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Voya Financial Announces First-Quarter 2018 ResultsVoya Financial, Inc. (NYSE:VOYA) announced today first-quarter 2018 net income available to common shareholders of $446 million, or $2.50 per diluted share, compared with a first-quarter 2017 net loss available to common shareholders of $143 million, or $0.74 per diluted share. The improvement largely reflects a first-quarter 2018 $449 million after-tax favorable adjustment to the estimated loss on the company's previously announced transaction to sell the majority of its variable and fixed annuities business. Voya is required to remeasure the estimated fair value and loss on sale at the end of each quarter until closing. First quarter 2018 adjusted operating earnings1 were $137 million, or $0.77 per diluted share, after-tax, up from $99 million, or $0.51 per diluted share, after-tax, in the first quarter of 2017. The increase was largely driven by higher fee-based margins in Retirement and Investment Management and a higher underwriting gain in Employee Benefits. This was partially offset by higher negative DAC/VOBA and other intangibles unlocking driven by unfavorable mortality experience on interest-sensitive products in Individual Life and changes in guaranteed minimum interest rate ("GMIR") provisions for certain retirement plan contracts. While the adjustments in GMIR provisions create negative DAC/VOBA and other intangibles unlocking, these changes reduce the company's interest rate exposure on new deposits and transfers for certain retirement plan contracts with fixed investment options. "We delivered strong results in the first quarter, as demonstrated by the 51% year-over-year increase in adjusted operating earnings per share that we achieved," said Rodney O. Martin, Jr., chairman and CEO, Voya Financial, Inc. "Our results reflect solid sales performance across our businesses as we continued to execute on our growth plans for 2018. In addition, we made strong progress this quarter toward completing our previously announced transaction to sell the majority of our variable and fixed annuities business. We remain on schedule to complete the transaction sometime during the second or third quarter as we continue to transform to a company that is positioned for accelerated growth, greater efficiency and better equipped to meet our customers' needs. "We concluded the quarter with $548 million in excess capital. In line with our commitment to effectively use our excess capital to repurchase shares, we have already begun additional buybacks that will enable us to deliver on our commitment to repurchase $1 billion in Voya shares by June 30. "Looking ahead, we will continue to execute on our priorities for 2018, including advancing our plans to increase profitable growth in our high-return businesses, grow adjusted operating earnings per share and best position Voya to achieve its vision to be America's Retirement Company," added Martin.
BUSINESS SEGMENT DISCUSSIONS The following discussions compare the first quarter of 2018 with the first quarter of 2017, unless otherwise noted. All figures are presented before income taxes. Retirement Retirement adjusted operating earnings were $109 million compared with $148 million. First-quarter 2018 results reflect $41 million of negative DAC/VOBA and other intangibles unlocking primarily due to the previously mentioned impact of changes in terms related to GMIR provisions, which reduce the company's interest rate exposure on new deposits and transfers for certain retirement plan contracts with fixed investment options. Conversely, the first quarter of 2017 benefited from $13 million of positive DAC/VOBA and other intangibles unlocking. During the first quarter of 2018, results from certain investment-only products were moved from Corporate to the Retirement segment. Key earnings drivers included:
Retirement net outflows were $362 million, compared with net outflows of $476 million in the fourth quarter of 2017 and net inflows of $611 million in the first quarter of 2017. Net flows vary in size and timing, sometimes substantially, from one quarter to the next. Retirement AUM was $144 billion, up from $138 billion as of December 31, 2017 largely due to the transfer of investment-only products to Retirement. Retirement AUM was $126 billion as of March 31, 2017. Investment Management Investment Management adjusted operating earnings were $61 million compared with $49 million. Key earnings drivers included:
During the first quarter of 2018, Investment Management sourced net inflows were driven by institutional net flows, including flows from alternative asset classes. Third-party sales (which exclude general account assets of Voya Financial's insurance company subsidiaries) were $4.7 billion, compared with $5.1 billion in the fourth quarter of 2017 and $5.0 billion in the first quarter of 2017. Third-party AUM totaled $141 billion as of March 31, 2018, down from $142 billion as of Dec. 31, 2017, and up from $131 billion as of March 31, 2017. Employee Benefits Employee Benefits adjusted operating earnings were $32 million compared with $11 million. First-quarter 2018 and 2017 results both reflected $1 million of negative DAC/VOBA and other intangibles unlocking. Key earnings drivers included:
The loss ratio for Group Life was 79.3%, compared with 83.2% in the first quarter of 2017. The loss ratio for Stop Loss was 80.2%, compared with 81.0% in the first quarter of 2017. The company typically expects an annual loss ratio for Stop Loss and Group Life between 77-80%. Total Employee Benefits in-force premiums increased slightly. Sales were $304 million, down from $341 million given the company's focus on maintaining pricing discipline. Individual Life Individual Life adjusted operating earnings were $17 million compared with $32 million. First-quarter 2018 results reflect $21 million of higher negative DAC/VOBA and other intangibles unlocking driven by unfavorable mortality experience on interest-sensitive products. Key earnings drivers included:
Total Individual Life sales, which primarily consist of indexed life insurance, were $17 million, down from $25 million. First-quarter 2017 results reflected sales of more capital intensive products, which have since been discontinued. Corporate Corporate adjusted operating losses were $56 million, compared with losses of $95 million. The improvement was largely due to higher earnings from legacy annuities, which are those that are not included in the transaction to sell the majority of the company's variable and fixed annuities business. First-quarter 2018 results in Corporate also benefited from the reallocation of strategic investment spending into the business segments. In addition, results in the first quarter of 2017 were also negatively impacted by a loss in a closed block of business and implementation expenses in preparation for the Department of Labor fiduciary rule. Share Repurchases In the first quarter of 2018, Voya completed the accelerated share repurchase ("ASR") agreement entered into with a third-party during the fourth quarter of 2017 to repurchase an aggregate of $500 million of Voya's common stock. Under this agreement, approximately 10 million shares of common stock were repurchased. This includes the 8 million shares that were received by Voya in 4Q 2017 as part of the ASR agreement. Voya had $1 billion remaining under its share repurchase authorization as of March 31, 2018. Supplementary Financial Information More detailed financial information can be found in the company's Quarterly Investor Supplement, which is available on Voya's investor relations website, investors.voya.com. Earnings Call and Slide Presentation Voya will host a conference call on Wednesday, May 2, 2018, at 10 a.m. ET, to discuss the company's first-quarter 2018 results. The call and slide presentation can be accessed via the company's investor relations website at investors.voya.com. A replay of the call will be available on the company's investor relations website at investors.voya.com starting at 1 p.m. ET on May 2, 2018. About Voya Financial Voya Financial, Inc. (NYSE:VOYA), helps Americans plan, invest and protect their savings - to get ready to retire better. Serving the financial needs of approximately 14.7 million individual and institutional customers in the United States, Voya is a Fortune 500 company that had $8.6 billion in revenue in 2017. The company had $541 billion in total assets under management and administration as of March 31, 2018. With a clear mission to make a secure financial future possible - one person, one family, one institution at a time - Voya's vision is to be America's Retirement Company®. Certified as a "Great Place to Work" by the Great Place to Work® Institute, Voya is equally committed to conducting business in a way that is socially, environmentally, economically and ethically responsible. Voya has been recognized as one of the 2018 World's Most Ethical Companies® by the Ethisphere Institute, one of the 2018 World's Most Admired Companies by Fortune magazine and one of the Top Green Companies in the U.S. by Newsweek magazine. For more information, visit voya.com. Follow Voya Financial on Facebook, LinkedIn and Twitter @Voya. Use of Non-GAAP Financial Measures Adjusted operating earnings before income taxes is a measure used to evaluate segment performance. We believe that adjusted operating earnings before income taxes provides a meaningful measure of Voya's business and segment performances and enhances the understanding of our financial results by focusing on the operating performance and trends of the underlying business segments and excluding items that tend to be highly variable from period to period based on capital market conditions and/or other factors. We use the same accounting policies and procedures to measure segment adjusted operating earnings before income taxes as we do for the directly comparable U.S. GAAP measure Income (loss) from continuing operations before income taxes. Adjusted operating earnings before income taxes does not replace Income (loss) from continuing operations before income taxes as the comparable U.S. GAAP measure of our consolidated results of operations. Therefore, we believe that it is useful to evaluate both Income (loss) from continuing operations before income taxes and Adjusted operating earnings before income taxes when reviewing our financial and operating performance. Each segment's adjusted operating earnings before income taxes is calculated by adjusting Income (loss) from continuing operations before income taxes for the following items:
Adjusted operating earnings before income taxes for Corporate in the prior period includes Net investment gains (losses) and Net guaranteed benefit hedging gains (losses) associated with the retained CBVA and annuities businesses that are not components of discontinued operations. These retained amounts are insignificant and do not distort the ability to make a meaningful evaluation of the trends of Corporate activities. Income (loss) related to businesses exited through reinsurance or divestment (including net investment gains (losses) on securities sold and expenses directly related to these transactions) is excluded from the results of operations from adjusted operating earnings before income taxes. When we present the adjustments to income (loss) from continuing operations before income taxes on a consolidated basis, each adjustment excludes the relative portions attributable to businesses exited through reinsurance or divestment. The most directly comparable U.S. GAAP measure to adjusted operating earnings before income taxes is income (loss) from continuing operations before income taxes. For a reconciliation of income (loss) from continuing operations before income taxes to adjusted operating earnings before income taxes, see the tables that accompany this release, as well as our Quarterly Investor Supplement. Adjusted operating earnings - excluding unlocking is also a non-GAAP financial measure. This measure excludes from adjusted operating earnings before income taxes the following items:
In addition to net income (loss) per share, we report adjusted operating earnings per share (diluted) because we believe that adjusted operating earnings before income taxes provides a meaningful measure of its business and segment performances and enhances the understanding of our financial results by focusing on the operating performance and trends of the underlying business segments and excluding items that tend to be highly variable from period to period based on capital market conditions and/or other factors. In addition to book value per share including accumulated other comprehensive income (AOCI), we also report book value per share excluding AOCI and shareholders' equity excluding AOCI. Included in AOCI are investment portfolio unrealized gains or losses. In the ordinary course of business we do not plan to sell most investments for the sole purpose of realizing gains or losses, and book value per share excluding AOCI and shareholders' equity excluding AOCI provide a measure consistent with that view. The adjusted debt to capital calculation excludes AOCI and includes a 25% equity treatment afforded to subordinated debt. In our Investment Management business, adjusted operating margin excluding Investment Capital results is reported because results from Investment Capital can be volatile and excluding the effect of this item can improve period-to-period comparability. For a reconciliation of these non-GAAP measures to the most directly comparable U.S. GAAP measures, refer to the tables that accompany this release, as well as our Quarterly Investor Supplement. We also analyze our segment performance based on the sources of earnings. We believe this supplemental information is useful in order to gain a better understanding of our adjusted operating earnings before income taxes for the following reasons: (1) we analyze our business using this information and (2) this presentation can be helpful for investors to understand the main drivers of adjusted operating earnings (loss) before income taxes. The sources of earnings are defined as such:
More details on these sources of earnings can be found in Voya Financial's Quarterly Investor Supplement, which is available on Voya Financial's investor relations website, investors.voya.com. Forward-Looking and Other Cautionary Statements This press release contains forward-looking statements. Forward-looking statements include statements relating to future developments in our business or expectations for our future financial performance and any statement not involving a historical fact. Forward-looking statements use words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. Actual results, performance or events may differ materially from those projected in any forward-looking statement due to, among other things, (i) general economic conditions, particularly economic conditions in our core markets, (ii) performance of financial markets, including emerging markets, (iii) the frequency and severity of insured loss events, (iv) mortality and morbidity levels, (v) persistency and lapse levels, (vi) interest rates, (vii) currency exchange rates, (viii) general competitive factors, (ix) changes in laws and regulations, such as those relating to Federal taxation, state insurance regulations and NAIC regulations and guidelines, including those affecting reserve requirements for variable annuity policies and the use of and possible application of NAIC accreditation standards to captive reinsurance entities, those made pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the U.S. Department of Labor's final rules and exemptions pertaining to the fiduciary status of providers of investment advice, or any amendments thereto, (x) changes in the policies of governments and/or regulatory authorities, and (xi) our ability to successfully complete the transaction entered into on Dec. 20, 2017. Factors that may cause actual results to differ from those in any forward-looking statement also include those described under "Risk Factors" and "Management's Discussion and Analysis of Results of Operations and Financial Condition - Trends and Uncertainties" in our Annual Report on Form 10-K for the year ended Dec. 31, 2017, which the company filed with the Securities and Exchange Commission on Feb. 23, 2018 and in our Quarterly Report on Form 10-Q for the three-month period ended March 31, 2018, which the company expects to file with the Securities and Exchange Commission on or before May 10, 2018. VOYA-IR
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