Voya 2014 Annual Report Download - page 313

Voya Financial, Inc.
Notes to the Consolidated Financial Statements
(Dollar amounts in millions, unless otherwise stated)
Embedded derivatives on reinsurance: The carrying value of embedded derivatives is estimated based upon the
change in the fair value of the assets supporting the funds withheld payable under reinsurance agreements. As the
fair value of the assets held in trust is based on a quoted market price (Level 1), the fair value of the embedded
derivative is based on market observable inputs and is classified as Level 2.
Transfers in and out of Level 1 and 2
There were no securities transferred between Level 1 and Level 2 for the years ended December 31, 2014 and
2013. The Company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting
period.
Level 3 Financial Instruments
The fair values of certain assets and liabilities are determined using prices or valuation techniques that require
inputs that are both unobservable and significant to the overall fair value measurement (i.e., Level 3 as defined
by ASC Topic 820), including but not limited to liquidity spreads for investments within markets deemed not
currently active. These valuations, whether derived internally or obtained from a third party, use critical
assumptions that are not widely available to estimate market participant expectations in valuing the asset or
liability. In addition, the Company has determined, for certain financial instruments, an active market is such a
significant input to determine fair value that the presence of an inactive market may lead to classification in
Level 3. In light of the methodologies employed to obtain the fair values of financial assets and liabilities
classified as Level 3, additional information is presented below.
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