Voya 2014 Annual Report Download - page 153

and other asset-based expenses in our Retirement segment, higher commission expenses in our CBVA segment
associated with higher AUM, an increase in variable expenses in our Investment Management segment and
higher variable compensation costs in the current period compared to the prior period.
Net amortization of DAC/VOBA decreased $279.5 million from $722.3 million to $442.8 million. The
decrease is primarily driven by favorable unlocking in the current period compared to the prior period as a result
of prospective assumption changes in our Retirement and Annuities segments, as well as lower amortization
associated with a decline in net realized investment gains in the current period compared to the prior period.
Interest expense increased $31.1 million from $153.7 million to $184.8 million primarily due to additional
interest and debt issuance costs associated with changes in debt structure. See a description of the changes in debt
structure under “Liquidity and Capital Resources—Debt Securities.”
Income before income taxes increased $152.1 million from $606.0 million to $758.1 million driven
primarily by the immediate recognition of actuarial gains on pensions in the current period compared to losses in
the prior period, Net gain from Lehman Recovery/LIHTC in the current period and the loss on the sale of certain
alternative investments in the prior period, lower amortization of DAC/VOBA, and higher Fee income. This was
partially offset by higher losses related to the incurred guaranteed benefits and guarantee hedge program in our
CBVA segment and changes in the fair value of guaranteed benefit derivatives due to nonperformance risk, a
decline in net investment gains and lower investment income on the CMO-B and alternative investment
portfolios as a result of portfolio restructuring in the prior period.
Income tax benefit increased $27.3 million from $5.2 million to $32.5 million. The low effective tax rate is
because the tax expense (benefit) on Income (loss) before income taxes is mostly offset by increases/decreases in
valuation allowances. Tax capital gains (losses) are generally not offset by changes in valuation allowances,
which resulted in an $88.9 million increase in the income tax benefit. This increase in the tax benefit for capital
gains (losses) was partially offset by a decrease in the benefit and valuation allowance from tax credits of $62.9
million.
Operating Earnings before Income Taxes
Operating earnings before income taxes increased $350.3 million from $918.3 million to $1,268.6 million
as a result of several factors. Higher Fee income in our Retirement and Investment Management segments and
improved margins in our Annuities segment related to MYGA run-off contributed to the increase. In addition,
higher Net investment income was due to the Net gain from Lehman Recovery/LIHTC in the current period and
the loss on the sale of certain alternative investments in the prior period was offset by lower investment income
in our Retirement Solutions and Insurance Solutions businesses as a result of portfolio restructuring in the prior
period. DAC/VOBA and other intangibles unlocking improved to $133.2 million in the current period compared
to $(77.0) million in the prior period, largely as a result of favorable prospective assumption changes of $84.8
million in the current period. Offsetting these increases was higher Interest expense in our Corporate segment.
Adjustments from Income (Loss) before Income Taxes to Operating Earnings before Income Taxes
CBVA is discussed in Results of Operations-Segment by Segment-CBVA in Part II, Item 7. of this Annual
Report on Form 10-K.
Net investment gains decreased $243.4 million from $455.5 million to $212.1 million primarily driven by
changes in fair value adjustments on our CMO-B portfolio and lower gains on the sale of securities, as well as
derivative mark to market adjustments. Higher gains on derivative mark to market adjustments were primarily
due to rising interest rates, resulting in favorable changes to the fair value of derivatives that are hedging our
exposure to various market risks within the investment portfolio.
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