Voya 2014 Annual Report Download - page 204

Critical Accounting Judgments and Estimates
General
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and
expenses during the reporting period. Critical estimates and assumptions are evaluated on an on-going basis
based on historical developments, market conditions, industry trends and other information that is reasonable
under the circumstances. There can be no assurance that actual results will conform to estimates and assumptions
and that reported results of operations will not be materially affected by the need to make future accounting
adjustments to reflect changes in these estimates and assumptions from time to time.
We have identified the following accounting judgments and estimates as critical in that they involve a
higher degree of judgment and are subject to a significant degree of variability:
Reserves for future policy benefits, DAC, VOBA and other intangibles (collectively, “DAC/VOBA and
other intangibles”), valuation of investments and derivatives, impairments, income taxes, contingencies and
employee benefit plans.
In developing these accounting estimates, we make subjective and complex judgments that are inherently
uncertain and subject to material changes as facts and circumstances develop. Although variability is inherent in
these estimates, we believe the amounts provided are appropriate based on the facts available upon preparation of
the Consolidated Financial Statements.
The above critical accounting estimates are described in the Business, Basis of Presentation and Significant
Accounting Policies Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual Report on
Form 10-K.
Reserves for Future Policy Benefits
The determination of future policy benefit reserves is dependent on actuarial assumptions. The principal
assumptions used to establish liabilities for future policy benefits are based on our experience and periodically
reviewed against industry standards. These assumptions include mortality, morbidity, policy lapse, contract
renewal, payment of subsequent premiums or deposits by the contract owner, retirement, investment returns,
inflation, benefit utilization and expenses. The assumptions used require considerable judgments. Changes in, or
deviations from, the assumptions used can significantly affect our reserve levels and related results of operations.
• Mortality is the incidence of death among policyholders triggering the payment of underlying
insurance coverage by the insurer. In addition, mortality also refers to the ceasing of payments on life-
contingent annuities due to the death of the annuitant. We utilize a combination of actual and industry
experience when setting our mortality assumptions.
• A lapse rate is the percentage of in-force policies surrendered by the policyholder or canceled by us due
to non-payment of premiums. For certain of our variable products, the lapse rate assumption varies
according to the current account value relative to guarantees associated with the product and applicable
surrender charges. In general, policies with guarantees that are considered “in the money”, or where the
benefit is in excess of the account value, are assumed to be less likely to lapse or surrender.
Conversely, “out of the money” guarantees may be assumed to be more likely to lapse or surrender as
the policyholder has less incentive to retain the policy.
See the Reserves for Future Policy Benefits and Contract Owner Account Balances Note and the
Guaranteed Benefit Features Note in our Consolidated Financial Statements in Part II, Item 8. of this Annual
Report on Form 10-K for further information on our reserves for future policy benefits, contract owner account
balances and product guarantees.
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