Voya Financial Reaps Rewards of Life-Annuity Reorg
August 8, 2017 by Warren S. Hersch
To boost earnings, a growing number of insurers are unifying their annuities and life insurance businesses. Among the spate of carriers releasing financial results this week, the benefits of such a reorganization is notably evident for Voya Financial.
Commenting on the company’s second quarter results, Carolyn Johnson, Voya’s CEO of Annuities and Individual Life businesses, says the Windsor, Conn.-based insurer has achieved significant gains because of the company reorg. Undertaken last fall, the restructuring placed departmental heads of the respective life and annuities units — including executives overseeing new sales, product development, pricing and operations — under one roof, all reporting to Johnson.
“The reorganization has really created a way to leverage talent and simplify our operations,” says Johnson. “We’re increasingly looking at new ways to do things, and to incorporate best practices, that will benefit both our life and annuity business segments.”
For example, Voya now fields case managers for both life and annuities products who manage business from the application phase through underwriting and policy delivery to ensure all aspects of the sale are appropriately attended to. The carrier has also merged life-annuity competitive intelligence, product development and pricing groups to better leverage knowledge bases, systems and processes.
The industry is taking notice. And some carriers have followed suit. Among them: Industry behemoth Prudential Financial, which last month restructured its five businesses into three groups. As reported, the reorg puts the annuities and individual life insurance businesses into an Individual Solutions Group, led by Lori Fouché.
Whether Prudential can match Voya’s cost efficiencies and other gains remains to be seen. For now, the carrier has some pace-setting financial benchmarks to track.
For the three months ended, June 30, Voya boosted its return on equity by 14.3%. That’s the highest level since the U.S. insurer’s divestiture from Netherlands-based ING Group in 2013 via an initial public offering.
The company’s return on capital (ROC) for annuities attained 10.9%, also a new high. On the individual life side, Voya’s ROC rose by 7.5%, maintaining an upward momentum that reflects, in part, reduced death claims in the second quarter. Also a factor is the company’s decision to exit the term life business and focus on indexed universal life products, a less capital-intensive product line.
“We’re really pleased with that [ROC] improvement,” says Johnson. “It speaks to the quality of results that we’re producing, including positive net flows across all our key businesses. We’re seeing a solid combination of quality, performance and growth.”
The loss of the jettisoned life products, however, resulted in a decline in individual sales. For the quarter, premiums totaled $18 million, down from $28 million recorded in the second quarter of 2016. But net income attributable to common shareholders rose to $167.2 million in the second quarter from $161.5 million in year-ago period, according to a press release and investor presentation on the mid-year results.
The downward trend in premium revenue may be short-lived, as Voya is beefing up profitable individual product lines that are fueling earnings gains. Chief among them: Indexed Universal Life-Global Choice, the company’s biggest seller among its permanent life offerings.
Later this month, Voya will be launching Cash-Value Flex Rider, an option for Global Choice. Johnson says the rider will let policyholders build cash values faster in the contract’s early years by more evenly spreading out commissions and other charges against the cash value.
“Distributors have been asking about this rider for a while, so they’re really excited to see us come to market with it,” says Johnson. “They feel like it’s a really good fit for our Global Choice product.”
On the annuity front, Voya is planning to debut by end of year a fee-based version of Voya Journey, a commission-based fixed indexed product the carrier released last February. As reported, the fee version will feature indices from JPMorgan Chase and Citigroup, including the J.P. Morgan Meridian Index and the Citi Dynamic Asset Selector 5 Excess Return Index.
Driving the product’s development is the Department of Labor fiduciary rule and, in particular, its best interest contract exemption. Set to be phased in January 1, 2018, a streamlined version of the BICE (popularly dubbed “BICE Lite”) will be available to level-fee advisors. Competitors that have debuted fee-based annuities in recent months — Allianz, Lincoln and Pacific Life, to name a few — are counting on an upsurge in advisor demand for fee-based products in the run-up to the January 1 applicability date.
Also planned for 2018 is the rollout of a new buffer variable annuity. Buffer VAs are similar to fixed indexed products in design, but offer retirement investors both greater downside risk and upside growth potential.
“We continue to make progress on [development] of this product,” says Johnson. “Only four other carriers currently have this type of product, which is the fastest growing VA segment right now. So we’re really excited about entering this space.”
Also in the works, Johnson adds without elaborating, are certain initiatives relating to Voya Cares. The program offers products and financial planning for individuals with special needs due to physical or mental disabilities. A common component of such planning is a life insurance-funded special needs trusts.
In the employee benefits arena, the company is “moving toward” a holistic approach in the sale and servicing of benefits, according to a spokesperson for Voya’s group products. A key aim of the initiative is to provide a “more informative” customer experience, as well as streamlined enrollment, review and underwriting processes.
For the upcoming fall benefits season, the new offerings include Voya’s new Employee Benefits Resource Center, a customizable online tool for learning about products, enrollment and managing claims. Under development, too, is an update to Voya’s Critical Illness Insurance at Work. The offering is part of a suite of voluntary benefits, including accident, hospital confinement indemnity, disability income, whole life and term insurance products