Item 7.01. Regulation FD Disclosure
On September 24, 2015, Voya Financial, Inc. and its subsidiary Security Life of
Denver International Limited ("SLDI") entered into a Facility Agreement with
Hannover Life Reassurance Company of America and several of its affiliates. The
Facility Agreement will be used to collateralize reinsurance liabilities of SLDI
to another subsidiary of Voya Financial, Security Life of Denver Insurance
Company. Since 2009, these reinsurance liabilities have been retroceded by SLDI
to an affiliate of Hannover Life, and, prior to entry into the Facility
Agreement, were collateralized by letters of credit and collateral notes issued
under Voya Financial and SLDI credit agreements with third-party financial
institutions. This collateral has been replaced by a variable rate senior note
issued pursuant to the Facility Agreement by Hannover Life's parent, Hannover
Rück SE, in the principal amount of $2.9 billion and with a maturity date of
September 1, 2025.
Under this new collateral arrangement, Voya Financial and SLDI have reduced
their use of letters of credit and other collateral for reserve financing
requirements by approximately $2.3 billion as of the date of the transaction,
and will realize a consequent reduction in financing fees for the duration of
the Facility Agreement. Voya Financial estimates that the financing fees
eliminated by this transaction amounted to approximately $20 million (net of
partial reimbursements from Hannover Life) during the twelve-month period
preceding the entry into the Facility Agreement.
The block of business affected by these arrangements is reported in Voya
Financial's Closed Block Other segment. As business exited by reinsurance, it is
excluded from that segment's operating earnings.
Further information regarding the Facility Agreement and the associated
transaction is contained in Item 1.01 of this Current Report on Form 8-K.
As provided in General Instruction B.2 of Form 8-K, the information provided
pursuant to this Item 7.01 shall not be deemed to be "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be
deemed to be incorporated by reference in any filing under the Securities Act of
1933, as amended, except as shall be expressly set forth by specific reference
in such a filing.
Item 1.01. Entry into a Material Definitive Agreement
On September 24, 2015, Voya Financial, Inc. (the "Company"), SLDI, Hannover Life
Reassurance Company of America ("HLRUS"); Hannover Re (Ireland) Limited ("HRI"),
and Hannover Rück SE ("Hannover Re") entered into a Hannover Re Buyer Facility
Agreement (the "Facility Agreement"). Pursuant to the Facility Agreement,
Hannover Re issued a Variable Rate Senior Note due September 1, 2025 in the
principal amount of $2,900,000,000 (the "Note") as reinsurance collateral to The
Bank of New York Mellon, as trustee under a credit for reinsurance trust
established by SLDI for the benefit of SLD. The Note collateralizes a portion of
the reinsurance liabilities incurred by SLDI under two pre-existing reinsurance
agreements between SLDI and SLD covering a designated block of life insurance
policies (the "Subject Business"). SLDI has retroceded its liabilities in
respect of the Subject Business to HRI under a pre-existing retrocession
reinsurance agreement between SLDI and HRI (the "Retrocession Agreement").
Hannover Re's issuance of the Note also serves as an effective guarantee of the
performance of HRI of its material obligations under the Retrocession Agreement.
Under the Facility Agreement, the Company and SLDI have contingent reimbursement
and guarantee obligations, up to the full principal amount of the Note, in the
remote circumstance where SLD or SLDI directs the sale or liquidation of the
Note other than as permitted by the Facility Agreement, or fails to return
reinsurance collateral (including the Note) upon termination of the Facility
Agreement or as otherwise required by the Facility Agreement. In general, the
Facility Agreement permits a sale or liquidation of the Note without the Company
or SLDI incurring a reimbursement or guarantee obligation only upon the failure
by Hannover Re or HRI to perform specified obligations under the Facility
Agreement or if HRI fails to perform its material obligations under the
Retrocession Agreement. In addition, the Company has agreed to indemnify
Hannover Re for any losses it incurs in the event that SLD or SLDI were to
exercise offset rights unrelated to the Subject Business. The Facility Agreement
may only be terminated upon the occurrence of certain specified events.
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