Voya Financial Shares Plummet

Shares of Voya Financial (NYSE:VOYA) saw a notable decline of 8.6% on Tuesday, marking its largest intraday drop since February. This downturn followed the company’s pre-announcement of weaker-than-expected performance for the fourth quarter.

Voya indicated that its Stop Loss policy year loss ratio is expected to range between 90% and 105%, significantly above the prior forecast of 86%.

In light of this announcement, Evercore ISI analyst Thomas Gallagher cut the price target for Voya Financial to $89.00, down from $94.00, while maintaining an Outperform rating. Gallagher pointed out that this negative update relates specifically to Voya's medical stop loss business, which is expected to result in a significant loss for Q4. This news raises concerns that Voya may not meet its target margin range by 2025, potentially pushing it to 2027.

Gallagher noted, “They indicated that they now expect the 2024 accident year to have a midpoint of around a 98% loss ratio, compared to their previous expectation of 86%, which exceeds their target pricing range of 77-80%.”

Further complicating matters, Gallagher highlighted the anticipated departure of Rob Grubka, the head of the health and wealth business, by the end of 2024, and noted the need for more information regarding his successor.

Jefferies analysts also weighed in, attributing the downturn to the high frequency of claims noted into November 2024, particularly pointing out an increase in cancer diagnoses among younger individuals.

Keefe, Bruyette & Woods analyst Ryan Krueger also lowered his price target from $95.00 to $92.00, while keeping an Outperform rating. He acknowledged the negative update and Grubka's departure as contributors to this reassessment. Krueger also indicated a decline in stop-loss claims through November, leading to revised earnings per share (EPS) estimates for the upcoming years and adjustments to the price target based on an 8.5 times multiple of the estimated EPS for 2026.

Voya Financial is facing challenges with its Stop Loss policy, indicating possible delays in achieving financial targets, with a mid-point loss ratio significantly elevated compared to earlier forecasts for the 2024 accident year. The company anticipates reduced stop-loss premium revenues in 2025 and expects an improvement in the loss ratio, although it remains above the targeted range.

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