Voya 2014 Annual Report Download - page 266

Voya Financial, Inc.
Notes to the Consolidated Financial Statements
(Dollar amounts in millions, unless otherwise stated)
When assessing the Company’s intent to sell a security or if it is more likely than not it will be required to sell a
security before recovery of its amortized cost basis, management evaluates facts and circumstances such as, but
not limited to, decisions to rebalance the investment portfolio and sales of investments to meet cash flow or
capital needs.
When the Company has determined it has the intent to sell or if it is more likely than not that the Company will
be required to sell a security before recovery of its amortized cost basis and the fair value has declined below
amortized cost (“intent impairment”), the individual security is written down from amortized cost to fair value,
and a corresponding charge is recorded in Net realized capital gains (losses) in the Consolidated Statements of
Operations as an other-than-temporary impairment (“OTTI”). If the Company does not intend to sell the security
and it is not more likely than not that the Company will be required to sell the security before recovery of its
amortized cost basis, but the Company has determined that there has been an other-than-temporary decline in fair
value below the amortized cost basis, the OTTI is bifurcated into the amount representing the present value of the
decrease in cash flows expected to be collected (“credit impairment”) and the amount related to other factors
(“noncredit impairment”). The credit impairment is recorded in Net realized capital gains (losses) in the
Consolidated Statements of Operations. The noncredit impairment is recorded in Other comprehensive income
(loss).
The Company uses the following methodology and significant inputs to determine the amount of the OTTI credit
loss:
• When determining collectability and the period over which the value is expected to recover for U.S.
and foreign corporate securities, foreign government securities and state and political subdivision
securities, the Company applies the same considerations utilized in its overall impairment evaluation
process, which incorporates information regarding the specific security, the industry and geographic
area in which the issuer operates and overall macroeconomic conditions. Projected future cash flows
are estimated using assumptions derived from the Company’s best estimates of likely scenario-based
outcomes, after giving consideration to a variety of variables that includes, but is not limited to: general
payment terms of the security; the likelihood that the issuer can service the scheduled interest and
principal payments; the quality and amount of any credit enhancements; the security’s position within
the capital structure of the issuer; possible corporate restructurings or asset sales by the issuer; and
changes to the rating of the security or the issuer by rating agencies.
• Additional considerations are made when assessing the unique features that apply to certain structured
securities, such as subprime, Alt-A, non-agency RMBS, CMBS and ABS. These additional factors for
structured securities include, but are not limited to: the quality of underlying collateral; expected
prepayment speeds; loan-to-value ratios; debt service coverage ratios; current and forecasted loss
severity; consideration of the payment of the underlying assets backing a particular security; and the
payment priority within the tranche structure of the security.
• When determining the amount of the credit loss for U.S. and foreign corporate securities, foreign
government securities and state and political subdivision securities, the Company considers the estimated
fair value as the recovery value when available information does not indicate that another value is more
appropriate. When information is identified that indicates a recovery value other than estimated fair value,
the Company considers in the determination of recovery value the same considerations utilized in its
overall impairment evaluation process, which incorporates available information and the Company’s best
estimate of scenarios-based outcomes regarding the specific security and issuer; possible corporate
restructurings or asset sales by the issuer; the quality and amount of any credit enhancements; the
security’s position within the capital structure of the issuer; fundamentals of the industry and geographic
area in which the security issuer operates; and the overall macroeconomic conditions.
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