Voya 2014 Annual Report Download - page 278

Voya Financial, Inc.
Notes to the Consolidated Financial Statements
(Dollar amounts in millions, unless otherwise stated)
Company’s reinsurers with the largest reinsurance recoverable balances are A-rated or better, including Lincoln
National Corporation (“Lincoln”), Hannover Life Reassurance Company of America (“Hannover US”) and
Hannover Re (Ireland) Limited (“HLRI”) (collectively, “Hannover Re”) and various subsidiaries of Reinsurance
Group of America Incorporated (collectively, “RGA”).
Only those reinsurance recoverable balances deemed probable of recovery are recognized as assets on the
Company’s Consolidated Balance Sheets and are stated net of allowances for uncollectible reinsurance. Amounts
currently recoverable and payable under reinsurance agreements are included in Reinsurance recoverable and
Other liabilities, respectively. Such assets and liabilities relating to reinsurance agreements with the same
reinsurer are recorded net on the Consolidated Balance Sheets if a right of offset exists within the reinsurance
agreement. Premiums, Fee income and Policyholder benefits are reported net of reinsurance ceded. Amounts
received from reinsurers for policy administration are reported in Other revenue.
The Company has entered into coinsurance funds withheld reinsurance arrangements that contain embedded
derivatives whose carrying value is estimated based on the change in the fair value of the assets supporting the
funds withheld payable under the agreements.
Employee Benefits Plans
The Company sponsors and/or administers various plans that provide defined benefit pension and other
postretirement benefit plans covering eligible employees, sales representatives and other individuals. The plans
are generally funded through payments, determined by periodic actuarial calculations, to trustee-administered
funds.
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive
on retirement, usually dependent on one or more factors such as age, years of service and compensation. The
liability recognized in respect of defined benefit pension plans is the present value of the projected pension
benefit obligation (“PBO”) at the balance sheet date, less the fair value of plan assets, together with adjustments
for unrecognized past service costs. This liability is included in Pension and other postretirement provisions on
the Consolidated Balance Sheets. The PBO is defined as the actuarially calculated present value of vested and
non-vested pension benefits accrued based on future salary levels. The Company recognizes the funded status of
the PBO for pension plans and the accumulated postretirement benefit obligation (“APBO”) for other
postretirement plans on the Consolidated Balance Sheets.
Net periodic benefit cost is determined using management estimates and actuarial assumptions to derive service
cost, interest cost and expected return on plan assets for a particular year. The obligations and expenses
associated with these plans require use of assumptions, such as discount rate, expected rate of return on plan
assets, rate of future compensation increases and healthcare cost trend rates, as well as assumptions regarding
participant demographics such as age of retirements, withdrawal rates and mortality. Management determines
these assumptions based on a variety of factors such as historical performance of the plan and its assets, currently
available market and industry data and expected benefit payout streams. Actual results could vary significantly
from assumptions based on changes, such as economic and market conditions, demographics of participants in
the plans and amendments to benefits provided under the plans. These differences may have a significant effect
on the Company’s Consolidated Financial Statements and liquidity. Differences between the expected return and
the actual return on plan assets and actuarial gains (losses) are immediately recognized in Operating expenses in
the Consolidated Statements of Operations.
For postretirement healthcare and other benefits to retirees, the entitlement to these benefits is usually conditional
on the employee remaining in service up to retirement age and the completion of a minimum service period. The
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