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Voya Financial Banks on Strong Premiums & Capital Strength

Voya Financial, Inc. VOYA is currently riding on high premiums and strong net investment income, which, in turn, is boosting its top-line growth.

The company has a decent surprise history, having surpassed earnings estimates in two of the trailing four quarters, the average beat being 0.6%.

Factors Driving Voya Financial

Premiums and net investment income contribute a major portion to the life insurer’s top-line growth. While premiums moved up 6.6% in 2019, net investment income improved 4.6% over the same time frame. On the basis of strength across both revenue components, the top line registered an increase of 4.4% in 2019. However, the current low interest rate environment in the U.S. economy is likely to keep investment yields under pressure, which would consequently weigh on its overall investment income.

Voya Financial primarily reports under the following segments — Retirement, Investment Management and Employee Benefits. Strong demand for products and services offered by the segments has continued to aid top-line growth of the life insurer as well. While Retirement segment is driven by solid momentum in higher equity markets and business; Investment Management banks on improved external client net flows and strong performance fees. Also, its Employee Benefits segment seems to gain from the high demand for its product portfolio mainly offered by its Voluntary business.

Furthermore, Voya Financial flaunts a robust capital position on which it returns value to shareholders in forms of share buybacks and dividend hikes. Last August, the company raised its quarterly dividend by 1400% to 15 cents per share. Evidently, its dividend payments have witnessed a CAGR of 71.9% in the past five years (2014-2019).

Also, the company’s decision to divest its non-performing Individual Life business and other non-retirement annuities businesses bodes well. Though Voya Financial has been witnessing an increase in financial leverage for the past few years, its debt levels have reduced by nearly 3% in 2019. Based on reduced debt levels, the company’s interest expenses have declined 20.4% in the same time frame.

Shares of this Zacks Rank #3 (Hold) company have lost 17.7% in a year, narrower than the industry’s decline of 26.1%.

Nevertheless, we believe that its strong fundamentals are likely to drive its shares going forward.

Stocks to Consider

Some better-ranked stocks in the insurance space are AXIS Capital Holdings Ltd. AXS, First American Financial Corp. FAF and Cincinnati Financial Corp. CINF. While First American Financial currently sports a Zacks Rank #1 (Strong Buy), AXIS Capital and Cincinnati carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AXIS Capital, First American Financial and Cincinnati surpassed estimates in the last reported quarter by 150%, 33.33% and 10.81%, respectively.

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Cincinnati Financial Corporation (CINF): Free Stock Analysis Report
 
Axis Capital Holdings Limited (AXS): Free Stock Analysis Report
 
First American Financial Corporation (FAF): Free Stock Analysis Report
 
Voya Financial, Inc. (VOYA): Free Stock Analysis Report
 
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