Voya Financial Inc. has announced plans to divest from its Closed Block Variable Annuity (CBVA) division and its entire individual fixed and fixed indexed annuity businesses.

Voya's planned divestiture follows similar moves by large life insurers, including MetLife and the Hartford. These firms all concluded that the costs and risks associated with providing certain guarantees in a world characterized by lower interest rates and increasing longevity world were too expensive to justify the prospect of modest returns.

A new entity, Venerable Holdings, will acquire Voya’s variable, index and indexed annuity insurance subsidiary, Voya Insurance and Annuity Company (VAIC). Venerable is an investment vehicle collectively owned by a group of investors led by affiliates of Apollo Global Management, Crestview Partners and Reverence Capital Partners.

Voya says the deal will substantially reduce its insurance and market risk while allowing it to focus on its high-performance businesses, including what the firm calls its “capital light” businesses—retirement, investment management and employee benefits companies, which it says yield higher returns.

“Through this transaction, we are further demonstrating our commitment to delivering shareholder value by eliminating the risk associated with the CBVA segment and securing significant value for our annuities business,” said Rodney O. Martin Jr., Voya’s chairman and chief executive officer, in a statement. “Since we became a stand-alone company in 2013, we have focused on growing our capital-light businesses.” He said the transaction accelerates that focus.

“With our increased focus on these core businesses,” he said, “we will be able to work even more closely with our distribution partners and help our customers get ready to retire better. We are also committed to ensuring a seamless transition for our annuity customers, who will continue to benefit from the features of the products.”

Voya will be left with a 9.9 percent stake in Venerable Holdings.  

Based on balances from June 30, 2017, the total annuity accounts taken over by Venerable would be valued at approximately $35 billion. The firm will hold the entirety of Voya’s Closed Block Variable Annuity segment. Athene Holding will also participate in the consortium. Voya will sell via reinsurance to Athene its individual fixed and fixed indexed annuity policies, which had approximately $19 billion of account value as of June 30, 2017.

After the transaction closes, Voya will no longer produce non-retirement focused individual annuities.

The agreement is projected to result in $1.1 billion in added value, including $400 million in commissions from Athene for Voya’s fixed and fixed indexed annuity business. Voya is expecting $500 million in liquid capital after restructuring and various other transaction costs have been met, and plans to make additional share repurchases exceeding the original authorization of $1 billion. (Voya intends to repurchase $1 billion of common stock by June 30, 2018.)

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