Voya 2013 Annual Report Download - page 224

The NAR for GMIB and GMWBL is equal to the excess of the present value of the minimum guaranteed
annuity payments available to the contract owner over the current account value. It assumes that all policyholders
exercise their benefit immediately, even if they have not yet attained the first exercise date shown in their
contracts, and that there are no future lapses. The NAR assumes utilization of benefits by all customers as of the
date indicated. This hypothetical immediate exercise of the benefit means that the customers give up any future
increase in the guaranteed benefit that might accrue if they were to delay exercise to a later date. The discount
rates used in the GMIB NAR methodology grade from current U.S. Treasury rates to long-term best estimates
over ten years. The GMWBL NAR methodology uses current swap rates. The discounting for GMWBL and
GMIB NAR was developed to be consistent with the methodology for the establishment of U.S. GAAP reserves.
For GMIB products, in general, the policyholder has the right to elect income payment, beginning (for
certain products) on the tenth anniversary year of product commencement, receive lump sum payment of the then
current cash value, or remain in the variable sub-account. For GMIB products, if the policyholder makes the
election to annuitize, the policyholder is entitled to receive the guaranteed benefit amount over an annuitization
period. A small percentage of the products were first eligible to elect annuitizations beginning in 2010 and 2011.
The remainder of the products become eligible to elect annuitization from 2012 to 2020, with the majority of first
eligibility dates in the period from 2014 through 2016. Many of these contracts contain significant incentives to
delay annuitization past first eligibility.
Because policyholders have various contractual rights and significant incentives to defer their annuitization
election, the period over which annuitization election will take place is subject to policyholder behavior and
therefore indeterminate. In addition, upon annuitization the contract holder surrenders access to the account value
and the account value is transferred to the Company’s general account where it is invested and the additional
investment proceeds are used towards payment of the guaranteed benefit payment.
Similarly, most of our GMWBL contracts are still in the first four to six policy years, so our assumptions for
withdrawal from contracts with GMWBL benefits may change as experience emerges. In addition, like our
GMIB contracts, many of our GMWBL contracts contain significant incentives to delay withdrawal. We expect
customer decisions on annuitization and withdrawal will be influenced by customers’ financial plans and needs
as well as by interest rate and market conditions over time and by the availability and features of competing
products. If emerging experience deviates from our assumptions on either GMIB annuitization or GMWBL
withdrawal, we could experience gains or losses and a significant decrease or increase to reserve and capital
requirements.
The account values and NAR, both gross and net of reinsurance (“retained NAR”), of contract owners by
type of minimum guaranteed benefit for retail variable annuity contracts are summarized below as of
December 31, 2013.
As of December 31, 2013
($ in millions, unless otherwise indicated)
Account
Value(1) Gross NAR Retained NAR
% Contracts NAR
In-the-Money(2)
% NAR
In-the-Money(3)
GMDB ........................... $44,740 $5,702 $5,074 40% 26%
Living Benefit
GMIB ........................ $15,909 $1,682 $1,682 62% 15%
GMWBL ..................... 16,537 452 452 24% 12%
GMAB/GMWB ................ 943 20 20 12% 18%
Living Benefit Total ................. $33,389 $2,154 $2,154 44%(4) 14%(5)
(1) Account value excludes $959.0 million of Payout, Policy Loan and life insurance business which is included
in consolidated account values.
(2) Percentage of contracts that have a NAR greater than zero.
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