Voya 2013 Annual Report Download - page 206

The following table summarizes fixed maturities balances held in the CMO-B portfolio by NAIC rating as
of the dates indicated:
($ in millions) December 31, 2013 December 31, 2012
NAIC Designation Amortized Cost Fair Value % Fair Value Amortized Cost Fair Value % Fair Value
1 ........... $2,609.1 $3,138.1 93.0% $2,526.4 $3,323.1 91.0%
2 ........... 6.8 10.6 0.3% 5.1 6.9 0.2%
3 ........... 2.9 6.1 0.2% 11.6 25.0 0.7%
4 ........... 11.1 20.1 0.6% 32.4 46.0 1.3%
5 ........... 35.9 50.7 1.5% 40.1 59.6 1.6%
6 ........... 88.9 150.2 4.4% 108.9 188.6 5.2%
$2,754.7 $3,375.8 100.0% $2,724.5 $3,649.2 100.0%
For CMO securities where we elected the FVO, amortized cost represents the market values. For details on
the NAIC designation methodology, please see “-Fixed Maturities Credit Quality-Ratings” above.
The following table summarizes the notional amounts and fair values of interest rate derivatives used in our
CMO-B portfolio as of the dates indicated:
December 31, 2013 December 31, 2012
($ in millions)
Notional
Amount
Assets
Fair
Value
Liability
Fair
Value
Notional
Amount
Assets
Fair
Value
Liability
Fair
Value
Derivatives non-qualifying for hedge
accounting:
Interest Rate Contracts .................... $26,358.1 $526.1 $568.2 $34,634.2 $773.1 $1,005.8
The following table summarizes our CMO-B fixed maturity securities balances and tranche type as of the
dates indicated:
($ in millions) December 31, 2013 December 31, 2012
Tranche Type
Amortized
Cost Fair Value % Fair Value
Amortized
Cost Fair Value % Fair Value
Inverse Floater ................... $ 840.1 $1,172.7 34.8% $1,008.6 $1,518.6 41.7%
Interest Only (IO) ................ 312.5 349.2 10.3% 225.5 264.4 7.2%
Inverse IO ...................... 1,149.5 1,398.2 41.4% 1,196.7 1,565.6 42.9%
Principal Only (PO) ............... 401.6 403.1 11.9% 205.4 211.2 5.8%
Floater ......................... 45.2 45.9 1.4% 77.4 78.2 2.1%
Other .......................... 5.8 6.7 0.2% 10.9 11.2 0.3%
Total ........................... $2,754.7 $3,375.8 100.0% $2,724.5 $3,649.2 100.0%
Generally, a continued increase in valuations, as well as muted prepayments despite low interest rates, have
led to a very strong performance for our CMO-B portfolio in recent years. Based on fundamental prepayment
analysis, we have been able to increase the allocation to notional securities in a manner that was diversified by
borrower and mortgage characteristics without unduly increasing portfolio risk because the underlying drivers of
prepayment behavior across collateral type are varied.
A rebound in home prices and an anticipated increased availability of housing-related credit in 2013 have
lowered IO and Inverse IO valuations modestly in the year ended December 31, 2013. To the extent these
conditions persist in the coming quarters, we expect prepayment speeds will increase and the results of our
CMO-B portfolio will likely underperform those of recent periods.
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