Greenlight Capital's fourth quarter positions (Part 7 of 8)
Greenlight Capital and ING
Einhorn’s Greenlight Capital hiked its stake in ING US Inc (VOYA) from 1.92% in 3Q 2013 to 2.06% last quarter. The stake was initiated in 2Q 2013. ING U.S. is a retirement, investment, and insurance company serving the financial needs of approximately 13 million individual and institutional customers in the United States. ING U.S. is rebranding itself as Voya Financial this year.
Commenting on the investment in its 2Q 2013 letter, Greenlight said:
- “VOYA is an assortment of U.S insurance and retirement product businesses that Dutch ING Groep NV (ING) is divesting into the public markets. ING sold an initial 29% stake in VOYA in May at $19.50 per share and plans to dispose of the rest of its stake over the next three years. The Partnerships established an investment at an average price of $20.29. At this price we paid roughly 0.5x book value for a business currently earning an 8% ROE on its ongoing businesses with a plan to improve that return by 3% to 4% in the coming years. VOYA has a large, closed block of variable annuities that are generating losses and tying up about 35% of its capital. This closed book has considerable resers and has been substantially hedged to interest rate and equity market movement. In time, we think commercial solutions may develop that would allow VOYA to reduce its exposure to these losses and possibly free up capital to be returned to shareholders. In the meantime. ROE improvement on the ongoing businesses should drive an improved valuation for the shares. Management received stock incentives concurrent with the IPO pricing.”
ING Group took the unit public to comply with the conditions of its 2008 bailout that stipulated that the bank sell its insurance operations, its U.S. online bank, and a Dutch mortgage lender before the end of 2013. The unit raised $1.3 billion in its May 2013 initial public offering, selling more shares than expected, but at a price below the targeted range. ING Group sold 65.2 million shares at $19.50, according to news reports last year. A secondary offering in October reduced ING Group’s ownership stake to approximately 57%.
In its recent 4Q 2013 results, ING U.S. reported net income available to common shareholders of $548 million, or $2.08 per diluted share, compared with a loss of $23 million, or $0.10 per share, in 4Q 2012. The company posted operating earnings of $0.75 per share, or $198 million—more than the EPS of $0.59 and $136 million reported in the fourth quarter of 2012. During the fourth quarter, total assets under management and administration grew to $511 billion, driven in part by positive net flows in the company’s Retirement and Investment Management businesses.
The company said, “Our success can be seen in the 200 basis point increase in our Ongoing Business adjusted operating ROE compared with year-end 2012. At 10.3%, this is a substantial improvement in our ROE and a significant step toward our 2016 target of 12-13%.”
ING recently declared a quarterly dividend of $0.01 per share, representing a $0.04 dividend on an annualized basis and a yield of 0.11%.
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