Voya 2014 Annual Report Download - page 148

In addition, we have certain products that contain guarantees that are embedded derivatives related to
guaranteed benefits, while other products contain such guarantees that are considered derivatives (collectively
“guaranteed benefit derivatives”).
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Net Income (Loss)
Net investment income decreased $74.2 million from $4,689.0 million to $4,614.8 million primarily due to
net investment income from Lehman Recovery/LIHTC in the prior period that did not recur at the same level.
Excluding the impact of Lehman Recovery/LIHTC, net investment income increased as a result of higher
prepayment income, growth in AUM related to fixed indexed annuities (“FIA”) in our Annuities segment and
higher investment income on fixed interest options in our CBVA segment as a result of a higher earned rate.
Partially offsetting these increases are the impact of the continued low interest rate environment on reinvestment
rates in our Ongoing Business, the continuing runoff of the Annual Reset and Multi-Year Guarantee Annuities
(“Annual Reset/MYGAs”) in our Annuities segment, and decrease in block size in our Closed Block Institutional
Spreads Products segment.
Fee income decreased $33.8 million from $3,666.3 million to $3,632.5 million primarily due to lower
recordkeeping fees in our Retirement segment, lower fee income in our CBVA segment as a result of lower
average separate account AUM, and an unfavorable change in intangibles unlocking, primarily as a result of
prospective assumption changes. These decreases were partially offset by an increase in fees associated with
higher AUM in our Retirement, Annuities, and Investment Management segments. Higher Fee income was also
driven by increased cost of insurance fees on the aging in-force universal life block. Higher fees within our
Investment Management segment, including fees associated with affiliated and CLO entities, are eliminated in
consolidation.
Premiums increased $670.1 million from $1,956.3 million to $2,626.4 million primarily due to higher
premiums in immediate annuities with life contingencies in our Annuities segment, as well as higher premiums
associated with the annuitization of life contingent contracts in our CBVA segment, both of which were partially
offset by a reserve increase in the corresponding Interest credited and other benefits to contract owners/
policyholders. Additionally, higher Premiums in our Employee Benefits segment were primarily due to increased
group stop loss and voluntary product sales.
Net realized capital losses decreased $1,640.4 million from $2,534.8 million to $894.4 million as a result of
several factors. Changes in fair value of guaranteed benefit derivatives due to nonperformance risk resulted in a
decrease in Net realized capital losses of $958.5 million, from a loss of $550.3 million to a gain of $408.2
million. Changes in fair value of derivatives and guaranteed benefit derivatives, excluding nonperformance risk
in our CBVA segment, described below, resulted in a $687.7 million decrease in Net realized capital losses. In
addition, changes in fair value adjustments in our CMO-B portfolio as a result of interest rate movements
reduced the Net realized capital loss. Gains from market value changes and sales of securities associated with
business reinsured are partially offset by the corresponding increase in Interest credited and other benefits to
contract owners/policyholders. The overall improvement was reduced by changes in fair value of guaranteed
benefit derivatives, excluding nonperformance risk in our Retirement Solutions business, and unfavorable
derivative mark to market adjustments, which were both largely a result of interest rate movements. Declining
interest rates in the current period compared to rising interest rates in the prior period resulted in unfavorable
changes in the fair value of derivatives that are hedging our exposure to various market risks within the
investment portfolio. Lower gains on the sale of securities also contributed to the offset.
As mentioned above, the result of changes in fair value of derivatives and guaranteed benefit derivatives,
excluding nonperformance risk, in our CBVA segment resulted in a $687.7 million decrease in Net realized
capital losses, including favorable changes in fair value of derivatives from our CBVA hedge and CHO program
of $3,303.1 million, partially offset by an unfavorable variance of $2,615.4 million related to changes in
guaranteed benefit derivatives. The favorable variance, which included the impact of prospective assumption
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