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Here's Why Hold Strategy is Apt for Voya Financial (VOYA) Now

Voya Financial, Inc. VOYA should continue to benefit from growth across all product lines, rising fee income, a higher rate environment and increased alternative asset income.

Estimate Revision

The Zacks Consensus Estimate for 2022 and 2023 has moved 2.2% and 2.7% north, respectively, in the past 30 days, reflecting analysts’ optimism.

Earnings Surprise History

Voya Financial has a solid track record of beating earnings estimates in five of the last seven quarters and missing in the other two.

Zacks Rank & Price Performance

Voya Financial currently carries a Zacks Rank #3 (Hold). In the past year, the stock has lost 3.4% compared with the industry’s decline of 14.1%.

 

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Return on Equity (ROE)

Voya Financial’s trailing 12-month return on equity (ROE) was 8.9%, which expanded 140 basis points year over year. ROE reflects its efficiency in using its shareholders’ funds.

Business Tailwinds

The Health Solutions segment of VOYA is likely to benefit from growth across all product lines, strong alternative and prepayment income, growth of the Stop Loss and Voluntary blocks of business, and higher alternative asset income.
Voya Financial expects net annual revenue growth of 5-7% for the Health Solutions segment.

Wealth Solutions continues to deliver strong earnings and operating margin, given its diversified revenue streams. The segment should continue to gain from higher fee income from business growth, favorable equity markets and net investment spread experience. Its spread-based income should gain from the higher rate environment.

Voya Financial expects net annual revenue growth of 2-4% in Wealth Solutions.
The Investment Management segment should gain from higher investment capital returns, owing to the overall market performance and higher fee revenues, driven by higher average equity markets and positive net flows.

The company expects net annual revenue growth of 7-10% in Investment Management.

Voya Financial undertakes strategic steps to ramp up growth in its Investment Management segment. In June 2022, the company and Allianz Global Investors entered an agreement, wherein Allianz Global Investors will transfer its U.S. business to Voya Investment Management. The transaction is a strategic fit, as Allianz Global Investors would make Voya IM’s investment strategies available outside the United States, leveraging its international presence through a long-term strategic partnership.

In August 2022, Voya Financial inked a deal to acquire Czech Asset Management to build upon Voya IM’s continued growth, and expand its private and alternative capabilities.

Voya Financial boasts a solid balance sheet and capital position. The company exited the quarter with excess capital of $0.7 billion, which is above the estimated statutory surplus in excess of a 375% combined risk-based capital (RBC) ratio. Free cash flow conversion of 90% to 100% leads to a high free cash flow yield, which currently stands at 13.2%, one of the highest in the industry.

As of Jun 30, 2022, VOYA had $271 million remaining under a share repurchase program. On Apr 28, 2022, the company’s board provided its most recent share repurchase authorization, increasing the aggregate amount of the common stock authorized for repurchase by $500 million. The share repurchase authorization expires on Jun 30, 2023.

Stocks to Consider

Some better-ranked stocks in the insurance industry are Arch Capital Group Ltd. ACGL, American Financial Group, Inc. AFG and ProAssurance Corporation PRA, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The bottom line of Arch Capital surpassed earnings estimates in three of the last four quarters and missed in one, the average being 33.64%. In the past year, the insurer has rallied 12.8%.

The Zacks Consensus Estimate for Arch Capital’s 2022 and 2023 earnings has moved 5.7% and 4.9% north, respectively, in the past 30 days.

American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 37.09%. In the past year, American Financial has lost 2.8%.

The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 3.1% and 3.3% north, respectively, in the past 30 days.

The bottom line of ProAssurance surpassed earnings estimates in three of the last four quarters and missed in one, the average being 150.9%. In the past year, the insurer has lost 11.7%.

The Zacks Consensus Estimate for ProAssurance’s 2022 and 2023 earnings has moved 25.9% and 13.9% north, respectively, in the past 30 days.


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