Voya 2013 Annual Report Download - page 193

When assessing our intent to sell a security or if it is more likely than not we will be required to sell a
security before recovery of its amortized cost basis, we evaluate facts and circumstances such as, but not limited
to, decisions to rebalance the investment portfolio and sales of investments to meet cash flow or capital needs.
We use the following methodology and significant inputs to determine the amount of the OTTI credit loss:
• When determining collectability and the period over which the value is expected to recover for U.S. and
foreign corporate securities, foreign government securities and state and political subdivision securities,
we apply the same considerations utilized in our overall impairment evaluation process, which
incorporates information regarding the specific security, the industry and geographic area in which the
issuer operates, and overall macroeconomic conditions. Projected future cash flows are estimated using
assumptions derived from our best estimates of likely scenario-based outcomes, after giving consideration
to a variety of variables that include, but are not limited to: general payment terms of the security; the
likelihood that the issuer can service the scheduled interest and principal payments; the quality and
amount of any credit enhancements; the security’s position within the capital structure of the issuer;
possible corporate restructurings or asset sales by the issuer; and changes to the rating of the security or
the issuer by rating agencies.
• Additional considerations are made when assessing the unique features that apply to certain structured
securities, such as subprime, Alt-A, non-agency, RMBS, CMBS and ABS. These additional factors for
structured securities include, but are not limited to: the quality of underlying collateral; expected
prepayment speeds; loan-to-value ratio; debt service coverage ratios; current and forecasted loss severity;
consideration of the payment terms of the underlying assets backing a particular security; and the
payment priority within the tranche structure of the security.
• When determining the amount of the credit loss for U.S. and foreign corporate securities, foreign
government securities and state and political subdivision securities, we consider the estimated fair value
as the recovery value when available information does not indicate that another value is more appropriate.
When information is identified that indicates a recovery value other than estimated fair value, we consider
in the determination of recovery value the same considerations utilized in its overall impairment
evaluation process, which incorporates available information and our best estimate of scenario-based
outcomes regarding the specific security and issuer; possible corporate restructurings or asset sales by the
issuer; the quality and amount of any credit enhancements; the security’s position within the capital
structure of the issuer; fundamentals of the industry and geographic area in which the security issuer
operates and the overall macroeconomic conditions.
• We perform a discounted cash flow analysis comparing the current amortized cost of a security to the
present value of future cash flows expected to be received, including estimated defaults and prepayments.
The discount rate is generally the effective interest rate of the fixed maturity prior to impairment.
Mortgage loans on real estate are all commercial mortgage loans. If a mortgage loan is determined to be
impaired (i.e., when it is probable that we will be unable to collect all amounts due according to the contractual
terms of the loan agreement), the carrying value of the mortgage loan is reduced to the lower of either the present
value of expected cash flows from the loan, based on the original purchase yield or the fair value of the collateral.
For those mortgages that are determined to require foreclosure, the carrying value is reduced to the fair value of
the underlying collateral, net of estimated costs to obtain and sell at the point of foreclosure.
Impairment analysis of the investment portfolio involves considerable judgment, is subject to considerable
variability, is established using management’s best estimate and is revised as additional information becomes
available. As such, changes in, or deviations from the assumptions used in such analysis can have a significant
effect on the results of operations.
For additional information regarding the evaluation process for impairments, see “Item 8. Note 2.
Investments (excluding Consolidated Investment Entities).”
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