Voya forecasts $700M in excess capital for 2025 as retirement and investment flows top $50B

Management View

Heather Hamilton Lavallee, CEO of Voya Financial, emphasized the strength of the company’s business model during the earnings call. She highlighted the importance of disciplined execution and the ability to assist customers in navigating a dynamic macroeconomic environment. The integrated retirement and investment management businesses are delivering attractive returns, reinforcing the value of the company's integrated approach. Lavallee also mentioned that the company is operating from a position of strength with solid capital and liquidity positions.

Lavallee announced the return to prior segment names, with retirement and employee benefits replacing wealth solutions and health solutions. This change reflects the company's strategic focus on its core areas. She also shared a significant milestone, noting that the company has surpassed $1 trillion in total assets across Retirement and Investment Management and is nearing 10 million participant accounts in retirement.

During the quarter, the company reported approximately $12 billion in total defined contribution net flows, with year-to-date assets increasing by more than $100 billion. This growth includes $40 billion in organic flows and $60 billion from OneAmerica. Lavallee emphasized the importance of partnerships, including a collaboration with Blue Owl Capital to expand private market access and a new selling agreement with Edward Jones. She stated that this partnership opens the door to future growth through one of the country's largest adviser networks.

The OneAmerica integration remains on track, with a full-year target of $75 million in operating earnings. Michael Robert Katz, CFO, reported adjusted operating earnings per share of $2.46 for the second quarter, a 13% increase over the prior year. He explained that net income was impacted by investment losses and severance expenses but noted that cash generation is still ahead of plan. The company incurred $18 million in severance expenses as part of resource reallocation.

Katz also mentioned that the company added approximately $200 million of excess capital in the quarter and generated approximately $400 million year-to-date. These figures underscore the company's strong financial position and commitment to capital discipline.

Outlook

Management maintained its priorities for the remainder of the year, focusing on driving strong organic growth in Retirement and Investment Management, continuing the OneAmerica integration for earnings growth, and improving margins in Employee Benefits. Lavallee stated that these priorities remain unchanged.

Looking ahead, Katz said the company is on pace for one of its strongest years, growing total defined contribution assets by more than $100 billion in the first half of 2025 while maintaining strong margins. The company plans to resume share repurchases, targeting $200 million in the second half of 2025, and aims to generate over $700 million of excess capital for the full year.

Financial Results

Adjusted operating earnings per share for the quarter were $2.46, representing a 13% increase year-over-year. The Retirement segment generated $235 million in adjusted operating earnings, with over $860 million in the last 12 months, both showing double-digit growth over the prior year. Total defined contribution net inflows for the quarter were approximately $12 billion, with year-to-date net flows over $40 billion.

Investment Management posted $51 million in adjusted operating earnings and $2 billion in net inflows for the quarter, contributing to nearly $10 billion in year-to-date net flows. The Employee Benefits segment delivered $69 million in adjusted operating earnings, up 15% year-over-year. The expected loss ratio for the January 2024 stop-loss cohort was lowered by 200 basis points to 91% due to favorable claims experience.

The company returned over $40 million in capital to shareholders and entered the third quarter with approximately $300 million in excess capital.

Q&A

Analysts raised questions about the stop-loss business and capital deployment for 2026. Michael Robert Katz responded that reserve levels for the January 2024 block were reduced based on claims experience and emphasized a "very cautious mindset heading into the fall," adding, "we're going to prioritize margin over growth." On capital, Katz stated, "We exit 2025 well positioned with sufficient capital to address OneAmerica and the earnout expected in the middle of next year."

Lavallee added that the company continues to see some really nice catalysts for growth heading into 2026. John Bakewell Barnidge asked about the Blue Owl partnership and Edward Jones distribution. Jay Stuart Kaduson explained that this partnership will allow the company to expand access to private investments, with initial offerings to be embedded in target date funds. On Edward Jones, Kaduson stated that it will help drive more full-service sales and serve as a key driver of growth for the retirement business.

Thomas George Gallagher focused on medical stop-loss trends and risk selection. Katz replied that first-dollar medical inflation is expected to increase in 2026 relative to 2025 and that they'll have a better sense of the 2025 block in the fourth quarter. On risk selection, Katz said the 87% level is appropriate for January 2025.

Ryan Joel Krueger asked about voluntary benefits loss ratios and premiums. Katz stated the 47% loss ratio is the base case for the third quarter. Kaduson explained that the top line is trending well for the full year 2025, attributing prior growth to several jumbo cases and highlighting bundling strategies for future growth.

Wilma Carter Jackson Burdis questioned the Blue Owl partnership and fee structures. Matthew Toms noted that the company is working with Blue Owl to build solutions that provide strong risk-adjusted returns for plan participants. On fees, Toms said the fee component is being worked on, but these products are not yet in launch.

Sentiment Analysis

Analysts maintained a tone of cautious optimism, with repeated questions on stop-loss, capital deployment, and new partnerships, displaying a focus on understanding risk management and future growth catalysts. Management delivered responses with a disciplined and confident tone during prepared remarks, using phrases like "we are on pace for one of our strongest years" and "we will continue to focus on executing on our near-term priorities."

During the Q&A, responses were more guarded and emphasized caution, particularly regarding medical trends and capital management, with Katz stating "very cautious mindset heading into the fall" and prioritizing "margin over growth." Compared to the previous quarter, management's confidence remains strong in prepared remarks, while Q&A responses continued to reflect prudence due to macro uncertainty.

Quarter-over-Quarter Comparison

The current quarter saw a return to prior segment names, a milestone of surpassing $1 trillion in assets, and the announcement of new strategic partnerships with Blue Owl Capital and Edward Jones. Guidance language remains consistent, focusing on organic growth, integration of OneAmerica, and margin improvement.

Key metrics showed continued growth, with higher adjusted operating earnings per share and segment earnings for Retirement, Investment Management, and Employee Benefits. Analysts' focus shifted slightly towards the impact of new partnerships and the integration of recent acquisitions, with ongoing scrutiny of stop-loss performance and capital deployment.

Management's confidence in achieving capital generation targets and strategic execution remains high, while maintaining a cautious approach towards risk and macro volatility.

Risks and Concerns

Management highlighted uncertainty in healthcare trends, particularly around medical stop-loss claims and inflation, emphasizing a "very cautious mindset heading into the fall." Analysts expressed concerns about the sustainability of loss ratio improvements, the impact of the OneAmerica earnout on capital deployment, and the evolving competitive landscape in retirement and private market offerings.

Mitigation strategies include prioritizing margin over growth, continued focus on disciplined underwriting and risk selection, and leveraging technology and automation for operational efficiency.

Final Takeaway

Management reiterated that Voya's business model and disciplined execution are driving strong results across core segments, supported by solid capital generation and integration progress. Strategic partnerships and new distribution channels are expanding growth opportunities, while risk management remains a top priority as the company maintains its focus on margin improvement and capital discipline throughout 2025 and heading into 2026.