An investor group led by affiliates of Apollo Global Management, Crestview Partners and Reverence Capital Partners is to acquire Voya Financial’s Closed Block Variable Annuity business (CBVA Business).
The investment will be made through a newly formed standalone entity, Venerable Holdings. The proposed transaction, which is expected to close in the second or third quarter of 2018, is subject to regulatory approvals and other customary closing conditions. Apollo, Crestview, and Reverence will own equal stakes in Venerable, and Athene Holding and Voya will also acquire minority positions in Venerable.
The investors in Venerable are all well-established strategic investors with significant regulatory credibility and experience in successfully building and growing insurance businesses with patient, long-term capital. Upon closing of the transaction, Venerable will be conservatively capitalized to CTE 98+. The investors in Venerable believe it is advantageous that the CBVA Business will operate as a private company, with a hedging strategy that will focus on the economic and regulatory stability of the underlying assets and statutory capital strength rather than reducing GAAP earnings volatility. In connection with the transaction, Voya Investment Management will become Venerable’s preferred asset management partner. Voya has substantial heritage and knowledge in this area and will manage the assets of the CBVA Business as well as the assets from future acquisitions of closed block variable annuities by Venerable.
Apollo, Crestview and Reverence, say: “We are attracted to Voya’s CBVA Business due to the strength of the team and platform, and the structure and stability of the underlying assets. We believe blocks such as the CBVA Business are best owned through private ownership. In addition, we believe success in variable annuities is primarily calibrated with effective risk management, which is Venerable’s most significant core competency. With a sole focus on variable annuities and support from an outstanding group of strategic investors, Venerable is uniquely positioned to serve as a leading industry solution for the consolidation of variable annuity blocks and the creation of long-term economic value.”
In connection with the transaction that is being announced today, Athene has signed a definitive agreement to reinsure approximately USD19 billion of Voya’s fixed and fixed indexed annuities, which will be administered by Venerable, and Athene Asset Management will provide asset management services for these fixed annuities. In addition, Athene will be Venerable’s strategic partner for fixed annuity blocks as opportunities arise going forward.
The senior leadership team of the current CBVA Business, including Patrick Lusk, David Wiland, and Timothy Brown, will remain in place at Venerable and will continue to perform the same functions. Venerable will also establish a core group of employees exclusively focused on risk management and operational efficiency.
Venerable’s headquarters will remain in the CBVA Business’s current headquarters in West Chester, Pennsylvania, and the CBVA Business’s existing US operations will be consolidated in Des Moines, Iowa. Over time, as Venerable acquires additional variable annuity portfolios, it expects to build a meaningful presence in Des Moines and establish a centre of excellence for variable annuities.
Barclays is serving as financial advisor and Sidley Austin LLP is serving as legal counsel to Venerable in connection with this transaction.