VOYA - NYSE

Good morning. Welcome to Voya Financial's Second Quarter 2025 Earnings Call. [Operator Instructions] Please note this event is being recorded. I'd now like to turn the conference over to Mei Ni Chu, Head of Investor Relations. Please go ahead.

Good morning, and thank you for joining us this morning at Voya Financial's Second Quarter 2025 Earnings Conference Call. As a reminder, materials for today's call are available on our website at investors.voya.com. We will begin with prepared remarks by Heather Lavallee, our Chief Executive Officer; and Mike Katz, our Chief Financial Officer. Following their prepared remarks, we will take your questions. I'm also joined on this call by the Heads of our businesses, specifically Jay Kaduson, CEO of Workplace Solutions; and Matt Toms, CEO of Investment Management. Turning to our earnings presentation materials that are available on our website. Slide 2 will have some comments during today's discussion that may contain forward-looking statements and refer to certain non-GAAP financial measures within the meaning of federal securities law. GAAP reconciliations are available in our press release and financial supplement found on our Investor Relations website. And now I will turn the call over to Heather.

Thank you, Mei Ni. Good morning, and thank you for joining us today. Let's turn to Slide 4. In the first half of the year, our business model has proven its strength, driven by disciplined execution and our commitment to helping customers navigate a dynamic macro environment. Our retirement and investment management businesses are delivering attractive returns, reinforcing the value of our integrated approach to serving our clients. And in Employee Benefits, we continue to make progress on margin improvement, moving toward the levels of performance that have historically defined this business. We are operating from a position of strength with solid capital and liquidity positions to give us the flexibility to invest in growth, while maintaining a healthy balance sheet. This foundation enables us to deliver long-term value positioning Voya not just for today's environment, but for the growth opportunities ahead. Turning to Slide 5 for highlights from the quarter. Before commenting on our results, I want to share an important update in how we describe our workplace businesses. We're returning to our prior segment names with retirement and employee benefits replacing wealth solutions and health solutions, respectively. These industry aligned names better reflect the services and solutions Voya provides today. Moving to our results. We're encouraged by another solid quarter of performance across our businesses with strong contributions from each of our core segments. In the second quarter, we achieved a major milestone surpassing $1 trillion in total assets across our Retirement and Investment Management businesses, and we're now approaching nearly 10 million participant accounts in retirement alone. This accomplishment reflects the trust we have earned from our customers and the value proposition our integrated model provides. In Retirement, we delivered another strong quarter generating approximately $12 billion in total defined contribution net flows. Year- to-date, we have increased overall assets by more than $100 billion, including $40 billion in organic flows and $60 billion in assets onboarded from OneAmerica. Investment Management generated approximately $2 billion in net flows in the second quarter, continuing a trend of positive organic growth. We continue to see momentum across both institutional and retail channels. In particular, strong demand for public and private fixed income solutions reinforces our leadership in insurance asset management, strong investment performance, platform breadth and diversified client base continue to differentiate Voya Investment Management. Beyond these strong financial results, we continue to advance our strategy this quarter by driving greater value for our customers. We partnered with Blue Owl Capital to meet rising demand for private market access, leveraging complementary capabilities, across our Investment Management and Retirement businesses. This expands our retirement offering and helps plan sponsors and participants pursue stronger outcomes through broader investment choice. The OneAmerica integration remains on track. We're delivering on our full year target of $75 million in operating earnings, while deepening relationships with new customers. In addition, we have announced a new selling agreement with Edward Jones. This partnership opens the door to future growth through one of the country's largest adviser networks. It reinforced the strategic value of the OneAmerica acquisition and our ability to meet the needs of our plan sponsors. In Employee Benefits, we're making steady progress with in-sourcing lead management. Our expanded lead capabilities help to solve an increasingly complex issues for employers. This enhancement, combined with the breadth of our benefit offerings, strengthens our competitive position in delivering bundled solutions for employers. In stop-loss, we saw another quarter of positive claims development, and we remain focused on improving margins. We are encouraged by our performance in the quarter. We will continue to focus on executing on our near-term priorities and are optimistic about our growth opportunities ahead. With that, I'll turn it over to Mike to walk through the financials in more detail. Mike?

Thank you, Heather. Let's turn to our financial results on Slide 7. We generated adjusted operating earnings per share of $2.46 in the second quarter, a 13% increase over the prior year. This result reflects the progress we are making on our near-term strategic priorities, including improving margins and stop loss, strong commercial momentum and integrating OneAmerica. Net income was impacted by investment losses and severance expenses. However, cash generation is still ahead of plan. We incurred $18 million of severance expenses in the quarter. These actions are an outcome of the reallocation of resources to our strategy. As we look to the second half of this year, we will balance ensuring we are achieving our financial targets, while accelerating future profitable growth. We added approximately $200 million of excess capital in the quarter and have generated approximately $400 million year-to-date. With that, let me turn to our segment results. Turning to Retirement on Slide 8. Second quarter was highlighted by continued commercial momentum, driving further organic growth and higher earnings. We continue to make progress integrating OneAmerica which has us approaching nearly 10 million participant accounts across retirement. Retirement generated $235 million of adjusted operating earnings in the quarter and over $860 million in the last 12 months. This represents an increase of 10% and 19%, respectively, over the prior year. Higher net revenues were driven by growth in fee-based margins as our platform continues to attract new flows and gain scale. Spread-based revenues also remained resilient in the quarter due to improved portfolio yields and higher participant fund transfers into the general account. We generated approximately $12 billion of total defined contribution net inflows in the second quarter, bringing our total year-to-date net flows to over $40 billion. The strong commercial result includes positive full-service net flows before OneAmerica and strong success in the large market, including a large recordkeeping win in the quarter. Looking ahead, we expect outflows in the third quarter driven by a large planned surrender and recordkeeping. Having said that, we are on pace for one of our strongest years, growing our total defined contribution assets by more than $100 billion in the first half of 2025 while maintaining strong margins. Turning to Investment Management on Slide 9. The second quarter demonstrated strong organic growth and favorable financial performance. Adjusted operating earnings were $51 million for the quarter and $214 million over the last 12 months. This represents an increase of 2% and 15%, respectively, over the prior year. Our diversified platform, scale and breadth of product offerings continue to drive organic growth at strong margins. We generated second quarter net inflows of approximately $2 billion, contributing to year- to-date net flows of nearly $10 billion. Our institutional business generates strong and steady demand for our suite of public and private fixed income solutions. These solutions continue to strengthen our leadership position, including key strategic focus areas such as insurance asset management. Our retail net flows contributed nearly half the net inflows in the quarter, and approximately 1/3 year-to-date. We are encouraged by the momentum across both domestic and international retail channels. These results are an outcome of the experienced leadership team delivering strong investment outcomes for our clients. Turning to Employee Benefits on Slide 10. We continue to improve margins and employee benefits. Adjusted operating earnings for the segment were $69 million in the quarter, up 15% over the prior year quarter. We have lowered our expected loss ratio for the January 2024 cohort by 200 basis points to 91%. This was driven by claims experience in the second quarter. This cohort is now over 95% complete and will be nearing completion in the third quarter. For our more recently priced January 2025 stop-loss cohort, we continue to hold reserves at an 87% loss ratio, no change from the first quarter. As a reminder, it is early in the development of this cohort. Experience will be more credible later this year. In Group Life and voluntary favorable claims experience in the second quarter led to improved loss ratios. As we look forward, continued discipline in underwriting and risk selection remains our top priority. We continue to embed industry data and medical trends into our pricing while delivering a market-leading portfolio of benefit solutions for our customers. Turning to Slide 11. Our balance sheet is well positioned and was strengthened by the approximately $200 million of excess capital we generated in the quarter. We returned over $40 million of capital to shareholders via common stock dividends and entered the third quarter with approximately $300 million of excess capital. Turning to Slide 12. We've now generated approximately $400 million of capital year-to-date above our 90% target. The first half positions us well to achieve our plan to generate over $700 million of excess capital for the full year. In the third quarter, we will resume share repurchases targeting $200 million in the second half of 2025 as planned. Looking forward, we are focused on executing our near-term priorities, generating consistent strong free cash flows and executing on our balanced approach to capital deployment, which maximizes shareholder value over the long term. I'll now turn it back to Heather.

Thanks, Mike. Turning to Slide 13. This quarter, we made meaningful progress on our priorities, delivering strong first half results across our businesses. Our priorities for the remainder of the year are unchanged, driving strong organic growth in Retirement and Investment Management, successfully integrating OneAmerica to drive higher earnings and meaningfully improving margins and employee benefits. As we look ahead, we're executing with purpose, helping our customers achieve their goals while generating strong cash flow across our businesses. I want to thank our team for their continued focus and hard work. And with that, we'll turn the call over to the operator so we can take your questions.

[Operator Instructions] Our first question is from Elyse Greenspan with Wells Fargo.

I guess my first question is on just the stop-loss business. I was hoping to just get some more color on just what led you to bring down the [ '24 block ], again, this quarter. Just how '25 is looking? And then is the expectation still that you guys would expect to get back to target loss ratios on that business in 2026?

Elyse, Mike will start and take your questions.

Elyse, first, I'll just start by saying stop loss continues to be a high priority for Heather, myself, Jay, the entire management team. We continue to be laser-focused on the prudent actions we've been taking across reserves, pricing, risk selection, underwriting. You asked first about the January 2024 business. We did reduce the IBNR in the quarter, the reserve levels from 93% to 91% as a targeted loss ratio. And that's just simply based on the claims experience that came in the quarter. So as we come out of the quarter, we believe 91% is the appropriate amount. You also asked about January 2025. What I would say on that is very, very early in the development of that cohort. We would estimate that it's approximately 15%, 1 5, 15% complete. And so as we step back and we think about reserve levels going forward, it is a very uncertain backdrop in the health care industry. And so as we approach the reserving, we're going to continue to take a prudent approach as we see that play out for the balance of this year. What we like about this business is it's annually renewable, which allows us to take decisive actions around rates-risk selection and the way that we're approaching the pricing is to get back to target loss ratios. And the last question you had, Elyse, do you still continue to expect it to be a 2-step process. That is our goal. We're coming out and trying to price every piece of business such that we get back to target margins. But again, we have this very cautious mindset heading into the fall. And I would just finish by saying the entire mindset of the entire team is that we're going to prioritize margin over growth.

And then my second question, I guess, is on capital. I know you reaffirmed the buyback view for the second half of the year. But then for '26, I think there's like $160 million that could be due to OneAmerica, not sure. It sounds like you guys are on track with that deal. So I guess, expectations would be that, that's paid out next year. Is that going to impact, I guess, '26 capital return? Or should we think of '26 being more in line with historical levels than 2025 in terms of share repurchase?

Yes. No, makes sense. It makes sense. And look, we're going to -- we believe it's prudent to stay on plan for repurchases. We talked about $200 million in the second half. The capital we generated in the second quarter, the capital we've generated in the first half puts us in a good position to do just that. And then as you alluded to, we exit 2025 well positioned with sufficient capital to address OneAmerica and the earnout that's expected in the middle of next year. I would say just as a quick aside, OneAmerica fully on track. We hit that in the prepared remarks. And as it relates to just next year, more to come on how we think about the deployment of capital, we come into it in a position with a balance sheet that's healthy, a balance sheet that's strong and businesses that continue to generate a lot of capital. And I would just finish by saying 2025 is a good example of balanced capital deployment. When we think about what we deployed and what we're executing both from an organic and inorganic perspective but then also finishing the year with the share repurchases that we signaled on the call.

Yes. And Elyse, it's Heather, if I can maybe just build a few points on Mike's comments. I'll reiterate, we're going to continue to take a balanced approach to capital as we think about '26, but we also expect to continue to drive higher cash flow generation heading into '26. A couple of things that I would point you to, to think about where -- what are the attractive investment options for us heading into '26, I'll point to 3 things. First is continued investments in wealth management. We have some modest investments that are baked into our '25 targets around growing our field and phone-based advisers and building digital capabilities. We think that this is a really attractive growth area for us, given the growth and success we've had in the workplace business. We like the high-margin, high-growth opportunities within Wealth and are well positioned to build on the base. Second, I would point to is retirement roll-ups. We're going to be opportunistic around this. You certainly can't predict inorganic. But we think that the OneAmerica, certainly, has been a terrific addition to growing our retirement business and very attractive for shareholders. And the third area that I would point to is investing in automation across the organization. We're certainly going to take advantage of AI capabilities and to drive efficiencies that creates sleeves of spend that allows us to reinvest in higher growth areas. So I just want to reiterate the fact that we continue to see some really nice catalysts for growth heading into '26.

Our next question is from John Barnidge with Piper Sandler.

My first question, can you maybe talk about the Blue Owl partnership and opportunity, what it means for retirement? Do you anticipate maybe some co-branding of products as options?

Yes. Thanks, John. We'll do a combination of Jay and Matt will add some comments.

Thanks, John, for the question. We're really excited about the Blue Owl partnership. When we think about what Matt and I and the IM team were able to develop through this partnership, really is a lot of mutuality of interest and we're on our front foot here. This partnership, John, is going to let us expand the access to private investments, as you heard Heather open with. With that said, we are paying attention to the regulatory environment and any developments that may impact our business. Specifically, today, we're currently developing CITs that will soon be on the shelf. It's going to start with our adviser managed accounts and it's going to be embedded in our target date funds. So the Blue Owl partnership, it really does better position us to meet what I would say is an expanding need of our customers and plan sponsors. but Matt, anything you'd build on?

Yes. No, I completely agree, Jay. We look forward to building products together for retirement plan participants. This will include within target date products where the combination of Voya's areas of the expertise pair very nicely with Blue Owl's broader and complementary private strategies. Our focus will be on risk-adjusted returns as well as attractive returns net of fees. That's critical for the outcomes for retirement plan participants. We think that will be a benefit to the entire space and open up the retirement landscape in a very beneficial manner for active managers. We also look forward to opportunities within the insurance channel, where the breadth of our complementary capabilities and structuring capabilities really provide a differentiated value prop for our clients. So in sum, the early feedback from our clients is quite positive, and we look forward to building the partnership.

My follow-up question would be on the distribution partnership with Edward Jones. Will those products and the full product suite be available through that.

Yes. Thanks, John. So I'll just start. And this was one of the other attractive aspects of an OneAmerica, right? Not only did we see an opportunity to grow the revenues by $200 million, the earnings by $75 million, but we also talked about the attractive capabilities and the Edward Jones partnership being one of them, but I'll turn it to Jay to elaborate.

Great. John, thanks for the question. If you think about OneAmerica today, right, it accounts for about 10% of the retirement business and the contribution today is pretty consistent with that. And one of the big advantages that we saw with that acquisition was the partnership programs with certain key adviser firms like Edward Jones. We were successful in the second quarter in executing a selling agreement, and we like this relationship. We think it's going to help us drive more full service sales. The partnership programs, you should think about them helping us expand our distribution footprint. And they really are going to be a key driver of growth for the retirement business. In the second quarter, I spent a lot of time with our intermediaries and plan sponsors that came to Voya through the OneAmerica transaction, and we continue to receive very positive feedback on Voya's products, our services, but more importantly, our people. As part of that transaction, we acquired some great people and relationship managers. And so the consistency and retention of those relationships, as you see in our numbers are starting to show themselves. So again, we'll come back as more of these distribution relationships get executed.

Our next question is from Tom Gallagher with Evercore ISI.

Just wanted to ask a few questions on medical stop loss. The -- now I know it's early in the 2025 accident year. But -- there were essentially 2 components, as I think about to improve the outcomes this year and into next year. One was re-underwriting the book and risk selection. And the second was just getting enough rate, broadly speaking, on the medical loss cost trend. So I guess my question is, what are you -- what's the broader kind of macro development you're seeing so far? Because I assume you don't have enough seasoning on your own book, but you probably do have some inputs on medical loss cost trend more broadly, and that's probably informing your pick and why you left it at 87. So you're still seeing that same level of elevation in loss cost trend where you reinsure. That's question number one. And number two, how is the risk selection gone so far based on -- and maybe that's early, but I just want to get a sense for -- does it look like you got it right in terms of the non-renewed business versus that which you retained?

Thanks, Tom. We'll let Mike take your questions.

Yes, Tom, look, first, I'd say, it is still uncertain out there. I think to what you're trying to drive at is how do we see ultimately what we price for materializing in the results. And when you're pricing, you're always taking a forward-looking approach. And maybe the one thing I would say that continues to give us the posture of making sure that we want to see this play out is that we expect first dollar medical inflation to increase in 2026 relative to 2025. We continue to feel good about what we did heading into January 2025. You hit the 2 pieces where we were very prudent around the rate that we went after. We were very prudent around underwriting and risk selection, but it's just too early. I think we'll have a better sense of where 2025 ultimately lands later this year. You should think fourth quarter is kind of the first key moment where we're going to be approximately 2/3, maybe 70% complete. So we'll have a much better sense. But there's a lot of noise, as you know, Tom, in the health care arena. And I think right now, it's just too early to signal anything different than what we have up.

Got you. And Mike, anything on the risk selection because I think there that was more unique to Voya, not so much of a broader market issue. Do you feel like the initial indications on the changes in the business you lost, is playing out as you thought? Or any color or light you could shed on that?

Yes. And Tom, you're alluding to the point that we made around known claims being a piece of what drove the unfavorable experience last year. And just for those not close to this, that's where you ultimately would see a claim from a prior year, maybe younger cancer, where the opportunity for that to continue into the next calendar year is higher. That was absolutely a focus with the underwriting teams going into the year, but they're still when you think about cell and gene therapy drugs, when you think about younger cancer still being kind of an area of higher frequency, we continue to feel that the 87% is the appropriate level for January 2025.

Yes. And Tom, if I can add, it's Heather, I think the punchline on stop loss is we're making meaningful progress, but we're not taking our eye off the ball. As you think about what's going on in the broader landscape, some of the things we're paying attention to, this is more going into the 1/1/26 pricing season. It Is just what's going on with first dollar expenses, what we're seeing in trend on high dollar drugs as well as paying attention to provider billing and just seeing if that has any impact on 1/1/26 pricing. And what I would reinforce that Mike talked about earlier is that going into the 1/1/26 pricing season, we are assuming that medical trend is going to be higher than we had assumed it a year prior. And so that's why, Jay, Mike, our entire teams, we're continuing to focus in on the discipline of margin improvement over any type of premium growth and really the alignment between our underwriting pricing and sales teams.

Our next question is from Ryan Krueger with KBW.

I had 2 questions on the voluntary benefits business. First was on the loss ratio. It improved to 47% in the quarter. Are you still expecting more around 50% in the back half of the year at this point?

Ryan, yes, I think that's the base case at least for the third quarter. As you alluded to, we did have favorable claims experience in the quarter. We talked about last quarter that we're adding additional reserves to the tune of 150 to 200 basis points per quarter in advance of the fourth quarter where we see seasonality for voluntary. So we're obviously happy with the favorable claims experience in the second quarter, but no change to outlook in the third quarter and then we'll have a better sense where this ultimately lands at the end of the year.

And then related to this, could you give a little bit more color on what's driving the decline in voluntary premiums this year, previously had free strong [indiscernible].

Ryan, can you repeat the question? You broke up a bit there.

Apologies. I was just asking about why the voluntary premiums are declining this year compared to the strong growth you had over a number of prior years?

Yes. We'll let Jay take your question. Thanks for clarifying.

Thanks, Ryan. If you think about 2024, Ryan, sales finished really strong it was due to a number of a few jumbo cases. And you should think about top line is actually trending really well for the full year '25. In addition to that, our ability now to bundle in-source leave solutions sets us up well for 1/1/26. That was always a desire in that leave investment is our ability to bundle leave. If you think about with leave today and other voluntary products, when you think about group and voluntary and self-health, 50% of those cases are now getting bundled with leave. And so as we think about the overall voluntary business, that leave solution will help us get access to more RFPs. This has been a deliberate strategy to drive member engagement as you think about this with our members and customer retentions for the long term. So always balancing, Ryan, this kind of driving consumer value with the cost of servicing claims, particularly as utilization increases, but we are a market leader. We're a top 3 provider for voluntary with 10% market share. And maybe just in closing, we've taken deliberate steps to align the product performance with customer value and market expectations, specifically a couple of areas. We've upgraded in-force blocks. We've enhanced the benefits and we've improved the admin experiences to actually ensure that the members are using what they buy. When customers see early value, they stay longer as groups stay longer with 3-plus years, we see participation rates double. So it's going to be a solid '25.

Our next question is from Wilma Burdis with Raymond James.

Some of the other alternative asset managers have cited that the 401(k) landscape is going to change dramatically in the near term. Could you go into a little bit more detail on how you're offering with Blue Owl work for the customer and the types of products you hope to develop in the future? And additionally, would you expand your -- with other alt managers.

Yes. Thanks, Wilma. We'll let Matt elaborate. But really, we think this is something that everything we do is really intended to drive participant outcomes and breadth of offerings. And so we think this is just yet another example of how we can give access to private markets to our participants who just historically have not had it. But let me let Matt get into a little bit more of the technical.

Yes. Thanks, Wilma. There is a regulatory component to this that you see, obviously, in the new paper every day. So ultimately, plan sponsors have to make choices about what they offer. Our announcement with the Blue Owl is that we're going to work with Blue Owl who is a highly regarded partner to build solutions that we think importantly, provide strong risk-adjusted returns for plan participants as well as strong and attractive returns net of fees. So now those concepts are a little different than what you hear in the retirement space today, which is lowest fee passive regulatory or legal uncertainty. So this conversation will happen through the industry over the coming quarters and years. I wouldn't anticipate this to be incredibly fast. But as you see that standing up products such as target dates that could include a broader array of active and private solutions makes a lot of sense. We'll provide better outcomes for clients and our complementary capabilities within Voya Investment Management in Blue Owl, I think is a fantastic platform to build from. To your second question, will there be other providers naturally on a platform the size of ours, you're going to have an array of providers, but we look forward to working specifically with Blue Owl to deliver products and design products, co-create products we're excited about.

Okay. And then how are you thinking about the fees and the economic split on these types of products given the sensitivity you just mentioned to a few levels in 401(k)?

Ultimately, it's much like any active management. The way I'd frame it is active management needs to provide a value proposition beyond the fees that are embedded. So still much to be determined. I think of CITs as being the cornerstone and the vehicle of choice within the retirement landscape because of its lower fee access points. So that fee component, the expense component will work closely on. These products aren't in launch yet, but we'll be working towards that. And I would tell you, the entire industry will be looking at making sure that you have these long-term investments oriented towards a net fee return that's attractive. So stay tuned, but really no different than the active investment management more broadly. .

Our next question is from Suneet Kamath with Jefferies.

I wanted to go back to stop loss for a second, and I appreciate the color that you gave. Just on the medical cost trend, I guess I just want to clarify, is what you're seeing in terms of the cost trends year-to-date. Consistent with what you assumed in your January 2025 pricing, meaning step one, because it seems to me that a lot of health insurers are seeing an escalation in severity and frequency, which perhaps they did not anticipate, which is surprising investors. So I just wanted to get a sense of how things are playing out versus what you built into pricing.

We'll let Mike take your question.

I'm very consistent with what I was sharing with Tom earlier. We continue to approach 2025 with that uncertain and kind of cautious view given everything that's happening with the health care industry. As it relates to what we price for, what we underwrote, we came into the year feeling good about that. I think as I mentioned earlier, we're still only 15% 1-5 through. So it's -- I think it's way too early for us to get much deeper into how we see claims ultimately playing out for the year. But I would say in the same breath that we put up 87%. That's our best estimate right now. And as we get deeper in the year, we'll continue to update you with respect to how this plays out. As Heather mentioned just a moment ago and I shared earlier, we continue to think as we move into the fall that first dollar medical moves up, we are working with advisers. We are partnering with everyone that we can to make sure we have the best thinking around that, whether it's cell and gene or what might happen with cancer in younger ages and making sure we have the best thinking around that. But again, this is something that we'll continue to update you in the fall. And as I said earlier, we'll have a better sense ultimately where this 2025 block is heading in late third quarter, fourth quarter. .

Okay. Sorry for the repeat question. And then I guess on retirement, can you just talk a little bit about what you're seeing at the planned participant level in terms of withdrawals? And maybe an update, I think, on prior calls, you've talked about strategies to retain more assets at retirement -- point of retirement. So just an update there would be helpful as well.

Yes. We'll let Jay take your question. We have seen some improvement. And we've also -- as we've talked about on prior calls, has been working on some product development to be able to retain more of those assets. But Jay?

Yes. Great. Appreciate the question, Suneet. If you think about retention, we feel really good about where we're retaining, whether it be in the OneAmerica at the 90% level that we talked about, full-service plan retention remained really strong this quarter at 97%. That's in line with expectations. And the results that we see are really demonstrating the clear execution we've had towards the strategic priorities around commercial momentum in OneAmerica. It was a solid first half of the year. You heard Heather reference $100 billion of positive flows with $40 billion being purely organic. Much of that was in the large end of the market in record keeping. The results in record keeping, they are purposeful and it's selected growth. We see it as an attractive market. That's also -- if you think about this very complementary to our other businesses, including wealth management, where -- we continue to expand our adviser base and capabilities to serve the customers to and through retirement. So we feel really good around where our strategy is around retention. Our pipeline right now remains really healthy. We've got 25% more assets year-over-year in the final stages in the key segments. It really does underscore our value proposition. So whether it be where we are in current flows, our retention or our pipeline, it's a really strong business right now in '25.

Sorry, anything on the participant behavior? That was kind of the root of my question as opposed to planned behavior.

Yes, thanks. I'll take that question. I think what you're referring to is in prior years where we saw heightened participant surrenders with a higher interest rate environment. We have seen that begin to normalize a bit in '25. So given some of the market volatility in the second quarter, we did see more transfers from variable into fixed. So that has been a favorable trend. But in addition to some of that participant behavior, we are also seeing a greater uptick in some of our target date funds that include the general account and other products. So we see this as a combination around what's going on with the participant behavior as well as making sure we've got a competitive sleeve of products to be able to help us to moderate some of the outflows we have seen in the general account. Hopefully, that answers your question.

Our next question is from Wes Carmichael with Autonomous Research.

Employee Benefits, you previously flagged, I think, $50 million of strategic spend for 2025. Just wondering how much progress has been made on the $50 million and should we expect, I guess, within the income statement, those expense lines to be a little bit more pronounced in the back half of this year?

Michael will take your question on expenses, and Jay can just talk about just what we're seeing on some of the commercial momentum around leave.

We continue to expect that approximately $50 million of investments aimed at the leave capability that we're building. And I would think about that as more back half than first half, not tremendously, but modestly higher in the second half. I would also flag as you're thinking about just overall expenses second quarter to third quarter, I think relatively flat for retirement IM, again, modestly up in EB. The other piece to keep in mind for EB is just open enrollment. So on track for what we're trying to accomplish there on leave and maybe I'll pass it to Jay to give a bit more of an update on how that's going.

Great. Appreciate the question. If you think about the leave administration right now, it's definitely the most important capability in the market. It's -- that's leading to growth really among carriers. It's increasingly becoming a more complex market. The in-sourcing of the leave is going to help us drive our bundled solutions around group and voluntary. And that is always an intention. We knew the marketplace was going there, and we decided that the in-source solution was our best way to create a positive customer experience. The early response right now from the market and from our intermediaries has been very, very positive. We are on plan to deliver the technology and the operating model to support a 1/1/26 launch, and we've already sold a number of cases for 1/1. Like I referenced, intermediaries, one of the reasons we see this as a positive development with them is they're already placing us on their panels for sales, and that's a key trigger for us. So to underscore the importance of leave, I referenced it earlier, over 50% of the life and disability RFPs are being bundled with leave today. So we're really confident that the leave, disability and sub health capabilities that we're developing right now for employers are going to help them manage their benefits and for employees to access support when they need it. Maybe the last part of this is bringing this integrated claims platform remains a top priority for our employee benefits business, and we'll continue to come back to you with the progress. But we're on plan for 1/1/26.

And my follow-up, Heather, I think in response to 1 of the questions on capital uses, you mentioned additional retirement roll-ups. Could you maybe just give us a little bit of color on the landscape in terms of how many opportunities are out there? And what kind of multiple those businesses are demanding?

Yes. No, it's a good question. And a bit early and always hard to be so specific on inorganic. What I would just say is, we do see that consolidation continues to take place within the retirement industry. I think we're viewed as a good acquirer in terms of how we're going to take good care of those employees and the plan sponsor. So I think it is a constructive environment, but this is one that's a little bit more of stay tuned. We're going to be opportunistic. We have a high bar for capital deployment, just given where our share price is trading today. So stay tuned. We are going to be disciplined on any inorganic moves that we would make and make sure it is something that is a highly attractive and accretive investment for us.

Our next question is from Alex Scott with Barclays.

I wanted to ask on investment management, just the progress with the Allianz partnership on like the AGI distribution? And what kind of impact is that having? Is that fully in place at this point? Or is it still building? Any color there would be helpful.

Yes. Thanks, Alex. I'll start and toss to Matt. I mean, we're 3 years in on our partnership with AGI, continues to be one that is very mutually beneficial for both organizations as well as for the clients. And it's really that economic alignment that we have between them. But let me toss it to Matt to provide more details.

Yes. Thanks, Alex. The fundamentals, of course, as Heather mentioned, are really driven around delivering world-class investment solutions for clients. We call out the income and growth franchise, our thematic equity, fundamental equity franchises. We've seen growth in the private placement component. That's somewhere where we have a strong value prop from the investment team as well as distribution insurance and globally. We've referenced growth in the fixed income component. We continue to see green shoots for selling our fixed income components globally. That's somewhere where we have very strong performance numbers and a strong franchise as well. We are seeing growth there, and we'd anticipate we continue to see growth as we move into 2025, 2026. Bottom line, relationship continues to be very strong and look forward to continue to build upon it.

Helpful. Maybe in retirement, just with the average AUM levels and so forth, looking like there will potentially be a lot stronger headed into the back half of the year. How would you think about the additional flexibility that, that provides you from a top line standpoint? And to what degree would you maybe use that flexibility to invest in the business as opposed to letting to hit the bottom line through margin?

Yes. Maybe I'll start. As we think about our priorities for '25, we've been really clear on what we're trying to accomplish. And so I would just kind of come back to our priorities around executing on the margin improvement and employee benefits, continuing to drive the commercial momentum across retirement and investment management and the successful integration of OneAmerica. . So as we think about -- that's our top priority is to continue to execute, drive the cash generation, it maybe ties back to a little bit of what Mike talked about in terms of the severances. We are going to continue to be good stewards of how we think about expenses, how we look for opportunities to drive efficiency that creates -- create catalysts for us to be able to invest in the business. So there isn't anything specific that I would point to. I think the final bit that I would mention is what has already been in the targets that I've talked about on prior calls, is the modest investments we're making in Wealth Management this year, which sits inside that retirement business. And we think that's a great opportunity for us to continue to grow value across that franchise.

Our next question is from Josh Shanker with Bank of America.

Just looking at the sales figures and the medical stop loss, obviously, it's a rebuilding stage. But as we think about 2026, what sort of a partnership to your buyers look at you as having with them? And do you expect to be a more competitive player in the market with a real value add to your buyers' needs.

Yes, Josh, let me start and then I'll toss it to Jay. So I'll reaffirm on stop loss. The priority is not about capturing market share in this business. Really, the partnership goes back to -- you think about the 50-year track record we have in the business, we've got very strong distribution partners. But our priority remains clear, and it is about that margin over premium growth. But Jay, please add.

Yes, sure, Josh. Appreciate the question. Listen, this prioritization of margin over growth has been a kind of a cultural transformation for the team. And I really like what I'm seeing right now from the alignment between pricing, underwriting, risk and distribution. We have the ability to renew this business annually. And so we're constantly looking at our relationships in the marketplace, our intermediaries. There are new intermediaries that are joining this marketplace. You're seeing more and more companies on the smaller end of the market, thinking about with the rising cost of health insurance, self-insuring. This marketplace will expand. And as it does, we're going to remain disciplined on our pricing and our improved risk selection. This has been a driver for us to return to profitability. When we look at the pricing discipline that I'm seeing in the market right now and the competitive pressures, I'm seeing a natural alignment with our competitors going to the center more around risk capacity, thinking about what each of our competitors' capacity is, and we're seeing some of that movement in our results, which we see as positive. Again, prioritizing margin over growth is going to be our strategy, and the team is focused on that.

And just one other question. When you think about medical stop loss business in the sort of health solutions area. It's very different from the other things that you're offering. You talk to different places within the organization when you're selling it, and it's a different kind of product. How does the stop-loss business fit within the goals of the health solutions. Is this a business that Voya needs to do the other things that it wants to do in health solutions.

I appreciate the question. I think where the alignment happens, the way we look at this is, it really is around risk transfer. It's another risk transfer product for us. And so the way we think about this and the way we price and underwrite this is really based on 50 years of experience in pricing and underwriting in this market. The data is evolving as Mike referenced earlier, and we are on top of some of the latest data with our advisers. . But the linkage between this and our intermediaries and brokers see this very much as a risk transfer business. And so that's going to be our focus. Sitting inside the employee benefits business, this is another benefit that does happen to employers to help protect them as they're self-insuring. And so we very much see this as complementary to the rest of our business. Now with that said, there's volatility in this business that we're managing. And we have separate stop-loss teams that are on top of this business, both from a pricing and an underwriting and a distribution and we very much look at this business while complementary, we're disciplined about managing with the volatility that it brings.

Our next question is from Mike Ward with UBS.

I just had a question for Matt Toms and curious about the outlook for flows for the remainder of the year in Investment Management. And then if you could help us think about the fee rates. And if they were -- if your revenues were pressured by the strange equity market diversion in the quarter, if you could help us think about sort of a run rate.

Thanks, Mike, for the question. Very happy with flows on the quarter of $1.8 billion in the quarter in what was a volatile market, I think, a difficult operating environment. The key there is the breadth of these flows, and that's both year-to-date if we think about the $9.5 billion flows year-to-date, that's a 3.1% organic growth number for the first half. And I'd say that the breadth of flows that we look into the second half is what makes us confident. So across channels, still insurance and international are standouts for us. If We think by investment platform, private fixed income, our multi-asset components and incoming growth continue to show strength. So in the first half as well in the second half, that balance and that breadth of flows, we think is a differentiator for us. As far -- so I'd say the components are similar to the second half as we had as far as growth rate, we see no reason to pivot away from that 2- plus percent longer-term organic growth rate target. And that's where we landed in the second quarter, and we think the second half is likely to be similar down that path. As far as fee rate roughly unchanged quarter-over-quarter at 27 basis points. We think that's something we've been very successful in holding flat versus an industry headwind. But you're right, the equity market drawdown in the quarter does provide a little bit of noise, but I view that as nothing other than noise. And it sets us up quite well heading into the third quarter.

And then maybe for Heather or Jay. Appreciate the restoring of the segment names. And I guess it seems like now strategically and I think you've alluded to this, but you could actually set up an actual wealth advisory business, maybe a segment at some point. Is that how we should be thinking about that? And could you size at all the contribution to earnings from that platform? Or is it still earlier innings?

Yes.I will take your question. So when you think about it, we have a wealth management business that sits inside of Retirement today. And we have, for a number of years, we are calling out the capability. This has been a very important capability within our tax-exempt business. Jay came in, bringing in a lot of wealth management expertise. So I wouldn't necessarily think about this as a separate segment. But like others in the space, we see this as an important growth lever inside Retirement when you think about our ability to provide more holistic advice and planning to our clients.