Voya 2014 Annual Report Download - page 126

other dividends and distributions made within the preceding twelve months, exceeds the lesser of (1) 10% of the
insurer’s policyholder surplus as of the preceding December 31 or (2) the insurer’s net gain from operations for
the twelve-month period ended the preceding December 31, in each case determined in accordance with statutory
accounting principles. New York has similar restrictions, except that New York’s statutory definition of
extraordinary dividend or distribution is an aggregate amount in any calendar year that exceeds the lesser of
(1) 10% of policyholder’s surplus as of the preceding December 31 or (2) the insurer’s net gain from operations
for the twelve-month period ended the preceding December 31, not including realized capital gains. In addition,
under the insurance laws applicable to our insurance subsidiaries domiciled in Connecticut, Iowa and Minnesota,
no dividend or other distribution exceeding an amount equal to an insurance company’s earned surplus may be
paid without the domiciliary insurance regulator’s prior approval (the “positive earned surplus requirement”).
From time to time, the NAIC and various state insurance regulators have considered, and may in the future
consider, proposals to further limit dividend payments that an insurance company may make without regulatory
approval. No assurance is given that more stringent restrictions will not be adopted from time to time by
jurisdictions in which our insurance subsidiaries are domiciled, and such restrictions could have the effect, under
certain circumstances, of significantly reducing dividends or other amounts payable to Voya Financial, Inc. or
Voya Holdings by our insurance subsidiaries without prior approval by regulatory authorities. In addition, in the
future, we may become subject to debt instruments or other agreements that limit the ability of our insurance
subsidiaries to pay dividends or make other distributions. The ability of our insurance subsidiaries to pay
dividends or make other distributions is also limited by our need to maintain the financial strength ratings
assigned to such subsidiaries by the rating agencies. These ratings depend to a large extent on the capitalization
levels of our insurance subsidiaries.
Prior to our initial public offering, our Principal Insurance Subsidiaries domiciled in Colorado, Iowa and
Minnesota each had negative earned surplus accounts, and therefore had no ordinary dividend capacity. In order
to obtain dividends or distributions from these insurance companies, we historically obtained approval from the
insurance companies’ respective domiciliary state regulators, which could be granted or withheld in the
regulators’ discretion, for extraordinary dividends or distributions. On May 8, 2013, following the completion of
our IPO and payment of $1,434.0 million of extraordinary distributions, these insurance companies each reset, on
a one-time basis, their respective negative unassigned funds account as of December 31, 2012 (as reported in
their respective 2012 statutory annual statements) to zero (with an offsetting reduction in gross paid-in capital
and contributed surplus). These resets were made pursuant to permitted practices in accordance with statutory
accounting practices granted by their respective domiciliary insurance regulators. A detailed description of the
permitted practices is included in “Item 1. Business—Regulation—Insurance Regulation—Insurance Holding
Company Regulation”.
This reset allows our Principal Insurance Subsidiaries domiciled in Colorado, Iowa and Minnesota to build
up ordinary dividend capacity to the extent their operating results subsequent to December 31, 2012 generate
positive earned surplus. Based on legislative amendments adopted by the Colorado legislature in 2014, our
insurance subsidiary domiciled in Colorado is no longer subject to the positive earned surplus requirement.
Under applicable domiciliary insurance regulations, our Principal Insurance Subsidiaries must deduct any
distributions or dividends paid in the preceding twelve months in calculating dividend capacity. Our Principal
Insurance Subsidiaries domiciled in Colorado, Iowa and Minnesota did succeed in building up sufficient positive
earned surplus to pay ordinary dividends in 2014. VRIAC had ordinary dividend capacity in December 2013 and
also in 2014.
Our Principal Insurance Subsidiaries domiciled in Connecticut, Iowa and Minnesota, however, may not
succeed in building up sufficient positive earned surplus going forward. If such Principal Insurance Subsidiaries
do not succeed in building up sufficient positive earned surplus to have ordinary dividend capacity, or if our
Principal Insurance Subsidiaries generate capital in excess of our combined estimated RBC ratio of 425% and
our individual insurance company ordinary dividend limits, then we may seek extraordinary dividends or
distributions (for which prior approval of their respective domiciliary insurance regulators would be required,
and can be granted or withheld in the discretion of the regulators). There can be no assurance that our Principal
Insurance Subsidiaries will receive approval for extraordinary distribution payments in the future.
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