Voya 2014 Annual Report Download - page 149

changes, was primarily due to lower equity market appreciation in the current period, partially offset by interest
rate movements as described above. The focus in managing our CBVA segment continues to be on protecting
regulatory and rating agency capital, and our hedging program is primarily designed to mitigate the impacts of
market scenarios on capital resources, rather than mitigating earnings volatility.
Interest credited and other benefits to contract owners/policyholders increased $1,440.1 million from
$4,497.8 million to $5,937.9 million primarily driven by unfavorable guaranteed benefit reserve changes in our
CBVA segment due to lower fund returns in the current period compared to the prior period as well as the net
impacts of policyholder behavior and other assumption changes in the current period compared to the prior
period. In addition, we experienced unfavorable mortality changes, net of reinsurance on the universal life blocks
due to an aging block, partially offset by favorable changes in reserve from lower term sales in our Individual
Life segment. An increase in reserves in our Employee Benefits segment was primarily due to higher stop loss
volumes, resulting in higher benefits incurred, along with slightly higher voluntary benefits. The increases were
partially offset by declining contract owner account balances for our Closed Block Institutional Spread Products
segment, the Gain on reinsurance recapture in our Individual Life segment and improved loss ratios in our
Employee Benefits Segment. Higher interest credited due to an increase in FIA account balances was more than
offset by a decline in account balances for Annual Reset/MYGAs due to continued runoff and lower crediting
rates in our Retirement and Annuities segments.
Additionally, certain other variances impacting the increase in Interest credited and other benefits to
contract owners/policyholders are offset in other line items, as described below. Unfavorable intangibles
unlocking from prospective assumption changes in the current period compared to favorable unlocking in the
prior period contributed to the increase, but is offset by unlocking from prospective assumption changes that is
explained in Net amortization of DAC/VOBA below. An increase in reserves for immediate annuities with life
contingencies in our Annuities segment and an increase in reserves associated with the annuitization of life
contingent contracts in our CBVA segment are offset by the increase in Premiums described above. An increase
in the funds withheld reserve and changes in the reinsurance deposit asset associated with business reinsured
resulting from market value changes in the related assets are partially offset by a corresponding amount recorded
in Net realized capital losses.
Operating expenses increased $875.0 million from $2,686.7 million to $3,561.7 million as a result of several
factors, primarily $777.9 million higher pension expenses related to the immediate recognition of $372.7 million
of actuarial losses in the current period compared to a gain of $405.2 million in the prior period, resulting from
changes in assumptions primarily due to discount rates, mortality and actual versus expected results.
Additionally, investments in the business, higher expenses from operating as a public company, increased costs
in the current period related to rebranding and restructuring, higher commissions, and higher share-based
compensation contributed to the increase as well as higher credit facility fees supporting reinsurance transactions,
including a termination fee related to the Term Life Coinsurance Agreement (defined below in the Individual
Life segment’s results of operations). These increases were partially offset by lower recordkeeping expenses and
lower LOC expenses in our Closed Block Other segment due to lower collateral requirements. In addition, we
incurred certain expenses in the prior period that did not reoccur, including costs related to the divestment of the
Company by ING Group and LOC expenses associated with the contingent capital letter of credit facility
supporting our CBVA segment that was terminated in the prior period.
Net amortization of DAC/VOBA decreased $63.5 million from $442.8 million to $379.3 million primarily
due to favorable unlocking in the current period compared to the prior period as a result of prospective
assumption changes in our Individual Life and CBVA segments and lower amortization on guaranteed benefit
hedging gains (losses). Additionally, lower amortization on Individual Life segment’s universal life blocks was
driven by lower gross profits. An unfavorable variance driven by prospective assumptions changes in our
Retirement, Annuities and Employee Benefits segments, higher amortization related to realized investment gains,
and higher amortization in our Employee Benefits segment resulting from terminated cases partially offset these
items.
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