Voya 2013 Annual Report Download - page 73

that consider interest rates, and an extended period of low interest rates may increase the statutory capital we are
required to hold and the amount of assets we must maintain to support statutory reserves.
Despite an increase in long-term interest rates in 2013, interest rates remain low by historical standards. We
believe a continuation of the current low interest rate environment would also negatively affect our financial
performance. In addition, we expect that a continuation of the current low interest rate environment would reduce
our total company estimated combined RBC ratio (which includes the effect from the Closed Blocks) in an
amount that could be material.
Conversely, in periods of rapidly increasing interest rates, policy loans, withdrawals from, and/or surrenders
of, life insurance and annuity contracts and certain GICs may increase as policyholders choose to seek higher
investment returns. Obtaining cash to satisfy these obligations may require us to liquidate fixed income
investments at a time when market prices for those assets are depressed because of increases in interest rates.
This may result in realized investment losses. Regardless of whether we realize an investment loss, such cash
payments would result in a decrease in total invested assets and may decrease our net income and capitalization
levels. Premature withdrawals may also cause us to accelerate amortization of DAC, which would also reduce
our net income. An increase in market interest rates could also have a material adverse effect on the value of our
investment portfolio by, for example, decreasing the estimated fair values of the fixed income securities within
our investment portfolio. An increase in market interest rates could also create a significant collateral posting
requirement associated with our interest rate hedge programs and Federal Home Loan Bank funding agreements,
which could materially and adversely affect liquidity. In addition, an increase in market interest rates could
require us to pay higher interest rates on debt securities we may issue in the financial markets from time to time
to finance our operations, which would increase our interest expenses and reduce our results of operations. An
increase in interest rates could result in decreased fee income associated with a decline in the value of variable
annuity account balances invested in fixed income funds, which also might affect the value of the underlying
guarantees within these variable annuities. Lastly, certain statutory reserve requirements are based on formulas or
models that consider forward interest rates and an increase in forward interest rates may increase the statutory
reserves we are required to hold thereby reducing statutory capital.
A downgrade or a potential downgrade in our financial strength or credit ratings could result in a loss of
business and adversely affect our results of operations and financial condition.
Ratings are important to our business. Credit ratings represent the opinions of rating agencies regarding an
entity’s ability to repay its indebtedness. Our credit ratings are important to our ability to raise capital through the
issuance of debt and to the cost of such financing. Financial strength ratings, which are sometimes referred to as
“claims-paying” ratings, represent the opinions of rating agencies regarding the financial ability of an insurance
company to meet its obligations under an insurance policy. Financial strength ratings are important factors
affecting public confidence in insurers, including our insurance company subsidiaries. The financial strength
ratings of our insurance subsidiaries are important to our ability to sell our products and services to our
customers. Ratings are not recommendations to buy our securities. Each of the rating agencies reviews its ratings
periodically, and our current ratings may not be maintained in the future.
Our ratings could be downgraded at any time and without notice by any rating agency. For a description of
material rating actions that have occurred from the beginning of 2013 through the date of this Annual Report on
Form 10-K, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity and Capital Resources—Ratings”.
A downgrade of the financial strength rating of one of our Principal Insurance Subsidiaries could affect our
competitive position by making it more difficult for us to market our products as potential customers may select
companies with higher financial strength ratings and by leading to increased withdrawals by current customers
seeking companies with higher financial strength ratings. This could lead to a decrease in AUM and result in
lower fee income. Furthermore, sales of assets to meet customer withdrawal demands could also result in losses,
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