Voya 2014 Annual Report Download - page 55

returns, inflation, benefit utilization and expenses. Changes in, or deviations from, the assumptions used can
significantly affect our reserve levels and related future operations.
The determination of future policy benefit reserves is dependent on actuarial assumptions set by us in
determining policyholder behavior, as described above.
Reserves for variable annuity GMDB and GMIB are determined by estimating the value of expected
benefits in excess of the projected account balance and recognizing the excess ratably over the accumulation
period based on total expected assessments. Expected assessments are based on a range of scenarios. The reserve
for the GMIB guarantee incorporates an assumption for the percentage of the contracts that will annuitize. In
general, we assume that GMIB annuitization rates will be higher for policies with more valuable (more “in the
money”) guarantees. We periodically evaluate estimates used and adjust the additional liability balance, with a
related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier
assumptions should be revised. Changes in reserves for GMDB and GMIB are reported in Policyholder benefits
in the Consolidated Statements of Operations.
Variable annuity GMAB, GMWB, and GMWBL are considered embedded derivatives, which are measured
at estimated fair value separately from the host annuity contract, along with attributed fees collected or payments
made, and reported in Other net realized capital gains (losses) in the Consolidated Statements of Operations.
At inception of the GMAB, GMWB, and GMWBL contracts, we project fees to be attributed to the
embedded derivative portion of the guarantee equal to the present value of projected future guaranteed benefits.
Any excess or deficient fee is attributed to the host contract and reported in Fee income in the Consolidated
Statements of Operations.
The estimated fair value of the GMAB, GMWB, and GMWBL contracts is determined based on the present
value of projected future guaranteed benefits, minus the present value of projected attributed fees. A risk neutral
valuation methodology is used under which the cash flows from the guarantees are projected under multiple
capital market scenarios using observable risk free rates. The projection of future guaranteed benefits and future
attributed fees require the use of assumptions for capital markets (e.g., implied volatilities, correlation among
indices, risk-free swap curve, etc.) and policyholder behavior (e.g., lapse, benefit utilization, mortality, etc.). The
projection also includes adjustments for nonperformance risk and margins for non-capital market risks, or
policyholder behavior assumptions. Risk margins are established to capture uncertainties related to policyholder
behavior assumptions. The margin represents additional compensation a market participant would require in
order to assume these risks.
The table below presents the policy count and account value by type of deferred variable annuity benefits:
($ in millions, unless otherwise specified) As of December 31, 2014
Policy Count Account Value(1)
$ %
Guaranteed Death Benefits: .......................... 398,082 $41,077
Standard ..................................... 173,058 18,876 46%
Ratchet ...................................... 89,949 7,647 19%
Rollup ....................................... 26,952 2,205 5%
Combo ...................................... 108,123 12,349 30%
Guaranteed Living Benefits: .......................... 398,082 $41,077
GMIB ....................................... 142,742 14,027 34%
GMWBL ..................................... 115,443 15,804 39%
GMAB/GMWB ............................... 8,560 777 2%
No Living Benefit .............................. 131,337 10,469 25%
(1) Account value excludes $2.1 billion of Payout, Policy Loan and Life Insurance business which is included
in consolidated account values.
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