Voya 2014 Annual Report Download - page 274

Voya Financial, Inc.
Notes to the Consolidated Financial Statements
(Dollar amounts in millions, unless otherwise stated)
The estimated fair value of the FIA contracts is based on the present value of the excess of interest payments to
the contract owners over the growth in the minimum guaranteed contract value. The excess interest payments are
determined as the excess of projected index driven benefits over the projected guaranteed benefits. The
projection horizon is over the anticipated life of the related contracts, which takes into account best estimate
actuarial assumptions, such as partial withdrawals, full surrenders, deaths, annuitizations and maturities.
Stabilizer and MCG: Products with guaranteed credited rates treat the guarantee as an embedded derivative for
Stabilizer products and a stand-alone derivative for managed custody guarantee products (“MCG”). These
derivatives are measured at estimated fair value and recorded in Contract owner account balances on the
Consolidated Balance Sheets. Changes in estimated fair value, along with attributed fees collected, are reported
in Other net realized capital gains (losses) in the Consolidated Statements of Operations.
The estimated fair value of the Stabilizer and MCG contracts is determined based on the present value of
projected future claims, minus the present value of future guaranteed premiums. At inception of the contract the
Company projects a guaranteed premium to be equal to the present value of the projected future claims. The
income associated with the contracts is projected using actuarial and capital market assumptions, including
benefits and related contract charges, over the anticipated life of the related contracts. The cash flow estimates
are projected under multiple capital market scenarios using observable risk-free rates and other best estimate
assumptions.
The liabilities for the GMAB, GMWB, GMWBL, FIA and Stabilizer embedded derivatives and the MCG stand-
alone derivative include a risk margin to capture uncertainties related to policyholder behavior assumptions. The
margin represents additional compensation a market participant would require to assume these risks.
The discount rate used to determine the fair value of the liabilities for the GMAB, GMWB, GMWBL, FIA and
Stabilizer embedded derivatives and the MCG stand-alone derivative includes an adjustment to reflect the risk
that these obligations will not be fulfilled (“nonperformance risk”).
Separate Accounts
Separate account assets and liabilities generally represent funds maintained to meet specific investment
objectives of contract owners or participants who bear the investment risk, subject, in limited cases, to minimum
guaranteed rates. Investment income and investment gains and losses generally accrue directly to such contract
owners. The assets of each account are legally segregated and are not subject to claims that arise out of any other
business of the Company.
Separate account assets supporting variable options under variable annuity contracts are invested, as designated
by the contract owner or participant under a contract, in shares of mutual funds that are managed by the
Company or in other selected mutual funds not managed by the Company.
The Company reports separately, as assets and liabilities, investments held in the separate accounts and liabilities
of separate accounts if:
• Such separate accounts are legally recognized;
• Assets supporting the contract liabilities are legally insulated from the Company’s general account
liabilities;
• Investments are directed by the contract owner or participant; and
• All investment performance, net of contract fees and assessments, is passed through to the contract
owner.
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