Voya 2013 Annual Report Download - page 212

loans is reduced by establishing an other-than-temporary write-down recorded in Net realized capital gains
(losses) in the Consolidated Statements of Operations.
Loan-to-value (“LTV”) and debt service coverage (“DSC”) ratios are measures commonly used to assess the
risk and quality of commercial mortgage loans. The LTV ratio, calculated at time of origination, is expressed as a
percentage of the amount of the loan relative to the value of the underlying property. An LTV ratio in excess of
100% indicates the unpaid loan amount exceeds the value of the underlying collateral. The DSC ratio, based
upon the most recently received financial statements, is expressed as a percentage of the amount of a property’s
net income (loss) to its debt service payments. A DSC ratio of less than 1.0 indicates that property’s operations
do not generate sufficient income to cover debt payments. These ratios are utilized as part of the review process
described above.
As of December 31, 2013, our mortgage loans on real estate portfolio had a weighted average DSC of
2.0 times, and a weighted average LTV ratio of 59.0%. See “Item 8. Note 2. Investments (excluding
Consolidated Investment Entities)” for further information on mortgage loans on real estate.
Other-Than-Temporary Impairments
We evaluate available-for-sale fixed maturities and equity securities for impairment on a regular basis. The
assessment of whether impairments have occurred is based on a case-by-case evaluation of the underlying
reasons for the decline in estimated fair value. See “Item 8. Note 1. Business, Basis of Presentation and
Significant Accounting Policies” for a policy used to evaluate whether the investments are other-than-
temporarily impaired.
During the year ended December 31, 2013, we recorded $21.2 million of credit related OTTI of which the
primary contributor being $7.5 million of write-downs recorded in the RMBS sector on securities collateralized
by Alt-A residential mortgages. See “Item 8. Note 2. Investments (excluding Consolidated Investment Entities)”
for further information on OTTI.
Derivatives
We use derivatives for a variety of hedging purposes as further described below. We also have embedded
derivatives within fixed maturities instruments and certain annuity products with guarantees. See “Item 8. Note 1.
Business, Basis of Presentation and Significant Accounting Policies” for further information.
Closed Block Variable Annuity Hedging
Refer to Part II. Item 7A. Quantitative and Qualitative Disclosures About Market Risk of this Annual Report
on Form 10-K for further information.
Invested Asset and Credit Hedging
Interest rate caps and interest rate swaps are used to manage the interest rate risk in our fixed maturities
portfolio. Interest rate swaps include forward starting swaps, which are used for anticipated purchases of fixed
maturities. They represent contracts that require the exchange of cash flows at regular interim periods, typically
monthly or quarterly.
Foreign exchange swaps are used to reduce the risk of a change in the value, yield or cash flow with respect
to invested assets. Foreign exchange swaps represent contracts that require the exchange of foreign currency cash
flows for U.S. dollar cash flows at regular interim periods, typically quarterly or semiannually.
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