No big bang for ING IPO

Shares of ING U.S. Inc. had a muted start today after the company kicked off its initial public offering with a decrease in the offering price.
The company, now trading on the New York Stock Exchange under the symbol VOYA — the firm will be known as Voya Financial next year —placed about 65.2 million shares on the market at $19.50 per share. Shares were trading around $20.65 by midafternoon in New York.
Today’s kickoff fell short of what the company had hoped for. In an updated registration form filed with the Securities and Exchange Commission last month, the company aimed for an offering of about 64 million shares of common stock at $21 to $24 per share.
The adjustment brings the overall offering down to $1.3 billion in size, while the S-1 pegged it at $1.4 billion to $1.5 billion, including $600 million in primary proceeds.
“Pricing an IPO is an art, not a science,” Rod Martin, chief executive of ING U.S., said. “We made a judgment at the end of the day yesterday based on what we saw in the marketplace. I think it’s a tremendous value for the shareholders. What happened today validates that the market has reacted well.”
Vincent Lui, an analyst who covers the life insurance sector at Morningstar Inc., noted that the $19.50-per-share price was “a little surprising,” but that a couple obstacles might be weighing on the share price.
“They inherited a big book of variable annuities, and with rates being so low, the cost of the guarantees will increase in the future,” he said. “These annuities tend to carry more generous returns and benefits, and that also weighed on the IPO.”
ING’s Dutch parent cut its ownership of the U.S.-based subsidiary by 25% immediately following the offering. It plans to eliminate its ownership altogether by 2016.
But the timing of the offering was fortunate, given the stock market’s recent march into record territory.
“We are encouraged by the strength of the U.S. equity market in the first four months of the year,” Mr. Martin said.
Voya’s operations will be made up of three of ING’s U.S. businesses: retirement solutions, investment management and insurance. The closed block of variable annuities and institutional-spread products will be run separately from the rest of the business.