Voya Financial announced that it has entered into an agreement to sell via reinsurance an in-force block of approximately 155,000 term life insurance policies to Reinsurance Group of America (RGA).
Voya Financial will continue to administer and service the policies, which represent approximately $90 billion of life insurance in force backed by approximately $1.4 billion of statutory reserves as of June 30, 2015.
Following the closing of the transaction, Voya Financial’s insurance subsidiaries will have more than 950,000 policies representing approximately $270 billion of life insurance in-force backed by statutory reserves of $18 billion as of June 30, 2015.
"This transaction supports our focus on improving returns in our Ongoing Business while also enabling us to free up more than $230 million in excess capital," said Rodney O. Martin, Jr., chairman and CEO, Voya Financial, Inc.
Based on financials as of June 30, 2015, Voya Financial expects the transaction will:
Create excess capital of approximately $230 million;
Reduce GAAP capital allocated to the company’s Individual Life business by approximately $270 million;
Reduce operating earnings in Voya’s Individual Life segment by approximately $4-6 million on a quarterly basis; and
Create an immediate non-operating pre-tax GAAP loss of $100 million to $110 million and a deferred non-operating pre-tax GAAP loss that the company expects to recognize at an average rate of approximately $12 million a year over the next 15 years.
The figures presented above represent the estimated pro forma effect of the transaction as of June 30, 2015. Actual amounts will differ at the time of closing, which is expected to occur in the fourth quarter of 2015. In addition, beginning with full year 2016, Voya expects the transaction to provide approximately 10-20 basis points of incremental operating return on capital (ROC) benefit to both Voya’s Individual Life segment and the Ongoing Business.
The transaction is subject to regulatory approval and other customary closing conditions. The block of term life insurance products included in this transaction were issued by ReliaStar Life Insurance Company and ReliaStar Life Insurance Company of New York (collectively "ReliaStar"). The transaction does not affect Voya’s Tax-Exempt Markets (403(b)), Employee Benefits or Annuities businesses also conducted through ReliaStar.
"Our success over the past several years in shifting sales of individual life insurance to less capital intensive, higher-return products, such as indexed life insurance, not only supports our focus on improving returns but also enables us to fulfill a key aspect of our value proposition as we help Americans get ready to retire better by helping them plan, invest and protect their savings," added Martin.
Citigroup served as sole financial advisor and Sutherland Asbill & Brennan served as legal advisor to Voya Financial on the transaction.