Voya 2013 Annual Report Download - page 258

ING U.S., Inc.
Notes to the Consolidated Financial Statements
(Dollar amounts in millions, unless otherwise stated)
• Prudent and feasible tax planning strategies the Company would employ to avoid a tax benefit from
expiring unused; and
• Tax rules that would impact the utilization of the deferred tax assets.
In establishing unrecognized tax benefits, the Company determines whether a tax position is more likely than not
to be sustained under examination by the appropriate taxing authority. The Company also considers positions that
have been reviewed and agreed to as part of an examination by the appropriate taxing authority. Tax positions
that do not meet the more likely than not standard are not recognized in the Consolidated Financial Statements.
Tax positions that meet this standard are recognized in the Consolidated Financial Statements. The Company
measures the tax position as the largest amount of benefit that is greater than 50% likely of being realized upon
ultimate resolution with the tax authority that has full knowledge of all relevant information.
Reinsurance
The Company utilizes reinsurance agreements in most aspects of its insurance business to reduce its exposure to
large losses. Such reinsurance permits recovery of a portion of losses from reinsurers, although it does not
discharge the primary liability of the Company as direct insurer of the risks reinsured.
For each of its reinsurance agreements, the Company determines whether the agreement provides
indemnification against loss or liability relating to insurance risk. The Company reviews all contractual features,
particularly those that may limit the amount of insurance risk to which the reinsurer is subject or features that
delay the timely reimbursement of claims. The assumptions used to account for both long and short-duration
reinsurance agreements are consistent with those used for the underlying contracts. Ceded future policy benefits
and contract owner liabilities are reported gross on the Consolidated Balance Sheets.
Long-duration: For reinsurance of long-duration contracts that transfer significant insurance risk, the difference,
if any, between the amounts paid and benefits received related to the underlying contracts is included in the
expected net cost of reinsurance, which is recorded as a component of the reinsurance asset or liability. Any
difference between actual and expected net cost of reinsurance is recognized in the current period and included as
a component of profits used to amortize DAC.
Short-duration: For prospective reinsurance of short-duration contracts that meet the criteria for reinsurance
accounting, amounts paid are recorded as ceded premiums and ceded unearned premiums and are reflected as a
component of Premiums in the Consolidated Statements of Operations and Other assets on the Consolidated
Balance Sheets, respectively. Ceded unearned premiums are amortized through premiums over the remaining
contract period in proportion to the amount of protection provided.
For retroactive reinsurance of short-duration contracts that meet the criteria for reinsurance accounting, amounts paid
in excess of the related insurance liabilities ceded are recognized immediately as a loss. Any gains on such retroactive
agreements are deferred in Other liabilities and amortized over the remaining life of the underlying contracts.
Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future
performance of the underlying business and the potential impact of counterparty credit risks. The Company
periodically reviews actual and anticipated experience compared to the assumptions used to establish assets and
liabilities relating to ceded and assumed reinsurance. The Company also evaluates the financial strength of
potential reinsurers and continually monitors the financial condition of reinsurers. The S&P ratings for the
Company’s reinsurers with the largest reinsurance recoverable balances are all A rated or better, including
Lincoln National Corporation (“Lincoln”), Hannover Life Reassurance Company of America and Hannover Re
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