Voya 2013 Annual Report Download - page 70

insurance, annuity, retirement and investment products depends in part on the value of the general
accounts and separate accounts supporting them, which may fluctuate substantially depending on the
foregoing conditions.
• Volatility or downturns in the equity markets can cause a reduction in fee income we earn from
managing investment portfolios for third parties and fee income on certain annuity, retirement and
investment products. Because these products and services generate fees related primarily to the value
of AUM, a decline in the equity markets could reduce our revenues because of the reduction in the
value of the investments we manage.
• A change in market conditions, including prolonged periods of high or low inflation or interest rates,
could cause a change in consumer sentiment and adversely affect sales and could cause the actual
persistency of these products to vary from their anticipated persistency (the probability that a product
will remain in force from one period to the next) and adversely affect profitability. Changing economic
conditions or adverse public perception of financial institutions can influence customer behavior,
which can result in, among other things, an increase or decrease in claims, lapses, withdrawals,
deposits or surrenders in certain products, any of which could adversely affect profitability.
• An equity market decline, decreases in prevailing interest rates, or a prolonged period of low interest
rates could result in the value of guaranteed minimum benefits contained in certain of our life
insurance, annuity and retirement products being higher than current account values or higher than
anticipated in our pricing assumptions, requiring us to materially increase reserves for such products,
and may result in a decrease in customer lapses, thereby increasing the cost to us. In addition, such a
scenario could lead to increased amortization and/or unfavorable unlocking of DAC and value of
business acquired (“VOBA”).
• Reductions in employment levels of our existing employer customers may result in a reduction in
underlying employee participation levels, contributions, deposits and premium income for certain of
our retirement products. Participants within the retirement plans for which we provide certain services
may elect to effect withdrawals from these plans, or reduce or stop their payroll deferrals to these
plans, which would reduce assets under management or administration and our revenues.
• We have significant investment and derivative portfolios that include, among other investments, corporate
securities, ABS, equities and commercial mortgages. Economic conditions as well as adverse capital market
and credit conditions, interest rate changes, changes in mortgage prepayment behavior or declines in the
value of underlying collateral will impact the credit quality, liquidity and value of our investment and
derivative portfolios, potentially resulting in higher capital charges and unrealized or realized losses and
decreased investment income. The value of our investments and derivative portfolios may also be impacted
by reductions in price transparency, changes in the assumptions or methodology we use to estimate fair
value and changes in investor confidence or preferences, which could potentially result in higher realized or
unrealized losses and have a material adverse effect on our results of operations or financial condition.
Market volatility may also make it difficult to value certain of our securities if trading becomes less frequent.
• Market conditions determine the availability and cost of the reinsurance protection we purchase and
may result in additional expenses for reinsurance or an inability to obtain sufficient reinsurance on
acceptable terms, which could adversely affect the profitability of future business and the availability
of capital to support new sales.
• Hedging instruments we use to manage product and other risks might not perform as intended or
expected, which could result in higher realized losses and unanticipated cash needs to collateralize or
settle such transactions. Adverse market conditions can limit the availability and increase the costs of
hedging instruments, and such costs may not be recovered in the pricing of the underlying products
being hedged. In addition, hedging counterparties may fail to perform their obligations resulting in
unhedged exposures and losses on positions that are not collateralized.
• Regardless of market conditions, certain investments we hold, including privately placed fixed income
investments, investments in private equity funds and commercial mortgages, are relatively illiquid. If
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