Voya 2014 Annual Report Download - page 306

Voya Financial, Inc.
Notes to the Consolidated Financial Statements
(Dollar amounts in millions, unless otherwise stated)
Net realized gains (losses) on derivatives were as follows for the periods indicated:
Year Ended December 31,
2014 2013 2012
Derivatives: Qualifying for hedge accounting(1)
Cash flow hedges:
Interest rate contracts ...................................... $ 0.7 $ 0.4 $ —
Foreign exchange contracts ................................. 2.0 0.4 —
Fair value hedges:
Interest rate contracts ...................................... (17.2) 21.1 (10.0)
Derivatives: Non-qualifying for hedge accounting(2)
Interest rate contracts .......................................... 821.1 (1,058.5) 51.5
Foreign exchange contracts ..................................... 106.0 75.7 10.9
Equity contracts .............................................. (909.7) (2,217.2) (1,801.9)
Credit contracts .............................................. 9.8 25.2 37.1
Managed custody guarantees .................................... 0.1 0.2 1.1
Embedded derivatives:
Within fixed maturity investments(2) .............................. (10.6) (107.5) (15.7)
Within annuity products(2) ...................................... (820.5) 1,094.5 336.2
Within reinsurance agreements(3) ................................. (77.6) 90.4 (32.2)
Total ........................................................... $(895.9) $(2,075.3) $(1,423.0)
(1) Changes in value for effective fair value hedges are recorded in Other net realized capital gains (losses).
Changes in fair value upon disposal for effective cash flow hedges are amortized through Net investment
income and the ineffective portion is recorded in Other net realized capital gains (losses) in the Consolidated
Statements of Operations. For the years ended December 31, 2014, 2013 and 2012, ineffective amounts
were immaterial.
(2) Changes in value are included in Other net realized capital gains (losses) in the Consolidated Statements of
Operations.
(3) Changes in value are included in Policyholder benefits in the Consolidated Statements of Operations.
Credit Default Swaps
The Company has entered into various credit default swaps. When credit default swaps are sold, the Company
assumes credit exposure to certain assets that it does not own. Credit default swaps may also be purchased to
reduce credit exposure in the Company’s portfolio. Credit default swaps involve a transfer of credit risk from one
party to another in exchange for periodic payments. As of December 31, 2014, the fair values of credit default
swaps of $40.9 and $36.0 were included in Derivatives assets and Derivatives liabilities, respectively, on the
Consolidated Balance Sheets. As of December 31, 2013, the fair value of credit default swaps of $40.5 and $14.5
were included in Derivatives assets and Derivatives liabilities, respectively, on the Consolidated Balance Sheets.
As of December 31, 2014 and 2013, the maximum potential future net exposure to the Company was $1.7
billion, net of purchased protection of $0.5 billion on credit default swaps. These instruments are typically
written for a maturity period of five years and contain no recourse provisions. If the Company’s current debt and
claims paying ratings were downgraded in the future, the terms in the Company’s derivative agreements may be
triggered, which could negatively impact overall liquidity.
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