Earnings Call Transcript - VOYA Q2 2024

Operator, Operator

Good morning. Welcome to Voya Financial's Second Quarter 2024 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the call over to Mike Katz, Executive Vice President of Finance. Please go ahead.

Mike Katz, Executive Vice President of Finance

Thank you, and good morning. Welcome to Voya Financial's second quarter 2024 earnings conference call. We appreciate all of you who have joined us this morning. As a reminder, materials for today's call are available on our website at investors.voya.com. Turning to Slide 2. Some of the comments made during the call may contain forward-looking statements or 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 website. Now joining me on the call are Heather Lavallee, our Chief Executive Officer; and Don Templin, our Chief Financial Officer. After their prepared remarks, we will take your questions. For the Q&A session, we have also invited the heads of our businesses, specifically, Matt Toms, Investment Management; and Rob Grubka, Workplace Solutions. With that, let's turn to Slide 3, as I would like to turn the call over to Heather.

Heather Lavallee, Chief Executive Officer

Good morning, and thank you for joining us today. Our second quarter results reflect our success in strategic execution and sound capital management. We achieved our financial targets in the second quarter and remain on track to achieve our targeted full year results for 2024. We are executing our strategy, driving robust growth and commercial momentum in both Workplace Solutions and in Investment Management. And we continue to demonstrate strong excess capital generation and high free cash flow conversion in line with our targets for 2024. Turning to Slide 5. Our second quarter adjusted operating EPS was $2.18. We generated strong fee-based revenues in Wealth and Investment Management, offsetting higher than target aggregate loss ratios in Health. As Don will discuss in more detail, we are actively addressing loss ratios by adjusting pricing on new business and renewals in order to return to our target range in 2025. While loss ratios have presented a headwind, we remain on track to deliver our full year EPS target of $8.25 to $8.45. This is the result of the strong actions we have taken throughout the year to drive revenue growth and control spending, while continuing to invest in the business. We have grown net revenues in line with our targets and maintained strong margins, driving higher earnings in Investment Management and Wealth. These results reflect the transformation of our Workplace Solutions and Investment Management businesses over the past several years. Diversified revenues and robust commercial momentum across a breadth of markets and distribution channels are driving profitable growth and resiliency. And our capital-light and high free cash flow businesses continue to demonstrate their capacity to generate excess capital, which has allowed us to further increase our dividend this quarter. Turning to Slide 6. With market-leading presence across retirement and employee benefits, our Workplace Solutions business is uniquely positioned to help employers optimize their investments in workplace benefits and savings, while providing their employees with comprehensive health and wealth solutions. Our strategy enables multiple paths for growth in the workplace by landing and retaining customers, by expanding our solution set and by deepening our engagement. Across Workplace Solutions, we are landing new business, driven by the scale and breadth of our solutions and distribution across markets, tax codes and employer sizes. We continue to grow in full service retirement, with a strengthening presence in the mid-market, continued momentum in the emerging market and high retention rates. We expect positive full-service flows throughout the second half of 2024 and into 2025. We are expanding our reach with customers through the solutions and capabilities we provide. We continue to build on expansion opportunities through Benefitfocus. Benefits administration customers now represent our largest channel for HSA sales. We are also delivering on the customer service enhancements needed to maximize the value of this platform with Net Promoter Scores up 26 points year-over-year for our most recent renewal cycle. And to enhance our solution set in Group Life and Voluntary, we are investing in lead management to meet employers' growing needs for a differentiated solution in this space. Our deepening engagement with customers is shown through the increased adoption of managed accounts and growth in our Retail Wealth Management platform. Managed account revenues are up 30% year-over-year, and Retail Wealth Management continues to grow as a key distribution channel. Voya has over $100 billion in total client assets, with our advisers serving both the in-plan and out-of-plan wealth needs for our customers. Turning to Slide 7. Voya Investment Management's diversified and globally distributed investment strategies position us for continued growth across institutional and retail markets. With institutional fixed income as our strategic anchor, we are focused on delivering exceptional solutions that are grounded in strong investment performance. Our clients are responding with greater demand, driving strong net inflows and growth expectations, supporting our outlook for 2% organic growth for the year. Strong flows in insurance for the first half of 2024 were driven by the breadth of our institutional client relationships. While our income and growth franchise continues to support robust international retail flows. And with a refined intermediary channel strategy, and new distribution leadership, we continue to scale and strengthen our distribution of investment products and services globally in the institutional, sub-advisory and intermediary channels. We also continue to expand into adjacent private and alternative strategies by delivering differentiated solutions and continued growth in our private funds, including plans to launch three funds during the second half of 2024. Voya Investment Management enters the second half of 2024 focused on execution and position for long-term sustainable growth. Turning to Slide 8. At Voya, we are living our purpose and vision to drive positive outcomes for our clients, colleagues and the communities in which we live and work. For example, by improving access to comprehensive financial guidance and education, we are having a positive influence on the decisions our customers are making about their savings and benefits. We are also expanding the solutions available to our customers that support caregiving, mental health and emotional well-being. And in May, we celebrated our 11th annual National Day of Service, with over 70% of Voya employees participating in events that benefited a diverse set of charitable organizations across the country. With that, Don will now provide more details on our performance and results.

Don Templin, Chief Financial Officer

Thank you, Heather. Now let's turn to our results on Slide 10. We delivered $2.18 of adjusted operating earnings per share in the second quarter compared with $2.21 a year ago. Our results reflect higher fee-based margins in Wealth and Investment Management, offset by lower underwriting in Health. We expect higher loss ratios in Health to persist this year. That said, we are actively incorporating the elevated claims data into the January 2025 pricing to return loss ratios to our target range next year. Our focus on management actions, including diligence on spending, is helping us remain on track to achieve $8.25 to $8.45 of adjusted operating EPS in 2024. Second quarter GAAP net income was $201 million compared to $154 million in the prior year quarter, due to more favorable investment gains and lower acquisition and integration costs. Excess capital generation in the quarter remains robust at approximately $200 million, consistent with our track record of generating above our 90% target. And we remain on track to generate $800 million for the full year. Turning to Wealth on Slide 11. We continue to improve outcomes and deliver value for our customers, driving growth in both assets and participants. Our participant count exceeds 7 million, representing a 6% CAGR growth since 2019. Defined contribution client assets have grown to over $519 billion as of June 30. Full Service and recordkeeping net outflows were $597 million and $1 billion, respectively, in the second quarter. While improved equity markets are a net positive for retirement, they do have a counterintuitive effect on net flows by increasing the average account values of each participant surrender even though our surrender rates have improved. We continue to retain 98% of all Full Service plans and sales are up, powered by the mid-market where sales in the quarter are 3x higher year-over-year. Looking forward, we continue to build a strong pipeline and expect positive net flows in Full Service for the second half of the year. Moving to Slide 12. Wealth generated $214 million of adjusted operating earnings in the second quarter. This was meaningfully higher than the prior year, due to strong fees and expense discipline. Net revenues were 3% higher year-over-year, driven by strong management actions and favorable markets. Fee-based revenues reflect consistent growth in our participants and strong equity markets in 2024. For spread income, our actions to drive higher margin in the current rate environment has helped to offset the effect of lower spread-based assets. The spread income guidance we have provided assumes rates follow the forward curve prospectively. Our adjusted operating margin of 39.7% is an outcome of the net revenue growth and discipline on spending. The second quarter did include some timing benefits for administrative expenses, which contributes to the higher expense guidance we are providing for next quarter. We continue to be disciplined with our spending and have taken actions to further integrate our business while still investing for growth. This includes capabilities in the mid-market and Retail Wealth Management. Turning to Slide 13 on Health. Our immediate focus is to return aggregate loss ratios to within our 69% to 72% targeted range. In the second quarter, the total aggregate loss ratio was 72.9%, primarily driven by loss ratios for Stop Loss, which were above our 77% to 80% target range. While we feel good about the rate increases achieved on the non-January 2024 business, the impact on this year's results will be modest. Voya has a strong track record in Stop Loss. We also have an experienced team that helped correct the book in 2018 when our 2017 loss ratios were above target. As a result, we are confident in our ability to achieve target loss ratios in 2025. We continue to find the fundamentals of the Stop Loss business attractive as it can be repriced annually, has a natural tailwind for growth due to medical inflation and is a growing market as companies move to self-fund their employee health care plans. In-force premium growth remains robust and is supported by expanded quoting capabilities, success in the mid-market and greater adoption of voluntary solutions. Moving to Slide 14. Health adjusted operating earnings were $60 million in the second quarter. This compares to exceptionally favorable results in 2023, when loss ratios were well below target ranges. Looking ahead, we feel confident with our ability to restore loss ratios back to our target range in 2025, while continuing to profitably grow our Health business. Moving to Investment Management on Slide 15. The successful transformation of our business into a diversified global investment manager with an enhanced platform of investment solutions is allowing us to deliver strong results today and enabling opportunities to scale in new growth markets. We generated positive net inflows of $4.8 billion in the second quarter, putting us on track to meet our 2% organic growth expectation for the full year. In institutional, we saw a significant improvement and a return to positive net cash flows of approximately $3 billion. This was led by strong demand for core fixed income in the insurance channel. In retail, positive net cash flows of approximately $2 billion reflect continued momentum in both U.S. and international intermediary channels, including demand for our income and growth solutions, retail private equity fund and core fixed income. As a reminder, management of the remaining legacy assets connected to our annuity divestiture in 2018 is expected to transfer to Venerable over the next 12 months starting this September. These transfers will complete the runoff of approximately $14 billion in assets under management and an additional $4 billion in assets under administration. These assets were generally in lower fee index-oriented solutions. These flows have no impact on our general account and continue to be reflected in current guidance, which remains unchanged. Our leading positions in institutional fixed income and third-party insurance asset management serve as competitive advantages, and will support continued client and asset growth. Turning to Slide 16. Investment Management delivered adjusted operating earnings of $50 million in the second quarter, net of AllianzGI's noncontrolling interest. Second quarter net revenues were 5% higher year-over-year, reflecting strong growth in intermediary and insurance assets under management and favorable equity markets. Adjusted operating margin was 26% on a trailing 12-month basis, reflecting continued expense discipline while investing for growth. We remain on track to achieve our goal of expanding operating margins by at least 100 basis points on a full year basis in 2024. We are encouraged by our commercial momentum, and we expect our diverse pipeline and strong investment performance will support our outlook for 2% organic growth for the year. Turning to Slide 17. Our strong capital generation differentiates us from peers. We continue to build on our track record of generating excess capital above 90% of earnings, while still investing for growth. In the second quarter, we returned $214 million of capital to shareholders, including $174 million of share repurchases and $40 million of dividends. As Heather mentioned, we increased our quarterly dividend by $0.05 or 12.5%. Raising the dividend is driven by confidence in our business mix and our track record of consistent high free cash generation. It is also another step to regularly grow our dividend over time. Our leverage ratio sits comfortably in our targeted range of 25% to 30% today. Looking ahead, we have $400 million of debt maturing in 2025, which we intend to refinance, subject to market conditions. Turning to Slide 18. Management actions are keeping us on track to meet our full year adjusted operating EPS target of $8.25 to $8.45. Wealth delivered strong revenue growth and profitability in the second quarter. In Health, we have a clear plan to address lower-than-expected underwriting performance. In Investment Management, we have transformed the business into a diversified global asset manager, and we remain confident in our ability to achieve 2% organic growth with expanded margins. Finally, we are on track to generate and return over $800 million of excess capital to shareholders in the form of share repurchases and dividends in 2024. With that, I will turn the call back to the operator so that we can take your questions.

Operator, Operator

Our first question is from John Barnidge with Piper Sandler. Please proceed.

John Barnidge, Analyst

Good morning. Thank you for the opportunity. Can you talk about the investment in lead management for Health that was called out, maybe the opportunity set and the path to delivery there? Thank you.

Rob Grubka, Head of Workplace Solutions

Good morning, John. Yes, sure. So lead management is an area where we've had a partnership approach to the solution we provide, what we've learned and seen, and then I'll give you a market context is it's just the experience around that is a real pain point for employers. So when you think about sort of the frequency of activity that goes on versus short-term disability, long-term disability, leave is much higher frequency than both of those for sure. And so from an employer standpoint, it's an area where, like communication and handoffs and clarity and needing to stay aligned with what the employee's experience who goes out on leaves, their manager, the HR team, there's a lot of communication and opportunity for things to not be communicated well. And so what we're calling out here is really building our own capability, have a completely ingrained and embedded in our platforms, in our experience in such a way that we can be ever more important to the employer ultimately and then deliver a good experience for them and the employee throughout. So for us, we look at this as certainly a long-term decision and investment, but a really important one in where the market is going to more and more bundling of solutions, and HR teams wanted to get to fewer providers. We think it's a really smart investment and we're really excited about the opportunity that will emerge from it.

Heather Lavallee, Chief Executive Officer

Yes. And John, the only build I would have on Rob's comments is that this is really a critical part of our workplace strategy to ensure that we're best serving the employers and then helping to drive better outcomes for their employees across the workplace spectrum.

John Barnidge, Analyst

My related follow-up, thank you for that, would be, what's the timeframe for this investment for lead management and when do you think it will be up and running? Thank you.

Rob Grubka, Head of Workplace Solutions

Yes, we're going to be in a position to transition things actually next year, but then more fully the following year. So we'll do some work throughout the coming 12 plus months, and then we'll have technology work that does what technology does. It takes a little time to implement and continue to invest in the experience. We'll get most of it right the first time out, but there's always refinement and things that we're doing just like any other investment we make.

Operator, Operator

Our next question is from Elyse Greenspan with Wells Fargo. Please proceed.

Elyse Greenspan, Analyst

Hi, thanks. Good morning. My first question is on just the flows within Wealth. In your prepared remarks, you pointed to positive flows in the back half of the year. Can you just comment on the pipeline and how you would expect that to transpire in the third and the fourth quarter?

Rob Grubka, Head of Workplace Solutions

Yes, sure. So as we talked about even last quarter, it was all about focusing on the second half of the year. So I just want to make sure that's a point of consistency for us. So let me talk about Full Service, recordkeeping, but I'll start with recordkeeping. And the big thing here, actually across both, we see it. We see what's coming at us, which is why we're reinforcing the guidance around $1 billion for Full Service and $3 billion for recordkeeping. But in recordkeeping, obviously, the timeline to implement or deconvert is long and lengthy. And so those we have really strong insight perspective and knowing that those things are going to come to fruition, both on the ins and the outs, but obviously more in than out. And on a Full Service perspective, I had a few points here, and we called it out in the material. RFP activity is up 7%. So the front door is certainly moving well. On the emerging side of it, it's a more fluid market, obviously, versus recordkeeping. So that tends to ebb and flow a little bit more. But as you build momentum, obviously, we can see that coming at us. And what I'd call out broadly around Full Services, known sales are up 30%. And within that, we called out mid-market, being 4x what it was the prior year. And then I'd also call out government, which is 3x the prior year. So we've got a really good view into what's in motion and coming in the front door. And then we talked about in the material participant lapses or case lapses being around 2%. So feel really good about the case level activity. And again, as we're at this point in the year, we know a lot. And then finally, as we think about continued activity, the momentum as we move forward. We've talked about participants as an area where participant lapse has been elevated. We continue to expect it to be. So that's built into the numbers that we're giving you and the guidance. So I'll pause there.

Heather Lavallee, Chief Executive Officer

And I think the only point I'd build on, Elyse, or just to emphasize is the point that Rob made about known sales up 30% across all markets. So we continue to have a leadership position in the market and confidence in that second half flow guidance.

Elyse Greenspan, Analyst

And then my second question is on the Investment Management flow guidance, right, the 2% target for the year. If we look at the flows in the second quarter, that does imply somewhat of a slowdown in the back half. I just want to see maybe there's some level of conservatism there? Are you expecting a slowdown within net flows in the second half of the year within the 2% full year IM guide?

Matt Toms, Head of Investment Management

Thanks, Elyse. We're obviously very happy with the $4.8 billion in the quarter and $5.3 billion for the year. As we look forward, we're also pleased by both the backward look on the diversity of those flows and the forward looking. The 2%, we're trying to give a number that's repeatable quarter-to-quarter flows are very difficult to forecast. We want a sustainable flow rate and growth rate for the business. And if we look forward for the rest of this year and the momentum we have across both the institutional channels, where $2.5 billion for the quarter in insurance is a big mover. There's also some meaningful momentum on our pension side. Those are lumpy. We pointed that out in prior quarters. But beyond that, the breadth of that retail flows, both U.S. and international of nearly $1 billion each, really builds our confidence around that 2% growth target longer term. And then lastly, we've mentioned multiple times, and Don mentioned in his prepared remarks, the private fund launches in the second half of the year, we still expect those to come and that breadth of activities is what builds that confidence.

Heather Lavallee, Chief Executive Officer

I would just add, really proud of the transformation that Matt and team have delivered. Really, really pleased with the quarterly results and the guide for the full year. And the other point I would add on Matt's comment is the strength of the investment performance. So it really goes to the breadth of the solutions, the demand we have and the investment performance really giving us confidence in that full year outlook.

Operator, Operator

Our next question is from Tom Gallagher with Evercore ISI. Please proceed.

Tom Gallagher, Analyst

Good morning. A few questions on the Health business. First one is, what kind of rate increases are you planning on Stop Loss? When you think about '25 renewals, and what would you expect that to do to top line? I presume we're not going to see 20% plus top line when you think about how this plays out into 2025. But curious how you see the interplay between those variables.

Rob Grubka, Head of Workplace Solutions

Sure, thanks, Tom. Regarding Stop Loss, we are guiding towards the higher end of the loss ratio and what we anticipate. This will likely impact our renewal efforts. While I can't provide a specific number, I can refer back to 2017 and the transition into 2018, where we aimed for a similar overall rate increase. During that period, we experienced flat growth in Stop Loss. However, considering the current size of our business, we have been targeting an overall growth of 7% to 10%. It might be slightly lower as we focus on rate increases, but we do not expect it to drop to zero. We still anticipate growing our book of business, and we will see how this unfolds in the third and fourth quarters as we pursue rate adjustments. Our priority will be on achieving the desired margin. We will provide more insight as we progress through these quarters and refine our approach further.

Tom Gallagher, Analyst

That's helpful color, Rob. Appreciate it. My follow-up is just on the fee margin in the Health business. I noticed that was down a little bit year-over-year. And I'm assuming that's mainly Benefitfocus. But maybe can you comment on overall how Benefitfocus is playing out, Heather, I think you mentioned 20% plus growth in Net Promoter Scores. But how is that translating into revenue and margin growth? Thanks.

Rob Grubka, Head of Workplace Solutions

So let me start with the quick one on the fee level. Within Benefitfocus, there's a service they provide around Affordable Care Act and IRS reporting that needs to be done. And so there's a blip in fees in the first quarter, so I wouldn't read into that as anything other than normal seasonality. And I'll let maybe Heather just hit the high level on Benefitfocus and the excitement we've got around that business.

Heather Lavallee, Chief Executive Officer

Yes, Tom. To expand on what we've been discussing for about a year and a half, we truly value the strategic capabilities that Benefitfocus adds to our broader workplace solutions. It's not just about the fee revenues we generate from Benefitfocus; as mentioned in my prepared remarks, it will be a significant contributor to our HSA sales. It also plays a role in sub-Health sales, placing us at the heart of participant engagement within the health ecosystem and across the workplace. Ultimately, I want to emphasize that beyond just the fee revenues evident in Health, it’s the larger strategic capabilities that will arise in the upcoming years from these assets.

Operator, Operator

Our next question is from Jimmy Bhullar with JPMorgan. Please proceed.

Jimmy Bhullar, Analyst

First, could you provide more detail on the cohorts by year that are contributing to the poor performance in medical Stop Loss? We've been discussing this topic for almost a year now, and I have a few follow-up questions after that.

Rob Grubka, Head of Workplace Solutions

Yes, I'll provide a high-level overview, and you can ask for more details as needed. As we reflect on the end of the year and look into the first quarter, the primary factor that has shifted from our earlier expectations for 2023 is still in play. You can consider this to be in the 80% to 83% range, but leaning toward the lower end as we observe the results stabilizing. There’s typically a timeline of about 15 months for the business, and we are nearing completion of that now, which should not come as a surprise moving forward. When we relate this to 2024, the events prior to our target setting and renewal expectations were heavily influenced by 2023's performance, particularly its acceleration toward the end due to the deductible levels pertinent to our business. This affects our outlook for 2024; the guidance we’ve provided of 80% to 83% is our best estimate at this moment, noting it's still early in the 2024 cycle, as only about 20% of the data has surfaced. We anticipate learning more in the third quarter, and the fourth quarter will provide a clearer picture, with further information emerging as we enter the first quarter. Regarding the overall situation, thinking about the full year, I see the aggregate loss ratio for the Health business being somewhere between 72% and 73% at this point.

Jimmy Bhullar, Analyst

Is it reasonable to assume that if you're repricing the 25-year contracts, and almost 80% of the business will renew at the beginning of the year, then in 2025, if you price at a normal margin, your reported margin might still not be typical? Given the scenarios of 2024 and 2026, could that be the first year where you achieve a price for margin on a reported basis?

Rob Grubka, Head of Workplace Solutions

Yes. No. I appreciate the push on that, Jimmy. As I would think about it and our plans and expectation is to get back into the target loss ratio range. So as we think about that 77% to 80%, that is absolutely the marching orders, the goal and the expectation. Now it's a market, it's competitive. We'll see how things ultimately play out over the next quarter or two quarters, and we will continue to update as best we can. But the main point I want you to walk away with is we're going to strive very hard to get to the 77% to 80%.

Heather Lavallee, Chief Executive Officer

Yes. And Jimmy, if I can build and just add a few more points, as we've provided in the appendix that Rob and his team have a track record of managing this business, driving growth while managing the loss ratios within the 77% to 80% range. Many of those years, the loss ratios actually came below. And as we've talked about, the team also has a track record of being able to get rate increases in the one year that loss ratio occurred because they were elevated. And so I have incredible confidence the team will be able to execute on that this year. But I think the broader step back for folks to take away is why do we like this business and why do we continue to like the business? And it really goes to the point that Don emphasized on the call, the fact that we have secular headwinds, we see more and more employers that are choosing to self-fund. There's a natural medical trend in terms of the Health trend increases. And we also have the protections on the book of business in terms of our ability to reprice it and reinsurance on the book, and it has continued to be a positive net growth of earnings for us, and we expect it to be going forward.

Operator, Operator

Our next question is from Ryan Krueger with KBW. Please proceed.

Ryan Krueger, Analyst

Hi, thanks. Good morning. I had one more on Stop Loss, maybe just directly to ask. Can you just tell us, if you just remove 2023 development, what is the 2024 Stop Loss ratio year-to-date?

Rob Grubka, Head of Workplace Solutions

Well, look, you should think about it as in that 80% to 83% range that we've given you, I won't say more at this point, just given the early nature of the actual experience, we're really looking at '23, how that ultimately finished up. And so that's the clearest answer I can give you at this point. But obviously, we'll be back in three months, and we'll be able to talk more about what we've seen and how it's evolved from there.

Ryan Krueger, Analyst

Okay. Thanks. On the $14 billion of venerable AUM that's expected to leave, can you give us some sense for what the fee rate is on that? And anything on like the pace of how that will come through over the next year?

Matt Toms, Head of Investment Management

Yes, Ryan, thanks for the question. Venerable, of course, we've seen this coming for some time. This was the divestiture of our annuity business back in 2018 and largely passive quant equity related, lower fee products. So think of that as being meaningfully below our average fee rate as a blend of products. The total book, as Don mentioned, $14 billion AUM, $4 billion AUA. We've been working closely with Venerable over the last 6-plus years to coordinate. We anticipate half of that, so $7 billion AUM in the second half of this year and half the AUA, so $2 billion AUA. The remainder will be in the mid of 2025. Now importantly, these assets are legacy assets that have been in runoff are not part of the primary growth initiative of the company. And as Don mentioned, the financial impact, both revenue and earnings, has been fully embedded in our guidance and continues to be fully embedded in the guidance. So again, something we planned for, well-coordinated. The growth areas are clearly more in the U.S. institutional intermediary international areas that we've referenced that are driving the growth currently.

Operator, Operator

Our next question is from Wilma Burdis with Raymond James. Please proceed.

Wilma Burdis, Analyst

Could you guys talk about the decision to refinance the $400 million of debt that was coming due in 1Q '25? And will that have any impact on 2025 earnings?

Don Templin, Chief Financial Officer

Yes. Thanks, Wilma. So as you know, we have that $400 million that's coming due in early 2025. As I said, we expect to fully refinance the full amount. And that was really, that decision was based upon the fact that our balance sheet is really well positioned. We've been very prudent about how we position the balance sheet. Our leverage ratio is 28%. So it's comfortably in the range of that 25% to 30%. And I think sometimes people ask a question about what could be a barrier? I see really no barriers at this point to refinancing that full amount.

Wilma Burdis, Analyst

Thank you. Looking ahead to 2025, will we see any benefits from the improvements in the Stop Loss business in terms of EPS growth? Thank you.

Don Templin, Chief Financial Officer

Yes, sure. The results that we've delivered this year have really been with that headwind that we've had around Stop Loss. We fully expect, and Rob and the team are committed to getting us in that target range, aggregate loss ratio target range of 77% to 80%. And when they're successful doing that, that will obviously be very beneficial and helpful to our EPS for 2025.

Heather Lavallee, Chief Executive Officer

And I think, Wilma, one thing I would build on is if you look at what we're expecting for EPS growth, we're close to double digits over actual from prior years. And one of the things that I would say we're particularly proud of is the ability of this team to actively manage both our revenues and our spend as well as our capital that is helping to drive the EPS growth within this year. And we'll come back and as we know more and give you more guidance going into '25.

Operator, Operator

Our next question is from Wes Carmichael with Autonomous Research. Please proceed.

Wes Carmichael, Analyst

Hi. Good morning. I had a question on the reiteration of the EPS guide, it seems to imply that there's a little bit of a sequential slowdown in the second half of the year, at least relative to the second quarter. I think there might be a little bit of earnings compression coming in Wealth, but are there any other drivers that you can kind of point to get to maybe the midpoint of that range?

Don Templin, Chief Financial Officer

Yes. There are a few questions that have arisen since we released the presentation. One question is about the basis for our EPS guidance. I want to clarify that the starting point for this guidance is based on the actual results from the first half of 2024, along with our outlook for the rest of the year. We've made an effort to be transparent by providing modeling considerations for the third quarter, which you can find on Page 21 of the presentation, along with potential impacts on that guidance. We have sensitivities listed on Page 21. Health underwriting is something we're monitoring closely. The equity markets have been favorable, but we're keeping an eye on them as well. Alternative investments are performing in line with our long-term expectations, but we're also watching that. These are the factors that I believe are affecting our outlook for the rest of the year. However, I believe the team has done an excellent job managing expenses, continuing to invest in growth, and achieving the projected EPS of $8.25 to $8.45.

Wes Carmichael, Analyst

Got it, Don. So the first half of 2024, that's based on actuals and then going forward, it will be on a normalized basis, right? Is that the right way to think about it?

Don Templin, Chief Financial Officer

Yes. I mean our long-term assumptions assume sort of the 9% for alts on a normalized basis. But the starting point is actual, not normalized, actual for the first six months.

Wes Carmichael, Analyst

Understood. And then just my follow-up, just on the Stop Loss, I just want to make sure I'm thinking about it mathematically correctly, right? The 80% to 83%, I think in the first quarter it was a little bit over 84%, in the second quarter a little bit over 83%. Like should we think, Rob, like it should come in below the 83% in the third and fourth quarter?

Rob Grubka, Head of Workplace Solutions

Yes. To end up at the 80% to 83%, you've got to have that help. And so the context I'd give you on the first and second quarters is, again, back to the timing of how experience emerged. And so there's an element of catch-up that occurred in first and second quarters across the '23 book given the more data that came in on that. And then more tightly aligning what we were seeing initially emerge in '24. So that pushed up those numbers a bit. You can think about it within the quarters. But again, a big part of that was just getting the ending point right. And so the pace through the quarters showed itself a bit more in first and second. But again, the 80% to 83% is what we'd orient you around.

Operator, Operator

Our next question is from Suneet Kamath with Jefferies. Please proceed.

Suneet Kamath, Analyst

Thanks. So I guess, Rob, on the Stop Loss, is what's happening now similar to what happened in 2017 when you had to correct? Because I'd imagine the book is much bigger. So I'm just trying to figure out if that's really the right precedent to use when we think about this business improving going forward?

Rob Grubka, Head of Workplace Solutions

Yes. I would not consider it from the perspective of achieving a rate; we are targeting a similar rate. The book is significantly different and larger. Additionally, 2023 has shown a stronger performance compared to 2022, exceeding our expectations. There is a different market dynamic to note. When your book is performing exceptionally well based on the 2022 business, it impacts how we aim for that rate. The mix of business has varied, with some areas performing excellently while others have not fared as poorly as we typically see in normal conditions. It is somewhat more barbelled than usual due to the distinct nature of those cohorts. Currently, we are confident in what we need to pursue. We have clear alignment from underwriting to distribution and have communicated our goals effectively in the market. Regarding our 7/1 renewal business, we have seen significantly higher rates compared to 1/1, along with decent retention rates. These factors enhance my confidence that we are progressing alongside market changes. We are also hearing feedback from competitors, indicating that we are not the only ones seeking higher rates than in a typical year.

Heather Lavallee, Chief Executive Officer

The only thing I want to add, Suneet, is that I think what is the same is this is the same management team that was able to execute on that rate action back in 2017 heading into 2018. And that gives Rob and I incredible amount of confidence in our ability to do so now and the fact that we're already demonstrating that execution with the midyear increases.

Operator, Operator

Our next question is from Mike Ward with Citi. Please proceed.

Mike Ward, Analyst

Thank you. Good morning. I was hoping we could maybe dig a little bit into the Investment Management inflows. Super strong rebound, just I guess, wondering if there's any more color around the composition of the assets that came in this quarter?

Matt Toms, Head of Investment Management

Yes, Mike, let me unpack that a little bit for you. So we mentioned the breadth, obviously very happy with the $4.8 billion flow for the quarter. Fixed income through the insurance and pension channel really stood out. We have very strong performance at the right time in the fixed income cycle where we see demand are quite strong on the institutional side. And we believe growing, as we look forward, on the more the intermediary retail side. So fixed income, clearly a standout. Also our privates and alts businesses continues to perform quite well. We have more fund launches coming at the end of the year, and we continue to grow new capabilities there. That's the key underlying driver. And then really, the change on the quarter was the bigger inclusion of our U.S. retail business. So international retail has been quite strong on the back of the broader array of strategies we acquired a couple of years ago. Within the U.S., we're seeing our model business, our fixed income business, and our private equity secondary interval fund business continue to resonate in the marketplace. So really, it's the breadth that's driving that. As we look forward, we see more of the same coming. The one I mentioned that I'd have there is internationally, it's been retail oriented. I'm excited in the future about that expanding into the institutional space as well through a broad array of products, both fixed income, private and equities. So quite excited about that. Yes, Mike, let me unpack that a little bit for you. So we mentioned the breadth, obviously very happy with the $4.8 billion flow for the quarter. Fixed income through the insurance and pension channel really stood out. We have very strong performance at the right time in the fixed income cycle where we see demand are quite strong on the institutional side. And we believe growing, as we look forward, on the more the intermediary retail side. So fixed income, clearly a standout. Also, our privates and alts businesses continue to perform quite well. We have more fund launches coming at the end of the year, and we continue to grow new capabilities there. That's the key underlying driver. And then really, the change on the quarter was the bigger inclusion of our U.S. retail business. So international retail has been quite strong on the back of the broader array of strategies we acquired a couple of years ago. Within the U.S., we're seeing our model business, our fixed income business, and our private equity secondary interval fund business continue to resonate in the marketplace. So really, it's the breadth that's driving that. As we look forward, we see more of the same coming. The one I mentioned that I'd have there is internationally, it's been retail-oriented. I'm excited about the future about that expanding into the institutional space as well through a broad array of products, both fixed income, private, and equities. So quite excited about that.

Operator, Operator

This concludes our question-and-answer session. I would now like to turn the conference call back over to Heather Lavallee for any closing remarks.

Heather Lavallee, Chief Executive Officer

With the benefit of Voya's diversified capital-light business mix, we are well positioned to achieve our financial targets and remain focused on strategic execution. We are on track to deliver our full year financial targets, and are taking the necessary action in our Stop Loss business to improve our loss ratios in 2025. We have strong commercial momentum and our focus on spend discipline and prudent capital management, while continuing to invest in growth, and we will be relentless in our customer focus, exceeding service expectations and innovating to meet their needs. Thank you, and we look forward to updating you on our progress.

Operator, Operator

Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.