Voya Financial's Q1 2025 Results: Strength in Wealth, Struggles in Health

Voya Financial reported its first-quarter 2025 earnings, revealing a mixed performance where strategic wins in its Wealth Solutions segment offset persistent challenges in Health Solutions. The results underscore the insurer’s balancing act between growth opportunities and sector-specific headwinds, with adjusted operating earnings rising 5.4% to $195 million despite a 4.0% revenue decline. Here’s what investors need to know.

Revenue: A Mixed Picture

Total revenue fell to $1.97 billion in Q1 2025, down from $2.05 billion in the prior-year period. The decline stemmed from weaker premiums (-7.9%) in Health Solutions and a $34 million net loss from investments, compared to a $43 million gain in Q1 2024. However, fee income surged 11% to $570 million, driven by the OneAmerica acquisition and strong capital markets performance.

Segment Breakdown: Winners and Losers

1. Wealth Solutions: The Growth Engine
2. Revenue Growth: TTM net revenues rose 10.2% to $2.12 billion, fueled by the $60 billion in retirement assets from OneAmerica and $30 billion in defined contribution inflows.
3. Margins: Adjusted operating margins expanded to 39.7%, up from 35.7% in 2024, reflecting disciplined cost management.

4. Client Assets: Total client assets hit $694 billion, a 21% jump from 2024, signaling scale expansion.

5. Investment Management: Steady Progress

6. Revenue: TTM growth of 7.6% to $991 million, with $7.7 billion in net inflows (2.5% organic growth).

7. Margins: Adjusted operating margins improved to 28.1%, driven by fee-based revenue streams.

8. Health Solutions: Ongoing Struggles

9. Revenue Decline: TTM revenues fell 17.1% to $972 million due to lower underwriting gains and strategic actions to improve profitability.
10. Margins: Adjusted operating margins collapsed to 2.7%, down from 23.9% in 2024, as Stop Loss loss ratios and investments in new products weighed on results.

Balance Sheet and Capital Allocation

Voya maintained strong capital discipline, generating $200 million in excess capital during the quarter. The company:
- Deployed $200 million toward the OneAmerica acquisition and strategic investments.
- Returned $43 million to shareholders via dividends.
- Reduced debt by retiring $400 million in senior notes, keeping its leverage ratio at 27.5% (within its 25–30% target).

Despite these moves, the stock closed at $60.64 on May 6, down 0.66% after hours, reflecting investor skepticism about Health Solutions’ turnaround.

Management’s Outlook: Betting on Integration and Rate Hikes

CEO and CFO emphasized two key strategies to drive 2025 performance:
1. OneAmerica Synergies: The retirement plan acquisition is expected to boost Wealth Solutions’ scale and fee income. Management highlighted $30 billion in defined contribution inflows as a positive sign.
2. Health Solutions Turnaround:
- Stop Loss Rate Hikes: A 21% average increase for the January 2025 policy block aims to improve margins.
- Loss Ratio Improvements: The January 2024 cohort’s loss ratio dipped to 93%, while the January 2025 cohort saw an 87% ratio, signaling progress.

Risks and Analyst Sentiment

• Health Solutions Uncertainty: The sector’s margin contraction and revenue decline remain red flags. Analysts note that macroeconomic pressures could boost Voluntary business utilization, further straining profitability.
• Stock Performance: Voya’s shares are down 11.9% year-to-date, underperforming the S&P 500 (-3.9%). Zacks assigns a #5 (“Strong Sell”) rating due to negative earnings revisions, despite beating Q1 estimates.

Conclusion: A Stock for the Patient Investor

Voya Financial’s Q1 results paint a bifurcated picture. The Wealth Solutions segment’s robust growth and margin expansion provide a clear growth trajectory, while Health Solutions’ struggles highlight execution risks. With $694 billion in client assets and disciplined capital allocation, the company is positioned to capitalize on long-term trends in retirement and institutional investing.

However, investors must weigh the near-term drag from Health Solutions against the tailwinds in Wealth. At a market cap of $5.88 billion, Voya trades at a P/E ratio of ~18x (based on $3.26 EPS over the past 12 months), which may be reasonable if Wealth Solutions’ momentum continues and Health Solutions stabilizes.

The stock’s recent dip to $60.64 creates a potential entry point for investors willing to bet on management’s turnaround plans. Yet, the Zacks “Strong Sell” rating and lingering Health concerns suggest caution. Voya’s story is one of halves: its future hinges on whether Health Solutions can match the strengths of its Wealth business.