Voya Financial’s IUL Gambit Pays Off

At Voya Financial, the move to exit capital-intensive term life at the end of last year and concentrate on indexed universal life (IUL) has paid off – so far.

First-quarter IUL sales rose 24 percent to $21 million over the year-ago period, the company reported last week.

Leaving the term life segment to concentrate on IUL was “a pretty bold move,” said Carolyn Johnson, CEO of Annuities and Individual Life for Voya Financial.

“It was a strategic decision that’s starting to pay off,” she said in an interview on Wednesday.

IUL sales in 2016 reached a record $1.86 billion and the forecast is for an even better year in 2017, according to industry tracker Wink’s Sales & Market Report.

Other insurers have jumped into the IUL market as companies became more comfortable with new product performance illustration guidelines that took effect in 2015.

Over the years, term life sales represented a progressively smaller sales sliver for Voya Financial, which embarked on its own journey as a public company in 2013.

Voya has years of expertise developing indexed products for both the company’s individual life and annuities business, Johnson said. When the company decided to combine the strengths of the two businesses last fall, it was the right moment to exit the term life business altogether, she explained.

“We want to be a leader on the index side,” she said.

IUL’s Lower Capital Strain

Term life policies typically have higher acquisition costs and underwriters need to be “spot on” as mortality assumptions will appear on the bottom line quickly, Johnson said.

By contrast, IUL contracts require higher premiums for a commensurate amount of coverage. Once the IUL contract is in force, insurers have the flexibility to raise the cost of insurance or expense charges, or reduce crediting rates.

That flexibility gives insurers maneuvering room to adjust reserves for future claims.

Unlike term products, universal life products do not have the same reserving redundancies further out into the life of the policy, said A.M. Best analyst George Hansen.

IUL cash value accumulation features also appeal to policyholders over pure protection products at a time when interest rates are low and the stock market continues its record-breaking run, according to industry experts.

Low interest rates tend to dampen demand for fixed products, while robust stock indexes allow IUL policyholders to participate in the market gains.

Voya has taken several corporate actions to reduce capital usage, which will provide an estimated 20 basis points of additional return on capital improvement for Voya’s individual life segment by the end of this year, Voya Financial’s Chief Operating Officer Alain Karaoglan told analysts last week.

Voya Financial went public in May 2013 and later rebranded itself to Voya Financial from ING U.S.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].