Voya 2013 Annual Report Download - page 39

• in early 2011, we began hedging the interest rate risk of our GMWBL book of business; and
• in late 2011, we refined our policyholder behavior assumptions to more closely align with experience
resulting in U.S. GAAP and gross U.S. statutory reserve increases of $741 million and $2,776 million
in the fourth quarter of 2011, respectively.
U.S. GAAP accounting differs from the methods used to determine regulatory and rating agency capital
measures. Therefore our hedge programs may create material earnings volatility for U.S. GAAP financial
statements.
Our risk management program is focused on balancing key factors including regulatory reserves, rating
agency capital, risk-based capital (“RBC”), liquidity, earnings, and economic value. There is significant
operational scale (approximately 455,000 variable policy holders and $45.7 billion in AUM in our CBVA
segment as of December 31, 2013) which ensures ongoing hedging, financial reporting and information
technology maintenance expense efficiencies.
The block continues to generate revenue from asset-based fees. On a U.S. GAAP basis, we continue to
amortize capitalized acquisition costs over gross revenues and we incur operating costs and benefit expenses in
support of the segment.
Our focus in managing our CBVA segment is on protecting regulatory and rating agency capital from equity
market movements via hedging and judiciously looking for opportunities to accelerate the run-off of the block,
where possible.
Nature of Liabilities
Substantially all of our CBVA segment products were issued by one of our operating subsidiaries, ING
USA.
Each of our CBVA segment deferred variable annuity products include some combination of the following
features which the customer elected when purchasing the product:
Guaranteed Minimum Death Benefits (GMDB).
•Standard. Guarantees that, upon the death of the individual specified in the policy, the death benefit
will be no less than the premiums paid by the customer, adjusted for withdrawals.
•Ratchet. Guarantees that, upon the death of the individual specified in the policy, the death benefit will
be no less than the greater of (1) Standard or (2) the maximum policy anniversary (or quarterly) value
of the variable annuity, adjusted for withdrawals.
•Rollup. Guarantees that, upon the death of the individual specified in the policy, the death benefit will
be no less than the aggregate premiums paid by the contract owner, with interest at the contractual rate
per annum, adjusted for withdrawals. The Rollup may be subject to a maximum cap on the total
benefit.
•Combo. Guarantees that, upon the death of the individual specified in the policy, the death benefit will
be no less than the greater of (1) Ratchet or (2) Rollup.
Guaranteed Minimum Living Benefits
•Guaranteed Minimum Income Benefit (GMIB). Guarantees a minimum income payout, exercisable
only on a contract anniversary on or after a specified date, in most cases 10 years after purchase of the
GMIB rider. The income payout is determined based on contractually established annuity factors
multiplied by the benefit base. The benefit base equals the premium paid at the time of product issue
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