Voya 2013 Annual Report Download - page 41

The estimated fair value of the GMAB, GMWB, and GMWBL contracts is determined based on the present
value of projected future guaranteed benefits, minus the present value of projected attributed fees. A risk neutral
valuation methodology is used under which the cash flows from the guarantees are projected under multiple
capital market scenarios using observable risk free rates. The projection of future guaranteed benefits and future
attributed fees require the use of assumptions for capital markets (e.g. implied volatilities, correlation among
indices, risk-free swap curve, etc.) and policyholder behavior (e.g. lapse, benefit utilization, mortality, etc.). The
projection also includes adjustments for nonperformance risk and margins for non-capital market risks, or
policyholder behavior assumptions. Risk margins are established to capture uncertainties related to policyholder
behavior assumptions. The margin represents additional compensation a market participant would require in
order to assume these risks.
The table below presents the policy count and account value by type of deferred variable annuity benefits.
($ in millions, unless otherwise specified) As of December 31, 2013
Policy Count Account Value(1)
$ %
Guaranteed Minimum Death Benefits: .................. 443,386 $44,740
Standard ..................................... 193,888 20,676 46%
Ratchet ...................................... 100,296 8,384 19%
Rollup ....................................... 30,018 2,398 5%
Combo ...................................... 119,184 13,282 30%
Guaranteed Living Benefits: .......................... 443,386 44,740
GMIB ....................................... 163,343 15,909 36%
GMWBL ..................................... 123,276 16,537 37%
GMAB/GMWB ............................... 10,312 943 2%
No Living Benefit .............................. 146,455 11,351 25%
(1) Account value excludes $959 million of Payout, Policy Loan and Life Insurance business which is included
in consolidated account values.
Capital Management Considerations
The focus of the management of the CBVA segment is on regulatory reserve and capital requirements. As of
December 31, 2013 we held regulatory reserves, net of third-party reinsurance, of $3.3 billion supporting variable
annuities guarantees, which included $2.4 billion supporting living benefit guarantees.
Both market movements and changes in actuarial assumptions (including policyholder behavior and
mortality) can result in significant changes to the regulatory reserve and rating agency capital requirements of
this segment. The section below on “Variable Annuity Hedge Program and Reinsurance” describes the Variable
Annuity CHO program, which is designed to mitigate the effect of adverse equity market movements on our
regulatory capital and rating agency capital positions. Additionally, the section on “CBVA Risks and Risk
Management” discusses the risk of adverse developments in policyholder behavior and its potential impact on the
regulatory reserves and rating agency capital position.
We believe that our hedge program combined with our statutory reserves related to the variable annuity
block, provides adequate resources to fund a wide range of, but not all, possible market scenarios as well as a
margin for adverse policyholder behavior.
Net Amount at Risk (“NAR”)
The NAR for the GMDB, GMAB and GMWB benefits is equal to the guaranteed value of these benefits in
excess of the account values in each case as of the date indicated. The NAR assumes utilization of benefits by all
customers as of the date indicated.
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