Voya 2014 Annual Report Download - page 394

Voya Financial, Inc.
Notes to the Consolidated Financial Statements
(Dollar amounts in millions, unless otherwise stated)
Closed Blocks
Closed Blocks consists of three separate reporting segments that include run-off and legacy business lines that
are no longer being actively marketed or sold. The CBVA segment consists of variable annuity contracts that
were designed to offer long-term savings products in which individual contract owners made deposits that are
maintained in separate accounts. These products included options for policyholders to purchase living benefit
riders. In 2009, the Company separated its CBVA segment from other operations, placing it in run-off, and made
a strategic decision to stop actively writing new retail variable annuity products with substantial guarantee
features (the last policies were issued in 2010 and the block shifted to run-off). The Closed Block Institutional
Spread Products segment historically issued GICs and funding agreements and invested amounts raised to earn a
spread. While the business in the Closed Block Institutional Spread Products segment is being managed in active
run-off, the Company continues to issue liabilities from time to time to replace liabilities that are maturing. The
Closed Block Other segment consists primarily of retained and run-off activity related to divestment, including
the Company’s group reinsurance and individual reinsurance businesses.
Measurement
Operating earnings before income taxes is an internal measure used by management to evaluate segment
performance. The Company uses the same accounting policies and procedures to measure segment Operating
earnings before income taxes as it does for consolidated Net income (loss). Operating earnings before income
taxes does not replace Net income (loss) as the U.S. GAAP measure of the Company’s consolidated results of
operations. However, the Company believes that the definitions of Operating earnings before income taxes
provide users with a more valuable measure of its business and segment performances and enhance the
understanding of the Company’s performance by highlighting performance drivers. Each segment’s Operating
earnings before income taxes is calculated by adjusting Income (loss) before income taxes to exclude the
following items:
• Net investment gains (losses), net of related amortization of DAC, VOBA, sales inducements and
unearned revenue. Net investment gains (losses) include gains (losses) on the sale of securities,
impairments, changes in the fair value of investments using the FVO unrelated to the implied loan-
backed security income recognition for certain mortgage-backed obligations and changes in the fair
value of derivative instruments, excluding realized gains (losses) associated with swap settlements and
accrued interest;
• Net guaranteed benefit hedging gains (losses), which include changes in the fair value of derivatives
related to guaranteed benefits, net of related reserve increases (decreases) and net of related
amortization of DAC, VOBA and sales inducements, less the estimated cost of these benefits. The
estimated cost, which is reflected in operating results, reflects the expected cost of these benefits if
markets perform in line with the Company’s long-term expectations and includes the cost of hedging.
Other derivative and reserve changes related to guaranteed benefits are excluded from operating
results, including the impacts related to changes in the Company’s nonperformance spread;
• Income (loss) related to businesses exited through reinsurance or divestment (including net investment
gains (losses) on securities sold and expenses directly related to these transactions);
• Income (loss) attributable to noncontrolling interest;
• Income (loss) related to early extinguishment of debt;
• Impairment of goodwill, value of management contract rights and value of customer relationships
acquired;
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