Voya 2014 Annual Report Download - page 97

The determination of the amount of allowances and impairments taken on our investments is subjective and
could materially and adversely impact our results of operations or financial condition. Gross unrealized losses
may be realized or result in future impairments, resulting in a reduction in our net income (loss).
We evaluate investment securities held by us for impairment on a quarterly basis. This review is subjective
and requires a high degree of judgment. For fixed income securities held, an impairment loss is recognized if the
fair value of the debt security is less than the carrying value and we no longer have the intent to hold the debt
security; if it is more likely than not that we will be required to sell the debt security before recovery of the
amortized cost basis; or if a credit loss has occurred.
When we do not intend to sell a security in an unrealized loss position, potential credit related other-than-
temporary impairments (“OTTI”) are considered using a variety of factors, including the length of time and
extent to which the fair value has been less than cost, adverse conditions specifically related to the industry,
geographic area in which the issuer conducts business, financial condition of the issuer or underlying collateral of
a security, payment structure of the security, changes in credit rating of the security by the rating agencies,
volatility of the fair value changes and other events that adversely affect the issuer. In addition, we take into
account relevant broad market and economic data in making impairment decisions.
As part of the impairment review process, we utilize a variety of assumptions and estimates to make a
judgment on how fixed income securities will perform in the future. It is possible that securities in our fixed
income portfolio will perform worse than our expectations. There is an ongoing risk that further declines in fair
value may occur and additional OTTI may be recorded in future periods, which could materially and adversely
affect our results of operations and financial condition. Furthermore, historical trends may not be indicative of
future impairments or allowances.
Fixed income and equity securities classified as available-for-sale are reported at their estimated fair value.
Unrealized gains or losses on available-for-sale securities are recognized as a component of other comprehensive
income (loss) and are therefore excluded from net income (loss). The accumulated change in estimated fair value
of these available-for-sale securities is recognized in net income (loss) when the gain or loss is realized upon the
sale of the security or in the event that the decline in estimated fair value is determined to be other-than-
temporary and an impairment charge to earnings is taken. Such realized losses or impairments may have a
material adverse effect on our net income (loss) in a particular interim or annual period. For example, we
recorded OTTI of $31.6 million, $35.7 million, and $55.1 million in net realized capital losses for the years
ended December 31, 2014, 2013 and 2012, respectively.
Our participation in a securities lending program and a repurchase program subjects us to potential liquidity
and other risks.
We engage in a securities lending program whereby certain securities from our portfolio are loaned to other
institutions for short periods of time. Initial collateral, primarily cash, is required at a rate of 102% of the market
value of the loaned securities. For certain transactions, a lending agent may be used and the agent may retain
some or all of the collateral deposited by the borrower and transfer the remaining collateral to us. Collateral
retained by the agent is invested in liquid assets on our behalf. The market value of the loaned securities is
monitored on a daily basis with additional collateral obtained or refunded as the market value of the loaned
securities fluctuates.
We also participate in a repurchase agreement program whereby we sell fixed income securities to a third
party, primarily major brokerage firms or commercial banks, with a concurrent agreement to repurchase those
same securities at a determined future date. During the term of the repurchase agreements, cash or other types of
permitted collateral provided to us is sufficient to allow us to fund substantially all of the cost of purchasing
replacement assets in the event of counterparty default (i.e., the sold securities are not returned to us on the
scheduled repurchase date). Cash proceeds received by us under the repurchase program are typically invested in
74