Voya 2014 Annual Report Download - page 269

Voya Financial, Inc.
Notes to the Consolidated Financial Statements
(Dollar amounts in millions, unless otherwise stated)
maintenance and repair expenditures are expensed as incurred. Depreciation on property and equipment is
provided on a straight-line basis over the estimated useful lives of the assets, with the exception of land and
artwork which are not depreciated, as follows:
Estimated Useful Lives
Buildings ............... 40years
Furniture and fixtures ..... 5years
Leasehold improvements . . 10 years, or the life of the lease, whichever is shorter
Equipment .............. 3years
As of December 31, 2014 and 2013, total cost basis was $408.1 and $451.5, respectively. As of December 31,
2014 and 2013, total accumulated depreciation was $282.3 and $313.0, respectively. For the years ended
December 31, 2014, 2013 and 2012, depreciation expense was $26.6, $33.7 and $36.9, respectively, and included
in Operating expenses in the Consolidated Statements of Operations.
Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles
DAC represents policy acquisition costs that have been capitalized and are subject to amortization and interest.
Capitalized costs are incremental, direct costs of contract acquisition and certain costs related directly to
successful acquisition activities. Such costs consist principally of commissions, underwriting, sales and contract
issuance and processing expenses directly related to the successful acquisition of new and renewal business.
Indirect or unsuccessful acquisition costs, maintenance, product development and overhead expenses are charged
to expense as incurred. VOBA represents the outstanding value of in-force business acquired and is subject to
amortization and interest. The value is based on the present value of estimated net cash flows embedded in the
insurance contracts at the time of the acquisition and increased for subsequent deferrable expenses on purchased
policies.
Collectively, the Company refers to DAC, VOBA, deferred sales inducements (“DSI”) and unearned revenue
(“URR”) as “DAC/VOBA and other intangibles.” (See respective DSI and URR sections below.)
Amortization Methodologies
The Company amortizes DAC and VOBA related to certain traditional life insurance contracts and certain
accident and health insurance contracts over the premium payment period in proportion to the present value of
expected gross premiums. Assumptions as to mortality, morbidity, persistency and interest rates, which include
provisions for adverse deviation, are consistent with the assumptions used to calculate reserves for future policy
benefits.
These assumptions are “locked-in” at issue and not revised unless the DAC or VOBA balance is deemed to be
unrecoverable from future expected profits. Recoverability testing is performed for current issue year products to
determine if gross premiums are sufficient to cover DAC or VOBA estimated benefits and expenses. In
subsequent periods, the recoverability of the DAC or VOBA balances are determined by assessing whether future
gross profits are sufficient to amortize DAC or VOBA, as well as provide for expected future benefits and
maintenance costs. If a premium deficiency is deemed to be present, charges will be applied against the DAC and
VOBA balances before an additional reserve is established. Absent such a premium deficiency, variability in
amortization after policy issuance or acquisition relates only to variability in premium volumes.
The Company amortizes DAC and VOBA related to universal life (“UL”) and variable universal life (“VUL”)
contracts and fixed and variable deferred annuity contracts over the estimated lives of the contracts in relation to
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