Voya 2013 Annual Report Download - page 136

Other revenue decreased $49.7 million from $428.2 million to $378.5 million due to changes in market
value adjustment related to plan sponsors upon surrender, lower surrender fees on the CBVA segment as that
business runs off and a reduction in the deferred gain amortization on the divested group reinsurance business.
Partially offsetting these decreases is an increase in service fees earned by our Investment Management segment.
Interest credited and other benefits to contract owners/policyholders decreased $880.4 million from
$5,742.0 million to $4,861.6 million primarily due to an increase in reserves in the CBVA segment due to
updating lapse and other policyholder behavior assumptions in the fourth quarter of 2011, and a reduction in
interest credited due to declining contract owner account balances for the Closed Block Institutional Spread
Products segment and declining reserves for MYGAs. A reduction in average crediting rates across several
product lines as well as favorable claim results in our Employee Benefits segment also contributed to the
decrease. These reductions were partially offset by reserve changes and claim experience in our Individual Life
segment due to a combination of growth in the business and adverse mortality results, net of reinsurance and
reserve changes. Growth in general account assets in our Retirement segment also contributed to the increase.
Operating expenses increased $124.2 million from $3,030.8 million to $3,155.0 million primarily due to
higher LOC costs related to the contingent capital LOC for our CBVA segment and for our Individual Life
segment, a reduction in incentive compensation expense in 2011 that did not recur in 2012 and an increase in
expenses due to growth in the business. Partially offsetting these increases were lower expenses in our
Retirement business due to a reduction in recordkeeping cases, as well as a $22.0 million reimbursement of
expenses by ING Group in 2012. These expenses were paid in 2011 by ING U.S., Inc. on behalf of ING Group’s
Latin America business. In 2011, operating expenses included $24.6 million of previously unreimbursed
expenses.
Net amortization of DAC/VOBA increased $335.3 million from $387.0 million to $722.3 million. The
increase is primarily related to favorable unlocking in 2011 and unfavorable unlocking in 2012, primarily in our
Annuities segment, due to prospective assumption changes related to investment margins in 2011 and decreased
projected margins on MYGA policies in 2012, respectively.
Income before income taxes increased $328.2 million from $277.8 million to $606.0 million primarily due
to an improvement in net realized investment gains as well as favorable results from hedging activity in our
Retirement Solutions business, higher assets and margins in our Retirement segment, improved fund
performance in our Investment Management segment, and favorable claim results in our Employee Benefit
segment. Offsetting these increases were losses on guaranteed benefit derivatives due to nonperformance risk and
higher losses on derivatives from the CBVA segment liability hedges and CHO program, and the $91.9 million
loss on the sale of certain alternative investments. Adverse mortality and reserve changes in our Individual Life
segment and unfavorable changes in DAC/VOBA and other intangibles unlocking also contributed to the
decrease.
Income tax benefit for the year ended December 31, 2012 was $5.2 million. We anticipate an effective tax
rate of approximately 0%, as the tax expense (benefit) on Net income (loss) before income taxes should be offset
by increases/decreases in valuation allowances. The Income tax expense (benefit) for 2011 was $175.0 million,
which is higher than the tax at the statutory rate, primarily as a result of an increase in the valuation allowances
of $175.0 million, the tax impact of non-deductible expenses of $32.0 million, offset by the $74.0 million impact
of the dividends received deduction and $67.0 million of favorable impact from noncontrolling interests. The
increase in the valuation allowance was due primarily to continued tax losses, the benefit of which is uncertain.
Operating Earnings before Income Taxes
Operating earnings before income taxes decreased $201.3 million from $1,119.6 million to $918.3 million
primarily due to unfavorable DAC/VOBA and other intangibles unlocking in 2012 of $77.0 million compared to
favorable unlocking in 2011 of $303.8 million, the $92.0 million loss in 2012 related to the sale of certain
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