Voya 2013 Annual Report Download - page 246

ING U.S., Inc.
Notes to the Consolidated Financial Statements
(Dollar amounts in millions, unless otherwise stated)
The Company records an allowance for probable losses incurred on non-impaired loans on an aggregate basis,
rather than specifically identified probable losses incurred by individual loan.
Policy Loans: Policy loans are carried at an amount equal to the unpaid balance. Interest income on such loans is
recorded as earned in Net investment income using the contractually agreed upon interest rate. Generally, interest
is capitalized on the policy’s anniversary date. Valuation allowances are not established for policy loans, as these
loans are collateralized by the cash surrender value of the associated insurance contracts. Any unpaid principal or
interest on the loan is deducted from the account value or the death benefit prior to settlement of the policy.
Limited Partnerships/Corporations: The Company uses the equity method of accounting for investments in
limited partnership interests that are not consolidated, which consists primarily of private equities, hedge funds
and VIEs for which the Company is not the primary beneficiary. Generally, the Company records its share of
earnings using a lag methodology, relying upon the most recent financial information available, generally not to
exceed three months. The Company’s earnings from limited partnership interests accounted for under the equity
method are recorded in Net investment income.
Other Investments: Other investments are comprised primarily of Federal Home Loan Bank (“FHLB”) stock and
property obtained from foreclosed mortgage loans, as well as other miscellaneous investments. The Company is
a member of the FHLB system and is required to own a certain amount of stock based on the level of borrowings
and other factors; the Company may invest in additional amounts. FHLB stock is carried at cost, classified as a
restricted security and periodically evaluated for impairment based on ultimate recovery of par value.
Securities Lending: The Company engages in securities lending whereby certain securities from its portfolio are
loaned to other institutions for short periods of time. Initial collateral, primarily cash, is required at a rate of
102% of the market value of the loaned securities. For certain transactions, a lending agent may be used and the
agent may retain some or all of the collateral deposited by the borrower and transfer the remaining collateral to
the Company. Collateral retained by the agent is invested in liquid assets on behalf of the Company. The market
value of the loaned securities is monitored on a daily basis with additional collateral obtained or refunded as the
market value of the loaned securities fluctuates.
Corporate Loans: Corporate loans held by consolidated collateralized loan obligations (“CLO” or “CLO
entities”) are reported in Corporate loans, at fair value using the fair value option, on the Consolidated Balance
Sheets. Changes in the fair value of the loans are recorded in Changes in fair value related to collateralized loan
obligations in the Consolidated Statements of Operations. The fair values for corporate loans are determined
using independent commercial pricing services. In the event that the third-party pricing source is unable to price
an investment (which occurs in less than 2% of the loans), other relevant factors are considered including:
• Information relating to the market for the asset, including price quotations for and trading in the asset
or in similar investments and the market environment and investor attitudes towards the asset and
interests in similar investments;
• The characteristics of and fundamental analytical data relating to the investment, including the cost,
current interest rate, period until next interest rate reset, maturity and base lending rate, the terms and
conditions of the corporate loan and any related agreements and the position of the corporate loan in
the borrower’s debt structure;
• The nature, adequacy, and value of the corporate loan’s collateral, including the CLO’s rights,
remedies and interests with respect to the collateral;
• The creditworthiness of the borrower, based on an evaluation of its financial condition, financial
statements and information about the business, cash flows, capital structure and future prospects;
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