Voya 2013 Annual Report Download - page 359

ING U.S., Inc.
Notes to the Consolidated Financial Statements
(Dollar amounts in millions, unless otherwise stated)
Private Equity Funds and Single Strategy Hedge Funds (Limited Partnerships)
The Company invests in and manages various limited partnerships, including private equity funds and single
strategy hedge funds. The Company, as a general partner or managing member of certain sponsored investment
funds, is generally presumed to control the limited partnerships unless the limited partners have the substantive
ability to remove the general partner without cause based upon a simple majority vote, can otherwise dissolve the
partnership or have substantive participating rights over decision-making of the partnerships.
On June 4, 2012, certain insurance subsidiaries of the Company entered into an agreement to sell certain general
account private equity limited partnership investment interest holdings with a carrying value of $812.2 as of
March 31, 2012 included in Assets related to consolidated investment entities to a group of private equity funds
that are managed by Pomona Management LLC, also a subsidiary of the Company. The transaction resulted in a
net pre-tax loss of $91.9 in the second quarter of 2012. The transaction closed in two tranches with the first
tranche closed on June 29, 2012 and the second tranche closed on October 29, 2012. No additional loss was
incurred on the second tranche since the fair value of the alternative investments was reduced to the agreed upon
sales price as of June 30, 2012.
As of December 31, 2013 and 2012, the Company consolidated 35 funds which were structured as partnerships.
Collateral Support for Reinsurance Contracts
Beginning in December 2009, the Company entered into various guarantee agreements involving Karson Capital
Limited (“Karson”). Karson is an unaffiliated company that provides collateral alternatives to letters of credit for
reinsurance transactions. Karson established the KCL Master Trust (“Master Trust” or “Borrower”), which is a
Delaware statutory series trust. The Master Trust enters into securities lending agreements as borrower with ING
Bank and various unaffiliated banks (“Securities Lenders”) as lenders. As of December 31, 2013, fair value of
the loaned securities was $1.5 billion. Effective November 5, 2013, the securities lending agreement with ING
Bank was terminated. As of December 31, 2012, fair value of the loaned securities was $2.8 billion including
securities with a fair value of $825.0 provided by ING Bank.
Collateral notes backed by the borrowed securities, with a face value of $1.5 billion and $2.8 billion as of
December 31, 2013 and 2012, respectively, were issued by the Master Trust and placed in reinsurance trusts
established for the benefit of the Company’s insurance subsidiaries, which are eliminated in the Company’s
Consolidated Financial Statements.
The Company has provided certain guarantees of the Borrower’s performance obligations to the Securities
Lenders as collateral for the Borrower’s obligations under the securities lending agreements. As of December 31,
2013, additional collateral in the form of letters of credit or similar liquidity obligations have been provided by
banks for $1.5 billion. As of December 31, 2012, additional collateral in the form of letters of credit or similar
liquidity obligations have been provided by banks for $2.8 billion, including $825.0 provided by ING Bank. The
Company pays the securities lending and LOC fees directly to ING Bank and unaffiliated banks. See Note 18.
Related Party Transactions to these Consolidated Financial Statements for further details.
The Master Trust sponsored by Karson has minimal equity, and therefore falls under the VIE model. The
Company holds variable interests in this VIE relating to the guarantees of the obligations under the securities
lending agreements. The Company considered its implicit and explicit financial responsibility to ensure that the
Master Trust operates as designed and, thus, determined that the Company has the implied power to direct the
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