Voya 2013 Annual Report Download - page 256

ING U.S., Inc.
Notes to the Consolidated Financial Statements
(Dollar amounts in millions, unless otherwise stated)
• Investments are directed by the contract owner or participant; and
• All investment performance, net of contract fees and assessments, is passed through to the contract
owner.
The Company reports separate account assets that meet the above criteria at fair value on the Consolidated
Balance Sheets based on the fair value of the underlying investments. Separate account liabilities equal separate
account assets. Investment income and net realized and unrealized capital gains (losses) of the separate accounts,
however, are not reflected in the Consolidated Statements of Operations. The Consolidated Statements of Cash
Flows do not reflect investment activity of the separate accounts.
Short-term and Long-term Debt
Short-term and long-term debt are carried at an amount equal to the unpaid principal balance, net of any
remaining unamortized discount or premium attributable to issuance. Direct and incremental costs to issue the
debt are recorded in Other assets on the Consolidated Balance Sheets and are recognized as a component of
Interest expense in the Consolidated Statements of Operations over the life of the debt using the effective interest
method of amortization.
Collateralized Loan Obligations Notes
CLO notes issued by consolidated CLO entities are recorded as Collateralized loan obligations notes, at fair value
using the fair value option, on the Consolidated Balance Sheets. Changes in the fair value of the notes are
recorded in Changes in fair value related to collateralized loan obligations in the Company’s Consolidated
Statements of Operations.
Repurchase Agreements
The Company engages in dollar repurchase agreements with MBS (“dollar rolls”) and repurchase agreements
with other collateral types to increase its return on investments and improve liquidity. Such arrangements meet
the requirements to be accounted for as financing arrangements.
The Company enters into dollar roll transactions by selling existing MBS and concurrently entering into an
agreement to repurchase similar securities within a short time frame at a lower price. Under repurchase
agreements, the Company borrows cash from a counterparty at an agreed upon interest rate for an agreed upon
time frame and pledges collateral in the form of securities. At the end of the agreement, the counterparty returns
the collateral to the Company, and the Company, in turn, repays the loan amount along with the additional agreed
upon interest.
Company policy requires that at all times during the term of the dollar roll and repurchase agreements that cash or
other collateral types obtained is sufficient to allow the Company to fund substantially all of the cost of purchasing
replacement assets. Cash received is invested in Short-term investments, with the offsetting obligation to repay the
loan included within Other liabilities on the Consolidated Balance Sheets. The carrying value of the securities
pledged in dollar rolls and repurchase agreement transactions and the related repurchase obligation are included in
Securities pledged and Short-term debt, respectively, on the Consolidated Balance Sheets.
The primary risk associated with short-term collateralized borrowings is that the counterparty will be unable to
perform under the terms of the contract. The Company’s exposure is limited to the excess of the net replacement
cost of the securities over the value of the short-term investments. The Company believes the counterparties to
the dollar rolls and repurchase agreements are financially responsible and that the counterparty risk is minimal.
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