Voya 2013 Annual Report Download - page 50

projections and volatility assumptions on certain products. These changes in lapse assumptions, taken together
with the update to lapse assumptions we made in late 2011, moved our assumptions to be in line with lapse
experience over the study period of 2006 to present. Although we believe it is appropriate to consider actual
experience over that entire period in setting our assumptions, this recent change also causes our assumption to
move considerably closer to our actual lapse experience for the period from mid-2009 to present. However, as
described in the previous paragraph, future reserve increases in connection with experience updates could be
material and adverse to the results of operations or financial condition of the Company. Any such increase to
reserves could require us to make material additional capital contributions to one or more of our insurance
company subsidiaries or could otherwise be material and adverse to the results of operations or financial
condition of the Company. We will continue to monitor the emergence of experience. We review our
assumptions at least annually, and, if necessary, update our assumptions more frequently as additional
information becomes available. If adjustments to policyholder behavior assumptions (e.g., lapse, annuitization
and withdrawal) are necessary, which is ordinary course for interest-sensitive long dated liabilities, we anticipate
that the financial impact of such a change will likely be in a range, either up or down, that is generally consistent
with the impact experienced in the past two years.
Other Risks. Despite the closure of new product sales, some new policy amounts continue to be deposited as
additional premium to existing contracts.Benefit designs do limit the attractiveness of additional premium, but in
some cases these additional premiums may increase the guarantee available to the policyholder.The volume of
additional premiums has diminished since we ceased new product sales in 2010.
Closed Block Institutional Spread Products
Prior to 2009, we operated a spread lending business, which we call Closed Block Institutional Spread
Products. However, following the financial crisis in 2008, investor appetite for uncollateralized liabilities not
rated “AAA” and collateralized funding became constrained causing funding spreads on new liabilities to widen.
We shifted the focus of the business strategy from growing assets and earnings to running off the business over
time. As of December 31, 2013, remaining assets in the institutional spread products portfolio had an amortized
cost of $2.5 billion, down from a peak of $14.3 billion in 2008. We continue to reduce the block by allowing the
assets and liabilities to mature or by finding opportunities to sell assets at prices deemed attractive. New liability
contracts may be issued from time to time or be terminated early in order to better match the run-off of the asset
portfolio. In addition, our Closed Block Institutional Spread Products segment wrote super senior credit default
swap (“CDS”) contracts of which, as of December 31, 2013, approximately $1 billion of notional amount
remained outstanding. As the business is in run-off, it is actively managed to limit liquidity risk and capital
requirements.
Closed Block Other
The third financial reporting segment making up our Closed Block business is Closed Block Other, which
includes continuing obligations and assets connected with the group reinsurance and individual reinsurance
businesses we sold between 2004 and 2009. Effective January 2009, we sold our group reinsurance business,
ING Reinsurance U.S., to RGA. The transaction was accounted for as a reinsurance transaction. To effect this
sale, we entered into coinsurance agreements with various subsidiaries of RGA. See “Item 8. Note 8.
“Reinsurance” for more information on these reinsurance arrangements. Between 2004 and 2009, we entered
into several reinsurance transactions with Scottish Re and Hannover Re pursuant to which we ceded all liabilities
related to our individual life reinsurance block. The reinsurance arrangements with respect to both the group and
life individual reinsurance businesses are described more fully in “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Reinsurance”
above.
Employees
As of December 31, 2013, we had approximately 7,000 employees, with most working in one of our 10
major sites in 9 states. On June 14, 2012, we announced that we entered into a seven-year agreement with
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