Voya 2014 Annual Report Download - page 225

The following table presents fixed maturities balances held in the CMO-B portfolio by NAIC rating as of
the dates indicated:
($ in millions) December 31, 2014 December 31, 2013
NAIC Quality Designation Amortized Cost Fair Value % Fair Value Amortized Cost Fair Value % Fair Value
1 ........... $2,961.9 $3,475.4 93.9% $2,609.1 $3,138.1 93.0%
2 ........... 1.2 1.2 — % 6.8 10.6 0.3%
3 ........... 2.6 8.8 0.2% 2.9 6.1 0.2%
4 ........... 7.5 13.5 0.4% 11.1 20.1 0.6%
5 ........... 33.0 45.9 1.2% 35.9 50.7 1.5%
6 ........... 93.0 158.7 4.3% 88.9 150.2 4.4%
$3,099.2 $3,703.5 100.0% $2,754.7 $3,375.8 100.0%
For CMO securities where we elected the FVO, amortized cost represents the market values. For details on
the NAIC designation methodology, please see Fixed Maturities Credit Quality-Ratings above.
The following table presents the notional amounts and fair values of interest rate derivatives used in our
CMO-B portfolio as of the dates indicated:
December 31, 2014 December 31, 2013
($ in millions)
Notional
Amount
Assets
Fair
Value
Liability
Fair
Value
Notional
Amount
Assets
Fair
Value
Liability
Fair
Value
Derivatives non-qualifying for hedge accounting:
Interest Rate Contracts ...................... $27,990.8 $463.1 $422.2 $26,358.1 $526.1 $568.2
The following table presents our CMO-B fixed maturity securities balances and tranche type as of the dates
indicated:
($ in millions) December 31, 2014 December 31, 2013
Tranche Type
Amortized
Cost Fair Value % Fair Value
Amortized
Cost Fair Value % Fair Value
Inverse Floater ................... $ 944.7 $1,273.3 34.4% $ 840.1 $1,172.7 34.8%
Interest Only (IO) ................ 289.9 317.2 8.6% 312.5 349.2 10.3%
Inverse IO ...................... 1,359.8 1,595.3 43.0% 1,149.5 1,398.2 41.4%
Principal Only (PO) ............... 465.4 475.6 12.8% 401.6 403.1 11.9%
Floater ......................... 34.8 36.1 1.0% 45.2 45.9 1.4%
Other .......................... 4.6 6.0 0.2% 5.8 6.7 0.2%
Total ........................... $3,099.2 $3,703.5 100.0% $2,754.7 $3,375.8 100.0%
Generally, a continued increase in valuations, as well as muted prepayments despite low interest rates, have
led to a very strong performance for our CMO-B portfolio in recent years. Based on fundamental prepayment
analysis, we have been able to increase the allocation to notional securities in a manner that was diversified by
borrower and mortgage characteristics without unduly increasing portfolio risk because the underlying drivers of
prepayment behavior across collateral type are varied.
For the year ended December 31, 2014, the valuations of our CMO-B portfolio generally increased due to
lower levels of prepayment speeds compared to market expectations. Yields within the CMO-B portfolio
continue to decline primarily as a result of paydowns or maturities of higher yielding historical CMO-B assets
being replaced at lower reinvestment rates.
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