Voya Financial Inc.'s announcement that it would shed most of its annuities business represents an ongoing "restructuring" within the life insurance industry, according to Athene Holding Ltd. Chairman and CEO James Belardi.
The deal announcement comes on the heels of a similar pact announced by The Hartford Financial Services Group Inc., which agreed to sell its runoff life and annuity businesses to a group of private equity firms. Voya's transaction involves divesting its closed-block variable annuity business to a vehicle owned by a group of investors including Apollo Global Management LLC and selling its individual fixed and fixed indexed annuity policies with about $19 billion of account value through reinsurance to Athene.
These deals boost confidence among life insurers looking to cut their exposure to variable annuities, Athene's executives said on a call, adding that its partnership with Apollo allows it to participate in a "wider array of transactions" in the life insurance industry. The Voya deal enables Athene to put to work $1 billion of excess capital and could generate returns in the midteens, Belardi said.
For Voya, the deal offers an opportunity to become a leaner company and reduce its exposure to interest rate and insurance risks, Chairman and CEO Rodney Martin said on a separate call. The company hopes to increase its focus on its retirement investment management and employee benefit businesses, which he expects to contribute more than 80% of operating earnings in the future.
Voya expects to derive about $1.1 billion from the transaction over a period of time. Martin said the company "is comfortable" with the price tag, saying it is "within the range of" the valuations provided by actuaries for its closed-block variable annuity and fixed annuity businesses. While the company will realize $500 million when the transaction closes, it will also have the opportunity to harvest certain illiquid assets currently supporting its closed block.
Voya does not expect any regulatory hurdles to the transaction, which requires approvals from state regulators in Iowa, Minnesota and Arizona, executives said.
