Voya To Sell Closed Block Variable Annuity And Fixed & Fixed Indexed Annuities

(RTTNews) - Voya Financial Inc. (VOYA) said Thursday that it will divest substantially all of its Closed Block Variable Annuity or CBVA segment and its individual fixed and fixed indexed annuity business through an agreement with a consortium of investors led by affiliates of Apollo Global Management, LLC (APO), Crestview Partners and Reverence Capital Partners.

Voya noted that the agreement will enable Voya to focus on its higher-growth, higher-return, capital-light Retirement, Investment Management and Employee Benefits businesses.

Voya said it will divest Voya Insurance and Annuity Company (VIAC), the insurance subsidiary that has primarily issued Voya's variable, fixed and fixed indexed annuities. VIAC will be acquired by Venerable Holdings, Inc., a newly formed investment vehicle owned by a consortium of investors led by Apollo, Crestview and Reverence. Athene Holding, Ltd. (ATH), and Voya also will participate in this consortium, with Voya having a 9.9% equity stake in Venerable.

Following its acquisition of VIAC, Venerable will hold substantially all of the variable annuities in Voya's CBVA segment with account value of approximately $35 billion based on June 30, 2017, balances. Concurrent with the sale of VIAC, Voya will sell via reinsurance to Athene its individual fixed and fixed indexed annuity policies with approximately $19 billion of account value as of June 30, 2017, representing the significant majority of Voya's fixed and fixed indexed annuities in force. Voya intends to cease manufacturing non-retirement-focused individual annuities after the transaction closes.

Based on the terms of the agreement, Voya estimates that the transaction will result in about $1.1 billion of value, which includes the benefit of a $400 million ceding commission paid by Athene for Voya's fixed and fixed indexed annuities business. Giving effect to certain assets that are not liquid today as well as expected transaction, restructuring, and other costs, Voya expects immediately deployable capital in excess of $500 million, which is subject to change until closing. Voya intends to utilize the deployable capital for additional share repurchases beyond its $1 billion existing authorization. Voya also expects to benefit from the above-mentioned assets that are not liquid today — and that are not included in excess capital — over time.

Voya does not expect that the transaction will have a significant impact on the net present value of its deferred tax assets.

Rodney O. Martin, Jr., chairman and chief executive officer, Voya Financial said, ".. we expect to increase Voya's quarterly operating earnings per share to between $1.10 and $1.20 within 12 months of the transaction closing. ... We also will continue with our share-repurchase plans, including our intent to repurchase $1 billion of our common stock by June 30, 2018."

To achieve its new, targeted annual run-rate cost savings, Voya will incur certain restructuring expenses. These expenses, which will be classified as non-operating items, are not reflected in the company's run-rate cost savings estimates for 2018.

As part of the agreement, Voya Investment Management (IM) will serve as the preferred asset management partner for Venerable. Voya IM will — for a minimum of five years following the closing of the transaction — manage approximately $10 billion of general account assets under management (AUM). Voya IM also will continue to manage the funds platform associated with the variable annuities, representing approximately $22 billion of AUM as of September 30, 2017. Voya IM will be the preferred asset manager for future blocks acquired by Venerable. This arrangement aligns with Voya IM's focus on providing long-term, risk-adjusted returns as well as its expertise in serving the needs of insurance companies.

The transaction is expected to close in Q2 or Q3 2018, subject to customary closing conditions, including regulatory approvals.

After completing the transaction, Voya expects annual free cash flow of between $600 and $700 million and anticipates that approximately 80% of its operating earnings would be generated from its Retirement, Investment Management and Employee Benefits businesses. As a result of its planned exit from the individual annuities business, Voya intends to conduct a strategic review of its Individual Life business during the first half of 2018.

Voya estimates that it would result in a $2.3 billion after-tax reduction to shareholders equity, excluding accumulated other comprehensive income, the majority of which reflects an after-tax loss that is subject to change upon finalizing fourth-quarter 2017 financials and would be recorded in the fourth quarter. The estimated loss on sale and retained tax benefits (and Voya's ability to realize such benefits) are based on current tax law and are subject to a final determination of the tax basis of the operations sold.

After the sale, VIAC or one of Venerable's affiliates will administer most of the variable, fixed and fixed indexed annuities included in the transaction, subject to some exceptions and transitional arrangements. Certain business in Voya's Annuities segment is not part of the transaction, including approximately $6 billion in investment-only products (primarily Select Advantage) that will be retained by Voya.