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Voya Financial Inc (NYSE:VOYA)
Q1 2021 Earnings Call
May 11, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the Voya Financial First Quarter 2021 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Michael Katz, Executive Vice President, Finance, Strategy and Investor Relations. Please go ahead.

Mike Kartz -- Executive Vice President, Chief Strategy, Planning and Investor Relations Officer

Thank you and good morning. Welcome to Voya Financial's first quarter 2021 earnings conference call. We appreciate all of you who have joined us for this call. As a reminder, materials for today's call are available on our website at investors.voya.com or via the webcast.

Turning to Slide 2. Some of the comments made during this conference call may contain forward-looking statements within the meaning of federal securities law. This includes potential impacts related to COVID-19. I refer you to this slide for more information.

We will also be referring today to certain non-GAAP financial measures. GAAP reconciliations are available in our press release and financial supplement found on our website, investors.voya.com.

Joining me on the call are Rod Martin, our Chairman and Chief Executive Officer; as well as Mike Smith, our Vice Chairman and Chief Financial Officer. After their prepared remarks, we will take your questions. For the Q&A session, we have also invited our Vice Chairman and Chief Growth Officer, Charlie Nelson as well as the heads of our businesses, specifically, Heather Lavallee, Wealth Solutions; Christine Hurtsellers, Investment Management; and Rob Grubka, Health Solutions.

With that let's turn to Slide 3 as I would like to turn the call over to Rod.

Rodney O. Martin -- Chairman and Chief Executive Officer

Good morning. Let's begin on Slide 4 with some key themes. Our results for the first quarter demonstrate that we continue to operate from a position of strength with a specific and clear strategy centered on health, wealth and investment solutions, Voya has tremendous opportunities to expand and grow. Our businesses give us both the scale and the insight to help employers and their employees manage a variety of health and wealth needs, and we're seeing an increase in demand for what we offer. The pandemic has led to individuals becoming even more focused on their health and wealth needs. As a result, employees are increasingly looking to their employer for support and employers are very much focused on this. Recent research by the Employee Benefit Research Institute indicates that employers overwhelmingly either have a strategy or are developing one to improve their employees financial well being. We believe that Voya is well positioned to deliver on this demand, which will enable us to provide even greater value for all of our stakeholders.

Turning to our results for the quarter. We delivered significant adjusted operating earnings-per-share growth. In addition, to strong investment income and the execution of our share repurchase plans, our EPS growth reflects continued momentum across our businesses. In Wealth Solutions, full service recurring deposits grew more than 5% compared with the trailing 12 months. This was driven completely by organic growth. We generated over $850 million in full service net flows and recordkeeping flows were also strong at $3.5 billion. Collectively, this reflects our strong results in both retention and the onboarding of new clients.

In Investment Management, we saw continued institutional inflows and interest in a number of our fixed income strategies. While we experienced net outflows during the quarter, we expect to achieve our 2% to 4% net flow organic growth target for 2021 due to a strong unfunded pipeline. In Health Solutions, annualized in-force premiums grew nearly 9% year-over-year. The strong increase reflects the growth across all products, but particularly in our Voluntary business.

During the first quarter, we announced a new operating model to advance our growth plans and ensure a customer-centric focus on health, wealth and investment solutions. We're excited about the opportunities to meet the increasing needs of employers and their employees. We're focused on how we can expand the solution set that we offer to drive a more coordinated and integrated experience through the workplace. Our acquisition of Benefit Strategies, which we announced yesterday, is a good example of focusing on increasing our capabilities and reach in the workplace. Specifically, this acquisition will accelerate our expansion in the health savings and spending accounts markets. We look forward to continuing to update you during the year on our plans and at Investor Day later this year when we will provide details on the next phase of our growth strategy.

Finally, our balance sheet and capital position remains strong. We continue to return capital to our shareholders by repurchasing $235 million of common stock during the quarter. As of March 31, we have returned $7 billion of capital to shareholders through both share buybacks and dividends since our IPO. As previously shared, we expect to repurchase $1 billion of our shares during 2021, and we had approximately $1.6 billion of excess capital as of March 31. Moving forward, we will continue to demonstrate the responsible stewardship of capital that has been a hallmark of Voya as a public company.

We've also further strengthened our Board, I'm pleased to share that we have welcomed Yvette Butler as a new Independent Director. Yvette brings to our board over 25 years of experience in financial services where she has distinguished herself as a strategist and a leader in providing wealth, advisory banking and financial planning solutions. We're delighted to have Yvette join us. And at the same time, I want to acknowledge Lynne Biggar, who stepped down from the Board last month. Lynne served on our Board since 2014, and has provided valuable contributions to Voya's success. On a personal note, I am very grateful for her guidance and her perspective.

Turning to Slide 5. We continue to earn further accolades for Voya's strong culture and commitment to ethical business practices during the quarter. Voya was named one of the world's most ethical companies for the eighth consecutive year. We were one of only 135 companies to earn this recognition and one of only six in the financial services category. This honor and others likely reflect our culture and the character of our brand. And these include being ranked fifth overall on Barron's 2021 100 Most Sustainable Companies list and earning the number one ranking in the financial services category for the third consecutive year and earning inclusion on Fortune's list of the 2021 Best Workplaces in Financial Services and Insurance. Our management team is extremely proud of our employees and all they have contributed for our clients and customers during the past year. Despite all that has occurred, our people have been steadfast in adapting and pivoting to ensure that Voya can be there for our customers when they need us the most.

With that, let me ask Mike Smith to provide more details on our performance and results.

Michael Smith -- Vice Chairman and Chief Financial Officer

Thank you, Rod. Before we turn to the numbers, I want to echo Rod's comments about our employees. We have many stakeholders of Voya including our clients and our shareholders, but it is our employees that have enabled us to execute everything you've seen from Voya over the past year. From completing the sale of our Individual Life business to responding to our customers when they needed us most, our employees have gone above and beyond, while also managing health and work life balance challenges. For this, we are all very grateful for their support.

This quarter we have changed the focus of our earnings discussion from normalized to adjusted operating earnings. In doing so, we hope to simplify the earnings presentation for investors. This is also consistent with our evolution toward being a less complicated company, especially with the Life transaction now behind us. In order to assist with trend analysis, we will of course call out notable items and any one-time adjustments.

Turning to Slide 7. We delivered after tax adjusted operating earnings of $1.70 per share in the first quarter of 2021. This includes the following items: first, $0.66 of prepayment and alternative income above our long-term expectations. Alternative income was boosted by favorable fourth quarter equity markets. First quarter equity market strength is likely a positive for second quarter alternative performance, though roughly a quarter of our holdings are in sectors that were relatively flat in the first quarter. Second, $0.17 of unfavorable COVID-19 related claims impacting health solutions. And, third, $0.03 of unfavorable other notable items in the quarter. With the Life transaction now successfully behind us, we are focused on and confident in our ability to eliminate stranded costs by the end of 2022. GAAP net income was more than $1 billion for the first quarter of 2021. This was largely driven by a significant gain from the reinsurance component of the Individual Life transaction booked at close. This gain reduced the ultimate GAAP loss on sale for the overall transaction to $633 million, at the low end of the guided $600 million to $800 million range.

Moving to Slide 8. Wealth Solutions delivered $255 million of adjusted operating earnings in the first quarter, significantly higher than $124 million in the first quarter of 2020. The year-over-year increase was largely driven by favorable alternative income, which was $81 million above our long-term expectations and $74 million higher than the first quarter of 2020 as well as a favorable DAC unlock relative to last year. Investment spread continued to benefit from the volume of transfers into our fixed account in 2020. In addition, we benefited from crediting rate actions that became effective this year, seasonally lower crediting days and income generated from discounted bonds that were called in the quarter. Equity markets along with consistently strong full service and recordkeeping net inflows, all combined to drive higher asset levels which provided a tailwind for our fee-based business. Our administrative expenses were favorable compared to a year ago, reflecting our expense discipline and continued drive toward lower unit costs.

Turning to deposits and flows. Full service recurring deposits grew 5.1% to over $11 billion on a trailing 12 month basis. We expect employer match and participant referral trends to continue improving throughout the year, such that full year recurring deposit growth will be 6% to 8% as previously guided. We generated over $850 million of positive full service net flows and more than $2 billion over the last 12 months. Recordkeeping net flows were $3.5 billion in the first quarter, largely driven by a large client win. Stable value saw modest net outflows of $156 million, following a record year for net inflows in 2020.

Looking ahead, we expect full service net flows to remain positive and recordkeeping flows to moderate slightly in the second quarter. We have a robust pipeline, a strong and growing distribution and we continue to invest in our customer-focused solutions through the workplace. Our diversified revenue streams from our top-tier presence across all markets will contribute to our ability to achieve long-term growth.

On Slide 9. Investment management delivered $52 million of adjusted operating earnings. This is higher than $40 million in the first quarter of 2020, primarily driven by investment capital results, which were higher year-over-year and significantly above our long-term target. We generated greater fee revenues from higher average asset levels and successive client wins. This was partly offset by waived fees on certain short-term money market products due to the current level of short-term rates. More materially external client revenue yield is down in the quarter due to the Life transaction, which produced an expected movement of assets from the general account to institutional. Administrative expenses were higher year-over-year, largely due to variable compensation associated with strong investment capital results in the quarter and continued investments in the business. Our adjusted operating margin, including investment capital improved 200 basis points to 28.8% benefiting from strong investment capital results.

Turning to flows. Overall net outflows were roughly $400 million in the quarter, primarily driven by the timing of expected redemptions and is in line with the guidance we shared in the prior quarter. In institutional, we saw strong demand in private credit and commercial mortgage loans across domestic channels, including insurance. This was offset by outflows from longer duration investments by international clients as US rates rose sharply in the first quarter. Having said that, we are seeing indications that trend is stabilizing. Additionally, we saw some short-term liquidity outflows related to client hedging activity. We are now separating these flows in our investor supplement to better represent the true growth of our business. This categorization change had an immaterial impact on historical organic growth and our outlook for 2021. Retail flows continue to improve sequentially, however, remain negative this quarter. Our fixed income performance remained strong. 94% of our fixed income funds outperformed the benchmark on a three year basis and over 95% did so on a five and 10 year basis.

Looking ahead, we expect to return to positive net flows in the second quarter and to achieve full year organic growth of 2% to 4% driven by a strong unfunded pipeline of client wins. We have a diverse platform to meet client needs across market cycles. Our strong long-term investment performance, strength of distribution channels and diversity and solutions, providing differentiated returns continues to drive long-term optimism in our pipeline.

Turning to Slide 10. Health Solutions delivered adjusted operating earnings of $37 million in the first quarter, compared to $61 million in the first quarter of 2020. We incurred $29 million of COVID related claims driving most of the variance. Prepayment and alternative income exceeded our long-term target by $6 million and was more favorable than first quarter of 2020 by $5 million. Annualized in-force premiums grew 8.6% year-over-year, supported by growth in all product lines, highlighted by double-digit growth in voluntary and 9% growth in stop-loss, following a successful January sales and renewal season. The total aggregate loss ratio was 71.8% on a trailing 12 month basis within our targeted range of 70% to 73%. Group Life loss ratios were elevated in the quarter due to COVID claims. Loss ratios for stop-loss and voluntary were in line with our expectations. As Rod mentioned, we are excited by our recently announced acquisition of Benefit Strategies. This acquisition accelerates our presence in the fast growing HSA market that we entered in 2019. As we look out to the rest of the year, we remain optimistic that as COVID eases throughout the year, earnings growth should rebound given solid underlying commercial growth momentum across our entire book of business.

On Slide 11, we provide EPS items to consider for the second quarter of 2021. Second quarter will benefit from several seasonal first quarter items not repeating at the same levels, including administrative expenses, Group Life loss ratios and preferred stock dividends. In the second quarter, we also expect an earnings benefit from lower variable compensation in investment management associated with investment capital results and less severe COVID related claims relative to first quarter levels. Considering claim submission lags, we expect $20 million of COVID related claims impact in the second quarter and $10 million in the second half of this year based on a full year assumption of 300,000 total US COVID-related deaths. Offsetting these items is the call bond investment gained in Wealth Solutions not expected to recur. We also experienced outsized alternative income in first quarter above our long-term expectations of 9%. While we have provided some items to consider, there will of course be other factors that affect second quarter results, including changes in our average share count, market impacts, business growth and the potential for additional COVID-19 impacts.

Slide 12. Our robust capital position allowed us to continue our strong track record of returning capital to shareholders. This quarter we returned $255 million to shareholders, including $20 million in common stock dividends and $235 million in share repurchases, the latter of which comprised $30 million of shares related to an ASR agreement that was entered into in the fourth quarter of 2020, $200 million of shares delivered as part of a new $250 million ASR agreement we entered into during the first quarter and $5 million of shares repurchased through open market transactions. The total amount of capital returned to shareholders since our IPO is $7 billion predominantly through shares repurchased. We continue to expect to deploy approximately $1 billion of capital toward share repurchases over the course of 2021 in a ratable manner, while continuing to balance investing in our business for the long-term. Our financial leverage ratio was above our 30% target, largely due to the impacts from the life flows and lower AOCI, due to the moving interest rates at the end of the quarter. This does not change our plan to retire $600 million to $800 million of debt this year, of which we retired $75 million in the quarter. We ended the quarter with strong excess capital of $1.6 billion. We continue to expect at least $300 million of additional excess capital upon the completed sale of our independent financial planning channel.

In summary, we are pleased to have closed the Life Insurance transaction, a huge step in our transition to our capital-light business and to have shared our new operating model. We believe our strong workplace and institutional franchises are poised for long-term success. We generate high free cash flow and have a significant excess capital position as well as an increasingly valuable deferred tax asset should higher corporate tax rates become law. We will continue to act as good stewards of capital as we look to deploy proceeds in the best interest of shareholders.

With that, I will turn the call back to the operator, so that we can take your questions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Elyse Greenspan with Wells Fargo. Please state your question.

Elyse Greenspan -- Wells Fargo -- Analyst

Hi, thanks, good morning. My first question on, just on the capital side of things, you guys reconfirmed $1 billion of buyback for this year. I was just hoping we could get more color on how to think about just timing. I think you said it will still be ratably throughout the year, but given that there is more certainty on the economy and coming out of COVID, will you perhaps look to pull forward some of the buyback given that the worst is behind us?

Rodney O. Martin -- Chairman and Chief Executive Officer

Elyse, good morning, I'll begin and as usual, Mike and I will toggle back and forth. And your assumption is correct or your understanding is correct. We have committed to $1 billion of buyback this year. As Mike just shared, with that we -- that's on top of the $7 billion that we've already done historically since the IPO. We're also retiring debt that you've heard Mike talk about between $600 million and $800 million and we'll probably be in the middle of that range. And if you look at how we've done this historically Elyse, we've done it ratably and that has served us well. And so that philosophy and approach is how we're approaching it and we will always make some judgments based on market conditions, but that's generally been the approach. And Michael, please feel free to add.

Michael Smith -- Vice Chairman and Chief Financial Officer

I think you covered it really well Rod. I would just kind of reemphasize the point of, we'll look for opportunities as the stock trades up and down or general market trades up or down to lean in or lean back with open market purchases where that makes sense. But, the ratably part Elyse just to be clear, was less about COVID and uncertainty and more just the application of the discipline that we've shown consistently. I think as Rod said it's served us well and we expect it to continue to serve us well.

Elyse Greenspan -- Wells Fargo -- Analyst

Okay, great. And then my second question on you guys announced the deal Benefit Strategies yesterday and I just, you guys didn't disclose the payment, so it sounds like it's more of a bolt-on deal. So as we think about additional M&A, would it more be kind of similar bolt-ons or could you just kind of give us an update as you guys think about potential additional M&A transactions?

Rodney O. Martin -- Chairman and Chief Executive Officer

Elyse, thank you for mentioning that. We are very excited and I'll have Rob comment in just a moment about Benefit Strategies, but in terms of our consideration we've talked about considering opportunities that will help accelerate growth in the workplace by integrating -- by increasing integrating outcomes across the health and wealth focus with employees and employers from an engagement in the data integration and the technology perspective. So, it -- Elyse it's extremely difficult to comment about size because these opportunities emerge as they emerge, but this is a good example of adding to a business that we started organically and I think enabling us to accelerate significantly but let me add Rob -- ask Rob to jump in and just describe this a little more fully. Rob?

Rob Grubka -- Chief Executive Officer, Health Solutions

Yes, sure. Thank you, Rod. Thanks for the question, Elyse. Yes, no, we're certainly excited about it from a strategic standpoint. I think it's probably super self evident as to why we got excited about this particular opportunity and to speak of them more particularly they have been in this business for a long time, they are East Coast based company. So, there is a broad mix of solutions that they cover and service and administer. HSA is certainly sort of a headline story because we see it as such a great connector between our health and wealth businesses and trying to really bring together for consumers, a more integrated decision framework, an opportunity to provide guidance and think about even servicing the business in a more holistic way. So there is certainly that element of things.

As a reminder, we talked about this actually back at Investor Day in 2018 and over the last couple of years, we certainly have learned a lot as we've entered that marketplace. We're excited about what we've learned. Again, it just reinforced the connectivity and the receptivity in the market to bring in together the wealth story as well as the HSA, a notional account story and connect it all the way through and then obviously it's an opportunity for our investment management team to play a role in this solution as well. So, we're really excited about the cultural fit, the consumer fit and the capabilities they bring, we actually partnered with Benefit Strategies last year in a more meaningful way. So, we got to sort of test ride with each other a little bit and just found it a really good match culturally and from an execution and delivering for our customer perspective, I couldn't be more excited about it.

Elyse Greenspan -- Wells Fargo -- Analyst

Okay, thanks for the color.

Rodney O. Martin -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Nigel Dally with Morgan Stanley. Please state your question.

Nigel Dally -- Morgan Stanley -- Analyst

Great, thanks, and good morning everyone. I just wanted to circle back to capital management. I understand that you could lean in or out depending on market conditions, which makes a lot of sense but, as you also mentioned, it does seem like the uncertainty with regards to the pandemic, the economy has dissipated, your current capital position remains very strong, your free cash flow is among the best in the industry and you also have the deal in the third quarter which is going to free up some additional capital. So if things go right, is there potential upside to the amount or should we -- or should I be taking from your comments that that $1 billion that you talked about, we should view as being largely safe and sound [Phonetic] at this point?

Rodney O. Martin -- Chairman and Chief Executive Officer

Nigel, I'll start, but, again Mike and I will toggle back and forth. Just, maybe as we believe the share repurchases are and have been a core part of the Voya story. In addition to that, we're carefully looking as we've discussed for opportunities to accelerate our workspace strategy, Benefit Strategies is an example of that. We're also retiring as we commented about just a moment ago, $600 million to $800 million of debt. And as a reminder, a number of these transactions close later this year. So, we will and have been opportunistic historically, but the guidance that we've given for 2021 is fully based on both organic growth and what we have in place now. With that Mike?

Michael Smith -- Vice Chairman and Chief Financial Officer

Yes, Nigel, I think the only thing I'd say is that you shouldn't view the $1 billion as a ceiling. I think there are -- to the extent that opportunities present themselves, and it makes sense for us to do, I think we could lean in, and we've -- I think we've said from the beginning was at least $1 billion. We will see how the balance of the year unfolds. We'll need to close the financial planning channel transaction and then we'll see how the balance of 2021 emerges. But to Rod's point, focusing on delivering shareholder value and being conscious of that has been I think a hallmark of this management team and I don't think that's in anyway changing here.

Nigel Dally -- Morgan Stanley -- Analyst

Okay, that's great. I appreciate the color. And just one other one on investment management. You commented you have a strong unfunded pipeline of mandates, any color as to where that's likely to be coming in as we kind of looking at that in the second quarter or just too tough to judge?

Rodney O. Martin -- Chairman and Chief Executive Officer

Christine?

Christine Hurtsellers -- Chief Executive Officer, Investment Management

Nigel, I would say not to go as far as say too tough to judge, but as you know just quarter-to-quarter, some of these mandates in the pipeline, not all are a bit lumpy. So, but, so saying that you know looking out at the full year and what we do see is see very strong unfunded wins as well as progressing through finals and semi-finals, so feeling really positive about it. You know, it's like what's driving some of this? Well, listen, right now our unfunded wins are 10 strategies, so, it's diverse -- diversified client type too. A lot of the demand is for some of our traditional private assets like private credit is an example, also commercial real estate that was held up a bit in terms of where the market was pricing and really the ability to underwrite properties last year, so that in COVID so that headwind is starting to dissipate and will be turning into a tailwind. So, overall what are we seeing, we're still -- we're very confident forecasting that 2% to 4% beginning of AUM growth, it's diversified and as you say, Nigel, it could be lumpy quarter-to-quarter, but overall the long run trajectory is very strong and as you know we've delivered five consecutive years of positive net cash flows and so we're well on track for having our sixth year of positive cash flows.

Nigel Dally -- Morgan Stanley -- Analyst

Sounds great, thanks a lot.

Operator

Our next question comes from Josh Shanker with Bank of America. Please state your question.

Joshua Shanker -- Bank of America -- Analyst

Yes, thank you very much. I wonder if you could talk a little bit, you get the question a lot, but I can tell you that from my perspective the fee margin on recordkeeping business has shrunk more quickly than I thought it would. I know you've had some big wins and those wins might be coming at a lower negotiated rate than the legacy portfolio, but when we talk about the trend, what we should expect going forward and as you do put on new wins, the margins on those wins relative to the legacy margin in the portfolio?

Rodney O. Martin -- Chairman and Chief Executive Officer

Absolutely. Heather?

Heather Lavallee -- Chief Executive Officer, Wealth Solutions

Yes, Josh. Thank you so much. Appreciate the question. First, I'll say, first, we did have some one-time annual fees in the fourth quarter that did not repeat in the first quarter which really drove the appearance of some accelerated fee compression between the quarters. We are very much focused in on positive and profitable sales growth and while we do anticipate some revenue pressure really across the industry, we are very much focused on growth in our full service, specifically within our mid-market space where we have expanded distribution. And what we see there is we may sell larger plans with a lower average fee but, higher total net revenues and very, very much in line with our expectations.

Second factor I'd point to is, we continue to be very focused on driving operational efficiencies and enhancements to our client experience that are helping to bring down expenses and helping to offset revenue pressure. And the final item I'd really point you to is, we're focused on driving alternative sources of revenue by expanding and enhancing our proprietary solutions that are really resonating in the market. So while we do recognize that there are revenue pressures, we are very confident in our ability to hit our 8% to 12% earnings growth that we forecasted for the year.

Joshua Shanker -- Bank of America -- Analyst

And the timing of the win that you had in the quarter, did that show up toward the end of the quarter, skewing the average balances as opposed to the beginning and end balances?

Heather Lavallee -- Chief Executive Officer, Wealth Solutions

Well, I will say I'm sure, let me address it this way, it's kind of talking about the flows in the quarter. We had very, very strong flows across full service and recordkeeping totaling $4.4 billion and all organic growth. So very, very pleased. What I would comment in terms of net flows is we did see a greater acceleration of funded wins coming in the quarter. So, I think a little bit less driving anything you're seeing in terms of average fee revenue, but again, I'm going to point to the fact of very, very strong flows in the quarter and really driving our strong commercial momentum that we're anticipating throughout the year within recordkeeping as you know it can be a little bit lumpy. We're building off an extremely strong 2020, so as I look forward into 2021, we expect flows to moderate a little bit, see continued strong revenue from our diversified portfolio and just strong commercial momentum throughout the year.

Joshua Shanker -- Bank of America -- Analyst

Thank you.

Operator

Our next question comes from Tom Gallagher with Evercore ISI. Please state your question.

Thomas Gallagher -- Evercore ISI -- Analyst

Good morning. Rod, I heard your comment before about in reaction to M&A that it depends on opportunities that emerge, but just wanted to ask you about sort of directionally where your head's at with the types of deals you'd consider because as you guys probably heard Prudential may be considering divesting their full service retirement business and I'm not asking you specifically about Prudential but would Voya consider a larger scale integration oriented deal in that space or is it really more bolt-on smaller size deals that we should be thinking about with more consideration for not wanting to take on too much execution risk here?

Rodney O. Martin -- Chairman and Chief Executive Officer

Tom, thank you. Two comments; one, we have scale in that space with our 6 million plus participants and it's been growing nicely as I think you're aware. The second piece is what we've really tried to signal is the focus of again accelerating growth in the workplace. Benefit Strategies is an example of that but, by increasing the outcomes across health and wealth. The employee and employer engagement, data integration and technology, that's where our focus is. Tom, through the pandemic the world in our view has really changed and you'll hear us and particularly Charlie with his focus on growth talking about connecting the unconnected. There are more and more employees are looking to their employer for help and support in this area and we see that as our primary focus. I think, Benefit Strategies is a good example of that in the, and again it's hard to comment beyond that, because it's hypothetical, but Mike, feel free to add.

Michael Smith -- Vice Chairman and Chief Financial Officer

Yes, just maybe, Tom, as Rod said, we have scale in retirement. Scale will always be important in retirement and so those, we've talked consistently about looking at bolt-ons in retirement and bringing on additional scale where it makes sense, but that will be very much a numbers game and as you pointed out an execution risk assessment game. I think we're -- as Rod also said, very excited about the opportunities to broaden our capabilities in the realm of integrating the experience for employers and employees, and so that's also going to be a continued focus.

Rodney O. Martin -- Chairman and Chief Executive Officer

Maybe one other comment, if you go back to what we've done with our Voluntary benefit business, I mean that was nascent and grow organically and over the last eight or 10 years, all organically. We've gone from really being a non-significant player to being fourth or fifth in the marketplace. And that experience and confidence about how the team has done that has bolstered our confidence and focus on what are the other adjacencies that we can do to something like Benefit Strategies that can further expand our capabilities and respond to what we're hearing from employers and employees that they're looking for. I'm sorry I interrupted you.

Thomas Gallagher -- Evercore ISI -- Analyst

No, that's really helpful. Appreciate the color from both of you. Just one follow-up, Mike if I could, on the sharp drop in crediting rates in the Wealth Solutions business, clearly it looks like that was a pretty favorable earnings driver in the quarter. Can you expand a bit on what happened there and whether or not there is more flexibility on the crediting rate side going forward or was this kind of a big lever that was pulled and what it means for future margins? Thanks.

Michael Smith -- Vice Chairman and Chief Financial Officer

Tom, I think I'll actually bump that one over to Heather. I think she is in a better position to give you the color on that.

Heather Lavallee -- Chief Executive Officer, Wealth Solutions

Thanks, Mike. Yes, happy to do so. First, as Mike did mention, we had a notable in the quarter that will not repeat in terms of the sale of call bonds, but we've taken very specific action to address some of the interest rate pressures. And let me point you to three specific actions. First, Mike talked about in his comments that we took some crediting rate actions last year and in beginning of this year, very much in line with the low interest rate environment that were reflected. Second, our GMIR initiative from several years ago has continued to help us on this front. And then the third item is that we had significant transfers from variable to fixed in 2020 into lower crediting rate product that, that really also helped our spread income. So, we certainly recognize the fact that recent rate increases have been a bit of a tailwind for us. We expect the low for long interest rate to continue and we are always looking for opportunities to further mitigate the risk from our low interest rate environment while honoring the commitments we've made to participants and planned sponsors. But overall, we feel that our earnings are very well balanced between spread, asset base and participant fees and very confident with our ability to deliver on the earnings targets that we set forth for the year.

Thomas Gallagher -- Evercore ISI -- Analyst

Thanks, Heather. Any further flexibility in that, and to continue to lower crediting rates?

Heather Lavallee -- Chief Executive Officer, Wealth Solutions

Yes. I appreciate the question. I mean, we are always looking for opportunities, I won't point you to any specific actions, but I'll tell you that the teams are always looking at certain blocks of business. We're looking at crediting rates and we want to make sure that we are kind of balancing opportunities to de-risk and with commitments we've made to clients, but being very good stewards of capital to shareholders. So, again, it's something that I think we have a very solid track record over the past several years of both adjusting crediting rates and taking appropriate action and we'll continue to do that going forward.

Thomas Gallagher -- Evercore ISI -- Analyst

Okay, thanks.

Heather Lavallee -- Chief Executive Officer, Wealth Solutions

Sure, thank you.

Rodney O. Martin -- Chairman and Chief Executive Officer

Thanks, Tom.

Operator

Our next question comes from Andrew Kligerman with Credit Suisse. Please state your question.

Andrew Kligerman -- Credit Suisse -- Analyst

Hey, good morning everyone. I'm interested in Health Solutions and the sales outlook as we look to the first quarter, stop-loss sales were up 23% year-over-year, but Life sales were down 26%. And we would have expected higher Life sales just given the increased attention to that product area. So could you touch on both product lines in Health Solutions?

Rodney O. Martin -- Chairman and Chief Executive Officer

Rob, do you want to begin?

Rob Grubka -- Chief Executive Officer, Health Solutions

I'd be happy to. Thanks, Andrew. And, as you know, stop-loss obviously really strong start to the year. On the Life side just to connect that and then I'll circle back because I think the story across Life and also Voluntary is just worth reinforcing. But on the Life side, on the sales front, definitely down sharply. Again, I'd point back to mix of sales being the real driver there. So at the larger end of the market, we just saw less sort of things to take swings at and the activity was just slow during 2020 for the obvious reasons.

Now to your longer term point of like why wasn't recognition around life insurance and the needs of it all the more apparent, I'd say that's very true. So I would look at this is more long-term trend intact, if not increasing, but at the same point, we just, the 2020 noise from COVID and what went to market was the real story there. And then when you look at the in-force book of business, just to put an emphasis on it, our in-force book of life and disability grew at close to 4%. So you had on the one hand, the drop in sales, but you also had an improvement retention. So, I think, net-net, the story kind of connects from both perspectives and underlies the point of just let's go into market than you might have otherwise anticipated. Stop-loss, again that's a business where we get swings at every year, feel good about the discipline around that.

And then, somewhat similar story on the supplemental health voluntary side of the house where we actually wrote a significant number of new groups over year-over-year, they just happened to be more middle market or smaller market than we've seen in prior years. So it was really a sales mix story on sort of national account, 500 lives -- 5,000 lives and up versus where we ended up writing a lot of business, a lot of groups with more in the middle market. So as I alluded to in comments, we're seeing that activity open back up and this is sort of prime season for both Voluntary and the Life business and we're optimistic about the activity in the pipeline.

Andrew Kligerman -- Credit Suisse -- Analyst

Very helpful. And then my second question is around the Wealth Solutions unit and I saw earlier last year, I think you had put together multiple -- multi-employer plans tied to SECURE Act, and I'm wondering how that's going? And then I see the SECURE Act 2.0 legislation in the house, and I'm wondering what the addressable market there is? So, maybe a little bit about how you're proceeding with respect to the SECURE Act? How it's impacting sales and now this new legislation, what that could do for you?

Rodney O. Martin -- Chairman and Chief Executive Officer

Heather?

Heather Lavallee -- Chief Executive Officer, Wealth Solutions

Yes, happy to address it. So, for starters, and I think we've been very clear in our support of both the SECURE Act 1.0 and 2.0 and we think that SECURE Act is providing a tremendous opportunity for more Americans to have greater access to retirement savings. So, very, very supportive and a couple of things that I would point to -- to your questions about multiple employer plans and I'll comment on even pooled employer plans. We believe that Voya is very well positioned. We have seen some great success in the adoption of pooled employer plans and Voya is absolutely well positioned to play successfully in that space and we're anticipating some growth in sales, particularly in our, in our corporate markets.

As I pivot to your question on SECURE Act 2.0, there, we think that there are a couple of components specific to SECURE 2.0 where our tax exempt business is going to be particularly well positioned to support it. Specifically, there are some opportunities that have been proposed that would expand the investment line-ups for tax exempt clients, specifically providing access to CITs, Collective Investment Trusts, and then also opportunities with four-tax exempt plan sponsors to enter into multiple employer plan. So, again, all in all, we're very well positioned. We have pivoted and responded very quickly to the adoption of SECURE Act and we think that Voya is in an excellent position to help increase the savings rates for both participants as well as growing plan sponsors as a result of SECURE Act.

Andrew Kligerman -- Credit Suisse -- Analyst

Thank you.

Rodney O. Martin -- Chairman and Chief Executive Officer

Thank you, Andrew.

Operator

Our next question comes from Ryan Krueger with KBW. Please state your question.

Ryan Krueger -- KBW -- Analyst

Hi, good morning. I was hoping you could discuss the divergence in recurring deposit growth that you're seeing in Full Service corporate which has recovered pretty strong compared to tax exempt, which seems to still be under some pressure?

Rodney O. Martin -- Chairman and Chief Executive Officer

Heather?

Heather Lavallee -- Chief Executive Officer, Wealth Solutions

Yes, thank you. Happy to address your question. First, as Mike stated in his comments, we're very confident on our ability to achieve the 6% to 8% recurring deposit growth for the year, very much in line with 2020 and to get specific to your question around the divergence, when we, if I look back to 2020, our tax exempt business did not, was not as impacted by COVID in terms of recurring deposits throughout the year. So, we did not see the same kind of rapid decline as we saw in the corporate markets.

Now, on the flip side, as we look into first quarter, our corporate market is seeing just a faster recovery from what we're seeing from the economy, specifically in terms of employer contributions and employee contributions. So, all in all, I think what it really speaks to is a very balanced mix of our business across corporate and tax exempt that was both growing and seeing nice signs of recovery and again I'll really point more toward that full year forecast on a combined basis, which is what we're, what we're really focusing in on, but again, I think we're very, very well positioned across markets and we do expect to see some improvement in tax exempt recurring deposits as the year progresses.

Ryan Krueger -- KBW -- Analyst

That's helpful. Thank you.

Operator

Thank you. Our next question comes from Erik Bass with Autonomous Research. Please state your question.

Erik Bass -- Autonomous Research -- Analyst

Hi, thank you. To start on Wealth Solutions, can you just talk about the outlook for expenses for this year? Was there anything unusual in the admin expense this quarter or should we expect kind of continued minimal year-over-year growth?

Heather Lavallee -- Chief Executive Officer, Wealth Solutions

Yes, I'll jump in and answer that question. So, for starters as we look back to first quarter of 2020, we did have some one-time expenses result in -- as a result from some large sales in 2020, particularly in our recordkeeping business and as we look forward, we continue to be very, very disciplined with our focus on expense management. We are proud of the fact we've driven lower unit cost across our book of business, which continues to be a focus. So what I'd say is really no notables. We are -- as I kind of look at the different levers that we have to pull, focusing in on not only expense management but how we're driving operational efficiency, how we're driving improved client experience that help us to manage expenses. So nothing notable for the year and again just something we'll continue to be disciplined with throughout 2021.

Erik Bass -- Autonomous Research -- Analyst

Thank you. And then I was hoping you could talk about your current distribution relationship with NN Investment Management and how that could be affected by their announced strategic review?

Rodney O. Martin -- Chairman and Chief Executive Officer

Actually, Christine, do you want to take that?

Christine Hurtsellers -- Chief Executive Officer, Investment Management

Sure thing, Rod. Yes, Eric, as you referenced, NN has made an announcement about NNIP potentially being up for strategic review and as you point out, they've been a long run strategic partner of ours. How do we think about this around a couple of lenses? I mean, number one, we know that the capabilities that they distribute on our behalf like notably investment grade credit, that's one of the best performing investment grade credit SICAVs in the world and so the quality of what we produce should continue and we would expect that strategic partner to continue, because on both sides we're adding real value. But how to think about the way forward? We have been planting seeds as far as direct distribution offshore, I mean, those markets are growing rapidly, notably, Asia. We did add sales resources into EMEA last year and also when you think about APAC we're going to add some resources in the fourth quarter and what we're seeing out of APAC notably is because a lot of the larger clients purchase eVestment data, we've actually won through direct origination just based on the quality of what we do some Asian clients.

And then finally, we continue to grow our product set in Asia, we worked hard to set up as an example, a Cayman Fund for commercial real estate for a large Japanese insurance company just due to some technicalities around taxes. So, continuing to be innovative, continuing to be able to meet some of the more complex solutions needed out of offshore clients and so again, NN has been a great strategic partner, but we're doing a lot away from them to continue to grow sort of our notable growing client interest offshore based on the state of yields globally.

Erik Bass -- Autonomous Research -- Analyst

Thank you and do you have a rough breakdown of kind of what your international distribution is that's sort of independent versus through that relationship?

Christine Hurtsellers -- Chief Executive Officer, Investment Management

Sure. We have a small team in EMEA that is direct. We have some onshore resources that are fully dedicated to servicing and reaching out to Asia. And we don't have any direct salespeople boots on the ground in Asia yet. We're in the planning process with Mike Smith and team but we're expecting to add a small team there in the fourth quarter and really what we want to do with that team is ensure that they are insurance focused as well because we just think globally there is a real opportunity given the strength of our insurance, asset management and the products that we have to really tap into that client base worldwide.

Erik Bass -- Autonomous Research -- Analyst

Thank you.

Operator

[Operator Instructions] Our next question comes from Jeremy Campbell with Barclays. Please state your question.

Jeremy Campbell -- Barclays -- Analyst

Hey, thanks. Mike and Rob, I'm just hoping you could help us think about the sizing of Benefit Strategies. I think the release said 370,000 participant accounts across HSA, HRA all that other fund stuff, I think that the national average balance for HSA is about 18,000 obviously everything else is probably quite a bit lower. So any high level color on account splits or total AUM on board would be helpful as well as any opportunity to convert some of these HSA assets into Voya strategies would be helpful as well?

Rodney O. Martin -- Chairman and Chief Executive Officer

Rob, do you want to begin?

Rob Grubka -- Chief Executive Officer, Health Solutions

Yes, sure. Look, we're not going to peel it all the way back as you're trying to do, which is understandable. Look, I think as we close the transaction, obviously once it's closed, we'll be able to talk differently about just how to set expectations. It's an appropriately sized deal. It's very strategic for us. Again, I think, I alluded to this before, it's a breadth of products. I wouldn't hang up on sort of the AUM story around it as much as it's a fee story and so certainly there is the side benefit of growing AUM as we move forward and continue to try to scale the business, but it's really a fee-oriented business and that's the best way to think about it. And I'd just say sort of stay tuned as we continue to refine putting numbers and specificity to it once the deal is closed.

Jeremy Campbell -- Barclays -- Analyst

Thank you.

Operator

Our next question comes from Humphrey Lee with Dowling and Partners. Please state your question.

Humphrey Lee -- Dowling and Partners -- Analyst

Good morning and thank you for taking my question. In investment management accounting for the favorable investment capital return and the corresponding expenses, the normalized earnings would be around kind of $34 million which seemed low relative to where it has been running. I think you talked about there are some reinvestment expenses going on into the quarter. So just how to think about the earnings power for investment management and where you think you should be kind of accounting for some of the variables in the quarter as well as the Individual Life transaction?

Rodney O. Martin -- Chairman and Chief Executive Officer

Mike, you want to start?

Michael Smith -- Vice Chairman and Chief Financial Officer

Yes, I'll take that. Humphrey, thanks for the question. And maybe just to cut to the chase on where we see Voya Investment Management coming in, in second quarter. I think there are a number of moving parts and probably too much to try and cover in the time we have, but we see the second quarter being in the mid 40s, that's going to be primarily driven by the variable comp adjustment that we flagged in the walk forward, a reversion to more normal expenses from the first quarter typical seasonality as well as some fee income growth. So I think all of that together, there's a couple of other smaller ins and outs, but I think if you think of it in terms of mid 40s, I think that's a good place for you to be for 2Q and that incorporates the impact of the Life transaction which we've shared previously is $10 million to $15 million annually.

Humphrey Lee -- Dowling and Partners -- Analyst

Thank you.

Operator

Our next question comes from Suneet Kamath with Citi. Please state your question.

Suneet Kamath -- Citi -- Analyst

Yes, thanks. The stop loss ratio in the quarter at 75.6% was quite a bit lower than kind of where it's been running over the past kind of three quarters. Is there anything unusual going on in there or is that just normal [Technical Issues]. Are you seeing people -- any impact from people sort of putting off medical treatments because of COVID and unwillingness to go to hospitals, etc?

Rodney O. Martin -- Chairman and Chief Executive Officer

Rob?

Rob Grubka -- Chief Executive Officer, Health Solutions

Yes, sure. I think the quick answer on this is, look, it's a business that's all about managing volatility for employers and so sometimes we're going to see the good or the bad of that volatility at different points in time. I wouldn't wrap it up in a seasonality comment, I think it's just how the block is evolving and as we're writing new business putting that on and then renewing new business, you're just going to see some inherent volatility there, but nothing that we obviously don't focus on and manage through as time goes on. So, it's sort of the knock-on question of delayed treatment and do we expect different sort of severity or frequency of activity. I think we're certainly like everybody in the industry sort of watching for those trends or those issues to emerge. At this point, we haven't seen sort of material deviation in the types of sort of coverage that we provide.

Just as a reminder, our attachment points in the market, given where we play, sort of that middle part of the marketplace, those are in and around $300,000 deductibles. So, it's going to take pretty severe events for us to cover. As you get down market, some players in the stop loss space are going to see different sorts of activity, different sorts of experience because they attach at lower deductibles. So there can be some give and take because of that dynamic that I just highlighted there, but we're certainly on top of it paying attention to it, and we'll see how it evolves and then we get a reprice as on the annual cycle and recover if we need to, but at this point, we're feeling good about where we're sitting.

Operator

Our next question comes from John Barnidge with Piper Sandler. Please state your question.

John Barnidge -- Piper Sandler -- Analyst

Thank you very much. As we think about the health savings account initiative and push there and the lens of taxes presumably going up. Can you talk about the opportunity to actually get maybe more of those accounts at like a fully funded level as opposed to where they traditionally maybe are and how the products across the suite at Voya helps that? Thank you.

Rodney O. Martin -- Chairman and Chief Executive Officer

Rob?

Rob Grubka -- Chief Executive Officer, Health Solutions

Yes, I'll jump in. From a funding level perspective I think maybe you're getting that using them more as savings of vehicle versus spending. I'll just sort of run with that assumption in case you dropped off, but look over time we certainly view the flexibility, the customer value piece from the tax treatment, is an area where most consumers to the extent they can accumulate assets there, it's really great, probably underutilized way to save and accumulate funds. You'll hear people talk about and we talk about the cost of medical care once you reach retirement age and that's in the $200,000, $300,000 range. It's not insignificant. HSA certainly can play an important role in that. I think for us it's recognize an individual situation, understanding what they're trying to accomplish, what their needs are at any point in time, obviously, those things change over time as well. And so I think this just puts us in a really good position to understand someone's situation, understand where they sit, both from a retirement perspective as well as the savings for healthcare perspective and provide really good guidance around that and support for them making really good decision. So back to Rod's comment around data integration and taking a more holistic approach to the consumer, again, that's why we view this is such a strategic move.

Operator

Thank you. This concludes our question-and-answer session. I would like to turn the call back over to Rod Martin for any closing remarks.

Rodney O. Martin -- Chairman and Chief Executive Officer

Thank you. The purposeful decisions that we've made as a company has enabled us to enter this period in a position of strength with our new operating model, our clear focus on the workplace and institutions and our expanding capabilities to deliver solutions that our clients and customers value. Voya is well positioned for continued growth and success. We're excited about the opportunities before us and we look forward to continuing to update you during the year and at our Investor Day later this year. I hope you and your families remain healthy and safe. Thank you and good day.

Operator

[Operator Closing Remarks]

Duration: 65 minutes

Call participants:

Mike Kartz -- Executive Vice President, Chief Strategy, Planning and Investor Relations Officer

Rodney O. Martin -- Chairman and Chief Executive Officer

Michael Smith -- Vice Chairman and Chief Financial Officer

Rob Grubka -- Chief Executive Officer, Health Solutions

Christine Hurtsellers -- Chief Executive Officer, Investment Management

Heather Lavallee -- Chief Executive Officer, Wealth Solutions

Elyse Greenspan -- Wells Fargo -- Analyst

Nigel Dally -- Morgan Stanley -- Analyst

Joshua Shanker -- Bank of America -- Analyst

Thomas Gallagher -- Evercore ISI -- Analyst

Andrew Kligerman -- Credit Suisse -- Analyst

Ryan Krueger -- KBW -- Analyst

Erik Bass -- Autonomous Research -- Analyst

Jeremy Campbell -- Barclays -- Analyst

Humphrey Lee -- Dowling and Partners -- Analyst

Suneet Kamath -- Citi -- Analyst

John Barnidge -- Piper Sandler -- Analyst

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