Voya 2013 Annual Report Download - page 38

Seasonality
We typically experience seasonality in our Employee Benefits segment results.
• The first quarters tend to have the highest Group Life loss ratio. There are a number of factors that
might contribute to this, such as delayed claims filings during the end of calendar year holiday season.
Sales for Group Life and Stop Loss also tend to be the highest in the first quarter, as most of our
contracts have January start dates in alignment with the start of the fiscal year of those clients.
• The third quarters tend to have the second highest Group Life and Stop Loss sales, as a large number of
our contracts have July start dates in alignment with the start of the fiscal year of those clients.
Closed Blocks
We separated our CBVA and Closed Block Institutional Spread Products segments from our other
operations, placing them in run-off, and made a strategic decision to stop actively writing new retail variable
annuity products with substantial guarantee features and to run-off the institutional spread products portfolio over
time. Accordingly, these segments have been classified as closed blocks and are managed separately from our
ongoing business.
Our Closed Blocks unit also includes Closed Block Other, which comprises various other lines of business
that have been exited through reinsurance agreements or which have also been placed in run-off and separated
from our other operations.
We continue to focus on the controlled run-off of our Closed Block segments and look for opportunities to
accelerate this run-off, where possible.
CBVA
Our CBVA segment consists of retail variable annuity insurance policies with substantial guarantee features
sold primarily from 2001 to early 2010, when the block entered run-off. These policies are long-term savings
vehicles in which customers (policyholders) made deposits that are primarily maintained in separate accounts
established by the Company and registered with the SEC as unit investment trusts. The deposits were invested,
largely at the customer’s direction, in a variety of U.S. and international equity, fixed income, real estate and
other investment options.
Many of these policies include living benefit riders, including guaranteed minimum withdrawal benefits for
life (“GMWBL”), guaranteed minimum income benefits (“GMIB”), guaranteed minimum accumulation benefits
(“GMAB”) and guaranteed minimum withdrawal benefits (“GMWB”). All deferred variable annuity contracts
included guaranteed minimum death benefits (“GMDB”).
The recent financial crisis resulted in substantial market volatility, low interest rates and depressed equity
market levels. Our variable annuity profitability declined markedly in 2009 and 2010 under these adverse market
conditions, as customer account values fell below guaranteed levels and therefore our liabilities with respect to
the underlying guarantees increased. Moreover, significant reduction in earnings from reduced mutual fund fees
and increased hedging costs exacerbated the decline in profitability.
We have taken numerous actions since the financial crisis to strengthen our balance sheet, increase
transparency and improve the risk profile of the block, including the following:
• in 2009, we decided to cease sales of retail variable annuity products with substantial guarantee
features. The products were fully closed to new sales in early 2010 and the management of the block
shifted to run-off;
• in 2010, we also refined our capital hedge overlay (“CHO”) program to dynamically protect regulatory
and rating agency capital levels in down equity market scenarios;
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