Voya 2014 Annual Report Download - page 210

During the third quarter of 2014, 2013 and 2012, we completed our annual review of assumptions, including
projection model inputs. As a result of these reviews, in the third quarter of 2014, we made a number of changes,
which resulted in net unfavorable unlocking of DAC/VOBA and other intangibles in our Ongoing Business
segments of $(20.0) million, of which $(19.3) million was included in Operating earnings before income taxes. In
the third quarter of 2013, changes in assumptions resulted in net favorable unlocking of DAC/VOBA and other
intangibles in our Ongoing Business segments of $94.4 million, of which $84.8 million was included in
Operating earnings before income taxes. In the third quarter of 2012, changes in assumptions resulted in net
unfavorable unlocking of DAC/VOBA and other intangibles in our Ongoing Business segments of $32.0 million,
all of which was included in Operating earnings before income taxes. In addition to the amounts above, changes
in the projection model inputs resulted in gains of $25.1 million and $15.0 million in the third quarter of 2014
and 2013, respectively, related to changes in the technique used to estimate nonperformance risk in our Ongoing
Business segments. These gains are excluded from Operating earnings before income taxes.
Sensitivity
We perform sensitivity analyses to assess the impact that certain assumptions have on DAC/VOBA and
other intangibles. The following table presents the estimated instantaneous net impact to Income (loss) before
income taxes of various assumption changes on our DAC/VOBA and other intangible balances and the impact on
related reserves for future policy benefits and reinsurance. The effects presented are not representative of the
aggregate impacts that could result if a combination of such changes to equity markets, interest rates and other
assumptions occurred.
($ in millions)
As of December 31,
2014
Decrease in long-term rate of return assumption by
100 basis points ............................ $(233.8)
A change to the long-term interest rate assumption of
-50 basis points ............................ (75.2)
A change to the long-term interest rate assumption of
+50 basis points ........................... 57.8
An assumed increase in future mortality by 1% ..... (22.9)
A one-time, 10% decrease in equity market values . . (359.4)
Assumptions regarding shifts in market factors may be overly simplistic and not indicative of actual market
behavior in stress scenarios.
Lower assumed equity rates of return, lower assumed interest rates, increased assumed future mortality and
decreases in equity market values tend to decrease the balances of DAC/VOBA and other intangibles and to
increase future policy benefits reserves, thus decreasing Income before income taxes.
Higher assumed interest rates tend to increase the balances of DAC/VOBA and other intangibles and
decrease Future policy benefits reserves, thus increasing Income before income taxes.
Valuation of Investments and Derivatives
Our investment portfolio consists of public and private fixed maturity securities, commercial mortgage and
other loans, equity securities, short-term investments, other invested assets and derivative financial instruments.
Fixed maturity and equity securities are primarily classified as available-for-sale and are carried at fair value. We
enter into interest rate, equity market, credit default and currency contracts, including swaps, futures, forwards,
caps, floors and options, to reduce and manage various risks associated with changes in value, yield, price, cash
flow or exchange rates of assets or liabilities held or intended to be held, or to assume or reduce credit exposure
associated with a referenced asset, index or pool. We also utilize options and futures on equity indices to reduce
and manage risks associated with our annuity products.
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