Voya 2013 Annual Report Download - page 26

We intend to achieve our risk-adjusted return objectives in Annuities through a disciplined approach,
balancing profitability with growth, with a focus on preserving margins and the avoidance of expansion in low
interest rate environments. As a result, we expect to opportunistically grow our FIA business when margins are
attractive and to reduce growth but maintain distribution access when margins are less attractive. Our mutual
fund custodial products business is not sensitive to interest rate conditions and, as such, is focused on growth.
While we still offer traditional fixed annuities, we are prepared to allow the business to decline in volume due to
low margins and less attractive returns. We intend to meet our risk management objectives by continuing to
hedge market risks associated with the crediting strategies selected by clients on many of our FIA contracts. See
“Item 7A. Quantitative and Qualitative Disclosures About Market Risk—Risk Management.”
Products and Services
Our Annuities segment product offerings include immediate and deferred fixed annuities designed to
address customer needs for tax-advantaged savings and retirement income and their wealth-protection concerns.
New sales comprise primarily FIAs and tax-qualified mutual fund custodial accounts.
FIAs. FIAs are marketed principally based on underlying interest-crediting guarantee features coupled with
the potential for increased returns based on the performance of market indices. For an FIA, the principal amount
of the annuity is guaranteed to be no less than a minimum value based on non-forfeiture regulations that vary by
state. Interest on FIAs is credited based on allocations selected by a customer in one or more of the strategies we
offer and upon policy parameters that we set. The strategies include a fixed interest rate option, as well as several
options based upon performance of various external financial market indices. Such indices may include equity
indices, such as Standard & Poor’s 500 Index (the “S&P 500”), or an interest rate benchmark, such as the change
in London Interbank Offered Rates (“LIBOR”). The parameters (such as “caps,” “participation rates,” and
“spreads”) are periodically declared by us for both initial and following periods. Our existing FIAs contain death
benefits as required by non-forfeiture regulations. Some FIAs allow the purchase of optional guaranteed
withdrawal benefit riders at an additional cost. These living benefits guarantee a minimum annual withdrawal
amount for life. The amount of the guaranteed annual withdrawal may vary by age at first withdrawal. We have
used multiple designs with varying parameters over time and all form designs and parameters make up the
existing block of in-force policies.
Annual Reset and Multi-Year Guarantee Annuities (“MYGAs”). Our in-force block includes Annual Reset
and MYGA products, which provide guaranteed minimum rates of up to 4.5% and with crediting rate terms from
one year to 10 years. These products are running off, with net outflows of $1.2 billion in 2013, compared to $2.8
billion in 2012. The net outflows in 2012 were high due to a large block of MYGAs, which reached the end of
their current guarantee period in 2012. The run-off of these Annual Reset and MYGA contracts is expected to
continue to enhance the margin of our Annuities segment in future periods.
Although not currently a significant portion of new sales, we also offer other fixed annuities with a
guaranteed interest rate or a periodic annuity payment schedule suitable for clients seeking a stable return.
Mutual Fund Custodial Products. Our Annuities segment also offers tax-qualified mutual fund custodial
products, which provide flexible investment options across mutual fund families on a no-load basis. We charge a
recordkeeping fee based on the amount of assets invested in the account, and we are paid asset-based fees by the
managers of the mutual funds within the account. This product is designed to be a streamlined, simple rollover
solution providing continued tax deferral on retirement assets. No minimum guarantees are offered for this
product.
16