ING U.S. Falls as JPMorgan Analysts Cite Annuity Risk

ING U.S. Inc. (VOYA), the insurer that had its initial public offering last month, declined 3 percent in New York trading after JPMorgan Chase & Co. gave the stock a neutral recommendation, citing risks related to annuities.

The company, majority-owned by ING Groep NV (INGA), fell to $27.57 at 1 p.m. after dipping as low as $27.25. Analysts at JPMorgan led by Jimmy Bhullar set a 2014 year-end price target of $28 for the New York-based insurer. The IPO price was $19.50 a share.

ING U.S. is coping with liabilities from variable annuities, in which the company ensures minimum returns to clients on portfolios of stocks and bonds. ING U.S. has scaled back from selling the retirement products. JPMorgan analysts said in a research note that they expect return on equity to “remain sub-par.”

“These factors, along with the prospect of secondary offerings, justify the stock’s discount valuation,” the analysts said.

ING Groep is required to sell off its stake in the U.S. business by the end of 2016. ING U.S., which is changing its name to Voya Financial, was the fourth-largest seller of variable annuities in 2007 and had dropped out of the top 20 by 2011, according to data from industry group Limra.

Analysts at Goldman Sachs Group Inc., Citigroup Inc. (C) and Deutsche Bank AG also rated the shares the equivalent of neutral in research notes today.

“The ratings are in line with our expectations and confirm what we’ve been saying all along,” Dana Ripley, an ING U.S. spokesman, said in a phone interview. “We need to focus on the execution of our retirement-readiness strategy and our ROE-improvement program, which were two of the key elements of our investment narrative.”

To contact the reporter on this story: Kathleen Chaykowski in San Francisco at kchaykowski2@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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