Voya 2014 Annual Report Download - page 303

Voya Financial, Inc.
Notes to the Consolidated Financial Statements
(Dollar amounts in millions, unless otherwise stated)
Variance swaps: The Company uses variance swaps to manage equity volatility risk on the economic liabilities
associated with certain minimum guaranteed living benefits and to mitigate certain rebalancing costs resulting
from increased volatility. An increase in the equity volatility results in a higher valuations of such liabilities. In
an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on the
changes in equity volatility over a defined period. The Company utilizes equity variance swaps in non-qualifying
hedging relationships.
Managed custody guarantees: The Company issues certain credited rate guarantees on variable fixed income
portfolios that represent stand-alone derivatives. The market value is partially determined by, among other
things, levels of or changes in interest rates, prepayment rates and credit ratings/spreads.
Embedded derivatives: The Company also invests in certain fixed maturity instruments and has issued certain
annuity products that contain embedded derivatives whose market value is at least partially determined by,
among other things, levels of or changes in domestic and/or foreign interest rates (short-term or long-term),
exchange rates, prepayment rates, equity rates or credit ratings/spreads. In addition, the Company has entered
into coinsurance with funds withheld arrangements, which contain embedded derivatives.
The Company’s use of derivatives is limited mainly to economic hedging to reduce the Company’s exposure to
cash flow variability of assets and liabilities, interest rate risk, credit risk, exchange rate risk and market risk. It is
the Company’s policy not to offset amounts recognized for derivative instruments and amounts recognized for
the right to reclaim cash collateral or the obligation to return cash collateral arising from derivative instruments
executed with the same counterparty under a master netting arrangement, which provides the Company with the
legal right of offset.
The notional amounts and fair values of derivatives were as follows as of the dates indicated:
December 31, 2014 December 31, 2013
Notional
Amount
Asset
Fair
Value
Liability
Fair
Value
Notional
Amount
Asset
Fair
Value
Liability
Fair
Value
Derivatives: Qualifying for hedge
accounting(1)
Cash flow hedges:
Interest rate contracts ......... $ 736.0 $ 114.6 $ — $ 786.0 $ 81.0 $ 0.5
Foreign exchange contracts ..... 174.7 25.3 — 174.7 6.3 1.6
Fair value hedges:
Interest rate contracts ......... 566.4 2.4 13.4 873.5 4.8 64.7
Derivatives: Non-qualifying for hedge
accounting(1)
Interest rate contracts ............. 66,474.0 1,108.0 563.2 63,122.0 826.2 1,174.3
Foreign exchange contracts ......... 1,373.1 45.3 26.8 1,281.7 17.8 43.3
Equity contracts .................. 21,165.7 483.1 209.9 11,725.9 172.7 52.9
Credit contracts .................. 4,221.0 40.9 36.0 3,221.0 40.5 14.5
Embedded derivatives:
Within fixed maturity investments . . . N/A 115.8 — N/A 126.5 —
Within annuity products ........... N/A — 3,659.6 N/A — 2,645.6
Within reinsurance agreements ...... N/A — 139.6 N/A — 79.0
Total .............................. $1,935.4 $4,648.5 $1,275.8 $4,076.4
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