Voya 2014 Annual Report Download - page 98

fixed income securities but may in certain circumstances be available to us for liquidity or other purposes prior to
the scheduled repurchase date. The repurchase of securities or our inability to enter into new repurchase
agreements would reduce the amount of such cash collateral available to us. Market conditions on or after the
repurchase date may limit our ability to enter into new agreements at a time when we need access to additional
cash collateral for investment or liquidity purposes.
For both securities lending and repurchase transactions, in some cases, the maturity of the securities held as
invested collateral (i.e., securities that we have purchased with cash collateral received) may exceed the term of
the related securities on loan and the estimated fair value may fall below the amount of cash received as
collateral and invested. If we are required to return significant amounts of cash collateral on short notice and we
are forced to sell securities to meet the return obligation, we may have difficulty selling such collateral that is
invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than
we otherwise would have been able to realize under normal market conditions, or both. In addition, under
adverse capital market and economic conditions, liquidity may broadly deteriorate, which would further restrict
our ability to sell securities. If we decrease the amount of our securities lending and repurchase activities over
time, the amount of net investment income generated by these activities will also likely decline. See “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital
Resources—Securities Lending”.
Differences between actual claims experience and reserving assumptions may adversely affect our results of
operations or financial condition.
We establish and hold reserves to pay future policy benefits and claims. Our reserves do not represent an
exact calculation of liability, but rather are actuarial or statistical estimates based on data and models that include
many assumptions and projections, which are inherently uncertain and involve the exercise of significant
judgment, including assumptions as to the levels and/or timing of receipt or payment of premiums, benefits,
claims, expenses, interest credits, investment results (including equity market returns), retirement, mortality,
morbidity and persistency. We periodically review the adequacy of reserves and the underlying assumptions. We
cannot, however, determine with precision the amounts that we will pay for, or the timing of payment of, actual
benefits, claims and expenses or whether the assets supporting our policy liabilities, together with future
premiums, will grow to the level assumed prior to payment of benefits or claims. If actual experience differs
significantly from assumptions or estimates, reserves may not be adequate. If we conclude that our reserves,
together with future premiums, are insufficient to cover future policy benefits and claims, we would be required
to increase our reserves and incur income statement charges for the period in which we make the determination,
which could materially and adversely affect our results of operations and financial condition.
We may face significant losses if mortality rates, morbidity rates, persistency rates or other underwriting
assumptions differ significantly from our pricing expectations.
We set prices for many of our insurance and annuity products based upon expected claims and payment
patterns, using assumptions for mortality rates, or likelihood of death, and morbidity rates, or likelihood of
sickness, of our policyholders. In addition to the potential effect of natural or man-made disasters, significant
changes in mortality or morbidity could emerge gradually over time due to changes in the natural environment,
the health habits of the insured population, technologies and treatments for disease or disability, the economic
environment, or other factors. The long-term profitability of our insurance and annuity products depends upon
how our actual mortality rates, and to a lesser extent actual morbidity rates, compare to our pricing assumptions.
In addition, prolonged or severe adverse mortality or morbidity experience could result in increased reinsurance
costs, and ultimately, reinsurers might not offer coverage at all. If we are unable to maintain our current level of
reinsurance or purchase new reinsurance protection in amounts that we consider sufficient, we would have to
accept an increase in our net risk exposures, revise our pricing to reflect higher reinsurance premiums, or
otherwise modify our product offering.
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