Voya Financial Inc. says it has reached an agreement to sell, via reinsurance, an in-force block of 155,000 term life insurance policies to Reinsurance Group of America Inc.
The policies represent approximately $90 billion of life insurance in force.
This does not look like a carrier exit from the life insurance business. When the transaction closes, most likely in the fourth quarter, Voya's insurance subsidiaries will still have more than 950,000 policies representing approximately $270 billion of life insurance in force, the company said.
Rather, the deal looks like a redirection. As Voya Chairman and CEO Rodney O. Martin Jr. put it in a statement, the transaction will help improve returns in the company’s ongoing business “while also enabling us to free up more than $230 million in excess capital.”
What matters for insurance professionals is that the transaction is also about a purposeful move towards indexed life insurance.
Specifically, Voya is continuing to move forward on it previously announced shift in its individual life portfolio. This is a shift towards “less capital intensive, higher-return products, such as indexed life insurance,” Martin said.
Indexed sales growing
An increasing portion of Voya’s business is already coming from indexed life sales. In the first half of 2015, the company’s indexed life sales rose by more than 41 percent compared to the same period last year, reaching nearly $26.6 million, according to Wink Inc.
The company ranked 11th among all indexed life sellers shown on Wink’s list of active sellers in the first half of 2015. That is up from 16th place in the first half of 2014 (when the company was still operating as ING USA) and 19th place in the first half of 2013.
Indexed life also represents an ever-increasing proportion of Voya’s total life insurance book. In the second quarter, the carrier reported that indexed sales represented 67 percent of total life sales for the quarter—up from 53 percent of the total in second quarter 2014.
This summer, the carrier rolled out a new indexed universal life policy, Voya Indexed Universal Life—Accumulator. It joins two others already in the portfolio.
This focus on index life has happened against a backdrop of exponential industrywide growth in indexed life sales, with more and more carriers angling for firm footing. In second quarter alone, the industry’s sales jumped 20 percent from the previous quarter and 28 percent from second quarter last year, according to Wink’s latest figures. The annualized indexed life premium for the quarter totaled $458 million.
The indexed life sales in second quarter 2015 were greater than any other second quarter in the history of the product line,” said Sheryl J. Moore, president and CEO of Wink, and also Moore Market Intelligence.
About the deal
Under the reinsurance agreement, Voya will continue to administer and service the 155,000 transferred term life policies.
Voya said the agreement does not affect Voya's tax-exempt markets (403(b)), employee benefits or annuities businesses, which ReliaStar also conducts.
The term contracts were issued by ReliaStar Life Insurance Company and ReliaStar Life Insurance Company of New York. The policies are backed by approximately $1.4 billion in statutory reserves, as of June 30, 2015, Voya said.
According to RGA, the term policies were written between 2008 and 2011.
The closing is subject to regulatory approvals and other customary conditions.
Voya and RGA announced a somewhat similar deal last year, also involving term reinsurance transfer. In announcing the new deal, RGA Senior Executive Vice President Anna Manning said “Voya is a long-standing partner with whom we have built a strong alliance over the years, and we are pleased once again to provide them with a solution to their capital and risk management needs.”