Voya 2014 Annual Report Download - page 168

Fee income decreased $2.0 million from $1,115.7 million to $1,113.7 million primarily due to lower net
contractual charges resulting from a reduction of secondary guarantee product sales. This was partially offset by
favorable unlocking of intangibles resulting from prospective assumption changes and an increase in cost of
insurance fees on the aging in-force block.
Operating benefits and expenses
Interest credited and other benefits to contract owners/policyholders decreased $32.9 million from $2,034.4
million to $2,001.5 million primarily due to lower benefit costs resulting from lower guarantee and term product
sales, improved UL mortality and favorable first quarter 2013 incurred but not recorded (“IBNR”) development.
In addition, favorable intangible unlocking, resulting from prospective assumption changes, contributed to the
decrease in the current period. These decreases were partially offset by higher gross claims on the term block.
Operating expenses decreased $32.2 million from $390.5 million to $358.3 million primarily due to lower
sales related expenses partially offset by increased credit facility fees supporting reinsurance transactions.
Net Amortization of DAC/VOBA increased $13.9 million from $162.3 million to $176.2 million primarily
due to changes in unlocking of DAC/VOBA, excluding other intangibles unlocking. The favorable DAC
unlocking in the current period was $22.5 million lower than the prior period favorable unlocking largely due to
the impact of the prospective assumption changes. This unlocking impact was more than offset by unlocking
recorded in Fee income and Interest credited and other benefits to contract owners/policyholders as discussed
above. In addition, there was increased amortization related to the Lehman Recovery. Partially offsetting these
items was lower amortization related to lower gross profits on UL products and lower term sales.
Interest Expense decreased $9.4 million from $10.5 million to $1.1 million primarily due to the repayment
of certain surplus notes in 2012.
Operating earnings before income taxes
Operating earnings before income taxes increased $58.6 million from $196.2 million to $254.8 million as a
result of several factors including lower benefit costs resulting from lower guarantee and term product sales,
favorable IBNR development and lower Operating expenses. Partially offsetting these favorable variances was
lower investment income due to lower CMO-B income and lower investment yields, lower net contractual
charges resulting from a reduction of secondary guarantee product sales and higher gross claims on the term
block. In addition, the year-over-year results were impacted by the Net gain from Lehman Recovery/LIHTC in
the current period, loss on sale of certain alternative investments in the prior period and the impact of prospective
assumption changes.
145