On Tuesday, Keefe, Bruyette & Woods made an adjustment to Voya Financial's (NYSE:VOYA) price target, reducing it to $92.00 from the previous $95.00. Despite this change, the firm maintains its Outperform rating on the company's shares. The adjustment follows Voya Financial's announcement of a negative update on its stop-loss performance and the upcoming departure of Rob Grubka, the CEO of Workplace Solutions (Health & Wealth), at the end of the year.
Voya Financial has experienced a further decline in stop-loss claims through November, leading the company to anticipate a loss ratio for the 2024 policy year of between 90-105%, compared to the previous estimate of 86%. Additionally, there is an expected decrease of 10-20% in stop-loss premiums for 2025, although there should be a significant improvement in the loss ratio for that year, albeit remaining above the target range of 77-80%.
In light of these developments, Keefe, Bruyette & Woods has revised its earnings per share (EPS) estimates for Voya Financial. The firm now projects a 2024 EPS of $6.52, down from $7.94, marking an 18% reduction. The 2025 EPS estimate has been lowered to $9.30 from $10.15, an 8% decrease, and the 2026 EPS forecast has been trimmed to $10.85 from $11.15, a 3% decline. The new price target of $92 is based on 8.5 times the projected 2026 EPS.
The analyst from Keefe, Bruyette & Woods noted that the stop-loss results have deteriorated more than expected, which tempers near-term confidence in the company. However, the firm also highlighted that the stop-loss can be repriced annually, suggesting that the issues could be resolved over time. The analyst believes that Voya Financial is currently trading at a discounted valuation relative to its business mix and robust free cash flow profile, indicating potential for future growth despite the current challenges.
In other recent news, Voya Financial has seen significant developments. Evercore ISI reduced its price target for the company to $89, maintaining an Outperform rating. This change followed the company's announcement of an expected fourth-quarter loss in its medical stop loss business, potentially delaying its target margin range achievement until 2027.
Voya Financial also revised its 2024 accident year expectations, forecasting a midpoint loss ratio of around 98%. The company anticipates this loss ratio to improve to 86% by 2026 due to rate increases. Despite these challenges, Voya Financial demonstrated strong revenue growth of 10.94% over the last twelve months.
RBC Capital and Piper Sandler adjusted their outlook on Voya Financial. RBC Capital increased the price target to $95 while Piper Sandler increased it to $91. The company also announced the upcoming departure of Rob Grupka, the head of the health and wealth business, at the end of 2024.
In other recent developments, HDFC Bank appointed an additional independent director to its board. This decision aligns with the corporate governance standards expected of companies listed on international stock exchanges. This appointment is expected to bring additional expertise and an external perspective to the bank's strategic decision-making process.
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