Voya 2013 Annual Report Download - page 286

ING U.S., Inc.
Notes to the Consolidated Financial Statements
(Dollar amounts in millions, unless otherwise stated)
Consolidated Balance Sheets and is reinvested in short-term investments. Collateral held is used in accordance
with the CSA to satisfy any obligations. Investment grade bonds owned by the Company are the source of
noncash collateral posted, which is reported in Securities pledged on the Consolidated Balance Sheets. As of
December 31, 2013, the fair values of credit default swaps of $40.5 and $14.5 were included in Derivatives assets
and Derivatives liabilities, respectively, on the Consolidated Balance Sheets. As of December 31, 2012, the fair
value of credit default swaps of $63.3 and $52.7 were included in Derivatives assets and Derivatives liabilities,
respectively, on the Consolidated Balance Sheets. As of December 31, 2013, the maximum potential future net
exposure to the Company was $1.7 billion, net of purchased protection of $0.5 on credit default swaps. As of
December 31, 2012, the maximum potential future net exposure to the Company was $1.1 billion, net of
purchased protection of $1.0 billion on credit default swaps. These instruments are typically written for a
maturity period of five years and contain no recourse provisions. If the Company’s current debt and claims
paying ratings were downgraded in the future, the terms in the Company’s derivative agreements may be
triggered, which could negatively impact overall liquidity.
4. Fair Value Measurements (excluding Consolidated Investment Entities)
Fair Value Measurement
The Company categorizes its financial instruments into a three-level hierarchy based on the priority of the inputs
to the valuation technique, pursuant to the Fair Value Measurements and disclosures of the ASC Topic 820. The
fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall
within different levels of the hierarchy, the category level is based on the lowest priority level input that is
significant to the fair value measurement of the instrument. Financial assets and liabilities recorded at fair value
on the Consolidated Balance Sheets are categorized as follows:
• Level 1—Unadjusted quoted prices for identical assets or liabilities in an active market. The Company
defines an active market as a market in which transactions take place with sufficient frequency and
volume to provide pricing information on an ongoing basis.
• Level 2—Quoted prices in markets that are not active or valuation techniques that require inputs that
are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2
inputs include the following:
a) Quoted prices for similar assets or liabilities in active markets;
b) Quoted prices for identical or similar assets or liabilities in non-active markets;
c) Inputs other than quoted market prices that are observable; and
d) Inputs that are derived principally from or corroborated by observable market data through
correlation or other means.
• Level 3—Prices or valuation techniques that require inputs that are both unobservable and significant
to the overall fair value measurement. These valuations, whether derived internally or obtained from a
third party, use critical assumptions that are not widely available to estimate market participant
expectations in valuing the asset or liability.
When available, the estimated fair value of financial instruments is based on quoted prices in active markets that
are readily and regularly obtainable. When quoted prices in active markets are not available, the determination of
estimated fair value is based on market standard valuation methodologies, including discounted cash flow
methodologies, matrix pricing, or other similar techniques.
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