Voya 2013 Annual Report Download - page 149

the impact of the prospective assumption changes. This unlocking impact was more than offset by unlocking
recorded in Fee income and Interest credited and other benefits to contract owners/policyholders as discussed
above. In addition, there was increased amortization related to the Lehman Recovery. Partially offsetting these
items was lower amortization related to lower gross profits on UL products and lower term sales.
Interest Expense decreased $9.4 million from $10.5 million to $1.1 million primarily due to the repayment
of certain surplus notes in 2012.
Operating earnings before income taxes
Operating earnings before income taxes increased $58.6 million from $196.2 million to $254.8 million as a
result of several factors including lower benefit costs resulting from lower guarantee and term product sales,
favorable IBNR development and lower Operating expenses. Partially offsetting these favorable variances was
lower investment income due to lower CMO-B income and lower investment yields, lower net contractual
charges resulting from a reduction of secondary guarantee product sales and higher gross claims on the term
block. In addition, the year-over-year results were impacted by the Net gain from Lehman Recovery/LIHTC in
the current period, loss on sale of certain alternative investments in the prior period and the impact of prospective
assumption changes.
Individual Life—Year Ended December 31, 2012 Compared to Year Ended December 31, 2011
Operating revenues
Net investment income and net realized gains (losses) decreased $36.2 million from $950.0 million to
$913.8 million primarily due to a $13.1 million loss on the sale of certain alternative investments and lower
investment income on the CMO-B and alternative asset portfolios due to asset sales in the second and third
quarters of 2012. Partially offsetting these impacts were higher prepayment fee income and higher yields on
certain fixed income investments.
Fee income decreased $23.5 million from $1,139.2 million to $1,115.7 million primarily related to the
emergence of gross profits for a particular block that caused accelerated unearned revenue amortization in 2011.
The gross profits caused accelerated amortization of unearned revenue, an increase in interest credited and other
benefits and higher DAC/VOBA amortization with an immaterial net impact to Operating earnings. Growth in
net contractual charges and cost of insurance fees due to higher UL sales offset the decrease to Fee income.
Premiums increased $76.9 million from $660.9 million to $737.8 million due to continued growth in
renewal premiums for term life business partially offset by lower first year premiums as a result of term sales
declining 25%.
Operating benefits and expenses
Interest credited and other benefits to contract owners/policyholders increased $179.3 million from
$1,855.1 million to $2,034.4 million primarily due to favorable reserve changes in 2011 as a result of annual
assumption changes that did not repeat in 2012, the emergence of gross profits for a particular block that caused
an increase as discussed above and an increase in reserves in 2012 related to the guaranteed UL block. In
addition, there was unfavorable mortality net of reinsurance in 2012, with the UL block experiencing a higher
number of gross claims and reinsurance recoveries on the term block providing less benefit.
Operating expenses increased $57.7 million from $332.8 million to $390.5 million primarily due to
increased credit facility fees supporting reinsurance transactions. The higher credit facility fees are the results of
higher rates and general growth in credit facilities supporting the reinsured block. Partially offsetting this
increase was lower sales related expenses.
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