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Voya Financial Announces Third-Quarter 2018 ResultsVoya Financial, Inc. (NYSE: VOYA) today announced financial results for the third quarter of 2018. "During the third quarter, we continued to make strong progress on our 2018 priorities," said Rodney O. Martin, Jr., chairman and CEO, Voya Financial, Inc. "Our commitment to achieving our growth plans this year was demonstrated in the third quarter by positive net flows in both Retirement and Investment Management and an increase in annualized in-force premiums in Employee Benefits. We also generated strong bottom-line results. Excluding the negative impact of DAC/VOBA and other intangibles unlocking and the benefit of prepayment fees and alternative investment income above our long-term expectations, normalized third-quarter 2018 adjusted operating earnings were $1.34 per diluted share, after-tax. This demonstrates our commitment to improving our adjusted operating earnings per share to reach $1.30 to $1.40 per share by the end of the second quarter of 2019. "In addition to organic growth, we continued to execute on our capital initiatives as we repurchased $250 million of common stock in the third quarter. We also received an additional share repurchase authorization of $500 million from the board of directors, which will enable us to continue to deliver further shareholder value through share repurchases. Finally, we continued to focus on achieving cost savings and began to take actions to lower our debt-to-capital ratio by the end of this year. "We are looking forward to our upcoming Investor Day on Nov. 13, when we'll share our long-term growth plans and opportunities to build upon the profitable growth we've achieved over the past several years, generate further shareholder value, expand our relationships with our customers, and achieve our vision to be America's Retirement Company," added Martin. Voya also announced today that the company has concluded the strategic review of its Individual Life business. The company will cease all new sales of individual life insurance on Dec. 31, 2018 and retain the in-force block of policies. "Following the sale of substantially all of our individual annuities businesses earlier this year, we conducted a thorough review of our Individual Life business to determine the best path forward. We carefully considered our broader, go-forward strategy of largely focusing on the workplace and institutional clients, analyzed the options available to us, and concluded that ceasing new sales aligns with our plans to focus on our higher-growth, higher-return, capital-light businesses: Retirement, Investment Management and Employee Benefits," said Martin. "Further, continuing to own the in-force block will benefit shareholders in that it will provide earnings and capital diversification and generate higher free cash flows. Specifically, we expect our Individual Life business to increase free cash flow conversion to 70% to 80% and generate meaningful free cash flow of at least $1 billion over the next five to six years. "Voya will continue to be good stewards of shareholder capital. As we have over the past several years, we will continue to explore and pursue opportunities to maximize the value of our in-force life insurance business," concluded Martin. Voya will continue to report its Individual Life segment financial results as part of the company's adjusted operating earnings. THIRD-QUARTER 2018 SUMMARY
1 This press release includes certain non-GAAP financial measures, including adjusted operating earnings and book value, excluding accumulated other comprehensive income. More information on non-GAAP measures and reconciliations to the most comparable U.S. GAAP measures can be found in the "Use of Non-GAAP Financial Measures" section of this release and in the company's Quarterly Investor Supplement. Net income available to common shareholders for the third quarter of 2018 was $142 million, or $0.87 per diluted share, compared with $149 million, or $0.81 per diluted share in the third quarter of 2017. The improvement on a per-share basis reflects the company's share repurchases. Total third-quarter 2018 net income available to common shareholders was lower due to higher income from continuing operations in the third quarter of 2018 being more than offset by the benefit of income from discontinued operations in the third quarter of 2017. Adjusted operating earnings for the third quarter of 2018 were $139 million, or $0.84 per diluted share, after-tax, up from $29 million, or $0.16 per diluted share, after-tax, in the third quarter of 2017. The increase was largely due to third-quarter 2018 results having lower negative DAC/VOBA and other intangibles unlocking, higher alternative investment income, lower expenses and higher fee-based margins. THIRD-QUARTER 2018 HIGHLIGHTS
SEGMENT DISCUSSIONS The following segment discussions compare the third quarter of 2018 with the third quarter of 2017, unless otherwise noted. All figures are presented before income taxes. Retirement Retirement adjusted operating earnings were $253 million, up from $107 million. The increase was largely due to:
Investment Management Investment Management adjusted operating earnings were $48 million, compared with $54 million. The decline was largely due to:
Total Investment Management AUM grew to $210 billion as of Sept. 30, 2018, up from $207 billion as of June 30, 2018. The decline from Sept. 30, 2017 reflects the sale of substantially all of the company's individual annuities business on June 1, 2018. During the third quarter of 2018, Investment Management net inflows of $477 million were driven by strong Institutional net flows of $1.4 billion, primarily from fixed income asset classes. Employee Benefits Employee Benefits adjusted operating earnings were $50 million, down from $58 million. The decline was largely due to:
Compared with the third quarter of 2017, total Employee Benefits in-force premiums increased 2%, reflecting strong growth in Voluntary premiums and continued pricing discipline in Stop Loss. During the third quarter of 2018, the Stop Loss and Group Life loss ratios were within the company's targeted annual range of 77-80%. Individual Life Individual Life adjusted operating earnings were $(134) million compared with $(66) million. The higher loss was due to:
Total Individual Life sales, which primarily consist of indexed life insurance, were $20 million, up from $18 million. Corporate Corporate adjusted operating losses were $(54) million, including $5 million of positive DAC/VOBA and other intangibles unlocking, compared with losses of $(110) million. The improvement was largely due to the reallocation of strategic investment spending into the business segments, revenue from the company's transition service agreements associated with the sale of substantially all of its individual annuities businesses on June 1, 2018, and higher earnings from the company's legacy annuities business. Share Repurchases In the third quarter of 2018, Voya repurchased 5,056,422 shares of its common stock at an average price per share of $49.44 for an aggregate purchase price of approximately $250 million. The company announced today that its board of directors has increased the amount of the company's common stock authorized for repurchase under the company's share repurchase program by an additional $500 million. This additional authorization increases the aggregate amount available under the company's share repurchase authorization to approximately $761 million as of Sept. 30, 2018. Under its share repurchase program, the company may, from time to time, purchase shares of its common stock through various means, including open market transactions, privately negotiated transactions, forward, derivative, accelerated repurchase, or automatic repurchase transactions, or tender offers. The additional $500 million share repurchase authorization expires on Dec. 31, 2019 (unless extended), and does not obligate the company to purchase any shares. The authorization for the share repurchase program may be terminated, increased or decreased by the board of directors at any time. 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 Wed., Oct. 31, 2018, at 10 a.m. ET, to discuss the company's third-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 Oct. 31, 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 14.3 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 $543 billion in total assets under management and administration as of Sept. 30, 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 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. 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 includes Net investment gains (losses) and Net guaranteed benefit hedging gains (losses) associated with the Retained Business in periods prior to 2018. 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 Adjusted operating earnings before income taxes to Income (loss) from continuing operations 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:
Because DAC/VOBA and other intangibles unlocking can be volatile, excluding the effect of this item can improve period to period comparability. The net gain from the Lehman Brothers bankruptcy settlement and loss from the disposition of low-income housing tax credit partnerships affected run-rate results and we believe that this effect is not reflective of our ongoing performance. . In addition to Net income (loss) per common share, we report Adjusted operating earnings per common 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 common share including Accumulated other comprehensive income (AOCI), we also report book value per common share excluding AOCI and shareholders' equity excluding AOCI and preferred stock. 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 common share excluding AOCI and common shareholders' equity excluding AOCI provide a measure consistent with that view. The Adjusted debt to capital ratio includes a 25% equity treatment afforded to subordinated debt, 100% equity treatment afforded to preferred stock and excludes AOCI. 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 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 manage the separation of Venerable, including the transition services, on the expected timeline and economic terms. 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 Sept. 30, 2018, which the company expects to file with the Securities and Exchange Commission on or before Nov. 9, 2018. VOYA-IR
(1) Voya Financial assumes a 32% tax rate on adjusted operating earnings and all components of adjusted operating earnings described as "after tax" for 2017. For 2018, the adjusted operating effective tax rate is based on the actual income tax expense for the current period related to Income (loss) from continuing operations, adjusted for estimated taxes on non-operating items and non-operating tax impacts, such as those related to restructuring, changes in a tax valuation allowance and changes to tax law, including the Tax Cuts and Jobs Act. A 35% tax rate is applied to all non-operating items in 2017 and 21% in 2018. The 32% tax rate for 2017 adjusted operating earnings and components reflects the estimated benefit of the dividend received deduction related to the company's Retirement, Investment Management, Employee Benefits and Individual Life segments. (2) "Other adjustments" consists of net guaranteed benefit hedging gains (losses) and related charges and adjustments; income (loss) from business exited; immediate recognition of net actuarial gains (losses) related to pension and other post-retirement benefit obligations and gains (losses) from plan amendments and curtailments; expenses associated with the rebranding of Voya Financial from ING U.S.; and restructuring expenses (severance, lease write-offs, etc.).
(1) 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.
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