Voya Financial Inc. VOYA is poised for long-term growth on the back of solid segmental performance, cost savings initiatives, strong capital position and prudent capital deployment. Operational excellence should help the company achieve bottom-line growth of more than 10% in the next three years.
The company has seen its 2019 estimates move up by a cent in the past 30 days, reflecting analyst confidence in the company.
Voya Financial’s return on equity was 8.1%, higher than the industry average of 5.7%. Return on equity is a profitability measure that identifies the company’s efficiency in utilizing its shareholders’ funds. The life insurer targets operating return on equity between 13% and 15%.
Voya’s core businesses — Retirement, Investment Management and Employee Benefits — continues to drive high quality and sustainable earnings for the company. Voya expects its Retirement business, Investment Management and Employee Benefits to boost earnings by a respective 4% to 7%, 5% to 8% and 7% to 10% annually through 2021.
The company has been focusing on lowering costs. Voya is targeting an additional $100 million of run-rate savings by the end of 2020. This is in addition to its earlier goal to achieve $110 to $130 million of cost savings by the middle of 2019 and $20 million in expected savings from its decision to discontinue sales of individual life insurance.
Also, the risk-based capital ratio of 479% is above the 400% target while debt-to-capital ratio of 26.6% is well below the target of 30%. The company estimates total free cash flow conversion of 85% to 95%.
Voya Financial has a disciplined capital management policy in place. While the company announced intention to increase common stock dividend to a dividend yield of at least 1% by mid-2019, it also entered into $250 million accelerated share repurchase program in early first quarter of 2019. These make the stock an attractive pick for yield-seeking investors.
Shares of this Zacks Rank #2 insurer have rallied 30.4% year to date outperforming the industry’s increase of 23.3% and the Zacks S&P 500 composite’s rise of 14.9%.
Also, the shares are priced at an attractive level. Price-to-book ratio, which is the best multiple for valuing insurers, because of variation in earnings from one quarter to another, is pegged at 0.9, lower than the industry average of 2.
The Zacks Consensus Estimate for 2019 earnings is pegged at $5.31, indicating 31.4% year-over-year increase. The consensus estimate for 2020 earnings is pegged at $6.13 per share, up 15.5%.
Other Stocks to Consider
Investors interested in insurers can look at Health Insurance Innovations, Inc. HIIQ, Manulife Financial Corporation MFC and Berkshire Hathaway Inc. BRK.B.
Health Insurance Innovations operates as a cloud-based technology platform and distributor of individual and family health insurance plans, and supplemental products in the United States. The company delivered four-quarter average positive surprise of 9.02%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Manulife Financial provides financial advice, insurance, and wealth and asset management solutions for individuals, groups, and institutions in Asia, Canada, and the United States. The company delivered four-quarter average positive surprise of 6.06%. The stock carries a Zacks Rank #2.
Berkshire Hathaway engages in insurance, freight rail transportation and utility businesses. The company delivered four-quarter average positive surprise of 11.26%. The stock carries a Zacks Rank #2.
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