Voya 2014 Annual Report Download - page 387

Voya Financial, Inc.
Notes to the Consolidated Financial Statements
(Dollar amounts in millions, unless otherwise stated)
The following narrative indicates the sensitivity of inputs:
• Default Rate: An increase (decrease) in the expected default rate would likely increase (decrease) the
discount margin (increase risk premium) used to value the CLO investments and CLO notes and, as a
result, would potentially decrease the value of the CLO investments and CLO notes.
• Recovery rate: A decrease (increase) in the expected recovery of defaulted assets would potentially
decrease (increase) the valuation of CLO investments and CLO notes.
• Prepayment Rate: A decrease (increase) in the expected rate of collateral prepayments would
potentially decrease (increase) the valuation of CLO investments and CLO notes as the expected
weighted average life (“WAL”) would increase.
• Discount Margin (spread over LIBOR): An increase (decrease) in the discount margin used to value the
CLO investments and CLO notes and would decrease (increase) the value of the CLO investments and
CLO notes.
VOEs—Private Equity Funds and Single Strategy Hedge Funds
Limited partnerships, at fair value, primarily represent the Company’s investments in private equity funds and
single strategy hedge funds. At times, the limited partnerships make strategic co-investments directly into private
equity companies, including, but not limited to, buyout, venture capital, distressed and mezzanine. The fair value
for these investments is estimated based on the NAV from the latest financial statements of these funds, provided
by the fund’s investment manager or TPA.
Private Equity Funds
As prescribed in ASC Topic 820, the unit of account for these investments is the interest in the investee
fund. The Company owns an undivided interest in the fund portfolio and does not have the ability to dispose of
individual assets and liabilities in the fund portfolio. Rather, the Company would be required to redeem or
dispose of its entire interest in the investee fund. There is no current active market for interests in underlying
private equity funds.
Valuation is generally based on the valuations provided by the fund’s general partner or investment manager. The
valuations typically reflect the fair value of the Company’s capital account balance of each fund investment,
including unrealized capital gains (losses), as reported in the financial statements of the respective investee fund
as of the respective year end or the latest available date. In circumstances where fair values are not provided, the
Company seeks to determine the fair value of fund investments based upon other information provided by the
fund’s general partner or investment manager or from other sources.
The fair value of securities received in-kind from fund investments is determined based on the restrictions around
the securities.
• Unrestricted, publicly traded securities are valued at the closing public market price on the reporting
date;
• Restricted, publicly traded securities may be valued at a discount from the closing public market price
on the reporting date, depending on the circumstances; and
• Privately held securities are valued by the directors/general partner of the investee fund, based on a
variety of factors, including the price of recent transactions in the company’s securities and the
company’s earnings, revenue and book value.
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