Voya 2013 Annual Report Download - page 120

• Our CBVA segment provides certain guaranteed minimum benefits. A prolonged low interest rate
environment may subject us to increased hedging costs or an increase in the amount of statutory
reserves that our insurance subsidiaries are required to hold for these variable annuity guarantees,
lowering their statutory surplus, which would adversely affect their ability to pay dividends to us. A
prolonged low interest rate environment may also affect the perceived value of guaranteed minimum
income benefits, which in turn may lead to a higher rate of annuitization of those products over time.
For additional information on the CBVA segment’s sensitivity to interest rates, see “Item 7A.
Quantative and Qualitative Disclosures About Market Risk.”
In the long-term, however, we believe the recent financial crisis and resultant lingering uncertainty will
motivate individuals to seek solutions combining elements of capital preservation, income and growth. Thus, as a
company with strong retirement, investment management and insurance capabilities, we believe current market
conditions may ultimately enhance the attractiveness of our broad portfolio of products and services. We will
need to continue to monitor the behavior of our customers, as evidenced by annuitization rates and lapse rates,
which adjusts in response to changes in market conditions, in order to ensure that our products and services
remain attractive as well as profitable.
The Impact of our CBVA Segment on U.S. GAAP Earnings
Our ongoing management of our CBVA segment is focused on preserving our current capitalization status
through careful risk management and hedging. Because U.S. GAAP accounting differs from the methods used to
determine regulatory and rating agency capital measures, our hedge programs may create earnings volatility in
our U.S. GAAP financial statements.
Governmental and Public Policy Impact on Demand for Our Products
The demand for our products is influenced by a dynamic combination of governmental and public policy
factors. We anticipate that legislative and other governmental activity—and our ability to flexibly respond to
changes resulting from such activity—will be crucial to our long-term financial performance. In particular, the
demand for our products is influenced by the following factors:
•Availability and quality of public retirement solutions: The lack of comprehensive or sufficient
government-sponsored retirement solutions has been a significant driver of the popularity of private
sector retirement products. We believe that concerns regarding Social Security and the reduced
enrollment in defined benefit retirement plans may further increase the demand for private sector
retirement solutions. The impact of any legislative actions or new government programs relating to
retirement solutions on our business and financial performance will depend substantially on the level of
private sector involvement and our ability to participate in any such programs. We believe we are well
positioned to take advantage of any future developments involving participation in any such programs
by private sector providers.
•Tax-advantaged status: Many of the retirement savings, accumulation and protection products we sell
qualify for tax-advantaged status. Changes in U.S. tax laws that alter the tax benefits of certain
investment vehicles could have a material effect on demand for our products.
Aging of the U.S. Population
We believe that the aging of the U.S. population will affect both the demand for our products and the levels
of our AUM and AUA. As the “baby boomer” generation prepares for retirement, we believe that demand for
retirement savings, growth and income products will grow. The impact of this growth may be offset to some
extent by asset outflows as an increasing percentage of the population begins withdrawing assets to convert their
savings into income.
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