Voya Financial's Q2 2025: Can Alternative Investments Keep the Momentum Alive for Shareholders?

Voya Financial (NYSE: VOYA) is set to release its Q2 2025 results on August 5, 2025, with a conference call the following day to discuss its financial performance. Investors will be keenly watching for updates on its alternative investment performance, which is central to its growth strategy. The company has already hinted at its Q2 alternative investment income, projecting it to fall between $45 million and $55 million—essentially within $5 million of its long-term targets. This consistency raises critical questions: How sustainable is this performance amid shifting market conditions? How does it impact fee-based revenue growth, and can capital returns remain a priority?

The Alternative Investment Consistency Conundrum

Voya's alternative investment arm, part of its Investment Management segment, has been a quiet contributor to its financial health. The projected Q2 range of $45M–$55M aligns with the company's long-term expectations of a 9% annual return. This stability is notable given the volatility in global markets, particularly in fixed income and equity products that underpin much of its alternative offerings.

However, the range's proximity to targets—rather than exceeding them—suggests a cautious outlook. External factors like rising interest rates and geopolitical risks could compress margins. The shows a flat trajectory, reflecting investor hesitation ahead of the earnings report. If the Q2 results come in at the lower end of the range, it could test management's ability to sustain returns in an uncertain macro environment.

Fee-Based Revenue: The Engine of Growth

Voya's Wealth Solutions segment has been the star performer, driven by its dominance in the $13 trillion U.S. retirement market. In Q1 2025, defined contribution net inflows surged to $30 billion, pushing total client assets to $694 billion—a 21% year-on-year jump. The segment's pre-tax earnings rose 11% to $207 million, with margins expanding to 39.7%.

This growth is underpinned by fee-based revenue, which now accounts for over 80% of Wealth Solutions' income. The would highlight this shift. The acquisition of OneAmerica's retirement business has amplified scale, while strategic renewals and a robust sales pipeline suggest momentum will carry into Q2.

The critical question: Can this fee-based machine offset headwinds from Voya's struggling Health Solutions segment, which saw margins shrink to 2.7% due to integration costs from the $570 million Benefitfocus acquisition? The answer hinges on whether Benefitfocus's health-tech tools—like Decision Support for voluntary benefits—can drive scalability without further margin erosion.

Capital Returns: Priorities Amid Uncertainty

Voya's capital return strategy has been consistent: prioritize shareholder value through dividends and buybacks while reinvesting in growth. In Q1 2025, it returned $214 million to shareholders ($174M in buybacks and $40M in dividends), and it recently increased its quarterly dividend by 12.5% to $0.45 per share. With $551 million remaining in buyback authorization as of June 2024, management has signaled confidence in its cash flow resilience.

But the Health Solutions segment's margin pressures are a wildcard. If Q2 results show stabilization there—via rate hikes or underwriting discipline—capital returns could remain robust. However, if margin issues persist, management may need to divert excess capital toward operational fixes, risking dilution of shareholder returns.

Risks and the ESG Edge

Voya's ESG credentials—including its inclusion in the Dow Jones Sustainability Index and its focus on retirement security and gender diversity—act as a competitive shield. These strengths could help attract ESG-conscious investors even if near-term results disappoint. Still, macro risks loom large. A potential recession could crimp retirement plan inflows or voluntary benefit uptake, directly impacting fee-based revenue.

The Bottom Line: A Buy, Hold, or Sell?

Voya trades at a 12.5% discount to its five-year average P/E, offering a compelling entry point if Q2 results confirm two things: 1. Alternative investments remain consistent with long-term targets, signaling no material underperformance. 2. Health Solutions margin pressures are easing, freeing capital for returns.

Investors should also monitor the Benefitfocus integration—if enrollment rates from its Decision Support tools rise, it could unlock a scalable revenue stream.

The verdict? Hold ahead of the earnings call. If the results beat expectations, Voya's P/E discount could narrow, rewarding shareholders. If not, the stock's valuation and ESG tailwinds might still justify a cautious buy for long-term investors.

As always, the devil is in the details. Tune in on August 6 to see if Voya's story holds—or if the cracks in its health segment overshadow its wealth management triumphs.