Voya 2014 Annual Report Download - page 385

Voya Financial, Inc.
Notes to the Consolidated Financial Statements
(Dollar amounts in millions, unless otherwise stated)
Investments held by consolidated private equity funds and single strategy hedge funds are measured and reported
at fair value in the Company’s Consolidated Financial Statements. Changes in the fair value of consolidated
investment entities are recorded as a separate line item within Income (loss) related to consolidated investment
entities in the Company’s Consolidated Statements of Operations.
The methodology for measuring the fair value and fair value hierarchy classification of financial assets and
liabilities of consolidated investment entities is consistent with the methodology and fair value hierarchy rules
applied by the Company to its investment portfolio. See the Business, Basis of Presentation and Significant
Accounting Policies Note to these Consolidated Financial Statements for further information.
As discussed in more detail below, the Company utilizes valuations obtained from third-party commercial
pricing services, brokers and investment sponsors or third-party administrators (“TPA”), that supply NAV (or its
equivalent) per share used as a practical expedient. The valuations obtained from brokers and third-party
commercial pricing services are non-binding. These valuations are reviewed on a monthly or quarterly basis
(dependent on the type of fund or product). Procedures include, but are not limited to, a review of underlying
fund investor reports, review of top and worst performing funds requiring further scrutiny, review of variance
from prior periods and review of variance from benchmarks, where applicable. In addition, the Company
considers both macro and fund specific events that may impact the latest NAV supplied and determines if further
adjustments of value should be made. Such changes, if any, are subject to senior management review.
When a price cannot be obtained from a commercial pricing service, independent broker quotes are solicited.
Securities priced using independent broker quotes are classified as Level 3. Broker quotes and prices obtained
from pricing services are reviewed and validated through an internal valuation committee price variance review,
comparisons to internal pricing models, back testing to recent trades or monitoring of trading volumes.
Cash and Cash Equivalents
The carrying amounts for cash reflect the assets’ fair values. The fair value for cash equivalents is determined
based on quoted market prices. These assets are classified as Level 1.
VIEs—CLO Entities
Corporate loans: Corporate loan investments, which comprise the majority of consolidated CLO portfolio
collateral, are senior secured corporate loans maturing at various dates between 2014 and 2024, paying interest at
LIBOR, EURIBOR or PRIME plus a spread of up to 9.5% and typically range in credit rating categories from
AAA down to unrated. As of December 31, 2014 and 2013, the unpaid principal balance exceeded the fair value
of the corporate loans by approximately $75.9 and $9.7, respectively. Less than 1.0% of the collateral assets were
in default as of December 31, 2014 and 2013.
The fair values for corporate loans are determined using independent commercial pricing services. Fair value
measurement based on pricing services may be classified in Level 2 or Level 3 depending on the type,
complexity, observability and liquidity of the asset being measured. The inputs used by independent commercial
pricing services, such as benchmark yields and credit risk adjustments, are those that are derived principally
from, or corroborated by, observable market data. Hence, the fair value measurement of corporate loans priced
by independent pricing service providers is classified within Level 2 of the fair value hierarchy. In addition, there
are assets held with CLO portfolios that represent senior level debt of other third party CLOs. These CLO
investments are classified within Level 3 of the fair value hierarchy. See description of fair value process for
CLO notes below.
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