VOYA Financial, Inc. 2014 Q3 Report


 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
——————————————————————
FORM 10-Q
(Mark One)
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014

OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from        _                   to  _                        

Commission File Number: _001-35897______________________________________

Voya Financial, Inc.
(Exact name of registrant as specified in its charter)
Delaware
52-1222820
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
230 Park Avenue
 
New York, New York
10169
(Address of principal executive offices)
(Zip Code)
(212) 309-8200
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.        Yes   x     No   o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes   x     No   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer    o
Accelerated filer    o
Non-accelerated filer    x
Smaller reporting company     o
(Do not check if a smaller reporting company)
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No ý

APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 4, 2014, 246,298,579 shares of Common Stock, $0.01 par value, were outstanding.
 

 
 


Voya Financial, Inc.
Form 10-Q for the period ended September 30, 2014

INDEX
 
 
PAGE
PART I.
FINANCIAL INFORMATION (UNAUDITED)
 
 
 
 
Item 1.
Financial Statements:
 
 
 
 
 
 
 
Notes to Condensed Consolidated Financial Statements
 
 
 
Item 2.
 
 
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
 
 
Item 4.
Controls and Procedures
 
 
 
PART II.
OTHER INFORMATION
 
 
 
 
Item 1.
Legal Proceedings
 
 
 
Item 1A.
Risk Factors
 
 
 
Item 2.
 
 
 
Item 5.
Other Information
 
 
 
Item 6.
Exhibits
 
 
 
 
 
 
 
 




2
 


As used in this Quarterly Report on Form 10-Q, "Voya Financial," the "Company," "we," "our" and "us" refer to Voya Financial, Inc.

NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements relating to future developments in our business or expectations for our future financial performance and any statement not involving a historical fact. Forward-looking statements use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. Actual results, performance or events may differ materially from those projected in any forward-looking statement due to, among other things, (i) general economic conditions, particularly economic conditions in our core markets, (ii) performance of financial markets, including emerging markets, (iii) the frequency and severity of insured loss events, (iv) mortality and morbidity levels, (v) persistency and lapse levels, (vi) interest rates, (vii) currency exchange rates, (viii) general competitive factors, (ix) changes in laws and regulations and (x) changes in the policies of governments and/or regulatory authorities. Factors that may cause actual results to differ from those in any forward-looking statement also include those described under "Risk Factors," "Management’s Discussion and Analysis of Financial Condition and Results of Operations-Trends and Uncertainties" and "Business-Closed Blocks-CBVA" in the Annual Report on Form 10-K for the year ended December 31, 2013 (File No. 001-35897) (the "Annual Report on Form 10-K"), "Risk Factors" in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 (File No. 001-35897) and this Quarterly Report on Form 10-Q.
The risks included here are not exhaustive. Current reports on Form 8-K and other documents filed with the Securities and Exchange Commission (“SEC”) include additional factors that could affect our businesses and financial performance. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.




3
 


PART I.        FINANCIAL INFORMATION

Item 1.        Financial Statements
Voya Financial, Inc.
Condensed Consolidated Balance Sheets
September 30, 2014 (Unaudited) and December 31, 2013
(In millions, except share and per share data)
 
September 30,
2014
 
December 31,
2013
Assets:
 
 
 
Investments:
 
 
 
Fixed maturities, available-for-sale, at fair value (amortized cost of $64,865.1 as of 2014 and $65,033.8 as of 2013)
$
70,155.7

 
$
68,317.8

Fixed maturities, at fair value using the fair value option
3,557.8

 
2,935.3

Equity securities, available-for-sale, at fair value (cost of $239.2 as of 2014 and $267.4 as of 2013)
270.5

 
314.4

Short-term investments
1,173.1

 
1,048.1

Mortgage loans on real estate, net of valuation allowance of $3.4 as of 2014 and $3.8 as of 2013
9,949.7

 
9,312.2

Policy loans
2,104.2

 
2,147.0

Limited partnerships/corporations
348.2

 
236.4

Derivatives
1,136.8

 
1,149.3

Other investments
106.8

 
124.6

Securities pledged (amortized cost of $951.7 as of 2014 and $1,457.9 as of 2013)
1,021.6

 
1,465.7

Total investments
89,824.4

 
87,050.8

Cash and cash equivalents
1,908.5

 
2,840.8

Short-term investments under securities loan agreements, including collateral delivered
593.8

 
552.9

Accrued investment income
926.9

 
897.1

Reinsurance recoverable
6,752.5

 
6,702.2

Deferred policy acquisition costs and Value of business acquired
4,779.9

 
5,351.6

Sales inducements to contract holders
259.9

 
279.0

Current income taxes
8.4

 
—

Deferred income taxes
—

 
162.1

Goodwill and other intangible assets
296.1

 
323.7

Other assets
1,051.4

 
1,036.5

Assets related to consolidated investment entities:
 
 
 
Limited partnerships/corporations, at fair value
3,842.8

 
3,218.6

Cash and cash equivalents
560.9

 
710.7

Corporate loans, at fair value using the fair value option
6,262.9

 
4,965.3

Other assets
176.1

 
104.8

Assets held in separate accounts
107,059.3

 
106,827.1

Total assets
$
224,303.8

 
$
221,023.2





The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
 
 
 
 
4
 

Voya Financial, Inc.
Condensed Consolidated Balance Sheets
September 30, 2014 (Unaudited) and December 31, 2013
(In millions, except share and per share data)

 
September 30,
2014
 
December 31,
2013
Liabilities and Shareholders' Equity:
 
 
 
Future policy benefits
$
15,048.1

 
$
14,098.4

Contract owner account balances
69,091.0

 
69,908.3

Payables under securities loan agreements, including collateral held
927.1

 
769.4

Long-term debt
3,515.5

 
3,514.7

Funds held under reinsurance agreements
1,136.7

 
1,181.5

Derivatives
656.8

 
1,351.8

Pension and other post-employment provisions
454.2

 
474.9

Current income taxes
—

 
44.1

Deferred income taxes
447.4

 
—

Other liabilities
1,315.8

 
1,274.1

Liabilities related to consolidated investment entities:
 
 
 
Collateralized loan obligations notes, at fair value using the fair value option
6,344.4

 
5,161.6

Other liabilities
1,163.3

 
903.3

Liabilities related to separate accounts
107,059.3

 
106,827.1

Total liabilities
207,159.6

 
205,509.2

 
 
 
 
Shareholders' equity:
 
 
 
Common stock ($0.01 par value per share; 900,000,000 shares authorized, 263,531,836 and 261,754,931 shares issued as of 2014 and 2013, respectively; 246,430,073 and 261,675,811 shares outstanding as of 2014 and 2013, respectively)
2.6

 
2.6

Treasury stock (at cost; 17,101,763 and 79,120 shares as of 2014 and 2013, respectively)
(624.2
)
 
—

Additional paid-in capital
23,621.5

 
23,563.7

Accumulated other comprehensive income (loss)
2,820.2

 
1,849.1

Retained earnings (deficit):
 
 
 
Appropriated-consolidated investment entities
21.4

 
18.4

Unappropriated
(11,256.4
)
 
(12,161.6
)
Total Voya Financial, Inc. shareholders' equity
14,585.1

 
13,272.2

Noncontrolling interest
2,559.1

 
2,241.8

Total shareholders' equity
17,144.2

 
15,514.0

Total liabilities and shareholders' equity
$
224,303.8

 
$
221,023.2


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
 
 
 
 
5
 

Voya Financial, Inc.
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2014 and 2013 (Unaudited)
(In millions, except per share data)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Revenues:
 
 
 
 
 
 
 
Net investment income
$
1,163.6

 
$
1,221.6

 
$
3,430.1

 
$
3,532.5

Fee income
908.9

 
920.8

 
2,738.0

 
2,722.4

Premiums
595.1

 
494.2

 
1,825.4

 
1,440.9

Net realized capital gains (losses):
 
 
 
 
 
 
 
Total other-than-temporary impairments
(19.5
)
 
(5.6
)
 
(25.4
)
 
(26.9
)
Less: Portion of other-than-temporary impairments recognized in Other comprehensive income (loss)
(0.1
)
 
(1.2
)
 
(0.2
)
 
(4.3
)
Net other-than-temporary impairments recognized in earnings
(19.4
)
 
(4.4
)
 
(25.2
)
 
(22.6
)
Other net realized capital gains (losses)
200.4

 
(512.7
)
 
(350.9
)
 
(1,935.2
)
Total net realized capital gains (losses)
181.0

 
(517.1
)
 
(376.1
)
 
(1,957.8
)
Other revenue
101.0

 
119.6

 
316.8

 
321.3

Income (loss) related to consolidated investment entities:
 
 
 
 
 
 
 
Net investment income
248.0

 
135.3

 
630.0

 
346.3

Changes in fair value related to collateralized loan obligations
(6.5
)
 
60.9

 
(4.1
)
 
(11.1
)
Total revenues
3,191.1

 
2,435.3

 
8,560.1

 
6,394.5

Benefits and expenses:
 
 
 
 
 
 
 
Policyholder benefits
1,234.7

 
570.7

 
2,910.9

 
1,822.2

Interest credited to contract owner account balances
498.2

 
517.0

 
1,485.3

 
1,556.8

Operating expenses
767.3

 
762.8

 
2,315.1

 
2,292.1

Net amortization of Deferred policy acquisition costs and Value of business acquired
30.6

 
64.6

 
272.4

 
319.6

Interest expense
47.2

 
48.4

 
142.3

 
136.6

Operating expenses related to consolidated investment entities:
 
 
 
 
 
 
 
Interest expense
56.6

 
50.4

 
152.3

 
130.6

Other expense
1.7

 
1.4

 
5.7

 
6.1

Total benefits and expenses
2,636.3

 
2,015.3

 
7,284.0

 
6,264.0

Income (loss) before income taxes
554.8

 
420.0

 
1,276.1

 
130.5

Income tax expense (benefit)
37.4

 
(27.7
)
 
74.2

 
(6.4
)
Net income (loss)
517.4

 
447.7

 
1,201.9

 
136.9

Less: Net income (loss) attributable to noncontrolling interest
116.6

 
101.1

 
296.7

 
84.5

Net income (loss) available to Voya Financial, Inc.'s common shareholders
$
400.8

 
$
346.6

 
$
905.2

 
$
52.4

Net income (loss) available to Voya Financial, Inc.'s common shareholders per common share:
 
 
 
 
 
 
 
Basic
$
1.59

 
$
1.33

 
$
3.54

 
$
0.21

Diluted
$
1.58

 
$
1.32

 
$
3.51

 
$
0.21

Cash dividends declared per share of common stock
$
0.01

 
$
0.01

 
$
0.03

 
$
0.01



The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
 
 
 
 
6
 

Voya Financial, Inc.
Condensed Consolidated Statements of Comprehensive Income
For the Three and Nine Months Ended September 30, 2014 and 2013 (Unaudited)
(In millions)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Net income (loss)
$
517.4

 
$
447.7

 
$
1,201.9

 
$
136.9

Other comprehensive income (loss), before tax:
 
 
 
 
 
 
 
Unrealized gains (losses) on securities
(510.8
)
 
(223.2
)
 
1,478.4

 
(2,733.4
)
Other-than-temporary impairments
5.9

 
13.5

 
30.2

 
44.8

Pension and other postretirement benefits liability
(3.4
)
 
(3.4
)
 
(10.3
)
 
(10.3
)
Other comprehensive income (loss), before tax
(508.3
)
 
(213.1
)
 
1,498.3

 
(2,698.9
)
Income tax expense (benefit) related to items of other comprehensive income (loss)
(175.8
)
 
(75.3
)
 
527.2

 
(938.2
)
Other comprehensive income (loss), after tax
(332.5
)
 
(137.8
)
 
971.1

 
(1,760.7
)
Comprehensive income (loss)
184.9

 
309.9

 
2,173.0

 
(1,623.8
)
Less: Comprehensive income (loss) attributable to noncontrolling interest
116.6

 
101.1

 
296.7

 
84.5

Comprehensive income (loss) attributable to Voya Financial, Inc.'s common shareholders
$
68.3

 
$
208.8

 
$
1,876.3

 
$
(1,708.3
)


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
 
 
 
 
7
 

Voya Financial, Inc.
 Condensed Consolidated Statements of Changes in Shareholders' Equity
For the Nine Months Ended September 30, 2014 (Unaudited)
(In millions)
 
Common
Stock
 
Treasury
Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained Earnings (Deficit)
 
Total
Voya
Financial, Inc.
Shareholders'
Equity
 
Noncontrolling
Interest
 
Total
Shareholders'
Equity
 
Appropriated
 
Unappropriated
Balance at January 1, 2014
$
2.6

 
$
—

 
$
23,563.7

 
$
1,849.1

 
$
18.4

 
$
(12,161.6
)
 
$
13,272.2

 
$
2,241.8

 
$
15,514.0

Comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
—

 
—

 
—

 
—

 
—

 
905.2

 
905.2

 
296.7

 
1,201.9

Other comprehensive income (loss), after tax
—

 
—

 
—

 
971.1

 
—

 
—

 
971.1

 
—

 
971.1

Total comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
1,876.3

 
296.7

 
2,173.0

Reclassification of noncontrolling interest
—

 
—

 
—

 
—

 
3.0

 
—

 
3.0

 
(3.0
)
 
—

Common stock issuance
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Common stock acquired - Share repurchase
—

 
(609.4
)
 
—

 
—

 
—

 
—

 
(609.4
)
 
—

 
(609.4
)
Dividends on common stock
—

 
—

 
(7.7
)
 
—

 
—

 
—

 
(7.7
)
 
—

 
(7.7
)
Share-based compensation
—

 
(14.8
)
 
65.5

 
—

 
—

 
—

 
50.7

 
—

 
50.7

Contributions from (Distributions to) noncontrolling interest, net
—

 
—

 
—

 
—

 
—

 
—

 
—

 
23.6

 
23.6

Balance at September 30, 2014
$
2.6

 
$
(624.2
)
 
$
23,621.5

 
$
2,820.2

 
$
21.4

 
$
(11,256.4
)
 
$
14,585.1

 
$
2,559.1


$
17,144.2



The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
 
 
 
 
8
 

Voya Financial, Inc.
 Condensed Consolidated Statements of Changes in Shareholders' Equity
For the Nine Months Ended September 30, 2013 (Unaudited)
(In millions)

 
Common
Stock
 
Treasury
Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained Earnings (Deficit)
 
Total
Voya
Financial, Inc.
Shareholders'
Equity
 
Noncontrolling
Interest
 
Total
Shareholders'
Equity
Appropriated
 
Unappropriated
Balance at January 1, 2013
$
2.3

 
$
—

 
$
22,917.6

 
$
3,710.7

 
$
6.4

 
$
(12,762.1
)
 
$
13,874.9

 
$
2,186.3

 
$
16,061.2

Comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
—

 
—

 
—

 
—

 
—

 
52.4

 
52.4

 
84.5

 
136.9

Other comprehensive income (loss), after tax
—

 
—

 
—

 
(1,760.7
)
 
—

 
—

 
(1,760.7
)
 
—

 
(1,760.7
)
Total comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
(1,708.3
)
 
84.5

 
(1,623.8
)
Reclassification of noncontrolling interest
—

 
—

 
—

 
—

 
(4.0
)
 
—

 
(4.0
)
 
4.0

 
—

Common stock issuance
0.3

 
—

 
571.3

 
—

 
—

 
—

 
571.6

 
—

 
571.6

Common stock acquired - Share repurchase
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Dividends on common stock
—

 
—

 
(2.6
)
 
—

 
—

 
—

 
(2.6
)
 
—

 
(2.6
)
Share-based compensation
—

 
—

 
38.4

 
—

 
—

 
—

 
38.4

 
—

 
38.4

Contributions from (Distributions to) noncontrolling interest, net
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(180.3
)
 
(180.3
)
Balance at September 30, 2013
$
2.6

 
$
—

 
$
23,524.7

 
$
1,950.0

 
$
2.4

 
$
(12,709.7
)
 
$
12,770.0

 
$
2,094.5

 
$
14,864.5


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
 
 
 
 
9
 

Voya Financial, Inc.
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2014 and 2013 (Unaudited)
(In millions)
 
Nine Months Ended September 30,
 
2014
 
2013
Net cash provided by operating activities
$
2,916.2

 
$
2,942.1

Cash Flows from Investing Activities:
 
 
 
Proceeds from the sale, maturity, disposal or redemption of:
 
 
 
Fixed maturities
9,192.3

 
11,626.7

Equity securities, available-for-sale
63.7

 
47.1

Mortgage loans on real estate
937.6

 
1,253.5

Limited partnerships/corporations
137.6

 
274.8

Acquisition of:
 
 
 
Fixed maturities
(9,172.3
)
 
(14,281.7
)
Equity securities, available-for-sale
(18.3
)
 
(17.9
)
Mortgage loans on real estate
(1,574.8
)
 
(1,583.2
)
Limited partnerships/corporations
(261.3
)
 
(81.0
)
Short-term investments, net
(124.5
)
 
3,443.2

Policy loans, net
42.8

 
52.8

Derivatives, net
(670.7
)
 
(1,981.6
)
Other investments, net
38.5

 
34.3

Sales from consolidated investment entities
2,558.5

 
2,518.7

Purchases within consolidated investment entities
(4,292.6
)
 
(3,352.2
)
Collateral received (delivered), net
116.8

 
(751.5
)
Purchases of fixed assets, net
(26.5
)
 
(25.7
)
Net cash used in investing activities
(3,053.2
)
 
(2,823.7
)
Cash Flows from Financing Activities:
 
 
 
Deposits received for investment contracts
5,681.5

 
8,985.2

Maturities and withdrawals from investment contracts
(7,332.9
)
 
(9,648.9
)
Proceeds from issuance of debt with maturities of more than three months
—

 
2,147.1

Repayment of debt with maturities of more than three months
—

 
(2,697.4
)
Short-term debt, net
—

 
(171.6
)
Debt issuance costs
(16.8
)
 
(24.8
)
Borrowings of consolidated investment entities
340.5

 
32.0

Repayments of borrowings of consolidated investment entities
(66.6
)
 
(8.5
)
Contributions from (distributions to) participants in consolidated investment entities
1,235.9

 
626.7

Proceeds from issuance of common stock, net
—

 
571.6

Common stock acquired - Share repurchase
(614.4
)
 
—

Share-based compensation
(14.8
)
 
—

Dividends paid
(7.7
)
 
—

Net cash used in financing activities
(795.3
)
 
(188.6
)
Net decrease in cash and cash equivalents
(932.3
)
 
(70.2
)
Cash and cash equivalents, beginning of period
2,840.8

 
1,786.8

Cash and cash equivalents, end of period
$
1,908.5

 
$
1,716.6

Supplemental cash flow information:
 
 
 
Income taxes paid (received), net
$
44.4

 
$
(2.8
)
Interest paid
156.9

 
126.3


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
 
 
 
 
10
 


Voya Financial, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in millions, unless otherwise stated)
 
 
 





1.    Business, Basis of Presentation and Significant Accounting Policies

Business    

Voya Financial, Inc. (which changed its name from ING U.S., Inc. on April 7, 2014) and its subsidiaries (collectively the "Company") is a financial services organization in the United States that offers a broad range of retirement services, annuities, investment management services, mutual funds, life insurance, group insurance and supplemental health products. The Company provides its principal products and services in three ongoing businesses (Retirement Solutions, Investment Management and Insurance Solutions) and reports results through five ongoing operating segments, including Retirement, Annuities, Investment Management, Individual Life and Employee Benefits. The Company also has a Corporate segment, which includes the financial data not directly related to the businesses, and Closed Block segments. See the Segments Note to these Condensed Consolidated Financial Statements.

Prior to May 2013, the Company was an indirect, wholly-owned subsidiary of ING Groep N.V. ("ING Group" or "ING"), a global financial services holding company based in The Netherlands, with American Depository Shares listed on the New York Stock Exchange. In 2009, ING Group announced the anticipated separation of its global banking and insurance businesses, including the divestiture of the Company. On April 11, 2013, the Company announced plans to rebrand as Voya Financial. On May 2, 2013, the common stock of Voya Financial, Inc. began trading on the New York Stock Exchange under the symbol "VOYA." On May 7, 2013 and May 31, 2013, Voya Financial, Inc. completed its initial public offering of common stock, including the issuance and sale by Voya Financial, Inc. of 30,769,230 shares of common stock and the sale by ING Insurance International B.V. ("ING International"), an indirect wholly owned subsidiary of ING Group and previously the sole stockholder of Voya Financial, Inc., of 44,201,773 shares of outstanding common stock of Voya Financial, Inc. (collectively, the "IPO"). On September 30, 2013, ING International transferred all of its remaining shares of Voya Financial, Inc. common stock to ING Group.

On October 29, 2013, ING Group completed a sale of 37,950,000 shares of common stock of the Company in a registered public offering ("Secondary Offering"), reducing ING Group's ownership in the Company to 57%.

On March 25, 2014, ING Group completed a sale of 30,475,000 shares of common stock of Voya Financial, Inc. in a registered public offering (the "March 2014 Offering"). Also on March 25, 2014, pursuant to the terms of a share repurchase agreement between ING Group and Voya Financial, Inc., Voya Financial, Inc. acquired 7,255,853 shares of its common stock from ING Group (the "March 2014 Direct Share Repurchase") (the March 2014 Offering and the March 2014 Direct Share Repurchase collectively, the "March 2014 Transactions"). Upon completion of the March 2014 Transactions, ING Group's ownership of Voya Financial, Inc. was reduced to approximately 43%.

On September 8, 2014, ING Group completed a sale of 22,277,993 shares of common stock of Voya Financial, Inc. in a registered public offering (the "September 2014 Offering"). Also on September 8, 2014, pursuant to the terms of a share repurchase agreement between ING Group and Voya Financial, Inc., Voya Financial, Inc. acquired 7,722,007 shares of its common stock from ING Group (the "September 2014 Direct Share Repurchase") (the September 2014 Offering and the September 2014 Direct Share Repurchase collectively, the "September 2014 Transactions"). Upon completion of the September 2014 Transactions, ING Group's ownership of Voya Financial, Inc. was reduced to 32.5%. Pursuant to an agreement with the European Union, ING Group is required to divest its remaining ownership stake in the Company by the end of 2016.

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and are unaudited. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Those estimates are inherently subject to change and actual results could differ from those estimates.




11
 


Voya Financial, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in millions, unless otherwise stated)
 
 
 



The Condensed Consolidated Financial Statements include the accounts of Voya Financial, Inc. and its subsidiaries, as well as partnerships (voting interest entities ("VOEs")) in which the Company has control and variable interest entities ("VIEs") for which the Company is the primary beneficiary. See the Consolidated Investment Entities Note to these Condensed Consolidated Financial Statements. Intercompany transactions and balances have been eliminated.

The accompanying Condensed Consolidated Financial Statements reflect adjustments (including normal, recurring adjustments) necessary to present fairly the financial position of the Company as of September 30, 2014, its results of operations and comprehensive income for the three and nine months ended September 30, 2014 and 2013, and its changes in shareholders' equity and statements of cash flows for the nine months ended September 30, 2014 and 2013, in conformity with U.S. GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2013 Consolidated Balance Sheet is from the audited Consolidated Financial Statements included in the Company's Annual Report on Form 10-K, filed with the SEC. Therefore, these unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in the Company's Annual Report on Form 10-K.

Adoption of New Pronouncements

Presentation of Unrecognized Tax Benefits
In July 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2013-11, "Income Taxes (Accounting Standards Codification ("ASC") Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists" ("ASU 2013-11"), which clarifies that:

•
An unrecognized tax benefit should be presented as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward, except,
•
An unrecognized tax benefit should be presented as a liability and not be combined with a deferred tax asset (i) to the extent a net operating loss carryforward, a similar tax loss or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from the disallowance of a tax position or (ii) the tax law does not require the entity to use, or the entity does not intend to use, the deferred tax asset for such a purpose.
•
The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date.

The provisions of ASU 2013-11 were adopted prospectively by the Company on January 1, 2014, to unrecognized tax benefits existing on that date. The adoption had no effect on the Company's financial condition, results of operations or cash flows, as the guidance is consistent with that previously applied.

Investment Companies
In June 2013, the FASB issued ASU 2013-08, "Financial Services-Investment Companies (ASC Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements" ("ASU 2013-08"), which provides comprehensive guidance for assessing whether an entity is an investment company and requires an investment company to measure noncontrolling ownership interests in other investment companies at fair value. ASU 2013-08 also requires an entity to disclose that it is an investment company and any changes to that status, as well as information about financial support provided or required to be provided to investees.

The provisions of ASU 2013-08 were adopted prospectively by the Company on January 1, 2014, for entities that are investment companies at that date. The adoption had no effect on the Company's financial condition, results of operations or cash flows.

Joint and Several Liability Arrangements
In February 2013, the FASB issued ASU 2013-04, "Liabilities (ASC Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date" ("ASU 2013-04"), which requires an entity to measure obligations resulting from joint and several liable arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of (1) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and (2) any additional amount it expects to pay on behalf of its co-obligors. ASU 2013-04 also requires an entity to disclose the nature and amount of the obligation, as well as other information about those obligations.




12
 


Voya Financial, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in millions, unless otherwise stated)
 
 
 



The provisions of ASU 2013-04 were adopted by the Company on January 1, 2014. The adoption had no effect on the Company's financial condition, results of operations or cash flows, as the Company did not have any fixed obligations under joint and several liable arrangements as of January 1, 2014.

Fees Paid to the Federal Government by Health Insurers
In July 2011, the FASB issued ASU 2011-06, "Other Expenses (ASC Topic 720): Fees Paid to the Federal Government by Health Insurers" ("ASU 2011-06"), which specifies how health insurers should recognize and classify the annual fee imposed by the Patient Protection and Affordable Care Act as amended by the Health Care Education Reconciliation Act (the "Acts"). The liability for the fee should be estimated and recorded in full at the time the entity provides qualifying health insurance in the year in which the fee is payable, with a corresponding deferred cost that is amortized to expense.

The provisions of ASU 2011-06 were adopted by the Company on January 1, 2014, when the fee initially became effective. The adoption of ASU 2011-06 had no effect on the Company's financial condition, results of operations or cash flows, as the amount of net premium written for qualifying health insurance by the Company in 2014 is expected to be below the $25.0 threshold as defined by the Acts and, thus, not subject to the fee.

Future Adoption of Accounting Pronouncements

Going Concern
In August 2014, the FASB issued ASU 2014-15, "Presentation of Financial Statements-Going Concern (ASC Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern" ("ASU 2014-15"), which requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. The provisions of ASU 2014-15 will not affect a company's financial condition, results of operation, or cash flows, but require disclosure if management determines there is substantial doubt, including management’s plans to alleviate or mitigate the conditions or events that raise substantial doubt.
The provisions of ASU 2014-15 are effective for annual periods ending after December 15, 2016, and annual and interim periods thereafter. The Company does not expect ASU 2014-15 to have an impact.

Collateralized Financing Entities
In August 2014, the FASB issues ASU 2014-13, “Consolidation (ASC Topic 810): Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity” (“ASU 2014-13”), which allows an entity to elect to measure the financial assets and financial liabilities of a consolidated collateralized financing entity using either:
•
ASC Topic 820, whereby both the financial assets and liabilities are measured using the requirements of ASC Topic 820, with any difference reflected in earnings and attributed to the reporting entity in the statement of operations.
•
The measurement alternative, whereby both the financial assets and liabilities are measured using the more observable of the fair value of the financial assets and the fair value of the financial liabilities.

The provisions of ASU 2014-13 are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015, with early adoption permitted. The Company is currently in the process of determining the impact of the adoptions of the provisions of ASU 2014-13.
Share-based Payments
In June 2014, the FASB issued ASU 2014-12, "Compensation-Stock Compensation (ASC Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period" ("ASU 2014-12"), which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition and should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved.

The provisions of ASU 2014-12 are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The amendments can be applied prospectively or retrospectively. The Company does not expect ASU 2014-12 to have an impact on its financial condition or results of operations, as the guidance is consistent with that previously applied.



13
 


Voya Financial, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in millions, unless otherwise stated)
 
 
 



Repurchase Agreements
In June 2014, the FASB issued ASU 2014-11, "Transfers and Servicing (ASC Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures" ("ASU 2014-11"), which (1) changes the accounting for repurchase-to-maturity transactions to secured borrowing accounting, and (2) requires separate accounting for a transfer of a financial asset executed with a repurchase agreement with the same counterparty. This will result in secured borrowing accounting for the repurchase agreement. The amendments also require additional disclosures for certain transactions accounted for as a sale and for repurchase agreements, securities lending transactions and repurchase-to-maturity transactions that are accounted for as secured borrowings.

The provisions of ASU 2014-11 are effective for the first interim or annual period beginning after December 15, 2014, with the exception of disclosure amendments for repurchase agreements, securities lending transactions and repurchase-to-maturity transactions that are accounted for as secured borrowings, which are effective for annual periods beginning after December 15, 2014, and for interim periods beginning after March 15, 2015. The Company does not expect ASU 2014-11 to have an impact on its financial condition or results of operations, as the Company has not historically met the requirements for sale accounting treatment for such secured borrowing arrangements. The Company is currently in the process of determining the impact of adoption of the disclosure provisions of ASU 2014-11.
Revenue from Contracts with Customers
In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (ASC Topic 606)" ("ASU 2014-09"), which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognized when, or as, the entity satisfies a performance obligation under the contract. The standard also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

The provisions of ASU 2014-09 are effective retrospectively for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently in the process of determining the impact of adoption of the provisions of ASU 2014-09.
Discontinued Operations and Disposals
In April 2014, the FASB issued ASU 2014-08, "Presentation of Financial Statements (ASC Topic 205) and Property, Plant, and Equipment (ASC Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity" ("ASU 2014-08"), which requires the disposal of a component of an entity to be reported in discontinued operations if the disposal represents a strategic shift that has, or will have, a major effect on the entity's operations and financial results. The component should be reported in discontinued operations when it meets the criteria to be classified as held for sale, is disposed of by sale or is disposed of other than by sale.

The amendments also require additional disclosures about discontinued operations, including disclosures about an entity’s significant continuing involvement with a discontinued operation and disclosures for a disposal of an individually significant component of an entity that does not qualify for discontinued operations.

The provisions of ASU 2014-08 are effective for annual periods beginning after December 15, 2014 and for interim periods beginning after December 15, 2015. The amendments should be applied prospectively to disposals and classifications as held for sale that occur within those periods.



14
 


Voya Financial, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in millions, unless otherwise stated)
 
 
 




2.    Investments (excluding Consolidated Investment Entities)

Fixed Maturities and Equity Securities

Available-for-sale and fair value option ("FVO") fixed maturities and equity securities were as follows as of September 30, 2014:
 
Amortized Cost
 
Gross Unrealized Capital Gains
 
Gross Unrealized Capital Losses
 
Embedded Derivatives(2)
 
Fair Value
 
OTTI(3)
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasuries
$
3,767.5

 
$
424.7

 
$
5.1

 
$
—

 
$
4,187.1

 
$
—

U.S. Government agencies and authorities
415.3

 
47.1

 
0.1

 
—

 
462.3

 
—

State, municipalities and political subdivisions
434.8

 
21.5

 
1.5

 
—

 
454.8

 
—

U.S. corporate securities
37,243.2

 
3,054.6

 
219.6

 
—

 
40,078.2

 
10.6

 
 
 
 
 
 
 
 
 
 
 
 
Foreign securities(1):
 
 
 
 
 
 
 
 
 
 
 
Government
862.6

 
47.2

 
12.8

 
—

 
897.0

 
—

Other
15,115.3

 
1,065.0

 
59.8

 
—

 
16,120.5

 
—

Total foreign securities
15,977.9

 
1,112.2

 
72.6

 
—

 
17,017.5

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Agency
4,988.3

 
414.0

 
20.5

 
75.0

 
5,456.8

 
0.3

Non-Agency
1,036.1

 
168.6

 
8.3

 
43.2

 
1,239.6

 
80.1

Total Residential mortgage-backed securities
6,024.4

 
582.6

 
28.8

 
118.2

 
6,696.4

 
80.4

Commercial mortgage-backed securities
3,761.5

 
270.5

 
1.2

 
—

 
4,030.8

 
—

Other asset-backed securities
1,750.0

 
78.2

 
20.2

 
—

 
1,808.0

 
4.8

 
 
 
 
 
 
 
 
 
 
 
 
Total fixed maturities, including securities pledged
69,374.6

 
5,591.4

 
349.1

 
118.2

 
74,735.1

 
95.8

Less: Securities pledged
951.7

 
77.6

 
7.7

 
—

 
1,021.6

 
—

Total fixed maturities
68,422.9

 
5,513.8

 
341.4

 
118.2

 
73,713.5

 
95.8

 
 
 
 
 
 
 
 
 
 
 
 
Equity securities:
 
 
 
 
 
 
 
 
 
 
 
Common stock
188.7

 
0.5

 
—

 
—

 
189.2

 
—

Preferred stock
50.5

 
30.8

 
—

 
—

 
81.3

 
—

Total equity securities
239.2

 
31.3

 
—

 
—

 
270.5

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Total fixed maturities and equity securities investments
$
68,662.1

 
$
5,545.1

 
$
341.4

 
$
118.2

 
$
73,984.0

 
$
95.8

(1) Primarily U.S. dollar denominated.
(2) Embedded derivatives within fixed maturity securities are reported with the host investment. The changes in fair value of embedded derivatives are reported in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
(3) Represents Other-than-Temporary-Impairments ("OTTI") reported as a component of Other comprehensive income (loss).




15
 


Voya Financial, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in millions, unless otherwise stated)
 
 
 




Available-for-sale and FVO fixed maturities and equity securities were as follows as of December 31, 2013:
 
Amortized Cost
 
Gross Unrealized Capital Gains
 
Gross Unrealized Capital Losses
 
Embedded Derivatives(2)
 
Fair Value
 
OTTI(3)
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasuries
$
5,094.0

 
$
174.0

 
$
86.8

 
$
—

 
$
5,181.2

 
$
—

U.S. Government agencies and authorities
598.0

 
22.3

 
1.4

 
—

 
618.9

 
—

State, municipalities and political subdivisions
272.0

 
10.6

 
1.5

 
—

 
281.1

 
—

U.S. corporate securities
36,010.3

 
2,174.5

 
706.2

 
—

 
37,478.6

 
12.8

 
 
 
 
 
 
 
 
 
 
 
 
Foreign securities(1):
 
 
 
 
 
 
 
 
 
 
 
Government
1,044.0

 
49.6

 
42.2

 
—

 
1,051.4

 
—

Other
14,617.4

 
864.2

 
176.5

 
—

 
15,305.1

 
—

Total foreign securities
15,661.4

 
913.8

 
218.7

 
—

 
16,356.5

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Agency
5,379.2

 
431.1

 
62.1

 
79.2

 
5,827.4

 
0.4

Non-Agency
1,101.1

 
166.2

 
18.3

 
47.3

 
1,296.3

 
103.2

Total Residential mortgage-backed securities
6,480.3

 
597.3

 
80.4

 
126.5

 
7,123.7

 
103.6

Commercial mortgage-backed securities
3,427.9

 
327.7

 
3.5

 
—

 
3,752.1

 
4.4

Other asset-backed securities
1,883.1

 
81.6

 
38.0

 
—

 
1,926.7

 
5.2

 
 
 
 
 
 
 
 
 
 
 
 
Total fixed maturities, including securities pledged
69,427.0

 
4,301.8

 
1,136.5

 
126.5

 
72,718.8

 
126.0

Less: Securities pledged
1,457.9

 
24.6

 
16.8

 
—

 
1,465.7

 
—

Total fixed maturities
67,969.1

 
4,277.2

 
1,119.7

 
126.5

 
71,253.1

 
126.0

 
 
 
 
 
 
 
 
 
 
 
 
Equity securities:
 
 
 
 
 
 
 
 
 
 
 
Common stock
214.3

 
5.1

 
0.9

 
—

 
218.5

 
—

Preferred stock
53.1

 
43.4

 
0.6

 
—

 
95.9

 
—

Total equity securities
267.4

 
48.5

 
1.5

 
—

 
314.4

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Total fixed maturities and equity securities investments
$
68,236.5

 
$
4,325.7

 
$
1,121.2

 
$
126.5

 
$
71,567.5

 
$
126.0

(1) Primarily U.S. dollar denominated.
(2) Embedded derivatives within fixed maturity securities are reported with the host investment. The changes in fair value of embedded derivatives are reported in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
(3) Represents OTTI reported as a component of Other comprehensive income (loss).





16
 


Voya Financial, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in millions, unless otherwise stated)
 
 
 



The amortized cost and fair value of fixed maturities, including securities pledged, as of September 30, 2014, are shown below by contractual maturity. Actual maturities may differ from contractual maturities as securities may be restructured, called or prepaid. Mortgage-backed securities ("MBS") and Other asset-backed securities ("ABS") are shown separately because they are not due at a single maturity date.
 
Amortized
Cost
 
Fair
Value
Due to mature:
 
 
 
One year or less
$
2,313.2

 
$
2,362.3

After one year through five years
12,705.5

 
13,484.2

After five years through ten years
20,943.9

 
21,719.0

After ten years
21,876.1

 
24,634.4

Mortgage-backed securities
9,785.9

 
10,727.2

Other asset-backed securities
1,750.0

 
1,808.0

Fixed maturities, including securities pledged
$
69,374.6

 
$
74,735.1


The investment portfolio is monitored to maintain a diversified portfolio on an ongoing basis. Credit risk is mitigated by monitoring concentrations by issuer, sector and geographic stratification and limiting exposure to any one issuer.

As of September 30, 2014 and December 31, 2013, the Company did not have any investments in a single issuer, other than obligations of the U.S. Government and government agencies, with a carrying value in excess of 10% of the Company’s condensed consolidated Shareholders' equity.

The following tables set forth the composition of the U.S. and foreign corporate securities within the fixed maturity portfolio by industry category as of the dates indicated:
 
Amortized
Cost
 
Gross
Unrealized
Capital
Gains
 
Gross
Unrealized
Capital
Losses
 
Fair
Value
September 30, 2014
 
 
 
 
 
 
 
Communications
$
3,959.6

 
$
455.8

 
$
15.5

 
$
4,399.9

Financial
7,582.8

 
669.3

 
20.1

 
8,232.0

Industrial and other companies
30,002.1

 
1,982.7

 
204.4

 
31,780.4

Utilities
9,335.1

 
884.0

 
30.0

 
10,189.1

Transportation
1,478.9

 
127.8

 
9.4

 
1,597.3

Total
$
52,358.5

 
$
4,119.6

 
$
279.4

 
$
56,198.7

 
 
 
 
 
 
 
 
December 31, 2013
 
 
 
 
 
 
 
Communications
$
4,016.2

 
$
293.0

 
$
73.4

 
$
4,235.8

Financial
6,640.7

 
566.6

 
72.6

 
7,134.7

Industrial and other companies
29,303.1

 
1,524.5

 
564.5

 
30,263.1

Utilities
9,200.6

 
570.0

 
142.2

 
9,628.4

Transportation
1,467.1

 
84.6

 
30.0

 
1,521.7

Total
$
50,627.7

 
$
3,038.7

 
$
882.7

 
$
52,783.7




17
 


Voya Financial, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in millions, unless otherwise stated)
 
 
 




Fixed Maturities and Equity Securities

The Company's fixed maturities and equity securities are currently designated as available-for-sale, except those accounted for using the FVO. Available-for-sale securities are reported at fair value and unrealized capital gains (losses) on these securities are recorded directly in Accumulated other comprehensive income (loss) ("AOCI") and presented net of related changes in Deferred policy acquisition costs ("DAC"), Value of business acquired ("VOBA") and Deferred income taxes. In addition, certain fixed maturities have embedded derivatives, which are reported with the host contract on the Condensed Consolidated Balance Sheets.

The Company has elected the FVO for certain of its fixed maturities to better match the measurement of assets and liabilities in the Condensed Consolidated Statements of Operations. Certain collateralized mortgage obligations ("CMOs"), primarily interest-only and principal-only strips, are accounted for as hybrid instruments and valued at fair value with changes in the fair value recorded in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.

The Company invests in various categories of CMOs, including CMOs that are not agency-backed, that are subject to different degrees of risk from changes in interest rates and defaults. The principal risks inherent in holding CMOs are prepayment and extension risks related to significant decreases and increases in interest rates resulting in the prepayment of principal from the underlying mortgages, either earlier or later than originally anticipated. As of September 30, 2014 and December 31, 2013, approximately 44.0% and 38.3%, respectively, of the Company's CMO holdings, such as interest-only or principal-only strips, were invested in those types of CMOs that are subject to more prepayment and extension risk than traditional CMOs.

Repurchase Agreements

The Company engages in dollar repurchase agreements with mortgage-backed securities ("dollar rolls") and repurchase agreements with other collateral types to increase its return on investments and improve liquidity. Such arrangements meet the requirements to be accounted for as financing arrangements. The Company also enters into reverse repurchase agreements. These transactions involve a purchase of securities and an agreement to sell substantially the same securities as those purchased. As of September 30, 2014 and December 31, 2013, the Company did not have any securities pledged in dollar rolls, repurchase agreement transactions or reverse repurchase agreements.

Securities Lending

The Company engages in securities lending whereby certain securities from its 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 the Company. Collateral retained by the agent is invested in liquid assets on behalf of the Company. 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. As of September 30, 2014 and December 31, 2013, the fair value of loaned securities was $409.9 and $435.4, respectively, and is included in Securities pledged on the Condensed Consolidated Balance Sheets. As of September 30, 2014 and December 31, 2013, collateral retained by the lending agent and invested in liquid assets on the Company's behalf was $426.2 and $451.0, respectively, and recorded in Short-term investments under securities loan agreements, including collateral delivered on the Condensed Consolidated Balance Sheets. As of September 30, 2014 and December 31, 2013, liabilities to return collateral of $426.2 and $451.0, respectively, were included in Payables under securities loan agreements, including collateral held on the Condensed Consolidated Balance Sheets.












18
 


Voya Financial, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in millions, unless otherwise stated)
 
 
 



Unrealized Capital Losses

Unrealized capital losses (including noncredit impairments), along with the fair value of fixed maturity securities, including securities pledged, by market sector and duration were as follows as of September 30, 2014:
 
Six Months or Less
Below Amortized Cost
 
More Than Six
Months and Twelve Months or Less
Below Amortized Cost
 
More Than Twelve
Months Below
Amortized Cost
 
Total
 
Fair Value
 
Unrealized Capital Losses
 
Fair Value
 
Unrealized Capital Losses
 
Fair Value
 
Unrealized Capital Losses
 
Fair Value
 
Unrealized Capital Losses
U.S. Treasuries
$
375.6

 
$
1.9

 
$
—

 
$
—

 
$
70.3

 
$
3.2

 
$
445.9

 
$
5.1

U.S. Government agencies and authorities
6.9

 
0.1

 
—

 
—

 
—

 
—

 
6.9

 
0.1

U.S. corporate, state and municipalities
3,902.8

 
54.3

 
75.3

 
3.9

 
3,536.4

 
162.9

 
7,514.5

 
221.1

Foreign
1,558.8

 
24.6

 
19.3

 
0.3

 
916.5

 
47.7

 
2,494.6

 
72.6

Residential mortgage-backed
266.2

 
1.3

 
62.1

 
0.6

 
760.1

 
26.9

 
1,088.4

 
28.8

Commercial mortgage-backed
114.1

 
0.7

 
3.5

 
0.5

 
—

 
—

 
117.6

 
1.2

Other asset-backed
236.7

 
0.6

 
2.6

 
0.1

 
247.7

 
19.5

 
487.0

 
20.2

Total
$
6,461.1

 
$
83.5

 
$
162.8

 
$
5.4

 
$
5,531.0

 
$
260.2

 
$
12,154.9

 
$
349.1






19
 


Voya Financial, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in millions, unless otherwise stated)
 
 
 



Unrealized capital losses (including noncredit impairments), along with the fair value of fixed maturity securities, including securities pledged, by market sector and duration were as follows as of December 31, 2013:
 
Six Months or Less
Below Amortized Cost
 
More Than Six
Months and Twelve Months or Less
Below Amortized Cost
 
More Than Twelve
Months Below
Amortized Cost
 
Total
 
Fair Value
 
Unrealized Capital Losses
 
Fair Value
 
Unrealized Capital Losses
 
Fair Value
 
Unrealized Capital Losses
 
Fair Value
 
Unrealized Capital Losses
U.S. Treasuries
$
1,559.5

 
$
24.3

 
$
1,087.6

 
$
52.6

 
$
41.9

 
$
9.9

 
$
2,689.0

 
$
86.8

U.S. Government agencies and authorities
9.5

 
—

*
55.9

 
1.4

 
—

 
—

 
65.4

 
1.4

U.S. corporate, state and municipalities
3,524.9

 
78.5

 
6,893.9

 
519.6

 
821.9

 
109.6

 
11,240.7

 
707.7

Foreign
1,133.6

 
16.0

 
2,447.8

 
184.3

 
179.1

 
18.4

 
3,760.5

 
218.7

Residential mortgage-backed
919.1

 
8.3

 
1,019.6

 
40.6

 
377.9

 
31.5

 
2,316.6

 
80.4

Commercial mortgage-backed
235.8

 
3.3

 
—

 
—

 
6.2

 
0.2

 
242.0

 
3.5

Other asset-backed
150.6

 
0.9

 
105.5

 
1.5

 
299.3

 
35.6

 
555.4

 
38.0

Total
$
7,533.0

 
$
131.3

 
$
11,610.3

 
$
800.0

 
$
1,726.3

 
$
205.2

 
$
20,869.6

 
$
1,136.5

* Less than $0.1.

Of the unrealized capital losses aged more than twelve months, the average market value of the related fixed maturities was 95.5% and 89.4% of the average book value as of September 30, 2014 and December 31, 2013, respectively.




20
 


Voya Financial, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in millions, unless otherwise stated)
 
 
 



Unrealized capital losses (including noncredit impairments) in fixed maturities, including securities pledged, for instances in which fair value declined below amortized cost by greater than or less than 20% for consecutive months as indicated in the tables below, were as follows as of the dates indicated:
 
Amortized Cost
 
Unrealized Capital Losses
 
Number of Securities
 
< 20%
 
> 20%
 
< 20%
 
> 20%
 
< 20%
 
> 20%
September 30, 2014
 
 
 
 
 
 
 
 
 
 
 
Six months or less below amortized cost
$
6,559.3

 
$
2.8

 
$
85.4

 
$
0.6

 
559

 
4

More than six months and twelve months or less below amortized cost
362.1

 
—

*
23.7

 
—

*
74

 
2

More than twelve months below amortized cost
5,568.4

 
11.4

 
235.4

 
4.0

 
551

 
8

Total
$
12,489.8

 
$
14.2

 
$
344.5

 
$
4.6

 
1,184

 
14

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
Six months or less below amortized cost
$
7,883.3

 
$
80.5

 
$
166.0

 
$
18.6

 
570

 
20

More than six months and twelve months or less below amortized cost
12,339.7

 
67.6

 
776.8

 
16.7

 
798

 
8

More than twelve months below amortized cost
1,579.2

 
55.8

 
144.5

 
13.9

 
302

 
22

Total
$
21,802.2

 
$
203.9

 
$
1,087.3

 
$
49.2

 
1,670

 
50

* Less than $0.1.