unconsolidated VIEs (June 30, 2025) | Entity Type | Ownership Interest / Max Exposure (in millions) | | :--- | :--- | | Collateralized Loan Obligations (CLOs) | $494 | | Limited Partnerships (LPs) | $1,970 | Condensed Consolidated Balance Sheet Summary | Balance Sheet Item | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Investments | $37,579 | $35,024 | | Assets held in separate accounts | $107,278 | $101,676 | | Total Assets | $172,436 | $163,889 | | Contract owner account balances | $40,450 | $37,104 | | Liabilities related to separate accounts | $107,278 | $101,676 | | Total Liabilities | $165,883 | $157,882 | | Total Shareholders' Equity | $6,338 | $5,788 | Condensed Consolidated Statement of Operations Summary | Income Statement Item | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $1,981 | $2,033 | $3,950 | $4,084 | | Total Benefits and Expenses | $1,793 | $1,757 | $3,589 | $3,521 | | Income Before Income Taxes | $188 | $276 | $361 | $563 | | Net Income | $161 | $235 | $312 | $523 | | Net Income Available to Common Shareholders | $162 | $201 | $301 | $435 | | Diluted EPS | $1.66 | $1.96 | $3.09 | $4.20 | Condensed Consolidated Statement of Cash Flows Summary | Cash Flow Item | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $563 | $547 | | Net cash provided by (used in) investing activities | $(279) | $990 | | Net cash provided by (used in) financing activities | $(477) | $(1,475) | | Net increase (decrease) in cash and cash equivalents | $(193) | $62 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2025 performance, highlighting strategic focus, the OneAmerica acquisition's impact, adjusted operating earnings growth, and a strong capital position with improved financial leverage - On January 2, 2025, the Company acquired the full-service retirement plan business of OneAmerica Financial, adding scale and capabilities to its Retirement segment[258] Consolidated Results Summary (Three Months Ended June 30) | (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenues | $1,981 | $2,033 | | Income before income taxes | $188 | $276 | | Net income available to common shareholders | $162 | $201 | Adjusted Operating Earnings Before Income Taxes by Segment (Three Months Ended June 30) | Segment (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Retirement | $235 | $214 | | Employee Benefits | $69 | $60 | | Investment Management | $65 | $64 | | Corporate | $(67) | $(54) | | Total (incl. noncontrolling interest) | $302 | $284 | - As of June 30, 2025, the company estimated its excess capital at approximately $0.3 billion and its combined RBC ratio at 401%[315] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate, equity market, and credit risks, with hypothetical scenarios showing significant fair value declines from adverse market movements Interest Rate Risk Sensitivity (as of June 30, 2025) | Financial Instrument (in millions) | Fair Value | Hypothetical Change from +100 bps Shift | | :--- | :--- | :--- | | Fixed maturity securities | $29,089 | $(1,703) | | Mortgage loans on real estate | $5,379 | $(162) | | Investment contracts (deferred) | $37,494 | $(1,683) | Equity Market Risk Sensitivity (as of June 30, 2025) | Financial Instrument (in millions) | Fair Value | Hypothetical Change from -10% Shock | | :--- | :--- | :--- | | Equity securities | $210 | $(21) | | Limited partnerships/corporations | $1,970 | $(118) | | Equity derivatives | $6 | $(20) | Item 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management, including 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] - No changes occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[390] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal and regulatory matters, with estimated reasonably possible losses up to $25 million beyond current accruals - This section refers to the Commitments and Contingencies Note (Note 18) for details on legal proceedings[391] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - This section refers to the Risk Factors section in the company's Annual Report on Form 10-K for a discussion of potential risks and uncertainties[392] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase shares under its public program in Q2 2025 but acquired 119,446 shares for tax obligations, with $761 million remaining authorization Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Program | Remaining Authorization (in millions) | | :--- | :--- | :--- | :--- | :--- | | April 2025 | 24,587 | $64.93 | 0 | $761 | | May 2025 | 12,448 | $65.84 | 0 | $761 | | June 2025 | 82,411 | $69.94 | 0 | $761 | | Total | 119,446 | $68.48 | 0 | N/A | - The shares purchased were not part of the publicly announced repurchase plan but were acquired in connection with employee equity-based compensation to cover tax withholding obligations[393] Item 5. Other Information The EVP and CFO adopted a Rule 10b5-1 trading plan in Q2 2025 to sell 20,600 securities from expiring stock options - Michael R. Katz, EVP and Chief Financial Officer, adopted a Rule 10b5-1 trading plan on May 28, 2025, to sell 20,600 securities between August and December 2025[394][395] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The report includes required certifications from the Chief Executive Officer and Chief Financial Officer under Sarbanes-Oxley Sections 302 and 906[398]