Voya 2013 Annual Report Download - page 134

Income tax benefit increased $27.3 million from $5.2 million to $32.5 million. The low effective tax rate is
because the tax expense (benefit) on Income (loss) before income taxes is mostly offset by increases/decreases in
valuation allowances. Tax capital gains (losses) are generally not offset by changes in valuation allowances,
which resulted in an $88.9 million increase in the income tax benefit. The increase in the tax benefit for capital
gains (losses) was partially offset by a decrease in the benefit and valuation allowance from tax credits of $62.9
million.
Operating Earnings before Income Taxes
Operating earnings before income taxes increased $350.3 million from $918.3 million to $1,268.6 million as a
result of several factors. Higher Fee income in our Retirement and Investment Management segments and improved
margins in our Annuities segment related to MYGA run-off contributed to the increase. In addition, higher Net
investment income was due to the Net gain from Lehman Recovery/LIHTC in the current period and the loss on the
sale of certain alternative investments in the prior period was offset by lower investment income in our Retirement
Solutions and Insurance Solutions businesses as a result of portfolio restructuring in the prior period. DAC/VOBA
and other intangibles unlocking improved to $133.2 million in the current period compared to $(77.0) million in the
prior period, largely as a result of favorable prospective assumption changes of $84.8 million in the current period.
Offsetting these increases was higher Interest expense in our Corporate segment.
Adjustments from Income (Loss) before Income Taxes to Operating Earnings before Income Taxes
Closed Block Variable Annuity is discussed in “Results of Operations—Segment by Segment—CBVA.”
Net investment gains decreased $243.4 million from $455.5 million to $212.1 million primarily driven by
changes in fair value adjustments on our CMO-B portfolio and lower gains on the sale of securities, as well as
derivative mark to market adjustments. Higher gains on derivative mark to market adjustments were primarily
due to rising interest rates, resulting in favorable changes to the fair value of derivatives that are hedging the
Company’s exposure to various market risks within the investment portfolio.
Net guaranteed benefit hedging gains (losses) and related charges and adjustments decreased $77.8 million
from $97.2 million to $19.4 million. Lower gains on guaranteed benefit derivative hedging, net amortization of
DAC/VOBA, and other intangibles, were primarily driven by changes in the fair value of derivatives associated
with the Stable Value hedge program put in place during the prior period, in addition to reductions in expected
future guaranteed interest rates on certain Stabilizer contracts in the prior period. These were partially offset by
higher gains resulting from rising interest rates and equity market movements and changes in the fair value of
guaranteed benefit derivatives related to nonperformance risk.
Loss related to businesses exited through reinsurance or divestment increased $14.0 million from
$45.8 million to $59.8 million primarily due to higher costs associated with the business transferred from us to
Hannover Re.
Immediate recognition of net actuarial gains (losses) related to pension and other postretirement benefit
obligations and gains (losses) from plan adjustments and curtailments increased $570.2 million. We immediately
recognize actuarial gains and losses. A net actuarial gain of $405.2 million was recorded in 2013, driven
primarily due to strong investment returns in the assets of the pension plan and an increase in the discount rate
used to value benefit obligations. A net actuarial loss of $165.0 million was recorded in 2012, driven primarily
by the net impact of a decrease in the discount rate and a curtailment.
Other adjustments to operating earnings changed $31.9 million from $(100.1) million to $(68.2) million
primarily due to lower costs in the current period related to the divestment of the Company by ING Group and
integration expenses in the prior period related to our acquisition of Citistreet.
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