Voya 2013 Annual Report Download - page 74

depending on market conditions. In addition, a downgrade in either our financial strength or credit ratings could
potentially, among other things, increase our borrowing costs and make it more difficult to access financing;
adversely affect access to the commercial paper market or the availability of LOCs and other financial
guarantees; result in additional collateral requirements, or other required payments or termination rights under
derivative contracts or other agreements; and/or impair, or cause the termination of, our relationships with
creditors, broker-dealers, distributors, reinsurers or trading counterparties, which could potentially negatively
affect our profitability, liquidity and/or capital. In addition, we use assumptions of market participants in
estimating the fair value of our liabilities, including insurance liabilities that are classified as embedded
derivatives under U.S. GAAP. These assumptions include our nonperformance risk (i.e., the risk that the
obligations will not be fulfilled). Therefore, changes in our credit or financial strength ratings may affect the fair
value of our liabilities.
As rating agencies continue to evaluate the financial services industry, it is possible that rating agencies will
heighten the level of scrutiny that they apply to financial institutions, increase the frequency and scope of their
credit reviews, request additional information from the companies that they rate and potentially adjust upward the
capital and other requirements employed in the rating agency models for maintenance of certain ratings levels. It
is possible that the outcome of any such review of us would have additional adverse ratings consequences, which
could have a material adverse effect on our results of operations, financial condition and liquidity. We may need
to take actions in response to changing standards or capital requirements set by any of the rating agencies which
could cause our business and operations to suffer. We cannot predict what additional actions rating agencies may
take, or what actions we may take in response to the actions of rating agencies.
We receive an explicit guarantee of our liabilities under one International Swaps and Derivatives
Association, Inc. (“ISDA”) master agreement from NN Group N.V. (“NN Group”), a wholly owned subsidiary of
ING Group. NN Group is successor to ING V which was previously our indirect parent. Previously, ING V also
provided a guarantee of our commercial paper program which has been terminated. Also, ING Bank, an affiliate,
provides certain LOC facilities to the Company. A downgrade of ING Bank could negatively impact our ability
to utilize these facilities as reinsurance collateral. Additionally, certain of our securities are guaranteed by our
majority shareholder, ING Group. A downgrade of the credit ratings of ING Group could result in downgrades of
these securities. For information on additional collateral requirements in case of a downgrade of our or NN
Group’s ratings, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity and Capital Resources—Potential Impact of a Ratings Downgrade”.
Because we operate in highly competitive markets, we may not be able to increase or maintain our market
share, which may have an adverse effect on our results of operations.
In each of our businesses we face intense competition, including from domestic and foreign insurance
companies, broker-dealers, financial advisors, asset managers and diversified financial institutions, both for the
ultimate customers for our products and for distribution through independent distribution channels. We compete
based on a number of factors including brand recognition, reputation, quality of service, quality of investment
advice, investment performance of our products, product features, scope of distribution, price, perceived financial
strength and credit ratings. A decline in our competitive position as to one or more of these factors could
adversely affect our profitability. In addition, we may in the future sacrifice our competitive or market position in
order to improve our profitability. Many of our competitors are large and well-established and some have greater
market share or breadth of distribution, offer a broader range of products, services or features, assume a greater
level of risk, or have higher claims-paying or credit ratings than we do.
In recent years, there has been substantial consolidation among companies in the financial services industry
resulting in increased competition from large, well-capitalized financial services firms. Future economic turmoil
may accelerate additional consolidation activity. Many of our competitors also have been able to increase their
distribution systems through mergers or contractual arrangements. Furthermore, larger competitors may have lower
operating costs and have an ability to absorb greater risk, while maintaining financial strength ratings, allowing
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