Voya Financial (VOYA), Alliance Global Ink Asset Transfer Deal
Voya Financial, Inc. VOYA and Allianz Global Investors (AllianzGI) inked a definitive agreement wherein Allianz will transfer its U.S. business (AGI U.S.) to Voya Investment Management (Voya IM), the asset management business of VOYA. AllianzGI will have a 24% stake in Voya IM as consideration. Both parties had entered into a memorandum of understanding on May 17. The transaction is expected to be closed in July 2022.
AGI U.S.’ $120 billion assets under management (AUM) consists of income and growth, fundamental equity, and private placement assets, which, when combined with VOYA, will increase Voya IM’s AUM to about $370 billion.
Management estimates the combination of the two businesses to be cash accretive to Voya’s adjusted operating earnings per share by 6-8% in 2023 and to also expand Voya Investment Management’s operating margin to 30-32% from 26%.
The transaction is a strategic fit as AllianzGI would make Voya IM’s investment strategies available outside the United States, leveraging its international presence (significant presence in Europe and the Asia Pacific) through a long-term strategic partnership. Due to this transaction, Voya IM non-US client base is expected to grow to 27% from 9%. The transaction also diversifies the client mix across retail, institutional, U.S. and international.
Voya Financial has been taking strategic steps to ramp up growth in its Investment Management segment. The acquisition of Benefit Strategies, LLC in July 2021 accelerated VOYA’s presence in the fast-growing HSA market and expanded its range of solutions offered through the workplace. In January 2022, Investment Management bought Tygh Capital Management to ensure Voya’s continued investment in its equity capabilities.
The strategic steps in turn should help VOYA achieve net annual revenue growth of 7-10% in the Investment Management segment which will contribute to total net revenue growth by 2024.
Shares of this Zacks Rank #3 (Hold) retirement, investment, and employee benefits company have lost 9.6% compared with the industry’s decrease of 12.2% year to date. Voya’s earnings are driven by solid performance across Wealth Solutions, Investment Management and Health Solutions. These businesses are higher-growth, higher-return, capital-light businesses boasting a solid presence. Expansion of the distribution network and achievement of efficiencies through automation should help the company outperform the industry.
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Given the insurance industry’s adequate capital level, players like Arthur J. Gallagher & Co. AJG, Brown & Brown, Inc. BRO and Marsh & McLennan Companies, Inc. MMC have been pursuing strategic mergers and acquisitions.
Arthur J. Gallagher & Co. acquired Menlo Park, CA-based Valerie Frederickson & Company, Inc. in May 2022. AJG boasts an impressive inorganic story. AJG has a strong merger and acquisition pipeline.
Arthur J. Gallagher’s revenues are geographically diversified with strong domestic and international operations and a compelling product and service portfolio. A solid capital position supports AJG in its growth initiatives and the company remains focused on continuing its tuck-in mergers and acquisitions.
Brown & Brown’s subsidiary Brown & Brown Dealer Services (“BBDS”) acquired all the assets of Profits Creation Corp., which provides finance and insurance products and sales support to automotive dealers across the southeast.
Brown & Brown’s impressive growth is driven by organic and inorganic means across all segments. BRO intends to make consistent investments in boosting organic growth and margin expansion. Its solid earnings have allowed the company to expand its capabilities, with the buyouts extending the company’s geographic footprint.
Marsh & McLennan Companies’ Marsh McLennan Agency (MMA) purchased Maine-based Clark Insurance. This buyout will help MMA to boost its capabilities and more effectively cater to clients, colleagues and the community.
Acquisitions are one of the core growth strategies of Marsh & McLennan, which has helped it to expand product offerings, benefit customers and strengthen its global presence. MMC spent $1.1 billion on buyouts in 2021 and $24 million in the first quarter of 2022.
Shares of AJG, BRO and MMC have lost 9.9%, 22%, and 14.8%, respectively, in a year.
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