Voya Financial Inc

Previous wording

The following discussion and analysis presents a review of our consolidated results of operations for the three and six months ended June 30, 2024 and 2023 and financial condition as of June 30, 2024 and December 31, 2023. This item should be read in its entirety and in conjunction with the Condensed Consolidated Financial Statements and related notes contained in Part I, Item 1. of this Quarterly Report on Form 10-Q, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") section contained in our Annual Report on Form 10-K.

Current wording

The following discussion and analysis presents a review of our consolidated results of operations for the three and nine months ended September 30, 2024 and 2023 and financial condition as of September 30, 2024 and December 31, 2023. This item should be read in its entirety and in conjunction with the Condensed Consolidated Financial Statements and related notes contained in Part I, Item 1. of this Quarterly Report on Form 10-Q, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") section contained in our Annual Report on Form 10-K.

Previous wording

Other revenue increased $22 million from$164 million to $186 million primarily due to:

Current wording

Other revenue increased $22 million from $81 million to $103 million primarily due to:

Previous wording

•an increase in other interest income due to float.

Current wording

•an increase in other interest income due to float on cash balances.

Previous wording

Interest credited and other benefits to contract owners/policyholders increased $161 million from $682 million to $843 million primarily due to:

Current wording

Interest credited and other benefits to contract owners/policyholders increased $139 million from $799 million to $938 million primarily due to:

Previous wording

•an increase in benefits to policyholders in Health Solutions due to a higher total aggregate loss ratio and growth in in-force business;

Current wording

•an increase in benefits to policyholders in Health Solutions due to a higher loss ratio for stop loss and in-force business growth, partially offset by a favorable change from the annual assumption update; and

Previous wording

•a favorable change in the value of embedded derivatives associated with businesses reinsured primarily due to changes in interest rates, which is fully offset by a corresponding amount in Net gains (losses);

Current wording

•unfavorable changes in the fair value of embedded derivatives associated with businesses exited primarily due to changes in interest rates, which are mostly offset by a corresponding amount in Net gains (losses).

Previous wording

•the Security Life of Denver Company capital loss carryback. For more details, see the Income Taxes Note to our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q; and

Current wording

•the Security Life of Denver Company capital loss carryback recorded in 2023. For more details, see the Income Taxes Note to our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q.

Previous wording

•lower investment income on fixed maturity securities primarily due to interest rate movements and lower average volume, partially offset by actions to improve the portfolio yield.

Current wording

•lower investment income on fixed maturity securities primarily due to lower average volume and interest rate movements, partially offset by actions to improve the portfolio yield.

Previous wording

•equity market impacts to limited partnership valuations; and

Current wording

•equity market impacts to limited partnership valuations.

Previous wording

•an increase in other interest income due to float; and

Current wording

•an increase in other interest income due to float on cash balances; and

Previous wording

Interest credited and other benefits to contract owners/policyholders increased $261 million from $1,433 million to $1,694 million primarily due to:

Current wording

Interest credited and other benefits to contract owners/policyholders increased $400 million from $2,232 million to $2,632 million primarily due to:

Previous wording

•an increase in benefits to policyholders in Health Solutions due a higher total aggregate loss ratio and growth in in-force business; and

Current wording

•an increase in benefits to policyholders in Health Solutions due a higher loss ratio for stop loss and in-force business growth, partially offset by a favorable change from the annual assumption update; and

Previous wording

•lower interest credited in Wealth Solutions primarily due to lower spread-based assets, partially offset by a higher crediting rate;

Current wording

•lower interest credited in Wealth Solutions primarily due to lower spread-based assets, partially offset by a higher crediting rate; and

Previous wording

•a litigation reserve recorded in the prior period within Businesses exited; and

Current wording

•a litigation reserve recorded in the prior period within businesses exited.

Previous wording

•a loss on debt extinguishment incurred in the prior period; and

Current wording

•a loss on debt extinguishment incurred in the prior period.

Previous wording

Operating expenses related to consolidated investment entities increased $16 million from $60 million to $76 million primarily due to:

Current wording

Operating expenses related to consolidated investment entities increased $24 million from $123 million to $147 million primarily due to:

Previous wording

Adjustments from Income (Loss) from Continuing Operations before Income Taxes to Adjusted Operating Earnings (Loss) before Income Taxes

Current wording

The summary below reconciles Income (loss) before income taxes to Adjusted operating earnings before income taxes for the periods indicated:

Previous wording

Net investment gains (losses) changed $58 million from a loss of $38 million to a gain of $20 million primarily due to:

Current wording

Net investment gains (losses) changed $75 million from a gain of $42 million to a loss of $33 million primarily due to:

Previous wording

Net investment gains (losses)changed $131 million from a loss of $47 million to a gain of $84 million primarily due to:

Current wording

Net investment gains (losses)changed $54 million from a loss of $4 million to a gain of $50 million primarily due to:

Previous wording

Other adjustments to operating earnings improved $87 million from a loss of $122 million to a loss of $35 million primarily due to:

Current wording

Other adjustments to operating earnings improved $87 million from a loss of $150 million to a loss of $63 million primarily due to:

Previous wording

The following tables present Total Client Assets, which comprise total AUM and AUA, for our Wealth Solutions segment as of the dates indicated:

Current wording

The following table presents Total Client Assets by product group, which comprise total AUM and AUA, for our Wealth Solutions segment as of the dates indicated:

Previous wording

•lower interest credited primarily due to lower spread-based assets, partially offset by a higher crediting rate; and

Current wording

•lower interest credited primarily due to lower spread-based assets, partially offset by a higher crediting rate.

Previous wording

•lower net investment income primarily due to lower spread-based assets resulting from participant surrenders, partially offset by higher alternative asset returns, actions to improve the portfolio yield and income on cash.

Current wording

•lower net investment income primarily due to lower spread-based assets resulting from participant surrenders, partially offset by income on cash, actions to improve the portfolio yield, and higher alternative asset returns.

Previous wording

•lower interest credited primarily due to lower spread-based assets, partially offset by a higher crediting rate; and

Current wording

•lower interest credited primarily due to lower spread-based assets, partially offset by a higher crediting rate.

Previous wording

•higher benefits to policyholders due to a higher total aggregate loss ratio and growth in in-force business; and

Current wording

•higher benefits to policyholders due to a higher loss ratio for stop loss and in-force business growth, partially offset by a favorable change from the annual assumption update; and

Previous wording

•higher benefits to policyholders due to a higher total aggregate loss ratio and growth in in-force business; and

Current wording

•higher benefits to policyholders due to a higher loss ratio for stop loss and in-force business growth, partially offset by a favorable change from the annual assumption update; and

Previous wording

Adjusted operating earnings before income taxes including Allianz noncontrolling interest increased $1 million from $63 million to $64 million primarily due to:

Current wording

Adjusted operating earnings before income taxes including Allianz noncontrolling interest increased $9 million from $63 million to $72 million primarily due to:

Previous wording

•higher alternative investment income primarily driven by overall market performance.

Current wording

•lower investment capital returns primarily driven by overall market performance.

Previous wording

Other adjustments to operating earnings improved $40 million from a loss of $52 million to a loss of $12 million primarily due to:

Current wording

Adjusted operating earnings before income taxes including Allianz noncontrolling interest decreased $8 million from a loss of $52 million to a loss of $60 million primarily due to:

Previous wording

•lower other revenue due to the absence of transition services agreements revenue recognized in the prior period associated with the Individual Life transaction; and

Current wording

•lower other revenue due to the absence of transition services agreements revenue recognized in the prior period associated with the Individual Life Transaction;

Previous wording

•lower investment income due to a change in the allocation of income on our cash balances to the operating segments in the current period.

Current wording

•lower investment income due to a change in the allocation of income on our cash balances to the operating segments; and

Previous wording

Investment income on certain alternative investments can be volatile due to changes in market conditions. The following table presents the amount of investment income (loss) on certain alternative investments that is included in segment Adjusted operating earnings before income taxes and the average level of assets in each segment, prior to intercompany eliminations, which excludes alternative investments and income that are a component of Income (loss) related to businesses exited or to be exited through reinsurance or divestment. These alternative investments are carried at fair value, which is estimated based on the net asset value ("NAV") of these funds.

Current wording

Investment income on certain alternative investments can be volatile due to changes in market conditions. The following table presents the amount of investment income (loss) on certain alternative investments that is included in segment Adjusted operating earnings before income taxes and the average level of assets in each segment, prior to intercompany eliminations, which excludes alternative investments and income that are a component of Income (loss) related to businesses exited or to be exited through reinsurance or divestment. These alternative investments are carried at fair value, which is estimated based on the net asset value ("NAV") of these funds. While investment income on these assets can be volatile, based on current plans, we expect to earn 9% on these assets over the long term.

Previous wording

We estimate that our excess capital (which we define as the amount of total adjusted capital in our insurance subsidiaries above our 375% RBC target, plus the amount of holding company liquidity above our $200 million target) as of June 30, 2024, was approximately $0.4 billion. As of June 30, 2024, our estimated combined RBC ratio, with adjustments for certain intercompany transactions, was 407%.

Current wording

We estimate that our excess capital (which we define as the amount of total adjusted capital in our insurance subsidiaries above our 375% RBC target, plus the amount of holding company liquidity above our $200 million target) as of September 30, 2024, was approximately $0.4 billion. As of September 30, 2024, our estimated combined RBC ratio, with adjustments for certain intercompany transactions, was 395%. Both excess capital and the estimated combined RBC ratio are adjusted for the anticipated payment of the 3.976% Senior Notes maturing February 15, 2025. See the Financing Agreements Note to our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q for additional details on the maturing debt.

Previous wording

(1) See Put Option Agreement for Senior Debit Issuance below for further detail.

Current wording

(1) See Debt and Put Option Agreement for Senior Debt Issuance below for further detail.

Previous wording

See the Shareholders' Equity Note in our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q for information relating to authorizationsby the Board of Directors to repurchase our shares and amounts of common stock repurchased pursuant to such authorizations during the six months ended June 30, 2024. As of June 30, 2024, our remaining repurchase capacity under the Board's authorization was $551 million.

Current wording

See the Shareholders' Equity Note in our Condensed Consolidated Financial Statements in Part I, Item 1. of this Quarterly Report on Form 10-Q for information relating to authorizationsby the Board of Directors to repurchase our shares and amounts of common stock repurchased pursuant to such authorizations during the nine months ended September 30, 2024. As of September 30, 2024, our remaining repurchase capacity under the Board's authorization was $382 million.

Previous wording

Subsequent to June 30, 2024, we repurchased 871,636 shares pursuant to a 10b5-1 plan for $63 million.

Current wording

Subsequent to September 30, 2024, we repurchased 997,994 shares pursuant to a 10b5-1 plan for $81 million.

Previous wording

As of June 30, 2024, we had $395 of short-term debt borrowings outstanding consisting entirely of the current portion of long-term debt. The following table summarizes our borrowing activities for the six months ended June 30, 2024:

Current wording

As of September 30, 2024, we had $397 million of short-term debt borrowings outstanding consisting entirely of the current portion of long-term debt. The following table summarizes our borrowing activities for the nine months ended September 30, 2024:

Previous wording

We maintain revolving reciprocal loan agreements with a number of our life and non-life insurance subsidiaries that are used to fund short-term cash requirements that arise in the ordinary course of business. Under these agreements, either party may borrow up to the maximum allowable under the agreement for a term not more than 270 days. For life insurance subsidiaries, the amounts that either party may borrow under the agreement vary and are between 2% and 5% of the insurance subsidiary's statutory net admitted assets (excluding separate accounts) as of the previous year end depending on the state of domicile. As of June 30, 2024, the aggregate amount that may be borrowed or lent under agreements with life insurance subsidiaries was $1.2 billion. For non-life insurance subsidiaries, the maximum allowable under the agreement is based on the assets of the subsidiaries and their particular cash requirements. As of June 30, 2024, Voya Financial, Inc. had $510 million outstanding borrowings from subsidiaries and had loaned $385 million to its subsidiaries.

Current wording

We maintain revolving reciprocal loan agreements with a number of our life and non-life insurance subsidiaries that are used to fund short-term cash requirements that arise in the ordinary course of business. Under these agreements, either party may borrow up to the maximum allowable under the agreement for a term not more than 270 days. For life insurance subsidiaries, the amounts that either party may borrow under the agreement vary and are between 3% and 5% of the insurance subsidiary's statutory net admitted assets (excluding separate accounts) as of the previous year end depending on the state of domicile. As of September 30, 2024, the aggregate amount that may be borrowed or lent under agreements with life insurance subsidiaries was $1.2 billion. For non-life insurance subsidiaries, the maximum allowable under the agreement is based on the assets of the subsidiaries and their particular cash requirements. As of September 30, 2024, Voya Financial, Inc. had $195 million outstanding borrowings from subsidiaries and had loaned $572 million to its subsidiaries.

Previous wording

Rating agencies use an "outlook" statement for both industry sectors and individual companies. For an industry sector, a stable outlook generally implies that over the next 12 to 18 months the rating agency expects ratings to remain unchanged among companies in the sector. For a particular company, an outlook generally indicates a medium or long-term trend in credit fundamentals, which if continued, may lead to a rating change. In December of 2023, Moody’s confirmed its outlook for the U.S. life insurance sector as stable. Also, in November of 2023, A.M. Best maintained a stable outlook on the U.S. life insurance and annuities sector and Fitch changed its outlook from neutral to improving for the North American life insurance sector.

Current wording

Rating agencies use an "outlook" statement for both industry sectors and individual companies. For an industry sector, a stable outlook generally implies that over the next 12 to 18 months the rating agency expects ratings to remain unchanged among companies in the sector. For a particular company, an outlook generally indicates a medium or long-term trend in credit fundamentals, which if continued, may lead to a rating change.

Previous wording

Changes in, or deviations from, assumptions used can significantly affect our reserve levels and related results of operations. Assumptions are management's best estimates of future outcomes. We review these assumptions at least annually against actual experience and, based on additional information that becomes available, update them if necessary.

Current wording

Long-duration contracts are insurance contracts that provide insurance coverage and remain in force for an extended period. Principal assumptions used to establish the liability for future policy benefits of long-duration contracts include mortality, morbidity, policy lapse, contract renewal, payment of subsequent premiums or deposits by the contract owner, retirement, inflation, and benefit utilization. Other than interest rate assumptions, these assumptions are based on our experience and periodically reviewed against industry standards. The assumptions used require considerable judgments. Interest rates used to calculate these reserves are based on an upper-medium grade (low-credit-risk) fixed-income instrument yield derived from observable market data. Changes in, or deviations from, assumptions used can significantly affect our reserve levels and related results of operations. Assumptions are management's best estimates of future outcomes. We review these assumptions at least annually against actual experience and, based on additional information that becomes available, update them if necessary.