Voya 2014 Annual Report Download - page 243

available to the contract owner over the current account value. It assumes that all policyholders exercise their
benefit immediately, even if they have not yet attained the first exercise date shown in their contracts, and that
there are no future lapses. The NAR assumes utilization of benefits by all customers as of the date indicated. This
hypothetical immediate exercise of the benefit means that the customers give up any future increase in the
guaranteed benefit that might accrue if they were to delay exercise to a later date. The discount rates used in the
GMIB NAR methodology grade from current U.S. Treasury rates to long-term best estimates over fifteen years.
The GMWBL NAR methodology uses current swap rates. The discounting for GMWBL and GMIB NAR was
developed to be consistent with the methodology for the establishment of U.S. GAAP reserves.
For GMIB products, in general, the policyholder has the right to elect income payment, beginning (for
certain products) on the tenth anniversary year of product commencement, receive lump sum payment of the then
current cash value, or remain in the variable sub-account. For GMIB products, if the policyholder makes the
election to annuitize, the policyholder is entitled to receive the guaranteed benefit amount over an annuitization
period. A small percentage of the products were first eligible to elect annuitizations beginning in 2010 and 2011.
The remainder of the products become eligible to elect annuitization from 2012 to 2020, with the majority of first
eligibility dates in the period from 2014 to 2016. Many of these contracts contain significant incentives to delay
annuitization past first eligibility.
Because policyholders have various contractual rights and significant incentives to defer their annuitization
election, the period over which annuitization election will take place is subject to policyholder behavior and
therefore indeterminate. In addition, upon annuitization the contract holder surrenders access to the account value
and the account value is transferred to the Company’s general account where it is invested and the additional
investment proceeds are used towards payment of the guaranteed benefit payment.
Similarly, most of our GMWBL contracts are still in the first five to seven policy years, so our assumptions for
withdrawal from contracts with GMWBL benefits may change as experience emerges. In addition, like our GMIB
contracts, many of our GMWBL contracts contain significant incentives to delay withdrawal. We expect customer
decisions on annuitization and withdrawal will be influenced by customers’ financial plans and needs as well as by
interest rate and market conditions over time and by the availability and features of competing products. If emerging
experience deviates from our assumptions on either GMIB annuitization or GMWBL withdrawal, we could
experience gains or losses and a significant decrease or increase to reserve and capital requirements.
The account values and NAR, both gross and net of reinsurance (“retained NAR”), of contract owners by
type of minimum guaranteed benefit for retail variable annuity contracts are summarized below as of
December 31, 2014.
As of December 31, 2014
($ in millions, unless otherwise indicated)
Account
Value(1) Gross NAR Retained NAR
% Contracts NAR
In-the-Money(2)
% NAR
In-the-Money(3)
GMDB ........................... $41,077 $5,574 $5,048 46% 24%
Living Benefit
GMIB ........................ $14,027 $2,361 $2,361 75% 19%
GMWBL ..................... 15,804 1,324 1,324 47% 16%
GMAB/GMWB ................ 777 17 17 12% 19%
Living Benefit Total ................. $30,608 $3,702 $3,702 61%(4) 18%(5)
(1) Account value excludes $2.1 billion of Payout, Policy Loan and life insurance business which is included in
consolidated account values.
(2) Percentage of contracts that have a NAR greater than zero.
(3) For contracts with a NAR greater than zero, % NAR In-the-Money is defined as NAR/(NAR + Account
Value).
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