Voya 2014 Annual Report Download - page 71

This reset allows our Principal Insurance Subsidiaries domiciled in Colorado, Iowa and Minnesota to more
readily build up ordinary dividend capacity to the extent their operating results subsequent to December 31, 2012
generate positive earned surplus. Based on legislative amendments adopted by the Colorado legislature in 2014,
our insurance subsidiary domiciled in Colorado is no longer subject to the positive earned surplus requirement.
Under applicable domiciliary insurance regulations, our Principal Insurance Subsidiaries must deduct any
distributions or dividends paid in the preceding twelve months in calculating dividend capacity. Our Principal
Insurance Subsidiaries domiciled in Colorado, Iowa and Minnesota did succeed in building up sufficient positive
earned surplus to pay ordinary dividends in 2014. VRIAC had ordinary dividend capacity in December 2013 and
also in 2014.
Our Principal Insurance Subsidiaries domiciled in Connecticut, Iowa and Minnesota, however, may not
succeed in building up sufficient positive earned surplus going forward. If such Principal Insurance Subsidiaries
do not succeed in building up sufficient positive earned surplus to have ordinary dividend capacity, or if our
Principal Insurance Subsidiaries generate capital in excess of our combined estimated RBC ratio of 425% and
our individual insurance company ordinary dividend limits, then we may seek extraordinary dividends or
distributions (for which prior approval of their respective domiciliary insurance regulators would be required,
and can be granted or withheld in the discretion of the regulators). There can be no assurance that our Principal
Insurance Subsidiaries will receive approval for extraordinary distribution payments in the future.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Liquidity and Capital Resources—Restrictions on Dividends and Returns of Capital from Subsidiaries” for a
discussion of dividends and distributions from our insurance subsidiaries.
Financial Regulation
Policy and Contract Reserve Sufficiency Analysis. Under the laws and regulations of their states of domicile,
our insurance subsidiaries are required to conduct annual analyses of the sufficiency of their life and annuity
statutory reserves.Other jurisdictions in which these subsidiaries are licensed may have certain reserve
requirements that differ from those of their domiciliary jurisdictions.In each case, a qualified actuary must
submit an opinion that states that the aggregate statutory reserves, when considered in light of the assets held
with respect to such reserves, are sufficient to meet the insurer’s contractual obligations and related expenses.If
such an opinion cannot be rendered, the affected insurer must set up additional statutory reserves by moving
funds from available statutory surplus.Our insurance subsidiaries submit these opinions annually to applicable
insurance regulatory authorities.
Recent actions by the NAIC. The NAIC has begun a process of redefining the reserve methodology for
certain of our insurance liabilities under a framework known as Principles-Based Reserving (“PBR”). Under
PBR, an insurer’s reserves are still required to be conservative, since a primary focus of SAP is the protection of
policyholders, however, greater credence is given to the insurer’s realized past experience and anticipated future
experience as well as to current economic conditions. An important part of the PBR framework was the adoption
of AG43 as of December 31, 2009 for variable annuity guaranteed benefits. Another significant development was
the adoption of the new Valuation Manual (“VM”), which defines PBR for life insurance policies. The full NAIC
membership adopted the new VM in December 2012. The model law that enables the new VM will become
effective on the January 1st after it has been adopted by at least 42 of the 55 jurisdictions that make up the NAIC,
with the further proviso that the 42 adopting jurisdictions must also account for 75% of the premium by U.S. life
insurance companies (measured as of 2008). The new VM is expected to become effective no earlier than
January 1, 2016, and we anticipate that its provisions will require us to make changes to certain of our term and
universal life insurance policies, in particular, those policies with guaranteed features and may result in more
volatility in our financial results given the greater weight it places on current economic conditions.
Surplus and Capital Requirements. Insurance regulators have the discretionary authority, in connection with
the ongoing licensing of our insurance subsidiaries, to limit or prohibit the ability of an insurer to issue new
policies if, in the regulators’ judgment, the insurer is not maintaining a minimum amount of surplus or is in
48