On Wednesday, Voya Financial (NYSE:VOYA) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

Voya Financial reported strong financial performance with a 13% year-over-year increase in adjusted operating EPS and a return on equity above 18%, alongside generating $200 million in excess capital returned to shareholders.

The company highlighted strategic successes, including the integration of One America, which enhanced the scale and earnings power of their retirement business, and continued expansion in wealth management and investment management sectors.

Voya Financial remains confident in its future outlook, expecting positive net flows for the full year, continued margin improvement in employee benefits, and sustained free cash flow generation. Management emphasized the durability of their business model and strategic alignment within the board.

Operational highlights include maintaining strong margins in retirement and investment management, a significant increase in employee benefits earnings, and successful pricing and underwriting actions in the Stop Loss market.

Management expressed confidence in achieving further margin improvement and reaffirmed their commitment to returning capital to shareholders, while also acknowledging external discussions with stakeholders about strategic options.

Full Transcript

OPERATOR

Good morning. Welcome to Voya Financial's first quarter 2026 earnings conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the Star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then one on your touchtone phone. To withdraw your question, please press Star two. Participants are limited to one question and one follow up. Please note this event is being recorded. I would now like to turn the call over to Manny Chu, Head of Investor Relations. Please go ahead.

Manny Chu

Good morning and thank you for joining today's call. We will begin with prepared remarks by Heather Lavallee, our Chief Executive Officer and Mike Katz, our Chief Financial Officer. Following their prepared remarks, we will take your questions. Also joining the call are Jay Caterson, CEO of Workplace Solutions and Matt Thomas, CEO of Investment Management. As a reminder, materials for today's call are available on our website@investors.voya.com as noted on slide 2 of our analyst presentation, some of the comments during today's discussion may contain forward looking statements and refer to certain non Generally Accepted Accounting Principles (GAAP) financial measures within the meaning of Federal securities law. Generally Accepted Accounting Principles (GAAP) reconciliations are available in our press release and financial supplement found on our investor relations website. And now I will turn the call over to Heather.

Heather Lavallee (Chief Executive Officer)

Thank you Manny Good morning and thank you for joining us today. Let's turn to Slide 4. Building on our 2025 performance, we are off to a strong start in 2026. In the first quarter we delivered significant growth in revenues, earnings and cash flows. We grew adjusted operating EPS by 13% year over year through strong execution across the enterprise while continuing to deliver a return on equity above 18%. And we generated approximately $200 million of excess capital returning that same amount to shareholders through repurchases and dividends. Continuing to execute on our priorities, we are building on our strong commercial momentum, maintaining robust margins in retirement and investment management, and continuing to drive margin and earnings improvement in employee benefits. Our momentum is clear and our advantage comes from our diversified, resilient business model built to perform across markets and business cycles. I'd like to touch on a few highlights from the quarter. In retirement we generated over $200 million in adjusted operating earnings, delivering trailing 12 month margins of 39% while continuing to invest in future growth, we continue to expect positive net flows for the full year, more than offsetting the exit of a large record keeping plan. In the first quarter which was expected, revenues grew year over year supported by more than $50 billion in annual recurring deposits, giving the business a resilient foundation across market conditions. Our acquisition of One America has been a strategic and operational success. It has meaningfully strengthened both the scale and earnings power of our retirement business, which now serves nearly 10 million retirement accounts. We expect to complete the integration in the second quarter and we're building on that strong foundation by expanding the advice, guidance and planning we provide through our wealth management business, helping customers better meet their financial needs. In wealth management, expansion remains on track with first quarter revenues up more than 12% year over year. In investment management, we entered 2026 with strong momentum driven by continued demand from clients across both institutional and retail markets. We remain confident in our ability to deliver 2 plus percent organic growth. This year we drove margin expansion by continuing to scale key strategies across insurance, private and alternative assets in international retail markets. These are the channels where we have clear competitive advantages and are seeing strong commercial momentum. Our investment performance shows we are delivering for our clients. With 78% of assets outperforming peers or benchmarks over three years and 82% outperforming over 10 years in employee benefits, we generated significantly higher operating earnings through disciplined execution across the portfolio. Across all lines within the business, decisive underwriting and pricing is resulting in higher margins in stop loss. The pricing, underwriting and reserving actions we took last year have us firmly on the path to full margin recovery in this business. Our near term focus on restoring the profitability and earnings power of this business is the most value accretive path we can take for shareholders and this value is already emerging in the results we delivered this quarter. Mike will provide additional detail in a moment. Our strong results this quarter reflects the durability of our cash generation, our strong earnings power and our continued commitment to to disciplined execution. With that, I'll turn it over to Mike to walk through the financials in more detail.

Mike Katz (Chief Financial Officer)

Mike, thank you Heather. Our financial results this quarter were strong, providing a solid start to the year. In the quarter, adjusted operating EPS was $2.26 per share on a trailing 12 month basis. Adjusted operating EPS totaled $9.11 per share, representing a growth of over 20%. EPS Growth Highlights our consistent execution and capital discipline. We generated higher revenues across all segments and our continued expense discipline is sustaining our robust margins in retirement and investment management while expanding margins meaningfully in employee benefits. In the quarter, GAAP net income was lower than adjusted operating earnings primarily due to non cash items. Overall, our results highlight the durability of our business mix and the resiliency of our capital generation with that, let me turn to our segment results. Turning to retirement on slide 7 retirement continues to demonstrate the strength of our scaled franchise. We generated 209 million of adjusted operating earnings in the quarter and 960 million over the trailing 12 months representing a 14% year over year increase. Higher net revenues were primarily driven by an 8% increase in fee based revenues. Fee based revenues have grown meaningfully over the last several years and now represent close to 60% of of total net revenues for the segment. Spread Income remained resilient reflecting disciplined portfolio management and continued focus on risk adjusted returns. Margins remain strong at over 39%. Looking ahead, we expect expenses to step down in the second quarter due to normal seasonality and as the year progresses we anticipate further reduction in spending as the One America integration work concludes and the organization transitions to steady state operations. Turning to flows Our outlook for flows remains unchanged. We expect strong net inflows in the second quarter and full year supported by healthy retention and a robust pipeline. The first quarter commercial result was primarily timing driven and as expected, reinforced by disciplined execution. Retirement is delivering strong profitability and is well positioned for continued growth. Turning to Investment Management on slide 8, the business's differentiated client focused solutions continue to deliver investment performance and financial results. We generated 46 million of adjusted operating earnings in the first quarter, up 12% year over year and up 8% on a trailing 12 month basis. Overall net revenues drove the result supported by higher institutional and retail fees. Our trailing margin of 28.6% reflects the benefit of these higher revenues and expense discipline. Net flows were positive in the first quarter and the pipeline remains healthy. In institutional we continue to see strong demand from clients for private market strategies including private fixed income and commercial mortgage loans. Clients continue to value high quality investment grade private credit solutions where we have a long track record and we see structural demand for the asset class in retail. International demand for our differentiated income and growth strategy remain resilient which helped to offset industry wide headwinds in the US market that affected domestic flows. Over the past year we generated approximately 7 billion of net inflows and with a healthy pipeline in place, we remain confident in building on that success and driving strong organic growth at attractive margins in 2026. Turning to employee benefits on slide 9, we continue to execute a deliberate strategy to expand margins which has meaningfully improved run rate earnings and employee benefits. Our progress is clear in both the 63 million of adjusted operating earnings we generated in the first quarter and the 169 million we reported over the last 12 months. A key driver of the year over year improvement was strong net underwriting results in group life claims experience was favorable in the quarter driven by lower frequency and severity and involuntary results are tracking in line with our expectations in Stop loss. The actions we've taken with underwriting and risk selection have us well positioned to return margins back to target levels. In the quarter we released 25 million of reserves. 2024 is now behind us which drove the majority of the reserve release. We also released a portion of the reserves for the 2025 blocks as experience improved in the first quarter. We are now over 90% complete with the 2025 business and are well reserved heading into the second quarter. The work we did last year has positioned the 2026 business for meaningful improvements. We strengthened the team with new leadership and specialized resources, improving risk selection through more selective quoting and deeper clinical reviews. That discipline combined with an industry wide repricing environment and increase in RFP volumes helped drive approximately 24% rate increases while keeping in force premium flat. With pricing and underwriting actions now firmly embedded, we are on a clear path to restore stop loss margins back to long term targets. Looking ahead, our first quarter results reflect continued progress in improving earnings power and we remain confident in the path to further margin expansion in employee benefits. Turning to slide 10 this was another strong cash flow quarter as excess capital generation was approximately $200 million. We continue to convert cash at 90% plus levels. In the quarter, we returned approximately $200 million of capital to shareholders through a combination of share repurchases and dividends and we are executing an additional $150 million of share repurchases in the second quarter, underscoring the durability of our cash generation. Our business mix and earnings growth are driving a return on equity of over 18%. In summary, our balance sheet remains a strength supported by durable free cash flow generation that positions us well to drive long term shareholder value across a range of market conditions. Turning to Slide 11, this view looks beyond any single quarter and reflects how execution supports capital deployment over time. We've steadily grown dividends over the past five years and at the same time we've returned significant capital through share repurchases. This has reduced diluted shares outstanding by roughly 14% since 2022. Our ability to consistently purchase shares allows us to increase dividends each year while maintaining a payout ratio of approximately 20%. Importantly, these returns have been balanced with ongoing investment in our business to enhance customer and client outcomes and support future business growth. In closing, we delivered a strong quarter driven by consistent execution, high free cash flow and disciplined capital deployment to create long term shareholder value. We're executing on our strategy and our priorities are unchanged. Grow the franchise, maintain balance sheet strength and return excess capital to shareholders. With that, I'll turn it back to Heather.

Heather Lavallee (Chief Executive Officer)

Thanks Mike. Turning to slide 12 looking ahead, our priorities is clear and compelling and is driving tangible financial results. We're growing excess cash generation while maintaining balance sheet strength and flexibility. We're advancing commercial momentum across retirement and investment management and we're laser focused on realizing additional margin improvement in employee benefits. Together, these priorities define how we run the company with unwavering focus on creating long term shareholder value. Before we close, I want to share that we are encouraged by the recent legislative and regulatory momentum that is expanding access to retirement savings for Americans who have historically been underserved, especially workers at small and mid sized employers who have lacked a clear path to workplace savings. These policy initiatives include coverage mandates, mandatory auto enrollment and protections for caregivers and non traditional workers. These important measures will help address the overwhelming need for additional retirement savings, particularly among the most vulnerable segments of our workforce. Voya Financial is a leader in providing retirement security to the American worker and their families. We welcome these policy developments and are among those companies best positioned to serve the growing demand for financial solutions that will allow more Americans to retire securely. I want to thank our employees who relentlessly work to create better financial outcomes for the customers and clients we serve, which is always our number one priority. We remain focused on executing our strategic priorities, returning capital to shareholders and driving outcomes for our customers over the long term and across market cycles. With that, I'll turn it over to the operator so we can take your questions.

OPERATOR

Thank you. We will now begin the question and answer session. To ask a question please press Star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star 2. As a reminder, participants are limited to one question and one follow up question. Our first question is from Bob Hung with Morgan Stanley.

Bob Hung (Equity Analyst)

Hi, good morning. My first question is actually on the Group Life business. Group Life loss ratio was very favorable, 70.6 versus a long term target of 77 to 80. It's been trending fairly favorable over the past four quarters and the industry does look like that's where things are going. Can you maybe talk give us a little bit more detail about what you're seeing there? Generally, first quarter tends to be the worst quarter for the loss ratio for group Life. Are we thinking the 77 to 80 maybe isn't where we're going to land this year? Can you maybe give us a little bit of color on that?

Mike Katz (Chief Financial Officer)

Hey, Bob, it's Mike. Yeah, look, I think you're thinking about it, right? And we do typically see group life as running a little higher than the 77 to 80%. Q1 usually is the worst mortality quarter for group life. So we're certainly very encouraged by what we're seeing in the quarter and has been a good trend for us. We're spending a lot of time, you know, we talk a lot about employee benefits and the margin expansion there. Group life is another area we're focused on. I think it's a little early right now for us to suggest, hey, we think there's going to be a lower loss ratio for the balance of the year if you factor in the first quarter. From a calendar year perspective, certainly we would expect to be better than the 77 to 80 given the result in the first quarter. But right now I think the base case is back to range in the second and third, fourth quarter.

Bob Hung (Equity Analyst)

Okay, got it. Really, really helpful there. Thank you. My second question is on the net flow. So you gave some decent color in terms of where things are going. But if we think about the investment management, right, net flow was about, net inflow was about 65 million for the quarter. If we're thinking about a positive flow, we're looking at probably 6 or 7 billion of net inflows in the rest of the year. Does that ballpark sound about right? Like, can you maybe give us a little bit more color of how we think about the investment management flows going forward into the rest of the year?

Matt Thomas

Sure, Bob. Yeah, this is Matt. I'll unpack that a little bit for you. So looking back, the trailing twelve month number is in the right in that ballpark that you referenced. That's a $7 billion number and that's a roughly 2% organic growth rate for the trailing 12 months. So as you acknowledge, as we mentioned, the flows in the individual quarter this quarter were a little light. But as we look forward, our confidence around the maintaining that growth level is driven by, in the institutional space, our continued strength in insurance. We saw actually a good first quarter in insurance and we have good visibility into the second quarter and the rest of the year in insurance. And again, that's a channel that's demonstrated really nice growth over recent years. Differentiated value prop and one where you can see volatility quarter to quarter but feel very good on the forward. Look more broadly on the institutional side we see opportunities we've been working on for some time internationally on the fixed income side and then domestically, CLO creation is likely to improve into the second quarter and the rest of the year. On the retail side, a little bit more detail there. The incoming growth franchise internationally we've called out, Mike called out in his remarks as well. That continues to be a stalwart for us. Nice performance first quarter. We think that continues for the year where there is some volatility in broader equity markets. Where we had market volatility was in thematic equities. Internationally we're already seeing with stronger markets in the second quarter. Some bounce back there we'll see where that ends. Obviously a lot of dynamism in the broader markets, but broader strength in retail, including US fixed income makes us, makes us feel pretty good about the forward look. Bottom line, the organic growth expectation of 2/ percent for the remainder of the year remains intact.

OPERATOR

Our next question is from Andrew Klingerman with TD Cowan.

Andrew Klingerman (Equity Analyst)

Thank you so much and good morning. With regard to the group Stop Loss business, if I'm reading slide 43 of the supplement correctly, it appears that the 2026 loss pick is 87%. And my sense is given all the rate increases you've attained that it's a pretty conservative loss pick and perhaps we could see releases as we're seeing for the 24 and 25 years.

Mike Katz (Chief Financial Officer)

Am I thinking about that? Right. Do I have the number for the loss pick? Right. Hey Andrew, it's Mike. So just maybe first on the reserving part of this, we continue to set reserves on the high end of reasonable outcomes. And so I think you know your thinking about it right? From that perspective and what gives us a lot of confidence around how the 26 business is really going to perform are some of the things I mentioned in my remarks. When you look at this from a price perspective, getting 24% on that book of business, we feel really good about that. But more importantly the work we did last year around just strengthening the teams, ensuring we got the best risk selection and frankly getting to do that with even more RFPs. RFPs continue to build in Stop loss. So we're getting a look at a lot of different things. So this is really the best we felt around Stop Loss in quite some time. We feel good about the 26 business, you know, stepping back. We're seeing improvement now. That's, that's encouraging, but we think there's more to come.

Andrew Klingerman (Equity Analyst)

Got it. Thank you for that, Mike. And, and then, you know, it's pretty clear in the media. We've been hearing about an activist and the talk has been around their interest in you either divesting of Group Stop Loss and or putting the company up for sale. So it's been out there. Hate to ask about it, but maybe you could comment a little bit about that.

Heather Lavallee (Chief Executive Officer)

Yeah, Good morning Andrew, it's Heather and certainly appreciate the question. So you know, we're regularly engaging with our shareholders and at the end of the day our actions and how we deploy capital are guided by what is in the best long term interest of our shareholders, frankly, as well as our customers. And as part of our normal governance with our board, we're constantly evaluating different strategic options that we can do, frankly across the whole portfolio to drive shareholder value. But where we have aligned very, very clearly is that the path we laid out 18 months ago in terms of continuing to grow retirement investment management, we had a terrific 20, 25 and are off to a great start. And importantly the earnings improvement in Stop Loss where we demonstrated real value in 25 and again are off to a great start. That's where we have full alignment and full conviction. And maybe the last thing I'd say, Andrew, on this one is there is no daylight between the board and management on the strategic path forward. And what we've laid out very clearly in the presentation and what you heard Mike and I talk about in our prepared remarks, we've got tremendous conviction in our ability to deliver on that and drive further shareholder value.

OPERATOR

Thanks for that, Heather. Our next question is from Ryan Krueger with kbw.

Ryan Krueger (Equity Analyst)

Hey, thanks. Good morning. I guess I wanted to come back on Stop Loss. Last quarter you said you expected calendar year improvement. The stop loss loss ratio which was 84% last year. I think just mathematically if I take your loss pick of 87% and your 1Q loss ratio, it would imply it would be higher than 84%. So the only way to get that is more reserve releases. So I guess maybe just. Am I looking at that right? Are you still confident that you'll get calendar year improvement this year?

Mike Katz (Chief Financial Officer)

Hey Ryan, it's Mike. Yeah, that's the base case. And maybe just first like when you think about claims experience and the emergence of claims that we saw 24 into 25 or what we're seeing now from 25 to 26 claims are coming in faster. When we were in the fourth quarter we were only 2/3 complete. Now as you look at the 25 business, we're about 90% complete. And as Andrew was asking, we still are on the high end of reasonable outcomes from a best estimate reserving perspective. So the base case, if that gets to more middle, low end of the range.

Heather Lavallee (Chief Executive Officer)

Absolutely. We would expect the calendar year loss ratio to, to perform better than 84%. One way you can look at that is just seeing where the reserves were set a year ago on the 24 business versus where we have 25 right now, it's a couple points better. So that's what we're seeing. We're seeing that through April. Frankly. If we continue to see that in May and June and in the third quarter, that's exactly what's going to happen. Yeah. And Ryan and Mike, the only add that I would have is, you know, I quite honestly have not been this confident on stop loss for 18 months. And for all the reasons that Mike laid out, we've got real conviction in our ability to drive continued margin improvement and get this business back to the full earnings potential we know it can generate.

Ryan Krueger (Equity Analyst)

Thanks. And then this is slightly different, but also on Stop Loss a little bit. Just how intertwined is your Stop Loss business with the voluntary and other group products in employee benefits? In other words, as you've been pulling back on stop Loss to. To reprice the business and improve profitability, like, to what extent is this having a negative impact on the growth of the other product lines in that business or are they not that interrelated at this point?

Jay Caterson (CEO of Workplace Solutions)

Hi, Ryan, it's Jay. I'll take this one. We see stop loss right now as another important risk transfer solution. It is rising in demand from our employers. And while we're not seeing stop loss and maybe broader employee benefits in a bundled sale today, it is another important solution for our employers and even more importantly for brokers who are actively looking to grow their stop lock books given the heightened demand in the market. So Stop Loss, we see it as a door opener for new brokers who are entering the space as the demand is increasing. But it's also driving tighter alignment and value with the existing employee benefit broker relationships. You know, Since I joined 16 months ago, you know, we've been focused on the workplace strategy structure and the people. And I couldn't be here with the new workplace leadership team specifically for Stop Loss. We focused on bringing in strong leaders with deep expertise. And what you're seeing today is a really tight flying formation with our leaders in risk pricing, underwriting and distribution. And as you can see in our results, the new team is already driving meaningful change. Our commercial momentum and results. As you referenced and talked about the impact it's having in our employee benefits business, Employee benefits sales are up 8% year over year with persistency remaining strong. In our supplemental health and voluntary business, where we continue to grow from a top three provider position, we're really pleased with the Results. To start 26, our pipeline is up 10%. Sales are up 13% over prior year and that's resulted in a block growth of 4%. So overall, the positive commercial momentum we're emerging in employee benefits and what we're seeing is this connection point on additional risk transfer and stop loss is deepening our relationships with our intermediaries and our customers.

Heather Lavallee (Chief Executive Officer)

Yeah, and Ryan, if I can just add. It's Heather again. Maybe three additional points on Stop Loss and why it's so important is first, we're seeing increasing demand from employers for stop loss. RFP volumes are up 200% year over year. And it just goes to. There's a real need in the market for this, but there's also limited supply. And why that's so important is if you think about that increased RFP activity, we can continue to be selective when we're doing our underwriting, but that limited supply also holds up on the hardening market and our ability to get pricing for this business.

OPERATOR

Our next question is from Pablo with JP Morgan.

Pablo (Equity Analyst)

First question is for Mike on Stop Loss. You'd mentioned that stop Loss claims are coming in faster. Is there something you change in your operations that's driving that or is it claim amount just being larger and therefore hitting retentions faster? I think one of the difficulties with stop Loss is your excess position. But I was wondering if you're getting better line of sight into the claims even before they break retention level.

Mike Katz (Chief Financial Officer)

Thanks. Hey, Pablo. Yeah? I think it depends if you look at it from a reported or paid perspective. You're looking from a paid perspective. Absolutely. The operational effects matter and we are churning through claims faster. We've got more people. Jay just talked about the talent we brought in. We're excited about that. It's really what we're trying to get at. More is around the reported side and what we're seeing from 24 to 25 and now again 25 to 26, where the claims experience has come in faster. We've talked a lot about cell and gene therapies, we talked a lot about the severity of claims coming in and frankly, some of the health care providers trying to move that through the system because they're thinking about their P and L faster. Stop loss is a tail product. We would typically see that more on the later side, 24 to 25 was the first time we saw that. And so now, and we were sitting here in the fourth quarter only two thirds complete with experience, we weren't sure if that was necessarily going to be a trend once again. So you're certainly going to want to be on the higher end of a best estimate range being put in that position. I think the good thing, now that we're 90% through, we're seeing that again, we think this is the new normal coming out of COVID And so we're post Covid and so I think that's a good thing. Again, we're running a couple points better when we look at it from a reported perspective year over year. You can see that through the reserves and the disclosure. I think that has us feeling really good. And again, April has us feeling really good. And this is, as Heather was mentioning, it's a big part of the cash generation expansion story for us in 26 and beyond. So we're really looking forward to letting the experience speak for itself and we expect it to in the balance of the year.

Pablo (Equity Analyst)

Thanks for that. And my follow up is also on Stop loss. Right. So taking a step back, I think if you just look at stat results, for example, the other insurers you compete with in the market have historically reported loss ratios in the low 70s. They run, you know, high 70s, low east, which is fine in a more normal environment. And then you have the health insurance that run much higher. I was just wondering that, you know, just given the experience of the past couple of years, if, you know, you think that entails a change in your approach to pricing, just given the fact that, you know, maybe there's more volatility in the, in this business that you know, more than you had previously appreciated. Right. And maybe running at an 80% loss ratio is not the right level considering the volatility. Thank you.

Mike Katz (Chief Financial Officer)

Hey, Pablo, you know, look, I think you're thinking about it very similar that we do. I think maybe just the only caveat to is sometimes when you're looking at other companies, they do have captive businesses that's different than, you know, more the fully insured stop losses. Sometimes that can conflate what you're looking at. But as far as just, you know, where, where's the end state on this? I think we're thinking about it exactly like you are.

OPERATOR

Our next question is from Wilma Burgess with Raymond James.

Wilma Burgess (Equity Analyst)

Hey, good morning from some of the healthcare insurers. 1Q26 reporting. It sounds like medical trend is moderating somewhat still high. And of course it's been unprecedentedly high over the last couple years, but maybe rising at a more modest pace. Are you seeing any of that? And just talk about what you're planning

Mike Katz (Chief Financial Officer)

for, for this year. Thanks. Yeah, Wilma, we're definitely seeing a bit of that. I think it's really early. I think it's a good sign. Yeah, if you look peripherally at some of the healthcare companies out there, you're definitely seeing some of the turnaround there. That's very encouraging for us. It's really early though for us to just in any way declare that that's going to come through results in a big way. But as we've been talking about, the fact that we got 24% on this 26 business, everything Jay talked about on the team, the risk selection we're getting, as Heather mentioned, the number of RFPs we're getting a look at, I think these are all very, very good signs around the trajectory of where this business is headed. And so we're encouraged by that. But we're going to let the results kind of play out and that will illustrate the progress.

Wilma Burgess (Equity Analyst)

Okay, thank you. And then this kind of goes back to Andrew's question on the activists a little bit. But we think Voya's management team is strong and we think you guys are doing a great overall job of running the company. But results were a bit soft across a few important metrics this quarter. And of course there's a lot of volatility in the market and also medical inflation. But could you give us some visibility into the coming quarters and some of the areas where you plan to show progress on growth?

Heather Lavallee (Chief Executive Officer)

Thanks. Yeah, well, let me start and first appreciate the support and you know, as we think about it, we don't necessarily look at progress on a quarter by quarter basis, but really on a full year basis. We are pleased with the results in the quarter with earnings up. But let me toss it to Jay to talk a little bit about the commercial momentum, specifically what we're seeing in retirement. And I think Matt answered the commercial momentum question, but if not, we could certainly circle back to that.

Jay Caterson (CEO of Workplace Solutions)

Jay? Yeah, thanks, Wilma. I'll highlight a little bit of what we're seeing in retirement and wealth. I think I talked about just briefly about employee benefits and where we were seeing the growth and happy to answer any follow up questions on that as it relates to retirement. You know, as I referenced last quarter, we expected Strong flows in 26 with, with most of that growth back half weighted. So, you know, as We've had visibility into the planned first quarter outflows which which are largely timing driven in one America. And due to a known single large plan outflow, we equally have visibility into the known plan implementations in 26 and that's going to result in positive net flows not only in quarter two but for the full year. So our full year 26 outlook is unchanged. We're on track for a fifth consecutive year of positive organic DC net flows. Now it's worth noting our sales momentum remains solid across our key segments. So in large record keeping our wins are scheduled to begin funding in Q2 and Q3. And additionally in Q1 we saw full service sales in emerging markets which is an important market for us, up 13% year over year. And in government where we are leader, we were up 200% year over year. So in addition to all that, I also look at plan retention and seeing that our plan retention was over 95%, you know, and a reminder, this includes the expected impact of When America Surrenders. All of that speaks to the strength we have right now with our sponsors and intermediary relationships. So overall in retirement I'm seeing really strong commercial momentum for the business in 26. And if I kind of translate that over to wealth management where we're starting to see early days in the build, but I'm starting to see success. And what I mean success is I'm pleased with the team and they've achieved some meaningful growth year over year of 12%. That's both on a revenue and an asset view. In addition, we've seen really strong advisor productivity, particularly those that we've onboarded in 25 and 26 as we've been stepping up our recruitment of advisors. The step back here on the wealth management build is that it is embedded in the retirement business's strong 39% margin. This is a really solid result. Now our clients are increasingly asking for more advice and guidance at the workplace. We're really well positioned to fill this demand. And overall I'm pleased with wealth management builds and the overall growth, particularly in the alignment with our retirement business.

Heather Lavallee (Chief Executive Officer)

And Wilma, if I can just add one other perspective from the enterprise. If you kind of think about the collection of points that have been made today about commercial momentum in investment management, the confidence we have in the employee benefits, earnings outlook, the retirement that Jay just talked about, all of those collectively give us the confidence in us further growing cash generation, which is one of our number one priorities and our commitment to returning that capital to shareholders.

OPERATOR

Our next question is from Tom Gallagher with Evercore isi.

Tom Gallagher (Equity Analyst)

Good morning.

Heather Lavallee (Chief Executive Officer)

Just a few follow ups on Stop Loss. So, Heather, if I listen to your comments about, you know, everything, including the activist and the way you're thinking about things, is it fair to say that you think Stop Loss is a core part of the long term Voya franchise or is that something you would consider divesting if the situation was attractive enough? Yeah. So first, good morning, Tom. Thanks for the question. You know, what we have talked about is that we see the earnings improvement in Stop Loss as most immediate source of value creation for shareholders. All right. We've already made great progress with 100 million earnings improvement in 25 on a year over year basis and the $140 million earnings improvement on a trailing 12 month basis if you just look at the first quarter. So it is very valuable for us in terms of that earnings and the cash generation. Now, if you think about it more broadly across the portfolio, what I would say is we see this as a real valuable part of our portfolio and it goes to some of the points we've made earlier is first, there's a lot of client demand, growing client demand, limited supply hardening of the market and the ability to get the price. And we see this as continuing to be an earnings grower for the firm. So the end of the day, Stop Loss is one where it's going to be value creation for shareholders as well as a strategic asset for Voya at the enterprise. Gotcha. Thanks for that. And then just based on your description of what you're seeing, it sounds like you're more constructive on where this business is headed. And I know you're approaching the 26 renewals and certainly 25 renewals is very cautious and more focused on risk selection. As you think about mid year 26 renewals, are you thinking about leaning into growth now or are we still at the part of the year process where you need to further risk select and you may not grow yet? Yeah, Tom, I didn't want to jump in and cut you off, but the quick answer on that is no, we're not pivoting to growth. We continue with our focus on margin improvement and Stop loss and being very disciplined with pricing. And frankly, we're focused on margin improvement across overall employee benefits. So right now it's, you know, continue steady as she goes on that margin improvement plan and, and delivering on the earnings that we know we can deliver with this business.

OPERATOR

Our next question is from Wes Carmichael with Wells Fargo.

Wes Carmichael

Hey, good morning. Thank you. A couple of follow ups as well. So just one question on Stop Loss and loss trend. I'm just curious if there's any update on how that's tracking relative to your 24% rate increase. And I know you mentioned that claims

Mike Katz (Chief Financial Officer)

are coming in faster. Are you seeing any change in trends and the type of claims that are inflecting inflation? And Mike, I think you made the comment that maybe the range of outcomes for the business have kind of doubled. Maybe that was last quarter, the quarter before. Just curious if you still have that view. Hey Wes, it's Mike. Yeah, no, look, I think first we're pricing everything to get back to target. I think as you just alluded to at the end, it was we stood here in the fourth quarter with 2 3rd complete. There definitely was a wider range of outcomes that has narrowed for the 25 block as we get into the first quarter. Quarter now 90% complete. As I mentioned, we're running a couple points better than where we were a year ago relative to the 24 business. That's a good sign. And again I think what we're seeing in April is a good sign. So if this continues then we'll see some reserve release in 2025. And I think similarly we feel well reserved on the 26 business given all the actions we've taken. So we're heads down on it. And as Heather was just referring to, we're going to take the same approach in the middle of the year and just let the results speak for themselves. And we believe this is going to be a big part of that cash generation expansion story for the franchise at the boya level that we've been talking about. We're the second year of the journey and we like where we're at right now. Got it, thanks.

Wes Carmichael

And just switching to retirement during the quarter, it looks like there were some elevated outflows there. I know you spoke to net inflows for 2Q in the full year, but just curious what you're seeing in terms of shock lapses from One America in the quarter and how long that should kind of continue.

Jay Caterson (CEO of Workplace Solutions)

Thanks, I appreciate that question. On the One America integration, if you think about where we are, it's near complete. We're really pleased with where the retention is landing. So I'd highlight that One America's retention is embedded into the comments around positive net flows in Q2 and for full year 26. So this transaction has enhanced our scale. It's also enhanced our distribution. And so when you look at the retirement franchise, talked a little bit about distribution last quarter, we've Onboarded the Edward Jones relationship, fully engaged in this new distribution relationship and then maybe on a completion basis. The team is nearing completion of the final migration wave later this month, which is going to include approximately 3,000 plans. So I'm focused on the team's execution on this integration. The value we're giving for our customers and our intermediaries that we've onboarded through this integration has been really strong and I think you're seeing the results of that. Really pleased with where we are overall in retention and One America is embedded in that.

Heather Lavallee (Chief Executive Officer)

Yeah. And Wes, let me hit the finer point. Specific to One America. We had always expected to see higher surrenders than our normal book. The shock surrenders through the migration period which ends the end of the second quarter of this year. So after that point is when we should certainly things to moderate. But you are seeing those in the first quarter.

OPERATOR

Our next question is from Joel Hurwitz with Dowling and Partners.

Joel Hurwitz (Equity Analyst)

Hey, good morning. Another one on stop loss. So Mike, you mentioned you're running a couple of points better on 25 at this point, but I think you might have pointed to the loss ratio on that. Can you just talk about pay trends or pay trends at this point? Running a couple of points better year over year.

Mike Katz (Chief Financial Officer)

Yeah, paid's actually maybe roughly a point better. It gets to the question earlier around just operational year to year. It's one of the things you always have to be careful with. On paid we have staffing levels are much higher in 25 than they were in prior year. And so that certainly is going to have effect on paid. So that's why I would point you to reported and why we're trying to anchor you to more of like think of us about approximately two points better at this point in the journey.

Jay Caterson (CEO of Workplace Solutions)

And then just back to retirement. How much of the full service sort of redemption pressure is One America? Can you just comment on sort of how the legacy Voya full service book has been performing from a retention standpoint and then sounds like the pipeline is very strong for the back half. Any color on the mix between record keeping and full service there?

OPERATOR

Yeah, appreciate the question, Joel. I think what we're seeing right now is with the One America kind of planned surrenders that we've seen in outflows, we're still sitting at over 95% retention, which is a really strong number. I think you referenced back half and I talked a little bit about where we see flows coming in. I talked about it being back half weighted last quarter. You know, positive development we're seeing some early funding in Q2. We'll be seeing positive flows. And so you know that's, that's in the mix of business that sits today. I don't think you're going to see a materially different mix of business between full service and record keeping. Now you know, as a reminder as we think through this business and providing advice and guidance in wealth management, you know, those recordkeeping plans provide, you know, tremendous value to us as, as we're bringing advice and guidance and, and those plan sponsors are looking for that advice and guidance. So there's value through the ecosystem in those record keeping plans. But you should see a very similar mix as we complete through the year with a high retention rate. So pleased with where that is and clearly a fifth year consecutive of positive flows. You should see that through the end of the year. Our next question is from Josh Shanker with Bank of America securities.

Ryan Krueger (Equity Analyst)

Yeah, thank you for taking my question. Much of it's been answered. I just want to, I guess one more stop off question given that you're marking the new book at 87% combined with double digit rate increases and 2% premium decline. I'm trying to just better understand the unit volume and as Mike said that it's being booked for the hope that it's conservative so it might later yield favorable development. How should I think about that 200, 300 basis point reduction in the benefit ratio against the backdrop of double digit price increases? Yeah, Josh, I would just think of it as. It was what Heather was talking about. We're just being really, really careful about what we let into our block and that includes what already exists in our block and then new business that could potentially be in our block. So we're just being very, very careful with risk selection coming out of this health care cycle. I think we understand that the relative value of a point of margin is meaningfully better than a point of growth. And so to the point around even in the middle of the year, it's the same philosophy. And so we just want to make sure the block is as clean as possible. We think that's the most productive and fastest way to the earnings expansion that we've been talking about and the progress in the second year, this two year journey. Yeah. And just as Heather, I would just reiterate that the kind of the parts and pieces, the 24% rate increase, the reserving on the high end of the range and the strengthening of the underwriting, those are all the components of why we feel so confident in our ability to get continued margin improvement within the 26 year. Is there any relationship between policy renewal, persistency and the potential for adverse selection and you putting up such a conservative mark? I mean with these amount of rate increases, presumably the year over year improvement in the margin should be much, much better. But maybe you're somewhat worried that you have a book of business that is at greater risk. Not really, Josh. Like and we, you know, there's a not to get too deep into this on an earnings call, but happy to get into it deeper with you afterwards. But you know, we look at the block under just different risk dimensions. So there's parts of the block that are going to get rate increases much higher than 24% and there's parts of the block that are getting rate increases that are much lower than 24% because we like that risk and we want to keep it on the book. So think of the 24 as an aggregate. You know, think of us just being very selective around what we like and what we think requires much, much higher rate increases. So it's the right question thinking about it on aggregate. But it's we really dive into this to make sure that again, the block is as healthy as possible. Our next question is from Sunit Kamas with Jefferies. Thanks. Wanted to go to Stop Loss again. And specifically the comment about the most value accretive path is to return it to full margins. Does that imply that you tested the market in terms of interest from external parties when you make that statement? Or I guess what's behind that? Yeah. Suneet. So if you think about it, you know, as I mentioned, our board, we're always looking at different options across all of our portfolios. We're laser focused on the earnings improvement as the most immediate and value accretive action that we can take for this book of business. And then maybe just sticking with the board. And I appreciate the comments about line of sight or alignment, excuse me, between management and the board and all the commercial momentum you've shown over the past couple years, including the first quarter here. But if I look at the stocks pe, it's at a pretty significant discount to what I would consider to be your peers that occurred or that has come despite the fact that you've exited some risky businesses like CBVA and Individual Life. And that was the case even before Stop Loss had issues. So I guess when you think about these conversations you're having with the board, I mean, how do you explain that and what's the path to try to get a better valuation here yes, it all comes down to execution. We you go back and look at the priorities that we've laid out. Our focus is on executing every quarter, every year and delivering that shareholder value. And what I would look to the proof points is first it starts with how we're delivering for our customers and our customers are voting with their feet. You look at the commercial momentum. We're coming off two record years in investment management, strong margins, great investment performance and the confidence we have in continuing to drive that growth. As Jay mentioned, five years of positive flows in retirement and margins that are industry leading. We've got a lot of confidence in continuing to grow. And the proof points that we've delivered already on the employee benefit improvement of, you know, 100 million earnings improvement in 25 and 140 on a trailing 12 month basis. And I think the last thing I would kind of leave you with sunit is that the collection of those businesses. I'm going to go back to our focus which has been on continuing to drive growth in our free cash flow generation and then making sure we are returning that and deploying that into the most accretive opportunities and that's in returning that capital to shareholders. So we think the collection of doing all of that sunit is going to continue to further to drive our share price and the value of the franchise. Our next question is from Mike Ward with ubs. Good morning. I was just wondering in retirement if you guys could give us an update on the inorganic pipeline potential. Yeah. Good morning Mike. Thanks so much for your question. You know, we've been active, we've been vocal on how pleased we are with One America, the integration and adding new clients in and delivering over a 30% return on that acquisition. So we're active, we're looking for retirement roll ups, but we don't see anything imminent. Which goes to what Mike and I have been talking about of the cash that we generate, the excess cash, it's the expectation that we're going to deploy that into the highest value and that's in buying the company we know, which is Voya, through share repurchases. Thanks, Heather. And then on the wealth business, you guys said revenue's up 12%. I think just kind of wondering like how that is going so far and how much of that is driven by organic conversion versus markets and just kind of overall curious like how the reception is in terms of kind of turning on the advice switch. Yeah. And Mike, I'll let Jay cover it, but you're absolutely right. And our focus there is on the revenue growth and that's kind of the metric that we're looking at for success. But you know, it's been just 10 months since we stood up this office and we're really, really pleased with what we're seeing. So I'll turn it to Jay to elaborate. Yeah, you know, if we look at the wealth business and you look at where, you know, where we have a right to win, I mean between the roughly 10 million, you know, customers we have to our retirement business and equal that through our employee benefits and benefit focused business and looking at the request for advice. In my career this is probably the loudest employers have been in seeking advice at the workplace. And so when you look at our business, you know, we really are well positioned when we service our customers the right way through retirement and employee benefits, we build their trust and that trust translates to the ability to bring that advice to the workplace. And because that advice is being sponsored by employers and plan sponsors and we have an existing relationship and an existing solution with that client, we think we have a unique advantage to continue to build that lifetime value for our customers. And that also allows us to connect in Matt's business where he is helping us build some unique solutions in the marketplace. And so I think when you look at the overall wealth management business and how we've been building it, we've been building it through recruitment of our advisors, really happy with the early development and the productivity of those advisors. The tools that we have onboarded have helped us create efficiencies and overall there's more and more demand for digital self service which is a future component of our build. So I like where we're at. I also love the fact that that build is sitting inside our 39% margin in our retirement business. So, you know, overall a really productive build for us and in alignment with where our employers and plan sponsors are looking for on the advice and guidance. Our next question is from Alex Scott with Barclays.

T

Hey, thanks for taking it. I do have one follow up on Stop Loss, so apologies for that ahead of time. I just heard a comment that we're two years into a two year journey and I thought that was interesting. I mean, that sounds like next year you'd be back at targeted margins. I just want to understand if I'm hearing that correctly and the timing associated with that kind of comment and maybe if you could help us understand how we get there. Because even if we give you the benefit of the doubt on some of the reserve development, it still seems like we're you know, a decent amount above, you know, where you'd be targeting right now. So yeah, I mean, do I have that right? And anything you can tell us about the IBN or something you're seeing to help us, you know, put numbers behind your optimism?

F

Yeah, Alex, thanks for the question. I'll start with the thematics and then toss it over to Mike.

E

So you're absolutely right.

F

When, when all of this started coming out of COVID and we saw the impact on the broader industry, we've always said we expect this to be a two year journey and not something that was done in one year. We really, really like the progress. And as Mike mentioned, we're pricing the business to be back within the target loss ratio. So that is certainly the goal we have laid out and we're going to see how things progress through the year. But we've got confidence in seeing that improvement.

T

Okay, follow up question is just related to a couple peers engaged in a merger of equals. I know both of them, I think were much smaller peers in terms of their group retirement businesses specifically. But it does sort of indicate an increase in importance on scale. And just thought I'd get your take on where BOYA is situated relative to that competitive positioning. And as a result of, you know, some of the peers scaling up, do you see any more fee compression in the competitive environment? Are you expecting to see that?

F

Yeah, first Alex, frankly, America now serving close to 10 million participants, we would not be a scaled provider if we could not operate at a 39% margin for 10 years. So retirement really, really like our position. The expansion into wealth management is absolutely the right strategy where we're building on a core foundation. You know, in investment management, you think about the two years of outpacing the industry in terms of organic growth, delivering strong investment performance. Our fees are holding up really well, we're improving margins. So, and maybe I'd close with it, is also buoyed and strengthened by a solid balance sheet. We're one where we don't have, we don't have a lot of noise in our balance sheet. We generate a lot of free cash flow and we've got scale where we play.

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