Voya 2014 Annual Report Download - page 152

benefits to contract owners/policyholders. The increased losses, discussed in further detail below, were partially
offset by changes in fair value of guaranteed benefit derivatives, excluding nonperformance risk in our CBVA
segment.
Changes in fair value of derivatives from the CBVA segment liability hedge and CHO program resulted in
an increase in losses of $1,683.9 million, from a loss of $1,801.5 million to a loss of $3,485.4 million, primarily
as a result of rising interest rates and higher equity market growth. The hedge program in the CBVA segment
focuses on protecting regulatory and rating agency capital from equity market movements rather than mitigating
earnings volatility. Lower net realized investment gains of $449.0 million, as a result of net realized gains of
$163.9 million in the current period compared to gains of $612.9 million in the prior period, were primarily
driven by changes in fair value adjustments on our CMO-B portfolio and lower gains on the sale of securities,
partially offset by derivative mark to market adjustments as a result of rising interest rates. Changes in the fair
value of guaranteed benefit derivatives due to nonperformance risk in our CBVA segment resulted in an increase
in Net realized capital losses of $50.9 million, from a loss of $443.6 million to a loss of $494.5 million. Lower
gains on guaranteed benefit derivative hedging, excluding nonperformance risk in our Retirement Solutions
business were primarily driven by changes in the fair value of derivatives associated with the Stable Value hedge
program put in place during the prior period, in addition to reductions in expected future guaranteed interest rates
on certain Stabilizer contracts in the prior period. These were partially offset by higher gains resulting from rising
interest rates and equity market movements and changes in the fair value of guaranteed benefit derivatives related
to nonperformance risk.
Higher losses in the current period are partially offset by gains from changes in fair value of guaranteed
benefit derivatives in our CBVA segment. Gains on guaranteed benefit derivatives, excluding nonperformance
risk in our CBVA Segment increased $923.6 million, from $833.9 million to $1,757.5 million, driven by higher
equity market growth, rising interest rates and favorable changes in volatility in the current period compared to
the prior period.
Other revenue increased $54.5 million from $378.5 million to $433.0 million primarily due to higher
income earned by our Retirement segment’s broker dealers for sales on non-proprietary products, which is
partially offset by the corresponding higher broker-dealer expenses within Operating expenses. Changes in
market value adjustments related to retirement plan sponsors upon surrender and an increase in production and
performance related fees earned by our Investment Management segment also contributed to the increase.
Interest credited and other benefits to contract owners/policyholders decreased $363.8 million from
$4,861.6 million to $4,497.8 million primarily due to a decrease in reserves in our CBVA segment and a decline
in the funds withheld reserve with business reinsured resulting from market value changes in the related assets,
the latter of which is entirely offset by a corresponding amount recorded in Net realized capital gains (losses). A
decline in guaranteed benefit reserves in our CBVA segment driven by more favorable fund returns in the current
period compared to the prior period is partially offset by an increase in reserves associated with the annuitization
of life contingent contracts in our CBVA segment, which corresponds to the increase in Premiums described
above. In addition, decreases in interest credited in our Annuities segment due to declining reserves for MYGAs
and lower crediting rates, favorable reserve changes and intangible unlocking in our Individual Life segment, and
declining contract owner account balances for the Closed Block Institutional Spread Products segment
contributed to the decrease.
Operating expenses decreased $468.3 million from $3,155.0 million to $2,686.7 million primarily due to
lower pension expenses in the current period related to the immediate recognition of actuarial gains, compared to
losses in the prior period, largely due to changes in equity markets and interest rates as well as a curtailment in
the third quarter of 2012. Additionally, lower LOC costs in the current period for our CBVA segment and for our
Individual Life segment, lower sales related expenses in our Individual Life segment in the current period, and
lower costs in the current period related to the divestment of the Company by ING Group each contributed to a
decrease in Operating expenses. These decreases were offset by higher expenses in our Closed Block Other
segment as a result of a reimbursement of expenses by ING Group during the prior period, higher broker-dealer
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