Voya to exit annuities and Athene to expand, in deal that creates new variable annuity company
JOE GARDYASZ Dec 21, 2017 | 8:04 pm
3 min read time
797 wordsAll Latest News, Business Record Insider, InsuranceTwo financial services companies with operations in Des Moines announced a deal today in which one will exit the annuity business while the other will significantly expand in the fixed annuity market. The deal also brings with it the formation of a new annuity company that’s expected to have a growing presence in Des Moines.
Voya Financial announced this morning that it will divest its Voya Insurance and Annuity Co. to a consortium led by Apollo Global Management and other investors. As part of the deal, Athene Holding Ltd. has secured the rights from Voya to reinsure $19 billion of fixed and fixed indexed annuity liabilities, as well as an estimated $8 billion in future reinsurance business.
The consortium of investors — led by affiliates of Apollo Global Management LLC, Crestview Partners and Reverence Capital Partners — has agreed to purchase Voya’s annuity businesses, which include its closed block variable annuity segment.
The consortium will create a newly formed stand-alone entity, Venerable Holdings Inc., that will administer the fixed and variable annuity blocks. The three investment firms will have equal stakes in the new privately held company. Athene will make a $75 million minority equity investment in Venerable to be held as an alternative investment. Voya Financial said it will also have a 9.9 percent equity stake in Venerable.
Venerable’s headquarters will be located in West Chester, Pa., where Voya now bases its variable annuity business, and Venerable will consolidate operations from Voya’s closed block of variable annuity business to Des Moines, where it also has annuity operations.
“Over time, as Venerable acquires additional variable annuity portfolios, it expects to build a meaningful presence in Des Moines and establish a center of excellence for variable annuities,” Apollo said in a release.
Christopher Breslin, a Voya spokesman, said that “a number of employees currently aligned with the (annuity) business will be transferred to the new company,” adding that details have yet to be worked out. Voya did not have a breakout of how many of its approximately 450 Des Moines employees and contractors will be affected by the divestment.
With the reinsurance agreement, Athene Holding — whose annuity business Athene USA is based in West Des Moines — will expand its portfolio of invested assets by 20 to 25 percent, and boost operating income by 7 to 9 percent, it said in a presentation on its investors’ website.
“The large block of fixed annuities we will be reinsuring are products Athene understands well, and they present a meaningful asset redeployment opportunity,” Athene CEO Jim Belardi said in a release. “Amid a historically tight credit spread environment, we expect this transaction to achieve our mid-teens return target, leaving us well-positioned for incremental value creation in a more favorable credit spread environment or through enhanced asset management.”
As part of the agreement, Athene has also secured rights to reinsure liabilities that will be created from the subsequent annuitization of some of Venerable’s variable annuities to fixed payout annuities, which is estimated to total approximately $8 billion over the life of the block.
The transaction, which is subject to approval by the Iowa insurance commissioner and other regulators, is expected to close in the second or third quarter of 2018.
“Through this transaction, we are further demonstrating our commitment to delivering shareholder value by eliminating the risk associated with the (closed book of variable annuity) segment and securing significant value for our annuities business,” Rodney Martin Jr., Voya chairman and CEO, said in a statement. “Since we became a standalone company in 2013, we have focused on growing our capital-light businesses — specifically, retirement, investment management and employee benefits.”
Based on the terms of the agreement, Voya estimates that the transaction will result in about $1.1 billion of value for the company, which includes the benefit of a $400 million ceding commission paid by Athene for Voya’s fixed and fixed indexed annuities business. Voya said it intends to cease offering non-retirement-focused individual annuities after the transaction closes.
As part of the agreement, Voya Investment Management will serve as the preferred asset management partner for Venerable. Voya Investment Management will — for a minimum of five years following the closing of the transaction — manage about $10 billion of general account assets under management.
Shares of Voya jumped 5.6 percent to a record $49.48 at 9:32 a.m. in New York, the biggest gain in 13 months, Bloomberg reported. Athene shares rose 4.1 percent to $52.84.
“This transaction represents the catalyst investors have been waiting for on both companies,” Mark Dwelle, an analyst with RBC Capital Markets, said in a note to clients. “This is the sort of transaction that management had described and has the sort of economics that were expected, so for Athene we view the deal as delivering on expectations.”